Hemas Holdings revenue up 14.9%

• Consolidated revenue of Rs. 11.4 billion y-o-y and earnings stable at Rs. 694.2 million 

Hemas Holdings Plc (HHL) and its subsidiaries achieved consolidated revenue of Rs. 11.4 billion, a year-on-year (YoY) growth of 14.9%, while earnings were stable at Rs. 694.2 million. 

Its healthcare sector was the main contributor to growth during the quarter. Operating profit reached Rs. 865.7 million, a de-growth of 4.6%. The key factors that influenced the decline in profitability were subdued consumer spending resulting from increased inflation and VAT, flooding and landslides in Sri Lanka and exchange rate depreciation. In addition, headwinds faced with the organisation’s Bangladesh operation and losses incurred within the Leisure, Travel and Aviation (LTA) segment also impacted profitability.   

The consumer business recorded revenue of Rs. 4.2 billion for the first three months ending 30 June, 2017, a decline of 1.5% YoY. Operating profits were Rs. 526.4 million, 17.3% YoY de-growth, whilst PAT Rs. 425.3 million, a fall of 17.1%. 

Despite the challenging domestic macro environment, Hemas’ Sri Lanka business reported steady growth in key personal care categories with market shares being maintained across most major categories. The decline in revenue and profitability was mainly on account of a below par performance in its Bangladesh operation which was impacted by bad weather conditions during Q1, and the restructuring of the sales and distribution network. With regard to new markets, Hemas incurred start-up losses in West Bengal as it commenced operations.

Consolidated healthcare sector revenue for the first three months under review stood at Rs. 5.1 billion, a YoY increase of 18.7% whilst operating profit and PAT grew at 22.4% and 54.3%. Hemas pharmaceutical’s distribution operation registered strong revenue growth, increasing its market leadership position. However, managing the impact of price regulation and devaluations in the wake of the depreciation of the rupee was a key operational challenge. As a result, pharmaceutical distribution profitability was negatively impacted. However, this decline in profitability was mitigated by the strong growth in hospitals. Hospitals operated at high capacity levels over the quarter in part due to the dengue epidemic.

J. L. Morison posted revenue of Rs. 954.7 million and PAT of Rs. 118.7 million for the three months ended 30 June 2017. JLM’s underlying revenue and earnings growth, excluding Agro, which Hemas exited during the latter part of FY17, was 7.6% and 19.5% respectively. 

The growth against the previous year was primarily driven by pharma manufacturing and pharma distribution. The groundbreaking ceremony for JLMs new manufacturing facility, which will be Sri Lanka’s first EU Good Manufacturing Practices (GMP)-compliant pharmaceutical manufacturing facility, was held in June. Construction will take approximately 24 months. 

Hemas’ Leisure, Travel and Aviation business recorded total revenue of Rs. 682.1 million, reflecting a decline of 12.1% YoY for the three months under consideration. During this period, overall arrivals to Sri Lanka witnessed a moderation in growth as a result of the negative publicity and travel warnings due to flooding and landslides in May. 

Serendib Hotels reported a 2.5% fall in revenue due to a decline in average room rates and occupancies across the group. The Travel and Aviation segment indicated a growth in revenue of 5.4%. Overall profitability of this segment continued to be below expectations. The fall in segmental profitability during the quarter was compounded by losses at Anantara Peace Haven Tangalle Resort.

Hemas Logistics and Maritime recorded revenue growth of 80.8% over last year with revenues of Rs. 622.5 million. This growth has been driven by both its agencies, Evergreen and Far Shipping. During the year, the logistics arm of Hemas showed improved results, mainly driven by the 3PL operations. Construction of Hemas’ new logistics and container yard facility is ongoing and on track to be completed by early FY 2019. 

The technology business N*Able got the year off to a strong start with revenue growth of 405.3% due to the successful completion of three major projects during the quarter in contrast to its weak start in FY17.

The group anticipates a challenging year ahead for its businesses with the recent developments in its macroeconomic context. However, it said it continues to position itself for future growth through investing in new facilities, new personal care categories and new geographies with the aim of achieving strong future growth and higher levels of revenue and profitability.