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Silverlake Axis posts 21.8% drop in Q2 net profit to RM52.8m

MAINBOARD-LISTED business software company Silverlake Axis saw a drop in its second-quarter earnings despite higher turnover, according to results released on Thursday.

Separately, the board announced that Silverlake Axis has won four contracts worth RM60 million (S$20.1 million) in all with banking customers across the region.

Net profit was down 21.8 per cent year-on-year to RM52.8 million for the three months to Dec 31, 2019, even though revenue grew by 12.8 per cent to RM190.7 million.

The rise in turnover came on improvements in project-related software licensing revenue, as well as in recurring income from maintenance and enhancement services and software-as-a-service for insurance processing and retail.

Revenue from the sale of software and hardware products also more than tripled, helped by the consolidation of newly acquired SIA X Infotech Group, a contract to upgrade a Malaysian financial institution's application systems, and another sale of hardware to a Malaysian bank.

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These gains made up for weaker contributions from software project services, as well as the credit and cards processing segment, where an outsourcing contract was terminated.

Still, even with share of contributions from a joint venture turning positive on the previous year's loss, the bottom line sank as selling and distribution, administrative and finance costs increased. The higher finance costs were on the back of a higher unwinding of the discount on the contingent considerations for the acquisitions of Silverlake Investment and SIA X Infotech.

Earnings per share slipped to two sen for the quarter, down from 2.55 sen in the year before, while net asset value was 24.25 sen a share, against 22.39 sen as at June 30, 2019.

For the half-year, net profit decreased by 20.3 per cent to RM100 million, even as revenue grew by 5.7 per cent to RM355.5 million.

Meanwhile, the four newly announced contracts comprise deals to modernise the core banking system of an Indonesian lender and another in Vietnam, as well as two licence renewals and maintenance support contracts with existing customers in Malaysia and Pakistan.

The contracts are expected to contribute positively to Silverlake Axis' results this financial year and in the future, the board said in a bourse filing.

While Silverlake Axis flagged a "cautious business environment" in its outlook statement, it noted that "the existing level of enquiries remains active and the group is working to convert them into firm orders".

"The group expects the trend of increasing spend on incremental enhancements, as opposed to projects, to continue," it added.

Andrew Tan, the group managing director of Silverlake Axis, said in a statement: "In a period of increasing market uncertainties, the group's majority revenue segments, comprising recurring revenue from banking-related maintenance and enhancement services as well as non-banking segments of insurance and retail remain positive."

The board has recommended an interim dividend of 0.3 Singapore cent a share, unchanged from the year before, which will be paid out on March 6. The books close on Feb 25.

Silverlake Axis shares fell half a Singapore cent or 1.33 per cent to S$0.37 on Thursday before the announcements.

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