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Mphasis BFL: The consolidated numbers - Views on News from Equitymaster
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  • Feb 14, 2001

    Mphasis BFL: The consolidated numbers

    The 3QFY01 consolidated earnings for Mphasis show a QoQ growth of 17% in revenues and the net loss stood at Rs 325 m. This is due to a huge component of amortization of goodwill of Rs 349 m.

    On a YoY basis the company achieved a 90% growth in the consolidated revenues. The operating margin for Mphasis BFL is 8%, this includes a figure of Rs 49 m in expenses due to amortization of stock compensation expense. Excluding this the companies operating margins would be 14%. Last quarter the company had made an operating loss of Rs 80 m (Rs 29 m excluding the amortization for stock compensation expense).

    (Rs m) 2QFY01 3QFY01 Change
    Sales 685 799.8 16.8%
    Other Income 14 10 -25.0%
    Expenditure 765 736 -3.7%
    Operating Profit (EBDIT) (80) 64  
    Operating Profit Margin (%) -11.7% 8.0%  

    The inflection is due to the company getting a strong grip on its expenditure. The cost of revenues has come down from 69.3% of topline in 2QFY01 to 59.8% in 3QFY01. Also the SG&A expenses have come down to 25.9% (from 35% of revenues). The company’s focus for the current quarter has been inwards to manage the Mphasis/BFL merger and create a single unified entity.

    Costs have come down primarily due to cutting down of all the overlaps. The BFL offices in Toronto, Chicago, New Jersey are being shut down as Mphasis has a strong presence in New York. The London and Amsterdam offices too have been shut down due to similar reasons.

    BFL contributed to 53% of revenues while the contribution from Mphasis is 46%. The operating margin for BFL was 19.9%. The operating margins from Mphasis BFL was 14% (excluding stock compensation amortisation). The operating margins for Mphasis work out to be 8%.

    Solutions architecture accounts for 5 to 6% of revenues. Web enabling accounts for about 45 to 50% of revenues and remaining (40 to 45%) comes from traditional business. The company needs to move up the value chain focusing on solutions architecture and web enablement business.

    The company added five new clients in the quarter ended December. The top five clients accounted for 69% of revenues. Client concentration seems to be quite high for the company. Mphasis BFL has seen a couple of customer cutting down budgets due to slow down in the US economy. However, the company is quite positive that a lot of work will be pushed offshore to avail lower billing rates.

    The performance this quarter was more towards getting organised internally. Mphasis now is marketing aggressively but now needs to look at growth rates comparable to the Indian software companies. The next quarter results will be a good indicator of the merged entity’s ability to makes it to the ranks of the top software companies in the country.



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