The LOLC Group continues to record steady growth in profitability, with its core business in the financial services sector maintaining its progressive growth in profits. The Group recorded Rs. 9.3Bn PBT for the nine months ended December which is an excellent growth of 30% compared with the previous year. The resultant PAT recorded a 31% growth over the last year at Rs. 7.9Bn.
The financial services sector strengthened its position and remained the main contributor to operating profits, and this had a positive impact on the Group’s performance despite lower other income recorded for the period due to the prevailing equity market conditions. Attractive interest rates commanded by the Group for its lending portfolio together with effective portfolio management steered the companies to improve their income earned from the financial services business by 49% to Rs. 13Bn for the nine months. Strong collections by the marketing and recoveries teams strengthened the Group’s collections ratios which are the best in the industry and this, significantly improved the quality of the loan portfolio. The corresponding income for the same period in 2010 was Rs. 8.8 Bn.
The income growth corresponds with the focused business strategies of Lanka ORIX Finance PLC (LOFC), LOLC Micro Credit Ltd (LOMC) and Commercial Leasing and Finance Ltd (CLC), which is to strengthen its presence in the North and East and to support financing activities of the agriculture centric client segment. The target customer segment of the Group represents the SME and the Micro clients and LOLC Group commands leadership as the largest agriculture financier in the country. This strategy increased the advance portfolio by 65% which is a growth of Rs.15Bn for the last twelve months. The branch expansion strategy of LOLC helped this growth and currently the Group is operating through almost 200 locations throughout the country with significant presence in the North and East, 35 locations accounting for nearly 20% of the Group’s total reach.
The Islamic business of the Group, “Al Falaah” made progress during the reporting period with significant growth in the portfolio. Dedicated branches set up to service this segment enables the business to service its clientele at desired levels while making positive contribution to the Group’s operating profits.
The borrowing costs grew by 26% corresponding with the higher quantum of borrowing. The additional borrowing came from several multilateral and bilateral foreign funding partners who use the LOLC Group as their catalysts to realize developmental roles. These funding institutions also provide technical services assistance and global best practice knowledge transfer. However, the cost of funding for the Group remained competitive relative to the interest cost volatility. Total assets of the Group grew by 36% mainly due to the growth in advances from the financial services sector and the fair value gain of assets acquired during the period below the market value.
LOFC’s deposit base grew by 62% compared with the previous year to reach Rs. 23Bn. LOLC’s strategic business model with financial services as the core, complemented by the diversification into Leisure, Trading/Manufacturing, Agriculture, Plantation, Renewable Energy and Construction positioned the Group as one of the largest Conglomerates in the country, poised to reap the benefits of a growing economy since the end of the ethnic conflict, two years ago.
Subsequent to the approval received from the Central Bank, CLC converted itself to a Registered Finance Company and commenced its savings and fixed deposits operations. The Company is well geared to mobilize savings and FDs through its extensive branch network.
The newly setup LOLC Insurance Co. Ltd. as a composite insurer offers both General and Life products to LOLC Group customers and other customers. LOLC Insurance is well aligned to deliver a distinctive value proposition to its customers through the use of the Group’s extensive branch network, which puts the company on a very strong position compared with the competitors. The state-of-the-art motor vehicle facility of LOLC, LOLC Motors Ltd. and Speed Italia complements the financial services sector and the fleet management business and this is vital considering the Group’s exposure into motor vehicle financing and insurance. There is a significant shift in growth for Fiat vehicles where the demand has increased since LOLC becoming distributors for Fiat.
The factoring businesses of the Group, LOLC Factors Ltd. and Commercial Factors holds the leadership position in the factoring business in the country and these two companies are in the process of expanding its operations to the regions where the market is greatly untapped. LOLC Securities Ltd. commenced its operations during the last quarter and is well geared to generate steady income for the Group in the medium to long term. The Group’s strategic investments into the banking sector through its stakes in Seylan and HDFC demonstrates LOLC’s commitment to the financial services sector as a whole.
LOLC’s expansion into the Leisure sector two years ago, with the acquisition of four hotels in the golden mile on the southern coast was further strengthened by the new addition of Dickwella Resort Ltd. which is a 77 roomed resort hotel with a stunning location deep south of the island. The Group now holds 623 plus keys making LOLC Leisure one of the largest leisure operators in the country. The ongoing refurbishment project for the upgrading of Palm Garden, Riverina and Tropical Villas will enhance the value proposition of the leisure sector in the medium term. This sector’s position will be further strengthened with the Group’s decision to work with an internationally reputed hotel management Company to manage these hotels once the refurbishment is completed.
With the investment made in the Construction sector through the Sierra Group, Trading and Manufacturing through the Browns Group and Asia Siyaka, Agriculture and Plantation through Mathurata, Pussellawa, Gal-Oya and Agstar Fertilizers and the overall investment strategies in the renewable energy sector through United Dendro and Hydro Power Free Lanka, LOLC is well poised as a Conglomerate that capitalizes the opportunities presented by the positive economic outlook.
Commenting on the outstanding performance of the Group, Mr. Kapila Jayawardena, the Group Managing Director/CEO of LOLC said; “The future trends are promising where we will continue to maintain sustainable business growth for the long term. We expect to see similar results in the fourth quarter where we would see the Group’s diversified portfolio perform increasingly in tandem with the Group’s core business, financial services.