JKH defies economic crisis to pull off strong June quarter

• Group revenue at Rs.71.5bn, up 84% YoY
• Net profit surges to Rs.11.2bn, from Rs.1.5bn
• Earnings get a fillip from massive jump in net exchange gains
• Most notable turnaround was seen in group’s leisure biz

John Keells Holdings PLC (JKH) reported some robust top and bottom-line performance in the three months to June (1Q23), despite the multiple vagaries coming from the economic crisis, as the business activity reached its pre-pandemic levels across all segments compared to a year ago when virus-related restrictions dampened the performance. 

The diversified conglomerate, with interests in consumer foods, retail, leisure, property, transportation and financial services, reported revenues of Rs.71.5 billion in the April-June quarter, up 84 percent from a year ago. 

The earnings before interest tax and depreciation (EBITDA), which measures the underlying cash operational performance of the business, reported Rs.13.33 billion for the quarter, compared to Rs.4.76 billion reported in the same period last year, logging a 180 percent increase. 

The stronger top and operational level performances reflected that JKH was able to navigate the fresh challenges coming from soaring prices, surging interest rates, rupee depreciation, shortages in dollars, fuel and other inputs and political and social unrest, which mostly characterised the quarter under watch. 

The most notable turnaround was seen in the group’s leisure business, where the strong performance from the Maldivian resorts and its destination management segments were assisted by the Colombo city hotels, as the resorts segment could not sustain the momentum seen in the first three months of the year, due to the social unrest and fuel shortages, which prevented the visitors from travelling. 

The leisure sector revenues were reported at Rs.8.63 billion for the quarter, up from Rs.1.95 billion a year ago while the EBITDA returned to black with Rs.1.87 billion, compared to a negative EBITDA of Rs.648.77 million. 
The group’s transport business received a fillip from its bunkering business, driven by higher margins on account of the steep increase in fuel prices and volumes while its ports and shipping business, represented by South Asia Gateway Terminals got a tailwind from the higher revenues came from the ancillary operations and the translation impact, due to the depreciation of the rupee. 

The revenues of this segment recorded a multifold increase to Rs.24.0 billion, from Rs.5.63 billion a year earlier while the EBITDA was reported at Rs.4.55 billion from just over a billion rupees. 

The property segment, which includes the Cinnamon Life project, reported subdued performance, as the revenues and profits of the sale of the residential units of the property were recognised a year ago. 

The financial services segment, comprising mainly of its life insurance and commercial banking business, did better with the EBITDA increasing by 14 percent to Rs.877.1 million. 

Accordingly, the group reported earnings of Rs.8.14 a share on total profits of Rs.11.28 billion, compared to earnings of Rs.1.16 a share or Rs.1.53 billion in the year earlier period. The earnings also received a fillip from the massive jump in the net exchange gains possible from the group’s dollar-denominated cash holdings after the rupee lost 80 percent of its value against the dollar.

JKH recently announced a private placement of a convertible bond to Fairfax, Canada, to raise Rs.27.06 billion to meet the increased funding requirements of the group while lessening its reliance on the local banking sector, where the interest rates surged by exponential levels recently.

JKH share added 75 cents or 0.63 percent yesterday to end at Rs.120.50.