Over-leveraged but not worried, says Hayleys

From left: The Kingsbury PLC Managing Director and Haleys PLC Executive Director Lalin Samarawickrama, Hayleys Advantis Managing Director and Hayleys PLC Executive Ruwan Waidyaratne, Group Chairman/Managing Director Mohan Pandithage, Hayleys Group Executive Director and Dipped Products Managing Director Sarath Ganegoda, , Hayleys Agriculture Ltd Managing Director and Hayleys PLC Executive Director Jayanthi Dharmasena and Hayleys Group Head of Human Resources, Legal and Corporate Communication & Sustainability Darshi Talpahewa

• Hayleys top executives say group has clear liquidity target which they are working to achieve 
• May consider disposing some of the underperforming assets to settle part of the debts
• Hayleys group, which has interests in 16 business sectors, accounts for 3.3% of Sri Lanka’s export earnings 

By Indika Sakalasooriya

Sri Lankan multinational Hayleys PLC, which accounts for 3.3 percent of the country’s export earnings and has business interests spanning over 16 sectors, says it is “not worried” about the debt pile it has accumulated as a result of its big-ticket acquisitions, particularly during the latter part of last year.

“We are over-leveraged at the moment but we are not worried,” Hayleys PLC Executive Director Sarath Ganegoda told a press briefing organized to mark the conglomerate’s 140-year journey in Colombo, last Friday. 

“We have a very clear target set in terms of liquidity. Our target is debt to EBITDA of not more than three times, and we are working towards it. Yes, we are overleveraged but we are not worried,” Ganegoda said. 

Two of the biggest buyouts by Hayleys were the acquisition of Sri Lanka Shipping Company for Rs.4.9 billion in August last year, and Singer (Sri Lanka) PLC in September for Rs.12.5 billion. 

Both acquisitions were largely debt-funded.

As a result, the group’s short-term interest bearing borrowings soared to a whopping Rs.43.9 billion as at December 31, 2017, compared to Rs.27.4 billion just three months ago.

As per the latest interim financial accounts of Hayleys for the quarter ended June 30, 2018 (1Q19), the short-term borrowings stood little unchanged from six months ago at Rs.43 billion from just Rs.23.4 billion 12 months ago.

The total current liabilities of the group as per the same quarterly accounts stood at Rs.105.09 billion compared to Rs.45.8 billion 12 months ago.

Under non-current liabilities the group had accumulated Rs.35 billion in interest bearing borrowings, up from Rs.20.5 billion 12 months ago. The total non-current liabilities as at June 30, 2018 stood at Rs.52.8 billion compared to Rs.28.9 billion 12 months ago.

Responding to a query as to whether Hayleys would consider divesting some of its assets to settle part of its loans that hamper its bottom line, Ganegoda said the group would not hesitate to dispose certain assets if they are not performing at optimal levels. 

 “We are talking about a company of 140-year history and we are very asset rich. The true value of some of the assets is not reflected in our balance sheet. 
Something we haven’t been looking at in the past is the return on assets. But now we are very closely looking at that,” he said. 

 The higher debt resulted in the group reporting a net finance cost of Rs.2.4 billion for 1Q19 against a net finance cost Rs.875.6 million a year ago, which in turn resulted in the group reporting a loss per share Rs.3.48 or a net loss of Rs.261.2 million for its ordinary shareholders.

However, the group saw its revenue surging 74 percent year-on-year (YoY) to Rs.50.6 billion and operating profits improving almost by three-fold to Rs.3.16 billion.
Hayleys became Sri Lanka’s first listed entity to achieve US $ 1 billion turnover in FY17/18, which the Group Chairman and Managing Director Mohan Pandithage said the group was hoping to achieve in 2020. 

The consolidation of revenues of Singer (Sri Lanka) PLC under group revenues helped Hayleys to achieve this feat much earlier.

The Singer acquisition marked the entry of Hayleys group into consumer durables and lifestyle business. Singer is the market leader in this segment and currently has a retail network of 432 outlets around the country. 

According to Pandithage, before the Singer acquisition, about 60 percent of the group’s revenue came from its export activities.

The group is very well known for local value addition to exports and some of its core export business segments, such as its coconut shell charcoal based activated carbon business under Haycarb and hand protection business under Dipped Products, have been pillars of strength for the group, which allowed it to expand into many other sectors.  

Other key business segments of Hayleys group, which employs around 33, 000 people, are transportation & logistics, textiles, agriculture, construction material, plantations and renewable energy. 

However, the bulk of the group revenue comes from its consumer & retail segment led by Singer and the transportation & logistics business led by Hayleys Advantis. 
According to Hayleys Advantis Managing Director Ruwan Waidyaratne, the company has 22 sea-going assets, which includes a tanker that provides bunkering services. 

Meanwhile, Hayleys is the largest manufacturer of aluminium extrusions in the country—a business segment it entered into in 2011 with the acquisition of Alumex Group.

Hayelys is also a leading agriculture innovator in the country and accounts for 43 percent of Sri Lanka’s fruit and vegetable exports.  

Further, the group, which owns two plantations companies and manages another, accounts for 3.6 percent of tea and 3.5 percent of rubber produced in the country. 
Hayleys group also supplies close to 2 percent of the country’s total renewable energy with an installed capacity of 50 MW of hydro, solar and wind power plants.
Under its leisure sector operations, Hayleys ventured into Maldives in 2016 by acquiring an island resort for US $ 23 million. The group operates number of resort hotels in Sri Lanka under Amaya brand and also owns and operates the city hotel The Kingsbury.

Little over 50 percent of the issued shares of Hayleys PLC is owned by business tycoon Dhammika Perera while Employees’ Provident Fund (EPF) also has 5 percent stake in the group being the third largest shareholder. 

Twin towers seek concessions 

The ambitious twin tower ‘World Export Centre’ project, announced by Hayleys PLC in the latter part of 2016, is awaiting government concessions for commencement.
“With the current cost of construction it is unlikely for us to commence work on this project unless some concessions are given.

 Until then it’s a no-go,” Hayleys PLC Executive Director and the director of the twin tower project Sarath Ganegoda said.

When queried as to what were the concessions expected, Ganegoda said, “The same concessions that were given to similar strategic projects.” 

The plan was to build two towers, each having 55 floors with a total 3.8 million square feet of commercial office space at the 6-acre freehold land where the group operations are currently located at Deans Road, Colombo 10.

The towers were to provide working space for 20,000 employees, with ample parking for over 2,000 vehicles, 3 floors of retail and office amenities. 

“The soil has been tested. Plans have been drawn and we got all the approvals. It’s ready to start. We have been waiting to see whether we’ll get some concessions to make the project viable,” Hayleys PLC Chairman Mohan Pandithage said.