Softlogic suffers loss in 2Q; 1H net profit down 99%

Diversified Softlogic Holdings Plc has suffered a net loss in the second quarter whilst first half net profit had dipped by 99% though the group’s results from operating activities have seen strong positive growth.

Group Revenue grew 6.4% to Rs. 31.1 billion during the first half of the financial year with the quarter also registering a similar growth of 6.5% to Rs. 15.9 billion. Group top-line for the six months was led by Retail (30.8%), ICT (26.4%), Healthcare Services (19.1%), Financial Services (16.5%) and Automobile (3.8%).Gross Profit improved 21.2% to Rs. 11.2 billion during 1HFY18, indicating a healthy improvement in GP margin from 31.5% in 1HFY17 to 35.9% in 1HFY18.

The quarter also registered similar GP margin improvements, taking the quarterly gross profit to 5.7 billion (up 21.1%). Cost control measures and economies of scale helped maintain profit margins amidst systemic challenges.

Results from operating activities rose by 40% to Rs. 4.05 billion in 1H and by 44% to Rs. 2.2 billion in 2Q.

Group EBITDA for the quarter improved 42.1% to Rs. 2.9 billion while the cumulative EBITDA increased 40% to Rs. 5.4 billion Net finance expenses increased 28.2% to Rs. 2.2 billion during 1HFY18 with the quarter increasing 28.6% to Rs. 1.2 billion.

Profit before tax for the cumulative period was Rs. 1 billion (down 16%) while the quarter reported a PBT of Rs. 358.1 million (down 41%). In FY17 Group pre-tax profit was 1.68 billion.

Profit after taxation for the first half of FY2017/18 closed at Rs. 677.9 million (down 25%) with the quarter concluding with a PAT of Rs. 248.2 million (down 37%). In FY17, the figure was Rs. 821 million.

Net profit attributable to equity holders of the parent in 1H was a paltry Rs. 2.46 million, lower by 99% compared to Rs. 196 million in the first half of last year. In 2Q, the net loss of Rs. 41 million was against a profit of Rs. 94 million a year earlier. In FY17, Softlogic’s bottom line amounted to Rs. 108 million.

Softlogic Chairman Ashok Pathirage in his review accompanying interim results said investments in group activities continue especially in the retail arena, with the planned expansion of Odel in Colombo City Centre by March 2018 and Shangri-La by June 2019.

“We expect to benefit from economies of scale and synergies so as to become the only fashion retailer with a portfolio of international and local brands in a captive market,” he said.

“The current macroeconomic conditions, although are challenging, should tourism grow at the expected pace, the leisure and retail sectors would be beneficiaries. The upcoming Asiri Hospital Kandy would undoubtedly be a preferred hospital in the Central Province further boosting this sector thus unlocking cash flows from such new investments,” Pathirage added.

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