VAT hits Sri Lanka Softlogicâ€™s health care profits
ECONOMYNEXT – The introduction of value-added tax eroded profits at Softlogic Group’s healthcare business in the June 2016 quarter, but profitability is expected to recover with the suspension of the tax, the company said.
Softlogic Group’s June 2016 quarter net profit rose 22 percent to Rs102 million from a year ago, with sales up 13 percent to Rs14.8 billion. Earnings per share were 13 cents, compared with 11 cents the year before, according to interim accounts filed with the stock exchange.
The accounts showed a sharp increase in financial services profit, with profits from its retail business also up, but continued losses in the group’s automobile and leisure sectors, and lower earnings from information technology.
Chairman Ashok Pathirage said first quarter financial results of FY2016/17 reflected mixed fortunes, given the floods and landslides that affected Sri Lanka in May taking their toll on some parts of the economy and dampening business sentiment.
“Furthermore, the introduction of VAT to the healthcare sector resulted in such services being viewed by the public as too expensive to bear, which adversely affected the quarter results of this sector,” he said.
Softlogics’s Healthcare Services reported sales of Rs2.4 billion, up 4.6 percent during 1QFY17, with operating profit down 14 percent to Rs428.3 million and profit after tax falling to Rs296.0 million from Rs345 million the previous year.
“The private healthcare industry was negatively affected by the 15 percent VAT imposition on the sector in May, discouraging patients from private heathcare to escape the unaffordable surcharge in their medical bills,” Pathirage said.
“However, with the suspension of VAT subsequently, the sector’s performance has been restored.”
The group’s Laboratory Services business has been on an “rapid expansion mode”, Pathiragee said.
“Asiri Health will expand its footprint with centers island-wide in the upcoming period. Asiri Kandy hospital, which has commenced construction, will completed by 2018.”
(COLOMBO, August 18, 2016)