Systems Limited targets strategic M&A expansion as growth strategy

September 04, 2026 (MLN):  Systems Limited (PSX: SYS) is positioning its recent acquisition of US-based Confiz as a primary catalyst for scalable earnings growth starting in CY27, while aggressively targeting enterprise Artificial Intelligence (AI) and data engineering opportunities across key global markets.

Management highlighted that 2026 serves as a foundational integration year for Confiz, which already contributed 25% to 30% of the company's North American growth during the first half.

Speaking during the company’s 1HCY26 corporate briefing session, leadership detailed a strategic roadmap centered on cross-selling, operational integration, and selective offshore M&A in North America and Europe particularly the UK to complement its core Middle Eastern presence.

Management emphasized that government digital mandates in the GCC, including the UAE's push for autonomous AI agentic workflows, are accelerating demand for large-scale enterprise data consolidation, legacy system integration, and cloud transformation.

On operational dynamics, management addressed the company's structural foreign exchange exposure, noting that 94% of total revenue is foreign currency-denominated, whereas 56% of operating costs remain in Pakistani Rupees.

Because customer contracts typically carry a tenure of one to three years without quarterly currency pass-through clauses, local currency appreciation creates temporary margin pressures.

Management estimated that a 2% to 3% rupee devaluation adds roughly $10 million to annual profitability.

On the financial front, consolidated half-year revenue surged 35% to 36% year-on-year to Rs 49.7 billion, supported by approximately 20% organic growth.

Gross profit margins held firm at 25.5%, with management targeting a recovery toward 28% to 29% as post-acquisition synergies materialize and cost overlaps are removed.

Geographically, the Middle East & Africa (MEA) maintained its position as the primary revenue driver, accounting for over 50% of consolidated turnover and growing 36% year-on-year.

North America grew 36% to 39% year-on-year, aided by the consolidation of Confiz. Asia Pacific revenues jumped over 84% year-on-year on the back of a one-off, high-margin project, which management expects to normalize over the full year.

Domestically, Pakistan gross margins improved markedly to 17% (up from 8.9% in SPLY).

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