So the bourse was saving the best for last. At the tail-end of the result season for CY18, a prominent local software house delights its shareholders with record earnings, a decent payday (Rs2 dividend per share, or 20% of par value) and bonus shares (10%). For the year ended December 31, 2018, Systems Limited (PSX: SYS) almost doubled its bottom-line over CY17, to cross the billion-rupee milestone, thanks mainly to strong top line growth at holding company (Systems) and subsidiaries, besides currency fluctuations.

The holding company held firm in 2018. Systems accounted for 71 percent of the group’s net revenues in CY18, but a disproportionately higher 95 percent of its operating and net profits. Besides a healthy top line growth of 29 percent year-on-year, controlled growth in cost of sales and a fall in distribution expenses, the holding company’s financials were immensely boosted also by the falling PKR in 2018.

The exchange gain is reflected in ‘other income’ that jumped by 270 percent year-on-year to Rs438 million for the holding company. For the group, this gain equated to 8 percentage points of net revenue, something of immense benefit down the line. Further PKR depreciation this year augurs well for the holding company, which derives majority of its revenues form exports in markets like North America.

Talking to BR Research, Asif Peer, CEO at Systems Limited noted that with or without the exchange gains, the consolidated SYS bottom-line showed strong growth thanks to growth in core business. He noted that the company’s business model, which is not built around exchange gains, is set to scale up further by using the Middle East as a base to get more business inside the US and European markets.

Meanwhile, the two subsidiaries – i) the majority-owned, Pakistan-based E-Processing Systems that mainly sells airtime solutions and ii) the Dubai-based, wholly-owned TechVista that provides software development solutions in the MENA region – accounted for 29 percent of consolidated top line in CY18, up from 24 percent in CY17. The CEO explained that the subsidiaries’ jump is coming mainly from TechVista, as EP Systems is in an early stage where focus is more on growing volumes.

However, the subsidiaries’ share in the consolidated operating and net profits was down to 5 percent (CY17: 16%). The lower share in operating profit is not unusual; in their formative years, the two subs focus more on growing sales (CY18: yearly top line growth at subs was 70%) than on controlling costs. As for CY18 in particular, the subs’ share in operating and net profits was limited, thanks also to high exchange gains scored by holding company.

Over at the bourse, the SYS scrip, for the most part, has done better than the broader index in the last 12 months. The stock, which has a daily average trade of 125,000 shares, is up nearly 15 percent over the last one year; now it is slowly pacing the incline towards the last year’s high of Rs129.7 (July 30 2018). Expected top line growth at the holding company and the two subsidiaries, as well as favourable currency movements, have SYS poised for another good year in 2019.