Softlogic 3Q better but 9-month losses mount

• Consolidated pre-tax loss of Rs. 2.7 billion for nine months as against a loss of Rs. 41 m last year
• 3Q pre-tax profit more than doubles to Rs. 985 m
• Chairman Ashok Pathirage says 3Q result validates hitherto ambitious forays into Retail, Healthcare and Financial Services sectors

Softlogic Holdings PLC has managed to post an improved third quarter vis-a-vis a year earlier but losses have risen substantially in the first nine months. 

Consolidated pre-tax loss was Rs. 2.7 billion for the nine months ended on 31 December 2020 as against a loss of Rs. 41 million in the corresponding period of last financial year.

 After tax loss was Rs. 3 billion six times more than Rs. 518 loss in first nine months of FY20. Net loss attributable to equity holders of the parent rose from Rs. 1.46 billion to Rs. 3.5 billion in FY21 first nine months. 

Results from operating activities were down to Rs. 4.7 billion from Rs. 6.5 billion. Group revenue for the nine months of FY21 was Rs. 58 billion, down by 2% from a year earlier. 

Retail and telecommunication business reported a pre-tax loss of Rs. 1.9 billion for the nine months up from Rs. 644 million loss a year earlier. Leisure and property loss rose from Rs. 995 million to Rs. 1.2 billion. 

Automobile sector had reduced loss to Rs. 103 million from Rs. 154 million whilst the financial sector posted a loss of Rs. 162 million as against a profit of Rs. 1.1 billion. IT sector pre-tax profit improved from Rs. 189 million to Rs. 215 million. Healthcare sector too improved profit to Rs. 931.5 million from Rs. 827 million.

In the 3Q revenue amounted to Rs. 22 billion, almost same as a year before. Gross profit was down 5% to Rs. 7.7 billion and results from operating activities down 3% to Rs. 2.9 billion. Group EBITDA reached Rs. 3.7 billion for the 3Q.

Softlogic said the reduced volatility in the interest rate regime resulted the change in insurance contract liabilities to decline. The quarter witnessed a transfer of Rs. 593 million in comparison to Rs. 707 million transfer last year.  A transfer of Rs. 2.99 billion was recorded for the cumulative period compared to Rs. 1.5 billion in first nine months of FY20.

Quarterly pre-tax profit recorded more than a two-fold increase to Rs. 985 million while after tax profit rose by 99% to Rs. 780 million.

In a Chairman’s Review accompanying Softlogic Holdings interim results, Ashok Pathirage said as envisaged, with profitability increasing two-fold during the third quarter, business recovery has witnessed a resounding turnaround to reach near pre-crisis levels of transaction activity. 

This was fuelled by local consumers alone in the absence of high-spending tourists. 

Coincidentally, this also corresponds with the positive changes reflected in the market and rising investor confidence. These results were achieved in the backdrop of import restrictions, airport closures and close monitoring of movements enforcing social distancing which affected most hotels, retail outlets and restaurants.

With the rollout of the vaccines currently taking place, and coinciding with the airport reopening, the economy will have a slow but steady recovery when tourism and export sectors propel the nation forward with increased FOREX earnings, employment generation, improved purchasing power.

“Third quarter results have validated our hitherto ambitious forays into Retail, Healthcare and Financial Services sectors. With the GOSL vaccines plan being implemented, resumption of robust economic activity is bound to augment the Group’s growth imperatives further with consumer confidence becoming more positive as the days pass by,” Pathirage said. 

“No doubt Sri Lanka’s economy is closely intertwined with the global economy and pent-up tourism will become one of the greatest boons in history when tourists identify Sri Lanka as a destination which managed its COVID-related issues and death rates with exemplarily low incident rates,” he said. 

“With tourism closely linked to our economy, the Group’s Retail and Hotel arm would become one of its chief beneficiaries. Furthermore, Healthcare and Life insurance will continue to dominate their increasing leadership positions stemming from the ensuing fear of uncertainty of overcoming global health risks,” Pathirage said. 

“Notwithstanding this, our investments in Omni-platforms where the Group possess an enviable database - datamining and targeting consumers under our loyalty programs - will give us unrivalled comparative advantages,” he added.

He said as Softlogic investments and business models have been optimised fully during these challenging times - particularly in Retail and Restaurants, Healthcare and Financial Services - they are nonetheless long term in nature, and they will continue to grow selectively. 

“Suffice to say, when the external factors stemming from the cloud of COVID-19 and uncertainty are overcome, we envisage that the Group will benefit from greater opportunities giving it substantially higher returns when the full potential of these investments dominate the market,” Pathirage added