LOLC dethrones JKH to become most profitable listed corporate

• Financial services-rich conglomerate ups FY17 after-tax profit by 124% to Rs. 21 b overtaking JKH’s figure of Rs. 18.1 b
• Bottom line up 101% to Rs. 17.15 b, above JKH’s Rs. 16.2 b
• LOLC Group pre-tax profit up 106% to Rs. 24.4 b
• Consolidated gross income grows 37% to Rs. 92 b
• Total assets of the group up 69% to Rs. 641 b

Lanka Orix Leasing Company (LOLC) has emerged as the most profitable listed corporate, dethroning premier blue chip JKH.

As confirmed by interim results released yesterday, the LOLC Group’s post-tax profit in the 2016/17 financial year was a mammoth Rs. 21 billion, as against that of JKH, which last week reported a figure of Rs. 18.1 billion. 

LOLC’s bottom line was Rs. 17.15 billion, up by 101% whilst JKH ended the FY17 with Rs. 16.27 billion. 

Sustaining its unblemished track record, the LOLC Group in a statement said yesterday it has concluded an excellent year sealed by its strongest financial performance to date. 

For the year ended 31 March 2017, the group recorded PBT of 24.4 billion and PAT of Rs. 20.9 billion, an increase of 106% and 124% respectively compared to the previous year. Consolidated gross income grew by 37% to Rs. 92 billion, while the interest income from financial services grew by 41% to Rs. 55 billion. The total assets of the group increased to Rs. 641 billion, a growth of 69% over last year. 

Despite external challenges, the group’s resilient financial sector, led by the key players LOLC Finance Plc (LOFC), Commercial Leasing and Finance Plc (CLC), LOLC Micro Credit Ltd. (LOMC) and BRAC Lanka Finance Plc (BRAC) delivered a consistently strong financial performance. 

The profit contribution from these companies, together with the rapid penetration into microfinance in Asia, positioned the group at a strong level of profitability. Of the group’s profit, 81% was derived from financial services, while its strategic investments into the non-financial sectors, leisure, plantations, construction, healthcare, trading and manufacturing complemented the growth. This diverse portfolio, spread over a multitude of growth sectors, has made LOLC one of the largest conglomerates in the country.

LOFC

The flagship finance company of the group, LOFC recorded PBT of Rs. 2.2 billion, with an asset base of Rs. 123 billion, a deposit base of Rs. 81 billion and an advances portfolio of Rs. 91 billion, thus making LOFC one of the strongest and largest NBFIs in the country.

CLC, a turnaround case study since its acquisition by LOLC in 2008, recorded PBT of Rs. 2.2 billion, with an asset base of Rs. 78 billion, a deposit base of Rs. 16 billion and an advances portfolio of Rs. 54 billion. 

LOMC, the largest private sector microcredit company in the country, achieved PBT of Rs. 2.5 billion with an asset base of Rs. 63 billion and an advances portfolio of Rs. 50 billion. 

LOMC has made its name in the global microfinance arena with its unique business model that sets itself apart from conventional microfinance models. INSEAD business school, France, included LOMC as one of the case studies in their MBA program following an independent study on the company’s remarkable performance, commitment to empowering women and communities and outstanding social stewardship reflected in their business model. It is also the first and only Sri Lankan microfinance institution to be awarded Client Protection Principles Certification from the SMART Campaign.

BRAC achieved a significant financial performance in the current year with PBT of Rs. 352.7 million with an asset base of Rs. 13 billion, a deposit base of Rs. 3 billion and an advances portfolio of Rs. 11 billion.

BRAC was able to replicate LOLC’s micro business model and operational processes effectively in achieving this superior performance.

Seylan Bank, an associate company of the group, contributed well to the group’s financial performance with a contribution of Rs. 1.4 billion as profits. 

The group’s insurance businesses, LOLC Life Assurance and LOLC General Insurance, has performed well during the year, positioning itself among the top 10 players in both the general and life business in terms of gross written premiums in less than four years of operations. General business contributed Rs. 310 million as profits, while the life business recorded Rs. 320 million as surplus during the last financial year.

LOLC ventured into the Asian region with its globally acclaimed microfinance model, and the footprint now stands in Cambodia, Myanmar and Pakistan, with a few more strategic locations identified in the pipeline.

PRASAC, the maiden overseas investment of LOLC and the largest microfinance institution in Cambodia, has achieved an unprecedented performance since LOLC’s initial investment in 2007. PRASAC grew its asset base by 260 times to Rs. 210 billion, 90 times in profitability to Rs. 7.8 billion and 100 times growth in its advances portfolio to Rs. 172 billion while maintaining a low 30 days NPL ratio of 1.16%. Anticipating further value addition from this investment, LOLC Group increased its holding from 22.25% to 70% recently. Hong Kong-based Bank of East Asia (BEA) partnered the LOLC Group in this transaction and holds 21% of the company. PRASAC is now set to transition into a fully-fledged commercial bank in due course.

LOLC Cambodia Plc, the fourth-largest microfinance institution in Cambodia, made a significant contribution to the group’s profit with Rs. 2.5 billion holding an asset base of Rs. 42 billion, a deposit base of Rs. 5 billion and an advances portfolio of Rs. 36 billion.

LOLC Myanmar

LOLC Myanmar, the greenfield operation established in 2013, has demonstrated remarkable growth, reaching profitable status in just four years since the commencement of business. The profit contribution to the group was Rs. 61 million with an asset base of Rs. 2 billion, a deposit base of Rs. 460 million and an advances portfolio of Rs. 1.6 billion. LOLC was the first Sri Lankan organisation and the fourth international operator to commence operations in the Myanmar financial sector.

This year, in recognition of LOLC’s distinctive microfinance model, the State Government of Pakistan and the Sultanate of Oman invited LOLC to take up the major shareholding of their joint venture – Pak Oman Bank Pakistan. Through its new partnership with LOLC, Pak Oman Microfinance Bank hopes to capitalise on the specialty of LOLC’s unique microfinance model which transforms and enables micro businesses to become small and medium level enterprises through sustainable industrialisation.

Aligning itself with the growth sectors of the Sri Lankan economy, LOLC Group has also been a catalyst in the development of the Non-Financial Sector through Brown and Company, a 142-year-old conglomerate with exposure in leisure, agriculture and plantation, power generation, marine and manufacturing, home and office solutions, pharmaceuticals and healthcare. 

The battery division performed with its renowned brands such as EXIDE, LUCAS and Dagenite where EXIDE maintained its standing with 58% market share. The agriculture division fared well despite adverse weather conditions with its strong brand portfolio including Massey Ferguson and Yanmar, while TAFE tractors, the premier brand in the portfolio, maintained 55% of market share over the financial year.

As a value addition to the agriculture portfolio, AgStar, one of the largest fertiliser companies in the country, in its product proposition and performance complements the group’s business well. The marine division, with global marine brands like Hyundai, Yanmar, Tohatsu and Isuzu, affirmed its position, with 51% market share. Browns Thermal Engineering recorded 54% market share as the only radiator manufacturer in the country. 

Displaying resilience in the face of testing external market conditions such as low-priced imports on veterinary products, the veterinary division grew by 34% in sales. The pharmaceuticals division expanded its product portfolio into the Human Pharma segment with nutraceutical products introduced in the year under review. 

Browns Hospitals

Browns Hospitals, celebrating its second year as the only hospital with an ISO 9001:2015 certification for quality, recorded steady growth in business with significant progress in its in-house patient care facilities. 

In line with the group’s dynamic investment management process, the group divested two of its plantations, Agalawatte and Pussellawa, in the year under review with significant returns to shareholders. 

In the meantime, the restructuring strategy adopted by the group with the entry into the plantation sector saw strong operational performance at Maturata Plantations. Gal-Oya Plantations continues with its sugar production and is venturing into other value added services in the medium term. 

The construction arm of the group, Sierra, also completed a notable year with a profit contribution to the LOLC Group of Rs. 493 million.

The group’s leisure portfolio made steady progress, holding four operational hotels: Eden Resort and Spa in Beruwela, Paradise Resort and Spa in Dambulla, Dickwella Resort and Spa in the Deep South and Calm Resort in Pasikudah. 

The pipeline is promising with international strategic partners onboard, Sheraton partnering with Turtle Beach Kosgoda to be opened in 2017, while Club Méditerranée, France will take over the management in Riverina Beruwala, which once completed will be one of the largest resorts in the country. 

This year marked the group’s first overseas leisure venture, with the North Malé Resort Development project in partnership with State-owned China Machinery Engineering Corporation (CMEC), where LOLC is pioneering the creation of three islands on lagoons in the Maldives with one five star and two four star properties. 

LOLC’s other projects in the Maldives are the Nasandhura Hotel and Apartment Complex in Male with 135 rooms and 118 apartments, the development of a five star resort in Bodufaruin Raa Atoll and a four star resort in Bodufinolhuin South Ari Atoll.

The group’s tremendous success over the year in review was validated by recognition from several independent organisations within the business community. 

The highlight, however, was being the overall Gold Winner of the National Business Excellence Awards, widely recognised as the pinnacle of corporate accomplishment in Sri Lanka.

With the growth momentum witnessed over the last financial year, LOLC Group is poised to embrace opportunities to empower entrepreneurs in Sri Lanka and beyond.