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Silverlake Axis posts 12% drop in 4Q earnings to $19.4 mil on lower revenue

Felicia Tan
Felicia Tan • 3 min read
Silverlake Axis posts 12% drop in 4Q earnings to $19.4 mil on lower revenue
The numbers translate to earnings per share (EPS) of 2.25 sen and 7.04 sen for 4Q20 and FY20 respectively.
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Silverlake Axis reported 12% lower earnings of RM59.1 million ($19.4 million) for 4Q20 ended June, from the RM67.5 million a year ago.

The quarterly bottomline brings FY20 earnings for the Mainboard-listed company to RM184.7 million, 25% lower than the RM245.6 million in FY19.

The numbers translate to earnings per share (EPS) of 2.25 sen and 7.04 sen for 4Q20 and FY20 respectively. EPS for 4Q19 and FY19 stood at 2.55 sen and 9.27 sen respectively.

For the quarter, revenue came in 17% lower y-o-y to RM156.8 million from lower contributions from the company’s project-related revenue segments, and software-as-a-service for insurance processing.

Project related revenue comprising software licensing and software project services fell 61% y-o-y to RM26.7 million in 4Q20 while the company saw lower progressive revenue from major ongoing licensing and implementation contracts secured in Malaysia and Thailand.

The decline was mitigated, however, by new and smaller core banking implementation and retail automation contracts secured in Indonesia and Malaysia.

Recurring revenue segments comprising maintenance, enhancement services and software-as-a-service rose 5% y-o-y to RM118.6 million, which accounts for 76% of the company’s overall revenue in 4Q20.

Revenue from software-as-a-service for insurance processing decreased by 30% y-o-y to RM6 million in 4Q20 due to movement restriction orders in the country.

Revenue from maintenance and enhancement services grew 8% y-o-y to RM112.5 million for the quarter, with additional contribution coming from new contracts secured in several Asean countries and Hong Kong.

Revenue contribution from credit and cards processing increased 319% y-o-y to RM6.2 million in 4Q20 mainly due to early contract termination fees and additional professional services requested by a customer in Japan.

Gross profit for 4Q20 fell 28% y-o-y to RM87.5 million due to the lower revenue recorded, while gross profit margin fell 8 percentage points to 56% attributable to lower contributions from business segments that enjoy higher margins.

Finance costs for the quarter increased 21% y-o-y to RM8.6 million mainly due to the unwinding of discount on the contingent consideration payable.

Other income for 4Q fell 40% y-o-y to RM14.9 million.

For the FY20, group revenue dipped 3% y-o-y to RM663.7 million, while gross profit fell 8% y-o-y to RM391.7 million.

The company has proposed a final dividend of 33 Singapore cents per share, which translates to a full year dividend payout of 40%.

As at end June, cash and cash equivalents stood at RM476.4 million.

“In a period of increasing market uncertainties, the group’s majority revenue segments, comprising recurrent revenue from banking related maintenance and enhancement services as well as non-banking segments of insurance and retail remain buoyant with good prospects for growth,” says Andrew Tan, group managing director.

“While we are pursuing growth, we will also review our operating expenses and seek to optimise our tax structure to improve the overall cost efficiency,” he adds.

During the quarter, Silverlake Axis has signed contracts with 16 of its existing customers in 4Q20. The company’s software solutions and services deployed are from its wholly-owned subsidiaries including Silverlake Axis MSC Sdn Bhd, Silverlake Digitale Sdn Bhd, and Silverlake One Paradigm Sdn Bhd.

The total value of these contracts stood at some RM41 million and are expected to contribute positively to Silverlake Axis’ results in the current and following FYs, says the company.

Looking ahead, the group has launched its digital suite Mobius and embarked on a five-year multi-pronged strategy to retain and protect its existing customer base in anticipation of a “challenging operating environment”.

Shares in Silverlake Axis closed 1 cent higher, or 3.4% up, at 30.5 cents on August 26.

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