Softlogic’s FY2011 pre-tax profit tops Rs. 1 b mark

Newest listed diversified conglomerate Softlogic Holdings Ltd., has surpassed the Rs. 1 billion mark in pre-tax profit in the financial year ended 31 March, 2011, reflecting an exponential 575% growth over the previous year.Group after tax profit had amounted to Rs. 970.8 million, as against Rs. 254 million in financial year ended on 31 March, 2010. Net profit attributable to equity holders was Rs. 829.2 million, up from Rs. 154 million a year earlier. Group turnover had more than doubled to Rs. 10.78 billion.

The FY2011 results were contained in the Softlogic’s interim accounts for first quarter of FY2012, released yesterday.

Both in terms of top line and profit performance, Softlogic’s actual results in FY2010 had either met or surpassed broker forecasts made at the time of the Company’s IPO in June whereby it raised Rs. 4 billion issuing 138 million shares at Rs. 29 each.

Interim accounts for the first quarter of 2012 FY also confirm continued buoyancy of Softlogic’s performance.

In the first quarter ended on 30 June, 2011, Softlogic Group recorded a turnover of Rs. 4.4 billion, up by 162% over the corresponding period of last financial year.

This was partly due to the consolidation of Asiri Group results which contributed Rs. 1.3 billion to the turnover. Group gross profit saw a fourfold increase to Rs. 1.5 billion in the FY2011 first quarter.

The Profit Before Tax (PBT) for the Group in the first quarter was up 218% to Rs. 466 million and Profit After Tax (PAT) rose by 257% to Rs. 368 million.

Assets as at 30 June, 2011 amounted to Rs. 34.3 billion, up from Rs. 29.1 billion as at 31 March, 2011 and Rs. 7 billion as at 30 June, 2010. Liabilities were Rs. 17.8 billion, up from Rs. 2.9 billion as at 30 June, 2010. Of the latter, long-term debt amounted to Rs. 4.3 billion and short term borrowings were Rs. 6.3 billion.

               

“This growth in profits does not reflect the interest savings from consolidation of the Group’s borrowing position consequent to the Initial Public Offering (IPO) of shares of Softlogic Group as the funds were received towards the end of the quarter. The benefits of the interest savings will be reflected in the future periods,” Softlogic Holdings Chairman Ashok Pathirage said in a review accompanying interim accounts for the first quarter.

The ICT sector of the Group reported an increased turnover figure of Rs. 1.5 billion and a PBT of Rs. 116 million which is a 17% YoY growth. The telecommunications business continues to maintain its market leadership. Nokia remains the key brand, recording a growth of 33% YoY. We continue to hold a dominant position in the market whilst driving the business towards increasing our sales.

The Healthcare sector of the Group performed exceptionally well during the quarter. The Asiri Group recorded PAT of Rs. 123.7 mn this quarter as compared to Rs. 5.95 mn for the corresponding period in the previous year.

The financial structure of the sector has received a significant boost with the strategic partnership with IFC who have disbursed US$ 20 million by way of a long-term loan of 10 years including the initial grace period of 2 years. The major quantum of which will be taken up by the new Central Hospital which in its second year of existence recorded strong operating profits of Rs. 53.5 mn in the first quarter of this year. “Taking a cue from this outstanding performance, we are confident that The Central will become a key contributor to the profitability of our healthcare business,” Chairman Pathirage said.

According to him, the Asiri Group is committed to taking quality healthcare out of the confines of the Western Province, into the outlying areas of the country, resulting in the setting up of a pathology laboratory in Jaffna to serve the area with hi-tech healthcare diagnostics expertise. Further the Group acquired a project to construct a 100-bed hospital in Kandy; construction of this is anticipated to commence in the near future.

Softlogic Capital Ltd., which was acquired and rebranded in the last financial year reported a profit of Rs. 17.4 mn for the quarter. Its flagship subsidiary, Softlogic Finance Plc, is the main contributor to the Group performance and has shown exceptional growth with customer advances recorded at Rs. 5.7 billion which is an increase of 32% for the quarter. Customer deposits kept pace surging 46% and surpassing Rs. 2 billion during the quarter under review.

Pathirage said the Company continues to perform outstandingly adding value to the Group Balance Sheet and has firmly set its sight towards market leadership in the industry and is positioning itself to be amongst the top 5 in the industry by year 2014.

“One of our impressive recent achievements in this sector is the acquisition of Asian Alliance Insurance by the Softlogic Group. I am proud to announce that this strategic acquisition will further enhance synergies within the group and the full benefit of this will be revealed in the months ahead,” Pathirage said.

Asian Alliance Insurance will be held under Softlogic Capital Ltd., that has been identified as the financial services holding company and is due to be listed on the Colombo Stock Exchange shortly.

Although a modest contributor to the Group profits, Softlogic’s Automobile arm of the business reflects strong fundamentals and is recording steady sales volumes of circa 130 - 150 Ford vehicles for a quarter. The government’s move to open up vehicle permits has resulted in a significant increase in sales of Daihatsu SUVs contributing positively to the top and bottom lines. The operating profit of the sector for the current quarter was Rs. 40 million against the Rs. 1 million in the first quarter of 2010 with a PBT of Rs. 37.8 million in the same quarter against the Rs. 227,351 in the previous year.

Meanwhile, The Softlogic Group’s retail arm continues to be one of the key thrust areas for the group, posting a 122% YoY revenue growth during the first quarter of the year and a PBT of Rs. 116 million. This was primarily due to the expansion of retail stores during the period and the duty benefits as a result of the last budget.

“We are on track to achieve our plans to open 150 retail outlets by December 2011 and 250 by December 2012 with 85 stores in operation at the end of June 2011. These well-appointed showrooms will showcase the world’s best brands in Consumer Electronics, Branded Apparel and Furniture segments,” Pathirage said.

Noting that branded Apparel remains a key growth strategy for the group, currently with 3 Levi’s outlets and one Nike store, Softlogic Chairman said: “We are committed to enhancing our portfolio of international retail brands and in line with that commitment we will be opening Giordano and Mango stores in Colombo in the second quarter.”

“We are currently looking for a large retail space to open a Debenhams Department store in Sri Lanka which will be Sri Lanka’s first International Department Store,” he added.

The Group has plans to commence construction of the Movenpick City Hotel in Colombo in collaboration with the Movenpick Group in September 2011. The project is expected complete in 24 months. Softlogic Group also acquired the Ceysands Hotel in Bentota during 2011 and has signed up Centara International Management, a leading resort management group to manage the day to day operations of the hotel. Refurbishment and reconstruction of the hotel is anticipated to commence in September 2011 which will transform it from an 84 room hotel to a 160 room 4 star plus resort which will reopen in time for the 2012 winter season.

“As our new acquisitions and consolidation comes to fruition over the next few months and years, we expect the future financial performance of the group to reflect these strategic gains. Our objective in each sector is to play a leading role. It is therefore with much pride that we look back on our achievements in the last quarter and the growth path that we have traversed. As the country’s economy surges ahead, we believe that we possess a diversified portfolio of businesses that stand ready to profit from opportunities created by the “Sri Lankan miracle”,” Softlogic Chairman said.

Ours is a “value story”. We are determined and committed to a continuous process of “strategic value creation”. We have over a short period, made new investments that are extremely strategic, aggressively grown business volumes, and in simple, made every stroke count,” Pathirage added.