The first quarter of the financial year 2019/20 has been a challenging period for Hemas with revenues 2.3% below last year. This has been, primarily, a result of the Easter attacks on April 21, with the aftermath causing economic slowdown and difficult trading conditions.
Chief Executive Officer, Steven Enderby said in his review the company’s profitability has been more significantly impacted and recorded a loss before tax of Rs.140 million.
“Key factors in this have been in the business mix with our higher margin consumer businesses experiencing a slowdown while our lower margin healthcare businesses grew revenue by 7.6%. In line with the sharp downturn in the tourism industry, our Leisure and Travel interests incurred a loss at earnings level of Rs.129 million. The generally depressed economic environment has resulted in weak performance across the Group in particular at Morisons and N*able,” he said.
The CEO said, the Group was also impacted by a number of one-offs totaling Rs.130 million including a charge from the adoption of SLFRS16. “We incurred a dividend tax charge of Rs.278 million following the upstreaming of dividends to pay our final dividend and redeem our listed debenture.”
He added during the quarter, consumer businesses have been impacted by market wide weak consumer sentiment and baseless ethnically divisive attacks on their business and brands. Many of these attacks appear designed to mislead the public and exacerbate already strained communal relationships. “We continue our efforts to ensure everyone understands that building great Sri Lankan consumer and healthcare brands and services is an important component of the national economy generating employment and taxes, developing great suppliers and sales and distribution teams across the country, and ultimately driving the livelihoods of thousands of families. As our teams across the Group workto ensure this message is understood, we are seeing a steady recovery in the performance of our consumer businesses from the lows of May. There is ongoing improvement into Q2 as we push hard to return to normal business levels as quickly as possible.”
Hemas Leisure, Travel and Aviation business performance declined sharply with revenues down Rs.105.3 million compared to last year. This is mainly driven by the loss of tourist arrivals in May and June by 71% and 57% respectively. “This is primarily driven by cancellation of tour groups in our inbound segment. We are now seeing early signs of recovery in the sector.”
However, the CEO added, the Group is optimistic that Sri Lanka is on its path to recovery displaying its customary resilience.
“At Hemas throughout our 70 years we have learned resilience is an essential component of any successful Sri Lankan business. I have been hugely impressed with my team’s hard work and energy over this quarter as they have visited every corner of the country ensuring everyone understands we are a great Sri Lankan business playing its part in building a better Sri Lanka.Success for us, and for the country, is founded on unity.
We are working together to continue the recovery we have seen over the last two months, as we target a return to normal levels of business activity,” he said.