Consumer goods giant Singer goes for LKR300 mn debenture

December 18, 2006 (LBO) – Consumer goods giant Singer (Sri Lanka) is issuing a 300 million rupee debenture to support its growing hire purchase business. The unsecured four-year issue will not be listed but will carry a A+(lka) rating from Fitch Ratings Lanka Ltd, Singer’s Company Secretary, Asoka Pieris said Monday.

Earlier in the year, Singer issued a similar 800 million rupee debenture to partly retire debt and fund its hire purchase business. Singer last year, raised around 1.2 billion rupees in debt to expand the higher purchase unit.

For the 9-months to September, Singer’s sales rose to 9.375 billion rupees, which operating profits advanced to 996 million rupees – a 20 percent growth over the corresponding period 2005, explains Fitch in their rating assessment.

Broadly 48 percent of total sales were financed by its in-house consumer financing schemes. The interest earned on its consumer loan book accounted for 13 percent of total revenues.

Gross profit margins improved from 33.1 percent in FY05 to 34.3 percent reflecting both timely revisions of selling prices and absolute growth in interest earned on its consumer loan book.

As a result, the company was able to sustain EBITDA (earnings before interest dividends tax and amortization) margins at around 11.2 percent, offsetting the affect of increased collection commissions and lease-rentals on its showrooms.

For the six months to June, Singer had total debt amounting to 5,157 million rupees, of which 48 percent was capital market debt (FYE05 – 38 percent). Loans maturing within a year amounted to 2,334 million rupees (45 percent of total debt).

Against this, the company had 358 million rupees of cash reserves. Fitch cautions that some of Singer’s capital market debts are due to mature, in 2008, 2009 and 2010 (amounting to 854 million rupees, 800 million rupees and 800 million rupees, respectively) and have to be refinanced.

However, Fitch believes given Singer’s good access to banks and capital markets, this will not prove to be a problem.

For the nine months to September, Singer had total committed undrawn credit facilities of 1.0 billion rupees to provide additional liquidity support.

Much of the company’s debt is related to its in-house consumer financing operation.