John Keells Holdings PLC (JKH), the country’s largest market capitalized conglomerate, has seen a first half downturn in the six months ended September 30, 2009 but the company’s Chairman, Mr. Susantha Ratnayake, has told shareholders that "the potential that has emerged as a result of the end of the conflict offers unprecedented opportunities to all our businesses."

"Given our exposure to key segments of the economy and our strong balance sheet, we are well positioned to benefit from the opportunities that the new environment presents," he said in an upbeat interim statement now with shareholders.

"We have already invested in increasing our presence in the North-East in the consumer foods and retail industry group and the financial services industry group and will be upgrading the Club Oceanic Hotel commencing December 1, 2009."

Ratnayake noted that tourism had rebounded relatively quickly following the end of the conflict with August arrivals up 34.3% from a year earlier and September arrivals up 28.6%.

He disclosed that on the basis of their predictions for the tourist industry, "several projects are being evaluated" and told shareholders that details will be unveiled shortly.

The JKH Chairman said that although these half-year results are not as good as those of the comparative period the previous year, "they are well above what was expected at the beginning of the year, given the improved environment."

"We are confident that the full potential that this opportunity affords us will be realized in the near future. However, there is much to be done by all stakeholders to capitalize on this historic opportunity afforded to our country," he said.

The six months under review saw profits attributable to equity holders down 34% to Rs.1.22 billion. The September quarter profits were down 43% to Rs.575 million.

Analysts noted that given the capital gain booked on the AMW divestiture the previous year, the results were not as bad as they looked. Also, on the basis of the LMS judgment, a strong profit generator was no longer part of the group.

Ratnayake reported that revenue for the first half of the current financial year at Rs.21.3 billion was down 2% from a year earlier while the September quarter revenue at Rs.11.2 billion was up 5% from the comparative period the previous year.

At company level, JKH posted a profit of nearly Rs.2 billion for the first half, down 32% from a year earlier.

The interim statement reveals that the transportation segment which is the major cash cow for JKH had seen profit before-tax down 21% to Rs.1.16 billion although in the second quarter, transportation profitability was up 15% to Rs.627 million.

"South Asia Gateway Terminals (SAGT) saw volumes rise for a fourth consecutive month and in August set a record with a throughput of 163,024 TEUs," Ratnayake said.

The leisure sector ran at a loss during the first half although this loss of Rs.174 million was down sharply from a loss of Rs.581 million recorded in the comparative period last year. The second quarter loss of Rs.127 million compared to a loss of Rs.223 million a year earlier.

"This improvement in performance is mainly due to better results achieved by the Maldives and Sri Lankan resorts. Our flagship city hotel, Cinnamon Grand, also performed well. The former Trans Asia Hotel was re-launched on 1 September 2009 as Cinnamon Lakeside. This new product has been well received and is well positioned to increase the group’s dominance in the city," he said.

The property segment also saw a 63% dip in PBT to Rs.105 million with the pre-tax profit in the second quarter too down 34% to Rs.71 million due to what Ratnayake called "the cyclical nature of the revenue recognition."

Gains were posted in consumer food and retail where PBT grew 22% to Rs.91 million and financial services where PBT was up 40% to Rs.382 million. In information technology, losses grew to Rs.35 million during the first half from Rs.18 million a year earlier.

JKH has a stated capital of Rs.22.6 billion, a capital reserve of Rs.7.4 billion and revenue reserves of Rs.16.2 billion in its books.

Total assets were running at Rs.93 billion and current liabilities at Rs.14 billion.

Net assets per share had grown to Rs.75.41 from Rs.71.81 and the JKH share traded at a high of Rs.157 and a low of Rs.62.50 during the half year. This compared to a trading range of Rs.122 to Rs.80.50 a year earlier.