As at September 30, 2019, our Indian subsidiary, WNS Global Services Private Limited (WNS
Global), had unsecured lines of credit of ₹840 million ($11.9 million based on the exchange rate on September 30,
2019) from The Hongkong and Shanghai Banking Corporation Limited, $15.0 million from BNP Paribas, ₹1,200.0 million
($16.9 million based on the exchange rate on September 30, 2019) from Citibank N.A. and ₹810.0 million ($11.4 million
based on the exchange rate on September 30, 2019) from Standard Chartered Bank for working capital purposes. Interest on these lines of credit would be determined on the date of the borrowing. These lines of credit generally can be withdrawn by
the relevant lender at any time. As at September 30, 2019, there was no amount utilized from these lines of credit.
In February 2019, WNS Global
Services (UK) Limited (WNS UK) renewed its working capital facility obtained from HSBC Bank plc. of £9.9 million ($12.1 million based on the exchange rate on September 30, 2019) until February 28, 2020. The
working capital facility bears interest at Bank of England base rate plus a margin of 2.45% per annum. Interest is payable on a quarterly basis. The facility is subject to conditions to drawdown and can be withdrawn by the lender at any time by
notice to the borrower. As at September 30, 2019, there was no outstanding amount under this facility.
As at September 30, 2019, our South
African subsidiary, WNS Global Services SA (Pty) Ltd., had an unsecured line of credit of ZAR 30.0 million ($2.0 million based on the exchange rate on September 30, 2019) from The HSBC Bank plc. for working capital purposes. This
facility bears interest at prime rate less a margin of 2.25% per annum. This line of credit can be withdrawn by the lender at any time. As at September 30, 2019, there was no outstanding amount under this facility.
In January 2017, our US subsidiary, WNS North America Inc., obtained a term loan facility for $34.0 million from BNP Paribas, Hong Kong. The proceeds
from this loan facility were used to finance our acquisition of Denali. The loan bears interest at a rate equivalent to the three-month US dollar LIBOR plus a margin of 1.27% per annum. In connection with the term loan, we have 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%. WNS North America Inc.s obligations under the term loan are guaranteed by WNS. The term loan is
secured by a pledge of shares of Denali held by WNS North America Inc. and security over the assets of WNS North America Inc. The facility agreement for the term loan contains certain covenants, including restrictive covenants relating to our
indebtedness and financial covenants relating to our EBITDA to debt service ratio and total borrowings to EBITDA ratio, each as defined in the facility agreement. The loan matures in January 2020 and the principal is repayable in six semi-annual
installments. The first five repayment installments are $5.7 million each and the sixth and final repayment installment is $5.8 million. On July 20, 2017, January 22, 2018, July 20, 2018, January 22, 2019 and
July 22, 2019 we made scheduled repayments of $5.7 million each, following which $5.8 million was outstanding under this loan facility.
In
March 2017, our Mauritius subsidiary, WNS (Mauritius) Limited, obtained a term loan facility for $84.0 million from HSBC Bank (Mauritius) Ltd. and Standard Chartered Bank, UK. The proceeds from this loan facility were used to finance our
acquisition of HealthHelp. The loan bears interest at a rate equivalent to the three-month US dollar LIBOR plus a margin of 0.95% per annum. In connection with the term loan, we have 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%. WNS (Mauritius) Limiteds obligations under the term loan are guaranteed by WNS. The term loan is secured by a pledge of shares of WNS (Mauritius) Limited
held by WNS. The facility agreement for the term loan contains certain covenants, including restrictive covenants relating to our indebtedness and financial covenants relating to our EBITDA to debt service ratio and total borrowings to EBITDA ratio,
each as defined in the facility agreement. The loan matures in March 2022 and the principal is repayable in ten semi-annual installments of $8.4 million each. On September 14, 2017, March 14, 2018, September 17, 2018,
March 14, 2019 and September 14, 2019 we made scheduled repayments of $8.4 million each. As at September 30, 2019, $42.0 million was outstanding under this loan facility.
Based on our current level of operations, we expect that our anticipated cash generated from operating activities, cash and cash equivalents on hand, and use
of existing credit facilities will be sufficient to fund our debt repayment obligations, estimated capital expenditures, share repurchase, contingent consideration for our acquisition of Denali and working capital needs for the next 12 months.
However, if our lines of credit were to become unavailable for any reason, we would require additional financing to fund our debt repayment obligations, capital expenditures, share repurchase, contingent consideration for our acquisition of Denali
and working capital needs. We currently expect our capital expenditures needs in fiscal 2020 to be approximately $37.0 million. The geographical distribution, timing and volume of our capital expenditures in the future will depend on new client
contracts we may enter into or the expansion of our business under our existing client contracts. Our capital expenditure for the six months ended September 30, 2019 amounted to $18.4 million and our capital commitments (net of capital
advances) as at September 30, 2019 were $5.1 million. Further, under the current challenging economic and business conditions as discussed under Global Economic Conditions above, there can be no assurance that our
business activity would be maintained at the expected level to generate the anticipated cash flows from operations. If the current market conditions deteriorate, we may experience a decrease in demand for our services, resulting in our cash flows
from operations being lower than anticipated. If our cash flows from operations are lower than anticipated, including as a result of the ongoing downturn in the market conditions or otherwise, we may need to obtain additional financing to meet our
debt repayment obligations and pursue certain of our expansion plans. Further, we may in the future make further acquisitions. If we have significant growth through acquisitions or require additional operating facilities beyond those currently
planned to service new client contracts, we may also need to obtain additional financing. We believe in maintaining maximum flexibility when it comes to financing our business. We regularly evaluate our current and future financing needs. Depending
on market conditions, we may access the capital markets to strengthen our capital position, and provide us with additional liquidity for general corporate purposes, which may include capital expenditures acquisitions, refinancing of our indebtedness
and working capital. If current market conditions deteriorate, we may not be able to obtain additional financing or any such additional financing may be available to us on unfavorable terms. An inability to pursue additional opportunities will have
a material adverse effect on our ability to maintain our desired level of revenue growth in future periods.
The following table shows our cash flows for the six months ended September 30, 2019 and September 30, 2018:
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Six months ended September 30,
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2019
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2018
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(US dollars in millions)
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Net cash provided by operating activities
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$
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97.5
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$
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45.2
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Net cash used in investing activities
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$
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(9.8
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)
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$
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(7.0
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)
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Net cash used in financing activities
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$
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(88.6
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)
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$
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(69.4
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)
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Cash Flows from Operating Activities
Net cash provided by operating activities increased to $97.5 million for the six months ended September 30, 2019 from $45.2 million for the six
months ended September 30, 2018. The increase in net cash provided by operating activities was attributable to an increase in profit as adjusted for non-cash and other items by $35.5 million, an
increase in cash inflow from working capital requirements by $26.4 million, an increase in cash inflow from interest received by $0.3 million, partially offset by an increase in cash outflow towards interest paid by $5.7 million and
an increase in cash outflow towards income taxes paid by $4.2 million.
The increase in net cash provided by operating activities excludes a cash
outflow towards principal payment of lease liabilities of $11.3 million now reflected under cash flows from financing activities on adoption of IFRS 16 (see Note 2 to the unaudited condensed consolidated financial statements included elsewhere
in this report).
Profit after tax as adjusted for non-cash and other items primarily comprised the following:
(i) profit after tax of $56.4 million for the six months ended September 30, 2019 as compared to $47.2 million for the six months ended September 30, 2018; (ii) depreciation and amortization expense of $31.2 million for
the six months ended September 30, 2019 as compared to $18.0 million for the six months ended September 30, 2018; (iii) interest expense of $8.6 million for the six months ended September 30, 2019 as compared to
$1.5 million for the six months ended September 30, 2018; (iv) share-based compensation expense of $20.3 million for the six months ended September 30, 2019 as compared to $15.8 million for the six months ended
September 30, 2018; (v) unrealized exchange gains of $3.5 million for the six months ended September 30, 2019 as compared to $6.3 million for the six months ended September 30, 2018; (vi) current tax expense of
$14.5 million for the six months ended September 30, 2019 as compared to $12.0 million for the six months ended September 30, 2018; (vii) deferred rent expense of Nil for the six months ended September 30, 2019 as compared
to $1.1 million for the six months ended September 30, 2018; (viii) unrealized loss on derivative instruments of $1.8 million for the six months ended September 30, 2019 as compared to $4.1 million for the six months ended
September 30, 2018; and (ix) interest income of $1.7 million for the six months ended September 30, 2019 as compared to $1.2 million for the six months ended September 30, 2018.
Cash outflow on account of working capital changes amounted to $6.3 million for the six months ended Sept 30, 2019 as compared to $32.7 million for
the six months ended September 30, 2018. This was primarily on account of an increase in cash inflow from trade receivables and unbilled revenue by $16.5 million, a decrease in cash outflow towards current liabilities by
$12.5 million, contract liabilities by $10.3 million and trade payables by $3.3 million, partially offset by an increase in cash outflow in relation to other assets by $16.2 million.
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