Sri Lanka’s leverage buyout King and retail King titled billionaire Ashok Pathirage owned and controlled leading retail conglomerates in Sri Lanka, Softlogic Holdings PLC group has witnessed a Rs. 335 million loss particularly in the aftermath of the Rupee depreciation in the retail and leisure sector, the latest financials released for the nine months ended December 2018 outlines.
“Group foreign exchange losses for the period amounted to Rs. 335 million. This was particularly in the aftermath of the Rupee depreciation in the retail and leisure sector” Chairman of Softlogic Ashok Pathirage points out in his review of the company.
Company’s cumulative revenue of the retail sector grew 2% to Rs. 27.4 billion while the quarter had reported a topline of Rs. 9.7 billion.
“This import-oriented sector was impacted by the depreciation of the Rupee – LKR/USD increased from Rs. 155.97 as at 29th March to Rs. 182.75 as at 31st December. This sector was also clouded by various other macro-economic challenges including 100% cash margin imposition on imports of selected durables and other import restrictions on footwear and apparel” Chairman of Softlogic Holdings Ashok Pathirage further points out in his review.
The financials also notes that Softlogic group’s leisure sector topline increased to Rs. 1.9 billion (up 11.3%) during first nine months of the financial year 2019 (March 31st to 31st December 2018 or 1-3QFY19), whilst quarterly revenue rose 12.9% to Rs. 769 million in 3rd quarter of FY19. Centara has emerged to be the key contributor to the sector while Movenpick is yet to contribute to earnings. Movenpick’s performance was affected by unrealized forex losses resulting from the hotel’s USD denominated borrowings.
During the third quarter from October to December 2018, company has reported Rs. 326.98 million loss against a profit of Rs. 953 million a year earlier, whilst for the first nine months the group post-tax profit has recorded a 29% gain to hit the Rs. 2 billion, according to the financials.
“The Group’s operating environment was assailed by the sudden and steep depreciation of the Rupee, particularly, affecting the retail imports and the leisure sector which has USD denominated borrowings” Pathirage notes in his review adding that furthermore, the 100% cash margin imposition which affected the retail imports and 200% margin for motor vehicles and motorbikes, disrupted cash flow timings leading to increased working capital requirements.
“This coupled with increasing interest rates triggered by poor market liquidity and rising Fed rates impacted cost of financing for the Group which dampened the quarter’s performance” Pathirage further highlights.
However He notes that although these are challenging times, the Group expansion plans in core sectors will continue as they are optimistic about future consumer demand.
“Sri Lankans are becoming more sophisticated and are aware of modern global lifestyle changes and hence continued demand for premium brands is expected to grow in conjunction with the tourist influx” Pathirage adds in his review. He further notes that with this in mind, they are making every effort to improve Group synergy with a view to focus on cost-discipline and plans are afoot to buff equity at subsidiary levels to support their expansion plans.
“With the stabilizing of the Rupee at these levels, we expect the Group to consolidate its efforts with a view to enhance the existing synergies. We believe that Government policies would be calibrated to inspire the country towards becoming a tourist shopping destination given its strategic location” Pathirage highlights in his review.
Financials further outline that Group revenue grew 8.4% to Rs.53.6 billion during the first nine months of this financial year while quarterly revenue grew 7.5% to Rs. 19.7 billion. Softlogic Group’s diversity, scale of operations and financial adaptability however helped weather these macroeconomic shocks to a greater
Extent according to Pathirage. Group’s core sectors which includes Retail (51% contribution to Group topline), Financial Services (19%) and Healthcare Services (18%) had emerged as strong contributors to Group performance while its non-core operations – IT, Leisure and Automobile – together made up 12% of Group topline.
Reporting by Devendra Francis
The post Sri Lanka’s Softlogic hits with Rs. 335 Mn Forex Loss from March-December 2018 due to Rupee Depreciation – Financials appeared first on Adaderana Biz English | Sri Lanka Business News.
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