Expert RA Raises Softline's Credit Rating to ruBBB+

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

MOSCOW, Russian Federation - Sept. 1, 2020 - PRLog -- 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.

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.

Valeriya Aver
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