Losses at The Finance widen in 1Q

The Finance Company PLC’s (TFC) losses expanded during the quarter ended June 30, 2018 (1Q19) as the beleaguered finance company saw further erosion in its customer deposits while customer advances declined. 

The former ill-famed Ceylinco group entity reported a net loss of Rs.743. 6 million for the April-June period, expanding the negative earnings from Rs.541.9 million in the earlier period. 

The net interest expenses rose by about Rs.91 million to Rs.305 million as the interest expenses rose, while the interest income from loans, leases and other investments remained weak. 

As losses have accumulated over the years, the company operates with a Rs.15.2 billion hole in the balance sheet. The total liabilities surpass the shareholder funds.

The company has an asset base of Rs.22.5 billion, down from Rs.23.6 billion three months ago. 
The quarter saw the deposits declining by 2 percent quarter-on-quarter (QoQ) to Rs. 29.9 billion and the borrowings rose by 5 percent QoQ to Rs.5.4 billion.

During the preceding quarter ended March 31, 2018 (4Q18), The Finance reported a net loss of Rs.571 million and for the full financial year the reported net loss was Rs.2.3 billion. 

Although, The Finance director board remains extremely optimistic of turning around the ailing finance company, it is entirely in the hands of a new investor or a consortium of investors who are willing to take some risk.

The Finance, once one of the biggest holders of property said it halted new real estate projects to concentrate on the core business of raising deposits and lending. 

The company has Rs.1.8 billion under investment properties and another Rs.4.0 billion under property, plant and equipment (free hold assets). 

The halt in the real estate business comes amid the company facing an uphill task in claiming the title ownership for many properties it once owned. 

It appears that under Ceylinco group’s mismanagement, which ceased about a decade ago, The Finance-owned properties, had been transferred or assigned to other group entities without documents or any trails. 

Lack of documents on major transactions on historical legacy issues hampers the recovery efforts, said The Finance Chairman Wasantha Kumarasiri in his annual review of operations to the shareholders.   During FY18, the company managed to get the title ownership of the investment property Frances Road Residencies transferred, which was under another Ceylinco group entity.   The Finance had also called for expressions of interest to dispose 100 percent ownership of two international schools, while two other school properties in Galle and Wennappuwa were sold for Rs.11 million. 

The State-controlled private sector pension fund, the Employees’ Provident Fund held 8.43 percent stake in The Finance being the fifth largest shareholder while high net worth investor, T. Senthilverl held 21.64 percent stake being the single largest shareholder.