CSE proposes classification change for listed companies

Tuesday, 20 September 2011 01:00 - - {{hitsCtrl.values.hits}}

Colombo Stock Exchange (CSE) has put forward a proposal to revise the industry sector classification of listed companies in line with their revenue generating activities.

However, the proposed sector definitions remain the same and are Banks, Finance and Insurance, Beverages Food and Tobacco, Chemicals and Pharmaceuticals, Construction and Engineering, Diversified Holdings, Footwear and Textile, Healthcare, Leisure, Investment Trust, Information Technology, Land and Property, Manufacturing, Motors, Oil Palms, Plantation, Power and Energy,

Services, Stores and Supplies, Telecommunications and Trading.

The revised classification proposed is based on revenue generated, a global standard, the CSE said in its statement posted on its web site. The audited financial accounts will be used as a primary source of information.

The CSE in determining the sector may look at the contribution of revenue of each business activity to total revenue for three years and in doing so will look at sectors of business the company currently operates. A company engaged in one business activity shall be classified to the sector or that best matches the revenue source of the company while a company engaged in two different business activities will be classified to the sector that generates the majority of its revenue.

A company engaged in three or more different business activities with none of the business activities generating more than 60% of the total revenue will be classified into the “diversified sector”.

A company engaged in not more than five different business activities out of which at least three business activities contributes not less than 10% of the total revenue of the company, and a company engaged in more than five different business activities of which at least three business activities contribute not less than 5% of the total revenue of the company will be classified under the Diversified sector.

The rationale behind excluding business activities that generate less than 5% and 10% of total revenue is to discourage companies with small revenues from being classified under diversified sector.

All other companies not mentioned above would be classified under the sector which provides the largest contribution to the total revenue, CSE said.