Odel December profit hurt due to higher admin and finance costs

Sri Lanka’s up market fashion and lifestyle retailer, Odel PLC, saw its bottom line getting dented the most during its December quarter and during the nine months due to higher administrative and finance costs albeit the top-line showing a modest growth, the interim results showed.

The company reported earnings of 22 cents a share or Rs.60 million for the quarter, which is a 61 percent decline from the same period, last year. The revenue however rose by a little under 7.0 percent year-on-year (YOY) to Rs.1.93 billion. The administrative costs rose sharply by 23 percent YOY to Rs.609.3 million while the finance cost also rose by 124 percent YOY to Rs.74 million.

It’s unclear as to why the administrative overheads were up significantly but it could be due to the company being re-structured after the Softlogic group took over it in 2014.

Since the takeover, the new management changed the company’s business strategy and closed at least a couple of outlets opened in outskirts of Colombo and expanded space in its flagship store in Alexandra Place, Colombo 7.

The leading retailer, Softlogic Holdings bought 44.5 percent stake in Odel in September 2014 in a deal worth Rs.2.7 billion. As of December 31, 2016, Softlogic group held 97.33 percent stake in Odel.

Meanwhile, for the nine months ended December 31, 2016, the Odel reported earnings of 62 cents a share or Rs.169.8 million, down 31 percent YOY.

The revenues were up by a little under 9.0 percent to Rs.5.23 billion from a year ago. In 2015, Odel acquired Softlogic Brands (Private) Limited for a consideration of Rs.600 million.

Softlogic Brands possesses the largest international branded apparel and fashion accessory portfolio in Sri Lanka with over 41, 000 sq.ft. of prime retail space in Colombo, where 20 brands are being retailed.

Softlogic group and Odel are seen successfully leveraging the post acquisition synergies, industry growth and favourable macroeconomic conditions, such as increasing purchasing power of consumers and growth in the tourism industry.