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Aptech FY01: Lacklusture performance - Views on News from Equitymaster
 
 
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  • Feb 28, 2001

    Aptech FY01: Lacklusture performance

    Aptech has registered a significant 32% QoQ dip in topline for 4QFY01. The net profit figure has also gone down by a similar amount. The only positive note in the result was a 100 basis point improvement in margins. 92% of its revenues came from the education business while the rest was from software & consultancy. The contribution of software and consultancy services to the revenues is down from 12% in 3QFY01 to 8% in 4QFY01.

    However, on a YoY basis the company showed a small increase of about 15% in topline and a marginal 3% in the bottomline. Operating margins however, came down by more than 500 basis points.

    (Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
    Net Sales 887 1,024 15.4% 3,665 4,663 27.2%
    Other income 1 58 5146.4% 57 91 59.2%
    Expenses 629 787 25.0% 2,868 3,461 20.7%
    Operating profit 258 237 -8.1% 797 1,202 50.8%
    Operating margin 29.1% 23.2%   21.7% 25.8%  
    Depriciation 71 89 25.2% 193 336 74.1%
    Interest (7) -   55 -  
    Profit before tax 195 206 5.7% 606 957 57.9%
    Tax 29 35 20.7% 95 142 49.2%
    Profit after tax 166 171 3.0% 511 815 59.5%
    Net profit margin 18.7% 16.7%   13.9% 17.5%  
    FD No of shares 30.3 30.3   30.3 30.3  
    FDEPS* 22 23   17 27  
    P/E 10 10   13 8  
    *(annualised)            

    The FY01 results look much better. Though the topline growth is a small 27%, the bottomline has grown by 59.5%. The performance is marked by a 400 basis point improvement in operating margins. This is mainly due to better performance in the 2QFY01 when the company recorded operating margins in the range of 37%.

    The company derived 15% of revenues from the software and consultancy business in FY01. Remaining part of the revenues came from its education and training businesses. As a result operating margins of the company are comparatively lower than its peers in the industry.

    (News of the de-merger of the software division declared on the 21st of February.)

    Aptech has announced its intention of separating its software business. The company is looking a the following options:

    • Merger of Hexaware Technologies into Aptech and operating the two businesses of Training & Education and Software & Consulting as independent Strategic Business Units.
    • Merger of Hexaware Technologies into Aptech in a manner that two independent listed companies are created – one for the Training & Education business and the other for the Software & Consulting business.
    • Aptech can consider any other option that is in the best interest of the businesses of the company. This might include merger of Aptech’s software business into Hexaware, which is an unlisted company. Fearing this the markets have given a negative reaction to the initial announcement of de-merger.

    At the current market price of Rs 221, the stock is trading a P/E multiple of 8 times it’s FY01 earnings. For the investor the watchword is caution and to wait and watch till the company comes out clear with what it is planning to do.

     

     

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