Financial Times

Arpico Finance plans new investments for 2006-07

The Arpico Finance Company Ltd (AFCL) has planned new credit and real estate investments for 2006-07 on the back of recording a 43 percent growth at Rs.22.3 million last year from 15.5 in 2004, but is apprehensive about the ever increasing taxation.

The company’s taxes, both financial value added tax (VAT) together with corporate tax amounted to Rs.9.3 million, which Pratapkumar de Silva, Chairman, AFCL said was ‘burdensome’.

“From a fiscal perspective the tax regime encompassing income tax, financial VAT, social responsibility levy have all been increased and becoming burdensome.

The planned IT investments by the company are likely to increase costs until economies of scale are achieved. All these will directly affect the profitability of the company,” he has stated in his annual review.

The pre-tax profits of AFCL increased to Rs.27 million after charging financial VAT of Rs.4.6 million.

“This in effect was a growth of Rs.6.6 million or 32.3 percent over the preceding year. The taxes, both financial VAT and corporate tax amounted to Rs. 9.3 million which was 34.4 percent of the pre-tax profits.

The post –tax profit for the year grew to Rs.22.3 million by Rs.6.7 million. It is seen that the incidence of various taxes are on the increase affecting profitability,” De Silva has further stated.

AFCL, which has a BB2 rating from Lanka Ratings, has secured Rs.296.2 million recoveries from lease and hire purchase contracts, accounting for 100.3 percent of debts for last year.

The trading income grew to Rs 124.4 million by Rs.26 million or 26.5 percent.
“The economic growth will no doubt propel the demand for financial services which would benefit the services offered by the company, but the escalation of violence and costs are likely to have a negative impact on both investments and interest rates,” de Silva has stated.

He has said that interest rates are gradually on the increase and the recent developments in the security situation have added to the volatility and uncertainty of the economy.

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