Sunday, 18 October 2009

BT still a drag on TCS UK revenues

(By Anthony Miller – Sunday 18th October 2009 12:15pm). Despite winning some notable UK deals over the past couple of quarters in both the private and public sectors, TCS has yet to make up for lost revenues at BT. Much like Infosys, TCS saw UK revenues decline in Q2 (to 30th Sep.) both yoy and qoq. However, with UK revenues at £155m for the quarter and £680m over the trailing 12 months, TCS remains the UK’s top India-based supplier, comfortably ahead of Infosys at £96m for the quarter and £420m TTM.

In other respects, TCS’ results echoed many of the trends seen at Infosys last week (see Infosys takes another small step forward). On a US dollar basis, TCS’ revenues grew 4% seq to $1.54b as against +3% at Infosys to $1.15b. TCS also saw EBIT margins expand to 26.3% though still some way away from Infosys’ 30.3%. Sure, more favourable exchange rates helped both players, but ‘great execution’ did most of the work. Both players are reinstating salary rises, with TCS paying 150% of the quarterly variable pay component for Q2. Infosys lifted base offshore salaries by an average 8% and onshore by 2% at the beginning of the month.

The messages on demand were also similar, with both players starting to see ‘discretionary spend’ return in BFSI, though mainly due to M&A driving integration projects. Retail, Utilities and Pharma sectors are also starting to show promise, though Manufacturing, Hi-Tech and Telecom sectors remain deeply troubled. So while there was a much more upbeat tone from TCS management – as for Infosys – it would still be fair to say that both remain cautious, especially with client IT budgets still yet to be nailed down.

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