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Systems Limited profits rise 31% to Rs8.69bn in 2023

Systems Limited profit plummets 66% YoY to Rs1.24bn
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March 25, 2024 (MLN): Systems Limited (PSX: SYS) recorded an increase of 31.06% YoY in its profits, with the company's after-tax profits rising to Rs8.69 billion [EPS: Rs29.86], compared to a profit of Rs6.63bn [EPS: Rs23.61] in the same period last year (SPLY).

Along with the results, the company announced a final cash dividend for the year ended December 31, 2023 at Rs6 per share.

During the review year, operating revenues of the company were Rs53.44bn compared to Rs31.76bn in 2022.

The growth in revenue was contributed by both the company and its subsidiaries.

Current period showed a significant increase by Rs24.61bn after normalizing the last year reported revenue by one-off sale of license of CLOS, a product developed by NDC which was sold for an upfront payment of $8 million and subsequent royalty of around $7m over five years and recognized at present value.

Cost of $15m had also been adjusted against the revalued intangibles at the time of acquisition neutralizing the P&L.

The normalized growth in the revenues for 2023 was 85% and with the one-off revenue in 2022, the reported growth was 68%.

Gross profit grew by 58% to Rs13.66bn in 2023.

The gross margins, however, worsened to 25.56% as compared to 27.19% in 2022.

Operating profit from ordinary course of business amounted to Rs7.89bn showing a growth of 47.06%.

The reported number includes one off impairment loss on remeasurement of investment in Jomo Technologies (Pvt) Limited amounting to Rs154m bringing the reported growth down to 44.19%.

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 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 Rs154.46m does not truly reflect its fair value.

Hence the management, in the interest of prudence has taken requisite impairment of the investment.

The net profit from ordinary business stood at Rs9.62bn and with one-off adjustments, the reported number stood at Rs8.69bn.

The adjustments include a proportionate share of loss on EP Systems B.V, netted off with the share of profit from Retailistan arising from a one-off notional gain from disposal of Jugnu Technologies (Pvt) Limited.

It also includes the impairment losses pertaining to Sales Flo due to the value in use of the company being less than the carrying value of the investments.

The carrying value of investment was adjusted upwards with the notional gain on disposal of Jugnu Technoglogies (Pvt) Limited as stated above.

The impairment loss is adjusting the same notional gain.

Moreover, it includes the impairment losses pertaining to EP Systems B.V due to the value in use of the company being less than the carrying value of the investments.

In 2021, the company had to record a one-time notional gain in the financial statements amounting to Rs816.23bn arising from conversion of E-Processing Systems B.V. from a subsidiary to associate on account of dilution of voting rights resulting from investment of Gates Foundation in irredeembable preference shares.

On revaluation, the same notional value was written down.

After the share of loss and impairment, the remaining carrying value was Rs200 million only.

With this adjustment, all the investments in the company’s books have been written off.

Consolidated (un-audited) Financial Results for year ended December 31, 2023  (Rupees in '000)
  Dec 23 Dec 22 % Change
Sales – Net 53,435,483 31,759,927 68.25%
Cost of sales (39,778,797) (23,123,648) 72.03%
Gross Profit / (Loss) 13,656,686 8,636,279 58.13%
Selling and distribution expenses (1,569,564) (740,518) 111.95%
Administrative expenses (3,982,646) (2,483,965) 60.33%
Impairment losses/ (Reversal of impairment losses) on financial assets (205,137) 40,359
Share of loss from associates (48,069) (323,899) -85.16%
Impairment loss on investment in associates (729,463)
Other Income 3,193,598 2,230,060 43.21%
Other operating expenses (166,792) (89,326) 86.72%
Finance Cost (868,990) (287,820) 201.92%
Profit before taxation 9,279,622 6,981,169 32.92%
Taxation (590,732) (351,508) 68.06%
Net profit / (loss) for the period 8,688,890 6,629,661 31.06%
Basic earnings/ (loss) per share  29.86 23.61

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Posted on: 2024-03-25T09:25:41+05:00