Service GlobalFootwear Limited (SGF) has delivered an impressive financial performance for the year ended December 31, 2025, reporting a substantial 74% surge in profit after tax and recommending a final cash dividend of PKR 2 per share (20%). This robust growth, coupled with a significant turnaround in cash flows, signals a strong year for the company and positive prospects for investors.
Financial Performance Highlights
SGF's net revenue climbed by a healthy 14% to PKR 19.94 billion in 2025, up from PKR 17.47 billion in 2024. This top-line growth translated into even stronger profitability, with gross profit increasing by 23% to PKR 3.92 billion. This pushed the gross profit margin from 18.2% in 2024 to an improved 19.7% in 2025, indicating enhanced operational efficiency or pricing power within its core business.
The bottom line saw dramatic improvement, with Profit After Tax (PAT) soaring by 74% to PKR 1.94 billion, up from PKR 1.11 billion in the previous year. This translates into a Basic Earnings Per Share (EPS) of PKR 9.39, a significant jump from PKR 5.40 in 2024.
A notable achievement was the 26% reduction in finance costs, dropping to PKR 498 million, suggesting more efficient debt management or favorable interest rate movements. Furthermore, the company saw a remarkable turnaround in its cash generation. Net cash from operating activities shifted from a negative PKR 618 million in 2024 to a positive PKR 631 million in 2025. Similarly, net cash from investing activities also turned positive, reaching PKR 1.51 billion, despite substantial capital expenditure.
On the balance sheet, total assets expanded by approximately 8% to PKR 20.94 billion, while total equity strengthened by about 16.5% to PKR 8.39 billion, reflecting a solid financial position. The company significantly increased its fixed assets by over PKR 1.25 billion, indicating substantial investment. Short-term borrowings were reduced by nearly PKR 1.90 billion, while long-term financing increased by PKR 802 million, suggesting a strategic shift in debt structure.
Key Drivers of Stellar Performance
SGF's exceptional profit growth was primarily catalyzed by two key factors. Firstly, the core footwear business demonstrated robust performance, with a 14% top-line growth reflecting strong market demand and effective sales strategies. This was complemented by an improvement in gross profit margins, moving from 18.2% to 19.7%, suggesting enhanced operational efficiency or successful pricing power. Secondly, and most significantly, the 'Share of net profit of associate accounted for using the equity method' surged by an impressive 72% to PKR 2.28 billion. This substantial contribution from associated companies proved to be a pivotal factor, underscoring the strategic value and strong returns from SGF's investment portfolio.
Management Actions & Strategic Signals
SGF undertook substantial capital expenditure, investing PKR 1.56 billion in fixed assets during 2025. This signals management's commitment to expanding capacity or modernizing operations, which could drive future growth and efficiency.
The Board has recommended the renewal of a PKR 4.5 billion working capital loan to Service Industries Limited, an associated company, for another year until June 30, 2027. This related-party transaction highlights ongoing financial support to group entities, which investors should monitor for transparency and impact on SGF's liquidity and overall returns.
The restructuring of debt, moving from higher short-term borrowings to increased long-term financing, could be a strategic move to stabilize financial costs and improve liquidity management, providing more predictability in an environment of fluctuating interest rates.
Investor Takeaway
The recommended final cash dividend of PKR 2 per share (20%) is a welcome return for shareholders, reflecting the company's strong earnings and commitment to shareholder value. SGF's 2025 results paint a picture of robust growth, driven by both operational improvements in its core business and significant contributions from associated investments. The turnaround in cash flows is particularly encouraging, indicating improved financial health and sustainability.
Rational investors should keep a close eye on several key areas:
- Associate Performance: The continued strong performance of associated companies will be crucial for sustaining SGF's profitability, given their significant contribution to the bottom line.
- Capex Impact: Investors should monitor how the substantial capital expenditure translates into future revenue and profit growth, ensuring these investments yield expected returns.
- Debt Management: The ongoing shift in debt structure and the renewed loan to the associated company warrant attention to ensure prudent financial management and minimize potential risks.
- Market Conditions: The broader economic environment and consumer spending trends in Pakistan will continue to influence SGF's core footwear business, impacting its top-line growth.