INFOTECH ENTERPRISES LIMITED First Quarter, FY 2014 Results

 

  INFOTECH ENTERPRISES LIMITED First Quarter, FY 2014 Results

Earnings Release, Mumbai, India, July 18, 2013
     Revenues in INR at Rs.4,839 Mn, Up 4.2% QoQ   Revenue in Constant Currency up 0.7% QoQ   Operating Profit  at Rs.802 Mn; Up 1.4% QoQ
Quarter 1 – Highlights


Financial Highlights ü Revenue Growth o In INR at Rs.4,839Mn; Up 6.0% YoY and 4.2% QoQ  o In US$ at $86 Mn; Up 2.2% YoY and 0.1% QoQ  o Constant Currency revenueup by 0.7% QoQ ü Operating Margin at 16.6% as against 17.0% in Q4 ü Operating Profit at Rs.802Mn; Up 1.4% QoQ ü Net Profit at Rs.543Mn; Up0.2% QoQ
Financial Metrics ü Cash Balance, including liquid investments, is Rs. 6,099 Mn; Highest ever ü Free Cash Flowgenerated Rs.503 Mn vs. Rs.412 Mn lastquarter.FCF as % of EBITDA up from 46% to 52% this quarter ü Billed DSO for Q1stands at 75 days, as compared to 78 days in Q4.Best in last 8 quarters
Business Highlights ü Employee gross addition for the quarter at 763.  2ndconsecutive quarter of 750+ gross additions.


Management Message


Commenting on the results, Mr. BVR Mohan Reddy, Chairman and Managing Director, said: “Challenges that we had in the last two quarters with few of our large customer engagements and uncertainties in global economies, are behind us.  In-spite of these major challenges, we were able to keep revenue, margins and profitability for the last two quarters at a stable level.  We are confident that we are back on a robust growth path from this quarter onwards.  While we grow our business, we are equally committed for stable margins and profitability. We are also confident of a strong performance this FY.”
Mr. Ajay Aggarwal, Chief Financial Officer, said “This quarter our revenue grew 4.2% in INR and 0.7% in constant currency. Both operating profit and net profit grew QoQ, despite margin headwinds of annual wage hike and a one-off dividend tax impact. Growth in profit is led by better operational efficiencies and foreign exchange benefit. We continue to focus our efforts to invest in growth along with optimization of our cost structure and improvement incash generation.”



Financial Performance Highlights


(inRs.million)   30-Jun-13 31-Mar-13 30-Jun-12 Growth %    QoQ YoY    Revenue 4839.3 4644.5 4,563.8 4.2 6.0    Operating Profit 801.9 791.1 851.8 1.4 (5.9)    Operating Margin 16.6% 17.0% 18.7%    PAT 543.1 542.1 647.1 0.2 (16.1)  

 (in US$million)   30-Jun-13 31-Mar-13 30-Jun-12 Growth %    QoQ YoY    Revenue 86.0 85.9 84.2 0.1 2.2    Operating Profit 14.3 14.6 15.7 (2.6) (9.3)    Operating Margin 16.6% 17.0% 18.7%    PAT 9.7 10.0 12.0 (3.8) (19.1)  
   Rs/US$ Rate 30-Jun-13 31-Mar-13 30-Jun-12       Quarter Average 56.26 54.04 54.22    Quarter Closing 59.70 54.39 56.31  







Quarter that Was
Revenue Growth 
AERO revenue growth of3.6% in INR and -0.4% in US$.It consists of an exchange rate impact of 4.0%.  HTH revenue growth of 2.7% in INR and -1.2% in US$. It consistsof an exchange rate impact of 3.6%.  Utilities and Telecom revenue growth of 4.8% in INR and 0.8% in US$. It consists of anexchange rate impact of 2.5%.  Data Transformation & Analytics (D&A)* revenue growth of 8.3% in INR and 4.1% in US$. It consists of an exchange rate impact of 3.8%. 
Overall INR revenue growth was4.2% and US$ was at 0.1%. It consists of an exchange rate impact of 3.5%.


*Note : From this quarter, Content BU has been renamed to Data Transformation and Analytics (D&A)
Business Update


ENGG Highlights
It was a mixed quarter for the Aerospace business.  We started a new strategic engagement in engineering design and analysis with a leading helicopter manufacturer which is expected to grow over the next one year. Line-replaceable units designed and developed by us for Bombardier Aerospace, have been cleared for flight safety, which is a critical milestone in the development process of the C-Series aircraft. Our selection as a strategic supplier by UTAS to provide mechanical engineering, embedded software and electronics further helped us to open up a strategic relationship with their global engineering center in India. We were recognized at the Paris Air Show by GKN Aerospace for the significant contribution made towards achieving first flight clearance of the A350 XWB rear spar.  We had challenges in Q1 from some of our existing customers as programs were shifted to the next quarter, causing this quarter’s performance to remain flat. We will be shortly initiating an engagement with an MRO company in Europe. A new SEZ delivery center in Bangalore in Q2 has been planned to propel the growth in Q2 along with new programs with existing customers.
The first quarter of FY 2014 saw stability returning to the HTH business. Europe showed turnaround in revenues with modest growth while the North America and Asia Pacific regions remained stable. There were no new ramp-downs in existing customer engagements, though the ramp-downs announced in Q4 FY13 took full effect in the last 3 months. We are starting to see new wins in our customer engagements – we were selected as should cost analysis partner for one of our large off-highway customers in the US; we won 3 projects in aftermarket services with a global rail transportation company; we kicked off our first semiconductor engagement in Europe. We also signed 5-year contract extensions with two of our top 10 customers. For Rail Transportation, outlook is robust and we will witness growth across existing strategic customers as well as new customers.
Utilities, Telecom and Data Transformation & Analytics (UT and D&A) Highlights
We are pleased to report that we had another strong quarter for our Utilities and Telecom BU. We exceeded our Q1 revenue targets, helped by a particularly strong performance from two of our clients in APAC where we saw more business than planned. Broadband and backhaul (FTTx) plan and design services remain in high demand across all geographies, and we have made some significant progress around launching a number of new service offerings to capitalize on this and other market trends. In terms of our long-term strategy, we have completed an internal reorganization of the business unit into four market-focused PDU’s that we believe will give us a much stronger platform for continued growth. It was also pleasing to see a strong quarter-on-quarter improvement in our operating margins. In terms of outlook, we believe Q2 should be another strong quarter.
During the last quarter, we rebranded our Content business unit. It is now called the Data Transformation & Analytics Business Unit (D&A BU for short). We believe this reflects more accurately what we do and where our value addition for customers lies. The BU had another record quarter, achieving revenues of $9.8million – the highest revenues ever and ahead of our Q1 targets. Growth came predominately from our existing key accounts, but some of the changes that we have made around sales and business development are starting to have an impact. Gross margins and operating margins remained very healthy, and we were particularly pleased that we achieved significant DSO reduction for this BU – the lowest of the last several quarters.  The outlook for Q2 remains good with our only concern being around the slight slowdown in some budgets for clients and prospects in the energy andnatural resources sector.

Business and Operational Highlights


ü New Business, Pursuits& Services Offerings
o 10 customers added during the quarter, 5 in ENGG and 5 in UT and D&A.
o Key wins across all verticals.

ü Awards and Recognitions
o Infotech Enterprises was recognized at the Paris Air Show by GKN Aerospace for the significant contribution made towards achieving first flight clearance of the A350 XWB rear spar
o Mr. B. Ashok Reddy, President - Global Human Resources and Corporate Affairs, was conferred with the ‘Visionary Leader of the Year’ award by the Asian Confederation of Businesses
o Mr. Rajesh Sehgal, Senior VP HR, was conferred with the ‘Innovative Leader of the Year’ award by the Asian Confederation of Businesses


ü New Facility o New Office opened in Taiwan to address Semi-Conductor and ASIC Business
ü Key Management Addition
o Mr. Chris Jones has joined as Vice President and Head ofEurope Aerospace. He will be operating from Infotech’s Bristol office in UK


Revenue Segmentation



Geographies (in %)   30-Jun-13 31-Mar-13 30-Jun-12*    Americas 56.8 56.3 62.5    Europe 26.8 27.3 26.7    Asia Pacific & Others 16.4 16.4 10.8   *Revenue contribution for ‘Europe’ and ‘APAC and Others’ is different than published numbers in Q1 FY13. A subsidiary which used to be addedunder‘APAC and Others’ has been reclassified to ‘Europe’ category. 
Business Units (in %)   30-Jun-13 31-Mar-13 30-Jun-12    ENGG 64.0 64.6 67.6    Aero 36.0 36.2 37.6    HTH 28.0 28.4 30.0    UT and D&A 34.9 34.3 31.7    Util.&Telecom 23.5 23.4 21.4    D&A 11.4 10.9 10.3    Others 1.1 1.1 0.7  

Onsite / Offshore Split (in %)   30-Jun-13 31-Mar-13 30-Jun-12    Offshore 48.3 51.4 51.2    Onsite 51.7 48.6 48.8  
The onsite – offshore split of revenues was 42:58 for UT and D&A and 55:45 for ENGG in Q1 FY14.

CurrencyMix (in %)   30-Jun-13 31-Mar-13       USD 65.5 65.4    EUR 16.4 16.0    GBP 7.2 7.2    AUD 7.0 8.1    OTHERS 3.9 3.3  









Operational Metrics



Utilization (in %)   30-Jun-13 31-Mar-13 30-Jun-12       Overall Utilization 74 74 77    - ENGG 66 68 71    -UT and D&A 83 80 84  

Receivable Days* (in Days)   30-Jun-13 31-Mar-13 30-Jun-12       DSO (Total) 95 95 99    - Billed 75 78 82    - Unbilled 20 17 17   *From this year, in-line with industry best practices,methodology of DSO calculation has been changed from YTD annualized to Quarterly Annualized.There is no change in either Billed or Unbilled DSO values for Q1 FY14, Q4 FY13 and Q1 FY13 due to change in DSO calculation methodology.

Customer Metrics


Top Customers- Revenue Contribution (in %)   30-Jun-13 31-Mar-13 30-Jun-12       Top 5 36.6 35.1 38.6    Top 10 49.3 48.1 55.2   Customers Added (in number)   30-Jun-13 31-Mar-13 30-Jun-12       ENGG 5 11 5    UT and D&A 5 8 12    Total 10 19 17  

No. of million dollar clients (in number)   30-Jun-13 31-Mar-13 30-Jun-12       20 Mn+ 2 2 3    10 Mn+ 8 8 8    5 Mn+ 15 15 15    1 Mn+ 55 53 43   *Revenue segments basis LTM (Last twelve months) Revenues 
Employee Metrics



Manpower by Business Units (in number)   30-Jun-13 31-Mar-13 30-Jun-12       ENGG 4,774 4,721 4,619    UT and D&A 5,268 5,076 4,507    IT Services 120 118 87    Support Functions 653 602 585    Total 10,815 10,517 9,798  

Manpower by Company (in number)   30-Jun-13 31-Mar-13 30-Jun-12       Infotech Enterprises Ltd 9,282 8,931 8,191    Infotech Enterprises Europe Ltd 55 55 114    Infotech Enterprises America Inc. 1,075 1,117 1,134    Infotech Enterprises GmbH 276 287 270    Infotech Geospatial (India) Ltd. 4 4 7    Infotech Enterprises IT Services Pvt. Ltd. 115 113 78    Infotech Enterprises Japan KK 8 10 4    TOTAL 10,815 10,517 9,798  

Attrition (Voluntary) (in %)   30-Jun-13 31-Mar-13 30-Jun-12       Attrition (QAA) 12.3 11.8 14.3  












Detailed Financials



Consolidated Income Statement (in Rs.millions)   30-Jun-13 31-Mar-13 30-Jun-12    Operating Revenues        4,839.3 4,644.5        4,563.8    Operating Expenditure        4,037.4 3,853.4        3,712.0    Salary Costs          3,085.6 2,853.7          2,762.2    Travel Expenditure             221.1 249.5             246.2    Purchases               51.2 144.5             152.9    Other Operating Costs             679.5 605.7             550.7    Operating Profits            801.9 791.1            851.8    Depreciation & Amortization             180.8 195.4             134.2    Financial Expenses                  6.9 3.9                  0.5    Other Income             182.1 100.4             178.8    Profit Before Tax            796.3 692.2            895.9    Exceptional Item -                -                 18.1    Tax 294.5 170.6 292.3    Profit After Tax 501.8 521.6 585.5    Share of Profits - IASI 41.3 20.5 61.6    Minority Interest - IGIL - - -    PAT after Share of Profits 543.1 542.1 647.1    Basic EPS (Rs.) 4.9 4.9 5.8  
   Operating Margin 16.6% 17.0% 18.7%    PBT Margin 15.9% 14.6% 18.9%    Effective Tax Rate 37.0%* 24.6% 32.6%    PAT Margin 11.2% 11.7% 13.6%  
*Note:The effective tax rate for the quarter excluding one off is 28.4%. The one off during the quarter is due to dividend tax of Rs.68 Mn on receipt of dividend of Rs.400 Mn from the overseas subsidiaries during the quarter. The tax on intercompany dividend is eligible for setoff against dividend distribution tax to be paid by Infotech India on dividend declared in the financial year and hence will have no cash flow impact.

Other Income (in Rs.millions)   30-Jun-13 31-Mar-13 30-Jun-12    Income from Investments 97.9 99.6 96.2    FX Gain/(Loss) 79.6 (14.6) 62.7    Others 4.6 15.4 19.9    TOTAL 182.1 100.4 178.8  

Capital Expenditure (in Rs.millions)   30-Jun-13 31-Mar-13 30-Jun-12    Capital Expenditure 138 360 212  

Cash Position (in Rs.millions)   30-Jun-13 31-Mar-13 30-Jun-12    Cash Including Liquid Investments 6,099 5,591 4,815  

Outstanding Hedge Position (in millions)   30-Jun-13 31-Mar-13 30-Jun-12    USD / INR 72.7 58.1 64.4    EURO / INR 17.7 16.4 24.2    GBP / INR 2.9 5.1 10.5    AUD / INR 5.4 3.6 3.6  







Performance by Company


Revenue (in Rs.millions)   30-Jun-13 31-Mar-13 30-Jun-12    Infotech Enterprises Ltd            2,841.5 2,629.8 2,584.9    Infotech Enterprises Europe Ltd                213.2 223.9 213.3    Infotech Enterprises America Inc.            2,164.0 2,135.4 2,106.2    Infotech Enterprises GmbH                761.8 886.7 728.1    Infotech Geospatial (India) Ltd                    2.7 3.2 8.5    Infotech HAL Limited                    4.5 3.7 3.5    Infotech Enterprises Japan KK                  25.2 23.1 15.0    Infotech Enterprises IT Services Pvt. Ltd.                  53.8 52.6 38.5    Gross Revenues 6,066.7 5,958.4 5,698.0    Less: Intragroup Revenues           (1,227.4) (1,313.9) (1,134.2)    Net Revenues            4,839.3 4,644.6 4,563.8  

Profit (in Rs.millions)   30-Jun-13 31-Mar-13 30-Jun-12    Infotech Enterprises Ltd                866.4 421.9 524.0    Infotech Enterprises Europe Ltd                (14.7) (18.9) (10.3)    Infotech Enterprises America Inc.                  80.0 50.0 71.3    Infotech Enterprises GmbH                   (4.2) 26.1 (0.1)    Infotech Geospatial (India) Ltd                   (4.5) (5.2) 0.0    Infotech HAL Limited                    0.9 (0.3) 0.0    Infotech Enterprises Japan KK                   (3.8) (15.0) (6.3)    Infotech Enterprises IT Services Pvt. Ltd.                  13.3 2.4 4.6    Gross Net Profit 933.4 461.0 583.2    Add / (Less): Others (Elimination)              (431.6) 60.6 20.5    Exceptional Item (18.1)    Profit After Tax                501.8 521.6 585.6    Share of Profits from IASI                  41.3 20.5 61.5    Minority Interest of IGIL                      -   - -    Profit After Minority Interest                543.1 542.1 647.1  

Company Overview

Infotech Enterprises provides leading-edge engineering solutions, including product development and life-cycle support, process, network and content engineering to major organizations worldwide. With over two decades of continuous growth, Infotech leverages a global delivery and collaborative engineering model to achieve measurable and substantial benefits for our clients. Whether your organization needs to design innovative products faster, optimize R&D costs, increase market share, enhance operational efficiency or maximize the return on investment in your networks, Infotech Enterprises is the ideal partner.
Infotech has over 10,000 associates across 36 global locations. We adopt a proactive approach to serve our clients with our best-in-class delivery centers in North America, Europe, Middle East and Asia Pacific. Our clients span multiple industries such as Aerospace, Consumer, Energy, Medical, Oil & Gas, Mining, Heavy Equipment, HiTech, Transportation, Telecom and Utilities and include 22 'Fortune 500' and 27 'Global 500' blue chip organizations.
In order to create and deliver services that exceed clients' expectations consistently and enhance their business agility, Infotech employs a framework of robust internal processes to ensure IP security, quality of solution and on-time delivery. Infotech aligns with industry best practices and internationally renowned standards and frameworks including International Standards Organization (ISO) 9001:2008, Information Security 27001:2005, Aerospace (AS9100 C), and Medical Devices (ISO 13485).
For more information, please visit www.infotech-enterprises.com.

Contact Details




Disclaimer
This document contains certain forward-looking statements on our future prospects. Although Infotech believes that expectations contained in these statements are reasonable, their nature involves a number of risks and uncertainties that may lead to different results. These forward-looking statements represent only the current expectations and beliefs, and the company provides no assurance that such expectations will prove correct.
All the references to Infotech’s financial results in this update pertain to the company’s consolidated operations comprising overseas wholly-owned subsidiaries Infotech Enterprises Europe Ltd. (IEEL); Infotech Enterprises America Inc. (IEAI); Infotech Enterprises GmbH (IEG); Infotech Enterprises IT Services Pvt. Ltd (IEITS); Infotech Enterprises Japan KK; Infotech Geospatial (India) Ltd (IGIL); joint venture Infotech HAL Ltd (HAL JV) and associate company Infotech Aerospace Services Inc. (IASI).

The income statement provided is in the internal MIS format. MIS format is different from the income statement published as part of the financial results, which is as per the statutory requirement, in terms of grouping of cost elements. Previous period numbers are regrouped orreclassified, wherever necessary.