Reuters: Sri Lankan shares rose for a fourth session of gains on Tuesday to hit their highest close in four months, led by conglomerate John Keells Holdings Plc , while foreign investors' selling dented the sentiment.
The benchmark stock index rose 0.65 percent to 6,637.74, its highest closing level since Jan. 11.
"Today, Keells moved the market but foreign outflow is giving out a negative sentiment. It looks like a foreigner is exiting from Keells," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.
Foreign investors were net sellers of 445.3 million rupees ($3.06 million) worth of shares on Tuesday, extending the net selling so far this year to 3.3 billion rupees worth of equities.
John Keells Holdings Plc, which saw a net foreign selling of 2.7 million shares on Tuesday, ended up 2.2 percent.
Shares in Hatton National Bank Plc rose as much as 2.82 percent.
The turnover stood at 1.04 billion rupees, well above this year's daily average of around 778.2 million rupees.
The index gained 1.2 percent last week, its fifth straight weekly rise. The 14-day relative strength index ended at 80.541 on Tuesday, compared with Monday's 78.277, Thomson Reuters data showed. A level of 70 and above indicates the market is overbought.
However, gains were capped as investors were worried that the island government's move to increase the value added tax (VAT) and impose new taxes, effective since May 2, would hit the bottom lines of companies.
($1 = 145.4000 Sri Lankan rupees)
(Reporting by Ranga Sirilal; Editing by Sherry Jacob-Phillips)
SriLankan Airlines announced that it has recorded a significantly improved performance at the close of the Financial Year ending 31st March 2016 (based on un-audited financials) compared to the previous year despite several legacy issues still remaining unresolved.
Given the complexity of the business these issues are being addressed in a responsible manner together with the Shareholder, as part of the restructuring programme of the airline.
Without ‘one-off’ extraordinary payments related to restructuring activities, the Airline’s Group Loss stood at LKR 8.9 billion - a 46% improvement for the current period compared to the previous year.
While the steep drop in fuel prices contributed to the Airline’s improved performance, this benefit was significantly eroded with its revenue declining 4% year on year to LKR 115.9 Billion in 2015/16 from LKR 120.4 Billion in 2014/15. Addition of capacity to the Colombo market by other airlines, accompanied by a dramatic drop in airfares in certain markets largely contributed to the declining revenues. The performance was further impacted by the depreciation in the exchange rate compared to the previous year.
As at 31st March 2016, the National Carrier’s debt stood at LKR 64.92 Billion against the previous year of LKR 56.92 Billion. A capital infusion of USD 150 Million (for SriLankan and Mihin Lanka) in the National Budget presented to the Parliament in November 2014, and approved, was not included in the Interim Budget presented in March 2015. The National Budget presented in November 2015 did not contain it either. The finance charges of the Airline stood at LKR 5.6 billion, for the current year an increase of 16% from last year. Due to the non-receipt of the capital infusion of USD 125 Million, additional bank borrowing had to be taken which resulted in an additional interest charge for the financial year of LKR 1.73 billion.
Notwithstanding these challenges, the Airline has been able to make significant savings in controllable cost items which have also contributed to the improved performance. This has been due to increased focus on and scrutiny of costs across all areas. The Airline’s staff have come forward to make constructive suggestions towards cost saving initiatives and also worked hard at negotiating cost reductions with vendors. Given market realities, revenue enhancements are going to be challenging. Therefore the Airline will continue to work on costs, streamlining processes and improving productivity without which the Airline cannot achieve financial self- sufficiency.
The Restructuring Plan which was approved by the Cabinet last year recognised that, for a sustainable future, the Airline needed to address certain fundamental problems. Re-structuring the fleet and addressing the issue of the A350-900 aircraft which had been ordered by the previous management was a priority. These aircraft are both inappropriate and too expensive for the Airline, given the current operating environment and the excessive lease costs. The Airline is exploring all options in this regard and hopes to continue with the acquisition of more narrow body aircraft, while delaying or otherwise changing the future wide body aircraft already committed. These negotiations are now at an advanced stage and the Airline has been continuously interacting with the shareholder on this matter.
The Restructuring Plan also recognised that significant route rationalisation was required given the recent unprecedented shift in the marketplace. However, the Airline took a measured and phased approach towards route rationalisation, to ensure that any decisions would not have a negative impact on the tourism industry. Therefore all changes are taking place in a phased manner with adequate notice being given to both the travel trade and our customers.
At the same time, given the magnitude of the inherited adverse financial situation, the Ministry of Finance and the Ministry of Public Enterprises have reviewed the funding requirements for the immediate future. The Ministry has advised the Airline that within the next six months it intends to re-structure the financials (including the outstanding debt) of the Airline.
The Shareholder has also indicated that it is exploring the option of a Public Private Partnership (PPP) for the Company and has appointed a Special Committee to provide direction on the broader expectations of the GoSL. The Airline will be working closely with the Committee, and under its guidance implementing certain steps necessary to prepare for a possible PPP. The Airline expects that in this process, a clear path to a sustainable, long term future which would be in the interest of all the stakeholders, will be identified and implemented within the next six months.
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Adam Carbons has signed a Memorandum of Understanding with Kooks E&C Ltd, Seoul South Korea for a joint venture for rice husk carbonization. Kooks E&C Ltd, is a diversified group of companies based in Seoul, South Korea and are a manufacturer of electrical motors and generators and a wholesaler of non-specialized goods of food and agriculture, chemicals and energy.
This venture permits Adam Carbons to diversify its product range into high value added products with a strong export market.
- Bank’s PAT up 68% to Rs. 3.1 b
- Group PAT up 73% to Rs. 3.5 b
- Group PBT up Rs. 4.9 b
HNB PLC said yesterday it has recorded robust growth in Q1 2016 with the bank’s Profit After Tax (PAT) growing by 68% YOY to Rs. 3.1 b, driven by core banking operations, while Group PAT improved to Rs. 3.5 b, which is an increase of 73% from Q1 2015.
Strong growth of 26% YOY in the bank’s advances portfolio resulted in a 29% YOY growth in interest income whereas the deposit base recorded a YOY growth of 22% while maintaining a healthy CASA ratio of 43.5%. Accordingly, the bank’s net interest income grew by 19.2% YOY to Rs. 7.4 b.
Net Fee and Commission income of the bank grew by 28.6% over Q1 2015 to Rs. 1.7 b with trade finance, credit card business and fees on loans and advances contributing significantly. The foreign exchange income of the bank also recorded a significant growth of 125% YOY propelled by volatile market conditions.
The bank’s relentless efforts to achieve high credit quality and effectiveness in recoveries resulted in a NPA ratio of2.41% as at the end of Q1 2016, continuing with the declining trend witnessed over the recent years.
HNB’s operating costs increased by 11.5% YOY to Rs. 4.4 b, mainly due to the revisions to collective agreements resulting in a higher personnel cost. Nevertheless the bank’s cost to income ratio continued to improve driven by cost optimisation and process improvement initiatives which enabled impressive top-line growth while containing cost. The cost to income ratio which was at 50.5% in Q1 2015 improved to 45.6% in Q1 2016.
The asset base of the bank increased to Rs. 760 b as at end of Q1 2016 which is a growth of 27% YOY. Further to the $ 185 m raised via multilateral financial institutions in 2015, HNB in Q1 2016 successfully raised Rs. 7 b through a Subordinated Debenture issue which was oversubscribed on the day of opening.
Commenting on the first quarter performance, HNB Managing Director and CEO Jonathan Alles said: “Our excellent first quarter performance and the continuous improvement in key performance indicators is testimony to the effectiveness of our strategic direction and business model.”
He further stated: “We will continue our focus on driving sustainable growth by understanding the needs of our customers from all walks of life and by providing superior solutions. We have transformed the livelihoods of millions of Sri Lankans over generations through our commitment towards this end and provided more choice and convenience to our customers through an array of alternate channels. Our untiring efforts in business development and service excellence will be enabled through our constant focus on improving process efficiency, our persistent pursuit of adopting state of the art technology as well as through continuous development of our human capital.”
The HNB Group also performed well with all Group companies contributing to the growth in profit after tax to Rs. 3.5 b. HNB General Insurance business, which was impacted due to high claims last year, turned around during Q1 2016 while the microfinance subsidiary HNB Grameen Finance Ltd. recorded superior results.
The Group assets improved by 27% YOY to Rs. 792.7 b, which is a growth of 4.6% compared to the December 2015.The cost to income ratio of the Group improved substantially from 56.5% in Q1 2015 to 51.4% in Q1 2016 while ROA and ROE stood at 1.7% and 17.7% respectively for the Group.
During the first quarter of 2016 HNB was recognised by the prestigious ‘Asian Banker Magazine’ as the Best Retail Bank in Sri Lanka for the eighth time. HNB is also the first bank to receive a rating on par with the sovereign from Moody’s Investor Services while maintaining National Long-Term rating of AA-(lka) from Fitch Ratings Lanka Ltd.
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