Expert RA Raises Softline's Credit Rating to ruBBB+

Softline Holding plc began trading under the brand name Noventiq after divesting part of its business in October 2022.

Expert RA, a rating agency, has upgraded Axion Holding (Softline Group) credit rating to ruBBB+ with a stable outlook.

The rating has improved due to the following key factors:

• fast growth of the Group's operational indicators;
• sustainable expansion of the IT services market in the countries where the Group operates;
• the synergy effect of mergers and acquisitions and the start of steady operation of newly acquired companies within the Group’s perimeter.

Improved operational indicators had a good effect on Softline’s profitability in FY 2019. During FY 2018 the Group introduced numerous structural changes aimed at optimizing costs at recently acquired companies and increasing brand awareness in new markets. The outcomes of FY 2019 testify to the beneficial effect of the group's business transformation that had improved its financial performance, particularly due to economies of scale. Expert RA also commended the policy of achieving and maintaining a strong liquidity position that had been pursued by the Group during the monitoring period.

The Group’s continuing status of a key software vendor in the markets where it operates has a positive impact on the assessment of business risks. The global need to accelerate digital transformation and set up remote workplaces led to a surge in demand for products and services from Softline; preliminary data show that the Group's turnover in Q2 2020 in dollar terms increased by 16% (QoQ), while the operating profit more than doubled. The current demand for remote work also helps Softline sell more cloud services, the most revenue-generating area of its business that is projected to grow worldwide by over 13% in 2020, according to Gartner. The agency also noted that the reduction in income tax and social contributions granted by the government to Softline as an IT company would be conducive to its profitable operation in a volatile global economy.

2018 was a period of operational consolidation for Axion Holding companies: substantial funds were allocated to integrate new entities such as Insight Enterprises Inc., Infosecurity, and others. These acquisitions have strengthened Softline's positions in cybersecurity, IT distribution, and software development in Russia and abroad, as well as increased its EBITDA by an estimated 39% according to Expert RA. The all-time high OCF and FCF made it possible to repay more of the corporate debt and build up a healthy liquidity cushion.

According to Expert RA, the Group has sufficient liquidity resources (forecasted operating cash flows, accumulated cash, and unused credit lines) to cover 110% of its debt payments, capital expenditures and the cost of foreign acquisitions for 18 months from the credit report date. The Group also holds a stake in Crayon, a Norwegian public IT company specializing in cloud technology and digital business transformation. The market value of equity in the company more than doubled last year to about $34 million as of the report date (March 31, 2020) and continued to grow through April–August 2020.

According to IFRS-compliant consolidated financial statements that include foreign operations, Softline’s revenue in the 2019 financial year amounted to $1,362 million, and the net profit was $9.5 million. As of March 31, 2020, the Group's assets totaled $394.8 million, and its capital amounted to $56.7 million.

"The upgrade of Softline’s credit rating by the Expert RA agency confirms that the company follows a sound strategy and has a strong leadership. Despite the slowdown in the global economy, the demand for our products and services keeps growing. This gives us every reason to believe that in the mid-term, Softline will attract more investment, enjoy reduced borrowing costs and stay on the cutting edge of the competition by offering new opportunities to our customers and partners and improving working conditions for our employees," comments Sergei Chernovolenko, Global CEO of Softline.

About Softline

Softline is a trusted partner and reliable provider of state-of-the-art IT solutions and cybersecurity tools that helps customers all over the world go through digital business transformation. Softline operates in more than 50 countries of Eastern Europe and Central Asia, Latin America, and the Asian Pacific region. Thanks to alliances and partnerships with global IT vendors Softline employs best practices and has ample experience in wide-ranging projects. In the 2019 calendar year the Softline Group had a turnover of $1.54 billion.

Learn more about Softline at www.softline.com and www.softline.ru.