Softcat CEO predicts ‘tonnes of opportunities in the future’ after positive H1 results

Graham Charlton hints at potential M&As to complement organic growth

Softcat has reported an upward trend in its H1 FY25 results, driven by its new focus on customers and a comeback in hardware.

Gross profit, the VAR’s “primary measure of income”, climbed 12.1 per cent year-on-year, from £1.26bn to £1.5bn.

The upward trend was driven by the enterprise, mid-market, and public sector customer segments, but also by growth in cybersecurity.

Gross invoiced income (GII) ramped up 19.3 per cent, reaching £220.2m, compared to £196.5m the year before.

Operating profit stood at £73.7m, a 10.4 per cent increase from £66.7m last year.

Despite CEO Graham Charlton previously referring to revenue as the company’s “most meaningless number” in its set of results, the latter was up 16.8 per cent in the first half of the year (H1 FY25: £545.6m, H1 FY24: £467.2m).

In a call with CRN, Charlton explains this positive evolution was made possible by “different customer segments and different parts of [Softcat’s] technology offering growing well.”

The company is now “expecting to be ahead of previous estimates for the full year” as it plans on seeing “a real strength in cybersecurity” as well as “good performance in solutions hardware.”

The company now predicts operating profit growth to be in the lower double digit rather than the high single digit in FY25.

Softcat also strives to “prioritise customer need, not gross revenue.”

“It’s not totally meaningless, it’s really nice to see Bytes celebrate their £2bn GII milestone, but it is the least important metric for us.”

Hardware was also back on track after a sharp decline in FY24.

This comeback was made possible by growth in datacentres and networking infrastructure, as well as server and compute sales.

The CEO also expects AI PCs to add to the momentum in the future, “but in the next two or three years, rather than the next six months.”

Software gross profit was also on the up across technologies and services growth was reportedly boosted by large and high margin support service deals.

M&A, macroeconomics, and new hires

The organisation also hinted that its strong organic development might create room acquisitions in the future.

“There's a list of interesting organisations for us to look at,” explains Charlton.

“We’re looking and are interested to learn from others and what they're doing, and if at some point that bubbles over into a compelling opportunity to accelerate through M&A, then we've got the opportunity to take it.

“But it's a really high bar, so it would have to be a very, very compelling opportunity, because that ability to build organically is always there for us.”

While most companies were negatively impact by macroeconomic challenges in the UK, such as “low business confidence,” the “change of government,” “changes in policy,” “changes in taxation,” as well as “changes in government spending,” Charlton explains that Softcat doesn’t mind.

“We feel we've got a quality offering we can work with the customers, no matter what their IT agenda is moving from and to.

“The breadth of that offering is pretty unique in the market across hardware, software, services, networking, datacentre, workplace technology, cybersecurity, data, AI automation.

“The richness of the offering is why we've been able to keep generating double digit growth and, most importantly, providing the service that our customers need at the time they need it, and not running products that we want to sell them down their throat.”

The VAR has also double down on its focus on customers, by increasing its client base by 1.4 per cent year-on-year, but also by selling more to already existing ones, with an increase of 10.7 per cent in gross profit per customer.

To support its growth goals, the company has also increased its headcount by six per cent year-on-year to 2,617.

New hires are focused across technical, specialist and sales support functions.