Political uncertainty and devaluation hurting business: Hemas
View(s):Sri Lanka’s business environment remains challenging with significant and ongoing currency devaluation through September and October and political uncertainty impacting the domestic economy which is the source of major business activity, a top conglomerate said this week.
In his review of the group’s performance for the six months ending September 2018, Hemas Holdings CEO Steven Enderby also said that while the group saw strong revenues in the first six months “we have had mixed performance in the profitability in our core sectors”.
In a media statement, he said the group recorded a consolidated revenue of Rs. 30 billion for the first six months ended September 30, a year-on-year (YoY) growth of 33 per cent driven by its recent acquisition of Atlas and the healthcare sector. Group operating profit stood at Rs.2.4 billion, a growth of 22.5 per cent over the previous financial year.
Operating profit growth resulted from stronger performance in the home and personal care segment in Sri Lanka and the contribution by Atlas. “Despite aggressive growth in revenue, we see a lag in operating profit primarily due to weaker performance at Morisons and N*able and margin compression at pharmaceutical distribution. The profit attributable to equity holders of the parent at Rs.1.5 billion is a YoY growth of 4.3 per cent,” he said.
During the period under review, the consumer business recorded a revenue of Rs.12.2 billion, indicating a YoY growth of 57.7 per cent. Revenue growth in the consumer sector excluding Atlas stood at 8.2 per cent.
“Our Bangladesh business still continues to experience challenges where intense competition in a weak market environment has resulted in revenue growth of only 1.4 per cent during the first six months of the financial year 2018-19. Profitability remains a challenge due to heavy marketing spend. Atlas performance has been on track in Q2 with revenues up by 12.4 per cent over the same period last year,” the statement added.
Consolidated healthcare sector revenue for the first six months under review stood at Rs.13.4 billion, a YoY increase of 27.3 per cent while operating profit and earnings indicated a decline of 8.3 per cent and 12.6 per cent.
Hemas Hospitals achieved an overall occupancy of 57 per cent, with revenues and profitability improving significantly during Q2 compared to the first three months of the financial year and over last year. The key driver of growth was the continued enhancement in surgical capability.
Hemas Leisure, Travel and Aviation (LTA) interests achieved revenues of Rs.1.8 billion, reflecting a growth of 16.7 per cent for the six months under consideration. Broader industry fundamentals remain favourable with tourist arrivals up during the year.
Serendib Hotels reported a 10.2 per cent growth in revenue due to an increase in average room rates and average occupancies across the group reaching 69 per cent against 64 per cent reported last year. During the review period, Anantara Peace Haven Tangalle had a satisfactory performance in occupancy.
“However, overall, profitability remained a challenge, declining by 12.5 per cent, owing to ongoing soft refurbishment at Avani Bentota and Hotel Sigiriya coupled with exchange losses attributed to forex loan financing at Anantara,” the statement added.
Hemas Logistics and Maritime recorded a revenue growth of 10.9 per cent over last year with revenues of Rs.1.4 billion. During the period in review, Port of Colombo was ranked as the world’s fastest growing port with a growth of 15.6 per cent in container handling during the first half of 2018, fueled by 20 per cent growth in transshipment volumes and profitability of the maritime sector increased as a result, the CEO said.