CEO’s Review Q2 2019/2020:
Hemas Holdings PLC witnessed a recovery in Q2 with group revenue up by 19.2%, over Q1 FY20 and operating profit and earnings growing by Rs.662.7Mn and Rs.633.1Mn. The growth was driven by an improvement in our Consumer and Healthcare businesses and the normal positive seasonal trend at Atlas.
The Group recorded a consolidated revenue of Rs.28.9Bn for the 6 months ended September 30 2019, 3.6% lower than last year. Operating profits for the first half of the financial year were Rs.701.5Mn, a Year-on-Year (YoY) decline of 70.8% in comparison to previous year. Group reported a loss of Rs.218.8Mn for the 6 months. As discussed in detail in our Q1 release, profits were significantly compressed by the impact of the Easter Sunday terrorist attacks and their aftermath. In addition, the disposal of N*able coupled with increased dividend tax and adoption of SLFRS 16 has reduced earnings by Rs.566.0Mn.
On an underlying basis, excluding the impact from, N*able, our technology business sold in Q2 FY20 and Hemas Southern Hospitals which we exited in Q3 FY19, Group revenue was Rs.28.5Bn and earnings Rs.58.6Mn.
During the quarter, both our Consumer businesses have witnessed a steady recovery following subdued performance in the first quarter amid a general economic slowdown and the adverse impact of Easter Sunday attacks. Our monthly revenues from this segment returned to prior year levels by the end of Q2 and we reported a quarter on quarter growth in operating profit and earnings of Rs.598.6Mn and Rs.346.4Mn respectively for the three months period in consideration.
Due to the sharp slowdown in the first quarter, year-to-date consumer sector revenue stood at Rs.11.3Bn for the six months ending September 30, 2019, indicating a YoY decline of 6.8%. Segment profits of Rs.630.7Mn witnessed a drop of 57.5% over last year due to increased costs incurred with regard to promotional activities in further strengthening the Hemas brands. Home and Personal care international segment remained depressed during the quarter due to heavy competition in the value added hair oil segment in Bangladesh coupled with increased duty and tariff under the new budget.
Consolidated healthcare sector revenue for the first half of the year stood at Rs.14.5Bn, a YoY increase of 8.3% whilst operating profit and earnings fell by 3.8% and 8.5%, due to declines at Morison and Hemas Hospitals during the first quarter. The sector witnessed a significant recovery during the second quarter with revenues reporting a YoY growth of 9.0% and operating profits growth of 16.3% over last year. Hemas pharmaceutical distribution operation registered satisfactory performance with the price increase on price-controlled pharmaceuticals becoming effective in May. Hemas Hospitals achieved an overall average occupancy of 54%, with profitability down on last year. Hemas Hospitals improved Q2 profitability over Q1 by approximately Rs.80.0Mn.
Morison Limited, our pharmaceutical manufacturing arm, achieved a revenue of Rs.1.3Bn and operating profit of Rs.101.2Mn for the six months ended September 30, 2019, a growth of 3.3% and a decline of 8.9% respectively. In line with many of our other businesses we have seen an improvement in performance in Q2. We continue to invest behind new initiatives within the healthcare space, with our pharmaceutical distribution in Myanmar and digital healthcare businesses incurring start-up losses of approximately Rs.50.0Mn for the quarter. The sector also recorded increased finance costs on account of increased working capital financing at pharmaceutical distribution segment and the expenditure on the new Morison manufacturing plant. year.
Leisure, Travel and Aviation
Hemas Leisure, Travel and Aviation business performance declined sharply with revenues down Rs.399.5Mn compared to last year. Although the tourist arrivals picked up moderately during the period from July to September compared to the previous quarter, the arrivals were still 35% lower than last year. Serendib Group of Hotels recorded a revenue of Rs.535.4Mn, a 31.8% decline over last year with an average occupancy of 56% across its hotels during the quarter, 21% below the occupancy achieved in the same quarter last year. Rates across all properties reduced during the period under review, in order to boost occupancy which led to a drop in profitability.
However, a series of stringent cost control initiatives partially offset the unfavorable impact to profitability from a significant revenue loss. Against this backdrop, the Travel and Aviation segment also recorded a revenue decline of 16.6%, whilst the operating loss was at Rs.35.2Mn during the first half ending September 30, 2019. This is primarily driven by cancellation of tour groups in our inbound segment.
Hemas Logistics and Maritime recorded a revenue decrease of 16.4% over last year with revenues of Rs.1.2Bn. This is mainly attributable to the delays in the new Spectra distribution center ramp-up plans. Additionally, the segment profitability is impacted by the increased depreciation and finance costs resulting from the new facility.
In early Q2, we concluded the sale of our stake in N*able, our technology services business. This disposal has had a negative impact on our Group P&L of Rs.230Mn.
I would like to thank my team for their significant efforts over the last six months in a very challenging environment. Their efforts are delivering results as evidenced by the improvement in operating performance in Q2. We are committed to working hard during the remainder of the year to get Hemas back to our normal growth trajectory.
- Steven Enderby
- Group Chief Executive Officer
- June 09, 2020
Released by the Group Sustainability and Corporate Communications Division on behalf of the Group Chief Executive Officer.