Singer Sri Lanka emerges out of temporary slump in demand

Singer Sri Lanka PLC emerged out of a temporary slump in demand as the country’s leading consumer durables retailer reported financial performance with higher revenues and profits for the quarter ended in March 2018. 

The Singer group reported Rs.13.6 billion in revenues for the January-March period, up 13 percent from the same period last year, as the country’s agricultural community – Singer’s largest market—is emerging from a prolonged drought, which eroded their buying power. 

The group reported a profit before tax of Rs.419.8 million, up 3.0 percent but the higher taxes dented the total earnings. 

Singer reported earnings of 41 cents a share or Rs.153 million for the quarter, little down from 43 cents or Rs.160 million reported for the corresponding period, last year. 

The tax expense rose to Rs.207.5 million, from Rs.161.5 million a year ago, due to the withholding taxes charged for the dividend income received from the subsidiary companies of the group. 

However, at the company level, Singer Sri Lanka reported earnings of Rs.482 million, up 51 percent from the same three months in 2017.  

Commenting on the financial performance, Singer Sri Lanka Group CEO Asoka Pieris said Singer Sri Lanka’s business is highly susceptible to cyclicality in the economy, unlike the other sectors, such as retail.  

“The consumer durables industry, where Singer is present, is more susceptible to market conditions than other industries. 

When the customer income and sentiments decrease, the demand for consumer durables is well below that of the general market. At the same time, when the customer income and sentiments increase, the demand for consumer durables is above that of the general market demand. We have seen this oscillation over many years,” Pieris said in an earnings release. 

Singer Sri Lanka revealed its aspiration to aggressively expand the home furnishing brand range, mainly its furniture products, following the acquisition by Hayleys PLC, backed by business magnate Dhammika Perera. 

Hayleys and its subsidiaries acquired up to a 82.81 percent stake in Singer Sri Lanka PLC, in a nearly Rs.15 billion deal, mostly funded by bank borrowings. 

As at March 31, 2018, Retail Holdings (Sri Lanka) BV, Singer Sri Lanka’s former controlling owners, held a 9.47 percent stake in the company, being the second largest shareholder. 

Pieris expressed optimism on the future business climate for white goods and luxury furniture but the upward adjustment in all prices led by the recent fuel hike and new and higher taxes imposed under the new Inland Revenue Act could dampen the consumer durables retailers’ prospects. 

Meanwhile, Singer Sri Lanka reported earnings of Rs.2.62 a share or Rs.983 million in profit for the 15 months ended in March 31, 2018, as the group’s financial year end has been brought in sync with that of its parent after the acquisition. 

The corresponding earnings for the 12 months ended in December 31, 2016 stood at Rs.2.1 billion. 
The group recorded a top line of Rs. 65.1 billion for the 15 months compared to Rs.46.9 billion recorded for the 12 months ended in December 2016. 

The weak profit for the 15 months is due to adverse weather prevailed and lower disposable income caused by higher interest rates and indirect taxes.