Hemas achieves revenue growth of 11.6%

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By 2017-11-14

Hemas Holdings PLC (HHL) and its subsidiaries achieved consolidated revenue of Rs 23 billion, a Year-on-Year (YoY) growth of 11.6%, while profit attributable to equity holders stood at Rs 1.4 billion, a decline of 8.0% for the six months ending 30 September 2017, according to a press release.

Year-to-date operating profit reached Rs 1.96 billion, a YoY decline of 5.4%. Despite consolidated revenue growth aided by higher turnover from the healthcare and mobility sectors, group earnings indicate a decline due to the Group's Bangladesh personal care business, pharmaceutical distribution, leisure and travel all facing margin challenges. Further, cost escalations were experienced as the Group invested in expanding its consumer portfolio and building new pharmaceutical and logistics facilities. Domestic consumer demand remained soft, impacted by higher headline inflation, drought conditions persisting in parts of the country, and headwinds from currency fluctuations and VAT increase, added the release.

The home and personal care sector revenue of Rs 8.1 billion for the first six months ending 30 September 2017 indicates a decline of 2.6% over the previous financial year. Operating profits were Rs 968.7 million, a 16.4% YoY decline. Despite the challenging domestic macro environment, the Group's Sri Lankan business reported steady growth in key personal care categories, with market shares being maintained across most major categories. The decline in operational performance was impacted by the Group's Bangladesh operations, where bad weather conditions during Q1, the restructuring of their sales and distribution network, increased competition and the expansion of their portfolio resulted in lower margins.

HHL is now seeing signs of increased stability in its revamped sales and distribution network in Bangladesh, and have introduced the first-ever marbleized herbal-beauty soap 'Kumarika Herbal Soap' in Bangladesh during August 2017. With regard to new markets, the Group incurred start-up losses in West Bengal as its operations commenced.

During the six months under review, HHL's consolidated healthcare sector registered revenue of Rs 10.6 billion, a YoY increase of 16.5%, while operating profit and PAT grew at 8.0% and 18.0% respectively. The healthcare sector was the main contributor to Group growth year-to-date. Hemas Pharmaceuticals' distribution operation registered strong revenue growth, increasing its market leadership position. However, profitability in the industry remained challenging, due to price regulation and devaluations in the wake of depreciation of the rupee. As a result, pharmaceutical distribution profitability was negatively impacted. In order to drive future growth, Hemas Pharmaceuticals ventured into regional markets for the first time with its entry into Myanmar during Q2.

Hemas Hospitals operated at high occupancy levels during the first six months of the financial year, partly due to the dengue epidemic. It is also seeing growth from increased surgeries, as it expands its services, pushes to higher levels of clinical excellence and generates improved performance from investments made in the sector.

JL Morison Son & Jones (Ceylon) PLC (JLM) was rebranded to Morison PLC. The company launched its new identity with the unveiling of its new logo, signifying the company's focus on being a leader in technical excellence and innovation. Morison PLC posted revenue of Rs 1.9 billion and operating profit Rs 282.7 million for this interim period. Morison's underlying revenue and operating profit growth, excluding Agro, which was exited during the latter part of FY17, were 4.0% and 28.0% respectively. Growth against the previous year was primarily driven by pharmaceutical manufacturing and distribution. Construction of Morison's new manufacturing facility is ongoing.

The Group's Leisure, Travel and Aviation business recorded total revenue of Rs 1.6 billion, reflecting a decline of 14.7% YoY for the six months under consideration. During Q1, overall arrivals to Sri Lanka witnessed a moderation in growth as a result of the negative publicity and travel warnings due to flooding and landslides in May. Serendib Hotels reported a 5.6% fall in revenue due to decline in occupancies and average room rates, primarily due to increase in room inventory. During the second quarter, Serendib Group announced the acquisition of a 51.15% stake of the Lantern Group for an investment of Rs 309.5 million. This is a significant milestone in Serendib Leisure's quest to grow in boutique luxury villas in Sri Lanka, enabling the Group to provide diverse hospitality options to the discerning traveler. The Travel and Aviation segment indicated a growth in revenue of 1.3%. Overall profitability of this segment continued to be below expectations, stemming from travels and hotels. Anantara Peace Haven, Tangalle performed comparatively better than last year, however, losses incurred year-to-date have impacted Group profitability.

Hemas Logistics and Maritime recorded revenue growth of 54.0% over last year, with revenues of Rs 1.3 billion. This growth has been driven by both agencies and logistics. During the year, Hemas' logistics joint venture with GAC and Maclaren's has shown improved results, mainly driven by the 3PL operations. Construction of their new logistics and container yard facility is on track towards completion by early FY 2019.

The Group's technology business, N*Able, generated strong revenue growth due to the successful completion of three major projects during the quarter, in contrast to its weak start in FY17.

The overall business environment appears challenging for the second half of the year. The Group has developed plans to drive improved profitability and address areas of weaker performance identified during the period to 30 September 2017. The team will continue to push hard to drive growth and efficiently manage emerging risks and challenges, concluded the release.

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