SOFTCAT plc
(“Softcat”, the “Company”)
Preliminary results for the year to 31 July 2022
Another year of strong organic growth, profitability, and good cash generation
Softcat plc (LSE: SCT.L), a leading UK provider of IT infrastructure products and services, today announces its full year results to 31 July 2022. The results demonstrate continued strong growth alongside sustained investment, and both a progressive ordinary dividend and special dividend.
| Financial Summary | Year ended | ||
| 31 July | 31 July | ||
| 2022 | 2021 | Growth | |
| £m | £m | ||
| RevenueaGross invoiced incomeb | 1,077.92,507.5 | 784.01,938.4 | 37.5%29.4% |
| Gross profit | 327.2 | 276.4 | 18.4% |
| Operating profit | 136.1 | 119.4 | 14.0% |
| Cash conversion %c | 76.2% | 89.9% | |
| Total ordinary dividend (p) | 23.9p | 20.8p | 14.9% |
| Final dividend (normalised, p) | 16.6p | 14.4p | 15.3% |
| Special dividend (p) | 12.6p | 20.5p | (38.5)% |
| Basic earnings per share (p) | 55.5p | 48.4p | 14.7% |
Highlights for the twelve months to 31 July 2022
· Strong performance across both first and second halves of the year, extending our record of unbroken organic year-on-year growth in gross invoiced income, gross profit and operating profit.
· Further growth in both the customer base (+2.1%) and average gross profit per customer (+16.1%), demonstrating good progress against each key aim of our strategy.
· Headcount up 14.3%, delivering investment across all areas of the business.
· A final dividend of 16.6p, up 15.3%, and a special dividend of 12.6p.
· Strong balance sheet position maintained with net cash at year end of £97.3m (2021: £101.7m).
· Outlook: the company is in a strong competitive position heading into the new financial year, which has started well.
a Revenue is reported under IFRS 15, the international accounting standard for revenue. IFRS 15 requires finely balanced judgements be made to determine whether Softcat acts as principal or agent in certain trading transactions. These judgements, coupled with slight variations of business model between IT Solutions Providers, means the impact of IFRS 15 across the peer group is not uniform. Income prior to the IFRS 15 adjustment is referred to as gross invoiced income. Revenue for 2021 has been restated due to a change in accounting policies in relation to the recognition of software revenue during the year as detailed in Note 2.
b Gross invoiced income reflects gross income billed to customers adjusted for deferred and accrued revenue items. This is an Alternative Performance Measure (APM). For further information on this, please refer to the CFO Report on page 7.
c Cash conversion is defined as cash flow from operations before tax but after capital expenditure, as a percentage of operating profit. This is also an Alternative Performance Measure.
Graeme Watt, Softcat CEO, commented,
“I am pleased to report on our 2022 results, which represent another record achievement for our business. Thanks to the hard work and dedication of our entire team, we have now achieved 68 successive quarters of organic year over year income and profit growth. Our focus on being the best place to work and delivering outstanding customer service continues to serve us well.
Our strong and unique culture enabled us to manage the challenges of the pandemic and we emerged in an even stronger competitive position, continuing to grow faster than the market. Our sales growth was delivered right across the board with double digit growth in all segments and technologies as we continued to manage hardware supply chain constraints.
We made excellent progress selling deeper into existing customers and saw gross profit per customer improve by 16.1%, while also attracting new customers driving 2.1% growth in our overall customer base.
Our people continue to be the primary focus of our investments. Despite the tough talent market, we were able to grow headcount by 14.3% and, since year end, this has grown further to 2,060 which sets us up to drive future success by continuing to take share of a growing market. We do this by providing the broadest portfolio of leading-edge technology solutions and services, listening to our customers, and leveraging the largest commercial team in our space in the UK market.
I am delighted that the Company is again able to recommend the payment of a special dividend this year.
Thank you to all those with whom we enjoy a partnership, and, of course, a huge thank you to the Softcat team for your amazing energy, ambition, execution and dedication to each other and our customers. During the challenges of the pandemic the business didn’t miss a heartbeat thanks to your passion and the care you took to look after everyone around you.”
Outlook
The Company is in as strong a competitive position as ever heading into the new financial year and we expect to continue to deliver double-digit gross profit growth and deliver market share gains.
Demand has remained strong and customer behaviour across all segments is normal. That said, the comparative first half period to January 2022 was exceptional and, as highlighted at the time, benefitted from a very high volume of business from our largest customer. In addition, Covid delayed the resumption of internal events and travel to see customers until March 2022, while this new year has seen the Company award significantly higher pay increases across all departments, including an increase to the starting salaries of new sales recruits to reflect market conditions. We have also increased the rate of recruitment into the Company as we remain focussed on the enormous and growing opportunity the IT infrastructure market presents.
We are confident that operating profit for the year will be in line with expectations and at levels similar to 2022, but the factors mentioned above mean cost growth is likely to outstrip gross profit growth in the first half.
To date, and throughout previous periods of market upheaval and uncertainty (including Covid), customer demand has been robust and growing but we nevertheless plan carefully for all possible scenarios. Our business model has significant agility; approximately 35% of our operating cost base is made up of sales commissions that naturally flex in a linear fashion with gross profit, while hiring plans are reviewed on a weekly basis to react to market dynamics. Our balance sheet remains strong, and the Company carries no external bank debt. Consequently, we are confident that the business is in a very strong position to continue to outperform the market.
Analyst and investor call
Management will host an analyst and investor conference call and webcast at 09.30 today. Access details for the conference call and webcast are:
Conference Call Details:
To dial in to the conference call and participate in the Q&A please click on the link below to register for the call and receive your details:
Please note the pin code that is provided is a unique code for you.
Webcast Link:
Please register approximately 10 minutes prior to the start of the event. The announcement and presentation will be available at www.softcat.com from 0 7.00 and 0 9.00, respectively.
| Enquiries | |
| Softcat plc: | +44 (0)1628 403 403 |
| Graeme Watt, Chief Executive Officer | |
| Graham Charlton, Chief Financial Officer | |
| FTI Consulting LLP: | +44 (0)20 3727 1000 |
| Ed Bridges | |
| Matt Dixon |