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New acquisitions weigh on Hemas 1Q bottom line

16 August 2018 12:02 am - 0     - {{hitsCtrl.values.hits}}

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The recent new acquisitions weighed on the bottom line of the diversified conglomerate Hemas PLC during the quarter ended June 30, 2018 (1Q19), the interim financial accounts released to the Colombo Stock Exchange showed.


The earnings for the quarter under review fell 20.2 percent year-on-year (YoY) to Rs.554.3 million, on revenue of Rs.13.5 billion, up 21.3 percent YoY.


The earnings per share for the period fell to 96 cents, from Rs.1.21.
Hemas Group CEO Steven Enderby said the reduced interest income due to the utilization of cash reserves to acquire Atlas Axillia was a key reason for the reduction in earnings during the quarter.
The finance income for the quarter under review fell 57 percent YoY to 
Rs.95.4 million.


He also identified higher interest costs relating to higher working capital due to the strong growth in pharmaceutical distribution and loan financing for the group’s new logistics park as another key reason that hampered the group bottom line. 


The finance costs for the period rose 66 percent YoY to Rs.119.21 million. 


“All three of these investments should contribute to earnings from 3Q,” Enderby said.


The group operating profit for the quarter under review grew only by 3.5 percent YoY to 
Rs.895.7 million.


“The operating profit growth has been impacted by losses at N*Able, our IT technology solutions business, coupled with a weaker macroeconomic environment with sluggish consumer demand as disposable incomes have been dampened by the rising costs from rupee depreciation and increased taxes,” Enderby said.


The group’s consumer business revenue stood at Rs.5.4 billion for period under review, up 36.2 percent YoY. The growth in the consumer sector, excluding Atlas, stands at 6.8 percent. The operating profit of the segment grew 8.1 percent YoY Rs.569.3 million.


Hemas said during the quarter under review, the market conditions domestically remain depressed with most market commentaries indicating low or negative growth in most major 
FMCG categories.

The group’s Bangladesh business experienced revenue growth of 6.1 percent, following the Kumarika relaunch last December. However, Enderby said profitability still remains a challenge due to the heavy marketing spend post-launch. 


The group said Atlas performance has been on track in 1Q with revenues up by 8.8 percent over last year and break even in operating profits in line with its normal seasonal performance trend.
The revenue of the group’s healthcare segment rose 24.7 percent YoY to Rs.6.4 billion but the operating profit fell 2 percent YoY to Rs.498.8 million. 


Hemas said the price regulations brought in for certain pharmaceutical drugs and depreciation of the rupee against the dollar was a major operational challenge it had to face during the quarter under review.


The hospitals run by Hemas saw 60 percent occupancy during the period but the revenues and profitability were flat compared to the same quarter, last year, when the occupancy levels were higher due to the dengue epidemic. 


The group’s pharmaceutical manufacturing and marketing subsidiary Morison posted revenue of Rs.844.3 million and operating profit of Rs.83 million for the quarter under review. 


Meanwhile, Hemas leisure, travel and aviation business recorded total revenue of Rs.792.4 million reflecting a growth of 16.2 percent for the three months under consideration. The segment was also able to narrow its operating loss to Rs.68.1 million, from Rs.127.6 million a year ago.


The group’s logistics and maritime business recorded a revenue growth of 15.4 percent YoY to Rs.718.3 million. The operating profit improved to Rs.216.6 million, from Rs.188 million a year ago.
During this period, the Colombo port witnessed a YoY growth of 15 percent.


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.


Franklin Templeton Fund also has a 9.7 percent stake in Hemas.


During 1Q19, the two new entrants to the top 20 shareholders of Hemas were Phoenix Venture (Pvt.) Ltd with a one percent stake and Kopernik Global All Cap fund with 0.69 percent. 

 

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