People’s Leasing & Finance PLC

Annual Report 2019/20

Chairman’s message

Our resilience and our positive attitude coupled with our agility to adapt to the “next normal” helped us to consolidate our operations amidst a challenging environment.

World is experiencing a global pandemic. Stock markets are down and unemployment is rising. Leading economies are suffering. Proactive, decisive responses to such crises mark true leadership. People’s Leasing has long enjoyed a leadership position in the NBFI sector, therefore it was our responsibility to lead by example. I am proud to report that even though we collectively experienced unprecedented challenges during the financial year, we harnessed all our resources and our key strengths to confront these obstacles prudently.

Operating in turbulent times marked by challenges from the local and external contexts, we experienced a difficult financial year. The first half of the year was marred by the Easter attacks and its recovery leading up to the Presidential Election in November. The economic impact of the Easter attacks led to a slowdown of the economy that caused a reduction in disposable income of customers and business volumes. Consequently, there was a rise in non-performing loans in the sector. However, in the aftermath of the Presidential Elections, the political uncertainty that prevailed before waned and business and operations showed favourable signs. Yet, with the outbreak of the Covid-19 pandemic in 2020 had far-reaching socio-economic impacts. The pandemic and the ensuing lockdown of Sri Lanka impacted our operations and our overall financial performance for the year. Our day-to-day operations were affected since the beginning of the lockdown in mid-March. Due to the difficulties in recovery arising from events related to Covid-19, we experienced a pressure on our credit quality resulting high impairment charges in the month of March Nevertheless, our resilience and our positive attitude coupled with our agility to adapt to the “next normal” helped us to consolidate our operations amidst these challenges. Our first priority was to ensure the health and safety of our committed workforce and our loyal customer-base that come from all segments of society. We implemented health and safety guidelines recommended by the relevant authorities and formulated a Covid-19 response guide outlining directives to follow when resuming operations in the lockdown period. Our branches and customer support services operated following all the regulations to ensure that our customers were not abandoned in their time of need. We also took timely measures to assist those who were severely affected by the pandemic and supported them to restore their livelihoods, especially our SME clients. Following the CBSL regulations, we have completed the evaluation of applications we received and are currently in the process of granting moratorium for those who are eligible.

We were able to be resilient during this crisis particularly owing to the strong foundations that were in place. Our business model and strategy are structured in such a way that enables absorbing external shocks. Our agility to adapt to the external environment was exemplified during and in the aftermath of the Easter attacks. Past investments in IT and state-of-the-art technology helped us to manage the situation which followed the attacks. The same systems and processes are utilised during the Covid-19 pandemic to continue our operations while complying with all the necessary safety regulations. Our call centre operated during the lockdown period to provide the necessary service to our customers.

True to our strategy, the customer-centric approach of People’s Leasing adapted an empathetic approach towards recovery which will continue where we will support our customers to rebuild with necessary financial assistance while providing them all concessions prescribed by regulators based on their eligibility. We also invested Rs. 58.85 million on empowering local community and conserving environment. Further, the consolidation of our operations focused on controlling costs during the crisis where operational expenses were maintained below the budgeted levels. However, in the wake of the pandemic and the uncertainty that exists even at the time of this Report, we have revisited business targets and strategies set for 2020/21. Operational changes, envisaged results, and specific measures that were taken during the year are discussed further in the Chief Executive Officer’s review.

People’s Leasing recorded a profit after tax of Rs. 2,942.51 million for the year, a decrease of 33.37% compared to Rs. 4,416.12 million reported the year before. At the Group level, the drop in profit after tax was 28.33% only when the profit after tax was Rs. 3,591.72 million compared to Rs. 5,011.27 million in 2018/19. This is a trend that is prevalent across the industry due to aforementioned factors in the operating environment. An increase in total operating income contributed to by higher net interest income and fee and commission income was more than off-set by the impairment provision which increased by 192.89% due to the challenging operating context. Deposits crossed the Rs. 100 billion mark to close the year at Rs. 106.70 billion, a remarkable 20.75% growth. We own the largest deposit base and the largest loans and receivables portfolio in the sector. This significant growth in the deposit base, operating in a difficult context is a testimony to the trust and confidence Sri Lankans have placed in the Company. Total assets of the Company recorded a marginal drop from Rs. 172.54 billion as at 31 March 2019 to Rs. 171.66 billion as at 31 March 2020 while the total assets of the Group remained unchanged. Following the trend in profit after taxation, profitability in terms of ROA and ROE too decreased to 2.64% and 10.00% respectively compared to 3.95% and 15.88% previous year.

I am happy to report that during the year People’s Leasing was bestowed with numerous awards and recognitions which is a testament to our good governance. We were named one of the Ten Best Corporate Citizens of the country and recognised as the Winner in the Community relations category at the Best Corporate Citizen Sustainability Awards 2019 raced by the Ceylon Chamber of Commerce. We were also recognised as a Winner of the Best ten CSR/Sustainability Projects presented by Japan Sri Lanka Technical and Cultural Association (JASTECA). People’s Leasing Annual Report 2018/19 secured several local and international awards at the CA Sri Lanka Annual Report Awards, ARC International Annual Report Awards and SAFA Best Presented Annual Report Awards. Further, we were placed 13th in Business Today Top 30 Annual Listing. Further, People’s Leasing was judged as first among NBFIs and the joint third of the top 50 Corporates by Transparency International for Transparency in Corporate Reporting. This is Sri Lanka’s first ever assessment of transparency in corporate reporting.

The immediate future of the Company will be impacted by the disruptions caused by the Covid-19 pandemic and the socio-economic impact it will have on Sri Lanka and the world. Especially, since the pandemic is ongoing, there is lot of uncertainty clouding the socio-economic environment. Come what may, we are ready to embrace the next normal and we have already implemented measures for business continuation in the coming years. Our short-term goals are to focus on preserving liquidity, minimising credit losses, reducing operating costs, and ensuring the safety of our staff and customers. Our continued investments on digitalisation will also be a vital asset to confront the next normal.

Our short-term goals are to focus on preserving liquidity, minimising credit losses, reducing operating costs, and ensuring the safety of our staff and customers.

In conclusion, I would like to thank the Board of Directors for their commitment and steering the Company through this difficult time. My thanks also go to the Director and officials of the Department of Supervision of Non-Bank Financial Institutions for their cooperation, guidance, and support. I also extend my appreciation to the CEO Mr A S Ibrahim, along with the Management team, for effectively managing the impact of the crises. Recognition is also due to our committed and highly-skilled employees, who rallied around the Company and the Management during this difficult time and maintaining service standards. Lastly, I would like to extend my gratitude to our customers for their trust in our Company, shareholders for their confidence, partners and all other stakeholders for their continued support.


Sujeewa Rajapakse

8 July 2020