TIDMSCT
RNS Number : 8694T
Softcat PLC
18 October 2017
SOFTCAT plc
("Softcat", the "Company")
Preliminary Results for the twelve months to 31 July 2017
Strong growth and cash generation, final and special dividends
totalling 19.6p proposed
Softcat plc (LSE: SCT.L), a leading UK provider of IT
infrastructure products and services, today publishes its full year
results to 31 July 2017. The results demonstrate strong revenue
growth, profit performance and cash generation during the
period.
Twelve months
Financial Summary ended
31 July 31 July
2017 2016 Growth
--------- --------- --------
GBPm GBPm %
Revenue GBP832.5 GBP672.4 23.8
Gross profit GBP136.3 GBP120.7 12.9
Operating profit GBP50.2 GBP42.2 18.9
Adjusted operating
profit(a) GBP51.5 GBP46.8 10.1
Cash conversion(b) 97.2% 85.5% n/a
Final dividend (p) 6.1 3.6 69.4(c)
Special dividend (p) 13.5 14.2 (4.9)
Diluted earnings per
share (p) 20.2 16.9 19.5
Adjusted diluted earnings
per share(d) (p) 20.9 19.1 9.4
(a) Adjusted operating profit is defined as operating profit
before exceptional items and share-based payment charges.
(b) Cash conversion is defined as cash flow from operations
before tax but after capital expenditure, as a percentage of
operating profit.
(c) The high growth in the final 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.
(d) 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 twelve months to 31 July 2017
-- Revenue up 23.8% to GBP832.5m (2016: GBP672.4m)
-- Gross profit up 12.9% to GBP136.3m (2016: GBP120.7m)
-- Gross profit margin down 1.6% pts to 16.4% (2016: 18.0%)
-- Operating profit growth of 18.9% to GBP50.2m (2016: GBP42.2m)
-- Adjusted operating profit up 10.1% to GBP51.5m (2016: GBP46.8m)
-- In 2016 gross profit included the benefit of a one-off
procurement saving of GBP3.4m. Excluding this, in 2017 gross profit
grew by 16.2% (2016: 14.1%) and adjusted operating profit by 16.4%
(2016: 8.9%)
-- Cash conversion of 97.2% (2016: 85.5%), reflecting the
ongoing close management of working capital
-- Net cash position at year end of GBP61.6m, after payment of GBP40.9m dividends during 2017
-- Customer numbers up 6.0% to 13,000 (2016: 12,200), gross
profit per customer growth of 6.5%, to GBP10,500 (2016:
GBP9,900)
-- Average headcount up 18%, reflecting further investment
across all areas of the business, especially in our services and
technical capability
-- Total dividend relating to 2017 up 15% to 22.5p (2016: 19.5p)
Martin Hellawell, Softcat CEO commented
"I'm pleased to report on another very strong year for Softcat
with 24% revenue growth and double-digit growth in both gross
profit and operating profit.
Our simple strategy of winning new customers and selling more to
existing customers was successfully executed, and we were delighted
to welcome an incremental 800 customers last year and to see gross
profit per customer increase by over six per cent. Once again this
was achieved through unwavering focus on customer service,
delivered by an outstanding team of highly engaged Softcat
people.
Our search for a new CEO is progressing. In the meantime I
remain fully focussed on doing the job and look forward when the
time comes to continuing with the company as non-executive
Chairman.
It's been a privilege to lead Softcat through a period of 48
quarters of top line and bottom line year-on-year organic growth
and, while we are far from perfect and have much we can improve on,
the business is in good shape and the opportunity ahead of us is
clear."
Outlook
Our financial year starts on August 1(st) and as I write this we
are approximately ten weeks into the new year. It's very early days
and there is still all to play for but we are where we would like
to be at this stage.
Analyst meeting
A results presentation for analysts and investors will be held
today at the offices of FTI Consulting: 9(th) Floor, 200
Aldersgate, Aldersgate Street, London, EC1A 4HD. 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)2037 271 000
Ed Bridges
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
We had a very satisfactory financial year 2017 and I am pleased
with the outcome.
Revenue growth was really strong at 24%. I'm always most
interested in our gross profit growth and that was equally pleasing
for me being up 13% despite last year containing a one-off benefit
that we knew would not repeat. So, excluding that, in underlying
terms growth in gross profit was 16%. Our growth would indicate
that once again we have taken further market share in our
sector.
The gross profit growth resulted in 10% adjusted EBIT growth
(16% underlying, i.e. excluding the 2016 one-off
procurement-related benefit), while we continue to invest in new
capabilities. That, combined with another year of strong cash
generation, result in the special dividend we've proposed alongside
these results.
All our major business lines showed good growth in the year. Our
security and services businesses were perhaps the two stand-out
performers, delivering very strong growth.
Our security business has been one of our key strengths for many
years now. We saw strong underlying growth in this area which was
further assisted by purchases related to organisations preparing
themselves for General Data Protection Regulation (GDPR) compliance
which will be enforced from 25 May 2018. This is a significant
challenge for the majority of our customers and there is a lot more
work required in this area, which is therefore a good opportunity
for us moving forward. General security risks continue to grow in
complexity and frequency and are now a major board room priority,
highlighted by high profile events like the Wannacry attacks.
Softcat was particularly proactive in advising and assisting
customers on these types of threats.
We have invested significantly in our own services capability
and we continue to work with a number of third party organisations
to complement our internal offering. Particularly in areas such as
hybrid cloud migration and mobility, in many cases customers are
looking to Softcat to provide a complete solution rather than
trying to stitch various technology components together themselves.
We completed a large number of projects in these areas using tried
and tested expertise and templates.
We have six existing branches and all met expectations and
achieved positive growth. The stand-out performers were Manchester
and London. We very much enjoyed our first full financial year in
Scotland and are delighted with the number of new Scottish
customers who are trading with Softcat since we became established
there. We also recently announced that we intend to open a seventh
location in Southampton in the first half of this new financial
year.
The SMB and mid-market remains our largest segment and despite
our market leadership position continues to grow well from a very
large base. Our public sector business saw very strong growth again
this year and the enterprise segment also outpaced overall company
growth and it's pleasing to see us tapping into that opportunity.
The vast majority of our business is in the UK but we assist an
increasing number of our customers with their requirements outside
the UK.
In terms of market and technology trends, we see an increasing
proportion of our software licensing business transition to a cloud
based platform. For example, we may previously have sold Microsoft
licensing agreements for Office which were installed by customers
on their sites. Today, many customers are choosing to consume
Office from the Cloud with Office 365.
For reasons of control, security, cost and the difficulty of
porting legacy applications to the cloud, customers own
infrastructure and private cloud infrastructure still has its
place. Indeed we have seen several instances of customers moving
back from the public cloud to the private cloud environment.
Overall however, we see a continuing trend from customers to
transition towards the public cloud for an increasing number of
workloads. Softcat has subsequently grown a strong Microsoft Azure
business over recent years and is working with a number of
customers on the Amazon AWS platform.
Consequently we see a growing opportunity to develop our
services and support business by helping customers migrate to a
hybrid and public cloud environment. We can then work with
customers to support and manage those environments. This is
effectively an opportunity to augment our already very large
subscription licensing business, a part of the business we've been
well known for throughout our history and received many plaudits
for.
In particular, we want to be the best in cloud and traditional
subscription software, we want to be the go to security company in
the market and the partner of choice for cloud and datacentre.
There's plenty to do but we're well on our way.
We continue to define our business into three broad categories -
workplace technology which is all the standard technology on or
around a customer's desk, networking & security, and datacentre
and cloud. All areas are affording us plenty of opportunity and we
continue to expand our offering in each. In the workspace area our
managed print offering has gained significant traction. Last year
we expanded our range of extended support services particularly in
the networking area and this has added considerable incremental
business and profitability for the company.
While we have performed well for many years now and have enjoyed
48 quarters of top line and bottom line growth, the opportunity
ahead of us is clear. If you just take the list of the top 100 VARs
in the UK and put our turnover against the aggregated total, that
gives us around six and a half per cent market share. And there are
a lot more than one hundred VARs out there. That gives us at least
93.5% of the market still to go for. Our sales force strength, the
breadth and depth of our capability have never been better and
there's great momentum in the company. Despite questions around the
economy, our exit from the EU and public sector policy, the market
for what we do feels quite buoyant. We're lucky to have a very
broad portfolio and our customer centricity and flexibility allows
us to move quickly to the areas in the market where there is most
demand, which makes us far less vulnerable to specific technology
segments.
The opportunity is there for the taking but we are well aware
that only constant hard work, hunger and excellent execution will
allow us to take it.
I would like to thank our employees for taking the opportunity
last year and for all their tremendous support, commitment, hard
work and camaraderie during 2017 and over my last eleven years with
Softcat. I would also like to thank our very valued customers who
continue to be a pleasure to work with and who keep pushing us on
to ever greater things. And finally I would like to thank our
business partners who continue to give Softcat a tremendous amount
of support for which we are extremely grateful.
Chief Financial Officer's Review
Financial Summary FY17 FY16 Growth
-------------------- ------------ ------------ -----------
Revenue GBP832.5m GBP672.4m 23.8%
-------------------- ------------ ------------ -----------
Revenue split
Software GBP414.8m GBP320.0m 29.6%
Hardware GBP287.4m GBP250.7m 14.6%
Services GBP130.3m GBP101.7m 28.1%
-------------------- ------------ ------------ -----------
Gross profit GBP136.3m GBP120.7m 12.9%
-------------------- ------------ ------------ -----------
Gross profit
margin 16.4% 18.0% (1.6% pts)
-------------------- ------------ ------------ -----------
Adjusted operating
profit GBP51.5m GBP46.8m 10.1%
-------------------- ------------ ------------ -----------
Adjusted operating
profit margin 6.2% 7.0% (0.8% pts)
-------------------- ------------ ------------ -----------
Operating profit GBP50.2m GBP42.2m 18.9%
-------------------- ------------ ------------ -----------
Cash conversion 97.2% 85.5% 11.7% pts
-------------------- ------------ ------------ -----------
Revenue, gross profit and gross margin
Revenue growth was very strong at 23.8%, rising to GBP832.5m
(2016: GBP672.4m). This reflects good progress across all customer
segments with public sector business once again expanding fastest
and rising as a proportion of total income to 31% (2016: 29%).
Public sector revenue performance was boosted by the signing of a
large central government, low margin deal during the first half
worth up to GBP40m over 3 years, with GBP14m of income booked
during 2017. Revenue growth was also very strong across the
corporate sector by virtue of both new customer wins and
cross-selling new products to existing customers.
Revenue mix across technology categories (software, hardware and
services) was largely unchanged. Services expanded slightly as a
proportion of the total to 15.6% (2016: 15.1%) due to good growth
from both the expansion of in-house professional service capacity
as well as the introduction of new vendor support services.
Gross profit grew strongly, up 12.9% to GBP136.3m (2016:
GBP120.7m). Prior year gross profit includes the impact of GBP3.4m
non-recurring procurement savings within cost of sales. Excluding
this impact, gross profit grew in 2017 by 16.2% (2016: 14.1%). This
acceleration in underlying growth reflects further gains in market
share and pleasing returns on investment in sales and technical
capabilities over the past 18 months.
Gross profit margin was down during the year from 18.0% to 16.4%
due to the following key factors:
- non-recurring impact of procurement savings in 2016 (0.5% pts);
- large low margin central government contract in H1 2017 (0.3% pts)
- partial impact on Softcat margin from currency-induced vendor price rises (0.5% pts); and
- other (0.3% pts).
Customer KPIs
Customer numbers were up 6.0% to 13.0k (2016: 12.2k) reflecting
the continued efforts of both new hires and existing account
managers to expand our reach.
Perhaps even more pleasing, gross profit per customer rose 6.5%
(2016: 9.2%), or 9.6% (2016: 6.2%) on an underlying basis
(excluding the 2016 procurement benefit). This acceleration in
underlying gross profit per customer growth bears close correlation
with the Company's ability to cross-sell new product lines to
existing customers and increase share of wallet.
Revenue remains well dispersed across the customer base, with
the largest customer accounting for less than 2% of total
income.
Adjusted operating profit and operating margin
Adjusted operating profit increased by 10.1% to GBP51.5m.
Excluding the impact of the 2016 procurement upside, adjusted
operating profit grew by 16.4%, referred to as underlying adjusted
operating profit growth. This is a strong result in the context of
significant investments in the form of new graduate account
managers as well as services and technical staff. On an underlying
basis, and despite these investments, the margin of adjusted
operating profit to gross profit increased marginally from 37.7% to
37.8%.
Adjusted operating profit margin to sales of 6.2% (2016: 7.0%)
fell on the back of the gross margin reduction, detailed above.
Operating profit
Operating profit of GBP50.2m (2016: GBP42.2m) is 18.9% up due to
both the growth in adjusted operating profit and the exceptional
costs in the prior year related to the IPO.
Corporation tax charge
The effective tax rate for 2017 fell to 20.3% (2016: 21.8%),
mainly reflecting the absence from the current period of the
non-deductible expenses related to the IPO recognised in 2016.
Cash and balance sheet
Cash conversion was again strong at 97.2% (2016: 85.5%),
reflecting the ongoing close management of working capital balances
as the business continues to grow.
The broad composition of the balance sheet is unchanged,
reflecting the simple and efficient business model. The value of
stock is minimal due to the close operational partnership with
distributors and the value of inventory recognised at year end
mainly reflects goods in transit.
The Company's closing cash balance of GBP61.6m was only slightly
down on the prior year figure of GBP62.4m, having been replenished
by the results of operations following the payment of GBP40.9m
dividends during the year.
Dividend
A final dividend of 6.1p per share has been recommended by the
directors and if approved by shareholders will be paid on 15
December 2017. The record date will be 3 November and the shares
will trade ex-dividend on 2 November.
In line with the Company's stated intention to return excess
cash to shareholders over time, a further special dividend payment
of 13.5p per share has been proposed. If approved by shareholders
at the Company's AGM this would also be paid alongside the final
dividend in December 2017, and would bring total cash returned to
shareholders in the 2 years since IPO to GBP83.0m.
Principal Risks and Uncertainties
The principal risks facing the Company have been identified and
evaluated by the Board. In summary, these include:
Risk Potential Management & mitigation
impacts
---------------- --------------------------------------------- ------------------------------------------------------------
BUSINESS STRATEGY
--------------------------------------------------------------- ------------------------------------------------------------
Customer
dissatisfaction * Reputational damage * Graduate training programme
* Loss of competitive advantage * Ongoing vendor training for sales staff
* Annual customer survey with detailed follow-up on
negative responses
* Process for escalating cases of dissatisfaction to MD
& CEO
---------------- --------------------------------------------- ------------------------------------------------------------
Failure to
evolve our * Loss of customers * Processes in place to act on customer feedback about
technology new technologies
offering
with changing * Reduced profit per customer
customer * Training and development programme for all technical
needs staff
* Regular business reviews with all vendors
* Sales specialist teams aligned to emerging
technologies to support general account managers
* Regular specialist and service offering reviews with
senior management
---------------- --------------------------------------------- ------------------------------------------------------------
OPERATIONAL
--------------------------------------------------------------- ------------------------------------------------------------
Cyber and
data security * Inability to deliver customer services * Company-wide information security policy
* Reputational damage * Appropriate induction and training procedures for all
staff
* Financial loss
* External penetration testing programme undertaken
* ISO 27001 accreditation
---------------- --------------------------------------------- ------------------------------------------------------------
Business
interruption * Customer dissatisfaction * Operation of back-up operations centre and data
centre platforms
* Business interruption
* Established processes to deal with incident
management, change control, etc.
* Reputational damage
* Continued investment in operations centre management
* Financial loss and other resources
* Ongoing upgrades to network
* Regular testing of DR plans
---------------- --------------------------------------------- ------------------------------------------------------------
FINANCIAL
--------------------------------------------------------------- ------------------------------------------------------------
Profit margin
pressure * Reduced margins * Ongoing training to sales and operations team to keep
including pace with new vendor programmes
rebates
* Rebate programmes are industry standard and not
specific to the Company
* Rebates form an important but only minority element
of total operating profits
---------------- --------------------------------------------- ------------------------------------------------------------
PEOPLE
--------------------------------------------------------------- ------------------------------------------------------------
Culture change
* Reduced staff engagement * Culture embedded in the organisation over a long
history
* Negative impact on customer service
* Branch structure with empowered local management
* Quarterly staff survey with feedback acted upon
* Regular staff events and incentives
---------------- --------------------------------------------- ------------------------------------------------------------
Poor leadership
* Lack of strategic direction * Succession planning process
* Deteriorating vendor relationships * Experienced and broad senior management team
* Reduced staff engagement
---------------- --------------------------------------------- ------------------------------------------------------------
The Company is required to value share based payments, financial
instruments and apply judgment to revenue recognition and deferred
tax. A more detailed description of these estimates and
uncertainties are included in the prospectus and 2016 annual
report, which can be obtained from the Company's registered office
or from www.softcat.com.
Going Concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the strategic report contained within the Annual
Report. The financial position of the Company, its cash flows, and
liquidity position are described in the Chief Financial Officer's
Review above. In addition, note 20 to the financial statements
contained within the Annual Report includes the Company's
objectives, policies and processes for managing its capital, its
financial risk management objectives and its exposures to credit
risk and liquidity risk.
The Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future and have therefore continued to adopt the going
concern basis in preparing the financial statements.
Cautionary Statement
This preliminary announcement 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 preliminary announcement should not be relied on by
any other party or for any other purpose.
In making this preliminary announcement, 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.
Statement of Directors' responsibilities in relation to the
financial statements
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulations.
The Directors are required to prepare financial statements for
each financial year in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. Under
company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Company as at the end of the financial
year and the profit or loss of the Company, so far as concerns
members of the Company, for the financial year. In preparing those
financial statements, the Directors are required to:
- select and apply accounting policies in accordance with IAS 8;
- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
- provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance;
- make judgements and estimates that are reasonable and prudent;
- state that applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the
Company's financial statements; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records which are sufficient to disclose with reasonable accuracy
at any time the financial position of the Company and enable them
to ensure that the financial statements comply with the Companies
Act 2006 and Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
Fair and balanced reporting
Having taken advice from the Audit Committee, the Board
considers the Annual Report and Accounts, taken as a whole, is
fair, balanced and understandable and that it provides the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
Responsibility statement pursuant to FCA's Disclosure Guidance
and Transparency Rule 4 (DTR 4)
Each Director of the Company confirms that (solely for the
purpose of DTR 4) to the best of his or her knowledge:
- the financial statements in this document, prepared in
accordance with the applicable accounting standards, give a true
and fair view of the assets, liabilities, financial position and
profit of the Company; and
- the Strategic Report and the Directors report include a fair
review of the development and performance of the business and the
position of the Company, together with a description of the
principal risks and uncertainties that it faces.
Statement of profit or loss and other comprehensive income
For the year ended 31 July 2017
2017 2016
GBP'000 GBP'000
Note
Revenue 3 832,486 672,351
Cost of sales (696,173) (551,634)
---------- ----------
Gross profit 136,313 120,717
Administrative expenses (86,151) (78,527)
---------- ----------
Operating profit 50,162 42,190
Adjusted operating profit 51,464 46,751
Exceptional items 4 - (3,673)
Share - based payments
charge (1,302) (888)
---------- ----------
Finance income 142 213
---------- ----------
Profit before taxation 50,304 42,403
Income tax expense 5 (10,196) (9,245)
---------- ----------
Profit for the year attributable
to owners of the Company 40,108 33,158
---------- ----------
Total comprehensive income
for the year attributable
to owners of the Company 40,108 33,158
========== ==========
Basic earnings per Ordinary
Share (pence) 9 20.4 16.9
Diluted earnings per Ordinary
Share (pence) 9 20.2 16.9
Adjusted basic earnings
per Ordinary Share (pence) 9 21.0 19.2
Adjusted diluted earnings
per Ordinary Share (pence) 9 20.9 19.1
========== ==========
All results are derived from continuing operations.
Statement of Financial Position
As at 31 July 2017
2017 2016
GBP'000 GBP'000
Note
Non-current assets
Property, plant and equipment 5,579 6,391
Intangible assets 504 667
Deferred tax asset 895 426
---------- ----------
6,978 7,484
---------- ----------
Current assets
Inventories 6,975 4,611
Trade and other receivables 7 173,506 132,787
Cash and cash equivalents 61,643 62,361
---------- ----------
242,124 199,759
---------- ----------
Total assets 249,102 207,243
========== ==========
Current liabilities
Trade and other payables 8 (155,174) (115,527)
Income tax payable (5,510) (4,352)
---------- ----------
(160,684) (119,879)
---------- ----------
Net assets 88,418 87,364
========== ==========
Equity
Issued share capital 99 99
Share premium account 4,664 4,454
Other reserves (3,214) (3,531)
Retained earnings 86,869 86,342
---------- ----------
Total equity 88,418 87,364
========== ==========
Statement of Changes in Equity
For the year ended 31 July 2017
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
2015 98 3,942 (3,994) 95,770 95,816
Total comprehensive
income for the year - - - 33,158 33,158
Share-based payment
transactions - - - 572 572
Dividends paid - - - (43,453) (43,453)
Shares issued in
year 1 512 - - 513
Tax adjustments - - - 295 295
Own share movement
during the year - - 463 - 463
--------- --------- -------- ---------- ---------
Balance at 31 July
2016 99 4,454 (3,531) 86,342 87,364
Balance at 31 July
2016 99 4,454 (3,531) 86,342 87,364
Total comprehensive
income for the year - - - 40,108 40,108
Share-based payment
transactions - - - 1,070 1,070
Dividends paid - - - (40,904) (40,904)
Shares issued in
the year - 210 - - 210
Tax adjustments - - - 253 253
Own share movement
during the year - - 317 - 317
--------- --------- -------- ---------- ---------
Balance at 31 July
2017 99 4,664 (3,214) 86,869 88,418
Statement of Cash Flows
For the year ended 31 July 2017
2017 2016
--------- ---------
GBP'000 GBP'000
Note
Net cash generated from
operating activities 10 40,971 29,925
Cash flows from investing
activities
Finance income 142 213
Purchase of property,
plant and equipment (945) (1,190)
Purchase of intangible
assets (516) (536)
Proceeds from asset disposals 7 11
--------- ---------
Net cash used in investing
activities (1,312) (1,502)
Cash flows from financing
activities
Issue of share capital 210 513
Deferred purchase share
proceeds - 1,773
Dividends paid 6 (40,904) (43,453)
Own share transactions 317 463
--------- ---------
Net cash used in financing
activities (40,377) (40,704)
--------- ---------
Net decrease in cash and
cash equivalents (718) (12,281)
Cash and cash equivalents
at beginning of year 62,361 74,642
--------- ---------
Cash and cash equivalents
at end of year 61,643 62,361
========= =========
Notes to the Financial Information
1. General information
Softcat plc (the "Company") is a public limited company,
incorporated and domiciled in the UK. Its registered address is
Fieldhouse Lane, Marlow, Buckinghamshire, SL7 1LW.
The annual financial information presented in this preliminary
announcement does not constitute the Company's statutory accounts
for the years ended 31 July 2017 or 2016 but is based on, and
consistent with, that in the audited financial statements for the
year ended 31 July 2017, and those financial statements will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting. The auditor's report on those financial
statements was unmodified, 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
Whilst the financial information included in this announcement
has been compiled in accordance with International Financial
Reporting Standards ("IFRS") this announcement does not itself
contain sufficient information to comply with IFRS.
The Financial Statements are presented in Pounds Sterling,
rounded to the nearest GBPthousand, unless otherwise stated. They
were prepared under the historical cost convention.
Going concern
For reasons noted above, the financial information has been
prepared on the going concern basis, which assumes that the Company
will continue to be able to meet its liabilities as they fall due
for the foreseeable future, being a period of at least twelve
months from the date of signing the financial statements. At the
date of approving the financial statements, the Directors are not
aware of any circumstances that could lead to the Company being
unable to settle commitments as they fall due during the twelve
months from the date of signing these financial statements.
Changes to accounting standards
There have been no changes to accounting standards during the
year which have had or are expected to have any significant impact
on the Company.
Accounting policies
The preliminary announcement for the year ended 31 July 2017 has
been prepared in accordance with the accounting policies as
disclosed in Softcat plc's Annual Report and Accounts 2017, as
updated to take effect of any new accounting standards applicable
for the year.
Exceptional items
Items that are material in size and unusual in nature are
included within operating profit and disclosed separately in the
income statement. The separate reporting of these items helps to
provide a more accurate indication of the underlying business
performance. These costs related to the Company's Listing on the
premium main market of the London Stock Exchange in November
2015.
Share based payment charges
The share based payment charge includes a fair value charge of
GBP1,070,486 (2016: GBP572,156) and a charge for employer's
national insurance contributions of GBP231,600 (2016: GBP315,794),
which become payable on exercise of share options and long-term
incentive awards.
Adjusted operating profit
In arriving at adjusted operating profit, both exceptional items
and share based payment charges are removed in order to help
present a more accurate picture of the Company's underlying
performance.
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 profit or loss and
other comprehensive income and statement of financial position. An
analysis of revenues by product, which form one reportable segment,
is set out below:
Revenue by type
2017 2016
GBP'000 GBP'000
Software 414,781 319,978
Hardware 287,424 250,692
Services 130,281 101,681
-------- --------
832,486 672,351
======== ========
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:
2017 2016
GBP'000 GBP'000
IPO costs - 3,673
All IPO costs incurred relate to the Company's listing on the
London Stock Exchange in November 2015.
5. Taxation
2017 2016
GBP'000 GBP'000
Current Tax
Current income tax charge
in the year 10,393 9,179
Adjustment in respect of
current income tax in previous
years 88 (7)
Deferred Tax
Temporary differences (285) 73
Total tax charge for the
year 10,196 9,245
6. Ordinary Dividends
2017 2016
GBP'000 GBP'000
Declared and paid during the
year, prior to IPO and share
reorganisation:
Ordinary dividend on ordinary
shares 36,765
Ordinary dividend on 'MR'
shares 864
Ordinary dividend on 'A' ordinary
shares 2,469
--------
40,098
Declared and paid during the
year, post IPO and share reorganisation:
Special dividend on ordinary
shares (14.2p per share) 28,060
Final dividend on ordinary
shares (3.6p per share) 7,114
Interim dividend on ordinary
shares (2.9p per share (2016:1.7p)) 5,730 3,355
-------- --------
40,904 3,355
-------- --------
40,904 43,453
The dividends paid prior to the IPO in November 2015 were paid
prior to the reorganisation of share capital, see note 11, and
therefore are shown as dividends split between the
pre-reorganisation share classes.
The Board recommends a final dividend of 6.1p per ordinary share
and a special dividend of 13.5p per ordinary share to be paid on 15
December 2017 to all ordinary shareholders who were on the register
of members at the close of business on 3 November 2017.
Shareholders will be asked to approve the final and special
dividends at the AGM on 8 December 2017.
7. Trade and other receivables
2017 2016
-------- --------
GBP'000 GBP'000
Trade and other receivables 162,089 123,833
Provision against receivables (1,263) (1,265)
-------- --------
Net trade receivables 160,826 122,568
Other debtors 59 59
Prepayments 5,415 4,764
Accrued Income 7,206 5,396
-------- --------
173,506 132,787
8. Trade and other payables
2017 2016
-------- --------
GBP'000 GBP'000
Trade payables 100,312 67,759
Other taxes and social security 12,153 11,778
Accruals 28,708 24,000
Deferred Income 14,001 11,990
-------- --------
155,174 115,527
9. Earnings per share
2017 2016
------ ------
Pence Pence
Earnings per share
Basic 20.4 16.9
Diluted 20.2 16.9
Adjusted earnings per share
Basic 21.0 19.2
Diluted 20.9 19.1
The calculation of the basic and adjusted earnings per share and
diluted earnings per share is based on the following data:
2017 2016
-------- --------
GBP'000 GBP'000
Earnings
-------- --------
Earnings for the purposes
of earnings per share being
profit for the year 40,108 33,158
-------- --------
Adjusted Earnings
Profit for the year 40,108 33,158
Exceptional costs - 3,673
Share based payment charge 1,302 888
Tax effect of adjusting items (47) (97)
-------- --------
Earnings for the purposes
of adjusted earnings per
share 41,363 37,622
-------- --------
The weighted average number of shares is given below:
2017 2016
-------- --------
000's 000's
Number of shares used for
basic earnings per share 196,959 196,040
Number of shares deemed to
be issued at nil consideration
following exercise of share
options 1,137 696
-------- --------
Number of shares used for
diluted earnings per share 198,096 196,736
-------- --------
10. Notes to the cash flow statement
2017 2016
--------- ---------
GBP'000 GBP'000
Cash flow from operating
activities
Operating profit 50,162 42,190
Depreciation of property,
plant and equipment 1,641 1,796
Amortisation of intangibles 367 327
Loss/(profit) on disposal
of fixed assets 109 (9)
Loss on disposal of intangible
assets 312 -
Cost of equity settled employee
share schemes 1,070 572
--------- ---------
Operating cash flow before
movements in working capital 53,661 44,876
Increase in inventory (2,364) (1,961)
Increase in trade and other
receivables (40,719) (12,608)
Increase in trade and other
payables 39,647 7,474
--------- ---------
Cash generated from operations 50,225 37,781
Income taxes paid (9,254) (7,856)
--------- ---------
Net cash generated from operating
activities 40,971 29,925
========= =========
11. Share capital
2015
---------
GBP'000
Authorised
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.
Allotted and called
up 2015
---------
GBP'000
Pre- reorganisation
Ordinary shares of 1p
each 90
'MR' shares of 1p each 2
'A' ordinary shares
of 1p each 6
---------
98
2017 2016
------- -------
GBP'000 GBP'000
Post- reorganisation
Ordinary shares of 0.05p
each 99 99
Deferred shares* of
1p each - -
------- -------
99 99
*At 31 July 2017 deferred shares had an aggregate nominal value
of GBP189.33 (2016: GBP189.33).
On 12 November 2015, pursuant to special resolutions of the
Company and conditional upon admission to the official list of the
FCA (which took place on 18 November 2015), 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.
No issued ordinary shares of GBP0.0005 each were unpaid at 31
July 2017 (2016: nil unpaid).
Deferred shares do not have rights to dividends and do not carry
voting rights.
12. Post balance sheet events
Dividend
The Board recommends a final dividend of 6.1p per ordinary share
and a special dividend of 13.5p per ordinary share to be paid on 15
December 2017 to all ordinary shareholders who were on the register
of members at the close of business on 3 November 2017.
Shareholders will be asked to approve the final and special
dividends at the AGM on 8 December 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
L Ginsberg
M J Hellawell
V Murria
P Ventress
B Wallace
Secretary
Winifred Chime
Company registration number
02174990
Registered office
Solar House
Fieldhouse Lane
Marlow
Buckinghamshire
SL7 1LW
Auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFIRIDLDLID
(END) Dow Jones Newswires
October 18, 2017 02:00 ET (06:00 GMT)
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