Softcat throws up hard cash amid growing demand for cyber security

IT products and service provider Softcat proposed a bumper dividend after generating double-digit annual growth in sales and profits, but said it has not yet found a replacement for departing CEO Martin Hellawell.

Revenue in the year to 31 July of £832.5m was up 23.8% on the previous year, versus an £800m consensus forecast, with growth across all major business lines, led by security and services.

The security business saw strong underlying growth boosted by purchases from organisations preparing for the EU's General Data Protection Regulation (GDPR) compliance, which will be enforced from 25 May next year, as well as a general reaction to cyber attacks such as Wannacry.

"This is a significant challenge for the majority of our customers and there is a lot more work required in this area, which is therefore a good opportunity for us moving forward," said Hellawell, adding that the growing complexity and frequency of cyber security issues was making it a major boardroom priority.

Gross profits rose 12.9% to £136.3m despite the prior year containing a one-off benefit that was not possible to repeat, while profits before tax jumped 18.6% to £50.3m, just ahead of a consensus forecast pointing to £49.5m.

Diluted earnings per share were up 19.5% to 20.2p and, with cash conversion increased to 97.2% from 85.5%, the final dividend was hiked more than two thirds to 6.1p and a 13.5p special payout has been declared.

"Our growth would indicate that once again we have taken further market share in our sector," said Hellawell, who said the FTSE 250 group was continuing to invest in new capabilities.

"That, combined with another year of strong cash generation, result in the special dividend we've proposed alongside these results."

He added: "Our simple strategy of winning new customers and selling more to existing customers was successfully executed, and we were delighted to welcome an incremental 800 customers last year and to see gross profit per customer increase by over 6%."

He said the search for a new CEO was "progressing" but that he remained "fully focussed on doing the job" and would anyway continue with the company as non-executive chairman.