Tough December quarter for Softlogic as costs rise, business slows down

Diversified conglomerate, Softlogic Holdings PLC (SHL), continued to face headwinds from both within and outside as its October – December quarter performance was dented by weaker performance of its key business segments, the interim financial accounts of the company showed. 
In addition, the overheads rose and the finance costs spiked as the group made new borrowings.
As a result the group reported an earnings of 20 cents a share or Rs.151.5 million, 33 percent lower from a year ago.

SHL said its performance continued to be affected by rising interest, tax rates and falling consumer confidence. 
The group top-line barely rose to Rs.15.7 billion. The administration costs rose by 24 percent year-on-year (YoY) to Rs.3.1 billion and the company attributed it to a, “one-off expenditure pertaining to re-branding”. 
Softlogic disposed its general insurance business in October, last year to Fairfax group for a consideration of Rs.1.27 billion after which the remaining life bus 
Odel, the up market retailer acquired in 2014, is also in an integration phase into the group.  The finance cost rose by almost 50 percent YoY to Rs.1.21 billion as the fresh long-term borrowings rose by Rs.6.6 billion during the nine months. 
Meanwhile, for the nine months ended December 31, 2016, the Softlogic group reported earnings of 45 cents or Rs.347.1 million, down 18.5 percent YoY. 
The group top line rose by little under 10 percent YoY to Rs.45.1 billion. 
The downsizing of ‘Nokia’ operations had also hit the revenues.  The retail business, the group cash cow after healthcare, generated a net profit of Rs.293 million for the December quarter, up 25 percent YoY. 
The revenue was Rs.5.6 billion and the operating margins improved, the company said. 
The healthcare and financial services segments saw their net profits plunging YoY while leisure and automobile segments were in red although the losses were narrowed. 
The information technology unit more than doubled its earnings to Rs.58.8 million although the top line contracted by about 9 percent to Rs.4.57 billion. 
The group remains hopeful of some turnaround in performance supported by the pickup in business of its new city hotel, Mövenpick, increased occupancy in Ceysand Resorts, soon to be commenced Odel Mall and other strategic investments in the hospital sector.  By the end of 2016, Softlogic group Chairman Ashok Pathirage held 41.96 percent stake in the company while the state controlled private sector pension fund, Employees’ Provident Fund held 0.93 percent stake being 8th largest shareholder. 
Pemberton Asian Opportunities Fund was the only foreign shareholder among the top 20 shareholders with 46 million shares or 5.91 percent stake.