Softcat: More of the same following IPO

"We know how to make this a good, profitable business for shareholders", CEO Martin Hellawell says

Softcat's chief executive Martin Hellawell has promised "no surprises" in the company's strategy if its IPO plans go ahead, claiming investors like its reseller image.

Softcat filed plans to IPO this morning, but a valuation is yet to be agreed.

Its intention to float is the first part of a three-stage process before it officially goes public. Following today's announcement, Softcat will meet with investors and discuss the finer points of the process such as what price shares will be valued at and exactly how much of the company will float.

Softcat will float a minimum of 25 per cent, in order to gain a main premium listing, which Hellawell described as "the big boys' league", as opposed to the Alternative Investment Market.

The IPO has been in the making for some time - in June last year, speaking to CRN, Hellawell said for the first time that this could be an option.

On the valuation, Hellawell said "your guess is as good as mine", but analyst Megabuyte pegged it around the £500m mark.

In a separate Annual Report published today, Sofcat reported revenue of £596.1m for the 12 months to 31 July, up 18 per cent.

Hellawell insisted Softcat's strategy as a public company would not change much.

"We really don't want this to change much in the company," he said. "We are not doing this to revolutionise or transform the company in any shape or form. We feel very, very strongly about the culture of the business. We are not trying to hide that; we are very proud of that. We have no intention of changing that whatsoever."

He said Softcat's core customer base will remain in the mid-market.

"The basic message we have put out to the market is ‘more of the same'," he said.

"We are asking investors to support the trajectory and development of the business that we are already on, and have been on for a number of years, rather than areas we were not planning to [invest in]. That is the message they like - consistency and not just trying things for the hell of it.

"Our main business remains mid-market; that's the core of the business. We moved into public sector and did very nicely out of the public sector and we continue to enjoy that. We started moving into the enterprise market and we expect to penetrate that market deeper. But we will see our core customer base as being that mid-market customer base and the other areas are on top of that. You won't see any surprises in the areas we will go into."

Hellawell boasted pride in Softcat's reseller image and said he has no intentions of moving away from the tag, like some firms are doing.

"It's probably quite a bold statement and I think some people who go through this process try and dress themselves up as something different," he said. "But we are comfortable in our skin and like what we do. If you look at the returns of the business, they do better than a lot of companies who are more sophisticated in services and other areas. We know how to make this a good, profitable business for shareholders. We've spoken to a lot of them and they like that message."

Although consistency is a top priority for Hellawell and his team, some things at the company will change, he said. The firm's current managing director Colin Brown is no longer on the board of directors but will retain his full role and duties. Hellawell said this is because in the UK, it is best practice for public companies to have more non-exec directors than directors. The company recently welcomed in former Domino's Pizza chief financial officer Lee Ginsberg as a non-exec director, as well as Peter Ventress.

Hellawell said Softcat currently sends monthly progress reports to staff, which will have to stop if the company goes public. He insisted there would be "no tears" about this development.

In the last three years, Softcat's sales have shot up from £395.8m to £596.1m. Hellawell said there remains plenty of room to grow in the future.

"Of our addressable market in the UK, we have around five per cent market share, despite our strong growth we've had," he said. "There's still 95 per cent of this market to go for. So we don't think there's any shortage of growth ahead of us."

He said, in line with its current strategy, acquisitions are not a core focus, but that he has "not got a complete aversion to it".