Multi Finance records a significant profit for the last quarter

Multi Finance PLC reported a total turnaround of its results for the fourth quarter ended 31 March recording a net profit of Rs. 18.6 million, against a Rs. 54.7 million loss year-on-year (YoY), as per its published accounts.

During the quarter under review, net income from operations reached Rs. 39.9 million, 71% growth compared to the quarter ended 03/2013 which was recorded as Rs. 23.3 million. The net interest income for the quarter ended 03/14 also increased with 24% reaching Rs. 31.7 million, compared to Rs. 25.6 million YoY owning to improvements in quality lending and strict credit processes introduced. Operating expenses of the company fell to Rs. 35.5 million as against Rs. 41.4 million YoY which is a 14% improvement mainly due to strict cost control mechanisms adopted.

Most significant is that the company’s net impairment has recorded an outstanding improvement of 198% which is a reversal of Rs. 12.6 million as against a charge of Rs. 12.8 million in the quarter ended March 2013. Further NPLs on leasing, HP and loans have come down to 4.41% quarter on quarter due to aggressive recovery techniques adopted by the company. Earnings per Share of the company have improved to Rs. 3.32 against a loss per share of Rs. 9.74 within the quarter while improving the company’s quality of the asset portfolio. Return on equity has improved to 5.54% from -13.88% and Return on assets up by 83% from -4.09% to 1.25%YoY.

Commenting on company’s improvement, Multi Finance Chief Executive Officer Pushpike Jayasundera said the total re-structuring of the company, introducing best practices in the industry, BPR carried out with regard to most of its processes were the key factors to achieve this significant results in the quarter.

“I am happy to announce that Multi Finance team managed to achieve this total turn around recording a significant net profit of Rs. 18.6 million, up by 134% YoY. This achievement was possible due to the prudent management policies adopted at the right time and dedicated and motivated team said Jayasundera.

The company’s had re-engineered its entire processes from lending, recovery to deposits in order to harness the best possible output. At the same time its staff was motivated and directed to increase its output per employee by recruiting able experience personnel from top performing financial and banking institutions. Further, new innovative products were introduced to increase volumes during this period. “The confidence placed by our valued customers helped Multi Finance to achieve improved performances and we expect to continue this growth by supporting our customers and expand our product portfolio and reach,” Jayasundera said.
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Amana Takaful profits up eight fold, mainly in General insurance

Sri Lanka’s Amana Takaful insurance recorded a Profit After Tax (PAT) increase in 2013, to Rs. 117 million, which was eight times that of its 2012 PAT, as per a statement by the company, which attributed this increase in profits “largely” to its General nsurance arm.Further, the company also showed a consolidated Gross Written Premium (GWP) of Rs. 1.9 billion in 2013, an increase of 19.7 per cent over 2012, wherein Rs. 1.32 billion was for the Life Insurance segment and Rs. 543 million was for General Insurance.

According to the insurer’s Chief Executive Fazal Ghaffoor; “While the Life segment contributed to our overall growth in volume, the modest increase in the General segment contributed largely to profits. This was possible mainly due to our ability to hold price, in addition to productivity gains and efficiency improvements, despite pressure on margins”. Elaborating, the company noted that the “Life business growth was balanced with new subscriptions between the regular portfolio and Prosper, our wealth management product, growing collectively by almost 50 per cent over 2012. The motor and non-motor classes improved by 9.8 per cent and 13.3 per cent, respectively. Motor class achieved product-line profitability for the first time in a full year while all other classes continued their profit momentum”.

Adding to this, Mr. Ghaffoor stated that the “net claims experience was Rs. 595 million, which is 2.9 per cent over 2012. Industry-wide, Amana Takaful has a record of a relatively low claims ratio, attributable to astute claims management due to prudent underwriting and risk assessment. This is reflected in our claims ratio of 54.2 per cent for the segment, which is the lowest amongst the insurance players who are listed in the Colombo Stock Exchange.

The combined ratio of the segment is 97 per cent and as a consequence the risk fund is in surplus for the second successive year, enabling the company to distribute a surplus to non-claimant participants this year too. The overall operational efficiency of the company is reflected in the underwriting margin of 28 per cent, the highest amongst the listed insurers. The total underwriting result for the year is Rs. 531 million, 24 per cent higher than 2012″.

The company further revealed that it had “distributed a surplus of 12.5 per cent to all non-claimant participants in 2012″.

Meanwhile, it also emerged that the insurer faced what it called a challenge by extraneous circumstances, in early 2013, with the company commenting; “Industry’s double digit growth in the post conflict years, was restricted to 9.8 per cent in 2013, principally by the lower performance of the motor class which accounts for two-thirds and more of the market.

Motor class growth halved from 16.5 per cent in 2012 to 8.2 per cent in 2013 due to lower registrations exacerbated by heightened price-cutting which took a toll on value performance”.
(JH)
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Acuity to tie up with US, UK brokerages

Acuity Partners are in discussion with three leading stock brokerage houses in the UK and USA in a bid to establish partnerships with them.

Acuity Partners CEO Prashan Fernando told the Business Times that two of the brokerage houses are in the US and one in the UK but declined to name the companies since the discussions are at the final stages and the parties were currently engaged in working out the legal matters pertaining to the partnership. He noted the partnership would ensure the parties would work together with “mutual interest” where clients in those markets who want to invest in Sri Lanka could do so through Acuity Partners.
Foreign funds were interested mainly in the blue chips of the diversified and banking sectors listed on the Colombo Stock Exchange, he explained.

Mr. Fernando pointed out that these companies were in touch with the frontier and emerging markets and were looking favourably at Sri Lanka.

As part of their partnership Acuity Partners would provide adequate exposure in these markets in addition to the sharing of research and participation in road shows, the CEO explained.

In this regard, a road show scheduled for September in New York would ensure that Acuity Partners would be part of this as well.
Mr. Fernando observed that these funds in identifying Sri Lanka as a favourable market to invest in within the frontier markets proved positive since the island nation was faring better than Bangladesh and Vietnam in terms of literacy levels, healthcare and communication. However, he pointed out that there were concerns on the law and order and governance fronts. Vietnam was considered a key competitor within the frontier markets for Sri Lanka since “most of our funds are going there,” Mr. Fernando said.
Other markets eyed closely by foreign funds were mainly Burma and Thailand, it was noted.

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‘Touchwood’ – is the saga over?

The moment Lanka Kiwlegedera, CEO of the troubled Touchwood Investments, took over the organisation, investors in this ‘attractive’ forestry management company felt something amiss.

On the Touchwood website was this ‘accolade’ to Kiwlegedera being referred to as: “One of Sri Lanka’s most eminent corporate personalities”. “Not by a chance,” quipped a frustrated Touchwood investor. The Touchwood chief had also been in trouble before – once being accused in the Magistrate’s Court of Mount Lavinia of unpaid bills.

Their fears were not in vain. In the weeks that followed his take-over of the company from the Maloney couple (Ross and Swarna who are reportedly somewhere in Asia), supposedly with new investors there were musical chair-type appointments on the board. Directors came and went, some functioning for a day. Duminda Silva, parliamentarian and murder case suspect and his father, were appointed directors but stepped down a few days later.

At the last annual general meeting of the company, Kiwlegedera grandly said they had found new investors from Singapore and the company was on a turnaround and the infusion of new capital of over Rs. 3 billion or US$21 million from Duminda Silva’s business partner in Singapore. Ross Maloney even spoke via Skype at the meeting to provide some legitimacy to the event.

Kiwilegedera was appointed executive director, acting CEO and finally chairman/CEO in three separate announcements. He then went on to make totally contradictory statements to the media, lately distancing himself from the Maloneys’ as saying that the company now focuses on its Sri Lanka plantations, and also talking about a Korea investor (what happened to the Singapore investor?).
The Touchwood tentacles spread across Asia with companies or subsidiaries in Hong Kong, Thailand, Dubai, Australia, China, Vietnam and Cambodia, according to court documents.

Finally one investor took the company to court some months back and on Thursday, Touchwood was told to wind up as its assets didn’t match its liabilities. A liquidator is to be appointed to sell off the assets and settle the investors who have bought lots (trees) in Touchwood plantations. In the meantime, trees have been cut at some of the plantations, some with Kiwlegedera’s knowledge, some without, he claims.

No doubt the company, which for all purposes has just two employees (Kiwlegedera and an aide), as seen by Business Times reporters visiting the ‘new’ office on Monday, will contest the ruling in a higher court leading to another protracted period in which investors have to kick their heels for a money-back solution. While court records show that Touchwood has 257 investors in their books in Thailand plantations, how many more are there, is uncertain in Sri Lankan plantations. In fact there are two or three groups of concerned parties (investors) trying to recover their failed investments like the group coordinated by lawyer Lakshan Dias.
Some of these groups are not in favour of liquidation saying that they would like to independently run the plantations and sell the trees at gestation time. The future seems uncertain and bleak for Touchwood investors.

Appeals have been made to the Police to issue an international warrant for the Maloneys’ while the Securities and Exchange Commission (SEC) also wanted to question the Maloney’s over the Touchwood accounts. Touchwood is a listed company in the Colombo Stock Exchange (CSE) and for all purposes, the SEC is reluctant to see the company going ‘down under’ (winding up) as it provides a negative signal to the stock market.

Whether negative or not, regulators need to ensure fly-by-night or cash-grabbing businessmen don’t seek refuge under the CSE umbrella as ‘respected’ companies. The investing public needs to be shown some honesty by the regulating authorities.

Touchwood appears to be anything but a Ponzi scheme (bringing in more depositors/ investors to pay the debts/ exiting investors) like Golden Key and the many finance companies that sprung up in the early to late 2000-2010 period. Some of those companies and their misdeeds would soon find cover under the financial sector reforms when they merge with stronger entities, leaving the latter the burden of clearing the debts.

Ironically why the Central Bank has on one hand repeatedly, in recent years, run newspapers advertisements warning the Sri Lankan public against Ponzi schemes and explaining what a Ponzi scheme is, on the other hand many licenses have been issued to dubious finance companies which have collapsed and waiting now (thankfully) to be swallowed by bigger entities. There are a few crises that have been ongoing for many months with depositors suffering in silence, some even dying for want of their deposits like those at the CIFL (Central Investments and Finance Ltd) whose former top promoter Deepthi Perera, is on the run. Until a few weeks ago, depositors were still housed outside the CIFL premises in Colombo, hoping for relief from an organization that showed ‘respectability’ and drew deposits from the public. Consider this report in the Sunday Times Business dated September 17, 2007: “Central Investments & Finance Ltd (CIFL) has announced the appointment of Professor L.R. Amarasekara as the new chairman of the company effective September 10. Deepthi Perera who was the Chairman earlier resigned from the Board due to personal reasons, the company said. The Board of Directors at a special meeting held last week decided to appoint Prof. Amarasekara as the Chairman of CIFL. Prof. Amarasekara is a consultant Physician and has over 20 years of experience in the financial sector. Shirley Perera is the Deputy Chairman of CIFL. In addition to them, CIFL has a wealth of financial experts on the board like H. P. J. De Silva, first CEO / General Manager of Sampath Bank, H.G.C. Rodrigo, fellow member of Institute of Chartered Accountants, Roshan Egodage, former Deputy Chief Executive of The Finance Company PLC, Gamini Sarath, former Director / CEO of Bankers Training Institute and Sharm Fernando, a lawyer and a banker.”

Where are all these respected individuals who lent their name to provide credibility and soundness to induce people to invest in the CIFL? The regulators need to take stock of those being appointed to banks, finance companies and deposit-taking institutions and ensure that such parties, instead of being mere directors, are also held accountable for the dealings of the organization.

The Touchwood saga is one that kicked off in the early 2000s’ when the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) had a problem with its accounts. However in a subsequent court case, the company was cleared of any irregularity in its accounts. The Maloneys, who launched the company offering huge returns on investment in forestry plantations, subsequently sold a major stake to LOLC which ran the company and appointed veteran banker Rienzie Wijetillake as the chairman. He stepped down in July 2012 after LOLC began easing out of the shareholdings, bringing back Maloney, then the largest single shareholder, as the chairman.

Maloney was also approved by the Central Bank as the investor to revive the CIFL, promising foreign cash to end that company’s woes. The rest is history.
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