Softcat CEO praises 'record year' as sales and profits rise

Graeme Watt said 'strong public sector demand' and 'further recovery in the corporate sector' boosted business

UK reseller giant Softcat saw its sales and profits rise over the past year as CEO Graeme Watt heralded a "record year which surpassed expectations".

Revenue for the 12 months ending 31 July 2021 stood at £1.16bn, an increase of 7.4 per cent, while gross invoiced income stood at £1.94bn which was up 17.7 per cent from the prior year.

Gross profit, which Softcat deems its key financial measure, rose 17.2 per cent to reach £276m while operating profit increased by 27.4 per cent to £119m.

Watt identified "strong public sector demand" and "further recovery in the corporate sector" as two factors which were behind the growth of the business over the past year but said the company is in a good position across all sectors.

"We started to see enterprise customer demand pick up within the corporate space and we saw our ability to engage, well not just our ability to engage, but our win rate on new customers pick up towards the latter part of the year as well," he told CRN.

"So I think they're both related to the fact that companies are returning to some level of normality in terms of the way they trade and the way they behave with parties.

"And then obviously, on the enterprise side, their demand for infrastructure picked up having been, in some cases, put on pause because of the uncertainty or because they were just in a in a vertical that was challenged and just couldn't operate at its normal levels.

"The other thing that's been particularly pleasing is that the breadth of our growth has been across all technologies, it's been across most of our customer segments and types. Most of our vendors have grown nicely year-over-year so we've just got this model of breadth that gives us, if a customer segment or a vertical or a technology or something else is particularly challenged, we've got other areas that will, hopefully, if we do our job right, pick up some of the slack."

Watt, announcing the results, added that Softcat's customer base has grown by 2.3 per cent while its headcount also rose by an additional ten per cent. Meanwhile, basic earnings per share reached 48.4p, up from 38.2p.

The results showed that revenue for software and services was down 3.6 per cent and 14.1 per cent respectively but gross invoiced income, which Softcat said more accurately reflected how the business was performing in those sectors because it is adjusted prior to the IFRS 15 accounting standard and for deferred and accrued revenue items, was up 15 per cent and 17.6 per cent for the same categories.

Watt added that product shortages have led to "lengthened lead times" but that the business was "managing fine" and was not expecting the shortages "to get worse".

Softcat saw its gross invoiced income for hardware rise 23.6 per cent to £566m and Watt believes the demand could continue, while also identifying other sectors such as security as key growth areas moving forward.

"HP, Dell, Lenovo and those types are very confident, and we've got no reason to disbelieve this. I think we share their confidence that that demand is going to continue," he explained.

"I think workspace demand will continue. I think it drives the need for further security, which is great, so I think the security of the network and the network and security in general continue to be strong and I think more and more people are adopting cloud but in a hybrid cloud environment so that needs to continue to upgrade.

"We just did a customer survey two or three months ago and they confirmed that those three areas - hybrid cloud, security and workspace - were the three areas of focus and that's what we're seeing."