IBS IT Services Announces Intention to Float

MOSCOW, April 4, 2018 /PRNewswire/ --

IMPORTANT NOTICE: NEITHER THIS ANNOUNCEMENT NOR THE INFORMATION CONTAINED HEREIN IS FOR PUBLICATION, DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR TO ANY PERSON IN ANY OF THOSE JURISDICTIONS OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE LAWS OF SUCH JURISDICTION

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Information to Distributors 

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the securities the subject of the offering referred to herein have been subject to a product approval process, which has determined that such securities are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, Distributors should note that: the price of the securities may decline and investors could lose all or part of their investment; the securities offer no guaranteed income and no capital protection; and an investment in the securities is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the offering referred to herein. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Joint Global Coordinators and Joint Bookrunners will only procure investors who meet the criteria of professional clients and eligible counterparties. For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the securities. Each distributor is responsible for undertaking its own target market assessment in respect of the securities and determining appropriate distribution channels. 

IBS IT Services (Public Joint-Stock Company) (the "Company" and, together with its subsidiaries, the "Group" or "IBS"), a leading provider of IT services in the Russian market, today announces its intention to conduct an Initial Public Offering (the "Offering") of its ordinary shares (the "Shares").

DETAILS OF THE OFFERING 

• The Shares are expected to be listed on Moscow Exchange (on the Innovation and Investment Market, the Moscow Exchange market dedicated to innovative and high-tech enterprises with high growth potential).
• The Offering comprises an offering of the Shares (i) outside the United States and the Russian Federation in reliance on Regulation S under the U.S. Securities Act of 1933, as amended, and (ii) in Russia to institutional and retail investors.
• The Offering is expected to consist of both new and existing ordinary shares. The shares will be offered by the Company, as well as by its shareholder, IBS Holding (Limited Liability Company), beneficially owned by Anatoly Karachinskiy and Sergey Matsotskiy. The additional share issue is expected to be over 50% of the Offering.
• Following the Offering the free float is expected to amount to 30-35% of the enlarged share capital.
• The Company intends to use the net proceeds from the Offering for strengthening and expanding its offering through both internal development and value-accretive M&A.
• Citigroup and Renaissance Capital are acting as Joint Global Coordinators and Joint Bookrunners. SOVA Capital is acting as Joint Bookrunner and Alfa-Bank as Retail Manager.

IBS HIGHLIGHTS  

• Track-record of outstanding financial performance with double-digit, above-market revenue growth and strong profitability during the last three years
• Focus on large and fast-growing verticals and sub-segments of the IT services market
• Proven ability to identify and successfully implement high-potential IT technologies, including projects that disrupt and transform traditional markets through digitization and automation (business process outsourcing and vendor programs)
• Client-centric and vendor-agnostic approach, with 'best of breed' offering independently of any particular vendor, supported by proprietary products and solutions
• Strong brand and a key provider of new technologies to a diversified client base of 2,000+ leading Russian and Russian divisions of international companies and government institutions
• Strategic relationships with more than 500 global high-technology vendors, such as Cisco, Dell EMC, Hewlett-Packard, IBM, Lenovo, Microsoft, SAP and others
• Well-defined areas of focus and clear strategy supporting future growth, including in evolving technology trends such as cloud services, data analytics, blockchain, machine learning, internet of things, cyber security and others
• Strong operating performance delivered by a highly skilled workforce and experienced management team with an outstanding track record of project execution spanning over 25 years
• Long-standing compliance with public-company reporting and governance standards, and shareholders who are well known to the market and have previous public-company experience

Svetlana Balanova, CEO of IBS IT Services, said:

"IBS is a leader in the Russian market for IT services, one of the most dynamic sectors of the economy. The Russian IT sector has delivered strong growth in the past years, and IBS's own revenue growth, which has significantly outpaced the market, underlines the company's successful turnaround as a business. We believe that the recovery of the Russian economy, as well as increased digitalization and modernization, will provide a strong platform for further growth.

"The IT sector's share of Russia's overall economy is still significantly below developed countries, in large part due to lower penetration of business automation solutions. Today this is changing, and Russian companies are investing significantly in IT services, a trend we expect to continue and intensify over the years to come. Other key growth drivers of the IT services sector are the digital transformation of the economy, substantial IT investments by the Russian government and the continued development of new technologies.

"IBS has a clearly defined growth strategy and is well placed to take advantage of these positive industry trends.  We are delighted to announce our intention to bring IBS to the public market, and to give investors an opportunity to participate in what we expect to be an exciting growth phase for the company."

ABOUT IBS  

IBS was founded in 1992 and is a leading provider of IT services to a highly diversified base of large and medium-sized corporate and public-sector clients in Russia. The Group consists of three core, synergistic segments: (i) IBS, offering sophisticated customer-designed business systems and infrastructure solutions for corporates and the public sector, based on best-of-breed vendor products and proprietary products; (ii) Platformix, providing integration of ready-to-go IT solutions; and (iii) BFT, offering software solutions for regional and municipal authorities.

Our competences in our core business segments include a wide range of services, including delivery and integration of sophisticated corporate IT systems to support business processes; proprietary solutions addressing the public sector's financial, management and budgeting needs; business analytics management solutions; ready-to-go replicable IT solutions; outsourcing of business processes; information security systems; software development; delivery and integration of IT infrastructure, including hardware and software; and cloud platforms. The services we provide enable our clients to improve their competitive positions by increasing efficiency and transparency, bringing down costs, reducing time-to-market for their products and services, and improving the end-user experience by implementing IT systems. We believe our 25 years in supporting our clients' IT needs has made us an important strategic partner to our existing clients, as well as a subject-matter expert to our prospective clients.

In addition to growing its core business segments, the Company implements digital and innovative technological solutions that transform traditional markets, allowing us to tap into new growth opportunities. We develop platforms for outsourcing business processes, including HR outsourcing platforms. As a vendor, IBS has launched its own products such as hyper-converged computing platform SCALA-R, business-process management platform Planeta, multipurpose data platform ArenaData, as well as BFT software solutions for regional governments and municipalities across Russia.

We have developed long-term partnerships with most major global technology vendors, including Avaya, Cisco, Dell EMC, Hewlett-Packard, Huawei, IBM, Lenovo, Microsoft, NetApp, Oracle and SAP. These partnerships enable us to provide the best-of-breed offering to our clients without becoming dependent on any particular vendor.

We have a highly skilled and experienced workforce of more than 3,000 professionals. Our professional team serves our clients through our delivery centres located in Moscow and other Russian regions, including Penza, Belgorod, Ulyanovsk, St. Petersburg and Perm.

Throughout our 25-year history, we have set benchmarks in the Russian IT industry, including, for example, being among the first to pioneer business systems integration services in Russia and to implement SAP based ERP practices. We regularly rank among Russia's top IT companies, according to IDC.

We have had significant growth over the last three years, reflecting our strong resistance to the market downturn that the Russian IT industry experienced in the same period. Our revenue has grown from RUB 14.7 billion in the year ended 31 March 2015 to RUB 21.4 billion in the year ended 31 March 2017, representing a CAGR of 21%. Our net profit has grown from RUB 338 million in the year ended 31 March 2015 to RUB 1,461 million in the year ended 31 March 2017, representing a CAGR of 108%. In the nine months from 1 April to 31 December 2017, our revenue totalled RUB 19.7 billion, an increase of 10% from RUB 17.8 billion in the nine months ended 31 December 2016. Our net profit was RUB 2,313 million in the nine months ended 31 December 2017, an increase of 85% from RUB 1,251 million in the nine months ended 31 December 2016.

The Company is currently targeting revenue growth of over 15% in the year ended 31 March 2018 from the year ended 31 March 2017. This target revenue growth is based on preliminary estimates of our financial results for the year ended 31 March 2018 which have not been audited, and is not a guarantee of future financial performance. The Company's actual results could differ from those expressed or implied by the above statement and are subject to the Company's revenue recognition policy.

The Company has an experienced management team with a track record of successful growth, and has longstanding governance mechanisms in place that are in line with the standards of publicly listed companies. IBS Group Holding, which the Company formed part of until 2014, was listed on the Frankfurt Stock Exchange from 2007 to 2014. In addition, IBS Group Holding successfully listed its subsidiary Luxoft on the New York Stock Exchange (NYSE) in 2013.

OPERATIONAL AND FINANCIAL HIGHLIGHTS 

   
                                                       Nine months ended
    RUB (millions)       Year ended 31 March              31 December
                        2015      2016      2017          2016       2017
    Revenue           14,691    16,586    21,422        17,824     19,693
    Growth                          13%       29%                      10%
    OIBDA[1]             889     1,268     2,363         1,957      3,149
    Growth                          43%       86%                      61%
    OIBDA margin         6.1%     7.6%      11.0%         11.0%      16.0%
    Net profit           338      584      1,461         1,251      2,313
    Growth                         73%       150%                      85%
    Net profit margin    2.3%     3.5%       6.8%          7.0%      11.7%
    Free cash flow[2]    351    1,331      1,094         1,329      3,034

Note on the financials: Audited IFRS financial statements for FYE March 31, 2015-2017. Unaudited IFRS financial statements for 9M ended December 31, 2016 and 2017.

^[1] OIBDA denotes Operating income before Depreciation and Amortisation and is calculated as Operating profit + Depreciation and Amortisation.

^[2] Free cash flow = Cash flow from operating activities - Capital expenditure (include proceeds from sale of PPE & Int.).