HHL.N0000 ( Hemas Holdings PLC)

Hemas Holdings is engaged in a business where profit margins can be kept high. Pharmaceuticals, FMCG,Hospitals are the areas where profit margins are kept high. Tourism , transportation are other areas concentrated. Hydro Power project was sold ACL and NDB in order to concentrate in the areas where it enjoy as " largest home grown Personal Care Business.

Beauty Soap Velvet, Baby Cheramy the baby care product, Clogard, Diva,Fems are among the leading branded products in FMCG sector where profit growth was 29.4%. Three hosptials at Wattala, Thalawatugoda and Galle have increased revenue by 34.9%.

Club Hotel Dolphin was closed for refurbishment.Anantara Peace Heaven Tangalle and Anantara Kalutara will generate revenue within this financial year..

It business N-able has increased revenue by 26% and profit by 144%

When compared with other diversified businesses revenue was lower but profit was higher than few others..

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Revenue and Profit has been continuously growing ..

As mentioned in many FMCG sector companies year under review will generate better results as disposable income has grown up after January 2015

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Dividend hunters may worry as less dividends paid compared to market price

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Nav 35,eps june .35

2015/16 Results

Year 2015/16 was not a good year for two big Holding companies, namely Carsons and Hayleys.

Yet companies which had focused on FMCG sector showed substantial growth during the same year, and Hemas has performed well during that period.

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Revenue has grown than the expected level shown by the linear line....

HHL was improving PAT and its represented in EPS

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Conglomerates often are not for dividend Hunters...

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2017/18

Hemas Holdings has increased its revenue to reach the highest ever but a  drop in PAT compared to last year.

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EPS of the year is lower than the previous year.

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In January 2018 HHL acquired Atlas Axillia, the stationery supplier for a consideration of LKR 5.7Bn

Thanks YK

Thanks.

Hemas to focus on specialised health care, lab services

ECONOMYNEXT - Hemas Holdings will be focusing on improving specialised health care services at its two remaining hospitals, following the sale of its hospital in Galle, and laboratory services, a Colombo Stock Exchange filing said.

Its two remaining hospitals, in Thalawathugoda and Wattala, have a combined capacity of 184 beds. It also has an islandwide network of 34 diagnostic laboratories.

Asiri Hospital Holdings Plc acquired Hemas Southern Hospitals (Private) Limited for 450 million rupees last Friday, increasing its hospitals to five.

Hemas Holdings’ stocks were up 5.40 rupees to 93.40 rupees when markets closed on Monday.

Asiri Hospital Holdings’ stocks were down 20 cents to 22.80 rupees. (COLOMBO, November 5 2018)

It seams Hemas shares getting attractive again on CSE. Even last couple of days direct foreign buying also towards Hemas.

Sri Lanka stationery maker Atlas in South East Asia push

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ECONOMYNEXT- Atlas Axilia, a top stationery manufacturer in Sri Lanka, is planning to grow exports to South East Asia, where it may also open a new plant, an official said.

"We are currently exporting to the Philippines, Bangladesh and the Maldives," Managing Director Asitha Samaraweera said.

"Currently, exports do not make up a large portion of our sales," he said.

"However, plans are underway to grow our export earnings four to five times."

"There is a big push to build up a substantial export business in South East Asia."

He said the firm has studied regional markets, and Atlas has an opportunity in countries such as Cambodia and Myanmmar.

As a stationery brand, opportunities arise for Atlas as countries grow their education spending, which is happening at a rapid pace in developing economies.

Atlas has an immediate plan to grow its local business and to resist an anti-Muslim boycott which it is caught up in, Samaraweera said.

Export plans would firm up over the next two to three years, he said.

"Due to tax reasons, we may even set up a factory outside, with the royalties coming in," he said.

D. S. Madanayake founded Atlas in 1959, when the market was dominated by imports, he said.

Atlas has managed to compete and build up a 50 percent market share in its product categories due to increasing production and reducing costs.

The price of the firm's popular pen Atlas Chooty has remained at 10 rupees since 1999, while productivity at its factories have grown 20 percent annually over the past 3 years.

In 2018, the Esufally family's  Hemas Group bought a 75.1 percent stake in the stationery firm, to build up its defensive cashflow across all economic cycles, due to patterns of education expenditure.

Hemas, which has a fast-moving consumer goods business focusing on personal healthcare and pharmaceuticals, has a distribution network in Bangladesh, Myanmmar and India.

Foreigners bought quantities around 150 even and now selling around 70.Should go up when selling stops

Hemas Holdings makes Rs426mn loss in June quarter

ECONOMYNEXT – Sri Lanka’s Hemas Holdings made a loss of 426 million rupees in the June 2019 quarter compared with profits of 554 million rupees a year ago as consumer demand fell after April’s suicide bombings and subsequent communal violence.

But a recovery in group businesses was under way, Hemas Holdings chief executive Steven Enderby told shareholders in a note accompanying interim accounts filed with the Colombo stock exchange.

Hemas Holdings posted a 71 cents loss per share for the June quarter. The share was trading at 77.50 rupees, down 40 cents or 0.5 percent in early trade Friday.

Group sales fell 2.3 percent to 13.2 billion rupees in the June 2019 quarter from a year ago.

Enderby said the fall in June quarter sales was mainly a result of the terrorist attacks of 21st April, “with the aftermath causing economic slowdown and difficult trading conditions.”

More than 250 people were killed in bombings of churches and hotels by Islamist extremists and subsequent violence against minority Muslims also affected business.

Enderby said the Hemas group leisure and travel business incurred a loss of 129 million rupees with the generally depressed economic environment also weakening performance across the group in particular at Morisons and N*able subsidiaries.

“We were also impacted by a number of one-offs totaling 130 million rupees including a charge from the adoption of SLFRS 16,” Enderby said, referring to a new accounting rule that brings leases hitherto held off-balance sheet, on-balance sheet.

Hemas group consumer sales were also affected by “baseless ethnically divisive attacks on our business and brands,” Enderby said, referring to a campaign by extremists to boycott Muslim-owned businesses.

“Many of these attacks appear designed to mislead the public and exacerbate already strained communal relationships,” he said.

“We continue our efforts to ensure everyone understands that building great Sri Lankan consumer and healthcare brands and services is an important component of the national economy generating employment and taxes, developing great suppliers and sales and distribution teams across the country, and ultimately driving the livelihoods of thousands of families.

”As our teams across the group work to ensure this message is understood, we are seeing a steady recovery in the performance of our consumer businesses from the lows of May,” Enderby said.

“There is ongoing improvement into Q2 as we push hard to return to normal business levels as quickly as possible.”
(COLOMBO, 09 August, 2019)

Hemas Holdings sells loss-making N*able unit

ECONOMYNEXT – Sri Lanka’s Hemas Holdings said it has sold a loss-making information technology unit, N*able (Pvt) Ltd., held by a subsidiary, for 450 million rupees.

N*able made a net loss of 163.6 million rupees in the June 2019 quarter, according to interim accounts filed with the stock exchange.

“In line with our strategy of focusing on our core businesses, in early Q2, we concluded the sale of our stake in N*able, our technology services business,” Hemas Holdings said in a not to the accounts.

The loss from the sale of about 114 million rupees will impact the Hemas group’s second quarter results, it said.

Vishwa BPO (Private) Limited, a subsidiary of Hemas Holdings PLC, divested its 100 percent stake in N*able on 12 July 2019.

Hemas Holdings’ Sri Lanka rating lifted to ‘AAA(lka)’ by Fitch

ECONMYNEXT – Fitch Ratings has raised the domestic rating of Sri Lanka’s Hemas Holdings to ‘AAA(lka)’ from ‘AA-(lka)’ in the wake of a re-caliberation of the local rating scale after downgrade of the sovereign rating, low borrowings and less volatile business segments.

“Hemas’ rating reflects its increasing exposure to defensive healthcare and consumer goods, while gradually exiting cyclical non-core sectors such as leisure,” the rating agency said.

“The rating also benefits from Hemas’ exceptionally strong balance sheet and high rating headroom before the economic downturn.”

Fitch said leverage would be 0.4 to 0.5 times compared to a threshold of 3.5 times for the current rating.

The rating agency said its healthcare segment would be protected from import controls as it had been listed as essential goods.

Sri Lanka runs into frequent balance of payments trouble and knee-jerk import controls as the country lacks a credible monetary framework. Sri Lanka has resisted a credible external anchor (peg) by operating a highly unstable discretionary peg called a ‘flexible’ exchange ate.

It has also avoided a credible domestic anchor by running a highly discretionary ‘flexible’ inflation targeting regime while also collecting (or losing) forex reserves through a peg.

National scale ratings are a risk-ranking of issuers in a particular market designed to help local investors differentiate risk.

National scales are not comparable with Fitch’s international ratings scales or with other countries’ national rating scales.

The full statement on Hemas is reproduced below.


KEY RATING DRIVERS

Hemas Holdings Plc

The revision of Hemas’ National Long-Term Rating reflects the recalibration of the Sri Lankan national scale ratings as well as our view that Hemas will maintain its leverage – defined as net debt/EBITDA – in line with a rating.

Hemas’ rating reflects its increasing exposure to defensive healthcare and consumer goods, while gradually exiting cyclical non-core sectors such as leisure.





The rating also benefits from Hemas’ exceptionally strong balance sheet and high rating headroom before the economic downturn. We estimate steady leverage of around 0.4x-0.5x in the financial year ended March 2020 (FY20) and FY21 compared with the 3.5x leverage threshold for the current rating.

Stable Healthcare Revenue: During COVID-19: We expect Hemas’ pharmaceutical sales to remain stable throughout FY21 due to defensive demand and the government classifying pharmaceutical imports as essential goods, even as it imposed restrictions on a wide range of other imports to preserve foreign exchange.

Hemas continued its distribution operations during the country’s lockdown starting in March through third-party pharmacies, delivery partners and its own delivery platform. The business also has adequate inventory, providing a buffer against any supply shortages although supplies have so far held up.

We expect Hemas to mitigate the margin pressure stemming from currency devaluation owing to its contractual arrangements with global suppliers, cost efficiencies and price revisions. The company’s domestic pharmaceutical-manufacturing business was disrupted in the early part of Sri Lanka’s lockdown due to social distancing requirements.

However, Hemas says production capacity utilisation is improving and should normalise with the lifting of the lockdown in early May. We expect demand for domestic pharmaceutical manufacturing to increase in the medium term as Sri Lanka seeks to reduce foreign-exchange outflows.





There is also increased demand for contract manufacturing on behalf of foreign pharma companies to help mitigate the risk stemming from domestic price controls on imported pharmaceuticals..

Consumer Revenue to Improve: Sales disruptions in Hemas’ consumer segment, which accounts for around 45% of group EBIT and is based mainly in Sri Lanka, have been limited across most product categories since the lockdown.

The closure of grocery stores nationwide in early FY21 affected Hemas’ customer reach, but stronger sales through supermarkets and online platforms mitigated the impact. We expect the distribution network to be fully operational by mid-2020 and sales to normalise from 2HFY21, assuming the country-wide lockdown will ease gradually from May.


We do not expect a significant weakening in demand for the consumer segment, despite slower economic activity, due to its essential nature and its products’ low ticket value.

The segment’s production facilities were closed or were operating at lower utilization levels due to social distancing for the most part of 1QFY21 but are operational at present, subject to social distancing constraints on production capacity.





The segment was able to manage the impact from closures as it had sufficient finished goods inventory Hemas’ Bangladesh operations will remain muted for most of FY21 as the product portfolio is less defensive.

Biggest Impact on Leisure: Hemas’ 300-room hotel chain would be the hardest hit segment from the pandemic due to the indefinite closing of Sri Lanka’s borders and global travel restrictions. Hotels currently generate minimal revenue, which is insufficient to cover the high fixed costs.

We expect a continued cash burn, even with a minimal cost structure, until tourism picks up, which could be at least 12 months away.

However, the impact on Hemas’ cash flow should be manageable as the sector accounts for less than 5% of consolidated revenue, and we expect its operating losses from hotels to lower the group EBIT margin by less than 100bp in FY21.

Margins to Fall in FY21: We expect Hemas’ EBIT margin to contract to 5.5% in FY21, from around 8% historically, amid lower sales and near-term cost pressures in the consumer segment and hospitals, and losses in leisure, mitigated by the company’s cost-cutting measures.

Cost-saving measures across the group include pay cuts to preserve cash. We expect margins to recover to historical levels from FY22, helped by a strong rebound in the consumer segment’s volume, improved capacity utilisation in hospitals and the logistics business, and a slow but gradual pick-up in leisure.


Low Leverage: We expect Hemas’ net debt/EBITDA to remain comfortably below 1.0x over the next two years (9MFY20: 0.9x) amid lower capex and dividends to preserve cash, despite our expectations of weak operating performance in FY21.

We expect Hemas’ cash flow from operations to cover its capacity expansion and dividends over the next few years without depending on external funding. The company says its medium-term expansion would focus mostly on its core businesses with the ability to leverage on the existing infrastructure without significant capital outlay.

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