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- QoQ Operating profits up by Rs. 660 m
Hemas Holdings PLC said it has witnessed a recovery in 2Q with group revenue up by 19.2%, over 1Q FY20, and operating profit and earnings growing by Rs. 662.7 million and Rs. 633.1 
million.
“The growth was driven by an improvement in our Consumer and Healthcare businesses and the normal positive seasonal trend at Atlas,” Hemas Group CEO Steven Enderby said.
He said the Group recorded a consolidated revenue of Rs. 28.9 billion for the six months ended 30 September, 3.6% lower than last year. Operating profits for the first half of the financial year were Rs. 701.5 million, a year-on-year (YoY) decline of 70.8% in comparison to previous year. Group reported a loss of Rs. 218.8 million for the six months. As discussed in detail in our 1Q release, profits were significantly compressed by the impact of the Easter Sunday terrorist attacks and their aftermath. In addition, the disposal of N*Able coupled with increased dividend tax and adoption of SLFRS 16 has reduced earnings by Rs. 566 million.
On an underlying basis, excluding the impact from, N*Able, our technology business sold in 2Q FY20 and Hemas Southern Hospitals which we exited in Q3 FY19, Group revenue was Rs. 28.5 billion and earnings Rs. 58.6 million.
Following is the Group CEO’s review of the second quarter performance of Hemas Holdings PLC.
During the quarter, both our Consumer businesses have witnessed a steady recovery following subdued performance in the first quarter amid a general economic slowdown and the adverse impact of Easter Sunday attacks. Our monthly revenues from this segment returned to prior year levels by the end of 2Q, and we reported a quarter on quarter growth in operating profit and earnings of Rs. 598.6 million and Rs. 346.4 million, respectively, for the three-month period in consideration.
Due to the sharp slowdown in the first quarter, year-to-date consumer sector revenue stood at Rs. 11.3 billion for the six months ending 30 September, indicating a YoY decline of 6.8%. Segment profits of Rs. 630.7 million witnessed a drop of 57.5% over last year due to increased costs incurred with regard to promotional activities in further strengthening the Hemas brands. Home and Personal care international segment remained depressed during the quarter due to heavy competition in the value added hair oil segment in Bangladesh coupled with increased duty and tariff under the new budget.
Consolidated healthcare sector revenue for the first half of the year stood at Rs.14.5 billion, a YoY increase of 8.3% whilst operating profit and earnings fell by 3.8% and 8.5%, due to declines at Morison and Hemas Hospitals during the first quarter. The sector witnessed a significant recovery during the second quarter with revenues reporting a YoY growth of 9.0% and operating profits growth of 16.3% over last year. The Hemas pharmaceutical distribution operation registered satisfactory performance with the price increase on price-controlled pharmaceuticals becoming effective in May. Hemas Hospitals achieved an overall average occupancy of 54%, with profitability down on last year. Hemas Hospitals improved 2Q profitability over 1Q by approximately Rs. 80 million.
Morison PLC, our pharmaceutical manufacturing arm, achieved a revenue of Rs. 1.3 billion and operating profit of Rs. 101.2 million for the six months ended 30 September, a growth of 3.3% and a decline of 8.9%, respectively. In line with many of our other businesses, we have seen an improvement in performance in 2Q. We continue to invest behind new initiatives within the healthcare space, with our pharmaceutical distribution in Myanmar and digital healthcare businesses incurring start-up losses of approximately Rs. 50 million for the quarter. The sector also recorded increased finance costs on account of increased working capital financing at pharmaceutical distribution segment and the expenditure on the new Morison manufacturing plant.
The Hemas Leisure, Travel and Aviation business performance declined sharply with revenues down Rs. 399.5 million compared to last year. Although the tourist arrivals picked up moderately during the period from July to September compared to the previous quarter, the arrivals were still 35% lower than last year. Serendib Group of Hotels recorded a revenue of Rs. 535.4 million, a 31.8% decline over last year with an average occupancy of 56% across its hotels during the quarter, 21% below the occupancy achieved in the same quarter last year. Rates across all properties reduced during the period under review, in order to boost occupancy which led to a drop in profitability. However, a series of stringent cost control initiatives partially offset the unfavourable impact to profitability from a significant revenue loss. Against this backdrop, the Travel and Aviation segment also recorded a revenue decline of 16.6%, whilst the operating loss was at Rs. 35.2 million during the first half ending 30 September. This is primarily driven by cancellation of tour groups in our inbound segment.
Hemas Logistics and Maritime recorded a revenue decrease of 16.4% over last year with revenues of Rs. 1.2 billion. This is mainly attributable to the delays in the new Spectra distribution centre ramp-up plans. Additionally, the segment profitability is impacted by the increased depreciation and finance costs resulting from the new facility.
In early 2Q, we concluded the sale of our stake in N*Able, our technology services business. This disposal has had a negative impact on our Group P&L of Rs. 230 million.
I would like to thank my team for their significant efforts over the last six months in a very challenging environment. Their efforts are delivering results as evidenced by the improvement in operating performance in 2Q. We are committed to working hard during the remainder of the year to get Hemas back to our normal growth trajectory.
