Strong consumer demand propels JKH 4Q profits beyond pre-pandemic levels

• Reports earnings of Rs.3.60 a share or Rs.4.8bn for 4Q21 against Rs.2.83 a share or Rs.3.73bn 4Q20
• Reports earnings of Rs.3.62 a share or Rs.4.8bn for FY21 against Rs.7.14 a share or Rs.9.4bn in FY20

John Keells Holdings PLC reported robust revenues and profits for the three months ended March 31, 2021 (4Q21) barring the leisure sector on a resurgent economy, as its multiple business segments reached pre-pandemic levels, while its frozen confectionary sales hit a record high in March, reflecting improved consumer demand. 

The corporate heavyweight with its presence in a number of industries, reported revenues of Rs.38.8 billion for the quarter under review, up 5 percent year-on-year (YoY). 

However, the top-line surged 17 percent to Rs.36.15 billion barring leisure sector, of which the Sri Lankan section is still reeling, while the Maldivian resorts have fast recovered from the pandemic-induced restrictions on travel and tourism. 

Maldivian resorts have now set their eyes on a complete recovery in earnest due to, “encouraging,” forward booking as they are already looking past the pandemic. 

“The group witnessed a faster than anticipated recovery momentum with the performance of most businesses reaching pre COVID-19 levels with business activity and consumer trends being near normal by the end of the financial year,” JKH said in a statement.

The group reported an operating profit of Rs.3.0 billion for the quarter, up 16 percent YoY, as it contained overheads although direct costs rose faster than revenues. 

 However, barring leisure, the group’s Earnings Before Interests, Tax, Depreciation and Amortisation (EBITDA), which is a closer gauge for operating performance, rose by robust 43 percent YoY to Rs.7.1 billion.  

“The pace of recovery in 4Q is demonstrated by the recurring EBITDA of Rs.7.21 billion in the quarter against the full year recurring EBITDA of Rs.15.57 billion,” JKH said. 

The group’s consumer food behemoths, Keells Food Products PLC and Ceylon Cold Stores PLC which make processed meat, frozen confectionaries, dairy products and beverages, apart from running a supermarket chain, generated a pre-pandemic level performance reflecting the surge in consumer demand. 

Revenues from consumer foods rose to Rs.5.3 billion, up 12.3 percent YoY, while the revenues from the supermarket business generated revenues of Rs.20.8 billion, up 31 percent YoY.

The two companies now strive to generate sales via e-commerce after the government clamped down on in-person visits to supermarkets, greatly reducing customer footfall, while the restaurant dining has become limited, a channel which normally generates significant sales for products like processed foods and fizzy drinks.

Meanwhile, the group’s transportation business generated revenues of Rs.5.8 billion for the quarter under review compared to Rs.7.3 billion. The segment’s operating profits surged to Rs.412.2 million compared to Rs.111.3 YoY as volumes at South Asia Gateway Terminals recovered to pre-pandemic levels as transshipment volumes from India and the region gained momentum. 

Further, JKH said it received a letter of intent as part of a consortium consisting of Adani Ports and Special Economic Zone Limited (APSEZ) to develop and operate the West Container Terminal of the Port of Colombo as a public private partnership (PPP) project.

Meanwhile, under its property sector operations, JKH is expected to begin the handover process of units of the residential and office towers at Cinnamon Life on a staggered basis, which will result in recognising revenues and profits from the project. The full project completion is scheduled for the first quarter of 2022/23. 

The group’s insurance business represented by Union Assurance PLC and the banking business represented by Nations Trust Bank PLC reported improved performance for the quarter on higher premiums and higher growth in loans and enhanced asset quality.

As a result, the group reported earnings of Rs.3.60 a share or Rs.4.8 billion for 4Q21 compared to earning of Rs.2.83 a share or Rs.3.73 billion in the same period last year. 

For the full year, the group reported earnings of Rs.3.62 a share or Rs.4.8 billion compared to earnings of Rs.7.14 a share or Rs.9.4 billion. The annual revenue declined to Rs.114.5 billion from Rs.127.8 billion. 

JKH doesn’t have a controlling shareholder and its public shareholding as at March 31, 2021 was 98.98 percent. As of the same data, the single largest shareholder of JKH was S.E. Captain.

Interestingly, Don & Don Investments, an investment vehicle linked to controlling shareholders of LOLC Group, which had entered the top 20-shareholder list of JKH with 2 percent stake as at December 31, 2020, was not featured among the top 20 shareholders of the company as at March 31, 2021.