Softcat Annual Report 2022

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FY2022 Annual Report · Softcat

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VALUES

RECOGNITION

COLLABORATION

VALUED

TOGETHER
PEOPLE
INTELLIGENCE

MI
CUSTO
CARE
REC
ALLYSHIP
COMMUNITY
CONFIDENCE
CULTURE
RESPONSIBILITY
FUN
PASSION
DIVERSITY
TEAMWORK

PARTNERS

Softcat plc Annual Report and Accounts 2022

INCLUSION

COMMUNITY

COMMUNITY
AT THE HEART
OF EVERYTHING
WE DO

This year an internal project team undertook a review
of Softcat’s values to ensure that they were still
relevant to our business and employees. Having
refreshed the descriptors of the existing four values,
Intelligence, Responsibility, Fun and Passion, we felt that
our commitment to Softcat’s various communities wasn’t
reflected strongly enough in the existing values. This led
us to introduce a fifth value, Community. As we
wanted to embed the new value in our employees’
minds, we also decided to make ‘Community’ our word
of the year. To us, ‘Community’ means that we believe in
the power of people, encouraging collaboration to
provide support and positively contribute to our
internal and external communities.

Strategic report

H I G H L I G H T S

Financial highlights

Operational highlights

• Revenue growth: 37%

• Gross profit growth: 18%

• Operating profit growth: 14%

• Cash conversion: 76%

• Employee engagement: 90%

• Customer satisfaction: 94%

• Customer base up by: 200

• Gross profit per customer growth: 16%

1. The prior year comparatives have been restated in line with
the change in accounting policy for the IFRS IC agenda
decision – IFRS 15 Revenue from Contracts with Customers,
treatment of Software revenue as agent revenue. For further
information, see note 1.5 to the financial statements. As a
result, revenue is only available on a comparable basis for
2021 and 2022.

2. Customer base is defined as the number of customers who
have transacted with Softcat in both of the preceding
twelve-month periods.

3. Gross invoiced income (GII) and cash conversion are

alternative performance measures. Please see page 33 for
further definitions and reconciliations.

Pages 1 to 64 form the Strategic Report of Softcat plc for the
financial year ended 31 July 2022. The Strategic Report has
been approved by the Board of Softcat plc and signed on
behalf of the Board by Graeme Watt, CEO, and
Graham Charlton, CFO.

For more information visit:
www.softcat.com

Gross profit £m

Gross profit per customer £’0002

22
21
20
19
18

327.2

276.4

235.7

211.1

175.2

22
21
20
19
18

33.0

28.4

24.8

23.0

19.9

Operating profit £m

Revenue £m1

136.1

119.4

22
21

1,077.9

784.0

22
21
20
19
18

93.7

84.5

68.0

Customer base ’0002

Cash conversion %3

22
21
20
19
18

9.9

9.7

9.5

9.2

8.8

22
21
20
19
18

76.2

89.9

88.0

92.0

98.0

Gross invoiced income £m3

22
21
20
19

2,507.5

1,938.4

1,646.2

1,414.1

Contents

Strategic report
1 Highlights
2 Strategic roadmap
3
Investment case
4 At a glance
12 Chair’s statement
16 Chief Executive Officer’s statement
20 Business model
22 Our market and offering
28 Strategy
30 KPIs
32 Chief Financial Officer’s review
34 Section 172 – Stakeholder engagement
38 Social value
43 Task Force on Climate-related Financial
Disclosures (‘TCFD’) and sustainability

59 Risk management

Corporate governance
66 Introduction to corporate governance
68 Board leadership and company focus
70 Governance report
80 Audit Committee report
90 Nomination Committee report
96 Sustainability Committee report
98 Remuneration Committee report
128 Directors’ report

Financial statements
136 Independent auditor’s report
144 Statement of profit or loss and other

comprehensive income
145 Statement of financial position
146 Statement of changes in equity
147 Statement of cash flows
148 Notes to the financial statements
175 Company information and

contact details

Annual Report and Accounts 2022 Softcat plc

Strategic reportS T R A T E G I C R O A D M A P

A CLEAR DIRECTION

Our strategy is simple, putting both our employees and customers at the heart of everything we do.

Our purpose

Our purpose is to help customers use technology to succeed,
by putting our employees first.

Our vision

To be the leading IT infrastructure product and services provider in terms of
employee engagement, customer satisfaction and shareholder returns.

Strategy

Acquire more customers.

Sell more to existing customers.

Read more on pages 96 to 97

•strategy implementation;
•operational, financial and competitive

performance;

•commercial developments;

•succession planning below Board level;
•organisational development; and
•maintaining Softcat’s culture.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceG O V E R N A N C E R E P O R T C O N T I N U E D

WHAT THE BOARD
DID THIS YEAR

Strategy

Stakeholder engagement

The development and implementation of Softcat’s strategy
remained a key focus for the Board. This has been covered in
a number of ways including:

• recurring updates from the CEO;

• specific strategy review discussions with the Board and key

senior management in February 2022; and

• discussion of critical items to support the growth of the
business, such as the implementation of a new finance
system and discussion with management on high level
operational plans for the coming year.

Performance monitoring

The Board has a robust process in place for setting
expectations and for regular monitoring of business
performance. During the year this included:

• review and approval of a three-year plan at the same time
as the strategy review in order to provide a comprehensive
longer-term outlook. Forecasts in the three-year plan are
subsequently refreshed as needed during the year;

• approval of an annual budget, followed by a report each

month comparing performance against budget;

• consideration of year-end and half-year performance

and subsequent review, approval and publication of the
year-end and half-year results;

• setting of a dividend policy. Determining whether an
interim dividend should be paid and proposals for a
year-end dividend, after taking into account performance,
the Company’s financial situation and the needs of the
business and any other relevant circumstances;

• discussion of the performance and resilience of the business
against the background of certain IT component shortages
in the market and macro-economic pressures; and

• an update from the Company’s brokers on investor themes

and equity market matters.

The Board knows the importance of being aware of the
views of its key stakeholders. These include our shareholders,
employees, customers and vendors. During the year we
maintained our engagement with stakeholders, which
included the following:

• the Board met with a major customer. The meeting was

very helpful in gaining perspectives from outside the Board;

• the Board discussed sustainability with management,

in particular performance against environmental targets
and commitments, and the development of Softcat’s
plan submitted and approved by the Science Based
Targets initiative;

• discussions with investors and analysts, including their
feedback following meetings and after the release of
our annual and half-year announcements. We maintain
an investor relations programme of meetings with existing
and potential shareholders;

• Vin Murria is Softcat’s Designated Non-Executive Director

for Workforce Engagement. She led, with the other
Non-Executive Directors present, engagements with our
employees at the London and Birmingham offices;

• reviewing the feedback from employee surveys. This

includes regular surveys of the managers in the business
and our annual all-employee survey to gauge the
wellbeing and satisfaction of employees;

• the Chair undertook an investor engagement programme
inviting engagement with our top 50 shareholders and
with the key proxy advisory agencies, to further strengthen
our mutual understanding of governance matters. Martin
updated the Board regularly;

• the Remuneration Committee Chair engaged with our top
shareholders on the revised Remuneration Policy, which will
be proposed for shareholder approval at the 2022 Annual
General Meeting (see pages 113 to 127);

• the Board reviewed the outcomes of Softcat’s annual
customer satisfaction survey and the actions to further
improve engagement with customers; and

• the Audit Committee Chair reached out to our top

shareholders for feedback on key areas of audit focus
for the coming year.

Softcat plc Annual Report and Accounts 2022

Governance and risk

During the year the Board:

Other

The Board has also:

• increased its focus on environmental strategy, targets and
performance by establishing a Sustainability Committee
of the Board (see pages 96 to 97);

• approved the appointment of Lynne Weedall as Chair of

the Remuneration Committee. This rebalanced the
workload of the Non-Executive Directors as Karen
Slatford was until that time Chair of both the Nomination
Committee and the Remuneration Committee;

• monitored the longer-term impact post the COVID-19
pandemic and other macro-economic considerations,
such as inflation, on the Company’s performance and
finances, and the economy more widely;

• reviewed reports on governance and legal issues,
including developments in corporate governance,
executive remuneration and sustainability;

• received feedback and comments on governance from

major shareholders;

• performed a review of Board effectiveness, which was

externally facilitated;

• reviewed the Company’s risk appetite, principal risks

and uncertainties;

• considered changes to the delegation of authorities to

management and approved updated terms of reference
for each Committee, in line with best market practice; and

• received regular governance and regulatory updates.

People, vision and values

During the year the Board:

• approved the Board succession changes which will

take effect in 2023 and commenced the search for a
new CFO;

• met with many of the members of the Senior Leadership
Team (‘SLT’) and other senior managers in the business.
The CEO provided regular updates to the Board on the
SLT and any changes in key roles in the business;

• received regular updates on people and HR matters,
including training and development, culture, levels of
employee turnover and diversity and inclusion;

• considered the results of the annual employee survey
and the quarterly management team surveys; and

• engaged with employees in our London and

Birmingham offices.

• approved the 2022 Annual Report and Accounts;

• approved the 2022 Notice of AGM; and

• reviewed monthly reports which analysed key changes

in our shareholder base.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceG O V E R N A N C E R E P O R T C O N T I N U E D

COMPOSITION, SUCCESSION
AND EVALUATION

Composition and succession
This is discussed in the report from the Nomination
Committee on pages 90 to 95.

Board evaluation

This is a Board that functions well, with a
good mix of skills and personalities, and
well defined roles between the NEDs
and the Executives. The Board members
are passionate about Softcat and
engaged with the business.”

Extract from the external evaluation report prepared
by Russell Reynolds Associates

Board evaluation process
Each year the performance of the Board is assessed
through an evaluation exercise. In accordance with the UK
Corporate Governance Code, the process this year was
conducted independently by an external company (the
Board having last conducted an external evaluation in
2019). The Board appointed Russell Reynolds Associates
(‘RRA’), which has a well-established board evaluation
team and service, to conduct the evaluation. RRA
supported the Board in respect of the Board succession
changes which will take place in 2023 and also assisted
the Board in its recruitment of Lynne Weedall as a
Non-Executive Director during the year. As a result of its
work with the Board, RRA had developed a deep
understanding in respect of the Board’s composition, its
target skillset, succession planning priorities and longer-
term succession considerations. The Board considered that
RRA would therefore be well placed to conduct the Board
evaluation. Other than the foregoing, RRA has no other
connections with Softcat.

The key stages of the process this year were:

Stage 1: Selection and appointment

The Company Secretary reviewed the capabilities of RRA to
conduct the evaluation and discussed this with the Chair, who
was satisfied with RRA’s strong track record and experience.
The Board approved the appointment of RRA to conduct the
exercise. RRA discussed with the Chair and the Company
Secretary a proposed approach and timing for the Board
evaluation exercise. The Chair approved the approach on
behalf of the Board.

Stage 2: Document review

RRA reviewed key documents to build on its knowledge of the
operation and activities of the Board, including:

• Board and Committee papers and minutes covering the

financial year; and

• governance documents such as Matters Reserved to the
Board, the roles of the Board and the terms of reference
for the Committees of the Board.

Stage 3: Observation

RRA observed in person the Board and Committee meetings
in May 2022. This provided useful insight into the work,
dynamics and culture of the Board and its Committees.

There are good relationships between the
Executive and Non-Executive teams. The NEDs
view the Executive team as being of high
quality, enjoy working with them, and feel they
are listened to. The Executives feel appropriately
challenged in the right areas by the Board and
point to the value these discussions are adding
to the business.”

Extract from the external evaluation report prepared by
Russell Reynolds Associates

Softcat plc Annual Report and Accounts 2022

Stage 4: Questionnaires and interviews

RRA sent an online questionnaire to each Director, asking
them to provide their assessment on a number of critical
areas in respect of the effectiveness of the Board. The areas
included:

• oversight of strategy, risk, values and purpose;

• people and composition;

• Board leadership;

• structures and processes;

• use of Board Committees;

• Board culture; and

• further self-development of Directors.

RRA collated the questionnaire responses. RRA then
interviewed each Director, selected Executives and the
Company Secretary to validate and gain a better
interpretation of the responses to the questionnaire.

Stage 5: Board report

RRA prepared a comprehensive report, with the individual
responses of each Director anonymised. A draft of the report
was discussed with the Chair and then distributed to the
Board in July in advance of a Board meeting. RRA attended
the Board meeting to present and discuss its findings and
recommendations with the Board.

Stage 6: Action planning

An action plan was prepared to address points of
recommended improvements. Progress will be tracked
during the year.

Outcome
The outcome of the review was once again positive and
concluded that the Board and its Committees continue to function
well, consider the right issues and work in a transparent and
constructive way. There was strong alignment between the
Company’s and the Board’s values and culture. Some of the points
made by RRA included:

• The Board functions well, with a good mix of skills
and personalities, and well-defined roles between
the Non-Executive Directors and the Executives.

• Non-Executive Directors contribute openly and broadly across

the range of issues.

• The Board has an inclusive and open culture, and all

contributions are welcome and discussed by the Board.

• The Executive team appreciates the support and trust it is given

by the Board.

• All Board members are well prepared for Board meetings and
spend the necessary time to keep up with the business outside
of the meetings.

• The Board leadership is very strong, with a Chair valued for his

insights into the business and for his support of the broader
management team. The Board has good support from the
Company Secretary’s team.

RRA’s report included a rating out of five for each important area
under review. No area scored less than 4.5 and the average score
was 4.7 out of five. The Board is satisfied with this assessment.

Outputs and recommendations
The Board was pleased with the outcome of the independent
Board evaluation, which reflects the Directors’ commitment to the
business, strong processes, and positive culture and attitudes for
the successful operation of the Board. RRA has suggested some
minor areas for improvement, which the Board has considered
further. These improvement points include:

• further deepening the Non-Executive Directors’ understanding
of broader market trends, best practice, market risks and
sustainability to further strengthen strategic oversight and
risk oversight;

• additional considerations of complementary skills and

experiences which will further strengthen the composition
of the Board when considering the next appointment of
Non-Executive Directors;

• considering ways to support deeper discussions on the most
important topics, for example by holding additional Board
dinners or a pre-Board discussion prior to the annual Board
Strategy Review; and

• arranging Board discussions on the self-development points

identified through RRA’s questionnaire and interviews.

The Company Secretary has prepared an action plan based on
the recommendations and the Board’s discussions, which will be
progressed and monitored. An update will be provided in next
year’s Annual Report.

Good progress had been made on the actions arising from the internal
Board evaluation conducted in the previous year. This included:

• increasing the amount of direct feedback and engagement

between employees and the Board;

• additional interaction with members of the Senior Leadership

Team at Board meetings; and

• The Board members are passionate about Softcat and

engaged with the business.

• improving the format and overall usability of certain Board and

Committee papers.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceG O V E R N A N C E R E P O R T C O N T I N U E D

OPERATION OF THE BOARD

Workforce engagement
Vin Murria is the Board’s Designated Director for Workforce
Engagement. After a year of virtual engagements in 2021, Vin
was very happy to be able to lead in-person engagements again
during 2022. Engagements this year were held in Softcat’s London
and Birmingham offices, both of which were attended by the
Non-Executive Directors. Various topics were discussed, including
the Board’s strategic outlook, the role of the Board, retention and
recruitment of staff, work-life balance, progression and pay, and
various commercial and operational matters. The discussions
provided valuable insight and actions were taken following
feedback where appropriate.

Dividend and distributions policy
The Board is responsible for:

• setting Softcat’s dividend policy;

• deciding on the Company’s capital structure; and

• approving any key decisions in respect of capital allocation.

In respect of dividends, the Board approves the interim dividend
and recommends the final and any special dividend for
shareholders’ approval. Softcat’s dividend policy remains a
progressive one which targets an annual dividend of between
40% and 50% of the Company’s profits after tax in each financial
year before any exceptional items. Subject to any cash requirements
for ongoing investment, the Board will consider returning excess
cash to shareholders over time. In determining the level of dividend in
any year in accordance with the policy, the Board also considers a
number of other factors that influence the proposed dividend,
which include but are not limited to:

• the level of available distributable reserves in the Company;

• future cash commitments and investment needed to sustain the

long-term growth prospects of the business; and

• potential strategic opportunities.

Softcat’s constitution does not limit or oblige the Company to any
minimum or maximum dividend payments. However, no dividend
may exceed the amount recommended by the Directors and all
dividends shall be paid in accordance with any relevant legislation.

The Audit Committee on behalf of the Board reviews management’s
confirmation that the Company has sufficient distributable reserves
before a dividend payment is made or proposed to shareholders.
The Board then considers the Audit Committee’s review as part of
its process to approve or recommend dividends. Consideration is
also made of the balance on the retained earnings reserve, which
as at 31 July 2022 amounted to £202.5m (as disclosed in the
Statement of financial position).

In addition to the reviews of distributable reserves prior to a
dividend being paid or proposed, the Board regularly reviews the
performance of the business, particularly in respect of cash flow,

receivables and the minimum amount of cash required to operate
the business. Since 2020, the Board has approved a minimum
cash holding in the business of £45m. The Board has reviewed the
matter and, given the continuing increase in the size and scale of
the business, has agreed to increase this level to £60m. A special
dividend is also proposed which has been calculated to take into
account the increase in minimum cash holding in the business.

The Directors have proposed a final dividend and a special
dividend for the financial year ended 31 July 2022. Further
information in respect of the proposed dividends can be found
on page 33. Softcat is well positioned to continue to fund its
dividend which is well covered by the cash generated by the
business. Details of the Company’s viability and going concern
can be found on page 64 and pages 133 and 134 respectively.
Details of total dividend distributions for the financial year can be
found in note 6 to the financial statements.

The Company intends to seek shareholders’ approval at the 2022
AGM to permit the Directors, should they consider exercising the
authority, to repurchase up to 10% of the ordinary issued share
capital. The Directors have no current intention of exercising this
authority, which is sought in the best interest of shareholders to
allow the flexibility to react promptly where such market purchases
may be desirable.

Board development and support
The Chair is responsible, with the assistance of the Company
Secretary, for ensuring that all Non-Executive Directors receive
ongoing training and development. All Directors are provided with
frequent briefings of current and relevant issues and a twelve-month
forward plan is maintained by the Company Secretary to ensure
that emerging topics or repeat topics which require further debate
by the Board can be effectively scheduled. Topics discussed
during the year included updates on industry trends and competitor
performance, corporate governance and audit reforms, and
developments in sustainability and environmental reporting. The
Board also receives updates on our public reporting commitments,
such as gender pay gap reporting (and ethnic pay gap reporting,
on which Softcat reports voluntarily), tax strategy, creditor payment
practices and risks of modern slavery.

When a new Director has been appointed, it is important to
accelerate their understanding of the business so the Director can
maximise their contribution to the Board and fulfil their responsibilities
and duties successfully and effectively. An extensive and tailored
induction programme was conducted following the appointment of
Lynne Weedall in May 2022. The programme included meetings
with the Chair, the Chief Executive Officer, the Chief Financial Officer,
members of the Senior Leadership Team and other key management,
and representatives from the Company’s Remuneration Committee
advisers, PwC. The Company Secretary also highlighted key
Board documents for Lynne to review, such as the Board’s current
annual Budget, Board Strategy Review and Three Year Plan.
This helped to accelerate Lynne’s understanding of the business.

Softcat plc Annual Report and Accounts 2022

• through the Sustainability Committee, scrutinise management’s
activities and policies for pursuing Softcat’s sustainability
strategy and achieving its climate-related targets.

Organisation of Board meetings
The following are key features of how our Board and Committee
meetings are organised to support the good governance of
the business:

• Board meetings are scheduled to consider issues requiring Board
oversight and adequate time for discussion of each agenda
item is provided. Agendas are set to provide the Directors with
opportunities to discuss the longer-term outlook of the business.
Additional meetings are arranged when the need arises;

• an annual calendar of scheduled Board and Committee

meetings is structured to allow the Board/Committees to review
cyclical and ad hoc items, such as key projects;

• the Directors have access to key governance documents, such
as the Matters Reserved to the Board, Terms of Reference for
each Committee, and the Delegated Authorities Matrix;

• Non-Executive Board members make themselves available outside
of scheduled meetings should the need occur. In particular,
the Chairs of the standing committees often hold preliminary
planning discussions with the Company Secretary, management
or external advisers to a Committee prior to a meeting;

All Directors have the opportunity to approach the Company
Secretary (who acts as Secretary to the Board and all its
Committees) for advice. The Company Secretary is appropriately
qualified and highly experienced and is responsible for advising
the Board on certain regulatory, legislative and governance
matters and other ad hoc issues when required. Each Board
meeting includes an update from the Company Secretary on
any major developments of which the Board should be aware.
The role of the Company Secretary also includes:

• informing the Board of their key obligations as Directors

of a public listed company;

• assisting the Chair by organising induction and training

programmes and ensuring that all Directors have full and timely
access to all relevant information;

• developing the agenda for each meeting of the Board
and its Committees for approval by the respective Chair;

• working with the Directors to develop the long-term agenda for
the Board and its Committees to enable them to discharge their
responsibilities effectively; and

• ensuring that the correct Board procedures are followed, in
accordance with the Company’s constitution, applicable
legislation and good governance practice.

The removal of the Company Secretary is a matter for the Board
as a whole.

Role of the Non-Executive Directors
All of Softcat’s Non-Executive Directors, including the Chair and
SID, are required by their role to perform certain functions to
improve the effectiveness of the Board. In particular they:

• constructively challenge and contribute to the development

of strategy;

• offer additional perspectives, advice and strategic guidance;

• scrutinise the performance of management in meeting agreed

goals and objectives;

• have oversight to ensure compliance with key listed company

requirements;

• through the Audit Committee, satisfy themselves that financial
information is accurate, and that internal controls and systems
of risk management are robust;

• through the Remuneration Committee, take responsibility
for determining appropriate levels of remuneration for
senior executives;

• through the Nomination Committee, undertake the role of

recommending the appointment and, where necessary, the
removal of positions on the Board. Consideration is also given
to diversity, succession planning, employee engagement (led
by the Designated Director) and culture within the business; and

Annual Report and Accounts 2022 Softcat plc

Corporate governanceG O V E R N A N C E R E P O R T C O N T I N U E D

O P E R A T I O N O F T H E B O A R D C O N T I N U E D

Organisation of Board meetings continued
• reporting packs are provided for each Board/Committee
meeting, which are designed to be clear, analytical and
concise. Papers are distributed and retained in an electronic
system which is managed by the Company Secretary and this
provides Directors with instant access to papers at any time;

• reporting packs are normally prepared and presented by

the Executive Directors and other senior managers. Packs are
distributed by the Company Secretary to the Board around five
days in advance of Board or Committee meetings. This enables
the reporting packs to be as up to date as possible whilst allowing
sufficient time for their review in advance of the meeting. Verbal
updates cover any subsequent material developments;

• a summary of the actions arising at Board and Committee
meetings is circulated by the Company Secretary following
each meeting. The Company Secretary then ensures progress
is made in respect of each action;

• financial updates with commentary are distributed to the
Board monthly. This gives the Directors the opportunity to
review performance and any emerging issues in ‘real time’.
The financial updates include an assessment of performance
against the annual Budget as approved by the Board, giving
the Board additional analysis on developing Company trends;

• the development of strategy is led by the Executives with
input, challenge, examination and ongoing testing from
the Non-Executive Directors. A dedicated Board Strategy
Review session is held annually; and

• Board discussions are held in an open and collaborative

atmosphere of mutual respect allowing for questions, scrutiny
and constructive challenge. This supports decisions on which
the Board seeks a consensus.

Independence and conflicts
The Board, excluding the Chair, is currently comprised of four
independent Non-Executive Directors and two Executive Directors
and therefore complies with the independence requirements of the
Code. Martin Hellawell was formerly the Chief Executive Officer
before being appointed as Chair in April 2018. The Board
considers for the purposes of the Code that he was not
independent when he was appointed Chair and that he remains
not independent.

The Company announced earlier in the year Board succession
changes which will take effect on 1 August 2023. This included
that Graeme Watt, the current Chief Executive Officer, will
succeed Martin Hellawell as Chair. Given Graeme’s current
Executive role, for the purposes of the Code he will not be
considered as independent when he succeeds Martin as Chair.

The independence of the Non-Executive Directors is reviewed
annually by the Nomination Committee (described in the
Nomination Committee Report on pages 90 to 95). Their
independence could be impinged where a Director has a conflict
of interest, and the Board therefore operates procedures to identify
and manage situations where such a conflict could arise. Board
procedures operate to restrict a Director from voting on any matter
in which they have a material personal interest, unless the Board
unanimously decides otherwise. If necessary, Directors are
required to absent themselves from a meeting of the Board while
such matters are being discussed.

During the year, all Directors confirmed that they are able to
allocate sufficient time to discharge their responsibilities effectively
and all Directors continue to devote adequate time to their duties
at Softcat. Directors are also required to notify the Board of any
major changes to their external commitments that arise during the
year with an indication of the time commitment involved.

Softcat plc Annual Report and Accounts 2022

RELATIONS WITH
SHAREHOLDERS

Governance engagements
The Board maintains a proactive and constructive programme of
engagement with its stakeholders and recognises within this the
important and valuable role that shareholders play, as owners
of the Company. Further information on the Board’s engagement
with its stakeholders is provided on pages 34 to 37.

For the fourth year, the Chair undertook an extensive engagement
programme with the Company’s largest shareholders on governance
matters. Feedback from these sessions was reported back to the
Board to make sure the Board fully understood the views of those
shareholders and the Board discussed whether any actions should
be taken as a result.

As part of an ongoing investor relations programme, there was
extensive interaction with institutional shareholders and market
analysts across the year. The Chief Financial Officer provides the
Board with briefings and reports on these interactions and on any
material changes in the shareholder base of the Company.

The Chair of the Remuneration Committee conducted a
consultation with the Company’s largest shareholders on minor
changes to the Remuneration Policy which will be proposed at the
AGM to be held in December 2022. Please see pages 113 to 127
for more information.

The Chairs of each of the Committees welcome the views and
questions of shareholders at any time. Each of the Committee
Chairs can be contacted via the Company Secretary at
cosec@softcat.com.

In the event that shareholders have any concerns, which the normal
channels of communication to the Chair or Chief Executive have
failed to resolve or for which such contact is inappropriate, our
Senior Independent Director or any independent Non-Executive
Director is available (via cosec@softcat.com) to address such
issues. The Board continues to make itself available, when requested,
for meetings with shareholders on issues relating to the Company’s
governance and strategy.

Annual General Meeting
Due to the additional restrictions on gatherings put in place in
response to the Omicron variant of COVID-19, and to protect the
health and safety of our employees and Directors, shareholders
were encouraged to appoint the Chair as their proxy and not attend
the Company’s 2021 Annual General Meeting (‘AGM’) in person.
This did not affect the shareholders’ right to attend, speak and vote
at the meeting, if they still wished to do so. Shareholders were given
the opportunity to submit questions to the Directors via email;
however, no such questions were received from shareholders
for the 2021 AGM.

The Board maintains a proactive and
constructive programme of engagement
with its stakeholders.”

The 2022 AGM will be held on 13 December 2022 at Softcat plc,
Fieldhouse Lane, Marlow SL7 1LW. Details of the meeting and
the resolutions to be proposed are set out in the Notice of
AGM which is available to download on our website (www.softcat.
com/about-us/investor-centre/shareholder-information).

The AGM gives shareholders an opportunity to vote on key aspects
of Softcat’s business and to ask questions to the Directors. The
opportunity to submit questions for the Directors via email will be
given again for the 2022 AGM. Details of how to do this can be
found in the Notice of AGM.

Shareholder meetings
Throughout the year, numerous meetings were held with existing and
potential shareholders. These meetings were attended by either the
Chief Executive or the Chief Financial Officer or sometimes both,
with the support as needed of the Commercial Finance Director,
who has responsibility for investor relations. The meetings focused
primarily on trading performance and the implementation of our
business strategy. Any significant views expressed by shareholders
are recorded and reported to the Board to keep them up to date
with investor sentiment. In line with the Market Abuse Regulation,
strict protocols are observed to make sure that no unpublished
price sensitive information is discussed during these meetings.

Results presentation and investor roadshows
The Chief Executive Officer and the Chief Financial Officer provide
a briefing later in the day after the release of the full-year preliminary
results and also of the half-year results. The briefing is primarily aimed
at institutional holders and market analysts but all stakeholders,
including employees, and all shareholders are welcome to access
the briefing. Any supporting material for the briefing is published on
Softcat’s website and is accessible to all stakeholders and the public.

Following the release of our full-year preliminary results
announcement and our half-year results, the Chief Executive and
Chief Financial Officer undertake extensive investor engagement
roadshows (which may be held in person or held virtually).
Feedback from the roadshows and from reports by analysts, by
industry experts and in the media are collated and shared with the
Board to improve the Board’s understanding of their views.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceA U D I T C O M M I T T E E R E P O R T

ACCOUNTABILITY

One of the key activities of the Committee was
the audit tender process, with a significant
proportion of time devoted to this process.”

Robyn Perriss
Chair of the Audit Committee

Introduction
As Chair of the Audit Committee (the ‘Committee’), I am pleased to
present the Committee’s report for the year ended 31 July 2022.

The Committee continues to fulfil a vital role in the Company’s
governance framework, providing valuable independent
challenge and oversight of the accounting, financial reporting and
internal control processes, risk management, the internal audit
function and the relationship with the external auditor. These pages
outline how the Committee discharged the responsibilities
delegated to it by the Board over the course of the year, the key
issues it has considered during FY2022 and also areas of focus
over the next financial year.

Ernst & Young LLP (‘EY’) has been Softcat’s external auditor since
July 2013 and during FY2021 a decision was made to tender the
external audit for the year ending 31 July 2023. Consequently one
of the key activities of the Committee was the audit tender process,
with a significant proportion of time devoted to this process.
Following a very comprehensive, high quality and competitive
tender process, the Committee has recommended the
reappointment of EY as auditor to the Board at the 2022 AGM.
Further details of the external audit tender process are set out
on page 85.

Members

R Perriss (Chair)

K Slatford

V Murria

L Weedall

Attendance of the Audit Committee

Committee attendance 2022

Name

R Perriss

V Murria

K Slatford1

L Weedall2

Total meetings held

Attended

Did not attend

n/a

1. Karen was unable to attend due to illness.

2. Lynne joined the Committee on 3 May 2022, when she joined the Company

and attended the remaining Committee meeting for the financial year.

Allocation of time

Internal audit: 18%

External audit: 37%

Risk and internal controls: 25%18+

Financial reporting: 20%

Softcat plc Annual Report and Accounts 2022

37
+
20
+
25
+
M
Areas of focus in 2022 included:

Focus areas for 2023:

• reviewing the appropriateness of our published half-year

• ongoing monitoring of IT general controls and financial

and full-year results;

reporting controls within the new finance system;

• reviewing the application of financial reporting and

governance standards;

• assessing the Company’s Going Concern and

Viability Statements;

• confirming that the Annual Report and Accounts is fair,

balanced and understandable;

• receiving updates and exercising oversight in relation to
the implementation of a new finance ERP system to
support greater automation and further strengthen the
financial control environment as the Company continues
to scale;

• receiving regular updates in relation to IT systems

and security;

• receiving and discussing internal audit reports on:

– IT asset governance and user access management;
– organisational fraud maturity;
– in-flight and go/no go assurance updates in respect
of the implementation of a new ERP finance system;
– purchase to pay process;
– commission calculation and process;

• ongoing monitoring of the status of the proposals for

reforms issued by the Department for Business, Energy &
Industrial Strategy (‘BEIS’) to improve trust in audit and
corporate governance;

• reviewing the effectiveness of internal audit and internal

controls, discussing the Company’s risk appetite, principal
risks and risk management and reviewing the Company’s
risk register;

• evaluating the effectiveness and independence of the

external auditor; and

• discussing the external audit tender process and

approving a proposal to recommend the reappointment
of EY as the statutory auditor from FY2023.

• an assessment of the readiness to meet the final BEIS proposal
outcomes announced in May 2022, including future actions
and the development of an Audit and Assurance Policy;

• continued focus on cyber and IT security with a particular
focus on our internal cloud security platforms and business
continuity planning;

• ongoing maturation of our approach to defining our risk

appetite; and

• smooth transition to working with a new lead partner of the

external auditor, following the scheduled mandatory rotation
of the current partner in accordance with audit regulations.

As noted above, in May 2022, Softcat went live with a new ERP
finance system. Throughout the year the Committee and the Board
have been kept abreast of the status of the project including key
milestones and decision staging gates together with an appraisal
of costs incurred on the project together with a consideration of
accounting implications such as meeting the criteria for
capitalisation and the appropriate useful economic life.

During the year, the Committee’s core duties remained unchanged
and the usual cadence of activities relating to risk, assurance and
internal controls remained in place. The Committee has also
carried out a review of the independence and effectiveness of
EY as auditor and performed an internal questionnaire-based
review of the effectiveness of the internal audit function.

With the assistance of management, the Committee has reviewed
the content in the Annual Report and Accounts and believes that
this explains our strategic objectives and is fair, balanced and
understandable.

Whilst this Report of the Audit Committee contains some of the
matters addressed during the year, it should be read in conjunction
with the Independent Auditor’s Report starting on page 136 and
indeed the Softcat plc financial statements in general. This includes
the significant accounting matters and issues in relation to the
Company’s financial statements that the Committee has assessed
during the year, which can be found on page 83. This report
explains why the issues were considered significant and further
information can be found in the Auditor’s Report from page 136
which covers its key audit matters.

If any shareholders would like to raise any matters with me in
respect of the work of the Committee and our key focus areas
for FY2023, I can be contacted via the Company Secretary at
cosec@softcat.com. I will also be happy to answer any questions
about the work of the Committee at the forthcoming AGM.

Robyn Perriss
Chair of the Audit Committee
24 October 2022

Annual Report and Accounts 2022 Softcat plc

Corporate governanceA U D I T C O M M I T T E E R E P O R T C O N T I N U E D

A C C O U N T A B I L I T Y C O N T I N U E D

Responsibilities
The Committee’s terms of reference are available at www.softcat.
com/investors and in hard copy from the Company Secretary.
These provide the framework for the Committee’s work and can
be summarised as providing oversight of:

• the appropriateness of the Company’s external

financial reporting;

• the relationship with, and performance of, the external auditor;

• the Company’s system of internal control, including the risk

management framework, key and emerging risks and the work
of the internal audit function;

• appropriate controls to detect and prevent fraud; and

• the Company’s system of compliance activities.

The terms of reference are reviewed at least annually and are
updated as appropriate to ensure there is clarity on the expected
duties of the Committee. A further review of the terms of reference
will be conducted to reflect the final outcomes and Company
implementation of BEIS’ reforms on the audit market and corporate
governance. In advance of the outcome of the reforms, the
Committee has already approved an express clarification in its
terms of reference in respect of the legality of dividend payments
and that the Committee reviews that the Company has sufficient
distributable reserves in respect of any proposal to pay a dividend.

A whistleblowing policy and procedure for colleagues to raise
issues regarding possible improprieties in matters of financial
reporting or other matters is in place and operated throughout
the year.

The Company operates anti-bribery and corruption procedures
which support compliance with the Bribery Act 2010, the Criminal
Finances Act 2017 and certain equivalent legislation outside of
the UK.

The Committee reviews the Company’s published tax strategy
and during the year considered and approved an updated
version. The tax strategy is available on the Company’s website
at www.softcat.com/corporate-responsibility. The Committee
also reviewed the Company’s reporting in respect of payment
practices to suppliers.

During the year the Committee assessed the adequacy of the
existing fraud control framework and received reports from
management in respect of fraud prevention and detection controls.
Management has improved fraud awareness within the Company,
including rolling out refreshed fraud awareness training for all
employees. The Committee recognises this as an important area,
given the evolving nature and increasing sophistication of fraud.
The importance of strong controls over fraud was highlighted in the
audit and governance reforms proposed by BEIS and this area will
continue to be a key responsibility of the Committee as part of the
safeguarding of the Company’s assets.

Membership
The membership of the Committee has been selected with the aim
of providing the range of financial and commercial expertise
necessary to meet its responsibilities and the requirements of the
2018 UK Corporate Governance Code (the ‘Code’), which is
applicable for the financial year ended 31 July 2022. Given my
experience as a qualified Chartered Accountant and as a recent
finance director of a listed UK company, I have been designated
as the financial expert on the Committee for the purposes of
the Code.

Vin Murria and Karen Slatford both have considerable sector
experience, in accordance with Code provision 24. Furthermore, in
order to ensure that the Committee continues to have experience
and knowledge relevant to the sector in which Softcat operates,
all of the Non-Executive Directors receive regular updates on
business, regulatory, financial reporting, governance and
accounting matters. Biographies of the members of the Committee
are shown on pages 68 and 69. Changes to the membership
of the Committee during the year are shown on page 80.
All members are independent Non-Executive Directors of the
Company. The Company Secretary acts as Secretary to the
Committee, supported by the Company Secretarial Assistant.

How the Committee operates
The Committee met formally four times during FY2022 and each
meeting, other than the March meeting (for which Karen Slatford
was unwell), had full attendance. Meetings of the Committee
generally take place on the same day as the Board meeting to
maximise the efficiency of interaction with the Board. The Company
Secretary maintains a twelve-month rolling plan to support an
effective process which ensures the Committee reviews all required
matters to effectively discharge its duties.

The external auditor, EY, is invited to each meeting together with the
Company Chair, the Chief Executive, the Chief Financial Officer
(‘CFO’), the Company Secretary, the Group Financial Controller,
the Internal Audit Manager, the Commercial Finance Director and
Grant Thornton (which provides a co-sourced internal audit service
to Softcat). This means that each member of the Board is present
at Committee meetings. However, I shall, as needed, report to the
Board as a separate agenda item on the activity of the Committee
and matters of particular relevance to the Board regarding the
conduct of the Committee’s work. The Board as a whole regularly
reviews the performance of the business via monthly reporting
packs and a CFO’s report at each Board meeting. This provides
the Committee with a good ongoing understanding of the financial
standing of the business which accumulates towards the formal
half-year and full-year results.

The Committee sets time aside at the end of each meeting, in
addition to on an ad hoc basis where necessary, to seek the
views of the external auditor, in the absence of management. The
Committee also meets separately with the internal auditor during
the year and in between meetings the Committee Chair keeps in
touch as needed with the CFO, other members of the management
team, the internal audit function and the external auditor.

Softcat plc Annual Report and Accounts 2022

Financial reporting
The Committee’s primary responsibility in relation to the Company’s
financial reporting is to review with both management and the
external auditor the appropriateness of the half-year and annual
financial statements concentrating on, amongst other matters:

• the quality and acceptability of accounting policies and practices;

• the impact of any material changes in accounting policies;

• material areas in which significant judgements have been

applied or where significant issues have been discussed with
the external auditor;

• the clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance
reporting requirements, including the UK Corporate
Governance Code;

• any correspondence from regulators in relation to our financial

reporting; and

• assisting the Board in an assessment of whether the Annual

Report and Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s position and prospects,
performance, business model and strategy. This assessment
forms the basis of the advice given to the Board to assist it in
making the statement required by the UK Corporate
Governance Code.

Matter considered

Action

Accounting policies and practices
The Committee received reports from management in relation to
the identification of critical accounting judgements, key sources
of estimation uncertainty, significant accounting policies and
proposed disclosure of these in the 2022 Annual Report. The
Committee’s review of how management approached a change
in the application of IFRS 15 is summarised on page 84 (a fuller
description is provided in note 1 ‘Accounting policies’ to the
financial statements). There were no other new material changes
to significant accounting policies adopted during the year.

Following discussions with management and the external auditor,
the Committee approved these critical accounting judgements and
significant accounting policies and disclosures, which are set out in
note 1 ‘Accounting policies’ to the financial statements.

Significant judgements and issues
An important part of the Committee’s responsibilities is to assess
key issues in respect of published financial statements and the
Committee pays particular attention to any matters which it
considers may affect the integrity of Softcat’s financial statements,
with a view to satisfying itself that each matter has been treated
appropriately. The significant areas of focus considered, and the
actions taken by the Committee, in relation to the 2022 Annual
Report are outlined below.

We discussed these with the external auditor during the year and,
where appropriate, these have been addressed as areas of audit
focus as outlined in the Independent Auditor’s Report on pages
136 to 143.

Going concern and viability

Inappropriate revenue
recognition: misstatement
of revenue recognised at
or near year end

Misstatement of rebate
income

In respect of the financial statements for the year ended 2022, management prepared analysis modelling
a variety of downside scenarios having regard to the principal risks faced by the business to assess the
Company’s viability and ability to continue as a going concern. The analysis including budgets for
FY2023 and three-year cash projections were presented together with potential mitigating actions which
could be taken in the event of one or more of the downside scenarios occurring. The Committee was
satisfied with management’s work and supported the conclusions reached in respect of the Company’s
going concern and longer-term viability (see pages 133 and 134 and page 64 respectively).

The Committee will monitor developments in good practice under the BEIS reform proposals in respect of
potential additional areas and risks on which companies will be expected to have due regard in future
resilience statements.

The Committee has reviewed the Company’s revenue recognition policy and discussed in detail with
management the processes applied to accurately record revenue at period ends. The Committee also
receives detailed monthly reporting on business performance which includes revenue recognition data
and trends. The Committee or the Board discusses the performance and data trends as needed with the
CFO. The Committee has concluded that the timing of revenue recognition is appropriate.

The Committee has taken steps to understand the nature and quantum of supplier rebates received by the
Company. The Committee receives management information on rebates accrued as part of monthly
performance reporting and monitors trends against prior period results. The Committee is satisfied with
management’s ability to accurately record rebates earned within the financial period.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceA U D I T C O M M I T T E E R E P O R T C O N T I N U E D

A C C O U N T A B I L I T Y C O N T I N U E D

Significant judgements and issues continued

Matter considered

Action

Application of IFRS 15

The Committee is aware that inappropriate application of IFRS 15 may result in erroneous presentation
and disclosure of revenue and cost of sales. Management has taken appropriate action and performed
detailed work to ensure that revenue is reported accurately on a principal or agent basis. Softcat
evaluates each revenue stream against known indicators to determine disclosures and presentation.
The indicators are reviewed quarterly and factor in product mix sold by Softcat. During the year, the IFRS
Interpretation Committee (‘IC’) shared guidance on the “control” criteria which is used to determine
whether companies should recognise revenue from the resale of standard software licences on a net basis
under IFRS 15. Following this guidance, management presented an analysis to the Audit Committee of the
impact of amending its judgement in the Company’s accounts, including a restatement of the prior
financial year. Management also presented a revised accounting policy which reflected the application
of the IC’s guidance. Please see note 1.5 to the financial statements for more information.

EY has audited the disclosures of IFRS 15 and presented the results of their procedures to the Committee.
The above provided the Committee with comfort that an appropriate approach continues to be taken on
the presentation of revenue under IFRS 15, which also incorporates the new guidance from the IC.

Other matters
The Committee also undertook a range of further activities in relation
to the Company’s accounting and external reporting in the year:

Fair, balanced and understandable
The processes and controls that underpin the Committee’s
assessment of whether the Annual Report and Accounts, taken as
a whole, is fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company’s
position and prospects, performance, business model and strategy
include ensuring that:

• all team members who provide a material contribution to
drafting the Annual Report and Accounts are fully briefed
by the Company Secretary on the fair, balanced and
understandable requirement;

• an experienced core team is responsible for the co-ordination of
content submissions, verification, detailed review and challenge;

• the Annual Report and Accounts follows a framework which

supports the inclusion of key messaging, market and performance
overviews, principal risks and other governance disclosures.
Sufficient forward-looking information is provided and a balance is
sought between describing potential challenges and opportunities;

• information in the different parts of the Annual Report and

Accounts is consistent;

• the Annual Report and Accounts is written to avoid jargon

where possible and is presented free of unnecessary clutter;

• senior management confirms that the content in respect of its areas of
responsibility is considered to be fair, balanced and understandable;

• the Committee receives an early draft of the Annual Report and

Accounts to enable timely review and comment; and

• the Committee receives a briefing from management which
sets out the key themes and links in the Annual Report and
Accounts which contribute to it being a fair, balanced and
understandable document.

Following its review, the Committee is of the opinion that the
2022 Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable. This allows the Committee to
provide positive assurance to the Board to assist it in making the
statement required by the Code.

Softcat plc Annual Report and Accounts 2022

Going concern and viability statements
The Committee has reviewed the Company’s ability to continue to
operate as a going concern for the twelve-month period post the
date of this report and the Company’s assessment of viability over
a period greater than twelve months. In assessing viability, the
Committee has considered the Company’s position presented in
the budget and the three-year plan recently approved by the
Board. The Committee also considered amongst other things a
number of scenarios modelled by management, including a severe
but plausible downside scenario and reverse stress tests carried
out to assess the strength of the Company’s liquidity position.
The Committee has concluded that the assumptions and mitigating
actions are appropriate. Further details are set out in the statements
on page 64 and pages 133 and 134 of this Annual Report.
The Committee confirms that, following review, it has
recommended both statements for approval by the Board.

External audit
The Committee has primary responsibility for overseeing the
relationship with, and performance of, the external auditor.
This includes making the recommendation on the appointment,
reappointment and removal of the external auditor, assessing
its independence on an ongoing basis and negotiating the audit
fee. The Committee is also responsible for considering the most
appropriate time and circumstances, observing applicable
legislation, to conduct a tender for the external audit.

Audit engagement partner rotation
In accordance with the Auditing Practices Board’s Ethical
Standards, the term limit of an audit engagement partner is
five years and David Hales will step down as our lead audit
engagement partner following the conclusion of the FY2022 audit
in October 2022. During the 2022 financial year, the Committee
worked with EY to ensure a suitable handover process for the new
audit engagement partner. EY confirmed and the Committee
endorsed that Marcus Butler would take over as the new lead
audit partner. EY confirmed that Marcus was independent from
Softcat, with no known conflicts of interest. Marcus and David
have been working to ensure a smooth transition. The Committee
would like to thank David for his contribution during his time as
audit engagement partner.

Audit tender
EY was appointed as the Company’s auditor in July 2013.
The 2014 Competition and Markets Authority Order requires
Softcat to tender its external audit at least every ten years.
In accordance with this requirement, we started planning a
competitive tender process in 2021 and undertook the process
during our 2022 financial year. The appointment will be
effective for Softcat’s 2023 financial year audit.

The process followed the FRC’s guidance on audit tenders.
The Audit Committee led the process with the assistance of
a tender panel made up of the Committee Chair, Vin Murria
(who is a Committee member), the CFO, the Company
Secretary, the Financial Reporting Manager and other key
stakeholders in the audit process.

October 2021
Timeline finalised by the Committee
Informal approaches and meetings with potential candidate audit firms
Candidate firms confirmed their independence and that they had no conflict of interest to potentially act as external auditor

November 2021
Request for proposal (‘RFP’) sent to four candidate firms, including a ‘challenger’ audit firm
Clear assessment criteria were subsequently established and communicated to the candidate firms ahead
of submission date for the RFPs

December 2021
Company presentation day with the candidate firms. This provided a detailed overview of Softcat
and an opportunity to meet with management
Population of a ‘data room’ with key relevant information for the candidate firms to consider for their audit proposals

January 2022
Detailed follow-up meetings held with the audit tender panel
Shortlisting of three candidate firms, including a ‘challenger’ firm, which were invited to tender

April 2022
Submission of proposals from two of the shortlisted candidate firms as one firm withdrew from the process

May 2022
Presentation of tender proposals by shortlisted candidate firms
Completion of a detailed scorecard on each candidate firm by each member of the tender panel
Tender panel discussed results and made a recommendation to the Audit Committee to reappoint EY, which was reviewed and
supported by the Audit Committee. A recommendation to reappoint EY was made to the Board and approved

Conclusion and rationale
The members of the tender panel had scored each of the
candidates’ proposals independently, ensuring a fair and
consistent review of each proposal. The tender panel then met
to discuss the scores, share their views and further reflect on the
proposals. Part of the consideration was given to the long-term
nature of the audit relationship and the balance of the potential
benefits of maintaining EY as auditor versus those of
changing auditor.

Overall, the Committee was impressed by the high quality of the
proposals put forward by each candidate firm, all of which

demonstrated significant commitment to the tender process, and
good understanding of key areas of risk and of Softcat’s values
and culture. All candidates had expressed a strong desire to
be Softcat’s auditor. The tender panel concluded that the
advantages of EY’s strong audit quality record, established
positive relationship with and understanding of the business and
performance as assessed on the scorecard were greater than
the potential advantages of changing auditor.

A resolution proposing the appointment of EY as Softcat’s
auditor will be put to the shareholders at the 2022 Annual
General Meeting.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceA U D I T C O M M I T T E E R E P O R T C O N T I N U E D

A C C O U N T A B I L I T Y C O N T I N U E D

Auditor appointment
Following the competitive tender process concluded in May 2022 described above, EY was retained as auditor effective from
financial year 2023. A timeline setting out the tenure of EY as auditor and requirements on Softcat to next tender and change auditor
is set out below:

Prior to July 2013
Rayner Essex LLP conducted the external audit immediately prior to FY2013

July 2013
EY appointed as auditor and conducted the external audit for FY2013

November 2015
Softcat becomes a publicly listed entity

October 2017
Mandatory change of EY lead audit partner

May 2022
EY reappointed as auditor, following competitive tender process

October 2022
Mandatory change of EY lead audit partner

By May 2032
Competitive tender, being ten years since last audit tender

By July 2033
Pursuant to legislation, mandatory audit firm rotation, being up to 20 years since appointment. Option, pursuant to transitional
provisions, to extend this period to 2035, being 20 years since Softcat became a publicly listed company

The Committee will continue to review the auditor’s appointment
and the need to tender the audit, ensuring the Company’s best
interests are considered and ensuring compliance with the
requirements of the UK Competition and Markets Authority.
Accordingly, the Company confirms that it complied with the
provisions of the Competition and Markets Authority’s Order
2014 for the financial year under review. There are no
contractual obligations restricting Softcat’s choice of
external auditor.

For the financial year ended 31 July 2022, the Committee has
recommended to the Board that EY be reappointed under the
current external audit contract and the Board has endorsed
that recommendation. The Board has therefore proposed the
reappointment of EY at the Annual General Meeting to be
held in December 2022.

Softcat plc Annual Report and Accounts 2022

Audit risk
At the start of the audit cycle we received from EY a detailed
audit plan identifying its audit scope, planning materiality and
assessment of key audit risks.

The audit risk identification process is considered a key factor in the
overall effectiveness of the external audit process, and the key risks
for the 2022 financial year closely align to the significant
judgements and issues above. The key risks identified included:

• inappropriate revenue recognition;

• presentation of revenue in respect of IFRS 15;

• misstatement of rebate income;

• a review of the operation of a new finance ERP system

on financial reporting; and

• going concern and viability.

Should the need ever occur, the Committee has the authority
to request for additional areas to be reviewed if it is deemed
to be relevant for the integrity of Softcat’s financial statements.

EY also outlined other areas of audit focus which included a
combination of standing matters usually associated with an
external audit each year and additional matters which reflect
potential changes in Softcat’s risk profile, such as exposure to
climate change risk. Key audit risks are regularly reviewed by
the Committee or the Board.

Working with the external auditor
The external auditor attended all Committee meetings in 2022
and received all Committee reading papers (other than papers
in respect of the competitive audit tender) and minutes. After each
Committee meeting, we hold a private meeting with the external
auditor to provide additional opportunity for open dialogue and
feedback from the Committee and the auditor without management
being present. The external auditor has direct access to the
Committee Chair to raise any concerns outside formal Committee
meetings. Matters typically discussed include:

• auditor views on the resourcing of internal functions which are

important to Softcat’s control environment;

• the external auditor’s assessment of business risks;

• the transparency and openness of interactions with management;

• confirmation that there has been no restriction in scope placed

on it by management; and

• the independence of its audit and how the auditor has

exercised professional scepticism.

The Committee Chair, if appropriate, will discuss with management
any actions arising from the private meetings with the external auditor.

Effectiveness of the external audit process
The Committee reviewed the quality of the external audit
throughout the year and considered the performance of EY.
The effectiveness of the external audit process is dependent on a
number of factors. These include the quality, continuity, experience
and training of audit personnel, business understanding, technical
knowledge and the degree of rigour applied in the review
processes of the work undertaken, communication of key
accounting and audit judgements, together with appropriate audit
risk identification at the start of the audit cycle. The Committee also
took into account an assessment of the firm-wide Audit Quality
Inspection (‘AQI’) report issued by the FRC in July 2022 together
with EY’s responses to that report. The Committee also noted the
equivalent AQI reports issued in respect of the other audit firms
which participated in the Company’s tender for the external audit
(see page 85).

Following the conclusion of the 2022 financial year, the Committee
conducted an effectiveness evaluation of the external auditor. The
evaluation was led by the Committee Chair and involved issuing a
tailored evaluation questionnaire for completion by the Committee,
by selected managers in the Finance team who regularly work with
EY, and by Grant Thornton (as co-sourced internal auditor). The
results of the survey were shared with the Committee and
discussed. The feedback was positive overall, with the Committee
noting comments about the working relationship and good
engagement between the EY Team and those involved in the audit
process, and the smooth and timely manner in which the audit was
run. Some areas were highlighted as opportunities for
improvements, such as the utilisation of technology within the audit
process as the Company’s control environment matures and
greater functionality is utilised within the new ERP finance system.
Further opportunities were also identified to improve the
engagement between EY and the wider business. These areas will
be further discussed with EY for implementation with the new audit
lead partner. Based on the above, the Committee concluded that
EY continued to perform their role well, there had been
appropriate focus and challenge on the primary areas of audit
focus from EY, and that the performance of EY remained effective.

During 2022, an Audit Quality Review Team from the FRC
undertook an inspection of EY’s audit of the Company’s 2021
Financial Statements. As part of that process, the Committee Chair
shared her and the Board’s view of the quality of the EY audit. The
Committee considered the final inspection report, which did not
raise any significant findings, and discussed the results and agreed
actions with the lead audit partner. The Committee agreed with the
overall assessment, which was consistent with its own view of the
quality and effectiveness of the external audit.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceA U D I T C O M M I T T E E R E P O R T C O N T I N U E D

A C C O U N T A B I L I T Y C O N T I N U E D

Independence and objectivity
The Committee has a policy governing the engagement of the
external auditor to provide non-audit services. This precludes EY
from providing certain services. The policy is reviewed annually
and was last updated in 2021 (the Committee having agreed in
2022 that no changes were required). The latest version can be
found on the Company’s website at: www.softcat.com/about-us/
investor-centre/governance. All non-audit services provided by
the external auditor are reported to the Committee and a record is
kept so that the total costs regarding non-audit work during a
financial year are monitored.

For certain specific permitted services, the Committee has
pre-approved that EY can be engaged by management, subject
to the policy set out above, and subject to a total of 10% of the
current external audit fee on an annual basis.

For all other services or those permitted services that exceed these
specified fee limits, I, as Committee Chair, or in my absence
another Committee member, can pre-approve permitted services.

The Committee also received confirmation from EY that there are
no relationships between the Company and EY that may have a
bearing on its independence.

In respect of the audit of the 2022 financial statements, the
Committee considered a fee proposal from EY and the Committee
reviewed the quantum and rationale relating to increased costs for
EY to undertake required audits. Audit fees had increased from the
previous year, reflecting the ongoing growth of the Company.
Following the receipt of formal assurance that its fees were
appropriate for the scope of the work required, the Committee
agreed a charge from EY of £545,000 for statutory audit services
in respect of the Company’s annual financial statements.

In addition to the above statutory audit fee, EY and related
member firms charged the Company £132,500 for additional
audit fees primarily in connection for the first year of auditing
following the implementation of Softcat new finance ERP system,
NetSuite. The Committee also agreed a fee of £40,000 in respect
of EY’s review of the 2022 half-year results, which was classified
as a non-audit fee. Further details of the fees paid, for audit and
non-audit services, to EY for the 2022 and 2021 financial years
can be found in note 3 to the financial statements.

The Committee is aware of the requirements of the Statutory
Auditors and Third Country Auditors Regulations 2016 (the ‘2016
Regulations’). The 2016 Regulations provide for a cap on non-audit
services of a maximum of 70% of the average of the audit fees paid
on a rolling three-year basis. In order to ensure this limit is not
exceeded, the Company shall in usual circumstances seek that
permitted non-audit fees shall not exceed 50% of the average
audit fee over the three preceding financial years in each case. The
three-year measurement period covers the 2020, 2021 and 2022
financial years and is 6.6%, which is considerably below the cap.

Internal control and risk management
The Committee has the primary responsibility for the oversight
of the Company’s system of internal control, including the risk
management framework and the work of the internal audit function
(see below). During the year the Committee closely monitored
the Company’s internal control and risk management systems and
received regular reports from management and the Internal Audit
Team covering the major risks and/or events faced by the business.

Softcat plc Annual Report and Accounts 2022

During the year, the Committee considered the proposals in the
BEIS reforms on the audit market and on corporate governance,
including proposals to further strengthen processes and disclosures
on the effectiveness of a company’s internal controls. The Committee
is monitoring developments and considering its potential next steps.
A further update will be provided in next year’s Annual Report.

Assessment of the Company’s system of internal
control, including the risk management framework
The Company’s risk assessment process and the way in which
significant business risks are managed is a key area of focus for the
Committee. Our activity here was driven primarily by the Company’s
assessment of its principal risks and uncertainties, as set out on
pages 59 to 63.

The Company has in place an internal control environment to protect
the business from the material risks which have been identified.
Management is responsible for establishing and maintaining
adequate internal controls over financial reporting and the
Committee has responsibility for ensuring the effectiveness of
these controls.

The Committee has completed its review of the effectiveness of the
Company’s system of internal control, including risk management,
during the year and up to the date of this Annual Report, in
accordance with the requirements of the Guidance on Risk
Management, Internal Control and Related Financial and Business
Reporting published by the FRC. As part of the financial year-end
process, management presented to the Committee an overview of
the existing control framework and it summarised the key controls
in operation which underpinned the control environment during
FY2022. Management has documented certain key controls,
including IT general controls, overarching controls for the Finance
department, financial management controls, audit risk financial
reporting controls, and fraud management.

Management had considered the control environment and
concluded that in its view the controls had been operating
effectively throughout the year and, taken together, provided a high
degree of assurance that the financial statements are free from
material misstatement.

Through the processes outlined above, the Audit Committee has
considered all significant aspects of the Company’s risk management
and internal control systems for the year and up to the date of this
Annual Report, allowing it to provide positive assurance to the
Board to assist it in making the statements required by the
UK Corporate Governance Code. No significant failings or
weaknesses were identified as a result of the review that may
significantly impact the financial statements. However, had there
been any such failings or weaknesses, the Committee and the
Board confirm that necessary actions would have been taken
to remedy them.

Internal audit
During the 2022 financial year, the Company had an internal audit
function consisting of an internal audit manager (who joined
Softcat during the year) and Grant Thornton LLP (‘Grant Thornton’).
The aim of the internal audit function is to provide independent and
objective assurance on the adequacy and effectiveness of internal
controls, risk management and governance processes. The
appointment and removal of the internal audit function is a matter
reserved to the Committee.

expected reforms, a review will be conducted to assess the
current maturity of financial reporting processes and controls
and to identify any material gaps/priority actions to further
develop controls over financial reporting.

• Cloud adaptation internally and use of managed services:

cloud usage is growing rapidly in Softcat. The audit will review
and give assurance on governance and usage, to drive further
improvements on the overall control environment.

• Business continuity and disaster recovery planning: part of
Softcat’s operational effectiveness is to ensure it has robust
plans to operate the business in the event of a major disruption.
The review will focus on Softcat’s business continuity management
and IT disaster recovery arrangements, against good practice.

• Third party risk management: Softcat relies on a number of IT

third parties to deliver services to its employees and customers.
The review will consider the resilience of the Company against
incidents or problems at a critical third party supplier.

Effectiveness of the internal audit process
Both Grant Thornton and the internal audit manager have had
access to the relevant documentation, premises, functions and
employees to enable it to perform its activities. Grant Thornton is a
major professional services firm with experience in consulting,
assurance and audit and the relationship with the Audit Committee
is led by an experienced partner of Grant Thornton.

Following the conclusion of the 2022 financial year, the Committee
undertook a review of the effectiveness of Grant Thornton’s role as
part of the internal audit function. The evaluation was led by the
Committee Chair and involved issuing tailored evaluation
questionnaires for completion by Softcat management, who had
worked with Grant Thornton on internal audits during the year. A
separate questionnaire was completed by EY (as external auditor),
the Committee and Softcat’s internal audit manager. The results of
the questionnaires were collated, reported to, and discussed by the
Committee. The overall feedback was positive, concluding that
Grant Thornton’s work continues to strengthen the control
environment in the business. Minor recommendations arose from
the evaluation, including the provision of additional expertise within
Grant Thornton to support internal audit reviews in respect of IT
general controls. Implementation of the recommendations will be
further discussed with Grant Thornton. Following the evaluation, the
Committee concluded that Grant Thornton continue to perform well
and remain effective.

Robyn Perriss
Chair of the Audit Committee
24 October 2022

Monitoring and review of the scope, extent and effectiveness of
the activity of the Company’s internal audit function is regularly
considered by the Committee. Management and the internal audit
manager discuss with Grant Thornton the selection of appropriate
areas and controls within the business for internal audit. This is then
presented by Grant Thornton as a proposed annual internal audit
plan prior to the start of each financial year. The audit plan is then
reviewed and approved by the Committee. The Committee then
receives updates from Grant Thornton/the internal audit manager
on the audits and receives an audit report on each audit
undertaken, which includes the results of their audits,
recommendations for changes and management action plans
to address any unsatisfactory audits or recommendations.
The Committee also receives from the internal audit manager
regular progress updates on previously undertaken audits in
order to ensure those actions have been completed or closed.

The internal audit plan for 2022 covered a broad range of core
financial and operational processes and controls, focusing on
specific risk areas. Reviews were undertaken in the following areas:

• assurance in relation to the ‘go-live’ decision on the new ERP

finance system: this was important given the significant investment
cost and that it is viewed as a key platform to support Softcat’s
growth ambitions;

• IT governance and access management: this was important for
Softcat’s IT general controls maturity and to protect sensitive
data and information;

• security against the risk of fraud: this was particularly relevant

given the potential external prevalence for fraud and increasing
sophistication of fraud attempts; and

• purchase to pay procedures: this was important following
the change in Softcat’s ERP finance system and associated
revised procedures.

During the year the internal audit manager supported the
strengthening of the Company’s internal control environment.
In particular, a more formal process to identify and document
key controls is underway. This will further improve our assessment
and assurance on the effectiveness of controls.

Approach to developing the 2023 internal audit plan
and scheduled reviews
During the year Grant Thornton worked closely with management
and the Audit Committee Chair on an internal audit plan for 2023.
The plan was formulated considering an ‘audit universe’ which had
been developed in prior years, with consideration of the important
risks facing Softcat and the wider economic and regulatory climate.
The internal audit plan also takes into account the potential impact
of the BEIS consultation and proposed reforms on improving trust in
audit and corporate governance and the emerging themes on
enhanced governance and controls.

During 2023 reviews are planned in the following areas:

• Internal controls over financial reporting: the consultation and

reforms proposed by BEIS (see above) include a strengthening
of controls over financial reporting and enhanced reporting
requirements in this regard. Management will be making plans
to comply with the required changes. In preparation for the

Annual Report and Accounts 2022 Softcat plc

Corporate governanceN O M I N A T I O N C O M M I T T E E R E P O R T

EFFECTIVENESS

Members

K Slatford (Chair)

M Hellawell

R Perriss

L Weedall

V Murria

Attendance of the Nomination Committee

Committee attendance 2022

Name

K Slatford1

M Hellawell

R Perriss

L Weedall2

V Murria

Total meetings held

Attended

Did not attend

n/a

1. Karen missed one Committee meeting due to illness.

2. Lynne joined the Board in May 2022 and she attended each meeting of the

Committee following appointment.

Allocation of time

Board composition,
skillset and experience: 22%

Corporate governance: 12%22+

Succession planning: 40%

Culture and diversity: 26%

Softcat plc Annual Report and Accounts 2022

The Board succession changes which will
take place in 2023 reflect the Committee’s
longer-term succession planning considerations.
These changes provide a firm foundation for an
effective composition of the Board over the next
few years.”

Karen Slatford
Chair of the Nomination Committee

Committee Chair’s introduction
I am pleased to present this year’s report from the Nomination
Committee (the ‘Committee’). This has been a busy and important
year for the Committee, as I note the appointment of Lynne Weedall
as a Non-Executive Director and also our significant announcement
in July in respect of Board succession changes for the Chair, CEO
and CFO. The Board succession changes which will take place in
2023 reflect the Committee’s longer-term succession planning
considerations, which were briefly mentioned in last year’s report.
These changes provide a firm foundation for effective composition
of the Board over the next few years. More details are provided
below, but I would like to register my thanks to the other Committee
members for their additional time, commitment, support and
contribution during the year.

In addition to considering the changes to the Board, the Committee
also continued its other work. We have firmly established in the
Committee’s annual calendar a formal update and discussion on
employee culture, which is in addition to the Committee’s annual
review of employee engagement. Diversity and inclusion also
continue to receive a high level of attention by the Committee
and I remain encouraged by the efforts and dedication across
the business to continue making Softcat a more diverse and
inclusive employer. As a Company, we acknowledge that further
improvements are needed on gender and ethnic diversity in some
roles and in management positions, and some progress is being
made in this regard. As explained previously, this is a longer-term
endeavour. More details on the above are in the report which
follows and in the Sustainability section of this Annual Report.

Below Board level, during the year the Committee reviewed and
discussed with the Executive Directors the succession plans for the
Senior Leadership Team (the most senior level of management
below the Board).

If any shareholders or proxy voting advisory agencies would like
to raise any matters with me in respect of the Committee, I can be
contacted via the Company Secretary at cosec@softcat.com.

40
+
26
+
12
+
M
Membership, meetings and operation
of the Committee
The members of the Committee are set out above and all the
members are Non-Executive Directors. The Committee is chaired
by an independent Director. The biographies of the members of
the Committee can be found on pages 68 and 69. The Chief
Executive Officer, Chief Financial Officer, Chief People Officer
and Head of Engagement, Diversity and Inclusion are invited to
attend meetings where appropriate. The Committee met seven
times during the year and meetings generally take place on the
same day as the Board meeting to maximise the efficiency of
interaction with the Board. If needed, the Committee Chair will
report to the Board, as a separate agenda item, on the actions
taken by the Committee. The Company Secretary acts as Secretary
to the Committee.

The key responsibilities of the Committee are to advise on
appointments to the Board, to review Board composition and
to review succession planning both for the Board and senior
management. The Committee also reviews and provides feedback
on the initiatives to improve diversity and inclusion. Carrying out
these responsibilities is critical to ensure the Board and wider
business have plans in place to have the best available talent to
drive the Company forward.

Any Director who intends to join the Board is required to
disclose all significant outside commitments prior to appointment.
On joining the Board, Non-Executive Directors receive a formal
appointment letter, which, amongst other things, identifies the time
commitment expected of them. Each Director continues to devote
sufficient time to meet their Board responsibilities.

The Committee considered and recommended that each Director
willing to stand for re-election be proposed for reappointment at
the 2021 AGM. The Board endorsed all the appointment and
reappointment recommendations of the Committee.

Key activities during the year

The calendar of activities below provides an overview of the
key topics for the Committee during the year.

May 2022
• Discussion on diversity and inclusion

October 2021
• Update on Board composition

• Recommendation to reappoint Directors at the 2021 AGM

• Approval of the 2021 Nomination Committee Report

December 2021
• Review of the results of the annual employee satisfaction

survey and planned actions

• Discussion on employee culture

• Discussion on diversity and inclusion

• Discussion on Board composition/Board succession planning

February 2022
• Discussion on Board composition/Board succession planning

• Discussion on appointment of a further Non-Executive Director

March 2022
• Discussion on Board composition/Board succession planning

• Non-Executive Director update, discussion and

candidate proposal

• Discussion on Board composition/Board succession planning

• Update and discussion following Company Chair’s

individual reviews with Board members

July 2022 (two meetings)
• Recommended proposals for Board composition/

succession planning

• Discussion of a transition plan for the new CEO in 2023

• Update on recruitment for a new CFO

• Review and discussion of succession plans below Board level

Regular or standing items at each Committee
meeting include:
• Approval of previous Committee meeting minutes and

review of follow-up on outstanding actions

• Governance updates for Committee discussion or approval

• Review of and updates to the Committee’s terms of reference

Annual Report and Accounts 2022 Softcat plc

Corporate governanceN O M I N A T I O N C O M M I T T E E R E P O R T C O N T I N U E D

E F F E C T I V E N E S S C O N T I N U E D

Board appointments
I am pleased with the progress made this year on the Board’s
composition and on its succession plans.

As mentioned in last year’s report from the Committee, the Board
had discussed the potential benefits of adding a further Non-
Executive Director, if that person would add further significant value
to the Board’s effectiveness, skillset and expertise and be a good
cultural fit. The Committee, on behalf of the Board, deliberated on
this further and concluded that the Board would benefit from the
additional role and a search commenced to select and appoint a
further Non-Executive Director. The Committee considered the
current composition, workload, expertise and skills of the Board,
the Board’s strategic priorities and the attributes best required to
complement the Board. The Committee arranged for a detailed
role description to be prepared and worked with an external
executive search firm, Russell Reynolds Associates (‘RRA’) to
identify suitable candidates. RRA also conducted the external
evaluation of the Board’s effectiveness this year (see pages 74 to
75) but apart from that RRA has no other business relationship with
the Company. As the Committee remains committed to the Board
having a diverse mix, we will usually only engage with search firms
which have signed up to the relevant Voluntary Code of Conduct
for Executive Search Firms on diversity and best practice. RRA
subscribes to both the Standard and the Enhanced Voluntary Code
of Conduct for Executive Search Firms. By using such firms the
Committee can maximise the ability to consider a diverse range of
suitable candidates.

RRA researched and identified potential candidates for the role
and following initial interviews a shortlist was presented and
discussed with the Committee. Further interviews were held with
final candidates. At the conclusion of the process, it was agreed
that Lynne Weedall was our preferred candidate because of her
insights from her executive career and significant experience
gained on the boards of other listed companies. Lynne was
appointed to the Board as a Non-Executive Director with effect from
3 May 2022. I am delighted that she stepped in to become Chair of
the Remuneration Committee.

As part of the appointment process, the Committee reviewed the
positions of both Lynne Weedall and Robyn Perriss, who are both
independent Non-Executive Directors of Dr. Martens plc. The
Committee noted that neither Lynne nor Robyn are involved in
executive duties at Dr. Martens and each have a similar obligation
to be independent for Dr. Martens as they do for Softcat.
Consequently, the Committee did not consider that their positions
as independent Non-executive Directors of Softcat are adversely
impacted by their roles on the board of Dr. Martens.

I believe that the composition works well and provides the right mix
of challenge and support to the business.

Succession planning

As mentioned in last year’s report, succession planning is very
important to the Committee and for some time particular attention
has been given to longer-term succession planning for the Chair,
CEO and CFO.

In our regular succession planning reviews, Graham Charlton
has been considered a very strong CEO candidate and during
the year he confirmed his interest in the role to the Committee.
During his seven years as CFO, Graham has developed a
deep understanding of the business and in what makes Softcat
successful, not least our culture, which he has championed since
joining. As part the Committee’s consideration of Graham, RRA
prepared a detailed leadership development report which
assessed whether he had the right attributes for the role of CEO.
The report recommended Graham for the role. The Committee
has also discussed with Graham his transition plan for moving to
the role of CEO and particular areas of focus on which he will
continue to build on when he assumes the role. The Committee
recommended Graham’s appointment to the Board as it believes
Graham is the right person to lead the business successfully and
through the next stage of its growth.

Martin Hellawell led Softcat in an executive capacity between
2006 and April 2018, when he stepped down as CEO to become
the Non-Executive Chair. The Nomination Committee has regularly
discussed longer-term succession planning for this role, given that
under the rules of the UK Corporate Governance Code his
nine-year term comes to an end in 2024. Graeme Watt, our
current CEO, had made the Board aware recently that he was
contemplating retirement as a full-time Executive and he had
expressed an interest in being considered as Martin’s successor.
The Nomination Committee considered this, along with potential
alternative options, and was unanimous that Graeme’s deep
knowledge of the business, Softcat’s culture and its markets made
him the ideal candidate to support the interests of all our
stakeholders. The Nomination Committee therefore recommended
to the Board that Graeme succeed Martin as Non-Executive
Chair. The Board endorsed the recommendation, acknowledging
that the appointment of the CEO into the role of the Chair is not in
line with the recommendations of the UK Corporate Governance
Code. More information about the Board’s compliance with the
UK Corporate Governance Code can be found on page 66.

A search for a CFO to succeed Graham Charlton is underway
which considers external as well as internal candidates.

Lynne was provided with an extensive, full and tailored induction
programme, prepared by the Company Secretary and overseen
by the Company Chair. This included meeting members of the
Senior Leadership Team, other senior managers in the business
and PwC, the Remuneration Committee’s external adviser. There
was also a comprehensive handover from me (as the outgoing
Remuneration Committee Chair) and a briefing from the Company
Secretary so that Lynne could quickly assume the responsibilities of
the Chair of the Remuneration Committee.

Following Lynne Weedall’s appointment and the changes which will
occur in 2023, the Board will have improved its overall succession
planning and created a more robust and diverse mix of tenure on
the Board. The Committee keeps an ongoing watch in respect of
the tenures of the Non-Executive Directors and is keeping in mind
that in 2024 we will reach the nine-year tenure in respect of Vin
Murria. The Committee will continue to review the likely retirement
dates and required skills on the Board as part of its longer-term
succession planning and Board composition refreshment.

The Board, particularly after taking into account the appointment
of Lynne Weedall, now has a stronger and more diverse range
of skills, experience, mix of tenure, personalities and backgrounds.

Softcat plc Annual Report and Accounts 2022

The Committee works with the Chief People Officer and the
CEO and reviews annually the plans which are in place for orderly
succession planning of our Senior Leadership Team (‘SLT’). During
the year there were a number of changes on the SLT and these
were discussed either with the Committee or with the Board.
We have a strong talent pipeline and our review also considers
opportunities to develop a more diverse pipeline in leadership roles.

Board member review process
Martin Hellawell as Company Chair is responsible for conducting
an annual review of the CEO and each Non-Executive Board
member. The CEO performs a similar process with the CFO. The
reviews gather additional feedback to support the good running
of the Board. The Board also conducted an externally facilitated
Board effectiveness review which resulted in a positive assessment

of the Board’s performance but equally some valuable pointers on
how to make further improvements. More information on this year’s
effectiveness review can be found in the Governance Report on
pages 74 to 75.

In my capacity as the Senior Independent Director, I led a meeting
of the Non-Executive Directors, without the Company Chair present,
to discuss the Company Chair’s performance. The Non-Executive
Directors confirmed that they continued to be happy with Martin’s
performance and remain fully supportive.

As a result of the above and following further consideration by
the Committee, we have recommended to the Board that each
Director be proposed for reappointment at the AGM to be held
in December 2022.

Diversity and inclusion
The Board and the Committee devote significant time to the issue of diversity and inclusion in the Company and management realises the
importance and benefits of creating a more diverse workforce at all levels in the Company. This continues to be a long-term endeavour
and we recognise it as such.

The Committee is supportive of and recognises the importance of diversity and inclusion both for the effective functioning of the Board
and more widely in the Company. The Board has a diverse range of experience by way of expertise and background. It recognises the
benefits that different viewpoints can contribute to better decision making and the recent appointment of Lynne Weedall and the future
appointment of a new CFO will make this stronger.

In February 2022, the annual report from the FTSE Women Leaders (which succeeded the Hampton-Alexander Review) was published.
The annual report provides new recommended aspirational targets for gender diversity in FTSE 350 companies by the end of 2025:

FTSE Women Leaders: targets for FTSE 350 companies by the
end of 2025

Current Softcat position

Boards of FTSE 350 companies to comprise at least 40% women.

Achieved. The Board of Softcat currently comprises 57% women.

FTSE 350 companies to have at least one woman in the chair or
senior independent director role on the board, and/or one woman
in the chief executive or finance director role in the company.

Leadership teams (as defined) of FTSE 350 companies to comprise
at least 40% women.

Achieved. The role of Senior Independent Director is currently held
by a woman.

Softcat is included in the annual report of FTSE Women Leaders
published in February 2022, at which time Softcat reported women
comprising 29.3% of leadership roles (as defined). We will continue
our efforts to improve diversity in leadership roles.

I am pleased that Softcat already meets two of the above three new targets and the Committee notes the new target on leadership teams
for FTSE 350 companies to achieve for 2025. As already noted, we recognise that more progress is needed in respect of the diversity
of our leadership team and this has been discussed with the Committee. The Board currently meets the recommendation set by the Parker
Review that boards should have at least one person of colour. Whilst the Board has reached some of the above targets, it is not the policy
of the Committee to set a quota in terms of the gender or ethnic diversity mix on the Board or its Committees. Our policy, which we have
implemented, is:

• the primary criterion for an appointment is that it is made on merit;

• the appointment achieves the best fit with the Board and its Committees; and

• to keep in mind the benefits of the Board and its Committees having a diverse range of skills, experience and professional backgrounds.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceN O M I N A T I O N C O M M I T T E E R E P O R T C O N T I N U E D

E F F E C T I V E N E S S C O N T I N U E D

Diversity disclosures pursuant to Listing Rule 9.8.6R
In April 2022, the UK Financial Conduct Authority (‘FCA’) published its final rules to increase the disclosure of diversity on listed company
boards and executive committees. This requires listed companies to disclose in a prescribed format information on the diversity of their
board and executive committee. The Listing Rules (to which Softcat is subject) have been amended to require disclosure of the prescribed
information and the new requirement applies to financial years beginning on or after 1 April 2022. The FCA has, however, asked listed
companies to report earlier on a voluntarily basis. The below information has been disclosed on a voluntary basis.

The Listing Rules require listed companies to state whether they have met the certain targets on board diversity. The information in the table
below is at 31 July 2022, which is the date selected as the reference date within the Company’s accounting period. The targets set out in
the Listing Rules are that:

• at least 40% of the individuals on its board of directors are women;

• at least one of the following senior positions on its board of directors is held by a woman:

– the chair; or

– the CEO; or

– the CFO; or

– the SID; and

• at least one individual on its board of directors is from a minority ethnic background.

As at the reference date, the Board of Softcat met all of the above targets.

Gender diversity reporting

Men

Women

Not specified/prefer not to say

Ethnic background diversity reporting

Number of
Board members

Percentage of
the Board

—

43%

57%

—

White British or other White (including minority White groups)

Mixed/multiple ethnic groups

Asian/Asian British

Black/African/Caribbean/Black British

Other ethnic group, including Arab

Number of
Board members

Percentage of
the Board

—

86%

—

14%

—

Number of
senior positions
on the Board
(CEO, CFO,
SID, Chair)

—

Number of
senior positions
on the Board
(CEO, CFO,
SID, Chair)

—

Number in
Executive
management

Percentage of
Executive
management

—

80%

20%

—

Number in
Executive
management

Percentage of
Executive
management

—

90%

—

10%

—

Note:
‘Executive management’ is defined above using the prescribed definition in the Listing Rules. This is defined as the most senior executive or
managerial body below the Board, including the Company Secretary. At Softcat, this is the Senior Leadership Team (‘SLT’), which has
day-to-day responsibility for the operation of the business, and the Company Secretary. The SLT includes both Executive Directors.

Between 31 July and 24 October 2022, being the date at which this report is approved, there have been no changes in the composition
of the Board. Each member of the Board or Executive management (as defined) has previously confirmed to the Human Resources team
their gender and ethnic background and the above data has been collated from those records.

Softcat plc Annual Report and Accounts 2022

Documents available for inspection
Non-Executive Directors are appointed for an initial three-year
term, extendable by a further two additional three-year terms.
The letters of appointment for Non-Executive Directors and the
service contracts of the Executive Directors are available to
shareholders for inspection at the Company’s registered office
during normal business hours. Letters of appointment and service
contracts will be available for inspection at the 2022 AGM.

The formal responsibilities of the Committee are set out in terms
of reference. During the year the Committee reviewed an update
to the terms of reference, which was subsequently approved by
the Board. The Committee’s terms of reference are available at
www.softcat.com/about-us/investor-centre/governance.

Karen Slatford
Chair of the Nomination Committee
24 October 2022

Inclusion
The Committee has also received briefings on the initiatives to
improve inclusion in the business and the Company employs a
dedicated manager to co-ordinate our diversity and inclusion
efforts. The briefings received by the Committee included not only
diversity regarding gender, but also on ethnicity, sexual orientation,
disability, social mobility and updates on various inclusion activities
such as supporting family wellbeing outside of work. More
information about diversity and inclusion in the business can
be found in the report on Social Value in this Annual Report
on pages 38 to 42.

Assessment of the independence of the
Non-Executive Directors
The Committee and the Board are satisfied that the external
commitments of the Company Chair and the other Non-Executive
Directors do not conflict with their duties and commitments as
Directors of the Company. Our Directors must:

• report to the Board any material changes to their commitments;

• notify the Company Secretary of actual or potential conflicts or a
change in circumstances relating to an existing authorisation; and

• complete an annual conflicts questionnaire.

Any conflicts identified are considered and, as appropriate,
authorised by the Board. Each year the Committee reviews
the independence of the Non-Executive Directors. All
Non-Executive Directors, excluding the Company Chair,
are currently considered independent.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceS U S T A I N A B I L I T Y C O M M I T T E E R E P O R T

CORPORATE RESPONSIBILITY

In March 2022, the Board delegated authority to
the Committee for the monitoring and oversight of
sustainability matters at Softcat. This is a vital function,
requiring specific dedication of time and effort at a
Board level, and is a further demonstration of the
Board’s commitment to sustainability.”

Vin Murria
Chair of the Sustainability Committee

Introduction
As Chair of the Sustainability Committee (the ‘Committee’), I am
pleased to present the Committee’s inaugural report, for the year
ended 31 July 2022. In March 2022, the Board delegated
authority to the Committee for the monitoring and oversight of
sustainability matters at Softcat. This is a vital function, requiring
specific dedication of time and effort at a Board level, and is a
further demonstration of the Board’s commitment to sustainability.
This report outlines the key responsibilities of the Committee
delegated to it by the Board, the work it has done over the 2022
financial year and the focus of the Committee going forward.

Membership, Committee Chair
and operation of the Committee
The Committee is made up of all of the Directors at Softcat. During
the year, our sustainability governance structure was developed to
better support the business and to clarify responsibilities. Graham
Charlton, the CFO, was originally appointed as Chair of the
Committee. However, following further review, the Committee
recommended in order to increase Board level oversight that a
Non-Executive Director should assume the responsibility. The
Board approved the Committee’s recommendation. As Designated
Non-Executive Director for Workforce Engagement, it is already
my role to monitor, communicate with and engage with one of our
key stakeholder groups, our employees. Our employees have an
important part to play in the sustainability strategy of Softcat, so the
Committee believed I should be appointed Chair as part of my
wider oversight of ESG matters. I am delighted to accept this role
and I would like to thank Graham for his part in establishing the
Committee and its main areas of focus.

Graham retains the Executive lead at Softcat for sustainability.
We have a dedicated internal resource for sustainability
at Softcat, including our Sustainability Lead. The Business
Development Director, who is a member of the Senior Leadership
Team, also has sustainability in his brief. Both the Sustainability
Lead and the Business Development Director attend the meetings
of the Committee.

Members

V Murria (Chair)

K Slatford

M Hellawell

R Perriss

G Watt

G Charlton

L Weedall

Attendance of the Sustainability Committee

Committee attendance 2022

Name

V Murria

M Hellawell

G Watt

G Charlton

K Slatford1

R Perriss

L Weedall2

Total meetings held

Attended

Did not attend

n/a

1. Karen was unable to attend due to illness.

2. Lynne joined the Board in May 2022, after the Committee meeting had

taken place.

Allocation of time

Setting climate-related strategy: 22%

Reviewing climate-related

performance against strategy: 17%22+

Climate-related governance,
compliance and regulation: 44%

Monitoring climate-related

disclosures: 17%

Softcat plc Annual Report and Accounts 2022

17
+
44
+
17
+
M
The Committee met once during the financial year, with its
inaugural meeting in March 2022. However, two meetings each
year (March and September) are held. Meeting frequency will
be reviewed to ensure sufficient oversight is maintained by the
Committee. Meetings are scheduled to generally take place on
the same day as the Board meeting to maximise the efficiency of
interaction with the Board. If needed, the Committee Chair will
report to the Board, as a separate agenda item, on the actions
taken by the Committee. The Company Secretary acts as Secretary
to the Committee, supported by the Company Secretarial Assistant.

The Committee’s key responsibilities
The key responsibilities of the Committee are:

• setting the sustainability strategy of Softcat;

• oversight and monitoring of the performance of the Company

against its sustainability-related goals and targets;

• monitoring the effectiveness of management’s processes for

identifying and assessing climate-related risks and opportunities;

• reviewing our formal public disclosures relating to sustainability; and

• oversight of other areas of corporate social responsibility,

as requested by the Board.

For more on the Committee’s responsibilities, the Committee’s
terms of reference are available on our website, at: www.softcat.
com/about-us/investor-centre/governance.

For further details on Softcat’s approach to sustainability, please
see pages 43 to 58 of this report and our website at www.softcat.
com/about-us/sustainability.

If any shareholders would like to raise any matters with me in
respect of the work of the Committee, I can be contacted via the
Company Secretary at cosec@softcat.com. I will also be happy
to answer any questions about the work of the Committee at the
forthcoming AGM.

Vin Murria
Chair of the Sustainability Committee
24 October 2022

Areas of focus in 2022 included:

Areas of focus in 2023:

The Committee decided that Softcat’s response to climate
change, and our strategy for reducing our emissions, should
remain its primary focus. This is reflected in the following
areas covered during 2022:

• establishing the primary areas of focus of the Committee
through a forward agenda and formal terms of reference;

• monitoring the Company’s progress against its climate-

related targets and goals, and the appropriateness of these;

• overseeing management’s progression on the Task Force

on Climate-related Financial Disclosures (‘TCFD’)
compliance and development of internal processes.
This included the creation of new climate-related risk
and opportunities registers, informed through a climate
scenario risk assessment, and consideration of the steps
needed to integrate climate-related risks into Softcat’s
day-to-day risk management framework;

• review of sustainability-related disclosures, including the

regulatory emissions disclosures;

• considering management’s plan to take advantage of
climate-related opportunities and integrate these into
Softcat’s strategy, such as through Softcat’s Enexo
platform (see page 55 for more details); and

• horizon scanning for future compliance regulations,

obligations and best practice trends.

We expect that the focus of the Committee will remain
on climate change related matters in 2023. However, this
will be kept under review and will be amended, where
necessary, to include other areas of corporate responsibility
to ensure the Committee retains adequate oversight of
matters which are important to Softcat and its stakeholders.
I anticipate in 2023 the Committee will focus on:

• progress against our key sustainability targets;

• further integration of Softcat’s sustainability strategy

into its overall strategy;

• oversight of the next stages for the development of our

Enexo platform;

• the progression of outputs from an ESG materiality

assessment performed in 2022;

• monitoring preparedness for full compliance with

TCFD; and

• reviewing Softcat’s level of readiness and approach
for forthcoming disclosure standards, such as the
International Sustainability Standards Board’s
disclosure standards.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceCorporate governance

R E M U N E R A T I O N C O M M I T T E E R E P O R T

LETTER FROM THE CHAIR OF THE
REMUNERATION COMMITTEE

The Committee concluded that the existing
Remuneration Policy was broadly fit for purpose,
operated well with sufficient flexibility for future growth
and was aligned to Softcat’s strategy… the changes
proposed to the Policy are relatively minor…”

Lynne Weedall
Chair of the Remuneration Committee

Dear shareholder
I am very pleased to present this report as Chair of Softcat’s
Remuneration Committee (the ‘Committee’). This is my first report
on remuneration since I joined the Board of Softcat in May 2022.
I would like to thank Karen Slatford, who stepped down as
Committee Chair, for chairing the Committee so effectively and for
her help whilst I transitioned into this role. I would like to thank the
other Committee members for their support and contributions this year.

Business performance
The Company continued to perform well during the year.
There was double-digit growth in gross profit and operating
profit. Operational performance was also excellent and we have
continued to invest for future growth. You will see our performance
and progress explained in more detail in the Strategic Report but
I would like to pick out some key achievements, which are a
continuing credit to the business and its leadership:

• Revenue growth:

• Gross profit growth:

37%

18%

• Operating profit growth: 14%

• Employee engagement: 90%

• Customer satisfaction:

94%

In addition to strong financial performance, good employee
engagement and customer satisfaction are vital to Softcat. This is
closely aligned to our strategy to acquire more customers and to
sell more to existing customers. It also encapsulates our corporate
purpose: “to help customers use technology to succeed, by putting
our employees first”. We can preserve our competitive edge by
having happy employees and satisfied customers and this is reflected
in our approach to remuneration for the Executive Directors.
Further details on our key performance indicators (‘KPIs’) and
the importance of each KPI can be found on pages 30 and 31.

Members

L Weedall (Chair)

K Slatford

R Perriss

V Murria

Attendance of the Remuneration Committee

Committee attendance 2022

Name

L Weedall1

K Slatford

V Murria

R Perriss

Total meetings held

Attended

Did not attend

n/a

1. Lynne joined the Board in May 2022 and attended all Committee meetings

during the financial year after her appointment.

Allocation of time

Workforce remuneration and
conditions: 33%

Corporate governance: 25%33+

Executive remuneration: 21%

Remuneration market practice and
developments: 21%

Softcat plc Annual Report and Accounts 2022

21
+
21
+
25
+
M
Proposed Remuneration Policy (the ‘Policy’)
A revised proposed Policy will be put to shareholders for binding
approval at the Annual General Meeting (‘AGM’) to be held in
December 2022. Our current Policy was approved by shareholders
at the 2019 AGM with a vote of 98.6%, which is a high level of
support. Our current Policy had already incorporated the
recommendations and good points of practice set out in the 2018
UK Corporate Governance Code (the ‘Code’). The Committee
wishes to ensure that any changes do not move the Policy
significantly away from one which has gained such widespread
support from shareholders. During the year, the Committee
reviewed the current Policy and considered in advance the
approach it would adopt. The key components were:

• a further review of how well the Policy was aligned to the UK
Corporate Governance Code and any recent changes in
good remuneration practice;

• the ongoing growth of the Company, particularly as Softcat
matures from when it listed on the London Stock Exchange
in 2015;

• how well the Policy aligns with Company strategy;

• whether the Policy continues to effectively attract, retain and

motivate executive talent; and

• the high level of shareholder support for the current Policy.

The above parameters allowed the Committee to ensure that any
changes were considered holistically and a comprehensive review
was undertaken. Following review, the Committee concluded that
the existing Policy was broadly fit for purpose, operated well with
sufficient flexibility for future growth and was aligned to Softcat’s
strategy. The Committee also concluded that the Policy was
generally aligned well to the UK Corporate Governance Code
and to the expectations of most investors. That being the case, the
changes proposed to the Policy are relatively minor and designed
to further increase the alignment of the Policy to the UK Corporate
Governance Code and to reflect current market practice. Key
changes proposed are:

• we will increase the post-cessation shareholding requirement to
100% of the in-role requirement for two years post-cessation.
The current Policy provides for a post-cessation holding
requirement of 100% in year one and then 50% in year two;

• we will make minor amendments to the Policy (and any

associated Plan Rules in respect of the LTIP and the annual
bonus plan) to extend the malus and clawback event triggers
to fully align it to recent guidance issued by the UK Financial
Reporting Council (‘FRC’). Malus and clawback triggers will
be extended to include events relating to corporate failure;

• in respect of awards under our Long Term Incentive Plan (‘LTIP’),
minor amendments will be made to further clarify the minimum
weighting of financial metrics and applicable measures; and

• the Company has recently introduced a salary sacrifice

programme for employees (which would result in a benefit in
kind arising) which allows the leasing of electric vehicles for
employees’ personal and business use, commuting, etc. Given
this aligns well with our objectives to reduce environmental
impact, the Committee plans to make this programme available
for all Directors, including Non-Executive Directors. The Policy
will be amended accordingly.

The Committee believes that the proposed minor amendments to
the Policy ensures that our remuneration arrangements remain fit for
purpose and maintains strong alignment of shareholders and our
management team as they strive to continue driving the business
forward. We have consulted with our largest shareholders and
with certain proxy advisory agencies and obtained significant
shareholder support in respect of our proposed Remuneration
Policy. I trust that we will have your support on the shareholder
resolution at our 2022 AGM.

Remuneration outcomes during the year
Our Board succession plans for 2023 are covered elsewhere in
this Annual Report. From a remuneration perspective, both our
current and proposed Remuneration Policies provide an effective
framework for the Board changes and for orderly succession
plans generally.

During the year, the Board/relevant Board Committee regularly
reviewed Softcat’s financial and operational performance.
We confirmed in trading updates during the year that:

• the Company performed well during the year and has once
again delivered double-digit year-on-year growth in gross
invoiced income, gross profit and operating profit. Profit growth
was ahead of expectations;

• investment in our growth strategy has continued, including

strong increases in headcount; and

• employees had responded well following the removal of

certain COVID-19 restrictions. The Company had reverted to
a hybrid working policy and our employees were enjoying
being back together in the office. Following an employee
engagement survey, our employee net promoter score
remained at the consistently high levels. Softcat was ranked
third for wellbeing by the Great Place to Work Institute.

Annual Report and Accounts 2022 Softcat plc

Corporate governanceR E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D

L E T T E R F R O M T H E C H A I R O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

Main activities during FY2022

October 2021
• Review of Remuneration Policy
• Review and approval of the 2021 Remuneration Report
• Update on gender pay gap and ethnic pay gap

performance and reporting

• Consideration and approval of grants of LTIPs to Executive
Directors for FY2022 and other share-based awards to
senior managers below Board level

• Review and determination of vesting outcomes for LTIPs

granted in 2018

• Review of impact of share-based awards on

shareholder dilution

• Review and approval of the annual bonuses awarded

to Executive Directors and Senior Leadership Team (‘SLT’)
members for FY2021

• Consideration of the annual bonus arrangements for
the Executive Directors and SLT members for FY2022
• Review of achievement against share ownership targets

for the Executive Directors

May 2022
• Review and discussion on remuneration benchmarking

for the SLT

• Review of fees for Non-Executive Directors and the Chair

and associated market practice

• Update on workforce pay and conditions and discussion

of Company-wide pay review

• Interim update report on performance of annual bonus plan

and outstanding LTIPs

• Discussion of executive remuneration and approval of

changes for FY2022

• Review of Remuneration Policy to be proposed at the AGM

in 2022

July 2022 (two meetings)
• Review of remuneration aspects of proposed changes
on the Board (retirement and appointment of the CEO
and of the Chair)

• Assessment against customer satisfaction and employee

engagement actions which form part of the FY2022 annual
bonus plan for the CEO and CFO

• Update on workforce remuneration, including salary reviews

and bonuses below Board level

• Consideration of proposed approach and timing in respect

of annual bonus and LTIP awards for FY2022

• Update on Remuneration Policy to be proposed at the AGM

in 2022

• Review of remuneration trends and remuneration-related
corporate governance developments for listed companies

• Discussion on all-employee share schemes

Regular or standing items at each Committee
meeting include:
• Approval of previous Committee meeting minutes and

review of follow-up on outstanding actions

• Governance updates for Committee discussion or approval
• Review of and updates to the Committee’s terms of reference
• Review of the outcomes of shareholder voting on the

Remuneration Report

The Company Secretary also prepares a twelve-month rolling
plan for the Committee so that matters can be planned and
considered over the longer term.

Remuneration outcomes during the year continued
The Board/relevant Board Committee also regularly reviewed key
areas of employee/customer engagement, including:

the maximum target set by the Committee, leading to 100%
of the maximum annual bonus being earned by the Executive
Directors; and

• the outcomes of our annual customer experience survey and
our employee engagement survey, together with actions to
further maintain engagement;

• a quarterly survey from managers in respect of each member of
the SLT and the key operational functions in the business; and

• workforce engagement sessions.

The strong financial performance and maintenance of excellent
relations with employees and customers are reflected in a strong
achievement of many of the Company’s KPIs (outlined on pages
30 and 31) and resulted in the following for the annual bonus plan
for FY2022:

• financial metrics (operating profit) account for 80% of the

annual bonus for FY2022. Operating profit achieved exceeded

• non-financial metrics account for 20% of the annual bonus for
FY2022 and the focus for FY2022 was on customer and
employee satisfaction. The Committee assessed actions taken
by management during the year and on the consistently high
overall satisfaction/engagement scores. Following review, the
Committee concluded that 80% of the maximum annual bonus
had been achieved by the Executive Directors.

Good performance has been sustained and during the financial
year the LTIP awards granted in November 2018 to Graham
Charlton and to Graeme Watt vested. The Committee assessed the
vesting outcomes for the LTIPs and concluded that maximum metrics
of total shareholder return (‘TSR’) and earnings per share (‘EPS’)
had been attained. The LTIP awards therefore vested in full.

100

Softcat plc Annual Report and Accounts 2022

During the year the Committee concluded that all long-term
incentive and annual bonus outcomes were appropriate and no
discretion was exercised to amend any remuneration outcomes for
the Executive Directors. This conclusion was reached after taking
into account relevant matters, such as the performance of the
business and the alignment between the Executive Directors and
the wider workforce in respect of annual variable pay for the year.
In particular the Committee carefully reviewed the outcomes in light
of share price performance in the year, noting the fall from an
historic high point earlier in the financial year. It is the Committee’s
view that this reduction in share price is primarily due to the
changing valuation of technology stocks in the market and not due
to any management action. The Committee firmly believes that the
financial and operational performance delivered in the year, as
well as the overall investor experience over a number of years,
represent exceptional management performance and therefore
that the proposed incentive outcomes are appropriate.

In respect of LTIPs, the Committee approved a grant in respect of
FY2023 to the Executive Directors (see page 107). The Committee
considered the fall in the Company’s share price as noted above
and for the same reasons concluded that it would not be
appropriate to reduce the usual award of 150% of salary, but it will
review at vest whether there have been any windfall gains. The
LTIPs granted in 2019 are due to vest in late 2022. Based on
current performance, I would expect the LTIPs, when they vest, to
exceed the threshold performance conditions (EPS and TSR), which
were set and announced at the time of grant. In respect of all LTIPs,
the Committee will as usual determine the extent to which the
performance conditions have been met, along with any other
relevant matter, before formally concluding on the vesting outcome.

Changes in executive remuneration for FY2023
As can be seen from the activities during 2022, the Committee
reviewed executive remuneration and agreed the implementation
of the changes below, all of which are within our existing and
proposed Remuneration Policies. Further details are provided in
the Annual Report on Remuneration.

Each year management consider whether to award rises in basic
pay across the workforce, in order to maintain the competitiveness
of our rewards. We reviewed market practice and discussed with
management about the pay and conditions across the Company.
The Committee agreed a rise of 5% for each of the CEO and CFO,
which was in line with the standard pay rises but lower than rises
for many employees in Sales and other roles.

In July 2022, Softcat announced changes to the Board which will
take place in August 2023. This included the retirement of Graeme
Watt as CEO, at which time he will succeed Martin Hellawell as
Non-Executive Chair. The Remuneration Committee confirmed that
Graeme will be treated as a good leaver and further details on the
specific treatment of his remuneration in respect of his forthcoming
retirement as CEO are contained on page 108 of the Annual
Report on Remuneration. In addition we announced that Graham
Charlton will be promoted to CEO, effective 1 August 2023.
The Remuneration Committee will determine Graham’s salary
on appointment at that time.

Wider workforce context
Having a dedicated and passionate team and providing excellent
customer service is core to what we do at Softcat and this helps to
drive our exceptional performance. We believe it is right to
recognise and reward our employees through fair remuneration.

We also believe it is important to understand the views of
employees over a wide range of issues, including remuneration.
We continued to receive regular updates on remuneration across
the workforce to ensure the Committee’s deliberations were well
informed. This included actions taken by management to ensure
our rewards remained competitive and additional considerations
by management on the challenges facing many people on the cost
of living crisis. The Committee was pleased to hear of the steps
taken by management to address both points. Please see page 35
for a case study on how management approached pay reviews
for employees this year.

We have taken the opportunity to engage directly with employees
over a number of matters, including on our approach to executive
remuneration. Please see page 111 for more details.

What we have done during the year
The calendar activities (see page 100) summarise the areas of
focus and actions for the Committee during the 2022 financial
year, all of which were within the framework of the current
Remuneration Policy.

In conclusion
The Committee has been focused on ensuring that our remuneration
arrangements remain fit for purpose for the future and aimed at
ensuring alignment of both shareholders and our management
team as they strive to continue driving the business forward.
We have consulted with our largest shareholders and with certain
proxy advisory agencies and obtained significant shareholder
support in respect of the key elements of our proposed
Remuneration Policy.

The Annual Report on Remuneration (pages 105 to 112) together
with this letter will be subject to an advisory shareholder vote at the
forthcoming AGM on13 December 2022. The revised Remuneration
Policy (pages 113 to 127) will be subject to a binding vote at the
AGM. I trust that we will have your support on the resolutions at
our AGM. If shareholders do wish to discuss any issues about
executive remuneration, I can be contacted via the Company
Secretary at cosec@softcat.com.

Lynne Weedall
Chair of the Remuneration Committee
24 October 2022

Notes:
This report has been prepared in accordance with Schedule 8 to the Large and
Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as
amended and the provisions of the current Corporate Governance Code and the Listing
Rules. The report consists of three sections:

• the Annual Statement by the Remuneration Committee Chair;
• the Annual Report on Remuneration, incorporating:

– an ‘at a glance’ section summarising our Remuneration Policy;
– details of payments made to the Directors and details of the link between
Company performance and remuneration for the 2022 financial year; and

• the Directors’ Remuneration Policy.

The Chair’s Annual Statement and the Annual Report on Remuneration will be subject to
an advisory shareholder vote at the AGM to be held on 13 December 2022 (‘AGM’).
The Directors’ Remuneration Policy will be subject to a binding shareholder vote at the AGM.
If approved, the Policy will formally supersede the previous Policy with immediate effect.

Annual Report and Accounts 2022 Softcat plc

101

Corporate governanceR E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D

PART A – AT A GLANCE

Introduction
In this section, we set out a summary of our performance and remuneration outcomes for the 2022 financial year
and a summary of how we intend to implement our proposed Remuneration Policy for the 2023 financial year.
As stated in the letter from the Chair of the Remuneration Committee, we are proposing to make minimal changes
to our current Remuneration Policy. Our proposed Remuneration Policy is included in full in Part C (pages 113 to
127).

How we performed during the 2022 financial year (‘FY2022’) (audited)
In respect of FY2022, the bonus awards payable to Executive Directors were agreed by the Committee having carefully reviewed:

• Financial performance (80% weighting): the Committee considered the Company’s year-end results and any relevant associated

factors in respect of underlying performance.

• Non-financial performance (20% weighting): the Committee considered progress against key actions in respect of employee

engagement and customer satisfaction and noted the ongoing strong overall engagement/satisfaction scores.

The performance measures and targets under the Annual and Deferred Bonus Plan for FY2022 and the extent to which they were satisfied
are set out below:

Performance condition

Weighting

Threshold

Target

Maximum

Actual

Actual as
a % of
maximum
opportunity

Annual bonus payout

Graeme
Watt

Graham
Charlton

Operating profit

80%

£108.1m

£120.1m

£132.1m

£136.1m

100%

£630,175

£420,117

Employee engagement and
customer satisfaction

20%

Overall outcome

See below

80%

£126,035

£84,023

96%

£756,210

£504,140

Employee engagement and customer satisfaction

Priorities

Achievements and outcome

Employee engagement
Maintain focus on employee engagement

Improve feedback relating to flexible working
and pay

102

Softcat plc Annual Report and Accounts 2022

• Management sought regular employee feedback with1x annual engagement survey,
4x quarterly management surveys and 2x employee pulse surveys conducted during
FY2022. The results of each survey were discussed with the Board/the Nomination
Committee, together with management’s plans which addressed all areas of concern.

• A 13-point action plan was created and followed up from the annual survey results.

• Overall employee engagement achieved remained high at 90%.

• Our employee net promoter score achieved is +52 which is excellent and above

market norms.

• Excellent external rankings for workplace environment: 8th place in the Great Place to

Work/Best Workplaces – Super Large category; 4th place in the UK’s Best Workplaces
for Women 2022 – Super Large category; Glassdoor Excellence in Employee
Wellbeing Award; CRN’s Best Company to Work for – £101m+ category.

• Management focused on the approach to hybrid working, particularly on employees

maintaining strong connections with their colleagues and preserving our unique culture,
which is a vital differentiator for our success. Target of 80% satisfaction rate was
overachieved with a result of 85%.

• Following a detailed review of pay in the workforce, pay rises considerably higher than
in previous years were announced by the CEO and CFO for many roles. This received
favourable feedback from employees. Employee attrition levels are being monitored
and have reduced.

Priorities

Achievements and outcome

Customer satisfaction
Continued attention on customer excellence

Prioritise improvements in customer experience

• Management implemented its most extensive ever annual customer experience survey

(1,870 respondents in FY2022, compared to 1,248 in FY2021) to engage with more of
our customers than ever before.

• Strong and consistent levels of customer satisfaction achieved at 94%.

• Our customer net promoter score achieved is +55 which is excellent and above

market norms.

• A detailed improvement action plan arising from the FY2021 survey was discussed

with the Board and then implemented. An action plan arising from the FY2022 survey
is underway.

• An internal training programme (the Voice of the Customer) was developed and rolled
out to improve customer insights into their wants and needs. This enhances a key part of
our strategy to sell more to existing customers.

• Deep dives undertaken to further understand customer feedback and expectations
on eCat (our portal for customers to place orders, which accounts for a significant
number of customer transactions). Tools were rolled out for customer feedback to be
received in real time, to more promptly respond to customer needs and make faster
improvements to the portal. Management gave a demonstration of eCat to the Board,
which showcased improvements made to enhance the user experience.

• Key areas of improvement in our customer Managed Services offering were identified
and implemented. This has already resulted in improvements in associated customer
satisfaction scores.

• Refresher training successfully rolled out and undertaken by over 99% of employees
on use of the corporate phone system, to improve the customer experience when
they call Softcat.

• Revised customer excellence training programme rolled out to ensure we maintain

a high level of customer experience at each stage of the customer journey.

No discretion was exercised by the Committee in relation to the outcome of the annual bonus awards. In respect of the bonus payout up
to 100% of salary, two-thirds will be paid in cash and one-third will be paid by way of deferred shares. In respect of the bonus payout
above 100% of salary, all of this shall be by way of deferred shares.

Long-term incentives awarded in FY2022 (audited)
On 30 November 2021 the following annual awards of nil-cost options under the Company’s Long Term Incentive Plan (‘LTIP’) were
made to the CEO and CFO:

Executive Director

Graeme Watt
Graham Charlton

LTIP award
(% of salary)

LTIP award
(shares)

Award date

Share price 1

150
150

42,282
28,188

30/11/21
30/11/21

£18.63
£18.63

Note:
1. The share price used to determine the award was calculated by reference to the prevailing market price of an ordinary share on the business day prior to the award.

50% of the award will be subject to the Company’s relative TSR performance against the FTSE 250 (excluding real estate and investment
trusts) over a three-year performance period and the remaining 50% will be subject to adjusted EPS targets at the end of the period. Further
details are on page 106.

Annual Report and Accounts 2022 Softcat plc

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P A R T A – A T A G L A N C E C O N T I N U E D

Single figure remuneration for our Executive Directors
The table below sets out the single total figure of remuneration and breakdown for each Executive Director in respect of FY2022.

Graeme Watt (CEO)3
Graham Charlton (CFO)4

Salary

£525,146
£350,097

Taxable
benefit

£4,604
£4,604

Pension

Total
fixed

Bonus 1

LTIP 2

Total
variable

Total

£26,257 £556,007
£23,236 £377,937

£756,210 £1,554,917
£2,867,134
£504,140 £1,036,592 £1,540,732 £1,918,669

£2,311,917

Notes:
1. In respect of performance up 100% of salary, two-thirds of the annual bonus earned will be paid in cash and one-third will be deferred into shares (by way of nil-cost options).

In respect of performance above 100% of salary, all of the annual bonus earned will be deferred into shares (by way of nil-cost options).

2. LTIP awards made on 21 November 2018 to Graham Charlton and to Graeme Watt vested during FY2022. The award was calculated by reference to a share price of £6.00, which
was the prevailing market price of an ordinary share on the business day preceding the grant. Details of the performance condition (relative TSR and EPS targets) were disclosed in an
announcement to the London Stock Exchange at the time of grant.

3. As a result of full achievement of the performance criteria, nil-cost options over 75,000 shares vested and were subsequently exercised by Graeme during FY2022. The share price

at the date of vesting (22 November 2021, being the next business day following the third anniversary of the grant) was £19.22 and the LTIP value shown above reflects this. The total
value shown above comprises £1,441,500 (the value of the award at vesting) plus a dividend equivalent of £113,417. The value of the LTIP that is attributable to share price
appreciation between grant and vest is £991,500.

4. As a result of full achievement of the performance criteria, nil-cost options over 50,000 shares vested and were subsequently exercised by Graham during FY2022. The share price

at the date of vesting (22 November 2021, being the next business day following the third anniversary of the grant) was £19.22 and the LTIP value shown above reflects this. The total
value shown above comprises £961,000 (the value of the award at vesting) plus a dividend equivalent of £75,592. The value of the LTIP that is attributable to share price appreciation
between grant and vest is £661,000.

Summary of implementation of Policy for 2022/23
A full statement of implementation can be found on page 112. In summary only limited changes are being proposed.

There have been no changes to incentive quantum for either Executive Director, with minor changes to measures:

• For the Annual Bonus, the measures remain 80% based on Operating Profit and 20% based on ESG. The assessment of ESG for

2022/23 will incorporate sustainability in addition to employee and customer objectives.

• For the LTIP, metrics in respect of EPS and TSR will be retained. Following review by the Committee, the weighting between TSR and
EPS in respect of the award to Executive Directors in FY2023 will be slightly changed to 60% EPS and 40% TSR (FY2022 grant 50%
EPS and 50% TSR). The Committee believes this change will further encourage the Executive Directors to focus on the achievement of
superior earnings over the longer term. The EPS targets in respect of the FY2023 grant take into account the announcement by the
Government in October 2022 which confirmed that there will be an increase in corporation tax to 25% from April 2023. The
Committee will consider using its discretion to adjust the EPS targets if there is a further change in the rate of corporation tax.

During the year, the Committee was briefed on the pay reviews and on proposed average increases for the general workforce. In respect
of the Executive Directors, the Committee agreed an increase of 5% in the basic pay for the Executive Directors with effect from 1 August
2022. This level reflects a standard pay rise for employees, but is below the level of pay rise received for much of the workforce.

In respect of the Company’s Chair, the Committee conducted a market review which concluded that the Chair’s fee was materially below
the lower quartile for the FTSE 250. Given the evolution and growth of Softcat as well as the high level of contribution and effectiveness of
the Chair, the Committee approved an increase in the Chair’s fee to £200,000 with effect from 1 August 2022. The Committee noted that
this places the Chair’s fee slightly above the FTSE 250 lower quartile benchmark but still considerably below the median benchmark,
despite Softcat being one of the largest companies within the FTSE 250.

The Board (excluding the Non-Executive Directors) is responsible for determining the fees payable to the Non-Executive Directors (‘NED’).
Effective 1 August 2022 fee increases were approved in order to better reflect the time commitment and market rate for these roles.

Further details are provided on page 112.

104

Softcat plc Annual Report and Accounts 2022

PART B – ANNUAL REPORT
ON REMUNERATION

Single total figure of remuneration (audited)
Executive Directors (audited)
The table below sets out the single total figure of remuneration and breakdown for each Executive Director in respect of FY2022
and FY2021.

Salary1

Taxable
benefits1,4

Pension1,2

Total fixed

Bonus3,5

LTIP3

Total variable

Total

2022
£’000

2021
£’000

2022
£’000

2021
£’000

2022
£’000

2021
£’000

2022
£’000

2021
£’000

2022
£’000

2021
£’000

2022
£’000

2021
£’000

2022
£’000

2021
£’000

2022
£’000

2021
£’000

Graeme Watt (CEO)
525.1 477.4

4.6

Graham Charlton (CFO)
350.1 318.3

4.6

4.1

26.3 23.9 556.0 505.4 756.7 716.1 1,554.9 1,366.6

2,311.6 2,082.7 2,867.1 2,588.1

4.1

23.2 15.9 377.9 338.3 504.1 477.4 1,036.6

923.2 1,540.7 1,400.6

1,918.6 1,738.9

Notes:
1. Fixed pay consists of salary, taxable benefits and pensions as set out above.

2. Graham Charlton receives 5% in pension contribution/cash allowance in line with employees; during FY2022 an overpayment exceeded this value against his FY2022 salary by

£5,731. For FY2023 his pension contribution/cash allowance will be adjusted to correct this and ensure that over FY2022 and FY2023 this meets 5% of his salary during those periods.

3. Variable pay consists of bonus and LTIP as set out above. Further details on the LTIPs which vested and were exercised by Graham and by Graeme during the year are provided in the

section ‘Single figure remuneration for our Executive Directors’ above.

4. See section below setting out details of the benefits provided.

5. Details of the bonus targets, their level of satisfaction and the resulting bonus earned in FY2022 are set out on page 102 to 103.

Non-Executive Directors (audited)
The table below sets out the single total figure of remuneration and breakdown for each Non-Executive Director.

Non-Executive Director

2021 fees

2022 fees

Martin Hellawell1

Karen Slatford2

Vin Murria3

Lynne Weedall4

Robyn Perriss

£157,944

£162,903

£71,301

£78,819

Senior Independent Director and Chair of the Nomination Committee

£68,525

£63,759

Independent Non-Executive Director, Designated Director for
Workforce Engagement and Chair of the Sustainability Committee

—

£15,698 Independent Non-Executive Director and Chair of the Remuneration Committee

£61,902

£63,759

Independent Non-Executive Director and Chair of the Audit Committee

Roles

Non-Executive Chair

Notes:
1. As previously reported, the Remuneration Committee exercised its discretion to allow Martin to continue to receive his health benefits as Chair. The cost of providing this cover during

FY2022 and other P11D benefits was £3,768 (2021: £3,444) and is included in the figure for Martin’s fees above.

2. In respect of 2021, the fees for Karen Slatford are pro-rated with effect from the respective date of appointment as Chair of the Nomination Committee. In respect of 2022 the fees for

Karen are pro-rated with effect from the respective date she stepped down as Chair of the Remuneration Committee.

3. In respect of 2021, the fees for Vin Murria are pro-rated with effect from the respective date she stepped down as Chair of the Nomination Committee.

4. Lynne joined the Board in May 2022.

Taxable benefits
Benefits in the year for the Executive Directors comprised health benefits such as private health insurance, health cash plan, critical illness,
income protection, dental and life cover. Figures are reported where appropriate.

Annual Report and Accounts 2022 Softcat plc

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P A R T B – A N N U A L R E P O R T O N R E M U N E R A T I O N C O N T I N U E D

2022 annual bonus outcomes
In respect of 2022, the bonus awards payable to Executive Directors were agreed by the Committee, having carefully reviewed:

• Financial performance (80% weighting): the Committee considered the Company’s year-end results and any relevant associated

factors in respect of underlying performance.

• Non-financial performance (20% weighting): the Committee considered progress against key actions in respect of employee

engagement and customer satisfaction and noted the ongoing strong overall engagement/satisfaction scores.

The annual bonus structure operating for 2023 is explained on pages 104 and 112.

Details of the targets used to determine bonuses in respect of FY2022 and the extent to which they were satisfied are shown on pages
102 to 103. These figures are included in the single figure table.

Long-term incentives awarded and vested
Awarded in FY2022 (audited)
On 30 November 2021 the following annual awards of nil-cost options under the Company’s Long Term Incentive Plan (‘LTIP’) were
made to the CEO and CFO:

Executive Director

Graeme Watt
Graham Charlton

LTIP award
(% of salary)

LTIP award
(shares)

Award date

Share price 1

150
150

42,282
28,188

30/11/21
30/11/21

£18.63
£18.63

Note:
1. The share price used to determine the award was calculated by reference to the prevailing market price of an ordinary share on the business day prior to the award.

50% of the award is subject to the Company’s relative TSR performance against the FTSE 250 (excluding real estate and investment trusts)
over a three-year performance period to the end of FY24 and the remaining 50% subject to adjusted EPS targets at the end of the period.
These conditions are set out below:

Measure

Adjusted EPS

Weighting

Details

50%

• Nil vesting of this element for adjusted EPS at end of performance

period of less than 49.5p

• 20% vesting (threshold) for achieving 49.5p

• 67% vesting for achieving 53.8p

• Full vesting for achieving 59.4p or above

Relative TSR – assessed against the constituents of
the FTSE 250 (excluding real estate and equity
investment trusts)

• Straight-line vesting between 20% and 67% and between 67% and

full vesting

50%

• Nil vesting for below median performance against the comparators

• 30% vesting (threshold) for median performance

• Full vesting for upper quartile performance

• Straight-line vesting between threshold and full vesting

The EPS targets were set following the end of the 2021 financial year based on an assessment of the business and were included in the
2021 Annual Report on Remuneration. The adjusted basic earnings per share for the purposes of the LTIP performance measure is
calculated as basic earnings per share in accordance with IAS 33, adjusted for exceptional items as determined by the Committee.

106

Softcat plc Annual Report and Accounts 2022

Vested in FY2022 (audited)
Awards under the Company’s LTIP granted in November 2018 to Graham Charlton and to Graeme Watt vested and were exercised by
Graham and Graeme in FY2022. Options over 50,000 shares were granted to Graham and options over 75,000 shares were granted
to Graeme. Vesting of the awards was subject to the following performance conditions (which were disclosed at the time of grant):

Measure

Adjusted EPS

Weighting

Details

50%

• No vesting of this element for adjusted EPS at end of performance

period of below 29.3p

• 20% vesting (threshold) for achieving 29.3p

• Full vesting for achieving 35.7p or above

• Straight-line vesting between threshold and full vesting

Relative TSR – assessed against the constituents
of the FTSE 250 (excluding real estate and
equity investment trusts)

50%

• No vesting for below median performance against the comparators

• 30% vesting (threshold) for median performance

• Full vesting for upper quartile performance

• Straight-line vesting between threshold and full vesting

EPS for FY2021 was 48.4p per share and upper quartile performance was achieved in respect of the TSR. Following formal review by the
Committee, the Committee confirmed that full vesting had been achieved in respect of both EPS and TSR. Further details on the LTIPs which
vested are provided in the tables in respect of single figure remuneration.

To be awarded in FY2023
Vesting of the awards will be subject to the following performance conditions:

Measure

Adjusted EPS

Weighting

Details

60%

• No vesting of this element for adjusted EPS at end of performance

period of below 55.8p

• 20% vesting of this element for adjusted EPS at end of performance

period of 55.8p

• 67% vesting of this element for adjusted EPS at end of performance

period of 59.6p

• Full vesting for 67.0p

• Straight-line vesting between 20% and 67% and between 67%

and full vesting

40%

• No vesting for below median performance against the comparators

• 30% vesting (threshold) for median performance

• Full vesting for upper quartile performance

• Straight-line vesting between threshold and full vesting

Relative TSR – assessed against the constituents of
the FTSE 250 (excluding real estate and equity
investment trusts)

Pension entitlements (audited)
The Company operates a defined contribution pension scheme which the Executive Directors can participate in, or they can take a cash
supplement in lieu of pension.

In FY2022, both Graham Charlton and Graeme Watt were entitled to 5% of salary either as an employer pension contribution into the
defined contribution scheme or as a pension cash allowance. This is in line with employer pension contributions available for the general
workforce.

None of the Directors receive an entitlement under a defined benefit plan.

Share Incentive Plan (‘SIP’)
There were no free shares awarded in FY2022 (FY2021: nil). Free shares were awarded under the SIP on 11 December 2015, and became
free of any restrictions on the fifth anniversary following the award. Graham was awarded 301 free shares in 2015, which he retained.

The Executive Directors have an entitlement to purchase partnership shares under the SIP. Graham Charlton and Graeme Watt purchased
121 and 124 partnership shares respectively during the year. The total SIP holdings are provided on page 108 as part of the Directors’
share interests table.

Annual Report and Accounts 2022 Softcat plc

107

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P A R T B – A N N U A L R E P O R T O N R E M U N E R A T I O N C O N T I N U E D

Payments to past Directors/payments for loss of office (audited)
There were no payments for loss of office made to Directors in the year.

In July 2022, Softcat announced changes to the Board which will take place in August 2023. This included the retirement of Graeme Watt
as CEO, at which time he will succeed Martin Hellawell as the Non-Executive Chair. The Committee has confirmed that Graeme will be
treated as a good leaver under the terms of the Remuneration Policy and associated plan rules. All remuneration terms and payments are
in line with both the current and the proposed Remuneration Policy. Below are the key elements of Graeme’s remuneration arrangements
in respect of his retirement as CEO:

• Loss of office: on stepping down as CEO, Graeme will receive no termination payments from the Company.

• Base pay: this will be paid until the date of retirement. Graeme’s service agreement provides for twelve months’ notice, which will be

deemed as served.

• Pension contributions or allowance: this will be paid until the date of retirement.

• Existing LTIPs: these will pro-rated from the date of grant to the date of retirement. They will vest on the original vesting dates and be

subject to applicable performance conditions.

• Grant of LTIPs expected in November 2022: Graeme will be eligible to participate in this grant. The LTIP will be pro-rated as per the above.

• Deferred bonus shares: these will vest in full on their original respective vesting dates. Deferred awards are not subject to performance conditions.

• Annual bonus plan: full participation in the FY2022 and FY2023 annual bonus plans.

• Benefits: the Committee has exercised its discretion and permitted Graeme to retain whilst he is Chair the following benefits currently being

provided to him: life assurance, private medical insurance, health cash plan, dental plan, income protection and critical illness cover.

Statement of Directors’ shareholding and share interests (audited)

Director

Shareholding
requirement
(% of salary) 1

Current
shareholding
(% of salary) 2

Beneficially
owned 3

Other shares held

Options

LTIP interests
subject to
performance
conditions

Deferred
shares not
subject to
performance
conditions

Vested and
unexercised

Unvested

Exercised

Shareholding
requirement
met?

Executive Directors
Graeme Watt
Graham Charlton

200
200

Non-Executive Directors
Martin Hellawell5
Karen Slatford
Vin Murria
Lynne Weedall
Robyn Perriss

n/a
n/a
n/a
n/a
n/a

283
528

n/a
n/a
n/a
n/a
n/a

78,670 3
113,947 3

124,783
83,188

53,940 4
35,960 4

4,201,857
—
165,397
1,300
15,000

n/a
n/a
n/a
n/a
n/a

—
—

n/a
n/a
n/a
n/a
n/a

—
—

n/a
n/a
n/a
n/a
n/a

—
-—

n/a
n/a
n/a
n/a
n/a

Yes
Yes

n/a
n/a
n/a
n/a
n/a

Notes:
1. The Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build up, over a five-year period, and then subsequently hold, a shareholding

equivalent to at least 200% of base salary. The shareholding requirement is calculated as follows:

• Shares owned by the Executive Director (and their associates) count towards the ownership target.

• Shares which have vested, but which remain subject to a holding period and/or clawback, count towards the ownership target.

• Unvested shares, which are not subject to a further performance condition, count towards the ownership target on a net of tax basis. This includes deferred awards under the

annual bonus plan.

• Unvested awards and unexercised options which have performance conditions attached do not count towards the ownership target.

2. T his is based on a closing share price of £13.95 on 29 July 2022 (being the last business day before 31 July 2022) and the year-end salaries of the Executive Directors. The calculation
includes the value of ‘Deferred shares not subject to performance conditions’ on a net of tax basis, based on the tax rates applicable on 31 July 2022. Values are not calculated for
Non-Executive Directors as they are not subject to shareholding requirements.

3. This includes investment in partnership shares under the SIP. Graeme and Graham have each purchased 35 partnership shares between the year end and the date of this report, which

is not included above.

4. This is in respect of previous awards of nil-cost options granted under the Deferred Share Bonus Plan.

5. Includes ordinary shares held by, or in trust for, Martin and/or his family members.

Fees retained for external non-executive directorships by Executive Directors
Executive Directors may hold positions in other companies as Non-Executive Directors and retain the fees. Graeme and Graham currently
hold no such external directorships.

108

Softcat plc Annual Report and Accounts 2022

Comparison of overall performance and pay
The graph below shows the value of £100 invested in the Company’s shares since listing compared with the FTSE 250 index. The graph shows
the total shareholder return generated by both the movement in share value and the reinvestment over the same period of dividend income.

The Committee considers that the FTSE 250 is the appropriate index because the Company has been a member of this since the first
review of the index since the IPO. This graph has been calculated in accordance with the Regulations. It should be noted that the
Company listed on 18 November 2015 and therefore only has a listed share price for the period of 18 November 2015 to 31 July 2022.

Total shareholder return

FTSE 250

Softcat

1,000

900

800

700

600

500

400

300

200

100

18/11/2 015

18/0 3/2 016

18/07/2 016

18/11/2 016

18/0 3/2 017

18/07/2 017

18/11/2 017

18/0 3/2 018

18/07/2 018

18/11/2 018

18/0 3/2 019

18/07/2 019

18/11/2 019

18/0 3/2 0 2 0

18/07/2 0 2 0

18/11/2 0 2 0

18/0 3/2 0 21

18/07/2 0 21

18/11/2 0 21

18/0 3/2 0 22

18/07/2 0 22

Chief Executive’s historical remuneration
The table below sets out the relative importance of spend on pay in the 2022 financial year. All figures provided are taken from the
relevant Company accounts.

Chief Executive

2022

2021

2020

2019

2018

2017

2016

2015

G Watt
M Hellawell1

Total single figure £2,867,134 £2,588,093
—

—

£991,372
—

£919,518 £305,539
— £532,716

—
£774,908

—
£562,117

—
£335,762

G Watt

M Hellawell1

G Watt

M Hellawell1

Annual bonus
payment level
achieved
(% of maximum
opportunity)

LTIP vesting level
achieved
(% of maximum
opportunity)

—

100

n/a

100

—

100

n/a

—

n/a

100

—

n/a

100

n/a

—

100

n/a

—

n/a

—

n/a

Note:
1. Martin stepped down from his role as Chief Executive on 31 March 2018 and Graeme joined as Chief Executive on 1 April 2018. The single figure includes remuneration paid for the

role as Chief Executive during the financial year.

Relative importance of the spend on pay
The table below sets out the relative importance of spend on pay in the 2022 financial year. All figures provided are taken from the
relevant Company accounts.

Profit distributed by way of dividend
Total tax contributions1
Overall spend on pay, including Executive Directors

Disbursements
from profit in 2022
financial year

Disbursements
from profit in 2021
financial year

£84.0m
£41.9m
£148.3m

£60.8m
£36.4m
£127.8m

Note:
1. Includes corporation tax and Employer’s national insurance contributions. The total tax contributions have been included because of the size of the contributions in comparison

to other payments.

Annual Report and Accounts 2022 Softcat plc

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Corporate governance
R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D

P A R T B – A N N U A L R E P O R T O N R E M U N E R A T I O N C O N T I N U E D

Change in the Directors’ remuneration compared with employees
The table below sets out the annual change in Directors’ remuneration from the previous year compared to the average annual change in
remuneration for all other employees. The notes beneath this table describe how we have calculated the year-on-year change.

% increase/(decrease) in remuneration in
2020 compared with remuneration in 2019

% increase/(decrease) in remuneration in
2021 compared with remuneration in 2020

% increase/(decrease) in remuneration in
2022 compared with remuneration in 2021

Salary or
fees

Bonus 2

Benefits 3

Salary or
fees

Bonus 2

Benefits 3

Graeme Watt1
Graham Charlton1
Martin Hellawell
Vin Murria4
Robyn Perriss
Karen Slatford5
Lynne Weedall6
All employees7

3%
3%
3%
23%
0%
n/a
n/a
5%

12%
12%
0%
0%
0%
n/a
n/a
(14)%

0%
(9)%
1%
0%
0%
n/a
n/a
(14)%

3%
3%
0%
4%
3%
6%
n/a
3%

43%
43%
0%
0%
0%
0%
n/a
12%

37%
37%
1%
0%
0%
0%
n/a
1%

Salary
or fees

10%
10%
5%
(7)%
3%
11%
n/a
5%

Bonus 2

Benefits 3

6%
6%
0%
0%
0%
0%
n/a
7%

12%
12%
9%
0%
0%
0%
n/a
34%

Notes:
1. For the Directors, the percentage change reflects the figures set out in the single figure table on page 105. Figures are on an annualised basis where the Director joined or left during the year.

2. Excludes commissions for employees.

3. Includes private medical insurance only for employees.

4. In respect of 2020/21, Vin Murria stepped down as Chair of the Nomination Committee during the year. Fees receivable for these duties were in addition to the fees payable as a

Non-Executive Director.

5. In respect of 2020/21, Karen Slatford was appointed as Chair of the Nomination Committee during the year. Fees receivable for these duties were in addition to the fees payable as

a Non-Executive Director. In respect of 2021/22, Karen stepped down as Chair of the Remuneration Committee during the year.

6. Lynne Weedall joined the Board of Softcat in May 2022.

7. For employees, figures represent Softcat plc, which is a single entity company. Details are in respect of the average percentage change in respect of the remuneration of employees on a full-time

equivalent basis. In order to make the comparisons meaningful, the average percentage change in respect of each of salary, bonus and benefits for employees is a per capita figure. The
increase in bonus is due mostly to improved performance versus targets for senior management when compared to the prior year. The benefits values have fluctuated due to change in premiums.

CEO pay ratios
The UK Government requires certain companies with over 250 employees to disclose annually the ratio of their CEO’s single figure total
remuneration to that of the UK workforce. CEO pay ratio data is presented below for 2022, with comparative figures for 2019 to 2021,
which were disclosed in previous Directors’ Remuneration Reports. The data shows how the CEO’s single figure remuneration for 2022 (as
taken from the single figure remuneration table) compares to equivalent single figure remuneration for full-time equivalent UK employees,
ranked at the 25th, 50th and 75th percentiles.

Year

2022

2021
2020
2019

Method

25th percentile pay ratio

Median pay ratio

75th percentile pay ratio

Option A

Option A
Option A
Option A

100:1

89:1
33:1
35:1

64:1

57:1
21:1
22:1

36:1

32:1
12:1
12:1

The Government’s methodology of Option ‘A’ has been used to calculate the remuneration of 1,882 employees (FY2021: 1,655) who
were employed on the assessment date of 31 July for each respective financial year. All individuals in employment at this date were
included in the calculation, with applicable components of individual remuneration annualised for employees not employed for the full
twelve months. This option was selected given as it was considered to be the most efficient and robust approach in respect of gathering
the required data and in particular was considered to be the most accurate way of identifying the best equivalents of the 25th, 50th and
75th percentiles.

We calculated our total remuneration for full-time equivalent employees to include:

• annual salary and allowances;

• annual bonus earnings (for the period relating to the respective financial year);

• gains realised from exercising awards granted under the SIP or LTIP share plans; and

• the value of taxable benefits (including pension contributions).

The above ratio increased from 2021 reflecting LTIP awards which vested and were exercised during each period. The value of each
LTIP when it was exercised is included in the single remuneration figure for the year. The ratio further increased in 2022, reflecting the
increased value of the LTIP exercised due to a growth in the Company’s share price and in part a 10% increase in the CEO’s base pay,
which was fully disclosed in last year’s Annual Report on Remuneration. The Committee believes that the median pay ratio is consistent with
the Company’s pay, reward and progression policies.

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Pay in respect of the CEO and UK workforce is shown in the table below.

CEO

All employees

(See single figure table, page 105)

25th percentile

2022 salary
2022 total pay

£525,146
£2,867,134

£21,228
£28,574

Median

£25,159
£44,594

75th percentile

£36,945
£79,816

Consideration by the Directors of matters relating to Directors’ remuneration
The Board has delegated to the Committee, under agreed terms of reference, responsibility for the Remuneration Policy and for
determining specific packages for the Executive Directors and other selected members of the senior management team. The Company
consults with key shareholders in respect of the Remuneration Policy and the introduction of new incentive arrangements.

The terms of reference for the Committee are available on the Company’s website, softcat.com/investors, and from the Company
Secretary at the registered office.

Our main responsibilities are:

• to determine and agree with the Board the broad Remuneration Policy for the Executive Directors and other selected members of the

senior management team;

• to review the ongoing appropriateness and relevance of the Remuneration Policy; and

• to review any major changes in employee benefit structures throughout the Company and to administer all aspects of any share scheme.

The Committee receives assistance from the Company Secretary, who attends meetings. The Chief Executive Officer, the Chief Financial
Officer, the Chief People Officer and the Reward, Payroll & HR Operations Manager attend by invitation and when appropriate.

In setting the Remuneration Policy for Directors, the pay and conditions of other employees of the Company are taken into account,
including any base salary increases awarded and the level of employer pension contribution. During the year the Committee received
updates on pay and benefits across the general workforce. The Committee also reviews and approves the remuneration structure for the
management-level tier below the Executive Directors and the proposed framework for annual pay rises and uses this information to ensure
consistency of approach.

The Company does not use remuneration comparison measurements. A formal Employee Forum has been established within the business
where staff can raise any issue they feel to be relevant with the Designated Non-Executive Director for Workforce Engagement (Vin
Murria). There are also regular employee engagement meetings led by the CEO and CFO.

The Committee Chair (assisted by the Chief People Officer and the Company Secretary) has directly engaged with a small group of
employee representatives to explain Softcat’s executive remuneration policy and how it aligns with wider Company pay policy. During
the engagement session, the Committee Chair explained the purpose and work of the Committee and the key decisions which were made
during the year. The employee representatives asked questions about executive remuneration and how it aligns to pay elsewhere in the
Company and also provided feedback on pay in certain other roles in the business and were provided with responses. The engagement
provided useful feedback and further assurance to the Committee that executive remuneration is considered to be well-aligned with the
Company’s wider philosophy on pay, particularly in respect of the importance of setting appropriate benchmarks for fixed pay and on the
importance of variable pay as an incentive to drive stretching performance. The Committee believes there is strong alignment between
executive pay, wider workforce pay, the Company’s culture and strategy.

Advisers to the Remuneration Committee
During the financial year, PwC advised the Committee on all aspects of the Remuneration Policy for Executive Directors and selected
members of the senior management team. PwC was appointed by the Committee following IPO in November 2015. The Committee is
satisfied that no conflict of interest exists or existed in the provision of these services.

PwC is a member of the Remuneration Consultants Group and the Voluntary Code of Conduct of that body is designed to ensure
objective and independent advice is given to remuneration committees. Fees of £90,000 (excluding VAT) (2021: £87,750) were
provided to PwC during the year in respect of remuneration advice received.

Statement of voting at general meeting
The table below shows the binding vote approving the Directors’ Remuneration Policy at the 2019 AGM and the advisory vote on the
Annual Report on Remuneration at the 2021 AGM.

Directors’ Remuneration Policy (2019 AGM)

161,238,582

98.60 2,296,086

Annual Report on Remuneration (2021 AGM)

169,210,527

97.36 4,591,454

1.40

2.64

109

9,561

Votes for

% Votes against

Votes withheld

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Statement of implementation of the Remuneration Policy in the 2022 financial year
The Remuneration Committee has reviewed and considered the key components of remuneration to ensure that the Remuneration Policy
(summarised below) is fit for purpose, continues to drive success within the remuneration framework and meets the shareholder and
governance expectations of a FTSE 250 company. In respect of the implementation in 2022/23 below, a revised Remuneration Policy
will be proposed at the 2022 AGM and where applicable the implementation will be subject to the new Remuneration Policy being
approved by shareholders.

Implementation in 2022/23

What was implemented in 2021/22

Base salary

For FY2023, base salaries for the CEO and CFO
will be £551,403 and £367,602.

CEO: £525,146.

CFO: £350,097.

Pension

Benefits

The above increases represent a rise of 5%, which was
the standard pay rise for employees but lower than
pay rises for much of the workforce.

No change.

All Directors, including Non-Executive Directors, will
be entitled to participate in the Company salary
sacrifice scheme for electric vehicles for personal use
and commuting.

5% of salary.

No change.

Annual bonus plan
(‘ABP’)
• Cash

• Deferred share

award

For FY2023 the annual bonus measure will retain
80% based on Operating Profit and 20% based
on robust ESG goals. In addition to customer and
employee satisfaction, sustainability measures will
be added.

Maximum opportunity: 150% of salary for CEO
and CFO.

Measures: 80% Operating Profit, 20% ESG (based on
customer and employee satisfaction goals).

LTIP

FY2023 LTIP awards:

FY2022 LTIP awards:

• 150% of salary for CEO and CFO

• 150% of salary for CEO and CFO.

• Measures against TSR (40%) and EPS (60%)

• Measures against TSR (50%) and EPS (50%).

• Targets shown on pages 106 to 107

• Targets are shown on pages 106 to 107

Shareholding
requirements

No change.

Chair and
Non-Executive fees

Chair fee: £200,000.

Board fee: £60,000.

200% of salary for CEO and CFO.

Chair fee: £159,135.

Board fee: £52,167.

Senior Independent Director fee: £13,500.

Senior Independent Director fee: £5,796.

Committee Chair fee (per Committee): £15,000.

Fee for the Designated Director for Workforce
Engagement (which includes Chair of the Sustainability
Committee): £15,000.

Committee Chair fee (per Committee) and fee for the
Designated Director for Workforce Engagement:
£11,592.

Lynne Weedall
Chair of the Remuneration Committee
24 October 2022

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PART C – DIRECTORS’
REMUNERATION POLICY

Introduction
In accordance with the remuneration reporting regulations, the
Directors’ Remuneration Policy (the ‘Policy’) as set out below will
become formally effective at the AGM on 13 December 2022,
subject to shareholder approval, and will apply for a period of
three years from the date of approval unless a new Policy is
approved by the Company’s shareholders prior to expiry.

The Company’s core principles of remuneration are:

• to ensure top Executives are attracted, retained and motivated

to drive the Company in its next stage of development;

• to incentivise management in extending the Company’s
leadership in the IT infrastructure solutions industry; and

• to deliver long-term sustainable growth.

The Committee will review annually all elements of remuneration,
including: the base salary, annual bonus levels and annual and
long-term incentive performance conditions for the Executive
Directors and selected members of the senior management team,
drawing on trends and adjustments made to all employees across
the Company and taking into consideration:

• our business strategy;

• overall Company performance;

• market conditions;

• views of key stakeholders of the business;

• corporate governance considerations; and

• changing views of institutional shareholders and their

representative bodies.

The Remuneration Committee is comprised of independent
Non-Executive Directors. The Committee operates within terms
of reference which:

• authorise it to review and implement the Policy; and

• provide a framework to avoid conflicts of interest.

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Our Remuneration Policy and its link to our Company strategy
The Company’s strategy is laid out on page 28 and 29.

Ensuring the alignment of the proposed Policy to the Company strategy was key for the Remuneration Committee in refining the existing
Policy as proposed below. The key elements of the Company’s strategy and how its successful implementation is linked to the Company’s
remuneration are set out in the following table.

Strategic priorities

Equity
ownership
and retention
of shares

Retain
and reward
Executive team
to deliver the
strategy

Remuneration Policy (from the date of
shareholder approval)

Generate sector-leading
value for shareholders

Growth in profit
from existing customers

Win new customers

Annual bonus
• The maximum bonus

(including any part of the
bonus deferred into an ABP
award) deliverable under
the ABP will not exceed
200% of a participant’s
annual base salary.

Operating profit
The key performance indicator for the Company. The Committee believes
that the Directors should focus on this key metric during the financial year to
maintain high profit growth and the success of the business to deliver value
for our shareholders.

Growth in this metric is a direct demonstration of the successful execution of
our business strategy, including winning new customers and growth of
profit from existing customers.

Non-financial measures
The Committee also believes in the importance of wider non-financial
metrics to measure the success of a business, including the use of
environmental, social and governance (‘ESG’) measures. The Committee
will consider appropriate measures linked to strategic priorities.

EPS
An incentive to grow this
market in the longer term
is provided through EPS
growth targeted by the
LTIP. The success of this
element of the strategy
should be reflected in
long-term TSR
performance.

TSR
The generation of profit
growth targeted by the
annual bonus will help
enhance the value of
the Company, which
will be measured
through the success of
the Company’s TSR
performance against its
comparators (a
performance condition
under the LTIP).

EPS and TSR
The success in
maximising profit
growth will be
measured through the
long-term EPS growth
targeted by the LTIP.

In addition, sustained
value generation will
be reflected in the
share price of the
Company, which will
be measured through
the Company’s TSR
performance under
the LTIP.

LTIP
Maximum annual award is
normally 200% of salary.

Awards will vest at the end of
three years.

For FY2022 the performance
conditions for awards were
equally weighted between:

• adjusted earnings per share

(‘EPS’) growth; and

• comparative total

shareholder return (‘TSR’).

For FY2023, awards will be
weighted 60% EPS and 40%
TSR.

Share Incentive Plan (‘SIP’)

Minimum shareholding
requirements
• Chief Executive Officer:

200% of salary.

• Chief Financial Officer:

200% of salary.

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Alignment with provision 40 of the UK Corporate Governance Code
As part of its review of the proposed Policy and remuneration practices, the Committee has considered the factors set out in provision 40
of the UK Corporate Governance Code (the ‘Code’). In the Committee’s view, the proposed Policy addresses those factors as set out below:

Provision 40 element

How our Remuneration Policy aligns

Clarity
Remuneration
arrangements should be
transparent and promote
effective engagement
with shareholders and
the workforce.

Simplicity
Remuneration structures
should avoid complexity
and their rationale and
operation should be easy
to understand.

Risk
Remuneration
arrangements should
ensure reputational and
other risks from excessive
rewards, and behavioural
risks that can arise from
target-based incentive
plans, are identified
and mitigated.

Predictability
The range of possible
values of rewards to
individual directors and
any other limits or
discretions should be
identified and explained
at the time of approving
the policy.

Proportionality
The link between
individual awards, the
delivery of strategy and
the long-term
performance of the
company should be clear.
Outcomes should not
reward poor performance.

Alignment to culture
Incentive schemes should
drive behaviours consistent
with company purpose,
values and strategy.

Our Policy is simple, designed to support long-term, sustainable performance and aligned to our strategy.
It clearly sets out the performance conditions that will be used for the annual bonus and the LTIP, as well
as the maximum potential value of the elements of remuneration and the areas in which discretion can be
applied. Achievement against performance conditions is fully disclosed.

Our Policy is in line with UK corporate governance good practice, which makes it understandable to our
key stakeholders. This also promotes effective stakeholder engagement.

Our executive remuneration structure comprises fixed and variable remuneration through the use of
market standard annual bonus and LTIP structures. The performance conditions for variable elements
are clearly communicated to stakeholders and understood by the executive participants. Our executive
reward structures are clearly aligned to the delivery of key strategic indicators of success and this helps
to ensure simplicity. In respect of variable remuneration, we keep this simple by operating just one plan
for our short-term incentive (annual bonus plan) and one plan for longer-term performance (LTIP).

The majority of our Executive Directors’ total remuneration is focused on the long term and provided
in Softcat shares (through our LTIP and through the deferred share element of the annual bonus plan).
Rewards are aligned to our strategy and are designed for Executive Directors to drive the right behaviours
for both the Company and its shareholders.

We operate minimum shareholding requirements for Executive Directors whilst they are in employment and
for two years post-vesting. Executive Directors must also retain shares (net of sales for taxes and costs)
arising from the exercise of an LTIP for two years. These measures ensure a strong alignment between
Executive Directors and shareholders and discourage unnecessary risk taking by Executive Directors.
Significant rewards on the long-term element can only be achieved if there is sustained performance.

Our Remuneration Policy explains, where appropriate, defined limits on the maximum awards which can
be earned. The Committee retains discretion to override formulaic outcomes, if appropriate, on variable
remuneration. Malus and clawback provisions are included in both the annual bonus plan and in the LTIP.

Our Policy sets out, where applicable, the maximum potential value for each element of remuneration.
Our Policy also explains the use of any discretion. The potential total remuneration outcomes can be
assessed from this and we include both in our Policy and in each Annual Report on Remuneration
illustrations of the application of our Policy. We observe in our share plans the dilution limits set by the
Investment Association (10% in any rolling ten-year period and for executive share plans 5% in any rolling
ten-year period).

Remuneration is appropriately balanced between fixed and variable pay and the annual bonus and
LTIP reward the successful implementation of our strategy over the short and long term. Stretching targets
ensure payments are only made for strong corporate performance and for the successful execution
of our strategy, providing a direct link between Company performance and individual rewards.
The Committee has discretion to override formulaic outcomes to ensure that remuneration always
reflects overall performance.

Executive rewards are aligned to our strategy and are designed for Executive Directors to drive the right
behaviours for both the Company and its shareholders. The performance measures used by the Committee
are designed to help underpin our culture and strategy. The weighting towards long-term remuneration
emphasises the importance of strong performance over the longer term. Our annual bonus plan includes
non-financial metrics which support our values and culture on how we do business and this will help us to
maintain a competitive advantage.

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Remuneration Policy table
Remuneration Policy aim
The Committee has developed a remuneration framework and policy which adhere to practice that is fit for purpose for a
FTSE 250 company. The Committee’s objective is to operate this policy to ensure that our Executive Directors have a remuneration
structure and total remuneration opportunity that is aligned to Softcat’s business and is competitive when assessed against the market
we compete for talent in.

Element of remuneration

Salary
Changes from
previous policy: none.

Provides a base level of remuneration
to support recruitment and retention
of Executive Directors with the necessary
experience and expertise to deliver the
Company’s strategy.

How it supports the Company’s
short and long-term strategic objectives

Operation

Maximum opportunity

An Executive Director’s basic salary is set on appointment and reviewed
annually or when there is a change in position or responsibility.

When determining an appropriate level of salary, the Committee considers:

• remuneration practices within the Company;

• the general performance of the Company;

• salaries within the ranges paid by the companies in the comparator

group used for remuneration benchmarking;

• any change in scope, role and responsibilities; and

• the economic environment.

Individuals who are recruited or promoted to the Board may, on occasion,
have their salaries set below the targeted policy level until they become
established in their role. In such cases subsequent increases in salary may
be higher than the general rises for employees until the target positioning
is achieved.

The Executive Directors receive benefits which include, but are not limited
to, private health insurance, life insurance and death in service benefit.

The Committee recognises the need to maintain suitable flexibility in the
benefits provided to ensure it is able to support the objective of attracting
and retaining personnel in order to deliver the Company strategy.
Additional benefits may therefore be offered, such as relocation
allowances on recruitment.

The maximum will be set at the cost of providing the benefits described.

Non-Executive Directors may participate in benefit programmes available
to employees which have the purpose of reducing environmental emissions.

Pension arrangements are provided in line with practice to enable the
Company to recruit and retain Executive Directors with the experience
and expertise to deliver the Company’s strategy.

The Company operates a defined contribution (‘DC’) scheme.
The Executive Directors are entitled to receive a maximum employer
contribution into the DC scheme or a salary supplement in lieu of pension
which is in line with the employer contribution for the wider workforce. New
joiners will receive a pension contribution in line with the wider workforce.
The current level is 5% of basic salary per annum. Increases will only be in
line with employer pension contribution in the wider workforce, but shall not
exceed 10% within the period of this Policy.

The Committee ensures that maximum salary levels are positioned in line with companies of a similar size to Softcat and validated against

companies operating in a similar sector, so that total remuneration opportunity (base salary, benefits, annual bonus and long-term incentives) for

the Executive Directors is competitive against the market.

When assessing salary levels, the Committee will consider levels in the comparator group, made up of organisations in the FTSE 250 (excluding

financial services, real estate and equity investment trusts) and sector peer companies of comparable size to Softcat.

The Committee intends to review the comparator groups each year and may add or remove companies from the group as it considers

appropriate. Any changes to the comparator group will be set out in the section headed Implementation of Remuneration Policy in the following

financial year.

In general salary increases for Executive Directors will be in line with the increase for employees.

The Company will set out in the section headed Implementation of Remuneration Policy, in the following financial year, the salaries for that year

for each of the Executive Directors.

See description of benefits in previous column.

The maximum contribution into the defined contribution plan or a salary supplement in lieu of pension will be in line with the wider workforce.

This ensures that Softcat’s approach is fully in line with corporate governance expectations and shareholder sentiment to align Executives’

pension with the wider workforce.

Provides a benefits package in line
with practice relative to its comparator
group to enable the Company to recruit
and retain Executive Directors with the
experience and expertise to deliver the
Company’s strategy.

Benefits
Changes from
previous policy:
following introduction
of a salary sacrifice
programme for
employees to lease
electric vehicles, this
Policy specifies that
Directors can
participate.

Pensions
Changes from
previous policy: none.

Provides a pension provision in line
with practice to enable the Company
to recruit and retain Executive Directors
with the experience and expertise to
deliver the Company’s strategy.

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Maximum opportunity

The Committee ensures that maximum salary levels are positioned in line with companies of a similar size to Softcat and validated against
companies operating in a similar sector, so that total remuneration opportunity (base salary, benefits, annual bonus and long-term incentives) for
the Executive Directors is competitive against the market.

When assessing salary levels, the Committee will consider levels in the comparator group, made up of organisations in the FTSE 250 (excluding
financial services, real estate and equity investment trusts) and sector peer companies of comparable size to Softcat.

The Committee intends to review the comparator groups each year and may add or remove companies from the group as it considers
appropriate. Any changes to the comparator group will be set out in the section headed Implementation of Remuneration Policy in the following
financial year.

In general salary increases for Executive Directors will be in line with the increase for employees.

The Company will set out in the section headed Implementation of Remuneration Policy, in the following financial year, the salaries for that year
for each of the Executive Directors.

Provides a benefits package in line

The Executive Directors receive benefits which include, but are not limited

with practice relative to its comparator

to, private health insurance, life insurance and death in service benefit.

See description of benefits in previous column.

Pensions

Changes from

Provides a pension provision in line

Pension arrangements are provided in line with practice to enable the

with practice to enable the Company

Company to recruit and retain Executive Directors with the experience

previous policy: none.

to recruit and retain Executive Directors

and expertise to deliver the Company’s strategy.

The maximum contribution into the defined contribution plan or a salary supplement in lieu of pension will be in line with the wider workforce.
This ensures that Softcat’s approach is fully in line with corporate governance expectations and shareholder sentiment to align Executives’
pension with the wider workforce.

Remuneration Policy table

Remuneration Policy aim

The Committee has developed a remuneration framework and policy which adhere to practice that is fit for purpose for a

FTSE 250 company. The Committee’s objective is to operate this policy to ensure that our Executive Directors have a remuneration

structure and total remuneration opportunity that is aligned to Softcat’s business and is competitive when assessed against the market

we compete for talent in.

Element of remuneration

short and long-term strategic objectives

Operation

How it supports the Company’s

Salary

Provides a base level of remuneration

An Executive Director’s basic salary is set on appointment and reviewed

to support recruitment and retention

annually or when there is a change in position or responsibility.

Changes from

previous policy: none.

of Executive Directors with the necessary

experience and expertise to deliver the

When determining an appropriate level of salary, the Committee considers:

Company’s strategy.

• remuneration practices within the Company;

• the general performance of the Company;

• salaries within the ranges paid by the companies in the comparator

group used for remuneration benchmarking;

• any change in scope, role and responsibilities; and

• the economic environment.

Individuals who are recruited or promoted to the Board may, on occasion,

have their salaries set below the targeted policy level until they become

established in their role. In such cases subsequent increases in salary may

be higher than the general rises for employees until the target positioning

is achieved.

The Committee recognises the need to maintain suitable flexibility in the

benefits provided to ensure it is able to support the objective of attracting

and retaining personnel in order to deliver the Company strategy.

Additional benefits may therefore be offered, such as relocation

allowances on recruitment.

The maximum will be set at the cost of providing the benefits described.

Non-Executive Directors may participate in benefit programmes available

to employees which have the purpose of reducing environmental emissions.

group to enable the Company to recruit

and retain Executive Directors with the

experience and expertise to deliver the

Company’s strategy.

Benefits

Changes from

previous policy:

following introduction

of a salary sacrifice

programme for

employees to lease

electric vehicles, this

Policy specifies that

Directors can

participate.

with the experience and expertise to

deliver the Company’s strategy.

The Company operates a defined contribution (‘DC’) scheme.

The Executive Directors are entitled to receive a maximum employer

contribution into the DC scheme or a salary supplement in lieu of pension

which is in line with the employer contribution for the wider workforce. New

joiners will receive a pension contribution in line with the wider workforce.

The current level is 5% of basic salary per annum. Increases will only be in

line with employer pension contribution in the wider workforce, but shall not

exceed 10% within the period of this Policy.

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Remuneration Policy table continued

Element of remuneration

How it supports the Company’s
short and long-term strategic objectives

Operation

Annual and
Deferred
Share Bonus Plan
(the ‘Bonus Plan’)
Changes from
previous policy:
malus/clawback
triggers extended.

Long Term Incentive
Plan (‘LTIP’)
Changes from
previous policy:
malus/clawback
triggers extended.

The Bonus Plan provides a significant
incentive to the Executive Directors linked
to achievement in delivering goals that
are closely aligned with the Company’s
strategy and the creation of value for
shareholders.

In particular, the Bonus Plan supports the
Company’s objectives, allowing the
setting of annual targets based on the
business strategy at the time, meaning
that a wider range of performance
metrics can be used that are relevant
and achievable.

The Committee operates deferral for part
of the annual bonus earned in shares
under the Bonus Plan. The advantage of
deferral is:

• increased alignment between

Executives and shareholders created
through deferral and the increased
equity stake of management in the
Company; and

• amounts deferred in shares are

subject to a Director’s continuing
employment, which provides an
effective lock-in.

The purpose of the LTIP is to incentivise
and reward Executive Directors in
relation to long-term performance and
achievement of Company strategy.

This will better align Executive Directors’
interests with the long-term interests
of the Company and act as a
retention mechanism.

The use of comparative TSR measures
the success of the implementation of the
Company’s strategy in delivering an
above-market level of return.

The use of EPS ensures Executive
Directors are focused on long-term
financial performance to ensure this
flows through to long-term sustainable
EPS growth.

The maximum bonus (including any part of the bonus deferred into share awards)
deliverable under the Bonus Plan will be up to 200% of a participant’s annual
base salary.

The Board will determine the bonus to be delivered following the end of the
relevant financial year.

The Company will set out, in the section headed Implementation of Remuneration
Policy, in the following financial year, the nature of the targets and their weighting
for each year.

Details of the performance conditions, targets and their level of satisfaction for the
year being reported on will be set out in the Annual Report on Remuneration.

The annual bonus will be paid in cash and deferred shares. A minimum level of
deferral into shares of one-third will apply for the first 100% of salary awarded as
a bonus. Any bonus awarded above 100% of salary will be deferred into shares.

Deferred bonus share awards vest:

• after a minimum deferral period of three years, during which no performance

conditions will apply; and

• subject to the participant’s continued employment at the end of the deferral

period unless he/she is a good leaver.

The Committee may award dividend equivalents on those shares to plan
participants to the extent that they vest.

The Committee will apply a two-year post-cessation shareholding requirement for
all deferred share awards granted after 5 December 2019 which vest under the
Bonus Plan (see ‘Minimum shareholding requirement’ below).

Awards are granted annually to Executive Directors in the form of a
conditional share award, nil-cost option or restricted share award.

Awards will vest at the end of a three-year period subject to:

• the Executive Director’s continued employment at the date

of vesting; and

• satisfaction of the performance conditions.

The Committee may award dividend equivalents on awards to the extent
that these vest.

Awards are subject to a mandatory two-year post-vesting holding
period. The total time period between award and release of shares
is therefore five years.

The Committee will apply a two-year post-cessation shareholding
requirement for all awards granted after 5 December 2019 which vest
under the LTIP (see ‘Minimum shareholding requirement’ below).

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Softcat plc Annual Report and Accounts 2022

Maximum opportunity

Performance metrics

For FY2023 the maximum opportunity will be 150%

An award under the Bonus Plan is subject to satisfying financial and strategic/

of salary. Percentage of bonus maximum earned

operational performance/personal performance conditions and targets measured

for levels of performance:

over a period of one financial year.

Below threshold: 0%.

Threshold: 20%.

Maximum: 100%.

A minimum of 50% of the bonus shall be based on financial performance measures.

Measures and weightings will be disclosed in the Annual Report on Remuneration for

the year ahead.

The Committee is of the opinion that given the commercial sensitivity arising in relation to

the detailed targets used for the annual bonus, disclosing precise targets for the Bonus

Plan in advance would not be in shareholders’ interests. Targets and performance

achieved will be published at the end of the performance period so shareholders can

fully assess the basis for any payouts under the Bonus Plan.

In exceptional circumstances the Committee retains the discretion to:

• change the performance measures and targets and the weighting attached to the

performance measures and targets partway through a performance year if there is

a significant and material event which causes the Committee to believe the original

measures, weightings and targets are no longer appropriate; and

• make downward or upward adjustments to the amount of bonus earned resulting

from the application of the performance measures, if the Committee believes that the

bonus outcomes are not a fair and accurate reflection of business performance.

Any adjustments or discretion applied by the Committee will be fully disclosed in the

following year’s Remuneration Report.

The Bonus Plan contains clawback and malus provisions.

Normal maximum value of up to 200% of salary p.a.

The performance conditions for the 2022 LTIP awards are earnings per share (‘EPS’)

based on the market value at the date of grant set

growth and relative total shareholder return (‘TSR’).

in accordance with the rules of the LTIP.

At least 50% of the LTIP will be based on financial metrics. The Committee may

In exceptional circumstances the Committee

change the balance of the measures, or use different measures for subsequent awards,

may grant an award with a maximum of up to

as appropriate.

250% of salary.

Across the LTIP award metrics up to 25% of the award

shareholder consultation.

will vest for threshold performance.

No material change will be made to the type of performance conditions without prior

Details of the performance conditions for each award will be disclosed in the Annual

100% of the award will vest for maximum

Report on Remuneration for the year ahead.

performance.

In exceptional circumstances the Committee retains the discretion to:

• vary, substitute or waive the performance conditions applying to LTIP awards

if the Board considers it appropriate and the new performance conditions are

deemed reasonable and are not materially less difficult to satisfy than the

original conditions; and

• make downward or upward adjustments to the amount vesting under the LTIP

resulting from the application of the performance measures if the Committee believes

that the outcomes are not a fair and accurate reflection of business performance.

Any adjustments or discretion applied by the Committee will be fully disclosed in the

following year’s Remuneration Report.

The LTIP contains clawback and malus provisions.

Element of remuneration

short and long-term strategic objectives

Operation

How it supports the Company’s

Annual and

Deferred

Share Bonus Plan

(the ‘Bonus Plan’)

Changes from

previous policy:

malus/clawback

triggers extended.

The Bonus Plan provides a significant

The maximum bonus (including any part of the bonus deferred into share awards)

incentive to the Executive Directors linked

deliverable under the Bonus Plan will be up to 200% of a participant’s annual

to achievement in delivering goals that

base salary.

are closely aligned with the Company’s

strategy and the creation of value for

shareholders.

In particular, the Bonus Plan supports the

Company’s objectives, allowing the

setting of annual targets based on the

business strategy at the time, meaning

that a wider range of performance

metrics can be used that are relevant

and achievable.

The Board will determine the bonus to be delivered following the end of the

relevant financial year.

The Company will set out, in the section headed Implementation of Remuneration

Policy, in the following financial year, the nature of the targets and their weighting

for each year.

Details of the performance conditions, targets and their level of satisfaction for the

year being reported on will be set out in the Annual Report on Remuneration.

The annual bonus will be paid in cash and deferred shares. A minimum level of

deferral into shares of one-third will apply for the first 100% of salary awarded as

The Committee operates deferral for part

a bonus. Any bonus awarded above 100% of salary will be deferred into shares.

Deferred bonus share awards vest:

• after a minimum deferral period of three years, during which no performance

conditions will apply; and

Executives and shareholders created

• subject to the participant’s continued employment at the end of the deferral

period unless he/she is a good leaver.

The Committee may award dividend equivalents on those shares to plan

participants to the extent that they vest.

The Committee will apply a two-year post-cessation shareholding requirement for

all deferred share awards granted after 5 December 2019 which vest under the

Bonus Plan (see ‘Minimum shareholding requirement’ below).

Long Term Incentive

The purpose of the LTIP is to incentivise

Awards are granted annually to Executive Directors in the form of a

and reward Executive Directors in

conditional share award, nil-cost option or restricted share award.

Plan (‘LTIP’)

Changes from

previous policy:

malus/clawback

triggers extended.

The use of comparative TSR measures

that these vest.

Awards will vest at the end of a three-year period subject to:

• the Executive Director’s continued employment at the date

of vesting; and

• satisfaction of the performance conditions.

The Committee may award dividend equivalents on awards to the extent

Awards are subject to a mandatory two-year post-vesting holding

period. The total time period between award and release of shares

is therefore five years.

The Committee will apply a two-year post-cessation shareholding

requirement for all awards granted after 5 December 2019 which vest

under the LTIP (see ‘Minimum shareholding requirement’ below).

of the annual bonus earned in shares

under the Bonus Plan. The advantage of

deferral is:

• increased alignment between

through deferral and the increased

equity stake of management in the

Company; and

• amounts deferred in shares are

subject to a Director’s continuing

employment, which provides an

effective lock-in.

relation to long-term performance and

achievement of Company strategy.

This will better align Executive Directors’

interests with the long-term interests

of the Company and act as a

retention mechanism.

the success of the implementation of the

Company’s strategy in delivering an

above-market level of return.

The use of EPS ensures Executive

Directors are focused on long-term

financial performance to ensure this

flows through to long-term sustainable

EPS growth.

Maximum opportunity

Performance metrics

For FY2023 the maximum opportunity will be 150%
of salary. Percentage of bonus maximum earned
for levels of performance:

An award under the Bonus Plan is subject to satisfying financial and strategic/
operational performance/personal performance conditions and targets measured
over a period of one financial year.

Below threshold: 0%.

Threshold: 20%.

Maximum: 100%.

Normal maximum value of up to 200% of salary p.a.
based on the market value at the date of grant set
in accordance with the rules of the LTIP.

In exceptional circumstances the Committee
may grant an award with a maximum of up to
250% of salary.

Across the LTIP award metrics up to 25% of the award
will vest for threshold performance.

100% of the award will vest for maximum
performance.

A minimum of 50% of the bonus shall be based on financial performance measures.
Measures and weightings will be disclosed in the Annual Report on Remuneration for
the year ahead.

The Committee is of the opinion that given the commercial sensitivity arising in relation to
the detailed targets used for the annual bonus, disclosing precise targets for the Bonus
Plan in advance would not be in shareholders’ interests. Targets and performance
achieved will be published at the end of the performance period so shareholders can
fully assess the basis for any payouts under the Bonus Plan.

In exceptional circumstances the Committee retains the discretion to:

• change the performance measures and targets and the weighting attached to the
performance measures and targets partway through a performance year if there is
a significant and material event which causes the Committee to believe the original
measures, weightings and targets are no longer appropriate; and

• make downward or upward adjustments to the amount of bonus earned resulting

from the application of the performance measures, if the Committee believes that the
bonus outcomes are not a fair and accurate reflection of business performance.

Any adjustments or discretion applied by the Committee will be fully disclosed in the
following year’s Remuneration Report.

The Bonus Plan contains clawback and malus provisions.

The performance conditions for the 2022 LTIP awards are earnings per share (‘EPS’)
growth and relative total shareholder return (‘TSR’).

At least 50% of the LTIP will be based on financial metrics. The Committee may
change the balance of the measures, or use different measures for subsequent awards,
as appropriate.

No material change will be made to the type of performance conditions without prior
shareholder consultation.

Details of the performance conditions for each award will be disclosed in the Annual
Report on Remuneration for the year ahead.

In exceptional circumstances the Committee retains the discretion to:

• vary, substitute or waive the performance conditions applying to LTIP awards
if the Board considers it appropriate and the new performance conditions are
deemed reasonable and are not materially less difficult to satisfy than the
original conditions; and

• make downward or upward adjustments to the amount vesting under the LTIP

resulting from the application of the performance measures if the Committee believes
that the outcomes are not a fair and accurate reflection of business performance.

Any adjustments or discretion applied by the Committee will be fully disclosed in the
following year’s Remuneration Report.

The LTIP contains clawback and malus provisions.

Annual Report and Accounts 2022 Softcat plc

119

Corporate governanceMaximum opportunity

Performance metrics

The maximums set by legislation from time to time.

The Company, in accordance with the legislation, may impose objective conditions on

participation in the SIP for employees.

The following table sets out the minimum shareholding requirements:

Maximum opportunity

Role

Chief Executive Officer

Chief Financial Officer

Shareholding requirement (% of salary)

200

The Committee retains the discretion to increase the shareholding requirements.

R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D

P A R T C – D I R E C T O R S ’ R E M U N E R A T I O N P O L I C Y C O N T I N U E D

Remuneration Policy table continued

Element of remuneration

All employee share
plans
Changes from
previous policy: none.

How it supports the Company’s
short and long-term strategic objectives

Operation

Softcat currently operates a SIP. The SIP
is an all-employee share ownership plan
which has been designed to encourage
all eligible employees to become
shareholders in the Company and
thereby align their interests with
shareholders.

The Company operates a SIP in which the Executive Directors are eligible
to participate (which is in line with HMRC legislation and is open to all
eligible staff).

The Executive Directors will also be eligible to participate in any other
all-employee arrangement implemented by the Company, on the same
terms as other employees.

Element of remuneration

How it supports the Company’s short and long-term strategic objectives

The Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build
up, over a five-year period, and then subsequently hold, a shareholding equivalent to a percentage of base salary.
Executive Directors shall retain all vested share-based awards (net of taxes and brokerage costs) as part of the
build-up towards their respective target. Adherence to these guidelines is a condition of continued participation in the
equity incentive arrangements. This policy ensures that the interests of Executive Directors and those of shareholders
are closely aligned.

A post-cessation shareholding requirement will operate. Executives must hold 100% of their shareholding requirement for
two years post-cessation. This is applicable to share awards granted after 5 December 2019 which vest under the Bonus
Plan and the LTIP. An Executive Director’s attainment against their respective requirement will be disclosed each year in
the Annual Report on Remuneration.

Minimum
shareholding
requirement
Changes from
previous policy:
increase in in-role
requirement for CFO
from 150% to 200%.

Increase in post-
cessation requirement
from 50% to 100% of
in-role requirement in
year two.

Illustrations of the application of the Remuneration Policy
The charts below illustrate the remuneration that would be paid to each of the Executive Directors, for the 2023 financial year, under three
different performance scenarios: (i) minimum; (ii) on target; and (iii) maximum. The elements of remuneration have been categorised into
three components: (i) fixed; (ii) annual bonus (deferred bonus); and (iii) LTIP.

In line with the regulations on policy scenarios, we have also included an additional reference point to show indicative share price growth
of 50% over three years (being the performance period of the LTIP) at maximum.

Chief Executive Oﬀicer (Graeme Watt)

Chief Financial Oﬀicer (Graham Charlton)

2,800

2,400

2,000

0
0
0
£

’

1,600

1,200

800

400

1,411

29%

41%

585

100%

2,238

37%

26%

Minimum

On target

Maximum

2,651

47%

31%

22%

0
0
0
£

’

1,800

1,500

1,200

900

600

300

Maximum
(including
50% share
price growth)

942

29%

41%

391

100%

1,493

37%

26%

Minimum

On target

Maximum

1,769

47%

31%

22%

Maximum
(including
50% share
price growth)

Fixed

Bonus

LTIP

Fixed

Bonus

LTIP

120

Softcat plc Annual Report and Accounts 2022

Element of remuneration

short and long-term strategic objectives

Operation

How it supports the Company’s

Maximum opportunity

Performance metrics

All employee share

Softcat currently operates a SIP. The SIP

The Company operates a SIP in which the Executive Directors are eligible

plans

is an all-employee share ownership plan

to participate (which is in line with HMRC legislation and is open to all

The maximums set by legislation from time to time.

The Company, in accordance with the legislation, may impose objective conditions on
participation in the SIP for employees.

Element of remuneration

How it supports the Company’s short and long-term strategic objectives

Maximum opportunity

The following table sets out the minimum shareholding requirements:

Role

Chief Executive Officer
Chief Financial Officer

Shareholding requirement (% of salary)

200
200

The Committee retains the discretion to increase the shareholding requirements.

The table below sets out the assumptions used to calculate the elements of remuneration for each of the scenarios set out in the charts opposite.

Element

Fixed1

Annual bonus2

Description

Minimum

Target

Salary, benefits and pension

Included

Maximum

Included

Maximum including
50% share price
growth

Included

Annual bonus (including
deferred shares)
Maximum opportunity of 150% of
salary for the CEO and for the CFO

No annual variable 50% of the

maximum bonus

100% of the
maximum bonus

LTIP2,3

Award under the LTIP
Maximum annual award
of 150% of salary

No multiple-year
variable

50% of the
maximum award

100% of the
maximum award

100% of the
maximum award
plus 50% share
price growth

Notes:
1. Based on FY2022 benefits payments and pension values as per the single figure table. The actual benefits and pension contributions for FY2023 will only be known at the end of the

Minimum

On target

Maximum

Minimum

On target

Maximum

financial year. Basic pay reflects a 5% increase awarded for FY2023.

2. See page 105 for the single figure table and the accompanying notes. Share price growth has been included in the final illustration in accordance with required regulations. Dividend

equivalents have not been added to the deferred share bonus and LTIP share awards.

3. Participation in the SIP has been excluded given the relative size of the opportunity levels.

Changes from

previous policy: none.

which has been designed to encourage

eligible staff).

all eligible employees to become

shareholders in the Company and

thereby align their interests with

shareholders.

The Executive Directors will also be eligible to participate in any other

all-employee arrangement implemented by the Company, on the same

terms as other employees.

The Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build

up, over a five-year period, and then subsequently hold, a shareholding equivalent to a percentage of base salary.

Executive Directors shall retain all vested share-based awards (net of taxes and brokerage costs) as part of the

build-up towards their respective target. Adherence to these guidelines is a condition of continued participation in the

equity incentive arrangements. This policy ensures that the interests of Executive Directors and those of shareholders

are closely aligned.

A post-cessation shareholding requirement will operate. Executives must hold 100% of their shareholding requirement for

two years post-cessation. This is applicable to share awards granted after 5 December 2019 which vest under the Bonus

Plan and the LTIP. An Executive Director’s attainment against their respective requirement will be disclosed each year in

the Annual Report on Remuneration.

Minimum

shareholding

requirement

Changes from

previous policy:

increase in in-role

requirement for CFO

from 150% to 200%.

Increase in post-

cessation requirement

from 50% to 100% of

in-role requirement in

year two.

Illustrations of the application of the Remuneration Policy

The charts below illustrate the remuneration that would be paid to each of the Executive Directors, for the 2023 financial year, under three

different performance scenarios: (i) minimum; (ii) on target; and (iii) maximum. The elements of remuneration have been categorised into

three components: (i) fixed; (ii) annual bonus (deferred bonus); and (iii) LTIP.

In line with the regulations on policy scenarios, we have also included an additional reference point to show indicative share price growth

of 50% over three years (being the performance period of the LTIP) at maximum.

Chief Executive Oﬀicer (Graeme Watt)

Chief Financial Oﬀicer (Graham Charlton)

2,800

2,400

2,000

’

1,600

1,200

800

400

1,411

29%

41%

585

100%

2,238

37%

26%

2,651

47%

31%

22%

’

1,800

1,500

1,200

900

600

300

Maximum

(including

50% share

price growth)

942

29%

41%

391

100%

1,493

37%

26%

1,769

47%

31%

22%

Maximum

(including

50% share

price growth)

Fixed

Bonus

LTIP

Fixed

Bonus

LTIP

Annual Report and Accounts 2022 Softcat plc

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P A R T C – D I R E C T O R S ’ R E M U N E R A T I O N P O L I C Y C O N T I N U E D

Pay at risk
The charts below set out the single figure of each Executive Director based on whether the elements remain ‘at risk’. For example:

• payment is subject to continuing employment for a period (deferred shares and LTIP awards); or

• performance conditions have to still be satisfied (annual bonus plan and LTIP awards); or

• elements are subject to clawback or malus for a period over which the Company can recover sums paid or withhold vesting. Further

details of what triggers clawback or malus are set out below.

Figures have been calculated based on target performance. The charts have been based on the same assumptions as set out above for
the illustrations of the application of the Remuneration Policy.

Chief Executive Officer (Graeme Watt)

59+

‘At risk’: £827,105

Salary: £551,403

Pension and benefits: £32,174

Annual bonus: £413,552

LTIP: £413,553

2022/23

2023/24

2024/25

2025/26

2026/27

2027/28

Subject
to malus

Subject
to clawback

Subject
to performance

Post-vesting
holding

Chief Financial Officer (Graham Charlton)

59+

‘At risk’: £551,403

Salary: £367,602

Pension and benefits: £22,984

Annual bonus: £275,701

LTIP: £275,702

2022/23

2023/24

2024/25

2025/26

2026/27

2027/28

Subject
to malus

Subject
to clawback

Subject
to performance

Post-vesting
holding

Malus and clawback
The following describes the malus and clawback provisions in the incentive plans:

• Malus is the adjustment of unpaid bonus, outstanding LTIP awards and deferred share bonus awards under the Bonus Plan as a result

of the occurrence of one or more circumstances listed below. The adjustment may result in the value being reduced to zero.

• Clawback is the recovery of payments under the Bonus Plan or vested LTIP awards as a result of the occurrence of one or more

of the circumstances listed below.

The circumstances in which malus and clawback could apply are as follows:

• the discovery that the assessment of any performance target or condition in respect of a bonus award or LTIP award was based

on error, or inaccurate or misleading information; and/or

• the discovery that any information used to determine the number of ordinary shares subject to a bonus award or LTIP award was

based on error, or inaccurate or misleading information; and/or

• the action or conduct of a holder of a bonus award or LTIP award which, in the reasonable opinion of the Board, amounts to fraud

or gross misconduct; and/or

• events or behaviour of a holder of a bonus award or LTIP award leading to the censure of the Company by a regulatory authority or
having a significant detrimental impact on the reputation of the Company, provided that the Board is satisfied that the relevant holder
of a bonus award or LTIP award was responsible for the censure or reputational damage and that the censure or reputational
damage is attributable to him or her; and/or

• the Company, or entities representing a material proportion of the Group, becomes insolvent or otherwise suffers a corporate failure.

122

Softcat plc Annual Report and Accounts 2022

39
+
2
+
K
39
+
2
+
K
Malus

Clawback

Annual Bonus Plan

Deferred Share Bonus Plan

Long Term Incentive Plan

Up to the date of payment
of a cash bonus

To the end of the three-year
deferral period

To the end of the three-year
vesting period

Three years post the bonus
determination

n/a

Two years post-vesting

The rules of the plans will be amended to include an event of insolvency or a corporate failure. The Committee believes otherwise that the
rules of the plans provide sufficient powers to enforce malus and clawback where required.

Discretion
The Committee has discretion in several areas of policy as set out in this report.

The Committee may also exercise operational and administrative discretions under relevant plan rules approved by shareholders as set
out in those rules. In addition, the Committee has the discretion to amend policy with regard to minor or administrative matters where it
would be, in the opinion of the Committee, disproportionate to seek or await shareholder approval.

It is the Committee’s intention that any outstanding commitments made in line with its policies prior to admission to the London Stock
Exchange in 2015 will be honoured, even if satisfaction of such commitments may be inconsistent with policy.

Recruitment policy
The Company’s principle is that the remuneration of any new Executive Director recruited will be assessed in line with the same principles
as for the incumbent Executive Directors, as set out in the Remuneration Policy table above. The Committee is mindful that it wishes to avoid
paying more than it considers necessary to secure a preferred candidate with the appropriate calibre and experience needed for the
role. In setting the remuneration for new recruits, the Committee will have regard to guidelines and shareholder sentiment regarding
one-off or enhanced short-term or long-term incentive payments as well as considering the appropriateness of any performance
measures associated with an award.

The Company’s detailed policy when setting remuneration for the appointment of new Directors is summarised in the table below:

Remuneration element

Recruitment policy

Salary, benefits
and pension

Annual bonus

These will be set in line with the policy for existing Executive Directors.

Maximum annual participation will be set in line with the Company’s policy for existing Executive Directors and will not
exceed 200% of salary.

LTIP

Maximum annual participation will be set in line with the Company’s policy for existing Executive Directors and will not
exceed 200% of salary in normal circumstances and 250% of salary in exceptional circumstances.

‘Buyout’ of incentives
forfeited on cessation
of employment

Where the Committee determines that the individual circumstances of recruitment justify the provision of a buyout, the
equivalent value of any incentives that will be forfeited on cessation of an Executive Director’s previous employment will be
calculated taking into account the following:

• the proportion of the performance period completed on the date of the Executive Director’s cessation

of employment;

• the performance conditions attached to the vesting of these incentives and the likelihood of them being satisfied; and

• any other terms and conditions having a material effect on their value (‘lapsed value’).

The Committee may then grant an award up to the same value as the lapsed value, where possible, under the
Company’s incentive plans. To the extent that it was not possible or practical to provide the buyout within the terms of
the Company’s existing incentive plans, a bespoke arrangement would be used.

Maximum variable
remuneration

The maximum variable remuneration which may be granted in normal circumstances is 400% of salary
(450% of salary if the maximum LTIP grant is made).

Where an existing employee is promoted to the Board, the policy set out above would apply from the date of promotion but there would
be no retrospective application of the policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing
elements of the remuneration package for an existing employee would be honoured and form part of the ongoing remuneration of the
person concerned. These would be disclosed to shareholders in the Remuneration Report for the relevant financial year.

The Company’s policy when setting fees for the appointment of new Non-Executive Directors is to apply the policy which applies to
current Non-Executive Directors.

Annual Report and Accounts 2022 Softcat plc

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P A R T C – D I R E C T O R S ’ R E M U N E R A T I O N P O L I C Y C O N T I N U E D

Payment for loss of office
The Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain liquidated damages clauses and
do not contain a fixed term of appointment. If a contract is to be terminated, the Committee will determine such mitigation as it considers
fair and reasonable in each case. There is no agreement between the Company and its Executive Directors or employees providing for
compensation for loss of office or employment that occurs because of a takeover bid.

The Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing
legal obligation (or by way of damages for breach of such an obligation), or by way of settlement or compromise of any claim arising in
connection with the termination of an Executive Director’s office or employment.

Element

Principles

Overview of policy

The Committee will honour Executive Directors’ contractual entitlements.
If a contract is to be terminated, the Committee will determine such mitigation as it considers fair and reasonable
in each case.

Salary, benefits
and pension

These will be paid over the notice period. The Company has discretion to make a payment as set out above.
In addition, provision is retained to make a payment in lieu of notice.

Cash bonus awards

Good leavers: performance conditions will be measured at the bonus measurement date. Bonuses will normally
be pro-rated for the period worked during the financial year.

Other leavers: no bonus payable for year of cessation.

Discretion: the Remuneration Committee has the following elements of discretion:

• to determine that an Executive is a good leaver. It is the Committee’s intention to only use this discretion in

circumstances where there is an appropriate business case, which will be explained in full to shareholders; and

• to determine whether to pro-rate the bonus to time. The Remuneration Committee’s normal policy is that it will pro-

rate bonus for time. It is the Committee’s intention to use discretion to not pro-rate in circumstances where there is an
appropriate business case, which will be explained in full to shareholders.

Share bonus awards Good leavers: all subsisting deferred share awards will vest at the end of the original deferral period.

Other leavers: lapse of any unvested deferred share awards.

Discretion: the Remuneration Committee has the following elements of discretion:

• to determine that an Executive is a good leaver. It is the Remuneration Committee’s intention to only use this
discretion in circumstances where there is an appropriate business case, which will be explained in full to
shareholders;

• to vest deferred shares at the end of the original deferral period or at the date of cessation. The Remuneration

Committee will make this determination depending on the type of good leaver reason resulting in the cessation; and

• to determine whether to pro-rate the maximum number of shares to the time from the date of grant to the date

of cessation. The Remuneration Committee’s normal policy is that it will not pro-rate awards for time. The Committee
will determine whether to pro-rate based on the circumstances of the Executive Director’s departure.

LTIP

Good leavers: pro-rated to time and performance in respect of each subsisting LTIP award.

Other leavers: lapse of any unvested LTIP awards.

Discretion: the Remuneration Committee has the following elements of discretion:

• to determine that an Executive is a good leaver. It is the Remuneration Committee’s intention to only use this discretion

in circumstances where there is an appropriate business case, which will be explained in full to shareholders;

• to measure performance over the original performance period or at the date of cessation. The Remuneration

Committee will make this determination depending on the type of good leaver reason resulting in the cessation; and

• to determine whether to pro-rate the maximum number of shares to the time from the date of grant to the date
of cessation. The Remuneration Committee’s normal policy is that it will pro-rate awards for time. It is the
Remuneration Committee’s intention to use discretion to not pro-rate in circumstances where there is an appropriate
business case, which will be explained in full to shareholders.

Other contractual
obligations

There are no other contractual provisions other than those set out above.

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Softcat plc Annual Report and Accounts 2022

A good leaver reason is defined as cessation in the following circumstances:

• death;

• ill health;

• injury or disability;

• redundancy;

• retirement;

• transfer of employment to a company which is not a Group company; and

• at the discretion of the Committee (as described above).

Cessation of employment in circumstances other than those set out above is cessation for other reasons.

Change of control
The Committee’s policy on the vesting of incentives on a change of control is summarised below:

Name of incentive plan

Change of control

Discretion

ABP cash awards

Pro-rated to time and performance to the date
of the change of control.

ABP deferred
share awards

Subsisting deferred share awards will vest on a
change of control.

LTIP

The number of shares subject to subsisting LTIP
awards will vest on a change of control, pro-rated
to time and performance.

Non-Executive Director remuneration

The Committee has discretion regarding whether to pro-rate the
bonus to time. The Committee’s normal policy is that it will pro-rate
the bonus for time. It is the Committee’s intention to use its discretion
to not pro-rate in circumstances only where there is an appropriate
business case, which will be explained in full to shareholders.

The Committee has discretion regarding whether to pro-rate the
award to time. The Committee’s normal policy is that it will not
pro-rate awards for time. The Committee will make this determination
depending on the circumstances of the change of control.

The Committee will determine the proportion of the LTIP award
which vests taking into account, among other factors, the period
of time the LTIP award has been held by the participant and the
extent to which any applicable performance conditions have
been satisfied at that time.

Element of remuneration

Non-Executive
Director and
Chair fees

Changes from
previous policy: none.

How it supports the Company’s
short and long-term strategic
objectives

Operation

Provides a level of fees to
support recruitment and
retention of Non-Executive
Directors and a Chair with
the necessary experience to
advise and assist
with establishing and
monitoring the Company’s
strategic objectives.

The Board is responsible for setting
the remuneration of the Non-Executive
Directors. The Remuneration Committee is
responsible for setting the Chair’s fees.

Non-Executive Directors are paid an annual
fee and additional fees for chairing Committees.
The Chair does not receive any additional fees
for membership of Committees. A fee is also
paid to the Designated Non-Executive Director
responsible for wider workforce engagement.

Fees are reviewed annually based
on equivalent roles in the comparator group
used to review salaries paid to the Executive
Directors. Fees are set at broadly the median
of the comparator group.

Non-Executive Directors and the Chair do
not participate in any variable remuneration.
Non-Executive Directors and the Chair do not
participate in benefits arrangements, with the
exception of benefit programmes available to
employees which have the purpose of
reducing environmental emissions.

Performance
metrics

None.

Opportunity

The fees for Non-Executive
Directors and the Chair are
set at broadly the median
of an appropriate
comparator group.

In general, the level of fee
increase for the Non-
Executive Directors and the
Chair will be set taking
account of any change in
responsibility and will take
into account the general
rise in salaries across the
UK workforce.

The Company will pay
reasonable expenses
incurred by the Non-
Executive Directors and
the Chair and may settle
any tax incurred in relation
to these.

Annual Report and Accounts 2022 Softcat plc

125

Corporate governanceR E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D

P A R T C – D I R E C T O R S ’ R E M U N E R A T I O N P O L I C Y C O N T I N U E D

Executive Director contracts and letters of appointment for Chair and Non-Executive Directors
Executive Directors

Name

Graeme Watt
Graham Charlton

Non-Executive Directors

Name

Martin Hellawell
Robyn Perriss
Vin Murria
Karen Slatford

Lynne Weedall

Date of service contract

1 April 2018
11 July 2022

Nature
of contract

Rolling
Rolling

Notice periods

From
Company

From
Director

Compensation
provisions for
early termination

Twelve months
Twelve months

None
None

Date of letter of appointment

1 April 2018
21 May 2019
3 November 2015
22 October 2019

21 March 2022

Note:
Graham Charlton’s original service contract was revised and amended during the year to reflect changes in legislation since his original contract was signed and also to provide more
consistency with Graeme Watt’s service contract.

The Committee’s policy for setting notice periods is that a twelve-month period will apply for Executive Directors.

The Non-Executive Directors of the Company (including the Chair) do not have service contracts. The Non-Executive Directors are appointed by letters of appointment. Each Independent
Non-Executive Director’s term of office runs for a three-year period.

The initial terms of the Non-Executive Directors’ positions are subject to their re-election by the Company’s shareholders at the AGM and to re-election at any subsequent AGM at which
the Non-Executive Directors stand for re-election. All Directors will be put forward for re-election by shareholders on an annual basis.

Statement of considerations of employment conditions elsewhere in the Company
The Remuneration Policy for all employees is determined in terms of best practice and ensuring that the Company is able to attract and
retain the best people. This principle is followed in the development of our Policy.

The remuneration strategy of the Company has been designed to ensure all employees share in its success through performance-related
remuneration and share ownership. Two remuneration arrangements operate: the LTIP for Executive Directors and for some members of
the senior team and annual bonus deferral for Executive Directors. Awards under both these plans will provide alignment between senior
leaders and our shareholders based on overall corporate performance of the business.

For all employees, the Company operates a SIP. Under the SIP, eligible employees will have the opportunity to purchase shares in the
Company subject to certain restrictions.

The Company does not use remuneration comparison measurements. The Board has designated a Non-Executive Director responsible
for general workforce engagement. The Chair of the Remuneration Committee has directly engaged with a group of employee
representatives to explain how executive remuneration aligns with wider Company pay policy. The engagement provided useful
feedback and further assurance to the Committee that executive remuneration is considered to be well-aligned with the Company’s wider
philosophy on pay, particularly in respect of the importance of setting appropriate benchmarks for fixed pay and on the importance of
variable pay as an incentive to drive stretching performance. The Committee believes there is strong alignment between executive pay,
wider workforce pay, the Company’s culture and strategy.

In setting and operating the Policy, the pay and conditions of other employees of the Company are taken into account, including any
base salary increases awarded and any changes in pension and benefits. The Committee is provided with data on the remuneration
structure for management-level tiers below the Executive Directors and uses this information to ensure consistency of approach throughout
the Company. The Committee is also informed of the proposed remuneration of Softcat’s Company Secretary.

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Softcat plc Annual Report and Accounts 2022

Link to objectives
The following table demonstrates how key objectives are reflected consistently in plans operating at various levels within the Company
and how our incentive schemes support the Company strategy.

Strategic objectives

Generate
sector-leading
value for
shareholders

Growth in profit
from existing
customers

Win new
customers

Equity
ownership
and retention
of shares

Retain and
reward
Executive team
to deliver the
strategy

Plan

SIP

Annual
bonus

Purpose

Eligibility

To broaden share ownership
and share in corporate
success over the medium term

All eligible employees

Incentivise and reward
short-term performance
At senior level, an element of
bonus is deferred in shares

Executive Directors,
senior executives,
senior managers
and managers

LTIP

Incentivise and reward
long-term performance

Executive Directors
and senior executives

Statement of consideration of shareholder views
The Committee takes the views of the shareholders seriously and these views are taken into account in shaping Remuneration Policy and
practice. Shareholder views are considered when evaluating and setting the remuneration strategy and the Committee commits to
consulting with key shareholders prior to any significant changes to its Remuneration Policy.

This year the Committee has consulted with major shareholders in advance of the new Remuneration Policy which will be proposed at the
Company’s 2022 AGM. We have obtained significant shareholder support as a result of the consultations. The Committee also consulted
with certain proxy voting advisory bodies, including the Investment Association (‘IA’) and the Institutional Shareholder Services (‘ISS’).

The Committee explained the rationale for the changes to the Remuneration Policy and invited comments. Responses were provided for
any question from those with whom the Committee consulted.

Shareholder support remains strong for the remuneration practices of the Company. The Remuneration Policy received 98.6% votes in
favour at the 2019 AGM. The advisory vote for the Annual Report on Remuneration at the 2021 AGM received 97.4% votes in favour.
The Committee is grateful for the continuing support of shareholders.

Historical awards
All historical awards that were granted under any current or previous bonus or share schemes operated by the Company, and which
remain outstanding, remain eligible to vest on the basis of their original award terms.

Policy on external appointments
Executive Directors are permitted to accept appropriate outside non-executive director appointments so long as the overall commitment
is compatible with their duties as Executive Directors and is not thought to interfere with the business of the Company. Any fees received
in respect of these appointments are retained directly by the relevant Executive Director.

Lynne Weedall
Chair of the Remuneration Committee

24 October 2022

Annual Report and Accounts 2022 Softcat plc

127

Corporate governanceD I R E C T O R S ’ R E P O R T

The following is the report of the Directors of the Company for the financial
year ended 31 July 2022.

Non-Financial Reporting Directive
In accordance with Sections 414CA and 414CB of the Companies Act 2006, the following chart summarises where you can find further
information in this Annual Report on each of the key areas of disclosure that these sections require.

Environmental, social and
employee-related matters

• This year we have provided further disclosure on Softcat’s environmental commitments, including reporting on

the Task Force on Climate-related Financial Disclosures (‘TCFD’). Our Green Teams continue to raise
awareness of the importance of environmental issues through their activities.

• Our positive and inclusive culture, as well as good employee engagement, are integral to Softcat’s success.
Both the Board and management understand this and a considerable amount of time is spent ensuring these
are maintained.

• We discuss each of these areas in the report on Social Value and in the report on TCFD and Sustainability on

pages 38 to 58. Please also see the Governance Report on pages 70 to 79.

Human rights and
anti-bribery-related matters

• Human rights abuse and modern slavery risks are not considered a material issue for the Company.

• We operate anti-bribery procedures which support compliance with the UK Bribery Act and other legislation.

• We discuss each of these areas in the report on Social Value on pages 38 to 42 and in the Governance

Report on pages 70 to 79.

Diversity policy
and approach

• We continue to put great importance on the positive benefits that diversity of gender, ethnicity, experience,

background and viewpoints can bring to the business.

• We support numerous initiatives to help improve diversity and inclusion. Progress on these is monitored by both
senior management and the Board. The Board acknowledges there is more we need to do to improve diversity
in areas of our business and we will continue with our efforts.

• We discuss some of the actions taken in response to employee engagement in the Section 172 Statement on
pages 34 to 37 of this report, and our approach to diversity in the report on Social Value on pages 38 to 42,
in the Chair’s Statement on pages 12 to 15 and in the Nomination Committee Report on pages 90 to 95.

Business model, policies,
principal risks and KPIs

• We operate a business model which includes non-financial inputs and outputs. Our business model is

underpinned by our straightforward strategy.

• Risks, including financial and non-financial risks, are monitored by management and by the Audit Committee.

The Audit Committee also considers the key internal controls for the business.

• The Board regularly reviews both financial and non-financial KPIs, which are relevant for monitoring the

performance of the business and have a clear link to delivering against our strategy. We disclose performance
against our key KPIs.

• We discuss our business model on pages 20 and 21 and key risks on pages 59 to 63 and selected KPIs are
reported on pages 30 and 31. Our strategy is discussed in various places in the Strategic Report, including
pages 28 and 29.

Directors’ Report
The Directors present their report for the year to 31 July 2022.

Softcat plc is a public company limited by shares, incorporated in England and Wales, and its shares are traded on the premium segment
of the Main Market of the London Stock Exchange.

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Softcat plc Annual Report and Accounts 2022

Disclosures incorporated by reference
For the purposes of compliance with Disclosure Guidance and Transparency Rules (‘DTR’) DTR 4.1.5 R (2) and DTR 4.1.8 R, the required
content of the ‘Management Report’ can be found in the Strategic Report and this Directors’ Report. The following disclosures required to
be included in this Directors’ Report have been incorporated by way of reference to other sections of this report and should be read in
conjunction with this report:

• Corporate Governance Statement – refer to page 66 of this report;

• statement explaining how the Directors have had regard to the need to foster the Company’s business relationships with suppliers,
customers and others, and the effect of that regard, including on the principal decisions taken by the Company during the financial
year – refer to pages 34 to 37 of this report;

• strategy and relevant future developments – refer to pages 22 to 26 and pages 28 to 29 of the Strategic Report; and

• financial risk management objectives and policies – refer to the ‘Risk Management’ section included in the Strategic Report on pages

59 to 64 and note 21 to the financial statements.

The information in respect of the Non-Financial Reporting Directive appearing in this Directors’ Report is also incorporated by reference as
required in the Strategic Report.

Directors of the Company
The following Directors have held office since 1 August 2021:

Name

Position

Date of appointment

M Hellawell
G Watt
G Charlton
V Murria
K Slatford
R Perriss
L Weedall

Chair
Chief Executive
Chief Financial Officer
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director

Appointed as a Director on 24 March 2006 and Chair on 1 April 2018
Appointed 1 April 2018
Appointed 19 March 2015
Appointed 3 November 2015
Appointed 5 December 2019
Appointed 1 July 2019
Appointed 3 May 2022

Biographies of the Directors as at 24 October 2022 can be found on pages 68 and 69.

Powers of Directors
The general powers of the Directors are contained within UK legislation and the Company’s Articles of Association (the ‘Articles’). The
Directors are entitled to exercise all powers of the Company, subject to any limitations imposed by the Articles or applicable legislation.

Directors’ interests
The interests of the Directors in the issued shares of the Company at 31 July 2022 are disclosed in the Remuneration Report on page 108.
The Remuneration Report also sets out details of any changes in those interests between the year end and up to the date of this report.

No Director had a material interest in any contract of significance with the Company at any time during the financial year.

Appointment and replacement of Directors
The rules about the appointment and replacement of Directors are contained in the Articles. They provide that Directors may be appointed
by ordinary resolution of the members or by a resolution of the Directors. Any Director so appointed must retire and put themselves
forward for election at the next Annual General Meeting (‘AGM’). Directors wishing to continue to serve as members of the Board will
seek re-election annually in accordance with the UK Corporate Governance Code (the ‘Code’).

In accordance with the Code, at the 2022 AGM each Director will stand for election or re-election.

Indemnification of Directors
The Directors have the benefit of an indemnity provision contained in the Articles. The provision was in force during the year ended 31 July 2022
and remains in force and relates to certain losses and liabilities which the Directors may incur to third parties in the course of acting as
Directors of the Company. In addition, Directors and officers of the Company and its subsidiaries are covered by directors’ and officers’
liability insurance.

Annual Report and Accounts 2022 Softcat plc

129

Corporate governanceFurther information on the Company’s issued share capital can be
found in note 17 to the financial statements.

The Company passed the following resolutions on 15 December 2021:

• an ordinary resolution providing the Directors with authority to:

(i) allot ordinary shares up to a maximum nominal amount

of £33,175, to be reduced by the nominal amount allotted
or granted under paragraph (ii) below in excess of such
sum; and

(ii) allot ordinary shares up to a maximum nominal amount of

£66,350 in connection with a pre-emptive offer by way of
a rights issue, such amount to be reduced by any allotments
made under paragraph (i) above;

• special resolutions providing the Directors with authority to:

(i) allot shares or sell treasury shares for cash up to a maximum

nominal amount of £4,976; and

(ii) allot shares or sell treasury shares for cash up to a maximum

nominal amount of £4,976, in connection with an
acquisition or other capital investment;

• otherwise than to existing shareholders pro-rata to their

shareholding; and

• a special resolution providing the Directors with authority to

make market purchases of up to 19,905,081 of the Company’s
ordinary shares.

These authorities are due to expire at the Company’s AGM to be
held on 13 December 2022 and proposals for the renewal of the
authority to allot ordinary shares and to make market purchases of
the Company’s own ordinary shares are set out in the Notice of the
Annual General Meeting. The Directors have no current intention
of exercising the authority in respect of the purchase of the
Company’s own shares, which is sought in the best interests of
shareholders to allow the flexibility to react promptly where such
market purchases may be desirable.

There are no restrictions on the transfer or limitations on the holding
of ordinary shares and no requirements to obtain approval prior to
any transfers other than: certain restrictions which may from time to
time be imposed by laws and regulations (for example, insider
trading laws); pursuant to the Market Abuse Regulation and the
Company’s own rules whereby Directors and certain employees of
the Company require the approval of the Company to deal in the
ordinary shares; and pursuant to the Articles where there is default
in supplying the Company with information concerning interests in
the Company’s ordinary shares. There are no special control rights
in relation to the Company’s ordinary shares.

There are no agreements between holders of securities that are
known to the Company which may result in restrictions on the
transfer of securities or on voting rights.

D I R E C T O R S ’ R E P O R T C O N T I N U E D

Compensation for loss of office and change
of control
There are no agreements in place with any Director that would
provide compensation for loss of office or employment resulting
from a change of control. Change of control provisions for the
Company’s share plans may cause options and awards granted
under such plans to vest on a takeover.

The Company is not party to any other significant agreements that
take effect after, or terminate upon, a change of control.

Articles of Association
The Articles may be amended by a special resolution of the
members. At the AGM held on 12 November 2015, shareholders
approved by special resolution the amended Articles which took
effect at the date of the initial public offering (‘IPO’) on 18
November 2015.

Share capital and control
The Company’s ordinary issued share capital as at 31 July 2022
was 199,354,076 ordinary shares of 0.05p each, which have
a premium listing on the London Stock Exchange. The ordinary
share class represents over 99.9% of the Company’s total issued
share capital.

In addition to the ordinary shares, the Company also has a class
of 18,933 deferred shares which were created following the
share capital reorganisation at IPO and which are not admitted
to trading on a regulated market.

Shares acquired through the Company’s share schemes and plans
rank equally with the other shares in issue and have no special
rights. The Company has a Share Incentive Plan Trust (‘SIP Trust’) for
the benefit of employees and former employees of the Company.
As at 31 July 2022, the SIP Trust held 187,771 shares (2021:
214,622) awarded to employees as part of the free share award,
subject to service conditions. A further 353,586 shares (2021:
346,958) were held on behalf of employees who have taken part in
the Company’s voluntary partnership share purchase programme.
The SIP Trust also held 51,007 unallocated shares (2021: 51,007).

During the year ended 31 July 2022, share options were exercised
pursuant to the Long Term Incentive Plan and the Annual and
Deferred Bonus Plan, resulting in the additional listing and allotment
of 312,266 new ordinary shares.

Holders of ordinary shares are entitled to attend and speak at
general meetings of the Company, and to appoint one or more
proxies and, if they are corporations, corporate representatives
who are entitled to attend general meetings and to exercise
voting rights.

The deferred shares carry no voting rights or rights to receive any
of the profits of the Company available for distribution by way
of dividend or otherwise. On a return of capital on a winding up
of the Company (but not otherwise), the holder is entitled only to
the repayment of the amount paid up on that share after payment
of the capital paid up on each other share in the capital of the
Company and the further payment of £10,000,000 on each
such share. The deferred shares represent less than 0.01% of the
Company’s total issued share capital.

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Softcat plc Annual Report and Accounts 2022

Substantial shareholders
The substantial shareholdings in the table below represent those interests notified to the Company as at 31 July 2022 in accordance with
the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, and those holdings may have changed since
notification to the Company.

Peter Kelly1
Mawer Investment Management Limited
John Nash1

As at 31 July 2022

As at 24 October 2022

Ordinary
shares

Voting
rights

Ordinary
shares

64,976,058
9,946,370
7,244,714

32.6% 64,976,058
5.0% 9,946,370
7,244,714
3.6%

Voting
rights

32.6%
5.0%
3.6%

Note:
1. The ordinary shares held by Peter Kelly and John Nash include shares held beneficially via various entities or connected persons.

Principal shareholder and Relationship Agreement
In accordance with Listing Rule 9.8.4R(14), the Company has set
out below a statement describing the Relationship Agreement
entered into by the Company with its principal shareholder (the
‘Relationship Agreement’). As at 24 October 2022, Peter Kelly, the
founder of Softcat plc, held 32.6% of the issued ordinary share
capital of the Company.

On 13 November 2015, the Company and Peter Kelly entered
into the Relationship Agreement. The principal purpose of the
Relationship Agreement is to ensure that the Company will be
capable of carrying on its business independently of Peter Kelly
and certain persons deemed to be connected with him
(‘Connected Persons’).

Pursuant to the Relationship Agreement, Peter Kelly, inter alia:

• shall procure that all transactions, agreements or arrangements
entered into between the Company and Peter Kelly (or any of
his Connected Persons) are conducted on an arm’s length
basis, on normal commercial terms and in accordance with the
related party transaction rules set out in Chapter 11 of the Listing
Rules and Peter Kelly shall abstain from voting on any resolution
to which LR 11.1.7R(4) of the Listing Rules applies relating to a
transaction with Peter Kelly (or any of his Connected Persons)
as the related party; and

• shall (and shall procure that each of his Connected Persons
shall) (i) not take any actions that would reasonably be
expected to have the effect of preventing the Company from
complying with its obligations under the Listing Rules or be
prejudicial to the Company’s status as a listed company or the
Company’s eligibility for listing; (ii) not propose or procure the
proposal of a shareholder resolution that would circumvent or
appear to circumvent the proper application of the Listing Rules;
and (iii) not exercise his voting rights or other rights to procure
any amendment to the Articles which would be contrary to the
maintenance of the Company’s independence, including its
ability to operate and make decisions independently from
Peter Kelly, or otherwise inconsistent with the provisions of the
Relationship Agreement.

Furthermore, the Company and Peter Kelly have agreed that for so
long as Peter Kelly (together with any of his Connected Persons)
holds 10% of the Company’s issued share capital, he shall be
entitled to appoint one Non-Executive Director of the Company,
although no such Director has been appointed as at the date of
this Annual Report.

The Relationship Agreement will remain in effect for so long as: (a)
Peter Kelly (and/or any of his Connected Persons) holds at least
10% of the Company’s issued share capital; and (b) the ordinary
shares are admitted to the premium listing segment of the Official
List maintained by the Financial Conduct Authority.

The Company has and, in so far as it is aware, Peter Kelly and
his Connected Persons have complied with the independence
provisions set out in the Relationship Agreement from the date
of the agreement.

Risk regarding financial instruments
The financial risk management objectives and policies are
disclosed in note 21 to the financial statements.

Research and development
The Company did not carry out any research and development
activities during the year (2021: none).

Political donations
The Company did not make any political donations during the year
(2021: £Nil).

A resolution to authorise the Company to make political payments
up to an aggregate amount of £100,000 has been included for
shareholder consideration in the Notice of AGM for 2022. The
Company does not intend to make any payments to political
organisations or to incur other political expenditure; however, this
resolution has been proposed to ensure that the Company has
authority under the wide definition used in the Companies Act
2006 of matters constituting political donations.

Greenhouse gas emissions and energy consumption
Information relating to the following is detailed in the report on
TCFD and Sustainability, on pages 43 to 58 of the Strategic
Report:

• greenhouse gas emissions; and

• energy consumption and energy efficiency.

Corporate social responsibility
Details on our commitment to corporate social responsibility can
be found in the report on Social Value on pages 38 to 42 of the
Strategic Report.

Annual Report and Accounts 2022 Softcat plc

131

Corporate governance

D I R E C T O R S ’ R E P O R T C O N T I N U E D

Equality and diversity
The Company operates an equal opportunities policy which
endeavours to treat individuals fairly and not to discriminate on
the basis of gender, disability, race, national or ethnic origin,
sexual orientation or marital status. Applications for employment
are fully considered on their merits, and employees are given
appropriate training and equal opportunities for career
development and promotion.

The Company is committed to ensuring that adequate policies and
procedures are in place to enable disabled applicants to receive
training to perform safely and effectively and to provide
development opportunities to ensure they reach their full potential.
Where an individual becomes disabled during their employment
with the Company, the Company will seek to provide, wherever
possible, continued employment on normal terms and conditions.
Adjustments will be made to the environment and duties or,
alternatively, suitable new roles within the Company will be
secured with additional training where necessary.

Details of the Company’s gender and ethnicity breakdown are
given in the report on Social Value on page 38.

The Company places considerable value on the involvement of its
employees and continues to keep them informed on matters
affecting them as employees. This is undertaken through a variety

of methods including, but not limited to, regular Company
meetings, team briefings, Company days, emails and the intranet.
Vin Murria serves as the Designated Non-Executive Director for
Workforce Engagement.

At team meetings, managers are responsible for ensuring that
information sharing, discussion and feedback take place on a
regular basis. As a result of these meetings management can
communicate the financial and economic factors affecting the
Company and ensure that the views of employees are taken
into account in Company decisions which are likely to affect
their interests.

Post-balance sheet events
Dividend
The Board recommends a final ordinary dividend of 16.6p per
ordinary share and a special dividend of 12.6p per ordinary
share to be paid on 19 December 2022 to all ordinary shareholders
who were on the register of members at the close of business on
11 November 2022. Shareholders will be asked to approve the
final and special dividends at the AGM on 13 December 2022.

The Company’s dividend and distributions policy is detailed in the
Governance Report on page 76.

Requirements of the Listing Rules
The following table provides references to where the information required by Listing Rule 9.8.4R is disclosed:

Listing Rule requirement

A statement of the amount of interest capitalised during the period under review and details of any
related tax relief.

Location in Annual Report

Not applicable

Information required in relation to the publication of unaudited financial information.

Not applicable

Details of any long-term incentive schemes and Directors’ interests.

Directors’ Remuneration Report,
pages 98 to 127

Details of any arrangements under which a Director has waived emoluments, or agreed to waive any
future emoluments, from the Company.

Directors’ Remuneration Report,
pages 98 to 127

Details of any non-pre-emptive issues of equity for cash.

Directors’ Report, page 130

Details of any non-pre-emptive issues of equity for cash by any unlisted major subsidiary undertaking. No such share allotments

Details of parent participation in a placing by a listed subsidiary.

Details of any contract of significance in which a Director is or was materially interested.

Details of any contract of significance between the Company (or one of its subsidiaries) and a
controlling shareholder.

Details of waiver of dividends by a shareholder.

Not applicable

Board statement in respect of Relationship Agreement with the controlling shareholder.

Directors’ Report, page 131

Auditor
Ernst & Young LLP (‘EY’) has signified its willingness to continue in office as auditor to the Company and the Company is satisfied that EY is
independent and that there are adequate safeguards in place to safeguard its objectivity. A resolution to reappoint EY as the Company’s
auditor will be proposed at the 2022 AGM.

Branches
The Company operates branches in Australia, the United States of America, the Netherlands, Singapore, Hong Kong and Ireland.

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Softcat plc Annual Report and Accounts 2022

Going concern
Overview
In considering the going concern basis for preparing the financial
statements, the Directors consider the Company’s objectives and
strategy, its principal risks and uncertainties in achieving its
objectives and its review of business performance and financial
position, which are all set out in the Strategic Report (see pages 1
to 64) and Chief Financial Officer’s review sections (see pages 32
to 33) of this Annual Report. Given the current macro-economic
environment and considering the latest guidance issued by the FRC
the Directors have undertaken a fully comprehensive going
concern review.

The Company has modelled three scenarios in its assessment of
going concern. These are:

• the base case;

• the severe but plausible case; and

• the reverse stress test case.

Further details, including the analysis performed and conclusion
reached, are set out below.

The Directors have reviewed detailed financial forecasts for a
13-month period from the date of this report (the going concern
period) until 30 November 2023. All the forecasts reflect the
payment of the FY2022 dividend of £58.2m which will be paid
in December 2022 subject to approval at the AGM.

The Company operates in a resilient industry. Our UK Corporate
customer base spend is increasingly non-discretionary as IT continues
to be vital to gain competitive advantage in an increasingly digital
age. Public Sector, a large and fast-growing area of the business,
continues to invest in technology to provide efficient services to the
public and this has continued apace despite the pandemic and recent
turbulence in the UK economy. The Company strategy remains
unchanged and will continue to focus on increasing the customer
base and spend per customer during the going concern period.

Liquidity and financing position
At 31 July 2022, the Company held instantly accessible cash and
cash equivalents of £97.3m, while net current assets were £190.7m.
Note 21 to the financial statements includes the Company’s
objectives, policies and processes for managing its capital, its
financial risk management and its exposures to credit risk and
liquidity risk. Operational cash flow forecasts for the going
concern period are sufficient to support the business with the
£60m cash floor set by the Board not being breached.

There is a sufficient level of liquidity headroom post mitigation
across the going concern forecast period in base and severe but
plausible scenarios considered and outlined in more detail below.

Challenging economic environment
Management have, in all three scenarios, considered the principal
challenges to short term business performance which are expected
to be:

• an economic downturn in the UK economy, aided by high

broad-based inflation and increasing interest rates;

• continued impact of hardware supply constraints, resulting from
the global semi-conductor shortage, although this is forecast to
improve and is isolated to a select few vendors; and

• higher risk of credit losses.

Despite the impact of Omicron and further lockdown period on
the year just finished, the Company has traded well, delivering
double-digit year-on-year growth. The Board continue to monitor
the global and national economic environment and organise
operations accordingly.

Base case
The base case, which was approved by the Board in October 2022,
takes into account the FY2023 budget process which includes
estimated growth and increased costs across the going concern
period and is consistent with the actual trading experience through
to September 2022. The key inputs and assumptions in the base
case include:

• continued revenue growth in line with historic rates;

• rebate income continues to be received in proportion to cost of

sales as in FY2022;

• employee commission is incurred in line with the gross margin; and

• increased levels of cost to reflect continued investment in our
people, the businesses IT infrastructure as well as a return of
travel and staff entertainment costs more in line with pre-COVID
levels than we have seen in the past twelve months.

The Company has taken a measured approach to the base case
and has balanced the expected trading conditions with available
opportunities in an increasingly resilient area of customer spend,
which is supported by the current financial position. In making our
forecasts we balanced our customer needs alongside employee
welfare. We have in place a hybrid working model with a balance
of remote working and return to the office, which has not had a
noticeable impact on the operational performance of the
Company. Year to date trading to the end of September 2022 is
consistent with the base case forecast.

Severe but plausible case
Given the current economic challenges facing our customer base
and supply chain, we have modelled a severe but plausible
scenario. In this case we have modelled a decline in revenue,
versus the base case, which is below any historic trend and more
severe than experienced during the height of the pandemic. Further
impacts of this scenario, such as reduced margins and greater
credit losses, have also been considered.

The key inputs and assumptions include:

• an average 7.5% reduction in revenue, compared to the base case;

• reduced gross profit margins of 1% in the period;

• additional bad debt write offs of £5m across the forecast period;

• extending the debtor days from historic levels achieved and no

change to historic supplier payment days;

• paying a reduced interim dividend in line with lower profitability

but still within the range set out in the dividend policy; and

• both commission cost and rebate income adjusted downwards
in line with reduced profitability and cost of sales, but at the
same percentage rates as in the base case.

Annual Report and Accounts 2022 Softcat plc

133

Corporate governanceD I R E C T O R S ’ R E P O R T C O N T I N U E D

Going concern continued
Severe but plausible case continued
The purpose of this scenario was to consider if there was a significant
risk that the Company would move to being cash negative in any of
the months in the going concern period. Even at these lower levels
of activity, which the Directors believe is a highly unlikely outcome,
the Company continues to be profitable, and maintains a positive
cash balance at all times. Despite this, management have modelled
further cost saving and working capital action (see mitigating
actions) that will enable the Company to mitigate the impact of
reduced cash generation further and achieve the Board’s desired
minimum cash position, should this scenario occur. The Directors
are confident that they can implement these actions if required.

Going concern conclusion
Based on the forecast and the scenarios modelled, together with
the performance of the Company to date, the Directors consider
that the Company has significant liquidity headroom to continue in
operational existence for the thirteen-month period from the date of
this report (the going concern period) until 30 November 2023.
Accordingly, at the October 2022 Board meeting, the Directors
concluded from this analysis it was appropriate to continue to
adopt the going concern basis in preparing the financial
statements. Should the impact of these conditions be even more
prolonged or severe than currently forecast by the Directors under
the severe but plausible case scenario, the Company would need
to implement additional operational or financial measures.

Mitigating actions
There are several potential management actions that have not
been included in the severe but plausible forecast and it is
estimated that the total cash impact of these actions is in excess
of a £18m cost reduction on an annualised basis and additional
annual working capital savings of £30m, before considering the
cost of delivering them and the point at time at which they were
delivered. The actions which if implemented would offset the
reduced activity:

• bonus costs scaled back in line with performance;

• no interim dividend in H2 of FY2023;

• savings in discretionary areas of spend;

• delayed payment to suppliers foregoing early settlement

discount; and

• short term supplier payment management.

The mitigations are deemed achievable and reasonable as the
Company benefits from a flexible business model with a high
proportion of costs linked to performance.

Reverse stress test
The Directors have performed a reverse stress test exercise to see
how extreme conditions would need to be for the Company to
become cash negative within a twelve-month period. The
conditions go significantly further than the severe but plausible
scenario and reflect a scenario that the business consider remote.
The four combined stresses modelled are as follows:

1. reduction of 15% in gross invoiced income, compared to the

base case;

2. reduced achievable gross margin by 3%;

3. additional bad debt write offs of £10m per year across the

forecast period; and

4. extending the debtor days by three days from historic levels
achieved and no change to historic supplier payment days.

All four inputs are greater than the business has ever experienced
in its history. In the modelled scenario, prior to mitigations, the
business could become cash negative within twelve months.

Whilst the Board considers such a scenario to be extremely remote
a programme of further actions to mitigate the impact, in excess of
those set out above, would be actioned should the likelihood of
such a scenario increase. The Board considers the forecasts and
assumptions used in the reverse stress test, as well as the event that
could lead to it, to be extremely remote.

134

Softcat plc Annual Report and Accounts 2022

Disclosure of information to the auditor
The Directors in office at the time of approval of the Directors’
Report are listed on pages 68 to 69 and have each confirmed
that:

• so far as he or she is aware, there is no relevant audit

information of which the Company’s auditor is unaware; and

• he or she has taken all the steps that he or she ought to have
taken as a Director to make himself or herself aware of any
such relevant audit information and to establish that the
Company’s auditor is aware of that information.

This confirmation is given and should be interpreted in accordance
with the provisions of Section 418 of the Companies Act 2006.

Annual General Meeting
The Company’s 2022 AGM will take place on 13 December 2022
at the Company’s registered office: Softcat plc, Fieldhouse Lane,
Marlow, Buckinghamshire SL7 1LW.

The Chair of the AGM intends for a poll to be called in respect
of each of the resolutions to be voted on at the 2022 AGM.
In the event of a show of hands every holder of ordinary shares
who is present in person or by proxy at a general meeting has one
vote on each resolution and, on a poll, every holder of ordinary
shares who is present in person or by proxy has one vote on
each resolution for every ordinary share of which he/she is the
registered holder. A proxy will have one vote against a resolution
in the event of a show of hands in certain circumstances specified
in the Articles. The Notice of AGM specifies deadlines for
exercising voting rights. The Notice of AGM can be found in the
Investor Centre section of the Company’s website, www.softcat.com,
and is being posted at the same time as this Annual Report. The
Notice of AGM sets out the business of the meeting and provides
explanatory notes on all resolutions. Separate resolutions are
proposed in respect of each substantive issue.

A holder of ordinary shares may usually vote personally or by
proxy at a general meeting. Any form of proxy must be delivered
to the Company not less than 48 hours before the time appointed
for holding the meeting or adjourned meeting at which the person
named in the appointment proposes to vote (for this purpose, the
Directors may specify that no account shall be taken of any part of
a day that is not a working day). A corporation which is a holder
of ordinary shares in the Company may authorise such persons as
it thinks fit to act as its representatives at any general meeting of
the Company.

No holder of ordinary shares shall be entitled to attend or vote,
either personally or by proxy, at a general meeting in respect of
any ordinary share if any call or other sum presently payable to the
Company in respect of such ordinary share remains unpaid or in
certain other circumstances specified in the Articles where there is
default in supplying the Company with information concerning
interests in the Company’s ordinary shares. The results of each of
the resolutions to be voted on at the 2022 AGM will be published
to the London Stock Exchange and will be available on the
Company’s website.

The AGM is the Company’s principal forum for communication with
private shareholders and the Directors recognise its important role.
The Chair of the Board and the Chairs of the Committees, together
with the other Directors, will be available to answer shareholders’
questions at the meeting. Additionally, shareholders will be given
the opportunity to submit questions via email, to the Directors,
ahead of the meeting. Questions may be submitted to cosec@
softcat.com or by letter addressed to the Company Secretary at
the Company’s registered office. Questions should be received up
to 24 hours in advance of the meeting and a response will be
provided. Further information and requirements can be found within
the Notice of AGM.

Statement of Directors’ responsibilities in relation
to the financial statements
The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable United
Kingdom law and regulations.

Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have elected to
prepare the Company’s financial statements in accordance with
UK-adopted international accounting standards (‘IFRSs’). Under
company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state
of affairs of the Company and of the profit or loss of the Company
for that period.

In preparing these financial statements the Directors are required to:

• select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and
Errors and then apply them consistently;

• make judgements and accounting estimates that are

reasonable and prudent;

• present information, including accounting policies, in a

manner that provides relevant, reliable, comparable and
understandable information;

• provide additional disclosures when compliance with the

specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the Company’s financial position and
financial performance;

• state that UK-adopted international accounting standards have
been followed, subject to any material departures disclosed
and explained in the financial statements; and

• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Company financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also
responsible for preparing a strategic report, directors’ report,
directors’ remuneration report and corporate governance statement
that comply with that law and those regulations. The Directors are
responsible for the maintenance and integrity of the corporate and
financial information included on the Company’s website.

Fair and balanced reporting
Having taken advice from the Audit Committee, the Board
considers that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and that it provides the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.

Responsibility statement pursuant to FCA’s Disclosure
Guidance and Transparency Rule 4 (‘DTR 4’)
Each Director of the Company (whose names and functions
appear on pages 68 to 69) confirms that (solely for the purpose of
DTR 4) to the best of his or her knowledge:

• the financial statements, prepared in accordance with

UK-adopted international accounting standards give a true and
fair view of the assets, liabilities, financial position and profit of
the Company;

• the Annual Report, including the Strategic Report, includes a fair
review of the development and performance of the business
and the position of the Company, together with a description
of the principal risks and uncertainties that they face; and

• they consider the Annual Report and Accounts, taken as a

whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s
position, performance, business model and strategy.

The responsibility statement has been approved by the Board
of Directors and is signed on its behalf by:

Graeme Watt
Chief Executive Officer
24 October 2022

Graham Charlton
Chief Financial Officer
24 October 2022

The Directors’ Report has been approved by the Board of Directors
and is signed on its behalf by:

Luke Thomas
Company Secretary
24 October 2022

Annual Report and Accounts 2022 Softcat plc

135

Corporate governanceFinancial statements

I N D E P E N D E N T A U D I T O R ’ S R E P O R T

To the members of Softcat plc

Opinion
We have audited the financial statements of Softcat plc for the year ended 31 July 2022 which comprise the Statement of profit or loss
and other comprehensive income, Statement of financial position, Statement of changes in equity, Statement of cash flows and the related
notes 1 to 27, including a summary of significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and UK adopted international accounting standards.

In our opinion, the financial statements:

• give a true and fair view of the Company’s affairs as at 31 July 2022 and of its profit for the year then ended;

• have been properly prepared in accordance with UK adopted international accounting standards; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section
of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Company and we remain independent of the
Company in conducting the audit.

Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Company’s ability to continue to adopt the
going concern basis of accounting included:

• understanding management’s process and controls related to the assessment of going concern including discussion with management

to assess whether all key factors were taken into account;

• checking the arithmetical accuracy of the cash flow forecast models and assessing the Company’s historical forecasting accuracy;

• obtaining management’s going concern models which included a base case, a severe yet plausible downside cash flow scenario,

and a reverse stress test covering the going concern assessment period to 30 November 2023. These forecasts include an assessment
of available cash balances given the Company has no external debt arrangements as well as understanding how the impact of the
ongoing macro-economic uncertainty had been reflected in the forecasts;

• considering the downside scenarios, including the reverse stress case, identified by management, independently assessing whether

there are any other scenarios which should be considered, and assessing the quantum of the impact on the available cash flows of the
downside scenarios in the going concern period;

• challenging management’s assumptions within the cash flow forecasts in relation to the forecast growth rates, inflation and working
capital in the going concern period, including searching for sources of contradictory evidence in our assessment of management’s
forecasting, such as assessing historical budgeting accuracy and comparing the forecast with analyst expectations. Due to uncertainty
in the wider economic markets, we have focused our work on further sensitivities to the severe but plausible scenario and whether the
reverse stress test scenario is considered remote;

• assessing the adequacy of the going concern assessment period until 30 November 2023, considering whether any events or

conditions foreseeable after the period indicated a longer review period would be appropriate;

• inquired of management as to their knowledge of events or conditions beyond the period of their assessment that may cast significant

doubt on the entity’s ability to continue as a going concern;

• comparing management’s forecasts to actual results through the subsequent events period and performing enquiries to the date of this

report; and

• assessing if the going concern disclosures in the financial statements are appropriate and in accordance with the revised ISA (UK) 570

going concern standard.

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Softcat plc Annual Report and Accounts 2022

Our key observations
• The Directors’ assessment is that Softcat plc, on a standalone basis, has sufficient liquidity and headroom in cash throughout the going
concern period to 30 November 2023. Management’s reverse stress testing demonstrated a 18% reduction in gross profit compared
to prior year (prior to mitigations) would be required to eliminate cash held, which is more than the impact of all of management’s
downside scenarios combined.

We have not identified any material climate-related risks that should be incorporated into Softcat plc’s forecasts to 30 November 2023.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for the period to 30 November 2023.

In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company’s
ability to continue as a going concern.

Overview of our audit approach
Key audit matters

• Overstatement of performance through the misstatement of revenue recognised at or near year end

• IFRS 15 presentation of revenue in respect of principal versus agent

• Misstatement of rebate income to overstate reported results at or near year end

Materiality

• Overall materiality of £6.5m which represents 5% of profit before tax

An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the
Company. This enables us to form an opinion on the financial statements. We take into account size, risk profile, the organisation of the
Company and effectiveness of controls, including controls and changes in the business environment when assessing the level of work to
be performed. All audit work was performed directly by the UK-based audit engagement team.

Climate change
There has been increasing interest from stakeholders as to how climate change will impact Softcat plc. The Company has determined
that the most significant future impacts from climate change on its operations will be from business interruption driven by extreme climate
or failure to evolve technology product offerings in line with consumer and investor demands. These are explained on pages 49 to 50 in
the required Task Force for Climate related Financial Disclosures and on page 62 in the principal risks and uncertainties, which form part
of the “Other information,” rather than the audited financial statements. Our procedures on these disclosures therefore consisted solely of
considering whether they are materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or
otherwise appear to be materially misstated.

As explained in note 1, the impact of climate change is not considered to have a material impact at this time. Governmental and societal
responses to climate change risks are still developing, and are interdependent upon each other, and consequently financial statements
cannot capture all possible future outcomes as these are not yet known. The degree of certainty of these changes may also mean that they
cannot be taken into account when determining asset and liability valuations and the timing of future cash flows under the requirements of
UK adopted International Accounting Standards (‘IFRS’).

Our audit effort in considering climate change was focused on evaluating management’s assessment of the impact of climate risk, physical
and transition, and ensuring that the effects of climate risks disclosed on pages 49 to 50 do not gave a material impact on the financial
statements. We also challenged the Directors’ considerations of climate change in their assessment of going concern and viability and
associated disclosures.

Whilst the Company has stated its commitment to the aspirations of the Paris Agreement to achieve net zero emissions by 2050, the
Company is currently unable to determine the full future economic impact on their business model, operational plans and customers to
achieve this and therefore as set out above the potential impacts are not fully incorporated in these financial statements.

Annual Report and Accounts 2022 Softcat plc

137

Financial statements
I N D E P E N D E N T A U D I T O R ’ S R E P O R T C O N T I N U E D

To the members of Softcat plc

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a
whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Key observations communicated
to the Audit Committee

We concluded that the revenue
recognised at or near year
end was properly accounted
for and that revenue has
appropriately been recognised
in accordance with IFRS.

We concluded that
management’s disclosures in
relation to revenue, including
disclosed accounting policies
and those relating to key critical
accounting judgements, to be
appropriate.

We did not identify any
issues over revenue cut-off
as a result of the new ERP
system implemented in the
current period.

As part of our procedures,
we noted no indication
of deliberate or other
manipulation of revenue cut-off
or management override.

Risk

Our response to the risk

Overstatement of
performance through
the misstatement of
revenue recognised at or
near year end
During the year the Company
recognised revenue of £1,077.9m
(2021: £784.0m).

Refer to the Audit Committee Report
(pages 80 to 89); Accounting
policies (pages 148 to 159); and
note 2 of the Company Financial
Statements (page 159 to 160).

• Management’s process for

accounting for certain revenue
transactions, particularly the
review process at year end to
record revenue in the appropriate
period, is mostly manual and
therefore susceptible to error
(either deliberate or without intent).
The accounting is made more
challenging due to the reliance on
suppliers to notify the Company
of delivery, and for international
shipments which results in a longer
delivery lead time needing to
be built into the assumptions
utilised by management. There is
a risk that revenue is recognised
prematurely or fictitiously.

• Certain compensation incentives
are based on quarterly and
annual gross margin targets,
creating a risk of revenue
misstatement through management
override via top side revenue
journals with no associated cost
or revenue recognised in the
incorrect period prematurely.

We performed the following procedures:

• Performed walkthroughs within the new ERP system to

understand key changes in the revenue recognition process.
We amended our audit strategy to reflect changes in
the process for accounting for unbilled receivables and
deferred income.

• Updated our understanding of management’s cut off

assessment, including the delivery lead time assumptions
utilised, which we validated to historic averages.

• Tested revenue cut off by obtaining management’s sales cut off
assessment and independently testing a sample of transactions
therein by vouching to invoices and proof of delivery.

• Tested unbilled receivables by obtaining management’s

analysis and independently testing transactions therein by
vouching to invoices and proof of delivery.

• Tested an independent sample of transactions invoiced in
the two weeks either side of the year end. We stratified the
population between revenue type and selected our sample
based on the following criteria:

– key items based on a quantitative threshold or specific

qualitative factors; and

– statistical sample of items invoiced within the seven days

prior to the balance sheet date, which we considered to be
of higher risk based on average delivery lead times.

• We tested our sample by vouching to invoices and proof
of delivery, to confirm these had been recorded in the
correct period.

• To address the risk of management override - we tested a

sample of journal entries recorded at or near year end as well
as top-side adjustments by verifying to appropriate supporting
documentation.

• Tested a statistical sample of sales transactions deferred at the
year end. We recalculated the split of revenue recognised and
the deferred elements based on a review of the supporting
documentation to obtain assurance over the recognition of
revenue. We also selected a sample of invoices from billing
data and assessed whether the revenue was appropriately
recognised or deferred, based on completion of the
performance obligation.

• Analysed sales related journal entry data to track sales from
revenue through to accounts receivable through to cash
collection using data analytics tools. We used this analysis to
validate the appropriateness of transaction flows and tested a
sample of transactions to determine if the journals accurately
reflected the substance of transactions recorded.

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Softcat plc Annual Report and Accounts 2022

Key observations communicated
to the Audit Committee

We concluded that the
judgements made by
management are consistent
with the level of control
we have observed, the
presentation and disclosure of
revenue is materially correct,
and has been recognised in
accordance IFRS.

We concluded that
management’s disclosures in
relation to revenue, including
disclosed accounting policies
and those relating to key critical
accounting judgements, to be
appropriate.

We concluded that
management’s rationale for
including the APM to be
reasonable. The disclosures
in respect of the APM is
appropriate and is correctly
reconciled to revenue. We
conclude the disclosures made
in the accounts, including
the use of APMs, to be fair,
balances and understandable.

We did not identify any issues
over presentation of revenue
as a result of the new ERP
system implemented in the
current period.

Key audit matters continued

Risk

Our response to the risk

IFRS 15 Presentation of
revenue in respect of
principal vs agent
During the year the Company
recognised revenue of
£1,077.9m (2021: £784.0m).

Refer to the Audit Committee
Report (pages 80 to
89); Accounting policies
Accounting policies (pages
148 to 159); and note 2 of the
Company Financial Statements
(page pages 159 to 160).

There is a risk that the reported
revenue may be incorrectly
presented on a gross basis
as a result of the incorrect
assessment of whether the
Company has control over the
products or services sold and
consequently if the Company
is principal or agent in its
arrangements with customers.
As products and services
offered continually evolve
the assessment of control
needs to be revisited on an
ongoing basis.

The nature of the current
systems is to process all
revenue streams gross, and a
manual adjustment is made by
management at year end to
record revenue on a net basis
where Softcat is the agent
in the arrangement.

We performed the following procedures:

• Performed incremental walkthroughs within the new ERP system to
understand key changes in the revenue recognition process. There
were no significant changes driven by the change in system that
affected our planned audit procedures.

• Updated our understanding of management’s judgement

over the classification of transactions between gross and net
presentation, specifically in relation to the change in accounting
policy for software revenue following responses made by the IFRS
Interpretations Committee in relation to revenue recognition from
the resale of software licenses. Our procedures with respect to the
change in accounting policy included:

– obtaining and reviewing management’s paper to the

audit committee, including involvement of internal IFRS technical
reviewers; and

– benchmarking the conclusions reached to publicly available
information for comparative companies that have already
communicated a change in accounting policy.

• Assessed management’s judgement made for any significant new

product types by independently assessing the nature of such products
and meeting with key members of the sales and solutions teams to
develop an understanding of Softcat’s responsibilities in relation to
the sale. We challenged whether Softcat has primary responsibility
for fulfilling the promise of the goods or service and whether Softcat is
exposed to inventory risk during the delivery period, in order to help
ascertain the exercise of control of goods prior to their delivery, and
ultimately concluded if the principal (gross) or agent (net) treatment
applied was appropriate according to the criteria set out within IFRS
15 and management’s revised accounting policies.

• Tested a sample of transactions across the year to determine the

Company’s control over the product or service including:

– Verified the product type to external sources, such as supplier
websites, and met with key members of the sales and solutions
teams to develop an understanding of Softcat’s responsibilities
in relation to the sale. For each sample selected we challenged
whether Softcat has primary responsibility for fulfilling the
promise of the goods or service and whether Softcat is
exposed to inventory risk during the delivery.

– Corroborated the related cost for each sample item to

supporting purchase invoices.

– Assessed if principal (gross) or agent (net) treatment should

be applied and compared this to management’s conclusion to
determine if this was appropriate according to the criteria set
out within IFRS 15.

• Reperformed management’s calculation of the adjustment
to record revenue on a net basis, including reperforming
management’s calculation of the prior period revenue net down to
confirm the impact of the restatement of prior period comparatives.

• Tested that the methodology utilised to calculate the adjusted

performance measure (APM) ‘gross invoiced income’ is consistent
with the FY2021 financial statements and in accordance the
definition of the APM disclosed in the financial statements.
We assessed management’s rationale for including the APM and
ensured that the amount reported is reconciled to reported revenue.

Annual Report and Accounts 2022 Softcat plc

139

Financial statementsI N D E P E N D E N T A U D I T O R ’ S R E P O R T C O N T I N U E D

To the members of Softcat plc

Key audit matters continued

Risk

Our response to the risk

Misstatement of rebate
income to overstate
reported results at or
near year end
Accrued rebate income at
31 July 2022 amounts to
£10.5m (2021: £8.2m).

Refer to the Audit Committee
Report (pages 80 to 89);
Accounting policies (pages
148 to 159); and note 11
of the Company Financial
Statements (page 165).

Rebates are recorded through
a primarily manual process.
While most rebates are
agreed with the supplier and
received during the year, there
is an opportunity to misstate
results through adjustments to
the balance sheet receivable.

We performed the following procedures:

• Performed walkthroughs within the new ERP system to understand
key changes in the rebate process. There were no significant
changes driven by the change in system that affected our planned
audit procedures.

• Obtained confirmations from a sample of sales personnel to
confirm no rebate agreements outside of standard practice.

• Tested the year end accrued income by confirming a sample of
rebates due from suppliers to third party source documentation.

• Analysed the rebate receivable by vendor and compared
the largest vendor level balances (making up 92% of the
balance) against the 31 July 2021 comparative to identify
unusual movements that are not in line with our expectation or
understanding of the business. Performed analysis to understand the
drivers of increases or decreases in the underlying balances.

• Assessed the cash conversion of rebates accrued at the year end

and tested a sample to subsequent receipts.

• Tested a sample of rebate transactions recorded in the statement
of profit and loss throughout the year and obtained underlying
support to consider whether the transactions have been recorded
in the correct period.

Key observations communicated
to the Audit Committee

We concluded that the rebate
receivable and corresponding
income are materially correct
and have been recognised in
accordance with IFRS.

We concluded that
management’s disclosures in
relation to accrued income,
including disclosed accounting
policies, to be appropriate.

We did not identify any
issues over accrued income
as a result of the new ERP
system implemented in the
current period.

As part of our procedures,
we noted no indication
of deliberate or
other manipulation of
accrued income or
management override.

Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.

Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined materiality for the Company to be £6.5m (2021: £6.0m), which is 5% (2021: 5%) of profit before tax. We believe that profit
before tax provides us with the most appropriate basis as it drives shareholder returns and is a key measure of Company performance.

During the course of our audit, we did not amend our initial materiality.

Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our judgement was that
performance materiality was 50% (2021: 75%) of our planning materiality, namely £3.2m (2021: £4.4m). We have set performance
materiality at this percentage, decreasing from the prior year, to reflect the heightened risk of misstatement arising as a result of the
transition of the primary ERP system and related process and controls during the period.

Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.3m (2021: £0.3m),
which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.

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Softcat plc Annual Report and Accounts 2022

Other information
The other information comprises the information included in the annual report set out on pages 1 to 135, including the Strategic report
set out on pages 1 to 65 and the Corporate governance report set out on pages 70 to 79, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information contained within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are

prepared is consistent with the financial statements; and

• the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,
in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not

visited by us; or

• the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting

records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review by
the Listing Rules.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:

• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material

uncertainties identified set out on page 135;

• Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the period is

appropriate set out on page 64;

• Director’s statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its

liabilities set out on page 133;

• Directors’ statement on fair, balanced and understandable set out on page 135;

• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 59;

• the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out

on page 59; and

• the section describing the work of the audit committee set out on page 80.

Annual Report and Accounts 2022 Softcat plc

141

Financial statementsI N D E P E N D E N T A U D I T O R ’ S R E P O R T C O N T I N U E D

To the members of Softcat plc

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 135, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including
fraud is detailed below.

However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the
Company and management.

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that the
most significant are those related to the reporting framework (IFRS, the Companies Act 2006 and the UK Corporate Governance
Code 2018), relevant tax compliance regulations in the UK, relevant employment law in the UK and Data Protection Act 2018. In
addition, we concluded that there are certain significant laws and regulations which may have an effect on the determination of the
amounts and disclosures in the financial statements, being the Listing Rules of the London Stock Exchange.

• We understood how Softcat plc is complying with those frameworks by making inquiries of management, those responsible for legal
and compliance procedures and the Company Secretary. We corroborated our enquiries through our review of board minutes,
discussions with the Audit Committee and any correspondence received from regulatory bodies.

• We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur by

meeting with management to understand where they considered there was susceptibility to fraud. We also considered performance
targets and their propensity to influence efforts made by management to manage earnings or influence the perceptions of analysts.
Where this risk was considered to be higher, we performed audit procedures to address each identified fraud risk. The key audit
matters section above addresses procedures performed in areas where we have concluded the risks of material misstatement are
highest (including where due to the risk of fraud). In addition, we completed procedures to conclude on the compliance of the
disclosures in the Annual Report and Accounts with the requirements of the relevant accounting standards, UK legislation and the UK
Corporate Governance Code 2018.

• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our

procedures involved review of board minutes to identify non-compliance with such laws and regulations, review of reporting to the
Audit Committee on compliance with regulations and enquires of the Company Secretary and management.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Other matters we are required to address
• Following the recommendation from the audit committee, we were re-appointed by the Company on 15 December 2021 to audit the
financial statements for the year ending 31 July 2022. During the year the Company undertook a formal competitive tender process.
Following completion of such process, Ernst & Young LLP was recommended by the chair to the Audit Committee to continue as the
external auditor with effect for the financial year ending 31 July 2023. This recommendation was approved by the Board on 18 May
2022, subject to approval by shareholders at the Company’s 2022 Annual General Meeting.

The period of total uninterrupted engagement including previous renewals and reappointments is ten years, covering the years ending
2013 to 2022.

• The audit opinion is consistent with the additional report to the audit committee.

142

Softcat plc Annual Report and Accounts 2022

Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

David Hales (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
24 October 2022

Annual Report and Accounts 2022 Softcat plc

143

Financial statementsS T A T E M E N T O F P R O F I T O R L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M E

For the year ended 31 July 2022

Revenue
Cost of sales

Gross profit
Administrative expenses

Operating profit
Finance income
Finance cost

Profit before tax
Income tax expense

Profit for the year

Other comprehensive income
Other comprehensive income that may be reclassified to profit or loss in subsequent periods:
Foreign exchange differences on translation of foreign branches

Total other comprehensive income

Total comprehensive income for the year

Profit attributable to:
Owners of the Company

Total comprehensive income attributable to:
Owners of the Company

Earnings per ordinary share (p)
Basic
Diluted

Notes

2022
£’000

2 1,077,946
(750,736)

327,210
(191,065)

136,145
252
(253)

136,144
(25,739)

3
4
4

2021 1
£’000

784,049
(507,691)

276,358
(156,942)

119,416
28
(477)

118,967
(22,782)

110,405

96,185

3,562

—

113,967

96,185

110,405

96,185

113,967

96,185

18
18

55.5
55.3

48.4
48.2

Note:
1. The prior year comparatives have been restated in line with the change in accounting policy for the IFRS IC agenda decision – IFRS 15 Revenue from Contracts with Customers,

treatment of Software revenue as agent revenue. For further information, see Note 1.5.

The Statement of profit or loss and other comprehensive income has been prepared on the basis that all operations are
continuing operations.

144

Softcat plc Annual Report and Accounts 2022

S T A T E M E N T O F F I N A N C I A L P O S I T I O N

As at 31 July 2022

Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax asset

Current assets
Inventories
Trade and other receivables
Income tax receivable
Cash and cash equivalents

Total assets

Current liabilities
Trade and other payables
Contract liabilities
Income tax payable
Lease liabilities

Non-current liabilities
Contract liabilities
Lease liabilities

Total liabilities

Net assets

Equity
Issued share capital
Share premium account
Reserves for own shares
Foreign exchange translation reserve
Retained earnings

Total equity

Notes

7
8
9
15

10
11

12
13

13
8

2022
£’000

11,270
6,162
7,978
2,508

27,918

2021
£’000

11,753
7,022
5,202
3,149

27,126

5,104
541,424
296
97,316

38,411
329,666
432
101,724

644,140

470,233

672,058

497,359

(419,108)
(31,564)
—
(2,716)

(293,528)
(12,759)
—
(2,598)

(453,388)

(308,885)

(3,620)
(3,950)

(7,570)

(3,626)
(5,704)

(9,330)

(460,958)

(318,215)

211,100

179,144

100
4,979
—
3,562
202,459

211,100

100
4,979
—
—
174,065

179,144

These financial statements were approved by the Board of Directors and authorised for issue on 24 October 2022.

On behalf of the Board

Graeme Watt
Chief Executive Officer

Graham Charlton
Chief Financial Officer

Softcat plc company registration number: 02174990

Annual Report and Accounts 2022 Softcat plc

145

Financial statements

S T A T E M E N T O F C H A N G E S I N E Q U I T Y

For the year ended 31 July 2022

Equity attributable to owners of the Company

Balance at 1 August 2020
Total comprehensive income for the year
Share-based payment transactions
Dividends paid
Shares issued in the year
Dividend equivalents paid
Tax adjustments
Other

Balance at 31 July 2021
Profit for the period
Impact of foreign exchange on reserves

Total comprehensive income for the year
Share-based payment transactions
Dividends paid
Shares issued in the year
Dividend equivalents paid
Tax adjustments

Share capital
£’000

100
—
—
—
—
—
—
—

100
—
—

—
—
—
—
—
—

Share
premium
account
£’000

4,979
—
—
—
—
—
—
—

4,979
—
—

—
—
—
—
—
—

Foreign
exchange
translation
reserve
£’000

Reserves for
own shares
£’000

—
—
—
—
—
—
—
—

—
—
3,562

3,562
—
—
—
—
—

—
—
—
—
—
—
—
—

—
—
—

—
—
—
—
—
—

Retained
earnings
£’000

135,668
96,185
2,267
(60,815)
—
(196)
1,117
(161)

174,065
110,405
—

110,405
2,541
(84,020)
(215)
(214)
(317)

Total
£’000

140,747
96,185
2,267
(60,815)
—
(196)
1,117
(161)

179,144
110,405
3,562

113,967
2,541
(84,020)
(215)
(214)
(317)

Balance at 31 July 2022

100

4,979

3,562

— 202,459

211,100

The share capital and share premium accounts represent the nominal value and premium arising on the issue of equity shares.

The reserve for own shares refers to ordinary shares held by a Share Incentive Plan (‘SIP’) Trust.

During the year ended 31 July 2022, 305,266 share options (2021: 362,639) were exercised and new shares were issued to satisfy this
exercise. Proceeds of £Nil (2021: £Nil) were realised from the exercise of these share options.

As at 31 July 2022, the SIP Trust held 187,771 shares (2021: 218,258) awarded to employees as part of the free share award, subject to
service conditions. A further 353,797 shares (2021: 348,779) were held on behalf of employees who have taken part in the Company’s
voluntary partnership share purchase programme. The SIP also held 51,007 unallocated shares (2021: 51,007).

146

Softcat plc Annual Report and Accounts 2022

S T A T E M E N T O F C A S H F L O W S

For the year ended 31 July 2022

Net cash generated from operating activities

Investing activities
Finance income
Purchase of property, plant and equipment
Purchase of intangible assets

Net cash used in investing activities

Financing activities
Issue of share capital
Dividends paid
Payment of principal portion of lease liabilities
Payment of interest portion of lease liabilities

Net cash used in financing activities

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange gains/(losses) on cash and cash equivalents

Cash and cash equivalents at end of year

Notes

2022
£’000

2021
£’000

83,644

91,252

4
7
9

6
8
4,8

252
(1,890)
(3,334)

(4,972)

—
(84,020)
(2,369)
(253)

28
(2,265)
(4,199)

(6,436)

—
(60,815)
(2,125)
(291)

(86,642)

(63,231)

(7,970)
101,724
3,562

21,585
80,139
—

97,316

101,724

Annual Report and Accounts 2022 Softcat plc

147

Financial statements
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

For the year ended 31 July 2022

1 Accounting policies
1.1 Corporate information
The financial statements of Softcat plc for the year ended 31 July 2022 were authorised for issue in accordance with a resolution of the
Directors on 24 October 2022. Softcat plc is a public limited company incorporated and domiciled in the United Kingdom and whose
shares are publicly traded. The registered office is Solar House, Fieldhouse Lane, Marlow, Buckinghamshire, in the United Kingdom.

The principal activity of the Company continued to be that of a value-added IT reseller and IT infrastructure solutions provider to the
corporate and public sector markets.

1.2 Basis of preparation
These financial statements have been prepared in accordance with UK-adopted international accounting standards (IFRS) in accordance
with the requirements of the Companies Act 2006. IFRS includes the application of International Financial Reporting Standards (‘IFRS’) as
issued by the International Accounting Standards Board (‘IASB’) and the IFRS Interpretations Committee (‘IFRIC’) interpretations.

These financial statements have been prepared under the historical cost convention and are presented in the Company’s presentational
and functional currency of Pounds Sterling and all values are rounded to the nearest thousand (‘£’000’), except when otherwise stated.

The Company applied all standards and interpretations issued by the IASB that were effective as at 1 August 2021. The accounting
policies set out below have, unless otherwise stated (see 1.4 and 1.5 below), been applied consistently to all periods presented in these
financial statements.

The potential climate change-related risks and opportunities to which the Company is exposed, as identified by management, are
disclosed in the Company’s TCFD disclosures on pages 49 to 51. Management has assessed the potential financial impacts relating to
the identified risks and exercised judgement in concluding that there are no further material financial impacts of the Company’s climate-
related risks and opportunities on the financial statements. These judgements will be kept under review by management as the future
impacts of climate change depend on environmental, regulatory and other factors outside of the Company’s control which are not all
currently known.

Going concern
Overview
In considering the going concern basis for preparing the financial statements, the Directors consider the Company’s objectives and
strategy, its principal risks and uncertainties in achieving its objectives and its review of business performance and financial position, which
are all set out in the Strategic Report (see pages 1 to 64) and Chief Financial Officer’s review sections (see pages 32 and 33) of this
Annual Report. Given the current macro-economic environment and considering the latest guidance issued by the FRC the Directors have
undertaken a fully comprehensive going concern review.

The Company has modelled three scenarios in its assessment of going concern. These are:

• the base case;

• the severe but plausible case; and

• the reverse stress test case.

Further details, including the analysis performed and conclusion reached, are set out below.

The Directors have reviewed detailed financial forecasts for a thirteen-month period from the date of this report (the going concern
period) until 30 November 2023. All the forecasts reflect the payment of the FY2022 dividend of £58.2m which will be paid in
December 2022 subject to approval at the AGM.

The Company operates in a resilient industry. Our UK Corporate customer base spend is increasingly non-discretionary as IT continues to be
vital to gain competitive advantage in an increasingly digital age. Public Sector, a large and fast-growing area of the business, continues
to invest in technology to provide efficient services to the public and this has continued apace despite the pandemic and recent turbulence in
the UK economy. The Company strategy remains unchanged and will continue to focus on increasing the customer base and spend per
customer during the going concern period.

Liquidity and financing position
At 31 July 2022, the Company held instantly accessible cash and cash equivalents of £97.3m, while net current assets were £190.7m.
note 21 to the financial statements includes the Company’s objectives, policies and processes for managing its capital, its financial risk
management and its exposures to credit risk and liquidity risk. Operational cash flow forecasts for the going concern period are sufficient
to support the business with the £60m cash floor set by the Board not being breached.

There is a sufficient level of liquidity headroom post mitigation across the going concern forecast period in base and severe but plausible
scenarios considered and outlined in more detail below.

Challenging economic environment
Management have, in all three scenarios, considered the principal challenges to short term business performance which are
expected to be:

• An economic downturn in the UK economy, aided by high broad-based inflation and increasing interest rates;

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Softcat plc Annual Report and Accounts 2022

1 Accounting policies continued
1.2 Basis of preparation continued
Going concern continued
Challenging economic environment continued
• Continued impact of hardware supply constraints, resulting from the global semi-conductor shortage, although this is forecast to

improve and is isolated to a select few vendors; and

• Higher risk of credit losses.

Despite the impact of Omicron and further lockdown period on the year just finished, the Company has traded well, delivering double-digit
year-on-year growth. The Board continue to monitor the global and national economic environment and organise operations accordingly.

Base case
The base case, which was approved by the Board in October 2022, takes into account the FY2023 budget process which includes
estimated growth and increased costs across the going concern period and is consistent with the actual trading experience through
to September 2022. The key inputs and assumptions in the base case include:

• continued revenue growth in line with historic rates;

• rebate income continues to be received in proportion to cost of sales as in FY2022;

• employee commission is incurred in line with the gross margin; and

• increased levels of cost to reflect continued investment in our people, the businesses IT infrastructure as well as a return of travel and

staff entertainment costs more in line with pre-covid levels than we have seen in the past twelve months.

The Company has taken a measured approach to the base case and has balanced the expected trading conditions with available
opportunities in an increasingly resilient area of customer spend, which is supported by the current financial position. In making our
forecasts we balanced our customer needs alongside employee welfare. We have in place a hybrid working model with a balance
of remote working and return to the office, which has not had a noticeable impact on the operational performance of the Company.
Year to date trading to the end of September 2022 is consistent with the base case forecast.

Severe but plausible case
Given the current economic challenges facing our customer base and supply chain, we have modelled a severe but plausible scenario.
In this case we have modelled a decline in revenue, versus the base case, which is below any historic trend and more severe than
experienced during the height of the pandemic. Further impacts of this scenario, such as reduced margins and greater credit losses,
have also been considered.

The key inputs and assumptions include:

• an average 7.5% reduction in revenue, compared to the base case;

• reduced gross profit margins of 1% in the period;

• additional bad debt write offs of £5m across the forecast period;

• extending the debtor days from historic levels achieved and no change to historic supplier payment days;

• paying a reduced interim dividend in line with lower profitability but still within the range set out in the dividend policy; and

• both commission cost and rebate income adjusted downwards in line with reduced profitability and cost of sales, but at the same

percentage rates as in the base case.

The purpose of this scenario was to consider if there was a significant risk that the Company would move to being cash negative in any
of the months in the going concern period. Even at these lower levels of activity, which the Directors believe is a highly unlikely outcome,
the Company continues to be profitable, and the Company would still have sufficient cash reserves to meet the Board’s minimum
requirements. Despite this, management have modelled further cost saving and working capital action (see mitigating actions) that will
enable the Company to mitigate the impact of reduced cash generation further, should this scenario occur. The Directors are confident
that they can implement these actions if required.

Mitigating actions
There are several potential management actions that have not been included in the severe but plausible forecast and it is estimated that
the total cash impact of these actions is in excess of a £18m cost reduction on an annualised basis and additional annual working capital
savings of £30m, before considering the cost of delivering them and the point at time at which they were delivered. The actions which if
implemented would offset the reduced activity:

• bonus costs scaled back in line with performance;

• no interim dividend in H2 of FY2023;

• savings in discretionary areas of spend;

Annual Report and Accounts 2022 Softcat plc

149

Financial statements1 Accounting policies continued
1.2 Basis of preparation continued
Going concern continued
Mitigating actions continued
• delayed payment to suppliers foregoing early settlement discount; and

• short term supplier payment management.

The mitigations are deemed achievable and reasonable as the Company benefits from a flexible business model with a high proportion
of costs linked to performance.

Reverse stress test
The Directors have performed a reverse stress test exercise to see how extreme conditions would need to be for the Company to become
cash negative within a twelve-month period. The conditions go significantly further than the severe but plausible scenario and reflect a
scenario that the business consider remote. The four combined stresses modelled are as follows:

1. reduction of 15% in gross invoiced income, compared to the base case;

2. reduced achievable gross margin by 3%;

3. additional bad debt write offs of £10m per year across the forecast period; and

4. extending the debtor days by three days from historic levels achieved and no change to historic supplier payment days.

All four inputs are greater than the business has ever experienced in its history. In the modelled scenario, prior to mitigations, the business
could become cash negative within twelve months.

Whilst the Board considers such a scenario to be extremely remote a programme of further actions to mitigate the impact, in excess
of those set out above, would be actioned should the likelihood of such a scenario increase. The Board considers the forecasts and
assumptions used in the reverse stress test, as well as the event that could lead to it, to be extremely remote.

Going concern conclusion
Based on the forecast and the scenarios modelled, together with the performance of the Company to date, the Directors consider that the
Company has significant liquidity headroom to continue in operational existence for the thirteen-month period from the date of this report
(the going concern period) until 30 November 2023. Accordingly, at the October 2022 Board meeting, the Directors concluded from
this analysis it was appropriate to continue to adopt the going concern basis in preparing the financial statements. The ongoing impacts
of COVID-19, the current economic environment and the cost of living crisis continue to impact both customers and suppliers and create
market uncertainty. Should the impact of these conditions be even more prolonged or severe than currently forecast by the Directors under
the severe but plausible case scenario, the Company would need to implement additional operational or financial measures.

1.3 Critical accounting judgements and key sources of estimation uncertainty
When applying the Company’s accounting policies, management must make a number of key judgements involving estimates and
assumptions concerning the future. These estimates and judgements are based on factors considered to be relevant, including historical
experience that may differ significantly from the actual outcome. The key assumptions concerning the future and other key sources of
estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year include:

Revenue cut-off
The Company’s management information systems are configured to recognise revenue upon notification of dispatch from the supplier or
distributor which in instances, especially regarding physical shipments, may not be aligned to when control has been transferred to the
customer and the performance obligation has been met by the Company. Management therefore performs an exercise to capture items
that may have been dispatched from the distributor but not delivered in the financial year, and subsequently defers the recognition of
revenue and associated cost into the following year. This gives rise to a deferred income, which is recognised as a contract liability, and
associated inventory in the Statement of financial position. The exercise applied includes assumptions, which management believes are
reasonable, in order to identify items that fit the criteria for deferral. Separately, management reviews individual large transactions on a
case-by-case basis, which reduces the opportunity for error.

The key judgements that are made in the cut-off process are as follows:

• When identifying transactions to review in the cut-off process, management limits the review period to a fixed number of days before

and after the period end and validates the date of dispatch.

• Management incorporates a one-day shipment delay assumption onto the sale of hardware items to reflect the time taken between
vendor shipment and customer delivery. Management further assess a five day risk window for international hardware shipments.

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most
significant effect on the amounts recognised in the financial statements:

150

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 20221 Accounting policies continued
1.3 Critical accounting judgements and key sources of estimation uncertainty continued
Principal versus agent
Significant judgement is required in determining whether the Company is acting as principal, reporting revenue on a gross basis, or agent,
reporting revenue on a net basis. Softcat evaluates each revenue stream against the following indicators when determining whether it is acting
as principal or agent in a transaction: (i) primary responsibility for fulfilling the promise to provide the specified goods or service, (ii) inventory
risk before the specified good or service has been transferred to a customer and (iii) discretion in establishing the price for the specified
good or service. Certain revenue streams present a more balanced judgement than others when assessed against the above criteria and
the conclusion may be reliant on the weighting applied to the responses to these criteria. When applying the weighting and concluding on
whether principal or agent treatment is appropriate, the Company exercises significant levels of judgement due to the balanced nature of the
assessment. The specific judgements made for each revenue category are discussed in the accounting policy for revenue as disclosed below.

Determining the lease term of contracts with renewal and termination options
Softcat determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend
the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain
not to be exercised. Softcat has several property leases that include termination options and Softcat applies judgement in evaluating
whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, that Softcat considers all
relevant factors that create an economic incentive to exercise either the renewal or termination option. Factors in considering extension
or termination options include, but are not limited to, capacity constraints and growth plans, budgets and forecasts, trading relationships
as well as current state of the property. After the commencement date, Softcat reassesses the lease term if there is a significant event or
change in circumstances that is within its control and affects its ability to exercise or not exercise the relevant option available.

1.4 Adoption of new and revised standards
There have been no new standards effective in the period to 31 July 2022, that materially affect Softcat other than the accounting policy
change in note 1.5. The standards in issues but not yet effective at the reporting date are not expected to materially affect Softcat.

1.5 Changes to Accounting Policies
The following changes in accounting policies are effective in the year to 31 July 2022. Other than those mentioned below, there are no
further changes to accounting policies applicable in the period.

Change in Accounting Policy – IFRS 15
The IFRS Interpretation Committee (IC) recently concluded on a response to an industry request to clarify whether a company should
recognise revenue from the resale of standard software licenses on a gross or net basis under IFRS 15 – Revenue from Contracts with
Customers. The fact pattern provided to the IC was very similar to that faced by the Company when transacting software sales with
customers. Whilst not providing a direct clarification on the topic, as they stated that the specifics of each case may vary and must be
analysed in detail, the IC provided further guidance on the ‘control’ criteria which is used to determine whether revenue is recognised on
a principal or agent basis. The staff paper, the published discussions within the IFRS IC and the ultimate decision indicate, in management’s
view, support of revenue recognition on a net basis.

Prior to this conclusion, Softcat recognised cloud-hosted and security software revenue on a ‘net’ basis, together with other lines of
business where its role is considered more aligned to that of a billing agent or introducer. The remaining software lines of business
were recorded on a ‘gross’ basis. However, this gross conclusion required significant judgement and consisted of elements that were
indicative of either net or agent treatment with the ultimate conclusion being dependent on an assessment of the relative weighting of the
various factors.

The guidance provided by the IC set out the following factors that previously aided the principal conclusion for software, specifically:

• The removal of pre-sales advice as an explicit or implicit promise in a contract. Softcat did not previously consider pre-sales advice

as a separate performance obligation but factored these services into the consideration of control of licenses.

• In the case of software products, there is no inventory risk before the customer is provided with the licences, the risk arises after that

point until the customer accepts the licences.

• In the case of software products, the software manufacturer is responsible for the software’s functionality, in addition to issuing and
activating the licenses, and is therefore responsible in those respects for fulfilling the promise to provide the licenses to the customer.

As a result of this guidance in favour of agent, the Company has amended its finely balanced judgement in favour of principal (and gross)
presentation and concluded, considering the facts presented, that an accounting policy change in favour of agent (and net) presentation
should be adopted for all software products that were previously recorded as principal and presented gross.

As prescribed in IAS 8, the business has applied this accounting policy change retrospectively, so the prior year and current year are
presented consistently.

The impact of this change in accounting policy on the prior year financial statements is as follows;

• revenue and cost of sales would decrease by a further £372.6m on top of the current IFRS 15 software adjustment net down; and

• gross profit, operating profit, and profit before and after taxes will be unchanged in all periods. The Statement of financial position,

Statement of cash flows and the Statement of changes in equity also remain unchanged.

Annual Report and Accounts 2022 Softcat plc

151

Financial statements1 Accounting policies continued
1.5 Changes to Accounting Policies continued
Change in Accounting Policy – IFRS 15 continued

Year ended 31 July 2021

Software revenue

Revenue
Cost of sales

Gross profit
Administrative expenses

Operating profit
Finance income
Finance cost

Profit before tax
Income tax expense
Profit and total comprehensive income for the year
Profit attributable to:
Owners of the Company

Revenue
as reported
IFRS 15
£’000

Increase in
net down
£’000

Revised
revenue
£’000

501,058

(372,618)

128,440

31 July 2021
as originally
presented
£’000

Impact of
change
in policy
£’000

1,156,667
(880,309)

(372,618)
372,618

276,358
(156,942)

119,416
28
(477)

118,967
(22,782)
96,185

96,185

—
—

—
—
—

—

31 July 2021
as restated
£’000

784,049
(507,691)

276,358
(156,942)

119,416
28
(477)

118,967
(22,782)
96,185

96,185

1.6 Revenue recognition
Revenue is recognised based on the completion of performance obligations at the transaction price allocated to the performance obligation.
The transaction price is determined by the price specified in the underlying contract or order. Where the contracts include multiple
performance obligations, the transaction price will be allocated to each performance obligation based on the stand-alone selling prices.
No discounts, loyalty points or returns are offered to customers. All performance obligations are separately listed as individual items on
the order and the price is allocated on this basis. A performance obligation is satisfied when control of the promised good or service is
transferred to the customer. The following indicators are used by the Company in determining when control has passed to the customer:

(i) the Company has a right to payment for the product or service;

(ii) the customer has legal title to the product;

(iii) the Company has transferred physical possession of the product to the customer;

(iv) the customer has the significant risks and rewards of ownership of the product; and

(v) the customer has accepted the product.

Principal versus agent
The Company evaluates the following indicators amongst others when determining whether it is acting as a principal or agent in the
transaction and recording revenue on a gross, or net, basis:

(i) the Company is primarily responsible for fulfilling the promise to provide the specified goods or service;

(ii) the Company has inventory risk before the specified good or service has been transferred to a customer; and

(iii) the Company has discretion in establishing the price for the specified good or service.

Hardware revenue
The Company sells hardware that is sourced from and delivered by multiple vendors and distributors. Revenues from sales of hardware
products are recognised on a gross basis as the Company is acting as a principal in these transactions, with the gross value of the
consideration from the customer recorded as revenue. The Company is acting as principal as it has primary responsibility for the
acceptability of goods sold following the provision of consulting services which are not considered to be separately identifiable.
Costs relating to the provision of consulting services are expensed as incurred. Softcat is also exposed to inventory risk during the delivery
period and establishes the selling price itself. Revenue from the sale of these goods is recognised when the control has passed to the
buyer, therefore the Company has satisfied its performance obligation. In line with industry standard terms, payment is generally due
30 days after invoice date.

Vendors typically provide standard warranties on most of the hardware products the Company sells. These manufacturer warranties are
assurance-type warranties and are not considered separate performance obligations. The warranties are not sold separately and only
provide assurance that products will conform with the manufacturer’s specifications.

152

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 20221 Accounting policies continued
1.6 Revenue recognition continued
Principal versus agent continued
Software revenue
Revenue from software licence sales is recognised on a net basis as the Company is acting as an agent in these transactions at the point
the software licence is delivered to the customer. The Company is deemed to be acting as agent in these transactions as these products
are intangible, customer specific and in most cases sent directly to customers by the vendor electronically, removing inventory risk for the
Company, prior to delivery. Despite the ability to set pricing, the lack of inventory risk and the vendor having primary responsibility for the
product meeting customer specifications, through largely standardised products, underline that these sales should be recorded as agent.

The revenue associated with the license sale is recognised upon the transfer of the license to the customer. At this point Softcat has satisfied
its performance obligations. Payment is generally due 30 days from invoice date.

The Company sells cloud computing solutions which include Software as a Service (‘SaaS’). SaaS solutions utilise third party partners
to offer the Company’s customers access to software in the cloud that enhances office productivity, provides security or assists in
collaboration. As the Company has satisfied its performance obligations by arranging the transfer of the licensing to the customer, revenue
is recognised in full at that point on a net basis as the Company is acting as an agent in the transaction, with an invoice subsequently
raised. Payment is generally due within 30 days from invoice date.

The Company sells, for a single vendor, access to corporate enterprise agreements which is a certain licensing programme for customers
who are eligible. For these transactions the Company introduces the customer to the vendor who then fulfils the sale, including transfer of
licensing, invoicing and cash collection, without further involvement of the Company. In return for this introduction the vendor compensates
the Company with a fee as the Company has satisfied its performance obligations at the point of initial transaction being completed
between the vendor and the customer. This fee is recognised net as the Company is acting as an agent in these transactions. Payment is
generally due within 30 days of the initial transaction between the vendor and the customer.

Service revenue
Softcat sells professional services days which are fulfilled by either Softcat’s own internal team of consultants or by consultants provided
by third parties. The Company recognises the revenue on these transactions, irrespective of whether they are fulfilled internally or
externally, when confirmation has been received from the customer that the work has been satisfactorily completed. In most cases there is
a short timeframe between a customer order and subsequent delivery of the sold service days. As such, the Company does not recognise
revenue on a percentage completion basis as this would not have a material impact.

On very rare occasions the Company will sell professional service days which cover an extended period. For these transactions,
management assesses the individual contract and, if required, recognises the revenue over time according to the output method.
Softcat recognises revenue on the basis of direct measurements of the value to the customer which for professional days would be days
completed as a percentage of total days. Revenue is recognised on a gross basis; the Company is deemed to be acting as principal
in these transactions as it is responsible for selecting the external party, where relevant, for the acceptability of the services and for
determining the price charged to the customer.

The Company also provides hosted managed services to its customers offering Infrastructure as a Service (‘IAAS’) and managed print
services among others. The Company hosts these services using internal resources and recognises revenue on a straight-line basis
over the contractual service period. The Company recognises the respective revenue on a gross basis as the Company is acting as a
principal in the transaction as it has both managerial involvement and effective control over the services being provided throughout the
contract period.

Softcat also sells extended or enhanced warranty products provided by third parties. These warranties are sold separately to hardware
and provide the customer with a service in addition to assurance that the product will function as expected. For these enhanced warranty
products, the Company is arranging for those services to be provided by the third party over an extended period and therefore is acting
as an agent in the transaction and records revenue on a net basis at the point of sale. Revenue from such services is recognised in full at
the point of service commencement as the Company has no ongoing obligation in relation to delivery of the underlying service.

Payments for these goods are generally received on industry standard terms of 30 days from the date of invoice.

Public sector partner business revenue
The Company transacts with several partners in the public sector where the partner is responsible for the solution and customer
relationship. These transactions incorporate the provision of hardware, software or services to the end customer. For this business,
the Company’s responsibilities of invoicing and cash collection are more aligned to those of an agent and therefore this business is
recognised as agent and presented net of cost of sales.

Revenue is recognised in full on satisfactory completion of the work by the partner, as this is the point the Company has satisfied its
performance obligations. Payment is generally due within 30 days from completion of the work.

Annual Report and Accounts 2022 Softcat plc

153

Financial statements1 Accounting policies continued
1.6 Revenue recognition continued
Principal versus agent continued
Deferred costs
IFRS 15 requires certain costs to fulfil a contract to be recognised as a separate asset. These deferred costs are deferred until the
performance obligation to which they relate has been met. Deferred costs are measured at the purchase price of the associated goods
or services received. Deferred costs are released from the Statement of financial position in line with the recognition of revenue on the
specific transaction. There are no significant or material judgements made by management in the measurement or recognition of these
deferred costs, as costs are matched to an associated sale and the period of deferral is typically short.

Commissions have been incurred in respect of contracts whereby the performance obligation has not yet been satisfied, however, the
Company has applied the practical expedient and recognised the commission as an expense when incurred given that the period over
which the commission would have been recognised is less than a year.

Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which Softcat has received consideration (or an amount
of consideration is due) from the customer. If a customer pays consideration before Softcat transfers goods or services to the customer,
a contract liability is recognised when the payment is made, or the payment is due (whichever is earlier). This occurs infrequently and is
usually to support the wishes of the customer who sometimes may prefer to provide funds upfront which can then be allocated to future
orders. Contract liabilities are recognised as revenue when Softcat performs obligations under the contract. Further details of contract
balances are provided in note 13.

1.7 Cost of sales
The Company recognises cost of sales at the point at which it recognises revenue as explained above. Cost of sales predominantly relate
to the cost of goods or services purchased from suppliers and then sold to customers. In addition to these costs, the following elements are
also included within cost of sales.

Rebates
Included within cost of sales are rebates received from commercial partners. Further details are provided on rebates in 1.8, below.

Managed service infrastructure costs
The Company operates its own network operating centre which facilitates the selling of Softcat hosted managed services. The costs of
maintaining this capability include, but are not limited to, the rental of space in data warehouses, energy and licensing costs. These costs
represent the cost of sale of selling hosted managed service solutions and are included within cost of sales.

Funded training costs
The Company carries out numerous training programmes, activities and schemes that aim to educate its sales force and internally promote
the products the business resells. The costs of these activities are recognised within cost of sales.

Early settlement discounts
Through the normal course of business, the Company receives credits from distributors and suppliers for the prompt settlement of invoices.
Softcat recognises these discounts in cost of sales as they are considered to be a reduction in the cost of goods sold.

1.8 Rebates
Rebates from suppliers are accounted for in the period in which they are earned and are based on commercial agreements with
suppliers. Rebates earned are mainly sales volume related and are generally short term in nature, with rebates earned but not yet
received typically relating to the preceding quarter’s trading. Other forms of rebate received from commercial partners include income
from training provided to staff. Rebate income is recognised in cost of sales in the Statement of profit or loss and other comprehensive
income and rebates earned but not yet received are included within accrued income in the Statement of financial position.

1.9 Interest income
Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate (‘EIR’) applicable.
EIR is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or
a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance
income in the income statement.

154

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 20221 Accounting policies continued
1.10 Property, plant and equipment
Property, plant and equipment other than freehold land is stated at cost, net of accumulated depreciation and/or impairment losses, if
any. If the costs of certain components of an item of property, plant and equipment are significant in relation to the total cost of the item,
they are accounted for and depreciated separately. Depreciation is provided at rates calculated to write off the cost of each asset over
its expected useful life, as follows:

Freehold buildings

fifty years straight line

Building improvements

remaining period of lease – ten years straight line

Computer equipment

three to five years straight line

Fixtures, fittings and equipment

six years straight line

Motor vehicles

three years straight line

Land is not depreciated.

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the difference between the net disposal proceeds and the carrying amount of the
asset and is recognised in the income statement when the asset is derecognised.

Building improvements relate to expenditure on improving both leasehold property and the freehold property of Solar House in Marlow.
Improvements to Solar House are depreciated over a ten-year period, which represents their useful life. Leasehold improvements are
depreciated over their useful life which is the lesser of the remaining length of the lease or ten years.

The residual values, useful lives and methods of depreciation are reviewed for reasonableness at each financial year end and adjusted
for prospectively if appropriate.

1.11 Intangible assets
Intangible assets are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less
accumulated amortisation and accumulated impairment losses, if any. Intangible assets with a finite useful life are assessed for impairment
whenever there is an indication that the intangible asset may be impaired. Amortisation is provided for at rates calculated to write off the
cost of each asset over its expected useful life, as follows:

Computer software

three to fifteen years straight line

Costs associated with maintaining software programmes are recognised as an expense as incurred. Development costs that are directly
attributable to the design and testing of identifiable and unique software products controlled by the Company are recognised as
intangible assets where the following criteria are met:

• it is technically feasible to complete the software so that it will be available for use;

• management intends to complete the software and use it;

• there is an ability to use the software;

• it can be demonstrated how the software will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to use the software are available; and

• the expenditure attributable to the software during its development can be reliably measured.

The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent
with the function of the intangible assets. The amortisation period and the amortisation method are reviewed at least at the end of each
reporting period. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

1.12 Leases
A lease is a contract or part of a contract that conveys the right to control the use of an identified asset for a period of time in exchange
for consideration. The Company’s leases, which predominantly relate to property leases, are recognised in line with IFRS 16.

The leases policy under IFRS 16 is as follows:

i) Right-of-use assets
Softcat recognises right-of use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use).
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised and lease payments made at or before
the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of
the lease term and the estimated useful lives of the assets, as follows:

Annual Report and Accounts 2022 Softcat plc

155

Financial statements

1 Accounting policies continued
1.12 Leases continued
i) Right-of-use assets continued
Property lease assets

three to ten years straight line

The right-of-use assets are also subject to impairment reviews.

ii) Lease liabilities
At the commencement date of the lease, Softcat recognises lease liabilities measured at the present value of lease payments to be
made over the lease term adjusted for any termination options. The lease payments include fixed payments, variable lease payments
that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. Payments to be made under the
reasonably certain extension option are also included.

In calculating the present value of the lease payments, Softcat uses its incremental borrowing rate at the lease commencement date
because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities
is remeasured if there is a modification, a change in the lease term, a change in the lease payments from a change in index or rate, or a
change in the assessment of an option to purchase the underlying asset.

iii) Short-term leases and leases of low value assets
Softcat applies the short-term lease recognition exemption to any short-term leases it enters into (i.e. those leases that have a lease term of
twelve months or less from the commencement date and do not contain a purchase option). Softcat also applies the lease of low-value
assets recognition exemption to leases that are considered to be low value and under £5,000. Lease payments on low-value assets and
short-term leases are recognised as an expense on a straight-line basis over the lease term.

1.13 Inventories
Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the estimated costs to sell.

Inventories include goods in transit and other products ordered to fulfil customer orders where the right of ownership is yet to transfer.

1.14 Financial instruments
Financial assets
The Company’s financial assets include cash and cash equivalents and trade and other receivables. All financial assets are recognised
when the Company becomes party to the contractual provisions of the instrument.

i) Trade receivables
Trade receivables are recognised and measured at the transaction price less allowance for expected credit losses. Trade receivables do
not carry interest.

The simplified approach on expected credit losses (ECL’s) for trade receivables and contractual assets has been used as there is not a
significant financing component to these assets. In accordance with the simplified approach for impairment of trade receivables and
accrued income under IFRS 9, the loss allowance for trade receivables is always measured at an amount equal to lifetime expected
credit losses and includes a forward-looking element as well as an assessment based on history and experience. Factors considered
when assessing the expected credit losses include prior experience, specific customer credit ratings, communication quality, industry
factors and the current economic climate.

Due to the size of the receivables ledger and the volume of smaller balances, it is not possible to review all balances individually and therefore
a portion of the ledger is reviewed collectively and provided for as such. More material or higher risk balances are reviewed individually
looking at specific circumstances including payment history, the forecast of economic conditions in the sector the customer operates in,
communication quality and responsiveness, to determine future expected credit losses, and are provided for individually with respect to the
perceived level of risk. In addition, any entities that are in administration or have been passed to debt collection are provided for individually.

Unbilled receivables are recognised when a contract results in completion of a performance obligation in advance of the customer
being invoiced.

ii) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, call deposits and bank overdrafts. Cash and cash equivalent balances
have a maturity of three months or less and are subject to an insignificant level of risk to change in value.

iii) Accrued income
Accrued income predominantly relates to supplier rebates and is recognised according to both rebate agreements and supplier spend in
the financial year.

As accrued income has a contractual right to receive cash, it is a financial asset and therefore also subject to loss allowances under
IFRS 9. The loss allowance for accrued income is measured at an amount equal to lifetime expected credit losses and includes a
forward-looking element as well as an assessment based on history and experience. Factors considered when assessing the expected
credit losses include prior experience, supplier credit ratings, communication quality, industry norms and the current economic climate.

156

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 2022
1 Accounting policies continued
1.14 Financial instruments continued
Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into. The Company’s financial
liabilities comprise trade and other payables. All financial liabilities are recognised initially at their fair value and subsequently measured
at amortised cost using the effective interest method.

i) Trade payables
Trade payables are initially measured at fair value. Trade payables due after one year are measured at amortised cost, using the effective
interest rate method.

Derecognised financial instruments
For a small number of customers, Softcat acts as intermediary to provide financing arrangements between the customer and a third-party
financing provider. Following the delivery of the goods or services, which represents our performance obligation in full, Softcat receives
settlement of the customer invoice, by the third-party financing company. Receivables are derecognised only when Softcat has transferred
the receivable, meaning that it has retained the contractual rights to the cash flows, but has assumed an obligation to pay those cash flows
to the finance provider, in the case where all three of the following conditions are met:

• Softcat has no obligation to pay amounts to the finance provider unless it collects equivalent amounts from the receivable;

• Softcat is prohibited from selling or pledging the receivable; and

• Softcat has an obligation to remit the cash received without material delay.

The transfer described above qualifies for derecognition as Softcat has transferred substantially all the risks and rewards of ownership of
the receivable. Its only continuing involvement following delivery is to act as agent in the receipt and transfer of cash payments and, in line
with the derecognition criteria set out above, the customer receivable is derecognised. Softcat does not retain or regain ownership of any
assets at the end of these arrangements and the finance provider takes on the credit risk of future cash flows from the customer.

Cash flows in respect of these arrangements are recognised within cash generated from operations and typically result in a £Nil impact
given that the Company acts as agent in the receipt and transfer of cash payments.

1.15 Pensions
The pension costs charged in the financial statements represent the contributions payable by the Company during the year on the defined
contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered
fund. The amounts charged to the income statement represent the contributions payable to the scheme in respect of the accounting period
and represent the full extent of the Company’s liability.

1.16 Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised.

Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which
case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax
assets and liabilities on a net basis.

For deferred tax on leases, Softcat has applied the initial recognition exception under IAS 12. Under the general approach of IAS 12,
the depreciation of the right-of-use asset is regarded as reducing the temporary difference that arose on initial recognition of the asset,
and therefore gives rise to no tax effect. However, the accretion of the finance costs on the liability gives rise to an additional deductible
temporary difference arising after initial recognition of the liability, requiring recognition of a deferred tax asset. This gives rise to an
immaterial deferred tax asset for the years ended 31 July 2021 and 31 July 2022.

Annual Report and Accounts 2022 Softcat plc

157

Financial statements1 Accounting policies continued
1.17 Current taxation
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities.
The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the
countries where the Company operates and generates taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the Statement of profit or loss and
other comprehensive income. Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Softcat applies judgement in
identifying uncertainties over income tax treatments and considered whether it has any uncertain tax positions and determined that it is
highly probable that its tax treatments will be accepted by the taxation authorities. Where it is not probable that an uncertain tax treatment
will be accepted the most likely amount or expected amount is recognised depending on which method better predicts the resolution of
the uncertainty.

1.18 Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into Pounds Sterling at the rates of exchange ruling at
the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are
taken to the income statement.

The assets and liabilities of foreign operations are translated into Pounds Sterling at the rates of exchange ruling at the balance sheet date.
Income and expense items are translated using average exchange rates, which approximate to actual rates, for the relevant accounting
period. Exchange differences arising, if any, are classified as other comprehensive income and recognised in the foreign exchange
translation reserve in the statement of financial position.

1.19 Share-based payments
During the year the Company operated the following equity-settled share option schemes:

Share Incentive Plan (‘SIP’)
The Company operates a SIP for employees who were awarded free shares following the initial public offering in November 2015.
Shares were allocated to employees on the basis of length of service. Free shares awarded to an employee under the SIP are subject to
a minimum holding period of three years following the date on which beneficial interest in the relevant ordinary shares is conferred by the
SIP Trustee to the employee.

The fair value of the SIP shares was determined by the share price at date of grant, on 9 December 2015. A fair value charge was
recognised as an expense in the income statement over the vesting period with a corresponding increase in equity. The charge was
recognised only on the expected number of shares to vest. The assumption used for expected leavers within three years from the date of
award was calculated with reference to historical employee retention rates.

In addition, the Company’s voluntary partnership share purchase programme, which is open to all eligible employees, is administered
through the SIP. Through this programme, employees have the option to purchase shares from their gross income, the cost of which is not
borne by the Company.

Long Term Incentive Plan (‘LTIP’)
Details in relation to the Softcat LTIP awards to Executive Directors are included in the Directors’ Remuneration Report on page 103.

LTIP awards will only vest and become exercisable upon achievement of performance targets, linked to earnings per share and total
shareholder return, as well as being conditional upon continued employment with the Company. The fair value is measured using a
suitable valuation model where appropriate. Non-market vesting conditions are taken into account by adjusting the number of LTIP shares
expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the
number of LTIP shares that will eventually vest. Market vesting conditions are factored into the fair value of the LTIP shares granted. The
cumulative expense is not adjusted for failure to meet a market vesting condition. The resulting fair value charge is charged as an expense
in the income statement over the vesting period with a corresponding increase in equity. Employer’s national insurance contributions are
payable, on exercise, on the market value of the award and are accrued for within the share-based payments expense in the Statement
of profit or loss and other comprehensive income.

Deferred shares
One-third of the Executive Directors’ annual bonus up to 100% of salary is paid in deferred shares and any bonus above 100% of salary
is paid in deferred shares. The Company accrues for the cost of the non-cash bonus over a four-year period, including the year in which
the bonus targets are assessed and the following three-year vesting period. Employer’s national insurance contributions are payable, on
exercise, on the market value of the award and are accrued for within the share-based payments expense in the Statement of profit or loss
and other comprehensive income.

SIP Trust
The Company operates a SIP Trust for the benefit of eligible employees. The Company recognises the assets and liabilities of this trust as its
own until such assets held vest unconditionally with identified beneficiaries. The Company meets all costs incurred by the trust.

158

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 20221 Accounting policies continued
1.20 Company accounts
Softcat plc is a single entity with no subsidiary undertakings. The SIP Trust, which hold shares on behalf of employees, are not consolidated
within the results of Softcat plc and instead are treated as extensions of the Company.

1.21 Adjusted Performance Measures
The Company uses two non-Generally Accepted Accounting Practice (non-GAAP) financial measures in addition to those reported in
accordance with IFRS. The Directors believe that these non-GAAP measures, set out below, assist in providing additional useful information
on the underlying trends, sales performance and position of the Company. Gross invoiced income is a measure which correlates closely
to the cash received by the business and therefore aids the users understanding of working capital movements in the Statement of financial
position and the relationship to sales performance and the mix of products sold.

Consequently, non-GAAP measures are used by the Directors and management for performance analysis, planning and reporting and
have remained consistent with the prior year. These non-GAAP measures comprise of gross invoiced income and cash conversion.

Gross invoiced income reflects gross income billed to customers adjusted for deferred and accrued revenue as reported in the IFRS
measure. A reconciliation of IFRS Revenue to Gross invoiced income is provided within note 2, Segmental information.

Cash conversion ratio comprises of cash flows from operations net of capital expenditure as a percentage of operating profit.

A reconciliation to the adjusted measure for cash conversion is provided below:

Cash generated from operations
Purchase of property, plant and equipment
Purchase of intangible assets

Cash generated from operations, net of capital expenditure

Operating profit

Cash conversion ratio

2022
£’000

108,988
(1,890)
(3,334)

103,764

136,145

76.2%

2021
£’000

113,797
(2,265)
(4,199)

107,333

119,416

89.9%

2 Segmental information
The information reported to the Company’s Chief Executive, who is considered to be the chief operating decision maker for the purposes
of resource allocation and assessment of performance, is based wholly on the overall activities of the Company. The Company has
therefore determined that it has only one reportable segment under IFRS 8, which is that of ‘value-added IT reseller and IT infrastructure
solutions provider’. The Company’s revenue, results and assets for this one reportable segment can be determined by reference to the
Statement of profit or loss and other comprehensive income and Statement of financial position. An analysis of revenues by product,
which form one reportable segment, is set out below:

Revenue by type:

Software
Hardware
Services

Gross invoiced income by type:

Software
Hardware
Services

2022
£’000

150,000
797,897
130,049

Restated
2021 1
£’000

128,440
556,472
99,137

1,077,946

784,049

2022
£’000

2021
£’000

1,365,343
810,241
331,953

1,109,198
566,305
262,937

2,507,537

1,938,440

Note:
1. The prior year comparatives have been restated in line with the change in accounting policy for the IFRS IC agenda decision – IFRS 15 Revenue from Contracts with Customers,

treatment of software revenue as agent revenue. For further information, see note 1.5.

Annual Report and Accounts 2022 Softcat plc

159

Financial statements2 Segmental information continued
Revenue and gross invoiced income can also be disaggregated by type of business2:

Revenue by type of business:

Small and medium
Enterprise
Public sector

Gross invoiced income by type of business:

Small and medium
Enterprise
Public sector

2022
£’000

535,823
222,064
320,059

Restated
2021
£’000

471,076
164,468
148,505

1,077,946

784,049

2022
£’000

1,169,255
427,249
911,033

2021
£’000

839,398
336,013
763,029

2,507,537

1,938,440

Note:
2. Types of business are split by entity staff size. Small and medium business represents work forces of up to 2,000 seats. Enterprise is above 2,000 seats and public sector represents

government and other public bodies.

Gross invoiced income reflects gross income billed to customers adjusted for deferred and accrued revenue items. Softcat continue to
report gross invoiced income as an alternative financial KPI as this measure allows a consistent, year on year, understanding of gross
income billed, business performance and position and correlates closely to working capital movements. The impact of IFRS 15 and
principal versus agent consideration is an equal reduction to both revenue and cost of sales.

Gross invoiced income
Income recognised as agent under IFRS 15

Revenue

2022
£’000

Restated
2021
£’000

2,507,537
(1,429,573)

1,938,440
(1,154,391)

1,077,946

784,049

The total revenue for the Company for the year has been derived from its principal activity as an IT reseller.

During the period there was one direct customer (FY2021: none) that individually accounted for greater than 10% of both the Company’s
total revenue and gross invoiced income, and a considerably lower proportion of Gross Profit. Gross invoiced income and revenue
generated from this customer in FY2022 was £251.3m and £227.5m, respectively (FY2021 £80.3m and £74.2m). The revenues related
to this direct customer were derived within the USA branch of the Company. Substantially all of the remaining trading of the Company is
undertaken in the United Kingdom.

3 Operating profit

Operating profit is stated after charging:

Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Low value asset and short-term lease expense
Foreign exchange gain/(loss)
Inventories expensed in the year
Movement in trade receivables provision as potentially uncollectable, recovered or written off during the year

Auditor’s remuneration
Fees payable for the audit of the Company’s annual accounts
Additional fees payable for the audit of the Company’s annual accounts

Total for statutory audit services

Fees payable for the half year review of the condensed financial statements

Total for non-audit-related services

For details on employee numbers and employee costs, please see note 24.

2022
£’000

2,373
1,594
558
32
2,938
705,539
1,544

545
133

678

2021
£’000

2,332
2,263
297
102
(68)
476,442
552

435
7

442

160

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 2022
4 Finance income and finance cost

Bank interest income
Interest on tax
Lease liability interest cost

5 Income tax
The major components of the income tax expense for the years ended 31 July 2022 and 31 July 2021 are:

Statement of profit or loss
Current income tax charge in the year
Adjustment in respect of current income tax of previous years
Foreign tax relief
Foreign tax suffered

Total current income tax charge

Deferred tax
Current year
Adjustments in respect of prior periods
Effect of changes in tax rates

Deferred tax credit

Total tax charge

Reconciliation of total tax charge
Reconciliation of tax expense and accounting profit multiplied by the Company’s
domestic tax rate for 2022 and 2021:
Profit on ordinary activities before taxation

Profit on ordinary activities before taxation multiplied by the standard rate of UK
corporation tax of 19% (2021: 19%)

Effects of:
Non-deductible expenses
Adjustment to previous periods
Effect of changes in tax rates
Effects of overseas tax rates
Share options
Other differences

2022
£’000

60
192
(253)

2021
£’000

28
(186)
(291)

2022
£’000

2021
£’000

25,979
52
(2)
3

26,032

(110)
7
(190)

(293)

22,909
80
(1)
1

22,989

(303)
168
(72)

(207)

25,739

22,782

136,144

118,967

25,867

22,604

112
59
(190)
1
(110)
—

(128)

118
248
(72)
—
(92)
(24)

178

Income tax charge reported in profit or loss

25,739

22,782

In the year ended 31 July 2022, £616,745 (2021: £582,785) of current tax was credited to equity and £933,778 (2021: £534,278 credit)
of deferred tax was debited to equity.

Annual Report and Accounts 2022 Softcat plc

161

Financial statements

6 Dividends

Declared and paid during the year
Special dividend on ordinary shares (20.5p per share (2021: 7.6p))
Final dividend on ordinary shares (14.4p per share (2021: 16.6p))
Interim dividend on ordinary shares (7.3p per share (2021: 6.4p))

2022
£’000

2021
£’000

40,806
28,663
14,551

84,020

15,100
32,981
12,734

60,815

A final dividend of 16.6p per share has been recommended by the Directors and if approved by shareholders will be paid on
19 December 2022. The final ordinary dividend will be payable to shareholders whose names are on the register at the close
of business on 11 November 2022. Shares in the Company will be quoted ex-dividend on 10 November 2022. The dividend
reinvestment plan (‘DRIP’) election date is 28 November 2022.

In line with the Company’s stated intention to return excess cash to shareholders, a further special dividend payment of 12.6p has been
proposed. If approved this will also be paid on 19 December 2022 alongside the final ordinary dividend.

The Board recommends the final and special dividend for shareholders’ approval.

Softcat’s dividend policy remains a progressive one which targets an annual dividend of between 40% and 50% of the Company’s profits
after tax in each financial year before any exceptional items. In determining the level of dividend in any year in accordance with the
policy, the Board considers a number of other factors that influence the proposed dividend, which include but are not limited to:

• the level of available distributable reserves in the Company;

• future cash commitments and investment needs to sustain the long-term growth prospects of the business; and

• potential strategic opportunities.

Softcat’s constitution does not limit or oblige the Company to any minimum or maximum dividend payments. However, no dividend may
exceed the amount recommended by the Directors and all dividends shall be paid in accordance with any relevant legislation.

The Audit Committee on behalf of the Board reviews the distributable reserves of the Company as part of its half-year and full-year
reviews. The Board then considers the Audit Committee’s review as part of its process to approve or recommend dividends.

Softcat intends to continue to fund its dividends through the cash generated by the business. Details of the Company’s continuing viability
and going concern can be found on page 64 and pages 133 and 134 respectively.

7 Property, plant and equipment

Building
improvements
£’000

Computer
equipment
£’000

Fixtures,
fittings and
equipment
£’000

Motor
vehicles
£’000

Freehold
land and
buildings
£’000

2,649
—
—

7,529
1,236
(802)

7,963
98
—

2,649

8,060

200
—
31

231
—
25

256

2,393

2,418

1,513
(784)
1,197

1,926
—
1,149

3,075

4,985

6,037

8,143
442
(7,293)

1,292
647
—

1,940

7,357
(7,240)
506

623
—
512

4,071
586
(936)

3,721
1,082
—

4,803

1,525
(931)
547

1,141
—
642

1,135

1,783

805

669

3,020

2,580

363
—
(211)

152
63
—

215

263
(211)
51

102
—
45

148

Total
£’000

22,755
2,264
(9,242)

15,777
1,890
—

17,667

10,858
(9,166)
2,332

4,024
—
2,373

6,397

11,270

11,753

Cost
At 1 August 2020
Additions
Disposals

At 31 July 2021
Additions
Disposals

At 31 July 2022

Depreciation
At 1 August 2020
On disposals
Charge for the year

At 31 July 2021
On disposals
Charge for the year

At 31 July 2022

Net book value
At 31 July 2022

At 31 July 2021

162

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 2022

7 Property, plant and equipment continued
Freehold land amounting to £1.4m (2021: £1.4m) has not been depreciated.

No assets are subject to restrictions on title or are pledged as security for liabilities (2021: £Nil).

There is no material difference between the carrying and fair value of the underlying assets as at both 31 July 2022 and 31 July 2021.

8 Right-of-use assets and lease liabilities
Leases – as a lessee
Softcat has lease contracts for various offices across the country used for its operations. Property leases generally have lease terms of
between three and ten years. A number of these contracts include extension and termination options which are discussed below.

Set out below are the carrying amounts of right-of-use assets recognised and movements during the year:

Property leases

Opening right-of-use asset as at 1 August
Lease additions and modifications
Depreciation

Closing right-of-use asset as at 31 July

2022
£’000

7,022
734
(1,594)

6,162

2021
£’000

8,698
587
(2,263)

7,022

The weighted average incremental borrowing rate as used for the period is 2.7%.

Set out below are the carrying amounts of lease liabilities included under current and non-current liabilities and the movements during
the period:

Property leases

Opening lease liability as at 1 August
Lease additions and modifications
Accretion of interest
Payments

Closing lease liability as at 31 July

Split as:
Short-term
Long-term

2022
£’000

8,302
734
253
(2,623)

6,666

2,716
3,950

2021
£’000

9,839
588
291
(2,416)

8,302

2,598
5,704

Lease modifications in the year were in respect of extension of specific lease terms of existing property leases.

Softcat had no variable leases expenses or income from sub-leases charged to the Statement of profit or loss and other comprehensive
income, nor any sale and leaseback transactions.

Softcat has several lease contracts that include termination options. These options are negotiated by management to provide flexibility in
managing the leased-asset portfolio to align to business needs. Management exercise significant judgement in determining whether these
options are reasonably certain to be exercised.

Set out below are the undiscounted potential future rental payments relating to periods following the exercise date of termination options
that are not included in lease term:

As at 31 July 2022

Termination options expected to be exercised

As at 31 July 2021

Termination options expected to be exercised

Within five
years
£’000

More than
five years
£’000

4,376

1,279

Within five
years
£’000

More than
five years
£’000

3,613

2,428

Total
£’000

5,655

Total
£’000

6,041

The total value of lease charges for low value and short-term leases to Statement of profit or loss and other comprehensive income for the
year was £31,656 (2021: £101,617).

Annual Report and Accounts 2022 Softcat plc

163

Financial statements9 Intangible assets

Cost
At 1 August 2020
Additions
Disposals

At 31 July 2021
Additions
Disposals
Reclassifications

At 31 July 2022

Amortisation
At 1 August 2020
Charge for the year
Disposals

At 31 July 2021
Charge for the year
Disposals

At 31 July 2022

Net book value
At 31 July 2022

At 31 July 2021

Software
under
development
£’000

Computer
software
£’000

Total
Intangibles
£’000

906
3,927
—

4,833
3,195
—
(8,028)

—

—
—
—

—

4,833

2,540
272
(1,924)

888
139
—
8,028

9,055

2,145
297
(1,923)

519
558
—

3,446
4,199
(1,924)

5,721
3,334
—
—

9,055

2,145
297
(1,923)

519
558
—

1,077

7,978

369

7,978

5,202

Software under development capitalised related to the new enterprise resource planning (ERP) system being designed and built internally.
This was completed and put in to use in FY2022.

The amortisation of intangible assets is included in administrative expenses within the income statement. See note 3.

10 Inventories

Finished goods and goods for resale

2022
£’000

5,104

2021
£’000

38,411

The decrease in stock is predominantly driven by stock in transit for a specific customer yet to be delivered as at the end of FY2021 as
well as timing of the balance sheet date.

The amount of any write down of inventory recognised as an expense in the year was £Nil (2021: £Nil).

164

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 202211 Trade and other receivables

Trade and other receivables
Provision against receivables

Net trade receivables
Unbilled receivables
Prepayments
Accrued income
Deferred costs

2022
£’000

2021
£’000

497,308
(4,958)

300,058
(3,415)

492,350
26,192
4,338
10,534
8,010

296,643
10,500
3,584
8,171
10,768

541,424

329,666

The provision against receivables follows the expected credit loss model under IFRS 9. The Directors consider that the carrying amount of
trade and other receivables approximates to their fair value.

The ageing profile of trade receivables was as follows:

Current
0–30 days
31–60 days
61–90 days
Over 90 days

Total due

2022
£’000

335,579
79,981
28,402
26,332
27,014

497,308

Related
provision
£’000

(3,453)
(622)
(227)
(43)
(613)

Net
£’000

332,126
79,359
28,175
26,289
26,401

2021
£’000

232,372
46,370
12,775
4,780
3,761

Related
provision
£’000

(2,369)
(463)
(80)
(48)
(455)

Net
£’000

230,003
45,907
12,695
4,732
3,306

(4,958)

492,350

300,058

(3,415)

296,643

The Company provides against its trade receivables using the forward-looking expected credit loss model under IFRS 9. An impairment
analysis is performed at each reporting date. Provisions against future recoverability are set to reflect probability-weighted outcomes,
analysis of prior events, current conditions, including an assessment of COVID-19 related factors. Further details on how the Company
manages its credit risk can be found in note 21. Movement in the provision for trade receivables was as follows:

Balance at beginning of year
Increase for trade receivables regarded as potentially uncollectable
Decrease in provision for trade receivables recovered, or written off, during the year

Balance at end of year

2022
£’000

3,415
4,206
(2,663)

4,958

2021
£’000

2,863
2,880
(2,328)

3,415

Set out below is the information about the credit risk exposure on Softcat’s trade receivables:

31 July 2022

Current
£’000

<30 days
£’000

31–60 days
£’000

61–90 days
£’000

>91 days
£’000

Total
£’000

Expected credit loss rate
Estimated total gross carrying amount at default
Expected credit loss

1.03%
335,579
(3,453)

0.78%
79,981
(622)

0.80%
28,402
(227)

0.16%
26,332
(43)

2.27%
27,014
(613)

1.00%
497,309
(4,958)

31 July 2021

Expected credit loss rate
Estimated total gross carrying amount at default
Expected credit loss

Current
£’000

<30 days
£’000

31–60 days
£’000

61–90 days
£’000

1.02%
232,372
(2,369)

1.00%
46,370
(463)

0.63%
12,775
(80)

1.00%
4,780
(48)

>91 days
£’000

12.10%
3,761
(455)

Total
£’000

1.14%
300,058
(3,415)

Whilst successful, the system implementation in the year created some temporary disruption to collection procedures, but this is expected
to return to normal during the first half of the new year.

Unbilled receivables and accrued income have been reviewed by management and have been determined to have an immaterial
impact on expected credit losses. The Company does not hold collateral as security.

As part of our assessment of expected credit losses, an assessment of specific potentially uncollectable debt as well as wider
macroeconomic factors that may require a provision, is performed. See note 21 for details on how the Company approaches its exposure
to credit risk.

Annual Report and Accounts 2022 Softcat plc

165

Financial statements12 Trade and other payables

Trade payables
Other taxes and social security
Accruals

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

13 Contract liabilities

Deferred income

Deferred income is split as follows:

Short term deferred income
Long term deferred income

2022
£’000

280,769
23,078
115,261

2021
£’000

220,305
12,378
60,845

419,108

293,528

2022
£’000

2021
£’000

35,184

16,385

2022
£’000

31,564
3,620

35,184

2021
£’000

12,759
3,626

16,385

Contract balances
Deferred income includes short-term and long-term goods or services to be delivered to a customer by Softcat for which there is a
contractual obligation arising from receipt of consideration or amounts due from the customer. The outstanding balances on these
accounts has moved in line with the activity of the business and customer base. During the current year, £12.759m (2021: £13.929m) has
been recognised in revenue resulting from these contract liabilities existing as at 31 July 2021. As at 31 July 2022, £31.558m remains on
the Statement of financial position as a contract liability resulting from transactions arising from the year to 31 July 2022. Softcat expects
that £31.564m of the balance as at 31 July 2022 will be released in the following year with the remainder released within 2–5 years of
the end of the current year.

14 Cash and cash equivalents

Cash at bank and in hand

2022
£’000

2021
£’000

97,316

101,724

Cash and cash equivalents comprise cash at bank and cash in hand. Cash at bank earns interest at floating rates based on daily bank
deposit rates. All cash held is accessible and is not restricted for any period of time.

15 Deferred tax
The deferred tax asset is made up as follows:

Accelerated capital allowances
Share-based payments
Other temporary differences

Deferred tax assets

Reconciliation of deferred tax asset
Balance at 31 July 2021 (PY: 31 July 2020)
Adjustment in respect of prior years
Profit and loss account
(Charge)/credit to equity

Balance at 31 July 2022 (PY: 31 July 2021)

166

Softcat plc Annual Report and Accounts 2022

2022
£’000

95
1,442
971

2,508

2022
£’000

3,149
(7)
300
(934)

2,508

2021
£’000

120
2,154
875

3,149

2021
£’000

2,408
(236)
375
602

3,149

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 2022

15 Deferred tax continued
The Company recognises all deferred tax movements in the year within the income statement, except for £933,778 debited to equity
(2021: £534,278 credit) in relation to deferred tax movements on share-based payments.

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax
liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

2022

2021

Current tax
Movement in respect of prior years
Movement in respect of current year

Total current tax

Deferred tax
Movement in respect of prior years
Movement in respect of current year:
Share options
Fixed assets
Other temporary differences

Total deferred tax

Total tax

Income
statement
£’000

52
25,979

26,031

(222)
18
95

(293)

25,739

SOCIE
£’000

Total
£’000

52
25,362

25,414

712
18
95

642

—
(617)

(617)

—

934
—
—

934

317

Income
statement
£’000

80
22,909

22,989

168

(151)
(66)
(158)

(207)

SOCIE
£’000

Total
£’000

—
(583)

(583)

(602)
—
—

(534)

80
22,326

22,406

236

(753)
(66)
(158)

(741)

26,056

22,782

(1,117)

21,665

16 Pension and other post-retirement benefit commitments
Defined contribution pension scheme
The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company
in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund. At the year
end, pension contributions of £570,782 (2021: £482,087) were outstanding.

Contributions payable by the Company for the year

2022
£’000

2,813

2021
£’000

2,484

17 Share capital
Authorised share capital
In accordance with the Companies Act 2006, the Company no longer has an authorised share capital. The Company’s Articles of
Association have been amended to reflect this change.

Allotted and called up
199,354,076 (2021: 199,041,810) ordinary shares of 0.05p each
18,933 (2021: 18,933) deferred shares1 of 1p each

2022
£’000

2021
£’000

100
—

100

100
—

100

Note:
1. At 31 July 2022 deferred shares had an aggregate nominal value of £189.33 (2021: £189.33).

In the year ended 31 July 2022, 305,266 (2021: 362,639) new ordinary shares were issued to satisfy the exercise of share options and
no ordinary shares (2021: nil) were issued to satisfy exercises under the deferred share bonus plan.

No issued ordinary shares of 0.05p each were unpaid at 31 July 2022 (2021: nil unpaid).

All ordinary shares rank pari passu in all respects.

Deferred shares do not have rights to dividends and do not carry voting rights.

Own share transactions
In the year ended 31 July 2022 the SIP Trust returned £Nil (2021: £Nil) to the Company through share recycling.

Annual Report and Accounts 2022 Softcat plc

167

Financial statements

18 Earnings per share

Earnings per share
Basic
Diluted

The calculation of the basic earnings per share and diluted earnings per share is based on the following data:

Earnings
Earnings for the purposes of earnings per share, being profit for the year

The weighted average number of shares is given below:

Number of shares used for basic earnings per share
Number of shares deemed to be issued at nil consideration following exercise of share options

Number of shares used for diluted earnings per share

19 Notes to the Statement of cash flows
Reconciliation of operating profit to net cash inflow from operating activities

Operating profit
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangibles
Loss on disposal of fixed assets
Dividend equivalents paid
Cost of equity-settled employee share schemes

Operating cash flow before movements in working capital
Decrease/(increase) in inventory
Increase in trade and other receivables
Increase in trade and other payables and contract liabilities

Cash generated from operations
Income taxes paid

Net cash from operating activities

2022
p

55.5
55.3

2021
p

48.4
48.2

2022
£’000

2021
£’000

110,405

96,185

2022
’000

2021
’000

198,976
656

198,559
884

199,632

199,443

2022
£’000

136,145
2,373
1,594
558
—
(215)
2,541

142,996
33,307
(211,694)
144,379

108,988
(25,344)

2021
£’000

119,416
2,332
2,263
297
76
(196)
2,267

126,455
(26,667)
(15,544)
29,553

113,797
(22,545)

83,644

91,252

20 Financial commitments
Guarantees
As at the reporting date, Softcat plc has a class guarantee facility of £Nil (2021: £2,000,000) with HSBC UK Bank plc.

168

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 2022

21 Financial instruments and financial risk management
The Company’s principal financial liabilities comprise trade and other payables and lease liabilities. The primary purpose of these
financial liabilities is to finance the Company’s operations. The Company’s principal financial assets comprise trade and other receivables
and cash that derive directly from its operations.

Financial assets
The financial assets of the Company were as follows:

Cash at bank and in hand
Trade and other receivables

2022
£’000

97,316
529,076

626,392

2021
£’000

101,724
315,313

417,037

The Directors consider that the carrying amount for all financial assets approximates to their fair value.

In respect of assets and liabilities that should be derecognised as at 31 July 2022, there remained a receivable of £627,779 (2021:
£369,200 payable) on the Statement of financial position. The receivable recognised at the 31 July 2022 was due to timing differences
between the transfer of cash that spanned the year end date.

Financial liabilities
The financial liabilities of the Company were as follows:

Trade payables
Accruals
Lease liabilities

2022
£’000

2021
£’000

(280,769)
(115,261)
(6,666)

(220,305)
(60,845)
(8,302)

(402,696)

(289,452)

The Directors consider that the carrying amount of financial liabilities (excluding lease liabilities) approximates to their fair value.

Financial risk management
The Company is exposed to interest rate risk, foreign currency risk, credit risk and liquidity risk. The Company’s senior management
oversees the management of these risks and ensures that the Company’s financial risk taking is governed by appropriate policies and
procedures and that financial risks are identified, measured and managed in accordance with Company policies and Company risk
appetite. During the year, no external debt was required and no facilities were entered in to.

The Board of Directors reviews and agrees the policies for managing each of these risks, which are summarised below:

Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. At the year end the Company has no borrowings and therefore the exposure to interest rate risk is limited to the rates
received as interest income on cash deposits. The Company accepts the risk of losing interest on deposits. Due to the limited exposure
to interest rate risk no sensitivity analysis has been prepared.

Foreign currency risk
The Company is exposed to foreign currency risk when dealing with customers and suppliers who wish to be billed in a currency other
than Pounds Sterling. As the vast majority of transactions are with UK customers and are denominated in Pounds Sterling, the Directors
consider this foreign currency risk to be small and do not hedge this risk due to the limited exposure. The level of foreign currency
transactions is monitored closely to ensure that the level of exposure is manageable. Due to the limited exposure to currency risk no
sensitivity analysis has been prepared.

Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a
financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing
activities, including deposits with banks and financial institutions.

Annual Report and Accounts 2022 Softcat plc

169

Financial statements

21 Financial instruments and financial risk management continued
Trade receivables
Credit risk from trade receivables is managed in accordance with the Company’s established policy, procedures and control relating to
customer credit risk management. A customer’s credit quality is assessed based on an extensive credit rating scorecard and individual
credit limits are defined in accordance with this assessment.

Outstanding customer receivables are regularly monitored. At 31 July 2022, the Company had 2,173 customer accounts (2021: 1,623)
that owed the Company more than £25,000 each. These accounts accounted for approximately 20% (2021: 17%) of total customers and
92% (2021: 98%) of the total value of amounts receivable. There were 841 customers (2021: 562 customers) with balances greater than
£100,000 accounting for just over 8% (2021: 6%) of the total number of receivable accounts and 79% (2021: 81%) of the total value of
amounts receivable.

The Company continues to monitor the impact of COVID-19 on its customer base and how that is managed through the provision of
credit, payment terms and the expected credit loss provision against trade receivables. We monitor the impact of COVID-19 as well as
the Ukraine conflict and current UK economic uncertainty. The receivables balance remains well diversified and individual customers
typically represent a very small proportion of the outstanding balance. In this regard, we consider the provision for expected credit losses
to be appropriate.

The requirement for impairment is analysed at each reporting date. The calculation is based on actual incurred historical data and
expected credit losses. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.
The Company does not hold collateral as security. The Company has evaluated the concentration of risk with respect to trade receivables,
as there is limited reliance on single, or few customers; instead, sales are typically small in size but large in volume as are the number of
customers, the Company considers concentration risk to be low. This is reflected by the fact that as at 31 July 2022, no more than 3%
(2021: 7%) of receivables are due from any one customer.

The Company provides against its trade receivables using the forward-looking expected credit loss model under IFRS 9.

Financial instruments and cash deposits
Credit risk from cash balances with banks and financial institutions is managed in accordance with Company policy. The Company has
significant cash reserves which are accessible immediately and without restriction. Credit risk with respect to cash deposits is managed
by carefully selecting the institutions with which cash is deposited and spreading its deposits across more than one such institution to ease
concentration risk.

Liquidity risk
The Company generates positive cash flows from operating activities and these fund short-term working capital requirements. The Company
aims to maintain significant cash reserves and none of its cash reserves are subject to restrictions. Access to cash is not restricted and all
cash balances could be drawn upon immediately if required. The Board carefully monitors the levels of cash deposits and is comfortable
that for normal operating requirements, no external borrowings are currently required.

The following table details the Company’s remaining contractual maturity for its financial liabilities based on undiscounted
contractual payments:

2022
Trade payables
Accruals
Lease liabilities

2021
Trade payables
Accruals
Lease liabilities

Within 1 year
£’000

1 to 2 years
£’000

2 to 5 years
£’000

Over 5 years
£’000

Total
£’000

(280,769)
(115,261)
(2,716)

(398,746)

(220,305)
(60,845)
(2,598)

(283,748)

—
—
(1,829)

(1,829)

—
—
(2,502)

(2,502)

—
—
(1,722)

(1,722)

—
—
(2,681)

(2,681)

— (280,769)
(115,261)
—
(7,365)
(1,098)

(1,098)

(403,395)

—
—
(1,497)

(220,305)
(60,845)
(9,278)

(1,497)

(290,428)

In both the current year and the prior year, materially all of the financial liabilities other than lease liabilities, above, have a contractual
settlement date of between zero and three months.

170

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 2022
21 Financial instruments and financial risk management continued
Capital risk management
The Company manages its capital to ensure that it will be able to continue as a going concern while also maximising the operating
potential of the business. The capital structure of the Company consists of equity attributable to equity holders of the Company, comprising
issued capital, reserves and retained earnings as disclosed in the Company statement of changes in equity. The Company is not subject to
externally imposed capital requirements.

22 Capital commitments
At 31 July 2022 the Company had £Nil capital commitments (2021: £Nil).

23 Directors’ remuneration

Remuneration for qualifying services
Company pension contributions to defined contribution schemes

2022
£’000

2,619
15

2,634

2021
£’000

2,358
3

2,361

During the year ended 31 July 2022 the Directors of the Company were awarded a total of 70,470 LTIP shares (2021: 67,466) at an
average exercise price of £Nil (2021: £Nil) and 35,590 shares (2021: 22,830) under the Deferred Share Bonus Plan.

The number of Directors for whom retirement benefits are accruing under defined contribution schemes amounted to one (2021: one).
The number of Directors who are entitled to receive shares under long-term incentive schemes during the year was two (2021: two).

Gains on share options exercised in the year were £2,612,553 (2021: £2,300,922).

Share-based payment charges include £983,983 (2021: £1,019,135) in respect of Directors.

For further information on Directors remuneration, please also see pages 98 to 112.

24 Employees
Number of employees
The average monthly number of employees (including Directors) during the year was:

Sales
Services
Administration

Employment costs

Salaries, commissions and bonus
Social security costs
Other pension costs

Employment costs – subtotal
Share option charge

2022
Number

1 ,141
332
323

1,796

2022
£’000

131,296
16,205
2,813

105,314
2,541

2021
Number

1,068
286
282

1,636

2021
£’000

110,470
14,862
2,484

127,816
2,267

Total employment costs including share option charge

152,855

130,083

Annual Report and Accounts 2022 Softcat plc

171

Financial statements

25 Share option schemes
The Company operates a Long Term Incentive Plan (‘LTIP’) for Executive Directors and senior management and a Share Incentive Plan
(‘SIP’) for all employees.

The Company recognised the following expenses related to equity-settled share-based payment transactions:

LTIP

Share option charge

Employer’s national insurance contributions payable on all plans

Share option charge including Employer’s national insurance

2022
£’000

2,541

220

2,761

2021
£’000

2,267

1,468

3,735

All options vest at the end of the vesting period relating to that option or on the occurrence of a contingent event. This includes substantial
sale or substantial business asset sale. If the options remain unexercised after a period of ten years from the date of grant, the options
expire. Furthermore, the vesting of these share options is dependent on continued employment.

Following the public listing of shares in the Company, share options become readily convertible assets for which the Company is liable
for Employer’s national insurance contributions. The Company accrues for national insurance contributions on a straight-line basis from the
date of award to the vesting date.

LTIP
The LTIP provides share awards to Executive Directors and senior management.

Executive Directors
Details in relation to the Softcat LTIP awards to Executive Directors are included in the Directors’ Remuneration Report on page 106.

During the year 70,470 (2021: 67,466) share awards related to LTIP schemes were issued to two Executive Directors at nil exercise
price with a performance period of three years. The fair value of these awards was £980,942 (2021: £497,224). Performance conditions
are linked to earnings per share and total shareholder return over the vesting period. The EPS linked element of the LTIPs awarded in
the year were valued using the Black-Scholes model and a Monte-Carlo simulation was used for the TSR linked element of the award.
The following assumptions were used to reach the below fair value:

Proportion of LTIP award
Share price at grant date (£)
Weighted average exercise price at grant date
Risk-free interest rate
Expected volatility
Dividend yield
Performance period (years)

Fair value (£)

31 July 2022

31 July 2021

EPS

50%
18.63
—
0.10%
51%
—%
3

18.63

TSR

50%
18.63
—
0.10%
51%
—%
3

9.22

EPS

50%
11.46
—
0.10%
55%
3%
3

7.94

TSR

50%
11.46
—
0.10%
55%
3%
3

6.80

Expected volatility has been determined using historical data reflecting share price movements covering the audited financial year.

During the year 125,000 (2021: 140,938) LTIP options were exercised with an average weighted share price at the date of exercise
of £18.45 (2021: £14.86).

Deferred Share Bonus Plan
One-third of the Executive Directors’ annual bonus up to 100% of salary is paid in deferred shares and any bonus above 100% of salary
is paid in deferred shares. In the year 35,590 (2021: 22,830) deferred shares relating to the 2019 Deferred Share Bonus Plan were
issued to two Executive Directors with a £Nil exercise price and a further vesting period of three years. The fair value is calculated using
the share price on the date of grant and the number of shares awarded. The fair value of deferred shares issued in the year is £663,063
(2021: £262,548).

During the year 16,596 (2021: 18,177) options arising from deferred share bonus plans were exercised with an average weighted share
price at the date of exercise of £18.47 (2021: £11.37).

172

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 2022
25 Share option schemes continued
LTIP continued
Executive Directors continued
Senior management
An award of 121,508 (2021: 164,245) shares was made to members of the Executive Leadership Team and other senior management in
the year. These shares had an exercise price of £Nil at the date of grant and a performance period of three years. The fair value of these
awards was £2,037,325 (2021: £1,692,545). As the exercise price of the options awarded in the year was £Nil, the charge has been
calculated by multiplying the number of shares issued by the share price on the date of grant, adjusted for an expected forfeiture rate.
The share price is the fair value of the equity instrument granted, which was £18.63 (2021: £11.45) at grant date. The resultant fair value
is then recognised over the performance period.

During the year 51,032 shares (2021: 17,467) were forfeited as members of senior management left the business prior to completion
of the vesting period.

The weighted average remaining contractual life under exercise period of all LTIP awards is 8.05 years (2021: 8.08 years).

Share Incentive Plan
The Company awarded free shares to its employees following the initial public offering in November 2015. Shares were allocated to
employees on the basis of length of service. Free shares awarded to an employee under the SIP were subject to a minimum holding
period of three years.

Historical employee attrition rates were used to calculate the expected number of shares expected to vest. The resulting income statement
charge was spread over the three-year vesting period with a corresponding entry in equity.

In addition, the Company’s voluntary partnership share purchase programme, which is open to all employees, is administered
through the SIP.

As at 31 July 2022 the SIP Trust held 592,575 (2021: 618,044) ordinary shares in the Company. The market value of the shares held by
the SIP Trust as at 31 July 2022 was £8.3m (2021: £11.9m).

The weighted average remaining contractual life of share-based payment arrangements at the year end was 3.36 years (2021: 4.36 years).

All share-based payment arrangements
The number and weighted average exercise price of all share-based payment arrangements (including LTIP) are as follows:

Outstanding at 1 August
Granted during the year
Forfeited during the year
Exercised during the year

Outstanding at 31 July

Exercisable at 31 July

Weighted
average
exercise
price
£

No. of
shares
as at
31 July 2022

Weighted
average
exercise
price
£

No. of
shares
as at
31 July 2021

— 1,098,374
232,832
—
—
(51,032)
— (353,153)

927,021

251,268

— 1,330,096
254,541
—
(17,467)
—
(468,796)
—

1,098,374

264,291

The fair value of share-based payment arrangements granted in the year was £3,747,316 (2021: £2,452,317), relating entirely to Long
Term Incentive Plan awards.

The weighted average remaining contractual life of share-based payment arrangements at the year end was 7.21 years
(2021: 7.25 years).

26 Post balance sheet events
Dividend
A final dividend of 16.6p per share has been recommended by the Directors and if approved by shareholders will be paid on
19 December 2022. The final ordinary dividend will be payable to shareholders whose names are on the register at the close
of business on 11 November 2022. Shares in the Company will be quoted ex-dividend on 10 November 2022. The dividend
reinvestment plan (‘DRIP’) election date is 28 November 2022.

Annual Report and Accounts 2022 Softcat plc

173

Financial statements27 Related party relationships and transactions
Transactions with key management personnel
The remuneration of key management personnel, which consists of persons who have been deemed to be discharging managerial
responsibilities, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

Short-term employee benefits
Post-employment benefits

2022
£’000

3,061
23

3,084

2021
£’000

2,758
19

2,777

Key management personnel received a total of 117,228 share awards (2021: 99,902) at a weighted average exercise price of £Nil
(2021: £Nil).

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key
management personnel.

Share-based payment charges include £1,083,687 (2021: £1,049,849) in respect of key management personnel.

Dividends to Directors

M Hellawell
G Watt
G Charlton
R Perriss
V Murria
K Slatford
L Weedall

2022
£’000

1,773
18
37
6
70
—
—

1,904

2021
£’000

1,555
—
17
5
51
—
—

1,628

174

Softcat plc Annual Report and Accounts 2022

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 July 2022

Financial statements

C O M P A N Y I N F O R M A T I O N A N D C O N T A C T D E T A I L S

Company number 02174990

Registered office
Softcat plc
Solar House
Fieldhouse Lane
Marlow
Buckinghamshire
SL7 1LW
United Kingdom

Tel: 01628 403 403

Website
www.softcat.com

Directors
Martin Hellawell (Chair)
Graeme Watt (CEO)
Graham Charlton (CFO)
Robyn Perriss (Independent NED)
Vin Murria OBE (Independent NED)
Karen Slatford (Senior Independent NED)
Lynne Weedall (Independent NED)

Company Secretary
Luke Thomas

Investor relations contact
investors@softcat.com

Softcat LEI
213800N42YZLR9GLVC42

Registrar
Link Group
10th Floor, Central Square
29 Wellington Street
Leeds
LS1 4DL
United Kingdom

enquiries@linkgroup.co.uk

Tel: 0371 664 0300

Calls are charged at the standard geographic rate and will vary
by provider. Calls outside the United Kingdom will be charged at
the applicable international rate. Lines are open between 9.00am
and 5.30pm, Monday to Friday excluding public holidays in
England and Wales.

Corporate advisers
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF

Joint corporate broker
Jefferies International
100 Bishopsgate
London EC2N 4JL

Numis Securities Limited
45 Gresham Street
London EC2V 7BF

Legal advisers
Ashurst LLP
London Fruit & Wool Exchange
1 Duval Square
London E1 6PW

CBP015485

Softcat plc’s commitment to environmental issues is reflected in this Annual Report, which has been
printed on Arena Smooth Extra White, an FSC® certified material. This document was printed by
Pureprint Group using its environmental print technology, with 99% of dry waste diverted from landfill,
minimising the impact of printing on the environment. The printer is a CarbonNeutral® company.

Both the printer and the paper mill are registered to ISO 14001.

Annual Report and Accounts 2022 Softcat plc

175

Financial statementsTEAMWORK

VALUES
RECOGNITION

PASSION

FUN

INTELLIGENCE

RECOGNITION
COLLABORATION
TOGETHER
VALUED

COMMUNITY

ALLYSHIP

PARTNERS

WECARE

RESPONSIBILITY

CUSTOMER
CULTURE

PEOPLE
INCLUSION

Softcat plc
Fieldhouse Lane
Marlow
Buckinghamshire SL7 1LW

Tel: 01628 403 403

www.softcat.com

COMMUNITY

WECARE