I couldn't say if they'll be exactly dancing in the streets around silicon roundabout but UK tech investors can look forward to another big IT float coming to the main market soon (some time in November, looks likely). Marlow-based Softcat isn't a cuddly toy but a software reseller with a very credible growth track record and seemingly churning out oodles of cash.

Core product it sells include suites of US giants Microsoft (MSFT:NDQ), VMWare (VMW:NYSE), Cisco Systems (CSCO:NDQ), plus UK cyber security firm Sophos (SOPH).

[caption id="attachment_59757" align="alignnone" width="475"]Martin Hellawell CEO Softcat by Alex Baker Photography Martin Hellawell,
CEO Softcat[/caption]

Results for its last full year to 31 July were published alongside its intention to float and they make interesting reading. Adjusted operating profit rose 14.4% to £40.6 million on an 18% rise in revenues, to a fraction more than £596 million, so its a sizeable business. Panmure Gordon IT analyst George O'Conner tells us that Softcat has put up a compound average growth rate in revenues of 33% over the past five years, so consistent too. Operating cash flow was around £50 million.

No new money is expected to be raised, although founder and ex-chairman Peter Kelly has left the board, so a new home for his 52% stake will be needed.

Softcat founder Peter Kelly

Softcat founder and ex-chairman, Peter Kelly

That's what we do know. Here's what we don't. How much investors are being asked to stump up. There's no firm valuation detail although market analysts, as they tend to like doing, currently speculate a £500 million market value, or an enterprise value (EV) of £460 million once the £40million of cash is stripped out.

Softcat signThat implies a current year EV to EBITDA (earnings before interest, tax, depreciation and amortisation) multiple of 9.2-times, extrapolating past EBITDA growth into this year. If right, that would mean a fairly chunky premium to its obvious peer, Computacenter (CCC).

That said, the pair are different animals. Softcat is growing much faster and it a UK pure play. That may aid its valuation talks given that Computacenter has long struggled to balance large French and German businesses. A final data point might be extracted from recent M&A. August's $431 million acquisition of Kelway by reseller peer CDW was struck at a double-digit EV to EBITDA multiple.

Issue Date: 19 Oct 2015