JKH posts phenomenal recovery midst crisis times

• Diversified blue-chip reverses three years of decline in the bottom line 
• Group revenue up 71% to Rs. 218 b; recurring Group EBITDA soars by 152% to Rs. 39.26 b
• Significant growth in profits driven by turnaround in Group’s Leisure businesses, revenue recognition at ‘Cinnamon Life’ and improved performance across all other business verticals
• Exchange gains influenced finance income up 405% to Rs. 22 b in 4Q and by 188% to Rs. 30.8 b in FY22
• Declares final dividend of 50 cents bringing total to Rs. 1.50 per share in FY22
• JKH Chief Krishan Balendra stresses immediate need is to ensure Sri Lanka has the political and social stability required to achieve the desired economic outcomes 
• Lists stabilising the foreign currency liquidity position and restoring the supply of essential items and power as priorities 
• Welcomes new PM and commitment from most political parties to support progressive and the necessary policies to deal with economic situation

John Keells Holdings PLC has posted a phenomenal recovery in FY22 amidst challenging times initially with COVID-19 and later on with economic, political crisis and social unrest with a good fourth quarter despite the circumstances though bottom line got a sudden boost due to exchange gains following the sharp depreciation of the currency. 

JKH Group revenue rose by 71% to Rs. 218.07 billion while recurring Group EBITDA increased by 152% to Rs. 39.26 billion. The significant growth in profits was driven by the turnaround in the Group’s Leisure businesses, the revenue recognition at ‘Cinnamon Life’ and improved performance across all other business verticals.

In the 4Q, revenue rose by 96% to Rs. 76 billion and net profit by 129% to Rs. 10.9 billion. This was mainly driven by the strong top line performance and a 405% year on year increase in finance income to Rs. 22. 2 billion as a result of foreign currency translation gains. In FY22 finance income amounted to Rs. 30.8 billion as against Rs. 10.6 billion in FY21. 

FY22 reflects a significant turnaround for JKH which in FY21, saw its recurring EBITDA decline to Rs. 15.5 billion from Rs. 20 billion in FY20 whilst recurring PBT plunged to Rs. 3.5 billion from Rs. 10.3 billion. The figures in FY19 were Rs. 23.7 billion and Rs. 15.3 billion respectively. JKH after tax profit and bottom line has been down year on year between FY18 and FY21.

FY22 profit before tax grew by 402% to Rs. 27.3 billion and after tax by 417% to Rs. 20.4 billion. Net profit attributable to the equity holders of the parent rose by 324% to Rs. 20.2 billion.

“The Group reported a strong performance during the year, which was a significant  improvement, as expected, over the previous  year, with all businesses witnessing a robust recovery momentum,” JKH Chairman Krishan Balendra said in the Company’s Annual Report for FY22 released yesterday. 

He said the Leisure industry group, in particular, recorded a significant turnaround in performance with a recurring EBITDA of Rs. 3.78 billion compared to the negative recurring EBITDA of Rs. 3.59 billion in the corresponding year.

The Maldivian Resorts segment continued its strong recovery where the occupancy and average room rates at our hotels reached pre-pandemic levels. With the relaxation of travel restrictions, the Colombo Hotels and Sri Lankan Resorts segments recorded a significant turnaround, reporting a positive EBITDA and PBT in the fourth quarter.

Revenue recognition at ‘Cinnamon Life’ commenced during the year with the completion and commencement of the handing over of the residential and commercial units. The remainder of the project is scheduled for commencement of operations, in a phased manner, in the first half of the calendar year 2023.

The Group’s Port business recorded an increase in profitability driven by volume growth and ancillary revenues whilst the Bunkering business recorded an increase in profitability driven by higher margins on account of the increase in global fuel prices and volumes.

The Retail industry group recorded an encouraging performance with same store sales growth driving profitability in the Supermarket business, whilst the Office Automation business recorded a strong increase in mobile phone volumes, although PBT was materially impacted on account of the sharp depreciation of the Rupee.

The Consumer Foods industry group continued its strong recovery momentum with all segments recording strong double-digit growth in volumes, with volumes reaching pre-pandemic levels.

The Insurance business recorded double-digit growth in gross written premiums driven by a strong growth in regular new business premiums. The Banking business recorded an increase in profitability aided by loan growth, focused recovery efforts and cost management initiatives.

JKH also announced a final dividend of 50 cents per share (payable on or before 22 June) increasing the total to Rs. 1.50 for FY22.

Balendra said whilst the Group recorded a strong recovery momentum and growth in profits, the prevailing volatile and uncertain macroeconomic environment could result in stresses on operating performance and cash flows and the pipeline of strategic investments such as the West Container Terminal-1 project.

“The Group will follow its dividend policy which corresponds with growth in profits, whilst ensuring that the Company maintains adequate funds to ensure business continuity, particularly given the prevailing challenging circumstances, and fund its pipeline of strategic investments,” he added. 

In terms of outlook, JKH Chief said while businesses witnessed a strong recovery during the year, with performance reaching pre pandemic levels faster than anticipated, the uncertainty and volatility on the macroeconomic stability of the country at this juncture, and resultant social unrest, poses an unprecedented and significant challenge for the country in the ensuing year. 

Whilst the developments in relation to the engagement with the IMF and the commencement of the requisite steps pertaining to the debt restructuring process is positive, the immediate need is to ensure Sri Lanka has the political and social stability required to achieve the economic outcomes needed at this crucial juncture, particularly in terms of stabilising the foreign currency liquidity position and restoring the supply of essential items and power. 

In this regard, Balendra said the appointment of a new Prime Minister and a commitment from most political parties to support progressive and the necessary policies to deal with the economic situation in the country has established a level of stability and confidence. 

While the current macroeconomic challenges continue to evolve, Balendra assured shareholders that all JKH businesses have done its best to prepare for the uncertainty and challenges ahead in ensuring the momentum of business continues to its utmost potential as it serves all stakeholders. 

JKH Chief also expressed confidence in the resilience of the people of the country to overcome challenges, as they have done time and time again. 

“The manner in which Sri Lankans have united gives us hope that we will overcome these challenges, together, and be stronger in the future as we look to build a sustainable future with strong governance and transparency as the cornerstone. As a corporate in existence for over 150 years, we will continue to play our part in building the future of our country, leveraging on the ‘Strength of Fundamentals’ of both the country and our Group,” JKH Chief Balendra added.