Bottom line turns positive in 3Q posts profit before and after tax compared to loss a year earlier but still not out of the woods with loss in first 9 months Group turnover up 11% to Rs. 59.4 b in first 9 months up 14% to Rs.

22.2 b in 3Q Cumulative Group EBITDA improved 25% to near Rs. 10 b quarterly EBITDA increased 55% to Rs.

4.2 b led by increasing activity levels, improving profit margins and cost discipline measures One of the leading diversified groups Softlogic Holdings PLC has achieved strong turnaround in the third quarter of FY20 with bottom line turning positive along with the realisation of pre and post-tax profit as against loss a year earlier.

However at the cumulative first nine months level, Softlogic still reported a loss.Net profit attributable to equity holders of the parent in 3Q was Rs.

52 million, as against a loss of Rs. 346.6 million.

It was the first time in FY20 the bottom line turned positive. Loss for the first nine months was Rs.

1.46 billion, as against a profit of Rs.

75 million a year earlier. Despite the business environment operating under a cloud, PBT for the three-month period was Rs.

305 million as opposed to a loss of Rs. 237 million in 3QFY19 with PAT registering an increase of Rs.

393 million (a loss of Rs. 327 million in 3QFY19).

For the nine months pre-tax loss was Rs. 41 million as against a profit of Rs.

618 million and post-tax loss was Rs. 518 million in comparison to profit of Rs.

2 billion.Softlogic Holdings Chairman Ashok Pathirage said: "Despite the difficult operating climate common to most businesses, consolidated group turnover significantly increased 11% to Rs.

59.4 billion during the first nine months of this financial year while quarterly revenue improved 14% to Rs. 22.2 billion.

"Group turnover was dominated by the rapidly expanding Retail sector (51% contribution to Group topline), Financial Services (20%) and Healthcare Services (20%) while the IT, Leisure and Automobile collectively made up 10% of Group topline.Pathirage said the Group's efforts to restore consumer and business confidence during the period was augmented by expanding the international branded retail portfolio and upmarket stores at One Galle Face by Shangri-La along with Odel Flagship department store which distinctly fosters a class of its own, standing shoulder-to-shoulder with reputed marques thereby enhancing customer shopping experience manifold.

In the same way, the healthcare sector, with the addition of Asiri's 190-bed ultra-modern hospital in Kandy, will have an important role to play in the country's healthcare serving the healthcare needs of the Central Province given its reach to the untapped regions of Northern and Eastern Provinces."Despite the new investments, we are still recovering from the shock of the April incidents and will have to bear the consequence of the uncertainty of the coronavirus and its implications together with the General Election in the offing," Pathirage said.

Nonetheless, he pointed out that the new Government's pro-business decision to reduce the tax burden for corporates while also reducing interest rates will give a significant fillip to future earnings.Gross Profit grew 11% to Rs.

21.7 billion during the 1-3QFY20. The quarter reported a Gross Profit of Rs. 8.

4 billion (up 15%) maintaining GP margins at 38% amidst Softlogic's expansion drive whereby synergies are created.Quarterly distribution costs increased 11% to Rs.

1 billion with the cumulative figure rising 10% to Rs. 2.

7 billion. Administrative expenses increased 10% to Rs.

13 billion during the nine-month period while a marginal decline was noted during the quarter (Rs. 4.

7 billion). The increasing scale of operations accounted for the cost increases with depreciation of PPE and headcount increase making up most of this cost.

Cumulative operational costs increased 10% to Rs. 15.8 billion in 1-3QFY20 maintaining operational cost margins at 27%.

Quarterly operational costs was flat at Rs. 5.

7 billion to record an operating cost margin improvement from 29% in 3QFY19 to 26% in 3QFY20. Focusing on cost discipline and economies of scale helped achieve the cost margin improvements amid our expansions.Other operating income declined marginally by 9% to Rs.

528 million during 1-3QFY20 while the quarter also witnessed a decrease of 32% to Rs. 201 million due to prevailing market conditions.

Cumulative Group EBITDA improved 25% to near Rs. 10 billion while quarterly EBITDA increased 55% to Rs 4.

2 billion primarily led by increasing activity levels, improving profit margins and cost discipline measures.Operating profit for the cumulative period increased 12% amounting to Rs.

6.5 billion while the quarterly operating profit grew 50% to Rs.

2.9 billion primarily supported by increased activities and cost controls which led to the operating profit margin improving from 10% in 3QFY19 to 13% in 3QFY20.Finance income is primarily made up of the gains of Softlogic Life Insurance's investment portfolio.

Finance income for 1-3QFY20 increased 60% to Rs. 1.

4 billion while quarterly finance income increased 14% to Rs. 479 million.

Net finance costs increased 23% to Rs. 1.

9 billion for the quarter while the cumulative period saw an increase of 35% to Rs. 5.

1 billion."Softlogic's heavy capital investments in the recent past, particularly in the retail sector, have been via short-term funding sources.

We are seeking longer term funding options and quasi-equity to relieve the finance cost burden to enhance earnings," Chairman Pathirage said in his review accompanying interim results.The quarter witnessed a transfer of Rs.

707 million to life policy holders (up 10%) while a transfer of Rs. 1.

5 billion (up 1%) during the nine-month period to build a conservative actuarial book.

© Pakistan Press International, source Asianet-Pakistan