FORM 6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the quarter ended December 31, 2017

Commission File Number 001—32945

 

 

WNS (HOLDINGS) LIMITED

(WNS (Holdings) Limited)

 

 

Gate 4, Godrej & Boyce Complex

Pirojshanagar, Vikhroli (W)

Mumbai 400 079, India

+91-22 - 4095 - 2100

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F                Form 40-F  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

Part I — FINANCIAL INFORMATION

  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

     3  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

     4  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

     5  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

     6  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

     8  

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

     9  

Part II — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     42  

Part III — RISK FACTORS

     73  

Part IV — OTHER INFORMATION

     100  

SIGNATURES

     101  


Table of Contents

WNS (Holdings) Limited is incorporating by reference the information set forth in this Form 6-K into its registration statements on Form S-8 filed on July 31, 2006 (File No. 333-136168), Form S-8 filed on February 17, 2009 (File No. 333-157356), Form S-8 filed on September 15, 2011 (File No. 333-176849), Form S-8 filed on September 27, 2013 (File No. 333-191416), and Form S-8 filed on October 11, 2016 (File No. 333-214042).

CONVENTIONS USED IN THIS REPORT

In this report, references to “US” are to the United States of America, its territories and its possessions. References to “UK” are to the United Kingdom. References to “India” are to the Republic of India. References to “China” are to the People’s Republic of China. References to “South Africa” are to the Republic of South Africa. References to “$” or “dollars” or “US dollars” are to the legal currency of the US, references to “” or “rupees” or “Indian rupees” are to the legal currency of India, references to “pound sterling” or “£” are to the legal currency of the UK, references to “pence” are to the legal currency of Jersey, Channel Islands, references to “Euro” are to the legal currency of the European Monetary Union, references to “South African rand” or “R” or “ZAR” are to the legal currency of South Africa, references to “A$” or “AUD” or “Australian dollars” are to the legal currency of Australia, references to “RMB” are to the legal currency of China, references to “LKR” or “Sri Lankan rupees” are to the legal currency of Sri Lanka, and references to “PHP” or “Philippine Peso” are to the legal currency of the Philippines. Our financial statements are presented in US dollars and prepared in accordance with International Financial Reporting Standards and its interpretations (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), as in effect as at December 31, 2017. To the extent the IASB issues any amendments or any new standards subsequent to December 31, 2017, there may be differences between IFRS applied to prepare the financial statements included in this report and those that will be applied in our annual financial statements for the year ending March 31, 2018. Unless otherwise indicated, the financial information in this interim report on Form 6-K has been prepared in accordance with IFRS, as issued by the IASB. Unless otherwise indicated, references to “GAAP” in this report are to IFRS, as issued by the IASB. References to “our ADSs” in this report are to our American Depositary Shares, each representing one of our ordinary shares.

References to a particular “fiscal year” are to our fiscal year ended March 31 of that calendar year, which is also referred to as “fiscal”. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

In this report, unless otherwise specified or the context requires, the term “WNS” refers to WNS (Holdings) Limited, a public company incorporated under the laws of Jersey, Channel Islands, and the terms “our company,” “the Company,” “we,” “our” and “us” refer to WNS (Holdings) Limited and its subsidiaries.

In this report, references to the “Commission” or the “SEC” are to the United States Securities and Exchange Commission.

We also refer in various places within this report to “revenue less repair payments,” which is a non-GAAP financial measure that is calculated as (a) revenue less (b) in our auto claims business, payments to repair centers for “fault” repair cases where we act as the principal in our dealings with the third party repair centers and our clients. This non-GAAP financial information is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” that 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 and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources, tax assessment orders and future capital expenditures. We caution you that reliance on any forward-looking statement inherently 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 risks and uncertainties include but are not limited to:

 

  worldwide economic and business conditions;

 

  political or economic instability in the jurisdictions where we have operations;

 

  our dependence on a limited number of clients in a limited number of industries;

 

  regulatory, legislative and judicial developments;

 

  increasing competition in the business process management industry;

 

  technological innovation;

 

  telecommunications or technology disruptions;

 

  our ability to attract and retain clients;

 

  our liability arising from fraud or unauthorized disclosure of sensitive or confidential client and customer data;

 

  negative public reaction in the US or the UK to offshore outsourcing;

 

  our ability to expand our business or effectively manage growth;

 

  our ability to hire and retain enough sufficiently trained employees to support our operations;

 

  the effects of our different pricing strategies or those of our competitors;

 

  our ability to successfully consummate, integrate and achieve accretive benefits from our strategic acquisitions, and to successfully grow our revenue and expand our service offerings and market share;

 

  future regulatory actions and conditions in our operating areas; and

 

  volatility of our ADS price.

These and other factors are more fully discussed in our other filings with the SEC, including in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in our annual report on Form 20-F for our fiscal year ended March 31, 2017. 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.

 

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Part I- FINANCIAL INFORMATION

WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Amounts in thousands, except share and per share data)

 

    

Notes

   As at
December 31, 2017
    As at
March 31, 2017
 
          (Unaudited)        

ASSETS

       

Current assets:

       

Cash and cash equivalents

   5    $ 89,664     $ 69,803  

Investments

   6      118,240       111,992  

Trade receivables, net

   7      67,475       60,423  

Unbilled revenue

        56,091       48,915  

Funds held for clients

        10,086       9,135  

Derivative assets

   13      18,803       35,401  

Prepayments and other current assets

   8      26,548       27,385  
     

 

 

   

 

 

 

Total current assets

        386,907       363,054  

Non-current assets:

       

Goodwill

   9      135,760       134,008  

Intangible assets

   10      91,794       96,624  

Property and equipment

   11      59,428       54,796  

Derivative assets

   13      3,752       6,581  

Deferred tax assets

        21,883       16,687  

Investments

   6      468       429  

Other non-current assets

   8      40,647       31,944  
     

 

 

   

 

 

 

Total non-current assets

        353,732       341,069  
     

 

 

   

 

 

 

TOTAL ASSETS

      $ 740,639     $ 704,123  
     

 

 

   

 

 

 

LIABILITIES AND EQUITY

       

Current liabilities:

       

Trade payables

      $ 16,281     $ 14,239  

Provisions and accrued expenses

   15      27,004       27,217  

Derivative liabilities

   13      2,455       3,947  

Pension and other employee obligations

   14      54,947       52,933  

Current portion of long term debt

   12      27,708       27,613  

Deferred revenue

   16      3,747       5,478  

Current taxes payable

        4,110       1,322  

Other liabilities

   17      15,896       16,015  
     

 

 

   

 

 

 

Total current liabilities

        152,148       148,764  

Non-current liabilities:

       

Derivative liabilities

   13      631       836  

Pension and other employee obligations

   14      10,528       10,680  

Long term debt

   12      75,364       89,130  

Deferred revenue

   16      1,048       378  

Other non-current liabilities

   17      17,916       18,469  

Deferred tax liabilities

        12,074       20,800  
     

 

 

   

 

 

 

Total non-current liabilities

        117,561       140,293  
     

 

 

   

 

 

 

TOTAL LIABILITIES

      $ 269,709     $ 289,057  
     

 

 

   

 

 

 

Shareholders’ equity:

       

Share capital (ordinary shares $0.16 (10 pence) par value, authorized 60,000,000 shares; issued: 54,701,978 shares and 53,312,559 shares; each as at December 31, 2017 and March 31, 2017, respectively)

   18      8,514       8,333  

Share premium

        363,730       338,284  

Retained earnings

        339,896       277,988  

Other components of equity

        (106,979     (114,854
     

 

 

   

 

 

 

Total shareholders’ equity, including shares held in treasury

        605,161       509,751  
     

 

 

   

 

 

 

Less: 4,400,000 shares as at December 31, 2017 and 3,300,000 shares as at March 31, 2017, held in treasury, at cost

   18      (134,231     (94,685
     

 

 

   

 

 

 

Total shareholders’ equity

        470,930       415,066  
     

 

 

   

 

 

 

TOTAL LIABILITIES AND EQUITY

      $ 740,639     $ 704,123  
     

 

 

   

 

 

 

See accompanying notes.

 

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WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except share and per share data)

 

          Three months ended December 31,     Nine months ended December 31,  
    

Notes

   2017     2016     2017     2016  

Revenue

      $ 188,598     $ 145,436     $ 555,246     $ 443,174  

Cost of revenue

   19      124,450       97,535       374,722       295,913  
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        64,148       47,901       180,524       147,261  

Operating expenses:

           

Selling and marketing expenses

   19      10,559       7,868       29,925       23,591  

General and administrative expenses

   19      28,345       21,465       87,094       64,478  

Foreign exchange gain, net

        (4,364     (6,161     (13,532     (8,828

Amortization of intangible assets

        3,927       4,129       11,546       17,610  
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

        25,681       20,600       65,491       50,410  

Other income, net

   21      (2,473     (2,240     (7,676     (6,645

Finance expense

   20      976       33       3,115       131  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit before income taxes

        27,178       22,807       70,052       56,924  

Provision for income taxes

   23      892       4,829       8,144       14,185  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit

      $ 26,286     $ 17,978     $ 61,908     $ 42,739  
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per ordinary share

   24         
     

 

 

   

 

 

   

 

 

   

 

 

 

Basic

      $ 0.52     $ 0.36     $ 1.23     $ 0.84  
     

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

      $ 0.51     $ 0.35     $ 1.18     $ 0.81  
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes.

 

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WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Amounts in thousands)

 

     Three months ended December 31,     Nine months ended December 31,  
     2017     2016     2017     2016  

Profit

   $ 26,286     $ 17,978     $ 61,908     $ 42,739  

Other comprehensive loss, net of taxes

        

Items that will not be reclassified to profit or loss:

        

Pension adjustment

     119       366       1,989       (2,749

Items that will be reclassified subsequently to profit or loss:

        

Changes in fair value of investment in mutual funds

     (2     —         (6     —    

Changes in fair value of cash flow hedges:

        

Current period (loss)/gain

     11,149       10,676       6,215       34,019  

Reclassification to profit/(loss)

     (6,244     (7,062     (22,381     (16,861

Foreign currency translation

     11,917       (11,082     15,759       (24,464

Income tax (provision)/benefit relating to above

     (655     (1,019     6,299       (6,033
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 16,165     $ (8,487   $ 5,886     $ (13,339
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income/ (loss), net of taxes

   $ 16,284     $ (8,121   $ 7,875     $ (16,088
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

   $ 42,570     $ 9,857     $ 69,783     $ 26,651  
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes.

 

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WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands, except share and per share data)

 

                                Other components of equity                     
                                Foreign                                  
                                Currency     Cash flow                         Total  
     Share capital      Share     Retained      Translation     Hedging      Pension     Treasury shares     shareholders’  
     Number      Par value      premium     earnings      Reserve     Reserve      adjustments     Number      Amount     equity  

Balance as at April 1, 2016

     52,406,304      $ 8,211      $ 306,874     $ 240,225      $ (124,357   $ 5,928      $ 1,769       1,100,000      $ (30,461   $ 408,189  

Shares issued for exercised options and RSUs (Refer Note 22)

     839,129        113        7,987       —          —         —          —         —          —         8,100  

Purchase of treasury shares (Refer Note 18)

     —          —          —         —          —         —          —         2,200,000        (64,151     (64,151

Share-based compensation expense (Refer Note 22)

     —          —          16,464       —          —         —          —         —          —         16,464  

Excess tax benefits relating to share-based options and RSUs

     —          —          (483     —          —         —          —         —          —         (483
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Transactions with owners

     839,129        113        23,968       —          —         —          —         2,200,000        (64,151     (40,070
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Profit

     —          —          —         42,739        —         —          —         —          —         42,739  

Other comprehensive income/(loss), net of taxes

     —          —          —         —          (24,464     11,125        (2,749     —          —         (16,088
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total comprehensive income/(loss) for the period

     —          —          —         42,739        (24,464     11,125        (2,749     —          —         26,651  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Balance as at December 31, 2016

     53,245,433      $ 8,324      $ 330,842     $ 282,964      $ (148,821   $ 17,053      $ (980     3,300,000      $ (94,612   $ 394,770  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands, except share and per share data)

 

                            Other components of equity                    
    Share capital     Share     Retained    

Foreign

currency

translation

   

Cash flow

hedging

    Investment in
mutual funds
fair value
adjustments
    Pension     Treasury shares    

Total

shareholders’

 
    Number     Par value     premium     earnings     reserve     reserve       adjustments     Number     Amount     equity  

Balance as at April 1, 2017

    53,312,559     $ 8,333     $ 338,284     $ 277,988     $ (132,174   $ 17,348       7     $ (35     3,300,000     $ (94,685   $ 415,066  

Shares issued for exercised options and RSUs (Refer Note 22)

    1,389,419       181       1,166       —         —         —         —         —         —         —         1,347  

Purchase of treasury shares (Refer Note 18)

    —         —         —         —         —         —         —         —         1,100,000       (39,546     (39,546

Share-based compensation expense (Refer Note 22)

    —         —         23,506       —         —         —         —         —         —         —         23,506  

Purchase of equity from non-controlling interest

    —         —         (52     —         —         —         —         —         —         —         (52

Excess tax benefits relating to share-based options and RSUs

    —         —         826       —         —         —         —         —         —         —         826  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners

    1,389,419       181       25,446       —         —         —         —         —         1,100,000       (39,546     (13,919
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit

    —         —         —         61,908       —         —         —         —         —         —         61,908  

Other comprehensive income/(loss), net of taxes

    —         —         —         —         15,759       (9,867     (6     1,989       —         —         7,875  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income/(loss) for the period

    —         —         —         61,908       15,759       (9,867     (6     1,989       —         —         69,783  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at December 31, 2017

    54,701,978     $ 8,514     $ 363,730     $ 339,896     $ (116,415   $ 7,481     $ 1     $ 1,954       4,400,000     $ (134,231   $ 470,930  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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WNS (HOLDINGS) LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

 

    

Notes

   Nine months ended December 31,  
          2017     2016  

Cash flows from operating activities:

       

Cash generated from operations

      $ 113,018     $ 78,605  

Income taxes paid

        (15,293     (17,768

Interest paid

        (2,584     (56

Interest received

        1,341       644  
     

 

 

   

 

 

 

Net cash provided by operating activities

        96,482       61,425  
     

 

 

   

 

 

 

Cash flows from investing activities:

       

Working capital adjustment towards acquisition of HealthHelp, net

   4(a)      (508     —    

Adjustment towards acquisition of Denali, net

   4(b)      454       —    

Acquisition of Value Edge, net of cash acquired

   4(c)      —         (11,957

Restricted cash, held in escrow

   4(c)      —         (5,112

Proceeds from restricted cash held in escrow

        239       280  

Purchase of property and equipment and intangible assets

        (27,830     (15,488

Government grant received

        168       —    

Government grants repaid

        (50     —    

Proceeds from sale of property and equipment

        284       378  

Proceeds from maturity of fixed maturity plans (“FMPs”)

        100       —    

Dividends received

        2,381       3,147  

Marketable securities sold/(purchased), net

        10,109       48,457  

Investment in fixed deposits

        (14,105     —    
     

 

 

   

 

 

 

Net cash provided by investing activities

        (28,758     19,705  
     

 

 

   

 

 

 

Cash flows from financing activities:

       

Buyback of shares

        (39,546     (64,151

Proceeds from exercise of stock options

        1,347       8,100  

Repayment of long term debt

        (14,050     —    

Excess tax benefit from share-based compensation expense

        243       267  

Purchase of equity of non-controlling interest

        (52     —    

Payment of debt issuance cost

        (354     —    
     

 

 

   

 

 

 

Net cash provided by/(used) in financing activities

        (52,412     (55,784
     

 

 

   

 

 

 

Exchange difference on cash and cash equivalents

        4,549       3,469  

Net change in cash and cash equivalents

        19,861       28,815  

Cash and cash equivalents at the beginning of the period

        69,803       41,854  
     

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

      $ 89,664     $ 70,669  
     

 

 

   

 

 

 

Non-cash transactions:

       

Investing activities

       

(i) Liability towards property and equipment and intangible assets purchased on credit

      $ 2,320     $ 2,104  

(ii) Contingent consideration payable towards acquisition of Value Edge

   4(c)      —         4,833  

(iii) Working capital adjustment amount payable towards acquisition of Value Edge

   4(c)      —         765  

See accompanying notes.

Reconciliation of liabilities arising from financing activities

 

                  Non-cash changes         
     Opening balance
April 1,

2017
     Cash flows     Amortization of debt
issuance cost/others
     Closing balance
December 31,
2017
 

Long term debt (including current portion)

   $ 116,743      $ (14,050   $ 379      $ 103,072  
  

 

 

    

 

 

   

 

 

    

 

 

 

 

8


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

1. Company overview

WNS (Holdings) Limited (“WNS Holdings”), along with its subsidiaries (collectively, “the Company”), is a global business process management (“BPM”) company with client service offices in Australia, Dubai (United Arab Emirates), London (UK), New Jersey (US), Switzerland, Germany and Singapore and delivery centers in the People’s Republic of China (“China”), Costa Rica, India, the Philippines, Poland, Romania, Republic of South Africa (“South Africa”), Sri Lanka, Turkey, the United Kingdom (“UK”) and the United States (“US”). The Company’s clients are primarily in the insurance; travel and leisure; diversified businesses including manufacturing, retail, consumer packaged goods (“CPG”), media and entertainment and telecommunications; utilities; consulting and professional services; banking and financial services; healthcare; and shipping and logistics industries. During the year ended March 31, 2017, the Company completed certain acquisitions (Refer Note 4).

WNS Holdings is incorporated in Jersey, Channel Islands and maintains a registered office in Jersey at 22, Grenville Street, St Helier, Jersey JE4 8PX.

These unaudited condensed interim consolidated financial statements were authorized for issue by the Board of Directors on January 29, 2018.

 

2. Summary of significant accounting policies

Basis of preparation

These condensed interim consolidated financial statements are prepared in compliance with International Accounting Standard (IAS) 34, “Interim financial reporting as issued by the IASB. They do not include all of the information required in annual financial statements in accordance with IFRS, as issued by the IASB and should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s annual report on Form 20-F for the fiscal year ended March 31, 2017.

The accounting policies applied are consistent with the policies that were applied for the preparation of the consolidated financial statements for the year ended March 31, 2017.

 

3. New accounting pronouncements not yet adopted by the Company

Certain new standards, interpretations and amendments to existing standards have been published that are mandatory for the Company’s accounting periods beginning on or after April 1, 2018 or later periods. Those which are considered to be relevant to the Company’s operations are set out below.

 

i. In May 2014, the IASB issued IFRS 15 “Revenue from Contracts with Customers” (“IFRS 15”). This standard provides a single, principle-based, five-step model to be applied to all contracts with customers. Guidance is provided on topics such as the point at which revenue is recognized, accounting for variable consideration, costs of fulfilling and obtaining a contract and various other related matters. IFRS 15 also introduced new disclosure requirements with respect to revenue.

The five steps in the model under IFRS 15 are: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contracts; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

IFRS 15 replaces the following standards and interpretations:

 

    IAS 11 “Construction Contracts”;

 

    IAS 18 “Revenue”;

 

    IFRIC 13 “Customer Loyalty Programmes”;

 

    IFRIC 15 “Agreements for the Construction of Real Estate”;

 

    IFRIC 18 “Transfers of Assets from Customers”; and

 

    SIC-31 “Revenue - Barter Transactions Involving Advertising Services”.

 

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Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

When first applying IFRS 15, it should be applied in full for the current period, including retrospective application to all contracts that were not yet complete at the beginning of that period. In respect of prior periods, the transition guidance allows an option to either:

 

    apply IFRS 15 in full to prior periods (with certain limited practical expedients being available); or

 

    retain prior period figures as reported under the previous standards, recognizing the cumulative effect of applying IFRS 15 as an adjustment to the opening balance of equity as at the date of initial application (beginning of current reporting period).

In April 2016, the IASB issued amendments to IFRS 15, clarifying some requirements and providing additional transitional relief for companies. The amendments do not change the underlying principles of IFRS 15 but clarify how those principles should be applied. The amendments clarify how to:

 

    identify a performance obligation (the promise to transfer a good or a service to a customer) in a contract;

 

    determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and

 

    determine whether the revenue from granting a license should be recognized at a point in time or over time.

In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies IFRS 15. The amendments have the same effective date as IFRS 15.

IFRS 15 is effective for fiscal years beginning on or after January 1, 2018. The Company expects to apply this standard retrospectively with the cumulative effect of initially applying this standard recognized at April 1, 2018 (i.e. the date of initial application in accordance with this standard) which will be based on specific terms of active contracts as at April 1, 2018. The Company continues to evaluate specific terms of such contracts, potential changes to accounting system and processes, additional disclosure requirements that may be necessary and believes that the implementation plan is on schedule for adoption on April 1, 2018.

 

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Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

ii. In July 2014, the IASB finalized and issued IFRS 9 – “Financial Instruments” (“IFRS 9”). IFRS 9 replaces IAS 39 “Financial instruments: recognition and measurement”, the previous standard which dealt with the recognition and measurement of financial instruments in its entirety upon former’s effective date.

Key requirements of IFRS 9:

Replaces IAS 39’s measurement categories with the following three categories:

 

    fair value through profit or loss (“FVTPL”);

 

    fair value through other comprehensive income; and

 

    amortized cost.

Eliminates the requirement for separation of embedded derivatives from hybrid financial assets and the classification requirements to be applied to the hybrid financial asset in its entirety.

Requires an entity to present the amount of change in fair value due to change in the entity’s own credit risk in other comprehensive income.

Introduces new impairment model, under which the “expected” credit loss are required to be recognized as compared to the existing “incurred” credit loss model of IAS 39.

Fundamental changes in hedge accounting by introduction of new general hedge accounting model which:

 

    increases the eligibility of hedged item and hedging instruments; and

 

    introduces a more principles–based approach to assess hedge effectiveness.

IFRS 9 is effective for annual periods beginning on or after January 1, 2018.

Earlier application is permitted provided that all the requirements in the standard are applied at the same time with two exceptions:

(1) The requirement to present changes in the fair value of a liability due to changes in own credit risk may be applied early in isolation; and

(2) An entity may choose as its accounting policy choice to continue to apply the hedge accounting requirements of IAS 39 instead of the new general hedge accounting model as provided in IFRS 9.

The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

In October 2017, the IASB issued an amendment to IFRS 9 on the modification of financial liabilities measured at amortized cost that does not result in the derecognition of the financial liability. The amendment states that any adjustment to the amortized cost of the financial liability arising from a modification or exchange shall be recognized in the profit or loss at the date of the modification or exchange. A retrospective change of the accounting treatment may therefore become necessary if in the past the effective interest rate was adjusted and not the amortized cost amount.

This amendment is to be applied retrospectively for fiscal years beginning on or after January 1, 2019, i.e. one year after the first application of IFRS 9 in its current version and early application is permitted. Additional transitional requirements and corresponding disclosure requirements must be observed when applying the amendments for the first time.

The Company is currently evaluating the impact of this amendment on its consolidated financial statements.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

iii. In January 2016, the IASB issued IFRS 16 “Leases” (“IFRS 16”). Key changes in IFRS 16 include:

 

    eliminating the requirement to classify a lease as either operating or finance lease in the books of lessee;

 

    introducing a single lessee accounting model, which requires lessees to recognize assets and liabilities for all leases, initially measured at the present value of unavoidable future lease payment. An entity may elect not to apply this accounting requirement to short term leases and leases for which underlying asset is of low value;

 

    replacing the straight-line operating lease expense model with a depreciation charge for the lease asset (included within operating costs) and an interest expense on the lease liability (included within finance costs);

 

    requiring lessees to classify cash payments for principal and interest portion of lease arrangement within financing activities and financing/operating activities respectively in the cash flow statements; and

 

    requiring entities to determine whether a contract conveys the right to control the use of an identified asset for a period of time to assess whether that contract is, or contains, a lease.

IFRS 16 replaces IAS 17 “Leases” and related interpretations viz. IFRIC 4 “Determining whether an Arrangement contains a Lease”; SIC-15 “Operating Leases—Incentives”; and SIC-27 “Evaluating the Substance of Transactions Involving the Legal Form of a Lease”.

IFRS 16 substantially carries forward lessor accounting requirements in IAS 17 “Leases”. Disclosures, however, have been enhanced.

IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019. Early application is permitted for entities that apply IFRS 15 “Revenue from Contracts with Customers” at or before the date of initial application of IFRS 16.

A lessee shall apply IFRS 16 either retrospectively to each prior reporting period presented or record a cumulative effect of initial application of IFRS 16 as an adjustment to opening balance of equity at the date of initial application.

The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

iv. In June 2016, the IASB issued amendments in IFRS 2 “Share-based Payment” to clarify the following:

 

    the accounting for cash-settled share-based payment transactions that include a performance condition should follow the same approach as for equity-settled share-based payment;

 

    the classification of share-based payment transactions with net settlement features for withholding tax obligations should be classified as equity-settled in its entirety, provided the share-based payment would have been classified as equity-settled had it not included the net settlement feature; and

 

    modifications of a share-based payment that changes the transaction from cash-settled to equity-settled should be accounted for as follows:

 

  i. the original liability is derecognized;

 

  ii. the equity-settled share based payment is recognized at the modification date fair value of the equity instrument granted to the extent that services have been rendered up to the modification date; and

 

  iii. any difference between the carrying amount of the liability at the modification date and the amount recognized in equity should be recognized in the statement of income immediately.

The above amendments are effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted. The amendments are to be applied prospectively. However, if an entity applies the amendments retrospectively, it must do so for all of the amendments described above.

The Company expects the adoption of these amendments will have no material impact on its consolidated financial statements.

 

v. In December 2016, the IFRS Interpretations Committee (‘IFRIC’) issued amendments to IFRIC 22 “Foreign Currency Transactions and Advance Consideration” to clarify the exchange rate to use for translation when payments are made or received in advance of the related asset, expense or income (or part of it) in foreign currency.

The exchange rate in this case will be the rate prevalent on the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration.

IFRIC 22 is effective for annual reporting periods beginning on or after January 1, 2018. Earlier application is permitted.

On initial application, entities have the choice to apply the Interpretation either retrospectively or, alternatively, prospectively to all assets, expenses and income in the scope of the Interpretation initially recognized on or after:

 

    the beginning of the reporting period in which the entity first applies the Interpretation; or

 

    the beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the Interpretation.

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

 

vi. In June 2017, the IFRIC issued IFRIC 23 “Uncertainty over Income Tax Treatments” to clarify the accounting for uncertainties in income taxes, by specifically addressing the following:

 

    the determination of whether to consider each uncertain tax treatment separately or together with one or more uncertain tax treatments;

 

    the assumptions an entity makes about the examination of tax treatments by taxations authorities;

 

    the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates where there is an uncertainty regarding the treatment of an item; and

 

    the reassessment of judgements and estimates if facts and circumstances change.

IFRIC 23 is effective for annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted.

On initial application, the requirements are to be applied by recognizing the cumulative effect of initially applying them in retained earnings, or in other appropriate components of equity, at the start of the reporting period in which an entity first applies them, without adjusting comparative information. Full retrospective application is permitted, if an entity can do so without using hindsight.

The Company is currently evaluating the impact of this pronouncement on its consolidated financial statements.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

4. Business Combinations

 

  a) HealthHelp

On March 15, 2017 (“Acquisition date”), the Company acquired all ownership interests of MTS HealthHelp Inc. and its subsidiaries (“HealthHelp”), which provides benefits management across several specialty healthcare areas, including radiology, cardiology, oncology, sleep care, orthopedics, and pain management, for a total consideration of $68,845, including working capital adjustments of $508 and a contingent consideration of $8,545, payable over a period of two years linked to revenue targets and continuation of an identified client contract. The fair value of the contingent consideration liability was estimated using Level 3 inputs which included an assumption for discount rate of 2.5%. The potential undiscounted amount of all future payments that the Company could be required to make under the contingent consideration arrangement is between $0 and $8,876.

The Company has funded the acquisition primarily with a five-year secured term loan. The Company is expected to leverage HealthHelp’s capability in care management to address the needs of payor, provider and insurance organizations.

During the nine months ended December 31, 2017, the Company made a payment of $508 towards working capital adjustments.

The Company has incurred acquisition related costs of $1,809, which have been included in “General and administrative expenses” in the consolidated statement of income for the year ended March 31, 2017.

The purchase price has been allocated on a provisional basis, as set out below, to the assets acquired and liabilities assumed in the business combination.

 

     Amount  

Cash

   $ 3,119  

Trade receivables

     4,910  

Unbilled revenue

     1,854  

Prepayments and other current assets

     1,070  

Property and equipment

     4,612  

Intangible assets

  

- Software

     1,274  

- Customer contracts

     4,537  

- Customer relationships

     49,584  

- Service mark

     400  

- Covenant not-to-compete

     4,693  

- Technology

     4,852  

Non-current assets

     96  

Term loan

     (29,249

Current liabilities

     (2,526

Non-current liabilities

     (1,423

Deferred tax liability

     (18,132
  

 

 

 

Net assets acquired

   $ 29,671  

Less: Purchase consideration

     68,845  
  

 

 

 

Goodwill on acquisition

   $ 39,174  
  

 

 

 

Goodwill of $14,767 arising from this acquisition is expected to be deductible for tax purposes. Goodwill is attributable mainly to expected synergies and assembled workforce arising from the acquisition.

The purchase consideration has been allocated on a provisional basis based on management’s estimates. The Company is in the process of making a final determination of the fair value of assets and liabilities. Finalization of the purchase price allocation may result in certain adjustments to the above allocation and revision of amounts recorded as of December 31, 2017 to reflect the final valuation of assets acquired or liabilities assumed.

 

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Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

  b) Denali Sourcing Services Inc.

On January 20, 2017 (“Acquisition Date”), the Company acquired all outstanding shares of Denali Sourcing Services Inc. (“Denali”), a provider of strategic procurement BPM solutions for a purchase consideration of $38,659 (including the contingent consideration of $6,277, dependent on the achievement of revenue targets over a period of three years and deferred consideration of $522 payable in first quarter of fiscal 2018), including adjustments for working capital. The fair value of the contingent consideration liability was estimated using Level 3 inputs which included an assumption for discount rate of 2.5%. The potential undiscounted amount of all future payments that the Company could be required to make under the contingent consideration arrangement is between $0 and $6,578. The payment was funded through a three-year secured term loan.

During the nine months ended December 31, 2017, the Company made the payment of $522 towards deferred consideration and an amount of $976 was reduced from purchase consideration towards working capital adjustments.

In January 2018, a contingent consideration of $2,351 was paid by the Company to the sellers on achievement of the revenue target related to the first measurement period.

Denali delivers global sourcing and procurement services to high-tech, retail and CPG, banking and financial services, utilities, and healthcare verticals. The acquisition of Denali is expected to add a strategic procurement capability to the Company’s existing Finance and Accounting services and enables the Company to offer procurement solutions to its clients.

The Company has incurred acquisition related costs of $502, which have been included in “General and administrative expenses” in the consolidated statement of income for the year ended March 31, 2017.

The purchase price has been allocated on a provisional basis, as set out below, to the assets acquired and liabilities assumed in the business combination.

 

     Amount  

Cash

   $ 1,204  

Trade receivables

     2,891  

Unbilled revenue

     1,256  

Prepayments and other current assets

     95  

Property and equipment

     53  

Deferred tax asset

     18  

Intangible assets

  

- Software

     3  

- Customer contracts

     3,025  

- Customer relationships

     8,000  

- Trade name

     545  

- Covenant not-to-compete

     1,718  

Non-current assets

     27  

Current liabilities

     (3,848

Short-term line of credit

     (475

Non-current liabilities

     (343

Deferred tax liability

     (5,020
  

 

 

 

Net assets acquired

   $ 9,149  

Less: Purchase consideration

     38,659  
  

 

 

 

Goodwill on acquisition

   $ 29,510  
  

 

 

 

Goodwill arising from this acquisition is not expected to be deductible for tax purposes. Goodwill is attributable mainly to expected synergies and assembled workforce arising from the acquisition.

The purchase consideration has been allocated on a provisional basis based on management’s estimates. The Company is in the process of making a final determination of the fair value of assets and liabilities. Finalization of the purchase price allocation may result in certain adjustments to the above allocation and revision of amounts recorded as of December 31, 2017 to reflect the final valuation of assets acquired or liabilities assumed.

Subsequently, in January 2018, the Company concluded the fair value adjustments of the assets acquired and liabilities assumed on acquisition and no material adjustments were made.

 

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Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

  c) Value Edge

On June 14, 2016 (“Acquisition Date”), the Company acquired all outstanding equity shares of Value Edge Research Services Private Limited (“Value Edge”) which provides business research and analytics reports and databases across the domains of pharmaceutical, biotech and medical devices, for a total consideration of $18,265 including working capital adjustments of $765 and contingent consideration of $5,112 (held in escrow), subject to compliance with certain conditions, payable over a period of three years. The acquisition is expected to deepen the Company’s domain and specialized analytical capabilities in the growing pharma market, and provide the Company with a technology asset, which is leverageable across clients and industries.

During the nine months ended December 31, 2017, the Company paid an amount of $1,693 towards contingent consideration to the sellers.

The Company has incurred acquisition related costs of $24, which have been included in “General and administrative expenses” in the consolidated statement of income for the year ended March 31, 2017.

The purchase price has been allocated, as set out below, to the assets acquired and liabilities assumed in the business combination.

 

     Amount  

Cash

   $ 432  

Trade receivables

     370  

Unbilled revenue

     706  

Investments

     87  

Prepayments and other current assets

     99  

Property and equipment

     78  

Deferred tax asset

     49  

Intangible assets

  

- Software

     10  

- Customer contracts

     701  

- Customer relationships

     1,894  

- Trade name

     104  

- Covenant not-to-compete

     2,655  

- Technology

     1,238  

Non-current assets

     74  

Current liabilities

     (1,236

Non-current liabilities

     (126

Deferred tax liability

     (2,281
  

 

 

 

Net assets acquired

   $ 4,854  

Less: Purchase consideration

     18,265  
  

 

 

 

Goodwill on acquisition

   $ 13,411  
  

 

 

 

Goodwill arising from this acquisition is not expected to be deductible for tax purposes (Refer Note 23). Goodwill is attributable mainly to expected synergies and assembled workforce arising from the acquisition.

During the year ended March 31, 2017, the Company concluded the fair value adjustments of the assets acquired and liabilities assumed on acquisition. Corresponding changes to the comparatives for the three and nine months ended December 31, 2017 have not been made, as the impact of the change on finalization of purchase price allocation is not material to the Company’s statement of financial position or statement of income.

 

16


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

5. Cash and cash equivalents

The Company considers all highly liquid investments with an initial maturity of up to three months to be cash equivalents. Cash and cash equivalents consist of the following:

 

     As at  
     December 31,
2017
     March 31,
2017
 

Cash and bank balances

   $ 67,010      $ 46,110  

Short term deposits with banks

     22,654        23,693  
  

 

 

    

 

 

 

Total

   $ 89,664      $ 69,803  
  

 

 

    

 

 

 

Short term deposits can be withdrawn by the Company at any time without prior notice and are readily convertible into known amounts of cash with an insignificant risk of changes in value.

 

6. Investments

Investments consist of the following:

 

     As at  
     December 31,
2017
     March 31,
2017
 

Investments in marketable securities and mutual funds(1)

   $ 78,813      $ 87,652  

Investments in FMPs

     —          96  

Investment in fixed deposits

     39,895        24,673  
  

 

 

    

 

 

 

Total

   $ 118,708      $ 112,421  
  

 

 

    

 

 

 

Note:

 

(1) Marketable securities represent short term investments made principally for the purpose of earning dividend income.

 

     As at  
     December 31,
2017
     March 31,
2017
 

Current investments

   $ 118,240      $ 111,992  

Non-current investment

     468        429  
  

 

 

    

 

 

 

Total

   $ 118,708      $ 112,421  
  

 

 

    

 

 

 

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

7. Trade receivables, net

Trade receivables consist of the following:

 

     As at  
     December 31,
2017
     March 31,
2017
 

Trade receivables

   $ 70,023      $ 62,136  

Less: Allowances for doubtful accounts receivable

     (2,548      (1,713
  

 

 

    

 

 

 

Total

   $ 67,475      $ 60,423  
  

 

 

    

 

 

 

The movement in the allowances for doubtful accounts receivable is as follows:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Balance at the beginning of the period

   $ 2,653      $ 2,045      $ 1,713      $ 4,446  

Charged to operations

     92        147        1,419        608  

Write-offs, net of collections

     (82      (97      (246      (2,542

Reversals

     (138      (360      (449      (595

Translation adjustment

     23        (67      111        (249
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the end of the period

   $ 2,548      $ 1,668      $ 2,548      $ 1,668  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

8. Prepayments and other assets

Prepayments and other assets consist of the following:

 

     As at  
     December 31,
2017
     March 31,
2017
 

Current:

     

Service tax and other tax receivables

   $ 6,111      $ 8,029  

Deferred transition cost

     1,099        423  

Employee receivables

     1,085        1,215  

Advances to suppliers

     2,306        2,087  

Prepaid expenses

     8,383        8,819  

Restricted cash, held in escrow (Refer Note 4 (c))

     1,535        1,611  

Others assets

     6,029        5,201  
  

 

 

    

 

 

 

Total

   $ 26,548      $ 27,385  
  

 

 

    

 

 

 

Non-current:

     

Deposits

   $ 8,953      $ 7,569  

Income tax assets

     13,606        10,202  

Service tax and other tax receivables

     9,902        6,236  

Deferred transition cost

     901        365  

Restricted cash, held in escrow (Refer Note 4 (c))

     1,535        3,222  

Others assets

     5,750        4,350  
  

 

 

    

 

 

 

Total

   $ 40,647      $ 31,944  
  

 

 

    

 

 

 

 

18


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

9. Goodwill

 

     As at  
     December 31,
2017
     March 31,
2017
 

Gross carrying amount

   $ 159,216      $ 155,681  

Accumulated impairment of goodwill

     (23,456      (21,673
  

 

 

    

 

 

 

Total

   $ 135,760      $ 134,008  
  

 

 

    

 

 

 

The movement in goodwill balance by reportable segment as at December 31, 2017 and March 31, 2017 is as follows:

Gross carrying amount

 

            WNS         
     WNS      Auto         
     Global BPM      Claims BPM      Total  

Balance as at April 1, 2016

   $ 46,503      $ 29,739      $ 76,242  

Goodwill arising on acquisitions (Refer Note 4(a), 4(b) & 4(c))

     82,127        —          82,127  

Foreign currency translation adjustment

     1,248        (3,936      (2,688
  

 

 

    

 

 

    

 

 

 

Balance as at March 31, 2017

   $ 129,878      $ 25,803      $ 155,681  
  

 

 

    

 

 

    

 

 

 

Goodwill arising on acquisitions (Refer Note 4(a) & 4(b))

     (32      —          (32

Foreign currency translation adjustment

     1,444        2,123        3,567  
  

 

 

    

 

 

    

 

 

 

Balance as at December 31, 2017

   $ 131,290      $ 27,926      $ 159,216  
  

 

 

    

 

 

    

 

 

 

Accumulated impairment losses

 

            WNS         
     WNS      Auto         
     Global BPM      Claims BPM      Total  

Balance as at April 1, 2016

   $ —        $ —        $ —    

Impairment of goodwill recognized during the year

     —          21,673        21,673  
  

 

 

    

 

 

    

 

 

 

Balance as at March 31, 2017

   $ —        $ 21,673      $ 21,673  

Foreign currency translation adjustment

     —          1,783        1,783  
  

 

 

    

 

 

    

 

 

 

Balance as at December 31, 2017

   $ —        $ 23,456      $   23,456  
  

 

 

    

 

 

    

 

 

 

 

19


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

10. Intangible assets

The changes in the carrying value of intangible assets for the year ended March 31, 2017 are as follows:

 

Gross carrying value

  Customer
contracts
    Customer
relationships
    Intellectual
property
rights
    Trade
names
    Technology     Leasehold
benefits
    Covenant
not-to-
compete
    Service
mark
    Software     Total  

Balance as at April 1, 2016

  $ 156,786     $ 63,147     $ 4,450     $ —       $ —       $ 1,835     $ 326       —       $ 19,760     $ 246,304  

Additions

    —         —         —         —         —         —         —         —         4,611       4,611  

On acquisition (Refer Note (4(a),(b),(c))

    8,263       59,478       —         649       6,090       —         9,066       400       1,287       85,233  

Translation adjustments

    1,952       (703     (589     4       41       —         59       —         (72     692  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at March 31, 2017

  $ 167,001     $ 121,922     $ 3,861     $ 653     $ 6,131     $ 1,835     $ 9,451     $ 400     $ 25,586     $ 336,840  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

                   

Balance as at April 1, 2016

  $ 145,483     $ 58,992     $ 4,450     $ —       $ —       $ 1,835     $ 326     $ —       $ 8,101     $ 219,187  

Amortization

    10,653       4,016       —         78       167       —         650       —         4,975       20,539  

Translation adjustments

    1,840       (833     (589     2       5       —         (12     —         77       490  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at March 31, 2017

  $ 157,976     $ 62,175     $ 3,861     $ 80     $ 172     $ 1,835     $ 964     $ —       $ 13,153     $ 240,216  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net carrying value as at March 31, 2017

  $ 9,025     $ 59,747     $ —       $ 573     $ 5,959     $ —       $ 8,487     $ 400     $ 12,433     $ 96,624  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The changes in the carrying value of intangible assets for the nine months ended December 31, 2017 are as follows:

 

Gross carrying value

  Customer
contracts
    Customer
relationships
    Intellectual
Property and
other

rights
    Trade
names
    Technology     Leasehold
benefits
    Covenant
not-to-
compete
    Service
mark
    Software     Total  

Balance as at April 1, 2017

  $ 167,001     $ 121,922     $ 3,861     $ 653     $ 6,131     $ 1,835     $ 9,451       400     $ 25,586     $ 336,840  

Additions

    —         —         250       —         —         —         —         —         5,957       6,207  

Translation adjustments

    1,459       766       317       2       20       —         58       —         683       3,305  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at December 31, 2017

  $ 168,460     $ 122,688     $ 4,428     $ 655     $ 6,151     $ 1,835     $ 9,509     $ 400     $ 32,226     $ 346,352  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

                   

Balance as at April 1, 2017

  $ 157,976     $ 62,175     $ 3,861     $ 80     $ 172     $ 1,835     $ 964     $ —       $ 13,153     $ 240,216  

Amortization

    2,037       2,772       42       177       593       —         1,736       —         4,189       11,546  

Translation adjustments

    1,364       697       317       1       3       —         29       —         385       2,796  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at December 31, 2017

  $ 161,377     $ 65,644     $ 4,220     $ 258     $ 768     $ 1,835     $ 2,729     $ —       $ 17,727     $ 254,558  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net carrying value as at December 31, 2017

  $ 7,083     $ 57,044     $ 208     $ 397     $ 5,383     $ —       $ 6,780     $ 400     $ 14,499     $ 91,794  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

20


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

11. Property and equipment

The changes in the carrying value of property and equipment for the year ended March 31, 2017 are as follows:

 

Gross carrying value

   Buildings      Computers
and
software
    Furniture,
fixtures and
office
equipment
    Vehicles     Leasehold
improvements
    Total  

Balance as at April 1, 2016

   $ 10,150      $ 69,203     $ 60,860     $ 459     $ 52,589     $ 193,261  

Additions

     —          4,411       7,455       135       8,105       20,106  

On acquisition (Refer Note 4(a),(b),(c))

     —          1,014       1,895       14       1,820       4,743  

Disposals/retirements

     —          (3,407     (1,619     (33     (1,723     (6,782

Translation adjustments

     96        (1,350     286       12       201       (755
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at March 31, 2017

   $ 10,246      $ 69,871     $ 68,877     $ 587     $ 60,992     $ 210,573  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation

             

Balance as at April 1, 2016

   $ 3,661      $ 58,768     $ 47,375     $ 347     $ 36,874     $ 147,025  

Depreciation

     505        5,742       5,126       92       5,438       16,903  

Disposals/retirements

     —          (3,327     (1,241     (20     (1,354     (5,942

Translation adjustments

     42        (1,372     171       10       222       (927
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at March 31, 2017

   $ 4,208      $ 59,811     $ 51,431     $ 429     $ 41,180     $ 157,059  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital work-in-progress

                1,282  
             

 

 

 

Net carrying value as at March 31, 2017

              $ 54,796  
             

 

 

 

The changes in the carrying value of property and equipment for the nine months ended December 31, 2017 are as follows:

 

Gross carrying value

   Buildings      Computers
and
software
    Furniture,
fixtures and
office
equipment
    Vehicles     Leasehold
improvements
    Total  

Balance as at April 1, 2017

   $ 10,246      $ 69,871     $ 68,877     $ 587     $ 60,992     $ 210,573  

Additions

     —          3,004       6,486       93       6,261       15,844  

Disposals/retirements

     —          (1,409     (1,614     (23     (2,051     (5,097

Translation adjustments

     69        2,331       1,702       14       1,610       5,726  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at December 31, 2017

   $ 10,315      $ 73,797     $ 75,451     $ 671     $ 66,812     $ 227,046  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation

             

Balance as at April 1, 2017

   $ 4,208      $ 59,811     $ 51,431     $ 429     $ 41,180     $ 157,059  

Depreciation

     385        4,934       4,874       75       4,642       14,910  

Disposals/retirements

     —          (1,417     (1,534     (23     (2,057     (5,031

Translation adjustments

     29        2,033       1,168       9       904       4,143  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at December 31, 2017

   $ 4,622      $ 65,361     $ 55,939     $ 490     $ 44,669     $ 171,081  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital work-in-progress

                3,463  
             

 

 

 

Net carrying value as at December 31, 2017

              $ 59,428  
             

 

 

 

Certain property and equipment are pledged as collateral against borrowings with a carrying amount of $126 and $170 as at December 31, 2017 and March 31, 2017, respectively.

 

21


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

12. Loans and borrowings

Long-term debt

The long-term loans and borrowings consist of the following:

 

                 As at  
                 December 31, 2017      March 31, 2017  

Currency

  

Interest rate

   Final
maturity
(fiscal
year)
     Foreign
Currency
     Total      Foreign
currency
     Total  

US dollars

   3M USD Libor +1.27%      2020      $ —          28,350        —          34,000  

US dollars

   3M USD Libor +0.95%      2022      $ —          75,600        —          84,000  
           

 

 

       

 

 

 

Total

              103,950           118,000  
           

 

 

       

 

 

 

Less: Debt issuance cost

              878           1,257  
           

 

 

       

 

 

 

Total

              103,072           116,743  
           

 

 

       

 

 

 

Current portion of long term debt

            $ 27,708        —        $ 27,613  

Long term debt

            $ 75,364         $ 89,130  

In January 2017, WNS North America Inc. obtained from BNP Paribas, Hong Kong, a three-year term loan facility of $34,000 at an interest rate equal to the three-month US dollar LIBOR plus a margin of 1.27% per annum to finance the acquisition of Denali Sourcing Services Inc. WNS North America Inc. has pledged its shares of Denali Sourcing Services Inc. as security for the loan. In connection with the term loan, the Company has entered into an interest rate swap with a bank to swap the variable portion of the interest based on three-month US dollar LIBOR to a fixed rate of 1.5610%. The facility agreement for the term loan contains certain financial covenants as defined in the facility agreement. This term loan is repayable in six semi-annual installments. The first five repayment installments are $5,650 each and the sixth and final repayment installment is $5,750. On July 20, 2017 and January 22, 2018, the Company made scheduled repayments of $5,650 each. As at December 31, 2017, the Company has complied with the financial covenants in all material respects in relation to this loan facility.

In March 2017, WNS (Mauritius) Limited obtained from HSBC Bank (Mauritius) Ltd. and Standard Chartered Bank, UK a five-year term loan facility of $84,000 at an interest rate equal to the three-month US dollar LIBOR plus a margin of 0.95% per annum to finance the acquisition of HealthHelp. The Company has pledged its shares of WNS (Mauritius) Limited as security for the loan. In connection with the term loan, the Company has entered into interest rate swaps with banks to swap the variable portion of the interest based on three-month US dollar LIBOR to a fixed rate of 1.9635%. The facility agreement for the term loan contains certain financial covenants as defined in the facility agreement. This term loan is repayable in ten semi-annual installments of $8,400 each. On September 14, 2017, the Company repaid the first scheduled repayment of $8,400. As at December 31, 2017, the Company has complied with the financial covenants in all material respects in relation to this loan facility.

The Company has pledged trade receivables, other financial assets and property and equipment with an aggregate amount of $93,625 and $88,730 as of December 31, 2017 and March 31, 2017, respectively, as collateral for the above borrowings.

Short-term lines of credit

The Company’s Indian subsidiary, WNS Global Services Private Limited (“WNS Global”), has unsecured lines of credit with banks amounting to $63,689. The Company has also established a line of credit in the UK amounting to £9,880 ($13,352 based on the exchange rate on December 31, 2017). Further the Company has also established a line of credit in South Africa amounting to ZAR20,800 ($1,681 based on the exchange rate on December 31, 2017).

As at December 31, 2017, no amounts were drawn under these lines of credit.

 

22


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

13. Financial instruments

Financial instruments by category

The carrying value and fair value of financial instruments by class as at December 31, 2017 are as follows:

Financial assets

 

     Loans and
receivables
     Financial
assets at
FVTPL
     Derivative
designated
as cash flow
hedges (carried
at fair value)
     Available
for
sale
     Total
carrying
value
     Total
fair value
 

Cash and cash equivalents

   $ 89,664      $ —        $ —        $ —        $ 89,664      $ 89,664  

Investment in fixed deposits

     39,895        —          —          —          39,895        39,895  

Investments in marketable securities and mutual funds

     —          —          —          78,813        78,813        78,813  

Trade receivables

     67,475        —          —          —          67,475        67,475  

Unbilled revenue

     56,091        —          —          —          56,091        56,091  

Funds held for clients

     10,086        —          —          —          10,086        10,086  

Prepayments and other assets(1)

     5,449        —          —          —          5,449        5,449  

Other non-current assets(2)

     10,488        —          —          —          10,488        10,488  

Derivative assets

     —          3,407        19,148        —          22,555        22,555  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total carrying value

   $ 279,148      $ 3,407      $ 19,148      $ 78,813      $ 380,516      $ 380,516  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

 

     Financial
liabilities at
FVTPL
     Derivative
designated
as cash flow
hedges (carried
at fair value)
     Financial
liabilities at
amortized
cost
     Total
carrying
value
     Total
fair value
 

Trade payables

   $ —        $ —        $ 16,281      $ 16,281      $ 16,281  

Long term debt (includes current portion)(3)

     —          —          103,950        103,950        103,950  

Other employee obligations(4)

     —          —          47,873        47,873        47,873  

Provision and accrued expenses

     —          —          27,004        27,004        27,004  

Other liabilities(5)

     18,088        —          845        18,933        18,933  

Derivative liabilities

     177        2,909        —          3,086        3,086  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total carrying value

   $ 18,265      $ 2,909      $ 195,953      $ 217,127      $ 217,127  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Notes:

 

(1) Excluding non-financial assets $21,099.
(2) Excluding non-financial assets $30,159.
(3) Excluding non-financial asset (unamortized debt issuance cost) $878.
(4) Excluding non-financial liabilities $17,602.
(5) Excluding non-financial liabilities $14,879.

 

23


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The carrying value and fair value of financial instruments by class as at March 31, 2017 are as follows:

Financial assets

 

     Loans and
receivables
     Financial
assets at
FVTPL
     Derivative
designated
as cash flow
hedges (carried
at fair value)
     Available
for sale
     Total
carrying
value
     Total
fair value
 

Cash and cash equivalents

   $ 69,803      $ —        $ —        $ —        $ 69,803      $ 69,803  

Investment in fixed deposits

     24,673        —          —          —          24,673        24,673  

Investments in marketable securities and mutual funds

     —          —          —          87,652        87,652        87,652  

Investment in FMPs

     —          96        —          —          96        96  

Trade receivables

     60,423        —          —          —          60,423        60,423  

Unbilled revenue

     48,915        —          —          —          48,915        48,915  

Funds held for clients

     9,135        —          —          —          9,135        9,135  

Prepayments and other assets(1)

     4,262        —          —          —          4,262        4,262  

Other non-current assets(2)

     10,791        —          —          —          10,791        10,791  

Derivative assets

     —          5,041        36,941        —          41,982        41,982  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total carrying value

   $ 228,002      $ 5,137      $ 36,941      $ 87,652      $ 357,732      $ 357,732  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

 

     Financial
liabilities at
FVTPL
     Derivative
designated
as cash flow
hedges (carried
at fair value)
     Financial
liabilities at
amortized
cost
     Total
carrying
value
     Total
fair value
 

Trade payables

   $ —        $ —        $ 14,239      $ 14,239      $ 14,239  

Long term debt (includes current portion)(3)

     —          —          118,000        118,000        118,000  

Other employee obligations(4)

     —          —          46,701        46,701        46,701  

Provision and accrued expenses

     —          —          27,217        27,217        27,217  

Other liabilities(5)

     19,678        —          1,086        20,764        20,764  

Derivative liabilities

     26        4,757        —          4,783        4,783  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total carrying value

   $ 19,704      $ 4,757      $ 207,243      $ 231,704      $ 231,704  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Notes:

 

(1) Excluding non-financial assets $23,123.
(2) Excluding non-financial assets $21,153.
(3) Excluding non-financial asset (unamortized debt issuance cost) $1,257.
(4) Excluding non-financial liabilities $16,912.
(5) Excluding non-financial liabilities $13,720.

For the financial assets and liabilities subject to offsetting or similar arrangements, each agreement between the Company and the counterparty allows for net settlement of the relevant financial assets and liabilities when both elect to settle on a net basis. In the absence of such an election, financial assets and liabilities will be settled on a gross basis.

 

24


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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

Financial assets and liabilities subject to offsetting, enforceable master netting arrangements or similar agreements as at December 31, 2017 are as follows:

 

    

Gross

amounts of

    

Gross amounts

of recognized

financial

liabilities offset

in the

    

Net amounts

of financial

assets

presented in

     Related amount not set off in
financial instruments
        

Description of types of financial assets

   recognized
financial
assets
     statement of
financial
position
     the statement
of financial
position
     Financial
instruments
    Cash
collateral
received
     Net
Amount
 

Derivative assets

   $ 22,555      $ —        $ 22,555      $ (1,882   $ —        $ 20,673  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 22,555      $ —        $ 22,555      $ (1,882   $ —        $ 20,673  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
    

Gross

amounts of

    

Gross amounts

of recognized

financial assets

offset in the

    

Net amounts

of financial

liabilities

presented in

     Related amount not set off in
financial instruments
        

Description of types of financial liabilities

   recognized
financial
liabilities
     statement of
financial
position
     the statement
of financial
position
     Financial
instruments
    Cash
collateral
pledged
     Net
Amount
 

Derivative liabilities

   $ 3,086      $ —        $ 3,086      $ (1,882   $ —        $ 1,204  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 3,086      $ —        $ 3,086      $ (1,882   $ —        $ 1,204  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Financial assets and liabilities subject to offsetting, enforceable master netting arrangements or similar agreements as at March 31, 2017 are as follows:

 

    

Gross

amounts of

    

Gross amounts

of recognized

financial

liabilities offset

in the

    

Net amounts

of financial

assets

presented in

     Related amount not set off in
financial instruments
        

Description of types of financial assets

   recognized
financial
assets
     statement of
financial
position
     the statement
of financial
position
     Financial
instruments
    Cash
collateral
received
     Net
Amount
 

Derivative assets

   $ 41,982      $ —        $ 41,982      $ (1,712   $ —        $ 40,270  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 41,982      $ —        $ 41,982      $ (1,712   $ —        $ 40,270  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
    

Gross

amounts of

    

Gross amounts

of recognized

financial assets

offset in the

    

Net amounts

of financial

liabilities

presented in

     Related amount not set off in
financial instruments
        

Description of types of financial liabilities

   recognized
financial
liabilities
     statement of
financial
position
     the statement
of financial
position
     Financial
Instruments
    Cash
collateral
pledged
     Net
Amount
 

Derivative liabilities

   $ 4,783      $ —        $ 4,783      $ (1,712   $ —        $ 3,071  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 4,783      $ —        $ 4,783      $ (1,712   $ —        $ 3,071  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Fair value hierarchy

The following is the hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — other techniques for which all inputs have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3 — techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

 

25


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The assets and liabilities measured at fair value on a recurring basis as at December 31, 2017 are as follows:

 

            Fair value measurement at reporting date using  

Description

   December 31, 2017      Quoted
prices in
active
markets
for identical
assets
(Level 1)
     Significant
other
observable
inputs
(Level 2)
     Significant
unobservable
inputs
(Level 3)
 

Assets

           

Financial assets at FVTPL

           

Foreign exchange contracts

   $ 3,407      $ —        $ 3,407      $ —    

Financial assets at fair value through other comprehensive income

           

Foreign exchange contracts

     18,750        —          18,750        —    

Interest rate swaps

     398        —          398        —    

Investments in marketable securities and mutual funds

     78,813        78,345        468        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 101,368      $ 78,345      $ 23,023      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Financial liabilities at FVTPL

           

Foreign exchange contracts

   $ 177      $ —        $ 177      $ —    

Contingent consideration

     18,088        —          —          18,088  

Financial liabilities at fair value through other comprehensive income

           

Foreign exchange contracts

     2,794        —          2,794        —    

Interest rate swaps

     115        —          115        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 21,174      $ —        $ 3,086      $ 18,088  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

26


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The assets and liabilities measured at fair value on a recurring basis as at March 31, 2017 are as follows:-

 

            Fair value measurement at reporting date using  

Description

   March 31,
2017
     Quoted
prices in
active
markets
for identical
assets
(Level 1)
     Significant
other
observable
inputs
(Level 2)
     Significant
unobservable
inputs
(Level 3)
 

Assets

           

Financial assets at FVTPL

           

Foreign exchange contracts

   $ 5,041      $ —        $ 5,041      $ —    

Investment in FMPs

     96        96        —          —    

Financial assets at fair value through other comprehensive income

           

Foreign exchange contracts

     36,733        —          36,733        —    

Interest rate swaps

     208        —          208        —    

Investments in marketable securities and mutual funds

     87,652        87,223        429        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 129,730      $ 87,319      $ 42,411      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Financial liabilities at FVTPL

           

Foreign exchange contracts

   $ 26      $ —        $ 26      $ —    

Contingent consideration

     19,678        —          —          19,678  

Financial liabilities at fair value through other comprehensive income

           

Foreign exchange contracts

     4,136        —          4,136        —    

Interest rate swaps

     621        —          621        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 24,461      $ —        $ 4,783      $ 19,678  
  

 

 

    

 

 

    

 

 

    

 

 

 

Description of significant unobservable inputs to Level 3 valuation

The fair value of the contingent consideration liability was estimated using a probability weighted method and achievement of revenue target with a discount rate of 2.5%. One percentage point change in the unobservable inputs used in fair valuation of the contingent consideration does not have a significant impact on its value.

The fair value is estimated using discounted cash flow approach which involves assumptions and judgments regarding risk characteristics of the instruments, discount rates, future cash flows and foreign exchange spot, forward premium rates and market rates of interest.

During the nine months ended December 31, 2017 and the year ended March 31, 2017, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Fair value on a non-recurring basis as at March 31, 2017

The non-recurring fair value measurement for the Auto Claim BPM CGU of $38,492 (before cost of disposal of $656) has been categorized as Level 3 fair value based on the inputs to the valuation technique used.

Derivative financial instruments

The primary risks managed by using derivative instruments are foreign currency exchange risk and interest rate risk. Forward and option contracts up to 24 months on various foreign currencies are entered into to manage the foreign currency exchange rate risk on forecasted revenue denominated in foreign currencies and monetary assets and liabilities held in non-functional currencies. Interest rate swaps are entered to manage interest rate risk associated with the Company’s floating rate borrowings. The Company’s primary exchange rate exposure is with the US dollars and pound sterling against the Indian rupee. For derivative instruments which qualify for cash flow hedge accounting, the Company records the effective portion of gain or loss from changes in the fair value of the derivative instruments in other comprehensive income (loss), which is reclassified into earnings in the same period during which the hedged item affects earnings. Derivative instruments qualify for hedge accounting when the instrument is designated as a hedge; the hedged item is specifically identifiable and exposes the Company to risk; and it is expected that a change in fair value of the derivative instrument and an opposite change in the fair value of the hedged item will have a high degree of correlation. Determining the high degree of correlation between the change in fair value of the hedged item and the derivative instruments involves significant judgment including the probability of the occurrence of the forecasted transaction. When it is highly probable that a forecasted transaction will not occur, the Company discontinues the hedge accounting and recognizes immediately in the consolidated statement of income, the gains and losses attributable to such derivative instrument that were accumulated in other comprehensive income (loss).

 

27


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The following table presents the notional values of outstanding foreign exchange forward contracts, foreign exchange option contracts and interest rate swap contracts:

 

     As at  
     December 31,
2017
     March 31,
2017
 

Forward contracts (Sell)

     

In US dollars

   $ 251,370      $ 241,673  

In United Kingdom pound sterling

     136,278        126,441  

In Euro

     22,170        14,769  

In Australian dollars

     51,922        43,474  

Others

     3,352        3,511  
  

 

 

    

 

 

 
   $ 465,092      $ 429,868  
  

 

 

    

 

 

 

Option contracts (Sell)

     

In US dollars

   $ 99,009      $ 84,490  

In United Kingdom pound sterling

     110,419        94,094  

In Euro

     20,917        14,494  

In Australian dollars

     25,612        19,412  

Others

     1,239        1,978  
  

 

 

    

 

 

 
   $ 257,196      $ 214,468  
  

 

 

    

 

 

 

Interest Rate Swap contracts

     

In US dollars

     103,950        118,000  

The amount of gain/ (loss) reclassified from other comprehensive income into consolidated statement of income in respective line items for the three and nine months ended December 31, 2017 and 2016 are as follows:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Revenue

   $ 2,405      $ 2,199      $ 9,313      $ 5,696  

Foreign exchange gain/(loss), net

     3,969        4,863        13,581        11,165  

Finance expense

     (130      —          (512      —    

Income tax related to amounts reclassified into statement of income

     (2,347      (2,536      (8,339      (6,100
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,897      $ 4,526      $ 14,043      $ 10,761  
  

 

 

    

 

 

    

 

 

    

 

 

 

As at December 31, 2017, a gain amounting to $7,202 on account of cash flow hedges in relation to forward and option contracts entered is expected to be reclassified from other comprehensive income into consolidated statement of income over a period of 24 months and a gain amounting to $279 on account of cash flow hedges in relation to interest rate swaps is expected to be reclassified from other comprehensive income into consolidated statement of income over a period of 51 months.

Due to the discontinuation of cash flow hedge accounting on account of non-occurrence of original forecasted transactions by the end of the originally specified time period, the Company recognized in the consolidated statement of income a gain of nil each for the three months ended December 31, 2017 and 2016, and a loss of $20 and a gain of $666 for the nine months ended December 31, 2017 and 2016, respectively.

 

28


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

14. Pension and other employee obligations

Pension and other employee obligations consist of the following:

 

     As at  
     December 31,
2017
     March 31,
2017
 

Current:

     

Salaries and bonus

   $ 47,873      $ 46,701  

Pension

     1,084        770  

Withholding taxes on salary and statutory payables

     5,990        5,462  
  

 

 

    

 

 

 

Total

   $ 54,947      $ 52,933  
  

 

 

    

 

 

 

Non-current:

     

Pension and other obligations

   $ 10,528      $ 10,680  
  

 

 

    

 

 

 

Total

   $ 10,528      $ 10,680  
  

 

 

    

 

 

 

 

15. Provisions and accrued expenses

Provisions and accrued expenses consist of the following:

 

     As at  
     December 31,
2017
     March 31,
2017
 

Accrued expenses

     27,004        27,217  
  

 

 

    

 

 

 

Total

   $ 27,004      $ 27,217  
  

 

 

    

 

 

 

 

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Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

16. Deferred revenue

Deferred revenue consists of the following:

 

     As at  
     December 31,
2017
     March 31,
2017
 

Current:

     

Payments in advance of services

   $ 1,030      $ 717  

Advance billings

     2,037        4,014  

Others

     680        747  
  

 

 

    

 

 

 

Total

   $ 3,747      $ 5,478  
  

 

 

    

 

 

 

 

     As at  
     December 31,
2017
     March 31,
2017
 

Non-current:

     

Payments in advance of services

   $ 1,029      $ 359  

Others

     19        19  
  

 

 

    

 

 

 

Total

   $ 1,048      $ 378  
  

 

 

    

 

 

 

 

17. Other liabilities

Other liabilities consist of the following:

 

     As at  
     December 31,
2017
     March 31,
2017
 

Current:

     

Withholding taxes and value added tax payables

   $ 5,289      $ 5,356  

Contingent consideration (Refer note 4(a), 4(b) and 4(c))

     8,349        8,252  

Deferred rent

     739        677  

Other liabilities

     1,519        1,730  
  

 

 

    

 

 

 

Total

   $ 15,896      $ 16,015  
  

 

 

    

 

 

 

Non-current:

     

Deferred rent

   $ 6,270      $ 5,292  

Contingent consideration (Refer note 4(a), 4(b) and 4(c))

     9,739        11,426  

Other liabilities

     1,907        1,751  
  

 

 

    

 

 

 

Total

   $ 17,916      $ 18,469  
  

 

 

    

 

 

 

 

30


Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

18. Share capital

As at December 31, 2017, the authorized share capital was £6,100 divided into 60,000,000 ordinary shares of 10 pence each and 1,000,000 preferred shares of 10 pence each. The Company had 50,301,978 ordinary shares (excluding 4,400,000 treasury shares) outstanding as at December 31, 2017. There were no preferred shares outstanding as at December 31, 2017.

As at March 31, 2017, the authorized share capital was £6,100 divided into 60,000,000 ordinary shares of 10 pence each and 1,000,000 preferred shares of 10 pence each. The Company had 50,012,559 ordinary shares (excluding 3,300,000 treasury shares) outstanding as at March 31, 2017. There were no preferred shares outstanding as at March 31, 2017.

Treasury shares

On March 16, 2016, the Company’s shareholders authorized a share repurchase program for the repurchase of up to 3,300,000 of the Company’s ADSs at a price range of $10 to $50 per ADS. Pursuant to the terms of the repurchase program, the Company’s ADSs may be purchased in the open market from time to time for 36 months from March 16, 2016, the date of shareholders’ approval. The Company is not obligated under the repurchase program to repurchase a specific number of ADSs, and the repurchase program may be suspended at any time at the Company’s discretion.

During the year ended March 31, 2017, the Company purchased 2,200,000 ADSs in the open market for a total consideration of $64,224 (including transaction costs of $33 for share repurchase of 2,200,000 ADSs, $111 paid towards cancellation fees for ADSs in relation to share repurchase of 2,200,000 ADSs which was completed during the year ended March 31, 2017, and $55 paid towards cancellation fees for ADSs in relation to share repurchase of 1,100,000 ADSs, which was completed during the year ended March 31, 2016). The shares underlying these purchased ADSs are recorded as treasury shares.

During the nine months ended December 31, 2017, the Company purchased 1,100,000 ADSs in the open market for a total consideration of $39,546 (including transaction costs of $17). The shares underlying these purchased ADSs are recorded as treasury shares.

 

19. Expenses by nature

Expenses by nature consist of the following:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Employee cost

   $ 111,837      $ 81,852      $ 335,174      $ 247,023  

Repair payments

     3,437        5,590        12,480        18,830  

Facilities cost

     21,771        19,011        65,600        55,646  

Depreciation

     4,935        4,093        14,911        12,478  

Legal and professional expenses

     5,579        3,442        16,293        9,801  

Travel expenses

     6,030        4,784        17,695        14,415  

Others

     9,765        8,096        29,588        25,789  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cost of revenue, selling and marketing and general and administrative expenses

   $ 163,354      $ 126,868      $ 491,741      $ 383,982  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20. Finance expense

Finance expense consists of the following:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Interest expense

   $ 728      $ 33      $ 2,226      $ 131  

Interest rate swaps

     130        —          512        —    

Debt issue cost

     118        —          377        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 976      $ 33      $ 3,115      $ 131  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

21. Other income, net

Other income, net consists of the following:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Interest income

   $ 934      $ 516      $ 2,640      $ 1,513  

Dividend income

     835        877        2,381        3,148  

Net gain/(loss) arising on financial assets designated as FVTPL

     —          1        3        4  

Others, net

     704        846        2,652        1,980  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,473      $ 2,240      $ 7,676      $ 6,645  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

22. Share-based payments

The Company has three share-based incentive plans: the 2002 Stock Incentive Plan adopted on July 1, 2002 (which has expired), the 2006 Incentive Award Plan adopted on June 1, 2006, as amended and restated in February 2009, September 2011 and September 2013 (which has expired), and the 2016 Incentive Award Plan effective from September 27, 2016 (collectively referred to as the “Plans”). All these plans are equity-settled. Under these plans, share-based options and RSUs may be granted to eligible participants. Options and RSUs are generally granted for a term of ten years and have a graded vesting period of up to four years. The Company settles employee share-based option exercises with newly issued ordinary shares. As at December 31, 2017, the Company had 2,505,095 ordinary shares available for future grants.

Share-based compensation expense during the three and nine months ended December 31, 2017 and 2016 is as follows:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Share-based compensation expense recorded in

           

Cost of revenue

   $ 972      $ 559      $ 3,017      $ 1,943  

Selling and marketing expenses

     650        385        2,005        1,183  

General and administrative expenses

     5,555        4,165        18,484        13,338  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total share-based compensation expense

   $ 7,177      $ 5,109      $ 23,506      $ 16,464  
  

 

 

    

 

 

    

 

 

    

 

 

 

Upon exercise of share options and RSUs, the Company issued 154,902 and 19,954 shares for the three months ended December 31, 2017 and 2016, respectively, and 1,389,419 and 839,129 shares for the nine months ended December 31, 2017 and 2016, respectively.

BBBEE program in South Africa

During the nine months ended December 31, 2017, the Company’s South African subsidiary issued share appreciation rights to certain of its employees to be settled through the Company’s shares on the fourth anniversary of the grant date. As part of the settlement, the Company has granted such grantees 32,050 RSUs which shall vest on the fourth anniversary of the grant date, subject to such grantee’s continued employment with the Company through the applicable vesting date. The grant date fair value was estimated using a binomial lattice model. The total stock compensation expense in relation to these RSUs was $3,040 to be amortized over the vesting period of four years. The stock compensation expense charged during the three months and nine months ended December 31, 2017 was $190 and $357, respectively.

RSUs related to Total Shareholder’s Return (‘TSR’)

During the nine months ended December 31, 2017, the Company has issued 135,630 RSUs to certain employees. The conditions for the vesting of these RSUs are linked to the TSR of the Company in addition to the condition of continued employment with the Company through the applicable vesting period.

The performance of these RSUs shall be assessed based on the TSR of the custom peer group (based on percentile rank) and the industry index (based on outperformance rank). The RSUs granted with the TSR condition, shall vest on the third anniversary of the grant date, subject to the participant’s continued employment with the Company through the applicable vesting date and achievement of the specified conditions of stock performance and total shareholder return parameters.

The fair value of these RSUs is determined using Monte-Carlo simulation. The grant date fair value was determined at $36.52. The stock compensation expense charged during the three months and nine months ended December 31, 2017 was $373 and $1,009, respectively. As at December 31, 2017, there was $3,945 of unrecognized compensation cost related to these RSUs.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

23. Income taxes

The domestic and foreign source component of profit/ (loss) before income taxes is as follows:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Domestic

   $ (1,461    $ (1,599    $ (4,562    $ (4,329

Foreign

     28,639        24,406        74,614        61,254  
  

 

 

    

 

 

    

 

 

    

 

 

 

Profit before income taxes

   $ 27,178      $ 22,807      $ 70,052      $ 56,925  
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s provision for income taxes consists of the following:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Current taxes

           

Domestic taxes

   $ —        $ —        $ —        $ —    

Foreign taxes

     6,950        6,761        14,766        19,711  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 6,950      $ 6,761      $ 14,766      $ 19,711  
  

 

 

    

 

 

    

 

 

    

 

 

 

Deferred taxes

           

Domestic taxes

     —          —          —          —    

Foreign taxes

     (6,058      (1,932      (6,622      (5,526
  

 

 

    

 

 

    

 

 

    

 

 

 
     (6,058      (1,932      (6,622      (5,526
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 892      $ 4,829      $ 8,144      $ 14,185  
  

 

 

    

 

 

    

 

 

    

 

 

 

Domestic taxes are nil as there are no statutory taxes applicable in Jersey, Channel Islands. Foreign taxes are based on applicable tax rates in each subsidiary’s jurisdiction.

On July 27, 2017, National Company Law Tribunal in India approved the scheme of amalgamation of Value Edge Research Services Limited (Value Edge) and WNS Global Services Private Limited (WNS India). The legal merger resulted in the creation of a tax base of goodwill and certain other identifiable intangible assets in the financial statements of WNS India. WNS India is entitled to claim a tax benefit for amortization of goodwill and intangible assets in its future tax returns. The Company had previously recorded a deferred tax liability for temporary differences between the tax base of identifiable intangible assets and its carrying amount in the Company’s consolidated financial statements upon the acquisition of Value Edge. As a result, the carrying value of such liability as at the effective date of the scheme of amalgamation, amounting to $1,686, was derecognized during the nine months ended December 31, 2017.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

Provision (credit) for income taxes has been allocated as follows:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Income taxes on profit

   $ 892      $ 4,829      $ 8,144      $ 14,185  

Income taxes on other comprehensive income/(loss):

           

Unrealized gain on cash flow hedging derivatives

     655        1,019        (6,299      6,033  

Income taxes recognized in equity

           

Excess tax deductions related to share-based options and RSUs

     140        189        (583      751  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total income taxes

   $ 1,687      $ 6,037      $ 1,262      $ 20,969  
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company in fiscal 2012 started operations in delivery centers in Pune, Mumbai and Chennai, India registered under the Special Economic Zone (“SEZ”) scheme. These operations were eligible for a 100% income tax exemption until fiscal 2016 and are eligible for a 50% income tax exemption from fiscal 2017 to fiscal 2026. During fiscal 2015, the Company started these operations in new delivery centers in Gurgaon and Pune, India registered under the SEZ scheme. These operations are eligible for a 100% income tax exemption until fiscal 2019, and a 50% income tax exemption from fiscal 2020 to fiscal 2029. During the nine months ended December 31, 2017, the Company started its operations in new delivery center in Gurgaon, India registered under the SEZ scheme that are eligible for a 100% income tax exemption until fiscal 2022, and a 50% income tax exemption from fiscal 2023 to fiscal 2032. The Government of India pursuant to the Indian Finance Act, 2011 has also levied a minimum alternate tax (“MAT”) on the book profits earned by the SEZ units at the prevailing rate which is currently 21.34%. The Company’s operations in Costa Rica are eligible for a 50% income tax exemption from fiscal 2018 to fiscal 2021. During fiscal 2013, the Company started operations in a delivery center in Techno Plaza II, Manila which was eligible for a tax exemption that expired in fiscal 2017. During fiscal 2016, the Company started its operations in a new delivery center in the Philippines which is eligible for a tax exemption until fiscal 2020. During fiscal 2017, the Company opened two additional delivery centers in Iloilo and Alabang, Philippines which are eligible for a 100% tax exemption until fiscal 2021. During the nine months ended December 31, 2017, the Company opened an additional delivery center in Iloilo, Philippines which is eligible for a 100% tax exemption until fiscal 2022. The Government of Sri Lanka has exempted the profits earned from export revenue from tax, which enables the Company’s Sri Lankan subsidiary to continue to claim a tax exemption till fiscal 2018 and would be taxed at 14% on net basis with effect from April 1, 2018.

The “Tax Cuts and Jobs Act of 2017” (the “2017 US tax reforms”) was enacted on December 22, 2017 with an effective date of January 1, 2018. The reduction in the corporate tax rate from 35% to 21% will have an impact on the various current and deferred tax items recorded by the Company’s subsidiaries. At December 31, 2017, the Company has not completed its initial accounting for the tax effects of the Act. However, a reasonable estimate of the effects of such enactment has been made by recognizing a net one-time provisional tax benefit of $5.2 million, primarily resulting from the adjustments to its deferred tax balances arising from intangibles, stock compensation, losses and accruals and transition tax on undistributed earnings of foreign subsidiaries. A provisional amount of $5.2 million has been included as a component of our income tax expense for the three months and nine months ended December 31, 2017, thereby reducing the effective tax rate by 19. 1% and 7.41% for the three and nine months ended December 31, 2017, respectively. The Company is still analyzing certain aspects of the Act and refining its calculations, and expects to update these provisional amounts during the measurement period as additional information is obtained, prepared and analyzed.

From time to time, the Company receives orders of assessment from the Indian tax authorities assessing additional taxable income on the Company and/or its subsidiaries in connection with their review of their tax returns. The Company currently has orders of assessment outstanding for various years through fiscal 2014, which assess additional taxable income that could in the aggregate give rise to an estimated $41,386 in additional taxes, including interest of $13,606. These orders of assessment allege that the transfer prices the Company applied to certain of the international transactions between WNS Global and its other wholly-owned subsidiaries were not on arm’s length terms, disallow a tax holiday benefit claimed by the Company, deny the set off of brought forward business losses and unabsorbed depreciation and disallow certain expenses claimed as tax deductible by WNS Global. The Company has appealed against these orders of assessment before higher appellate authorities.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

In addition, the Company has orders of assessment pertaining to similar issues that have been decided in favor of the Company by first level appellate authorities, vacating the tax demands of $45,767 in additional taxes, including interest of $14,130. The income tax authorities have filed appeals against these orders at higher appellate authorities.

Uncertain tax positions are reflected at the amount likely to be paid to the taxation authorities. A liability is recognized in connection with each item that is not probable of being sustained on examination by taxing authority. The liability is measured using single best estimate of the most likely outcome for each position taken in the tax return. Thus, the provision would be the aggregate liability in connection with all uncertain tax positions. As at December 31, 2017, the Company has provided a tax reserve of $12,622 primarily on account of the Indian tax authorities’ denying the set off of brought forward business losses and unabsorbed depreciation.

As at December 31, 2017, corporate tax returns for years ended March 31, 2015 (for certain legal entities) and onward remain subject to examination by tax authorities in India.

Based on the facts of these cases, the nature of the tax authorities’ disallowances and the orders from first level appellate authorities deciding similar issues in favor of the Company in respect of assessment orders for earlier fiscal years and after consultation with the Company’s external tax advisors, the Company believe these orders are unlikely to be sustained at the higher appellate authorities. The Company has deposited $13,410 of the disputed amounts with the tax authorities and may be required to deposit the remaining portion of the disputed amounts with the tax authorities pending final resolution of the respective matters.

Others

In 2009, the Company received an assessment order from the Indian service tax authority, demanding payment of $5,450 of service tax and related penalty for the period from March 1, 2003 to January 31, 2005. The assessment order alleges that service tax is payable in India on BPM services provided by the Company to clients based abroad as the export proceeds are repatriated outside India by the Company. In response to the appeal filed by the Company with appellate tribunal against the assessment order, the appellate tribunal has remanded the matter back to lower tax authorities to be adjudicated afresh. After consultation with Indian tax advisors, the Company believes this order of assessment is more likely than not to be upheld in favor of the Company. The Company intends to continue to vigorously dispute the assessment.

 

24. Earnings per share

The following table sets forth the computation of basic and diluted earnings per share:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Numerator:

           

Profit

   $ 26,286      $ 17,978      $ 61,908      $ 42,739  

Denominator:

           

Basic weighted average ordinary shares outstanding

     50,238,903        50,165,675        50,397,032        50,784,531  

Dilutive impact of equivalent share-based options and RSUs

     1,732,016        1,617,079        2,201,016        1,913,957  

Diluted weighted average ordinary shares outstanding

     51,970,919        51,782,755        52,598,048        52,698,488  

The computation of earnings per ordinary share (“EPS”) was determined by dividing profit by the weighted average ordinary shares outstanding during the respective periods.

The Company excluded from the calculation of diluted EPS options and RSUs to purchase 29,875 and 47,233 shares for the three months ended December 31, 2017 and 2016, respectively, and 29,875 and 19,200 shares for the nine months ended December 31, 2017 and 2016, respectively, because their effect will be anti-dilutive.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

25. Subsidiaries

The following is a list of subsidiaries of WNS as at December 31, 2017:

 

Direct subsidiaries

 

Step subsidiaries

   Place of
Incorporation
WNS Global Services Netherlands Cooperatief U.A.      The Netherlands
  WNS Global Services Philippines Inc.    Philippines
  WNS Global Services (Romania) S.R.L.    Romania
WNS North America Inc.      Delaware, USA
  WNS Business Consulting Services Private Limited    India
  WNS Global Services Inc.    Delaware, USA
  WNS BPO Services Costa Rica, S.R.L    Costa Rica
  Denali Sourcing Services Inc.(1)    Delaware, USA
WNS Global Services (UK) Limited(2)      United Kingdom
  WNS Global Services SA (Pty) Limited    South Africa
 

- WNS B-BBEE Staff Share Trust(3)

   South Africa
 

- Ucademy (Pty) Limited(4)

   South Africa
WNS Assistance Limited (previously WNS Workflow Technologies Limited)      United Kingdom
  WNS Assistance (Legal) Limited(5)    United Kingdom
  Accidents Happen Assistance Limited    United Kingdom
  WNS Legal Assistance LLP(6)    United Kingdom
WNS (Mauritius) Limited      Mauritius
  WNS Capital Investment Limited    Mauritius
 

- WNS Customer Solutions (Singapore) Private Limited

   Singapore
 

- WNS Global Services (Australia) Pty Ltd

   Australia
 

- WNS New Zealand Limited(7)

   New Zealand
 

- Business Applications Associates Beijing Ltd

   China
  WNS Global Services Private Limited(8)    India
 

- MTS HealthHelp Inc.(9)

   Delaware, USA
 

- HealthHelp Holdings LLC(9)

   Delaware, USA
 

- HealthHelp LLC(9)

   Delaware, USA
 

- Value Edge Inc.(10)

   Delaware, USA
 

- Value Edge AG.(10)

   Switzerland
 

- Value Edge GmbH(10)

   Germany
  WNS Global Services (Private) Limited    Sri Lanka
  WNS Global Services (Dalian) Co. Ltd.    China

Notes:

 

(1) On January 20, 2017, the Company acquired all outstanding equity shares of Denali Sourcing Services Inc.
(2) WNS Global Services (UK) is jointly held by WNS Holdings Limited and WNS Global Services Private Limited. The percentage of holding of WNS Holdings Limited is 49.3% and of WNS Global Services Private Limited is 50.7%.
(3) The WNS B-BBEE Staff Share Trust (‘the trust’) was registered on April 26, 2017 in relation to the grant of share appreciation rights by WNS Global Services SA (Pty) Limited. The trust holds 10% of the equity capital of WNS Global Services SA (Pty) Limited and the balance 90% is held by WNS Global Services (UK) Limited.
(4) Ucademy (Pty) Limited has been incorporated as a subsidiary of WNS Global Services SA (Pty) Limited with effect from June 20, 2016.
(5) WNS Assistance (Legal) Limited, a wholly owned subsidiary of WNS Assistance Limited, was incorporated on April 20, 2016.
(6) WNS Legal Assistance LLP is a limited liability partnership, organized under the laws of England and Wales in November 2014. WNS Legal Assistance LLP provides legal services in relation to personal injury claims within the Auto Claims BPM (as defined in Note 26) segment in the UK. During the nine months ended December 31, 2017, the Company acquired 20% of the equity capital of WNS Legal Assistance LLP from Prettys Solicitors (the non-controlling interest in WNS Legal Assistance LLP) as a consequence of which, WNS Legal Assistance LLP has become a wholly owned subsidiary of WNS Assistance Limited. As at December 31, 2017, WNS Legal Assistance LLP is 98.75% owned by WNS Assistance Limited and 1.25% owned by WNS Assistance (Legal) Limited.
(7) WNS New Zealand Limited, a wholly owned subsidiary of WNS Global Services (Australia) Pty Ltd, was incorporated on June 13, 2017.
(8) WNS Global Services Private Limited is held jointly by WNS (Mauritius) Limited and WNS Customer Solutions (Singapore) Private Limited. The percentage of holding for WNS (Mauritius) Limited is 80% and for WNS Customer Solutions (Singapore) Private Limited is 20%.
(9) On March 15, 2017, the Company acquired all ownership interests of MTS HealthHelp Inc. and its subsidiaries, which existed on that date. HealthHelp Holdings LLC is 63.7% owned by MTS HealthHelp Inc. and 36.3% owned by WNS North America Inc.
(10) On June 14, 2016, the Company acquired all outstanding equity shares of Value Edge Research Services Private Limited. As part of the acquisition, the Company also acquired the three subsidiaries of Value Edge Research Services Private Limited, which existed on that date. Value Edge Research Services Private Limited was merged with WNS Global Services Private Limited pursuant to the Scheme of Amalgamation approved by the National Company Law Tribunal on July 27, 2017.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

26. Operating segments

The Company has several operating segments based on a mix of industry and the types of services. The composition and organization of these operating segments currently is designed in such a way that the back office shared processes, i.e. the horizontal structure, delivers service to industry specific back office and front office processes i.e. the vertical structure. These structures represent a matrix form of organization structure, accordingly operating segments have been determined based on the core principle of segment reporting in accordance with IFRS 8 “Operating segments” (“IFRS 8”). These operating segments include travel, insurance, banking and financial services, healthcare, utilities, retail and consumer products groups, auto claims and others. The Company believes that the business process outsourcing services that it provides to customers in industries other than auto claims such as travel, insurance, banking and financial services, healthcare, utilities, retail and consumer products groups and others that are similar in terms of services, service delivery methods, use of technology, and long-term gross profit and hence meet the aggregation criteria in accordance with IFRS 8. WNS Assistance Limited and Accidents Happen Assistance Limited (which provide automobile repair through a network of third party repair centers), and WNS Legal Assistance LLP (which provides legal services in relation to personal injury claims), which constitute WNS Auto Claims BPM, do not meet the aggregation criteria. Accordingly, the Company has determined that it has two reportable segments “WNS Global BPM” and “WNS Auto Claims BPM.”

The Group Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”). The CODM evaluates the Company’s performance and allocates resources based on revenue growth of vertical structure.

In order to provide accident management services, the Company arranges for the repair through a network of repair centers. Repair costs paid to automobile repair centers are invoiced to customers and recognized as revenue except in cases where the Company has concluded that it is not the principal in providing claims handling services and hence it would be appropriate to record revenue from repair services on a net basis, i.e. net of repair cost. The Company uses revenue less repair payments (non-GAAP) 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 (a) revenue less (b) in the Company’s auto claims business, payments to repair centers for “Fault” repair cases where the Company acts as the principal in its dealings with the third party repair centers and its clients. 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.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The segment results for the three months ended December 31, 2017 are as follows:

 

     Three months ended December 31, 2017  
     WNS
Global BPM
     WNS Auto
Claims BPM
     Inter
segments*
     Total  

Revenue from external customers

   $ 180,600      $ 7,998      $ —        $ 188,598  

Segment revenue

   $ 180,604      $ 7,998      $ (4    $ 188,598  

Payments to repair centers

     —          3,436        —          3,436  
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue less repair payments (non-GAAP)

     180,604        4,562        (4      185,162  

Depreciation

     4,865        69        —          4,934  

Other costs

     139,095        4,352        (4      143,443  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment operating profit

     36,644        141        —          36,785  

Other income, net

     (2,337      (136      —          (2,473

Finance expense

     976        —          —          976  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit before income taxes

     38,005        277        —          38,282  

Provision for income taxes

     869        23        —          892  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit

     37,136        254        —          37,390  

Amortization of intangible assets

              3,927  

Share based compensation expense

              7,177  
           

 

 

 

Profit

            $ 26,286  
           

 

 

 

Addition to non-current assets

   $ 7,221      $ 36      $ —        $ 7,257  

Total assets, net of elimination

     618,437        122,202        —          740,639  

Total liabilities, net of elimination

   $ 189,624      $ 80,085      $ —        $ 269,709  

 

* Transactions between inter segments represent invoices issued by WNS Global BPM to WNS Auto Claims BPM for business process management services rendered by the former to the latter.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The segment results for the three months ended December 31, 2016 are as follows:

 

     Three months ended December 31, 2016  
     WNS
Global BPM
     WNS Auto
Claims BPM
     Inter
segments*
     Total  

Revenue from external customers

   $ 135,007      $ 10,429      $ —        $ 145,436  

Segment revenue

   $ 135,012      $ 10,429      $ (5    $ 145,436  

Payments to repair centers

     —          5,591        —          5,591  
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue less repair payments (non-GAAP)

     135,012        4,838        (5      139,845  

Depreciation

     4,021        72        —          4,093  

Other costs

     101,362        4,557        (5      105,914  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment operating profit

     29,629        209        —          29,838  

Other income, net

     (2,034      (206      —          (2,240

Finance expense

     33        —          —          33  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit before income taxes

     31,630        415        —          32,045  

Provision for income taxes

     4,763        66        —          4,829  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit

     26,867        349        —          27,216  

Amortization of intangible assets

              4,129  

Share based compensation expense

              5,109  
           

 

 

 

Profit

            $ 17,978  
           

 

 

 

Addition to non-current assets

   $ 2,442      $ (38    $ —        $ 2,404  

Total assets, net of elimination

     380,422        136,492        —          516,914  

Total liabilities, net of elimination

   $ 47,341      $ 74,803      $ —        $ 122,144  

 

* Transactions between inter segments represent invoices issued by WNS Global BPM to WNS Auto Claims BPM for business process management services rendered by the former to the latter.

The segment results for the nine months ended December 31, 2017 are as follows:

 

     Nine months ended December 31, 2017  
     WNS
Global BPM
     WNS Auto
Claims BPM
     Inter
segments*
     Total  

Revenue from external customers

   $ 529,122      $ 26,124      $ —        $ 555,246  

Segment revenue

   $ 529,163      $ 26,124      $ (41    $ 555,246  

Payments to repair centers

     —          12,480        —          12,480  
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue less repair payments (non-GAAP)

     529,163        13,644        (41      542,766  

Depreciation

     14,705        205        —          14,910  

Other costs

     414,510        12,844        (41      427,313  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment operating profit

     99,948        595        —          100,543  

Other income, net

     (6,879      (797      —          (7,676

Finance expense

     3,115        —          —          3,115  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit before income taxes

     103,712        1,392        —          105,104  

Provision for income taxes

     7,959        185        —          8,144  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit

     95,753        1,207        —          96,960  

Amortization of intangible assets

              11,546  

Share based compensation expense

              23,506  
           

 

 

 

Profit

            $ 61,908  
           

 

 

 

Addition to non-current assets

   $ 23,912      $ 231      $ —        $ 24,143  

Total assets, net of elimination

     618,437        122,202        —          740,639  

Total liabilities, net of elimination

   $ 189,624      $ 80,085      $ —        $ 269,709  

 

* Transactions between inter segments represent invoices issued by WNS Global BPM to WNS Auto Claims BPM for business process management services rendered by the former to the latter.

 

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WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

The segment results for the nine months ended December 31, 2016 are as follows:

 

     Nine months ended December 31, 2016  
     WNS
Global BPM
     WNS Auto
Claims BPM
     Inter
segments*
     Total  

Revenue from external customers

   $ 408,646      $ 34,528      $ —        $ 443,174  

Segment revenue

   $ 408,710      $ 34,528      $ (64    $ 443,174  

Payments to repair centers

     —          18,831        —          18,831  
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue less repair payments (non-GAAP)

     408,710        15,697        (64      424,343  

Depreciation

     12,245        233        —          12,478  

Other costs

     312,150        15,295        (64      327,381  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment operating profit

     84,315        169        —          84,484  

Other income, net

     (6,042      (603      —          (6,645

Finance expense

     131        —          —          131  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit before income taxes

     90,226        772        —          90,998  

Provision for income taxes

     14,053        132        —          14,185  
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profit

     76,173        640        —          76,813  

Amortization of intangible assets

              17,610  

Share-based compensation expense

              16,464  
           

 

 

 

Profit

            $ 42,739  
           

 

 

 

Addition to non-current assets

   $ 18,630      $ 405      $ —        $ 19,035  

Total assets, net of elimination

     380,422        136,492        —          516,914  

Total liabilities, net of elimination

   $ 47,341      $ 74,803      $ —        $ 122,144  

 

* Transactions between inter segments represent invoices issued by WNS Global BPM to WNS Auto Claims BPM for business process management services rendered by the former to the latter.

External Revenue

Revenues from the geographic segments are based on the domicile of the customer. The Company’s external revenue by geographic area is as follows:

 

     Three months ended December 31,      Nine months ended December 31,  
     2017      2016      2017      2016  

Jersey, Channel Islands

   $ —        $ —        $ —        $ —    

US

     76,814        46,279        225,516        140,235  

UK

     60,650        59,794        190,658        188,500  

Australia

     19,475        12,355        49,833        34,496  

Europe (excluding UK)

     13,100        9,856        34,688        27,968  

South Africa

     10,378        10,604        31,682        30,512  

Rest of the world

     8,181        6,548        22,869        21,463  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 188,598      $ 145,436      $ 555,246      $ 443,174  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

WNS (HOLDINGS) LIMITED

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

 

27. Commitment and Contingencies

Leases

The Company has entered into various non-cancelable operating lease agreements for certain delivery centers and offices with original lease periods expiring between 2018 and 2028 that are renewable on a periodic basis at the option of the lessor and the lessee and have rent escalation clause. The details of future minimum lease payments under non-cancelable operating leases as at December 31, 2017 are as follows:

 

     Operating lease  

Less than 1 year

   $ 26,135  

1-3 years

     42,853  

3-5 years

     24,563  

More than 5 years

     25,434  
  

 

 

 

Total minimum lease payments

   $ 118,985  
  

 

 

 

Rental expenses were $8,370 and $7,120 for the thr