The holding company (Systems Limited) as well as the two subsidiaries (Pakistan-based E-Processing Systems and the Dubai-based TechVista) posted strong performance for early 2023 on the bourses recently. Systems Limited (PSX: SYS), the leading IT exporter, announced a hefty increase in its earnings for the first half of 2023. The company’s witnessed an increase of 79 percent in its consolidated earnings for 1HCY23, which was largely led by doubling group topline as well as the continued devaluation of the domestic currency as seen in growth in non-core gains recorded under ’other income. Not only did the company on standalone basis continue to grow business, the subsidiaries contribution to topline as well as the bottomline were part of the progress the company has made.
Core topline growth (standalone)for SYS was 62 percent year-on-year, while consolidated revenue growth was over 100 percent in 1HCY23. The growth came from all geographies, but MEA region has been at the forefront in its share in revenues – overtaking North America region recently to become the biggest contributor total revenues. The current breakdown of segment-wise revenue stands at 52 percent from Middle East, 28 percent North America and Europe, 18 percent for Pakistan and the remaining 2 percent from Asia Pacific.
However, the gross profit did not grow in the same proportion as consolidated gross margins fell from 32 percent in 1HCY22 to 27 percent in 1HCY23.a s highlighted in the analyst briefing, factors for lower gross margins were the inflationary adjustments in salaries, increase in energy prices, currency devaluation impacting onsite resources cost along with licenses and subscription cost, and high amortization cost of intellectual property purchased by NDC along with high cost of human capital. The decline in Operating profits on a consolidated basis was due to additional cost related to newly incorporated subsidiaries, one of adjustment of investment in JOMO- a fashion ecommerce marketplace apart from other costs.
The company’s bottomline benefitted from massive uptick in other income that came from higher currency devaluation. Out of Rs2.8 billion under ‘other income’ head, Rs1.7 billion accounted for exchange gains. Finance cost also grew due to increased interest rates for borrowing. The analyst briefing also pointed out that the share of loss generated by Jugnu – a B2B ecommerce startup that has now shut down its operations - has already been offset the investments, which means that the IT company will not likely incur any further loss share from Jugnu.
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