EBITDA margin improved by 15 basis points QoQ in Q2FY19 at 5.36 percent
Business services provider Quess Corp, that saw a 50 percent growth in revenue in the September quarter, is now focusing on improving the bottom-line and generating additional cash flows. In an interaction with Moneycontrol, Ajit Isaac, Chairman and Managing Director, Quess Corp, talks about the expansion strategy and business prospects. Excerpts:
Q: There was a drop in Q2 net profit. What was the reason for this?
A: The profit after tax for Q2FY19 is not exactly comparable on a year-on-year basis due to a tax benefit relating to an earlier period to the tune of Rs 67 crore in Q2FY18.
There was also a disproportionate impact of certain non-operating accounting charge such as amortisation of intangible assets and non-controlling interest put option during the same period. However, if you look at the adjusted PAT, it has seen a 13 percent growth YoY to Rs 74 crore.
Q: What drove the revenue growth in Q2?
A: We have had a strong quarter. It was an execution-led growth of our business plans and sales programme. Here, sales went up by 50 percent, of which organic growth is 26 percent. That is a significant number, considering that the economy is growing at 6-7 percent.
Further, the margins went up quarter-on-quarter by 15 basis points to 5.36 percent. The core business that includes staffing, facilities management and customer lifecycle management is doing well. This adds to 75-80 percent of the total sales.
Here, staffing grew by 34 percent YoY and 5 percent QoQ. Facilities management grew by 26 percent and 12 percent QoQ.
Q: There were quite a few acquisitions by Quess in the past few quarters. How have they performed?
A: Conneqt, which is a 51 percent joint venture with Tata Sons, is performing well. The EBITDA has improved significantly in H1FY19 on YoY basis at Rs 37 crore versus Rs 17 crore a year ago.
All the acquisitions have performed well. Take Monster for instance. The employment platform had a traffic of 10.9 million. Further, the cumulative active searchable resumes is up by 22 percent compared to last year.
Q: You had announced plans to reach $100 million by 2020. Are you on track?
A: The dollar has been galloping away but we are on track to touch about Rs 650 crore. This quarter has been much better on the cash front and generated Rs 72 crore in Q2. The operating cash flow to EBITDA conversion is at 35 percent.
Q: Are there any more acquisitions on the cards?
A: When we sit on cash, we have a greater ability to go look for potential transactions. We are looking for a transaction in the customer lifecycle management space. We are looking for something in the non-voice, non-India space.
Q: Has the East Bengal football club acquisition yielded positive results?
A: It is a very small piece for us and only cost Rs 10 crore. While it is not a material investment, the team will start to play the I-League matches from tomorrow. We are hoping for positive results.
Q: Will profitability be the key focus?
A: We are more focused on our bottom-line. We want to expand margins and ensure that we keep generating more cash.
Q: On the skill development front, have the collections improved?A: We have signed new MoUs with the government and Quess is expanding the set of projects being done. But the focus is on collections and we are hoping that it will improve next quarter.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.