Hemas boosts operating profits by 51%, anticipates strong second half

Hemas Holdings Plc yesterday announced a 51% increase in consolidated operating profit to Rs. 1.03 billion in the first half and said a strong second half is anticipated in FY13.

As per SLAS, earnings for the half-year was Rs. 705 million, a year-on-year growth of 44.9%.

Hemas Holdings Chief Executive Husein Esufally said earnings were driven by Transportation, FMCG and Healthcare sectors, whose earnings grew by 52.2%, 39.6% and 33.0% respectively, and Leisure sector which posted earnings of Rs. 42.4 million as against a loss of Rs. 32.8 million last year.

The Group posted revenues of Rs. 12.9 billion, a growth of 29.0% over the previous year. Main contributors were Power, Healthcare and FMCG sectors, which recorded growth levels of 50.4%, 22.9% and 17.2% respectively.

“As we complete the first half of our financial year, we look ahead with great encouragement driven by the growth experienced by most of our businesses. Although we foresee a challenging second half for our consumer related businesses, we anticipate a boost from our Leisure sector during the upcoming winter season, and are optimistic of sustaining our growth momentum to close the year on a positive note,” Esufally said.

Hemas’ FMCG sector performed very well to record a top line growth of 17.2% in a slowing market, to post Rs. 3.7 billion of revenues. Sector earnings were Rs. 358 million for the half-year, a growth of 39.6%.

“Both revenues and earnings were driven by the strong performance of our Personal care and Personal wash categories,” Esufally said.

Many of the brands in these categories have seen increasing market shares during the period with Velvet succeeding to become the market leader in the beauty soap category. Escalating food prices during the quarter resulted in the slow growth experienced by the Personal care market, a trend Hemas expects will continue into the next quarter. Despite a slow market growth the personal care portfolio recorded a strong growth of 9.4%, helped by the baby care, oral care and hair care categories.

Flagship brand Baby Cheramy celebrated its 50th anniversary with the launch of the Big Heart Project together with the Department of Probation and Childcare Services of the Ministry of Child Development and Women Affairs to fund the education of disadvantaged children from across the country during the crucial first five years of schooling. The project will specifically fund children who are ‘at-risk’ or ‘in danger of being institutionalised’ due to the financial inability of their families to care for them.

The Hemas sanitary napkin brand, Fems, won the Silver Award for the Best Turnaround Brand of the Year, while the adult personal wash brand, Velvet, secured the Bronze Award for the Product Brand of the Year at the 11th SLIM Brand Excellence Award Ceremony held recently.

“Our Healthcare sector continued the growth it has been enjoying in the recent past during the first two quarters of the current year as well. Revenue and earnings growth was primarily driven by the performance of our Pharmaceuticals business, which benefited from the healthy growth of the market to post an increase in top line of 21.9%,” the Hemas CEO said.

During the period under review the business successfully grew its market share to 17.6% (source: IMS), further strengthening its market leadership position. Despite the negative impact caused by the depreciating currency the business posted a healthy profit growth of 27.0%.  Hemas Hospitals business experienced a good half-year with inpatient capacity nearing 80% at Wattala hospital, contributing to the increase in Hospital revenues of 30.3% to Rs. 660 million.

During the year Hemas Hospitals also continued its efforts to create awareness amongst the community as well as educating and training doctors on colon cancer, ophthalmology, chest infections, and ENT diseases.

“These activities, together with our high service standards, helped the business achieve higher surgery volumes recorded since inception and enhance volumes of our laboratory, which helped the business close the half year recording an EBITDA growth of 41.2%,” Esufally added.

Hemas Leisure sector enjoyed a good first half by recording revenue of Rs. 656 million, a growth of 44.9%. The performance of Hotel Dolphin helped the sector swing its earnings from a negative Rs. 33 million to a positive Rs. 42 million. The soft opening of Kani Lanka took place in September, rebranding it under the Avani umbrella as Avani Kalutara.

Hemas hotels experienced a good first half recording an overall occupancy in excess of 70%, in a period which was predominantly the ‘low season’ and are looking forward to an exciting winter season. The sector’s performance was enhanced by the inbound tour operation, which recorded a top line growth of 34% for the period, largely driven by increasing volumes.

The Transportation sector posted a top line of Rs. 465 million, a 29.4% growth over the previous year. This was mainly on account of strong revenue growth in the aviation and maritime segments. Sector earnings rose by 52.2% to Rs. 155 million during the first half of 2012.

According to the CEO, the Hemas Aviation segment recorded satisfactory growth in passenger and cargo sales while outbound tour operation too increased their share of the travel agency market.

“Our maritime segment’s performance was aided by increasing throughput volumes of our feeder business. The sector diversified its presence in this segment to handle casual callers and provide maritime services through our joint venture with Mercantile Shipping Company PLC which is expected to commence operations in the third quarter,” Esufally said.

“Despite the growth of the maritime and aviation segments, our performance in the logistics segment was challenging. In September this year, we made an investment in Forwardair Logistics (Pvt) Ltd., strengthening our presence in this segment and allowing us to leverage our existing relationships in the industry for further growth,” he added.

Hemas Power sector recorded revenues of Rs. 3.1 billion a growth of 50.4%, led by the pass through effect of increasing fuel prices of its thermal power plant, Heladhanavi. However, the sector earnings suffered a decline of 29.6%, to record Rs. 87 million, hit by the low rainfall experienced in the catchment areas of its hydro power plants, which contributed 42.7% to earnings. Sector profitability was further depressed by the unrealised negative impact of Rs.18 million arising from a depreciating rupee on foreign exchange borrowings.

Hemas also said ‘Piyawara,’ its main CSR project focused on early childhood development in Sri Lanka, was launched in 2002 with the Ministry of Child Development and at present it has 35 preschools islandwide providing education for over 3,000 children daily. Its 35th school was declared open in September 2012 in the resettled village of Silawathei, Mullaitivu.

Continuing its efforts in early childhood development, it has begun construction of a community preschool in another resettled village in Mullaitivu and a model pre-school for 100 children in the Kilinochchi city, which is expected to be completed during early 2013.