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 Second quarter (Q2) of FY 2020 ending September 30, 2019.
Financial Highlights
- Consolidated revenue at ₹11,589Mn; Growth of 6.4% QoQ (₹ terms) and de-growth of 2.4% YoY(₹ terms); $ 164.2Mn; Growth of 4.9% QoQ ($ terms)and de-growth of 2.8% YoY($ terms)
- Profit After Tax at ₹985Mn for the quarter; growth of 8.8% QoQ and de-growth of 22.5%YoY
- Services revenue at $140.4 Mn; growth of 1.8% QoQ (2.6% in CC) and de-growth of 3.8%YoY
- DLMrevenueat $23.8Mn;growthof27.4% QoQ,3.9%YoY
- Normalised EBIT* excluding one-offs andlong-terminvestmentsat₹1,420Mn
- EBITmarginexcludingone-offsandlong-terminvestmentsat12.3%,up105bpsQoQ
- EBIT margin for services excluding one-offs and long-term investments at 14.3%, up 158 bpsQoQ
*For
details refer slide number 12 of Investor Presentation FY 2020
Business Highlights
- Signed a Memorandum of Understanding (MoU) with UK-based defense technology firm, QinetiQ’s Target Systems (QTS), to offer avionics products for its unmanned target systems. Cyient will provide advanced manufacturing and electronics engineering solutionsforQTS’rangeofunmannedair,landandsea targetsystemsfromitsfacilitiesinIndia
- ExtendedtheCoEsetupforJohnDeereinHyderabad andPune
Message from the Management
Commenting on the results, Mr. Krishna Bodanapu, Managing Director and Chief Executive Officer, said,“Our Q2 FY 20 results were in line with our commentary, we recorded a revenue of $164.2 Mn, a growth of 4.9% QoQ or 5.7% in CC while a decline of 2.8% YoY or 1.2% in CC. In constant currency, our revenue for the quarter would have been $165.4Mn which is the quarterly average of last year’s revenue. Our services business grew by 1.8% QoQ predominantly driven by growth in Energy and Utilities and Portfolio business units and offset by decline in Aerospace & Defense and Semiconductor, IoT and Analytics (SIA) business units.
Our Design led Manufacturing (DLM) BU grew 27.4%QoQ driven by growth in key clients. Our EBIT at 9.6 was 35bps higher QoQ driven by lower SGA spend, operational efficiency improvements, increase in offshoring and better revenue mix. Excluding the one off spends, the EBIT would have been 105 bps higher QoQ and our services EBIT margin would have been higher by 158 bps QoQ. This quarter we also witnessed an increased traction in our solutions business with key wins across solutions such as Additive Manufacturing, Intelligent Data Management System (iDMS), and Internet of Things (IoT) to name a few. This instills confidence in our S3 strategy and execution and as a company we will continue to invest in key strategic areas in line with our strategy.”
Commenting on the results, Mr. Ajay Aggarwal, President & CFO, said, “We continue to make steady progress despite the near-term headwinds. The quarter performance was in line with our expectations with 4.9% QoQ growth in dollar revenue and 10.5% QoQ growth in EBIT. Excluding the one offs (non-recurring costs) and long-term investments our EBIT margins stood at 12.3% and the free cash flow conversion stood at 51%. DSO is lower by 9 days QoQ and stood at 95 days.
Our cost optimization initiatives are bearing fruit and we expect our margins to further strengthen in FY21 where the full benefits of improved operational efficiency will be visible. We also declared an interim dividend of ₹6.0/share. We are confident of delivering a steady growth in our services business for the rest of the year. We remain strongly focused on growth, improvement in operating efficiencies and cash generation and thus maximizing the value for our shareholders.
Business performance and outlook
Aerospace & Defense
Aerospace & Defense business unit had a 7.8% growth QoQ and 2.1% YoY driven primarily by Design led Manufacturing(DLM).Services segment slightly de-grewduetoneartermindustryuncertainties,theseare expectedtoimprovefromnextyearonwards. Thoughwe faceseasonalitychallenges in Q3 ourforecastfor thenextquarterremainsflatdue toramp-up in key clients and growth in the DLM segment. We expect a single digit growth through the year. Our Services business is expected to remain flat while DLM business is expected to witness a double-digit growththroughtheyear.
Communications
Communications BU witnessed a growth of 2.6% QoQ and -15.7% YoY driven by growth in key accounts, momentum across geographies and new project wins. The BU witnessed growth momentum after several quarters, driven by mitigation actions taken to offset the cyclicality faced in major programs and diversify client portfolio. We expect the growth momentum to continue through the year, driven by growth in focus segments, healthy pipeline and momentum in strategy execution.
Rail
Transportation BU witnessed a growth of 2.9% QoQ and 6.3% YoY driven by growth in rolling stock segment, growth in key clients and new project wins. Growth in signaling segment is expected to remain subdued due to program cyclicality in key geographies. We expect the growth momentum to continue through the next quarter, driven by growth in rolling stock segment. Our outlook for FY 20 continues to remainstrongbackedbygrowthintheindustry,healthypipelineandstronglong-termclientengagements.
E&U
The Energy and Utilities BU witnessed a strong growth of 2.1% QoQ and 25.6% YoY driven by growth in the services business. The DLM business witnessed a decline due to reduced demand from key clients. We expect the growth momentum to continue through the year, with double digit growth expected driven by the positive momentum in the services business and new client wins in the utilities segment.
MTH
MedicalTechnologyandHealthcareBUwitnessedagrowthof17.7%QoQand16.6%YoYdrivenbygrowth acrossservicessegmentledbykeyclients.DLMbusinessalsowitnessedadouble-digitgrowthdrivenbykey client growth. The outlook for the year continues to be strong with double digit growth expected through theyear,drivenbystronggrowthinservicesand as wellasDLM business segments.
Semiconductor
Semiconductor,IoTandAnalyticsBU witnessed a decline of 9.6%QoQand18.9%YoY driven by downturn in the semiconductor industry, leading to key projects getting pushed which in-turn impacted growth. Despite the industry slowdown our outlook for the year continues to remain positive with single-digit growth expected through the year,driven by growth in the turnkey mixed-signal analog business
Portfolio
The Portfolio BU witnessed a growth of 6.8% QoQ and -24.7% YoY driven by growth in the industrial and geospatial segments. The BU witnessed growth across key clients through the quarter while the DLM business segment witnessed a decline.We expectd decline in growth through the year impacted by sluggish industry outlook and decline in key clients.
Operational Highlights
CSR Activities
- Continue to support 25 Government Schools – providing education to 18,500+ underprivileged children
- Continuetosupport67CyientDigitalCentres(CDCs) in and around Hyderabad which cater to more than 25,000childrenand15,000communitymembers
- Completedtrainingtoapilotbatchof 600community unemployed women on tailoring, bakery and beauty courses through the Cyient Urban Micro Skill Center (CUMSC)forurbanpoor
- Cyient trained and certified 363 unemployed people undertheCyientIT/ITESSkillCentre
- Distributed more than 3,000 saplings among more than 2,500 associates in Hyderabad as part of the “AdoptaPlant”initiative
- Distributed and planted more than 7,000 saplings aroundCyientadoptedschoolsandthecommunityas a part of “Haritha Haram”, a mega plantation drive in thestateofTelangana
