Hemas September quarter profit rises 33% on key business segments

Expects tougher market due to VAT, price controls & runway refurbishment
Exits from agriculture supply operations to focus more on healthcare
Evergreen agency drives maritime sector performance 
Group leverages Evergreen to further expand in maritime & logistics
Diversified conglomerate, Hemas Holdings PLC, saw its group net profit for the quarter ended September 30, 2016 (2Q17) increasing 33.4 percent to Rs.847.5 million or Rs.1.48 a share from a year ago, supported by all key business segments, the interim results showed. 
The Hemas share closed at Rs.104.0, unchanged from last week’s close.  
The group top line rose 12 percent year-on-year (YoY) to Rs.10.7 billion, while the cost of sales grew 8.4 percent YoY to Rs.6.6 billion. The gross profit for the period was Rs.4.12 billion, up 18.1 YoY. 
For the six months, the group earned a net profit of Rs.1.54 billion or Rs.2.70 a share, an increase of 47 percent from the same period last year. The group revenue increased 12.1 percent YoY to 
Rs.20.63 billion.  

However, Hemas Group CEO Steven Enderby cautioned about the “challenging” market conditions for the second half of the year from the increased value-added tax (VAT), introduction of VAT on healthcare services, runway refurbishment at Bandaranaike International Airport impacting travel and leisure sector and recent price controls imposed 
on pharmaceuticals. 

The Hemas group has interest in the fast-moving consumer goods (FMCG), healthcare, leisure, travel and aviation and logistic and maritime sectors.  
During the quarter under review, the group’s FMCG business increased its top line 16 percent YoY to Rs.4.13 billion while the segment’s profit-after-tax rose 44 percent YoY to Rs.432.3 million. The performance was supported by the market share improvement in the personal care and personal wash portfolio and the improvement in the gross margins due to benign commodity prices, the 
company said. 
Meanwhile, the group’s consumer business in Bangladesh also increased its market reach through the company’s own distribution channels and marketing activities. 
The group healthcare business increased its revenues 17 percent YoY to Rs.4.7 billion, while the bottom line rose 43 percent YoY to Rs.403.1 million. The segment’s performance has mainly been driven by the group’s pharmaceutical operations, which increased its market share during the period, the company said. 
“With a view to increasing our focus on our healthcare portfolio, we have exited from the agricultural supply operations, which have been part of J. L. Morison’s for many years,” Enderby said in an earnings note.  
Hemas also runs three hospitals in Wattala, Galle 
and Thalawathugoda.
Meanwhile, the group’s leisure, travel and aviation business saw its top line growing 9 percent YoY during the quarter to a little over Rs.1.0 billion and the sector earnings jumped 163 percent YoY to Rs.61.6 million. 

However, the six months earnings fell 59 percent YoY to Rs.28 million due to losses at Anantara Peace Haven Tangalle Resort, which is in its first full-year of operations. 
Further in September, the group added Anantara Kalutara to the leisure portfolio. Hemas Holdings has a 12 percent ownership in Anantara Kalutara.

“We continue our efforts to enhance and develop the luxury travel market in Sri Lanka through our close relationship with Minor Group,” Enderby said. 
Meanwhile, the travel and aviation segment revenue declined 15 percent YoY as some GSAs faced competitive environment. 

The group’s logistic and maritime business saw both top and bottom lines rising 122 percent and 168 percent to Rs.497.2 million and Rs.83.4 million, respectively, as the performance was driven by the group’s new maritime 
agency, Evergreen. 

“The acquisition of this agency gives us a stronger position in the logistics and maritime space an area where we are now planning to expand further,” Enderby said. 
As of September 30, 2016, Esufally family held a slightly over 60 percent stake in Hemas Holdings.