Softcat’s share price rose by over five per cent this morning as it unveiled its interim results, despite reporting slower growth.
Having stood at close to 30 per cent in its fiscal 2022, Softcat’s gross invoiced income (GII) growth slowed to 4.9 per cent in the six months to 31 January 2023. Operating profit also dipped by two per cent to £63.1 million, ending a run of 68 quarters of consecutive growth.
However, the slower GII growth was due almost entirely to the artificial impact of the high-value, low-margin business it secured with a “major” customer the prior year. Softcat had already prepared the market for a possible profit dip as its travel and entertainment costs rebounded post-Covid.
Operating profits were better than expected while Softcat’s key profit measure of gross profit hiked by 17.9 per cent to £177.1 million.
While many big tech firms are laying off staff, Softcat is giving them more money and this policy had a “profoundly positive impact” on attrition rates and its ability to attract new talent.
CEO Graeme Watt said the reseller handed existing staff an 11.1 per cent average pay award. That reflected a 6.8 per cent average award tied to inflation, together with a restructuring of sales salaries.
Softcat’s net headcount has swelled by 375 employees since the start of its fiscal 2023, Watt said.
“This represents a 21.1 per cent increase on the prior period, achieved in a market where we are finding it easier to recruit again,” he said.
He said that the chip shortage that has dogged the channel for the last 18 months is easing, various vendors including HPE have testified in recent weeks.
Watt concurred, remarking that the “external challenges of the pandemic and supply chain constraints largely dissipated”.
Softcat expects that things will be even better in the second half of the year in a period that has exceeded expectations”.
Although Softcat’s hardware GII fell 27.2 per cent to £334.6 million during its first half (due to the impact of the one-off deals done with a major customer in the prior year period), software GII grew by 24.5 per cent to £687.4 million and services by 31.5 per cent to £192.7 million.
Spending on the IT infrastructure Softcat specialises in has become “less and less discretionary”, he added, arguing that the need to invest in cyber security, hybrid cloud environments and end-user devices has become an “operational imperative”.
