Mercantile Investments pre tax profits up 16% to Rs. 360.8m

Mercantile Investments Limited (MIL) performed extremely well again for the year ended March 31, 2006 with pre tax profits of Rs. 360.8 million, an increase of 16% over a previous year despite a challenging economic environment.

MIL has increased revenue by 22% to Rs. 974 Million and interest income has grown to Rs. 890 Million, an increase of 27% due to strong growth in Hire Purchase income. Interest expenses too were significantly up by 38% to Rs. 335 Million as a result of a volatile interest rate prevailing during the past year.

The company took strategic decisions during the year to further reduce the mismatch with a long term lending and short term borrowing and did secure its loan portfolio by more long term debt contributing to additional interest cost during the year. MIL has in addition strengthened their Lease and Hire Purchase Recovery Process and provided for non-performing loans as directed by the Central Bank.

The investment and security of the company increased by 15% to Rs. 1.032 Billion. Although, securities are stated at cost Rs. 357 million, they carry a realisable market value of Rs. 684 million. MIL has recorded their investment and securities at market value as at the Balance Sheet date of Rs. 672 million.

However, the investment has greater value as the major investments are in companies where MIL has group controlling interest.

The loan portfolio of MIL has increased by 35% to Rs. 4.28 Billion as at the Balance Sheet dated March 31, 2006. Immovable assets of the company are stated at either cost or revaluations done in the past. Such assets especially, properties where the city office is located have considerable higher realisable market value than the amount stated in a Balance Sheet.