Softcat boss talks H1 results, M&A and growing headcount

Getting behind emerging technology areas, sticking with a strategy of organic growth and increasing headcount are the areas of focus at Softcat.

Having put out a decent set of half-year numbers today, Softcat CEO Graham Charlton believes the firm is in a strong position.

“2023 was a difficult year for sure, and I don’t think those conditions will change too much in the next six months. They will turn, but even in a time like this there is so much opportunity in the space we operate in, and we are very lucky to be in an organisation with the broadest and deepest offering in the market,” he said.

“Our job is to work with customers through the economic cycle and help them with whatever developments they’re doing, because even if their discretionary and project spend dies down, they’re still such a huge proportion of renewable and refreshable expenditure that they have to execute,” he added. “We’ve been very consistent in saying that we will build for the longer term through economic cycles.”

One of the key tenets of the Softcat approach has been to grow organically, and the firm is not one associated with mergers and acquisitions (M&A). For the short term, that will remain the case, but Charlton said the option was there to grow, particularly overseas, through acquisition.

“My approach to acquisitions is the same as my predecessors, because we work as a team, and it is that we look actively at that as an opportunity to accelerate our strategy. It just hasn’t culminated in a deal yet because we’re so fortunate that our organic strategy is delivering such strong growth,” he said.

“Having said that, looking at how we are building our multinational capability, we could accelerate that through acquisition, and that’s something we think about, particularly in the US market. And the new technologies that are coming to market, whether it’s AI [artificial intelligence], or the need to organise data in the way for AI to make use of it, or some of what’s happening in the public cloud management and implementation space,” he added.

For now, there is nothing on the horizon – the current approach is delivering, and the long-standing policy of getting close to customers and retaining and growing relationships is also continuing to pay off.

“That is the bedrock that all our growth is based on. And that’s one of the reasons we haven’t had to execute M&A. Buying scale doesn’t really make sense for us when we are growing and developing it organically with customers who we’re building trust with – you can’t artificially just buy that and bolt it in,” he said.

People are the key factor in driving that organic growth, and in the first half of its financial year the firm expanded its headcount by 14.6%. Charlton said the business continues to attract, develop and retain staff in a competitive market.

“Being able to have the confidence in the model that we do to keep recruiting, to keep training young people and more experienced people, throughout the economic cycle is a real privilege and something that we definitely take advantage of,” he said.

Charlton is enjoying being at the helm of Softcat and views the first-half performance as an indicator that it is continuing to travel in the right direction.

“Gross profit is our key measure – and that was up 11%. And despite those strong investments for the future, we’ve made good progress on operating profit, too. We’re delighted with that first half performance, which puts us slightly ahead of where we expected to be at this point in the year, and with a lot of confidence heading into the second half,” he concluded.