SSI Q2 net tumbles 93%

By : |January 28, 2002 0

CHENNAI: SSI Ltd., an Indian computer education and software services firm,
on Monday said its October-December net profit plunged 93 per cent from a year
ago, on sharply lower revenue and a jump in depreciation charges.

The results, released just before the market opened, sent its shares sliding
as much as 6.7 per cent to Rs 189.60 at the Bombay exchange, whose main index
was trading flat.

The Chennai-based firm said its second quarter net profit shrunk to Rs 17.35
million from 250.83 million a year ago. Income from operations fell 43 per cent
to Rs 660.76 million from 1.15 billion.

"As far as our education business was concerned enrollments fell about
20 per cent from the previous quarter to under 40,000 and prices were under
pressure, dropping seven to eight per cent," SSI chief executive Kalpathi
Suresh told Reuters.

Indian computer education firms have taken a big hit in recent quarters as
the negative sentiment towards the technology sector has dampened enrollments.

Outlook tough
Suresh said the outlook for the education business — which contributed 47
per cent of its revenue in the past quarter, down from 55 per cent a year-ago —
remained challenging on account of poor demand for technology graduates.

He said the profit for the current year to June will be lower than in the
previous year. "Depreciation will be up nearly 100 per cent on year and
other income significantly lower," he said. In the past quarter,
depreciation charges jumped nearly two-fold to Rs 160.35 million from 55.82
million a year earlier.

SSI, which acquired US software consulting firm AlbionOrion Co last year, is
depreciating $51.38 million in intangible intellectual assets over six years. It
began the write-down in the April-June quarter.

Margins up, technology prospects
Analysts said the company’s improved operating margins gave some reason for
cheer in an otherwise negative quarter.

"Despite a sharp fall in income, they have posted a profit at the
operating level because margins have improved to 24.26 per cent from 16.5 per
cent in the first quarter," said M Ravichandran, analyst at Anush Shares
and Securities.

"They’ve cut costs and have also upped the utilization rate to over 90
per cent which is very good," he added. SSI’s Suresh said he expected the
company’s technology business to post a strong performance in the next two

"Q3 and Q4 should be good for technology where we have a very strong
order pipeline of about $55 million of business, most of which is to be
completed in one to one-and-a-half year’s time."

He said the company had added three key new clients in North America and
Europe in the past quarter, including pharmaceutical major Abbott Laboratories.

(C) Reuters Limited.

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