After a hefty increase in earnings for CY22, Systems Limited (PSX: SYS) announced another good year in earnings. The announcement on the stock exchange showed a growth of 31 percent year-on-year in SYS’s consolidated bottomline for CY23 with a colossal profit after tax of Rs8.7 billion.

The growth in consolidated earnings came from topline growth. The IT giant’s revenues during CY23 were seen increasing by 68 percent year-on-year. With Rs 53.5 billion in revenues, the growth came from 71 percent year-on-year growth in technology-related solutions, and over 2.8 times growth in telecommunications services during the year.

The company’s gross profits also witnessed growth of 58 percent year-on-year as the company’s revenues grew. However, the gross margins for CY23 fell to 25.6 percent from 27.2 percent in CY22, which was due to higher cost pressure and inflationary cycle during the year. A research note from Arif Habib highlights that the cost increase came from higher compensation, rising energy costs, and substantial amortization.

While the IT Company saw a massive rise in selling and distribution expenses as well as administrative expenses along with impairment losses and other operating expenses, the operating profits were up by 44 percent year-on-year in CY23. The rise in the cost of components can be seen in lower operating margins, however.

And while three times the increase in finance cost was bound to axe the bottmline of the company – eating away the net margins – System Limited’s growth in finance cost was partially offset by higher other income and lower share of losses from associates. Other income growth was linked to higher domestic currency depreciation, and hence higher gains. Finance costs rose on the back of higher borrowings amid high interest rates.