Diversified blue chip Hemas Holdings PLC stated that the group has initiated cost- cutting and cash conservation measures in order to protect business amid coronavirus pandemic.

The measures include:  freezing all discretionary expenditure, capital expenditure, recruitment and driving an efficiency program across the group.

In a disclosure to CSE, Hemas Group CEO Steven Enderby stated that each of their businesses are working through a detailed plan on cash conservation and cost containment and they are also rebuilding demand and supply of key products and services.

Full disclosure as follows;

Impact of Covid-19 pandemic on Hemas Holdings PLC and its subsidiaries

We wish to inform you that subsequent to the outbreak of Covid-19, the Company and its subsidiaries have taken appropriate measures including, engaging high quality medical and public health advice, social distancing, provision of protective equipment and working from home to safeguard the health of all our employees and ensure compliance with various directives issued by the Government of Sri Lanka (GoSL). The health and safety of our staff is critical while we also recognize the need for us to continue operations due to the important role we play in the healthcare of the nation.

To date the overall impact of the pandemic on the Group revenues and profitability is negative, both in the last few weeks of FY 19/20 and continuing on to FY 20/21. Cost cutting and cash conservation measures to protect the business have already been initiated. We have deferred capital expenditure and discretionary spending and instituted salary cuts at the senior levels in the Group and in businesses with very low revenues. Each business is working through a detailed plan on cash conservation and cost containment. We are also rebuilding demand and supply of key products and services. The impact of the pandemic on our individual businesses is varied and best addressed through an assessment of the impact on each of our major businesses.

Healthcare - Our healthcare sector contributes approximately 54% to Group revenue.

Our largest business, pharmaceutical distribution is operating at normal levels. While there are many logistical challenges, the team have done an exceptional job in ensuring pharmaceuticals are available across the country. To date we have faced no major supply shortages and hold adequate stock to cover demand. Our e-commerce venture in online prescription fulfillment, Healthnet, is experiencing a significant spike in demand.

Morisons, the Group’s pharmaceutical manufacturing arm, has operated at a reduced level. Current production is focused on meeting the demand from the Ministry of Health for essential pharmaceuticals. The new manufacturing facility at Homagama will be delayed. While we are at an advanced stage of completion, in line with all major construction projects, the project is now on hold.

Our Hospitals continue to operate 24/7 offering high quality healthcare. However, they have experienced a decline in the patient footfall and elective surgeries. There is now a surge in demand for online consultations, home care services and medicine delivery. Both Thalawathugoda and Wattala hospitals follow stringent protocols and processes guided by WHO and MOH. The hospitals are incurring increased costs as a result of the requirements for additional protective equipment and the adoption of best in class safety protocols.

Consumer - Our consumer sector accounts for approximately 39% of Group revenue.

Home & Personal care demand initially declined due to restricted movement preventing supplies from reaching distributors and retailers, and customers being unable to access stores. There is now a pick-up in demand through modern trade and various e-commerce channels while the general trade has limited and intermittent opening hours where curfew is lifted. To assist in the national effort to limit the spread of the virus, our focus is on producing hygiene products including a new hand-sanitizer range under our health and hygiene brand “Shield”.

Revenue contribution from Atlas was disrupted with schools being closed from mid-March. The impact on group revenue is relatively small due to this period being off season. Similar to Home & Personal Care, ecommerce sales at Atlas are emerging.

Logistics and Maritime – Our Mobility sector accounts for 5% of the total Group revenue.

Slowdown in the transshipment volumes and movement in the export sector coupled with import restrictions have resulted in depressed revenues in the maritime segment. However, our logistics operations are nearing normal level of activity after initial challenges in operating with minimum workforce. There is increased demand for logistic support from clients engaged in food and pharmaceutical supplies.

Leisure - Hotels contribute 3% to our total group revenue.

The impact of the Covid-19 pandemic has been most significant in our Hotel segment with zero or minimum occupancy due to social distancing requirements, travel disruptions/restrictions, and quarantine requirements from the start of the lockdown. However, the impact to the Group was reduced due to the divestment of our travel and aviation segment during March FY 19/20.

Social Impact

Since the beginning of this crisis, we have made substantial efforts to contribute to the communities where we operate and society more widely. Atlas engineering team developed an Automated Guided Vehicle for use in Government Hospitals treating Covid-19 patients and converted its school bag manufacturing plant to produce face masks to support the Sri Lanka Army. Club Hotel Dolphin is being utilized as a quarantine centre by the Government.

Future Outlook

The impact of the pandemic on Sri Lanka’s economy and global demand and supply cannot be predicted at this time. The duration of the lockdown is uncertain and the recovery period of key industries most likely to take at least several months. Hence, the overall future impact on the operations of the Company is not immediately predictable.

There are also multiple new risks that have emerged including increased exchange rate volatility, foreign currency availability and import restrictions.

Our businesses focus primarily on the Sri Lankan consumer and healthcare sectors providing essential healthcare products and services and day to day fast moving, mass market consumer goods. As such, we anticipate that demand for our products and services will recover relatively quickly from current levels. It is not possible at this time to predict the exact timing or extent of recovery.

Conclusion

As a team, we remain as committed as ever to meet the consumer and healthcare needs of the nation. We will play our part in driving national recovery through building on our exceptional product range and services with new innovations to drive a healthier living Sri Lanka.