NetSol: a flying start in FY14
More good news for NetSol’s shareholders! After scoring its all-time high revenues and net profits in FY13, NetSol Technologies Limited has had an impressive start to its new financial year. Growing top line and booming bottom line are reported by the Company for the first quarter ending September.
Overseas business is the Company’s mainstay, for revenues from foreign sales have consistently made up for over 90 percent of total revenues generated in last four financial years. Past data shows that the revenue growth for NetSol picks up in later quarters of a given financial year, as the pipeline of foreign software and IT services deals built in earlier months starts maturing as the year passes by.
In that context, the 38.4 percent year on year 1Q FY14 revenue growth is a healthy sign, which points towards aggressive marketing and promotion efforts in the Company’s overseas markets in the Asia-Pacific region. The top line growth is expected to have come about due to good performance in the major business segments of IT services and software licensing.
This strong revenue growth has helped the quarterly financial results to remain in god shape, despite a 36 percent hike in cost of revenue. A bit of cost efficiency is visible though, as these costs exhausted 104bps less of revenues (59.3 percent) compared to same period of last year. That helped the software Company post a slightly improved gross margin, 40.7 percent, over last year.
Similarly, though both heads of selling expenses and administrative expenses increased year on year by 50.5 percent and 32.9 percent, they collectively consumed 34 percent of revenues in 1Q FY14, which is 44bps less than the corresponding period of last year.
NetSol’s non-operating performance also played a major part in posting stellar first quarter results. Its ‘other income’-–which comprises of foreign currency gains, dividend income and returns on bank deposits-–increased by 1.8 times over last year to reach Rs111.8 million. This significant gain in non-core income seems to have come from greater rupee depreciation during the period under review.
NetSol closed its 1st quarter with net profits of Rs140.15 million, showing a 151.2 percent growth over 1Q FY13. Revenue growth is expected to intensify in subsequent quarters, and if cost control measures are stepped up, NetSol may exceed its FY13 performance this year. However, top line expansion is reliant on how the Company sells its flagship product, NetSol Financial Suite, to prospective clients overseas.
