Financial Times

Retirement benefit costs soar at Seylan Merchant
Seylan Merchant Bank, the merchant banking arm of the Ceylinco Group, has introduced a new provisioning method for retirement benefit costs, company officials said. This has resulted in a 429 percent increase in provisioning for staff retirements benefits to Rs 2.4 million for the nine months ended September 30, 2004 from Rs 400,000 the year before, according to the company's interim results.

The huge increase in provisioning left shareholders guessing as it was not explained in the interim results but company officials said this would be disclosed in the company's year-end final results.

The company's Value Added Tax on profits also shows a significant increase of 810 percent amounting to Rs 1.7 million for the period under review compared to Rs 0.18 million paid for the previous year. This was due to the VAT on financial services introduced in August 2003. The bank recorded a net income of Rs 395.9 million for the nine months ended September 30, 2004, a decline of seven percent compared to Rs 425.7 million in the same 2003 period.

Despite the decline in revenue the bank recoded an increase in net earnings of 11 percent to Rs 7.9 million for the current period compared to Rs 7.1 million in the previous year. The bank's group performance also showed a mixed performance for the same period.

Though the revenue declined to Rs 505.8 million from Rs 519.4 million, the group's earnings rose to Rs 37.9 million from Rs 31.1 million, a significant increase of 22 percent. The group consists of three subsidiary companies, namely SMB Money Brokers (Pvt.) Limited, SMB Real Estate Limited and Seylan Merchant Leasing Limited and an associate company called Open Arc Global Solution (Pvt.). The bank absorbed a loss of Rs 109, 613 from this associate company in the year to date.

According to segment analysis of the company's operations, an increased contribution was recorded from banking and leasing related business. Banking related business contributed a net income of Rs 2.1 million compared to Rs 1.6 million earned in previous year while leasing contributed Rs 6.9 million against Rs 5.3 million earned in the previous year.

Treasury and property related business activities showed a decline in contribution. Treasury's earnings declined to Rs 0.45 million compared to Rs 1 million earned in the previous year while the property related business recorded a net earnings of Rs 7.8 million compared to Rs 8.3 million earned in the previous year. (KK)

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