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 First quarter (Q1) of FY 2020 ending June 30, 2019.
Financial Highlights
- Consolidated revenue at ₹10,890Mn; Growth of 0.8% YoY (₹ terms) and de growth of 6.3% YoY (₹ terms); $ 156.6Mn; degrowth of 5.2% QoQ and de- growth of 2.6% YoY;
- Profit After Tax at ₹905 Mn for the quarter; growth of 9.7%YoY
- Services revenue at $ 137.9Mn; de-growth of 6.1% QoQ (-5.7% in CC) and de- growth of 3.4%YoY
- DLM revenue at $ 18.7Mn; growth of 2.2% QoQ,3.7%YoY
- EBIT margin for services at 10.5%, up 10 bps YoY (EBITDA margin for services at 14.8%, up 160bpsYoY)
- EBIT margin for DLM at -0.3%, down 280 bps YoY (EBITDA margin for DLM at 1.9%, down 260bpsYoY)
Business Highlights
- Strategic Investment in Cylus (a rail cybersecurity company) : The investment strengthens our focus on digitization and cybersecuritysolutionsfortherailindustry
- Announced partnership with Onestrand Inc.: This partnership will allow Cyient to provide interactive technical publication solutions using Onestrand’sS1000Dsoftware
Message from the Management
Commenting on the results, Mr. Krishna Bodanapu, Managing Director and Chief Executive Officer, said,“Our Q1 FY 20 results were disappointing, we recorded a revenue of $156.6 Mn lower by 5.2% QoQ and 2.6% YoY. Our services business was lower by 5.7% QoQ predominantly driven by Communications, Aerospace, Energy and Utilities and Portfolio business units. However, our top 20 client’s revenue grew by 270 bps QoQ. The DLM business grew by 2.2% QoQ. Our EBIT% at group level witnessed a degrowth of 356bps QoQ due to lower business volume, incremental spend on investments and wage hike impact. This quarter saw us make investments in building our offerings through strategic investment in Cylus a rail cybersecurity company. This investment will allow us to strengthen our focus on digitization and cybersecurity solutions for the rail industry. We will continue to invest in strategic are as through the area to strengthen our offerings.
Our outlook for the year remains positive and we are confident on double digit EBIT growth backed by revenue growth and cost optimization initiatives.”
Commenting on the results, Mr. Ajay Aggarwal, President & CFO, said, “While the company has challenges in the short-term, focus and investments on the long-term initiatives continue.
The introduction of our robust cost optimisation and profit improvement program has helped to clearly identify and begin implementation of potential cost reduction levers. The program is on track and a plan is in place for redesigning the company and building efficiency in systems and processes for sustainable outcomes. With operational efficiency being realised in phases in the coming quarters, the results from the initiative would strengthen our position not only for the current year but also for the coming years.
Cyient continues to invest in IT and technology solutions, with a strong focus on return on investments. We successfully implemented SAP S/4 Hana across the organisation as well as its seamless integration with other systems. Cyient has invested significantly in the NBA (New Business Accelerator) Program this quarter. While this do have a short-term impact on performance, the program is garnering good traction and we are confident that it will materially add to the company’s EPS in the near future. We will also continue our focus on organic and inorganic investments in the industry.
The Free Cash Flow stood at INR 186 Mn impacted mainly due to one-offs in DSO and is likely to be on track for H2 with DSO.
Cyient would continue to focus on growth, improvement in operating margin and cash generation, thereby delivering on the promise of maximising value for the shareholders. “
Business performance and outlook
Aerospace&Defense
Aerospace & Defense business unit had a de-growth of 0.1% QoQ and growth of 1.6% YoY driven byslowdowninbusinessacrosstwokeyclients.Weexpecttheslowdowntobeshorttermandthebusinessto normalize towards the end of Q2. Our digital solutions offerings are gaining momentum and we see increased interest among several of our clients. Our Outlook for Q2 remains positive, we expect a single digitgrowththroughthequarterdrivenbygrowthinkeyclientsandmanufacturingbusiness.
Communications
The Communications BU witnessed a de-growth of 10.3% QoQ and 17.0% YoY driven by decreased work volume across two key clients. We expect the momentum in t to return through the year. The cost optimizationmeasurestakenhelpedusdeliveragoodmargingrowththroughthequarter. We expect single digit growth in Q2 driven by growth in Europe and North America as we continue to supportlargecarriersinfibrenetworkrollout.
Rail
TheTransportationBUhadade-growthof1.6%QoQandgrowthof2.8%YoYprimarilydrivenbygrowthin rolling stock segment and new wins with key clients. We expect the signaling segment growth to remain subduedowingtoprogramcyclicalityinkeygeographies.TheBU continuestomakesignificantprogressin identifying opportunities and launching new solution offerings in areas such as Augmented Reality, Smart AssetMaintenance&CabAlarmNotification.Weexpectasingledigitgrowththroughthenextquarter.
E&U
Energy and Utilities BU is a newly formed business unit that brings together the synergy across both the segments.Weexpecttoseegrowththroughcombinesynergyaswegothroughtheyear.TheBUwitnessed a degrowth of 5.7% QoQ and 7.3% YoY driven by slowdown in key accounts. The BU expects a strong growththroughthesecondhalfoftheyearbackedbygrowthinminingandutilitiessegment.
MTH
The Medical Technology and Healthcare (MT&H) business unit (BU) delivered a growth of 0.4% QoQ and 23% YoY driven by strong growth across both existing and new accounts. The BU is witnessing continued growth across all segments and is expected to deliver a double-digit growth through Q2 backed by strong orderpipelineinservicesandsolutionsandgrowthinkeyaccounts.
Semiconductor
The Semiconductor BU witnessed a de-growth of 7.8% QoQ and 2.2% YoY primarily driven by low work volumefromkeyclients.Thedownturnintheindustryisresultinginconsolidationandprojectpushout’sfor mostclients.However,ourpipelinefornewopportunitiesremainsstrongandweexpectamoderategrowth throughourkeyaccounts.Weexpectamidsingledigitgrowththroughthenextquarter.
Operational Highlights
CSR Activities
- Continue to support 25 Government Schools – providing education to 15,800+ underprivilegedchildren
- Continue to support 67 Cyient Digital Centers (CDCs) in around Hyderabad to more than 20,000+ children and 14,000+ communitymembers
- Completed training to a pilot batch of 300 communityunemployedwomenontailoring, bakery and beauty courses through the Cyient Urban Micro Sill Center(CUMSC) for urbanpoor
- Cyient trained and certified 320 unemployed peopleundertheCyientIT/ITESSkillCentre
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