Dear Shareholders,
The past year was another tough year for Mastek. The economic downturn
as well as the changes in the UK Government continued to impact
spending on transformation initiatives – impacting both the private
sector and the public sector. Consequently, as a provider of IT
platforms that support our clients’ transformation programs, we
continued to operate in a challenging demand environment.
We ended the year under review with total income of Rs. 614.2 crore, a
net loss of Rs. 55.9 crore and cash and cash equivalents (including
investment in Mutual Funds) of Rs. 159.02 crore. The net loss for the
year included an exceptional item of Rs. 27.2 crore towards write off
of goodwill of Vector Insurance services. A combination of factors
including the increasing strain on the UK economy where government
spends have been reduced, a key client of ours ramping down its
business and sales cycles getting increasingly elongated had an impact
on the financial performance of the Company for FY 2011.
Despite strain on the revenue, we continued to make substantial
investments in our insurance product portfolio. We believe these
investments are necessary to consolidate our position as an IP-led
solutions provider. During the year under review, the product
development spends were Rs. 39.8 crore as compared to Rs. 38.9 crore in
the previous year. Other investments were in form of greater than
normal salary hikes to retain the best talent that drives the Mastek
engine as well as greater S G & A costs in terms of sales and marketing
expenses in order to be able to address the available opportunity.
To enable our customers to realise business impact, we have aligned our
business units into 8 distinct verticals or value corridors across 3
geographies. Value Corridors operate as a business unit that is
responsible for a set of value propositions that are taken to a target
market in a consistent, scalable fashion – enabling delivery of
superior differentiated value to our clients and partners by aligning
all aspects of value delivery namely – marketing, sales,
engagement/solutioning, delivery and our platforms, products and
productized services.
We started the year with a clear objective of building our order book.
The multiple steps mentioned above have been a step in that direction.
We are beginning to see improvements being realised as a result of
these steps even though it has taken a while to see tangible results.
Our 12 month order backlog now stands at Rs. 309 crore. We have been
able to make significant additions to our client portfolio in both the
insurance and government verticals. During the last financial year, we
added 14 new clients which is a clear indication of increased traction
that we are witnessing in the markets. The effort now would be to build
on these relationships and scale them up to meaningful proportions.
During the year, we also acquired SEG Software, LLC, a leading provider
of policy administration systems covering individual and group life,
health & annuity insurance products. This acquisition reinforces our
commitment to the North American insurance market and will expand our
presence and capabilities in the life and annuity policy administration
arena.
Mastek is working with Foresters, a life insurance provider, as a
technology partner in their major transformational initiative to
modernise Foresters infrastructure. The Foresters partnership will
leverage our insurance technology solutions in three major areas of
business transformation – New Business and Underwriting, Policy
Administration and Producer Portal. This is a clear example of a
business impact solution where Foresters will be able to derive
dramatic cost savings in both policy acquisition and inforce
maintenance.
Mastek was also selected as partner of choice by the Social Justice
Department of the State of Maharashtra to implement the e-scholar -ship
programme which will benefit over 32 lakh students in the state. Apart
from enabling granting procedures, the solution caters to processes of
scholarship suspension, renewal and cancellation. The system also
provides the department with MIS to monitor and analyse the scholarship
distribution and disbursement. This is another example of a solution
that benefits the end customer by ensuring complete transparency and
thereby eliminating fraud in the system. These are but just a few
examples of instances where Mastek has delivered business impact to
customers.
Our focus remains on sustaining the momentum we have achieved and
starting the new financial year with a strong order backlog position.
We are committed to restoring the margins and bringing back revenue
growth and we are already seeing some signs of the same through the new
wins in the last two quarters. We are confident that this momentum will
continue and the company’s performance would slowly but surely refect
the same in the foreseeable future.
On behalf of the board, I would like to place on record my heartfelt
appreciation to all our investors, employees and customers who have
stood by us in these tough times. I am sure that your support will
ensure that Mastek regains its pre-eminent position as a provider of
high-end IP leveraged solutions to its customers.
Sudhakar Ram
Chairman and Managing Director
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