Dialog Finance : Quarterly Financial Report as of 31.03.2024

DIALOG FINANCE PLC

CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED

31 MARCH 2024

Page 1

Financial Review for the Quarter ended 31 March 2024

Dialog Finance PLC (the "Company") announced, Wednesday 8th May 2024, its financial results for the three months ended 31st March 2024.

The lending book of the Company recorded a healthy growth of 13.1% Year-on-Year ("YoY") to record net loans and advances of Rs. 3.4 Bn as at 31 March 2024. Despite the expansion in lending activities, total operating income declined by 19.6% YoY to reach Rs. 176.6 Mn for Q1 2024. This decline was primarily attributed to the decline in the investment portfolio and the drop in the net interest margin. The decrease in the investment portfolio was mainly due to the withdrawal of a fixed deposit investment of LKR 2.2 Bn made by a related party company. Furthermore, the decline in the net interest margin was driven by the reduction in lending and investment yields in line with the market interest rates.

Total operating expenses increased by 23.2% YoY mainly driven by increased cost stemming from the acquiring business. The Company introduced its acquiring business proposition, including Genie Business, subsequent to obtaining the Payment Acquiring license from the Central Bank of Sri Lanka. Furthermore, this increase in cost was contributed by investments made on human capital, technology and customer experience to support business strategies and business growth. However, the Company continued to drive the aggressive cost management and rationalization initiatives along with the streamlining of processes which are expected to deliver both service excellence and cost efficiency.

Consequently, Profit After Tax (PAT) for Q1 2024 was recorded negative at Rs. 32.6 Mn compared to the net profit of Rs. 28.8 Mn recorded for Q1 2023.

During the period under review, the Company maintained capital and liquidity levels well above the statutory minimum requirements. The Tier I capital adequacy ratio (CAR) and total CAR recorded at 40.07% and 41.16%, respectively as at 31 March 2024, which were well above the CBSL's prescribed minimum thresholds of 8.5% for Tier 1 CAR and 12.5% for Total CAR.

Dialog Finance PLC provides a wide range of financial products tailored to meet the needs of diverse customer segments, including consumers, retailers & merchants, and SMEs. The Company is setting itself to be at the forefront of innovation in the finance industry in Sri Lanka and has a vision to propel the nation's finance technology to a level of advancement on par with the developed world. Dialog Finance PLC recognises the need to deliver convenient, accessible, and affordable financial tools to the unbanked and underbanked segments of society and continues steadfast with its unifying mission in introducing cutting edge technology to launch industry-leading financial products and services.

DIALOG FINANCE PLC

Statement of financial position
(all amounts in Sri Lanka Rupees thousands)
	31 Mar 2024	31 Dec 2023
	(Unaudited)	(Audited)
ASSETS
Cash and cash equivalents	254,189	33,917
Placements with banks and financial institutions	158,170	54,068
Securities purchased under repurchase agreements	21,040	-
Financial assets at fair value through profit or loss	660,854	1,121,790
Financial assets at amortised cost - loans and advances	3,441,636	3,042,903
Financial assets at fair value through other comprehensive income	2,185	2,185
Financial investments at amortised cost	838,881	1,250,021
Other assets	85,892	68,125
Current tax receivable	6,255	6,255
Right-of-use assets	15,160	18,708
Property, plant and equipment	44,160	47,189
Intangible assets	189,946	190,394
Deferred tax assets	117,493	117,493
Total assets	5,835,861	5,953,048
LIABILITIES
Financial liabilities at amortised cost - due to customers	2,956,615	2,616,766
Financial liabilities at amortised cost - due to banks	-	502,117
Retirement benefit obligations	10,717	9,133
Lease liabilities	16,356	20,025
Other liabilities	240,010	160,242
Total liabilities	3,223,698	3,308,283
EQUITY
Stated capital	2,934,582	2,934,582
Statutory reserve fund	16,688	16,688
Fair value through other comprehensive income reserve	3,154	3,154
Accumulated losses	(342,261)	(309,659)
Total equity	2,612,163	2,644,765
Total equity and liabilities	5,835,861	5,953,048
Net assets per share (Rs.)	22.25	22.53
Commitments and contingencies	411,598	497,339

The notes on pages 5 to 8 form an integral part of these financial statements.

CERTIFICATION

We certify that the above Interim Financial Statements are in compliance with the requirements of the Companies Act No: 7 of 2007 and give true and fair view of the state of affairs of Dialog Finance PLC as at 31 March 2024 and its profit/(loss) for the period ended 31 March 2024.

Signed	Signed
Head of Finance	Chief Executive Officer
Date: 08/05/2024	Date: 08/05/2024

The Board of Directors is responsible for the preparation and presentation of these financial statements.

Signed for and on behalf of the Board of Directors by,

Signed	Signed
Director	Director
Date: 08/05/2024	Date: 08/05/2024

Dialog - Internal

DIALOG FINANCE PLC

Statement of profit or loss and other comprehensive income (all amounts in Sri Lanka Rupees thousands)

	Three months ended 31 March
	2024	2023	Change
	(Unaudited)	(Unaudited)	%
Interest income	236,968	362,383	(35)
Less: Interest expense	(76,251)	(154,305)	51
Net interest income	160,717	208,078	(23)
Fee and commission income	12,920	10,657	21
Net Profit / (loss) from trading	27	(87)	131
Other operating income	2,887	983	194
Total operating income	176,551	219,631	(20)
Less: Impairment charges and other losses	(18,682)	(23,040)	19
Net operating income	157,869	196,591	(20)
Less: Operating expenses
Personnel expenses	(62,280)	(64,876)	4
Depreciation and amortisation	(14,736)	(12,392)	(19)
Other expenses	(108,129)	(73,025)	(48)
Operating (loss) / profit before taxes on financial	(27,276)	46,298	(159)
services
Taxes on financial services	(5,326)	(17,515)	70
(Loss) / profit before tax for the period	(32,602)	28,783	(213)
Income tax expense	-	-	-

(Loss) / profit for the period

Other comprehensive income

Items that will not be reclassified to profit or loss:

Changes in the fair value of equity investments at fair value through other comprehensive income

Remeasurement of defined benefit Obligations Deferred tax effect on other comprehensive income

Other comprehensive income, net of tax

Total comprehensive income for the period, net of tax

(32,602)	28,783	(213)
-	-	-
-	-	-
-	-	-
-	-	-
(32,602)	28,783	(213)

(Loss) / Profit per share (Rs.)

(0.28)

0.25

The notes on pages 6 to 8 form an integral part of these financial statements.

Dialog - Internal

Page 4

DIALOG FINANCE PLC

Statement of changes in equity
(all amounts in Sri Lanka Rupees thousands)
			Retained		Fair value through
			earnings /	Statutory	other
		Stated	accumulated	reserve	comprehensive
		capital	losses	fund	income reserve	Total
Balance at 1 January 2024	2,934,582	(309,659)	16,688	3,154	2,644,765
Loss for the period		-	(32,602)	-	-	(32,602)
Other comprehensive income, net of		-	-	-	-	-
tax
Transfer to Statutory reserve fund		-	-	-	-	-
Total comprehensive income for	-	(32,602)	-	-	(32,602)
the year
Balance at 31 March 2024	2,934,582	(342,261)	16,688	3,154	2,612,163

Balance at 1 January 2023

Profit for the period

Other comprehensive income, net of tax

Total comprehensive income for the year

2,934,582	(347,125)	14,716	1,596	2,603,769
-	28,783	-	-	28,783
-	-	-	-	-
-	28,783	-	-	28,783

Balance at 31 March 2023

Balance at 1 April 2023

Profit for the period

Other comprehensive income, net of tax

Total comprehensive income for the year

Transferred to statutory reserve fund

Balance at 31 December 2023

2,934,582	(318,342)	14,716	1,596	2,632,552

2,934,582	(318,342)	14,716	1,596	2,632,552
-	10,655	-	-	10,655
-	-	-	1,558	1,558
-	10,655	-	1,558	12,213
-	(1,972)	1,972	-	-
2,934,582	(309,659)	16,688	3,154	2,644,765

The notes on pages 6 to 8 form an integral part of these financial statements.

		Page 5
DIALOG FINANCE PLC
Statement of cash flows
(all amounts in Sri Lanka Rupees thousands)
	Quarter ended 31 March
	2024	2023
	(Unaudited)	(Unaudited)
Cash flows from operating activities
(Loss) / Profit before income tax	(32,602)	28,783
Adjustments for
Interest expenses	76,251	154,305
Impairment charges and other losses	18,682	23,040
Provision for retirement benefit obligation	1,584	1,297
Depreciation and amortization	14,736	12,392
Interest on lease liability	622	342
Net losses on financial assets at fair value through profit or loss	(27)	87
Cash generated from operations before working capital changes	79,246	220,246
(Increase) / Decrease in loans and advances	(417,415)	10,178
(Increase) in other assets	(14,791)	(50,350)
Increase in amounts due to customers	339,850	347,166
(Decrease) in bank borrowings	(502,117)	-
Increase in trade and other payables	71,186	13,635
Cash (used in)/generated from operations	(444,041)	540,905
Interest paid	(76,251)	(154,305)
Retirement benefits paid	-	(498)
Net cash generated from operating activities	(520,292)	386,102
Cash flows from/(used in) investing activities
Acquisition of property, plant and equipment	(11,087)	(1,624)
Acquisition of intangible assets	448	(10,200)
Net investment in treasury bills	411,139	(3,152)
Net cash flows from securities purchased under repurchased agreement	(21,040)	113,420
Net investment in unit trust	460,964	-
Net placements with banks and financial institutions	(55,353)	-
Net cash generated from investing activities	785,071	98,444

Cash flows from/(used in) financing activities

Principle element of lease payment

Net cash from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

Cash and cash equivalents at the end of the period

Analysis of cash and cash equivalents at the end of the period

Cash and bank balances

Add: Placements with financial Institutions (less than 90 days)

Less: Impairment provision

The notes on pages 6 to 8 form an integral part of these financial statement

4,291(2,448)

4,291 (2,448)

269,070 482,098

88,003 2,599,119

357,073 3,081,217

254,213 140,725

102,860 2,940,492

357,073 3,081,217

1. (2,142)
   357,006 3,079,075

Page 5

DIALOG FINANCE PLC

Financial reporting by segment

(all amounts in Sri Lanka Rupees thousands)

For the three months ended	Leasing and Hire	Factoring & revolving
purchase	loans		Margin Trading	Term loans	Treasury/investments	Unallocated	Total
31 March	2024	2023	2024	2023	2024	2023	2024	2023	2024	2023	2024	2023	2024	2023
Interest income	16,163	13,476	18,088	44,220	31,505	46,216	96,420	65,512	74,792	192,959	-	-	236,968	362,383
Interest expenses	(3,662)	(5,473)	(3,698)	(8,693)	(8,968)	(9,348)	(26,071)	(21,909)	(33,852)	(108,882)	-	-	(76,251)	(154,305)
Net interest income	12,501	8,003	14,390	35,527	22,537	36,868	70,349	43,603	40,940	84,077	-	-	160,717	208,078
Fee & commission income	170	15	-	119	-	-	8,637	2,422	-	-	4,113	8,101	12,920	10,657
Other income	105	215	-	-	-	-	2,244	107	-	(87)	565	661	2,914	896
Operating income by segment	12,776	8,233	14,390	35,646	22,537	36,868	81,230	46,132	40,940	83,990	4,678	8,762	176,551	219,631
Total Operating Income	12,776	8,233	14,390	35,646	22,537	36,868	81,230	46,132	40,940	83,990	4,678	8,762	176,551	219,631
Impairment (expense) / reversal	6,413	(9,974)	(10,652)	(2,476)	(263)	1,547	(14,316)	(12,010)	136	(127)		-	(18,682)	(23,040)
Net operating income	19,189	(1,741)	3,738	33,170	22,274	38,415	66,914	34,122	41,076	83,863	4,678	8,762	157,869	196,591
Operating expenses	(10,950)	(7,977)	(19,033)	(14,030)	(23,147)	(14,934)	(54,999)	(36,084)	-	-	-	-	(108,129)	(73,025)
Depreciation and amortization	(1,492)	(1,354)	(2,594)	(2,381)	(3,155)	(2,534)	(7,495)	(6,123)	-	-	-	-	(14,736)	(12,392)
Segment result	6,747	(11,072)	(17,889)	16,759	(4,028)	20,947	4,420	(8,085)	41,076	83,863	4,678	8,762	35,004	111,174
Personnel expenses													(62,280)	(64,876)
Profit/l(loss) from operations													(27,276)	46,298
VAT on financial services													(5,326)	(17,515)
Income tax expense													-	-
Profit for the year													(32,602)	28,783
Other information
Balance at 31 March
Segment assets	290,214	305,036	301,926	587,111	776,463	669,474	2,073,033	1,461,609	1,935,319	3,257,230	458,906	692,477	5,835,861	6,972,937
Total assets	290,214	305,036	301,926	587,111	776,463	669,474	2,073,033	1,461,609	1,935,319	3,257,230	458,906	692,477	5,835,861	6,972,937
Segment liabilities	326,446	474,156	567,443	833,879	690,089	887,615	1,639,720	2,144,735	-	-	-	-	3,223,698	4,340,385
Total liabilities	326,446	474,156	567,443	833,879	690,089	887,615	1,639,720	2,144,735	-	-	-	-	3,223,698	4,340,385

Page 6

DIALOG FINANCE PLC

Notes to the condensed interim financial statements

(all amounts in the notes are in Sri Lanka Rupees thousands unless otherwise stated)

1. Basis of preparation
   The condensed interim financial statements for the Three months ended 31 March 2024 of the Company have been prepared in accordance with Sri Lanka Accounting Standard LKAS 34, 'Interim Financial Reporting'. The condensed interim financial statements should be read in conjunction with the audited financial statements for the year ended 31 December 2023.
   There were no changes to the accounting policies since the publication of the audited financial statements for the year ended 31 December 2023.
2. Events after the reporting period
   No circumstances have arisen since the statement of financial position date which requires adjustments to or disclosures in the financial statements.
3. Contingent liabilities
   There were no material contingent liabilities as at the reporting date which require adjustments to / or disclosures in the financial statements.
4. Fair value of financial instruments
   The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
   All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
   Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
   Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
   Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
   For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Financial assets

Financial assets at fair value through profit or loss

Financial assets at fair value through other comprehensive income

5 Market price per share

For the three months ended 31 March

• Highest
• Lowest
• Last traded

Measurement criteria and the fair value

Level 1		Level 3	Total
31 Mar	31 Mar	31 Mar	31 Mar	31 Mar	31 Mar
2024	2023	2024	2023	2024	2023
660,854	2,779	-	-	660,854	2,779
-	-	2,185	2,120	2,185	2,120

2024	2023
Rs.	Rs.
56.00	85.00
45.00	60.00
47.00	61.40

			Page 7
DIALOG FINANCE PLC
Notes to the condensed interim financial statements (Continued)
6 Twenty largest shareholders of the Company
Name of Shareholders	No. of shares	% Holding
1	Dialog Axiata PLC	116,290,376	99.05%
2	Mrs. L.K. Goonewardene	258,363	0.22%
3	Mr.S.R.S. De Saram/ Mrs. S.T.T. Jayasundera (Joint)	112,000	0.10%
4	Mr. M.A.T. Raaymakers	27,307	0.02%
5	Mrs. R. Ameen UR Rahman/ Mr.K.R. Ameen UR Rahman (Joint)	26,000	0.02%
6	Hatton National Bank PLC/ Dawi Investment Trust (Pvt) Ltd	24,719	0.02%
7	Mr. P.S.M. Fernando	24,282	0.02%
8	Mr. W.C. Madhushanka	22,750	0.02%
9	Guardian Insurance Brokers (Pvt) Ltd	20,039	0.02%
10	Mr. D.M.H.B. Dasanayake	20,000	0.02%
11	People's Leasing & Finance PLC/ C.D.Kohombanwickramage	18,152	0.02%
12	Mr. M.K. Gunawardena M Kithsiri/ Mr. M.K. Gunawardena M Kaveen(Joint)	16,190	0.01%
13	Mr. B.Y. Edirisuriya/ Mrs. R.D. Edirisuriya/ Mr. P.M.Weerasuriya (Joint)	15,001	0.01%
14	Mr. G. D. M Ranasinghe/ Mrs. O. R. K Ranasinghe (Joint)	14,029	0.01%
15	Mrs. S. Suwandaratne	13,346	0.01%
16	Miss. T.K. Hulugalle	12,865	0.01%
17	Mr. P. Poongunaseelan	11,516	0.01%
18	Citizens Development Business Finance PLC/ K.D.C. Somalatha and K. Nandasiri	10,480	0.01%
19	Mr. M.F. Carder	10,202	0.01%
20	Mr. T.D. Mahaliyana	10,082	0.01%
		116,957,699	99.62%
	Others	442,167	0.38%
	Total	117,399,866	100.00%

7 Directors' shareholdings

None of the Directors and their close family members held any shares in the Company as at 31 March 2024.

8 Public shareholdings
Information pertaining to public shareholding is as follows:
	31 Mar 2024	31 Mar 2023
Public holding percentage	0.95%	0.95%
Number of public shareholders	776	735
Float adjusted market capitalisation (Rs.)	52,419,040	68,118,924

1. The Company is not compliant with the Minimum Public Holding requirement under option 2 of Rule 7.14.1(b) of the Listing Rules of the Colombo Stock Exchange ('CSE'). Accordingly, the Company was transferred to the Second Board on 10 February 2020.

Page 8

DIALOG FINANCE PLC

Notes to the condensed interim financial statements (Continued)
Selected performance indicators
		As at 31 Mar	As at 31 Mar
Item	2024	2023
Regulatory capital adequacy
Tier I capital base, Rs. '000	2,305,390	2,331,273
Total capital base, Rs. '000	2,368,439	2,331,273
Risk weighted assets, Rs. '000	5,754,006	5,133,101
Tier I capital adequacy ratio
(As a % of risk weighted assets - Minimum requirement - 8.5%)	40.07%	45.42%
Total capital adequacy ratio
(As a % of risk weighted assets - Minimum requirement - 12.5%)	41.16%	45.42%
Capital funds to deposit liabilities ratio	88.35%	63.68%
(Minimum requirement, 10%)
Assets quality (quality of loan portfolio)
Gross non-performing accommodations, Rs. '000	216,329	104,402
Gross non-performing accommodations ratio, %	5.97%	3.28%
Net-non-performing accommodations ratio, %	2.35%	1.87%

Profitability

Net Interest margin, %

Return on assets (before taxes), % Return on equity (after taxes), %

11.44%13.01%

4.99%1.72%

-2.21%4.46%

Regulatory liquidity (Rs. '000)
Required minimum amount of liquid assets	340,101	435,453
Available amount of liquid assets	1,241,861	3,456,314
Required minimum amount of government securities	241,244	242,515
Available amount of government securities	868,444	369,354
Memorandum information
Number of employees	118	95
Number of branches	2	2