High interest cost on loan capital obtained by Hemas Holdings PLC for their new hospital and factory relocation projects had hurt the mid-year bottom line of the group which posted a profit of Rs.372.4 million during the six months ended September 30, 2008, down 8.3% from Rs.406.2 million a year earlier.

But revenue was up 18.1% to Rs.7.9 billion during the first half of the current financial year.

Mr. Husein Esufally, Director/CEO of Hemas said that the increase in finance cost by 28% to Rs.211.7 million during the half year had been expected given prevailing high interest rates.

Although their pre-tax profit was down 12% to Rs.454.7 million, tax efficiencies had resulted in the after-tax profit declining only 8% for the period under review.

He reported that operating margins during the first half of the current financial year had declined by 2% to Rs.658.6 million with planned maintenance cost in the power sector as well as a 29% increase in administrative cost being contributory factors.

The group had done well in its healthcare sector with the half-year turnover up 26% to Rs.1.82 billion and operating profits up 28% to Rs.122.3 million.

The soft opening of their 100-bed multi specialty hospital in Wattala had been concluded during the second quarter with the project completed within budget.

"The out-patient department including the emergency unit, laboratory, one operating theatre and a limited number of rooms are now fully operational and proving popular in the community," Esufally said.

"The formal opening of the hospital is scheduled for the end of this year."

Their southern Hospital in Galle, now undergoing renovation and extension, recorded a marginal loss in the six-month period.

He reported that healthcare segment’s profits, affected by high finance costs and higher taxes had recorded a 21% decline to Rs.50.7 million over the corresponding period the previous year.

Fast moving consumer goods (FMCG) had increased turnover 11% to Rs.2.3 billion during the first half with operating profits up 17% to Rs.282.8 million due to price adjustments as well as business efficiencies, Esufally said.

"Significantly, the sector grew sales volume during a period which saw declines in consumer consumption as a result of pressure on household spending," he noted.

"Our signature Baby care range, Baby Cheramy performed well retaining its position as market leader while its `Flowers’ range introduced last quarter was well received by the market."

Their Diva detergent powder had recorded high growth during the first half of the year achieving market leadership in volume terms while Clogard tooth paste, had recorded double digit growth.

Hemas Marketing had been ranked the second largest company in the country in terms of distribution reach in an AC Neilson report on the country’s FMCG market released in September.

Esufally said that this augured well for growth in this sector.

Their transportation sector too had done well with turnover up 25% to Rs.364.9 million with good performances by travel and aviation segments driven by an increase in both passenger sales and outbound tours.

In the leisure sector, Hemtours, the group’s destination management company, had been re-branded Diethelm Travel Sri Lanka, following a strategic partnership with the Diethelm Travel group. This means that Hemas is now a member of a network of travel offices based in nine countries in the Far East.

However, low tourist arrivals here meant a disappointing performance although an attributable profit of Rs.12.6 million had been posted mainly from non-operating income earned during the period.

In the power segment the company had seen a profit of Rs.61.7 million after-tax, down from Rs.149.3 million during the first half of the previous year. Esufally explained that turnover was up 18% to Rs.2.9 billion mainly as a result of passing on the effects of increased fuel cost. They had expended Rs.185 million on a planned overhaul and a turbine also had to be shut down for unscheduled repairs during the period under review.

During the second quarter Hemas had commissioned their first 2 MW hydro power plant at Giddawa which will begin generating revenue from the third quarter.

Esufally said that the second half of the current financial year would pose a number of challenges as the group gears to meet the implications of the global financial crisis.

"With major economies expected to go into recession we are mindful that productivity and efficiency are key to maintaining market share as disposable incomes contract," Esufally said.

"Prevailing high interest rates pose another set of challenges together with the implications of the depreciating rupee."

He concluded by saying that they have set in place a process to identify and mitigate their risks in this context and were confident they would maintain their growth momentum in line with strategic objectives.

Hemas has a stated capital of Rs.1.33 billion, a preference share capital of Rs.50 million, reserves of Rs.800.5 million and retained earnings of Rs.4.48 billion in their books. Interest bearing loans and borrowings were running at Rs.2.3 billion.

Group net assets per share had grown to Rs.65.73 from Rs.55.42 while for the company, net assets per share were up to Rs.43.29 from Rs.42.92.

The Hemas share had traded at a high of Rs.92.25 and a low of Rs.75 during the half year against a high of Rs.120 and a low of Rs.95 a year earlier.