Systems Limited (SYS) slides after disappointing Q1 result

Systems Limited has recently released its quarterly results for the first quarter of calendar year 2024 (1QCY24). Let’s delve into the key points from this earnings announcement.

Profit Analysis

The consolidated Profit After Tax (PAT) for 1QCY24 was PKR 1.6 billion, translating to an Earnings Per Share (EPS) of PKR 5.39. This represents a significant decrease of 59% compared to the same period last year (SPLY), where the PAT was PKR 3.9 billion with an EPS of PKR 13.32. The reported result fell below expectations primarily due to lower revenue and other income.

Revenue Overview

Revenue for the quarter stood at PKR 15.2 billion, reflecting a 6% decline compared to the previous quarter (QoQ). This reduction in revenue was largely driven by decreased revenue from the Middle East market.

The company’s dollarized revenue in 1QCY24 was approximately US$54 million, showing a year-on-year growth of around 7%. However, on a quarter-on-quarter basis, dollarized revenue declined by approximately 1%.

Gross Margins

Gross margins for the quarter were 23%, down from 26% in the same period last year (SPLY). This decline can be attributed to an increasing portion of dollarized expenses coupled with the appreciation of the Pakistani Rupee (PKR) against the US Dollar (USD).

Other Financial Highlights

During the quarter, Systems Limited recorded an exchange loss due to PKR appreciation against USD, resulting in negative other income of PKR 57 million. Finance costs decreased by 6% year-on-year (YoY) and 31% quarter-on-quarter (QoQ), amounting to PKR 148 million, possibly due to a decline in debt levels.

Administrative expenses increased by 41% YoY and 10% QoQ, mainly driven by inflationary pressures and an increase in the company’s resource pool.

Metric	1QCY24 (PKR mn)	1QCY23 (PKR mn)	4QCY23 (PKR mn)	YoY Change	QoQ Change
Revenue	15,194	10,699	16,102	42%	-6%
Cost of Sales	11,690	7,908	12,559	48%	-7%
Gross Profit	3,504	2,790	3,543	26%	-1%
Gross Profit Margin	23%	26%	22%	–	–
Distribution Cost	433	347	281	25%	54%
Administrative Expenses	1,108	785	1,007	41%	10%
Other Income	(57)	2,552	177	NM	NM
Finance Cost	148	157	215	-6%	-31%
Profit Before Taxation	1,760	3,992	1,734	-56%	2%
Taxation	188	113	191	67%	-2%
Profit After Tax (PAT)	1,571	3,879	1,542	-59%	2%
Earnings Per Share (EPS)	5.39	13.32	5.29	–	–

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Disclaimer:

The information in this article is based on research by Insight Securities. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.