Investor Presentation Review of Q1 FY2020 Version 1.3 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 1.10 billion ▪ No controlling shareholder - 99% free float ▪ Debt : Equity ratio of 25.7% ▪ The Board comprises of two Executive Directors and six Independent Non- Executive Directors 2
Portfolio profitability PAT attributable to equity holders (%) 2017/18 2018/19 2016/17 15 23 22 Transportation 4 33 33 36 Consumer foods Retail 11 Leisure 17 1 Property 32 5 8 Financial 10 16 Services 10 4 20 Note: The above excludes the contribution from Other, including Information Technology and Plantations Services ▪ 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
Cumulative EBITDA : for the year ended 31 March 2019 FY2019 FY2018 YoY Growth Industry Group (%) (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) 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
EBITDA : for the quarter ended 30 June 2019 Q1 FY2020 Q1 FY2019 * YoY Growth Industry Group (Rs. Million) (Rs. Million) (%) Transportation 1,055 929 14 Consumer Foods 843 522 61 Retail 1,087 573 90 Leisure ** (332) 228 (246) Property (12) 18 (163) Financial Services 774 865 (11) Total EBITDA 4,041 4,512 (10) *Note that the Q1 FY2019 EBITDA is adjusted for SLFRS 16, the accounting standard on Leases. Under the adoption of SLFRS 16, the impact to the Income Statement is front-loaded due to the higher finance expense at the inception of the lease. Accordingly, the ensuing slides, where applicable, are based on an adjusted EBITDA, where the lease expense in EBITDA in 2018/19 is comparatively adjusted on a like-with-like basis against the EBITDA in 2019/20 (adjusted EBITDA). **The Group’s Sri Lankan leisure business was significantly impacted by the Easter Sunday terror attacks and the resultant adverse travel advisories imposed by key tourist markets. 5
Portfolio evaluation 2018/19; returns vs. effective capital deployed Industry group Effective capital employed (%) Cinnamon Life 24 Adjusted ROCE (%) Leisure 21 Property (Excluding Cinnamon Life) 13 IT - 54 Transportation 8 Financial Services 6 Retail 4 Consumer Foods 3 Plantation Services 1 Financial Services - 25 Information Technology 0.1 Transportation - 21 ▪ In addition, the Holding Company accounts for 18% of effective capital employed which consists primarily of cash Consumer Foods - 21 Plantations - 15 Hurdle Rate - 15 Retail - 13 Leisure - 4 Property (Excl. Cinnamon Life) – 0.2 Cinnamon Life – (0.1) Adjusted effective capital employed (Rs.bn) 6
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: Project Expected completion Cinnamon Life - Residential and Commercial towers 4Q FY2020 1Q FY2021 - Hotel and Retail Mall 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 7
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
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 9
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 10
Sustained volume growth in the Port of Colombo 7.05 6.21 5.74 Million TEUs 5.19 4.91 4.31 2013 2014 2015 2016 2017 2018 11
Rapid absorption of capacity in the Port of Colombo Port Container handling SAGT Port of Colombo - volumes ('000 TEUs) capacity (TEUs) JCT 800,000 CICT Colombo 8 million 600,000 Hong Kong 21 million 400,000 Singapore 40 million 200,000 Shanghai 36 million 0 Q1 Q2 Q3 Q4 Q1 2018/19 2019/20 FY2019 FY2020 YoY 1Q FY20 earnings update: Volumes Change (TEU) Transportation industry Q1 Q2 Q3 Q4 Q1 (%) group SAGT 504,312 538,723 516,037 514,589 535,998 6 (Rs. mn) Q1 Q1 JCT 547,629 592,551 604,672 607,913 561,897 3 2018/19 2017/18 CICT 656,986 676,710 703,470 668,230 702,745 7 EBITDA 1,055 929 Total 1,708,927 1,807,984 1,824,179 1,790,732 1,800,639 5 • SAGT profits driven by higher volumes and improved FY2019 FY2020 volumes mix YoY. SAGT Q1 Q2 Q3 Q4 Q1 Domestic: Transshipment 17:83 17:82 20:80 21:79 19:81 volume mix Sources: Government websites/ Sri Lanka Ports Authority 12
Opportunities for growth in the Bunkering businesses Bunkering Business (Lanka Marine Services) FY2019 FY2020 LMS Q1 Q2 Q3 Q4 Q1 Volume growth 20 2 9 (4) (16) LMS volumes were impacted by the continuous drop in base fuel prices during the months of May and ▪ June, which increased the selling price parity between Colombo and Singapore 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 Sources: Government websites/ Sri Lanka Ports Authority 13
Consumer Foods - overview Market leader in soft drinks, ice creams and processed meats ▪ 1Q FY20 earnings update: ▪ Custodians of the consumer brands “Elephant House”, “Keells - Krest”: high brand equity Consumer Foods industry group Key performance indicators (%) FY2016 FY2017 FY2018 FY2019 (Rs. mn) Q1 FY2020 Q1 FY2019 Growth of frozen confectionery volumes 15 11 (4) 10 EBITDA 843 522 Growth of beverage volumes 22 10 (16) (25) Frozen Confectionery: Growth of convenience food volumes 11 (4) 3 7 • Improved performance in the EBITDA margin (%) 26 27 20 18 Frozen Confectionery business driven by strong volume growth in FY2019 Q1 the impulse segment Key performance indicators (%) FY2020 Q1 Q2 Q3 Q4 Beverages: Growth of frozen confectionery 3 8 7 21 19 • The Beverages business recorded a volumes strong growth in volumes and an Growth of beverage volumes (37) (31) (23) (6) 22 improvement in margins on Growth of convenience foods account of higher operating 12 12 3 1 (2) volumes leverage EBITDA (Rs. million) 523 691 596 1,103 843 EBITDA margin (%) 14 16 16 24 19 Revenue mix (Bev:FC) 49:51 50:50 47:53 49:51 48:52 ▪ 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 14 reduced by ~20 per cent from February 2019.
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