Poor business environment here; JKH looks at India

John Keells Holdings (JKH) has urged the government to ‘create an enabling environment that is conducive to business.

“It is critical that the government creates for us, and for the private sector, an enabling environment that is conducive to the creation of value,” JKH Chairman, Susantha Ratnayake said in the company’s latest annual report released on Friday.

He said Asian economies in particular, lead by China and India, are recording exponential growth on the back of stable macro economies and significant foreign direct investment inflows and that Sri Lanka must exploit these moments of time when global interest in, and fund flows created by, the region are at a high.

“These are opportunities which will pass us by, unless we grab them quickly,” he has reiterated, JKH, he added, will continue to seek growth opportunities locally, with plans to expand its Consumer Foods & Retail Industry in India. “In terms of new business, we will only enter those industry groups which offer both scale and growth potential,” he has said, adding that the convenience foods business has done extensive research of the Indian market and the company is currently evaluating the options.

The JKH’s group profit increased to Rs.3.94 billion from 3.49 billion, reflecting an increase of 13 percent. The company’s profit increased to Rs.2.14 billion from Rs.1.75 billion which is an increase of 22 percent. The group’s revenue augmented to Rs.32.9 billion, which is an increase of 12 percent with the pre tax profits increasing to Rs.4.8 billion reflecting an increase of 11 percent. Stockbrokers said that the profit growth was achieved by a significant increase in the profit from the associate companies (mainly from Nations Trust Bank and SAGT). The profit from associate companies grew from Rs.958 million to Rs.1, 701 million, which is an improvement of 77 percent.

Financial Services reported a decline of 10 percent in profit after tax (PAT) mainly as a result of lower contributions from the insurance business. Nations Trust Bank had profits growing by 159 percent, although the share of profits to the group only grew by 14 percent post last year’s merger of the bank with Mercantile Leasing. Transportation recorded a 25 percent growth in PAT and remained the single largest contributor to group profits. The port operations recorded a healthy increase in bottomline and market share while the bunkering business continued its steady performance.

The company aims to focus on selected large local industries, Ratnayake has said, adding that opportunities in large scale industries such as energy, power and communications in addition to expanding the involvement in the industries that they are already in.

Consumer Foods & Retail posted a 64 percent growth in profits on the back of a strong performance from the carbonated drinks and processed meats segments.

Leisure reported a 19 percent decline in PAT, as the Sri Lankan operations were affected by the escalation in hostilities and the consequent negative travel advisories issued by the major markets.

Ratnayake said the decline was partially offset by the strong performance of the four Maldivian resorts, including the Dhonveli and Ellaidhoo Island resorts that were acquired this year. He has said that the company’s portfolio is still skewed towards leisure and transportation, but the company will redress this imbalance by entering new industries that meet its strict qualifying criteria.
He has said that the company will accelerate its expansion in India during 2008. “Although some fine tuning is still required in Cinnamon and Chaaya brands, they are established and are gaining more visibility and are now portable.

The Destination Management sector, under the Leisure industry group, opened its first office in Mumbai, India during the year,” he has said.