Investors toast Hayleys FY12 results with share price up Rs. 16 - Record profit fuelled by Rs. ...
Record profit fuelled by Rs. 2.3 b in capital gains; core businesses post recovery with 23% pre-tax profit growth
Hayleys Plc share price on Friday produced one of its highest day gains of Rs. 16 as investors toasted record earnings in FY2012 largely fuelled by Rs. 2.3 billion in capital gains but its core businesses too posting strong rebound.
Given lacklustre market, Hayleys share touched an intra-week low of Rs. 348.70 last week but on Friday it gained by Rs. 16 to close at Rs. 365, the highest for the week also. This was a direct response to Hayleys announcing its best ever results in 134-year history – a pre-tax profit of Rs. 4.8 billion and a post-tax profit of Rs. 3.8 billion whilst net profit attributable to equity holders was up 269% to Rs. 2.5 billion.
Whilst Rs. 2.3 billion capital gains bolstered results (group companies of Hayleys disposed 6,874,584 ordinary shares in Hayleys and the gain on disposal was Rs. 2.19 billion), the diversified blue chip’s leading sectors posted profits with some bouncing from losses. Profit before tax from operations excluding capital gains reflected a growth of 23%.
Under Hayleys’ global markets and manufacturing segment, hand protection produced a Rs. 2 billion profit as against Rs. 454.6 million in FY11 whilst purification products contributed Rs. 806.6 million, up from Rs. 643 million. Fibre returned to profitability with a positive Rs. 163 in comparison to a loss of Rs. 122.7 million whilst construction materials contribution was Rs. 179.9 million, up from Rs. 57 million in FY11. Textiles remain biggest setback for Hayleys with a loss of Rs. 741 million, up from Rs. 678 million last year.
Under agriculture and plantations, agriculture improved its profits to Rs. 1.2 billion, from Rs. 721 million whilst plantations saw a decline to Rs. 526 million from Rs. 632 million.
Transportation and logistics segment increased its pre-tax profit to Rs. 596 million from Rs. 558 million and a similar improvement was recorded by consumer products to Rs. 279 million from Rs. 236 million.
Under power and energy, industry inputs saw a big leap in profitability to Rs. 160.7 million from Rs. 29 million in the previous year whilst power energy was down to Rs. 125 million from Rs. 182 million. Leisure and aviation, a new sector contributed Rs. 95 million, down from Rs. 124 million. Investments and services brought in Rs. 826 million up from Rs. 16.5 million. Except for textiles, industry inputs and power, all the other segments saw top line growth as well with hand protection producing Rs. 13.5 billion, up from Rs. 11.7 billion followed by purification products Rs. 8.4 billion, up from Rs. 6.3 billion.
During FY12 Hayleys Group also restructured its investments, under which initiative subsidiaries sold stakes in the parent. Additionally Hayleys PLC sold 33.3% shareholding in Hayleys Plantation Services Ltd to DPL Plantations Ltd, a wholly owned Subsidiary of Dipped Products PLC which is a Hayleys Group Company.
Hayleys PLC and its Group Companies acquired 51% of equity stake in Amaya Leisure PLC. Hayleys PLC acquired 12,785,861 shares (26.62%) of the Amaya Group whilst the remaining were purchased by Hayleys Group Companies. Post the acquisition Hayleys Plc made a mandatory offer to purchase the remaining shares of Amaya Leisure PLC from existing shareholders of which 6,580,353
Hayleys also invested Rs. 826 million in the troubled subsidiary Hayleys MGT Knitting Mills via a Rights Issue of two shares for every existing share at Rs. 9 each. The issue was fully subscribed with Hayleys accounting for 90.3% of the issue’s value whilst Group shareholding was only around 62%.
With its Agriculture, Hand Protection, Purification and Transportation sectors turning in particularly strong performances, the Group improved turnover to Rs 62.5 billion, growing by Rs 8.1 billion or 15 per cent over the 12 months ending 31 March 2012
Hayleys Chairman Mohan Pandithage said most sectors made positive contributions to the Group’s earnings in the concluded financial year. “It is satisfying to note that our performance is a reflection of a number of strategic actions taken in recent years,” he added.
“A fundamental change that was implemented in 2009 was the policy that Hayleys will focus on investments in which we have ownership and management control, and exit passive stakes. This was done to exercise more control over our income streams, and this approach is now reaping rewards.”
“Our broad strategy in recent years has been to drive innovation and value addition in our core businesses and strategically enter into new growth areas that have emerged in post war Sri Lanka,” Pandithage noted.
He said this was reflected in the Group’s performance in the year reviewed, with major contributions to earnings from the Hand Protection (32% of PBIT), Agriculture (19% of PBIT), Purification (13% of PBIT) and Transportation (9% of PBIT) sectors.
“In all our core business areas, we have mastered the business, grown organically and become leaders on the national as well as the global stage,” Pandithage said. “Hayleys has consciously taken strong positions in industries that have strong future growth potential based on long term economic and socio-political trends.”
“At the same time, the management is well aware that with a paradigm shift in the Sri Lankan economy since 2009, there are new growth areas in the economy that the Group ought to have exposure to. It is well established that the leisure sector will be a major growth area in Sri Lanka in the next decade,” he said, pointing out that the exposure of Hayleys to the leisure sector is holistic, ranging from hotel ownership, management, travel agency and tour operations.
The recent acquisition of the Amaya Group has already brought in significant earnings and also brings in synergies in resort management. With the refurbishment of the Continental Hotel, Hayleys will have a modern and diverse leisure portfolio, well positioned to take advantage of the impending tourism boom, Pandithage said.
Hayleys investments in wind power and mini-hydro power are also expected to add to the Group’s bottom line in years to come as renewable energy takes on ever increasing significance in a growing economy which demands energy, he said.
The Board of Directors of Hayleys PLC has proposed a dividend of Rs. 4 per share, payable in July 2012.
Deputy Chairman Dhammika Perera’s direct shareholding in Hayleys as at 31 March 2012 amounted to 45.09% whilst related party Vallibel One Plc also holds 2.42% stake.
The Board of Directors of Hayleys PLC comprises A.M. Pandithage (Chairman and Chief Executive), K.D.D. Perera (Deputy Chairman), M.R. Zaheed, J.A.G. Anandarajah, W.D.N.H. Perera, S.C. Ganegoda, H.S.R. Kariyawasan, Dr. Harsha Cabral PC, Dr. M. Ranasoma, M.D.S. Goonatileke, R.P. Pathirana and L.T. Samarawickrama.
