LOLC Group FY 2011 pre-tax profit swells 192% to Rs. 8.3 b; Revenue up 118% to Rs. 32.5 b

LOLC Group has recorded an impressive pre-tax profit of Rs. 8.3bn and Rs. 7bn as post-tax profits for the 12 months up to 31 March 2011.

The growth in the pre-tax profits was a staggering 192% over last year with post-tax profits recording a growth of 194% with comparatives for the last financial year were pre-tax profits of Rs. 2.8bn and Rs. 2.4bn post tax profits. Net profit attributable to equity holders grew by 109% to Rs. 3.8 billion. Group turnover rose by 118% to Rs. 32.5 billion.

A high other income of Rs. 5 billion, up by 260% over 2009/10 financial year had boosted LOLC profits.  Other income includes foreign exchange gains, capital gains arising from marked to market valuation of quoted shares held for trading purposes, rent income and dividends.

However LOLC’s core business, Financial Services concluded an exceptional year with more than 60% profit contribution to that of the group. The profits from the financial service sector grew three times over when compared with the previous year and ended at Rs. 5.3 bn.

The financial services sector is reaping the benefits of the well thought proactive strategies executed by the company capitalising on the resurgence of the economy subsequent to the end of the three decade long war. LOLC’s strategy of rapidly expanding its footprint throughout Sri Lanka and the wide range of products on offer complemented the growth of the group along with the favourable macro economic conditions. The group’s focused efforts in extending its service offerings in the North and East resulted in significant business volumes being generated from these regions. The lending businesses more than doubled the disbursement of new loans when compared with the previous year, with the increased demand for credit and prevalent lower interest rates.

The total lending portfolio of the group grew by 68% over the previous year to Rs. 58.4 bn with the increased quantum of disbursements. The lending portfolio consists of finance lease, hire purchase, loans, Islamic financing, debt factoring, working capital solutions, micro finance and fleet management.

LOLC’s finance company, Lanka ORIX Finance Company Ltd. (LOFC)’s deposits mobilisation gathered momentum throughout the year with a strong year end with a deposits base of Rs. 17.4bn, an impressive growth of 72% over the last year’s deposit base of Rs. 10.1bn.

Total revenue from the financial services sector of the group, increased by 45% over F/Y 2009/10 and was Rs. 18.3 bn, despite the lower interest rates and resultant lower interest income during 2010/11 when compared with the previous year. The intra group revenue was Rs. 2.2bn.

The net interest cost of the financial services sector was Rs. 5.9 bn for the year, lower than the previous year’s net interest cost of Rs. 6.0 bn even though the quantum of interest bearing borrowings were much higher during the current year. The lower interest rate environment prevalent in the country during the current financial year, and the USD and Euro denominated long term financing that LOLC and its subsidiaries secured through bilateral and multilateral funding partners contributed towards the reduction in cost of funds.

During this financial year LOLC sought Central Bank of Sri Lanka’s approval not to renew its leasing licence to facilitate the company’s intention to move to a holding company structure. In line with this, all leasing business done under the LOLC Company previously is now booked under Lanka ORIX Finance Co. Ltd. (LOFC) LOLC Micro Credit Co. Ltd., (LOMC) and Commercial Leasing Co. Ltd. (CLC), the three financial services companies who are engaged in the lending business.

LOLC’s move towards a diversified holding company commenced with many diversified investments being made into carefully picked growth sectors which are very much aligned with the economic growth prospects for Sri Lanka. These sectors consist of leisure, plantation and agriculture, renewable energy, trading and construction.

LOLC Group’s long term strategy is to grow the financial services sector from strength to strength capitalising on the already established companies which has clear strategies targeting several segments of the SME and Micro sectors.

Whilst the financial services sector provides the steady growth in profitability, the investments made in the diversified businesses too has given much advantage to the Group’s bottom line which is a 40% of the Group’s total profitability. This sector has contributed Rs. 3.3bn pre-tax profits to the Group. LOLC has made these investments in line with their long term growth strategy coupled with growth trends seen in the Sri Lankan economy which are expected to perform well in the medium to long term.

In line with this strategy, LOLC increased its investments in the leisure sector with the acquisition of 4 hotels on the southern coast of the country, consisting Confifi Hotel Holdings PLC, Riverina Hotels PLC, Eden Hotels PLC and Tropical Villas (Pvt) Ltd. Three of the hotels were closed for business from 1 May in order to complete an accelerated refurbishment programme. After being upgraded, the hotels will be managed by a globally reputed hotel management company.

During the year, further investments were made by the LOLC Group into the Sierra Holdings (Pvt) Ltd., Sierra Construction (Pvt) Ltd., and Agstar Fertilisers (Pvt) Ltd.

The year ended was an exceptional one for the LOLC Group with significant changes in the strategic direction leading to a long term sustainable business model of diversified business enterprises contributing well to the core business of financial services.

Browns Group posts Rs. 3.6 b pre-tax profit in FY 2011

The Browns Group has posted for the first time in its history a phenomenal Profit before Tax of Rs.3.6 b, which is a growth of 184% compared to last year, and a Net Profit of Rs. 3.26 b, which is a growth of 185%.

The Group also posted revenue of Rs. 12.18 b for the financial year ended 31 March 2011, which was an increase of 36% as against last year.

Group MD/CEO Murali Prakash said: “A splendid achievement indeed, particularly for an organisation such as ours which is in several industries needing resource allocation and focus at its best.

Three years ago we had a comprehensive strategy to reshape our core business of trading and also diversify into investing in Sunshine Industries. This today has paid us great dividends. Having said that, Browns Group will continue with its journey in keeping its core competencies of engineering excellence and customer care, therefore we are exceedingly assured of the long-term sustainability of our strategic direction and the viability of the investments and expansions we are engaged in.”

The Browns Group equity attributable to equity holders of the company grew by 50% from Rs. 9.6 b to Rs. 14.4 b, as a result net assets per share grew to Rs. 203.65 as against Rs. 135.51 for the previous year.

In the Trading segment the Group grew its revenue by as much as 49% to Rs. 8.46 b for the year.

Prakash said: “We are extremely satisfied that the core trading activities of the organization are firmly in place, with a strong marketing focus, both in terms of people, policies and practices; as well as from a  futuristic perspective. The re-segmentation of businesses and enhanced scope of segments have also been a reason to the growth seen in the trading sector.”

The Browns Group is one of the few organisations to have market leadership in seven segments they operate in: Tractors with 70%, Marine Engines 55%, Battery with 70%, Branded Power tools 45%, Radiators 42%, Vet Pharma with 29% and Integrated Business Solutions with 30% market share. Strong focus on brands, channels and customer value has helped the Browns Group achieve substantial growth in its trading divisions.

The trading sector would be further strengthened by the introduction of innovative products and services in the near future which would enhance the value proposition to their large and diverse customer base. These new introductions would further strengthen their position in the trading sector.

In the sector of manufacturing the Group recorded revenue of Rs. 1.29 b, which is an increase of 76% as against the previous year.

As a manufacturing entity the Browns Group is perhaps the largest producer of Radiators for vehicles in the local market through its subsidiary Browns Group Industries Limited & Browns Thermal Engineering Limited.

Browns Thermal Engineering Limited (BTEL) are manufactures Heat exchangers namely, Radiators for all auto and industrial applications. BTEL is producing radiators for almost all vehicles staring from cars to earth moving vehicles. In addition specialised radiators for locomotives and generators are manufactured by Browns.

Browns Group Industries Limited manufactures 40% of all plastic components needed for Battery manufacture. With new investments into machinery and processors the Group will look to expand into related products through its manufacturing entities.

The new investments made by the group have also paid great dividends with revenue growing to over Rs.3 b.

Browns Investments has a 30% shareholding in LOLC Leisure with the balance 70% held by LOLC. Browns Investments invested additional sum of Rs. 849 m during the year in LOLC Leisure. LOLC Leisure is carrying out a major upgrading programme of the Riverina, Palm Garden and Tropical Villas hotels. They are also discussing with a number of overseas parties in relation to management contracts.

Browns Investments through its subsidiary Taprobane Capital has controlling interest in Royal Fernwood Porcelain Ltd. (RFPL), a company which manufactures and exports porcelain ware.   With the new ownership and management, RFPL has commenced program of upgrading its production facilities and has actively pursued and obtained new markets overseas as well as locally.

Strategic investments in Sierra Construction Limited and Sierra Holdings gives Browns Investments an opening into the lucrative construction sector and provides a partner for construction projects within the group.

 The company through its acquisition of shares in Sierra also gained a foothold in Agstar Fertiliser. This company sells blended fertiliser, planting material and crop care products. These investments consolidate the business presently in the agri business sector whereby the Browns Group can now offer complete package to the farming community.

Browns Investments Limited, a subsidiary of Brown & Co. PLC, has applied to the Colombo Stock Exchange (SCE) for an Initial Public Offer (IPO).

The Brown & Company Board consists of Rohini Nanayakkara (Chairperson), Ajith Devesurendra (Deputy Chairman), Murali Prakash (Group Managing Director/CEO), I.C. Nanayakkara (Director) Shanker Somasunderam (Director), R.N. Asirwatham (Director) and Janaka de Silva (Director).