Hemas Holdings posts healthy topline growth

Hemas Holdings Plc revealed yesterday that it has achieved a healthy topline growth though profits have been under the weather.

For the six months ended 30 September 2011, Hemas grew its topline by 17% to record a consolidated turnover of Rs. 10 b. Revenue growth was driven by Leisure and Power sectors, which posted 37% and 31% increases in revenue respectively. Group gross profit showed a growth of 9%, reflecting a marginal decline in the gross profit margins to 31%, from 33% achieved the previous year.           

“This was largely due to the increase in raw material prices of our FMCG sector and the pass-through effect of higher oil prices in the Power sector. Group earnings declined by 17% to close at Rs. 486 m. However, after adjusting for one-off items during the first half of 2010/11 and the first half of 2011/12, Group earnings have declined only by 9%,” Hemas Holdings CEO Husein Esufally said in his review accompanying interim results.

He said the FMCG sector recorded a turnover of Rs. 3.1 b, a growth of 8% over the previous year. Kumarika was re-launched during the period under review, with new variants and improved packaging, whilst the brand also introduced a face wash as a first step towards building a franchise in the fast growing skin cleansing market.

It was heartening to see Diva Detergent soap win the Bronze award for the ‘Best New Entrant of the Year; at the recently-concluded SLIM Brand Excellence awards.

Although the sector profits dropped by 13% during the first six months, the three months ended 30 September 2011 saw an 8% growth in earnings.  The Quarter performance was fuelled by strong earnings growth of 15% in the domestic business.

The Healthcare sector has seen an inspiring first half with a revenue growth of 16% to record Rs. 3.6 b and a profit growth of 81% to record Rs. 190 m.

“Our pharmaceutical business has seen a top line growth of 15%, largely driven by the growth in industry,” Esufally said, adding that the company continued to remain in the lead with a market share of 16.75% (IMS, Q2-2011).

“Strong focus on operational efficiencies and processes has enabled us to manage the overheads whilst benefiting from a growing topline. Our hospitals too have seen an impressive growth in topline of 25%. Whilst we have further strengthened the hospital lab chain by setting up a branch of the Hemas Hospital laboratory at Ja-Ela during the quarter, we also intend expanding our footprint by developing two new hospitals in the near future, in the suburbs of Colombo,” the Hemas CEO added.

In the Leisure sector, he said Hotel Dolphin and Hotel Sigiriya have been performing exceptionally well, but the closure of Hotel Serendib, on account of repositioning it as a design hotel, has impacted the results during the first half. The sector achieved a revenue growth of 37%, but showed a decline in profits to record a loss of Rs. 23 m.

In addition to the closure of Hotel Serendib, the negative growth over last year was also impacted by the capital gains on the sale of shares of Hotel Sigiriya that took place during the corresponding period last year.

“On average, our hotels recorded occupancy rates in excess of 70% and we look forward to a good winter complemented by the reopening of Hotel Serendib in November,” Esufally added.

Hemas Transportation sector showed a 4% decline in topline to record Rs. 359 m and a decrease in profits of 23% to close at Rs. 102 m. According to the CEO, despite the overall decline in the cargo market, the steady growth in the passenger business, both in travel agency and airline representation, has been the key positive factor in the sector.

“Our Power sector recorded a growth in revenue of 31% to close at Rs. 2.1 b brought about by the pass through effect of high furnace oil prices and higher generation at Heladhanavi in comparison to the previous year. The hydro power plants recorded low utilisation levels as a result of poor rain fall experienced in the catchment areas contributing to lower sector profitability of Rs. 165 m, a drop of 19%. The hydro power contribution to profitability decreased to 23% from 45% recorded the previous year, whilst the contribution from our thermal power plant was boosted by the financial restructuring that took place during the latter half of the second quarter the previous year,” Esufally said.

“Our third hydro power plant at Magal Ganga was commissioned in October this year adding another 2.4MW to the portfolio taking the total hydro power generation capacity to 7.0MW.The sector is looking out for new opportunities in renewable energy both locally and overseas, particularly in East Africa,” he added.

“Going forward, we expect better results from our underlying businesses during the second half of the year. This will be augmented with the build-up of hospital revenues, the new mini hydro project commissioned in October and the re-opening of Hotel Serendib in Bentota,” Hemas CEO Esufally said in his review.