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Softcat delivers solid H1, sees no material impact from coronavirus

The reseller continues to deliver numbers that deliver cheer to investors, with the CEO reporting that there has been no material impact from coronavirus so far

Softcat has delivered a solid set of numbers and indicated that the business has not seen a material impact so far from the Covid-19 coronavirus.

The reseller delivered 20.8% growth in revenues to £524.1m for its half-year ended 31 January. Operating profit climbed by 19.5%, hitting £40.5m.

During H1, the firm cut the ribbon an a new office in Birmingham, which already has a staff of 20, and increased the overall headcount by just shy of 13%.

Graeme Watt, CEO of Softcat, also drew attention to the 4.2% increase in the firm’s customer base over the six month period.

He said there had been no particular pattern to the additional customers, with its numbers expanding across both corporate and public sector accounts. Where Softcat was attracting fresh interest was around its core product proposals, with most users looking for help with software, services and security.

The other focus for the firm has been to get more out of existing accounts, and Watt said those efforts had also borne fruit in the first half, with gross profit per customer increasing by 12.2%.

“We have made good progress and continued momentum,” said. “Our strategy of getting deeper with existing customers is [going well]. We continue to invest in the business to extend our capabilities, driven and informed by customer demand, and to ensure we have the resources to execute on our current and future growth plans.”

Robust position

Watt said the business was in a robust position thanks to the balance between software, enterprise services and security plus its diverse customer base. “We have a diversity of customers that means we don’t have any high-value verticals we depend on,” he said.

That diversity is going to be important as coronavirus does start to have a greater impact, but as things stand, Watt said there had not been any material impact on the business.

“We have seen a surge of interest from customers in remote working and collaboration tools,” he said, referring to the immediate impact of the virus.

“We are well positioned to deal with the challenge,” said Watt. “The traits of the business are good ones to have in a time like this.”

Market watchers agreed with equity research firm Jefferies issuing guidance to investors indicating it believed Softcat was well placed to weather the current market conditions.

“Despite strong trading, investor focus will understandably be on the effects of the Covid-19 outbreak on trading. Based on current trading, the company has seen limited effects on both demand and its supply chain, noting on the demand front the company has seen increased demand for remote working and collaboration software as a result of social distancing due to the outbreak,” stated equity analysts Paul Kratz, Julian Serafini and equity associate Annick Baumann.

“While the outbreak introduces near-term uncertainty for Softcat, its conservative capital structure (eg. no bank debt, £49m of cash at F1H20) and decision to pay its interim dividend suggest the company is in a strong position to invest counter cyclically, enabling the company to sustain earnings growth over the medium term,” they added.

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