Hemas sustains growth momentum

Hemas did well in difficult conditions, delivering record profits and continuing to create exceptional value to shareholders, said CEO of the company Husein Esufally commenting on the 2004 performance.

He said despite various challenges, the company has been able to sustain its growth momentum with the Group recording a revenue of Rs. 8.8 billion, and a net profit of Rs. 804 million, reflecting a top-line growth of 35.7 per cent and a bottom-line growth of 31.3 per cent.

"For the third year in succession, we have been able to deliver returns on shareholders' funds of greater than 25 per cent, on a fast growing equity base.

Our emphasis on sustainable earnings as the key driver of shareholder value ensures that bottom-line focus is not compromised when growth is being pursued," Esufally said.

During the year under review, Hemas share price increased by 23.5 per cent, from Rs. 88.25 to Rs. 109. When dividend are taken into account, this reflects an overall return of 26.9 per cent. Investors who purchased Hemas shares at the initial public offer and held till the year and, have made a total return of 129 per cent.

The FMCG Sector, which accounts for 33 per cent of Group revenue and 44 per cent of Group profits, saw its turnover decline marginally.

However its core branded business performed well, under difficult conditions, maintaining its market share intact. Due to improved profitability, as a result of a favourable sales mix and careful monitoring of expenses, the sector has recorded a healthy profit growth.

During the year, the FMCG sector consolidated its position in its existing market segments through new products and brand re-launches, while entering allied segments through brand acquisitions and takeovers. In August 2004, the sector exited its distribution agreement with Proctor and Gamble due to increased conflicts within the product portfolio which were incompatible with its future growth strategy.

The Healthcare sector has shown excellent growth in both turnover and profits during the year, and was able to reinforce its leadership position in the private pharmaceutical market, closing the year with a market share of 15.8 per cent. The sector was able to attract the agency of Bristol Mayers Squibb (BMS) to its portfolio of principals, which currently amounts to more than 35. In its quest to become an industry leader, the sector has started venturing into new areas in healthcare, in addition to its mainstream business of pharmaceutical distribution.

Hemas Transportation sector which consists of airline representation, travel agency business and freight forwarding, recorded a healthy growth in profits, in an industry which continues to be increasingly competitive.

For the nine months ending December 2004 the leisure sector, which consists of destination management, travel centre operations and hotels, was seeing an excellent growth, but consequent to the tsunami its profits were washed away during the last quarter of the financial year.

"We perceive the setback due to the tsunami to be a short-term phenomenon, and we are in the process of completing our blueprint for the leisure sector strategy in view of the long-term growth prospects of this sector," Esufally said.

"After a period of mediocre performance, the apparel business showed much improved results with the management restructuring that took place in August 2004. The search for a strategic partner was successfully concluded in March this year when 70 per cent of the business was acquired by The Fielding Group, a UK-based apparel supplier".

"We believe this strategic move would help the business grow faster as a result of wider exposure to international buyers, technical expertise and increased focus", he said.