Notes to the Consolidated Financial Statements

1 General information

SoftwareONE Holding AG ('the company') and its wholly-owned subsidiaries (together ‘the group’ or ‘SoftwareONE’) is a leading global provider of end-to-end software and cloud technology solutions. With capabilities across the entire value chain, it helps companies design and implement their technology strategy, buy the right software and cloud solutions at the right price, and manage and optimize their software estate.

The company is incorporated and domiciled in Stans, Switzerland. The address of its registered office is Riedenmatt 4, 6370 Stans. SoftwareONE Holding AG is traded on the SIX Swiss Exchange. The shares trade under the ticker symbol 'SWON'.

The consolidated financial statements of SoftwareONE are presented in Swiss francs (CHF). Unless otherwise stated, all amounts are stated in thousands of Swiss francs (TCHF). All figures shown are rounded in accordance with standard business rounding principles.

These consolidated financial statements were authorized for issue by the Board of Directors on 24 March 2021 and are subject to approval by the Annual General Meeting to be held on 20 May 2021.

2 Summary of significant accounting policies

SoftwareONE Holding AG’s consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

Basis of presentation

New and amended standards and interpretations

As at 1 January 2020, the following amendments to IFRS entered into force:

  • IFRS 3: Business Combinations: Definition of a Business
  • IAS 1 and IAS 8: Presentation of Financial Statements and Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Material
  • IFRS 9/IAS 39/IFRS 7: Interest Rate Benchmark Reform, Phase 1
  • Amendments to References to the Conceptual Framework in IFRS Standards
  • IFRS 16: Leases: COVID-19 Related Rent Concessions – early adopted by SoftwareONE

These amendments did not have a significant effect on the group’s consolidated financial statements. SoftwareONE has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

New standards and interpretations not yet adopted

The IASB has issued a number of potentially relevant changes to IFRS that will be effective in future accounting periods. New standards that are expected to have only a minor impact on the group and the effective date are listed below:

  • IFRS 9/IAS 39/IFRS 7/IFRS 4/IFRS 16: Interest Rate Benchmark Reform, Phase 2 – adoption by 1 January 2021
  • IFRS 3: Business Combinations: References to the Conceptual Framework – adoption by 1 January 2022
  • IAS 37: Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts, Costs of Fulfilling a Contract – adoption by 1 January 2022
  • IAS 16: Property, Plant and Equipment: Proceeds before Intended Use – adoption by 1 January 2022
  • Annual Improvements Project 2018-2020: Changes to IFRS 1, IFRS 9, IFRS 16, IAS 41 – adoption by 1 January 2022
  • IAS 1: Presentation of Financial Statements: Classifications of Liabilities as Current or Non-Current – adoption by 1 January 2023

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group.

Change in presentation

SoftwareONE reviews the presentation of financial reporting for comprehensibility and transparency on an ongoing basis. Management considers that the following changes lead to an improved presentation.

Compared to the previous year, trade receivables also include receivables with an unconditional right to payment, which were reported under contract assets in the previous year. The comparative figures for trade receivables were increased by TCHF 181,696 and contract assets were reduced by the same amount. In the consolidated statement of cash flows, the change in trade receivables has decreased by the amount, while change in other receivables, prepayments and contract assets has increased.

Additionally, trade payables also include liabilities to software vendors for incoming invoices not yet received, which were reported under accrued expenses in the previous year. The comparative figures for trade payables were increased by TCHF 477,863 and accrued expenses were reduced by the same amount. In the consolidated statement of cash flows the change in trade and other payables has increased by the amount, while change in accrued expenses and contract liabilities has decreased.

Compared to previous year, revenue from Software & Cloud include revenue from sale of hardware presented as other revenue in the previous year. The comparative figures for revenue from Software & Cloud were increased by TCHF 17,601.

Additionally, non-current trade payables for multiyear contracts, which were reported as long-term supplier liabilities under non-current financial liabilities in the previous year, are included in non-current other payables. The comparative figures for non-current other payables were increased by TCHF 19,184 and non-current financial liabilities were reduced by the same amount.

Furthermore, changes were made in the consolidated statement of cash flows for the presentation of foreign currency effects on changes in net working capital and changes in provisions. Foreign currency effects on changes in net working capital, which are directly allocated to the related net working capital item, are no longer presented in a separate line item. The comparative figures were adjusted for change in trade receivable (TCHF 27,326), change in other receivables, prepayments and contract assets (TCHF 5,095), change in trade and other payables (TCHF -16,554), change in accrued expenses and contract liabilities (TCHF -12,833) and foreign currency effects on changes in net working capital (TCHF -3,033). Changes in provisions are presented in a separate line item. The comparative figures were adjusted for change in provisions (TCHF -309) and other non-cash items (TCHF 309).

Consolidation

Subsidiaries

Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated in full.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method of accounting. The cost of a business combination is equal to the fair values at the date of acquisition of assets given, liabilities incurred or assumed, and equity instruments issued by SoftwareONE group, in exchange for control over the acquired company. Any difference between the cost of the business combination and the net fair value of the identifiable assets, liabilities and contingent liabilities so recognized is treated as goodwill. Goodwill is not amortized but is assessed for impairment annually. Acquisition-related costs are expensed. For each business combination, the group recognizes the non-controlling interests in the acquiree at the non-controlling interests’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets.

If a business combination is achieved in stages (control obtained over an associate or joint venture), the previously held equity interest in an associate or joint venture is remeasured to its acquisition-date fair value and any resulting gain or loss is recognized in finance result in the income statement.

Non-controlling interests

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder’s share of changes in equity since the date of the combination.

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Swiss francs (CHF), which is the group’s presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured.

Monetary assets and liabilities of group companies which are denominated in foreign currencies are translated using closing exchange rates. Exchange rate differences are recorded as income or expense. Non-monetary assets and liabilities are translated at historical exchange rates. Translation differences on non-monetary financial assets and liabilities such as equity securities held at fair value through profit or loss are recognized in the income statement as part of the fair value gain or loss.

Foreign currency translation

When translating foreign currency financial statements into Swiss francs, year-end exchange rates are applied to assets and liabilities, while average rates for the period are applied to income statement accounts. The resulting exchange differences are recognized in other comprehensive income.

Goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at closing rate. The resulting exchange differences are recognized in other comprehensive income (OCI).

The following exchange rates were used:

 

 

2020

2019

Currency (CHF 1 =)

Code

Ø-rate

Closing rate

Ø-rate

Closing rate

 

 

 

 

 

 

Euro

EUR

0.93

0.92

0.90

0.92

US dollar

USD

1.07

1.13

1.01

1.03

Swedish crown

SEK

9.79

9.28

9.51

9.61

British pound

GBP

0.83

0.83

0.79

0.78

Japanese yen

JPY

113.75

116.75

109.68

112.46

Financial assets

Initial recognition and measurement

The group classifies its financial assets at initial recognition in the following categories: subsequently measured at amortized cost, fair value through OCI and fair value through profit or loss. The classification depends on the financial asset’s contractual cash flow characteristics and the group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the group has applied the practical expedient, the group initially measures a financial asset at its fair value plus transaction costs in the case of a financial asset not at fair value through profit or loss. Trade receivables that do not contain a significant financing component or for which the group has applied the practical expedient are measured at the transaction price determined under IFRS 15.

In order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. This assessment is performed at an instrument level.

SoftwareONE’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Financial assets are classified as current if payments are due within one year or less. If not, they are presented as non-current receivables.

Subsequent measurement

For purposes of subsequent measurement, SoftwareONE has financial assets at amortized cost (debt instruments), financial assets at fair value through profit or loss and derivatives designated as hedging instruments.

Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in the income statement when the asset is derecognized, modified or impaired.

The group’s financial assets at amortized cost comprise trade and other receivables, loans and cash and cash equivalents.

Cash and cash equivalents

The position includes cash on hand, bank accounts and short-term bank deposits with original maturities of three months or less.

Trade receivables

Trade receivables are initially recorded at a transaction price determined in accordance with IFRS 15 less impairments.

Financial assets

The group has listed equity instruments presented as short-term financial assets which are subsequently measured at fair value through profit or loss, as it had not irrevocably elected to classify those at fair value through OCI at initial recognition. Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognized in the income statement.

Derecognition

The group derecognizes financial assets when:

  • the rights to receive cash flows from the asset have expired; or
  • the group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third-party under a ‘pass-through’ arrangement; and either (a) the group has transferred substantially all the risks and rewards of the asset, or (b) the group has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.

Receivables subject to factoring arrangements may be derecognized on sale and these assets are not held to collect contractual cash flows and would be measured at fair value through profit or loss. However, due to their short-term nature, the difference between transaction price and fair value is not considered to be material. Where the factored receivables continue to be recognized in the balance sheet, they are treated as held to collect contractual cash flows and measured at amortized cost.

Impairment of financial assets

The group recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

For trade receivables and contract assets, the group applies a simplified approach in calculating ECLs. Therefore, the group does not track changes in credit risk but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The group has established a provision matrix that is based on its historical credit loss experience and SoftwareONE’s business knowledge, adjusted for forward-looking factors specific to the debtors and the economic environment.

Derivative financial instruments and hedge accounting

The group reviews the currency exposure regularly and covers its risks in two ways:

  • The group hedges the net exposure from foreign currency balance sheet positions with forward contracts. Such contracts, however, are not accounted for using hedge accounting.
  • Highly probable future transactions are hedged with forward transactions (sales and purchase). Those contracts are designated as cash flow hedges. The transactions are expected to affect profit and loss within the next 36 months. At inception of a hedge relationship, the group designates and documents the hedge relationship to apply hedge accounting. The hedge relationship includes the hedging instrument, the hedged item and the nature of the risk being hedged. The hedges are expected to be highly effective.

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value through profit or loss except for the effective portion of cash flow hedges, which is recognized in OCI and later reclassified to the income statement when the hedged item affects profit or loss. The ineffective portion is recognized immediately in the income statement.

In case of a positive value, the derivative is recognized as an asset and in case of a negative value, as a liability (classified as non-current when the remaining maturity of the hedged item is more than 12 months and as current when the remaining maturity of the hedged item is less than 12 months).

Tangible assets

Tangible assets are stated at historical cost less depreciation and impairments. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Repair and maintenance costs are recognized in the income statement in the period in which they are incurred.

Depreciation is calculated using the straight-line method over the expected useful life as follows:

  • Land and Buildings: max. 33 years
  • Furniture, fittings and equipment: max. 5 years
  • Leasehold improvements: max. 10 years or shorter duration lease contract
  • Vehicles: max. 5 years
  • IT equipment: max. 3 years
  • Assets under construction: no depreciation

Intangible assets

Purchased intangible assets such as software and customer relationships are measured at cost less accumulated amortization (applying the straight-line method) and any impairment. The useful life is as follows:

  • Software: 3–10 years
  • Acquired customer relationships: max. 10 years
  • Other intangible assets: 3–10 years

Internally generated intangible assets are capitalized only if the identifiable asset is commercially and technically feasible, can be completed, its costs can be measured reliably and will generate probable future economic benefits. In addition to the internal costs (including all attributable direct costs), total costs also include externally contracted development work. Such capitalized intangibles are recognized at cost less accumulated amortization over a useful life of three to 10 years. In-process capitalized development costs are tested annually for impairment.

Acquired customer relationships are capitalized and amortized over their useful lives. They are assessed for impairment if events or changes in circumstances indicate that their value may be impaired.

Impairment test of goodwill and intangibles with indefinite useful life

With regard to impairment testing of goodwill and other intangible assets deemed to have indefinite lives, the group determines the higher of value in use and fair value less costs of disposal of the respective cash generating units to which goodwill and intangibles have been allocated. The calculation of value in use is based on the current budget and business plan approved by the Board of Directors and the expectations regarding the future development of the respective markets, market shares and profitability. The planning period covers five years. Assumptions are made for the subsequent years taking into account macroeconomic trends and historical information adjusted for current developments.

The impairment test is performed at least once a year and additionally when there are indications of impairment in the cash-generating unit. Impairment losses for goodwill are never reversed.

Investments in joint ventures and associates

Companies in which SoftwareONE has joint control and associates in which the group has significant influence are accounted for using the equity method. Under the equity method, the investment in a joint venture or associate is initially recognized at cost. The statement of profit or loss reflects SoftwareONE’s share of the results of the joint ventures and associates and SoftwareONE's share of OCI of those investees is presented in OCI. The financial statements of the joint ventures and associates are prepared using uniform accounting policies as applied by SoftwareONE.

Financial liabilities

Initial recognition and measurement

SoftwareONE classifies financial liabilities at initial recognition as financial liabilities at fair value through profit or loss, financial liabilities subsequently measured at amortized cost or as derivatives designated as hedging instruments in an effective hedge as appropriate.

All financial liabilities are recognized initially at fair value, and in the case of instruments, not subsequently measured at fair value through profit or loss net of directly attributable transaction costs.

The group’s financial liabilities include trade and other payables, accrued expenses, contingent consideration liabilities and other financial liabilities including bank overdrafts and derivative financial instruments.

Subsequent measurement

Contingent consideration liabilities are subsequently measured at fair value through profit or loss.

Derivatives are subsequently measured at fair value with fair value changes in the income statement, except for the effective portion of cash flow hedges that is initially recognized in other comprehensive income.

All other financial liabilities are subsequently measured at amortized cost using the effective interest method.

Trade payables and financial liabilities are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement except to the extent that it relates to items recognized in OCI or directly in equity. In this case, the tax is also recognized in OCI or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Periodically, management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries except for deferred income tax liabilities where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognized on deductible temporary differences arising from investments in subsidiaries. They are only recognized to the extent that it is probable that the temporary difference will reverse in the future and there needs to be a sufficient taxable profit available against which the temporary difference can be utilized.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Employee benefits

The group operates various post-employment schemes including both defined benefit and defined contribution pension plans.

Defined contribution plans

A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset.

Defined benefit plans

A defined benefit plan is a pension plan that is not a defined contribution plan.

Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Actuarial gains or losses are recognized in OCI. Service costs are presented in personnel expenses. Interest costs and interest on plan assets are netted in finance costs.

Other employee benefits

Obligations to employees not paid at the balance sheet date, such as bonuses, holiday entitlements or compensations are presented as accrued expenses.

Contingent consideration arrangements related to business acquisitions in which payments are contingent on continued employment and thus compensation for future service are presented as provisions.

Share-based payments

Certain management members and senior employees participate in equity compensation plans. The fair value of all equity-settled compensation awards granted to employees is determined at the grant date and recorded as an expense over the vesting period. The expense for equity compensation awards is part of personnel expense and a corresponding increase in equity is recorded.

Provisions

Provisions are recognized when the group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. If the effect of the time value of money is material, provisions are discounted.

Share capital

Ordinary shares are classified as equity. Dividends on ordinary shares are recorded in equity in the period in which they are approved by the parent company’s shareholders.

Where the group purchases shares of the company, the consideration paid (including any attributable transaction costs) is deducted from equity as treasury shares. Any consideration received from the sale of own shares is recognized in equity, net of any taxes.

Revenue recognition

Revenue from contracts with customers comprises revenue from sale of software and cloud products as well as sale of solutions and services. Revenue from contracts with customers is recognized either when the performance obligation in the contract has been satisfied either at the ‘point in time’ or ‘over time’ as control of the promised good or service is transferred to the customer at an amount that reflects the consideration to which the group expects to be entitled in exchange for those goods or services.

Revenue from Software & Cloud

SoftwareONE enters into contracts with customers to sell Software & Cloud products of several third-party software providers. Revenue from the sale of Software & Cloud is recognized at the point in time control of the license is transferred to the customer, generally on delivery of the product key or with signing the contract in the volume license business. The normal credit term is 30 to 90 days upon delivery.

SoftwareONE distinguishes between two types of software selling arrangements:

  • Direct business: As an approved channel partner, SoftwareONE sells software products provided by third parties to end customers in several areas worldwide. The group’s obligation in these arrangements is only to arrange for another entity to provide the software license to the end customer. Hence, SoftwareONE acts as an agent and recognizes revenue at the net amount that it retains from its agency services.
  • Indirect business: SoftwareONE acts as a value-added software reseller and provides consulting services in connection with the sale of the software licenses to its customers. These services include aspects of strategic and operational software procurement, complex technology advice or customized solutions. They are bundled with the sale of the software products and are regarded as an integral part of the performance obligation to the customer. The software licenses only deliver benefits together with the extensive consulting services that are not distinct from the services in the contractual context and constitute a bundled performance obligation. As the group is primarily responsible for fulfilling this promise, SoftwareONE concluded that it acts as a principal in these arrangements. For further details on the principal vs. agent assessment, please refer to the section ‘Significant judgements’. SoftwareONE therefore recognizes revenue from such contracts gross in the consolidated financial statements. The purchase from the supplier is presented as cost of software purchased.

The group also enters into non-cancellable multi-year licensing contracts with customers. In such contracts, SoftwareONE transfers control of the software license at the beginning of the contract and collects the consideration over the contract duration. As the customer pays in arrears, SoftwareONE is effectively providing financing to the customer. Hence, there are two components in such arrangements: a revenue component (for the notional cash sales price); and a loan component (for the effect of the deferred payment terms). Interest income on the loan component is calculated based on the rate that would be reflected in a separate financing transaction between the group and its customers at contract inception and is presented under finance income. SoftwareONE uses the practical expedient in IFRS 15 and does not adjust the promised amount of consideration for the effects of a significant financing component if it expects at contract inception that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.

Revenue from Solutions & Services

SoftwareONE provides a wide range of technology consulting services but also delivers self-developed on-premise software.

Revenue from technology consulting services is recognized over time using an input method based on labor hours to measure progress towards complete satisfaction of the service because the customer simultaneously receives and consumes the benefits provided by SoftwareONE. The group determined that the input method based on labor hours incurred in relation to total expected hours is the best method in measuring progress of the consulting services because there is a direct relationship between SoftwareONE’s effort and the transfer of service to the customer. Payment is due 30 days after the solutions and services have been performed.

Revenue from self-developed on-premise software is recognized at the point in time control of the license is transferred to the customer.

Contract balances

  • Contract assets
    A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized for the earned consideration that is conditional.
  • Trade receivables
    A trade receivable represents the group’s right to an amount of consideration that is unconditional (in other words only the passage of time is required before payment of the consideration is due).
  • Contract liabilities
    A contract liability is the obligation to transfer goods or services to a customer for which the group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the group transfers goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognized as revenue when the group performs under the contract.

Transaction price of unsatisfied performance obligations

SoftwareONE uses the practical expedient in IFRS 15.121 and does not disclose information about the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied when the original expected duration of the underlying contract is one year or less. After applying this practical expedient, the remaining performance obligations to be disclosed 31 December 2020 and 2019 are not material.

Leases

Right-of-use assets

The group recognizes right-of-use assets at the commencement date of the lease (that is the date the underlying asset is available for use). Right-of-use assets are measured at cost less any accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. For leased vehicles, SoftwareONE makes use of the option not to separate lease and non-lease components and ancillary costs are therefore included in the calculation of the entire lease component.

Unless the group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over the shorter of their estimated useful life and the lease term. The useful life is as follows:

  • Buildings: max. 10 years
  • Vehicles: max. 5 years
  • Other equipment: max. 5 years

Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the group and payments of penalties for terminating a lease if the lease term reflects the group exercising the option to terminate.

The variable lease payments that do not depend on an index or a rate are recognized as expense in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the group uses the incremental borrowing rate at the lease commencement date, if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. Lease liabilities are included in the financial liabilities (refer to Note 20 Financial liabilities).

Short-term leases and leases of low-value assets

The group applies the short-term lease recognition exemption to its short-term leases of other machinery and equipment (these are those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (in other words below CHF 5,000). Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.

3 Change in the scope of consolidation

Acquisitions in 2020

On 20 May 2020, the group acquired 100% of GorillaStack Pty Ltd., Australia (‘GorillaStack’), a provider of cloud cost management and real-time event monitoring software as a service (SaaS) platform for Amazon Web Services (AWS). This acquisition adds capabilities within automation and security for the cloud, thereby accelerating its roadmap towards an innovative cloud management platform.

On 10 July 2020, SoftwareONE acquired 100% of B-Lay B.V., Netherlands (‘B-Lay’), with subsidiaries in the US and Romania. B-Lay is a leading provider of Software Asset Management (SAM) advisory and managed services for SAP and Oracle solutions. The transaction will further strengthen SoftwareONE’s market-leading Software Lifecycle Management (SLM) and SAM practice in Europe, adding significant know-how and delivery capabilities.

On 9 November 2020, SoftwareONE exercised a call option to acquire the remaining 60% of IG Services SAS, Columbia (‘InterGrupo’), following its initial investment of 40% in 2019.

On 30 December 2020, the group acquired the activities and assets of Optimum Consulting LLC, US (‘Optimum’), by way of an asset deal. Optimum is a SAP-certified technology consulting company that provides solutions and managed services for customers seeking to migrate and efficiently run their SAP environment in the public cloud. With operations in India, Optimum provides comprehensive SAP-related services and solutions mainly to US customers, some of which with global operations.

On 31 December 2020, SoftwareONE acquired 100% of Intelligence Partner SL, Spain (‘Intelligence Partner’), with subsidiaries in Brazil and Dubai. Intelligence Partner offers the complete portfolio of Google Cloud products, along with related consulting, migration and managed services. The acquisition significantly expands SoftwareONE’s Google Cloud capabilities, strengthening its ability to serve customers with multi-cloud strategies in Europe and beyond.

The purchase price allocation for all business combinations is still provisional as at 31 December 2020.

The provisional fair values of the identifiable assets and liabilities as at the date of acquisition were:

in CHF 1,000

InterGrupo

Intelligence Partner

Others

Total

 

 

 

 

 

Cash and cash equivalents

3,562

2,596

75

6,233

Trade receivables

8,861

1,059

380

10,300

Other short term assets

655

2,076

219

2,950

Indemnification assets 

543

469

1,012

Tangible assets

8,634

204

61

8,899

Intangible assets (excluding goodwill)

8,155

5,754

5,163

19,072

Right-of-use assets

570

369

285

1,224

Deferred tax assets

657

159

816

Other non-current assets

79

79

 

 

 

 

 

Total assets

31,637

12,765

6,183

50,585

 

 

 

 

 

Trade payables

773

4,133

139

5,045

Other short-term liabilities

3,247

832

278

4,357

Accrued expenses and contract liabilities

1,093

8

1,010

2,111

Defined benefit liabilities

24

24

Provisions

111

111

Contingent liabilities

656

469

1,125

Financial liabilities

5,023

399

648

6,070

Deferred tax liabilities

3,994

1,598

1,305

6,897

 

 

 

 

 

Net assets acquired at fair value

16,827

5,215

2,803

24,845

Acquisition of InterGrupo

With the exercise of the call option to acquire the remaining 60% of the shares, SoftwareONE obtained control over InterGrupo. A fair value remeasurement of the shares acquired in 2019 was carried out, which resulted in a fair value of TCHF 13,428 immediately before the acquisition date. The purchase price of TCHF 20,142 for the acquisition of the remaining 60% was paid in January 2021.

The goodwill recognized is primarily attributed to the workforce and the expected synergies and other benefits from combining the activities of InterGrupo with those of the group. The goodwill is not deductible for income tax purposes. There were no significant transaction costs related to this acquisition.

From the date of acquisition, InterGrupo has contributed TCHF 5,459 of revenue and TCHF 301 to the profit for the year.

Acquisition of Intelligence Partner

The goodwill recognized is primarily attributed to the expected synergies and other benefits from combining the assets and activities of Intelligence Partner with those of the group. The goodwill is not deductible for income tax purposes. Transaction costs of TCHF 162 are related to this acquisition.

As part of the purchase agreement, a contingent consideration arrangement was agreed that could result in additional cash payments to the previous shareholders of Intelligence Partner. An expected earn-out amount of TCHF 4,177 is related to a continuing employment of the selling shareholders and is recognized as personnel expense over the service period of three years and thus not part of the purchase price. For details regarding such earn-out arrangements, refer to Note 19 Provisions. An expected earn-out amount of TCHF 3,417 payable to selling shareholders without continuing employment is part of the purchase price and recognized as a financial liability. For details refer to Note 4.3 Categories of financial instruments and fair value estimation.

Other acquisitions

The purchase price paid for the acquisition of Optimum (TCHF 2,648) mainly relates to the skilled workforce and, therefore, represents goodwill. Transaction costs of TCHF 248 are related to this acquisition. Transaction costs of TCHF 210 are related to the acquisition of B-Lay. For details regarding contingent consideration arrangements, refer to Note 19 Provisions.

If all acquisitions would have taken place at the beginning of the year, total revenue of SoftwareONE group would have been TCHF 7,957,141 and net profit for the period would have been TCHF 178,814.

Details of the purchase considerations recognized at acquisition and the derivation of goodwill are as follows:

in CHF 1,000

InterGrupo

Intelligence Partner

Others 1)

Total

 

 

 

 

 

Cash paid

11,938

7,206

19,144

Contingent consideration liabilities

3,417

3,417

Exercise call option

20,142

20,142

Carrying amount of previously held equity interest in a joint venture

6,986

6,986

Fair value remeasurement of previously held equity interest in a joint venture

6,442

6,442

 

 

 

 

 

Total purchase consideration

33,570

15,355

7,206

56,131

Less net assets acquired at fair value

16,827

5,215

2,803

24,845

 

 

 

 

 

Goodwill

16,743

10,140

4,403

31,286

1) Cash paid includes a subsequent purchase price adjustment (TCHF 124) for the acquisition of BNW in 2019.

Cash flows on acquisitions

in CHF 1,000

InterGrupo

Intelligence Partner

Others

Total

 

 

 

 

 

Cash consideration

11,938

7,082

19,020

Net cash acquired

3,562

2,596

75

6,233

Cash consideration for current period acquisitions

3,562

–9,342

–7,007

–12,787

Cash consideration for prior period acquisitions

32,725

32,725

 

 

 

 

 

Net outflow of cash – investing activities

3,562

–9,342

–39,732

–45,512

In addition to the subsequent purchase price adjustment for BNW, the contingent consideration liability for the acquisition of
COMPAREX group in 2019 was paid in January 2020 (TCHF 32,601).

Acquisitions in 2019

On 31 January 2019, SoftwareONE acquired 100% of COMPAREX AG, Germany ('COMPAREX'). As a global IT company with thirty years of experience, COMPAREX is one of the world’s leading IT service providers in the EMEA markets. The contingent consideration liability of TCHF 32,601 was paid in January 2020.

The final fair values of the identifiable assets and liabilities as at the date of acquisition of COMPAREX were:

in CHF 1,000

COMPAREX

 

 

Cash and cash equivalents

110,965

Trade receivables

558,227

Other short term assets

63,503

Indemnification assets 

12,446

Tangible assets

17,816

Intangible assets (excluding goodwill)

78,304

Right-of-use assets

25,392

Deferred tax assets

6,226

Other non-current assets

16,513

 

 

Total assets

889,392

 

 

Trade payables

533,701

Other short term liabilities

80,773

Accrued expenses and contract liabilities

57,992

Defined benefit liabilities

5,429

Provisions

4,134

Contingent liabilities

14,689

Contingent consideration liabilities

6,610

Financial liabilities

143,234

Deferred tax liabilities

26,001

 

 

Net assets acquired at fair value

16,829

On 19 November 2019, the group acquired 100% of the shares of BNW Consulting Pty Ltd., Australia ('BNW'), a growing technology and cloud consulting company based in Australia and the US, specializing in services around SAP platform transformation. In January 2020, a subsequent purchase price adjustment of TCHF 124 was made, which led to an increase in goodwill of TCHF 124 to TCHF 6,113. There were no other changes in the final fair values of acquired assets and liabilities compared to the provisional amounts disclosed in the Annual Report 2019.

On 30 April 2019, the group acquired 100% of the shares of RightCloud Pte. Ltd., a cloud-based service provider based in Singapore. On
31 October 2019, the group acquired all customer contracts and the workforce of MassiveR&D K.K., a Tokyo-based Amazon Web Services (AWS) specialist. During the business year, the group finalized the purchase accounting and there were no changes in the final fair values of acquired assets and liabilities compared to the provisional amounts disclosed in the Annual Report 2019.

Cash flows on acquisitions 2019

in CHF 1,000

COMPAREX

BNW

Others

Total

 

 

 

 

 

Cash consideration

54,463

7,965

278

62,706

Net cash acquired

110,965

1,532

167

112,664

 

 

 

 

 

Net inflow of cash – investing activities

56,502

–6,433

–111

49,958

4 Financial risk management

4.1 Financial risk factors

The group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk, equity price risk), credit risk and liquidity risk. The group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the group’s financial performance. The group uses derivative financial instruments to hedge certain risk exposures. The financial derivatives are measured with the aid of standardized mathematical models. The counterparty risk related to those derivatives is considered to be immaterial for the group.

Risk management is carried out by Group Treasury under a policy approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the group’s operating entities. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

Market risk

Foreign exchange risk

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

Group Treasury has set up a policy to manage its foreign exchange risk. The group hedges its foreign exchange risk exposure of recognized assets and liabilities and future commercial transactions by derivative contracts.

The group has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk which, as per group policy, is not hedged. These differences are recognized in other comprehensive income and accumulated in equity. Translation risk is not considered in the below analysis.

The following table details the group’s sensitivity in the major currencies with all the other variables held constant.

 

 

2020

2019

Impact in TCHF

Sensitivity

Earnings before income tax

Equity

Earnings before income tax

Equity

 

 

 

 

 

 

EUR

+/– 5 %

+/– 319

+/– 1,018

+/– 9,362

+/– 969

USD

+/– 5 %

+/– 1,395

+/– 2,084

+/– 2,253

+/– 942

SEK

+/– 5 %

+/– 340

+/– 104

+/– 280

+/–334

GBP

+/– 5 %

+/– 412

+/– 181

+/– 647

+/– 141

JPY

+/– 5 %

+/– 510

+/– 38

Interest rate risk

The group’s interest-bearing instruments with variable interest are cash, bank overdrafts, bank loans and a multiple currency revolving credit facility (currently undrawn). Currently there is no material exposure to interest rate risk. Also refer to Note 20 Financial liabilities.

Equity price risk

The group holds a short-term investment in listed shares. The asset is subject to fluctuation in share price. Changes in fair value are recognized in profit and loss as they arise.  A sensitivity analysis was performed. A 10% fluctuation in share price leads to fluctuations in pre-tax earnings of TCHF +/– 14,194 (prior year: TCHF +/– 5,761).

Credit risk

Group Treasury and the group Credit & Collection Department are responsible for managing and analyzing the credit risk for all new clients before standard payment and delivery terms and conditions are offered. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and contract assets. Risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. No collateral is required. Individual risk limits are set based on internal or external ratings in accordance with guidelines set by the Board. The utilization of credit limits is regularly monitored.

There is no concentration of credit risk with respect to trade receivables, as the group has a large number of customers that are internationally diversified. 47% of trade receivables are covered through credit insurance (prior year: 39%).

The remaining part is not insured as one of the following:

  • From customers with top rating (based on internal and credit insurance assessment): 20% (prior year: 35%)
  • Too small to be insured: 3% (prior year: 1%)
  • No insurance available: 30% (prior year: 25%)

Refer to Note 12 Trade receivables for information about the credit risk exposure on the group’s trade receivables and contract assets using a provision matrix.

Liquidity risk

Cash flow forecasting is performed in the operating entities of the group and aggregated by Group Treasury. Group Treasury monitors rolling forecasts of the group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn borrowing facilities (for details see further below) at all times.

The table below analyzes the group’s non-derivative financial liabilities and derivative financial liabilities according to relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, ie undiscounted interest and principal payments:

 

 

Cash outflows

in CHF 1,000

Carrying amount

Total cash outflow

Less than 3 months

Between 3 months and 1 year

Between 1 and 5 years

Over 5 years

 

 

 

 

 

 

 

As at 31 December 2020

 

 

 

 

 

 

Trade payables

1,685,263

1,685,263

1,653,255

32,009

Other payables

108,288

108,288

35,713

14,979

57,596

Accrued expenses

67,497

67,497

54,129

13,367

Financial liabilities (including bank overdrafts, excluding lease liabilities)

103,908

106,646

39,746

4,246

58,856

3,798

Lease liabilities

41,718

42,401

3,271

12,131

26,057

942

Derivatives (net)

7,218

7,218

6,404

101

3

710

 

 

 

 

 

 

 

Total

2,013,892

2,017,313

1,792,518

76,833

142,512

5,450

 

 

 

 

 

 

 

As at 31 December 2019

 

 

 

 

 

 

Trade payables 1)

1,550,851

1,550,851

1,527,135

23,716

Other payables 1)

61,427

61,427

33,077

9,166

19,184

Accrued expenses 1)

146,877

146,877

124,810

22,066

Financial liabilities 1) (including bank overdrafts, excluding lease liabilities)

137,337

142,073

44,976

6,865

90,225

7

Lease liabilities

38,623

39,116

3,643

12,204

22,568

702

Derivatives (net)

5,786

5,786

4,248

114

1,423

 

 

 

 

 

 

 

Total

1,940,901

1,946,130

1,737,889

74,131

131,977

2,132

1) Prior-year figures restated, refer to Note 2 Change in presentation

The group maintains a CHF 470 million multiple currency revolving credit facility. The agreement was signed in 2019. In 2020, SoftwareONE exercised the option to increase the initial facility (CHF 400 million) by CHF 70 million. Additionally, the tenor of the facility was extended from 30 September 2022 to 30 September 2023. The facility contains one remaining extension option (which can be exercised with consent of the lending banks in September 2021), which could extend the maturity of the credit facility by another year to 30 September 2024. Interest would be payable at the rate of LIBOR plus a margin of 50, respectively 60, basis points initially, depending on the currency, and thereafter adjusted for changes in the leverage ratio of the group. As at 31 December 2020, nothing was drawn down. Each drawdown within the facility would have a tenor ranging from one week up to the maturity of the credit facility. The facility is subject to loan covenants (leverage ratio: net debt/earnings before net financial items, taxes, depreciation and amortization). A potential breach of covenant triggers measures which are standard in such circumstances. Under the agreement, the covenants are monitored on a regular basis by the treasury department and half yearly reported to management and lending banks to ensure compliance with the agreement. Transaction costs of TCHF 1,330 were capitalized in 2019 and amortized pro rata over the commitment period.

As at 31 December 2020, the group had total committed and uncommitted credit lines (including factoring) of TCHF 998,062 (prior year: TCHF 985,089) available, of which 21% (prior year: 22%) drawn. From the drawn amount, TCHF 47,737 are covered by financial covenants, which are completely fulfilled as at 31 December 2020 (prior year: TCHF 74,457).

4.2 Capital risk management

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

Surplus cash held by the operating entities over and above working capital requirements are transferred to Group Treasury whenever the legal environment permits. Group Treasury invests surplus cash in interest bearing current accounts or short-term time deposits to provide sufficient headroom as determined by the abovementioned forecasts.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

Capital is measured based on the group’s consolidated financial statements and monitored closely on an ongoing basis. Management's target for the period under review was to strengthen the capital base to sustain and support further development of the business. This goal was achieved through the positive operating results of the group and the increase in equity.

The equity ratio for the period ended 31 December 2020 and the prior year were as follows:

in CHF 1,000

2020

2019

 

 

 

Total equity

776,522

636,916

Total assets

3,127,230

2,976,940

 

 

 

Equity ratio

24.8 %

21.4 %

The equity ratio for 2020 increased slightly compared to the previous year, which is mainly due to the net income for the period.

4.3 Categories of financial instruments and fair value estimation

Categories of financial instruments

The following table discloses the carrying amounts and fair values, as required, of the group’s financial instruments by class and category:

As at 31 December 2020

 

 

 

 

in CHF 1,000

IFRS 9 category

Carrying amount

Fair value

Fair value level

 

 

 

 

 

FINANCIAL ASSETS

 

 

 

 

Cash and cash equivalents

Amortized cost

434,941

n/a*

 

Trade receivables

Amortized cost

1,714,158

n/a*

 

Other receivables

Amortized cost

72,645

n/a*

 

Derivative financial instruments

Fair value through profit or loss

2,587

 

Level 2

Derivative financial instruments

Designated as cash flow hedge

1,290

 

Level 2

Financial assets - listed equity instrument

Fair value through profit or loss

141,944

 

Level 1

Financial assets - loans

Amortized cost

1,430

n/a*

 

 

 

 

 

 

Total financial assets

 

2,368,995

 

 

 

 

 

 

 

FINANCIAL LIABILITIES

 

 

 

 

Trade payables

Financial liabilities at amortized cost

1,685,263

n/a*

 

Other payables

Financial liabilities at amortized cost

108,288

n/a*

 

Accrued expenses

Financial liabilities at amortized cost

67,497

n/a*

 

Contingent consideration liabilities

Fair value through profit or loss

9,848

 

Level 3

Other financial liabilities

Financial liabilities at amortized cost

94,059

n/a*

 

Derivative financial instruments

Fair value through profit or loss

5,726

 

Level 2

Derivative financial instruments

Designated as cash flow hedge

1,492

 

Level 2

 

 

 

 

 

Total financial liabilities

 

1,972,173

 

 

* The carrying amount is a reasonable approximation for fair value.

Financial assets consist of an investment in listed equity instruments for which the group recognized a fair value gain of TCHF 84,197 in finance income in 2020 (prior year: gain of TCHF 38,946).

As at 31 December 2019

 

 

 

 

in CHF 1,000

IFRS 9 category

Carrying amount

Fair value

Fair value level

 

 

 

 

 

FINANCIAL ASSETS

 

 

 

 

Cash and cash equivalents

Amortized cost

313,490

n/a*

 

Trade receivables 1)

Amortized cost

1,830,647

n/a*

 

Other receivables 1)

Amortized cost

65,266

n/a*

 

Derivative financial instruments

Fair value through profit or loss

2,389

 

Level 2

Derivative financial instruments

Designated as cash flow hedge

1,171

 

Level 2

Financial assets - listed equity instrument

Fair value through profit or loss

57,612

 

Level 1

Financial assets - loans

Amortized cost

4,389

n/a*

 

 

 

 

 

 

Total financial assets

 

2,286,866

 

 

 

 

 

 

 

FINANCIAL LIABILITIES

 

 

 

 

Trade payables 1)

Financial liabilities at amortized cost

1,550,851

n/a*

 

Other payables 1)

Financial liabilities at amortized cost

61,427

n/a*

 

Accrued expenses 1)

Financial liabilities at amortized cost

146,877

n/a*

 

Contingent consideration liabilities

Fair value through profit or loss

16,108

 

Level 3

Contingent consideration liabilities

Fair value through profit or loss

32,601

 

Level 2

Other financial liabilities 1)

Financial liabilities at amortized cost

88,628

n/a*

 

Derivative financial instruments

Fair value through profit or loss

5,397

 

Level 2

Derivative financial instruments

Designated as cash flow hedge

389

 

Level 2

 

 

 

 

 

Total financial liabilities

 

1,902,278

 

 

* The carrying amount is a reasonable approximation for fair value.

1) Prior-year figures restated, refer to Note 2 Change in presentation.

Fair value estimation

The carrying amounts of cash and cash equivalents, trade and other receivables and trade and other payables with a remaining term of up to 12 months, as well as other current financial assets and liabilities, represent a reasonable approximation of their fair values, due to the short-term maturities of these instruments.

The fair value of financial assets (equity instruments) is based on observable price quotations at the reporting date. The fair value of derivatives is determined on the basis of input factors observed directly or indirectly on the market. The fair value of foreign exchange forward contracts is based on forward exchange rates.

Financial instruments carried at fair value are analyzed by valuation method. The fair value hierarchy has been defined as follows:

Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices for identical assets or liabilities at the balance sheet date.

Level 2: The fair value measurements are those derived from valuation techniques using inputs for the asset or liability that are observable market data, either directly or indirectly. Such valuation techniques include the discounted cash flow method and option pricing models. For example, the fair value of interest rate and currency swaps is determined by discounting estimated future cash flows, and the fair value of forward foreign exchange contracts is determined using the forward exchange market at the end of the reporting period.

Level 3: The fair value measurements are those derived from valuation techniques using significant inputs for the asset or liability that are not based on observable market data.

The following table discloses valuation classes for financial instruments measured at fair value:

 

As at 31 December 2020

As at 31 December 2019

in CHF 1,000

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Financial assets

141,944

141,944

57,612

57,612

Derivative financial instruments

3,877

3,877

3,560

3,560

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Contingent consideration liabilities

9,848

9,848

32,601

16,108

48,709

Derivative financial instruments

7,218

7,218

5,786

5,786

Other than disclosed in the table below, there have been no transfers between the different hierarchy levels in 2020 and 2019.

The change in carrying values associated with 'Level 3' contingent consideration liabilities are set forth below:

in CHF 1,000

2020

2019

 

 

 

At 1 January

16,108

23,515

Business acquisitions

34,395

Additions

3,417

6,610

Settlement in cash

–2,824

–7,366

Fair value adjustment

–5,931

–6,652

Transfer to 'Level 2'

–32,601

Currency translation adjustments

–922

–1,793

 

 

 

As at 31 December

9,848

16,108

The most significant contingent consideration liabilities relate to the acquisition of the customer base of CompuCom and the acquisition of Intelligence Partner.

CompuCom (fair value as at 31 December 2020: TCHF 6,266; prior year: TCHF 14,949)
The purchase price for the customer base of CompuCom acquired in 2015 is fully based on variable payments that depend on the future revenues generated from those customers over a period of 10 years. During 2020, the group recognized an unrealized fair value gain of TCHF 5,904 (prior year: TCHF 3,300 gain). Consequently, an impairment of the customer base of TCHF 4,655 was recognized. The most significant unobservable input used to determine the fair value of the CompuCom contingent consideration is the cash flow forecast, which is mainly based on future gross profit. The development of the future gross profit and the contingent consideration is linear. Thus, a change of +/– 10% in gross profit development leads to a change of cash outflow by +/– 10%, eg TCHF 0,627 (prior year: TCHF +/– 1,495).

Intelligence Partner (fair value as at 31 December 2020: TCHF 3,417)
The contingent consideration liability of Intelligance Partner depends on the future EBITDAs about the next three years and an additional 'catch-up' year if necessary. The development of the future EBITDAs and the contingent consideration is not linear and capped at a maximum of TEUR 3,150. SoftwareONE estimates that the maximum amount will be paid.

4.4 Transfer of financial assets

The group enters into transactions in which it transfers trade receivables under factoring agreements and, as a result, may either be eligible to derecognize the transferred receivables in their entirety or must continue to recognize the transferred receivables to the extent of any continuing involvement, depending on certain criteria. These criteria are presented in the section 'Significant accounting policies’.

The amount of the receivables sold as at 31 December 2020 is TCHF 151,619 (prior year: TCHF 135,668). This amount is fully derecognized from the balance sheet. Moreover, liabilities to factoring partners for forwarding incoming payments from customers of TCHF 5,210 (previous year: TCHF 0) are recognized under financial liabilities.

5 Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates may differ from the actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

5.1 Significant estimates

Income taxes (Note 10)

The group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes.

In particular, the deferred tax assets on unused tax losses require estimates of the amount and dates of future taxable income as well as the future tax planning strategies. If the group expects not to realize the unused tax losses, these are not recognized or impaired.

Contingent consideration liabilities related to business acquisitions and the acquisition of customer relationships (Note 4.3, 16 and 20)

Contingent consideration liabilities reflect potential future payments following the acquisition of customer relationships and businesses. The calculation of the future payments is based on future cash flows. These future cash flows were estimated at initial recognition. These assumptions are reviewed at each reporting date and changes impact profit and loss.

Defined benefit obligations (Note 21)

The present value of the defined benefit obligations depends on actuarial assumptions including the discount rate. Any changes in these assumptions will impact the carrying amount of defined benefit obligations. Additional information is disclosed in Note 21 Defined benefit liabilities.

Contingent liabilities and indemnification assets related to purchase price allocations (Note 13 and 19)

COMPAREX, acquired in 2019, has several ongoing dispute cases which could lead to future cash outflows. Occasional dispute cases also exist for InterGrupo and Intelligence Partner acquired in 2020. In the course of the purchase price allocation, those contingent liabilities were measured at fair value on the acquisition date and presented as provision. On each reporting date, such contingent liabilities are valued at the higher amount that would result in accordance with IAS 37 or the amount initially recognized. Part of the risks are covered through indemnity clauses. The resulting indemnification assets are measured at fair value on the acquisition date on the same basis as the indemnified liability.

5.2 Significant judgments

Revenue recognition – principal versus agent assessment in indirect business (Note 6)

For software license reselling arrangements bundled with consulting services (indirect business), the assessment whether the group acts as a principal or an agent is judgmental and requires a weighting of the individual factors in reaching a conclusion. Management concluded that SoftwareONE is the principal with respect to such arrangements. Based on the assessment in accordance with IFRS 15, the specified service provided to the customer is the consulting service to which the software product is an input and, therefore, is not distinct within the context of the contract. Management concluded that SoftwareONE controls the specified service before it is transferred to the customer. This is evidenced by the fact that SoftwareONE is primarily responsible for fulfilling the promise to the customer as it ensures compatibility of software and customer requirements. Furthermore, the group has discretion in establishing the price for the specified software license. To support this assessment, management has verified that its conclusion is in line with the group’s peers in the software reseller sector. By contrast, in arrangements where SoftwareONE does not have control over the traded software license and does not perform any consulting services for the customer (ie direct business), it qualifies as an agent.

5.3 Impact of the COVID-19 pandemic

Due to the currently unforeseeable global consequences of the COVID-19 pandemic, accounting estimates and management judgments are subject to increased uncertainty. On the basis of the information available in the reporting period, an analysis of the effects on the accounting of SoftwareONE group was carried out as at 31 December 2020, in particular with respect to expected credit losses on trade receivables and contract assets, impairment indicators for tangible and intangible assets and fair values of contingent consideration liabilities. SoftwareONE group has determined that no significant effects as a result of COVID-19 had to be recorded in these consolidated financial statements.

SoftwareONE group will continuously review the possible effects on accounting with respect to further developments of the COVID-19 pandemic.

6 Revenue

SoftwareONE generates its revenue from contracts with customers through the sale of software & Cloud (point in time), the delivery over time of Solutions & Services as well as revenue related to the resale of sale or self-developed on-premise software (point in time, presented in Solutions & Services).

For management purposes, SoftwareONE is organized by geographical areas. The below breakdown of revenue follows the regional clusters by the group’s operating segments, refer to Note 29 Segment reporting.

Revenue is broken down as follows:

2020

 

 

 

 

 

in CHF 1,000

EMEA

NORAM

LATAM

APAC

Total

 

 

 

 

 

 

Revenue from Software & Cloud

4,843,634

1,201,193

387,509

1,160,996

7,593,332

Revenue from Solutions & Services

210,602

41,505

30,999

29,817

312,923

 

 

 

 

 

 

Total revenue

5,054,236

1,242,698

418,508

1,190,813

7,906,255

2019

 

 

 

 

 

in CHF 1,000

EMEA

NORAM

LATAM

APAC

Total

 

 

 

 

 

 

Revenue from Software & Cloud

4,643,037

1,255,121

391,114

1,024,633

7,313,905

Revenue from Solutions & Services

216,424

37,623

22,668

20,220

296,935

 

 

 

 

 

 

Total revenue

4,859,461

1,292,744

413,782

1,044,853

7,610,840

SoftwareONE group splits its revenue from Software & Cloud between Microsoft indirect, Multivendor indirect and Microsoft direct. Multivendor represents all license transactions excluding Microsoft. Microsoft indirect and Multivendor indirect includes revenue from indirect business in which SoftwareONE acts as a principal, whereas Microsoft direct includes revenue from direct business in which SoftwareONE acts as an agent.

in CHF 1,000

2020

2019

 

 

 

Revenue from Software & Cloud

 

 

– Microsoft indirect

4,687,236

4,524,930

– Multivendor indirect

2,787,066

2,641,387

– Microsoft direct

119,030

147,588

 

 

 

Total revenue from Software & Cloud

7,593,332

7,313,905

 

 

 

Revenue from Software & Cloud indirect

7,474,302

7,166,317

Cost of software purchased

–7,073,855

–6,773,422

 

 

 

Revenue indirect net of cost of software purchased

400,447

392,895

7 Personnel expenses

in CHF 1,000

2020

2019

 

 

 

Salaries fixed

–272,739

–249,761

Salaries variable

–90,549

–93,421

Social security costs

–55,288

–51,798

Pension costs – defined benefit plans (Note 21)

–4,366

–4,197

Pension costs – defined contribution plans

–5,828

–5,181

Other personnel expenses

–41,200

–35,510

 

 

 

Total personnel expenses

–469,970

–439,868

 

 

 

Average head count (FTE)

6,102

5,442

Other personnel expenses include expenses for the Management Equity Plan in an amount of TCHF 19,964 (prior year: TCHF 21,375) and other share-based payment programs in an amount of TCHF 5,302 (prior year: TCHF 445), refer to Note 26 Share-based payments.

8 Other operating expenses

in CHF 1,000

2020

2019

 

 

 

Travel and car expenses

–12,803

–29,245

Administrative expenses

–40,910

–45,397

Expenses for short-term leases

–769

–3,656

Maintenance and utility expenses

–7,002

–5,045

Information technology expenses

–10,030

–10,743

Telecommunication expenses

–3,822

–4,257

Marketing expenses

–3,074

–8,697

Other operating expenses

–8,226

–8,300

 

 

 

Total other operating expenses

–86,636

–115,340

The decrease in other operating expenses of TCHF 28,704 is related to a reduction in travel expenses (TCHF 16,442) due to the impact of COVID-19. In 2019, one-time costs related to the IPO (TCHF 10,506) were included in other operating expenses.

9 Finance result

in CHF 1,000

2020

2019

 

 

 

Interest income

2,194

2,277

Other finance income

86,801

43,214

Gains from fair value remeasurement of previously held equity interest in a joint venture

6,442

Change in fair value of contingent consideration liability

5,931

6,652

 

 

 

Finance income

101,368

52,143

Interest expense

–4,090

–4,145

Other finance expenses

–6,904

–5,461

 

 

 

Finance expenses

–10,994

–9,606

 

 

 

Foreign exchange differences, net

–10,149

–7,108

 

 

 

Total finance result

80,225

35,429

Other finance income includes TCHF 84,197 from the valuation of equity instruments (prior year: TCHF 38,946) and TCHF 2,136 income from significant finance components (prior year: TCHF 2,510).

Other finance expenses include TCHF 2,658 factoring expenses (prior year: TCHF 3,222).

The foreign exchange differences, net result 2020 excludes unrealized losses on derivatives designated as instruments to hedge foreign currency risks in the amount of TCHF 41 (prior year: unrealized gains of TCHF 780) recognized in OCI and to be reclassified in future periods. In 2020, losses of TCHF 971 (prior year: gains of TCHF 684) have been reclassified to profit and loss, refer to Note 14 Derivative financial instruments. In addition, the cumulative foreign exchange losses recognized in other comprehensive income of TCHF 1,168 for the investment in joint venture InterGrupo were recycled to foreign exchange differences when the call option to acquire the remaining 60% was exercised.

10 Income taxes

Tax expenses comprise the following positions:

in CHF 1,000

2020

2019

 

 

 

Current income taxes

–43,968

–43,297

Change in deferred taxes

6,926

13,951

 

 

 

Total tax expense

–37,042

–29,346

The tax on the group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

in CHF 1,000

2020

2019

 

 

 

Earnings before income tax (EBT)

213,803

154,350

Expected average group tax rate

21.3 %

24.6 %

 

 

 

Tax at expected average rate

–45,533

–37,970

+/– Effect of

 

 

Expenses not deductible for tax purposes

–7,587

–4,110

Income not subject to tax

16,328

1,994

Utilization of previously unrecognized tax losses

475

2,145

Impairment of previously recognized tax losses

–2,711

–1,611

Capitalization of tax losses previously not recognized

1,109

9,099

Unrecognized current year's tax losses

–1,887

–2,143

Current income tax charges/credits related to prior periods

3,507

2,598

Impact from tax rate changes

898

–879

Other effects

–1,641

1,531

 

 

 

Total tax expense

–37,042

–29,346

 

 

 

Effective tax rate

17,3 %

19.0 %

The group’s expected average tax rate is the aggregate obtained by applying the expected tax rate for each individual jurisdiction to its respective result before taxes. The weighted average expected tax rate was 21.3% (prior year: 24.6%).

The group has not recognized deferred tax assets of TCHF 1,887 (prior year: TCHF 2,143) in respect of losses for the period ended 31 December 2020 amounting to TCHF 9,466 (prior year: TCHF 13,067).

The impact from tax rate changes compared to 2019 is mainly related to tax rate change in Switzerland and Colombia.

Other effects in 2020 are mainly related to withholding taxes on intercompany transactions. Other effects in 2019 are mainly related to tax benefits on the taxable impairment on investments in subsidiaries which was partially offset by the write-off on withholding tax receivables on group internal transactions. 

Deferred income tax

Deferred tax income of TCHF 705 (prior year: expense TCHF 214) is recorded in other comprehensive income on actuarial losses on defined benefit liabilities and on hedge accounting, refer to Note 21 and 14.

Deferred tax assets and liabilities are based on the temporary differences between group valuation and tax valuation:

 

2020

2019

in CHF 1,000

Deferred tax assets

Deferred tax liabilities

Deferred tax assets

Deferred tax liabilities

 

 

 

 

 

Trade receivables

2,435

3,168

5,453

3,371

Other current assets

820

2,126

478

3,946

Tangible, intangible and right-of-use assets

3,972

35,547

2,389

38,200

Other non-current assets

20

1

571

494

Accrued expenses, prepaid income and contract assets

4,159

1,888

4,528

1,900

Other current liabilities

8,749

851

6,596

432

Defined benefit liabilities

3,413

2,789

Other non-current liabilities

6,340

41

6,300

424

Deferred taxes from losses carried forward

8,987

12,368

 

 

 

 

 

Total

38,895

43,622

41,472

48,767

Offsetting of balances

–14,801

–14,801

–17,091

–17,091

 

 

 

 

 

Total

24,094

28,821

24,381

31,676

For some group companies, dividend payments are subject to a withholding tax which cannot be fully recovered in Switzerland. The company has not recognized deferred tax liabilities associated with investments in subsidiaries where the group can control the reversal of the temporary differences and where it is not probable that the temporary differences will reverse in the foreseeable future.

The aggregate amount of temporary differences associated with investments in subsidiaries for which no deferred tax liabilities have been recognized amounts to TCHF 46,357 (prior year: TCHF 37,083).

The movement of available tax loss carryforwards is as follows:

in CHF 1,000

2020

2019

 

 

 

At 1 January

187,475

29,611

Business acquisitions

1,203

156,200

Tax losses arising in current year

12,699

27,002

Tax losses utilized against current year profits

–17,831

–18,642

Expired tax losses during the period

–2,263

–1,671

Other movements

–4,761

–1,149

Currency translation adjustments

–4,262

–3,876

 

 

 

As at 31 December

172,260

187,475

Tax losses carried forward as of 31 December 2020 include tax losses in the amount of TCHF 92,161 (no expiry date) originating from the Austrian permanent establishment of COMPAREX AG in Germany. In 2019, the Austrian permanent establishment of COMPAREX AG was dissolved. It is legally uncertain if these tax losses carried forward were transferred to the head office and therefore no deferred tax asset was recognized.

Deferred tax assets of TCHF 8,987 (prior year: TCHF 12,368) were recorded in respect of available tax loss carryforwards of TCHF 37,494 (prior year: TCHF 49,651).

Tax losses, for which no deferred tax asset was recognized will expire as follows:

in CHF 1,000

2020

2019

 

 

 

Expiry within 12 months

4,834

2,036

Expiry in 2–3 years

9,854

6,971

Expiry in 4–5 years

8,639

6,652

Expiry in more than 5 years

11,117

15,468

No expiry date

100,322

106,697

 

 

 

Total not recognized tax losses

134,766

137,824

11 Cash and cash equivalents

in CHF 1,000

2020

2019

 

 

 

Cash at bank

418,620

307,569

Short-term bank deposits

16,321

5,921

 

 

 

Total

434,941

313,490

12 Trade receivables

in CHF 1,000

2020

2019 1)

 

 

 

Trade receivables

1,731,266

1,846,769

Trade receivables from joint ventures

101

Less provision for impairment of trade receivables

–17,108

–16,223

 

 

 

Trade receivables, net

1,714,158

1,830,647

1) Prior-year figures restated, refer to Note 2 Change in presentation.

Trade receivables are non-interest bearing and are generally on terms of 30 to 90 days.

An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns (ie, geographical region and customer rating, and coverage by letters of credit or other forms of credit insurance). The calculation reflects the probability weighted outcome and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.

The provision matrix is initially based on the group’s historical observed default rates. The group calibrates the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (ie, gross domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.

The group applies the expected credit loss model under IFRS 9 and reviews its receivables periodically to determine an adequate impairment provision. Loss allowances are recognized based on lifetime ECLs at the reporting date. The aging of the receivables for the year 2020 and 2019 are as follows:

2020

 

 

 

in CHF 1,000

Expected credit loss rate

Estimated total gross carrying amount at default

Expected credit loss

 

 

 

 

Not past due

–0.1 %

1,499,911

–836

Past due since 1–90 days

–0.4 %

192,858

–710

Past due since 91–180 days

–13.5 %

18,409

–2,484

Past due since 181–360 days

–52.7 %

8,487

–4,473

Past due since more than 360 days

–74.2 %

11,601

–8,605

 

 

 

 

Total trade receivables, gross

–1.0 %

1,731,266

–17,108

2019

 

 

 

in CHF 1,000

Expected credit loss rate

Estimated total gross carrying amount at default

Expected credit loss

 

 

 

 

Not past due 1)

–0.1 %

1,526,244

–1,276

Past due since 1–90 days

–0.2 %

258,390

–609

Past due since 91–180 days

–5.7 %

31,149

–1,769

Past due since 181–360 days

–22.9 %

16,319

–3,733

Past due since more than 360 days

–59.8 %

14,768

–8,836

 

 

 

 

Total trade receivables, gross 1)

–0.9 %

1,846,870

–16,223

1) Prior-year figures restated, refer to Note 2 Change in presentation.

Movements on the group’s provision for impairment of trade receivables are as follows:

 

2020

2019

 

 

 

At 1 January

–16,223

–9,790

Allowance recognized

–7,492

–8,893

Receivables written off during the year as uncollectible

2,101

1,223

Unused amounts reversed

2,952

982

Currency translation adjustments

1,554

255

 

 

 

As at 31 December

–17,108

–16,223

13 Other receivables, prepaid expenses and contract assets

in CHF 1,000

2020

2019 1)

 

 

 

Other receivables

60,967

74,317

– thereof financial assets: 15,748 (prior year: 31,958)

 

 

Indemnification assets

3,290

7,974

Prepaid expenses

28,966

47,120

Contract assets

58,206

11,901

 

 

 

Total current other receivables, prepaid expenses and contract assets

151,429

141,312

Other receivables

64,833

34,059

– thereof financial assets: 56,897 (prior year: 33,309)

 

 

Indemnification assets

2,770

5,088

 

 

 

Total non-current other receivables

67,603

39,147

1) Prior-year figures restated, refer to Note 2 Change in presentation.

Contract assets are initially recognized for services as receipt of consideration is conditional on successful completion of the service. Upon completion of the service and acceptance by the customer, the amounts recognized as contract assets are reclassified to trade receivables.

Other receivables mainly include VAT and other sales tax receivables.

Indemnification assets are related to the acquisition of COMPAREX group in the amount of TCHF 5,591 (prior year: TCHF 12,446) and Intelligence Partner (TCHF 469). In 2020, the group received payments in an amount of TCHF 4,724 from the previous shareholder of COMPAREX group. The underlying risks that have been classified as contingent liabilities are recorded as provisions, refer to Note 19 Provisions.

In other current receivables an impairment of TCHF 577 is considered (prior year: TCHF 670).

14 Derivative financial instruments

 

2020

2019

2020

2019

in CHF 1,000

Notional amount

Notional amount

Derivative financial assets

Derivative financial liabilities

Derivative financial assets

Derivative financial liabilities

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

Forward foreign exchange contracts

906,986

630,928

3,354

6,505

3,245

4,362

– cash flow hedges recognized in OCI

54,777

32,347

769

782

856

275

– not designated as hedging instruments

852,209

598,581

2,585

5,723

2,389

4,087

 

 

 

 

 

 

 

Non-current

 

 

 

 

 

 

Forward foreign exchange contracts

57,596

55,983

523

713

315

1,424

– cash flow hedges recognized in OCI

57,452

23,021

521

710

315

114

– not designated as hedging instruments

144

32,962

2

3

1,310

 

 

 

 

 

 

 

Total derivatives

964,582

686,911

3,877

7,218

3,560

5,786

In 2020 and 2019, no ineffectiveness was recognized in the income statement.

15 Tangible assets

in CHF 1,000

Land

Buildings

IT equipment

Leasehold improvement

Furniture and fixtures

Vehicles

Other equipment

Total

 

 

 

 

 

 

 

 

 

At 1 January 2020

1,920

9,821

18,652

4,657

4,600

2,816

1,538

44,004

Business acquisitions

1,699

6,776

60

98

181

32

53

8,899

Additions

5,313

881

395

227

230

7,046

Disposals

–2,834

–552

–38

–846

–661

–4,931

Currency translation adjustments

129

512

–611

113

–224

–42

156

33

 

 

 

 

 

 

 

 

 

As at 31 December 2020

3,748

17,109

20,580

5,197

4,914

2,187

1,316

55,051

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

At 1 January 2020

271

12,682

2,105

2,614

2,136

659

20,467

Additions

311

3,923

788

729

319

452

6,522

Disposals

–2,433

–331

–35

–720

–506

–4,025

Currency translation adjustments

–332

231

–140

–32

338

65

 

 

 

 

 

 

 

 

 

As at 31 December 2020

582

13,840

2,793

3,168

1,703

943

23,029

 

 

 

 

 

 

 

 

 

Carrying amount 31 December 2020

3,748

16,527

6,740

2,404

1,746

484

373

32,022

As at 31 December 2020, there were no contractual commitments for the purchase of tangible assets and no impairment was required.

in CHF 1,000

Land

Buildings

IT equipment

Leasehold improvement

Furniture and fixtures

Vehicles

Other equipment

Total

 

 

 

 

 

 

 

 

 

At 1 January 2019

14,739

4,111

3,544

3,754

447

26,595

Business acquisitions

1,593

9,750

2,639

1,251

986

306

1,310

17,835

Additions

327

71

4,029

1,448

554

103

278

6,810

Disposals

–2,537

–2,091

–395

–1,271

–467

–6,761

Currency translation adjustments

–218

–62

–89

–76

–30

–475

 

 

 

 

 

 

 

 

 

As at 31 December 2019

1,920

9,821

18,652

4,657

4,600

2,816

1,538

44,004

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

At 1 January 2019

11,551

2,632

2,019

2,719

380

19,301

Additions

271

3,648

1,335

1,010

587

686

7,537

Disposals

–2,470

–1,872

–371

–1,114

–401

–6,228

Currency translation adjustments

–47

10

–44

–56

–6

–143

 

 

 

 

 

 

 

 

 

As at 31 December 2019

271

12,682

2,105

2,614

2,136

659

20,467

 

 

 

 

 

 

 

 

 

Carrying amount 31 December 2019

1,920

9,550

5,970

2,552

1,986

680

879

23,537

As at 31 December 2019, there were no contractual commitments for the purchase of tangible assets and no impairment was required.

16 Intangible assets

in CHF 1,000

Goodwill

Software, acquired technology and customer relationships

Brand

Internally generated intangibles

Total

 

 

 

 

 

 

At 1 January 2020

339,560

137,762

31,277

35,050

543,649

Business acquisitions

31,286

18,436

636

50,358

Additions

6,636

9,140

15,776

Disposals

–310

–310

Currency translation adjustments

–12,485

–6,174

49

–18,610

 

 

 

 

 

 

As at 31 December 2020

358,361

156,350

31,962

44,190

590,863

 

 

 

 

 

 

Accumulated amortization

 

 

 

 

 

At 1 January 2020

41,287

18,218

59,505

Amortization

17,536

35

9,710

27,281

Impairment

4,655

4,655

Disposals

–285

–285

Currency translation adjustments

–2,954

–2,954

 

 

 

 

 

 

As at 31 December 2020

60,239

35

27,928

88,202

 

 

 

 

 

 

Carrying amount 31 December 2020

358,361

96,111

31,927

16,262

502,661

in CHF 1,000

Goodwill

Software, acquired technology and customer relationships

Brand

Internally generated intangibles

Total

 

 

 

 

 

 

At 1 January 2019

9,372

55,279

31,277

25,844

121,772

Business acquisitions

343,413

82,144

425,557

Additions

4,276

9,206

13,482

Disposals

–609

–609

Currency translation adjustments

–13,225

–3,328

–16,553

 

 

 

 

 

 

As at 31 December 2019

339,560

137,762

31,277

35,050

543,649

 

 

 

 

 

 

Accumulated amortization

 

 

 

 

 

At 1 January 2019

21,309

9,899

31,208

Amortization

21,039

8,319

29,358

Disposals

–598

–598

Currency translation adjustments

–463

–463

 

 

 

 

 

 

As at 31 December 2019

41,287

18,218

59,505

 

 

 

 

 

 

Carrying amount 31 December 2019

339,560

96,475

31,277

16,832

484,144

Internally generated intangible assets mainly relate to PyraCloud, a platform helping organizations manage the entire lifecycle of on-premise software and providing insights into the best options and consumption as workloads shift to the cloud. Technical innovations are capitalized separately in accordance with the component approach if the group expects to obtain a future use from these. The average remaining amortization period is two years with a carrying amount of TCHF 14,954 (prior year: TCHF 15,524).

The acquired technology and customer relationships include customer relationships/bases related to the CompuCom acquisition in 2015 and the COMPAREX acquisition in 2019. The purchase price for the customer relationships of CompuCom is fully based on variable payments depending on future revenues generated from those customers over a period of 10 years. At the acquisition date, the purchase price was determined based on the net present value of estimated total payments to be made. These customer relationships are amortized over a period of 10 years. For the customer base of CompuCom, the remaining amortization period is 4.5 years with a carrying amount of TCHF 12,720 (prior year: TCHF 22,575). In 2020, a review of the valuation of the customer base of CompuCom indicated a need for impairment due to a decrease in value in the amount of TCHF 4,655 (previous year: TCHF 0). The impairment relates to the operating segment NORAM. For the customer base of COMPAREX, the remaining amortization period is 8.1 years with a carrying amount of TCHF 49,516 (prior year: TCHF 57,949).

The brand SoftwareONE was acquired in a business combination. It has been determined to have an indefinite useful life as there is no intention to abandon the brand name. It has existed for many years and the group has the ability to maintain the brand value for an indefinite period of time. Thus, the brand name is not amortized but is assessed for impairment annually. As the brand does not generate largely independent cash inflows, it is allocated to the group’s CGUs for goodwill impairment testing as part of corporate assets. In addition, the brand InterGrupo was acquired in 2020, which will be amortized over an estimated useful life of three years.

Goodwill and the brand are allocated to four CGU’s as illustrated below:

2020

 

 

 

 

 

in CHF 1,000

Pre-tax discount rate

Post-tax discount rate

Goodwill

Brand 1)

Total

 

 

 

 

 

 

EMEA

8.3 %

6.7 %

305,761

31,277

337,038

LATAM

15.4 %

11.4 %

39,290

39,290

APAC

10.5 %

8.3 %

9,889

9,889

NORAM

8.9 %

7.1 %

3,421

3,421

 

 

 

 

 

 

Carrying amount as at 31 December 2020

 

 

358,361

31,277

389,638

1) With indefinite useful life. Due to changes in transfer pricing the brand SoftwareONE was allocated to Switzerland in 2020.

2019

 

 

 

 

 

in CHF 1,000

Pre-tax discount rate

Post-tax discount rate

Goodwill

Brand 1)

Total

 

 

 

 

 

 

EMEA

7.2 %

5.6 %

305,234

21,102

326,336

LATAM

16.2 %

11.4 %

23,242

2,275

25,517

APAC

10.2 %

7.7 %

10,233

3,021

13,254

NORAM

9.0 %

6.8 %

851

4,879

5,730

 

 

 

 

 

 

Carrying amount as at 31 December 2019

 

 

339,560

31,277

370,838

1) With indefinite useful life.

The recoverable amount for each CGU was determined based on its value in use. Cash flows are calculated on the basis of the expected growth rates in the sales markets concerned. Growth in the operating profit of the cash generating unit is expected up to the end of the detailed planning period of five years. Estimated cash flow for the year after the detailed planning period is based on an annual growth rate of 2.0%. The pre-tax discount rate is calculated based on a risk-free interest rate as well as the market risk premium and borrowing interest rate, specific peer group information for beta factors and the debt ratio are also taken into account.

17 Investment in joint ventures and associated companies

In 2019, the group acquired 40% of IG Services SAS, Columbia (‘InterGrupo’) with subsidiaries in Mexico, Panama, Dominican Republic, Ecuador and Peru. At this time, SoftwareONE had no control over the company despite the existence of a call option. The investment was  classified as a joint venture and accounted for using the equity method.

In November 2020, SoftwareONE exercised the call option to acquire the remaining 60% of IG Services SAS. The company is fully consolidated since this point in time, refer to Note 3 Change in the scope of consolidation. Therefore, the investment in joint ventures was derecognized.

The carrying amount of the investments in joint ventures developed as follows:

in CHF 1,000

2020

2019

 

 

 

At 1 January

7,720

Acquisitions

7,478

Share of profit or loss

764

–88

Currency translation adjustments

–1,493

330

Change in scope of consolidation

–6,986

Reclassification of shares in TCL Digi Trade

–5

 

 

 

As at 31 December

7,720

The 30% interest in TCL DigiTrade sro (TCHF 5) is recognized as an associated company that is presented in other receivables due to insignificance.

18 Trade payables, accrued expenses, contract liabilities and other payables

in CHF 1,000

2020

2019

 

 

 

Trade payables 1)

1,685,263

1,550,545

Trade payables to joint ventures

306

Accrued expenses 1)

86,437

227,822

– thereof financial liabilities 67,497 (prior year: 146,877)

 

 

Contract liabilities

42,199

31,172

Other payables 1)

221,250

233,492

– thereof financial liabilities 50,692 (prior year: 42,243)

 

 

 

 

 

Total current trade payables, accrued expenses, contract liabilities and other payables as at 31 December

2,035,149

2,043,337

Other payables

61,648

19,184

– thereof financial liabilities 57,596 (prior year: 19,184)

 

 

 

 

 

Total non-current other payables

61,648

19,184

1) Prior-year figures restated, refer to Note 2 Change in presentation.

Contract liabilities include short-term advances received to deliver software products or to render services. All contract liabilities as at 1 January 2020 were recognized as revenue in 2020 (TCHF 31,172).

Accrued expenses mainly include employee-related accruals and accruals related to other operating expenses. Other payables mainly include VAT and other sales tax-related liabilities.

Other non-current payables include TCHF 57,596 non-current trade payables for multiyear contracts (prior year: TCHF 19,184).

19 Provisions

in CHF 1,000

Employment- related

Non-income tax-related

Earn-out- related

Other

Total

 

 

 

 

 

 

Current provisions

946

1,753

359

1,056

4,114

Non-current provisions

5,040

3,560

4,237

12,837

 

 

 

 

 

 

Total Provision as at 31 December 2020

5,986

5,313

4,596

1,056

16,951

 

 

 

 

 

 

At 1 January 2020

8,594

8,810

879

2,423

20,706

Business acquisition

656

469

111

1,236

Increase

142

4,084

1,422

5,648

Used provisions

–1,201

–1,826

–493

–2,431

–5,952

Unused amounts released

–1,005

–1,131

–214

–2,350

Currency translation adjustments

–1,200

–1,009

15

–143

–2,337

 

 

 

 

 

 

As at 31 December 2020

5,986

5,313

4,596

1,056

16,951

Provisions related to employment and non-income taxes are mainly associated with business acquisitions within the scope of IFRS 3. For the acquisition of COMPAREX group in 2019, risks in an amount of TCHF 14,689 have been identified and classified as contingent liabilities. By the end of the year, there are still provisions in an amount of TCHF 9,083 which are related to employment (TCHF 4,239; prior year: TCHF 7,503) and non-income taxes (TCHF 4,844; prior year: TCHF 7,186). For a significant portion, indemnification assets have been recognized in an amount of TCHF 5,591 (prior year: TCHF 12,446), refer to Note 13 Other receivables and prepaid expenses.

Contingent consideration arrangements that could result in additional cash payments to the previous owners of the companies are presented as provisions if they are contingent on continued employment and thus compensation for services. The amount of the earn-out depends on KPI developments for a contractually defined period and, where appropriate, a multiplier derived from other variables. They are accreted as personnel expenses during the period of service.

The earn-out calculations are based on the following KPIs:

Acquired company

Earn-out relevant KPI

 

 

RightCloud

EBITDA

BNW

EBITDA

GorillaStack

Development milestones

B-Lay

EBITDA

makeITnoble 1)

Gross Profit

MassiveR&D

Gross Profit and EBITDA

Optimum 2)

Gross Profit

Intelligence Partner 2)

EBITDA

1) Founder of Swiss make it noble gmbh joined SoftwareONE in 2020 (not within the scope of IFRS 3).

2) Contingent consideration arrangements where the accretion starts in 2021.

21 Defined benefit liabilities

Defined benefit plans

The group’s retirement plans include defined benefit pension plans in Switzerland, Belgium, Germany, Austria, India, Mexico, Ecuador, France, Italy, Turkey, Costa Rica and Indonesia. These plans are, except the plans in Switzerland, Belgium and Germany, unfunded and all determined by local regulations using independent actuarial valuations according to IAS 19. The group’s major defined benefit plan in Switzerland accounts for TCHF 14,900 or 68,7% (prior year: 10,958 or 64.5%) of the group’s net defined benefit liability.

Pension plans in Switzerland

The current pension arrangement for employees in Switzerland is made through a plan governed by the Swiss Federal Occupational Old Age, Survivors and Disability Pension Act (BVG). The plan of SoftwareONE’s Swiss company is administered by a separate legal foundation, which is funded by regular employer and employee contributions defined in the pension fund rules. The Swiss pension plan contains a cash balance benefit which is in essence contribution-based with certain minimum guarantees. Due to these minimum guarantees, the Swiss plan is treated as a defined benefit plan under IFRS. The plan is invested in a diversified range of assets in accordance with the investment strategy and the common criteria of an asset and liability management. A potential underfunding may be remedied by various measures such as increasing employer and employee contributions or reducing future benefits.

As at 31 December 2020, 229 employees (prior year: 203 employees) and one retiree (prior year: one retiree) are insured under the Swiss plan. The defined benefit obligation has a duration of 21 years (prior year: 22 years).

Amounts recognized in the balance sheet:

in CHF 1,000

Swiss plan

Other plans

2020

2019

 

 

 

 

 

Present value of funded obligations

59,964

7,499

67,463

54,324

Fair value of plan assets

–45,064

–5,613

–50,677

–41,321

Present value of unfunded obligations

4,917

4,917

3,996

 

 

 

 

 

Defined benefit liability in the balance sheet as at 31 December

14,900

6,803

21,703

16,999

Reconciliation of the present value of the defined benefit obligation (DBO):

in CHF 1,000

Swiss plan

Other plans

2020

2019

 

 

 

 

 

At 1 January

46,902

11,418

58,320

41,710

Business acquisitions

24

24

14,911

Service costs

3,055

1,311

4,366

4,096

Employee contribution

1,463

1,463

1,260

Interest cost

120

144

264

597

Actuarial losses/(gains)

2,363

386

2,749

1,194

Benefits paid/transferred

6,061

–893

5,168

–4,777

Currency translation adjustments

26

26

–671

 

 

 

 

 

As at 31 December

59,964

12,416

72,380

58,320

Reconciliation of fair value of plan assets:

in CHF 1,000

Swiss plan

Other plans

2020

2019

 

 

 

 

 

At 1 January

35,944

5,377

41,321

29,737

Business acquisitions

9,482

Interest income

47

49

96

397

Return on plan assets (excluding interest income)

–339

272

–67

1,777

Employer contributions

1,889

428

2,317

2,163

Employee contributions

1,463

1,463

1,260

Benefits paid/transferred

6,061

–545

5,516

–3,253

Currency translation adjustments

31

31

–242

 

 

 

 

 

As at 31 December

45,065

5,612

50,677

41,321

Pension costs:

in CHF 1,000

Swiss plan

Other plans

2020

2019

 

 

 

 

 

Current service cost

3,055

1,311

4,366

4,096

Interest cost on defined benefit obligation

120

144

264

597

Interest on plan assets

–47

–49

–96

–397

 

 

 

 

 

Total defined benefit cost recognized in income statement

3,128

1,406

4,534

4,296

Thereof finance expense

73

95

168

99

Thereof personnel expense

3,055

1,311

4,366

4,197

 

 

 

 

 

Actuarial (gain)/loss arising from demographic assumptions

–199

–199

779

Actuarial (gain)/loss arising from changes in financial assumptions

2,529

585

3,114

4,557

Actuarial (gain)/loss arising from experience

–166

–166

–4,142

Return on plan assets excluding interest income

339

–272

67

–1,777

 

 

 

 

 

Total remeasurements cost recognized in OCI

2,702

114

2,816

–583

 

 

 

 

 

Total defined benefit cost

5,830

1,520

7,350

3,713

Split of plan assets in %:

 

Swiss plan

Other plans

2020

2019

 

 

 

 

 

Cash and cash equivalents

1.4 %

1.0 %

0.6 %

Equity instruments

31.2 %

22.9 %

27.1 %

Debt instruments

44.4 %

32.7 %

38.6 %

Real estate

18.6 %

13.7 %

16.4 %

Other

4.4 %

100.0 %

29.7 %

17.2 %

 

 

 

 

 

Total

100.0 %

100.0 %

100.0 %

100.0 %

The actual return on plan assets amounted to TCHF29 (prior year: TCHF 2,174).

Significant actuarial assumptions:

 

Swiss plan

Other plans

2020

2019

 

 

 

 

 

Discount rate

0.2 %

0.6 %

0.3 %

0.8 %

Salary growth rate

1.0 %

1.6 %

1.1 %

1.3 %

Pension liability – Sensitivity analysis for Swiss plans:

 

Change in assumption

Change in DBO 2020

Change in DBO 2019

 

 

 

 

Discount rate

+/– 0.25 %

+/– 5.4 %

+/– 5.2 %

Salary growth rate

+/– 0.25 %

+/– 1.1 %

+/– 1.2 %

The above sensitivity analyses are based on a change in one assumption while holding all other assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognized within the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

Expected employer contributions to post-employment benefit plans for the period ended 31 December 2021 amounts to TCHF2,089 (prior year: TCHF 2,028).

The group also operates defined contribution plans for its employees under which the relevant contributions are expensed as they occur. The aggregate cost of these plans in 2020 amounted to TCHF 5,828 (prior year: TCHF 5,181).

22 Leases

Group as a lessee

The group leases various offices, cars and IT under non-cancellable lease agreements. The lease terms are between three months and 10 years, and the majority of lease agreements are renewable at the end of the lease period at market rate.

Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period:

in CHF 1,000

Buildings

Vehicles

Other equipment

Total

 

 

 

 

 

At 1 January 2020

34,784

14,925

2,098

51,807

Business acquisitions

1,215

9

1,224

Additions

13,861

6,592

20,453

Disposals

–4,280

–2,635

–363

–7,278

Currency translation adjustments

–1,605

–76

–28

–1,709

 

 

 

 

 

As at 31 December 2020

43,975

18,815

1,707

64,497

 

 

 

 

 

Accumulated depreciation

 

 

 

 

At 1 January 2020

8,921

4,421

624

13,966

Additions

10,295

5,863

546

16,704

Disposals

–3,692

–2,283

–332

–6,307

Currency translation adjustments

–559

–7

–6

–572

 

 

 

 

 

As at 31 December 2020

14,965

7,994

832

23,791

 

 

 

 

 

Carrying amount 31 December 2020

29,010

10,821

875

40,706

in CHF 1,000

Buildings

Vehicles

Other equipment

Total

 

 

 

 

 

At 1 January 2019

18,245

1,897

75

20,217

Business acquisitions

14,230

9,025

2,137

25,392

Additions

2,947

4,400

9

7,356

Disposals

–68

–52

–79

–199

Currency translation adjustments

–570

–345

–44

–959

 

 

 

 

 

As at 31 December 2019

34,784

14,925

2,098

51,807

 

 

 

 

 

Accumulated depreciation

 

 

 

 

Additions

9,156

4,527

687

14,370

Disposals

–94

–13

–53

–160

Currency translation adjustments

–141

–93

–10

–244

 

 

 

 

 

As at 31 December 2019

8,921

4,421

624

13,966

 

 

 

 

 

Carrying amount 31 December 2019

25,863

10,504

1,474

37,841

Set out below are the carrying amounts of lease liabilities (included under interest bearing loans and borrowings) and the movements during the period:

in CHF 1,000

2020

2019

 

 

 

At 1 January 2020

38,623

20,289

Business acquisitions

1,224

25,392

Additions

20,453

7,357

Disposals

–963

0

Accretion of interest

526

684

Payments

–16,984

–13,640

Currency translation adjustments

–1,161

–1,459

 

 

 

As at 31 December 2020

41,718

38,623

The following are the amounts recognized in the income statement:

in CHF 1,000

2020

2019

 

 

 

Depreciation expenses on right-of-use assets

–16,704

–14,370

Interest expenses on lease liabilities

–526

–684

Expenses relating to short-term leases (included in other operating expenses)

–769

–3,656

Income from subleasing of right-of-use assets

887

716

 

 

 

Total

–17,112

–17,994

In 2020, the group had total cash outflows for leases of TCHF 17,753 (prior year: TCHF 17,296).

23 Share capital and treasury shares

 

Number of shares

Carrying amount in CHF 1,000

 

 

 

As at 1 January 2019

135,428,570

1,354

Increase/(Decrease)

23,152,890

232

 

 

 

As at 31 December 2019

158,581,460

1,586

Increase/(Decrease)

 

 

 

As at 31 December 2020

158,581,460

1,586

The nominal value of the company’s shares amounts to CHF 0.01 as at 31 December 2020. All shares issued by the company are fully paid.

Treasury shares

 

Number of shares

Carrying amount in CHF 1,000

 

 

 

As at 1 January 2019

3,978,540

9,943

Shares purchased under transfer window

486,570

2,618

Shares issued under employee share plan

–94,207

–1

Shares used for acquisition of BNW and MassiveR&D

–99,399

–536

 

 

 

As at 31 December 2019

4,271,504

12,024

 

 

 

Shares issued under employee share plan

–228,460

–1,232

Shares issued for renumeration of Board of Directors

–26,243

–142

 

 

 

As at 31 December 2020

4,016,801

10,650

24 Earnings per share (EPS)

Basic EPS is calculated by dividing the profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

in CHF 1,000

2020

2019

 

 

 

Profit for the period attributable to owners of the parent

176,836

125,997

Number of shares

2020

2019

 

 

 

Weighted average number of ordinary shares

154,442,769

152,468,521

Adjustment for share-based payment plans

126,858

346,985

Weighted average number of shares used to calculate diluted earnings per share

154,569,627

152,815,506

 

 

 

Basic earnings per share in CHF

1.14

0.83

 

 

 

Diluted earnings per share in CHF

1.14

0.82

25 Dividends

The dividends paid in 2020 were TCHF 32,460 or CHF 0.21 per share (prior year: TCHF 25,300 or CHF 0.16 per share). A dividend in respect of the period ended 31 December 2020 of CHF 0.30 per share (excluding treasury shares), amounting to a total dividend of TCHF 47,574, is to be proposed at the Annual General Meeting on 20 May 2021. These financial statements do not reflect this proposed dividend. Dividends are paid out of the capital contribution reserve of SoftwareONE Holding AG.

26 Share-based payments

In 2020, SoftwareONE launched three new share-based payment programs in line with the long-term corporate strategy. These are the Free Share Grant (‘FSG’), the Employee Share Purchase Plan (‘ESPP’) and the Long-term Incentive Plan (‘LTIP’). The objective of the programs is to support a business policy that is primarily oriented towards the interests of the shareholders by creating long-term increase in value through greater customer focus, employee satisfaction as well as enhanced passion, loyalty and retention of employees. In addition, arrangements that were launched in previous years, the Share-based Payment Plan and the Management Equity Plan (‘MEP’) exist.

Effective with the Annual General Meeting 2020, the remuneration of the Board of Directors is partially paid out in shares.

SoftwareONE recognized total share-based payment expenses of TCHF 25,266 in 2020 (prior year: TCHF 21,393). The following table discloses how the expenses are allocated to the existing share-based payment arrangements:

in CHF 1,000

Share-based Payment Plan

Management Equity Plan

Free Share Grant

Employee Share Purchase Plan

Long-term Incentive Plan

Board of Directors fees paid in shares

2020

 

 

 

 

 

 

 

 

Program launched in

2015

2019

2020

2020

2020

2020

 

 

 

 

 

 

 

 

 

Expenses recognized in income statement

172

19,964

3,561

103

1,138

328

25,266

Thereof expenses related to key management

45

17,816

523

328

18,712

in CHF 1,000

Share-based Payment Plan

Management Equity Plan

 

 

 

 

2019

 

 

 

 

 

 

 

 

Program launched in

2015

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses recognized in income statement

18

21,375

 

 

 

 

21,393

Thereof expenses related to key management

45

18,659

 

 

 

 

18,704

SoftwareONE has recognized an increase in equity in the balance sheet of TCHF 26,256 for share-based payment (prior year: TCHF 21,010), of which TCHF 911 (prior year: TCHF 0) are related to tax effects.

Share-based Payment Plan

In 2015, SoftwareONE group started to grant SoftwareONE Holding AG shares to selected employees free of charge if the vesting condition (still being employed with SoftwareONE at a defined point in time) is fulfilled. The fair value of those shares at grant date is recognized in personal expenses over the vesting period (one to 50 months) and was calculated using a market approach model.

Management Equity Plan

Selected senior SoftwareONE employees participate in the MEP, a plan set up/sponsored by shareholders of the company in 2017 and amended in 2019 immediately prior to the IPO.  While SoftwareONE has no obligation to settle the entitlements of MEP participants, the plan is accounted for as equity-settled by SoftwareONE because the group receives employee service from the MEP participants. Upon the IPO in 2019, 33% of the MEP was paid in cash and 67% in unvested shares transferred by the shareholders transferred to a blocked account.

The MEP includes certain conditions such as a restriction period and non-compete clause as well as a call option of the company to buy the unvested shares at a nominal price on termination of employment by bad and early leavers during a staggered vesting period of one, two and three years starting with the date of the IPO. The non-compete clause is a post vesting restriction, with no significant effect on the grant date measurement of fair value. The company’s call option to buy the unvested shares from bad and early leavers is considered a service condition and the expense of the amended MEP is recognized over the remaining vesting periods of one, two and three years from the IPO using a graded vesting scheme.

The fair value of the amended MEP granted in 2019 amounted to TCHF 53,288 (cash and 2,072,322 shares) and was determined based on the opening listing price at the SIX Swiss Exchange of the Company’s shares on 25 October 2019. In 2019, SoftwareONE Holding AG received a cash payment from shareholders in the amount of TCHF 15,986 to settle social security liabilities relating to the amended MEP.

Free Share Grant

The FSG provides all entitled SoftwareONE employees 100 bonus shares each and therefore represents a share-based remuneration with compensation through equity instruments.

On 31 July 2020, 387,200 free shares were granted at a fair value of CHF 23.40 per share. However, employees started rendering services from 10 April 2020 in anticipation of the grant. 50% of the free shares granted vest over a service period of 16 months and the other 50% vest over a period of 28 months. There are no voting rights and no dividend claims until the end of the contractual vesting period.

Employee Share Purchase Plan

The program allows eligible SoftwareONE employees to participate in a sponsored ESPP. Participants are able to make periodic contributions to acquire investment shares at the respective market price over a purchase period, which will generally be one year. At the end of the purchase period, participants receive free matching shares based on the number of investment shares bought during the purchase period and held until the end of the purchase period. For every four investment shares acquired, SoftwareONE grants each employee one matching share free of charge. The matching shares granted represent an equity-settled share-based payment and are recognized over a service period ending 12 months after the purchase period.

The ESPP is rolled out in three waves resulting in three different grant dates (always day of final agreement between participant and SoftwareONE). In 2020, the first and second wave were rolled out, resulting in a grant date on 7 August 2020 at a price of CHF 23.60 per share and on 8 November 2020 at a price of CHF 23.40 per share, respectively. For the first and second wave, 21,640 matching shares are expected.

Long-term Incentive Plan

The LTIP grants the Executive Board, the Executive Leadership Team and selected key employees so-called performance share unit ('PSU') subscription rights.

The number of PSUs granted is determined by dividing the individual LTIP grant on the grant date by the fair value of one PSU, rounding up to the next whole PSU. Each PSU subscription right securitizes a right to receive shares depending on the development of the underlying vesting factor. The vesting factor depends 75% on a gross profit and 25% on a relative total shareholder return ('rTSR'). In both variables, the target factor is 1.0, while the minimum factor is 0.0 and the maximum factor is 2.0. The gross profit vesting factor depends on SoftwareONE’s gross profit during year three and is determined on a straight-line basis between the target ranges. The relative rTSR vesting factor depends on the TSR of the company and the TSR of the STOXX® Global 1800 Industry Technology index. A relative TSR of <= -33% leads to a vesting factor of 0 and a TSR >= 33% to a vesting factor of 2.0. The rTSR vesting factor distributes linearly between the target ranges. The award cycle (service period) is three years from the contractual grant date.

The LTIP is valued using a Monte Carlo simulation. SoftwareONE has taken the following parameters into account in the valuation:

 

PSU 2020

Valuation date

29 May 2020

Remaining term (in years)

3

SWON share price at the valuation date

CHF 21.25

Price STOXX 1800 Technology Index at the valuation date

USD 1,473.43

Volatility SWON

34.79 %

Volatility STOXX 1800 Technology Index

21.96 %

Correlation

47.97 %

Risk-free interest rate SWON

-0.69 %

Risk-free interest rate STOXX 1800 Technology Index

0.22 %

Expected dividend yield

0.99 %

Exercise price

CHF 0.00

Gross profit vesting measure

1

Number of PSUs granted

319,208

Fair value per PSU

CHF 21.65

The term of the PSUs granted in 2020 starts on 29 May 2020 (valuation date) and ends on 28 May 2023 (end of the vesting period). An average expected fluctuation of 0% p.a. for the Executive Board, 5.0% p.a. for the Executive Leadership Team and a historical fluctuation per country has been applied for the other beneficiaries.

Renumeration of Board of Directors partially paid in shares

Effective from the Annual General Meeting 2020, on 14 May 2020, the Board of Directors' fees are settled 60% in cash and 40% in SoftwareONE shares. The share part of the compensation is granted immediately after the Annual General Meeting and the election or re-election of the members of the Board of Directors. The Swiss franc amount is converted into shares at the closing price of the ex date, the first date after the Annual General Meeting the shares are traded ex dividend (for 2020: 19 May 2020). The shares vest until the next Annual General Meeting and afterwards are subject to transfer restrictions of three years.

In 2020, 26,243 shares were granted at a fair value of CHF 19.66 per share.

27 Contingencies

As an internationally operating group, SoftwareONE is exposed to contingencies in respect of legal and tax claims in the ordinary course of business. It is not anticipated that any material liabilities will arise from the contingent liabilities.

In 2016, the Federal Revenue Office in São José dos Campos (‘DRF/SJC’) issued an Infraction Notice against SoftwareONE Brazil for the fiscal year 2012, levying alleged debts related to sales tax contributions (‘PIS/COFINS’), charging the difference between the non-cumulative system (9.25%) and the cumulative system (3.65%). As expected, in July 2017, the administrative appeal against this Infraction Notice was rejected. In 2020, The Federal Revenue Office issued a further infraction notice against SoftwareONE Brazil for the fiscal year 2017 for the same subject mentioned above. Nevertheless, SoftwareONE Brazil and SoftwareONE group are still of the opinion that the cumulative system was and continues to be correctly applied in line with industry standard, and is defending its position for both fiscal years 2012 and 2017 with the support of third-party lawyers. Thus, SoftwareONE Brazil has filed a further appeal before the Administrative Tax Appeal Court (‘CARF’). Neither the amount under dispute nor the probability of the outcome of the dispute can be reliably predicted at this stage.

In 2019, the National Tax Administration Superintendence (SUNAT) in Lima issued an Infraction Notice against SoftwareONE Peru for the fiscal year 2016, levying alleged debts related to withholding taxes (‘Impuesto a la Renta de no Domiciliados’ – IRND), charging the not contributed withholding taxes related to Software Assurance for payments made abroad. According to Resolution 042-2014-SUNAT/5D0000 from 2014, licensing purchased abroad are not subject to withholding taxes, whereas services are subject to withholding tax contribution. As expected, in June 2020, the administrative appeal (2nd SUNAT instance) against this Infraction Notice was rejected. Nevertheless, SoftwareONE Peru and the group are still of the opinion that the non-contribution of withholding taxes was and continus to be correctly applied as Software Assurance is defined as Licensing and not Services in line with the industry standard, and is defending its position with the support of third-party lawyers. Thus, SoftwareONE Peru filed a further appeal before the Administrative tax court (Tribunal Fiscal), the last administrative instance, in July 2020, which ruled in favor of SoftwareONE Peru by the tax court in January 2021. SUNAT has the right to appeal the decision within three months following the notification. The probability of the outcome of the dispute cannot be reliably predicted at this stage.

29 Segment reporting

For management purposes, SoftwareONE is organized by geographical areas. The following regional clusters are the group’s operating segments:

  • EMEA (Europe and South Africa)
  • NORAM (US, Canada)
  • LATAM (Latin America)
  • APAC (Asia Pacific, including India and Dubai)

No operating segments have been aggregated to reportable segments.

The Executive Board (CEO, CFO, COO and President of Sales) is the Chief Operating Decision Maker (CODM) and assesses each of the reported segments separately for the purpose of evaluating performance and allocating resources. Gross profit and EBITDA are the key performance indicators used for internal management and monitoring purposes of the group and are reported as segment results. The group allocates revenue and expenses to regions based on its customer’s headquarter domicile since this region is responsible for the global client relationship with a particular customer. There are no intersegment revenues. Different average exchange rates are used in management reporting than for group consolidation purposes.

The group’s financing (including finance income and finance costs) and income taxes are managed on a group basis and are not allocated to the operating segments.

The segment totals are reconciled to the figures reported in the consolidated income statement (column 'Total') as follows:

The column 'Corporate' includes the group cost centers such as management and shared service costs. The column ‘FX’ eliminates the effect of using different average foreign exchange rates in the segment reporting. The column 'Other' includes other reconciling items that are not allocated to the segments and corporate in internal reporting such as share-based payment plans (with the exception of LTIP and ESPP), earn-outs and integration costs as well as differences in accounting policies of IFRS 16 which are not reflected in the segment reporting. Additionally, column 'Other' includes a reclassification of bad debt provisions which are presented in gross profit in the internal reporting but in operating expenses in the the consolidated income statement.

Segment disclosure 2020

in CHF 1,000

EMEA

NORAM

LATAM

APAC

Total segments

Corporate

FX

Other

Total

 

 

 

 

 

 

 

 

 

 

Total revenue (external)

5,466,075

933,352

405,586

1,119,072

7,924,085

–23,290

5,460

7,906,255

Cost of software purchased and third-party service delivery costs

–4,981,246

–829,806

–354,728

–1,037,896

–7,203,676

–1,102

22,153

5,990

–7,176,635

 

 

 

 

 

 

 

 

 

 

Gross profit 1)

484,829

103,546

50,858

81,176

720,409

–1,102

–1,137

11,450

729,620

Personnel expenses and other operating expenses/income

–272,344

–66,971

–37,694

–53,680

–430,689

–85,075

264

–26,144

–541,644

 

 

 

 

 

 

 

 

 

 

EBITDA 2)

212,485

36,575

13,164

27,496

289,720

–86,177

–873

–14,694

187,976

1) Total revenue net of cost of software purchased and third-party service delivery costs.

2) EBITDA from segment reporting reconciled to earnings before net financial items, taxes, depreciation and amortization.

In 2020, the most relevant reconciliation items in the column ‘Other’ were costs for share-based payments (TCHF 24,025), for earn-outs (TCHF 4,084), for integration (TCHF 4,791) and an opposite effect from the difference in accounting policies of IFRS 16 (TCHF 16,850). The reclassification of bad debt provisions amounts to TCHF 6,244. Moreover, the financials of InterGrupo are not reflected in the internal reporting. Therefore, the income statement for the months of November and December is included in column 'Other' with an impact on total revenue (TCHF 6,056), cost of software purchased and third-party service delivery costs (TCHF 602) and personnel expenses and other operating expenses/income (TCHF 4,194). All other reconciliation items were minor.

Segment disclosure 2019

in CHF 1,000

EMEA

NORAM

LATAM

APAC

Total segments

Corporate 3)

CPX Jan 19

FX

Other

Total

 

 

 

 

 

 

 

 

 

 

 

Total revenue (external)

5,381,637

955,365

413,138

1,003,165

7,753,305

–242,612

100,147

7,610,840

Cost of software purchased and third-party service delivery costs

–4,877,426

–846,179

–357,544

–930,980

–7,012,129

–1,773

214,571

–104,268

7,070

–6,896,529

 

 

 

 

 

 

 

 

 

 

 

Gross profit 1)

504,211

109,186

55,594

72,185

741,176

–1,773

–28,041

–4,121

7,070

714,311

Personnel expenses and other operating expenses/income

–276,393

–65,459

–45,193

–49,453

–436,498

–93,023

19,025

5,393

–38,934

–544,037

 

 

 

 

 

 

 

 

 

 

 

EBITDA 2)

227,818

43,727

10,401

22,732

304,678

–94,796

–9,016

1,272

–31,864

170,274

1) Total revenue net of cost of software purchased and third-party service delivery costs.

2) EBITDA from segment reporting reconciled to earnings before net financial items, taxes, depreciation and amortization.

3) The column ‘CPX Jan 19’ eliminates the income statement of COMPAREX group for the month of January 2020. The segment reporting includes COMPAREX for 12 months (comparable with pro forma presentation) and not for 11 months.

In 2019, the most relevant reconciliation items in the column 'Other' were costs for share-base payments (TCHF 21,375), costs for the acquisition and integration of COMPAREX group (13,169), costs related to the IPO (TCHF 10,506) and positive effects from the application of IFRS 16 (TCHF 13,640). All other reconciliation items were minor.

Switzerland, the US, Germany and the Netherlands are the main geographical markets for SoftwareONE and represent approximately 56% (prior year: 58%) of total revenue. Revenue is reported based on the customer's headquarter domicile:

Additional geographical information 2020

in CHF 1,000

Switzerland

US

Germany

Netherlands

Other countries

Total

 

 

 

 

 

 

 

Revenue (external)

677,377

1,198,493

1,632,276

930,388

3,467,721

7,906,255

Non-current assets

82,710

16,511

210,498

101,203

164,467

575,389

Additional geographical information 2019

in CHF 1,000

Switzerland

US

Germany

Netherlands

Other countries

Total

 

 

 

 

 

 

 

Revenue (external)

606,640

1,268,459

1,582,048

972,837

3,180,856

7,610,840

Non-current assets

83,733

23,822

223,271

100,922

121,499

553,247

No transactions with one single external customer exceed 10% of consolidated revenue of the group.

Non-current assets for this purpose consist of tangible, intangible assets and right-of-use assets and are allocated based on the location of the group company.

30 Subsequent events

From the balance sheet date until the consolidated financial statements were approved by the Board of Directors on 24 March 2021, the following significant events occurred:

Acquisitions

On 1 March 2021, SoftwareONE acquired 100% of VB Technology Group AG, Switzerland (‘ITPC’), with subsidiaries in Switzerland and India. ITPC is a SAP specialist for S/4HANA transformations, public cloud migrations and related managed services offerings, including monitoring, maintenance and support. The purchase price in the amount of TCHF 3,000 was fully paid in cash. No disclosures are made in accordance with IFRS 3, as no company figures were available at the time of publication of this report.

Employee Share Purchase Plan

In 2021, the third wave of ESPP has been rolled out, resulting in a grant date on 7 February 2021 at a price of CHF 29.15 per share. For the third wave, 294 matching shares are expected.

31 List of group companies

Fully consolidated

 

 

Voting & capital right in %

Voting & capital right in %

Company

Registered country

2020

2019

 

 

 

 

Western Europe (EMEA)

 

 

 

SoftwareONE Holding AG

Stans, CH

n/a

n/a

SoftwareONE AG

Stans, CH

100

100

SoftwareONE Deutschland GmbH

Munich, DE

100

100

SoftwareONE Germany Services GmbH

Heilbronn, DE

100

100

SoftwareONE UK Ltd

Wimbledon, UK

100

100

SoftwareONE Italia Srl

Milan, IT

100

100

SoftwareONE BV Netherlands

Amsterdam, NL

100

100

SoftwareONE France SAS

Paris, FR

100

100

SoftwareONE Österreich GmbH

Vienna, AT

100

100

SoftwareONE Spain SL

Madrid, ES

100

100

SoftwareONE OY 3)

Espoo, FI

100

100

SoftwareONE AB Sweden

Kista, SE

100

100

SoftwareONE Norway AS

Oslo, NO

100

100

SoftwareONE ApS 4)

Copenhagen, DK

100

SoftwareONE LATAM Holding SL

Madrid, ES

100

100

SoftwareONE Belgium Sprl 3)

Brussels, BE

100

100

Software Pipeline Ireland Ltd

Cork, IE

100

100

COMPAREX Sweden AB 1)

Kista, SE

100

COMPAREX Norge AS 1)

Oslo, NO

100

SoftwareONE Finland Oy

Helsinki, FI

100

100

SoftwareONE Luxembourg SARL

Bâtiment Laccolith, LU

100

100

COMPAREX Holding GmbH

Vienna, AT

100

100

COMPAREX Beteiligungsverwaltung GmbH

Vienna, AT

100

100

PC-Ware Information Technologies LTD 4)

Middlesex, UK

100

COMPAREX AG

Leipzig, DE

100

100

Comparex PC-Ware Deutschland GmbH 1)

Leipzig, DE

100

SoftwareONE BE 5)

Brussels, BE

100

100

COMPAREX Austria GmbH

Vienna, AT

100

100

COMPAREX International Services GmbH 1)

Poing, DE

100

ISP*D International Software Partners GmbH

Leipzig, DE

100

100

PC-Ware Professionals GmbH 1)

Leipzig, DE

100

COMPAREX Cloud Services GmbH 1)

Leipzig, DE

100

Systematica Distribution srl 5)

Saronno, IT

100

100

COMPAREX UK Limited 3)

Harrow, UK

100

100

COMPAREX France SAS 1)

Louveciennes, FR

100

SoftwareONE Denmark ApS

Birkerød, DK

100

100

COMPAREX Nederland BV

Amsterdam, NL

100

100

COMPAREX Espana SA

Madrid, ES

100

100

B-lay BV

Utrecht, NL

100

B.services BV

Utrecht, NL

100

Intelligence Partners SL

Madrid, ES

100

Intelligence Partner U.K. Limited

London, UK

100

 

 

 

 

Eastern Europe (EMEA)

 

 

 

SoftwareONE Czech Republic sro

Prague, CZ

100

100

SoftwareONE Slovakia sro

Bratislava, SK

100

100

OOO SoftwareONE Ltd 5)

Moscow, RU

100

100

SoftwareONE Hungary Ltd

Budapest, HU

100

100

SoftwareONE Polska Sp zoo

Warsaw, PL

100

100

SoftwareONE Licensing Experts SRL

Bucharest, RO

100

100

SoftwareONE Experts South Africa

Johannesburg, ZA

100

100

SoftwareONE doo Serbia 3)

Belgrade, RS

100

100

SoftwareONE Lisans Danismanlik Ltd Sirketi Turkey 4)

Istanbul, TR

100

COMPAREX DOO BEOGRAD

Belgrade, RS

100

100

COMPAREX SOUTH AFRICA (PTY) LTD 3)

Gauteng, ZA

100

100

COMPAREX Poland Spzoo

Warsaw, PL

100

100

SoftwareONE, informacijski sistemi, doo 5)

Slovenia, SL

100

100

COMPAREX Slovakia spol sro 1)

Bratislava, SK

100

COMPAREX CZ sro 1)

Praha, CZ

100

SoftwareONE Ukraine Limited liability company

Kiev, UA

100

100

COMPAREX Hungary Kft 3)

Budapest, HU

100

100

DIGI TRADE sro 3)

Praha, CZ

100

100

OOO COMPAREX

Moscow, RU

100