review of q3 fy2018...review of q3 fy2018 private & confidential john keells holdings plc 1...

Review of Q3 FY2018

Private & Confidential

John Keells Holdings PLC 1

About JKH

▪ Market cap of USD 1.50 billion

▪ No controlling shareholder - 97.5% free float

▪ Debt : Equity ratio of 13%

▪ The Board comprises of three Executive Directors and five

Independent Non-Executive Directors


Contribution to net profits; a gradual rebalancing of portfolio profitability

2015/16

Note: The above excludes the contribution from Other including Plantation Services

2016/17

PAT attributable to equity holders

3

22%

31%

4%

24%

15%

4%Transportation

Leisure

Property

Consumer Foodsand Retail

Financial Services

InformationTechnology

2014/15

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

▪ The effective capital deployed in Leisure will be re-evaluated based on the existing hotel portfolio and where relevant, an asset light investment model to be undertaken in new projects

▪ The cyclicality of profitability in the Property industry group will be managed proactively through the development of a more robust pipeline of projects

21%

36%11%

13%

16%

3%

21%

31%

10%

23%

14% 1%


Cumulative profitability update : for the year ended 31 March 2017

Industry GroupFY2017 FY2016

YoY Growth (%)(Rs. Million) (Rs. Million)

Transportation 2,968 2,448 21

Leisure 4,165 3,684 13

Property* 508 1,179 (57)

CF & R 3,165 2,655 19

Financial Services 1,978 1,665 19

Information Technology 468 96 389

*Decline is attributable to the revenue recognition cycle of the residential apartments

PAT to equity holders of JKH

Total PAT 16,275 14,070 16

Diluted earnings per share (Rs.) 11.84 10.52 13


Profitability update : Q3 FY2018


Industry GroupQ3 FY2018

(Rs. Million)Q3 FY2017

(Rs. Million)YoY Growth (%)

Transportation 880 815 8

Leisure* 533 992 (46)

Property 29 128 (77)

CF & R 556 744 (25)


Information Technology 57 153 (63)

*Decline attributable to the partial closure of Ellaidhoo Maldives by Cinnamon and the closure of “Bentota Beach by Cinnamon” for reconstruction

Total PAT 4,492 5,149 (13)


Profitability update : cumulative to Q3 FY2018


Industry GroupQ3 FY2018

(Rs. Million)Q3 FY2017

(Rs. Million)YoY Growth (%)

Transportation 2,690 2,156 25

Leisure* 1,234 2,389 (48)

Property 114 197 (42)

CF & R 1,819 2,436 (25)


Information Technology 205 284 (28)

*Decline attributable to the partial closure of two Maldivian resorts and the closure of “Bentota Beach by Cinnamon” for reconstruction

Total PAT 11,055 11,289 (2)

Note the following adjustments:1)The above graph excludes the capital employed at Cinnamon Life as it is a project under development2)Investment property and revaluation gains/losses for FY15, FY16 and FY17

3)2013 Rights issue funds, 2015 and 2016 Warrant funds and debt drawn at Cinnamon Life4)Capital employed in non-operational properties of the Group has been allocated to “Property Excl. Cinnamon Life”5)The adjusted capital employed considers the effective share based on the ownership

John Keells Holdings PLC7

70

60

40

010 20 30 40 50 60

20

Adjusted effective capital employed (Rs.Bn)

Adjusted ROCE (%)Industry Group/Sector

% of total effective

capital employed

Retail 2

Consumer Foods 5

Financial Services 7

Information Technology 2

Transportation 14

Leisure 32

Property (Excl. Cinnamon Life) 630

50

70

10

80

Consumer Foods - 62%

Retail- 64%

Financial Services - 28%

Property (Excl. Cinnamon Life) - 7%

Transportation - 19%

Leisure - 12%

IT - 27%

Hurdle Rate - 15%

Portfolio evaluation 2016/17; returns vs. effective capital deployed

Aggressive investment pipeline of over USD 600 million during FY2019 and FY2020

▪ Aggressive investment pipeline exceeding USD 600 million over the next two years. Given the gestation period, the realisation of benefits from these investments is expected to accrue from FY2021 onwards

▪ Approximately USD 160 million of these investments to be funded through available/internally generated cash. Some of the key projects include:


Project Expected completion

Cinnamon Life FY2020

Reconstruction of Bentota Beach by Cinnamon November 2019

Refurbishment of Cinnamon Hakura Huraa Maldives December 2019

Proposed minority stakes in new Hotels (Nuwara Eliya and Kandy) FY2020 & FY2021

Frozen Confectionery manufacturing plant May 2018

Roll out of 80 Retail outlets FY2019 & FY2020

Retail Centralised Distribution Centre December 2019

JK Logistics - construction of a warehouse FY2020

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 select service business 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



▪ Greater focus on asset light 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

▪ Nuwara Eliya (Central Province) : 3.4 acres

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

SectorFY2017 FY2016

Occupancy (%) ARR (US $) Occupancy (%) ARR (US $)

City Hotels* 69 132 62 133

Resorts in Sri Lanka 80 93 79 92

Resorts in Maldives 89 305 85 311

SectorQ3 FY2018 Q3 FY2017

Occupancy (%) ARR (US $) Occupancy (%) ARR (US $)

City Hotels* 65 124 73 130

Resorts in Sri Lanka 80 86 81 89

Resorts in Maldives 92 300 94 294


*Note City Hotels occupancy and ARR excludes Cinnamon red

Occupancies and average room rates

YearTourist arrivals

(In 000’s)Growth (%)

2008 438 -

2009 448 2

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

China arrivals

Year Tourist arrivals

2012 20,323

2013 54,288

2014 128,166

2015 214,783

2016 271,577

2017 268,952

YTD 24,819

▪ Tourist arrivals from January – December 2017 was 2,116,407, a growth of 3.2%, as compared to 2,050,832 recorded in the comparative period of the previous year

▪ Arrivals for the quarter increased by 4.1%

▪ Tourist arrivals for January 2018 was 246,972, a growth of 12.6% as compared to 219,360 recorded in 2017

Source: Sri Lanka Tourism Development Authority


Encouraging growth momentum of tourist arrivals to Sri Lanka

-

500

1,000

1,500

2,000

2,500

Annual tourist arrivals to Sri Lanka


Source: Sri Lanka Tourism Development Authority

Significant growth in Asian arrivals to Sri Lanka

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2011 2012 2013 2014 2015 2016 2017

Tou

rist

Arr

ival

s

Calendar yearNorth America Western Europe Eastern Europe Asia Others Total

Source: Governmental tourism websites


Tourist arrivals to Sri Lanka lag well below regional peers

0

5

10

15

20

25

30

35

40

Malaysia Indonesia Thailand Vietnam Cambodia Sri Lanka

Arr

ival

s (

Mn

s)

1990 2016 2017 Actual/Target


60,000

31,79030,114

26,113

9,100 7,6005,019

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Bangkok Manila Kuala Lampur Jakarta Ho Chi Minh Hanoi Colombo

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

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

▪ Expected 5-star room supply:

Development No. of roomsYear of

completion

Sheraton* 306 2019

Grand Hyatt* 475 2019

Cinnamon Life 800 2020

Total rooms 1,581


* Note that the year of completion of the above may be later than the stipulated

Pipeline of room inventory to support arrivals trajectory

Property - overview

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

▪ “Tri-Zen”- an 800 apartment residential development in central Colombo, with expected completion in FY2022/23. Pre-sales have commenced and initial bookings are very encouraging

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

▪ Focused strategies for expansion via developer/landowner tie ups

Cinnamon Life Total unitsNumber of units sold as

at Q3 FY2018The Residence at Cinnamon Life 231 107

The Suites at Cinnamon Life* 196 69Cinnamon Life - commercial complex** 10 floors 4 floors

17

“7th Sense” on Gregory’s Road

*Pre-sales for The Suites at Cinnamon Life commenced from September 2016 onwards** Remaining 14 floors to be on rental/lease model


▪ Key real-estate sites in Colombo;

City Centre

▪ Cinnamon Grand premises : 8.03 acres (freehold land)

▪ Cinnamon Lakeside premises : 7.65 acres (leasehold land till 2081)

▪ Cinnamon Life : 10.80 acres (under development)

Developable freehold land within the city limits

▪ Vauxhall Street, Colombo 2 : 3.06 acres

▪ Vauxhall Street/Dawson Street : 2.09 acres

▪ Union place, Colombo2 : 0.58 acres

▪ Mackinnons Keells, Colombo 1 : 0.45 acres

▪ Keells Realtors, Colombo 15 : 1.22 acres

▪ Two neighbourhood malls, one with freehold land of approximately 6.6 acres, in addition to a 17.7 acre land extent located in an emerging township, identified under the Government led urban development strategy (Megapolis)

One of the largest privately held land banks in prime city locations


Developable land bank of over 36 acres in central Colombo

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

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

Vauxhall street land bank:

▪ Prime freehold land extent of 9.3 acres, held with a JV partner

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


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 (PCC) and a multi modal transportation hub to be developed

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

Colombo - Katunayake expressway/ outer circular expressway connecting to the southern expressway

Port access elevated highway

Bandaranaike International

Airport

Thudella 18 Acres

freehold

Kapuwatta 6.9 Acres

freehold

Port City Development

Future development potential

New developments

1. High end niche residential developments in prime locations, such as “7th Sense” on Gregory’s Road, to cater to the premium segment

2. Following the OnThree20 model, identifying similar properties in convenient locations to address the growing demand from the mid level residential market

3. Studio apartments targeting high density commercial and tourist areas with possible tie ups with operators to manage such properties


Rajawella Holdings Limited (RHL)

▪ Acquisition of a majority stake in RHL to complement the Group’s leisure and property portfolios in September 2015

▪ The 500 acre land in Digana includes an 18-hole, Donald Steel designed, Golf Course and developable land extent of over 83 acres

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

▪ Troon Golf has taken over the management of the course and the refurbishment of the course will commence 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


Scenic 500 acre land bank with an 18-hole golf course

Cinnamon Life Integrated Resort



Integrated development in Colombo

Cinnamon Life – construction progress

27

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

800 guest room hotel. Include conferencing, banqueting, 7 specialty restaurant 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


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


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


Capacity enhancements in the Port of Colombo

▪ Container handling capacity in the region

▪ Port of Colombo utilisation

▪ Port of Colombo volumes Q3 FY2018 vs Q3 FY2017 (October – December)

Port Container handling capacity (TEUs)

Colombo 8 million*

Hong Kong 21 million

Singapore 40 million

Shanghai 36 million

Q3 FY2018 Q3 FY2017

SAGT 478,972 444,830

SLPA 539,021 493,763

CICT 645,637 540,839

Total 1,663,630 1,479,432

Sources: Government HK

Source: Sri Lanka Ports Authority

YoY Growth of 8% at the Port of Colombo

Total Port of Colombo volumes – CY2017* 6,208,763

Utilisation* 78%


Rapid absorption of capacity in the Port of Colombo

* As per estimates

Consumer Foods - overview

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

Key performance indicators - CF FY2015 FY2016 FY2017

Growth of ice cream volumes (%) 8 15 11

Growth of beverage volumes (%) 3 22 10

PBT growth- Consumer Foods (%) 73 65 19

Key performance indicators - CF Q3 FY2018

Growth of ice cream volumes (%) (6)

Growth of beverage volumes (%) (21)*

Profitability margins - CF GP margin EBITDA margin PBT margin

Q3 FY2018 (%) 30 16 9

Q3 FY2017 (%) 35 22 14


Note: CF is inclusive of the Frozen Confectionary, Beverage and Processed foods businesses

*A sugar tax on carbonated beverages was implemented from 9th November 2017 onwards

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

52.0

39.0 31.4

19.0 10.0

Philippines Thailand Singapore Malaysia Sri Lanka

Carbonated Soft Drinks - Per Capita Consumption (Litres)

70

49 4843 40

16

Singapore Malaysia Hong Kong Taiwan Thailand Sri Lanka

Modern Retail Penetration (%)


Low consumption patterns and penetration reflects potential for sustained growth

2.4 2.0 1.91.5

Singapore Sri lanka Malaysia Thailand

Ice Cream – Per Capita Consumption (Litres)

Retail - overview

Key performance indicators - Retail FY2015 FY2016 FY2017 Q3 FY2018

Same store sales growth (%) 15.3 12.5 9.5 3.9

Same store foot fall growth (%) 10.6 10.1 6.8 2.7

Present share of modern retail No. of outlets

Keells Super* 79

Cargills 338

Arpico 41

Laugfs 31

Profitability margin FY2015 FY2016 FY2017 YTD (9m)

PBT margin (%) 3.1 5.4 5.6 3.0

* As at 15th March 2018


• Although outlets are profitable in the first year of operations, the aggressive outlet rollout undertaken has resulted in a margin contraction in the short term as a result of the ramp up period of a new outlet

• The sector will undertake planned capex of approximately USD 90 million over the next two years

▪ 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

▪ Over 130 outlets expected by FY2019/20

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

FY2018/19

Keells Super forecasted coverage


No. of new stores expected

FY2019 40

FY2020 40

Rapid expansion to capitalise on low retail penetration levels

▪ Union Assurance (JKH Stake : 93.8%)

▪ Gross written premiums: UA growth of 22% against an industry growth of 13% in CY2017

Key performance indicators:Life Insurance

CY2012 CY2013 CY2014 CY2015 CY2016 CY2017*

Market share 14% 14% 13% 13% 13% 14%

Premiums growth 14% 8% 8% 17% 19% 22%

Net profit growth 28% 48% 11% 23% 17% 157%

Net profit (Rs. Mn) 533 791 881 1,127 1,313 3,367

Surplus from Life Fund (Rs. Mn)

525 612 750 800 1,100 3,000

Life Fund (Rs. Bn) 16.5 19.3 23.1 26.3 30.3 33.1

Capital Adequacy Ratio** N/A N/A N/A N/A 411% 383%


*As per unaudited 4th quarter interim results released by UA**Capital Adequacy Ratio is calculated from CY2016 onwards as per the Risk Based Capital framework proposed by the Insurance Board of Sri Lanka, the stipulated minimum regulatory requirement is 120 per cent

Financial Services – Insurance sector overview

▪ Nations Trust Bank (JKH Stake : 29.9%)

▪ Focus on SME / retail strategy

▪ Franchise for American Express cards

Key performance indicators

CY2012 CY2013 CY2014 CY2015 CY2016 CY2017

Loans and advances growth 20.0% 12.1% 19.5% 22.4% 23.7% 25%

Industry (LCB’s) 21.8% 8.5% 12.3% 23.5% 17.7% 19.2%

Return on equity 20.8% 19.6% 19.8% 18.2% 17.7% 17.4%

Industry (LCB’s) 21.7% 17.3% 16.8% 15.7% 17.3% 17.5%

Net Interest Margin 4.3% 5.8% 5.8% 5.5% 5.1% 4.4%

Industry (LCB’s) 4.3% 3.7% 3.6% 3.5% 3.5% 3.5%

Deposit base (Rs. Bn) 86.3 95.7 111.0 129.1 151.5 194.3

Asset base (Rs. Bn) 122.4 142.1 158.8 176.3 211.2 268.3

Net Profit (Rs. Mn) 1,951 2,136 2,537 2,614 2,869 3,372


Financial Services – Banking sector overview

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 Quarter 3 of the Financial

year 2018, and does not constitute an issue prospectus or a financial analysis.

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.

review of q3 fy2018...review of q3 fy2018 private & confidential john keells holdings plc 1...

Documents