|WNS (HOLDINGS) LTD filed this Form 6-K on 01/31/2019|
This report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those described in the following risk factors and elsewhere in this report. If any of the following risks actually occur, our business, financial condition and results of operations could suffer and the trading price of our ADSs could decline.
Risks Related to Our Business
The global economic and geo-political conditions have been challenging and have had, and may continue to have, an adverse effect on the financial markets and the economy in general, which has had, and may continue to have, a material adverse effect on our business, our financial performance and the prices of our equity shares and ADSs.
Global economic conditions continue to show signs of turbulence. Although some key indicators of sustainable economic growth show signs of improvement, volatility in the domestic politics of major markets may lead to changes in the institutional framework of the international economy.
In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national referendum. The referendum was advisory, and the terms of any withdrawal are subject to a two-year negotiation period (unless an extension is agreed), which commenced on March 29, 2017. The withdrawal of the United Kingdom from the European Union is set to take place on March 29, 2019, however the terms agreed between the United Kingdom and the European Union to govern the United Kingdoms departure from the European Union and the future terms of the United Kingdoms relationship with the European Union were rejected by the UK parliament on January 15, 2019. There is the possibility that the UK ends up leaving the EU in March 2019 without having reached final agreement with the EU on the terms of its withdrawal. The referendum, and now the risk of a no deal between the United Kingdom and the European Union, has created significant uncertainty regarding the future relationship between the United Kingdom and the European Union, including with respect to the laws and regulations that will apply as the United Kingdom determines which European Union-derived laws to replace or replicate in the event of a withdrawal. The referendum has also given rise to calls for the governments of other European Union member states to consider withdrawal. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations.
29.7% of our revenues and 28.3% of our revenue less repair payments (non-GAAP) for nine months ended December 31, 2018 and 31.8% of our revenues and 30.2% of our revenue less repair payments (non-GAAP) for fiscal 2018 are denominated in pound sterling. The extent and duration of any potential decline in the value of the pound sterling to the US dollar and other currencies is unknown at this time. A long-term reduction in the value of the pound sterling as a result of the UK referendum could adversely impact our earnings growth rate and profitability. We believe that our hedging program is effective and it substantially protects us against fluctuations in foreign currency exchange rates through a mix of forwards and options for this current fiscal year.
In the US, economic growth is tempered by continuing concerns over the failure to achieve a long-term solution to the issues of government spending, the increasing US national debt, and their negative impact on the US economy as well as concerns over potential increases in the cost of borrowing and reduction in availability of credit as the US Federal Reserve continues to raise interest rates. On December 22, 2018, the United States federal government partially shut down after the Senate failed to agree on the presidents budget demand for further funding to build a wall on the United States border with Mexico. The 35-day shutdown was the longest in United States history, and while the president agreed on January 25, 2019 to reopen the government for three weeks to facilitate negotiations in relation to border security, another government shutdown could cause further disruption to the United States economy and may have a material adverse effect on global economic conditions. The policies that may be pursued by the presidential administration in the US have added further uncertainty to the global economy, and the prevailing political climate may lead to more protectionist policies. Further, there is uncertainty regarding the impact of the escalating trade war between China and the United States on the global economy. Globally, countries may require additional financial support, sovereign credit ratings may continue to decline, and there may be default on sovereign debt obligations of certain countries. Any of these may increase the cost of borrowing and cause credit to become more limited, which could have a material adverse effect on our business, financial condition and results of operations.
Further, there continue to be signs of economic weakness, such as relatively high levels of unemployment, in major markets including Europe. Continuing conflicts and instability in various regions around the world may lead to additional acts of terrorism, and armed conflict around the world. The ongoing refugee crisis in Europe, North Africa and the Middle East may contribute to political and economic instability in those regions. A resurgence of isolationist and/or protectionist policies in North America, Europe and Asia may curtail global economic growth. China continues to have room for economic growth, but such growth opportunities remain subject to political developments, particularly with respect to a US-China trade deal, and uncertainties in the regulatory framework of the economy.