REG - Softcat PLC - Final Results
24/10/2024 07:00
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RNS Number : 3892J Softcat PLC 24 October 2024
SOFTCAT plc
('Softcat', the 'Group')
Preliminary results for the year ended 31 July 2024
Strong operating and financial performance drives another year of profitable
organic growth alongside investment in strategic priorities
Softcat plc (LSE: SCT.L), a leading UK provider of IT infrastructure products
and services, today announces full year results for the twelve months to 31
July 2024 ('the period'). These results reflect another year of strong growth
and cash generation, enabling continued investment to ensure we are best
placed to take advantage of the significant opportunity our market presents.
Financial Summary Year ended
31 July 31 July
2024 2023 Change
£m £m
Gross invoiced income(a) 2,852.2 2,563.3 11.3%
Revenue(b) 962.6 985.3 (2.3%)
Gross profit 417.8 373.8 11.7%
Operating profit 154.1 140.9 9.3%
Cash conversion %(c) 95.9% 93.2% 2.7pts
Total ordinary dividend (p) 26.6p 25.0p 6.4%
Final dividend (p) 18.1p 17.0p 6.5%
Special dividend (p) 20.9p 12.6p 65.9%
Basic earnings per share (p) 59.7p 56.2p 6.2%
Highlights for the year ended 31 July 2024
● Another year of strong performance, delivering double-digit growth in gross
invoiced income and gross profit.
● Operating profit growth of 9.3% alongside continued investment in our market
opportunity, including average headcount growth of 14.3%.
● Further development of our technology and service proposition as we continue
to scale, making it easier for customers and vendors to do business with
Softcat and reflecting industry trends including data and AI.
● A final ordinary dividend of 18.1p, resulting in a full year dividend of
26.6p, up 6.4%, together with a special dividend of 20.9p.
● Strong balance sheet position with cash conversion of 95.9% (FY2023: 93.2%),
and cash and cash equivalents of £158.5m (FY2023: £122.6m).
● Outlook: We expect to deliver another year of double-digit gross profit growth
together with high single-digit operating profit growth in FY2025.
( )
(a) 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 8.
(b) 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).
(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 8.
Graham Charlton, Softcat CEO, commented,
"I'm delighted to report another record year for Softcat, delivering strong
growth ahead of market expectations(a) despite challenging market conditions.
These results are testament to the power of our culture and our continued
ability to deliver high quality value to customers just when, more than ever,
they need our help to navigate the increasing pace of technological change.
During the year we made further progress against our two key strategic goals:
expanding our position with existing customers whilst also adding to our
customer base. We also continued to evolve our technology and service
proposition, reframing and strengthening our offer to enable further strategic
progress in the years to come. The investment we have made in our team,
growing headcount by more than 30% over the past two years, puts us in an
incredibly strong position for when economic conditions improve. We have the
capacity and skills to be the best possible partner for our ten thousand
customers as they continue to transform their technology in the years ahead.
The Group's financial position is as strong as ever, with cash generation
continuing to support our progressive ordinary dividend and once again also
enabling the recommendation of a special dividend.
As always, I'd like to give a heartfelt thank you to the Softcat team for
their outstanding attitude and dedication to each other, our customers and our
partners during the past year. Their spirit and ability create an unbeatable
foundation upon which we will continue to build as we drive towards our full
potential in the years ahead."
Outlook
Softcat operates in a significant and growing market, and we continue to
invest to capitalise on this exciting growth potential. As we drive further
market share gains, we expect to deliver another year of double-digit gross
profit growth together with high single-digit operating profit growth in
FY2025.
(a) Market consensus FY2024 Operating Profit as at 23 October 2024 was
£152.2m.
Analyst and investor call
The management team will host a hybrid virtual and in-person investor and
analyst briefing at 9.30am UK time, on Thursday 24 October 2024. To join the
briefing virtually, please use the following access details:
Webcast Link:
https://brrmedia.news/SCT_PR_24 (https://brrmedia.news/SCT_PR_24)
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
Michael Watts, Head of Investor Relations
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 Financial Conduct 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. The
responsible individual for insider information at Softcat plc is Luke Thomas
(Company Secretary).
Chief Executive Officer's Review
Performance and market conditions
We are pleased to report another strong year of growth that was ahead of
market expectations in a challenging macroeconomic environment. This continues
our unbroken record of double-digit gross profit growth stretching back almost
20 years, demonstrating the sustainability of our model and consistency in
execution.
During the year we made further progress against our two key strategic goals:
winning new customers, up 1.8% year-on-year, and selling more to existing
customers, delivering an increase of 9.7% in gross profit (GP) per customer.
Looking closer at the performance of the customer base, it was encouraging to
see how we continue to strengthen our relationships with existing customers.
For example, the number of customers generating over £1k of gross profit in
the year grew 5.1% from 7.5k to 7.9k and the average GP delivered from each of
those customers expanded by 6.3% from £49.6k to £52.7k.
This progress comes despite general weakness in UK economic conditions, which
had a dampening effect on customer demand throughout the year, resulting in
longer sales cycles and deferred spending. We observed customers prioritising
cost optimisation and sweating existing assets ahead of committing to major
new projects and while, for example, sales of client devices delivered growth
for the year, this was an area of our industry that was especially impacted.
Notwithstanding these challenges, our continued growth highlights the
resilience of our business model supported by our diverse product offering and
customer base, and our ongoing ability to gain market share. We estimate
that our share of the UK and Irish markets remains in the region of 5%.
While external conditions can have an impact on trading from period to period,
we see significant opportunities for growth in the years ahead.
Market trends
There are many technology-related factors that contribute to our optimism,
including the increasing impact of AI, and the more positive outlook for
economic growth, together with reducing inflation and interest rates.
There is widespread anticipation of a device refresh cycle, expected to gain
momentum into calendar year 2025. In addition, there is the ongoing impetus
created by the continuing evolution of the AI opportunity. We continue to see
customers engage with and adopt Microsoft Copilot as well as the AI
enhancements being built into other SaaS solutions. On top of that,
organisations are beginning to move ahead with bespoke and internally
developed AI tools and solutions, which in turn creates demand for datacentre
evolution and expansion, whether on premise or in the cloud.
This new generation of applications are more dependent than ever on
information-rich and well-organised data sets, but also increase the attack
surface and potential for harm if compromised. This in turn leads to an
increasing array of ever more sophisticated cyber threats, ensuring that
security also remains a top priority for our customers. Against this backdrop,
we continue to invest at pace in relevant capabilities through internal
training, expanding our advisory teams and staying in-step with our vendor
partners as they continue to bring innovations to their product portfolios and
remaining close to our customers' needs and enquiries.
Such innovations place ever greater demand on the foundational layers of IT
infrastructure, reinforcing existing megatrends in compute and storage to
ensure the right workloads are hosted in the right place, and data is secure
at all stages of processing. The unrivalled breadth and depth of our
technology proposition means we are very well placed to help customers
navigate these complexities, adding value to CIO and IT manager
decision-making processes.
Ease of doing business and maintaining relevance
Average headcount increased during the year by 14.3%, as we invest for future
growth and build on the very strong investment in our teams over recent years.
Growth was delivered across all departments but with a bias towards our
technical and support functions as we continue to scale our ability to go
deeper into existing customer relationships. This reflects that, for the vast
majority of our customer base, we have huge opportunity to gain a larger share
of their spend.
We have also been investing in productivity enhancing tools and processes. We
have, for example, implemented Microsoft Copilot licences for around two
thirds of our staff, including all of our salespeople, bringing the added
benefit of being better able to support our customers with their AI
projects. The roll out of Microsoft Copilot to all remaining staff will be
completed in the year ahead.
Alongside this, our digital strategy continues to gather pace with the
appointment of a new Head of Digital as we seek to consolidate the number of
systems and platforms both employees and customers interact with. As part of
this, we are centralising our content management and market data tools, paving
the way for AI functionality. This has the potential to better and more
intuitively equip our account managers with the tools they need to address
customer needs at the right time, as well as more efficiently match our
expertise and solutions to our customers' problems. We have also kicked off a
project to replace our sales system over the coming years and put in place the
foundations for continuous evolution of our capabilities and employee
experience.
Our multinational business has continued to grow too, via our network of
branches in Europe, APAC and an office in Virginia, USA. Rising demand from
our customers to serve their operations beyond the UK and Ireland will drive
further expansion of our international footprint in the year ahead.
We continue to embrace and lead the market in adoption of new consumption
models and routes to market, with investment in vendor marketplace offerings
and a rise in as-a-service consumption models for both software and hardware.
Our word of the year, "Evolution", encapsulates our approach to maintaining
relevance in a dynamic and disrupted industry, making good use of our capacity
to invest in change compared to our competitors.
Feedback from customers strongly supports our desire to remain their clear
partner of choice, with our latest survey showing 98% customer satisfaction
(FY2023: 97%) and a net promoter score of 63 (FY2023: 62) which all our staff
should be proud of.
People and culture
Whilst we continue to make huge investments in the evolution of our customer
proposition, the core of our strategy and competitive advantage will always be
firmly rooted in our culture and the very strong customer service this
delivers. Softcat was created to be a special place to work, and we
obsessively monitor the results of our efforts to remain so. This year we
have updated our learning and development platform, broadened our flexible
working policy and enacted a number of developments to help teams work more
closely together. It has been very pleasing to receive recognition for these
efforts from our people, and also by winning the award for the 'Best Overall
UK Workplace in Tech' by The Great Places to Work Institute in the Super Large
category. We were also absolutely thrilled to be named the UK's 'Best
Workplace for Women', 'Best Workplace for Development' and fifth 'Best UK
Workplace' in the Super Large category.
Our internal Communities play an integral and increasing role in promoting and
protecting an inclusive and supportive environment. A packed calendar of
events across our network of offices helps make them a vibrant place to work,
whilst charity days and fundraising are an important part of our social
engagement. This year, for the first time, we were pleased to bring our
Community Leaders together for an event in partnership with vendors and
distributors, sharing knowledge and experiences and celebrating the
contribution they make to Softcat and society.
Our 11(th) charity ball in May 2024 was a huge success, bringing together over
900 guests from Softcat and our partners to raise over £400k for charity.
Other events during the year helped bring our total charitable donations to
over £540k.
We also recently held our largest ever annual Kick Off event at the NEC in
Birmingham with 2,200 Softcat staff in attendance, an event which remains the
highlight of our calendar.
Our growth has meant that we are reaching capacity in our London and
Birmingham offices, and so we will relocate these teams to improved premises
during the new financial year. These moves are part of a rolling 5-year
strategy to ensure we have the right environments for hybrid working as we
continue to scale across all our regions.
Strategy evolution
Our strategic growth goals remain clear: to deepen our relationship with
existing customers whilst also adding to the customer base. During the past
financial year, we have looked closely at the trends and opportunities driving
our industry forward to ensure we remain best placed to deliver against these
goals - not just next year but for the years ahead. As a result, we have
implemented an enhanced strategic framework to ensure we create a customer
proposition fit for the age of data and AI and to ensure we can continue to
operate effectively and efficiently as we continue to scale.
Our technology proposition is a keystone to this, and we have defined a new
structure within which to frame our offering. This will allow our customers
to interact with us in a way that is intuitive and easy for them to do
business with, whilst also improving our collaboration with vendor partners.
In addition, we can more clearly define the direction for the further
development of our services portfolio to augment and complement the in-house
capabilities of our customers in the areas of technology that matter most to
them.
These customer- and vendor-facing developments will be underpinned by further
investment in our own data and digital strategies. We have ambitious plans
to modernise our own operations, increasing our digital footprint and ability
to drive insight from our uniquely broad view of the market. This will
benefit the user experience internally in Softcat as well as within our
customers and increase our relevance to both customers and vendors by bringing
together the right people, to have the right conversations, at the right time,
more often.
The developments we are planning form a strategic roadmap for Softcat in the
years ahead, all of which can be pursued through organic investment. We also
have and will explore the option to accelerate some of these enhancements
through acquisition and/or strategic partnership.
Sustainability
We remain committed to making progress against our stated goals to reach net
zero emissions by 2040, taking purposeful steps to minimise our impact on the
environment and build momentum in the wider industry to do the same. It is
part of our integrated approach to ESG (Environmental, Social and Governance)
and we continue to move forward on this journey with close alignment and
collaboration with key partners and supporting our customers with sustainable
solutions and services.
This year we launched a fully carbon neutral managed support service in
partnership with Cisco, one of the first in our industry. We've also received
recognition in the period from valued partners including Lenovo and HP, and we
were named Sustainability Partner of the Year at the Tech Excellence Awards.
We continue to take meaningful steps on our sustainability journey within our
business, recruiting into our sustainability team and rolling out expanded
training to all staff. We worked hard to make our annual Kick Off event carbon
neutral and it was pleasing to see the impact of the recent project to install
solar panels at our Marlow office which now provide up to 80% of the annual
power requirements at that site, whilst the rest of our office network is
powered by 100% renewable electricity.
Investment in sales system
During FY2025 we are commencing work on a replacement sales system. Due to the
accounting standard requirements regarding the capitalisation of SaaS based
solutions, we will not know whether the cost for building this system will be
capitalised or treated as operating expenditure until we have selected the
vendor and finalised the contract details. Due to the materiality and
non-trading nature of the cost, if the solution cannot be capitalised, we
intend to treat it as an adjusting item to operating profit.
Board changes
Vin Murria is Softcat's longest serving Non-Executive Director, having joined
Softcat in 2015 when Softcat listed on the London Stock Exchange.
Non-Executive Directors are appointed for an initial three-year term,
extendable by a further two additional three-year terms, making a total of
nine years. Having served nine years, Vin has confirmed that she will not
stand for re-appointment at the Group's Annual General Meeting to be held on 9
December 2024, at which point she will leave the Board. Graeme Watt,
Non-Executive Chairman commented "On behalf of the Board, I would like to take
the opportunity to thank Vin for her invaluable contributions, energy, passion
and counsel over the years. We will miss Vin and wish her all the very best."
Vin Murria is currently the Chair of the Sustainability Committee and
the designated Non-Executive Director for Workforce Engagement. With effect
from 9 December 2024, Non-Executive Director, Robyn Perriss, will assume the
Chair of the Sustainability Committee and Non-Executive Director Lynne Weedall
will become the designated Non-Executive Director for Workforce Engagement.
Chief Financial Officer's Review
Financial Summary FY2024 FY2023 Change
Gross invoiced income split
Software £1,807.5m £1,543.5m 17.1%
Hardware £568.5m £617.8m (8.0%)
Services £476.2m £402.0m 18.5%
Total gross invoiced income1 £2,852.2m £2,563.3m 11.3%
Revenue split
Software £213.5m £188.8m 13.1%
Hardware £561.2m £610.6m (8.1%)
Services £187.9m £185.9m 1.1%
Total revenue £962.6m £985.3m (2.3%)
Gross profit £417.8m £373.8m 11.7%
Gross profit margin2 14.6% 14.6% -% pts
Operating profit £154.1m £140.9m 9.3%
Operating profit margin2 5.4% 5.5% (0.1) pts
Gross profit per customer3 £40.6k £37.0k 9.7%
Customer base4 10.3k 10.1k 1.8%
Cash conversion5 95.9% 93.2% 2.7 pts
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 page 11.
2 Gross profit margin and operating profit margin are both calculated as a
percentage of gross invoiced income.
3 Gross profit per customer is defined as Gross profit divided by the customer
base.
4 Customer base is defined as the number of customers who have transacted with
Softcat in both of the preceding twelve-month periods.
5 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 page 11.
Gross profit, revenue and gross invoiced income
Our FY2024 results reflect both the strength of our business model and
excellent execution, as we support the needs of new and existing customers
through our comprehensive range of IT solutions and highly engaged employees
while also investing in strategic priorities that will position us for future
success.
Gross profit (GP), our primary measure of income, grew by 11.7% to £417.8m,
in line with guidance of double-digit growth for the year. Our FY2024 forecast
was based on the premise that market conditions would remain in line with the
second half of FY2023, when we saw some customers adopting a more considered
approach to buying decisions, and this turned out to be materially correct
with macro volatility continuing across the period. This performance
demonstrates, yet again, the resilience our broad product portfolio and
diverse customer base brings to the business.
GP growth across enterprise, mid-market and public sector customer segments
was broad based with all segments growing high single-digit or double-digit.
GP growth across technology areas was also widespread, albeit with
particularly strong growth in networking and security driven by the continued
high demand for cyber, while workplace was impacted by a continued weak market
for client devices partially offset by an increase in demand for
devices-as-a-service.
Software and services GP also grew double-digit, with hardware GP growth
accelerating in the second half to finish the year at high single-digit.
Hardware GII declined by (8.0%), due to the market driven decline in client
devices and a reduction in low margin server and compute sales linked to a
handful of sizeable transactions in the base period, however, this was more
than offset by gross margin expansion driven by a mix into margin rich
datacentre infrastructure sales.
Revenue is reported in accordance with IFRS 15 with some transactions
(generally hardware and internally-delivered services) reported gross
(principal) and others (generally software and externally provided services)
reported net (agent) which can make revenue trends hard to understand. We have
thus continued to also report GII to help give a clearer view of underlying
growth. FY2024 revenue declined overall by (2.3%) driven by: (1) an (8.0%)
decline in hardware GII due to client devices and a reduction in low margin
server and compute sales described above; (2) software revenue which grew at
13.1% compared to GII growth of 17.1% due to a lower software gross margin
driven by a mix into high volume, low margin, mostly public sector
transactions in the period; and (3) services revenue which registered 1.1%
revenue growth compared to a GII growth of 18.5% caused by a mix into services
fulfilled by partners which is reported net.
GII increased 11.3% to £2,852.2m, driven by the strong growth in software and
services mentioned above, partially offset by hardware. Year-on-year, GP grew
largely in line with GII, with GP as a percentage of GII stable year-on year
(14.6% vs. 14.6% in FY2023). GP growth accelerated slightly into H2, driven by
the relatively weaker base with macro volatility continuing to impact the
trading environment across both halves of FY2024.
As shown in the below table, GII growth accelerated in H2 (17.8%) vs H1 (4.0%)
associated with a decline in GP as a percentage of GII (13.9% vs 15.6% in
H1). In H1 gross margin expanded compared to the prior year due to the
decline in low margin client device sales and a reduction in low margin server
and compute sales linked to a handful of sizeable transactions in the base
period and a mix into margin rich datacentre infrastructure solutions; while
in H2 there was a higher volume of lower margin deals, primarily through
public sector frameworks transactions which predominantly drove the
year-on-year and H2 vs H1 decline.
H1 FY2024 H1 FY2023 Change H2 FY2024 H2 FY2023 Change
GII £1,263.5m £1,214.7m 4.0% £1,588.7m £1,348.6m 17.8%
GP £196.5m £177.1m 11.0% £221.3m £196.7m 12.5%
GP/GII % 15.6% 14.6% 1.0 pts 13.9% 14.6% (0.7) pts
Customer KPIs
During the year, GP per customer grew by 9.7% to £40.6k (FY2023: £37.0k) and
the customer base expanded by 1.8%, to 10.3k (FY2023: 10.1k). Growth in GP per
customer was broad based, driven by all three of our solution types
(datacentre infrastructure, networking and security and workplace).
As the longevity of the relationship with our customers increases, the GP
transacted with them also increases. Over time, customers buy across more
technology areas and thus across an increasing range of vendors. Loyalty, as
measured by lower churn of customers, also significantly increases.
Once a customer is transacting greater than £1k of GP p.a., the likelihood
that they stop trading with Softcat drops significantly. The churn rate in
customers doing less than £1k GP is 29%, falling to an average of 6% in
customers trading above this threshold, with the churn rate inversely
correlated to per annum increases. This, more stable, customer cohort doing
>£1k grew at 5.1% from 7.5k to 7.9k with the average GP delivered from
each of those customers expanded by 6.3% from £49.6k to £52.7k.
The long tail of low transactional customers, along with customers who have
not purchased from Softcat in the last 12 months or at all, constitute future
growth opportunities which our Account Manager model balances against the
opportunity from continuing to go deeper with the existing customer base, thus
optimising the balance between both strands of our strategy, to attract new
customers and go deeper with our existing customers.
Company analysis, incorporating data from multiple sources (Gartner, HG
Insights, CRN and ICG), indicates that our market share remains around 5% in
the UK. We transact with approximately 20% of the customers in our target
market in the UK based on those who trade with us in two consecutive 12 month
periods and this implies a 25% average share of wallet.
Operating profitability and investment in future growth
Operating profit of £154.1m (FY2023: £140.9m) increased by 9.3%
year-on-year, ahead of expectations, and reflects the 11.7% increase in GP
offset by a 13.2% rise in operating costs.
Operating cost growth was driven by increased commissions, in line with GP
growth, and a 16.8% increase in wages and salaries, driven by a 14.3% increase
in average headcount. H2 operating cost growth of 12.2% represented a
deceleration from the growth of 13.9% in H1, predominantly driven by lower
average headcount growth (H1: 16.3% vs H2: 11.7%), with closing headcount
growth of 8.4%, in line with the more moderate high single-digit headcount
growth planned for FY2025 as we fully leverage the 30.6% combined headcount
growth of the last two years.
We continue to invest in our systems and data and digital journey. During
FY2024 we invested £7.1m across operating expenditure and capital expenditure
to build further finance system functionality, upgrade our service management
system and automate parts of our credit assessment and cash allocation
processes, as well as develop our data governance and digital strategy. In
the second half of FY2024 we decided to invest in Microsoft Copilot for all
our staff with 60% of staff already having access by the end of the financial
year.
At the end of FY2024 we committed to office moves in London and Birmingham.
We expect to finalise these moves during FY2025 and this will significantly
increase our office capacity in these two regions.
As a result of the ongoing investment, we are making in the future of our
business, the ratio of operating profit to gross profit has marginally
decreased from 37.7% in FY2023 to 36.9% in FY2024 and was consistent in the
second half of both periods at 39.5% and 39.6% in FY2024 and FY2023
respectively.
Corporation tax charge
The effective tax rate for FY2024 was 25.3% (FY2023: 21.0%), reflecting the UK
statutory increase to 25.0% from April 2023. This is marginally higher than
the UK statutory rate due to a small number of non-deductible expenses and
share-based payment transactions. Our tax strategy continues to be focussed on
paying the right amount of tax in the right jurisdiction, at the right time.
Cash flow and cash conversion
Cash at the FY2024 balance sheet date increased by £35.8m to £158.5m
(FY2023: £122.6m), and the Group remains debt free.
Cash conversion, defined as net cash generated from operating activities
before tax but after capital expenditure, as a percentage of operating profit,
was 95.9% (FY2023: 93.2%). The result is slightly above our target range of
85%-95% cash conversion. The strong performance was due to good working
capital management particularly on receivables, only partially offset by
increased capex due to investments in IT platforms.
Our capital allocation policy remains unchanged, prioritising investment in
organic growth to ensure we can continue to take market share in our growing
addressable market; secondly to maintain a progressive ordinary dividend.
Remaining excess capital is then either returned to shareholders or allocated
to strategic investments such as M&A. In FY2024 we have continued to
invest in the long-term growth potential of Softcat, increasing headcount,
investing in new office capacity and continuing to develop our data and
digital platforms. Our proposed total ordinary dividend of 26.6p is 6.4%
higher than FY2023 and excess cash will be returned to shareholders via a
special dividend.
Finance income
In the period income from cash and cash equivalents held in interest bearing
accounts totalled £5.8m (FY2023: £1.2m).
Dividend
A final ordinary dividend of 18.1p per share (FY2023: 17.0p) has been
recommended by the Directors, bringing the total dividend for the year to
26.6p per share (FY2023: 25.0p). If approved by shareholders, the final
ordinary dividend will be payable on 17 December 2024, to shareholders whose
names are on the register at the close of business on 8 November 2024. Shares
in the Company will be quoted ex-dividend on 7 November 2024. The last day for
dividend reinvestment plan ('DRIP') elections is 26 November 2024.
In line with the Group's stated intention to return excess cash to
shareholders, a further special dividend payment of 20.9p per share has been
proposed. If approved by shareholders, this will also be paid on 17 December
2024 alongside the final ordinary dividend. This will bring the total amount
returned to shareholders since becoming a public company to £571.2m.
Group consolidation
Softcat US LLC, a Limited Liability Company (LLC) began trading on 1 February
2024 and is a wholly owned subsidiary of Softcat plc. Prior to this, trade in
the US was recorded within a branch of Softcat plc and single entity accounts
were prepared. Following this change, consolidated full year accounts have
been prepared for the first time.
Alternative Performance Measures
The Group 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 Group.
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 user's 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 Group's ability to
convert profits into available cash. A reconciliation to the adjusted measure
for cash conversion is provided below:
2024 2023
£'000 £'000
Net cash generated from operating activities 115,608 104,802
Income taxes paid 39,226 29,793
Cash generated from operations 154,834 134,595
Purchase of property, plant and equipment (1,115) (2,544)
Purchase of intangible assets (6,017) (701)
Cash generated from operations, net of capital expenditure 147,702 131,350
Operating Profit 154,064 140,898
Cash conversion ratio 95.9% 93.2%
Principal Risks and Uncertainties
The principal and emerging risks facing the Group 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 due to the ongoing rapid evolution of
· Regular insights into customer priorities including
climate-related through the annual customer experience survey results and
technology, including AI and potential
'voice of the customer' surveys. Multi-layered relationship with strategic
vendors and executive sponsor alignment
changes in customer purchasing
· Regular Quarterly Business Reviews with vendors
behaviours)
· Regular meetings between senior representatives from sales,
technology and vendor management teams to review technology and market trends
and customer propositions.
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 geo-political conditions, impact on customer · Short-term supply chain disruption · Customer base is well diversified in terms of both revenue
sentiment, inflationary 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
· Market conditions are factored in our annual budgeting process
· Reduced profit per customer
· Operating costs are budgeted and reviewed regularly
· Higher operating costs
· Going concern and viability statements are underpinned by robust
· Customer insolvencies and cash collection challenges 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 Group, 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 and annual all-employee
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 · Significant investment in a second line of defence function
emerging regulation/legislation
(Governance Risk & Control, Information Security, Legal and Company
· Reputational damage Secretarial)
(no change in net risk)
· Loss of customers · Management committee in place to review second line progress and
report to the Audit Committee
· Ongoing engagement with specialist third parties where required
Climate change
During the year, in line with the approach recommended by the Climate-related
Financial Disclosures ('CFD'), 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 above.
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 Group'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 Group 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
Group's financial statements in accordance with UK-adopted international
accounting standards ('IFRS').
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 Group and of the profit or loss of the Group 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 Group'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 Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of the Group and enable
them to ensure that the Group financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Group
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
Group'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 Group 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 Group;
● the Annual Report, including the Strategic Report, includes a fair review of
the development and performance of the business and the position of the Group,
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 Group's position, performance, business model and strategy.
Group Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 July 2024
2024 2023
£'000 £'000
Note
Revenue 3 962,633 985,300
Cost of sales (544,880) (611,466)
Gross profit 417,753 373,834
Administrative expenses (263,689) (232,936)
Operating profit 154,064 140,898
Finance income 5,778 1,171
Finance cost (443) (205)
Profit before taxation 159,399 141,864
Income tax expense 4 (40,355) (29,835)
Profit for the year 119,044 112,029
Foreign exchange differences on translation of foreign branches
(620) (204)
Net gain/(loss) on cash flow hedge 514 (799)
(106) (1,003)
Total comprehensive income for the year 118,938 111,026
Profit attributable to:
Owners of the Parent Company 119,044 112,029
Total comprehensive income attributable to:
Owners of the Parent Company 118,938 111,026
59.7 56.2
Basic earnings per ordinary share (pence) 10
Diluted earnings per ordinary share (pence) 10 59.4 56.0
All results are derived from continuing operations.
Group Statement of Financial Position
As at 31 July 2024
2024 2023
£'000 £'000
Note
Non-current assets
Property, plant and equipment 9,832 11,348
Right-of-use-assets 10,066 9,969
Intangible assets 11,608 7,155
Deferred tax asset 2,571 2,997
34,077 31,469
Current assets
Inventories 6 2,916 3,591
Trade and other receivables 7 585,302 490,041
Income tax receivable - -
Cash and cash equivalents 158,454 122,621
746,672 616,253
Total assets 780,749 647,722
Current liabilities
Trade and other payables 8 (430,082) (359,627)
Contract liabilities 9 (31,980) (23,851)
Lease liabilities (2,253) (2,734)
Income tax payable (1,141) (6)
(465,456) (386,218)
Non-current liabilities
Contract liabilities 9 (9,151) (3,032)
Lease liabilities (8,105) (7,027)
(17,256) (10,059)
Total liabilities (482,712) (396,277)
Net assets 298,037 251,445
Equity
Issued share capital 12 100 100
Share premium account 4,979 4,979
Cash flow hedge reserve (285) (799)
Foreign exchange translation reserve 2,738 3,358
Retained earnings 290,505 243,807
Total equity 298,037 251,445
Group Statement of Changes in Equity
For the year ended 31 July 2024
Share capital Share premium Cash flow hedge reserve Transl-ation reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 August 2022 100 4,979 - 3,562 202,459 211,100
Profit for the year - - - - 112,029 112,029
Impact of foreign exchange reserves - - - (204) - (204)
Hedging reserve movement - - (799) - - (799)
Total comprehensive income for the year - - (799) 112,029 111,026
(204)
Share-based payment transactions - - - - 3,330 3,330
Dividends paid - - - - (74,175) (74,175)
Dividend equivalents paid - - - - (66) (66)
Tax adjustments - - - - 230 230
Other - - - - - -
Balance at 31 July 2023 100 4,979 (799) 3,358 243,807 251,445
Balance at 1 August 2023 100 4,979 (799) 3,358 243,807 251,445
Profit for the year - - - - 119,044 119,044
Impact of foreign exchange reserves - - - - (620)
(620)
Hedging reserve movement - - 514 - - 514
Total comprehensive income for the year - - 514 119,044 118,938
(620)
Share-based payment transactions - - - - 3,612 3,612
Dividends paid - - - - (76,048) (76,048)
Dividend equivalents paid - - - - (98) (98)
Tax adjustments - - - - 182 182
Other - - - - 6 6
Balance at 31 July 2024 100 4,979 (285) 2,738 290,505 298,037
Group Statement of Cash Flows
For the year ended 31 July 2024
2024
2023
£'000 £'000
Note
Net cash generated from operating activities 11 115,608 104,802
Cash flows from investing activities
Finance income 5,778 1,171
Purchase of property, plant and equipment (1,115) (2,544)
Purchase of intangible assets (6,017) (701)
Net cash used in investing activities (1,354) (2,074)
Cash flows from financing activities
Issue of share capital - -
Dividends paid 5 (76,048) (74,175)
Payment of principal portion of lease liabilities (1,929) (2,839)
Payment of interest portion of lease liabilities (443) (205)
Net cash used in financing activities (78,420) (77,219)
Net increase in cash and cash equivalents 35,834 25,509
Exchange losses on cash and cash equivalents (1) (204)
Cash and cash equivalents at beginning of year 122,621 97,316
Cash and cash equivalents at end of year 158,454 122,621
Notes to the Consolidated Financial Information
1. General information
Softcat plc (the 'Group) is a public limited company, incorporated and
domiciled in England and Wales. Its registered address is Fieldhouse Lane,
Marlow, Buckinghamshire, SL7 1LW.
The annual financial information presented in this preliminary announcement
does not constitute the Group's statutory accounts for the years ended 31 July
2024 or 2023 but is based on, and consistent with, that in the audited
financial statements for the year ended 31 July 2024, and those financial
statements will be delivered to the Registrar of Companies following the
Group'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 Group's presentational and functional
currency of Pounds Sterling and all values are rounded to the nearest thousand
('£'000'), except when otherwise stated.
The Group applied all standards and interpretations issued by the IASB that
were effective as at 1 August 2023. 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
Group is exposed, as identified by management, are disclosed in the Group's
Climate-related Financial Disclosures ('CFD') 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 Group'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 Group's control which are not all currently
known.
Going Concern
Overview
These financial statements have been prepared on a going concern basis
covering at least the twelve month period from the date of signing the
financial statements.
In considering the going concern basis for preparing the financial statements,
the Directors consider the Group and 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 30 to 35) and Chief Financial Officer's review
sections (see pages 38 to 41 of the 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 Group 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 twelve-month
period from the date of this report (the going concern period) until 31
October 2025. All the forecasts reflect the payment of the FY2024 dividend of
£77.9m which will be paid in December 2024 subject to approval at the AGM.
Liquidity and financing position
At 31 July 2024, the Group held instantly accessible cash and cash equivalents
of £158.5m, with net current assets of £281.2m. Note 1 to the financial
statements in the Annual Report includes the Group'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 interest rates; and
● higher risk of credit losses.
Despite the challenging economic environment, the Group and Company have
traded well, delivering double-digit year-on-year growth in gross profit and
operating profit growth is ahead of expectations. 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 2024, takes into
account the FY2025 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 2025. 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
FY2024;
● employee commission is incurred in line with the gross margin; and
● increased levels of cost to reflect continued investment in our people and the
business's IT infrastructure.
The Group 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 2025 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
COVID-19 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 5% reduction in revenue;
● reduced gross profit margins of 0.5% in the period;
● additional bad debt write offs of £4.2m across the forecast period;
● an average 5% reduction in rebates;
● extending the debtor days from historic levels achieved and no change to
historic supplier payment days by an additional three days;
● paying a reduced interim dividend in line with lower profitability but still
within the range set out in the dividend policy; and
● commission cost 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 Group and 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 Group 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 Group to mitigate the impact of
reduced cash generation further and achieve the Board's 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, including significant cost reduction
measures and additional annual working capital savings. The actions which if
implemented would offset the reduced activity include:
● 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 Group benefits
from a flexible business model with a high proportion of costs linked to
performance.
Reverse stress test
The Directors have performed an analysis of each variable used in the severe
but plausible case that would, standalone, trigger a threat to the going
concern status of the business. This reverse stress Testing goes beyond what
is considered in the severe but plausible scenario to understand the limits of
the business model.
Before a negative cash balance within the going concern period is likely, the
following key inputs and assumptions, compared to the base case, would be
required:
● a reduction in sales of 90%;
● reduction in gross margin of 8%; and
● extending the debtor days by an additional twelve days.
The Board considers the forecasts and assumptions used in the reverse stress
tests, as well as the events 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 Group and Company to date, the Directors consider that the
Group and Company have sufficient liquidity headroom to continue in
operational existence for the twelve-month period from the date of this report
(the going concern period) until 31 October 2025. Accordingly, at the October
2024 Board meeting, the Directors concluded from this analysis it was
appropriate to continue to adopt the going concern basis in preparing the
Consolidated 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 Group and Company would need to
implement additional operational or financial measures.
In relation to the identified potential climate change-related risks and
opportunities, the Directors do not believe there would be a material impact
on cash flows in the going concern period.
Accounting policies
The preliminary announcement for the year ended 31 July 2024 has been prepared
in accordance with the accounting policies as disclosed in Softcat plc's
Annual Report and Accounts 2024, as updated to take effect of any new
accounting standards applicable for the year.
3. Segmental information
The information reported to the Group'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 Group. The Group 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 Group'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
2024 2023
£'000 £'000
Software 213,520 188,797
Hardware 561,238 610,638
Services 187,875 185,865
962,633 985,300
Gross invoiced income by type
2024 2023
£'000 £'000
Software 1,807,468 1,543,501
Hardware 568,450 617,844
Services 476,233 401,963
2,852,151 2,563,308
Revenue and gross invoiced income can also be disaggregated by type of
business:
Revenue by type of business
2024 2023
£'000 £'000
Small and medium 473,985 555,541
Enterprise 298,434 253,229
Public sector 190,214 176,530
962,633 985,300
Gross invoiced income by type of business
2024 2023
£'000 £'000
Small and medium 1,157,007 1,103,851
Enterprise 597,320 512,839
Public sector 1,097,824 946,618
2,852,151 2,563,308
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 user's
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.
Reconciliation of gross invoiced income to revenue
2024 2023
£'000 £'000
Gross invoiced income 2,852,151 2,563,308
Income to be recognised as agent under IFRS 15 (1,889,518) (1,578,008)
Revenue 962,633 985,300
The total revenue for the Group 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
2024 2023
£'000 £'000
Current Tax
Current income tax charge in the year 40,338 30,414
Adjustment in respect of current income tax in previous years (465) (160)
Foreign tax effects 84 -
Deferred Tax
Temporary differences 398 (419)
Total tax charge for the year 40,355 29,835
5. Dividends
2024 2023
£'000 £'000
Declared and paid during the year:
Special dividend on ordinary shares (12.6p per share (2023: 12.6p)) 25,113 25,122
Final dividend on ordinary shares (17.0p per share (2023: 16.6p)) 33,965 33,098
Interim dividend on ordinary shares (8.5p per share (2023: 8.0p)) 16,970 15,955
76,048 74,175
A final dividend of 18.1p per share has been recommended by the Directors and
if approved by shareholders will be paid on 17 December 2024. The final
ordinary dividend will be payable to shareholders whose names are on the
register at the close of business on 8 November 2024. Shares in the Company
will be quoted ex-dividend on 7 November 2024. The dividend reinvestment plan
('DRIP') election date is 26 November 2024.
In line with the Group's stated intention to return excess cash to
shareholders, a further special dividend payment of 20.9p has been proposed.
If approved this will also be paid on 17 December 2024 alongside the final
ordinary dividend.
The Board recommends the final and special dividend for shareholders'
approval.
6. Inventories
2024 2023
£'000 £'000
Finished goods and goods for resale 2,916 3,591
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
2024 2023
£'000 £'000
Trade and other receivables 504,488 429,569
Provision against receivables (3,122) (3,920)
Net trade receivables 501,366 425,649
Unbilled receivables 40,487 34,508
Prepayments 6,982 6,344
Accrued income 10,279 9,270
Deferred costs 26,188 14,270
585,302 490,041
8. Trade and other payables
2024 2023
£'000 £'000
Trade payables 290,869 254,907
Other taxes and social security 17,009 13,699
Accruals 121,919 90,222
Other creditors 285 799
430,082 359,627
9. Contract liabilities
Contract liabilities are comprised of:
2024 2023
£'000 £'000
Deferred income 41,131 26,883
Deferred income is further broken down as:
Short term deferred income 31,980 23,851
Long term deferred income 9,151 3,032
41,131 26,883
10. Earnings per share
2024 2023
Pence Pence
Earnings per share
Basic 59.7 56.2
Diluted 59.4 56.0
The calculation of the basic earnings per share and diluted earnings per share
is based on the following data:
2024 2023
£'000 £'000
Earnings
Earnings for the purposes of earnings per share being profit for the year 119,044 112,029
The weighted average number of shares is given below:
2024 2023
000's 000's
Number of shares used for basic earnings per share 199,490 199,237
Number of shares expected to be issued at nil consideration following exercise
of share options
1,026 922
Number of shares used for diluted earnings per share 200,516 200,159
11. Notes to the cash flow statement
2024 2023
£'000 £'000
Cash flow from operating activities
Operating profit 154,064 140,898
Depreciation of property, plant and equipment 2,631 2,466
Depreciation of right-of-use assets 2,429 2,127
Amortisation of intangibles 1,564 1,525
Dividend equivalents paid (98) (66)
Cost of equity settled employee share schemes 3,612 3,330
Operating cash flow before movements in working capital 164,202 150,280
Decrease in inventories 675 1,513
(Increase)/decrease in trade and other receivables (95,261) 51,383
Increase/(decrease) in trade and other payables 85,218 (68,581)
Cash generated from operations 154,834 134,595
Income taxes paid (39,226) (29,793)
Net cash generated from operating activities 115,608 104,802
12. Share capital
2024 2023
£'000 £'000
Allotted and called up
Ordinary shares of 0.05p each 100 100
Deferred shares* of 1p each - -
100 100
*At 31 July 2024 deferred shares had an aggregate nominal value of £189.33
(2023: £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 18.1p per share has been recommended by the Directors and
if approved by shareholders will be paid on 17 December 2024. The final
ordinary dividend will be payable to shareholders whose names are on the
register at the close of business on 8 November 2024. Shares in the Company
will be quoted ex-dividend on 7 November 2024. The dividend reinvestment plan
('DRIP') election date is 26 November 2024.
In line with the Group's stated intention to return excess cash to
shareholders, a further special dividend payment of 20.9p has been proposed.
If approved this will also be paid on 17 December 2024 alongside the final
ordinary dividend.
Contractual obligations
On 27 September 2024, the Group signed a property lease in relation to
relocating the London sales office. The right-of-use asset and lease liability
from this contract will be £17.1m
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
J Ferguson
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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