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Kale Consultants: 3QFY01 Flat topline - Views on News from Equitymaster
 
 
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  • Feb 12, 2001

    Kale Consultants: 3QFY01 Flat topline

    From the 3QFY01 results of Kale consultants it seems that the company has been putting more efforts towards improving internal operations than at acquiring new clients and marketing. In 3QFY01 the revenue grew by a mere 3.8% on a QoQ (Quarter on Quarter) basis. On a YoY (Year on Year) basis the topline has grown by 31%. However, the net profit figure has come down by a significant 82% from the corresponding quarter last year. The net profit figure in 3QFY00 has a huge component of Rs 34.09 m as other income. This was due to the IPO (initial public offering). But the heartening news is that operating margins increased by 630 basis points from 15% in 2QFY01.

    This improvement in operating margins is due to the fact the personnel expenses for the company have come down by a significant 600 basis points in just one quarter. The figure at the end of the 3QFY01 was 45% of revenues. Still it is quite high compared to other software companies. For the nine months of FY01 the operating margins of the company is 17%. The employee costs accounts for more than 51% of the expenditure.

    The contribution of airline products is 39.6% to the operating income and the figures are 8.3% and 52.2% for the banking and the software services business respectively. The contribution from exports is 80% to the total revenues.

    (Rs m) 2QFY01 3QFY01 Change
    Sales 90 94 5.2%
    Other Income 1 0 -94.2%
    Expenditure 76 74 -2.6%
    Operating Profit (EBDIT) 13 20 49.2%
    Operating Profit Margin (%) 15.0% 21.3%
    Interest 3 4 40.1%
    Depreciation 7 10 43.7%
    Profit before Tax 4 5 25.2%
    Tax 0 0
    Profit after Tax/(Loss) 4 5 25%
    Net profit margin (%) 4.9% 5.8%
    No. of Shares (eoy) (m) 11 11
    Diluted Earnings per share* 1.6 1.9
    P/E (at current price) 50.1 41.5
    *(annualised)

    The company completed the acquisition of Speedwing, an independent division of British Airways, in 3QFY01. The acquisition was for a consideration of Rs 50 m and is expected to bring Rs 500 m to the company over a period of 3 years. The effect off the acquisition of Speedwing should add to the topline growth of the company in 4QFY01.

    According to the company, the high expenditure is due to gearing up of infrastructure and resources. It has been saying similar things for quite sometime now. Itís time the results spoke too. It seems Kale consultants missed the boom. Now with fears of an economic slowdown marketing and establishing a brand in the US will be an uphill task.

    At a current market price of Rs 79 the stock is trading at a P/E multiple of 41 times in 3QFY01 annualised earnings.

     

     

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