Cognizant's net profits fall 39% - as its management prepares to enter 2020 with vigour and optimism

New Delhi, Feb 6 () IT major Cognizant on Thursday reported over 39 per cent decline in net profit at USD 395 million for December 2019 quarter on account of factors like restructuring charges, and said it expects its topline to grow by 2-4 per cent in 2020. The company also appointed Vinita Bali, former managing director and chief executive officer of Britannia Industries, as a new independent director, effective February 24, 2020.

The US-based company, which has a significant chunk of its workforce in India, had posted a net profit of USD 648 million in October-December 2018 quarter.

Its revenue grew 3.8 per cent to USD 4.3 billion during the quarter under review from USD 4.1 billion in the year-ago period. In constant currency terms, this translated to 4.2 per cent growth.

"Our steady progress against key initiatives is increasingly evident in our commercial and financial performance. We enter 2020 with renewed vigor and optimism," Cognizant Chief Executive Officer Brian Humphries said.

For the full year (2019), the company's net profit was down 12.38 per cent to USD 1.8 billion, while revenue was 4.1 per cent higher at USD 16.8 billion as compared with the previous fiscal.

Cognizant said it expects its March quarter revenue growth to be in the range of 2.8-3.8 per cent in constant currency, which includes a negative 60 basis points impact from the exit of certain content services business announced last year.

For 2020, revenue growth is estimated to be in the range of 2-4 per cent in constant currency, taking into estimate a negative 110 basis points impact from the exit.

"Our operating performance and strong free cash flows in the fourth quarter reflect the actions taken throughout 2019 to improve our cost structure and instill greater operating discipline across the company," Cognizant CFO Karen McLoughlin said.

The 2020 outlook reflects the company's commitment to further improve cost structure to fund investments in growth.

"We are executing a balanced capital deployment strategy that is focused on reaccelerating top-line growth through strategic acquisitions and other investments while returning capital to shareholders," she said.

In October, Cognizant had announced plans to slash up to 7,000 jobs in the next few months as part of cost reduction efforts. It had also said it would partially exit from content operations business and the move would impact another 6,000 jobs.

During the December 2019 quarter, Cognizant incurred USD 53 million in realignment charges, including USD 4 million in employee separation costs, USD 27 million in employee retention costs and USD 22 million in third-party realignment costs, it said in a statement.

For the year, it incurred USD 169 million in realignment charges that include USD 64 million of employee separation costs, USD 22 million of costs associated with CEO transition and the departure of the president, USD 45 million of employee retention costs and USD 38 million in third-party realignment costs.

During the three months ended December 31, 2019, Cognizant incurred USD 48 million in restructuring charges as part of its 2020 Fit for Growth Plan, that included USD 45 million in employee separation costs, USD 2 million in employee retention costs and USD 1 million in third party costs, it said.

The charges included USD 5 million of costs incurred in 2019 related to the company's exit from certain content-related services. SR RVK