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WNS Announces First Quarter Fiscal 2011 Earnings
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WNS Announces First Quarter Fiscal 2011 Earnings

AAP Measures-- Q1 revenues of $150.0 million, up 12.7% from the corresponding quarter last year and down 4


NEW YORK, NY and MUMBAI, INDIA -- (Marketwire) -- 07/22/10 -- WNS (Holdings) Limited (WNS)(NYSE: WNS)

Financial Highlights:

GAAP Measures


-- Q1 revenues of $150.0 million, up 12.7% from the corresponding quarter
last year and down 4.8% sequentially
-- Q1 net loss(1) of $6.0 million, compared to net income(1) of
$1.0 million in the corresponding quarter last year and net income of
$1.0 million sequentially
-- Q1 diluted loss per ADS of $0.14, compared to diluted income per ADS of
$0.02 in the corresponding quarter last year and diluted income per ADS
of $0.03 sequentially

Non-GAAP Measures

--  Q1 revenue less repair payments of $89.3 million, down 8.8% from the    corresponding quarter last year and down 7.7% sequentially--  Q1 adjusted net income (ANI)(2) of $2.2 million, compared to $12.6    million in the corresponding quarter last year and $13.3 million    sequentially--  Q1 adjusted diluted net income per ADS of $0.05, compared to $0.29 in    the corresponding quarter last year and $0.30 sequentially

Global headcount of 21,406 as of June 30, 2010

WNS (Holdings) Limited (WNS) (NYSE: WNS), a leading provider of globalbusiness process outsourcing (BPO) services, today announced results forthe fiscal first quarter 2011 ended June 30, 2010.

Fiscal First Quarter 2011 Financial Highlights

Revenue for the fiscal first quarter 2011 increased by 12.7 percent to$150.0 million, compared to $133.1 million in the corresponding quarter inthe prior fiscal year, and decreased by 4.8 percent sequentially from$157.6 million in the fiscal fourth quarter of 2010. Revenue less repairpayments* for the fiscal first quarter 2011 decreased 8.8 percent to $89.3million, compared to $97.9 million in the corresponding quarter in theprior fiscal year, and decreased 7.7 percent sequentially from $96.7million in the fiscal fourth quarter of 2010. Revenue less repair paymentsdeclined largely as a result of lower volumes within the insurancebusinesses stemming from technology and operating efficiencies by a keyclient, the change to the pricing structure of the contract with a keyclient in the travel vertical, as previously disclosed, and the decline inthe value of the British Pound. These headwinds were partially offset byincreased volumes from existing clients in the shipping and logisticsindustries, ramp ups from Finance and Accounting contracts and revenuesfrom new clients.

Gross margin, as a percent of revenues declined to 17.8 percent in thefiscal first quarter 2011, compared to 27.9 percent in the correspondingquarter in the prior fiscal year and 21.6 percent in the fiscal fourthquarter of 2010. WNS's gross margin excluding share based compensationexpense*, as a percent of revenue less repair payments, declined to 30.1percent in the fiscal first quarter 2011, compared to 38.8 percent in thecorresponding quarter in the prior fiscal year and 36.2 percent in thefiscal fourth quarter of 2010. This decline was primarily due to theimpact of wage inflation and the change in pricing of a key travel client,as mentioned above.

Selling, General and Administrative (SG&A) expenses, as a percentage ofrevenues, were 13.1 percent in the fiscal first quarter 2011, compared to15.6 percent in the corresponding quarter in the prior fiscal year and 14.5percent in the fiscal fourth quarter of 2010. Selling, General andAdministrative (SG&A) expenses excluding share based compensation expenseand fringe benefit tax*, as a percentage of revenue less repair payments,were 21.5 percent in the fiscal first quarter 2011, compared to 18.6percent in the corresponding quarter in the prior fiscal year and 20.0percent in the fiscal fourth quarter of 2010.

Operating loss, as a percentage of revenues, was 0.5 percent in the fiscalfirst quarter 2011, compared to operating income of 6.1 percent in thecorresponding quarter in the prior fiscal year and operating income of 2.1percent in the fiscal fourth quarter of 2010. Adjusted operating incomeexcluding amortization of intangible assets, share based compensation andrelated fringe benefit tax*, as a percentage of revenue less repairpayments, was 8.6 percent in the fiscal first quarter 2011, compared to20.3 percent in the corresponding quarter in the prior fiscal year and 16.2percent in the fiscal fourth quarter of 2010. Operating margins during thefiscal first quarter were negatively impacted by lower volumes in theinsurance business, the strengthening Rupee, wage inflation, and the changein pricing of a key travel client, as mentioned above.

Net loss attributable to WNS shareholders for the fiscal first quarter 2011was $6.0 million or $0.14 diluted loss per ADS, compared to net incomeattributable to WNS shareholders of $1.0 million or $0.02 diluted incomeper ADS in the corresponding quarter in the prior fiscal year and netincome attributable to WNS shareholders of $1.0 million or $0.03 dilutedincome per ADS in the fiscal fourth quarter of 2010. Similarly, Adjustednet income* for the fiscal first quarter 2011 was $2.2 million or $0.05adjusted diluted income per ADS, compared to $12.6 million or $0.29adjusted diluted income per ADS in the corresponding quarter in the priorfiscal year and adjusted net income of $13.3 million or $0.30 adjusteddiluted income per ADS in the fiscal fourth quarter of 2010. Adjusted netincome was negatively impacted by the issues listed above, as well asone-time costs associated with the refinancing of the term loan, asdetailed below.

On July 6, 2010, WNS announced that it had taken advantage of favorableconditions in the debt markets and refinanced its term loan facility atlower interest rates than the previous term loan facility. The refinancingentailed making the third scheduled repayment of $20 million on theexisting term loan and prepaying the remaining $115 million on the loanwith cash on hand and proceeds from a new term loan facility for $94million. At the same time, WNS also announced that it had established a$30 million line of credit in the U.K., which will be drawn down from timeto time to partly fund WNS's U.K. business. The interest rate of the newterm loan and the credit line is approximately 100 basis points lower thanthe existing facility. The payment schedule of the new $94 million termloan will mirror the payment schedule of the previous term loan. Theprepayment resulted in a one-time charge of approximately $5.4 millionprimarily on account of the reclassification of fair value of interest rateswaps from "Other Comprehensive Income" on our balance sheet to earnings asthe swaps on the existing term loan have lost hedge effectiveness, thewrite-off of a portion of the remaining debt issuance costs associated withthe existing term loan taken in 2008 and debt refinancing cost for the newterm loan taken in July 2010.

Operational Highlights

"During the first quarter, we completed our strategic review of all facetsof the business and are now finalizing the details of our plan. We havealready started some of the new growth initiatives, including thereorganization of the sales force into hunting and client engagement teams,and finalizing some of our key strategic initiatives," said Group ChiefExecutive Officer Keshav Murugesh.

"This is an exciting time for WNS. Our management team is re-energized andfocused on building out our core verticals. We now also have a formalizedcross-selling strategy in place to help us expand with our current clientbase. WNS is establishing a strong foundation on which we will build aleading global BPO company," continued Murugesh.

Fiscal 2011 Guidance

WNS provided the following guidance on May 21, 2010 for the fiscal yearending March 31, 2011:

--  Revenue less repair payments is now expected to be between $353 million    and $378 million. This assumes an average GBP to USD exchange rate of    1.45 for the 2011 fiscal year.--  Adjusted net income is expected to range between $43 million and $46    million. This assumes an average USD to INR exchange rate of 46.5 for    the 2011 fiscal year.

"Our top and bottom lines reflect a challenging currency environment,including a strengthening Rupee and weakening Pound, the move to baselinepricing with one of our larger clients, wage increases and one-time costsassociated with refinancing our term loan. We also had bonus, severanceand insurance premium payouts this quarter, which impacted our cash flow.Excluding the one-time costs of refinancing the term loan and the severancecosts, we would have realized ANI of $8.1 million," said Alok Misra, GroupChief Financial Officer. "We are seeing more positive trends recently asthe British Pound has strengthened, volumes in both our travel andinsurance clients are improving more than we previously expected and ourinterest expense is expected to come down significantly starting with thesecond fiscal quarter. We should see these tailwinds reflected in nextquarter's results."

Conference Call

WNS will host a conference call on July 22, 2010 at 8:00 am (EDT) todiscuss the company's quarterly results.

To participate in the call, please use the following details:+1-800-320-2978; international dial-in +1-617-614-4923; participantpasscode 67143887. A replay will be available for one week following thecall at+1-888-286-8010; international dial-in +1-617-801-6888; passcode 61813609,as well as on the WNS website, www.wns.com, beginning two hours after theend of the call.

About WNS

WNS (Holdings) Limited (NYSE: WNS) is a leading global business processoutsourcing company. Deep industry and business process knowledge, apartnership approach, comprehensive service offering and a proven trackrecord enables WNS to deliver business value to some of the leadingcompanies in the world. WNS is passionate about building a market-leadingcompany valued by our clients, employees, business partners, investors andcommunities. For more information, visit www.wns.com.

About Non-GAAP Financial Measures

For financial statement reporting purposes, the company has two reportablesegments: WNS Global BPO and WNS Auto Claims BPO. In the auto claimssegment, which includes WNS Assistance and Chang Limited, WNS providesclaims-handling and accident-management services, in which it arranges forautomobile repairs through a network of third-party repair centers. In itsaccident-management services, WNS acts as the principal in dealings withthe third-party repair centers and clients.

In order to provide accident-management services, the Company arranges forthe repair through a network of repair centers. Repair costs are invoicedto customers. Amounts invoiced to customers for repair costs paid to theautomobile repair centers are recognized as revenue. The Company usesrevenue less repair payments for "fault" repairs as a primary measure toallocate resources and measure segment performance. Revenue less repairpayments is a non-GAAP measure which is calculated as revenue less paymentsto repair centers. For "non fault repairs," revenue including repairpayments is used as a primary measure. As the Company provides aconsolidated suite of accident management services including credit hireand credit repair for its "Non fault" repairs business, the Companybelieves that measurement of that line of business has to be on a basisthat includes repair payments in revenue.

The Company believes that the presentation of this non-GAAP measure in thesegmental information provides useful information for investors regardingthe segment's financial performance. The presentation of this non-GAAPinformation is not meant to be considered in isolation or as a substitutefor the Company's financial results prepared in accordance with US GAAP.

Safe Harbor Statement under the provisions of the United States PrivateSecurities Litigation Reform Act of 1995

This release contains forward-looking statements, as defined in the safeharbor provisions of the US Private Securities Litigation Reform Act of1995. These forward-looking statements are based on our currentexpectations, assumptions, estimates and projections about our Company andour industry. The forward-looking statements are subject to various risksand uncertainties. Generally, these forward-looking statements can beidentified 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 otherthings, the discussions of our business strategy, industry growthpotential, expansion opportunities, expectations concerning our futurefinancial performance and growth potential, including our fiscal 2011guidance and future profitability, our ability to generate free cash,relevant foreign currency exchange rates, and our future operations. Wecaution you that reliance on any forward-looking statement involves risksand uncertainties, and that although we believe that the assumptions onwhich our forward-looking statements are based are reasonable, any of thoseassumptions could prove to be inaccurate, and, as a result, theforward-looking statements based on those assumptions could be materiallyincorrect. These factors include but are not limited to worldwide economicand business conditions; political or economic instability in thejurisdictions where we have operations; regulatory, legislative andjudicial developments; our ability to attract and retain clients;technological innovation; telecommunications or technology disruptions;future regulatory actions and conditions in our operating areas; ourdependence on a limited number of clients in a limited number ofindustries; the implications of the accounting changes and restatement ofour financial statements as detailed in our annual report on Form 20-F forthe fiscal year ended March 31, 2010 filed with the U.S. Securities andExchange Commission (SEC), and any adverse developments in existing legalproceedings or the initiation of new legal proceedings; our ability toexpand our business or effectively manage growth; our ability to hire andretain enough sufficiently trained employees to support our operations;negative public reaction in the US or the UK to offshore outsourcing;increasing competition in the BPO industry; our ability to successfullygrow our revenue, expand our service offerings and market share and achieveaccretive benefits from our acquisition of Aviva Global Services SingaporePte. Ltd. (which we have renamed as WNS Customer Solutions (Singapore)Private Limited following our acquisition), and our master servicesagreement with Aviva Global Services (Management Services) Private Limited;our ability to successfully consummate strategic acquisitions; andvolatility of WNS's ADS price. These and other factors are more fullydiscussed in our annual report on Form 20-F for the fiscal year ended March31, 2010 filed with the SEC which is available at www.sec.gov. In light ofthese and other uncertainties, you should not conclude that we willnecessarily achieve any plans, objectives or projected financial resultsreferred to in any of the forward-looking statements. Except as required bylaw, we do not undertake to release revisions of any of theseforward-looking statements to reflect future events or circumstances.

References to "$" and "USD" refer to the United States dollars, the legalcurrency of the United States; references to "GBP" refer to the BritishPound, the legal currency of Britain; and references to "INR" refer toIndian Rupees, the legal currency of India.

(1) Net income (loss) attributable to WNS shareholders

(2) Net income attributable to WNS shareholders excluding amortization ofintangible assets, share-based compensation and related fringe benefittaxes and gain/loss attributable to redeemable noncontrolling interest

* This is a Non-GAAP measure. Reconciliations of non-GAAP financialmeasures to GAAP operating results are included at the end of this release

Growth of revenue (GAAP) and revenue less repair payments (non-GAAP)                                                         Quarter ended                                                         June 30, 2010                              Three months ended          compared to                         ----------------------------  ------------------                         June 30,  June 30,   Mar 31,  June 30,   Mar 31,                           2010      2009      2010      2009      2010                         --------  --------  --------  --------  --------                           (US dollars in millions)        (% growth)                         --------  --------  --------  --------  --------Revenue (GAAP)           $  150.0  $  133.1  $  157.6      12.7%     (4.8)%Less: Payments to repair centers              60.7      35.2      60.8      72.3%     (0.3)%Revenue less repair payments (Non-GAAP)     $   89.3  $   97.9  $   96.7      (8.8)%    (7.7)%Reconciliation of cost of revenue (GAAP to non-GAAP)                                                  Three months ended                                             ----------------------------                                             June 30,  June 30,   Mar 31,                                               2010      2009      2010                                             --------  --------  --------                                               (US dollars in millions)                                             --------  --------  --------Cost of revenue (GAAP)                       $  123.3  $   96.0  $  123.5Less: Payments to repair centers                 60.7      35.2      60.8Less: Share-based compensation expense            0.1       0.9       1.0Adjusted cost of revenue (excluding payment to repair centers and share-based compensation expense) (Non-GAAP)            $   62.5  $   59.9  $   61.7Reconciliation of gross margin (GAAP to non-GAAP)                                                  Three months ended                                             ----------------------------                                             June 30,  June 30,   Mar 31,                                               2010      2009      2010                                             --------  --------  --------                                               (US dollars in millions)                                             --------  --------  --------Gross margin (GAAP)                          $   26.7  $   37.1  $   34.1Add: Share-based compensation expense             0.1       0.9       1.0Adjusted gross margin (excluding share-based compensation expense) (Non-GAAP)                                  $   26.8  $   38.0  $   35.0                                                  Three months ended                                             ----------------------------                                             June 30,  June 30,   Mar 31,                                               2010      2009      2010                                             --------  --------  --------Gross margin as a percentage of revenue (GAAP)                                  17.8%     27.9%     21.6%Adjusted gross margin (excluding share-based compensation expense) as a percentage of revenue less repair payments (Non-GAAP)                      30.1%     38.8%     36.2%Reconciliation of selling, general and administrative expense(GAAP to non-GAAP)                                                  Three months ended                                             ----------------------------                                             June 30,  June 30,   Mar 31,                                               2010      2009      2010                                             --------  --------  --------                                               (US dollars in millions)                                             --------  --------  --------Selling, general and administrative expenses (GAAP)                             $   19.6  $   20.8  $   22.8Less: Share-based compensation expense            0.4       2.4       3.4Less: Related FBT(1)                                -       0.2         -Selling, general and administrative expenses (excluding share-based compensation expense and related FBT(1)) (Non-GAAP)                                  $   19.2  $   18.2  $   19.3                                                  Three months ended                                             ----------------------------                                             June 30,  June 30,   Mar 31,                                               2010      2009      2010                                             --------  --------  --------Selling, general and administrative expenses as a percentage of revenue (GAAP)                                          13.1%     15.6%     14.5%Selling, general and administrative expenses (excluding share-based compensation expense and related FBT(1)) as a percentage of revenue less repair payments (Non-GAAP)                             21.5%     18.6%     20.0%1.  FBT means the fringe benefit taxes on options and restricted share    units granted to employees under the WNS 2002 Stock Incentive Plan and    the WNS 2006 Incentive Award Plan (as applicable) paid by WNS to the    Government of India. In August 2009, the Government of India passed the    Finance (No. 2) Act, 2009 which withdrew the levy of FBT with effect    from April 1, 2009.Reconciliation of operating (loss) income (GAAP to non-GAAP)                                                  Three months ended                                             ----------------------------                                             June 30,  June 30,   Mar 31,                                               2010      2009      2010                                             --------  --------  --------                                               (US dollars in millions)                                             --------  --------  --------Operating (loss) income (GAAP)               $   (0.8) $    8.2  $    3.2Add: Amortization of intangible assets            8.0       8.2       8.1Add: Share-based compensation expense             0.5       3.3       4.4Add: Related FBT(1)                                 -       0.2         -Adjusted operating income (excluding amortization of intangible assets, share-based compensation expense, and related FBT(1)) (Non-GAAP)                  $    7.7  $   19.8  $   15.7                                                  Three months ended                                             ----------------------------                                             June 30,  June 30,   Mar 31,                                               2010      2009      2010                                             --------  --------  --------Operating (loss) income as a percentage of revenue (GAAP)                               (0.5)%     6.1%      2.1%Adjusted operating income (excluding amortization of intangible assets, share-based compensation expense, and related FBT(1)) as a percentage of revenue less repair payments (Non-GAAP)          8.6%     20.3%     16.2%1.  FBT means the fringe benefit taxes on options and restricted share    units granted to employees under the WNS 2002 Stock Incentive Plan and    the WNS 2006 Incentive Award Plan (as applicable) paid by WNS to the    Government of India. In August 2009, the Government of India passed the    Finance (No. 2) Act, 2009 which withdrew the levy of FBT with effect    from April 1, 2009.Reconciliation of net (loss) income attributable to WNS shareholders(GAAP to non-GAAP)                                                  Three months ended                                            ------------------------------                                             June 30,   June 30,  Mar 31,                                               2010      2009      2010                                            ---------  --------- ---------                                               (US dollars in millions)                                            ---------  --------- ---------Net (loss) income attributable to WNS (Holdings) Limited shareholders (GAAP)     $    (6.0) $     1.0 $     1.0Add: Amortization of intangible assets            8.0        8.2       8.1Add: Share-based compensation expense             0.5        3.3       4.4Add: Related FBT(1)                                 -        0.2         -Less: Net loss attributable to redeemable noncontrolling interest                          0.3        0.1       0.2Adjusted net income (excluding amortization of intangible assets, share-based compensation expense, related FBT(1) and loss attributable to redeemable noncontrolling interest) (Non-GAAP)                                 $     2.2  $    12.6 $    13.3                                                  Three months ended                                            ------------------------------                                             June 30,   June 30,  Mar 31,                                               2010      2009      2010                                            ---------  --------- ---------Net (loss) income as a percentage of revenue (GAAP)                                  (4.0)%      0.8%      0.7%Adjusted net income (excluding amortization of intangible assets, share-based compensation expense, related FBT(1) and loss attributable to redeemable noncontrolling interest) as a percentage of revenue less repair payments (Non-GAAP)                       2.4%      12.8%     13.8%1.  FBT means the fringe benefit taxes on options and restricted share    units granted to employees under the WNS 2002 Stock Incentive Plan and    the WNS 2006 Incentive Award Plan (as applicable) paid by WNS to the    Government of India. In August 2009, the Government of India passed the    Finance (No. 2) Act, 2009 which withdrew the levy of FBT with effect    from April 1, 2009.Reconciliation of basic (loss) income per ADS (GAAP to non-GAAP)                                                   Three months ended                                             ------------------------------                                             June 30,   June 30,  March 31,                                               2010       2009      2010                                             ---------  --------- ---------Basic (loss) income per ADS (GAAP)           $   (0.14)$    0.02 $    0.03Add: Adjustments for amortization of intangible assets, share-based compensation expense, related FBT(1), loss attributable to redeemable noncontrolling interest and impact from changes in carrying amount of redeemable noncontrolling interest.              0.19       0.27      0.28                                             ---------  --------- ---------Basic adjusted net income per ADS (excluding amortization of intangible assets, share-based compensation expense, related FBT(1) and loss attributable to redeemable noncontrolling interest) (Non-GAAP)         $    0.05  $    0.29 $    0.31                                             =========  ========= =========Reconciliation of diluted (loss) income per ADS (GAAP to non-GAAP)                                                  Three months ended                                             ------------------------------                                             June 30,   June 30,  March 31,                                               2010       2009      2010                                             ---------  --------- ---------Diluted (loss) income per ADS (GAAP)         $   (0.14) $    0.02 $    0.03Add: Adjustments for amortization of intangible assets, share-based compensation expense, related FBT(1), loss attributable to redeemable noncontrolling interest and impact from changes in carrying amount of redeemable noncontrolling interest.              0.19       0.27      0.27                                             ---------  --------- ---------Diluted adjusted net income per ADS (excluding amortization of intangible assets, share-based compensation expense, related FBT(1) and loss attributable to redeemable noncontrolling interest) (Non-GAAP)                                  $    0.05  $    0.29 $    0.30                                             =========  ========= =========1.  FBT means the fringe benefit taxes on options and restricted share    units granted to employees under the WNS 2002 Stock Incentive Plan and    the WNS 2006 Incentive Award Plan (as applicable) paid by WNS to the    Government of India. In August 2009, the Government of India passed    the Finance (No. 2) Act, 2009 which withdrew the levy of FBT with    effect from April 1, 2009.

CONTACT:

Investors & U.S. Media:
Alan Katz
SVP - Investor Relations
WNS (Holdings) Limited
+1 212 599-6960 ext. 241
ir@wns.com

India Media:
Smita Gaikwad
VP - Corporate Communications
WNS (Holdings) Limited
+91 22 40952461
smita.gaikwad@wns.com

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