Noventiq announces strong results for H1 FY2022

 

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 7th October 2022 of the sale of its Russian business: EGM Sale of Russian business, the company completed the transaction on the 20th October: Sale confirmation.

At the general meeting held on the 25th October 2022, shareholders approved the bonus issuance in relation to the transaction: GM Result.

 

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

 

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 20th of October 2022 the company operates under the brand name of Noventiq: Noventiq RNS.

 

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    
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