ECONOMYNEXT - Profits at Sri Lankan conglomerate Hemas Holdings fell 20.2 percent from a year earlier to 554.3 million rupees in the June 2018 quarter on higher finance costs, lower healthcare profits and losses in leisure and tech, interim results showed.
"The decline in earnings is due to reduced interest income post utilisation of cash reserves to acquire stationery company Atlas in January 2018 and increased interest costs relating to higher working capital due to strong growth in pharmaceutical distribution and the loan financing for our new logistics park," Chief Executive Steven Enderby told shareholders.
Earnings were 96 cents a share in the quarter, interim results filed with the Colombo Stock Exchange showed. The share last traded at 98.30 rupees.
Gross profit grew 17.6 percent to 4.7 billion rupees on revenues increasing 21.3 percent to 13.5 billion rupees and cost of sales growing a faster 23.4 percent to 8.8 billion rupees.
"Revenue growth was led by higher contributions in our consumer and healthcare sectors," Enderby said.
"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 rising costs from rupee depreciation and increased taxes," he said.
The group reported a net finance cost of 102.1 million rupees in the quarter, compared to a net finance income a year earlier of 100.9 million rupees.
Long-term borrowings were 4.5 billion rupees at end June 2018, up from 1.7 billion rupees a year earlier.
-Segment results-
Hemas' consumer businesses reported revenue growth of 36.2 percent from a year earlier to 5.4 billion rupees. Profits were up 8 percent to 569 million rupees.
"Market conditions domestically remain depressed with most market commentaries indicating low or negative growth in most major FMCG categories," Enderby said.
The group's Bangladesh business reported revenue growth of 6 percent but profitability remains a challenge due to heavy marketing spend, the Chief Executive said.
Stationery subsidiary Atlas reported revenue growth of 8.8 percent with operating profits breaking even, he said.
Healthcare revenue grew 24.7 percent to 6.4 billion rupees but earnings fell 6 percent to 339.5 million rupees.
"The pharmaceutical distribution operation registered strong revenue growth. However, managing the impact of price regulation and devaluations in the wake of depreciation of the rupee was a key operational challenge," Enderby said.
Hemas Hospitals achieved an occupancy rate of 60 percent in the quarter.
"Revenues and profitability were flat compared to a year earlier when occupancy levels were higher due to the dengue epidemic".
Subsidiary Morison reported a 31 percent decline in profits to 83 million rupees due to higher operating costs and exiting from Alcon eye-care distribution, after making revenues of 844.3 million rupees in the quarter.
The tourism and aviation segment of the group saw revenues grow 16 percent to 792.4 million rupees. The segment reported a loss of 140.2 million rupees, down 30 percent from a year earlier on improving occupancies at Serendib Hotels and Anantara Peace Haven.
Logistics and Maritime segment revenue grew 15.4 percent to 718.3 million and profits were up 10 percent to 171 million rupees.
"Construction of the new logistics park facility is now almost finalized with our first customer moving into our new 3PL warehouse in early August," Enderby said.
Other segment revenue fell 48 percent to 557 million rupees and losses deepened to 275 million rupees in the June 2018 quarter, from a loss of 65 million rupees a year earlier.
"Our technology business, N-Able got the year off to a slower start with revenue decline of 68.5 percent due to delays in project completion during the quarter in contrast to its strong start the previous year," Enderby said.
"The decline in earnings is due to reduced interest income post utilisation of cash reserves to acquire stationery company Atlas in January 2018 and increased interest costs relating to higher working capital due to strong growth in pharmaceutical distribution and the loan financing for our new logistics park," Chief Executive Steven Enderby told shareholders.
Earnings were 96 cents a share in the quarter, interim results filed with the Colombo Stock Exchange showed. The share last traded at 98.30 rupees.
Gross profit grew 17.6 percent to 4.7 billion rupees on revenues increasing 21.3 percent to 13.5 billion rupees and cost of sales growing a faster 23.4 percent to 8.8 billion rupees.
"Revenue growth was led by higher contributions in our consumer and healthcare sectors," Enderby said.
"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 rising costs from rupee depreciation and increased taxes," he said.
The group reported a net finance cost of 102.1 million rupees in the quarter, compared to a net finance income a year earlier of 100.9 million rupees.
Long-term borrowings were 4.5 billion rupees at end June 2018, up from 1.7 billion rupees a year earlier.
-Segment results-
Hemas' consumer businesses reported revenue growth of 36.2 percent from a year earlier to 5.4 billion rupees. Profits were up 8 percent to 569 million rupees.
"Market conditions domestically remain depressed with most market commentaries indicating low or negative growth in most major FMCG categories," Enderby said.
The group's Bangladesh business reported revenue growth of 6 percent but profitability remains a challenge due to heavy marketing spend, the Chief Executive said.
Stationery subsidiary Atlas reported revenue growth of 8.8 percent with operating profits breaking even, he said.
Healthcare revenue grew 24.7 percent to 6.4 billion rupees but earnings fell 6 percent to 339.5 million rupees.
"The pharmaceutical distribution operation registered strong revenue growth. However, managing the impact of price regulation and devaluations in the wake of depreciation of the rupee was a key operational challenge," Enderby said.
Hemas Hospitals achieved an occupancy rate of 60 percent in the quarter.
"Revenues and profitability were flat compared to a year earlier when occupancy levels were higher due to the dengue epidemic".
Subsidiary Morison reported a 31 percent decline in profits to 83 million rupees due to higher operating costs and exiting from Alcon eye-care distribution, after making revenues of 844.3 million rupees in the quarter.
The tourism and aviation segment of the group saw revenues grow 16 percent to 792.4 million rupees. The segment reported a loss of 140.2 million rupees, down 30 percent from a year earlier on improving occupancies at Serendib Hotels and Anantara Peace Haven.
Logistics and Maritime segment revenue grew 15.4 percent to 718.3 million and profits were up 10 percent to 171 million rupees.
"Construction of the new logistics park facility is now almost finalized with our first customer moving into our new 3PL warehouse in early August," Enderby said.
Other segment revenue fell 48 percent to 557 million rupees and losses deepened to 275 million rupees in the June 2018 quarter, from a loss of 65 million rupees a year earlier.
"Our technology business, N-Able got the year off to a slower start with revenue decline of 68.5 percent due to delays in project completion during the quarter in contrast to its strong start the previous year," Enderby said.
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