Mphasis Q1 net profit down 2%

Forex, seasonality, exceptional loss hit Q1 earnings

Seasonal weakness, foreign exchange volatility and an exceptional loss led mid-size information technology (IT) services company Mphasis to posted a 2% year-on-year decline in consolidated net profit for November-January (Q1FY2014) quarter at Rs 180.6 crore, even as the company's net sales rose 24.4% to Rs 1,564 crore.

On a quarter-on-quarter basis, the Bangalore-based company's consolidated net profit fell 5%, while net sales declined nearly 2%.

Mphasis is in the process of changing its financial year from November-October to April March, because of which the current financial year of the company would be from November 1, 2013 to March 31, 2014.

"Client shutdown during the quarter impacted the revenue growth," Mpasis said. "Revenue is lower during the quarter on account of annual shutdown at HP. Revenues also impacted due to ramp downs in certain projects"

Earnings during the quarter were also impacted by an exceptional loss of Rs 64.4 crore. "On February 13, 2014, the group has entered into a definitive agreement subject to fulfillment of certain conditions for sale of a business devision on a slump sale basis. Accordingly, the expected loss of Rs 64.4 crore (net tax of Rs 33.2 crore) on such sale of business has been provided for and disclosed as an exceptional item," it said. The company did not share any further details on the same.

The company said it added 11 new clients during Q1FY2014, of which 10 were from its direct channel (non-HP) business. Mpahsis's revenue from direct (non-HP) business rose by a tepid 1% during Q1FY2014, and made for 63 per cent of the total revenues as against 60 per cent in a quarter ago.

Margins during the quarter were at 15% as against 15.3% a quarter ago. "This slight drop in margin is on account of higher provisioning for certain IS Government business receivables and increased selling expenses during the quarter," the company said.

Additionally, the company added 16 sales personnel during the quarter, including senior leaders in focus areas of mobility and infrastructure services.

As on January 31, 2014, Mphasis held cash and cash equivalents at Rs 2,647 crore.