Interim Financial Report for the half year ended 30 June Upgrading your Business. future through TECHNOLOGY & INNOVATION

Transcription

1 Interim Financial Report for the half year ended 30 June 2017 Upgrading your Business future through TECHNOLOGY & INNOVATION

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3 Contents Corporate Information Director s Review Director s Review Auditor s Review Condensed Interim Financial Statements Condensed Interim Balance Sheet Condensed Interim Profit and Loss Account Condensed Interim Statement of Comprehensive Income Condensed Interim Cash Flow Statement Condensed Interim Statement of Changes in Equity Selected Notes to the Condensed Interim Financial Information Condensed Interim Consolidated Financial Statements Condensed Interim Consolidated Balance Sheet Condensed Interim Consolidated Profit and Loss Account Condensed Interim Consolidated Statement of Comprehensive Income Condensed Interim Consolidated Cash Flow Statement Condensed Interim Consolidated Statement of Changes in Equity Selected Notes to the Condensed Interim Consolidated Financial Information

4 CORPORATE INFORMATION BOARD OF DIRECTORS Mr. Aezaz Hussain Chairman Mr. Asif Peer CEO and Managing Director Mr. Arshad Masood Director Mr. Omar Saeed Director Mr. Ayaz Dawood Director Mr. Asif Jooma Director Mr. Tahir Masaud Director Nonexecutive Executive Nonexecutive Independent Independent Independent Independent SHARES REGISTRAR THK Associates (Private) Limited. 1st Floor, 40C, Block6 P.E.C.H.S, Karachi. T: F: REGISTERED OFFICE Chamber of Commerce Building, 11 SharaeAiwane Tijarat, Lahore, Pakistan. T: F: AUDIT COMMITTEE Mr. Ayaz Dawood Chairman Mr. Omer Saeed Member Mr. Tahir Masaud Member HUMAN RESOURCE & COMPENSATION COMMITTEE Mr. Omar Saeed Chairman Mr. Asif Jooma Member Mr. Tahir Masaud Member COMPANY SECRETARY & CHIEF FINANCIAL OFFICER Mr. Muhammad Khurram Iqbal AUDITORS EY Ford Rhodes Chartered Accountants Lahore LEGAL ADVISOR Hassan & Hassan Advocates BANKERS Habib Metropolitan Bank Limited United Bank Limited Standard Chartered Bank (Pakistan) Limited Albaraka Bank Limited Bank Alfalah Limited Bank Islami Limited Meezan Bank Limited Dubai Islamic Bank Faysal Bank Limited Deutsche Bank AG Habib Bank Limited MCB Bank Limited LAHORE OFFICE HEAD OFFICE Systems Campus Software Technology Park E1, Sehjpal Near DHA PhaseVIII, (ExAir Avenue), Lahore Cantt. UAN: T: KARACHI OFFICE E5, Central Commercial Area, ShaheedeMillat Road, Karachi, Pakistan T: F: DUBAI OFFICE TechVista Systems FZLLC O ce 1905, Regal Tower Business Bay, Dubai, UAE Tel: Fax: WEB PRESENCE 2 Systems Limited

5 DIRECTOR S REVIEW On behalf of the Board of Directors we are pleased to present the Financial Statements together with the Consolidated Financial Statements for the half year ended 30 June MARKET OUTLOOK We have seen sustained growth of our software development services and business process outsourcing services. With our customer focused delivery we are able to retain and grow most of our customers in first half of Keeping in line with our history we continue to invest in innovation and stay at the cutting edge of Information Technology. We developed business solutions in the Apparel/Retail vertical for Omni Channel Retail, Business Partner Integrations, and apparel/retail specific templates for Business Intelligence solutions. Our focused and result oriented effort in this space has paid off and we are able to sign up many new logos in this space. We have also diversified in the digital marketing and call center business and we are able to sign up customer to perform their digital marketing and sales through our call center agents. This business vertical has stabilized and has growth potential in the near future. Our operations based in Dubai through our subsidiary TechVista Systems (TVS) have grown as our client base in this region. For last 3 years we have invested in client acquisition and building our brand name in these markets, with our meticulous focus and customer oriented strategy we have been able to sign up about a number of recurring customers both in Public and Private Sector. We are expecting a sustainable future growth and quality revenue through these markets. We have already started to get our Return on Investment in this region during Our subsidiary EP Systems' product OneLoad has been successfully integrated with all the telecom service providers as well as most of the banks. As a result the total monthly transactions of OneLoad have dramatically increased to nearly two (2) million. This increase in transaction volume was only achieved through word of mouth and minimum sales effort. EP Systems is targeting to do aggressive marketing campaign during FINANCIAL RESULTS Unconsolidated: During the half year ended 2017, the Company's revenues showed steady growth of 2%. Gross profit and operating profits showed growth of 11% and 5% respectively due to operational efficiency. Profit after tax, basic and diluted earnings per share showed decline of nearly 5% due to other operating expenses. Unconsolidated Six months ended 30 June 2017 Six months ended 30 June 2016 Change % Revenue Gross Profit Operating Profit Profit After Taxation Basic Earnings Per share (Rs) Diluted Earnings Per Share (Rs) 1,364,858, ,168, ,095, ,078, ,338,353, ,551, ,649, ,543, % 11% 5% (5)% (5)% (5)% Consolidated: During the half year ended 2017, the Company's consolidated revenues grew by 8%. Gross profit and operating profits showed growth of 16% and 34% respectively due to operational efficiency and profitable operations of TVS. Resultantly, Profit after tax, basic and diluted earnings also increase by nearly 2122%. Consolidated Six months ended 30 June 2017 Six months ended 30 June 2016 Change % Revenue Gross Profit Operating Profit Profit After Taxation Basic Earnings Per share (Rs) Diluted Earnings Per Share (Rs) 1,682,399, ,127, ,215, ,604, ,562,677, ,528, ,696, ,517, % 16% 34% 21% 21% 22% Interim Financial Reprot 3

6 DIRECTOR S REVIEW FUTURE OUTLOOK Our 2017 budget is focused on achieving steady growth. This growth is going to be attributed to following factors: Strong and consistent pipeline and recurring business from North America. Our Investment in the new tools, technologies and completion of our business solutions for the North American Apparel and Retail Vertical will provide us steady growth and recurring revenue. We are expecting further growth from our MEA business since we have established credible references in the region which will help us in getting recurring business and winning new logos. In domestic market we are strongly aligned with two major Principals Microsoft and IBM and expect business from their partnerships. We are targeting to complete the Pakistan Civil Aviation Authority project by end of 2017 and kickoff 3 year support immediately after completion. This project will not only add growth to our top and bottom line but also enable us to do more projects with other airports locally and internationally. We have moved to our new building in Lahore which would be fully operational by end of 3rd quarter. We have already registered our new building in Lahore as Software Technology Park with Pakistan Software Export Board (PSEB). This will not only result in enhancing image of brand but also help us in reducing our overheads and bring efficiency by putting all teams under one roof and most importantly we will have immediate space available to double our capacity without further investing in infrastructure. With Pakistan Law and Order getting better we envision significant opportunities in our business, as our foreign customers/prospects will feel comfortable in visiting us and this will spur the growth in Pakistan IT Sector. We are expecting growth in our export revenue. Any Dollar depreciation will provide additional profitability. ACKNOWLEDGEMENT The Board takes this opportunity to thank the Company's valued customers, bankers and other stakeholders for their corporation and support. The Board greatly appreciates hard work and dedication of all employees of the Company. On behalf of the Board 25 August 2017 Lahore Asif Peer Chief Executive 4 Systems Limited

7 30 June June % 1,338,353,187 1,364,858,943 11% 390,551, ,168,166 5% 239,649, ,095,670 (5)% 252,543, ,078,507 (5)% (5)% (Basic) (Diluted) 30 June June % 1,562,677,245 1,682,399,849 16% 427,528, ,127,883 34% 218,696, ,215,171 21% 229,517, ,604,364 21% 22% (Basic) (Diluted) Interim Financial Reprot 5

8 Systems Limited

9 Condensed Interim Financial Information

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11 AUDITORS' REPORT TO THE MEMBERS ON REVIEW OF INTERIM FINANCIAL INFORMATION Introduction We have reviewed the accompanying condensed interim balance sheet of Systems Limited as at 30 June 2017 and the related condensed interim profit and loss account, condensed interim statement of comprehensive income, condensed interim cash flow statement and condensed interim statement of changes in equity together with the notes forming part thereof, for the sixmonth period then ended (hereinafter referred to as the interim financial information ). Management is responsible for the preparation and presentation of this interim financial information in accordance with approved accounting standards as applicable in Pakistan for interim financial reporting. Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim financial information as at and for the sixmonth period ended 30 June 2017 is not prepared, in all material respects, in accordance with approved accounting standards as applicable in Pakistan for interim financial reporting. Chartered Accountants Engagement Partner: Naseem Akbar Lahore: 28 August 2017 Interim Financial Reprot 9

12 CONDENSED INTERIM BALANCE SHEET as at 30 June 2017 Note Unaudited Audited 30 June 31 December ASSETS Noncurrent assets Property and equipment 6 Intangibles 7 Long term investments 8 Long term deposits Deferred taxation Total noncurrent assets 785,472, ,598,452 55,795,799 51,467,435 51,077,980 51,077,980 6,130,852 6,130,852 25,276,863 25,276, ,754, ,551,582 Current assets Unbilled revenue Trade debts 9 Advances considered good 10 Trade deposits and short term prepayments 11 Interest accrued Other receivables 12 Short term investments 13 Tax refunds due from the Government Cash and bank balances 14 Total current assets TOTAL ASSETS 435,522, ,894,130 1,162,559,435 1,290,766,880 55,020,662 31,158,750 59,543,557 59,561,630 13,439,799 11,863, ,654, ,917, ,000, ,000, ,794, ,551, ,435, ,200,188 2,419,970,519 2,482,914,221 3,343,724,593 3,174,465,803 The annexed notes from 1 to 28 form an integral part of this condensed interim financial information. AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive 10 Systems Limited

13 Note Unaudited Audited 30 June 31 December EQUITY AND LIABILITIES Share capital and reserves Authorized share capital 200,000,000 (2016: 150,000,000) ordinary shares of Rs. 10 each Issued, subscribed and paid up share capital 15 Capital reserves Unappropriated profit Total shareholders' equity 2,000,000,000 1,118,276, ,932,799 1,377,571,530 2,976,780,849 1,500,000,000 1,110,784, ,091,227 1,344,492,456 2,916,368,603 Noncurrent liabilities Long term advances 16 Current liabilities Trade and other payables 17 Short term borrowings 18 Unearned revenue Current portion of long term advances Total current liabilities 11,987,624 11,987, ,849, ,000,000 11,556,688 2,550, ,956,120 10,910,791 10,910, ,689,126 14,387,586 6,109, ,186,409 TOTAL EQUITY AND LIABILITIES Contingencies and commitments 20 3,343,724,593 3,174,465,803 MUHAMMAD KHURRAM IQABL Chief Financial Officer Interim Financial Reprot 11

14 CONDENSED INTERIM PROFIT AND LOSS ACCOUNT for the six and three months ended 30 June 2017 Note Six Months Ended Three Months Ended 30 June 30 June 30 June 30 June Revenue net Cost of sales Gross profit 1,364,858,943 1,338,353, ,102, ,959, ,690, ,801, ,006, ,958, ,168, ,551, ,095, ,001,296 Distribution expenses Administrative expenses Research and development expenses Operating profit Other income Other operating expenses Finance costs Profit before taxation Taxation Profit for the period 21 46,794,289 20,368,955 40,909,008 3,285, ,278, ,751,392 71,207,806 69,974,091 1,781,590 (2,687,921) 183,072, ,901, ,116,814 70,571, ,095, ,649, ,979, ,429,457 32,885,669 15,640,677 28,133,240 4,531, ,981, ,290, ,112, ,961,273 37,074,557 37,074,557 1,579, ,055 1,142, , ,327, ,515, ,894, ,549,716 5,248,769 1,972,413 3,048,769 (27,587) 241,078, ,543, ,846, ,577,303 Earnings per share: Basic earnings per share 22 Diluted earnings per share The annexed notes from 1 to 28 form an integral part of this condensed interim financial information. AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive MUHAMMAD KHURRAM IQABL Chief Financial Officer 12 Systems Limited

15 CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME for the six months ended 30 June 2017 Six Months Ended 30 June 30 June Profit for the period 241,078, ,543,532 Other comprehensive income Total comprehensive income for the period 241,078, ,543,532 The annexed notes from 1 to 28 form an integral part of this condensed interim financial information. AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive MUHAMMAD KHURRAM IQABL Chief Financial Officer Interim Financial Reprot 13

16 CONDENSED INTERIM CASH FLOW STATEMENT for the six months ended 30 June 2017 Note CASH FLOWS FROM OPERATING ACTIVITIES Net cash generated from / (used in) operations ,795,576 (91,404,464) Finance costs paid Taxes paid Net cash flows from / (used in) operating activities (1,579,506) (774,055) (21,491,749) (29,424,646) (23,071,255) (30,198,701) 182,724,321 (121,603,165) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment Development expenditure Proceeds from the disposal of property and equipment Purchase / (disposal) of short term investments net Profit received on bank deposits Net cash flows (used in) / from investing activities (243,956,841) (111,213,777) (16,887,688) (12,733,160) (12,556,203) 2,955,805 93,000, ,799,398 1,305,478 2,436,539 (179,095,254) 314,244,805 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of share options Increase in short term borrowings Dividend paid Increase / (decrease) in long term advances Net cash flows used in financing activities 15,088,889 15,297, ,000, ,000,000 (207,999,433) (138,848,114) (2,482,864) 3,994,528 (45,393,408) (9,556,064) Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at closing of the period (41,764,341) 183,085, ,200, ,644, ,435, ,730,162 The annexed notes from 1 to 28 form an integral part of this condensed interim financial information. AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive MUHAMMAD KHURRAM IQABL Chief Financial Officer 14 Systems Limited

17 CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2017 Issued, subscribed and paid up share capital Share capital premium Capital reserves Revenue reserve Employee compensation reserve Unappropriated profit Total Balance as at 31 December 2015 (Audited) Share issued against Employees' Share Option Scheme Share based payments Final Rs.1.25 per share for the year ended 31st December 2015 Total comprehensive income for the period Balance as at 30 June 2016 (Unaudited) 1,106,808,760 3,976,160 1,110,784, ,302,586 11,321, ,623,948 9,255,467 4,550,100 13,805, ,260,624 (138,848,114) 252,543,532 1,081,956,042 2,495,627,437 15,297,522 4,550,100 (138,848,114) 252,543,532 2,629,170,477 Balance as at 31 December 2016 (Audited) Transfer from compensation reserve to share premium reserve Share issued against Employees' Share Option Scheme Share based payments Final Rs.1.86 per share for the year ended 31st December 2016 Total comprehensive income for the period Balance as at 30 June 2017 (Unaudited) 1,110,784,920 7,491,600 1,118,276, ,623,948 43,068,402 7,597, ,289,639 38,467,279 (43,068,402) 12,244,283 7,643,160 1,344,492,456 (207,999,433) 241,078,507 1,377,571,530 2,916,368,603 15,088,889 12,244,283 (207,999,433) 241,078,507 2,976,780,849 The annexed notes from 1 to 28 form an integral part of this condensed interim financial information. AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive MUHAMMAD KHURRAM IQABL Chief Financial Officer Interim Financial Reprot 15

18 SELECTED NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION for the six months ended 30 June THE COMPANY AND ITS OPERATIONS 1.1 The Company is a public limited Company incorporated in Pakistan under the repealed Companies Ordinance 1984, and is listed on the Pakistan Stock Exchange (formerly Karachi, Islamabad and Lahore Stock Exchanges). The Company is principally engaged in the business of software development, trading of software and business process outsourcing services. The registered office of the Company is situated at Chamber of Commerce building, 11 ShahraeAiwaneTijarat, Lahore. 1.2 This financial information is the separate financial information of the company in which investment in subsidiary is stated at cost less impairment losses, if any. The condensed interim consolidated financial statements are prepared separately. 2. STATEMENT OF COMPLIANCE 2.1 During the year, the Companies Act 2017 (the Act) has been promulgated with effect from 30 May However, Securities and Exchange Commission of Pakistan vide its circular no.17 of 2017 dated July 20, 2017 communicated that the companies whose financial year closes on or before June 30, 2017 shall prepare their financial statements in accordance with the provisions of the repealed Companies Ordinance, Accordingly, these unconsolidated condensed interim financial information of the Company for the six months period ended 30 June 2017 has been prepared in accordance with the requirements of the International Accounting Standard 34 Interim Financial Reporting as are notified under the repealed Companies Ordinance, 1984, provisions of and directives issued under the repealed Companies Ordinance,1984. In case requirements differ, the provisions or directives of the repealed Companies Ordinance, 1984 shall prevail. 2.3 This is condensed interim financial information is unaudited and is being submitted to shareholders, as required by section 245 of the Companies ordinance, BASIS OF PREPARATION 3.1 These unconsolidated condensed interim financial information of the Company for the six months period ended 30 June 2017 has been prepared in accordance with the requirements of the International Accounting Standard 34 Interim Financial Reporting as are notified under the repealed Companies Ordinance, 1984, provisions of and directives issued under the repealed Companies Ordinance, This condensed interim financial information does not include all the information and disclosures required in annual financial statements, and should be read in conjunction with the Company's annual financial statements as at 31 December This condensed interim financial statements have been prepared under the historical cost convention. 4 ACCOUNTING POLICIES The accounting policies adopted for the preparation of this condensed interim financial information are the same as those applied in the preparation of the preceding annual published financial statements of the Company for the year ended 31 December 2016 except as follows: The Company has adopted the following standards and amendment to IFRSs which became effective for the current period: IFRS 7Financial Instruments: Disclosures Disclosure Initiative (Amendment) IAS 12 Income Taxes Recognition of Deferred Tax Assets for Unrealized losses (Amendments) 16 Systems Limited

19 The adoption of the above amendment to accounting standards did not have any material effect on the condensed interim financial information. 5 ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of condensed interim financial information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amount of assets and liabilities, incomes and expenses. Actual results may differ from these estimates. The significant judgments made by management in applying the Company's accounting policies and the key sources of estimation are the same as those that applied to the financial statements for the year ended 31 December Note Unaudited Audited 30 June 31 December PRPOERTY AND EQUIPMENT Opening balance net book value Additions during the period / year cost 6.1 Less: Disposals during the period / year 6.2 Depreciation during the period / year Book value at the end of the period / year 557,598, ,204, ,069, ,640, ,667, ,845,653 7,318,420 10,606,471 33,876,699 72,640, ,472, ,598, Additions during the period/yearcost Computers Computer equipment and installations Other equipment and installations Furniture and fittings O ce equipment Vehicles Project assets Mobile sets Capital work in progress 5,725,481 21,208,723 4,854,345 4,407, ,645 1,170, ,500 1,280,747 1,869,718 5,172,978 13,482,500 31,139,108 1,353, , ,802, ,916, ,069, ,640,741 Interim Financial Reprot 17

20 Cost Accumulated Depreciation Written Down Value 6.2 Disposals during the period / year 30 June 2017 Computers 1,686,211 1,392, ,330 Vehicles 15,363,830 8,338,740 7,025,090 17,050,041 9,731,621 7,318, December 2016 Computers 23,834,170 23,161, ,577 Computer equipment and installations 4,266,428 4,252,261 14,167 Other equipment and installations 1,319,893 1,213, ,667 Generator 359, , ,233 Furniture and fittings 2,171,557 2,171,557 Vehicles 20,556,828 10,910,334 9,646,494 O ce equipment 510, ,000 Project assets 40,543 40,543 Mobile sets 139, ,157 33,333 53,198,409 42,591,938 10,606,471 Unaudited Audited 30 June 31 December Note INTANGIBLES Opening balance net book value Additions during the period / year cost Less: Amortization during the period / year Book value at the end of the period / year 51,467,435 16,887,688 68,355,123 12,559,324 55,795,799 42,247,518 29,003,609 71,251,127 19,783,692 51,467, Systems Limited

21 Unaudited Audited 30 June 31 December Note LONG TERM INVESTMENTS Investment in Subsidiaries at cost unquoted E Processing Systems (Private) Limited ,700,030 49,700, ,004 (2016: 140,004) fully paid ordinary shares of Rs. 10/ each Tech Vista Systems FZLLC 8.2 1,377,950 1,377, (2016: 50) fully paid ordinary shares of AED 1000/ each 51,077,980 51,077, This represents 63% share in Company's subsidiary EProcessing Systems (Private) Limited, a company engaged in the business of purchase and sale of airtime and related services in Pakistan. 8.2 This represents 100% share in Company's subsidiary, TechVista Systems FZ LLC, a company set up in Dubai Technology and Media Free Zone Authority engaged in providing a host of services including enterprise application integration and software development and has been registered as a limited liability company on 03 April Unaudited Audited 30 June 31 December Note TRADE DEBTS Considered good unsecured Export Local Considered doubtful unsecured Local Less: Provision for doubtful debts ,335,427 1,054,908, ,099, ,404,144 1,166,434,918 1,306,312,776 10,442,367 11,179,257 (10,442,367) (11,179,257) Less: Written o (3,875,483) (15,545,896) 1,162,559,435 1,290,766, This includes receivables from related parties i.e. Visionet Systems Incorporation and Tech Vista Systems FZLLC amounting to Rs million (2016: Rs million) and Rs million (2016: Rs million) respectively. Interim Financial Reprot 19

22 Unaudited Audited 30 June 31 December Note ADVANCES considered good Advances considered good against salary against expenses To suppliersagainst goods 2,869,408 14,163,134 17,032,542 37,988,120 55,020,662 2,160,096 20,605,249 22,765,345 8,393,405 31,158, TRADE DEPOSITS AND SHORT TERM PREPAYMENTS Security deposits ,667,050 32,693,991 Prepayments 27,876,507 26,867,639 59,543,557 59,561, This represents interest free security bid bonds deposited with customers. Unaudited Audited 30 June 31 December Note OTHER RECEIVABLES These represent receivables from the following related parties: Considered good unsecured Visionet Systems Incorporation USA Eprocessing Systems (Private) Limited Tech Vista Systems FZ LLC UAE 6,894,277 2,593, ,139,351 76,552, ,620, ,772, ,654, ,917, SHORT TERM INVESTMENTS Term deposit receipts ,000, ,000, These carry interest at the rate of 5.75% (2016: 5.85% per annum). 20 Systems Limited

23 Unaudited Audited 30 June 31 December Note CASH AND BANK BALANCES Cash in hand Cash at bank: Local currency: Current accounts Deposit accounts Foreign currency current accounts ,893 35,803, ,878, ,681,909 3,465, ,146, ,435,847 47,660 38,931, ,712, ,643,884 1,508, ,152, ,200, These carry interest rate of 3.19% to 4% (2016: 3.29% to 4.04%) per annum. 15. ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL Unaudited 30 June 2017 Audited 31 December June December 2016 No of Shares No of Shares Ordinary shares of Rs. 10/ each fully paid in cash 22,226,927 22,226, ,269, ,269,270 Ordinary shares of Rs. 10/ each fully paid up as bonus shares 89,600, ,827,652 88,851, ,078, ,007,250 1,118,276, ,515,650 1,110,784, Reconciliation of issued, subscribed and paidup share capital: 30 June December June December 2016 No of Shares No of Shares Balance as at 1st January Stock options exercised 111,078, ,680,876 1,110,784,920 1,106,808, , ,616 7,491,600 3,976, ,827, ,078,492 1,118,276,520 1,110,784,920 Interim Financial Reprot 21

24 16. LONG TERM ADVANCES This represents advances received from staff and will be adjusted as per Company's car policy against sale of vehicles. 17. TRADE AND OTHER PAYABLES Unaudited Audited 30 June 31 December Note Creditors Advance from customers Retention Money Accrued liabilities Withholding income tax payable Provident fund payable Provision for Worker's Welfare Fund Sales tax payable Unclaimed dividend 115,265,645 4,035, ,116 67,544,408 1,215,257 2,453, ,849,432 14,752,641 3,759,560 11,604, ,684,704 6,913,335 10,345,091 17,930,514 5,007,552 3,691, ,689, SHORT TERM BORROWINGS This represents export running finance ERF II facility obtained from Habib Bank Limited. The facility has a limit of Rs. 150 million for working capital requirement and carries interest rate at State Bank of Pakistan (SBP) rate for ERF + 1% per annum. The facility is mainly secured alongwith letter of guarantee facility of Rs. 150 million by way of first charge over present and future current and fixed assets of the Company and collateral of land and building to the effect of Rs. 400 million each. 19. OPERATING SEGMENT INFORMATION Geographical segments For management purposes, the Systems Limited is organized into business units based on their geographical areas and has three reportable operating segments as follows: North America Middle East Pakistan No other operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its operating segments separately for the purpose of performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. Transfer prices between operating segments are on arm's length basis in a manner similar to transactions with third parties. 22 Systems Limited

25 North America Unaudited Six Months Ended 30 June Middle East Unaudited Six Months Ended 30 June Pakistan Unaudited Six Months Ended 30 June Total Unaudited Six Months Ended 30 June Revenue Net 920,499, ,940, ,920, ,143, ,438, ,269,171 1,364,858,943 1,338,353,187 Cost of sales (566,853,340) (474,982,240) (142,868,194) (137,996,618) (219,969,243) (334,823,069) (929,690,777) (947,801,927) Gross profit 353,646, ,958,305 39,052,449 14,146,853 42,469,222 29,446, ,168, ,551,260 Distribution expenses (1,451,188) (1,416,546) (31,979,675) (1,590,484) (13,363,426) (17,361,925) (46,794,289) (20,368,955) Research and development expenses (457,171) (624,831) (699,589) (1,781,590) Administrative expenses (97,454,405) (84,901,196) (19,078,259) (15,554,977) (19,745,543) (28,295,219) (136,278,207) (128,751,392) (98,905,593) (86,774,913) (51,057,934) (17,770,292) (33,108,969) (46,356,733) (183,072,496) (150,901,937) Profit / (loss) before taxation and Unallocated income and expenses 254,740, ,183,392 (12,005,485) (3,623,439) 9,360,253 (16,910,631) 252,095, ,649, Unallocated income and expenses: Other operating expenses (37,074,557) Other income 32,885,669 Finance cost (1,579,506) (5,768,394) Profit before taxation 246,327,276 Taxation 5,248,769 Profit for the year 241,078,507 15,640,677 (774,055) 14,866, ,515,945 1,972, ,543, CONTINGENCIES AND COMMITMENTS Contingencies There is no significant change in the contigencies since the date of preceding published annual financial statements. Commitments: 20.1 Guarantees issued by the financial institutions on behalf of the Company amount to Rs (2016: Rs ) million Commitments include capital commitments for construction of building of the Company amounting to Rs (2016: 427.6) million. 21. OTHER OPERATING EXPENSES Unaudited 30 June 30 June Note Unaudited Provision for doubtful debts Unbilled and bad debt writteno 840,484 36,234,073 37,074,557 Interim Financial Reprot 23

26 22. EARNINGS PER SHARE Basic earnings per share Six Month Ended Three Month Ended Profit for the period 241,078, ,543, ,846, ,577,303 Weightedaverage number of ordinary shares outstanding during the period 111,413, ,023, ,745, ,078,492 Basic in Diluted earnings per share Profit for the period 241,078, ,543, ,846, ,577,303 Weightedaverage number of ordinary shares (basic) 111,413, ,023, ,745, ,078,492 E ect of share options 210, , , , ,624, ,835, ,982, ,492,376 Diluted in Systems Limited

27 23. TRANSACTIONS WITH RELATED PARTIES Related parties comprises of associated companies, staff retirement fund, directors and key management personnel. Transactions with related parties other than remuneration and benefits to key management personnel under the terms of their employment, are as follows: Related party E Processing Systems (Pvt.) Ltd. Relationship Nature of Unaudited Six Months Ended 30 June transactions Subsidiary Payment for expenses 30,587,197 53,557,127 Interest income 1,966, ,352 32,553,299 54,181,479 Tech Vista Systems FZ LLC Subsidiary Sales 164,591, ,389,018 Payment for expenses 8,848,446 41,479, ,439, ,868,425 Visionet Systems Incorporation Common directorship Sales 899,311, ,124,973 Payment for expenses 4,300,951 5,431, ,612, ,556,107 Provident fund Employee benefit plan Contributions 43,455,174 37,047,292 Interim Financial Reprot 25

28 Unaudited Six Months Ended 30 June CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 246,327, ,515,945 Adjustments for: Depreciation on property and equipment Amortization of intangibles Provision for bad debts Bad debts written o Share based payment expense Finance costs Exchange gain net Profit on bank deposits Gain on short term investments Gain on disposal of property and equipment Profit before working capital changes 33,876,699 12,559, ,484 36,234,073 12,244,283 1,579,506 (610,210) (1,305,478) (5,632,814) (5,237,783) 84,548, ,875,360 35,191,550 9,318,658 (1,469,520) 4,550, ,055 (2,035,732) (2,436,539) (7,905,210) (1,747,534) 34,239, ,755,773 E ect on cash flow due to working capital changes (Increase) / decrease in current assets: Unbilled revenue net Trade debts Advances Trade deposits and short term prepayments Interest accrued Other receivables (Decrease) / increase in current liabilities: Trade and other payables Net cash generated from / (used in) operations (117,459,187) (20,704,863) 91,743,098 (111,559,013) (23,861,912) (20,051,895) 18,073 (60,446,685) 4,056,431 19,022,175 (43,736,593) (79,486,662) (89,240,090) (273,226,943) (35,839,694) (106,933,294) (125,079,784) (380,160,237) 205,795,576 (91,404,464) 26 Systems Limited

29 25. FINANCIAL RISK MANAGEMENT 25.1 Financial risk factors There is no change in the company's objectives, policies, procedures for measuring and managing the financial risks including capital management risk, since the preceding annual financial year ended 31 December Fair values of financial assets and liabilities The carrying values of all financial assets and liabilities reflected in financial statements approximate to their fair values. Fair value is determined on the basis of objective evidence at each reporting date. Accordingly, detailed disclosure with reference to fair value has not been given in this condensed interim financial information. Fair value hierarchy The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable either, directly or indirectly Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data There were no financial assets and liabilities measured at fair value as at 30 June During the six month period ended 30 June 2017, there were no transfers between Level 1 and Level 2 fair value measurements. There were no financial assets and liabilities measured at fair value as at 31 December Interim Financial Reprot 27

30 Cash and cash equivalents 30 June 2017 Loans and advances Total 25.3 Financial instruments by categories Financial assets as per balance sheet Long term deposits 6,130,852 6,130,852 Unbilled revenue 435,522, ,522,419 Loans to employees 2,869,408 2,869,408 Trade debts 1,162,559,435 1,162,559,435 Trade deposits 31,667,050 31,667,050 Interest accrued 13,439,799 13,439,799 Other receivable 270,654, ,654,118 Short term investments 160,000, ,000,000 Cash and bank balances 141,435, ,435, ,435,847 2,082,843,081 2,224,278, June 2017 Financial Liabilities at amortized cost Financial liabilities as per balance sheet Trade and other payables 185,598,904 Cash and cash equivalents 31 December 2016 Loans and advances Total Financial assets as per balance sheet Long term deposits 6,130,852 6,130,852 Unbilled revenue 320,894, ,894,130 Loans to employees 2,160,096 2,160,096 Trade debts 1,290,766,880 1,290,766,880 Trade deposits 32,693,991 32,693,991 Interest accrued 11,863,416 11,863,416 Other receivables 226,917, ,917,525 Short term investments 253,000, ,000,000 Cash and bank balances 183,200, ,200, ,200,188 2,144,426,890 2,327,627, Systems Limited

31 Financial liabilities as per balance sheet Trade and other payables 182,733, DATE OF AUTHORIZATION FOR ISSUE 31 December 2016 Financial Liabilities at amortized cost This condensed interim financial information was authorized for issue on 25 August 2017 by the Board of Directors of the Company. 27. CORRESPONDING FIGURES Corresponding figures have been rearranged or reclassified where necessary for the purpose of comparison, however no significant reclassification or rearrangements have been made in this condensed interim financial information. 28. GENERAL 28.1 Figures have been rounded off to the nearest rupees, unless otherwise stated Corresponding figures have been rearranged or reclassified, wherever necessary, for the purpose of comparison. However, no significant reclassification has been made in these financial statements except for the following in order to comply with requirements of International Financial Reporting Standards: 31 December 2016 Reclassification from component Reclassification to component Trade Debtor Tax refunds due from the Government 6,593,361 AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive MUHAMMAD KHURRAM IQABL Chief Financial Officer Interim Financial Reprot 29

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33 Condensed Interim Consolidated Financial Information

34 CONDENSED INTERIM CONSOLIDATED BALANCE SHEET as at 30 June 2017 Note Unaudited Audited 30 June 31 December ASSETS Noncurrent assets Property and equipment 6 Intangible assets 7 Long term deposits Deferred taxation Total noncurrent assets 797,888, ,355,324 9,136,852 25,276, ,657, ,175, ,945,145 9,136,852 25,276, ,533,987 Current assets Unbilled revenue Trade debts 8 Advances considered good 9 Trade deposits and short term prepayments 10 Interest accrued Other receivables 11 Short term investments 12 Tax refunds due from the Government Cash and bank balances 13 Total current assets 262,384,124 1,172,761,511 55,020, ,354,386 1,884, ,481, ,000, ,794, ,887,273 2,338,568, ,659,781 1,108,405,149 33,871,434 67,903,663 2,274, ,344, ,000,000 98,958, ,133,403 2,382,550,972 TOTAL ASSETS 3,306,225,979 3,107,084,959 The annexed notes from 1 to 27 form an integral part of this condensed interim financial information. AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive 32 Systems Limited

35 Note Unaudited Audited 30 June 31 December EQUITY AND LIABILITIES Share capital and reserves Authorized share capital 200,000,000 (2016: 150,000,000) ordinary shares of Rs. 10 each Issued, subscribed and paid up share capital 14 Capital and reserve Unappropriated profit Total shareholders' equity Noncontrolling interest 2,000,000,000 1,118,276, ,783,758 1,322,143,967 2,921,204,245 (23,776,155) 2,897,428,090 1,500,000,000 1,110,784, ,774,513 1,244,108,681 2,815,668,114 (15,568,020) 2,800,100,094 Noncurrent liabilities Convertible loan Long term advances 15 Provision for gratuity Current liabilities Trade and other payables 16 Short term borrowings 17 Unearned revenue Current portion of long term advances Total current liabilities 10,423,914 11,987,624 5,500,555 27,912, ,779, ,000,000 11,556,688 2,550, ,885,796 10,910,791 4,009,766 14,920, ,567,025 14,387,586 6,109, ,064,308 TOTAL EQUITY & LIABILITIES Contingencies and commitments 19 3,306,225,979 3,107,084,959 MUHAMMAD KHURRAM IQABL Chief Financial Officer Interim Financial Reprot 33

36 CONDENSED INTERIM CONSOLIDATED PROFIT AND LOSS ACCOUNT for the half year ended 30 June 2017 Note Half year Ended Quarter Ended 30 June 30 June 30 June 30 June Revenue 1,682,399,849 1,562,677, ,752, ,594,080 Cost of sales 1,185,271,966 1,135,148, ,600, ,605,405 Gross profit 497,127, ,528, ,152, ,988,675 Distribution cost 42,681,500 60,412,536 22,063,241 19,887,032 Administrative expenses 161,231, ,637,883 85,106,918 81,647,474 Research & development expenses 1,781,591 (2,687,920) 203,912, ,832, ,170,159 98,846,586 Operating profit 293,215, ,696, ,982, ,142,089 Other income 30,021,069 14,570,115 26,371,466 3,888, ,236, ,266, ,353, ,030,620 Other operating expenses 20 37,074,557 37,074,557 Finance cost 2,835,021 1,776, , ,188 Profit before taxation 283,326, ,489, ,054, ,136,432 Taxation 5,722,298 1,972,413 3,522,298 (27,587) Profit after taxation 277,604, ,517, ,532, ,164,019 Attributable to: Equity holders of the parent 282,262, ,549, ,283, ,090,257 Noncontrolling interest (4,657,814) (2,032,269) (2,750,968) (926,238) 277,604, ,517, ,532, ,164,019 Earnings per share: Basic earnings per share Diluted earnings per share The annexed notes from 1 to 27 form an integral part of this condensed interim financial information. AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive MUHAMMAD KHURRAM IQABL Chief Financial Officer 34 Systems Limited

37 CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the half year ended 30 June 2017 Half year Ended 30 June 30 June Profit for the period 277,604, ,517,399 Other comprehensive income Exchange di erence on transaltion of foreign operations 167, ,244 Total comprehensive income for the period 277,772, ,631,643 Attributable to: Equity holders of the parent Noncontrolling interest 282,429,851 (4,657,814) 277,772, ,663,912 (2,032,269) 229,631,643 The annexed notes from 1 to 27 form an integral part of this condensed interim financial information. AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive MUHAMMAD KHURRAM IQABL Chief Financial Officer Interim Financial Reprot 35

38 CONDENSED INTERIM CONSOLIDATED CASH FLOW STATEMENT for the half year ended 30 June 2017 Note (Unaudited) 30 June 2017 (Unaudited) 30 June 2016 CASH FLOWS FROM OPERATING ACTIVITIES Net cash flows from/(used in) operations ,617,867 (46,884,201) Finance costs paid Gratuity paid Taxes paid Net cash flows from/(used in) operating activities (1,579,506) (335,941) (21,965,278) (23,880,725) 238,737,142 (1,776,972) (328,871) (29,425,346) (31,531,189) (78,415,390) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment Development expenditure Proceeds from the disposal of property and equipment Increase in long term deposits Purchase / (disposal) of short term investments net Profit received on short term investment Profit received on bank deposits Net cash flows used in/from investing activities (259,075,327) (16,887,688) (12,556,203) 93,000,000 1,305,478 (194,213,740) (113,543,471) (27,025,564) 2,955,805 (5,717,351) 432,799,398 11,494,808 2,444, ,407,683 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of share options Proceeds from issue of shares Increase in short term borrowings Proceeds from convertible loan Dividend paid Increase / (decrease) in long term advances Net cash flows used in financing activities 15,088, , ,587,197 10,423,914 (207,999,433) (2,482,864) (4,160,077) 15,297, ,000,000 (138,848,114) 3,994,528 (9,556,064) Net (decrease) in cash and cash equivalents E ect of exchange translation reserve Cash and cash equivalents at 1st January Cash and cash equivalents at 30 June 40,363, , ,133, ,887, ,436, , ,593, ,144,329 The annexed notes from 1 to 27 form an integral part of this condensed interim financial information. AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive MUHAMMAD KHURRAM IQABL Chief Financial Officer 3 6 Systems Limited

39 CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the half year ended 30 June 2017 Issued, subscribed and paid up share capital Share capital premium Capital reserve Revenue reserve Employee Foreign currency compensation reserve transaltion reserve Unappropriated profit Total equity attributable to shareholders of parent company Noncontrolling interest Total Balance as at 31 December 2015 (Audited) Shares issued under employees share option scheme Adjustment ot employee compensation reserve Cash dividend Total comprehensive income for the period Balance as at 30 June 2016 (Unaudited) 1,106,808,760 3,976, ,302,586 11,321,362 9,255,467 4,550,100 1,110,784, ,623,948 13,805,567 33, , , ,921,042 (138,848,114) 231,549, ,622,596 2,423,320,937 15,297,522 4,550,100 (138,848,114) 231,663,912 2,535,984,357 (9,746,736) (2,032,269) (11,779,005) 2,413,574,201 15,297,522 4,550,100 (138,848,114) 229,631,643 2,524,205,352 Balance as at 31 December 2016 (Audited) Transfer from compensation reserve to share premium reserve Share issued against Employees' Share Option Scheme Share based payments Share issued to NCI against cash Adjustmen on account of issue of shares to NCI Final Rs.1.86 per share for the year ended 31st December 2016 Total comprehensive income for the period Other comprehensive income for the period Balance as at 30 June 2017 (Unaudited) 1,110,784, ,623,948 38,467,279 (316,714) 1,244,108,681 2,815,668,114 (15,568,020) 7,491,600 7,597,289 43,068,402 (43,068,402) 12,244, ,673 3,772,541 (207,999,433) 15,088,889 12,244,283 3,772,541 (207,999,433) 222,220 (3,772,541) 282,262, ,262,178 (4,657,814) 1,118,276, ,289,639 7,643,160 (149,041) 1,322,143,967 2,921,204,245 (23,776,155) 167,673 2,800,100,094 15,088,889 12,244, ,220 (207,999,433) 277,604, ,673 2,897,428,090 The annexed notes from 1 to 27 form an integral part of this condensed interim financial information. AEZAZ HUSSAIN Chairman ASIF PEER Chief Executive MUHAMMAD KHURRAM IQABL Chief Financial Officer Interim Financial Reprot 37

40 SELECTED NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL INFORMATION for the six months ended 30 June THE GROUP AND ITS OPERATIONS Holding company Systems Limited (the Company) is a public limited company incorporated in Pakistan under the Companies Ordinance 1984, and is listed on the Pakistan Stock Exchange (formerly Karachi, Islamabad and Lahore Stock Exchanges). The Company is principally engaged in the business of software development, trading of software and business process outsourcing services. The registered office of the Company is situated at Chamber of Commerce building, 11 ShahraeAiwaneTijarat, Lahore. Subsidiary company TechVista Systems FZ LLC, a limited liability company incorporated in Dubai Technology and Media Free Zone Authority, is a 100% owned subsidiary of Systems Limited. The Company is engaged in the business of developing software and providing ancillary services. EProcessing Systems (Private) Limited, a private limited company registered under Companies Ordinance, 1984 incorporated on 06 February 2013, is a 63% owned subsidiary of Systems Limited. The Company is principally engaged in the business of purchase and sale of airtime and related services. 2. STATEMENT OF COMPLIANCE 2.1 During the year, the Companies Act 2017 (the Act) has been effective from 30 May However, Securities and Exchange Commission of Pakistan vide its circular no.17 of 2017 dated July 20, 2017 communicated that the companies whose financial year closes on or before June 30, 2017 shall prepare their financial statements in accordance with the provisions of the repealed Companies Ordinance, Accordingly, these consolidated condensed interim financial information of the Group for the six months period ended 30 June 2017 has been prepared in accordance with the requirements of the International Accounting Standard 34 Interim Financial Reporting as are notified under the repealed Companies Ordinance, 1984, provisions of and directives issued under the repealed Companies Ordinance,1984. In case requirements differ, the provisions or directives of the repealed Companies Ordinance, 1984 shall prevail. 2.3 This consolidated condensed interim financial information is unaudited and is being submitted to shareholders, as required by section 245 of the Companies ordinance, BASIS OF PREPARATION This condensed interim consolidated financial information is not audited and has been prepared in condensed form and does not include all the information as is required to be provided in full set of annual financial statements. This condensed interim consolidated financial information should be read in conjunction with the audited financial statements of the Group for the year ended 31 December Consolidated financial satements This condensed interim consolidated financial information comprises the financial information of Systems Limited and its subsidiaries, hereinafter referred to as "the Group". 3.2 Basis of measurement This condensed interim consolidated financial information has been prepared under the historical cost convention. 38 Systems Limited