Tess Group to go for a Rights Issue

Tess Agro PLC, a subsidiary of Tess Group of Companies will go for a Rights Issue to raise funds to the tune of Rs 59 million.

The company will utilize the funds to increase the working capital which is expected to boost the export volume of fish to the global market. The country regained the GSP plus facility in June 2017 which the European Union removed earlier.

However, the fishing resources improved only in October that year and the Group had difficulties in exporting the fish to the EU countries, Tess Group of Companies CEO/ Director Shiran Fernando told Business Observer.

“With the funds raised, the company will have the possibility of exporting more fish to the international market and earning more foreign exchange in return,” he said.

The Right Issue will comprise of 70,000,000 new ordinary voting shares at Rs 0.80 per share and 10,000,000 new ordinary non-voting shares at Rs. 0.30 per share by way of a Rights Issue payable on or before 1st June 2018.

Approval, in principle, has been obtained from the Colombo Stock Exchange to issue and list the new Securities, the company said.

Tess Agro PLC established in 1992 as the first cold chain operator in Sri Lanka has been dedicated towards the processing and distribution of superior seafood, since 2007. The Company obtained a listing by way of IPO on the Colombo stock exchange in December 2002.

During the past three years, the company had to face its biggest challenge as the European Union, which was Sri Lanka’s most lucrative market, decided to ban Sri Lankan fish being imported into the EU.

Prior to the ban imposed in January 2015, the EU accounted for nearly one-third of Sri Lanka’s fish exports in terms of volume and about 40 per cent of the exports in terms of revenue. Against the total fish export earnings of $ 267 million that year, Sri Lanka earned $ 108 million from Europe.

During the EU ban the company continued to carry out its business with the help of its Belgium branch by importing from other neighbouring countries such as Maldives and Philippines, hoping that when Sri Lanka is back in business we would still hold on to our market share.

However, owing to the past performance, the company accrued losses and its debt position primarily due to the ban, has resulted in a poor cash flow, preventing the company from taking full advantage of the GSP plus tax benefit.. It can be noted that there is a significant increase of exports from Sri Lanka which is 376 % increase from 2016 to 2017 and accounts to almost 40 % of the total revenue in 2017 as opposed to 8 % in 2016, which is mainly attributed to the GSP + concession. Due to the current GSP + concession the company has the ability to increase revenue similar to its performance in 2010, 2011 (Rs. 771 million and Rs. 952 million), when the Sri Lankan fisheries industry was booming before the loss of GSP+ in 2012.

The rights issue proceeds will help the company to go for higher volumes of purchases from Sri Lanka to boost its exports and make use of the GSP concession for Sri Lanka exports to the EU.

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Sri Lanka's Taj Samudra Hotel owner in the red

ECONOMYNEXT - TAL Lanka Hotels, the owner of five-star Taj Samudra Hotel in Colombo, said it made a loss of 15.8 million rupees in the March 2018 quarter, compared to a 1.2 million profit a year earlier, on higher taxation, falling revenue and rising marketing and administrative costs.

The company which also manages the Airport Garden Hotel reported a loss of 11 cents per share in the quarter. The stock was trading 40 cents lower at 15.80 rupees on Wednesday.

It reported earnings of 68 cents a share in the year ending March 2018 on a profit of 94.9 million rupees, down 9 percent from a year ago, interim accounts filed with the Colombo Stock Exchange showed.

Revenue fell 6 percent from a year earlier to 654.5 million rupees in the March 2018 quarter which is part of the peak tourism season, direct costs were flat at 500.5 million rupees, constricting gross profits by 21 percent to 154 million rupees.

Marketing expenses rose 37 percent to 17.9 million rupees and administrative expenses increased 25 percent to 74.8 million rupees. Finance costs declined 12 percent to 60.9 million rupees.

Income tax expenses rose to 33.4 million rupees in the quarter, compared to 4.4 million rupees the previous year.

A loss of 25.5 million rupees for a re-measurement of defined benefit plans resulted in a total comprehensive loss of 41.8 million rupees.

Sri Lanka's Sampath Bank March 2018 quarter net profit up 41.4-pct

ECONOMYNEXT - Profits at Sri Lanka's Sampath Bank increased 41.4 percent from a year earlier to 3.3 billion rupees in the March 2018 quarter, on improving interest margins despite increasing bad loan provisioning and taxation, interim accounts showed.

The bank reported earnings of 13.92 a share in the quarter, as net interest income grew 31 percent from a year earlier to 8.3 billion rupees as a result of interest income growing 27.7 percent to 22.5 billion rupees and interest costs rising a slower 26 percent to 14.2 billion rupees, interim accounts filed with the Colombo Stock Exchange showed.

The stock was down 1 rupee to 298 rupees in early trading Friday.

Sampath Bank's interest margin had improved to 4.10 percent in the quarter, up from 3.91 percent in the previous December 2017 quarter.

Net fee and commission income grew 18.7 percent to 2.3 billion rupees and other operating income increased 64.2 percent to 1.3 billion rupees.

Bad loans provisioning grew 56.7 percent to 1.1 billion rupees.

Operating expenses grew 18.3 percent to 4.7 billion with staff costs amounting to 2.2 billion rupees, up 15.3 percent from a year earlier.

Value added tax and a nation building tax amounted to 1.2 billion rupees, up 31 percent from a year earlier while the bank's income tax expense rose 36 percent to 1.6 billion rupees.

Sampath Bank's deposit base grew 3 percent from the previous December 2017 quarter to 643.7 billion rupees in the March 2018 quarter.

The bank's loan book expanded 7.4 percent to 602.3 billion rupees.

The bank increased investment in subsidiaries by 42 percent to 1.9 billion rupees in the March 2018 quarter.

Subsidiaries of the bank includes listed non-bank lender Siyapatha Finance, SC Securities and Sampath Information Technology Services.

Sri Lanka's Distilleries Corp net up 134-pct in March quarter

ECONOMYNEXT - Distilleries Corporation of Sri Lanka said profits for the March 2018 quarter rose 134 percent from a year earlier to 1.902 billion rupees after prices were increased to pass on all new taxes that were charged.

The firm reported earnings of 41 cents per share for the quarter. The stock closed at 22.40 rupees, up 30 cents Friday.

"The increase in profits for the quarter is a reflection of adjustments that have been made in November 2017 to recover all the taxes imposed in November 2016," Chairman Harry Jayawardena told shareholders.

"Until then the company has been partially absorbing (taxes) to somewhat deflect the sharp increase in price that would otherwise have been passed on to the customer."

Jayawardena said the Distilleries will follow a policy of paying out 70 percent of the profits as dividends, since investments will take place at holding company level in the future.

Investment needs of the alcohol business would be minimal he said.

In the March 2018 quarter gross revenues with turnover taxes rose 7.4 percent to 24.9 billion rupees, ending several quarters of shrinking revenues.

Net turnover rose 15 percent to 8.16 billion rupees and cost of sales fell 11 percent to 4.46 billion rupees and gross profits rose 79.3 percent to 3.7 billion rupees.

Other operating income was up 21 percent to 118 million rupees.

In the year to March gross revenues with taxes was flat at 90.3 billion rupees, and net revenues grew 8 percent to 29 billion rupees. But cost of sales grew 23 percent to 19.7 billion rupees and gross profits shrank 14 percent to 9.4 billion rupees.

IFC invests in Sri Lanka’s Melwa Hotels to be run by Hilton

ECONOMYNEXT – The International Finance Corporation (IFC), part of the World Bank Group, is investing US$27 million in Melwa Hotels and Resorts Private Limited to build three hotels across Sri Lanka which will be operated by Hilton Hotels.

The investment will help Melwa Hotels, a subsidiary of steel manufacturer Melwire Rolling Private Limited, to develop three new hotels outside of Colombo, in Yala, Kosgoda, and Negombo, a statement said.

IFC had earlier said the funding will be for a 42-room hotel in Yala, a 196-room hotel in Kosgoda and a 96-room hotel in Negombo.

“The investment will increase Sri Lanka’s capacity in the tourism sector, create jobs, and generate more foreign exchange,” the IFC said.

“In addition to the funding, Melwa will also benefit from IFC’s expertise and advice as we diversify in to tourism,” said P. P Muruganandhan, Managing Director of Melwa, which is a new entrant to Sri Lanka’s tourism sector.

Amena Arif, IFC Country Manager for Sri Lanka and Maldives., said IFC will also provide advice to Melwa Hotels on how to manage environmental and biodiversity matters to minimize their environmental footprint.

Sri Lankan stocks end at near 3-week low in thin trade

Reuters: Sri Lankan shares ended at a near three-week low on Friday, led by large-cap shares in a light trading session, as investors looked for fresh cues from political and economic fronts.

The Colombo stock index ended 0.26 percent weaker at 6,506.74, its lowest since April 16. The index lost 0.37 percent during the week, its second straight weekly fall.

“The market was down primarily on CTC (Ceylon Tobacco Company PlC). It fell in low volumes and dragged the market. Other shares ended flat with most of the investors still on the sidelines awaiting direction,” said Dimantha Mathew, head of research, First Capital Holdings.

Shares in Ceylon Tobacco Company Plc ended 2.6 percent lower while Lanka ORIX Leasing Plc fell 2.7 percent.

Conglomerate John Keells Holdings Plc ended 0.1 percent down and Dialog Axiata Plc closed steady.

Analysts said depreciation of the rupee also weighed on the sentiment as it is likely to dent the profits of some listed firms that rely heavily on imports.

The Sri Lankan rupee hit a fresh low on Wednesday on importer demand for the U.S. currency, dealers said, but recovered after the central bank intervened in the market.

Fitch Ratings said on Thursday that recent political developments in Sri Lanka have created some uncertainty over reform momentum and fiscal consolidation, and prolonged upheaval could undermine investor confidence ahead of large external debt maturities in 2019-22.

Turnover stood at 386.4 million rupees ($2.45 million), around a third of this year’s daily average of 1.04 billion rupees.

Foreign investors bought a net 34.8 million rupees worth of equities on Friday, but the market has seen a net foreign outflow to 587.9 million rupees worth of equities so far this year. 

($1 = 157.4300 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)