Softcat Reports High Teens Growth in Gross Profit for FY2025

Softcat FY2025 trading update: strong finish, high-teens gross profit growth, and cash purring

Softcat’s year-end trading update for the 12 months to 31 July 2025 delivers exactly what investors like to see: another year of healthy growth and excellent cash generation. Q4 was helped by further conversion of larger solutions projects, pushing Group expectations to high-teens growth in gross profit and mid-teens growth in operating profit on an adjusted basis.

Cash conversion is expected to land towards the top end of the guided 85%-95% range, reinforcing the company’s reputation for turning profit into cash. Preliminary results are slated for 22 October 2025.

What Softcat is guiding for FY2025 and FY2026 in plain English

Metric	Guidance/Commentary	Notes
FY2025 gross profit growth	High-teens	Driven by Q4 conversion of larger solutions projects
FY2025 operating profit growth (adjusted)	Mid-teens	Adjusted to remove non-underlying items
FY2025 cash conversion (adjusted)	Towards the top end of 85%-95%	Cash generative year
FY2026 gross profit growth (underlying)	Low double-digit	Excludes the significant incremental contribution from large projects in FY2025
FY2026 operating profit growth (underlying)	High single-digit	Excludes the significant incremental contribution from large projects in FY2025
FY2026 gross profit growth (reported)	High single-digit	Includes the large FY2025 deals in the comparative period
FY2026 operating profit growth (reported)	Low single-digit	Includes the large FY2025 deals in the comparative period
Operating profit base (ex large FY2025 deals)	c.£170m	Reference point for FY2026 underlying growth

Q4 momentum came from big-ticket solutions projects

Management highlights further conversion of larger solutions projects in the fourth quarter, which can be lumpy by nature but were clearly a tailwind into the year end. That helped to lift full-year growth up a notch, particularly in gross profit, which is a good proxy for how the mix of higher-value services is trending.

The read-across is encouraging: customers are still committing to sizeable projects even in a mixed macro environment, and Softcat’s execution engine continues to land and deliver them.

Adjusted metrics: what’s in, what’s out

Adjusted operating profit excludes non-underlying items such as acquisition-related expenses (including fair value changes on deferred contingent consideration) and implementation costs of the new sales system. That keeps the year-on-year comparison consistent with prior guidance.

Cash conversion is also presented on an adjusted basis, excluding non-underlying items and acquisition-related cash flows. In simple terms, cash conversion is how efficiently profit turns into cash. Landing towards the top end of 85%-95% is a strong result for a reseller-services model with heavy working capital flows.

FY2026 outlook: underlying growth is solid, reported growth will look softer

There’s a useful distinction in the outlook. If you strip out the significant incremental contribution from FY2025’s large deals, Softcat expects low double-digit gross profit growth and high single-digit operating profit growth in FY2026. That feels sensible and steady.

However, when you include those large FY2025 deals in the comparative base, the reported growth rates naturally compress to high single-digit for gross profit and low single-digit for operating profit. This is classic “tough comps” territory: last year’s big wins make next year’s growth look slower, even if the underlying engine is still humming.

For reference, operating profit excluding the significant incremental contribution from large deals in FY2025 is c.£170m. That gives investors a rough base to think about the FY2026 growth percentages that management has flagged.

My take: quality cash, healthy core, and a reminder that big deals are lumpy

• Positives: High-teens gross profit growth and top-end cash conversion are hard to argue with. It signals demand resilience, solid execution, and tight cash discipline. The consistency of adjusted guidance compared to previous statements adds credibility.
• Caution flags: The dependence on large projects to turbocharge Q4 is a double-edged sword. It’s great when they land, but it can make year-to-year growth choppy. Management has wisely set expectations for a slower reported growth rate in FY2026 due to the tough comparator.
• Valuation context: Not disclosed here, but markets will likely reward the cash performance while weighing the step down in reported growth next year. The split between underlying and reported growth should prevent overreactions if read carefully.

What is not disclosed in this RNS

• Revenue, gross profit and operating profit in absolute terms for FY2025 – not disclosed.
• Order backlog or pipeline detail – not disclosed.
• Dividend or capital allocation updates – not disclosed.
• Any changes to strategy beyond the new sales system implementation costs – not disclosed.

What to watch for on 22 October 2025

• Exact FY2025 numbers: Gross profit, adjusted operating profit, and cash flow to validate the “top end” cash conversion comment.
• Large deal dynamics: How much of FY2025’s performance uplift came from large projects, and how repeatable is that mix into FY2026.
• Margin drivers: Any colour on mix shift towards higher-margin services and the impact of the new sales system on productivity.
• Non-underlying items: Size and timing of acquisition-related costs and sales system implementation costs.
• FY2026 guidance precision: Whether the company narrows the growth ranges or provides additional scaffolding around that c.£170m operating profit base.

Bottom line

Softcat has delivered another year of robust growth and enviable cash generation, with a late push from big-ticket solutions work. The FY2026 framing is realistic: underlying growth remains healthy, but the official reported rates will look softer because FY2025 was flattered by large deals.

For long-term investors, the message is steady and reassuring. The cash engine is intact, the core franchise is growing, and expectations have been set sensibly for the coming year.