Systems Limited (SYS) announces 2023 annual results

Systems Limited (SYS), a leading company in the technology sector, recently disclosed its financial performance for the fourth quarter of Calendar Year 2023 (CY23).

Item (PKR mn)	CY23	CY22	YoY	4QCY23	4QCY22	YoY	QoQ
Net Revenue	53,435	31,760	68%	16,102	11,615	39%	14%
Cost of Sales	39,779	23,124	72%	12,559	9,338	34%	22%
Gross Profit	13,657	8,636	58%	3,543	2,277	56%	-8%
Gross Margins	26%	27%		22%	20%
Admin & Dist Exp	5,552	3,224	72%	1,289	1,007	28%	-19%
Others Expense	372	49	660%	(11)	(48)	-77%
Others Income	3,194	2,230	43%	177	495	-64%	-1%
Finance Cost	869	288	202%	215	134	60%	-12%
PBT	9,280	6,981	33%	1,734	1,586	9%	-12%
Taxation	591	352	68%	191	72	166%	50%
PAT*	8,689	6,629	31%	1,542	1,513	2%	-17%
EPS (PKR)^	29.8	22.8		5.3	5.2	2%	-17%
DPS (PKR)	6.0	5.0		6.0	5.0

Let’s delve into the figures and understand what these numbers signify for the company.

Impressive Profit Growth

SYS reported a Profit After Tax (PAT) of PKR 8,689 million, translating to an Earnings Per Share (EPS) of PKR 29.8 for CY23. This marks a notable increase of 31% compared to the previous year, where the company recorded a PAT of PKR 6,629 million (EPS: PKR 22.8) during CY22.

In the fourth quarter of CY23, the earnings stood at PKR 1,542 million (EPS: PKR 5.3), reflecting a modest growth of 2% year-on-year.

Dividend Announcement

In addition to the financial results, Systems Limited announced a final cash dividend of PKR 6.00 per share for CY23, a step up from the PKR 5.00 per share distributed in CY22.

Key Highlights of the Results

Let’s dissect the numbers to understand the driving forces behind these results:

Robust Revenue Growth

Net Sales Surge

The company witnessed substantial growth in net sales during CY23, totalling PKR 53,435 million, marking a remarkable 68% increase year-on-year. This surge can be attributed to the outstanding performance in telecommunications services and technology-related solutions, with growth rates of 187% and 71% YoY, respectively.

The fourth quarter of CY23 saw a significant increase in revenue, reaching PKR 16,102 million, a 39% rise compared to the same period last year.

Gross Margin

While gross margins for CY23 stood at 25.56%, showing a slight decline from 27.19% in CY22, the margins for the fourth quarter of CY23 improved to 22.00%, up by 240 basis points year-on-year. This reduction in gross margins was primarily due to inflationary adjustments, rising energy costs, and substantial amortization expenses.

Income and Expenses

Other Income Growth

Other income witnessed a notable increase of 43% YoY, amounting to PKR 3,194 million in CY23, primarily driven by significant exchange gains amid PKR depreciation. However, in the fourth quarter of CY23, other income decreased to PKR 177 million, down by 64% YoY, mainly due to lower dividend income.

Finance Cost

Finance costs surged by 202% YoY, totaling PKR 869 million during CY23. In the fourth quarter of CY23, finance costs increased by 60% YoY, reaching PKR 215 million, attributed to an increase in short-term borrowings and a higher interest rate environment.

Administrative and Distribution Expenses

These expenses grew by 72% YoY, possibly due to inflationary pressure and an expansion in the resource pool.

Taxation

The company booked effective taxation at 11.0% in the fourth quarter of CY23, compared to 4.5% in the same period last year.

Conclusion

In conclusion, Systems Limited showcased commendable performance in CY23, marked by significant revenue growth and improved margins. Despite facing challenges such as inflationary pressures and rising finance costs, the company managed to maintain its profitability. With the announcement of an enhanced dividend and a strong revenue outlook, Systems Limited appears to be on a positive trajectory in the competitive technology sector.