LOLC yesterday announced excellent growth in profitability in the first half of FY18 driven by the financial services sector compared with an year earlier.
The profit before tax for the first half ended on 30 September 2017 was Rs. 11.7 billion compared with Rs. 6.6 billion reported last year, a growth of 77%. The corresponding PAT increased by a robust 73% to end the quarter at Rs. 8.8 billion.
The Group’s total assets reached Rs. 748 billion, with an advances portfolio of Rs. 488 billion. The Group balance sheet is further strengthened by investment securities held by the financial services sector companies of Rs. 86 billion mainly represented by Government securities and bank deposits.
The Group’s local financial services companies – LOLC Finance PLC(LOFC), Commercial Leasing and Finance PLC(CLC), LOLC Micro Credit Ltd.(LOMC), and BRAC Lanka Finance PLC(BRAC) – performed well and contributed well to the bottom line results.
The lending portfolios of each company recorded steady growth, with LOFC portfolio reaching Rs.94 billion, CLC portfolio reaching Rs.58 billion, LOMC’s portfolio reaching Rs. 55 billionand BRAC portfolio reaching Rs.12 billion over the last 12 months.
Deposit bases of LOFC, CLCand BRAC grew to Rs. 99 billion, Rs. 23 billion and Rs. 6 billion respectively. The total assets of LOFC reached Rs.135 billion, whist CLC’s total assets reached Rs.76 billion, LOMC’s total assets reached Rs.80 billion and BRAC’s total assets reached Rs.15 billion.
The three finance companies hold large portfolios of investments in Government securities and bank deposits as its statutory reserves and other investments, strengthening each balance sheet. LOFC holds Rs.27 billion of such assets, with CLC following suit with Rs.12 billion in statutory reserves and investments.
PRASAC Micro Finance Institution Ltd. in Cambodia became a subsidiary of the Group at the beginning of the year, which positively contributed to the bottom line. LOLC’s other two investments in Cambodia and Myanmar also join in reporting strong financial performance.
The regional expansion of the Group is poised to deliver steady results diversifying and balancing the exposure LOLC has to the local market. The markets reached by LOLC with regional expansion are with great potential for portfolio growth and strong portfolio quality. Therefore, these investments are expected to derive a strong profit signature in the medium to long term enhancing the shareholder value of the Group. Profit contribution from the financial services companies to the Group results was Rs. 10.6 b, with both local companies and companies in the region contributing equally.
The financial services sector’s performance is remarkable given the external challenges faced by the industry including increasing interest rates putting pressure on net interest margins, strain on collection efforts due to rising interest rates and lower economic activity.
Other sectors in the Group delivered moderate results with the leisure sector still being in a stage of development with three of the Group’s local properties being under construction. The properties in Kosgoda, Beruwala (Riverina) and the Maldives are progressing steadily in line with the project plans.
The trading sector consisting of the Browns Group and the plantation sector too recorded moderate results. The plantation company within the Group, Maturata Plantations recorded operating profits before finance costs reversing its long history of making losses, well adopting the restructuring of the estate management operations and producing high quality produce.
Equity accounted investees contributed lower profits compared with last year, mainly as PRASAC was moved to subsidiary category in the financials of the Group.
Commenting on the performance of the Group, LOLC Group Managing Director/CEOKapila Jayawardena stated: “The Group’s fine and consistent performance for the last six months is driven by the financial services companies, led by the four companies in Sri Lanka and our investments in Cambodia and Myanmar. All financial services companies are doing well with strong assets growth and steady profitability. Regional expansion to Myanmar and Cambodia has derived excellent results, with PRASAC and LOLC Cambodia contributing well to the bottom line.”