Softcat has emerged as one of London’s leading AI plays, cementing its position on Wednesday after the group reported another year of strong growth ahead of expectations and set out plans to expand into the United States.
But shares slipped, perhaps because market expectations were high going into results, or possibly due to ongoing wobbles in the AI trade in the US and Asia.
Nonetheless, its recent performance was commendable.
The IT products and services provider said gross invoiced income rose 30.5% to £4.72bn in the year to 31 July, with gross profit up 24.7% and underlying operating profit up 19.4% to £215.1m.
Growth was broad-based across its technology areas and customer groups, with a particularly strong performance in its corporate segment. Cash generation remained strong, and it returned £137.5m to shareholders during the year through dividends and a £45m buyback, while lifting its total dividend 7.5%.
“Softcat has found itself in an enviable position as the AI revolution creates winners well beyond the companies developing the technology,” said Mark Crouch, Market Analyst at eToro.
“Businesses are spending heavily to modernise increasingly complex IT systems, and Softcat is benefiting from the growing need for trusted advice, infrastructure and security. A near 20% jump in underlying operating profit suggests the company is making the most of an opportunity that shows little sign of disappearing.”
The company said demand was supported by the growing importance and complexity of IT infrastructure as businesses build the computing power, storage, networks, and security needed for artificial intelligence, though memory chip shortages complicated pricing and availability. Customers remained disciplined but kept spending.
After the year-end, Softcat announced the acquisition of GDT, a US-based IT solutions provider, in a significant step to build a presence in the American market and serve customers with international needs. Excluding the deal, Softcat expects high single-digit growth in underlying operating profit in the coming year.
These more measured expectations of future profit growth may be why shares were down 6% at the time of writing.