Kumar de Silva
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Hemas Group achieved operating profit of Rs.907 Mn, YoY growth of 34.8% for the Q1 of Financial Year 2016/17

PHOTO - Hemas Group CEO Steven Enderby

CEO’s Review

Through continued focus on our strategic priorities, profitable growth, improved organizational structure and innovation, we delivered strong revenues and earnings growth for the first quarter of financial year 2016/17. Hemas Holdings PLC (HHL) and its subsidiaries achieved consolidated revenues of Rs.9.9Bn, year-on-year (YoY) growth of 12.1% for the period, operating profit reached Rs.907Mn and earnings Rs.696Mn, growth of 34.8% and 67.8% respectively. Despite external pressures due to flooding, VAT uncertainty, and increasing inflation resulting in weaker demand, we continued to generate solid performance with FMCG Bangladesh, Pharmaceutical Distribution, and our new shipping agency Evergreen all contributing well.

The Consumer business recorded a topline of Rs.4.2Bn for the first three months, a 10.2% YoY increase over the previous financial year. Operating profits were Rs.636Mn, 59.2% YoY growth, whilst earnings grew at 62.6% to stand at Rs.509Mn. We continued to expand our position in key categories with the introduction of our new range of Baby Cheramy diapers. Bangladesh Consumer performed well contributing to overall Consumer business growth, driven by extended reach attained through own distribution channels and strong marketing activities.

Consolidated healthcare sector revenue for the first quarter stood at Rs.4.3Bn, a YoY increase of 17.6% whilst earnings grew at 13.5%. Hemas pharmaceutical distribution registered strong growth maintaining its market leadership position.  Our pharmaceutical sales growth continues to be driven by our strong presence in growing therapeutic segments and due to the recovery in the overall pharmaceutical market over the last year. We launched our latest addition to the pharma portfolio, Jenburkt Pharma during the month of May 2016. Hospitals performance showed mixed results during the quarter due to the introduction, and subsequent removal, of VAT for healthcare services, and different approaches to VAT introduction by various private healthcare operators creating market confusion.

J. L. Morison posted a YoY growth of 4.3% and earnings growth of 28.2% for the three months ended June 30, 2016. Our Rx Pharma portfolio continued to do well, benefiting from new product launches. OTC and Consumer also contributed significantly towards overall revenue growth while the Agro division registered a decline in growth limiting overall company revenue growth.

Leisure, travel and aviation segment recorded a total revenue of Rs.775Mn, reflecting an 8.2% YoY growth for the three months under consideration. During this usual low season for the Leisure industry and despite a decrease in occupancy at Avani Bentota and Club Hotel Dolphin, Serendib Hotels posted a revenue growth of 4.8% with traditional markets performing slightly below expectations.  Travel and Aviation segment also showed mixed results with some GSAs showing improvements in both yields and number of passengers handled, while others faced competitive operating environments. As a result, the segment recorded a decline in revenues of 4.3%.

In April 2016 Hemas Maritime was appointed the exclusive shipping line agent of Evergreen Lines. We believe this will enable us to consolidate our position in the logistics and maritime sector. Growth continued in our domestic logistics operations with warehouses operating at high levels of capacity underpinned by new customers for our distribution operation and higher levels of container handling activity. As a result, logistics and maritime revenues grew by 63.2% whilst earnings registered a growth of 118.6% over last year.

FY 2016/17 has got off to a good start for HHL with our major businesses growing well. We continue to be watchful of tightening economic conditions for the year ahead. Our teams are working hard to sustain our growth momentum in the coming quarters of the financial year.

Steven Enderby
Chief Executive Officer
Colombo
10 August 2016

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