Service Industries Limited (PSX: SRVI) delivered a stronger first-half performance in 2026, but its second-quarter earnings declined and the company recommended no cash dividend, bonus shares or rights issue.
For the six months ended June 30, 2026, consolidated revenue increased 21% to Rs84.75 billion, while profit after tax rose 24% to Rs9.69 billion. However, second-quarter profit fell to Rs4.64 billion from Rs6.16 billion a year earlier.
Stronger Revenue and Gross Profit
The group’s operating performance improved significantly during the first half. Gross profit increased 41% to Rs22.41 billion from Rs15.84 billion, lifting the gross margin to around 26.4% from 22.5%.
Operating profit also climbed to Rs13.44 billion from Rs8.63 billion. Meanwhile, finance costs declined to Rs2.27 billion from Rs3.08 billion as mark-up expenses eased.
Profit before tax more than doubled to Rs11.16 billion compared with Rs5.52 billion in the same period last year, showing a substantial improvement in underlying operations.
Tax Impact Weighs on Net Profit
The biggest difference in the earnings comparison came from taxation.
During the first half of 2025, Service Industries recorded a tax credit of Rs2.33 billion. This year, the company booked a tax expense of Rs1.47 billion.
As a result, the improvement in profit after tax was much smaller than the increase in pre-tax earnings.
Q2 Profit Falls Despite Higher Sales
The second quarter presented a different picture from the overall half-year results.
Quarterly sales increased to Rs42.52 billion from Rs37.77 billion, while gross profit rose to Rs10.98 billion from Rs8.41 billion.
Profit before tax also improved to Rs5.21 billion from Rs3.10 billion. However, profit after tax declined to Rs4.64 billion from Rs6.16 billion.
The previous year’s second quarter benefited from a Rs3.06 billion tax credit, while the latest quarter recorded a tax charge of Rs564 million. Quarterly EPS consequently declined to Rs5.90 from a restated Rs7.04.
Working Capital Requirements Remain High
Service Industries reduced its short-term borrowings to Rs42.30 billion from Rs54.18 billion at the end of December, providing some balance-sheet relief.
However, working-capital requirements increased. Inventory rose to Rs32.26 billion from Rs26.47 billion, while trade debts increased to Rs20.95 billion from Rs16.97 billion.
Loans and advances also climbed to Rs3.74 billion from Rs1.10 billion. Fixed assets increased to Rs56.32 billion from Rs49.22 billion, while long-term financing rose to Rs14.85 billion from Rs12.35 billion.
Cash and bank balances stood at Rs9.31 billion, compared with Rs8.48 billion at year-end, while short-term investments declined to Rs15.57 billion from Rs21.42 billion.
No Dividend Recommended
Despite the stronger first-half profit, the board recommended no cash dividend, bonus shares or rights issue for the period.
Profit attributable to equity holders of the holding company reached Rs5.79 billion, translating into EPS of Rs12.32, compared with restated EPS of Rs9.70 in the previous period.
The decision marks a notable change from calendar 2025, when the company paid Rs17.50 per share as part of what it described as a consistent payout history.
Service Industries Earnings Outlook
Service Industries’ latest results present a mixed picture for investors. The first-half numbers show stronger sales, wider gross margins, lower finance costs and a significant increase in pre-tax profit.
However, the second-quarter decline and absence of a dividend highlight the impact of tax changes and continued working-capital requirements.
The key factors to watch going forward will be profit margins, inventory levels, receivables, borrowing costs and cash generation. The company’s ability to convert stronger operating performance into sustainable net earnings and shareholder returns will remain central to its outlook.