Softlogic Holdings’ 1Q topline up 73% to Rs. 24.5 b; moves to pre-tax profit from loss year ago 

Softlogic Holdings Chairman Ashok Pathirage

Softlogic Holdings Plc yesterday announced robust business performance in 1QFY22 achieving a consolidated topline of Rs. 24.5 billion, up 73% from a year earlier.

Quarterly operating profit was Rs. 2.3 billion as against a loss of Rs. 593 million in 1Q of FY20. Quarterly PBT recorded an increase to Rs. 163 million as opposed to a loss of Rs. 2.9 billion in 1QFY20.

Operational expenses rose 9% to Rs. 5.1 billion whilst Distribution and Administration expenses increased 41% and 5% to Rs. 805 million and Rs. 4.3 billion respectively in 1QFY22 as a result of the increased investment in safety equipment as well as continued capital expansions in the retail sector.

The Group achieved an EBITDA of Rs. 3.2 billion for the quarter as against Rs. 303 million a year ago with an EBITDA margin of 13%. 

The top contributors to Group revenue were Retail (55%), Healthcare Services (20%) and Financial Services (19%) while the IT sector made up 5% of Group topline. 

Gross Profit improved 87% to Rs. 7.2 Bn during the quarter. A GP margin improvement was evident during the quarter from 27.3% in 1QFY21 to 29.6% in 1QFY22 stemming from cost optimisation and re-pricing measures to meet new demand. 

Import restrictions and rupee depreciation and liquidity in the local foreign exchange market led to supply side challenges. Commercial banks have restricted opening of LCs for imports given macro-economic debt repayment obligations of CBSL temporarily distorting the market.

“These results were achieved against the backdrop of so many external challenges. Yet, the Group’s performance fortuitously rebounded to unlock market potential in terms of unprecedented revenue growth despite the massive human challenges faced by consumers culminating in successive lockdowns amidst a more virulent pandemic tearing through cities and towns,” Softlogic Holdings Plc Chairman Ashok Pathirage said.

He said the shortage of US Dollar liquidity in the market hampering opening LCs at the most opportune time, the complexities of re-pricing goods and services in a volatile forex market, the increasing uncertainty accompanied by deficit purchasing power due to the toll of pandemic-related-economic consequences and rising cost-push inflation were major setbacks for the economy as a whole.

“While the pandemic has crippled many industries and companies, our core business verticals have demonstrated that being in the right economic sectors have played a redeeming role under the most trying circumstances,” Pathirage said.

He also said the vaccine drive may speed up global recovery of the pandemic which will be gradual when the pandemic becomes endemic. The much-hyped economic reset is expected to usher in a prosperous period, which the Group has prepared itself for, in any event. A global upsurge in travel and business would see a new wave of economic activity with unfettered expansion in some areas and industry consolidation in others. “Thus, the three core verticals of the Group – Retail, Healthcare and Financial Services – are primed to meet this new emergence no sooner the normalising of the business environment takes place,” Pathirage said.

“Market leaders are expected to play a pivotal role in reshaping the economic landscape to ensure that not only the economy falls back on track, but also, new solutions are made possible by creating demand for goods and services using online platforms. In this way, our forays into Retail and Healthcare expansion in the port city will continue to add mileage to our long-term value creation model,” the Softlogic Chairman said.

“Furthermore, the Group’s focus on high-speed integrated customer data platforms will transform the retail landscape as it possesses an unrivalled customer database in the country, another compelling reason for unlocking returns on our portfolio of investments,” Pathirage added.

In 1Q FY21 he said with ‘Asiri Health’ delivering life-saving measures to patients from its dedicated medical staff primed to serve the Nation, the Healthcare sector performed at near-optimal levels notwithstanding demanding times pushing the limits of human endurance.

Similarly, the Retail sector reported strong revenue turnaround during the quarter aided by the demand for electronics, mobile phones and computers due to the continuing home-schooling and home working rules being imposed while the financial services sector continued a steady climb amidst greater concerns of uncertainty with the pandemic taking predominance in most people’s mind, where they are looking for safety-nets to protect their families, their health and their lifestyles. 

The non-core verticals – the Leisure sector, remained subdued, but it will see a gradual return to normalcy when the pandemic recedes – while Automobiles focused primarily on the much-needed ambulance business.