Karachi: Systems Limited (SYS), a prominent IT services firm, reported a decrease in its earnings for the first half of the calendar year 2024, with earnings dropping to PKR 3.2 billion from PKR 5.3 billion in the same period last year. The company’s earnings per share also fell from PKR 18.2 to PKR 11.1, reflecting various strategic and economic challenges.

According to AKD Securities Limited, the management attributed the decline in gross margins primarily to an aggressive growth strategy that incurred higher costs due to increased inflation, high interest rates, and the Pakistani Rupee’s appreciation against the US dollar. Further impacting margins were outdated contracts in the domestic market, which are set to expire by the first quarter of 2025. The company has decided to shift its focus away from small to mid-sized implementations in Pakistan to renegotiate these contracts at better rates.

Systems Limited also plans to adjust its business strategy by no longer relying on the depreciation of the Pakistani Rupee, a significant shift from its previous practices. Additionally, the company’s workforce distribution has changed, with a slight increase in staff based in the UAE and Egypt, and a slight decrease in Pakistan.

The company reports that 93% of its revenue is now generated in foreign currency, which provides some buffer against domestic currency fluctuations. Seasonal effects, notably from the Eid holidays, also impacted the company’s productivity during this period.

Looking ahead, Systems Limited is set to benefit from new regulations by the State Bank of Pakistan, allowing more flexibility in handling export proceeds. This change is expected to facilitate more aggressive mergers and acquisitions. Despite recent internet disruptions in Pakistan, the company reported no significant impact on its operations.

Furthermore, management is optimistic that global economic challenges could present opportunities, as businesses look for more cost-effective outsourcing solutions, positioning Pakistan as a competitive player in the IT outsourcing market.