SSI Q2 net tumbles 93%

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

quarters.

"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.