Friday, October 7, 2011

Jewellery maker out of the blues

* Blue Diamonds Jewellery Worldwide PLC  records profit for Q2

After sustaining losses over the past few years, Blue Diamonds Jewellery Worldwide PLC recorded a net profit of Rs. 24.2 million for the September quarter, up 469 percent from a Rs. 6.5 million loss sustained a year earlier, "derived from the writing back of non payable creditors and loans," the company announced yesterday.

Turnover increased by 100 percent to Rs. 25.88 million during the second quarter, from Rs. 12.9 million a year ago. Profit from operations increased 498 percent to Rs. 20.8 million from a loss of Rs. 5.2 million.

Blue Diamonds Chairman Bandula Ranaweera in his review published in the 2010/11 Annual Report said that "barring any unforeseen circumstances the company will be moving to a positive zone and a remarkable achievement is that the company is in a zero interest zone as all debts have been settled".

A year earlier, interest bearing loans and borrowings amounted to Rs. 17.7 million.

The company’s export income from gold, gems and jewellery is exempt from income tax. It holds a suppliers stock of jewellery amounting to Rs. 1.1 million for items not collected for a period of over ten years.

During the quarter the Board of Directors decided to write back the total outstanding balance of Rs. 19.3 million payable to Ceylinco Investment Company Ltd as non existing liability as an amount received as marketing support during the previous years, the company noted in its interim statements filed with the Colombo Stock Exchange.

Some of the new markets that Blue Diamonds is now working on positively are India, Malaysia and Russia. Products will also be offered to direct marketing companies from selected regions who will be given very specially designed collections of jewellery suited for tele-marketing, Blue Diamonds said.

The company is hoping to invest Rs.14 million to build a new administration and marketing building. They hoped to have this building ready eight months after construction begins.

The biggest shareholder (voting) is Sri Lanka Insurance with a 10 percent stake in the company amounting to Rs. 10.86 million as at September 30, 2011, followed by British American Technologies (7.66 percent) and Ceylinco Insurance (4.92 percent).

Of the non-voting share capital, Seraka Investments Ltd holds a 10.8 percent stake amounting to Rs. 16.56 million.

Ordinary voting shares closed 20 cents lower at Rs. 9.40 yesterday.

According to the 2010/11 annual report, The company’s Auditors, KPMG Ford, Rhodes, Thornton & Company have issued a qualified opinion saying that Blue Diamonds had obtained a credit facility of US$ 2.75 million from the Seylan Bank in previous years by pledging an inventory of jewellery as security. During the year ended March 31, 2005, the directors had resolved to write back the balance outstanding to the bank in respect of this facility on the basis that the company had handed over jewellery in lieu of the said credit facility as a full and final settlement.

Although Rs.203.5 million had been written back to the income statement during that financial year there was insufficient and appropriate audit evidence of this transaction. The Seylan Bank has in December 2009 demanded US$ 4.3 million together with further interest of 8% being the total outstanding sum.

The company and bank have agreed to go to arbitration on this matter and this process has commenced with the case currently at the trial stage.

The auditors have pointed out that no liability had been recorded in the financial statements in respect of the balance payable to the bank. They were therefore unable to satisfy themselves of the completeness, existence and accuracy of this liability as at March 31, 2011.

The auditors have also made reference to a write back of Rs.4.5 million to the income statement out of a payment due to Ceylinco Investment Co Ltd during the year. They have not been able, due to the absence of sufficient and appropriate audit evidence, satisfy themselves "as to the completeness, accuracy, existence of amount due to Ceylinco Investment Co Ltd of Rs.19.4 million as at March 31, 2011."

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