# Makes more established conglomerates look minnows as aggressively diversifying Group revenue tops Rs. 25 b# Pre-tax profit exceeds Rs. 7 b
# Net profit up 315% to Rs. 3.2 b
# Assets surpass Rs. 100 b mark
# Rs. 5.7 b cumulative investment in subsidiaries
Making the fastest leap to top the league, Lanka Orix Leasing Group proved its true mettle this week by announcing a mega Rs. 7.1 billion pre-tax profit in just nine months of 2010/11 financial year and a net profit attributable to equity holders of Rs. 3.2 billion aided by a top line gross revenue of Rs. 25.5 billion.
Gross revenue saw 172% growth in the first nine months whilst profit before tax rose by 485% and after tax figure by 647% to Rs. 6 billion. Profit attributable to equity holders was up by 315%.
This unprecedented performance has firmly placed LOLC much above some of the older conglomerates such as Hayleys (whose net profit was only Rs. 580 million), Aitken Spence (whose turnover was Rs. 18 billion and net profit was Rs. 1.65 billion) and Carson Cumberbatch (with Rs. 25 billion turnover and Rs. 2.8 billion net profit).
Interim results for nine months released show financial services sector, trading sector and the other sectors contributing exceptionally well.
However LOLC has benefited substantially from other income of Rs. 4.2 billion, up by 302% over last year. They included Rs. 2.6 billion on sale of investments, Rs. 1.8 billion in marked market valuation of quoted shares held for trading purpose.
An analysis of the cash flow statements reveals Rs. 1.56 billion as proceeds from sale of subsidiaries, associates and shares and Rs. 3.1 billion in sale of property, plant and equipment. Interestingly LOLC had invested Rs. 5.7 billion in subsidiary companies, up from Rs. 7.5 million a year earlier.
The financial services sector showed excellent performance with pre-tax profits of Rs. 5.5 bn a growth of 354% over last year. The rest of the group contributed Rs. 1.6 bn to the bottom line. With a contribution of taxes of Rs. 1.1 bn, the Group recorded post-tax profits of Rs. 6 bn, a growth of 647% over last year.
LOLC said the increase in total revenue kept its momentum in line with the aggressive growth in the financial services sector and the trading sector. The revenue grew by 172% over last year to reach an all time high of Rs. 26 bn for the nine months. The revenue from the financial services sector saw a growth of 41% to reach Rs. 13 bn while the contribution from the rest of the sectors was Rs. 12.4 bn. The borrowing costs continued to come down in line with the sliding interest rates with the Group raising funds at attractive rates. LOLC’s ability to source long-term funding from foreign multilateral and bilateral agencies at attractive rates contributed well to the reduction in borrowing costs. The total borrowing costs reached Rs. 4.9 bn by December reflecting the lower interest margins demanded by the Group.
LOLC Group’s core business, the lending operations and its strategic investments contributed well to the bottom line positioning the Group on a strong footing to reap steady growth in profitability in the medium to long term. “The Group’s expansion strategies augers well with the economic growth forecasted in the near future,” LOLC said.
The balance sheet grew along with the business growth of the Group, with total assets crossing the Rs. 100 bn mark reaching Rs. 108 bn by December. This is almost a 100% growth over last year. The corresponding liabilities grew by 60% represented by the borrowings of the Group mainly coming from the financial services cluster and the holding company. The total assets of the financial services cluster reached Rs. 68 bn, a growth of 20% over last year. The corresponding liability grew by 20%.
The advances grew by 49% to reach Rs. 49 bn. which is an indication of the strong portfolio growth as a result of the growth in executions. The newly set up branches in the North and the East contributed significantly to this growth.
The strong growth of the lending business, propelled by the rapid expansion of the customer base, was facilitated through a strong growth in the Group’s footprint, especially in the rural sectors. The footprint continued to grow, with several key branches and “Isuru Diriya” centres being opened during the quarter. On a monthly basis, four “Isuru Diriya” centres are being opened, strengthening the presence in the rural areas.
The total count of the financial services sector outlets now exceeds 140, of which, Lanka Indian Oil Company outlets and “Isuru Diriya” centres account for 65. The company’s entry into the North and East is already reaping benefits with significant business volumes coming from these largely untapped markets.
Reflecting this aggressive growth, Lanka ORIX Finance Company, Commercial Leasing Ltd., and LOLC Micro Credit Ltd. contributed exceptional results to the bottom line of the Group. Economies of scale from operations, and multiplying synergies from shared distribution channels and shared services are deriving benefits to these companies. The collections efforts of the Group continue to be of utmost importance to the sustainable profit growth, and strategies are continuously evaluated and improved to maintain the desired level of collections.
LOLC’s 100% owned subsidiary, Lanka ORIX Finance Company continues to grow from strength to strength, with its deposits base increasing to Rs. 14 bn, a significant growth of 61% over the same period last year. The company is well positioned in all regions to reap the benefits of the common distribution channels of the Group. Commercial Leasing Company and LOLC Micro Credit Ltd. too grew its lending business in the SME/Micro sectors especially in the rural sectors of the country, contributing well to the bottom line of the Group.
The trading and plantation sectors too contributed well to the performance of the Group with steady profits flowing to the Group, a Rs. 1.6 bn as at December.
The leisure sector saw significant activity during the peak season and is also gearing up for the upcoming refurbishment. LOLC is finalising its management agreements with renowned international hoteliers to manage these hotels once the refurbishments are concluded.
LOLC Insurance Co., and LOLC Securities Ltd., — the latest additions to the group are drawing up their plans and are expected to commence operations within the next few months.
LOLC Group Managing Director and CEO Kapila Jayawardena said: ‘Sri Lanka is on the threshold of Economic Prosperity with new opportunities beckoning from the North and East of the country as well.
LOLC has been able to break new ground in profit diversity with vigorous implementation of initiatives taken in developing its Core business, as well as embracing the quest for new opportunities. This performance, which reflects a quantum leap when compared to the previous year, was due to the implementation of the Group’s road map which enabled us to capture opportunities well ahead of time.”
source - www.ft.lk
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