Higher subsidiary income boosts LVL Energy Fund 3Q

LVL Energy Fund Limited (LVEF), which started trading in the Colombo bourse this January, posted a Rs.103.5 million net profit for the December quarter (3Q18), which was an over six-fold increase compared to the corresponding quarter of the previous financial year, stemming from higher income from subsidiaries.

Earnings per share increased to 22 cents from 4 cents year-on-year (YoY) and LVEF share was trading at Rs 9.50 last Friday. The company, which offered 120 million shares at Rs.10 a share in an Initial Public Offering last December, invests in power projects in Sri Lanka, Nepal and Bangladesh.

LVEF’s subsidiary income for the 3Q18 increased to Rs. 121.8 million from Rs. 38.2 million YoY, while the contribution from other income was negligible, pushing up revenue for the quarter to Rs. 126.4 million.

Operating expenses of subsidiaries doubled YoY to Rs. 32 million. Finance costs meanwhile increased 41.8 percent YoY to Rs. 55.5 million, owing to project-related borrowings of subsidiaries.

LVEF CEO Sumith Arangala in his quarterly review said the finance costs are expected to reduce in the current quarter since the funds raised from the IPO would go towards settling some of the firm’s debt.

Income taxes meanwhile fell to Rs. 3.9 million from Rs. 34.6 million YoY, which Arangala attributed to the “decline in withholding tax attributable to dividend income arising from timing differences in the declaration of dividend by companies under the group”. Compared to the start of the financial year, when LVEF total assets stood at Rs.4 billion, the balance sheet expanded to Rs.5 billion at the end of the third quarter with the cash raised from the IPO.

Total interest bearing borrowings fell to Rs. 509 million from Rs. 717.8 million.

Meanwhile, for the 9-month period ended December31, 2017, LVEF posted a net profit of Rs. 394.9 million, down 9.7 percent YoY. There was a reclassification of a negative Rs.108 million available for sale financial reserve from other comprehensive income to the profit/loss statement, narrowing the net profit margin. Earnings per share for the 9 months fell to 85 cents from 98 cents. Revenue for the period increased 43.7 percent YoY to Rs. 319.4 million. Finance costs for the period increased 42.4 percent YoY to Rs.155.4 million. The tax expense fell 58.9 percent YoY to Rs. 25.6 million.

Lanka Ventures PLC is LVEF’s parent, holding a 57 percent stake in the energy subsidiary. Mohandas Wijetunge owns 11.66 percent of the stake in LVEF, while the State owns 9.38 percent of LVEF through the Sri Lanka Insurance Corporation (SLIC) and the National Savings Bank.
In fact, SLIC and Phoenix Ventures, the parent of Brandix group, are the main investors of the LVEF IPO as 60 percent of the IPO shares were allocated to them.