Mastek (MASTEK) Q4 00/01 earnings summary

Executive summary

• FY01 Group revenue was Rs 2,611m vs Rs 2,537m, up 3%; the pivot toward large Fortune 1000 outsourcing accounts and lengthening sales cycles constrained near-term growth.

• Group PAT under Indian reporting was Rs 79m vs Rs 299m, including a Rs 56m extraordinary investment write-off; US GAAP net income was $1.244m vs $6.825m.

• Revenue mix shifted toward Europe at 45.7% from 31.0%, while the US share fell to 44.2% from 59.6%.

Financial highlights

• US GAAP revenue was $55.734m vs $57.957m; gross profit $21.882m vs $24.356m; operating income $2.041m vs $7.979m.

• US GAAP EPS was $0.09 vs $0.50; net income margin was 2.2% vs 12% of revenue.

• Indian consolidated PBT before extraordinary items was Rs 177m vs Rs 335m; PAT was Rs 79m vs Rs 299m after the investment write-off and minority interest.

• Standalone revenue declined to Rs 849m from Rs 963m; standalone PBT was Rs 147m vs Rs 294m and PAT Rs 137m vs Rs 294m.

Outlook and guidance

• FY02 organic revenue growth guidance was 10%–15%; management remained cautiously optimistic amid uncertain US conditions and emerging signs of slowdown in Europe.

• The next few quarters could remain affected by the slowdown and longer sales cycles; strategic focus remained on large outsourcing accounts, high-growth technologies, geographic diversification, domain expertise, alliances and acquisitions.

• Offshore outsourcing demand was expected to benefit from cost-control efforts; available cash, investments and credit facilities were expected to support working capital needs.