Financial Times

The Hemas Group said last week the current level of uncertainty (lower profits, etc) was worrying but it was optimistic that the various initiatives and investments being made would provide for healthy growth in the future.

Husein Esufally, Chief Executive Officer, in his review for the quarter ending June 30, said the company achieved revenues of Rs 2.5 billion and a profit of Rs 217 million, “reflecting a top-line growth of 12.3% and a bottom-line growth of 14.8% as against the corresponding period of the last financial year.”

Profit growth was mainly driven by the Healthcare Sector, which grew by 41%, and the turn around of the Leisure Sector, which posted a profit of Rs 6 million for the quarter.

He said FMCG (Fast Moving Consumer Goods) turnover has recorded a marginal increase whilst profits have declined by 6% due to lower margins, mainly as a result of higher input costs on account of a stronger US dollar. “Whilst most key brands have grown, high levels of competition and increasing inflationary pressures make for a challenging year ahead. The sector has progressed its plans to set up dedicated Foods/Homecare and International business divisions, and the necessary operating structure are mostly in place,” Esufally said.

Healthcare Sector posted a 16% growth in turnover and a 41% growth in profits. High profit growth was a result of successfully reducing the losses incurred in the own branding business, which is in the process of being scaled down. An important milestone for the Healthcare Sector was the signing of the joint venture agreement with Columbia Asia to construct and operate a 100 bed general hospital.

In the Leisure Sector, the first quarter yielded a profit of Rs 6 million against a loss of Rs 27 million during the corresponding period last year in the aftermath of the tsunami. Despite the modest recovery during the first quarter, resort occupancies are threatened by the current security situation, and as a result the short-term outlook remains somewhat uncertain. In June, Hemas signed a memorandum of understanding with Minor International Plc, a leading hotel owner and operator in Thailand, to explore the possibility of upgrading and repositioning the hotel properties that belong to the Serendib Group, a subsidiary of Hemas.

Transportation Sector revenues grew by 17% whilst profits declined by 37% over the corresponding period last year, mainly as a result of a decline in passenger volumes and margins. A key developmental priority for the sector is the regional expansion in Freight operations which have been taking place since the latter part of last year. ACX International, which was acquired in March 2005, has thus far performed up to its expectations, the report said.

“The Power Plant continues to operate satisfactorily although dispatch levels have been below last year, mainly due to ongoing maintenance work. As a result the profit for the quarter has declined marginally when compared to the first quarter of last year. Finance cost has reduced as a result of the company commencing repayment of the long term loans,” Esufally said.