Q4 Trading Update
24/05/2022 07:00
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RNS Number : 5095M Softline Holding PLC 24 May 2022
Softline Holding PLC
("Softline" or the "Company")
Softline announces strong results for Q4'21 ending 31 March 2022, including
39% constant currency turnover growth, and 51% gross profit growth, with
strong execution and superior profitable growth
24 May 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 provider headquartered in London and
operating in 60 countries, announces unaudited key operating highlights for
the fourth quarter of financial year ending 31 March 2022.
Q4 and 2021 BUSINESS HIGHLIGHTS
· Q4 2021 turnover growth increased by 25.4% YoY to $534m in reported
currency, and 39% in constant currency. For the 12 Months to 31 March 2022
turnover grew 22% YoY to $2,175.5m in reported currency, and 25% in constant
currency. Including the impact of unconsolidated turnover from M&A of
$99M, growth was 27%
· Q4 2021 Gross Profit increased by 51% in constant currency to
$75.5m. For the 12 Months to 31 March 2022, Gross Profit increased in constant
currency by 39% to $306.2m.
· International business turnover growth was particularly strong
with reported growth of 48% YoY in 2021.
· 2021 IT Services turnover grew 85.3% to $144.0m reported currency
YoY with Gross profit growth of 95% YoY.
· 2021 recurring turnover increased to more than 60% of overall
turnover, from 56% at the end of FY2020.
· Headcount increased 52% YoY to 8,384 employees on 31 March 2022.
Softline more than doubled its Services capacity to 4,024 employees on 31st
March 2021.
· Strong execution on M&A with five deals announced and closed since
IPO which underpins Softline's growth strategy.
· Successful completion of tender offer on 18 May 2022 with 4,420,277
GDRs tendered, priced at $1 per GDR, confirming that shareholders believe in
the more fundamental value in Softline, and the management's clear strategy
for increasing company value.
· Implementation of industry leading, performance based long-term
employee partnership program.
Jacques Guers, Chairman of the Board of Directors of Softline Group, noted:
"It is clear that the geopolitical situation has had a profound impact on some
markets in which we operate. Over the past few months, we have made thoughtful
and proactive decisions to navigate the environment. We are managing with
discipline, as well as taking bold decisions to drive forward on our strategic
objectives, and to accelerate and extend our position as a global leader in
digital transformation solutions, platforms, and services."
Softline Global CEO Roy Harding said:
"I am very pleased with our strong execution and performance in FY21, and our
consistent delivery for our customers all over the world. This is driven by
our talented people, and I would like to thank our entire team of 8,400
Softliners around the world for their continued dedication to driving digital
transformation for customers. I couldn't be more proud of my leadership team,
who have an unwavering commitment to driving our business forward. They have a
significant depth of experience and expertise, and a strong ability to
navigate change in our rapidly evolving market… and we remain laser focused
on the next chapter of our growth story"
Key Figures
2021* 2020 % 4Q 2021 4Q 2020 %
Turnover ($ '000) 2,175,512 1,788,481 22% 533,980 425,786 25%
Recurring turnover % 60% 56%
Turnover by business line ($ '000)
Software & Cloud 1,796,396 1,510,043 19% 431,054 370,977 16%
IT Services 144,043 77,728 85% 40,804 23,281 75%
Hardware 235,072 200,710 17% 62,123 31,527 97%
2021* 2020 % 4Q 2021 4Q 2020 %
Turnover by region ($ '000)**
APAC 569,942 345,319 65% 174,273 132,173 32%
EMEA 167,863 42,102 299% 59,538 16,637 258%
Russia 1,128,245 1,081,609 4% 233,317 210,542 11%
RoE 139,765 125,239 12% 32,505 24,841 31%
LATAM 185,542 208,319 -11% 37,933 44,460 -15%
Reported growth
*Year ended 31 March 2022
**Regional numbers include intercompany sales
BUSINESS Review
Services - Services remains a segment with a highest growth rate. 2021
turnover grew 85.3% to $144.0m. Services remains the most profitable segment
with gross profit margin of 78%. Services represents 7% of Group turnover, and
this segment contributes 37% of total Gross Profit. Growth reflects the impact
of acquisitions, as well as strong organic growth.
Software & Cloud - Turnover from Software & Cloud increased by 19.0%
in 2021. Despite challenges in some markets where we operate, growth in Q4
2021 accelerated to 16.2% YoY. The major growth contribution was made by the
cloud business.
Hardware - Hardware grew 17.1% YoY in 2021. We see significant acceleration of
growth to 97.0% YoY in Q4 2021 compared to 8.5% in Q3 2021 due to pent up
demand from the previous quarter, and increased demand from customers in
selected regions ahead of expected supply limitations.
Geographic Turnover - 49% of the total 2021 turnover was generated outside of
Russia. This is part of the company's commitment to advance the
diversification of Softline's business. Growth was particularly strong in
EMEA, and APAC, both organically and due to recent acquisitions. Despite
heightened uncertainty, 4Q turnover growth in Russia was resilient with YoY
growth of 11.9%.
Profitability
Gross Profit in 2021 was $306.2M, up 35.5% year over year, compared to $225.9M
for the last year. Growth was broad-based overall, particularly with 95%
growth in the Services business. Gross Profit margin, turnover based, was
14.1%, compared to 12.6% for the last year partly driven by the contribution
of the Services business.
For FY2021 ended 31 March 2022, adjusted EBITDA was $70.7M, up 35.8% compared
to $52.1M for FY2020. Adjusted EBITDA margin, Gross Profit based, was flat at
23.1%. Adj. EBITDA reflects the significant investments Softline is making for
future growth, as well as the negative headwinds on currency. These
investments include people, motivation and retention, continued company
diversification into Services - doubling the workforce in 2021, corporate
governance, systems such as CRM, ERP and digital platforms, and new
geographies
Other selected financial events
Softline continues to optimize its capital structure. As a part of the earlier
announced tender offer, on 18 May 2022 Softline's shareholders tendered
4,420,277 GDRs priced at $1 per Ordinary Share or GDR. As previously
announced, Softline initiated the tender offer in the best interests of its
shareholders to provide an opportunity for those shareholders with a need to
close their positions. With the minimal take up of just 2% of diluted shares
outstanding, the outcome of the tender offer has confirmed that shareholders
believe in the more fundamental value in Softline, and the management's clear
strategy for increasing company value. It is expected that the proceeds of the
tender offer will be credited to the Euroclear or Clearstream accounts of
tendering shareholders as soon as practicable, or otherwise despatched in
accordance with the procedures outlined in Softline's tender offer
announcement dated 14 April 2022.
In addition to GDRs purchased as a part of the tender offer, up to the
reporting date Softline repurchased 1,212,625 GDRs for a total of $7.8M,
financed from operations and finance investments. As reported previously, this
does not impact the company's investment strategy for proceeds from IPO
outlined in the prospectus.
A tender offer for rouble-denominated bonds was completed on 28th of April
2022. Bonds for the total amount RUB 185.8m have been tendered at a level of
84.1% from the nominal price of the bond. The transaction served to smooth the
debt repayment schedule.
The company had 16,508,117 management LTI options outstanding as at 31 March
2021.
Balance sheet and liquidity
As of the reporting date operational Net debt/adj.EBITDA was 0.34x. This
excludes IPO proceeds and Crayon shares. The stake in Crayon at 31(st) March
2022 was valued at $63.3m.
The Cash position as of 31 March 2022 was $335m.
Softline continues to operate with negative working capital, which was $12.9m
at 31(st) March 2022. Softline has increased its stock towards the end of the
fourth quarter in anticipation of demand for hardware and limited supply in
some regions of operations. This is a temporary balance and Management expects
that stock will be sold down by the end of May 2022.
M&A
Softline'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. Softline announced and closed five deals in Q4 2021:
· Umbrella Infocare is a market-leading cloud services company based in
Delhi with a 200+ strong team of cloud professional. Umbrella Infocare is an
AWS Premier Consulting Partner with competencies in AWS Managed Services,
Migration and DevOps and it also has Platinum Plus Consulting partnership with
Citrix.
· SoftClub is a specialist in the rapidly-growing industry of
financial technology, and the largest developer of integrated solutions for
banks, e-commerce, and stock exchanges in Central and Eastern Europe.
Considered by industry experts to be amongst the top-100 software firms in the
world. SoftClub has one of the most qualified software engineering teams in
Eastern Europe with over 20 years of industry experience, and this brings
nearly 1,000 professionals with a deep knowledge of the sector to Softline.
· MMTR Technology is a specialist in software development and
application engineering employing nearly 500 software engineers, with a focus
on business process automation and quality assurance testing.
· Academy IT creates, develops, and deploys bespoke corporate training
solutions and has a strong track record particularly in cybersecurity
training.
· TC Engineer helps to broad Softline cyber security capabilities -
extending the portfolio of services with more expertise in compliance, GDPR
and cybersecurity awareness training. TC Engineer brings capabilities across
the entire spectrum of cybersecurity consulting services.
Softline's management is pleased with the M&A opportunities in the market,
and the strength of the pipeline of deals that they are working on.
Microsoft
Softline is a top 10 global Microsoft partner and has been further progressing
this cooperation. Softline sees very significant potential to partner with
Microsoft and scale in many more markets around the world. Softline works
closely with Microsoft across multiple customer segments ranging from SMB's to
large organizations across private and public sectors. Softline has
collaborated with Microsoft for more than 25 years and is continuing to expand
its services footprint with Microsoft solutions. Softline 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 ten
Advanced Specializations by Microsoft, and it maintains Microsoft Gold
competencies in 18 of 20 categories.
During 2021 Softline has received the Partner of the Year award in various
countries including Bulgaria, Cambodia, Malaysia, and Vietnam, and the
Security Excellence Award for the Philippines and Malaysia in recognition of
the success with leveraging the best of Microsoft Services to protect
customers during 2020. And Softline was also crowned with the Modern Work
Partner of the Year 2021, as well receiving Microsoft Cloud Champions Program
in India 2021.
ESG
Softline continues to advance and embed ESG across its operations, and it
continues to be at the forefront of Softline's strategy. The company focuses
on creating an environment where people can prosper. Softline's commitment to
its teams has been recognized with the certification of Great Place To Work in
many of our regions. We have a longstanding dedication to the preservation of
basic rights and human dignity in our workplace and beyond, including
diversity and inclusion policies which are incredibly important to the
company's leadership team.
As part of its ESG strategy, Softline's purpose is to ensure environmentally
sound and sustainable development of the company, and we will continue to look
for ways to reduce the climate impact of our business. Softline 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. We have implemented the right board structure
to ensure we advance our governance processes, and we now have 3 independent
board members. This year, Softline launched a Supplier Code of Conduct (SCoC),
focused on gaining supplier commitment to ESG credentials.
Also, this year the company published its ESG statement that can be read here:
https://softline.com/about/esg/esg-statement
(https://softline.com/about/esg/esg-statement)
Business Outlook
On the 11(th) of March Softline withdrew its business outlook due to increased
uncertainty from the evolving regulatory environment and regional disruption.
In the near term, Softline plans to provide guidance for the next quarter
only. Softline will continue to review the situation, and will provide longer
term guidance at the appropriate time.
For Q1 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 growth to decline at least mid-single
digits year-over-year based on the continued uncertainty in the market. 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.
As it relates to Gross Profit overall for Q1, Softline expects year-over-year
growth of at least 25%.
Softline expects to deliver positive adjusted EBITDA for the group in Q1,
including in the Russia operation.
Operations
As previously stated in its press release dated 6th May 2022, Softline is
exploring alternative options to adjust the group's assets and ownership
structure in order to optimize value for all of its stakeholders. It is clear
that the geopolitical situation has had a profound impact on some markets in
which Softline operates. The Russian and Global businesses now differ
significantly in operations, priorities, and go-to-market strategies, and
therefore Softline is assessing how best to structure the business to support
the objectives, regulations, and priorities in all the geographies where it
operates. The process of exploring options takes time. As this process takes
place, the company expects no impact on the fundamental principles of the
group and its commitment to customers, vendor-partners, and employees.
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 24(th) February 2022 at
8:00am UK time. Softline will announce key operating highlights for the fourth
quarter of financial year ending 31 March 2022.
The webcast can be accessed from the Investor Relations section of
Softline.com
A livestream of the investor call will be available and can be accessed here:
Softline Holding plc - Q4 Trading Update
(https://www.lsegissuerservices.com/spark/SOFTLINEHOLDING/events/2cb4b675-2349-4874-88b9-2fb2b9364493)
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
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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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