Hemas Dec. net boosted by higher top line growth, finance income

Diversified Hemas Holdings PLC, which has interests i n FMCG, hea l t h c a r e , transportation and leisure saw its net profit for the December quarter (3Q16) soaring as much as 219.7 percent year-on-year (yoy) to Rs.858.66 million, the interim accounts released to the Colombo bourse showed. The profits were boosted by healthy top line growth, absence of los s es from discontinued operations and, higher other operating and finance incomes.

The earnings per share (EPS) accordingly improved to Rs.1.50 from 52 cents a year ago. Hemas share on Friday closed at Rs.80, 20 cents up. Higher gains from FMCG, healthcare and transportation operations of the group helped the revenue during the quarter under review grow 19.8 percent yoy to Rs.9.87 billion

The cost of sales increased 19.2 percent yoy to Rs.6.23 billion, resulting in a gross profit of Rs.3.63 billion, up 21 percent yoy. The other operating income during the quarter rose 152.8 percent yoy to Rs.83.24 million. Despite both administrative expenses and selling and distribution costs increasing 9.5 percent and 6.6 percent yoy, respectively, the operating profit for the quarter rose 52.4 percent yoy to Rs.1.17 billion, helped by higher top line gains.

The finance income for the period soared 450.7 percent yoy to Rs.178.9 million. Hemas group carried out a rights issue, raising Rs.4 billion in May last year, to fund inorganic growth relating to its key business sectors. The group is yet to announce such acquisitions. A segmental analysis for the three months showed FMCG sector revenue increasing to Rs.3.79 billion from Rs.3 billion, a year ago. The net profit of the segment accordingly rose to Rs.452.2 million from Rs.355.5 million.“This performance has been driven by our Bangladesh operation maintaining excellent revenue and profit growth, strong sales across all our major brands in the domestic market and relatively weak commodity prices for key raw material inputs,” Hemas Group CEO Steven Enderby said. The healthcare business also saw the revenue improving to Rs.4.21 billion from Rs.3.6 billon. The net profit increased to Rs.355.5 million from Rs.260.1 million.

Hemas operates three hospitals in the outskirts of Colombo and is the leader in the pharmaceutical distribution in the country. The group also owns a listed pharmaceuticals manufacturing subsidiary. “During the quarter, Hemas Hospitals opened its first wellness centre at Orion City responding to a call to provide top quality healthcare services to the 6,000 plus employee strength, at Colombo’s premier IT park,” Enderby said. Despite a higher revenue of Rs.856.3 million compared to Rs.765 million a year ago, the leisure sector recorded a net loss of Rs.2.9 million against a net profit of Rs.40.3 million.

Apart form Hotel Sigiriya and Hotel Dolphin, Hemas has two new 5-star properties in partnership with Thailand’s Minor group. Anantara, Peace Haven, Tangalle commenced operations in December 2015 while Anantara Kalutara is scheduled to open in the first half of 2016. The transportation segment saw its revenue increasing to Rs.454.5 million from Rs.390.5 million. However the sector profits fell to Rs.87.5 million from Rs.109.8 million.

“Aviation businesses continued to experience challenges due to lower yields of ticketing income despite increases in volumes,” Enderby said. As at December 31, 2015, the Esufally family controlled four companies held 62 percent of the issued shares of the company, down from 67.68 percent as at December 31, 2014. During the rights issue in May, the Esufally family decided not to subscribe to their portion of rights, allowing foreign investors in the group to up their shareholdings. Accordingly, Franklin Templeton Investment Funds increased its shareholding to Rs.9.95 percent as at December 31, 2015 from 7.21 percent as at December 31, 2014. Templeton Global Investment, which didn’t have a stake in the group as at December 31, 2014, held 2.61 percent as at December 31, 2015, as the sixth single largest shareholder of Hemas. Meanwhile, for the nine months ended December 31, 2015, Hemas group posted a net profit of Rs.1.9 billion, up 65.2 percent yoy. The EPS improved to Rs.3.33 from Rs.2.24.