Kale emerges stronger after restructuring, Posts PAT of Rs 31.66 mn

Kale Consultants Limited, the leading provider of software solutions and outsourced services to the airline and travel industries, has undertaken a strategic restructuring exercise of its operations during the year to focus more sharply on Airlines and Travel vertical. The restructuring involved sale of software business with Citibank / OrbiTech , sale of banking products business, formation of Subsidiary company to carry on contracting and generic software services business and acquisition of Cognosys, a travel technology company with cutting edge products and l eading customers. Post restructuring, Kale has emerged a very focused and strong solution provider to the Airline and travel industry.

For the year ended March 31,2004 , the company has recorded total revenues of Rs 481.37 million as compared to Rs 507.01 million in the previous year , despite the revenue loss due to the restructuring. The discontinued business had contributed Rs 152 million in the last financial year. The core business of Airline products and services has continued to show steady growth with a 5 year CAGR of 32%.

The company had a PAT of Rs 31.66 million, compared to Rs 31.42 million last year, despite the lower top line. This reflects the improved profitability of the restructured business.

For the year ended March 31, 2004 , the company has recorded consolidated total revenue of Rs. 570.61 million and net profit of Rs. 35.18 million. For the fourth quarter ended March 31, 2004 , consolidated total revenue was Rs. 200.34 million and net profit was Rs. 24.32 million. Consolidated EPS for the year amounted to Rs. 3.06. The above results mainly reflect the performance of the core airlines and travel divisions, after disengagement of non-core businesses.

Commenting on the performance, Mr. Vipul Jain, Managing Director said, " Post restructuring, our company has become a pure play in Airlines and Travel vertical . We plan to grow in the chosen areas of Revenue Accounting, Cargo and Travel distribution, by providing the entire continuum from software, hosted solution and outsourced services. With the synergy of domain knowledge, marquee customers, IPR and brand, we are posed for a profitable, scalable and sustainable growth.

Operational Highlights for the Year ended March 31, 2004
	Managed Process Services (MPS) revenue grew by 30%.
	Set up a new state of the art facility for MPS at Andheri, Mumbai.
	Annuity type recurring revenues from Annual Maintenance Contracts and growing Managed Process Services (MPS) accounted for over 60% of operating revenue as compared to 49% in the previous year
	Exports grew from 76% to 85% of the operating revenue.
	Top 5 customers accounted for 51% of the operating revenue.
	Middle East / Africa contributed 31% of operating revenue, followed by Europe with 30%, Asia Pacific with 21% , India with 15% and USA with 3%.

Products & IPR led BPO
Kale provides innovative and practical business solutions to the airline and travel industries. Solutions comprise of software products, hosted solutions or end to end business process outsourcing. Product based outsourced services along with traditional product licensing model is a very synergistic business model.

Due to its vertical focus, the company has built deep domain expertise. Its competitive edge is in-depth understanding of the industry processes and ability to deliver demonstrable value through a combination of IPR, consulting, technical and processing skills.

The company offers end-to-end revenue accounting, sales audit, ticket proration, cargo sales audit and interline billing services to the Airline industry. The MPS centre uses Kale's award winning software products (REVERA™, APEX™, FAREGAIN™ and PRISM) to provide outsourcing services thus offering a unique combination of deep domain expertise and cutting edge technology. Unlike other BPO providers, Kale's MPS business is based on a per transaction pricing and hence provides “True Outsourcing” benefits to customers.

The company's product, APEX™, has been chosen globally as an industry standard by IATA for neutral fare proration. This represents a very strong endorsement of Kale's technology and evidence of growing industry recognition.

The company has finished implementation of it's flagship enterprise-wide cargo solution CSP ™ Rel 2 at Seoul based Asiana Airlines . 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.

With the acquisition of Cognosys, Kale has extended it's reach into the travel industry. Kale's sees outsourced software and BPO services to the travel industry as another growth engine for the company.

Secured & Scaleable Business
The company's Product + BPO model makes sound financial sense. Products and IPR give differentiation and build entry barriers, along with branding. BPO gives scale, long term revenue visibility and predictability.

The airlines business has grown at a CAGR of 32% during past 5 years. The recurring revenue from AMC coupled with growing MPS business has reduced lumpiness of earnings and contributes over 60% of operating revenue.

Business Outlook
Global spending on IT by the airline and travel industries is looking up with increased emphasis on outsourcing. Saddled with legacy systems, customers are focusing on cost effective solutions to cope up with changing business needs.

Kale is extending its strong presence in the airline vertical to the travel vertical with acquisition of Cognosys. In future, it would leverage air cargo expertise to enter into multi-modal cargo and logistic industry.

The order book is healthy with strong pipeline. Major phase of investments in products development, marketing and BPO operations is already completed. Resultantly, profits are expected to rise faster than revenue going forward. With deep domain knowledge, IPR and marquee customers, Kale is well positioned to captialise on the huge opportunity in the Airline and Travel industries.

 

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.