Burger King business model ‘easy’ – Pathirage says
View(s):Ashok Pathirage, Chairman Softlogic Holdings says that the success of the famous Quick Service Restaurant (QSR) business model was ‘easy’ where consumer response has been very encouraging promising strong contribution in the upcoming periods accelerating the venture’s payback.
“Burger King (also) opened an outlet in Kandy City Centre. The latest outlet is at the Arcade,” he has said in his review of the interim financial statements for the three months ended 30 June 2014. He told the Business Times that expansion of QSR and retail will be Softlogic’s primary focus this year.
The QSR sector’s profit before tax (PBT) declined 64.6 per cent to Rs. 60.4 million while profit after tax (PAT) fell 57.5 per cent to Rs. 85 million during 1QFY15 and it added Rs. 2.1 billion to the group topline (25.9 per cent contribution), which is 12.2 per cent growth from Rs. 1.9 billion reported during the comparative period.
Operating profit of the sector was Rs. 541.6 (up 9.9 per cent) during the quarter taking PBT to Rs. 397.4 (versus Rs. 325.4 million in 1QFY14). In the first quarter financial results of FY2014/15, the consolidated revenue at Softlogic Holdings increased 14.6 per cent to Rs. 8 billion with healthcare services leading its contribution followed by Retail, Financial Services, ICT and Automobiles, Mr. Pathirage has said in his statement. “This uptrend is expected to bolster further in the upcoming quarters with fresh revenue generation from our most recently opened, Centara Ceysands Resorts & Spa. The peak season for the leisure sector, which is November to March, has now been added to our normal peak calendar.”
Consolidated Gross Profit increased 14.4 per cent to reach Rs. Rs. 2.5 billion during the first three months of the financial year. Operational expenses increased 32.9 per cent to Rs. 2.1 billion. Consequent to the increase in operating cost margins to 26.6 per cent from 22.9 per cent in the comparative quarter. Distribution costs increased to Rs. 420 million.
Finance Income, which registered a 103 per cent growth to Rs. 422.6 million. (Rs. 208.2 million in 1QFY14) during the three months period under discussion, was primarily triggered by investment portfolio gains, both fixed and equity investments, at Asian Alliance Insurance PLC, he has said, adding finance expenses declined marginally to that Rs. 625.6 million, as opposed to Rs. 677.8 million in the comparative period. “This was in light of the favourable macro-economic conditions where interest rates continued to decline allowing the absorption of the rapid capex growth of the group,” Mr. Pathirage has said.
Group PBT improved 36 per cent to Rs. 294.4 million during the quarter against R. 216.8 million 1QFY14. Profit for the period during the first three months of FY2014/15 amounted to Rs. 225.3 million (up by a strong 21.9 per cent) Non-controlling interest’s share of profit was 81.9 per cent to Rs. 184.6 million (up 26.9 per cent).
Retail
Retail sector contributed 25.6 per cent to group turnover registering a 10.7 per cent growth to Rs. 2.1 billion during the period. This growth was led by growing foot fall rates of existing showrooms coupled new brands, store expansion, and increased product sales, Mr. Pathirage has said.
“Retail sector has had an upswing during this period with the continuing strategic expansion of this sector.”
The Consumer Electronics unit opened its 179th showroom (an exclusive Samsung store) at the Arcade adding to its cumulative retail space which stands at 235,331 sq. ft. “We are well in line with our target of 335,000 sq. ft by 2017,” Mr. Pathirage has said.
Performance of the hospitals are expected to improve further in the upcoming quarters with the consolidation of Asiri Hospital Holdings PLC’s ownership at Central Hospital Ltd, according to Mr. Pathirage. “A sales agreement to dispose one of the properties at Horton place for a total consideration of Rs. 2.6 billion is expected to materialize and sales proceeds would be used to reduce Group debt despite other expansion imperatives in the horizon,” Mr. Pathirage has said.
The Automobile sector saw a 71.7 per cent in revenue during the quarter chiefly led by sale of the ‘Ford’ vehicle range. However, the sector closed the first quarter with loss of Rs. 3.8 million versus Rs. 19.8 million compared with the previous year. “The gradual decline in the sector’s losses brings hope for the future of the sector which is working on a number of strategies to diversify into related operations such as rent-a-car, commercial and passenger vans, body repair and paint services which would cater to all vehicle brands,” Mr. Pathirage has said, adding that Softlogic’s first resort, Centara Ceysands Resorts & Spa, was opened for guests in June 2014.
“The construction of the 219-room Movenpick City Hotel has now completed Level 24 and is progressing as per the construction schedule with a view to open its doors in 4Q2015,” Mr. Pathirage has said.