Our Group

The cumulative Group profit before tax (PBT) for the nine months ended 31 December 2012 at Rs. 8.97 billion was an increase of 27 per cent over the PBT of Rs. 7.06 billion recorded in the corresponding period in the previous year. Group PBT at Rs. 3.58 billion in the third quarter represented an increase of 8 per cent above the Rs. 3.33 billion recorded during the same period last year. The cumulative revenue for the nine months ended 31 December 2012 at Rs. 62.20 billion represented an increase of 13 per cent over the Rs. 54.92 billion recorded in the corresponding period last year. The revenue for the third quarter at Rs. 21.51 billion was a marginal increase over the Rs. 21.41 billion revenue recorded in the same period last year.

 

The company PBT for the nine months ended 31 December 2012 of Rs. 3.93 billion was an increase of 69 per cent over the Rs. 2.33 billion recorded in the corresponding period of the previous year.The Group’s quarterly results reflect the challenges that we continue to face in a volatile macro-economic environment.

 

The Transportation industry group PBT of Rs. 844 million was in line with the third quarter PBT of the previous year [2011/12 Q3: Rs. 845 million] mainly on account of exchange losses in the bunkering business as a result of the appreciation of the Rupee. The new domestic aviation associate of the Group, operating under the brand name ‘Cinnamon Air’, completed the purchase of two Cessna amphibian aircrafts. Operations of the airline are scheduled to commence during the fourth quarter of the financial year 2012/13, which we believe will be an important addition to the tourism infrastructure within the country.

 

The Leisure industry group PBT of Rs. 1.34 billion was an increase of 33 per cent over the third quarter of the previous year [2011/12 Q3: Rs. 1.00 billion]. The growth in PBT was predominantly driven by City Hotels. Sri Lankan Resorts were impacted by lower than expected occupancies as a result of a drop in our traditional markets, combined with aggressive marketing by competing destinations. We continue to reiterate the importance and urgency of creating greater awareness of Sri Lanka as a travel destination, to ensure that the country fully realises the substantial multiplier effects to the economy from this important industry.

 

The Property group PBT of Rs. 180 million for the third quarter was a decrease of 44 per cent over the PBT recorded in the corresponding period of the previous year [2011/12 Q3: Rs. 319 million], primarily as a result of the revenue recognition cycle. The progress of ‘OnThree20’ is on schedule and construction has progressed up to the 28^th floor. The 140,000 square foot ‘K Zone’ mall in Kapuwatte will commence operations in February 2013.

 

The Consumer Foods & Retail industry group PBT of Rs. 186 million was a decrease of 65 per cent over the third quarter of the previous year [2011/12 Q3: Rs. 533 million] mainly due to a non-recurring income of Rs. 120 million in the corresponding quarter of the previous year. Ice cream, soft drink and processed meat volumes were below expectations while overall profitability was negatively impacted by excise and duty increases and other cost escalations during the quarter under review. This was compounded by the severe floods experienced in many districts. The Retail sector is seeing benefits arising from the implementation of the new way forward strategy and witnessed growth in footfall and basket values. The imposition of the value added tax (VAT) of 12 per cent with effect from 1st January 2013 on retail businesses with turnover exceeding Rs. 500 million per quarter is expected to have an impact on the margins of the Retail sector. Whilst we support the principle of broadening the tax base, the fact that no transitional provisions were made available to allow for the claim of input VAT on the closing stocks as at 31st December 2012 was disappointing. This will result in a significant ‘one-off’ impact on profitability in the next quarter.

 

The Financial Services industry group PBT of Rs. 734 million was an increase of 27 per cent over the third quarter of the previous year [2011/12 Q3: Rs. 577 million]. Nations Trust Bank was the primary contributor to growth. Union Assurance raised Rs. 750 million through a rights issue to strengthen its capital base.

 

The Information Technology industry group PBT of Rs. 103 million was an increase of 59 per cent over the third quarter of the previous year [2011/12 Q3: Rs. 65 million]. The growth in PBT was driven by the improved performance of the Office Automation and Software Services businesses compared with the corresponding period last year. Other, including Plantation Services Other, comprising of Plantation Services, John Keells Capital and the Corporate Centre, recorded a PBT of Rs. 194 million as opposed to the loss of Rs. 16 million recorded for the third quarter of the financial year 2011/12, mainly as a result of higher income arising from better interest rates.

 

During the quarter, the Group continued with its strategy of integrating sustainability within its financial goals, while continuing to stay focussed on our triple bottom line operating philosophy. The roll out of the Group’s enterprise-wide sustainability performance tracking system has enhanced the effective monitoring and tracking of the sustainability performance.  The Group’s carbon footprint for the third quarter was estimated at 17,550 MT as against 17,358 MT in the previous year, showing only a marginal increase despite the inclusion of the 200 room Cinnamon Bey Beruwala. The Group’s estimated water usage reduced in the third quarter to 431,585 cubic meters as against 466,218 cubic meters in the corresponding period of the previous year, due to better metering and control mechanism being put in place during the year. The total waste generated in the third quarter amounted to 2,206 MT as against 2,258 MT in the corresponding period of the previous year. The Group has continued to benefit from the numerous environmental and staff-oriented initiatives introduced and implemented over the year, while many projects falling under the categories of community development and environmental conservation are progressing well.

 

The ‘English for Teens’ Programme under the John Keells English Language Scholarship Programme, which targets school children in 18 Districts commenced in November. A total of 1,002 students have been registered under the programme. The first programme under the ‘University Soft Skills’ initiative was successfully concluded in November at the University of Peradeniya. The John Keells Vision project conducted a total of 3 eye camps, examining approximately 500 persons where 149 cataract patients were identified, of whom 74 patients underwent cataract operations. The HIV and AIDS Awareness Campaign commemorated the World Aids Day 2012, with a schedule of week-long activities and a free health check for 400 Group staff sponsored by the John Keells Foundation (JKF).

 

Following the successful implementation of the Village Adoption Programme in Halmillawe and Mangalagama, 2 villages in the North and 1 village in the East have been selected to further expand the programme.

 

The John Keells Foundation (JKF) contributed to the maintenance of a water hole at Yala during the prolonged drought period. The Nature Field Centre in Rumassala, which is a public-private partnership between the JKF and the Central Environment Authority, continues to attract a large

number of visitors.

 

Susantha Ratnayake

Chairman

30 January 2013