Financial Times

Spence to buy ship, expand hotel chain
The diversified Aitken Spence conglomerate plans to spend Rs 1 billion to upgrade two of its hotels next year, is looking to build new hotels here and abroad and considering investing in coal power.

The blue chip company, which has just announced a net profit of over a billion rupees last year, is also looking at buying a cargo ship as part of its efforts to improve the under-performing shipping division.

It has also struck a deal with a US firm to build an islandwide network for transactions processing whose total cost is $12 million (around Rs 1.2 billion). Senior company officials said its core areas of business in future would be tourism, infrastructure, shipping and cargo logistics.

A company statement said Aitken Spence and Company Ltd has become the latest blue chip to join the "Billion Rupee Profit Club" with net profit attributable to ordinary shareholders jumping 143 percent to Rs. 1.27 billion from Rs. 525 million in 2002/3 in the financial year ended March 31, 2004. Group turnover rose 30 percent to Rs. 9.1 billion.

Officials said the company would spend Rs 1 billion to refurbish its Kandalama and Triton hotels during the off-season next year. "We're doing a big refurbishing programme to re-position them to cater to more up-market tourists and get better prices," a company official said.

When refurbished, the hotels will have spas and there will be fewer rooms but they (rooms) would be bigger. The company also plans to build a boutique hotel on a nine-acre plot of land next to Triton, again to cater to up-market tourists.

However, it has yet no definite plans for its 100 acres of land at Nilaveli, on the east coast north of Trincomalee. Officials said the idea is to build a hotel for mass tourism when mass tourism comes back to the region but that any investment decision would have to wait for an improvement in the investment climate and a lasting peace.

Aitken Spence wants to capitalize on the success of its three Maldivian hotels, which made a big contribution to profits, by building a fourth and is bidding for one of the 11 islands currently on offer.

Returns from Maldivian hotels were around 20-25 percent but much lower from the Sri Lankan hotels. The company is also seriously looking at investing in a hotel in South India now that the climate is becoming better with the launch of more flights to Colombo by domestic Indian airlines.

"It takes time to find the correct match," one official said. "We specialise in resort hotels so we must find a hotel to add to our Sri Lankan hotels." Aitken Spence has ventured into IT infrastructure as part of its thrust into the infrastructure sector with a tie-up with GTECH Global Services of the US to build a network for transactions processing.

"The aim is to network the whole country and use it for transaction processing such as bill payments. We will offer the network to other companies like telephone firms." The total cost of the project is $12 million and Aitken Spence will contribute $3 million of which it has already invested $1.7 million.

It is also looking at investing in coal power projects following the investment in its third power plant, a 100 MW plant in Embilipitya with Caterpillar USA. The company, which started off shipping in Galle in 1868, wants to rebuild its shipping sector and has hired former SLPA chairman Parakrama Dissanayake to head it. It is in talks with partners to acquire a cargo ship.

Its freight forwarding operations in Bangladesh are to be expanded and extended to India. Group chairman Harry Jayawardena told shareholders in his annual report that Earnings Per Share were up by 141 percent to Rs. 47.36 last year with a return on equity of 22.6 percent.

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