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resulting from start-up losses at the group’s new hospital at Thalawathugoda and the closure of Hotel Dolphin and Sigiriya since early this year.
“Nevertheless, the group’s underlying profit after tax adjusted for these events posted a growth of 19.1%, over the previous year. Profitability for the quarter was also impacted by increased interest costs of Rs. 90 million, primarily utilised to fund new investments during the period under review,” Hemas Holdings CEO Husein Esufally said in a note accompanying interim accounts.
He said Hemas FMCG sector recorded a strong growth of 25.3%, to achieve revenues of Rs. 2.2 billion, whilst operating profits grew by 47.7% to Rs. 224 million. Despite a general slowdown in the industry, the new financial year commenced with record sales; mainly driven by the oral care, personal wash and homecare categories.
After many months of extensive research the sector entered the adult skin care market with the launch of ‘Cheramy Touch’, a range of milk-based skin care products with unique formulations. Hemas’ male fragrance brand ‘Pro Sport’ launched two variants of ‘Eau De Toilette Spray’ during the quarter tapping into the premium fragrances category. In conjunction with the launch, ‘Pro Sport’ was introduced with the new expression ‘PRO’, as part of the initiative to modernise the brand. The homecare segment saw an increase in both value and volume with the ‘Nidan ekka idam’ activation of Diva detergent powder which was focused on giving back to our consumers.
Esufally said the healthcare sector registered revenues of Rs. 2.7 billion, a growth of 23.0% over the same period last year. This was driven by the positive performance of both our pharmaceutical distribution and hospital businesses. Operating profits of the sector dropped by 23.2% to Rs. 169 million, mainly attributable to the start-up losses at the new hospital at Thalawathugoda. “The pharmaceuticals business posted a 17.5% growth in revenue and 6.9% improvement in operating profits, backed by an increase in sales volumes during the quarter,” the CEO said.
The business was also successful in attracting a new principle, Aristo Pharma a leading pharmaceutical company in Bangladesh specialising in the manufacturing of a wide range of therapeutic classes. The performance of the group’s pharmaceutical business helped strengthen its market leadership position by increasing market share to 18.6% (Source: IMS).
During the month of June, Hemas Hospitals celebrated the grand opening of its newest 60-bed, multi –specialty hospital at Thalawathugoda by President Mahinda Rajapaksa. The hospital is fully equipped with modern operating theatres, an intensive care unit, high-tech 24-hour laboratory with the latest sophisticated MRI and CT scanners and a 24-hour emergency care unit. Over 200 leading consultants would be providing indoor and channelling services at this state-of-the-art hospital.
“The hospital saw a steady pick up in volumes since its inception and we are confident that the hospital will post encouraging results in months to come,” Esufally said.
Hemas’ leisure sector revenue dropped by 27.8% to Rs. 209 million resulting from the closure of Club Hotel Dolphin and Hotel Sigiriya for refurbishments. The leisure industry recorded over 500,000 tourist arrivals for the year 2013, a growth of 13% in comparison to 19% recorded the previous year reflecting a slowdown since the end of war.
However, the conversion of these arrivals to guest nights was not clearly visible in the occupancies recorded by the industry. Operational hotels recorded an average occupancies in excess of 50%, despite this quarter being considered an ‘off-peak’ season. However, the drop in revenue during the quarter cascaded down to sector operating profit which posted a loss of Rs. 31 million, a decline of Rs. 47 million over last year.
Profits for the sector were further impacted by Rs. 31 million of unrealised losses recognised on re-valued foreign currency loans during the quarter. With the reopening of Hotel Sigiriya and Club Hotel Dolphin in time for the winter season, Hemas is optimistic of ending the year on a positive note.
The group’s transportation sector posted an impressive revenue growth of 57.3% and operating profit growth of 22.0% to record Rs. 357 million and Rs. 108 million respectively, led by the performance of its aviation and logistics services. The growth by the aviation arm was largely driven by increased cargo and passenger volumes, whilst the new business lines, haulage and integrated logistics, performed well during the period under review.
The sector invested in an integrated logistics facility for shippers and shipping lines with the intention of broadening its presence in the logistics space. The ground breaking ceremony of the facility took place at Welisara, in June 2013.
The group’s power sector recorded a drop in revenue of 4.6% to post Rs. 1.4 billion and an operating profit growth of 326.8% to achieve Rs. 147 million for the first quarter. Revenue was largely impacted by the drop in generation at the group’s thermal power plant Heladhanavi resulting from the curtailment of generation imposed by the CEB.
In spite of this, the profitability of the sector improved due to higher rainfall experienced at our hydropower plants. In April 2013, Hemas Power acquired a 29.3% stake in Pan Asian Power PLC expanding its hydropower portfolio to include a capacity of 11.4MW. The performance of hydro power plants Rath Ganga and Manelwala of Pan Asian Power PLC has helped enhanced the sector’s profitability during the period under review.
In May, the group acquired 70.5% of voting shares and 50% of non-voting shares of J.L. Morison Sons and Jones (Ceylon) PLC for a consideration of Rs. 1.7 billion. With the resulting mandatory offer the company was able to increase its stake to 90% of voting and 85% non-voting shares. J.L. Morison has over 70 years of experience operating in consumer, pharmaceuticals and agro businesses. The company has a well-established presence in the OTC and consumer space, with some strong brands which we believe have significant potential for expansion. The acquisition also provides the group a stepping stone into the pharmaceutical manufacturing industry which is a key national priority. Today, the business is a leading supplier of generic pharmaceuticals to the state as well as the private market and going forward the business will work on improving both the quality and capacity in line with potential demand.
“Our acquisition of the controlling stake in J.L. Morison and a 29.3% stake of Pan Asian Power PLC, the commencement of operations at our new hospital and refurbishment of two of our hotels have made this an eventful quarter. We believe these investments provide the group an excellent platform to grow our business in the future,” Hemas CEO Esufally concluded.
