WNS (Holdings) Limited (NYSE: WNS), a leading provider of global
business process outsourcing (BPO) services, today provided a
business update for the fiscal year ended March 31, 2010.
WNS's financial statements for the year ended March 31, 2010 are
subject to finalization and the conclusion of the external audit,
and more specifically, adjustments relating to the accounting
treatment for referral fees earned from garages, and revenues and
costs on completed but unbilled repairs, in its Auto Claims BPO
segment (the AutoClaims business).
As background, for automobile accident management services,
where WNS arranges for the repairs through a network of repair
centers, it invoices the client for the amount of the repair. When
it directs a vehicle to a specific repair center, it receives a
referral fee from that repair center. In the past, WNS had
recognized the referral fees from garages and the repair payments
from clients, net of the amount of referral fees that are passed
back to clients, as revenues, and had recognized the payments to
the repair centers as cost of revenues. WNS had also not recognized
as revenues the amount of completed but unbilled repairs due from
clients and similarly not recognized the corresponding costs of
these repairs as cost of revenues.
WNS, in consultation with its Audit Committee, has concluded
that it should not include the referral fees from garages within
revenues, and should instead subtract them from the costs of
revenues for the AutoClaims business. WNS has also concluded that
it should recognize the revenues and costs of completed but
unbilled repairs as revenues and costs of revenues, respectively.
WNS will accordingly restate the "revenue" and "cost of revenue"
lines of its audited financial statements for the years ended March
31, 2009 and 2008 (as well as selected financial information for
the years ended March 31, 2007 and 2006 and the quarterly
information for fiscal 2009 and 2010) to reflect these accounting
changes.
WNS is currently determining the impact of these accounting
changes where the reduction in revenues for the AutoClaims business
will be largely matched by the reduction in cost of revenues. WNS
currently expects the impact of these changes will be material with
respect to revenues of the AutoClaims business. However, the impact
of these changes on WNS's net income in its financial statements,
as well as adjusted net income is not expected to be material.
Adjusted net income refers to adjusted net income attributable to
WNS shareholders excluding amortization of intangible assets,
share-based compensation, related fringe benefit taxes and loss
attributable to non-controlling interest.
WNS has not amended its reports for prior periods affected by
these changes. WNS intends to include restated financial
information, including quarterly information, in its Annual Report
on Form 20-F for the year ended March 31, 2010.
WNS is assessing the effect of the restatement on its internal
control over financial reporting and its disclosure controls and
procedures and will not reach a final conclusion until completion
of the restatement process.
Fiscal Q4 2010
Revenue less repair payments grew in the fourth fiscal quarter
2010 over the corresponding quarter of the prior fiscal year and
was flat compared to the sequential previous quarter, largely as a
result of the impact of a stronger British Pound (GBP) compared
with the corresponding quarter in the prior fiscal year, and
increased transaction volumes from new clients. This growth was
offset by transaction volume declines in the travel and insurance
industries and the second year pricing terms for the Aviva Global
Services (AGS) contract. Revenue less repair payments grew modestly
on a constant currency basis compared with the fiscal third quarter
2010, resulting from increased transaction volumes from new
clients. Compared to the same quarter last year, revenue less
repair payments declined slightly on a constant currency basis
largely resulting from transaction volume declines in the travel
and insurance industries and the second year pricing terms for the
Aviva Global Services (AGS) contract.
Adjusted net income in the fiscal fourth quarter declined over
the same quarter last year. Adjusted net income was impacted
primarily by the stronger Indian Rupee (INR), transaction volume
declines in the travel and insurance industries, one-time severance
costs associated with changes in senior management, and lower
revenues resulting from the second year pricing terms for the AGS
contract. This decline was partially offset by tighter cost
management and improved scale benefits. Compared to the previous
sequential quarter in fiscal 2010, adjusted net income
increased.
"Despite the challenging operating environment, WNS finished the
2010 fiscal year on a positive note," said Keshav Murugesh, Group
Chief Executive Officer. "I joined WNS to continue to build upon an
already strong foundation. Although our travel and insurance
verticals have current volume challenges, the growth potential in
the BPO industry is tremendous, and WNS is well-positioned to take
advantage of it. We see expansion opportunities in terms of service
offerings, geographies and the industries which we serve. Our top
ten clients account for almost 60 percent of our revenues and we
have significant farming opportunities by replicating those
successes with the next tier of clients. Appropriate programs will
be driven at WNS across all opportunity areas to positively impact
both top line and profitability."
Fiscal Year 2010
Revenue less repair payments grew in the fiscal year 2010 over
the prior fiscal year. The growth in revenue less repair payments
was largely a result of increased revenues from new and existing
clients. This growth was offset by the decline in the average
GBP/USD exchange rate from 1.72 in fiscal 2009 to 1.60 in fiscal
2010. Revenue less repair payments also grew on a constant currency
basis compared with the previous fiscal year.
Adjusted net income increased over fiscal 2009. The primary
drivers of this increase were improved synergies from acquisitions,
tighter cost management, improved scale benefits and lower interest
expense during the second half of the year resulting from WNS's
debt payments. These increases were partially offset by the full
year impact from interest and foreign exchange losses, lower
revenues resulting from the second year pricing terms of the AGS
contract, one-time severance costs associated with changes in
senior management and lower transaction volumes in the travel and
insurance spaces.
"Our revenue less repair payments is in line with our guidance
and our adjusted net income, excluding a one-time charge of $1
million from the unwinding of interest rate swaps and $2.1 million
associated with recent management changes is in line with our
adjusted net income guidance as well," said Alok Misra, Group Chief
Financial Officer.
"In fiscal 2010, we also improved our adjusted net income and
demonstrated our ability to generate strong free cash flow,"
continued Misra.
WNS's headcount at the end of the fiscal fourth quarter was
21,958, compared with 21,392 in the prior quarter. WNS added 602
employees during fiscal 2010.
Neeraj Bhargava, who had stepped down as Group Chief Executive
Officer and a member of the Board of WNS to assume the role of a
Strategic Advisor on January 31, 2010, will cease to act as a
Strategic Advisor effective April 30, 2010.
Fiscal 2011 Guidance WNS is providing the following guidance for
the fiscal year ending March 31, 2011:
- Revenue less repair payments is expected to be between $365
million and $390 million. This assumes an
average USD to GBP exchange rate of 1.53 for the 2011 fiscal
year.
- Adjusted net income (ANI) (or net income attributable to WNS
shareholders excluding amortization of intangible assets,
share-based compensation, related fringe benefit taxes and loss
attributable to non-controlling interest) is expected to range
between $46 million and $49 million. This assumes an average INR to
USD exchange rate of 44.5 for the 2011 fiscal year.
"Given that we report in US Dollars, but earn almost 60 percent
of our net revenues in British Pounds, the guidance reflects the
decline of the GBP valuation as well as the continued pressure we
see in our travel and insurance businesses," continued Misra.
"While we should be able to offset some amount of the FX impact
through our hedging program, headwinds from wage inflation and the
costs associated with ramping up new business are reflected in our
ANI guidance."
Conference Call WNS will host a conference call on April 22,
2010 at 8:00 am (EDT) to provide a business update.
To participate in the call, please use the following details: +
1-866-543-6407; international dial-in +1-617-213-8898; participant
passcode 77406730. A replay will be available for one week
following the call at +1-888-286-8010; international dial-in
+1-617-801-6888; passcode 24918921, as well as on the WNS website,
www.wns.com, beginning two hours after the end of the call.
About WNS WNS (Holdings) Limited (NYSE: WNS) is a leading global
business process outsourcing company. Deep industry and business
process knowledge, a partnership approach, comprehensive service
offering and a proven track record enables WNS to deliver business
value to some of the leading companies in the world. WNS is
passionate about building a market-leading company valued by our
clients, employees, business partners, investors and communities.
For more information, visit www.wns.com.
About Non-GAAP Financial Measures For financial statement
reporting purposes, the company has two reportable segments: WNS
Global BPO and WNS Auto Claims BPO. In the auto claims segment,
which includes WNS Assistance and Chang Limited, WNS provides
claims-handling and accident-management services, in which it
arranges for automobile repairs through a network of third-party
repair centers. In its accident-management services, WNS acts as
the principal in dealings with the third-party repair centers and
clients.
In order to provide accident-management services, the Company
arranges for the repair through a network of repair centers. Repair
costs are invoiced to customers. Amounts invoiced to customers for
repair costs paid to the automobile repair centers are recognized
as revenue. The Company uses revenue less repair payments for
"fault" repairs as a primary measure to allocate resources and
measure segment performance. Revenue less repair payments is a
non-GAAP measure which is calculated as revenue less payments to
repair centers. For "non fault repairs," revenue including repair
payments is used as a primary measure. As the Company provides a
consolidated suite of accident management services including credit
hire and credit repair for its "Non fault" repairs business, the
Company believes that measurement of that line of business has to
be on a basis that includes repair payments in revenue.
The Company believes that the presentation of this non-GAAP
measure in the segmental information provides useful information
for investors regarding the segment's financial performance. The
presentation of this non-GAAP information is not meant to be
considered in isolation or as a substitute for the Company's
financial results prepared in accordance with US GAAP.
Safe Harbor Statement under the provisions of the United States
Private Securities Litigation Reform Act of 1995
These forward-looking statements are based on our current
expectations, assumptions, estimates and projections about our
Company and our industry. The forward-looking statements are
subject to various risks and uncertainties. Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as "anticipate," "believe,"
"estimate," "expect," "intend," "will," "project," "seek," "should"
and similar expressions. Those statements include, among other
things, the discussions of our business strategy, industry growth
potential, expansion opportunities and expectations concerning our
future financial performance, including our fiscal 2011 guidance
and future profitability; our restatement of our financial
statements and its impact; our ability to generate free cash; and
our future operations. We caution you that reliance on any
forward-looking statement involves risks and uncertainties, and
that although we believe that the assumptions on which our
forward-looking statements are based are reasonable, any of those
assumptions could prove to be inaccurate, and, as a result, the
forward-looking statements based on those assumptions could be
materially incorrect. These factors include but are not limited to
worldwide economic and business conditions; political or economic
instability in the jurisdictions where we have operations;
regulatory, legislative and judicial developments; our ability to
attract and retain clients technological innovation;
telecommunications or technology disruptions; future regulatory
actions and conditions in our operating areas; our dependence on a
limited number of clients in a limited number of industries; our
ability to expand our business or effectively manage growth; our
ability to hire and retain enough sufficiently trained employees to
support our operations; negative public reaction in the US or the
UK to offshore outsourcing; increasing competition in the BPO
industry; our ability to successfully grow our revenue, expand our
service offerings and market share and achieve accretive benefits
from our acquisition of Aviva Global Services Singapore Pte. Ltd.
(which we have renamed as WNS Customer Solutions (Singapore)
Private Limited following our acquisition), or Aviva Global, and
our master services agreement with Aviva Global Services
(Management Services) Private Limited; our ability to successfully
consummate strategic acquisitions; the timing and nature of the
final resolution of the accounting issues discussed in this press
release; the implications of those accounting issues for WNS's SEC
reporting (including the timing of that reporting), any adverse
developments in existing legal proceedings or the initiation of new
legal proceedings; and volatility of WNS's stock price. These and
other factors are more fully discussed in our annual report on Form
20-F for the fiscal year ended March 31, 2009 filed with the U.S.
Securities and Exchange Commission which is available at
www.sec.gov. In light of these and other uncertainties, you should
not conclude that we will necessarily achieve any plans, objectives
or projected financial results referred to in any of the
forward-looking statements. Except as required by law, we do not
undertake to release revisions of any of these forward-looking
statements to reflect future events or circumstances.
References to "$" and "USD" refer to the United States dollars,
the legal currency of the United States; references to "GBP" refer
to the British Pound, the legal currency of Britain; and references
to "INR" refer to Indian Rupees, the legal currency of India.
CONTACT: Investors: Alan Katz VP -- Investor Relations WNS
(Holdings) Limited +1 212 599-6960 ext. 241 Email Contact Media:
Deborah Kops Chief Marketing Officer WNS (Holdings) Limited + 1 703
321-6526 Email Contact
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