LOLC Group’s 2014 first quarter results show strong momentum and growth over last year. The PBT for the three months of 1.35Bn is 45% over the last year’s Rs. 934Mn. This is a reflection of the strong profitability recorded from its operating activities which grew by 23% compared with 2013 June.

External effects on the Company, namely, significant reduction in interest rates have contributed positively to the reduction in borrowing costs which saw an overall drop of 20% compared with last year and this is despite the growth in savings and deposits increasing the overall borrowings of the Group. The increase in the borrowings base reflects the growth strategy fuelling higher executions strengthening the financial sector lending portfolio. A reduction in lending interest rates were also seen during the current period however, the higher quantum of lending resulted in the interest income from the Group’s lending business moving up 7% compared with last year June quarter end.

The financial services sector shows tremendous performance in the lower interest rate regime along with better collection results coming from all three financial services companies of the Group. The contribution to profits (PBT) from this sector increased from Rs. 672Mn to 1.14Bn which is an increase of 71%. LOLC’s flagship finance company, Lanka ORIX Finance PLC (LOFC) posted strong profits for the quarter, with Rs. 325Mn as PBT which is an impressive increase of 222% over previous year June. This reflects the strong collections together with lower interest costs. The Company has managed to reduce its borrowing costs as a result of the reduction in interest rates on its deposits base which grew by Rs. 2Bn to Rs.45Bn over the last year. Strong growth in the deposit base of the Company reflects strong financial strength and the customer confidence in LOFC which has drawn funds even at low interest rates. LOFC looks positively to year 2014/15 with lower borrowing costs and higher level of income fuelled by the expansion in the lending book increasing its core interest income.

Commercial Leasing & Finance PLC (CLC) too showed strong performance and maintained profits at the same level as in the last year, despite pressures on collections. The PBT for the June quarter was Rs. 381Mn. The Company’s deposit base grew from Rs.3Bn to Rs.9Bn, a growth of 200% over the comparative period last year. CLC commenced its deposit mobilizing activities two and a half years ago and the deposit base growth shows its financial stability and depositors’ confidence in the Company. The higher level of deposits and other borrowings will fuel higher level of lending, targeting an increase in the asset book, higher earnings from interest income, the key focus for the year 2014/15.

LOLC Micro Credit Ltd (LOMC) too recorded strong profits in the first quarter, with Rs.407Mn as PBT compared with Rs.268Mn in the last year. The Company shows strong profits as a result of the reduced interest rates coupled with superior collections, which was a challenge throughout the year of 2013/14 due to poor weather affecting its agriculture centric customer base. However, strong recovery is seen in the current year, resulting in higher collections.

The two associate Companies of LOLC operating in the financial services sector, Seylan Bank and PRASAC Micro Finance Company in Cambodia continues to give strong positive growth in profits, an impressive increase of 74% over last year. The contribution from the share of profits from its associate companies

was Rs. 423Mn against Rs. 243Mn in June 2013. PRASAC’s contribution to these profits is a Rs. 201Mn compared with Rs. 86Mn in June 2013.

Though the trading sector of the Group shows lower profits compared to last year, Brown and Company PLC which is the main contributor to the trading business of LOLC, shows promising recovery in its core business trading, which was at negative profits last year vs. strong profits in the current quarter of Rs. 148 Mn. Last year’s profits were mainly from other income which is seen shifting to its core activities, trading and manufacturing.

LOLC, the Parent Company records higher profits compared with last year, a 202% growth over last year, reaching Rs. 44Mn. The Company continues to reduce its lending book which is passed on to its subsidiaries in line with its conversion into a core Holding Company. The Company earns income from the shared services activities that provides, common services to Group Companies. The Company also continues to reduce its borrowings, strengthening its balance sheet with stronger gearing. The borrowing book saw a drastic reduction, Rs. 22Bn reducing to Rs. 15Bn which has improved the Company’s gearing ratio to a strong holding company ratio of 0.46

Envisioning LOLC’s financial services expansion strategy, LOLC entered into Myanmar through LOLC Micro Investment Ltd (100% subsidiary of LOLC) in 2013, obtaining formal approval to commence lending business in Myanmar. LOLC is one of the first financial services giants to enter Myanmar which is essentially an untapped market with great potential for the industry. LOLC’s operation has already made a positive impact in Myanmar, with its first three branches being opened in Myangone, North Okkalapa and Dalla. The business is already flourishing and the Group is extremely positive of this investment which is expected to derive steady growth in business and long term profitability.

In the coming months, LOLC will align group strategies towards strengthening its financial position further with increasing interest income with higher executions coupled with stronger collections in the financial services sector. The other sectors too will further strengthen its business operations, to derive medium to long term profitability. The Group is well positioned and all sectors are being developed with strong investment backing to strengthen its business proposition for long term profitability growth.