For the financial year ended December 2005, consolidated revenue was up 18% to Rs 147.79 crore and net profit for the same was down by 17% to Rs 36.23 crore.

YoY Performance:

On the back of muted 1% growth in the Export Information Processing unit, to Rs 22.93 crore, Macmillan recorded a 9% YoY growth in its consolidated revenue to Rs 33.71 crore. On the other hand, 360bps expansion in the raw materials cost to 5% of revenue coupled with increase in the staff cost, which expanded by 750 bps to 10% of revenue, OPM for the period declined by around 1300bps to 28.4%, which took operating profit lower by 25% to Rs 9.58 crore for the quarter ended December 2005. Other income rose by 68% to Rs 1.04 crore, thus PBIDT was down by 21% to Rs 10.62 crore. Depreciation cost was marginally up by 1% to Rs 1.25 crore, thus PBT was down by 23% to Rs 9.36 crore.

During the period Tax credit was up by 224 % to Rs 1.20 crore, and Fringe Benefit Tax stood at Rs 15 lakh against nil in the corresponding quarter previous year. Thus, resultant net profit went down by 17% to Rs 10.41 crore for the quarter ended December 2005.

FY 2004-05 Performance:

For the financial year ended December 2005, Macmillan posted an 18% growth in its consolidated revenue to Rs 147.79 crore. On the other hand, escalation in the staff cost coupled with increase in the raw materials cost, dragged down the OPM by around 1200bps to 26.1%, which took operating profit lower by 19% to Rs 38.58 crore. Other income was up by 28% to Rs 4.67 crore, thus PBIDT was down by 15% to Rs 43.25 crore. With negligible interest cost and 49% increase in the depreciation cost, took Profit at the PBT level further down by 21% to Rs 36.72 crore. However, with tax charges down by 84% to Rs 49 lakh, the declined in the net profit was restricted at 17% to Rs 36.23 crore for the financial year ended December 2005.

Information Processing Division:

IPD (Information Processing Division), revenue grew by 17% QoQ to Rs 22.93 crore and however with escalation in the staff cost, PBIT margin declined by around 1100bps to 47%, which took PBIT lower by 6% to Rs 10.77 crore for the quarter ended December 2005.

On YoY basis, IPD business has grown by 30% and PBIT is down by 20%. Total capital employed in this business increased by 2% YoY and 12% QoQ basis, to Rs 44.64 crore for the quarter ended December 2005.

For financials year ended December 2005, IPD business grew by 23% to Rs 95.16 crore as compared to the corresponding previous year. On the other hand, PBIT for the same period was down by 19% at Rs 34.54 crore.

• Good growth prospects in Book division and continued expansion of Typesetting business

• Europe contributed around 63% to sales and US contributed around 37%

• Continue to explore inorganic growth opportunities

 Publishing Division:

On YoY basis, publishing business, which constitutes publishing, book selling and E-business, grew by 75% to Rs 10.78 crore for the quarter ended December 2005. However, the loss in the PBIT level continues, however it declined by 6% to Rs 10.77 crore for the quarter ended December 2005. For FY05, publishing business showed a growth of 9% to 52.64 crore as compared to the corresponding previous year. On the other hand, for the same period PBIT for the segment was down by 35% to Rs 4.18 crore.

• Publishing business grew by 12% to Rs. 48.33 cr. over the corresponding previous year

• Organizational restructuring with senior appointments expected to give rewards in the coming years

• Encouraging response received on educational testing and evaluation services offered to schools during the second year of its operation.

• Several initiatives including launch of new titles, major order from U.P. Government etc

MPS Technologies:

For the period ended December 2005, MPS Technologies, a subsidiary, has generated revenue of Rs 9.56 crore mainly in providing services in the field of content delivery platform, fulfillment consultancy to the Publishers in Europe and USA.

It has a current head count of 75 and has plans to increase its head count in the coming months to meet its increased business needs.

Management Comment:

Commenting on the performance, Mr Rajiv Beri, Managing Director

"This has been a year of significant investment and consolidation. We have invested in acquiring new typesetting unit Charon Tech, expanded the book division, on our subsidiary MPS Technologies and also on new recruitments both for Information Processing and Publishing Business. We expect positive results from all these investments in the coming years"

Business Outlook:

Macmillan plans to maintain its leadership in educational publishing by expanding the scope to higher education books, general non-fiction books, distance education through e-learning, entry into low price segment and regional publishing. Long-term outlook for publishing business remains positive due to increasing shift towards English medium and possibility of decontrol of content at the state level. Recent project to offer educational testing and evaluation services to schools is expected to be a major contributor in the coming years. E-macmillan has established a wide customer base among global publishers. It has launched various initiatives to grow business.

MPS Technologies, a subsidiary, has immense potential since it will provide a next generation content delivery platform for scholarly communication, with electronic delivery and access soon becoming the primary form of communication in scientific, technical and medical publishing.

Information processing division’s core strategy revolves around winning large annuity accounts from leading publishers. Based on its domain expertise, the company plans to significantly grow this business while maintaining focus on high value added services. The company has adopted selective inorganic growth strategy to expand its service offerings and customer base. Global outsourcing opportunity, new service offerings, initiatives in US market and strong support from the parent would drive growth in the future.

Valuation:

The share price of the company is trading at around Rs 468. This price discounts FY 2004-05 EPS of Rs 21.5 by 21.8 times.