Sunday 26 July 2015

Softlogic Capital bounces strongly in 2014/15

Softlogic Capital PLC., incorporated as Capital Reach Holdings Ltd. by former Central Bank Governor Ajith Nivad Cabraal in April 2005 and subsequently acquired by the Softlogic Group which changed its name, has returned a superior performance in the year ended March 31, 2015 boosting revenue 20% to Rs 9.95 bn. and profit after tax 153% to Rs. 782 mn. from the previous year’s Rs. 309 mn.

But the highly capitalized company which concluded a 13 for 10 rights issue at Rs. 3.60 a share increasing its stated capital to Rs. 2.88 billion during the year under review has been unable to pay a dividend to its shareholders.

The company which controls the financial services business of the Softlogic Group is however upbeat about its future prospects given its estimation of the high potential of financial services in Sri Lanka’s economy.

Softlogic acquired Capital Reach in August 2010 and the shares of the company were listed on the Dirisavi board of the Colombo Stock Exchange in September 2011. This company is now the financial services sector holding company of the Softlogic group.

According to the Company’s recently released annual report Softlogic Capital’s portfolio of financial services comprised Softlogic Finance PLC., a licensed finance company, Asian Alliance Insurance PLC., an insurer licensed for life insurance by the Insurance Board of Sri Lanka and Asian Alliance General Insurance Ltd., licensed for general insurance by the Insurance Board as well as Softlogic Stockbrokers (Pvt) Ltd., a stock broking company licensed and operating on the CSE.

Softlogic Capital PLC is licensed by the Securities and Securities and Exchange Commission (SEC) as a market intermediary under the ‘investment manager’ category.

Softlogic’s investment strategy has focused on the most promising sectors likely to benefit from the country’s growth, and the financial services sector is one area that we see has huge potential based on the increasing per capita values, Mr. Ashok Pathirage, chairman of the company has said in Softlogic Capital’s annual report.

He noted that insurance expansion and penetration in the country is relatively low standing at 1.05% in 2014 with 0.45% penetration for life and 0.06% for general insurance. This compared with insurance penetration in the whole of Asia at 5.18% with 3.56 for life and 1.62% for general insurance.

"At Asian Alliance Insurance we are capitalizing on these prospects and are happy to report that life premiums for the company grew by 21% for 2014 and continued with the same momentum into the first quarter of 2015," Pathirage said.

"Asian Alliance Insurance PLC., is ranked fifth in the industry and has so far concentrated its business almost entirely on protection products. We see huge potential for life business and are planning on diversifying our product range."

He said that they had adopted a clear technology backec strategy in general insurance and is aiming at "providing unparalleled and unrivalled customer convenience." Their focus will be directed to the motor and health classes of insurance and will synergize with the Softlogic retail channel for distribution and Asiri Hospitals for healthcare.

"Our MOU with Apollo Hospitals, India that establishes the ‘Asian Health Alliance’ will ensure that our customers have the best choice of health care options whether local or overseas," Pathirage said.

Discussing Softlogic Finance, he said that they had coped with continued volatility related to impairment from leasing and hire purchase products and had made a timely change to focus on SME loan products where there is immense potential to grow based on speed of execution and delivery.

The company’s deposit base had increased by 30% to exceed Rs. 12 bn. which was the highest recorded increase in the Non-Banking Finance Institution (NBFI) sector, he said.

Pathirage also said they had transformed Softlogic Stockbrokers into "a winning proposition" on the back of favourable market conditions and the company had "stormed into third place" in the industry recording a turnover of Rs. 63.3 bn. and commanding a market share of 8.9%.

"With excellent client coverage and extensive research capabilities, the company has a strong focus on the foreign sector and sees enormous business potential tied to a strong based economy," Pathirage said.

He concluded by confidently stating that the group’s Financial Services Sector "is fully primed and in a great position to benefit from Sri Lanka’s growth.We have invested heavily in upgrading our teams, acquiring the infrastructure and building our brands which we also see as doing our part in developing our country’s future."

The company’s Managing Director, Mr. Ifthikar Ahamed, said that Asian Alliance insurance had delivered an extraordinary year recording gross written premiums of Rs. 4.9 bn., up 16% from a year earlier, while the bottom line saw an impressive profit of Rs. 705 mn. up 22% from the previous year’s profit of Rs. 576 mn.

Softlogic Finance had "stormed its way through impairment turbulence" and delivered a profit of Rs. 216 mn., up 31% from the previous year, he said. The total assets of the company was up 10% to Rs. 20 bn. from Rs. 18 bn. the previous year.

Ahamed reported that Softlogic Strockbrokers that was totally revamped had risen dramatically in their league recording a turnover of Rs. 225 mn for the year and a profit of Rs. 63 mn. against a turnover of Rs. 42 mn. and a loss of Rs. 13 mn. the previous year.

Their stock broking team has a keen focus on foreign business and one of the best research teams delivering outstanding works importantly institutional and high-net-worth clients, he said.

Softlogic Capital has a stated capital of Rs. 2.88 bn. and a reserve of Rs. 73.66 mn. It’s available for sale reserve is Rs. 31.5 mn. and retained earnings Rs. 509.9 mn. Total Assets ran at Rs. 32.85 bn. and total liabilities at Rs. 26.73 bn.

Earnings per share had grown to Rs. 0.72 from Rs. 0.20 the previous year for the group and Rs. 0.32 for the company from a loss of Rs. 0.36 per share the previous year.

Softlogic Holdings is the controlling shareholder of the company owning 73.11% though two accounts followed by ARC Capital (10.22%), Melstacorp (5.81%) Rosewood (Pvt.) Ltd., (5.41%) and WDNH Perera ( 1.49%).

The Softlogic share traded at a high of Rs. 8.80 and a low of Rs. 3.60 during the year under review against a trading range of Rs. 7.20 to Rs. 3.10 the previous year.

The director of the company are Messrs. A K Pathirage (Chairman), T M I Ahamed (Managing Director), R J Perera, WL P Wijewardena, Mr. A M Pasqual, Ms E Wickramaarachchi and Mr. H Premaratne.
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