Dialog Consolidates Performance with Strong 3rd Quarter results

Dialog Axiata PLC announced, Wednesday 05th November 2014, its consolidated financial results for the nine months ended 30th September, 2014. Financial results included those of Dialog Axiata PLC (the “Company”) and of the Dialog Axiata Group (the “Group”) post-consolidation with subsidiaries Dialog Broadband Networks (Pvt) Ltd (“DBN”), and Dialog Television (Pvt) Ltd (“DTV”).

The Group continued its strong growth momentum across Mobile, Digital Pay Television, Tele-infrastructure and Fixed Line businesses to record a consolidated revenue of Rs. 17.0Bn for Q3 2014 and Rs. 50.0Bn for the nine months ended 30th September 2014 respectively, representing an increase of 2% Quarter on Quarter (“QoQ”) and 6% Year to Date (“YTD”). On the backdrop of strong revenue growth, Group EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) grew by 4% QoQ to be recorded at Rs. 5.5Bn for Q3 2014. The Group EBITDA for the first nine months of the year was recorded at Rs. 15.4Bn, up 1% compared to the corresponding period in 2013. Group YTD EBITDA margin was registered at 31%.

The Group NPAT (Net Profit After Tax) for Q3 2014 was recorded at Rs. 1.7Bn, an increase of 2% QoQ on the back of growth in Group EBITDA. Group NPAT for the nine months ended 30th September 2014 was posted at Rs. 4.6Bn, an increase of 13% YTD.

At an entity level, Dialog Axiata PLC (“the Company”) featuring the Mobile, International and Tele-Infrastructure segments of the Group portfolio continued to contribute a major share of Group Revenue (85%) and of Group EBITDA (89%). Company revenue grew by 2% QoQ on the back of its 9 Million over Mobile subscriber base to reach Rs. 14.7Bn in Q3 2014. Revenue for the nine months ended 30th September 2014 was recorded at Rs. 43.3Bn, up 5% relative to the corresponding period in 2013. Underpinned by robust performance in Revenue, Company EBITDA reached Rs. 4.9Bn in Q3 2014, representing an increase of 3% QoQ. Company EBITDA for the first nine months of the year increased by 2% YTD to reach Rs. 13.8Bn. Company NPAT for the quarter was recorded at Rs. 2.0Bn whilst the Company's NPAT for the first nine months of the year was recorded at Rs. 5.4Bn compared to a NPAT of Rs. 4.4Bn in the corresponding period due to growth in EBITDA and recognition of a foreign exchange gain in contrast to a foreign exchange loss in 2013.

Dialog Television (DTV), the Digital Pay Television business of the Dialog Group continued its growth momentum, recording revenue growth of 29% YTD to reach Rs. 3.4Bn for the first nine months of 2014. DTV EBITDA was recorded at Rs. 690Mn for the same period, an improvement of 55% YTD driven by strong revenue growth. On the backdrop of growth in EBITDA, Net Profit for the nine months ended 30th September 2014 was recorded at Rs. 252Mn, compared to a net loss of Rs.19Mn posted for the corresponding period in 2013.  The company‟s Pay TV subscriber base grew by 36% YoY to be recorded at 410,000 subscribers as at end Q3 2014.

Dialog Broadband Networks (DBN) featuring the Group‟s Fixed Telecommunications and Broadband Business recorded revenue of Rs. 4.5Bn for the first nine months of the year, representing an increase of 3% YTD. Following the expiration of VAT credits totalling to Rs. 392Mn recognised during the corresponding period in 2013, DBN EBITDA contracted 26% YTD to reach Rs. 909Mn. DBN‟s net loss for the same period was recorded at Rs. 924Mn relative to the net loss of Rs. 280Mn in the corresponding period of 2013. Negative NPAT performance was attributed to the decline in EBITDA in combine with the increase in depreciation due to Fixed 4G-LTE related investments.

Group capital expenditure for Q3 2014 amounted to Rs. 4.0Bn and was focused on investments in high speed broadband infrastructure to support the Group‟s strategy to consolidate and grow its leadership in the data space. Group Free Cash Flow (FCF) was recorded at Rs. 1.1Bn for Q3 2014 on the back of improved EBITDA. The Dialog Group continued to exhibit a structurally robust balance sheet with Net Debt to EBITDA ratio improving from 1.2 times as at end of Q2 2014 to 1.03 times as at end of Q3 2014. The Dialog Group was reaffirmed a Fitch National Long Term Rating of „AAA (lka)‟/Stable in September 2014.

Sri Lankan stocks at near-4-week high

Nov 5 (Reuters) - Sri Lankan stocks rose on Wednesday to hit a near-four-week high led by banks and helped by low interest rates and better earning expectations.

Sri Lanka's main stock index closed up 0.51 percent, or 37.57 points, at 7,358.46, its highest close since Oct. 9.

"Earnings are quite healthy. We expect buying interest to continue amid lower interest rate regime," said Dimantha Mathew, manager, research, at First Capital Equities (Pvt) Ltd.

Shares in top listed lender Commercial Bank of Ceylon Plc , which led the overall gain, rose 1.89 percent to 172.80 rupees, while Lanka IOC Plc rose 8.42 percent to 59.20 rupees.

Top conglomerate John Keells Holdings Plc, which reported a 29 percent year-on-year rise in September quarter net profit on Tuesday, rose 0.75 percent to 255 rupees.

Foreign investors were net buyers of 547.6 million rupees ($4.18 million) worth of shares, extending the net foreign inflow so far this year to 14.83 billion rupees, exchange data showed.

Wednesday's turnover was 2.1 billion rupees, well above this year's daily average of 1.39 billion rupees.

Analysts expect trading to be choppy in the near-term due to the revised presidential poll schedule in January and a possible bottoming out of interest rates.

The country's central bank has kept key policy rates steady for a ninth straight month, saying private sector credit growth was picking up and long-term lending rates were adjusting downwards.

($1 = 130.8500 Sri Lankan rupee) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Sri Lanka stocks close up 0.5-pct

Nov 05, 2014 (LBO) - Sri Lanka's stocks closed 0.51 percent higher with the price gains of Commercial Bank and Lanka IOC, amid net foreign purchases, brokers said.

The Colombo benchmark All Share Price Index closed 37.57 points higher at 7,358.46, up 0.51 percent. The S&P SL20 closed 15.86 points higher at 4,102.11, up 0.39 percent.

Turnover was 2.10 billion rupees, up from 1.99 billion rupees a day earlier with 116 stocks closed positive against 74 negative.

John Keells Holdings had off market transactions of 370.58 million rupees changing hands at 256.00 rupees per share contributing 18 percent of the turnover.

The aggregate value of all off-the-floor deals represented 22 percent of the daily turnover.

Lanka IOC attracted most number of trades during the day.

Foreign investors bought 699.14 million rupees worth shares while selling 151.50 million rupees worth shares.

Commercial Bank of Ceylon closed 3.20 rupees higher at 172.80 rupees and Lanka IOC closed 4.60 rupees higher at 59.20 rupees, contributing most to the index gain.

Access Engineering closed 1.20 rupees higher at 33.20 rupees and John Keells Holdings closed 1.90 rupees higher at 255.00 rupees.

JKH’s W0022 warrants closed 20 cents higher at 73.40 rupees and its W0023 warrants closed 50 cents higher at 79.00 rupees.

Dialog Axiata closed 10 cents higher at 12.20 rupees.

Merchant Bank of Sri Lanka said a listed debt offer for 2.00 billion rupees had been oversubscribed Wednesday and is closing on the same day.

Sri Lanka's October tourist arrivals up 13.56 pct yr/yr

Janashakthi posts Rs 609 m BPT in nine months

Janashakthi Insurance PLC posted yet another solid performance despite recording higher than normal claims. Continuing its strategy of ensuring the fairest and most responsive customer claims management process in the industry, Janashakthi has managed to grow bottom line through continued growth of investment income, company said in its interim financial staments as at 30-09-2014.

The company posted a gross written premium Rs 6.3 bn and a profit before tax of Rs 609 mn. This was despite prevailing lackluster industry growth of 4.5 % in motor business and a negative -2.8% in non motor. The life industry itself grew at around 7.65%.

This was achieved while still honouring a hefty Rs 3.7 bn in claims. Claims management and disbursement is a critical driver of performance both in customer expectations and in building brand equity. The year has been a tough one for the industry but it is a landmark year for the Company that now records its twentieth year. Growth in total assets was 9.8% for the period under review as against the same period last year. The total assets as the end of quarter 04, 2014 amounts to Rs 19.6 bn. Life operations sales and insurance functions were totally revamped with structural changes. The interim three months of transition has impacted on sales growth on the life side, which is anticipated to show growth momentum in 2015.
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Fitch withdraws Ratings on Softlogic Holdings

Fitch Ratings has withdrawn Softlogic Holdings Plc’s (SHL) National Long-Term Rating of ‘BBB-(lka)’ and the ‘BBB-(lka)’ rating on the company’s senior unsecured redeemable debentures. Both ratings were on Rating Watch Negative.

The ratings have been withdrawn due to insufficient information to maintain the ratings.

While the Issuer has provided Fitch with some information, we have not received sufficient information. Fitch will no longer provide rating or analytical coverage of this issuer.
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Sunshine Holdings posts Rs 551M PAT for 1H

Sunshine Holdings PLC (CSE: SUN) reported PAT of Rs 551 million for the six months ended 30 September 2014 (1HFY15), up 52.6% YoY on a consolidated top line of Rs 8.2 billion, up 16.9% YoY due to strong performance by all three of its core sectors.

EBIT margin of 9.3% for 1H FY15 was up 100bps from 8.3% in 1HFY14. The growth in revenue is mostly attributed to the Agri sector, especially Palm Oil and Tea. Healthcare and FMCG also contributed to grow the top-line. The increase in profitability is attributed to better margins in Palm Oil and lower interest cost due to contraction in lending rates.

For 1HFY15, PAT grew 52.6% YoY, but Profit to equity holders (PATMI)is up only 17.0% YoY to Rs 283 million. Majority of the growth in PAT is on account of the strong performance of the Agri sector which has a limited impact at the PATMI level due to low effective holding. Healthcare still remains the largest contributor to PATMI in 1HFY15 with Rs 154 million, which represents 54.6% of total PATMI.

Net Asset Value per share increased to Rs 37.58 as at end 1HFY15, compared to Rs 36.23 at the beginning of the year (FY14).

Healthcare revenue for 1HFY15 grew 8.0% YoY and stood at Rs 2.9 billion. This represents 35.8% of Group turnover for the period. 2QFY15 was a better quarter for the Healthcare sector with revenues amounting to Rs 1.5 billion, up 12.0% against 2QFY14.

The Pharma sub segment which made Rs 2.0 billion in revenues (67.4% of Healthcare revenue) grew 5.6% YoY over 1HFY14. This was a commendable performance against the market growth of just 2.07% based on IMS data.Growth in other sub sectors were at; Retail (+15.2% YoY), Surgical (+13.7% YoY), Diagnostics (+4.3% YoY), OTC (+17.3% YoY). The strong growth in our Retail sector came in the back of increased revenues from 3 new outlets, namely Thalawathugoda, Orion City, Ethul Kotte.

PAT for Healthcare amounted to Rs 154 million in 1HFY15, up 1.2% YoY. PAT margin contracted to 5.3% in 1HFY15, against 5.6% in 1HFY14, due to higher growth in operating expenses, including promotional expenses which grew 25.1% YoY.

The healthcare business was rebranded as 'Sunshine Healthcare Lanka' in 2HFY15 and as such will build on the brand strength of the group name. Through this rebranding we have communicated to all stakeholders, our vision for a continued focus on the healthcare business to be the most admired healthcare marketing company in Sri Lanka.

The FMCG sector reported revenues of Rs 1.3 billion in 1HFY15, up 16.0% YoY, on the back of both volume and price growth. The sector accounts for 16.2% of group revenue for the quarter. The branded tea business within FMCG sold 1.5 million kgs of branded tea, up 11.6% YoY, primarily driven by their largest brand 'Watawala Tea'. The division also markets edible oil under the 'Oliate' brand and bottled water under 'Zest' brand.

PAT from the FMCG segment contracted 7.4% YoY to stand at Rs 123 million in 1HFY15, with margin of 9.3% in 1HFY15, compared to 11.7 % in the same period last year. The dip in profitability is due to a challenging 1QFY15 which generated only Rs 29 million PAT at a margin of 4.9%. But this was reversed in 2QFY15 where profits grew by 19.6% to stand at Rs 94 million. 2Q PAT margin was at 12.9% and was comparable to same period last year.

The Agri sector with revenues of Rs 3.7 billion in 1HFY15, up 27.9% YoY, contributed 45.1% of the total group revenue. Management attributes the strong topline growth mainly to its tea segment which saw higher volumes aided by favorable weather in 1QFY15, and increased quantities of bought crop.Palm Oil volumes (+5.7% YoY) continued to grow steadily during 1HFY15.

PAT for 1HFY15 amounted to Rs 262 million, against Rs 99 million in the same period last year. The growth is mainly attributed to the strong performance in the 1QFY15, with PAT for 2QFY15 just amounting to Rs 31 million, down 64.2% YoY. 2QFY15 was challenging for the Agri sector which was adversely affected by inclement weather.

Nevertheless, the Palm Oil segment which made Rs 421 million PAT for 1HFY15, continued to be the largest contributor to WATA profits and managed to cover the losses in both Tea and Rubber.

Packaging revenues amounted to Rs 137 million, up 4.0% YoY in 1HFY15, against
Rs 132 in the same period last year. 2QFY15 was challenging to the packaging division which saw a contraction in sales to the Tea Export Industry currently suffering from tensions in the CIS and the Middle East. Sales to the confectionary sector was also lull highlighting the challenges in the industry. PAT was negative for the Packaging business at (Rs 7 million) due to a challenging 2QFY15as a result of low capacity utilization at the plant.

Revenue for the Renewable energy division witnessed a dip of 24.6% YoY to
Rs 46 million 1HFY15 due to low rainfall during 1QFY15 and also five day loss of revenue due to CEB grid failure. As a result, the mini-hydro plant, which is in its second year of operation made PAT of Rs 2 million, down 36.3% YoY.

For FY15, we expect revenue growth to be largely driven by our core business segments. 

Our Healthcare segment will focus on aggressively growing its Wellness brands business, and to increase the retail footprint of Healthguard. The group also expects more traction from the new products which were introduced during FY14. In the Parma space, the company has launched 51 products for 1HFY15 and plans to lunch another 26 products in 3QFY15.

In FMCG, we are bullish on our bottom of the pyramid strategy, in which we target to convert the unbranded tea consumers with our 'Ran Tea' brand. This segment is estimated to consume approx. 14m kgs a year. We will also continue to expand our edible oil and bottled water business going forward.

For the Agri sector, we expect the Palm Oil segment to continue its strong performance for 2HFY15. We expect CPO prices to be challenged during 2HFY15, given the global dip in CPO prices.

We are also mindful of the demand side issues with buying at the auctions slowing down due to issues in key Ceylon tea markets in CIS and the Middle East.

In our road map towards 10MW, the group plans to add another two mini-hydro plants 
with a combined capacity of 5MW, at a cost of LKR1.2bn. Power Purchase Agreements (PPA) with the CEB were signed during 2QFY15 and the 2 projects will commence construction soon.
www.ceylontoday.lk

Textured Jersey marks emphatic recovery with 72% growth in 2Q profits

Textured Jersey Lanka PLC (TJL) has reported a top line of Rs. 3.5 b and net profit of Rs. 282 m for the quarter ended 30 September 2014 (2Q FY2014/15).

According to TJL Chairman Bill Lam, this marked an emphatic recovery from the temporary setback suffered in the previous quarter, with sales up 29% and net profit up 72% on a quarter on quarter basis. Further, on a year on year basis the company was back on a strong growth trajectory with both sales and net profit up 7%.

Lam further stated that gross profit for 2Q FY2014/15 reduced by 2% year on year to Rs. 339 m, mainly due to lower margins arising from a combination of factors which included changes in product mix, outsourcing and higher dyes and chemical costs. However, the company managed to cut down its administrative and distribution expenses by 4% to Rs. 99 m, which resulted in the operating profit remaining at Rs. 249 m, on par with the corresponding quarter of last year.

TJL continued to maintain its near debt-free balance sheet as at 30 September 2014, with a strong cash position of Rs. 1.6 b, and only a temporary overdraft of Rs. 366 m. However, according to Lam, the cash balance was 21% less compared with the previous year, due to dividends and capital expenditure during the current quarter. As a result, net finance income for 2Q FY2014/15 was Rs. 16 m, 10% lower compared to last year.

Lower interest rates also contributed to this reduction in net finance income. The other operating income consisting of technical service fees of Rs. 21 m, allowed TJL to close the quarter at a net profit of Rs. 282 m, an improvement of 7% from last year.

Commenting on strategic initiatives, Lam highlighted that the construction phase of the multi fuel co-generation boiler plant was successfully completed during the quarter and test operations had been commenced. The plant will be fully operational in the coming quarters and is expected to generate substantial savings in energy costs. Similarly, the recently added 10-12% capacity will be fully utilised during the coming quarters with US demand coming back on track.

He concluded by stating that with strategic investments made in recent times coming into fruition, combined with a strong focus on innovation, quality and execution, the management is confident that TJL will be able to continue its growth trajectory and create shareholder value for the foreseeable future.
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Dr. Senthilverl buys over 8% stake in Vallibel Power, US firm sells 21% stake

High net worth but low-profile investor Dr. T. Senthilverl yesterday acquired over 8% stake in Vallibel Power Erathna Plc for over Rs. 660 million as a longstanding foreign shareholder exited.

Vallibel Erathna saw 187.6 million shares changing hands via 1,505 trades for Rs. 1.245 billion. The number of trades confirms the retail and high net worth investor play on the stock.

Of the quantity traded 85 million shares and 74 million shares changed hands at Rs. 6.60. 

Dr. Senthilverl previously held 3.6 million shares in the company as at 30 September 2014.

The seller was longstanding shareholder Asia Energy Management Systems Inc, a US-based firm with interests in the power sector in Asia and the Middle East. It also enjoyed two board seats. As at 30 September 2014, Asia Energy held 160 million shares of 21.4% stake in Vallibel Power which is controlled by business leader Dhammika Perera with over 60% stake.
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JKH posts impressive 2Q results but flags off Land Bill concern

Premier blue chip John Keells Holdings Plc (JKH) yesterday announced impressive second quarter results, reflecting strong resilience despite challenging times.

The Group profit before tax (PBT) at Rs. 3.68 billion in the second quarter of the financial year 2014/15 was an increase of 39%. The cumulative PBT for the first half of the financial year 2014/15 at Rs. 6.74 billion was an increase of 39%. 


“The profit attributable to equity holders for the second quarter at Rs. 2.65 billion reflects an increase of 29% over the previous year, while the first half performance at Rs. 4.79 billion reflects an increase of 32% over the corresponding period of the previous financial year,” JKH Chairman Susantha Ratnayake said in a note accompanying interim results.

The revenue at Rs. 22.16 billion in the second quarter of the financial year 2014/15 was an increase of 6% over the Rs. 20.88 billion recorded in the second quarter of the previous financial year. The cumulative revenue for the first half of the financial year 2014/15 at Rs. 43.45 billion was an increase of 7% over the revenue of Rs. 40.73 billion recorded in the same period of the previous financial year
Company PBT for the second quarter of the financial year 2014/15 at Rs. 1.09 billion was an increase of 481% over the PBT of Rs. 188 million recorded during the same period last year, while the PBT for the first half of the financial year at Rs. 4.06 billion was an increase of 65% over the previous financial year.

Though posting impressive results, JKH made it a point to refer to the contentious Land Bill in the Chairman’s Review.

“The Land (Restrictions on Alienation) Act recently passed by Parliament poses several challenges to business in general. Impacts to the Group, if any will be assessed once the specifics in the Act are interpreted and understood,” JKH Chief Ratnayake added.

Following is a snapshot of JKH’s sectoral performance:

Transport: The Transportation industry group PBT of Rs. 589 million in the second quarter of 2014/15 was a decrease of 21% over the second quarter of the previous financial year [2013/14 Q2: Rs. 745 million]. The decline in profitability is mainly attributable to the lower contribution from the Bunkering business, where, in spite of maintaining market share, margins contracted on account of an increasingly competitive operating environment. The performance of the port business was in line with expectations, as volumes stabilised and the continuous focus on cost management further contributed towards profitability. DHL Keells witnessed an improvement in its performance aided by the continued growth in its active customer base.



Leisure: The Leisure industry group PBT of Rs. 1.15 billion in the second quarter of 2014/15 was a marginal increase over the second quarter of the previous financial year [2013/14 Q2: Rs. 1.14 billion]. The associate Cinnamon Red, a select service business hotel, commenced operations during the quarter under review and has recorded encouraging occupancies to date. The Sri Lankan resorts sector witnessed an increase in occupancies, aided by the growth in tourist arrivals, whilst higher average room rates and successful management of costs further strengthened profitability.

The performance of the city hotel sector was negatively impacted during the quarter under review on account of lower volumes generated primarily through the corporate and MICE segments. The performance of the destination management business was in line with expectations primarily driven by a significant improvement in volumes generated from China which was augmented by the commencement of a weekly charter.

Property: The Property industry group PBT of Rs. 341 million in the second quarter of 2014/15 was a significant increase over the second quarter of the previous financial year [2013/14 Q2: Negative Rs. 45 million]. The improved performance was mainly on account of higher revenue recognition at the OnThree20 and 7th Sense on Gregory’s Road residential apartment projects, which have sold 96% and 83% of apartment units to date respectively.

Construction of the ‘Waterfront Project’ is in progress with demand for both the residential and commercial spaces continuing to be promising.

Consumer Foods and Retail: The Consumer Foods and Retail industry group PBT of Rs. 496 million in the second quarter of 2014/15 was an increase of 96% over the second quarter of the previous financial year [2013/14 Q2: Rs. 253 million].

Both the Frozen Confectionary and Beverage businesses benefited as a result of a growth in volumes emanating from the improving consumer sentiment and an evolving product portfolio. Keells Food Products recorded a growth in volumes compared to the second quarter of the previous financial year with its performance being in line with expectations. The Retail sector recorded a significant improvement in performance as it continued to benefit from year-on-year growth in same store sales due to a notable increase in footfall.

Financial Services: The Financial Services industry group PBT of Rs. 460 million in the second quarter of 2014/15 was an increase of 51% over the second quarter of the previous financial year [2013/14 Q2: Rs. 305 million]. Nations Trust Bank was the primary contributor to the improved performance as it benefited from a marginal pick up in credit volumes coupled with an increased focus on operational cost management and investment in IT infrastructure. The performance of the insurance business was in line with expectations. The life business maintained its market share while the general business focused on managing underwriting results in an increasingly competitive industry coupled with a low interest rate environment. The stock broking business recorded strong results in the quarter under review driven by the higher revenue on account of the improved daily market turnover levels and the execution of a few large transactions.

Information Technology: The Information Technology industry group PBT of Rs. 112 million in the second quarter of 2014/15 was an increase of 162% over the second quarter of the previous financial year [2013/14 Q2: Rs. 43 million]. The improved performance was driven by the office automation business and the software services business, which realised a gain of Rs. 41 million on the sale of its hotel reservation software Zhara HS. The office automation business benefited from the growing demand for smart phones, whilst greater emphasis on managing margins further enhanced profitability. Growth from existing clients had a positive impact on the Group’s Business Process Outsourcing (BPO) operations.

Other, Including Plantations: Other, including Plantation Services and the Corporate Centre recorded a PBT of Rs. 531 million in the second quarter of 2014/15, which was an increase of 154% over the second quarter of the previous financial year [2013/14: Rs. 209 million]. The improved performance is mainly on account of an increase in the finance income.

JKH also announced one rupee per share interim dividend for FY15 with payment on 25 November and XD on 14.Nov.2014.
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