Last close As at 05/08/2026
GBP19.01
▲ −10.00 (−0.52%)
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GBP3,743m
Research: TMT
Softcat’s FY24 results supports management’s assertion that the group has found a unique formula. Management re-emphasised the role of its corporate culture in creating a differentiated offering for the highly fragmented UK IT services market. Softcat’s resulting growth in market share also translated into strong cash generation and dividend flow. The results suggest that management can meet or slightly exceed guidance even under challenging economic conditions.
Softcat |
FY24 shows the strength of Softcat’s model
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Technology |
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25 October 2024 |
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Softcat’s FY24 results supports management’s assertion that the group has found a unique formula. Management re-emphasised the role of its corporate culture in creating a differentiated offering for the highly fragmented UK IT services market. Softcat’s resulting growth in market share also translated into strong cash generation and dividend flow. The results suggest that management can meet or slightly exceed guidance even under challenging economic conditions.
FY24 results a welcome (modest) beat
Softcat’s FY24 results were slightly ahead of consensus expectations. Gross profit was £417.8m, up 11.7% (consensus: £416.2m), operating profit was £154.1m, up 9.3% (consensus: £152.2m) and EPS was 59.4p (consensus: 57.6p). A special dividend of 20.9p (FY23: 12.6p) and a final dividend of 18.1p (FY23: 17.0p) took the total FY24 dividend to 47.5p (FY23: 37.6p).
The growth formula continues to deliver
In our view, Softcat’s growth has as much to do with strong execution as strong demand. The principal driver is selling a growing range of IT services each year to an increasingly loyal customer base. Furthermore, with an estimated market share of only 5% (the largest in the UK), there is plenty of potential to keep repeating this model. Add to this a continued modest investment capital requirement and Softcat’s strong financial returns look set to continue.
Guidance underpins consensus
For FY25, management has guided (once again) to double-digit gross profit growth together with high single-digit operating profit growth. We note that the prevailing UK economic conditions did little to hinder the delivery of a slightly above consensus performance in the FY24 results.
Valuation: Look beyond P/E multiples
Softcat’s consensus estimates underpin what might, at a superficial level, appear to be full P/E multiples relative to peers. However, industry-leading forecast operating margins and strong consensus cash conversion should continue to support modest growth capital requirements. As a result, the market expects a continuation of both ordinary and special dividend payouts, optimising the balance sheet and keeping financial returns strong.
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Consensus estimates
Source: LSEG Data & Analytics. Note: Dividend includes special dividends (FY23: 12.6p, FY24: 20.9p, FY25e: 13p and FY26e: 14p). *Gross invoiced income. |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: TMT
Zalaris delivered its 11th consecutive quarter of revenue growth in Q324, alongside record quarterly revenue and profitability. Contract momentum continues with both existing clients and new contracts, resulting in a net retention rate within Managed Services of 108%. Zalaris has made good progress towards its mid-term adjusted EBIT margin target of 12–15%, with a 17.9% margin in the Managed Services business boosting group margins to 10.9% (Q323: 8.5%). The enhanced profitability has been driven by the strategic improvements to operations in Germany and increased use of near-shore and offshore service locations to drive efficiencies. Our estimates are unchanged as we expect a strong final quarter with maintained margin progression and contract momentum. Management noted it is making progress in the strategic review announced in April, although no outcome has yet been reported.