Multi Finance profits up 120% in the first quarter 2014/15

Multi Finance PLC recorded a 120 per cent increase in its bottom line in the first quarter ended 30th June 2014 recording a net profit of Rs. 8.6 million against a loss of Rs. 39.2 million loss in the preceding quarter 2013, as per published accounts. During the quarter under review, net income from operations reached Rs. 56.2 million, up 236 per cent compared to the quarter ended June 2013 which was recorded as Rs. 16.7 million.

The net interest income for the quarter ended 06/14 also increased by 215 per cent reaching Rs. 50.5 million compared to Rs. 16 million in the same earlier quarter owing to improvements in quality lending and strict credit processes introduced.

Operating expenses of the company fell to Rs. 32.3 million as against Rs. 40.3 million, a 19.8 per cent improvement owing to strict cost control mechanisms adopted.

The company’s total assets grew by 3.5 per cent to over Rs. 1.38 billion as of 30th June 2014 while the deposit base grew by 9.8 per cent over the same quarter of the previous year

Commenting on the company’s improvement, Multi Finance Chief Executive Officer Pushpike Jayasundera said the introduction of prudent credit policies, risk management tools and stringent recovery processes were the key factors that contributed to the significant results in the quarter. These results were achieved in the midst of interest rate pressures and slowdown in credit growth which was common to the industry during the period concerned.
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CIFL depositors face new crisis

By Quintus Perera

Depositors of the failed Central Finance and Investments (CIFL), given some hope by the Central Bank (CB), have been stumped by a possible misunderstanding that their problems are over.

At a recent meeting between the CIFLDA (CIFL Depositors Association) and the CB, the latter appeared to indicate that if the association withdraws its case in court, the CB will find an investor and provide matching funds to revive the company.

Following this ‘assurance’, the depositors withdrew the case and wrote to the CB saying they had kept their part of the bargain, and that “We appreciate your kindness and dedication to release Rs.1 billion loan facility to CIFL for restructuring the company with the help of investors.”

However in response, the CB wrote back saying: “We wish to inform you that this is factually incorrect and it is only stated at that meeting that the Central Bank is in a position to provide funds from Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDSS) once the company finds a new investor/investors and infuse the required capital to company in line with Financial Sector Consolidation Plan”.

CIFLDA President Wijeya Goonawardena, told the Business Times (BT) that the latest position of the CB is a matter to be of grave concern as the case, now withdrawn, was the only hold they had on the CB.

He said they have received information that CIFL is trying to close down all the branches and centralise all CIFL functions in Colombo and if so there would be nothing left to restructure.

CIFLDA alleges that the invisible hand of Deepthi Perera alias ‘Chulaka Gunawardena’ a Navy deserter and a former CIFL Chairman, is sabotaging the business plan. He said that it is unfortunate that the CIFL restructuring plan is getting regularly delayed and it is high time the Government takes concrete action to expedite the restructure as older depositors will die before they get relief.

The CB has said in the past that it is in discussion with three foreign investors to revive the failed company.
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CFT diversifies, posts record revenue growth

Ceylon & Foreign Trades PLC (CFT) founded in 1949 as an exporter of traditional Ceylonese commodities has increased revenue during the year ended March 31, 2014 by 109% posting the highest growth in the company’s 64-year long history.

The group has posted an after tax profit of Rs.60.1 million, up from Rs.12.7 million a year earlier while at company level a profit of Rs.8.4 million against the previous year’s profit of Rs.7.2 million has been recorded.

The company’s Chairman, Dr. S.A. Gulamhusein, has said in its annual report that diversification into import and marketing of cement had significantly contributed to growth. They are now importing cement both from Pakistan and India.

Their consumer division which had disappointing results the previous year due to a break in supplies had been able to resume its business while their land at Sedawatte had been filled during the year and prepared for operation for warehousing in container boxes branded as "Jack In The Box."

They had also resumed importing of bulk palm oil re-entering this business after many years.

"This is an extremely competitive business and we will have to proceed cautiously to grow it if we are to profit from the turnover it could generate," Gulamhusein said.

He reported that their associate company, On’ally Holdings PLC had done well over the year and CFT had earned substantial dividend income. Also, the On’ally share had appreciated with the unrealized market value of the original investment increasing six fold.

Gulamhusein said that the company is looking at further investment and diversification and will embark on new ventures once they are convinced of profitability and growth.

Mr. G.I. Shabbir with 31.5% of the company, Spice of Life (Pvt) Limited with 20.6% and Mr. S.A. Gulamhusein with 20.3% are the major shareholders of the company.

CFT has a stated capital of Rs.14.1 million, a revaluation reserve of Rs.544.3 million, a revenue reserve of Rs.1.2 million and retained profits of Rs.291.7 million in its books.

Total assets ran at Rs.1.16 billion and total liabilities at Rs.311.4 million.

Net assets per share for the group was down to Rs.6.02 from Rs.6.32 a year earlier while for the company it was up to Rs.4.31 from Rs.4.25. The share traded at a high of Rs.9 and a low of Rs.5 during the year against a trading range of Rs.9.20 to Rs.4 the previous year.

The directors of the company are: Messrs. S.A. Gulamhusein (Chairman),Dr. D.C. Gunasekera, Mr. T.A. Gulamhusein, Mr. I. Shabbir, Mr. A. Tyebkhan, Dr. A.A. Shabbir, Mr. L.W.W. Priyankara and Mr. I. Zahir.
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Merchant Bank of Sri Lanka PLC reports a Net Profit before Tax growth of 78% in Q3 of 2014

Chairman Shah and CEO Mutugala confident of further post merger growth

Merchant Bank of Sri Lanka (MBSL), the pioneer subsidiary of State Banking giant, the Bank of Ceylon, reported a positive NPBT growth of 78% with a NPAT growth of 67% for the period ending Q3 of 2014. The Group NPBT grew by 376%, while the NPAT reported a 130% growth for the same period. The company’s Asset Base had a growth by Rs 1,339 million compared to the first nine months of 2013.

Commenting on the achievement, the Bank’s Chairman, M. R. Shah said "With the clear Business Vision of the Board of Directors, and the dedication of the staff who were effectively driven by the CEO, who was appointed in latter part of 2013 have resulted in this remarkable achievement".

He further said that "these strengths will be utilized to develop the branches of MCSL Financial Services Ltd (MCSL) and MBSL Savings Bank which will be merged with Merchant Bank of Sri Lanka PLC in due course, which will eventually enhance the Stakeholders value, with a greater portion of it adding to the Shareholders".

Merchant Bank of Sri Lanka PLC posted a revenue growth of 8% for the period ending 30th Sep 2014, compared to the first nine months of 2013. The Net Interest Income which was at Rs 672 million in the first nine months of 2013 also reported a growth of 19% in the corresponding 9 month period ending 30th Sep 2014. It peaked at Rs 800 million mainly due to the branch expansion drive in the year 2012 and business growth in Personal loans, Term loans, Microfinance and Auto Loans.   

On the other hand Merchant Bank of Sri Lanka PLC has been able to reduce the interest Expense by 10% in the Third Quarter of 2014 as against its corresponding period the year before.

Accordingly the Interest Expense that was at Rs 1,026 million in the 3rd Quarter of 2013, dipped to Rs 929 million for the same period of 2014. Net Fee and Commission Income remained a negative growth for MBSL with a 6% decrease during the period under review.

The Company recorded a Profit Before Tax (PBT) of Rs 206.2 million, which is a growth of 78% compared to the corresponding period of 2013, and NPAT was also recorded at Rs 142.4 million. This reflects a growth of 67% compared with the 9 months of 2013. The comprehensive income recorded as Rs 203 million, a growth of 114% as against the Rs 95 million in the previous year.

Chief Executive Officer of Merchant Bank of Sri Lanka PLC, T. Mutugala said that "We are now fully focused on our merger plans with MCSL and MBSL Savings Bank. Our aim is to continue the same growth momentum even after the merger is completed. We are confident of developing the MCSLFS and MBSL Savings Bank branches too and getting their contribution to the final results of MBSL. He is also very confident that with the current guidance of the Board of Directors and with the commitment of his staff, the goals could be reached within the set timelines".
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Unrecorded transactions & discrepancies drives Sierra into the red

Part written off, no fraud alleged

Sierra Cables PLC has posted a loss of Rs.306.5 million after tax in the year ended March 31, 2014, up from a loss of Rs.24.6 million a year earlier on account of certain unrecorded transactions and discrepancies in its accounts that have not been described as a fraud in the company’s annual report.

"Operational performance this year was undermined pursuant to the identification of certain unrecorded transactions as well as discrepancies between the physical stock of inventory and recorded balances, in relation to both prior and current year," the company’s Chairman Mr. Priyantha Perera has told shareholders in the annual report.

"These unrecorded transactions and discrepancies were quantified following a report from the auditors. The current year’s financial statements now incorporate the unrecorded revenue, expenses and assets, while a part of the value of inventories and finished goods were written-off."

He said that these adjustments triggered a considerable negative impact on the operating results of the year under review and disclosures regarding these matters had been made to the Colombo Stock Exchange.

Sierra had meanwhile initiated action to rectify and prevent such occurrences in the future, Perera said.

One of Sierra’s Associate companies, T&G Lanka (Pvt) Limited reported a profit of Rs.0.36 million in the year under review against a loss of Rs.5 million the previous year while Tea Leaf Resorts Holdings (Pvt) Limited reported a loss of Rs.0.7 million against a loss of Rs.0.05 million in 2013. Perera said that this company was presently awaiting approval to commence operations.

Of the two subsidiary companies, Sierra Industries (Pvt) Limited engaged in manufacturing PVC pipes, had commenced commercial operations in 2012.

However its operational results have been affected by a delay in receiving anticipated commercial orders for water supply schemes from within the group, lower than forecast margins and delay in obtaining SLS Standard for fittings.

"Several measures were implemented to arrest losses, including strengthening the sales team and the debt collection process," Perera said.

He also reported that Sierra Power (Pvt) Limited focused on mini hydro projects has commenced civil construction work.

"Whilst our inherent strengths and resilience enabled us to surmount challenges, the disquieting occurrence this year has strengthened our resolve to fortify our internal control systems, an aspect we have undertaken without delay," Perera said.

"Measures have been introduced to tighten and improve internal processes as well as our computerized systems so as to augment our risk management framework."

He also announced Sierra had a major order worth over Rs.1 billion which will contribute significantly to their growth plans.

"The ensuing year will probably pose its own share of challenges. Nonetheless, the improved prognosis for infrastructure development and national development offers considerable business opportunities for our diverse business segments," he said.

The company’s Auditors, KPMG, has issued a qualified opinion on the group results saying that certain transactions relating to the operations of the company had neither been recorded in the general ledger nor in the financial statements of the company up to March 31, 2014.

"The company has neither followed the established accounting procedures nor used the accounting system of the company for recording and accounting for these transactions as it had followed for recording and accounting for other transactions of the company up to 31st March 2014," the Auditors have said.

Sierra Holdings (Pvt) Limited with 58.11% is the controlling shareholder of the company followed by Browns Investments (5.99%) and Mr. D.S. Panditha (3.17%). The EPF too owns 1.51%.

Sierra has a stated capital of Rs.894.6 million, retained earnings of Rs.40.5 million, a fair value reserve of Rs.87.8 million and revaluation reserve of Rs.332.9 million in its books.

Total assets ran at Rs.3.02 billion and total liabilities at Rs.1.65 billion.

Net assets per share were down to Rs.2.52 from Rs.3.08. The Sierra share traded at a low of Rs.1.60 and a high of Rs.2.70 during the year under review against a trading range of Rs.2 to Rs.3.70 the previous year.

The directors of the company are: Messrs. W.A.P. Perera (Chairman), D.S. Panditha (MD/CEO), G.S.M. Irugalbandara, D. Lokuge, J.P. Ratnayeke, E.A.D.T.B. Perera, Dr. D.G.K.E. Weerapperuma, Prof. A.K.W. Jayawardane, B.W.N. Rupasinghe and P.R. Saldin.
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Cargills plan to delist Kotmale & run merged dairy operation

Cargills (Ceylon) PLC (CCP) has sent out an offer document to voluntarily acquire all the remaining ordinary shares of Kotmale Holdings PLC (KHP) not already owned by Cargills or any other person acting in concert with Cargills offering a price of Rs.62.50 per share which is a premium over the Rs.55 per share paid to acquire the major stake of the company.

The Kotmale shares are owned by Cargills Quality Foods Limited (CQF) and Cargills Quality Dairies (Pvt) Limited (CQD). Cargills is now paying the Rs.62.50 price of the volunatary offer to buy Kotmale on the secondary market increasing its shareholding of that campany to over 95%.

"The ultimate intention of CCP is to delist KHP from the official list of the CSE and subsequently merge the operations of KHP with CQD. The objective of this restructure is to create a unified entity focusing on carrying out the dairy operations of the group.

"The business operations will be continued under KHP until the entities are amalgamated. Subsequently to amalgamation, the business operations of KHP will be continued under the merged entity with the absorption of the assets and liabilities.

"The surviving amalgamated company will absorb all employees of KHP and its subsidiaries at the date of amalgamation and will continue to be employed by the entity," the offer document said.
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Milk powder price controls drive down LMF profits

No dividend recommended as earnings plunge

Lanka Milk Foods PLC (LMF) has seen a sharp downturn in profitability both at group and company levels in the year ended March 31, 2014 with the group attributable profit slumping 83.71% to Rs.61.1 million from Rs.374.9 million the previous year while the company saw its profit plunge 81% to Rs.44 million from the previous year’s Rs.231.2 million.

LMF Chairman Harry Jayawardena has said in the company’s annual report that although overall country economic indicators have improved during the year, "the milk powder sector continued to face challenging conditions."

Lakspray generates 44.27% of the group’s turnover followed by Ambewela (17.33%), yoghurt (12.99%) and fresh milk (6.95%),

Jayawardena expressed the hope that the government and the Consumer Affairs Authority will take a well informed decision to allow price increases in line with rising global prices of powdered milk in order to ensure a level playing field in the industry.

Jayawardena’s daughter, Ms. D.S.C. Jayawardena also said as much in the annual report stating:

"The profitability of the powdered milk arm suffered during the year due to the refusal by the Consumer Affairs Authority to allow companies engaged in the marketing and distribution of powdered milk to hike their prices in keeping with the global price rise in the rates of powdered milk."

"This ongoing and unfavourable status quo for the last two years is eroding the profitability of the powdered milk business in the country and gives rise to an urgent need for the renewed appraisal of price structures," she said.

Although LMF had made several representations to the concerned authorities to consider the plight of powdered milk companies, no positive response has been forthcoming so far.

LMF which owns 12% of the Distilleries Company of Sri Lanka, one of the country’s strongest listed corporates, has recommended no dividend for the year under review.

Mr. Harry Jayawardena said that LMF has sustained market leadership in several segments of the dairy industry through accelerated innovation and meaningful engagement with consumers.

"We are confident that our strong management systems and newly improved operational processes will combine to deliver much strong profitability in the upcoming financial year," he said.

The company which is into milk production running a herd of over 2,000 cattle in its dairy farms had injected Rs.875 million into its subsidiary, Lanka Dairies (Pvt) Limited to expand production capacity from 2,650 litres per hour to 8,500 litres per hour. New state of the art machinery enabled them to supply milk in the latest screw cap in one-litre slim packs in keeping with international standards.

Ms. Jayawardena said that the demand for fresh milk had reached a peak during the year enabling LMF to function at optimum capacity with the demand for fresh milk outstripping supply at the end of the period under review.

Ambewela Yoghurt had delivered a strong performance during the year with the Ambewela products boosting turnover Rs.847 million from Rs.683 million the previous year. Lanka Dairies earned revenue of Rs.1.2 billion during the year, up from Rs.1.08 billion the previous year.

"Ambewela products and Lanka Dairies were the two best performing companies in the Lanka Milk Foods Group in the period under review. Meanwhile, Lanka Milk Foods (CWE) PLC earned revenue of Rs.2,446 million during 2013/14 and posted a gross profit of Rs.171 million during the same period," she said.

She further reported that the upsurge in demand for fresh milk has accelerated their expansion plans in order to expand capacity further to meet the higher demand.

LMF has a stated capital of Rs.999.95 million, a capital reserve of Rs.105.1 million, an available for sale reserve of Rs.7.47 billion and revenue reserves of Rs.1.4 billion in its books.

Total assets ran at Rs.11.6 billion and total liabilities at Rs.1.6 billion.

Millford Exports (Ceylon) Limited with 33.57%, Mills Enterprises Limited with 15.3% and Melstacorp (Pvt) Limited with 14.87% are the biggest shareholders of the company.

Net assets per share had grown to Rs.247.08 from Rs.212.93 the precious year while the share closed for the year at Rs.107.10, down from Rs.108.30 the previous year.

The directors of the company are: Messrs. D.H.S. Jayawardena (Chairman), R.K. Obeyesekere, Zaki Alif, Mr. C.R. Jansz, Ms. D.S.C. Jayawardena, D.S.K. Amarasekera and Dr. A. Shakthevale.
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