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Odel confident of carrying on, while auditor flags ‘significant doubts’ amid Rs 8.2b loss
View(s):By Kapila Bandara
Apparel retailer Odel, which has been shutting down stores and whose financial losses have been widening, has booked a Rs 4.2 billion group loss for the 2023-2024 year and the accumulated loss has ballooned to Rs 8.2b.
The 2023-2024 loss has deepened by 90% from Rs 2.21b the year before, annual filings to the Colombo Stock Exchange show.
Auditor EY (Ernst & Young) notes that the accumulated loss of the group is Rs. 8.2b (company loss Rs. 4.42b) for the year ended 31 March 2024.
Shares of parent Softlogic Holdings chaired by Ashok Pathirage, are also on a watch list and some “remedial actions’’ including re-negotiating debt repayment plans, fresh infusions of equity, and raising Rs 10b through a rights issue and warrants, have been announced. For the year ended March 31, 2023, the conglomerate posted a loss of Rs 24.07b.
Mr Pathirage has 41.35% interest in Softlogic Holdings.
Current liabilities of the Odel Group (apparel retail and investment property) exceed current assets by Rs. 14.16b (company Rs. 12.23b).
EY cautions that a material uncertainty exists which may cast significant doubt on the group’s and company’s ability to continue as a going concern. “Our opinion is not modified in respect of this matter.’’
EY also said additional funding of Rs 19.35b is needed to complete the Odel mall with its capital work of 17.65b.
Other key audit matters are highlighted.
Among them is Rs 22.6b of total interest bearing loans and borrowings of the group, of which Rs. 13.8b is current liabilities and the balance Rs. 8.9b are non-current liabilities.
The loans and borrowings balance accounts for 71% of the group’s total liabilities.
The group said its board “has made an assessment of the group and the company’s ability to continue as a going concern’’. This, it says, is based on available information of the forecast future cash flows and conditions of business and the effect of measures such as short-term financing facilities of Rs. 9.16b from financial institutions.
“Certain financial institutions have communicated to Softlogic Holdings Plc, that they intend on extending conditional support to the operations of the Softlogic Group that includes Odel Plc and its subsidiaries’’.
The group said that after the balance sheet date, “the management has also been able to reschedule principal payment on debt amounting to Rs. 1b’’.
As for the mall, funding will be raised through equity infusion, short term loan, syndicated loan, and apartment sales.
Management has secured the syndicated loan of Rs. 704m which will be used as planned up to 2025/26, the group said.
As for operational strategies, the group cites rationalising and disposing of underused assets, as well as reviewing and rationalising the outlet network with the aim of exiting low profitable locations.
Considering these and other measures, the board “has concluded that the group and company have adequate resources to continue its operations in the foreseeable future’’.
Financial statements for the year ended 31 March 2024 have been prepared on a going concern basis, the group said.
Subsidiary Odel Properties One (Pvt) Ltd, is building a shopping mall with apartments as a Board of Investment project. It will have offices, residences, retail and associate facilities and a car park. The group said work on the mall had been “significantly impacted by changes in the economic and political environment’’ and that work was suspended occasionally from late 2022 and during 2023. As a result, an Rs 767.43m impairment loss was recognised.
The retailer, with a workforce of more than 1,400, has been closing stores and holding seasonal sales such as those that clear out old inventory.
Odel has closed loss-making stores Odel Battaramulla, Odel Majestic City, Cotton Collection Majestic City and some exclusive branded outlets in Colombo City Centre, Liberty Plaza and in Kollupitiya. Love Moschino and Hallmark at One Galle Face Mall, Crocs at Arcade Independence Square were also closed down. The Nugegoda department store was turned into a discount store. A new outlet was opened at Havelock City Mall.
Odel Plc revenue dropped by 12% to Rs 7.3b from the Rs 8.2b the year before.
It cited “a challenging business environment’’.
Odel also said the loss increased mainly due to “a significant rise in administration costs’’, including an impairment loss of Rs. 767m on the investment in Odel Properties One (Pvt) Ltd, along with shrinking revenue.
Overall gross profit margin fell to 53%, from 57% in the year before.
Odel Plc has several subsidiaries including Odel Apparels (Pvt) Ltd, Cotton Collection (Pvt) Ltd Softlogic Brands (Pvt) Ltd, Odel Properties One (Pvt) Ltd
For the six months ended 30 September 2024-2025, Odel Plc posted a loss of Rs 2.22b, versus Rs 1.18b loss in the year before.
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