Half-year Results
29/11/2022 07:01
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RNS Number : 9039H Softline Holding PLC 29 November 2022
Softline Holding plc
("NOVENTIQ" or the "Company")
Noventiq announces strong results for H1 FY2022, including 44% constant
currency turnover growth, and 67% gross profit growth.
29 November 2022, London, UK - Noventiq [Softline Holding PLC / SFTL,
US83407L2079] (Noventiq, the Group, or the Company), the Cyprus registered
global digital transformation and cybersecurity solutions and services
provider headquartered in London and operating in almost 60 countries,
announces unaudited key operating highlights for the second quarter and first
half of FY2022.
Q2 and H1 2022 BUSINESS HIGHLIGHTS
· Q2 2022 turnover was $320.4M, an increase of 35% in USD, and 48% in
constant currency. For the 6 months to 30 September 2022 turnover was $691M,
an increase of 32% in USD, and 44% in constant currency.
· Q2 2022 gross profit was $49.9M, an increase of 66% in USD, and 77%
in constant currency. For the 6 months to 30 September 2022 gross profit was
$95.8M, an increase of 58% in USD, and 67% in constant currency.
· Broad based geographic growth, with strong double-digit growth in all
4 regions, including strength in India, with $315M turnover in H1, and growth
of 43% in constant currency.
· Services turnover growth in USD of 105% in Q2, driving 63% share of
gross profit.
· Hardware turnover grew 217% year-over-year in Q2.
· Recurring turnover was 73% in H1, up from 60% in H1 last year.
· Successful completion of demerger of Russian business.
· Rebranded to Noventiq, a strong business with more than 25 years of
IT experience, and a strong track record of growth.
· Destination for talent, with c. 3,900 people, up 54% year-over-year
overall, and up 76% in Services.
· Enhancing Microsoft capabilities and expanding in existing and new
geographies.
· Investment in growth innovation with key vendors including AWS,
Apple, Google.
· Continued investment and execution of M&A strategy with 4
transactions announced in FY2022 enhancing skills, capabilities and geographic
presence.
· Expanded geographic footprint, establishing presence in 4 new
countries in Q2 in the Middle East and Asia.
· Accelerating the business to multi-cloud > Services >
multi-vendor > cybersecurity > digital transformation.
Sergey Chernovolenko, Global CEO at Noventiq, said:
"I would like to thank our nearly 4,000 talented professionals at Noventiq for
their relentless focus on driving value for our customers. I am proud that we
have delivered on the commitments we made 90 days ago. We have delivered
tremendous turnover growth in Q2 of 48% in constant currency which was well
above our business outlook. I am particularly pleased with the broad-based
strength in the business, with all four regions delivering strong double-digit
turnover growth. Gross profit growth of 77% was also incredibly strong, well
ahead of turnover growth, and significantly above our guidance. At the same
time, we have been investing and transforming our business at unprecedented
pace and scale. We have not let anything distract us from our key strategic
priorities, and we are better positioned than ever before to continue
delivering on our strategy for long term profitable growth."
Jacques Guers, Chairman of the Board of Directors at Noventiq, noted:
"We have very successfully navigated significant change in the business
throughout this year in the context of a complex market dynamic. In October,
we completed the sale of the Russian business, and we have moved forward to a
new era under the brand of Noventiq. The brand reflects changes in the
technology industry over the last 20 years. Enterprises and organisations
around the world require purposeful and intelligent innovation on demand to
improve their business outcomes. Noventiq is a strong independent company
which comes from the heritage and experience of more than 25 years of deep
technology experience. It has a solid foundation and a well-established strong
track record of growth driven by a highly experienced management team. The
company is growing rapidly, at scale, and operating nearly 60 countries. We
have the right recipe for growth, as we continue to leverage global
relationships to deliver local outcomes for our customers all around the
world."
Key Financials
H1 2022* H1 2021 % Q2 2022 Q2 2021 %
Turnover ($ '000) 691 089 522 542 32% 320 361 237 940 35%
Recurring turnover % 73% 60% 66% 61%
Turnover by business line ($ '000)
H1 2022* H1 2021 % Q2 2022 Q2 2021 %
Software & Cloud 596 418 478 549 25% 264 646 214 959 23%
IT Services 61 344 30 465 101% 31 315 15 281 105%
Hardware 33 327 13 528 146% 24 400 7 701 217%
H1 2022* H1 2021 % Q2 2022 Q2 2021 %
Gross profit ($ '000) 95 801 60 760 58% 49 978 30 113 66%
Gross profit by business line ($'000)
H1 2022* H1 2021 % Q2 2022 Q2 2021 %
Software & Cloud 36 074 34 759 4% 17 815 13 820 29%
IT Services 51 718 24 034 115% 26 141 15 246 71%
Hardware 8 009 1 967 307% 6 022 1 046 475%
Turnover by region ($ '000)
H1 2022* H1 2021 % Q2 2022 Q2 2021 %
APAC 379 095 285 722 33% 169 155 123 375 37%
EMEA 102 324 74 875 37% 43 197 40 304 7%
RoE** 84 419 62 434 35% 51 924 35 359 47%
LATAM 125 251 99 511 26% 56 085 38 902 44%
Reported growth
*6 Months ended 30 September 2022
**Rest of Eurasia
BUSINESS Review
Services - Services remains a segment with a highest growth rate. Q2'22
turnover grew 105% to $31.3m. Services continues as the most profitable
segment with gross profit margin of 83%. Services represents 10% of Group
turnover, and contributes 52% of total Gross Profit. Services growth reflects
the impact of acquisitions, as well as strong organic growth.
Software & Cloud - Turnover from Software & Cloud increased by 23% in
Q2'22.
Hardware - Hardware grew 217% year-over-year in Q2'22. Growth in all regions,
and includes a mix of both organic and inorganic growth.
Geographic Turnover - Strong double-digit growth in all regions, both
organically and due to recent acquisitions.
Profitability
Gross Profit in Q2'22 was $49.9M, up 66% year over year. Growth was
particularly strong in the Hardware business (+475% YoY) and Services business
with 71% year-over-year. Gross Profit margin, turnover based, was 15.6%
compared to 12.7% for Q2 last year, partly driven by the contribution of the
Services business.
For Q2'22, adjusted EBITDA was $4.4M. Adjusted EBITDA margin, Gross Profit
based, was 8.7%. Adj. EBITDA reflects the significant investments the company
is making for future growth. These investments include people, motivation and
retention, continued company diversification into Services, corporate
governance, systems such as CRM, ERP and digital platforms.
Other selected financial events
Further to the announcement on the 7(th) October 2022 of the sale of its
Russian business: EGM Sale of Russian business
(https://www.londonstockexchange.com/news-article/SFTL/notice-of-shareholder-circular-and-general-meeting/15663913)
, the company completed the transaction on the 20(th) October: Sale
confirmation
(https://www.londonstockexchange.com/news-article/SFTL/softline-completes-sale-of-its-russian-business/15680538)
.
At the general meeting held on the 25(th) October 2022, shareholders approved
the bonus issuance in relation to the transaction: GM Result
(https://www.londonstockexchange.com/news-article/SFTL/result-of-general-meeting/15687479)
.
Balance sheet and liquidity
As of the reporting date operational Net debt was negative (cash>debt).
The Cash position as at 30 Sept 2022 was $221.6m.
Net WC at 30.09.22 was $55.8m. This is due to the seasonality of the business.
M&A
Noventiq's M&A strategy underpins the 3-dimensional growth strategy, and
the company has been active over the past few years with a specific focus on
key strategic objectives. Of the notable transactions this year, Noventiq
announced two deals in the first half of financial year 2022. Both
acquisitions will help the company to strengthen Noventiq's positioning in the
Middle East region and beyond:
· Seven Seas Technology (June 2022): Noventiq significantly bolstered
its Middle East presence through the acquisition of Seven Seas Technology,
which is a leading system integrator and Information and Communications
Technology (ICT) solution provider in the UAE. In partnership with major
technology vendors such as Microsoft, HPE and Cisco the company provides
medium and large enterprises with collaborative, multi-cloud strategies. SST
has 15 Gold competencies with Microsoft, as well as several advanced
specialisations. SST's 300+ ICT trained and certified professionals serve
large and medium businesses across a number of sectors including civil
aviation, government, oil & gas, banking & finance, hospitality,
healthcare, education and retail.
· Makronet (Sept 2022): The acquisition of the leading Turkish
Microsoft Cloud Solution Provider (CSP) partner by Noventiq represents a
significant addition to Softline's business in Turkey and the MEA region. It
contributes to two dimensions of Noventiq´s three-dimensional growth
strategy: geographical expansion, and strengthening sales channel capabilities
with Makronet's own unique platform MyAdmin, which is globally awarded by
Microsoft. This solution, which simplifies and optimises customers´
management and operations of CSP assets, complements Noventiq´s own
ActivePlatform to further digitally transform customers´ ecosystems. In
addition to Microsoft´s cloud solutions, they also offer Software Asset
Management (SAM) services and General Data Protection Regulation (GDPR)
security services and managed services. Makronet has almost 1,000 cloud
customers in Turkey.
During the second half (H2) of FY2022, the company signed agreements to
acquire Saga Group in Serbia and also Value Point Systems in India.
· Value Point Systems (October 2022): Value Point Systems (VPS) is an
Indian digital infrastructure and cybersecurity solutions & services with
more than 1,200 employees, and over 2,000 local customers. This acquisition
accurately represents Noventiq´s strategy and vision for this market:
"Investing in India for India". Once the transaction is completed, Noventiq
will strengthen its global cybersecurity proposition with the skills of VPS'
Security Operation Centre (SOC) - including the cybersecurity integration
capabilities and a sophisticated cybersecurity consultancy offering -, which
is one of the industry's leading SOCs in India.
· Saga Group (November 2022): Noventiq has signed an agreement to
acquire the majority of Serbian software and digital solutions leader Saga
Group, bringing 400 people to Noventiq´s team. Saga Group, which has
operations in more than 25 countries, will contribute to Noventiq's growth in
Central and Eastern Europe. This transaction will also help Noventiq to
reinforce its global portfolio, as Saga Group is an advanced partner of Oracle
and Cisco, as well as Microsoft, DELL, Hewlett Packard Enterprise, Juniper,
VMWare, and others. Saga Group has built an impressive portfolio of
proprietary digital products, including its own IP for digital banking,
Fintense - created by Saga's subsidiary NF Innova -, which is an omnichannel
digital banking platform. Saga's other sophisticated IP platforms are, Weaver,
a sophisticated AI chatbot; and Selecta, a next generation AI-powered CRM
platform - these two platforms are created and owned by Intellya, another of
Saga Group's subsidiaries
Noventiq's management team continues to be pleased with the M&A
opportunities in the market, and the strength of the pipeline of deals
currently in progress.
Microsoft
Noventiq is one of 10 globally managed Microsoft's partners and has been
further progressing this cooperation. Noventiq sees very significant potential
to partner with Microsoft and scale in many more markets around the world.
Noventiq works closely with Microsoft across multiple customer segments
ranging from SMBs to large organizations across private and public sectors.
Noventiq, and formerly Softline, has collaborated with Microsoft for more than
25 years and is continuing to expand its services footprint with Microsoft
solutions. Noventiq is now a Licensing Solutions Provider and Cloud Solutions
Provider in more than 35 countries. The company is a member of the prestigious
Microsoft Intelligent Security Association, a Microsoft Azure Expert Managed
Services Provider, with twelve Advanced Specializations by Microsoft, and
maintains 5 out of 6 Microsoft solutions partner designations. In 2022,
Noventiq has received a number of Partner of the Year awards.
ESG
Noventiq continues to advance and embed ESG across its operations, and it
continues to be at the forefront of Noventiq's strategy. The company focuses
on creating an environment where people can prosper. Noventiq's commitment to
its teams has been recognized with the certification of Great Place To Work in
many of its regions. The company has a longstanding dedication to the
preservation of basic rights and human dignity in the workplace and beyond,
including diversity and inclusion policies which are incredibly important to
the company's leadership team.
As part of its ESG strategy, Noventiq's purpose is to ensure environmentally
sound and sustainable development of the company, and will continue to look
for ways to reduce the climate impact of its business. Noventiq also has a
resilient framework in place for ethics and compliance in all the markets
where they operate. The company will continue to promote diversity across its
extended governance structure. The company has implemented a Board governance
structure in line with best practice
The company published its ESG statement that can be read here:
https://noventiq.com/about/esg (https://noventiq.com/about/esg)
Awards
Noventiq was recognised as a 'Visionary' in the 2022 Gartner Magic Quadrant
for SAM Managed Services.
Noventiq continues to benefit from very strong vendor relationships, and this
quarter, Microsoft recognised Noventiq Vietnam and Noventiq Cambodia with the
Partner of the Year Award, for excellence in innovation and implementation of
Microsoft´s solutions.
Embee, a company acquired by Softline in January 2020, was also recognised
with the Microsoft India Area Award 2022 - MWP Partner of the Year. This
acknowledgement emphasised Noventiq's leading position in the market, and
comes after Softline India was recognised by Microsoft as the leading Cloud
Solution Provider (CSP) in India early this year.
Business Outlook
Based on the sale of the Russian business and the visibility across the
Noventiq regions, the company is now able to reinstate its business outlook
for the full year 2022.
Noventiq expects to deliver turnover growth of at least 28% in reported
currency in FY22, or at least 39% in constant currency based on FX rates at
the end of H1. This would represent nearly $350M of new turnover. This outlook
reflects the continuation of a solid demand environment; however, the company
is also conscious of the broader economic and geopolitical uncertainty. The
company is managing the business responsibly, and based on what it sees today,
it does see a path to potential upside.
As it relates to Gross Profit overall for FY22, the company expects gross
profit margin in the range of 13 to 14%, and is targeting the upper end of the
range.
Noventiq expects to deliver adjusted EBITDA margin on gross profit of close to
double digits in FY22. This includes the impact of the very significant
investments the company has been making this year. Including the impact of
M&A proforma, and additional IPO organic investments, which are starting
to fuel the top line, the adjusted EBITDA margin on gross profit is expected
in the high-teens.
The company believes this is a significant achievement for the business given
the macro environment dynamics related to the geopolitical situation.
Noventiq remains focused on delivering on Q3 and driving continued profitable
growth for the full financial year 2022, and will continue to manage the
business responsibly while closely monitoring the demand environment.
For the full year FY2021, Noventiq reported turnover of $1,155,753, and gross
profit of $146,461.
Other selected events
Since the 20(th) of October 2022 the company operates under the brand name of
Noventiq: Noventiq RNS
(https://noventiq.com/news/softline-holding-plc-begins-trading-under-the-brand-name-noventiq)
.
Financial tables
Profit & Loss account
kUSD Q2'22 Q2'21
Turnover 320 361 237 940
Revenue 305 878 217 819
Cost of sales (255 900) (187 707)
Gross profit 49 978 30 113
Gross profit % 16% 13%
S&D (37 486) (21 881)
G&A (12 015) (6 538)
Operating profit 386 1 226
Foreign exchange/loss (2 294) (554)
Finance income 2 365 327
Finance expenses (3 984) (2 712)
Profit before tax (3 527) (1 713)
Income tax expense (50) (36)
Net profit for the year (3 577) (1 749)
EBITDA adj. 4 367 3 404
Cashflow statement
kUSD 6m2022 6m2021
Net profit/(loss) (9 919) 3 743
Adjustments to reconcile net profit to net cash flows:
Income tax expense 696 1 289
Depreciation and amortization 5 554 9 778
Finanсe costs and income 5 017 8 508
Foreign exchange loss/(gain) 5 385 1 367
Other 1 968 402
Operating profit before working capital changes 8 701 25 086
Working capital adjustments:
(Increase)/decrease in inventories 5 451 (11 670)
(Increase)/decrease in advances issued (4 744) (10 450)
Increase/(Decrease) in advances received 12 782 (926)
(Increase)/Decrease in trade and other receivables (26 777) (51 976)
(Increase)/decrease in other current assets (8 933) 5 567
Increase / (Decrease) in trade and other payables (50 037) (15 130)
Cash generated from operations (63 558) (59 498)
Income tax paid (168) (975)
Net cash generated from operating activities (63 726) (60 473)
Cash flows from investing activities
Purchase of property, plant and equipment (590) (4 429)
Creation and purchase of intangible assets (3 591) (9 179)
Investments in subsidiaries and joint ventures (47 429) (26 125)
Disposal of subsidiaries - (1 411)
Sale of Crayon shares 42 268 35 650
Treasury shares (4 420) -
Interests received (loans and deposits) 1 197 695
Loans collected 9 256 12 160
Loans issued (9 932) (17 784)
Net cash used in investing activities (13 241) (10 425)
Cash flows from financing activities
Repayments of borrowings (54 853) (468 527)
Receipts from borrowings 70 676 517 470
Overdrafts and revolving credit lines cash turnover 5 145 8 150
Financial lease payments (1 212) (5 037)
Interest paid (borrowings and financial leasing for internal use) (1 155) (7 821)
Redemption of shares 0 (2 476)
Dividends paid (619) 0
Net cash used in financing activities 17 982 41 760
Foreign exchange difference (4 121) (2 831)
Net increase/(decrease) in cash and cash equivalents (63 106) (31 969)
Balance Sheet
kUSD unaudited unaudited
Group BS 30 September 2022 30 September 2021
Goodwill 122 943 75 685
Deffered tax assets 7 914 9 492
Intangibles 47 272 57 215
Property, plant and equipment, net 6 086 11 714
Lease assets rights 4 450 12 044
Investments in associates and joint ventures 805 96
Available-for-sale financial assets - 94 402
Long term deposits 471 63
Long term loans issued 7 183 3 039
Other non-current assets 16 120 3 385
Non-current assets 213 245 267 134
Advances issued 5 082 18 497
Other current assets 16 200 9 252
Income tax receivable 5 356 7 210
Inventory, net 13 696 37 016
Other receivables 41 187 44 173
Trade receivables, net 209 122 248 104
Loans issued 1 154 5 920
Cash and cash equivalents 221 625 57 646
Assets held for sale 462 550
Current assets 975 971 427 818
TOTAL ASSETS 1 189 216 694 952
kUSD unaudited unaudited
Group BS 30 September 2022 30 September 2021
Share capital 44 30
Retained earnings 65 474 14 678
Owner's contribution 14 259 14 260
Other components of equity 383 948 (868)
Treasury shares (7 198) -
Other comprehensive income (98 702) 37 296
Total equity and assets attributable to owners 357 826 65 396
Non-controlling interest (6 939) (6 342)
Total equity 350 886 59 054
Deferred Tax liabilities 3 795 3 637
Long-term contingent liabilities 25 938 6 767
Long-term deferred payments for acquisitions 9 285 9 241
Long-term tax payable 786 920
Long-term borrowings - third parties 9 554 88 239
Long-term obligations under finance leases 2 724 9 860
Other long term creditors 5 814 801
Non-current liabilities 57 895 119 465
Short-term contingent liabilities 20 616 5 098
Short-term deferred payments for acquisitions 18 525 15 736
Advances from customers 17 837 43 518
Income tax payable 2 509 3 494
Other payables 56 358 49 529
Trade payables, including 167 643 225 996
Short-term obligations under finance leases 2 925 4 923
Short-term borrowings - third parties 47 414 168 139
Liabilities directly associated with the assets held for sale 446 607
Current liabilities 780 435 516 433
TOTAL EQUITY AND LIABILITIES 1 189 216 694 952
Additional Information
Noventiq's related supporting materials can be accessed in the Investor
Relations section of Noventiq.com
Results conference call
An investor, analyst and media webcast will be held on 29(th) November 2022 at
8:00am UK time. Noventiq will announce key operating highlights for Q2, H1 of
financial year ending 31 March 2023.
A livestream of the investor call will be available and can be accessed here:
Noventiq - FY2022 H1 Trading Update
(https://www.lsegissuerservices.com/spark/SOFTLINEHOLDING/events/73190a44-b36b-46de-af54-cf644c2a8450)
About Noventiq
Noventiq is the new brand name of Softline Holding plc, one of the fastest
growing players in the sector. It is a leading global solutions and services
provider in digital transformation and cybersecurity, headquartered in London.
Under this brand, the company enables, facilitates and accelerates the digital
transformation of its customers' businesses, connecting over 75,000
organisations from all industries with hundreds of best-in-class IT vendors,
and delivering its own services and solutions.
The company delivered turnover of approximately US$1.1 billion in the fiscal
year of 2021. It is listed on the London Stock Exchange following successful
IPO in October 2021.
The company´s c. 3,900 employees, work in almost 60 countries throughout
Asia, Latin America, Eastern Europe, Middle East and Africa - markets with
significant growth potential.
Additional information about the company can be found here:
https://noventiq.com/investor-relations
(https://noventiq.com/investor-relations)
Contacts
Steven Salter
Global Investor Relations VP
IR@noventiq.com (mailto:IR@noventiq.com)
Rocio Herraiz
Global Head of Communications
pr@noventiq.com (mailto:pr@noventiq.com)
Important Notices
The financial results set out in this release are sourced from the Group's
management accounts for Q2 & H1 FY2022, Q2 & H1 FY2021 and are
unaudited. The "constant currency" metric excludes the effect of foreign
currency exchange rate fluctuations by translating the current period revenues
into U.S. dollars at the weighted average exchange rates of the prior period
of comparison.
This document may constitute or include forward-looking statements. Forward
looking statements are statements that are not historical facts and may be
identified by words such as "plans", "targets", "aims", "believes", "expects",
"anticipates", "intends", "estimates", "will", "may", "continues", "should"
and similar expressions. These forward-looking statements reflect, at the time
made, the Company's beliefs, intentions and current targets/aims concerning,
among other things, the Company's or the Group's results of operations,
financial condition, liquidity, prospects, growth and strategies.
Forward-looking statements include statements regarding: objectives, goals,
strategies, outlook and growth prospects; future plans, events or performance
and potential for future growth; liquidity, capital resources and capital
expenditures; economic outlook and industry trends; developments of the
Company's or the Group's markets; the impact of regulatory initiatives; and
the strength of the Company's or any other member of the Group's competitors.
Forward-looking statements involve risks and uncertainties because they relate
to events and depend on circumstances that may or may not occur in the future.
The forward-looking statements in this document are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in the Company's records (and those of other members of
the Group) and other data available from third parties. Although the Company
believes that these assumptions were reasonable when made, these assumptions
are inherently subject to significant known and unknown risks, uncertainties,
contingencies and other important factors which are difficult or impossible to
predict and are beyond its control. Forward-looking statements are not
guarantees of future performance and such risks, uncertainties, contingencies
and other important factors could cause the actual outcomes and the results of
operations, financial condition and liquidity of the Company and other members
of the Group or the industry to differ materially from those results expressed
or implied in this document by such forward-looking statements. No
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intended to be nor may be construed as a profit forecast.
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