Infosys Q1 profit down 3.3%, retains FY18 constant currency revenue growth guidance

It was a good start to the year by Infosys as its first quarter earnings beat analysts’ expectations on all counts on Friday, with the company retaining its full year constant currency revenue growth guidance. The stock rallied 3 percent intraday.

Consolidated profit during the quarter fell 3.3 percent sequentially to Rs 3,483 crore and revenue declined 0.2 percent to Rs 17,078 crore.

Dollar revenue growth was 3.2 percent at USD 2,651 million against expectations of 2.6 percent increase and constant currency revenue growth came in at 2.7 percent against estimates of 2 percent.

“Our persistent focus on execution in Q1 is reflected in broad-based performance on multiple fronts revenue growth, resilient margins despite multiple headwinds, healthy cash generation and overall business results,” Vishal Sikka, CEO & MD said.

The IT bellwether has maintained its constant currency revenue growth guidance at 6.5-8.5 percent (which was 8.3 percent in FY17 and 13.3 percent in FY16) and also retained operating margin guidance at 23-25 percent for the current financial year.

It raised its FY18 dollar revenue growth guidance to 7.1-9.1 percent from 6.1-8.1 percent earlier.

Profit was expected at Rs 3,426 crore (down 4.9 percent QoQ) on revenue Rs 17,014 crore (down 0.6 percent) while EBIT was estimated at Rs 4,025 crore (down 4.4 percent) and margin at 23.65 percent (down 95 basis points) for the quarter, according to average of estimates of analysts polled by CNBC-TV18.

Earnings before interest and tax (EBIT) declined 2.4 percent to Rs 4,111 crore and margin contracted by 50 basis points to 24.1 percent compared with previous quarter, which both numbers were far better than analysts’ expectations of Rs 4.025 crore and 23.65 percent, respectively.

“We had broad-based growth across geographical and industry segments. Initiatives on operational discipline led to record levels of utilisation and better realisation during the quarter,” UB Pravin Rao, COO said.

Margin impact on account of visa and rupee appreciation was offset by 200 basis points improved utilisation and higher realisation of 1.8 percent in Q1.

Revenues contribution from new services and new software launched from April 2015 were at 8.3 percent and 1.6 percent during the quarter, respectively.

New services include cloud ecosystem, big data and analytics, API and micro services, data and mainframe modernization, cyber security and IoT engineering services while new software included Edge, NIA, Panaya and Skava.

Operating cash flow was USD 644 million at the end of March 2017, which increased significantly by 17.7 percent compared with USD 547 million in Q4FY17.

Liquid assets including cash and cash equivalents and investments rose 1.9 percent to USD 6,091 million in June 2017 from USD 5,979 million in March 2017.

“Our relentless focus on strong cash generation led to a healthy operating cash flow. Further, our continued emphasis on operational efficiencies enabled us to mitigate the impact of margin headwinds during the quarter,” MD Ranganath, CFO said.

Infosys added 59 clients during the quarter (against 71 in March 2017), including 6 clients in USD 25 million category, 1 client in USD 10 million category and 8 clients in USD 1 million band but the client addition in USD 100 million category reduced to 18 from 19 QoQ.

Geography wise revenues

Infosys said North America business, which contributed 61.1 percent to total revenue, grew by 1.3 percent sequentially as well as in constant currency while Europe, accounted for 22.4 percent of revenue, showed 4.7 percent growth QoQ and 3.1 percent in constant currency terms.

India business grew by 14.2 percent sequentially and 11.2 percent in constant currency while the rest of the world, which contributed 12.9 percent to total revenue, reported a 7.3 percent growth QoQ and 6.9 percent in constant currency terms.

Industry wise revenues

Banking & financial services, insurance (BFSI) segment, which contributed 33.3 to total business, grew by 2.6 percent sequentially and 2 percent in constant currency terms, Infosys said.

Manufacturing & hi-tech business, which accounted for 22.2 of total revenue, rose by 2 percent QoQ and 1.5 percent in constant currency.

Retail & life sciences, which contributed 22.7 to revenue, showed 3.1 percent growth QoQ and 2.6 percent in constant currency while energy, utilities, communications & services (21.8 percent of revenue) grew by 5.5 percent QoQ and 4.9 percent in constant currency.

Infosys during the quarter reduced its headcount by 1,811 to 1,98,553 employees compared with previous quarter.

Attrition on consolidated basis increased to 21 percent in June 2017 from 17.1 percent in March 2017 and the same on standalone basis rose to 16.9 percent from 13.5 percent QoQ.

The company said utilisation (excluding trainees) grew by 2 percent to 84 percent and utilisation (including trainees) increased to 80.2 percent from 78.2 percent on sequential basis.

In Q1, the EdgeVerve business delivered strong performance with 36 wins (Finacle 24 + Edge 12) and 38 go lives (Finacle 21 + Edge 17) from both the Finacle and Edge suite of solutions across various market regions.

Finacle continued to strengthen its position as a platform of choice for digital transformation and enabling new business models for banks, the company said.

Meanwhile, it will pay up to Rs 13,000 crore via buyback or dividend in FY18.

[Source”cnbc”]