BANGALORE, India, Oct. 24, 2017 /PRNewswire/ --
1. Highlights of financial results for the quarter and half year ended September 30, 2017
Q2 revenues grew sequentially by 2.9% in USD terms; 2.2% in constant currency terms
Q2 revenues grew 5.4% year-on-year in USD terms
Q2 operating margin at 24.2%, as compared to 24.1% in Q1 18
Q2 net margins improved to 21.2%, as compared to 20.4% in Q1 18
Q2 Basic EPS was $ 0.25, sequential growth of 7.0% and year-on-year growth of 7.3%
H1 year-on-year revenue growth at 5.7% in reported terms; 5.5% in constant currency terms
Liquid assets including cash and cash equivalents and investments were at $6,340 million as on September 30, 2017
Utilization excluding trainees at all-time high of 84.7%
Declared interim dividend of `13 per share, compared to an interim dividend of `11 per share in FY 17
FY 18 revenue guidance at 5.5%-6.5% in constant currency. Operating margin guidance unchanged at 23%-25%
Financial Highlights
Consolidated results under International Financial Reporting Standards (IFRS) for the quarter ended September 30, 2017
Consolidated results under International Financial Reporting Standards (IFRS) for the half year ended September 30, 2017
"We continue to focus on executing on the theme of software enabled services and on accelerating growth of our new services portfolio." said U B Pravin Rao, Interim CEO and Managing Director. "During the quarter, we responded quickly to the management and Board changes through proactive communication with all stakeholders minimizing any negative impact to the business and allowing us to deliver growth across all our large industry units."
"Our focus on improving operational efficiencies enabled us to deliver stable margins in the quarter and at the same time provide compensation increases and higher variable payouts to our employees." said M. D. Ranganath, CFO. "We have taken several steps during the quarter towards our capital allocation policy covering `13,000 crore share buyback, coupled with interim dividend of `13 per share for enhancing shareholder returns."
2. Outlook for FY 2018
The Company's outlook (consolidated) for the fiscal year ending March 31, 2018, under IFRS is as follows:
*FY 17 constant currency rates - AUD/USD - 0.75; Euro/USD - 1.09; GBP/USD - 1.30
**Currency rates as of September 30, 2017 - AUD/USD - 0.78; Euro/USD - 1.18; GBP/USD - 1.34
3. Update on share buyback
The Board, at its meeting on August 19, 2017, approved a proposal for the Company to buyback its fully paid-up equity shares of face value of `5 each from the eligible equity shareholders of the Company for an amount not exceeding `13,000 crore (approximately $2 billion). The Buyback offer comprises a purchase of upto 113,043,478 Equity Shares aggregating upto 4.92% of the paid-up equity share capital of the Company at a price of `1,150 per Equity share. The buyback is proposed to be made from all eligible equity shareholders (including those who become equity shareholders as on the Record date by cancelling American Depository Shares and withdrawing underlying Equity shares) of the Company as on the Record Date (i.e. November 1, 2017) on a proportionate basis through the "Tender offer" route. The shareholders approved the said proposal of Buyback of Equity Shares through the postal ballot concluded on October 7, 2017. The Company has published a Public Announcement on October 10, 2017 for the buyback of its shares through a tender offer and has submitted the Draft Letter of Offer to regulatory authorities for their comments.
4. Strategy Refresh
Over the past eight weeks, members of the management team and the Committee of Directors undertook a comprehensive strategy refresh exercise. With the objective of outlining a sharpened strategic direction, they reviewed all programs across the organization, accelerated execution plans and prioritized key areas of investments across the services and software portfolios.
An important outcome of the exercise is a reassertion that our strategic direction will continue to be driven with a portfolio of market relevant design, consulting and technology services, enabled by software. The successful execution of this strategy positions us as the partner our clients can count on to accelerate their digital transformation journey.
5. CEO search and shareholder consultation
The process of identifying the next CEO and shareholder consultation outreach have been initiated and are progressing well.
6. Review of Investigations
As previously indicated, the Chairman has conducted a review of all the external investigations into certain anonymous complaints the Company had previously received. The review covered a range of matters described below, including the acquisition of Panaya which was completed by the Company in February 2015 and the severance payments to the former CFO.
After careful consideration led by our Chairman, the Board reaffirms the previous findings of external investigations that there is no merit to the allegations of wrongdoing.
Mr. Nilekani, Chairman of the Board, said. "I believe that all stakeholders acted out of a strong passion for Infosys, wanting what they believed to be the best for the Company and to see it succeed. In light of my review of these matters, I am fully persuaded, as is the entire Board, that the conclusions of the independent investigations are correct. This Board and I are committed to the highest standards of professionalism and will deal promptly and decisively with any governance issues should they ever come up in the future."
In certain respects, as the Board has previously noted, the severance payments to the Company's former CFO could have been better handled, and the Company has identified opportunities for improvements in processes and practices, which have been implemented. While the disclosures in this regard were timely, based on the feedback received, the Company has since December 2016 adopted a practice of disclosing the severance payment to key managerial personnel ("KMP") at the time of their departure, making the disclosures sooner than required. Additionally, the Company has now globally benchmarked its severance pay and revised its senior management employment contracts.
As previously noted, these external investigations were comprehensive and robust. The investigation conducted by Gibson, Dunn & Crutcher and Control Risks, neither of whom had any prior dealings with Infosys, also included a review of the previous two investigations conducted by Cyril Amarchand Mangaldas ("CAM"). They concluded that CAM's two previous investigations were thorough and their findings and conclusions were reasonable and credible based on the evidence. Gibson Dunn's investigation was led by Charles Stevens and Benjamin Wagner, both Presidentially-appointed former senior prosecutors in the U.S. Department of Justice, each with several decades of experience in investigating and prosecuting fraud and business crimes. The investigation involved interviews of over 50 witnesses globally, a review of company policies, Board minutes, public filings and internal documents, the collection, search and review by Gibson Dunn attorneys of many thousands of internal emails and attachments, the use of forensic accounting experts to analyze technical and financial information, the review of media accounts and public records in multiple countries, the review of the previous investigation reports issued by CAM and supporting documentation, and other investigative measures. No limitations or restrictions were placed on the investigating team from accessing information, and the Company and the relevant directors and employees cooperated fully.
Among other things, the review reaffirmed the conclusion of the independent investigation that there was no merit to the allegations of wrongdoing with respect to the acquisition of Panaya. The review also confirmed that the Company made appropriate and timely disclosures relating to severance payments to the former CFO at the end of the quarter of his resignation, and subsequently in the Company's 20-F and Annual Report.
Unlike the practice followed in the past, the Company published the summary findings of these investigations, given the attention these matters had received. A copy of Gibson, Dunn & Crutcher's memorandum to the Audit Committee with the summary findings of the investigation is attached as an Annexure.
After careful re-consideration, the Company has concluded that publishing additional details of the investigation would inhibit the Company's ability to conduct effective investigations into any matter in the future. Confidentiality is critical to ensuring the candor and cooperation of whistleblowers and other participants in any investigative process. The precedent of releasing the full investigation reports could impair the cooperation of participants should the need for an investigation arise in the future.
Mr. Nilekani added, "As the Company moves forward to a more stable environment I am grateful to all the well-wishers of the Company, including Mr. Narayana Murthy, for their deeply held passion for Infosys. The Board will continue to represent the interest of all the shareholders. I would also like to acknowledge the leadership role Mr. Narayana Murthy has played in building this iconic institution and in corporate governance matters. Going forward, it is our endeavour to build a trusting relationship with Mr. Murthy."
The Board notes that the questions and scrutiny in relation to these matters were fuelled in part by the strong feelings that various stakeholders have for the Company and its success. Questions were raised by stakeholders who have a deeply held passion for Infosys. The Board responded with equal passion and good faith.
The Board also firmly believes that it is time to put these issues to rest. It seeks the support of all stakeholders to look towards the future, and to collectively focus on strategy, operations, and growth.
7. Business highlights
This quarter we acquired Brilliant Basics, a London-based product design and customer experience (CX) innovator known for its world-class Design Thinking-led approach and experience in executing global programs. This acquisition will enhance our digital capabilities to drive transformation solutions for clients.
We further enhanced our global footprint by opening a new office in the Netherlands. We also made good progress on our commitment to hire 10,000 American workers over the next two years, and announced that we will open our North Carolina Technology and Innovation Hub in Raleigh.
Our investments in new services, especially Cloud Ecosystem, Big Data and Analytics, API and Micro services, Data and Mainframe Modernization, Cyber Security and IoT Engineering Services are showing promising results. Over the past quarter, these offerings have seen increased traction with clients, and currently contribute 9.4% of our revenues in Q2 18.
In addition, the nature of our client engagements continues to evolve, as we explore new models and go-to-market approaches.
Our new software business continues to grow and contributed 1.6% to our revenue in Q2 18. We are leveraging offerings across Finacle, NIA, Edge, Panaya and Skava to streamline processes, drive business differentiation and elevate user experience for our clients.
Infosys is very proud to be associated with the prestigious GST project which is the largest tax project of its kind in the world. The system has already demonstrated success across several parameters - till date 37 crore invoices have been uploaded on the system while the system is designed to handle 300 to 320 crore invoices every month. 70 lakh tax payers have successfully migrated to the new system and the country has recorded 25 lakh new registered taxpayers. Central and state level tax regimes have been integrated with all 29 States and 7 Union Territories successfully migrating onto this system. In addition, the system is able to manage 1 Lakh active users and saw peak loads during the last two days of filing, with 50% of the filings done in that timeframe and 70% of the collection achieved with just 25% of server utilization, demonstrating the system's ability to manage scale.
Any large project of this scale, especially a transformative one like this has to deal with changes in both policy and stakeholder usability. Some of these modifications have resulted in rapid changes to the system particularly due to its integration with heterogeneous IT ecosystems including GST Suvidha Providers, Aadhar, Central Board of Excise and Customs and Model 1 states. Given the complex nature of the project and rapid change management, there have been several stakeholder concerns that have also been raised. Some of our finest engineers are supporting the GSTN team as they work towards resolving these and serving all stakeholders.
AWARDS & RECOGNITION
About Infosys Ltd.
Infosys is a global leader in technology services and consulting. We enable clients in 45 countries to create and execute strategies for their digital transformation. From engineering to application development, knowledge management and business process management, we help our clients find the right problems to solve, and to solve these effectively. Our team of 198,000+ innovators, across the globe, is differentiated by the imagination, knowledge and experience, across industries and technologies that we bring to every project we undertake.
Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise thrive in the digital age.
Safe Harbor
Certain statements mentioned in this release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2017. These filings are available at www.sec.gov Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company unless it is required by law.
Infosys Limited and subsidiaries
Unaudited Condensed Consolidated Balance Sheets as of
(Dollars in millions except equity share data)
| September 30, |
March 31, 2017 |
|
| ASSETS |
||
| Current assets |
||
| Cash and cash equivalents |
3,575 |
3,489 |
| Current investments |
1,857 |
1,538 |
| Trade receivables |
2,056 |
1,900 |
| Unbilled revenue |
633 |
562 |
| Prepayments and other current assets |
797 |
749 |
| Derivative financial instruments |
1 |
44 |
| Total current assets |
8,919 |
8,282 |
| Non-current assets |
||
| Property, plant and equipment |
1,814 |
1,807 |
| Goodwill |
580 |
563 |
| Intangible assets |
107 |
120 |
| Investment in associate |
- |
11 |
| Non-current investments |
945 |
984 |
| Deferred income tax assets |
111 |
83 |
| Income tax assets |
956 |
881 |
| Other non-current assets |
119 |
123 |
| Total non-current assets |
4,632 |
4,572 |
| Total assets |
13,551 |
12,854 |
| LIABILITIES AND EQUITY |
||
| Current liabilities |
||
| Trade payables |
82 |
57 |
| Derivative financial instruments |
10 |
- |
| Current income tax liabilities |
700 |
599 |
| Client deposits |
2 |
5 |
| Unearned revenue |
306 |
274 |
| Employee benefit obligations |
228 |
209 |
| Provisions |
64 |
63 |
| Other current liabilities |
1,025 |
954 |
| Total current liabilities |
2,417 |
2,161 |
| Non-current liabilities |
||
| Deferred income tax liabilities |
29 |
32 |
| Other non-current liabilities |
21 |
24 |
| Total liabilities |
2,467 |
2,217 |
| Equity |
||
| Share capital- `5 ($0.16) par value 2,400,000,000 |
199 |
199 |
| Share premium |
592 |
587 |
| Retained earnings |
12,571 |
12,190 |
| Cash flow hedge reserve |
(1) |
6 |
| Other reserves |
108 |
- |
| Other components of equity |
(2,385) |
(2,345) |
| Total equity attributable to equity holders of the |
11,084 |
10,637 |
| Non-controlling interests |
- |
- |
| Total equity |
11,084 |
10,637 |
| Total liabilities and equity |
13,551 |
12,854 |
Infosys Limited and subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Income
(Dollars in millions except share and per equity share data)
| Three months |
Three months |
Six months |
Six months |
|
|
|
2,728 |
2,587 |
5,379 |
5,088 |
| Cost of sales |
1,743 |
1,638 |
3,435 |
3,231 |
| Gross profit |
985 |
949 |
1,944 |
1,857 |
| Operating expenses: |
||||
| Selling and marketing expenses |
132 |
134 |
269 |
271 |
| Administrative expenses |
194 |
171 |
377 |
340 |
| Total operating expenses |
326 |
305 |
646 |
611 |
| Operating profit |
659 |
644 |
1,298 |
1,246 |
| Other income, net |
137 |
114 |
263 |
226 |
| Share in associate's profit / |
||||
| (loss) |
- |
(1) |
- |
(1) |
| Write-down of investment in |
- |
- |
(11) |
- |
| Profit before income taxes |
796 |
757 |
1,550 |
1,471 |
| Income tax expense |
218 |
218 |
431 |
421 |
| Net profit |
578 |
539 |
1,119 |
1,050 |
| Other comprehensive income |
||||
| Items that will not be |
||||
| Re-measurements of the net defined |
1 |
(6) |
1 |
(9) |
| Cumulative impact on reversal of |
- |
- |
- |
(5) |
| Equity instruments through other |
- |
- |
- |
- |
| Items that will be reclassified |
||||
| Fair value changes on investments, |
2 |
- |
6 |
- |
| Fair value changes on derivatives |
3 |
- |
(7) |
- |
| Foreign currency translation |
(107) |
119 |
(47) |
(54) |
| Total other comprehensive income, |
(101) |
113 |
(47) |
(68) |
| Total comprehensive income |
477 |
652 |
1,072 |
982 |
| Profit attributable to: |
||||
| Owners of the Company |
578 |
539 |
1,119 |
1,050 |
| Non-controlling interests |
- |
- |
- |
- |
| 578 |
539 |
1,119 |
1,050 |
|
| Total comprehensive income |
||||
| Owners of the Company |
477 |
652 |
1,072 |
982 |
| Non-controlling interests |
- |
- |
- |
- |
| 477 |
652 |
1,072 |
982 |
|
| Earnings per equity share |
||||
| Basic ($) |
0.25 |
0.24 |
0.49 |
0.46 |
| Diluted ($) |
0.25 |
0.24 |
0.49 |
0.46 |
| Weighted average equity shares |
||||
| 2,285,865,36 |
2,285,641,71 |
2,285,762,18 |
2,285,632,08 |
|
| Basic |
1 |
0 |
6 |
1 |
| 2,287,526,18 |
2,285,949,30 |
2,287,882,53 |
2,285,875,98 |
|
| Diluted |
3 |
3 |
4 |
8 |
NOTE:
1. The unaudited Condensed Consolidated Balance sheets and Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended September 30, 2017 have been taken on record at the Board meeting held on October 24, 2017
2. A Fact Sheet providing the operating metrics of the company can be downloaded from www.infosys.com
3. During the quarter ended June 30, 2017, the Company has written down the entire carrying value of the investment in its associate DWA Nova LLC, an Infosys Innovation Fund Investment. The impact of write down on Q1 18 net profit is $11 million
IFRS-INR Press Release: https://www.infosys.com/investors/reports-filings/quarterly-results/2017-2018/q2/Documents/IFRS-INR-press-release.pdf
Fact Sheet: https://www.infosys.com/investors/reports-filings/quarterly-results/2017-2018/q2/Documents/fact-sheet.pdf
Contact
Investor Relations
Sandeep Mahindroo
+91-80-3980-1018
Sandeep_Mahindroo@infosys.com
Media Relations
Sarah Vanita Gideon
+91-80-4156-3998
Sarah_Gideon@infosys.com
Chiku Somaiya
+1-7136706752
Chiku.Somaiya@infosys.com
