Financial Times

The group said the uncertainty and incidents in Colombo and other areas have adversely affected the occupancy levels of resorts and city hotel properties, negatively impacting on the destination management businesses.

The leisure sector of John Keells Holdings returned to profitability in the first quarter of the 2006-2007 year against a loss last year due to the tsunami but the prevailing uncertainty over the peace process is hurting tourism.

The Maldivian properties however continued to record healthy profits during the quarter which saw the group’s post-tax profits in the first quarter of FY2006/07 grow by 19 percent to Rs 722 million.

“Profits attributable to equity holders of the parent increased by 25 percent to Rs 492 million over the comparable period in FY 2005/06. Group revenues grew by 19 per cent to Rs 7.57 billion. At the company level, net profit for the period grew by 2 percent to Rs 282 million,” a company statement said last week.

On June 21 JKH made a partial offer to all shareholders of Associated Motorways Limited (AMW) to acquire 10 percent of the current issued share capital of AMW at a price of Rs 380. The offer was conditional upon AMW issuing a further 10 percent of new shares by way of a private placement to JKH at a price of Rs 380.

“We believe an association with AMW has a number of positives, in particular for our property industry group. AMW has freehold land of 217 perches in Union Place, which is adjacent to the Vauxhall Street property owned by the John Keells Group – the combined property will have access from both Union Place and Vauxhall Street, adding value to both properties. With approximately 4.5 acres of freehold land, the combined property would be a prime location for a large scale development. JKH intends to make this investment through its Capital Investments Division, under the John Keells Financial Services Industry Group,” JKH chairman Susantha Ratnayake said.

The Capital Investments Division has been formed to make investments where JKH can create value via strategic linkages and management. The Transportation Industry Group, the largest contributor to Group profitability, continued to show growth in FY 2005/06, with all sectors within the industry group registering positive contributions.

As expected, the property industry group saw a marginal drop in its profitability compared to the corresponding quarter of the previous year, reflecting the revenue cycle of “The Monarch” development. Construction of “The Monarch” is on schedule. Pre Sales of “The Emperor”, the new condominium tower project at the Crescat City commenced in June this year, and a considerable number of bookings have been already received.

The Food & Beverage Industry Group recorded a growth of 35 per cent in PBT during the period under review, despite the rising cost of raw materials. Carbonated Soft Drinks and frozen confectionaries continued to improve its year on year profits. “Keells Super” continues its expansion with 2 new outlets opening during the quarter increasing the total outlets in the chain to 20, the group said.

The Financial Services Industry Group registered higher profitability with PBT increasing by 28 per cent compared to the corresponding quarter in the previous year, despite the volatility witnessed in the stock market.

JKH said the industry group is in the process of maximising cross selling opportunities that exist between its banking, leasing and insurance businesses.