Investor Presentation Review of 2Q FY2019 Version 1.0 This Investor Presentation should be read in conjunction with the JKH Annual Report 2017/18 to obtain a more comprehensive understanding of the drivers and strategies of our businesses
About JKH ▪ Market cap of USD 1.10 billion ▪ No controlling shareholder - 98.5% free float ▪ Debt : Equity ratio of 16% ▪ The Board comprises of three Executive Directors and six Independent Non-Executive Directors 2
Contribution to net profits; a gradual rebalancing of portfolio profitability PAT attributable to equity holders 2016/17 2017/18 2015/16 14% 15% Transportation 21% 23% 22% 34% 7% Leisure 10% Property 16% Consumer Foods 20% 17% 31% 32% Retail 8% 4% 10% 5% 11% Financial Services Note: The above excludes the contribution from Other including Information Technology and Plantations services ▪ 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, 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
Cumulative profitability update : for the year ended 31 March 2018 PAT to equity holders of JKH FY2018 FY2017 YoY Growth Industry Group (%) (Rs. Million) (Rs. Million) Transportation 3,073 2,968 4 Leisure 2,822 4,165 (32) Property 745 508 47 Consumer Foods 1,515 2,192 (31) Retail 1,145 1,306 (12) Financial Services 8,016 1,978 305 Total PAT 21,021 16,275 29 Diluted earnings per share (Rs.) 15.15 11.84 28 Recurring PAT 18,320 16,119 14 Refer page 62 of the JKH Annual Report 2017/18 for commentary on recurring adjustments 4
Profitability update : 1H FY2019 PAT to equity holders of JKH 1H FY2019 1H FY2018 YOY Growth Industry Group (Rs. Million) (Rs. Million) (%) Transportation 1,882 1,810 4 Leisure* 108 701 (85) Property (22) 86 (126) Consumer Foods 420 797 (47) Retail 53 588 (91) Financial Services** 2,280 609 274 Total PAT # 7,282 6,560 11 *Profitability was impacted by the partial closure of “ Ellaidhoo Maldives by Cinnamon” and the closures of “Cinnamon Hakura Huraa Maldives” and “ Bentota Beach by Cinnamon” for the construction of new hotels. Both hotels are scheduled to open by end 2019. ** During the quarter under review, the insurance sector of the Group recognised a deferred tax asset amounting to Rs.1.53 billion arising from brought forward tax losses as at 31 December 2017. # The increase in profitability is mainly attributable to the higher exchange gains recorded at the Holding Company on its foreign currency denominated cash holdings. 5
Profitability update : FY2019 Q2 PAT to equity holders of JKH Q2 FY2019 Q2 FY2018 YOY Growth Industry Group (Rs.Million ) (Rs.Million) (%) Transportation 1,055 1,040 1 Leisure* 332 601 (45) Property (20) 43 (146) Consumer Foods 226 431 (48) Retail (91) 305 (130) Financial Services** 1,753 374 368 Total PAT # 5,095 3,730 37 *Profitability was impacted by the partial closure of “ Ellaidhoo Maldives by Cinnamon” and the closures of “Cinnamon Hakura Huraa Maldives” and “ Bentota Beach by Cinnamon” for the construction of new hotels. Both hotels are scheduled to open by end 2019. ** During the quarter under review, the insurance sector of the Group recognised a deferred tax asset amounting to Rs.1.53 billion arising from brought forward tax losses as at 31 December 2017. # The increase in profitability is mainly attributable to the higher exchange gains recorded at the Holding Company on its foreign currency denominated cash holdings compared to the corresponding quarter of the previous financial year. 6
Portfolio evaluation 2017/18; returns vs. effective capital deployed 60 Financial Services - 54% Industry group % of effective capital employed Financial Services 5 50 Retail 2 Consumer Foods 3 Information Technology 1 40 Retail - 36% Transportation 9 Consumer Foods - 34% Leisure 20 30 Property (Excl. Cinnamon Life) 10 Cinnamon Life 20 IT - 21% ▪ In addition, the Holding Company accounts for 28 per cent of effective Transportation - 18% 20 capital employed (Rs.45 bn), which consists primarily of cash Hurdle Rate - 15% Leisure - 8% 10 Property (Excl. Cinnamon Life) - 6% Cinnamon Life – (0.1%) 10 30 40 60 70 80 90 100 130 150 20 50 110 120 140 Adjusted effective Note the following adjustments: 1) The above graph excludes the capital employed at Cinnamon Life as it is a project under development capital employed 2) Investment property and revaluation gains/losses for FY16 ,FY17 and FY18 (Rs.bn) 3) 2013 Rights issue funds, 2015 and 2016 Warrant funds and debt drawn at Cinnamon Life 4) Capital employed in non- operational properties of the Group has been allocated to “Property Excl. Cinnamon Life” 7 5) The adjusted capital employed considers the effective share based on the ownership
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 CY2020 Reconstruction of Bentota Beach by Cinnamon End 2019 Reconstruction of Cinnamon Hakura Huraa Maldives End 2019 Cinnamon red Kandy FY2021 Frozen Confectionery manufacturing plant Completed 1Q FY2019 Roll out of 80 Retail outlets FY2019 & FY2020 Retail Centralised Distribution Centre 2H FY2019 JK Logistics - construction of a warehouse FY2020 8
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 9
Round trip offering in key tourist destinations; further potential to expand the ‘Cinnamon’ footprint ▪ 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 10
Occupancies and average room rates FY2018 FY2017 Sector Occupancy (%) ARR(US $) EBITDA Occupancy ARR (US $) EBITDA Margin (%) (%) Margin (%) City Hotels* 64 127 27 69 133 36 Resorts in Sri Lanka 81 91 28 80 93 33 Resorts in Maldives 82 263 24 89 261 33 City Hotels occupancies and ARRs were impacted by the increase in room inventory ▪ ▪ The decrease in EBITDA margins of the Sri Lankan Resorts segment is on account of the closure of “Bentota Beach by Cinnamon” The Maldivian Resorts segment was affected by the partial closure of “Cinnamon Dhonveli ▪ Maldives” and refurbishment of “Ellaidhoo Maldives by Cinnamon” Q2 FY2019 Q2 FY2018 Sector Occupancy (%) ARR (US $) Occupancy (%) ARR (US $) City Hotels* 52 127 66 127 81 Resorts in Sri Lanka 85 85 87 Resorts in Maldives 79 257 69 268 *City Hotels occupancy and ARR excludes Cinnamon red 11
Encouraging growth momentum of tourist arrivals to Sri Lanka Tourist arrivals Year Growth (%) Annual tourist arrivals to Sri Lanka (‘000) (In 000’s) 2,500 2010 654 46 31 2011 856 2,000 2012 1,006 18 2013 1,275 27 1,500 2014 1,527 20 1,000 2015 1,798 18 2016 2,051 14 500 2017 2,116 3 - Jan- Sep’18 1,732 12 Arrivals from China and India ▪ Tourist arrivals from January- September 2018 was Year China India 1,731,922, a growth of 11.6%, as compared to the 1,551,931 2014 128,166 242,734 recorded in the comparative period of the previous year 2015 214,783 316,247 2016 271,577 356,729 ▪ Arrivals for the quarter (July-September 2018) increased by 4.8% 2017 268,952 384,628 Jan- Sep ‘18 209,912 301,784 Source: Sri Lanka Tourism Development Authority 12
Significant growth in Asian arrivals to Sri Lanka 1,200,000 1,000,000 800,000 Tourist Arrivals 600,000 400,000 200,000 0 2010 2011 2012 2013 2014 2015 2016 2017 Calendar Year Source: Sri Lanka Tourism Development Authority 13
Tourist arrivals to Sri Lanka lag well below regional peers 40 35 30 25 Arrivals (Mns) 20 15 10 5 0 Malaysia Indonesia Thailand Vietnam Cambodia Sri Lanka 1990 2017 Actual/Target Source: Governmental tourism websites 14
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