Thursday, 8 May 2003  
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Mercantile Leasing records Rs 47 million post tax profit

Mercantile Leasing Ltd. posted an impressive post-tax profit of Rs 47 million this year in contrast to a loss of Rs.211 million in 2001, the Company Chairman A.N.U Jayawardena said in the Annual Report 2002.

He said favourable market conditions coupled with effective treasury management combined to ease interest costs by 33 percent from Rs.567 million last year to Rs.378 million this year.

"Meanwhile, the necessity for provision for bad and doubtful debts declined sharply from Rs.227 million a year ago to Rs.28 million this year, a reduction of 88 percent, while effective cost control measures adopted the previous year effectively contained overall overhead costs.

It is pertinent to note that renewed investor confidence and the resultant buoyancy, is reflected in the appreciation of our own share price by 74 percent from Rs.13.50 at the commencement of the year to Rs.23.50 at the close of the year," Jayawardena said.

He said while in consequence of the company's strategy to restrict credit expansion last year, in pursuit of quality, the Group's turnover and total income declined by 10 percent and 18 percent from Rs.1,717 million and Rs.778 million a year ago to Rs.1,541 million and Rs.638 million respectively.

"The Directors have decided to recommend a first and final dividend of 7.5 percent involving a payout of Rs.15.3 million, thus leaving a balance of Rs.32 million towards retained profits. This coupled with a transfer from the revaluation reserve amounting to Rs.4.8 million would be directed towards the reduction of the Group's Accumulated loss of Rs.130 million to Rs.93 million," Jayawardena said.

He said following the unprecedented loss incurred by the Company last year, they embarked on several measures to contain its vulnerability to bad and doubtful debts and fluctuations in market interest rates.

"Among these were effective risk management strategies and the launch of an innovative variant of the finance lease, the variable rate lease, indexed to market rates, meticulously designed to stabilise interest earnings in times of volatile external interest rate environments.

The success of the program could be measured by the magnitude of the market response we received, which was in excess of our projected targets. During the year we were focused on sound Asset Liability management principles and were able in addition to the introduction of innovative assets, to secure medium and long term funding through the issue of debentures and asset backed notes," Jayawardana said.

He said the enactment of the Finance Leasing Act No.56 of 2000 has now introduced a degree of uniformity among leasing companies.


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