JKH leisure business crisis affects group performance
View(s):The Consumer Foods, Retail, Leisure and Property industry groups at John Keells Holdings continued its growth momentum from the first quarter despite the disruptions after the Easter Sunday terror attacks in April 2019, according to the group’s results released recently for the three months ending September 2019.
JKH Chairman Krishan Balendra
The group’s year-on-year performance for the (quarter) was impacted by the downturn in the group’s Sri Lankan leisure business which continued to be significantly impacted post the Easter Sunday terror attacks, lower finance income as a result of the deployment of cash in new investments and lower exchange gains recorded at the holding company on its foreign currency denominated cash holdings.
“We are encouraged that the forward bookings for the Sri Lankan hotels have witnessed an upward trend and we expect occupancy in the peak season to be in line with the previous year, albeit at a moderately lower room rate. During the quarter under review, we added our fourth resort property to our Maldivian hotel portfolio, Cinnamon Velifushi Maldives, in line with our asset light investment strategy where the hotel was handed over to Cinnamon on an operating lease,” said Group chairman Krishan Balendra in his quarterly review of the performance.
The report said that the quarterly performance of the group’s Ports and Shipping business, South Asia Gateway Terminals, was impacted by an operational disruption in August whilst the group’s Bunkering business, Lanka Marine Services, recorded strong growth in profits driven by improved margins.
Retail performance was driven by robust revenue growth in the supermarkets business, supported by a notable contribution from new outlets and strong growth in customer footfall.
Consumer Foods witnessed growth on account of an improved performance in the Beverages and Frozen Confectionery businesses, driven by growth in volumes and improved profitability on account of higher margins. The report noted that the volume growth momentum prior to the month of September displayed encouraging double-digit growth, although adverse weather impacted volumes in September.
The quarter under review marked the first tranche of revenue recognition for the “Tri-Zen” residential development project. Revenue recognition of the project will ramp up over the next few quarters as the project progresses.
The installation of external facades, mechanical and electrical services and interior works are nearing completion for the Cinnamon Life Residential and Office Towers, for handover from April 2020 onwards. The full completion of the project is on track for March 2021.
Despite the challenges, the group reported a 3 per cent growth in revenue during the second quarter of the year to Rs.33.70 billion compared to the Rs.32.63 billion recorded in the same months of the previous financial year.