Annual Report 2010-2011 - Colombo Stock Exchange

Chairman’s Review
the growth of 3.2% achieved in 2009. Reflecting a similar trend,
industries recorded a growth of 8.4% while services posted a
growth of 8%, both of which were significantly higher than the
values recorded in the previous year.
The annual average rate of inflation as measured by the
Colombo Consumers’ Price Index stood at 5.9% in 2010. The
annual average rate of unemployment reached its lowest ever
level of 4.9%, while the per capita income rose further to US $
2,399 in 2010.
In response to the significant reductions in policy interest
rates, there was a substantial downward adjustment of market
interest rates across the term structure.
With favorable macroeconomic conditions and the consequent
recovery in economic activity, performance and stability of the
financial sector strengthened in 2010. Accordingly, the financial
sector expanded further during the year and thereby stimulated
more economic activity. Improved performance of financial
sector institutions was observed in terms of profitability, capital
levels, asset quality and the range of products and services
offered.
The overall fiscal deficit was reduced to 7.9% of GDP in 2010
from the 9.9% recorded in 2009. Several vital revisions were
also introduced to the tax structure, with special focus on the
simplification of the tax system, rationalization of exemptions,
improvement of tax compliance and strengthening of tax
administration.
The external sector continued to sustain its strong
performance in 2010, supported by the favorable global
economic environment that persisted during the year. The
Balance of Payments recorded a surplus of $ 921 mn, an
outcome attributable to the higher inflows to the capital and
financial account which exceeded the current account deficit.
Consequently, the appreciating trend in the exchange rate
continued during year, as reflected by the nominal effective
exchange rate of the Sri Lanka rupee, (based on the 5-currency
basket) appreciating by 4.1%. Gross official reserves also
increased substantially from US $5,097 mn in 2009, to record
US $6,610 mn by end 2010.
The All Share Price Index and the Milanka Price Index
increased by 96% and 83% respectively in 2010. The number
of shares traded increased four-fold and the average daily
turnover rose more than three-fold, while market capitalization
of the CSE reached Rs.2.2 trillion by end 2010.
Sector Review
The Group achieved a respectable growth and surpassed the
revenue milestone of Rs. 27,242 mn in 2010/2011. The plantation
and retail sectors accounted for a larger portion of the total
revenue generated.
The plantations sector was the most significant contributor,
representing more than half of the earnings before interest
and tax. The retail sector, in continuing its long term trend, also
contributed towards both the top line and bottom line. Except for
the rubber and tyre sectors, all operating segments significantly
contributed to the outstanding consolidated performance.
Cash generated from operating activities of the group
amounted to Rs. 2,819 mn of which Rs. 2,077 mn was
attributable to the plantations sector. Plastic & Services sectors
contributed Rs. 168 mn and Rs. 1,097 mn respectively to the
operating cash flow. During the year under review, all sectors
excepting Rubber and Services expanded their asset base and
the group Return on Assets stood at 17% in 2010/11 compared
to 12% in 2009/10
Real GDP vs. Real Growth Rate vs. Unemployment Rate
Balance of Payments vs. Exchange Rates LKR/USD $
Rs. Bn. %
3,000
2,500
10
8
2,000
6
1,500
4
1,000
500
2
0
0
06/07 07/08 08/09 09/10 10/11
Real GDP Real Economic Growth Rate
Unemployment Rate
USD$ Mn.
3,500
2,000
500
(1,000)
(2,500)
(4,000)
(5,500)
(7,000)
LKR/USD$
116
114
112
110
108
106
104
06/07 07/08 08/09 09/10 10/11
Trade Deficit USD $ Mn (Jan - Dec)
Overall Balance of Payment USD $ Mn (Jan - Dec)
Annual Exchange Rate LKR / USD (March)
9
Annual Report 2010/2011 | Richard Pieris and Company PLC