A loss share of Rs.32.9 million in First Capital Limited, up from a loss of Rs.3 million the previous year, has impinged on Singer (Sri Lanka’s) bottom line which marginally moved down to Rs.490.3 million in the year ended December 31, 2006 from Rs.492.9 million a year earlier despite revenue topping a record Rs.12.2 billion, the company’s annual report reveals.

Despite the loss at First Capital, Singer had a profit share of Rs. 79.6 million, down from Rs. 93.3 million a year earlier, from two associates, Rs. 110.3 million from Commercial Leasing and Rs. 2.1 million from Commercial Fund Management after discounting the loss at First Capital.

Singer Chairman Hemaka Amarasuriya reported to shareholders that the company expected the present market buoyancy to continue till the middle of this year and taper off thereafter "as without intervention, multi faceted pressures on the economy may slow down growth."

Singer whose business is led by its retail channel which is driven by consumer credit accounting for 60% of sales against 40% cash sales will complete renovating over 115 stores by the year end with the rest to be completed next year.

Amarasuriya reported that sewing machine sales had remained flat in the year under review after heavy post-tsunami buying in 2005 while refrigerator sales were up 19% with Singer winning the price war against its competitors.

"However, contributions (to profit) did not grow proportionately," he said. "We need to work closely with our associate Regnis, the ninth largest refrigerator manufacturer in South Asia, to expand their home market."

Amarasuriya said that Regnis manufactures a host of unique models which cannot be matched by competition.

Television sales had suffered a decline in a growing market with Singer’s market share down to 29% as a result of new entrants and re-launches at the low and mid ranges.

Amarasuriya said that while group gross margins had increased to 36.3% from 33% supported by commissions earned on CDMA phone connections not reported in the previous year. But there had been a sharp growth in administrative and selling expenses partly due to one time cost in IT expenses, a comprehensive shop renovation program and setting up a new loyalty program at the Singer Plus channel.

"Sales and administration expenses growth is expected to stabilize once these programs are concluded satisfactorily," Amarasuriya said. Finance cost had moved up even more sharply with increases in the borrowing rates sand hedging finance cost on long-term borrowings.

An operations review in the annual report said that the market still looks much as it did in 2005 with a vast number of low cost Asian suppliers feeding a growing consumer base through a variety of distribution channels offering a plethora of choice.

"There is also a substantial `grey’ market in irregularly-imported goods, whose purveyors can afford to undersell legitimate importers and manufactures because of `savings’ on duties, tariffs, etc." the report said.

The directors have proposed a first and final dividend of 25% matching the previous year’s 25% return to shareholders. This dividend will absorb Rs.156.5 million against the previous year’s Rs.125.2 million on account of a one for four bonus issue made in 2006.

Two new directors, Mr. Ajit Jayaratne and Dr. S. Saman Kelagama were appointed to the Singer board last June.

Singer owns 30% of Commercial Leasing Company Limited and 20% of Commercial Fund Management (Pvt) Limited.

Singer (Sri Lanka) BV with 81.03% is the company’s controlling shareholder followed by Dr. T. Senthilverl (3.59%) and Ceybank Unit Trust (2.31%). All other shareholders own less than 0.5% of the company individually with 1,498 of its 2,579 shareholders owning less than 1,001 shares.

The company has an issued share capital of Rs.626 million, reserves of Rs.1.4 billion and accumulated profits of Rs.695.9 million.

Singer saw net assets per share dip to Rs.44 during the year from Rs.47.25 a year earlier. The share traded at a high of Rs.88 and a low of Rs.52 against a trading range of Rs.95 to Rs.57 the previous year.

The directors of the company are Messrs. Hemaka Amarasuriya (Chairman/MD), G.C.B. Wijeyesinghe, A.M. de S. Jayaratne, Dr. S. Kelegama, S.H. Goodman (alternate A.I. Abeyesekera), P.J. O’Donnel (alternate H.A. Pieris), T. Brown (alternate V.G.K. Vidyaratne nd G.J. Walker (alternate M.H. Wijewardene).