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RNS Number : 0891W Softline Holding PLC 16 August 2022
Softline Holding plc
("Softline" or the "Company")
Softline announces strong gross profit growth of 25% in Q1, with constant
currency turnover growth of 44% in its international business
16 August 2022, London, UK - Softline Holding PLC [SFTL, US83407L2079]
(Softline, Softline Group, the Group, or the Company), the Cyprus registered
Global IT and digital transformation solutions and services provider
headquartered in London and operating in almost 60 countries, announces
unaudited key operating highlights for the first quarter of financial year
ending 31 March 2023.
Q1 BUSINESS HIGHLIGHTS
* Gross Profit increased by 25.5% in constant currency to $78.2m. Gross profit
margin improved to 14.3%.
* Group turnover increased by 8.3% year-over-year to $545m in reported currency,
and 10% in constant currency.
* The International business, which is now more than 50% of Softline overall,
delivered very strong constant currency turnover growth of 44% year-over-year.
This was driven by double-digit turnover growth in all international
geographic segments.
* IT Services turnover grew 81% year-over-year to $47.7m in reported currency,
with gross profit growth of 137% year-over-year.
* Recurring turnover increased to more than 70% of overall turnover, from 60% on
average in FY 2021.
* Headcount increased 44% year-over-year to 8,358 employees on 30 June 2022.
Softline more than doubled its Services capacity to 4,031 employees over the
past 12 Months.
* Strong execution of M&A with one more deal announced in June 2022, Seven
Seas Technology in UAE, in line with its three-dimensional growth strategy.
* External recognition with Softline noted as a 'Visionary' in the 2022 Gartner
Magic Quadrant for SAM Managed Services, and Partner of the Year with
Microsoft in a number of international geographies
* On 19th of July 2022 Softline announced its intention to proceed with a
demerger of its Russian and non-Russian operations, subject to all necessary
approvals, including shareholder approval.
Sergey Chernovolenko, Global CEO at Softline, said:
"I am very proud of how our team is navigating the current market environment,
and I am thankful to our 8,400 Softliners around the world for their great
focus and effort to deliver for our customers. We are investing heavily in the
business, and our growth strategy is resonating. I am particularly pleased
with the very strong performance in our Services business, and also in our
International business. I am confident that our depth of experience and our
ability to navigate changes in our rapidly evolving market will continue
bringing us success in all markets where we operate. I am also very proud of
the continued external recognition we have received from Microsoft by our
teams in Vietnam, Cambodia and India. These markets are incredibly important
for us, and strong growth within the APAC region is key to the global strategy
of the wider business. Technology creates opportunities, and Softline is well
positioned to help our customers in accelerating and increasing revenues,
boosting profits, and operating efficiently and securely in the digital
economy."
Jacques Guers, Chairman of the Board of Directors at Softline Group, noted:
"We are driving the business with discipline based on market dynamics that
differ significantly in Russia and elsewhere. Based on the diverging nature of
operations, priorities, and go-to-market strategies in both markets, we are
now well underway with executing on our plan we recently announced to demerge
our Russian and International businesses. Our intent is to create two leading
independent companies in their respective markets, resulting in optimised
growth strategies, operations and shareholder value for both new companies. We
are committed to protecting the interests of all of our stakeholders and I see
a bright future for both companies where they can lead in digital
transformation solutions, platforms, and services in each and every market of
our presence."
Key Figures
1Q 2022* 1Q 2021 %
Turnover ($ '000) 544,843 503,169 8%
Recurring turnover % 70% 60%
Turnover by business line ($ '000)
Software & Cloud 448,993 442,836 1%
IT Services 47,711 26,355 81%
Hardware 48,139 33,977 42%
1Q 2022* 1Q 2021 %
Turnover by region ($ '000)**
APAC 209,940 162,347 29%
EMEA 52,138 20,929 149%
Russia 180,836 233,547 -23%
RoE 35,246 29,337 20%
LATAM 69,166 60,609 14%
Reported growth
*Year ended 31 March 2023
**Regional numbers include intercompany sales
BUSINESS Review
Services - Services remains a segment with a highest growth rate. Q1'22
turnover grew 81.0% to $47.7m. Services continues as the most profitable
segment with gross profit margin of 80%. Services represents 9% of Group
turnover, and contributes 49% 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 1.4% in
Q1'22. Growth was impacted by weakness in the Russian market. Software &
Cloud increased 31% year-over-year in the international business.
Hardware - Hardware grew 41.7% year-over-year in Q1'22. We see significant
acceleration of growth in the last two reported quarters due to delayed demand
from the first nine months of FY 2021, as well as increased demand from
customers in selected regions ahead of expected supply limitations.
Geographic Turnover - 67% of the Q1'22 turnover was generated outside of
Russia, reflecting very strong growth rates in our international business,
where turnover grew 44% year-over-year in constant currency. Growth was
particularly strong in EMEA, and APAC, both organically and due to recent
acquisitions. Our business in Russia declined, due to the pace of vendor
migration and key international vendors ramping down faster than expected.
Profitability
Gross Profit in Q1'22 was $78.2M, up 25.5% year over year, compared to $62.3M
for the last year. Growth was particularly strong in the Services business
with 136.9% year-over-year. Gross profit in hardware segment more than doubled
thanks to the turnover growth and visible margin improvement. Gross Profit
margin, turnover based, was 14.3% compared to 12.4% for Q1 last year, partly
driven by the contribution of the Services business.
For Q1'22, adjusted EBITDA was $3.0M. Adjusted EBITDA margin, Gross Profit
based, was 3.8%. Adj. EBITDA reflects the significant investments we are
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.
Balance sheet and liquidity
As of the reporting date operational Net debt/adj. EBITDA was 1.34x. This
excludes IPO proceeds. The Cash position as of 30 June 2022 was $369m.
M&A
Softline's M&A strategy underpins the three-dimensional growth strategy,
and the company has been active over the past few years with a specific focus
on key strategic objectives - to scale faster geographically, to increase
skills, and expand capabilities that Softline can bring to customers. In Q1
Softline strategically expanded its presence in the Middle East and Africa
through the acquisition of UAE based Seven Seas Technology.
Seven Seas Technology 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, 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,
Platinum Cloud Solutions Provider status with HPE, Cisco Gold Integrator and
others. This combination of partnerships together with an extensive services
portfolio sets SST apart in the regional market. 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.
Through Softline's acquisition, organisations in the region can now access an
expanded portfolio of solutions and services, as well as Softline's global
talent base. This includes global relationships that Softline holds with
multiple cloud providers, including Microsoft. Customers in the region can now
rely on Softline's managed services supported by its Global Delivery
organisation and advanced MSP statuses from Microsoft and AWS, and on its
advanced cybersecurity capabilities. Customers can also access the company's
software development and application modernization & engineering
capability.
Softline's management team is pleased with the M&A opportunities in the
market, and the strength of the pipeline of deals currently in progress.
Awards
Softline was recognised as a 'Visionary' in the 2022 Gartner Magic Quadrant
for SAM Managed Services.
Softline continues to benefit from very strong vendor relationships, and this
quarter, Microsoft recognised Softline Vietnam and Softline 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 Softline´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
As previously announced, in the near term, Softline plans to provide guidance
for the next quarter only. The company will continue to review the situation,
and will provide longer term guidance at the appropriate time
For Q2 FY2022, Softline expects year-over-year turnover growth of at least
15%. To provide some context:
* In its global business outside Russia, the company expects year-over-year
growth of at least 30%, and while this includes the impact of some continued
uncertainty in its Rest of Eurasia (RoE) region, this represents a very strong
level of growth.
* In Russia, the company expects reported growth to be flattish year-over-year
based on the continued uncertainty in the market. This includes a positive
impact from FX of about 7%. This should be viewed in the context of the
transformation of the Russian IT market where IDC estimates that there will be
at least a 25% decline in Information Communication Tech Spending in
2022/2021, and a 36% decline in Information Technology.
As it relates to Gross Profit overall for Q2, Softline expects year-over-year
growth of at least 20%.
Softline expects to deliver positive adjusted EBITDA for the group in Q2,
including in the Russia operation.
Other selected events
On 19th of July 2022 Softline announced its intention to proceed with a
demerger of its Russian and non-Russian operations, subject to all necessary
approvals, including shareholder approval. The announcement follows a review
initiated in May 2022 to adjust the group's assets and ownership structure in
order to optimise value for all of its stakeholders.
https://softline.com/news/update-on-business-and-operations-19-july-2022
(https://softline.com/news/update-on-business-and-operations-19-july-2022)
Softline recently published its FY 2021 annual report, which is available on
the Investor Relations section of Softline.com: Softline Annual Report FY2021
(https://softline.com/uploads/files/5a78a6/2e3e0e/c5a7d3/Softline-Annual-Report-2021.pdf)
Additional Information
Softline's related supporting materials can be accessed in the Investor
Relations section of Softline.com
Results conference call
An investor, analyst and media webcast will be held on 16(th) August 2022 at
8:00am UK time. Softline will announce key operating highlights for the first
quarter of financial year ending 31 March 2023.
A livestream of the investor call will be available and can be accessed here:
Softline Holding plc - Q1 FY2022 Trading Update
(https://www.lsegissuerservices.com/spark/SOFTLINEHOLDING/events/28b0ae75-2747-414c-a7f3-3378ff9c77d4)
Contacts
Eve Frayling Steven
Salter Alexandra
Melnikova
Media
Global Investor Relations VP IR Director
Eve.frayling@pagefield.co.uk (mailto:Eve.frayling@pagefield.co.uk)
IR@softline.com (mailto:IR@softline.com)
IR@softline.com (mailto:IR@softline.com)
About Softline
Softline is a leading global solutions and services provider in digital
transformation and cybersecurity, with its headquarters in London. The company
enables, facilitates and accelerates the digital transformation of its
customers' businesses, connecting over 150,000 organizations from all
industries with over 6,000 best-in-class IT vendors, and delivering its own
services and solutions. Foundation of Softline's growth is so-called
three-dimensional strategy, which includes geographic, portfolio and sales
channel expansion. This strategy is supported by energetic M&A activity,
so Softline is benefiting from the on-going consolidation of the industry.
Thanks to this strategy, Softline is currently one of the fastest growing
companies in the sector. Softline achieved a turnover of US$ 2.2 billion in
fiscal year of 2021. In October 2021, the company conducted a primary listing
on the London stock exchange.
Softline's 8,400 employees work in almost 60 countries throughout Asia, Latin
America, Eastern Europe and Africa - markets with significant growth
potential.
Important Notices
The financial results set out in this release are sourced from the Group's
management accounts for 2021, 2020, Q4 2021 and Q4 2020 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
representation or warranty is made that any of these forward-looking
statements or forecasts will come to pass or that any forecast result will be
achieved. Undue influence should not be given to, and no reliance should be
placed on, any forward-looking statement. No statement in this document is
intended to be nor may be construed as a profit forecast.
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