TIDMSCT
RNS Number : 1392A
Softcat PLC
22 March 2017
SOFTCAT plc
("Softcat", the "Company")
Interim Results for the six months to 31 January 2017
Softcat plc (LSE: SCT.L), a leading UK provider of IT
infrastructure products and services, today publishes its interim
results for the six months to 31 January 2017 ("the period"). The
results demonstrate excellent growth, further profitable market
share gains and strong cash generation.
Six months
Financial Summary ended
31 January 31 January
2017 2016 Growth
----------- ----------- --------
GBPm GBPm %
Revenue 378.5 293.6 28.9
Gross profit 61.3 53.7 14.1
Adjusted operating
profit(a) 21.4 19.5 9.4
Operating profit 20.9 15.3 36.3
Interim dividend (p) 2.9p 1.7p 70.6(b)
Diluted earnings per
share (p) 8.5p 6.1p 39.3
Adjusted diluted earnings
per share(c) (p) 8.7p 8.2p 6.1
(a) Adjusted operating profit is defined as operating profit
before exceptional items and share-based payment charges.
(b) The high growth in the interim dividend reflects the
reduction applied in the prior period to account for the fact the
Company was only publicly listed for approximately two thirds of
the 2016 financial year.
(c) Adjusted diluted earnings per share is defined as profit
after tax before exceptional items and share based payment charges
divided by the weighted average number of shares including the
dilutive effect of share options.
Highlights for the six months to 31 January 2017
-- Gross profit up 14.1% to GBP61.3m (H1 2016: GBP53.7m)
-- Adjusted operating profit up 9.4% to GBP21.4m (H1 2016: GBP19.5m)
-- Excluding the one-off prior year procurement benefit (FY
2016: GBP3.4m, H1 2016: GBP1.6m), gross profit and adjusted
operating profit growth were 17.5% (H1 2016: +11.7%) and 16.4% (H1
2016: +6.1%), respectively
-- Operating profit up 36.3% to GBP20.9m, assisted by the
absence of IPO costs in the current period
-- Cash conversion was 112% (defined as cash flow from
operations before tax but after capital expenditure, as a
percentage of operating profit - H1 2016: 142%)
-- The Company remains debt free with a cash balance of GBP46.6m
-- Customer numbers up 8.7% (H1 2016: 6.7%), the fastest rate of
customer growth since H1 2014, reflecting the investment in the
sales force over the past 18 months
-- Adjusted diluted earnings per share up 6.1% from 8.2p to 8.7p
-- Interim dividend of 2.9p per share (H1 2016: 1.7p) to be paid on 28 April 2017
Martin Hellawell, Softcat CEO, commented:
"We are very pleased to report another set of strong results.
Growth in gross profit, our primary measure of income, was 14.1%.
The Company has made significant investments in new sales, services
and technical resource over the past 18 months and the return on
those investments is evident in our latest figures. As a result, we
are pleased to announce the payment of an interim dividend of 2.9p
per share, in line with the policy set out at the time of our
IPO.
I'd like to take this opportunity to thank all Softcat employees
for their continued dedication to delivering outstanding customer
service and shareholder value, and to our customers for their
continuing business and loyalty.
The Board is confident of meeting its expectations for the full
year. Whilst trading in the first six weeks of the second half has
been strong, we have some important months ahead and we remain
focussed on the job in hand."
Analyst meeting
A results presentation will be held for investors and analysts
at the offices of FTI Consulting: 9(th) Floor, 200 Aldersgate,
Aldersgate Street, London, EC1A 4HD on 22 March 2017. Registration
will open at 09.15 for a 09.30 start. Materials from this
presentation will be available online at www.softcat.com from
09.00. A copy of this announcement will also be available online
from 07.00.
Enquiries
Softcat plc: +44 (0)1628 403 403
Martin Hellawell, Chief
Executive Officer
Graham Charlton, Chief
Financial Officer
FTI Consulting LLP: +44 (0)20 3727 1000
Ed Bridges
Matt Dixon
Dwight Burden
Forward-looking statements
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". By their nature, such
statements involve risk and uncertainty since they relate to future
events and circumstances. Actual results may, and often do, differ
materially from any forward-looking statements.
Any forward-looking statements in this announcement reflect
management's view with respect to future events as at the date of
this announcement. Save as required by law or by the Listing Rules
of the UK Listing Authority, the Company undertakes no obligation
to publicly revise any forward-looking statements in this
announcement following any change in its expectations or to reflect
subsequent events or circumstances following the date of this
announcement.
Chief Executive Officer's Review
During the period the Company delivered further strong
performance with growth continuing to outstrip the sector as we
gain market share. Gross profit grew 14.1%, adjusted operating
profit increased 9.4% and cash conversion was 112%, underpinning
the payment of an interim dividend of 2.9p per share. With these
results, Softcat has delivered 46 consecutive quarters of revenue
and profit growth. Growth was particularly strong during Q2,
partially driven by customers placing orders before vendor price
rises took effect on 1 January 2017.
Revenue growth was especially strong at 28.9% with software,
hardware and services all delivering double-digit growth. Gross
margin percentage decreased due to the one-off procurement benefit
in the prior period, the impact of a large, low-margin licensing
deal and an increase in demand from customers for lower margin
workplace technology in part driven by a relative recovery in PC
sales.
While all areas of the business have performed well, it has been
pleasing to see particularly strong growth in some of our newer
offerings such as managed print, contractual support services and
professional services. Notwithstanding the ongoing adoption of
public cloud services, our on-premise data centre infrastructure
business also had a very strong first half, continuing a trend
evident throughout 2016.
Recruitment and retention of the sales force developed strongly
during the period. We also continue to invest in services
capability and technical expertise, responding to customer demand
and ensuring our offering continues to expand and keep pace with
changes in technology. Headcount growth across these areas has been
in excess of 30% in the last 12 months, including the addition of
key individuals with significant experience to complement our
graduate sales population.
The Company intends to continue recruitment during the second
half, driving our dual-track strategy of winning new customers and
selling more to existing customers. Progress against these
objectives in H1 has been strong:
- The Company traded with 800 more customers compared to the
same period last year, a rise of 8.7%. This is the fastest rate of
customer growth since H1 FY14 and demonstrates the on-going success
of our graduate model.
- Gross profit per customer grew 4.6% demonstrating that,
despite the natural dilution created by new customer growth, our
existing customers continue to entrust us with more and more of
their infrastructure needs (excluding the impact of non-recurring
procurement benefits in 2016, gross profit per customer increased
8.1%).
Given the recent opening of Glasgow, the relocation and
expansion of Bristol to a new city-centre location completed during
the period, and the planned expansion of Manchester, further new
office openings are not envisaged within the current financial year
as we focus on driving through the growth opportunity from this
expanded footprint.
During the period we were delighted that Softcat was named Cisco
EMEAR Partner of the Year, Adobe EMEA Partner of the Year, Hewlett
Packard Enterprise UKI Partner of the Year and CRN Reseller of the
Year. We also became the first Microsoft Licensing Solutions
Provider to sell one million Office 365 Enterprise Suite licenses
in the UK.
The Company continues to focus primarily on the significant
organic growth opportunity and the Board's view of acquisitions is
unchanged; we remain vigilant for new opportunities to accelerate
growth but will only act should we identify something genuinely
compelling.
Outlook
The Board is confident of meeting its expectations for the full
year. Whilst trading in the first six weeks of the second half has
been strong, we have some important months ahead and we remain
focussed on the job in hand.
Chief Financial Officer's Review
Financial Summary H1 FY17 H1 FY16 Growth
-------------------- ------------ ------------ -----------
Revenue GBP378.5m GBP293.6m 28.9%
-------------------- ------------ ------------ -----------
Revenue split
Software GBP193.4m GBP139.3m 38.9%
Hardware GBP126.3m GBP110.3m 14.5%
Services GBP58.7m GBP44.0m 33.5%
-------------------- ------------ ------------ -----------
Gross profit GBP61.3m GBP53.7m 14.1%
-------------------- ------------ ------------ -----------
Gross profit
margin 16.2% 18.3% (2.1% pts)
-------------------- ------------ ------------ -----------
Adjusted operating
profit GBP21.4m GBP19.5m 9.4%
-------------------- ------------ ------------ -----------
Adjusted OP:GP
margin 34.9% 36.4% (1.5% pts)
-------------------- ------------ ------------ -----------
Adjusted operating
profit margin 5.6% 6.7% (1.1% pts)
-------------------- ------------ ------------ -----------
Operating profit GBP20.9m GBP15.3m 36.3%
-------------------- ------------ ------------ -----------
(29.5%
Cash conversion 112.3% 141.8% pts)
-------------------- ------------ ------------ -----------
Revenue and gross profit
Gross profit is Softcat's primary measure of top-line
performance and the Company has delivered growth of 14.1% to
GBP61.3m. However, as stated in the 2016 annual report, prior year
gross profit benefited from non-recurring procurement savings of c.
GBP3.4m (H1 2016: GBP1.6m). Removing this effect 2017 H1 underlying
gross profit growth was 17.5% (H1 FY16: 11.7%).
The acceleration in underlying growth reflects continued
execution against our strategy of growing the customer base and
selling more products and services to existing customers. In
addition, the Company responded quickly to the opportunity to
secure pricing for customers ahead of January increases caused by
the fall in the value of sterling.
Gross profit margin decreased in the period by 2.1% pts to 16.2%
driven by the following factors:
-- The FY16 non-recurring procurement savings boosted the FY16 H1 margin by 0.6% pts;
-- The Company secured its largest ever public sector software
licensing deal for an 80,000-user central government department.
This contract was secured at low margin and decreased the overall
Company margin by 0.6% pts in the period;
-- The remaining 0.9% pts decline was predominately due to
changes in business mix. For example, the period saw increased
demand for lower-margin PC hardware (against a weak comparative).
Furthermore, there were some especially complex (and therefore
higher margin) software deals in the previous period that have not
been repeated.
Due to the strong gross profit performance and shift in business
mix, revenue growth was very strong at 28.9% (H1 2016: 10.4%).
Customer Metrics H1 FY17 H1 FY16 Growth
------------------ --------- --------- -------
Customer numbers 10.0k 9.2k 8.7%
------------------ --------- --------- -------
Gross profit
per customer GBP6.12k GBP5.85k 4.6%
------------------ --------- --------- -------
Customer numbers growth of 800 (8.7%) represents the fastest
absolute and percentage rate of growth achieved since H1 2014. This
reflects the ongoing success of the Company's graduate and
apprentice sales model.
Gross profit per customer also continued to grow, up 4.6%,
despite the natural dilutive impact of customer growth. Adjusting
for the non-recurring impact of the procurement savings in the
prior year, underlying gross profit per customer growth was
8.1%.
Adjusted operating profit
Adjusted operating profit increased by 9.4% to GBP21.4m,
reflecting the growth in gross profit and the continuing investment
in new capabilities and capacity. Removing the GBP1.2m net benefit
of the FY16 H1 non-recurring procurement benefit, underlying growth
was 16.4%.
Operating profit
Operating profit of GBP20.9m (H1 FY16: GBP15.3m) has grown by
36.3%, very significantly ahead of gross and adjusted operating
profit growth due to the impact of exceptional IPO costs of GBP3.7m
in the prior period.
Corporation tax charge
The interim tax charge of GBP4.2m reflects an effective tax rate
of 20.2% (2016: 22.7%). The lower effective tax rate compared to
last year is mostly the result of disallowable IPO-related expenses
in FY16 coupled with a fall in the applicable standard corporation
tax rate from 20.0% to 19.7% in the period. The effective tax rate
is also marginally above the statutory rate in both periods due to
the impact of non-deductible expenses.
Cash flow and cash conversion
The Company entered the year with a cash balance of GBP62.4m and
paid a final ordinary dividend of GBP7.1m and a special dividend of
GBP28.1m on 16 December 2016. The Company remains debt-free and
closed the period with a cash balance of GBP46.6m.
Operating cash flow after capital expenditure was strong during
the reporting period at GBP23.5m, representing a conversion rate of
112.3% of operating profit. This is consistent with underlying
(pre-IPO costs) conversion of 114.3% achieved in H1 FY16. The net
movement in working capital for H1 FY17 created a cash inflow of
GBP2.2m. Since FY16 year end there has been a small decrease in
debtor days and a small increase in creditor days due to
differences in trading seasonality between year-end and half
year-end.
The Company continues to target sustainable annual operating
cash conversion after capital expenditure in the range of 90-95% of
operating profits.
Capital investment
The Company's immediate requirements for capital investment to
fund growth remain relatively modest. Net capex of GBP1.1m (FY16
H1: GBP1.0m) in the period relates mainly to computer equipment and
fixtures & fittings to satisfy the demands of operational
growth.
Dividend
The Board is pleased to declare an interim dividend of 2.9p per
share, amounting in total to GBP5.7m. The interim dividend will be
payable on 28 April 2017 to shareholders whose names are on the
register at the close of business on 31 March 2017. Shares in the
Company will be quoted ex dividend on 30 March 2017. The DRIP
election date is 3 April 2017. This interim dividend is an increase
of 71% on FY16, reflecting both the growth in profit and the
reduction in the prior period dividend due to the Company having
only been publicly listed since November 2015, and demonstrates the
Company's continued commitment to return excess cash to
shareholders.
Principal Risks and Uncertainties
Like most businesses, there is a range of risks and
uncertainties facing the Company. A brief summary is given below
detailing the specific risks and uncertainties that the Directors
believe could have a significant effect on the Company's financial
performance.
In assessing the Company's likely financial performance for the
second half of the current financial year, these risks and
uncertainties should be considered in addition to the matters
referred to regarding seasonality in note 15 to the condensed
interim financial statements, and the comments made under the
heading "outlook" in the Chief Executive's Review.
-- Customer dissatisfaction: If we fail to deliver a
differentiated and superior experience to our customers, this could
diminish our brand and reputation and impact on our growth;
-- Technology: If we fail to evolve our technology offering with
changing customer needs, this could potentially lead to customer
churn and/or significant downward pressure on our margins;
-- Cyber security: A successful cyber-attack or internal event
could result in us not being able to deliver services to our
customers or failing to protect data we collect and hold on
customers, employees and vendors;
-- Disruption to Managed Services operations: If our IT systems
fail, the service provided from our network operating centre which
facilitates the selling of hosted managed services may be
significantly interrupted. This could impact on customer
satisfaction and diminish our brand and reputation;
-- Profit margin pressure including rebates: If we fail to
manage the effect of internal or market forces on our margins, this
could result in reduced margins and erode profits;
-- Culture change: Our culture is an integral part of our
business model. If we fail to maintain our culture, this could
impact on the level of staff engagement and on customer
experience;
-- Poor leadership: If we fail to retain and develop a strong
leadership team, this could impact on the delivery of Softcat's
strategy, impact on staff engagement and vendor relationships.
These risks and uncertainties have not changed significantly
since 31 July 2016. Further information on the risks can be found
on pages 24 to 25 of Softcat 2016 Annual Report and Accounts, which
is available at
https://www.softcat.com/investor-relations/reports-and-presentations/annual-report-and-accounts-2016.pdf
Going Concern
As stated in note 2 to the Condensed Interim Financial
Statements, the Directors are satisfied that the Company has
sufficient resources to continue in operation for the foreseeable
future, a period of at least 12 months from the date of this
report. Accordingly, they continue to adopt the going concern basis
in preparing the Condensed Interim Financial Statements.
Cautionary Statement
This report has been prepared solely to provide additional
information to shareholders to assess the Company's strategies and
the potential for those strategies to succeed. The Interim
Management Report should not be relied on by any other party or for
any other purpose.
In making this report, the Company is not seeking to encourage
any investor to either buy or sell shares in the Company. Any
investor in any doubt about what action to take is recommended to
seek financial advice from an independent financial advisor
authorised by the Financial Services and Markets Act 2000.
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge:
-- the unaudited Condensed Interim Financial Statements have
been prepared in accordance with International Accounting Standard
34 Interim Financial Reporting as adopted by the European
Union;
-- the Interim Management Report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- the Interim Management Report includes a fair review of the
information required by DTR 4.2.8R (disclosure of relates parties'
transactions and changes therein).
Neither the Company nor the directors accept any liability to
any person in relation to the half-year financial report except to
the extent that such liability could arise under English law.
Accordingly, any liability to a person who has demonstrated
reliance on any untrue or misleading statement or omission shall be
determined in accordance with section 90A and schedule 10A of the
Financial Services and Markets Act 2000.
Martin Hellawell Graham Charlton
Chief Executive Officer Chief Financial Officer
22 March 2017 22 March 2017
Condensed Statement of profit or loss and other comprehensive
income
For the six months ended 31 January 2017
Six months Year
ended 31 January ended
31 July
2017 2016 2016
Unaudited Unaudited Audited
Note
GBP'000 GBP'000 GBP'000
Revenue 3 378,450 293,591 672,351
Cost of sales (317,200) (239,916) (551,634)
---------- ---------- ----------
Gross profit 61,250 53,675 120,717
Administrative expenses (40,358) (38,347) (78,527)
---------- ---------- ----------
Operating profit 20,892 15,328 42,190
Adjusted operating profit 21,366 19,527 46,751
Exceptional costs 4 - (3,693) (3,673)
Share - based payments
charge 2 (474) (506) (888)
---------- ---------- ----------
Finance income 88 106 213
---------- ---------- ----------
Profit before taxation 20,980 15,434 42,403
Income tax expense 5 (4,235) (3,501) (9,245)
---------- ---------- ----------
Profit for the year attributable
to owners of the Company 16,745 11,933 33,158
---------- ---------- ----------
Total comprehensive income
for the year attributable
to owners of the Company 16,745 11,933 33,158
========== ========== ==========
Basic earnings per Ordinary
Share (pence) 10 8.5p 6.1p 16.9p
Diluted earnings per Ordinary
Share (pence) 10 8.5p 6.1p 16.9p
Adjusted basic earnings
per Ordinary Share (pence) 10 8.7p 8.2p 19.2p
Adjusted diluted earnings
per Ordinary Share (pence) 10 8.7p 8.2p 19.1p
All results are derived from continuing operations.
Condensed Statement of Financial Position
As at 31 January 2017
31 January 31 July
2017 2016 2016
Unaudited Unaudited Audited
Note
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 6,143 6,763 6,391
Intangible assets 944 632 667
Deferred tax asset 419 522 426
---------- ---------- ----------
7,506 7,917 7,484
Current assets
Inventories 5,622 3,922 4,611
Trade and other receivables 7 151,673 113,473 132,787
Cash and cash equivalents 46,620 54,881 62,361
---------- ---------- ----------
203,915 172,276 199,759
---------- ---------- ----------
Total assets 211,421 180,193 207,243
========== ========== ==========
Current liabilities
Trade and other payables 8 (137,583) (108,778) (115,527)
Income tax payable (4,086) (2,456) (4,352)
---------- ---------- ----------
(141,669) (111,234) (119,879)
---------- ---------- ----------
Net assets 69,752 68,959 87,364
========== ========== ==========
Equity
Issued share capital 12 99 99 99
Share premium account 4,664 4,455 4,454
Other reserves (3,423) (3,530) (3,531)
Retained earnings 68,412 67,935 86,342
---------- ---------- ----------
Total equity 69,752 68,959 87,364
========== ========== ==========
Condensed Statement of Changes in Equity
Reserve
for
Share Share own Retained Total
capital premium shares earnings equity
--------- --------- -------- ---------- ---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 August
2016 99 4,454 (3,531) 86,342 87,364
Total comprehensive
income for the period - - - 16,745 16,745
Share-based payment
transactions - - - 436 436
Dividends paid - - - (35,174) (35,174)
Shares issued in
period - 210 - - 210
Tax adjustments - - - 63 63
Own share movement
during the period - - 108 - 108
--------- --------- -------- ---------- ---------
Balance at 31 January
2017 99 4,664 (3,423) 68,412 69,752
Balance at 1 August
2015 98 3,942 (3,994) 95,770 95,816
Total comprehensive
income for the period - - - 11,933 11,933
Share-based payment
transactions - - - 189 189
Dividends paid - - - (40,098) (40,098)
Shares issued in
period 1 513 - - 514
Tax adjustments - - - 141 141
Own share movement
during the period - - 464 - 464
--------- --------- -------- ---------- ---------
Balance at 31 January
2016 99 4,455 (3,530) 67,935 68,959
Condensed Statement of Cash Flows
For the six months ended 31 January 2017
Six months
ended Year
31 January ended
31
July
2017 2016 2016
---------- ---------- ---------
Unaudited Unaudited Audited
Note
GBP'000 GBP'000 GBP'000
Net cash generated from
operating activities 11 20,120 18,497 29,925
Investing activities
Finance income 88 106 213
Purchase of property,
plant and equipment (657) (686) (1,190)
Purchase of intangible
assets (443) (335) (536)
Proceeds from asset disposals 7 6 11
---------- ---------- ---------
Net cash used in investing
activities (1,005) (909) (1,502)
Financing activities
Issue of share capital 210 513 513
Deferred purchase share
proceeds - 1,772 1,773
Dividends paid 6 (35,174) (40,098) (43,453)
Own share transactions 108 464 463
---------- ---------- ---------
Net cash used in financing
activities (34,856) (37,349) (40,704)
---------- ---------- ---------
Net decrease in cash and
cash equivalents (15,741) (19,761) (12,281)
Cash and cash equivalents
at beginning of period 62,361 74,642 74,642
---------- ---------- ---------
Cash and cash equivalents
at end of period 46,620 54,881 62,361
========== ========== =========
Notes to the Financial Information
1. General information
The Directors of Softcat plc (the "Company") present their
Interim Report and the unaudited Condensed Interim Financial
Statements for the six months ended 31 January 2017 ("Condensed
Interim Financial Statements").
The Company is a public limited company, incorporated and
domiciled in the UK. Its registered address is Fieldhouse Lane,
Marlow, Buckinghamshire, SL7 1LW.
The Condensed Interim Financial Statements have been reviewed,
but not audited, by Ernst & Young LLP and were approved by the
Board of Directors on 22 March 2017. The financial information
contained in this report does not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006. The
Condensed Interim Financial Statements should be read in
conjunction with the Annual Report and Financial Statements for the
year ended 31 July 2016, which were prepared in accordance with
European Union endorsed International Financial Reporting Standards
("IFRS") and those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. The Annual Report and Financial
Statements for the year ended 31 July 2016 were approved by the
Board of Directors on 19 October 2016 and delivered to the
Registrar of Companies. The auditor's report on those financial
statements was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498(2) or
(3) of the Companies Act 2006.
2. Accounting policies
2.1 Basis of preparation
These Condensed Interim Financial Statements have been prepared
in accordance with International Accounting Standard 34, 'Interim
Financial Reporting' as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
The Condensed Interim Financial Statements are presented in
Pounds Sterling, rounded to the nearest thousand ('GBP'000'),
unless otherwise stated. They were prepared under the historical
cost convention.
Going concern
The Directors are satisfied that the Company has sufficient
resources to continue in operation for the foreseeable future, a
period of at least 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing the Condensed Interim Financial statements.
Changes to accounting standards
There have been no changes to accounting standards during the
period which have had or are expected to have any significant
impact on the Company.
Accounting policies
The accounting policies adopted in the preparation of the
Condensed Interim Financial Statements are consistent with those
applied in the preparation of the Company's Financial Statements
for the year ended 31 July 2016.
Exceptional items
Items that are material in size and unusual in nature are
included within operating profit and disclosed separately in the
condensed statement of profit or loss and other comprehensive
income. The separate reporting of these items helps to provide a
more accurate indication of the underlying business
performance.
Share based payment charges
The share based payment charge includes a fair value charge of
GBP436,468 (H1 2016: GBP188,792) and an accrual for employers
national insurance contributions of GBP37,460 (H1 2016:
GBP317,020), which become payable on exercise of share options and
long term incentive awards.
Adjusted operating profit
The Company discloses an adjusted operating profit measure as
this is used by management to measure performance and also provides
a useful metric for shareholders. Management use this metric as it
removes the impact of one-off or volatile non-trading expenses
which, when included, may distract the user from understanding the
underlying performance of the Company. The term adjusted operating
profit is not a defined term under IFRS and may not therefore be
comparable with similarly titled profit measurements reported by
other companies. It is not intended to be a substitute for, or
superior to, IFRS measures of profit.
3. Segmental information
The information reported to the Company's Chief Executive
Officer, who is considered to be the chief operating decision maker
for the purposes of resource allocation and assessment of
performance, is based wholly on the overall activities of the
Company. The Company has therefore determined that it has only one
reportable segment under IFRS 8, which is that of "value-added IT
reseller and IT infrastructure solutions provider". The Company's
revenue, results and assets for this one reportable segment can be
determined by reference to the statement of comprehensive income
and statement of financial position. An analysis of revenues by
product, which form one reportable segment, is set out below:
Six months
ended Year
Revenue by type 31 January ended
31
July
2017 2016 2016
-------- -------- --------
GBP'000 GBP'000 GBP'000
Software 193,398 139,271 319,978
Hardware 126,312 110,327 250,692
Services 58,740 43,993 101,681
-------- -------- --------
378,450 293,591 672,351
======== ======== ========
The total revenue for the Company has been derived from its
principal activity as an IT reseller. Substantially all of this
revenue relates to trading undertaken in the United Kingdom.
4. Exceptional items
Operating profit for the year has been arrived at after
charging:
Six months
ended Year
31 January ended
31
July
2017 2016 2016
--------- -------- --------
GBP'000 GBP'000 GBP'000
IPO costs - 3,693 3,673
All IPO costs incurred relate to the Company's listing on the
London Stock Exchange in November 2015.
5. Taxation
Six months
ended Year
31 January ended
31
July
2017 2016 2016
-------- -------- --------
GBP'000 GBP'000 GBP'000
Current Tax
Current period 4,243 3,451 9,179
Adjustment for prior years - - (7)
Deferred Tax
Temporary timing differences (8) 50 73
-------- -------- --------
Total tax charge for the
period 4,235 3,501 9,245
The income tax expense was recognised based on management's best
estimate of the annual income tax rate expected for the full
financial year, applied to the profit before tax for the half year
ended 31 January 2017. On this basis, the Company's tax charge was
GBP4.2m (H1 2016: GBP3.5m). The applicable statutory tax rate for
the full year is 19.7% (H1 2016: 20.7%). Following adjusting items
which relate to client entertaining and non qualifying
depreciation, the effective tax rate is 20.2% (H1 2016: 22.7%). The
effective tax rate has fallen due to a 1% fall in the full year
statutory rate and a reduction in non-deductible expenses, in
particular costs of the initial public offering in the prior
year.
6. Ordinary Dividends
Six months
ended Year
31 January ended
31
July
2017 2016 2016
-------- -------- --------
GBP'000 GBP'000 GBP'000
Declared and paid during
the period, prior to IPO
and share reorganisation:
Ordinary dividend on ordinary
shares 36,765 36,765
Ordinary dividend on 'MR'
shares 864 864
Ordinary dividend on 'A'
ordinary shares 2,469 2,469
-------- --------
40,098 40,098
Declared and paid during
the period, post IPO and
share reorganisation:
Interim dividend for the
year ended 31 July 2016 - 3,355
Final dividend for the year
ended 31 July 2016 7,114 -
Special dividend 28,060 -
-------- --------
35,174 43,453
The dividends paid in the six months ended 31 January 2016 were
paid prior to the reorganisation of share capital, see note 12, and
therefore are shown as dividends split between the
pre-reorganisation share classes.
An interim dividend of 2.9p per share, amounting to a total
dividend of GBP5.73m was declared post period end and is to be paid
on 28 April 2017 to those on the share register on 31 March
2017.
7. Trade and other receivables
Six months
ended Year
31 January ended
31
July
2017 2016 2016
-------- -------- --------
GBP'000 GBP'000 GBP'000
Trade receivables 143,194 107,471 123,833
Provision against receivables (1,150) (853) (1,265)
-------- -------- --------
Net trade receivables 142,044 106,618 122,568
Other debtors 276 41 59
Prepayments 3,914 3,125 4,764
Accrued Income 5,439 3,689 5,396
-------- -------- --------
151,673 113,473 132,787
8. Trade and other payables
Six months
ended Year
31 January ended
31
July
2017 2016 2016
-------- -------- --------
GBP'000 GBP'000 GBP'000
Trade payables 91,774 72,552 67,759
Other taxes and social security 12,927 8,939 11,778
Accruals 27,786 22,874 24,000
Deferred Income 5,096 4,413 11,990
-------- -------- --------
137,583 108,778 115,527
9. Financial Instruments
The Company's principal financial liabilities comprise trade and
other payables. The primary purpose of these financial liabilities
is to finance the Company's operations. The Company has trade and
other receivables and cash that derive directly from its
operations.
Six months
ended Year
31 January ended
31
July
2017 2016 2016
---------- --------- ---------
GBP'000 GBP'000 GBP'000
Financial assets
The financial assets of the
Company were as follows:
Cash at bank and in hand 46,620 54,881 62,361
Trade and other receivables 151,673 113,473 132,787
---------- --------- ---------
198,293 168,354 195,148
Financial liabilities
The financial liabilities
of the Company were as follows:
Trade payables (91,774) (72,552) (67,759)
Accruals (27,786) (22,874) (24,000)
---------- --------- ---------
(119,560) (95,426) (91,759)
The Directors consider that the carrying amount for all
financial assets and liabilities approximate to their fair
value.
10. Earnings per share
Six months
ended Year
31 January ended
31
July
2017 2016 2016
------ ------ -------
Pence Pence Pence
Earnings per share
Basic 8.5 6.1 16.9
Diluted 8.5 6.1 16.9
Adjusted earnings per share
Basic 8.7 8.2 19.2
Diluted 8.7 8.2 19.1
The calculation of the basic and adjusted earnings per share and
diluted earnings per share is based on the following data:
Six months
ended Year
31 January ended
31
July
2017 2016 2016
-------- -------- --------
GBP'000 GBP'000 GBP'000
Earnings
Earnings for the purposes
of earnings per share being
profit for the period 16,745 11,933 33,158
-------- -------- --------
Adjusted Earnings
Profit for the period 16,745 11,933 33,158
Exceptional costs - 3,693 3,673
Share based payment charge 474 506 888
Tax effect of adjusting items (7) (46) (97)
-------- -------- --------
Earnings for the purposes
of adjusted earnings per
share 17,212 16,086 37,622
The weighted average number of shares is given below:
Six months
ended Year
31 January ended
31
July
2017 2016 2016
-------- -------- --------
000's 000's 000's
Number of shares used for
basic earnings per share 196,887 195,935 196,040
Number of shares deemed to
be issued at nil consideration
following exercise of share
options 515 696 696
-------- -------- --------
Number of shares used for
diluted earnings per share 197,402 196,631 196,736
11. Notes to the cash flow statement
Reconciliation of operating
profit to net cash inflow
from operating activities
Six months
ended Year
31 January ended
31 July
2017 2016 2016
--------- -------- ---------
GBP'000 GBP'000 GBP'000
Operating profit 20,892 15,328 42,190
Depreciation of property,
plant and equipment 824 920 1,796
Amortisation of intangibles 165 161 327
(Profit)/loss on disposal
of fixed assets 73 (6) (9)
Cost of equity-settled employee
share schemes 436 189 572
--------- -------- ---------
Operating cash flow before
movements in working capital 22,390 16,592 44,876
Increase in inventories (1,008) (1,270) (1,961)
(increase)/Decrease in trade
and other receivables (18,886) 6,706 (12,608)
Increase in trade and other
payables 22,057 725 7,474
--------- -------- ---------
Cash generated from operations 24,553 22,753 37,781
Income taxes paid (4,433) (4,256) (7,856)
--------- -------- ---------
Net cash generated from operating
activities 20,120 18,497 29,925
========= ======== =========
12. Share capital
Year
ended
31
July
2015
--------
Authorised GBP'000
Pre-reorganisation
Ordinary shares of 1p each 112
'MR' shares of 1p each 2
'A' ordinary shares of 1p each 6
--------
120
Limits on authorised share capital were removed on
re-registration as a public limited company.
Six months
ended Year ended
31 January 31 July
2017 2016 2016 2015
-------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
Allotted and called
up
Ordinary shares of 1p
each 90
'MR' shares of 1p each 2
'A' ordinary shares
of 1p each 6
--------
98
Post - reorganisation
Ordinary shares of 0.05p
each 99 99 99
Deferred shares* of
0.01p each - - -
-------- -------- --------
99 99 99
*At 31 January 2017 the deferred shares
had an aggregate nominal value of GBP189.33
On 12 November 2015, by special resolution of the Company, it
was resolved that:
-- 188,500 'MR' shares of GBP0.01 each be redesignated as
ordinary shares of GBP0.01 each and their rights varied
accordingly;
-- 588,322 'A' ordinary shares of GBP0.01 each be redesignated
as ordinary shares of GBP0.01 each and their rights varied
accordingly;
-- 18,933 'A' ordinary shares of GBP0.01 each be redesignated as
deferred shares of GBP0.01 each; and
-- each ordinary share of GBP0.01 be sub-divided into 20
ordinary shares of GBP0.0005 each.
13. Related party transactions
Dividends to Directors
The following Directors, who served as Directors for either the
whole or part of the interim period, were paid the following
dividends:
Six months
ended Year
31 January ended
31
July
2017 2016 2016
-------- -------- --------
GBP'000 GBP'000 GBP'000
M J Hellawell 2,632 4,868 5,119
B Wallace 153 175 190
L Ginsberg 4 - -
V Murria 5 - -
P Ventress 5 - -
-------- -------- --------
2,799 5,043 5,309
With the exception of the above, there were no other significant
related party transactions.
14. Post balance sheet events
Dividend
An interim dividend of 2.9p per share, amounting to a total
dividend of GBP5.73m was declared post period end and is to be paid
on 28 April 2017 to those on the share register on 31 March
2017.
15. Seasonality of operations
Historically, revenues have been marginally higher in the second
half of the year than in the first six months. This is principally
driven by customer buying behaviour in the markets in which we
operate. This increased revenue weighting in the second half of the
year has traditionally resulted in higher operating profit in the
second half.
Independent review report to Softcat plc
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended January 31, 2017, which comprises the condensed
statement of financial position as at January 31, 2017 and the
related condensed statement of profit or loss and other
comprehensive income, condensed statement of changes in equity and
condensed statement of cash flows for the six-month period then
ended and explanatory notes. We have read the other information
contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in notes 1 and 2, the annual financial statements
of the Company are prepared in accordance with IFRSs as adopted by
the European Union. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with the International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
January 2017 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
22 March 2017
Corporate Information
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial information differs from
legislation in other jurisdictions.
Directors
G L Charlton
M J Hellawell
L Ginsberg
V Murria
P Ventress
B Wallace
Secretary
W Chime
Company registration number
02174990
Registered office
Solar House
Fieldhouse Lane
Marlow
Buckinghamshire
SL7 1LW
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FMGZFNMRGNZM
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