JKH reports subdued earnings for 3Q amid virus disruptions

• Group revenue and EBITDA, excluding leisure, increase by 5%
• Handover of Cinnamon Life residential and office units to commence in March 2021
• Retail business remains bright spot with over Rs.20bn revenue 

The isolation measures that kicked in since October, due to the second wave of COVID-19 and significantly lower revenues coming from its leisure operations, hindered the robust recovery momentum seen at John Keells Holdings PLC (JKH), as the group reported subdued profits with its key business segments  feeling the pinch that came from the restrictions on travel and other economic activities. 

JKH reported revenues of Rs.35.6 billion in the three months to December 2020 (3Q21), down by 5 percent from the same period in 2019, with only the retail business and financial services posting higher revenues. The group’s earnings before interest, tax, depreciation and amortisation (EBITDA), which measures the operating performance of the business, recorded Rs.4.21 billion for the quarter, compared to Rs.5.63 billion in the corresponding period in 2019, recording a 25 percent decline.

The EBITDA of the group, excluding the leisure sector, was however up 5 percent to Rs.5.22 billion, as the pandemic nearly decimated the travel and tourism sector. Nevertheless, the company said the businesses across the group were seen returning to near normal levels by December, with the exception of tourism. 

“Despite the isolation measures adopted by the authorities, due to the second wave of the COVID-19 outbreak in early October 2020, which caused a slowdown in business activity and dampened consumer sentiment, the subsequent gradual easing of restrictions enabled the businesses across the group to recover to near normal levels by December, with the exception of leisure,” JKH Chairman Krishan Balendra said.

The group reported earnings of 75 cents a share or Rs.992.4 million for the quarter under review, compared to Rs.1.82 a share or Rs.2.4 billion in the same period in 2019.  

The retail business, represented by its 116 Keells-branded supermarket chain, remained the bright spot, as they generated revenues of Rs.20.3 billion in the three months, compared to Rs.17.7 billion in the comparable period in 2019. 

Meanwhile, the recovery in the leisure sector is anticipated with the reopening of the borders on January 21, 2021 but it is yet to be seen how everything will play out with the stringent health and safety protocols. 

“The Maldivian Resorts segment demonstrated an encouraging performance, following the opening of the airport in the Maldives in mid-July, with occupancy increasing to 53 percent in the month of December, resulting in the segment recording a positive EBITDA for the quarter,” Balendra said. Meanwhile, the transportation sector of the group reported an EBITDA of Rs.930.4 million in the three months, compared to Rs.1.29 billion in the year earlier period but the company said the year-on-year comparison is distorted, due to the “comparative quarter of the previous year had above-average profitability in the bunkering business on account of a transition to low sulphur fuel oil (LSFO), well ahead of competition”.

 
The property segment of the group generated only Rs.13.8 million in the EBITDA during the quarter under review, compared to Rs.32.2 million in the year earlier period, as the company is yet to monetise its flagship ‘Cinnamon Life’ project. 

“The Certificates of Conformity (COC) for the Cinnamon Life office tower and ‘The Suites’ residential tower have been obtained, which will enable hand-over of the residential apartments and office tower to commence, on a staggered basis, from the fourth quarter of 2020/21 onwards,” Balendra said. 

Meanwhile, the financial services business segment of the group, represented by commercial banking, insurance and brokerage business, generated an EBITDA of Rs.1.23 billion, compared to Rs.1.16 billion in the year earlier period. 

“The insurance business continued its recovery momentum, recording encouraging growth in all its channels of distribution, amidst a challenging environment,” Balendra added.  

As at December 31, 2020, Captain family held over 20 percent of the issued shares of JKH while Don and Don Holdings, an investment vehicle linked to LOLC’s Ishara Nanayakkra, had entered the top 20 shareholders of JKH during the quarter, buying a 2 percent stake.

JKH announced a 50 cent third interim dividend per share to be paid on March 2, 2021.