EAP Group hosts investor spotlight, plants to revamping business, go public

EAP Group Chairman and Managing Director Mano Tittawella – Pix by Upul Abayasekera

 

 

By Channa Fernandopulle
The EAP Group of companies announced that it would be undertaking an extensive corporate restructuring program with the eventual goal of listing on the Colombo Stock Exchange (CSE).
The restructuring program was described by EAP Group Chairman and Managing Director Mano Tittawella to be a crucial pre-requisite for the company fulfil prior to any potential listing.
“The EAP Group is a family company inter-held by various companies. The final objective is to flatten this structure under a holdings company so that we have a structure that is capable of either going public at a holdings level or in individual companies.
“Of course with the public issuance of debt and equity instruments in the future we will do capital raising and therefore the dilution of the owners shares will take place. This again is a great leap of faith on the part of the Edirisinghe family however they too believe that a diluted share will have more value when the Company is run publicly that a share which is controlled 100%,” Tittawella stated.
Established by the Edirisinghe family in 1969, EAP Holdings is a diversified company with operations in broadcast media, entertainment, trading, financial services, property development and hospitality and leisure through a host of well known companies such as EAP Broadcasting Company Ltd, EAP Films and Theatres and Swarnamahal Jewellers, along with small scale hotels such as Hotel Sapphire and Hotel Concord.

More recently, the group also incorporated two new companies, Swarna Solutions, a BPO operation which manages the financial and materials requirements of the entire group through an SAP based platform, and Galaxy Landmarks, another property development company.
Elaborating on the progress of its restructuring program, Tittawella explained that in its current format, ETI Finance – one of the oldest companies in the group – also functioned in practice as a holding company, a position which would have to be reversed in the process of taking ETI public as well, as per Central Bank of Sri Lanka (CBSL) regulations for non-banking and financial institutions.
“ETI effectively functioned as a holding company for the Group from the days when regulations on finance companies were very different. We want to move away from that structure and get into a structure where the finance companies are taken out while the other companies are moved under a holdings company so that the final structure will be a flat one under the holdings umbrella,” he stated.
Commenting on the current status of ETI Finance, and the group’s smaller finance company, Swarnamahal Financial Services (SFS), Tittawella stated that the group was proceeding with the restructure of both companies in an extremely cautious manner under CBSL supervision.
“ETI and SFS were rather severely affected in the last few years by an asset liability mismatch which we’re addressing now through the restructuring program. They were also affected by the massive gold provisioning that we had to do because ETI and SFS are both heavily dependent on the gold pawning business,” he explained.
Nevertheless, Tittawella reiterated that ETI had continued to maintain depositor and customer trust and stated that over its 45 years of operations, the company had managed to maintain an excellent brand image. He added that going forward; both companies would be carefully diversified away from the gold pawning business.
Given the position of ETI’s unique position within the EAP Group structure, Tittawella noted that the company held several dormant assets which also would be extensively redeveloped going forward.
“The EAP Group is a very property rich, they own major properties all over Sri Lanka and all of them are freehold. We also have very little commercial debt because the companies are not geared at all but these assets have to be moved out of ETI and then monetized in other companies of the group. At the end of this process we will perform a further capital infusion into ETI and then we will take it public as per CBSL requirements,” he explained.

EAP Cinema network to be renovated and expanded     EAP Films and Theatres Ltd announced plans to completely digitize its entire chain of theatres while expanding to a minimum of 100 screens by 2018. The company, which was founded in April 1957, is the largest film company in Sri Lanka currently owns 16 theatres and holds the largest privately owned theatre circuit of 45 cinemas, commanding over 60% of all cinema revenue generated in the island. Most notable in the group’s planned expansion will be the complete redesign of its smaller-scale cinemas, commencing with the Impala in Rajagirya. EAP Group Chairman and Managing Director, Mano Tittawella stated that the Impala would be closed from April and construction on a ultra modern building design would be commenced in May. Consisting of four floors of cinemas, retail outlets and a food court, the new cinema will be developed by EAP’s newly incorporated property development company, Galaxy Landmarks Ltd. Meanwhile, commenting on the refurbishment of its other cinemas, Tittawella stated that the company would roll out a digitization program to its remaining network of theatres over the coming year. “As the major player in Sri Lankan cinema, we decided to roll out an extensive digitization program through all of our theatres meaning that all of them will be fully digital by 2015. As you know Sri Lankan theatres, particularly in the outstation areas, still run on the old spool system. “We have already digitized four of our cinemas and we will continue to roll this program out to the other 12 at a rate of 2 cinemas every 2 months. This will result in a reduced cost to the business since digital film masters are much cheaper but it also means that we can carry out digital advertising which in an area that hasn’t been fully explored in Sri Lanka,” Tittawella explained. He added that the digitization of the entire network of EAP cinemas would also allow the group to screen high quality movies across the island.