One step forward, two steps backwards

It will be a step backwards if lawlessness were to prevail, Asian Alliance Insurance(AAI)CEO Ramal Jasinghe told the TV programme Benchmark last Sunday.

"Somebody said that the triumph of evil is for good people to do nothing. So, I think all of us have a role in the effort of restoring our democracy. For any government to move forward, you've got to get your fundamentals right. Our democracy needs to be working; our social environment needs to be positive; our socio-economic situation needs to improve," he said.

Assessing the current fiscal scenario, Jasinghe stressed that spending would be curtailed. "Things will be difficult. It will be a quarter of belt-tightening," he cautioned.

On the introduction of tighter regulations by the monetary authorities governing financial institutions and the reportage of transactions above a certain value to Central Bank (CB), he said: "In today's environment of disclosure, I think it is a safer initiative that we do disclose information and be as transparent as possible, because, at the end of the day it leads to confidence. What we now see is probably a breakdown in confidence due to shortcuts and I welcome the present regulatory environment-but it should be more attuned to our economic climate. All in all, it's a welcome step."

Touching on the state of the insurance industry against the backdrop of the financial crisis, Jasinghe said: "It is stable simply due to the fact that it is regulated. And the requirements that we need to comply with have been well-thought-out. The fundamentals of how we invest and how we manage our investments are tight. We have seen situations where the regulator has stepped in and rectified and even streamlined some of the practices. So, to that extent, the insurance industry is stable."

Commenting on Standard & Poor's downgrading of Sri Lanka's credit rating, Jasinghe asserted: "The downgrading was probably inevitable but we could always correct it, I believe, by prudently managing our businesses and by being prudent about what our fiscal policies are. Some of CB's and other regulatory bodies of various financial services initiatives are in line with the global regulatory environment. So, to that extent, we might be able to salvage the situation."

Benchmark is presented by LMD and airs on TNL on Sundays at noon with a repeat at 9.05 p.m. The programme is also carried over DialogTV as well as on LBN and on Bloomberg Channel on Mondays at 10 p.m. The weekly biz show is produced by the wrap factory.

Rupee under pressure

High net worth investors shun forex, stock markets

Local markets are hit by a dearth of high net worth investors leading to a depressed state of activities despite recent military successes, market sources said.

Markets are "driven" by retailers who have no holding power.

Government has placed all their bets on the war, but successes in that theatre have not activated the confidence of high net worth investors, the main drivers of markets, they said.

In the Colombo bourse foreigners are on the selling side, on Friday they were selling Asian Hotels, they said.

Asian Hotels, a John Keells Holding subsidiary is the holding company of Cinnamon Grand and other valuable properties in that locality such as Crescat, Monarch and Emperor residencies.

Friday's net foreign outflow in the Colombo Bourse is estimated at Rs. 58.2 million.

Even institutions are selling, the only active players in the bourse are retailers, they said.

Dialog was the biggest contributor to Friday's turnover and also for its fall.

Some 9.3 million of its shares were sold, with the seller believed to have had been high net worth investor Shankar Somasunderam.

This deal was done at a discounted price of Rs. 5 a share, and contributed Rs. 57 million to the day's turnover. Dialog closed Friday at Rs.5.25, 50 cents less than its previous closing price.

The benchmark ASPI fell 13.7 points over Thursday's close, while the more sensitive MPI fell 47.21 points on a turnover of Rs. 300.9 million.  The second biggest contributor to the day's turnover was Asian Hotels with Rs. 51 million.

The absence of high networth investors is also visible in the money markets, they said.

The rupee is under pressure to depreciate.

If State intervention is removed, the rupee vis-…-vis the US dollar will go down by Rs. 1 to Rs. 115 immediately, they said.

There is demand building up for dollars in the market due to a dearth in supply, with demand mainly emanating from the Government, the sources said.

However, on Friday, State owned Bank of Ceylon (BoC) was defending the rupee (vis-…-vis the US dollar) at the Rs. 114 levels, with People's Bank, the other State run commercial bank being among the buyers.

BoC's selling of dollars, at least to the market, is however controlled, they said. Dollars are available only for imports and not for trading.

Necessary import documents have to be first furnished before BoC sells their dollars, they said.

"A rupee gain by the dollar means that if the Government has an outstanding debt of US$ one billion to settle, its costs will go up by Rs. one billion," they said. That's the reason for the rupee peg.

The government's plan to raise US$ 300 million from the markets in October 2008 has apparently failed.

That's why they are trying to tap the diaspora by launching road shows in the Middle East, Europe and the USA to raise US$ 500 million, with the launch scheduled on February 4, Independence Day, touting war victories as a marketing tool, they said.

But especially in markets like the USA have they arranged for a bank there, who knows that market, to assist them in that endeavour? The sources asked.

Otherwise the exercise may be a waste of time and money, they said.

They alleged that the Central Bank (CB) apparently not completing their investigations on Ceylon Petroleum Corporation's (CPC's) oil hedge deals with banks was a bid to postpone CPC's hedge payment dues, estimated by some to run upto US$ 500 million in the validity period of such contracts, due to expire in May 2009 or thereabouts.

CPC hedged against the upward price movements of oil prices, but took a hit when oil prices began to tumble since July 2008, coinciding with the global financial crisis.

Recently the Supreme Court (SC) suspended CPC's oil hedge payments on the grounds that such transactions were allegedly irregular and requested the CB to investigate into the matter. In a separate petition, the SC also ordered the government to reduce petrol prices to Rs. 100 a litre, commensurate with declining oil prices.

Petrol is currently retailed at Rs. 120 a litre.

However, the government refused to reduce petrol prices on the grounds that it will affect revenue. Then the petitioners requested the SC to rescind the hedge payment suspension order on the grounds that the benefits of falling oil prices had not been passed on to the consumer.

Last week the SC withdrew the oil hedge payment suspension order, but the CB, alleging that such transactions were tainted, ordered the banks involved in the hedging transactions not to collect their monthly hedging dues, due from the CPC.

Government is playing for time and placing all their bets on raising US$ 500 million from the diaspora, they alleged.

They further said that if there is no progress in the war front, this week's Treasury Bill (T.Bill) primary auction would see T. Bill yields stagnating at the 16-17% levels. However, if there is a breakthrough, yields may even dip to as low as 12-13%, they said. Trading in the secondary Treasury Bond (T.Bond) market on Friday was however slack, with bonds maturing in the 2011-12 period being traded at the 18-18 ¬ % levels.

"CB, at Thursday's primary Bond auction gave mixed signals by even accepting bids at the 18.40% levels," the sources said.

Meanwhile, overnight (O/N) inter-bank borrowing rates dipped to 14% on Friday, as a result of banks' going to the CB's overnight reverse repo window and borrowing cheap at the concessionary rate of 12%. (See also last week's T. Bill and T. Bond primary auction details on page 18)

Controls spawn grey market

Import controls spawn a grey market, a businessman warned.

Ashok Pathirage, chairman/managing director Softlogic Group, told The Sunday Leader that already the grey market for mobile phones was valued at 30% of the legitimate market in rupee terms.

But with the recently introduced 100% margins on letters of credit (L/C), that would increase, leading to a loss in government revenue, he said.

Softlogic are the agents for Nokia phones in Sri Lanka.

However, import duties on mobile phones are 10%.

Pathirage said that nowadays hand phones cannot be construed as a luxury item. It has become a necessity in the day to day lives of peoples.

He valued the legal market for Nokia phones as per last year's statistics at Rs. four billion.

"But last year over 2007 saw a 10% drop in the sale of mobile phones both in rupee and in volume terms," said Pathirage.

Drop in sales is an indication that consumer spending power has contracted, chiefly because of inflation, running at over 20%, despite a watered down inflationary measurement index introduced by government authorities recently.

Pathirage had impressed the authorities about the danger of imposing controls. They had said that the system would be reviewed in March.

Pathirage said that Nokia commands 85% of the legitimate mobile phone market in the country.

On Wednesday, Nokia opened their flagship store in Bambalapitiya at an investment cost of Rs. 30 million which was borne by Softlogic. "We have to make a start somewhere," Pathirage told this reporter, when he was asked whether the time was opportune to make such investments.

"We are facing challenges because of the recession," Pathirage told the invitees at the opening of this store. He also urged the mobile phone industry to band together and voice their grievances to the authorities with one voice.

No "flash in the pan"

Cinnamon Grand, the Rs. two billion turnover five star city hotel winning the Presidential Award for the best five star city hotel for the second consecutive year shows that this win is not a "flash in the pan," its General Manager Rohan Karr told The Sunday Leader.

The 2008 awards were presented recently, with the competition having being inaugurated in 2007.

Karr attributed the hotel's success to its 1,200 associates; as he calls his staff, as well as to its customers.

There are some six five star hotel properties in the city.

"Credit for winning this competition in these trying times goes to my associates," he said. The judges (headed by marketer Nalin Attygalle) did their markings on several attributes, such as service quality and "CSR" works, Karr added.

He believed that this award would motivate his staff to reach for even higher goals.

"Staff satisfaction leads to customer satisfaction and the latter indicator translates to repeat visits which will naturally enhance my bottom line," he said.

Karr said that the hotel at present was having a 58% occupancy, higher than the industry average in this category which is 40% plus. "58% was also the average room occupancy range throughout last year," he said.

Room rates, as per the minimum room rate charges applicable for the two top range city hotels, namely Cinnamon Grand and Hilton are US$ 90 per day for corporate clientele and between US$ 55-65 for leisure and "MICE" clientele.

He said that the general split in regard to hotel revenue is 80% from rooms and 20-25% from the food and beverage sector. "But in the case of my hotel, the split is 50:50," he said.

The hotel has 12 restaurants. "If not for the food & beverages sector I would not have had survived in these hard times," said Karr.

He expected occupancy to be flat this year (it was also flat last year, he said) due to the country situation and the global recession, "but as far as the former is concerned peace appears to be at hand, however the recession may continue for another 18 months."

A business traveller who would generally make two visits to the island may now make only one, he said. Cinnamon Grand is essentially a business traveller hotel, as opposed to being a leisure hotel.

"But we are ready for the long haul, there will be no retrenchment, and we have a flexible scheme of employment on the ground," he said.

The hotel commands 26% of the five star city hotel rooms.

"However, on an overall basis, we got 36% of the pie in the five star city hotel category in terms of room occupancy, which works out to 38% more (i.e. the 10 percentage point difference) of the business than that we should have had got, if pro-rated," said Karr.

"The fact that Cinnamon Grand had 38% more room occupancy over its actual five star city hotel room percentage holding go to show that my hotel was the preferred choice of customers patronizing this category of city hotels," he added.

Rs.100 mn. alarm system

Dialog GSM financed a Rs. 100 million GSM enabled early warning system that may warn disasters such as impending tsunamis with minutes.

This system was donated to the Government on Friday.

The technology in this regard was developed by Microimage, a local software company and Moratuwa University.

Such danger alerts may be notified on one's mobile phones and also on alarm system units that may be installed in public places.

The service is offered free of charge.

The alarm system units cost some Rs. 30,000 a unit, but costs may be scaled down if produced in sizeable numbers, this reporter was told.

At present the system is Dialog connected, but as connectivity revolves round the SIM mobile telephony connection, it may be inter-changed to another mobile network after making a couple of other adjustments, reporters were told.

Dialog is believed to be having the widest coverage in the country, with coverage even extending to the North and East.

The disaster warning network is globally connected to international disaster monitoring centres, in particular tsunamis, located in places such as Hawaii and Japan.

Those in turn are connected to the local disaster management centre, which, if necessary, may sound the alarm, particularly to those vulnerable areas, through this technology, for civilian evacuation to safer areas.

"If this technology was available at the time the tsunami struck Sri Lanka, thousands of lives may have had been saved," Disaster Management Minister Mahinda Samarasinghe speaking at the event said.

The December 2004 tsunami took 1« hours to hit Sri Lanka after it originated from the seas off Indonesia, the new early warning system, if it had been on stream, would have had sounded the alarm bells within minutes, he said.

Inflation: 21.6%

The new Colombo Consumers' Price Index (CCPIN) saw point to point inflation decline by 3.7 percentage points month on month (MoM) to 10.70% last month.

MoM annual average change in inflation last month declined by one percentage point to 21.6%.

Continuously hitting the top

United Motors Lanka PLC once again won the prestigious Gold Award for Excellence in Annual Financial Reporting (in the Motor Companies category) for the Year 2008.

Since 1992 the company has been consistently winning awards at the Annual Report Awards Competition conducted by The Institute of Chartered Accountants of Sri Lanka.

Those are: Best Corporate Report and Accounts 1991/92-Sector Compliance Award, Best Corporate Report and Accounts 1992/93-Sector Runner up, Best Corporate Report and Accounts 1993/94-Sector Merit Award, Best Corporate Report and Accounts 1994/95-Sector Runner up, Best Corporate Report and Accounts 1995/96-Sector Runner up, Best Corporate Report and Accounts 1996/97- Sector Winner, Best Corporate Report and Accounts 1997/98-Sector Winner, Best Corporate Report and Accounts 1998/99- Sector Winner, Best Corporate Report and Accounts 1999/2000-Sector Winner, Best Corporate Report and Accounts 2000/01-Sector Winner, Best Corporate Report and Accounts 2001/02-Sector  Compliance Award, Best Corporate Governance Disclosures 2002/03-1st Runner up, Best Corporate Report and Accounts 2002/03-Sector Runner up, Best Corporate Report and Accounts 2003/04-Sector Winner, Best Corporate Report and Accounts 2004/05-Sector Runner-up, Best Corporate Report and Accounts 2005/06-  Sector Winner, Best Corporate Report and Accounts 2006/07-Sector Winner and Best Corporate Report and Accounts 2007/2008-Sector Winner.

The company is proud of its excellent record of good governance and has adopted several best practices over the years.

In the company's 2008 Annual Report, Chairman R.M.S. Fernando said, "We believe that the continuous strengthening of good corporate governance practices contributes significantly to the better conduct of our business and in meeting the company's responsibilities to its shareholders."  

United Motors was incorporated in 1945 as a private limited liability company. It was vested with the government in March 1972 and carried on operations as Government Owned Business Undertaking (GOBU) of United Motors Ltd. In 1985 the company entered into a distributor agreement with Mitsubishi Motors Corporation, Japan and has since been the sole distributor for brand new Mitsubishi vehicles in Sri Lanka.

In 1989 it was selected as the first government venture for "Peoplisation" with the intention of broadening the ownership of the company amongst the public. Accordingly on May 9, 1989 the company was renamed United Motors Lanka Ltd. and incorporated as a public limited liability company. The company was re-registered as United Motors Lanka PLC under the Companies Act No. 7 of 2007.

Since becoming a Public Limited Liability Company in 1989, United Motors has achieved remarkable results and it is today one of the leading blue chip companies in Sri Lanka having a diversified business portfolio with five subsidiary companies and a jointly controlled entity in the Group.

In the Financial Year 2007/08 the company excelled in its performance, achieving the highest ever turnover and profit in its history.

Minimal exposure to real estate

LB Finance in the nine months ended December 31, 2008 saw profit before tax increase by 106% year on year (YoY) to Rs. 419 million.

 The company's net interest income in the period under review was Rs.844 million, while total revenue at Rs. 2.6 billion was a 30% YoY growth. 

Company assets rose from Rs.10.7 billion to Rs.14.4 billion due to expansion of lending activities, of which 96% are earning assets. Lending chiefly comprised lease and hire purchases of which Rs.9.4 billion was secured through vehicle Leasing and Hire Purchase. Real estate stock amounted to Rs.221 million at the end of the period. A notable expansion in its pawning operations, pawning advances stood at Rs.1.9 billion as at Dec.31, 2008.

98% of all earning assets are said to generate regular cash flows.

The Company's gross NPL ratio which stood at 3.86% as at end Dec. 2007 improved to 3.39% as at Dec. 31, 2008, well below the industry ratio. Bad debts provision for the period reduced to Rs.15 million, 85% less than the Rs.104 million provision for the 9 months ended December 31, 2007. The Company's shareholders equity was at Rs.1.2 billion as at December 31, 2008, while the core capital adequacy ratio was at 9.11%. Rs.450 million was successfully raised through the Company's recently oversubscribed debenture issue, increasing its total capital adequacy ratio from 10.79% to 13.26%, well above the required minimum.

Managing Director Sumith Adhihetty said that the success of the concluded nine months could be attributed to a strategic and focused approach as well as, prudent financial principles.

"We are a company that's been around long enough to feel the changing winds of the industry before they even begin and are always ready to turn with it." Foreseeing the economic fluctuations caused by an international financial downturn, the company changed its business strategy, opting to focus on the micro-level operations and pawning services. Adhihetty said that financial figures reaped were therefore a result of always being a step ahead of the ever-changing economy.

The Company also focused on high-growth areas such as its loan base, especially lease financing for 3-wheelers. Special attention to pawning operations saw LB Finance expanding its services further across the island through 35 pawning centres, 18 branches and the head office.

Establishing itself among the top three entities in the country's finance sphere, LB Finance continues to attract more and more investors. The trust acquired during the over 37 years that it has been in the business speaking for itself. Backed by veterans in the industry and a dynamic team of young but experienced professionals, the company has earned a name for seeing it through every economic crisis to hit the country, coming out focused as ever. Veteran businessman Dhammika Perera remains its largest shareholder, owning a 71.33% stake as at Dec. 2008.

RAM Ratings has reaffirmed LB Finance PLC's long and short-term financial institution ratings at BBB- and P3 respectively with a stable outlook for the long-term rating. Leasing, Hire Purchase and Pawning remain the Company's key revenue drivers and the management has leveraged on its expertise in the automotive business by the trading of vehicles.

L B Finance is also engaged in the acceptance of deposits, mortgage loans and other credit facilities, real estate development and related services. The Company offers leasing solutions for a range of vehicles/equipment including private vehicles, commercial vehicles, machinery, three wheelers and motor bikes, agricultural equipment, trucks and trailers. The Company added 5 more branches in 2008, another in January 2009 and plans are afoot to open one more in Polonnaruwa before the end of the financial year.

Year of Success

By Ashwin Hemmathagama 

Chartered Institute of Management Accountants (CIMA) founded in 1919 is the world's leading and largest professional body of Management Accountants with 164,000 members and students operating in 161 countries, working at the "heart" of business. Following are excerpts of an interview with South Asia & Middle East Regional Director Bradley Emerson on recent developments in CIMA Sri Lanka.

Question (Q): Where do you stand in uniqueness when comparing CIMA with alternates such as AAT, ICASL and ACCA?

Answer (A): CIMA's uniqueness lies in its futuristic approach and that it moulds people to go beyond the role of accountants and grooms individuals to lead businesses. CIMA is becoming known worldwide as accountancy in business.  This phrase elaborates CIMA's vision globally to have its members driving businesses worldwide.  

Q: Is there a demand for this course?

A: CIMA has been in Sri Lanka for over 40 years and it is the quality of its curriculum and the global acceptance that has sustained the demand for the qualification.  CIMA Sri Lanka Division had an excellent year in 2008 registering over 3,000 which reflects a 11% growth over 2007.  This we believe is an appreciation of  the CIMA qualification given the options available and the economic challenges in the market.  The 2008 intake we believe was a collective effort of our tuition providers, "word of mouth" advocacy of our existing students, members in senior positions and the marketing initiative taken by the division. The demand for CIMA qualification is reflected in the employability of our students and in the progression of our members.  CIMA students and members are not narrowly confined to financial roles. They also find themselves in diverse positions in general management, Human Resource Management, Project Management, Business Analysis, IT and so on.  Our pass rates at TOPCIMA has exceeded 500 in the last yea, a further indication in what we see as a reflection of the demand for CIMA graduates.  The demand is not only reflected among local enterprises, but widely respected world over and that is why you find close to 4,000 Sri Lankan members and students employed overseas.  It is also note worthy to mention that CIMA globally has registered the highest growth rate of 8%.

Q: Do you find the demand for CIMA wide spread in Sri Lanka?

A: We ran a National spelling competition in the first half of 2008 which was an eye opener for us.  We had participation from over 1,000 contestants from all the districts. The enthusiasm and application of the language was tremendous.  We did move our promotions outside the Colombo District to find that our 2008 intake has seen an increase of students from regions out of Colombo.

Q: Given the current economic climate how do you propose to those who desire the qualification?

A: Compared to early 2008 the exchange rate for the Sterling Pound has actually come down by around 10%.   This works well for Sri Lankan students to register for CIMA while exchange rates are favourable.  We have also made arrangements with HSBC, Nations Trust Bank, Sampath Bank, Standard Chartered and Seylan Bank for flexible payment plans with the use of credit cards issued by these banks for both students and members.  Through this scheme students have a 6 months instalment plan to settle payments made to CIMA using these credit cards.   Our future is about the choices we make today.  End of the day a professional education is an investment in the future.  Our parents and children have the wisdom in choosing CIMA for it is a globally recognized qualification. 

Q: How did you achieve this growth despite the recent negative wave?

A:  Issues that prevailed were concerned with the Divisional Council that consisted of honorary CIMA members. These have been addressed and as indicated by CIMA President Gynn Lowth in his media release, CIMA activities in Sri Lanka for student and member support, employer relations and tuition support are there as usual. Whatever happened, in my view, it has put the strength of CIMA Brand to test and the Brand has come out of it stronger.

I think we had the right business model in place long before what you call a negative wave.  We adopted different business modules to reach markets out of Colombo.  Our communications and promotions mix were also reconstituted to complement the new business model.

In conclusion the appetite for CIMA qualification has grown as we see in the demand from districts outside Colombo.  Library services and study facilities are continued to be patronized heavily by our students.  The results of the November exam which were just released underline the progression of CIMA students.  And we are confident that 2009 will be yet another successful year for CIMA Sri Lanka and the region. 

7.5 kg. of gold on offer

Pathum Udanaya, HNB's deposit draw for Sri Lankans working abroad as well as locals saving in foreign currency  is back again  this year giving away 7.5kg of gold in two mega draws.

The scheme chiefly targets those living in the Middle-East and European countries.

Pathum Udanaya is for HNB customers saving in NRFC/RFC savings accounts, NRFC/RFC fixed deposits and the Singithi Surakum minor foreign currency savings account.

The 2009 Pathum Udanaya draw is scheduled to be held at the year end.

The Year-end Golden Draw is for customers with a minimum savings of US$ 10,000 in NRFC/Singithi Surakum savings accounts and fixed deposits or US$ 15,000 in RFC savings & fixed deposits.

The year end "Golden" draw offers  2kg of gold as first prize, 1kg of gold as second prize, ten prizes of 10 one sovereign gold coins each and 125 consolation prizes of one sovereign gold coins.

Customers with minimum savings balance of US$500 in NRFC/Singithi Surakum savings accounts, US$ 1,000 in RFC savings accounts & US$ 2,500 in NRFC/Singithi Surakum and RFC  fixed deposits will be eligible for the year-end draw that includes 50 one sovereign gold coins as first prize,  20 prizes of five one sovereign gold coins each and 400 consolation prizes of  « sovereign gold coins.

Tackling the crisis

Indian Institute of Management, Bangalore Professor R. Narayanaswamy will speak on the topic "Current Developments in Finance & Accounting" at Trans Asia Hotel on February 11.

It's organized by the Institute of Chartered Accountants of Sri Lanka.

Narayananswamy will touch on some of the crucial points of the current financial crisis such as  the role of the finance function and the accounting profession in the evolution of the on-going financial crisis, the finance and accounting professionals response towards the evolving situation and additional skills the professional should develop to face such difficult and unpredictable times.

"Right" investments in a recession

Investing in enterprise resource planning (ERP) solutions in a recessionary environment is a saving and not an expense, an ERP manager claimed.

Jayantha de Silva, Vice President, IFS' operations in South Asia told The Sunday Leader that ERP solutions help companies to cut down holding on to excess and costly inventories.  "Tough times call for smart investments," he said.

IFS is a Swedish based enterprise resource planning (ERP) solutions company with its main research & development (R&D) centre in Colombo. Its speciality includes the aeronautical industry, in particular providing ERP solutions for F 16 fighter jets, and the power and telecoms industries.

In Sri Lanka it's involved in the retail, commercial properties, food & beverages, vehicle retail and telecoms industries.

"Our operations in Sri Lanka are valued at Rs. 200 million plus a year and growing at 30% plus annually," he said. "Our projected growth this year is between 30-35%." Last year the company grew at 32%, but the year before, at a much faster pace, at 36%.

But de Silva said that the cream of their operations is doing R&D work for their parent company, 80% of which is handled by Colombo.

He said that IFS Global is a US$ 450 million company serving 2,200 firms worldwide; with its salary bill in Colombo alone being in the region of Rs. 1.2 billion annually. The company employs over 700 software engineers in its operations here.

"A trainee gets paid Rs. 40,000; while a manager, Rs. 200,000;" he said.

"What is creditable is that despite the negative reporting on Sri Lanka by the international media, our headquarters in Sweden still has faith in Colombo," said de Silva.

He further said that ERP also helps to capture non-performers in an organisation.

De Silva claimed that they were the leaders in the respective ERP fields to which they cater to in Sri Lanka.

One of the new areas that they are planning to "capture" is to sell an ERP solution to the State controlled Ceylon Electricity Board. His target is mid size companies and above. There are over 300 mid size companies in Sri Lanka, ie those whose turnover are in the region of Rs. 50 million annually, said de Silva. Currently IFS Colombo has a customer base of 42 local companies, whilst working to obtain contracts from a further 30 companies.

"The ERP solutions we sell locally range from Rs. 20 million and above, while those same solutions are sold overseas at more than 10 times that price," he said.

De Silva said that he not only tries to sell his ERP products, but is also advising his customers to find new markets in this recessionary environment.

"A food company that exports to Europe, but which has been hit due to the downturn in that region, is now exploring the possibility of exploring those products to Australia following my advise," he said.

Consultative Group appointed

With the CIMA Sri Lanka Divisional Council suspended, CIMA UK has appointed John Keells Holdings plc Group Finance Director Ronnie Peiris to head a five member Consultative Group to advise the CIMA local Division.

Others in the Group comprise Union Bank of Colombo Ltd. Director Anil Amarasuriya, Hayleys plc Finance Director Richard Ebell (Group spokesman); Amba Research Research Delivery Director Keren Stephen and Ernst & Young Country Managing Partner Asite Talwatte.

The Consultative Group will suggest appropriate arrangements for restoring an elected Divisional representative body and will provide a focal point for advice to CIMA on its members and student support in the region.  It will also advise on the delivery of CIMA's programme in Sri Lanka and will bring to the attention of CIMA any matters which affect the wellbeing of CIMA, its members, students, tuition providers, staff and the profession in Sri Lanka.

The Division saw over 500 students pass the exams in May and November 2008, two-thirds higher than the previous record in 2005.

Peiris said: "CIMA has appointed five of us to the Consultative Group to advise it on its affairs in Sri Lanka, and amongst others, advise the CIMA Council  of appropriate arrangements for the restoration of a Sri Lanka Divisional representative body under an operating model that best serves the needs of the various stakeholders in Sri Lanka whilst adhering to the principles of CIMA's global governance prerogatives and objectives.  In the meanwhile it will be business as usual for CIMA and its partners in Sri Lanka.".

Cargo volumes down 23%

Last month  global international cargo traffic plummeted by 22.6% compared to December 2007. The same comparison for international passenger traffic showed a 4.6% drop.

The collapse in the airline industry's freight business is a reflection of 20-30% declines in export and import volumes being reported across Asia, North America and Europe as the global recession plumbs new depths in December.

Airlines registered a US$5 billion loss in 2008. For 2009 IATA is forecasting a further loss of US$2.5 billion based on a fuel price of US$60 per barrel, a decline of 3% in passenger volumes, a drop of 5% in cargo traffic and yield deterioration of 3%. Industry revenues are expected to contract by US$35 billion (from US$536 billion in 2008 to US$501 billion in 2009).

For the full-year 2008, international cargo traffic was down 4% and passenger traffic showed a modest increase of 1.6%.

"The 22.6% free fall in global cargo is unprecedented and shocking.

There is no clearer description of the slowdown in world trade. Even in September 2001, when much of the global fleet was grounded, the decline was only 13.9%," said IATA Director General Giovanni Bisignani.

Air cargo carries 35% of the value of goods traded internationally.

Bolstered by year-end advance-booked leisure travel, the 4.6% decline in December passenger demand was less dramatic than the fall in cargo. A 1.5% cutback in supply could not keep pace with falling demand, resulting in a 2.4% decline in the December load factor to 73.8%.

"Airlines are struggling to match capacity with fast-falling demand. Until this comes into balance, even the sharp fall in fuel prices cannot save the industry from drowning in red ink," said Bisignani.

For November, IATA reported a 11.5% drop in the number of premium tickets issued globally.

Full-year traffic results show a 1.6% increase in demand which is down from the 7.4% recorded in 2007. Capacity grew by 3.5% resulting in a full-year average load factor of 75.9% (down from the 77.3% recorded for 2007).

Certifications

Intercom Ltd., a founder life member of The Spice Council (TSC) achieved ISO 22000-2005, ISO 9001-2000 & HACCP certification recently.

TSC founder chairman is Intercom Ltd., Chairman/Managing Director Sarada de Silva.

He served as TSC Chairman for four years.

Intercom celebrated its Golden Jubilee anniversary last year.

It is probably the first cinnamon export company to obtain these three certifications in Sri Lanka.

Also associated at this event were SGS Lanka Country Manager Sri Ram, Systems Certification Business Manager V. Sumanasiri and Group Stores GM Marven Pietersz. Under the leadership of Hector Fernando, B. Darsin De Silva, C. Muttukumaraswamy and Owen Kreltszheim who were pioneers in the Cinnamon & Coconut industry, Intercom established itself as one of the leading exporters of Cinnamon to world markets.

 "Intercom" brand Cinnamon has become a household name throughout the Central and South American regions.

When Kreltszheim retired from his post as Chairman/Managing Director in September 2008, Sarada who was Executive Director, was elected as his successor.

Kithul drink

Industrial Technology Institute (ITI) has patented a non alcoholic beverage made from Kithul or Caryota urens sap.

Ms. Damitha Rajapalcse and Ms. Agnes Fernando of ITI's Food Technology Section have formulated a method to process kithul sap into a "refreshing," natural, non -fermented drink and obtained the patent rights for the process. Kithul sap is known among Asians from historic times for its products such as treacle, jaggery and toddy.

Kithul sap contains 5-18 % natural sugars or sucrose, glucose and fructose and is highly perishable. It starts deteriorating from the moment it flows out from the flower due to fermentation by the yeast in the environment.

In this process they have been able to arrest the fermentation soon after tapping, and this helps the processing of the sap to make the non-alcoholic beverage.

This novel drink could be stored in sealed bottles at room temperature for more than six months.

JKH PAT down 44%

John Keells Holding plc's profits attributable to equity holders for the quarter (Q) and nine months ended December 31, 2008 of  Rs. 765 million and Rs. 2.6 billion respectively, were year on year (YoY) decreases of 44% and 19% over the corresponding periods in the previous year.

The decrease in group performance is mainly due to the one-off charges in additional taxes and write offs arising out of Lanka Marine Services (LMS) and a decrease in profitability of LMS relative to the previous year as a result of adopting a different mode of operations.

Revenue of Rs. 9.3 billion in the third Q (3Q) was 16% lower YoY, while revenue of Rs. 31.1 billion for the first nine months of  the financial year 2008/09 was 7% above YoY.

Transportation sector saw a decline in profits due to the global economic conditions that affected the freight forwarding and logistics industry as a whole. In addition, the judgement on LMS by the Supreme Court, as referred to previously,has resulted in a one off charge of Rs. 904 million to date and increased costs due to the change in the operating format. This format, which combines floating and land based storage operations are still in a nascent stage and is the subject of regular fine tuning as LMS seeks to establish optimum operating efficiencies.

Profit before tax (PBT) recorded for the sector was 346 million for the Q, a 53% YoY decline. For the nine months ended December 31, 2008, PBT was Rs. 1.8 billion, a 24% YoY decrease.

 Leisure recorded a PBT of Rs. 122 million, a 39% YoY gain for the 3Q. Profit growth was mainly from the Maldivian segment, with full operations of Dhonveli and Ellaidhoo which were closed for refurbishment last year.

Overall the loss for the nine months was Rs. 459 million compared to a loss of Rs. 330 million in the corresponding period last year.

Sri Lankan resorts and city hotels were impacted by high inflation and increased utility costs.

The reopening of Cinnamon Island, Alidhoo, post construction of a breakwater in November 2008 should improve the performance of the Leisure Group in this Q.

Property recorded a 3Q PBT of Rs. 88 million, 57% YoY lower. This was due to the delay in the recognition of revenues arising mainly out of a delay inreceiving the final tranches against the backdrop of the prevailing macro economic environment. PBT for the nine months ended December 31 2008 is 4 % lower YoY. The construction of the Emperor continues despite many obstacles due to road closures and stringent security restrictions for the area.

Consumer Foods and Retail, recorded a PBT of Rs. 99.8 million for 3Q, a 14% YoY decrease. PBT for the nine months ended December 31, 2008 at Rs. 174 million was 28%YoY lower. The results include initial set up costs of its Indian subsidiary which has expanded its marketing and sales activities for processed meats into five States during the period under review.

Ceylon Cold Stores has continued to improve its performance over the past nine months on the back of higher sales revenue. Keells Super chain is continuing to expand, with the total number of outlets established as at end of the Q increasing to 40 and a further six outlets identified for completion before the end of the financial year. Although the modern trade industry has experienced a decline in basket values due to high inflation, the shift in consumer trends towards the supermarket experience continues to grow.

Financial Services recorded a PBT at Rs. 136 million for the Q, 11% higher YoY.

Though declining global market conditions and local sentiment have adversely effected the performance of the stock broking arm of the group in the past nine months, strong performance by the Nations Trust Bank and Union Assurance plc resulted in the financial services sector recording a PBT of Rs. 409 million for the nine months ended  December31, 2008, 8%  YoY higher.

Information Technology recorded a Rs. 27 million loss for the 3Q compared with a Rs. 6 million profit in the same period last year. For the nine month period, the loss was Rs. 45 million compared to a Rs.1.2 million profit recorded in the same period in 2007/2008.

The BPO business is making steady progress in its business expansion efforts.

Others, comprising Plantation Services, Strategic Investments and Corporate Centre recorded a Rs. 154 million PBT for 3Q, a 66% YoY decrease, mainly as a result of a  substantial drop in tea prices which impacted the Plantations Services sector and lower interest income at the holding company. However, for the nine months ended December 31, 2008, PBT recorded was Rs. 1.7 billion, a 62% YoY increase.

The company completed its share repurchase of a total of 25,499,999 shares amounting to Rs.2.295 billion in December 2008. 

War & Consumer spend

Winning the war is not going to increase consumer spending power, a mobile telephony industry source told The Sunday Leader.

This source, whose company sales has been chiefly hit by inflation, emphasized the importance of bringing this negative economic indicator down.

A Rs. 10 shrinkage in consumer mobile spend, when multiplied with the number of connections sold, to rich and poor alike amounts to a sizeable packet, he said.

The source said their 4th quarter results have had taken a hit.

But he was looking at the new year with optimism.

The source was not worried about competition, especially from a new competitor, who, allegedly has poor coverage, even in the more developed Western Province. The recent hype over it was because it was offering a limited number of free air time, and that too to a restricted period, he said.

CB lends Rs. 156.8 bn.

Central Bank Treasury Bill (CB TB) holdings in the week ended Thursday increased by Rs. 9.235 million (6.3%) week on week to Rs. 156,773 million.

CB's TB holdings is directly proportionate to the amount of money that the Bank has lent to the Government Treasury by printing and lending to the same an equivalent amount of paper money. The danger in such an exercise is that it fuels demand side inflationary pressure in the economy.

Govt. crowds out pvt. sector

Total outstanding government debt at Rs. 3,432.4 billion as at end November 2008 is a year on year (YoY) increase of 14.2% and a month on month (MoM) increase of Rs. 53.5 billion (1.6%).

This comprised a domestic debt component of Rs. 2,052.5 billion and a foreign debt component of Rs. 1,379.9 billion.

Government's domestic debt component during this period increased by 23.1% YoY, while MoM the increase was Rs. 42.4 billion (2.1%). Its foreign debt component in the period under review increased by Rs. 42 billion (3.1%) YoY, while MoM the increase was Rs. 11. 1 billion (0.8%).

72% of capex met

Government's capital & lending minus repayments in the first 11 months of last year was Rs. 238 billion, meeting 71.8% of the budgeted (Budget 2008) target of Rs. 331.3 billion.

Its current expenditure figure of Rs. 653.6 billion during this period has however met 91.7% of the budgeted target of Rs. 712.9 billion.

Budget 2008's expenditure & lending minus repayment target is Rs. 1,044.2 billion. With this figure at Rs. 891.6 billion in the first 11 months of last year, it has met 85.4% of that target

Seeks investors

Representatives from companies in Dubai are present in Sri Lanka, seeking local investors to bring in capital to this Gulf city, knowledgeable sources said.

Dubai is one of the victims of the present global recession.

Recession free

The global recession will dissipate in another eight months times, a manager said.

Jayantha de Silva (58), Vice President, IFS' operations in South Asia told The Sunday Leader that the reason for this assessment was that everyone could not be a debtor-his reason for the current crisis.

IFS is a Swedish based enterprise resource planning (ERP) solutions company with its main research & development (R&D) centre in Colombo.

de Silva's reasoning was that for every debtor there has to be a creditor.

"But now all are debtors, it cannot go on," he said. People, sooner or later, will have to open their fists and start spending, then the global economy will once again take-off, said de Silva.

The world today is better equipped to deal with such situations than during the period of the Great Depression which hit the world in 1929, he said. Everybody wants to get out of this mess, he said.

It's Sri Lankans who are investing in real estate in Australia and not the locals, said de Silva. They are wise, he said. This is also the best time to invest in real estate in Sri Lanka, where those have become cheap, de Silva added.

WAYs above 18%

Weighted average yields (WAYs) of Treasury Bonds (T. Bonds) of two, three and four year tenures fetched 18.34%, 18.25% and 18.10% respectively at Thursday's T. Bond primary auction.

This auction was for the re-issue of Rs, 2,000 million  worth of T. Bonds each of two and three year tenures and Rs. 1,000 million worth of T. Bonds of four year tenure respectively.

While Central Bank (CB) allowed the market to fully subscribe to the Bond of two year maturity, CB, for T. Bonds of three and four year maturities, allowed the market to subscribe to only Rs. 1,713 million and Rs. 545 million of those maturities respectively. 

Tops batch

Ms. Vindya Cooray, an undergraduate at Colombo University's Management & Finance Faculty was the top ranker at the ICASL Final I exams held in October 2008. She also topped her batch in the degree programme last year.

Cooray was a former Head Prefect at St. Lawrence Convent.

According to her the best technique is to cover all areas of the syllabus and to walk into the examination without a single doubt in mind, for which she appreciates her lecturers for the personal attention given to the students and the study environment they created for them at all times.

Transporter at helm

Abeyakumar Mohan Pandithage (57), Chairman & Chief Executive Designate Hayleys PLC is credited for developing and growing Hayleys' transportation & logistics business under Hayleys Advantis Ltd. over a period of 38 years.

 Now  employing over 1,000 people In 35 companies, it is considered the largest organisation in Sri Lanka for both shipping and international freight forwarding services, with many operations overseas, including subsidiaries in USA, India and Fiji and representative offices in Europe, Hong Kong and the Maldives.

Married with two children, Sheahara (30), Assistant Treasurer, Bank of New York Mellon, UK and Prishan (33), a professional photographer, Pandithage, Appointed Deputy Chairman of Hayleys in 2007, also serves in the  boards of Sri Lanka Ports Authority, Jaya Container Terminals Ltd and  Sri Lanka Port Management Consultancy Services Ltd.

WAYs decline

Wednesday's primary Treasury Bill (T. Bill) auction saw the weighted average yields (WAYs) for 91 day maturing T. Bills tumble by 24 basis points (bp)to 15.94%, that of 182 day bills by 12 bp to 16.77% and those of 364 day maturing T. Bills by 44 bp to 17.56%.

This auction was for the re-issue of Rs. five billion worth of maturing T. Bills of which Rs. 4,246 million was re-issued to the market while offers for the balance Rs. 754 million was rejected.

SLT gets CEO

SLT and Maxis Malaysia appear to have had resolved their alleged differences, with the appointment of Greg Young an Australian as CEO of SLT effective from Tuesday.

SLT has been without a CEO since April 2008, after the resignation of its previous CEO/director Shoji Takahashi, a nominee of NTT Japan, when the latter company sold its 35.2% stake in SLT to a Maxis company, Global Telecom Holdings, Netherlands.

Stock market announcements

Property Development plc has declared a first and final dividend of Rs. 2 a share with dates to be notified.

Commercial Bank of Ceylon plc has declared a Rs. 4 final dividend for both voting and non voting shares. Shareholders' meeting: March 30, 2009; excluding dividend (XD) date: March 31 and payment date: April 6, 2009.

Keells Food Products plc has declared a rights issue in the proportion of 7 for 10 at an issue price of Rs.50 a share. Quantity offered: 3.5 million shares; X rights: February 20, 2009; EGM and provisional allotment: Feb. 19; splitting: March 6, 2009; renunciation: March 16, 2009; Dispatch of provisional letter of allotment: Feb. 27, 2009 and trading starts: March 5, 2009.

John Keells Holding plc has declared a Rs.1 second interim dividend. XD date: Feb. 10, 2009 and payment date: Feb. 20, '09.

"Non Event"

Ceylinco Finance plc informed the Colombo Stock Exchange on Friday that the proposed merger with Asian Finance Ltd. which was due on Thursday could not take place as Central Bank approval has to be first obtained for such an event.

As such the new shares to be allotted to Asian Finance's minority shareholders has been deferred, the announcement said.

Virtusa PAT up 19%

Virtusa, a US based software company with roots in Sri Lanka saw third quarter (quarter ended December 31, 2008) revenue in constant currency grow by 10% year on year (YoY) to US$ 44.9 million.

However income from operations in the quarter (Q) under review declined by 8.5% YoY to $5.4 million.

Net income for the third Q (3Q) of fiscal 2009 was $6.3 million, an 18.9% YoY increase. 4Q 2009 revenue is expected to be in the range of $40.5 to $42 million.

Fiscal year 2009 revenue is expected to be in the range of $172 to $173.5 million.

Rs. 10 bn. debits

Commercial Bank's islandwide ATM network, the country's largest on-line cash dispensing system, dispensed a record Rs. 10 billion in December 2008, the Bank said.

Branded 'CAT' (Commercial Automated Teller), the 333 ATM network saw withdrawals of Rs. 345 million a day, working out to an average of more than Rs. 1 million per machine per day during the festive month.