Lanka Ventures PLC, a subsidiary of the DFCC Bank, has posted its first loss in ten years during the year ended March 31, 2009 as a result of an extraordinary tax charge of Rs.137 million covering prior years, the company’s Chairman, Mr. Nihal Fonseka has told shareholders in the annual report.

The tax charge arose as a result of the company receiving a tax refund of Rs.130 million in 2003/04 under provisions of the Inland Revenue (Special Provisions) Act No.10 of 2003, best known as the Tax Amnesty.

"The company paid a special dividend to shareholders utilizing part of this refund. The claim from the Inland Revenue arose from the subsequent repeal of the said Act," Fonseka said.

The year under review had seen the Lanka Ventures group recording a pre-tax group profit of Rs.50 million, down from Rs.87.6 million a year earlier, but this was wiped off by the one-off tax charge which drove the bottom line into the red.

The loss translated to Rs.1.82 per share against the previous year’s group earning of Rs.1.59 per share. At company level there was a loss of Rs.2.03 per share against an earning of Rs.1.48 a year earlier.

Fonseka said that healthcare and renewable power generation are the sectors in which the company will continue to invest. They are also evaluating the feasibility of investing in projects in the North and East.

The year had seen a marked improvement in the profit realized from the disposal of venture capital investments with Lanka Ventures exiting from three of these earning a profit of Rs.14 million against Rs.4 million realized by divesting one investment the previous year.

Dividend income remained unchanged at Rs.30 million while debenture income increased to Rs.20 million from the previous years Rs.17 million.

"Market conditions were not conducive for active stock market trading during the year and as a result no income was derived from stock market transactions this year compared to the profit of Rs.9 million realized from trading in listed shares in the previous year," Fonseka said.

The company’s venture capital portfolio was valued at Rs.397 million at the end of the year, down slightly from Rs.411 a year earlier, despite Rs.65 million in new investments. Fonseka explained that the portfolio contracted due to Rs.49 million worth of disposals and provisions of Rs.30 million made during the year.

The company’s fully owned subsidiary, LVL Energy Fund (Pvt) Limited, focusing on investments in the energy sector expanded its portfolio by a further Rs.40 million during the year growing it to Rs.217 million from Rs.177 million the previous year.

"The total generation capacity of the mini-hydro power generation projects that LEF has invested in amounted to 144 MW or 60 GWH of electricity per year," Fonseka said.

"Although there have been some teething problems with the power projects, we remain confident that these projects will create significant shareholder value in the medium term."

No dividend has been declared for the year under review on account of the loss. The company paid a dividend of Rs.1.50 per share for the preceding four years and Rs.2.75 per share in 2004.

The DFCC Bank with 58.23% is the controlling shareholder followed by HNB with 20.07%.

Net assets per share were down to Rs.13.66 from Rs.16.97 the previous year while the company’s share traded at a high of Rs.13 and a low of Rs.5 against a trading range of Rs.14 to Rs.10 the previous year.