Firstsource Solutions (FSL) Q4 08/09 earnings summary

Executive summary

• Revenue from operations rose 35% YoY to Rs. 17,494 million, while consolidated profit after tax fell 77% to Rs. 307 million amid recession-related operating pressure and financing losses.

• Growth came with a larger delivery footprint, more employees and clients, and a shift to four industry- and geography-aligned business units.

• Seven of the top 10 clients expanded business; 94% rated services satisfactory or highly satisfactory.

Financial highlights

• Consolidated total income increased 33% to Rs. 17,792 million; income from services rose 41% to Rs. 17,525 million, reflecting MedAssist’s full-year contribution and client growth.

• Operating EBITDA declined 5% to Rs. 2,198 million and operating EBIT fell 15% to Rs. 1,237 million; EBITDA margin was 12.6% versus 17.8% YoY.

• Profit before tax decreased 65% to Rs. 507 million and profit after tax fell 77% to Rs. 307 million; basic and diluted EPS were both Rs. 0.72.

• Net finance charges rose to Rs. 1,028 million, including a Rs. 778 million FCCB mark-to-market loss; other income included a Rs. 635 million FCCB buyback gain and Rs. 236 million loss on undesignated derivatives.

Outlook and guidance

• FY2010 outlook assumed continued slow growth and profitability pressure, with recovery in developed economies expected to be gradual and uncertain.

• Medium- and long-term prospects were viewed positively, as recession-driven cost reduction and efficiency needs could increase outsourcing demand; near-term outsourcing decisions could be delayed.

• Operational excellence and cost controls remained priorities, alongside continued investment in sales and marketing and growth areas.