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Fourth Voluntary Retirement Scheme
During the second quarter of 2008, the Company announced its fourth VRS, incurring a cost of
Rs. 390.46 million compared to Rs. 43.41 million incurred in 2007. The objective of this VRS was to benefit the Company as well as employees, the Company moving towards a lean structure and employee being supported with early retirement. 273 employees availed themselves to the VRS in 2008 versus 52 employees in 2007.
International Telecommunications Operators’ Levy (ITL)
ITL was introduced in 2004 by Finance Act No. 11 of 2004 whereby all International Telecommunications Operators are required to contribute to the Government of Sri Lanka at the rate of US$ 0.038 per international incoming traffic minute. The law is retroactive with effect from 3 March 2003. This amount would be credited as Telecommunications Development Charge (TDC). According to gazetted terms, SLT is entitled to reclaim two-thirds of the TDC within three years against the funds expended by the Company in terms of network roll out to unserved and underserved areas of Sri Lanka.
In December 2008, Telecommunication Regulatory Commission (TRC) informed SLT that for the period 3 March 2003 to 31 December 2005 a sum of Rs. 2.18 billion would be refunded in lieu of two-thirds of TDC.
Finance Costs
Finance costs consist mainly of interest expenses and include the effects of exchange rate fluctuations generated by the restatement of monetary assets and the writing off of realised exchange fluctuations from the hedging reserve. Finance costs decreased by 11.8% during the year under review to Rs. 1.20 billion.
Taxation
Taxation was Rs. 2.17 billion, a decrease of 20.8% against Rs. 2.74 billion from the previous year.
Profitability
Operating profits after taking into account the ITL and VRS declined by 25.8% to Rs. 6.01 billion in 2008 against
Rs. 8.09 billion in 2007. Lower revenues and increased costs mentioned above contributed to the decrease.
However Profit Before Tax (PBT) at Rs. 8.77 billion was up 7.9% from Rs. 8.13 billion in the previous year. The main contributory factor for this turnaround in profits was the additional income from TRC on account of the refund of TDC amounting to Rs. 2.18 billion.
Profit After Tax (PAT) increased by 22.5% to Rs. 6.60 billion in 2008 as against Rs. 5.39 billion in 2007. The substantial increase in PAT is mainly attributed to the refund from TRC not being taxed. Thereby the effective tax rate in 2008 was 24.7% verses 33.7% in the previous year. The Company recorded a PAT margin of 18.3% in 2008 compared to 14.5% in 2007.
Measuring Performance
Earnings per Share (EPS) recorded an increase of 22.4% to Rs. 3.66 over the Rs. 2.99 recorded in the previous year. Return on Equity (ROE) also increased to 13.4% from 12.1% in 2007. |
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