A 12-month accountability review. Last year management promised CODSL would ramp, WCT-1 would break even, and the NEV business would be "material." This is the audit of what the public filings actually show — segment by segment, promise by promise, with the cash flow math intact.
JKH grew reported EBITDA by 75% to Rs.80.01Bn — exactly the inflection story management told investors a year ago. The two flagship projects, City of Dreams Sri Lanka (CODSL) and West Container Terminal (WCT-1), each crossed the threshold management had set: CODSL flipped to positive recurring EBITDA of Rs.933Mn for the full year, and CWIT (the WCT-1 operating entity) delivered positive PAT in year one, ahead of the plan that called only for cash-positive operations. Net debt/EBITDA improved from 2.5× to 1.7×, and Group capex collapsed by 64% to Rs.20.7Bn — the capex cycle is genuinely done. But: the Leisure segment as a whole, including CODSL, still produced a recurring PBT loss of Rs.10.3Bn, the casino is still only paying fixed rental income (variable rental tied to gaming volume has not been triggered), and a meaningful share of the EBITDA upside came from a one-time pent-up demand release in the NEV business that is unlikely to repeat at the same intensity in FY2026/27 given the new 3-month vehicle import surcharge effective 15 May 2026.
The four headline metrics that management is using to anchor the year's narrative. All figures from the FY2025/26 Annual Report Chairperson's Message and the company's stated Performance Indicators table.
Each row below cross-references a specific commitment from the FY2024/25 Chairperson's Message (the "Ready, Set, Go" report) against what the FY2025/26 Annual Report actually disclosed. Source page references are included for verification.
Of the Rs.32.36Bn YoY increase in recurring EBITDA, the NEV business (JKCG) alone contributed Rs.18.48Bn — that is 57% of the entire Group's EBITDA growth from a business that did not exist a year ago. This single fact is what every investor should grapple with first when reading the FY26 numbers.
JKCG (BYD) delivered Rs.18.30Bn EBITDA on 10,081 vehicles. Supermarkets grew 24% to Rs.12.09Bn EBITDA on 14% same-store sales growth driven by 14.3% footfall growth — this is the durable structural story. The NEV portion is partly pent-up demand from the 5-year vehicle import ban, and faces a 3-month surcharge from 15 May 2026, a customs-classification dispute on certain BYD EV models (now released against bank guarantees), and Rupee pressure that the import surcharge is specifically designed to address. Treat the Rs.18.30Bn as substantially non-recurring at that magnitude.
The headline "176% growth" includes the swing of CODSL from Rs.(4.74)Bn EBITDA loss to Rs.0.93Bn EBITDA — a Rs.5.67Bn swing. Below the EBITDA line, CODSL absorbed Rs.10.96Bn of depreciation + interest in FY26 (vs Rs.4.29Bn the prior half-year). Result: CODSL recurring PBT loss widened from Rs.(8.21)Bn to Rs.(13.66)Bn. Excluding CODSL, Leisure EBITDA grew 25% — that is the legitimate underlying growth from improved Sri Lankan and Maldivian resort occupancies. Middle East conflict impact on March 2026 arrivals is the new visible risk.
Genuine operational delivery. LMS volume +29% — record highs. CWIT (WCT-1) was the standout: positive PAT in year 1, full phase-1 utilisation on a March-2026 run-rate, ahead of plan. Watch: the Supreme Court LMS tax judgment (March 2026, 2:1 majority dismissed LMS appeals) added Rs.1.26Bn provision in FY26 alone, with further periods still under appeal. The bunkering Q4 surge was partly Middle East disruption-driven and may not repeat.
Beverages +18% volume; Confectionery +8% (versus +22% prior year). Confectionery margins compressed under cocoa and dairy raw-material inflation and new extruder line introduction costs. Capacity investment continues — Group has flagged ongoing capex in this category. Steady, but not the breakout the previous year was.
The 106% growth is real but quality merits flagging: Rs.1.26Bn of the Rs.2.96Bn EBITDA is fair-value gains on investment property (WPL office tower), versus Rs.795Mn FV gains the year before. Stripping out FV gains: Rs.1.70Bn vs Rs.0.65Bn — still ~160% real growth, but on a small base. Cinnamon Life office floors now fully leased; Vauxhall DSTRCT 749-unit luxury project launched March 2026.
EBITDA growth of just 4% reflects the Fairfirst Insurance divestment offsetting NTB's growth. The HSBC Sri Lanka Retail Banking acquisition completed 1 May 2026 for Rs.18Bn — over 200,000 customer accounts, the branch network, fixed deposits and the credit/debit portfolio transferred broadly in line with plan. This is the segment's forward catalyst, not what is in the FY26 numbers.
This is the most important section of any conglomerate review. Headline EBITDA is an accounting construct heavily influenced by IFRS treatment of equity-accounted investees, share of associate profits, and fair value movements. What matters for solvency, dividend capacity, and deleveraging is operating cash flow after capex.
Per S&P Global Market Intelligence data (Trailing Twelve Months ending Dec 2025), JKH's operating cash flow was Rs.40.29Bn against capital expenditures of Rs.35.26Bn — leaving free cash flow of approximately Rs.5.03Bn. The full FY26 cash flow statement (in the AR Financial Statements section, p.466) will reveal the final number but the trajectory is established: a year-and-a-half ago the company posted Rs.41.5Bn in operating cash flow against Rs.42.2Bn in capex, producing negative free cash flow of Rs.(0.7)Bn for FY25.
The single largest swing factor in working capital over the last twelve months has been inventory: TTM inventory increased by ~Rs.15.6Bn, partially offset by Rs.22.5Bn increase in payables. This is consistent with the JKCG inventory build (vehicle stocks against pent-up demand release) that management itself attributes the Group debt increase to. The Group's working capital position moved from positive Rs.34.7Bn at FY25-end to negative Rs.(39.3)Bn at Dec 2025 — a Rs.74Bn swing — driven by inventory financing maturities being reclassified to short-term debt. This is not a crisis (it is inventory-backed trade financing), but it is the reason management's "Group debt has not materially increased excluding JKCG" framing is technically true but practically misleading.
| Indicator | FY2025/26 | FY2024/25 | Variance | Read |
|---|---|---|---|---|
| EPS (fully diluted, Rs.) | 0.77 | 0.32 | +141% | Recovery of EPS to pre-CODSL drag levels |
| ROCE (%) | 9.0% | 5.1% | +390 bps | 17% excl. CODSL — underlying portfolio quality |
| Group debt (excl. leases, Rs.Bn) | 238.1 | 210.4 | +13.2% | Debt actually up Rs.27.7Bn — JKCG inventory finance |
| Net debt (excl. leases, Rs.Bn) | 137.2 | 116.2 | +18.1% | Net debt also up — improvement is denominator-led |
| Net debt / EBITDA (×) | 1.7× | 2.5× | −0.8× | Real improvement, but driven by EBITDA expansion |
| Net debt / Equity (%) | ~31% | ~28% | +~3 pp | Slightly higher gearing despite better cash flow profile |
| FX debt (% of total) | ~44% | ~55% | −11 pp | WPL refinancing reduced USD-exposure share |
| USD cash at Holding Co (USD M) | ~180 | n/d | — | Provides natural hedge against USD 136M IFC term loan |
Per the AR FY25/26 maturity analysis (p.25), the new WPL refinancing structure includes a USD 39M bridging facility due within 6 months (FY27), but the USD 150M long-term facility has ~60% (~USD 90M) due for final settlement in March 2031. The IFC USD 136M loan amortises evenly until June 2030. The maturity stack is now meaningfully smoothed — this is a real structural improvement to the credit profile, separate from the cash flow trajectory.
Yes — at the EBITDA level. No — at the PBT level. And the casino, the supposed catalyst, has only triggered fixed rental income so far. Here is the four-quarter view of how the ramp actually played out:
Under the operating agreement with Melco (the casino operator), JKH receives revenue in two layers: a fixed rental component recognised regardless of casino activity, and a variable rental component that activates only once gaming operations cross a defined activity threshold. In FY26 only the fixed portion was recognised. The Chairperson's Message states this explicitly: "the variable rental component will come into effect once operations reach a certain level of activity, in line with the anticipated ramp-up." The Group has chosen not to disclose the casino threshold publicly. This is therefore the single largest disclosed-but-unquantified upside in the entire portfolio.
| Line item | FY25/26 (Rs.Bn) | FY24/25 (Rs.Bn) | Note |
|---|---|---|---|
| CODSL recurring EBITDA | +0.93 | −4.74 | The headline "turnaround" |
| Depreciation & interest at CODSL | −10.96 | −4.29 | FY25 was a partial half-year (Oct'24+) |
| FX impact on USD WPL loan | −3.86 | +0.86 | Rupee depreciation flipped sign |
| CODSL recurring PBT | −13.66 | −8.21 | PBT loss widened by Rs.5.45Bn |
| CODSL recurring attributable PAT | −14.10 | −8.15 | The drag on consolidated EPS |
Investors should not conflate "positive EBITDA" with "making money." The PBT loss at CODSL widened by Rs.5.45Bn YoY because depreciation on the full integrated resort (Cinnamon Life + Nuwa + casino + mall infrastructure) is now being charged for a full 12 months versus 5.5 months in the prior year, and a Rupee depreciation crystallised Rs.3.86Bn of FX loss on the USD-denominated WPL loan. The refinancing at a "materially lower" rate concluded in March 2026 should provide finance-cost relief from FY27 onwards. The casino variable rental, when triggered, is the structural lever that could move CODSL from "operationally positive, financially loss-making" to genuinely profitable. Until that threshold is crossed, CODSL is still consuming Group earnings.
Group-level margins are noisy because the FY26 revenue base ballooned 67% due to JKCG (a high-revenue, lower-margin vehicle retail business) being consolidated as a subsidiary. The fairer view is segmental EBITDA margins on segment revenue:
| Segment | Revenue FY26 (Rs.Bn) | EBITDA FY26 (Rs.Bn) | EBITDA % FY26 | EBITDA % FY25 | Trend |
|---|---|---|---|---|---|
| Transportation | 85.01 | 9.67 | 11.4% | 10.0% | ▲ Expansion |
| Consumer Foods | 44.44 | 7.57 | 17.0% | 17.3% | ▼ Slight contraction |
| Retail (combined) | 313.92 | 31.74 | 10.1% | 7.9% | ▲ NEV mix-up |
| — Supermarkets + JKOA | ~140 | 13.44 | ~9.6% | ~9.1% | ▲ Marginal |
| Leisure | 67.51 | 12.49 | 18.5% | 9.0% | ▲ Material recovery |
| Property | 12.88 | 2.96 | 23.0% | 14.1% | ▲ But FV-gain inflated |
| Financial Services | 44.16 | 11.37 | 25.7% | 28.6% | ▼ Mix shift / Fairfirst sale |
Strip out CODSL, NEV (one-time pent-up demand), and Property FV gains, and the segments with genuine margin expansion are Transportation (LMS bunkering margin recovery and CWIT scale) and the Leisure ex-CODSL portfolio (occupancy and rate gains from Maldivian and Sri Lankan resorts). Supermarkets margins are essentially flat — durable but unexciting. Consumer Foods margins slipped on confectionery cocoa cost inflation. Financial Services margin compression is consistent with the loss of Fairfirst's insurance contribution, plus declining net interest margins industry-wide.
Government imposed a 3-month temporary surcharge on duty on all motor vehicles to manage import demand and currency pressure from the Middle East conflict. The surcharge does not apply to bookings received before 15 May 2026 — meaning JKCG can clear existing order book but new orders will face higher cost. The Rs.18.3Bn JKCG EBITDA contribution is the most exposed line in the entire portfolio.
Tourist arrivals declined year-on-year in April 2026 due to flight re-routing, cancellations, increased travel costs (European arrivals especially, given the Middle East transit hub model). March 2026 was already softening — the peak winter season tail end. Cinnamon Life ramp, Maldivian resorts, and CWIT bunkering volumes all have second-order exposure to a prolonged regional conflict.
The activity threshold above which JKH's variable rental from the Melco-operated casino activates has not been publicly disclosed. Until management quantifies this, investors cannot model the asymmetric upside they keep being told to expect. This is a disclosure gap, not a flag against the business.
The March 2026 Supreme Court ruling against LMS was a 2:1 majority and led to a Rs.1.26Bn additional provision. Further assessment periods remain under appeal. While management has provisioned for prudence, the recurring nature of this tax dispute warrants monitoring through the next annual cycle.
The Rupee depreciated to ~Rs.340 by mid-May 2026 from ~Rs.309 in February 2026 — roughly 10% in three months. With USD-denominated debt at WPL (USD 150M post-refinancing) and the IFC term loan (USD 136M), every 10% depreciation generates meaningful translation losses through the P&L despite the Holding Company's USD 180M natural hedge.
NTB's Rs.18Bn acquisition of HSBC Sri Lanka's retail franchise completed 1 May 2026. Integration of 200,000+ customer accounts, branch network, credit/debit portfolio is a meaningful operational lift. Management has stated the transfer was "broadly in line with the business plan" but the customer-attrition and integration-cost trajectory will only become visible in FY27 disclosures.
The defining feature of the FY2024/25 report ("Ready, Set, Go") was a series of operational commitments — CODSL would ramp, WCT-1 would break even, NEV would be material, capex would peak, and the balance sheet would deleverage. Five out of seven of those commitments were either delivered or beaten. The two that fell short — the casino's path to variable rental, and the residential sales acceleration at Cinnamon Life — were each commitments that depended on conditions outside management's direct control (gaming volume threshold and post-completion buyer behaviour).
The legitimate criticisms relate to cash quality (free cash flow is only modestly positive despite the EBITDA surge), gross debt direction (actually up Rs.27.7Bn, not down), and the dependence of the headline EBITDA growth on a JKCG result that benefited from a one-time pent-up demand release after a five-year vehicle import ban. None of these are governance flags — they are normal business-cycle characteristics that the Chairperson's Message itself acknowledges. The disclosure quality remains best-in-class for the Colombo Stock Exchange.