Sri Lanka Newspapers Sunday 11/03/2012

CSE market system stutters and stumbles
Stockmarket Review
By Elton P. Ebert
The ATS Version 7 installed on 24th February which should have been a plus mark has now become a disgrace to the bourse, a sorrow to the investors and a cause of friction between investors and some brokers.

Brokers say that instead of reducing the work it has become more problematic with unexpected confusion. This unfortunate situation has caused severe repercussions to the share market, one of which is that it has caused a big dent in the confidence level of foreign investors. Local fund managers are also in great discomfort because of the end of the March quarter. After weeks of arguments and confusion some clients have now realized that the fault is not with the brokers but the system. A director of an older brokerage, who was also disturbed of the situation, said that usually when any new modification is introduced it will facilitate the user with more data but the opposite has happened here in that most of the data necessary for successful trading has been deleted.

While the ASI oscillates around the 5400 mark, moderate activity was visible in blue chips JKH, Aitken Spence and Commercial Bank while PC Pharma, Softlogic Holdings, Expolanka and ERI were moderately active. Over a million shares in Expolanka were traded on Friday, its closing level being Rs.6.60. Pricewise JKH ended the 4-day week at Rs.189.30 and PC Pharma at Rs 24. JKH was also successful in striking a deal with its stock brokering arm for collaboration with Malaysia's CIMB Investment Bank. The other highly diversified Hayleys group through its subsidiary Puritas Pvt Ltd are in a joint venture with India’s Veolia Water for a Rs 185 million hi tech central sewage and waste water treatment plant at the Pasikudah Holiday Resort.

Surprising everybody Access Engineering was fully subscribed on day one itself. The company which recently took control of Sathosa Motors entered to the pharmaceuticals trade signing an agency agreement with Teva Pharmaceutical, Singapore.

Changes in directorates: Multi Finance - Ravindra Manohara Sri Tillakawardana was appointed an independent/Non-Executive Director on 30th January 2012; and Nawaloka Hospitals - Damian Sunil Abeyratna was appointed a Director on 28th February. The turnover for the four days was a meagre Rs.2.2 billion against Rs.11.1. billion the week earlier. However the Milanka was just 76.45 points or 1.5% better than last week to end at 4828.88, while the All Share Index was 3.92 or 0.01% lower at 5456.27.
http://sundaytimes.lk/120311/BusinessTimes/bt28.html

By Sunimalee Dias
A revenue crisis at the Treasury is badly affecting the tourism sector with key officials unable to attend crucial overseas fairs due to budget constraints. For the past two years, Sri Lanka Tourism (SLT) Chairman Nalaka Godahewa, the main government official promoting tourism, has not attended the UK-based World Travel Mart held in November and the International Tourism, Berlin which began this week.
Industry sources observe that there is an increased need for high level representation at key travel industry events as they are required to conduct one-on-one business meetings and other related activities.

But the authorities believe Sri Lankan foreign missions are able to stand-in for top officials, thus cutting down on colossal expenditure for participation at these travel fairs, sources said.
However this rule strangely appears to apply only to top officials while some 'favourites' are sent for these events.

A week ago, it was announced that Deputy Minister Lakshman Yapa Abeywardena and another SLT official would be the two government representatives joining the mostly-private sector delegation. Sources told the Business Times that a few days later three other officials at SLT hand-picked by the Treasury to attend the event caused a controversy resulting in these individuals then being held back from attending the ITB. These three were not nominated by SLT. Following this controversy, the authorities believed it was necessary now to consider nominating someone as a representative of Sri Lanka Tourism to take charge of the situation there.

In a last ditch effort authorities on March 2, Sri Lanka Convention Bureau Director General Vipula Wanigasekara was asked to join the delegation. In the meantime, Sri Lanka Tourism Promotion Bureau Managing Director Rumy Jaufer has also not been granted Treasury approval to attend a related trade event in China.
http://sundaytimes.lk/120311/BusinessTimes/bt02.html

By Duruthu Edirimuni Chandrasekera
Journalists have become the latest focus of the Securities and Exchange Commission (SEC) in a crackdown on market manipulators, according to SEC officials. "The SEC has written to a business journalist in conjunction with a probe relating to a market manipulation, seeking information on a story that was written," an SEC official told the Business Times, declining to name the person. He said that investigations are currently hotting up and that the SEC is looking to 'complete' this particular probe with as much evidence as possible.

SEC is flexing its muscles pertaining to bringing market manipulators to justice, he said, noting that SEC will do 'what it has to' in risk management. "There was the period when low valued shares increased in price by more than 1000%. We are looking at these trades closely to identify the perpetrators.

They will be dealt with severely," he added. He further said that SEC does routine checks and they are following up on a lead relating to a particular high networth investor who is allegedly to have indulged in pushing up prices of undervalued shares. Analysts say that what is imperative is the foreign investor confidence and a tough SEC will help in this regard.

"We need foreign investor confidence, a strong SEC which is hard on blatant manipulation, added liquidity and lower interest rates, improved corporate performance and more educated investors who make rational decisions and calculated risks," an analyst stressed.
http://sundaytimes.lk/120311/BusinessTimes/bt04.html

Carson Cumberbatch PLC, one of the top businesses in Sri Lanka with a history going over 100 years, has called itself "a company whose outlook is regional, focused on a future which is technology-oriented, results driven and world class."

This has been stated in the company’s interim report for the nine months ended December 31, 2011 when it posted a group profit of Rs.7.9 billion up 22% from Rs.6.5 billion a year earlier.

The Carson’s businesses range from oil palm plantations in Malaysia and Indonesia, oils and fats in Malaysia and India to breweries, investment holdings, portfolio management, real estate and leisure in Sri Lanka.

At company level the nine-month result was more modest at Rs.1.8 billion, up 10% from Rs.12.6 billion during the comparative period the previous year.

The group has offices in Malaysia, Singapore, Indonesia and India in addition to its offices here.

Segmentally, Carsons profits had come mainly from its oil palm plantations in Malaysia and Indonesia with Rs.4.3 billion earned on this account followed by investment holdings which generated Rs.2.9 billion.

Ceylon Guardian Investment Trust, a Carson’s subsidiary, is the strongest investment company quoted on the CSE.

Carson’s new oils and fats segment consolidated into the group accounts from July 2011 had posted a loss of Rs.486.5 million during the nine months under review according to the review.

The company had a stated capital of Rs.1.6 billion and revenue reserves of Rs.7.6 billion in its books as at December 31, 2011 with total assets running at nearly Rs.10.6 billion and total liabilities at nearly Rs.1.4 billion.

Bukit Darah PLC, the Malaysian plantation company under the Carson’s banner is its main shareholder with 45.68% of the company’s equity followed by Tower Investments (Pvt) Ltd. (10.66%), Fulcrum (Pvt) Ltd (9.79%), Lake View Investments (Pvt) Ltd (8.79%), Portelet Ltd (7.51%), and Newgreens Ltd (7.51%)

Analysts said that the controlling beneficial shareholders are the Selvanathan brothers, Mano and Hari, who own on their own accounts, are in the top 20 shareholders list with a 0.23% interest.

The EPF is also in the top 20 list with 0.57%.

The Carson’s share had a net asset value of Rs.125.54 at group level, up from Rs.103.50 a year earlier, and Rs.46.32 at company level, up from Rs.38.25 a year earlier.

The share traded at a high of Rs.705 and a low of Rs.525 during the nine months under review against a trading range of Rs.595 to Rs.525 a year earlier.

Carson’s market capitalization stood at Rs.106.29 billion and its enterprise value at Rs.156 million according to the nine months results.

The directors of the company are Messrs. Tilak de Zoysa (Chairman), H. Selvanathan (Deputy Chairman), M. Selvanathan, I Paulraj, D.C.R. Gunawardena, S.K. Shah, P.C.P. Tissera, Vijaya Malalasekera, Mangala Moonesinghe and F. Mohideen.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47133

Milestone achieved in face of poor tea prices for much of the year
Best ever profit in 2011

Kelani Valley Plantations PLC (KVPL) has posted its highest ever profit since inception with an earning of Rs.432.5 million after-tax in the year ended Dec. 31, 2011, up from the previous year’s Rs.439.6 million despite rubber prices declining during the latter part of the year and poor tea prices during a major part of the year.

KVPL is a member of the Hayleys group and a subsidiary of Dipped Products. Its plantation portfolio comprises 27 estates of approximately 13,000 ha in total with almost equal extents of tea and rubber located in the Nuwara Eliya, Dickoya and Yatiyantota-Bulathkohupitiya areas spanning three distinct agro climatic regions.

The company’s Chairman, Mr. Mohan Pandithage, said that 2011 was a good year for the company notwithstanding a sharp decline in the tea market commencing from the first quarter and a similar downturn in rubber prices in the latter part of the year. The impact of the wage increase effective from April had also been heavy.

However, he noted that the plantation worker wage increase was negotiated without any disruption to work and said that its cost to KVPL translates to an additional Rs.340 million annually.

Rubber prices rose steadily in all markets from the last quarter of 2010 up to the third quarter of 2011 with latex crepe peaking at over US$ 6 in June and RSS fetching equal value in February at the Colombo auctions.

"The Asian countries led by China and India accounted for much of the global consumption and the high prices. However, the slowing down of these giant economies and financial instability in the Eurozone, combined with increased outputs during the year resulted in a sharp price decline in the last quarter of 2011. By end December, latex crepe and RSS were both trading at around US$ 3 per kg," he said.

Pandithage said that the group’s before-tax profit included a contribution of Rs.37 million from Mabroc Teas, their marketing subsidiary engaged in the export of value added products and brand promotion overseas for over two decades.

During the year under review, this company revamped its operations by investing in new tea blending, cleaning and packing machinery, automating and streamlining tea bagging operations etc.

Mabroc had installed a new racking system and office complex to accommodate all its operations under one roof.

The demand for green tea which declined sharply in 2009 had continued to stagnate at unrewarding levels due to the availability of cheaper products from other origins. Consequently, production in the company’s facilities had to be curtailed.

Pandithage said that their instant tea plant at Nuwara Eliya continued to operate more as a research and development project and had done well during the year under review. With interest shown by many overseas buyers, they foresaw a brighter demand for tea in the future. In 2003 the black tea factory at Oliphant Estate in Nuwara Eliya was converted to production of green tea followed by Glassaugh black tea factory in 2008 with the instant tea factory set up at Nuwara Eliya Estate in 2007.

The chairman reported that erratic weather had affected power generation at Kalupahana Power Company resulting in a profit slightly lower than in the previous year.

Having considered the company’s performance during the year the directors have proposed a first and final dividend of Rs.5 per share.

Pandithage warned that issues now confronting the plantation industry "will be serious to say the least" down the road. Plantations were burdened with escalation in cost of all inputs, volatility in commodity prices and the growing expectations of a large resident workforce for wage increases at pre-determined intervals.

Declaring that the survival of the industry is at stake, he said that it was crucial that the state takes the initiative to act as the catalyst and provide the required leadership to any recovery strategy.

A large proportion of the population was dependent on this industry for its livelihood and its health was vital to the country’s economic well being, he said.

DPL Plantations (Pvt) Limited, a subsidiary of Dipped Products which is a member of the Hayleys group, is the dominant shareholder of KVPL with 71.18% of its shares followed by Mr. Lalith Hapangama with 8.17% and the Ceybank Unit Trust with 5.64%.

The company has a total of 14,614 shareholders with the majority owning less than 1,000 shares.

The KVPL share traded at a high of Rs.205.50 and a low of Rs.80 during 2011 against a trading range of Rs.210 and Rs.40 the previous year.

The company has a stated capital of Rs.340 million and a revenue reserve of Rs.1.83 billion. Total assets ran at Rs.5.4 billion and total liabilities at Rs.3.2 billion.

Net assets per share had grown to Rs.63.68 for the group from Rs.534.14 the previous year. Company’s net assets per share were up to Rs.62.66 from the previous year’s Rs.53.83.

The directors of the company are: Messrs A. M. Pandithage (Chairman), J.A.G. Anandarajah (MD – DPL Plantations (Pvt) Ltd), G.K. Seneviratne (MD), R. Seevaratnam, F. Mohideen, S. Siriwardana, S.C. Ganegoda, L.T. Samarawickrama, S.T. Gunatilleke and Dr. K.I.M. Ranasoma.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47134

by R.M.B Senanayake

The editorial of a local newspaper states that "the news that car registrations are soaring gives credence to the view that wealth generation in this country is proceeding at a steady pace. That more and more Lankans are getting into the upper income bracket is the construct many are likely to place on the statistics highlighted by us on our business pages yesterday to the effect that the national expenditure incurred on vehicle imports and spare parts in 2011 has grown by 87 percent. The value of such imports too has increased from Rs 117 billion to Rs 219 billion in 2011’.The editor goes on to say "the inference is inescapable that wealth has been growing correspondingly in this country"

The editor is mistaking personal wealth for the wealth of the society. A society gets wealthy only when it produces wealth not when it consumes wealth. A person however can get wealthy when he buys or robs somebody else’s wealth. The figures of car imports reflect the transfer of wealth from a supplier abroad to buyers here. It is the transfer of wealth and not its production. If the country had produced all those vehicles instead of importing them, then the wealth of the society would have increased. But not when the vehicles are imported. The higher consumption of imported goods does not mean that the society has become wealthier. It does not reflect the wealth of the society.

If more wealth is produced than there was before, a society becomes richer; the total stock of wealth increases. But if some accumulate capital only at the expense of others, wealth is merely shifted from A to B. In principle, it is possible that a few people or organizations to accumulate capital and grow richer, although the total stock of wealth of society decreases. But it should be noticed that capital may also increase by increasing the total wealth of society but few people grow richer while most of the people grow comparatively poorer. What is the situation in our country in recent years? Has total wealth of the society increased and if so by how much? We do not have statistics of capital (assets) that has been accumulated in the country. Consumption of wealth of course has increased with the growth of the GDP.

Economic Growth

The economy is a process by which economic inputs and resources such as skilled labor, capital and funding for new businesses are converted into economic outcomes like wage growth (in real terms) productive job creation or new businesses. If there is to be continuous growth or sustainable growth which we have never had over the years and is not likely to happen this year or the next, there must be a process of capital accumulation; just as in the case of an individual who gets richer through saving and investing and accumulating capital although capital in the form of money is in a special category. Capital may be accumulated by the individual by collecting money. But creating more and more money is not creation of capital by the society.

Capital accumulation helps an individual to grow richer. He will save and then invest either in financial assets or in productive real assets. Those who engage in the latter are entrepreneurs. The investment will be successful if and only if it produces greater output. Several entrepreneurs will fail to produce a return and may even lose the capital they invested. It is the same with government investment. Many of the investments made by our governments have not contributed to a permanent increase in our capital stock. Instead when the investment doesn’t provide a return to pay for itself, the accumulated capital has to be used to pay the cost. All those State Corporations like the Sri Lankan Airlines or Mihin Air, which are running huge losses are consuming or destroying capital.

Our government has never saved. Instead it has dissaved, reducing the aggregate savings of the society, reducing the potential capital available in society. It all started in the 1960s when Minister Ilangaratne introduced deficit finance for the first time. Before that, the budgets were supposed to be balanced. The golden rule in capital expenditure then was that it should be funded from the savings of the government by way of a surplus in the recurrent budget. Later such expenditure through borrowing the savings of the people became acceptable if such investment produced a surplus. But the politicians found another method, namely to borrow money created by the Central Bank and the banking system instead of limiting themselves to borrowing the savings of the people. So with every budget the amount of money created to fund the deficit has been increasing although some window dressing is generally done at the end of each year to downplay it. Even today the Central Bank holds over Rs 200 billion worth of Treasury securities bought either in the primary or the secondary market by using money created by it. So instead of accumulating capital our society is accumulating money. But money is not capital.

Foreign Borrowing to fund Capital Expenditure

With the country reaching middle income status it is no longer able to borrow from international lending agencies at concessional rate of interest and for long tenures. Instead the government now has to borrow at commercial rates of interest on commercial terms. Earlier all our infrastructure investments were funded from international multilateral lending agencies and the repayment of such loans was not a burden since they were long term loans. But in recent years all such investments have been funded from commercial loans or bilateral loans tied to projects like the loans from the Indians and the Chinese governments. To accumulate capital these investments must produce a surplus over and above the cost of the investments.

For a long time these investments were treated by economists as social investments and instead of financial returns it was assumed that the increase in economic output would be the justification for such investments. But when they are funded from foreign commercial loans there has to be some way to repay the foreign loans. There has to be a larger net supply of foreign exchange to repay the foreign loans. But our politicians are believers in a free lunch. They assume that foreign loans can be repaid by fresh borrowing. This is called rolling over of foreign debt. Fine but can it be done always? Economic history has shown that roll-over is not always possible and what happens then? Consider what happened in Argentina in the 1980s and Greece today. Argentina defaulted on its foreign debt. Greek creditors have had to take a haircut (write down of their debt by some percentage). The EU insists on fiscal austerity. Germany wants the Greek people to pay for their politicians’ profligacy. So they insist on Greece practicing austerity, at least fiscal austerity. But what if the growth hitherto was mainly due to government investment with borrowed funds? When the Greek government is forced to cut its deficit and enforce fiscal austerity it means that Greece can no longer grow. The type of growth through government investment is ended and that means a recession in the economy. A recession makes it even harder for the country to repay its foreign debt.

This is the dilemma that countries which have over borrowed to fund infrastructure investment have to face. Consider our own economic situation. We have over-borrowed from foreigners by way of attracting foreign short term capital to the bond and stock markets and the Central Bank has accumulated Foreign Reserves by buying foreign exchange which came in by way of short term capital in the market. But under the current exchange control regime the Central Bank has to provide foreign exchange to fund the plethora of imports including oil and the large number of vehicles. Instead of using foreign borrowings for capital investments which would generate a surplus in output which could earn foreign exchange to repay the foreign loans, we have used such foreign capital to fund consumption of the rich.

The rich will not pay for austerity except via higher oil prices. It is the poor who will have to pay for the consumption of the rich. The oil consumption has risen to dizzy heights because of the increase in vehicle imports in addition to the needs for thermal energy. Did we become richer as a society? Rather the poor are going to be made poorer although the rich too will have to bear the burdens. Would our trade deficit have increased so much if not for vehicle imports and the import of luxury consumer durables? If the trade deficit had not increased so much we would not have to depreciate the rupee as sharply to correct it. But even the rupee depreciation of 5-6% cannot correct the current account deficit unless the government cuts its budget deficit and the Central Bank stops creating money to fund it.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47136

One of the country’s major rubber producers had described 2011 as an exceptional year for the rubber industry world over with prices recording levels of US$ 6 per kg for RSS 3 in major trading centres.

But prices have since started to slide. Kelani Valley Plantations PLC, a major producer however hopes that rising oil prices pushing up synthetic rubber prices and state inytervention in Thailand, the world’s biggest natural rubber producer, would influence prices to stabilize at ``reasonably remunerative levels.’’

In Sri Lanka, the market opened at Rs.622 per kilo for latex crepe 1X and Rs.592 per kilo for RSS 1 peaking in February and March when latex crepe 1X traded at Rs.700 per kilo and RSS 1 at Rs.650.

Kelani Valley plantations said in a management discussion and analysis that India and China together absorbed the major part of the world’s natural rubber production for internal consumption as well as for export manufacture.

"However, a slowing down of these giant economies, the European debt crisis and the post-tsunami disruptions in Japan have retarded the progress of the automobile industry which consumes 70% of the world’s natural rubber production, whilst the high prices in the first half of the year have compelled non-tyre product manufacturers to resort to less costly synthetic alternatives, or to curtail production as a response to declining demand," an analysis said.

"These factors, coupled with increased production resulting from the extensive exploitation of rubber plantations by producers eager to maximize the potential of attractive prices, have contributed to the decline in natural rubber prices."

Sri Lanka had produced around 157,000 tons of rubber in 2011, the highest annual production in over 30 years.

The analysis attributed this partly to smallholders who account for approximately 70% of the country’s production intensifying harvesting to reap maximum benefits from the record rubber prices that prevailed during a major part of the year.

KVPL, by prudent rationalization of its tapping operations, had been able to record a yield of 841 kg per ha and a crop of 2.78 million kg – an increase of 11% from the yield per ha and 5.6% from the total crop.

"The company’s ability to switch its product mix between sole crepe, latex crepe and centrifuged latex helped to derive maximum benefit from varying demand patterns," the analysis said.

It expressed the view that the increase in production trend in rubber growing countries as well as China’s rubber stockpile enabling moderation of spot purchases will contribute to already sliding prices.

However rising oil prices as well as events in Thailand, the world’s largest natural rubber producer reportedly restricting supplies through state intervention, may together still result in stabilizing prices at reasonably remunerative levels, the analysis said.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47137

Ceylon Guardian Investment Trust PLC, the Carson’s subsidiary which is the strongest investment holding company quoted on the Colombo Stock Exchange, has seen a loss making December quarter in the three months ended December 31, 2011 but posted a group nine-month profit of Rs.1.9 billion, down 21% from an earning of Rs.2.5 billion a year earlier.

The December quarter saw Guardian posting a loss of Rs.154.5 million against a profit of Rs.132.7 million in the comparative period the previous year.

At company level Guardian posted a December quarter loss of Rs.85.1 million, down from a profit of Rs.117.1 million a year earlier, while its nine-month earnings stood at nearly Rs.1.1 billion, down 13% from Rs.1.2 billion earned in the comparative period the previous year.

Analysts said that the Guardian’s performance reflected the downturn on the Colombo Stock Exchange adding that its investments in the Carson’s group and other blue chips makes it a very strong business entity.

During the nine-month period Guardian has posted a profit of Rs.1.49 billion on group portfolio activity and a profit of Rs.1.1 billion on company portfolio activity.

The group’s investment portfolio was valued at Rs.10.7 billion at the end of last year against Rs.13.8 billion a year earlier.

Carson’s with 67.15% and Thurston Investments with 6.43% are the major shareholders of Guardian whose share traded between Rs.320 and Rs.247 in the December quarter.

Net assets per share for the group were down to Rs.121.67 from Rs.134.86 at book value but up to Rs.297.12 from Rs.286.41 at market value.

The directors of the company are Messrs. I. Paulraj (Chairman), D.C.R. Gunawardena, A. de Z. Gunasekera, V.M. Fernando, Mrs. M.A.R.C. Cooray, K. Selvanathan and C.W. Knight.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47138

Trading on the Colombo bourse remained dull in the four-day week which closed on Friday with the All Share Price Index losing 3.92 points (0.07%) while the Milanka moved up 76.45 points (1.61%), Acuity Stockbrokers said in a market report.

"Markets remained dull over the week with average turnover levels hovering just below the Rs.1 billion mark and strategic buying in Aitken Spence the only notable transaction over the week," the report said.

It noted that retail activity remained muted as investors continued to struggle with technical issues related to the new trading system.

"We expect markets to remain subdued yet again this week as similar issues prevail," Acuity said.

Nearly 80% of listed companies have reported quarterly earnings with the December quarter indicating a year-on-year decline. However, on a cumulative 12-month basis earnings were up 15% year-on-year with strong gains posted by sectors like financial services, healthcare, hotels and travels, manufacturing, motors, diversified and beverage, food and tobacco doing well.

The market PER had continued to decline, down to 11.14x from 12.7x following the conclusion of earnings of the third quarter in 2011.

Aitken Spence dominated the weekly aggregate turnover value for the third consecutive week accounting for 18.3% of the week’s business volume with JKH (17.41%) and Sathosa Motors (10.76%) making significant contributions.

The average daily turnover value for the week declined 75.06% to Rs.556.29 million against the previous week’s Rs.2.23 billion.

Market capitalization for the week closed at Rs.2,000.6 billion, down 0.07% from the previous week’s nearly Rs.2.002 billion.

Aitken Spence which opened the week at Rs.115 closed at Rs.119.30 while JKH opened at Rs.178.30 and closed at Rs.189.30.

Foreign participation on both the buying and selling sides contracted during the week with foreign sales down 86.5% to Rs.197.8 million and foreign purchases down 22.6% to Rs.645.6 million.

The Acuity report however noted that foreign investors had nevertheless closed the week with a net buying position of Rs.465.8 million, up 173.6% from the previous week’s net selling position of Rs.620.7 million.

John Keells Stockbrokers said in its weekly report that the All Share Price Index closed the week flat after seeing moderate volatility during the week. Activity remained subdued except for large trades in Aitken Spence, JKH and Sathosa Motors on Monday which accounted for most of the week’s turnover.

There was a net foreign inflow of Rs.456.8 million.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47139

Property Development PLC (PDL), the owners of the Bank of Ceylon headquarters building, is looking at becoming the strategic project development partner of its parent, the Bank of Ceylon, and also the possibility of service expansion to third parties.

"In addition PDL will look for avenues of energy efficient and green friendly property management solutions in future," the company’s Chairman, Mr. Gamini Wickramasinghe, said in the just released annual report.

Already PDL has gone into hydro power making a strategic investment in Koladeniya Hydro Power (Pvt) Limited. Construction work including infrastructure and equipment installation there had been completed.

The 4.4 GWh capacity plant is expected to be commissioned in the first quarter of this year and power delivered to the national grid under the Standardized Power Purchase Agreement signed with the CEB.

"With this acquisition, PDL is now geared to explore more avenues for investments in eco-friendly renewable energy sources with the objective of complementing our income," Wickramasinghe said.

He reported that while the company concentrated on its main line of business, it continued to focus on high maintenance standards set for building service of the BOC Tower. Work in upgrading/modernizing lifts and escalators and a move towards a low energy conserving property management solution is in progress.

The existing lifts have been in operation for over 24 years and upgrading/modernizing work that commenced in 2010 is expected to be completed this year, Wickramasinghe said.

PDL already manages the BOC Merchant Tower in Kollupitiya and Ceybank House in Kandy to PDL under a management agreement with a BOC subsidiary. This work continues with a fee of Rs.11.9 million received on this account in 2011 against Rs.10.7 million in 2010.

The year under review saw the PDL group posting a total income of Rs.626.7 million, up 4% from Rs.601 million the previous year. The group operating profit of Rs.414 million was up from the previous year’s Rs.403 million.

Profit after-tax at Rs.306.7 million was up from Rs.251.8 million the previous year but operating cost has come under pressure with electricity billing shifted to a multiple rate system and an increase in municipal rates.

Energy cost representing 50% of direct cost had experienced a tariff increase of 40% during the year while municipal rates were up approximately 30% from the previous year, the chairman said.

He reported that staff cost had been held at only 4% above the previous year while administrative and other operating expenses were down thanks to a reduced Nation Building Tax rate applicable during the year.

The directors have proposed a first and final dividend of Rs.2.50 per share for the year under review.

The PDL building occupied in October 1987 has approximately 600,000 sq. ft. of space. A landmark building in Colombo, it was damaged by the LTTE’s Central Bank bomb attack and other terrorist strikes in 1996/97 with restoration work completed in December 2001 without disruption to continued occupation.

PDL has a stated capital of Rs.660 million, reserves of Rs.335 million and retained earnings of over Rs.1 billion in its books. Total assets ran at Rs.2.4 billion, current liabilities at Rs.75.8 million and non-current liabilities Rs.293.7 million.

The Bank of Ceylon with 93.6% is the dominant shareholder with all other shareholders individually owning less than one percent.

The directors of the company are: Dr. Gamini Wickramasinghe (Chairman), Mr. B.M. Amarasekera, Dr. M.S. Perera, Mr. L.N. de Silva Wijeyeratne, Mr. P.A. Lionel and Mr. S.E. de Silva.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47140