Softcat reports double-digit growth in Q3, but warns cost savings could reverse in next fiscal year

Trading update claims reseller will beat expectations in fiscal 2021

Softcat has reported double-digit growth across the board in its Q3, but warns that cost savings made during the pandemic could reverse in its next fiscal year.

The LSE-listed firm issued a trading update today claiming that it hit "double-digit, year-on-year growth" in revenue, gross profit and operating profit for the three months ending 30 April 2021.

The reseller added that the growth was "generally more broad-based" than in the first half of its fiscal year, with run-rate transaction volumes increasing and cash collections and conversion remaining in line with normal trends.

As a result Softcat is expecting results for its full year ending 31 July 2021 to be ahead of expectations. It adds that the firm remains "confident of the road ahead" and expects to see further growth, but more normalised EBIT levels, in its fiscal 2022.

Softcat's share price climbed by as much as five per cent to 1,909 pence this morning following the trading update.

The reseller's commentary did not come without its warnings. Softcat cautioned that the cost savings it made during the Covid pandemic last year are due to reverse as it enters its next financial year.

It warns that it expects a return of staff traveling to see customers and the resumption of internal events will rack up costs for the firm that were not seen during the pandemic.

Softcat added that several one-off deals made during the second half of its fiscal 2021, some of which were the largest the company has ever done, will also impact profitability in its fiscal 2022.

The combination of a halt to internal costs such as travel costs and these one-off deals translated to around £12m in EBIT in its current fiscal year - most of which came during the first half.

Softcat CEO Graeme Watt told CRN in March that he was "cautiously optimistic" about the next six months of business for the firm.

The comments came after the reseller reported it had increased gross invoiced income by 19.7 per cent to £870.8m, and operating income by 41 per cent to £57.1m during the first six months of its financial year until 31 January 2021.