Textured Jersey 3Q net up 79% over operating efficiencies & subsidiary performance

Textured Jersey Lanka PLC (TJL), a unit of leading apparel exporter Brandix Lanka Limited, increased its net profit by as much as 79 percent year-on-year (yoy) to Rs. 672.1 million for the quarter ended December 31, 2015 (3Q15), the interim results showed.
The earnings per share (EPS) rose to Rs.1.02 from 57 cents a year ago. At Wednesday’s close TJL’s share closed at Rs.34, up 2.41 percent or 80 cents.
The performance was driven by stronger gross profit resulted from improved operating efficiencies and the sustained growth of acquired entities where the latter’s income and expenditure were fully consolidated with that of TJL’s.
This is the first full quarter of TJL as a group as they acquired TJL’s supply chain partners, Quenby Lanka Prints Private Limited (QPL) on June 1, 2015 and Ocean India Private Limited (OCI) on September 1, 2015.
TJL invested Rs. 1.61 billion for its acquisitions during the period.
The group gross profit rose by 103 percent yoy to Rs. 976.7 million as the consolidated revenue grew by 48 percent yoy to Rs. 5.58 billion while the cost of sales rose by 40 percent to Rs. 4.6 billion.

The management has expressed their plans to expand the capacity of OCL as TJL is now operating at full capacity but have not finalized the dates for the expansion, SC Securities Private Limited said in a post earnings review on the group’s 3Q performance.
OCL accounts for 50 percent of the capacity of TJL.
Meanwhile, on a standalone basis, the knit fabric manufacturer increased its net profit by 7 percent yoy to Rs.402 million on a revenue of Rs.3.94 billion which rose by 5 percent yoy.
“Furthermore, the bottom-line growth was despite the cost of investments on strategic initiatives. TJL also chose to take a loss of income due to non-renewal of its operational technical service agreement with OCI, since the companies are now consolidated,” Chairman, Bill Lam said in an earnings release.
The expenses however rose above the top line growth both in the group as well as a standalone entity.
At the group level the distribution expenses rose by 62 percent yoy to Rs. 36.9 million while administrative expenses rose by as much as 164 percent yoy to Rs. 273.5 million.
TJL on a standalone basis continued to remain un-leveraged with a net cash surplus of Rs.1.29 billion but the group borrowings – both long and short term  amounted to Rs. 865.9 million due to the recognition of liabilities of the acquired entities as part of the group.
Meanwhile, for the nine months ended December 31, 2015 the TJL group increased the net profit by 64 percent to Rs. 1.35 billion on a revenue of Rs.12.3 billion, up 25 percent from a year ago.
The group net margin was 10.9 percent, up from 8.3 percent recorded a year ago on a standalone basis.
The gross profit for the nine months was up 85 percent yoy to Rs.1.92 billion.
TJL Chief Executive, Sriyan de Silva Wijeyeratne commenting on the performance said the group is on target towards establishing a well-balanced retailer and vendor base and customer demand is strong for its cutting edge innovations, both in the fabric and print space.
The company’s customers include the top international retail brands such as Marks & Spencer, Victoria’s Secret, Intimissimi, Tezenis and Calvin Klein.
As of December 31, 2015, Brandix Lanka Limited and Pacific Textured Jersey Holdings Limited held 29.81 percent and 29.65 percent stakes, respectively.
Norges Bank, the world’s biggest sovereign wealth fund with about a trillion dollars invested in equities, fixed income securities and real estate, bought in to TJL in September, and as of December 31, 2015 the fund held 10.3 million shares or 1.56 percent stake being the seventh largest shareholder.