Shareholders stunned by Hayleys Photo de-listing
The recent decision by Hayleys Photoprint Ltd of the Hayleys group, to delist from the stock exchange has taken its minority shareholders by complete surprise.
Just a few years back members of the public were enticed into buying shares in Hayleys Photoprint at an exorbitant price of Rs. 55 per share largely backed up by the goodwill and reputation of Hayleys.
Now these shareholders, who have been taken for real suckers, are being offered a paltry Rs. 16 per share, take it or leave it.
Hayleys Photoprint has operated profitably over the past years and has paid dividends in the range of 15% annually. It acquired the Fuji agency and got rid of its loss making Xerox agency. The company was in a better state than it was before it made its first public issue. If so, why the drop in price?
A tale of corporate greed would be a good answer. The company gave a bonus of 510,515 shares and a rights issue of 35,273 shares in 1991 and a further 200,000 shares in 1992 in addition to a rights issue of 550,000 shares at the par value of Rs. 10 totalling 1,300,788 shares, most of which were for the benefit of Hayleys Ltd, just prior to the public issue.
Having watered down the value of the shares, these were then off loaded onto the unsuspecting public at Rs. 55 per share, racking in an unconscionable profit of Hayleys Ltd at the expense of the unwary investing public.
The shares were sold to the public at Rs. 55 per share when the net assets were Rs. 11 whereas they are now being taken back at Rs. 16 when the net assets are worth Rs. 18. On this basis alone the price should actually be Rs. 90 per share.
The company accounts for the last quarter (very opportune timing) indicates a loss for the first time. This is caused by charging costs relating to re-organisation and the termination of employees although the company has not revealed this fact in its accounts.
The shares should have been evaluated prior to charging these costs since the re-organisation is being done for the benefit of Hayleys Ltd. Perhaps Hayleys Ltd should bear these costs.
Further the reason given for the de-listing of Hayleys Photoprint Ltd is on the grounds that Hayleys Ltd is being re-organised. Now why should Hayleys Photoprint Ltd, which is a separate company, be de-listed because Hayleys Ltd is being re-organised. There is more to it than meets the eye.
Most companies in the share market have majority shareholders who are in a similar position to take over the entire control of a company after giving its public shareholder the same type of treatment.
What is the remedy for public investors while the Securities and Exchange Commission and the Colombo Stock Exchange turn a blind eye to these developments. Perhaps these bodies are not as independent as they should be.
- Disgusted investor
Should SLIM hold ad awards?
There seems to be some confusion of the role of advertising in marketing.
For over ten years the Sri Lanka Institute of Marketing (SLIM) has been holding these annual ad awards which end up in controversy. SLIM has deviated from its objectives, which is to "develop marketing as a business philosophy".
Instead, it is promoting the advertising industry. A person who calls himself a "marketer" cannot be confused regarding the role of advertising in marketing management. An advertisement cannot be judged on its creativity because what is creative to you is not creative to me as it is a subjective question.
An advertisement is only one element in the marketing communication mix and therefore there is no justification to judge it separately either for its beauty or "marketing effectiveness".
Any marketing textbook will give you these details. Yet, I find your article is quoting many authorities either justifying or suggesting modifications to the SLIM ad awards. The question one should ask oneself (if the person is a professional marketer) is, should SLIM hold this event at all?
For instance, the CLIO award of the USA is one award which judges world class advertisements but it is not held by a marketing institution. The submission rules are given by the organisers who are an independent institution.
Apparently, officials of SLIM are not aware of basic principles of marketing. They should start reading some textbooks. The matter is very urgent because SLIM has been actively reducing the stature of marketing as a profession in this country, with this annual as awards event.
As this has happened year after year, the question arises about the professional quality of marketers. Perhaps SLIM is one marketing institution in the world which offers a playing field for advertisers.
Somachandre Wijesuriya
114, Right Circular Road,
Jayanthipura
Battaramulla
Local CIMA for underprivileged students?
The cost of sitting for part 1 of the CIMA examination is very prohibitive inclusive of its tuition fees and is beyond the reach of working-class parents.
The country needs more accountants but considering the cost only children of affluent parents can afford it. The local institute could conduct a local examination called the Sri Lanka Institute of Management Accountants (SLIMA) and provide an opportunity to those who cannot afford the high fees to qualify as accountants. The Institute should ensure that very high standards are maintained in this local examination.
Such a local examination may not be internationally recognised but would provide an opportunity for middle-class students – unable to pay high fees - to qualify as accountants.
With many graduates out of employment, this would give them another opportunity to qualify in a profession where job opportunities are available.
Small businesses and industries, cooperative societies, CWE, government factories, tea factories, etc. would absorb locally-qualified accountants with decent wages.
What do you say CIMA? The ministries of education and commerce and trade should also consider this move.
K.A.S.L. Silva
Colombo
The plantation sector in the country, consisting mainly of mono-cropped large plantations and small holdings, originated during the colonial period with tea, rubber and coconut as the main crops. Out of the total land area, 26.7 percent (1,752,000 ha) is agricultural land. In 2000, 180,000, 158,000 and 439,000 ha came under tea, rubber and coconut respectively. Hence, the plantation sector covers approximately 44.4 percent of the total agricultural land of the country. Apart from the main tree crops mentioned oil palm, cocoa and some fruit crops, e.g. mango and rambutan, are also planted in small extents.
The tree crop sector contributes immensely to the social and economic development of the country. In 2000, the contribution to the national GDP was 2.6, 0.4 and 2.2 percent from the three sectors, respectively. Protection of the environment and creation of employment are the other benefits. Protecting the environment has become a key issue.
In 1901 the forest cover was 70 percent of the country, but by 1993 it had dwindled to 23.9 percent of dense forest and 6.9 percent of sparse and open forest.
Performance of tea and rubber
The rubber extent and annual production show a downward trend in the country. In the tea sector, however, there is a steady increase in both the extent and the annual production.
Since the rubber industry is contributing significantly towards the socio-economic development of the country whilst protecting the environment, if this downward trend in the extent and production continues the country will lose the benefits coming from this industry.
The decline in performance in the rubber sector of the country is due to poor prices and the resulting low investment on replanting and revenue areas. From 1995 to 2000 the average Colombo Auction price for rubber (RSS Grade 1) fell by 24 percent while tea prices for the same period gained by 88 percent. The daily labour wage has increased from Rs. 72.24 to Rs. 112.00 in the plantation sector during this period.
Little or no returns to the grower due to poor farm gate prices often results in poor agro-management like non-adoption of soil conservation, weeding, and fertiliser applications. Moreover, one cannot rule out growers either abandoning tapping or even over-exploiting trees to enhance yields under these circumstances. Adoption of such strategies when faced with low prices often leads to poor productivity levels.
It is interesting to note that during the period 1995-2000, the only year in which productivity levels of rubber increased over the previous year was 1996. It may be that relatively higher farm gate prices during 1995 and 1996 may have generated sufficient revenue to support improved agronomic practices in existing rubber revenue areas. Further, harvesting may have been undertaken in all revenue extents to take advantage of the higher prices prevailing. This also confirms that progress made in any industry is mainly price-driven. Further, it contradicts the argument put forward by a few that technology developed and recommended by our research institutes does not suit the current needs of the industry.
Alternate crops
It is evident that poor prices lead to poor productivity in commercial plantings due to curtailing of inputs. Further, it appears that the current scenario does not drive growers towards investing in the rubber industry. Therefore, rubber growers are looking into alternate crops such as tea, oil palm and timber species.
Environmental impacts
Replacing natural vegetation which is rich in biodiversity (over 200 species/0.25 ha) and biomass (400-450 tonnes/ha) and also efficient in soil, water and nutrient balancing and conservation with any plantation crop will have adverse effects on the environment. There is however, little information if any on the effect on the environment of changing from one plantation crop to another. In this context both socio-economic and ecological implications need to be considered.
Ideally plantation crops are established with adequate measures for soil conservation. Terracing, draining and leguminous covers are used to check soil erosion.
Conclusions
Naturally, investors will try to maximise the return on their investment. Therefore, among the different possibilities in the tree crop sector the most rewarding crop will be chosen for their investment. Social and environmental issues may not be very important concerns for the investors. Hence, future trends in the relative extents of these tree-crops in the country will be determined by prevailing farm-gate prices unless an artificial situation is created to discriminate against or favour a particular crop in relation to the other. This could happen, for example, if the Government decides to minimise adverse effects on the environment proved beyond doubt to be caused by a particular tree crop cultivated widely for economic reasons. A stable and reasonable farm-gate price for all commodities will boost the interest of growers in investing in all possible crops with equal confidence. In order to supplement the price of a particular commodity when market prices are low the government will need to build up a fund by adopting appropriate methods. Nevertheless, the fluctuating nature of commodity prices has inevitable adverse effects on the economic management of plantations. The ideal solution to this problem is for the investor to have a healthy mix of different tree crops in an estate. Processing will then need to be centralised rather than left to individual estates.
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