Easter attacks, property closure drive John Keells Hotels into red

John Keells Hotels PLC continued to remain in red for the second quarter in a row in September amid aftershocks of Easter attacks and the closure of few resort hotels in Sri Lanka and Maldives for refurbishments.

As one of the largest resort operators in the country with 1,123-room inventory, John Keells Hotels reported revenues of Rs.1.74 billion for the three months ended September, 30, 2019 (2Q20), which is a 27 percent decline against the same period a year ago. As a result, the company recorded a net loss of Rs.468.5 million or a loss of 32 cents a share for the quarter under review, compared to a nominal profit of Rs.850, 000 reported for the same period last year.

For the first half of 2020 (1H20), the company reported a net loss of Rs.902.2 million or a loss per share of 62 cents compared to Rs.262.1 million loss reported for the similar period last year.

The top-line for the six months also fell by 25 percent year-on-year (YoY) to Rs.3.4 billion. 

Although a weaker performance was largely expected, the extent of the losses might have come as a surprise to the firm, which until recently maintained over 80 percent occupancy levels across the properties in the two geographies it operates. 

At the start to the financial year, the company expected adverse impacts on profitability partly due to the ongoing and planned refurbishments in Sri Lanka and Maldives, and the expected short-term decline in tourist arrivals to Sri Lanka.

According to the latest arrivals data, in September, 109, 575 tourists visited Sri Lanka, which was a 27.2 percent decline from the same period last year. 

However, the decline was easing from its peak in May, when the arrivals plunged by 70.8 percent to 37, 802 in the immediate aftermath of the Easter bombings on April 21.
The company’s resort sector in Sri Lanka suffered heavily during the six months with revenue falling to Rs.1.73 billion from Rs.2.4 billion a year ago. 
The Maldivian resort sector income also fell to Rs.1.67 billion from Rs.2.08 billion.

The Sri Lankan resort cluster’s contribution to the group profitability during 2018/19 was as high as 81 percent, which rose from 56 percent in the previous year due to the closure of two resorts in Maldives , but the mix could be different this year with Sri Lankan resorts still reeling with the aftershocks of the Easter Sunday attacks.

The group operates nine resorts both in Sri Lanka and Maldives—a mix of four and five-star rooms.

Cinnamon Bentota Beach and Cinnamon Hakuraa Maldives, which have a combined room inventory of 259, are currently under re-development or re-construction.  

Cinnamon Bentota Beach, which was closed in 2018, is expected to be operational by the end-2019, and Cinnamon Hakuraa Maldives which was closed in May 2018 for re-construction is expected to be opened in December 2019 with the addition of 20 new rooms on the adjacent island. 

The company is also constructing 212-room Cinnamon Red Kandy in which it has 40 percent stake and is set to open in the second half of 2020/21. 

As of September 30, 2019 John Keells Holdings PLC had 80.32 percent stake in John Keells Hotels PLC while Employees’ Provident Fund held 5.39 percent stake being its second largest shareholder.