Hemas posts 26% earnings growth to Rs. 1.05 b in 9 months

Hemas Holdings has posted a revenue growth of 26.1% to record Rs. 19.2 billion (as per SLAS) for the period ending 31 December 2012. The power, healthcare and FMCG sectors were the main contributors to the increase in revenue, posting a growth of 40.9%, 22.0% and 15.4% respectively.

Group earnings grew by 25.8%, to record Rs. 1,052 million, driven by the FMCG, healthcare and transportation sectors which grew at 27.2%, 31.1% and 35.8% respectively, for the period ending December 2012. Earnings in the leisure sector swung from a loss of Rs. 8 million last year to a profit of Rs. 98 million.

“The company has been successful in continuing the growth momentum it enjoyed during the first half of this year,” Hemas Holdings CEO Husein Esufally said.

The financial statements of Hemas are prepared in compliance with Sri Lanka Financial Reporting Standards (SLFRS) for the current year, while a second set of financial statements have been prepared as per Sri Lanka Accounting Standards (SLAS) for both the current and previous year for the ease of comparison.

Detailing sectoral performance, the CEO said the FMCG sector recorded revenues of Rs. 5.6 billion, which is a 15.4% growth over the previous nine months; however, much of this growth was price led. The sector was the largest contributor to group earnings posting Rs. 548 million for the period ending 31 December 2012, a growth of 27.2%.

“Our personal wash category, led by our beauty soap ‘Velvet’, performed very well during the quarter recording a growth in both volume and value terms, while our personal care segment recorded market share gains boosted by the oral and hair care categories. In November, two new variants of deodorant were introduced under ‘Gold’; our brand catering to the male grooming segment, while both ‘Goya’ and ‘Pro Sport’ launched new fragrance variants strengthening our market position in this category,” Esufally said.

Sales to the modern trade were impacted due to the imposition of VAT on large scale wholesalers and supermarkets introduced in the 2013 Budget proposals. “Continuing with our efforts to fund the education of disadvantaged children in the country under the ‘Big Heart’ project, a 20-20 cricket match was organised reuniting the ’96 world cup champions who played against the Sri Lankan cricket legends, who stepped forward as volunteers for this worthy cause.

The event was a great success and all the funds raised were directed to the ‘Nana Diriya’ program of the Ministry of Child Development and Women Affairs. The ‘Big Heart’ project was launched to celebrate 50 years of the flagship brand ‘Baby Cheramy’, the Hemas CEO said.

The healthcare sector posted a revenue growth of 22.0% to record Rs. 6.7 billion, driven by the growth in hospitals as well as pharmaceutical distribution. The sector posted a healthy earnings growth of 31.1%, to reach cumulative earnings of Rs. 375 million for the year under review.

“Our pharmaceuticals business continued to maintain its market leadership position with a market share of 17.8% (Source: IMS) in a rapidly growing industry which grew at 18% during the period ending 31 December, 2012.  Our hospital business also posted strong results with a 28.1% growth in turnover during the year under review.

“Progress in constructing our third hospital at Thalawathugoda is on schedule, and we expect to serve our first patient on 1 May, 2013. During the quarter, we concluded preliminary discussions to introduce dialysis services at our hospitals, a key milestone on our way to becoming a comprehensive healthcare services provider in the community,” Esufally said.

Hemas’ leisure sector enjoyed an excellent nine months posting revenue growth of 49.5% to close at Rs. 1.1 billion, largely attributable to a good winter season performance.

Club Hotel Dolphin led the sector with a top line growth of 22.0% and an average occupancy of 85%. Avani Kalutara resort was officially declared open by Economic Development Minister Basil Rajapaksa, in November 2012.

During the quarter under review, Serendib Leisure Hotels received several accolades with Avani Bentota being awarded the Agoda Gold Circle Award for excellence in on-line distribution, while Club Hotel Dolphin was awarded Holiday Check Award 2013 for being one of the 99 most popular hotels worldwide in the ‘family’ category. Avani Bentota and Hotel Sigiriya won merit certificates by the EU-SWITCH ASIA for conservation and waste management.

“Whilst our performance so far has been encouraging, we eagerly anticipate a meaningful initiative by Sri Lanka Tourism to market the destination to the right target segments. With increased inventory coming into the market, demand creation will be key to maintaining rates and occupancy at current levels,” Hemas CEO said.

Transportation sector top line grew by 38.0% over last year to Rs. 747 million driven by the performance in the aviation and maritime segments. Sector earnings stood at Rs. 217 million, reflecting an impressive growth of 35.8% year-on-year. Hemas aviation segment performed well with Outbound travel business continuing to increase its market share.

“Our maritime arm commenced operations on a joint venture with mercantile shipping in Galle to transport crew and sea marshals. As of date, our crew boats have steadily gained acceptance among key clients and their feedback is encouraging. Our feeder agency business enjoyed a steady quarter and also served new customers by providing maritime services, positively impacting earnings.

In our logistics segment, we expanded our service portfolio into contract warehousing apart from the empty container transport business at Hemas Logistics. The performance of our freight forwarding and courier partners was also noteworthy and supported overall growth in the sector,” CEO said.

“Our power sector recorded a revenue growth of 40.9% reaching Rs. 4.4 billion driven by escalating fuel prices. Despite our ‘Giddawa’ hydropower plant being affected by floods during the quarter, the hydro power segment recorded an increase in revenue of 31.6% for the period, mainly attributable to the improved performance of ‘Magal Ganga’.

Sector earnings declined by 14.3% compared with the corresponding period last year due to higher finance costs and exchange losses, most of which were unrealised translation losses. Over the next quarter we expect to continue our pre-development work on new projects in Sri Lanka and in the East-African region,” Esufally said.

This holiday season an initiative was undertaken by ‘Piyawara’, our CSR project, to set up an ‘Angel Christmas Tree’ to collect Christmas gifts for underprivileged children in the Northern Province. During the quarter, Hemas Outreach Foundation also sponsored a three day residential teacher training program in the Northern Province which was organised by the Ministry of Education.

“We enter the last quarter, which is traditionally our best, with positive momentum and look forward to closing out the year on a positive note,” the CEO added.