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UK tech supplier Softcat shows off fuller figures

Less hunger for low-margin PC stuff, apparently

Mid-market reselling monster Softcat is still piling on the pounds after adding hundreds of new punters and squeezing more out of existing ones. But the tech supplier agrees with Chancellor Osborne - storm clouds are gathering over the UK economy.

At the half-way stage of fiscal ’16 ended 31 January, turnover at the Marlow-based biz that listed on LSE in November - with a market cap of £472m - bounced 10.4 per cent to £293.6m.

Software sales - the starting point for the company when it was founded in the 90s - grew 11.6 per cent to £139.3m; hardware was up more modestly by 4.2 per cent to £110.3m’ and services (managed including remote support and monitoring) leaped more than a quarter to £44m.

Martin Hellawell, CEO, described market demand for “more complex solutions” as “buoyant”. This was most visible in security, networking and “full data centre” systems - both on premise and in the cloud.

Conversely, the exec conceded less hunger from customers in low-margin areas, “particularly in the PC category”, which led to resellers undercutting each other.

“The company is not chasing unprofitable revenue and therefore did not compete at the levels required to win these deals, instead choosing to focus attention on areas where customer service and advice is most needed.”

This is a strategy pursued by some of the bigger vendors out there, including HP Inc.

Some 600 fresh customers were captured by Softcat in the six month, taking the total number to 9,200, up from 8,600 in the same period of the previous year. Average revenue per customer went up 3.2 per cent to £31,800.

Extra junior account managers joined the company under the grad scheme, taking the total account manager headcount to 397, compared to 316 in H1 fiscal ’15. The office in Glasgow was launched in the period.

Gross profit - one of the indicators used by management at Softcat to test their vitality - was up 15.1 per cent to £53.7m and gross profit margin was up 0.8 per cent to 18.3 per cent, though roughly half of this margin expansion was related unspecified “non-recurring procurement benefits” that are expected to continue until the end of March.

Adjusted operating profit was up to £19.52m from £17.29m, but this excluded £3.6m in exceptional costs due to the IPO and £506,000 in share based payments.

Operating profit as reported fell to £15.32m from £17.23m, finance income of £106,000 pushed profit before tax to £15.43m Net profit was £11.93m versus £13.54m.

Softcat said the outlook for the second fiscal ’16 supports its full-year guidance, but it was “mindful of the risks posed to business confidence by general global economic uncertainty, as well as potential political distractions within the UK during the coming months”.

The Chancellor yesterday downgraded growth forecasts for the UK economy, pulling it down from projections of 2.4 per cent to two per cent. ®

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