Financial Times

Ships help Aitken Spence ride downturn in tourism
Aitken Spence has reported a sharp fall in profits in the first quarter due to the disappointing performance of its tourism sector which is still suffering from the effects of the tsunami, but a “significant” rise in income from its new shipping joint ventures has helped cushion the blow.

The diversified group recorded increased revenues during the first quarter of the financial year for 2005/06 but the poor performance of its tourism sector caused the company to experience a negative growth in profits, it said in a statement.

“Although Aitken Spence, which represents the world’s largest tour operator, holds a key position in destination management services in Sri Lanka, it has not been able to withstand the huge blow of the local tourism scene,” it said.
The investments borne by Aitken Spence in the maritime transport sector during the last financial year, has stood the company in good stead.

“The group’s cargo logistics sector experienced a significant rise in incomes consequent to the joint ventures with leading shipping companies and a strong performance from the existing container vessels,” the statement said. “The group has continued with its formidable investments with two more container vessels acquired during the quarter which are expected to further boost profitability of the logistics sector.”

The Integrated Logistics arm of the group also experienced steady growth in operations. The cargo logistics and the strategic investments sectors of the group experienced increases in profitability while the tourism sector which has been a long standing sustainer of healthy profits experienced a 30 percent drop in profits over the previous year.

The business of the infrastructure development sub-sector continues to fare well with the third power plant in Embilipitiya coming on stream during the quarter.

“However, the restructuring and the adverse financial status of the CEB is perceived as a matter of concern for the future,” Aitken Spence warned. The company also warned that the prevailing economic and political state of affairs in the country poses a threat in itself towards the growth of the industry.

“Political insatiability which has come about to be a prevalent feature of our economy has hindered the influx of foreign investment to the country.”
The firm said there was a need for proactive measures and prompt action by the government to revive the tourism industry.

The company is of the view that effective propaganda should be focused especially at the European market, in order to attract tourists. The drastic decline in arrivals of organized tourist traffic into the country had an adverse impact on Aitken Spence as the occupancies at the group’s top class hotels and resorts have not been on comparable levels with the corresponding period last year.

The Maldive Islands, home to three of the group’s beach resorts have experienced a 30 percent decline in arrivals since the tsunami.“This has also significantly hampered the group’s revenues in the hotel industry.”
The company said its Printing and Garments arms have performed satisfactorily and are expected to generate healthy contributions to group’s profits as the year progresses.

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