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Silverline: Routine performance - Views on News from Equitymaster
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  • Aug 1, 2001

    Silverline: Routine performance

    Silverline's first quarter performance for FY02 is in line with those shown by its peers in the software industry. The company has posted a sequential (QoQ) dip in topline of 9%, while the drop in net profits was 34%. On a YoY basis, the topline has declined by 14% and the bottomline has declined by 30%. However, the company's other income figure has grown by almost 93%.

    (Rs m) 4QFY01 1QFY02 Change
    Sales 610 556 -8.9%
    Other Income 60 26 -24.5%
    Expenditure 388 377 -13.9%
    Operating Profit (EBDIT) 223 179 -25.4%
    Operating Profit Margin (%) 36.5% 32.2%  
    Interest 1 0 -55.4%
    Depreciation 28 29 7.9%
    Profit before Tax 254 175 -27.5%
    Tax 24 -  
    Profit after Tax/(Loss) 230 175 -34.2%
    Net profit margin (%) 37.8% 31.6%  
    No. of Shares (eoy) (m) 85.7 85.7  
    Diluted Earnings per share* 10.8 8.2 -23.9%
    P/E (at current price)   5.2  

    On a consolidated basis, the company's revenues have grown from US$ 38.8 m to US $ 45.5 m, a growth of 36.8%. The company's net profits according the US GAAP (before restructuring charges) have grown by 13%, from US$ 7.7 m to US$ 8.9 m. However, due to the restructuring charges of US$ 3.2 m, the net profit figure has shown a decline. These charges relate to the integration of SeraNova into Silverline and the internal restructuring costs. The net profit figure has also declined due to amortisation of goodwill.

    The operating margins have declined by more than 430 basis points. The company has managed to contain its software development expenses. However, the increase in employee costs and other expenditure has taken a toll on the margins.

    Contribution from mainframes (28%) has increased significantly compared to the quarter ended March 2001 (20%). The contribution from e-business was 17% and the figure was 18% for e-integration. In 4QFY01, the company had 48% of its revenues from e-commerce related areas. The increase in contribution in revenues from mainframes and decline in contribution from e-commerce related projects is in line with the general trend that has been seen in the software industry this quarter. Again this shift in business mix might have been the cause for decline in topline, as realisations from maintenance of mainframes is lower compared to those from e-commerce projects.

    During the quarter, two excutives from SeraNova, Mr. Rajan Nair and Mr Ravi Singh were appointed as the chief operating officer (COO) and co-chief executive officer (CEO) in the company. The president and CEO of Silverline now functions as co-CEO.

    At the current market price of Rs 43, the stock is trading at a P/E multiple of 5 times its 1QFY01 annualised earnings. The company's performance is not going to improve valuations.



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    Apr 19, 2012 (Close)


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