Hemas eyes recovery after difficult first quarter

Diversified Hemas Holdings PLC reported depressed performance for the quarter ended June 1, 2019 (1Q20) amid the general slowdown in the country’s business and economic environment and Easter Sunday attacks on April 21.

Hemas Holdings, which has interests in FMCG, hospitals, pharmaceuticals, hotels, travel and aviation, logistics and technology services, reported a loss of 71 cents a share or Rs.425.8 million for 1Q20, against a profit of 93 cents a share or Rs.554.3 million reported for the same period, last year.

The revenue for the period fell 2.3 percent year-on-year (YoY) to Rs.13.2 billion, while the gross profit fell 9.3 percent YoY to Rs.1.2 billion.
The group’s operating profit also fell 97.8 percent YoY to Rs.19.7 million.

The group’s higher-margin consumer goods business saw its revenue declining to Rs.4.6 billion in 1Q20, from Rs.5.4 billion in 1Q19. The segment’s operating profit fell to Rs.16 million, from Rs.569.3 million, while the earnings fell to Rs.38.6 million, from Rs.464.9 million.

“During the quarter, both our consumer businesses have been impacted by market wide weak consumer sentiment and baseless ethnically divisive attacks on our business and brands,” Hemas Group CEO Steven Enderby said.

He said the segment’s personal care products and over-the-counter products of the group’s pharmaceutical making and marketing subsidiary Morison PLC moved slowly during the quarter, in response to the general slowdown in the economy.

The group’s stationery business carried out by Atlas Axilia was hit by the difficult trading conditions followed by the Easter Sunday attacks carried out by the Islamist extremists. 
The group’s personal care business in Bangladesh recorded a 7.4 percent YoY increase in revenue, following the relaunch of Kumarika in May. 

“However, profitability still remains a challenge due to the heavy marketing spend post-launch,” Enderby said.

Meanwhile, the group’s lower-margin healthcare business reported a revenue of Rs.6.9 billion for 1Q20, against Rs.6.4 billion in 1Q19. The operating profit of the segment however fell to Rs.379.8 million, from Rs.498.1 million, while the segment earnings fell to Rs.232.4 million, from Rs.331.3 million.

Enderby said the subdued performance was due to the depressed profits at Morison’s and Hemas Hospitals. The group operates two hospitals in Wattala and Thalawathugoda.
The group’s leisure, travel and aviation business was sharply hit by the Easter Sunday bombings with revenues declining to Rs.687.2 million in 1Q20, from Rs.792.5 million in 1Q19. The segment saw its operating losses widening to Rs.126.9 million, from RS.68.2 million.

The operating profit of the group’s logistics operations also fell to Rs.120.2 million in 1Q20, from Rs.216.6 million on a revenue of Rs.671.6 million, down from Rs.724.3 million.
“This is mainly attributable to the delays in the new Spectra distribution centre ramp-up plans. Additionally, the segment profitability is impacted by the increased depreciation and finance costs resulting from the new facility,” Enderby said.

Meanwhile, Hemas said it divested its full interest in N*able, a technology services company operated under the group subsidiary Vishwa BPO (Private) Limited, for a consideration of Rs.450 million during the quarter under review, continuing with its strategy to focus on its core businesses. 

“N*able recorded a net loss of Rs.163.6 million for the quarter. The loss from the sale of approximately Rs.114 million will impact our 2Q financials,” Enderby said. 

The group performance was also impacted by a number of one-offs totalling Rs.130 million, including a charge from the adoption of SLFRS 16. The group also incurred a dividend tax charge of Rs.278 million following the upstreaming of dividends to pay final dividend and redeem listed debenture.

While praising the hard work of the group’s employees in these trying times, Enderby said they are working together to continue the recovery seen in the aftermath of the Easter attacks.
“We are working together to continue the recovery we have seen over the last two months, as we target a return to normal levels of business activity,” he said. 
The Esufally family has a 61 percent stake in Hemas through various investment vehicles. 

Norway’s giant wealth fund, operating under its central bank, Norges Bank, has a 2.99 percent stake in Hemas. Franklin Templeton Fund also has an 8.33 percent stake in Hemas.