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TogetherSoftcat plcAnnual Report and Accounts 2021
Softcat:we’re in thistogetherOur purpose, to help customers use IT to succeed byputting our employees first, has seemed especiallyprescient during the past twelve months. The specialculture we have at Softcat was born from our founder’svision to bring people together in a company they couldenjoy being part of. While we haven’t been able tophysically get together as much as we would haveliked this past year, we have been able to stay in touchthrough some typically ingenious and fun Softcatinitiatives – take a look at pages 2 and 3 and pages 41to 43 for more detail on what we’ve been up to.
Gross profit per customer ’0002Gross profit m21276.4201917Operating profit .019.9Revenue ntents991.8797.250.2Cash conversion %3Customer base ’0002219.7209.5199.2188.8178.3Strategic report11246121516182122262830343640FY21 operational highlightsFinancial highlightsOur response to COVID-19At a glanceBringing our enablers togetherChair’s statementInvestment caseBusiness modelChief Executive Officer’s statementStrategic roadmapOur market and offeringStrategyChief Financial Officer’s reviewRisk managementKPIsSection 172 – Stakeholder engagementSocial valueCorporate governance2189.952 Introduction to corporate governance2088.054 Board of Directors1992.01898.01797.058 Governance report67 Audit Committee report76 Nomination Committee report80 Remuneration Committee report99 Directors’ reportFY21 operational highlights Revenue growth: 7%Gross profit growth: 17%Operating profit growth: 27%Cash conversion: 90%Employee engagement: 93%Customer satisfaction: 95%Financial statements107 Independent auditor’s report113 Statement of profit or loss and othercomprehensive income114 Statement of financial position115 Statement of changes in equity116 Statement of cash flows117 Notes to the financial statementsIBC Company information andcontact detailsCustomer base up by 200Gross profit per customer growth: 15%1. Revenue was previously restated due to the adoption ofIFRS 15 during 2019. As a result revenue is only availableon a comparable basis for 2018 to 2021.2. Customer base is defined as the number of customers whohave transacted with Softcat in both of the precedingtwelve-month periods.3. Cash conversion is an alternative performancemeasures. Please see page 29 for further definitionand reconciliation.Pages 1 to 51 form the Strategic Report of Softcat plcfor the financial year ended 31 July 2021. The StrategicReport has been approved by the Board of Softcat plcand signed on behalf of the Board by Graeme Watt, CEO,and Graham Charlton, CFO.1Strategic reportFinancial highlights
Our response to COVID-19Supporting ourstakeholders throughthe COVID-19 pandemicAt its core, Softcat is a people business which invests in itsemployees and the things they care about. In this section youwill see some of the ways we have responded to the COVID-19pandemic, supporting one another and our wider stakeholders.Supporting our peopleThe outbreak of the COVID-19 pandemic created insecurityand uncertainty. Keeping our employees safe remained ourtop priority and we have also made great efforts to keep ourspecial culture, regardless of the challenges of remote working.Our ‘Word of the Year’ was ‘Together’, which was a cornerstoneto our approach to how we work, even when separated.We are grateful to report that there have been no casesof COVID-19-related deaths in our workforce. No employee,regardless of their role and responsibilities, was furloughed.As the pandemic continued, management maintained a keeninterest in how our employees were coping, through regularemployee surveys and virtual all-employee meetings. These havebeen helpful in allowing management to understand how ouremployees are feeling, as well as how Softcat can best support them.Vin Murria, our Designated Director for Workforce Engagement,along with our other Non-Executive Directors, held a virtualengagement session with representatives from our South Coast,Leeds and Birmingham offices, giving our employees and ourDirectors a direct opportunity to engage on many topics,including how employees were coping during the pandemic.Keeping our employees informed about COVID-19-relateddevelopments, both inside and outside the business, was crucialin supporting a sense of togetherness. Management releasedcomprehensive and regular updates by email, which includedupdates on the latest Government guidelines, links to helpfulwebsites, as well as details of the support made available by theCompany. To maintain a sense of normality, we have continuedthe Softcat tradition of a member of our Senior Leadership Teamreleasing an email each Friday to all employees. The weekly emailis an important opportunity to continue recognising the hardwork and support of other colleagues and it often provideda more personal insight into the lives and thoughts of ourmanagement team as they dealt with the lockdown. Prior to thepandemic, each quarter the highest performing employees were2Softcat plc Annual Report and Accounts 2021taken out for lunch by a member of our Senior Leadership Teamand given the rest of the day off. This tradition was continued invirtual form, with the Company buying lunch at home for thewinning employees. Our non-sales staff were also recognised fortheir essential role on ‘Non-Sales Recognition Day’, where staffwere given lunches and awarded prizes.From the outset of the pandemic, all employees were givenaccess to IT kit, desks and other equipment, paid for by Softcat,to help them work from home comfortably and effectively.It was apparent, however, through our regular engagementwith employees, that for a small number of employees thehome environment was not ideal and so, where possible underGovernment guidance, we made our offices available for thosewho needed to use them. Our Facilities team did a brilliant jobof implementing safety measures and protocols, including aone-way systems, frequent deep cleans, face covering protocolsand extra cleaning stations.We have also taken a practical approach for those who need tojuggle home duties, such as child and social care, with work.Management has allowed, where possible, a more flexibleapproach to working hours.As the lockdown continued, it became clear how importantit is to take care of our own and each other’s mental health.We trained more mental health first aiders, who were available tochat and provide guidance to employees in need of help. We alsocreated a ‘buddy system’, which matched newer employees withmore experienced members of staff. To further raise awarenessand the support available, we ran a Mental Health AwarenessWeek in May, with a focus on matters such as anxiety aboutreturning to the office.What makes Softcat stand out is our culture, typified by ourcollaborative, vibrant and fun office environment. A key challengewas how our culture could be maintained, and continue to flourish,without coming together physically. Offices adapted by runningvirtual activities, such as coffee mornings and fitness classes.
Strategic reportSupporting our wider stakeholdersMarlow office as vaccination centre‘Together’ doesn’t only apply to the employees of Softcat, butalso to those around us in the communities in which we operate.Some charities have struggled during the COVID-19 pandemic aslockdowns have made fundraising harder and charities connectedto mental health and wellbeing have experienced an increase inpeople turning to them for help. With the help of our SoftcatCommunities Network, Softcat has donated over 180,000 tovarious charities. To read more about the charities, see ourCharities section on page 42.Finally, one of our proudest moments was opening a COVID-19vaccination centre, in partnership with Marlow NHS Trust, usingpart of our Marlow office. Softcat provided and converted thespace free of charge. The centre opened in January 2021 andcontinued to operate up until October. Tens of thousands ofpeople have been vaccinated at the centre, mostly from thelocal community and many of our employees were alsovaccinated onsite.To empower our employees to support the causes they careabout, Softcat launched Love2Volunteer in 2019. Each employeecan use two days per year as free charitable days, for whichthey will be paid by the Company. Last year, we expanded theuse of these days to cover activities and initiatives around theenvironment, community, homelessness and animals, and toprovide support to those in need during the pandemic. To helpemployees utilise these days, Softcat partnered with the ‘onHand’app, which connects volunteers with those who need someoneto talk to, which was very important during the lockdown.We know how hard the families of Softcat employees wereworking who also care for their young children. To bringsomething different and fun into their worlds, ‘Half-TermHampers’ were sent to employees with young children, whichincluded toys and educational material, to give our Softcatfamilies a helping hand. There was also a shortage of laptops,which were critical to help children with learning remotely, insome schools. Softcat donated laptops to a school local to ouroffice in Marlow, which some of our employees’ children attend.Lots of people ask me why I’vestayed at the same company for13 years. Well the answer is simple:I feel incredibly valued as anemployee.”Rachel ClayEducation Sales Manager3
At a glanceCulture, expertiseand passionOur goal is to be the leading IT infrastructure solutionsprovider in terms of employee engagement, customersatisfaction and shareholder returns. Success will createopportunities for our people and drive growth for ourcustomers and partners.Our valuesSoftcat was founded to be a place where people enjoyed coming to work.The values we hold today remain grounded in that vision and create whatwe believe is a unique culture which forms the basis of all our ityRead more on pages 6 and 7 and page 21Where we landsUnited Statesof Americacustomer baseHong KongSingaporeAustralia4Softcat plc Annual Report and Accounts 20211,681people
Strategic reportOur offeringWe help commercial and public sector organisationsdesign, procure, implement and manage their digitalinfrastructure. Our success in recent years puts us inthe privileged position to invest in new capabilities inexciting and emerging areas of technology, organisedaround four key customer priorities:Hybrid infrastructureDigital workspaceDesigning, implementing and supporting a mix of privateand public cloud, optimised for individual customer needs.Designing and implementing the tools and applicationsto deliver agile, collaborative and highly productivebusiness environments.Cyber securityIT intelligenceProviding assessment services, and implementingand managing solutions to stay one step ahead.Supporting customers to make more informed decisionsabout their technology through the power of data.Our vendorsWe work with all of the very biggest global technologyvendors as well as the emerging innovators to deliverthe broadest possible choice for our customers.200 vendorsAnnual Report and Accounts 2021 Softcat plc5
Bringing our enablers togetherOur culture and valuesOur culture and values drive our successAt the heart of Softcat lies our culture. We area vibrant, passionate team who love workingtogether and place enormous value inopenness, transparency and leadership byexample. Our values help define us and are: Fun – not taking ourselves too seriously and a keen senseof humour allow our people to be their true selves at work. Responsible – actions, attitude and choices matter – for ourpeople, our customers and also the environment. Community – we want our people to feel valued andrespected, supported by a culture that recognises theirunique set of skills and perspectives. Intelligence – we empower our people to use their initiativeand good judgement. Passion – conviction, commitment and hard work are someof the most important traits we look for.6Softcat plc Annual Report and Accounts 2021I’m excited to be part of a trulysuccessful organisation andculture. I’m genuinely excited forthe future; what else could anemployee look for?”A response from an employee surveyHappy employees happy customersWe are dedicated to delivering exception and customerservice and believe that happy employees are a prerequisitefor happy customers, so our primary focus is on investingin and supporting our staff. Our most recent employeesatisfaction survey resulted in a score of 93% satisfaction.We’re extremely proud of our team and we’re committed tofinding and recruiting people who embody our core values.
Strategic reportAward-winning cultureWe are extremely proud of theculture we have created atSoftcat, and thankfully you don’thave to just take our wordfor it. Over the last twelve monthswe have received externalrecognition, including rankingninth in the Great Place to WorkBest Workplaces – Super Largecategory and first in the Great Place to Work Best TechWorkplaces – Super Large category, a Glassdoor Excellence inEmployee Wellbeing Award, CRN Best Company to Work forand our CEO Graeme Watt appeared at number three in theGlassdoor Top CEOs in the UK list.Community drivenWe celebrate and promote diversity, encouraging staff to join andsupport our networks. These give an opportunity for colleaguesto share perspectives and better understand how to fostergenuine equality of opportunity, understanding and knockingdown some traditional barriers to progress. These networkscomprise a selection of groups including the Family Network,LBGTQ , BAME, Supporting Women in Business and others.Being a Softcat AllyOur #StrongerTogether allyship programme highlights our beliefthat everyone should feel equally supported and welcome atwork. Every member of staff has been invited to attend theprogramme, which includes workshops on diversity andinclusion, how to amplify suppressed voices, being empoweredto speak up and providing a safe space to ask questions.Our culture is thevital ingredient torealising our ultimategoal, to provideoutstanding serviceto customers.”Graeme WattCEOAnnual Report and Accounts 2021 Softcat plc7
Bringing our enablers together continuedEase of doingbusinessOur desire for operational excellence flows from ourculture and values and if delivered will supportour strategy. This will help us achieve long-termsustainable growth. We are service led by peoplewho care. We deliver industry-leading IT services: Our IT infrastructureservices have evolved with customer needs. Whether you’re atthe point of discovery, design, delivery, or operation, we havea mature portfolio of services and IT professionals ready tosupport you. Over 400 dedicated service professionals: Committedservice developers, highly experienced consultants anddesigners, expert support analysts, dedicated customer andpartner managers working together to deliver a truly uniqueservice experience. A reliable, high quality partner network: We don’t pretendto know everything, which is why we’re always searching forpartners to join our network and work with us in deliveringthe solutions you crave. Quality service, quality standards: We’ve set high standardsfor ourselves in terms of the service we provide – but we don’tjust rely on our own intuition or mark our own homework, wealso carry ISO 27001 (InfoSec), ISO 9001 (Quality), ISO 22301(Business Continuity) and ISO 20000 (Service Management).Read more on pages 22 to 25As a business we’ve always triedto keep things simple – for bothour people and our customers.This makes us easy to deal withand allows us to focus onproviding high quality service.”Richard Wyn-GriffithManaging Director8Softcat plc Annual Report and Accounts 202116years of consecutive organic growth95%customer satisfaction
Strategic reportCASE STUDY: VALUES IN ACTIONUnderstanding Microsoft licensing for a smooth transition to cloudVirgin Money Group provides financial products and services to4 million customers in the UK. With around 3,500 employees,The Group has operated for over five years. Virgin Money Groupwanted to understand the details of their Microsoft environmentin order to develop a plan to move into the cloud. The cultural fitand partnership focus were important aspects of the contractaward process, and Virgin Money Group determined that Softcatwas thoroughly aligned with these considerations. Softcatestablished Virgin Money Group’s effective licensing positionbefore guiding them through the range of Microsoft productsand helping them select the most appropriate licensingagreement, based on their situation and business objectives.The team also helped Virgin Money Group to negotiate thebest value agreement.Softcat helped Virgin Money Group to assess their currentposition and define their strategy to migrate to Office 365 viaWindows 10. Softcat’s knowledge and expertise combined withattention to detail ensured that the solution was implementedquickly. Softcat worked to establish a comprehensiveunderstanding with Virgin Money Group, providing a bespokesolution and establishing a relationship built on exceptionalcustomer service. James Reynolds, IT Manager at Virgin MoneyGroup, commented: “Softcat’s attention to detail and regularcommunication was crucial in assisting Virgin Money to completethis process correctly. Their customer service was excellent andthat formed the foundation of an excellent relationship.”Read more about our values on pages 6 and 7 and page 21Annual Report and Accounts 2021 Softcat plc9
Bringing our enablers together continuedAddressablemarketAs the global pandemic begins to ease,organisations will be focusing on the beststrategies for recovery and growth.Gartner estimates that the non-consumer UK IT market wasworth 100bn in 2019. Company analysis of this and othersources, such as the CRN Top VARs report, suggests thatour addressable market in the UK&I is worth around 45bn.Our current customer base of 9,700 represents around20% of the addressable universe, with whom we have anestimated average of 20% share of IT infrastructure spend.Our proven model of building customer trust over thelong term, coupled with our continued investments incontemporary IT skills, gives us the confidence that Softcathas a future organic growth opportunity best measured indecades rather than years.10Softcat plc Annual Report and Accounts 2021As industry commentators predict more market growthin the years ahead, we have invested significantly in newresources to expand our geographic presence, increaseour capacity for training and development, as well asadding new specialist and technical skills to the team.We also prepared diligently for the UK’s exit from theEU and now see an opportunity to provide our servicesacross a multinational landscape, encompassing theUS and Far East as well as Europe. We have made strongprogress in building a team in the US branch and ourbranches in the Netherlands, Hong Kong, Singaporeand Australia enable us to support UK customers intheir overseas operations.In the coming years, technology will be integral toenabling business and economic recovery.
Strategic reportThrough a simple formula predicatedon selling more to existing customersand winning new ones, Softcat has risenfrom relative obscurity to the peak ofthe industry in the time I have beencovering it (14 years). When CRN firstbegan sizing the UK market for techresale and related services in 2011,Softcat was the ninth largest player,with revenues of 220m. A decade on,it is a FTSE 250 company with grossbillings approaching 2bn and a marketvaluation in line with some of the globaltechnology manufacturers whosetechnology it sells, installs and manages.”Doug WoodburnHead of Channel Research, CRN, Incisive MediaOrganisations across corporate and public sectors will need tofurther adapt their infrastructure models to deliver enhancedemployee and customer experiences and drive productivity andefficiency improvements whilst protecting their data. Thesedrivers and trends play straight into our diverse range of solutionsincluding managed, professional and support services, cloud,datacentre, infrastructure, security and digital workspacesolutions from hardware, peripherals and software licensing.To meet the needs of these organisations, we have continued toinvest heavily in our tools and technical offering. In the face of thepandemic, we have taken very deliberate steps to maintain ourinvestments at a rate at least equivalent to the pre-COVID-19 era.Our cloud proposition is being enhanced through significantinitiatives with both Microsoft Azure and AWS, and we continueto build our security services practice as well.With our focus firmly on the long-term opportunity, we havemaintained double-digit headcount growth, encompassingincreases across all areas of the business including sales,specialists, support, technical and business operations.Our customers and partners can expect more of the samefrom us in 2022 and beyond.Annual Report and Accounts 2021 Softcat plc11
Chair’s statementStrongerand resilienttogetherI say this every year but this year it’smore deserved than ever. I’d like tothank our employees, our customersand our partners for their passion, fortheir incredibly hard work, for theirdedication and support.”Martin HellawellNon-Executive ChairWhile demand is not uniform across all sectors, the market forwhat we do continues to grow. I don’t know many companiesright now which don’t see the need to invest in their IT systemsto survive and thrive. I can’t see that changing in the foreseeablefuture. We continue to invest in the Company to ensure we cancapitalise on this opportunity and stay ahead of the game. This isa highly competitive market and future growth will depend on uscontinually improving everything we do.More information on how we performed can be found in theChief Executive Officer’s Statement on pages 18 to 20 andChief Financial Officer’s review on pages 28 and 29Response to the pandemicIntroductionI am pleased to report on another highly successful financial yearfor the Company. Given the degree of uncertainty coming intothe year and coming off the back of strong growth the previousfinancial year, this one really did surpass our expectations.Gross invoiced income was up 18%, gross profit was up 17% andoperating profit performance up 27%. The particularly strongoperating profit performance was due partly to lower spend inareas such as travel and expenses due to the pandemic. Thatsaid, the Company continued to invest very significantly in theperiod in areas such as headcount, IT systems and our capabilitiesacross the Company. Some companies have paused investmentduring this period; Softcat has done exactly the opposite andinvested at record levels.12Softcat plc Annual Report and Accounts 2021Coming into this year we did not expect Government guidanceto remain to be work from home if you can for the entire financialyear. As an organisation, we don’t enjoy this. Despite the outstandingperformance, we think we are better together including contactin person. Many of our team members are new into the workplace,many joining on the apprentice or graduate schemes. They don’thave fantastic home offices and particularly in those formative years,the lack of role models to observe and learn from is a big loss.Workloads have increased and without the support andencouragement of your team and colleagues sitting nextto you, we really understand how tough this can be.I can only commend the executive team led by Graeme for theirexcellent and tireless work to do everything they can to look afterour employees in this period. Employee communication in everyshape and style has been constant, as have been the myriad ofwell thought out acts of kindness, staff appreciation and mentalhealth support.
Particularly in light of these additional challenges, may I take thisopportunity to wholeheartedly thank Graeme and all the Softcatemployees for very much keeping it ‘together’.Regarding employee pay, given the uncertainty presented by thepandemic, we felt it was prudent to not make the usual annualpay rises in August for employees across the Company exceptfor those in the lower pay brackets. As business continued toperform well the Board was fully supportive of the executiveteam’s decision to implement the annual pay rises in Februaryand back dating the increase to August. Furthermore theexecutive team proposed a second in-year pay rise for thelower pay brackets which the Board fully backed.At no time during the pandemic has the Company furloughedstaff or taken Government funding.Looking forward, we are very mindful of the challenges of homeworking. But we are equally appreciative that at least in part, therehave been positive attributes of this for many of our employees.One policy really doesn’t fit all and I think you almost need apolicy per individual depending on how long they have been inthe workplace, their job type, their personal circumstances andpreferences. The future will be a hybrid of some description,but the devil is in the detail and getting this right is a significantchallenge. Graeme is extremely mindful of this and I have everyconfidence we will ultimately find the right balance going forward.More information on how we responded to the COVID-19 pandemiccan be found on pages 2 and 3The BoardOur Board comprises Graeme Watt CEO, Graham Charlton CFO,and four Non-Executive Directors, Karen Slatford, Robyn Perriss,Vin Murria and me. No changes were made to the composition ofthe Board in the last financial year. We have a 50/50 gender spliton the Board and benefit from BAME Board representation butthe diversity of the Board goes way beyond that. We have a verydiverse mix of personality types, backgrounds, types ofexperience, areas of interest and focus. I see very clear benefitsof that degree of diversity in the workings of our Board.I think the Board has worked together exceptionally well duringthis period, showing the right levels of challenge and support andencouragement to the executive team and each other. We havebeen fortunate in approximately half of our Board dates falling ondays when it has been possible to meet in person.We have benefited from the various guests who have attendedBoard meetings including key vendor and service partners,customers, peers from other territories, leading industry figuresas well as many sessions held with a wide array of Softcatemployees at various levels, some of which have been partof our Board employee engagement programme.The Board has been particularly supportive of the executiveteam in all matters relating to the Company’s ESG programmesand activities.It’s a pleasure to work with our Board team and I thank them fortheir enormous contribution to the stewardship of the Company,for their incredible responsiveness and for always making theirwork with Softcat a priority.Engagement with shareholdersWe have a highly supportive and valued group of shareholders,many of whom have invested in Softcat for many years now andwith whom we have managed to develop strong relationships.We even managed to persuade one of our key institutionalshareholders to do a session with all our Marlow employees togive their view from a shareholder’s perspective. As it should be,most of the shareholder engagement is with Graeme, Graham,Charlie Heald (who heads up Investor Relations) and occasionallyother members of the executive team. Feedback from shareholdersfollowing roadshows is collected independently and presentedand discussed at the Board.For several years now we have also run an annual Chair engagementprogramme where we write to our top 50 shareholders and theproxy agencies, encouraging engagement with our Non-ExecutiveBoard members, particularly myself. These sessions focus onBoard matters, governance, and stewardship, not Companyperformance or operational matters. We value these sessions andthe feedback. Year on year it is noticeable how increasinglyinterested our shareholders are in all areas of ESG, notably in theareas of sustainability and diversity and inclusion. While we areconstantly looking to listen, learn and improve, we see it as verypositive that our Company agenda and our shareholders’requirements are very much aligned on these matters.SustainabilityWe have discussed in previous reports the drive within theorganisation to do everything we can to reduce our own carbonfootprint, as well as improving this within our supply chain. Thedrive to reduce waste, use of paper, energy and to encouragerecycling, reuse and low emission vehicles has been relentlessand has been hugely supported by employees and the Companyfor whom this matters.We have published targets to be carbon neutral (scopes 1 and 2)by 2022, to use 100% renewable energy by 2024 and to achievea carbon net zero supply chain by 2040.We support the UN Sustainable Development Goals and areworking with WRI’s Science Based Target initiative to developan action plan towards our 2040 goal. We are committed tothe Task Force on Climate-related Financial Disclosures.This year, things have stepped up further. We are delighted to seethe Company taking a leadership position on these issues withinour industry. We are proactively working with our vendors andkey distribution partners to positively influence our supply chainand have received direct feedback that these organisations havemade changes as a direct result of their collaboration withSoftcat in this area. We were delighted to be named as the firstfive-star partner in the UK for sustainability by one of our keyvendor partners, HPE.We are increasingly working with our customers to help themreduce their own IT carbon footprint and are investing in servicesdelivered by us and our partners in this area.In March, Softcat w
Revenue m1 21 991.8 18 797.2 Cash conversion %3 89.9 88.0 19 92.0 98.0 97.0 Financial highlights FY21 operational highlights 113Revenue growth: 7% Gross profit growth: 17% Operating profit growth: 27% Cash conversion: 90% Employee engagement: 93% Customer satisfaction: 95% Customer base up by 200 Gross profit .
