Financial Times

Keells supermarkets do better after re-branding
The performance of John Keells Holdings' supermarkets has improved following the re-branding of Elephant House 'Super Pola' outlets as Keells Super in the conglomerate's food and beverage sector which is struggling to increase profitability.

"The change has already proven to be very positive, both in customer perception and supermarket performance," JKH chairman Vivendra Lintotawela said, referring to the company's supermarket strategy under which Super Polas have been re-launched as 'Keells' supermarkets.

The move followed market research that revealed a marked customer preference for the Keells Super brand prompting the company to expand that brand.

JKH's food and beverage sector registered lower profits prior to exceptional items, due to the company absorbing higher input costs in respect of both carbonated soft drinks and ice creams, and particularly the excise duty in the case of soft drinks, Lintotawela told shareholders in the half yearly performance report. JKH "continued to maintain its strong growth momentum" during the second quarter of 2004/05, he said.

Revenues rose by 15 percent to Rs. 10.92 billion from Rs. 9.47 billion while group pre-tax profits grew 52 percent growth before exceptional items to Rs. 1.76 billion from Rs. 1.16 billion during the half year ended September 2004.

Profit attributable to shareholders increased 158 percent to Rs. 1.22 billion from Rs. 0.47 billion. The company has announced a 10 percent interim dividend, the first time in its history an interim dividend was declared after the half-yearly results.

JKH's stake in the transhipment terminal in Colombo port run by the South Asia Gateway Terminals consortium made a big contribution to profits in the group's transportation sector.

"With enhanced levels of trade and activity at the Port of Colombo and the increased passenger travel to and from the country, the Transportation Sector continued to exceed our expectations," Lintotawela said.

"Growth in the sector continues to be fuelled mainly by the ports and shipping operations with the enhanced capacity at South Asia Gateway Terminals Ltd improving our competitive position, while the airlines division has also registered commendable growth, fuelled by LTU, and the newly acquired American Airlines GSA."

Lintotawela said the company is well placed to fund new investments in hotels following its recent restructuring in which most of its hotels were brought under one holding company and strong momentum in tourist arrivals and higher average room rates.

This resulted in "significant earnings growth" for the leisure sector and particularly for the cluster of Sri Lankan hotels. The Maldivian resorts also registered healthy earnings growth. However, earnings in the financial services sector were lower, particularly for last year's main contributors to sector earnings, Nations Trust Bank and John Keells Stockbrokers (JKSB). This was because of low interest rate trends as well as lower stock market activity. The introduction of finance VAT for the stockbroking industry in 2004 resulted in JKSB incurring a charge of Rs. 10 million during the six months to 30 September 2004.

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