August 29, 2024 (MLN): The profitability of Systems Limited (PSX: SYS) dropped by 39% YoY to Rs3.24 billion [EPS: Rs11.12] for the six months ended on June 30, 2024, compared to a profit of Rs5.29bn [EPS: Rs18.21] in the same period last year (SPLY), the company's filing on PSX revealed today.
The company attributed this plunge in profit to the exchange loss against a considerably high exchange gain recorded in last year.
Normalizing the impact of currency fluctuation, profit after tax showed an increase of 25% from the same period last year.
Wage inflation adjustment has significantly offset the revenue growth. Basic and diluted earnings per share increased by 25% after normalizing the impact of currency fluctuation.
| Consolidated (un-audited) Financial Results for the six months ended June 30, 2024 (Rupees in '000) | |||
|---|---|---|---|
| Jun-24 | Jun-23 | ||
| Sales | 31,023,362,819 | 23,189,163,398 | 33.78% |
| Cost of sales | 24,040,376,078 | 16,930,536,067 | 41.99% |
| Gross Profit/ (loss) | 6,982,986,740 | 6,258,627,331 | 11.57% |
| Administrative Expenses | 2,164,970,404 | 1,843,693,101 | 17.43% |
| Selling And Distribution Expenses | 874,032,603 | 835,417,628 | 4.62% |
| Other Gains / (Losses) | 84,720,065 | 220,530,590 | -61.58% |
| Other Income | 114,530,802 | 2,838,286,831 | -95.96% |
| Finance Cost | 287,095,140 | 408,141,675 | -29.66% |
| Profit/ (loss) before taxation | 3,328,651,997 | 5,319,855,433 | -37.42 |
| Taxation | 85,332,669 | 25,994,073 | 228.28% |
| Net profit for the period | 3,243,319,328 | 5,293,861,360 | -38.73% |
| Basic earnings per share | 11.12 | 18.21 | -38.93% |
During the review period, the consolidated revenue grew by 34% from Rs23.18bn to Rs31bn while the gross profit and operating profit increased by 12% and 15% respectively.
"Since billing is primarily based on man-days, seasonality significantly impacts revenue due to lost billing during public holidays," the statement reads.
Q2 saw a notable reduction in billable days, with two major religious holidays occurring in the same quarter. However, Q3 is expected to be a full working quarter with 5% more billable days, providing the Company with consistent billing opportunities and improved revenue.
The company continues to invest in markets where significant opportunities are identified. This investment is driving aggressive growth in these regions, it added.
Although 90% of the company’s business is conducted in USD to hedge currency risk and the exchange rate has remained stable, rising inflation is putting pressure on margins despite the robust growth, it further noted.
Optimization and rationalization of costs and efficiencies will help release this pressure in the second half.
The company continues to maintain a strong backlog for the upcoming quarters, coupled with a robust pipeline that is well-positioned to support future growth.
This solid foundation is expected to drive consistent performance in the coming periods.
The introduction of the new State Bank of Pakistan (SBP) investment policy, which addresses foreign exchange regulations, is expected to attract long-term investors.
This policy not only strengthens the Company’s financial stability but also opens up opportunities for inorganic growth through mergers and acquisitions, enhancing its competitive edge.
In line with technological advancements, the company is actively working on transitioning towards providing AI as a Service.
This strategic shift is aimed at capitalizing on the growing demand for AI-driven solutions, positioning the company at the forefront of innovation in its industry.
In terms of regional performance, the European market has shown stable growth, while the US market, which had historically been flat, has recently begun contributing positively to the group’s overall growth.
This diversification in geographic revenue streams enhances the company’s resilience and growth prospects.
The Middle East segment continues to be a key driver of growth for the company.
A strategic focus on the development and maturity of enterprise customers in this region is central to the company’s business model, with significant efforts directed towards scaling operations and deepening market penetration, the statement further added.
While the company has seen an increase in exports, it has strategically reduced its focus on the domestic market. However, contracts within Pakistan that were previously eroding profitability are nearing completion, which is expected to lead to improved segment profitability by the end of the year.
The company’s recent success in signing numerous banking and financial services (BFS) customers is poised to significantly boost the return on investment (ROI) from its NDC.
This strategic alignment underscores the company’s commitment to leveraging its infrastructure to deliver enhanced value to its clients.
Copyright Mettis Link News
Posted on: 2024-08-29T09:55:28+05:00
