Applications outsourcing company Keane Inc has reaped the benefits of its offshore delivery model with a strong performance in the second quarter of the year, and has announced a new acquisition in the UK.
Boston, Massachusetts-based Keane will pay a possible total of $8m for Fast Track Holdings Ltd, a company with 50 employees that provides SAP configuration, deployment and training services to clients in the government, pharmaceutical and logistics sectors.
Brian Keane, chief executive, told ComputerWire that the target company had annual sales of about $8m, and said the company is considering further acquisitions in the ERP services space. Keane has paid $2m upfront for the takeover, and will pay a further earn-out of $5m if Fast Track meets certain performance targets over the next two years.
One of Keane’s main selling points is that it was one of the first US application services vendors to establish a low-cost resource base in India, which it achieved through the takeover of Signaltree Solutions in February 2002, and the acquisition of a 60% stake in offshore business process outsourcing provider Worldzen Holdings Ltd in October 2003.
Brian Keane said the company currently has 1,700 employees in India, a number he expects to increase to in excess of 4,000 in the next couple of years. He said: There is greater competition for resources in India, and wage inflation will be between 10% and 15% in the country this year.
Keane also said that the company is looking to recruit 60 new employees at its Boston headquarters, mainly in marketing positions. He said: Offshore has been hot for the last few years, but it is important to have a balance. You get a higher degree of customer intimacy by having a strong local presence.
In the three months to June 30, 2004, Keane increased net profit 21.9% to $8.1m on revenue that grew 13.9% to $231.7m.
Outsourcing revenue rose 27.4% to $116.5m during the quarter, on the back of applications management wins with Entergy, the US Department of Justice, and the Great American Insurance Group. Order bookings also rose 25.3% to $225.2m during the second quarter.
The company closed the quarter with $156.9m in cash and investments, after completing the acquisition of Illinois-based consulting firm NIMS Associates Inc and repurchasing 2.1 million shares of the company’s common stock for $30.1m in the first half of the year. This puts the company in a strong position to fund future M&A activity.
Looking ahead, the company said it expects revenue in the third quarter to reach between $230m and $240m, with earnings per share in the range of $0.11 to $0.13.