July 22, 2016 (LBO) – Sri Lanka’s Access Engineering said group net profits grew 5.1 percent to 2.46 billion rupees in the year to March 2016, with the civil engineering firm facing a slow down in the global and local economy.
The company showed a better performance with a 19.1 percent growth in net profits — group revenue grew 6.7 percent to 17.6 billion rupees.
Earnings per share rose 5.1 percent to 2.47 rupees and share closed on Friday at 23.20 rupees. Earnings per share is down from a high of 2.83 rupees in 2014.
“Looking forward, while we remain firmly convinced that there still is great opportunity in our core business, there are also reasons why we need to strengthen our position by way of further diversification,” Chairman Sumal Perera said in the annual report.
The principal way to ensure financial stability is to expand further into real estate, he said.
“We have set ourselves a target of constructing a minimum of three million square feet of valuable real estate over the next five years.”
The group invested in three real estate companies during the year which collectively hold 21 acres of land in Malabe. This would strengthen the balance sheet by converting depreciating assets such as cash and cash equivalents into appreciating assets such as land, bricks and mortar, he said.
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“Our thrust into real estate will be backed up by our core competencies in design, engineering, construction and procurement.”
In June, Access Engineering said it invested 800 million rupees to buy 50 percent stake of a property developer, Blue Star Constructions private limited.
Access Engineering said in a stock exchange filing that the developer is the beneficial owner of over a 1 acre property located in Rajagiriya.
“There is every possibility of the engineering and construction sectors being targeted for tax increases like the banking and financial sectors have been. In this scenario, we should focus on lobbying for tax holidays for our investments,” Perera added.
Another thrust of diversification was the Motor Vehicle sector, he said. The investment in Sathosa Motors was “a resounding success” with the shares purchased quadrupling in value.
“Further SML Frontier, which is 50 percent owned by Sathosa Motors has shown a fair performance over the years and we intend to go for an IPO for SML Frontier anytime after November 2016.”
The other Access Engineering Group companies, Sathosa Motors PLC (SML), Access Realties (Private) Limited (ARL), ZPMC Lanka Company (Private) Limited (ZPMC) and Access Projects (Private) Limited, recorded year on year growths both on the top and the bottom lines, the annual report said.
“Access Realties improved on its cash profit compared to last year, primarily because the previous year’s profit included revaluation gain. The Company’s new acquisitions of Horizon Holdings, Horizon Holdings Ventures and Horizon Knowledge City did not have any significant business activities during the year.”