JKH delivers robust 3Q on consumer exuberance

• Records Rs.4.91bn net profit, up almost 400%; revenue tops Rs.49bn
• Turnaround performance by leisure sector on pent-up demand 

Premier diversified blue-chip John Keells Holdings PLC delivered strong top and bottom line performances for the three months ended on December 31, 2021 (3Q22), as the performance of the group’s all business segments reached near pre-pandemic levels amid the recovery in consumer activity after the successful vaccination drive against COVID-19.
JKH reported revenues of Rs.49.17 billion for the October-December quarter, up 57 percent year-on-year (YoY) while the earnings before interest, tax, depreciation and amortisation (EBITDA), which captures the underlying cash operational performance, was Rs.9.53 billion, recording a massive 126 percent increase. 
However, JKH share closed at Rs.160.25 yesterday, 25 cents or 0.16 percent lower. 

“The positive momentum of the group’s performance during the quarter is largely on account of the COVID-19 pandemic being well contained in Sri Lanka, primarily as a result of the successful vaccination drive, where almost the entirety of the adult population is fully vaccinated,” JKH Chairman/CEO Krishan Balendra said in an earnings commentary. 
Balendra in his earnings commentary particularly noted the turnaround performance of the group’s leisure operations during the quarter, with the occupancy at JKH’s Maldivian resorts reaching pre-pandemic levels. 

He said the momentum was continuing through January as well, with forward booking for the next few months remaining encouraging at the Maldives resorts sector amid the pent-up demand for leisure travel. 
Commenting on the group’s Sri Lankan leisure sector operations, Balendra said reopening of the country for tourism would be a key catalyst to drive the recovery of the economy, particularly in the context of the positive impact it would have on foreign exchange earnings.

The quarter under review also saw the group balance sheet being restructured and strengthened with the refinancing of a US $ 395 million syndicated loan taken for Cinnamon Life, which is nearing completion and the subsequent private placement equivalent to US $ 80 million by the Asian Development Bank in January this year. Meanwhile, the strong consumer demand helped the group’s consumer and retail businesses to deliver some robust financial performance as reflected in the performance of JKH subsidiaries, Ceylon Cold Stores PLC and Keells Food Products PLC, which filed their interim financial accounts a few days earlier. 

JKH’s performance provides a strong proxy for the overall economy of the country, which is rebounding fast despite the numerous challenges stemming from higher prices, shortages of certain commodities and the foreign exchange crunch. 
Meanwhile, the group’s transportation and property segments did particularly well, as reflected by their EBITDAs of Rs.1.39 billion and Rs.707.5 million, respectively, up from Rs.930.4 million and Rs.13.8 million in the year earlier period. 

Under transportation, the development of the West Container Terminal - 1 project “is currently in the final stages of fulfilling the conditions precedent in the Build, Operate and Transfer (BOT) agreement and the handover of the site for the commencement of construction is expected to take place in the ensuing quarter,” Balendra said. 
Under property, revenue is continued to be recognised from the handover of its commercial office spaces along with the residential apartment units at Cinnamon Life through the quarter, in addition to the lease component of the five commercial office floors at ‘The Offices’, which commenced operations in December 2021. 
With the construction of the commercial and residential components of the project now completed, Balendra said the second residential apartment tower would become ready for handover from February onwards. 

“The group has commenced discussions with key tenants of the retail mall, with various alternatives being considered for the retail space to ensure unique attractions and offerings,” he said. 
Meanwhile, the group’s financial service cluster delivered EBITDA of Rs.2.11 billion for the quarter, up 72 percent YoY, predominantly due to the group’s insurance and commercial banking operations. 

At a consolidated level, JKH reported earnings of Rs.3.72 a share or Rs.4.91 billion for the October-December 2021 quarter, compared to the earnings of 75 cents or Rs.992.5 million reported for the comparable period in 2020, recording a 395 percent increase. 

For the nine months ended on December 31, 2021, JKH reported earnings of Rs.7.05 a share or Rs.9.3 billion on revenues of Rs.130.5 billion, compared to the earnings of just one cent a share on revenues of Rs.78.9 billion in the equivalent period in 2020. 
JKH has no controlling shareholder and the public shareholding of the company was 98.83 percent as at December 31, 2021.