Cognizant Q1 profit up 23%; forecasts Q2 revenue at $2.5 bn

New Delhi: IT services major Cognizant posted a 22.8 percent jump in net profit to $348.9 million in the January-March quarter, buoyed by strong growth in the UK and higher spending by clients on consulting and technology services.

The New Jersey-headquartered firm had registered a profit of $284.2 million in the first quarter of 2013.

Revenue in the first quarter of 2014 climbed 19.9 percent to $2.42 billion, in line with the company’s forecast.

Business in the UK region, which accounted for 11.5 percent of the quarter’s revenue, grew 28.2 percent year-on-year to more than $1 billion.

[caption id=“attachment_74947” align=“alignleft” width=“380”]  Reuters[/caption]

More from International

Nato on alert as Poland scrambles jets amid Russian drone threat Hong Kong rejects bid to recognise same-sex partnerships — a first for govt bill since China takeover

“The strength in the UK revenue came from multiple clients across several industries, including financial services and high technology. Consulting and technology services was up 5.5 percent sequentially and 23.7 percent year over year,” Cognizant Chief Financial Officer Karen McLoughlin said on a conference call.

Consulting and technology services (formerly known as application development) and outsourcing services (formerly known as application management) represented 51 percent and49 percent of revenue, respectively, for the quarter.

Outsourcing services were essentially flat sequentially and up 16.1 percent from Q1 a year ago.

Cognizant expects revenue to increase to between $2.5 billion and $2.53 billion in the second quarter, compared with $2.16 billion a year earlier. For 2014, Cognizant has maintained its guidance for revenue to be at least $10.3 billion, up 16.5 percent from 2013.

Impact Shorts

More Shorts

What will FBI’s new office in New Zealand do? Kash Patel’s suggestion leaves China fuming

“We remain confident in the overall demand environment and in our ability to deliver our previously stated revenue guidance of at least $10.3 billion for 2014,” Cognizant President Gordon Coburn said.

The European region’s business grew 35 percent y-o-y, accounting for 19.4 percent of the quarter’s revenue.

The North American market grew 16.1 percent (75.8 percent of revenue), while the rest of the world saw revenue rising 28.4 percent.

Financial services saw a 19.7 percent growth from a year ago, while manufacturing, retail & logistics and healthcare grew over 20 percent.

“Clients are facing a dual mandate of how to ‘run better’ and simultaneously ‘run different’. This was particularly true in Q1 where we observed certain customers optimising their ‘run better’ spend to further invest in their ‘run different’ initiatives.

“During Q1, we continued to see expansion of application development work in our public sector services business,” McLoughlin said.

Cognizant closed the quarter with 1,223 active customers and 250 strategic clients (those with the potential to ramp up annual revenue from $5 million to over $50 million).

It had about $3.86 billion of cash and short-term investments on its books and spent about $43 million on capital expenditure during the quarter.

“Our broad set of capabilities and our compelling value proposition enable Cognizant to help clients simultaneously run better and run different, by not only driving efficiency in their operations, but also helping them to re-imagine and re-design their business models,” Cognizant Chief Executive Officer Francisco D’Souza said.

Cognizant, which has 75 percent of its about 1,78,600 employees based in India, added approximately 7,200 people (net) in the quarter, the strongest hiring in any quarter during the past two-and-a-half years, it said.

“This strong hiring is a testament to our continued confidence in the demand environment and our ability to continue to post industry-leading revenue growth,” McLoughlin said.

About 44 percent of gross additions for the quarter were direct college hires, while the remainder were lateral recruitment of experienced professionals.

“Our annualised attrition during the quarter, including BPO and trainees, continued to trend down to 14.1 percent annualised. We have put in place a series of employee engagement programmes that are paying off nicely,” she said.

PTI