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‘JKH business momentum displays a faster than anticipated recovery’

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• The Group’s Leisure business was significantly impacted during the quarter given the suspension of operations of our hotels in April and May on account of the closure of the airports in Sri Lanka and the Maldives and the lockdown measures in Sri Lanka. The Maldivian airport was opened for arrivals in mid-July. While bookings for the next few weeks are low, we are encouraged by strong forward bookings for the peak season of January to April 2021, exceeding the bookings we had for the same time last year. Whilst Sri Lanka is yet to re-open its airport, our hotels in Sri Lanka have now commenced operations where the recovery of domestic tourism has been encouraging.

• The Consumer Foods businesses displayed a faster than expected recovery in volumes post the easing of the lockdown in May. In the month of June, the Frozen Confectionery and Convenience Foods recorded positive volume growth whilst the Beverage business recorded a low single digit decline.

• The week-on-week momentum of same store sales of the Supermarket business displayed signs of recovery.

• The Group’s Bunkering business, Lanka Marine Services, recorded an increase in profitability driven by improved margins despite a reduction in the overall market volumes due to lower throughput in the Port of Colombo.

• Construction resumed at ‘Cinnamon Life’ in mid-May after a 2-month closure and it is encouraging to note that the momentum is gradually reaching pre COVID-19 levels. The Group is working closely with the contractor to ascertain the impact of the COVID-19 disruptions on the overall timelines of the project. The finishing work of the apartment and office towers are being re-sequenced to be completed within the financial year to enable handover.

• The profitability of Nations Trust Bank recorded an increase despite pressure on margins, due to the positive impact on account of the removal of the Debt Repayment Levy from January 2020 onwards.

• Due to the deployment of cash equity to fund the ‘Cinnamon Life’ project, Group profitability for the quarter was impacted by a year-on-year decrease in finance income, as expected.

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SLT and Epic Technology Group launch ‘Helaviru Digital Economic Center’

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Sri Lanka Telecom – the national ICT service provider and Epic Technology Group – one of the leading digital technology solution providers in the region, proudly launched the Helaviru Digital Economic Center online platform for the first time in South Asia on the July 31.

Helaviru Agro-produce & Commodities Trading Platform is a cloud-based digital marketplace that facilitates trading activities (buying & selling) of agriculture and farm produce and Commodities among diverse stakeholders on a seamlessly connected supply chain.

The Helaviru platform will create an ecosystem of digitally connected agro-producers (farmers & growers), small scale collectors, wholesalers, retailers, large consumers (super markets, food processing industries, hotels, etc.) and agro-produce exporters, and provide an easy and secure channel to carry out their trading activities. In addition, diverse service providers such as Transport & delivery service providers, fertilizer suppliers, plants & seeds suppliers, auxiliary products and services suppliers, agro-insurance providers, banks and government institutes too will be connected to facilitate the main stakeholders and their commercial transactions on the platform, thus will revolutionize the agriculture sector in Sri Lanka.

SLT as a partner will join Epic to operationalize the Helaviru Digital Economic Center, while facilitating to host the platform in its state of the art SLT iDC ensuring reliability and security backed by professional support. Also, users can experience SMS and e-mail facilities along with IVR facilities and call center support. Through this project, SLT will actively endeavor to realize the national objectives of the government of Sri Lanka in uplifting the livelihood of the agriculture sector stakeholders in Sri Lanka. (SLT)

 

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CCPI-based inflation increases in July 2020

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Headline inflation as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2013*100)1 increased to 4.2 per cent in July 2020 from 3.9 per cent in June 2020.

This was mainly driven by monthly increase of prices of items in Non-food category along with the statistical effect of the low base prevailed in July 2019. Food inflation (Y-o-Y) increased to 10.9 per cent in July 2020 from 10.0 per cent in June 2020. Further, Non-food inflation

(Y-o-Y) also increased marginally to 1.5 per cent in July 2020 from 1.4 per cent in June 2020.

The change in the CCPI measured on an annual average basis also increased marginally to 4.8 per cent in July 2020 from 4.7 per cent in June 2020.

Monthly change of CCPI recorded at 0.1 per cent was mainly due to net effect of price changes observed in the items of the Non-food category. Meanwhile, prices of items in the Food category also recorded marginal increases in July 2020. The core inflation (Y-o-Y), which reflects the underlying inflation in the economy, increased marginally to 3.2 per cent in July 2020 from 3.1 per cent in June 2020. However, annual average core inflation declined further to its sixteen months low of 4.0 per cent in July 2020 from 4.2 per cent in June 2020.

 

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SEC introduces framework for Real Estate Investment Trusts

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From left to right Rajeeva Bandaranaike CEO CSE, Dr. Harshana Suriyapperuma, Director Corporate Affairs SEC, Chinthaka Mendis DG SEC, Viraj Dayaratne chairman SEC, Dumith Fernando, chairman CSE and Ms. Ayanthi Abeywickrema, Director-Legal and Enforcement SEC

 

In Sri Lanka, owing to spiraling property prices it is a challenge for average citizens to finance real estate investments. Therefore, a significant proportion of the population of Sri Lanka is unable to benefit from the value appreciation of property and infrastructure development.

The issue can be resolved by introducing a mechanism where capital is pooled by people who are willing to invest in prime commercial and residential property and they will benefit from property related income and value appreciation in the long term. Such pooled funds could be used to acquire prime residential and commercial property and income and wealth derived from such property is then shared with the unit holders of the fund.

Real Estate Investment Trusts (REITs) have been available for some time and are developing rapidly in Asia and are popular particularly in Thailand, Malaysia and India. The Securities and Exchange Commission of Sri Lanka (SEC) along with the other stakeholders have been contemplating the introduction of REITs framework in Sri Lanka for quite some time although no finality had been reached. The SEC has now facilitated the introduction of a REIT framework and the proposed initiative provides real estate developers and owners to convert fully completed properties into a REIT which will provide an avenue for the general public of Sri Lanka to make an investment and thereby benefit from any property value increases. Corporate Bonds were introduced to the capital market in Sri Lanka in 1997 and it is approximately, after 23 years that a new product by way of REITs is being introduced.

The Sri Lankan REITs structure has considered the local environment in which it is expected to operate and the SEC has brought in a regulatory framework that is best suited to our market. The rules that have been introduced by the SEC will be an extension of the current Unit Trust Code and the new rules, which came into effect from July 31 is in the form of a Gazette Notification published by the SEC. These rules which are comprehensive, will govern the setting up of and the conduct of a Sri Lankan REIT. Specific provisions have been included for the verification of title and valuation of property that will form part of the assets of the REIT.

Among the requirements is the mandatory distribution of approximately 90% of income to the unit holders, which is currently not a requirement for any of the listed entities. Further, due to the availability of the tax pass through mechanism to Unit Trusts, REITs also could benefit to be a viable business concept to Sri Lanka that will open new horizons for entrepreneurs to take the real estate industry to greater heights.

This property backed alternative platform offers unique benefits to the investing public and to the nation as a whole.

Benefits to investors include:

* High dividend – since requirement to pay at least 90% of their income as a dividend

*Relatively stable income stream due to long leases

* Investor protection ensured since regulated by SEC

* Swift entry and exit opportunities

* Opportunity for portfolio diversification

* Professional investment management at a relatively low transaction and management cost

* An effective hedge against inflation due to real estate asset backing

Benefits to the country include:

* Optimize land usage due to vertical high-rise building complexes and mixed developments

* A catalyst for foreign investment

* liquidity added to market through listing

* Improved investor confidence through increased transparency created through the disclosure requirements

* Increased tax revenue

*Facilitation of planned urbanization with controlled congestion

* Environmental benefits

* Employment creation

* Contribution to the country’s capital formation

* GDP growth

* Optimize capital allocation

Many real estate owners/developers can immediately benefit from the Unit Trust based REITs framework, which is now enabled under the capital market framework of the SEC. In order to promote transparency and to distribute ownership among people of Sri Lanka, REITs are only allowed as listed REITs on the Colombo Stock Exchange. (SEC)

 

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