Cyient reports PAT at INR 814 Mn for the First Quarter FY 21; growth of 8.0% QoQ

HYDERABAD, India, July 16, 2020 /PRNewswire/ -- Cyient (Estd: 1991, NSE: CYIENT), a global engineering and technology solutions company, today reported its consolidated financial results for the First quarter (Q1) of FY 2021 ending June 30, 2020.

Financial Highlights

- Consolidated revenue at $130.6 Mn (INR 9,917 Mn); degrowth of 12.5% QoQ (in $ terms) and de-growth of 16.6% YoY (in $ terms) and degrowth of 7.6% QoQ (in INR terms) and de-growth of 8.9% YoY (in INR terms)

- Services revenue at $112.2 Mn; de-growth of 15.2% QoQ (-14.3% in CC) and de-growth of 18.6% YoY

- DLM revenue at $18.4 Mn; growth of 8.5% QoQ, and de-growth of 1.4% YoY

- Free cash flow to EBITDA conversion at 138.1%

- EBIT margin for services at 6.7%, down 283 bps QoQ

- EBIT margin for DLM at -4.6%, down 410 bps QoQ

- Profit After Tax at INR 814 Mn for the quarter; growth of 8.0% QoQ

Business Highlights

    --  Update on deal wins - Hitachi Rail:
        --  Signed an agreement with Hitachi Rail to deliver project engineering
            services and accelerate the evolution of its signalling technology
        --  Cyient will develop and operate a Central Delivery Centre for
            Hitachi Rail in India, and a Regional Centre in the US
        --  Will be responsible for delivering engineering services for
            Hitachi's global signalling projects that use proprietary
            interlocking platforms
    --  Update on collaboration with Microsoft
        --  Cyient loT Edge Gateway 5400, the flagship product in the company's
            family of loT gateways, is Microsoft Azure Certified for loT
        --  Cyient's loT Edge Gateway 5400 provides diverse connectivity and
            communication protocol options, advanced data processing, and edge
            analytics capabilities for remote asset monitoring and predictive
            maintenance solutions
    --  Diversifying our customer base
        --  We have added 25 new customers in Q1 FY21
    --  Commissioning of the Hyderabad factory
        --  The new DLM factory in Hyderabad has been commissioned. This is one
            of the most advanced electronics manufacturing facilities in India,
            underpinned by the latest technologies in factory automation,
            Industry 4.0 and supply chain management
        --  Strategic advantage to be located in a manufacturing hub in terms of
            proximity to probable customers, managing supply chains and
            co-ordination with the design teams

Message from the Management
Commenting on the results, Mr. Krishna Bodanapu, Managing Director and Chief Executive Officer, said "Q1 FY21 results were better than our expectations, where we recorded a revenue of $130.6 Mn which was lower by 11.6% QoQ and 15.1% YoY in constant currency. Services business was lower by 14.3 % QoQ in constant currency. The DLM business grew by 8.5% QoQ. We expect traction from top clients to return post Q2. The EBIT margin is lower by 328bps QoQ mainly due to lower business volume which was somewhat offset by lower SG&A spend. We generated Free Cash Flow of INR 2,163 Mn which was higher by 101% QoQ.

This quarter we had some significant wins in both new business and existing clients. This will help us strengthen our revenue outlook in the coming quarters. This quarter we also made significant investments in strengthening our business through strategic partnerships and alliances. We partnered with Microsoft for industry 4.0 offerings. The partnership will allow us take IoT solutions faster to market with hardware and software that has been pre-tested and verified to work with Microsoft Azure IoT services. We also signed a partnership with Fore Optics for joint Go to Market on taking asset tracking offering to the market. As part of this partnership Fore Optics brings in its IP in supply chain analytics and Cyient its IP in asset tracking IoT. We further strengthened the management team with the addition of Felice Gray-Kemp as the Global General Counsel and Meenu Bagla as the Chief Marketing Officer. The new DLM factory in Hyderabad has been commissioned and I am happy to say that this is one of the most advanced electronics manufacturing facilities in India, underpinned by the latest technologies in factory automation, Industry 4.0 and supply chain management.

Our Outlook for Q2 is positive and we expect growth to return in all industries except Aerospace, which will de-grow further in Q2. For the year, we expect a de-growth in revenue in double digits. We will also reiterate that H2 margin will be back to the steady state margin of H1 of last year. This will continue to be underpinned by strong free cash flow generation and prudent Capex spend."

Commenting on the results, Mr. Ajay Aggarwal, President & CFO, said, "The revenue for Q1FY21 stood at $130.6 Mn (INR 9,917 Mn) with EBIT of INR 511 Mn and PAT of INR 814 Mn. Our rigor on cash collections, close engagement with customers and initiatives on cash conservation has yielded results with FCF generation of INR 2,163 Mn and FCF to EBITDA conversion of 138.1%.

With significant efforts spent on efficiencies and cost optimisation in the last financial year, our focus on cost reduction and profit improvement continued in Q1 and well set to show results in the coming quarters. We are positive on realising benefits of our sustained initiatives on collections, working capital cycles, payables and discretionary cost control in FY21.

In the current turbulent times, it is very difficult to predict future with a reasonable certainty. We are cognizant of the dynamic situation we are in, and are working with extreme agility in making decisions and taking corrective actions to manage business scenarios with special focus on cash and costs.

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 & Defence business unit witnessed a decline of 15.6% QoQ and 21.5% YoY. The services business from commercial aviation clients witnessed significant challenges across geographies. The defence business remained resilient and we expect the traction to continue through the year. The manufacturing business grew driven by new wins and stable defence accounts.

We expect to witness decline in Q2 driven by poor market demand for passenger travel. We are actively engaged with key clients to strengthen our relationship and retain our market share. We expect manufacturing business to witness strong growth through Q2. The digital offerings are seeing momentum in this vertical. We expect the demand to be driven by digital, defence and DLM in the near term.

Communications business unit witnessed a decline of 10.8% QoQ and growth of 0.6% YoY. The services business witnessed increased demand in key clients driven by demand for increased network bandwidth both from consumer & enterprise segments. Also, 5G rollouts across various geographies are gaining traction. However, closure on major programs, field access and new client acquisition remained a challenge.

We expect strong growth in Q2 driven by growth in key clients. 5G rollouts, wireless and fiber rollout, digital technologies will continue to drive growth through next few quarters.

Transportation business unit witnessed a decline of 10.9% QoQ and 23.9% YoY, primarily driven by change in revenue complexion and lower momentum in one of our key clients.

Our outlook for Q2 continues to remain positive driven by growth in key client accounts and new wins in mobility business. We expect momentum in signaling business to return through the quarter.

Energy and Utilities business unit witnessed a decline of 19.4% QoQ and 30.0% YoY driven by temporary stoppage in field work for the Utilities business and decline in demand for the manufacturing business.

We expect strong growth in Q2 driven by growth across services. We expect traction in Energy segment to return post Q2

Medtech and Healthcare
Medical technology and Healthcare business unit witnessed a growth of 18.2% QoQ and 32.7% YoY driven by growth in key client in the services business and manufacturing business.

Our outlook for Q2 stands positive driven by growth in key client in the manufacturing business. We expect growth in Covid related equipment's like IVD and hospital equipment's to drive growth through the quarter.

SIA (Semiconductor, Semiconductor, IoT and Analytics)
Semiconductor, IoT and Analytics business unit witnessed a growth of 15.6% QoQ and decline of 18.7% YoY. The growth was driven by growth in key clients in semiconductor as well as embedded automotive services. We also completed ASIC IC shipments for a high precision GPS chip leveraging our new test infrastructure in Europe. Asides this, our facilities in Leuven (Belgium) and Duisburg (Germany) will be fully equipped to perform test development for high volume production for complex analog mixed signal ASICs through the year.

We expect growth through Q2 driven by ramp up in new turnkey ASIC projects and IC shipments.

DLM (Design Led manufacturing)
Design Led manufacturing business unit witnessed a growth of 8.4% QoQ and decline of 1.4% YoY driven by growth across Aerospace and Medical segments. Our strong focus on inventory reduction through the quarter resulted in increased cash flow for the business.

We expect strong growth through Q2 driven by key clients in Aerospace & Defence and Medical segment. We will continue to focus on better inventory management and operational excellence to improve our cash position.

About Cyient
Cyient (Estd: 1991, NSE: CYIENT) is a global engineering and technology solutions company. As a Design, Build, and Maintain partner for leading organizations worldwide, Cyient takes solution ownership across the value chain to help customers focus on their core, innovate, and stay ahead of the curve. The company leverages digital technologies, advanced analytics capabilities, domain knowledge, and technical expertise to solve complex business problems.

Cyient partners with customers 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, healthcare, telecommunications, rail transportation, semiconductor, geospatial, industrial, and energy.

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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.

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