Near Term Disappointment For Geometric Global

Geometric Global, a leader in Product Lifecycle Management (PLM), Global Engineering Services and Outsourced Software Product Development (OSPD) solutions and technologies announced its Q3FY13 results yesterday (January 21^st). The result was rather dismal with a sequential decline of 2.85% in revenues to USD 46.31 million. In rupee terms, revenues declined by 4.11% to Rs 250.83 crore.

Margins for Geometric too remained under pressure during the quarter. The operating profit declined by 8.82% to Rs 43.53 crore while the EBITDA increased by 5.87% to Rs 44.58 crore. However, this increase was on account of the Other Income, which also helped the net profit to rise by 6.76% to Rs 19.1 crore. 

The decline in Geometric’s revenues was a result of the weakness in the Engineering Services segment which contributed to 36.17% of the consolidated income. Revenues from this service line declined by 13.44% on a sequential quarter basis. Software Services, which contributed to 56.33% of the consolidated income, too lacked lustre, revenues from it having declined by 0.38%. Geographically, USA and APAC remained weak with a sequential revenue decline of 5.83% and 11.12% respectively, Europe showed stability with a 2.34% growth.

Client additions too showed weakness in Q3FY13. New client additions stood at four as compared to 11 of the previous quarter. In all, new clients added USD 8.88 million to the order book. This figure is considerably lower than the USD 14.64 million worth of order book observed in Q2FY13.

Employee metrics of Geometric are indicative of utilisation levels continuing to hover around the usual 90%. For Q3FY13, it stood at 88.8% (excluding trainees). The total headcount saw a reduction of 95 to 4591 employees.

Although the performance of Geometric remained subdued for Q3FY13, the quarter saw a major move that could set up good long term prospects for Geometric. On January 02, 2013, it announced that its German subsidiary, Geometric Europe GmbH acquired a 100% stake in 3Cap Technologies GmbH (3Cap) for 11 million Euros.

3Cap has 110 employees and 7 customers which are mostly Tier I automotive suppliers. Geometric’s key verticals being engineering and automotive, this acquisition fits in perfectly for the company. Moreover, it is looking at expanding its presence in Europe, which currently contributes to 25.02% of its total revenues.

Apart from strengthening its presence in the automotive industry and in Europe, it would also be able to widen its service offerings. “The use of embedded systems is increasing in all our customer products. This acquisition fills a major gap in the solutions we offer to our customers”, said Manu Parpia, Managing Director & CEO, Geometric.

Thus, although the quarter has been non-impressive for Geometric, the acquisition led approach and specialised service offerings sets the company apart, also providing for good long term prospects. We maintain our long term positive outlook on Geometric.