Revaluation gains, profit on asset sales boost LOLC March quarter
Lanka Orix Leasing Company PLC, the financial services behemoth with diverse business interests, reported earnings of Rs. 9.6 billion or Rs.20.27 a share for the January – March quarter (4Q17), up from Rs.2.3 billion reported for the corresponding quarter of the previous year, the interim financial accounts released to the Colombo bourse, showed.
The massive rise in profits could largely be attributed to the one-off gain of Rs.10.6 billion made when acquiring and disposing interests in some of the group entities.
In March 2017, LOLC group increased its stake in PRASAC Microfinance Institution Limited in Cambodia from 22.25 percent to 70 percent for US $ 186 million.
This resulted in a gain of Rs.7.0 billion, which is the difference between the fair value and the carrying value of the existing stake, which is recognized as a profit in the income statements, according to the accounting standards.
Further, the group disposed two of its subsidiaries—flmc Plantations (Pvt) Ltd., and Lotus Hydro Power Plc—which resulted in a disposal gain of Rs. 3.6 billion. However, the operating profit from recurring businesses is up by 71 percent to Rs.2.9 billion from a year ago, which also includes an unclassified Rs.5.6 billion of other incomes that rose from Rs.1.4 billion during the same quarter last year. Meanwhile, the group net interest income suffered a decline of 9.0 percent year-on-year (YOY) to Rs.4.2 billion due to surge in interest expense during the March quarter, a result of rising interest rates in the economy. MORE ON P4
The interest income grew by 41 percent YOY to Rs. 15.6 billion, while interest expense rose by a sharper 76 percent YOY to Rs.11.4 billion, resulting a contraction in the net interest income.
Group’s financial services segment, which comprises of both local and foreign entities, accounts for almost 81 percent of the group profit, LOLC said in an earnings note released to the media.
The revenue from non-financial sector businesses such as leisure, plantations, construction, healthcare, trading & manufacturing and power grew by a modest 19 percent YOY to Rs.6.7 billion with the gross profit rising by 8.0 percent YOY to Rs.3.0 billion.
Meanwhile, for the financial year ended March 31, 2017, LOLC reported earnings of Rs.17.2 billion inclusive of the aforementioned one-off gain of Rs. 10.6 billion.
The net interest income rose by 8 percent YOY to Rs.21.4 billion while the gross profit from the non-financial services businesses increased by 24 percent YOY to Rs.9.4 billion.
The operating profit of the consolidated business for the full year rose by 14 percent YOY to Rs.9.9 billion.
According to the group balance sheet, assets grew by as much as Rs.261.3 billion during the 12 months or by 69 percent YOY to Rs.641 billion, largely supported by the growth in advances and other loans.
Such advances and other loans, of which majority comprise of customer advances, rose by a mammoth Rs.206 billion during the year to Rs.367 billion.
Meanwhile, customer deposits rose by Rs.136.9 billion or 185 percent YOY to Rs.211 billion while borrowing increased by Rs.81 billion or 39 percent YOY to Rs.287 billion.
As at March 31, 2017, R.M. Nanayakkara held 36.3 percent stake in LOLC group while Japan’s Orix Corporation Japan held another 30 percent being the second largest shareholder.
I.C. Nanayakkara held a12.6 percent being the third largest shareholder.