Premier blue chip John Keells Holdings (JKH) yesterday reported a sharp decline in profit for the second quarter and first half, largely owing to COVID-19’s impact on the Leisure sector, but signalled recovery post re-opening of the country has been faster than anticipated.
JKH Group revenue at Rs. 32.39 billion for the quarter under review was marginally down 4% from a year earlier. Cumulative Group revenue for the first half of FY21 at Rs. 53.99 billion was down 17%.
Group earnings before interest expense, tax, depreciation and amortisation (EBITDA) at Rs. 3.32 billion in 2Q of FY21 was down by 18% from a year earlier.
Group EBITDA excluding the Leisure industry segment was Rs. 4.50 billion, up 15% from 2Q of FY20 and as a result JKH described 2Q performance as “resilient”.
The Leisure sector at EBITDA level posted a Rs. 1.18 billion loss in 2Q and Rs. 2.6 billion loss in 1H.
Cumulative Group EBITDA for the first half of the financial year 2020/21 at Rs. 4.12 billion was down 46%. Finance cost in 2Q increased by 104% YoY to record Rs. 864.5 million and by 79% to Rs. 2.8 billion in 1H.
Group profit before tax (PBT) at Rs. 636 million in 2Q reflected a 76% decrease whilst for the six months it was a Rs. 1.8 billion loss as against a PBT of Rs. 3.96 billion a year earlier.
Profit attributable to equity holders of the parent in 2Q was Rs. 680 million, down 70% from a year earlier, and in the first half JKH reported a loss of Rs. 978 million as against a profit of Rs. 3.28 billion in first half of FY20.
JKH results and Rs. 0.50 per share second interim dividend (see box story) were announced after the market had closed. Nevertheless, on a record-setting day, JKH share price dipped 60 cents to Rs. 136.
“The underlying performance of the Transportation, Consumer Foods, Retail and Financial Services industry groups continued its growth momentum witnessed in the latter part of the previous quarter, demonstrating a faster-than-anticipated recovery following the resumption of business activity in the country post the easing of lockdowns in May 2020,” said JKH Chairman Krishan Balendra.
He said the Leisure industry group continued to be impacted by the closure of the airport in Sri Lanka, although this has been mitigated, to an extent, by a resumption in domestic tourism, recovery in the banqueting, food and beverage segments and the opening of the airport in the Maldives in mid-July.
“The Frozen Confectionery, Beverage and Convenience Foods businesses recorded double-digit growth in EBITDA against the corresponding period of the previous quarter, continuing the trajectory witnessed in June,” Balendra added.
The Supermarket business continued its positive momentum with a strong rebound in sales and EBITDA, driven by the contribution from new outlets towards revenue growth and a pick-up in same store footfall post the easing of lockdown measures witnessed in the first quarter.
Balendra said the pace of construction at ‘Cinnamon Life’ continued to gain traction during the quarter. “Post ascertaining the impact of COVID-19 on the overall timelines of the project to manage deliverables and the re-sequencing of work, it is expected that the hand-over of the residential apartments and office tower will commence on a staggered basis from the fourth quarter of 2020/21 onwards,” JKH Chairman added.
Balendra said the Leisure business, however, continued to be significantly impacted given the closure of the airport in Sri Lanka and the high dependency on the recovery of key source markets, both in Sri Lanka and the Maldives, although the resurgence of domestic tourism, food and beverage and banqueting revenue in Sri Lanka as well as the opening of the airport in the Maldives in mid-July helped support the cash flows of the business during the quarter.
Pre-tax loss of the leisure sector in 1H was Rs. 5 billion and post-tax was Rs. 4.5 billion.
Noting that the COVID-19 pandemic was contained in Sri Lanka throughout the second quarter, resulting in a strong resumption of business activity, the JKH Chief said the outbreak of a cluster in early October led to an increase in the number of COVID-19 cases within the country, prompting partial lockdowns in some areas.
“While it is too early to ascertain the impact of this cluster outbreak and the resultant performance of the Group, the curtailing of movement has caused a slowdown in business activity and the pace of recovery will depend on how the situation improves in the next few weeks,” he said.
(FT)