Lanka Orix Leasing Company PLC (LOLC) posted a net profit of Rs.2 billion for the quarter ended March 31, 2012 largely assisted by the drop in payable income tax and the positive change in fair value of investment properties.
Interim financials of the company revealed a change in value of investment property of Rs.251.2 million during the period in consideration in contrast to a negative figure of Rs.13.5 million during 4Q11.
Also income tax expense during the quarter under review stood at Rs.5.7 million as against Rs.142.7 million during the corresponding quarter of the previous year.
Earnings per Share (EPS) during 4Q12 stood at Rs.4.19 in contrast to Rs.1.26 during the previous year.
Meanwhile for the year ended March 31, 2012 LOLC recorded a 66 percent year-on-year increase in net profit to Rs.6.3 billion while EPS for the year stood at Rs.13.42 as against Rs.8.08 during the previous year.
LOLC group’s policy of zero exposure to foreign exchange risks paid well, where the group was not exposed to the devaluation effects of the rupee and this policy was also mandated by the CBSL on all foreign borrowing of LOLC Group.
According to a LOLC press statement, the firm’s performance came amidst a challenging environment where its core business of financial services faced interest rate volatility, increased taxes on motor vehicles, lower liquidity in the market and a general credit squeeze.
“Despite these challenges, financial services remained dominant in profit contribution, with 72% of the profits amounting to Rs 7.4 billion, coming from this sector further reducing the dependency on other sectors in the group,” the statement said.
According to the financial accounts, the total net receivables of the financial services sector increased to Rs. 80 billion, a solid growth in the book of advances (portfolio growth) a 38% growth compared with the previous year’s book of Rs 58 billion.
Despite the impressive performance by the firm, the accounts also showed that the firm loss Rs.1.5 billion on the trading equity portfolio due to the downturn of the stock market.
The Group’s total assets as at the year-end was a strong Rs.146 billion compared with previous year’s Rs.112 billion, 30% growth, while total borrowings of the group including deposits and savings stood at Rs.92 billion. Equity of the group was Rs.43 billion at the end of the financial year, an increase of 24% from Rs.35 billion last year.
During the year under review, the parent company LOLC obtained the consent of the Central Bank to relinquish its leasing license from April 2011. Consequently, the existing book of LOLC was transferred to its flagship finance company- LOFC, and LOLC consolidated its position as a holding company.
Of the subsidiaries, all financial services companies are duly registered with and regulated either by Central Bank of Sri Lanka, Insurance Board of Sri Lanka or the Securities and Exchange Commission. Of these, the CBSL regulated finance companies, LOFC and Commercial Leasing and Finance PLC (CLC) posted remarkable results during the year, with LOFC a PBT of Rs 1.8 billon and CLC with a PBT of Rs 3.2 billon. LOLC Micro Credit Ltd (LOMC), the only regulated micro finance institution in the private sector recorded an impressive PBT of Rs 858Mn.
LOLC Securities Pvt Ltd. (LOSEC) reported a PBT of Rs 21 million in less than a year of its operations. The insurance arm, LOLC Insurance Company Ltd (LOIC) in its maiden year, recorded Rs 65 million as losses due to start-up costs however, made excellent progress capturing the captive market of the Group’s motor business, one of the largest motor books in the insurance industry.
Despite the momentous growth, the quality of the lending portfolio was not compromised. The NPL ratios of the companies at LOFC 1.4%, LOMC negative 3.1% and CLC negative 0.4%. Both LOMC’s and CLC’s provision cover is more than 100% of their respective NPLs, which result in negative NPL ratios. These ratios are clearly among the best in the industry. Nevertheless, these companies maintain a very conservative provisioning policy and made additional specific provisions on account of the bad and doubtful debts amounting to Rs 487 million, which is well above the regulatory requirements stipulated by the CBSL.
LOLC’s associate, PRASAC Micro Finance Company is the largest micro finance institution in Cambodia, and contributed Rs 174 million as profits to LOLC. This investment has given LOLC not only financial returns but also offered synergies to LOMC in effective management of rural micro financing.
LOLC also consolidated its presence in the leisure sector during FY12 with the acquisition of Dickwella Resort and Spa, and also closed three of its hotels situated in the south coast for refurbishment.
Plans are finalized for a new complex, the largest in the southern coastal belt with 500 keys within the three properties of Riverina, Palm Garden and Tropical Villas.
The contribution of plantation, renewable energy, construction, manufacturing and trading companies to the group profit was Rs.2.9 billion during the year.
“LOLC is on track to sustain its steady growth in the years ahead. With the recent financial results reflecting a landmark achievement in the Company’s history, LOLC is fully geared to strengthen its performance and explore more opportunities, in particular, in the financial services sector” Kapila Jayawardena, Group Managing Director/ CEO of LOLC said.