LOLC Group, releasing its year-end results for 31 March, registered another strong year to its stellar performance over the last decade. With a robust Profit Before Tax (PBT) of Rs. 26.81 billion, compared to Rs. 24.66 billion recorded in 2018, LOLC continues to surpass its own accomplishments. The Group’s Profit After Tax (PAT), as at 31st March, stood at Rs. 19.62 billion in comparison to Rs. 19.19 billion that was recorded in 2018.
LOLC Group Deputy Chairman Ishara Nanayakkara
LOLC Group Managing Director/CEO Kapila Jayawardena
The Group, well-served by its characteristic strength in the SME and microfinance sectors of the country, has been a catalyst in financial inclusion in Sri Lanka. Excelling on a national level, LOLC has undertaken a timely expansion to the region and has now established itself as a market leader in microfinance in the countries which it operates.
Regional expansion has not only offered LOLC a diversified revenue stream with increased financial stability, but also has added resilience with a well-spread risk profile. Therefore, it has made the Group susceptible for local externalities offering consistent growth. LOLC’s maiden overseas investment PRASAC is a good testament to this. Invested in 2007, with mere 18%, PRASAC grew leaps and bounds to become the largest microfinance institution in the dollarised Cambodian economy.
Today, LOLC owns 70% of PRASAC, a company that clams $ 2.6 billion in assets, $ 2.2 billion in portfolio, $ 1.5 billion in deposits and $ 103 million in PBT for the 12 months ending March.
LOLC Cambodia, the fourth largest MFI in Cambodia, has also recorded an impressive performance to conclude the year. The Group owns 97% of LOLC Cambodia that has an asset base of $ 687 million, a portfolio of $ 564 million, a deposit base of $ 286 million, and recorded a profit of $ 28.5 million.
Reaffirming its regional expansion strategy, LOLC ventured into Myanmar in 2013. As a greenfield operation, LOLC Myanmar Microfinance Company Ltd. has demonstrated a remarkable track record to become the third largest among the 176 microfinance institutions in Myanmar. LOLC Myanmar was also the first Sri Lankan organisation and the fourth international operator to commence operations in Myanmar with an asset base of $ 52.4 million, portfolio of $ 39.5 million, and PBT of $ 2 million in just five years of business.
In 2017, the Government of Pakistan and the Sultanate of Oman invited LOLC to take up the major shareholding of their joint venture Pak Oman Microfinance Bank in recognition of LOLC’s outstanding contribution to the microfinance community. With the Group’s technical expertise in areas such as risk management and proven track record in the microfinance field, Pak Oman is rapidly growing to become an important player in the Pakistani economy that accounts to a population of over 200 million.
The Group ventured into Indonesia in 2018, acquiring a controlling interest in PT Sarana Sumut Ventura (SSV). LOLC’s strategic objective of alleviating poverty through the empowerment of female clientele is well-positioned to make inroads in rural areas of Indonesia through a portfolio catering to 95% female customers.
Expanding its international footprint, LOLC invested in Philippines through LOLC ASKI Finance and LOLC Development Bank. The synergy between the two companies in Philippines is set to create significant value to different market segments, especially at the grassroots level.
Today, with the financial sector representation in Cambodia, Myanmar, Pakistan, Indonesia and Philippines, that accounts for a gross revenue of 41%. LOLC has fully establish itself as a strong regional financial conglomerate. With this standing, the Group is determined to reach its vision of becoming a global player with a multi-currency, multi-geographic microfinance and SME platform in the future.
The Central Bank imposed a consolidation plan to strengthen the financial sector of the country. Consequently, LOLC Finance PLC (LOFC) merged with its sister company, LOLC Micro Credit Ltd., in March 2018. The merger was successful in many facets; it created the largest NBFI in the country with an asset base of Rs. 211 billion and a portfolio of Rs. 151 billion in addition to the efficiencies and synergies generated through the merger. The merged entity recorded a staggering profit of Rs. 7.1 billion at its first post-merger financials amidst the challenging macroeconomic conditions prevailing in the country. During the year under review, LOFC brought about a conscious contraction in the portfolio along with other stringent NPL management strategies that resulted in a 6.38% NPL, which is ahead of the industry standards.
Commercial Leasing and Finance PLC has been an exemplary performer since its acquisition by LOLC in 2008. This year however, CLC recorded a PBT of Rs. 2 billion, despite the adverse economic climate experienced in the year under review.
LOLC Development Finance PLC, formerly known as BRAC Lanka PLC, maintained strong compliance with statutory ratios with a CAR ratio of 17.03%. However, the company was impacted the most compared to LOFC and CLC, with the ongoing economic implications that had direct repercussions to the microfinance sector resulting in a loss of Rs. 140 million. The Company proactively realigned its short-term strategies to focus on collection and recoveries to demonstrate a strong positive change in the coming months.
Seylan Bank, an Associate of LOLC Group, also contributed Rs. 1 billion to the Group profits. The group’s insurance businesses, LOLC Life Assurance and LOLC General Insurance, has performed well during the year, positioning itself among the top 10 players in both the general and life segments and are fully geared to explore the largely untapped insurance market in Sri Lanka.
Adopting the new SLFRS 09 and SLFRS 15 standards, the Group’s financial services companies made further provisions for bad and doubtful debts as required by these standards. LOLC’s conservative provisioning policy of the past years safeguarded the companies from having to make excessive provisions and required only moderate provisions in addition to the previous standards’ level.
Aligning itself with the growth sectors of the Sri Lankan economy, LOLC Group has also been an effective player in the development of the non-financial sector through Brown and Company, a 143-year-old conglomerate with exposure in leisure, agriculture and plantation, power generation, marine, manufacturing and trading, home and office solutions, pharmaceuticals and healthcare.
Browns Capital PLC merged with its immediate parent company, Browns Investments PLC, during the year under review as a measure to strengthen capital structures and ensure further stability moving forward. This will set the tone for the promising expansions and undertakings in the pipeline in the Non-Financial Sector in the medium to long term.
The Group has a strong base in the plantation sector through its two plantations, Maturata and Gal Oya, where the focus lies in the value addition of cinnamon products and sugar cultivation, with extended benefits from market leaders in the Group along the value chain, like AgStar Fertilisers with agri inputs and Browns with agricultural equipment.
The Group penetrated its non-financial sector, too, in the international arena with its investments in Sierra Leone and Maldives. Sunbird Bio-energy Sierra Leone Ltd. is the latest addition and an integrated farm that generates power, sugar and bio ethanol. The Company currently owns 23,500 hectares of agricultural estate which provides sugarcane, as well as a bio-ethanol plant which produces 380,000 litres per day, and a 32 MW biomass power plant. Looking forward, the Company is well-positioned to add sugar production, cassava-based starch and ENA as by-products.
The Group’s leisure portfolio made steady progress, holding four operational hotels: Eden Resort and Spa in Beruwela, Paradise Resort and Spa in Dambulla, Dickwella Resort and Spa and Calm Resort in Pasikudah. The pipeline is promising with international strategic partners Sheraton partnering with Turtle Beach Kosgoda, which is due to open over the course of FY 2019/20, and Riverina Beruwala in the making, which, once completed, will be one of the largest resorts in the country.
There have also been strong inroads made in the Maldivian leisure sector as LOLC Group has secured some of the most sought-after real estate in Male with construction on the Nasandhura Hotel and Apartment Complex approaching completion over the course of the year, as well as other atolls in Maldives, assuring a diversified leisure portfolio to the Group.
In a statement on the annual performance of the Group, Group Managing Director/CEO Kapila Jayawardena said: “We are proud of our resounding achievements this year, with a Group PBT of Rs 26.81 billion – an extremely challenging task given the pressures of the prevailing macroeconomic conditions affecting most industries in which we operate. As a well-positioned regional force with a timely global expansion strategy and a distributed revenue stream placed in short, medium and long term in both financial and non-financial sectors, the Group is insulated from any externalities, at the same time poised to grow exponentially.”