Softcat Annual Report 2023

FY2023 Annual Report · Softcat

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Strategic report

Softcat plc
Annual Report and Accounts 2023

COECWELCOME

CREATING
OPPORTUNITIES
TO GROW AND

Every year we pick a ‘word for the year’. The word is
our anchor point for our values and behaviours which
we promote and encourage throughout the year.
Our word this year is ‘connect’ and it feels so important
to us for several reasons. As Softcat expands, it would
be easy for connections to be lost, between geographies,
offices, colleagues, teams and departments.

We are determined that no matter how big we get, we will not lose the DNA that got
us here, and connection with each other plays a huge part in that. Connecting is about
bringing colleagues together, whether that is for special events, such as our annual
Kick Off for all of our employees, or simply in the flow of work. Reminding everyone
to connect is vital.

COECStrategic report

HIGHLIGHTS

SUSTAINED PERFORMANCE

Financial highlights

Gross profit £m

£373.8

Gross profit per customer £’0002

£37.0

23
22
21
20
19

373.8

327.2

276.4

235.7

211.1

23
22
21
20
19

37.0

33.0

28.4

24.8

23.0

Operating profit £m

£140.9

Revenue £m1

£985.3

23
22
21
20
19

93.7

84.5

140.9

136.1

119.4

23
22
21

985.3

1,077.9

784.0

Customer base ’0002

Cash conversion %3

10.1

23
22
21
20
19

93.2

10.1

9.9

9.7

9.5

9.2

23
22
21
20
19

76.2

93.2

89.9

88.0

92.0

Gross invoiced income £m3

£2,563.3

23
22
21
20
19

2,563.3

2,507.5

1,938.4

1,646.2

1,414.1

Operational highlights
• Gross profit growth: 14%
• Operating profit growth: 3.5%
• Cash conversion: 93%
• Employee engagement: 92%
• Customer satisfaction: 97%
• Customer base up by: 200
• Gross profit per customer growth: 12%

1. During FY2022, there was a change in accounting
policy for the IFRS IC agenda decision – IFRS 15
Revenue from Contracts with Customers, treatment of
software revenue as agent revenue. This resulted in the
restatement of the FY2021 comparatives during the
prior period. As a result, revenue is only available on a
comparable basis for 2021 to 2023.

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

Contents
1–78
Strategic report
Highlights
1
Celebrating 30 years
2
At a glance
4
Strategic roadmap
6
Investment case
7
8
How we connect
10 Chairman’s statement
14 Group Q&A
16 Chief Executive Officer’s statement
20 Business model
22 Our market and offering
28 Strategy
32 KPIs
34 Chief Financial Officer’s review
36 Section 172 – Stakeholder engagement
42 Employee engagement
44 Social value
50

Task Force on Climate-related Financial
Disclosures (‘TCFD’) and Sustainability

72 Risk management
79–142
Corporate governance
Introduction to corporate governance
80
82 Board leadership and company focus
84 Governance report
96 Audit Committee report
106 Nomination Committee report
112 Sustainability Committee report
114 Remuneration Committee report
135 Directors’ report
143–182

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

comprehensive income
153 Statement of financial position
154 Statement of changes in equity
155 Statement of cash flows
156 Notes to the financial statements
182 Company information and

contact details

alternative performance measures. Please see page 35
for further definitions and reconciliations.

Pages 1 to 78 form the Strategic Report of Softcat plc for the financial year ended 31 July 2023. The Strategic Report
has been approved by the Board of Softcat plc and signed on behalf of the Board by Graham Charlton, CEO, and
Katy Mecklenburgh, CFO.

For more information visit:
www.softcat.com

Annual Report and Accounts 2023 Softcat plc

Strategic reportCELEBRATING 30 YEARS

A 30 YEAR
JOURNEY...

Software catalogue
became Softcat

1993

1995

2002

Founded by Peter Kelly

First profitable year of trading
We’ve come a long way; from selling PCs
out of a High Wycombe shed in 1993 to
delivering transformative solutions to a global
customer base.

Listed on the London
Stock Exchange

Softcat launches eCat: its online
purchasing platform
for customers

2015

2014

2013

2017

99%

Customer satisfaction for
seven years in a row

6th Best Workplace in Europe

Turnover reached

£500m

Ranked 6th as Rate my Apprenticeships
Top 100 Employers

Launched the Softcat
Community Network

2019

2020

Softcat plc Annual Report and Accounts 2023

Employees built an
orphanage in Fiji

2004

2007

Moved to Marlow

Turnover reached

£50m

Second office opened
in Manchester

Turnover reached

£100m

2008

2011

2010

Charity donations exceeded

Opened the London office

£100k

Sunday Times No.1 Best Small
Company to Work For

Softcat became the UK’s NO.1 VAR

Transformed part of our Marlow office
into a COVID-19 vaccination centre

Opened the
Newcastle office

...AND BEYOND

2021

2023

First FTSE 250 Company to receive
5* from UN for Sustainable
Development Goals

Annual Report and Accounts 2023 Softcat plc

Strategic reportAT A GLANCE

A CONNECTED
COMMUNITY

Our goal is to be the
leading IT infrastructure
solutions provider as
measured by employee
engagement, customer
satisfaction and shareholder
returns. Success will create
opportunities for our people
and drive growth for our
customers and partners.

Our offering
We support commercial and public sector organisations to
design, procure, implement and manage their digital infrastructure.
Our continuing success puts us in the privileged position to invest
in new capabilities in exciting and emerging areas of technology,
organised around three key customer priorities:

Hybrid infrastructure
Designing, implementing
and supporting a mix of
private and public cloud,
optimised for individual
customer needs.

Cyber security
Providing assessment
services as well as
implementing and
managing solutions
to stay one step ahead.

Digital workspace
Designing and implementing
the tools and applications
to deliver agile, collaborative
and highly productive
business environments.

Read more on page 44

Softcat plc Annual Report and Accounts 2023

INVESTMENT CASE

WHY INVEST IN SOFTCAT?

We are well positioned to help commercial and public sector organisations design, procure, implement
and manage the right IT solutions to match their needs. We set ourselves apart from our peers as the
solutions provider of choice through our unique culture. By providing the best IT solutions, we provide
the underpinnings to the modern digital economy. We are well placed in our market, which is in a sector
seeing substantial growth – we think there is so much more growth to come.

1 We advise, design,

procure, implement
and manage
technology for
our customers

Read more on pages 22 to 27

3 A dedicated and

passionate team

Read more on page 44

400+

vendors
and partners

We work with all of the leading global
technology manufacturers to provide
our customers with the broadest possible
choice of IT infrastructure solutions to suit
their needs. This includes software licensing,
workplace technology, networking, security,
cloud and datacentre. We do all of this
through our own teams of technologists
augmented by numerous specialist
service partners.

We provide much the same technology as
our competitors. What makes us different
is the passion and expertise of our people
in supporting our customers across
our offering.

97%

customer
satisfaction

We believe that if people enjoy what they
do, and care about the company they
work for, they will perform at a higher
level. Our culture is the vital ingredient
to providing outstanding service to
our customers.

92%

employee
engagement

4 Market-leading

growth and
financial strength

Read more on pages 16 to 19 and pages 34 and 35

We have delivered 18 consecutive years
of gross invoiced income and profit
growth, all of which has been organic.
The business has no debt and a strong
track record of cash generation.

20%

compound annual
growth rate in
GII over the
last ten years

5 Large and growing

addressable market

Read more on pages 22 to 27

We estimate our UK addressable market
is around £60bn in 2023. Per Gartner, this
is forecast to grow at 9% p.a. through to
2027. As the largest VAR in the UK we have
a relatively small share of the addressable
market, giving us the opportunity to deliver
market-leading growth.

4.3%

estimated share
of addressable
market in FY2023

Annual Report and Accounts 2023 Softcat plc

Strategic reportHOW WE CONNECT

We connect and collaborate with major global
technology vendors, as well as emerging innovators, to
deliver the broadest possible choice for our customers.

We then connect to our customers to help them use technology to
succeed by focusing our advice, procurement and services across
three key IT priorities: hybrid infrastructure, digital workspace and
cyber security.

HOW WE

97%

customer satisfaction

2,315

employees

10,110

customer base

Softcat plc Annual Report and Accounts 2023

COECConnecting our customers to solutions
We connect our customers to a single point of purchase for a broad range
of technology solutions and services including: public and private cloud,
collaboration, datacentre, lifecycle solutions and software licensing.

Connecting our employees to each other
This year our headcount passed 2,000 employees. We are working harder
than ever to make every employee feel part of a connected team at Softcat.
Our training makes employees feel equipped and innovates them to provide
the best solutions for our customers. Our culture focuses on both teamwork
and on celebrating individual contributions, ranging from our employee
of the month awards to team of the year awards.

The people within Softcat appreciate the culture
built over many years and embrace this. We all
work collaboratively together and support one
another throughout. It really is a very healthy,
happy and prosperous environment.

Response from 2022 employee satisfaction survey

In focus

Bringing technology to life
We also connect to our customers
by bringing their technology to life
with our Services team, helping our
customers achieve their business
goals sooner and with more
efficiency by:

• Designing our support to help

them overcome their key challenges

• Simplifying the complexities of

modern technology
• Making their technology

investments more manageable

Annual Report and Accounts 2023 Softcat plc

COECStrategic reportCHAIRMAN’S STATEMENT

INVESTING FOR
FUTURE GROWTH

In my first few months as Non-Executive
Chairman of Softcat, I am very satisfied
with the performance of the Company,
the team at Softcat and the contributions
and guidance of the Board.

Graeme Watt
Non-Executive Chairman

Softcat plc Annual Report and Accounts 2023

I am pleased to provide my first statement as
Non-Executive Chairman of Softcat, following
my move to this role on 1 August 2023

FY2023 was my final year as Chief Executive Officer (‘CEO’)
of Softcat and the performance of the business is explained in
detail in the reviews of the current CEO and CFO on pages 16
to 19 and 34 and 35 respectively. In summary, FY2023 was
another successful year for Softcat where we again exceeded
the expectations we set at the start of the year. Key measures of
performance moved forward as we grew gross profit, gross profit
per customer, customer numbers and operating profit. The team did
well to navigate the headwinds of slowing hardware demand, cost
pressures and economic slowdown and we took further market
share in the UK. Softcat continues to invest in IT infrastructure to
be productive, secure and competitive and the majority of our
customers are no different. Our strategy and focused execution
continue to serve us well.

I would like to highlight three further areas of success that I think
underline the progress the team continues to make. Both employee
engagement and customer engagement made significant steps
forward – this is a testament to the leadership team and to all
those that work at Softcat. I am particularly pleased with our
performance here. Our fundamental belief that highly engaged
and motivated staff will deliver outstanding customer service
continues to hold true and the team is always looking at ways to
improve. Our efforts to drive inclusion in all facets of what we do
have delivered further results, most significantly in gender diversity
where now 35% of the workforce are female.

This is up from 28% five years ago and we have hit this important
measure five years ahead of our expectation. The leadership
team has also made important steps forward in its diversity and
is looking to mirror the Company-wide diversity levels.

Whilst the challenging economic environment continues, the
Board believes that Softcat’s culture, breadth of technology,
services and customers position it well to absorb any market
demand challenges and the Company continues to fully invest to
deliver further organic growth over the long term. I continue to be
confident in the Company’s future. The focus is on maintaining
and evolving the culture of the business to deliver first class
customer service. The Company will continue to evolve its
technical and service offering to remain relevant and valuable to
customers. We work with customers to assist with their technology
infrastructure challenges of choice, complexity and rate of change.
Technology changes continue at pace so the future is bright as
we develop further ways to help our customers and win more
customers in the process. Those changes include, but are not
limited to, artificial intelligence, edge computing, Internet of Things
applications, security, data management, digital transformation
and marketplaces. We are not opportunity limited.

The impacts of climate change continues to be a priority and the
Company is playing its part to become more sustainable and to
help our customers and channel partners make more sustainable
choices. In the last year we have taken tangible steps that have
made an immediate impact, such as completing the switch of
our car pool fleet from petrol/diesel to all electric. We are also
installing solar panels at our head office in Marlow and moving
energy supply at our other locations to renewable electricity where
possible. Further actions are planned and will take a little longer,
in particular getting complete alignment with all of our key vendors
to ensure our customers have the ability to consider sustainable
choices in many more of their purchasing decisions. We will
continue to work with all of our vendors to reach this goal.

In my first few months as Non-Executive Chairman of Softcat,
I am very satisfied with the performance of the Company,
the team at Softcat and the contributions and guidance from
the Board.

Softcat continues to be in an excellent position to continue to
grow, thrive and perform well whilst taking share in a growing
market. The business is in good health with a strong balance sheet
and no debt. Our reputation is as strong as ever, our employees
remain highly engaged and our customers remain highly satisfied.

Board changes
There have been a number of changes in the Board in the last
year, including the Board succession changes as explained in last
year’s Annual Report. Martin Hellawell retired as Non-Executive
Chair and a Director of the Board on 31 July 2023, after having
served in various roles at Softcat for 18 years. I can’t thank Martin
enough for his role in building the success we continue to enjoy
today and for his personal and professional guidance he provided
to me through my tenure as CEO. We wish him every success and
lots of fun in the future. We executed a very thorough handover
process from Martin to me to ensure I could ‘hit the ground running’
from 1 August in my new role, at which point I stepped down from
all executive responsibilities at Softcat.

As announced in 2022, Graham Charlton succeeded me as
Chief Executive Officer (‘CEO’) on 1 August 2023. This follows his
eight years tenure as Chief Financial Officer (‘CFO’) during which
time he developed a deep understanding of the business and
what makes Softcat successful. Our orderly succession plan has
allowed Graham to invest a significant amount of energy and time
in preparing for the move to CEO and, as the Board expected,
he has made an excellent start. The Board has full confidence in
Graham and his leadership as he leads the organisation in its next
chapter of growth.

We also announced in 2022 that a search for a CFO to succeed
Graham would commence. The search considered external as
well as internal candidates and we were delighted to appoint
Katy Mecklenburgh as CFO with effect from 19 June 2023. Katy
has come from outside the Company and shone through in what
was a very comprehensive search and selection process. Her
background, experience and affinity with our culture made her
perfect for the position and she is already beginning to make
a significant contribution as she settles into her role. Katy and
Graham are already working very well together.

Softcat announced in January 2023 that Karen Slatford (an
independent Non-Executive Director and Chair of the Nomination
Committee) had advised the Company that due to health reasons
she would retire from the public company boards on which she
served, including Softcat. On behalf of the Board, I would like
to take the opportunity to again thank Karen for her contributions,
dedication, wise counsel and down to earth approach during
her tenure at Softcat. Following Karen’s retirement from the Board,
Lynne Weedall, Non-Executive Director, assumed the roles of
Senior Independent Non-Executive Director as well as Chair
of the Nomination Committee on an interim basis.

Annual Report and Accounts 2023 Softcat plc

Strategic reportCHAIRMAN’S STATEMENT CONTINUED

Board changes continued
In respect of the overall composition of the Board, we have
previously commented that Softcat has a relatively small Board for
the size of the business and the Board had previously discussed
the potential benefits of adding Non-Executive Directors, if that
approach would add further significant value to the Board’s
effectiveness, skillset and expertise. The Nomination Committee
deliberated on this earlier in the year and concluded that the time
was right to search for two new Non-Executive Directors – one
additional and one to replace Karen. The Nomination Committee,
with the support of an external consultant, prepared detailed
profiles to define the qualities and expertise required for the new
candidates and the consultant undertook an exhaustive search.
From a shortlist of very strong candidates we were pleased to
recently select and announce the appointment of Mayank Prakash
and Jacqui Ferguson as independent Non-Executive Directors with
effect from 1 September 2023 and 1 January 2024 respectively.

Mayank is a seasoned chief information officer and brings
significant expertise across the areas of operations, technology,
and digital information and transformations. In addition to
significant non-executive experience, Jacqui is familiar with
Softcat’s business ecosystem and has a wealth of knowledge in
the large scale, growth-oriented business-to-business technology
environment. I welcome both Mayank and Jacqui and the
valuable contribution they will make to the quality of the Board.

Following a review of Board composition, the Board is pleased
to confirm with immediate effect that Lynne Weedall is appointed
as Chair of the Nomination Committee on a permanent basis.
The Board has agreed that Lynne will retain the role of interim
SID, which will transition to Jacqui on a permanent basis at some
point in 2024.

After just over five years as Softcat’s CEO, I succeeded Martin
Hellawell as Softcat’s Non-Executive Chairman and I am most
grateful for the opportunity to remain on the Board of such an
excellent company. My move was explained in last year’s Annual
Report, as part of our orderly succession plan. As mentioned last
year, the Nomination Committee (of which I was not a member
at the time) had considered alternative potential candidates.
They concluded that my industry channel experience, deep
network of industry relationships, public company experience,
Softcat knowledge and cultural fit were key attributes and

very much in the interest of all stakeholders, particularly our
shareholders. My appointment was very carefully considered
by the Nomination Committee, which acknowledged 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. However, the Board has a very clear and successful
operating model as demonstrated during the time when Martin
was Chair (Martin was formerly Softcat’s CEO). Martin regularly
explained that the CEO is ‘the boss’ of the Company and that will
be no different going forward. Graham is in charge of the business;
I am confident that he will take the business to the next level.

I am very pleased with the composition of the Board following
these changes. We have further built out our skillset and are
well positioned to provide the strategic oversight, constructive
challenge and support expected for an effective board. The Board
will also benefit from leveraging the expertise and experience
from the recent appointees in addition to that of the existing
Board members.

Board effectiveness
I am delighted so far at the way the Board operates and I believe
we are a strong and effective Board. On becoming Chairman,
I discussed with the Board the way we work together and we
have considered what works well and where we can make some
improvements or changes. We have conducted an internal Board
evaluation process this year (see page 88), which reaffirms my
view that we continue to work well. As it should, the evaluation
identified some points for improvement on which we will
take action.

Stakeholders
I am pleased with the way the Board continues to provide
effective oversight and consider Softcat’s wider stakeholder
base. Throughout the year we have had regular updates on the
engagement, recruitment and retention of our employees and
on customer satisfaction. The Board has approved three targets
as part of its commitment to continue improving its environmental
impact in the business and within the supply chain and these were
reviewed by the Sustainability Committee during the year. We are
making good progress in all of these areas, which are described
in more detail elsewhere in this Annual Report.

T H E N : 22 PEOPLE

Softcat plc Annual Report and Accounts 2023

The Board also continues to engage with management on the
many efforts to improve our diversity and inclusion. We recognise
that we still have more to do and it will take some time before we
reach a better diversity mix in some management roles, but I would
like to thank our employees for their continued efforts. Softcat
remains a particularly inclusive place to work and I am proud
of the way our Community Networks (see page 47) bring this
together for so many of our employees.

The Board has also had two direct engagement sessions with
the employees of our offices in Leeds and Manchester this year,
giving employees the opportunity to ask questions and get answers
directly from the Board.

The views of our shareholders continue to be very important to
me. As Chair, I will maintain our longstanding programme of
contact with our largest shareholders and with the proxy advisory
agencies, encouraging engagement with me and/or other
Non-Executive Board members if required. This programme does
not cover operational business matters but focuses on Board
matters, governance and stewardship. This remains valuable in
achieving a better understanding of mutual objectives from the
investors’ perspective.

Dividend
The Board has reviewed Softcat’s dividend policy and it remains
unchanged. Our dividend policy remains a progressive one which
targets an annual (interim and final) 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 prioritise returning excess cash to
shareholders over time. We recommend a final dividend of 17.0p per
ordinary share, taking the total dividend to 25.0p per ordinary share.

In addition, we recommend a special dividend of 12.6p per
ordinary share is paid at the same time as the final dividend.
The Board regularly reviews the target minimum amount of cash
required to operate the business and since 2022 has approved a
target of £60m. Given the continuing increase in the size and scale
of the business, the Board agreed to increase this level to £75m.
The special dividend takes into account the increase in target
minimum cash holding in the business. Further details of our capital
allocation framework and our dividend and distributions policy
can be found on pages 90 to 92.

Softcat continues to be in an excellent
position to continue to grow, thrive and
perform well, whilst taking share in
a growing market.

Shareholders will be asked to approve the final and special
dividends at the AGM on 13 December 2023.

Looking ahead
The Company is in great shape to take on future opportunities and
challenges presented in the IT infrastructure solutions space and the
Board remains confident of our future performance prospects. I am
relishing and thoroughly enjoying my new role as Non-Executive
Chairman and I am so pleased I can keep my association with a
company I love and respect so much. I will work hard to develop
in the role as quickly as possible along with the other recently
appointed Directors.

Our Annual General Meeting will be held on 13 December 2023
and I look forward to meeting any shareholders who wish
to attend.

Graeme Watt
Non-Executive Chairman
23 October 2023

E O P L E

5 P

W: 2,3 1

O
N

Annual Report and Accounts 2023 Softcat plc
Annual Report and Accounts 2023 Softcat plc

13
13

Strategic reportGROUP Q&A

Graeme Watt, Chairman
Graham Charlton, CEO
Katy Mecklenburgh, CFO
Graeme, Graham and Katy talk about their
new roles, Softcat’s strategy and what’s next
for the Company

Q&AQ How would you describe your transition

from CEO to Non-Executive Chairman?
I would say it is early days but well planned and orderly.
I have left the CEO role behind and it is clear to the
Board, and in particular the executive Board members,
where my responsibilities now lie. Since announcing, a
year ahead of the actual appointment, I have worked
hard to ensure I maintained the focus on my executive
duties. In parallel I prepared a detailed plan of transition
ahead of the change and I completed a thorough
handover from Martin Hellawell. I remain very excited
and honoured to be appointed as Chairman. I already
know the Board well and we have taken time to discuss
how we want to run things together given the number
of recent changes to the team. I feel I have a lot to offer
Softcat in my new position and I have a lot to learn too
given that it is my first chair role.

Q How would you describe your transition

from CFO to CEO?
It’s been a very gradual and natural process. We have
a terrific culture and a simple strategy and these will be
two key features I will nurture and protect. I’ve learned a
huge amount from working with both Martin Hellawell and
Graeme Watt since I joined in 2015, and I’ve used the last
year to make good progress against a transition plan to
get ready for the role. Perhaps most importantly, I’m really
enjoying the job, especially spending more time with our
customers and partners, deepening the working relationships
with some of our most important stakeholders. While there is
a lot for us to preserve, there are also some changes in our
industry that require evolution of our model and I’m looking
forward to driving Softcat forward into this new era. There
will be challenges of course but we are a team at Softcat
and I’ve no doubt we’ll be successful together.

A key early action has been to work with the rest of
the Board to make sure we have the right diversity of
talent, expertise and experience. We have already
announced all of the changes in the pipeline including
the appointment of Katy as CFO, the addition of Mayank
Prakash as NED with technology experience and the
future appointment of Jacqui Ferguson on 1 January 2024
to bring in her industry experience. I start my role as
Chairman with a strong Board which is ready to provide
the best possible oversight and leadership.

Q What attracted you to join Softcat

as the CFO?

KM A good number of reasons! Firstly the description of the

Company culture, and the priority that was placed on this
throughout the recruitment process. The culture encapsulates
many values I really believe in and so this really caught my
attention. Secondly, the clarity and simplicity of the strategy
and business model and the results they have delivered.
To have grown top and bottom line every single year, while

Softcat plc Annual Report and Accounts 2023

I start my role as Chairman with a strong
Board which is ready to provide the best
possible oversight and leadership.

Graeme Watt
Chairman

continuously investing in future growth, is remarkable and
demonstrates great execution. Thirdly the future potential
of the Company; with both an expanding market and a
relatively low market share there is still so much room to
continue our growth trajectory.

able to contribute actively and effectively. Jacqui joins the
Board in January 2024, which will complete the series of
changes. It is a great team and one that I am excited to
be in a position to lead and help Softcat continue on it’s
remarkable journey.

Q There have been several changes to the Board

of Softcat, does this mean a change of
strategy for the business?

GC Our headline strategy is simple and has served us well and
will continue to guide us. The changes to the Board will add
a new dimension to the discussions we have, and I’m very
excited by the new experiences that we have to draw on, but
we are all aligned that the core of what has made Softcat the
business it is today will not change. At the same time, there
are some disruptions happening in parts of the IT Channel
and we’re excited to find the opportunities for Softcat
within that. We will invest in developing new propositions
and modernising our operating model, embracing the
contemporary methods of distribution and consumption
being pioneered by our vendor partners. We will continue
to provide the broadest and deepest range of solutions and
services to the UK and Ireland market by listening carefully to
the changing needs of our customers.

GW We will continue to provide robust challenge and inputs to
the strategy for which the Board is responsible. The Board
changes are not connected to any change in strategy.
We have a really good strategy that together with strong
execution has led to excellent historic performance. We are
in a fast moving industry and would expect that the strategy
will continue to evolve over time. The Board changes are
a result of Martin Hellawell stepping down after nearly
nine years since Softcat listed on the Stock Exchange and
a desire to make sure we have the right mix of skills and
experience to lead and provide oversight and this has been
supported by a strong succession plan and process.

Q What are your priorities over the

next 12 months?

GW To fully settle in as Chairman of the Board and make sure
that our new Board members are properly inducted and
that everyone on the team feels good about the team and

GC Maintaining the excellent momentum we have is a

priority. Our position today reflects 30 years of relentless
focus on our customers. We must not forget what has
made us so successful, as our market changes and as we
continue to grow we also need to evolve so we continue
to be successful in the future as we have been in the
past. We are closely tracking innovations like the various
forms of AI, marketplaces and edge computing and the
exciting options this creates for our customers. Whilst
our strategy is consistent, we have very deliberately
extended one of our underpinning principles from
“expanding our addressable market” to “maintaining
relevance and expanding our addressable market”.
This is a prompt for everyone in the business to avoid
complacency and recognise that there are changes we
must embrace. This will sharpen our focus on how we
continue to be the partner of choice for our customers.
This includes the modernisation of our proprietary data
and digital platforms to enable the power of emerging
technology within our own operations. But we will never
forget what got us here either. Being a great place to
work where our people feel valued, listened to and
supported will always be number one.

KM So far, I have spent a lot of my time meeting the team
and getting to know the business. I have visited six of
the offices, which has been a great way to learn more
about our culture, people and performance, and plan to
visit the rest in the next months. I’d like to thank everyone
at Softcat who has made me feel so welcome, it has
been a brilliant introduction into the Company. I really
like the focus throughout the Company not to become
complacent. For me that is about responding to market
and technology changes and making sure our back
office continues to evolve as we grow and become more
complex and I am looking to being part of this journey
over the next 12 months.

Annual Report and Accounts 2023 Softcat plc

Strategic reportCHIEF EXECUTIVE OFFICER’S STATEMENT

ANOTHER RECORD
YEAR FOR SOFTCAT

I am pleased to report on our FY2023 results
which represent another record year for Softcat.
Our unique culture and relentless dedication to
delivering the best customer service in the industry
continue to serve us well.

We once again made progress on both selling deeper into
existing customers, with double-digit gross profit per customer
growth, while also attracting new customers, delivering 1.9%
growth in the customer base.

We continued our investments for future growth, growing
headcount by 20.5% to 2,315, by investing across all departments.
We are evolving our customer offering in response to the
changing technology landscape, keeping pace with emerging
customer needs. The rate of change in our industry, with respect
to the technology we are selling, the channels through which
it is sold and the way it is consumed, is significant. However,
the customers’ need for advice and support in navigating this
increasing complexity, and the need to deploy the right technology
for their circumstances to remain competitive, is constant. This gives
organisations like Softcat an exciting opportunity to take a bigger
share of an ever-growing market.

The Company remains in a very strong financial position, and
we have great confidence in our long-term growth and cash
generation. In recognition of this, we are again recommending
the payment of a special dividend.

We are evolving our customer offering
in response to the changing technology
landscape, keeping pace with emerging
customer needs.

Graham Charlton
Chief Executive Officer

14.2%

Gross profit growth

2.0%

Customer base growth

Softcat plc Annual Report and Accounts 2023

A huge thank you to all the fantastic people at Softcat for their
incredible dedication to each other and our customers, their efforts
and attitude continue to be the bedrock of our success. I’d also like
to thank our partners for their support and look forward to another
exciting year ahead.

Sales Strategy and Execution
Our sales strategy remains unchanged: we continue to look to
acquire new customers and gain an ever-greater share of wallet
with existing customers.

Gross profit growth, our primary measure of income, grew by
14.2% despite very strong comparative figures, and our annual
customer engagement survey, completed by a larger set of
customers than ever before, delivered very positive results with
an NPS of 62 (FY2022: 55) showing improvements across
every category.

Our customer base grew by 1.9%, passing through 10,000.
We continue to benefit from their insight and feedback on where
they are taking their technology in the years to come and the
problems they are trying to solve. Gross profit per customer also
grew strongly, up 12.2% in the year, as we retained our focus on
delivering high quality service and solutions for both existing and
new customers.

The opportunity we have across all segments of our customer base
for further wallet share gains in the years to come, capitalising on
the full breadth and depth of our technology proposition across
software, hardware and services, and within datacentre, security
networking and workplace technologies, is as exciting as ever.

We estimate that our share of the addressable UK market is around
5%. While conditions were challenging during the second half of
the year, with customers noticeably slowing their rate of investment
and some larger, more complex deals being delayed or subject
to more stringent procurement processes, we remain as positive as
ever about the medium- and long-term prospects for our industry.
We have the largest commercial team in the UK market and will
continue to invest with intent across all functions as we build capacity
and new capabilities to maintain our relevance in a market
evolving at pace.

We have the largest commercial team in
the UK market and will continue to invest
with intent across all functions...

We will also maintain our position as a key partner to both
established and emerging technology vendors, evolving our skills
around the ever-changing portfolios of services and products
coming to market.

People and Culture
Our culture remains as strong as ever as evidenced by the results
of our annual employee satisfaction survey which showed an
employee NPS of 63 (as surveyed in October 2022 (FY2022:
52)). Despite our growth in headcount, we continue to not only
preserve our strong culture but also evolve it as society adjusts to the
world of hybrid working. Having a highly motivated and engaged
workforce was the founding principle of Softcat 30 years ago and
remains our number one priority, allowing us to attract and retain
talented people with an outstanding attitude. Our employees
reported that they were particularly happy with our stance on
remote working and inclusivity.

Hybrid working at Softcat has settled into a healthy and natural
rhythm – staff have the freedom to choose a formula that works
for them and we have worked hard to foster an understanding
that circumstances are different for everyone and that there isn’t
an easily prescribed formula that can be mandated across the
business. At the same time, it is clear that as an organisation
we benefit from as much time as possible spent together and it
has been highly encouraging to see our people’s response to that.
Our offices are vibrant during the middle of the week when teams
interact and our partners visit, but also purposefully populated
by those who need the space at either end of the working week.

Our annual Kick Off event was hosted face to face in September
2023 for the second time since the pandemic, proving to be a
bigger success than ever based on employee feedback and very
motivating for the 2,100 employees who attended. Our partner
forum and charity ball were also hosted in person and it’s terrific
to see how both Softcat people and our partners enjoy coming
together as a single team.

The labour market eased during the year and we were able to
increase headcount by 20.5%. This represents rapid expansion of
our sales team (up 24.1%) as well as strong growth in supporting
specialist and technical teams (up 13.5%). Expansion of the
business operations teams was slower (up 11.3%) following very
significant investment during FY2022 in those teams to support the
new finance system implementation and other developments.

Our learning and development initiatives continue to bear fruit and
we are delighted with the number of employees going through our
various programmes including the Sales Development Programme,
the Specialist Acceleration Programme, our Tech Starter programme
and other initiatives including inclusivity, sustainability and cyber
security training.

Annual Report and Accounts 2023 Softcat plc

Strategic reportCHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED

People and Culture continued
Our leadership transition was completed smoothly during the
summer of 2023 as previously communicated. Katy Mecklenburgh
joined us as CFO on 19 June and has settled excellently into the
Softcat culture. I’d like to formally welcome her to the Company
and am very confident she has a big role to play in our
future success.

Ease of doing business
During the previous year we implemented a new finance
system, alongside which we developed new data management
processes and integration layers. This has established a modern
system architecture which we are now augmenting with external
data feeds, creating exciting new possibilities for analytics and
reporting. This in turn can form the basis for new ways of working
and, potentially, the application of AI technology to advance
our operating model in significant ways. For example, enabling
automated lead generation, enhancing the efficiency of our
account managers to navigate the enormity and complexity
of our customer proposition, and significantly more effective
resource allocation.

We also continue to invest in developing the skills and digital
platforms necessary to embrace new distribution and consumption
models. This includes the adoption of the various marketplaces
released by the public cloud providers and distributors, as well
as the growing number of subscription-based hardware offerings.
Demand for these innovations is variable but developing and we
have the plans in place to ensure we are best placed to support
both customers and vendors as they reach maturity.

Addressable market
Along with the trends discussed above that we are seeing in the
distribution and consumption of IT infrastructure, the market is also
witnessing rapid introduction of new and exciting technologies.

Hybrid models of compute and storage, placing data and
workloads in the most appropriate and cost-effective location
for the task, are producing more thoughtful approaches from
customers on the design of their environments and that plays
strongly into our design and advice capabilities.

The impact of AI is building rapidly. Datacentres, wherever they
are located, are beginning to be designed around the need to
handle the demands of this new technology and we only see this
increasing. Datacentres are already created for specific needs,
but we expect even greater differentiation around specific tasks
to be increasingly factored into design choices. Perhaps the
most significant impact from AI in the short term comes from its
deployment in mainstream desktop applications. This will have
immediate implications for the cost of those applications, the
technology being expensive to run, but also promises exciting
new productivity gains and possibly even the transformation
of some elements of the operating model for certain customers.
Apart from the licensing of AI-enabled applications, customers
will also need to think about where they are hosted and the
devices they are deployed upon. Operating systems will need
to be refreshed and end-user device estates re-evaluated.

Cyber security continues to be a major concern for customers and
while AI is already being deployed within security software, its
application will also transform the threat landscape. As a result,
we expect to see continued innovation in this space which will
mean the constant upgrading of organisation’s defences will
only become a greater necessity.

Our UK customers continue to ask for our support in their overseas
operations, and so we have invested further in our multinational
operation across Europe, APAC and the US. We now have
9 people operating out of our US branch and a desire to add
more resource as that business grows. This presence in the US
will enable us to better understand that market, providing insights
that will benefit our wider operations and inform future strategy.

Softcat plc Annual Report and Accounts 2023

The Company is well positioned to
continue to deliver double-digit gross
profit growth through the year, driving
further market share gains.

Diversity, Inclusion and Sustainability
Our word of the year in FY2023 was ‘Connect’ and it has been
great to see the Company settle well into a productive hybrid
working pattern this year, evidenced by a strong employee
NPS score mentioned of 63. We were also featured in the top
50 Great Places to Work in Europe.

Our community networks have once again played a strong role in
developing the organisation towards being a more inclusive place
to work. This has included raising awareness across the Company
of minority groups through our ongoing allyship programme, and
we have continued to support The Technology Channel for Racial
Equality to improve racial equality across our industry. 17% of
Softcat employees are now from ethnic-minority backgrounds.

From a gender diversity perspective, we have met our first target
of 35% women in the business, well ahead of schedule, and this
includes now having 36% female representation on our senior
leadership team. We were pleased to be recognised by Great
Places to Work in the following categories:

• 1st in the UK’s Best Workplaces in Tech
• 6th in the UK’s Best Workplace for Women
We were also pleased to be awarded the Bronze Award by
Stonewall for the progress we have made for our LGBTQ+
community and were ranked 124th in the UK Workplace Equality
Index. We have collated data for the first time on our employees
sexual orientation, disability, neurodiversity, and socio-economic
background to better inform company policy in a number of areas
in the future.

During the year we received more recognition for the strides we
are making with our carbon reduction plans. We were awarded
five-star status by HP in their partner programme and were named
Lenovo ESG Partner of the Year.

We continue to work through key industry bodies and contribute
to thought leadership in this space and were involved with CRN,
Canalys, GTDC, and PWC to influence change across the
channel with respect to product data, circular economy and
other sustainability initiatives.

The development of Enexo, our in-house sustainability reporting
and action planning platform, is ongoing. During the year we
have seen more uptake from customers, suppliers and partners
to measure and manage the impact of scopes 1–3 in our
value chain.

Company-wide training has also been carried out, reaching 98%
adoption during our first round of carbon literacy coaching.

We have also worked hard to improve our compliance
with TCFD reporting requirements – satisfying 9 of the 11
recommended disclosures.

A huge thank you again to the very special team we have at
Softcat for their efforts during the past year. The Company is in
great health and perfectly positioned for future growth.

Outlook
The Company is well positioned to continue to deliver double-digit
gross profit growth through the year, driving further market share
gains. We expect full year FY2024 operating profit to be in line
with market expectations.

We expect the operating profit growth to be second half
weighted, with modest growth in the first half of the year principally
reflecting the strong gross profit performance in the comparative
period in the first half.

We see significant and expanding opportunity in our market and
will continue to invest to capitalise on this exciting growth potential.

We were delighted to be able to host our Charity Ball again
during last financial year, for the first time since the pandemic, and
in total, across the year, raised £470,000 for charitable causes.

Graham Charlton
Chief Executive Officer
23 October 2023

Annual Report and Accounts 2023 Softcat plc

Strategic reportBUSINESS MODEL

BUILT FOR SUCCESS

Our business model is resilient and designed to drive value for our stakeholders.
Our people are bright, motivated, driven and enthusiastic and trained to meet their
customers’ needs. Most importantly they care about the Company they work for and
the customers they serve. This drives the business model to deliver long-term success.

What sets us apart

1 Our people

2 Our market opportunity

3 Our customers

Our people are the keystone of
our competitive edge. Their passion,
intelligence, sense of fun and commitment
to the long-term success of our customers
are what really make us stand out from
the crowd. We support our employees
to help provide our customers with a
broad range of technology solutions.

Read more on pages 22 to 27

The longevity of our customer
relationships is a direct product of the
trust they place in our people and the
value we deliver from our technical
capabilities. During the past 18 years of
consecutive organic growth the number
of customers and the average GP per
customers have both more than trebled.

Read more on pages 22 to 27

4 Our vendor partnerships

5 Our financial strength

Technology vendors face intense
competition and need partners that
can accurately, reliably and credibly
represent their products and services to
tens of thousands of target organisations
in the UK and Ireland. With our scale
and expertise, we offer unrivalled access
for both global and local partners to UK
and Irish customers. This reach is being
further expanded through investment
in our multi-national branch network.

Read more on page 44

Annual Report and Accounts 2023 Softcat plc

Strategic reportOUR MARKET AND OFFERING

WE PROVIDE A BROAD
PORTFOLIO OF TECHNOLOGY
SOLUTIONS AND SERVICES
IN A GROWING MARKET

Our business is broad based from both
a technology and customer perspective,
providing us with the best opportunity to
take advantage of an addressable market
which is expected to continue expanding.

Our simple strategy to acquire more customers and sell more to
existing customers and our investment in employees to continue
building customer trust give us the confidence that Softcat has a
long-term future organic growth opportunity. We are capitalising
on our opportunity by investing significantly in new resources and
expanding our geographic presence to serve customers better and
through ongoing highly effective training and development. Our
Sales teams are supported by internal specialists and technology
experts who make sure as technology evolves we continue to add
to and update our offerings to existing and potential customers.

Our addressable market

Gartner (a leading research firm) estimates that the
non-consumer UK IT market is worth £148bn in 2023.
Company analysis of this and other sources, such as the CRN
Top VARs report, suggests that our addressable market in the UK
and Ireland is worth around £60bn. This gives us a market share
of around 5%, up from 3% in 2019. Our current customer base of
10,110 represents around 20% of the addressable universe, with
whom we have an estimated average of 20% to 25% share of
IT infrastructure spend.

Opportunities for Softcat

Industry commentators predict more market growth in the years
ahead, with Gartner forecasting that the non-consumer UK IT
market will grow to £193bn in 2026 – a three-year compound
annual growth rate (‘CAGR’) of 8.9%. The areas addressable
by us are forecast to grow slightly faster with a three-year CAGR
of 9.1% taking our addressable market to £83.7bn in 2027.

Our proven model of building customer trust over the long
term gives us the confidence that Softcat has a future organic
growth opportunity best measured in decades rather than
years. To capitalise on this opportunity we continue to invest
significantly in new resources to expand our geographic
presence and increase our capacity for training and
development, as well as adding new specialist and technical
skills to the team. As technology evolves over time, it is a strategic
imperative that we continue to add complementary offerings to
remain relevant to our customers and partners.

Our opportunity goes beyond the UK and Ireland with many
of our customers asking for support for IT solutions and services
across their global operations. Our branches in the US, the
Netherlands, Hong Kong, Singapore and Australia enable
us to support these customers with their IT Infrastructure needs
wherever they are. There has been particularly strong demand

for support in the US and we have now established a US
team made up of long-term Softcat UK employees and local
new recruits.

In the current challenging macro-economic environment,
technology will be integral to enabling businesses to
regain, maintain or improve their efficiency and profitability.
Organisations across corporate and public sectors will need
to further adapt their infrastructure models to deliver enhanced
employee and customer experiences and drive productivity
and efficiency improvements whilst deriving value from and
protecting their data. These drivers and trends play straight into
our diverse range of solutions including managed, professional
and support services and cloud, datacentre, infrastructure,
security and digital workspace solutions from hardware,
peripherals and software licensing.

Softcat plc Annual Report and Accounts 2023

Each new transformational technology has seen
periods of elevated tech spend. We posit that the next
wave will be driven by AI, driving UK B2B tech spend
from just 3% of GDP in 2023 to 10% by 2031.

Peel Hunt

How we’re responding

According to Gartner, chief information officers (‘CIOs’) have
many priorities to balance simultaneously. They should:

• use digital technology to transform the company’s value

proposition, revenue and client interactions;

• evaluate cloud first for new initiatives while maintaining

operational on-premise environments;

• use digital technology to realise operational efficiency and

To meet the needs of organisations, we have continued to
invest heavily in our tools and technical offering. In the face
of economic uncertainty, we have taken very deliberate steps
to maintain our investments at a rate at least equivalent to the
previous five years. Our cloud proposition is being enhanced
through significant initiatives, in particular with Microsoft Azure
and AWS, and we continue to build our security services
practice as well.

cost savings;

• expand the operational landscape to include hybrid work,

remote and edge environments; and

• upskill/reskill existing IT staff, hire new IT staff and rebalance

the use of an external service provision.

With our focus firmly on the long-term opportunity, we have
maintained double-digit headcount growth, encompassing
increases across all areas of the business including sales,
specialists, support, technical and business operations.
Our customers and partners can expect more of the same
from us in 2024 and beyond.

Addressable market 2020–2027 (£bn)

9 . 1 % C A G R

£71.4

£83.7

£77.5

£56.0

£59.8

£65.3

£46.0

£49.2

£90

£80

£70

£60

£50

£40

£30

£20

£10

£0

2020

2021

2022

2023

2024
Forecast

2025
Forecast

2026
Forecast

2027
Forecast

(Source: Gartner IT Spending Forecast, 2Q 2023 Update)

Annual Report and Accounts 2023 Softcat plc

Strategic reportOUR MARKET AND OFFERING CONTINUED

GROWING OUR OFFERING
IN AN EXPANDING AND
EVOLVING MARKET

A structurally growing market
Investment in technology is a tool for commercial acceleration
in addition to core demands to drive operational efficiency
and reduce costs. Organisations of all sizes are recognising
how technology can enhance their competitive position and
improve their value proposition. Interactions with employees
and customers need to be engaging, seamless and secure.
Whilst macro-economic and tech sector conditions continue to
define which pockets of IT infrastructure see the highest demand
at any given time, long-term tail winds support IT infrastructure
spend outstripping UK GDP growth over the long term. As Satya
Nadella, chairman and chief executive officer of Microsoft, put it
in Microsoft’s 2022 annual report: “Technology is a deflationary
force in an inflationary economy. Every organisation in every
industry will need to infuse technology into every business process
and function so they can do more with less. It’s what I believe will
make the difference between organisations that thrive and those
that get left behind.” Softcat’s wide and evolving offering enables
us to serve our customers’ needs and to deliver profitable growth.

These competing demands to deliver operational efficiency,
reduce costs and deploy technology that enhances organisations’
commercial offering provide substantial challenge to chief
information officers (‘CIOs’) and their IT departments. Meanwhile,
skill shortages in the tech sector make retaining, upskilling and
reskilling staff as challenging as ever. The diversity and depth of
our offering, delivered with outstanding customer service, place
Softcat in a unique position to advise, architect, deliver and
manage across a CIO’s remit.

The rise in the use of artificial intelligence (‘AI’) has been particularly
prominent in recent years and we are seeing AI integrating into the
strategic and operational plans of our customers. Use cases continue
to emerge and the rate and scale of change are expected to
accelerate in future. Peel Hunt (a leading UK investment bank)
commented that: “Each new transformational technology has seen
periods of elevated tech spend. We posit that the next wave will
be driven by AI, driving UK B2B tech spend from just 3% of GDP
in 2023 to 10% by 2031.” For organisations of all sizes, in both
public and private sectors, we will be needed to advise, architect
and deliver on the increased demands AI will place on core
infrastructure and on the new AI environments.

Employees with critical IT skills are
switching employers, and CIOs are
losing talented employees faster than
they can hire.

Gartner
July 2023

Softcat plc Annual Report and Accounts 2023

The new IT landscape

The advent of cloud and the rise of ‘as a service’ mean that
organisations are more in control of their own technology
decisions. In addition, they are embracing the ability to
consume solutions and services when and how they are
needed, and to pay only for what they need.

Accordingly, we focus our independent advice and
recommendations, procurement capabilities and services
offering across three key IT priorities: digital workspace,
hybrid infrastructure and cyber security.

Each of these priorities generates intelligence and insight that
underpin our ability to provide proactive, independent and
actionable recommendations, to deliver value-added services
and support customers on their transformation journey in a
bespoke manner.

CEOs and CFOs who view
technology as a competitive
advantage, rather than a cost,
will continue to increase spending
on digital business initiatives.

Gartner
July 2023

Our customers supported by our people
We are passionate about deepening our engagement with
our customers to develop long-term valuable and sustainable
relationships. Our sales strategy perfectly aligns with our overall
strategy to acquire new customers and sell more to existing
customers and is focused on:

• developing our high performance sales culture;
• simplifying our sales and customer journey; and
• maturing our market approach and offering.
We train our Account Managers to build trust over time, by doing
what we say we will and responding positively when something
goes wrong. As our Account Managers identify opportunities, they
will bring in vendor and technology experts to provide guidance,
design, procurement advice or service options to support their
customers. Over time, customers do not have one relationship with
their Account Manager at Softcat but multiple relationships with us
across all areas of IT infrastructure.

Our annual customer experience survey is a key check and
balance that informs our strategy. It drives the ongoing investment
in people and specialist resources needed to deliver on our
customer promise.

More than eight in ten members of the Softcat team interact
directly with customers in one manner or another, including
Account Managers, Sales Specialists, Technical Design,
Professional Consultants, Managed Services and our Customer
Experience Team, where Customer Success Managers work
alongside Service Delivery teams to ensure that complex solutions
are integrated and delivered to the highest quality.

We focus on developing, attracting and retaining the best talent,
increasing our expertise so that we can better understand the
environments and industries that our customers operate in. This
helps us collaborate across industries and share best practice
and innovation to ensure we deliver the best experience for our
customers and the challenges they face. We also believe in putting
the right people in place and investing in them over the long
term. We are continuing to develop our agenda across issues
like inclusion and sustainability – topics that are important to our
leadership team as well as our staff, customers and partners.

Annual Report and Accounts 2023 Softcat plc

Strategic reportOUR MARKET AND OFFERING CONTINUED

Our customers’ top five IT priorities

Cyber security
and services

Devices and end
user computing

Data (including
strategy,
governance,
platforms
and analytics)

IT asset
and service
management

Networking
and connectivity

(Source: Softcat 2023 customer
experience survey)

Digital workspace
With a people-first approach, we improve experiences, create
choice and enable outcomes by securely connecting people,
data, apps and devices. We consider the key aspects that
underpin a successful digital workspace strategy: workstyle
flexibility, choice and creating collaborative workspaces to enable
enhanced productivity and a happier workforce.

IT services
Softcat develops in-house services and invests in an extensive
partner ecosystem, maintaining long-term relationships with
organisations that complement our offering. This creates a
compelling range of market-leading capabilities that ensures we
can design, deliver and operate. Our services align with our IT
priorities and enable us to identify, build, support and optimise.

87%

of businesses plan to accelerate their cloud migration

(Source: Logic Monitor cloud survey)

Organisations are asking not only how
– but how fast – they can apply this next
generation of AI to address the biggest
opportunities and challenges they face
– safely and responsibly.

Satya Nadella
Chairman and chief executive officer of Microsoft

Hybrid infrastructure
Whether it is public, private or multi-cloud, what counts is delivering
and maintaining the optimal combination of technology for each
customer’s unique situation. Softcat as a cloud aggregator can
design, deliver and operate a range of effective environments.

Across data assurance, through management and monitoring, to
connectivity and security, we design the public, private and hybrid
cloud solutions that deliver the optimal estate.

95%

of organisations agree that a digital
workspace is important

(Source: Dizzion Digital Workplace: Definition, Drivers
and Best Practices (smarp.com))

Cyber security
Protecting data, networks and systems is now a critical issue for the
industry. Almost every business relies on the confidentiality, integrity
and availability of its data. Protecting information needs to be at
the heart of an organisation’s security planning. As cyber security
evolves, we build, implement and maintain ongoing programmes
to proactively reduce risk for our customers.

80% and 74%

of businesses

of charities

say that cyber security is a high priority for their
organisation’s senior management

(Source: Cyber Security Breaches Survey 2020 – GOV.UK (www.gov.uk))

Softcat plc Annual Report and Accounts 2023

OUR VENDOR PARTNERS

Partnering for success
We pride ourselves on partnering with over 400 of the largest and the best emerging technology partners, enabling us to
deliver the latest pioneering solutions to our customers. We work closely with these industry-leading vendors on a common
goal to deliver the best solution or service which meets the IT needs of our customers. By continuously listening to and asking
questions of our customers we are able to evolve and improve our partner strategy.

Awards we have won

Our vendors

Annual Report and Accounts 2023 Softcat plc

Strategic reportSTRATEGY

OUR STRATEGY

Our sales strategy remains unchanged and we continue to look to acquire new
customers and gain an ever greater share of wallet in existing customers.

Customer base and GP per customer

11,000

10,000

9,000

8,000

7,000

6,000

5,000

4,000

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

Customer base

GP per customer

£45k

£40k

£35k

£30k

£25k

£20k

£15k

£10k

£5k

£0k

Softcat plc Annual Report and Accounts 2023

ACQUIRE
MORE
CUSTOMERS

In 2023 customer numbers grew organically
for the 16th year in a row, but we still
only serve around one in five from our
target market.

Progress in 2023
Our customer base grew by 2% during the year, with
success across each of our key segments: mid-market,
enterprise and public sector. We increased headcount by
20.5%, expanding our Sales team, as well as supporting
specialist and technical teams.

Future focus
Our customer base was 10,110 in 2023, exceeding 10,000
for the first time. However, this only reflects approximately
20% of the addressable market. We will continue to target
new accounts through further investment, training and
development of our Sales team and allowing our unique
culture to flourish.

KPIs

+2%

Customer base increased
by 2% to 10,110

97%

Customer satisfaction

SELL
MORE TO
EXISTING
CUSTOMERS

The opportunity to help customers navigate
a complex array of technology choices has
never been greater.

Progress in 2023
We continued to evolve our customer offering in response
to the changing technology landscape, keeping pace with
emerging customer needs.

Future focus
The rate of change in our industry, with respect to the
technology we are selling but also the channels through
which it is sold and the manner in which it is consumed,
is unprecedented. This gives organisations like Softcat
an exciting opportunity to take a bigger share of an ever
growing opportunity. We will also maintain our position as
a key partner to both established and emerging technology
vendors, evolving our skills around the ever-changing
portfolios of services and products coming to market.

KPIs

+12%

Gross profit per customer
increased by 12% during
the year

97%

Customer satisfaction

Annual Report and Accounts 2023 Softcat plc

Strategic reportSTRATEGY CONTINUED
STRATEGY IN ACTION

NG Bailey

GETTING A GRIP
ON DEVICE ESTATE
MANAGEMENT

Established in 1921, NG Bailey has grown from a small,
family-owned electrical contractor into the UK’s leading
independent engineering and services business.
With clients across multiple sectors, its innovative,
technology-driven approach underpins every project
and has led to multiple industry awards.

The benefits
“With Softcat’s help, we’ve transformed our
JML service,” said Jon Wade, IT Services
Manager. “We’re now able to get devices
to every user on time. They’re configured
to our precise specifications and all round
it’s a huge improvement on what we had
before. Returns were an issue in the past,
with many leavers reluctant to return kit
on time, if at all! Now, with a dedicated
service, it’s simply a matter of arranging a
time for the courier to pick it up. Our return
rate has improved significantly as a result.”

The challenge
Like any construction business, NG Bailey
is involved in multiple projects at any given
time. One consequence of its diverse
portfolio is the need to continually onboard
new starters, effectively manage movers
within the business and ensure that people
who are leaving return devices they no
longer need. In an average year, more
than 300 people use the joiner, mover,
leaver (‘JML’) service managed by the
IT team, making device and peripheral
asset management a time-consuming
and complex task.

The solution

Reduce the time and
complexity involved in
device estate management

Improve efficiency of device
configuration, returns and distribution

Scan the QR code above
to read the full article

Scale up device and peripheral
supply chain to match
ongoing demand

Softcat plc Annual Report and Accounts 2023

Key facts

Leading UK-based
independent engineering
and services business

Award-winning projects
delivered across
multiple sectors

Leverages leading-
edge technologies to
deliver operational and
technical excellence

Morrisons

SEAMLESS DEVICE
REFRESH FIT FOR
THE FUTURE

Morrisons is one of the UK’s leading food and grocery retailers.
Originally established in Yorkshire, it now has over 500 sites
across the UK and multiple online home delivery channels and
serves millions of customers every year.

The challenge
Morrisons needed to implement a
hardware refresh programme to ensure
its device estate was up to date, fully
supported and providing the performance
it needed to face the future with
confidence. With more than 500 sites
encompassing retail, manufacturing,
logistics and central functions, it was a
hugely complex task. More than 10,000
devices needed to be upgraded where
possible or replaced entirely and its
success was deemed as mission critical
by its executive team.

Critical success factors

Replace or upgrade unsupported
Windows 7 devices

Refresh 10,000-unit device estate
across 500+ locations

Project seen as ‘mission critical’ by
Morrisons executive team

Reuse equipment where possible
to ensure a sustainable approach
throughout the project

The solution
Given the complexity of the Morrisons
device estate, Softcat brought in
longstanding strategic services partner
Greensafe to assist with the project. Aside
from a strong track record of successful

hardware rollouts and configuration,
Greensafe is a familiar and trusted
provider, having worked on projects
with Morrisons and Softcat previously.

Solution highlights

End-to-end solution from initial
scope to device deployment

Close collaboration with in-house
teams to ensure seamless
device integration

Extensive support provided to
ensure project deadline achieved

The benefits
The following statistics are a measure
of the strategy’s success:

19,600kg of IT equipment recycled

4,000,000kg of CO2 saved
through device reuse

10,000kg of CO2 saved
through recycling

Scan the QR code above
to read the full article

Key facts

Leading UK food and
grocery retailer

Over 500 sites
and multiple online
delivery channels

Provider of high quality
fresh food products

Annual Report and Accounts 2023 Softcat plc

Strategic report

KPIS

SUMMARY RESULTS AND KPIS

The financial and non-financial key performance indicators shown below demonstrate the
Company’s progress against strategic goals and delivery of financial performance and
shareholder value. These metrics are referred to throughout this report and further discussed
in more detail within the Chief Financial Officer’s Review on pages 34 and 35.

Financial

Revenue £m1
23
22
21

985.3

1,077.9

784.0

Gross profit £m
23
22
21
20
19

373.8

327.2

276.4

235.7

211.1

Operating profit £m
23
22
21
20
19

84.5

93.7

140.9

136.1

119.4

Strategic link

Comments
• Revenue includes all income from the resale of
third party software, hardware and services, as
well as the sale of the Company’s own services.

Comments
• Gross profit comprises revenue net of third
party product costs, supplier rebates and
certain internal direct costs.

Comments
• Operating profit comprises gross profit net

of administrative expenses.

Link to Directors’ remuneration3
• For 2023 operating profit accounts for 80% of

the weighting for the Executive Directors’ annual
bonus, reflecting an important role in measuring
the delivery of in-year shareholder value.

Gross invoiced income £m2

Basic earnings per share p

Cash conversion %2

23
22
21
20
19

2,563.3

2,507.5

1,938.4

1,646.2

1,414.1

23
22
21
20
19

56.2

55.5

48.4

38.2

34.6

23
22
21
20
19

93.2

76.2

89.9

88.0

92.0

Comments
• Gross invoiced income reflects gross income
billed to customers adjusted for deferred and
accrued items.

Comments
• Basic earnings per share (‘EPS’) is defined as
profit after tax divided by the number of shares
in issue at the balance sheet date.

Link to Directors’ remuneration3
• Basic EPS is a performance measure in the

targets for the Executive Directors’ Long Term
Incentive Plan (‘LTIP’).

• Delivery of EPS growth will also contribute
indirectly to share price performance, and
the ability to pay dividends, both important
elements in total shareholder return (‘TSR’).
TSR is also a performance measure of the LTIP.

Comments
• Cash conversion ratio is net cash generated
from operating activities before taxation, net
of capital expenditure, as a percentage of
operating profit.

• The five-year average for cash conversion
is 88%, reflecting the highly liquid nature of
the business operations and a disciplined
approach to working capital management.

• The increase on prior year reflects a return to

historic normal levels after a transient expansion
in FY2022 year-end trade receivables
following the implementation in the fourth
quarter FY2022 of a new finance system.

Softcat plc Annual Report and Accounts 2023

Link to strategy:

Acquire
more customers

Sell more to
existing customers

People
and culture

Ease of
doing business

Maintain relevance
and expand our
addressable market

Non-financial

2. Gross invoiced income (‘GII’) and cash conversion
are alternative performance measures. Please see
page 35 for further definitions and reconciliations.

3. For more information on the remuneration of the

Executive Directors, please see the Annual Report
on Remuneration on pages 114 to 134.

Read more in our Chief Financial Officer’s
Review; see pages 34 and 35

Employee engagement score %
23
22
21
20
19

Customer satisfaction %
23
22
21
20
19

Strategic link

Comments
• The employee engagement score is derived

Comments
• Customer satisfaction is defined as the

from responses to an annual survey of all staff.

• Enthusiastic and highly motivated people form
the very core of the Softcat business model and
our customer proposition.

Link to Directors’ remuneration3
• Actions overseen by the Executive Directors
to maintain strong employee engagement
account for 20% of the weighting (along with
customer satisfaction and sustainability) for the
Executive Directors’ annual bonus, reflecting
the importance of a well-engaged workforce
to Softcat’s overall success.

percentage of customers who rate themselves
as either ‘satisfied’ or ‘very satisfied’ in response
to an annual survey (possible responses also
include ‘dissatisfied’ and ‘very dissatisfied’).
In 2023 the survey had 4,049 respondents
(2022: 1,870).

Link to Directors’ remuneration3
• Actions overseen by the Executive Directors
to maintain strong customer satisfaction
account for 20% of the weighting (along with
employee engagement and sustainability) for
the Executive Directors’ annual bonus, reflecting
the importance of customers, who are at the
core of Softcat’s strategy.

Gross profit per customer £’000
23
22
21
20
19

28.4

23.0

33.0

24.8

37.0

Strategic link

Customer base ’000
23
22
21
20
19

Strategic link

10.1

9.9

9.7

9.5

9.2

Comments
• Gross profit per customer is defined as gross
profit divided by the number of customers.

• New customers are included in the calculation
and tend to create a dilution of the metric, but
to a similar degree from one financial year
to another.

• The growth in this metric therefore demonstrates
the value created by ever-deepening long-term
relationships, and the Company’s ability to sell
an increasing range of technologies based
upon genuine trust and loyalty.

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

• Growth in this metric demonstrates the ability

of the sales force to win new customers while
also retaining existing relationships.

• Important for in-year performance but also

underpins future growth.

Annual Report and Accounts 2023 Softcat plc

Strategic reportStrategic report

CHIEF FINANCIAL OFFICER’S REVIEW

ANOTHER YEAR
OF PROFITABLE
GROWTH

Financial summary

FY2023

FY2022

Change

Revenue

Revenue split
Software
Hardware
Services

£985.3m £1,077.9m

(8.6)%

£188.8m
£610.6m
£185.9m

£150.0m
£797.9m
£130.0m

25.9%
(23.5)%
42.9%

Gross invoiced income (GII)1 £2,563.3m £2,507.5m

2.2%

GII split
Software
Hardware
Services

£1,543.5m £1,365.3m
£810.2m
£332.0m

£617.8m
£402.0m

13.0%
(23.7)%
21.1%

Gross profit (GP)
Gross profit margin
Operating profit
Operating profit margin
Gross profit per customer2
Customer base3
Cash conversion4

£373.8m
37.9%
£140.9m
14.3%
£37.0k
10.1k
93.2%

£327.2m
30.4%
£136.1m
12.6%
£33.0k
9.9k
76.2%

14.2%
7.5%
3.5%
1.7%
12.2%
1.9%
17.0%

1. Gross invoiced income reflects gross income billed to customers adjusted for deferred
and accrued revenue items. This is an Alternative Performance Measure (APM). For
further information see page 35.

2. Gross profit per customer is defined as GP divided by the customer base.
3. Customer base is defined as the number of customers who have transacted with Softcat

in both of the preceding twelve-month periods.

4. Cash conversion ratio is net cash generated from operating activities before taxation,

net of capital expenditure, as a percentage of operating profit. This is also an

Alternative Performance Measure. For further information see page 35.

Gross profit, revenue and gross invoiced income
Softcat operates in a fast-growing and constantly changing market,
catering to the IT infrastructure requirements of corporate entities and
public sector organisations across the UK and Ireland. Our strategy is
to provide a comprehensive range of technology solutions (spanning
workplace, datacentre, cloud, networking and security solutions) across
software, hardware and services, delivered through highly engaged
employees who provide exceptional customer service, to attract new
customers and increase sales to our existing customer base.

Our FY2023 results reflect our ability to continue to deliver against
this strategy. Gross profit (GP), our primary measure of income,
grew by 14.2% to £373.8m, in line with expectations, against
a tough FY2022 comparable in which a mid-market customer
accounted for marginally more than 10% of our Gross Invoiced
Income (GII), primarily driven by one-off, low-margin datacentre
hardware sales.

Softcat plc Annual Report and Accounts 2023

Excluding these FY2022 one-off transactions, GP growth was
broad based and underlying software, services and hardware
GP all grew double-digit. Hardware sales were also impacted by
soft market demand for client devices but this was offset by strong
underlying growth in networking and datacentre solutions. After
adjusting for the one-off transactions, all technology areas also
grew double-digit with particularly strong growth in networking,
as supply chain issues receded during the year, and in security,
which continues to be an area of focus for our customers. Growth
was also strong across all customer segments, with double-digit
underlying growth across enterprise, mid-market and public sector,
demonstrating our continued relevance across our target markets.

In the second half of the year GP grew by 11.2%, following a very strong
first half performance of 17.9%, with growth impacted by customers
delaying some discretionary spend and large projects being slower to
close as customers applied stricter procurement processes.

FY2023 revenue declined by (8.6)%, driven by a (23.7)% decline
in hardware GII. This decline in hardware GII, which is reported
on a gross basis within the revenue number (unlike software and
some services revenue which are netted down), was driven by
the one-off transactions in the base year as mentioned above.
Excluding these one-off transactions hardware Gll increased
marginally compared to the prior year.

GII growth of 2.2% was driven by strong growth in both software
and services, up by 13.0% and 21.1% respectively, largely offset
by the decline in hardware sales mentioned above. GII grew
more slowly than GP in the period, with GP as a percentage of GII
expanding by 1.5%. Margin expansion was driven by the FY2022
one-off transactions, which diluted the comparative gross margin, and
several positive mix effects, with the year-on- year decline in lower
margin client devices, and strong growth in higher margin datacentre,
networking and security solutions driving a positive margin impact.

Customer KPIs
During the year average GP per customer grew by 12.2% to
£37.0k (2022: £33.0k) and the customer base increased to
10,100, up 1.9% on the prior year.

We won new customers from a broad range of industries with
initial sales balanced across our core business lines, consistent
with sales to existing customers as described above.

Despite this further strong progress and being confirmed again
as the largest reseller in the UK by CRN, our industry remains
highly fragmented. Our latest estimates, based on multiple industry

sources including CRN and Gartner, suggest we have around
5% of total addressable market value. This comprises a trading
relationship with c.20% of potential customers with whom we
have an average share of wallet of c.20% – 25%. As a result,
we continue to have a fantastic opportunity for future growth by
continuing to concentrate on our simple strategy of seeking to sell
deeper into existing accounts by building trust and loyalty over
time, while gradually expanding our customer base year on year.

Operating profitability and investment in future growth
Operating profit of £140.9m (FY2022: £136.1m) increased by 3.5%
year-on-year reflecting the 14.2% increase in GP offset by a 21.9%
rise in operating costs. Cost growth was in line with expectations,
driven by increased commissions due to higher GP, alongside a 19.8%
increase in average headcount, investments in pay and IT and a return
to pre COVID-19 levels of staff events and travel.

The investment in headcount was across all areas of the business
including sales operations, technical capabilities, and core support
functions to ensure we are appropriately resourced to support
future growth. Average salary costs increased by 7.5% over the
year, driven by inflationary pay awards across existing staff and
an increase in new hire salaries reflecting the current inflationary
environment and ensuring we remain competitive within the market.

Cost growth decelerated in H2 to 12.7% compared to 32.4%
in H1. This was driven by several factors: firstly lower GP growth
resulted in lower commissions in H2 compared to H1; secondly
the phasing of the new ERP system implementation costs, with more
impacting H2 than H1 in FY2022; thirdly travel and entertainment
costs which remained constrained in H1 FY2022 due to COVID-19
but returned to normal in H2 with in person customer meetings and
incentive trips back to pre-pandemic levels; and lastly, while the full
year cost was broadly in-line, bad debt write-offs year-on-year
were more front half weighted in FY2023.

As a result of the investments in headcount, wages and salaries, IT
and travel and entertaining our operating to GP margin decreased
to 37.7% (2022: 41.6%) as forecast and previously communicated.

Corporation tax charge
The effective tax rate for 2023 was 21.0% (2022: 18.9%),
reflecting the increase in the UK statutory rate to 25.0% from
19.0% in April 2023 together with the relatively marginal impact of
non-deductible expenses and share-based payment transactions.
Our tax strategy continues to be focused on paying the right
amount of tax in the right jurisdiction, at the right time.

Cash and balance sheet
Cash conversion, defined as net cash generated from operating
activities before tax but after capital expenditure, as a percentage of
operating profit, was 93.2% (2022: 76.2%). The improvement on prior
year reflects a return to normal levels of year-end receivables following
a temporary expansion last year following the implementation of a new
finance system and is towards the top of the target range of 85%–95%.

Cash at the FY2023 balance sheet date was £122.6m (FY2022:
£97.3m) and the company remains debt free.

Under our capital allocation framework the first priority is to invest
behind future organic growth and our second priority is to deliver
on our progressive ordinary dividend policy. Additional excess
capital is then either allocated to strategic investments or returned to
shareholders. In FY2023, as outlined above we have continued to
invest in people costs and IT to further drive organic growth and the

proposed ordinary dividend is an increase of 4.6% vs. FY2022, while
excess cash will be returned to shareholders via a special dividend.

Dividend
A final ordinary dividend of 17.0p per share has been
recommended by the Directors and if approved by shareholders
will be paid on 19 December 2023. The final ordinary dividend
will be payable to shareholders whose names are on the register
at the close of business on 10 November 2023. Shares in the
Company will be quoted ex-dividend on 9 November 2023.
The last day for dividend reinvestment plan (‘DRIP’) elections to
be received is 28 November 2023.

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. This has been calculated taking into account
an increase in the minimum cash holding from £60m to £75m,
reflecting the continued growth of the business. If approved this will
also be paid on 19 December 2023 alongside the final ordinary
dividend. This will bring the total amount returned to shareholders
since becoming a public company to £476.2m.

Alternative 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, which are set out below, assist in providing
additional useful information on the underlying trends, sales
performance and position of the Company.

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 gross invoiced income (or ‘GII’) and cash conversion.

1. 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. 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 of the financial statements.
2. Cash conversion ratio is net cash generated from operating activities before taxation,
net of capital expenditure, as a percentage of operating profit. Cash conversion is an
indicator of the Company’s ability to convert profits into available cash. A reconciliation
to the adjusted measure for cash conversion is provided below:

Net cash generated from operating
activities
Income taxes paid
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

2023
£’000

2022
£’000

83,644
104,802
25,344
29,793
134,595 108,988
(1,890)
(3,334)

(2,544)
(701)

131,350 103,764

140,898 136,145

93.2%

76.2%

Katy Mecklenburgh
Chief Financial Officer
23 October 2023

Annual Report and Accounts 2023 Softcat plc

Strategic reportSECTION 172 – STAKEHOLDER ENGAGEMENT

ENGAGING
WITH ALL OF OUR
STAKEHOLDERS

The Directors of Softcat realise that the business has several key stakeholders and the
Company cannot operate effectively without taking each stakeholder into account.
This section describes how the Directors take into account stakeholders and other matters
in carrying out their duties and the impact on decision making. The Board considers
regular and effective engagement with Softcat’s stakeholders to be fundamental to
our success. The Board considers that it acts in a way that promotes the success of the
Company, whilst having regard to the interests of its stakeholders.

We define our key stakeholders as individuals or groups who have
an interest in, or are affected by, the activities of our business. The
Board believes a good understanding of our key stakeholders and
their needs is essential to deliver sustainable value creation over the
long term, bringing benefits to our shareholders and stakeholders.

The annual strategy review provides a dedicated forum, in addition
to the Board meetings, for the Board to discuss the areas of focus
and change over the coming year and beyond. Actions arising
from the annual strategy review are progressed and considered
throughout the year.

Director responsibilities
Our Directors are fully aware of their responsibilities under
Section 172(1) of the Companies Act 2006 (the ‘Act’) and take
their responsibilities seriously. The Board considers that, in its
decisions and actions taken, it has acted in a way that would
promote the success of the Company for the benefit of its members
as a whole, whilst having regard to stakeholders and matters set
out in Section 172(1) (a–f) of the Act. The Directors’ responsibilities
under Section 172 are rooted in our Company culture, our values
and particularly our purpose: ‘we help customers use technology
to succeed, by putting our employees first’.

Section 172 imposes a duty on our Directors to consider the likely
consequences of any decision in the long term and there are a
variety of means by which the Directors achieve this obligation.
The Board receives standing updates at each Board meeting
from the CEO and CFO on key market developments and the
Company’s operational and financial performance. Members
of the Senior Leadership Team (‘SLT’) also provide regular
updates on a wide range of topics, including business updates,
changes in our market, and customer and employee issues. The
Company Secretary also provides regular briefings to the Board
which include updates on regulation, compliance and corporate
governance. Updates often include the outcome of engagement
with employees, customers and key suppliers. The Board also holds
an annual strategy review, which includes presentations from key
areas of the business and the review of a three-year financial plan.

Our key stakeholders
The Board has identified Softcat’s key stakeholders to be our
employees, customers, suppliers and vendors, investors, and the
environment and communities in which we operate. We connect
with our stakeholders at all levels of our business. The potential
impact of the Company’s operations on each of our stakeholders is
an important consideration for the Board. The Board has approved
a framework of key topics which ensures that regular updates are
received and discussed by the Board regarding each stakeholder
group. On occasion, as explained within this report, the Board
has also directly engaged with its stakeholders, when it determines
this to be the most effective method of engagement to support
its views and potential decision making. The Board’s approach
to engagement and stakeholder management ensures it remains
well informed and able to make appropriate considerations when
deciding Softcat’s strategy and other business decisions.

The following table sets out how our stakeholders have been
engaged with, how relationships with stakeholder groups are
monitored, and how their interests have influenced decisions made
by the Board.

Read more elsewhere in this Strategic Report, our Social Value Report on pages
44 to 49, our Report on TCFD and Sustainability on pages 50 to 71 and our
Corporate Governance section on pages 79 to 142

Softcat plc Annual Report and Accounts 2023

Our key stakeholders

Employees
Our employees are at the heart of our business
and help to drive Softcat’s continued success

Customers
Understanding the needs of our customers in
order to build enduring relationships is critical
to Softcat’s strategy

Suppliers and vendors
Our strong relationships with our suppliers and
vendors help us provide the best solutions and
support for our employees and customers

Investors
Investors are the owners of the Company and
have made a financial commitment to the
success of Softcat

Communities and the environment
We recognise we are part of each community in which we operate and it is vital to make a meaningful
commitment to long-term sustainability

Annual Report and Accounts 2023 Softcat plc

Strategic reportSECTION 172 – STAKEHOLDER ENGAGEMENT CONTINUED

Employees

Our employees are at the heart of our business
and help to drive Softcat’s continued success.

How we engaged and monitored
• The Board operates a framework of meetings which

includes regular scheduled visits to our offices. During the
year the Board held direct engagement with employees at
our Leeds and Manchester offices. Vin Murria, our Designated
Non-Executive Director for Workforce Engagement, led the
engagement sessions.

• The Chair of the Remuneration Committee also holds an

annual engagement session with employee representatives to
discuss the approach to pay, incentives and reward throughout
the organisation. The session also provides an opportunity
to explain and discuss executive remuneration. Employee
representatives asked questions to the Remuneration Committee
Chair and they received responses. A summary of the session
was then discussed with the Remuneration Committee.

• Each year we hold a ‘Kick Off’ event, which all employees are
invited to attend. This provides the Executive Directors (on behalf
of the Board) with an opportunity to engage with all employees
together at a single event. The event includes presentations of
key business achievements of the year and key business goals
to consider in the coming year. Vendors also attend in an
exhibition area, providing the vendors with a further opportunity
to engage with employees. Key achievers in the business are
celebrated in an employee awards event.

• Through the Nomination Committee, management presents a
succession plan in respect of key positions in the Company.
The Committee provides oversight and constructive challenge
to management to ensure that robust plans are in place to
maintain high quality leadership for the benefit of the Company
and its employees.

• We hold an annual employee engagement survey, the results
of which are reported to the Board, with an action plan to
tackle the issues raised. Results are compared against last
year’s equivalent questions to track progress. Quarterly surveys
are also discussed with the Board on the performance and
engagement by our most senior managers.

• Virtual all-hands meetings are held to update employees on

the business. This includes opportunities for employees to submit
questions to Directors and senior management after the event
for a response. Feedback on these meetings is shared by the
CEO with the Board.

• Internal communications, such as weekly ‘Love’ emails, detailing
initiatives, recognising accomplishments and raising awareness
of key matters in the Company.

• Feedback on employee pay is collated through a variety of
sources, including through the employee engagement survey
and exit interviews. The Board or Remuneration Committee
receives regular updates on employee attrition levels and
on pay conditions.

Key topics of engagement
• Office culture
• Pay and reward structures
• Recruitment and ongoing investment for long-term

organic growth

• General wellbeing and job satisfaction, including recognition

of achievements

• Sustainability
• Diversity and inclusion

Outcomes
The Board reviewed, approved or endorsed outcomes, including:

• Approving the establishment of a formal capital allocation

framework (see case study on page 39).

• Direct engagements were held between the Board and

certain employees identified for potential progression in the
management succession plan. This provided the Board with
an opportunity to better understand the role and contribution
of those employees and provided the employees with a
development opportunity.

• Given the importance of employee engagement to the success
of Softcat’s strategy, the Remuneration Committee of the Board
decided to incorporate performance metrics in the Executive
Directors’ annual bonus plan in respect of good employee
engagement (see the Annual Report on Remuneration on pages
114 to 134).

• We continue to invest in improvements to our internal IT

infrastructure. This was included as part of the Board’s annual
strategy review and investment costs were also included in
the annual operating budget discussed and approved by the
Board. The improvements are designed to better the employees’
user experience and enhance their productivity.

• An annual review of salaries for all roles was undertaken and
discussed with the Remuneration Committee, on behalf of
the Board.

Softcat plc Annual Report and Accounts 2023

Customers

Understanding the needs of our customers in
order to build enduring relationships is critical
to Softcat’s strategy.

How we engaged and monitored
• Our annual customer experience survey, sent out to customers,
requests honest feedback, the results of which are reported
to the Board against the results of the previous year to
track progress.

• Direct engagement between the Board and key customers

of Softcat.

• The Board receives standing updates at each Board meeting

on any material customer disputes.

• The Board reviews regular management information which

analyses important customer data and trends, such as growth in
the customer base and the changes in the type of customer.
• The annual Board strategy review includes a focus on how

the business will need to evolve and change to continue best
serving our customers. Ongoing investment to ensure we serve
our customers well is included in the annual operating budget,
which is approved by the Board.

Key topics of engagement
• Understanding actions necessary for increasing

customer satisfaction
• Softcat’s sales model
• Technology propositions for customers
• Understanding customers’ IT priorities and main challenges
• Investment to ensure our employees have strong capabilities

to support our customers

Case study

Capital allocation framework
During the year the Board formalised its approach to
prioritising how capital is allocated at Softcat (see page 90
for further details). This involved the Board considering its
approach to the allocation of capital, which is primarily
aligned to our purpose, vision, strategy and investment case.
The allocation of capital impacts on Softcat’s stakeholders,
for example:

• Prioritising investment for organic growth is primarily

achieved by increasing headcount, investing in employees
and investing in systems and processes to facilitate ease
of doing business for customers.

Outcomes
The Board reviewed, approved or endorsed outcomes, including:

• A comprehensive action plan, developed from the feedback
received through the annual customer experience survey, to
further improve customer satisfaction.

• Holding a direct engagement between the Board and one
of our customers to better understand the role Softcat plays
in their business.

• Approval of the annual budget which includes investment
to better support ease of doing business with customers.
• Given the importance of customer satisfaction to the success
of Softcat’s strategy, the Remuneration Committee of the
Board decided to include a performance metric in the
Executive Directors’ annual bonus on maintaining good
customer satisfaction (see the Annual Report on Remuneration
on pages 114 to 134).

• The Board reviewed and gave support for the ongoing

development of our Enexo platform (see page 69). This will
help our customers better understand and manage their
carbon footprint.

• Our capital allocation framework includes a progressive
ordinary dividend policy, which allocates a percentage
range of operating profit to be paid as dividends to
our shareholders.

The Board considered the competing priorities on the
allocation of capital, after taking into account both
the business and its stakeholders. The approved
capital allocation framework sets out the prioritisation
of our capital.

Annual Report and Accounts 2023 Softcat plc

Strategic report
SECTION 172 – STAKEHOLDER ENGAGEMENT CONTINUED

Suppliers and vendors

Softcat’s strong relationships with its suppliers and
vendors helps it provide the best solutions and
support for its employees and customers.

How we engaged and monitored
• Direct engagements between the Executive Directors and key
vendors. Regular updates at Board meetings from the CEO.
• Our dedicated internal ‘vendor alliance teams’ manage and
maintain Softcat’s relationships with key vendors. Any key
market developments are informed to the CEO for further
discussion with the Board.

• During the year, the Board held a direct engagement with one
of its top ten vendors (by revenue). This provided good insight
for the Board on both working with the supply chain and on the
potential for the sector to improve its approach to sustainability
(see case study below).

• Our Sustainability Team continues its engagement work to

better understand the sustainability commitments and net zero
targets of our major suppliers and vendors. This is part of a
Board-approved target to achieve a carbon net zero supply
chain by 2040 (see page 66 for more information). Progress
updates are reviewed regularly by the Sustainability Committee
on behalf of the Board.

• Softcat is required to publish its performance in respect of the
timeliness in which it pays its suppliers. The Board reviews the
latest performance, providing oversight to ensure we maintain
a good track record of paying our suppliers, thus protecting
the business from reputational damage.

Case study

Key topics of engagement
• Market developments in respect of key suppliers and vendors
• Engagements between the Executive Directors and key

suppliers and vendors

• Sustainability of products and services, and future goals

and commitments

• Maintaining performance of payment practices for

our suppliers

Outcomes
The Board reviewed, approved or endorsed outcomes, including:

• The Board discussed potential market changes which may

impact the way in which certain vendors trade and the potential
impact on parts of Softcat’s operating model. The Board
requested further updates from management on how the
business will respond and management demonstrated the
additional focus and plans which are in place.
• Sustainability measures and activities with vendors.
• Through ongoing changes in procedures and systems,
management demonstrated to the Board that payment
times to suppliers continued to improve. The Board noted
improvements in the performance to pay more of our
suppliers in a timely manner.

Board engagement with a key vendor
During the year the Board held a direct stakeholder
engagement with one of its top ten vendors (by revenue).
The discussion focused on building a better understanding
of the vendor’s sustainability journey and how Softcat can be
part of that journey. The discussion also focused on working
with others in the supply chain to improve the approach and
offerings on sustainability.

• How Softcat can enhance sustainable products,

services and information to aid customers when making
purchasing decisions.

• How those in the supply chain can collaborate more
closely to promote sustainable purchasing, which will
benefit the environment.

• Understanding the net zero plans of a key vendor and

The engagement session considered the impact on Softcat’s
stakeholders, in particular:

• How Softcat’s employees can be better equipped to

support its customers when customers make sustainable
purchasing decisions.

how they align with a Board-approved climate target to
work with a supply chain which is committed to becoming
carbon net zero by 2040.

Softcat plc Annual Report and Accounts 2023

Investors

Communities and
the environment

Investors are the owners of the Company and
have made a financial commitment to the success
of Softcat.

We recognise we are part of each community
in which we operate, and it is vital to make a
meaningful commitment to long-term sustainability.

How we engaged and monitored
• The CFO and CEO regularly engage with major shareholders
and analysts in respect of Company performance. Investor
feedback is given after major investment roadshows, the results
of which are discussed by the Board.

• The Company Chair undertook his annual engagement

programme with major shareholders, discussing governance
and sustainability matters, feedback from which was discussed
by the Board.

• Shareholder analysis is presented at each Board meeting to
inform the Directors of key shareholder movements and trends.

• The Chair of the Audit Committee reached out to major

shareholders on Softcat’s annual audit plan.

Key topics of engagement
• Strategy
• Company performance
• Corporate governance
• Executive Director remuneration
• Sustainability

Outcomes
The Board reviewed, approved or endorsed outcomes, including:

• Approving the establishment of a formal capital allocation

framework (see case study on page 39).

• Feedback from investors/analysts on Company performance

and on our strategy.

• A better understanding of investor expectations in respect

of corporate governance.

• Additional disclosures in the Annual Report to support

our investors’ understanding of the business.

How we engaged and monitored
• Softcat’s sustainability strategy, progress and performance

were regularly monitored at Board level through the
Sustainability Committee.

• During the year, the Board held a direct engagement with one
of its top ten vendors (by revenue). This provided good insight
for the Board on the potential for the sector to improve its
approach to sustainability (see case study in page 40).
• Our Charity Team, which reports to members of the Senior
Leadership Team, has strong connections with local and
national charities and volunteering networks and also engages
with our employees.

• Through our sustainability governance framework, we
have initiatives and localised Green Teams to support
environmental activities.

• We maintain dialogues with local institutions, such as schools
and colleges, to understand how we can help them and how
we can encourage students to join our apprenticeship scheme.

Key topics of engagement
• Softcat’s sustainability strategy and goals
• Selection of charities and volunteering initiatives our employees

wish to support

• How Softcat can best help local communities and groups

Outcomes
The Board reviewed, approved or endorsed outcomes, including:

• Operating a Sustainability Committee, which has delegated
responsibility for setting Softcat’s sustainability strategy,
monitoring Softcat’s performance against its emissions
targets and oversight of sustainability initiatives and activities.

• The Board has approved the ongoing development of our

Enexo platform (see page 69).

• Softcat is working with the Social Mobility Pledge, further
demonstrating our commitment to being a purpose and
people-led company by boosting opportunities in the
communities in which we operate.

• Given the importance of reducing our impact on the
environment to the success of Softcat’s strategy, the
Remuneration Committee of the Board decided to include
a performance metric in the Executive Directors’ annual
bonus plan in respect of environmental sustainability
(see the Annual Report on Remuneration on pages114 to 134).

Annual Report and Accounts 2023 Softcat plc

Strategic reportEMPLOYEE ENGAGEMENT

HAPPY EMPLOYEES =
HAPPY CUSTOMERS

2023 highlights

2,315

Employees

21%

Headcount increase

97%

Customer satisfaction

Investing in our employees
FY2023 saw the largest increase in headcount at Softcat, adding
400 employees and for the first time employing more than 2,000
employees. We have a wide variety of training and support,
including a dedicated Learning & Development team and a Sales
Development Programme. These all come together to achieve
success through personal growth and continuous development.
Our investment in employees makes them more productive,
efficient, and confident in whatever role they play at Softcat.

Our annual Customer Experience Survey results tell us the quality
of engagement from employees is a crucial differentiator and one
which drives customer satisfaction. This includes:

• First class account management
• Proactivity and frequent engagement
• Quality of advice and expertise
• Ease of doing business
• Digital capability

For more information visit:
www.softcat.com/about-us/people

Softcat plc Annual Report and Accounts 2023

How do we engage with our employees?

Dedicated Non-Executive
Director (DNED)
The DNED hosts Q&A sessions
between the Board and employees
in our various offices. This year
the Board had Q&A sessions with
employees from our offices in
Manchester and Leeds.

Employee
engagement surveys
We undertake an annual employee
survey. The results following
the survey are discussed by
management and the Board and
detailed follow-up actions are
prepared to respond to issues.

Management surveys
We issue a survey quarterly to
managers, asking for their views on
the Senior Leadership Team and how
they feel about the business. Survey
results are reviewed by the Senior
Leadership Team and the Board.

All hands meetings
The CEO and CFO hold regular
virtual all hands meetings, providing
a regular opportunity for employees
to be kept informed of developments
in Softcat.

Internal communication
We have our own internal website,
Softcat Central. This puts news, key
events, business updates, access to
resources and tools, and important
information from other teams all into
one place.

The Founders Group
The Founders Group are employees
who volunteer to co-ordinate
activities throughout Softcat, such as
our Founders Day celebrations. This
keeps alive the culture and vision of
our founder Peter Kelly.

Softcat Community network
This is a network of seven diversity
and inclusion communities. It
champions awareness throughout
Softcat and helps us to celebrate
our differences.

Kick Off
See In focus, opposite.

In focus

Kick Off
Kick Off is our annual
flagship event, bringing
employees all together.

This year’s event was held at the
International Convention Centre
Wales and it was a full house, with
over 2,000 employees coming
together to collaborate, learn,
talk about the year gone past
and the year to come. We hold
an awards ceremony to celebrate
the very best individual and team
contributions across Softcat.
We also have breakout sessions
so that individual functions can talk
about their part of the business and
celebrate their achievements.

Many of our vendors attend in
an exhibition area, providing
employees a relaxed environment
to engage with vendors and learn
more about the products, services
and solutions for our customers.

We try to keep Kick Off
sustainable. This year we set
off the event’s carbon footprint
by supporting the planting of
3,000 trees.

Annual Report and Accounts 2023 Softcat plc

Strategic reportSOCIAL VALUE

A SUSTAINABLE BUSINESS
FOR A SUSTAINABLE FUTURE

This report covers our approach to sustainability and also how we act as a responsible Company.

Highlights
• Improved diversity in our senior leadership team and across

the business

• We were highly rated again by Glassdoor and by UK’s

best workplaces

• We had another strong set of employee engagement results
• We received a bronze award as an LGBTQ+ inclusive

employer following an audit by Stonewall

• Company-wide training was rolled out to improve awareness

of climate-related issues. Over 98% of employees have
successfully completed their training so far

• We further reduced our carbon footprint by changing our

internal combustion car fleet to EV cars

• The Board engaged directly with one of its top ten vendors
to build a better understanding of the vendor’s sustainability
journey and how Softcat can be part of that journey

• We increased our compliance against the recommendations
of the Task Force on Climate-related Financial Disclosures
• All of Softcat’s scope 1, scope 2 and operational scope 3

emissions for FY2023 will be offset

Our people
Diversity as at 31 July
Gender breakdown

Board of Directors

Ethnicity breakdown

Total permanent employees

2023

2022

2021

2020

2023

Female: 57%

Male: 43%

Female: 57%

Male: 43%

Female: 50%

Male: 50%

Female: 50%

Male: 50%

Ethnic: 17%

White British and White Other: 83%

Senior Leadership Team

2023

2022

2021

2020

2022

Female: 33%

Male: 67%

Female: 22%

Male: 78%

Female: 20%

Male: 80%

Female: 20%

Male: 80%

Ethnic: 15%

White British and White Other: 85%

Total permanent employees

2023

2022

2021

2020

2021

Female: 35%

Male: 65%

Female: 33%

Male: 67%

Female: 33%

Male: 67%

Female: 30%

Male: 70%

Ethnic: 13%

White British and White Other: 87%

Softcat plc Annual Report and Accounts 2023

PEOPLE

Another incredible year for Softcat, driven
by our employees
We couldn’t be happier with how this year has gone from
a people perspective. From record recruitment and retention
numbers, to a significant increase in employee engagement
and major milestones on our diversity and inclusion journey,
there have been a lot of reasons to celebrate.

Hiring, developing and retaining
With 716 joiners, up 14% on FY2022, and more than 300 internal
moves, FY2023 has been another record year for recruitment.
We continue to work hard on our employer brand to attract
the very best early career and experienced talent in the market.
Our induction processes across sales and non-sales have been
redesigned with the employee journey experience at the heart of
the crucial joining experience. Every new starter from around the
business can expect to spend quality time in our head office, have
exposure to our Senior Leadership Team through Q&A sessions,
learn all about our roots from the Founders’ Club and, most
importantly, start building those peer to peer relationships that will
stand them in good stead over the course of their Softcat careers.

Watch us grow – our number of employees
has nearly doubled in the last five years

Employees as at 31 July 2023

2,315

23
22
21
20
19
18

2,315

1,921

1,681

1,534

1,330

1,188

Our learning offerings are always evolving and FY2023 saw
the launch of Connect Learning, a suite of developmental
activities communicated in a magazine format for all employees.
Communicating everything in one place has helped demonstrate
the sheer breadth of offering and has been extremely positively
received. Sales, being the engine of our business, has a very
structured training programme – Elevate. Consisting of four
separate levels dependent on experience, Elevate aims to take
a salesperson on their career journey from Account Executive
to Strategic Client Director.

The effect of so much focus on induction, training and development
has been a significant reduction in attrition at an overall Company
level, down from 21% in FY2022 to 15% in FY2023. Retention is
a key metric for our leadership and people teams and we are
delighted to see such a substantial improvement.

Engaging, caring, rewarding and recognising
Our annual employee engagement survey, conducted in
October 2022, produced some outstanding results. At a high
level, employee engagement increased by 5% to 92% and the
employee net promoter score (‘I am likely to recommend Softcat
to someone in my network as a great place to work’) increased
11 points to 63. The most significant increases came from job
satisfaction, flexible working, career progression and fair pay.
This success was echoed externally with 87% of Glassdoor reviews
saying they would recommend Softcat to a friend, an increase
of 5% on last year.

The people within Softcat appreciate
the culture built over many years and
embrace this. We all work collaboratively
together and support one another
throughout. It really is a very healthy,
happy and prosperous environment.

Actual response from our annual employee
engagement survey

Annual Report and Accounts 2023 Softcat plc

Strategic report
SOCIAL VALUE CONTINUED

WHAT
IS HEALTH AND
WELLBEING?

We understand that to experience a true sense
of positive health and wellbeing, there’s a lot
that needs to be fulfilled – from developing a
connection with others to physical, emotional,
and financial wellbeing, and more. We seek
to do as much as we possibly can to help
employees reach their full potential.

So why do we put a focus on health
and wellbeing?
Our employees are at the heart of everything that we do
at Softcat. This is why we believe so strongly in giving our
employees access to the tools, resources, learning and
development, and fun activities needed to support their health
and wellbeing. But we also extend this support by helping
others too!

The two Health and Wellbeing Weeks that Softcat runs every
year in January and June were well received once again, with
employees across all offices joining in the various activities and
events that help raise awareness of important topics. A new
brochure was launched, bringing all health and wellbeing related
material together in one place. To underline our progress in
this space, we were ranked as the 5th Best Place to Work for
Wellbeing in the Super Large category by Great Place to Work.

We continually look for ways in which we
can improve our benefits offering to boost
our total reward package. This year was no
different and we launched a fantastic range
of benefits across several areas covering
financial, physical and social wellbeing.
Some highlights included increasing life
assurance from 3x salary to 4x salary for all employees, the
introduction of a workplace ISA and we even launched a
discount card for beauty treatments!

Recognition plays a huge part in the culture of Softcat and making
sure our employees feel acknowledged for the work they’ve done
is a big part of our employee engagement strategy. This year
we’ve introduced a new way of being recognised – a quarterly
customer excellence award.

Diversifying our workforce and including everyone
Our diversity and inclusion (‘D&I’) strategy has come a long way
since its inception six years ago. We reached a major milestone
during this past year, when we were able to publish our first ever
Diversity and Inclusion Report. This document brings together
a collection of work led by our seven employee community
networks, alongside critical elements such as our all-Company
Allyship training and external pledges.

Softcat plc Annual Report and Accounts 2023

Emotional
Coping effectively
with life and creating
satisfying relationships.

Occupational
Finding personal satisfaction
and enrichment in
the workplace.

Financial
Feeling satisfied with
current and future
financial situations.

Physical
Acknowledging the
importance of physical
activity, nutrition and sleep.

Social
Developing a sense of
connection, belonging and
having support from others.

Intellectual
Recognising creative abilities
and finding ways to expand
knowledge and skills.

Spiritual
Discovering a sense of
purpose and meaning
in life.

Environmental
Maintaining good health,
surrounded by a pleasant,
stimulating environment.

To find out more about diversity and inclusion at Softcat, please
see our Diversity and Inclusion Report 2022. This can also be viewed
by scanning the QR code below with your tablet or smartphone.

To find out what we are doing on sustainability, please see our website
at www.softcat.com/about-us/corporate-social-responsibility.

Our communities have gone from strength to strength this year.
In the Supporting Women in Business Network, we celebrated a
wonderful International Women’s Day over the course of a week
with a combination of panel sessions from both industry veterans and
celebrity sportspeople alongside skills-based learning sessions on
topics such as presenting with confidence and breaking through the
glass ceiling. We were ranked 6th in the Super Large category for the
UK’s Best Workplaces for Women 2023 by Great Place to Work.

The Pride Network, in conjunction with the Diversity and Inclusion
team, undertook a thorough piece of work responding to the
Stonewall Audit for the first time. Our efforts were rewarded with
a Bronze Award for LGBTQ+ inclusive employers. We have
received constructive feedback from Stonewall about areas that
we can further develop and will continue to address these in the
months and years to come.

FY2023 saw the second full year of the Empowering Disability
and Neurodiversity (‘EDN’) Network. One of the most
inspirational aspects of this network is our employees’ desire
to speak up and share their personal stories. We have heard
about some incredibly private journeys, which not only helps us
understand our colleagues better, but also empowers colleagues
facing similar challenges.

The Family Network is one of the most popular networks at Softcat.
Representing employees with caring responsibilities and those
experiencing bereavement or fertility issues, the network caters
to a wide range of interests. To further enhance Softcat’s support
for our employees and their other responsibilities outside of work,
improvements were made to our flexible working policy this year,
allowing for more flexible start and finish times, and a menopause
policy was launched for the first time.

This year has seen some fantastic events organised by the Ethnic
and Cultural Diversity Network, such as Black History Month,
World Day for Cultural Diversity, Juneteenth in our US office and
South Asian Heritage Month. Technology Channel for Racial
Equality (‘TC4RE’), which Softcat co-founded, continues to go
from strength to strength. Highlighting career stories from women
of colour, podcast episodes discussing hot topics and the TC4RE
scholarship competition, we take immense pride in the work that
we do with this amazing organisation. In our annual survey, our
employees of colour rated Softcat one point higher for employee
NPS than our non-ethnic colleagues.

In other areas, our work to improve our social mobility continues
to progress, with a further intake of work experience delegates
from local underprivileged schools in our Manchester and Marlow
offices. There is further work to do at a grassroots level and this is a
long-term commitment for Softcat.

For line managers, we launched the Allyship: Inclusive Culture
session, led by an external D&I consultancy. The sessions are
designed to support line managers in developing inclusive cultures
within their teams and have been well received by attendees.

Seven networks.
One community.

Supporting Women
in Business Network (‘SWIB’)

SWIB is Softcat’s longest standing network. It improves confidence
in women, recognises their equality with men and raises awareness
of women in the business. SWIB also works with Softcat’s senior
management to understand how it can support on the retention
and progression of women in Softcat.

Ethnic and Cultural
Diversity Network

The Ethnic and Cultural Diversity Network celebrates, educates and
collaborates on topics and important cultural events relating to our
culturally diverse community at Softcat.

Pride Network

Our Pride Network creates a supportive and inclusive work
environment for all sexual orientations, gender identities and
marginalised or under-represented LGBTQ+ groups.

Family Network

The Family Network ensures that, as an organisation, we focus
on creating a culture where our employees can balance family
commitments with work responsibilities.

EDN Network

EDN stands for ‘Empowering Disability and Neurodiversity’. Our
network aims to empower and support our members and colleagues
through education and awareness of disabilities that are both visible
and hidden. We are a Disability Confident employer as a result of the
progress we have made in such a short period of time.

Faith Network

The Faith Network ensures that we live out Softcat’s commitment of
supporting our employees to bring their whole selves to work, by creating
a safe space and place to support anyone practising their religion.

Armed Forces Network

Veterans are an important part of our present and future because they
fight for our right to freedom. We recognise the importance of that
commitment but also to embrace the skills our veterans can bring to the
workplace – bravery, strength and hard work. Our network supports
those who identify with a military life.

Annual Report and Accounts 2023 Softcat plc

Strategic reportSOCIAL VALUE CONTINUED

Measuring our success in diversity and inclusion
In previous years we collated data on the ethnicity of our
workforce, meaning that we had a comprehensive view of the
gender and ethnicity of 99% of our employees. This year we
asked them to tell us about their sexual orientation, socio economic
background, disability and neurodiversity. We did this with the
aim of being able to support our employees better by using the
data to shape our diversity and inclusion strategy. The response
rate was 68%, which has given us a good foundation to build
on. Each Senior Leadership Team member is working through the
data in their own departments to more fully understand their own
demographic splits.

We are proud that our female gender diversity has increased
at an overall Company level to 35%, with 33% women in our
management team and 30% at leadership team level (figures as at
31 July 2023). Although we have similar numbers of ethnic minority
employees to the UK overall, at 17%, we have further work to do
to increase our ethnicity at management team and leadership team
level, which sit at 6% and 4% respectively. Softcat’s Board diversity
at 31 July 2023 was 57% women and one person of colour (and
at the date of this report 57% women and two persons of colour),
meeting both the FTSE Women Leaders and Parker Review targets.
We continue to voluntarily publish our ethnic pay gap alongside
our gender pay gap every year.

At the most recent CRN Women & Diversity in Channel Awards,
held in October 2022, Softcat was the proud winner of three
company awards: the Cultural Inclusion Award, the Health &
Wellbeing Recognition Award and Diversity Employer of the Year.

Softcat plc Annual Report and Accounts 2023

ETHICAL
BEHAVIOUR

We recognise the importance of good ethics to maintain a positive
environment for both our employees and the business. In addition
to a number of formal policies which operate within our business,
our Employee Handbook (which is our Code of Conduct) also
summarises some of the key expectations and behaviours we
expect from all Softcat employees and those who work on behalf
of Softcat. Our policies and our Employee Handbook help to
provide a framework for all employees to comply with relevant
laws, to behave in an ethical manner and to respect the rights
of our employees and other stakeholders of the business. Senior
management regularly reviews our key policies and updates
them to make sure they remain relevant and up to date and
that they continue to provide the right guidance for employees.
‘Responsibility’ is one of Softcat’s core values and this helps to
underpin our approach to good ethics. Employees recognise that
their actions, attitude and choices matter for our key stakeholders.

We are conscious that potential human rights risks exist within any
business and supply chain, including labour risk, unsafe workplace
conditions and bribery and corruption. We therefore continue to
be compliant with the annual reporting requirements contained
within Section 54 of the Modern Slavery Act 2015, being a
relevant commercial organisation as defined by Section 54.
We produced an updated Modern Slavery Statement this year,
which is available on our website. We also provide additional
disclosures as required in respect of modern slavery and other
matters in respect of corporate responsibility when bidding for
large public sector contracts.

We do not currently operate a specific human rights policy as
most of our business is focused in the UK and in jurisdictions
where human rights are well observed and already protected.
Management will, however, keep under review whether operating
such a policy would be beneficial.

35% women

gender diversity in the Company

33% women

in the management team

30% women

in the leadership team

Softcat is aware that fraud is a constant threat which can
have a considerable impact both for our business and for
our stakeholders. We realise a key part of good anti-fraud
management comes from good awareness of the types of frauds
which might be perpetrated. Employees have received training on
fraud awareness in order to continue protecting our business and
important stakeholders such as our customers. The Audit Committee
also receives regular reports from management on steps taken
to detect and prevent any fraudulent attempts, which provide
the required oversight to ensure that robust anti-fraud controls
are in place.

We operate a Speak Up hotline for all employees to widen
employees’ channels of raising any issues they may encounter.
This provides our employees with an externally provided, secure
and confidential channel to voice issues, in addition to internal
channels already available.

We also operate an anti-bribery, corruption and tax evasion
policy, which is regularly reviewed by management to ensure
it is comprehensive and practical. Employee training is provided
where appropriate, including at induction for new starters.
The anti-bribery, corruption and tax evasion policy provides that
we take a zero-tolerance approach to bribery, corruption and
tax evasion and that we are committed to acting professionally,
fairly and with integrity in all our dealings. The policy also sets
out the types of behaviour which are unacceptable in the conduct
of business and the procedures we have to prevent bribery,
corruption and tax evasion. We also operate a register which
requires all employees to seek approval from their line manager
and to disclose any gifts or hospitality received or given which
are valued over the applicable disclosure threshold. Guidance
on accepting or giving gifts and hospitality is contained in the
anti-bribery, corruption and tax evasion policy and the gifts
and hospitality register is reviewed regularly by management.

Softcat publishes twice yearly details of its payment practices to
its trade suppliers. This is reviewed by the Board during the year
as part of the Directors’ wider responsibilities to consider how
Softcat impacts its key stakeholders. We take these responsibilities
seriously and the Board noted during the year that management
had improved performance in respect of invoices paid within
agreed terms.

The Company adopts an open and honest relationship
when dealing with Government agencies. For example,
during the year the Board approved an update to
Softcat’s tax strategy, which is published on our website
(www.softcat.com/corporate-responsibility). The tax strategy
includes an outline of our approach to dealing with HMRC and
confirms that Softcat’s primary tax objective is to ensure that it pays
the right amount of tax, in the right jurisdiction, at the right time, as
dictated by legislation.

Softcat’s ongoing strong financial performance also contributes
to the UK economy. In 2023, our total tax contribution to the
UK economy was £176.4m (2022: £150.9m). This includes
corporation tax, payroll taxes, VAT and other business rates and
taxes. In the last four years, Softcat’s total tax contributions to the
UK economy has exceeded half a billion pounds.

Tax contributions 2023

Tax contributions 2022

£176.4m

£150.9m

Corporation tax: £29.8m

Corporation tax: £25.3m

Employment taxes: £63.9m

Employment taxes: £52.0m

VAT: £80.1m

VAT: £71.8m

Other rates/taxes: £2.6m

Other rates/taxes: £1.8m

Annual Report and Accounts 2023 Softcat plc

Strategic reportTASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY

Environment, climate change and Task Force on Climate-related
Financial Disclosures (‘TCFD’)

We continue to make progress in respect of climate change and sustainability, as explained below.

Key sustainability highlights and progress
• Softcat’s net zero targets have been approved by the

Science-Based Targets initiative (‘SBTi’). Softcat was the
first IT company in Europe to receive this.

• We are making steady progress towards full compliance

with the Task Force on Climate-related Financial
Disclosures (‘TCFD’).

• We also continue to make good progress on our key

commitments to take action on greenhouse gas (‘GHG’)
emissions. Our sustainability efforts have been recognised
throughout our industry.

Introduction
This section explains our approach to sustainability and includes
the disclosures required under TCFD.

We are committed to aligning success with corporate responsibility.
We are also motivated to drive change within our own organisation,
work with our partners and our supply chain and support our
customers on their socially responsible journey through the
technology solutions we provide. The Board takes ultimate
responsibility for Softcat’s sustainability and we formally delegated
authority to our Sustainability Committee to provide a more focused
Board-level oversight on this aspect of our business. The Board
remains committed to Softcat’s responsibilities to the environment.

To find out more about what we are doing
on sustainability, please see our website at
www.softcat.com/about-us/sustainability.
This can also be viewed by scanning the QR
code with your tablet or smartphone.

Softcat is a constituent of the FTSE4Good
Index Series – an index of companies that
demonstrates strong environmental, social
and governance practices, measured
against globally recognised standards.

Approach to sustainability
In order to make sure we are considering the right aspects, we started our journey by identifying the most relevant areas of the
United Nations Sustainable Development Goals (‘SDGs’) for our business. These areas have not changed since last year and
remain an important underpin to our approach on climate change and wider corporate responsibility:

Achieve gender equality and empower
all women to achieve their goals.

Ensure sustainable consumption
and production patterns.

Promote sustained, inclusive and
sustainable economic growth, full and
productive employment and decent
work for all.

Reduce inequality within and
among countries.

Take urgent action to combat
climate change and impact.

Strengthen the means of implementation
and revitalise the global partnership
for sustainable development.

Last year we also undertook an ESG materiality assessment, which included both surveys and interviews, to better understand which ESG
issues matter most. Employees, customers, suppliers and vendors participated in the materiality assessment, making sure the views of key
stakeholders had been considered. The outputs from the materiality assessment have helped to confirm our areas of focus.

Softcat plc Annual Report and Accounts 2023

Action on climate change
We recognise that climate change is having an impact on our
planet and that we have a role to play to mitigate our contribution
to that impact. The Board also recognises that climate change has
potential business and financial impacts; these include both risks
and opportunities for Softcat and it is its responsibility to lessen and
take advantage of these, respectively.

We are taking steps to make our business more resilient to climate
change and we continue to make progress against the ambitious
environmental targets we set in 2020.

The Board fully supports the adoption of the Task Force on
Climate-related Financial Disclosures (‘TCFD’) as it considers
that TCFD will help organisations and Softcat’s stakeholders to
focus their efforts and ambitions towards achieving net zero.
Enhancing our understanding of the climate-related risks facing us
and the opportunities that may be available to Softcat continues
to be a focus.

The following disclosures are aligned to the four thematic areas of
the TCFD: governance, strategy, risk management, and metrics and
targets. We have provided a summary of our compliance against
the recommended disclosures below with a reference table
detailing where disclosures are located throughout the report.

As we learn more about climate science and projections become
clearer, we will continue to refine our approach to identifying,
assessing and managing our climate-related financial risks
and opportunities.

Key activity in 2023

Governance/
strategy

Strategy

The Board held a direct stakeholder engagement with one of its top ten vendors (by revenue). The discussion
focused on building a better understanding of the vendor’s sustainability journey and how Softcat can be part of
that journey. The discussion also focused on working with others in the supply chain to improve the approach and
offerings on sustainability.

The Board considered sustainability and climate-related matters as part of its annual review of Softcat’s business
strategy. This integrated sustainability into the Board’s decision making, resulting in a more joined-up approach to
the resilience of Softcat’s strategy to climate change and further opportunities for sustainable growth.

We undertook a financial impact assessment of our climate-related risks and opportunities, to improve our
understanding of risks and opportunities facing Softcat over the short, medium and long term. A summary of the
process and results is provided on page 58.

Risk management We refined our methodology for prioritising climate-related risks and opportunities, allowing us to focus on those

risks and opportunities that present the highest potential to impact Softcat. Please see pages 59 to 63 for
more information.

Metrics
and targets

The annual bonus plan for Executive Directors includes a non-financial element in respect of the achievement of key
steps towards our climate change strategy for the first time. This is further explained in the Annual Report on Directors’
Remuneration on pages 114 to 134. The Remuneration Committee has decided to retain a sustainability metric in the
annual bonus plan for FY2024.

We continue to develop our opportunity metrics to take advantage of the move to a lower carbon world. Key to this
is ensuring our workforce understands key climate change issues. In the year we rolled out climate change training
across the Company. Over 98% of employees have completed the training, which received very favourable feedback.

Our Sustainability team continues to review opportunities relating to the IT ‘circular economy’ and other
opportunities to increase the focus on more sustainable products and services to sell to our customers. Actions
required to realise the opportunities are being developed. In order to fully realise the potential, we will need the
support of other stakeholders, including vendors. During the year, a summary assessment of the current state of the IT
circular market was presented to the Sustainability Committee together with an assessment of potential opportunity
and an action plan to take better advantage of the opportunities. Opportunity metrics will be further developed.

Our overall reported greenhouse gas emissions and energy consumed for FY2023 (see page 71) have reduced
compared to FY2022, despite the ongoing overall growth of the business.

Annual Report and Accounts 2023 Softcat plc

Strategic reportTASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

Environment, climate change and Task Force on Climate-related Financial Disclosures
(‘TCFD’) continued

TCFD cross-reference and compliance table
Our disclosures are as required by the Companies (Strategic Report) (Climate-related Financial
Disclosure) Regulations 2022. They also meet the requirements of Listing Rule 9.8.6R in respect of TCFD,
in which we have concluded that we fully comply with nine of the eleven recommended disclosures as set
out below.

In the table below we cross-refer to where the disclosures are located in this Annual Report or provide reason for non-compliance.
We plan to continue improving our compliance with TCFD.

TCFD pillar

TCFD recommended disclosures

Cross-reference (within this
Annual Report) or reason
for non-compliance

Governance

1) Board oversight of

(Pages 54 and 55)

climate-related risks and
opportunities.

Compliant

Governance

2) Management’s role in

(Pages 54 and 55)

assessing and managing
climate-related risks and
opportunities.

Compliant

Strategy

3) Climate-related risks and

(Page 56)

opportunities the organisation
has identified over the short,
medium and long term.

Compliant

Strategy

4) Impact of climate-related risks
and opportunities on the
business, strategy and
financial planning.

(Pages 56 to 63)

Compliant

Strategy

5) Resilience of strategy, taking
into consideration different
future climate scenarios.

(Pages 56 to 63)

Compliant

Risk management 6) Processes for identifying and
assessing climate-related risks.

(Page 64)

Compliant

Softcat plc Annual Report and Accounts 2023

Comments and next steps

The Sustainability Committee monitors
climate-related risks, opportunities and
disclosures and reports to the Board.

The CFO is the executive lead for
sustainability, supported by the Business
Transformation Director and our Sustainability
Team. As explained in this report, they form
part of a comprehensive governance
framework to manage climate change
risk and opportunities. We will continue
to develop the roles and responsibilities on
the management of climate-related issues
across Softcat.

We have refreshed our scenario analysis
in respect of climate change risks and
opportunities. We have also undertaken
a financial impact assessment of our
climate-related risks and opportunities,
to improve our understanding and
management of the risks and opportunities.

Through our climate scenario analysis, no
material or catastrophic net risk exposures
were identified in the time horizons assessed.
We have further integrated climate-related
planning into our key strategic planning.
In particular, during the year we considered
sustainability and opportunities to further
reduce our carbon footprint as part of our
annual Board strategy review.

Through our climate scenario analysis of risks,
mitigating actions and potential opportunities,
we believe our business is resilient to climate
change in the time horizons assessed.
We continue to review how climate change
may impact our strategy.

We have undertaken a financial impact
assessment of our climate-related risks and
opportunities, to improve our understanding
and management of them. As we look to
continue our growth, evolve our offerings and
work with our supply chain, we will increase
our level of knowledge on climate-related risks.

TCFD pillar

TCFD recommended disclosures

Risk management 7) Processes for managing

climate-related risks.

Risk management 8) Processes for identifying,
assessing and managing
climate-related risks
integrated into the
organisation’s overall
risk management.

Metrics
and targets

9) Metrics used to assess
climate-related risks
and opportunities.

Cross-reference (within this
Annual Report) or reason
for non-compliance

(Page 64)

Compliant

(Page 64)

Compliant

(Pages 65 to 67 and pages 114 to
134 (Annual Report on Directors’
Remuneration))

Partially compliant – we have
not yet fully set opportunity metrics
related to low-carbon products
and services.

Metrics
and targets

10) Scope 1, scope 2 and,
if appropriate, scope 3
greenhouse gas emissions,
and the related risks.

(Pages 65 to 67)

Compliant

Metrics
and targets

11) Targets used to manage
climate-related risks
and opportunities and
performance against targets.

(Pages 65 to 67)

Partially compliant – our net zero
targets have been approved by the
SBTi. However, we have not yet
fully set opportunity targets related
to low-carbon products
and services.

Comments and next steps

We explain in our assessment of
climate-related risks the mitigating
actions which we can take or have
taken. Through the financial impact
assessment, we have improved our
understanding and management of our
climate-related risks and opportunities.

We have conducted climate risk
workshops to identify risks. Our process
for assessing the materiality of our
climate-related risks is consistent with
the process for other corporate risks.
We will continue to monitor and
manage our climate-related risks and
ensure that each risk is monitored and
managed appropriately.

For FY2023, the annual bonus plan
for Executive Directors includes a
non-financial element in respect of
the achievement of key steps towards
our climate change strategy for the
first time.

Our Sustainability team continues to
review further opportunities of the IT
‘circular economy’ and the actions
required to realise the opportunities.

We disclose in this Annual Report our
emissions which cover scopes 1,2 and
3. Available prior year data is included
to support trend analysis.

Softcat’s net zero targets have been
approved by the SBTi, using our
FY2021 emissions as our baseline year.

We have a defined approach to risk
appetite on the level of risk that we
are willing to accept in the pursuit
of a specific objective or strategy
(see page 73).

Our Sustainability team continues to
review further opportunities, particularly
the IT ‘circular economy’ and other
opportunities to increase the focus on
more sustainable products and services
to sell to our customers. Actions
required to realise the opportunities
are being developed.

Annual Report and Accounts 2023 Softcat plc

Strategic reportTASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

Environment, climate change and Task Force on Climate-related Financial Disclosures
(‘TCFD’) continued

The Sustainability Team works in collaboration with other teams
as necessary to ensure the effectiveness of the climate-related
risk assessment process and to explore opportunities. This includes
organising initiatives and actions to mitigate these risks and to
capitalise on opportunities. The Sustainability Team also works with
external stakeholders, in particular the supply chain on the planning
and co-ordination required to realise opportunities.

The business also retains internationally recognised ISO
accreditations including ISO 14001 (Environmental Management)
and ISO 50001 (Energy Management) accreditations to support
its approach to environmental matters. The ISO standards help
Softcat to improve its environmental performance through more
efficient use of resources, reduction of waste and an improved
energy management system.

We have undertaken a financial impact assessment of
our climate-related risks and opportunities to improve our
understanding of potential implications over the short, medium
and long term. Our process for assessing the materiality of our
climate-related risks (on a gross and a mitigated net basis) is
consistent with the process for other corporate risks. Any material
risks (including any material climate-related risks) together with
plans to mitigate or manage such risks will be presented and
reviewed by the Audit Committee as part of its responsibility for
risk management oversight.

The Audit Committee has also discussed developments in respect of
proposed revisions to the UK Corporate Governance Code which
are currently under consultation. The proposed revisions reflect the
increasing responsibilities of boards and audit committees of listed
companies for sustainability and ESG reporting. The Financial
Reporting Council has outlined its intention to revise the Code to
incorporate these responsibilities into audit committees. Softcat’s
Audit Committee is monitoring developments and awaiting the
finalisation of changes to the Code. The governance structure will
then be reviewed by the Board to ensure that the Audit Committee
takes on additional responsibilities as appropriate.

Governance
The Board retains ultimate responsibility and
accountability for the oversight of the Company’s
strategy. Sustainability is an important issue at
Softcat and is discussed both by management
and the Board. The Board’s approach includes
seeking compliance with respect to sustainability
and climate change and the approval of material
environmental targets.

In 2022 the Board established a Sustainability Committee as
a Committee of the Board. The Sustainability Committee meets
twice per year and is chaired by Vin Murria. The Sustainability
Committee is responsible for, on behalf of the Board, setting the
sustainability strategy of Softcat, including goals, targets and
objectives, and it monitors management’s performance against
these. Monitoring the effectiveness of management’s processes
for identifying, assessing, and responding to climate-related risks
and opportunities has also been delegated to the Sustainability
Committee. A report from the Sustainability Committee is provided
on page 112.

To successfully manage sustainability and implement associated
initiatives effectively, Softcat operates a tiered governance
approach. This ensures that all areas of sustainability get the right
levels of focus throughout the business, including both the effective
monitoring of climate-related risks and taking advantage of
climate-related opportunities.

This approach has been designed to focus on what is required to
support Softcat, its supply chain and its customers on our vision.
Katy Mecklenburgh is the Executive lead for sustainability, and she
is supported by various managers and employees. In particular,
the Business Transformation Director (who is a member of the
Senior Leadership Team) provides Executive-level support on
strategy and direction. Both Katy and the Business Transformation
Director are supported by a Sustainability Team, which has
the full time responsibility for the day-to-day implementation of
sustainability initiatives. The Business Transformation Director and
Sustainability Lead (who heads up the day to day management of
the Sustainability team) attend each meeting of the Sustainability
Committee to ensure the Committee engages with those who
have responsibility for operational management of sustainability
throughout the Company. The Sustainability team and the
Company Secretary take responsibility for monitoring for changes
in regulation and required disclosures in respect of climate change
and discussing this with the Sustainability Committee together
with plans if required to adhere to incoming regulations. Updates
on climate-related performance and initiatives in the Company
is provided by the Sustainability Lead to each meeting of the
Sustainability Committee.

Softcat plc Annual Report and Accounts 2023

Sustainability governance structure

Board

Overall strategic direction

Sustainability Committee (see page 112)

Board-delegated responsibility for
oversight of sustainability strategy, policy
and actions

Board-delegated responsibility for
monitoring climate-related risks,
opportunities and targets

Oversight of key climate-related
compliance and disclosures

Audit Committee

Responsible for risk management oversight. It reviews all material risks, including any material
climate-related risks

Remuneration Committee
Establishes and reviews the remuneration framework and remuneration metrics for the Executive Directors. To support good progress
on sustainability issues, part of the annual bonus plan for Executive Directors is based on the achievement of non-financial objectives

Sustainability Leadership Team

Comprises the CFO, Business Transformation Director,
Sustainability Lead and Company Secretary

Responsible for providing Executive-level direction and support on
climate-related actions, risks, opportunities, targets and compliance

Sustainability Delivery Team

Comprises the Sustainability Leadership
Team plus selected senior representatives
responsible for key climate-related
stakeholder management

Responsible for operational management
of key environmental targets, actions and
engagement with stakeholders

Responsible for operational requirements
from a sustainability perspective

Green Teams

Comprise a Green Team Executive
Committee and local Green
team volunteers

Responsible for local delivery of
environmental initiatives around their local
offices and communities

Raise awareness and champion the
importance of environmental issues

Annual Report and Accounts 2023 Softcat plc

Strategic reportTASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

Environment, climate change and Task Force on Climate-related Financial Disclosures
(‘TCFD’) continued

Strategy
Softcat’s overarching strategy is to sell more to our existing customers and to grow our customer
base. Our purpose is to help customers use technology to succeed, by putting our employees first.
Our approach to climate change is well aligned to both our strategy and purpose.

As an IT reseller, we do not manufacture products. Our exposure to climate-related risks and opportunities is through our ability
to procure goods and services from our vendors, and add value as our employees apply their IT expertise to provide services,
products and support for our customers. To enable Softcat to keep delivering value for its stakeholders, we must ensure that
sustainability is embedded in the way our business operates. Each year the Board conducts a formal strategy review, which this
year integrated a review of sustainability. This provided the Board with a more holistic view of Softcat’s strategy, including the
resilience of the business to climate change and other sustainability challenges, as well as potential opportunities for
sustainable growth.

We operate a framework shown below for sustainability which defines our approach, guides our actions and supports the steps
we take to mitigate the impacts of climate change. This framework also supports our overarching strategy to grow our customer
base and sell more to existing customers, as we expect the importance of sustainability to our customers will continue to increase.
Our simple methodology in the framework below allows us to focus on relevant internal and external factors, better manage our
scope 1, 2, and 3 emissions and work closely with identified stakeholders:

Softcat’s framework for sustainability

Softcat

Supply chain

Solutions

Making sustainability a core element
to its business and embedding it in
Softcat’s future. Softcat will support
all of its priority goals and continue
to drive and develop a more efficient
and lower carbon industry.

Softcat is working with its partners,
suppliers and vendors to better
understand their net zero plans. It is
also working with them to ensure
they are adhering to Softcat’s
values and doing what they can to
enable, deliver and support a more
sustainable supply chain.

Softcat is reviewing the services and
solutions offered to its customers.
This will enable its employees
to create and deliver more
sustainable products and services
to assist customers on their own
sustainability journey.

We have taken steps to put our strategy and framework into effect, including:

• Setting environmental targets and developing action plans to achieve them.
• Working closely with our key stakeholders, particularly:

• Vendors and our supply chain – to help us both reduce our environmental footprint;
• Customers – using our knowledge and solutions to help customers take a more environmentally responsible approach to how

they use IT; and

• Employees – to reduce the environmental impact of our operations. This includes Company-wide sustainability training, which

was rolled out in FY2023, with over 98% of employees completing the training.

Given the nature of our business, we do not envisage that material investments or changes to our business model are required
to mitigate the risks of climate change or to take advantage of opportunities. For example:

• We do not expect to incur any material research and development costs, as is the case now;
• Our strategic focus is on organic growth, rather than growth through acquisition and divestments;
• We are debt free and prioritise our capital for organic growth. We do not envisage the need for additional access to capital

in respect of our approach to managing climate change (see our capital allocation framework on page 90);

• Our operations are office-based and we work in modern, energy efficient offices. All offices, apart from our head office in

Marlow, are leased properties for which we can change location should it be necessary.

Softcat plc Annual Report and Accounts 2023

Climate-based scenario analysis
In line with the TCFD recommendations, we conducted a climate scenario analysis in 2022 to assess potential impacts and opportunities
for Softcat against possible climate futures. During 2023, working with our external advisers, we conducted a refresh of our scenario
analysis to ensure it is up to date and that potential business impacts reflect the latest climate scenarios. For our updated scenario analysis,
three key variables were considered: the appropriate physical and transition climate scenarios, geographical scope of the analysis and
time horizons. For the scenario analysis to remain effective, we have followed the TCFD recommendations to use a divergent range of
scenarios. We have therefore made our assessments based on the below climate scenarios from the Intergovernmental Panel on Climate
Change (‘IPCC’) Sixth Assessment Report (‘AR6’), as well as new transition scenarios from the International Energy Agency (‘IEA’).
The latest climate change scenarios from the IPCC, which are known as Shared Socioeconomic Pathways (‘SSPs’), update the Representative
Concentration Pathways (‘RCP’) used by Softcat in its scenario analysis last year. Transition scenarios were derived from the IEA’s World
Energy Outlook.

Physical scenarios

Low emissions
scenario (SSP1-2.6)

A low GHG emissions scenario where CO2 emissions decline to net zero around 2070. This is most ambitious
of the three physical scenarios, with projected warming limited to under 2°C by 2100.

Warming: 1.3°C–2.4°C by 2100.

Medium emissions
scenario (SSP2-4.5)

A medium GHG emissions scenario where CO2 emissions remain around current levels until 2050. If the
world continues on its current trajectory, this is seen as the most likely scenario.

Warming: 2.1°C–3.5°C by 2100.

High emissions
scenario (SSP5-8.5)

A very high GHG emissions scenario where CO2 emissions roughly double from current levels by 2050.
With no mitigation, this is deemed the worst-case scenario.

Warming: 3.3°C–5.7°C by 2100.

Transition scenarios

Net zero emissions
by 2050
scenario (‘NZE’)

This maps out a way to achieve a 1.5°C stabilisation in the rise in global average temperatures, alongside
universal access to modern energy by 2030.

Announced pledges
scenario (‘APS’)

This assumes that all aspirational climate-related targets announced by governments are met on time and
in full, including their long‐term net zero and energy-access goals.

Stated policies
scenario (‘STEPS’)

This is a pragmatic exploratory scenario that shows the trajectory implied by today’s policy settings.

Annual Report and Accounts 2023 Softcat plc

Strategic reportTASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

Environment, climate change and Task Force on Climate-related Financial Disclosures
(‘TCFD’) continued

Climate-related risks and opportunities
Through the application of our risk management approach,
we summarise below the most relevant climate-related risks and
opportunities. These are in respect of the emissions scenarios and
the time horizons as set out above. Through our initial analysis,
no major or catastrophic net risk exposures were identified in
the short-term time horizon assessed across our climate scenarios.
We believe there are opportunities, which we continue to explore
and develop. We will continue to assess the potential risks over
the medium- and long-term, ensuring that mitigative actions
are developed. Analysis concluded that the potential financial
impact was not materially sensitive to each of the different time
horizons assessed.

Our process for assessing the materiality of our climate-related
risks is consistent with the process for other corporate risks.
The assessment of our corporate risks includes an assessment
of the potential financial impact:

Risk

Potential financial impact

Insignificant

Up to 100k

Minor

Moderate

Major

£100k–£500k

£500k–£3m

£3m–£25m

Catastrophic

Greater than £25m

In FY2023, we undertook a financial impact assessment of our
climate-related risks and opportunities, to further improve our
understanding of the materiality of these risks and opportunities
and how to manage them. The assessment also helped to inform
any inputs required into the annual operating budget, or other
longer-term financial plans, as approved by the Board.

Following the review, we do not envisage that adaptation and
transition to a lower carbon world will require a fundamental shift
to the way we do business or a major change to our business
model (which is shown on pages 20 and 21). We also do not
envisage that we will need to make major divestments, acquisitions
or other significant capital allocation decisions (including access
to capital or financing, if required) to take climate change into
consideration. We have approved relatively minor additional/
changes in expenditure, in particular during FY2023 we:

• completed the replacement of our internal combustion car fleet

with electric vehicles (‘EVs’); and

• commenced the installation of solar panels on the roof of our

head office in Marlow.

Climate-based scenario analysis continued
The UK is the most significant location for our operations and our
revenue (representing over 95% of both headcount and revenue).
Most of our key vendors also have operations in the UK. For 2023,
our climate scenario analysis also included impacts on operations
in our Dublin office. As part of our risk management framework,
we conducted our analysis across three time horizons:

Term

Short term

Medium term

Long term

Horizon

Milestone year

2023 to 2030

2030 to 2040

2040 to 2050

2026

2035

2045

Consistent with TCFD, our assessment covered the following:

physical risks:
resulting from climate
change events and changes
in weather. These can be
acute (event driven) or
chronic (long-term shifts);

transition risks:
associated with the
implications from the measures
taken to reach a low carbon
economy. These risks can be
categorised as policy and
legal, technological, market
and reputational; and

opportunities:
realised capitalisation of
benefits upon the low
carbon market and
technological drivers. These
can be from resource
efficiencies, energy sources,
new products or services,
markets and resilience.

Softcat plc Annual Report and Accounts 2023

Risks

Physical risk
category

Acute

Relevant
emissions
scenario

Potential
financial
impact

Medium
High




Identified risk and timeframe

Current or future control measure

Increased frequency and intensity of extreme
weather events such as intense rainfall and
heatwaves which could disrupt Softcat’s operations,
supply chain and services.

Link to principal risk: we have robust plans
to combat the risk of business interruption
(see page 76).

Timeframe of potential materialisation:
Medium, Long

Our largest vendors (see page 27) are major
international businesses, which have the resilience
and investment to mitigate the future risk of
climate-related risks to their organisation.
We work with a wide breadth of technology
partners to reduce concentration risks.

We also hold ISO 22301 for Business Continuity.
This was stress-tested during the COVID-19 pandemic.

Remote/hybrid working is available to all
employees, providing flexibility during challenging
conditions. Alternative workplaces for employees
are available if needed to avoid low-lying areas.

Our offices our modern and energy-efficient.

Potential financial impacts include:

• reduced revenue due to decrease in productivity and availability

• increased costs for building repair, maintenance and insurance; and

of workforce;

• increased costs associated with office leases;

• increased energy consumption costs.

Chronic

Long-term increased temperature increases in
the UK and Ireland, leading to business disruptions
or damaged infrastructure.

Softcat leases its premises, providing opportunity
to seek out modern spaces more resilient to
climate change.

Medium
High




Link to principal risk: we have robust plans
to combat the risk of business interruption
(see page 76).

Timeframe of potential materialisation:
Medium, Long

Remote/hybrid working is available to all employees,
providing flexibility during challenging conditions.

Our offices our modern and energy-efficient.

Potential financial impacts include:

• reduced revenue due to decrease in productivity and availability

• increased costs for building repair, maintenance and insurance; and

of workforce;

• increased costs associated with office leases;

• higher energy consumption costs.

Chronic

Rising sea levels resulting in disruption to offices
in the south-east, low lying coastal areas of the
UK and the Dublin office.

Softcat leases its premises, providing opportunity
to seek out modern spaces more resilient to
climate change.

Medium
High




Link to principal risk: we have robust plans
to combat the risk of business interruption
(see page 76).

Timeframe of potential materialisation:
Medium, Long

Remote/hybrid working is available to all
employees, providing flexibility during challenging
conditions. Alternative workplaces for employees
are available if needed to avoid low-lying areas.

Our offices are assessed as necessary by
our insurers for flood risk. We take action
as recommended by our insurers to reduce
the potential impact of flooding.

Potential financial impacts include:

• reduced revenue due to decrease in productivity and potential

• increased costs for building repair, maintenance and insurance; and

closure of select offices;

• increased costs associated with office leases;

• higher energy consumption costs.

Key to potential financial impact:

 Low  Medium  High

Annual Report and Accounts 2023 Softcat plc

Strategic reportTASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

Environment, climate change and Task Force on Climate-related Financial Disclosures
(‘TCFD’) continued

Climate-related risks and opportunities continued
Risks continued

Transition risk
category

Policy and
legal

Identified risk and timeframe

Current or future control measure

Relevant
emissions
scenario

Potential
financial
impact

Increasing policies and regulations that could place
new requirements on Softcat, such as enhanced
emissions reporting, regulation of critical minerals,
and carbon taxes.

Link to principal risk: N/A

Timeframe of potential materialisation:
Short, Medium, Long

Softcat’s current decarbonisation targets, submitted
to SBTi, provide a trajectory which would result
in net zero by 2040.

Net zero
Low
Medium





As a reseller, increases in input costs are passed
on to the customer.

Management regularly reviews the impact of
changes in legislation, taxes, etc. and oversees
initiatives to ensure compliance.

The Sustainability Committee has oversight in
respect of sustainability reporting and progress
towards our emissions targets.

Potential financial impacts include:

• increased input costs incurred through vendor and partner products;

• reduced revenue from potential termination of relationships with suppliers

• increased property costs associated with enhanced

building standards;

Technology

The cost of transitioning to using low-carbon
technology and energy sources in Softcat’s
operations, for example, green energy tariffs

Link to principal risk: N/A

Timeframe of potential materialisation:
Short, Medium

Potential financial impacts include:

• increased capital allocation to low-carbon technologies and
to retrofit office spaces for low-carbon technology; and

Market

Suppliers being unable to transition to a low carbon
economy at the same pace as Softcat, making
Softcat unable to achieve its net zero goal
and commitments.

Link to principal risks: we have robust plans to
combat the risk of business interruption and against
a failure to evolve our technology offering with
changing customer needs (see page 76).

Timeframe of potential materialisation:
Short, Medium, Long

Net zero
Low
Medium





unable to transition to net zero;

• costs from fines or increased carbon taxes; and

• reduced investment from non-compliance.

We have signed up to the SBTi and have a goal to
achieve 100% renewable energy by 2024. 60%
of our offices use renewable energy and we
purchase renewable energy credits for the
remaining offices where we are unable to use
renewable energy.

We are actively developing our net zero delivery
plan. Most of our offices are outfitted with modern
amenities which are energy efficient. We have
replaced our internal combustion car fleet with
electric vehicles. We have commenced the
installation of solar panels at our head office
in Marlow.

• increased cost to accommodate changing energy tariffs.

We are working with our supply chain and with
the wider IT industry as part of our framework for
sustainability. We understand many of their goals
to achieve net zero and these will be reflected in
our target to achieve a carbon net zero supply
chain by 2040.

Net zero
Low
Medium





Potential financial impacts include:

• reduced revenue due to a shift in consumer preference for

• reduced investment as a result of failure to achieve net zero target.

low-carbon products; and

Key to potential financial impact:

 Low  Medium  High

Softcat plc Annual Report and Accounts 2023

Relevant
emissions
scenario

Potential
financial
impact

Net zero
Low
Medium





Transition risk
category

Market

Identified risk and timeframe

Current or future control measure

Risks associated with not having a carbon-literate
workforce able to promote low carbon technology
to our customers could generate lower customer
satisfaction engagement.

Link to principal risk: we have robust plans against
a failure to evolve our technology offering with
changing customer needs (see page 76).

Timeframe of potential materialisation:
Medium, Long

In respect of sustainability, we have a Company-
wide structure with Board level oversight for
sustainability, including climate-related issues,
operational responsibilities assigned to appropriate
senior management and local level activities and
promotions undertaken by local Green Teams.

We have rolled out Company-wide training and
awareness on climate change and our initial training
has been completed by over 98% of the workforce.
We are also considering further improvements to our
sales systems to highlight and promote the sale of
lower-carbon products.

Potential financial impacts include:

• reduced revenue from lower sales of low-carbon products;

• increased expenditure on employee upskilling.

• reduced capital and investment due to lower performance; and

Market

Impacts to our global supply chain due to physical
risks occurring in other regions, generating
disruptions and delays in procurement.

Link to principal risks: we have robust plans to
combat the risk of business interruption and against
a failure to evolve our technology offering with
changing customer needs (see page 76).

Timeframe of potential materialisation:
Short, Medium, Long

Potential financial impacts include:

We work with a wide breadth of technology
partners to reduce concentration risks.

As a reseller, increases in supplier costs are
typically passed on to the customer.

Net zero
Low
Medium
High






• reduced revenue from supply chain disruption and delays

• increased costs of products and services from Softcat’s vendors and partners

in procurement;

as a result of increased supply chain costs.

• decrease in revenue due to increases in product prices and

customers identifying cheaper alternatives; and

Reputation

Negative perceptions from stakeholders, including
customers, potential investors and existing shareholders,
as a result of failure to embed sustainability into the
business or take action on climate change.

Link to principal risk: we have robust plans against
a failure to evolve our technology offering with
changing customer needs (see page 76).

Timeframe of potential materialisation:
Short, Medium, Long

Potential financial impacts include:

We have developed and are communicating a
clear climate change strategy and our targets to
reduce carbon emissions.

Net zero
Low
Medium





Softcat discloses performance data relating to
climate-related risks, its net zero trajectory and other
environmental performance information through its SBTi
and Carbon Disclosure Project (‘CDP’) submissions.

• reduced revenue from customers as a result of impacted

• reduced investment leading to impacted growth strategy and share prices.

market positioning; and

Key to potential financial impact:

 Low  Medium  High

Annual Report and Accounts 2023 Softcat plc

Strategic reportTASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

Environment, climate change and Task Force on Climate-related Financial Disclosures
(‘TCFD’) continued

Climate-related risks and opportunities continued
Opportunities

Relevant
emissions
scenario

Potential
financial
impact

Net zero
Low
Medium





Net zero
Low
Medium
High






Net zero
Low
Medium
High






Read more on pages 112 and 113

Inside this section:
80 Introduction to corporate governance
82 Board leadership and company focus
84 Governance report
96 Audit Committee report

106 Nomination Committee report
112 Sustainability Committee report
114 Remuneration Committee report
135 Directors’ report

Annual Report and Accounts 2023 Softcat plc

INTRODUCTION TO CORPORATE GOVERNANCE

INTRODUCTION
TO GOVERNANCE

I am delighted to present my
first report on governance as
Non-Executive Chairman.

Graeme Watt
Non-Executive Chairman

Dear shareholder
I am delighted to present my first report on governance
as Non-Executive Chairman. The 2018 UK Corporate
Governance Code (the ‘Code’) (a copy of which is available
at www.frc.org.uk) is applicable to Softcat for the financial year
ended 31 July 2023.

I am pleased to confirm that your Company has complied with
the principles and provisions of the Code during the year with
one exception. In respect of Provision 9 of the Code, Martin
Hellawell was the Company Chair until 31 July 2023, when he
stepped down from the Board. Martin was not independent on
his appointment as Chair in April 2018. Subsequent to the financial
year end, I was appointed as Non-Executive Chairman on
1 August 2023. As I was Softcat’s previous Chief Executive Officer,
I was not independent on my appointment as Chairman.

When deciding on both my appointment and the previous
appointment of Martin as Chair, the Board recognised that
the Code states that the chair should on appointment meet the
independence criteria and that ordinarily the chief executive
should not go on to be the chair of the same company.

Prior to me becoming Chairman, detailed conversations were
held with the Board and plans agreed to ensure that my role as
Chairman was very clear to the Board, our shareholders, our
employees, other stakeholders of the business and me. We remain
conscious that it is not seen as best practice for a former CEO to
be chair of the same company. However, all of the Board and the
Nomination Committee confirmed they believe we have a clear
framework for the roles of the Chairman and of the CEO and there
remains a clear separation between those roles.

This allowed me to hand over all executive duties to Graham
by 1 August. Since 1 August I have not been involved in any
operational matters, other than acting as an occasional sounding
board for the CEO, in much the same way that former Chair
Martin had previously done for me. The clear and successful
operating model of the CEO running the Company (not the
Chairman) will continue. The Board will benefit from an infusion
of new thinking following the appointment of Katy as CFO in June
2023 and from the appointments of Mayank Prakash and Jacqui
Ferguson as independent Non-Executive Directors (September
2023 and January 2024 respectively). Your Board firmly believes
that these appointments and the composition of the Board are in
best interests of the Company’s stakeholders. Your Board continues
to operate a strong and effective system of governance and it
demonstrates good leadership and oversight of its responsibilities.

We have conducted our annual Board effectiveness evaluation,
which concluded that your Board continues to work well. I would
like to thank my fellow Directors for their ongoing support,
particularly against the background of significant changes to
the roles and composition of the Board.

The following reports explain how the Board and its Committees
operate and explain some of the work they have undertaken
during the year. If you have any questions or comments on
the reports, I can be contacted via the Company Secretary
at cosec@softcat.com.

Prior to 1 August 2023, Graham Charlton increased his executive
responsibilities and held the role of CEO Designate from June
2023 following the appointment of Katy Mecklenburgh as CFO.

Graeme Watt
Non-Executive Chairman
23 October 2023

Softcat plc Annual Report and Accounts 2023

Finance: 3

Marketing: 4

Operations: 7

Management: 7

Technology: 4

Male: 43%

Female: 57%

Board overview

Tenure of Directors
Director

G Watt

G Charlton

V Murria

R Perriss

L Weedall

K Mecklenburgh

4mths

M Prakash

1mth

5yrs 6mths

8yrs 7mths

7yrs 11mths

4yrs 3mths

1yr 5mths

Directors’ experience

Board composition (%)

Board gender diversity (%)

Chair: 14%

Independent
Non-Executive Directors: 57%

Executive Directors: 29%

Corporate governance
and investor relations: 15%

Financial performance: 25%

Risk: 15%

Strategy and operations: 45%

Allocation of time

Annual Report and Accounts 2023 Softcat plc

Corporate governanceBOARD LEADERSHIP AND COMPANY FOCUS

YOUR BOARD OF DIRECTORS

Our business is led by our Board
of Directors. Biographical and
other details of the Directors as at
23 October 2023 are as follows:

Graeme Watt
Non-Executive Chairman
Appointed to the Board: 1 April 2018
(and became Chair on 1 August 2023)

N D S

Key strengths
• Extensive knowledge of the sector,
distribution and the reseller channel

• Strong commercial skills
• Business and system transformations
• Mergers and acquisition experience
• Strong leadership skills and delivery of
growth in very sizeable business units

• Deep understanding of the Softcat

business and culture

• Wealth of financial and risk knowledge

Current external commitments
None.

Previous roles
Graeme has over 30 years of experience
in the IT distribution industry. He was CEO
of Softcat between April 2018 and July
2023. Prior to joining Softcat, Graeme
was most recently senior vice president
EMEA, advanced and specialist solutions,
Tech Data Corporation (‘Tech Data’),
a position he held from March 2017.
Before that, he was president for Avnet
Technology Solutions, EMEA, for almost
seven years and a member of Avnet’s
global executive committee. He previously
spent six years at Bell Micro (as president
of global distribution) and his earlier career
included roles at Tech Data (president
EMEA) and Computer 2000 (managing
director UK & Ireland). Graeme is a
qualified accountant (ICAEW).

Graham Charlton
Chief Executive Officer
Appointed to the Board: 19 March 2015
(and became CEO on 1 August 2023)

D S

Key strengths
• Strong leadership skills
• Strong financial and commercial skills
• Extensive experience in both financial

and general management

• Deep understanding of the Softcat

business and culture

• Significant experience of financing and

capital raising

Current external commitments
None.

Previous roles
Graham was CFO of Softcat between
March 2015 and July 2023 and was
appointed CEO in August 2023. Before
Softcat, Graham previously spent four years
as finance director at comparethemarket.
com. Prior to that, Graham spent one year
as finance director at See Tickets (the
trading name of See Group Limited) and

Softcat plc Annual Report and Accounts 2023

Committee key

A Audit Committee
N Nomination Committee
R Remuneration Committee

D Disclosure Committee
S Sustainability Committee

Chair

over five years in various roles, including
group financial accountant, finance
manager and finance director, decision
analytics, at Experian Ltd. Graham is a
Chartered Accountant and began his career
with Andersen.

Katy Mecklenburgh
Chief Financial Officer
Appointed to the Board: 19 June 2023

D S

Key strengths
• Strong leadership skills
• Strong financial and commercial skills
• Extensive experience in commercial

finance and audit matters

• Previous significant senior finance roles

across a range of industries

Current external commitments
None.

Previous roles
Katy joined Softcat in June 2023. Previously,
she was interim Chief Finance Officer at
ASOS plc. Prior to that, she spent three
years as Group Controller at Inchcape plc.
She has held various other positions across
a range of industries and blue-chip firms.
Katy was Head of Finance at Amazon and
Finance Director at Serco and she spent
over a decade at Procter and Gamble
where she held a series of senior finance
roles. Katy is a Chartered Management
Accountant. She earned a BSc in
Pharmacology and a PhD in Respiratory
Medicine, both from Edinburgh University.

Vin Murria OBE
Independent Non-Executive Director and
Designated NED for Workforce Engagement
Appointed to the Board:
3 November 2015

A N R S

Key strengths
• A seasoned and successful entrepreneur

with extensive board experience
• A strong background in technology-
based businesses coupled with a
strong network

• Well-developed strategic and

commercial skills

Current external commitments
Chair of AdvancedAdvT Limited and
non-executive director at Bunzl plc.

Previous roles
Prior to joining Softcat, Vin spent seven
years as the founder and chief executive at
Advanced Computer Software plc, before
its acquisition by Vista Equity Partners in
2015, and five years as chief executive
of Computer Software Group plc, before
its acquisition by HG Capital and then
Hellman & Friedman in 2007. Previously,
Vin was a non-executive director at
Sophos Group plc, Zoopla Plc, Chime
Communications plc, MC Saatchi plc,
Silicon Valley Bank UK and DWF Group
plc, and chief operating officer at Kewill
Systems plc.

Robyn Perriss
Independent Non-Executive Director
Appointed to the Board: 1 July 2019

Lynne Weedall
Independent Non-Executive Director
Appointed to the Board: 3 May 2022

A N R S

Key strengths
• Significant experience of senior
positions in human resources

• Extensive experience as a non-executive

director of listed companies

Current external commitments
Non-executive director at Dr. Martens
plc, Greggs plc and Stagecoach
Group Limited.

Previous roles
Previous senior executive positions include
group people & culture director of Selfridges
Group, and group human resources &
strategy director of Carphone Warehouse.
Previous non-executive roles include Treatt plc,
William Hill plc and Greene King plc.

A N R S

Key strengths
• Wealth of financial, risk and
governance knowledge

• Significant investor relations and

capital markets experience

• Extensive experience of strategic roles,
particularly within a dynamic and
fast-paced progressive environment

Current external commitments
Non-executive director at Next 15
Communications Group PLC and
Dr. Martens plc.

Previous roles
Robyn was finance director at Rightmove
plc, the UK’s largest property portal, until
30 June 2019. Prior to being finance director
at Rightmove, Robyn also held senior roles as
financial controller and company secretary.
Before joining Rightmove, Robyn was group
financial controller at the online media
business Auto Trader.

She qualified as a Chartered Accountant in
South Africa with KPMG and worked in both
audit and transaction services.

Mayank Prakash
Independent Non-Executive Director
Appointed to the Board:
1 September 2023

A N R S

Key strengths
• Significant experience of senior
positions in various sectors

• A strong background across operations,
technology and digital information
and transformations

Current external commitments
Group chief operations officer of Evelyn
Partners Group Limited and non-executive
director at Uber in the UK.

Previous roles
Mayank held senior executive positions
including being chief consumer digital
and information officer of Centrica plc,
managing director, global wealth &
investment management technology of
Morgan Stanley, chief digital & information
officer of DWP and UK chief information
officer of Sage Group plc.

Annual Report and Accounts 2023 Softcat plc

Corporate governanceGOVERNANCE REPORT

Division of responsibilities
OUR GOVERNANCE
FRAMEWORK

Board meeting attendance
All members of the Board are required to devote sufficient time to
prepare in advance for Board meetings and to attend. The Board
met seven times during the year.

The Board is committed to fostering an open and transparent
culture at Softcat and recognises the importance of regular
engagements with employees as a part of this culture. This year, the
Board took advantage of combining some of its Board meetings
with an opportunity to engage with employees, holding question
and answer sessions in both the Manchester and Leeds offices.
Each session was led by Vin Murria (the Board’s Designated
Director for Workforce Engagement) and provided a valuable
opportunity for the Board to better understand the matters of
importance to each office, and for the employees to get to know
the Directors, some of whom had not met the Board before.

The Company held five meetings of the Audit Committee, three
meetings of the Remuneration Committee, four meetings of the
Nomination Committee and two meetings of the Sustainability
Committee. Attendance for each Committee is shown in the
respective Committee report. Additionally, from time to time,
authority will be delegated to a sub-committee of the Board or
one of its Committees to authorise specific actions, for example the
publication of a trading statement. Sub-committee meetings are
held as and when they are necessary throughout the year.

Board attendance 2023

Name

M Hellawell
G Watt
G Charlton
K Mecklenburgh
K Slatford
V Murria
R Perriss
L Weedall

Attended

Did not attend

n/a

Karen Slatford retired from the Board in January 2023.
She attended all meetings of the Board during the financial
year prior to her retirement.

Katy Mecklenburgh joined the Board in June 2023. She attended
all meetings of the Board during the financial year following
her appointment.

Softcat plc Annual Report and Accounts 2023

Our Board

Matters reserved for the Board
The Board has a formal schedule of matters reserved
for the Board’s approval which is regularly reviewed
and updated. Matters include:

• our strategy, business objectives and annual

budgets to ensure we can deliver long-term value
to our shareholders;

• annual and half-year results and our

dividend policy;

• material acquisitions, disposals and contracts;
• major changes to internal controls, risk management

or financial reporting policies and procedures;

• determining our risk appetite;
• oversight of strategic sustainability objectives;

Board Committees

Audit Committee
Provision of effective governance over:

• the appropriateness of the Company’s

financial reporting;

• the performance and appointment of both the

internal audit function and the external auditor; and

• the Company’s system of internal control, risk
management and compliance activities.
Read more on pages 96 to 105

Disclosure Committee
• Supports the Board in overseeing the accuracy and
timeliness of Softcat’s formal business disclosures,
including disclosures made in Softcat’s half and
full-year results.

Executive leadership

Senior Leadership Team (‘SLT’)
The SLT is led by the CEO and is responsible for leading
the day-to-day operation of Softcat. The SLT focuses on:

Our Board

Executive leadership

• major changes to capital, corporate or management

structure; and

• succession planning for the Board and

senior management.

Matters reserved can be found at
www.softcat.com/about-us/investor-centre/governance.

The Code expects certain roles of the Board to be clearly
set out. The Board has a formal document outlining the
key aspects of the role of the Chair, Chief Executive,
Senior Independent Director (‘SID’), Non-Executive
Directors (‘NEDs’) and Designated Director for Workforce
Engagement. This is regularly reviewed, and the current
version can be found at https://www.softcat.com/about-us/
investor-centre/governance.

Nomination Committee
• Evaluates Board composition and

ensures Board diversity and a balance
of skills.

• Reviews Executive succession plans,
performance on diversity and plans
to improve diversity in the business.
• Oversees the performance evaluation
of the Board, its Committees and
individual Directors.

• Reviews employee engagement and

the culture within the business.
Read more on pages 106 to 111

The Committees of the Board have remained unchanged since last year and there has
been no material change in their duties and responsibilities over the last year.

Remuneration Committee
• Sets, reviews and recommends the policy
on remuneration of the Chair, Executive
Directors and Senior Leadership Team.
• Sets the pay of the Executive Directors
and agrees their participation in bonus
plans and share-based incentives.

Sustainability Committee
• Sets and approves the sustainability

strategy of the Company.
• Reviews performance against

climate-related targets, goals and
initiatives, and oversees compliance
with climate-related regulations.

• Sets a Remuneration Policy for approval
by shareholders and then manages the
implementation of the Policy.
Read more on pages 114 to 134

• Reviews the effectiveness of

management’s practices for identifying
and monitoring climate-related risks
and opportunities.

• Reviews other corporate responsibility

issues as requested.
Read more on pages 112 and 113

• 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 2023 Softcat plc

Corporate governance
GOVERNANCE REPORT CONTINUED

WHAT THE BOARD
DID THIS YEAR

Each year the Board reviews, discusses and approves a variety of matters. Some of the matters are cyclical, for example the Board’s review
of our half year and full-year results. Some items are discussed at each meeting, for example updates from the CEO and the CFO on business
and financial performance. The below summarises some of the key matters considered by the Board during the year.

Strategy

Stakeholder engagement

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 as to how Softcat provided support to its business;

• 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 members of the Board present, engagements with
our employees at the Manchester and Leeds 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. The Chair provided the Board
with a comprehensive briefing of the key themes arising
from the engagements and on agreed actions;
• the Remuneration Committee Chair completed an

engagement process with our top shareholders on the
revised Remuneration Policy, which was subsequently
approved by shareholders at the Annual General
Meeting held in December 2022 (see page 115);
• 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.

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 2023;
• an informal Board dinner in 2023 which allowed

additional time to discuss strategy ahead of the formal
strategy review session; and

• updates on the actions arising from the strategy review

throughout the 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

(which is circulated to the Board) 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 a challenging
macro-economic environment; and

• an update from the Company’s brokers on investor

themes and equity market matters.

Softcat plc Annual Report and Accounts 2023

Governance and risk

During the year the Board:

• increased its focus on environmental strategy, targets and
performance through the Sustainability Committee of the
Board (see pages 112 and 113);

• approved the appointments of Katy Mecklenburgh,
Mayank Prakash and Jacqui Ferguson to the Board;

• monitored the impact of the macro-economic

environment, such as inflation, on the Company’s
performance and finances, customers and the economy
more widely;

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

People, vision and values

During the year the Board:

• had oversight of the changes on the Board announced

last year in respect of the Chair, CEO and 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 Manchester and

• received feedback and comments on governance from

Leeds offices.

major shareholders;

• performed a review of Board effectiveness, which was

conducted internally;

• reviewed the Company’s risk appetite, principal risks

and uncertainties;

• considered and approved changes to the delegation
of authorities to management and reviewed whether
changes were required to the terms of reference for each
Committee; and

• received regular governance and regulatory updates.

Other

The Board has also:

• approved the 2023 Annual Report and Accounts;
• approved the 2023 Notice of AGM; and
• reviewed monthly reports which analysed key changes

in our shareholder base.

Annual Report and Accounts 2023 Softcat plc

Corporate governanceGOVERNANCE REPORT CONTINUED

COMPOSITION, SUCCESSION
AND EVALUATION

Composition and succession
This is discussed in the report from the Nomination
Committee on pages 106 to 111.

Board evaluation

Stage 1: Approval of process

The Board agreed that the process for the year would be
conducted internally. The Company Secretary discussed a
process with the Chairman and it was agreed to circulate a
questionnaire for completion by each member of the Board.

This really is in my view a high
performing Board with an amazing
executive team and very talented
non-executive directors.

Comment in the Board evaluation report

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 internally (the Board having conducted
an external evaluation in 2022 and an internal
evaluation in 2021). The key stages of the process this
year were:

Stage 2: Approval of a questionnaire

The Company Secretary circulated a draft questionnaire
to the Board to make sure it captured all the relevant issues
for the Board to consider. It was agreed to repeat most of
the questions from the previous internal review to provide a
comparison of responses where possible. The areas in the
survey included:

• Board processes;
• strategic issues and oversight;
• contribution and development; and
• Committees.
The questionnaire asked each Director to rate various topics
using a four-point rating system (poor, adequate, good,
excellent). Directors were also asked to provide additional
comments to each question to give a more qualitative view.

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 continues to be strong alignment between
the Company’s and the Board’s values and culture. Some of the
points made in the survey included:

• There had been an increased focus on strategy.
• Risks continue to be well-understood and were addressed.
In particular, there had been increased focus on potential
market changes facing the business.

• Recent changes to the Board had been managed well. These

were a result of good succession planning over the longer term.

• Each of the Board’s committees continues to function well

and each has an effective Committee Chair

• Each Board member continues to provide high quality

contribution to Board discussions. An environment operates
where questions can be raised and challenges made in the
spirit of continuous improvement.

• Interactions at Board meetings with senior managers across

the business continues to be very helpful.

• All Board members are well prepared for Board and

Committee meetings, with pre-read papers providing the
necessary information to prepare in advance.

There were no areas rated as ‘poor’ in the review.

Outputs and recommendations
The Board was pleased with the outcome of the Board evaluation,
which reflects the Directors’ commitment to the business, strong
processes, a positive culture and attitude for the successful
operation of the Board.

Softcat plc Annual Report and Accounts 2023

Stage 3: Collation of results

Stage 6: Action planning

The surveys were conducted online and managed by an
independent third party to ensure anonymity of responses,
should a Director not wish to attribute a comment. Individual
responses were collated to provide a collective overview
of the responses and comments on each question.

Following the Board review and discussion, it was agreed
that the Company Secretary prepare an action plan to
address points of recommended improvements. Progress will
be tracked during the year.

Stage 4: Review of results

The Chairman and Company Secretary reviewed and
discussed the collated survey results, highlighting key themes
and areas from the responses. These were summarised in a
covering note and executive summary for distribution to the
Board along with the full survey results.

Stage 5: Board review and discussion

The Board discussed the key points and conclusions from the
review during a Board meeting.

The output of the evaluation also confirmed the Board’s top
strategic issues. These will be incorporated as needed into the
twelve-month rolling plan for the Board, which is maintained by
the Company Secretary and regularly reviewed by the Board,
to ensure appropriate time continues to be dedicated to each
key topic.

Some areas for further refinement or implementation were
identified by the Board, which include:

• Dedicating further time to discussing strategy, particularly ahead
of the annual Board strategy review meeting which is usually
held each February.

• Additional Board level time and focus on potential market

changes which may impact Softcat.

• Consider moving one or more Committee meetings to a

different day to a Board meeting to free up further time for
the Board.

• The format/content of some meeting pre-read papers will be

reviewed to improve clarity.

The Board has asked the Company Secretary to maintain 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 was made on the actions arising from the external
Board evaluation conducted in the previous year. This included:

• an increased focus on topics to further deepen the

Non-Executive Directors’ understanding, for example on
broader market trends;

• the appointment of Non-Executive Directors to further improve
the complementary skills and experiences of the Board; and

• additional advance consideration of the strategic issues to

be discussed at the annual Board strategy review.

Annual Report and Accounts 2023 Softcat plc

Corporate governanceGOVERNANCE REPORT CONTINUED

OPERATION OF THE BOARD

Workforce engagement
Vin Murria is the Board’s Designated Director for Workforce
Engagement and she led in-person engagements during 2023.
Engagements have been held in Softcat’s Manchester and Leeds
offices, both of which were attended by the Board. Various topics
were discussed, including:

• the Board’s strategic outlook;
• feedback on local Softcat offices;
• plans to continue growing the Company;
• challenges of the current economic condition, including the high

inflation environment;

• industry issues;
• the role of the Board; and
• recent changes to the composition of the Board.
The discussions provided valuable insight and actions were taken
following feedback where appropriate.

Softcat capital allocation framework (‘CAF’)
Introduction and purpose
Softcat has a disciplined approach to the allocation of capital,
which is primarily aligned to our purpose, vision, strategy and
investment case (see pages 6, 7 and 28). Our CAF is used to
prioritise the use of cash generated by Softcat while maintaining
an appropriate capital structure for the business. The framework
balances Softcat’s investment requirements and commitments
to regular dividend payments against the need to maintain
appropriate levels of cash reserves and the maintenance of
a strong balance sheet.

The Board believes that adopting this framework aligns to the
Board’s key objective of enhancing shareholder value over
the long term.

Summary – investment and allocation priorities
Softcat’s capital allocation framework is outlined below.

Invest for organic growth

Strategic investments

Progressive ordinary
dividend policy

Return excess cash to
shareholders

Our key priority is to invest for organic growth, as we believe this
is the main driver of long-term shareholder value, and our second
priority is to maintain our progressive ordinary dividend policy.
Additional excess capital is then either allocated to strategic
investments or returned to shareholders.

Invest for organic growth
Our imperative is to prioritise long-term investment for
organic growth.

Investing in our people is at the core of our business model.
This is our largest single and most important investment and
is the key driver for ongoing growth.

Expanding our headcount and capabilities enables us to
fulfil our strategy of acquiring more customers and selling
more to existing customers.

We also prioritise investments in systems and processes
which support our existing operations, mitigate risks and
underpin business growth.

Progressive ordinary dividend policy
Softcat’s ordinary dividend policy is to distribute
between 40% and 50% of reported profits after tax each
financial year.

Our dividend and distributions policy is on page 91.

Strategic investments
Inorganic growth, and/or expanding into new areas or
markets, is an option. However, given the size of the organic
opportunity available to Softcat, any acquisition or entry
into new areas or markets would need to provide a truly
compelling opportunity to drive long-term shareholder value.

Return excess cash to shareholders
We will return excess cash to shareholders, after taking
into account cash reserves required to operate and grow
the business. This has historically been achieved via a
special dividend.

The Board regularly reviews the level of cash reserves
which should be retained in the business to preserve
day-to-day operational flexibility. The Board also regularly
reviews the most appropriate method to return excess cash
to shareholders.

Softcat has a highly liquid and cash-generative business model.
To date, all of our growth has been organic, driven by increasing
headcount, growing sales capabilities and opening new offices,
and investing in IT systems, enabling us to successfully grow our
customer base and spend per customer. Given our relatively
modest UK market share and the size of the future organic
opportunity available to Softcat, the Board will continue to
prioritise investment to deliver growth within the UK market.

Softcat plc Annual Report and Accounts 2023

Given the nature of Softcat’s business, spend on plant, machinery
and other non-systems infrastructure is relatively low, and this is
expected to continue moving forward. The Company’s working
capital is dominated by short-term trade debtors and creditors,
with very low levels of inventory held. Timings of trade outflows
and inflows are typically closely aligned and therefore there
is only a modest need to fund working capital as the business
grows. The cash floor of the minimum cash holding in the business
is reviewed annually to ensure it is appropriate relative to the size
of these balances.

Softcat is debt free with all of our growth funded from reinvesting
the cash we generate. Whilst our current plans are to remain
debt free, the Board will consider all options to continue investing
in its strategic priorities, including the most appropriate source
of financing.

We do not envisage that transition to a lower carbon world will
require us to make major capital allocation changes (including
access to capital or financing, if required). For further information,
please see our Report on Climate Change and the Task Force on
Climate-related Financial Disclosures on pages 50 to 71.

Capital allocation governance
The Board is responsible for reviewing and approving all key
decisions in respect of capital allocation, including oversight
of the CAF. In particular, the Board:

• sets Softcat’s dividend and distributions policy;
• decides on the Company’s capital and financing structure;
• approves all other decisions in respect of capital allocation;
• will review the capital allocation priorities and refine them as

required to achieve the Company’s strategy;

• regularly reviews key performance metrics in the business given

operational and capital allocations; and

• conducts post-investment reviews on major project investments

so that future major projects can be optimised.

The Board considers capital allocation in the context of Company
performance, risks and other relevant business information. In
particular, each year the Board approves a budget for the coming
financial year, which includes capital allocation and expenditures
to drive our strategic investment priorities. The Board also approves
annually a three-year plan, which is prepared when the Board
reviews its strategy. The three-year plan gives a longer-term view
of capital requirements and expenditures and supports the Board’s
decision making against relevant factors such as anticipated
wider market trends. Capital allocation decisions and dividend
distributions are also considered against the Company’s going
concern position and the Company’s longer-term viability.

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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 ordinary dividend policy
remains a progressive one which targets an annual dividend of
between 40% and 50% of the Company’s reported profits after
tax in each financial year. 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.

Annual Report and Accounts 2023 Softcat plc

GOVERNANCE REPORT CONTINUED
OPERATION OF THE BOARD CONTINUED

Dividend and distributions policy continued
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 2023 amounted to £243.8m (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 2022, the Board has approved a
target minimum cash holding in the business of £60m. 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 £75m. The level is reviewed annually by the Board and the
minimum cash holding represents a desired forecast minimum cash
balance held in Company funds across all accounts.

The Directors have proposed a final dividend and a special
dividend for the financial year ended 31 July 2023. The special
dividend takes into account the increase in minimum cash holding
in the business. Further information in respect of the proposed
dividends can be found on page 35.

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
78 and pages 140 and 141 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 2023
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 Chairman 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 for Mayank Prakash who
joined the Board in September 2023 and Jacqui Ferguson who
will join in January 2024. The programme included meetings with
the Chairman, the Chief Executive Officer, the Chief Financial
Officer, members of the Senior Leadership Team, other key
management and the Company’s brokers. The Company Secretary
also highlighted key Board documents for Mayank and Jacqui to
review, such as the Board’s current annual budget, Board strategy
review and three-year plan. This helped to accelerate their
understanding of the business.

Softcat plc Annual Report and Accounts 2023

When there is a material change in role for an existing Director,
the Director is responsible for preparing and progressing a plan
of transition to ensure they are fully prepared for their new role.
During the year the Board reviewed the transition plans prepared
by Graeme Watt (for his transition from CEO to Chairman) and
Graham Charlton (for his transition from CFO to CEO). The Board
provided feedback on the plans and offered additional support,
if needed.

All Directors have the opportunity to obtain advice from the
Company Secretary (who acts as Secretary to the Board and all
its Committees). 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 its key obligations as Directors of

a public listed company;

• assisting the Chairman 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
Chairman and SID, are required by their role to perform certain
functions to improve the effectiveness of the Board. The roles
of the Non-Executive Directors are reviewed regularly and
summarised in a written document which is approved by the
Board and available for inspection on the Company’s website at
www.softcat.com/about-us/investor-centre/governance. The
document is reviewed by the Board with the support of the
Company Secretary to ensure it remains relevant and reflects
any changes in governance or good practice. The role of the
Non-Executive Directors include:

• constructively challenging and contributing to the development

of strategy;

• offering additional perspectives, advice and strategic guidance;
• scrutinising the performance of management in meeting agreed

goals and objectives;

• exercising oversight to ensure compliance with key listed

company requirements;

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

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

• through the Nomination Committee, undertaking 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
• through the Sustainability Committee, scrutinising 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;

• each Board meeting includes a report from the CEO and

the CFO. The reports provide a comprehensive overview of
key matters on which the Board needs to be informed and
they provide a good foundation to many of the other topics
discussed at Board and Committees meetings. Topics included
in the CEO and CFO reports include operational and financial
performance, industry developments, employee matters and
current priorities for the CEO and CFO;

• 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;
• 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
typically five to seven 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;

Annual Report and Accounts 2023 Softcat plc

Corporate governanceGOVERNANCE REPORT CONTINUED
OPERATION OF THE BOARD CONTINUED

Organisation of Board meetings continued
• 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;

• additional time is allocated on occasion to facilitate more
in depth discussion when appropriate. For example, Board
dinners have been held to provide a more informal setting for
the Board to meet and to discuss business; 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 Chairman, is currently comprised of four
independent Non-Executive Directors and two Executive Directors
and therefore complies with the independence requirements
of the Code. Graeme Watt was formerly the Chief Executive
Officer before being appointed as Chairman on 1 August 2023.
The Board considers for the purposes of the Code that he was
not independent when he was appointed Chairman and that
he remains not independent.

In respect of the financial year ended 31 July 2023,
Martin Hellawell was the Chair before he retired from the
Board on 31 July 2023. Martin was also not considered
as independent whilst he served as Chair due to his previous
role as Chief Executive Officer up to April 2018.

The independence of the Non-Executive Directors is reviewed
annually by the Nomination Committee (described in the
Nomination Committee Report on pages 106 to 111). 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 2023

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 36 to 41.

During the year, the Chair once again 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 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
The 2023 AGM will be held on 13 December 2023 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 2023 AGM. Details of how to do this can
be found in the Notice of AGM.

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

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 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 shareholders 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 2023 Softcat plc

Corporate governanceAUDIT COMMITTEE REPORT

ACCOUNTABILITY

I am confident that over the course
of the year the Committee has
carried out its duties effectively
and to a high standard.

Robyn Perriss
Chair of the Audit Committee

Members

R Perriss (Chair)
V Murria
L Weedall
M Prakash2

Attendance of the Audit Committee
Name

Committee attendance 2023

R Perriss
V Murria
K Slatford1
L Weedall

Total meetings held

Attended

Did not attend

n/a

1. Karen Slatford retired from the Board in January 2023. She attended

all meetings of the Committee up to the time of retirement.

2. Mayank Prakash joined the Board and the Audit Committee from

September 2023, after the 2023 financial year.

Allocation of time

Internal audit: 20%

External audit: 30%

Financial reporting: 25%

Risk and internal controls: 25%

Introduction
As Chair of the Audit Committee (the ‘Committee’), I am pleased
to present the Committee’s report for the year ended 31 July 2023.

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 the year and also areas of focus
over the next financial year.

Ahead of implementing the expected FRC corporate governance
code reforms and cognisant of the increased scale of the business,
a key priority in the year has been the establishment of a more
formal ‘second line of defence’ function, led by an experienced
Head of Governance, Risk and Control, with a clear focus on “no
regret” actions and formalising and embedding risk management
process and controls across the organisation. The Committee
received regular progress updates, including an in depth training
session on an internal project to formalise the second line of
defence. I am pleased with the focus given by management on
these important issues, which will further strengthen the overall
control environment.

The Government announced in October 2023 that it was
withdrawing the draft new statutory reporting regulations in
respect of proposed audit and governance reforms, following
a consultation with businesses on the wider reporting regime.
The Committee will monitor these developments and consider
the implications of this further in 2024.

Softcat plc Annual Report and Accounts 2023

Areas of focus in FY 2023 included:

• reviewing the appropriateness of our published half-year

and full-year results;

• 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 regular updates in relation to IT systems and security;
• receiving and discussing internal audit reports on

– cloud adoption and governance by Softcat in relation
to internal operations in support of the Company’s
journey in adopting a cloud first approach;
– IT third party risk management review; and
– business continuity management and IT disaster recovery;
• 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;

• monitoring the progress in formalising and embedding
IT general systems and financial reporting controls, post
the implementation in FY 2022 of a new ERP system.
Management has made good progress which will allow the
external auditor to place greater reliance on certain IT controls
as part of the external audit in the future. The external auditor,
as promised during the recent audit tender, is increasing the
use of data and technology tools to support its audit;
• evaluating the effectiveness and independence of the

external auditor; and

• assessing developments in market reforms and practice,
including the proposed revisions to the UK Corporate
Governance Code and the publication of the FRC’s
minimum audit standard for FTSE 350 companies.

Focus areas for FY2024:

• continue to monitor the progress as appropriate in

formalising the risk and control environment of the second
line of defence function;

• monitor the planned investment and progress in renewing
key internal IT infrastructure systems, together with the associated
risks of commissioning new systems and change management;

• continued focus on IT general controls maturity;
• continue to monitor cyber awareness and our counter

fraud control environment maturity;

• track and implement as appropriate any statutory and
non-statutory aspects in respect of reforms in audit and
corporate governance. This will include any changes in
legislation, revisions to the UK Corporate Governance Code
(and associated guidance) and the FRC’s recently published
minimum standard for audit committees in respect of the
external auditor; and

• to consider emerging risks as appropriate in respect of

potential market disruptors and as the evolution of certain
technologies (for example AI) continue.

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. However, following a review
of the Committee’s workload and responsibilities in respect of
its focus on audit, risk management and effective controls, the
Committee agreed to increase the number of scheduled meetings
each year from four to five. This will serve the Committee well,
allowing more time to focus on its responsibilities.

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. Both continue to be effective and further information
on the reviews conducted is provided in the report below on
pages 103 and 105.

During the year Katy Mecklenburgh took over from Graham
Charlton as Chief Financial Officer. Our external auditor, the
management team and I have worked closely with Katy as part of
her comprehensive induction to ensure she has been quickly and
fully familiarised with relevant issues from the perspective of the
Audit Committee. Also during the year, EY successfully completed
the rotation of lead audit partner, the previous partner having
reached the five-year period which requires a mandatory rotation.

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 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 144 and indeed
the Softcat plc financial statements in general. Each year the
Committee’s programme of work covers a range of items that are
of particular significance to the Company’s financial statements
or where it is necessary to exercise a high degree of judgement.
Supported by management, the Committee reviewed the
significant accounting issues, judgements and areas of estimation
uncertainty relating to FY2023. Details of these and why they
were considered important are set out on page 99, while further
information on items that were identified as key audit matters is
located in the Independent Auditor’s Report from page 144.

I would like to conclude by thanking the management team at
Softcat and all Committee members for their valuable contributions
which support the work of the Committee. I’d also like to formally
welcome the newest member of the Committee, Mayank Prakash,
who joined the Board and the Committee subsequent to the year
end on 1 September 2023. I am certain that we will benefit
significantly from his substantial experience in technology and
digital information and transformation projects and I look forward
to working with him over the year ahead.

As in previous years, I shall engage with our largest shareholders,
asking if they would like to raise any matters with me in respect of
the work of the Committee and our key focus areas for the coming
financial year. If any shareholder would like to contact me in respect
of these matters, 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
23 October 2023

Annual Report and Accounts 2023 Softcat plc

Corporate governanceAUDIT COMMITTEE REPORT CONTINUED

Responsibilities
The Committee’s terms of reference are available at
www.softcat.com/about-us/investor-centre/governance 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:

additional resource has been added into the Finance team with
a focus on further strengthening fraud controls. The Committee
recognises this as an important area, given the evolving nature and
increasing sophistication of fraud and it will continue to be a key
responsibility of the Committee as part of the safeguarding of the
Company’s assets.

• 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. Following a review during FY2023,
the Committee concluded that no material changes to the terms
of reference were required. The terms of reference remain fully
compliant with the recommendations of the UK Corporate
Governance Code. During the year the Committee was apprised
of the expected statutory and non-statutory proposals for reform
of the audit market and corporate governance launched under
a consultation from BEIS. It is noted that the Government has
now withdrawn the proposed statutory reporting regulations in
respect of the reforms. A further review of the terms of reference
will be conducted to reflect the final outcomes and Company
implementation of any non-statutory elements of the reforms.

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
and a formal policy which supports compliance with the Bribery
Act 2010, the Criminal Finances Act 2017 and certain equivalent
legislation outside of the UK. Employees undertake regular training
to ensure compliance. Our anti-bribery and corruption procedures
and policy also includes a gifts and hospitality register. All gifts and
hospitality (either given or received) above applicable thresholds
must be approved by the employee’s line manager in line with
the policy and entered on the register. The Committee provides
oversight to ensure that management confirms appropriate policies
and procedures are in place.

During the year the Committee reviewed the Company’s
published tax strategy and also discussed with management
tax compliance and relationships with relevant tax
authorities. An updated tax strategy was approved by the
Committee and this 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 received an update from
management on fraud resilience in the business. The Committee
reviewed the current framework on fraud risk management,
proposed actions for FY2023 and details of attempted frauds.
Fraud awareness remains heightened across the Company with
Company-wide training and more targeted training rolled out for
certain roles. The Committee was informed during FY2023 that

Softcat plc Annual Report and Accounts 2023

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 2023. 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 has considerable sector experience, in accordance
with Code Provision 24. In August 2023, the Company announced
the appointment of two further independent Non-Executive Directors
who will serve on the Audit Committee. Mayank Prakash joined
on 1 September 2023 and he has significant experience in
technology and digital information. This will be a valuable addition
to the Committee’s skillset, particularly given a growing importance
of the Committee’s oversight of IT general controls. Jacqui Ferguson
joins on 1 January 2024 and she also has considerable sector
experience in accordance with Code Provision 24. Overall, these
appointments will further improve the Committee’s effectiveness.

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. All Directors participated in a formal training
session in March 2023 on internal controls and the ‘second line
of defence’. Biographies of the members of the Committee are
shown on pages 82 and 83. Changes to the membership of the
Committee during the year are shown on page 96. 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
Following a review of the Committee’s workload and
responsibilities in respect of its focus on audit, risk management
and effective controls, the Committee agreed to increase the
number of scheduled meetings each year from four to five.
The Committee met formally five times during FY2023 and each
meeting 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 Chairman, the Chief Executive (‘CEO’) and the
Chief Financial Officer (‘CFO’). 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 Company Secretary, the Group Financial Controller and the
Commercial Finance Director also attend Committee meetings.
Attendees were reviewed during the year and, recognising the
increased focus on maturing our controls and formalising our
second line of defence, the interim Head of Governance, Risk and
Controls was added as an attendee. Grant Thornton provides a
co-sourced internal audit service to Softcat and it attend at least
three of the five scheduled meetings.

The Committee sets time aside at the end of each meeting to seek
the views of the external auditor, in the absence of management.
Committee meetings have recently been further extended to allow
for a similar “in camera session” with management, in the absence
of the external auditor. This addition will assist the Committee in the
discharge of its increased duties under the minimum standard for
FTSE 350 audit committees published by the Financial Reporting
Council in respect of the assessment of the external auditor.

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.

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.

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 2023 Annual Report. There
were no 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 areas of focus
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. Management is required to present for discussion
with the Committee its approach and rationale on each significant
judgement and issue. Management’s presentation is an integral
part of the year-end process and management provides interim
updates during the year (particularly at the half-year stage) to ensure
the Committee is fully apprised of emerging new issues on a timely
basis and has the opportunity to ensure these are fully scrutinised.

The significant areas of focus considered, and the actions taken
by the Committee, in relation to the 2023 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
144 to 151.

Matter considered

Going concern
and viability

Action

In respect of the financial statements for the year ended 31 July 2023, management once again 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 FY2024 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 it supported the conclusions reached in respect of the Company’s
going concern and longer-term viability (see pages 140 and 141 and page 78 respectively).

Annual Report and Accounts 2023 Softcat plc

Corporate governance
AUDIT COMMITTEE REPORT CONTINUED

Significant judgements and issues continued

Matter considered

Action

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

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
noted improvements in the period-end process as a result of additional functionality in the new finance
ERP system.

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.

Misstatement of
rebate income

The Committee has taken steps to understand the nature and quantum of supplier rebates received by
the Company and to understand the steps taken by management to improve the modelling of accrued
rebate income.

The Committee also 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.

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. Management confirmed that it had followed the
guidance on the ‘control’ published last year by the IFRS Interpretations Committee (‘IC’), which is used
to determine whether companies should recognise revenue from the resale of standard software licences
on a net basis under IFRS 15 (please see note 1 to the financial statements for more information). 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. The Committee also noted
that management had utilised the new finance ERP system to improve the categorisation of transactions
which should be recognised on a net basis under IFRS 15.

EY has audited the disclosures of IFRS 15 and presented the results of its 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 guidance from the IC.

Expected credit losses

Against a backdrop of a tougher UK macro-economic environment the Committee also asked
management to include regular updates on working capital, cash conversion and the provision
for expected credit losses as an additional area of focus for FY 2023.

The Committee has taken steps to understand management’s assessment of potential changes in
exposure to bad debt compared to previous reporting periods. Management presented their analyses,
which included a more detailed assessment of the ageing of trade receivables and relevant external
data in respect of recent trends in corporate liquidations/administrations. Management noted to the
Committee that detailed reviews of outstanding balances had been undertaken to assess customer
ability to pay. Following management’s reviews they had concluded and presented to the Committee a
small decrease in the overall percentage of bad debt to be provided was warranted. The Committee
was satisfied with management’s thorough approach to assessing expected credit losses and endorsed
management’s assessment.

100

Softcat plc Annual Report and Accounts 2023

Other matters
The Committee also undertook a range of further activities in relation
to the Company’s accounting and external reporting, governance
and controls 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 provides 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 2023
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.

Going Concern and Viability Statements
The Committee has reviewed the Company’s ability to continue
to operate as a going concern for the thirteen-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 annual 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 78 and pages 140 and 141 of this Annual
Report. The Committee confirms that, following review, it has
recommended both statements for approval by the Board.

Governance and controls
During the year the Committee provided oversight on a number
of matters which have further improved governance and controls.
This included:

• reviews of new or updated policies, including a risk

management policy, a capital allocation framework and
a treasury policy;

• review of a project to mature the controls environment in

the business;

• preparatory work to comply with the expected changes

proposed under the BEIS audit and corporate governance
reforms; and

• a review of the minimum audit standard for FTSE 350

companies published by the FRC. The standard currently has
voluntary standing, pending enacting legislation; however, the
Committee reviewed the standard to consider areas of early
voluntary adoption, as recommended by the FRC.

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. EY was
first appointed as the Company’s auditor in July 2013 and was
reappointed following a competitive tender (in accordance with
the 2014 Competition and Markets Authority Order) for Softcat’s
2023 financial year audit. In accordance with the Auditing
Practices Board’s Ethical Standards, the term limit of an audit
engagement partner is five years. Marcus Butler has recently
completed his first year as EY’s lead audit engagement partner
for Softcat. Marcus is independent from Softcat, with no known
conflicts of interest.

Annual Report and Accounts 2023 Softcat plc

101

Corporate governanceAUDIT COMMITTEE REPORT CONTINUED

Auditor appointment
Following the competitive tender process concluded in May 2022 described above, EY was retained as auditor effective from
FY2023. 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 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 timing of the next tender for 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 2023, the Committee
recommended to the Board that EY be reappointed under
the current external audit contract and the Board endorsed
that recommendation. The Board has further proposed the
reappointment of EY at the Annual General Meeting to be
held in December 2023.

102

Softcat plc Annual Report and Accounts 2023

Audit risk
At the start of the audit cycle we received and discussed with
EY their detailed audit plan identifying the audit scope, planning
materiality and assessment of key audit risks. Planning materiality
thresholds are further updated by EY during the financial year
following a refreshed assessment of Softcat’s forecasted results,
thus ensuring that EY reviews all relevant transactions in excess
of the applicable threshold.

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 2023 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; and
• misstatement of rebate income.
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. No such
additional areas were considered necessary in respect of FY2023.

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 potential
changes in exposure to expected credit losses. 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 2023
and received all Committee reading papers and minutes. After
each Committee meeting, we allow time if needed to hold a
private meeting with the external auditor, which provides 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 2023 together with EY’s responses to that report.
The Committee welcomed the improvements in audit quality noted
in the AQI report and discussed with EY’s lead audit partner their
response to the FRC, which included plans to further enhance the
quality of their audits.

The Committee also noted a summary of the AQI reports issued in
respect of other audit firms, as part of the Committee’s watching
brief on the general quality of audit firms.

Following the conclusion of the 2023 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
and by Grant Thornton (as co-sourced internal auditor).

A separate meeting was held between the Chair of the Committee
with selected managers to gain feedback from those most closely
involved with EY in the year end accounts process and also those
who worked on a project during the year to improve the reliance
on IT general controls which was reviewed by EY. The overall
feedback was positive and it was noted that EY had engaged well
with the various Softcat teams and that we continued to benefit
from good continuity and experienced and knowledgeable
team members.

The results of the survey and the meeting with managers were
shared with the Committee and discussed. The Committee
had made positive comments about EY, in particular on their
understanding of the business and the risks it faces, the technical
expertise of the audit team, the clarity and detail in preparing their
audit plan (including the areas of audit focus) for the financial year.

As a result of the survey and meeting with managers, a
small number of areas were highlighted as opportunities for
improvements, such as considering the benefits of EY having a
wider interaction with key managers in the business. These areas
will be further discussed with EY for progression in FY2024.

Based on the above processes, the Committee concluded that
EY continued to perform its 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.

Annual Report and Accounts 2023 Softcat plc

103

Corporate governanceAUDIT COMMITTEE REPORT CONTINUED

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
both 2022 and 2023 after review 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 2023 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
and higher costs incurred by EY to perform their work. 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 £733,000 for statutory audit services in respect of the
Company’s annual financial statements.

The Committee also agreed a fee of £42,000 in respect of EY’s review
of the 2023 half-year results, which is classified as a non-audit fee.
Further details of the fees paid, for audit and non-audit services, to
EY for the 2022 and 2023 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 2021, 2022 and 2023
financial years and is 5.9%, which is considerably below the cap.

Taking the above into consideration, the Committee has concluded
that EY remains independent and objective and that appropriate
safeguards and controls are in place to assess ongoing
independence and objectivity.

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

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Softcat plc Annual Report and Accounts 2023

received regular reports from management and the newly formed
Governance Risk and Compliance team (‘GRC’) (which now
incorporates the internal audit function) covering the major risks
and/or events faced by the business. As Softcat continues to grow,
the Committee recognises the importance of increasing its focus on
maturing our controls and formalising our ‘second line of defence’.
The Committee is monitoring a project lead by the interim Head of
Governance, Risk and Controls to mature the controls environment
and will continue to exercise oversight as this becomes embedded
into the business in FY2024.

The Committee continued to monitor the proposals arising from 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. Provisional
plans to accommodate the proposed changes have been
prepared by management and summarised to the Committee.
Management and the Committee will review their plans in light
of the announcement by the Government in October 2023 to
withdraw the new statutory reporting regulations in respect of
the reforms.

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 72 to 77.

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. As noted above, the Committee has monitored
management’s plans and the progress being made to further
strengthen the control environment.

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 FY2023. Management had over the year increased the
documentation of certain key controls and business processes,
including certain 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

A number of internal audit reviews are planned for FY2024,
including reviews on the following areas:

• Processes and controls for employee joiners, leavers and

role changes: the audit will review the IT general controls in
place in the business when employees join, leave or change
roles in Softcat. This is important to the control environment to
ensure our systems are secure, are accessed by authorised
employees only and that we have appropriate controls, such
as segregation of duties, in place.

• Accounts receivable: ongoing assurance that our accounts
receivable processes and controls are robust and reliable is
an important part of the integrity of our financial reporting. The
audit will review the key controls over the accounts receivable
process to assess its design and operating effectiveness.

Effectiveness of the internal audit process
Both Grant Thornton and the GRC team have 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 2023 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) and the Committee. The results of the questionnaires
were collated, reported to and discussed by the Committee.
As in previous years, the overall feedback was positive, concluding
that Grant Thornton’s work continues to support a strong control
environment in the business. The Committee commended
matters such as the preparation of internal audit plans which
reflect changes in the risk landscape of the business. Minor
recommendations arose from the evaluation, including potential
refinements to audit scoping and timing and the recommendations
will be further discussed with Grant Thornton. Following the
evaluation, the Committee concluded that Grant Thornton
continues to perform well and remain effective.

Robyn Perriss
Chair of the Audit Committee
23 October 2023

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 2023 financial year, the Company’s internal audit
function evolved as part of the process to formalise controls and
our ‘second line of defence’. We continue to utilise Grant Thornton
LLP (‘Grant Thornton’) as a co-source partner to provide external
subject matter expertise as needed, effectively operating as a
“third line of defence”. During the year, we have developed
a Governance, Risk and Control (‘GRC’) function, which
incorporates our existing in-house internal audit resource plus other
risk and control roles needed to support a formal ‘second line’
control function. The aim of GRC (including internal audit) includes
providing independent and objective assurance on the adequacy
and effectiveness of internal controls, risk management and
governance processes.

Monitoring and review of the scope, extent and effectiveness of
the activity of the Company’s GRC team and Grant Thornton is
regularly considered by the Committee. Management discusses
with Grant Thornton the selection of appropriate areas and
controls within the business for internal audit. This is then jointly
presented by Grant Thornton and management as a proposed
annual internal audit plan prior to the start of each financial
year. The internal audit plan is then reviewed and approved
by the Committee. The Committee 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 then receives regular progress updates from the
GRC team on previously undertaken audits in order to ensure
that outstanding actions have been completed or closed,
or where there is a delay in closing an action, that revised
completion dates have been set.

The internal audit plan for 2023 covered a broad range of core
financial and operational processes and controls, focusing on
specific risk areas. Reviews were undertaken in the following areas:

• cloud adoption and governance by Softcat in relation to
internal operations in support of the Company’s journey
in adopting a Cloud first approach;

• IT third party risk management review; and
• business continuity management and IT disaster recovery.

Approach to developing the 2024 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 2024.
The plan was formulated considering an ‘audit universe’ which had
been developed in prior years, with consideration of the important
risks facing Softcat together with known “hot topics”.

Annual Report and Accounts 2023 Softcat plc

105

Corporate governanceNOMINATION COMMITTEE REPORT

EFFECTIVENESS

Members

L Weedall (Chair)
G Watt1
R Perriss
V Murria
M Prakash2

Attendance of the Nomination Committee
Name

Committee attendance 2023

K Slatford3
M Hellawell1
R Perriss
L Weedall
V Murria

Total meetings held

Attended

Did not attend

n/a

1. Graeme Watt succeeded Martin Hellawell as Non-Executive Chairman on
1 August 2023 at which time Graeme became a member of the Committee.
Martin retired from the Board on 1 August 2023.
2. Mayank Prakash joined the Board in September 2023.
3. Karen retired from the Board in January 2023. She attended all meetings

of the Committee prior to her retirement.

Allocation of time

Board composition: 40%

Succession planning: 30%

Employee, culture, diversity
and inclusion: 25%

Corporate governance: 5%

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Softcat plc Annual Report and Accounts 2023

…the Board succession changes
and appointments…ensured smooth
and seamless succession and have
provided a firm foundation for the
effective running of the Board over
the next few years...

Lynne Weedall
Chair of the Nomination Committee

Committee Chair’s introduction
I am pleased to present this year’s report as Chair of the
Nomination Committee (the ‘Committee’). I would like to thank
Karen Slatford who was the Committee Chair until she retired from
the Board in January 2023. This has been a busy and important
year for the Committee, for which Karen provided oversight and
guidance from the start. I am pleased to conclude on a process on
which Karen so diligently commenced.

As explained further below, the Board succession changes and
appointments which took place this year and our announcement of
the appointment of Jacqui Ferguson as a Non-Executive Director
in 2024 reflect the Committee’s approach to long-term succession
planning. These changes ensured smooth and seamless succession
and have provided a firm foundation for the effective running of the
Board over the next few years. I would also like to thank the other
members of the Committee and the other Board Directors for their
additional time, commitment, support and contribution during such
a busy year.

In addition to oversight of 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, equality
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 has been made to improve diversity since the last Annual
Report. As explained previously, this is a longer-term endeavour.
More details on the above are in the report which follows and in
the Social Value section of this Annual Report.

Key activities during the year:

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

October 2022
• Progress update on search for CFO
• Update on diversity, equality and inclusion
• Discussion on Board succession planning, including

the transition plan for the incoming Chairman

• Recommendation to reappoint Directors at

the 2022 AGM

• Approval of the 2022 Nomination Committee Report

December 2022
• Review of the results of the annual employee satisfaction

survey and planned actions
• Discussion on employee culture
• Written resolution recommending the CFO appointment
• Discussion on senior management succession planning

May 2023
• Update on diversity, equality and inclusion
• Progress update on search for Non-Executive

Director appointments

• Discussion on Board succession planning, including

the transition plan for the incoming CEO

July 2023
• Further progress update on search for Non-Executive

Director appointments

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

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).

Membership, meetings and operation
of the Committee
The members of the Committee are set out on page 106 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 82 and 83.
The Chief Executive, Chief Financial Officer, Chief People Officer
and Head of Engagement, Diversity and Inclusion are invited to
attend meetings where appropriate. The Committee met four times
during the year and also passed a resolution in writing without a
meeting. Committee 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, equality 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 and that there is Board
level oversight to ensure we retain an inclusive environment for
all employees.

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 2022 AGM. The Board endorsed all the appointment and
reappointment recommendations of the Committee.

Board appointments
I am pleased with the progress made this year on the Board’s
composition and on its succession planning, as evidenced by
the orderly succession and transition process for the Board
appointments this year.

Following our announcement that Graham Charlton would
become CEO from 1 August 2023, we also announced a search
for a CFO to succeed Graham. The Committee approved a role
description and hired the executive search firm, Russell Reynolds
Associates (‘RRA’) to identify and assess suitable candidates.

Annual Report and Accounts 2023 Softcat plc

107

Corporate governanceNOMINATION COMMITTEE REPORT CONTINUED

Board appointments continued
The search and assessment considered external as well as internal
candidates. RRA also conducted a search for a Non-Executive
Director in 2022 and also undertook in 2022 the external
evaluation of the Board’s effectiveness. 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
demonstrate good practice in searching for a diverse range
of candidates. RRA subscribes to both the Standard and the
Enhanced Voluntary Code of Conduct for Executive Search Firms.
By using firms which demonstrate good practice, the Committee
can maximise the ability to consider a diverse range of suitable
candidates. After a robust and thorough search process we were
delighted to announce in December 2022 the appointment
of Katy Mecklenburgh as CFO and she joined the Board in
June 2023.

We have also previously mentioned, the Board keeps under
consideration the potential benefits of adding one or more
further Non-Executive Directors, if that person would add further
significant value to the Board’s effectiveness, skillset and expertise
and be a good cultural fit. The Committee further deliberated on
this earlier in the year and concluded that the time was right to
search for two new Non-Executive Directors; this also took into
account the retirement of Karen Slatford from the Board in January
2023 and the recommendations of the UK Corporate Governance
Code in respect of the nine year tenure for non-executive directors.
The Committee considered the composition, workload, expertise
and skills of the Board, the Board’s strategic priorities and the
attributes best required to complement the Board as well of
course as diversity. The Committee arranged for two detailed
role descriptions to be prepared and worked with an external
executive search firm, The Up Group, to identify suitable
candidates. The Up Group has no other business relationship
with the Company. The Up Group followed good practice on
searching for diverse candidates.

The Up Group researched and identified potential candidates for
the roles and following initial interviews a shortlist for each role was
presented and discussed with the Committee. Further interviews
were held with final candidates. At the conclusion of the process,
it was agreed that Mayank Prakash and Jacqui Ferguson were
our preferred candidates for each respective role, for a variety of
reasons, including significant senior level experience and excellent
track records in their areas of expertise. Mayank joined the Board
on 1 September 2023 and is a member of the Committee. Jacqui
will join on 1 January 2024 and will also be a Committee member.

Softcat had already announced last year that Graeme Watt
(former CEO) would succeed Martin Hellawell as Non-Executive
Chairman from 1 August 2023. The Committee continues to
acknowledge 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. The Board remains unanimous
that Graeme’s deep knowledge of the business, Softcat’s culture
and its markets makes him the ideal appointee to support the
interests of all of Softcat’s stakeholders. Through our ongoing
governance engagements with major shareholders, broad support

was expressed for the appointment. More information about
the Board’s compliance with the UK Corporate Governance
Code can be found on page 80. Graeme was first appointed
to the Softcat Board as CEO in April 2018 and the Committee
acknowledges the recommendation of Code Provision 19 that a
chair should not remain in post beyond nine years from the date
of their first appointment to the board.

The Board, particularly after taking into account the appointment
of the new Directors and new roles of existing Directors, has a
stronger and more diverse range of skills, experience, mix of
tenure, views and backgrounds. It also provides for the retention
of corporate memory, whilst facilitating an infusion of new thinking.
I believe that the composition will work well and provides the
right mix of challenge and support to the business. I am delighted
that the Committee has successfully concluded on such important
processes and I welcome the contribution that Graeme, Mayank
and Jacqui will make to the Committee.

The Company Secretary is responsible, with oversight from
the Company Chairman, for providing an effective induction
programme for new Directors. An extensive, full and tailored
induction programme was prepared for each of the new Directors,
which included meeting members of the Senior Leadership Team,
other senior managers in the business and some of the Company’s
external advisers. The CFO has undertaken further familiarisation
activities, such as visiting many of Softcat’s offices in the first few
months of her role.

Succession planning
As already mentioned, succession planning is an important part
of the Committee’s responsibilities. In order to support Graeme’s
role change to Chairman and Graham’s role change to CEO,
each prepared a transition plan, which included actions to fully
familiarise themselves with aspects of their new role and particular
areas of focus on which to continue building after each had
assumed their new role. The Committee considers that these
transition plans are an integral part of the succession planning
process. Both transition plans were presented to the Committee
shortly after they were prepared and there was a follow-up
discussion later in the year which provided the Committee with
comfort that good progress had been made ahead of the date
their roles would change and. We will continue to discuss and
review progress as part of our normal review processes.

More generally, the Committee keeps a watching brief on the
likely retirement dates of Board members, particularly in respect
of the tenure provisions in the UK Corporate Governance Code.
This is conducted as part of the Committee’s longer-term succession
planning and plans for Board composition refreshment.

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
(which includes the Executive Directors) and these were discussed
either with the Committee or with the Board. We retain a strong
talent pipeline and our annual review also places increasing
emphasis on opportunities to develop a more diverse pipeline
in leadership roles.

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Softcat plc Annual Report and Accounts 2023

Board member review process
The Company Chairman 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 internal (i.e. self-assessed) Board effectiveness review which resulted in overall a positive assessment of the Board’s
performance but equally some valuable small pointers on how to make further improvements. More information on this year’s effectiveness
review can be found in the Governance Report on pages 88 to 89.

I am also the interim Senior Independent Director, and in this capacity 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 the performance and remain fully supportive.

The Chairman has also implemented a short review process at the end of each board meeting to ensure agile continuous improvement.

As a result of the above points and following further consideration by the Committee, we have recommended to the Board that each
serving Director be proposed for reappointment at the AGM to be held in December 2023.

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 appointments of Mayank Prakash and
Jacqui Ferguson as Non-Executive Directors will make this stronger.

The most recent report from the FTSE Women Leaders (which succeeded the Hampton-Alexander Review) provides 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.

Achieved. Katy Mecklenburgh was appointed CFO in June 2023.
The role of Senior Independent Director is currently held by
a woman.

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

Softcat is included in the latest annual report of FTSE Women
Leaders, which for Softcat reported women comprising 32.6%
of leadership roles (as defined). This was an improvement on the
prior year of 29.3% and we will continue our efforts to improve
diversity in leadership roles.

I am pleased that Softcat already meets two of the above three targets and that we are making progress on the target on leadership
teams for FTSE 350 companies to be achieved for 2025. As already noted, we recognise that we must maintain momentum in respect
of greater diversity of our leadership team and this is regularly discussed between management and the Committee. The Board currently
meets the recommendation set by the Parker Review that boards should have at least one person of colour.

Whilst we have 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 2023 Softcat plc

109

Corporate governanceNOMINATION COMMITTEE REPORT CONTINUED

Diversity disclosures pursuant to Listing Rule 9.8.6R
In April 2022, the UK Financial Conduct Authority (‘FCA’) published 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) were amended to require disclosure of the prescribed information.

The Listing Rules require listed companies to state whether they have met certain targets on board diversity. The information in the table
below is at 31 July 2023, 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

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

—

43%

57%

—

Number of
Board members

Percentage of
the Board

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

—

69%

31%

—

Number in
Executive
management

Percentage of
Executive
management

—

86%

—

14%

—

92%

—

Note:
1. The Listing Rules require disclosure at the applicable reference date, which as noted above was 31 July 2023. The composition of the Board has subsequently changed between

31 July and 23 October 2023, being the date at which this report is approved:
• Graeme Watt (former CEO) succeeded Martin Hellawell as Non-Executive Chairman on 1 August 2023. Martin retired from the Board on 1 August 2023;
• Graham Charlton (CFO until 19 June 2023 and CEO Designate between 19 June and 31 July 2023) succeeded Graeme Watt as CEO on 1 August 2023;
• Mayank Prakash joined the Board as an independent Non-Executive Director on 1 September 2023.
The composition of the Board as at 23 October 2023 still meets the above requirements set out in the Listing Rules in respect of the number of senior Board positions held by women,
the percentage of women on the Board and at least one Director being from a minority ethnic background.

2. ‘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 and the changes explained in note 1 above in respect of the roles for Graeme Watt and Graham Charlton also applied to changes
in Executive management after 31 July 2023.

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Softcat plc Annual Report and Accounts 2023

The Human Resources team had previously conducted a voluntary
survey to all existing employees asking them to confirm how
they should be identified for gender and for ethnic background.
New employees are requested to make such a confirmation.
This survey/information request includes Executive management
(as defined) and has also been extended to the Board, including
the Non-Executive Directors. Responses were received from each
member of the Board and Executive management which confirmed
how they should be identified. The above data has been collated
from those survey records.

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 Chairman, are currently
considered independent.

All Non-Executive Directors also affirm as part of the annual
conflicts questionnaire that they continue to be able to devote
sufficient time to discharge their duties in respect of their Board
appointment at Softcat.

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, equality 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. More information about diversity, equality and
inclusion in the business can be found in the Report on Social Value
in this Annual Report on pages 44 to 49.

Assessment of the independence and conflicts
of the Non-Executive Directors
The Committee and the Board are satisfied that the external
commitments of the Company Chairman 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.

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 2023 AGM.

The formal responsibilities of the Committee are set out in the terms
of reference. During the year, the Committee reviewed the terms
of reference and concluded that no further amendments were
required. The Committee’s terms of reference are available at
www.softcat.com/about-us/investor-centre/governance.

Shareholder engagement
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.

Lynne Weedall
Chair of the Nomination Committee
23 October 2023

Annual Report and Accounts 2023 Softcat plc

111

Corporate governanceSUSTAINABILITY COMMITTEE REPORT

CORPORATE RESPONSIBILITY

The Committee serves a vital function,
requiring specific dedication of time and
effort at a Board level, and demonstrates
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 report for the year ended
31 July 2023. This report outlines the key responsibilities of the
Committee delegated to it by the Board, the work it has done over
the 2023 financial year and the focus of the Committee going
forward. The Committee is the newest Committee of the Board,
having been established in March 2022, with responsibility for
the monitoring and oversight of sustainability matters at Softcat.
The Committee held its first full cycle of meetings during the 2023
financial year, having met twice (September 2022 and March 2023).
The Committee serves a vital function, requiring specific dedication
of time and effort at a Board level, and demonstrates the Board’s
commitment to sustainability.

Membership, Committee Chair and operation
of the Committee
The Committee is made up of all of the Directors at Softcat. I am the
Chair of the Committee and as such take primary responsibility to
ensure the Committee is managed effectively. We have embedded
a sustainability governance structure into the business so that
we have leadership and expertise in the right place and at the
right levels within the organisation. The CFO retains the Executive
lead at Softcat for sustainability. We have a dedicated internal
resource for sustainability at Softcat, including our Sustainability
Lead. The Business Transformation Director, who is a member of the
Senior Leadership Team, has day-to-day senior management of
sustainability in his brief. Both the Sustainability Lead and the Business
Transformation Director attend the meetings of the Committee so that
the Committee is kept fully apprised and can discuss matters with
those most responsible for sustainability in the business.

As the importance of sustainability continues to increase and given the
Committee was only established last year, management will review
with the Committee in FY2024 whether the meeting frequency is
optimal to ensure sufficient oversight is maintained by the Committee.
Meetings are currently scheduled to take place on the same day as
the Board meeting to maximise the efficiency of interaction and time
of 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.

Members

V Murria (Chair) M Prakash1
L Weedall
R Perriss
G Watt
G Charlton
K Mecklenburgh1

Attendance of the Sustainability Committee
Name

Committee attendance 2023

V Murria
M Hellawell2
G Watt
G Charlton
K Slatford3
R Perriss
L Weedall
K Mecklenburgh

Total meetings held

Attended

Did not attend

n/a

1. Katy Mecklenburgh joined the Board in June 2023, after the meetings of the

Sustainability Committee had been held during the financial year. Mayank Prakash
joined the Board in September 2023, after the end of the financial year.

2. Martin Hellawell retired from the Board on 31 July 2023.
3. Karen Slatford retired from the Board in January 2023. She attended all meetings

of the Committee until the time of her retirement.

Allocation of time

Climate-related strategy and
initiatives: 40%

Climate-related disclosures: 20%

Climate-related governance,
compliance and regulation: 20%

Monitoring climate-related
performance against strategy: 20%

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Softcat plc Annual Report and Accounts 2023

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,

if 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.

Some 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 and actions taken during 2023:

• The Committee discussed its climate strategic target of a net
zero supply chain by 2040, recognising we require ongoing
momentum from our vendors and suppliers to help us achieve
this target. The Committee requested a direct engagement
with a vendor so it could discuss first-hand the issues and
challenges on achieving this goal. On behalf of the Committee,
the Board held a direct stakeholder engagement with one
of Softcat’s top ten vendors (by revenue). The discussion
focused on building a better understanding of the vendor’s
sustainability journey and how Softcat can be part of that
journey. The discussion also focused on working with others
in the supply chain to improve the approach and customer
offerings on sustainability. The output of the engagement
session was important in respect of the next steps to be
taken to achieve the 2040 target.

• Committee meetings have included a focus on how

sustainability is becoming embedded into several facets
of Softcat’s overall strategy. To ensure this receives

ongoing deliberation by the Board, the Board considered
sustainability and climate-related matters as part of their
annual Company strategy review meeting in February 2023.
This integrated sustainability into the Board’s decision-
making, resulting in a more joined-up approach to the
resilience of Softcat’s strategy to climate change and further
opportunities which can be explored on sustainable growth.
• During the year the Committee also considered other plans by
management to take advantage of climate-related opportunities
and integrate these into Softcat’s strategy, such as through
Softcat’s Enexo platform (see page 69 for more details).
• The Committee monitored and discussed with management
on the Company’s progress against its climate-related
targets and goals, and the appropriateness of these.
• The Committee provided oversight of management’s

progression on compliance with the Task Force on Climate-
related Financial Disclosures (‘TCFD’). Progress made during
the year is explained in further detail on pages 52 and 53.

• The Committee also received regular updates on future

compliance regulations, obligations and best practice trends
and reviewed management’s plans to ensure compliance.

Areas of focus in 2024

We expect that the main focus of the Committee will remain
on climate change and sustainability-related matters in 2024.
However, this will be kept under review and will be amended or
expanded, where necessary, to include other areas of corporate
responsibility to ensure the Committee retains adequate oversight
of matters which are most important to Softcat and its stakeholders.
I anticipate in 2024 the Committee will focus on:

• ongoing 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;

• further compliance with TCFD; and
• preparing and implementing, as appropriate, changes
in disclosure standards, regulation and good practice
on sustainability.

Shareholder engagement
For further details on Softcat’s approach to sustainability, please see pages 50 to 71 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
23 October 2023

Annual Report and Accounts 2023 Softcat plc

113

Corporate governanceCorporate governance

REMUNERATION COMMITTEE REPORT

LETTER FROM THE CHAIR OF THE
REMUNERATION COMMITTEE

Our Policy was approved by
shareholders at last year’s AGM
with a vote of 98.5%, for which
I am grateful. I would like to thank
our shareholders for their
continuing support.

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’).

Business performance
The Executive Directors, supported by their management teams
continue to focus on the areas needed to drive success at
Softcat. The Company continued to perform well during the year,
with growth in both gross profit and operating profit. This was
particularly welcome given the wider economic headwinds
challenging many businesses over the financial year and
beyond. Our operational performance was also excellent and
we continued to invest for future growth, including our largest
ever increase in employees to help drive our strategy. Our
performance, progress and key areas of focus during the year is
explained in more detail in the Strategic Report but I would like to
pick out some key achievements which demonstrate how well the
business has performed and our ongoing investment in employees
so we can add value to our stakeholders over the long term:

c 400

• Gross profit growth:
14.2%
• Operating profit growth: 3.5%
• Employee engagement: 92%
97%
• Customer satisfaction:
• Headcount growth:
Our purpose is clear, “to help customers use technology to
succeed, by putting our employees first”. Therefore, it was pleasing
to see us improve on our industry leading position on both these
two metrics and that this continues to lead to profit growth. This is a
testament to each employee and the leadership which is ultimately
the responsibility of the Executive Directors. Further details on our
key performance indicators (‘KPIs’) and the importance of each
KPI can be found on pages 32 and 33.

The Committee agreed to introduce from FY2023 a sustainability
metric as part of the Executive Director’s annual bonus plan.
This reflects the Board’s view on the importance of having a clear

Members

L Weedall (Chair)
R Perriss
V Murria
M Prakash

Attendance of the Remuneration Committee
Name

Committee attendance 2023

L Weedall
K Slatford1
V Murria
R Perriss

Total meetings held

Attended

Did not attend

n/a

Mayank Prakash joined the Board in September 2023, after the financial year end.
1. Karen Slatford retired from the Board in January 2023. She attended
all meetings of the Remuneration Committee prior to her retirement.

Allocation of time

Executive remuneration: 45%

Workforce remuneration and
conditions: 25%

Remuneration market practice
and developments: 15%

Corporate governance: 15%

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Softcat plc Annual Report and Accounts 2023

plan to improve environmental performance. The Board has been
impressed by the progress being made by management to make
the business more sustainable. This includes extensive efforts to work
more closely with Softcat’s supply chain.

Remuneration Policy (the ‘Policy’)
Our Policy was approved by shareholders at last year’s AGM
with a vote of 98.5%, for which I am grateful. I would like to thank
our shareholders for their continued support. The Committee has
reviewed the Policy and has concluded that it is still fit for purpose.
In particular the Policy:

• already incorporates and is aligned to the provisions set out

in the current version of the UK Corporate Governance Code
as well as best practice;

• provides sufficient flexibility to effectively attract, retain and
motivate executive talent and for the Committee to make
changes, if appropriate, in executive remuneration;

• supports the ongoing growth of the Company, particularly as
Softcat continues to mature from when it listed on the London
Stock Exchange in 2015; and

• remains well aligned with Company strategy and to the

expectations of most investors.

Remuneration outcomes during the year
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 once again

delivered growth in gross profit and operating profit;

• business performance was robust despite the ongoing wider

economic challenges;

• operational metrics, such as cash generation, continued

to improve;

• our customer base continued to grow; and
• the business had successfully executed on its strategy to invest

in headcount to deliver growth over the longer term.

The Board/relevant Board Committee also regularly reviewed
key areas of employee/customer engagement and progress
on sustainability, including:

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

The strong financial performance, maintenance of excellent
relations with employees and customers are reflected in a strong
achievement of many of the Company’s KPIs (outlined on pages
32 and 33) and resulted in the following for the annual bonus plan
for FY2023:

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

the annual bonus for FY2023. Operating profit achieved
exceeded threshold but was below the maximum target set by
the Committee, leading to 78% of the maximum annual bonus
being earned by the Executive Directors; and

• non-financial metrics account for 20% of the annual bonus
for FY2023 and was in respect of customer and employee
satisfaction and progress against sustainability actions. 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 100% 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 December 2019 to Graham
Charlton and to Graeme Watt vested. An independent vesting
report was prepared by the Committees external remuneration
advisers and the Committee assessed the vesting outcomes for
the LTIPs. The Committee concluded that:

• the maximum goal had been achieved in respect of the

earnings per share (‘EPS’) element of the award;

• the metric in respect of the total shareholder return (‘TSR’)
element of the award was just below maximum (maximum
being the upper quartile of the comparator group).

Accordingly, 96.7% of the total 2019 LTIP award vested.

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;

• the overall investor experience, which the Committee believes
in particular over a number of years represents exceptional
performance by management; and

• any potential benefit from windfall gains experienced over the

• a quarterly survey from managers in respect of each member

three year vesting period.

of the Senior Leadership Team and the key operational functions
in the business;

• workforce engagement sessions;
• actions being taken to increase compliance against the Task
Force on Climate-related Financial Disclosures (‘TCFD’); and
• steps being taken over the short and longer term to reduce

Softcat’s carbon footprint.

In respect of LTIPs, the Committee will approve a grant in respect
of FY2024 to the Executive Directors (see page 128). In line with
our Remuneration Policy and recent practice, the LTIP award will
be 150% of salary. The Committee considered the Company’s
share price, which has increased during the financial year, and
concluded that it would not be appropriate given this to reduce
the usual award of 150% of salary. However, the Committee will
review at vest whether there have been any windfall gains.

Annual Report and Accounts 2023 Softcat plc

115

Corporate governanceREMUNERATION COMMITTEE REPORT CONTINUED
LETTER FROM THE CHAIR OF THE REMUNERATION COMMITTEE CONTINUED

Remuneration outcomes during the year continued

Main activities during FY2023

October 2022
• Review of Remuneration Policy for proposal to shareholders
• Review and approval of the 2022 Remuneration Report
• Consideration and approval of grants of LTIPs to Executive
Directors for FY2023 and other share-based awards to
senior managers below Board level

• Review and determination of vesting outcomes for LTIPs

granted in 2019

• 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 FY2022

• Consideration of the annual bonus arrangements for the

Executive Directors and SLT members for FY2023

• Review of achievement against share ownership targets

for the Executive Directors

November 2022
• Written resolution of the Committee to approve the

remuneration package of the incoming CFO

May 2023
• Update on workforce pay and conditions and discussion

of Company-wide pay review

• Review of fees for Non-Executive Directors and the Chair
• Interim update report on performance of annual bonus plan

and outstanding LTIPs

• Review of employee share ownership

The LTIPs granted in 2020 are due to vest in late 2023 and the
performance conditions were set and announced at the time
of grant. Based on our reported performance, the maximum
EPS target has been exceeded and therefore this element will
likely vest in full. Based on our current performance I would
also expect the TSR element to perform well, however, it will be
necessary to perform a final calculation at vesting of Softcat’s
performance against the comparator group. 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.

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Softcat plc Annual Report and Accounts 2023

July 2023
• Update on workforce remuneration, including salary

reviews and bonuses below Board level

• Review of proposed approach to target setting for FY2024

annual bonus and LTIP awards

• Consideration of key messages and themes for the 2023

Annual Report on Directors’ Remuneration

• Review of remuneration trends and remuneration-related
corporate governance developments for listed companies
• Review of workforce engagement session on remuneration

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/Remuneration Policy

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.

Changes in executive remuneration for FY2024
The Committee reviewed remuneration for executives and the
Chairman and agreed the principles and implementation of the
changes below, all of which are within our Remuneration Policy.
Further details are provided in the Annual Report on Remuneration.

In July 2022, Softcat announced changes to the Board which took
place between June and August 2023. These included:

• the retirement of Graeme Watt as CEO, at which time he
succeeded Martin Hellawell as Non-Executive Chairman;
• the promotion of Graham Charlton from CEO to CFO; and
• the launch of a search for a new CFO to succeed Graham.
In respect of the appointment of the Company’s Chairman, the
Committee conducted a market review which concluded that the
prior Chair’s fee was materially below the median for the FTSE 250,
despite Softcat being one of the largest companies within the
FTSE 250. Taking into account the ongoing growth of Softcat and
the critical role the Chairman will play following extensive changes
on the Board, the Committee concluded that it was appropriate
to increase the Chairman’s fee and this was set at £232,000 with
effect from 1 August 2023. This fee remains slightly below the
median of the FTSE 250.

The Remuneration Committee had previously confirmed that
Graeme shall be treated as a good leaver and further details
on the specific treatment of his remuneration in respect of his
retirement as CEO are contained on page 129 of the Annual
Report on Remuneration.

What we have done during the year
The calendar activities (see page 116) summarise the areas of
focus and actions for the Committee during the 2023 financial
year, all of which were within the framework of the Policy
approved by shareholders last year.

Looking forward and conclusion
Earlier in the year, the Financial Reporting Council (‘FRC’) launched
a consultation on proposed changes to the UK Corporate
Governance Code (the ‘Code’). The Committee has reviewed the
remuneration aspects of the proposed changes and, as currently
drafted, it does not envisage that material changes will be required
to our current remuneration practices or disclosures. The Committee
will keep the matter under review.

The Committee has been focused on ensuring that our remuneration
arrangements remain fit for the future and aimed at ensuring
alignment of both shareholders and our management team as they
strive to drive Softcat forward. I would like to thank the members of
the Committee for their support and contributions this year.

The Annual Report on Remuneration (pages 114 to 134) including
this letter will be subject to an advisory shareholder vote at the
forthcoming AGM on 13 December 2023. I trust that we will have
your support on the resolution at our AGM. If shareholders do
wish to discuss any issues in this report, I can be contacted via the
Company Secretary at cosec@softcat.com.

Lynne Weedall
Chair of the Remuneration Committee
23 October 2023

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 two sections:
• the Annual Statement by the Remuneration Committee Chair; and

• the Annual Report on Remuneration, incorporating:

– an ‘at a glance’ section summarising our Remuneration Policy; and

– details of payments made to the Directors and details of the link between
Company performance and remuneration for the 2023 financial year.

The Chair’s Annual Statement and the Annual Report on Remuneration will be subject
to an advisory vote at the AGM to be held on 13 December 2023.

The Committee concluded during the year that given Graham’s
calibre and experience of the business, his starting salary as CEO
should match that of the outgoing CEO and he would also be
eligible to receive a pay increase in respect of FY2024.

Softcat announced earlier in the year that Katy Mecklenburgh
would be appointed CFO and she joined the Board in June 2023.
The Committee determined a starting base pay for Katy of
£370,000, which was broadly similar to that of the outgoing
CFO. The Committee further determined that there would be no
further pay rise in FY2024. Katy will be eligible to receive a pay
rise in FY2025.

The Committee received updates on proposals to award rises in
basic pay across the workforce, particularly on plans to remain
competitive on pay for certain roles. The Committee also discussed
with its remuneration adviser external pay trends for executives
and in the general external workforce. Given the focus recently
for the business to target pay rises on employees where most
needed, particularly against the background of ongoing external
inflationary pressures and the cost of living pressures many are
experiencing, the Committee has once again shown restraint
in considering the pay rises for eligible Executive Directors. The
CEO’s pay rise for FY2024 will be 3%, which was well below the
rate of inflation at the time it was awarded and below the overall
pay rise across the workforce of 4% for FY2024. As noted above,
Katy will not be eligible to receive a pay rise until FY2025.

The Committee considers the steps it has taken in respect of pay
changes in FY2024 effectively balance the need to attract, retain
and motivate talent, whilst reflecting on the size and scale of the
business and demonstrating proportionality and restraint.

Wider workforce context
During the year the Committee continued to increase its awareness
of pay across the business. This was pertinent given some of the
largest pay increases ever awarded which were made in the
prior year to many in the general population of employees, the
largest ever increase in headcount in a year and the external
pressures caused by the high inflationary environment. As already
noted, the Committee received updates on both internal and
external pay trends, all of which helped to inform the Committee’s
decision-making, ensuring the pay changes it approved reflected
both the Company’s specific situation, wider pay trends and also
the factors some of our largest shareholders expect remuneration
committees to take into account.

Management continues to recognise and reward our employees
through fair remuneration. The Committee was pleased in particular
with the actions taken by management this year to target pay rises
within the business to remain competitive for certain critical roles.

I once again took the opportunity to engage directly with
employees over a number of matters, including on our approach
to executive remuneration and on the Company’s overall pay
philosophy. Please see page 119 for more details.

Annual Report and Accounts 2023 Softcat plc

117

Corporate governanceREMUNERATION COMMITTEE REPORT CONTINUED

PART A – AT A GLANCE

Introduction
In this section, we set out a summary of our Remuneration Policy, its link to corporate strategic objectives and the
performance and remuneration outcomes for the 2023 financial year.

Our Remuneration Policy and its link to our Company strategy
The Company’s strategy is laid out on pages 6 and 28.

Ensuring the alignment of the Remuneration Policy to the Company strategy was key for the Remuneration Committee in developing
the Policy below in conjunction with our core principles of remuneration.

The key elements of the Company’s strategy and how its successful implementation is linked to the Company’s Remuneration Policy are
set out in the following table.

Strategic priorities

Remuneration Policy (from the
date of shareholder approval)

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

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 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.

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.

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).

Annual bonus
The maximum bonus (including any part
of the bonus deferred) under the Annual
Bonus Plan (‘ABP’) will not exceed 200%
of a participant’s annual base salary.

For 2024:

• the maximum bonus opportunity
is 150% for the CEO and CFO
respectively; and

• the annual bonus measures include

20% based on robust environmental,
social and governance (‘ESG’) goals.

LTIP
Maximum annual award is normally
200% of salary. The normal annual award
for each of the CEO and CFO is 150%
of salary.

Awards will vest at the end of three years.

The performance conditions for awards
comprise financial and performance
measures, currently:

• earnings per share (‘EPS’) growth; and

• comparative total shareholder

return (‘TSR’).

For 2024 the LTIP award will be weighted
60% EPS and 40% TSR.

Share Incentive Plan (‘SIP’)

Minimum shareholding requirements
• Chief Executive: 200% of salary

• Chief Financial Officer: 200% of salary

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Softcat plc Annual Report and Accounts 2023

Our core principles of remuneration:
• to ensure senior executives are attracted, retained and motivated to drive the Company in its next stage of development;
• to incentivise the management team in extending the Company’s position in the IT infrastructure solutions industry; and
• to deliver long-term sustainable growth.

Statement of consideration of shareholder views
The Committee takes the views of the shareholders seriously and these views are taken into account in shaping the Remuneration Policy
and remuneration practices of the Company. 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 or any material
changes within the existing Policy.

As part of its review of the Policy last year and remuneration practices, the Committee considered the factors set out in provision 40 of the
UK Corporate Governance Code (the ‘Code’). In the Committee’s view, the Policy continues to addresses those factors. Further details of
how the Committee have addressed this can be found in the Policy in the 2022 Annual Report.

During the financial year the Committee concluded its consultation with major shareholders prior to finalising the Remuneration Policy
which was approved by shareholders at the Company’s Annual General Meeting in December 2022. There were no material changes
in remuneration approach in respect of the recent changes to the Board explained elsewhere in this report and hence the Committee did
not consider it was necessary or appropriate to consult with its shareholders on this matter.

Shareholder support remains strong for the remuneration practices of the Company. The Remuneration Policy received 98.5% votes in
favour at the 2022 AGM. The advisory vote for the Annual Report on Remuneration at the 2022 AGM received 97.95% votes in favour.
The Committee is grateful for the continued support of shareholders.

Statement of considerations of employment conditions elsewhere in the Company
The remuneration strategy 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 our Remuneration Policy.

The remuneration strategy of the Company has been designed to ensure all employees share in its success. 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.

All employees have base pay, certain employment benefits, a pension plan and eligible employees may participate in the Share
Incentive Plan. Commissions are available for qualifying sales employees whilst other employees may participate in other annual
bonus plans.

The Company does not use remuneration comparison measurements. The Board has designated a Non-Executive Director responsible
for general workforce engagement. There are also regular employee engagement meetings led by the CEO and CFO. 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 philosophy. 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 Remuneration 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. During the year the Committee received updates on pay and
benefits across the general workforce. 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. The Committee is also informed, in line with the provisions
of the UK Corporate Governance Code, of the proposed remuneration of Softcat’s Company Secretary.

Annual Report and Accounts 2023 Softcat plc

119

Corporate governanceREMUNERATION COMMITTEE REPORT CONTINUED
PART A – AT A GLANCE CONTINUED

Statement of considerations of employment conditions elsewhere in the Company continued
The table below shows 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

Broaden share
ownership and share in
corporate success over
the medium term.

Incentivise and reward
short-term
performance. At senior
level, an element of
bonus is deferred
in shares.

All eligible employees

Executive Directors,
senior executives,
senior managers and
managers

LTIP

Incentivise and
reward long-term
performance.

Executive Directors,
senior executives and
senior managers

How we performed during the 2023 financial year (‘FY2023’) (audited)
In respect of FY2023, 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 ESG actions

(employee engagement, customer satisfaction and sustainability) and noted the ongoing strong performance.

The performance measures and targets under the Annual and Deferred Bonus Plan for FY2023 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

Katy
Mecklenburgh 1

Operating profit

80% £122.5m £136.1m £149.7m £140.9m

78.4%

£518,958

£345,972

£41,024

Progress on
strategic ESG
metrics and actions

Overall outcome

20%

See below

100%

£165,421

£110,281

£13,077

82.7% £684,379

£456,253

£54,101

Note:
1. Katy Mecklenburgh was appointed to the Board in June 2023 and her annual bonus payout is the pro-rated amount for the year following her appointment.

120

Softcat plc Annual Report and Accounts 2023

ESG: Employee engagement, customer satisfaction and sustainability
Priorities

Achievements and outcome

Employee engagement
Maintain focus on employee engagement

• Management sought regular employee feedback with 1x annual engagement survey
and 4x quarterly management surveys conducted during FY2023. The results of each
survey were discussed with the Board/the Nomination Committee, together with
management’s plans which addressed all areas of concern.

• An action plan was created and followed up from the annual survey results.

• Overall employee engagement achieved remained high at 92%.

• Our employee net promoter score achieved is +63, a material increase on the prior

year (of +52) and well above market norms.

• Excellent external rankings for workplace environment during FY2023 including: 87%
of Glassdoor reviews saying they would recommend Softcat to a friend (an increase
of 5% on last year); ranked 5th Best Place to Work for Wellbeing in the Super Large
category by Great Place to Work; ranked 6th in the Super Large category for the UK’s
Best Workplaces for Women 2023 by Great Place to Work; received a Bronze Award
as an LGBTQ+ inclusive employer from Stonewall; three awards at the CRN Women &
Diversity in Channel Awards: Cultural Inclusion Award, Health & Wellbeing Recognition
Award and Diversity Employer of the Year.

Priorities

Achievements and outcome

Customer satisfaction
Continued attention on customer excellence

• Management undertook its most extensive ever annual customer experience survey

(4,049 respondents in FY2023, compared to 1,870 in FY2022) to engage with more
of our customers than ever before.

• Impressive level of customer satisfaction achieved at 97%, an improvement on the prior

year strong result of 94%.

• Further improvement in customer our customer net promoter score achieved to +62,

increased from +55 in FY2022. This is above market norms.

• A detailed improvement action plan arising from the FY2022 survey was discussed with
the Board and then implemented. An action plan arising from the FY2023 survey has
been presented to the Board and is underway.

• Updated employee training and development progresses, particularly through our
dedicated Learning and Development team, to maintain customer excellence.

Priorities

Achievements and outcome

Sustainability
Reporting, regulation and momentum

• Good progress made on improving compliance with the recommendations on the Task
Force on Climate-related Financial Disclosures (‘TCFD’), including completion of an
analysis of climate-related financial risks and opportunities.

• Sustainability embedded into the annual Board strategy review, in line with TCFD

recommendations.

• Company-wide sustainability training successfully rolled out, with approximately 98%

of employees completing their training.

• Ongoing progress working with our vendors to achieve carbon net zero supply chain

by 2040. This included the Board engaging with a top ten vendor to better understand
industry sustainability and to discuss directly actions to improve sustainability on
customer products.

In respect of the ESG measures, the Committee agreed at the beginning of the performance period a range of illustrative outcomes to
consider at threshold, target and maximum to determine whether meaningful progress had been made across the metrics. This would be
taken into account along with other relevant actions or progress related to the ESG measures. The Committee then reviewed the illustrative
outcomes along with other key relevant areas of progress on the ESG metrics at the end of the performance period, to ensure that a fair
and comprehensive review of progress had been undertaken. The Committee concluded, overall, that good progress had been made
on the ESG measures, resulting in the determination of an award of 100% of the maximum opportunity in respect of the ESG measures.
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.

Annual Report and Accounts 2023 Softcat plc

121

Corporate governanceREMUNERATION COMMITTEE REPORT CONTINUED
PART A – AT A GLANCE CONTINUED

Long-term incentives awarded in FY2023 (audited)
On 30 November 2022 the following annual awards of nil-cost options under the Company’s Long Term Incentive Plan (‘LTIP’) were
made to the Executive Directors as follows:

Executive Director 1

Graeme Watt
Graham Charlton

LTIP award
(% of salary)

LTIP award
(shares)

Award date

Share price 2

150
150

64,266 30/11/22
42,844 30/11/22

£12.87
£12.87

Note:
1. Katy Mecklenburgh was appointed with effect from June 2023 and did not receive an LTIP award in respect of FY2023.
2. 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.

40% 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 60% will be subject to adjusted EPS targets at the end of the period. Further details are
on page 127.

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 FY2023.

Salary

Taxable
benefit

Pension

Total
fixed

Bonus 1

LTIP 2

Total
variable

Total

Graeme Watt (CEO)3, 5
Graham Charlton
(CEO/CFO)4, 5
£367,602
Katy Mecklenburgh (CFO)5, 6 £44,848

£551,403

£4,578

£27,570 £583,551 £684,379

£569,431 £1,253,810 £1,837,361

£4,578
£ —

£12,649 £384,829 £456,253 £379,608
—
£47,090 £98,264
£2,242

£835,861 £1,220,690
£145,354

£98,264

Notes:
1. In respect of performance up to 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 3 December 2019 to Graham Charlton and to Graeme Watt vested during FY2023. The award was calculated by reference to a share price of £11.03, 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 partial achievement of the performance criteria, nil-cost options over 40,647 shares vested and were subsequently exercised by Graeme during FY2023. The share price
at the date of vesting (closing price on 2 December 2022, being the closest business day to the third anniversary of the grant) was £13.04 and the LTIP value shown above reflects this.
The total value shown above comprises £530,037 (the value of the award at vesting) plus a dividend equivalent of £39,394. The value of the LTIP that is attributable to share price
appreciation between grant and vest is £81,700.

4. As a result of partial achievement of the performance criteria, nil-cost options over 27,098 shares vested and were subsequently exercised by Graham during FY2023. The share price
at the date of vesting (closing price on 2 December 2022, being the closest business day to the third anniversary of the grant) was £13.04 and the LTIP value shown above reflects
this. The total value shown above comprises £353,358 (the value of the award at vesting) plus a dividend equivalent of £26,250. The value of the LTIP that is attributable to share price
appreciation between grant and vest is £54,467.

5. During FY2023:

• Graeme Watt was CEO up until 31 July 2023.

• Graham Charlton was CFO until 19 June 2023 and CEO Designate between 19 June and 31 July 2023.

• Katy Mecklenburgh was appointed CFO with effect from 19 June 2023.

6. As reported when Softcat announced Katy’s appointment as CFO, she was compensated in respect of certain variable compensation which was forfeited as a result of her resignation
from her previous employer. Katy received a cash payment in lieu of a forfeited retention award. The cash payment was based on the value of the shares in the retention award from her
previous employer which was due to vest on 30 April 2023. The payment was £44,163, which was made shortly after she joined the Board in June 2023. This figure is included in the
bonus figure above.

122

Softcat plc Annual Report and Accounts 2023

Remuneration Policy table summary
In accordance with the remuneration reporting regulations, the Directors’ Remuneration Policy (the ‘Policy’) summarised below
was approved at the AGM on 13 December 2022 and will apply for a period of three years from the date of approval.
The Policy is contained in Softcat’s 2022 Annual Report and Accounts, which is available on the Company’s website at
www.softcat.com/about-us/investor-centre/shareholder-information.

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 in which we compete for talent.

Element of remuneration

Operation

Salary

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.

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

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.

Benefits

The Executive Directors receive private health insurance, critical illness, life insurance and death-in-service benefit.

Additional benefits may 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.

Pensions

The Executive Directors are entitled to participate in the Company’s applicable pension plans. Executive Directors’
pensions are aligned with the employer contributions for the wider workforce, currently 5% of salary.

Annual and Deferred
Share Bonus Plan
(the ‘Bonus Plan’)

The Remuneration Committee will determine the maximum annual participation in the Annual Bonus Plan for each
year, which will not exceed 200% of salary. The maximum bonus opportunity is currently 150% of salary. This can
only be attained by achieving a level of stretch in the targets set.

Long Term Incentive
Plan (‘LTIP’)

Share Incentive
Plan (‘SIP’)

Minimum
shareholding
requirement

There is a mandatory deferral of one-third of bonuses up to 100% of salary and all bonuses above 100% of salary
into shares. The deferred elements vest after a minimum period of three years based on continued employment.
The bonus contains clawback and malus provisions.

LTIP maximum grant is 200% of salary p.a. (up to 250% in exceptional circumstances).

The Committee considers and sets the performance measures and targets for each LTIP award. See page 128
for the performance conditions of the grant made in the year.

The LTIP contains clawback and malus provisions.

There is a mandatory two-year post-vesting holding period.

The Company operates a SIP in which the Executive Directors are eligible to participate. The SIP is operated in
line with HMRC legislation and is open to all eligible employees (UK employees with at least three months’ service).
The SIP encourages employees to become shareholders in the Company and thereby align their interests
with shareholders.

The following table sets out the minimum shareholding requirements:

Role

Shareholding requirement
(% of salary)

Chief Executive and Chief Financial Officer

200

The Committee retains the discretion to increase the shareholding requirements.
There is also a mandatory two-year post-cessation holding period.

Annual Report and Accounts 2023 Softcat plc

123

Corporate governanceREMUNERATION COMMITTEE REPORT CONTINUED
PART A – AT A GLANCE CONTINUED

Remuneration Policy table summary continued

Element of remuneration

Operation

Non-Executive Director
and Chairman fees

The Board is responsible for setting the remuneration of the Non-Executive Directors. The Remuneration Committee
is responsible for setting the Chairman’s fees.

Non-Executive Directors are paid an annual fee and paid additional fees for chairing Committees, the Senior
Independent Director and the Designated Non-Executive Director for Workforce Engagement. The Chairman does
not receive any additional fees for membership of Committees.

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 Chairman do not participate in any variable remuneration. Non-Executive Directors
and the Chairman are not eligible to participate in benefit arrangements, apart from any benefit programme
available to employees which have the purpose of reducing environmental emissions.

The Company will pay reasonable expenses incurred and may settle any tax incurred in relation to these.

There are no changes to the approved Directors’ Remuneration Policy. The full Policy is available to view in Softcat’s 2022 Annual Report
which is on the Company’s website at www.softcat.com/about-us/investor-centre/shareholder-information.

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 2024 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 (Graham Charlton)

Chief Financial Ofﬁcer (Katy Mecklenburgh)

2,800

2,400

2,000

0
0
0
£

’

1,600

1,200

800

400

1,453

29%

41%

601

100%

2,305

37%

26%

Minimum

On target

Maximum

0
0
0
£

’

1,800

1,500

1,200

900

600

300

2,731

47%

31%

22%

Maximum
(including
50% share
price growth)

948

29%

41%

393

100%

1,503

37%

26%

Minimum

On target

Maximum

1,781

47%

31%

22%

Maximum
(including
50% share
price growth)

Fixed

Bonus

LTIP

Fixed

Bonus

LTIP

124

Softcat plc Annual Report and Accounts 2023

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

Element

Fixed1

Annual bonus2

LTIP2,3

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

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

No annual
variable

50% of the
maximum bonus

100% of the
maximum bonus

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 2023 benefits payments and pension values for Graham Charlton as per the single figure table. Katy Mecklenburgh joined the Board shortly before the FY2023 financial

year end and for the purposes of this illustration the same benefit payments which appear for Graham Charlton have been used for Katy. The actual benefits and pension contributions
for FY2024 in respect of both Executive Directors will only be known at the end of that financial year. Basic pay also reflects the 3% increase awarded for FY2024 to the CEO.

2. Share price growth has been included in the final illustration in accordance with the 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.

Executive Director contracts and letters of appointment for Chair and Non-Executive Directors
Executive Directors

Name

Graham Charlton
Katy Mecklenburgh

Non-Executive Directors
Name

Graeme Watt
Vin Murria
Robyn Perriss
Lynne Weedall
Mayank Prakash

Date of service contract

29 October 2015
1 December 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

11 July 2022
3 November 2015
21 May 2019
21 March 2022
31 July 2023

Note:
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 Chairman) 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 Chairman is subject to three months’ notice from either the Company or the Chairman.
The other Non-Executive Directors do not have notice periods.
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.

Annual Report and Accounts 2023 Softcat plc

125

Corporate governanceREMUNERATION COMMITTEE REPORT CONTINUED

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 FY2023
and FY2022.

Salary1

Taxable
benefits1,4

Pension1,2

Total fixed

Bonus3,5

LTIP3

Total variable

Total

2023
£’000

2022
£’000

2023
£’000

2022
£’000

2023
£’000

2022
£’000

2023
£’000

2022
£’000

2023
£’000

2022
£’000

2023
£’000

2022
£’000

2023
£’000

2022
£’000

2023
£’000

2022
£’000

Graeme Watt (CEO)6

551.4 525.1

Graham Charlton (CEO/CFO)6 367.6 350.1

Katy Mecklenburgh (CFO)6, 7

44.8

—

4.6

—

4.6

—

27.6

26.3

583.6 556.0

684.4 756.2

569.4 1,554.9

1,253.8 2,311.1

1,837.4 2,867.1

12.6

23.2

384.8

377.9

456.3 504.1

379.6 1,036.6

835.9 1,540.7

1,220.7 1,918.6

2.2

—

47.0

—

98.3

—

98.3

—

145.3

—

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 120 and 121.
6. During FY2023:

• Graeme Watt was CEO up until 31 July 2023.

• Graham Charlton was CFO until 19 June 2023 and CEO Designate between 19 June and 31 July 2023.

• Katy Mecklenburgh was appointed CFO with effect from 19 June 2023.

7. As reported when Softcat announced Katy’s appointment as CFO, she was compensated in respect of certain variable compensation which was forfeited as a result of her resignation
from her previous employer. Katy received a cash payment in lieu of a forfeited retention award. The cash payment was based on the value of the shares in the retention award from her
previous employer which was due to vest on 30 April 2023. The payment was £44,163, which was made shortly after she joined the Board in June 2023. This figure is included in the
bonus figure above.

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

2023 fees

2022 fees

Martin Hellawell1

£203,747

£162,903

Roles

Non-Executive Chair

Karen Slatford2

£40,898

£78,819

Senior Independent Director and Chair of the Nomination Committee

Vin Murria

£75,000

£63,759

Lynne Weedall3

£90,438

£15,698

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

Interim Senior Independent Non-Executive Director,
Chair of the Remuneration Committee and Chair of the Nomination Committee

Robyn Perriss

£75,000

£63,759

Independent Non-Executive Director and Chair of the Audit Committee

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

FY2023 and other P11D benefits was £3,747 (2022: £3,768) and is included in the figure for Martin’s fees above.

2. In respect of 2023, the fees for Karen Slatford are pro-rated to the time she retired from the Board in January 2023. 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. 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 and dental and life cover. Figures are reported where appropriate.

126

Softcat plc Annual Report and Accounts 2023

2023 annual bonus outcomes
In respect of 2023, 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 ESG actions

(employee engagement, customer satisfaction and sustainability) and noted the ongoing strong performance.

The annual bonus structure operating for 2024 will be similar to 2023 and is explained on pages 120 and 121.

Details of the targets used to determine bonuses in respect of FY2023 and the extent to which they were satisfied are shown on pages
120 and 121. These figures are included in the single figure table.

Long Term Incentives vested in FY2023 (audited)
Awards under the Company’s LTIP granted in December 2019 to Graham Charlton and to Graeme Watt vested and were exercised
by Graham and Graeme in FY2023. 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 38.6p

• 20% vesting (threshold) for achieving 38.6p

• Full vesting for achieving 45.5p 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 FY2022 was 55.5p per share and this element of the performance condition was achieved in full. TSR was ranked just below
the upper quartile and as a result 93.47% of this element of the performance condition was achieved. Following formal review by the
Committee, the Committee confirmed that vesting of the award would be in line with the achievement against performance conditions.
Further details on the LTIPs which vested are provided in the tables in respect of single figure remuneration. As a result of the partial
achievement of performance conditions, the following table details the LTIP granted in December 2019, the number of shares lapsed
and the number vested and exercised:

Director

Graeme Watt
Graham Charlton

LTIP options
granted in
December 2019

42,021
28,014

LTIP options
lapsed

1,374
916

LTIP options
vested and
exercised

40,647
27,098

Annual Report and Accounts 2023 Softcat plc

127

Corporate governanceREMUNERATION COMMITTEE REPORT CONTINUED
PART B – ANNUAL REPORT ON REMUNERATION CONTINUED

Scheme interests awarded during the financial year (audited)
Long Term Incentive Plan awarded in FY2023 (audited)
On 30 November 2022 the following annual awards of nil-cost options under the Company’s Long Term Incentive Plan (‘LTIP’) were
made to the CEO and CFO:

Director1

Graeme Watt
Graham Charlton

Award type

Nil-cost options
Nil-cost options

Basis of award
(% of salary)

150%
150%

Face value
of award
£

827,104
551,402

Number
of shares
granted

Date of grant Date of vesting

Share price 2

64,266
42,844

30/11/22
30/11/22

30/11/25
30/11/25

£12.87
£12.87

40% 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 FY2025 and 60% subject to adjusted EPS targets at the end of the period.
These conditions are set out below:

Measure

Adjusted EPS

Weighting

Details

60%

• Nil vesting of this element for adjusted EPS at end of performance period of less than 55.8p

• 20% vesting (threshold) for achieving 55.8p

• 67% vesting for achieving 59.6p

• Full vesting for achieving 67.0p 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

40%

• 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 2022 financial year based on an assessment of the business and were included
in the 2022 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.

Deferred Bonus Plan awarded in FY2023 (audited)
On 30 November 2022, awards under the Company’s Deferred Bonus Plan (DBP) were made as set out below. Deferred shares are not
subject to further performance conditions and vest following a three-year holding period.

Director

Graeme Watt
Graham Charlton

Award type

Nil-cost options
Nil-cost options

Face value
of award
£

406,113
270,733

Number
of shares
granted

31,555
21,036

Date of grant

30/11/22
30/11/22

End of
deferral period

30/11/25
30/11/25

Share price 1

£12.87
£12.87

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.

128

Softcat plc Annual Report and Accounts 2023

Long Term Incentive Plan to be awarded in FY2024
Vesting of the awards will be subject to the following performance conditions:

Measure

Adjusted EPS

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

Weighting

Details

60%

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

period of below 59.1p

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

period of 59.1p

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

period of 66.1p

• Full vesting for 71.8p

• 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

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 FY2023, Graham Charlton, Graeme Watt and Katy Mecklenburgh 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 FY2023 (FY2022: 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 each
purchased 140 partnership shares during the year. Katy Mecklenburgh purchased nil shares. The total SIP holdings are provided on
page 129 as part of the Directors’ share interests table.

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 took place in August 2023. This included the retirement of Graeme Watt
as CEO, at which time he succeeded Martin Hellawell as the Non-Executive Chairman. The Committee confirmed at the time of
announcement that Graeme will be treated as a good leaver under the terms of the Remuneration Policy and associated plan rules.
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 received no termination payments from the Company.
• Base pay: this was paid until the date of retirement. Graeme’s service agreement provides for twelve months’ notice,

which was deemed as served.

• Pension contributions or allowance: this was paid until the date of retirement.
• LTIPs: these have been 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.

• 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 confirmed at the time of the announcement that it had exercised its discretion and permitted Graeme to retain
whilst he is Chairman the following benefits currently being provided to him: life assurance, private medical insurance, health cash
plan, dental plan, income protection and critical illness cover.

Annual Report and Accounts 2023 Softcat plc

129

Corporate governanceREMUNERATION COMMITTEE REPORT CONTINUED
PART B – ANNUAL REPORT ON REMUNERATION CONTINUED

Statement of Directors’ shareholding and share interests (audited)

Other shares held

Options

Shareholding
requirement
(% of salary) 1

Current
shareholding
(% of salary) 2

Beneficially
owned 3

LTIP interests
subject to
performance
conditions

Deferred
shares not
subject to
performance
conditions

Vested and
unexercised

Unvested

Exercised

Shareholding
requirement
met?

200
200
200

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

394
645
—

108,555 3
133,916 3

—

147,028
98,018
—

69,766 4
46,510 4

—

n/a 4,201,857
—
n/a
165,397
n/a
1,300
n/a
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
n/a

Yes
Yes
No

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

Director

Executive Directors
Graeme Watt5
Graham Charlton
Katy Mecklenburgh6

Non-Executive Directors
Martin Hellawell7
Karen Slatford8
Vin Murria
Lynne Weedall
Robyn Perriss

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; and

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

2. This is based on a closing share price of £15.00 on 31 July 2023 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 2023. 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. Graham purchased 30 partnership shares between the year end and the date of this report and Graeme purchased 10.

Neither of these post-year end purchases are included above. Following Graeme’s retirement as an Executive Director, he is no longer a participant in the SIP.

4. This is in respect of previous awards of nil-cost options granted under the Deferred Share Bonus Plan.
5. Since the 2023 financial year end Graeme was appointed as Non-Executive Chairman. As such, he is no longer subject to the 200% of salary shareholding guidelines.
6. Katy Mecklenburgh was appointed to the Board in June 2023. In line with the shareholding guidelines for Executive Directors, she has a five-year period to build up

her shareholding to the target of 200% of salary.

7. Includes ordinary shares as at 31 July 2023 held by, or in trust for, Martin and/or his family members. Martin retired from the Board on 1 August 2023.
8. Karen retired from the Board in January 2023. The above reflect her interests as at the time of retirement.
9. Mayank Prakash joined the Board after the financial year end. He has no share interests in Softcat plc.
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 held no such external
directorships prior to his retirement as Chief Executive. Graham and Katy currently hold no such external directorships.

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 2023.

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

18/11/2 0 22

18/0 3/2 0 23

130

Softcat plc Annual Report and Accounts 2023

Chief Executive’s historical remuneration
The table below sets out the relative importance of spend on pay in the 2023 financial year. All figures provided are taken from the
relevant Company accounts.

Chief Executive

G Watt
M Hellawell1

Total single figure

Annual bonus payment
level achieved (% of
maximum opportunity)

G Watt
M Hellawell1

LTIP vesting level
achieved (% of
maximum opportunity)

2023

2022

2021

2020

2019

2018

2017

2016

2015

£1,837,361 £2,867,134 £2,588,093
—

—

£991,372
—

£919,518 £305,539

—
— £532,716 £774,908

—
£562,117

—
£335,762

83
—

97
—

96
—

100
n/a

100
—

100
n/a

72
—

n/a
n/a

100
—

n/a
n/a

100
100

n/a
n/a

—
100

n/a
n/a

—
99

n/a
n/a

—
72

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 2023 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 2023
financial year

Disbursements
from profit in 2022
financial year

£74.2m
£60.6m
£179.9m

£84.0m
£41.9m
£148.3m

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.

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
2021 compared with remuneration in 2020

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

% increase/(decrease) in remuneration in
2023 compared with remuneration in 2022

Salary or
fees

Bonus 2

Benefits 3

Salary or
fees

Bonus 2

Benefits 3

Graeme Watt1
Graham Charlton1
Katy Mecklenburgh1,4
Martin Hellawell
Vin Murria5
Robyn Perriss
Karen Slatford6
Lynne Weedall7
All employees8

3%
3%
n/a
—
4%
3%
6%
n/a
3%

43%
43%
n/a
—
—
—
—
n/a
12%

37%
37%
n/a
1%
—
—
—
n/a
1%

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

6%
6%
n/a
—
—
—
—
n/a
7%

12%
12%
n/a
—
—
—
—
n/a
34%

Salary
or fees

5%
5%
n/a
23%
18%
18%
12%
42%
8%

Bonus 2

Benefits 3

0%
0%
n/a
—
—
—
—
—
(44)%

(1)%
(1)%
n/a
(1)%
—
—
—
—
(3)%

Notes:
1. For the Directors, the percentage change reflects the figures set out in the single figure table on page 126. 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. Katy Mecklenburgh joined the Board of Softcat in June 2023.
5. 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.

6. 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 FY2022. Karen retired from the Board in January 2023.
7. Lynne Weedall joined the Board of Softcat in May 2022. Following the retirement of Karen Slatford in January 2023, Lynne was appointed interim Senior Independent Director and

Chair of the Nomination Committee.

8. 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.
For FY2023, the decrease in bonus is due mostly to higher/maximum targets being achieved in the prior year compared to the current year. The benefits values have fluctuated due to change
in premiums.

Annual Report and Accounts 2023 Softcat plc

131

Corporate governance
REMUNERATION COMMITTEE REPORT CONTINUED
PART B – ANNUAL REPORT ON REMUNERATION CONTINUED

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 2023, with comparative figures since 2019, which
were disclosed in previous Directors’ Remuneration Reports. The data shows how the CEO’s single figure remuneration for 2023 (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

2023
2022
2021
2020
2019

Method

25th percentile pay ratio

Median pay ratio

75th percentile pay ratio

Option A
Option A
Option A
Option A
Option A

72:1
100:1
89:1
33:1
35:1

44:1
64:1
57:1
21:1
22:1

24:1
36:1
32:1
12:1
12:1

The Government’s methodology of Option ‘A’ has been used to calculate the remuneration of 2,206 employees (FY2022: 1,882) 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 increase in ratio from 2021 primarily reflects the value of LTIP awards which vested and were exercised by the CEO during each
period. No LTIPs had vested in the prior periods shown above.

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

CEO

All employees

(See single figure table, page 126)

25th percentile

2023 salary
2023 total pay

£551,403
£1,837,361

£23,398
£25,594

Median

£27,538
£41,929

75th percentile

£38,000
£77,393

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, other selected members of the senior management team and the Chairman’s fee. 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,
www.softcat.com/about-us/investor-centre/governance, 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, the Chief Financial Officer,
the Chief People Officer and the Reward, Payroll and 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 and a wider briefing on external pay trends. 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.

132

Softcat plc Annual Report and Accounts 2023

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
session also discussed topical issues such as the ‘cost of living’. The engagement was very helpful in aiding employees’ understanding
of pay philosophy throughout the business. It also 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 £77,000 (excluding VAT) (2022: £90,000) 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 2022 AGM and the advisory vote on the
Annual Report on Remuneration at the 2022 AGM.

Directors’ Remuneration Policy (2022 AGM)

169,094,250

98.50

2,569,431

Annual Report on Remuneration (2022 AGM)

168,139,235

97.95

3,524,446

1.50

2.05

Votes for

Votes against

Votes withheld

Statement of implementation of the Remuneration Policy in the 2023 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. A revised Remuneration Policy was approved by shareholders at the 2022 AGM.

Implementation in 2023/24

What was implemented in 2022/23

Base salary

For FY2024, base salaries for the CEO and CFO
will be £567,945 and £370,000 respectively.

For the CEO, this represents an increase of 3%,
which is lower than the overall spend increase
across the workforce for the year. Katy Mecklenburgh
started as CFO in June 2023 and the above reﬂects
her base pay in appointment. There will be no increase
in CFO base pay during FY2024.

For FY2023, base salaries for the CEO and CFO
were £551,403 and £367,602 respectively. This
represented a rise of 5%, which was the standard
pay rise for employees but lower than pay rises for
much of the workforce.

No change.

Pension

Benefits

Annual bonus
plan (‘ABP’)
• Cash

• Deferred

share award

5% of salary.

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.

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

Measures: 80% on operating profit, 20% on robust
ESG goals.

Deferral: An element of the ABP is deferred into a
share award, usually with a three-year vesting period.

Annual Report and Accounts 2023 Softcat plc

133

Corporate governanceREMUNERATION COMMITTEE REPORT CONTINUED
PART B – ANNUAL REPORT ON REMUNERATION CONTINUED

Statement of implementation of the Remuneration Policy in the 2023 financial year continued

Implementation in 2023/24

What was implemented in 2022/23

LTIP

No change.

FY2023 LTIP awards:

Shareholding
requirements

No change.

• 150% of salary for CEO and for CFO.

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

• Targets are shown on pages 127 and 128

200% of salary for CEO and for CFO.

The shareholding requirement is calculated as follows:

• shares owned by the Executive Director 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; and

• 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.

Chair and
Non-Executive fees

Chair fee: £232,000.

Board fee: £61,800.

Chair fee: £200,000.

Board fee: £60,000.

Senior Independent Director fee: no change.

Senior Independent Director fee: £13,500.

Committee Chair fee (per Committee): no change.

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

Fee for the Designated Director for Workforce
Engagement (which includes Chair of the Sustainability
Committee): no change.

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

Lynne Weedall
Chair of the Remuneration Committee
23 October 2023

134

Softcat plc Annual Report and Accounts 2023

DIRECTORS’ REPORT

The following is the report of the Directors of the Company
for the financial year ended 31 July 2023.
Non-Financial and Sustainability Information Statement
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 50 to 71. This includes the sustainability disclosures required to comply with the Companies
(Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 (SI 2022/31). Please also
see the Governance Report on pages 84 to 95.

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, corruption and tax evasion 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 44 to 49 and in the Governance

Report on pages 94 and 95.

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.

Business model, policies,
principal risks and KPIs

• 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 36 to 41 of this report, and our approach to diversity in the report on Social Value on pages 44
to 49, in the Chairman’s Statement on pages 10 to 13 and in the Nomination Committee Report on pages
106 to 111.

• 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 72 to 77 and selected KPIs are
reported on pages 32 and 33. Our strategy is discussed in various places in the Strategic Report, including
pages 28 to 31.

Directors’ Report
The Directors present their report for the year to 31 July 2023.

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.

Annual Report and Accounts 2023 Softcat plc

135

Corporate governanceDIRECTORS’ REPORT CONTINUED

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 80 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 36 to 41of this report;

• strategy and relevant future developments – refer to pages 22 to 27 and pages 28 to 31 of the Strategic Report; and
• financial risk management objectives and policies – refer to the ‘Risk Management’ section included in the Strategic Report on pages

72 to 78 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 2022:

Name

G Watt

Position

Chairman

M Hellawell

Chair

G Charlton

Chief Executive

K Mecklenburgh Chief Financial Officer
V Murria
K Slatford
R Perriss
L Weedall
M Prakash

Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director

Date of appointment

Appointed as a Chief Executive on 1 April 2018 and Chairman on
1 August 2023
Appointed as a Director on 24 March 2006, Chair on 1 April 2018
and resigned on 31 July 2023
Appointed Chief Financial Officer on 19 March 2015 and Chief Executive
on 1 August 2023
Appointed 19 June 2023
Appointed 3 November 2015
Appointed 5 December 2019 and resigned on 17 January 2023
Appointed 1 July 2019
Appointed 3 May 2022
Appointed 1 September 2023

Biographies of the Directors as at 23 October 2023 can be found on pages 82 and 83.

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 2023 are disclosed in the Remuneration Report on page 129.
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 2023 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 2023
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.

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Softcat plc Annual Report and Accounts 2023

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 2023
was 199,555,082 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 2023, the SIP Trust held 159,996 shares
(2022: 187,771) awarded to employees as part of the free share
award, subject to service conditions. A further 368,545 shares
(2022: 353,586) were held on behalf of employees who have
taken part in the Company’s voluntary partnership share purchase
programme. The SIP Trust also held 51,041 unallocated shares
(2022: 51,007)

During the year ended 31 July 2023, 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 201,006 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.

Further 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
13 December 2022:

• an ordinary resolution providing the Directors with authority to:
(i) allot ordinary shares up to a maximum nominal amount of
£33,226, 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

£66,452 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 £4,983; and

(ii) allot shares or sell treasury shares for cash up to a maximum

nominal amount of £4,983, 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 19,935,795 of the Company’s
ordinary shares.

These authorities are due to expire at the Company’s AGM to be
held on 13 December 2023 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.

Annual Report and Accounts 2023 Softcat plc

137

Corporate governance

DIRECTORS’ REPORT CONTINUED

Substantial shareholders
The substantial shareholdings in the table below represent those interests notified to the Company as at 31 July 2023 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 2023

As at 23 October 2023

Ordinary
shares

Voting
rights

Ordinary
shares

64,976,058
9,946,370
7,244,714

32.6% 64,976,058
9,946,370
7,244,714

5.0%
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.

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 (2022: none).

Political donations
The Company did not make any political donations during the year
(2022: £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 2023.
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 50 to 71 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 44 to 49 of the
Strategic Report.

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 23 October 2023, 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.

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Softcat plc Annual Report and Accounts 2023

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 44.

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 17.0p per
ordinary share and a special dividend of 12.6p per ordinary share
to be paid on 19 December 2023 to all ordinary shareholders
who were on the register of members at the close of business on
10 November 2023. Shareholders will be asked to approve the
final and special dividends at the AGM on 13 December 2023.

The Company’s dividend and distributions policy is detailed in
the Governance Report on pages 91 and 92.

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.

Details of any arrangements under which a Director has waived emoluments, or agreed
to waive any future emoluments, from the Company.

Details of any non-pre-emptive issues of equity for cash.

Details of any non-pre-emptive issues of equity for cash by any unlisted major
subsidiary undertaking.

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.

Directors’ Remuneration Report,
pages 114 to 134

Directors’ Report, page 137

No such share allotments

Not applicable

Board statement in respect of Relationship Agreement with the controlling shareholder.

Directors’ Report, page 138

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 2023 AGM.

Branches
The Company operates branches in Australia, the United States of America, the Netherlands, Singapore, Hong Kong and Ireland.

Annual Report and Accounts 2023 Softcat plc

139

Corporate governanceDIRECTORS’ REPORT CONTINUED

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 78) and Chief Financial Officer’s review sections (see pages 34
and 35) 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 2024. All the forecasts reflect
the payment of the FY2023 dividend of £59.0m which will be
paid in December 2023 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 2023, the Company held instantly accessible cash and
cash equivalents of £122.6m, with net current assets of £230.0m.
Note 21 to the financial statements in the Annual Report 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
£75.0m 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; and

• higher risk of credit losses.

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Softcat plc Annual Report and Accounts 2023

Despite the challenging economic environment, the Company
has traded well, delivering double-digit year-on-year growth
in gross profit and operating profit growth in line with expectations,
following an expected rebound in travel and entertainment
costs, following periods of reduced spend due to the COVID-19
pandemic. 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 2023,
takes into account the FY2024 budget process which includes
estimated growth and increased cost across the going concern
period and is consistent with the actual trading experience through
to September 2023. 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 FY2023;

• employee commission is incurred in line with the gross

margin; and

• increased levels of cost to reflect continued investment in our

people and the businesses IT infrastructure.

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. Year to date trading to the end of September 2023 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, compared to the base
case, include:

• an average 7.5% reduction in revenue;
• 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.

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.

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 £21m cost
reduction on an annualised basis and additional annual working
capital savings of £30m. The actions which if implemented would
offset the reduced activity:

• bonus costs scaled back in line with performance;
• no interim dividend in H2 of FY2024;
• 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
assess the impact on liquidity, should a scenario more extreme
than the severe but plausible scenario occur. The impact of these
conditions, when combined, would place a strain on liquidity and
raise short term concerns to the business, however, would not result
in cash falling below a nil position. 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, compared to the base case,
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, cash
may not be sufficient for day to day operations.

Whilst the Board considers such a scenario to be 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 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 sufficient 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 2024.
Accordingly, at the October 2023 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.

Disclosure of information to the auditor
The Directors in office at the time of approval of the Directors’
Report are listed on pages 82 and 83 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 2023 AGM will take place on 13 December 2023
at the Company’s registered office: Softcat plc, Fieldhouse Lane,
Marlow, Buckinghamshire SL7 1LW.

The Chairman of the AGM intends for a poll to be called in respect
of each of the resolutions to be voted on at the 2023 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.

Annual Report and Accounts 2023 Softcat plc

141

Corporate governanceDIRECTORS’ REPORT CONTINUED

Annual General Meeting continued
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 2023 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 Chairman 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.

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Softcat plc Annual Report and Accounts 2023

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 82 and 83) 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:

Graham Charlton
Chief Executive Officer
23 October 2023

Katy Mecklenburgh
Chief Financial Officer
23 October 2023

The Directors’ Report has been approved by the Board of Directors
and is signed on its behalf by:

Luke Thomas
Company Secretary
23 October 2023

Financial statements

FINANCIAL
STATEMENTS

144 Independent auditor’s report
152 Statement of profit or loss and other comprehensive income
153 Statement of financial position
154 Statement of changes in equity
155 Statement of cash flows
156 Notes to the financial statements
182 Company information and contact details

Annual Report and Accounts 2023 Softcat plc

143

Financial statementsINDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SOFTCAT PLC

Opinion
We have audited the financial statements of Softcat plc for the year ended 31 July 2023 which comprise the Statement of profit and 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 2023 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;
• 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, (testing for consistency to the board approved three-year
plan), a severe yet plausible downside cash flow scenario, and a reverse stress test covering the going concern assessment period.
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 revenue growth rates, operating cost

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
and other external data sources. Due to uncertainty in the economy, 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 reasonableness of managements potential mitigating actions, principally the removal of forecast, undeclared dividends;
• assessing whether any material climate-related risks that should be incorporated into Softcat’s forecasts to 30 November 2024:
• assessing the adequacy of the going concern assessment period until 30 November 2024, considering whether any events or

conditions foreseeable after the period indicated a longer review period would be appropriate;

• inquiring 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.

144

Softcat plc Annual Report and Accounts 2023

Our Key Observations
• The Directors’ assessment is that Softcat plc has sufficient liquidity and headroom in cash throughout the going concern period to

30 November 2024. Management’s severe by plausible scenario demonstrated that a worsening of all key assumptions against the
base case would not result in liquidity concerns. This is prior to further potential mitigations modelled by management. The changes in
assumptions modelled are considered to be highly unlikely based on historical financial performance.

• We have not identified any material climate-related risks that should be incorporated into Softcat plc’s forecasts to 30 November 2024.

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 a period to 30 November 2024.

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
• 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 £7.0m which represents 4.9% 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, the potential impact of climate change and changes in the business environment when assessing
the level of work to be performed. All audit work was performed directly by the audit engagement team.

Climate change
Stakeholders are increasingly interested in 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 58 to 63 in the
required Task Force for Climate related Financial Disclosures and on pages 76 and 77 in the principal risks and uncertainties. They have
also explained their climate commitments on pages 66 to 67 All of these disclosures form part of the “Other information,” rather than
the audited financial statements. Our procedures on these unaudited 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, in line with our responsibilities on “Other information”.

In planning and performing our audit we assessed the potential impacts of climate change on the Company’s business and any
consequential material impact on its financial statements.

As explained in note 1, the basis of preparation, consideration of climate change impact on the judgements in the accounts 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 the impact of climate change on the financial statements was focused on evaluating management’s
assessment of the impact of climate risk, physical and transition, their climate commitments and the effects of material climate risks
disclosed on pages 58 to 63. As part of this evaluation, we performed our own risk assessment to determine the risks of material
misstatement in the financial statements from climate change which needed to be considered in our audit.

We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and
associated disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are
described above.

Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact
a key audit matter.

Annual Report and Accounts 2023 Softcat plc

145

Financial statementsINDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF SOFTCAT PLC

Key audit matters
Key audit matters are those matters that, in our professional judgment, 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.

Overstatement of performance through the misstatement of revenue recognised at or near year end
During the year the Company recognised revenue of £985.3m (2022: £1,077.9m).
Refer to the Audit Committee Report (page 96 to 105); Accounting policies (page 156 to 166); and Note 2 of the Company Financial
Statements (page 166 to167)

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.

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 IFRSs.

We concluded that management’s
disclosures in relation to revenue, including
disclosed accounting policies and those
relating to critical accounting judgements,
to be appropriate.

As part of our procedures, we noted no
indication of deliberate or other manipulation
of revenue cut-off or management override.

Our response to the risk

We performed the following procedures:

• Performed walkthroughs to update our understanding of the revenue recognition

processes and key controls.

• 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 a sample of 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;
– 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.

• Assessed appropriateness of disclosures in the Annual Report and Accounts by

comparing the disclosures against the requirements under International Financial
Reporting Standards.

146

Softcat plc Annual Report and Accounts 2023

Key audit matters continued
Presentation of revenue in respect of principal versus agent
During the year the Company recognised revenue of £985.3m (2022: £1,077.9m).

Refer to the Audit Committee Report (pages 96 to 105); Accounting policies (page 156 to 166); and Note 2 of the Company Financial
Statements (pages 166 and 167)

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 are the agent in the arrangement.

Key observations communicated
to the Audit Committee

We concluded that the judgements
made by management are consistent
with the evidence we have observed, the
presentation and disclosure of revenue is
materially correct, and has been recognised
in accordance IFRSs.

We concluded that managements
disclosures in relation to revenue, including
disclosed accounting policies and those
relating to critical accounting judgements, to
be appropriate.

Our response to the risk

We performed the following procedures:

• Performed walkthroughs to update our understanding of the revenue recognition

processes and key controls.

• Updated our understanding of management’s judgement over the classification

of transactions between gross and net presentation.

• 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:

– Verifying 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.

– Corroborating the related cost for each sample item to supporting

purchase invoices.

– Assessing 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.

• Assessed appropriateness of disclosures in the Annual Report and Accounts by

comparing the disclosures against the requirements under International Financial
Reporting Standards.

Annual Report and Accounts 2023 Softcat plc

147

Financial statementsINDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF SOFTCAT PLC

Key audit matters continued
Misstatement of rebate income to overstate reported results at or near year end
Accrued rebate income at 31 July 2023 amounts to £9.3m (2022: £10.5m).

Refer to the Audit Committee Report (pages 96 to 105); Accounting policies (pages 156 to 166); and Note 11 of the Company Financial
Statements (page 171).

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 rebate receivable.

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 IFRSs.

We concluded that management’s
disclosures in relation to accrued income,
including disclosed accounting policies, to
be appropriate.

As part of our procedures, we noted
no indication of deliberate or other
manipulation of accrued income or
management override.

Our response to the risk

We performed the following procedures:

• Performed walkthroughs to update our understanding of the rebate processes and

key controls.

• Obtained confirmations from a sample of sales and vendor management personnel

to confirm no rebate agreements outside of standard practise.

• 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 82% of the balance) against the 31 July 2022 comparative
balances to identify unusual movements that are not in line with our expectation or
understanding of the business. We 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.

• Assessed appropriateness of disclosures in the Annual Report and Accounts by

comparing the disclosures against the requirements under International Financial
Reporting Standards.

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 £7.0 million (2022: £6.5 million), which is 4.9% (2022: 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 .

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% (2022: 50%) of our planning materiality, namely £3.5m (2022: £3.2m), in line with the prior period.
We set our performance materiality at this level to reflect the quantum of audit adjustments identified in the prior 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 £0.35m (2022: £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.

148

Softcat plc Annual Report and Accounts 2023

Other information
The other information comprises the information included in the annual report set out on pages 1 to 142, including the Strategic report
set out on pages 1 to 78 and the Corporate governance report set out on pages 79 to 142, 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 pages 140 and 141;

• 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 78;

• 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 78;

• Directors’ statement on fair, balanced and understandable set out on page 142;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 72;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on

page 72; and;

• The section describing the work of the audit committee set out on page 96.

Annual Report and Accounts 2023 Softcat plc

149

Financial statementsINDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF SOFTCAT PLC

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 142, 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 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 journal entry testing, review of board minutes to identify non-compliance with such laws and regulations,
review of reporting to the Audit Committee on compliance with regulations, review of reporting of internal audit, enquires of the
Company Secretary and management and review of any instances of whistleblowing reporting.

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 13 December 2022 to audit the

financial statements for the year ending 31 July 2023 and subsequent financial periods.

The period of total uninterrupted engagement including previous renewals and reappointments is eleven years, covering the years ending
2013 to 2023.

• The audit opinion is consistent with the additional report to the audit committee.

150

Softcat plc Annual Report and Accounts 2023

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.

Marcus Butler (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
23 October 2023

Annual Report and Accounts 2023 Softcat plc

151

Financial statementsSTATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JULY 2023

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
Net (loss) on cash flow hedge

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

2023
£’000

2022
£’000

3
4
4

985,300 1,077,946
(750,736)
(611,466)

373,834
(232,936)

327,210
(191,065)

140,898
1,171
(205)

141,864
(29,835)

136,145
252
(253)

136,144
(25,739)

112,029

110,405

(204)
(799)

(1,003)

3,562
—

3,562

111,026

113,967

112,029

110,405

111,026

113,967

18
18

56.2
56.0

55.5
55.3

The Statement of profit or loss and other comprehensive Income has been prepared on the basis that all operations are
continuing operations.

152

Softcat plc Annual Report and Accounts 2023

STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2023

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
Cash flow hedge reserve
Reserves for own shares
Foreign exchange translation reserve
Retained earnings

Total equity

Notes

2023
£’000

2022
£’000

7
8
9
15

10
11

12
13

13
8

11,348
9,969
7,155
2,997

31,469

11,270
6,162
7,978
2,508

27,918

3,591
490,041
—
122,621

5,104
541,424
296
97,316

616,253

644,140

647,722

672,058

(359,627)
(23,851)
(6)
(2,734)

(419,108)
(31,564)
—
(2,716)

(386,218)

(453,388)

(3,032)
(7,027)

(10,059)

(3,620)
(3,950)

(7,570)

(396,277)

(460,958)

251,445

211,100

100
4,979
(799)
—
3,358
243,807

100
4,979
—
—
3,562
202,459

251,445

211,100

These financial statements were approved by the Board of Directors and authorised for issue on 23 October 2023.

On behalf of the Board

Graham Charlton
Chief Executive Officer

Katy Mecklenburgh
Chief Financial Officer

Softcat plc company registration number: 02174990

Annual Report and Accounts 2023 Softcat plc

153

Financial statementsSTATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2023

Equity attributable to owners of the Company

Balance at 1 August 2021
Profit for the period
Other comprehensive income

Total comprehensive income for the year
Share-based payment transactions
Dividends paid
Dividend equivalents paid
Tax adjustments

Balance at 31 July 2022
Profit for the period
Impact of foreign exchange on reserves
Net (loss) on cash flow hedge

Total comprehensive income for the year
Share-based payment transactions
Dividends paid
Dividend equivalents paid
Tax adjustments

Share
capital
£’000

100
—
—

—
—
—
—
—

100
—
—
—

—
—
—
—
—

Share
premium
account
£’000

4,979
—
—

—
—
—
—
—

4,979
—
—
—

—
—
—
—
—

Cash flow
hedge reserve
£’000

Foreign
exchange
translation
reserve
£’000

Reserves for
own shares
£’000

—
—
—

—
—
—
—
—

—
—
—
(799)

(799)
—
—
—

—
—
3,562

3,562
—
—
—
—

3,562
—
(204)
—

(204)
—
—
—
—

—
—
—

—
—
—
—
—

—
—
—
—

—
—
—
—
—

Retained
earnings
£’000

174,065
110,405
—

110,405
2,541
(84,020)
(215)
(317)

202,459
112,029
—
—

112,029
3,330
(74,175)
(66)
230

Total
£’000

179,144
110,405
3,562

113,967
2,541
(84,020)
(215)
(317)

211,100
112,029
(204)
(799)

111,026
3,330
(74,175)
(66)
230

Balance at 31 July 2023

100

4,979

(799)

3,358

— 243,807

251,445

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 2023, 174,791 share options (2022: 305,266) were exercised and new shares were issued to satisfy this
exercise. Proceeds of £Nil (2022: £Nil) were realised from the exercise of these share options.

As at 31 July 2023, the SIP Trust held 159,996 shares (2022: 187,771) awarded to employees as part of the free share award, subject to
service conditions. A further 368,545 shares (2022: 353,797) were held on behalf of employees who have taken part in the Company’s
voluntary partnership share purchase programme. The SIP also held 51,041 unallocated shares (2022: 51,007).

154

Softcat plc Annual Report and Accounts 2023

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JULY 2023

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

2023
£’000

2022
£’000

104,802

83,644

4
7
9

6
8
4,8

1,171
(2,544)
(701)

(2,074)

—
(74.175)
(2,839)
(205)

252
(1,890)
(3,334)

(4,972)

—
(84,020)
(2,369)
(253)

(77,219)

(86,642)

25,509
97,316
(204)

(7,970)
101,724
3,562

122,621

97,316

Annual Report and Accounts 2023 Softcat plc

155

Financial statements

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2023

1 Accounting policies
1.1 Corporate information
The financial statements of Softcat plc for the year ended 31 July 2023 were authorised for issue in accordance with a resolution of the
Directors on 23 October 2023. 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 2022. The accounting
policies set out below have, unless otherwise stated (see 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 in the Annual Report. Management has assessed the potential financial impacts relating to the identified
risks and exercised judgement in concluding that there are no 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 28 to 31) and Chief Financial Officer’s review sections (see pages 34 to 35)
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 2024. All the forecasts reflect the payment of the FY2023 dividend of £59.0m which will be paid in
December 2023 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 2023, the Company held instantly accessible cash and cash equivalents of £122.6m, with net current assets of £230.0m.
Note 21 to the financial statements in the Annual Report 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 £75.0m 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; and
• Higher risk of credit losses.

156

Softcat plc Annual Report and Accounts 2023

1 Accounting policies continued
1.2 Basis of preparation continued
Going concern continued
Challenging economic environment continued
Despite the challenging economic environment, the Company has traded well, delivering double-digit year-on-year growth in gross profit
and operating profit growth in line with expectations, following an expected rebound in travel and entertainment costs, following periods
of reduced spend due to the COVID-19 pandemic. 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 2023, takes into account the FY2024 budget process which includes
estimated growth and increased cost across the going concern period and is consistent with the actual trading experience through to
September 2023. 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 FY2023;
• employee commission is incurred in line with the gross margin; and
• increased levels of cost to reflect continued investment in our people and the businesses IT infrastructure.

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. Year to date trading to the end of September 2023 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, compared to the base case, include:

• an average 7.5% reduction in revenue;
• 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 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 Boards desired minimum cash position, 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 £21m cost reduction on an annualised basis and additional annual working capital
savings of £30m. The actions which if implemented would offset the reduced activity:

• bonus costs scaled back in line with performance;
• no interim dividend in H2 of FY24;
• 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.

Annual Report and Accounts 2023 Softcat plc

157

Financial statements1 Accounting policies continued
1.2 Basis of preparation continued
Going concern continued
Reverse stress test
The Directors have performed a reverse stress test exercise to assess the impact on liquidity, should a scenario more extreme than the severe but
plausible scenario occur. The impact of these conditions, when combined, would place a strain on liquidity and raise short term concerns to the
business, however, would not result in cash falling below a nil position. 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, compared to the base case, are as follows:

• reduction of 15% in Gross invoiced income, compared to the base case;
• reduced achievable gross margin by 3%;
• additional bad debt write offs of £10m per year across the forecast period; and
• 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, cash may not
be sufficient for day to day operations.

Whilst the Board considers such a scenario to be 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 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 sufficient 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 2024. Accordingly, at the October 2023 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.

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. We 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:

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.

158

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 20231 Accounting policies continued
1.3 Critical accounting judgements and key sources of estimation uncertainty continued
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 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
Finance (No 2) Bill 2023, that includes Pillar Two legislation, was substantively enacted on 20 June 2023. The Company has applied the
mandatory exemption from recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income
taxes as required by the amendments to IAS 12 International Tax Reform-Pillar Two Model Rules which was issued in May 2023.

There have been no other new standards effective, or issued but not yet effective, in the period to 31 July 2023, that materially affect
Softcat. There have also been no changes to accounting standards that will materially affect Softcat based on existing standards.

1.5 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 with the exception of public sector partner business revenue as explained below.
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. 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.

Annual Report and Accounts 2023 Softcat plc

159

Financial statements1 Accounting policies continued
1.5 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 offers access to corporate enterprise agreements, a specific licensing program for eligible customers, exclusively through
a single vendor. 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 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.

160

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 20231 Accounting policies continued
1.5 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.

1.6 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.

1.7 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.

1.8 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.

Annual Report and Accounts 2023 Softcat plc

161

Financial statements1 Accounting policies continued
1.9 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.

1.10 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.

1.11 Cloud software licence agreements
Licence agreements to use cloud software are treated as service contracts and expensed in the Company’s income statement, unless
the Company has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run
the software independently of the host vendor. In such cases, the licence agreement is capitalised as software within intangible assets.
Costs to configure or customise a cloud software licence are expensed alongside the related service contract in the Company’s income
statement, unless they create a separately identifiable resource controlled by the Company, in which case they are capitalised.

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:

162

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 2023

1 Accounting policies continued
1.12 Leases continued
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:

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.

Annual Report and Accounts 2023 Softcat plc

163

Financial statements
1 Accounting policies continued
1.14 Financial instruments continued
Financial assets continued
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.

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.

164

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 20231 Accounting policies continued
1.16 Deferred taxation continued
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 2022 and 31 July 2023.

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 122.

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 target bonus 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.

Annual Report and Accounts 2023 Softcat plc

165

Financial statements1 Accounting policies continued
1.20 Company accounts
The Company has applied the exemption from preparing consolidated accounts available under s402 as the inclusion of subsidiary
undertakings is not material for the purposes of giving a true and fair view. 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.
Cash conversion is an indicator of the Company’s ability to convert profits into available cash.

A reconciliation to the adjusted measure for cash conversion is provided below:

Net cash generated from operating activities
Income taxes paid
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

Notes

2023
£’000

104,802
29,793
134,595
(2,544)
(701)

2022
£’000

83,644
25,344
108,988
(1,890)
(3,334)

131,350

103,764

140,898

136,145

93.2%

76.2%

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

Revenue and gross invoiced income can also be disaggregated by type of business1:

Revenue by type of business:

Small and medium
Enterprise
Public sector

166

Softcat plc Annual Report and Accounts 2023

2023
£’000

188,797
610,638
185,865

2022
£’000

150,000
797,897
130,049

985,300 1,077,946

2023
£’000

2022
£’000

1,543,501 1,365,343
810,241
331,953

617,844
401,963

2,563,308 2,507,537

2023
£’000

555,541
253,229
176,530

2022
£’000

535,823
222,064
320,059

985,300 1,077,946

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 20232 Segmental information continued

Gross invoiced income by type of business:

Small and medium
Enterprise
Public sector

2023
£’000

2022
£’000

1,103,851 1,169,255
427,249
911,033

512,839
946,618

2,563,308 2,507,537

Note:
1. 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 to be recognised as agent under IFRS 15

Revenue

2023
£’000

2022
£’000

2,563,308 2,507,537
(1,578,008) (1,429,573)

985,300 1,077,946

The total revenue for the Company for the year has been derived from its principal activity as an IT reseller. Substantially all of this revenue
relates to trading undertaken in the United Kingdom.

During the period there was no direct customer (FY22: one) 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 FY22 was £251.3m and £227.5m respectively.

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
Fees payable for audit-related services

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.

4 Finance income and finance cost

Bank interest income
Interest on tax
Lease liability interest cost

2023
£’000

2,466
2,127
1,525
83
(1,052)
515,477
(1,038)

2022
£’000

2,373
1,594
558
32
2,938
705,539
1,544

733
—

733

545
133

678

2023
£’000

1,171
—
(205)

2022
£’000

60
192
(253)

Annual Report and Accounts 2023 Softcat plc

167

Financial statements
5 Income tax
The major components of the income tax expense for the years ended 31 July 2023 and 31 July 2022 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/ other 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 2023 and 2022:
Profit on ordinary activities before taxation

Profit on ordinary activities before taxation multiplied by the standard rate of UK
corporation tax of 21% (2022: 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

Income tax charge reported in profit or loss

2023
£’000

2022
£’000

30,414
(160)
—
—

25,979
52
(2)
3

30,254

26,032

(275)
229
(373)

(419)

(110)
7
(190)

(293)

29,835

25,739

141,864

136,144

29,791

25,867

267
69
(373)
1
74
6

112
59
(190)
1
(110)
—

(128)

29,835

25,739

In the year ended 31 July 2023, £159,460 (2022: £616,745) of current tax was credited to equity and £69,825 (2022: £933,778 debit)
of deferred tax was credited to equity.

6 Dividends

Declared and paid during the year
Special dividend on ordinary shares (12.6p per share (2022: 20.5p))
Final dividend on ordinary shares (16.6p per share (2022: 14.4p))
Interim dividend on ordinary shares (8.0p per share (2022: 7.3p))

2023
£’000

2022
£’000

25,122
33,098
15,955

74,175

40,806
28,663
14,551

84,020

A final dividend of 17.0p per share has been recommended by the Directors and if approved by shareholders will be paid on 19 December 2023.
The final ordinary dividend will be payable to shareholders whose names are on the register at the close of business on 10 November 2023.
Shares in the Company will be quoted ex-dividend on 9 November 2023. The dividend reinvestment plan (‘DRIP’) election date is
28 November 2023.

168

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 2023

6 Dividends continued
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 2023 alongside the final ordinary dividend.

The Board recommends the final and special dividend for shareholders’ approval.

Softcat’s ordinary 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 78 and pages 140 and 141 respectively.

7 Property, plant and equipment

Cost
At 1 August 2021
Additions

At 31 July 2022
Additions

At 31 July 2023

Depreciation
At 1 August 2021
Charge for the year

At 31 July 2022
Charge for the year

At 31 July 2023

Net book value
At 31 July 2023

At 31 July 2022

Freehold
land and
buildings
£’000

2,649
—

2,649
168

2,817

231
25

256
25

281

2,536

2,393

Building
improvements
£’000

Computer
equipment
£’000

Fixtures,
fittings and
equipment
£’000

Motor
vehicles
£’000

7,963
98

8,060
966

9,026

1,926
1,149

3,075
1,151

4,226

4,800

4,985

1,292
647

1,940
324

2,264

623
512

1,135
514

1,649

615

805

3,721
1,082

4,803
528

5,331

1,141
642

1,783
717

2,500

2,831

3,020

152
63

215
558

773

102
45

148
59

207

566

Total
£’000

15,777
1,890

17,667
2,544

20,211

4,024
2,373

6,397
2,466

8,863

11,348

11,270

Freehold land amounting to £1.4m (2022: £1.4m) has not been depreciated. No assets are subject to restrictions on title or are pledged
as security for liabilities (2022: £Nil).

Annual Report and Accounts 2023 Softcat plc

169

Financial statements
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 3 and 10 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

2023
£’000

6,162
5,934
(2,127)

9,969

2022
£’000

7,022
734
(1,594)

6,162

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

2023
£’000

6,666
5,934
205
(3,044)

9,761

2022
£’000

8,302
734
253
(2,623)

6,666

2,734
7,027

2,716
3,950

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 2023

Termination options expected to be exercised

As at 31 July 2022

Termination options expected to be exercised

Within five
years
£’000

More than
five years
£’000

—

Within five
years
£’000

More than
five years
£’000

4,376

1,279

Total
£’000

—

Total
£’000

5,655

Following the lease modifications above, the termination options on existing property leases were no longer expected to be utilised.

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 £82,569 (2022: £31,656).

170

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 2023

9 Intangible assets

Cost
At 1 August 2021
Additions
Reclassifications

At 31 July 2022
Additions
Reclassifications

At 31 July 2023

Amortisation
At 1 August 2021
Charge for the year

At 31 July 2022
Charge for the year

At 31 July 2023

Net book value
At 31 July 2023

At 31 July 2022

Software
under
development
£’000

4,833
3,195
(8,028)

—
—
—

—

—
—

—

Computer
software
£’000

Total
Intangibles
£’000

888
139
8,028

9,055
702
—

9,757

519
558

1,077
1,525

2,602

7,155

7,978

5,721
3,334
—

9,055
702
—

9,757

519
558

1,077
1,525

2,602

7,155

7,978

Software under development as capitalised in FY22 related to the new enterprise resource planning (ERP) system being designed and
built internally. This was completed and put in to use in FY22. The net book value of this asset as at the end of FY23 is £6.549m with a
remaining useful economic life of 6 years.

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

The amount of any write down of inventory recognised as an expense in the year was £Nil (2022: £Nil).

11 Trade and other receivables

Trade and other receivables
Provision against receivables

Net trade receivables
Unbilled receivables
Prepayments
Accrued income
Deferred costs

2023
£’000

3,591

2022
£’000

5,104

2023
£’000

2022
£’000

429,569
(3,920)

497,308
(4,958)

425,649
34,508
6,344
9,270
14,270

492,350
26,192
4,338
10,534
8,010

490,041

541,424

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.

Annual Report and Accounts 2023 Softcat plc

171

Financial statements

11 Trade and other receivables continued
The ageing profile of trade receivables was as follows:

Current
0–30 days
31–60 days
61–90 days
Over 90 days

Total due

2023
£’000

309,006
76,269
22,331
11,892
10,071

Related
provision
£’000

Net
£’000

(2,478) 306,528
75,873
22,137
11,752
9,358

(396)
(194)
(140)
(712)

2022
£’000

335,579
79,981
28,402
26,332
27,014

Related
provision
£’000

(3,453)
(622)
(227)
(43)
(613)

Net
£’000

332,126
79,359
28,175
26,289
26,401

429,569

(3,920) 425,648

497,308

(4,958)

492,350

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

Set out below is the information about the credit risk exposure on Softcat’s trade receivables:

31 July 2023

Current
£’000

<30 days
£’000

31–60 days
£’000

61–90 days
£’000

Expected credit loss rate
Estimated total gross carrying amount at default
Expected credit loss

0.80%
309,006
(2,478)

0.52%
76,269
(396)

0.87%
22,331
(194)

1.18%
11,892
(140)

2023
£’000

4,958
604
(1,642)

3,920

2022
£’000

3,415
4,207
(2,663)

4,958

>91 days
£’000

7.07%
10,071
(712)

Total
£’000

0.91%
429,569
(3,920)

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

1.273%
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)

Unbilled receivables and accrued income have been reviewed by management and have been determined to have an immaterial
impact on our expected credit losses. The Company does not hold collateral as security.

As part of our assessment of expected credit losses, we assess for specific potentially uncollectable debt as well as wider macro-economic
factors that may require provision. See note 21 for details on how the Company approaches its exposure to credit risk.

12 Trade and other payables

Trade payables
Other taxes and social security
Accruals
Other creditors

2023
£’000

254,907
13,699
90,222
799

2022
£’000

280,769
23,078
115,261
—

359,627

419,108

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

172

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 2023

13 Contract liabilities

Deferred income

Deferred income is split as follows:

Short term deferred income
Long term deferred income

2023
£’000

2022
£’000

26,883

35,184

2023
£’000

23,851
3,032

26,883

2022
£’000

31,564
3,620

35,184

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, £31.564m (2022: £12.759m)
has been recognised in revenue resulting from these contract liabilities existing as at 31 July 2022. As at 31 July 2023, £26.883m
remains on the Statement of Financial Position as a contract liability resulting from transactions arising from the year to 31 July 2023
Softcat expects that £23.851m of the balance as at 31 July 2023 will be released in FY23 with the balance released within 2–5 years
of the end of FY23.

14 Cash and cash equivalents

Cash at bank and in hand

2023
£’000

122,621

2022
£’000

97,316

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 2022 (PY: 31 July 2021)
Adjustment in respect of prior years
Profit and loss account
Credit/(charge) to equity

Balance at 31 July 2023 (PY: 31 July 2022)

2023
£’000

(313)
1,969
1,341

2,997

2023
£’000

2,508
(229)
648
70

2,997

2022
£’000

95
1,442
971

2,508

2022
£’000

3,149
(7)
300
(934)

2,508

The Company recognises all deferred tax movements in the year within the income statement, except for £69,825 (2022: £933,778 credit)
debited to equity in relation to deferred tax movements on share-based payments.

Annual Report and Accounts 2023 Softcat plc

173

Financial statements

15 Deferred tax continued
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.

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

2023

2022

Income
statement
£’000

(160)
30,414

30,254

—

(458)
408
(369)

(419)

SOCIE
£’000

Total
£’000

—
(160)

(160)

(160)
30,254

30,094

—

(70)
—
—

(70)

—

(528)
408
(369)

(489)

Income
statement
£’000

52
25,979

26,031

(222)
18
95

(293)

29,835

(230)

29,605

25,739

SOCIE
£’000

Total
£’000

—
(617)

(617)

—

934
—
—

934

317

52
25,363

25,415

712
18
95

641

26,056

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 £738,372 (2022: £570,782) were outstanding.

Contributions payable by the Company for the year

2023
£’000

3,671

2022
£’000

2,813

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
199,555,082 (2022: 199,354,076) ordinary shares of 0.05p each
18,933 (2022: 18,933) deferred shares1 of 1p each

Note:
At 31 July 2023 deferred shares had an aggregate nominal value of £189.33 (2022: £189.33).

2023
£’000

2022
£’000

100
—

100

100
—

100

In the year ended 31 July 2023, 174,791 (2022: 305,266) new ordinary shares were issued to satisfy the exercise of share options and
26,215 ordinary shares (2022: 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 2023 (2022: 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 2023 the SIP Trust returned £Nil (2022: £Nil) to the Company through share recycling.

174

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 2023

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 expected 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 in inventory
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables and contract liabilities

Cash generated from operations
Income taxes paid

Net cash from operating activities

20 Financial commitments
Guarantees
As at the reporting date, Softcat plc has a class guarantee facility of £Nil (2022: £Nil) with HSBC UK Bank plc.

2023
p

56.2
56.0

2022
p

55.5
55.3

2023
£’000

2022
£’000

112,029

110,405

2023
’000

2022
’000

199,237
922

198,976
884

200,159

199,443

2023
£’000

140,898
2,466
2,127
1,525
—
(66)
3,330

150,280
1,513
51,383
(68,581)

134,595
(29,793)

2022
£’000

136,145
2,373
1,594
558
—
(215)
2,541

142,996
33,307
(211,694)
144,379

108,988
(25,344)

104,802

83,644

Annual Report and Accounts 2023 Softcat plc

175

Financial statements

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

2023
£’000

2022
£’000

122,621
469,427

97,316
529,076

592,048

626,392

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 2023, there remained a receivable of £208,374
(2022: £627,779 receivable) on the Statement of Financial Position. The receivable recognised at the 31 July 2022 was due
to timing difference 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

2023
£’000

2022
£’000

(254,907)
(90,222)
(9,761)

(280,769)
(115,261)
(6,666)

(354,890)

(402,696)

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.

176

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 2023

21 Financial instruments and financial risk management continued
Financial risk management continued
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.

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 2023, the Company had 2,151 customer accounts (2022: 2,173)
that owed the Company more than £25,000 each. These accounts accounted for approximately 22% (2022: 20%) of total customers
and 91% (2022: 92%) of the total value of amounts receivable. There were 778 customers (2022: 841 customers) with balances greater
than £100,000 accounting for just over 8% (2022: 8%) of the total number of receivable accounts and 75% (2022: 78%) of the total
value of amounts receivable.

The Company continues to monitor the impact of the current macro-economic environment, for example the cost of living crisis and how
this impacts our customer base. The receivables balance continues to be well diversified and individual customers typically represent a
very small proportion of the outstanding balance.

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 2023, no more than
3.3% (2022: 3%) 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. Cash balances are only held across a number of financial institutions and only with financial institutions with a credit
rating at least one grade above investment grade. Credit ratings are reviewed on a regular basis.

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:

2023
Trade payables
Accruals
Lease liabilities

2022
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

(254,907)
(90,222)
(2,734)

—
—
(2,162)

—
—
(5,060)

— (254,907)
— (90,222)
(11,188)

(1,232)

(347,863)

(2,162)

(5,060)

(1,232)

(356,317)

(280,769)
(115,261)
(2,716)

(398,746)

—
—
(1,829)

(1,829)

—
—
(1,722)

(1,722)

— (280,769)
(115,261)
—
(7,365)
(1,098)

(1,098)

(403,395)

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.

Annual Report and Accounts 2023 Softcat plc

177

Financial statements21 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 2023 the Company had £Nil capital commitments (2022: £Nil).

23 Directors’ remuneration

Remuneration for qualifying services
Company pension contributions to defined contribution schemes

2023
£’000

2,521
3

2,524

2022
£’000

2,619
15

2,634

During the year ended 31 July 2023 the Directors of the Company were awarded a total of 107,110 LTIP shares (2022: 70,470)
at an average exercise price of £Nil (2022: £Nil) and 52,591 shares (2022: 35,590) under the FY17 Deferred Share Bonus Plan.

The number of Directors for whom retirement benefits are accruing under defined contribution schemes amounted to one (2022: one).
The number of Directors who are entitled to receive shares under long-term incentive schemes during the year was two (2022: two).

Gains on share options exercised in the year were £1,155,578 (2022: £2,612,553).

Share-based payment charges include £1,163,390 (2022: £983,983) in respect of Directors.

For further information on Directors remuneration, please also see pages 114 to 134.

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

2023
Number

1,415
377
359

2,151

2023
£’000

157,680
18,535
3,671

179,886
3,330

2022
Number

1,141
332
323

1,796

2022
£’000

131,296
16,205
2,813

150,314
2,541

Total employment costs including share option charge

183,216

152,855

178

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 2023

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

2023
£’000

3,330

464

3,794

2022
£’000

2,541

220

2,761

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 122.

During the year 107,110 (2022: 70,470) 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 £1,082,899 (2022: £980,942). 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 2023

31 July 2022

EPS

60%
12.59
—
3.00%
51%
—%
3

12.59

TSR

40%
12.59
—
3.00%
51%
—%
3

6.40

EPS

50%
18.63
—
0.10%
51%
—%
3

18.63

TSR

50%
18.63
—
0.10%
51%
—%
3

9.22

Expected volatility has been determined using historical data reflecting share price movements covering the financial year.

During the year 70,035 (2022: 125,000) LTIP options were exercised with an average weighted share price at the date of exercise
of £11.99 (2022: £18.45).

Deferred Share Bonus Plan
One-third of the Executive Directors’ annual bonus is paid in deferred shares. In the year 52,591 (2022: 35,590) deferred shares relating
to the 2020 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 £726,451 (2022: £663,063).

During the year 26,215 (2022: 16,596) options arising from deferred share bonus plans were exercised with an average weighted share
price at the date of exercise of £12.01 (2022: £18.47).

Annual Report and Accounts 2023 Softcat plc

179

Financial statements
25 Share option schemes continued
LTIP continued
Executive Directors continued
Senior management
An award of 242,263 (2022: 121,508) 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 £2,672,247 (2022: £2,037,325). 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 £12.59 (2022: £18.63) at grant date. The resultant fair value
is then recognised over the performance period.

During the year 50,082 shares (2022: 51,032) 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 8.19 years (2022: 8.05 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 2023 the SIP Trust held 579,582 (2022: 592,575) ordinary shares in the Company. The market value of the shares held by
the SIP Trust as at 31 July 2023 was £8.7m (2022: £8.3m).

The weighted average remaining contractual life of share-based payment arrangements at the year end was 3.36 years
(2022: 3.36 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 2023

Weighted
average
exercise
price
£

No. of
shares
as at
31 July 2022

—
927,021
— 401,964
— (50,082)
— (217,681)

1,061,222

241,560

— 1,098,374
232,832
—
(51,032)
—
(353,153)
—

927,021

251,268

The fair value of share-based payment arrangements granted in the year was £4,222,307 (2022: £3,747,316), relating entirely to Long
Term Incentive Plan awards.

The weighted average remaining contractual life of share-based payment arrangements at the year end was 7.43 years (2022: 7.21 years).

26 Post balance sheet events
Dividend
A final dividend of 17.0p per share has been recommended by the Directors and if approved by shareholders will be paid on
19 December 2023. The final ordinary dividend will be payable to shareholders whose names are on the register at the close of business
on 10 November 2023. Shares in the Company will be quoted ex-dividend on 9l November 2023. The dividend reinvestment plan
(‘DRIP’) election date is 28 November 2023.

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 2023 alongside the final ordinary dividend.

180

Softcat plc Annual Report and Accounts 2023

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 JULY 202327 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
Key management personnel share-based payment charges

2023
£’000

2,955
6
1,391

4,352

Key management personnel received a total of 177,283 share awards (2022: 117,228) at a weighted average exercise price
of £Nil (2022: £Nil).

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key
management personnel.

Dividends to Directors

M Hellawell
G Watt
G Charlton
R Perriss
V Murria
K Mecklenburgh
K Slatford
L Weedall

Katy Mecklenburgh started on 19 June 2023.

2023
£’000

1,563
32
44
6
62
—
—
—

1,707

2022
£’000

3,061
23
1,083

4,164

2022
£’000

1,773
18
37
6
70
—
—
—

1,904

Annual Report and Accounts 2023 Softcat plc

181

Financial statements

COMPANY INFORMATION AND CONTACT DETAILS

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
Graeme Watt (Non-Executive Chairman)
Graham Charlton (CEO)
Katy Mecklenburgh (CFO)
Robyn Perriss (Independent NED)
Vin Murria OBE (Independent NED)
Lynne Weedall (Independent NED)
Mayank Prakash (Independent NED)

Company Secretary
Luke Thomas

Investor relations contact
investors@softcat.com

Softcat LEI
213800N42YZLR9GLVC42

Registrar
Link Group
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 17.30pm, 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

182

Softcat plc Annual Report and Accounts 2023

Financial statements

CBP021508

Softcat plc’s commitment to environmental issues is reflected in this Annual Report, which has been
printed on Arena Extra White Smooth, 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.

Softcat plc
Fieldhouse Lane
Marlow
Buckinghamshire SL7 1LW

Tel: 01628 403 403