Annual report for 2004/05 - Hemas Holdings, Ltd

Strategic InvestmentsPowerAs reported in our last annual report, construction work of Heladhanavi powerplant commenced in September 2003 under a total turnkey contract. Frominception, it is pertinent to note that the work continued at a commendable paceand the completed plant, ready to be commissioned, was handed back toHeladhanavi in September 2004, three months ahead of schedule. In addition, allother conditions stipulated in the project agreement on the engineering andenvironmental aspects were fully met.Heladhanavi also signed a landmark Interest Rate Swap Agreement in June 2004,the largest such transaction hitherto in the country. The power plant thereby wasready to commence commercial operations ahead of schedule.This favourable time frame allowed for Heladhanavi to sign up for a short termPower Purchase Agreement (PPA) with the Ceylon Electricity Board (CEB),commencing commercial operations on 29 September 2004. The Short term PPA wasterminated on 7 December 2004 having met all our obligations. Heladhanavirecommenced commercial operations on 8 December 2004 under the main projectagreement.The plant has been operating satisfactorily and has consistently dispatched overand above the Minimum Guaranteed Energy Amount stipulated in the PPA.Considering the successful entry into this sector, the Group is currently looking atnew opportunities in the sector.ApparelThe Apparel business is now reaping the benefits of the expansion plan put intoplace last year and the high concentration on continuous improvementmethodologies to increase efficiency levels, on-time delivery, higher productivityand quality drives. Two more production lines were put into place in the Thihariyaplant to meet the increased demand. We have seen marked improvement inoperational performance, especially in the second half of the year in the areas ofefficiency, material usage and customer satisfaction. These have all contributedtowards the significant growth in sales from all our major customers in the EU andthe USA, especially Nike, Tesco and Next.A strategic decision taken during the year was the tie-up with TFG (The FieldingGroup), a UK based apparel supplier, which introduced into the business the threeimperatives of scale, design skills and focus at the highest level of decision making.PropertyDuring the year Hemas House, operated under Hemas Development (Pte) Ltd,achieved an overall occupancy level of 98%.The Company has a prestigious list of corporate clients and will continue to beselective in its efforts to deliver a unique quality and style to its clientele.External signage was erected in order to give visibility to our clients housed atHemas House.With full occupancy levels being achieved during the year under review, theCompany is expecting its healthy performance to be continued in the coming year.A N N U A L R E P O R T 2 0 0 4 - 2 0 0 5 21