The variance between top line growth and decline in earnings is explained by sharp variations in performance of the different sectors within the Group.
The FMCG sector performed well during the first quarter registering a revenue of Rs. 2.9Bn, a strong growth in comparison to last year. All categories contributed positively. Our Bangladesh operation recorded significant growth on account of the higher sales generated from our hair care segment. The multiple re-launches that took place during 2013/14 financial year have started to deliver results and operating profits have grown in line with sales.
The Healthcare sector registered a revenue of Rs. 3.0Bn, a growth of 9% driven by the strong performance of our hospitals. The Pharmaceuticals business faced weak market conditions during the quarter in review impacting sales and resulting in low growth. In these difficult trading conditions we retained our industry leadership position with a market share of 21.05% (Source: IMS). The Hospitals business performed well with overall revenue growing by 42% over last year. The revenue growth was driven by the notable performance of our Wattala Hospital along with the improving performance of Thalawathugoda Hospital, which completed its first year in operations during the quarter under review.
Our newest addition, J. L. Morison experienced an 8% drop in sales due to production being disrupted by a machine breakdown, which resulted in the closure of the manufacturing plant for several weeks. The plant is now back in its full production and we used this period to upgrade the factory. On a positive note, the distributed pharmaceuticals segment showed growth against the previous year’s turnover.
Our Leisure sector posted a revenue of Rs. 515Mn, a growth of 34% over the last year. Revenue growth was driven by our Hotels business which recorded a topline of Rs. 287Mn, a growth of 78%. However, last year’s numbers were impacted by the partial closure of Club Hotel Dolphin and Hotel Sigiriya for refurbishment during the corresponding period. Hotels enjoyed a healthy occupancy rate of 70%, a significant improvement over the last year. The sector closed the quarter on a positive note registering a profit before tax of Rs. 11Mn an improvement from its last year’s loss during the same period.
The Transportation sector experienced a strong performance with turnover growing by 19% to Rs. 334Mn over last year mainly due to top-line growth in the logistics segment, while earnings grew by 13% to Rs.99Mn. The maritime segment saw an increase in earnings arising out of the joint venture with Far Shipping Agency, while operations at the new container depot were a significant contributor towards the topline growth of the sector.
During the quarter, the turnover of the Power sector experienced a dip due to the low rainfall experienced at all five of its power plants and as a result, the accumulated power generation reduced to 7.6Mn Kwh, a 42% drop over the last year. With the introduction of SLFRS 11, the equity method has been adopted in accounting for Heladhanavi, thermal power plant. The power sector loss is mainly due to the heat rate reserve for Heladhanavi being charged to the income statement from this quarter onwards. The power sector overall earnings declined by Rs. 128Mn compared to last year.
N-Able, our IT solutions business, had a difficult quarter with the delay in finalization of key contracts resulting in a loss of Rs. 34Mn despite revenue being up by 14% compared to the last year.
The strong performance of our healthcare, personal care, leisure and transportation businesses is encouraging in tough market conditions and these have driven good revenue growth. However the plant closure at J.L. Morison, poor rainfall impacting our mini hydro power plants and the charging of the heat rate reserve at our thermal plant and weak results of N-able have been a drag on profits resulting a 12% decline in Group Profit After Tax.
The team continue to work hard to improve the profit performance of the Group. J.L. Morison is now back on track, however the thermal power plant coming to the end of its power purchase agreement will continue to impact financial performance.
Steven Enderby - CEO
