Systems Limited, a leading technology and IT services provider, has announced a significant decision to undergo a 5-for-1 stock split, a move that aims to increase liquidity and improve investor access to its shares. This decision was approved by the company’s Board of Directors, in accordance with Section 85(1)(c) of the Companies Act, 2017. However, the stock split remains subject to approval by the company’s shareholders.
Under the proposed stock split, for every 1 share currently held by an investor, they will receive an additional 4 shares, resulting in a total of 5 shares per existing share. This action is expected to enhance the liquidity of Systems Limited’s shares on the stock market by making its stock more affordable and accessible to a broader range of investors.
According to Arif Habib Limited (AHL), a brokerage house, this move will increase the total number of ordinary shares from 292.9 million to 1.46 billion. The stock split is designed to address concerns over stock price volatility, as lower share prices generally attract more retail investors and improve trading volumes. In turn, it is expected that this will lead to a more efficient and liquid market for Systems Limited’s stock, benefiting both current and prospective shareholders.
Alongside the stock split announcement, Systems Limited also disclosed its financial performance for the year ending December 31, 2024. The company reported impressive revenue growth, with total revenues reaching Rs. 67,473.02 million, up from Rs. 53,435.48 million in 2023. This represents a notable increase, highlighting Systems Limited’s strong position in the competitive IT services sector.
Despite the growth in revenues, the company’s operating profit showed a modest increase of 4 percent, reaching Rs. 8,149.95 million. However, the company’s net profit from ordinary business operations stood at Rs. 7,460.01 million, which represents a 14 percent decline compared to the previous year. The decline in net profit was primarily due to an exchange loss of Rs. 264.47 million, which contrasts with a significant exchange gain of Rs. 2,257.67 million recorded in FY 2023. The impact of exchange rate fluctuations has been a contributing factor to the lower net profit this year.
In addition to exchange losses, the company also faced challenges during the fourth quarter, where there was higher one-off trading with lower margins compared to its core services business. Furthermore, the company adopted a more aggressive methodology in recording Expected Credit Losses (ECL) this year, which will have a favorable impact on its financials in 2025 once these balances are collected.
Despite these challenges, Systems Limited has continued to demonstrate impressive growth. Since FY 2020, the company has achieved a Compound Annual Growth Rate (CAGR) in revenues of 50 percent, driven primarily by its strong performance in IT services. The company also reported an EBITDA growth rate of 45 percent, which outpaces the market average and reflects its resilience despite pressure on margins.
The company’s stock, however, closed at Rs. 571.72 on Monday, down 1.44 percent or Rs. 8.33, with 1.015 million shares traded. While the stock saw a decline on the day, the announcement of the stock split is expected to bolster investor confidence and potentially improve stock performance moving forward.
In conclusion, Systems Limited’s decision to undertake a 5-for-1 stock split, coupled with its strong financial performance and growth prospects, demonstrates the company’s commitment to enhancing shareholder value and improving its position in the market. The company’s ongoing expansion in IT services and its strategic moves to boost liquidity reflect a promising future for the technology giant.