Infosys Cuts FY18 Revenue Guidance Even As Earnings Meet Estimates
Infosys Q2 net profit beats estimates, company cuts FY18 guidance.
Infosys Ltd. cut its revenue guidance forecast for the financial year 2017-18 in a quarter when Nandan Nilekani returned to lead India’s second largest software services provider in a boardroom coup led by co-founders.
The software exporter expects a 6.5-7.5 percent growth in revenue in the year ending March 2018 in U.S. dollar terms, versus the 7.6 percent rise analysts were anticipating. In constant currency terms, the company forecast FY18 sales growth of 5.5-6.5 percent. According to Bloomberg data, this was the slowest projection by the company in a decade as key segments such as financial services and retail scaled back on traditional outsourcing work. The guidance for operating margin was reiterated at 23-25 percent.
The forecast came as net profit rose nearly 7 percent to Rs 3,726 crore compared to the previous quarter, surpassing the Bloomberg consensus estimate for the fifth straight quarter. Revenue rose almost 3 percent to Rs 17,567 crore on a sequential basis, in line with the consensus estimate.
During the quarter, we responded quickly to the management and board changes through proactive communication with all stakeholders minimising any negative impact to the business and allowing us to deliver growth across all our large industry units.UB Pravin Rao, Interim CEO And MD, Infosys
Ahead of the boardroom battle that ensued between the company’s board and founders that led to the resignation of former Chief Executive Officer Vishal Sikka, Infosys had forecast a 7.1-9.1 percent climb in revenue for the year ending March 2018 in U.S. dollar terms.
Watch the Infosys management discuss second quarter earnings.
Other Highlights
- Attrition, trailing over the last 12 months, rose to 17.2 percent from 16.9 on a sequential basis.
- Financial Services segment grew 2.7 percent
- Manufacturing grew 2.8 percent
- Energy and utilities grew 4.2 percent
- retail, consumer and packaged goods segment grew 1.7 percent
- Life sciences saw a 6 percent jump
- Hi-Tech segment saw a 1.5 percent rise.
Client Additions
- One new client in the $100 plus bracket
- One client lost in the $50 million plus bracket
- Three new clients in the $30 million plus bracket
- Four clients lost in the $10 million plus bracket
- Seven new clients in the $5 million plus bracket
- 14 new clients in the 41 million plus bracket
Corporate Governance Report
New Chairman Nandan Nilekani found no merit in allegations of wrongdoing at the company, which were a trigger for months-long bickering between the board and fellow co-founder NR Narayana Murthy that culminated in a boardroom coup in August.
“I believe that all stakeholders acted out of a strong passion for Infosys, wanting what they believed to be the best for the company and to see it succeed,” Nilekani said in a statement accompanying earnings.
In light of my review of these matters, I am fully persuaded, as is the entire Board, that the conclusions of the independent investigations are correct. This Board and I are committed to the highest standards of professionalism and will deal promptly and decisively with any governance issues should they ever come up in the future.Nandan Nilekani, Chairman, Infosys
Murthy had questioned governance standards at India’s second-largest software services provider over severance pay to former Chief Financial Officer Rajiv Bansal and anonymous allegations of wrongdoing in the acquisition of Israeli firm Panaya during Vishal Sikka’s term as the chief executive officer.
Search For New CEO
While UB Pravin Rao continues the manage the company as the interim chief, the hunt for a new CEO is on.
“The process of identifying the next CEO and shareholder consultation outreach have been initiated and are progressing well," the release said.
Nilekani has said he’s focused on finding a new CEO, reconstituting a depleted board and stabilising the company’s operations. The company is considering possible candidates and hopes to arrive at a final decision within weeks, the chairman said in late August.