Security and Intelligence Services (India) Limited has informed the Exchange regarding Investor Presentation
M
Leader in security
Date: July 24, 2019
National Stock Exchange of India Limited Exchange Plaza C-l, Block G, Bandra Kurla Complex, Bandra (E), Mumbai-400051
BSE Limited Phiroze Jeejeebhoy Towers Dalal Street
Mumbai-400001
NSE Symbol: SIS
Dear Sir/Madam,
BSE Code: 540673
Sub.: Investor presentation on Financial Results for Q1 FY20
Pursuant to the provisions of Regulation 30 of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, please find enclosed the presentation on financial results for
the quarter ended June 30, 2019.
This is for your information and records.
Thanking you.
Yours Faithfully, For Security and Intelligence Services (India) Limited
#1111ng
Pushpalatha K Company Secretary
SIS Group
Earnings Update Q1 – FY19-20 July 24, 2019
Q1FY19-20 Highlights
Q1 FY20 Earnings
2008 cr REVENUES
125 cr EBITDA
75 cr PAT
Rs 10.2 EPS
24.6% YoY
67.5% YoY
90% YoY
90% YoY
Notes from the Group Managing Director
Healthy growth despite economic headwinds
Q1 of FY20 continued our strong track record of quarter on quarter growth. Strong client wins, great execution focus and a rigorous eye on costs have helped all the business units deliver good revenue and profitability metrics. Our consolidated revenues increased from Rs1955 cr in Q4 of FY19 to Rs2008 cr in Q1 of FY20. This is a QoQ increase of 2.7% in revenues and a YoY increase of 24.6%.
Similarly, our EBITDA increased from Rs115 cr in Q4 of FY19 to Rs125 cr in Q1 of FY20, which is a QoQ increase of 8.8% and a YoY increase of 67.7%. The EBITDA increase has been the result of operating leverage across segments. SIS International margin has seen a significant uptick due to the margin accretive nature of the recent acquisitions.
Predictability re-inforced
While the broader economy has been seeing headwinds, we are buffeted from the storms by being in service streams where the nature of demand is largely recession resistant.
We ended Q1FY20 with a monthly run rate to Rs.670 cr. Over the last 9 quarters our revenues have grown at a quarterly CAGR of 6.2% and our EBITDA has shown a quarterly CAGR of 8.1% over this period. This pace and consistency of growth is a testament to the predictability that underpins SIS’ business model.
Integration of newly acquired entities – on track
In line with our strategy to focus on our core verticals, we completed five acquisitions during FY19, we have spent considerable effort over the past few months in integration and consolidation and we are proud that all the new entrants to the SIS family have become an integral part of the SIS group. All the entities are growing as per plan and contributing to margin improvement. We have also completed the last tranche
Rituraj Sinha Managing Director
“2000 cr quarter –off to solid start in challenging environment”
1. Comments from Managing Director 02
2.
India Security 04
3.
International Security 05
4. Facility Management 06
5. Cash Logistics 07
6. DTSS Deal Review 08
7. Consolidated Financials 09
8. Leverage and Financing 10
2
buyout in DTSS, now owning 100% of the company. The deal has given us an IRR of 32% and helped to establish FM as an independent growth engine in the long term.
Returns and Leverage
Our key metric of Return on Equity, is currently at 21%, despite a large hit on account of non-cash items in interest and amortization due to PPA treatment for acquisitions. Our leverage levels are comfortable at 1.4X Net Debt/ EBITDA with an average cost of capital of 7.5%.
Game changing labour reforms on the anvil
The new government has introduced two important labour legislations in the Parliament – Code on Wages and the other on Occupational Health, Safety and Working Conditions. The Code on Wages combines four existing laws on Payment of Wages, Minimum Wages, Equal Remuneration and Payment of Bonus.
Primarily, at its core, the Code on Wages aims to
Q1 FY20 Earnings
establish a minimum national wage that is going to establish a nationwide floor. This is going to significantly enhance both the wage scales and also attract more quality manpower to the industry. Further by bringing many wage bills under one code, the code on wages will minimize leakages between eligibility of employees. Thus negating the cost advantages of unorganized players, these changes will pave the way for further formalization in the space.
We believe that with more labour reforms being considered, the shift from unorganized to organized players will be expedited. The addressable market for organised players will increase leading to higher market share. This is expected to lead to greater pricing power as we can see in developed markets. As our Vision 2025 planning gets underway, market share is going to be a cornerstone of our strategy. We will continue to make investments in systems and culture to support our vision and make our business model more robust for scalability.
Group Revenues (Rs. In crs)
CAGR – 6.2%
3 4 2 1
8 1 Y F 1 Q
0 6 4 1
8 1 Y F 2 Q
8 3 5 1
8 1 Y F 3 Q
2 9 5 1
8 1 Y F 4 Q
1 1 6 1
9 1 Y F 1 Q
0 9 6 1
9 1 Y F 2 Q
7 3 8 1
9 1 Y F 3 Q
5 5 9 1
9 1 Y F 4 Q
8 0 0 2
0 2 Y F 1 Q
Group EBITDA (Rs. In crs)
CAGR – 8.1%
7 6
8 1 Y F 1 Q
4 7
8 1 Y F 2 Q
4 8
8 1 Y F 3 Q
7 8
8 1 Y F 4 Q
4 7
9 1 Y F 1 Q
8 7
9 1 Y F 2 Q
8 9
9 1 Y F 3 Q
5 1 1
9 1 Y F 4 Q
5 2 1
0 2 Y F 1 Q
3
Segment Update
Q1 FY20 Earnings
Security Solutions – India
The India security business comprises our flagship SIS security business and the two acquired entities of SLV and Uniq, that came under our fold in FY19. The India security business currently operates across 170 branches and has 149,200 employees. We became the largest security company in India in FY19 displacing the incumbent. During this quarter we also completed the buyout of the 50% stake in vProtect from our JV Partner Prosegur.
Solid Revenue Growth
The India security business had a strong beginning to the year, with total revenues of Rs 808 cr as against Rs779 cr for Q4 of 2019. This is a QoQ increase of 3.8% and a YoY increase of 43.1%. This quarter has seen impressive client wins and quarterly
growth despite this being a quarter where we do some portfolio rationalization every year.
Revenues per Branch growing
The revenues per branch, on an organic basis, increased from Rs 3.74 cr in Q1 of FY19 to Rs 4.44 cr in Q1 of FY20. Including the acquisitions, the revenue per branch increased to Rs4.78 cr in Q1FY20. The segment ended June with a run rate of Rs 272 Cr in revenues establishing a solid base for the rest of the year.
Margins stable
The segmental EBITDA for India security was Rs53 cr which is a 7.5% QoQ growth and a YoY increase of 93.1%. The EBITDA margin increased from 6.3% in Q4FY19 to 6.6% in Q1FY20.
Rs in Cr
Revenues
EBITDA
EBITDA%
Share of group Revenues
Share of group EBITDA
Q1FY20
Q4FY19
Change
Q1FY19
Change
43.1%
93.1%
3.8%
7.5%
808.4
53.0
6.6%
40.2%
42.5%
778.7
49.4
6.3%
39.8%
43.0%
565.0
27.5
4.9%
35.1%
36.9%
Revenues
EBITDA
+ 43.1%
565
808
+ 93.1%
27.5
53
Q1FY19
Q1FY20
Q1FY19
Q1FY20
4
Segment Update
Q1 FY20 Earnings
Security Solutions – International
The International security business comprises our entities in Australia (MSS and SXP) and the recently acquired businesses in Singapore (Henderson) and New Zealand (Platform4Group). The International security business currently has over 10,500 employees.
Solid Revenue Growth
The International security services ended Q1 with total revenues of Rs 913 cr as against Rs902 cr for Q4 of 2019. This is a QoQ increase of 1.3% and a YoY increase of 7.5%. The segment ended June with a monthly run rate of Rs300 cr in revenues establishing a solid base for the rest of the year.
Integration underway
We have set in place an integration plan for the acquired entities to align policies and best practices and to optimize synergies. The Henderson business in Singapore generated revenues of 73 cr in the first full quarter under SIS with an EBITDA margin of 9.6%. We are confident that our integration measures will lead to the acquired entities contributing meaningfully to margin improvement and cash flow generation.
Margins stable
The EBITDA for the International business was Rs53.7 cr which is a QoQ increase of 15.3% and a YoY increase of 56.3%. The EBITDA margins increased from 5.2% in in Q4FY19 to 5.9% in Q1FY20, establishing the margin accretive nature of our recent acquisitions.
Rs in Cr
Revenues
EBITDA
EBITDA%
Share of group Revenues
Share of group EBITDA
Q1FY20
Q4FY19
Change
Q1FY19
Change
7.5%
56.3%
1.3%
15.3%
913.4
53.7
5.9%
45.5%
43%
901.9
46.5
5.2%
46.1%
40.5%
849.7
34.3
4.0%
52.7%
46.1%
Revenues
EBITDA
+ 7.5%
850
913
+ 56.3%
34.3
53.7
Q1FY19
Q1FY20
Q1FY19
Q1FY20
5
Segment Update
Q1 FY20 Earnings
Facility Management Solutions
The facility management business comprises DTSS, SMC, Rare Hospitality and Terminix SIS. We are the second largest and fastest growing FM business in the country. The FM business continued its strong growth as the fastest growing vertical in the group. The FM business currently operates across 59 branches and has [58,300] employees.
Continued Revenue Momentum
The revenues for the FM vertical were Rs290 cr as against Rs277 cr for Q4 of 2019. This is a QoQ increase of 4.4% which is complete organic and a YoY increase of 45%. The FM segment ended June with a monthly run rate of Rs 100.8 cr in revenues, marking a key milestone in the evolution of our FM business.
All segments driving growth
SMC business continues to show strong growth in operating margins on the back of better operating leverage. The Terminix SIS business, after breaking even in Q4FY19, is poised to show strong operating margin in FY20 and has ended Q1FY20 with an EBITDA margin of 1.8%. We continue to show traction on our solutions business which now accounts for 24% of the segment revenues.
Margins at a more sustainable level
After a steep increase in EBITDA margin in FY19 in the DTSS business, on account on a large Minimum Wage increase in Karnataka, the margins have reverted to a more sustainable level. The EBITDA for the FM business was Rs18.1 cr which is a QoQ decline of -6.4% and a YoY increase of 42.9%. The EBITDA margin declined from 7.0% in Q4FY19 to 6.2% in Q1FY20.
Rs in Cr
Revenues
EBITDA
EBITDA%
Share of group Revenues
Share of group EBITDA
Q1FY20
Q4FY19
Change
Q1FY19
Change
45.0%
42.9%
4.4%
-6.4%
289.7
18.1
6.2%
14.4%
14.5%
277.8
19.3
7.0%
14.2%
16.8%
199.8
12.7
6.3%
12.4%
17.0%
Revenues
EBITDA
+ 45.2%
200
290
+ 42.5%
12.7
18.1
Q1FY19
Q1FY20
Q1FY19
Q1FY20
6
Segment Update
Q1 FY20 Earnings
Cash Logistics Solutions
Pricing Revisions Taking Time
The pricing revisions that the industry were hoping have not yet materialised because of the protracted negotiations with the banks and regulators. While we continue to be sanguine, in the absence of a near term price revision, financial pressures in the industry will intensify. Regulatory uncertainty continues with the RBI interchange fee committee and new ATM security guidelines.
Revenue growth returning
We have had a few quarters of weak revenue growth as we exited unviable contracts. However in Q1FY20 our revenues rebounded to end at Rs80 cr, a 13.8% YoY growth and 3.6% QoQ growth. We continue to
prioritise non-ATM business over ATM business as we steadily reduce the share of the ATM business in our overall mix, given the pricing and penalty terms.
Margins stable
Focus on non-ATM business and exiting unprofitable contracts has helped us steadily improve profitability. The EBITDA for the segment was Rs3.4 cr. The EBITDA margin for the segment is 4.3% as against -4.3% in Q1FY19 and 12.3% in Q4FY19. Continuous productivity improvement measures and better route synergies helped the segment improve margins.
Rs in Cr
Revenues
EBITDA
EBITDA%
Q1FY20
Q4FY19
Change
Q1FY19
Change
79.6
3.4
4.3%
76.8
9.4
12.3%
3.6%
-63.8%
69.9
3.0
-4.3%
13.8%
-215%
Revenues
EBITDA
+ 13.8%
70
80
Q1FY19
Q1FY20
+ 56.6%
Q1FY19
-3
3.4
Q1FY20
7
Dusters Final Tranche Acquisition – Deal Evaluation
Q1 FY20 Earnings
The transaction
Integration
We acquired 78.72% in DTSS in August 2016 for a purchase price of Rs117 cr. The founders of the company and key employees had an exit for their balance stake through an earnout mechanism linked to EBITDA growth.
The strategy
•
•
•
Building a second growth engine to supplement security
Complementary geographies - SMC was predominantly North & East and DTSS added South & West presence to our offerings
Add strong leadership bandwidth for scaling FM business
Integration is key to the success of any acquisition and at SIS we devote significant resources to make integration work with minimal disruption to ongoing business operations. The integration spanned processes and policies across financial, HR, technology apart from cultural integration. For SIS, integration is a two way street and there was sound knowledge sharing from DTSS too that has aided our FM segment as a whole.
The performance
The post-acquisition period of DTSS has seen a significant growth in revenues and margins. This has been directly a result of the inculcation of many best practices of SIS into DTSS.
Revenues – Pre and Post Acquisition
EBITDA – Pre and Post Acquisition
CAGR – 23%
CAGR – 58%
CAGR – 11%
CAGR – 33%
9 3 2
9 5 2
3 8 2
2 4 3
0 1 9 1 6 6 1 1
4 8 3
5 8 4
0 3 6
% 6 3
.
% 4 4
.
% 3 5
.
% 4 5
.
0 1 9 1 6 6 1 1
% 6 5
.
% 7 . 6
% 5 8
.
FY13
FY14 FY15
FY16
FY17
FY18
FY19
FY13
FY14 FY15
FY16
FY17
FY18
FY19
The acquisition of DTSS has yielded an IRR of 32% and is a testament to the transaction and integration structure that we have put in place that incentivises growth, aligns interests and paves the path to greater cultural and process integration. The standalone ROCE for DTSS is over 35%. The company has also become debt free and with the total acquisition price of Rs192 crores on an EBITDA of Rs52.6 cr in FY19, the deal has been a very successful acquisition for SIS.
8
Consolidated Financials
Q1 FY20 Earnings
Q1FY20
Q1FY19
Y-o-Y
Q4FY19
Q-o-Q
Revenue from operations
2008.4
1611.4
EBITDA
EBITDA%
Profit after taxes
Profit after taxes%
EPS (Rs
)
Diluted EPS (Rs
)
124.9
6.2%
74.9
3.7%
10.2
10.1
74.5
4.6%
39.5
2.5%
5.4
5.3
24.6%
67.5%
89.7%
89.7%
90.0%
1954.8
114.8
5.9%
72.4
3.7%
10.0%
9.9
2.7%
8.7%
3.5%
2.0%
2.0%
Revenues
Revenue from operations has increased by 24.6% YoY to Rs2008 cr in Q1FY20 from Rs1611 cr in Q1FY19. All the businesses have shown good revenue growth. Quarterly revenue has increased by 2.7% in Q1FY20 over Q4FY19.
EBITDA
Strong focus on costs and operating leverage across segments has resulted in a 67.5% YoY increase in EBITDA to Rs125 cr in Q1FY20. This is a 8.7% QoQ increase
PAT
Profit after tax has increased by 89.7% in Q1FY20 as compared to Q1FY19. The rise in PAT is commendable despite a large hit due to the PPA related adjustments for finance costs and depreciation.
IND-AS Lease Accounting Standard
As per the new standard, right-of-use assets have to
be recognized and a corresponding lease liability has be created at commencement date of lease period and payments are discounted using the incremental borrowing rate as of the date of initial application. Impact of new lease accounting on EBITDA is Rs6.97 cr and Rs(1.55) cr on PAT in Q1FY20.
PPA related adjustments
Finance cost with respect tounwinding of PV of PPA related future consideration (non-cash) is Rs11.8 Cr and Amortization for identified assets is amounting to Rs5.8 Cr in Q1 FY20. These amounts have seen a large increase this quarter, especially on account of the acquisition of Henderson in Q4FY19.
RONW
Our RONW is at 21% in Q1FY21 on par with the RONW of 21.7% in Q1FY19. We have achieved strong returns despite doing 5 acquisitions over this period, demonstrating our capital efficiency and making optimal usage of our balance sheet capacity.
9
Capital Employed and Leverage
Q1 FY20 Earnings
June 30th 2019
March 31st 2019
India
Intl
Total
India
Intl
Total
Gross debt
Long - term borrowings
Short - term borrowings
Current portion of long term borrowings
Gross Debt
Add : Lease Liability
Less: Cash and Cash Equivalents
Net Debt
197
454
26
677
58
223
512
452
12
1
465
48
334
180
648
467
27
1,142
106
557
691
201
320
24
545
189
356
413
16
1
430
369
61
614
336
25
975
558
417
•
Total Net Debt went up 274 crores
• New Ind-AS standards on leases led to Rs106 cr increase in lease liability and consequently net debt
•
Increase in long term borrowings in Australia on account of acquisitions of in New Zealand, which were acquired effective July 1, 2019
• Q1 and Q2 have historically been poor quarters for collections which has resulted in utilisation of additional working capital line of Rs130 crores in India across all our businesses.
• Our Net Debt to EBITDA is 1.4X (based on
trailing 12 months EBITDA) which we are quite comfortable with as our average cost of debt is only 7.5%. Including the impact of the new lease accounting norms under IND-AS, our Net Debt to EBITDA is 1.7.
10