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Logicalis reported a strong result in FY20 with revenues holding steady despite currency headwinds especially in Latin America. The good performance was aided by stronger gross margin and a continued trend towards higher Services mix at 41%, which was underpinned by Services revenue growth of 6%.
Revenue from operations increased in North America, Asia Pacific and Africa in absolute terms, but was impacted by multiple currency weaknesses within Latin America and a downturn in our European revenues attributable to the rightsizing of our UK business. FY20 reported revenues fell by 2% as a result, but increased by 4% on aconstant currency basis, remaining at $1.7 billion for the Group (FY19 $1.7 billion).
In September 2019, Logicalis acquired Cilnet, a Cisco Systems integrator, extending its presence in the Iberian region into Portugal. During the same month, it also acquired Orange Networks, a German-based Microsoft services business focused on Microsoft cloud and managed services.
Logicalis reported a stronger gross margin in FY20 at 25.9% (FY19 23.6%). This increase was driven in part by a large multi-year Latin American contract that transitioned from product delivery in FY19 into a more Managing through uncertain times Chairman’s statement Jens Montanana, Chairman substantial services element as the contract has progressed in FY20. In addition, a one-off tax credit in Brazil increased gross profit by $13.6 million following a court ruling in favour of Logicalis regarding overpaid indirect taxes. Overall Gross Profit was up 8% to $441.1 million (FY19 $410.1 million).
Operating expenses remained well controlled and were broadly in line with prior year at $317.3 million ($316.8 million), this is despite absorption of additional operating costs in the year from the new acquisitions.
Logicalis’ EBITDA was $123.8 million (FY19 $93.3 million), with a corresponding EBITDA margin of 7.3% (FY19 5.4%). The growth in EBITDA represents a significant rise of 33%, but it includes reclassifications arising from IFRS 16 adoption for FY20. Excluding the effects of IFRS 16 adoption, EBITDA result in FY20 would have been $103.9 million with corresponding EBITDA margin of 6.1%.
Since the onset of the COVID-19 pandemic, Logicalis has been modelling and planning for multiple scenarios to guide the business as it moves forward. The initial focus has been to ensure all its employees remain safe while seeking to reduce other fixed operating and support costs across the business. So far, in FY21, Logicalis has seen a modest reduction in revenues, partly due to the weaker Brazilian economy and currency, but its cash position remains strong and the business is in good shape to support its customers through these uncertain times on their journey to recovery.