Cyient Reports The Quarter With Continued Growth In Revenue, Profit And Cash

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Apr 25, 2019, 13:01 ET

~ Performance in line with outlook for FY19 with PROGRESS in A&D, Transportation and IE&NR ~

– Highest ever group annual revenue at $660Mn; growth of 8.7% in $ terms, 10.1% in CC terms; group revenue at ₹46,175 Mn, growth at 17.9%

– Highest ever annual operating profit at ₹6,443; growth of 17.3% post NBA investments

– Highest ever services operating margin at 16.4% for last 20 quarters, growth of 120 bps YoY

– Services revenue at $ 146.9Mn; growth of 1.7% QoQ (1.4% in CC), 2.9% YoY

– Group operating margin at 15.1% - highest in the last 20 quarters; expansion of 33 bps QoQ

HYDERABAD, India, April 25, 2019 /PRNewswire/ -- Cyient (Estd: 1991, NSE: CYIENT), a global provider of engineering, manufacturing, geospatial, network, digital and operations management solutions to global industry leaders, today reported its consolidated financial results for the fourth quarter (Q4) of FY 2019 ending March 31, 2018.

Financial Highlights:
For FY2019

Group revenue at $660Mn; growth of 8.7%, 10.1% in CC terms

Group revenue at ₹46,175 Mn; YoY growth at 17.9%

Services revenue at $580 Mn; growth of 6.3% (7.6% in CC)
DLM revenue at $79.7Mn; growth of 29.3%
Highest ever operating profit at ₹6,443; growth of 17.3% post NBA investments
Highest ever normalized profit after tax at ₹4,898 Mn; growth of 14.0%
Highest ever Free Cash flow at ₹3,770 Mn
Free Cash Flow conversion at 48.4%
Highest ever final dividend at ₹9/share, ₹15/share for the full year
Including buy back of ₹200 crores, the pay-out is ~82%

For Q4 FY19

Highest ever services operating margin at 16.4% for last 20 quarters, growth of 120 bps YoY
Services revenue at $ 146.9Mn; growth of 1.7% QoQ (1.4% in CC), 2.9% YoY
Group operating margin at 15.1% - highest in the last 20 quarters; expansion of 33 bps QoQ
Lowest ever ETR at 15.2%; lower by 719 bps QoQ, 651 bps YoY
Highest ever normalized Profit After Tax (PAT) at ₹1,881 Mn; growth of 104.2% QoQ; 54.7% YoY

Business Highlights

YoY revenue growth in A&D, Transportation and IE&NR stood at 5%, 9% & 6% respectively
NAM & APAC YoY revenue growth of 2%, 23% respectively
Rolled out a portfolio of services and solutions for 5G deployment
Selected by UK power portal networks to develop an outage planning portal
Tripartite MoU with the Government of Telangana and Telangana State Aviation Academy (TSAA) for Drone Pilot Training and Certification Programs
Launched Cybersecurity Security Operations Centre (SOC)
16 NBA programs in full swing - Proposal submission and advanced level discussion on a few projects with customers
Balance 26% in Cyient DLM Pvt. Ltd. purchased

Message from the Management

Commenting on the results, Mr. Krishna Bodanapu, Managing Director and Chief Executive Officer, said, "Our performance was lower than the initial expectations both on revenue and margin. Our revenue for the quarter stood at $165.2 Mn which was a 3.3% growth YoY and 0.3% degrowth QoQ in constant currency. In USD our revenue for the quarter was flat QoQ. We recorded the highest group operating profit margin of 15.1% since the acquisition of Cyient DLM. This was achieved due to operational efficiencies; incremental bill days and lower SG&A spend in the quarter. We also recorded our highest ever services revenue this quarter driven by Semiconductor, Utilities & Geospatial and Transportation business segments. Our Design led Manufacturing (DLM) BU witnessed a degrowth mainly on account of our defocus from non-margin generating clients and push out of an order due to documentation issues.

For the year we delivered a strong performance. We witnessed a growth of 10.1% YoY in constant currency, due to performance in Semiconductor, Communications, Transportation and Aerospace and Defense business segments. We also recorded our highest ever PAT at INR 4,898 Mn an increase of 14% YoY. This year saw an increased momentum in strategy execution resulting in acquisition of Ansem N.V (in April2018) a leading fabless, custom analog and mixed-signal application-specific integrated circuits (ASICs) design company and 100% stake in Cyient Insights, a data science company (formerly named Invati Insights) of which Cyient had acquired 51% stake in 2014. We also acquired additional 26% stake in Cyient DLM in the year. The acquisitions allow us to create a unique and comprehensive ecosystem of engineering capability, emerging technologies and design led manufacturing capability which not only enables Cyient to meet global customer expectations, but also to achieve our strategic goal of providing complete systems and solutions to clients across industries.

We also won many accolades through the year and were recognized by major industry analysts. The key among them being Pratt & Whitney supplier awards for 'Supplier Highest Productivity' Award, 'Supplier Innovation' Award and 'Consistent Supplier Productivity' Award. The awards reflect Cyient's continued focus on excellence, innovation, and success within its Pratt & Whitney Center of Excellence (CoE). This year we were also ranked as an 'Established and an Expansive' player by Zinnov, a global consulting and advisory firm, in its 2018 report on engineering R&D services. Cyient was also placed in the 'Leadership Zone' across four industry verticals—aerospace, energy & utilities, transport, and construction & heavy machinery – retaining its leadership position of several years.

Our outlook for FY20 remains strong backed by a strong pipeline and order backlog. We expect a high single digit growth in our services business while DLM business is expected to grow in the range of 15%. We will deliver a double-digit EBIT growth this year."

Commenting on the results, Mr. Ajay Aggarwal, President & CFO, said, "I am pleased to share that for FY19, we saw a strong and a well-rounded performance with earnings growth of 14% (Normalised EPS at ₹ 43.4) and operating profit growth of 17.3%. The revenue stood at $660 Mn with highest ever operating profit in INR terms (₹ 6443 Mn) and normalised PAT (₹ 4,898 Mn). Healthy conversion of Free Cash Flow to EBITDA at 48.4% culminating into a highest ever Free Cash Flow of ₹3,770 Mn. We also declared a highest ever final dividend of ₹10/share, taking the total dividend for the year to ₹15/ share. The company embarked on a special initiative of a buy-back of INR 200 crores which progressed well on anticipated lines.

The NBA program is garnering good traction and we are very confident that it would accelerate Cyient's EPS growth by 1.5-3%, from FY21 onwards. Profit improvement initiatives including cost optimisation and operational efficiency is on top priority. This would reflect in the results in the short-term. We are confident of delivering a strong performance in FY20. We are actively pursuing opportunities in organic and inorganic investments. Cyient would continue to focus on its commitments and the investor expectations aiming to maximize the shareholder's wealth."

Business performance and outlook

Aerospace & Defence
Aerospace & Defense (A&D) BU witnessed a growth of 0.4% QoQ and 5.4% YoY in constant currency. There was marginal growth in services business led by key accounts. The shortfall was primarily from the DLM and analytics business and workload challenges in Singapore business. The BU is witnessing strong traction across the product lifecycle and will continue to invest in S3 strategy to drive growth. The momentum is expected to continue into FY20 and the outlook for the year remains positive driven by growth in Avionics and DLM segments.

Communications
The Communications BU witnessed a degrowth of 3.7% QoQ and 2.5 % YoY in constant currency. This has been a particularly difficult quarter for the BU as most of the deals got pushed to early next year. The delay in decision making on couple of large programs and work allocation being restricted impacted performance in the quarter. The BU launched various 5G offerings and is supporting a large carrier in their 5G road map. Focus on IoT, Open Source and RPA are expected to be key technological advancements in 2020. The BU expects a stronger momentum in FY20.

Utilities & Geospatial
Utilities and Geospatial BU witnessed a growth of 3.2% QoQ and 0.8% YoY in constant currency. The growth in the BU was driven by new customer additions and new solutions offerings. More established solution offerings like iDMS for utilities and road health analytics for geospatial continue to gain traction. The BU expects a strong growth in FY20 in Europe and North American markets backed by a strong pipeline and continued interest in solutions across all geographies.

Transportation
Transportation BU witnessed a growth of 3.5% QoQ and 14.8% YoY in constant currency driven by momentum in key accounts and new project wins. The BU continues to make significant progress in identifying opportunities and launching new solution offerings in areas such as Augmented Reality, Smart Asset Maintenance & Cab Alarm notification. The outlook for the year continues to remain positive driven by strong industry growth in key segments, healthy pipeline and long term relationships.

Industrial, Energy and natural resources (IE&NR)
IE&NR BU witnessed growth of 0.6% QoQ and 8.6% YoY in constant currency. The BU experienced delays in key client projects. The BU continues to witness a strong pipeline in connected equipment, power and asset health monitoring solutions with new opportunities in both existing and new clients. The mining segment is showing growth in asset health monitoring as they continue to focus on operational efficiency and automation. The power business is seeing new opportunities in turbine design and engine controls systems. The industrial business has new opportunities in augmented and virtual reality, manufacturing engineering and electronics. The BU is expected to witness growth in FY20 driven by continued performance in key accounts.

Semiconductor, Internet of Things & Analytics (SI&A)
Semiconductor BU witnessed a growth of 22.5% QoQ and 47.8% YoY in constant currency terms. Our key Accounts continued to see moderate growth while new clients contributed to additional growth. Our Turnkey ASIC business saw significant new design wins in the quarter. Despite significant headwind and margin pressure on our traditional layout and physical design services, we increased our focus on pre-silicon verification and post-silicon validation in semiconductor design services, deploying innovative equipment in our Hyderabad and Bangalore labs. This focus is helping us create momentum with clients. We continue to work with new clients, expanding our foray into unique and growing applications in AI and autonomous driving. Our outlook for FY20 continues to remain positive based on opportunities identified with key clients and the challenges that our services and solutions are primed to address.

Medical Technology and Healthcare
The Medical Technology and Healthcare (MT&H) BU delivered a growth of 4.3% QoQ and 9.7% YoY in constant currency in a seasonally slow quarter. This quarter saw increased focus on both services and design led manufacturing with an increased pipeline for large transformational opportunities providing end-to-end product development services to strategic segments. We are focused on strengthening the sales funnel and backlog and are optimistic about new business. The BU expects to witness strong growth through FY20 driven by growth in strong pipeline, order intake, venture investments and ecosystem partnerships.

Design Led Manufacturing
DLM BU degrowth of 11.9% QoQ and 10% YoY in constant currency terms. The QoQ growth was impacted by change and seasonality in oder intake in India Israel business. Our planned exit from a major customer due to low margins also impacted our growth. Our outlook for FY20 continues to remain positive based on strong pipeline and order intake.

Operational Highlights

CSR Activities

Received "CSR Leadership" Award from ET Now in Community Development category
Continue to support 25 Government Schools – providing education to 15800+ underprivileged children
Continue to support 67 Cyient Digital Centers (CDCs) in around Hyderabad to more than 27000+ children and 5,500+ community members
Provided training to a pilot batch of 300 unemployed women on tailoring, bakery and beauty courses through the Cyient Urban Micro Sill Center (CUMSC) for urban poor

Awards & Recognitions

Positioned as an established and expansive player in Zinnov Zones' ER&D services report 2018
Recognized as a "Major Contender" in Everest Group's Peak Matrix Medical Device Engineering Services Assessment 2019
Cyient & India2022 coalition Launched Medtech Connect platform to address India's last – mile challenge in healthcare
Cyient Finance team won the "Best Risk Management Systems and Framework" award in the Treasury Risk and Compliance Excellence by Kamikaze B2B Media

Future Outlook for FY20

Revenue Growth

High single digit growth for Services in constant currency
DLM business expected to grow by ~ 15% in constant currency

EBIT

Double digit growth in Earnings Before Interest and Tax

Others

ETR likely to be in the range of 22.5% - 23.5%
Other income is expected to be marginally higher than current year based on a strong forex forward position (at current spot rate) and recurring export incentives

About Cyient

Cyient (Estd: 1991, NSE: CYIENT) provides engineering, manufacturing, geospatial, digital, networks, and operations management solutions to global industry leaders. Cyient leverages the power of digital technology and advanced analytics capabilities, along with domain knowledge and technical expertise, to solve complex business problems. As a Design, Build and Maintain partner, Cyient takes solution ownership across the value chain to help clients focus on their core, innovate, and stay ahead of the curve.

Relationships form the core of how Cyient works. With over 15,000 employees in 22 countries, Cyient partners with clients to operate as part of their extended team, in ways that best suit their organization's culture and requirements. Cyient's industry focus includes aerospace and defense, medical, telecommunications, rail transportation, semiconductor, utilities, industrial, energy and natural resources.

For more information, please visit www.cyient.com.
Follow news about the company at @Cyient.

Media Relations

Meeta Singh
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Mobile: +91 994 906 5300
Email: [email protected]

Disclaimer
This document contains certain forward-looking statements on our future prospects. Although Cyient believes that expectations contained in these statements are reasonable, their nature involves a number of risks and uncertainties that may lead to different results. These forward-looking statements represent only the current expectations and beliefs, and the company provides no assurance that such expectations will prove correct.

All the references to Cyient's financial results in this update pertain to the company's consolidated operations comprising wholly-owned and Step-down subsidiaries Cyient Europe Limited; Cyient Inc.; Cyient GmbH; Cyient Australia Pty Ltd; Cyient Singapore Private Limited; Cyient KK; Cyient Israel India Limited; Cyient Insights Private Limited; Cyient Canada Inc.; Cyient Defense Services Inc.; Certon Software Inc.; Certon Instruments Inc.; B&F Design Inc.; New Technology Precision Machining Co. Inc.; Cyient Insights LLC; Cyient Benelux BV; Cyient Schweiz GmbH; Cyient SRO; AnSem NV; AnSem B.V.; Cyient AB; partly owned subsidiaries Cyient Solutions and Systems Private Limited; Cyient DLM Private Limited; joint venture Infotech HAL Ltd (HAL JV) & associate company Infotech Aerospace Services Inc. (IASI) until 8th December 2017.

The income statement and cash flow provided is in the internal MIS format. MIS format is different from the income statement published as part of the financial results, which is as per the statutory requirement.

SOURCE Cyient