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FINANCIAL CHRONICLE™ » EXPERT CHRONICLE™ » LOLC remains ‘King of profits’

LOLC remains ‘King of profits’

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LOLC remains ‘King of profits’ The-king-of-profit-review

  • Group announces astonishing Rs. 57 b in PBT for FY21 and PAT figure of Rs. 53 b


  • Achieves Rs. 28 b as profit attributable to equity holders of parent company


  • Result on divestment of Group investments amounted to Rs. 44 billion, as against Rs. 6 billion in FY20


  • LOLC Group’s financial services post Rs. 17.3 billion despite allowing for strong risk mitigating provisions amounting to Rs. 30 b for bad and doubtful debts on a very conservative basis against Rs. 17 b in FY20


  • Second venture in Cambodia earns $ 45 m in PAT; total assets over $ 1 b



Diversified financial conglomerate, the LOLC Group, yesterday confirmed it remains the ‘king of profits’ among Lankan corporates after it announced record-breaking pre-tax profit of Rs. 57 billion and Rs. 53 billion in post-tax profit, for the financial year ending 31 March 2021.

Result on divestment of Group investments amounted to Rs. 44 billion, as against Rs. 6 billion in FY20.

LOLC in a statement said the achievement is a “first for any corporate” in the country.

“By achieving profits on this massive scale, for the first time in the history of Sri Lanka’s corporate world, the Group once again consolidated its position as the top-most profitable diversified corporate in the country, three years in a row – establishing LOLC as one of the largest micro, small and medium enterprises (MSME) platforms in the world,” the statement added.

In FY20 and FY19 too LOLC reigned supreme with Rs. 19.7 billion and Rs. 19.6 billion after tax profits.

LOLC said this stunning performance resulted in Rs. 28 billion being recorded as profits attributable to the equity holders of the parent company.

The Group results denote an impressive Earnings Per Share of Rs. 59.01 compared with Rs. 22.93 recorded in the previous year. Whereas the total comprehensive income was Rs. 81 billion out of which Rs. 37 billion is attributable to the equity holders of the parent company. Furthermore, the total attributable comprehensive income per share was Rs. 77.84. The resultant net assets value per share as at the year-end was Rs. 286.23 compared to Rs. 194.72 reported last year, demonstrating the exceptional value creation by the Group during the concluded financial year.

With interests in agriculture and plantations, leisure, renewable energy, construction, manufacturing and trading, information services, as well as research and innovation in addition to financial services, LOLC in a statement said all these businesses recorded an upward trend in profitability in 2020/21, despite the adverse effects of COVID-19 being felt by Sri Lanka’s economy through 2020, coupled with weak GDP growth in the preceding year. Despite the global economic downturn experienced during the period, a strong pipeline of multilateral and bilateral funding has been available to LOLC and its operating companies both locally and globally – a testament to the confidence these institutions have placed in the LOLC Group due to its strong and unblemished track record, and the potential for growth even during turbulent times.  

LOLC Group’s financial services achieved Rs. 17.3 billion as bottom line, despite allowing for a strong level of risk mitigating provisions amounting to Rs. 30 billion for bad and doubtful debts on a very conservative basis against Rs. 17 billion last year. Livelihoods of people in all sectors have been badly affected by the COVID-19 pandemic and at the request of the regulators of each country, the Group’s financial services companies have extended moratoriums to affected customers – extending a safety net to those in need.

LOLC’s finance companies in Sri Lanka experienced a strong level of deposit inflows despite all-time low interest rates. The flagship finance company, LOLC Finance PLC (LOFC), with a total assets base of Rs. 170 billion, recorded PAT of Rs. 4.4 billion. Commercial Leasing & Finance PLC (CLC) with a total assets base of Rs. 77 billion also recorded strong performance, posting a PAT of Rs. 2.2 billion in 2020/21. Meanwhile, with a total assets base of Rs. 19 billion, LOLC Development Finance (LODF) PLC recorded a PAT of Rs. 155 million.

Seylan Bank succeeded in delivering a steady PAT of Rs. 3 billion for FY2020. Deposits increased by 9.9% and advances increased by 4%, whereas the CASA ratio stood at 33%.

LOLC’s global success took seed in 2007, when it invested in PRASAC – a Cambodian microfinance organisation – and grew it into a billion-dollar organisation in less than 12 years. A 70% stake was recently acquired by the Republic of Korea’s largest commercial bank, Kookmin Bank, for $ 603 million – thereby contributing to overall Group profitability and strengthening its balance sheet with a put option to divest the remaining stake in December 2021.

LOLC’s overseas financial services entities made strong contributions to the profitability of the Group in 2020/21, with LOLC Cambodia leading the way with a $ 45 million in PAT with a total assets base exceeding $ 1 billion. In Cambodia, LOLC continues to hold a 97% stake in LOLC Cambodia – the fourth-largest microfinance company in terms of market position, and the second most profitable microfinance institution in Cambodia after PRASAC.

Venturing into Myanmar in 2013 as a Greenfield operation, LOLC Myanmar Microfinance Company Ltd. has now become the fourth largest among the 176 MFIs, with an asset base of $ 175 million, a portfolio of $ 126 million and a growing deposit book of $ 20 million. LOLC Myanmar has seen exceptional performance in FY2020/21 by posting a profit of $ 3 million as PAT and envisages strong growth prospects amidst the atmosphere of a large unbanked population.

In 2017, LOLC ventured into Pakistan by investing in Pak Oman Microfinance Bank (POMB), a joint venture with the Islamic republic of Pakistan and the Sultanate of Oman, which is now poised for rapid growth in a country with a population of over 200 million – offering attractive industry fundamentals. POMB operates through 66 branches, extending its services to over 50,000 clients. The Group ventured into Indonesia in 2018, acquiring the controlling interest in PT Sarana Sumut Ventura (SSV), further expanding its global footprint. SSV is now well-positioned to capture the industry potential in a country with a population of 270 million, with over a 100 million bottom of the pyramid population. SSV operates through 28 branches, extending its services to over 60,000 clients.

Tapping into other neighbouring emerging markets, LOLC invested in the Philippines – a country with a population of 110 million – through LOLC ASKI Finance and LOLC Bank Philippines – a thrift bank in 2019. LOLC ASKI operates through 15 branches, extending its services to over 3,000 clients, while LOLC Bank operates through 10 branches, extending its services to over 8,000 clients.

In the year under review, the Group made its first finance sector investment in the African region by acquiring a controlling stake of FinaTrust Microfinance Bank in Nigeria, a West African nation with the largest population in the continent of 206 million. FinaTrust will provide support to MSME entrepreneurs for significant financial inclusion in the country, operating through eight branches and extending its services to over 3,000 clients. The Group commenced operations in Zambia by incorporating LOLC Finance Zambia as a greenfield operation, which currently operates through six branches.

The global expansion strategy for the financial services sector remains a key focus, with plans being made for expanding into more markets in both Africa and Asia.

LOLC’s two insurance companies – LOLC General Insurance Ltd. and LOLC Life Assurance Ltd. – demonstrated strong resilience against the unprecedented impacts of the pandemic and other socio-economic adversities. LOLC Life Assurance registered a GWP (Gross Written Premium) of Rs 3.2 billion – the first life company in the industry to achieve this milestone in under 10 years – and posted a growth of 21% in GWP, backed by a robust growth of 59% in first year premiums – the highest new business growth in the insurance industry. LOLC General Insurance achieved Rs. 6 billion in GWP in 2020 – a feat achieved in under 10 years, a first for Sri Lanka.  

LOLC Securities (LOSEC) Ltd., a leading stockbroker with strong retail and local and foreign institutional client base, expanded its market share from 7% to 9.5% in FY 2020/21. The company is ranked second among peers in terms of total market turnover during the year under review. Improved brokerage earnings, ongoing expense management policies, and positive stock market sentiment helped the company to record impressive performance.

Performance of non-financial sector companies

Brown & Company PLC, with a history of 146 years, together with its investments arm Browns Investments PLC (BI), under which LOLC’s non-financial services businesses are structured, recorded resilient performance during the year under review. Despite the challenges encountered in the macroeconomic environment and in the intensity of the competitive landscape, Browns’ trading business recorded one of its highest revenues with an increase of 45%, with a gross profit increase of 47% for the FY 2020/21, while posting a PAT of Rs. 1.8 billion.

Browns and BI have energised many vital sectors of the Sri Lankan economy, including trading and manufacturing, precision engineering, mechanisation of agriculture, automotive, power storage, renewable energy, leisure and hospitality, plantations, construction, marine, and veterinary pharmaceuticals.

Browns is the most trusted, reliable and preferred partner for many leading global brands, introducing the world-renowned Massey Ferguson tractors back in 1952, and becoming the first distributor in the whole of South and South East Asia. Further, the company harnessed its superior enterprise capabilities to make TAFE the highest selling tractor brand in Sri Lanka. Today, TAFE and Massey Ferguson enjoy a 50% market share. Yanmar Combined Harvester, the most preferred brand in the Japanese segment, holds over 60% market share, while SUMO, its Chinese counterpart, holds over 50% market share in that particular segment.

The Auto Power market, with its distinctive competitiveness in technology and innovation, is well ahead of its competition with a 75% market share combined with the superior Exide, Lucas and Dagenite range. Further, RADCO, the number one brand of radiators in Sri Lanka, is the market leader holding over 50% market share.

Browns also partners with leading global veterinary brands such as Zagro, MSD and Eukanuba.

In collaboration with the world’s leading brands, the company provides an unmatched range of heavy machinery – Hitachi and Sakai – and tools – Makita and Tailin – reputed for trusted technology, advance functionality and energy efficiency. In the Electric Energy Solutions segment, Browns has a partnership with FG Wilson. The success of FG Wilson in Sri Lanka demonstrates the technical marketing proficiency of the company. It also markets Yanmar, Hyundai and PARSUN, the world’s most reliable and durable Marine engines.

The Group’s local plantations sector operates through Maturata Plantations and Gal Oya plantations, two businesses that recorded strong performance in the year under review.

Maturata’s business focus lies in the management of the company’s tea plantations profitably, while the future strategies are aligned to create long term value from cinnamon, with the company having the largest cinnamon plantation in the country. The BI Group acquired a 67% stake in Tropical Island Commodities Ltd., a cinnamon exporter in the country with a focus on developing value-added cinnamon products to attract global markets with strong demand for Sri Lankan cinnamon. During the year, Maturata recorded a historic performance with an excellent profit contribution to the Group, a PAT of Rs. 382 million.

Gal Oya Plantations continued to enhance its sugar cane growing and production capacity, with Hingurana Sugar Factory being expanded to meet local demand, which will also help the Government reduce expenditure on sugar imports. Gal Oya also produces the highest-grade ethanol in Sri Lanka.

BI Group invested in Sunbird Bioenergy (SBSL) Ltd. in 2019, an agro-based company incorporated in Sierra Leone, the largest land extent allocated for a sugar cane plantation in the region with 23,791Ha, with the ability to increase up to 50,000Ha, and one which produces Extra Neutral Alcohol (ENA) as per the global industrial standards. The company achieved its plantation target of increasing the sugar cane extent up to 6,500Ha from 900Ha in 2019, a remarkable achievement for the Group and produced an ENA of 14.3 million litres. SBSL also generates and exports power to the national grid with a power generation capacity of 32MWh.

In the renewable energy sector, Sagasolar Power Ltd., the first utility scale solar plant in the country, has been in operation for over four years since its commissioning in 2016 and generates steady profit contributions to the BI Group.

Browns Engineering, the construction and engineering arm of BI, aims to improve its market share in the telecommunication industry in Sri Lanka to be the turnkey solutions provider for telco operators. The company has performed extremely well with Rs. 1.6 billion revenue along with Rs. 361 million in PAT. Further, Browns Engineering plans to expand its operations in infrastructure development projects in roads and bridges, water and sewerage, and electrical and piling work in Sri Lanka and the Maldives.

Complementing the construction business of BI, Ajax Engineers Ltd. (Ajax), with its strong track record in the aluminium fabricating business, became the no. 1 player in the aluminium façade industry in Sri Lanka with large development projects being awarded to the company for end-to-end aluminium solutions. Gurind Accor Ltd., the renowned glass processing company with the brand Gurind Tough, is the no. 1 local glass processor and the pioneer toughened glass supplier in the country holding a dominant market share together with General Accessories & Coating Ltd. – recording strong financial performance despite COVID-19 challenges directly impacting the country’s construction industry. Creation Wooden Fabricators Ltd., which engaged in custom build furniture solutions, too reported commendable financial performance during the year.  

Excel World is being upgraded to become the premier food & beverage and MICE destination in the Colombo city. Meanwhile, Excel Restaurants Ltd. was granted franchise rights of seven leading restaurant brands in Colombo.

Browns Hotels & Resorts, a subsidiary of BI continued to enjoy a strong presence in the leisure sector, with Eden Resort & Spa in Beruwala (158 keys), The Paradise in Dambulla (67 keys), Dickwella Resort & Spa (76 keys) and The Calm Resort & Spa in Pasikuda (70 keys).  With the assistance of the Sri Lanka Tourism Development Authority (SLTDA), the Government has formulated short-term and long-term plans to rebuild the tourism industry impacted by the pandemic. The Group’s timely conversion of these properties into repatriation hotels helped the operating hotels enjoy a steady stream of revenue generating operating profits. Sheraton Kosgoda Turtle Beach Hotel with 172 keys, a five-star property managed by Sheraton, was commissioned during the year. The Group recommenced the construction activities of Riverina Resorts Beruwala, another 365 key five-star property.

Anticipating strong growth in the leisure business in the medium to long term, BI leisure subsidiary Eden Hotels Lanka PLC acquired the controlling stake of Serendib Hotels PLC. This acquisition adds the Dolphin Hotel in Waikkal with 154 keys, Avani Bentota with 75 keys, Hotel Sigiriya with 79 keys, and the Reveal Collection of Villa properties under Frontier Capital Ltd with 28 keys, into the Group’s leisure footprint. Dolphin Hotel, Avani Bentota and Hotel Sigiriya are currently operating as COVID-19 quarantine facilities.  

The Group’s leisure footprint expanded to the global arena with a significant investment in the Maldives in the last few years. Nasandhura Maldives, a luxury city hotel with 136 rooms, 118 apartments and a sophisticated retail mall, is nearing completion. This is a flagship property and will be an iconic development in the Male city. Another project in progress on the island of Bodhufarufinolhu with 100 keys, in the Ari Atoll, Maldives, is to be completed in December.

The Group signed a shareholder agreement with the Barceló Hotel Group to develop a three-hotel complex in North Male’ Atoll, Maldives – Bodufaru Beach Resorts Ltd., which consists of 470 keys. The total value of the development is estimated at $ 150 million with Barcelo investing $ 30 million for a stake of 33.33%. Apart from this shareholder agreement, Barcelo Hotel Group entered into a management agreement to manage five leisure properties in Sri Lanka and Maldives.

Having grown its leisure footprint significantly, and with the expansion planned for the medium term, the Group will hold 2,000 plus keys in Sri Lanka and overseas leisure properties, to be positioned as a significant leisure operator.

Browns Investments entered into a landmark agreement to partner with China Harbour Engineering Company Limited (CHEC) to commence the Colombo International Finance Centre (CIFC) mixed development project, which has strategic development project status in the Colombo Port City (CPC). This project comprises of a land area under development of 6.8 hectares, with an investment value totalling $ 1 billion. The total investment in phase one amounts to $ 450 million, with a buildable land area spanning 3.06 hectares, which is leased from CHEC Port City Colombo Ltd. to the new SPV that will be jointly managed by Browns and CHEC. This will be a significant undertaking involving the construction of two residential apartment towers, one serviced apartment tower, one office tower and a retail podium on the ground floor.

The LOLC Group is also exploring technology and innovation aligned to the President Gotabaya Rajapaksa’s vision, and to infuse local value addition. LOLC Advanced Technologies has built capacity to convert graphite to graphene and in partnership with SLINTEC, in which it has invested, is also conducting value additions such as fortifying rice with nutraceuticals and researching organic fertilisers to cater to the current demand. LOLC’s thirst for new knowledge and scientific innovation remains insatiable. More importantly, the Group provides opportunities for local scientists to work on exciting projects and encourages a spirit of discovery and innovation not abundantly available in Sri Lanka.

https://www.ft.lk/top-story/LOLC-remains-King-of-profits/26-718643#:~:text=Diversified%20financial%20conglomerate%2C%20the%20LOLC,year%20ending%2031%20March%202021.[/url]


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sureshot

Post Wed Jun 02, 2021 4:25 pm by sureshot

LOLC   may be the "King of profits" ........But a " beggar" in giving out dividends . 

J-CAT, Nandun, KingMaker2020 and stockchaser like this post

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Post Wed Jun 02, 2021 7:14 pm by Wickyz

https://youtu.be/fTqsy00vzuc

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Post Thu Jun 03, 2021 12:36 am by madukp

@sureshot wrote:LOLC   may be the "King of profits" ........But a " beggar" in giving out dividends . 

don't bother on div when there is enough capital gain. Cool

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