Kale Airline Division grows by 15%, forecasts strong growth

For the quarter ended June 30,2004 , the company has recorded revenues of Rs 99.98 million as compared to Rs 113.67 million in the previous year quarter. However last years figures include Rs 30.43 million of business that has been discontinued due to the restructuring done last year. Thus the Airlines Division grew approx 15% from Rs 80.04 million to Rs 91.93 million.

The company recorded a PAT of Rs 1.59 million, compared to Rs 2.56 million in the corresponding quarter of the previous year. Thus, the corporate overheads have largely been absorbed despite the restructuring.

Kale's subsidiary for Travel Technology, Cognosys, did a revenue of Rs 21.58 million in the quarter with a PAT of Rs 3.66 million. Cognosys is in the process of being merged with Kale. Thus taken together, the top line is Rs 121.56 million and bottom line Rs 5.25 million.

Commenting on the performance, Mr. Vipul Jain, CEO & Managing Director said, " This is the first quarterly result post-restructuring. We are seeing strong customer acquisition and by the end of this year, this will be reflected in our revenues and profitability. With Airlines and Travel as twin growth engines, our results will be a substantial improvement compared to the previous year.”

Operational Highlights for the Quarter ended June 30, 2004
	The company acquired four new customers during the quarter. Significant revenues from these customers will begin to flow in from Q3 of the current year. Of these four, three are MPS customers with long term annuity type contracts. The fourth is a license sale.
	Three new customers were acquired in the Travel Technology Division ( Cognosys) during the quarter.
	Managed Process Services (MPS) revenue grew by 49%.
	Annuity type recurring revenues from Managed Process Services accounted for 55% of revenue as compared to 42% in the corresponding quarter of the previous year.
	Continental Airlines, 7 th largest airline, selected Kale's APEX™ as the single proration engine for all domestic and international requirements.
	Global launch of CSP™, an enterprise-wide Cargo Operations & Management solution.
	Expanded the MPS facilities at its center at Andheri, Mumbai.
	Top 5 customers accounted for 66% of revenue.
	Middle East / Africa contributed 43% of revenue, followed by Europe with 29%, Asia Pacific with 21%, US with 5% and India with 2%.
	Mr. Neil Beck , a prominent professional in the Travel Technology industry, joined as Strategic Advisor to Travel Technology Division.

Airlines Division – Consistent Growth
Kale provides a range of solutions to the Airline industry- with particular focus on Air Cargo and PRA solutions. The division has performed well with consistent growth in revenue as reflected by 5 year CAGR of 32%. Growth continued in Q1 FY05 at 15% over the corresponding quarter.

Managed Process Services (MPS), using Kale's award winning software products, has been a strong growth driver with a revenue growth of 30% in FY04. Revenues from the long term, multi year contracts of MPS contributed 55% of revenue in Q1 FY05 as compared to 42% in Q1 FY04.

The company's product, APEX™, is one of the only two proration engines selected globally by IATA for Neutral Fare Proration (NFP), the core component of their recently launched initiative - “First & Final Interline Billing Service.” This represents a very significant opportunity.

The company launched CSP™, an enterprise-wide Cargo Operations & Management solution, globally to replace the existing legacy systems. The successful implementation at Asiana, the 14 th largest cargo airline in the world, has helped the customer obtain substantial improvements to business processes and vital revenue information for making strategic decisions. The solution is at use in a mission critical 24x7 environment over 50 stations and 500 users world-wide. This is an important milestone in the product lifecycle and marks the beginning of product promotion and customer acquisition phase.

Travel Division – New Growth Engine
Kale acquired Cognosys, a travel technology company with cutting edge products and leading customers, in FY04. The integration has been completed with assimilation of skills and business knowledge of the two teams. Cognosys, a subsidiary, and now branded as Kale Travel Technology Division, posted revenues of Rs. 21.56 million in Q1 of this year.

Mr. Neil Beck, who has recently joined as Strategic Advisor to Travel Technology Division, has been associated with the Travel & Airline industries for over three decades, with his last assignment being with Datalex Ltd. as Global Chief Executive Officer and Member of the Board. H is vast expertise would provide the right direction and momentum to the business.

Customer Relationships – Expanding and Deepening
The company continues to deepen the relationships with existing customers while adding new customers. It has added 4 new customers in Airlines and 3 new customers in Travel during Q1 FY05. New customers include 2 leading airlines from the Middle East and one from Asia for MPS, an airline from South East Asia for product license and a major global travel company. Some of these customers have the potential to become multi million dollar accounts.

Leading existing Airline customers include Qatar Airways, Continental Airlines, Malaysia Airlines, Air Luxor, Asiana Airlines, etc. The Travel Technology Division caters to leading travel organizations in Europe , US and India such as BCD Travel, Lastminute.com, Cox & Kings, TCube, Secure-res, etc.

Business Outlook
Kale is the leading provider of software solutions to the Airline and Travel industries. Its solutions comprise of software products, hosted solutions or end-to-end business process outsourcing. Its competitive edge is in-depth understanding of the industry processes and ability to deliver demonstrable value through a fine blend of IPR, consulting, technical and processing skills.

The company has deep domain knowledge, marquee customers and strong branding the Airline and Travel industry segments. The Product + BPO model is very synergistic and provides customers with a “True Outsourcing” value proposition. Products and IPR give differentiation and build entry barriers, along with branding. BPO gives scale, long term revenue visibility and predictability.

The airline industry is increasingly using IT as a strategic tool to sustain and grow in the highly competitive market place. The Travel industry, which is the biggest industry globally, is doing likewise. Both these industries have just started seeing the benefits of offshore outsourcing. Hence there is huge opportunity for Kale to be a large dominant global player.

Order book of the company is healthy with addition of many new customers and pipeline is strong. Major phase of investments in products development, marketing and BPO operations is already completed.

For additional information, please contact:

Mr. Sumeet Nadkar
Chief Financial Officer
Kale Consultants Ltd.
Tel: 91-22-28259580
Email: Sumeet_Nadkar@kaleconsultants.com

Safe Harbor

Certain statements in this release concerning our future growth prospects are forward-looking statements which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. The company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the company.