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Software reseller proving it is one of the more robust businesses in face of pandemic challenge
Thursday 04 Jun 2020 Author: Steven Frazer

SOFTCAT (SCT) £11.41

Gain to date: 18.9%

Original entry point: Buy at 959.5p, 1 August 2019

Software reseller and IT advisor Softcat (SCT) continues its excellent performance both operationally and in share price terms, even if its latest update was tinged with a slightly more cautious tone.

The 26 May third quarter update was free of specific numbers, as is usual, but noted ‘satisfactory’ trading during the period to 30 April, and flagged revenue, gross profit and operating profit growth while maintaining cash generation at normal levels.

That’s all very encouraging but the ‘high degree of uncertainty’ in the coming months and an acceptance that Softcat is ‘not immune to the challenges faced by the wider economy’ gave investors pause for thought.

Given that the third quarter bridges the UK lockdown period, it seems likely the company enjoyed a typically busy March, but a much slower April and May.

Those are certainly the implications drawn by analysts at Jefferies, who have decided to trim profit forecasts by £4m this year to 31 July, ‘to reflect the impact of slower trading’ in the second half.

That implies £91.1m for the full year versus £95.1m previously, although it is interesting that gross profit per customer estimates, a key performance indicator for Softcat, were left unchanged.

SHARES SAYS: Lockdown is the ultimate test and Softcat remains a relative outperformer in a world of declining revenues and earnings.

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