Capital Reach Holdings Limited, a financial services company promoted by Mr. Ajit Nivard Cabraal, has been successful in growing its business and reducing losses during the year ended March 31, 2008 according to the company’s annual report.

The company’s Chairman, Mr. Mayura Fernando, said there was strong growth in all activities of the group with total assets up to Rs.1.4 billion from Rs.851 million the previous year. He noted that this was a 64.3% asset growth over a one year period.

The lending portfolio had grown significantly during the year to Rs.1.7 billion from Rs.692 million a year earlier enabling 90% revenue growth to Rs.296 million in the year under review.

The company, while tightly managing its expenditure level, and expanded workforce and improved infrastructure particularly in the branches had to contend with interest expenses shooting to Rs.140.4 million from Rs.52.3 million the previous year.

"This increase of 168% in interest cost is partially due to the increased borrowing which is a result of the growth in lending. However, the fact that the increase in interest cost is at a higher rate than the growth in revenue clearly shows the loss of net interest margin due to prevailing market conditions," Fernando explained.

Despite huge increases in both interest cost and taxation, the group had posted an operating profit before-tax of Rs.2.7 million and reduced its consolidated loss 62% to Rs.8.4 million, he noted.

"At the time of writing this review we have witnessed that during the first half year the group recorded a strong operating profit and a consolidated net profit after tax. We are undoubtedly heading in the right direction and I am very confident that we will achieve the desired results despite the slowdown due to factors beyond our control," he said.

The annual report reveals that the Capital Reach group comprising the parent and five subsidiaries was progressively reducing losses from Rs.22.5 million in 2005/06 to Rs.21.9 million the next year and Rs.8.4 million the year under review.

Fernando said that the company had succeeded in increasing shareholder value by developing its subsidiaries where most of its funds are invested. They have held non-performing loans to a very low level of less than 2% despite portfolio growth and the lending portfolio and interest earning liquidity reserves represented 87% of total assets and 125% of total borrowings.

The company has been able to get all their branches operating at full capacity currently reversing the trend of the first two years when they carried excess capacity at branch levels in portfolio terms with low lending volumes.

"The value created over the past three years is reflected in the investments in the subsidiaries. The quality of assets, superior team, brand loyalty earned from our customers, regulatory approvals and licenses together with the future growth potential have made these investments very valuable today," Fernando said.

"This added value is not reflected in the income statement of the holding company and/or the consolidated income statement up to now but exist in the form of unrealized capital gains to cash in at an appropriate time."

Capital Reach has 170 shareholders in its register with 10 largest shareholders including SunTex International Holdings (27.6%), Vanik Incorporation (19.3%), Aegis Fund Management (9.2%) and Finco Group of Companies (9.2%).

The stated/share capital of Capital Reach stood at Rs.272 million, reserves at Rs.1.5 million and accumulated losses at Rs.81.9 million.

Borrowings payable after one year were Rs.308.1 million, public deposits Rs.47.2 million and deferred liabilities Rs.28.7 million. Borrowings payable within one year were Rs.425.1 million.