For chief executive Martin Hellawell, there was “not a lot of new news” in Softcat’s (SCT) half-year results. Indeed, a February trading update from the IT infrastructure group had already revealed gross profit growth of 22 per cent and adjusted operating profit growth of 19 per cent, triggering a small mark up in the shares at the time. On top of these numbers, we learnt this week that the customer base rose by 6 per cent, and gross profit per customer climbed 15 per cent. The group remains completely debt-free, and operating cash conversion in the period was above 100 per cent.
These were all good signs, but Softcat’s shares fell more than a tenth in reply. Some investors will have decided to cash in after an excellent recent run in the stock, which is up nearly 100 per cent in a year. Others may have hoped for hints that trading in the first few months of 2018 is tracking above market expectations. Both constituents may have simply taken their cues from Credit Suisse, which downgraded the firm to 'neutral' after a two-year outperform recommendation. In the event, management said the second half had started well, and it was confident of meeting expectations for 2018.
Strong sales for the six months to January reflected double-digit growth across all business lines. As expected, the gross margin fell very slightly – by 0.4 percentage points – stemming from positive trading for the group’s lower-margin public sector business. Amid rising fears of cyber attacks, Softcat continues to enjoy strong demand for security products from public sector and corporate clients, and management says momentum here was comfortably ahead of overall group sales growth of 25 per cent.
Based on the Bloomberg consensus average, EPS of 23p is expected for the 12 months to July 2018, against 20p in FY2017.
| SOFTCAT (SCT) | ||||
| ORD PRICE: | 593p | MARKET VALUE: | £1.17bn | |
| TOUCH: | 590-593p | 12-MONTH HIGH: | 683p | LOW: 336p |
| DIVIDEND YIELD: | 1.6%* | PE RATIO: | 27 | |
| NET ASSET VALUE: | 36p | NET CASH: | £43.3m | |
| Half-year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 379 | 21.0 | 8.5 | 2.9* |
| 2018 | 473 | 24.1 | 9.8 | 3.3 |
| % change | +25 | +15 | +15 | +14 |
| Ex-div: | 29 Mar | |||
| Payment: | 11 May | |||
| *Excludes special dividend of 13.5p paid on 15 Dec 2017 | ||||
