Infosys announces 1:1 bonus issue; Q1 profit drops 6.5%
BENGALURU: Infosys Ltd reported weak first-quarter earnings on Friday, as both revenue and profits were lower than analysts’ expectations, marking a slow start to the financial year even as the company jettisoned its practice of giving a full-year dollar revenue guidance.
However, despite reporting weak earnings in a quarter that generally sees more business for IT firms, Infosys rewarded shareholders with a 1:1 bonus issue. The board also inducted Mike Gibbs, chief information officer at oil giant BP Plc, as an independent director for three years, taking the total board strength to nine, including six independent directors.
Bengaluru-based Infosys’s dollar revenue increased 0.9% (2.3% in constant currency terms) to $2.83 billion in the quarter ended June 31 from the preceding three months. Net profit declined 6.5% to $534 million in the June quarter from $571 million in the preceding three months, primarily on account of the company making an additional write-down of $39 million from the fair value of Panaya and Skava, the two companies Infosys expects to sell during the current financial year.
A survey of 19 analysts had forecast Infosys to report revenue of $2.84 billion, or ₹19,526.1 crore, in the quarter. The analysts estimated the company to report a net profit of $540.38 million, or ₹3,719.2 crore, in the period.
In morning trading on Nasdaq, Infosys shares were trading down 3.75% at $19.26 a share.
Infosys’s operating margin declined 100 basis points to 23.7%
Bloomberg
at the end of the June quarter from 24.7% in the January-march period.
It posted 6.8% year-on-year dollar revenue growth in the April-june period, after reporting a 9.2% y-o-y dollar revenue growth in the March quarter, suggesting that the company is still struggling for stability. Worryingly for the firm, 11 months after co-founder Nandan Nilekani returned as its non-executive chairman, and six months after it appointed Salil Parekh as chief executive officer, Infosys’s attrition rate continues to move northwards, with attrition in parent IT services business rising to 20.6% from 16.6% at the end of March. Including Infosys’s subsidiaries, the attrition rate is 23%.
Infosys saw a 2% sequential constant currency growth in business from clients in the US, which accounts for 60% of total revenue. In the industry segment, the company saw a de-growth in business from customers in the banking and financial services sector, which accounts for 31.8% of revenue.
Infosys’s performance in the first quarter pales before that of its larger rival Tata Consultancy Services Ltd, which declared a strong first quarter earnings on Tuesday.