Positive market sentiments being witnessed due to the upcoming Presidential Election – Softlogic Chairman

Despite the economic sluggishness recently taking its toll across the economy, there is buoyancy and positive market sentiments being witnessed due to the upcoming Presidential Elections, Chairman of Softlogic Holdings PLC, Ashok Pathirage said in the SHL’s interim financial account released to the Colombo stock exchange. “The macroeconomic status will not pick up overnight due to the systemic risks that were endured as a result of the Easter attacks. However, a change of economic vision and strong leadership will augur well for business climate in the periods to come,” he added. Pathirage also believes that the high interest rate regime will stabilize at a much lower interest rate than currently reflected thereby spurring economic activity and the consumption drive which is strongly needed at this point of time. “Despite the gloomy backdrop, we are emboldened to consider taking investments offshore for the greater good of the Group and the value creation that it will entail,” he added. Softlogic Holdings PLC during its first quarter of the financial year witnessed an unexpected disruption to the economy following the Easter Sunday attacks. This woefully affected all sectors of the economy with hotels, hospitals and retail enduring the immediate impact of the aftermath of the Easter attacks, Movenpick Hotel and Centara Ceysands Resort & Spa were the most affected with booking cancellations which led to drastic drop in revenue which negatively impacted earnings. The ODEL flagship store was closed for an intermittent number of days after the attacks which further depressed consumer sentiments. “Our LUVSL brand along with our other brands, where tourist shopping constitutes nearly 35% of Odel sales, saw a sharp decline. However, we have noted a resumption of retail activity stemming predominantly from domestic demand with slight improvement in tourist arrivals toward the latter part of the quarter. Nonetheless, a slow recovery of tourism makes it more challenging for our retail sector which is beset by negative consumer sentiments and low tourist arrivals.” Chairman of Softlogic Holdings PLC, Ashok Pathirage said. Furthermore, the hospital chain was badly affected during April/ May as patients were circumspect to be in open crowded places and failed to patronize the hospitals during that critical period while Asiri Hospital Kandy commenced operations at the same time adversely skewing results (operational costs being absorbed faster than revenue growth) and both these factors depressed Asiri’s performance during the quarter. Group topline witnessed a 7% growth during the quarter to Rs. 17.1 Billion following the decline in consumer demand and business sentiments. The top contributors to Group revenue were Retail (49%), Financial Services (22%) and Healthcare Services (20%). The non-core vertical which includes Automobile and Leisure & Property together contributed 4% to Group topline. Gross Profit improved 10% to Rs. 6.4 Billion. A GP margin improvement was evident during the quarter from 36% in 1QFY19 to 37% in 1QFY20. Operating profit for the quarter was Rs. 1.7 Billion. Operational expenses increased 17% to Rs. 4.8 Billion. Distribution and Administration expenses increased 12% and 18% to Rs. 773 Million and Rs. 4.1 Billion respectively in 1QFY20 as a result of the opening of Asiri Hospital Kandy and expansion of supermarket operations. Other operating income which comprises one-off gains declined by 2% to Rs. 193 Million during the quarter. Given the challenging business environment, the Group reported a loss of Rs. 476 Million during the quarter. Retail sector revenue improved a marginal 3% to Rs. 8.5 Bn in 1QFY20 amidst weak economic conditions during most weeks of the quarter following the April attacks which depressed consumer demand and threw the country into an unprecedented negative business confidence. Sector operating profit for the quarter was Rs. 641 Million. Quarterly sector EBITDA was Rs. 879 Million. Consumer Electronics division operates 208 stores across the island with a total retail space of 330,000 sq. ft. While Crystal Jade restaurant is progressing to open its first outlet in One Galle Face by Shangri La.The group expects to open their outlets at One Galle Face by Shangri La by October/ November.

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