Continuing its growth momentum, Pakistan’s leading IT exporter has had a strong close to the first half of the calendar year. As per the latest company financials posted to the stock exchange for the six-month period ended June 30, 2022, Systems Limited (PSX: SYS)saw its consolidated topline jump by a phenomenal 75 percent year-on-year to reach Rs11.46 billion. There was an even bigger expansion of 96 percent year-on-year in the bottomline, which fetched nearly Rs3 billion in this latest reporting period. The balance sheet size, with assets of Rs21.68 billion, has expanded by a fifth since December-end 2021.

The topline is primarily driven by the holding company’s exports of IT services, BPO services; whereas domestic sales of IT services and software-trading are also growing. SYS growth-run pre-dated Covid-19-associated surge in digital adoption, it was turbo-charged mid-pandemic, and the trend continues this year. Management has recently made several investments to stay ahead. It remains to be seen whether the export growth seen in main regions of North America, Middle East and Europe can continue in the latter half of 2022, as there are fears of economic slowdown leading to lower IT spending by firms abroad.

With growing revenues are accompanying rising spending, as the cost of sales and administrative expenses grew out-of-proportion relative to the topline increase during 1HCY22, reflecting in comparatively lower (but still substantial) operating-profit expansion for SYS. To meet with growing external and local demand, SYS has had to significantly ramp up its recruitment of human resource.

It was the ‘other income’ down the line that really helped pre-tax profits to surge to Rs3.13 billion, an amount that was more than double the previous year’s tally. The ‘other income’ during 1HCY22 jumped 13 times over 1HCY21 to reach nearly a billion rupees, mainly due to exchange-related gains on account of massive PKR depreciation in the analysis period.

Looking at SYS components, the standalone financials – for the holding company (Systems Limited) – continue to boost the overall consolidated results. The holding company’s net revenues surged 76 percent year-on-year to reach Rs8.79 billion, its operating profit rose 53 percent year-on-year to cross Rs2 billion and its net profits jumped 107 percent year-on-year to reach Rs2.79 billion. As a result, during 1HCY22, the holding company accounted for 77 percent of consolidated topline gains, 82 percent of consolidated operating-profit growth and 99 percent of the increase in consolidated net profits.

Meanwhile, the SYS subsidiaries also returned healthy growth during 1HCY22. The subsidiaries’ combined net revenues grew 72 percent year-on-year to reach Rs2.67 billion, and the operating profits jumped 71 percent year-on-year to reach Rs360 million. However, the subsidiaries’ cumulative net profit was up only 5 percent year-on-year to Rs173 million. The contribution to consolidated bottomline could improve, as subsidiaries accounted for 23 percent of group topline but only 6 percent of group net profits. Let’s see what the remaining half of the year has in store for SYS.