Aitken Spence 1Q hampered by poor power and tourism sector performance

Weak sales and profits from the key power generation and tourism businesses hit Aitken Spence PLC performance as the Sri Lankan corporate monolith with interests in to wider business segments reported financial performance for the quarter ended in June 30, 2018 (1Q’19) last Friday. 

Aitken Spence group reported operating profits of Rs.720.4 million for the April - June period on revenues of Rs.10.6 billion compared to Rs.911 million profit and Rs.11.6 billion revenues for the same period last year. 

The company’s share ended 20 cents or 0.42 percent lower at Rs.47 end of trading last week. 

Aitken Spence was under financial strain until its powerful corporate strongman, Harry Jayawardena’s group in April 2016 managed to strike a deal with the Ceylon Electricity Board (CEB) to re-start the engines of the then abandoned 100 megawatt thermal power plant in Embilipitiya when the country faced back-to-back power blackouts. 

The deal was signed and renewed annually amid serious questions from the power regulator over the rationale behind the purchase of the most expensive thermal power as the CEB until recently failed to win the Public Utilities Commission’s conditional green light to its much delayed Least Cost Long Term Generation Plan. 
During this period the group’s power generation business captured under strategic investments reported significantly less revenues of Rs.3.0 billion compared to Rs.4.7 billion reported during the same quarter last year. 

The segmental operating profit too dropped to Rs.334 million from Rs.476 million a year ago. 

Aitken Spence did not specifically attributed this segment’s weak performance to the power generation business in their earnings release although the power generation unit accounts for a larger share of this segment. 

Sri Lanka’s power generation mix has wider swings between cheaper hydro and most expensive thermal power depending on the rainfall the country receives in to the catchment areas. 

Meanwhile the group’s tourism business which has resorts in Sri Lanka, Maldives, India and Oman reported an operating loss of Rs. 72 million for the quarter, on a revenue of Rs.4.9 billion. 

“Despite the impact of the exchange rates and increase in costs, revenue from the tourism sector remained strong as in the previous year rising by 4.7 percent to Rs. 4.9 billion. The revenue increased across Sri Lanka, the Maldives and India markets while Oman reported a reduction”, the company said in a statement. 

Stating on the losses the company further said the lower occupancies in the Maldivian resorts and a lack of significant improvement in occupancy levels in Sri Lankan hotels contributed towards the losses. 

“Indian performance improved, with better occupancy and banquet sales at Turyaa Chennai. Performance from Aitken Spence Travels during the quarter remained steady over the corresponding period last year”, the company added. 

The company invested heavily on its Heritance Aarah resort, in the Maldives - the first Heritance branded resort in the Maldives which is set to open by the end of 2018. 

Meanwhile the group’s maritime and logistics business reported an operating profit of Rs.367 million on a revenue of Rs.2.2 billion, up from a profit of Rs.297 million and a revenue of Rs.1.9 billion in the year earlier period. 

The company is also investing on a waste-to-energy power plant in Colombo in the north of Colombo and would be equipped to convert municipal solid waste to electricity, aimed at greatly relieving the Colombo city of its waste disposal burden.

For the 1Q’19 Aitken Spence reported earnings of Rs. 52 Cents a share or Rs.210.7 million in after tax profits compared to 87 Cents a share or Rs.354 million after tax profit for the same period last year. 

The Jayawardena-controlled Melstacorp Limited, Rubicond Enterprises Limited and others held over 68 percent of Aitken Spence while the Employees Provident Fund held 5.07 percent stake being the third largest shareholder.