John Keells Holdings (JKH) this week reported a gross profit of around Rs.1,081 billion for the six months to September 30, 2008 but market analysts are pointing out that if not for the sale of the company’s 20% stake in AMW to Dubai-based Al-Futtaim at a capital gain of around Rs.1,026 billion, the profits would have been far less.
Analysts said this is 'evidence that Al-Futtaim has saved them.' According to the quarterly figures also released in the interim report, JKH has reported a loss in several sectors including transportation, IT, financial services and others. Brokers are also reporting that JKH 2Q09 net profits are down 2% year-on-year to Rs.1,012 billion.
According to the interim report, JKH Chairman Susantha Ratnayake said the 'Profits Attributable to Equity Holders for the quarter, and six months, ended 30 September 2008 of Rs.1.01 billion and Rs.1.85 billion respectively, were marginal decreases of 1.5 percent and 0.2 percent over the corresponding periods in the previous year because of the one-off tax charge suffered by the group as a result of the Supreme Court judgment relating to Lanka Marine Services (Private) Ltd (LMSL).' Mr. Ratnayake added that transportation was significantly affected by the costs associated with the judgment relating to LMSL.
The PBT (profit before tax) for the quarter, according to the report, was Rs.545 million, a 34 % decrease compared to the Rs.831 million for the corresponding period last year and for the six months, the PBT was Rs.1.47 billion, an 11 % decrease compared to the Rs.1.65 billion for the same period last year. Mr. Ratnayake said that during the quarter, JKH acquired an additional stake of 4.22 % in South Asia Gateway Terminals (SAGT) for Rs.478 million, increasing JKH's total holding in the company to 37.97 %.
Analysts said the throughput volume at SAGT is up 14.6% YoY to 1.3 million TEU's during the first to the third quarter of 2008.
Volumes exceeded 150,000 TEU's during each month in 3Q2008 (July, August, September) and September 2008 was a record monthly high. Analysts also said that while SAGT has likely gained market share form the state-run SLPA, it will likely hit capacity limitations shortly. The price paid recently by JKH for a 4.22% stake in SAGT of US$4.41 million (Rs.478 million) is significantly less, on a pro rata basis, than the Rs.3.6 billion JKH paid in October 2006 for a 7.5% stake in SAGT. The analyst said the increasing stake in SAGT thus appears to be a good move and done at an attractive price.
They added that SAGT is also likely to be the investment vehicle used by JKH in bidding for the Colombo South Container Terminal when fresh bids are called. "We understand that SAGT also has the first right of refusal for the proposed East Terminal in the Colombo Harbour. They added that while JKH's increased stake in SAGT is thus beneficial in this respect (apart from contributing to enhanced profitability immediately), successful bidding and/or the development of new terminals is crucial in view of pending capacity constraints at SAGT,” one analyst said.
The Interim Report said financial services recorded a PBT at Rs.86 million for the quarter which was 39 % lower when compared to Rs.141 million for the corresponding period in the previous year. In his statement, Mr. Ratnayake said this was mainly due to a decline in the performance of the stock broking arm of the group. The PBT of Rs.272 million for the 6-month period was 7 % higher than the Rs.254 million recorded in the same period last year.
Mr. Ratnayake further stated that information technology recorded a loss of Rs.2 million for the second quarter compared with the profit of Rs.21 million in the same period last year. For the six month period, the loss was Rs.18 million compared to the loss of Rs.5 million recorded in the same period in 2007/2008. The BPO business is making steady progress. Mr. Ratnayake stated that JKH is continuing to identify leads in order to expand the business and currently have 330 staff in Gurgaon and 370 staff in Colombo.
In consumer foods and retail, the PBT for the six months ended 30 September 2008 at Rs.74 million was 40 % lower than the Rs.125 million recorded in the same period in 2007/2008. Mr. Ratnayake said consumer foods and retail, despite high inflation and other adverse economic conditions impacting purchasing power and input costs, recorded a PBT of Rs.74 million for the second quarter, an 89% increase over the Rs.39 million recorded in the corresponding period in the previous year. He added that Ceylon Cold Stores and Keells Food Products have continued to improve their performance. 'Though in challenging times, the Keells Super chain is continuing to expand, with the total number of outlets established as at end of the quarter being 38 with a further 11 outlets identified for completion very shortly.' (NG)
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