“Every year our Q4 and Q1 are lower margins, they come back sharply up in Q2 and even better in Q3.
Mid-Tier IT services firm Hexaware Technologies reported a seasonally weak quarter with a consolidated net profit of Rs 138.4 crore, up 12% sequentially and 3.1% year-on-year for the January-March quarter. However, the company’s EBITDA margin took a fall for the third consecutive quarter, coming down by 0.2% sequentially to 15%.
The mid-cap IT company posted consolidated revenue of Rs 1,264 crore, up 20.5% year-on-year. The company’s Q1 2019 revenue in dollar terms was at $180 million, a 10.9% year-on-year growth, 13% in constant currency.
“Every year our Q4 and Q1 are lower margins, they come back sharply up in Q2 and even better in Q3. This is a normal pattern for us,” R Srikrishna, CEO & Executive Director, Hexaware Technologies told FE. However, he added that some incremental things are happening this year with US onsite skill creation, additional sub contraction because of skill shortage.
“We expect to maintain margins at last year’s full year’s levels,” he added. Srikrishna also pointed out that he doesn’t expect sub-contractor costs increase from the current quarter run rate level and it won’t burden down on margins.
Hexaware’s banking and financial services, which contributes almost 40% of revenue, declined 1.3% sequentially and 2.9% year-on-year. “BFS has seen an outstandingly bad quarter, we don’t expect such a bad quarter to continue but growth will be lower than the company average,” Srikrishna said.
The company’s Healthcare and Insurance division which, however, saw a 0.8% sequential dip has seen a 2.3% year-on-year growth. Manufacturing and consumer services are also growing for the company with 15.6% quarter-on-quarter and 26.7% year-on-year growth in Q1 2019.
Hexaware’s attrition rate has been spiking constantly. It saw a 1.2% increase from last quarter and a 4.8% year-on-year. “Attrition is higher in the three-four year experience level. We don’t like where the level is. He said Hexaware is trying to better employee experience and company value proposition and also introduce manager programmes to make managers better leaders.
Hexaware is also investing in people from colleges in the US for skill creation to make them more employable.
Headcount stood at 16,509 at the end of the quarter and utilisation was 79%. The company has declared an interim dividend of Rs 2.50 per share for the quarter ended March 31. The company said in the statement that this would result in the cash outflow of Rs 89.7 crore for dividend payment including tax, resulting payout ratio of 65% for Q1 2019.