Another solid year for Mercantile Investments and Finance

Mercantile Investments and Finance PLC (MI) concluded another successful financial year with sound profitability, posting Net Profit Before Tax (NPBT) of Rs. 732 m and a Net Profit After Tax (NPAT) of Rs. 631 m for the year ended 31 March 2013.

This compares to last year’s NPBT figure of Rs. 626 m and a NPAT figure of Rs. 610 m, thus reflecting year-on-year profitability growth of 17% and 3% respectively.

Financial year 2012/13 particularly was a successful year for the company in terms of meeting the management’s expectations on core business growth where Net Interest Income increased by a very commendable Rs. 570 m (92%) year-on-year.

By maintaining core business income at these levels, MI was able to sustain overall gross Income level growth healthily at 41% despite witnessing a decline in other operating income. This decline mainly resulted from the persistent sluggishness of the stock market during this period that lowered MI’s realized gains from share trading profits by  Rs. 468 million (79%) from a year before.

The management’s cost consciousness throughout the year enabled MI to keep operating expenses under reasonable level at 16%, mainly on account of the on-going branch expansion and resultant increase in annual volumes coupled with general inflationary effects.  

In terms of balance sheet growth, the management’s commitment in boosting its core business resulted in MI’s advances growing satisfactorily to Rs. 13.8 b (33%) and deposits growing to Rs. 8.4 b (37%), with total assets growing to Rs. 21 b (21%) compared to previous year.

In this backdrop of sound growth, asset quality was maintained by effective credit and recovery measures. Accordingly, MI was able to maintain its gross non performing lending ratio at a healthy 3.1% with absolute non performing lending value remaining well controlled at Rs. 440 m.

Comparatively the Licensed Finance Company sector (LFCs) continued to observe deterioration in creditworthiness of some of the borrowers resulting mainly from high interest rates, a very sluggish vehicle market and a general slowing down of the economy.

In keeping to the company’s strategic aspirations on expanding its reach beyond Western Province, branches were opened in key regional hubs over the year. Three branches and two service centres were set up during the financial year and thereafter in May 2013 the company’s 18th branch was opened in Polonnaruwa.

The company continued to strive for service excellence over the year and thus continued to invest in nurturing a skilled and dedicated workforce to support the growing branch network. Staff strength stood at 443 as at 31 March 2013, reflecting a rise of 18% from a year before.  

Managing Director Gerard Ondaatjie stated: “This has been a commendable year for us. We stuck to our game plan, embracing a strategic approach and remaining conservative but agile. It is pleasing that we have ended the year on a sound note, posting positive performance not only in profitability but also against other key measures.”

The company placed significant importance in seeking optimal funding lines in bringing down cost of funding. In keeping to this, the proposed debenture issue June 2013 was recently withdrawn with the materialization of a long awaited funding line that was beneficial to the company.

Mercantile Investments and Finance PLC is a Licensed Finance Company under the Finance Business Act No. 42 of 2011, listed on the Diri Savi Board of the Colombo Stock Exchange. MI is a public limited liability company incorporated in Sri Lanka on 15 June 1964 under the Companies Ordinance No. 51 of 1938 and re-registered under the Companies Act No. 07 of 2007 and is on the verge of completing five decades in operation.