ANNUAL REPORT 2019/20 ANNUAL REPORT 2019/20 Scan the QR Code with your smart device to view this report online. LOLC HOLDINGS PLC Contents Annual Report 2019/20 Agriculture & 29 Financial Services 38 Plantation 40 Leisure 44 Renewable Energy Manufacturing & Other Strategic 46 Construction 49 Trading 52 Overseas Expansion 57 Investments About us 3 Report of the Integrated Group Structure 4 Risk Management Committee 78 Awards and Certifications 6 Report of the Corporate Governance Funding Partners 8 Committee 79 Our Local Presence 10 Corporate Governance Report 80 Our Global Presence 11 Enterprise Risk Management 85 Financial Highlights 12 Deputy Chairman’s Message 13 Financial Statements Group Managing Director/CEO’s Review 16 Financial Calendar 90 The Board of Directors 19 Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement 91 Management Discussion & Analysis Directors’ Responsibility for Financial Reporting 92 Financial Review 24 Independent Auditors’ Report 93 Financial Services 29 Statement of Financial Position 98 Agriculture & Plantation 38 Statement of Profit or Loss 100 Leisure 40 Statement of Comprehensive Income 101 Renewable Energy 44 Statement of Changes in Equity 102 Construction 46 Statement of Cash Flow 112 Manufacturing & Trading 49 Notes to the Financial Statements 114 Overseas Expansion 52 Other Strategic Investments 57 Property Details of the Company 316 Ten Year Summary 318 Sustainability at LOLC 61 Summarised Quarterly Statistics 322 Value Addition 324 Report of the Board of Directors 71 Indicative US Dollar Financial Statements 325 Report of the Audit Committee 75 List of Group Companies 328 Report of the Talent Development Share Distribution 337 and Remuneration Committee 76 Notice of Meeting 340 Report of the Related Party Transaction Form of Proxy 341 Review Committee 77 Corporate Information IBC 2 LOLC HOLDINGS PLC About Us Annual Report 2019/20 20,000++ Financial Professionals 1.8 Mn Customers USD 1.2 Bn Customer Deposits USD 2.1 Bn Loan Book Value The LOLC Group has rapidly evolved into being the biggest Non-Banking Financial Institution and one of the biggest and most diversified conglomerates in the country. 100++ Besides a range of financial products and services, our portfolio includes leisure, Funding Partners plantations, agri-inputs, renewable energy, construction, manufacturing and trading and other strategic investments. Our footprint in Sri Lanka spans every district, from the rural hinterlands to major cities and we have enduring business partnerships with a host of financial and developmental organisations across the world. We have significantly successful financial services investments in Cambodia, Myanmar, Pakistan, Indonesia, the Philippines, Nigeria and Zambia; business operations in Maldives and Sierra Leone as well as corporate offices in Singapore, UAE and Mauritius and we continue to expand our international presence by actively seeking new opportunities in the region. As a leading player in Sri Lanka’s SME and microfinance sectors, the LOLC Group has been a catalyst in facilitating financial inclusion. Our role in microfinance has enabled us to benefit many people and communities, whilst striving to maximise environmental benefits through green operations and processes in line with our triple bottom line focus in all we do. The Group’s business interests are in key growth areas of the economy and we are confident that LOLC will grow further both in potential and in value creation for the many stakeholders and partners that we serve. 3 LOLC HOLDINGS PLC Group Structure Annual Report 2019/20 4 LOLC HOLDINGS PLC Annual Report 2019/20 5 LOLC HOLDINGS PLC Awards and Certifications Annual Report 2019/20 This year, LOLC achieved numerous awards and accolades for the Company’s efforts, as we continued to uplift communities and realign our business goals and strategies in order to improve our service standards. As our motivated team journeys along a pathway to achieve far more in the years to come, we are confident that the trust and faith of our stakeholders will ensure business continuity. For the fourth consecutive year, LOLC was named one of Sri Lanka’s LOLC Placed at number 3 in the Business LOLC won the Financial Service Provider Most Admired Companies Today Top 30 of the Year award at the SLIM-Nielsen People’s Awards 2020. 6 LOLC HOLDINGS PLC Annual Report 2019/20 LankaPay International Business LankaPay Technnovation Awards Magazine Awards Technnovation Awards LOLC Finance was awarded the Gold iPay was recognised as the Best LOLC Finance secured the Overall Award for Non-Banking Financial Payment Platform, Sri Lanka for 2019 Gold Award for Excellence in Institution of the year for Customer by the International Business Magazine Inter-Bank Payments amongst Convenience. Awards. Non-Banking Financial Institutions. IFN Best Islamic Bank IFN Best Islamic Provider Sri Lanka Award Global Award 7 LOLC HOLDINGS PLC Funding Partners Annual Report 2019/20 LOLC’s achievement as a partner in uplifting communities was made possible by its longstanding international funding agencies which have extended the financial support the Group needed to achieve its developmental goals. Today, LOLC has forged partnerships with over 100 funding partners worldwide, whose commitment has sustained our sustainable inclusive financing approach to empower lives. 8 LOLC HOLDINGS PLC Annual Report 2019/20 9 LOLC HOLDINGS PLC Our Local Presence Annual Report 2019/20 Northern Province 07 05 01 North - 15 Central 07 North - 10 Province Western 07 03 Province 06 04 01 Eastern 13 Province 03 Central 14 12 01 05 Province 01 Sabaragamuwa 05 02 06 Province 09 05 Uva Province 06 04 01 Western Province 45 08 04 20 Southern Province 16 12 02 07 as at 31st March LOLC Finance Footprint Browns LOLC Finance, Al-Falaah Centres LOLC Development Finance, Branches and LOLC Finance, Al-Falaah Service Centres Service Centres Commercial Leasing & Finance (CLC) Branches 10 LOLC HOLDINGS PLC Our Global Presence Annual Report 2019/20 Mauritius 11 LOLC HOLDINGS PLC Financial Highlights Annual Report 2019/20 For the year ended 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Group Performance Indicators - Rs. Mn Net profit before tax 8,282 7,068 3,706 4,436 8,169 11,858 24,379 24,655 26,818 27,125 Net profit after tax 7,023 5,704 2,552 3,069 6,299 9,331 20,921 19,190 19,636 19,792 Total assets 113,070 145,204 162,982 167,175 244,917 379,595 640,925 822,239 1,043,747 1,335,919 New executions 47,392 58,233 48,119 65,299 113,048 191,135 152,558 172,673 129,588 129,099 Gross portfolio (Rentals 70,077 105,932 107,038 112,747 172,784 216,763 427,365 560,845 723,822 923,594 receivable) Deposits from customers 17,899 26,233 35,397 49,615 50,587 74,166 211,128 307,529 452,075 563,942 Outstanding borrowings 49,256 65,425 72,946 68,368 119,232 215,076 294,115 341,549 387,934 503,824 Non-performing portfolio 1,159 1,702 3,071 3,354 4,014 5,054 7,736 10,187 16,791 27,140 Return on equity (%) 25.88 14.62 5.90 7.05 13.16 25.84 35.54 15.05 14.43 12.20 Key Indicators - Rs. per share Net asset value per share 27.53 41.22 43.96 47.64 59.41 79.33 123.84 148.28 181.09 194.72 (adjusted) Earnings per share (adjusted) 8.08 12.00 5.37 3.19 11.37 17.93 36.11 20.47 23.76 22.93 Company Performance Indicators - Rs. Mn Net profit before tax 1,898 3,072 68 689 458 835 10,149 4,763 (3,106) (9,094) Net profit after tax 1,523 2,977 34 694 504 689 9,777 4,699 (3,184) (9,213) Total assets 54,213 58,028 53,239 49,254 62,609 75,494 102,007 110,723 124,996 146,241 New executions 5,036 3,926 271 - - - - - - - Gross portfolio (rentals 11,897 7,704 3,881 2,134 1,378 1,848 850 2,414 2,535 5,565 receivable) Outstanding borrowings 22,379 23,807 19,738 14,254 25,016 38,369 52,698 54,241 69,895 95,413 Non-performing portfolio 545 500 357 178 168 168 153 149 151 151 Key Indicators - Rs. per share Dividends per share - - 0.50 - - - - - - - Market price per share 119.60 54.00 60.70 75.00 76.60 72.00 61.00 118.00 88.90 88.90 Net asset value per share 15.67 69.97 68.86 71.82 73.44 74.71 98.89 108.85 101.49 98.97 Debt to equity ratio - Times 3.00 0.72 0.60 0.42 0.72 1.08 1.12 1.05 1.52 2.05 Interest cover - Times 1.80 2.19 1.02 1.25 1.27 1.26 2.93 1.78 0.61 0.15 Dividend cover - Times - - 0.14 - - - - - - - 12 LOLC HOLDINGS PLC Deputy Chairman’s Message Annual Report 2019/20 The reason for my optimism is that even with some of the premature investments in the portfolio, 80% of our Profit Before Tax is derived from overseas investments, which assures our partners and shareholders that our diversified business interests will always enable the Group to achieve growth regardless of challenges in Sri Lankan operations. followed by the Presidential Elections end of 2019 and then the outbreak of the COVID-19 pandemic in March 2020, which fortunately did not impact the year under review in any significant manner although it will cast a shadow on how the local and global economy will recover in the next financial year.