Hayleys MGT goes for Rs. 914 m Rights Issue

Tuesday, 14 February 2012 00:48 - - {{hitsCtrl.values.hits}}

Hayleys MGT Knitting Mills (MGT) yesterday announced plans to raise Rs. 914 million via a 2 for 1 Rights Issue at Rs. 9 per share.

Subject to shareholder and regulatory approvals, funds raised from the Rights Issue will be utilised to strengthen the company’s balance sheet; invest in equipment to manufacture higher value fabric; invest on energy saving initiatives and upgrade the Enterprise Resource Planning (ERP) system to augment Management Information System (MIS).

At present the number of Hayleys MGT shares in issue is 50.78 million and the Rights will offer 101.56 million new shares.

Hayleys Plc together with related parties owns slightly over a 60% stake in the venture, whilst among other major shareholders are EPF (8%), MAS Holdings (6%), Equity Investments Lanka Ltd. (5%).

Hayleys MGT share yesterday closed 60 cents lower at Rs. 19.60 after touching an intra-day high of Rs. 20.

The company recently announced a net loss of Rs. 514.8 million for the nine months of FY12, lower by 9% over the loss a year earlier. Loss in the third quarter was Rs. 156.7 million, down by 75% from the Rs. 627 million loss in third quarter of FY11. Revenue was down by 18% to Rs. 4.2 billion in the FY12 nine months and by 26% to Rs. 1.1 billion in the third quarter.

Cost of sales fell 11% to Rs. 4.015 million and gross profit declined 66% to Rs. 249 million. Distribution costs rose 6% to Rs. 57 million and administration expenses fell 50% to Rs. 587 million. Financing cost fell 4% to Rs. 105 million and profit before tax dropped 16% to Rs. 501 million.

In 2010/11 turnover of $ 58.3 million reflected an increase of 17% over the corresponding amount of the previous year. The volume too increased from 8,537 tons to 9,139 tons. The main contributor to the company’s turnover for the year under review was jersey fabric. The turnover generated from polar fleece fabric increased to 19% from 17% during this year. Contribution from interlock increased to 16 % from 13 %. Rib decreased from 20% to 11%.

Last year Hayleys MGT suffered a Rs. 800 million loss after the company found a fraud following discrepancy between value of physical balance of inventories and that in the financial records. Furthermore net realisable value of certain categories of inventories were lower than that of the stated weighted average cost and trade receivables were overstated as some credit notes due had not been recorded.

The net negative impact of the above on the profit of the company in 2010/11 was $ 6.5 million or over Rs. 650 million.

Following a forensic audit, the findings warranted a criminal investigation, which is being carried out.