JKH resilient amidst terror-hit first quarter

• Consumer foods, retail and transport businesses post gains in profit 
• Leisure sector suffers Rs.  1 b loss owing to impact of Easter Sunday attacks

Premier blue chip John Keells Holdings PLC (JKH) yesterday reported a topline growth of 5%, with most sectors except leisure performing well, whilst the bottom-line declined sharply largely due to non-operational factors.

Chairman  Krishan Balendra

Consolidated revenue in the first quarter of FY19/20 grew by 5% to Rs. 31.74 billion. The Group earnings before interest, tax, depreciation and amortisation (EBITDA) at Rs. 4.04 billion was a decrease of 10% over the adjusted EBITDA of Rs. 4.51 billion recorded in the previous financial year.

The Group profit before tax (PBT) at Rs. 1.36 billion was down 53% and the profit attributable to equity holders was lower by 55% to Rs. 994 million.

JKH, in a statement, said profits for the quarter were mainly impacted by the non-cash expense arising from the adoption of SLFRS 16 and the decline in finance income at the Holding Company.

It said the Transportation, Consumer Foods and Retail industry groups continued their growth momentum from the previous quarter, despite the disruptions post-Easter Sunday terror attacks, which occurred early in the quarter. The latter significantly impacted the performance of JKH’s leisure sector. 

The underlying performance of the Group is after adjusting for the new Accounting standard SLFRS 16 which came to effect this year, for fuller disclosure. Accordingly, EBITDA in 2018/19 is comparatively adjusted for the impact of SLFRS 16, on a like-with-like basis against the EBITDA in 2019/20 (adjusted EBITDA).

The Transportation industry group EBITDA of Rs. 1.06 billion for Q1 of FY2019/20 was a 14% increase from a year earlier. The gains were attributable to the strong performance of the Group’s Ports and Shipping business, South Asia Gateway Terminals, which enjoyed higher volumes and an improved volume mix. Profitability of the Group’s Bunkering business, Lanka Marine Services, was impacted by the significant variation in base fuel prices during the months of May and June, while the Logistics business recorded a strong increase in throughput of 30% in its facilities.

Consumer Foods industry group witnessed growth on account of improved performance in the Beverages and Frozen Confectionery businesses, driven by double digit growth in volumes and improved margins as a result of higher operating leverage. The Consumer Foods industry group EBITDA of Rs. 843 million was up 61%.

Retail industry group recorded a robust revenue growth of 20% which was driven by a strong performance in the Supermarkets business, supported by the rebranding initiative, expansion of outlets and a pick-up in average basket values. Retail recorded an EBITDA of Rs. 1.09 billion compared with the adjusted EBITDA of Rs. 573 million in the same period last year. Three new outlets were opened during the quarter, bringing the total store count to 98 as at 30 June 2019; the planned outlet rollout for 2019/20 is 25-30 stores.

The Group’s Sri Lankan leisure business was significantly impacted by the Easter Sunday terror attacks and EBITDA for the first quarter of 2019/20 was a negative Rs. 332 million, compared to the Rs. 228 million (adjusted) recorded in 2018/19 Q1. 

JKH said the City Hotels sector recorded a decline in both occupancies and average room rates but maintained its fair share of available rooms in the 5-star category in the quarter under review. The Group is encouraged that forward bookings for the Sri Lankan hotels have witnessed an upward trend in recent weeks, reaching levels of approximately 75% compared to the bookings received at the same time last year, indicating signs of recovery. 

The Maldives resorts segment recorded a strong growth driven by higher average room rates of the newly refurbished water bungalows and over water suites at Ellaidhoo Maldives by Cinnamon and Cinnamon Dhonveli Maldives. Cinnamon Dhonveli Maldives was partially closed for refurbishment in May 2019 with expected completion in October 2019. The newly reconstructed Cinnamon Hakuraa Huraa Maldives and Cinnamon Bentota Beach will commence operations in December 2019, as planned.

In the Property Industry Group, the Cinnamon Life project marked a key milestone in its construction in June 2019, with the topping-off of all its six buildings. Construction is now focused on the installation of the façade, mechanical and electrical services and interior works. The pre-sales of the Residential Towers is currently at 65% of total area available for sale, and the Group expects sales momentum to improve as completion draws nearer. The “Tri-Zen” residential development project completed its piling works in June, ahead of schedule. 207 of its 891 units were pre-sold as at 30 June 2019 and revenue recognition will commence from the next quarter onwards. The Property industry group recorded a negative EBITDA of Rs. 12 million in the first quarter, a year-on-year decrease compared to Rs. 18 million (adjusted) recorded the previous year.

The Financial Services industry group recorded an 11% drop in EBITDA (2019/20 Q1: Rs. 774 million versus 2018/19 Q1: Rs. 865 million] while Other, Including Information Technology and Plantation Services sectors recorded an EBITDA of Rs. 625 million in the first quarter of 2019/20 over the adjusted EBITDA for the first quarter of the previous financial year [2018/19 Q1: Rs. 1.38 billion], as a result of the decline in finance income at the Holding Company due to the deployment of cash in new investments and the share repurchase. The Information Technology sector recorded a strong growth in profitability on account of onboarding new clients.