| Financial review |
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Market Value Added (MVA) |
| Market Value Added (MVA) is the difference between the current Market Value of the Company and the capital contributed by investors viz. shareholder equity. MVA is an indicator of shareholder wealth unlike EVA which is a performance measure. Market price of a share is a key variable in MVA, and its interpretation should take into account the impact of the Company’s performance on the market price per share as well as the trends in the stock market. |
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| The computation of the MVA of the Company is below: |
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2007/08 Rs. ’000 |
2006/07
Rs. ’000 |
| Market Capitalisation |
1,073,875 |
1,452,000 |
| Shareholders’ Funds |
1,657,151 |
1,506,508 |
| Shareholders’ Funds |
(583,276) |
(54,508) |
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MVA as at year end showed a negative value of Rs. 583.3 mn (2006/07 - Rs. 54.5 mn) in the backdrop of a Rs. 150 mn (2006/07 -
Rs. 290 mn) increase in equity and a 26% (2006/07 - 13%) decline in market value per share during the year. |
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Property, Plant & Equipment |
| The year could be considered as a landmark year for investment in property, plant & equipment (PPE). The Company made the largest investment in PPE in its history when a 16.16 acre property in Weliveriya was acquired with a built area of 209,025 sq feet. The built area include 19,500 sq. feet of office space and 177,075 sq. feet of factory/stores area. This property would serve as the platform for further expansion and provide adequate parking space to streamline vehicle sales operations. During the year under review, Rs. 554 mn was invested in property, plant & equipment (2006/07 - Rs. 306 mn). The Company spent Rs. 400 mn for the acquisition of the property at Weliveriya. |
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Working Capital |
| The working capital as at the year end reduced from Rs. 975 mn to Rs. 906 mn. Prudent management of working capital is a key area of focus in our effort to produce a healthy Balance Sheet and to minimise finance costs. Inventories increased by 4% (2006/07 - 34% increase) to Rs. 2.2 bn (2006/07 - Rs. 2.1 bn). Trade receivables too increased by 10% (2006/07 - 11 % reduction) to Rs 2.1 bn (2006/07 - Rs. 1.9). |
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Borrowings |
Borrowings consist of term loans, import loans and bank overdrafts. A ten year term loan linked to market rates was obtained to finance the acquisition of the Weliveriya property. Whilst the interest rates of other term loans are fixed for two to three years, import loans are linked to money market rates. Interest rates on overdrafts are reviewed periodically.
Interest bearing borrowings marginally decreased despite the borrowings related to acquisition of the Weliveriya property.
The total borrowings outstanding as at the end of the year was Rs. 2,792 mn (2006/07 - Rs. 2,840 mn). |
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Cash Flow |
Cash flow from operating activities was an inflow of Rs. 521 mn. This is compared to an inflow of Rs. 383 mn for the year 2006/07. Increase in trade payables and funds generated from operations were the main contributing factor to the improvement. The cash outflow on account of capital expenditure amounted Rs. 547 mn (2006/07 - Rs . 305 mn). The outflow on account of servicing providers of finance in the form of interest and dividends amounted to Rs. 518 mn (2006/07 - Rs. 461 mn) and
Rs. 54 mn (2006/07 - Rs. 66 mn) respectively. The Group cash and cash equivalent increased by Rs. 181 mn (2006/07 - Rs. 46 mn). |
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| The Group possesses the necessary banking facilities to support its operations. Cash generated from operations and available banking facilities are adequate to finance working capital, capital expenditure, dividends and statutory payments. |
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Solvency |
Section 56 of Companies Act No. 7 of 2007, requires that a solvency test be carried out prior to the payment of dividends. In order to satisfy this requirement, the Company Auditors certified that the Company meets the required solvency levels prior to payment of dividends during the year. In doing so the Auditors confirmed that the Company has the ability to pay its debts as they become due in the normal course of business and that the value of the Company’s assets is greater than the value of its liabilities and the Company’s stated capital.
The computation of solvency as at the year end is given below:
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2008
Rs. mn |
2007
Rs. mn |
| Non-Current Assets |
1,389 |
949 |
| Current Assets |
4,186 |
3,991 |
| Total Assets |
5,575 |
4,940 |
| Current Liabilities |
3,355 |
3,098 |
| Non-Current Liabilities |
705 |
467 |
| Total Liabilities |
182 |
182 |
| Stated Capital |
1,333 |
1,193 |
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