Aitken Spence PBT up by 20.6% in Q1

Diversified blue chip conglomerate Aitken Spence PLC reported a pre-tax profit of Rs 1.2 bn for the first quarter, a growth of 20 per cent, over the previous year, while the Group’s profit attributable to shareholders of the parent grew by 12 per cent to Rs. 746 mn.

The Company’s financial results for the three months ended 30th June 2014 released to the Colombo Stock Exchange on Friday, reported that the revenue for the first quarter increased by 28.8 per cent to Rs. 10.32 bn, whilst earnings per share for the quarter stood at Rs. 1.84, an increase of 12% per cent over the corresponding period in the previous year.

The Tourism arm of the Group, which includes hotels in Sri Lanka, the Maldives, India and Oman together with its leading destination management company in Sri Lanka, reports healthy returns. The sector also expanded its portfolio with Al-Jabal Al-Akhdhar hotel in Oman and a five-star 143 room hotel in Chennai, India. Proposed 500-room, USD 100 million beach resort in Ahungalla jointly owned with international hotel chain - RIU commenced its construction during the quarter and is expected to open during the second half of the financial year 2016/17.
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People's Leasing Rs 3B debt issue rated 'AA-'

Ceylon FT: Fitch Ratings has assigned People's Leasing & Finance PLC's (PLC) proposed senior unsecured debentures of up to Rs 3 billion an expected National Long-Term 'AA-(lka)(EXP)' rating.

"The issue is expected to have tenors of three and four years with fixed-rate coupon payments. PLC expects to use the proceeds for working capital purposes. The proposed debenture is rated in line with PLC's National Long-Term Rating of 'AA-(lka)', given that the issue is expected to rank equally with the company's senior unsecured creditors," the ratings agency said in a statement.

"PLC's National Long-Term Rating reflects Fitch's view that PLC's parent, the State-owned and systemically important People's Bank (PB, AA+(lka)/Stable), has a high propensity but limited ability to provide extraordinary support to PLC if required, because PLC is strategically important to PB and due to other linkages.

"These linkages include PB's majority ownership and board representation, a common brand and PLC's association with PB's franchise. In 2013, PLC accounted for over 11% of PB's group assets, and contributed to over 25% of its post-tax profits. Apart from its own branches, PLC also operates 109 window offices within PB's branches.

"It is likely that State support will flow to PLC through PB, due to their strong linkages. PLC's association with the PB brand and therefore with the State, and the consequent reputational risk to the State should PLC fail, also supports Fitch's view.

"PB's limited ability to provide support to PLC stems from its own 'AA+(lka)' rating, which is in turn derived from the Government of Sri Lanka's (BB-/Stable) high propensity but moderate ability to provide support to the bank under extraordinary situations.

"The two-notch differential between the National Long-Term ratings of PLC and PB reflect Fitch's view that timely support from the State may be constrained by regulatory restrictions between the entities (such as maximum exposure limits) or administrative delays usually seen in layered support structures.

"PLC's outstanding senior unsecured redeemable debentures are rated in line with its National Long-Term Rating, because the instruments do not have any going concern-or gone-concern loss-absorbing features, and are therefore expected to be repaid in line with PLC's other senior creditors in the event of a liquidation.

"PLC's ratings may be downgraded if PB gives up its majority stake in PLC, or if PB's ability to provide support weakens, or if PLC's strategic importance to PB diminishes over time.

"Fitch does not expect PLC's standalone credit profile to improve above its Long-Term IDRs, primarily due to higher business and financial risks than companies that are rated higher than PLC. Therefore, Fitch does not expect PLC's ratings to be upgraded, unless PB's ratings are upgraded," Fitch said.
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US$ 35 billion Diaspora ignored

By Mario Andree

Ceylon FT: While foreign investments are limited and competition is high, Sri Lanka should focus on attracting the Diaspora into investing in the country to improve foreign direct investments according to an investment adviser, who pointed out that there were more than three million Sri Lankans living abroad whose earnings amounted to half the country's GDP.

York Street Partners Director Hiran Embuldeniya told the 15th Sri Lanka Economic Summit organized by the Ceylon Chamber of Commerce that the country was not focusing on the Diaspora for economic growth.
According to him there was much potential to develop the economy by attracting the Diaspora to engage in development activities.

He said that the earnings of the three million or so Sri Lankans living abroad amounted to over than US$ 35 billion, which was more than half the Sri Lankan GDP, could be attracted to the country.

According to Embuldeniya the country needed to focus more on promoting Diaspora investments to Sri Lanka in order to improve investments in the country."Sri Lanka should focus on increasing foreign direct investment through the Diaspora," he said.

Highlighting achievements by neighbouring India in increasing investments by Diaspora, he said Reliance Industries of Mukesh Ambani was a good example of a Diaspora investment which reached greater heights.

Further he said, the country was not appreciating and recognizing the achievements by Sri Lankans living abroad, which could create a poor image for the country.

Sri Lanka has been engaged in several promotional campaigns which were synchronized into one this year after the cabinet approved the mega scale destination promotion campaign.

However, according to Embuldeniya, appreciating and recognizing the activities of Sri Lankans living abroad could yield better results for the country.

The country is struggling to attract the required foreign direct investments needed to establish sustainable economic growth over the long term, and the government has noted that such investments would have to reach US$ 5 billion by 2016, after touching just US$ 913 million last year.

Sovereign credit agencies Fitch, Moody's and Standard and Poor's have all noted in recent credit reviews that governance and institutional integrity issues were holding them back from giving Sri Lanka better credit ratings. They also noted that the level of public debt and interest payments were among the highest in the world. The Sri Lanka Economic Association has for years being advocating the need to lay the groundwork to attract more FDI and boost exports in order to free the country from a vicious cycle of rising debt.
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Seylan Bank PAT grows 21 percent in 1H

Seylan Bank recorded an impressive performance with Profit before Income Tax reaching Rs 1,863 million for the six months ended June 30, 2014.

Profits after Tax reached Rs 1,213 million a 21% increase compared to the Rs 1,002 million reported in the corresponding six month period in 2013.

The quarterly PAT figure of Rs. 698 million was an improvement of 41% compared with Rs 497 million reported in the corresponding three months of last year.

Net Interest income increased from Rs 4.27 billion to Rs 5.16 billion, a 21% increase. Net fee and commission income increased by 8% from Rs 973 million to Rs 1,056 million with the bank showing a continuation of the solid growth trend recorded in the past few years.

During 1H 2014, the Bank increased its deposit base from Rs 167.4 billion to Rs 172.7 billion.

The growth was predominately achieved through the mobilisation of current and savings deposits, which enabled the Bank's low cost deposit base to increase from 33% in December 2013 to over 35% as at end June 2014. However, the Bank's Net Advance portfolio reduced from Rs 136.5 billion to Rs 133.1 billion during the six months under review, due to slower than expected credit growth in the industry and the impact of lower gold prices.

Despite the decline in gold prices and its impact on the pawning base, the Bank improved its asset quality through effective recovery and rehabilitation efforts.

This enabled the Bank to maintain its Gross NPA (net of IIS) at 10.86% as at end June 2014.

www.sundayobserver.lk

Krrish deadline for lease payment nears

By Bandula Sirimanna

The Krrish Group is most likely to make the final payment for the land lease in its Transworks Tower project before or by the September deadline, a senior official said.

Deputy Director General Urban Development (UDA) Nihal Fernando told the Business Times that Krrish is drawing up designs of the project and unlikely to withdraw from the project as they have to pay only another 10 per cent of the due land lease payment.However it is the same 10 per cent payment that has been delayed by the organisers since March 2013.

The government has issued a September ultimatum to the Krrish Group, to either take up the project by paying the balance of Rs. 639.5 million plus 12 per cent interest totalling Rs.800 or depart.

Meanwhile Treasury officials said they are yet to receive details of all payments made up to now by Krrish, a procedure that is followed in all mega and mixed development projects.

In the case of other mega development projects like Shangri-La and CATIC, all payments up to date had been deposited in Treasury General Accounts, a senior official revealed. www.sundaytimes.lk

Stock market dilemma: Information important but too much could lead to ‘insider’ trading

By Quintus Perera

While information is vitally important to invest in the stock market, there could also be problems in the sense that too much information could be considered ‘insider’ information – was the view of a top official of the Colombo Stock Exchange (CSE).

Vajira Kulatilaka, CSE Chairman, participating at the launch of the Institute of Chartered Accountants of Sri Lanka Annual Report Awards 2014, held in Colombo on Wednesday, said “If there is information sharing in a right and timely manner there goes inside information (it could result in ‘inside information and insider trading)”.

He said that the world is changing today and that “the thing” is information – information imparted in a timely manner, time not in months or years, but in milliseconds and nanoseconds and that information should be there to trade and to make right investments.
Mr. Kulatilaka said that providing information has to be improved not only to produce accounts but it should be distributed as expeditiously as possible in a timely manner. Sometimes information is not coming out on a timely manner, he said.

While there is room to improve in this respect, he said that they have come a long way during the last six years as earlier accounts were not believed or trusted but now people are starting to believe and trust accounts.

That itself is an achievement, he pointed out. Early dissemination of information is important not only for accountants, but also to the capital market as he said that they are promoting capital market outside this country. “When we promote the capital market outside, one of the basic things they (foreigners) look at is as to how the information is given. They find that locals have more information than what they have.”
He said that they (foreigners) like to see that information is shared equally. Mr. Kulatilaka said that they have taken great efforts during the past one or two years to go out and position Sri Lanka in the minds of the investors outside the country to come and invest in this country and to do that information is extremely valuable.

This year’s Annual Report Awards of the Institute of Chartered Accountants (CA Sri Lanka) is on the theme “Annual Reports Awards reaches Gold”, as the institute is holding this for the last 50 years consecutively, in its history of 55 years. At this occasion CA Sri Lanka President Arjuna Herath spoke of the institute’s proud history where by now they are aligned with all the international accounting and auditing standards and are considered as a very progressive institute across the world and a role model in the accounting fraternity in the world.

He said that they today are using the latest technology available and their curriculum is world class. Mr. Herath said that approximately 25 per cent of their members are serving overseas. He elaborated that they are in the leadership of the entire accounting fraternity of the Asia Pacific region.

To support this internationally acclaimed accreditations, he said, they are also collaborating with the Securities and Exchange Commission over a decade now in creating best practice guidelines to corporate governance in this country.

In order to facilitate the effective implementation of corporate governance in the corporate environment in this country, he said that they have launched recently the Corporate Directors Programme to impart knowledge and skills in line with CSE and SEC rules and regulations, financial reporting requirements, risk management, independence etc.

He said that the Treasury Secretary has instructed all government agencies to follow the Sri Lanka Public Sector Accounting Standards. At the moment CA Sri Lanka is conducting training to ensure that public sector agencies would be equipped to implement these public sector standards.

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