Softcat PLC (LSE:SCT) has been bumped up to a 'buy' by Deutsche Bank after a strong finish to the year.
The broker lifted its target price from 1,830p to 1,900p, noting that the IT reseller’s second-half performance was particularly impressive. The shares closed at 1,640p.
Gross invoiced income rose 27% to £3.6 billion in the year to July, while gross profit, the company’s preferred measure, climbed 18% to £494.3 million.
Growth accelerated sharply in the second half, with larger solution projects driving a 23.9% rise in gross profit compared with 12.1% in the first.
Despite hiring more staff, with headcount up 7%, operating profit grew 17% to £180.1m, about 1.5% ahead of forecasts and above the top of guidance. Fully diluted earnings per share rose 16% to 69.1p.
Cash generation remained robust at 95.6%, leaving the group with £182.3m in cash and no debt.
The total dividend for the year rises 10% to 29.3p, with an additional special payout of 16.1p. Softcat also raised its minimum cash reserve by 20% to £90m to reflect the company’s scale.
With strong momentum, a solid balance sheet and a rising dividend stream, Softcat looks comfortably in a league of its own.