Financial Times

Browns cuts losses, revamps business
Brown and Company Ltd. has been shedding loss-making businesses and selling off some of its numerous properties scattered around the island with the aim of cutting flab, reducing its debt and becoming a more dynamic business.

The company, one of the oldest in Sri Lanka, is also revamping its extensive islandwide branch network and thinking of new ventures as part of the turnaround.

"All this means we're changing our focus," declared Browns group chairman M. V. Theagarajah. "We've adopted a new theme: 'We're not the company we used to be and we're not yet the company we're going to be'."

Theagarajah said his priority is to reduce the firm's debt burden before thinking of further investments in new ventures. The company has been turned around from a Rs 7.7 million loss in the nine months ending December 2003 to a Rs 81.7 million profit in the nine months ending December 2004, which Theagarajah described as a "commendable achievement."

"After I took over in April 2004 we adopted three key objectives - to consolidate the group's position, dispose of all loss-making sectors and to encash idle assets," Theagarajah told The Sunday Times FT in an interview. Browns also has a project in the pipeline to develop its Darley Road property near St Joseph's College in a joint venture with Ceylinco by putting up a high rise apartment and shopping complex costing some Rs 2 billion.

The project, Serendib Residencies, is still in what Theagarajah called "cold storage" because of the need to first clear the property and arrange for better access.

"This is now being done. The advantage of the location is that it is close to top schools and places of worship. Also, dealers in motor spares form a prosperous community in the area and a potential customer base." Brown's agriculture directorate is housed in the property right now but is being shifted to the head office.

Asked about the danger of oversupply in the property market with so many high rises coming up, Theagarajah said: "As long as peace prevails there will be demand for apartments - I don't think there'll be over supply." Browns was established in 1875 and sells a range of products in consumer electronics, hardware, agricultural products, generators, automotive batteries, veterinary pharmaceuticals and office automation.

Theagarajah said directors of different group units had been given more autonomy and flexibility in order to make the company more dynamic and improve profitability. He found that working capital stock and accounts receivables were high with a lot of slow moving stocks and old debts.

"Rs 222 million was tied up. Today it has come down to Rs 47 million - a recovery of Rs 185 million." Stock levels were coming down and the company was emphasising better customer relations and efficient and effective service support to win new customers and ensure continuity of patronage.

"We found sales being made for the sake of making sales - without a mark up," Theagarajah said. "So we developed the theme: 'sales is vanity - profit is sanity'." Browns has disbanded its loss-making consumer products division. This was formed into another firm under a management buy out by employees while Browns retained a 40 percent stake - making it an associate company. Browns offices occupying rented space are being brought into the head office building while it is selling some of its outstation properties.

"We got land and buildings all over the island which are idling," Theagarajah said. "So we're selling them, including plant and machinery." The firm has sold part of its property in Hatton as well as properties in Nawalapitiya and Bogowantalawa.

"The aim is partly to reduce the debt burden and to make a profit." Browns is also revamping its branches. "We got 30 consumer electronics division branches island wide," Theagarajah said. "We're going to enlarge their operation into Brown & Co branches where all group products will be displayed."

The company is also planning to set up a big shopping complex and petrol station in Amparai where it has idle land. This will display products of the whole group. It is also toying with the idea of setting up a supermarket there, probably a franchise operation.

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