@Mahesh Mr. Arora told us during AGM (on the sidelines) that they are switching to one time dividend policy.
So if there are no impending acquisition by FY17 end and money is left they will declare dividend. Also expect lower dividend policy as well.
Standalone results: http://www.adi-mps.com/wp-content/uploads/2016/10/MPS-Standalone-Financials-as-on-Sept-2016.pdf
Consolidated results: http://www.adi-mps.com/wp-content/uploads/2016/10/MPS-Consolidated-Financials-as-on-Sept-2016.pdf
My running notes of the Con call.
General impression, Management looked confident of the growth and the 2018 target.
75.17 Cr from 66 cr. growth momentum expected to build up - New Baseline for the company will be 75cr
The expected margin decline is temporary because of acquisition of loss making technology MAG plugs, Tech transfer to India in next few quarters.
Will expect EBITA margins to high 30s
Reiterated commitment to April 2018 aspiration of 400cr revenue
Q: Question
A: Answer or Management remark
Q: Numbers of Magplus -> A: not eager to share mag+ numbersā¦ wait till its integrated. Mag plug acquired at 25cr
A: MPS integrate quickly, all other companies were integrated fully in an year, Magplus will be sooner.
A: Organically: 3 of the 10 customer have stepped up and are getting new business and services.
A: MPS will plays in SAS based solution, content solution space
++++++++++
Q: number of client builds decreased -> A: not a fair comparison on q-on-q basis look at y-y. Some are short term customers.
Q: Why Increase in cash employee -> A: magplus expenses added to this month.
Q: head count Dehradun. -> 1037
++++++++++
A: 300 customer not inluded in revenue.
A: 24cr paid for magplus
A: 74+ Cr it includes magplus numbers
A: short term pain of magplus, Marketing moving to India.
A: we are considering 75cr is baselineā¦
Q: 2018 rev target in cr -> A: 400cr by april 2018ā¦ -> margin -> higher 30% (target)
A: look out of acquisition continuesā¦
Q: Expected head count increase -> A: No annual headcount growth. , Not trying to increase revenue through head count.
++++++++++
Q: other expenses rise in % topline why? -> A: loss making entity, slightly different(SAS based) ā¦ looking at overall expenses.
Q: Sale of land. tax implication -> ???
Q: Hedge polity (UK) -> A: Shaktivel-> we hedge USD and GBP. If GBP had not decreased, revenue would have been higher
A: Now moving to dollar contractsā¦
++++++++++++++
Q: Strategy -> A: We have significant capacity in Dehradun -> mature operation-> not doing one step but doing end-to-end
A: we will ensure volume growthā¦ SPS is similar margins, there is de-growth in competitors
A: Mobile dev. markets are growing and digital publishing and will reach 20Billion by 2019. with magplus
A: Yamini-> Top American customer introduced into a new area -EMA-> this is multi-year, multi-service -global projectā¦expanding Services with existing customers
Q: How much time needed to scale , How much time did it took-> A: customer from 2009 -> customer wants to step upā¦ -> started small and now getting bigger
++++++++++++++++
Q: Margin decrease -> one reason is Magplus revenue coming from US. Few step up-> 3 step ups-> Magplus likely to break even-> normally a year -> SAS based product -. easier transition to India-> will integrate sooner than earlier acquisitions.
Q: organic scenario -> A: Had revenue headwinds (60cr) in past quarters but now step up
Q: how Mag+ integration is happening -> A: technology to Noida operations -> new marketing operations. -> more sale of their products by marketing than salesā¦-> organic building of team-> will be performance based
A: Element/EPS-> now fully integrated with MPS NA, no distinction
++++++++++++++++++++
Q: Any acquisition pipeline-> A: acquisition is key area. Confident to meet April 2018 aspiration
Q: % from product. -> A: 80 services and 20%-> productsā¦ using own productsā¦
A: services will remain but share of SAS based should increase, much more efficient revenue stream.
A: MPS has lasting account strategy-> builds strategic eco system.
Q: lots of opportunity for cross sell -> yes run deeper with our products with existing customers
Q: Owners of Mag+: -> owners no longer ā¦ tech team still intact and with MPS
+++++++++++++++
Q: About the QIP 150 cr cash. -> A: April 2018 is not far away. Have a disciplined framework for acquisition. Confident to meet aspiration.
Q: Organic run rate ? -> Noida unit reports into Yamini MPS NA. seamless content, global delivery. All previous acquisitions fully integrated.
Q: Total headcount -> A: 2964 (1037 Dehradun)
Q: any change in Dividend policy?-> A: Not decided yet, will be taken up during annual results.
+++++++++++++++++++++++++
Q: investments for organically growing Mag+ marketing-> A: same office -> small (4-5) digital marketing performance based ->
Q: ball park figure on investment -> A: current incumbent cost is high in mag+ā¦ will be substantially lower than that
A: +ve dev for MPS:
2 education publication houses -> one has expanded to new service 1 has opened up editorial -> content development side for MPS.
-> science/ academic-> workflow divided into two chunk -> one big chunk -> done by 7 vendors and other chunk-> only MPSā¦
A: MPS can now expect different types of revenueā¦
+++++++++++++++++++++++++++++
Q: any capex -> A: no anticipation
Q: productivity -> A: increase with digicore, use across MPS
A: Publishing business is growing at 4% or 5%. Some publishers have not been taken action for long and publishers will take action. This pressure is good for MPS and its well placed to get into opportunities as they appear.
+++++++++++++++++++++++++++++
Q: do we anticipate billing rate changes-> budget covered up to 31 mar 17.
Q: product development + AWS -> digicore platform -> one of customer is very happy and promoting-> two large deliveries -> exeley.com -> hosting is going goodā¦
A: Digicore and products will be contributing -> STEM customer (60 % customers), MAG+ has thrown interesting opportunities in the education publication spaceā¦
++++++++++++++++++++++
Q:Most important metrics -> A: manpower cost/ revenue
A: from management side -> how is revenue growingā¦ how customers are using MPS -> growing end to endā¦ or small tasks
Q: What MPS aspire to be ->A: Be the publishing operation of large publishing houses.
+++++++++++++++++++++++++++++++
Q: How large is Mag+ market? -> A: In terms of market, few statistics -> mobile apps will will CAGR of 30% will reach 7B enterprise app market to growā¦
A: Players-> adobe-> big player -> rest others small player.
A: Opportunity->bigā¦
++++++++++++++++++++++++++++
Latest HDFC Securities report on MPS http://www.hdfcsec.com/Research/ResearchDetails.aspx?report_id=3020821
Is anybody aware of the conf call details for today at 3.30 PMā¦It would be great if someone could share.
Please call 022 3960 0670
Time 03:30 PM
Hello team,
What was the outcome of the concall? Was there an explanation about the higher costs? Previously I could find the concall transcripts on the website but now I could not find it.
MPS Ltd has informed BSE that the Company has entered into a definitive asset purchase agreement to acquire THINK Subscription. This acquisition is subject to customary closing conditions. The acquisition of THINK will not have a material effect on revenues and profits of MPS Limited. Any clue anybody. Think subscription is a company providing subscription infrastucture to companies for their customer reach.
I think the THINK Subscription acquisition will certainly have impact on revenues & profits. They will either use this as a referral system to acquire new clients for their digital publication or generate new revenue from subscription. Seems like a good vertical integration move.
Thoughts?
Any idea, when is MPS announcing the Q4 results?
No dividend being paid this time around, dividend seekers may have to recalibrate expectations.
Q4FY17 results declared :
Prima Facie Notes :
On standalone basis constant currency (cc) degrowth of - (2.35) % on YoY babsis for FY17.
On consolidated basis, a cc growth of + 9.97 % ; interesting thing to note here is for overall addition of 3.9 mn. USD to topline (INR converted 26.14 cr.), company spent INR 27.56 cr. in FY17 on acquisitions.
Consolidated EBITDA margins at 32.24 % for FY17 v/s 35.38 % of FY16.
Margins might come under more pressure going ahead if currency situation remains as it is now. For the first time since many years, Philippines, the only major competitive outsourcing destination against India for industry of our concern, has started becoming more competitve than India. If we take FY17 average exchange rate to be the base, till 9th May 2017, Peso has depreciated by 3.59 % against USD and by 1.51 % against GBP as against INR appreciation of 3.89 % against USD and 5.96 % against GBP.
Dividend is skipped for the first time since Mr. Aroraās takeover.
Two more points:
Nishith Arora has stepped down from active management.
Foreign operations are just about break even at the moment (compare standalone profit with consolidated profit). This is dragging the bottom line.
Any clue on revenues derived from Mag+ ?
Profit is nearly comparable to last year. Why no dividend?
Does the management give any guidance as to how dividend saving amount gets utilised?
Please listen to the concall recording on the website, you will have all your answers.
Q4 FY17 Notes
MPS - Q4 FY17
ā¢ Margins suppressed due to losses in Magplus. Co believes that this is the last quarter of loss in MagPlus. Reasons for this belief is cost reduction in MagPlus and increase in revenue
ā¢ Unfavourable currency also impacted margins
ā¢ Acquired Think Subscription- small acquisition however critical in the customer architecture
ā¢ Focus is increasing margins in H1 FY18, followed by some pleasant developments in H2 FY18
ā¢ Acquisition framework looking at Scope deals - related business, allied geography, bigger businesses which are profit making
ā¢ Nishith Arora continues to perform the role that he was doing , just a formal announcement
ā¢ Stopped dividend in order to look at bigger deals.
ā¢ After acquisition of MagPlus have been looking at our business differently. From publishing vertical, now expanded the market scope to enterprise content.
ā¢ Organic growth in this market seems to be limited. So essentially growth is in-organic growth. Once the company is acquired and then integrate organic growth is single digit to early double digit growth
ā¢ Short term goal is to get back to high 30 kind of EBITDA margins. Laser like focus.
ā¢ Longer term goal is still committed to the INR 400 Crores target by FY18. However not stressed at all, even if we miss it by a 2-3 months
ā¢ 223 Crores of Cash as of FY17
ā¢ Think Subscription
o Small transaction, however strategic implication is huge.
o Has 45-50 Customers - customers are in the scientific, medical and technical publishing domain. Also some magazine publishers
o Essentially the company has software tools which help these publications to manage subscription - order management, customer support, payments, etc
o Short term strategy - optimize cost structure- Q1. Already started
o Expose MPSs customers to Think Subscription platform and also do vice-versa with penetrating MPS into THinkās Subscription.
o Customer overlap is minimal. 1 customer
o THink Subscription - margins are lower than MPS
o Goal for all SaaS business is to run them at better margins than MPS
ā¢ Top 10 customer base growth
o Couple of customers where there have been price cuts in lieu of longer term commitments. The ramp up in volume is yet to happen
o Longer term growth opportunities still remain in top 10 clients
o Started to look at building growth momentum in Top 25 accounts
ā¢ One of the biggest challenges in this industry is to build customer relationships.
ā¢ MagPlus is in a tricky situation. Adobeās solution DPS is sunsetted now. MagPlus is # 2 solution.
ā¢ MagPlus restructuring charges ~ 4.1 Crores. Bulk of other expenses increase is MagPlus.
ā¢ Reaching 400 Crores would not be margin dilutive
ā¢ Not much deals happening in this space. We are in a lucky position where we can command the price. EBITDA multiples 3-5x in this space.
ā¢ Very tough to grow organically in this business. Entry barriers are extremely high
ā¢ Co has been able to develop new areas of outsourcing. Something only a mature player can do
Excellent summary Rohit.
