COMPUTER Systems Advisers (M) Bhd's (CSA) earnings may recover in financial year (FY) 2005 as its efforts to expand outsourcing activities has started to bear fruit, said managing director Chuah Tai Eu.
He said FY2005 should be a better year because the value of the current outsourcing contracts would be fully reflected in the company's books.
“Hopefully shareholders will be happier by then,” Chuah told a press conference in Petaling Jaya yesterday.
He reiterated that outsourcing activities would be the main future growth engine for CSA given that the operating environment for its traditional hardware-driven IT infrastructure systems and solution business was getting tougher and competition was heating up.
The company's earnings have fallen sharply in the past two fiscal years. Its earnings per share (EPS) slid to 12 sen for the year ended March 31 compared with 33 sen in FY2001.
CSA also announced on Tuesday that its pre-tax profit had tumbled 47% to RM4.81mil for the half-year ended Sept 30 against RM9.03mil a year before. Turnover dropped to RM115.4mil from RM143.4mil. EPS came in at 2.98 sen versus 6.1 sen in the previous corresponding period.
Investment analysts were rather disappointed with the set of results that came below their forecasts. They said the latest earnings numbers failed to prove that the company's businesses were recovering.
Chuah attributed the substantial fall in CSA's profit to the decrease in IT infrastructure systems and solutions business, which was the company's major earner.
The government spending on IT infrastructure had also slowed, he added.
With three large outsourcing contracts in hand, Chuah expects outsourcing activities to generate 15% of CSA's total revenue and to contribute 8% to 10% of pre-tax profit.
For the first half year ended Sept 30, outsourcing activities only accounted for 6% of its revenue. And the division is still in the red at the end of second financial quarter.
CSA has spent about RM10mil on physical assets to beef up its outsourcing division over the past three years.
He said the award of the three contracts proved that the company's investment in outsourcing activities was yielding returns now.
CSA, together with its parent company Computer Science Corp (CSC), managed to clinch outsourcing contracts with Malayan Banking Bhd (Maybank), Motorola Inc and Du Pont this year.
The contract value for Maybank is RM1.3bil. According to Chua, CSA is likely to obtain at least 50% to 60% of the contract value as the company is performing most of the outsourcing works.
The RM52mil four-year outsourcing deal from US-based Du Pont is for the provision of end-to-end support for end-user computing, midrange and helpdesk services over 15 countries across the Asia Pacific.
Under a 10-year US$1.6bil IT infrastructure outsourcing agreement that CSC signed in March with Motorola, CSA was selected as one of three global helpdesk centres and infrastructure hubs to manage and service Motorola's helpdesk and data centre operations in more than 13 Asia Pacific countries.