Hemas Holdings’ operating profit up 22.5% | Sunday Observer

Hemas Holdings’ operating profit up 22.5%

Steven Enderby
Steven Enderby

The Hemas Group recorded a consolidated revenue of Rs.30 b for the first six months ended September 30, 2018, a year-on-year (YoY) growth of 33.0% driven by the recent acquisition of Atlas.

Group operating profit stood at Rs. 2.4 b, a growth of 22.5% over the previous financial year. Operating profit growth resulted from stronger performance in the home and personal care segment and the contribution by Atlas.

Despite growth in revenue, the lag in operating profit is due to weaker performance at Morisons and N*able and margin compression at pharmaceutical distribution.

The profit attributable to equity holders at Rs.1.5 b is a YoY growth of 4.3%. The lower growth in earnings 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 loan financing for the new logistics park.

Excluding the first six months performance of Atlas, HHL recorded a consolidated revenue and operating profit growth of 16.1% and 2.3% correspondingly, said Chief Executive Officer Steven Enderby in his annual review.

Consumer business recorded a revenue of Rs.12.2 b, indicating a YoY growth of 57.7%. Revenue growth in the consumer sector excluding Atlas stood at 8.2%. operating profit of Rs.1.5 b grew by 54.3% during the first six months compared to last year. Growth was experienced from brand relaunches in core personal care categories.

The Bangladesh business continues to experience challenges, intense competition in a weak market environment has resulted in revenue growth of only 1.4% during the first six months of the financial year 2018-19. Profitability remains a challenge due to heavy marketing spend.

Atlas’ performance has been on track in Q2 with revenues up by 12.4%.

Healthcare sector revenue for the first six months under review stood at Rs.13.4 b, an increase of 27.3% while operating profit and earnings indicated a decline of 8.3% and 12.6%.

Hemas pharmaceutical distribution operation registered strong revenue growth. The impact of price regulation and significant currency depreciation continues to compress margins. Hemas Hospitals achieved an overall occupancy of 57%, with revenues and profitability improving significantly during Q2.

The key driver of growth is the continued enhancement in surgical capability. The pharmaceutical manufacturing business, Morison posted a revenue of Rs.1.7 b and operating profit of Rs.162.7 m. Morison’s underlying revenue, excluding Alcon distribution business, which we exited during the latter part of FY2017/18, was 1.8%. Operating profit has been impacted by poor performance in OTC Pharma which has resulted in earnings recording a decline of 37.5% excluding Alcon, Enderby said.

Hemas Leisure, Travel and Aviation (LTA) interests achieved revenues of Rs.1.8 b, reflecting a growth of 16.7%.

Broader industry fundamentals remain favourable with tourist arrivals up during the year. Serendib Hotels reported a 10.2% growth in revenue due to an increase in average room rates and average occupancies across the group reaching 69% against 64% reported last year.

Anantara Peace Haven, Tangalle had a satisfactory performance in occupancy. Travel and Aviation segment indicated a growth in revenue of 22.1%. However, overall, profitability remained a challenge, declining by 12.5%, owing to ongoing soft refurbishment at Avani Bentota and Hotel Sigiriya coupled with exchange losses attributed to forex loan financing at Anantara. Hemas Logistics and Maritime recorded a revenue growth of 10.9%. Port of Colombo was ranked as the world’s fastest growing port with a growth of 15.6% in container handling during the first half of 2018, fuelled by 20% growth in transshipment volumes.

Profitability of the maritime sector increased as a result. The logistics business saw 3PL and warehousing segments make a notable contribution to profitability.

The technology business, N*able witnessed a gradual improvement in the second quarter with increased revenues by 31.7% compared to last year.