Softlogic : Quaterly Financial Statments for the period ended 31st December 2021

SOFTLOGIC HOLDINGS PLC

INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED 31 DECEMBER 2021

Dear Shareholders,

Spectacular growth was achieved by the Group during one of the most turbulent times in its operating history as consolidated cumulative revenue pressed ahead to reach Rs. 84 Bn (up 46%) while the quarter recorded a strong 45% increase to clock Rs. 32 Bn.

Group revenue for the nine-month period was led by the Retail sector (54% contribution), Healthcare Services (20%) and Financial Services (19%) and IT (6%).

Gross Profit for the cumulative period was up 44% to clock Rs. 27 Bn while a 45% growth was recorded during the quarter to reach Rs. 11.3 Bn.

Distribution costs for the cumulative period increased 36% to Rs. 2.5 Bn while the quarterly cost figure rose 88% to Rs. 901 Mn. Administrative expenses increased 11% to Rs.

5.2 Bn during the quarter while 8% growth was recorded during the nine-month period. Cumulative operational costs increased 12% to Rs. 16.3 Bn with quarterly operating costs also edging up 18% to Rs. 6.1 Bn. This increase was primarily led by expansion at the retail and healthcare sectors.

Other operating income, which is primarily made up of commission and fee income stemming from financial services and retail sector and sundry income, witnessed an increase of 22% to Rs. 742 Mn during 1- 3QFY22 while the quarter reported an upsurge of 76% to Rs. 339 Mn.

Group strategy became clearer as pieces of the puzzle fell into place providing more opportunities in the retail sector with repricing and better margins coupled with stronger demand due to the collective uncertainty followed by unprecedented growth in the financial services, particularly insurance, and healthcare sector amid the extraordinary economic and systemic challenges.

Early recovery is also seen across the non-core leisure sector with a resumption in tourist activities witnessed in recent times, which is very encouraging not only from a perspective of garnering foreign exchange but also in running the engine of tourism to avoid the adverse effects of inertia felt across the industry. Foreign exchange shortages cast a

temporary shadow over the economy but long- term solutions should be sought with cross- border and multilateral agencies without myopic quick fix solutions to ensure sustainable economic recovery. Softlogic with its diverse portfolio and long-term vision, will become a key beneficiary of post-pandemic rebound going forward.

EBITDA, OPERATING PROFIT & PAT

Due to increased revenues and cost discipline, cumulative Group EBITDA almost doubled to Rs. 14. 3 Bn (up 91%) while the quarter witnessed a 76% growth in EBITDA to clock Rs. 6.6 Bn.

Operating profit for the cumulative period recorded a 139% growth to Rs. 11.4 Bn while the quarterly operating profit increased 97% to Rs. 5.6 Bn.

Finance income, which predominantly comprises the investment gains at Softlogic Life Insurance, saw an increase of 63% to Rs. 919 Mn during the quarter while the cumulative finance income increased 33% to Rs. 2.3 Bn.

Net finance costs declined 20% to Rs. 3.6 Bn for the cumulative period as a result of overall YoY decline in AWPLR. The quarter however, witnessed a marginal 3% increase in net finance costs to Rs. 1.26 Bn. AWPLR has gradually risen during FY22 with the year starting with 5.67% in April 2021 while edging up to 8.33% in December 2021.

The recent volatility in the interest rates led to the change in insurance contract liabilities to increase during the quarter. The quarter witnessed a transfer of Rs. 1.1 Bn in comparison to Rs. 593 Mn transfer last year. A transfer of Rs. 3 Bn was recorded for the cumulative period compared to Rs. 2.99 Bn in 1- 3QFY21.

Cumulative PBT recorded more than a two-fold increase to Rs. 4.8 Bn, compared to a loss of Rs. 2.8 Bn in 1-3QFY21.

The quarter recorded a similar PBT growth to Rs. 3.2 Bn (up 224%).

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PAT for the nine months ending December 2021 achieved a two-fold recovery in profitability to Rs. 3.1 Bn in comparison to a loss of Rs. 3 Bn in 1-3QFY22. The quarter recorded a remarkable increase to Rs. 2.2 Bn (up 184%).

RETAIL

Sector revenue improved with a strong 44% growth to Rs. 16.9 Bn during the quarter while the cumulative turnover figure reported a growth of 49% to Rs. 45.3 Bn. Cumulative sector EBITDA rose 88% to Rs. 4.3 Bn while the quarter witnessed a 94% surge to Rs. 2.3 Bn for the retail sector. Retail sector delivered another quarter of strong progress as cumulative PAT recorded a remarkable YoY turnaround to report Rs. 441.1 Mn compared to a loss of Rs. 1.96 Bn in 1-3QFY21. Quarterly PAT reached Rs. 934 Mn as opposed to a loss of Rs. 139 Mn in 3QFY21.

As the impact of coronavirus moves towards an endemic, shopping volumes overall increased. Consumers shifted their priorities spending on products, services, and experiences delivered online during the lockdown notwithstanding patronizing physical stores. This multi-channel distribution thrust given the significant size of the customer database, assisted the retail arm to outperform industry.

Sales of smartphones, laptops and electronics grew during the festive quarter led by higher demand for mid-to-premium products. Apparel and lifestyle products sales surged to exceed 2019's pre-Covid festive season levels. Electronics and smartphones would have outperformed previous benchmarks if supplies had not been constrained by forex restrictions. Improved consumer sentiments and demand drove higher ticket sizes, aided by improvements in income stability, tourism and low Covid infection rates during the period under discussion.

Group telecommunication segment recorded strong performance during the period with increased contribution to Group PAT. Softlogic is the only phone distributor catering the entire industry including the small-scale and large- scale dealers providing both the feature phone segment as well as the smartphone market leaving no demand unfulfilled. We also fulfill the handset supply requirements of the mobile operators, including Dialog Axiata and Mobitel.

Samsung has a large market share in the smartphone category and Softlogic continues to be the lead distributor for Samsung. Softlogic is the oldest player in the country's handset market, and we own the biggest network with over 2,000 retail distribution points. Our longstanding relationship with the dealers has been a core strength.

Suffice to say, the most anticipated sale of the year, "The Softlogic Black Friday Sale," collected over Rs. 1 Bn. The sale was both online and instore at our Consumer Electronics, Supermarkets, Fashion Restaurants and Furniture divisions.

The Consumer electronics segment recorded strong performance during the quarter amidst numerous supply-side challenges. The continuous improvement in the company's Cash to Hire Purchase equation has thereby improved the cashflow position of retail. Laptop and tablet sales surged during the period under review as they were mandatory to support WFH and online schooling.

Continued focus on sales of Original Equipment Manufacturer (OEM) products, those products manufactured for our own private label such as 'Softlogic' and 'Softlogic MAXMO' improved GP margins of the company. The industry also witnessed an increase in prices of the electronic products given the inventory shortage as a result of forex limitations. Another primary driver of GP margin growth was our decision to seek imports from other alternative destinations where freight costing is relatively cheaper.

We are looking at building a local manufacturing plant for electronics. Location assessment and the testing phase of products are currently underway. We expect the factory to begin operations in 1QFY23 after a detailed cost-benefit analysis. We will be initially serving the local market and will focus on 'washing machines' during the initial run. We will expand the product line and seek export opportunities over time.

The company's local modular furniture factory recorded significant growth in sales, particularly from the B2B consumer segment. Direct consumer furniture sales also continued to increase during the quarter

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Softlogic's supermarket business, which rapidly progressed during and after the lockdown, continued to see new and returning customers. Glomark has established a larger than expected share of market niche in the country's supermarket industry. Our consistent supply of groceries during the most turbulent times of supply deficits, particularly the imported items was an industry positive. We have sought local food substitutes in some areas to overcome this import challenge. We will be opening the 12th Glomark outlet in Thalawathugoda in February. Our expansion plan will continue amid such challenges. Glomark won the Silver for 'Best Digital Marketing Innovation 2020', 'Digital Brand Bravery Awards 2020', 'Online & Offline Retail (Fashion/ Consumer Electronics)' at the SLIM DIGIS 2.1.

ODEL was affected by series of lockdown during the nine-month period, but online sales opened a new sales avenue. The company returned to profitability during the quarter primarily led by significant growth in store footfall post lockdown. 3QFY22 was the only quarter which did not witness any country lockdowns in FY22.

We will be opening an exclusive Polo Ralph Lauren store next week. Polo Ralph Lauren is a leading fashion label. The products will be retailed as a Shop-in-Shop within the ODEL department store at the One Galle Face Mall offering designer clothing for men, women and accessories and footwear.

ODEL Mall construction is progressing and is envisaged to open in 2023. Havelock City mall project is expected to open mid-2022. We will be anchor tenants at this new mall. We will see a Delifrance, Popeyes, Odel and some of the Exclusive Branded Apparel stores as well.

We are cautiously prioritizing and gradually overlooking the progress of the projects in the pipeline including The Kandy Mall and Colombo 14 projects.

Restaurants

Popeyes will be celebrating their first anniversary in February. The brand witnessed opening of three new outlets in Mount Lavinia, Negombo and Colombo 04 during its first year of operation. We will be opening five more Popeyes outlets this year. We will also soon open a Popeyes outlet at the BIA. Burger King opened its 23rd outlet in Kottawa and has witnessed exceptional response from the

region. Two new Burger King outlets have been planned during the year. Performance of Delifrance, after being moved to the ODEL promenade area, has recorded significant improvement. We also expect to open two Delifrance and two Baskin-Robbin outlets during the year. Further, we look forward to add three new international restaurant franchises to our portfolio this year.

HEALTHCARE SERVICES

Healthcare sector recorded strong financial performance during the period under discussion.

Cumulative sector revenue increased 49% to Rs. 16.6 Bn while the quarter also recorded a growth of 49% to Rs. 6 Bn. Asiri Hospital Holdings contributed 38% of the hospital group's cumulative topline followed by Central Hospital with 26% and Asiri Surgical Hospital making up 24%. Asiri AOI Cancer Centre, Asiri Matara, Asiri Hospital Galle and Asiri Diagnostics Services together contributed 12.6%.

Sector EBITDA for the quarter was Rs. 2.2 Bn (up 109%) while the cumulative EBITDA grew 93% to Rs. 5.4 Bn.

Sector operating profit for the cumulative period rose to Rs. 4.3 Bn, compared to Rs. 1.76 Bn in 1-3QFY21. The quarter also witnessed a 155% growth in operating earnings to Rs. 1.8 Bn.

Sector profitability recorded an impressive twofold growth in PAT to Rs. 2.8 Bn in 1-3QFY22. The quarter reported a 53% growth in sector bottomline to Rs. 1.1 Bn.

Our continued focus on driving innovation and investments in state-of-the-art facilities and treatments have been a core business driver. Our diversified portfolio encompassing lab testing, nursing, wellness centres, OPD, specialized treatment units and hospitals have emerged to be Asiri's key competitive strength.

Asiri Health has been in the forefront during the harsh waves of the pandemic. We continued to serve the Covid patients at designated wards at Asiri Central and Asiri Medical Hospital.

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We expect the momentum to solidify further in the upcoming periods with the rise of new variants, ageing population, obesity, growth in health awareness, increase in non- communicable diseases and increased spending in private healthcare.

INFORMATION TECHNOLOGY

Sector revenue grew 82% to Rs. 5.2 Bn during 1-3QFY22 while quarterly topline more than doubled to Rs. 2.4 Bn (Rs. 1.1 n reported in 3QFY21). This growth was primarily led by B2B revenues stemming from infrastructure modernizing projects.

Quarterly operating profit increased 118% to Rs. 355 Mn while cumulative operating earnings doubled to Rs. 695 Mn. Sector EBITDA also doubled to Rs. 385 Mn for the quarter while cumulative EBITDA improved 90% to Rs. 783 Mn. Sector's quarterly PBT increased to Rs. 331 Mn (up 126%) while Rs. 644 Mn was achieved during the cumulative period (up 140%). Quarterly PAT for the IT sector was Rs. 255 Mn (up 118%) while 1-3QFY22 recorded a PAT of Rs. 504 Mn (up 134%).

Many traditional companies lacked a strong integrated value chain and as a result, traditional methods continue to be modernized to fill those gaps. Education, shopping, medical services, payments, BPO services and many others are looking at innovative ways to be more productive, create completely new businesses, offer new services to their existing customer base and expand their reach to new customers. As such, digital adoption continues to grow in comparison with pre-pandemic levels and the traditional economy in Sri Lanka moves towards a digitalized economy. Softlogic's IT sector, is helping customers to accelerate their digital transformation by improving and strengthening business and workforce productivity. With our extensive portfolio of products and commitment to provide innovative globally proven solutions that extend from the 'mouse-to-cloud', we are today undoubtedly in the forefront of Sri Lanka's IT industry. Our plan to be the first to launch IT as-a-service in the country, and have thereby provided customers with greater flexibility to scale IT adoption to meet evolving business and budget needs especially during the new norm.

FINANCIAL SERVICES

A cumulative topline growth of 28% to Rs. 16.3 Bn was achieved in the Financial Services sector while a strong quarterly topline growth of 25% to Rs. 6.2 Bn was registered during 3QFY22.

Operating profit recorded a solid 74% growth to Rs. 3.6 Bn during 1-3QFY22 while the quarter witnessed a 17% improvement in operating earnings to Rs. 1.5 Bn.

Sector profitability recorded a phenomenal recovery as Rs. 1.4 Bn PAT was achieved for the nine-month period, as opposed to a loss of Rs. 56 Mn in 1-3QFY21.

Softlogic Life Insurance achieved a GWP of Rs.

20.1 Bn for the year ended December 2021, an increase of 28%. The Company continued its strong growth momentum and outperformed industry growth rates. Softlogic Life bagged 16 awards at the most prominent local and international industry awards ceremonies -- SLIM Brand Excellence Awards, Great Place To Work, Asia Sustainability Reporting Awards, CMA Excellence in Integrated Reporting, SAFA Best Presented Annual Reports (BPA) Awards, Asia Insurance Awards, SLIM Digi Awards and SMARTIES APAC Awards.

Softlogic Finance continued its profitable run during the quarter as the Company recorded a significant improvement of 179% in net interest income to Rs. 422 Mn during 3QFY22. Quarterly PAT was Rs. 96 Mn. Total assets improved 19% to clock Rs. 24.8 Bn.

AUTOMOBILE

The primary revenue drivers of the automobile sector are Ambulance sales and Spare parts and Servicing.

Automobile sector reported a turnover of Rs. 417 Mn during the nine months of financial year end 2020. The quarter witnessed an increase in topline to Rs. 87 Mn (up 73%) primarily led by Ambulance sales to the private and state-led organizations. Otherwise, import restrictions of vehicles hamper growth potential significantly.

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