Hemas eyeing India, Pak for investments

Hemas Holdings, restricted by growth constraints due to the conflict and delayed peace, says it’s eyeing investments in the region (India, Pakistan or Bangladesh) in the food marketing and hotel business to mitigate the uncertainty in doing business here.

“Like most big groups we are looking overseas because there is a problem in growing here due to the uncertainty,” said Abbas Esufally, a group director.

In its first quarter 2007-08 report, the group said the outlook (for business) in the next July to September quarter remains conservative “with no clear solution in sight with regard to the cessation of hostilities or stabilization of economic fundamentals.” It’s Director/Chief Executive Officer Husein Esufally, in his statement announcing the group’s results, said they were looking at mitigating the country risk by exploring opportunities to take the FMCG (food marketing consumer group) and leisure business regional and develop regional expansion in the transport sector.

The group recorded a turnover of Rs 3.13 billion for the first quarter of the financial year, up 20% from the 2006-07 year.

Operating margins however eased to 12% mainly due to higher input costs at FMCG along with an increase in establishment overheads. Finance costs for the quarter were Rs 80.4 million while the effective tax rate decreased to 18% on account of investment relief benefits. “As a result a 3% drop in pre-tax profit has been translated into a 6% increase in post tax profits, to Rs 229.6 million,” the report said.

CEO Husein Esufally said there was a slow down in industry growth at FMCG with the Personal Care category registering a value growth of 7% during the first 5 months of calendar 2007.

Turnover grew faster than the market by 22% to Rs 1,018 million although profits declined by 3% largely on account of higher input costs which were not passed on in full to the consumer. The sector is focusing on proactive cost management with a view to minimizing the impact of the increasing input costs on consumers, the report said.

The Healthcare sector performance was below expectation with a sluggish April holding back turnover for the quarter to Rs 689 million, a growth of 6% growth over the corresponding quarter of last year. Profits were up by 14% to Rs 31.3 million.

“The Leisure sector has, as expected, fared below potential due to the security situation. Pursuant to our decision to postpone the repositioning of Serendib, the hotel has been reintroduced to the market in its original state and will open for operations for the winter season. Our destination management company has focused on improving productivity during this difficult period and has developed an integrated booking solution which will come on stream in August this year,” the report said.

The Transportation sector closed with a profit for the quarter of Rs 26.9 million, a 31% increase over the corresponding period last year.

During the quarter, the closure of the airport for night flights had a significant impact on the company’s GSA operations with both Emirates and Malaysian Airlines reducing frequencies.