Hayleys PLC: Turnover high but staggering 91% drop in post-tax profits
View(s):Is Hayleys, one of Sri Lanka’s largest, listed conglomerates, going through a bad patch?
These questions and concerns were raised by investors and analysts after the group released its latest end June 2017 quarter results which shows that while revenue has increased to a commendable Rs. 29 billion against Rs.24 billion in the same June 2016 quarter, the post-tax results reflect a different story.
Consolidated post-tax profits of the group, as detailed in the accounts available on the Colombo Stock Exchange (CSE) website, is reported at Rs. 61.4 million, a staggering drop of 91 per cent from Rs. 650 million in the same 2016 quarter.
“I can’t fathom how profits can fall so sharply against such high turnover. It’s a mystery to me or there must be some explanation,” one minority shareholder at Hayleys queried. Analysts also said they were concerned about the health of the company.
Other figures in the unaudited accounts show that company revenue for the assessment periods (third quarter ending June 2017 against the quarter ending June 2016) rose to Rs. 96 million against Rs. 85 million. Gross profit at group level was Rs. 5.89 billion vs Rs. 5.37 billion while profit before tax was Rs.407.7 million vs Rs. 1.0 billion (June 2016), a 61 per cent drop.
Gross profit at company level was Rs. 39.6 million vs Rs. 38.5 million while pre-tax profit was Rs. 49.8 million vs Rs.140.4 million, a 64 per cent drop. Profit after tax at company level was reported at Rs. 49.9 million vs Rs.139.7 million.
Administrative costs were reported at Rs. 3.7 billion vs Rs. 3.1 billion, the unaudited accounts show.
The main revenue earners were transportation and logistics with Rs. 7.2 billion, hand protection at Rs. 4 billion, plantations at Rs. 3.5 billion and purification products at Rs. 3.3 billion.
In terms of shareholdings, the companies and related-companies of Dhammika Perera, Hayleys non-executive Co-Chairman, have a majority stake of 50.44 per cent while the D. S. Jayasundera Trust is the second largest stakeholder with 11.60 per cent following by the EPF with 5.04 per cent.
The board of directors comprises Messrs Mohan Pandithage (Chairman/CEO), Dhammika Perera (Co-Chairman), Rizvi Zaheed, Sarath Ganegoda, Rajitha Kariyawasan, Dr. Harsha Cabral, Dr. Mahesha Ranasoma, Lalin Samarawickrama, Ruwan Waidyaratne, Hisham Jamaldeen, Aravinda Perera and Noel Joseph.
Meanwhile a media announcement by Hayleys issued on Wednesday says that: “Backed by stronger performance of the transportation and logistics sector the Hayleys Group recorded a 21 per cent Year-on-Year (YoY) improvement in topline up to Rs. 29.2 billion during the three months to 30 June 2017 (1QFY18). Despite the improved revenue, it was a challenging quarter for the Group, during which Profits Before Tax (PBT) contracted 61 per cent YoY down to Rs. 407.7 million.”
Hayleys Chairman Mr. Pandithage was quoted as saying that despite lower profits during the first quarter, “we remain confident that group profits will rebound over the coming quarters as multiple strategic investments made over the recent past begin to generate returns and contribute positively towards group profitability.”
He said: “In particular, we note with satisfaction the consistently positive growth displayed by our transportation and logistics segment, represented by Hayleys Advantis, and the positive turn-around recorded within the plantations sector as a result of favourable market conditions.”