LOLC records Rs. 4.5b PBT

The LOLC Group completed a year of consolidation and steady growth in profits recording a Profit Before Tax (PBT) of Rs. 4.5 billion, a 22% growth over last year.

The profits of the Group were mainly derived from its core business of financial services.

To achieve the 22% growth profits, the Group made a Rs. 45 billion gross income and interest income of Rs. 28 billion which is a 20% growth over last year.

The year 2013-14 was considered a year of consolidation for the Group with strategies taking shape in all sectors to gear for growth and long-term profitability. The operating environment was full of challenges for the financial services business and for other sectors. The lowering interest rates in the latter part of the year was welcome as the Group believes that this move will trigger an increase in SME lending which will positively impact the Group's lending business.

LOLC continued in its strategy of deleveraging itself and is now fully converted into a holding company.

LOLC was one of the pioneering leasing companies and in 2011, the company opted to move out of the leasing business gradually transferring its lending and borrowing book to its flagship finance company Lanka ORIX Finance PLC (LOFC).

The company embarked on diversification in 2009 and entered into potential growth sectors, leisure, manufacturing and trading, construction, renewable energy, agriculture and plantations.

LOLC's financial services business experienced a 20% increase in interest income in line with the expansion of portfolio. Finance costs too increased by 13% to reach Rs. 16.4 billion from 14.5 billion recorded in the previous year mainly due to the higher quantum of borrowing needed for the lending business of LOFC, Commercial Leasing and Finance PLC (CLC) and LOLC Micro Credit Ltd (LOMC).

However, the growth in interest costs slowed down due to the lowering of interest rates on short-term borrowing and SWAP costs.

The two listed finance companies and the leasing company recorded steady growth in profits despite provisions made for bad and doubtful debts. LOFC increased its profit signature by 45% despite higher provisions made for possible defaults. The company's deposits grew by 33%.

CLC recorded Rs. 1.2 billion as profits and continues to be strong in its business sector and is experiencing a positive impact from reducing interest rates even as the quantum of borrowing is increasing to support growth in the portfolio.

LOMC remains strong in its profits signature contributing well to the Group. The company's micro business is performing well despite clients facing two years of bad weather impacting the agriculture business affecting collections.