REG - Softcat PLC - Final Results
24/10/2023 07:00
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RNS Number : 0250R Softcat PLC 24 October 2023
SOFTCAT plc
("Softcat", the "Company")
Preliminary results for the year ended 31 July 2023
Another year of strong organic growth, profitability and 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 2023. The
results demonstrate continued strong growth enabling both sustained investment
to support our future ambitions and the proposal of a progressive ordinary
dividend and a special dividend.
Financial Summary Year ended
31 July 31 July
2023 2022 Change
£m £m
Revenue(a) 985.3 1,077.9 (8.6%)
Gross invoiced income(b) 2,563.3 2,507.5 2.2%
Gross profit 373.8 327.2 14.2%
Operating profit 140.9 136.1 3.5%
Cash conversion %(c) 93.2% 76.2%
Total ordinary dividend (p) 25.0p 23.9p
Final dividend (p) 17.0p 16.6p
Special dividend (p) 12.6p 12.6p
Basic earnings per share (p) 56.2p 55.5p 1.3%
Highlights for the year ended 31 July 2023
· Strong performance across both halves of the year, extending our
record of unbroken organic year-on-year growth in gross invoiced income, gross
profit and operating profit.
· Double-digit gross profit per customer growth, while also
attracting new customers, driving further growth in the customer base.
· Continued investment across all areas of the business, including
headcount growth of 20.5%.
· A final dividend of 17.0p, resulting in a full year total
ordinary dividend of 25.0p, up 4.6%, and the special dividend maintained at
12.6p.
· Strong balance sheet position with cash conversion of 93.2%
(FY2022: 76.2%) with cash and cash equivalents of £122.6m (FY2022: £97.3m).
· Outlook: Double digit gross profit growth anticipated to
continue. Expectations(d) for operating profit for FY2024 unchanged, with
growth second half weighted.
( )
(a) Revenue is reported under IFRS 15, the international accounting standard
for revenue. IFRS 15 requires 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 and contractual arrangements
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, which is an Alternative Performance Measure (APM).
(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 net cash generated from operating activities
before tax but after capital expenditure, as a percentage of operating profit.
This is also an Alternative Performance Measure. For further information on
this, please refer to the CFO Report on page 7.
(d) Market expectations refers to the mean Analyst consensus operating profit
estimate as at the 23rd October 2023, available at
https://www.softcat.com/about-us/investor-centre.
Graham Charlton, Softcat CEO, commented,
"I am pleased to report on our FY2023 results which represent another record
year for Softcat. Our unique culture and relentless dedication to delivering
the best customer service in the industry continue to serve us well.
We once again made progress on both selling deeper into existing customers,
with double-digit gross profit per customer growth, while also attracting new
customers, delivering 1.9% growth in the customer base.
We continued our investments for future growth, growing headcount by 20.5% to
2,315, by investing across all departments. We are evolving our customer
offering in response to the changing technology landscape, keeping pace with
emerging customer needs. The rate of change in our industry, with respect to
the technology we are selling, the channels through which it is sold and the
way it is consumed, is significant. However, the customers' need for advice
and support in navigating this increasing complexity and the need to deploy
the right technology for their circumstances to remain competitive, is
constant. This gives organisations like Softcat an exciting opportunity to
take a bigger share of an ever-growing market.
The Company remains in a very strong financial position, and we have great
confidence in our long-term growth and cash generation. In recognition of
this, we are again recommending the payment of a special dividend.
A huge thank you to all the fantastic people at Softcat for their incredible
dedication to each other and our customers, their efforts and attitude
continue to be the bedrock of our success. I'd also like to thank our
partners for their support and look forward to another exciting year ahead."
Outlook
The Company is well positioned to continue to deliver double-digit gross
profit growth through the year, driving further market share gains. We expect
full year FY2024 operating profit to be in line with market expectations.
We expect the operating profit growth to be second half weighted, with modest
growth in the first half of the year principally reflecting the strong gross
profit performance in the comparative period in the first half.
We see significant and expanding opportunity in our market and will continue
to invest to capitalise on this exciting growth potential.
Analyst and investor call
The management team will host an investor and analyst briefing at 9.30am UK
time, on Tuesday 24 October 2023. To join the briefing, please use the
following access details:
Webcast Link:
https://www.investis-live.com/softcat/651bcb2537a2c50c0033265b/vavaa
(https://www.investis-live.com/softcat/651bcb2537a2c50c0033265b/vavaa)
Please register approximately 10 minutes prior to the start of the call.
For further information, please contact:
Softcat plc: +44 (0)1628 403 403
Graham Charlton, Chief Executive Officer
Katy Mecklenburgh, Chief Financial Officer
FTI Consulting LLP: +44 (0)20 3727 1000
Ed Bridges
Matt Dixon
Forward-looking statements
This announcement includes statements that are, or may be deemed to be,
"forward-looking statements". By their nature, such statements involve risk
and uncertainty since they relate to future events and circumstances. Actual
results may, and often do, differ materially from any forward-looking
statements.
Any forward-looking statements in this announcement reflect management's view
with respect to future events as at the date of this announcement. Save as
required by law or by the Listing Rules of the UK Listing Authority, the
Company undertakes no obligation to publicly revise any forward-looking
statements in this announcement following any change in its expectations or to
reflect subsequent events or circumstances following the date of this
announcement.
This announcement has been determined to contain inside information.
Chief Executive Officer's Review
Sales Strategy and Execution
Our sales strategy remains unchanged: we continue to look to acquire new
customers and gain an ever greater share of wallet with existing customers.
Gross profit growth, our primary measure of income, grew by 14.2% despite very
strong comparative figures, and our annual customer engagement survey,
completed by a larger set of customers than ever before, delivered very
positive results with an NPS of 62 (FY2022: 55) showing improvements across
every category.
Our customer base grew by 1.9%, passing through 10,000. We continue to benefit
from their insight and feedback on where they are taking their technology in
the years to come and the problems they are trying to solve. Gross profit per
customer also grew strongly, up 12.2% in the year, as we retained our focus on
delivering high quality service and solutions for both existing and new
customers.
The opportunity we have across all segments of our customer base for further
wallet share gains in the years to come, capitalising on the full breadth and
depth of our technology proposition across software, hardware and services,
and within datacentre, security networking and workplace technologies, is as
exciting as ever.
We estimate that our share of the addressable UK market is around 5%. While
conditions were challenging during the second half of the year, with customers
noticeably slowing their rate of investment and some larger, more complex
deals being delayed or subject to more stringent procurement processes, we
remain as positive as ever about the medium- and long-term prospects for our
industry. We have the largest commercial team in the UK market and will
continue to invest with intent across all functions as we build capacity and
new capabilities to maintain our relevance in a market evolving at pace.
We will also maintain our position as a key partner to both established and
emerging technology vendors, evolving our skills around the ever-changing
portfolios of services and products coming to market.
People and Culture
Our culture remains as strong as ever as evidenced by the results of our
annual employee satisfaction survey which showed an employee NPS of 63 (as
surveyed in October 2022 (FY2022: 52)). Despite our growth in headcount, we
continue to not only preserve our strong culture but also evolve it as society
adjusts to the world of hybrid working. Having a highly motivated and
engaged workforce was the founding principle of Softcat 30 years ago and
remains our number one priority, allowing us to attract and retain talented
people with an outstanding attitude. Our employees reported that they were
particularly happy with our stance on remote working and inclusivity.
Hybrid working at Softcat has settled into a healthy and natural rhythm -
staff have the freedom to choose a formula that works for them and we have
worked hard to foster an understanding that circumstances are different for
everyone and that there isn't an easily prescribed formula that can be
mandated across the business. At the same time, it is clear that as an
organisation we benefit from as much time as possible spent together and it
has been highly encouraging to see our people's response to that. Our
offices are vibrant during the middle of the week when teams interact and our
partners visit, but also purposefully populated by those who need the space at
either end of the working week.
Our annual Kick Off event was hosted face to face in September 2023 for the
second time since the pandemic, proving to be a bigger success than ever based
on employee feedback and very motivating for the 2,100 employees who attended.
Our partner forum and charity ball were also hosted in person and it's
terrific to see how both Softcat people and our partners enjoy coming together
as a single team.
The labour market eased during the year and we were able to increase headcount
by 20.5%. This represents rapid expansion of our sales team (up 24.1%) as well
as strong growth in supporting specialist and technical teams (up 13.5%).
Expansion of the business operations teams was slower (up 11.3%) following
very significant investment during FY2022 in those teams to support the new
finance system implementation and other developments.
Our learning and development initiatives continue to bear fruit and we are
delighted with the number of employees going through our various programmes
including the Sales Development Programme, the Specialist Acceleration
Programme, our Tech Starter programme and other initiatives including
inclusivity, sustainability and cyber security training.
Our leadership transition was completed smoothly during the summer of 2023 as
previously communicated. Katy Mecklenburgh joined us as CFO on 19 June and has
settled excellently into the Softcat culture. I'd like to formally welcome
her to the Company and am very confident she has a big role to play in our
future success.
Ease of doing business
During the previous year we implemented a new finance system, alongside which
we developed new data management processes and integration layers. This has
established a modern system architecture which we are now augmenting with
external data feeds, creating exciting new possibilities for analytics and
reporting. This in turn can form the basis for new ways of working and,
potentially, the application of AI technology to advance our operating model
in significant ways. For example, enabling automated lead generation,
enhancing the efficiency of our account managers to navigate the enormity and
complexity of our customer proposition, and significantly more effective
resource allocation.
We also continue to invest in developing the skills and digital platforms
necessary to embrace new distribution and consumption models. This includes
the adoption of the various marketplaces released by the public cloud
providers and distributors, as well as the growing number of
subscription-based hardware offerings. Demand for these innovations is
variable but developing and we have the plans in place to ensure we are best
placed to support both customers and vendors as they reach maturity.
Addressable market
Along with the trends discussed above that we are seeing in the distribution
and consumption of IT infrastructure, the market is also witnessing rapid
introduction of new and exciting technologies.
Hybrid models of compute and storage, placing data and workloads in the most
appropriate and cost-effective location for the task, are producing more
thoughtful approaches from customers on the design of their environments and
that plays strongly into our design and advice capabilities.
The impact of AI is building rapidly. Datacentres, wherever they are
located, are beginning to be designed around the need to handle the demands of
this new technology and we only see this increasing. Datacentres are already
created for specific needs, but we expect even greater differentiation around
specific tasks to be increasingly factored into design choices. Perhaps the
most significant impact from AI in the short term comes from its deployment in
mainstream desktop applications. This will have immediate implications for
the cost of those applications, the technology being expensive to run, but
also promises exciting new productivity gains and possibly even the
transformation of some elements of the operating model for certain
customers. Apart from the licensing of AI-enabled applications, customers
will also need to think about where they are hosted and the devices they are
deployed upon. Operating systems will need to be refreshed and end-user
device estates re-evaluated. Cyber security continues to be a major concern
for customers and while AI is already being deployed within security software,
its application will also transform the threat landscape. As a result, we
expect to see continued innovation in this space which will mean the constant
upgrading of organisation's defences will only become a greater necessity.
Our UK customers continue to ask for our support in their overseas operations,
and so we have invested further in our multinational operation across Europe,
APAC and the US. We now have 9 people operating out of our US branch and a
desire to add more resource as that business grows. This presence in the US
will enable us to better understand that market, providing insights that will
benefit our wider operations and inform future strategy.
Diversity, Inclusion and Sustainability
Our word of the year in FY2023 was 'Connect' and it has been great to see the
Company settle well into a productive hybrid working pattern this year,
evidenced by a strong employee NPS score mentioned of 63. We were also
featured in the top 50 Great Places to Work in Europe.
Our community networks have once again played a strong role in developing the
organisation towards being a more inclusive place to work. This has included
raising awareness across the Company of minority groups through our ongoing
allyship programme, and we have continued to support The Technology Channel
for Racial Equality to improve racial equality across our industry. 17% of
Softcat employees are now from ethnic minority backgrounds.
From a gender diversity perspective, we have met our first target of 35% women
in the business, well ahead of schedule, and this includes now having 36%
female representation on our senior leadership team. We were pleased to be
recognised by Great Places to Work in the following categories:
o 1(st) in the UK's Best Workplaces in Tech
o 6(th) in the UK's Best Workplace for Women
We were also pleased to be awarded the Bronze Award by Stonewall for the
progress we have made for our LGBTQ+ community and were ranked 124(th) in the
UK Workplace Equality Index. We have collated data for the first time on our
employees sexual orientation, disability, neurodiversity, and socio-economic
background to better inform company policy in a number of areas in the future.
We were delighted to be able to host our Charity Ball again during last
financial year, for the first time since the pandemic, and in total, across
the year, raised £470,000 for charitable causes.
During the year we received more recognition for the strides we are making
with our carbon reduction plans. We were awarded five-star status by HP in
their partner programme and were named Lenovo ESG Partner of the Year.
We continue to work through key industry bodies and contribute to thought
leadership in this space and were involved with CRN, Canalys, GTDC, and PWC to
influence change across the channel with respect to product data, circular
economy and other sustainability initiatives.
The development of Enexo, our in-house sustainability reporting and action
planning platform, is ongoing. During the year we have seen more uptake from
customers, suppliers and partners to measure and manage the impact of scopes
1-3 in our value chain.
Company-wide training has also been carried out, reaching 98% adoption during
our first round of carbon literacy coaching.
We have also worked hard to improve our compliance with TCFD reporting
requirements - satisfying 9 of the 11 recommended disclosures.
A huge thank you again to the very special team we have at Softcat for their
efforts during the past year. The Company is in great health and perfectly
positioned for future growth.
Board composition and succession planning
Lynne Weedall was appointed as interim Chair of the Nomination Committee and
interim Senior Independent Director (SID) in January 2023 following the
resignation of Karen Slatford on health grounds. Following a review of Board
composition, the Board is pleased to confirm with immediate effect that Lynne
is appointed as Chair of the Nomination Committee on a permanent basis. The
Company announced in August 2023 that Jacqui Ferguson will join the Board as a
Non-Executive Director in January 2024. The Board has agreed that Lynne will
retain the role of interim SID, which will transition to Jacqui on a permanent
basis at some point in 2024.
Chief Financial Officer's Review
Financial Summary FY2023 FY2022 Change
Revenue £985.3m £1,077.9m (8.6%)
Revenue split
Software £188.8m £150.0m 25.9%
Hardware £610.6m £797.9m (23.5%)
Services £185.9m £130.0m 42.9%
Gross invoiced income (GII) 1 £2,563.3m £2,507.5m 2.2%
GII split
Software £1,543.5m £1,365.3m 13.0%
Hardware £617.8m £810.2m (23.7%)
Services £402.0m £332.0m 21.1%
Gross profit (GP) £373.8m £327.2m 14.2%
Gross profit margin 37.9% 30.4% 7.5%
Operating profit £140.9m £136.1m 3.5%
Operating profit margin 14.3% 12.6% 1.7%
Gross profit per customer2 £37.0k £33.0k 12.2%
Customer base3 10.1k 9.9k 1.9%
Cash conversion4 93.2% 76.2% 17.0%
1 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.
2 Gross profit per customer is defined as GP divided by the customer base.
3 Customer base is defined as the number of customers who have transacted with
Softcat in both of the preceding twelve-month periods.
4 Cash conversion ratio is net cash generated from operating activities before
taxation, net of capital expenditure, as a percentage of operating profit.
This is also an Alternative Performance Measure. For further information on
this, please refer to the CFO Report on page 9.
Gross profit, revenue and gross invoiced income
Softcat operates in a fast-growing and constantly changing market, catering to
the IT infrastructure requirements of corporate entities and public sector
organisations across the UK and Ireland. Our strategy is to provide a
comprehensive range of technology solutions (spanning workplace, datacentre,
cloud, networking and security solutions) across software, hardware and
services, delivered through highly engaged employees who provide exceptional
customer service, to attract new customers and increase sales to our existing
customer base.
Our FY2023 results reflect our ability to continue to deliver against this
strategy. Gross profit (GP), our primary measure of income, grew by 14.2% to
£373.8m, in line with expectations, against a tough FY2022 comparable in
which a mid-market customer accounted for marginally more than 10% of our
Gross Invoiced Income (GII), primarily driven by one-off, low-margin
datacentre hardware sales.
Excluding these FY2022 one-off transactions, GP growth was broad based and
underlying software, services and hardware GP all grew double-digit. Hardware
sales were also impacted by soft market demand for client devices but this was
offset by strong underlying growth in networking and datacentre solutions.
After adjusting for the one-off transactions, all technology areas also grew
double-digit with particularly strong growth in networking, as supply chain
issues receded during the year, and in security, which continues to be an area
of focus for our customers. Growth was also strong across all customer
segments, with double-digit underlying growth across enterprise, mid-market
and public sector, demonstrating our continued relevance across our target
markets.
In the second half of the year GP grew by 11.2%, following a very strong first
half performance of 17.9%, with growth impacted by customers delaying some
discretionary spend and large projects being slower to close as customers
applied stricter procurement processes.
FY2023 revenue declined by (8.6)%, driven by a (23.7)% decline in hardware
GII. This decline in hardware GII, which is reported on a gross basis within
the revenue number (unlike software and some services revenue which are netted
down), was driven by the one-off transactions in the base year as mentioned
above. Excluding these one-off transactions hardware GII increased
marginally compared to the prior year.
GII growth of 2.2% was driven by strong growth in both software and services,
up by 13.0% and 21.1% respectively, largely offset by the decline in hardware
sales mentioned above. GII grew more slowly than GP in the period, with GP as
a percentage of GII expanding by 1.5%. Margin expansion was driven by the
FY2022 one-off transactions, which diluted the comparative gross margin and
several positive mix effects, with the year-on- year decline in lower margin
client devices, and strong growth in higher margin datacentre, networking and
security solutions driving a positive margin impact.
Customer KPIs
During the year average GP per customer grew by 12.2% to £37.0k (2022:
£33.0k) and the customer base increased to 10,100, up 1.9% on the prior year.
We won new customers from a broad range of industries with initial sales
balanced across our core business lines, consistent with sales to existing
customers as described above.
Despite this further strong progress and being confirmed again as the largest
reseller in the UK by CRN, our industry remains highly fragmented. Our latest
estimates, based on multiple industry sources including CRN and Gartner,
suggest we have around 5% of total addressable market value. This comprises a
trading relationship with c.20% of potential customers with whom we have an
average share of wallet of c.20% - 25%. As a result, we continue to have a
fantastic opportunity for future growth by continuing to concentrate on our
simple strategy of seeking to sell deeper into existing accounts by building
trust and loyalty over time, while gradually expanding our customer base year
on year.
Operating profitability and investment in future growth
Operating profit of £140.9m (FY2022: £136.1m) increased by 3.5% year-on-year
reflecting the 14.2% increase in GP offset by a 21.9% rise in operating costs.
Cost growth was in line with expectations, driven by increased commissions due
to higher GP, alongside a 19.8% increase in average headcount, investments in
pay and IT and a return to pre COVID-19 levels of staff events and travel.
The investment in headcount was across all areas of the business including
sales operations, technical capabilities, and core support functions to ensure
we are appropriately resourced to support future growth. Average salary costs
increased by 7.5% over the year, driven by inflationary pay awards across
existing staff and an increase in new hire salaries reflecting the current
inflationary environment and ensuring we remain competitive within the market.
Cost growth decelerated in H2 to 12.7% compared to 32.4% in H1. This was
driven by several factors: firstly lower GP growth resulted in lower
commissions in H2 compared to H1; secondly the phasing of the new ERP system
implementation costs, with more impacting H2 than H1 in FY2022; thirdly travel
and entertainment costs which remained constrained in H1 FY2022 due to
COVID-19 but returned to normal in H2 with in person customer meetings and
incentive trips back to pre-pandemic levels; and lastly, while the full year
cost was broadly in-line, bad debt write-offs year-on-year were more front
half weighted in FY2023.
As a result of the investments in headcount, wages and salaries, IT and travel
and entertaining our operating to GP margin decreased to 37.7% (2022: 41.6%)
as forecast and previously communicated.
Corporation tax charge
The effective tax rate for 2023 was 21.0% (2022: 18.9%), reflecting the
increase in the UK statutory rate to 25.0% from 19.0% in April 2023 together
with the relatively marginal impact of non-deductible expenses and share-based
payment transactions. Our tax strategy continues to be focused on paying the
right amount of tax in the right jurisdiction, at the right time.
Cash and balance sheet
Cash conversion, defined as net cash generated from operating activities
before tax but after capital expenditure, as a percentage of operating profit,
was 93.2% (2022: 76.2%). The improvement on prior year reflects a return to
normal levels of year-end receivables following a temporary expansion last
year following the implementation of a new finance system and is towards the
top of the target range of 85%-95%.
Cash at the FY2023 balance sheet date was £122.6m (FY2022: £97.3m) and the
company remains debt free.
Under our capital allocation framework the first priority is to invest behind
future organic growth and our second priority is to deliver on our progressive
ordinary dividend policy. Additional excess capital is then either allocated
to strategic investments or returned to shareholders. In FY2023, as outlined
above we have continued to invest in people costs and IT to further drive
organic growth and the proposed ordinary dividend is an increase of 4.6% vs.
FY2022, while excess cash will be returned to shareholders via a special
dividend.
Dividend
A final ordinary dividend of 17.0p per share has been recommended by the
Directors and if approved by shareholders will be paid on 19 December 2023.
The final ordinary dividend will be payable to shareholders whose names are on
the register at the close of business on 10 November 2023. Shares in the
Company will be quoted ex-dividend on 9 November 2023. The last day for
dividend reinvestment plan ('DRIP') elections to be received is 28 November
2023.
In line with the Company's stated intention to return excess cash to
shareholders a further special dividend payment of 12.6p has been proposed.
This has been calculated taking into account an increase in the minimum cash
holding from £60m to £75m, reflecting the continued growth of the business.
If approved this will also be paid on 19 December 2023 alongside the final
ordinary dividend. This will bring the total amount returned to shareholders
since becoming a public company to £476.2m.
Alternative Performance Measures
The Company uses two non-Generally Accepted Accounting Practice (non-GAAP)
financial measures in addition to those reported in accordance with IFRS. The
Directors believe that these non-GAAP measures which are set out below, assist
in providing additional useful information on the underlying trends, sales
performance and position of the Company.
Consequently, non-GAAP measures are used by the Directors and management for
performance analysis, planning and reporting and have remained consistent with
the prior year. These non-GAAP measures comprise gross invoiced income (or
'GII') and cash conversion.
1. Gross invoiced income is a measure which correlates closely to the
cash received by the business and therefore aids the users understanding of
working capital movements in the statement of financial position and the
relationship to sales performance and the mix of products sold. Gross invoiced
income reflects gross income billed to customers adjusted for deferred and
accrued revenue as reported in the IFRS measure. A reconciliation of IFRS
Revenue to gross invoiced income is provided within Note 2 of the financial
statements.
2. Cash conversion ratio is net cash generated from operating
activities before taxation, net of capital expenditure, as a percentage of
operating profit. Cash conversion is an indicator of the Company's ability to
convert profits into available cash. A reconciliation to the adjusted measure
for cash conversion is provided below:
2023 2022
£'000 £'000
Net cash generated from operating activities 104,802 83,644
Income taxes paid 29,793 25,344
Cash generated from operations 134,595 108,988
Purchase of property, plant and equipment (2,544) (1,890)
Purchase of intangible assets (701) (3,334)
Cash generated from operations, net of capital expenditure 131,350 103,764
Operating Profit 140,898 136,145
Cash conversion ratio 93.2% 76.2%
Principal Risks and Uncertainties
The principal and emerging risks facing the Company have been identified and
evaluated by the Board. In summary, principal risks include:
Risk Potential impacts Management and mitigation
BUSINESS STRATEGY
Failure to respond to market changes including technology offering, channel · Loss of competitive advantage · Insight from ongoing industry analysis and subscriptions input
disintermediation, competitor landscape and customer needs.
into annual strategy process
· Reduced number of customers and profit per customer
(slight increase in net risk)
· Regular insights into customer priorities including
climate-related through the annual customer experience survey results and
'voice of the customer' surveys. Multi-layered relationship with strategic
vendors and executive sponsor alignment
· Regular Quarterly Business Reviews with vendors
OPERATIONAL
Customer dissatisfaction · Reputational damage · Dedicated Customer experience team, who manage and escalate
customer dissatisfaction cases
(no change in net risk) · Loss of customers
· ISO20000-1 IT Service Management and ISO-9001 Quality management
· Financial penalties certified
· Ongoing customer service excellence training
· 'Big-deal review' process
Cyber security risk & business interruption risk · Inability to deliver customer services · ISO27001 accredited processes. Company-wide information security
policy and mandatory security-related training
(no change in net risk) · Reputational damage
· Regular testing of disaster recovery plans and business
· Financial loss continuity plans
· Customer dissatisfaction · Established and documented processes for incident management,
change of control, etc.
· Ongoing upgrades to network.
· All employees issued with corporate devices with standardised
access monitoring and control
· Key software used is from large multi-national companies who have
a 99.9% SLA and who also provide us with SOC2 reports that provide assurance
on their processes and controls
· Annual penetration test by a third party
FINANCIAL
Macro-economic factors including impact on customer sentiment, inflationary · Short-term supply chain disruption · Customer base is well diversified in terms of both revenue
pressures, interest and foreign currency volatility
concentration but also public and commercial sector exposure
· Reduced margins
(no change in net risk)
· Close dialogue with supply chain partners
· Reduced customer demand
· Annual budget considers the operating profit growth expectations
· Reduced profit per customer of the markets
· Higher operating costs · Operating costs are budgeted and reviewed regularly
· Customer insolvencies and cash collection challenges · Going concern and viability statements are underpinned by robust
analysis of scenarios
Ineffective working capital management (no change in net risk) · Increased bad debts · Robust credit assessment process including use of trade credit
insurance
· Increased cost of operations
· Regular review of the aged debt position by management
· Defined treasury policy covering liquidity management processes
and thresholds
· Regular cash forecasting, actual reporting and variance analysis
to highlight any adverse trends and allow sufficient time to respond
Failure to retain competitive terms with our suppliers and/or right size our · Uncompetitive pricing leading to loss of business · Budgeting process and regular reviews ensure costs are managed
cost base compared to gross profit generated.
appropriately and in consideration of gross profit growth. Any out of budget
· Reduced profitability/margins spend needs management level approval
(no change in net risk)
· Rebates form an important, but only minority, element of total
operating profit. In addition, Rebate programmes tend to be industry standard
and not specific to the Company, while vendor aligned teams ensure we
optimise available rebate structures
· Ongoing training to sales and operations teams to keep pace with
new vendor programmes
PEOPLE
Loss of culture · Reduced staff engagement · Culture sits at the heart of all changes that are made in
Softcat. There is regular communication from Senior Leadership Team members
(no change in net risk) · Negative impact on customer service to employees at 'Kick off' and 'All Hands' calls about the importance of
culture
· Loss of talent
· Regional offices with empowered local management
· Quarterly management satisfaction survey with feedback acted upon
· Regular staff events and incentives
· Enhanced internal communication processes and events
Talent, Capability & Leadership risk · Lack of strategic direction · Succession planning process in place.
(no change in net risk) · Reduced staff engagement · Experienced and broad senior management team
· Loss of talent · Investment in robust recruitment and selection processes
· Loss of competitive advantage · Attrition tracked and action taken as necessary
Regulatory and Compliance
Compliance with existing regulation/legislation and being prepared for · Financial penalties · Presence of a second line function (Governance Risk &
emerging regulation/legislation
Control, Information Security, Legal and Company Secretarial)
· Reputational damage
(new risk)
· Management committee in place to review second line progress and
· Loss of customers report to the Audit Committee
· Ongoing engagement with specialist third parties where required
Climate change
In our consideration of emerging risks, climate change continues as an area
requiring greater analysis. During the year, in line with the approach
recommended by the Task Force on Climate-related Financial Disclosures
('TCFD'), we conducted a formal assessment of the potential impact of climate
change to our business and supply chain. Climate change is already a component
of the risk of failure to respond to market changes when considering the needs
of our customers and how products, services and solutions might be affected by
the drive towards carbon neutrality. We also have robust business interruption
plans in the event of a disruption to our business. Our current analysis
concluded that no other climate change-related risk is a principal risk which
needs to be incorporated into the list of principal risks shown.
Going Concern
Please refer to note 2.1 under 'Basis of preparation'.
Cautionary Statement
This preliminary announcement has been prepared solely to provide additional
information to shareholders to assess the Company's strategies and the
potential for those strategies to succeed. The preliminary announcement should
not be relied on by any other party or for any other purpose.
In making this preliminary announcement, the Company is not seeking to
encourage any investor to either buy or sell shares in the Company. Any
investor in any doubt about what action to take is recommended to seek
financial advice from an independent financial advisor authorised by the
Financial Services and Markets Act 2000.
Statement of Directors' responsibilities in relation to the financial
statements
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable United Kingdom law and
regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
Company's financial statements in accordance with UK-adopted international
accounting standards ('IFRSs').
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that
period.
In preparing these financial statements the directors are required to:
· select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors and then apply
them consistently;
· make judgements and accounting estimates that are reasonable and
prudent;
· present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Company's
financial position and financial performance;
· state that UK-adopted international accounting standards have
been followed, subject to any material departures disclosed and explained in
the financial statements; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the Company financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a strategic report, directors' report, directors' remuneration
report and corporate governance statement that comply with that law and those
regulations. The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Company's website.
Fair and balanced reporting
Having taken advice from the Audit Committee, the Board considers the Annual
Report and Accounts, taken as a whole, is fair, balanced and understandable
and that it provides the information necessary for shareholders to assess the
Company's position and performance, business model and strategy.
Responsibility statement pursuant to FCA's Disclosure Guidance and
Transparency Rule 4 (DTR 4)
Each Director of the Company confirms that (solely for the purpose of DTR 4)
to the best of his or her knowledge:
· the financial statements, prepared in accordance with UK-adopted
international accounting standards give a true and fair view of the assets,
liabilities, financial position and profit of the Company;
· the Annual Report, including the Strategic Report, includes a
fair review of the development and performance of the business and the
position of the Company, together with a description of the principal risks
and uncertainties that they face; and
· they consider the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's position, performance, business model and
strategy.
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 July 2023
2023 2022
£'000 £'000
Note
Revenue 3 985,300 1,077,946
Cost of sales (611,466) (750,736)
Gross profit 373,834 327,210
Administrative expenses (232,936) (191,065)
Operating profit 140,898 136,145
Finance income 1,171 252
Finance cost (205) (253)
Profit before taxation 141,864 136,144
Income tax expense 4 (29,835) (25,739)
Profit for the year 112,029 110,405
Foreign exchange differences on translation of foreign branches (204) 3,562
Net gain/(loss) on cash flow hedge (799) -
(1,003) 3,562
Total comprehensive income for the year 111,026 113,967
112,029 110,405
Profit attributable to:
Owners of the Company
Total comprehensive income attributable to: 111,026 113,967
Owners of the Company
56.2 55.5
Basic earnings per ordinary share (pence) 10
Diluted earnings per ordinary share (pence) 10 56.0 55.3
All results are derived from continuing operations.
Statement of Financial Position
As at 31 July 2023
2023 2022
£'000 £'000
Note
Non-current assets
Property, plant and equipment 11,348 11,270
Right-of-use-assets 9,969 6,162
Intangible assets 7,155 7,978
Deferred tax asset 2,997 2,508
31,469 27,918
Current assets
Inventories 6 3,591 5,104
Trade and other receivables 7 490,041 541,424
Income tax receivable - 296
Cash and cash equivalents 122,621 97,316
616,253 644,140
Total assets 647,722 672,058
Current liabilities
Trade and other payables 8 (359,627) (419,108)
Contract liabilities 9 (23,851) (31,564)
Lease liabilities (2,734) (2,716)
Income tax payable (6) -
(386,218) (453,388)
Non-current liabilities
Contract liabilities 9 (3,032) (3,620)
Lease liabilities (7,027) (3,950)
(10,059) (7,570)
Total liabilities (396,277) (460,958)
Net assets 251,445 211,100
Equity
Issued share capital 12 100 100
Share premium account 4,979 4,979
Cash flow hedge reserve (799) -
Reserves for own shares - -
Foreign exchange translation reserve 3,358 3,562
Retained earnings 243,807 202,459
Total equity 251,445 211,100
Statement of Changes in Equity
For the year ended 31 July 2023
Share capital Share premium Cash flow hedge reserve Transl-ation reserve Reserves for own shares Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 August 2021 100 4,979 - - - 174,065 179,144
Profit for the period - - - - - 110,405 110,405
Impact of foreign exchange reserves - - - 3,562 - - 3,652
Total comprehensive income for the year - - - 3,562 - 110,405 113,967
Share-based payment transactions - - - - - 2,541 2,541
Dividends paid - - - - - (84,020) (84,020)
Dividend equivalents paid - - - - - (215) (215)
Tax adjustments - - - - - (317) (317)
Balance at 31 July 2022 100 4,979 - 3,562 - 202,459 211,100
Balance at 1 August 2022 100 4,979 - 3,562 - 202,459 211,100
Profit for the period - - - - - 112,029 112,029
Impact of foreign exchange reserves - - - (204) - - (204)
Net (loss) on cash flow hedge - - (799) - - - (799)
Total comprehensive income for the year - - (799) (204) - 112,029 111,026
Share-based payment transactions - - - - - 3,330 3,330
Dividends paid - - - - - (74,175) (74,175)
Dividend equivalents paid - - - - - (66) (66)
Tax adjustments - - - - - 230 230
Balance at 31 July 2023 100 4,979 (799) 3,358 - 243,807 251,445
Statement of Cash Flows
For the year ended 31 July 2023
2023 2022
£'000 £'000
Note
Net cash generated from operating activities 11 104,802 83,644
Cash flows from investing activities
Finance income 1,171 252
Purchase of property, plant and equipment (2,544) (1,890)
Purchase of intangible assets (701) (3,334)
Net cash used in investing activities (2,074) (4,972)
Cash flows from financing activities
Issue of share capital - -
Dividends paid 5 (74,175) (84,020)
Payment of principal portion of lease liabilities (2,839) (2,369)
Payment of interest portion of lease liabilities (205) (253)
Net cash used in financing activities (77,219) (86,642)
Net increase/(decrease) in cash and cash equivalents 25,509 (7,970)
Exchange (losses)/gains on cash and cash equivalents (204) 3,562
Cash and cash equivalents at beginning of year 97,316 101,724
Cash and cash equivalents at end of year 122,621 97,316
Notes to the Financial Information
1.1 General information
Softcat plc (the "Company") is a public limited company, incorporated and
domiciled in the UK. Its registered address is Fieldhouse Lane, Marlow,
Buckinghamshire, SL7 1LW.
The annual financial information presented in this preliminary announcement
does not constitute the Company's statutory accounts for the years ended 31
July 2023 or 2022 but is based on, and consistent with, that in the audited
financial statements for the year ended 31 July 2023, and those financial
statements will be delivered to the Registrar of Companies following the
Company's Annual General Meeting. The auditor's report on those financial
statements was unmodified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498(2) or (3) of the Companies Act
2006.
2. Accounting policies
2.1 Basis of preparation
These financial statements have been prepared in accordance with UK-adopted
international accounting standards (IFRS) in accordance with the requirements
of the Companies Act 2006. IFRS includes the application of International
Financial Reporting Standards ('IFRS') as issued by the International
Accounting Standards Board ('IASB') and the IFRS Interpretations Committee
('IFRIC') interpretations.
These financial statements have been prepared under the historical cost
convention and are presented in the Company's presentational and functional
currency of Pounds Sterling and all values are rounded to the nearest thousand
('£'000'), except when otherwise stated.
The Company applied all standards and interpretations issued by the IASB that
were effective as at 1 August 2022. The accounting policies set out below
have, unless otherwise stated (see below), been applied consistently to all
periods presented in these financial statements.
The potential climate change-related risks and opportunities to which the
Company is exposed, as identified by management, are disclosed in the
Company's TCFD disclosures in the Annual Report. Management has assessed the
potential financial impacts relating to the identified risks and exercised
judgement in concluding that there are no material financial impacts of the
Company's climate related risks and opportunities on the financial statements.
These judgements will be kept under review by management as the future impacts
of climate change depend on environmental, regulatory and other factors
outside of the Company's control which are not all currently known.
Going Concern
Overview
In considering the going concern basis for preparing the financial statements,
the Directors consider the Company's objectives and strategy, its principal
risks and uncertainties in achieving its objectives and its review of business
performance and financial position, which are all set out in the Strategic
Report (see pages 28 to 31) and Chief Financial Officer's review sections (see
pages 34 to 35]) of this Annual Report. Given the current macro-economic
environment and considering the latest guidance issued by the FRC the
Directors have undertaken a fully comprehensive going concern review.
The Company has modelled three scenarios in its assessment of going concern.
These are:
• The base case;
• The severe but plausible case; and
• The reverse stress test case.
Further details, including the analysis performed and conclusion reached, are
set out below.
The Directors have reviewed detailed financial forecasts for a thirteen-month
period from the date of this report (the going concern period) until 30
November 2024. All the forecasts reflect the payment of the FY2023 dividend of
£59.0m which will be paid in December 2023 subject to approval at the AGM.
The Company operates in a resilient industry. Our UK Corporate customer base
spend is increasingly non-discretionary as IT continues to be vital to gain
competitive advantage in an increasingly digital age. Public Sector, a large
and fast-growing area of the business, continues to invest in technology to
provide efficient services to the public and this has continued apace despite
the pandemic and recent turbulence in the UK economy. The Company strategy
remains unchanged and will continue to focus on increasing the customer base
and spend per customer during the going concern period.
Liquidity and financing position
At 31 July 2023, the Company held instantly accessible cash and cash
equivalents of £122.6m, with net current assets of £230.0m. Note 21 to the
financial statements in the Annual Report includes the Company's objectives,
policies and processes for managing its capital, its financial risk management
and its exposures to credit risk and liquidity risk. Operational cash flow
forecasts for the going concern period are sufficient to support the business
with the £75.0m cash floor set by the Board not being breached.
There is a sufficient level of liquidity headroom post mitigation across the
going concern forecast period in base and severe but plausible scenarios
considered and outlined in more detail below.
Challenging economic environment
Management have, in all three scenarios, considered the principal challenges
to short term business performance which are expected to be;
· An economic downturn in the UK economy, aided by high broad-based
inflation and increasing interest rates; and
· Higher risk of credit losses
Despite the challenging economic environment, the Company has traded well,
delivering double-digit year-on-year growth in gross profit and operating
profit growth in line with expectations, following an expected rebound in
travel and entertainment costs, following periods of reduced spend due to the
COVID-19 pandemic. The Board continue to monitor the global and national
economic environment and organise operations accordingly.
Base case
The base case, which was approved by the Board in October 2023, takes into
account the FY2024 budget process which includes estimated growth and
increased cost across the going concern period and is consistent with the
actual trading experience through to September 2023. The key inputs and
assumptions in the base case include:
· Continued revenue growth in line with historic rates;
· rebate income continues to be received in proportion to cost of
sales as in FY2023;
· employee commission is incurred in line with the gross margin;
and
· increased levels of cost to reflect continued investment in our
people and the businesses IT infrastructure.
The Company has taken a measured approach to the base case and has balanced
the expected trading conditions with available opportunities in an
increasingly resilient area of customer spend, which is supported by the
current financial position. In making our forecasts we balanced our customer
needs alongside employee welfare. Year to date trading to the end of September
2023 is consistent with the base case forecast.
Severe but plausible case
Given the current economic challenges facing our customer base and supply
chain, we have modelled a severe but plausible scenario. In this case we have
modelled a decline in revenue, versus the base case, which is below any
historic trend and more severe than experienced during the height of the
pandemic. Further impacts of this scenario such as reduced margins and
greater credit losses have also been considered.
The key inputs and assumptions, compared to the base case, include:
• an average 7.5% reduction in revenue,
• reduced gross profit margins of 1% in the period;
• additional bad debt write offs of £5m across the forecast
period;
• extending the debtor days from historic levels achieved and no
change to historic supplier payment days;
• paying a reduced interim dividend in line with lower
profitability but still within the range set out in the dividend policy; and
• both commission cost and rebate income adjusted downwards in
line with reduced profitability and cost of sales, but at the same percentage
rates as in the base case.
The purpose of this scenario was to consider if there was a significant risk
that the Company would move to being cash negative in any of the months in the
going concern period. Even at these lower levels of activity, which the
Directors believe is a highly unlikely outcome, the Company continues to be
profitable and maintains a positive cash balance at all times. Despite this,
management have modelled further cost saving and working capital action (see
mitigating actions) that will enable the Company to mitigate the impact of
reduced cash generation further and achieve the Boards desired minimum cash
position, should this scenario occur. The Directors are confident that they
can implement these actions if required.
Mitigating actions
There are several potential management actions that have not been included in
the severe but plausible forecast and it is estimated that the total cash
impact of these actions is in excess of a £21m cost reduction on an
annualised basis and additional annual working capital savings of £30m. The
actions which if implemented would offset the reduced activity:
· bonus costs scaled back in line with performance;
· no interim dividend in H2 of FY2024;
· savings in discretionary areas of spend;
· delayed payment to suppliers foregoing early settlement discount;
and
· short term supplier payment management.
The mitigations are deemed achievable and reasonable as the Company benefits
from a flexible business model with a high proportion of costs linked to
performance.
Reverse stress test
The Directors have performed a reverse stress test exercise to assess the
impact on liquidity, should a scenario more extreme than the severe but
plausible scenario occur. The impact of these conditions, when combined, would
place a strain on liquidity and raise short term concerns to the business,
however, would not result in cash falling below a nil position. The conditions
go significantly further than the severe but plausible scenario and reflect a
scenario that the business consider remote.
The four combined stresses modelled, compared to the base case, are as
follows:
· reduction of 15% in Gross invoiced income, compared to the base
case;
· reduced achievable gross margin by 3%;
· additional bad debt write offs of £10m per year across the
forecast period; and
· extending the debtor days by three days from historic levels
achieved and no change to historic supplier payment days.
All four inputs are greater than the business has ever experienced in its
history. In the modelled scenario, prior to mitigations, cash may not be
sufficient for day to day operations.
Whilst the Board considers such a scenario to be remote a programme of further
actions to mitigate the impact, in excess of those set out above, would be
actioned should the likelihood of such a scenario increase. The Board
considers the forecasts and assumptions used in the reverse stress test, as
well as the event that could lead to it, to be remote.
Going concern conclusion
Based on the forecast and the scenarios modelled, together with the
performance of the Company to date, the Directors consider that the Company
has sufficient liquidity headroom to continue in operational existence for the
thirteen-month period from the date of this report (the going concern period)
until 30 November 2024. Accordingly, at the October 2023 Board meeting, the
Directors concluded from this analysis it was appropriate to continue to adopt
the going concern basis in preparing the financial statements. Should the
impact of these conditions be even more prolonged or severe than currently
forecast by the Directors under the severe but plausible case scenario, the
Company would need to implement additional operational or financial measures.
Accounting policies
The preliminary announcement for the year ended 31 July 2023 has been prepared
in accordance with the accounting policies as disclosed in Softcat plc's
Annual Report and Accounts 2023, as updated to take effect of any new
accounting standards applicable for the year.
3. Segmental information
The information reported to the Company's Chief Executive Officer, who is
considered to be the chief operating decision maker for the purposes of
resource allocation and assessment of performance, is based wholly on the
overall activities of the Company. The Company has therefore determined that
it has only one reportable segment under IFRS 8, which is that of "value-added
IT reseller and IT infrastructure solutions provider". The Company's revenue,
results and assets for this one reportable segment can be determined by
reference to the statement of profit or loss and other comprehensive income
and statement of financial position. An analysis of revenues and gross
invoiced income by product, which form one reportable segment, is set out
below:
Revenue by type
2023 2022
£'000 £'000
Software 188,797 150,000
Hardware 610,638 797,897
Services 185,865 130,049
985,300 1,077,946
Gross invoiced income by type
2023 2023
£'000 £'000
Software 1,543,501 1,365,343
Hardware 617,844 810,241
Services 401,963 331,953
2,563,308 2,507,537
Revenue and gross invoiced income can also be disaggregated by type of
business:
Revenue by type of business
2023 2022
£'000 £'000
Small and medium 555,541 535,823
Enterprise 253,229 222,064
Public sector 176,530 320,059
985,300 1,077,946
Gross invoiced income by type of business
2023 2022
£'000 £'000
Small and medium 1,103,851 1,169,255
Enterprise 512,839 427,249
Public sector 946,618 911,033
2,563,308 2,507,537
Gross invoiced income reflects gross income billed to customers adjusted for
deferred and accrued revenue items and is consistent with our previous
application of IAS 18. Softcat will continue to report gross invoiced income
as an alternative financial KPI as this is a measure which correlates closely
to the cash received by the business and therefore aids the users
understanding of working capital movements in the statement of financial
position and the relationship to sales performance and the mix of products
sold. The impact of IFRS 15 and principal versus agent consideration is an
equal reduction to both revenue and cost of sales.
During the year there was no direct customer (FY2022: one) that individually
accounted for greater than 10% of both the Company's total revenue and gross
invoiced income, and a considerably lower proportion of gross profit. Gross
invoiced income and revenue generated from this customer in FY2022 was
£251.3m and £227.5m respectively.
Reconciliation of gross invoiced income to revenue
2023 2022
£'000 £'000
Gross invoiced income 2,563,308 2,507,537
Income to be recognised as agent under IFRS 15 (1,578,008) (1,429,573)
Revenue 985,300 1,077,964
The total revenue for the Company has been derived from its principal activity
as an IT reseller. Substantially all of this revenue relates to trading
activities undertaken in the United Kingdom.
4. Taxation
2023 2022
£'000 £'000
Current Tax
Current income tax charge in the year 30,414 25,979
Adjustment in respect of current income tax in previous years (160) 52
Foreign tax effects - 1
Deferred Tax
Temporary differences (419) (293)
Total tax charge for the year 29,835 25,739
5. Dividends
2023 2022
£'000 £'000
Declared and paid during the year:
Special dividend on ordinary shares (12.6p per share (2022: 20.5p)) 25,122 40,806
Final dividend on ordinary shares (16.6p per share (2022: 14.4p)) 33,098 28,663
Interim dividend on ordinary shares (8.0p per share (2022: 7.3p)) 15,955 14,551
74,175 84,020
A final dividend of 17.0p per share has been recommended by the Directors and
if approved by shareholders will be paid on 19 December 2023. The final
ordinary dividend will be payable to shareholders whose names are on the
register at the close of business on 10 November 2023. Shares in the Company
will be quoted ex-dividend on 9 November 2023. The dividend reinvestment plan
('DRIP') election date is 28 November 2023.
In line with the Company's stated intention to return excess cash to
shareholders, a further special dividend payment of 12.6p has been proposed.
If approved this will also be paid on 19 December 2023 alongside the final
ordinary dividend.
The Board recommends the final and special dividend for shareholders'
approval.
6. Inventories
2023 2022
£'000 £'000
Finished goods and goods for resale 3,591 5,104
The amount of any write down of inventory recognised as an expense in the year
was £nil in both years.
7. Trade and other receivables
2023 2022
£'000 £'000
Trade and other receivables 429,569 497,308
Provision against receivables (3,920) (4,958)
Net trade receivables 425,649 492,350
Unbilled receivables 34,508 26,192
Prepayments 6,344 4,338
Accrued income 9,270 10,534
Deferred costs 14,270 8,010
490,041 541,424
8. Trade and other payables
2023 2023
£'000 £'000
Trade payables 254,907 280,769
Other taxes and social security 13,699 23,078
Accruals 90,222 115,261
Other creditors 799 -
359,627 419,108
9. Contract liabilities
Contract liabilities are comprised of:
2023 2022
£'000 £'000
Deferred income 26,883 35,184
Deferred income is further broken down as:
Short term deferred income 23,851 31,564
Long term deferred income 3,032 3,620
26,883 35,184
10. Earnings per share
2023 2022
Pence Pence
Earnings per share
Basic 56.2 55.5
Diluted 56.0 55.3
The calculation of the basic earnings per share and diluted earnings per share
is based on the following data:
2023 2022
£'000 £'000
Earnings
Earnings for the purposes of earnings per share being profit for the year 112,029 110,405
The weighted average number of shares is given below:
2023 2022
000's 000's
Number of shares used for basic earnings per share 199,237 198,976
Number of shares expected to be issued at nil consideration following exercise 922 656
of share options
Number of shares used for diluted earnings per share 200,159 199,632
11. Notes to the cash flow statement
2023 2022
£'000 £'000
Cash flow from operating activities
Operating profit 140,898 136,145
Depreciation of property, plant and equipment 2,466 2,373
Depreciation of right-of-use assets 2,127 1,594
Amortisation of intangibles 1,525 558
Loss on disposal of fixed assets - -
Dividend equivalents paid (66) (215)
Cost of equity settled employee share schemes 3,330 2,541
Operating cash flow before movements in working capital 150,280 142,996
Decrease in inventories 1,513 33,307
(Increase)/decrease in trade and other receivables 51,383 (211,694)
(Decrease)/increase in trade and other payables (68,581) 144,379
Cash generated from operations 134,595 108,988
Income taxes paid (29,793) (25,344)
Net cash generated from operating activities 104,802 83,644
12. Share capital
2023 2022
£'000 £'000
Allotted and called up
Ordinary shares of 0.05p each 100 100
Deferred shares* of 1p each - -
100 100
*At 31 July 2023 deferred shares had an aggregate nominal value of £189.33
(2022: £189.33).
Deferred shares do not have rights to dividends and do not carry voting
rights.
13. Post balance sheet events
Dividend
A final dividend of 17.0p per share has been recommended by the Directors and
if approved by shareholders will be paid on 19 December 2023. The final
ordinary dividend will be payable to shareholders whose names are on the
register at the close of business on 10 November 2023. Shares in the Company
will be quoted ex-dividend on 9 November 2023. The dividend reinvestment plan
('DRIP') election date is 28 November 2023.
In line with the Company's stated intention to return excess cash to
shareholders, a further special dividend payment of 12.6p has been proposed.
If approved this will also be paid on 19 December 2023 alongside the final
ordinary dividend.
Corporate Information
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information differs from legislation in other jurisdictions.
Directors
G Watt
G Charlton
K Mecklenburgh
R Perriss
V Murria
L Weedall
M Prakash
Secretary
Luke Thomas
Company registration number
02174990
Registered office
Solar House
Fieldhouse Lane
Marlow
Buckinghamshire
SL7 1LW
Auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF
Softcat plc LEI
213800N42YZLR9GLVC42
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. END FR FLFVDILLVFIVRecent news on Softcat
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