1 June 2021 03:47 am Views - 272
Globally diversified financial conglomerate LOLC Group posted a record-breaking performance for the financial year ending on March 31, 2021, achieving unprecedented Rs.57 billion in profit before tax (PBT) and a profit after tax (PAT) of Rs.53 billion, a first for any corporate in the country.
This stunning performance by LOLC 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 and demonstrates the exceptional value creation by the group during the concluded financial year.
The group’s business verticals in Sri Lanka—agriculture and plantations, leisure, renewable energy, construction, manufacturing and trading, information services as well as research and innovation along with its flagship financial services—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.
The group’s financial services business achieved a 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 loans on a very conservative basis against Rs.17 billion last year.
LOLC’s finance companies in Sri Lanka experienced a strong level of deposit inflows despite the all-time low interest rates. The flagship finance company – LOLC Finance PLC (LOFC), with a total assets base of Rs.170 billion, recorded a 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 asset 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 percent and advances increased by 4 percent, whereas the CASA ratio stood at 33 percent.
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 percent stake was recently acquired by the Republic of Korea’s largest commercial bank, Kookmin Bank, for US $ 603 million, thereby contributing to the 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 US $ 45 million in PAT, with the total asset base exceeding over US $ 1 billion. In Cambodia, LOLC continues to hold a 97 percent 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 Limited has now become the fourth largest among the 176 MFIs, with an asset base of US $ 175 million, a portfolio of US $ 126 million and a growing deposit book of US $ 20 million. LOLC Myanmar has seen exceptional performance in FY2020/21 by posting a profit of US $ 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. 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 of Rs.3.2 billion, becoming the first life company in the industry to achieve this milestone in less than 10 years and posted a growth of 21 percent in GWP, backed by a robust growth of 59 percent in first year premiums: the highest new business growth in the insurance industry. Meanwhile, LOLC General Insurance achieved Rs.6 billion in GWP in 2020, in less than 10 years, a first for Sri Lanka.
Meanwhile, 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 percent, with a gross profits increase of 47 percent for the FY 2020/21, while posting a PAT of Rs.1.8 billion.
Meanwhile, the group’s local plantations sector operates through Maturata Plantations and Gal Oya plantations, 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 percent stake in Tropical Island Commodities (Pvt.) Ltd, a cinnamon exporter in the country with a focus of 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 to reduce expenditure on sugar imports. Gal Oya also produces the highest grade ethanol in Sri Lanka.
BI Group invested in Sunbird Bioenergy (SBSL) Limited in 2019, an agro-based company incorporated in Sierra Leone, the largest land extent allocated for sugar cane plantation in the region, with 23,791ha with the ability to increase up to 50,000ha, 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 (Pvt.) Limited, 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 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. Meanwhile, Excel World is being upgraded to become the premier food and beverage and MICE destination in Colombo City. Excel Restaurants (Pvt.) 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 with 158 keys, The Paradise in Dambulla with 67 keys, Dickwella Resort & Spa with 76 keys and The Calm Resort & Spa in Pasikudah with 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 to enjoy a steady stream of revenues 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 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 (Pvt.) Ltd with 28 keys into the group’s leisure footprint. Dolphin Hotel, Avani Bentota and Hotel Sigiriya are currently operating as quarantine properties.
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 Barceló Hotel Group to develop a three-hotel complex in North Male’ Atoll, Maldives, Bodufaru Beach Resorts Lts, which consists of 470 keys. The total value of the development is estimated at US $ 150 million, with Barcelo investing US $ 30 million for a stake of 33.33 percent. Apart from this shareholder agreement, Barcelo Hotel Group entered into a management agreement to manage five leisure properties in Sri Lanka and the 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.
Meanwhile, Browns Investments PLC 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 Colombo Port City (CPC). This project comprises of a land area under development of 6.8 hectares with an investment value totalling US $ 1 billion. The total investment in Phase One amounts to US $ 450 million with a buildable land area spanning 3.06 hectares, which is leased from CHEC Port City Colombo (Private) Limited to the new SPV that will be jointly managed by Browns and CHEC.