Softcat hits operating profit record even as revenue slips
By Josh White
Date: Tuesday 26 Mar 2024
(Sharecast News) - IT infrastructure specialist Softcat reported an 8.8% fall in first-half revenue on Tuesday, to £467.2m, but still achieved double-digit growth in gross profit, rising 11% to £196.5m.
The FTSE 250 company also set a new record for first-half operating profit at £66.7m, making for growth of 5.8% and surpassing expectations.
Growth was seen across technologies and customer segments, resulting in increased gross profit per customer of 9.6% and total customer numbers of 1.3%.
Gross invoiced income expanded by 4%, driven by robust growth in software and services, although partially offset by an expected decline in hardware.
The board put the revenue decline down to a hardware decline.
Softcat said it expanded its headcount by 14.6% in the period, reflecting continued investments in building capabilities and scale to position for long-term market share gains in a growing sector.
The company also reported robust cash generation, with a conversion rate of 101.1% from operating profit, resulting in closing cash of £112.5m, while maintaining a debt-free status.
Softcat declared an interim dividend of 8.5p per share, payable on 22 May with shares trading ex-dividend on 11 April.
Looking ahead, Softcat said it was optimistic, reinforcing its expectations to deliver double-digit gross profit and high-single digit operating profit growth for the full year.
The company said it saw significant and expanding opportunities in its market, and intended to maintain its investment approach in building its team, infrastructure, and tools to capitalise on the long-term growth potential.
"We are delighted to report a strong set of results and key performance indicators, delivering operating profit ahead of our expectations and double-digit gross profit growth from broad-based demand," said chief executive officer Graham Charlton.
"The breadth, depth and progressive nature of our offering, delivered via our exceptional people and their relentless dedication to customer service, remains a compelling proposition.
"We continue to execute against our key objectives to win new customers and sell more to existing customers."
Charlton said the future opportunity in the industry remained "incredibly exciting", adding that AI, data management and cybersecurity, among other technologies, were driving rapid transformation in technology, which would generate growth across all areas from the cloud and datacentre "to the edge".
"These incremental tailwinds to an already growing market play perfectly into our comprehensive offering at a time when customers need broader and more integrated support from their partners than ever before.
"This is a great opportunity for us to further increase our market share and we have therefore continued to invest for future growth, increasing headcount by 14.6%.
"This progress was only possible because of the fantastic team at Softcat with our special culture and the attitude of our people remaining key elements of our competitive advantage."
At 1005 GMT, shares in Softcat were up 6.33% at 1,580p.
Reporting by Josh White for Sharecast.com.
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