Despite the pandemic, it’s been a great run for a leading Lahore-based software export house. For the year ended December 31, 2020, Systems Limited (PSX: SYS) last week announced a record haul in net profits. Nearing Rs10 billion in group revenues, the topline gains were solid during the year, helping SYS close out the year on a high.
The holding company, Systems Limited, was the top performer, with the Rs7.5 billion topline in 2020 reflecting a 40 percent expansion during the year. It fetched about 76 percent of the consolidated net revenues during the year, about 5 percentage points higher than CY19. The firm provides software development, software trading and BPO services to clients in North America, Europe and the Middle East.
Asif Peer, the CEO and MD at Systems Limited, told BR Research that the holding company’s export business in Europe and North America had increased substantially last year despite the pandemic. Business became more profitable due to growing demand for digital transformation and secured data communications, especially in sectors of retail, digital commerce, and telecoms.
The holding company accounted for even higher 97 percent of group operating profits, and provided all of the consolidated net profits. Which is another way to say that the two key subsidiaries – EP Systems (which operates in Pakistan, providing cellular recharge platforms like OneLoad) and TechVista (which operates in the MENA region and provides software development solutions) – have underperformed relative to their rather stellar show in CY19.
Calculations show that the subsidiaries collectively scored a topline of Rs2.36 billion, an 8 percent yearly growth in CY20. The duo’s gross profits declined by 23 percent year-on-year to Rs459 million. And they barely eked out operating profits, standing at Rs69 million, down 71 percent over CY19. The subsidiaries together scored a net loss of about Rs30 million in CY20, as opposed to a net profit of Rs204 million in CY19.
The Systems CEO explained that OneLoad performance had picked up since lockdowns were lifted. As for TechVista, its clients opted for off-shore services, which affected the subsidiary’s business. But this offshoring of work to Pakistan also served to help the holding company’s business profitability to grow. The group is positive about subsidiaries’ performance in CY21.
Meanwhile, over at the bourse, the SYS stock has had a great rise during the pandemic. Standing near Rs500 per share, its value has more than tripled over the past 12 months. The CEO attributes this huge appreciation to investors who are confident in the company’s ability to maintain high-growth trajectory. Let’s see what 2021 has in store, as SYS transforms its persona from an IT company into a digital company.
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