IT group unveils strong interim results as momentum continues into second half

Graeme Watt

IT services group Softcat, with a base in Manchester, reported better interim revenues and profits today.

The group saw sales increase by 20.8% to £524.1m, while pre-tax profits of £40.523m were an improvement on the the previous year’s level of £33.964m.

During the six month reporting period ended January 31, Softcat reported a strong performance year-on-year with both income and profits growing 18% or more.

Cash and profit generation remain closely aligned, with cash conversion including capital expenditure at 100% for the period.

Strategic progress was demonstrated by the successful expansion of the group’s customer base (4.2%) coupled with growth in average gross profit per customer (12.2%).

Investment in people continues with the headcount up by 12.6% year-on-year, reflecting recruitment across all areas of the business.

The company retains its simple balance sheet philosophy with no external bank borrowings and a cash balance of £49.4m.

An interim dividend of 5.4p per share, up 20%, to be paid on May 15, has been declared, with the shares trading ex-dividend on April 2.

Looking ahead, the group said: “The second half has started well and to date we have not seen a material impact from the ongoing Covid-19 outbreak, although this does create uncertainty for the remainder of our financial year.

“Given the strength of our business model, lack of any bank debt and a strong cash position, we will continue to invest in our business and are confident in our ability to continue to build market share and drive profitable growth over the longer-term.”

Chief executive Graeme Watt said: “We are pleased with the strong performance in the first half as we continue to drive share gains in a healthy market.

“Our focus, as always, rests on the provision of IT infrastructure solutions to SMB, enterprise and public sector organisations and in the past six months we have continued to establish new customer relationships at the same time as deepening partnerships with existing customers.

“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.”

He added: “During the period our customer base grew by 4.2% and we expanded average gross profit per customer by 12.2%, with GP per customer growing for both new and existing customers.

“In September we opened a new office in Birmingham, which is already home to over 20 employees and is making good progress.

“Overall headcount grew by 12.6% year-on-year through investment across all areas of the business, and we were pleased to be ranked fifth on Glassdoor’s list of best places to work in the UK.

“IT Infrastructure is a complex field with a ton of options and rapidly-changing technology.

“In this market, customers are turning to us for advice across a broad range of technology and services where we have established a strong bench of expertise and experience.

“What makes Softcat stand out is our culture, not least the high energy and positive attitude of our people.

“Our people are our biggest and most important positive differentiator. We try to foster an environment which creates the highest levels of motivation and the teamwork that results enables us to deliver outstanding levels of customer satisfaction.

“I am very pleased with the fantastic contribution of the whole team at Softcat in delivering and meeting the challenges of continued high growth and expansion.”

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