Central Finance PLC (CF), one of the country’s strongest finance companies, has concluded what its Managing Director called "a particularly testing year" ended March 31, 2009 growing its deposit base and shareholders funds and posting a net profit of slightly over Rs.1 billion, marginally down from the previous year.

The after-tax profit of Rs.1.039 billion compared to the previous year’s Rs.1.048 billion translating to an earning per share of Rs.51.16 against Rs.51.62 a year earlier.

CF Managing Director E.M. Wijenaike said the year had seen a multitude of issues stemming from a deteriorating economy, rising inflation and a liquidity crunch.

"It is significant that the billion rupee profit level has been maintained for the fourth consecutive year despite the difficult conditions," Wijenaike said, adding that overhead cost increases had been contained to 7.33% over the comparable period.

"The year also saw the emergence of a severe crisis of confidence in the Non Bank Financial Institutions sector which crystallized during the third quarter, prompting government intervention through a `Policy Support Package’ for distressed finance and leasing companies," he said.

"Despite a year of unprecedented turmoil and upheaval, the company remained robust and strong, whilst delivering better than market performance."

CF’s total assets were up to Rs.31.5 billion from Rs.30.2 billion a year earlier while the deposit base too was up 10% over the previous year to Rs.13.5 billion. Profit before income tax and financial VAT was up 9.1% to Rs.1.65 billion but a higher tax charge of Rs.615 million, compared to Rs.468 million the previous year, had pushed down the after-tax profit marginally.

CF continues to enjoy an A+(lka) rating from Fitch with the rating agency taking into account the company’s relative size in terms of assets, strong financial position, good asset quality and solvency as well as its strong capital position relative to peers in the financial sector.

The directors have recommended a final dividend of Rs.2.50 per share giving shareholders a total return of Rs.5 per share for the year under review.

Wijenaike reported that automotive sector had performed at a lower level last year with sales of medium and light duty commercial vehicles also slowing down at a faster pace. The contraction in this market was 45% against 28% the previous year.

"The haulage sector also saw a reduction of 23% in new registrations compared to 9.9% in the previous year. Sales of land vehicles however, continued to grow, albeit at a slower pace, with 26,132 units registered as against 23,475 in the previous year," he reported.

Estimating the import duties on passenger cars at 300% of the landed cost, he said that this plus a 200% cash margin requirement for opening letters of credit resulted in a drastic drop in vehicle imports last year.

"As a result, majority of financing was directed towards used vehicles," he noted.

CF had grown core customer deposits comprising fixed deposits and savings by 10% during the year mobilizing Rs.6 billion in fresh deposits.

The company had completed the construction of its medium rise condominium development project in Colombo 10 last January and posted a turnover of Rs.495 million at Hedges Court Residencies despite the drastic downturn in the demand for apartments.

"It is envisaged that a turnaround in the real estate market in the future would result in increased sales in the next financial year," he said.

Central Finance has a stated capital of Rs.203 million, capital reserves of Rs.1.4 billion, reserve funds of Rs.0.6 million and a revenue reserve of Rs.6.1 billion in its books. Total assets stood at Rs.34 billion and total liabilities at Rs.25.4 billion including deposits of Rs.13.4 billion.

Corporate Services Limited holding 23.25% of Central Finance, up from 21.89% the previous year is the single biggest shareholder. This holding is on behalf of an Employees Share Ownership Plan.

Mr. E.H. Wijenaike owns 15.04% of the company and the Life Fund of the Insurance Corporation 12%. The annual report says that the company "does not have an identifiable parent of its own."

The Central Finance share with a net asset value of Rs.403.57, up from Rs.351.61 the previous year, traded at a high of Rs.237 and a low of Rs.148 during the year under review. This compared with a trading range of Rs.240 to Rs.180.50 the previous year.