The September quarter (2Q18) financial performance of John Keells Holdings PLC (JKH), the most valued conglomerate in the country, largely reflected the difficult economic conditions its diverse businesses were facing, in an extremely challenging environment.  

In fact, its highly diversified business portfolio proved much useful in facing these tough times, as poor performance of some of the segments were offset by performing segments such transport & logistics and banking & insurance to a certain degree. 

The JKH group reported earnings of Rs.2.69 a share for the July – September quarter on a profit of Rs.3.73 billion, largely unchanged from the same period, last year. This performance by the most diversified group is a barometer of the overall corporate earnings during the September quarter and shows how difficult it had been for businesses to make money.

The Sri Lankan economy slowed down as a result of the higher interest rates, taxes and natural disasters, and higher inflation erased most of the demand generated by consumers. 

The group’s top line was up by a modest 15 percent year-on-year (YoY) to Rs. 29.6 billion but the performance of the consumer food & retail and leisure businesses, the two biggest contributors to the group revenue, suffered deeply. 

However, the group’s transportation business, which is led by bunkering, ports and shipping operations, offset some of the biggest setbacks in the areas which are most vulnerable to consumer sentiments and demand. 

The transport segment generated revenue of Rs.4.1 billion for the quarter, increasing from Rs.2.4 billion reported for the same quarter, last year. 

This segment contributed little over a billion rupees to the group bottom-line, a leap from the Rs.651.3 million earned for the comparable period last year. 

Meanwhile, the group’s leisure business saw its earnings declining from Rs.1.2 billion to Rs.719.5 million during the quarter under review, as some of the hotel properties in both Maldives and Sri Lanka were closed for refurbishment and reconstruction. 

But fresh concerns loom in the city hotel segment as the, “sector witnessed a decrease in occupancies and average room rates primarily as a result of the increase in room inventory within Colombo,” said JKH Chairman Susantha Ratnayake. 

This segment generates revenue of Rs.5.8 billion for the quarter, down from Rs.6.4 billion a year ago.
The consumer foods and retail sector delivered the heaviest blow to the group’s bottom line as the earnings almost halved to Rs.789.4 million from Rs.1.14 billion.

But the segment revenue was up by about Rs.2.0 billion to Rs.13.2 billion as the same store sales increased and JKH opened 6 new Keells supermarkets bringing the total stores up to 70 by September end. 

Meanwhile, the financial services segment of the group, which is mainly supported by its banking arm, Nations Trust Bank PLC and life insurer, Union Assurance PLC, reported a net profit of Rs.374.6 million, up from Rs.245.1 million a year ago. 

The segment’s revenue was Rs.2.5 billion against Rs.2.07 billion a year ago. 

The group’s property segment, under which the integrated resort Cinnamon Life is listed, saw its profits rising to Rs.44.6 million from Rs.39.7 million. 

JKH said the Cinnamon Life project, which is currently under construction, is progressing well. 
Meanwhile, JKH said along with the group’s strategy of creating a robust pipeline of new projects, work has commenced in identifying suitable lands with development potential. 

The first of these new projects, being a large residential development in a prime location in Central Colombo, will be launched in the fourth quarter of 2017/18, JKH said.

The group this October bought a 334-perch land in Colombo 2 for Rs.4.3 billion and in September,  acquired 50 percent stake in Baybrook Residential Properties (Pvt) Ltd., formerly known as Indra Holdings, for Rs.1.8 billion.

As of September 30, 2017, Broga Hill Investment Ltd. a special purpose investment vehicle of Malaysia’s sovereign wealth fund Khazanah, held 10.2 percent stake in JKH as the single largest shareholder while the Captain family held 16.4 percent.