Major refurbishing costs Taj, Rs. 529 mn. loss in 2013/14

"Only limited business possible during renovation"

Tal Lanka Hotels PLC has posted a loss after tax of Rs.529 million in the year ended March 31, 2014 against a profit of Rs.221 million the previous year with revenues impacted by the major renovation project undertaken in the financial year 2013/14 between April and October last year.

The company’s Chairman Mr. Raymond Bickson, said that the project involved renovation of guest rooms in the fourth, sixth and seventh floors, lobby, arrival area and bar at a cost of US$ 15.27 million.

This is the first loss posted by the company since 2009/10 when a loss of Rs.36.4 million was incurred.

"Due to the project only limited business operations were possible during the renovation period and this impacted the company’s revenue and profitability," Bickson explained.

The gross earnings during the year had fallen to Rs.1.29 billion from the previous year’s Rs.1.94 billion and the company incurred a gross loss of Rs.143 million against a gross profit of Rs.556 million the previous year due to this renovation.

Bickson said that the country was on course to develop into a major tourist destination with arrivals crossing the one million mark during the year.

"The company is now well poised to exploit this opportunity by positioning the hotel as one of the leading hotels in Sri Lanka. The company is also well placed to compete against international hotel brands that are expected to launch in Sri Lanka," he said.

Leading industry consultants continued to forecast a demand–supply gap in hotel room inventory, a situation that will be beneficial for existing hotels, Bickson said.

"However challenges exist in development of the industry, such as the need for more trained staff, improving service standards and to better promotional efforts particularly in non-traditional markets," he added.

The government had accorded priority to the tourism sector both to push economic growth and earn foreign exchange. The ongoing mega projects in the hotel sector were expected to raise the capacity in the industry to meet requirements of the targeted tourist arrivals, he said. Hence the timely completion of these projects is vital.

"The tourism development strategy continues to support the President’s vision of attracting 2.5 million visitors by 2016 with additional objectives of attracting US$3 million of FDI and increasing tourism related employment to 500,000 by the year 2016," Bickson concluded.

The company announced that as it intends to undertake extensive refurbishment of banqueting facilities in the coming year, due to operational requirements they were constrained to suspend the traditional annual shareholder lunch until further notice.

"We thank you for your support and understanding in this regard," the management said, in the annual report.

Net assets per share were down to Rs.12.81 from Rs.16.69 the previous year but the share closed at Rs.39 against the previous year’s Rs.25.

The directors of the company are: Messrs. R.N.E. Bickson (Chairman), A.P. Goel, U.L. Kadurugamuwa, B.K. Chaudhary, R.K. Chaudhary, T. de Zoysa, V.V. Singh, Ms. D.M.. Harris, Dr. G. Sundaram, V. Govindasamy, S. Joshi and C. Subramanian (Alternate to R.K. Chaudhary).
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Intense competition from abroad for large local projects hurt ACL profits

Cheaper cable manufacturers threat to market welllbeing

ACL Cables PLC, a major player in the manufacture and distribution of electrical cables in the country, had seen a marginal increase in group turnover during the year ended March 31, 2014 but seen profit before tax decline mainly due to intense competition with foreign suppliers for large local projects.

The company’s Chairman, Mr. U.G. Madanayake has said in the annual report that group turnover was up to Rs.11.4 billion from Rs.11.3 billion the previous year while profit before tax declined from Rs.753 million to Rs.688 million.

"The metal prices have been relatively stable during the year and therefore, gains or losses from procurement have not been significant," he said.

ACL group comprises three listed companies, ACL Cables PLC, Kelani Cables PLC and ACL Plastics PLC as well as unlisted ACL Kelani Magnet Wire (Pvt) Limited, Ceylon Bulbs and Electricals Limited, ACL Metals and Alloys (Pvt) Limited, Ceylon Copper (Pvt) Limited and ACL Electric (Pvt) Limited.

Madanayake said that government focus on infrastructure development gives the group confidence to look forward to increase in demand for cables and other electrical products.

"These favourable predictions and proposed development of the five hubs concept of the government gives us confidence to invest in technology and capacity expansion to meet future demand," he said.

"The current policy of the government is to increase liquidity in the market by lowering of interest rates with the hope of increasing demand for consumption and investment goods. Lower cost of capital will help existing industries to invest more and also to create a new set of entrepreneurs, thereby widening the industrial base in Sri Lanka. These are favourable trends for our industry,"

He noted that although the number of electricity consumers had grown by 4.5% according to CEB statistics, the demand for electricity was down 2% reflecting energy conservation practices adopted in response to electricity price increases.

However, sales to hotels and general purpose categories have increased by 5% and 5.2% respectively reflecting continuous growth in the tourism industry and other business activities.

In the industrial sector, there was a 1.9% increase in electricity consumption although that sector too would have adopted conservation methods to reduce expenditure on electricity, Madanayake said.

"These positive trends in demand will enhance our confidence that demand for cables by utilities and industries will continue to increase," he added.

The company’s Managing Director, Mr. Suren Madanayake attributed the drop in profitability and turnover of ACL compared to the previous year mainly due to some of the large orders they had undertaken the previous year tailing off during the year.

However, they were confident that this situation would be more than corrected from the second quarter of the current financial year.

The company’s turnover was down to Rs.6.3 billion from the previous year’s Rs.6.7 billion and its profit after tax down to Rs.98 million from the previous year’s Rs.161 million.

"Stiff competition in the market, the slight reduction in turnover and the lower margin we earned on some of the large orders are the key reasons for the reduction in profitability," he said.

"Even though margins were relatively lower, many large-scale projects helped us to maintain our turnover above Rs.6 billion. A gradual reduction of interest rates during the year helped us to keep the financial costs lower compared to those of the last year.

"The CEB continued to remain active during the year under review which helped us to maintain a satisfactory turnover from that segment. It was encouraging to see that exports showed a growth in turnover to expected levels," Madanayake said.

He explained that relative stability of the metal market was indeed favourable and prevented them from losing money; had this market been volatile it would have created unexpected gains or losses.

"Cheaper cable manufacturers continued to remain a threat for the well-being of the cable market and safety standards of the country though their activities were less prominent in the year," he said.

ACL had introduced a range of switches that would be considered an effort towards filling a void in the market place which lacked high quality products in line with original international standards.

They had already received a large order for the supply of Aerial Bundled Cables as a result of the government’s desire to modernize infrastructure while supporting the local industry. They congratulated the government for this initiative and sincerely believed that this trend of supporting the local industry will be a more regular feature.

ACL Cables has a stated capital of Rs.299.5 million, a capital reserve of Rs.1.44 billion and general reserve of Rs.1.12 billion in addition to Rs.3.24 billion retained earnings in its books.

Total assets ran at Rs.12.05 billion and total liabilities at Rs.5.2 billion.

Net assets per share were up to Rs.101.84 from Rs.95.48 a year earlier and the share closed the period under review at Rs.61 against Rs.65.50 a year earlier.

Mr. U.G. Madanayake with 38.13% and Mr. Suren Madanayake with 22.21% are the major shareholders with the EPF (5.24%), SLIC Life Fund (3.51%), NSB (2.13%), ETF (1.86%) and Mrs. N.C. Madanayake (1.72%) among the top 20 shareholders.

The directors of the company are: Messrs. U.G. Madanayake (Chairman), Suren Madanayake (MD), Mrs. N.C. Madanayake, A.M.S. de S. Jayaratne, Hemaka Amarasuriya, D.D. Wahalatantiri and P.S.R. Casie Chitty.
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On’ally does nicely, rewards shareholders with highest payout

On’ally Holdings PLC, owners of the Unity Plaza in Galle Road, Bambalapitiya, which is the focus of the thriving information technology industry in the country with many computer related companies located there, has sustained growth during the year ended March 31, 2014 posting a profit before tax of Rs.88.9 million excluding the gain on revaluation of investment properties of Rs.235.5 million.

The Chairman of On’ally Holdings, Mr. P.A.I.S. Perera who is also Chairman of the UDA, said that this was a 23.98% increase from the previous year.

The 27th Annual General Meeting of the company summoned on September 25 has a special resolution on its agenda under "Special Business". This seeks to amend the Articles of the company by deleting Article 110 which specifies that the quorum necessary a board meeting shall be a majority of the directors and that any such quorum should include Mr. Onally Gulamhusein or his nominee.

Mr. Gulamhusein founded the company 27 years ago and Unity Plaza stand on prime Galle Road Bambalapitiya land that belonged to him. During the construction stage when the project ran into trouble, the UDA which is now the biggest shareholder of the company with 47.62%, came into the ownership structure and the succeeding UDA Chairmen have served as Chairman of the company.

Mr. Gulamhusein who is now 90 years of age has continued to be Managing Director of the company since its inception and continues to hold this position. A resolution enabling him to continue is included in the agenda of the next AGM.

Perera said that the year under review had seen turnover grow 7.15% to Rs.105.38 million and the company was able to increase both revenue and profitability by revising the rentals of existing tenants and maintaining 100% occupancy during the year under review.

The directors have approved a final dividend of Rs.1.70 per share on top of an interim dividend of Rs.1.10 per share to give shareholders a return of Rs.2.80 per share for the year – the largest pay out to shareholders since the inception of the company, up 12% from the previous year.

The earnings per share during the year under review including fair value gain on property was Rs.15.19, up from Rs.3.72 a year earlier while the EPS excluding fair value gain stood at Rs.4.58, up from Rs.3.72 the previous year.

The company has a stated capital of Rs.175 million, a revaluation reserve of Rs.27.9 million and retained earnings of Rs.1.08 billion in its books.

Total assets ran at Rs.1.5 billion and total liabilities at Rs.231.8 million.

The UDA with 47.6% is the top shareholder followed by Ceylon and Foreign Trades PLC with slightly under 16% and Mr. On’ally Gulamhusein with 12.9%.

The company’s share traded at a high of Rs.59.70 and a low of Rs.36.20 against a trading range of Rs.68.50 to Rs.41.60 a year earlier.


The directors of the company are: Messrs. P.A.I. Sirinimal Perera (Chairman), Onally Gulamhusein (MD), Dr. S.A. Gulamhusein, Mrs. Tharsini Sarveshwaran (Deputy MD), B.V. Selvanayagam, G.T. Fazleabas, Dr. D. Gunasekera, Lakshaman Hulugalle, K.E.V.N. Fernando, W.L.D.P.V. Jayawardene, A.Y. Tyebkhan Alternate to Dr. D.C. Gunesekera) and S. Selvanayagam (Alternate to B.V. Selvanayagam).
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Distilleries losing business to competitors not paying tax

Harry flays lack of level playing field & corruption

Mr. Harry Jayawardena, Chairman of the Distilleries Company of Sri Lanka PLC (DCSL), has complained bitterly of the lack of a level playing field for the alcohol business with rampant increase in non-invoiced and tax-unpaid alcohol openly eating into the market share of legitimate businesses.

The year ended March 31, 2013 had seen the DCSL group seeing turnover dip from Rs.65.8 billion to Rs.63.2 billion while at company level revenue was down from Rs.51.5 billion to Rs.47.75 billion.

While group profit after tax was up to Rs.6.2 billion from Rs.5.25 billion a year earlier, the company saw the profit decline from Rs.6.87 billion to Rs.5.35 billion.

Jayawardena said that every business needs a level playing field to function to its optimum potential, to expand and grow in volume and value.

"However, such a just and level playing field continues to remain out of reach for us year after year," he complained.

"The rampant increase in the non-invoiced and tax-unpaid alcohol sector is openly eating into the market share of legitimate alcoholic beverage businesses such as ours, which pay taxes as per the laws of the land while adhering to the strictest quality guidelines."

He said that DCSL does not directly or indirectly lure young people into alcoholism, "and never under any circumstances target children."

But certain industry players circumvent the National Authority on Tobacco and Alcohol (NATA) Act and resort to various subtle, tactical and innovative campaigns to do so.

"Yet, we note with concern that the authorities turn a deaf ear and a blind eye to such actions," he alleged.

Jayawardena said it was his firm conviction that the non-invoiced and tax unpaid alcohol sector should be the focus of investigation and national scrutiny as it is a scourge and promotes alcohol abuse and other social problems.

"Moreover, even the national coffers are denied substantial excise revenue which could be accrued if the non-invoiced and tax unpaid alcohol sector was discouraged by better enforcement and checks," he said.

Pointing out that DCSL’s tax payment to the State have come down from Rs.40 billion in 2013 to Rs.37 billion in 2014 due to a drop in sales as a direct result of the rise in the non-invoiced and tax unpaid alcohol segment and duplicate products in the market.

He estimated that if their beverage sector had continued to grow at a steady trajectory on a level playing field, state coffers would have benefited from approximately an additional Rs.15 to Rs.20 billion tax revenue from them.

Jayawardena said that 65% of the labeled price of their product goes to the state in the form of taxes.

On top of the loss of excise revenue due to the growing untaxed alcohol business, there was leakage of ethanol from local sugar factories and illegally imported ethanol in the market.

"It is common knowledge that the paint and cologne industries act as a front for the import of spirits in order to pass through customs, while also functioning as a front for the illegal manufacture and sale of liquor, which is sold cheaper than those that are heavily taxed," he said.

Jayawardena stressed that it is vital that regulators enforced the law and contain the widespread corruption that fuels illicit business activities in the alcohol sector. DCSL has made representations to the authorities in this regard and was hopeful that the government will reclaim its lost excise revenue by stamping down the untaxed alcohol sector sooner rather than later.

He said that despite violations taking place in the industry, they remained optimistic about the potential of their alcoholic beverage business. This bullish view has reflected in their investment of Rs.2.5 billion in a state-of-the-art blending and bottling plant which will enhance capacity, enable better packaging and presentation, and prevent adulteration of their products.

DCSL has a stated capital of Rs.300 million, reserves of Rs.20.8 billion and retained earnings of Rs.32.5 billion in its books.

Considered one of the wealthiest quoted corporates in the country, its total assets run at Rs.83.7 billion and total liabilities at Rs.23.7 billion.

Milford Exports (Ceylon) Limited with 41.49% is the largest shareholder of the company followed by Lanka Milk Foods (12.65%), Mr. M.A. Yaseen (11.08%) and Mrs. Lorraine Estelle Marlene Yaseen (4.78%).The dominant shareholders of DCSL are companies/entities that are controlled/influenced by Mr. Harry Jayawardena.

The DCSL share traded at a high of Rs.218 and a low of Rs.160 during the year under review against a trading range of Rs.190 and Rs.117 a year earlier. Net assets per share had grown to Rs.146.13 from Rs.130.52.

The directors have recommended a dividend of Rs.3.25 per share against Rs.3 per share paid the previous year.

The directors of the company are: Messrs. Harry Jayawardena (Chairman/MD), R.K. Obeyesekere, C. Jansz, N. de S. Deva Aditya, Capt. K.J. Kahanda (Retd.), C.F. Fernando, Dr. A.N. Balasuriya, A.L. Gooneratne (Alternate to N. de S. Deva Aditya) and V.J. Senaratne (Alternate to K.J. Kahanda).
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Ceylon Tea Brokers boost revenue and profits

Market share of 15% of low growns
Ceylon Tea Brokers PLC, the only stand-alone tea broking company listed on the Colombo Stock Exchange, has seen both revenue and profit growth in the year ended March 31, 2014 with revenue up to Rs.259.19 million from the previous year’s Rs.203.82 million and an attributable profit of Rs.56.20 million, up from the previous year’s Rs.39.77 million posted.

The company’s Chairman, Mr. Chrisantha Perera, described these results as "encouraging" and said that tea production last year had reached an all-time high of 340 million kilos topping the 331.4 million kilos achieved in 2010 with a gain of 11.6 million kilos over the 2012 production.

"Low growns continue to lead the way with over 60% of the production and at 208.1 million kilos is the highest on record, surpassing the previous best of 202.1 million kilos achieved in 2012," Perera said

"High and mid grown production was also higher than 2012 at 75.8 million kilos and 56.1 million kilos respectively, although not all time records."

Tea sold at the Colombo tea auctions had performed strongly with the average prices for all categories both in rupee terms and dollar equivalents being all-time records.

"It is noteworthy to highlight that this is the first occasion tea export earnings expressed in US dollars, have surpassed US$ 1.5 billion," Perera said.

However, he noted that in volume terms, total exports last year at 319.7 million kilos was below the figures for 2011/12,"which would be considered somewhat disappointing given the all time record production in 2013."

"This is however more than compensated for by the all time record export earnings in rupee terms as well as the US dollar equivalent. These improved earnings are a result of the substantially higher FOB prices per kilo," he added.

Perera made the point that Sri Lanka is the world’s fourth largest tea producer, substantially below China which produces approximately 1,850 million kilos, India with 1,200 million kilos and Kenya with 432 million kilos. But in export volume terms, Sri Lanka ranked third behind Kenya and China.

"It is however significant that in spite of the lower quantity of exports, Sri Lanka achieved the highest revenue from tea exports," he said, noting that this demonstrated that the Colombo auction average prices were higher than those at other auction centres.

Also, tea exports from here had a much higher value added component against tea from other exporting countries. It was important to ensure that this established position is not eroded with the emergence of regional destinations for value addition.

"This should be achieved by adopting the correct strategies of maintaining the competitiveness for value added tea exports from Sri Lanka whilst safeguarding the image of pure "Ceylon Tea". This is the "WIN – WIN situation we must strive to achieve," he said.

Perera made the further point that of the five largest tea importing countries in the world – Russian Federation, UK, Pakistan, USA and Egypt, Sri Lanka has a significant market share only in Russia and it was necessary that we should try to improve our presence in the large importing countries in addition to consolidating our position in the existing as well as emerging markets.
He said that Ceylon Brokers’ performance had improved significantly in the year under review although the final profit was impacted by the provisioning of Rs.37.5 million in the year against Rs.10.9 million the previous year. Of this, Rs.23 million was for specific prudential provision covering long outstanding balances.

"Notwithstanding this charge, we are continuing our efforts to recover these dues through legal proceedings," he said.
Going forward, he said that the financial support they offer their clients will be in strict accordance with a clearly laid out credit policy and closely monitored by the Credit Review and Risk Management Committees of the company.

In keeping with the policy consistently adopted by the directors, 50% of the company’s profits were transferred to reserves and the balance distributed as dividends enabling shareholders to receive a dividend of 25 cents per share for 2013/14 paid last July. This compared with a dividend of 17 cents per share paid in the preceding financial year.

The company’s Director/CEO, Suranga Perera, said that Ceylon Tea Brokers had in a short period grown to be a major player in tea broking with a market share of over 10%. In the low grown segment they now accounted for around 15% of the market.

The company has a stated capital of Rs.128 million and retained profits of Rs.58.2 million in its books. Total assets ran at Rs.1.42 billion and total liabilities at Rs.518.6 million.

Capital Alliance Holdings with which three of the company’s directors are associated is the dominant shareholder with 81.4% of the company.

Net assets per share had grown to Rs.1.63 from Rs.1.31 and the share traded at a high of Rs.5.80 and a low of Rs.3.20 during the year against a trading range of Rs.7 to Rs.4 the previous year.
The directors of the company are: Messrs. C.P.R. Perera (Chairman), W.A.T. Fernando (MD), M.J.C.S. Perera (Director/CEO), D.G.W. De Silva, Ms. N.S.T. Cooray, Ms. H.M.S. Perera, B.R.L. Fernando and R.P. Pathirana.
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Bairaha Farms Plc is truly a national, Sri Lankan Company, is approaching 40 years

Bairaha Farms Plc., was established in 1975 by setting up its first large scale commercial poultry farms in Katana in the Gampaha district.In subsequent years this was followed by establishment of large scale and modern parent broiler breeder farms, hatchery, broiler farms, out-grower farms and state of the art chicken processing factory.In fact Bairaha Farms Plc. was the pioneer in processing and supplying packeted, frozen quality broiler chicken to the Sri Lankan market.

There are number of factors to justify the claim that Bairaha Farms Plc (BFP) is truly a national, Sri Lankan company. First and the foremost, it is the only public listed company in the Stock Market in Sri Lanka, which is owned more than 98% by the Sri Lankan people and institutions numbering 3,308. Hence, earnings and dividends are retained within Sri Lanka for investments and/or for consumption purposes thereby spurring further economic and social developments within the country.

There being 3,308 shareholders in the company further demonstrates its national status.Besides the founder shareholders, Employees’ Provident Fund has a 9.6% stake in BFP, Empolyees’ Trust Fund Board owns nearly 7.7% of BFP and Perpetual Capital (Pvt.) Ltd. together with Perpetual Asset Management (Pvt.) Ltd. (which are owned by family of Aloysius) has a 6.01% stake in BEP as at 31st July 2014. Ownership of substantial stake in BFP by both Employees’ Provident Fund and Employees’ Trust Fund Board clearly demonstrates true national status in terms of ownership of Bairaha Farms Plc. Further, Bairaha Farms Plc was also one of the private companies to issue 5% of the shares through a Trust to all of its employees just before going for a public share issue (IPO) in 1994.

In the case of a number of other poultry companies, major production and operations activities tend to be located in the same area or district from where the founder/owner comes from but in the case of BFP except for a small sales outlet, all the farms and factories are located in six other districts and not in the district where the founder of the company was born.

Today, Bairah Farms Plc’s activities are based in a number of districts empoying nearly 800 persons, out-growers, sub-contractors, transporters, distributors and many others. There are spin-off effects on other sectors specially in the agricultural sectors, benefiting directly farmers engaged in maize cultivation and rice-millers providing rice by-product to the poultry industry. Maize farmers are nearly 90% dependant on the poultry industry.

The next step in Bairaha Farms Plc’s journey is to take company forward with export of chicken to middle eastern countries thereby helping to create employment opportunities in the rural areas encompassing a number of the sectors of the economy.
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J.L. Morison doing nicely as member of Hemas group

J.L. Morison Son & Jones (Ceylon) PLC, now a member of the Hemas group celebrating its 75th anniversary, has boosted both net earnings and operating profits in the year ended March 31, 2014 according to the company’s recently released annual report.

Describing the year under review as "successful and eventful", the company’s new Chairman, Mr. Husein N. Esufally reported that Hemas had acquired Morisons in May last year. Following this acquisition the company has posted a revenue of Rs.2.6 billion, an operating profit of Rs.258.2 million and net earnings of Rs.210.8 million for the year ended March 31, 2014.

"These numbers reflect an impressive 51% growth in net earnings and 34% growth in operating profits in spite of a 13% drop in revenue," Esufally said.

"While the drop in revenue is attributable to the loss of two consumer agencies, your company has done well to more than compensate for this loss through strategic initiatives undertaken during the year.

He explained that pharmaceutical manufacturing, import and distribution forms the core of the current J.L. Morisons operation. These activities had performed extremely well to post 20% revenue growth despite sluggish industry growth which stood at 1.32% for 2013.

The company’s Managing Director said that reduction in revenue was attributable to the company winding up their homecare distribution channel which distributed the Good Knight and Kiwi brands.

"In spite of the decline in revenue, the significant improvement in operating profit and net earnings was mainly attributable to the growth in manufacture, import and distribution of pharmaceuticals despite lackluster industry growth as well as other efficiency measures undertaken during the year," he said.

M.S.J. Industries, the pharmaceutical manufacturing arm, succeeded in significantly increasing supplies to government hospitals through the "Buy Back" agreement offered to local manufacturers by the government in order to stimulate the local manufacture of pharmaceuticals. M.S.J. Industries also commenced a project to upgrade GMP (Good Manufacturing Practice) standards at the manufacturing facility located in Colombo 15 in September 2013.

He expected these upgrades should increase their production capacity which would increase their production capacity to be completed by December 2014.

They had rationalized their portfolio further by discontinuing non core products focusing on key products and brands under the J.L. Morion umbrella. This initiative had yielded results in terms of improved sales of over the counter products and pharmaceuticals and also realized working capital significantly improving cash flows.

Morisons has a stated capital of Rs.7.9 million, reserves of Rs.1.47 billion and retained earnings of Rs.653.1 million in its books. Total assets ran at Rs.2.63 billion and total liabilities at Rs.504.4 million.

Hemas Manufacturing (Pvt) Limited with 90.04% of the voting shares is the dominant shareholder. Hemas also owns 84.84% of the non-voting shares.

The directors of the company are: Messrs. H.N. Esufally (Chairman), R.A.J.T. Perera (MD/CEO), A.S. Abeyewardene, Prof. P.R. Fernando and S. Enderby.
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