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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Environment, human rights & governance core issues for investment flows

Environment, human rights & governance core issues for investment flows

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CSE.SAS

CSE.SAS
Global Moderator
Hemas Chairman looks at the ``peace dividend’’

A respected business leader has gone public with the assertion that the expected peace dividend had not resulted in the massive investment inflows that had been expected.

"On reflection this should not be perceived as a negative," Mr. Lalith De Mel, Chairman of Hemas Holdings PLC, has said in the company’s annual report.

He explained that there are many countries that had peace and with peace Sri Lanka has joined the club of peaceful countries and was on a level playing field with the rest.

"The only surprise is that we ever expected a peace dividend!!," he said.

De Mel said that investment funds will flow where there is a competitive advantage giving the investor the potential of earning good returns.

"Tourism is a classic example. We have a competitive advantage and we are therefore seeing interest and inflows of funds," he noted.

The Cambridge and Harvard educated business leader who served most of his career at Reckitt Benckiser PLC, UK, and was also a main board director of that company, explained that modern business leaders place importance on the impact of the environment, human rights and governance as these are all areas of concern to their shareholders.

"Countries that do not score well on these three dimensions will suffer the consequences and will find that this will diminish inflows of funds," he said.

"We must hope that the government will deal vigorously with the problems of abductions, violence and corruption as they will be the log across the river that will reduce the inflow of investments."

De Mel expressed the view that the country’s macroeconomic fundamentals "are quite sound" saying that this gives confidence for the future. Inflation was at a single digit and unemployment figures are coming down.

Compared to most parts of the world, Sri Lanka’s unemployment numbers "are impressive even though they have to some extent been helped by those moving out as migrant workers."

"Reserves are adequate, government debt as a percentage of GDP is declining. The only blip that will not go away easily is the deficit in the balance of trade, but as long as other inflows bridge the gap it does not really spoil an otherwise good report card," he said.

Looking at the future through what he called "these very lightly rose tinted glasses," de Mel said that Hemas were continuing commitment to future growth.

"This means that in addition to optimizing revenue and profit growth from current activities we have been and we are continuing to invest in incremental activities that will give us new slabs of revenue in the future," he said.

The flip side to this strategy was that the short-term interest cost of investment in new activities will depress earnings, he said, declaring that while the company would be mindful of sustaining earnings growth, they would not stifle investment for the future.

Hemas investments will focus on three activities considered to be high potential in the long-term – hospitals, power and hotels.

De Mel also said that the company was continuing its successful journey from a family firm to a well structured public company with family members moving away from their executive roles.

Hemas whose business comprises FMCG, pharmaceuticals, hotels, aviation and power had closed the year ended March 31, 2012 with a profit after-tax of Rs.1.31 billion, down 3% from Rs.1.36 billion earned the previous year with the attributable profit down a marginal 0.1% to Rs.1.2 billion.

Mr. Husein Esufally, CEO of the company said that while their core businesses had experienced mixed fortunes during the year under review, many of them had closed the year on a high note.

Their investments in the past few years in the hospitals, hotels and power sectors had a long-term focus with the group having invested over Rs.5 billion over the past five years in these business segments.

Hemas has a stated capital of Rs.1.6 billion, reserves of nearly Rs.2 billion and retained earnings of Rs.7.2 billion in its books. Total assets ran at Rs.22.8 billion, non-current liabilities at Rs.1.8 billion and current liabilities at Rs.8.1 billion.

Net assets per share had grown to Rs.20.90 from Rs.17.30 the previous year and the company’s share traded at a high of Rs.51 and a low of Rs.23 during the year under review. This compared with a trading range of Rs.53.50 to Rs.23.60 a year earlier.

The major shareholders of the company are A.Z. Holdings (Pvt) Ltd (17.61%), Saraz Investment (Pvt) Ltd (16.77%), Blueberry Investments (Pvt) Ltd (16.65%), Amagroup (Pvt) Ltd (16.65%) and EPF (5.17%).

The Esufally family who are board members have major personal stakes – Messrs. I.A.H. Esufally (1.19%), H.N. Esufally (1.12%) and M.A.H. Esufally (1.10%).

The directors of the company are: Messrs. Lalith De Mel (Chairman), Husein Esufally (CEO), Abbas Esufally, Imtiaz Esufally, Murtaza Esufally, Maithri Wickremesinghe, Praditpa Mohapatra, D. Bhatnagar (Resigned 31.02.2012) and R. Gopalakrishnan (w.e.f. 01.04.2012).
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=56815

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
"We must hope that the government will deal vigorously with the problems of abductions, violence and corruption as they will be the log across the river that will reduce the inflow of investments."

Present government can't do this,because those are the tools which they are using to stay in power.

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