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Softcat warns of Brexit cloud forming over UK tech, vows: If prices rise, we'll pass them on...

...ahem, as is 'normal in our industry'

Though the wheels keep rolling at unstoppable reseller juggernaut Softcat, fuelled by a Windows 10 refresh and returning demand for servers, the CEO has voiced caution about the potential implications of Brexit.

Sales for fiscal ’18 ended 31 July came in at £1.08bn, up 29.9 per cent on the year ago period, with software up 35.9 per cent to £563.7m, hardware up 27.7 per cent to £366.9m and services growing 16 per cent to £151.1m.

Operating profit went up to £68m from £50.16m, and after tax and finance income, net profit was £55m versus £40m in the prior year.

Graeme Watt, Softcat’s CEO who took over from long-serving boss Martin Hellawell on April Fools’ Day, said the business had “embraced the strength of the market during 2018”.

“More than ever, organisations recognise the need for digitisation for survival, differentiation and competitive advantage. In addition, the impact of GDPR and Windows 10 have driven near-term demand for client and data centre spend which we expect to continue into the current financial year.”

Software sales comprised workplace and security licenses and asset management tech. Hardware was driven by computer sales and a “resurgence in servers” following a decline in fiscal ’17. Managed services and reselling vendor services made the third element of the business.

He said Softcat grew 20 per cent or more with 14 of its top 20 vendors, which that account for 66 per cent of total sales. As such, the reseller isn’t overly reliant on one company and its whims.

Hybrid IT, security and IoT were “fundamental and longer term drivers” - he had to tick the bingo buzzword boxes - and said the business is viewing with interest developments in AI/ ML, robotics and other emerging tech.

Softcat’s long-term planing and centred on selling more stuff to its existing clients, and bringing more customer on board, something that was put in place by Hellawell. The number of customers went up 4.7 per cent to 11.9k, slower than recent years, but gross profit per customer rose 22.8 per cent.

Watt said the “strategic priorities are unchanged”. Given that he only started in the role four months before the year end, he hasn’t had much time to affect longer term change.

He said the business was “very well positioned” for “further growth in 2019” but added a caveat and the UK’s split from the European Union on 29 March.

“Whilst the macro-economic picture is far from clear I believe the key issue surrounding Brexit will be business confidence. If price rises due to new tariffs or weakened sterling then we will see to pass them on as is normal for the industry.

“We’re working with our vendor and distribution partners to make sure that in the event of any supply chain impacts from changes in processes tat we are prepared so that there is minimal impact to our customers,” said Watt.

Last week, channel analyst Canalys predicted that a hard Brexit - something vendors are preparing for - could lead to price rises, product shortages and may send the British economy into a deep recession. In truth, nobody really knows what will happen and that generally isn’t good for businesses - businesses like certainty and predictability. ®

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