John Keells September quarter stung by heavy exchange losses

• Reports EBITDA of Rs.8.06bn, down 13% YoY;  but reflects underlying growth in many business lines 

John Keells Holdings PLC (JKH) saw its revenues decline and bottom line turning to negative in the three months

through September 2023 (2Q24) as the exchange losses weighed on the group’s earnings.
The diversified conglomerate reported revenues of Rs.64.1 billion for the July – September quarter, down 7 percent from Rs.69.1 billion in the same period in 2022. 

This was predominantly coming from the group’s outsize transportation segment where its bunkering operations which generated substantial revenues and margins on the back of higher global energy prices last year could not repeat the same performance due to more modest oil prices this year. 

Further, the appreciation of the rupee this year after a steep fall last year also had some bearing on this segment’s performance due to the dollar denominated revenues generated by it.

The group has interest in consumer foods, retail, financial services which include commercial banking, life insurance and commodities broking and property development.  
In this backdrop, the group swung to a loss of Rs.574.1 million or 41 cents a share in 2Q24 from a profit of Rs.1.60 billion or Rs.1.16 a share in the same period last year. 

JKH’s share added Rs.1.75 or 0.91 percent yesterday to settle at Rs.194.25. 
A Rs.2.14 billion non-cash exchange loss recognised on its US$ 225 million term loan facility at Waterfront Properties (Private) Limited (WPL), the project company of the Cinnamon Life Integrated Resort, had a significant bearing on the group bottomline.

This was because the functional currency of WPL was changed to Sri Lankan rupees from US dollars given the impending transition of the project from construction to an operational business next year, JKH said. 
Meanwhile, the group’s EBITDA, which measures the group’s as well as each segment’s underlying cash operational performance, was recorded at Rs.8.06 billion for the quarter under review, down 13 percent YoY from Rs.9.29 billion a year ago.
This is primarily due to the lower EBITDA of the transportation segment.

Among the other key segments, the consumer foods segment of the group which captures its beverages and frozen confectionery business increased its EBITDA by 23 percent YoY to Rs.1.24 billion as the margins improved on the back of decline in raw material prices and stabilisation of the rupee. 
The retail business of the group, which runs a network of Keells branded supermarkets recorded an EBITDA of Rs.1.98 billion, up 1 percent YoY. JKH said its same store sales recorded a growth of 10 percent driven by the customer footfall growth of 11 percent. 

The leisure sector represented by city hotels and resorts, both in Sri Lanka and Maldives reported an EBITDA of Rs.1.07 billion, up 6 percent YoY on the back of strong recovery in arrivals, specially in the city hotels, JKH said. 
The financial services segment, which mainly captures the group’s commercial bank, life insurance company and stock and commodities brokerages, reported solid 54 percent growth in the EBITDA to Rs.1.70 billion on the back of higher net interest income at Nations Trust Bank PLC and the double-digit growth in premiums at Union Assurance PLC. 

The property segment meanwhile reported a negative EBITDA of Rs.435.08 million, up from a Rs.278.97 million a year ago. 
Harry Jayawardena controlled Melstacorp PLC was the single largest shareholder at JKH as of September 30 with 9.3 percent stake, followed by S.E. Captain with 9.1 percent stake and HWIC Asia Fund with 8.6 percent stake.

Enters into MoU with leading gaming operator

John Keells Holdings PLC (JKH) said yesterday they entered into a Memorandum of Understanding (MOU) with a leading international gaming operator in connection to the Cinnamon Life Integrated Resort.

“WPL (Waterfront Properties Private Limited) entered into a Memorandum of Understanding (MOU) with a leading international gaming operator,” JKH Chairman Krishan Balendra said.
“This MOU consists of the framework for investing into and operating of a casino at the Cinnamon Life Integrated Resort as well as the commercial framework between the parties,” he added.

However, Balendra refrained from disclosing the identity of the party with whom JKH has signed the MOU, as the finer details of the agreement have not been fully settled. “As originally envisaged, WPL will lease out space at the Cinnamon Life Integrated Resort for the operation of the casino. On finalising details of the fit-out and equipping costs and conclusion of the lease agreement, a detailed disclosure will be made,” he said.