Azeus first-half net profit jumps a whopping 501% to HK$8.9m

Regional market investments now bearing fruit.

Singapore Exchange Mainboard-listed Azeus Systems Holdings Ltd. (Azeus) announced a 501.0% jump in profit attributable to equity holders (net profit) to HK$8.9 million for the six months ended September 30, 2013 (1H FY2014).

The higher net profit was backed by a 29.0% increase in revenue to HK$73.7 million for 1H FY2014, partially offset by lower administrative and operating expenses. In 1H FY2013, the Group recorded a one-time expense of HK$7.6 million in legal and professional fees, in relation to an arbitration case, where an interim ruling in the Group’s favour was announced in March 2013.

Mr. Lee Wan Lik, Managing Director of Azeus, commented, “We are pleased with our performance in the current financial year, having achieved growth for our IT services business segment. As a leading provider of IT consultancy services, we are enthused that our investments into regional markets, particularly in Hong Kong and the United Kingdom, have continued to pay off with new contract wins.”

The Group’s IT services segment was again the largest revenue contributor, accounting for HK$44.7 million or approximately 60.6% of total revenue for 1H FY2014. This segment recorded a 57% increase in revenue from HK$28.4 million for 1H FY2013, as there were more contracts secured and implemented and a major contract was completed during the review period.

The Maintenance and Support Services (MSS) segment was the second largest revenue contributor, accounting for 30.6% of total revenue for the review period, while the Business Process Outsourcing (“BPO”) segment accounted for the remaining 8.8%. Contributions from the MSS segment rose 2.0% to HK$22.6 million for 1H FY2014, while the BPO segment achieved revenue of HK$6.5 million.

Notwithstanding an increase in hardware and software costs, the Group was able to keep gross margin healthy at 34.3% for 1H FY2014.

Administrative and other operating expenses declined 34% to HK$11.3 million, mainly due to a decrease in legal and professional fees for the arbitration case. In addition, selling and marketing expenses declined 17% to HK$2.5 million as the Group participated in fewer tender bids in 1H FY2014.

In view of the above, the Group recorded a 501% jump in net profit to HK$8.9 million for 1H FY2014, compared to HK$1.5 million for 1H FY2013. Earnings per share on a fully diluted basis were 2.96 HK cents for 1H FY2014, an improvement from 0.49 HK cents for 1H FY2013.

The Group remains in a healthy net cash position, with no borrowings and strong cash and cash equivalents of HK$29.6 million as at September 30, 2013. “While market and operating challenges inevitably exist, we maintain a commitment to grow our businesses and bring value to shareholders. Backed by our capabilities as a leading provider of IT consultancy services, we are pleased to be selected as prequalified vendor for the Standing Offer Agreements for the supply of IT professional services for the Hong Kong Government effective from 31 July 2013 for four years.” Mr. Lee added.

“Additionally, our investment in the United Kingdom (UK) market is also yielding results. We are pleased to have secured a UK project in 1H FY2014 with a total contract value of HK$7.4 million (UK£593,400). The Group will continue to invest and make progress to further penetrate the UK IT services market.”

In FY2013, the Group booked an exceptional gain of HK$40.9 million arising from compensation received from an arbitration case in March 2013. The Group expects the net profit will be lower than last year as there is no similar level of exceptional gain to be recognised. Barring unforeseen circumstances, the Group is maintaining a cautious outlook for the 2H FY2014.