Group Financial Overview and Trends for the Quarter ended 31 January 2012

Transcription

1 Group Financial Overview and Trends for the Quarter ended 31 January 2012 Page Overview of Quarter Results 1 to 3 Consolidated Profit and Loss Account 4 Key Performance Indicators Profit and Loss Account 5 Consolidated Balance Sheet 6 Key Performance Indicators Balance Sheet 7 Primary Segment Information 8 Analysis of Revenues 9 to 11 Tower Information 11 & 12 Client wins & hedge 13 Trends

2 Overview of Quarter Results Safe Harbor: Certain statements in this document may be forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties like regulatory changes, local political or economic developments, and many other factors that could cause our actual results to differ materially from those contemplated by the relevant forward-looking statements. MphasiS will not be in any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. 1. Key Highlights Net revenues grew 4.1% QoQ Direct business revenues witnessed robust growth of 14.4% QoQ 60 bps improvement in EBITDA Cash generated from operations during the quarter was at ` 2,383 million 2. Strategy in action a. Direct Business The Company s results demonstrate that its focus on strategic business areas is gaining ground. Sustained momentum in Direct business delivered sequential growth of 14.4% in Rupee terms. Net of Rupee depreciation, revenues grew by 8.8% QoQ. Significant Direct business expansion continued in Mature as well as Emerging markets, which grew by 10.4% and 27.7% respectively QoQ. 17 new Direct business clients of the 28 clients added during the quarter. HP/Direct business mix shifted from 62:38 (Q4) to 58:42 (Q1), a significant step towards addressing single client concentration risk. Infrastructure services within the Direct business saw strong momentum this quarter, growing 48.9% sequentially. MphasiS-Wyde's Wynsure system recently went live at Symetra Life Insurance Company to support its growing group life and disability income insurance business. This was the first implementation following the acquisition of Wyde. 1

3 b. HP Business Key highlights of the HP related business for the Company: HP business revenues witnessed QoQ decline of 0.5%. o Net of rupee depreciation, revenues declined by 4.0% o Seasonally subdued quarter on account of annual shutdown at HP o Revenues also impacted due to ramp downs in certain projects 11 new clients added during the quarter in HP business 3. Financial indicators a. Revenues Revenues (net of hedge) grew by 4.1% in Rupee terms to ` 13,672 million o Net of rupee depreciation, revenues grew by 0.9% Strong traction seen in key strategic verticals of Banking & Capital Markets (BCM) and Insurance which grew sequentially by 4.5% and 7.4% respectively. b. Gross Profit Gross profit increased by 3.5% to ` 3,232 million in the current quarter from ` 3,124 million in Q4. This increase can be attributed mainly to the Company s cost optimization drive which is yielding significant results. Increase in offshore utilization, proactive planning to reduce the impact of the annual holiday shutdown period, new initiatives such as the US employee medical insurance policy re-negotiations reflect the improvement seen in the quarter. c. Selling Expenses Selling expenses for the quarter increased by 0.3% to ` 669 million, higher by ` 2 million as compared to ` 667 million in the preceding quarter. During the quarter the Company strengthened its sales team by adding 18 sales personnel. d. General and Administrative Expenses General and administrative expenses for the quarter were at ` 509 million, lower by ` 11 million as compared to ` 520 million in the preceding quarter. This reduction is the result of tight controls on discretionary expenses and hiring freeze on non-billable and non-sales personnel resulting in a G&A headcount decline of 33 during the quarter. e. EBITDA EBITDA margins improved 60 basis points from 17.9% in Q4 to 18.5% in Q1 FY12 despite being a seasonally weak quarter. This represents a reversal of the trend of declining EBITDA margins over the last three quarters. The Company is now within its target margin band of 18% to 21%. 2

4 f. Other income / (expense), net Other income for the quarter was ` 288 million against ` 301 million the previous quarter. The reduction is due to cash outflow for the Wyde acquisition in Q4 FY11. g. Cash Management Cash and cash equivalents increased by ` 1,158 million during the quarter to ` 21,819 million. Cash of ` 510 million was utilized as earnest money deposits for various Government tenders. Gross increase in cash balance during the quarter was around US$ 34 million. 4. Operational indicators a. Billing Rates Offshore average Application billing rates witnessed an increase from $ 20 per hour to $ 21 per hour mainly driven by optimal deployment of resources leading to efficient project execution. b. Utilization Onsite Application services utilization drop restricted to 100 basis points despite annual holiday shutdown in onsite locations. Utilization in offshore Application services witnessed an increase of 200 basis points and offshore BPO services increased by 100 basis points. Offshore ITO services utilization decreased by 200 basis points due to annual holiday shutdown and ramp down of projects in the HP channel. c. Unbilled Revenues Unbilled revenues showed an 11% reduction of ` 749 million in Q1 FY12 driven by operational efficiencies. Tower Financials: MphasiS embarked on a three-year transformation process in FY2011, following which the company has started evaluating its financial performance on the basis of key industry vertical segments. However, to maintain continuity of data, contribution from its three business Towers was being provided in quarterly financial releases through FY Starting Q1 FY2012, provision of Tower revenues is being discontinued as the company no longer evaluates its performance on the basis of this parameter. 3

5 * Cost of Revenue for the quarter ended Q1 FY12 are net of reversal of certain provisions which are no longer required amounting to ` Nil (Q4 FY11: ` Nil; Q1 FY11: ` 258 million). **General & Administrative expenses for the quarter ended Q1 FY12 are net of reversal of certain provisions which are no longer required amounting to ` Nil (Q4 FY11: ` Nil; Q1 FY11: ` 176 million). 4

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8 Cash and bank balance and Investment of cash surplus Cash and cash equivalents consists of cash & bank balances and short-term investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. It also includes restricted deposits amounting ` 31 million (Q4 FY11 - `55 million, Q1 FY11 - `71 million) The Group s treasury policy calls for investing only in fixed deposits of highly rated banks, units of debt mutual funds and fixed maturity plans (FMP) for maturities up to 6 months. Stringent guidelines have been set for de-risking counter party exposures. The Group maintains balances both in Indian Rupee and foreign currency accounts in India and overseas. The investment philosophy of the Group is to ensure capital preservation and liquidity in preference to returns. 7

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14 Our exposure to foreign exchange risk arises principally on account of non-functional monetary assets/liabilities at the balance sheet date and highly probable forecast transactions denominated in USD, GBP, EUR, AUD, CAD & SGD. We have sought to reduce the effect of foreign exchange risk arising from the exposures on our results by purchasing forward foreign exchange contracts. These contracts are entered into in a systematic manner over the lifecycle of the exposure in accordance with the FX Risk Management Policy as laid down by the Treasury Committee of the Board of Directors. These instruments typically have maturities of one to twenty four months. We use these instruments as hedges and not for speculative purposes and all of them qualify for hedge accounting under AS-30 published by the Institute of Chartered Accountants of India. 13

15 EBITDA Net Margin 14

16 Utilization Group Client Concentration 15

17 Cash and cash equivalents - ` Million Debtors Days 16