From the Chairman's Desk
The chart represents the number of employees with
Quess each year. We have grown at a CAGR of 64% since we founded ourinstitution and have been one of the prime drivers in creating employment in a new andemerging India. Today we are among the largest private sector employers in India with aheadcount of 318000 employees and have achieved this scale in a short span of 12 years!The previous year has been a year of significant strategic progress with its own set ofchallenges. We have delivered a strong performance in majority of our businesses. Ourstaffing and facility management business continues to deliver industry leadingperformance and we have strengthened our customer lifecycle management business throughthe acquisition of Allsec Technologies a pioneer in the Human Resource Operations spaceand the second largest payroll services provider in India. All this while our internetbusiness is undergoing metamorphosis both in terms of the revamping platform and offeringtargeted solutions for our clients.
India A Growth Story
We live in exciting times where India is one the fastest growingeconomies. India is projected to grow at about
7.5% in the future which we expect to result in more people joining theworkforce. Last year India moved
23 places to be ranked 77th in the World Bank's report
"Ease of Doing Business" owing to the robust economicreforms. This provides us an opportunity both in terms of skilling and placing theworkforce to create value for ourselves and the nation at large.
Business services as a percentage of GDP today stands at 2.0% in Indiawhich is significantly lower than BRIC nations where it stands at 6.0% or in developedeconomies where it stands at above 11.0%.
As economies mature and grow the share of business services grows at afaster pace than the rate of growth of the economy itself and should become between 5%& 7% over the next few years.
Formalization of the Economy
The introduction of GST has set in motion the process of formalizationand consolidation in the sector. Apart from the incentive for organisations to choose theservices of tax-compliant staffing firms which allow them to claim input tax creditcustomers are also driven by the need for superior services and a need to associatethemselves with brands that are ethical and compliant with all regulatory requirements.There is therefore potential to grow in the underpenetrated market for organized playerswho offer predictability and standardization to their customers.
Solving New Age Problems
Business disruptions in terms of innovative ways of working areemerging each day and we are transitioning from a "traditional jobs" to a"gig economy" where workforce and services are availed just-in-time. This makesit imperative that we keep identifying and providing critical talent in an efficientmanner enabling staffing companies to evolve and become strategic workforce solutionspartners.
In a disruptive tech world businesses are evolving to remain ahead ofthe curve by leveraging technology effectively to improve employee outcomes enhancecustomer experience and improve profitability. Last year we embarked on a journey ofenterprise wide digitization to improve productivity and efficiency.
We have been transforming our core business by optimising digitisingand automating processes. We have deployed newer technologies like robotic processautomation cloud telephony digital attendance monitoring chatbot etc. to improve ourefficiency while providing enhanced user experience to our major stakeholders employees and customers.
We operate in a decentralized manner supported by strong centralizedshared services. Each of our businesses is run by Presidents with minimal interventionfrom our corporate office. Our corporate office is involved primarily in threeareas-Capital allocation Performance goal setting and Leadership planning. Leading thiseffort has been my colleague Subrata Nag our Group CEO who over the last decadeat Quess has been instrumental in developing & implementing the decentralizedstructure. In the past year we have strengthened our senior leadership by hiring severalnew leaders. We hired
Rajesh Kharidehal as our Chief Business Officer who is responsiblefor driving our overall strategy and business metrics for the group that would enable usto have better visibility into our businesses. We have hired Ramakrishnan Subramanianas Deputy CFO to further strengthen our Finance function and Ritesh Aggarwal as theHead of Human Resources function.
We believe we have a strong senior leadership team who will act as akey catalyst for Quess' next phase of growth.
Highlights for the Year
The financial highlights of the year are as follows:
Revenuegrew 38% YoY to र8527 crore and EBITDAgrew 31%YoY to र465 crore
EBITDA Marginstood at 5.45%
PAT stood at र257 crore
PAT Marginstood at 3.01%
Diluted EPS stood at र17.5
Cash flow from operations stood at र202 crore in FY19 (up fromर109 crore in the previous year)
EBITDA to OCF conversionwas at 43% in FY19 (up from 31% in theprevious year) Our People Servicesbusiness grew by 35% to र3880 crore and our EBITmargin stood at 4.73%. This segment contributed 46% and 44% to our overall
Group Revenue and EBIT respectively. Our general staffing businesswithin the People Services segment continues to deliver impressive performance. We haveadded about 35000 associates during the year thereby further strengthening our leadershipposition in the market with an overall staffing headcount of over ~192000 associates. Ourcore to associate ratio an important measure of efficiency improved significantly to1:330 during the year. My colleagues Guruprasad Srinivasan and Lohit Bhatiahave had another incredible year and the market leadership achieved is a testament totheir focus and ability to lead large teams successfully.
We have scaled up our Training and Skill Development business in thepast year by becoming one of the largest training and skill development partners ofMinistry of Rural Development and National Skill Development Corporation with 96 Trainingcenters 750 trainers with an annual training capacity of over 50000. Ravi Tennetythe Head of our Training & Skill Development vertical has done an excellent job inscaling the business and I am sure Ravi would take our training business to greaterheights and make it a core engine for supplying skilled manpower to meet both internal aswell as external demand.
Our Technology Solutions business saw a Revenue growth of 50% toर2796 crore while EBIT margins stood at 5.87%. The segment contributed 33% and 39% to ouroverall group revenue and EBIT respectively. The growth in the segment was primarilydriven by our Business Process Management (BPM) business Conneqt and our after-salesservices business DigiCare. Conneqt has been witnessing steady growth in the last yeardelivering solid financial performance. Post-acquisition of Allsec our BPM business wouldbecome the second largest entity in the domestic space. Pinaki Kar continues tolead this business from the front as our new acquisitions add more depth and geography toour operations.
Our Facility Managementbusiness grew by 20% to र1230 crorewhile EBIT margins stood at 6.88%. The segment contributed 14% and 20% to our overallGroup
Revenue and EBIT respectively. Facilities Management business hasproved to be a promising business for us delivering impressive growth and offering a widerange of services - soft services hard services food services landscaping servicessecurity services. We manage
~220 million square feet of infrastructure spanning corporate parksairports metro stations universities hospitals exhibition centers and factories. AnandSundar Raj C has been leading the transformation in this business and has done anexcellent job in scaling the business as an integrated service provider. Our Securitybusiness combines the best of manned guarding and electronic security services. We haveover
19100 guards managing over 1800 sites across the country. I am happyto mention that Amit Satpathy has been steering the business towards making us oneof the preferred service providers in this space.
Our Industrials business witnessed a Revenue growth of 27% toर472 crore and the EBIT margin stood at
3.46%. The segment contributed 6% and 4% to our overall Group Revenueand EBIT respectively. In FY18 we forayed into smart city projects seeing potential in thebusiness. While we continue to successfully execute the project we faced certain issueson the working capital front due to longer cash collection cycles. Keeping this in mindwe have decided not to take up any more projects in smart city going forward as theyincrease our cash collection cycle. Apart from this we will focus on growing our mobiletelecom tower business industrial asset management business alongside the new renewableenergy business in the upcoming year. I am confident that Neil Elijah a veteran inthe Steel and Telecom industry would leverage his rich experience to drive profitablegrowth in this segment in the coming year as we focus on our core areas of expertise operations & maintenance contracts in metal power and oil & gas sectors. Iwould also like to thank Ashish Kapoor for his contribution towards leading ouractive infra business in a period when the industry has been experiencing significantturbulence. In our Internet business Revenue stood at र149 crore and the EBITmargin stood at (21%). The segment contributed 2% and (7%) to our overall Group. There area number of initiatives currently underway to turnaround this business and recapture themarket share and mind share of the customers. We are working on reducing costs byidentifying possible synergies with Quess. We had a soft launch of our new and improvedMonster platform across APAC and Gulf region in Mar'19. This was followed by a newMonster brand campaign Work Life Balance' which was well received by the jobseekers garnering about 600 million impressions 7 million clicks and 4 million visitsduring the campaign period. With initial heavy lifting done by
Abhijeet Mukherjee and team we expect Monster to deliver targetedresults in the coming year.
Creating Value for the Stakeholders
As the centre of our business are our customers we look to exploreopportunities to deliver more value to them each day and are in a constant pursuit ofcustomer delight. Adding 3 employees every 5 minutes we have been instrumental in puttingindividuals to work in our country. Apart from providing them with employmentopportunities we are bringing them into the fold of a formalized economy which promisespredictable income social security benefits and health benefits among others. OurShareholders have been pivotal to our business and we are on a constant endeavour tocreate long-term shareholder value through prudent capital allocation that would deliversuperior financial outcomes.
Since inception we have built a diverse portfolio of service offeringsthat have gone a long way to shape Quess in its current form. The economic business andtechnological disruptions are compelling organizations to evolve continuously. Goingforward we envision Quess as multiple platforms enabling us to provide end-to-endintegrated services to our customers and to be present across the value chain. In theforthcoming year we will align ourselves into three main platforms:
Workforce Management Operating Asset Management and Tech Services.Workforce Management would comprise of a diverse suite of offerings in the employeelifecycle management space ranging from training and recruitment to on-boarding andoff-boarding employees both in the general staffing and professional staffing businesses.Operating Asset Management would provide a one stop shop for all assets realestate industrials and telecom. Tech Services would comprise of business processmanagement after-sales services and online-recruitment portal.
Capital allocation continues to be a key focus area for us. We have anestablished inorganic playbook of successfully identifying and integrating value accretiveacquisitions. We are entering into a phase of consolidation and will allocate capitalstrategically to derive superior financial outcomes for our company. Our focus on BalanceSheet Management has yielded tangible results during the year. Our EBITDA to OCFconversion has improved significantly during the year. We started the year with aconversion of 31% and are exiting at a rate of 43% on a full year basis an improvement ofaround 40% and will continue to improve our cash flows further. We believe in the short tomedium term we should be able to generate higher amounts of operating cash from ourbusiness.
Creating a Better Tomorrow
We at Quess believe in creating a better world where everyone hasaccess to opportunities and has a right to have a better life. We strive to make thispossible through intervention at the formative stage of children's lives. This hasbeen the premise of our community outreach program Careworks Foundation
(CWF) that focuses on education and healthcare initiatives for primaryschool children. We currently work with 54 schools benefiting 10955 children who would goon to be responsible for shaping the future of our country. We have extendedinfrastructure support to 195 schools to make it safe and comfortable for children. Weregularly organize medical camps and also extend counselling sessions to ensure thewell-being of children. Education is clearly the way to create a responsible responsivetomorrow. I would like to thank Smitha Srinivas for her valuable contribution.
This note will be incomplete without thanking our 2000+ clients forthe belief entrusted in us which has enabled the company to grow thus far. I am alsothankful to the dedication of our 318000 employees who drive the outcomes for our clientsand have created a solid foundation for our institution. As we navigate into a new yearwe at Quess feel a unified sense of purpose and pride in seeing the institution that wehave built over the last 12 years. I am thankful to all our shareholders who havesteadfastly stood by us and helped us scale this company. I look forward to interactingand meeting you at our annual meet for shareholders.
|Ajit Isaac |
|Chairman & Managing Director |
|Quess Corp Limited |