Shams ul Nisa

Service Industries Limited (SIL) has reported a notable reduction in its fixed assets following the demerger of key business divisions, marking a significant shift in its financial structure, reports WealthPK.

According to the company’s financial statement, SIL has restructured itself by transferring its tyre, retail and Speed (Private) Limited shares to newly-formed entities -- Service Tyres, Service Retail, and Service Industries Capital -- to enhance operational efficiency. As a result, SIL has reported a sharp decline in its fixed assets, which dropped from Rs12.45 billion on December 31, 2023, to Rs1.23 billion on September 30, 2024.

Additionally, the company reported net sales of Rs12.90 billion for the nine months ended September 30, 2024, reflecting sustained operational activity following the demerger. The company posted a gross profit of Rs701 million and an operating profit of Rs1.63 billion during 9MCY24. However, despite these figures, SIL recorded a loss-after-tax of Rs165 million compared to a net profit of Rs1.09 billion in the same period of CY23, highlighting the financial challenges faced by the company in the aftermath of its restructuring.

Following the restructuring, SIL has strategically repositioned itself to enhance operational efficiency and strengthen its core business focus. The desegregated tyre, retail and investment segments can now streamline operations and drive sector-specific growth without the complexities of a diversified structure. This move also allows investors to assess performance with greater clarity. However, potential impacts from new taxation and stabilisation measures and inflationary pressures would still take their toll on SIL and its newly-formed entities, which could affect their overall profitability.

Despite the challenges, SIL has demonstrated resilience, supported by substantial dividend income from its subsidiaries, including Service Global Footwear Limited and Service Long March Tyres Private Limited. These dividends have provided financial stability, highlighting the continued profitability of certain business segments despite structural changes and market uncertainties. While some divisions face headwinds, SIL's diversified investment strategy ensures that key revenue streams remain intact, reinforcing its ability to navigate the evolving economic landscape.

Looking ahead, the company remains optimistic about overcoming economic challenges while focusing on maximising shareholder value. The company sees potential for growth, aided by improving macroeconomic indicators such as declining policy rates, which could create a more favourable business environment. While the demerger has significantly altered SIL’s asset structure, it also presents new opportunities for targeted expansion across its newly-independent entities. As the company adapts to evolving market conditions, strategic adjustments will be key to maintaining its competitive edge both in Pakistan and internationally.

Credit: INP-WealthPk