John Keells : Interim Financial Statements as @ 30th June 2022

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John Keells Holdings PLC

Interim Condensed Financial Statements Three Months Ended 30 June 2022

Chairman's Review

Dear Stakeholder,

Despite the significantly challenging and volatile operating environment, the Group reported a strong performance during the quarter, which was a significant improvement over the comparative period of the previous year, with all businesses witnessing a sustained recovery momentum. The Group's Leisure businesses, in particular, continued to record a significant turnaround in performance primarily due to the Maldivian Resorts.

It should be noted that the comparative performance with the corresponding quarter in the previous year is somewhat distorted due to the business disruptions on account of the imposition of island-wide travel restrictions from mid-May to mid-June 2021.

Although there were no pandemic related disruptions during the quarter under review, mainly as a result of the high vaccination levels in the country, there were numerous challenges and macro-economic pressures emanating from a precarious external financing position, including a severe fuel shortage, scarcity of essential commodities, food and medicines, and disruptions to power supply. The resultant economic turmoil, further exacerbated by unprecedented levels of inflation and interest rates, gave rise to social unrest and political uncertainty, culminating in the resignation of both the Prime Minister and President within a period of two months. As a result of the volatile environment, tourist arrivals to the country, which was witnessing an encouraging post-pandemic recovery, recorded a sharp slow-down due to multiple travel advisories issued.

At the time of writing this Message, while the shortages in fuel and other essential commodities persist, the situation in the country is calm with some level of social and political stability. The appointment of a new President on 21 July 2022, and the subsequent appointment of a Prime Minister and Cabinet, in line with the relevant constitutional and parliamentary procedures, should result in the achievement of the political stability needed to resolve the current economic crisis and implement the necessary reforms. While most

Summarised below are the key operational and financial highlights of our performance during the quarter under review:

• Group EBITDA recorded a significant improvement to Rs.13.33 billion during the quarter under review, which is an increase of 180 per cent against the comparative period of last year [2021/22 Q1: Rs.4.76 billion]. The first quarter of the previous year was partially disrupted on account of the lockdowns due to the pandemic.
• Despite the challenging and uncertain operating environment which was characterised by numerous supply chain disruptions, foreign exchange limitations, power disruptions and fuel shortages, the Group's businesses recorded strong growth in profitability compared to the first quarter of the previous year on the back of a continued recovery momentum with most businesses reaching pre- pandemic levels.
• The Leisure industry group, in particular, recorded a turnaround in performance reporting an EBITDA of Rs.1.87 billion compared to the negative EBITDA of Rs.649 million in the corresponding quarter of the previous year. The strong performance of the Maldivian Resorts and Destination Management segments, and a better performance in the Colombo Hotels segment were the main contributors to the turnaround in performance.
• The Group's Bunkering business recorded a significant increase in profitability in its core ship bunkering operations driven by higher margins on account of the steep increase in fuel oil prices and volumes, whilst the profitability of the Group's Ports and Shipping business recorded an increase as a result of higher revenue from ancillary operations and the translation impact due to the depreciation of the Rupee.
• The Consumer Foods industry group continued its strong recovery momentum with all three segments recording strong double-digit growth in volumes off a partially pandemic affected base. Volumes continue to exceed pre-pandemic levels.
• The Supermarket business recorded a strong performance with same store sales recording encouraging growth driven by a combination of higher basket values due to high inflation and, notably, an increase in customer footfall compared to the comparative quarter which was impacted by the pandemic.
• The Property industry group recorded a decline in EBITDA as the first quarter of the previous year included revenue and profit recognition from the handover of the residential apartment units at 'Cinnamon Life'. The recognition of revenue of all units sold as at that date at 'Cinnamon Life' was completed by 31 March 2022.
• The Insurance business recorded double digit growth in gross written premiums. The Banking business recorded an increase in profitability aided by an increase in net interest margins, loan growth, focused recovery efforts and cost management initiatives.
• As announced to the Colombo Stock Exchange, the Company is in the process of concluding a transaction to raise Rs.27.06 billion, subject to shareholder approval, through a private placement of LKR denominated convertible debentures to Fairfax, Canada.
• The 'SanNap' programme was rolled out across the Group, where sanitary napkins are provided free- of-charge to all female employees whilst a tri-lingual module on LGBTIQ+ awareness was launched on the Group's e-learning platforms as a mandatory and annual refresher, and also as a part of the Group induction.
• In light of the current socio-economic crisis in Sri Lanka and hardships faced by people in the country, the Group initiated several relief programmes to support vulnerable communities, covering areas such as the availability of food and nutrition, the adoption of sustainable agricultural practices to improve yields and providing assistance towards mitigating the loss of educational opportunities for children.
• The Group's carbon footprint per million rupees of revenue decreased by 38 per cent to 0.37 MT while the water withdrawal per million rupees of revenue decreased by 44 per cent to 6.71 cubic meters.

	Quarter ending 30th June
EBITDA*	Q1	Q1	%
(Rs.'000)	2022/23	2021/22
Transportation	4,551,449	1,023,326	345
Consumer Foods	1,233,225	317,682	288
Retail	2,318,952	1,562,792	48
Leisure	1,869,225	(648,773)	388
Property	(139,767)	542,404	(126)
Financial Services	877,094	769,679	14

• EBITDA includes interest income and the share of results of equity accounted investees which is based on the share of profit after tax but excludes the impact of exchange losses and gains on its foreign currency denominated debt and cash, to demonstrate the underlying cash operational performance of businesses.

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Chairman's Review

political parties have committed to support progressive reforms and the necessary policies required to address the economic issues,

we strongly urge all parties to leave aside political differences and work together in the national interest towards a common economic programme and enhanced governance and accountability.

We note the positive progress made thus far in terms of engagement with the International Monetary Fund (IMF), where technical discussions have concluded. The authorities expect that a staff level agreement can be reached shortly given anticipated political stability. As a precursor to an IMF programme, the Government appointed the financial and legal advisors to support the creditor negotiation process to restructure the country's foreign debts, whilst also engaging with supportive nations to secure bridge funding.

In terms of policy actions, the Central Bank of Sri Lanka undertook significant policy rate hikes to curtail spiralling inflation and support the currency while increases in both direct and indirect tax rates were announced along with fuel pricing adjustments and proposed revisions to increase electricity tariffs to have market reflective pricing mechanisms to reduce the cost of subsidies to the Government. We are supportive of the initial steps taken by the authorities towards economic recovery and urge all key stakeholders to reach consensus to ensure the actions required to revive the economy are taken in a decisive and expeditious manner. The significant increase in interest rates and the continued depreciation of the currency during the quarter, resulted in significant pressure on the cost structures of many businesses in the country. While the pricing adjustments on account of the inflationary impacts of the depreciation of the currency have taken place to an extent and could be one-off in the event the currency does not depreciate any further, the sharp rise in interest rates will place pressure on many businesses due to pressure on funding working capital requirements, particularly in the context of current supply chain challenges. The Group

has mitigated the risk of increasing LKR interest rates, to an extent, as it had converted many of its short-term facilities into term facilities while also ensuring such facilities were obtained on a fixed/capped rate basis.

The quarter under review was characterised by the significant challenges to our businesses due to the numerous disruptions on account of fuel shortages, supply chain constraints, lack of foreign currency in the market, power disruptions, and significant increases in interest rates and the depreciation of the currency. While the performance of our businesses was resilient as a result of the preemptive actions undertaken, where relevant, the Group had to continuously manage the disruptions to supply chains and distribution to ensure our operations were managed with minimal impact. The financial strength, together with agility in planning enabled the Group to navigate and circumvent the macroeconomic challenges encountered during the quarter. The impact of the fuel shortages on distribution and the mobility of people is relatively less during the quarter under review as the fuel shortages in the country reached a peak only towards mid-June to the time

of this Message. During the last few weeks, the shortage has been acute, resulting in a significant impact on the mobility of people and distribution of goods. At present, there are a few fuel shipments which have arrived in the country, and it is hoped there will be a more sustained supply, going forward. The Government is also in the process of rolling out a fuel rationing scheme, which, if successful, could help curtail domestic consumption and help sustain supplies.

Group Performance - Q1 2022/23

The Group revenue at Rs.71.52 billion for the period under review is an increase of 84 per cent over the Rs.38.80 billion recorded in the previous financial year. The Group earnings before interest, tax, depreciation and amortisation (EBITDA) at Rs.13.33 billion in the first quarter of the financial year 2022/23 is an increase of 180 per cent over the EBITDA of Rs.4.76 billion recorded in the corresponding period of the previous financial year.

The Group profit before tax (PBT) at Rs.14.80 billion in the first quarter of the financial year 2022/23 is a significant increase over the Rs.1.31 billion recorded in the previous financial year. The Group PBT was positively impacted by the net exchange gains recorded on its US Dollar denominated cash holdings at the Holding Company, net of the USD

175 million term loan from the International Finance Corporation (IFC), resulting from the steep depreciation of the Sri Lankan Rupee against the US Dollar during this quarter. The profit attributable to equity holders is Rs.11.28 billion compared to Rs.1.53 billion in the corresponding period of the previous financial year.

The Company PBT for the first quarter of 2022/23 at Rs.11.31 billion is a significant increase over the Rs.1.89 billion recorded in the corresponding period of 2021/22 due to the aforementioned foreign currency exchange gains on its US Dollar denominated cash holdings at the Holding Company. The Group maintained its foreign currency cash holdings to meet its funding commitments which comprises of the funds earmarked for the equity infusions of the 'Cinnamon Life' project and the funds raised for the Group's investment pipeline via the debt drawdown from the IFC term loan facility and the private placement of ordinary shares to the Asian Development Bank (ADB).

Proposed Private Placement to Fairfax, Canada

As announced to the Colombo Stock Exchange on 21 June 2022, the Company is in the process of concluding a transaction to raise Rs.27.06 billion, through a private placement of LKR denominated convertible debentures to certain controlled affiliates (subsidiaries) of Fairfax Financial Holdings Limited, subject to the approval of Shareholders by means of a special resolution at an Extraordinary General Meeting to be held on 4 August 2022. The debentures have a maturity period of three years and will accrue interest at a rate of three per cent per annum. The conversion of the debentures to newly listed ordinary shares of the Company, at the option of Fairfax, can take place within 18-36 months from the date of issue.

2 John Keells Holdings PLC | Interim Condensed Financial Statements Three Months Ended 30 June 2022

The recent steep depreciation of the LKR together with the significant increase in LKR interest rates has resulted in an increase of the funding commitments of the Company. The transaction will enable the Group to support this investment pipeline and match its foreign currency linked project costs, such as with the investment in the West Container Terminal project in the Port of Colombo, whilst reducing the need to fund some of its requirements through the local banking sector given the stresses on capital and interest rates. The Company believes that raising these funds will strengthen its financial position at a time when the country is faced with significant uncertainty and volatility. Furthermore, the inflow of foreign exchange through this transaction will augment Sri Lanka's foreign currency liquidity position and boost investor confidence in the country, particularly given the profile of the investor.

Transportation

The Transportation industry group EBITDA of Rs.4.55 billion in the first quarter of 2022/23 is an increase of 345 per cent over the EBITDA for the first quarter of the previous financial year [2021/22 Q1: Rs.1.02 billion]. The increase in profitability is mainly attributable to the strong performance of the Group's Bunkering business, Lanka Marine Services (LMS), and the Group's Ports and Shipping business, South Asia Gateway Terminals (SAGT). LMS recorded an increase in profitability in its core ship bunkering operations driven by higher margins on account of the significant increase in global fuel oil prices as well as higher volumes. The profitability at SAGT recorded an increase as a result of higher revenue from ancillary operations and the benefit of the depreciation of the Rupee.

In May 2022, the Government of Sri Lanka granted approval for licensed bunkering businesses to import and supply fuel oil to local industries to ensure continuity of operations in light of the fuel shortages in the country and ease the burden on Government supplies. While volumes at LMS were supported by the provision of fuel to such local industries, this was not material in the context of the overall volumes or profitability for LMS for the quarter.

Consumer Foods

The Consumer Foods industry group EBITDA of Rs.1.23 billion in the first quarter of 2022/23 is an increase of 288 per cent over the EBITDA for the first quarter of the previous financial year [2021/22 Q1: Rs.318 million]. The Beverages, Frozen Confectionery and Convenience Foods businesses continued its strong volume recovery momentum during the quarter, with volumes exceeding pre-pandemic levels. It should, however, be noted that volumes in the first quarter of the previous year were impacted significantly by pandemic related disruptions and lockdowns.

Similar to the previous quarter, the margins of the businesses continued to be under pressure due to the significant raw material and input price increases. However, the performance during the quarter was supported by the recouping of eroding margins through price increases, together with the benefit of operating leverage on account of the significant growth in volumes against the pandemic-affected base of last year. All necessary measures to mitigate impacts from rising inflation will be undertaken, to the extent market conditions permit, with due consideration to the price elasticity of demand for the products in the portfolio.

Whilst input costs have increased across all industries in the country on account of high inflation and supply chain disruptions in the market, the negative impact of exchange rates through the sharp depreciation of the Rupee could be largely one-off if the currency stabilises in the near future. The prevailing foreign currency shortage in the market continues to place pressure on supply chains in the country and, unless the ability to establish trade facilities improve, there could be disruptions to our suppliers and, in turn, on the manufacturing and seamless distribution of our product portfolio. Considering these circumstances, the business will use its available raw material resources to optimally manage its production and profitability.

Retail

The Retail industry group EBITDA of Rs.2.32 billion in the first quarter of 2022/23 is an increase of 48 per cent over the EBITDA for the first quarter of the previous financial year [2021/22 Q1: Rs.1.56 billion].

The Supermarket business EBITDA of Rs.1.86 billion in the first quarter of 2022/23 is an increase of 70 per cent over the EBITDA for the first quarter of the previous financial year [2021/22 Q1: Rs.1.09 billion]. Despite the challenging operating circumstances with disruptions in product availability, in particular, the Supermarket business recorded a strong performance with same store sales recording encouraging growth driven by a combination of higher basket values due to high inflation and, notably, an increase in customer footfall compared to the corresponding quarter which was impacted by the pandemic. On a consecutive quarter on quarter basis, same store sales during the quarter under review recorded growth over the fourth quarter of 2021/22 driven by higher basket values on account of high inflation.

Given the notable shortages in essential goods and other fast-moving items, the business continued to proactively ramp up its direct sourcing strategy with the aim of bridging gaps and, more importantly, providing its customers with comparative products at the best possible value. This has also helped drive footfall to our outlets. Whilst the Supermarket business has significantly increased penetration of its private label range, this focus was augmented with the intention of managing inventory better and also providing its customers with alternative options and 'value for money', both of which are important decision drivers for consumers, particularly in the current high inflationary environment.

Given the increased challenges in sourcing products due to supply chain disruptions affecting manufacturers and importers of goods, inventory gaps of the Supermarket business during the quarter have been at a peak. Such gaps are likely to increase, until such time the lack of foreign exchange

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