"License Finance Company with Monitory Board of the Central Bank of Sri Lanka under the Finance Business Act. 42 of 2011."

[SL] BBB - (Stable) from ICRA Lanka Limited (Subsidiary of ICRA Limited, a group Company of Moody’s Investors Service) Listed in Colombo Stock Exchange (CSE)

Board of Directors

board of directors
Mr.Brahmanage Premalal

Mr.Brahmanage Premalal

Group Chairman / Non- Independent Non-Executive Director

Group Chairman / Non- Independent Non-Executive Director's Message

Prime Finance PLC performed well amidst a challenging economic environment, to deliver encouraging performance levels. The performance in key indicators surpassed expectations, demonstrating the turnaround of the Company, in line with the new strategic initiatives implemented. The Company reported a profit before VAT on financial services of LKR 35.1 Mn and profit after tax LKR 13.1 Mn. The Company achieved significant strides in key spheres of lending portfolio growth and deposit mobilization. During the year the Company achieved significant asset growth reflecting a YoY growth of 116 %, achieving an asset base of LKR 3.7 Bn. This is attributable to the focused lending and new products and services introduced. A significant increase in our Public deposit portfolio was achieved, with the doubling of the deposit base to LKR 2.4Bn. This projects the renewed confidence and trust placed by the depositors. Positioning Prime Finance PLC A key milestone in 2017 was the rebranding of the Company as Prime Finance PLC which reinforced the Company’s strength through its affinity to its parent - Prime Group. Strength, trust and stability are paramount factors that determine the sustainability of a finance company. Thus being a part of a formidable and respected entity such as the Prime Group enhances the trust and stability of the Company. Prime Group is recognized as the vanguard in the real estate sector of Sri Lanka, with a market presence of over two decades. We have over the years transformed the real estate sector of Sri Lanka, through successful real estate projects spread over 13 districts of our country along with distinctive housing and apartment complexes. The Group has embarked on several landmark condominium projects in Colombo which will transform the skyline of the area. The Group has been recognized as one of ‘Asia’s Top 100 Brands’ in the ‘100 Asia’s Greatest Brands and Leaders Awards’ held in January 2018. I am proud to note that we were the only Sri Lankan company to be recognized in this forum along with iconic and global brands such as TATA, Airtel and many other leading brands. Extending on the corporate ideals of Prime Group - “committed to create a better place on earth”, Prime Finance PLC will help Sri Lankans realize their financial aspirations through innovative financial solutions. We hope to complement our product portfolio with an extensive range of financial products serving the needs of the SME sector and personal financing aspirations, by being a ‘one stop shop’ for all financing needs be it the financing of a land, a house, an apartment or a vehicle. This will empower Sri Lankans to reach their multidimensional aspirations through the Prime Group. We envision Prime Finance to be the trusted financial institution for our Prime Group customers. This will enable them to fulfil their financial needs within the trusted realms of the “Prime” brand thereby enriching the service experience. We believe that this will harness the latent potential of a captive clientele by building synergistic strength. Corporate governance As a financial institution backed by a respected Group we place significant emphasis in following a compliant framework to ensure that our business activities are carried out in an ethical manner by adopting practices of good governance. The Board of Directors of the Company have been strengthened with professionals from diverse backgrounds who possess wide expertise in the financial services industry. We have created the right governance framework to ensure that highest standards of transparency, compliance and risk management strategies are implemented in line with the directions issued for finance companies by the Central Bank of Sri Lanka along with the Code of Best Practice on Corporate Governance jointly issued by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka. Outlook for the future The Sri Lankan economy is expected to increase its pace of growth in the medium term from the moderate growth levels experienced presently. It is expected that the economy will boost through exports and FDIs which will improve the Balance of Payments position and ease exchange rate fluctuations. The Non-Banking Financial Institutions sector would need to keep abreast with the challenges and move in tandem with the changes in the macro-economic environment whilst seizing the opportunities present in the market. Way forward The Company has announced a rights issue through the Colombo Stock Exchange which was approved by the shareholders at the EGM held on 18th June 2018. This will strengthen the core capital base of the Company in compliance with the regulatory requirements of the Central Bank of Sri Lanka. The Company plans to issue LKR 43.2 Million ordinary voting shares by way of a Rights Issue to raise LKR 864 Million. This will enhance the stated capital of the Company to LKR 1.4 Billion, which is way above the threshold of LKR 1Billion stipulated by Central Bank. With the enhanced capital structure, the Company will be strategically positioned to win customer confidence for a sustainable growth in the future. Our strategic intent is to expand the lending portfolio through increased disbursements. In the formative year we strengthened the management team with industry expert’s in order to set the right path for the Company to reach new heights. With the correct management framework, operational structure and policies we have placed a structural framework conducive to be competitive. The Company will continue to refine and improve its service parameters to be agile in terms of service delivery standards of the industry to seize the captive market opportunities. The Prime Group has been recognized as a ‘Great Place to Work’ and is ranked among the best 25 establishments to work for in Sri Lanka. We take pride in our HR practices and development of our human resources. The HR practices and staff development activities will be aligned in such a way to create an engaged and productive team working towards the mission of our Company. A note of appreciation In conclusion, I extend my heartfelt gratitude to the Prime Finance Team ably lead by the CEO, senior management and the staff who have made the initial transition smooth by setting for growth. I extend my sincere appreciation to our customers who have placed their trust and confidence in the Company. My sincere appreciation goes out to the Governor of the Central Bank of Sri Lanka and the Director of the Department of Supervision of Non- Bank Financial Institutions of the Central Bank of Sri Lanka for their continuous support and guidance. I wish to appreciate the strategic direction extended by the Chairman and the Board of Directors of Prime Finance PLC who have set the right track for the Company. As your Company gains momentum we are confident and optimistic about the opportunities that lie ahead which could be harnessed to our full potential to maximize returns to all stakeholders.

Mr. Mangala Goonatilleke

Mr. Mangala Goonatilleke

Chairman / Independent Non- Executive Director

Chairman / Independent Non- Executive Director's Message

The global economy was on rebound in 2017 ending three years of slow growth. Hence the global GDP growth overtook mid-year projections and edged closer to 3.0% in 2017. Both advanced and emerging economies around the world reported improved economic performances, bolstered by a strong revival in global trade and investment as well as an overall improvement in business sentiments. The Sri Lankan economy expanded to 3.7%, driven by growth in the service and manufacturing sectors and a sustained increase in expenditure on large infrastructure projects. However, growth in the agricultural sector was hampered for the third consecutive year due to un-favourable weather conditions. Inflation increased slightly more than the usual mid-single digit level, ending the year above 7%. The rising cost of living and shrinking disposable income, prompted changes in consumer spending, market demand and supply trends with margins shrinking across the financial sector, competition in the non-bank financial services sector, intensified. Given this operating backdrop, Prime Finance PLC categorized as a mid-sized finance company in terms of asset size was able to perform in an optimal manner. We sharpened our resolve to discover opportunities in the face of every challenge and made notable progress in our business performance. The Non-Banking Financial Industry (NBFI) sector represented by Licensed Finance Companies (LFCs) and Specialized Leasing Companies (SLCs) performed moderately during the year with low credit growth, declining profitability and increasing non-performing loans. The year 2017 continued to be a challenging year for the sector, as some of the restrictions placed in 2016 on the core business of leasing, with high import duties on vehicle imports and regulatory Loan to Value (LTV) ratio of 70%, continuing in 2017 as well. According to statistics announced by the Central Bank of Sri Lanka, the credit growth in the industry decreased to 9.8% in 2017 in comparison to 21% in 2016. During 2017 the NBFI sector recorded an after-tax profit of LKR 17.7 Bn compared to LKR 20.2 Bn in the previous year, reflecting a drop of 12.7%. The net interest margin for the industry too dropped from 7.9% in 2016 to 7.7% in 2017, mainly due to the rise in funding costs and competitive loan pricing yielding pressure on margins. During the year the Central Bank initiated several prudential policy measures to strengthen the supervisory and regulatory framework of LFCs and SLCs with the aim of enhancing the stability and soundness of the sector and increasing the customer confidence in the sector. A new prudential direction was issued to revise the LTV ratio for credit facilities in line with the national budget proposals of 2017. Further, the minimum core capital requirement for LFCs has been increased to be completed on a staggered basis, in view of strengthening the capital position of the sector and increasing the capacity to absorb unexpected internal and external shocks. Accordingly, the minimum core capital has been increased from LKR 400 Million to LKR 1.0 Billion by 01 January 2018, LKR 1.5 Billion by 01 January 2019, LKR 2.0 Billion by 01 January 2020 and LKR 2.5 Billion by 01 January 2021. The strategic vision of Prime Finance PLC is to be ‘the most preferred, progressive and innovative financial solutions provider in Sri Lanka’. Consequent to the acquisition of Summit Finance PLC by Prime Lands (Pvt) Ltd last year the Company was rebranded as Prime Finance PLC, reflecting its affinity to the Prime Group and thereby infusing confidence and stability. During the year the Company was steered towards sustainable growth, whilst relentlessly focusing on operational efficiencies. This enabled us to demonstrate a remarkable financial performance amidst a challenging business environment. The Company increased its revenue to LKR 233 Million during the year, reflecting an increase of 78% compared to the last year. The Company recorded a total net profit after tax of LKR 13.1 Million, thereby recording a 419% increase over last year’s profit. The Company’s total asset base depicted a remarkable growth of 116% closing the year at LKR 3.7 Billion over the previous year’s LKR 1.7Billion. This was mainly driven by the increase in the lending portfolio which increased to LKR 2.7 Billion demonstrating a YoY (Year on Year) growth level of 130%. During the year the Company focused on diversifying its funding base and hence was able to significantly increase the public fixed deposits by 83% to LKR 2.4 Billion. The Company’s focused recovery efforts and the growth in its lending portfolio resulted in NPA levels improving significantly to 7.4% in comparison to 13.8%, in the previous year. The shareholders’ funds increased to LKR 613Mn during the financial year, and the Company plans to increase it approximately to LKR 1.4 Billion by July 2018 with the rights issue already announced to the Colombo Stock Exchange. The Company continued to pursue its Strategies of becoming a leading and distinctive financial institution, serving the financial aspirations of Sri Lankans. The introduction of innovative financial products to the market which forms a core strategy of the Company would be pursued into the future to derive exponential growth in our asset portfolio. Prime Finance’s achievements were also lauded by external parties, further re-enforcing the Company’s brand value to stakeholders. Throughout the Company’s journey since its relaunch, we have continued to emphasize the importance of ethical and transparent business operations. We have been consistently committed to developing a culture of trust and accountability while creating value for all our stakeholders. This has resulted in elevating the confidence and trust of our loyal employees, customers, shareholders, suppliers and vendors who believe in the Company’s ability to achieve its goals and remain sustainable in the future. In line with our strong governance mechanism embedded in our operations, we strive to ensure that the highest standards of transparency, compliance and risk management strategies are maintained. We comply with the Finance Companies Direction No. 03 of 2008 and the subsequent amendments thereto on Corporate Governance for Registered Finance Companies issued by the Central Bank of Sri Lanka along with the Code of Best Practice on Corporate Governance jointly issued by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka. As a subsidiary of Sri Lanka’s leading property development Company, which spearheaded the transformative impact on Sri Lanka’s real estate landscape we hope to create the same perpetual impact in the lives of Sri Lankans through innovative financial solutions. Our Board of Directors consists of professionals from diverse backgrounds who bring in professionalism and commitment. Together we are excited about the future prospects of the Company. We hope to strengthen the capital structure of the Company with the completion of the impending rights issue, which is planned to take place in July 2018. This will exceed the minimum regulatory requirement of the Central Bank of Sri Lanka. We are geared to promote financial inclusivity by serving Sri Lankans with our extended portfolio of products. We intend to offer tailor-made products for certain segments which we have already identified. We are confident that we have indeed coined together a formula of success, which we are ready to roll out while creating a positive and enduring brand experience. I would like to like to express my appreciation to our Group Chairman Mr. Brahmanage Premalal, for his visionary direction, guidance and support towards enabling the success of the Company. The Company’s performance and achievements are the direct results of the efforts extended by our loyal and dedicated employees who were driven to surpass targets and create new heights of success. I also take this opportunity to thank the management team led by the Chief Executive Officer for their leadership, and all employees for their commitment and dedication. I extend my deep appreciation to my colleagues on the Board for their valued counsel and guidance in setting the strategic path of the Company. I wish to convey my sincere appreciation to the Governor of the Central Bank of Sri Lanka and the Director - Department of Supervision of Non-Bank Financial Institutions for their continuous support and guidance extended to Prime Finance PLC.

Mr. Rasika Kaluarachchi

Mr. Rasika Kaluarachchi

Chief Executive Officer

Chief Executive Officer's Message

Several strategic initiatives were implemented across the entire business model, encompassing corporate governance, internal control systems, operational aspects which cascaded down to the operational levels across the business lines, branches and all personnel. Prime Finance PLC, during its first financial year under the ownership of the Prime Group of Companies, recorded an encouraging growth in its profitability levels in a challenging business environment. The Company recorded a net profit of LKR 35.1 Mn before taxes, with a profit after tax of LKR 13.1 Mn. The Company applied a two pronged strategy of strategic realignment of investments and focused recoveries strategies. This derived a positive impact, driving the revenue and profitability levels of the Company on an upward trend.

Focused marketing strategies drove growth in our lending portfolio reflecting a 130% YoY (Year on Year) growth, augmenting the asset base to LKR 3.7Bn. It is noteworthy to mention that the asset base increased steadily from December 2017, at an average of LKR 400Mn per month. Thereby the net loan portfolio increased to LKR2.7Bn in comparison to the LKR 1.2Bn during the previous financial year. Building the fixed deposit portfolio to strengthen our funding base was another priority where we were successful in doubling the deposit base from LKR 1.3Bn in the previous year to LKR 2.4Bn by 31st March 2018. This was achieved while maintaining an average monthly renewal ratio of more than 85% continuously. This signifies the trust and confidence depositors have placed in the Company under the new ownership and management of the Prime Group.

The Company’s asset quality remained strong due to proactive recovery strategies deployed during the last quarter of the year. The aggressive recovery drive derived positive results improving the NPA ratio to 7.4% from 13.8% in the previous year. During the financial year, the Company reached an income level of LKR 533Mn and with the steady income growth, cost to income ratio improved from 83% in the previous year to 58%. The strategic rebranding of the Company as “Prime Finance PLC” reflects the affinity and our strategic alliance with the Prime Group – a trusted name in the real estate sector in Sri Lanka for over two decades. This strong positioning helps us to create a strong value proposition on par with some of the industry’s best in terms of strength and stability. In the present context a finance company which is backed by the strength of a strong group provides us the impetus to forge ahead with a competitive edge in the NBFI sector. The Company’s ethics is built on professionalism and a friendly customer focused approach with a strong emphasis on good corporate governance practices within a cohesive risk management framework, while building on its core strengths.

While the year witnessed financial resilience in all aspects, it is noteworthy to recognize our team of employees who have been the hallmark of our success. The staff led by the senior management through their untiring efforts have paved the way to success and growth. Thereby we were able to fulfil the Company’s commitment to deliver greater value to our stakeholders in a sustainable manner.

Recognizing the importance of our human resources and its pivotal role in building our brand, we have taken steps to strengthen critical functions of our Company. We have appointed personnel with the requisite competencies and expertise to strengthen the critical functions of the Company. These new appointments to key positions and significant refinement of our policies, processes and HR systems has been instrumental in steering the Company towards growth. Our corporate culture is focused on innovation and value addition represented by an open and friendly communication conducive environment to foster creativity. We appreciate ideas presented by our staff which is rewarded at all levels. The workplace is energetic and vibrant with no barriers hindering communication. The Company’s open culture and values in enterprise management is communicated well to all team members. The Company places significant emphasis on its social and environmental responsibilities. We hope to engage with the communities on a greater level with a strong focus on sustainability and community engagement in the future We are confident that the sustainable business model, which is built on the synergistic capabilities of the Group will derive tangible results in the years to come. The Company hopes to introduce several new products to capture new market segments which have been identified as niche markets. We remain committed to develop innovative products in order to meet our customers’ needs and will be looking to enhance our product offerings through tailor-made solutions. Our key strategies thus would be product development and geographical penetration, which would expand these products to reach customer in un-chartered territories. We also hope to focus on our funding strategy by accessing low cost and diversified sources of finance to further elevate our competitive position in pricing our credit facilities at competitive rates. Strengthening our operating processes and risk management systems is another strategic priority, which we would place emphasis to ensure that asset quality is maintained. Further, the Company will focus on harnessing the IT capabilities to offer financial solutions which would appeal to the emerging customer segments who wish to transact through online mediums. We have also taken steps to enhance shareholder funds which was doubled during the year under review. The Company has announced to the Colombo Stock Exchange, a rights issue, that will come into the market soon. This will further improve the core capital of the Company to LKR 1.4Bn. The enhanced capital base would enable the Company to strategically position itself to sustain future growth and stability.

I wish to offer my sincere appreciation to the Group Chairman, Chairman and the Board of Directors for their unstinted support and guidance offered to me at all times Our success is mainly attributable to our Prime Finance Team, who worked together as one cohesive unit, demonstrating wholehearted commitment towards the realization of our goals. I wish to place my appreciation to the corporate and executive management for their leadership in driving growth across the business. I wish to recognize the support of our shareholders and our loyal customers for their continued confidence and trust placed in Prime Finance PLC. We look forward to sustaining our close engagement with them as we guide this organization to greater heights.

Good Corporate Governance Policy

The regulatory environment is continued to get tightened and the Board has succeeded in taking it up as a challenge to assume additional responsibilities and strive to discharge the related duties complying with the principles of accountability and transparency. As the Central Bank of Sri Lanka keeps on strengthening the regulatory environment further, we are conscious of the need to get the areas of Corporate Governance further strengthened while remaining ready to get the additional qualitative improvements done as may be required time to time. And, Prime Finance PLC’s Corporate Governance Report is an integral part of this year’s Annual Report; its frame of reference being the Central Bank of Sri Lanka’s Finance Companies (Corporate Governance) Direction No. 3 of 2008.

Board Subcommittees

Adherence to corporate governance rules, principles and best practices is considered as a paramount importance at Prime Finance PLC. In light of same, the Company set up following Board-appointed oversight committees to monitor, through full and active contribution to the affairs of the committees, the effective functioning of systems and processes ensuring the overall direction, effectiveness, supervision and accountability of the organization. All sub-committees report directly to the Board.

The Board Audit Committee is a Sub-Committee of the Board of Directors established in compliance with Finance Companies (Corporate Governance) Direction No.03 of 2008, the Listing Rules of the Colombo Stock Exchange and Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.

The Terms of Reference of the Board Audit Committee clearly defines the mandate and role of the Committee. The Board Audit Committee assists the Board of Directors in discharging its general oversight responsibilities for financial reporting, internal controls, internal and external audits.

Composition of the Board Audit Committee

The Board Audit Committee chaired by an Independent Non-Executive Director and comprising exclusively of Non-Executive Directors. The Committee comprises of three Non-Executive Directors as follows;

Mr. H M Hennayake Bandara - Chairman (Independent Non-Executive Director)

-    Mr. M. D. S. Mangala Goonatilleke - Member (Independent Non-Executive Director)

-    Mr. Anura Wijesiri Perera - Member (Non-Executive Director)

The Company Secretaries functions as the Secretary to the Committee. The Chairman of the Committee is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and of the Certified Management Accountants of Sri Lanka and counts many years of experience in the Financial Services Sector.

The Board Integrated Risk Management Committee was reconstituted on 3rd March, 2017 as a Sub-Committee of the Board of Directors in conformity with Section 8 (3) of the Finance Companies (Corporate Governance) Direction No. 03 of 2008. The Board Integrated Risk Management Committee assists the Board of Directors in ensuring the adequacy and effectiveness of the Company’s risk management framework and capabilities to achieve the strategic objectives.

Composition of the Board Integrated Risk Management Committee

 

The Board Integrated Risk Management Committee comprises of three Non-Executive Directors and Key Management Personnel (KMPs) supervising Credit, Market, Liquidity, Operational and Strategic Risks as follows,

-    Mr. Mahinda Perera – Chairman of the Committee (Non-Executive Director)

-    Mr. H M Hennayake Bandara – Member (Independent Non-Executive Director)

-    Mr. M. D. S. Mangala Goonatilleke – Member (Independent Non-Executive Director)

-    Mr. Rasika Kaluarachchi – Chief Executive Officer

-    Mr. Samantha Fernando – Chief Operating Officer

-    Mr. Mahadevan Suthakar – Head of Risk & Compliance / Compliance Officer.

-    Mr. Manjula Tennakoon – Assistant General Manager (Finance)

The Confidential Secretary of the CEO functions as the Secretary to the Committee.

The Board Related Party Transactions Review Committee comprises three Non-Executive Directors appointed by the Board of Directors in conformity with Section – 9 of the Listing Rules of the Colombo Stock Exchange. The Committee is responsible to the Board of Directors in ensuring that the interest of shareholders as a whole are taken into consideration by the Company when entering into transactions with Related Parties.

Composition of the Board Related Party Transactions Review Committee

 

The Committee comprises of three Non-Executive Directors as follows,

-    Mr. M. D. S. Mangala Goonatilleke – Chairman of the Committee (Independent Non-Executive Director)

-    Mr. Dhammika H. Kalapuge – Member (Independent Non-Executive Director)

-    Mr. Mahinda Perera – Member (Non-Executive Director)

The Confidential Secretary of the CEO functions as the Secretary to the Committee. The Chief Executive Officer, Chief Operating Officer, AGM Finance and Head of Risk and Compliance attend meetings by invitation.

The Remuneration and Nomination Committee was reconstituted by the Board of Directors w.e.f. 1st April, 2018 as a Board Sub Committee in conformity with the Listing Rules of the Colombo Stock Exchange and Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka. The Remuneration and Nomination Committee assists the Board of Directors in fulfilling its oversight responsibility on the compensation and benefits granted to the Directors, Chief Executive Officer and Key Management Personnel of the Company and appointments and re-appointments of the Board of Directors and reviewing the succession plans for the Directors and Key Management Personnel.

Composition of the Remuneration and Nomination Committee

The Committee comprises of three Non-Executive Directors as follows,

-    Mr. Dhammika H. Kalapuge – Chairman of the Committee (Independent Non-Executive Director)

-    Mr. Mahinda Perera – Member (Non-Executive Director)

-    Mr. B. Premalal – Member (Non-Executive Director)

The Confidential Secretary of the CEO functions as the Secretary to the Committee. The Executive Director and Chief Executive Officer attends meetings by invitation except when their own evaluation is under discussion.

Risk Management Framework

Effective Risk Management continues to be a fundamental element when going ahead with the business operations at Prime Finance PLC. As a financial institution, the Company is vulnerable to a wide variety of inherent risks which have the tendency to affect the financial and operational performance of the Company. Consequently, the Risk Management Policy of the Company has been designed in a way all the material classes of risk can be identified, so that business strategy and execution are aligned accordingly to minimize the risk to achieve Company’s Strategic Business Plan.

prime group

prime lands
prime housing
prime apartments
prime grand

group awards