Policy inconsistencies slowing down the economy: Softlogic chief

While the Government plays a vital role in driving an economy and ensuring investment growth, political vacillation and policy inconsistencies have affected consumer spending patterns slowing down the economy, one of the country’s largest business conglomerates said on Thursday

Ashok Pathirage, Chairman Softlogic Holdings PLC, in his review of the group’s performance for the six months ending September 2018, said that, notwithstanding these developments, “Softlogic has pursued expansionary goals in its core verticals with the aim of strategically positioning itself anticipating that Softlogic’s proposition is a fundamental need in today’s sophisti- cated market and that the economy will be fast- tracked with tourism, leisure and retail swinging into top gear.”

He also pointed out that shortsightedness of policy makers could result in several adverse side effects reverberating in the retail sector which is inextricably intertwined with the tourist industry as a whole.

Consolidated turnover of the group increased 9.8 per cent to Rs. 34.1 billion during the 1HFY19 while quarterly revenue grew 14 per cent to Rs. 18.1 billion. Top contributors to group turnover were Retail ( 52 per cent), Healthcare Services ( 19.4 per cent) and Financial Services ( 18.7 per cent). The non- core vertical which includes Automobile and Leisure together contributed 4.8 per cent to group turnover while the IT sector made up 5.2 per cent of group topline, Mr. Pathirage said.

“The scale and diversity of the group helped in weathering the macro- economic shocks of increased interest rates, a fast depreciating currency, adverse tax changes, import margin requirements and price led inflation,” he added.

The Retail sector post restructure, which comprises the consumer electronics, QSR, furniture, departmental store, branded fashion outlets and telecommunications companies registered a growth of 5.1 per cent to Rs. 17.7 billion during the first half of the financial year. “This is currently the group’s most capital-intensive sector which is redefining the country’s retail landscape with several new projects in the pipeline. This sector also witnessed numerous challenges in the business environment following tax changes and price inflation which dampens the purchasing power of consumers and depresses the business sentiment,” he said in the report which was released to the media.

A 100 per cent cash margin was imposed on refrigerators, TVs, air-conditioners and phones seriously impacting cash flows due to the recent policy of removing bank accommodation for import bill refinancing requiring cash upfront for establishing import LCs. “The imposition of applicable restrictions on selected import items, especially, in the electronics and footwear sector defeats the long- term vision of establishing Sri Lanka as a shopping destination to compete with other regional tourist destinations,” he noted.

Gross profit grew 10 per cent to Rs. 12.3 billion during 1HFY19, “Synergy and economies of scale protected profit margins, although there is severe pressure due to waning business sentiment and the ad hoc macroeconomic adjustments imposed by policymakers,” the review noted.

Profit after taxation for the first half of FY2018/ 19 was at Rs. 2.4 billion as opposed to Rs. 677.9 million in 1HFY18.