Recent acquisitions boost Hemas 2Q
Diversified conglomerate Hemas Holdings PLC posted improved performance for the quarter ended September 30, 2018 (2Q19), with the recent acquisitions by the group delivering positive contribution to the group, the interim financial accounts released to the Colombo bourse showed.
Hemas saw its top line growing significantly by 44.3 percent year-on-year (YOY) during the quarter under consideration to Rs.16.5 billion, helped by its recent acquisition of Atlas Axillia, which operates under the group’s consumer business.
The group’s consumer business saw its revenue increasing to Rs.12.2 billion, from Rs.7.7 billion a year ago, while the segment’s earnings rose to Rs.1.1 billion, from Rs.766.6 million.
The group’s operating profit for the period rose 37.5 percent YOY to Rs.1.5 billion.
Hemas Group CEO Steven Enderby said despite the aggressive growth in revenue, the operating profits lagged primarily due to the weaker performance of the group’s pharmaceutical manufacturing arm Morisons and its IT business N*able.
The group earnings for the quarter under review improved to Rs.1.62 per share or Rs.926.6 million, from Rs.1.27 per share or Rs.726 million reported for the same quarter, last year.
“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 the loan financing for our new logistics park,” Enderby said.
The finance income for the quarter under review fell to Rs.1097 million, from Rs.215 million, while for the first half the finance income fell 53 percent YOY to Rs.205.1 million.
Commenting on the group’s consumer business segment, Enderby said the Sri Lanka personal care market continues to remain challenging while the intense competition in Bangladesh saw the group’s revenue growing only 1.4 percent during the first half of FY19.
However, he said Atlas performance had been on track during the quarter under review with revenues up by 12.4 percent over the same period last year.
The group’s healthcare segment reported revenues of little over Rs.7 billion, compared to Rs.5.4 billion a year ago. However, the segment’s earnings fell to Rs.319.8 million, from Rs.392.6 million.
Enderby said the impact of price controls on certain pharmaceuticals and the rupee depreciation against the US dollar continues to compress the margins.
He also said Hemas Hospitals achieved an overall occupancy of 57 percent with revenues and profitability improving significantly during the 2Q19, compared to the first three months of the financial year and over last year.
Hemas has two hospitals in Wattala and Thalawathugoda. The group recently sold its 35-bed hospital in southern Sri Lanka to the Asiri group for Rs.450 million.
The Hemas group’s leisure and aviation business reported improved revenue over a Rs.1 billion for the quarter under review although the segment turned negative earnings of Rs.83.9 million, widening the loss from Rs.17.8 million a year ago.
Enderby cited the ongoing soft refurbishment work at Avani Bentota and Hotal Sigiriya coupled with exchange losses stemming from a forex loan financing at Anantara as key reasons for the segment to report negative earnings.
The logistics and maritime business segment of the group reported revenues of Rs.753.2 million for the quarter under
review, compared to Rs.673.5 million a year ago.
The segment’s earnings improved slightly to Rs.152.4 million, from Rs.148.4 million.
“Our logistics business saw 3PL and warehousing segments make a notable contribution to profitability. The new logistics park facility is now up and running with newly secured customers moving in August. However, with the hike in fuel prices there was pressure on operating margins,” Enderby said.
“Our technology business, N*able witnessed a gradual improvement in the second quarter with increased revenues over last year by 31.7 percent. However, a significant drop in revenue due to delays in project completion during the first quarter continues to have an impact on the year to date profitability,” he added.
Meanwhile, for the first half of FY19, the Hemas group reported earnings of Rs.2.58 per share of Rs.1.48 billion, compared to Rs.2.48 per share or Rs.1.42 billion reported for the first half of FY18.
The revenue rose 33 percent YOY to Rs.30.01 billion.
The Esufally family has a 61 percent stake in Hemas through various investment vehicles, while Norges Bank, Norway’s giant wealth fund operating under its Central Bank, has a 2.99 percent stake in the company. The Templeton Fund also has a 9.7 percent stake in Hemas.