2019-08-01_Shares_Magazine

GREAT IDEAS

10 | SHARES | 01 August 2019

T

his is not one of those

cuddly toys contestants

used to win on Crackerjack,

^ŽŌĐĂƚ;^dͿ is what’s called a

value-added reseller.

The Marlow-based FTSE 250

ŵĞŵďĞƌƐĞůůƐĂǁŝĚĞƐĞůĞĐƟŽŶŽĨ

ƚŚŝƌĚƉĂƌƚLJƐŽŌǁĂƌĞƚŽƐŵĂůůĂŶĚ

medium-sized companies and

ƉƵďůŝĐƐĞĐƚŽƌŽƌŐĂŶŝƐĂƟŽŶƐ͕ƉůƵƐ

PCs and smartphones. It then

ŽīĞƌƐĚĞĞƉƚĞĐŚŶŽůŽŐLJĞdžƉĞƌƟƐĞ

and advice on top.

^ŽŌĐĂƚĞīĞĐƟǀĞůLJƌĞŵŽǀĞƐƚŚĞ

burden of customers managing

ŵƵůƟƉůĞ/dƉƌŽĚƵĐƚƐĂŶĚƐĞƌǀŝĐĞ

ƌĞůĂƟŽŶƐŚŝƉƐďLJƵƐŝŶŐŝƚĂƐĂ

trusted point of contact. That’s

an immensely valuable service,

especially in an increasingly

ĚŝŐŝƟƐĞĚǁŽƌůĚ͘

The company has a string

ŽĨŝŶĚƵƐƚƌLJĂĐĐƌĞĚŝƚĂƟŽŶƐ

with many blue-chip

ŚŽƵƐĞŚŽůĚƐŽŌǁĂƌĞƐƵƉƉůŝĞƌƐ͕

ƐƵĐŚĂƐDŝĐƌŽƐŽŌ͕sDtĂƌĞ͕ŝƐĐŽ

Systems, IBM and HP, plus it’s

the biggest reseller of products

ĨƌŽŵĐLJďĞƌƐĞĐƵƌŝƚLJĮƌŵ

^ŽƉŚŽƐ;^KW,Ϳ in the UK.

The model works; in 15 years

revenue has jumped from

£50m to close to £1bn, while

the company has become the

UK’s number two value-added

reseller. Seven years ago it

ranked ninth.

tĞďĞůŝĞǀĞŝŶǀĞƐƚŽƌƐĂƌĞ

ƵŶĚĞƌĞƐƟŵĂƟŶŐƚŚĞŐƌŽǁƚŚ

Software reseller is already UK’s number two but still has big growth ambitions

Softcat primed for

IT outsourcing

market share run

July 2020.

^ŽŌĐĂƚǁŝůůĨĂĐĞĐŚĂůůĞŶŐĞƐ͕

not least from those periodic

/dĂŶĚƐŽŌǁĂƌĞƵƉŐƌĂĚĞǁĞĂŬ

spells. There’s also the chance

that public sector spending slows

ĂƐƚŚĞh<ŐƌĂƉƉůĞƐǁŝƚŚƌĞdžŝƚ͘

Ƶƚ^ŽŌĐĂƚŚĂƐĂůŽŶŐƚƌĂĐŬ

record of managing these sort of

challenges and prospering, which

ĞdžƉůĂŝŶƐǁŚLJƚŚĞƐŚĂƌĞƐĂƌĞƐŽ

highly rated.

The stock is trading on a

rough 2020 price-to-earnings

ŵƵůƟƉůĞŽĨϮς͘Θ͘dŚĞŐƌŽǁƚŚ

ƉŽƚĞŶƟĂůŝƐƚŚĞƌĞĨŽƌƚŚĞůŽŶŐĞƌͲ

ƚĞƌŵ͕ƉůƵƐĂƌŽƵŐŚϯ͘ΘйĨƌĞĞĐĂƐŚ

ŇŽǁLJŝĞůĚĂŶĚŝƚƉĂLJƐĚŝǀŝĚĞŶĚƐ͕

including specials when surplus

cash builds up.

ĂŵďŝƟŽŶĂŶĚƉŽƚĞŶƟĂů͘ŶĂůLJƐƚƐ

ĐĂůĐƵůĂƚĞƚŚĂƚ^ŽŌĐĂƚĐƵƌƌĞŶƚůLJ

ŚĂƐĂςйŵĂƌŬĞƚƐŚĂƌĞǁŝƚŚ

forecasts for it to move closer

ƚŽεйďLJϮϬϮϭ͘zĞƚƚŚĞĮƌŵ͛Ɛ

ĐŚŝĞĨĞdžĞĐƵƟǀĞ'ƌĂĞŵĞtĂƩ

believes £2bn of revenue is on

ƚŚĞĐĂƌĚƐŽǀĞƌƚŚĞŶĞdžƚĨĞǁ

LJĞĂƌƐ͕ŝŵƉůLJŝŶŐϭϭйŽƌϭϮй

market share is being targeted

by management.

Importantly, this will not be at

ƚŚĞĞdžƉĞŶƐĞŽĨƉƌŽĮƚďĞĐĂƵƐĞ

the company leaves loss-leading

ĐŽŶƚƌĂĐƚƐĨŽƌŽƚŚĞƌƐƚŽĮŐŚƚŽǀĞƌ͘

This is best measured by tracking

^ŽŌĐĂƚ͛ƐĐƵƐƚŽŵĞƌŐƌŽǁƚŚ͕ŝƚƐ

ŐƌŽƐƐƉƌŽĮƚƉĞƌĐƵƐƚŽŵĞƌĂŶĚďLJ

ĐĂůĐƵůĂƟŶŐŽƉĞƌĂƟŶŐƉƌŽĮƚĂƐĂ

ƉĞƌĐĞŶƚĂŐĞŽĨŐƌŽƐƐƉƌŽĮƚ͕ǁŚŝĐŚ

ǁĂƐƌƵŶŶŝŶŐĂƚĂďŽƵƚϯςйĂƚƚŚĞ

half year in January.

The company said on 25 July

ƚŚĂƚŽƉĞƌĂƟŶŐƉƌŽĮƚĨŽƌƚŚĞ

year to 31 July 2019 will beat

ĞdžƉĞĐƚĂƟŽŶƐ͕ƉŝƚĐŚĞĚĂƚĂďŽƵƚ

άΘϯ͘ρŵ͘dŚĂƚ͛ƐĞdžƉĞĐƚĞĚƚŽ

ƌŝƐĞƚŽάΘϳ͘ρŵĨŽƌƚŚĞLJĞĂƌƚŽ

XXXX È BUY

(xxx) xxxp

Stop loss: xxp

Market value: xxx

SOFTCAT È BUY

(SCT) 959.5p

Stop loss: 768p

Market value: £1.92bn

600

700

800

900

1000

SOFTCAT

2018 2019