Softcat 'outgrows market three times' as top line hits £2.5bn

Reseller says it has stepped up hiring spree and plans to open an office in Newcastle

Softcat this morning unveiled its fiscal 2022 results, which showed gross invoiced income of £2.51bn. Here we break down the key talking points.

Organic growth machine in overdrive

Softcat has grown rapidly to become the UK's largest reseller over the last decade and a half, and it has done this exclusively through organic growth.

The LSE-listed reseller's gross invoiced income (its ultimate top line) rose 29.4 per cent to £2.51bn in its year to 31 July 2022, with revenues (which strips out deals in which it was judged to have acted as an ‘agent') soaring 37.5 per cent to £1.08bn.

Based on figures from market watcher Context, Softcat claims it outgrew the wider market by three times.

Softcat has now racked up 68 successive quarters of organic year on year income and profit growth, CEO Graeme Watt stressed in his results statement.

The Marlow-based outfit hailed its "strong performance across both first and second halves of the year", adding that revenue growth across all its key sales segments topped 15 per cent.

No signs of slowing down

Emphasising that it has "less than five per cent of a growing market", Softcat said in its results statement that it "continues to be excited by the opportunity ahead".

Having grown its headcount by 14 per cent to 2,060 in its fiscal 2022, the reseller giant said it has increased the rate of recruitment into the company, adding that it plans to open a further office in Newcastle in 2023.

"The company is in a strong competitive position heading into the new financial year, which has started well," Softcat stated.

Supply chain challenge not over

Softcat's double-digit growth came despite the ongoing hardware supply challenges, which it claimed it "continued to manage".

Hardware was in fact the fastest growing of Softcat's three categories, with hardware GII soaring 43 per cent to £810m. Software GII rose 23 per cent to £1.37bn and services GII by 26 per cent to £332m.

Echoing recent statements from industry peers, Watt warned that the shortages that have blighted the market for the last 18 months are far from over.

"More recently there is some evidence that the supply chain situation is improving, at least for end user devices, although shortages on some storage and networking hardware lines look set to continue well into the new year," he said.

But profits may not grow in 2023

Having seen 2022 operating profits rise 14 per cent to £136.1m, Softcat predicted that its 2023 bottom line haul would be "at similar levels" to 2022, with cost growth likely to outstrip gross profit growth in the first half.

It put this down to a number of factors, including tough comparables, higher internal event costs post-Covid, and its decision to award "significantly higher pay increases across all departments" this year.

"We have also increased the rate of recruitment into the company as we remain focused on the enormous and growing opportunity the IT infrastructure market presents," it said.

Softcat moots international growth once again

Watt has been vocal about Softcat's need to look outside the UK to maintain its double-digit growth rates in the longer-term.

And the prospect of international growth - beyond just serving the international needs of its UK and Irish clients - was riffed on once again in the annual results statement.

Softcat has opened a "small" US office in Arlington, Virginia, it reported, which it said will "enable us to better understand that market, providing insights that will benefit our wider operations and inform future strategy".