Softcat plc Annual Report and Accounts 2020 Taking care of our people and customers Our goal is simple: To be the leading IT infrastructure product and services In a crowded field we stand out because of the vibrancy of provider in terms of employee engagement, customer our culture and the passion, intelligence and attitude of our satisfaction and shareholder returns. We hope our success people. Now more than, ever taking care of each other and will create opportunities for our people and deliver growth our customers is our top priority. for our customers and partners. This approach has helped us deliver 15 consecutive years of We don’t take ourselves too seriously and were founded organic gross invoiced income and operating profit growth, in 1993 to be, first and foremost, a fun place to work. 93% employee engagement and 97% customer satisfaction. Contents Strategic report Corporate governance Financial statements 1 FY20 highlights 44 Introduction to corporate governance 94 Independent auditor’s report 2 At a glance 46 Board of Directors 102 Statement of profit or loss and 4 COVID-19 response 48 Governance report other comprehensive income 6 Chair’s statement 55 Audit Committee report 103 Statement of financial position 10 Chief Executive Officer’s statement 63 Nomination Committee report 104 Statement of changes in equity 13 Our strategy and purpose 67 Remuneration Committee report 105 Statement of cash flows 14 Our market 84 Directors’ report 106 Notes to the financial statements 16 Business model IBC Company information and 18 Section 172 contact details 20 Our offering 22 Our customers 24 Our people 26 Our vendors 28 Chief Financial Officer’s review 30 KPIs 32 Risk management Find out more at: softcat.com 38 Sustainability Financial highlights FY2020 operational highlights Gross profit £m Gross profit per customer £’0002 • Revenue growth: 9% Gross profit growth: 12% 2020 235.7 2020 24.8 • • Operating profit growth: 11% 2019 211.1 2019 23.0 • Cash conversion: 88% 2018 175.2 2018 19.9 • Operations resilient to challenges of COVID-19 2017 136.3 2017 16.4 • Employee engagement: 93% 2016 120.7 2016 15.6 • Customer satisfaction: 97% • Customer base up by 300 • Gross profit per customer growth: 8% Operating profit £m Revenue £m1 Pages 1 to 43 form the Strategic Report of Softcat plc 2020 93.7 2020 1,077.1 for the financial year ended 31 July 2020. The Strategic Report has been approved by the Board of Softcat 2019 84.5 2019 991.8 plc and signed on behalf of the Board by Graeme Watt, CEO, and Graham Charlton, CFO. 2018 68.0 2018 797.2 2017 50.2 1 Revenue has been restated due to the adoption of IFRS 15 during 2019. As a result revenue is 2016 42.2 only available on a comparable basis for 2019 and 2018. 2 Customer base is a new measure and differs Customer base ’0002 Cash conversion % from previously disclosed ‘customer numbers’, being defined as the number of customers who 2020 9.5 2020 88 have transacted with Softcat in both of the preceding twelve-month periods. Customer 2019 9.2 2019 92 numbers were previously defined simply as the number of unique entities transacting with 2018 8.8 2018 98 Softcat during the reporting period. Prior year 2017 8.3 2017 97 numbers (customer base and gross profit per customer) have also been restated accordingly. 2016 7.7 2016 85 References in this Annual Report to the number of customers refers to the customer base. 1 At a glance A compelling INVESTMENT CASE We help commercial and public sector organisations design, procure, implement and manage the right digital infrastructure for their needs. In doing so, we provide the underpinnings to the modern, digital economy. It’s a sector that has seen terrific growth, but there is so much more to come. It’s an exciting place to be. A dedicated and 1 passionate team We believe that if people enjoy what they do, and care about the company they work for, they will do it better. Our culture is the vital ingredient to realising our ultimate goal: to provide outstanding service to customers. 93% 1,534 Employee engagement Number of employees at 31 July 2020 Read more on pages 24 and 25 Proven customer 2 excellence What really makes us different is the passion and dedication of our people to the service they provide. If a customer places their trust in us, we make it our business to never let them down. 97% 41+3920L Customer satisfaction SMB Public sector Enterprise Read more on pages 22 and 23 2 Softcat plc Annual Report and Accounts 2020 Strategic report / Corporate governance / Financial statements Market-leading growth 3 and financial strength We have delivered 15 consecutive years of gross invoiced income and profit growth, all of which has been organic. The business has no debt and a consistent track record of strong cash generation. £80.1m Net cash at 31 July 2020 Read more on pages 28 and 29 A technology offering that 4 is both broad and deep We advise, design, procure, implement and manage technology for businesses and public sector organisations, ranging across software licensing, workplace technology, networking, security, cloud and datacentre. We work with all of the leading global technology manufacturers to provide our customers with the broadest possible choice of solutions to suit their needs. 8% Increase in gross profit per customer Read more on pages 20 and 21 Strong partner 5 relationships We partner with hundreds of different software and hardware vendors to bring the latest and broadest range of technology to our customers, as well as numerous specialist service providers to augment the capabilities of our growing in-house teams. 200+ Number of significant vendor and partner relationships Read more on pages 26 and 27 Annual Report and Accounts 2020 Softcat plc 3 COVID-19 response PLAYING OUR PART during the COVID-19 pandemic Softcat is a people business first and foremost and we believe our special culture has always been the beating heart of our success. In this section, we set out some of the ways in which our employees have responded to the impact of COVID-19. People and culture Each year we choose a word of the year to try and create a focus for our culture in the twelve months ahead. In September 2019 we chose the word ‘care’ for 2020 and with the benefit of hindsight there couldn’t have made a more apt selection. We want our people to care about our customers and the partners we work with to support them. Caring for customers starts with caring about each other and the Company we work for. This is why our purpose statement is: “we help customers use technology to succeed, by putting our employees first”. Since March, we have listened to advice from the Government on COVID-19 and have put in place the protective measures recommended by the NHS. We frequently relayed these messages to employees so they understood what actions the • support and guidance for employees juggling childcare, Company had taken and what we expected from employees home schooling with their working commitments; and to keep themselves safe whilst working. Employees have settled • a list of teams which had reduced workload during the in quickly to working effectively from home and we are using lockdown and offered to help our busier teams. technology more than ever now to stay well connected. We have also taken surveys on how our employees are feeling To provide ongoing support, we created a one-stop online and what support they need. We have been humbled and are resource for employees. This included: grateful for the way they have responded and risen to the • the latest Company news on our response to the pandemic; challenge. Also during the lockdown Vin Murria, our Designated Director for Workforce Engagement, held a virtual • a list of the Company’s employee mental health first-aiders; engagement session with employee representatives from our (employees who are specially-trained to provide help) and Dublin and Glasgow offices, with much of the discussion on mental health support available outside of the Company, how employees were adjusting to remote working. for example through our Employee Assistance Programme; The employees were delighted that a member of the Board had taken a direct interest to check-in on how they were adjusting to the new way of working. We take pride in making Softcat a fun place to work and have gone to great lengths to preserve this during the pandemic. Michelin-starred chef Thomas Kerridge hosted a virtual cookery masterclass for our culinary-minded employees. Through these and other events such as our own virtual talent show and a quiz night, our employees keep making Softcat an enjoyable place to work. The importance of the good physical and mental wellbeing of our employees cannot be underestimated and we recognise that the pandemic has brought additional challenges. Some of our offices held exercise classes before the time of the lockdown which were popular and we were determined to carry that on, so we’ve held various virtual fitness classes to keep us fit as a fiddle. In May we held a virtual Mental Health Week with speakers and support on topics such as mindfulness and managing anxiety. 4 Softcat plc Annual Report and Accounts 2020 Strategic report / Corporate governance / Financial statements Volunteering and the community • Last year we launched our Love2Volunteer campaign. Softcat has a long track record of supporting charities and its Each employee can choose two free charitable days a year communities and the pandemic presented obstacles to at scheduled events focused on four areas: environment, traditional ways of fundraising and supporting communities.