Hemas FY18 revenues up, profits down

Hemas Holdings PLC (HHL) has reported a full year consolidated revenue of Rs. 50.9 billion in FY18, up 17.2% whilst profits were down due to acquisition costs and depressed economic factors.

Pre-tax profit was down by 14% to Rs.  4.4 billion, and post-tax by 21% to Rs. 2.95 billion. Hemas bottom line was down 23% to Rs. 2.68 billion. Operating profit was down 11% to Rs. 4.2 billion.

Revenue growth was primarily driven by enhanced performance in Hemas healthcare and mobility sectors.

“Adjusting for our investments in growing our businesses, the Atlas acquisition and asset disposals indicate a revenue growth of 14.9%, while operating profit and earnings remained flat,” Hemas Holdings CEO Steven Enderby said. 

“We have made significant investments in growing our businesses which have reduced our operating profits for the year. These include commencing Home and Personal Care (HPC) operations in West Bengal, India, investments in digital health start-ups, and a major profit improvement project for our Home and Personal Care business,” he said. 

“These investments have reduced operating profit by Rs. 397.9 million,” Enderby added. In January, Hemas acquired Atlas Axillia, Sri Lanka’s leading school and office stationery business for Rs. 5.7 billion. 

The seasonal nature of this business, with Q4 of the financial year being low season coupled with the loss of interest income from rights issue proceeds and other cash reserves used to fund the acquisition have impacted Hemas performance. 

“We have also had an increased tax charge resulting from higher dividend tax as we have upstreamed dividends in part to finance the acquisition,” he added.

As a result, the acquisition has had a negative impact on the operating profit of Rs.197 million, and on earnings of Rs.295.1 million. “We have now fully utilised the capital raised in the rights issue,” the CEO said. Adjusting for the costs associated with these investments and acquisition, including one-off gains from asset disposals in both the current and previous years, indicate Hemas performance in FY18 of revenue growth of 14.9% while operating profit and earnings remained flat.

This has been partly due to broader macroeconomic factors with increased inflationary pressure, and the impact on consumer purchasing power of increased VAT, and prolonged drought and flooding in the earlier part of the financial year,” he said. 

“We have also had mixed operating performance across the Group with Leisure and Travel, and HPC Bangladesh underperforming, while price controls on pharmaceuticals continues to put pressure on operating margins,” Enderby said. 

“Conversely, our HPC Sri Lanka business has performed robustly against the backdrop of a declining Personal Care market, and we have seen good growth at Hospitals, Logistics and Maritime,” he added.