Quess Corp DeliversStrong Organic Growth Despite Economic Headwinds
Operating Cash flow increasesby 60% YoYto Rs. 52Cr
Bengaluru, India – 24thJuly 2019: Quess Corp, India’s leading business services provider announced its financial results for the first quarter (Q1 FY20) ended 30thJune 2019 today. The Company has adopted Ind AS 116 standards with effect from 1stApril 2019. The key consolidated financial parameters are:
Particulars |
Q1 FY20 |
Q1 FY19 |
YoY(%) |
Q4 FY19 |
QoQ(%) |
Revenue |
2,395 |
1,968 |
22% |
2,295 |
4% |
EBITDA |
147 |
102 |
44% |
132 |
12% |
EBITDA Margin |
6.15% |
5.21% |
95 bps |
5.74% |
41 bps |
PBT |
67 |
64 |
5% |
88 |
-24% |
PAT |
56 |
54 |
3% |
76 |
-25% |
PAT Margin |
2.35% |
2.76% |
-41 bps |
3.29% |
-94 bps |
Diluted EPS (in ₹) |
3.7 |
3.7 |
-2% |
5.2 |
-29% |
Financial Highlights – Adjusted for the Impact of Ind AS 116
Particulars |
Q1 FY20 |
Q1 FY19 |
|||
Results with Ind AS 116 |
Adjustment due to Ind AS 116 |
Operating Results |
Q1 FY19 |
YoY (%) |
|
EBITDA |
147 |
-27 |
120 |
102 |
17% |
Dep. & Amortisation |
58 |
-25 |
33 |
30 |
12% |
Finance costs |
40 |
-7 |
33 |
26 |
25% |
Other Income |
17 |
17 |
16 |
8% |
|
Sh. of profit of Associates |
0.2 |
0.2 |
1.6 |
-85% |
|
PBT |
67 |
4 |
71 |
64 |
12% |
Tax |
11 |
0.6 |
11 |
9 |
20% |
PAT |
56 |
4 |
60 |
54 |
11% |
Diluted EPS (in ₹) |
3.7 |
0.3 |
3.9 |
3.7 |
5% |
Analysis of changes in operating parameters(without the Ind AS 116 adjustments):
- Our Revenues grew 22%YoY on the back of an increase in employee headcount of85,000 between June 2018 to June 2019 and an organic growth of 21% in Q1FY20.
- Our QuarterlyEBITDA grew by 17% YoY to Rs. 120Crresulting in anEBITDA Marginof5.02%in Q1FY20.
- PAT of Rs.60Crduring the quarter was higher by Rs. 4.4Crthan the Reported PAT due to the impact of Ind AS 116.
- Diluted Earnings per Share (EPS)stood atRs. 3.9for Q1 FY20compared to Rs. 3.7 inQ1FY19.
- Significantly, our Cash flow from Operations (OCF) stood at Rs. 52Cr for Q1 FY20as against Rs. 33Cr in Q1 FY19, an increase of 60%YoY basis.
- OCF/EBITDA conversion improved to 44% during the quarter compared to 32% in Q1FY19.
Business Update:
- Sales Wins: The Company has added a total of 106 clients in Q1 FY20 across platforms aggregating to a TCV of over Rs. 2500Cr.
- Strong Growth in Staffing: Quess’ General Staffing business registered the highest ever quarterly headcount addition of 32,000 in Q1 FY20 as against a full year addition of 35,000 in FY19.
- Leading BPM Platform:Conneqt’s acquisition of Allsec has resulted in creating one of the largest domestic BPM platforms with Allsec becoming our vehicle for Human Resource operations (HRO) and International Customer Lifecycle Management (CLM) business. Conneqt reported a robustRevenue and EBITDA growth of 21% and 74%YoY respectively. Similarly, Allsec reported a strong quarter with Revenues of Rs. 67.4Cr and EBITDA of Rs. 18.8Cr resulting in a margin of 27.9% in Q1 FY20.
- Partnership between Amazon& DigiCare: Amazon’s investment in Quess would be utilized to build Digicare into a large brand-agnostic after-sales service provider with a PAN India service network and superior technical capabilities across product categories.
- Strong Pipeline in Excelus: Our Training & Skill Development arm, Excelus, has receivedfresh targets to train students under Pradhan Mantri Kaushal VikasYojana (PMKVY) for 31,000 students aggregating to a contract value of Rs. 31Cr, which the Company shall execute in the next 2-3 quarters.
- Corporate Restructuring:
- EGM for approving the shareholding restructuring has been scheduled for 20th Aug, 2019
- The merger of four wholly owned subsidiaries – Master Staffing Solutions, Coachieve, Aravon, CenterQ shall be completed by Q3 FY20 to rationalize the number of group entities.
Capital Allocation:
- TheCompany’s focus remainsconsolidation while driving synergies across our platformsand is not planning any acquisitions in the near future. However, the Company would continue to pursue selective strategic partnerships with leading global players/investors to scale up some of its growth businesses.
- Quess signed a Share Subscription Agreement with Amazonto issue 7.54 lakh shares, at a price of Rs. 676 per share amounting to an investment of Rs. 51Cr by way of a preferential allotment.Quess and Qdigi Service Limited (DigiCare), a wholly owned subsidiary of the Company, executed an investment agreement with Amazon to utilize the investments towards the businessof DigiCare.
- Conneqt, a subsidiary of the Company completed the acquisition of Allsec Technologiesthrough purchase ofan initial tranche of 61.35% from the Promoters and Carlyle. This was followed by an open offer in whichConneqt purchased anadditional 12.03% shareholding taking the total ownership to 73.38%. The total consideration towards the acquisition stood at Rs. 330Cr.
- Update on QEBFC:
- Quess has started discussions with the stakeholders to monetize this investment in the short term.
- The Quarterly loss from QEBFC has been substantially reduced to Rs. 3.8Cr in Q1 FY20 from Rs. 11.8Cr in Q4 FY19.
- QEBFC has already signed three sponsors and few other sponsors are in pipeline, revenues from these sponsorshipshall help reduce the losses for the year.
PlatformUpdate:
- Workforce Management:
- Quess’ General Staffingheadcount crossed 223,000 as on June 30, 2019 registering the highest ever quarterly headcount addition of 32,000 compared to a full year addition of 35,000 in FY19.In addition to headcount increase, we added 40 new clients across sectors.
- Our Collect & Pay contracts share improved to 70% in Q1’FY20 from 65% in Q4’FY19
- Our General Staffing business’Core to Associateratio continues at industry leadingefficiency of 1:330 in Q1 FY20.
- Our Training & Skill development arm,Excelusreceived training target of 31,000 from NSDC for 37 PMKVY centers and has also diversified its revenue lines by strengthening its B2B presence by winning projects for training candidates in retail and in electronics manufacturing sector
- Operating Asset Management:
- Our Facilities Management business continued its strong organic growth momentum during the quarter with a healthy addition of 13+ logos. We have successfully added integrated contracts offering multiple services to clients ensuring higher contract value and customer stickiness
- Terrier: With 19,000 guards and presence across 200 cities in India, our security services business has added PAN India sourcing and recruitment capabilitiesduring the quarter. Additionally, our Security Services is now ISO27001 certified for guaranteeing information security which is a key differentiator for security players delivering digital security services
- Update on Smart City Project:
- An amount of Rs.7.6Cr has been received into the Escrow Account as of July 2019. The Company is in discussions with the Resolution Professional (RP) to transfer the amount to Quess account.
- Petition has been filed in NCLT Mumbai, directing the RP to uphold the terms of the escrow agreement. The same has been heard by the NCLT Mumbai on fast track basis on July 8, 2019. Next hearing is scheduled for Aug 20, 2019.
- Tech Services:
- BPM:Conneqt has won contracts worth Rs.80Cr (annual contract value) in Q1 FY20. This includes businesses from new logos and new LOBs from existing clients.The business has also received 11 awards across industry forums and from clients for its services and internal processes like ‘Dream companies to work for’, ‘Best service provider’, ‘Digital excellence in banking sector’ etc.Allsechas added one international and six domestic clients in its HRO practice during the quarter and has delivered strong results with Revenues of Rs. 67.4 Cr and EBITDA of Rs. 18.8 Cr resulting in a margin of 27.9%.
- DigiCare: The Company’scurrent service portfolio includes troubleshooting, repairs and installations of Smartphones, Consumer Electronics and Consumer Durables. It operates 250+ service centres across 150 towns and has plans of expanding its service network to 450+ service centres across 300 towns in the short term.
- Monster:
- Operational Update:
- Average monthly visits grew by 37% (13.4Mn in Q1 FY20 vs. 9.8 Mn in Q1 FY19)
- Brand campaign in March 2019 resulted in15.2 Mn visits, highest ever to be received in a month
- Acquired a total of 471Kphysical resumes in Jun 2019, highest in a month duringthe last 2 years
- Active resumes grew by 11% (60Mn in Q1 FY20 vs. 54 Mn in Q1 FY19)
- New physical resume addition grew by 26% (Monthly average of 421K in Q1 FY20 vs. 333K in Q1 FY19)
- Organic traffic grew over 78% showing improved customer acquisition efforts (3.8Mn in Q1 FY20 vs. 2.1 Mn in Q1 FY19 )
- Leadership Update:
- Mr. Krishnan Seshadri (Krish)has been appointed as theCEO of Monster.com (APAC & Middle East).Krish is a seasoned executive with over 23 years of rich experience in leading digital & mobile businesses of various sizes across industries for scale and growth. He has Global operating & leadership experience across India, US, Asia, Europe at MNCs such asFacebook, AOL-Verizon, Zynga and other Start Ups.
Segment Wise Performance
Particulars |
Q1 FY20 |
Q1 FY19 |
YoY (%) |
Q4 FY19 |
QoQ (%) |
Workforce Management |
|
|
|
|
|
Revenue |
1,487 |
1,148 |
30% |
1,394 |
7% |
EBITDA |
89 |
68 |
32% |
95 |
-6% |
EBITDA Margin |
6.00% |
5.89% |
|
6.83% |
|
|
|
|
|
|
|
Operating Asset Management |
|
|
|
|
|
Revenue |
427 |
398 |
7% |
438 |
-3% |
EBITDA |
32 |
30 |
8% |
36 |
-12% |
EBITDA Margin |
7.47% |
7.42% |
|
8.29% |
|
|
|
|
|
|
|
Tech Services |
|
|
|
|
|
Revenue |
480 |
422 |
14% |
462 |
4% |
EBITDA |
46 |
22 |
112% |
20 |
133% |
EBITDA Margin |
9.64% |
5.19% |
|
4.30% |
|
Commenting on the financial results, Chairman & MD Mr. Ajit Isaac said that, “Our focus on consolidation has resulted in a healthy growth of 22% in Revenues and 44% in EBITDA despite macroeconomic headwinds. Our strategic partnership with Amazon is yet another example of Quess’ ability to attract marquee global investors to partner with us. The investment will act as a catalyst for DigiCare to rapidly expand its service capability while providing a market leading customer experience to its clients. Our focus on organically growing our platforms into market leading positions and monetizing our growth investments is beginning to crystalize.”