Telecard Limited (PSX: TELE) reported a dramatic 89.3% drop in its net profit for the year ended June 30, 2024, with earnings falling to Rs34.64 million (EPS: Rs0.03) from Rs324.44 million (EPS: Rs0.85) in the previous fiscal year. The sharp decline in profit has been attributed primarily to a substantial increase in tax expenses, overshadowing the company’s strong revenue growth during the period.
Revenue Surge
Despite the decline in net profit, Telecard achieved impressive top-line growth, with sales reaching Rs10.8 billion in FY24, marking a significant 89.8% increase from Rs5.69 billion in FY23. This strong revenue performance was a result of the company’s expanding operations and increased demand for its services.
Rising Costs
However, the company’s cost of sales surged by 125.3% to Rs8.65 billion, compared to Rs3.84 billion in the previous year. Although the increase in costs was substantial, the growth in sales still allowed the company to improve its gross profit by 16.0%, rising to Rs2.14 billion from Rs1.85 billion in FY23.
Operating Expenses
Telecard’s administrative and distribution expenses also saw an uptick, rising by 22.8% year-on-year to Rs1.49 billion in FY24, which further eroded the company’s operating profit margins. Meanwhile, other operating expenses dropped significantly, declining by 73.4% to Rs19.46 million, providing some relief to the company’s bottom line.
Finance Cost and Taxation
Finance costs remained relatively stable at Rs156.01 million, compared to Rs155.87 million in the previous year, showing minimal impact on profitability. However, the major factor behind the steep decline in net profit was a massive increase in tax expenses. Telecard paid Rs445.6 million in taxes during FY24, a 438% rise from the Rs82.83 million paid in FY23.
Outlook
Telecard’s strong revenue growth reflects the company’s ability to expand and capture more market share. However, the sharp increase in tax expenses, coupled with rising operational costs, has severely impacted its profitability. The company will need to focus on controlling expenses and optimizing its tax strategy to improve its bottom line in the coming fiscal year.
Consolidated Financial Summary (FY24 vs FY23)
| Metrics | FY24 (Rs ‘000) | FY23 (Rs ‘000) | % Change |
|---|---|---|---|
| Sales | 10,796,970 | 5,687,851 | 89.83% |
| Cost of Sales | (8,654,398) | (3,841,093) | 125.31% |
| Gross Profit | 2,142,572 | 1,846,758 | 16.02% |
| Administrative & Distribution Exp. | (1,486,869) | (1,210,535) | 22.83% |
| Other Operating Expenses | (19,459) | (73,078) | -73.37% |
| Finance Cost | (156,005) | (155,873) | 0.08% |
| Profit Before Tax | 480,239 | 407,272 | 17.92% |
| Tax Expenses | (445,595) | (82,832) | 437.95% |
| Net Profit | 34,644 | 324,440 | -89.32% |
| Earnings Per Share (EPS) | 0.03 | 0.85 | – |
While Telecard has demonstrated resilience with substantial revenue growth, managing rising costs and tax liabilities will be crucial for the company to sustain profitability in the future.
