Bullish reseller Softcat unveiled its full-year results to the London Stock Exchange this morning. CEO Graeme Watt struck a buoyant tone as full-year revenue clambered 24 per cent to £991.8m (€1.15bn).
Here we round up the key talking points:
The £1bn revenue optical illusion
Softcat smashed through the symbolically important £1bn revenue barrier in its fiscal 2018, but has to do it all again after its introduction of new IFRS accounting standards wiped more than £400m off its top line.
‘Revenues' fell tantalising short of the £1bn marker in its year to 31 July 2019, hitting £991.8m.
But that is only because the giant reported full-year revenue under IFRS 15 for the first time, forcing it to "net down" some revenue streams where it acts as an "agent", rather than a "principal".
Softcat's revenue in old money - which it now refers to as gross invoiced income (GII) - would have hit a whopping £1.41bn without the impact of IFRS 15.
(Don't expect Softcat to do away with reporting GII any time soon: Because it allows for a better understanding of invoiced sales trends the giant said it will continue to report the measure externally as an alternative KPI alongside GAAP revenue.)
Softcat's growth accelerates
At the time of its 2018 results, CEO Graeme Watt hinted that the 30 per cent revenue growth Softcat achieved in its fiscal 2018 may not be sustainable, citing the "exceptional" market conditions encountered during the year.
But in actual fact, Softcat's top-line growth accelerated in 2019.
Full-year GII - ‘revenue' in old money - grew by 31 per cent to £1.41bn, ahead of the comparable figures for both 2018 and the first-half of 2019.
It's impossible to compare Softcat's IFRS 15 revenue figure year on year, but half on half revenue growth clearly accelerated (in the first half revenue growth was 21.1 per cent but for the full year it was 24.4 per cent).
Looking at the bottom line, operating profits swelled by 24.3 per cent to £84.5m.
"Performance this financial year has been very pleasing," Watt said. "We entered the year up against some incredibly tough comparative numbers and knew we had our work cut out to grow again on top of those - especially when considering that all our growth is organic."
Growth was broad-based
In his full-year review, Watt stressed that growth was "broad-based".
All eight of Softcat's regional offices operating throughout the year showed "positive progression" he said, adding that GII growth exceeded 25 per cent across all its tech categories, namely workplace, datacentre, cloud infrastructure and networking and security. Similarly, all customer segments grew by double digits, with "especially strong" growth occurring outside its traditional SMB stomping ground in enterprise and public sector, which now account for 21 and 35 per cent of its total GII.
Softcat stepping up efforts to expand addressable market
Softcat's growth has traditionally been predicated on winning new customers and selling more to existing ones.
That strategy continued to prevail in fiscal 2019. During the year Softcat traded with an additional 400 customers, propelling the total to 12,300 - up 3.4 per cent year on year. Average revenue and gross profit per customer also grew "very strongly", with the latter up 17 per cent to £17,200.
Despite this, Watt indicated that the Marlow-based firm is stepping up efforts to expand its addressable market as it enters the new financial year.
"Customer requirements are becoming more complex and they are faced with greater choice. The opportunity for Softcat is growing and this underpins our willingness to invest in skills and expertise for the long term," he said.
During the course of 2019, Softcat established four branches outside of the UK and Ireland to help its UK and Irish customers deploy tech across their organisations in other countries, Watt added.
"This is net new business for us with a significant opportunity for growth in the near term. The expansion of further low-cost, operational branches will continue to be customer led," he said.
"Taken together these investments have significantly increased our capability to support both partners and customers in this exciting but challenging new landscape. We feel this is the beginning of a tendency towards greater reliance by customers on fewer, larger partners - a trend we think we are well-positioned to benefit from given our broad range of technology and services."
Softcat ‘confident' for full-year 2020
Although there is heated debate over whether the current golden period for resellers is sustainable, Watt was upbeat about Softcat's trajectory, stressing that trading in the first eleven weeks of Softcat's new financial year have been "on track".
Watt highlighted mobile workforce, security, hyperconvergence, software defined management, edge computing, analytics and cloud adoption as among the growth drivers going forwards, adding that the arrival of 5G will stoke demand for devices, security, analytics, storage and compute at the edge of the network.
"We look forward to the rest of the year with confidence," he said.
"We think the structural drivers for growth in our industry will continue despite current political and economic uncertainty. The board also remains confident in the company's ability to gain market share and targets further growth during 2020."
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