Says acquisitions contributing well to the bottom line
LOLC yesterday announced its Group pre-tax profits for the first half of 2010/11 soared to Rs. 4.5 billion whilst post tax profits amounted to Rs. 3.9 billion.
Compared with the previous year, pre-tax profits grew by 370%. The company’s acquisitions made in the previous financial year contributed well to the bottom line along with other income, which increased by 215% to reach Rs. 2.7 bn at the end of the second quarter.
“LOLC has firmly set its sights on creating an organisation with outstanding strength through sustainable income, profitability, strategic expansion and good governance, building on the solid business base in financial services. The post war situation is gradually metamorphosing the country into a leading economic hub in Asia. LOLC too will take full advantage of the promising future laid before us and continually seek opportunities to diversify” LOLC Group’s Managing Director Kapila Jayawardena said reflecting on the half year financial performance.
The revenue of the group grew by 500% over last year, mainly contributed by the trading companies in the Brown & Co Plc cluster. The trading profits complemented well to the group’s financial services related business income of Rs. 5.8 bn, a 22% growth over last year. The borrowing costs continued to come down in line with the sliding interest rates with the group raising funds at attractive rates. This is mainly due to LOLC’s ability to source long-term funding from foreign multilateral and bilateral agencies at attractive rates contributing to the reduction in borrowing costs. The borrowing cost for the six months was 3% lower than last year and was Rs. 3 bn. This decrease is despite the increase in the quantum of borrowings.
Balance sheet growth was substantial with total assets reaching Rs. 98 bn, a 31% growth over last six months. Aggressive growth in the lending business increased the total advances to Rs. 47 bn, a 48% growth over last year. To support this aggressive growth in lending especially in the North and East, and branch expansion, the Group raised additional funding at attractive interest rates increasing the total borrowing by 29% over the last six months.
LOLC’s exponential growth, expansion strategy and strategic investments has positioned the Group on a strong footing for a steady stream of medium to long term sustainable profitability and this is already evident from the record increase in profits when compared with the same period last year.
|Deputy Chairman Ishara Nanayakkara
||Group Managing Director Kapila Jayawardena
Aggressive growth in the lending business over the last 12 months especially in the rural areas has contributed well to the bottom line of LOLC, Lanka ORIX Finance Co. Ltd. (LOFC), Lanka ORIX Micro Credit Ltd. (LOMC) and Commercial Leasing Company Ltd. (CLC), the main lending companies of the Group. Economies of scale from operations and multiplying synergies from sharing the distribution channels are reaping the benefits to the companies with each company making significant profit contributions to the Group. Effective and improved collection strategy following the initial disbursement complements well to this success. Strategic expansion of the footprint of the lending operations continues with the expansion of branches and “Isuru Diriya” centres being opened at an average of four a month in the rural areas. The total count of the financial services sector outlets now exceeds 135, of which, Lanka Indian Oil Company outlets and “Isuru Diriya” centres increased to 63 with “Isuru Diriya” centres reaching 50 last month. The company’s entry into the North and East with significant number of outlets being opened in the region is already reaping benefits to the lending businesses with significant business volumes coming from these untapped markets.
The Company’s fully owned subsidiary LOFC the registered finance company within the Group, is performing exceptionally well with tremendous growth in its deposit base to reach a Rs. 12.7 bn a 70% growth over last year. The deposit base increased by 26% within the last six months clearly establishing the financial stability and strong confidence the depositors have placed in the company.
CLC and LOMC, operates in the SME/Micro sectors and are well positioned and geared to capitalise on the heightened activity due to the positive sentiments in economic growth. These two companies are already contributing significantly to the bottom line of the Group giving high returns on investments.
The Group’s investments in the leisure sector are going through a phase of close evaluation for positioning for the future with significant investments being committed during the next 12 to 18 months. The capital investment envisaged for this sector is in excess of Rs. 3.5 bn and LOLC Leisure is currently negotiating with major international hoteliers to enter into strategic alliance for the management of these prime properties situated in the golden mile of the south coast of Sri Lanka.
The Company is gearing up to start off the two new operations namely LOLC Insurance and LOLC Securities. LOLC obtained a composite licence for insurance and is expected to commence business in both life and General insurance in early next year. LOLC Securities received the stock broking licence recently and is expected to commence operations again in the early part of 2011.
The Group made a strategic investment into the construction sector, by acquiring 20% of Sierra Holdings Pvt. Ltd and 20% in Sierra Constructions Pvt. Ltd at a cost of Rs. 1.6 bn.