December 2017: 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
John Keells Holdings PLC 2
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%
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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
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Profitability update : Q3 FY2018
PAT to equity holders of JKH
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)
Financial Services 1,465 1,089 35
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)
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Profitability update : cumulative to Q3 FY2018
PAT to equity holders of JKH
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)
Financial Services 2,075 1,532 35
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
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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
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
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▪ 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
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*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
▪ 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%
Source: Sri Lanka Tourism Development Authority
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Encouraging growth momentum of tourist arrivals to Sri Lanka
-
500
1,000
1,500
2,000
2,500
Annual tourist arrivals to Sri Lanka
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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
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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
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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
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* 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
16
“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
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▪ 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
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
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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
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Scenic 500 acre land bank with an 18-hole golf course
Cinnamon Life Integrated Resort
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Integrated development in Colombo
Integrated development in Colombo
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Integrated development in Colombo
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Cinnamon Life – construction progress
24
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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
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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
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KARACHI
GWADARBAHL
MUMBAI
CHENNAI
VISHAKHAPATNAM
KOLKATA
CHITTAGONG
YANGON
MOMBASA
LAMU
DAR-ES-SALAM
CAPE TOWN
PORT LOUIS
ADEN
KOCHI
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The strategic location of the Port of Colombo linking key shipping routes
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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%
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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
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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 (%)
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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* 72
Cargills 338
Arpico** 41
Laugfs 31
Profitability margin FY2014 FY2015 FY2016 FY2017
PBT margin (%) 1.3 3.1 5.4 5.6
* As at 31tst December 2017**Includes only Arpico Daily and Super Centres
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▪ 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
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No. of new stores expected
FY2018 20
FY2019 40
Rapid expansion to capitalise on low retail penetration levels
▪ Union Assurance (JKH Stake : 93.8%)
Key performance indicators:Life Insurance
CY2012 CY2013 CY 2014 CY2015 CY2016
Market share 14% 14% 13% 13% 13%
Premiums growth 14% 8% 8% 17% 19%
Net profit growth 28% 48% 11% 23% 17%
Net profit (Rs. Mn) 533 791 881 1,127 1,313
Surplus from Life Fund (Rs. Mn) 525 612 750 800 1,100
Life Fund (Rs. Bn) 16.5 19.3 23.1 26.3 30.3
Capital Adequacy Ratio* N/A N/A N/A N/A 411%
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*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
Loans and advances growth 20.0% 12.1% 19.5% 22.4% 23.7%
Industry (LCB’s) 21.8% 8.5% 12.3% 23.5% 17.7%
Return on equity 20.8% 19.6% 19.8% 18.2% 17.7%
Industry (LCB’s) 21.7% 17.3% 16.8% 15.7% 17.3%
Net Interest Margin 4.3% 5.8% 5.8% 5.5% 5.1%
Industry (LCB’s) 4.3% 3.7% 3.6% 3.5% 3.5%
Deposit base (Rs. Bn) 86.3 95.7 111.0 129.1 151.5
Asset base (Rs. Bn) 122.4 142.1 158.8 176.3 211.2
Net Profit (Rs. Mn) 1,951 2,136 2,537 2,614 2,869
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Financial Services – Banking sector overview
THANK YOU
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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.