September 28, Colombo (LNW): Softlogic Holdings PLC (SHL) has returned to the black at group level, recording a pre-tax profit of Rs. 24 million for the financial year ended March 2026. The result marks the first time the group has reported a pre-tax profit since 2019 and represents a significant turnaround from the Rs. 7.5 billion pre-tax loss recorded in the previous financial year.
The latest performance brings to an end a prolonged period of losses for the diversified group. SHL last recorded a pre-tax profit before FY26 in the year ended March 2019, when it reported Rs. 1.7 billion. Losses subsequently widened considerably, reaching Rs. 20.9 billion in FY23. The deficit was reduced to Rs. 12.6 billion in FY24 and then to Rs. 7.5 billion in FY25, before the group moved marginally into profit in FY26.
The return to profitability came alongside a broad improvement in operating performance. Group revenue climbed 24.5% year on year to Rs. 129 billion, its highest level in a decade, compared with Rs. 103.6 billion in FY25.
Gross profit increased by 22% to Rs. 46 billion, while EBITDA rose by 43.1% to Rs. 17.8 billion from Rs. 12.5 billion a year earlier. Both gross profit and EBITDA reached their highest levels in 10 years.
According to SHL, the audited results demonstrate continued resilience across its underlying businesses, with the group’s operations generating cash and retaining their structural strength. The substantial increase in EBITDA was attributed in part to stronger operating leverage, with the growth in revenue outpacing the increase in operating costs.
The improvement was also reflected in cash generation. Net cash generated from operating activities surged 59.6% to Rs. 14 billion in FY26, up from Rs. 8.8 billion in FY25. This represents a marked recovery from the Rs. 7.1 billion operating cash outflow recorded in FY23. Cash earnings per share consequently increased to Rs. 10.07 from Rs. 6.30.
Alongside the operational recovery, SHL continued its efforts to restructure its substantial debt obligations. The group said it had been working with its principal banking partners to replace short-term borrowings with longer-term structured facilities, with repayment schedules designed to better correspond with the cash flows generated by its businesses.
By 31 March 2026, the group had received and signed restructuring offer letters covering banking facilities worth Rs. 47.5 billion. A further Rs. 12.2 billion of facilities had been signed between the financial year-end and the publication date of the Annual Report. Taken together, the arrangements cover approximately Rs. 59.7 billion.
The revised banking arrangements provide the group with capital repayment moratoriums of six, 12 and 18 months, depending on the facility. SHL has additionally secured Banking Facility Support Letters worth Rs. 13.2 billion from the relevant financial institutions.
The group’s balance sheet nevertheless remains highly leveraged. Net debt declined to Rs. 115.9 billion in FY26 from Rs. 124.1 billion in FY24, but it was still equivalent to approximately 6.5 times the group’s FY26 EBITDA.
SHL has also revised the development strategy for the ODEL Mall mixed-use project. Rather than proceeding as a single development, the project has been divided into separate phases. Phase I is intended to be financed primarily through pre-sales of office space, allowing the company to proceed without taking on additional debt for the initial phase.
Within the hospitality portfolio, Pullman Colombo City Centre and Pullman Bentota Resort & Spa have been brought under realigned arrangements with Accor management. SHL expects the move to support higher international occupancy, increase foreign-currency cash generation and reduce the exposure of its hospitality-related debt to fluctuations in foreign exchange rates.
Its insurance arm, Softlogic Life Insurance, meanwhile, strengthened its capital position by raising US$15 million in long-term Tier 2 capital. The funding was provided by institutional impact investors Norfund and OP Finnfund Global Impact Fund I. Tier 2 capital is subordinated funding that can be recognised as part of an insurer’s regulatory capital base.
Softlogic Finance PLC also received regulatory relief, with restrictions on its lending activities lifted. This enables the finance company to rebuild its secured lending portfolio.
SHL said a further source of new equity is expected from the exercise of warrants. These instruments provide their holders with the right to purchase new shares at a predetermined price. The anticipated proceeds are expected to add equity capital to the group and support its efforts to reduce leverage further.
The FY26 results therefore represent a combination of stronger trading performance, improved cash generation, progress on debt restructuring and measures aimed at strengthening individual businesses across the group. While the return to a pre-tax profit marks a significant change from the losses reported in recent years, the group’s sizeable net debt position remains a key feature of its financial position.
*With inputs from DailyFT