Softline IPO: Everything you need to know about Softline

Russian IT company Softline, which has its HQ in London, completed its IPO on the London Stock Exchange in October 2021. The Softline IPO initially valued the company at around $1.5 billion, about 25% below what it had initially looked for. Read on to learn more about Softline.

How much is Softline worth?

Softline is worth approximately $1.5 billion as of early November 2021, in the wake of its October IPO. The most optimistic expectations had been set at around the $2 billion mark, but the float was eventually priced at the lower end of a marketed range.

The company raised around $400m from its IPO. It will offer up global depositary receipts (GDRs) from existing shareholders.

Read about all the latest IPO news now.

What happened with Softline's float?

Softline's float came during a period of turbulence for global technology stocks amid rising bond yields and China’s crackdown on the sector.

“We are not going to participate in the IPO this time due to high uncertainty regarding the way the market views Russian tech stories,” Konstantin Asaturov, a fund manager at Sistema Capital in Moscow, told Bloomberg.

What is Softline’s dividend policy?

 

Softline’s dividend policy includes a stated intention to distribute at least 25% of net profit to its shareholders over the medium term. It expects the first annual dividend payment will be paid in 2023.

It may also pay out interim dividends based on company performance, while adding this may depend “on the ability of its subsidiaries to pay dividends to it in accordance with the relevant legislation and contractual restrictions”.

How to trade stocks in Softline

Once Softline floats, you will be able to trade stocks in the company through City Index using spread-bets or CFDs, with spreads from 0.1%. Follow these easy steps to start trading now.

  1. Open a City Index account or log-in if you’re already a customer.
  2. Search for the company you want to trade on our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade
  5.  

What does Softline do?

Softline is an international IT provider covering 95 cities in more than 50 countries. Softline offers private and public cloud computing, integrated technology, cybersecurity, software licensing, hardware, and many other IT related services.

The company was founded in 1993 in Moscow, at a time when the internet was more of a worldwide novelty than the worldwide web. Expansion was initially slow and steady; it took 15 years for it to open offices outside Russia and it opened its London HQ in 2020.

Softline has partnerships with more than 6,000 software and hardware vendors. It operates a corporate investment wing, known as Softline Venture Partners, which invests in independent software developers in various countries where it retains a commercial presence.

How does Softline make money?

Softline makes money three principal revenue streams, namely:

  1. Software and Cloud (which represented 84.4% of turnover and 60.8% of gross profit in the year ended 31 March 2021)
  2. Hardware (11.2% of turnover and 13.6% of gross profit)
  3. Services (4.3% of turnover and 25.6% of gross profit)

 

Softline benefits considerably from a long-standing relationship with Microsoft. It has collaborated with the IT giant since the late 1990s and is one of only 10 globally managed service providers Microsoft has a licence with.

In the year ending 31 March 2021, turnover from sales of Microsoft products and services constituted 48% of the Softline’s total turnover.

The Group also has close links with many other major brands in IT, including:

  • Adobe
  • AWS
  • Apple
  • Cisco
  • Dell Technologies
  • Google
  • Hewlett Packard
  • Enterprise
  • IBM
  • Oracle
  • Check Point Software
  • Fortinet

 

What is Softline’s business strategy?

Softline’s business strategy revolves around geographical expansion, portfolio expansion and sales channel expansion.

It also has a plan to immediately re-invest the cash raised from its IPO. It will channel those funds towards the further development and execution of its growth strategy, including a raft of selective acquisitions.

The company believes the competitive advantages it already enjoys “will continue to support its favourable position and business strategy going forward.”

It summarises these advantages as:

  • Its integral position at the heart of digital transformation. Global investment in digital transformation has intensified because of the COVID-19 pandemic and is expected to grow to approximately $3.1 trillion in 2024 from $1.8 trillion in 2020 at a CAGR of 16%. (Source: AMR International)

  • Softline’s ability to bridge the gap between enterprises and vendors, as organisations navigate the changing expectations of customers and a challenging compliance environment

  • An integrated end-to-end service which captures demand from all segments of the digital transformation value chain

 

What is Softline’s outlook?

Softline has issued a raft of stated has medium-term objectives, as follows:

  • Turnover: It is targeting turnover growth between 20% and 30% for the year ending 31 March 2022, with growth continuing at a CAGR in the high teens thereafter over the medium term
  • Gross profit: It is seeking a gross profit margin of around 13%
  • Future Mergers and Acquisitions: It is targeting a gross profit margin from future M&A activity of around 15%

 

Is Softline profitable?

Softline is profitable. In the three-month period ending June 2021, it recorded a gross profit of $62.3m, up from $48.4m in the equivalent quarter of 2020.

However, when accounting for various unspecified costs and expenses, as well as financing, its net profit was only $1.35m for the period, down from $2m in 2020.

In 2020, Softline's turnover was $1.8 billion, an increase of 9%. Around 60% of that figure comes from markets outside Russia. Over the past 10 years, sales have grown annually at an average of 20%.

Softline has made a high number of acquisitions since 2017. It was able to grow its total asset pool to a valuation of $715.5m in June from a little over $632m three months earlier.

Who owns Softline?

Igor Borovikov, the founder of Softline, owns 78.8% of shares in the company. A Moscow State University graduate, he published over 30 scientific papers during a three-year postgrad course at the Academy of Sciences before setting up Softline.

He was named Russia’s top IT Business Leader in both 2010 and 2012.

The next biggest single shareholder is Karl Robb, a British citizen with decades of experience in software engineering. He is a senior non-executive director of Softline and also served on the board at EPAM Systems, taking it through a successful IPO on the New York Stock Exchange.

Board of Directors of Softline

  • Igor Borovikov, Chairman of the Board
  • Jacques Guers, Independent Non-Executive Director
  • Alexander Galitsky, Independent Non-Executive Director
  • Oleg Jelezko, Non-Executive Director
  • Karl Robb, Senior Independent Non-Executive Director
  • Marc Kasher, Independent Non-Executive Director
  • Sergey Chernevolenko, Global CEO

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