Hayleys Fabric doubles revenues in June after debt funded acquisition of South Asia Textiles

Filing its first set of consolidated interim financial statements for the three months ending June since acquiring South Asia Textiles Limited, Hayleys Fabric PLC doubled its revenues and nearly tripled its earnings in a sign that the combined entity is adding scale into its knit fabric making business with synergies being generated along its way.

Hayleys Fabric, the Hayleys group’s knit fabric maker reported revenues of Rs.5.81 billion in the April - June quarter, doubling from Rs.2.98 billion in the year earlier period when the company stood as a standalone entity until it acquired nearly 100 percent stake in the complementary weft knit fabric maker from Ambeon Holdings PLC in April 2021. 

Hayleys Fabric reported Rs.3.7 billion in revenues during the three months ended in March 2021, its fourth fiscal quarter.  The company on April 22 paid Rs.3.95 billion for 98.83 percent stake in South Asia Textiles Limited, prompting consolidation of its results into Hayleys Fabric from the date of the deal through June 30. 

Hayleys Fabric on July 15 paid a further Rs.46.6 million to acquire the remaining 1.17 percent stake in South Asia Textiles Limited, making the entity a fully owned subsidiary, the company said as part of its interim results.  Hayleys added fresh borrowings in the quarter by nearly the amount it paid to fund the acquisition, making the deal a leveraged buyout, in a sign that Hayleys Fabric is trying to make the most of the lower interest rates to add more capacity through M&A deals funded via borrowings.   

The acquisition nearly doubled the combined entity assets to Rs.22.85 billion, including the Rs.2.45 billion recognised as goodwill, from Rs.11.7 billion shortly prior to the combination.  Although the garment manufacturers confronted certain difficulties in meeting their full orders on time due to virus induced challenges during the June quarter, textiles manufacturers did particularly well as seen from the financial results of the two listed fabric makers - Hayleys Fabric and Teejay Lanka PLC - where the latter reported robust 119 percent jump in revenues to Rs.10.4 billion in the June quarter, with continuous improvement seen in their order books. Hayleys Fabric reported earnings of 72 cents a share or Rs.298.8 million for the April - June quarter compared to 25 cents a share or Rs.103.9 million in the corresponding quarter in 2020.  

The company’s share added Rs.2.00 or 9.01 percent last week to end at Rs.24.20.  Hayleys PLC along with its subsidiaries own 63.05 percent in Hayleys Fabric while Employees Provident Fund has 2.67 percent stake in the company being its third largest shareholder.