Analyst Briefing: Systems’ partnership with SAP to add significant value in business

May 4, 2021 (MLN): Systems Limited held its analyst briefing on Monday, wherein the management discussed and reviewed the company’s latest financial performance of 1QCY21, digitalization and the future outlook of the company.

To recall, the company posted net profit of Rs602million translating into an EPS of Rs4.96 for the year ended March 31, 2021, showing a growth of 14.25%YoY.

During briefing, management pointed out that increase in profitability is attributable to increased business from Middle East, Europe and North America region, surge in domestic sales and high contribution from MEA and North America in terms of maintenance contracts. On the contrary, rupee devaluation dented further increase in revenues.

The topline of the company increased by 37%YoY during 1QCY21 where highest growth was witnessed in the Middle East region of 58% while Europe, North America and Pakistan registered growth of 43%, 43% and 29% respectively. In dollar terms, company’s topline increased by 37%YoY to USD19.4mn. COVID-19 has only helped in accelerating growth further as resource count stands at 3604 as of 1QCY21 against 3287 for 4QCY20 while it stood at 2964 for 1QCY20, research report by AKD Securities highlighted.

Recently, company has signed a partnership deal with SAP which is going to be adding significant value in the business through stimulating sales further. In order to utilize the maximum potential from this partnership, company is focused to build a team of right people to cater the demand for respective services in domestic as well as in international market- mainly in Middle East and Europe.

Overall, growth potential in all the regions remains intact where company specifically highlighted more opportunity for skilled offshore resources in the European market. Moreover, system ventures is another bright prospect through which various options are currently being explored to invest in, AKD reported.

In the wake of Covid-19 and as a result of adaptability of the concept of “work from home” accelerated the demand of IT services throughout the world. Being a IT company, SYS Ltd is up to invest more strategically in human resource as the number of IT professionals has increased by 43% to 1,812 compared to the corresponding period last year.

The management also shared its expansion plan and divulged that company is opening its new office in South Punjab region to attract human resource and is also actively looking out to open its office in other cities of KPK/Sindh province as well.

During the meeting, the management also indicated that in order to cater the increasing demand of IT related services such as cloud and security services agreement, a new business unit “Digital Infrastructure Services (DIS)” has been launched by SYS Ltd. Under this project, company strives to target local market initially and in the next phase, it will explore untapped markets.

Talking about the upcoming federal budget, company stated that no significant changes are expected in the federal budget 2021-22 for the IT sector. In an amended Income tax bill 2021, the government has already replaced tax exemptions available to IT sector with 100% tax credit.

Management has also discussed change in its strategy post outbreak of COVID-19. Company has increased its focus on North America and Europe region due to higher margins in these markets, better credit worthiness of clients, and less working capital requirement for projects as compared to MEA region.

The company is currently exploring various opportunities for inorganic growth through its subsidiary, Systems Ventures.

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