Barry Yard, Mastek’s UK MD is leaving the India-headquartered IT services firm, and being replaced by global CEO, Sudhakar Ram. Yard joined Mastek to run the UK operation 3+ years ago from Siemens, and he has been successful at making the UK the most profitable division within the group and growing at 20%+ per year (see UK boost keeps Mastek steady). We understand that Ram is relocating to the UK to run the UK operation for the next couple of years because ‘the UK is so important to the wider Mastek’.
The UK is also Mastek’s largest market. In Q3 to 31 March, revenue was up an impressive 19% year on year at Rs.1.11bn ($20.4m), and up 28% over the past nine months - although it was down fractionally on the previous quarter. In Q3, the UK’s operating margin rose almost 3 points quarter on quarter to 22.5%, although it was down from 25.8% in Q212. This compares to a far more modest 8.1% margin achieved in the next biggest market the US.
The UK’s share of group revenue has fallen slightly over the past year, as the US has grown four-fold – Q313 revenue was Rs.818m ($15m) vs. Rs. ($3m) in Q312. Consequently, the UK now stands at 48% of group revenue vs. 50% this time last year, meanwhile the US is now 44% vs. 41%.
Mastek is clearly focusing on improving bottom line profits. In Q3, group EBITDA margins rose to 11.4% vs. 9.3% in Q2. Over the nine month period, the improvement was even more impressive, with the EBITDA margin up to 9.6% vs. just 0.8%. Revenue has grown far less dramatically however, nudging up 1% qoq to Rs.22.95bn ($42.3m) (2.6% in USD constant currency). Nonetheless, this was still up 23% yoy. Over the nine month period, operating revenue was up 31.4% to Rs.68.34bn ($126m), and up 19.7% (USD ccy).
Mastek’s issue is that margins are still way off those of its larger peers (see TCS closes year with first $3bn quarter). Ram will no doubt be looking to the UK to find out how it can replicate its impressive performance across the rest of the group, notably the sub-10% margin US business.