Softlogic Holdings post-tax profit up, bottom line down in FY12

Softlogic Holdings Plc has enjoyed growth in consolidated post-tax profit whilst suffering a dip in net profit attributable to equity holders in the financial year ended on 31 March 2012.

Group after-tax profit was up 9.6% to Rs. 1.06 billion whilst pre-tax profit improved by 51.72% to Rs. 1.6 billion. However the bottom line was down by 40% to Rs. 493.5 million in comparison to Rs. 829 million in FY11.

In the fourth quarter performance has been disappointing with after tax profit down to Rs. 61 million from Rs. 307.7 million but a loss of Rs. 74 million attributable to equity holders was recorded as against Rs. 199 million profit in the 4Q of last financial year.

Softlogic attributed the 4Q performance to a combination of factors. One was the foreign exchange losses of Rs. 231 million incurred due to the IFC loan borrowings of Asiri Group of hospitals.

The finance cost of acquiring Asian Alliance Insurance PLC (AAI) which is contributing to the lower profit before taxes achieved for the year in the finance sector and at the holding company. However, the Rs. 1.9 billion Rights issue of Softlogic Capital that was successfully concluded recently should reduce the exposure of Softlogic Capital going forward.

Furthermore, the profit before tax (down to Rs. 149.5 million from Rs. 220 million) was affected by total consolidation entries of Rs. 175 million including amortisation of intangible assets.

Furthermore an accounting change from SLAS to IFRS at our subsidiary AAI resulted in the parent being required to recognise Rs. 103 million as a loss in the fourth quarter. The Company said Rs. 83 million of this will be reversed in the next quarter when the entire Group migrates to IFRS.

Softlogic also said prevailing volatile market conditions, where the valuation of the short term investment portfolio of AAI significantly impacted the profit before tax level.

The Group is also not being able to consolidate the full profits from the life fund of AAI as the acquisition was in made in August whilst another factor is the change in fair value of the Asiri Central Hospital located on Horton Place in Colombo 7.

Profit after tax for FY12 was also affected by the reversal of Rs. 50 million in deferred tax assets in the Retail sector during the fourth quarter. The interest cost and taxes were the main drivers for lowered profits where the Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) when calculated is Rs. 4.8 billion for the year which is within the target set at the beginning of the year.

“The Group is carefully considering the long term strategic initiatives, including the consolidation of current businesses which will convert the strong revenue and EBITDA growth in to PAT growth,” Softlogic said.

In FY12 Group turnover amounted to Rs. 21.4 billion up by 99%. This was due to the consolidation of the Asiri Group of Hospitals which became a subsidiary of the Softlogic Group in December 2010. The health care sector achieved growth of 23% when compared to the corresponding period of the previous year, the full year effect of the Softlogic Finance acquisition that was made in August 2010. The Financial services sector excluding Asian Alliance Insurance which contributed seven months of revenue, had year over year growth of 75%

The expansion that is underway in the Retail and Automobile sectors which grew by 98% and 214% respectively. The ICT sector revenue grew by 6% for the year even though the fourth quarter was impacted heavily with the prevailing economic conditions. In the 4Q, revenue rose by 33% to Rs. 5.4 billion.