Hemas after-tax profit up 28-pct to Rs3.8Bn in FY17

May 18, 2017 (LBO) – Hemas Holdings Plc Wednesday announced an after-tax profit of 3.8 billion rupees for the year ended 31 March 2017, reflecting a 28.3% growth over the previous year.

Group revenue was 43.4 billion rupees, up by 14.3% while operating profit rose by 21.3% to 4.8 billion rupees.

Hemas Holdings CEO Steven Enderby said overall the group has shown strong growth over last year.

However, a multitude of factors such as increasing VAT rates, the introduction of VAT at hospitals, a new pharmaceutical pricing regulation and increasing inflation impacted profitability during the second half of the year.

“Despite this, we have seen limited signs of recovery during Q4, achieving revenue growth of 18.4% and PAT growth of 36.8% compared with the same period last year,” he added.

The group’s home and personal care business delivered revenue of Rs. 16 billion, a 12.0% increase over the previous financial year. Operating profit was Rs. 2.1 billion, a 17.3% YoY growth.

During the year, Hemas further developed consumer offerings by introducing a new Velvet bath and body range and relaunching leading hair care brand Kumarika. It also commissioned a new soap plant.

Enderby said local growth is predominantly driven by a market share improvement in Hemas’ personal care and personal wash portfolio. Further, relatively benign commodity prices during the first half of the year contributed towards the sector gross margin improvement.

Investments were made in increased marketing activities in Bangladesh in order to extend the reach attained through their own distribution channels and to counter competition. Further, Hemas entered the feminine hygiene category in Bangladesh during January.

Hemas’ healthcare sector registered total revenue of Rs. 18.8 billion, a growth of 16.7% for the full year. Operating profit and PAT grew at 15.9% and 17.3%, to achieve Rs. 2.1 billion and Rs. 1.4 billion respectively.

“During the last two quarters, our healthcare sector witnessed challenges arising from new pharmaceutical price regulation and the introduction of VAT on specified hospital services. Our pharmaceutical distribution operation recorded good volume growth over last year, however, we experienced depressed margins resulting from price controls,” the Hemas Group CEO said.

The hospitals, along with the laboratory network, delivered solid growth over last year with its latest investments in bed expansion in Hemas Hospital Wattala and a range of new surgical specialties and medical equipment.  All three hospitals registered Q4 standalone positive profitability at the PAT level for the first time, Enderby added.

J.L. Morison recorded YoY top line growth of 6.7% and operating profit growth of 21.8% for the year ended 31 March 2017. The Rx Pharma portfolio continued to do well, benefiting from new product launches.

The company continued to focus on building its Rx and OTC portfolio and has exited from agricultural supply operations which have been part of J. L. Morison prior to the acquisition of the business. As a result, underlying revenue for the FY 2016/17 excluding agricultural operations grew by 13.7% and EBIT by 28.0%.

In support of its future growth and innovation, J.L. Morison announced plans to set up a new research and manufacturing facility located within the SLINTEC nanotechnology park in Homagama at an estimated cost of $ 13.5 million.

Hemas’ Leisure, Travel and Aviation (LTA) business recorded total revenue of Rs. 4.3 billion, reflecting 1.3% YoY growth for the 12 months ended 31 March 2017. Hotel sector performance stagnated with a top line of Rs. 1.8 billion during the year 2016/17.

A fall in segmental profitability during the year was compounded by losses at Anantara Peace Haven Tangalle Resort which is in its first full year of operations.

During Q4, Hemas unified ownership of all its leisure investment property, travel and aviation businesses outside Serendib Hotels, under one single entity, Leisure Asia, 100% owned by HHL.

Despite the impact of the runway closure at Katunayake, Hemas’ representation division did well to enhance its market share. During the year, the travel sector went live with its new ERP system designed to enhance the company’s ability to respond to evolving traveller needs.

Hemas Logistics and Maritime recorded a top line growth of 103.4% over last year recording a top line of Rs. 1.9 billion. This growth has been driven by the company’s new maritime agency, Evergreen.

“The acquisition of this agency gives us a stronger position in the logistics and maritime space,” Enderby said.

During the year, the logistics arm of Hemas showed improved results, mainly driven by 3PL operations. Hemas is further strengthening its presence in the logistics space by constructing a new state-of-the-art logistics park to consolidate warehousing, improve capacity and provide a range of new services to clients. This new investment is through a joint venture with GAC and Hemas investment will be $ 5.2 million.

Enderby said despite a challenging macroeconomic context and an unprecedented period of tax and regulatory change in private sector healthcare, Hemas’ teams have worked well to deliver strong operating results in 2016/17.

“We enter 2017/18 with a number of new initiatives under development as we continue to pursue our vision of enriching the lives of all Hemas stakeholders,” the CEO added.