Kale Consultant’s Q3 Net Profit Up 271%
Kale Consultants Limited, the leading provider of software
solutions and outsourced services to the airline industry,
has recorded total revenue of Rs. 126.46 million and net
profit of Rs. 17.41 million for the quarter ended December
31, 2003. Net profit increased by 271% as compared to the
corresponding quarter of the previous year.
Sequentially, total revenue grew by 8% and net profit jumped
from Rs. 0.49 million to Rs. 17.41 million.
The above results mainly reflect the performance of the
core airlines division, after divesture of most of the non-core
businesses.
For the nine months ended December 31, 2003, the company
recorded total revenue of Rs. 357.20 million and net profit
of Rs. 20.46 million, a growth of 100% as compared to the
corresponding period of the previous year.
| Operational
Highlights for the Quarter ended December 31, 2003 |
 |
Airlines division
grew by 9% and contributed 87% to revenue. Other segments
contributed 13%. |
|
Airlines products revenue
was Rs. 50 million. |
|
Managed Process Services (MPS)
revenue was Rs. 47 million. |
|
Exports grew from 81% to 91%
of revenue. |
|
Operating profit margin improved
from 18.9% to 28.4%. |
|
2 new customers added, one
for proration product and other for MPS. |
|
Top 5 customers accounted
for 56% of revenue. |
|
Europe contributed 37% of
revenue, followed by Middle East / Africa with 32%,
Asia Pacific with 19%, India with 9% and USA with 3%.
|
Commenting on the performance,
Mr. Vipul Jain, Managing Director said, "We are on
a scaleable and sustainable growth path following successful
business transformation. Order backlog is strong and expected
to grow very significantly in the near future.”
Business Restructuring
/ Acquisition
In order to sharpen focus on the core airlines business,
the company restructured itself with transfer of Citibank
/ OrbiTech business to Polaris, sale of banking products
business and planned spin off of remaining software services
business. Operational costs will be lower by approximately
Rs. 20 million on an annualised basis due to these measures.
The company recently acquired Cognosys, a travel technology
company. It has cutting edge products such as eBizTravel,
eBookEngine, eFlightInfo and eFareEngine. It has leading
customers like lastminute.com (among top 3 online travel
sites in Europe), BCD Travel (US$ 9 billion business travel
agency of TUI AG) and Cox and Kings. This acquisition accelerates
Kale's entry into travel industry, is synergistic with airline
industry and offers opportunity to cross-sell BPO services.
Airlines Division
Kale is the only India-based software player with a complete
integrated suite of products for revenue accounting and
cargo management, two most important functions of the airline
industry.
Revenue Accounting - Revenue accounting is a good candidate
for outsourcing with estimated total market potential of
around $ 700 million over next few years. Kale is one of
the few software and BPO providers with strong domain expertise.
Emergence of credible suppliers is expected to expand the
market. IATA initiative of Neutral Fare Proration (NFP)
is a big industry push for third party processing. The company's
product APEX™ has been chosen as an industry standard
by IATA for NFP, only one of two products globally. It is
an extremely rare and unique instance of an Indian software
product being accepted as industry standard on a global
basis.
Processing of revenue accounting documents is a complex
and domain knowledge intensive process and involves a significant
investment in IT infrastructure. Customers who have outsourced
their entire revenue accounting function to Kale have derived
great value. Currently Kale has 6 customers in this category.
Kale recently bagged an outsourcing contract from HellasJet,
an European airline to provide end-to-end revenue accounting
services. A unique aspect of this contract is the use of
imaging technology, which ensures that the documents need
not be sent to India.
Cargo Management - Cargo management is becoming a significant
business for airlines. This segment has an estimated total
market potential of $ 500 million for outsourcing of software
and services as it can reduce transaction costs and turnaround
times. Kale has delivered world's first new generation enterprise-wide
cargo solution, CSP™ to Asiana Airlines (13th largest
airline in the world). CSP™ has two of the top 20
cargo airlines as its customers.
Kale's MPS – The company presently offers end-to-end
Revenue Accounting and Sales Audit services to the Airline
industry. It plans to expand the portfolio to include Ticket
Proration, Cargo Sales Audit and Interline Billing. The
MPS centre uses Kale's award winning software products (REVERA™,
APEX™, FAREGAIN™ and PRISM) to provide outsourcing
services thus offering an unique combination of deep domain
expertise and cutting edge technology..
The airlines business has grown at a CAGR of 51% during
past 5 years. The recurring revenues from AMC and growing
MPS business have reduced lumpiness of earnings significantly.
The combined revenues from MPS and AMC accounted for 55%
of operating revenue in Q3 FY04.
Travel Distribution
Travel is the biggest industry globally. The industry is
under huge pressure from suppliers and customers. Analysts
expect large scale offshore movement of customer service
and mid-office accounting. India's market share is expected
to be $ 1.2 billion in outsourced services. Kale and Cognosys
have deep domain knowledge and customers that can be leveraged
for software and BPO opportunities.
Business Outlook
Products coupled with BPO form a very synergistic business
model. Products and IPR give differentiation and build entry
barriers, along with branding. BPO gives scale, long term
revenue and predictability. Kale's competitive edge is its
in-depth understanding of the industry processes and ability
to deliver real value through a combination of consulting,
technical and processing skills.
The company's strategy is to grow in the areas of revenue
accounting, cargo management and travel distribution by
providing end-to-end solutions including product licences,
hosted solutions and MPS using own products. MPS business
is based on a per transaction pricing and hence productivity
benefits accrue to the company. The order backlog of Rs.
1200 million to be executed over next 4 years would strengthen
further with addition of new customers, new service offerings
and penetration into travel vertical. It would continue
to look at inorganic growth opportunities.
The business outlook for the airline and travel industry
is looking up. With deep domain knowledge, IPR and marquee
customers, Kale is well positioned to be a leading provider
of choice in the Airline and Travel industry.
Investor Relations
Kale Consultants Ltd is committed to create long-term sustainable
shareholder value through successful implementation of its
growth plans. The company's investor relations mission is
to maintain an ongoing awareness of its performance among
shareholders and financial community.
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.
