Softlogic Group 1Q net profit soars over 100% to Rs.84mn
Sri Lanka’s diversified Softlogic Group PLC saw its net profit for the quarter ended June 30, 2015 (1Q16) surging over 100 percent year-on-year (yoy) to Rs.84 million, the interim financial accounts released to the Colombo Stock Exchange showed.
The group, which has interests in retail, ICT, leisure, hospitals, financial services and automobile sectors, appears to have benefited from the higher consumer consumption wave, triggered by cheap credit and more disposable income due to administered price cuts and salary hikes.
The revenue for the quarter rose 62 percent yoy to Rs.13 million and he main revenue contributors were retail and ICT sectors.
The cost of sales for the quarter rose 70 percent yoy to Rs.8.7 billion. The gross profit was Rs.4.3 billion, up 47 percent yoy. Higher activity levels resulted in higher operating expenses with distribution and administrative expenses rising 56 percent yoy to Rs.655 million and 41 percent yoy to Rs.2.4 billion, respectively.
Other operating income mainly composed of fees received for new loans processed at Softlogic Finance PLC for the quarter under review rose 80 percent yoy to Rs.194 million.
The operating profit of the group for the quarter rose 59 percent yoy to Rs.1.43 billion.
However, the net finance cost of the group rose 149 percent yoy to Rs.505 million with finance income falling 29 percent yoy to Rs.301 million and finance expenses increasing 29 percent yoy to Rs.806 million.
The earnings per share for the quarter under review improved to 25 cents from 11 cents.
As at June 30, 2015, the total assets of the group stood at Rs.90 billion, up from Rs.67.5 billion as at December 31, 2014.
Meanwhile, as at June 30, 2015, the group’s short term borrowings stood at Rs.15.3 billion, up from Rs.12.65 billion as at December 31, 2014. However, the current portion of interest bearing borrowings remained flat at Rs.3.6 billion, while a steep rise in other current liabilities from Rs.749 million as at December 31, 2014 to Rs.3.6 billion as at June 30, 2015 can be seen.
The biggest contributor to the group revenue, retail sector reported a revenue of Rs.4.5 billion in 1Q16 up from Rs.2.2 billion in 1Q15. The posttax profit of the sector rose to Rs.78.8 million from Rs.48.4 million.
Softlogic group Chairman Ashok Pathirage said the growth in revenue was mainly due to consolidation of Softlogic subsidiary ODEL PLC’s financials during 1Q16.
“Strong synergies emerged following ODEL acquisition with notable operational cost savings and a better sales platform,” Pathirage said.
He said the first major initiative for ODEL would be the development of a mega mall adjoining the ODEL flagship store at Alexandre Place, Colombo 07.
“The mall structure would be of 400,000 sq.ft with car park amenities. Blocher Blocher Partners of Germany, a globally renowned expert in architecture and design, have been contracted for the mall development. The mall would not only retail our own brands but also rent out space to external retailers, cinemas, restaurants and other service providers.”
Pathirage said consumer durables and branded apparel operations contributed equally with noteworthy increase in footfall coupled with the entrance of new brands and store expansions.
Softlogic recently added Tommy Hilfiger’s ‘Pepe Jeans’ and casual footwear brand ‘Crocs’ to its impressive international brand portfolio.
The group currently has 208 consumer electronics showrooms and i ntends t o increase the number of stores to 250 by March 31 2016.
The second largest sector of the group in terms of revenue, ICT, reported a revenue of Rs.4 billion in 1Q16 against Rs.1.87 billion in 1Q15. The post-tax profit rose to Rs.177.2 million from Rs.116.1 million.
“Softlogic Communication (Pvt) Ltd, the telco-company of Softlogic, proved to be the top contributor with exceptional performance from ‘Microsoft’ followed by Softlogic Distribution ( Pvt) Ltd, which mirrored the robust growth in the ‘Samsung’ mobile phone division.
The telco sector’s success also relates to its successful strategy in fully utilsing the strong retail network coupled with an ambitious sales team delivering targets,” Pathirage said.
The revenue of the group’s financial services sector comprising of Asian Alliance Insurance PLC and Softlogic Finance PLC stood at Rs.2.2 billion up from Rs.1.99 billion. The after-tax profit grew to Rs.89.7 million up from Rs.14.4 million.
The healthcare sector reported a revenue of Rs.2.3 billion for 1Q16 compared with Rs.2.1 billion in 1Q15. The posttax profit of the segment remained flat at Rs.345 million.
“We are progressing on the preconstruction schedule for Asiri Kandy Hospital. We target to commence construction in October 2015.
Construction of the laboratory and administrative building and the facelift process of Asiri Hospital Holdings i n Kirula Road would be completed by mid2016,” Pathirage said.
The automobiles segment’s 1Q16 revenue rose t o Rs.308 million from Rs.141.5 million in 1Q15. However, the segment’s post-tax loss widened to Rs.17.8 million from Rs.7.6 million.
The group’s leisure sector operations reported a revenue of Rs.168 million for 1Q16, up from Rs.24.8 million. However the segment’s after-tax profit widened to Rs.86.2 million from Rs.51.3 million.
“The structure of the 24-storied building of Movenpick City Hotel was completed in September 2014. We are now at an advanced stage of completion of MEP, Aluminum/ Glazing and architectural works.
We are well on schedule to complete by latter part of 2015. The interior fit-out is expected to be completed by December 2015. Following the process of testing and commissioning, the hotel would open its doors to external guests in April 2016,” Pathirage said.