John Keells Group records strong revenue growth for 2Q

• Top line surges by 43% to Rs.65.1bn; but higher interest rates, translation impact dent bottom line
• With exception property segment, all business segments record strong growth
• JKH Chairman says overall operating indicators in most businesses demonstrated activity at pre-pandemic levels

Premier blue chip John Keells Holdings PLC (JKH) recorded a solid growth for the quarter ended on September 30, 2022 (2Q23), with its top line surging—though helped by base effects— but its bottom line was affected by higher interest rates, translation impact and absence of certain revenue and profit inflows recognised in the corresponding quarter of last year. 

The group saw its revenue surging to Rs.65.1 billion during the quarter under review, up 43 percent year-on-year (YoY) while the cost of sales rose 39 percent YoY to Rs.58.3 billion.

The corresponding quarter of last year was partially disrupted by the pandemic-related lockdowns and the group said during the quarter under review, the overall operating indicators in most businesses demonstrated activity at pre-pandemic levels.

The operating profit for the quarter was Rs.2.8 billion, up 7 percent YoY.
However, the group’s earnings for 2Q23 fell 44 percent YoY to Rs.1.6 billion. The earnings per share weakened to Rs.1.16, from Rs.2.17.

Yet, the group EBITDA recorded a notable improvement to Rs.9.29 billion during the quarter under review, which is an increase of 45 percent YoY, demonstrating the strong underlying cash operational performance of the group.

JKH said the decline in the bottom line is on account of the second quarter of the previous year, including revenue and profit recognition from the handover of the residential apartment units at Cinnamon Life and the higher finance expenses, due to the significant increase in interest rates on working capital facilities, particularly in the leisure and retail industry groups.Further, the profits of the group were impacted by the translation impact of the IFC loan interest payment and the notional non-cash interest charged on the convertible debentures issued to HWIC, amounting to Rs.27 billion in August 2022, in line with the accounting treatment, due to the significant difference between the market interest rates and the 3 percent interest accrued on the instrument.

JKH saw its finance cost rising 137 percent YoY to Rs.3.8 billion during the quarter under review, while its finance income rose 84 percent YoY to Rs.4.6. billion.

Meanwhile, with the exception of the property segment, the group’s businesses recorded strong growth in EBITDA, compared to the second quarter of previous year, on the back of a continued recovery momentum.

The profitability of the transportation segment recorded an increase, driven by the group’s bunkering business, which recorded higher margins and the group’s ports and shipping business, where both businesses benefitted from the translation impact, due to the depreciation of the rupee against the previous year.

The leisure segment of the group recorded a continued turnaround in performance primarily driven by the Maldivian Resorts segment, supported by higher occupancy.

The consumer foods segment continued its recovery momentum with the beverages and frozen confectionery businesses recording growth in volumes.

The performance of the supermarket business was driven by a growth in same store sales through a combination of higher basket values on account of inflation and an increase in customer footfall.

The property industry segment recorded a decline in profitability, as the second quarter of the previous year included revenue and profit recognition from the handover of the residential apartment units at Cinnamon Life. The recognition of revenue of all units sold at Cinnamon Life up to March 31, 2022 was recorded across 2021/22.

The group’s insurance business recorded a growth in gross written premiums whilst Nations Trust Bank PLC recorded an increase in net interest margins and a reduction in costs.

JKH’s public shareholding as at September 30, 2022 was 98.92 percent, marginally down from 98.93 percent.