CIC Holdings FY16 revenue up 13% to Rs. 26.6 b; PAT up 57% to Rs. 1.63 b

CIC Holdings Group has achieved a growth in revenue of 13% to Rs. 26.67 billion in the financial year ended 31 March 2016 and an after tax profit of Rs. 1.63 billion, up by 57% over the previous year.

Group pre-tax profit grew by 41.6% to Rs. 2.01 billion. Net profit attributable to equity holders of the company rose by 77.7% to Rs. 1.35 billion.

CIC Holdings Plc Chairman Harsha Amarasekera said in addition to the organic growth from the existing business ventures, the Group has invested Rs. 2 billion in growth sectors enhancing the future earnings potential of the group. 

“Increased earnings and timely risk management initiatives enhanced the asset quality by improving the Net Asset Value per Share from Rs. 75.14 to Rs. 93.44, a 24 % increase. Concurrently, the Board also increased the dividend per share from Rs. 3.0 to Rs. 4.0, which in turn contributed to a dividend yield of 4%,” the CIC Chairman said in his review in the 2015/16 Annual Report. 

“This combined with a capital appreciation for the share of 26% resulted in a Total Shareholder Return (TSR) of 31%. Return on Equity (ROE) was at 15% compared to 12% the previous year, confirming our strategy to enhance future earnings potential,” Amarasekera added.

The Debt to Equity ratio stood at 120% for 2015/2016 as opposed to 117% for the previous financial year, a factor which is closely monitored by the Board. 

“It is indeed gratifying to note the consistent improvement in profitability and growth sustained over the past eight quarters,” the Chairman emphasised.

Encouraged by the progress achieved, CIC has chartered a new trajectory for growth which is multifaceted, building on the Group’s core competencies and considerable strengths developed over three decades. The new strategies formulated entrenched the group presence in the agriculture and livestock, healthcare and consumer sectors.

Working together with external consultants, CIC also critically assessed their business portfolios, current positioning and how the CIC Group is perceived. The Chairman said it became clear that sharpening the corporate vision and mission and better defining and grouping of its diverse businesses were a prerequisite to strengthening CIC’s true identity as a well-diversified conglomerate. 

“Consequently, we have modified and rearranged the Group structure into five clear business segments in order to enhance group synergies and to facilitate a sharper focus on potential areas of high growth. As part of the same process, we have also re-defined our corporate vision and mission statement as it’s now depicted in this report. Further as the business grows and diversifies into new sectors, stretching the corporate brand CIC across an innumerable and diverse range of products and services will not be optimal or possible,” Amarasekera said.

According to him the new structure enables each business segment to have its own identity and brands for individual product lines with a higher level of visibility for the individual brands. The brands will be discrete, each one holding a distinct promise of quality and value for the end user. Where relevant, the CIC logo will be retained in an overarching capacity to provide continuity and reassurance.

CIC also implemented several structural changes during FY16 to ensure that all business sectors are well positioned for growth.

Relocating the PVA manufacturing facility in Ratmalana to the Godagama Industrial Zone was an important step; one which has been in the contemplation of the Company for several years and this move mitigates potential environmental and social issues in an urban neighbourhood. This has made available approximately 4 acres of land in an urban area which could be sold or developed. The relocation project required an investment of Rs.400 million and resulted in capacity expansion of 100% which is expected to commence its pay off from this financial year.

Amarasekera said the Board identified areas for growth and investment immediately following the turnaround in the performance of the Group in 2014/15 prioritising the many options available based on the potential value created for shareholders and Group synergies. 

Accordingly, the Group invested Rs.1 billion on building facilities for drying and storage of maize in Talawa and Siyambalanduwa, with an aggregate capacity of 50,000 MT, synergising the value chain from agriculture input distribution to the feed milling business within the Agri Produce and Livestock Solutions sectors. 

“This venture epitomises CIC’s philosophy of creating broader stakeholder value and is aligned with the Ministry of Agriculture’s Food Production National Program 2016 – 2018, where maize is a crop aimed at self-sufficiency and the Sustainability Development Goals of poverty alleviation, zero hunger and reduced inequalities too are addressed. The project also supports around 10,000 farmers in these two rural communities through buy back guarantees and provision of technical support to maximise yields. We also strengthened the value proposition to farmers by facilitating crop protection insurance and banking services,” Chairman said. 

Strategic investments

Another strategic investment approved by the CIC Board was a further Rs.1 billion for cultivation of vegetables in greenhouses using the latest technology. Higher value vegetables will be grown for export supporting the country’s export drive and building CIC’s reputation as an exporter of high quality vegetables. The investment in greenhouses seeks to mitigate the impact of adverse weather, land and labour shortage which regularly hampers the output of the agriculture sector.

Chairman has told shareholders via his review in the 2016 Annual Report that the Pharmaceuticals sector indicates significant potential for growth with a steady income throughout the year as indicated by the country’s demographics and changing wealth patterns. 

The CIC group’s pharmaceutical manufacturing plant produces generic lifestyle medications used on a continuous basis, including medications for diabetes, hypertension, cholesterol and gastric reflux among others. 

Given the increasing focus on availability of affordable generic drugs, this investment also supports the national healthcare agenda and saves valuable foreign exchange for the country. CIC is also investing a sum of approximately Rs.100 million in constructing a purpose built facility for storage of pharmaceuticals in Ekala, filling a lacuna in CIC’s infrastructure to support growth of this vital business segment. 

“Meeting stringent standards of our principals, this facility will enable us to widen the range of products marketed by the Group. Pharmaceuticals being a key growth sector at CIC, we will now be well positioned to ensure its continued expansion,” Amarasekera said. 

He pointed out that a solid financial position, decades of diverse industry insights, strong relationships globally with principals and locally with farmers, distributors and regulators provide a sound foundation for growth. 

“Our businesses are also in sectors important from an economic and social perspective to the country such as agriculture, healthcare and industrial solutions vital for the country’s progress. We have emerged from the losses incurred in 2013/14 as a stronger group, delivering increasing value to stakeholders and we are ready for further investment,” the Chairman said.

Growth plans

“ Projects commenced this year will enhance earnings of the Group in the coming year and we also expect to implement further plans for growth during the coming year,” he added.

Amarasekera also says in Chairman’s Review “Our course is clear – we expect to be one of the top three players in the country in every business we are engaged in.” 

According to him the CIC Board will continue to drive performance from the centre supported by strong reporting and risk management processes for objective decision making. 

“Our new identity will facilitate greater visibility and brand building, driving the value of each individual business and the conglomerate as a whole,” he added. 

In order to further drive and build value, the CIC Board has approved an ESOP scheme aimed at the top management of the Group. The Resolution in respect of the same will be placed before the Shareholders immediately after the AGM. “The Board is confident that this would pave the way for even greater commitment from the Management to improve the results of the Group, CIC Chairman Amarasekera said.

The CIC Holdings Plc’s Board of Directors comprises of S.H. Amarasekera (Chairman), S.P.S. Ranatunga (Managing Director/CEO), M.P. Jayawardena, R.S. Captain, P.WM.B.B. Marambe, R.N. Asirwatham, S.M. Enderby, A.V.P. Silva, R.C.W.M.R.D. Nugawela, K.B. Kotagama and D.S. Weerakkody.