Softlogic Group recorded 14% revenue growth in a challenging year despite declining disposable incomes.
Revenue growth of 14% reflects the Group’s resilience and indomitable spirit as we recorded Rs. 75 billion in revenue in a year of flat per capita income and moderating economic growth using a combination of acquisitions and business expansion,” said Chairman/Managing Director, Softlogic Group Ashok Pathirage.
Operating profit margins remained flat with only a marginal increase due to elevated price sensitivity stemming from a challenging operating environment and intense competition.
Encouragingly, volume growth supported a 17% increase in Gross Profit to Rs. 28 billion affirming the growth strategy of the Group.
The Retail Sector recorded 6% top line growth despite declining disposable incomes contributing Rs. 37.7 billion to Group revenue which amounts to 50% of the same as we strengthened the customer value proposition of this Sector.
This key Sector contributed Rs. 3.2 billion (38%) to Group Operating Profit and Rs. 151 million (5%) to Group PAT in the reporting year reflecting pressure on margins and increased finance costs as growth was funded through debt.
Healthcare recorded 12% revenue growth to Rs. 13.5 billion despite increasing price regulation in the healthcare. Sector revenues were increased due to increased operational efforts and to a lesser extent by the acquisition of Hemas Southern Hospital in November 2018.
The Asiri Hospitals Group accounts for a 15% of the private sector healthcare capacity. Intense competition in the sector and price sensitivity exerted pressure on margins resulting in a decrease of 7% in operating profit which amounted to Rs. 3.2 billion contributing 38% to Group Operating profits.
The Sector contributed Rs. 1.8 billion to Group Profit After Tax which is the second highest contribution equivalent to 61% of the same.
Softlogic Capital PLC, the holding company of the Financial Services Sector in the Group, delivered a strong performance largely attributable to the performance of Softlogic Insurance as gross written premiums grew by 30% outpacing industry growth of 13%.
This supported Sector revenue growth of 23% as we expanded our distribution channels to enhance market penetration in Life Insurance with the pioneering micro insurance product with Dialog enabling daily payment of premiums which is a first in the country.
Operating margins in the Financial Sector declined as expenses increased due to expansion. PBT declined as prior year numbers included Rs. 798 million arising from changes in contract liability due to the transfer of one off surplus of the sale of the general insurance business in 2017/18 financial year.
The increase in PBT excluding the impact of this one-off gain is 15%. PAT grew by 119% due to a sharp increase in origination of deferred tax assets of Rs. 2.4 billion which resulted in an Income Tax Reversal of Rs. 2 billion, supporting PAT growth of 42% to Rs. 3.2 billion.
The Group’s Information Technology Sector delivered 11% top line growth to Rs. 4.0 billion although margins were under pressure during this period of transition to a new business model. Operating profit declined during the year due to falling GP margins. Increased finance costs resulted in PBT decreasing by 43% and PAT by 47% to Rs. 172 million and 135 million respectively.
The operating environment in the automotive sector became more challenging as rupee depreciation, requirement for cash margins and enhanced emission standards for all motor vehicles exacerbated issues for an intensely competitive market.
The Sector recorded 147% growth in revenue to Rs. 3.1 billion. It is noteworthy that the Sector delivered a positive operating profit of Rs. 170 million compared to an operating loss of Rs. 64 million in the previous year.
Finance costs remain a concern due to the requirement for cash margins on letters of credit, exchange losses. The requirement for cash margins was subsequently removed. Losses after tax were reduced significantly to Rs. 35 million in the reporting year from Rs. 178 million in the previous year.
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