Silverlake Axis Q1 net profit up by 36% to RM57.9 million amid revenue recognition from older contracts

MAINBOARD-LISTED Silverlake Axis saw profits jump in the first quarter as revenue picked up, according to financial results released on Tuesday.

Net profit rose by 70 per cent on the previous year, to RM57.9 million (S$19.1 million) for the three months to Sept 30, while revenue climbed by 36 per cent to RM166.6 million, helped by the software licensing and software project services segments, where contributions more than doubled.

The business software firm's top line was lifted by progressive revenue recognition from Malaysian projects secured in FY2018 and Thailand projects dating to FY2017, as well as contributions from Silverlake Investment Ltd Group's software implementation contracts in Sri Lanka and Hong Kong.

Project-related revenue swelled from RM15.5 million to RM54.9 million, on the back of software contracts and projects that had been secured in previous financial years. Revenue from these deals will continue to be recognised until FY2020, said Silverlake Axis.

Gross profit margin improved, as higher-margin software licensing and customisation and implementation services made up a bigger share of its turnover. Silverlake Axis also bettered its margin in the credit and cards processing segment.

But a drop in other income, as well as higher finance costs, took their pound of flesh out of the earnings.

Other income was halved on the previous year, to RM3.5 million, on both lower unrealised currency gains in the three months, as well as the absence of an earlier gain, which had been recognised the year before on the waiver of debts by the previous owner of a subsidiary.

Finance costs increased to RM6.2 million, from RM0.5 million before, as new accounting standards required a quarterly fair-value adjustment on the contingent consideration for the SIL Group acquisition.

Earnings per share was 2.18 sen, up from 1.29 sen previously, while net asset value was 20.84 sen a share, against 19.7 sen as at June 30.

Managing director Raymond Kwong, quoting the group's outlook statement, said: "Notwithstanding the growing political and economic uncertainties around the world, we are still getting new enquiries and request for proposals. Our marketing and business development teams are actively responding to these enquiries and requests, and we are working to secure additional software projects in FY2019."

The group added that it will continue to buy suitable financial technology and insurance technology firms.

The board proposed an interim dividend of 0.3 Singapore cent a share - down from 0.8 Singapore cent in the same period the previous year, when there was also a special dividend.

Silverlake Axis closed up by S$0.01, or 2.5 per cent, at S$0.41, before the results were announced.

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