Systems Limited targets 26% USD revenue growth, margins to rise 4–5% in CY25

April 11, 2025 (MLN): Systems Limited (PSX: SYS) sets its sights on a strong topline growth of 26% in USD terms for CY25, while the management seeks to inch margins up by 4–5%.

This was revealed during the company's corporate briefing, where the 2024 financial results and future outlook were reviewed.

To support this growth, Systems Limited is implementing several measures to rationalize costs and improve gross profit margins. These include optimizing its bench, keeping fixed costs constant, boosting productivity, rationalizing expenses, and maintaining wage increments at a lower rate this year.

The company has already taken significant measures in 2024 and continues to focus on improving productivity and efficiency, aiming to maintain fixed costs and expecting margins to improve as a result.

In response to a question about whether revenues could exceed $300 million in CY25, the management expressed confidence, stating that with the current backlog and bookings, they are hopeful to continue the growth momentum built over the years.

The company also shared that financial planning for 2025 has been done with the assumption of a constant PKR/USD exchange rate.

SYS management does not expect higher income taxation on services in the FY26 budget, similar to the taxation on goods exports, as the government's focus is on increasing IT exports.

In terms of performance, SYS EBITDA margins decreased to approximately 15% in 2024, compared to 18% in 2023. Revenue growth in USD terms stood at 27% in 2024, compared to just a 2% growth in EBITDA for the same period.

The company's revenue in USD terms for 2024 amounted to $242.35m, while EBITDA was recorded at $35.94m.

The appreciation of the PKR dealt a blow to the company's margins, as management had originally planned for the PKR to depreciate by 5% in 2024.

Going forward, management is now focused on optimizing its operations and not relying on PKR depreciation to improve margins.

In 2024, the company provided its employees with an average increment of 20% due to the inflationary environment in Pakistan and the increasing challenge of retaining skilled resources amid migration trends.

However, this situation has improved following the visa restrictions now placed on Pakistani resources.

Management views the recent US tariffs as an opportunity, as the tariffs have not been imposed on the services industry.

Moreover, the increased tariffs are expected to raise costs, which the company plans to mitigate through the use of AI and outsourcing to companies like Systems Limited.

As of now, Systems Limited boasts over 250 active clients, compared to 236 in 2023. The company has also gained a significant client, with one customer contributing over $25m in annual recurring revenues.

This account has grown gradually from a lower revenue base, and the company is focused on converting other clients in a similar manner.

The company’s human resource distribution is composed of 82% in Pakistan, 12% in the UAE, and 3% in Egypt.

The remaining 3% is spread across Qatar, Saudi Arabia, and the APAC region. Notably, the proportion of resources in Egypt has increased from 0.55% in 2022 to 3.19% in 2024.

In terms of revenue, 94% of SYS's earnings come from foreign currency, while 6% is in PKR. On the cost side, 43% is in foreign currency and 57% in PKR.

Looking ahead, Systems Limited is targeting Saudi Arabia for future growth. According to management, the company still holds a small share of the market, leaving significant room for expansion.

The company is also a certified technology partner of major brands, including Microsoft, IBM, Salesforce, Amazon, and Temenos, and has received numerous awards for its services.

Furthermore, it ranks among the Top 100 Microsoft partners, being part of the Inner Circle.

Copyright Mettis Link News