TIDMSCT
RNS Number : 2560T
Softcat PLC
24 March 2021
24 March 2021
SOFTCAT plc
("Softcat", the "Company")
Half Year Results for the six months to 31 January 2021
Softcat plc (LSE: SCT.L), a leading UK provider of IT
infrastructure products and services, today publishes its half year
results for the six months to 31 January 2021 ("the period"). The
results reflect another period of strong profit growth and cash
generation.
Financial Summary Six months ended
31 January 31 January
2021 2020 Growth
----------- ----------- -------
GBPm GBPm %
Revenue 1 577.0 524.1 10.1
Gross invoiced income 2 870.8 727.7 19.7
Gross profit 134.5 111.7 20.4
Operating profit 57.1 40.5 41.0
Cash conversion 3 88% 100% n/a
Interim dividend (p) 4 6.4p 5.4p 18.5
Earnings per share (p) 23.3p 16.7p 39.5
Diluted earnings per share
(p) 23.2p 16.6p 39.8
1 Revenue is reported under IFRS 15, the international
accounting standard for revenue for both FY20 and FY21. IFRS 15
requires finely balanced judgements be made to determine whether
Softcat acts as principal or agent in certain trading transactions.
The judgement inherent in the application of IFRS 15, coupled with
slight variations of business model between IT Solutions Providers,
means the impact of IFRS 15 across the peer group is not uniform.
Income prior to the IFRS 15 adjustment is referred to as gross
invoiced income.
2 Gross invoiced income (GII) reflects gross income billed to
customers adjusted for deferred and accrued revenue items.
3 Cash conversion is defined as cash flow from operations before
tax but after capital expenditure, as a percentage of operating
profit.
4 The interim dividend of 5.4p, declared but subsequently
cancelled in March 2020, was reinstated as part of the prior year
final dividend of 16.6p.
Highlights for the six months to 31 January 2021
-- Strong double-digit income growth:
o Gross profit, our key measure of income, grew 20%
o Gross invoiced income (GII) also up 20%
o Revenue up 10%
-- Operating profit increased by 41% reflecting the strong top
line performance combined with Covid-related operating cost
savings.
-- Continued investment in our people and technical proposition
throughout the pandemic has driven double-digit growth in average
gross profit per customer from both new and existing customers.
-- The customer base rose 1.5% to 9,600 despite the ongoing challenges of remote working.
-- Headcount increased to 1,658 at the end of the period; a rise
of 177 (12%) over the past 12 months.
-- Cash conversion and debt collection remain strong.
-- An interim dividend of 6.4p per share, up 18.5%, will be paid
on 14 May 2021 with the shares trading ex-dividend on 31 March
2021.
-- Outlook : the second half has begun well and the Board is
confident the Company will deliver a full year result significantly
ahead of its previous expectations.
Graeme Watt, Softcat CEO, commented:
We are pleased with the strong performance in the first half of
the financial year in which we continued to grow and take share in
a market that has remained relatively resilient during the
pandemic. We did see a reduction in income from some corporate
customers during the last quarter of our previous financial year,
but during the current period that effect has gradually diminished.
In addition, the business has benefitted from a temporary reduction
to some elements of the cost base, although we expect this to
normalise as the second half develops. The Company has taken no
form of government support during the pandemic nor made any
headcount reductions and we expect that to continue to be the case.
We have been delighted to be able to put part of our Marlow head
office to good use as a Covid vaccination centre over the past few
months and this will continue into the summer.
We have a great culture at Softcat that gives us a cutting edge
in the good times and has served us extremely well throughout these
recent turbulent times. We have been able to lean on this culture
and use it as a source of great strength to deal with the personal
and business challenges of the pandemic. I am however very much
looking forward to working in person again with the team, our
customers and our partners just as soon as we safely can.
We have continued to invest in staff, internal systems and tools
to support current growth which puts us in a strong position to
deliver on future opportunities. Headcount increased by 12% on the
same period in the prior year as we continued to recruit across all
functions.
We continue to engage actively with our customers and employees
and this was reflected in the feedback to our annual satisfaction
and engagement surveys. Customer net promoter score (NPS) rose from
60 to 66 and our employee NPS increased from 53 to 58. I am
delighted with this feedback and for the second year in a row we
were ranked 5(th) on Glassdoor's list of best places to work in the
UK.
A huge thank you must go to the entire team. None of this
performance could have been achieved without their fantastic
support and care for our customers, partners and each other.
Outlook
Investment in our growth strategy has continued unabated
throughout the pandemic and we now carry good momentum into the
second half of our financial year. Cost savings related to Covid
restrictions are expected to dissipate over the next six months but
we are optimistic about the growth opportunity in our market. The
Board is confident the Company will deliver a full year result
significantly ahead of its previous expectations.
Analyst and Investor call
The management team will host an investor and analyst conference
call at 9.30am UK time, on Wednesday, 24 March 2021. To participate
in the conference call, please use the following access
details:
Dial in Details:
UK Toll Free: 0800 376 7922
+44 (0)20 7192
UK Local: 8000
Conference ID: 2149568
A live webcast of the presentation will be available at:
https://edge.media-server.com/mmc/p/byf35odi
Please register approximately 10 minutes prior to the start of
the call.
The announcement and presentation will be available at
www.softcat.com from 7.00am and 9.00am respectfully.
Enquiries
Softcat plc: +44 (0)1628 403 403
Graeme Watt, Chief Executive Officer
Graham Charlton, Chief Financial
Officer
FTI Consulting LLP: +44 (0)2037 271 000
Ed Bridges
Matt Dixon
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.
This announcement has been determined to contain inside
information.
Chief Executive Officer's Review
We are delighted with the strong performance we are reporting
for the first half in which we delivered gross invoiced income
(GII) and gross profit growth of 20%, with operating profit up 41%.
Revenue, which is gross income netted down to just the margin
element for cloud-based software and some other income streams, was
up 10%.
We have benefitted enormously from the way the Softcat team have
reacted to the challenges of the pandemic. The breadth and depth of
our technology solutions and the diversity of our customer base
have also served us well. These factors have been key contributors
to our performance in the first half of the year. Our public sector
business remained strong and corporate demand has continued to
gradually recover. In particular we have seen a strong recovery in
our datacentre category and mid-market segment as businesses begin
to look to the future. We delivered double digit growth in hardware
(+31% GII), software (+13% GII) and services (+23% GII) in the
period.
We grew GII in our mid-market and public sector segments by 32%
and 23%, respectively, but gross income from enterprise customers
declined by 9%. Mid-market growth benefitted from some of our
largest ever deals while enterprise demand has remained mixed with
the more challenged verticals such as non-essential retail, travel,
entertainment and events unsurprisingly taking longer to get back
to pre-pandemic spend levels.
Technology has continued to be a focus for investment for many
organisations as they have looked to accelerate the security of
their operations, manage distributed workforces and migrate to the
Cloud as part of a hybrid infrastructure. These technologies were
already in focus but the pandemic has accelerated the pace of
transformation. Customers have worked hard to adapt their
infrastructure models towards remote working. They seek to deliver
enhanced employee and customer experiences and drive productivity
and efficiency improvements whilst protecting their data. These
drivers and trends play straight into our portfolio of
infrastructure solutions.
As we look forward we are focused on driving further growth
through the addition of new customers and selling deeper into our
existing accounts. Despite our market-beating growth, our share is
still relatively small at c.3.5% and industry commentators predict
more market growth in the years ahead.
We are also pleased to be able to share the progress we have
made in other areas too. By opening an office in Birmingham during
the last financial year we filled what was an obvious gap in our UK
coverage and we are delighted that the team there are off to a very
strong start. We have prepared well for the UK's exit from the EU
and see it as an opportunity to provide service levels ahead of the
competition. Our branch in the Netherlands has provided a platform
for growth in our multi-national business by affording local
assistance in the EU to our UK and Irish customers. We have also
made strong progress with our multi-national business generally and
particularly in the US.
We continue to invest in our tools and technical offering as
well. Our Cloud proposition is being enhanced through significant
initiatives with both Microsoft Azure and AWS, whilst the upgrade
to our financial systems is progressing well.
We have taken deliberate steps to continue with investment to
drive long-term growth and increased headcount by 12% year on year
across all areas of the business including sales, specialists,
support, technical and business operations. The recruitment team
take great credit for adapting brilliantly to the challenges of the
pandemic and they have kept our business moving forward, both in
terms of delivering our strategy but also driving our efforts to
increase diversity.
Our focused network groups representing Women in Business, BAME,
Pride, ex-Armed Forces, Family and Faith have been as active as
ever in building awareness and understanding of different
challenges and perspectives. We have clear plans and goals in place
to improve gender and ethnicity balance within the organisation
through the actions set out in our gender and ethnicity pay gap
report. Over time our aim is that our gender and ethnicity
representation is the same at Management level as our company
demographics. I am also pleased we have established clear
sustainability goals and actions that demonstrate leadership in
this area and we are working hard with our customer and vendor
partners to find ways to achieve more.
During the early stages of the pandemic, when our performance
was noticeably impacted and visibility was at its lowest, we took
the precautionary steps of cancelling our interim dividend as well
as the annual pay review for the majority of staff. As time
progressed, the Company's cashflow proved to be robust and the
interim dividend was reinstated alongside the ordinary and special
dividend and paid in December. Income growth accelerated following
the start to the new financial year and so we also took the
decision in January 2021 to reinstate and back-date the annual
staff pay review for this financial year.
The pandemic has placed a lot of pressure and strain on our team
and society more generally across a number of issues ranging from
loneliness, physical and mental health, to caring for those of all
ages in care homes, home schooling and isolation from friends and
family. I would like to take a moment to thank key workers who
continue to work tirelessly to support businesses and communities.
I would also like to thank the Softcat team for continuing to be so
positive and taking ownership for the personal and business
challenges that have been presented. They have been amazing not
just inside the Company but outside too. Together we have
contributed to the donation of devices for children's home
schooling, volunteered to help those in need and it has been a
great pleasure to see part of our Marlow office turned into a
Covid-19 vaccination centre.
Board Committee Composition
Following a review of the composition of the Board's committees,
the Board has agreed that Karen Slatford will assume the Chair of
the Nomination Committee , from Vin Murria , with effect from 24
March 2021. Following this change, the Nomination Committee
comprises Karen Slatford (Chair), Vin Murria, Martin Hellawell and
Robyn Perriss .
Chief Financial Officer's Review
Financial Summary H1 FY21 H1 FY20 Growth
Revenue split
Software GBP240.1m GBP252.9m (5.1%)
Hardware GBP289 .2m GBP218 .8m 32.2%
Services GBP47 .7m GBP52 .4m (9.0%)
Total Revenue GBP577.0m GBP524.1m 10.1%
------------- ------------- ----------
Gross invoiced income
split
Software GBP461 .6m GBP409 .7m 12.7%
Hardware GBP293.9m GBP224.2m 31.1%
Services GBP115.3m GBP93.8m 22.9%
Total gross invoiced GBP870.8m GBP727.7m 19.7%
income
------------- ------------- ----------
Gross profit GBP134.5m GBP111.7m 20.4%
------------- ------------- ----------
Operating profit GBP57.1m GBP40.5m 41.0%
------------- ------------- ----------
OP:GP margin 42.4% 36.2% 6.2 % pts
------------- ------------- ----------
Cash conversion 88% 100% n/a
------------- ------------- ----------
Gross profit, revenue and gross invoiced income
Gross profit continues to be our primary income KPI and grew in
the period by 20.4% to GBP134.5m, reflecting the recovery in
spending seen across the customer base as the Covid-19 pandemic
moved beyond its initial phase and segments of the UK economy
reopened. The first half saw a number of customers catching up on
projects placed on hold during the early stages of Covid-19,
notably the last quarter of our previous financial year, and growth
in the second quarter of this financial year in particular was
augmented by a handful of very large deals. While difficult to
isolate and quantify, some elements of some of these larger deals,
contributing approximately 6-8% gross profit growth in the period,
were one-off in nature, and as such will result in tough H1
comparative figures next financial year. As a result, customer
concentration was slightly higher than in previous periods with the
top 5 customers accounting for 16% of GII (typically c.8-10% in
H1). Overall GII growth was 19.7%, driven by double-digit increases
across all technology areas.
Revenue growth lagged GII expansion due mainly to the continued
shift towards cloud-based software. Cloud-based solutions and third
party services are recognised net of product costs under IFRS 15
and this shift in mix accounts for the difference in growth rates
between GII and GAAP revenue. We expect this trend to continue in
future periods. The company continues to report on GII as well as
GAAP revenue since the former is considered by the directors to be
the most appropriate indicator of the performance of the business
and year on year trends and relates most closely to working capital
movements. The IFRS 15 reconciliation between revenue and gross
invoiced income is included in note 3 of this interim
statement.
Gross profit margin, when measured against GII, of 15.4% was
broadly in line with the prior period (H1 2020: 15.3%). This
reflects a largely stable mix of gross income across technology
areas and customer segments.
Customer Metrics(1) H1 FY21 H1 FY20 Growth
Customer base (rolling
12 month basis) 9.6k 9.5k 1.5%
--------- --------- -------
Gross profit per
customer (rolling
12 month basis) GBP26.9k GBP24.1k 11.5%
--------- --------- -------
(1) Customer base and the GP per customer are calculated on a
twelve-month rolling basis. This reflects the development of the
business over an annual cycle which is more closely aligned to
customer budget cycles than a six month view. Customer base is
defined as the number of customers who have transacted with Softcat
in both of the preceding twelve-month periods.
During the period, the customer base expanded by 1.5% to 9.6k
(H1 2020: 9.5k), and gross profit per customer grew by 11.5% to an
annualised GBP26.9k (H1 2020: GBP24.1k). The combination of these
effects has driven the gross profit growth of 20.4% seen during the
period. Our strategy remains focussed on growing both of these
metrics over the long term.
Company analysis, using data from a number of sources (including
Gartner, CRN and IDC), suggests our market share by value grew from
c.3% to c.3.5% during the past twelve months. Our analysis also
shows that we currently serve only around 1 in 5 target customers,
with an average share of wallet in existing accounts of 15-20%.
Therefore, the future opportunity is enormous despite our long
track record of entirely organic growth.
Operating costs and operating profit
Operating profit of GBP57.1m (H1 2020: GBP40.5m) grew by 41.0%,
reflecting the expansion of gross profit coupled with Covid-19
related cost savings. Headcount growth of 12% year on year, which
is in line with our historic run rate of investment, would
typically drive operating cost growth of c.15-18%. Actual cost
growth for the period was just 8.7%, due to reduced expenditure on
travel and staff events (incentive trips etc.) as a result of
Covid-19 restrictions. Consequently, the conversion of gross profit
to operating profit increased from 36.2% in the prior period to
42.4%. It is expected that this rate of conversion will normalise
as the pandemic is increasingly brought under control by
vaccination and especially during the 2022 financial year.
Headcount growth reflects investment across all areas of the
business. We have continued to expand our sales teams despite the
challenges of recruitment and onboarding in recent times. Average
tenure of the sales force during the period was up by 20% on the
comparative period driven by recruitment activity and reduced
attrition.
Corporation tax charge
The interim tax charge of GBP10.7m reflects an effective tax
rate (ETR) of 19.2% (2020: 18.5%). The ETR varied from the
statutory rate in both periods due to the impact of non-deductible
expenses. The effective statutory rate of 19.0% (2020: 18.3%) is in
line with government legislation at the reporting date.
Cash flow and cash conversion
The Company entered the year with a cash balance of GBP80.1m and
paid an aggregate final and special dividend of GBP48.1m in
December 2020. The Company has no external bank borrowings and
closed the period with a cash balance of GBP71.2m.
Operating cash flow after capital expenditure was strong during
the reporting period at GBP50.3m, representing a conversion rate of
88.2% of operating profit, in line with historic performance.
The Company continues to target sustainable full year operating
cash conversion (after capital expenditure) in the range of 85-95%
of operating profits.
Dividend
The Board is pleased to declare an interim dividend of 6.4p per
share (2020: 5.4p), amounting in total to GBP12.7m. The interim
dividend will be payable on 14 May 2021 to shareholders on the
register at the close of business on 1 April 2021. Shares in the
Company will be quoted ex-dividend on 31 March 2021. The dividend
reinvestment plan ("DRIP") election date is 23 April 2021.
Principal Risks and Uncertainties
Like most businesses, there is a range of risks and
uncertainties facing the Company. A 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.
Risk Potential impacts Management & mitigation
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 * Loss of customers * Processes in place to act on customer feedback about
our technology new technologies
offering with
changing * Reduced profit per customer
customer * Training and development programme for all technical
needs staff
Covid-19 consideration(s):
* Potential increase in the rate of change in customer * Regular business reviews with all vendors
needs
* 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
Covid-19 consideration(s): * ISO 27001 accreditation
* Increase in risk due to number of employees working
remotely
* In-house technical expertise
* Action plan to issue all employees with corporate
devices and address network access risks as a result
of increased home working
---------------------------------------------------------------- ----------------------------------------------------------------
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 disaster recovery and business
continuity plans
---------------------------------------------------------------- ----------------------------------------------------------------
Macro-economic
factors * Short-term supply chain disruption * Close dialogue with supply-chain partners on all
including Brexit scenarios
Brexit
* Reduced margins
* Customer-centric culture
* Reduced customer demand
* Breadth of proposition and customer base
* Reduced profit per customer
* Additional customer credit review processes
introduced in response to Covid-19
Covid-19 consideration(s):
* Increase in risk due to the uncertainty and economic * No change in cash receipts and conversion to date
disruption
* Customer base is well diversified in terms of both
revenue concentration but also public and commercial
sector exposure
---------------------------------------------------------------- ----------------------------------------------------------------
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
* Loss of talent
* Quarterly staff survey with feedback acted upon
Covid-19 consideration(s): * Regular staff events and incentives
* Slight increase in risk due to remote working
practices
* Enhanced internal communication processes and events
during the pandemic
---------------------------------------------------------------- ----------------------------------------------------------------
Poor leadership
* Lack of strategic direction * Succession planning process
* Deteriorating vendor relationships * Experienced and broad senior management team
* Reduced staff engagement
---------------------------------------------------------------- ----------------------------------------------------------------
These risks and uncertainties have not changed significantly
since those published in the 31 July 2020 Annual Report in October
2020. The Company continues to monitor the impact of Covid-19, as
discussed within the Chief Executive's review, above. Further
information on the risks can be found on pages 32 to 37 of
Softcat's 2020 Annual Report and Accounts, which is available at
https://www.softcat.com/about-us/investor-centre/shareholder-information
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 to at least 31 March 2022.
In preparing this financial information, Management has
considered the circumstances impacting Softcat during the period,
as detailed in the Chief Financial Officer's review, and reviewed
projected performance for the period to at least 31 March 2022;
being the going concern period. The Directors also considered the
Company's objectives and strategy, its principal risks and
uncertainties in achieving its objectives and its review of
business performance and financial position.
Softcat continues to monitor the operational effects of the
Covid-19 pandemic and update base case plans to reflect current
circumstances for the going concern period. In modelling the
assumptions for going concern assessments, the directors remain
positive of market recovery as vaccinations continue in the UK.
Softcat operates in a resilient industry. Softcat's customer base
incorporates a large volume of non-discretionary spend from UK
corporates as IT has become vital to establish competitive
advantage in an increasingly digital age. Public Sector, a large
and fast-growing area of the business, has shown no significant
negative sensitivity to Covid-19 so far.
Softcat continues to model its base case and severe but
plausible scenarios, as well as stress testing the limits of
Softcat.
Base case
The key assumptions in the base case going concern forecast
model for the period to 31 March 2022 and beyond are as
follows:
- Revenue and GII growth to be in line with the first two
quarters of FY21 adjusting for large deals augmenting the FY21
interim results and a return to normal growth levels in FY22;
- Gross margin, rebate income, debtor days, and bad debt
continue to be in line with the year so far adjusted for seasonal
variations;
- Payroll costs to increase as a result of continued investment in headcount;
- Travel and staff costs to increase throughout Q3 and Q4 FY21
as government restrictions ease and returning to normal budgeted
values in FY22; and
- Other operating costs to broadly follow patterns experienced over the last 12 months.
Severe but plausible
Softcat recognises that the government has supported a lot of
businesses during the pandemic, and the gradual removal of this
support may result in a general economic downturn, an increase in
bad debt and debtor days. Softcat has modelled the downside of this
expectation and analysed remedial action required under this
scenario to ensure that the Company can remain cash positive
without external debt. Mitigating action under all current models
for a short-term solution is to adjust the dividend paid out. This
ensures Softcat is able to continue operationally and maintains
cash above minimum accepted levels determined by the Board. Cost
reduction initiatives would also be considered if these modelled
scenarios were to crystallise.
Reverse stress testing
A reverse stress test has also been performed and mitigating
actions have been analysed. These scenarios and tests do not give
management or the Directors cause for concern because the
probability of them occurring is deemed to be extremely remote.
Liquidity and financing position
At 31 January 2021, the Company held instantly accessible cash
and cash equivalents of GBP71.2m, while net current assets were
GBP124.8m. The Company has access to a Revolving Credit Facility
(RCF) of GBP50m up to April 2021. No drawdown has been made on this
facility and Management have decided not to renew the facility.
This does not raise cause for concern, nor do Management anticipate
needing to obtain external funding for at least 12 months post
report date.
Going concern conclusion
The Directors consider that the Company has significant
liquidity headroom to continue in operational existence for the
going concern period to 31 March 2022. Accordingly, at the March
2021 Board meeting, the Directors concluded from this analysis it
was appropriate to continue to adopt the going concern basis in
preparing the interim report. The long-term impact of Covid-19 is
uncertain, and the impact will continue to be monitored.
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.
Graeme Watt Graham Charlton
Chief Executive Officer Chief Financial Officer
23 March 2021 23 March 2021
Condensed Statement of profit or loss and other comprehensive
income
For the six months ended 31 January 2021
Six months ended Year
31 January ended
31 July
2021 2020 2020
Unaudited Unaudited Audited
Note
GBP'000 GBP'000 GBP'000
Revenue 3 576,988 524,148 1,077,127
Cost of sales (442,524) (412,476) (841,422)
---------- ---------- ----------
Gross profit 134,464 111,672 235,705
Administrative expenses (77,400) (71,194) (141,972)
Operating profit 57,064 40,478 93,733
Finance income 24 154 200
Finance cost 6 (138) (109) (316)
Profit before taxation 56,950 40,523 93,617
Income tax expense 4 (10,716) (7,487) (17,953)
---------- ---------- ----------
Profit and total comprehensive
income for the period 46,234 33,036 75,664
---------- ---------- ----------
Profit attributable to:
---------- ---------- ----------
Owners of the Company 46,234 33,036 75,664
---------- ---------- ----------
Basic earnings per Ordinary Share
(pence) 11 23.3 16.7 38.2
Diluted earnings per Ordinary Share
(pence) 11 23.2 16.6 38.0
All results are derived from continuing operations.
Condensed Statement of Financial Position 5
As at 31 January 2021
31 January 31 July
2021 2020 2020
Unaudited Unaudited Audited
Note
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 12,783 6,585 11,897
Right-of-use assets 6 7,572 6,145 8,698
Intangible assets 2,696 701 1,301
Deferred tax asset 2,516 2,759 2,408
---------- ---------- ----------
25,567 16,190 24,304
---------- ---------- ----------
Current assets
Inventories 13,583 16,381 11,744
Trade and other receivables 7 284,143 284,166 314,123
Cash and cash equivalents 71,245 49,433 80,139
Income tax receivable 148 2,186 636
---------- ---------- ----------
369,119 352,166 406,642
---------- ---------- ----------
Total assets 394,686 368,356 430,946
========== ========== ==========
Current liabilities
Trade and other payables 8 (230,348) (252,142) (263,866)
Contract liabilities 9 (11,509) (10,405) (13,929)
Lease liabilities 6 (2,480) (2,338) (1,867)
---------- ---------- ----------
(244,337) (264,885) (279,662)
---------- ---------- ----------
Non-current liabilities
Contract liabilities 9 (3,730) - (2,565)
Lease liabilities 6 (6,214) (5,254) (7,972)
---------- ---------- ----------
(9,944) (5,254) (10,537)
---------- ---------- ----------
Net assets 140,405 98,217 140,747
========== ========== ==========
Equity
Issued share capital 13 100 99 100
Share premium account 4,979 4,979 4,979
Reserves for own shares - - -
Retained earnings 135,326 93,139 135,668
---------- ---------- ----------
Total equity 140,405 98,217 140,747
========== ========== ==========
5 The 31 January 2020 'Deferred income' balance of GBP10.4m has
been reclassified to 'Contract liabilities' from 'Trade and other
payables'. Refer to note 9 for further detail.
Condensed Statement of Changes in Equity (unaudited)
Reserves
Share Share for own Retained Total
capital premium shares earnings equity
--------- --------- --------- ---------- ---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 August 2020 100 4,979 - 135,668 140,747
Total comprehensive income
for the period - - - 46,234 46,234
Share-based payment transactions - - - 1,113 1,113
Dividends paid - - - (48,081) (48,081)
Dividend equivalents
paid - - - (81) (81)
Tax adjustments - - - 492 492
Other - - - (19) (19)
--------- --------- --------- ---------- ---------
Balance at 31 January
2021 100 4,979 - 135,326 140,405
Balance at 1 August 2019 99 4,979 - 110,135 115,213
Total comprehensive income
for the period - - - 33,036 33,036
Share-based payment transactions - - - 971 971
Dividends paid - - - (52,338) (52,338)
Dividend equivalents
paid - - - (259) (259)
Tax adjustments - - - 1,594 1,594
--------- --------- --------- ---------- ---------
Balance at 31 January
2020 99 4,979 - 93,139 98,217
Condensed Statement of Cash Flows
For the six months ended 31 January 2021
Six months ended
31 January Year ended
31 July
2021 2020 2020
---------- ---------- -----------
Unaudited Unaudited Audited
Note
GBP'000 GBP'000 GBP'000
Net cash generated from operating
activities 12 44,076 24,962 64,170
Investing activities
Finance income 24 154 200
Purchase of property, plant and
equipment (2,060) (1,484) (7,664)
Purchase of intangible assets (1,569) (530) (1,293)
---------- ---------- -----------
Net cash used in investing activities (3,605) (1,860) (8,757)
Financing activities
Issue of share capital - - (1)
Dividends paid 5 (48,081) (52,338) (52,338)
Payment of principal portion
of lease liabilities (1,146) (485) (1,882)
Payment of interest portion of
lease liabilities (138) (109) (316)
---------- ---------- -----------
Net cash used in financing activities (49,365) (52,932) (54,537)
Net (decrease)/increase in cash
and cash equivalents (8,894) (29,830) 876
Cash and cash equivalents at
beginning of period 80,139 79,263 79,263
---------- ---------- -----------
Cash and cash equivalents at
end of period 71,245 49,433 80,139
========== ========== ===========
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 2021 ("Condensed
Interim Financial Statements").
The Company is a public limited company, incorporated and
domiciled in the UK. Its registered address is Solar House,
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 23 March 2021. 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 2020, 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 2020 were approved by the
Board of Directors on 19 October 2020 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
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.
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 2020.
Presentation
Consistent with the reclassification published in the 31 July
2020 Annual Report and Financial Statements, "Deferred income and
contract liabilities" of GBP10.4m, included within "Trade and other
payables" at 31 January 2020, have now been separately disclosed on
the face of the statement of financial position as "Contract
Liabilities" as required by IFRS 15 "Revenue from Contracts with
Customers".
This reclassification had no impact on the Company's net assets,
income statement or net cash flow from operating activities
reported in 2020.
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 to at least 31 March 2022.
In preparing this financial information, Management has
considered the circumstances impacting Softcat during the period,
as detailed in the Chief Financial Officer's review, and reviewed
projected performance for the period to at least 31 March 2022;
being the going concern period. The Directors also considered the
Company's objectives and strategy, its principal risks and
uncertainties in achieving its objectives and its review of
business performance and financial position.
Softcat continues to monitor the operational effects of the
Covid-19 pandemic and update base case plans to reflect current
circumstances for the going concern period. In modelling the
assumptions for going concern assessments, the directors remain
positive of market recovery as vaccinations continue in the UK.
Softcat operates in a resilient industry. Softcat's customer base
incorporates a large volume of non-discretionary spend from UK
corporates as IT has become vital to establish competitive
advantage in an increasingly digital age. Public Sector, a large
and fast-growing area of the business, has shown no significant
negative sensitivity to Covid-19 so far.
Softcat continues to model its base case and severe but
plausible scenarios, as well as stress testing the limits of
Softcat.
Base case
The key assumptions in the base case going concern forecast
model for the period to 31 March 2022 and beyond are as
follows:
- Revenue and GII growth to be in line with the first two
quarters of FY21 adjusting for large deals augmenting the FY21
interim results and a return to normal growth levels in FY22;
- Gross margin, rebate income, debtor days, and bad debt
continue to be in line with the year so far adjusted for seasonal
variations;
- Payroll costs to increase as a result of continued investment in headcount;
- Travel and staff costs to increase throughout Q3 and Q4 FY21
as government restrictions ease and returning to normal budgeted
values in FY22; and
- Other operating costs to broadly follow patterns experienced over the last 12 months.
Severe but plausible
Softcat recognises that the government has supported a lot of
businesses during the pandemic, and the gradual removal of this
support may result in a general economic downturn, an increase in
bad debt and debtor days. Softcat has modelled the downside of this
expectation and analysed remedial action required under this
scenario to ensure that the company can remain cash positive
without external debt. Mitigating action under all current models
for a short-term solution is to adjust the dividend paid out. This
ensures Softcat is able to continue operationally and maintains
cash above minimum accepted levels determined by the Board. Cost
reduction initiatives would also be considered if these modelled
scenarios were to crystallise.
Reverse stress testing
A reverse stress test has also been performed and mitigating
actions have been analysed. These scenarios and tests do not give
management or the Directors cause for concern.
Liquidity and financing position
At 31 January 2021, the Company held instantly accessible cash
and cash equivalents of GBP71.2m, while net current assets were
GBP124.8m. The Company has access to a Revolving Credit Facility
(RCF) of GBP50m up to April 2021. No drawdown has been made on this
facility and Management have decided not to renew the facility.
This does not raise cause for concern, nor do Management anticipate
needing to obtain external funding for at least 12 months post
report date.
Going concern conclusion
The Directors consider that the Company has significant
liquidity headroom to continue in operational existence for the
going concern period to 31 March 2022. Accordingly, at the March
2021 Board meeting, the Directors concluded from this analysis it
was appropriate to continue to adopt the going concern basis in
preparing the interim report. The long-term impact of Covid-19 is
uncertain, and the impact will continue to be monitored.
Critical accounting judgements and key sources of estimation
uncertainty
When applying the Company's accounting policies, management must
make several key judgements involving estimates and assumptions
concerning the future. Key judgements management have made are
those which have the most significant effect on the amounts
recognised in the financial statements. Key sources of estimation
uncertainty are those assumptions concerning the future and other
key sources of estimation uncertainty at the reporting date, that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year.
The key judgements and sources of estimation uncertainty
reported in the financial statements for the year ended 31 July
2020 are still relevant. There have been no new areas of
significant accounting judgement or key sources of estimation
uncertainly arising from operations in the first 6 months of the
financial year to 31 July 2021, nor in the months to the date of
publication of this interim report.
Changes to accounting standards
There have been no new standards effective in the period to 31
January 2021, that materially affect Softcat. There has also been
no change that will materially affect Softcat based on existing
standards.
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
31 January Year ended
31 July
2021 2020 2020
---------- ---------- -----------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Revenue by type
Software 240,094 252,927 519,520
Hardware 289,170 218,856 442,349
Services 47,724 52,365 115,258
---------- ---------- -----------
576,988 524,148 1,077,127
Gross invoiced income by type
Software 461,633 409,675 964,280
Hardware 293,909 224,222 458,297
Services 115,274 93,825 223,614
---------- ---------- -----------
870,816 727,722 1,646,191
Six months ended
31 January Year ended
31 July
2021 2020 2020
---------- ---------- -----------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Revenue by type of business
Small and medium 348,106 272,037 530,573
Enterprise 111,928 140,848 257,478
Public sector 116,954 111,263 289,076
---------- ---------- -----------
576,988 524,148 1,077,127
Gross invoiced income by type of
business
Small and medium 446,680 337,472 669,607
Enterprise 155,481 171,420 338,312
Public sector 268,655 218,830 638,272
---------- ---------- -----------
870,816 727,722 1,646,191
Gross invoiced income reflects gross income billed to customers
adjusted for deferred and accrued revenue items. Softcat reports
gross invoiced income as an alternative financial KPI as this
measure allows a better understanding of business performance,
position and correlation to cash flows. The impact of IFRS 15 and
principal versus agent consideration is an equal reduction to both
revenue and cost of sales.
Reconciliation of gross invoiced
income to revenue
Six months ended Year
31 January ended
31 July
2021 2020 2020
---------- ---------- ----------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Gross invoiced income 870,816 727,722 1,646,191
Income recognised as agent under
IFRS 15 (293,828) (203,574) (569,064)
Revenue 576,988 524,148 1,077,127
========== ========== ==========
The total revenue for the Company has been derived from its
principal activity as an IT reseller. Substantially all this
revenue relates to trading undertaken in the United Kingdom.
4. Taxation
Six months ended Year
31 January ended
31 July
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Current Tax
Current period 10,849 6,785 18,154
Adjustment in respect of current
income tax in previous years. (138) - (36)
Foreign tax relief/other relief - - (58)
Foreign tax suffered - - 64
Deferred Tax
Temporary differences 5 702 (171)
---------- ---------- ---------
Total tax charge for the period 10,716 7,487 17,953
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 2021. On this basis, the Company's tax charge was
GBP10.7m (H1 2020: GBP7.5m). The applicable statutory tax rate for
the full year is 19.0% (H1 2020: 18.3%) following enacted
government legislation. Following adjusting items which relate to
client entertaining and non-qualifying depreciation, the effective
tax rate is 19.2% (H1 2020: 18.5%).
5. Dividends
Six months ended Year
31 January ended
31 July
2021 2020 2020
---------- ---------- ---------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Declared and paid during the period
Interim dividend - - -
Final dividend 32,981 20,618 20,618
Special dividend 15,100 31,720 31,720
---------- ---------- ---------
48,081 52,338 52,338
An interim dividend of 6.4p per share, amounting to a total
dividend of GBP12.7m, was declared post period end and is to be
paid on 14 May 2021 to those on the share register on 1 April
2021.
6. Right-of-use assets and lease liabilities
Leases - as a lessee
Softcat has lease contracts for various properties and offices
across the country used for its operations. Property leases
generally have lease terms of between 3 and 10 years. A number of
these contracts include extension and termination options which are
discussed below.
Set out below are the carrying amounts of right-of-use assets
recognised and movements during the period:
Six months ended Year ended
31 January 31 July
2021 2020 2020
---------- ---------- -----------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Property leases
Opening right-of-use asset 8,698 7,024 7,024
Additions - - 3,644
Depreciation (1,126) (879) (1,970)
---------- ---------- -----------
Closing right-of-use asset 7,572 6,145 8,698
The weighted average incremental borrowing rate as used for the
period is 2.7%.
Set out below are the carrying amounts of lease liabilities
included under current and non-current liabilities and the
movements during the period:
Six months ended Year
31 January ended
31 July
Property leases 2021 2020 2020
---------- ---------- -----------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Opening lease liability 9,839 8,077 8,077
Additions - - 3,644
Accretion of interest 138 109 316
Payments (1,283) (594) (2,198)
---------- ---------- -----------
Closing lease liability 8,694 7,592 9,839
Current lease liability 2,480 2,338 1,867
Non-current lease liability 6,214 5,254 7,972
---------- ---------- -----------
8,694 7,592 9,839
---------- ---------- -----------
Softcat had no variable leases expenses or income from
sub-leases charged to the Statement of profit or loss and other
comprehensive income, nor any sale and leaseback transactions.
Softcat has several lease contracts that include termination
options. These options are negotiated by management to provide
flexibility in managing the leased-asset portfolio to align to
business needs. Management exercise significant judgement in
determining whether these options are reasonably certain to be
exercised.
Set out below are the undiscounted potential future rental
payments relating to periods following the exercise date of
termination options that are not included in lease term:
Within five years More than five years Total
As at 31 January 2021 (unaudited) GBP'000 GBP'000 GBP'000
Termination options expected to be exercised 2,833 3,051 5,884
------------------ --------------------- --------
2,833 3,051 5,884
================== ===================== ========
Within five years More than five years Total
As at 31 January 2020 (unaudited) GBP'000 GBP'000 GBP'000
Termination options expected to be exercised 1,587 4,277 5,864
------------------ --------------------- --------
1,587 4,277 5,864
================== ===================== ========
Lease charges related to low value and short-term leases
recognised in the Statement of profit or loss and other
comprehensive income for the period was GBPNil.
7. Trade and other receivables
Six months ended Year
31 January ended
31 July
2021 2020 2020
---------- ---------- ---------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Trade receivables 260,705 259,142 296,286
Allowance for expected credit losses (2,929) (2,171) (2,863)
---------- ---------- ---------
Net trade receivables 257,776 256,971 293,423
Unbilled receivables 6,561 6,236 5,104
Prepayments 2,534 4,401 2,700
Accrued income 8,238 9,451 5,951
Deferred costs 9,034 7,107 6,945
---------- ---------- ---------
284,143 284,166 314,123
8. Trade and other payables
Six months ended Year
31 January ended
31 July
2021 2020 2020
---------- ---------- ---------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Trade payables 164,068 188,322 198,171
Other taxes and social security 18,036 16,167 16,799
Accruals 48,244 47,653 48,896
---------- ---------- ---------
230,348 252,142 263,866
9. Contract liabilities
Six months ended Year
31 January ended
31 July
2021 2020 2020
---------- ---------- ---------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Deferred income 15,239 10,405 16,494
---------- ---------- ---------
15,239 10,405 16,494
Deferred income is split as:
Six months ended Year
31 January ended
31 July
2021 2020 2020
---------- ---------- ---------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Current deferred income 11,509 10,405 13,929
Non-current deferred income 3,730 - 2,565
---------- ---------- ---------
15,239 10,405 16,494
Contract balances
Deferred income includes short-term and long-term goods or
services to be delivered to customers by Softcat for which there is
a contractual obligation arising from receipt of consideration or
amounts due from the customer. The outstanding balances on these
accounts has moved in line with the activity of the business and
customer base. During the current year, GBP8.715m has been
recognised in revenue resulting from these contract liabilities
existing as at 31 July 2020. As at 31 January 2021, GBP15.239m
remains on the Statement of Financial Position as a contract
liability. Softcat expects that GBP11.509m of the balance as at 31
July 2020 will be released in FY21 with the balance released within
2-5 years of the end of FY21.
10. Financial instruments
The Company's principal financial liabilities comprise trade and
other payables including lease liabilities. 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
31 January Year ended
31 July
2021 2020 2020
---------- ---------- -----------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Financial assets
The financial assets of the Company
were as follows:
Cash at bank and in hand 71,245 49,433 80,139
Trade receivables, other debtors
and accrued income 272,575 272,658 304,478
---------- ---------- -----------
343,820 322,091 384,617
Financial liabilities
The financial liabilities of the
Company were as follows:
Trade payables (164,068) (188,322) (198,171)
Accruals (48,244) (47,653) (48,896)
Lease liabilities (8,694) (7,592) (9,839)
---------- ---------- -----------
(221,006) (243,567) (252,906)
The Directors consider that the carrying amount for all
financial assets and liabilities (excluding lease liabilities)
approximate to their fair value.
11. Earnings per share (EPS)
Six months ended Year
31 January ended
31 July
2021 2020 2020
---------- ---------- --------
Unaudited Unaudited Audited
Earnings per share Pence Pence Pence
Basic 23.3 16.7 38.2
Diluted 23.2 16.6 38.0
The calculation of the earnings per share and diluted earnings
per share is based on the following data:
Six months ended Year
31 January ended
31 July
2021 2020 2020
---------- ---------- ---------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Earnings
Earnings for the purposes of EPS being
profit for the period 46,234 33,036 75,664
The weighted average number of shares is given below:
Six months ended Year
31 January ended
31 July
2021 2020 2020
---------- ---------- --------
Unaudited Unaudited Audited
000's 000's 000's
Number of shares used for basic earnings
per share 198,423 197,957 198,127
Number of shares deemed to be issued
at nil consideration following exercise
of share options 978 1,091 1,007
---------- ---------- --------
Number of shares used for diluted
earnings per share 199,401 199,048 199,134
12. 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
2021 2020 2020
---------- ---------- ---------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Operating profit 57,064 40,478 93,733
Depreciation of property, plant and
equipment 1,174 582 1,382
Depreciation of right-of-use assets 1,126 957 1,970
Amortisation of intangibles 175 69 232
Loss on disposal of fixed assets - - 146
Dividend equivalents paid (81) (259) (259)
Cost of equity-settled employee share
schemes 1,113 971 1,958
Operating cash flow before movements
in working capital 60,571 42,798 99,162
---------- ---------- ---------
Increase in inventories (1,839) (5,296) (660)
Decrease/(Increase) in trade and other
receivables 29,979 1,141 (28,816)
Increase in trade and other payables (34,772) 3,789 21,601
---------- ---------- ---------
Cash generated from operations 53,939 42,432 91,287
Income taxes paid (9,863) (17,470) (27,117)
---------- ---------- ---------
Net cash generated from operating
activities 44,076 24,962 64,170
========== ========== =========
13. Share capital
Six months ended Year
31 January ended
31 July
2021 2020 2020
---------- ---------- ---------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Ordinary shares of 0.05p each 100 99 100
Deferred shares of 1p each - - -
---------- ---------- ---------
100 99 100
14. 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
2021 2020 2020
---------- ---------- ---------
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
M Hellawell 1,286 1,691 1,382
G Watt - - -
G Charlton 12 16 16
R Perriss 4 - -
V Murria 40 78 78
P Ventress 6 - 8 8
K Slatford - - -
---------- ---------- ---------
1,342 1,793 1,484
6 Peter Ventress resigned from the Board on 31 December
2019.
Except for the above, there were no other significant related
party transactions.
15. Post balance sheet events
Dividend
An interim dividend of 6.4p per share, amounting to a total
dividend of GBP12.7m was declared post period end and is to be paid
on 14 May 2021 to those on the share register on 1 April 2021.
New leases
After the reporting date of these interim results, Softcat
committed to a new lease on an existing property. This new lease
will create a right-of-use asset and matching liability to the
value of GBP219k.
16. 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 of the financial year. Customer buying behaviour is
again expected to follow these patterns with the exception of the
handful of large deals in these H1 results.
INDEPENT REVIEW REPORT TO SOFTCAT PLC
Introduction
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 31 January 2021, which comprises the Condensed
Statement of Financial Position as at 31 January 2021 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 Guidance 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 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 enquiries, 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 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 2021 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
23 March 2021
Corporate Information
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Directors
M Hellawell
G Watt
G Charlton
R Perriss
V Murria
K Slatford
Secretary
L Thomas
Company registration number
02174990
Softcat LEI
213800N42YZLR9GLVC42
Registered office
Solar House
Fieldhouse Lane
Marlow
Buckinghamshire
SL7 1LW
Auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF
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IR KZGZFGFLGMZZ
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