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Olympia Mills Q3 FY26: Revenue Doubles, but Tenant-Service Costs Compress Margins

Olympia Mills more than doubled Q3 income, but tenant-service costs surged faster, compressing margins. Cash stayed positive while liquidity risk remained.

Sep 24, 2026

Verdict

Olympia Mills Limited delivered a strikingly larger top line in the quarter ended March 31, 2026, but most of that growth was absorbed by the cost of servicing tenants. Quarterly income rose 112.1% year on year to Rs55.80 million, while direct operating expenses jumped 272.0% to Rs36.24 million. Gross profit therefore increased only 18.0% to Rs19.56 million and gross margin compressed sharply to 35.1% from 63.0%. Operating profit still rose 18.7% to Rs14.48 million and profit after tax increased 27.8% to Rs8.21 million.

The company’s own review explains the economics behind the unusual combination of faster income and much faster direct costs: the increase in business income was driven primarily by higher income from facilities, utilities and other services provided to tenants, with the related costs also increasing. That makes Q3 a scale-growth quarter, but not a margin-expansion quarter. The recurring question is whether Olympia can retain more of the additional tenant-service income as gross profit rather than merely pass through a larger cost base.

Cash generation remained positive, yet earnings quality deserves attention. Nine-month operating cash flow fell 29.7% to Rs27.68 million as trade receivables absorbed Rs10.61 million of cash. Trade debts at March 31 were Rs17.63 million, 151.0% above June 2025. More importantly, the interim accounts continue to carry an explicit going-concern material-uncertainty disclosure because current liabilities substantially exceed current assets. The balance-sheet deficit has narrowed, but it has not disappeared.

Results at a glance

  • Company: Olympia Mills Limited
  • Ticker: OML
  • Reporting period: quarter and nine months ended March 31, 2026
  • Basis: company-level condensed interim financial statements, unaudited, prepared under IAS 34; June 30, 2025 balance-sheet comparatives are audited
  • Q3 income: Rs55.80 million, up 112.1% year on year
  • Q3 gross profit: Rs19.56 million, up 18.0%; gross margin 35.1% versus 63.0%
  • Q3 operating profit: Rs14.48 million, up 18.7%; operating margin 25.9% versus 46.3%
  • Q3 finance cost: Rs1.09 million, up 28.3%
  • Q3 profit after tax: Rs8.21 million, up 27.8%; EPS Rs0.68 versus Rs0.54
  • 9MFY26 income: Rs169.05 million, up 110.5%; PAT Rs23.13 million, up 8.5%
  • 9MFY26 operating cash flow: Rs27.68 million versus Rs39.40 million
  • Board payout decision for the quarter: no cash dividend, bonus shares or rights issue

What improved

The first improvement is simple: Olympia is generating far more activity from its industrial asset base. Q3 income more than doubled, and the increase was not an accounting gain recorded below operating profit. Management attributed the higher business income mainly to facilities, utilities and other services supplied to tenants. The company’s business model is therefore broader in practice than collecting a fixed property rent: it also monetizes the operating infrastructure around its Landhi industrial premises.

Despite the surge in direct costs, gross profit still rose by Rs2.99 million year on year. Administrative and general expenses were essentially flat at Rs5.44 million, which allowed the higher gross profit to flow through to operating profit. Operating profit increased to Rs14.48 million from Rs12.19 million. This is useful evidence that overhead did not expand in line with revenue.

The bottom line also improved without a large one-off income item in the quarter. Other income fell 54.3% to Rs0.57 million and finance cost rose 28.3% to Rs1.09 million, yet profit before tax still increased 18.0% to Rs13.39 million. Tax expense rose only 5.2%, allowing PAT to grow faster than pre-tax profit, to Rs8.21 million.

Balance-sheet deleveraging also continued on one important line. Short-term borrowings fell to Rs287.65 million at March 31 from Rs331.40 million at June 30, 2025, a decline of 13.2%. The cash-flow statement shows a Rs43.75 million repayment of short-term borrowings during the nine months. Current assets also rose while current liabilities declined, narrowing the excess of current liabilities over current assets to Rs310.32 million from Rs356.00 million at June 2025.

What weakened / needs attention

The major weakness is the collapse in gross conversion. Direct operating expenses rose from Rs9.74 million to Rs36.24 million, far faster than income. Direct costs consumed 64.9% of Q3 income versus 37.0% a year earlier. The gross margin consequently fell by almost 28 percentage points. Management’s explanation is important: higher facilities, utility and other tenant-service income came with higher related costs. This makes a large part of the top-line acceleration lower-margin in nature.

The nine-month numbers show the same pattern even more clearly. Income rose 110.5% to Rs169.05 million, but direct operating expenses rose 262.7% to Rs110.94 million. Nine-month gross profit increased only 16.8% and gross margin fell to 34.4% from 61.9%. Operating margin compressed to 24.9% from 43.4%. PAT rose only 8.5% because the tax charge increased 47.0% to Rs16.27 million, including a Rs1.16 million prior-period tax charge versus a favorable prior-period adjustment in the comparable period.

Receivables are the second pressure point. Trade debts increased to Rs17.63 million from Rs7.02 million at June 2025. That is not large relative to the investment-property base, but it is large relative to the company’s cash balance of only Rs3.62 million. In the cash-flow statement, the receivable build absorbed Rs10.61 million during 9MFY26, whereas receivables released Rs6.46 million in the comparable period.

Finance cost also moved against the company in Q3, rising 28.3% year on year even though period-end short-term borrowings were lower than at June. The public filing does not provide enough detail to assign the increase to a specific facility, rate reset or intra-period borrowing pattern. SBP kept the policy rate at 10.5% in both its January and March 2026 meetings, so it would be inappropriate to explain the Q3 increase simply as a rising-policy-rate effect. The financing mix and timing remain company-specific variables to watch.

The core economics: more tenant services, much lower incremental margin

Olympia’s current identity is important for interpreting the result. The company’s official profile says its principal business is renting or leasing its fixed assets. Its corporate briefing describes a Landhi industrial site with electricity, gas and water arrangements, together with housekeeping, security and canteen facilities for tenants. At March 31, 2026, investment property stood at Rs608.31 million, accounting for roughly 86% of total assets.

Against that backdrop, the Q3 income jump is best understood as an expansion in property-linked and tenant-service activity rather than a revival of a conventional textile-mill operation. The company itself says the increase was mainly due to greater income from facilities, utilities and other services. Because related costs rose at the same time, the incremental revenue carried a much lower gross margin than the prior-year base.

This distinction matters for forecasting the next result. If a larger portion of revenue is effectively a utility or service pass-through, top-line growth can remain strong without a proportional rise in earnings. The metric to watch is therefore not income growth alone but the spread between additional tenant-service income and its direct operating cost. Q3 generated roughly Rs29.49 million of additional income year on year but only about Rs2.99 million of additional gross profit.

Cash flow and liquidity: improvement in the gap, but material uncertainty remains

Olympia generated Rs44.06 million of cash from operations before taxes and finance costs during 9MFY26, down from Rs53.03 million a year earlier. After Rs13.62 million of taxes and Rs2.77 million of finance costs, net operating cash flow was Rs27.68 million. That remains positive, but it is 29.7% below the comparable period despite higher accounting profit before tax.

Working capital explains much of the disconnect. The company had an Rs11.31 million cash absorption from current assets, led by the Rs10.61 million increase in trade debts. Higher trade and other payables supplied Rs8.27 million of cash, partly offsetting the receivable build. This means cash conversion depended in part on stretching or accumulating liabilities while customer balances increased.

Financing cash flow also shows how the balance sheet is being managed. Olympia repaid Rs43.75 million of short-term borrowings but received a net Rs17.64 million from directors and others during the nine months. The balance of loans from directors and others consequently rose to Rs171.36 million from Rs153.72 million at June 2025. That director support is directly relevant because management cites sponsor support and flexible repayment of director loans as part of its basis for continuing to prepare the accounts on a going-concern basis.

The going-concern note should not be treated as boilerplate. At March 31, current liabilities of Rs395.59 million exceeded current assets of Rs85.27 million by Rs310.32 million. The current ratio improved to about 0.22x from 0.17x at June, but remains very low. The company also had an accumulated loss of about Rs510.14 million and explicitly states that the liquidity position, adverse financial ratios and legal cases create a material uncertainty that may cast significant doubt on its ability to continue as a going concern. Management nevertheless concludes that the going-concern basis remains appropriate, citing settlement of nearly all bank borrowing, positive business cash flow, creditor settlements and director/sponsor support.

Historical pattern: separate recurring operations from the FY25 waiver

The longer earnings record can be misleading if FY2025 is read without context. Olympia reported FY2025 profit after tax of Rs145.90 million, far above the current nine-month run rate. Its 2025 corporate briefing identifies a major non-recurring factor: settlement of the Askari Bank loan resulted in a Rs119.88 million markup waiver. That one-off benefit materially inflated the prior full-year earnings base.

The current Q3 is therefore cleaner as an operating read. It contains no comparable disclosed waiver. The quarter’s earnings came from gross profit on rental and tenant-service activity, modest other income and normal financing and tax lines. When assessing whether the business is improving, operating profit, cash generation and liquidity are more informative than comparing current PAT with the exceptional FY2025 annual PAT.

Sector and operating context

A conventional textile peer comparison would be misleading because Olympia is no longer operating as a normal spinning or weaving manufacturer; its disclosed principal business is leasing fixed assets and servicing tenants. A listed REIT is also not a clean peer because Olympia owns and operates an industrial site directly and carries a very different liability structure. For this quarter, the company’s own tenant-service disclosures and balance-sheet structure provide more useful operating evidence than forcing a peer multiple or margin comparison.

The most relevant external context is financing conditions. SBP kept the policy rate at 10.5% through the January and March 2026 decisions. That stable benchmark backdrop does not remove Olympia’s financing risk, because company-specific short-term borrowing, director funding and liquidity constraints remain material. It simply means the quarter’s higher finance cost cannot be attributed to an in-quarter policy-rate increase.

Recurring versus non-recurring drivers

The higher rental, facilities, utility and other tenant-service income is operational and potentially recurring to the extent occupancy and service usage persist. The associated direct costs are equally recurring. The key quality question is the margin retained on that activity, which weakened sharply this quarter.

The FY2025 markup waiver is different. It was tied to settlement of a bank loan and should not be treated as a recurring earnings source. The current-period tax charge also includes a prior-period component at the nine-month level, so PAT growth should be read alongside operating profit and profit before tax.

Director funding is a financing support rather than earnings. It helps liquidity and underpins management’s going-concern assessment, but it also highlights that the company still depends on sponsor flexibility while current liabilities exceed current assets by a wide margin.

What to monitor next

  • Income mix: whether growth continues to come from facilities, utilities and other tenant services, and whether rental income itself is expanding.
  • Gross margin: whether direct operating costs continue consuming roughly two-thirds of income or the retained margin improves from Q3’s 35.1%.
  • Receivable collection: whether trade debts fall from Rs17.63 million and the working-capital drag on operating cash flow reverses.
  • Liquidity gap: whether current liabilities continue to decline faster than current assets and the Rs310.32 million working-capital deficit narrows further.
  • Short-term borrowings and director loans: whether bank-like short-term funding falls without requiring larger sponsor balances.
  • Finance cost: whether expense normalizes after the 28.3% Q3 increase despite a stable policy-rate backdrop.
  • Going-concern indicators: creditor settlements, legal cases, positive operating cash flow and continued sponsor support remain central to the financial risk profile.
  • Expansion plans: management said in its 2025 corporate briefing that it was evaluating options to expand operations, but no quantified project or earnings contribution should be assumed until formally disclosed.

AlphaGen model outputs

  • Alpha QoQ Score: 31.60
  • TTM Performance Score: 83.83
  • 3Y Business Perf Score: 63.48
  • Sector Leadership Score: 79.26

These four measures are AlphaGen model outputs, not company-reported figures.

Sources

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