Hemas Group net profit down 20-pct in 1Q amid high finance cost

Steven Enderby, Chief Executive Officer, Hemas Holdings

Aug 15, 2018 (LBO) – Sri Lanka’s Hemas Holdings which has interests in FMCG, leisure, and healthcare has posted a shareholder profit of 554.3 million rupees in the June 2018 quarter, down 20.2 percent from a year earlier, interim accounts showed.

The decrease in profit is due to reduced interest income post utilization of cash reserves to acquire Atlas in January 2018.

Profits were also affected by the increased interest costs relating to higher working capital due to strong growth in Pharmaceutical Distribution and the loan financing for our new logistics park.

Chief Executive Officer of Hemas Holdings, Steven Enderby said all three of these investments should contribute to earnings from Q3.

“Excluding the first quarter performance of Atlas, HHL recorded a revenue and an operating profit growth of 10.9% and 1.5% correspondingly,” Enderby said.

Hemas Holdings posted a consolidated revenue of 13.5 billion rupees for the first quarter, a year-on-year growth of 21.3 percent, led by higher contributions in our consumer and healthcare sectors.

The Group operating profit of 895.7 million rupees in the first quarter of the financial year is an increase of 3.5 percent over the previous financial year.

“Operating profit growth has been impacted by losses at N*Able coupled with a weaker macroeconomic environment with sluggish consumer demand as disposable incomes have been dampened by rising costs from Rupee depreciation and increased taxes,”

“Our technology business, N*Able got the year off to a slower start with a revenue decline of 68.5% due to delays in project completion during the quarter in contrast to its strong start in FY2017/18.”

Consumer business revenue stood at 5.4 billion for the three months ending June 30, 2018, indicating a growth of 36.2 percent. Growth in the consumer sector excluding Atlas stands at 6.8 percent.

Healthcare sector revenue for the first three months under review stood at 6.4 billion, an increase of 24.7 percent whilst earnings indicated a decline of 6.0 percent.

Leisure, Travel, and Aviation business recorded a total revenue of 792.4 million, reflecting a growth of 16.2 percent for the three months.

“Overall, the country experienced an upward trend in tourist arrivals during the quarter,” Enderby said.

“Serendib Hotels reported an 11.0% growth in revenue due to rise in average room rates and occupancies across the group. Anantara Peace Haven Tangalle too had a satisfactory performance. Travel and Aviation segment indicated a growth in revenue of 17.1%.”

Hemas Logistics and Maritime recorded revenue growth of 15.4 percent over last year with revenues of 718.3 million rupees.

“Overall we have had a satisfactory start to the year in a difficult macro environment, Enderby said.

“Solid performance in our core Sri Lanka Consumer businesses supported by improvements in Leisure and Travel sector performance and the seasonality effect of Atlas, position us well to improve operating profit growth in the coming quarters.”