Infosys (NYSE: INFY) Announces Results for the Quarter Ended June 30, 2018
1. Financial Highlights
Consolidated results under International Financial Reporting Standards (IFRS) for the quarter ended June 30, 2018
"The strong revenue and margin performance in this quarter shows that our dual emphasis on Agile Digital and AI-driven Core services is resonating with our clients," said Salil Parekh, CEO and MD. "With our Agile Digital business growing sequentially at 8% in constant currency and increase in our large deal wins to over US$ 1 billion, we see good traction in the market."
"Our emphasis on deepening client relationships resulted in strong client metrics including increase in the number of $100 million+ clients to 24," said U B Pravin Rao, COO. "Utilization excluding trainees reached an all-time high of 85.7%."
"We had broad-based financial performance on multiple fronts - RoE crossed 25%, Free cash flow was up 32% quarter on quarter and operating margins were at the upper quartile of our margin guidance," said M.D. Ranganath, CFO. "While we continue to make strategic investments to leverage the opportunities in Digital, our relentless focus on operational efficiencies continued in this quarter."
2. Bonus issue of equity shares
The Board in its meeting held on July 13, 2018 has considered, approved and recommended a bonus issue of one equity share for every equity share held and a stock dividend of one American Depositary Share (ADS) for every ADS held, as on a record date to be determined. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder would remain unchanged. The Board approved and recommended the issue of bonus shares to celebrate the 25th year of Company's public listing in India and to further increase the liquidity of its shares. The bonus issue of equity shares and ADSs will be subject to approval by the shareholders, and any other applicable statutory and regulatory approvals.
The bonus shares once allotted shall rank pari passu in all respects and carry the same rights as the existing equity shareholders and shall be entitled to participate in full, in any dividend and other corporate action, recommended and declared after the new equity shares are allotted.
3. Addition to the Board
The Board appointed Michael Gibbs as an Independent Director of the Company effective July 13, 2018 for a period of three years, based on the recommendation of the Nomination and Remuneration Committee of the Board.
4. Assets Held for Sale
During the three months ended June 30, 2018, on remeasurement, including consideration of progress in negotiations on offers from prospective buyers for Panaya, the Company has recorded a reduction in the fair value of Disposal Group held for sale amounting to $39 million in respect of Panaya. Consequently, profit for the three months ended June 30, 2018 has decreased by $39 million resulting in a decrease in Basic earnings per equity share by $0.02 for the quarter ended June 30, 2018.
5. Adoption of Ind AS 115 - Revenue from contracts with customers
Effective April 1, 2018, the Company adopted Ind AS 115 "Revenue from Contracts with Customers" using the cumulative catch-up transition method which is applied to contracts that were not completed as of April 1, 2018. Accordingly, the comparatives have not been retrospectively adjusted. The effect on adoption of Ind AS 115 was insignificant.
6. Voluntary delisting of American Depositary Shares from Euronext Paris and London
In line with the announcement made on June 11, 2018, the Company has voluntarily delisted its American Depository Shares ("ADSs") (ISIN US4567881085) from Euronext Paris and London on July 5, 2018 and its ADS were removed from Euroclear France on July 10, 2018. The primary reason for voluntary delisting from Euronext Paris and London was the low average daily trading volume of Infosys ADSs on these exchanges, which was not commensurate with the related administrative expenses. Infosys ADSs will continue to be listed on the NYSE under the symbol "INFY" and investors can continue to trade their ADSs on the New York Stock Exchange.
Infosys is a global leader in next-generation digital services and consulting. We enable clients in 45 countries to navigate their digital transformation. With over three decades of experience in managing the systems and workings of global enterprises, we expertly steer our clients through their digital journey. We do it by enabling the enterprise with an AI-powered core that helps prioritize the execution of change. We also empower the business with agile digital at scale to deliver unprecedented levels of performance and customer delight. Our always-on learning agenda drives their continuous improvement through building and transferring digital skills, expertise, and ideas from our innovation ecosystem.
Visit http://www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise navigate your next.
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 http://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
Audited Condensed ConsolidatedBalance Sheet as at Dollars in millions except equity share data)
June 30, 2018 March 31, 2018 ASSETS Current assets Cash and cash equivalents 2,411 3,041 Current investments 1,004 982 Trade receivables 2,001 2,016 Unbilled revenue 680 654 Prepayments and other current assets 707 662 Derivative financial instruments 5 2 6,808 7,357 Assets held for sale[(3)] 273 316 Total current assets 7,081 7,673 Non-current assets Property, plant and equipment 1,781 1,863 Goodwill 349 339 Intangible assets 54 38 Investment in associate - - Non-current investments 821 883 Deferred income tax assets 190 196 Income tax assets 884 931 Other non-current assets 246 332 Total non-current assets 4,325 4,582 Total assets 11,406 12,255 LIABILITIES AND EQUITY Current liabilities Trade payables 117 107 Derivative financial instruments 20 6 Current income tax liabilities 297 314 Client deposits 27 6 Unearned revenue 340 352 Employee benefit obligations 219 218 Provisions 76 75 Other current liabilities 1,269 1,036 2,365 2,114 Liabilities directly associated with assets held for sale[(3)] 50 50 Total current liabilities 2,415 2,164 Non-current liabilities Deferred income tax liabilities 74 82 Employee benefit obligations 6 7 Other non-current liabilities 49 42 Total liabilities 2,544 2,295 Equity Share capital- `5 ($0.16) par value 2,400,000,000 (2,400,000,000) equity shares authorized, issued and outstanding 2,173,336,341 (2,173,312,301), net of 10,790,750 (10,801,956) treasury shares as at June 30, 2018 (March 31, 2018), respectively 190 190 Share premium 253 247 Retained earnings 10,907 11,587 Cash flow hedge reserve 1 - Other reserves 294 244 Capital redemption reserve 9 9 Other components of equity (2,792) (2,317) Total equity attributable to equity holders of the company 8,862 9,960 Non-controlling interests - - Total equity 8,862 9,960 Total liabilities and equity 11,406 12,255
Infosys Limited and subsidiaries
Audited Condensed Consolidated Statement of Comprehensive Income for the(Dollars in millions except equity share and per equity share data)
Three months Three months ended June 30, ended June 30, 2018 2017 Revenues 2,831 2,651 Cost of sales 1,819 1,692 Gross profit 1,012 959 Operating expenses: Selling and marketing expenses 149 138 Administrative expenses 193 183 Total operating expenses 342 321 Operating profit 670 638 Other income, net 107 127 Reduction in the fair value of Disposal Group held for sale[(3)] (39) - Share in net profit/(loss) of associate, including impairment[(4)] - (11) Profit before income taxes 738 754 Income tax expense 204 213 Net profit 534 541 Other comprehensive income Items that will not be reclassified subsequently to profit or loss: Re-measurements of the net defined benefit liability/asset, net - - Equity instruments through other comprehensive income, net - - Items that will be reclassified subsequently to profit or loss: Fair valuation of investments, net (7) 4 Fair value changes on derivatives designated as cash flow hedge, net 1 (10) Foreign currency translation (468) 60 Total other comprehensive income/(loss), net of tax (474) 54 Total comprehensive income 60 595 Profit attributable to: Owners of the Company 534 541 Non-controlling interests - - 534 541 Total comprehensive income attributable to: Owners of the Company 60 595 Non-controlling interests - - 60 595 Earnings per equity share Basic ($) 0.25 0.24 Diluted ($) 0.25 0.24 Weighted average equity shares used in computing earnings per equity share Basic 2,173,328,621 2,285,657,604 Diluted 2,175,355,178 2,287,058,148
1. Theaudited condensed consolidatedBalance sheet andStatement of Comprehensive Income for the three months ended June 30, 2018 have been taken on record at the Board meeting held on July 13, 2018
2. A Fact Sheet providing the operating metrics of the Company can be downloaded fromhttp://www.infosys.com
3. During the three months ended June 30, 2018, on remeasurement, including consideration of progress in negotiations on offers from prospective buyers for Panaya, the Company has recorded a reduction in the fair value of Disposal Group held for sale amounting to $39 million in respect of Panaya.
4. 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 amounting to $11 million