The fact that the regulator-imposed credit contraction measures by way of strict guidelines on loan to value ratios (LTV) was not helpful for business growth, these guidelines from a broader perspective, were beneficial in terms of sustaining credit quality. Overall the CBSL focused on tightening regulatory controls in the industry and I welcome these steps taken in the right direction, which would certainly lead to a more stable outlook for the financial services industry.
There is no denying that the year 2018/19 was a difficult year for most, if not all industries, amidst this situation , agriculture was blessed with adequate rainfall in key parts of the island and indeed was a “ silver lining “amidst many challenges that was witnessed. However, the entire dividend from a rich harvest could not be enjoyed as it was after some time that the agro sector was able to rejoice, as there were back to back droughts or floods in the preceding years, this resulted in part of the earnings being utilised to settle old debts.
Performance of the Company
It is indeed with much gratification that I announce that the net profit after tax of the Company grew by 22% Year on Year (YoY) to Rs. 542Mn. This is a milestone, as it was the first time that we surpassed the half a billion rupees in the bottom line performance. Outstanding growth in interest income which grew by 26.7% YoY to Rs. 3.8 billion and fee and commission income which grew by 34% to Rs. 237Mn were significant contributing factors to the Company’s overall performance. The year under review cannot be termed as a stellar year in terms of external support vis a vis the economy. Factors such as rising interest and imposition of debt recovery levy were direct variables that inhibited growth. The increase in Allowances for Impairment charges by 58.7% to Rs. 282Mn was mainly attributable to the external operating environment as liquidity positions of customers began to recede amidst tough economic conditions. Increase in interest expense YoY by 27.8% to Rs. 1.6Bn was attributable to both increase in rates and quantum borrowed. The growth in latter was entirely for lending in the core business, barring expenditure on branch expansion and software development. The visible growth in personnel costs 31% to Rs. 480 Mn is mainly due to the increase in staff by 129 to 518. 80% of the new additions were recruited for direct revenue generating operations and to support the branch expansion. Administration and Selling Expenses grew by 29% to Rs. 698Mn and this increase was attributable to the expansion of business activity and setting up of gold loan operations. The Management ensured that total costs were below budgeted levels and followed strict controls over budgetary allocations which were a major contributory factor for achieving good financial results.
Singer Finance opened new branches in Horana, Gampola and Kegalle a second branch in Kurunegala and relocated our Matara branch to a more visible and spacious location in the heart of the Southern hub. In keeping with the aggressive growth plans, the Company relocated service windows situated within the Parent Companies consumer durable outlets by shifting Panadura, Wellawattte and Vavuniya windows to spacious, visible and convenient locations to customers. We have applied for branch status for these three windows to the Central Bank of Sri Lanka. In fact, the aforementioned eight new locations will expand the business growth in volumes, with enhanced operational capabilities and vibrant and visible branding backed by enhanced service standards. We have expanded our Gold Loans business to 14 locations, and I am happy to note that there was dedicated concentration in progressing the Gold Loans business in the year under review and I am delighted with the speed at which the new product was rolled out and of the growth achieved .Gold Loans will soon become the second biggest portfolio next to Leasing. Non-Performing Assets Ratio of Singer Finance as of the financial year end was 3.10% and was way below the industry level of 7.7% as of end December 2018.
A Great Place to Work – Our Employee Proposition
It is with great pleasure that I wish to inform that during the year under review your Company was awarded and certified as a ‘Great Place to Work in Sri Lanka’ and is now among a select group of best 25 Companies. This accreditation reflects the Company’s excellent and inclusive culture of treating staff fairly and ensuring that all of us have a happy working environment. We are thankful to the solid cultural reflections that keep dawning on us from the rich heritage of two inspiring parent organizations i.e. Singer (Sri Lanka) PLC and Hayleys PLC , the positive sentiments stemming from this strong relationship, no doubt were contributory factors for achieving this accreditation.
To be recognised as a ‘Great Place to Work’, takes some effort as the best organisations are selected based on a very scientific direct research conducted. The entire staff of the Company are given a detailed questionnaire covering aspects such as credibility, respect, fairness, pride, and camaraderie towards and amongst staff.
During the year a brand enhancement programme for Singer Finance was carried out. With subtle, but modern changes, a more vibrant and colourful brand identity was introduced to the brand name with all facades and monlifts of new branch locations upgraded with our fresh corporate identity. This new identity would be introduced to the Company’s existing locations in phases.
During the year the Company relocated to a dedicated Head Office located in a strategic and central area in Colombo 3. This would create greater visibility for the Singer Finance brand – further establishing our presence in the financial services industry.
The Company also increased its brand presence in print, social media, radio and below the line advertising mediums and will continue to develop a strong and independent branch identity for Singer Finance. The Management tirelessly emphasised and impressed upon staff the need to continuously focus on providing an excellent customer service, which we believe is one variable that could differentiate us from the competition. The Company is also aware of the Groups emphasis on improving customer care and customer relationship management.
The Future Outlook
The Company will focus on aggressive growth plans in the branch network and marketing activities in the core business of Leasing and Gold Loans, with the objective of reaching its true potential. In reaching out for this growth with a ‘sense of urgency’, Management will be mindful of external risk factors and will be aware of the need to realign with the same ‘sense of urgency’ in the event economic factors do not move as envisaged. We will concentrate on increasing in reasonable proportions, the average loan size of secured Lease facilities, in addition to entering new markets and generating new business facilities through branch and marketing staff expansion. This approach, I believe is the risk appetite that the Company should stretch to, in an external environment which does not reflect much positiveness.
There are many opportunities in the market place that Singer Finance could grab through the skills and capabilities of our talented staff by offering a superior service. I have the utmost confidence in the capabilities of our staff and we are geared to meet any challenge that will come our way ‘Head on ‘.
In the past the Company was hesitant to offer competitive rates in Fixed Deposits and instead was keener to raise debt through other sources. I am happy to note that in line with the new strategies of the Company, Singer Finance have now become a competitive player in the Fixed Deposits business and have elaborate plans to grow this segment. I believe that broad basing fixed deposit mobilisation, as a key and important funding strategy for a Finance Company.
Building on our Strong Foundation
Singer Finance operates with a very strong foundation in ethics and Corporate Governance. The Company makes a lot of effort to reflect this in our choice of recruitment as we believe that it’s the staff that will ultimately carry forward the legacy of maintaining these values and principals. We demand nothing but the best conduct from all our staff members.
Our foundations have been secured, our capital and liquidity positions are strong, our risk appetite is well monitored by a very keen and experienced board subcommittee in the form of the Integrated Risk Management Committee and the Credit Committee. Despite this, we will not remain complacent and will continuously focus on enhancing our risk framework in line with the external and internal business environment.
Sustainability and CSR
The Company and the staff are committed towards building a sustainable business environment. As an employment creator we strive to establish jobs that are fulfilling and sustainable. When an employee joins us we ensure that he or she is mentored and developed until he reaches up to the fullness of his potential. The mentoring process includes guidelines on the importance of interacting with customers and wider stakeholders with the highest ethical standards. We also strive to educate our customers on the financial propositions most suitable for them which we believe is one of the first acts of building a sustainable entity. Whilst we look after our customers, employees and shareholders, there is a world beyond that which needs our assistance. We as an organisation have always been committed and cognisant of the need to assist society to the best of our ability and a detailed description of activities conducted in the year is reflected in pages 80 to 89 under Social and Relationship Capital.
It has been a privilege to provide leadership to this great organization in my first year as Chief Executive; it requires the combined talent and dedication of many to achieve what we achieved during the year. I thank the Chairman, Mr. Aravinda Perera and the Board of Directors for their strategic vision and oversight. I also wish to thank the Group Chairman Mr. Mohan Pandithage, Group Co-Chairman Mr. Dhammika Perera and Group CEO Mr. Mahesh Wijewardene for their guidance, support and encouragement.
An inspired and skilled team worked hard and with a sense of urgency to deliver on many fronts, they accepted the change expected, by delivering on accelerated growth and I am indeed grateful and appreciative of the unfailing camaraderie of the Senior Management team and each & every staff member of the Organization.
During the year under review the Company’s first Chief Executive Officer, Mr. R.S Wijeweera retired after a long and illustrious career. I wish to place on record my sincere appreciation for the guidance and support extended by him, and for his long service to the Company. During his tenure the Company grew steadily and achieved many a landmark. We wish Mr. Wijeweera a wonderful retirement. Our sincere appreciation also goes to Mr. Asoka Peiris, the former Group Chief Executive Officer who served in the Singer Finance Board for a period of nine years for his commitment and contribution to the Company.
I also take this opportunity to place on record our appreciation for the guidance and support extended to us by the, Governor of the Central Bank, Director Non- Bank Supervision of the Central Bank of Sri Lanka and his officials, Controller of Exchange and the General Manager and the staff of Credit Information Bureau. Let me also take this opportunity to recognise our shareholders, customers, suppliers and business partners for their valued support and contribution and trust that they would continue to be partners in the journey of Singer Finance in the years to come.
Chief Executive Officer