Karachi August 29 2024: System Limited, the largest IT company of Pakistan, profit plunged 49 percent in first half of 2024 due to cost escalation, according to company filing to the exchange.
Share price of the company drops PKR 7.53 or 1.78 percent in today’s trading session at Pakistan Stock Exchange.
During period under review, standalone revenue grew by 27 percent over same period last year from PKR 14,210.45 million to PKR 18,050.94 million. Gross profit increased by 5 percent whereas operating profit decreased by 4 percent, mainly due to higher inflationary costs.
Moreover, as a consequence of rupee appreciation, net profit for the period has been impacted by an exchange loss of PKR 221.87 million compared to the PKR 2,355.52 million exchange gain in June 2023 decreasing net profit by 49 percent, from PKR 4,821.90 million to PKR 2,456.56 million.
Normalizing the impact of currency fluctuation, the net profit showed increase of 9 percent from same period last year. Since the rupee has appreciated against the dollar in HY, the Company did not get the leverage on the wage inflation which has impacted the bottom line. However, the business continues to grow, and revenue has increased by 24 percent in USD terms.
Similarly Basic and diluted earnings per share increased by 8 percent and 9 percent respectively after excluding the effect of currency fluctuation.
The geographical segment analysis shows robust growth across all four segments. European and MEA segment is bouncing back showing an encouraging dollarized growth. The Company is rationalizing Pakistan segment as well by improving the quality of revenue bringing efficiencies and optimizing costs to improve the profitability in this segment as well. With the strategic actions that the Company is taking, the profitability across all segments is expected to show a positive trend towards latter half of the year. Export sales of the Company are now roughly around 87 percent of total sales in line with Company’s strategy to grow exports.
“Since billing is primarily based on man-days, seasonality significantly impacts revenue due to lost billing during public holidays. Q2 saw a notable reduction in billable days, with two major religious holidays occurring in the same quarter. However, Q3 is expected to be a full working quarter with 5 percent more billable days, providing the Company with consistent billing opportunities and improved revenue” says Chief Executive Officer Asif Peer.
During the Six months period ended 30th June 2024, consolidated revenue grew by 34 percent from PKR 23,189.16 million to PKR 31,023.36 million. Gross profit and operating profit increased by 12 percent and 15 percent respectively. Net profit for the period decreased by 39 percent from PKR 5,293.86 million to PKR 3,243.32 million due to exchange loss against a considerably high exchange gain recorded in last year. Normalizing the impact of currency fluctuation, profit after tax showed increase of 25 percent from same period last year. Wage inflation adjustment has significantly offset the revenue growth.
Basic and diluted earnings per share increased by 25 percent after normalizing the impact of currency fluctuation.
