TCS: Strong Share Gains in Europe Stand Out in Seasonally Weak Q3

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Tata Consultancy Services (BSE: 532540, NSE: TCS), the leading global IT services, consulting and business solutions organization, reported its consolidated financial results according to Ind AS and IFRS, for the quarter ending December 31, 2019.

Financial Highlights for Quarter Ended December 31, 2019

  • Revenue at $5,586 million, +6.4% YoY
  • Constant currency revenue growth: +6.8% YoY
  • Operating Margin at 25%; Net Margin at 20.4%
  • Net Income at $1,138 million; Earnings Per Share at $0.3
  • Net Cash from Operations at 116.4% of Net Income
  • Dividend per share: ₹5.00

Record date 25/01/2020; Payment date 31/01/2020

Business Highlights for Quarter Ended December 31, 2019

  • Life Sciences & Healthcare continues to outperform, growing +17.1% YoY; Manufacturing grew +9.2% YoY and Communications & Media grew +9.5%
  • Europe grew +15.9% YoY
  • Net addition of 22,390 employees YTD
  • 93% of the 30K freshers onboarded in H1 deployed in projects
  • Continued investments in organic talent development:
    • 327K+ employees trained in digital technologies
    • 404K+ employees trained in Agile methods
  • Industry-leading talent retention: IT Services attrition rate at 12.2% LTM

Commenting on the Q3 performance, Rajesh Gopinathan, Chief Executive Officer and Managing Director, said,“We saw the sectoral trends of the first half of the year continue to play out in the third quarter. Our robust order book during the quarter reflects our ability to pitch innovative technology solutions to address the business needs of different stakeholders in the enterprise, and participate in our customers’ enterprise-wide transformation initiatives. This is also helping deepen and broaden our customer relationships, and make the business more resilient.”

He added,“Our participation in the growth and transformation spends of our customers is most evident in our sustained success in Continental Europe where our revenues have more than doubled in the last five years. Our thought leadership in areas like the Business 4.0™ framework, Enterprise Agility and the Machine First Delivery Model, our domain and technology consulting expertise, investments in research and innovation, and our ability to design complex solutions leveraging multiple capabilities from across TCS, have made us the preferred partner for CEO-level initiatives at progressive organizations.”

N Ganapathy Subramaniam, Chief Operating Officer & Executive Director, said, In a seasonally weak quarter characterized by furloughs across multiple industry verticals, we focused on execution, while continuing to invest for future growth. Having onboarded over 30,000 trainees in the first half of the year, we worked on driving up utilization in Q3 and had good outcomes. Our client metrics were also very good, with additions across most revenue buckets.”

He added,“Our large core transformation engagements are all progressing very well. At M&G Prudential as well as at Scottish Widows, we crossed important transformation milestones, successfully migrating hundreds of thousands of policies from legacy systems onto our platform, significantly enhancing the customer experience for those policy holders. These are industry-defining engagements, closely watched by other insurance companies. Our achievement of these key milestones adds further impetus to their own transformation plans.

V Ramakrishnan, Chief Financial Officer, said,“Our ability to expand our margins in a volatile environment speaks of the strength of our business model, strong execution focus and the higher quality revenues we are getting on account of our strong positioning in our customers’ growth and transformation spends.”


IFRS Financial Statements

Unaudited Condensed Consolidated Statements of Comprehensive Income

For the three-month periods ended Dec 31, 2018 and Dec 31, 2019

(In millions of $, except per share data)

 

 

Three-month period ended

 Dec 31, 2018

Three-month period ended

 Dec 31, 2019

Revenue 5,250 5,586
Cost of revenue 3,056 3,275
Gross margin 2,194 2,311
SG & A expenses 849 913
Operating income 1,345 1,398
Other income (expense), net 161 83
Income before income taxes 1,506 1,481
Income taxes 364 340
Income after income taxes 1,142 1,141
Minority interest 2 3
Net income 1,140 1,138
Earnings per share in $ 0.30 0.30

Unaudited Condensed Consolidated Statements of Financial Position

As of Mar 31, 2019 and Dec 31, 2019

(In millions of $)

  As of Mar 31, 2019 As of Dec 31, 2019
ASSETS
Property and equipment 1,685 1,654
Right-of-use Assets 0 926
Intangible assets and Goodwill 581 576
Accounts Receivable 3,969 4,092
Unbilled Revenues 1,298 1,456
Investments 4,243 3,679
Cash and Cash equivalents 1,045 739
Other current assets 2,908 2,467
Other non current assets 1,207 1,106
Total Assets 16,936 16,695
LIABILITIES AND SHAREHOLDERS’ EQUITY
Shareholders’ Funds 13,243 11,949
Long term borrowings 6 0
Short term borrowings 3 0
Other current liabilities 3,192 3,497
Other non-current liabilities 423 1,170
Minority Interest 69 79
Total Liabilities 16,936 16,695

 

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