John Keells Holdings PLC Financial Summary and Investment Analysis

Executive Overview

John Keells Holdings PLC is a diversified Sri Lankan conglomerate operating across Transportation, Consumer Foods, Retail, Leisure, Property, Financial Services, Information Technology and Plantation Services. Its portfolio includes the West Container Terminal, Lanka Marine Services, Keells supermarkets, BYD new-energy vehicles, Cinnamon Hotels & Resorts, City of Dreams Sri Lanka, property developments, Nations Trust Bank PLC and Union Assurance PLC.

The reporting materials cover quarterly periods from Q3 2023 to Q2 2026, together with audited annual information for the 12 months ended 2026-03-31 and comparative annual data.

The 12 months ended 2026-03-31 represented an inflection point:

• Revenue increased 67% to Rs.528.85 billion.
• EBITDA increased 75% to Rs.80.01 billion.
• Profit attributable to shareholders increased 156% to Rs.13.64 billion.
• Return on capital employed improved from 5.1% to 9.0%.
• Capital expenditure declined 64% as City of Dreams Sri Lanka and the West Container Terminal moved from construction towards operating contribution.
• Retail became the largest earnings contributor, primarily through John Keells CG Auto and supermarkets.
• City of Dreams Sri Lanka became EBITDA-positive, although depreciation, interest and exchange losses continued to produce substantial losses below EBITDA.

Q2 2026 remained operationally stronger year-on-year, with revenue and EBITDA increasing 24% and 26%, respectively. However, profit attributable to shareholders was only Rs.62 million, principally due to foreign-exchange losses, higher tax expense, losses within Leisure and the allocation of earnings to non-controlling shareholders.

The annual financial statements received an unmodified audit opinion. The Q2 2026 interim statements were unaudited.

Financial Performance

Revenue and Profitability Trends

*Rs. billion unless stated otherwise.*

The annual revenue increase was driven predominantly by the consolidation and first full operating year of the new-energy-vehicle business, together with higher Leisure, Transportation, Consumer Foods and supermarket activity. Gross profit rose 64%, although the gross margin declined slightly because a larger proportion of revenue came from the relatively high-volume vehicle business.

Reported EBITDA increased to Rs.80.01 billion, while recurring EBITDA rose 71% to Rs.78.05 billion. Recurring profit before tax increased 143% to Rs.35.72 billion, and recurring profit attributable to shareholders increased 155% to Rs.13.24 billion.

Recent Quarterly Momentum

*Derived by subtracting the nine-month results from the audited 12-month results.

Q2 2026 revenue was broadly stable compared with Q1 2026 but EBITDA fell approximately 34%. This reflected seasonality, weaker tourism following Middle Eastern disruptions and a lower-priced vehicle sales mix. Nevertheless, compared with Q2 2025, revenue increased 24%, EBITDA 26% and PBT 31%.

Q2 2026 contained a Rs.1.89 billion net exchange loss, including approximately Rs.3.83 billion on the foreign-currency loan at City of Dreams Sri Lanka. Excluding exchange losses, PBT was Rs.5.97 billion and profit attributable to shareholders was Rs.1.95 billion.

Segment Performance and Growth Drivers

Transportation

Lanka Marine Services benefited from higher bunkering volumes, stronger margins and supply-chain disruptions. Its volume increased 38% in Q2 2026.

Colombo West International Terminal handled 460,840 TEUs during Q2 2026, exceeded plan and effectively reached full phase-one utilisation. Full-terminal operationalisation remained scheduled for December 2026. This creates further capacity and fixed-cost absorption potential.

Consumer Foods

During Q2 2026:

• Carbonated beverage volumes increased 27%.
• Confectionery volumes increased 13%.
• Higher volumes improved fixed-cost absorption.
• Confectionery margins were moderated by depreciation on the new extrusion line and increased marketing expenditure.

The Group plans to enter organised quick-service restaurants through Wendy’s, with the first outlet expected by December 2026. The initial equity requirement was described as immaterial.

Retail

Keells supermarkets recorded Q2 2026 same-store sales growth of 13%, comprising 7% average-basket-value growth and 6% footfall growth. The network reached 150 outlets after three openings during the quarter.

John Keells CG Auto delivered more than 2,400 vehicles, marginally exceeding Q2 2025 volume. EBITDA declined because sales shifted towards lower-priced models as pent-up demand normalised. More than 2,200 vehicles remained scheduled for delivery.

The customs dispute over motor-power classifications remained unresolved. Group guarantee commitments increased to Rs.15.30 billion, mainly due to guarantees issued for vehicle clearances.

Leisure

City of Dreams Sri Lanka recorded Q2 2026 EBITDA of Rs.389 million, compared with a Rs.1.00 billion loss in Q2 2025. Hotel occupancy, room rates and casino performance improved.

However, City of Dreams Sri Lanka recorded a Rs.5.85 billion PBT loss, including:

• Rs.2.52 billion of depreciation, amortisation and interest.
• Significant exchange losses on its US-dollar loan.

Leisure excluding City of Dreams Sri Lanka produced negative EBITDA of Rs.442 million as Sri Lankan and Maldivian tourism were disrupted by weaker travel sentiment, flight connectivity issues and higher energy costs.

Property and Financial Services

Vauxhall DSTRCT had secured 114 sale-and-purchase agreements by 2026-06-30. Cumulative sales reached 345 units at Cinnamon Life, 789 units at TRI-ZEN and 257 units at VIMAN.

Nations Trust Bank successfully integrated HSBC Sri Lanka’s retail banking franchise from 2026-05-01. The acquired portfolio contributed positively despite integration expenses. Union Assurance recorded double-digit premium growth and improved investment income.

Balance Sheet Analysis

Annual working capital declined 66% to Rs.11.83 billion, as current liabilities increased faster than current assets. Much of the increase came from inventory-backed, short-term trade financing for vehicles and bunkering.

Approximately USD 335 million, or 44% of debt excluding leases, was foreign-currency-denominated at 2026-03-31. Cash holdings and foreign-currency operational income provided partial hedging, leaving net foreign-currency debt exposure of approximately USD 125 million. Management estimated this exposure at approximately USD 100 million by 2026-06-30.

The USD 189 million Waterfront Properties loan was refinanced through a USD 150 million five-year facility and USD 39 million bridging facility at a materially lower interest rate.

Cash Flow Analysis

Annual operating cash flow declined despite higher profit because inventories, receivables and other working-capital requirements absorbed cash. Approximate free cash flow after reported capital expenditure was Rs.5.17 billion, compared with total dividends of Rs.4.42 billion, providing approximately 1.2 times coverage.

Q2 2026 operating cash flow improved to Rs.12.33 billion, supported by reductions in vehicle inventories and receivables. The Group repaid Rs.12.97 billion of long-term borrowings during the quarter.

Key Financial Ratios and Growth Indicators

From 2024-03-31 to 2026-03-31, revenue recorded a two-year CAGR of approximately 37%, PBT approximately 45%, and parent net profit approximately 10%. The lower net-profit CAGR reflects the sharp profit decline in the intervening year, additional shares issued and continuing losses below EBITDA at City of Dreams Sri Lanka.

Economic and Market Context

Sri Lanka’s economic recovery supported consumer demand, credit growth, supermarket footfall, vehicle purchases and property sales. However, conditions became less favourable during Q2 2026:

• Inflation increased to 6.8% by June 2026.
• The policy rate increased by 100 basis points to 8.75%.
• The Sri Lankan Rupee depreciated from approximately Rs.315 to Rs.337 per US dollar.
• Official reserves stood near USD 6.5 billion.
• Q2 2026 tourist arrivals declined 9% year-on-year to approximately 406,000.
• Higher oil prices raised transport, electricity, hotel and distribution costs.

The reports nevertheless noted continued IMF programme progress, resilient remittances and improving forward tourism bookings.

Future Potential and Outlook

Key potential catalysts are:

• Full West Container Terminal capacity becoming operational by December 2026.
• Higher occupancy, conferences, casino activity, mall leasing and variable casino rent at City of Dreams Sri Lanka.
• Lower Waterfront Properties interest rates following refinancing.
• Expansion of Keells supermarkets and data-driven retail initiatives.
• Broader BYD product coverage and charging/service infrastructure.
• Wendy’s quick-service restaurant rollout.
• Revenue recognition from VIMAN and construction commencement at Vauxhall DSTRCT.
• Earnings contribution from Nations Trust Bank’s acquired HSBC retail portfolio.
• Continued asset-light hotel divestments and selective capital recycling.

Risks and Challenges

• City of Dreams Sri Lanka conversion risk: Positive EBITDA has not yet translated into positive PBT due to large depreciation, interest and exchange charges.
• Foreign-exchange exposure: Rupee depreciation can materially reduce reported profit.
• Vehicle normalisation: The exceptional initial vehicle-import cycle is unlikely to repeat at the same margins.
• Liquidity: Current and quick ratios remain close to or below comfortable levels.
• Geopolitical exposure: Tourism, fuel prices, shipping routes and imported costs remain sensitive to Middle Eastern developments.
• Regulatory exposure: Vehicle duties, customs classifications, taxes and electricity tariffs affect planning and margins.
• Earnings attribution: Significant profits accrue to non-controlling shareholders because several major businesses are not wholly owned.
• Valuation and non-cash items: Property fair-value gains and disposal gains contributed to reported performance.
• Climate exposure: Absolute emissions, energy consumption, water withdrawal and waste increased as operations expanded.

Shareholder and Corporate Information

At 2026-06-30:

• Shares in issue: 17.73 billion.
• Public holding: 72.40%.
• Public shareholders: 45,351.
• Last traded price: Rs.20.20.
• Quarterly high/low: Rs.21.00/Rs.18.20.
• Net asset value per share: Rs.23.46.
• Approximate price-to-book ratio: 0.86 times.
• Approximate trailing P/E using Rs.0.77 annual EPS: 26.2 times.
• Trailing dividend yield using Rs.0.30 per share: approximately 1.5%.

The largest shareholders were HWIC Asia Fund at 26.5%, Melstacorp PLC at 8.0% and Mr. S. E. Captain at 7.2%. The Employees’ Provident Fund increased its holding to 1.6%.

Investment Decision Indicators

Strengths

• Broad-based annual revenue and EBITDA growth.
• Material improvement in ROCE, interest cover and net-debt-to-EBITDA.
• West Container Terminal performing ahead of plan.
• City of Dreams Sri Lanka crossing into positive EBITDA.
• Strong supermarket, Consumer Foods, banking and property pipelines.
• Lower capital expenditure and improving operating cash generation.

Weaknesses

• Low parent-level net margin and ROE.
• City of Dreams Sri Lanka remains loss-making below EBITDA.
• Working-capital liquidity has tightened.
• High sensitivity to currency movements.
• Q2 2026 earnings showed substantial dependence on non-controlling interests.
• Vehicle earnings declined despite higher unit volumes.

Overall Assessment

The reports depict a company transitioning from a capital-intensive investment period into an operating and cash-generation phase. The quality of that transition is supported by improving EBITDA, capital efficiency and contributions from the West Container Terminal, supermarkets, Consumer Foods and Financial Services.

The central uncertainty is whether City of Dreams Sri Lanka can scale sufficiently to absorb its financing and depreciation burden while vehicle earnings normalise and foreign-exchange volatility persists. The investment decision therefore depends primarily on confidence in the speed of this earnings conversion relative to the Group’s leverage, liquidity, valuation and geopolitical exposure.