Investor Presentation Review of Q4 FY2020 Version 1.0 This Investor Presentation should be read in conjunction with the JKH Annual Report 2019/20 to obtain a more comprehensive understanding of the drivers and strategies of our businesses
About JKH Market cap of USD 0.80 billion No controlling shareholder - 99% free float Debt : Equity ratio of 41.4%* The Board comprises of two Executive Directors and five Independent Non-Executive Directors * Debt includes the Right-of-Use assets due to the accounting impacts of SLFRS 16 – Leases. The debt to equity ratio excluding SLFRS 16 - Leases is 32.7%. 2
Portfolio profitability PAT attributable to equity holders 2018/19 2019/20 2017/18 Transportation Consumer Foods 22% 29% Retail 33% Leisure 33% 36% 54% Property 4% Financial Services 11% -17% 1% 5% 8% 10% 13% 16% 4% 18% 20% Note: The above excludes the contribution from Other including Information Technology and Plantations Services The Group is conscious of the composition of its earnings and targets a greater contribution from higher ROCE earning industry groups such as Consumer Foods, Retail and Financial Services. Approximately 50 per cent of earnings are contributed from these businesses. 2017/18 excludes the one-off surplus transfer of Rs.3.38 billion at Union Assurance PLC Earnings of the Sri Lankan Leisure businesses in 2019/20 were significantly impacted by the Easter Sunday attacks in April 2019 and resultant impact on tourist arrivals to the country. Performance was further impacted from the fourth quarter onwards with the global outbreak of the COVID-19 pandemic 3
COVID-19 – impact to Sri Lanka and JKH Sri Lankan Context Following the diagnosis of COVID-19 patients in Sri Lanka, the Government declared an island-wide • curfew, imposed from 20 March 2020 onwards. Restrictions were waived only for services classified as 'essential’. • Curfew has been gradually eased off in many parts of the country, except for two high risk districts, including the Colombo district. The most recent release by the Government states that curfew in the two districts will remain, with restrictions being eased off during the day for the gradual commencement of economic activity by the public and private sectors. With the resumption of activity across the country post the easing of curfew restrictions, the Group • is seeing early signs of an encouraging recovery of consumer activity which should be positive for consumer-focused businesses such as Consumer Foods, Retail, Logistics and Insurance. It is encouraging that there is no indication of community spread in the country. • 4
COVID-19 – impact to Sri Lanka and JKH Group response: • In order to evaluate the financial position of each business, particularly over the next 12 months, each of the businesses were stress-tested under multiple operating scenarios, and, subsequently at a Group consolidated level, to ascertain the impact on the ability to sustain its operations with its cash reserves and banking facilities in place. • Whilst the assumptions vary across the businesses, the Group is satisfied of the ability of the businesses to manage its operations even under an extreme stress-tested scenario. Whilst the short-term impact to the Group performance is expected to be significant, the Group has • undertaken various measures to ensure a sustainable and agile operating model, with a focused view on cash management and liquidity, in particular. The Group has evaluated all health and safety guidelines issued by the Government as well as • international best practice to ensure suitable working arrangements and safe conditions for employees, customers and other stakeholders. • With the easing of restrictions, we have seen a smooth transition with the resumption of business activity where we are already seeing a positive momentum. 5
Cumulative EBITDA : for the year ended 31 March 2020 FY2020 FY2019* YoY Growth Industry Group (%) (Rs. Million) (Rs. Million) Transportation 4,417 4,563 (3) Consumer Foods 3,412 2,920 17 Retail 5,110 2,890 77 Leisure 2,363 5,354 (56) Property 568 323 76 Financial Services 2,988 3,359 (11) Other, incl. IT and Plantation Services 3,315 6,388 (48) Total EBITDA 22,174 25,798 (14) Recurring EBITDA** 22,055 25,579 (14) Recurring EBITDA excluding Leisure*** 19,714 20,278 (3) *Note that the FY2019 EBITDA is adjusted to reflect impact from SLFRS 16 - Leases, for comparison purposes ** Refer page 38 of the JKH Annual Report 2019/20 for commentary on recurring adjustments ***Leisure is excluded due to the impacts of the Easter Sunday attacks 6
EBITDA : for the quarter ended 31 March 2020 Q4 FY2020 Q4 FY2019 * YoY Growth Industry Group (Rs. Million) (Rs. Million) (%) Transportation 952 1,290 (26) Consumer Foods 1,111 1,105 1 Retail 1,421 1,060 34 Leisure 1,933 2,502 (23) Property 497 188 164 Financial Services 833 1,185 (30) Total EBITDA 8,104 7,541 7 *Note that the FY2019 EBITDA is adjusted to reflect impact from SLFRS 16 - Leases, for comparison purposes While the performance of the Group initially witnessed strong momentum in the fourth quarter of the financial year 2019/20, the outbreak of the COVID-19 pandemic had varying levels of impact on the performance of the businesses. This is discussed further in the ensuing slides. 7
Portfolio evaluation 2019/20; returns vs. effective capital deployed Industry group Effective capital employed (%) Cinnamon Life 32 Adjusted ROCE (%) Leisure 24 Property (Excluding Cinnamon Life) 8 Transportation 7 Consumer Foods - 23% Financial Services 6 Retail 6 IT - 23% Consumer Foods 3 Plantations 1 Transportation - 19% Information Technology 1 Retail - 16% In addition, the Holding Company accounts for 12 per cent of effective Financial Services - 15% capital employed which consists primarily of cash Hurdle Rate - 15% Property (Excl. Cinnamon Life) - 2% Leisure – (1%) Plantations – (0.2%) Cinnamon Life – (0.1%) Adjusted effective capital employed (Rs.bn) 8
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 KLM Royal Dutch airlines and Gulf Air. Other operations include warehousing and supply chain management. 9
The strategic location of the Port of Colombo linking key shipping routes GWADAR BAHL KARACHI KOLKATA MUMBAI VISHAKHAPATNAM CHITTAGONG YANGON CHENNAI ADEN KOCHI LAMU MOMBASA DAR-ES-SALAM PORT LOUIS CAPE TOWN 10
Capacity enhancements in the Port of Colombo CICT - Colombo International Container Terminal • ECT - East Container Terminal • • SAGT - South Asia Gateway Terminal • JCT - Jaya Container Terminal 11
Sustained volume growth in the Port of Colombo 8.00 7.23 7.05 7.00 6.21 5.74 6.00 5.19 4.91 5.00 Million TEUs 4.31 4.00 3.00 2.00 1.00 - 2013 2014 2015 2016 2017 2018 2019 12
Rapid absorption of capacity in the Port of Colombo Port Container handling capacity (TEUs) Colombo 8 million Hong Kong 21 million Singapore 40 million Shanghai 36 million 2018/19 2019/20 4Q FY20 earnings update: Volumes % YoY Transportation industry (TEU) Change Q4 Q1 Q2 Q3 Q4 group SAGT 514,589 535,998 492,542 509,012 528,641 3% (Rs. mn) Q4 Q4 2019/20 2018/19 JCT 607,913 561,897 580,747 532,052 548,944 -10% EBITDA 952 1,290 • LMS recorded a strong CICT 668,230 702,745 763,123 759,448 726,303 9% growth in profits driven by improved margins. Total 1,790,732 1,800,639 1,836,411 1,800,512 1,803,888 1% • SAGT became liable for corporate income tax from October 2019 onwards, 2018/19 2019/20 SAGT thereby negatively impacting Q4 Q1 Q2 Q3 Q4 performance as the Group Domestic: Transshipment 21:79 19:81 19:81 19:81 20:80 recognises its share of profit volume mix after tax of SAGT as an equity Sources: Government websites/ Sri Lanka Ports Authority accounted investee. 13
Opportunities for growth in the Bunkering businesses Bunkering Business (Lanka Marine Services) 2018/19 2019/20 LMS Q4 Q1 Q2 Q3 Q4 Volume growth 9 (4) (16) (6) (8) 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. 318,000 sq.ft. in the year 2019/20, at a capacity utilisation of 96 per cent. 14
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