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Softcat impresses with strong full-year numbers

Channel player keeps delivering the numbers as it manages to successfully navigate the pandemic

Softcat has provided investors with cheer after delivering a solid set of full-year results and hiking its dividend thanks to profit improvements.

For the full year to the end of July, the channel player reported a 7.4% increase in revenue to £1.16bn and a 27.4% climb in operating profits, up from £93.7m to £119.4m.

The firm reported a 2.3% increase in its customer base, average gross profit per customer improved by 14.6% and the business increased headcount by 11% as it continued to invest in its operations.

The year also saw Softcat take its first tentative steps outside the UK and Ireland, with a small 10-staffed operation in the US being established to support customers that wanted the reseller to smooth business for them on the other side of the Atlantic.

Graeme Watt, Softcat CEO, said the results were “record-breaking” and showed the strength of the business to continue its momentum through the pandemic.

“We’re pleased we’ve set [what are] record results for us, and I think, given everything that’s been going on in the world, they certainly surpassed our expectations – we’ve now recorded 64 quarters of consecutive year-over-year growth in income and profit,” he said.

Watt indicated that the second half had seen more activity on the customer win front and around sales into the enterprise customer base. “Particularly in the second half of the year, we started to see some improving numbers around our ability to generate new customer wins,” he added. “Similarly on enterprise, which is basically pretty flat across the year, we did see second-half growth of 8% as some of the pandemic restrictions were lifting and businesses were starting to get back to normal and trade in a more normal fashion.”

Good momentum

Watt said the public sector and mid-market business had remained strong and the enterprise trends that were seen in the second half indicated there was good momentum in the market as it went deeper into a fresh fiscal year.

He added that the core strategy of organically growing the business across the UK remained the focus and that there was still scope for further growth.

“All of the things that are important to us have [also] been important to us in the past: taking share in existing customers and getting new customers, a focus on excellent execution, making sure we’re staying relevant and helping our customers with the rate of change they’re having to deal with, and the complexity of the choice they’re having to deal with,” said Watt.

“They’re buying all of the infrastructure we’re selling, so it’s just a question of us convincing our customers that we’re the right go-to reseller to help them with the outcomes they’re looking for, so that that model continues,” he added.

One challenge the firm has identified going forward is the return of events and customer visits – which were low during the pandemic – causing travel and entertainment budgets to climb again, but Watt said it had been clear to the markets in recent quarterly updates about how that would impact the business. The firm also sealed a few large one-off deals that are unlikely to be repeated in the next fiscal year, but the expectation is that the numbers delivered in these results will be matched.

Softcat has shown consistent growth – even through the worst of the coronavirus pandemic – and Watt said that looking ahead, there were reasons to feel optimistic about the prospects for its next fiscal year, with it already starting well.

“We’re really very excited about the future,” he said. “The industry is in great shape, we’ve had a strong start to the year and there’s a ton of market opportunity for us to go after. That growth we reported last year is growth ahead of the market, so we were taking share last year and we aim to do that again this year. There’s a big opportunity in front of us.”

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