Softlogic : Annual Report for the year ended 31st March 2023

A N N U A L R E P O R T 2 0 2 2 / 2 3

S o f t l o g i c H o l d i n g s P L C

CONTENTS

01	OVERVIEW
Our Vision - Our Credo	01
	Financial Highlights 02
	Operational Highlights	03
	About the Group	04
	Our Businesses	06

02	LEADERSHIP &
GOVERNANCE
	Message from the Chairman 08
	Board of Directors 10
	Corporate Governance 14

03	MANAGEMENT DISCUSSION
& ANALYSIS	20
	Risk & Opportunities
	Financial Review 23
	Retail & Telecommunications 25
	Healthcare Services	28
	Financial Services	31
	Information Technology & Others 33
	Leisure and Property	35
	Automobiles	37
	Human Capital	38

04

05

06

COMMITTEE

REPORTS

Annual Report of The Board of
Directors on The Aairs of The Company	48
Board Audit Committee Report 51
Related Party Transactions Review
Committee Report 52
HR & Remuneration Committee Report	53
Statement of Directors' Responsibilities	54

FINANCIAL

STATEMENTS

Independent Auditors' Report 56

Income Statement 62

Statement of Comprehensive Income 63

Statement of Financial Position	64
Statement of Changes in Equity	66

Statement of Cash Flows 68

Notes to the Financial Statements 70

SUPPLEMENTARY

INFORMATION

Investor Information 188

Corporate Directory 190

Notice of Meeting 194

Form of Proxy 195

Corporate Information IBC

Scan the QR Code with your smart device to view this report online.

OUR

VISION

To be the most preferred and ubiquitous product and service provider.

OUR

CREDO

To make responsible

investment decisions and retain the best talent and become the most admired corporate entity.

Softlogic Holdings PLC

FINANCIAL HIGHLIGHTS

For the year ended 31 March		2023	2022	2021	2020	2019	2018	2017	2016	2015	2014
Earnings Highlights
Group Revenue	Rs. Mn	96,899	111,229	82,621	76,722	75,143	66,019	58,882	54,600	39,564	29,246
Gross Profit	Rs. Mn	34,096	37,370	25,408	27,044	27,636	23,673	19,579	18,559	14,117	11,012
Earnings Before Interest, Tax,Depreciation &
Amortisation of Intangibles	Rs. Mn	12,136	13,995	8,196	9,807	11,721	11,695	8,451	7,897	6,398	5,025
Group Earnings/ (Loss) Before Interest & Taxation	Rs. Mn	8,044	10,167	4,539	6,462	8,859	9,052	6,391	6,082	4,959	3,918
Group Earnings/ (Loss) Before Taxation	Rs. Mn	(20,908)	(3,561)	(3,811)	(2,899)	1,743	3,092	1,581	2,836	2,266	1,258
Group Earnings/ (Loss) After Taxation	Rs. Mn	(23,657)	(5,278)	(4,008)	(3,181)	2,990	2,278	920	1,870	1,819	1,009
Total Comprehensive Income/ (Loss) Net of
Taxation	Rs. Mn	(22,706)	(3,090)	(2,739)	(2,272)	3,127	2,827	1,793	2,859	2,160	1,237
Group Earnings/ (Loss) Attributable to Equity Holders	Rs. Mn	(24,077)	(8,171)	(5,227)	(4,724)	105	204	120	565	556	156
Group Comprehensive Income/ (Loss)
Attributable to Equity Holders	Rs. Mn	(23,624)	(7,142)	(4,307)	(4,096)	353	450	783	1,829	761	220
Gross Profit Margin	%	35	34	31	35	37	36	33	34	36	38
Net Profit/ (Loss) Margin	%	(24.41)	(4.74)	(4.85)	(4.15)	3.98	3.45	1.56	3.43	5	3.5
Earnings/ (Loss) Per Share	Rs.	(20.19)	(6.85)	(4.38)	(3.96)	0.09	0.25	0.15	0.73	0.72	0.2
Dividends	Rs. Mn	-	-	-	596	596	503	387	194	-	120
Return on Capital Employed*	%	7.60	9.73	4.80	6.58	9.78	11.02	9.42	9.81	8.37	8.73
Balance Sheet Highlights
Total Assets	Rs. Mn	184,237	188,705	161,834	149,551	130,670	118,823	100,915	93,152	87,324	65,863
Current Ratio	No. of times	0.40	0.57	0.71	0.74	0.83	0.93	0.94	0.84	1.04	0.9
Asset Turnover	No. of times	0.53	0.59	0.51	0.51	0.58	0.56	0.61	0.61	0.45	0.4
Total Interest Bearing Borrowings	Rs. Mn	123,742	98,946	82,585	79,669	65,788	61,227	52,255	46,480	43,906	31,518
Shareholders' Funds	Rs. Mn	(32,078)	(8,434)	(415)	3,911	14,343	11,591	8,547	8,159	7,336	6,802
Net Asset/ (Liability) Value Per Share	Rs.	(26.90)	(7.07)	(0.35)	3.28	12.23	14.05	11.04	10.54	9.47	8.7
Total Equity	Rs. Mn	(17,872)	5,597	12,006	16,129	24,839	20,917	15,623	15,531	15,356	13,351
Debt : Equity **	No. of times	-	17.68	6.88	4.94	2.65	2.93	3.34	2.99	2.86	2.4
Debt : Total Assets	No. of times	0.7	0.5	0.5	0.5	0.5	0.5	0.5	0.5	0.5	0.5
Operating Cash Flow	Rs. Mn	(7,058)	9,146	17,126	9,009	1,556	(106)	2,331	3,432	426	1,775
Capital Expenditure	Rs. Mn	3,987	3,534	3,153	7,637	5,743	4,524	6,311	5,252	4,438	3,604
Cash Earnings/ (Loss) Per Share	Rs.	(5.92)	7.67	14.36	7.55	1.33	(0.13)	3.01	4.43	0.5	2.3
Investor Information
Market Price as at 31 March	Rs.	15.90	37.60	11.8	12.3	16	24.6	11.9	13.3	13.2	10.6
Shares in Issue	Mn	1,193	1,193	1,193	1,193	1,193	962	779	779	779	779
Market Capitalisation as at 31 March	Rs. Mn	18,969	44,857	14,072	14,668	19,081	23,659	9,270	10,205	10,283	8,257
52-Week Market Share Price High	Rs.	39.80	90.00	15.3	17	25.8	26.2	15.5	18	20.4	12.7
52-Week Market Share Price Low	Rs.	14.50	10.40	9.8	11	15.9	11.7	11.7	12.3	10.3	8.1
Price to Book Value	No. of times	-	-	-	3.7	1.3	1.7	1.01	1.1	1.4	1.5
Enterprise Value	Rs. Mn	137,451	134,679	89,076	90,611	81,672	78,733	58,730	53,677	52,263	38,014
Enterprise Value : EBITDA	No. of times	11.33	9.62	10.87	9.24	6.97	6.73	7.19	6.6	8.2	7.6
Dividend Per Share	Rs.	-	-	-	0.5	0.5	0.65	0.5	0.25	-	0.16
Dividend Payout Ratio	No. of times	-	-	-	(0.53)	(0.89)	0.14	0.38	0.19	-	(5.13)

• Return on Capital Employed calculated as a percentage of EBIT to Total Capital Employed (Equity plus Interest Bearing Borrowings).
• Debt to Equity calculated based on Total Equity Capital.

2

Annual Report 2022/2023

Overview		Leadership & Governance		Management Discussion & Analysis		Committee Reports		Financial Statements		Supplementary Information

OPERATIONAL HIGHLIGHTS

Annual Report 2022/2023

3

Softlogic Holdings PLC

ABOUT THE GROUP

Softlogic Holdings PLC is a dynamic and diversified conglomerate with a strong presence across various growth-oriented industries in Sri Lanka. The Group's expertise spans across retail & telecommunications, information technology, healthcare services, financial services, automobile, and leisure, where we offer a wide array of internationally-acclaimed products and services to meet diverse consumer demands.

With a strong focus on customer satisfaction and innovation, Softlogic continues to set new standards of excellence across all sectors it operates in.

RETAIL

• Softlogic Retail is one of the largest consumer electronic and durables retailer in the country with 198 stores covering an island-wide retail space of over 200,000 sq.ft.
• A key player in mobile phone distribution, renowned for having the largest distribution network and a portfolio featuring top international brands like Samsung and Nokia.
• ODEL and Softlogic Brands, the dominant force in fashion retailing showcases a portfolio of over 67 international fashion brands alongside its own private labels. Our fashion department stores, ODEL and Cotton Collection, are synonymous with style and quality, offering a premium shopping experience that caters to discerning fashion enthusiasts.
• We also operate the exclusive franchise for a global footwear brand 'Bata' which is a renowned household brand for footwear in Sri Lanka for many decades.
• As a prominent force in Sri Lanka's restaurant industry, we operate six international franchise brands that cater to a wide range of customer segments across a network of
  42 restaurants. These brands include Burger King, Popeyes, Baskin Robbins, Délifrance, Crystal Jade and Subway.
• Through Glomark, a leading and growing supermarket chain, the Group complemented its presence in all areas of the retail business.
• ODEL PLC is the listed company of this sector.
• Softlogic Retail Holdings is the sector holding of the retail cluster.

HEALTHCARE SERVICES

• Asiri Health stands as the largest private healthcare provider in Sri Lanka, operating over 800 beds across its seven hospitals spanning three provinces.
• Asiri Laboratories is the country 's largest private laboratory service, offering a wide range of tests through its Main Lab, six hospital labs, 17 Satellite Labs, and 80 collection centers.
• Asiri Health engages, consults, and collaborates with a team of highly dedicated, skilled, and experienced healthcare professionals in Sri Lanka.
• Our hospitals adhere to global accreditation standards set by the Joint Commission International (JCI) and the Australian Council of Health Standards International (ACHSI) for quality and patient safety. Additionally, our laboratories have obtained industry-specific and quality management ISO certifications, ensuring the highest standards of service and reliability.
• Asiri Hospital Holdings PLC and Asiri Surgical Hospital PLC are two listed companies in this sector.

FINANCIAL SERVICES

• Softlogic Life Insurance PLC is the second top player in the life insurance sector, offering a range of innovative and comprehensive life and medical insurance solutions to meet the evolving needs of customers.
• Softlogic Finance PLC, a licensed finance company, provides a wide range of financial services including leasing, hire purchase, loans, and savings products, catering to both individual and corporate clients.
• Softlogic Stockbrokers and Softlogic Asset Management are renowned for their expertise in stockbroking and asset management services, offering investment solutions and advisory services to clients.
• Softlogic Capital PLC, the sector holding company, which oversees and manages the strategic direction and growth initiatives of the financial services sector, ensuring synergies and strategic alignment across its various entities.
• Softlogic Capital PLC, Softlogic Life Insurance PLC and Softlogic Finance PLC are the three listed companies of this sector.

4

Annual Report 2022/2023

Overview		Leadership & Governance		Management Discussion & Analysis		Committee Reports		Financial Statements		Supplementary Information

INFORMATION

TECHNOLOGY & OTHERS

• A leading provider of IT solutions, offering a comprehensive range of services across the IT value chain. From end-user computing to back-end data centers, advanced infrastructure, cloud services, cyber security, imaging, printing, and managed services, we provide a holistic approach to meeting our clients' technological needs.
• We specialise in centralised management and consultancy services, ensuring seamless integration and optimisation of IT resources across organisations.
• Our expertise and commitment to excellence have positioned us as a trusted partner in delivering innovative and reliable IT solutions through our independent dealer network of over 150 distributors.
• We bring cutting-edge technologies and best-in-class products to
  our clients representing world- class brands such as Dell EMC, Microsoft, Aruba, Meraki, Lenovo, Huawei, VMware, and Epson, among others.

LEISURE & PROPERTY

• Two exceptional hotel properties: the luxurious 5-star Mövenpick Hotel Colombo, with 219 rooms that offer comfort and service, and the serene 4-star Centara Ceysands Resort & Spa in Bentota, featuring 166 rooms set in a picturesque environment ideal for relaxation and rejuvenation.
• Softlogic Destination Management, a specialised division focusing on outbound travel services. With a wealth of experience and expertise, Softlogic Destination Management is dedicated to providing travel experiences to both the Group companies and external clients.
• Sabre, the online ticketing platform used by the travel industry, offers convenient and efficient booking solutions for travel enthusiasts, ensuring seamless travel planning and management.
• Softlogic Properties, our sector holding company and a leading property developer, successfully completed the Everest apartment project in Colombo 5.

AUTOMOBILES

• Future Automobiles is the authorised dealer for Ford vehicles. Softlogic Automobiles is the authorised dealer for King Long buses. Suzuki Motors Lanka holds the exclusive Agency Agreement with Suzuki Motor Corporation
  of Japan for motorbikes. Vehicle imports are currently suspended due to foreign exchange control restrictions in the country.
• Softlogic Automobiles also operates a state-of-the-art collision repair center, equipped to handle repairs for all vehicle brands in the country.

Annual Report 2022/2023

5

Softlogic Holdings PLC

OUR BUSINESSES

RETAIL																																		HEALTHCARE SERVICES			FINANCIAL SERVICES
100%	55%									77%

CORE VERTICALS

Softlogic Retail Holdings (Pvt) Ltd

› Softlogic Retail (Pvt) Ltd

» Suzuki Motors Lanka Ltd

» SML Holdings (Pvt) Ltd

» Dai-Nishi Securities (Pvt) Ltd

› Odel PLC

» Softlogic Brands (Pvt) Ltd

» Odel Lanka (Pvt) Ltd

» Odel Apparels (Pvt) Ltd

» Odel Properties (Pvt) Ltd

» Odel Information Technology Services

(Pvt) Ltd

» Odel Properties One (Pvt) Ltd

» Odel Restaurants (Pvt) Ltd

» Cotton Collection (Pvt) Ltd

» Odel Apparel Holdings (Pvt) Ltd

» Odel Apparel Lanka (Pvt) Ltd

› Softlogic Mobile Distribution (Pvt) Ltd » Softlogic Communications (Pvt) Ltd

› Softlogic Communication Services (Pvt) Ltd

› Softlogic International (Pvt) Ltd

› Softlogic Restaurants (Pvt) Ltd

» Softlogic JSM Entertainment (Pvt) Ltd » Silk Route Foods (Pvt) Ltd

» Softlogic Healthy Concepts (Pvt) Ltd

› Softlogic Retail One (Pvt) Ltd

› Softlogic Supermarkets (Pvt) Ltd

› Softlogic Rewards (Pvt) Ltd

› Softlogic Pharmaceuticals (Pvt) Ltd

› Softlogic Manufacturing (Pvt) Ltd

› Footwear Retailer (Pvt) Ltd

› Softlogic Venture (Pvt) Ltd

6 Annual Report 2022/2023

Asiri Hospital Holdings PLC

• Asiri Surgical Hospital PLC
  » Asiri AOI Cancer Centre (Pvt) Ltd
• Central Hospital Ltd
• Asiri Central Hospitals Ltd
• Asiri Diagnostics Services (Pvt) Ltd
• Asiri Hospital Matara (Pvt) Ltd
• Digital Health (Pvt) Ltd
• Asiri Laboratories (Pvt) Ltd
• Asiri Hospital Galle (Pvt) Ltd
• Asiri Diagnostic Services (Asia) Pte Ltd
• Asiri Port City Hospital (Pvt) Ltd
• Asiri Academy of Health Sciences (Pvt) Ltd
• Asiri Myanmar Ltd

Softlogic Capital PLC

• Softlogic Life Insurance PLC
• Softlogic Finance PLC
• Softlogic Stockbrokers (Pvt) Ltd
• Softlogic Asset Management (Pvt) Ltd

Overview		Leadership & Governance		Management Discussion & Analysis		Committee Reports		Financial Statements		Supplementary Information

LEISURE & PROPERTY	AUTOMOBILES					INFORMATION
																										TECHNOLOGY & OTHERS
100%							100%										100%

NON-CORE VERTICALS

Softlogic Properties (Pvt) Ltd

›	Softlogic City Hotels (Pvt) Ltd	› Future Automobiles (Pvt) Ltd	›	Softlogic IT Holdings (Pvt) Ltd
›	Ceysand Resorts Ltd	› Softlogic Automobiles (Pvt) Ltd		» Softlogic Information Technologies (Pvt) Ltd
›	Softlogic Destination Management			» Softlogic Computers (Pvt) Ltd
	(Pvt) Ltd		›	Softlogic Australia (Pty) Ltd
› Sabre Travel Network Lanka (Pvt)		›	Softlogic BPO Services (Pvt) Ltd
	Ltd (Associate Company)
		›	Nextage (Pvt) Ltd

(Associate Company)

› Softlogic Corporate Services (Pvt) Ltd

› Jendo Innovations (Pvt) Ltd

(Associate Company)

› Softlogic Healthcare Holdings Ltd

› Softlogic Solar (Pvt) Ltd

Annual Report 2022/2023

7

Softlogic Holdings PLC

MESSAGE FROM THE CHAIRMAN

Under more favourable conditions, the Group's strategic plans would have achieved unprecedented transformation and growth, especially in the Retail sector with its strong distribution network, large customer base and over 320 retail stores with a first-in-class supermarket and unrivalled collection of international brands and products.

Dear Stakeholders,

This year was a challenging one for the Softlogic Group, although a Consolidated Revenue of Rs. 96.9 Bn was achieved with the resultant EBITDA of Rs. 10.5 Bn. In the face of unparalleled turbulence, uncertainty, and volatility, the Softlogic Group has shown resilience and adaptability, drawing upon decisive leadership to ensure sustained value creation for our stakeholders despite some setbacks.

OPERATING ENVIRONMENT AND CHALLENGES

During the year, the global economy witnessed inflation, supply chain disruptions, and geopolitical tensions amid the persistent impact of the pandemic and the economy which was beset by internal challenges.

Within the domestic realm, Sri Lanka confronted exceptional macroeconomic challenges throughout the year, affecting consumers, companies, and the government causing significant distress. Systemic disparities consisting of fiscal and current account deficits were accentuated by

external shocks, precipitating sovereign and balance-of-payments pressures. This precarious condition compelled Sri Lanka to suspend servicing of external debt in April 2022. The economic outcome resulted in a substantial 7.8% contraction in the nation's Gross Domestic Product (GDP) in 2022, inciting public protests, ultimately leading to political instability and a change of leadership at the top.

The business landscape suffered immensely owing to supply chain disturbances, import limitations, currency scarcity, and difficulties securing letters of credit, thus obstructing imports. Additionally, operational hurdles resulted in transportation issues due to fuel shortages and inconsistent electricity supply which negatively influenced consumer

and business confidence. To counteract the deteriorating scenario, concerted policy actions spearheaded by GoSL and the Central Bank of Sri Lanka (CBSL) were implemented. Monetary policy was significantly tightened, with the weekly AWPLR trending as high as 29.67% during the year.

TOTAL ASSETS

Rs. 184 Bn

TOTAL REVENUE

Rs. 97 Bn

EMPLOYEES ACROSS 6 SECTORS

11,092

8

Annual Report 2022/2023