Systems : Financial Results for the Year Ended 31 December 2023

25 March 2024

The General Manager Pakistan Stock Exchange Stock Exchange Building Stock Exchange Road KarachiSubject:

FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023

Dear Sir,

We have to inform you that the Board of Directors of the Company in their meeting dated: 22 March 2024 at Karachi have approved the financial statements for the year ended 31 December 2023 and recommend the following:

DIVIDEND

A final cash dividend for the year ended 31 December 2023 at Rs. 6/- per share i.e. 60%.

BONUS SHARES

Nil

FINANCIAL RESULTS

Financial results of the Company are attached hereto as Annexure - A and Annexure - B along with the Directors' Report as Annexure - C.

PERFORMANCE OVERVIEW

Please refer to the Directors' Report in Annexure C for detailed performance review and the future outlook of the Company.

ANNUAL GENERAL MEETING

The Annual General meeting shall be held on 19 April 2024 at Lahore, Pakistan.

The above entitlement will be paid to the shareholders whose name shall appear on the Register of Members on 12 April 2024.

Headquarters	MEA	KSA	APAC
Lahore	Dubai	Riyadh	Australia
E-1, Sehjpal Near DHA Phase-VIII	404, Dubai Hills Business Park 3,	7069 King Fahd Road, Al Hital	Level 16, 1 Market Street,
(Ex-Air Avenue), Lahore Cantt,	Emaar Hills Estate P.O. box:	Tower, 5th Floor, Al Sahafah	Sydney, NSW, Australia Postal
Lahore	500497	Dist, 13315.	Code 2000, Sydney.
[phone]	[phone]

BOOK CLOSURE

The Share Transfer Books of the Company shall be closed from 13 April 2024 to 19 April 2024 (both days inclusive). Transfer received at CDC Share Registrar Services Limited CDC House, 99 - B, Block 'B', S.M.C.H.S., Main Shahra-e-Faisal, Karachi, at the close of business12 April 2024 will be treated in time for the purposes of above entitlement to the transferees.

The Annual Report of the Company will be transmitted through PUCARS at least 21 days before holding of Annual General Meeting.

For and on behalf of Systems Limited,

Ali Ahmed Iftikhar

Company Secretary

Headquarters	MEA	KSA	APAC
Lahore	Dubai	Riyadh	Australia
E-1, Sehjpal Near DHA Phase-VIII	404, Dubai Hills Business Park 3,	7069 King Fahd Road, Al Hital	Level 16, 1 Market Street,
(Ex-Air Avenue), Lahore Cantt,	Emaar Hills Estate P.O. box:	Tower, 5th Floor, Al Sahafah	Sydney, NSW, Australia Postal
Lahore	500497	Dist, 13315.	Code 2000, Sydney.
[phone]	[phone]

SYSTEMS LIMITED

UNCONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED DECEMBER 31, 2023

Note	2023	2022
Rupees	Rupees
Revenue from contracts with customers - net	29	32,037,995,164	20,644,764,716
Cost of revenue	30	(22,421,301,632)	(13,889,659,278)
Gross profit	9,616,693,532	6,755,105,438
Selling and distribution expenses	31	(392,255,261)	(270,588,626)
Administrative expenses	32	(2,085,697,629)	(1,520,716,072)
Impairment losses on financial assets	33	(33,473,891)	(2,497,969)
Other operating expenses	34	(8,561,586)	(89,326,377)
(2,519,988,367)	(1,883,129,044)
Operating profit	7,096, 705, 165	4,871,976,394
Other income	35	2,645,199,791	1,977,050,375
Impairment loss on investment in associate	8.14	(68,953,239)
Finance costs	36	(664,179,989)	(224,538,852)
Profit before taxation	9,008,771,728	6,624,487,917
Taxation	37	(449,611,237)	(324,650,972)
Profit for the year	8,559,160,491	6,299,836,945
Earnings per share
-Basic	40	29.41	22.44
-Diluted	40	29.22	22.29

+

The annexed notes 1 to 46 form an Integral pa of these unconsolidated financial statements.

(CHAIRMAN)

(CHIEF EXECUTIVE)

(CHIEF FINANCIAL OFFICER)

SYSTEMS LIMITED

CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED DECEMBER 31, 2023

2023	2022
Note	Rupees	Rupees
Revenue from contracts with customers - net	33	53,435,483,177	31,759,927,263
Cost of revenue	34	(39,778,797,390)	(23,123,647,896)
Gross profit	13,656,685,787	8,636,279,367
Selling and distribution expenses	35	(1,569,563,845)	(740,518,496)
Administrative expenses	36	(3,982,646,207)	(2,483,965,304)
Impairment losses/ (Reversal of impairment losses) on financial assets	37	(205,137,108)	40,359,108
Other operating expenses	38	(166,791,530)	(89,326,377)
(5,924,138,690)	(3,273,451,069)
Operating profit	7,732,547,097	5,362,828,298
Other income	39	3,193,598,145	2,230,060,151
Share of loss from associates	10	(48,069,294)	(323,899,362)
Impairment loss on investment in associates	10	(729,463,249)
Finance costs	40	(868,990,456)	(287,819,752)
Profit before taxation	9,279,622,243	6,981,169,335
Taxation	41	(590,732,350)	(351,508,026)
Profit for the year	8,688,889,893	6,629,661,309
Attributable to:
Equity holders of the parent	8,688,546,281	6,628,727,695
Non-controlling interest	343,612	933,614
8,688,889,893	6,629,661,309
Earnings per share
Basic earnings per share	29.86	23.61
Diluted earnings per share	29.66	23.45

45

45

The annexed notes 1 to 54 form an integral part of these unconsolidated financial statements.

¥

(CHAIRMAN)

(CHIEF EXECUTIVE OFFICER)

(CHIEF FINANCIAL OFFICER)

DIRECTORS' REPORT

AT THE

FORTY-EIGHTH ANNUAL GENERAL MEETING

OF

SHAREHOLDERS

OF

Systems Limited

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

PROPRIETARY NOTICE: THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION PROPRIETARY TO SYSTEMS LIMITED AND MAY NOT BE REPRODUCED, COPIED OR USED FOR PURPOSES OTHER THAN ITS INTENDED USE WITHOUT THE PRIOR WRITTEN CONSENT OF SYSTEMS LIMITED. THE INFORMATION IN THIS DOCUMENT

IS SUBJECT TO CHANGE WITHOUT NOTICE.

DIRECTORS' REPORT TO THE SHAREHOLDERS 2023

The Directors of the Company take pleasure in presenting the Annual Report of your Company, together with the Unconsolidated and Consolidated Financial Statements for the year ended 31 December 2023.

Group Overview:

The Company is a public limited company incorporated in Pakistan under the Companies Act, 2017, and listed on the Pakistan Stock Exchange. The Company was incorporated in 1977 and is principally engaged in the business of software development, trading of software and business process outsourcing services.

Activities:

The Company's revenue comes primarily from Digital/Data/Cloud Services, Managed Services, Consulting Services, IT outsourcing and Business Process Outsourcing/Contact Center. The Company generates over 80% of its revenue from export of Services to various geographies such as North America, Europe, Asia Pacific and Middle East and less than 20% from domestic market. The Company is well diversified into various business verticals such as Banking and Finance, Telco, Retail, CPG, Pharma, and Public sector.

FINANCIAL PERFORMANCE OF THE COMPANY AND THE GROUP DURING 2023

Unconsolidated:

The Company's financial results for FY23 have maintained a strong trajectory. Operating revenues for the year in local currency were Rs. 32,037.99 million showing a growth of 55% over the previous year. Profit after tax for the year was Rs. 8,559.16 million showing a growth of 36%. Gross profit and operating profit increased by 42% and 46% respectively. Since FY19, the Company has delivered a Compounded Annual Growth Rate (CAGR) in revenues of 56%. The revenue growth has been mainly driven by IT services and profitability growth has been driven by demand and growth across all geographies and all verticals.

Unconsolidated

Particulars Revenue

FY 2023

FY 2022

Y/Y

32,037,995,164

20,644,764,716 55%

Gross profit Operating Profit Profit before taxation Profit after taxation Earnings per share (basic) Earnings per share (diluted)

9,616,693,532

6,755,105,438 42%

7,096,705,165

4,871,976,394 46%

9,008,771,728

6,624,487,917 36%

8,559,160,491

6,299,836,945 36%

29.41

22.44 31%

29.22

22.29 31%Consolidated:

During year ended 31 December 2023, operating revenues of the Company were Rs 53,435.48 million in 2023 compared to Rs. 31,759.92 million in 2022. Current period showed a significant increase by PKR 24,607.56 million after normalizing the last yearreported revenue by one-off sale of license of CLOS, a product developed by NDC which was sold for an upfront payment of $8 million and subsequent royalty of ~ $7 million over five years and recognized at present value. Cost of $15 million had also been adjusted against the revalued intangibles at the time of acquisition neutralizing the P<he normalized growth in the revenues for 2023 is 85% and with the one-off revenue in 2022, the reported growth is 68%. Gross profit grew by 58%.

Operating profit from ordinary course of business amounts to Rs 7,887.02 million showing a growth of 47.06%. The reported number includes one off impairment loss on remeasurement of investment in Jomo Technologies (Pvt) Limited amounting to Rs. 154 million bringing the reported growth down to 44.19%. During the year ended December 31, 2022, the management had acquired 9% stake in the fastest growing fashion e-commerce brand of Pakistan, JOMO, as a strategic investment. However, considering the economic downturn in the country and delay in anticipated funding resulting in deteriorating liquidity and financial performance of the brand, the management believes that the carrying value of investment amounting to Rs 154. 46 million does not truly reflect its fair value. Hence the management, in the interest of prudence has taken requisite impairment of the investment.

The net profit from ordinary business stands at Rs 9,620.89 million and with one-off adjustments, the reported number stands at Rs 8,688.89 million. The adjustments include

• - a proportionate share of loss on EP Systems B.V, netted off with the share of profit from Retailistan arising from a one-off notional gain from disposal of Jugnu Technologies (Pvt) Limited and

• - The impairment losses pertaining to Sales Flo due to the value in use of the company being less than the carrying value of the investments. The carrying value of investment was adjusted upwards with the notional gain on disposal of Jugnu Technoglogies (Pvt) Limited as stated above. The impairment loss is adjusting the same notional gain.

• - the impairment losses pertaining to EP Systems B.V due to the value in use of the company being less than the carrying value of the investments. In 2021, the Company had to record a one-time notional gain in the financial statements amounting to Rs 816,227 million arising from conversion of E-Processing Systems B.V. from a subsidiary to associate on account of dilution of voting rights resulting from investment of Gates Foundation in irredeembable preference shares. On revaluation, the same notional value has been written down. After the share of loss and impairment, the remaining carrying value is Rs 200 million only. With this adjustment, all the investments in the Company's books have been written off.

Basic and diluted earnings per share increased by 26% over the same period.

Growth in revenue is contributed by both the Company and its subsidiaries.

Consolidated

Particulars	FY 2023	FY 2022	Y/Y
Revenue*	53,435,483,177	31,759,927,263	68%
Gross profit	13,656,685,787	8,636,279,367	58%
Operating Profit**	7,732,547,097	5,362,828,298	44%
Share of loss from associate***	(48,069,294)	(323,899,362)
Impairment loss on investment in	(729,463,249)	-
associates ****
Profit before taxation	9,279,622,243	6,981,169,335	33%
Profit after taxation	8,688,889,893	6,629,661,309	31%
Earnings per share (basic)	29.86	23.61	26%
Earnings per share (diluted)	29.66	23.45	26%

* Consolidated revenue includes one-off revenue from sale of license of CLOS ** The operating profit includes one off impairment loss on remeasurement of investment in Jomo Technologies (Pvt) Limited amounting to Rs. 154 million.

*** The share of loss is proportionate share EP Systems B.V netted off with the share of profit from Retailistan due to the gain from disposal of Jugnu Technologies (Pvt) Limited.

***** This includes impairment losses pertaining to EP Systems B.V and Sales Flo due to the value in use of the company being less than the carrying value of the investments.

*operating and net profit adjusted for one off losses

REVENUE BY CURRENCY PKR 18% Euro 5% USD 77%

COST BY CURRENCY USD 36% PKR 64%

Performance by Segment (Consolidated)

Vertical Segment

The Company has realigned it's strategy for growth and has started monitoring performance based on industry verticals along with geographical segments. This helps to capture synergies through the cross-selling of technologies and solutions across different verticals This approach allows the Company to leverage its expertise and capabilities more effectively across various sectors, increasing operational efficiency

The Company can also better understand its competitive footprint within each vertical, identifying areas where it can capitalize on its strengths. Moreover, the emphasis on industry verticals highlights the importance of expanding within sectors that offer higher margins, indicating a strategic approach to revenue generation and profitability.

The Company will continue to use geographical segments as well in addition to vertical segments. However, the four primary segments now revolve around industry verticals, reflecting the company's strategic shift:

• • Banking Financial Services & Insurance (BFSI): This segment likely includes activities related to banking, financial services, and insurance.

• • Retail & CPG (Consumer Packaged Goods): This segment encompasses retail operations and consumer goods.

• • Telco (Telecommunications): This segment involves telecommunications services and technologies.

• • Technology: This segment includes technology related solutions, products and services.

• • Others: This catch-all category may include any remaining segments that don't fall into the specific verticals mentioned above.

BFSI	Retail & CPG	Technology	Telco	Others	Total
2023	2022	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022

-----------------------------------------------------------------------------------------------------------------------------------------Rupees------------------------------------------------------------------------------------------------

15,266	10,581	5,716	4,519	7,393	4,498	11,809	5,156	13,252	7,007	53,435	31,760
Cost of revenue	(12,906)	(8,773)	(3,367)	(2,509)	(4,669)	(2,851)	(8,687)	(3,918)	(10,150)	(5,072)	(39,779)	(23,124)
Gross profit	2,360	1,808	2,349	2,009	2,724	1,647	3,122	1,238	3,102	1,934	13,657	8,636
Distribution expenses	(448)	(196)	(168)	(116)	(217)	(116)	(347)	(132)	(389)	(180)	(1,570)	(741)
Administrative expenses	(1,138)	(659)	(426)	(389)	(551)	(388)	(880)	(444)	(988)	(604)	(3,983)	(2,484)
(1,586)	(856)	(594)	(505)	(768)	(503)	(1,227)	(577)	(1,377)	(784)	(5,552)	(3,224)
Profit / (loss) before taxation and
unallocated income and expenses	774	952	1,755	1,504	1,955	1,144	1,895	661	1,725	1,151	8,104	5,412

Revenue

Geographical Segment

The Company is showing a strong growth across all four segments, with Middle East region taking the lead, followed by Pakistan and North America. Export sales of the Company are approximately 83% of total sales, taking another 2% from the domestic sales, with the Company's target being to further increase the export component going forward. Diversification into new regions and new markets will support this objective as the company is actively looking to expand in the new markets.

During the year, the Company made significant progress in getting repeat business from existing customers and also increased its business through cross selling and upselling to new customers, and customers acquired through the two acquisitions.

North America

Europe

Middle East Africa

APAC

Pakistan

Total

2022
Revenue from all customers	12,262	9,342	1,891	4,367	29,309	12,092	1,328	456	8,645	5,502	53,435	31,760
Cost of revenue	(8,005)	(5,940)	(1,171)	(3,813)	(21,264)	(8,288)	(854)	(227)	(8,486)	(4,855)	(39,779)	(23,124)
Gross profit	4,258	3,403	720	554	8,045	3,804	474	229	159	647	13,657	8,636
Distribution expenses	(33)	(9)	(19)	(1)	(1,257)	(472)	(139)	(12)	(121)	(247)	(1,570)	(741)
Administrative expenses	(1,265)	(966)	(195)	(175)	(2,132)	(1,048)	(62)	(16)	(328)	(279)	(3,983)	(2,484)
(1,298)	(975)	(214)	(176)	(3,389)	(1,520)	(201)	(28)	(450)	(526)	(5,552)	(3,224)
Profit / (loss) before taxation and
unallocated income and expenses	2,960	2,428	506	378	4,656	2,283	273	201	(290)	121	8,104	5,412
North America & Europe

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

2023

------------------------------------------------------------------------------------------------------------Rupees---------------------------------------------------------------------------------------------------------

Margins of North America region are 35% GP and 24% OP. In 2022, the one-off sale of CLOS was classified under Europe segment. Since the transaction is P&L neutral, the normalized margins of Europe region are 39% GP and 26% OP. The Company is expecting to see modest growth in this segment in future.

Middle East Africa

In the Middle Eastern region, TVS and Syste,s Arabia in UAE are leading the growth trajectory contributing about 85% to the total revenue. Qatar is also expecting to gain momentum and will be become a sizeable business in near future.

APAC

APAC has also become a significant vertical where the company is seeing significant growth specially in the Technology and BFSI sector.

Pakistan

The Company has been re-strategizing its domestic business and has repositioned the customer base to private sector large scale enterprises from public sector and SMEs. The Company is focused on securing long-term recurring managed service contracts with Teleco and Financial institutions.

DIVIDEND & APPROPRIATIONS

For the year 2023, the Directors recommended a payment of final cash dividend @ 6 per share (2022: Rs. 5 per share).

The following appropriation on account of dividend was made during the year:

Un-appropriated profit (PKR)
Balance as at 31 December 2022	12,283,429,147
Total comprehensive income for the year	8,559,160,491
Less: Final dividend for the year ended 31 December 2022 at the rate of PKR Rs 5 per share	(1,455,268,500)
Balance as at 31 December 2023	19,387,321,138

EARNINGS PER SHARE

Basic and diluted earnings per share for the year ended 31 December 2023 for the Company are Rs. 29.41 and Rs. 29.22 (31 December 2022: Rs. 22.44 and Rs. 22.29) per share. Similarly, the basic and diluted earnings per share for the Group are Rs. 29.86 and Rs. 29.66 (31 December 2022: Rs. 23.61 and Rs. 23.45) per share.