Softcat strikes a cautious note on growth

"Revenue growth was 30% and operating profit was up on the prior year by 36%, driven by successful execution of our simple strategy but also supported by exceptionally good market conditions," said the CEO, Graeme Watt

Information technology
Tough comparatives point to a year of slower growth, according to Softcat's house broker

Softcat PLC (LON:SCT), the FTSE 250 information technology infrastructure specialist, found the market hard to please with its full-year results.

The shares were down 4.5% at 716p, despite what broker Jefferies described as a “modestly ahead set of results”, as management said that “exceptional market conditions” enjoyed in the year just ended would make it difficult to keep up the pace of growth in the current fiscal year.

READ: Softcat expects full-year profit ahead of expectations

Revenue in the 12 months to the end of July crashed through the billion pounds barrier to hit £1.08bn, up from £832.5mln the year before. The market had been expecting revenue of around £1.06bn.

Customer numbers rose 4.7% to 11,900 from 11,400 the previous year while gross profit per customer rose 22.8% to £14,700 from £12,000 the previous year.

Profit before tax improved to £68.14mln from £50.30mln a year earlier.

Adjusted earnings per share increased to 28.8p from 20.9p the previous year, paving the way for a proposed final dividend of 8.8p (2017: 6.21) and a special dividend of 15.1p (2017: 13.5p).

The company said it had benefited from exceptional market conditions in 2018 and that despite the current political and economic uncertainty, and notwithstanding tough comparative figures, it is confident of achieving further profitable growth in 2019.

Trading in the first ten weeks of the new financial year has been encouraging, it added.

"I'm delighted to report on a very successful year for Softcat with revenue surpassing £1 billion for the first time, net profit margin rising, and cash conversion being maintained at close to 100%,” said Graeme Watt, the chief executive officer of Softcat.

“The adoption of technology change continues to gather pace, as customers take the opportunity to embrace the benefits of digital transformation. In 2018 we saw customers from all sectors invest and this is reflected in our customer metrics. Both revenue and gross profit per customer increased significantly, as we benefited from a strong market and the increasing trust placed in us by our clients. Our long-term strategy of growth through sustained investment means we remain well-positioned to keep pace with the accelerating needs of customers,” he added.

House broker Jefferies left its fiscal 2019 forecasts largely unchanged and its rating at ‘hold’, although it cranked up its price target to 790p from 760p.

“The acceleration in gross profit per customer was the key highlight,” Jefferies said.

“It is worth pointing out that Softcat refined its calculation of customer numbers to remove the impact of multiple customers being recorded where they were part of a common group structure. As such the company restated the FY17 comparatives for customer numbers and gross profit per customer accordingly. We understand that the restatement has relatively limited impact on the YoY [year-on-year] growth figures for the prior years,” Jefferies revealed.


Quick facts: Softcat

Price: 1136 GBX

Market: LSE
Market Cap: £2.26 billion

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