2Q results add further value to Softlogic story: Ashok

Softlogic Holdings Plc Chairman Ashok Pathirage has declared that impressive second quarter results have added further value to its story strengthening the journey begun as a listed new conglomerate.

The Company has achieved significant results in both the second quarter and the first half of 2012 financial year which Pathirage said: “Exceeding our expectations set at the beginning of the year.”

Some of the key financial highlights for the first six months compared to the corresponding period of the previous year included Group turnover increased by 159% to Rs. 9.91 billion; Group Profit Before Tax (PBT) increased by 213% to Rs. 1.09 billion; Group Profit After Tax (PAT) increased by 213% to Rs. 869 million and Group profit attributable to equity holders increased by 88% to Rs. 500 million.

The first half contributions of Asiri Group of hospitals which became a subsidiary in December 2010 was Rs. 2.89 billion while the recently acquired Asian Alliance Insurance too contributed a month’s revenue. This group wide positive performance, contributed to a Group Gross Profit of Rs. 1.72 billion and Rs. 3.27 billion for the quarter and the first six months respectively.

The second quarter PBT was Rs. 627 million as compared to the Rs. 203 million recorded in the corresponding period of the previous year. The second quarter results were impacted by one off impairment related write-offs from various Group companies totalling Rs. 82 million.

The PAT for the group for the six months was Rs. 869 million as compared to Rs. 278 million for the same period in the previous year, indicating an increase of 213%. The second quarter recorded a PAT of Rs. 501 million, when compared to the Rs. 174 million recorded in the corresponding period of the previous year. The Company PBT for the first half of 2011/12 was Rs. 254 million, a 117% increase over the PBT of Rs. 117 million recorded in the corresponding period of 2010/11. The second quarter PBT was Rs. 250 million when compared to the Rs. 95 million recorded in the corresponding period of the previous year.

Detailing sectoral performance Softlogic Chairman said the Information and Communication Technology sector of the Group recorded a turnover of Rs. 3.4 billion and a PBT of Rs. 270 million for the first six months, an increase of 35% and 86% respectively when compared to the revenue of Rs. 2.53 billion and a PBT of Rs. 145 million recorded in the corresponding period of the previous year. The turnover and PBT recorded for the second quarter of 2011/12 was Rs. 1.89 billion and Rs. 153 million respectively when compared to the turnover of Rs.1.29 billion and PBT of Rs. 45 million recorded in the second quarter of 2010/11.

He said the telecommunications business continues to maintain its market leadership and is introducing new products and services to the Sri Lankan market. Softlogic launched Dell Streak 5 that will help Sri Lankans to discover new avenues and to experience the web, connectivity and navigation through a total enhanced user level. Softlogic appointed Dialog Axiata PLC as the official mobile service provider for this service.

The Healthcare sector of the Group continued to perform exceptionally well with the Asiri Group recording revenues of Rs. 2.89 Bn and PBT of Rs. 397 Mn for the first half of 2011/12. The Sector recorded revenues of Rs. 1.51 Bn and PBT of Rs. 240 Mn for the second quarter of this financial year.

Chairman Pathirage said the Asiri Group’s commitment to taking quality healthcare out of the confines of the Western province is coming to fruition with the setting up of the pathology laboratory in Jaffna which became operational at the end of the second quarter. The Group also has plans for opening a laboratory in Batticaloa by the end of the third quarter in order to serve the Eastern part of Sri Lanka with hi-tech healthcare diagnostics expertise. The planning stage for the construction of the 100-bed hospital in Kandy is nearing its final stages and we expect to receive the necessary approvals to start construction in the near future.

The Financial Services sector comprising of Leasing, Finance and Insurance recorded revenues and PBT of Rs. 833 Mn and Rs. 283 Mn respectively for the first half of the year. The revenues and PBT recorded for the second quarter were Rs. 554 Mn and Rs. 269 Mn respectively when compared to the revenue of Rs. 67 Mn and PBT of Rs. 27 Mn recorded in the second quarter of 2010/11.

Since its acquisition in August 2010, Softlogic Finance PLC has shown tremendous growth with Total Assets surpassing Rs. 8.0 Bn to be now categorised as a Large Finance Company as per Central Bank classification. RAM ratings accorded the Company investment grade status of BBB-/P3 (stable) during the second quarter. The total loan portfolio rose by 215% to Rs. 7.18 Bn in the second quarter, up from Rs. 2.28 Bn in the corresponding period of the previous year, whilst customer deposits surpassed Rs. 3.0 Bn at the end of the second quarter, 2011/12. The capital base of the company was further augmented by a Rights Issue infusion of Rs. 535 Mn that has seen Total Equity exceed Rs. 1.0 Bn as the firm stands primed for explosive growth in its business activities.

Asian Alliance Insurance PLC was acquired by the Softlogic Group during the second quarter and the Group currently holds majority interest in the Company through Softlogic Holdings PLC and Softlogic Capital Ltd. This acquisition will complement the financial services strategy of the Group through a number of synergies that will shortly be executed. The company which is a composite insurer, has a strong proposition in the “life business” and will aim to increase market share in a promising environment where strong insurance growth is keenly correlated to growth in the national economy.

During the Second quarter, Softlogic Capital Ltd, the holding company of the Financial Services and Insurance sector, was listed in the Colombo Stock Exchange by way of a share Introduction and is now a public limited company. While this did not raise any new funds, it would facilitate the trading of the Company’s Shares on the CSE and enhance the marketability of the shares and allow the Company greater access to the capital markets of Sri Lanka.

The Automobile arm of Softlogic had considerable growth during the second quarter despite delays in arrival of stock due to the unfortunate natural disasters that occurred in Japan in the early 2011. The automobile sector achieved revenues of Rs. 578 Mn and PBT of Rs. 50 Mn for the first half of 2011/12, being growths of 285% and 133% respectively when compared to the revenue of Rs. 150 Mn and PBT of Rs. 22Mn recorded in the corresponding period of the previous year. The second quarter revenue was Rs. 314 Mn and PBT was Rs. 12 Mn when compared to the Rs. 127 Mn and Rs. 21 Mn recorded respectively in the corresponding period in 2010/11.

Softlogic Group’s Retail sector continues to see steady growth amidst the expansion of the Retail outlets throughout the Island. The Company has reached the milestone of opening its 100th showroom, thereby enabling a wider consumer base to access its Multi Brand stores selling a World reputed range of Consumer Electronics and Home Appliances. By adding new brands such as Candy and Russell Hobbs to its existing impressive brand line-up of home appliances the Retail sector is making a firm indelible mark in the consumer electronics segment setting the stage for strong revenue growth in the coming year-end season which is traditionally a peak in the market. With the recent opening of its most modern, fully equipped, state of the art Service Center facility in a central location in Nawala, Softlogic further established its After sales service excellence to its customers offering a myriad services all under one roof, from Consumer durables to Office automation.

The Retail sector posted revenues of Rs. 2.18 Bn and PBT of Rs. 220 Mn in the first half of the year, being increases of 116% and 83% respectively when compared to the revenue of Rs. 1.0 Bn and PBT of Rs. 121 Mn recorded in the corresponding periods of 2010/11. The second quarter recorded revenues of Rs. 1.26 Bn and PBT of Rs. 104 Mn when compared to the revenue of Rs. 592 Mn and PBT of Rs. 84 Mn recorded in the corresponding period of the previous year. In addition, the expansion of the Branded Apparel sub sector is gaining momentum with the recent opening of the Giordano flagship store in Colombo and the Mango store which is planned to be opened in the third quarter in a central location in Colombo. The search for space for the Debenhams Department store in Sri Lanka which will be Sri Lanka’s first International Department Store is progressing positively with a few good leads.

Pathirage revealed that the construction of the Movenpick City Hotel in Colombo was commenced during the second quarter and the project is expected to complete in 24 months. The Ceysands Hotel in Bentota was closed in October for a complete refurbishment and expansion and will re-open for the 2012 winter season as a 166 room 4 star plus resort that will be managed by Centara International Management.

“Whilst you have seen the results of the new investments made and are aware of the short term strategic plans of the Group, I like to remind all of you that your company is constantly evaluating long term strategic priorities in order to aggressively grow the Group’s businesses,” Softlogic Chairman Pathirage has told shareholders in his review accompanying interim results.