Investor Presentation

Review of 1Q FY2019
Version 1.2

This Investor Presentation should be read in conjunction with the JKH Annual Report 2017/18 to obtain a more
comprehensive understanding of the drivers and strategies of our businesses
About JKH

▪ Market cap of USD 1.30 billion

▪ No controlling shareholder - 98.5% free float

▪ Debt : Equity ratio of 16%

▪ The Board comprises of three Executive Directors and five

Independent Non-Executive Directors

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Contribution to net profits; a gradual rebalancing
of portfolio profitability
PAT attributable to equity holders

2015/16 2016/17 2017/18

14% 15% Transportation

21% 23% 22%
7% 34% Lesiure
10%
Property

16% Consumer Foods

17% 20%
31% 32% Retail
8%
10% 4% 5%
11% Financial
Services

Note: The above excludes the contribution from Other including Information Technology and Plantations services

▪ 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, 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 profitability update : for the year
ended 31 March 2018
PAT to equity holders of JKH

FY2018 FY2017 YoY Growth

Industry Group
(Rs. Million) (Rs. Million) (%)

Transportation 3,073 2,968 4

Leisure 2,822 4,165 (32)
Property 745 508 47
Consumer Foods 1,515 2,192 (31)
Retail 1,145 1,306 (12)
Financial Services 8,016 1,978 305

Total PAT 21,021 16,275 29

Diluted earnings per share (Rs.) 15.15 11.84 28
Recurring PAT 18,320 16,119 14

Refer page 62 of the JKH Annual Report 2017/18 for commentary on recurring adjustments

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Profitability update : Q1 FY2019
PAT to equity holders of JKH

Q1 FY2019 Q1 FY2018
Industry Group YoY Growth (%)
(Rs. Million) (Rs. Million)
Transportation 827 770 7
Leisure* (224) 100 (324)
Property (3) 42 (107)
Consumer Foods 194 366 (47)
Retail 144 283 (49)
Financial Services 527 235 124

Total PAT 2,186 2,833 (23)

*Note profitability was impacted by the closure of “Cinnamon Hakura Huraa Maldives” for reconstruction, partial closure of
“Ellaidhoo Maldives by Cinnamon”. “Bentota Beach by Cinnamon” was closed for the construction of a new hotel in May 2017
and is scheduled to open by end 2019.

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Portfolio evaluation 2017/18; returns vs. effective
capital deployed
60
Financial Services - 54% Industry group % of effective capital employed
Financial Services 5
50
Retail 2
Consumer Foods 3
40 Information Technology 1
Retail - 36%
Transportation 9
Consumer Foods - 34%
Leisure 20
30
Property (Excl. Cinnamon Life) 10
Cinnamon Life 20
IT - 21%
20 Transportation - 18% ▪ In addition, the Holding Company accounts for 28 per cent of effective
capital employed (Rs.45 bn), which consists primarily of cash
Hurdle Rate - 15%
10 Leisure - 8%
Property (Excl. Cinnamon Life) - 6%

Cinnamon Life – (0.1%)

10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

Note the following adjustments: Adjusted effective
1) The above graph excludes the capital employed at Cinnamon Life as it is a project under development capital employed
2) Investment property and revaluation gains/losses for FY16 ,FY17 and FY18 (Rs.bn)
3) 2013 Rights issue funds, 2015 and 2016 Warrant funds and debt drawn at Cinnamon Life
4) 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 6
Investment pipeline of over USD 600 million during
FY2019 and FY2020
▪ Aggressive investment pipeline exceeding USD 600 million over the next two years. Given the
gestation period, the realisation of benefits from these investments is expected to accrue from
FY2021 onwards
▪ Approximately USD 160 million of these investments to be funded through available/internally
generated cash. Some of the key projects include:

Project Expected completion

Cinnamon Life CY2020

Reconstruction of Bentota Beach by Cinnamon End 2019
Reconstruction of Cinnamon Hakura Huraa Maldives End 2019
Cinnamon red Kandy FY2021
Frozen Confectionery manufacturing plant Completed 1Q FY2019
Roll out of 80 Retail outlets FY2019 & FY2020
Retail Centralised Distribution Centre 2H FY2019
JK Logistics - construction of a warehouse FY2020

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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 lean luxury 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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Round trip offering in key tourist destinations; further
potential to expand the ‘Cinnamon’ footprint

▪ Greater focus on asset light investment 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
▪ Nuwaraeliya (Central Province) : 3.4 acres
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Occupancies and average room rates
FY2018 FY2017
Sector Occupancy (%) ARR(US $) EBITDA Occupancy ARR (US $) EBITDA
Margin (%) (%) Margin (%)
City Hotels* 64 127 27 69 133 36
Resorts in Sri Lanka 81 91 28 80 93 33
Resorts in Maldives 82 263 24 89 261 33

▪ City Hotels occupancies and ARRs were impacted by the increase in room inventory

▪ The decrease in EBITDA margins of the Sri Lankan Resorts segment is on account of the closure of
“Bentota Beach by Cinnamon”

▪ Maldivian Resorts affected by the partial closure of “Cinnamon Dhonveli” and “Ellaidhoo by
Cinnamon” for refurbishment

Q1 FY2019 Q1 FY2018
Sector
Occupancy (%) ARR (US $) Occupancy (%) ARR (US $)
City Hotels* 43 128 58 125
Resorts in Sri Lanka 74 69 73 74
Resorts in Maldives 73 298 76 266
*Note City Hotels occupancy and ARR excludes Cinnamon red
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Encouraging growth momentum of tourist
arrivals to Sri Lanka
Tourist arrivals
Annual tourist arrivals to Sri Lanka (‘000) Year Growth (%)
(In 000’s)
2,500 2010 654 46
2011 856 31
2,000
2012 1,006 18
1,500 2013 1,275 27
2014 1,527 20
1,000
2015 1,798 18

500 2016 2,051 14

2017 2,116 3
- Jan-Jul’18 1,382 14

Arrivals from China and India

▪ Tourist arrivals from January- July 2018 was 1,382,476 a Year China India
growth of 13.7% as compared to the 1,215,926 recorded in 2014 128,166 242,734
the comparative period of the previous year 2015 214,783 316,247

▪ Arrivals for the quarter (April- June 2018) increased by 2016 271,577 356,729
12.6% 2017 268,952 384,628
Jan-Jul ‘18 163,754 237,369
Source: Sri Lanka Tourism Development Authority
11
Significant growth in Asian arrivals to Sri Lanka
1,200,000

1,000,000

800,000
Tourist Arrivals

600,000

400,000

200,000

0
2010 2011 2012 2013 2014 2015 2016 2017
Calendar Year

Source: Sri Lanka Tourism Development Authority

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Tourist arrivals to Sri Lanka lag well below regional
peers
40

35

30

25
Arrivals (Mns)

20

15

10

0
Malaysia Indonesia Thailand Vietnam Cambodia Sri Lanka
1990 2017 Actual/Target

Source: Governmental tourism websites

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Room inventory in Colombo lags far behind other
popular regional capital cities

60,000

31,790
30,114
26,113

9,100 7,600
5,019

Bangkok Manila Kuala Lampur Jakarta Ho Chi Minh Hanoi Colombo

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Pipeline of room inventory to support arrivals
trajectory
▪ Colombo is increasingly becoming an attractive location for City Hotel
developments
▪ Expected 5-star room supply:
Year of
Development No. of rooms
completion
Cinnamon Life 800 2020
ITC 400 2021
Ritz Carlton 450 2022
Total rooms 1,650

▪ “Cinnamon Life” is slated for completion in the calendar year 2020 with the
residential apartments and office complex ready for hand over and
occupation by early 2020

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Property - overview
▪ “John Keells Properties”; explore property development
opportunities by leveraging on brand equity

▪ Focused strategies for expansion via developer/landowner

tie ups

▪ Catering to different target market segments: “7th Sense” on Gregory’s Road

▪ Luxe Spaces
▪ Metropolitan Spaces
▪ Suburban Spaces

▪ High-rise apartment complexes completed

▪ “7th Sense” on Gregory’s Road
▪ OnThree20
▪ The Emperor
▪ The Monarch
OnThree20
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Industry potential
▪ Low levels of urbanisation within Sri Lanka in comparison to regional peers

▪ Annual condominium supply far below regional peers

Annual condominium supply in regional cities
60,000
53,796

50,000

40,000 38,000

30,000

20,000

10,000
2,187
-
KL Ho Chi Minh City Colombo
Source: KL: CBRE property market outlook 1Q 2018 (forecast for 2018)
HCMC: CBRE Vietnam property overview Q1 2017 (forecast for 2018)
CMB: Internal Estimates (forecast for 2018)
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One of the largest privately held land banks in
prime city locations
▪ 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 : 10.13 acres (under development)
Developable freehold land within the city limits
▪ Vauxhall Street, Colombo 2 : 9.38 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)

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Developable land bank of over 36 acres in central
Colombo

Cinnamon Lakeside
7.40 acres leasehold land
Cinnamon Life
7.1 acres freehold
3.03 acres leasehold
Vauxhall Street
9.3 acres freehold land
Crescat City
8.03 acres freehold land Union Place
1.5 acres
▪ Prime developable land bank of over 36
acres held in central Colombo
▪ Opportunities for development at land
banks held in Crescat City and Cinnamon
Lakeside
Vauxhall street land bank:
▪ Prime freehold land extent of 9.38 acres,
to be developed with Finlays Colombo
Limited
▪ Located in close proximity to the Beira
lake water front which is earmarked for
development of recreational and
residential projects by the UDA

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Developable freehold land of approximately 25
acres in close proximity to Colombo city

Bandaranaike International
Airport
▪ Greater connectivity and reduction in travel
time to Colombo city post construction of the
outer circular expressway
Thudella 18 Acres
freehold ▪ Direct connectivity to the Port City Colombo
and a multi modal transportation hub to be
Kapuwatta 6.6 developed
Acres freehold
▪ Opportunity to expand into residential
apartment projects in proximity to the
Colombo city

Port City Development

Colombo - Katunayake expressway/ outer circular

expressway connecting to the southern expressway
Port access elevated highway 20
 Robust development pipeline; on going
developments
1. Cinnamon Life
Number of units sold as at
Cinnamon Life Total units
30 June ‘18
The Residence at Cinnamon Life 231 132
The Suites at Cinnamon Life 196 107
Cinnamon Life - commercial complex 10 floors 4 floors
• Revenue recognition of Cinnamon Life will be on completion in CY2020

2. “Tri-Zen”- an 891 apartment residential development in central Colombo, with expected

completion in FY2022/23 (pre-sales have commenced)
3. Master planning has been initiated for the 18-acre land under JK Thudella Properties (Private)
Limited
4. Master planning has been initiated for the jointly held 9.38-acre property under Vauxhall Land
Development (Private) Limited (VLDL)
5. Finalising the acquisition of approximately 100 perches of land located in the heart of Colombo,
for a niche residential development which is expected to be launched in 4Q FY2019
6. Future development of the land bank held at Rajawella Holdings Limited discussed in detail
overleaf
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Robust development pipeline: Scenic 500 acre
land bank with an 18-hole golf course
Rajawella Holdings Limited (RHL)
▪ Owners of a majority stake in RHL to complement the Group’s leisure and property
portfolios
▪ The 500 acre land in Digana includes an 18-hole, Donald Steel designed, Golf Course and
developable land extent of approximately 80 acres
▪ Currently developing the master plan to maximise the development potential of the land
plot
▪ Troon International has taken over the management of the course and the refurbishment of
the course commenced 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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Cinnamon Life Integrated
Resort

23
Integrated development in Colombo

24
Integrated development in Colombo

25
Cinnamon Life – construction progress

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27
 Development programme

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
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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The strategic location of the Port of Colombo
linking key shipping routes

GWADAR
BAHL
KARACHI
KOLKATA
MUMBAI VISHAKHAPATNAM
CHITTAGONG
CHENNAI YANGON
ADEN
KOCHI

LAMU

MOMBASA

DAR-ES-SALAM

PORT LOUIS

CAPE TOWN

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Capacity enhancements in the Port of Colombo

31
Sustained volume growth in the Port of Colombo

6.21

5.74

5.19
Million TEUs

4.91

4.31

2013 2014 2015 2016 2017

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Rapid absorption of capacity in the Port of
Colombo
▪ Container handling capacity in the region
Port Container handling capacity (TEUs)
Colombo 8 million*
Hong Kong 21 million
Singapore 40 million
Shanghai 36 million

▪ Port of Colombo estimated utilisation CY2017 : 78 per cent

Volumes (TEU) Q1 FY2019 Q1 FY2018 % Change

SAGT 504,312 404,185 25

SLPA 547,629 505,114 8

CICT 656,986 575,948 14

Total 1,708,927 1,485,246 15

▪ SAGT Domestic : Transshipment volume mix (FY2018): 19:81

Sources: Government websites/ Sri Lanka Ports Authority

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Opportunities for growth in the Bunkering
businesses
Bunkering Business (Lanka Marine Services)
▪ Total volumes at LMS grew by 20 per cent during 1Q FY2019

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 up to approx. 250,000 CBM in the year
2017/18

Sources: Government websites/ Sri Lanka Ports Authority

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Consumer Foods - overview
▪ Market leader in soft drinks, ice creams and processed meats
▪ Custodians of the consumer brands “Elephant House”, “Keells” and “Krest”: high brand equity
Key performance indicators (%) FY2016 FY2017 FY2018
Growth of ice cream volumes 15 11 (4)
Growth of beverage volumes 22 10 (16)
Growth of convenience food volumes 11 (4) 3
PBT growth- Consumer Foods 65 19 (31)
EBIT margin - Consumer Foods 22 24 17

Key performance indicators (%) Q1 FY2019

Growth of ice cream volumes 3
Growth of beverage volumes (37)
Growth of convenience foods volumes 12
▪ A sugar tax on carbonated beverages was implemented from 9th November 2017 onwards,
which resulted in the selling prices across the CSD portfolio being increased by
approximately 40 per cent. Other mitigation strategies are discussed overleaf
▪ Beverage : Frozen Confectionary revenue mix stood at 49:51 as at 30 June 2018
35
Low consumption patterns and penetration
reflects potential for sustained growth
Carbonated Soft Drinks - Per Capita Bulk vs. Impulse Split - Regional
Consumption (Litres) Impulse Bulk

52.0 8% 44%
39.0 30% 70% 92%
31.4 56%

19.0
10.0
Philippines Thailand Singapore Malaysia Sri Lanka Sri Lanka Thailand Malaysia

▪ The bulk-impulse mix of regional markets are highly skewed towards the impulse
markets, demonstrating the significant growth potential for the impulse category

▪ CCS reformulated its flagship flavours to replace approximately 40 per cent of sugar
content with the natural sweetener Stevia while also implementing the following
initiatives;
▪ Launch of sugar free CSD variants - branded “GO Sugar Free
▪ Acceleration of non-CSD product launches (flavoured milk and water branded under Elephant
House, and additional flavours of fruit juice branded under “Fit-O”)

36
Retail - overview
Modern Retail Penetration (%)
70

49 48
43 40

16

Singapore Malaysia Hong Kong Taiwan Thailand Sri Lanka

Sources: Central Bank of Sri Lanka, Nomura Research Institute, Unilever Corp, Web articles

▪ “Keells” is a chain of ~10,000 square foot modern grocery retail outlets

Present share of modern retail No. of outlets

Keells * 82
Cargills 357
Arpico 45
Laugfs 34

* As at 30 June 2018

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 Rapid expansion to capitalise on low retail
penetration levels
Modern trade density – population (’000) per store Keells Super forecasted coverage
132

FY2018/19
47

30

21.0

7.3

4.7

4.5

3.7

3.6

3.4

3.0

2.5

1.9

0.9
Source: Retail and shopper trends in the Asia Pacific, AC Nielsen

▪ Comparatively higher modern trade density – population per

store ratios as against regional peers
No. of new stores expected
▪ High potential for expansion due to lower penetration of
FY2019 40
modern trade in Sri Lanka
FY2020 40
▪ Over 160 outlets expected by FY2019/20
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Retail - overview
Profitability margin FY2015 FY2016 FY2017 FY2018
EBIT margin (%) 3.2 5.8 5.4 4.0
PBT margin (%) 3.1 5.4 5.6 4.0

• Profitability margins impacted by the imposition of control prices on essential items, cost of expanding and
operating new stores coupled with the cost associated with rebranding and refitting stores

• Although outlets are profitable in the first year of operations, the aggressive outlet rollout undertaken has
resulted in margin contraction in the short term as a result of the ramp up period of a new outlet
• The sector will undertake planned capex of approximately USD 90 million over the next two years for an
aggressive expansion of the store footprint and construction of a centralised Distribution Centre. The
projects will be funded via debt given the low gearing ratio of the business

Key performance indicators FY2015 FY2016 FY2017 FY2018 FY2019-YTD

Same store sales growth (%) 15.3 12.5 9.5 5.7 1.4

Same store foot fall growth (%) 10.6 10.1 6.8 3.8 3.9

▪ The Q1 FY2019 same store sales were impacted by a decline in average basket value as a result of subdued
market sentiment, in addition to the temporary impact stemming from the rapid store expansion plans of
the sector and the corresponding “cannibalisation” effect it entailed.
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 Financial Services – Insurance sector overview
▪ Union Assurance (JKH Stake : 90%)
▪ Highest new business growth in the year 2017
▪ Committed to a “digital first” business model with an investment of over Rs. 800Mn to become the
largest digital insurer in Sri Lanka​
▪ Developing Bancassurance channels - 53% growth in 2017​
Life Insurance Penetration as a % of Life Insurance Gross Written Premiums
GDP - 2016
6%
71
5%
64
4% Global average – 3.47%

Rs. bn
54
3%
45
2%

1%

0%
2014 2015 2016 2017

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Financial Services – Insurance sector overview

Key performance indicators CY2013 CY2014 CY2015 CY2016 CY2017

Market share 14% 13% 13% 13% 14%

GWP growth 8% 8% 17% 19% 22%
Recurring net profit growth 48% 11% 23% 17% 205%
Recurring net profit (Rs. Mn) 791 881 1,127 1,313 4,002*
Surplus from Life Fund (Rs. Mn) 612 750 800 1,100 3,642
Life Fund (Rs. Bn) 19.3 23.1 26.3 30.3 29.1
Capital Adequacy Ratio N/A N/A N/A 411% 352%

*Excludes a one-off surplus of Rs. 3.38 billion arising from the change in policy liability valuation

Q4 FY 2018 Q1 FY 2019
Key performance indicators
(Jan-Mar 2018) (Apr-Jun 2018)
GWP growth (YoY) 12% 13%
Net profit Rs. 304 million Rs. 300 million
Net profit growth (YoY) 181% 349%
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 Financial Services – Banking sector overview
▪ Nations Trust Bank (JKH effective economic interest : 32.16%)
▪ Focus on SME / retail strategy
▪ Franchise for American Express cards
Key performance indicators CY2013 CY2014 CY2015 CY2016 CY2017

Loans and advances growth 12.1% 19.5% 22.4% 23.7% 25%

Industry (LCB’s) 8.5% 12.3% 23.5% 17.7% 19.2%
Return on equity 19.6% 19.8% 18.2% 17.7% 17.4%
Industry (LCB’s) 17.3% 16.8% 15.7% 17.3% 17.5%
Net Interest Margin 5.8% 5.8% 5.5% 5.1% 4.4%
Industry (LCB’s) 3.7% 3.6% 3.5% 3.5% 3.5%
NPL ratio (%) 3.51 4.16 2.77 2.80 2.72
Deposit base (Rs. Bn) 95.7 111.0 129.1 151.5 194.3
Asset base (Rs. Bn) 142.1 158.8 176.3 211.2 268.3
Net Profit (Rs. Mn) 2,136 2,537 2,614 2,869 3,372

Key performance indicators Q4 FY 2018 (Jan-Mar 2018) Q1 FY 2019 (Apr-Jun 2018)

Net profit Rs.939 million Rs. 936 million
Net profit growth (YoY) 30% 33%
Loan growth (YoY) 23% 24%
Net Interest Margin 5.5% 5.0%
NPL Ratio 2.62% 3.06%
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 THANK YOU
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 FY2019, and does not
constitute an issue prospectus or a financial analysis. This Investor Presentation should be read in
conjunction with the JKH Annual Report 2017/18 to obtain a more comprehensive understanding of the drivers
and strategies of our businesses.

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.

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