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
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
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
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
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
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,
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
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,
"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
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
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
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
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
However, import duties on mobile phones are
Pathirage said that nowadays hand phones
cannot be construed as a luxury item. It has
become a necessity in the day to day lives
He valued the legal market for Nokia phones
as per last year's statistics at Rs. four
"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
Pathirage had impressed the authorities
about the danger of imposing controls. They
had said that the system would be reviewed
Pathirage said that Nokia commands 85% of
the legitimate mobile phone market in the
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
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,"
The hotel has 12 restaurants. "If not for
the food & beverages sector I would not have
had survived in these hard times," said
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
"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
"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
This system was donated to the Government on
The technology in this regard was developed
by Microimage, a local software company and
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
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
"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,
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
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
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
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
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
"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
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
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
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
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
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
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
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
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
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
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
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
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
"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
"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
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
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
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
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
Intercom Ltd., a founder life member of The
Spice Council (TSC) achieved ISO 22000-2005,
ISO 9001-2000 & HACCP certification
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.
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
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
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
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
Sri Lankan resorts and city hotels were
impacted by high inflation and increased
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
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
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
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.
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
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.
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
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
Representatives from companies in
are present in Sri Lanka, seeking local
investors to bring in capital to this Gulf
city, knowledgeable sources said.
is one of the victims of the present global
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
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
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
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
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
Cooray was a former Head Prefect at St.
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
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
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.
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.
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.
Last year, the Bank began issuing 'instant'
over-the-counter ATM cum debit cards to
customers at the point of opening savings or