Mastek (MASTEK) Q4 05/06 earnings summary

Executive summary

• FY06 revenue rose 22% to Rs 7.011bn and net profit increased 29% to Rs 691m; EBITDA margin improved to 19% from 17%.

• The strategy narrowed new-business focus to government and insurance while growing strategic accounts; repeat business generated over 90% of revenue.

Financial highlights

• Consolidated income was Rs 7.011bn vs Rs 5.766bn; operating profit was Rs 1.312bn vs Rs 980m, and profit before tax was Rs 1.012bn vs Rs 725m.

• Net profit was Rs 691m vs Rs 534m; reported net margin was 10% vs 9%, and basic EPS was Rs 24.76 vs Rs 19.20, adjusted for the 1:1 bonus issue.

• Operating cash flow reached Rs 888m vs Rs 780m; cash and cash equivalents including liquid investments were Rs 1.482bn vs Rs 1.106bn.

Outlook and guidance

• Management expected robust insurance growth and dominant share over the next 2–3 years, supported by Elixir, Capita's platform selection and Zurich Insurance business.

• FY07 growth outlook cited a healthy order backlog/pipeline, strategic positioning and partnerships; NASSCOM projected Indian IT-ITES export growth of ~28%.

• US state and local government bids were expected to produce potential deals in the following financial year, reflecting long sales lead times.