CMC held a conference call to discuss fourth quarter financials for FY09 and future prospects. R. Ramanan, Managing Director, CMC and CEO and J. K. Gupta, CFO, CMC addressed the call.
Highlights of the call
- For the quarter ended March 2009, on consolidated basis, on y-o-y basis, CMC reported 9% dip in operating income at Rs 240.11 crore with OPM up 490bps at 17.4%. Other Income for the quarter was up 102% at Rs 2.79 crore, interest cost was at Rs 87 lakh and depreciation charge was up 25% at Rs 2.69 crore. For the quarter, there was write-back of expenses totaling to Rs 8.17 crore treated as EO. Tax charge for the quarter was up 32% at Rs 10.82 crore and the resultant PAT was up 60% at Rs 38.45 crore. PAT excluding EO was up 33% at Rs 32.07 crore.
- Other Income includes gains from mutual funds of Rs 1.23 crore and forex gain of Rs 1.7 crore. For FY09, forex gain was Rs 9.44 crore.
- For FY09, the split between Services & Solutions and Equipment sale was 75:25, which the Company plans to maintain or improve.
- For the quarter, on consolidated basis, Customer Services segment revenues dipped 37% at Rs 87.26 crore contributing 37% of revenues with PBIT margins dipping 210bps at 6.6%. For FY09, CS segment revenues dipped 33% at Rs 383.44 crore with PBIT margins down 280bps at 5.5%. For CS, growth has been seen in the international segment and the company is entering new areas like security & surveillance, IMS etc. there is scope for improvement in PBIT margins.
- For the quarter, on consolidated basis, System Integration segment revenues grew 19% at Rs 114.63 crore contributing 49% of revenues with PBIT margins improving 340bps at 30%. For FY09, SI segment revenues grew 12% at Rs 431.43 crore with PBIT margins up 330bps at 28.2%. The SI growth was restricted on the back of re-negotiation of contract with one large client, which led to loss of revenues to the tune of Rs 36 crore. The company is seeing good traction in SI business. The PBIT margins for SI are about 28%.
- For the quarter, on consolidated basis, ITES segment revenues grew 35% at Rs 22.45 crore contributing 10% of revenues with PBIT margins improving 1980bps at 31.3%. For FY09, ITES segment revenues grew 11% at Rs 72.29 crore with PBIT margins up 240bps at 21.1%. The target margins for ITES are about 24-25%. The Company is seeing good traction in ITES segment and has seen wins in this segment.
- For the quarter, on consolidated basis, Education & training segment revenues dipped 5% at Rs 11.77 crore contributing 5% of revenues with PBIT margins down 300bps at 7.4%. There has been slackness in E&T segment. However, with new job assured programs the Company would see growth. E&T segment target margins are 21-22%.
- Services revenues grew 3% sequentially and 10% y-o-y contributing 80% of the revenues against 56% in the corresponding quarter previous year.
- Equipment sales for the quarter were at Rs 48 crore against Rs 30 crore in the sequential quarter and Rs 89 crore in corresponding quarter previous year in line with company strategy.
- International business grew 3% sequentially and 10% on y-o-y basis contributing 43% of the revenues from 46.6% in Q3FY09 and up from 36% in Q4FY08.
- For FY09, services contributed 75% of revenues up from 64% in FY08 and International contributed 40% of revenues up from 35% in FY08.
- Revenue from USA geography grew 15% in US$ terms and 33% in rupee terms in FY09.
- CMC added 16 clients in the quarter with 6 in US, 1 in UK and 9 in India.
- TCS contribution to revenues is 45%. The Passport Seva project won alongwith TCS is in 2 phases and revenues would start flowing from FY10 with the project for 7 years.
- The company reduced headcount by 26 people during the quarter and the total strength is 5383 employees.
- Cash & Cash equivalents stood at Rs 162 crore and debt was Rs 50 crore. The debt is mainly for SEZ facility to come up in Hyderabad.
- The capex for FY09 was Rs 21 crore and for FY10 would be Rs 20 crore of general capex and Rs 40-60 crore towards Phase II of Hyderabad SEZ. Phase I of the SEZ is complete with 3 ODCs. The rental income for FY09 was Rs 8.4 crore.
- Growth going forward would come from SI, embedded systems and ITES segments. The IMS services are seeing traction in domestic as well international. The pipeline is strong for both domestic & international business. The Company has won deals in Ports & Cargo and Insurance segments.
- The management is seeing pressure on margins and pricing but it is better placed because of its cost structure.