Financial Times

Hayleys profit up 33 pct to Rs 1.4 bln, to sell troubled units
The Hayleys conglomerate has reported profit after tax grew 33 per cent to Rs 1.4 billion last year and announced it was revamping its business with plans to sell off loss-making entities.

The group took a Rs 200 million hit because of the sudden appreciation of the rupee against the dollar early this year after massive pledges of tsunami aid. The dividend payout for the year was Rs 262.5 million, an increase of 50 per cent over the previous year.

Hayleys Chairman Rajan Yatawara has said he is optimistic of achieving at least a 50 per cent improvement in group profits in the current financial year, given a stable security situation in the country and an exchange rate that is competitive with regional currencies.

Chief contributors to the conglomerate's performance in the year under review were the Dipped Products Group (DPL) comprising Hand Protection and Kelani Valley Plantations, the Maritime Holdings Group in the Transportation segment and Inland Marketing, a company statement said.

DPL, whose results have already been announced, improved its pre-tax profit by 57 per cent over the previous year, while Maritime Holdings generated impressive contributions from its shipping agency business, freight management, container depots and its recent venture into ship owning.

The group, which is believed to account for the second largest export volume from Sri Lanka, invested Rs 2.6 billion in the year under review in initiatives that will help consolidate and expand its core businesses and derive a higher share of profits from them. These "core" businesses have been reclassified for reporting from next year, on the basis of the end product or service and the market catered to, taking cognizance of size and potential and reflecting the group's competencies.

New benchmarks for performance and areas for "close focus" have also been developed, Yatawara said. "Loss making entities that do not fall comfortably into the matrix of activity defined will be sold. Strategic alliances with partners who are more competent will be sought for others," he disclosed. "We will exit from businesses that cannot grow adequately over the next three to five years, or which depend on providence or government policy change to achieve the required growth."

Established in 1878, the Hayleys Group comprises of local and international businesses in Coir, Hand Protection, Environment, Agriculture, Plantations, Transportation, Inland Marketing, Knitted Fabrics and Tourism.

According to the group's financial results presented to the Colombo Stock Exchange last week, pre-tax profit grew 37 per cent to Rs 1.9 billion on a turnover of Rs 19.4 billion, which reflected a growth of 25 per cent. Profit after tax attributable to the group, considered the "ultimate bottom line," grew 17.4 per cent to Rs 774 million.

"These results were achieved despite an adverse impact of more than Rs 300 million on turnover and profitability mostly in the final quarter of the year," the company statement said.

"The post-tsunami appreciation of the rupee against the dollar by seven percent cost the group Rs 200 million, donations and pledges toward tsunami relief cost another Rs 45 million, while Voluntary Retirement Schemes related to restructuring in two sectors of business cost Rs 56 million."

In keeping with the principle that profit retention beyond that needed to sustain the real value of equity has to be minimal, the group has proposed a final dividend of 17.5 per cent, bringing total dividends for the year to 35 per cent.

The group also floated a rights issue of one share for 10 held in the second half of 2004 and declared a bonus issue of four shares for every 11 in early 2005. Shareholder funds as at March 31, 2005 had grown 11.7 per cent to Rs 7.9 billion.

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