August 29, 2023 (MLN): Systems Limited (PSX: SYS) 's profitability increased significantly by 72.69% YoY in 1HCY23, clocking in its profit after tax at Rs4.82bn [EPS: Rs16.59] compared to a profit of Rs2.79bn [EPS: Rs10.05] in the same period last year (SPLY).
Going by the results, the company's top line increased by 61.63% YoY to Rs14.21bn as compared to Rs8.79bn in SPLY.
The growth in revenue, net of the impact of exchange gain, is 11%.
The increase in revenue has been led by the Middle East.
The cost of sales also rose by 71.22% YoY but was lesser than proportionate to sales decline, which improved the gross profit by 41.49% YoY to Rs4.01bn in 1HCY23.
Margins remain under stress due to significant inflationary pressures in the domestic market, partially eased by the continued devaluation of the Pak Rupee resulting in a revaluation gain of Rs2.36bn compared to the gain in June 2022 of Rs664.67 million.
During the review period, other income surged by 2.61x YoY to stand at Rs2.65bn in 1HCY23 as compared to Rs1.01bn in SPLY.
On the expense side, the company observed a rise in selling and distribution expenses by 29.11% YoY and administrative expenses by 47.99% YoY to clock in at Rs156.7 million and Rs1.02bn respectively during the review period.
The company’s finance costs went up by 3.77x YoY and stood at Rs298.31m as compared to Rs79.12m in 1HCY23, mainly due to higher interest rates.
On the tax front, the company paid a higher tax worth Rs233m against the Rs165.08m paid in the corresponding period of last year, depicting a rise of 41.15% YoY.
Consolidated Results
In line with the unconsolidated results, consolidated revenue grew by 102% from Rs11.46bn to Rs23.2bn versus SPLY. Gross profit and operating profit increased 71% and 41% respectively.
Investment in subsidiaries along with inflationary pressures in the domestic market have impacted margins, however, optimization of revenue and costs has positively impacted margins quarter over quarter.
Net profit for the period at Rs5.3bn is 79% higher than SPLY, including the Rs2.55bn exchange gain.
Basic and diluted earnings per share increased by 71% and 70% respectively in line with profit for the period.
Eliminating the currency impact, revenue is up by 39% in US dollar terms.
During the year ended December 31, 2022, the management had acquired 9% stake in the fastest-growing fashion e-commerce brand of Pakistan, JOMO, as a strategic investment.
However, considering the economic downturn in the country and the delay in anticipated funding resulting in deteriorating liquidity and financial performance of the brand, the management believes that the carrying value of investment amounting to Rs155m does not truly reflect its fair value.
Hence the management, in the interest of prudence has taken requisite impairment of the investment.
The company was absorbing a share of loss from another strategic investment in Retailistan/Jugnu which had been adversely impacting the margins.
| Unconsolidated (un-audited) Financial Results for the half year ended 30 June, 2023 (Rupees in '000) | |||
|---|---|---|---|
| June 23 | June 22 | % Change | |
| Sales | 14,210,448 | 8,791,854 | 61.63% |
| Cost of sales | (10,198,961) | (5,956,628) | 71.22% |
| Gross Profit | 4,011,486 | 2,835,227 | 41.49% |
| Selling and distribution expenses | (156,653) | (121,333) | 29.11% |
| Administrative expenses | (1,024,576) | (692,324) | 47.99% |
| Impairment losses on financial assets | (123,234) | 1,720 | -% |
| Other Income | 2,646,202 | 1,013,074 | 161.21% |
| Finance cost | (298,314) | (79,124) | 277.02% |
| Operating profit | 5,054,911 | 2,957,240 | 70.93% |
| Taxation | (233,004) | (165,079) | 41.15% |
| Net profit for the period | 4,821,908 | 2,792,160 | 72.69% |
| Basic and diluted earnings/ (loss) per share | 16.59 | 10.05 | – |
Amount in thousand except for EPS
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Posted on: 2023-08-29T09:56:44+05:00
