Systems Limited Posts 31% Profit Growth in 2023

Systems Limited (PSX: SYS) has announced its financial results for the calendar year 2023 whereby it posted a profit after tax of Rs. 8.68 billion, up 31 percent YoY against a PAT of Rs. 6.6 billion in the same period last year. Earnings in 4QCY23 clocked in at Rs. 1.54 billion, up by 2 percent YoY. Along with the result, the company announced a final cash dividend of Rs. 6.00/share. Net sales in CY23 clocked in at Rs. 53.4 billion, up by 68 percent YoY due to 187 percent and 71 percent YoY growth in telecommunications services and technology-related solutions, respectively, according to Arif Habib Limited. On a quarterly basis, the topline during 4QCY23 surged by 39 percent YoY, settling at Rs. 16.1 billion. Gross margins in CY23 arrived at 25.56 percent vis-à-vis 27.19 percent in CY22. This reduction in gross margins was predominantly driven by inflationary adjustments in compensation, rising energy costs, and the substantial amortization expenses associated with CLOS. The gross margins in 4QCY23 arrived at 22.00 percent (up by 240 bps YoY). Other income witnessed an increase of 43 percent YoY settling at Rs. 3.194 billion in CY23 due to significant exchange gains amid PKR depreciation. However, in 4QCY23, the other income came out to be Rs. 177 million, down by 64 percent YoY, mainly due to the dividend income received in SPLY. Finance cost elevated by 202 percent YoY, clocking in at Rs. 869 million during CY23. In addition, the finance cost in 4QCY23 increased by 60 percent YoY, reaching Rs. 215 million owed to jump in the short-term borrowings and higher interest rate environment. Administrative and Distribution expenses grew by 72 percent YoY, possibly due to inflationary pressure and an increase in the resource pool. The company booked effective taxation at 11.0 percent in 4QCY23 vs 4.5 percent in SPLY. SYS’s earnings per share clocked in at Rs. 29.8 for CY23 compared to an EPS of Rs. 22.8 last year.