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Sri Lanka’s Hemas Holdings recovers following setback suffered post-Easter Sunday attacks

Sri Lanka’s Hemas Holdings recovers following setback suffered post-Easter Sunday attacks

Hemas Holdings PLC of Sri Lanka has reportedly recorded a recovery in its Q2 FY 2019/20 with group revenue increasing by 19.2% over Q1 and operating profit and earnings growing by Rs. 662.7 million and Rs. 633.1 million.
The growth was driven by an improvement in the consumer and healthcare businesses and the positive seasonal trend at Atlas, the company has announced.
The group has reportedly recorded consolidated revenue of Rs. 28.9 billion for the six months ended 30 September 2019, 3.6% lower than last year.
According to reports, operating profits for the first half of the financial year were Rs. 701.5 million, which is a year-on-year (YoY) decline of 70.8% in comparison to the previous year. The group reported a loss of Rs. 218.8 million for the six months.
“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 million,” Group Chief Executive Officer Steven Enderby has been quoted as saying in the local media.
On an underlying basis, excluding the impact from N*able, the technology business Hemas has sold in Q2 FY20, and Hemas Southern Hospitals, which it exited in Q3 FY19, group revenue was Rs. 28.5 billion and earnings was Rs. 58.6 million.
During the quarter, both the consumer businesses of Hemas have witnessed a steady recovery following subdued performance in the first quarter amid a general economic slowdown and the adverse impact of the Easter Sunday attacks.
The monthly revenues from this segment have returned to prior-year levels by the end of Q2 and it reported a quarter-on-quarter growth in operating profit and earnings of Rs. 598.6 million and Rs. 346.4 million respectively for the three-month period in consideration.
Due to the sharp slowdown in the first quarter, year-to-date consumer sector revenue stood at Rs. 11.3 billion for the six months ended 30 September 2019, indicating a YoY decline of 6.8%. Segment profits of Rs. 630.7 million witnessed a drop of 57.5% over last year due to increased costs incurred with regards to promotional activities to further strengthen Hemas brands.
“The 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,” Enderby has noted.
Meanwhile, consolidated healthcare sector revenue for the first half of the year has been recorded at Rs. 14.5 billion, 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 has witnessed a significant recovery during the second quarter with revenues reporting a YoY growth of 9% and operating profit growth of 16.3% over last year.
Hemas’ pharmaceutical distribution operation was helped by the price increase on price-controlled pharmaceuticals becoming effective in May and Hemas Hospitals have achieved an overall average occupancy of 54%, with profitability down from last year.
Hemas Hospitals has improved Q2 profitability over Q1 by approximately Rs. 80 million.
However, Hemas’ leisure, travels, and aviation businesses’ performances have seen a decline with revenues down Rs. 399.5 million compared to last year. Although 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.

OSL take:

Sri Lanka’s economy has shown an impressive return to normalcy following the setback suffered in the Easter Sunday attacks. Many key economic sectors islandwide have returned to the growth path in the past few months. Also, Sri Lanka’s geographical positioning in the Indian Ocean, the ease of doing business environment in the country and the many trade agreements as well as trade concessions enjoyed by the country have made it an attractive business destination in the South Asian region. Given the buoyant growth and strength of Sri Lanka’s private sector, foreign businesses could confidently explore business/investment opportunities in Sri Lanka.

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Article Code : VBS/AT/20191122/Z_3

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