Performance Review for the Three Months Ended 30^th June 2026

The Group recorded revenue of Rs. 28.77 Bn in Q1 FY27, an increase of 0.9% YoY, while gross profit margin improved by 0.2 percentage points to 30.4%. However, EBITDA declined by 14.1% to Rs. 2.26 Bn and Group earnings attributable to equity holders declined by 21.4% to Rs. 937 Mn. Revenue growth in Consumer Brands, Hospitals and Mobility was offset by a 3.8% decline in Life Sciences. The divergence between revenue and earnings was primarily caused by the rapid escalation of costs and the time required to recover these increases through pricing.

The quarter was shaped by heightened geopolitical uncertainty following the escalation of conflict in the Middle East. This resulted in sharp increases in fuel, petroleum-based raw materials, freight and insurance costs. In Sri Lanka, petrol and diesel prices were over 40% higher YoY, while the LKR depreciated by an average of 8% YoY and 5% QoQ. Average inflation of 5.9%, reaching 6.8% in June, also moderated consumption growth and increased direct and indirect operating costs.

While pricing and portfolio mix supported the gross profit margin, net operating costs increased by 9% YoY. Selling and distribution costs rose by 12.3% and accounted for more than half of the increase in operating costs, primarily reflecting higher logistics, fuel, freight and distribution-related expenses. In selected Consumer Brands categories, price increases were implemented selectively to protect volumes where cost pressures were expected to be temporary, resulting in the Group absorbing part of the increase during the quarter. In Life Sciences, the impact was more pronounced because pharmaceutical prices are regulated and price revisions did not immediately reflect the depreciation of the LKR and higher import costs. The resulting cost increases were therefore absorbed until regulatory approvals were received. In addition, LKR depreciation increased finance costs at the Leisure JV on its USD borrowings, further reducing Group earnings.

These pressures were partly mitigated by strong earnings growth in Mobility and higher finance income from the Group’s net cash position. Supply continuity was maintained throughout the quarter, although at a higher cost. Management’s immediate priorities are to restore cost recovery, protect volumes through calibrated pricing, accelerate productivity initiatives and improve profitability in Consumer Brands and Life Sciences. While energy and currency volatility are expected to persist, the Group remains focused on strengthening performance while executing its long-term growth priorities with discipline.

Financial and Operating Performance

Enhanced Reporting structure

Going forward, the Group's segmental reporting will be broken into four major categories: Consumer Brands, Life Sciences, Hospitals, and Mobility. The key change is the split of the former Healthcare segment into two distinct categories, namely, Hospitals and Life Sciences, reflecting the fundamental differences between these businesses and how they are managed.

The primary distinction is that Hospitals is a service-oriented business, while pharma distribution and manufacturing are product-based businesses. Hospitals is also a labour and asset-heavy business with a longer payback period relative to pharma distribution and manufacturing. These differences result in distinctly different capital allocation needs, margins, and growth drivers, and the reporting structure has been segregated accordingly to reflect management's view of the business units. This change has been implemented in line with our commitment to improving transparency, giving shareholders a better understanding of the business.