Karachi: Systems Limited (SYS) announced a consolidated profit of Rs 3,243 million (EPS: Rs 11.12) for the first half of calendar year 2024 (1HCY24), reflecting a 39% year-over-year decline. For the second quarter of CY24 (2QCY24), the company reported a consolidated profit of Rs 1,672 million (EPS: Rs 5.73), an 18% increase compared to the same period last year. The company held a corporate briefing today to discuss its financial results and future outlook.

According to JS Global, the company’s management noted that gross margins were under pressure during the period, primarily due to ongoing growth initiatives that required significant investments. Additionally, the seasonality factor impacted the company in 2QCY24, with fewer working days due to two Eid holidays.

The management also highlighted that gross margins in the Gulf markets, as well as the Pakistani market, faced pressure. While Systems Limited is not aggressively targeting the Pakistani market, existing contracts are expected to be extended for the next three to four quarters. The company is currently renegotiating these expiring contracts with the aim of securing higher pricing.

Management anticipates an improvement in gross margins in the second half of CY24 (2HCY24) due to cost optimization efforts. However, margins are expected to remain below 30% in the near future as the company continues its horizontal expansion.

The company projected a 20% year-over-year increase in total IT exports for the year, with anticipated growth in the Saudi Arabian market, supported by its strong market presence. Systems Limited also aims to expand its business in the UAE and the Asia-Pacific (APAC) regions.

Management revealed that approximately 85% of the total workforce is based in Pakistan, with additional hiring from Egypt and Jordan for the company’s Dubai office. The UAE now accounts for 10.5% of the total headcount.

The Middle East segment was the main contributor to the company’s revenue during the period, accounting for 58% of the topline, followed by North America with a 22% share, and 13% from local business. Management noted that approximately 93% of the company’s revenue is denominated in foreign currency, while 7% is based in PKR. Conversely, 60% of the company’s costs are PKR-based.

The total number of active clients contributing more than $100,000 increased to 167 in 1HCY24, up from 150 in the same period last year. The top 20 clients contributed approximately 48% to the overall revenue, as per 1HCY24 figures.