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CorporateCraftsmanship John Keells Holdings PLC Interim Condensed Financial Statements Nine months ended 31 December Chairman's Review Dear Stakeholder, The cumulative revenue for the first nine
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CorporateCraftsmanship John Keells Holdings PLC Interim Condensed Financial Statements Nine months ended 31 December 2017 1 Chairman's Review Dear Stakeholder, The cumulative revenue for the first nine months of the financial year 2017/18 at Rs billion is an increase of 15 per cent over the revenue of Rs billion recorded in the same period of the previous financial year. The revenue at Rs billion for the quarter under review is a 12 per cent increase over the Rs billion recorded in the previous financial year. The Group profit before tax (PBT) for the first nine months of the financial year 2017/18 at Rs billion is a decrease of 4 per cent over the PBT of Rs billion recorded in the same period of the previous financial year. The Group PBT at Rs.5.83 billion in the third quarter of the financial year 2017/18 is a decrease of 13 per cent over the Rs.6.72 billion recorded in the corresponding period of the previous financial year. The profit attributable to shareholders in the first nine months at Rs billion is a decrease of 2 per cent over the corresponding period of the previous financial year while the Rs.4.49 billion recorded in the third quarter is a decrease of 13 per cent over the previous year. The Company PBT for the first nine months of the financial year 2017/18 at Rs.7.90 billion is an increase of 7 per cent over the previous financial year. The Company PBT for the third quarter of 2017/18 at Rs.2.36 billion is a decrease of 16 per cent over the Rs.2.83 billion recorded in the corresponding period of 2016/17. Transportation The Transportation industry group PBT of Rs.945 million in the third quarter of 2017/18 is an increase of 12 per cent over the third quarter of the previous financial year [2016/17 Q3: Rs.845 million]. During the calendar year 2017, the Port of Colombo witnessed a year on year growth of 8 per cent whilst South Asia Gateway Terminals (SAGT) recorded a growth in throughput of 11 per cent. The market share and profits of the Group s Bunkering business increased as a result of a double-digit growth in volumes. The performance of the Logistics business was in line with expectations. A new 57,000 sq. ft. warehouse was commissioned in Enderamulla during the quarter under review. DHL Keells recorded an improvement in performance driven by a growth in its active customer base. Leisure The Leisure industry group PBT of Rs.901 million in the third quarter of 2017/18 is a decrease of 34 per cent over the third quarter of the previous financial year [2016/17 Q3: Rs.1.36 billion]. The decline in profitability is mainly attributable to the City Hotel sector which witnessed a decline in occupancies primarily as a result of the increase in room inventory within Colombo. However, it is encouraging that the total number of rooms occupied in the city witnessed a doubledigit growth in the quarter under review. Whilst the Sri Lankan Resorts segment recorded an improvement in room rates and maintained occupancies, profit for the quarter under review was lower when compared to the corresponding period of the previous financial year which included the operations of Bentota Beach by Cinnamon which is now closed for the construction of a new hotel. The Maldivian Resorts segment recorded an improvement in average room rates, although profitability was impacted by lower occupancies and the partial closure of Ellaidhoo Maldives by Cinnamon for refurbishments in October However, occupancies at our hotels remained above the 2 John Keells Holdings PLC Interim Condensed Financial Statements Nine months ended 31 December 2017 Chairman s Review industry average during the quarter under review. Property The Property industry group PBT of Rs.34 million in the third quarter of 2017/18 is a decrease of 83 per cent over the third quarter of the previous financial year [2016/17 Q3: Rs.196 million]. The decline in profitability is on account of the third quarter of the previous year which included recognition of revenue on the 7th Sense on Gregory s Road residential development. The construction of Cinnamon Life is progressing well with the super structure approximately 50 per cent complete. Parallel to the ongoing construction work of the super structure, the installation of the façade of the hotel will commence shortly. The construction work on the main access point via a six lane bridge is nearing completion. The pre-sales of both the residential and commercial space continue to be encouraging. The concept design for the new 800-apartment joint venture residential development project, Tri-Zen, in Union Place, Colombo, has been finalised whilst the schematic designs are currently underway. This unique development will target a broader section of the market with apartments offered at attractive price points. Presales have commenced and initial bookings are very encouraging. Consumer Foods and Retail The Consumer Foods and Retail industry group PBT of Rs.947 million in the third quarter of 2017/18 is a decrease of 26 per cent over the third quarter of the previous financial year [2016/17 Q3: Rs.1.29 billion]. The decline in profitability is on account of the Consumer Foods sector and to a lesser extent the Retail sector. The Beverage and Frozen Confectionery businesses recorded a decline in volumes as a result of continued tapering of demand arising from subdued consumer discretionary spending. The volume decline in the Beverage business was further exacerbated by the implementation of a sugar tax from November 2017, which resulted in substantial price increases across the industry. Whilst over the years we have taken measures to reduce a significant quantum of sugar in our beverages, we will continue to aggressively expand our low sugar product range by accelerating the launch of such new products. As a continuing part of our beverage portfolio strategy, we will also launch more non-carbonated beverages to broaden our offerings. Keells Food Products PLC recorded an increase in profitability on account of a better sales mix. The Retail sector recorded growth in footfall contributing towards a year-on-year growth in same store sales, although profitability was impacted by store expansion related costs and promotional expenses. During the quarter under review, three new outlets were opened, bringing the total store count to 72 as at 31 December The stores opened during the quarter featured the new branding which will be rolled out to the existing stores as well in the ensuing quarters. The branding initiative encompasses new elements to the store in line with evolving consumer needs which we are confident will drive footfall, although this impacted the roll out of the store openings for the quarter under review. Financial Services The Financial Services industry group PBT of Rs.1.54 billion in the third quarter of 2017/18 is an increase of 35 per cent over the third quarter of the previous financial year [2016/17 Q3: Rs.1.14 billion]. The increase in profitability is on account of the performance of Union Assurance PLC, where gross 3 written premiums recorded strong growth above industry average whilst Nations Trust Bank recorded sound loan growth during the quarter under review. Information Technology The Information Technology industry group PBT of Rs.86 million in the third quarter of 2017/18 is a decrease of 56 per cent over the third quarter of the previous financial year [2016/17 Q3: Rs.195 million]. The corresponding quarter of the previous year included profits of the Group s BPO business which was divested in September The Office Automation businesses recorded a decline in profitability on account of lower volumes in its product segments. Other, Including Plantation Services Other, comprising of the Holding Company and other investments, and the Plantation Services sector, recorded a PBT of Rs.1.37 billion in the third quarter of 2017/18, which is a decrease of 19 per cent over the third quarter of the previous financial year [2016/17 Q3: Rs.1.70 billion]. The decrease in PBT is mainly attributable to lower exchange gains recorded at the Company on its foreign currency denominated cash holdings compared to the corresponding quarter of the previous financial year. The performance of the Plantation Services sector was impacted by trading losses due to a decline in tea prices within the quarter under review. Sustainability Initiatives Demonstrating the ongoing efficiency initiatives implemented by the Group, the carbon footprint and water withdrawn per million rupees of revenue decreased by 6 per cent and 18 per cent respectively to 0.79 MT and cubic meters during the quarter. In absolute terms, the carbon footprint increased by 2 per cent to 23,244 MT mainly as a result of increased operational activities in the Retail sector and the inclusion of Cinnamon Air to the Group s sustainability reporting scope whilst water withdrawal decreased by 11 per cent to 443,384 cubic meters mainly due to decreased operational activities in the Consumer Foods sector and the closing down of Bentota Beach by Cinnamon for refurbishment. The quarter on quarter performance when assessed against the 2020 Group sustainability goals, indicates a 5 per cent increase in energy usage and a 7 per cent reduction in water usage, from the targets established against the baseline year of 2015/16. The Group continuously monitors the progress towards the established goals and will strive to achieve the 2020 Goal. Group employees were provided with approximately 9 hours of training per employee, whilst 61 occupational injuries were reported during the quarter under review. Corporate Social Responsibility Following are some of the highlights of John Keells Foundation s (JKF) initiatives during the quarter under review: Under the John Keells English Language Scholarship Programme, a total of 1,248 school children followed classes under English for Teens courses held in various parts of the country. Under the Neighbourhood Schools Development Project, Ordinary Level revision classes were conducted benefiting 196 students sitting for the examination in December The third and final phase of the three-year Science Day Programme (conducted in collaboration with the Sri 4 John Keells Holdings PLC Interim Condensed Financial Statements Nine months ended 31 December 2017 Chairman s Review Lanka Association for the Advancement of Science) was completed with a cumulative participation of 858 students and 66 teachers from 62 schools in 6 districts. Under Project WAVE (Working Against Violence through Education), 741 employees were sensitised on gender based violence and child abuse. JKF conducted its second public awareness campaign against sexual harassment in public transport to coincide the International Day for the Elimination of Violence Against Women. The campaign targeting train commuters and undertaken in collaboration with the Sri Lanka Railways saw 107 John Keells volunteers disseminating approximately 30,000 information cards to commuters as well as pasting 1,500 stickers in railway carriages. Parallel to the public campaign, a social media campaign and a campaign targeting staff were also carried out. Under the John Keells Vision Project, 6,008 students of 30 schools in the Colombo district underwent vision screening and 475 eye glasses were donated to students. A total of 1,901 persons were sensitised under the John Keells HIV and AIDS Awareness Campaign. World AIDS Day falling on 1st December was commemorated across the Group with awareness raising initiatives for internal and external audiences. Under the Village Adoption Project, 30 low income families in Mullaitivu were provided seed capital and guidance to pursue self-enterprises under a Family Empowerment Programme conducted in collaboration with Sri Lanka Red Cross Society. Under Project Gathering (a 2-year research initiative on elephant gathering, behavioural and dispersion patterns undertaken by Cinnamon Nature Trails in collaboration with JKF), the satellite tracking of two elephant herds was initiated through GPS collaring. Dividends The Company paid a first interim dividend for the financial year 2017/18 in November 2017, amounting to Rs.2.00 per share. Your Board declared a second interim dividend of Rs.2.00 per share to be paid on 22 February Retirements and Appointments I would like to place on record our deep appreciation for the invaluable contribution made by Mr. Ajit Gunewardene, Deputy Chairman, and Mr. Ronnie Peiris, Group Finance Director, who retired with effect from 31 December As announced in the Group s succession plan, Mr. Krishan Balendra and Mr. Gihan Cooray assumed office as the Deputy Chairman and the Group Finance Director respectively, effective from 1 January Further, Mr. Balendra will take over as Chairman and Mr. Cooray as Deputy Chairman/ Group Finance Director upon my retirement at the end of this year. Susantha Ratnayake Chairman 30 January 2018 5 Consolidated Income Statement Quarter ended 31 December Note Change % Nine months ended 31 December Change % Continuing operations Sale of goods 21,416,901 18,314, ,126,523 49,798, Rendering of services 9,799,269 9,623, ,535,893 26,626,732 3 Revenue 31,216,170 27,937, ,662,416 76,425, Cost of sales (24,332,208) (19,798,782) 23 (66,946,413) (53,735,578) 25 Gross profit 6,883,962 8,138,524 (15) 20,716,003 22,689,567 (9) Other operating income 529, , ,559,797 1,167, Selling and distribution expenses (1,136,594) (1,108,166) 3 (3,133,636) (3,010,665) 4 Administrative expenses (3,125,619) (3,067,844) 2 (9,573,199) (8,674,756) 10 Other operating expenses (751,675) (863,701) (13) (2,310,726) (2,539,028) (9) Results from operating activities 2,399,253 3,536,195 (32) 7,258,239 9,632,227 (25) Finance cost (153,308) (3,090) 4,861 (414,081) (310,955) 33 Finance income 2,615,340 2,647,664 (1) 8,609,699 7,290, Change in insurance contract (347,633) (100) (3,626,788) (3,543,541) 2 liabilities Change in fair value of - 9, ,677 - investment property Share of results of equity accounted investees 967, , ,039,962 2,401, Profit before tax 5,829,650 6,724,567 (13) 14,867,031 15,479,451 (4) Tax expense 8 (1,025,294) (1,067,235) (4) (3,038,730) (2,981,582) 2 Profit for the period 4,804,356 5,657,332 (15) 11,828,301 12,497,869 (5) Attributable to: Equity holders of the parent 4,492,196 5,149,282 (13) 11,055,001 11,289,298 (2) Non-controlling interest 312, ,050 (39) 773,300 1,208,571 (36) 4,804,356 5,657,332 (15) 11,828,301 12,497,869 (5) LKR. LKR. LKR. LKR. Earnings per share Basic Diluted Dividend per share Note : All values are in LKR '000s, unless otherwise stated. Figures in brackets indicate deductions. The above figures are not audited. 6 John Keells Holdings PLC Interim Condensed Financial Statements Nine months ended 31 December 2017 Consolidated Statement of Comprehensive Income Quarter ended 31 December Nine months ended 31 December Note Profit for the period 4,804,356 5,657,332 11,828,301 12,497,869 Other comprehensive income Other comprehensive income to be reclassified to income statement in subsequent periods Currency translation of foreign operations (339,895) 815,457 (15,719) 622,439 Net (loss)/gain on cash flow hedges 128, , , ,331 Share of other comprehensive income of equityaccounted (20,018) 101, , ,658 investees Net gain/(loss) on available-for-sale financial assets (32,293) (470,462) 831,630 (194,709) Net other comprehensive income to be reclassified to income statement in subsequent periods (263,895) 961,013 1,105, ,719 Other comprehensive income not to be reclassified to income statement in subsequent periods Revaluation of land and buildings 1,916, ,753 1,983, ,753 Remeasurement gain / (loss) on defined benefit plans - - (9,600) - Share of other comprehensive income of equity - 6,525-6,525 accounted investees Net other comprehensive income not to be reclassified 1,916, ,278 1,974, ,278 to income statement in subsequent periods Tax on other comprehensive income 8 (20,007) - (22,708) (1,185) Other comprehensive income for the period, net of tax 1,633,084 1,170,291 3,057,432 1,202,812 Total comprehensive income for the period, net of tax 6,437,440 6,827,623 14,885,733 13,700,681 Attributable to: Equity holders of the parent 5,787,298 6,236,930 13,664,328 12,433,493 Non-controlling interest 650, ,693 1,221,405 1,267,188 6,437,440 6,827,623 14,885,733 13,700,681 Note : All values are in LKR '000s, unless otherwise stated. Figures in brackets indicate deductions. The above figures are not audited. 7 Consolidated Statement of Financial Position As at ASSETS Non-current assets Property, plant and equipment 71,279,577 64,396,373 Lease rentals paid in advance 12,945,581 13,206,058 Investment property 9,763,471 5,366,180 Intangible assets 2,053,284 2,118,160 Investments in equity accounted investees 21,403,633 17,718,887 Non current financial assets 33,222,818 27,666,621 Deferred tax assets 162, ,548 Other non current assets 48,239,825 41,692, ,070, ,308,143 Current assets Inventories 5,880,019 5,605,712 Trade and other receivables 11,836,506 11,687,429 Amounts due from related parties 159, ,639 Other current assets 3,741,415 3,265,327 Short term investments 67,328,052 79,174,327 Cash in hand and at bank 6,119,004 5,119,185 95,064, ,963,619 Total assets 294,135, ,271,762 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Stated capital 62,796,910 62,790,080 Revenue reserves 83,090,827 77,193,184 Other components of equity 41,614,053 38,651, ,501, ,634,832 Non-controlling interest 15,720,253 15,695,543 Total equity 203,222, ,330,375 Non-current liabilities Insurance contract liabilities 34,955,793 31,700,278 Interest bearing loans and borrowings 17,964,254 14,202,636 Deferred tax liabilities 2,696,934 2,336,241 Employee benefit liabilities 2,044,109 1,880,287 Other deferred liabilities 749, ,891 Other non-current liabilities 4,861,464 3,933,882 63,272,095 54,892,215 Current liabilities Trade and other payables 14,437,256 14,136,040 Amounts due to related parties 1,945 10,434 Income tax liabilities 1,820,551 2,395,379 Short term borrowings 2,332,599 1,380,238 Interest bearing loans and borrowings 1,829,066 2,918,854 Other current liabilities 3,241,367 2,944,118 Bank overdrafts 3,978,929 4,264,109 27,641,713 28,049,172 Total equity and liabilities 294,135, ,271,762 Net assets per share Note : All values are in LKR '000s, unless otherwise stated. The above figures are not audited. I certify that the financial statements comply with the requirements of the Companies Act No.7 of LKR. LKR. Suran Wijesinghe Group Financial Controller The Board of Directors is responsible for the preparation and presentation of these financial statements. S C Ratnayake Chairman J G A Cooray Group Finance Director 30 January 2018 8 John Keells Holdings PLC Interim Condensed Financial Statements Nine months ended 31 December 2017 Consolidated Statement of Cash Flows For the nine months ended 31 December Note CASH FLOWS FROM OPERATING ACTIVITIES Profit before working capital changes A 7,163,091 9,507,755 (Increase) / Decrease in inventories (274,307) (1,026,620) (Increase) / Decrease in trade and other receivables (389,004) 502,392 (Increase) / Decrease in other current assets 165,661 (369,460) (Increase) / Decrease in other non-current assets (6,193,604) (3,783,608) Increase / (Decrease) in trade and other payables and other non-current liabilities 1,160,608 21,187 Increase / (Decrease) in other current liabilities 355, ,509 Increase / (Decrease) in insurance contract liabilities 3,255,515 3,321,119 Cash generated from operations 5,243,774 8,984,274 Finance income received 8,281,122 6,959,628 Finance costs paid (414,081) (204,679) Dividend received 1,341,176 1,280,475 Tax paid (4,004,514) (3,081,590) Gratuity paid (129,525) (143,213) Net cash flow from operating activities 10,317,952 13,794,895 CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES Purchase and construction of property, plant and equipment (7,506,746) (3,312,458) Purchase of int
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