Hayleys’ investments spree under Dhammika tops Rs. 45 b in decade

Tuesday, 27 April 2021 01:02 -     - {{hitsCtrl.values.hits}}

Chairman Mohan Pandithage

Co-Chairman Dhammika Perera

  • Makes 32nd acquisition since 2010/’11, first in 2 years and biggest in 3 years
  • Pays Rs. 4 b to buy control of weft knitted fabric manufacturer for leading global brands, South Asia Textiles
  • Move as part of Hayleys Fabric’s strategic plan to expand capacity for higher value-added fabrics for exports by aligning with world-class tier 1 brands
  • Group already fulfils 5% of global demand for household and industrial gloves and is world’s largest producer of coconut shell-based activated carbon
  • Engaged in 12 industry sectors, value chains and communities, Hayleys accounts for approximately 3.2% of Sri Lanka’s export income
  • Group’s capital employed in past decade up by 361% to Rs. 186. 4 b

By Nisthar Cassim

Exports and service sectors-heavy blue chip conglomerate Hayleys Plc’s investment spree to expand businesses last week crossed the Rs. 45 billion mark since coming under Dhammika Perera’s empire a decade ago, reinforcing its sheer country and growth focus whilst harnessing global opportunities. 

The surpassing of Rs. 45 billion took place last week when Hayleys acquired control of South Asia Textiles Ltd. (SAT) for Rs. 4 billion or 2.5 times book value. It was the Hayley’s 32nd acquisition under the Chairmanship of veteran Mohan Pandithage and controlling shareholder and Co-Chairman Dhammika Perera. It was also the first acquisition in two years and the biggest in three years.

Against heavy odds and amid surprise and controversy, Dhammika Perera entered the 1878-founded Hayleys Plc in 2008/’09 followed by control in the 2011/’12 financial year. 

Company sources told the Daily FT that since then Hayleys has made 32 acquisitions with an investment of Rs. 45.14 billion (see table). The combined 100% investment value of these initiatives is Rs. 62.55 billion. 

The Rs. 45.14 billion figure excludes investments involving major expansions and acquisition of plant and machinery in the ordinary course of expanding respective businesses. 

The multinational Hayleys is internationally recognised as a leader in innovation, with manufacturing facilities in Indonesia, India and Thailand; marketing operations in Australia, India, Bangladesh, Italy, Japan, the Netherlands, UK and USA; and offering transportation and logistics solutions in the Maldives, Myanmar, India, Singapore, Indonesia and Malaysia. 

Engaged in 12 industry sectors, value chains and communities, the Group accounts for approximately 3.2% of Sri Lanka’s export income, and 3.6% of tea and 3.9% of rubber production. Hayleys Group directly employs 31,000 and a further 20,000 indirectly.

Serving over 10 million customers across five continents, the Group fulfils 5% of global demand for household and industrial gloves and is the world’s largest producer of coconut shell-based activated carbon. 

It is also Sri Lanka’s largest exporter of processed agricultural food and largest manufacturer and supplier of consumer durables apart from being a leader in Sri Lanka’s transportation and logistics.

Whilst Hayleys’ stellar full-year results for FY21 are pending, during the decade ended in the last financial year of 2020, Group revenue amounted to Rs. 210.3 billion up from Rs. 54.3 billion in FY11 reflecting a 14% compound annual growth rate. Non-current assets have grown by 16% during the 10 years to Rs. 130.6 billion and current assets by 17% to Rs. 117.6 billion. Borrowings had grown by 22% to Rs. 123.5 billion and capital employed shot up by 17% to Rs. 186. 4 billion from Rs. 40.3 billion in FY11.

Hayleys’ previous biggest investment was when it acquired control of Sri Lanka Shipping Ltd. for Rs. 5.3 billion, preceded by the mega buy of Singer Sri Lanka for Rs. 16 billion in FY 2018. The former purchase triggered a slew of related investments including Rs. 868 million to acquire the operations of American President Lines (APL).

The Dhammika and Mohan duo used a mix of sector-related Hayleys subsidiaries to make respective acquisitions. 

Reinforcing its confidence in the textile sector, the subsidiary Hayleys Fabric last week paid Rs. 4 billion to buy a 99% stake in South Asia Textiles Ltd. (SAT) from Ambeon Holdings Plc. 

“This acquisition supports Hayleys Fabric Plc’s strategic plan to expand capacity for higher value-added fabrics for exports by aligning with world-class tier 1 brands under its portfolio of customers,” Hayleys Fabric said.

A Board of Investment-certified company operating in Sri Lanka since 2004, SAT specialises in producing exceptional quality weft knitted fabric for leading global brands such as Victoria Secret, Next, Marks & Spencer, Tesco, Calvin Klein, Decathlon and Adidas.

Formerly Hayleys MGT Knitting Mills, Hayleys Fabric is a pioneer in weft knit fabric manufacture in Sri Lanka. It is presently recognised as a world-class fabric manufacturer with a high degree of innovative capabilities with its own brand, INNO. 

Hayleys Fabric PLC has the capability of delivering over three million metres of fabric per month. The product offering includes knitting, dyeing, printing, brushing, sueding and finishing. The product range includes single jersey, interlock, pique, rib, fleece and polar fleece, jacquard and flat knits, which are composed using pure and blend of cotton, polyester, viscose and modal yarns, in both solid colours and in printed form.

Since last year it has shifted focus towards sustainable innovations using recycled yarns from PET bottles collected from the shores of Sri Lanka and organic yarns to further align its operations to become a socially responsible, ethical and versatile commercial entity with a great degree of transparency.

The company works on a business model to establish strategic partnerships with its selected tier 1 customers such as L-Brands, Calzedonia, Nike, NEXT, Decathlon, PVH and Asics. 

Hayleys Fabric in the first nine months of FY21 reported pre-tax profit of Rs. 583 million, up 25% from a year earlier. Revenue grew by 11% to Rs. 11 billion. 

In the third quarter, top line growth was 24% to $ 3.8 billion whilst pre-tax profit saw a massive jump of 262% to Rs. 235 million. In FY20 revenue was Rs. 12.2 billion and pre-tax profit was Rs. 304 million and after-tax profit was Rs. 231 million. Its assets were Rs. 10.8 billion as at 31 December 2020.

SAT in FY20 achieved a revenue of Rs. 9.1 billion, as compared with a previous Rs. 8.3 billion, reflecting a growth rate of approximately 10.17% Year-on-Year (YoY), while reporting a Profit After Tax (PAT) of Rs. 23.2 million. As at end FY20, SATS had Rs. 6.2 billion in assets and 1,116 employees.

In the first nine months of FY21, Ambeon’s textile business had Rs. 6.3 billion in turnover, down from Rs. 7.4 billion a year earlier and suffered a loss of Rs. 417 million as against a profit of Rs. 191 million. Its assets amounted to Rs. 4.8 billion, down from Rs. 6.7 billion.