Hemas Holdings Sep net up 27-pct; consumer segment drives growth
ECONOMYNEXT – Profits at Sri Lanka’s Hemas Holdings Plc grew 27.6 percent from a year earlier to 926.6 million rupees in the September 2018 quarter driven by strong growth in its consumer businesses and stationery subsidiary Atlas, interim accounts showed.
Earnings in the quarter amounted to 1.62 rupees a share. In the six months to end September, earnings were 2.58 rupees a share on a profit of 1.48 billion rupees, up 4.3 percent from a year earlier.
"The lower growth in earnings (in the six months to end September) is due to increased net interest expense post utilisation of cash reserves to acquire Atlas in January 2018, higher working capital due to strong revenue growth in pharmaceutical distribution and the loan financing for our new logistics park, " Chief Executive Steven Enderby told shareholders.
"The business environment remains challenging with significant and on-going currency devaluation through September and October, and political uncertainty impacting the domestic economy, the source of our major business activity," he said.
Hemas was trading 3 rupees higher at 90 rupees on Wednesday.
In the September quarter, Hemas Holdings’ revenue grew 44.3 percent from a year earlier to 16.5 billion rupees, with cost of sales growing a faster 53.5 percent to 11.1 billion rupees leading to gross profits increasing 28.3 percent to 5.4 billion rupees.
Selling and distribution expenses rose 41.5 percent to 1.4 billion rupees and administration costs increased 21 percent to 2.5 billion rupees.
Net finance cost was 155 million rupees, down from a net finance income of 71 million rupees a year earlier. The group’s total borrowings grew 65 percent from a year earlier to 11.4 billion rupees at end September 2018.
-Consumer driven growth-
Hemas Holdings’ September earnings were boosted by its consumer segment which includes FMCG and personal care goods and stationery subsidiary Atlas.
Revenue from the consumer segment grew 80 percent from a year earlier to 6.8 billion rupees in the quarter and profits grew 108 percent to 721.7 million rupees.
"The Sri Lankan home and personal care market continues to be challenging, however we experienced growth from brand re-launches in our core personal care categories. Further, we are also seeing the benefits of our profit improvement programme initiated last year improving operating margins," Enderby said.
Hemas’ Bangladesh operations continue to experience challenges amidst intense competition, he said.
"Atlas performance has been on track in the (September quarter, with revenues up by 12.4 percent over the same period last year," Enderby said.
Earnings from healthcare fell 21 percent to 322 million rupees despite revenue increasing 30 percent to 7 billion rupees.
Currency depreciation and price controls are compressing margins at the group’s pharmaceuticals distribution business and impacting sales of over the counter drugs, Enderby said.
"Hemas Hospitals achieved an overall occupancy of 57%, with revenues and profitability improving significantly during the September quarter compared to the first three months of the financial year and over last year. The key driver of growth is the continued enhancement in surgical capability," Enderby said.
The Leisure sector saw revenue grow 17 percent to 1 billion rupees but reported a 104 million loss, deepening from a loss of 6.4 million rupees a year earlier due to foreign exchange losses and refurbishment costs.
The group’s Serendib Hotels reported a 10.2 percent growth in revenue due to an increase in average room rates and average occupancies across the group reaching 69 percent, up from 64 percent a year earlier, Enderby said.
The travel and aviation segment reported a revenue growth of 22.1 percent driven by newly secured agents under inbound travel, the chief executive said.
Revenue from maritime and logistics-related businesses which includes warehousing and a logistics park increased 7 percent to 719.2 million rupees in the quarter, but profits declined 9 percent to 175.3 million rupees due to fuel price increases.
Revenue from other businesses had grown 34 percent with profits falling 17 percent to 115.2 million rupees.
"Our technology business, N-able witnessed a gradual improvement in the second quarter with increased revenues over last year by 31.7 percent.
However, a significant drop in revenue due to delays in project completion during the first quarter continues to have an impact on year to date profitability," Enderby said. (COLOMBO, 14 November 2018)