- Strong final quarter to end-July
- Full-year forecasts raised again
- FY26 guidance also encouraging
Leading technology solutions and services reseller Softcat (SCT) rewarded investors’ faith with yet another increase in guidance for the year to July 2025 and a positive outlook for the year to July 2026.
The shares, which had drifted from their late-June highs of nearly £19 to a three-month low of £15.55 last week, gained 67p or 4.3% to £16.32 with more than a day’s volume traded in the first hour of dealings.
HIGH-TEENS PROFIT GROWTH
In a brief year-end trading statement, the FTSE 250 firm said activity in the fourth quarter had remained strong, supported by ‘further conversion of larger solution projects’, and it now expects to deliver high-teens growth in full-year gross profit and mid-teens growth in operating profit.
That compares with a forecast in May of low-teens growth in operating profit, which itself was an upgrade from its original forecast for the year.
The company also said it remained highly cash-generative, with cash conversion expected to be at the top of its range of estimates of 85% to 95% for the year.
Looking ahead, Softcat expects to generate low double-digit growth in gross profit and high single-digit growth in operating profit on an underlying basis, ‘excluding the significant incremental contribution from large projects in FY2025’.
EXPERT VIEW
Analyst Martin O’Sullivan at Shore Capital noted Softcat’s latest increase in guidance puts earnings for 2025 slightly above the company-compiled consensus, ‘so the quantum of the upgrade is fairly small (around 2%) but very welcome nonetheless’.
O’Sullivan has pencilled in EPS (earnings per share) growth of 32% from July 2024 to July 2027, representing a 10% compound annual growth rate, due to the firm’s consistent market share gains and exposure to structural drivers including wider adoption of AI tools and the early stages of a laptop and PC refresh cycle.
‘We view Softcat as a high-quality, long-duration compounder in the UK tech space, and we continue to see meaningful upside over time,’ concludes the analyst.
