investor presentation review of fy2019 · growth of beverage volumes 22 10 (16) (25) growth of...

John Keells Group - Confidential

Investor Presentation

Review of FY2019

Version 1.0

This Investor Presentation should be read in conjunction with the JKH Annual Report 2018/19 to obtain a more comprehensive understanding of the drivers and strategies of our businesses


About JKH

▪ Market cap of USD 1.14 billion

▪ No controlling shareholder - 99% free float

▪ Debt : Equity ratio of 23.7%

▪ The Board comprises of two Executive Directors and six Independent Non-

Executive Directors

2


Portfolio profitability

Note: The above excludes the contribution from Other including Information Technology and Plantations Services

2016/17

PAT attributable to equity holders

2017/18

▪ The Group has consciously focused on the shift in the composition of its earnings, targeting a greater contribution from higher ROCE earning industry groups such as Consumer Foods, Retail and Financial Services

▪ 2017/18 excludes the one-off surplus transfer of Rs.3.38 billion at Union Assurance PLC▪ The decline in contribution from the Property industry group is due to revenue of residential apartments

at Cinnamon Life not being recognised 3

2018/19

36%

10%4%

16%

1%

33%

Transportation

Consumer foods

Retail

Leisure

Property

FinancialServices

23%

17%

10%

32%

4%

15%

22%

11%

8%

20%

5%

33%


Cumulative EBITDA : for the year ended 31 March 2019

Total EBITDA 25,890 32,174 (20)

Recurring EBITDA* 25,672 28,805 (11)

*Refer page 36 of the JKH Annual Report 2018/19 for commentary on recurring adjustments

4

Industry GroupFY2019 FY2018 YoY Growth

(%)(Rs. Million) (Rs. Million)

Transportation 4,555 3,438 32

Consumer Foods 2,913 3,132 (9)

Retail 2,146 2,520 (15)

Leisure 5,017 6,330 (21)

Property 323 1,382 (77)

Financial Services 4,548 8,873 (49)

Other, incl. IT and Plantation Services 6,388 6,439 (1)


EBITDA : for the quarter ended 31 March 2019

Total EBITDA 7,809 14,092 (45)

5

Industry GroupQ4 FY2019

(Rs. Million)Q4 FY2018

(Rs. Million)YoY Growth

(%)

Transportation 1,282 497 158

Consumer Foods 1,103 864 28

Retail 827 580 42

Leisure 2,375 2,540 (7)

Property 195 1,158 (83)

Financial Services 1,590 6,459 (75)

Other, incl. IT and Plantation Services 437 1,995 (78)

Following are the reasons for the deviations in performance due to one-off/non-operational impacts: • Transportation EBITDA in Q4 2017/18 included an impairment provision for doubtful debt and a cumulative deferred

tax charge at SAGT.• Property EBITDA in Q4 2017/18 included a one-off revenue recognition at Rajawella Holdings Limited on the sale of

leasehold rights and lower fair value gains on investment in 2018/19. • The performance for the quarter also included an exchange loss at the Holding Company as a result of the appreciation

of the Rupee, in comparison to an exchange gain recorded in the fourth quarter of 2017/18.


Adjusted effective capital employed (Rs.bn)

Portfolio evaluation 2018/19; returns vs. effective capital deployed

6

Adjusted ROCE (%)

IT - 54%

Financial Services - 25%

Transportation - 21%

Consumer Foods - 21%

Plantations - 15%

Retail - 13%

Leisure - 4%Property (Excl. Cinnamon Life) – 0.2%

Cinnamon Life – (0.1%)

Hurdle Rate - 15%

Industry group Effective capital employed (%)

Cinnamon Life 24

Leisure 21

Property (Excluding Cinnamon Life) 13

Transportation 8

Financial Services 6

Retail 4

Consumer Foods 3

Plantations 1

Information Technology 0.1

▪ In addition, the Holding Company accounts for 18 per cent of effective capital employed which consists primarily of cash


Investment pipeline comprises primarily of Cinnamon Life

▪ Investment pipeline comprises primarily of Cinnamon Life, where completion is staggered

▪ The realisation of benefits from these investments is expected to accrue from beyond the next

12-18 months, particularly with Cinnamon Life.

▪ These investments will be funded through available/internally generated cash. Some of the key projects include:

7

Project Expected completion

Cinnamon Life - Residential and Commercial towers 4Q FY2020

- Hotel and Retail Mall 1Q FY2021

Reconstruction of Bentota Beach by Cinnamon End 2019

Reconstruction of Cinnamon Hakura Huraa Maldives End 2019

Cinnamon red Kandy FY2021

Roll out of 55-60 Retail outlets FY2020 & FY2021

Retail Centralised Distribution Centre 1H FY2021

JK Logistics - construction of a warehouse 1H FY2021


Transportation - overview

▪ 42% stake in SAGT

▪ SAGT capacity: ~2 million TEUs

▪ Largest cargo and logistics service provider in the country

▪ Leading bunkering services provider

▪ Joint Ventures with Deutsche Post for DHL air express and A P

Moller for Maersk Lanka

▪ GSA for Jet Airways, KLM Royal Dutch airlines and Gulf Air. Other

operations include warehousing and supply chain management

8


KARACHI

GWADARBAHL

MUMBAI

CHENNAI

VISHAKHAPATNAM

KOLKATA

CHITTAGONG

YANGON

MOMBASA

LAMU

DAR-ES-SALAM

CAPE TOWN

PORT LOUIS

ADEN

KOCHI

The strategic location of the Port of Colombo linking key shipping routes

9


Capacity enhancements in the Port of Colombo

10

• CICT - Colombo International Container Terminal• ECT - East Container Terminal• SAGT - South Asia Gateway Terminal• JCT - Jaya Container Terminal


Sustained volume growth in the Port of Colombo

11

4.31

4.91 5.19

5.74

6.21

7.05

2013 2014 2015 2016 2017 2018

Mil

lio

n T

EU

s


Port Container handling capacity (TEUs)

Colombo 8 million

Hong Kong 21 million

Singapore 40 million

Shanghai 36 million

Sources: Government websites/ Sri Lanka Ports Authority

Rapid absorption of capacity in the Port of Colombo

12

Volumes (TEU)

2017/18 2018/19 % YoY ChangeQ4 Q1 Q2 Q3 Q4

SAGT 507,668 504,312 538,723 516,037 514,589 1

JCT 559,681 547,629 592,551 604,672 607,913 9

CICT 639,002 656,986 676,710 703,470 668,230 5

Total 1,706,350 1,708,927 1,807,984 1,824,179 1,790,732 5

SAGT2017/18 2018/19

Q4 Q1 Q2 Q3 Q4

Domestic: Transshipment volume mix

20:80 17:83 17:82 20:80 21:79

4Q Earnings update: Transportation industry group

• SAGT profits driven by improvement in volumes and mix.

• 2017/18 included an impairment provision for doubtful debt and a cumulative deferred tax charge at SAGT.

(Rs. mn) Q4 2018/19

Q4 2017/18

EBITDA 1,282 497

400

600

800

Q4 Q1 Q2 Q3 Q4

Port of Colombo - volumes ('000 TEUs)

CICT

JCT

SAGT


Sources: Government websites/ Sri Lanka Ports Authority

Opportunities for growth in the Bunkering businesses

Bunkering Business (Lanka Marine Services)

Port of Hambantota

▪ Strong opportunities for private bunkering service providers with infrastructure in place for inland storage of petrochemicals and a pipeline to the Port

▪ The Port will occupy an area of 1,815 hectares and have a capacity to accommodate 33 vessels at a time

▪ Positioned within 10 nautical miles of the world’s busiest shipping lanes in which 200 to 300 ships sail through on a daily basis

Logistics Business (John Keells Logistics)

▪ Total warehouse space under management grew to approx. 315,000 sq.ft. in the year 2018/19, at a capacity utilisation of 90 per cent.

13

LMS2017/18 2018/19

Q4 Q1 Q2 Q3 Q4

Volume growth 20 20 2 9 (4)

▪ LMS revenue recorded an increase although profitability was impacted by the appreciation of the Rupee


Consumer Foods - overview

▪ Market leader in soft drinks, ice creams and processed meats▪ Custodians of the consumer brands “Elephant House”, “Keells - Krest”: high brand

equity

Key performance indicators (%) FY2016 FY2017 FY2018 FY2019

Growth of frozen confectionery volumes 15 11 (4) 10

Growth of beverage volumes 22 10 (16) (25)

Growth of convenience food volumes 11 (4) 3 7

EBITDA margin (%) 26 27 20 18

▪ A sugar tax on carbonated beverages was implemented from 9 November 2017 onwards, resulting in an upward revision of the selling prices across the CSD portfolio. Subsequently, the tax was revised to a threshold-based tax for sugar content for both CSD and fruit-based beverages in December 2018.

▪ Following the implementation of the threshold-based tax, selling prices of large PET packs of the CSD portfolio were reduced by ~20 per cent from February 2019, whilst selling prices of selected SKUs will be revised in 1Q of 2019/20 14

Key performance indicators (%)Q4

FY2018

FY2019

Q1 Q2 Q3 Q4

Growth of frozen confectionery volumes 2 3 8 7 21

Growth of beverage volumes (22) (37) (31) (23) (6)

Growth of convenience foods volumes 11 12 12 3 1

EBITDA (Rs. million) 864 523 691 596 1,103

EBITDA margin (%) 21 14 16 16 24

Revenue mix (Bev:FC) 59:41 49:51 50:50 47:53 49:51

4Q Earnings update: Consumer Foods industry group

Frozen confectionery:• Improved performance in the

Frozen Confectionery business driven by strong volume growth

Beverages: • Improved profitability in the

Beverage business as a result of higher margins.

• Growth in monthly volumes within the second half of 2018/19 has consistently witnessed an upward trend.

(Rs. mn) Q4 2018/19

Q4 2017/18

EBITDA 1,103 864


Low consumption patterns and penetration reflects potential for sustained growth

▪ The bulk-impulse mix of regional markets are highly skewed towards the impulse markets, demonstrating the significant growth potential for the impulse category.

Sri Lanka Thailand Malaysia

70%30%

8%

92%

56%

44%

Bulk vs. Impulse Split - Regional

Impulse Bulk

15

▪ CCS reformulated its flagship flavours and currently, approximately 70 per cent of the CSD portfolio’s calorific sugar content is reformulated and replaced with Stevia; a natural sweetener with zero calories.

▪ CCS also implemented the following initiatives;

• Launch of sugar free CSD variants -branded “GO Sugar Free

• Acceleration of non-CSD product launches (flavoured milk and water branded under Elephant House, and additional flavours of fruit juice branded under “Fit-O”)

52.0

39.0

31.4

19.0

10.0

Philippines Thailand Singapore Malaysia Sri Lanka

Carbonated Soft Drinks - Per Capita Consumption (Litres)


Sources: Central Bank of Sri Lanka, Nomura Research Institute, Unilever Corp, Web articles

70

49 4843 40

16

Singapore Malaysia HongKong

Taiwan Thailand Sri Lanka

Modern Retail Penetration (%)

Retail - overview

Present share of modern retail No. of outlets

Keells * 96

Cargills 380

Arpico 50

Laugfs 37

* As at 31 March 2019

▪ The Retail industry group consists of two business verticals; ▪ Supermarkets▪ Office Automation

▪ “Keells” is a chain of ~10,000 square foot modern grocery retail outlets

16


▪ Comparatively higher modern trade density – population per store ratios as against regional peers

▪ High potential for expansion due to lower penetration of modern trade in Sri Lanka

▪ Approximately 225-250 outlets expected by FY2022/23.

▪ The sector will undertake planned capex of approximately USD 65 million over the next two years for 60 new stores and the construction of the centralised distribution centre

13

2

47

30

21

.0

7.3

4.7

4.5

3.7

3.6

3.4

3.0

2.5

1.9

0.9

Modern trade density – population (’000) per store

Source: Retail and shopper trends in the Asia Pacific, AC Nielsen

Keells Super current coverage

No. of new stores expected

FY2020 25-30

FY2021 30

Rapid expansion to capitalise on low retail penetration levels

17


Supermarkets - overview

▪ The Q4 FY2019 same store sales were driven by the same store footfall growth for the quarter, although the average basket vales were impacted by the current economic conditions

▪ Profitability margins were impacted by the cost of expanding and operating new stores coupled with the one-off cost associated with rebranding and refitting stores

▪ The blended margins in the ensuing year are expected to improve as a result of the benefit of a larger base of existing outlets showing an improvement in the performance. However, there may be a certain dilutive effect on margins due to the opening of new outlets

18

Profitability margin (%)

FY2016 FY2017 FY2018 FY2019

EBITDA (Rs.milllion) 1,537 2,010 1,975 1,623

EBITDA margin 6.9 6.7 5.3 3.6

EBIT margin 5.8 5.7 4.0 2.0

Key performance indicators (%)Q4

FY2018

FY2019

Q1 Q2 Q3 Q4

Same store sales growth 3.5 1.4 0.8 2.4 4.5

Same store footfall growth 3.8 3.9 2.7 4.2 7.1

Average basket value growth (0.3) (2.4) (1.9) (1.7) (2.4)

EBITDA margin 4.2 3.5 1.6 4.0 5.0

4Q Earnings update: Retail industry group

• Retail performance was driven by strong revenue growth in the Supermarket business supported by new outlets and a pick up in same store sales to 4.5 per cent.

(Rs. mn) Q4 2018/19

Q4 2017/18

EBITDA 827 580


Leisure - overview

▪ Chain of Resort hotels in Sri Lanka

‾ 8 Resort hotels in strategic tourist destinations (1,000 rooms)

‾ 10% of the country’s 4-5 star class tourist accommodation

▪ 2 five star city hotels in Colombo (847 rooms)

▪ 240 roomed lean luxury hotel managed by Cinnamon; “Cinnamon red”

▪ 3 Resort properties in the Maldives (340 rooms)

▪ Established hotel brand – “Cinnamon”

▪ Leading inbound tour operator in Sri Lanka

▪ Tour operator partners include global players such as Thomas Cook, Kuoni, Hotel

Plan and Virgin Holidays

19


▪ Greater focus on asset light investment models as a part of the

strategy to enhance the ‘Cinnamon’ footprint in Sri Lanka

▪ Land bank of 173 acres of freehold and 127 acres of leasehold

land in addition to 517 acres of leasehold land in Digana

▪ Of the total freehold land acreage owned, a total of 96 acres

of freehold land are in key tourist hotspots:

▪ Ahungalla (Southern Province) : 10.9 acres

▪ Trincomalee (Eastern Province) : 14.6 acres

▪ Nilaveli (Eastern Province) : 41.7 acres

▪ Wirawila (Southern Province) : 25.2 acres

▪ Nuwaraeliya (Central Province) : 3.4 acres

Round trip offering in key tourist destinations; further potential to expand the ‘Cinnamon’ footprint

20


▪ "Cinnamon Hakuraa Huraa Maldives“ and "Cinnamon Bentota Beach Bentota“ - reconstruction of new hotels with expected completion in December 2019.

▪ The industry group commenced the construction of "Cinnamon red Kandy" in the heart of the hill capital of Sri Lanka in January 2019, complementing its round trip offering of its hotel portfolio• The development will follow a similar asset light business model• Jointly developed by John Keells Hotels PLC (KHL) and Indra Traders (Private) Limited• Consists 210 rooms at an aggregate investment of Rs.6.50 billion; where KHL’s

investment is estimated to be Rs.1.00 billion• Located in proximity to the upcoming Kandy-Colombo Expressway and is the first LEED-

Gold green building certified hotel in Kandy.

▪ Entered into a MoU and in the process of finalising a sublease agreement for a new property in the Maldives with a partner under the "Cinnamon" umbrella. • The new property is located in close proximity to the Velana International Airport (VIA).• The property will be subleased for a period of 10 years, with the option for further

extensions.

Expanding the ‘Cinnamon’ footprint

21


*City Hotels occupancy and ARR excludes Cinnamon red

Occupancies and average room rates

22

Sector

FY2019 FY2018

Occupancy (%)

ARR (US $)

EBITDA Margin

(%)

Occupancy (%)

ARR (US $)

EBITDA Margin

(%)

City Hotels*

48 128 22 64 127 27

Sri Lankan Resorts

80 90 28 81 91 28

Maldivian Resorts

84 320 23 82 263 24

Key indicators City Hotels * Sri Lankan Resorts Maldivian Resorts

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Occupancy (%) 43 52 65 48 74 81 70 87 73 79 92 95

ARR(US $) 128 127 128 126 69 85 85 109 298 257 300 393

EBITDA Margin (%) 13 25 23 25 101 22 21 493 (3)2 18 16 38

1. The reduced margin as a result of the off-season period for most resort properties.2. Impact of the closure of “Cinnamon Hakuraa Huraa Maldives” and the partial closure of “Cinnamon Dhonveli Maldives”3. Sri Lanka Resorts EBITDA includes IP gains

4Q Earnings update: Leisure industry group

• Leisure performance impacted by lower occupancies in the City Hotels sector due to the increase in room inventory within Colombo and the closure of "Cinnamon Hakuraa Huraa Maldives" for the reconstruction of a new hotel.

(Rs. mn) Q4 2018/19

Q4 2017/18

EBITDA 2,375 2,540

*City Hotels occupancy and ARR excludes Cinnamon red


Impact analysis: Easter Sunday attacks 2019

23

▪ Sri Lanka witnessed a series of coordinated attacks on Easter Sunday, 21 April 2019, which resulted in a death toll of over 250 people and injured over 500 individuals.

▪ The attacks targeted several religious establishments and three city hotels including “Cinnamon Grand Colombo”; the flagship city hotel property of the JKH Group. The damages sustained to the hotel were limited to the “Taprobane” restaurant and the surrounding vicinity.

▪ The hotel commenced accepting new bookings soon after the incident while its restaurants were opened to the public from 30 April 2019 onwards.

▪ The tourism industry witnessed cancellations particularly given adverse travel advisories from key source markets within a few days of the incident.

▪ However, the safety and security measures are currently confirmed to be in place by the Authorities.

▪ Subsequent to the the initial cancellations, forward bookings of the Group’s hotels are already witnessing a pick-up.


Easter Sunday attacks: recovery seen to be in 12-18 months

24

▪ Studies of other travel destinations that were impacted by similar terrorism incidents indicate that destinations typically require 12 to 18 months to revert to pre-incident levels.

▪ Popular destinations which were affected by acts of terrorism such as Bali, Mumbai, Paris and Brussels have indicated a recovery in less than 18 months.

Crisis Category Average recovery time (months)

Political Turmoil 26.7

Terrorism 13.0

Pandemic 21.3

Environmental Disaster 23.8

Trend in tourist arrivals post terror attacks:

(Source: World Economic Forum)

Estimates by the World Travel and Tourism council show the average recovery time in months by type of crisis:

-

4,000

8,000

12,000

16,000

Indonesia and Bali tourist arrivals

Indonesia Bali

(Source: World Bank and Bali Hotel Association)

-

2,000

4,000

6,000

8,000

10,000

Belgium Tourist Arrivals

(Source: World Bank)(Source: Ministry of Tourism, Thailand)

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

20

00

20

012

002

20

03

20

042

005

20

062

007

20

08

20

09

20

102

011

20

12

20

13

20

14

20

152

016

20

17

Thailand and Bangkok tourist arrivals

Thailand Bangkok


Easter Sunday attacks: recovery and way forward

25

▪ The GoSL has proactively initiated a range of measures and concessions to help the revival of the tourism industry.:

▪ Implement a public relations campaign to curtail the negative global media coverage whilst working towards the removal of adverse travel advisories for key tourist markets.

▪ A one-year moratorium on loans taken by the tourism related businesses.

▪ A proposed amendment to the Value Added Tax (VAT) for hotel and tour operators.

▪ The Group re-evaluated its short term plans for recovery of the Leisure businesses, particularly in the city hotels. Given the anticipated reduction in arrivals, particularly in the next 3 months, which is a relatively lower occupancy period. The mitigatory strategies for the immediate short term are as follows:

▪ Engage the domestic market to boost occupancy in the short term.

▪ Initiate marketing and outreach efforts once travel advisories on key tourist markets are removed.

▪ Develop agile cost structures within the hotel properties to remain flexible in managing short term operations costs.

▪ Critical evaluation of operating models to ensure optimum operating costs whilst maintaining the sustenance of the brand and service standards.


YearTouristarrivals

(In 000’s)

Growth (%)

2010 654 46

2011 856 31

2012 1,006 18

2013 1,275 27

2014 1,527 20

2015 1,798 18

2016 2,051 14

2017 2,116 3

2018 2,334 10

2019-YTD 908 2

▪ Tourist arrivals from January – March 2019 was 740,600, an increase of 4.6%, as compared to the 707,924 recorded in the comparative period of the previous year.

▪ Arrivals for April 2019 declined by 7.5 per cent.

Source: Sri Lanka Tourism Development Authority

Trend of tourist arrivals to Sri Lanka

26

-

500

1,000

1,500

2,000

2,500

1985 1996 2007 2018

Annual tourist arrivals to Sri Lanka ('000)


Source: Sri Lanka Tourism Development Authority

Significant growth in Asian arrivals to Sri Lanka

27

245,753

334,274 383,748

527,656

640,045

822,272

938,697 962,395 966,731

2010 2011 2012 2013 2014 2015 2016 2017 2018

To

uri

st a

rriv

als

Calendar Year


Source: Governmental tourism websites

Tourist arrivals to Sri Lanka lag well below regional peers

28

0

5

10

15

20

25

30

35

40

Malaysia Indonesia Thailand Vietnam Cambodia Sri Lanka

Arr

ival

s in

mil

lio

ns

1990 2018 Actual/ Target


60,000

31,79030,114

26,113

9,100 7,6005,019

Bangkok Manila Kuala Lampur Jakarta Ho Chi Minh Hanoi Colombo

Room inventory in Colombo lags far behind other popular regional capital cities

29


▪ Colombo is increasingly becoming an attractive location for City Hotel developments

▪ Expected 5-star room supply:

Development No. of roomsYear of

completion

Cinnamon Life 800 1Q 2021

ITC 350 2021

Ritz Carlton* 473 2022

Total rooms 1,623

▪ Operations at “Cinnamon Life” is expected to commence in March 2021 with the residential apartments and office complex ready for hand over and occupation by early 2020

Pipeline of room inventory to support arrivals trajectory

30

* Note that the year of completion of the above is uncertain and is likely to be later than stipulated


Property - overview

▪ “John Keells Properties”; explore property development opportunities by leveraging on brand equity

▪ Focused strategies for expansion via developer/landowner tie ups

▪ Catering to different target market segments:▪ Luxe Spaces▪ Metropolitan Spaces▪ Suburban Spaces

▪ High-rise apartment complexes completed▪ “7th Sense” on Gregory’s Road▪ OnThree20▪ The Emperor▪ The Monarch

“7th Sense” on Gregory’s Road

OnThree20

31


▪ Low levels of urbanisation within Sri Lanka in comparison to regional peers

▪ Annual condominium supply far below regional peers

Source: KL: CBRE property market outlook 1Q 2018 (forecast for 2018)HCMC: CBRE Vietnam property overview Q1 2017 (forecast for 2018)CMB: Internal Estimates (forecast for 2018)

Industry potential

32

53,796

38,000

2,187

KL Ho Chi Minh City Colombo

Annual condominium supply in regional cities


Low penetration of apartment living in Colombo

33

Source: Company analysis

10%

95%

80%

60%70%

50% 55%65%

90%

5%

20%

40%30%

50% 45%36%

GreaterColombo

Singapore Thailand(Central

Bangkok)

Thailand(Outskirts)

Malaysia(Central KL)

Malaysia(Greater KL)

India (Chennai) India(Bangalore)

Apartments Landed houses


Developable land bank of over 36 acres in central Colombo

▪ Prime developable land bank of over 36 acres held in central Colombo

▪ One of the largest privately owned land banks

▪ Opportunities for development at land banks held in Crescat City and Cinnamon Lakeside

Vauxhall street land bank

▪ Prime freehold land extent of 9.38 acres, to be developed with Finlays Colombo Limited

▪ Located in close proximity to the Beira lake water front which is earmarked for development of recreational and residential projects by the UDA

34

Cinnamon Lakeside

7.40 acres leasehold land

Vauxhall Street

9.3 acres freehold land

Union Place

1.5 acres

Crescat

8.03 acres freehold land

Cinnamon Life

7.1 acres freehold

3.03 acres leasehold


Developable freehold land of approximately 25 acres in close proximity to Colombo city

▪ Greater connectivity and reduction in travel time to Colombo city post construction of the outer circular expressway

▪ Direct connectivity to the Port City Colombo and a multi modal transportation hub to be developed

▪ Opportunity to expand into residential apartment projects in proximity to the Colombo city

Suburban Space development

▪ Master planning is currently underway for the 18-acre land in Thudella

▪ The site will be developed in phases, as a fully integrated community with approximately 2,000 units.

▪ The preliminary approvals for the development are in place, and the design work has been initiated.

35


Robust development pipeline; on-going developments

1. Revenue recognition of Cinnamon Life will be upon completion in CY2021. The completion dates of the project are as follows:

✓ Residential and office towers : March 2020

✓ Hotel and retail mall : March 2021

2. “Tri-Zen”- an 891 apartment residential development in central Colombo, with expected completion in FY2022/23

3. Master planning has been initiated for the jointly held 9.38-acre property in Vauxhall Street and the 18-acre site in Thudella

4. Acquisition of approximately 100 perches of land located in Colombo for a niche residential development

5. Future development of the land bank held at Rajawella Holdings Limited, as discussed in detail overleaf36

4Q Earnings update: Property industry group

• Performance of Property was impacted due to 2017/18 including a one-off revenue recognition at Rajawella Holdings Limited on the sale of leasehold rights and lower fair value gains on investment property in 2018/19 in comparison to 2017/18.

(Rs. mn) Q4 2018/19 Q4 2017/18

EBITDA 195 1,158

Cumulative sales (units)Number of units sold

as at 31 March ‘19

Cinnamon Life:

The Residence at Cinnamon Life 136

Suites at Cinnamon Life 110

Cinnamon Life commercial complex

4 floors

Tri-Zen 200


Rajawella Holdings Limited (RHL)

▪ Owners of a majority stake in RHL to complement the Group’s leisure and property portfolios

▪ The 500 acre land in Digana includes an 18-hole, Donald Steel designed, Golf Course and developable land extent of approximately 80 acres

▪ Currently developing the master plan to maximise the development potential of the land plot

▪ Troon International has taken over the management of the course and the refurbishment of the course commenced in February 2018

▪ Expected appreciation of land value with the completion of the central expressway

▪ Development and sale of properties such as villas, club house facilities, activity zones and possible operation of a hotel in the long term

37

Robust development pipeline: Scenic 500 acre land bank with an 18-hole golf course


Cinnamon Life Integrated Resort

38


Integrated development in Colombo

39


Integrated development in Colombo

40


41


42

As at December 2018


43As at May 2019


Conferencing ; capacity (4,837 pax) in three venues and car park facility (2,450 slots)

800 guest room hotel, including conferencing, banqueting, 7 specialty restaurants and entertainment facilities

Rentable mall and entertainment space of 372,000 Sq. Ft (Gross – 518,000 Sq. Ft)

First residential development of approximately – 358,000 Sq. Ft (231 units).

Second residential development of approximately – 255,000 Sq. Ft (196 units).

A standalone office development -254,000 Sq. Ft rentable area

Development programme

Note: Areas are subject to change based on final drawings

44


The growth in Indian MICE travel to complement Cinnamon Life

Source: MasterCard

45

1.51.63

1.78

1.94

2.11

2017 2018 2019 2020 2021

Indian Outbound MICE (Millions)


▪ Union Assurance (JKH Stake : 90%)

▪ Committed to a “digital first” business model with an investment of over Rs. 800Mn to become the largest digital insurer in Sri Lanka

▪ Developing Bancassurance channels - UA entered into exclusive bancassurance partnerships with Nations Trust Bank PLC and Union Bank PLC

Financial Services – Insurance sector overview

0%

1%

2%

3%

4%

5%

6%

Life Insurance Penetration as a % of GDP - 2016

Global average – 3.47%

46

45.0

54.0

64.0 71.0

80.3

2014 2015 2016 2017 2018

Rs.

Bn

Life Insurance Gross Written Premiums


*Excludes a one-off surplus of Rs. 3.38 billion arising from the change in policy liability valuation

Financial Services – Insurance sector overview

47

*The company recognised a deferred tax asset amounting to Rs.1.53 billion arising from brought forward tax losses as at 31 December 2017

Key performance indicators CY2013 CY2014 CY2015 CY2016 CY2017 CY2018

Market share (%) 14 13 13 13 14 14

GWP growth (%) 8 8 17 19 22 11

Recurring net profit (Rs.Mn) 791 881 1,127 1,313 4,002* 1,640

Surplus from Life Fund (Rs.Mn) 612 750 800 1,100 3,642 1,100

Life Fund (Rs.Bn) 19.3 23.1 26.3 30.3 29.1 32.1

Capital Adequacy Ratio N/A N/A N/A 411% 352% 262%

4Q Earnings update: Financial Services industry group

• The Life Insurance business included a one-off surplus and optimal surplus transfer recorded in 2017/18 which cumulatively amounted to Rs.7.02 billion.

• The annual life insurance surplus recorded by UA amounted to Rs.1.10 billion in 2018/19.

• Profits were further impacted by the downturn in economic conditions mark-to-market losses on its equity investment portfolio due to a decline in the stock market.

• NTB performance impacted by introduction of the Debt Repayment Levy and higher impairment charges.

(Rs. mn) Q4 2018/19

Q4 2017/18

EBITDA 1,590 6,459

Keyperformance indicators

Q4 FY2018(Jan-Mar

2018)

Q1 FY2019(Apr-Jun

2018)

Q2 FY 2019(Jul- Sep 2018)

Q3 FY 2019(Oct- Dec

2018)

Q4 FY2019 (Jan-Mar

2019)

GWP growth (% YoY)

12 13 4 15 (1)

Net profit(Rs.Mn)

304 300 1,638 1,002 178

Net profit growth (% YoY)

181 349 1,693 (86) (41)


▪ Nations Trust Bank (JKH effective economic interest : 32.16%)▪ Focus on SME / retail strategy▪ Franchise for American Express cards

Financial Services – Banking sector overview

48

Key performance indicators CY2013 CY2014 CY2015 CY2016 CY2017 CY2018

Loans and advances growth (%) 12.10 19.50 22.4 23.70 25.00 19.00

Industry (LCB’s) (%) 8.50 12.30 23.50 17.84 15.77 17.87*

Return on equity (%) 19.60 19.80 18.20 17.70 17.40 15.26

Industry (LCB’s) (%) 17.30 16.80 15.70 17.30 17.50 14.5*

Net Interest Margin (%) 5.80 5.80 5.50 5.10 4.50 4.60

Industry (LCB’s) (%) 3.70 3.60 3.50 3.50 3.50 3.70*

NPL ratio (%) 3.5 4.2 2.8 2.8 2.3 4.6

Deposit base (Rs. Bn) 96 111 129 152 194 231

Asset base (Rs. Bn) 142 159 176 211 268 325

Net Profit (Rs. Mn) 2,136 2,537 2,614 2,869 3,371 3,702

*As at September 2018

Key performance indicators

Q4 FY2018 (Jan-Mar 2018)

Q1 FY2019(Apr-Jun 2018)

Q2 FY2019 (Jul-Sep 2018)

Q3 FY2019 (Oct- Dec 2018)

Q4 FY2019 (Jan-Mar 2019)

Net profit (Rs. Mn) 939 936 1,043 783 773

Net profit growth (% YoY)

30 33 3 (16) (18)

Loan growth (% YoY) 28 24 25 20 18

Net Interest Margin (% 5.5 5.0 5.0 5.0 4.9

NPL Ratio (%) 2.62 3.06 3.71 4.58 4.88


THANK YOU

This document was produced by John Keells Holdings PLC for information purposes only. The information contained in this document are a review of the financial information pertaining to FY2019, and does not

constitute an issue prospectus or a financial analysis. This Investor Presentation should be read in conjunction with the JKH Annual Report 2018/19 to obtain a more comprehensive understanding of the drivers and

strategies of our businesses.

Whilst John Keells Holdings accepts responsibility for the accuracy of the information contained in this document, it does not assume any responsibility for investment decision made by the prospective investors based

on information contained herein. In making the investment decision, prospective investors must rely on their own examination and assessments of the Company including the risks involved.

49

investor presentation review of fy2019 · growth of beverage volumes 22 10 (16) (25) growth of...

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