Silverlake Axis half-year profit down 11% despite revenue increase

ENTERPRISE technology, software and services company Silverlake Axis (SAL) posted a net profit of RM88.6 million (S$25 million) for the six months ended Dec 31, 2023, down 11 per cent from RM99.3 million the year before.

This was despite revenue for the period increasing by 1 per cent to RM397.4 million from RM392.3 million a year ago, said the mainboard-listed company in a bourse filing on Thursday (Feb 15).

The drop in gross profit was due to a change in revenue mix, said the group, pointing out that the proportion of revenue from its higher-margin business segments such as software licensing was lower compared to the same period a year earlier.

Revenue from software licensing, which fell 53 per cent to RM26.5 million from RM56 million, accounted for 7 per cent of total group revenue in H1 FY2024, compared with 14 per cent the year before.

Basic earnings per share stood at RM0.0353 for the period, down 11 per cent from RM0.0396 a year ago.

Total expenses for the six months amounted to RM119.5 million, up 11 per cent from the RM107.6 million recorded in the year-ago period.

The increase in cost was attributed mainly to annual salary increments effected in Q3 FY2023, new headcount added to the organisation to support business development and expansion, sales and market coverage, as well as retirement gratuities for key management personnel.

The rest was related to operating costs, such as information technology-related expenses – particularly software subscription and support, as well as laptop leasing for new staff. The expenses also included business travel amid post-pandemic economic recovery, and interest charged on revolving credit.

However, SAL highlighted that its expense-to-revenue ratio – which covers its selling, distribution, administrative and finance costs – of 30 per cent remains below the industry benchmark of 40 per cent.

Noting that the sales cycle in the first half of the financial year has been challenging for core banking – and consequently licence and project services revenues – the group said: “The sentiment from the market is that this will persist (until) the end of 2024 with continued weakness… as core replacement and upgrading become less of a priority for our customer base.”

To mitigate this, the group said that it has expanded its market coverage and will prioritise positioning its suite of products to satisfy clients of various budgets.

“Our pipeline remains robust with total potential deals of about RM1.4 billion, of which in the immediate term, approximately RM150 million (is) in imminent stages of closure.”

It added: “More focus will be expanded to growth regions in the Middle East, Eastern Europe, the Indian sub-continent and the African region, where demand for our solutions remains robust.”

Shares of SAL closed at S$0.245, down S$0.005 or 2 per cent on Thursday, before the business update.