Fitch Rates NDB’s Subordinated Debentures Final ‘A+(lka)’

Fitch Ratings Lanka has assigned National Development Bank PLC's (NDB; AA-(lka)/Stable) proposed subordinated debentures of up to LKR10bn a final National Long-Term Rating of 'A+(lka)'.

The final ratings are the same as the expected ratings assigned on 21 May 2015, following the receipt of documents conforming to information already received.

The proposed subordinated debentures, which will have a tenor of five years and carry fixed and zero coupons, will be listed on the Colombo Stock Exchange. NDB expects to use the proceeds to strengthen its Tier 2 capital base and reduce asset and liability maturity mismatches.

KEY RATING DRIVERS
The proposed subordinated debentures are rated one notch below NDB's National Long-Term Rating to reflect the subordination to senior unsecured creditors.

The issuer rating is driven by the bank's intrinsic financial strength. NDB's rating captures its long and stable operating history and developing franchise as a commercial bank.

RATING SENSITIVITIES
The rating on the proposed debentures will move in tandem with NDB's National Long-Term Ratings.

Fitch believes that NDB's capitalization and rating would come under pressure if the bank sustains its growth momentum, in the absence of other mitigating factors.

The consolidation of NDB's franchise alongside its ability to sustain strong credit metrics could result in an upgrade of NDB's ratings.

A full list of NDB's ratings follows:
Long-Term Foreign-Currency Issuer Default Rating (IDR): 'B+'; Outlook Stable
Short-Term Foreign-Currency IDR: 'B'
Long-Term Local-Currency IDR: 'B+'; Outlook Stable
Viability Rating: 'b+'
Support Rating : '4'
Support Rating Floor: 'B'
National Long-Term Rating: 'AA-(lka)'; Outlook Stable
Outstanding subordinated debentures: 'A+(lka)'
Proposed subordinated debentures: 'A+(lka)'
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CDB grows PAT an impressive 25% to Rs 701 M in FY 2014/15

A financial entity that has always worked on the solid ethos of enriching people's lives through enabling access to financial services and thereby, ensuring empowerment, once again proved its mettle by recording impressive financial performance for 2014/15. Citizens Development Business Finance PLC (CDB) posted a noteworthy 25% growth in Profit After Tax to notch Rs 701 M as profit, as detailed by interim results released to the Colombo Stock Exchange.

The upward trajectory in performance continues as CDB's Balance Sheet showcases growth of 13% standing at Rs 38.01 Bn, the Loan Book detailing an incline of 14% displayed at Rs 29.38 Bn and the Deposits & Savings portfolio growing by 10% to be notched at Rs 27.07 Bn. Net Assets is recorded at Rs 4.30 Bn reflecting a growth of 20%. Revenue recorded a growth of 9%, commendable given the low interest backdrop experienced, while Net Interest Income also moved upwards by 23% to stand at Rs 2.87 Bn.

Profit Before VAT on Financial Services, Crop Insurance Levy, Nation Building Tax and Income Tax surpassed a milestone of Rs 1 Bn, showcased at a historic Rs 1.04 Bn, reflecting a growth of 33%.

Despite an increase of 48% in Income Tax, the Company showcased an impressive Rs 701 Mn in Profit After Tax.

Earnings Per Share recorded a figure of Rs 12.92, while Net Asset Value Per Share is detailed at Rs 79.22. Having always been a company that has remained well above par in its compliance culture, Capital Adequacy Ratios for both Tier I and Tier II remained well above the regulatory requirement of 5% and 10% respectively. Tier I is now at 10.14%, while Tier II is at 12.92%. Liquidity Ratio is posted at 14.66%, compared to the required 10%, which once again is above the regulatory directive. The liquidity position has been further strengthened by CDB's regular cash flow and income generating assets including the asset backed loan book representing 90% of balance sheet assets. Non-Performing Loans (NPL) stood at 5.78% and 3.19% on gross and net basis respectively.

Having moved into its own corporate headquarters at No 123, Orabipasha Mawatha, Colombo 10, CDB continued to etch its presence as a formidable player in the financial services industry. Aligned with the directives instituted within the Financial Sector Consolidation Programme, CDB acquired 86.26% stake in Laugfs Capital Ltd, a specialized leasing Company during the period under review.

Continuing to collate accolades and kudos for not only its prowess in the financial services industry, but also for the progressive compliance culture and people oriented strategies it espouses, CDB has been recognized by professional organizations both in Sri Lanka and abroad on various platforms. The Company's annual report won a Platinum Award at the Vision Awards conducted by the League of American Communication Professionals (LACP) making it the best in-house report in the Asia Pacific Region, 42nd among the Top 100 annual reports globally and 17th among the Top 80 in the Asia Pacific Region. In addition, this Annual Report also gained a Silver Award for integrated reporting at the CA Annual Report Awards organized by the Institute of Chartered Accountants of Sri Lanka. Silver Awards were conferred on CDB at the SLITAD People Development Awards 2014 and HRM Awards 2014 and a Bronze Award for Service Brand of the Year at 13th SLIM Brand Excellence Awards.

With sustainable development being a deep rooted commitment in its entire corporate philosophy, CDB continued its flagship social responsibility programme of empowering young people through education and IT literacy. A contemporary IT laboratory was presented to Kadaya Motte Sinhala Vidyalaya in Puttalam and 58 scholarships to children from low income families who excelled in the Grade 5 Scholarship Examination and GCE Ordinary Level Examination were awarded under the CDB Sisudhiri scholarship scheme. Believing strongly that environmental conservation and preservation remains in the hands of future generations, an environmental awareness programme was conducted for students of seven schools in the Galle district in the Kanneliya Forest under CDB Mihikathata Adaren Programme.

CDB's business model continues to evolve and remains strategically crafted to encompass multiple dynamics that compliment each other. With financial inclusion being a priority given its status as a net lender to the rural economy, urban funding and rural lending, adding access to finance for the base of pyramid markets has enabled CDB to play a vital role in rural economic development. However, competing with well established banking leaders in deposit and savings mobilization and lending to focused market segments to augment its value proposition, strongly positions CDB to continue performing consistently. Having constructed a solid foundation of stability and strength, CDB is undoubtedly poised to contribute effectively towards national development.
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Renuka Foods PLC continues growth momentum

• Revenue for the year 2014/15 at Rs 6.4B

• Aims for leading market share in Sri Lanka's FMCG landscape

In its interim financial statement released for the fourth quarter of the financial year 2014/15 Renuka Foods PLC recorded a revenue of Rs 1,703 million, a 17% increase compared to the revenue during the same period last year. For the year the turnover recorded was Rs 6.4 billion compared to Rs 5.5 billion in the previous year.

The profit for the period ended 31 March 2015 was Rs 462.9 million, of which profit attributable to the equity holders was Rs 229.6 million, reflecting a 150% increase compared to the same period during the previous financial year. The total comprehensive income of the group for the period ended 31 March 2015 was Rs 914.8 million, while the comprehensive income attributable to the equity holders was Rs 482.6 million.

In the operations review, which accompanied the interim financials, the organization stated that its vision is to be a leading food and beverage company, making every day delicious, by offering consumers in Sri Lanka and in over 34 international markets with its own brands. The business consists of the sectors of Agribusiness - Coconut, Organic Foods and Tea; and FMCG - Dairy, Fish, Fruit Beverages, Snacks and Soya.

In the Agribusiness Sector during the year the Group completed production capacity enhancements, increased warehousing capacity and expanded the product portfolio. It also invested in enhanced research and development capabilities, expanded its out-grower network and international distribution markets. All this contributed to the sector recording revenue of Rs. 2,775 million for the period ended 31 March 2015 and achieving a gross profit of Rs. 618 million for the same period.

The FMCG sector reported a gross profit of Rs. 748 million against a turnover of Rs. 3,629 million for the period ended 31 March 2015. The period under review has been one of consolidation.

"The dairy company, Richlife Dairies was completely integrated into Shaw Wallace Ceylon in terms of sales and distribution, sales administration and procurement resulting in significant cost savings being achieved in the quarter for the sector. This has enabled us to also further enhance the marketing and sales capabilities by increasing numeric distribution. The significant investments into this sector over the last three years are now complete and we believe we have built the platform for one of the country's leading food and beverage based FMCG companies powered by innovation and technology", Executive Chairman Dr. Ranjit Rajiyah said.

Total equity is Rs 5.3b as at 31 March 2015 while the Group recorded a Net Asset Value per Share of Rs 31.59 and Earning per Share of Rs 2.43 for the period ending 31 March 2015.

Renuka Foods PLC, is Sri Lanka's leading manufacturer and exporter of coconut based food and beverage products with its own organic certified plantations. It is also one of the top dairy manufacturers and is the largest player in the branded canned fish space in the country. Company Brands such as Richlife, Captain, Renuka, Pop and Rainers are among leading consumer brands in their respective categories.

The organization employs 1500 people, an out grower network of 7000 farmer families and contributes Rs. 1.5 billion to the rural economy annually. Renuka Foods PLC is a subsidiary of Renuka Holdings PLC.
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Citrus posts 102% revenue growth

The Citrus Leisure Group has posted 102% growth in revenue for 2014/15, recording Rs 616 million of which its first property in Hikkaduwa contributed Rs 270 million. The newly opened Citrus Waskaduwa hotel contributed Rs 317 million in revenue, operating only for 9 months of the financial year.

The strong revenues were posted despite the entire industry experiencing a sharp drop in both Summer and Winter arrivals from two of its key source markets – Ukraine and Russia – which were impacted by the Crimean crisis. As a result, Citrus Hikkaduwa, the Group's first project, was unable to capitalize onan otherwise good year but maintained its profit......momentum by recording an operational profit of Rs 66 million.

The Company was very excited about the commencement of its iconic 150-roomed 5-star flagship resort Citrus Waskaduwa, which opened its doors in July 2014. The company has aggressively marketed the destination Waskaduwa by promoting activities in and around the area, including adventure tourism options such as off road cycling. The property has also attracted attention from the MICE market and has hosted several local and international events including the glamorous Miss Sri Lanka for Miss Earth finale.

The company commenting on the performance said, "It is a source of immense satisfaction that our property in Waskaduwa has so quickly made a mark on the tourism industry. The resort was recently recognized by TripAdvisor with a Certificate of Excellence, the first time a 5star property in Sri Lanka has received the recognition in its very first year of operation."

Citrus Waskaduwa reported an operational loss of Rs 195 million during its first year of operations in keeping with expectations, due to pre-opening expenses and due to being at fully operational capacity for around 6 months of the year. The property was therefore unable to contract with most tour operators for the Winter season in 2014. The management is very excited about strong results in 2015/16 with major tour operators extremely happy with the product; a good mix of contracts from traditional and emerging markets is currently in place to generate greater footfall for Citrus Waskaduwa.

As a result, the Citrus Leisure Group recorded an operational loss of Rs 151 million for the year ended 31 March 2015. The new financial year is set to be an exciting one for Citrus Leisure PLC, with Citrus Waskaduwa operating at full throttle and alternative marketing strategies at Citrus Hikkaduwa attracting new markets. Soon, the Group will also make its entry into the City Hotel segment, through its fully owned subsidiary Citrus Silver Limited. Commencing 1 June 2015, Citrus Silver will enter into a 10 year lease agreement with George Steuart & Co., to operate the 50-roomed boutique business hotel at the heart of Colombo's commercial district. The property will operate under the brand name 'The Steuart by Citrus'. Having a city presence, will enable the Group to cross-promote its resort properties more effectively.

The Company is also encouraged by several positive announcements made by the current administration with regard to the proposed tourism development zone in Kalpitiya. The zone had not got underway for several years, resulting in investors withholding their developments due to anticipated infrastructure development not taking place as per the government's strategic plan. A fresh focus on Kalpitiya, as indicated by the Sri Lanka Tourism Development Authority in the recent past, augurs well for Citrus, which despite obtaining the necessary approvals and permits has so far delayed commencing construction there. Meanwhile the Company continues to hold a strategic investment in a 20% stake of Colombo Land and Development PLC, which is an associate company. The Group's substantial asset base also includes a strategically located property in Passikudah, available for future development.

Chandana Talwatte, CEO of Citrus Leisure PLC added, "The Citrus ethos of creating 'Happiness Moments' has become firmly entrenched in its service philosophy and this, combined with our unique properties and excellent F&B offering, bodes well for continued guest satisfaction. Furthermore, given the current developments in our locations of operation and the marketing and service strategies that we have in place at our properties, we are bullish about our prospects for the coming year. As a young leisure company that believes in Sri Lanka's tourism offering, the Company is determined to make a meaningful contribution towards the betterment of the industry".
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CSE mulling risk management and short selling - linked products

By Sara Pathirana

Commercial Bank of Ceylon (COMB) opened trading yesterday at the Colombo Stock Exchange (CSE) as part of a ‘Market Opening’ tradition where companies that are listed under the S&P SL20 index are invited to do so.

Commercial Bank is Sri Lanka’s third largest company to be listed, in terms of market capitalization in the Stock Market, hovering around US$ one billion.

On time to open trading by ringing the opening bell was Commercial Bank’s Managing Director and CEO Jegan Durairatnam.

CSE chairman Vajira Kulatilaka said that the CSE was in the process of working to further enhance and introduce new products in line with features such as risk management and short-selling, while also striving to provide better IT systems that would attribute user-friendly features at better levels.

"We are sure everyone involved in this sector would like to see a much more comfortable and convenient trading of debt instruments. A known fact is that interest rates go up in the market and nothing can be done other than to wait until the market settles. But, with new products such as short-selling, things can change. What we will do is bring that type of a complete range of products of this calibre in order to witness a complete Capital Market. Our expectation is your participation and backup on our road shows and help us take Sri Lanka into a different platform. Sri Lanka needs capital, up from the government and down to the SME who will need capital in order to grow, Kulatilaka said.

After seeing to the traditional opening, Durairatnam remarked, "Our bank had been listed with CSE from the year 1970 and since then we have grown with the Exchange. A platform such as this provides companies with a capacity to help enhance their visibility on the world stage. Our association with the Stock Exchange has been rewarding and positive."
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Urgently review land restriction legislation: JKH

Premier blue chip John Keells Holdings (JKH) has called for an “urgent review” of the Land Restrictions legislation passed by the previous regime, saying it deters capital formation and foreign investment in the country.

Amidst widespread concerns from the private sector, the Land (Restrictions on Alienation) Act was legislated on 29 October 2014 with retrospective application from 1 January 2013. 

JKH Chairman Susantha Ratnayake in his review in the company’s 2014/15 Annual Report said that whilst it recognised and appreciated the need to monitor and manage the freehold sale of land to foreign nationals, JKH was of the view that the Act had much ambiguity.

“The uncertainty it creates as a result will be deterrents to capital formation and foreign direct investment in Sri Lanka and, therefore, requires urgent review,” emphasised Ratnayake.
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