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Focus on high margin areas props up Global Tele's net profit

NetScribes/Abhijit Basu

An increased focus on e-commerce and software development projects has helped Global Tele-Systems (GTL) post a 111.35 per cent jump in net profit for the quarter ended December 31, 2000. It, however, fell marginally short of analysts' expectations of a 125 per cent jump.

The company's e-commerce and software revenues grew 71.07 per cent to Rs 1.4 billion over the year ago quarter. Also, the share of these revenues of the net sales went up to 67.12 per cent from 50.93 per cent for the year ago quarter.

Also, the company's attempts to focus on high-margin areas such as software and Internet and the shying away from low-margin areas such as its consumer telecom group and the hardware component of its engineering services division, have borne fruit.

"As a result, revenues from engineering services went down 7.35 per cent to Rs 683.57 million. The share of engineering services revenues went down to 32.87 per cent from 46.04 per cent for the year ago quarter," said a senior software analyst at Emkay Shares and Stockbrokers.

Net profit for the quarter amounted to Rs 570.56 million. Net sales rose 29.79 per cent to Rs 1,079.57 million. Other income rose a whopping 518.9 per cent to Rs 118.34 million for the quarter.

Net profit margins have gone up to 27.43 per cent, from 16.59 per cent in the year ago quarter. Also, operating margins have gone up to 35.57 per cent, from 32.74 per cent.

Interestingly, the company has a high exposure to the domestic marketplace. For the quarter ended December 2000, domestic sales contributed to about 60 per cent to total sales, against 50 per cent in the year ago quarter.

Staff costs went up a whopping 346.82 per cent to touch Rs 205.78 million for the quarter. The company issued 13,75,083 outstanding warrants under its Employee Stock Option Plan (ESOP) scheme and has accounted for Rs 104.99 million for it in the quarter.

Meanwhile, the results failed to bring any cheer to the scrip on the BSE. The Global Tele scrip rose Rs 6.70 to close at Rs 761.25 on Wednesday, up 0.89 per cent from its previous close of Rs 754.55. At its current market price, the scrip is trading at a forward earning multiple of 14 times its annualised EPS of Rs 52.4 for fiscal 2001 ending June.

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