Sumal Joseph Sanjeewa Perera, widely known as Sumal Perera, is a man of many facets. To some he is a deal maker, a phrase which is not a crime in the world of legitimate businesses. To others he is a true visionary and patriotic entrepreneur and a professional too. To his staff he is a caring godfather. But personally he is all of these and increasingly selfless to boot.
Recently Sumal together with two other co-founders of Access Engineering Ltd., Christopher Joshua and Ranjan Gomez, gifted a combined 15% (120 million shares) of their personal stakes to the 1,100 staff of the company. At Rs. 25 per share, the stake is worth Rs. 3 billion.
Access International, which is Sumal’s personal venture, is held by his family wife, son and daughter.
A Fellow of the Chartered Institute of Management Accountants, UK (FCMA), Sumal founded the Access Group 22 years ago after starting his career at Chandra Senanayake Holdings and Cornel and Company.
Access Engineering was started 10 years ago due to the belief of Sumal who held a 50% stake and the two co-founders (holding 25% each) that Sri Lanka is blessed with some of the world’s best engineers.
At Access Engineering, the professionals go beyond mere conventional engineering. With focus on improving cost efficiency, Access engineers pursue innovation or “value engineering,” a trait which has made it successful and enabled it to rise to the top league within a decade.
Under Sumal’s leadership, Access has within a short time span has grown to be a diversified and successful business Group as well.
As a Group, Access interests cover some of the key sectors of engineering, telecom, power and renewable energy, water, information technology, property, healthcare and general trading and contracting.
To succeed in these sectors, innovation and professional management are critical and at Access these are in abundance. Perhaps it was to further nurture these and to make professionals stakeholders in its future growth that the founders of Access Engineering decided to make them shareholders of the company.
In most cases, self-made entrepreneurs and family-owned companies in Sri Lanka boast of valuing human capital, but Access Engineering, by gifting shareholding, walked the talk. Employees are considered important stakeholders, but at Access they have been made shareholders. The exemplary move has certainly made Access Engineering stand tall not only within its core sector, but in overall corporate Sri Lanka. If more companies take a leaf from Access’ example, true employee empowerment for the benefit of all stakeholders of an organisation can flourish in Sri Lanka.
For Sumal, the gifting of shares is not merely an act of benevolence. In fact he doesn’t like it to be described as a gift, rather a true recognition of the critical source of an organisation – employees. For Access Engineering, its very survival and success depends on its people, especially the growing base of 100+ engineers. With this move, engineers and others have become shareholders, with Sumal and his co-founders thereby engineering a new generation of shareholders. This strategy also ensures sustainability of or continuity in an organisation to be driven by professionals.
Following the successful conclusion of a Rs. 4.5 billion (180 million shares at Rs. 25 each) private placement, Access Engineering intends to go public before end 2011 or early next year. For Sumal, exposure to the Colombo stock market or a public quoted entity is not a new experience. He has been Chairman of the successful listed venture Sathosa Motors Plc since June 1998. The Daily FT sat down with Sumal to get more insights into his character and the Access credo
Q: What are the reasons behind the decision to list Access Engineering within the next one year?
A: This is not a sudden decision. In fact when we started Access Engineering in 2001, the founders had a vision to list the company eventually. With the end of the war and resultant rebound in the economy and capital markets, time and the external environment is opportune to list. This will also help Access Engineering to tap capital markets to finance its future business growth, apart from broadening the ownership among the public and further improving good corporate governance.
Q: Recently Access Engineering successfully concluded a Rs. 4.5 billion private placement, which is one of the biggest issues. What were the objectives?
A: As a preparation to go public as well as raise funds to retire debt and finance a strong pipeline of projects we had a private placement. We offered 180 million shares or 22.5% stake at Rs. 25 each to make Access Engineering a benchmark in its industry subscription to the private placement was on invitation with a minimum amount of Rs. 10 million. This was to ensure the company had the benefits of select outside institutional investors and their expertise.
A good mix of highly respected corporates and individual high net worth investors were invited. Indeed 75% of the private issue was placed with around 10 investors including JKH, Carsons Group, MAS Holdings, Dhammika Perera’s Vallibel One Ltd. and Nimal Perera. I am confident that these strategic investors see value in Access Engineering and future potential.
Access Engineering also expanded the Board of Directors by appointing three independent directors – namely, Prof. Malik Ranasinghe, Vice Chancellor of University of Moratuwa, Alex Lovell, Deputy Chairman of Union Bank of Colombo who has over three decades of experience in finance and investment banking and top accountant Niroshan Gunarathne.
Of the Rs. 4.5 billion raised, around Rs. 600 million will be used to retire bank loans and the balance to finance working capital for already contracted projects and part fund future investments, which include township and other infrastructure projects under public-private partnerships.
Q: As opposed to the conventional practice of having Employee Share Ownership Plans (ESOP), the founders of Access Engineering further shed their stakes by gifting a 15% stake to management and employees. What is the rationale?
A: We awarded shares after categorising 50 managers and assistant mangers into 11 categories, 235 executive staff into 14 categories, 94 clerical staff into 4 categories and over 727 support staff into three categories. It may appear a gift, hence generous. This may be true, but to me the gesture makes more business sense.
Employees are the backbone of Access Engineering’s past success and key to a higher growth in the future. In the past we have motivated staff with generous high performance incentives schemes. Making them shareholders is a means of empowerment and employees also become more attuned to enhancing stakeholder value. Given the business we are in, our engineers and employees are key drivers of the organisation and such decision makers now have a stake in the company as well.
Following the private placement as well as after the IPO, Access Engineering becomes a public listed company requiring greater accountability, transparency, better governance and delivering good returns. Future investors will consider investing and remain with the company as long as we add value. So with share ownership also come greater responsibility for management and staff to improve performance.
Though at present shares gifted are worth Rs. 3 billion, I have urged employees to be of the mindset that their stakes are worth Rs. 9 billion in the medium term. With management and engineers becoming shareholders together, we can take Access Engineering to the next level of innovation, value engineering and growth.
I would describe the gesture of making employees shareholders as one of the most gratifying moments in my life. It is not only owners of business, employees in companies must also see their wealth improve. Going forward in tandem with improved performance, we will consider formalising this employee empowerment with an ESOP scheme.
Q: After the planned IPO, what would Access Engineering’s ownership structure be?
A: Access Engineering was founded on the basis of my having a 50% stake and the other two co-founders, Christopher Joshua and Ranjan Gomez, owning 25% each. For the private placement these stakes were reduced to 36.2% [for Sumal] and 12.5% each of the other co-founders. Post gifting of shares, my stake has come down to 31.25%. Post IPO, which will make available around a 2% stake to the public, the gifted employees’ stake will be 12%. [Several directors and senior executives also own shares whilst Sumal’s children and those of other-founders also own small stakes, which will make the management own around a 30% stake.]
Q: How does Access Engineering see future prospects for the company and industry as well as the country?
A: President Mahinda Rajapaksa, the Government and the armed forces must be commended for defeating terrorism in Sri Lanka. With hopes for lasting peace and stability, the economy has rebounded. The large scale socioeconomic development undertakings have helped the construction sector to expand. With the envisaged development plans and policies, we are optimistic of a boom in construction and engineering sectors of the country. Prospects can be significantly higher if the Government embarks on greater Public-Private Partnerships (PPP) in the socioeconomic infrastructure development sphere.
Q: Prospects for Access Engineering?
A: We have grown considerably over the years. From a Group turnover of Rs. 2.4 billion in 2007/8 financial year, we have grown to Rs. 3.6 billion in 2010/11. Our gross profit had grown from Rs. 553 million to Rs. 1.3 billion over the four years. Net profit after tax in 2010/11 amounted to Rs. 1.167 billion, which is a three-fold increase in comparison to Rs. 327 million achieved in 2007/8 financial year. Group assets have grown from Rs. 1.9 billion to Rs. 5.76 billion.
Over 80% of the projects we handle are multilateral or bilateral donor funded, which gives security to a healthy cash flow situation for Access Engineering. With more projects in the pipeline as well as those which we are planning, we see good prospects. The infusion of Rs. 4.5 billion via the private placement has made our balance sheet stronger to tap the high growth potential as well as embark on new innovative projects.
Access Engineering’s vision is ‘to be the foremost Sri Lankan business enterprise in value engineering’ and our mission is ‘to meet the challenges in the development of multi sector civil engineering projects, providing innovative solutions whilst developing long-term progressive relationships with all our stakeholders’.
Q: What is Access Engineering’s current standing?
A: In terms of the Institution of Construction Training & Development (ICTAD) grading, we are number one, whilst on turnover we should be within the top three. The team at Access Engineering, which has grown to over 1,400 persons, including over 100 engineering professionals, has successfully completed over 100 civil engineering projects countrywide.
Our ISO and Institute of Engineers Sri Lanka (IESL) accredited in-house design office provides practical engineering solutions to specific customer requirements, including detailed engineering construction drawings for many civil engineering projects. Our forte is value engineering and our projects and solutions encompass water and waste water; roads and highways; bridges and flyovers; irrigation and land drainage; harbours and marine work; dredging and reclamation; environment and waste management; telecommunication; piling and buildings; and engineering designs.
Q: Can you define value engineering?
A: Value engineering or intelligent solutions are the backbone of our business, which provides total solutions in an effective and cost effective manner. This has been possible because of the outstanding and innovative team of engineers and other professionals. Our customers have found reliability, speed, flexibility, value and cost efficiencies. We complement these with professional customer relationships.
Q: Is Access Engineering exploring foreign markets?
A: Yes. Our future growth plans include exploring prospects in select foreign markets. We have engineering skills that are comparable with that of the world’s best. We also have good project management skills. We will collaborate with foreign partners in tapping overseas markets.
Q: Did you have any other corporate in mind as a benchmark or to emulate when and where possible?
A: I have been inspired by John Keells Holdings as a role model for broad-based ownership, whilst the conglomerate is led by professional managers.
Q: What are your personal thoughts?
A: Listing Access Engineering is not to see my net worth increasing, but to achieve much broader objectives for the company, its management and employees as well as the industry. If Access Engineering can grow to greater heights via listing, the same route can be considered for some of the other Access Group companies as well as other companies in the industry.
Though many reasons can be attributed to the growth of Access, it is my firm belief and conviction that the main reason for our success is its people. Some of the best available human resources in the country are available at Access and their energy and adventurous spirit is the result of what it is today. I am happy to lead a people-driven company. I look forward to being part of the next phase of growth of Access, as we pursue its vision to be one of the foremost Sri Lankan business enterprises.
I am extremely confident about post-war Sri Lanka, especially because of the excellent pool of young human talent we have. New companies as well as emerging conglomerates have a big role to play in the new economy of Sri Lanka. Like Expolanka, Softlogic and Vallibel, Access is also a home-grown local brand. All of us listing on the Colombo Stock Exchange (CSE) is a good sign for the future.
From an industry perspective, Sri Lanka needs to attract more Foreign Direct Investments (FDI) whilst fostering local entrepreneurship, where necessary forging collaborations with foreign expertise. Putting State land to better and productive use is also important. People trying to get rich individually will not take Sri Lanka anywhere. It is important to reduce the gap between the rich and poor. The only way to respect those who sacrificed from both sides of the divide to usher in peace is by ensuring better socioeconomic prosperity to all across the country.
Entrepreneurship must be encouraged at all levels on a coherent and planned basis so that wealth, income, jobs or livelihoods can be generated at community level. If we do this, Sri Lanka as a country can realise its potential fully. I also feel some of us or business leaders must live by example, enhancing contribution to national development so that there is greater recognition, respect and support for entrepreneurs and the idea of entrepreneurship.