The UK’s general election in December delayed the fiscal 2020 budget. But broker Jefferies says that the Tory party’s manifesto – and recent comments from the Treasury secretary – “suggest government discretionary spending is likely to see further growth” this year. And that should, in turn, underpin growth in information technology (IT) spending.
Good news, then, for Softcat (SCT), a provider of IT infrastructure technology and services, which Jefferies says is in “a strong position” to benefit from said spending, given the work it has put into scaling up its public sector business. For the year to July 2019, the segment made up more than a third of the group’s gross invoiced income (GII) – helping overall GII increase by 31 per cent to £1.4bn. Gross profit – which Softcat sees as its main measure of income performance and growth – rose by around a fifth over the same period to £211m.
At the time of these results, Softcat said that it was in “great health” and “strategically well-positioned” – a description ostensibly proved accurate by the group’s November 2019 trading update, which revealed year-over-year growth in revenues, gross profits and operating profits for the first quarter. Chief executive Graeme Watt said that, although still early in the new financial year, he was confident Softcat would achieve the goals it had set itself.
With this encouraging narrative in mind, it is perhaps little wonder that Softcat’s shares have purred upwards – rising by more than 80 per cent over the past 12 months. It also means we are not overly concerned by the news that managing director Colin Brown offloaded 125,000 shares in the group at £12 each on 15 January – garnering £1.5m in total. Softcat declined to comment on the sale. We understand that Mr Brown – who has been in his role since 2012 – continues to hold 650,000 shares.
