Softcat plc Annual Report and Accounts 2023

Softcat plc

Annual Report and Accounts 2023

CO EC

WELCOME

CREATING

OPPORTUNITIES

TO GROW AND

CO EC

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.

Financial highlights

Operating proﬁt £m

£140.9

140.9

136.1

119.4

93.7

84.5

Gross proﬁt £m

£373.8

373.8

276.4

235.7

211 . 1

327.2

Gross proﬁt per customer £’000

£ 37. 0

37.0

33.0

28.4

24.8

23.0

Revenue £m

£985.3

985.3

1,077.9

784.0

Customer base ’000

10.1

9.7

9.5

9.2

9.9

Cash conversion %

93.2

76.2

89.9

88.0

92.0

2,563.3

2,507.5

1,646.2

1,414.1

1,938.4

Gross invoiced income £m

£2,563.3

1–78

Strategic report

Highlights

2 Celebrating 30 years

At a glance

6 Strategic roadmap

7 Investment case

8 How we connect

Chairman’s statement

14 Group Q&A

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

Social value

50 Task Force on Climate-related Financial

Disclosures (‘TCFD’) and Sustainability

Risk management

79–142

Corporate governance

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

143–182

Financial statements

14 4

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

Contents

For more information visit:

www.softcat.com

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

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.

HIGHLIGHTS

SUSTAINED PERFORMANCE

Strategic report

1Annual Report and Accounts 2023 Softcat plc

A 30 YEAR

JOURNEY...

CELEBRATING 30 YEARS

1993 1995 2002

2017

201320142 015

2019 2020

Founded by Peter Kelly

Software catalogue

became Softcat

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.

Softcat launches eCat: its online

purchasing platform

forcustomers

Listed on the London

Stock Exchange

6th Best Workplace in Europe

Turnover reached

£500m

99%

Customer satisfaction for

seven years in a row

Ranked 6th as Rate my Apprenticeships

Top 100 Employers

Launched the Softcat

Community Network

2 Softcat plc Annual Report and Accounts 2023

...AND BEYOND

2007

2023

Employees built an

orphanage in Fiji

Opened the London ofﬁce

Sunday Times No.1 Best Small

Company to Work For

2021

Softcat became the UK’s NO.1 VAR

Transformed part of our Marlow ofﬁce

into a COVID-19 vaccination centre

First FTSE 250 Company to receive

5*from UN for Sustainable

DevelopmentGoals

Opened the

Newcastle ofﬁce

2010

Charity donations exceeded

£100k

2 011

Moved to Marlow

Turnover reached

£50m

2004

Second ofﬁce opened

in Manchester

Turnover reached

£100m

2008

3Annual Report and Accounts 2023 Softcat plc

Strategic report

AT 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:

Our vendors

We’re proud to collaborate and work closely with allthe biggest global technology vendors,

as well as emerging innovators, to deliver the broadest possible choice for our customers.

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

Strategic report

21Annual Report and Accounts 2023 Softcat plc

Our addressable market

Opportunities for Softcat

OUR MARKET AND OFFERING

WE PROVIDE A BROAD

PORTFOLIO OF TECHNOLOGY

SOLUTIONS AND SERVICES

INAGROWING MARKET

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 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.

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.

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.

22 Softcat plc Annual Report and Accounts 2023

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

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.

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.

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.

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

£80

£90

£70

£60

£50

£40

£30

£20

£10

£0

2020

9.1% CAGR

2 021 2022 2024

Forecast

2025

Forecast

2026

Forecast

2027

Forecast

£71.4

£77.5

£83.7

£65.3

£59.8

£56.0

£49.2

£46.0

2023

Addressable market 2020–2027 (£bn)

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

Strategic report

23Annual Report and Accounts 2023 Softcat plc

OUR MARKET AND OFFERING CONTINUED

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.

GROWING OUR OFFERING

INANEXPANDING AND

EVOLVING MARKET

Employees with critical IT skills are

switching employers, and CIOs are

losing talented employees faster than

they can hire.

Gartner

July 2023

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.

24 Softcat plc Annual Report and Accounts 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.

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

Strategic report

25Annual Report and Accounts 2023 Softcat plc

OUR MARKET AND OFFERING CONTINUED

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.

95%

of organisations agree that a digital

workspace is important

(Source: Dizzion Digital Workplace: Deﬁnition, Drivers

and Best Practices (smarp.com))

87%

of businesses plan to accelerate their cloud migration

(Source: Logic Monitor cloud survey)

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))

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.

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.

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.

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)

Our customers’ top ﬁve IT priorities

26 Softcat plc Annual Report and Accounts 2023

Awards we have won

Our vendors

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.

Strategic report

27Annual Report and Accounts 2023 Softcat plc

OUR STRATEGY

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

£40k

£45k

£35k

£30k

£25k

£20k

£15k

£10k

£5k

£0k

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

28 Softcat plc Annual Report and Accounts 2023

ACQUIRE

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.

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

KPIs

+2%

Customer base increased

by 2% to 10,110

97%

Customer satisfaction

Strategic report

29Annual Report and Accounts 2023 Softcat plc

STRATEGY CONTINUED

STRATEGY IN ACTION

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 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

Scale up device and peripheral

supply chain to match

ongoing demand

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.”

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

Scan the QR code above

toread the full article

NG Bailey

30 Softcat plc Annual Report and Accounts 2023

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 CO

saved

through device reuse

10,000kg of CO

saved

through recycling

Morrisons

Key facts

Leading UK food and

grocery retailer

Over 500 sites

and multiple online

delivery channels

Provider of high quality

fresh food products

Scan the QR code above

toread the full article

Strategic report

31Annual Report and Accounts 2023 Softcat plc

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.

SUMMARY RESULTS ANDKPIS

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 invoiced income reﬂects gross income

billed to customers adjusted fordeferred and

accrued items.

Comments

• Gross proﬁt comprises revenue net ofthird

party product costs, supplier rebates and

certain internal direct costs.

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’ remuneration

• 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

• Operating proﬁt comprises gross proﬁt net

ofadministrative expenses.

Link to Directors’ remuneration

• 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.

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.

Financial

Revenue £m

2222

2121

2020

2,507.5

1,938.4

1,414.1

1,646.2

55.5

48.4

34.6

38.2

1919

Gross invoiced income £m

Gross proﬁt £m

Basic earnings per share p

Operating proﬁt £m

Cash conversion %

Strategic link Strategic link Strategic link

784.0

1,077.9

327.2

235.7

211 . 1

276.4

136.1

119.4

93.7

84.5

76.2

89.9

88.0

92.0

2,563.3

56.2

23 23

93.2

2323

985.3

373.8 140.9

32 Softcat plc Annual Report and Accounts 2023

Comments

• The employee engagement score is derived

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’ remuneration

• 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.

Comments

• Customer satisfaction is deﬁned as the

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’ remuneration

• 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.

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.

Non-ﬁnancial

Read more in our Chief Financial Ofﬁcer’s

Review; seepages 34 and 35

Employee engagement score % Customer satisfaction %

Gross proﬁt per customer £’000 Customer base ’000

Strategic link

Strategic link Strategic link

Link to strategy:

33.0

28.4

24.8

23.0

9.9

9.7

9.5

9.2

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

comparative basis for 2021 to 2023.

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.

People

and culture

Ease of

doing business

Maintain relevance

and expand our

addressable market

Acquire

more customers

Sell more to

existing customers

37.0

10.1

Strategic report

33Annual Report and Accounts 2023 Softcat plc

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

Financial summary FY2023 FY2022 Change

Revenue £985.3m £1,077.9m (8.6)%

Revenue split

Software £188.8m £150.0m 25.9%

Hardware £610.6m £797.9m (23.5)%

Services £185.9m £130.0m 42.9%

Gross invoiced income (GII)

£2,563.3m £2,507.5m 2.2%

GII split

Software £1,543.5m £1,365.3m 13.0%

Hardware £617.8m £810.2m (23.7)%

Services £402.0m £332.0m 21.1%

Gross proﬁt (GP) £373.8m £327.2m 14.2%

Gross proﬁt margin 37.9% 30.4% 7.5%

Operating proﬁt £140.9m £136.1m 3.5%

Operating proﬁt margin 14.3% 12.6% 1.7%

Gross proﬁt per customer

£37.0k £33.0k 12.2%

Customer base

10.1k 9.9k 1.9%

Cash conversion

93.2% 76.2% 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.

ANOTHER YEAR

OF PROFITABLE

GROWTH

CHIEF FINANCIAL OFFICER’S REVIEW

34 Softcat plc Annual Report and Accounts 2023

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:

2023

£’000

2022

£’000

Net cash generated from operating

activities 104,802 83,644

Income taxes paid 29,793 25,344

Cash generated from operations 134,595 108,988

Purchase of property, plant and equipment (2,544) (1,890)

Purchase of intangible assets (701) (3,334)

Cash generated from operations,

netofcapital expenditure 131,350 103,764

Operating proﬁt 140,898 136,145

Cash conversion ratio 93.2% 76.2%

Katy Mecklenburgh

Chief Financial Ofﬁcer

23 October 2023

Strategic report

35Annual Report and Accounts 2023 Softcat plc

SECTION 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.

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.

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.

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

36 Softcat plc Annual Report and Accounts 2023

Our employees are at the heart of our business

and help to drive Softcat’s continued success

Employees

Understanding the needs of our customers in

order to build enduring relationships is critical

to Softcat’s strategy

Customers

Our strong relationships with our suppliers and

vendors help us provide the best solutions and

support for our employees and customers

Suppliers and vendors

Investors are the owners of the Company and

have made a ﬁnancial commitment to the

success of Softcat

Investors

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

Communities and the environment

Our key stakeholders

Strategic report

37Annual Report and Accounts 2023 Softcat plc

SECTION 172  STAKEHOLDER ENGAGEMENT CONTINUED

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.

Employees

38 Softcat plc Annual Report and Accounts 2023

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

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.

Customers

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.

• 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.

Case study

Strategic report

39Annual Report and Accounts 2023 Softcat plc

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.

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.

Suppliers and vendors

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.

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 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

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.

Case study

SECTION 172  STAKEHOLDER ENGAGEMENT CONTINUED

40 Softcat plc Annual Report and Accounts 2023

Investors are the owners of the Company and

have made a ﬁnancial commitment to the success

of Softcat.

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.

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

• 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).

Communities and

the environment

Investors

Strategic report

41Annual Report and Accounts 2023 Softcat plc

EMPLOYEE ENGAGEMENT

HAPPY EMPLOYEES =

HAPPY CUSTOMERS

2023 highlights

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

2,315

Employees

21 %

Headcount increase

97%

Customer satisfaction

42 Softcat plc Annual Report and Accounts 2023

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.

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.

In focus

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.

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.

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.

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.

Kick Off

See In focus, opposite.

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.

How do we engage with our employees?

Strategic report

43Annual Report and Accounts 2023 Softcat plc

SOCIAL VALUE

Board of Directors Total permanent employees

Ethnicity breakdown

Senior Leadership Team

Total permanent employees

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

2022

2023

2020202120222023

2023 2022 2021 2020

2020

2021

2022

2021

A SUSTAINABLE BUSINESS

FORASUSTAINABLE FUTURE

Our people

Diversity as at 31 July

Gender breakdown

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

Ethnic: 13%

White British and White Other: 87%

Ethnic: 17%

White British and White Other: 83%

2023

Ethnic: 15%

White British and White Other: 85%

Female: 57%

Male: 43%

Female: 50%

Male: 50%

Female: 50%

Male: 50%

Female: 20%

Male: 80%

Female: 20%

Male: 80%

Female: 57%

Male: 43%

Female: 22%

Male: 78%

Female: 30%

Male: 70%

Female: 33%

Male: 67%

Female: 33%

Male: 67%

Female: 33%

Male: 67%

Female: 35%

Male: 65%

44 Softcat plc Annual Report and Accounts 2023

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

1,681

1,534

1,330

1,188

1, 9 21

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

PEOPLE

Strategic report

45Annual Report and Accounts 2023 Softcat plc

SOCIAL VALUE CONTINUED

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.

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.

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!

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.

46 Softcat plc Annual Report and Accounts 2023

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.

Armed Forces 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.

EDN 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.

Faith 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.

Ethnic and Cultural

Diversity Network

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.

The Family Network ensures that, as an organisation, we focus

oncreating a culture where our employees can balance family

commitments with work responsibilities.

Family Network

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.

Supporting Women

in Business Network (‘SWIB’)

Seven networks.

One community.

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.

47Annual Report and Accounts 2023 Softcat plc

Strategic report

SOCIAL 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.

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.

48 Softcat plc Annual Report and Accounts 2023

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.

Tax contributions 2023 Tax contributions 2022

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.

Strategic report

49Annual Report and Accounts 2023 Softcat plc

Corporation tax: £29.8m

Employment taxes: £63.9m

VAT: £80.1m

Other rates/taxes: £2.6m

Corporation tax: £25.3m

Employment taxes: £52.0m

VAT: £71.8m

Other rates/taxes: £1.8m

£176.4m £150.9m

TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY

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.

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.

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.

Environment, climate change and Task Force on Climate-related

Financial Disclosures (‘TCFD’)

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.

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

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.

Take urgent action to combat

climatechange and impact.

Strengthen the means of implementation

and revitalise the global partnership

forsustainable development.

Promote sustained, inclusive and

sustainable economic growth, full and

productive employment and decent

work for all.

Reduce inequality within and

amongcountries.

50 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

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.

Strategy 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.

Strategic report

51Annual Report and Accounts 2023 Softcat plc

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 Comments and next steps

Governance

1) Board oversight of

climate-related risks and

opportunities.

(Pages 54 and 55)

Compliant

The Sustainability Committee monitors

climate-related risks, opportunities and

disclosures and reports to the Board.

Governance

2) Management’s role in

assessing and managing

climate-related risks and

opportunities.

(Pages 54 and 55)

Compliant

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.

Strategy

3) Climate-related risks and

opportunities the organisation

has identiﬁed over the short,

medium and long term.

(Page 56)

Compliant

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.

Strategy

4) Impact of climate-related risks

and opportunities on the

business, strategy and

ﬁnancial planning.

(Pages 56 to 63)

Compliant

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.

Strategy

5) Resilience of strategy, taking

into consideration different

future climate scenarios.

(Pages 56 to 63)

Compliant

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.

Risk management

6) Processes for identifying and

assessing climate-related risks.

(Page 64)

Compliant

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.

TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

52 Softcat plc Annual Report and Accounts 2023

TCFD pillar TCFD recommended disclosures

Cross-reference (within this

AnnualReport) or reason

fornon-compliance Comments and next steps

Risk management

7) Processes for managing

climate-related risks.

(Page 64)

Compliant

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.

Risk management

8) Processes for identifying,

assessing and managing

climate-related risks

integrated into the

organisation’s overall

riskmanagement.

(Page 64)

Compliant

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.

Metrics

and targets

9) Metrics used to assess

climate-related risks

andopportunities.

(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.

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.

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

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.

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.

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.

Strategic report

53Annual Report and Accounts 2023 Softcat plc

Environment, climate change and Task Force on Climate-related Financial Disclosures

(‘TCFD’) continued

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.

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.

TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

54 Softcat plc Annual Report and Accounts 2023

Strategic report

55Annual Report and Accounts 2023 Softcat plc

Sustainability governance structure

Board

Overall strategic direction

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

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

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

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

Environment, climate change and Task Force on Climate-related Financial Disclosures

(‘TCFD’) continued

TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

56 Softcat plc Annual Report and Accounts 2023

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:

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

Softcat’s framework for sustainability

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.

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.

Solutions

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.

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 CO

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 CO

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 CO

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.

Strategic report

57Annual Report and Accounts 2023 Softcat plc

Environment, climate change and Task Force on Climate-related Financial Disclosures

(‘TCFD’) continued

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 Horizon Milestone year

Short term 2023 to 2030 2026

Medium term 2030 to 2040 2035

Long term 2040 to 2050 2045

Consistent with TCFD, our assessment covered the following:

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 £100k–£500k

Moderate £500k–£3m

Major £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.

TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

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.

physical risks:

resulting from climate

change events and changes

in weather. These can be

acute (event driven) or

chronic (long-term shifts);

58 Softcat plc Annual Report and Accounts 2023

Risks

Physical risk

category Identiﬁed risk and timeframe Current or future control measure

Relevant

emissions

scenario

Potential

ﬁnancial

impact

Acute

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.

Medium

High





Potential ﬁnancial impacts include:

• reduced revenue due to decrease in productivity and availability

ofworkforce;

• increased costs associated with ofﬁce leases;

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

• increased energy consumption costs.

Chronic

Long-term increased temperature increases in

theUKand Ireland, leading to business disruptions

or damaged infrastructure.

Link to principal risk: we have robust plans

tocombat the risk of business interruption

(see page 76).

Timeframe of potential materialisation:

Medium, Long

Softcat leases its premises, providing opportunity

toseek out modern spaces more resilient to

climate change.

Remote/hybrid working is available to all employees,

providing ﬂexibility during challenging conditions.

Our ofﬁces our modern and energy-efﬁcient.

Medium

High





Potential ﬁnancial impacts include:

• reduced revenue due to decrease in productivity and availability

ofworkforce;

• increased costs associated with ofﬁce leases;

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

• 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.

Link to principal risk: we have robust plans

tocombat the risk of business interruption

(seepage 76).

Timeframe of potential materialisation:

Medium, Long

Softcat leases its premises, providing opportunity

toseek out modern spaces more resilient to

climate change.

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.

Medium

High





Potential ﬁnancial impacts include:

• reduced revenue due to decrease in productivity and potential

closure of select ofﬁces;

• increased costs associated with ofﬁce leases;

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

• higher energy consumption costs.

Strategic report

59Annual Report and Accounts 2023 Softcat plc

Key to potential ﬁnancial impact:



Low



Medium



High

Environment, climate change and Task Force on Climate-related Financial Disclosures

(‘TCFD’) continued

Climate-related risks and opportunities continued

Risks continued

Transition risk

category Identiﬁed risk and timeframe Current or future control measure

Relevant

emissions

scenario

Potential

ﬁnancial

impact

Policy and

legal

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.

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.

Net zero

Low

Medium









Potential ﬁnancial impacts include:

• increased input costs incurred through vendor and partner products;

• increased property costs associated with enhanced

buildingstandards;

• reduced revenue from potential termination of relationships with suppliers

unable to transition to net zero;

• costs from ﬁnes or increased carbon taxes; and

• reduced investment from non-compliance.

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

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.

Net zero

Low

Medium









Potential ﬁnancial impacts include:

• increased capital allocation to low-carbon technologies and

toretroﬁt ofﬁce spaces for low-carbon technology; and

• increased cost to accommodate changing energy tariffs.

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

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

low-carbon products; and

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

TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

Key to potential ﬁnancial impact:



Low



Medium



High

60 Softcat plc Annual Report and Accounts 2023

Transition risk

category Identiﬁed risk and timeframe Current or future control measure

Relevant

emissions

scenario

Potential

ﬁnancial

impact

Market

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.

Net zero

Low

Medium









Potential ﬁnancial impacts include:

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

• reduced capital and investment due to lower performance; and

• increased expenditure on employee upskilling.

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

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









Potential ﬁnancial impacts include:

• reduced revenue from supply chain disruption and delays

inprocurement;

• decrease in revenue due to increases in product prices and

customers identifying cheaper alternatives; and

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

as a result of increased supply chain costs.

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

We have developed and are communicating a

clear climate change strategy and our targets to

reduce carbon emissions.

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.

Net zero

Low

Medium









Potential ﬁnancial impacts include:

• reduced revenue from customers as a result of impacted

marketpositioning; and

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

Key to potential ﬁnancial impact:



Low



Medium



High

Strategic report

61Annual Report and Accounts 2023 Softcat plc

Environment, climate change and Task Force on Climate-related Financial Disclosures

(‘TCFD’) continued

Climate-related risks and opportunities continued

Opportunities

Category Identiﬁed opportunity and timeframe Potential impact

Relevant

emissions

scenario

Potential

ﬁnancial

impact

Markets

Engaging employees to understand Softcat’s net

zero ambitions, green skills and training.

Timeframe of potential materialisation:

Short, Medium.

Upskilling Softcat employees on the necessary

green skills required for a low-carbon economy

can help Softcat strengthen its relations with

stakeholders, building reputation and

competitiveadvantage.

This can also support Softcat in improving its talent

retention and development for its workforce. The

market for good talent remains highly competitive.

Ensuring we have a strong and credible approach

to sustainability provides a competitive edge to

attract and retain talent. We are proactive in our

support for employees to beneﬁt from environmental

initiatives, such as:

• local Green Teams throughout the business;

• the provision of a tax efﬁcient salary sacriﬁce

scheme to enable employees to lease electric

vehicles for their use; and

• ﬂexible hybrid working, allowing employees to

work some days at home, thus reducing carbon

emissions arising from commuting.

Net zero

Low

Medium









Resource

efﬁciency

Promoting and encouraging the implementation

ofcircular economy practices throughout the

valuechain, such as takeback schemes and reuse

ofequipment.

Timeframe of potential materialisation:

Short, Medium.

Encouraging circular economy practices and

behaviour change on the use of technology and

natural resources is paramount to achieving net

zero. Doing so presents a strong case both

environmentally and commercially, as it can result

ingreater operational savings, more resilient

hardware and a longer lifespan of in-use products.

Softcat already operates these services. Expanding

services presents commercial incremental

opportunities through existing and potential

newservices for customers.

Net zero

Low

Medium

High









Investing in more sustainable technology to improve

Softcat’s day-to-day operations, such as utilising

green energy tariffs and low-carbon

ofﬁceequipment.

Adapting working spaces to create a productive

working environment in a warmer climate.

Timeframe of potential materialisation:

Short, Medium, Long

Whilst most of our ofﬁces already use energy-

efﬁcient equipment, this will be kept under review

for further opportunities. The use of more sustainable

technology in our day-to-day operations provides

opportunity to lower our dependency on fossil fuels

and reduce our annual operational expenditure. In

the face of rising fossil fuel prices, utilising renewable

energy tariffs will also improve our resiliency.

By ensuring our ofﬁces remain productive working

environments, we can maintain and even enhance

our productivity.

Net zero

Low

Medium

High









TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

Key to potential ﬁnancial impact:



Low



Medium



High

62 Softcat plc Annual Report and Accounts 2023

Category Identiﬁed opportunity and timeframe Potential impact

Relevant

emissions

scenario

Potential

ﬁnancial

impact

Products

andservices

Leverage of Softcat’s products and services as

contributing to a low-carbon economy, including

promoting the sale of energy efﬁcient and

sustainable IT solutions.

Positioning Softcat as a thought leader in the industry

through engagement with stakeholders to build

customer solutions and propositions.

Timeframe of potential materialisation:

Short, Medium.

Through our partners and vendors, we have an

opportunity to build on our existing relationships to

promote low-carbon products and services to our

customers. This opportunity becomes more impactful

as technological advancements enable greater

availability of low-carbon products and services.

We expect growth in demand for more

energy-efﬁcient and sustainable IT solutions.

This presents opportunities for us, as our customers

will require support to implement and manage

technology solutions. Taking advantage of this

opportunity will also mitigate the risk of failing

toevolve our technology offering with changing

customer needs. We have strong relationships

withmany IT vendors and we are well-positioned

tosupport our customers.

In addition, we leverage our expertise through our

Solutions service. This allows customers to maximise

the use and lifespan of an asset and to support the

circular economy through recycling, refurbishing

and reuse.

Last year Softcat launched Enexo (see page 69),

our cloud-based sustainability platform that gives

UK organisations accurate carbon emissions

intelligence. This can support our customers’

journeyto net zero and deepen our relationship

with our customers.

Net zero

Low

Medium

High









Our approach to risk management is set out on pages 72 to 78. Through our regular risk assessments, new risks, including emerging

climate-related issues, will be identiﬁed and assessed for materiality. There is a Board-approved deﬁnition for material emerging risks and

a process is in place, which requires the CFO to escalate promptly any such risk to the attention of the Board. Following our assessment

ofclimate risk to Softcat, we are conﬁdent that our business strategies are resilient against the impacts of climate change, due to the

nature of our business operations and the breadth of global technology vendors with which we work.

We will remain proactive by refreshing scenario analysis and testing scenarios on an as-needed basis, at minimum every three years or

whenever there are signiﬁcant changes to the assumptions and climate scenarios used. We will re-evaluate our climate-related risks and

opportunities on an annual basis to ensure Softcat remains resilient.

Key to potential ﬁnancial impact:



Low



Medium



High

Strategic report

63Annual Report and Accounts 2023 Softcat plc

Environment, climate change and Task Force on Climate-related Financial Disclosures

(‘TCFD’) continued

Risk management

Our risk management framework helps us to

identify, assess, manage, monitor and act on

risks, including those related to climate change.

Managing our risks effectively will enable Softcat

to deliver on its strategy. We recognise that climate

change may have an impact on our strategy and

operations and have considered these as part of

our risk management process.

Climate change is already a component of the risk of failure to

respond to market changes when considering the needs of our

customers and how products, services and solutions might be

affected by the drive towards carbon neutrality (see our principal

risks and uncertainties on pages 76 and 77). We also have

robust plans to mitigate the impact of business interruption (which

may occur, for example, due to extreme weather events) and this

is already included as a mitigating action in our principal risks.

Climate change also provides us with opportunities to help our

customers to reduce their environmental impact and to differentiate

our offerings from competitors.

Our climate-related risks and opportunities, and their associated

business and potential ﬁnancial impacts, are captured within our

climate change risk and opportunities register. The register provides

a framework to identify, assess, manage and monitor the impacts

of climate change on our business. We identify current or future

mitigation measures and controls for the risks in order to reduce the

impact and likelihood of each arising.

This year, we updated our assessment of climate change risks and

opportunities that could pose a ﬁnancial impact to the business.

The primary purpose of the updated assessment was to determine

whether the risks and opportunities were still relevant since the last

assessment, as well as to consider risks against revised climate

scenarios. No new material risks were identiﬁed or added. We

incorporated the identiﬁcation and assessment of climate-related

risks into our overarching corporate risk management framework

using our current corporate risk framework.

Climate-related risks and their potential ﬁnancial impacts were

validated and scored through a risk review workshop. The

workshop was attended by senior managers in the business,

including the CFO, Commercial Finance Director, Business

Transformation Director and Sustainability Lead.

Representatives from our Group Risk and Compliance team (which

is responsible for day-to-day management of the corporate risk

approach between climate change risks and corporate risks.

A summary of the key risks and opportunities was reviewed by

the Sustainability Committee, which has oversight of the climate

change risk.

Our primary business is an IT reseller and the majority of

our business is conducted in the UK and Ireland. We do not

manufacture goods and we have no production facilities

(e.g.factories). Given the nature, locations and operation of

ourbusiness and following our assessment of risks, we believe

that the direct impact of climate change on Softcat will be low.

Our current view is that we are not materially exposed to climate

change as a business, and that climate-related risks do not present

a material threat to our strategy, long-term viability, liquidity or

ability to operate.

Furthermore, none of the actions taken so far (or currently planned)

to reduce our environmental impact, mitigate identiﬁed risks

or take advantage of identiﬁed opportunities have resulted in

a signiﬁcant ﬁnancial impact on our business. Through our risk

management process, we will continue to assess likely effects that

climate change may have on our business, to ensure our current

assumptions remain valid. To the extent that we do identify material

risks, these will be modelled into our scenario analysis and for

potential ﬁnancial impact for longer-term viability assessment and

disclosure in future Annual Reports.

The Board is comfortable that climate change has not had a

material effect on our accounting judgements and estimates this

ﬁnancial year. It has also determined that climate change has had

no material impact on our asset and liability valuations for the

ﬁnancial year. The impact of climate change risks is not currently

considered by the Board as a key source of estimation uncertainty.

At Softcat, we are also conscious that there are ‘emerging trends’

that we do not currently expect to impact the business within our

associated time horizons. Therefore, within the register, we have

identiﬁed emerging trends that may impact the business in future,

and we will maintain a watching brief to track risks which may

become of signiﬁcance.

TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

64 Softcat plc Annual Report and Accounts 2023

Metrics and targets

As we evolve our sustainability strategy, we

continue toreview our metrics and targets, to

ensure the data we measure is relevant and

meaningful to the business and aligns with our

overarching strategy, culture and values. The

data we measure and disclose also allows our

stakeholders to effectively monitor Softcat’s

environmental performance over time.

The Board of Softcat has approved three key target commitments

and the Sustainability Committee regularly monitors progress.

Our metrics focus on our GHG emissions and these are assessed

through the intensity measurements set out on page 70. The

Sustainability Committee has also endorsed the GHG emissions

reduction targets approved by the SBTi. Achieving these key targets

forms the focus of our sustainability initiatives:

• to use carbon offsetting to operate as a carbon neutral

business and to implement initiatives throughout the business

toreduceemissions;

• to use, where possible, renewable energy across all ofﬁce

locations (by 2024);

• to work with our supply chain to help it become net zero (by

2040); and

• the SBTi has approved Softcat’s targets to reduce GHG

emissions by 45% by 2030 for scopes 1, 2 and 3, and to

reduce GHG emissions by 90% by 2040, relative to a FY2021

base year).

We are committed to improving the measurement of our carbon

footprint and engaged an external ﬁrm specialising in sustainability

for our FY2023 carbon footprint calculation.

Like the majority of businesses, scope 3 emissions comprise most of

our carbon footprint. We therefore understand that to transition to

a low carbon future, it is imperative that we work with our supply

chain and customers. Our emissions are disclosed on page 71.

Given the nature of our business, water and land use are not

material metrics. Energy consumed primarily relates to our ofﬁces;

progress on initiatives to reduce energy consumption is shown

on page 71.

Strategic report

65Annual Report and Accounts 2023 Softcat plc

Environment, climate change and Task Force on Climate-related Financial Disclosures

(‘TCFD’) continued

Metrics and targets continued

Progress on our targets on CO

Softcat has made commitments and goals on its environmental impact in the business and its supply chain. As mentioned above, the

Board approved a long-term target to become a net zero business, and this will be achieved primarily by completing three key stages.

Below is a summary of the targets and the progress being made:

Timing Goal Summary and progress update

2022 Carbon neutral Softcat will use offsetting schemes to help offset its scope 1 and

scope 2 emissions. We will also offset selected scope 3 emissions

and will continue to reduce GHG emissions produced.

Complete

2024 100% renewable electricity Softcat will use, where possible, renewable electricity across all

ofﬁce locations. Using renewable electricity will reduce scope 2

emissions and reduce the environmental impact of energy used

inthe business. 60% of Softcat locations use renewable energy.

We purchase renewable energy credits for the remaining ofﬁces

where we are unable to use renewable energy.

In FY2022, this target was expanded to include changing Softcat’s

pool car ﬂeet from internal combustion to EVs. This changeover has

now been completed.

Complete

2040 Net zero supply chain Softcat is working with its supply chain to help it become net zero.

Good progress continues with our vendors, many of which have set

net zero targets. Softcat has also received recognition from some

leading market vendors and sustainability organisations.

Work in progress

As a pivotal part of our journey to net zero, Softcat has committed to the SBTi and had its net zero targets validated. This commits the

business to reduce its GHG emissions in line with the Paris Agreement, limiting global warming to 1.5°C. Softcat’s science-based targets

have been approved as in line with the emissions reductions required to achieve net zero emissions across its value chain by 2050.

In FY2022, Softcat became the ﬁrst IT company in Europe to have its targets on climate action approved by the SBTi; the targets

approved cover emissions for scopes 1, 2 and 3. Our target to become net zero by 2040 is ambitious and is ten years ahead of the

targets set by the UK Government. Softcat has therefore developed a carbon reduction plan to support the achievement of the targets

approved by the SBTi. This includes ten high level steps over the next ten years (our ‘ten in ten’), which will help us reduce emissions across

all scopes. We will communicate our key steps to our customers, suppliers and employees to improve their awareness of actions and

targets to reduce emissions.

TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

66 Softcat plc Annual Report and Accounts 2023

2025

2026

2027

2028

2029

2030

2 0 31

2032

Action: Major suppliers/partners to have net

zero plans and SBTi targets where applicable

Action: Softcat services to be certiﬁed ‘Carbon

Neutral’ (PAS 2060)

Action: 100% of deliveries to be completed

using low emissions delivery services

Action: >80% of customers to purchase

sustainable products or services

Action: Suppliers to use 100% renewable

energy across their operations

Target: 45% reduction in gross emissions

(versus FY2021 as a baseline)

Action: Zero to landﬁll (ofﬁce waste)

Action: >80% of customers using

renewableenergy

Remuneration

For FY2023, the Remuneration Committee has determined that remuneration practices for the Executive Directors should for the ﬁrst

time include an assessment of performance against some of our key environmental targets and actions. This was included in the annual

bonus plan for Executive Directors for FY2023. Achievement in respect of the actions is disclosed in the Annual Report on Remuneration.

Pleasesee pages 114 to 134 for further information about executive remuneration practices.

Internal carbon prices

Beyond offsetting our scope 1, 2 and operational scope 3 emissions, we have not introduced internal carbon prices. In FY2024

management will commence a review into carbon pricing and the role it may play within the business.

2023

Action: Change pool cars from internal

combustion to EV

OUR TEN IN TEN

2024

Action: 100% renewable electricity/

renewable energy credits

Strategic report

67Annual Report and Accounts 2023 Softcat plc

Environment, climate change and Task Force on Climate-related Financial Disclosures

(‘TCFD’) continued

Working with our stakeholders

Partnerships

To help us achieve our net zero targets, we are working closely with our supply chain, vendors and other industry and business forums.

Many of our vendors are dedicated to operating more sustainably and are making major commitments towards tackling climate change.

We are collaborating with our vendors to ensure they understand Softcat’s commitments and that we understand their own sustainability

journeys. For example, we have improved our understanding of many of our vendors’:

• progress to reduce energy usage during manufacturing;

• use of renewable energy;

• use of sustainable packaging materials; and

• approach to extend the life expectancy of devices.

Ultimately, we will require sustained action from our vendors and suppliers to enable us to achieve our target of a net zero supply chain

by 2040. We will continue to support our partners to realise this ambitious target.

Our work with industry and business forums raises the proﬁle and importance of reducing carbon emissions. It also supports better

collaboration and improved disclosures to allow stakeholders to better understand how they can play their part in the journey to net zero.

Below are some of our important partnerships:

Softcat is a signatory of the UN SDGs.

The SDGs are a collection of 17 interlinked

global goals that are designed to be a

‘blueprint to achieve a better and more

sustainable future for all’.

Softcat is accredited with key internationally

recognised environmental standards:

ISO 14001 sets out the requirements for an

environmental management system. It helps

organisations improve their environmental

performance through more efﬁcient use of

resources and reduction of waste.

ISO 50001 speciﬁes the requirements for

establishing, implementing, maintaining and

improving an energy management system.

Softcat is a member of the UN Global

Compact Support the Goals, an initiative to

rate and recognise businesses that support

the UN Global Goals. The key aims of the

initiative are to raise awareness of the

Global Goals in the business community,

and promote a structured approach to

planning, target setting and reporting in

respect of the goals.

Techies Go Green is a forum driving

andsupporting sustainability across the

technology industry. Softcat is a member

and we participate in the steering

committee to support its development

anddirection.

Softcat has approved near and long-term

science-based emissions reductions

targets with the SBTi.

Softcat is a member of TechUK, the UK’s

technology trade association. It champions

technology’s role in preparing and

empowering the UK for what comes next,

delivering a better future for people,

society, the economy and the planet.

TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

68 Softcat plc Annual Report and Accounts 2023

Customers

Softcat does not manufacture products and most of Softcat’s

reportable emissions are in respect of scope 3, which includes

the supply of goods and services in our supply chain and on to

customers. We therefore make an active contribution to help our

customers understand and reduce their environmental impact.

Last year Softcat launched Enexo, which aims to help other

organisations in the UK lower their carbon footprint, and thus, help

to tackle climate change. The sustainability platform allows a UK

organisation to measure and manage its carbon emissions and

is being used by many of Softcat’s customers. The platform draws

on data from approximately 12 million data points, and leverages

on Softcat’s own experience of reducing emissions across the

business. Enexo also enables organisations to benchmark their

emissions against other organisations and to review data and

actionable information. This will help users to plan their net zero

journey, explore emissions reduction mitigations across their supply

chain, and comply with public reporting requirements.

See more of what Enexo is doing for Softcat’s stakeholders

to help them measure and manage their emissions.

Visitwww.enexo.io/introduction/or scan the QR code.

Softcat leverages its expertise in IT through

its Solutions services to help its customers

be more sustainable. Our comprehensive

approach to customer support underpins

key drivers of future sustainability – maintain,

refurbish and reuse. Softcat’s sustainable

solutions allow customers to maximise the

use of an asset and to support the circular

economy through recycling, as well as ensuring the customers’

supply chains are as efﬁcient as possible.

Making it sustainable for our customers

Commitment:

Ensure our customers understand their

IT estate’s carbon footprint.

Opportunity and deliverables:

• IT sustainability assessment

• Consultancy/pre-sales

• Enexo

Commitment:

Supply sustainable solutions and

services to assist our customers

ontheir sustainability journey.

Opportunity and deliverables:

• Sustainable products

• Sustainable services

• Supply chain/logistics

Commitment:

Offer sustainable maintenance,

management and retirement services

to our customers.

Opportunity and deliverables:

• Support services

(ThirdPartyMaintenance)

• Device lifecycle management

• Supply chain services

Pre-supply Supply chain Post-supply

Softcat continues to develop solutions in line with vendor offerings and new sustainable developments. This includes:

• Rolling out of Company-wide training on sustainability in FY2023. Over 98% of employees have now completed their training. We

will also review more bespoke training across our Sales teams, enabling them to better help customers in making sustainable choices;

• Promoting increased use of sustainable products and services to our customers;

• Helping our customers to understand the beneﬁt of more sustainable solutions, such as greater adoption of cloud services if

appropriate; and

• Further promotion of refurbished items if that meets the customer’s requirements.

Employees

Our employees have a major role to play in the success of our response to climate-related risks and opportunities. The Company-wide

training rolled out in FY2023 has improved our employees’ awareness of climate-related issues. It has also improved their understanding

of some of the climate-related terminology used by Softcat’s stakeholders, such as our customers and suppliers. This will make it easier for

employees to engage with our key stakeholders when selling or procuring products and services.

Softcat has ‘Green Teams’ in place in its ofﬁces, which help to drive awareness, formulate innovative ideas and coordinate events

associated with climate change. The employees who form the Green Teams volunteer their time to support Softcat and communities in

tacklingclimate change. The Green Teams meet regularly to discuss the latest sustainability news and developments and to arrange

Softcat initiatives.

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.

Strategic report

69Annual Report and Accounts 2023 Softcat plc

Environment, climate change and Task Force on Climate-related Financial Disclosures

(‘TCFD’) continued

Environmental initiatives

There will always be ways for us to play our part in fostering a more sustainable world. Softcat is running several activities to improve its

environmental footprint, as highlighted below. We are pleased that some of these are complete, whilst others are still in progress.

Activity Progress

Reduction in printing across all ofﬁces using printing software solutions

Reduction in energy consumption through new, efﬁcient lighting and technology throughout all ofﬁces

EV chargers at Marlow HQ for use of staff, visitors and pool cars

Single use plastic cups and cutlery removed from all ofﬁces

Secure WEEE/recycling of internal IT when no longer required

Investment in new collaboration solutions across all ofﬁces to reduce internal business travel

CDP disclosure for FY2021 (including all scopes)

Introduction of a hybrid working policy that allows employees to work remotely, and thus, reduces employee

commutingby approximately 40%

ISO 50001 Energy Management System

Validation of a 1.5°C emissions reduction target through SBTi

Installation of power meters across all Softcat ofﬁces to obtain accurate power usage data to support reduction plans

Direct delivery to customers from Softcat’s suppliers with no middle management, which results in minimal logistics emissions

Promotion of remote professional services engagements where possible to reduce business travel.

Certiﬁed renewable energy to be used across all Softcat ofﬁce locations where possible

Replacement of existing pool car ﬂeet with EVs

Supply chain review, including all vendors, suppliers and partners

Reduction in business travel (client and supplier meetings)

Integration of a Biodiversity Conservation Project

Softcat ‘Sustainability/Responsibility Framework’

To be progressed

Goal complete

Key:

Regulatory disclosures

GHG emissions

Our emissions have been calculated using the GHG Protocol Corporate Accounting and Reporting Standard (revised edition),

togetherwith the latest emissions factors from the Department for Environment, Food & Rural Affairs (DEFRA) and the Department

ofEnergy& Climate Change (DECC).

• Scope 1: comprises emissions from our pool cars and natural gas burnt in boilers we control.

• Scope 2: comprises our electricity consumption in leased and owned buildings.

• Scope 3: comprises all indirect emissions (not included in scope 2) that occur across our value and supply chain.

Softcat intensity measurements

We have chosen to present our total emissions relative to the average number of employees, in order to represent how our emissions are

impacted by the growth of our business. We also present, for additional information, our emissions relative to our turnover. Commentary

on the steps we take to reduce energy consumption and reduce our carbon footprint are provided elsewhere in this report.

FY2023 FY2022 FY2021 FY2020 FY2019

tCO

e/£m 0.22 0.21 0.20 0.30 0.51

tCO

e/employee 0.26 0.28 0.23 0.22 0.39

TASK FORCE ON CLIMATERELATED FINANCIAL DISCLOSURES (‘TCFD’) AND SUSTAINABILITY CONTINUED

70 Softcat plc Annual Report and Accounts 2023

Energy consumption and energy efﬁciency

This disclosure is made in accordance with The Companies

(Directors’ Report) and Limited Liability Partnerships (Energy

and Carbon Report) Regulations 2018, which requires certain

companies to report on energy consumption and efﬁciency.

This Annual Report describes elsewhere measures taken to

increase energy efﬁciency. The following in part explain the actions

taken to reduce emissions and to improve the measurement of

emissions so that further actions can be considered:

• Our UK-based ofﬁces are in modern buildings and use

renewable energy where possible. Some of our ofﬁces have

recently switched to 100% electricity usage so there is no

reliance on gas consumption in those locations.

• We are working towards moving our electricity supply to

100% renewable electricity in all locations. The reduction in

emissions reﬂects emissions savings achieved by switching to

renewable electricity tariffs. We plan to purchase Renewable

Energy Certiﬁcates to cover all non-renewable electricity used

during FY2023.

• We continue to utilise, where appropriate, technology such as

video conferencing, which reduces business travel.

• Our ﬂexible working policies, which include hybrid working,

reduce employee commuting.

• Our internal combustion car pool ﬂeet has been replaced

with EVs.

• We have now established an energy metering solution to

measure and monitor energy usage across all ofﬁces.

Waste management and water are included within our emissions

calculations. Given the nature and operation of our business, we

do not consider impacts relating to biodiversity and use of land to

be material.

Use of carbon offsetting

Whilst on our journey to net zero and our commitment to

science-based targets, Softcat is working with its accredited

offsetting partners to offset its scope 1 and scope 2 emissions

and its operational scope 3 emissions (including waste, business

travel and employee commuting). We use carbon credit approved

offsetting schemes, in which we make ﬁnancial contributions to the

equivalent of the emissions to be offset. All of Softcat’s scope1,

scope 2 and operational scope 3 emissions for FY2022 have

been offset and will be offset for FY2023.

We use a mixture of initiatives to offset our emissions and all

offsetting meets the Veriﬁed Carbon Standard (‘VCS’) for reducing

emissions from deforestation and degradation. Recent initiatives

include planting trees across school grounds, parks, farms,

woodlands and other biodiversity sites. This also helps wildlife

habitats and provides educational and community beneﬁts.

Energy consumed

Million kilowatt hours

2.59

1.79

1. 12

2.75

Scope 1 and scope 2 emissions

tCO

342

15 8

304

258

334

184

229

342

563

386

326

Scope 3 emissions

tCO

e ‘000

357

249

383

The above ﬁgure relates to Softcat plc, which was a single entity

company as of 31 July 2023. It consists of the aggregate of the

annual quantity of energy: (i) consumed from activities; and (ii)

consumed resulting from the purchase of electricity or certain

other energy products. The ﬁgure was calculated following

UK Government Environmental Reporting Guidelines including

Streamlined Energy and Carbon Reporting guidance (March 2019).

The aggregate quantity of energy consumed in FY2023 includes

0.05m kilowatt hours in respect of the ofﬁce in Ireland and the

remaining portion relates to energy consumed in the UK.

GHG emissions

GHG emissions are calculated in line with the GHG Protocol

Corporate Accounting and Reporting Standard, using UK

Government GHG conversion factors 2022 (for the ﬁrst half of the

ﬁnancial year) and 2023 (for the second half of the ﬁnancial year).

Scope 1 Scope 2

Strategic report

71Annual Report and Accounts 2023 Softcat plc

RISK MANAGEMENT

EFFECTIVELY MANAGED RISK

Overview

We have adopted a strategic and structured approach to risk management enabling us to proactively identify and address risks.

Thebeneﬁts of risk management include improved decision making, better risk communication and eventually enhanced organisation

value and performance.

During the year, we continued to evolve our risk management approach. This included strengthening the second line functions, establishing

a three-tier risk management architecture with clear responsibilities and adopting a holistic risk and internal controls approach based on

elements of the widely recognised ‘Internal Control – Integrated Framework’ published by the Committee of Sponsoring Organizations

ofthe Treadway Commission (‘COSO’).

Risk governance

Executive Directors, Senior and

ExtendedLeadership Team

• Front line

businessoperations.

• Responsible for

correct and consistent

application of

organisational policies

and procedures.

• Responsible for

day-to-day

riskmanagement.

First line

• Comprised of

Governance, Risk and

Control management,

Legal, Company

Secretarial and

Information Security.

• Oversees

compliance and risk

management matters.

• Supports ﬁrst line

inriskidentiﬁcation

andmanagement.

Second line

• Board provides overall governance

onrisk management. Approves strategy

and sets the risk appetite.

• Audit Committee, on behalf of

Board monitors effectiveness of risk

management, internal control and

internal audit function. Reviews estimates

and judgements made by management

inﬁnancial statements.

• Responsible for setting and implementing

strategy and policies.

• Responsible for ensuring that risks

are proactively identiﬁed and

effectively managed in achieving

theorganisationalobjectives.

Board

Audit Committee

• Internal audit

functionprovides

independent assurance.

• Reports to

AuditCommittee.

• Adopts risk-based

approach and tests

design and operating

effectiveness of

policies, procedures

and controls.

Third line

72 Softcat plc Annual Report and Accounts 2023

Assessing key risks against our risk appetite enables us to

understand areas where we are operating within or outside

the target risk appetite. This allows management to consider

the actions required to achieve the target appetite. Our risk

appetite varies across different principal risks, which are set out

on pages 76 and 77.

Risk appetite

We recognise the need for informed risk-taking in order to

deliver sustainable and proﬁtable business growth in line with

our values and strategy. Our ‘risk appetite’ is reviewed and

approved by the Board each year. The Senior Leadership Team

is responsible for operating the business within the risk appetite

approved by the Board.

Our risk appetite ratings are deﬁned as follows:

Low: We aim to mitigate these

risks to the fullest extent possible

Balanced: We accept broadly

predictable risks wherethere

are business beneﬁts of

carrying that risk

High: We seek out opportunities

with attractive potential upsides,

takeconsidered risks and manage

theconsequences

Strategic report

73Annual Report and Accounts 2023 Softcat plc

• Strategic threats to our business.

• Owned by Directors and senior leaders.

• Published externally providing insight for our investors.

Key risk

Process

level risk

Process

level risk

• Underlying signiﬁcant risks across the business.

• Risks managed by Directors, senior and extended

leadership team across the business.

• Maintained in ‘Key risk’ register.

• First line and second line operational risk registers.

• Risks are closely aligned with core business processes.

• Used for identifying and managing day-to-day risks.

Principal risk

Key risk

Process

level risk

RISK MANAGEMENT CONTINUED

Risk management methodology

Our Framework

Integrated three lines model and COSO internal control framework: As outlined in the risk governance section, the ‘three lines’ model

helps organisations identify structures and processes that best assist in the achievement of objectives and facilitate strong governance and

risk management. COSO’s ‘Internal Control – Integrated framework’ outlines how internal controls can be operationalised to achieve an

effective system of internal controls.

We have strengthened the three lines approach and have incorporated elements from COSO’s internal control framework. As a result, the

key elements of risk management (effective identiﬁcation, management, monitoring and reporting of risks and controls) are underpinned

by clear responsibilities and structure. This has improved the overall governance during the year.

Three-Tier risk management architecture

During the year, we formalised and further strengthened the three-tier risk management architecture to improve clarity and understanding

around principal risks and their management across the business. Principal Risks are often made up of one or more key risks. Key risks are

linked to process level risks.

Risk categories play a key role in

effective risk management. They help

identify, group and assign risks to

theright leaders and mangers within

the business. This also enables a

comprehensive assessment of the

overall risk landscape. We identify

our current key risks under

thesecategories.

Tier 1

Tier 2

Tier 3

Risk categories

74 Softcat plc Annual Report and Accounts 2023

Business strategy

Risks which have the potential to

impede the achievement of our

strategic goals or impact our

business model.

People

Risks that could impact our ability to

attract, retain and motivate the very

bestemployees.

Financial

Risks that could impact the proﬁtability

or ﬁnancial viability of the Company

or increase economic exposure.

Operational

Risks (both external and internal) that

could impact day-to-day operations

and prevent business-as-usual

activities.

Regulatory and compliance

Following review by the Audit

Committee, this was added as a

new risk category, acknowledging

ongoing and increasing regulatory

and compliance requirements

for Softcat.

Principal risks

The Board has identiﬁed the principal risks facing the Company

and considered the likely impact that each could have on

thebusiness.

Set out on pages 76 and 77 is the Board’s view of key risks

currently facing the Company, along with commentary on how

this might impact progress against our strategic goals. Weprovide

a view on the change in risk compared to the prior year’s

assessment. There is a Board-approved deﬁnition for material

emerging risks and a process is in place which requires the CFO

toescalate promptly any such risk to the attention of the Board.

Due to increasing regulation and Softcat’s overall growth, this year,

we have introduced a new Principal Risk titled ‘Regulatory and

compliance risk’, albeit some elements of this was already covered

as part of other risks earlier.

Issues associated with each of the principal risks below have been

discussed and reviewed by the Board or relevant Committee

on a regular basis, for example the Board/relevant Committee

have discussed updates on cyber security, the macro-economic

environment, forthcoming changes in regulation/legislation,

customer satisfaction and changes in Softcat’s leadership team.

During the year the Board also considered other emerging external

matters, for example changes in technology (such as AI) and

market changes which might impact on our operating model.

Some of the key risks are also reﬂected in scenario planning as

part of the Company’s assessment of viability over the longer term.

Please see the Viability Statement on page 78 for further details.

An explanation of how the Company manages ﬁnancial risks is

provided in note 21 to the ﬁnancial statements. An explanation of

the Company’s approach to critical accounting judgements and

key sources of estimation uncertainty is also provided in note1 to

the ﬁnancial statements.

Process

Risk management is aligned to our strategy, and each principal

risk and uncertainty is considered in the context of how it relates

to the achievement of our strategic objectives and risk appetite.

Ownership for each principal risk is assigned to a director or

senior leader based upon alignment with operational duties.

First line teams and leaders identify, evaluate, escalate and record

risks. They also identify appropriate risk management activities and

action them. Information on identiﬁcation, assessments and actions

are captured in operational risk registers.

The second line function oversees the overall risk management

and internal control process. They review the operational risk

registers, update the key risk register based on insights and

interviews with risk owners and managers from across the business,

update principal and emerging risks, perform sample checks,

provide feedback to ﬁrst line teams, and undertake a formal risk

management and internal control effectiveness review at least

twice a year.

The Audit Committee, on behalf of the Board, reviews the

effectiveness of the risk management functions and receives

assurances on the effectiveness of key controls in the business.

This process provides an effective combined ‘bottom-up’ and

‘top-down’ approach to ensure risks have been considered

from different perspectives. Key risk register is reviewed at least

twice ayear to ensure that it remains current as the business

and its markets evolve and that identiﬁed remedial actions are

progressed. The principal and emerging risks are reviewed

annually. The Audit Committee reviews the Viability Statement,

which considers the potential impact over the longer term of

some of the key risk factors. The Audit Committee receives reports

from management and from internal audit on key areas of risk

and control and challenges management on the timelines and

effectiveness of corrective action. The Audit Committee also

considers the ﬁndings and recommendations oftheexternal auditor

with regard to ﬁnancial controls. The Audit Committee then makes

a recommendation to the Board for ﬁnal approval.

Climate change

During the year, in line with the approach recommended

by the Task Force on Climate-related Financial Disclosures

(‘TCFD’), we conducted a formal assessment of the potential

impact of climate change to our business and supply chain.

Please see our report on TCFD and Sustainability on pages

50 to 71. Climate change is already a component of the risk

of failure to respond to market changes when considering

the needs of our customers and how products, services and

solutions might be affected by the drive towards carbon

neutrality. We also have robust business interruption plans in

the event of a disruption to our business. Our current analysis

concluded that no other climate change-related risk is a

principal risk which needs to be incorporated into the list

ofprincipal risks shown.

Strategic report

75Annual Report and Accounts 2023 Softcat plc

Operational

RISK MANAGEMENT CONTINUED

PRINCIPAL RISKS

AND UNCERTAINTIES

Business strategy

Customer dissatisfactionFailure to respond to

marketchanges including

technology offering,

channel disintermediation,

competitor landscape

andcustomer needs

Cyber security risk and

business interruption risk

Macro-economic factors

including impact on

customer sentiment,

inﬂationary pressures,

interest and foreign

currency volatility

Change from 2022

No change

Target risk appetite:

Low

Change from 2022

Slight increase

Target risk appetite:

Low

Change from 2022

No change

Target risk appetite:

Balanced

Change from 2022

No change

Target risk appetite:

Balanced

Management and mitigation

• Dedicated customer

experience team,

who manage and

escalate customer

dissatisfaction cases

• ISO20000-1 IT Service

Management and

ISO-9001 Quality

management certiﬁed

• Ongoing customer service

excellence training

• ‘Big-deal review’ process

Management and mitigation

• Insight from ongoing

industry analysis and

subscriptions input into

annual strategy process

• Regular insights into

customer priorities including

climate-related through

the annual customer

experience survey results

and ‘voice of the customer’

surveys. Multi-layered

relationship with strategic

vendors and executive

sponsoralignment

• Regular Quarterly Business

Reviews with vendors

Management and mitigation

• ISO27001 accredited

processes. Company-wide

information security policy

and mandatory security-

related training

• Regular testing of disaster

recovery plans and

business continuity plans

• Established and

documented processes

for incident management,

change control, etc.

• Ongoing upgrades

to network

• All employees issued

with corporate devices

with standardised access

monitoring and control

• Key software used is

from large multi-national

companies who have

a 99.9% SLA and who

also provide us with

SOC2 reports that

provide assurance on their

processes and controls

• Annual penetration test

bya third party

Management and mitigation

• Customer base is

well diversiﬁed in

terms of both revenue

concentration but also

public and commercial

sector exposure

• Close dialogue with supply

chain partners

• Annual budget considers

the operating proﬁt growth

expectations of the markets

• Operating costs

are budgeted and

reviewed regularly

• Going concern and

viability statements are

underpinned by robust

analysis of scenarios

Link to strategy Link to strategy Link to strategy Link to strategy

Potential impacts

• Reputational damage

• Loss of customers

• Financial penalties

Potential impacts

• Loss of

competitive advantage

• Reduced number of

customers and proﬁt

per customer

Potential impacts

• Inability to deliver

customer services

• Reputational damage

• Financial Loss

• Customer dissatisfaction

Potential impacts

• Short-term supply

chaindisruption

• Reduced margins

• Reduced customer demand

• Reduced proﬁt

per customer

• Higher operating costs

• Customer insolvencies and

cash collection challenges

A B

Ineffective working

capitalmanagement

Change from 2022

No change

Target risk appetite:

Balanced

Management and mitigation

• Robust credit assessment

process including use of

trade credit insurance

• Regular review of the

aged debt position

bymanagement

• Deﬁned treasury policy

covering liquidity

management processes

and thresholds

• Regular cash forecasting,

actual reporting and

variance analysis to

highlight any adverse

trends and allow sufﬁcient

time to respond

Link to strategy

Potential impacts

• Increased bad debts

• Increased cost

ofoperations

Financial

76 Softcat plc Annual Report and Accounts 2023

Financial People

Failure to retain competitive

terms with our suppliers

and/or right size our cost

base compared to gross

proﬁt generated.

Loss of culture Talent, Capability and

Leadership risk

Compliance with existing regulation/legislation and being

prepared for emerging regulation/legislation

Change from 2022

No change

Target risk appetite:

Balanced

Change from 2022

No change

Target risk appetite:

Low

Change from 2022

No change

Target risk appetite:

Low

Change from 2022

New

Target risk appetite:

Low

Management and mitigation

• Budgeting process and

regular reviews ensure

costs are managed

appropriately and in

consideration of gross

proﬁt growth. Any

out of budget spend

needs management

level approval

• Rebates form an important,

but only minority element

of total operating proﬁt.

In addition, rebate

programmes tend to be

industry standard and not

speciﬁc to the Company,

while vendor aligned

teams ensure we optimise

available rebatestructures

• Ongoing training to sales

and operations teams

to keep pace with new

vendor programmes

Management and mitigation

• Culture sits at the heart of

all changes that are made

in Softcat. There is regular

communication from Senior

Leadership Team members

to employees at ‘Kick off’

and ‘All Hands’ calls about

the importance of culture

• Regional ofﬁces

with empowered

localmanagement

• Quarterly management

satisfaction survey with

feedback acted upon

• Regular staff events and

incentives

• Enhanced internal

communication processes

and events

Management and mitigation

• Succession planning

process in place

• Experienced and broad

senior management team

• Investment in robust

recruitment and

selection processes

• Attrition tracked and action

taken as necessary

Management and mitigation

• Presence of a second line function (Governance Risk &

Control, Information Security, Legal and Company Secretarial)

• Management committee in place to review second line

progress and report to the Audit Committee

• Ongoing engagement with specialist third parties

where required

Link to strategy Link to strategy Link to strategy Link to strategy

People and culture

(see pages 44 to 49)

Ease of doing business

(see page 18)

Maintaining relevance and expanding our addressable market

(see pages 22 to 27)

Acquire more customers

(see page 28)

Sell more to existing customers

(see page 28)

Potential impacts

• Uncompetitive pricing

leading to loss of business

• Reduced

proﬁtability/margins

Potential impacts

• Reduced staff engagement

• Negative impact on

customer service

• Loss of talent

Potential impacts

• Lack of strategic direction

• Reduced staff engagement

• Loss of talent

• Loss of

competitive advantage

Potential impacts

• Financial penalties

• Reputational damage

• Loss of customers

Regulatory and Compliance

Strategic report

77Annual Report and Accounts 2023 Softcat plc

RISK MANAGEMENT CONTINUED

Viability statement

In accordance with the UK Corporate Governance Code, the

Directors have assessed the viability of the Company over a

three-year period to 31 July 2026, which is a longer period than

the twelve-month outlook required in adopting the going concern

basis of accounting. This assessment period remains appropriate

given the timescale of the Company’s planning and investment

cycle. The Directors conﬁrm that they have performed a robust

assessment of the principal risks facing the Company as detailed

on pages 72 to 77, including those that will threaten its business

model, future performance and solvency or liquidity.

The Company’s gross invoiced income has grown on average

17% in the last three years. This has been achieved by gaining

market share through increasing the number of customers as

well as increasing spend per customer year on year. Against a

backdrop of high inﬂation and increasing interest rates which have

put pressure on our customer base, the Company has displayed

a large degree of resilience to challenging conditions, evidenced

by an increase in gross proﬁt of 14% in FY2023. The year-to-date

trading to the end of September 2023 shows growth in line with

the base case forecast.

As of September 2023, the principal challenges to short term

business performance are a downturn in the UK economy, resulting

from higher broad-based inﬂation and increasing interest rates

which affect both our direct customers and limit the discretionary

spend of the end users of their products and services. This may

result in delayed decisions on non-critical projects as well as

enhanced procurement processes which ultimately could push

spend into future periods. Higher than normal risk of credit losses

remains. These factors have been assessed within the Company

risk review and discussed within the Strategic Report.

The assessment of the Company’s viability considers severe but

plausible scenarios aligned to the principal risks and uncertainties

set out on pages 76 and 77, and the assessment was based on

the severe but plausible scenario set out in our going concern

assessment. The realisation of these risks, to the extent modelled,

isconsidered highly unlikely.

The degree of severity applied in the viability scenarios was based

on management’s experience and knowledge of the industry to

determine plausible changes in assumptions. The most relevant

potential impact of the key risks on viability are:

• a substantial and sustained shortfall in revenue and gross

invoiced income compared to the budget and strategic three-

year plan resulting from a signiﬁcant and extended downturn in

the UK economy and resulting fall in spend;

• a fall in achievable gross margins resulting from margin pressure

associated with lower demand and increased competition for

the remaining business;

• signiﬁcantly increased levels of bad debt losses in the ﬁrst year

of the modelled period, to coincide with the challenges of

higher inﬂation, interest rates and less discretionary spend for

consumers; and

• an ongoing increase in the working capital cycle, speciﬁcally

driven by a delay in customer payments versus historical levels.

The following stress testing over a three-year period has been

performed (i) against the budget approved by the Board for the

2024 ﬁnancial year; and (ii) against the remaining two ﬁnancial

years (i.e. 2025 and 2026) of the three-year plan:

• an average 7.5% year-on-year reduction, compared to the

original budget and three-year strategic plan, in revenue and

gross invoiced income;

• reduced gross proﬁt margins of 1% compared to the original

budget and three-year strategic plan;

• savings in discretionary areas of spend;

• bad debt write offs of £5m above budgeted levels in FY2024,

FY2025 and FY2026; and

• extending the length of debtor days by two days across the

three years (thus negatively impacting working capital).

The Company beneﬁts from a ﬂexible business model with

a high proportion of costs linked to performance, such as

commission, nowarehousing of unsold products and a low

operating cost base, consisting of mostly staff costs. On top of

the natural reduction in some of these outﬂows as proﬁtability

reduces, management could, if necessary, take mitigating actions

(forexample, the ability to adjust the level of discretionary special

dividend) providing opportunities for the business to make further

decisions on the cost base of the business. Despite the minimum

desired cash position being achieved in the severe but plausible

scenario through a reduction in planned special dividends, the

following options also exist for management:

• reduced salary costs, through recruitment restrictions on

newheads and not replacing leavers;

• no interim dividend in H2 of FY2024 or thereafter;

• savings in discretionary areas of spend;

• delay payments to suppliers foregoing early settlement

payments; and

• short-term supplier payment management.

The Company operates a ﬂexible model in a resilient industry that

incorporates an increasing level of non-discretionary spend from

UK corporates as IT has become vital to establish competitive

advantage in an increasingly digital age. In Public Sector, a fast-

growing area of the business, spending has also continued to be

strong as investment in IT continues apace in order to provide the

best level of service to the public.

Financially, signiﬁcant free cash ﬂow generation and the strength

of the Company’s balance sheet provide comfort around the ability

to absorb the impact of the stress tests outlined above.

Conﬁrmation of viability

Based on the analysis, the Directors have a reasonable

expectation that the Company will be able to continue in operation

and meet its liabilities as they fall due over the three-year period

oftheir assessment.

78 Softcat plc Annual Report and Accounts 2023

COMPLIANCE WITH

THE UK CORPORATE

GOVERNANCE CODE

Board leadership and Company purpose

The Board is responsible for establishing Softcat’s

purpose, engaging and building strong relationships

with our shareholders and stakeholders, and promoting

the long-term success of Softcat.

Read more on pages 112 and 113

Executive leadership

Our Board

• 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.

• strategy implementation;

• operational, ﬁnancial and

competitiveperformance;

• commercial developments;

• succession planning below Board level;

• organisational development; and

• maintaining Softcat’s culture.

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.

Corporate governance

85Annual Report and Accounts 2023 Softcat plc

GOVERNANCE REPORT CONTINUED

WHAT THE BOARD

DIDTHIS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.

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.

Strategy

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.

Performance monitoring

Stakeholder engagement

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.

86 Softcat plc Annual Report and Accounts 2023

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

Leeds ofﬁces.

People, vision and values

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;

• received feedback and comments on governance from

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.

Governance and risk

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.

Other

Corporate governance

87Annual Report and Accounts 2023 Softcat plc

GOVERNANCE REPORT CONTINUED

COMPOSITION, SUCCESSION

AND EVALUATION

Composition and succession

This is discussed in the report from the Nomination

Committee on pages 106 to 111.

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.

Stage 1: Approval of process

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.

Stage 2: Approval of a questionnaire

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:

Board evaluation

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

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.

88 Softcat plc Annual Report and Accounts 2023

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 4: Review of results

The Board discussed the key points and conclusions from the

review during a Board meeting.

Stage 5: Board review and discussion

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 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.

Stage 3: Collation of results

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.

Corporate governance

89Annual Report and Accounts 2023 Softcat plc

GOVERNANCE 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

Progressive ordinary

dividend policy

Strategic investments

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.

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.

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.

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.

90 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.

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.

91Annual Report and Accounts 2023 Softcat plc

Corporate governance

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.

92 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;

Corporate governance

93Annual Report and Accounts 2023 Softcat plc

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.

GOVERNANCE REPORT CONTINUED

OPERATION OF THEBOARD CONTINUED

94 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.

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.

The Board maintains a proactive and

constructive programme of engagement

withitsstakeholders.

Corporate governance

95Annual Report and Accounts 2023 Softcat plc

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.

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

AUDIT COMMITTEE REPORT

ACCOUNTABILITY

Members

R Perriss (Chair)

V Murria

L Weedall

M Prakash

Attendance of the Audit Committee

Name Committee attendance 2023

R Perriss

V Murria

K Slatford

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.

Internal audit: 20%

External audit: 30%

Financial reporting: 25%

Risk and internal controls:25%

Allocation of time

96 Softcat plc Annual Report and Accounts 2023

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

• 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.

• 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.

Areas of focus in FY 2023 included:

Focus areas for FY2024:

Corporate governance

97Annual Report and Accounts 2023 Softcat plc

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:

• 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

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.

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.

AUDIT COMMITTEE REPORT CONTINUED

98 Softcat plc Annual Report and Accounts 2023

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 Action

Going concern

andviability

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).

Corporate governance

99Annual Report and Accounts 2023 Softcat plc

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.

AUDIT COMMITTEE REPORT CONTINUED

Signiﬁcant judgements and issues continued

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.

Corporate governance

101Annual Report and Accounts 2023 Softcat plc

AUDIT 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:

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.

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

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.

Corporate governance

103Annual Report and Accounts 2023 Softcat plc

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

AUDIT COMMITTEE REPORT CONTINUED

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

104 Softcat plc Annual Report and Accounts 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”.

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

Corporate governance

105Annual Report and Accounts 2023 Softcat plc

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.

…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

NOMINATION COMMITTEE REPORT

EFFECTIVENESS

Members

L Weedall (Chair)

G Watt

R Perriss

V Murria

M Prakash

Attendance of the Nomination Committee

Name Committee attendance 2023

K Slatford

M Hellawell

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.

Board composition: 40%

Succession planning: 30%

Employee, culture, diversity

andinclusion: 25%

Corporate governance: 5%

Allocation of time

106 Softcat plc Annual Report and Accounts 2023

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.

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

Key activities during the year:

Corporate governance

107Annual Report and Accounts 2023 Softcat plc

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.

NOMINATION COMMITTEE REPORT CONTINUED

108 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.

Corporate governance

109Annual Report and Accounts 2023 Softcat plc

NOMINATION 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

Number of

Board members

Percentage of

the Board

Number of

senior positions

on the Board

(CEO, CFO,

SID, Chair)

Number in

Executive

management

Percentage of

Executive

management

Men 3 43% 2 9 69%

Women 4 57% 2 4 31 %

Not speciﬁed/prefer not to say — — — — —

Ethnic background diversity reporting

Number of

Board members

Percentage of

the Board

Number of

senior positions

on the Board

(CEO, CFO,

SID, Chair)

Number in

Executive

management

Percentage of

Executive

management

White British or other White

(including minority White groups) 6 86% 4 12 92%

Mixed/multiple ethnic groups — — — — —

Asian/Asian British 1 14 % — — —

Black/African/Caribbean/Black British — — — 1 8%

Other ethnic group, including Arab — — — — —

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.

11 0 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.

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.

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.

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

Corporate governance

111Annual Report and Accounts 2023 Softcat plc

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.

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

SUSTAINABILITY COMMITTEE REPORT

CORPORATE RESPONSIBILITY

Members

V Murria (Chair) M Prakash

R Perriss L Weedall

G Watt G Charlton

K Mecklenburgh

Attendance of the Sustainability Committee

Name Committee attendance 2023

V Murria

M Hellawell

G Watt

G Charlton

K Slatford

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.

Climate-related strategy and

initiatives: 40%

Climate-related disclosures: 20%

Climate-related governance,

compliance and regulation: 20%

Monitoring climate-related

performance against strategy: 20%

Allocation of time

112 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.

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.

Some areas of focus in2023

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.

Areas of focus in 2024

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

Corporate governance

113Annual Report and Accounts 2023 Softcat plc

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:

• Gross proﬁt growth: 14.2%

• Operating proﬁt growth: 3.5%

• Employee engagement: 92%

• Customer satisfaction: 97%

• Headcount growth: c 400

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

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

REMUNERATION COMMITTEE REPORT

LETTER FROM THE CHAIR OF THE

REMUNERATION COMMITTEE

Members

L Weedall (Chair)

R Perriss

V Murria

M Prakash

Attendance of the Remuneration Committee

Name Committee attendance 2023

L Weedall

K Slatford

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.

Executive remuneration: 45%

Workforce remuneration and

conditions: 25%

Remuneration market practice

anddevelopments: 15%

Corporate governance: 15%

Allocation of time

114 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;

• a quarterly survey from managers in respect of each member

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.

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

three year vesting period.

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.

Corporate governance

115Annual Report and Accounts 2023 Softcat plc

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

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.

REMUNERATION COMMITTEE REPORT CONTINUED

LETTER FROM THE CHAIR OF THE REMUNERATION COMMITTEE CONTINUED

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.

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.

Main activities during FY2023

Remuneration outcomes during the year continued

11 6 Softcat plc Annual Report and Accounts 2023

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.

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.

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.

Corporate governance

117Annual Report and Accounts 2023 Softcat plc

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

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.

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.

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.

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).

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.

Share Incentive Plan (‘SIP’)

Minimum shareholding requirements

• Chief Executive: 200% of salary

• Chief Financial Ofﬁcer: 200% of salary

PART A  AT A GLANCE

REMUNERATION COMMITTEE REPORT CONTINUED

118 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.

Corporate governance

119Annual Report and Accounts 2023 Softcat plc

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

Plan Purpose Eligibility

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

SIP Broaden share

ownership and share in

corporate success over

the medium term.

All eligible employees

Annual bonus Incentivise and reward

short-term

performance. At senior

level, an element of

bonus is deferred

inshares.

Executive Directors,

senior executives,

senior managers and

managers

LTIP Incentivise and

rewardlong-term

performance.

Executive Directors,

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

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 20% See below 100% £165,421 £110,281 £13,077

Overall outcome 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.

REMUNERATION COMMITTEE REPORT CONTINUED

PART A  AT A GLANCE CONTINUED

12 0 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.

Corporate governance

121Annual Report and Accounts 2023 Softcat plc

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

LTIP award

(% of salary)

LTIP award

(shares) Award date Share price

Graeme Watt 15 0 64,266 30/11/22 £12.87

Graham Charlton 15 0 42,844 30/11/22 £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

LTIP

Total

variable Total

Graeme Watt (CEO)

3, 5

£551,403 £4,578 £27,570 £583,551 £684,379 £569,431 £1,253,810 £1,837,361

Graham Charlton

(CEO/CFO)

4, 5

£367,602 £4,578 £12,649 £384,829 £456,253 £379,608 £835,861 £1,220,690

Katy Mecklenburgh (CFO)

5, 6

£44,848 £ — £2,242 £47,090 £98,264 — £98,264 £145,354

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.

REMUNERATION COMMITTEE REPORT CONTINUED

PART A  AT A GLANCE CONTINUED

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.

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.

Long Term Incentive

Plan(‘LTIP’)

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.

Share Incentive

Plan(‘SIP’)

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.

Minimum

shareholding

requirement

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.

Corporate governance

123Annual Report and Accounts 2023 Softcat plc

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)

£’000

Chief Financial Ofﬁcer (Katy Mecklenburgh)

41%100%100%

29%

948

26%

37%

1,503

22%

31 %

47%

1,781

393

41%

29%

1,453

26%

37%

2,305

22%

31 %

47%

2,731

601

2,800

2,400

2,000

1,600

1,200

£’000

800

Minimum

Fixed Bonus LTIP

On target Maximum Maximum

(including

50% share

price growth)

Minimum

Fixed Bonus LTIP

On target Maximum Maximum

(including

50% share

price growth)

400

1,800

1,500

1,200

900

600

300

Remuneration Policy table summary continued

REMUNERATION COMMITTEE REPORT CONTINUED

PART A  AT A GLANCE CONTINUED

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 Description Minimum Target Maximum

Maximum

including 50%

share price growth

Fixed

Salary, beneﬁts and pension Included Included Included Included

Annual bonus

Annual bonus (including

deferredshares)

Maximum opportunity of 150%

of salary

No annual

variable

50% of the

maximumbonus

100% of the

maximumbonus

100% of the

maximumbonus

LTIP

2,3

Award under the LTIP

Maximum annual award

of 150% ofsalary

No multiple-year

variable

50% of the

maximumaward

100% of the

maximumaward

100% of the

maximum award

plus 50% share

pricegrowth

Notes:

1. Based on 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 Date of service contract

Nature

of contract

Notice periods

Compensation

provisions for

early termination

From

Company

From

Director

Graham Charlton 29 October 2015 Rolling Twelve months Twelve months None

Katy Mecklenburgh 1 December 2022 Rolling Twelve months Twelve months None

Non-Executive Directors

Name Date of letter of appointment

Graeme Watt 11 July 2022

Vin Murria 3 November 2015

Robyn Perriss 21 May 2019

Lynne Weedall 21 March 2022

Mayank Prakash 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.

Corporate governance

125Annual Report and Accounts 2023 Softcat plc

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.

Salary

Taxable

beneﬁts

1,4

Pension

1,2

Total ﬁxed Bonus

3,5

LTIP

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)

551.4 525.1 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

Graham Charlton (CEO/CFO)

367.6 350.1 4.6 4.6 12.6 23.2 384.8 3 7 7. 9 456.3 504.1 379.6 1,036.6 835.9 1,540.7 1,220.7 1,918.6

Katy Mecklenburgh (CFO)

6, 7

44.8 — — — 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 Roles

Martin Hellawell

£203,747 £162,903 Non-Executive Chair

Karen Slatford

£40,898 £78,819 Senior Independent Director and Chair of the Nomination Committee

Vin Murria £75,000 £63,759 Independent Non-Executive Director, Designated Director for

WorkforceEngagement and Chair of the Sustainability Committee

Lynne Weedall

£90,438 £15,698 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.

PART B  ANNUAL REPORT

ONREMUNERATION

REMUNERATION COMMITTEE REPORT CONTINUED

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 Weighting Details

Adjusted EPS 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

LTIP options

granted in

December 2019

LTIP options

lapsed

LTIP options

vested and

exercised

Graeme Watt 42,021 1, 374 40,647

Graham Charlton 28,014 916 27,098

Corporate governance

127Annual Report and Accounts 2023 Softcat plc

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:

Director

Award type

Basis of award

(% of salary)

Face value

of award

Number

of shares

granted Date of grant Date of vesting Share price

Graeme Watt Nil-cost options 150% 827,104 64,266 30/11/22 30/11/25 £12.87

Graham Charlton Nil-cost options 150% 551,402 42,844 30/11/22 30/11/25 £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 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 Weighting Details

Adjusted EPS 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

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

Relative TSR – assessed against

the constituents of the FTSE 250

(excluding real estate and

equity investment trusts)

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 Award type

Face value

of award

Number

of shares

granted Date of grant

End of

deferral period Share price

Graeme Watt Nil-cost options 406,113 31,555 30/11/22 30/11/25 £12.87

Graham Charlton Nil-cost options 270,733 21,036 30/11/22 30/11/25 £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.

REMUNERATION COMMITTEE REPORT CONTINUED

PART B  ANNUAL REPORT ONREMUNERATION CONTINUED

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 Weighting Details

Adjusted EPS 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

Relative TSR – assessed against the constituents

of the FTSE 250 (excluding real estate and

equity investment trusts)

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.

Corporate governance

129Annual Report and Accounts 2023 Softcat plc

Statement of Directors’ shareholding and share interests (audited)

Director

Shareholding

requirement

(% of salary)

Current

shareholding

(% of salary)

Beneﬁcially

owned

Other shares held Options

Shareholding

requirement

met?

LTIP interests

subject to

performance

conditions

Deferred

shares not

subject to

performance

conditions

Vested and

unexercised Unvested Exercised

Executive Directors

Graeme Watt

200 394 108,555

147,028 69,766

— — — Yes

Graham Charlton 200 645

133,916

98,018 46,510

— — — Yes

Katy Mecklenburgh

200 — — — — — — — No

Non-Executive Directors

Martin Hellawell

n/a n/a 4,201,857 n/a n/a n/a n/a n/a n/a

Karen Slatford

n/a n/a — n/a n/a n/a n/a n/a n/a

Vin Murria n/a n/a 165,397 n/a n/a n/a n/a n/a n/a

Lynne Weedall n/a n/a 1,300 n/a n/a n/a n/a n/a n/a

Robyn Perriss n/a n/a 15,000 n/a n/a n/a n/a n/a n/a

Notes:

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

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

• shares owned by the Executive Director (and their associates) count towards the ownership target;

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

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

annualbonus plan; 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.

800

900

1,000

400

500

600

200

Total shareholder return

300

100

700

FTSE 250

Softcat

18/11/2015

18/03/2016

18/07/2016

18/11/2016

18/03/2017

18/07/2017

18/11/2017

18/07/2019

18/11/2019

18/03/2020

18/07/2020

18/11/2020

18/03/2021

18/07/2021

18/03/2022

18/07/2022

18/11/2021

18/03/2023

18/11/2022

18/03/2018

18/07/2018

18/11/2018

18/03/2019

REMUNERATION COMMITTEE REPORT CONTINUED

PART B  ANNUAL REPORT ONREMUNERATION CONTINUED

13 0 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 2023 2022 2 021 2020 2 019 2 018 2 017 2 016 2 015

G Watt Total single ﬁgure £1,837,361 £2,867,134 £2,588,093 £991,372 £919,518 £305,539 — — —

M Hellawell

— — — — — £532,716 £774,908 £562,117 £335,762

G Watt Annual bonus payment

level achieved (% of

maximum opportunity)

83 96 100 72 100 10 0 — — —

M Hellawell

— — — — — 100 10 0 99 72

G Watt

LTIP vesting level

achieved (% of

maximum opportunity)

97 100 10 0 n/a n/a n/a n/a n/a n/a

M Hellawell

— n/a n/a n/a n/a n/a n/a n/a n/a

Note:

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

role as Chief Executive during the ﬁnancial year.

Relative importance of the spend on pay

The table below sets out the relative importance of spend on pay in the 2023 ﬁnancial year. All ﬁgures provided are taken from the

relevant Company accounts.

Disbursements

from proﬁt in 2023

ﬁnancial year

Disbursements

from proﬁt in 2022

ﬁnancial year

Proﬁt distributed by way of dividend £74.2m £84.0m

Total tax contributions

£60.6m £41.9m

Overall spend on pay, including Executive Directors £179.9m £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

Beneﬁts

Salary or

fees Bonus

Beneﬁts

Salary

or fees Bonus

Beneﬁts

Graeme Watt

3% 43% 37% 10 % 6% 12 % 5% 0% (1)%

Graham Charlton

3% 43% 37% 10 % 6% 12 % 5% 0% (1)%

Katy Mecklenburgh

1,4

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

Martin Hellawell — — 1% 5% — — 23% — (1)%

Vin Murria

4% — — (7)% — — 18% — —

Robyn Perriss 3% — — 3% — — 18 % — —

Karen Slatford

6% — — 11 % — — 12 % — —

Lynne Weedall

n/a n/a n/a n/a n/a n/a 42% — —

All employees

3% 12 % 1% 5% 7% 34% 8% (44)% (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.

Corporate governance

131Annual Report and Accounts 2023 Softcat plc

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 Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio

2023 Option A 72:1 44:1 24:1

2022 Option A 100:1 64:1 36:1

2 021 Option A 89:1 57:1 32:1

2020 Option A 33:1 21:1 12:1

2 019 Option A 35:1 22:1 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 Median 75th percentile

2023 salary £551,403 £23,398 £27,538 £38,000

2023 total pay £1,837,361 £25,594 £41,929 £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.

Votes for % Votes against % Votes withheld

Directors’ Remuneration Policy (2022 AGM) 169,094,250 98.50 2,569,431 1.50 88

Annual Report on Remuneration (2022 AGM) 168,139,235 97.95 3,524,446 2.05 88

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.

Pension

No change. 5% of salary.

Beneﬁts

No change. All Directors, including Non-Executive Directors, will be

entitled to participate in the Company salary sacriﬁce

scheme for electric vehicles for personal use

andcommuting.

Annual bonus

plan(‘ABP’)

• Cash

• Deferred

share award

No change. 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.

Corporate governance

133Annual Report and Accounts 2023 Softcat plc

REMUNERATION COMMITTEE REPORT CONTINUED

PART B  ANNUAL REPORT ONREMUNERATION CONTINUED

Implementation in 2023/24 What was implemented in 2022/23

LTIP No change. FY2023 LTIP awards:

• 150% of salary for CEO and for CFO.

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

• Targets are shown on pages 127 and 128

Shareholding

requirements

No change. 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.

Senior Independent Director fee: no change.

Committee Chair fee (per Committee): no change.

Fee for the Designated Director for Workforce

Engagement (which includes Chair of the Sustainability

Committee): no change.

Chair fee: £200,000.

Board fee: £60,000.

Senior Independent Director fee: £13,500.

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

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

Statement of implementation of the Remuneration Policy in the 2023 ﬁnancial year continued

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.

• 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.

Business model, policies,

principal risks and KPIs

• We operate a business model which includes non-ﬁnancial inputs and outputs. Our business model is

underpinned by our straightforward strategy.

• Risks, including ﬁnancial and non-ﬁnancial risks, are monitored by management and by the Audit Committee.

The Audit Committee also considers the key internal controls for the business.

• The Board regularly reviews both ﬁnancial and non-ﬁnancial KPIs, which are relevant for monitoring the

performance of the business and have a clear link to delivering against our strategy. We disclose performance

against our key KPIs.

• We discuss our business model on pages 20 and 21 and key risks on pages 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.

Corporate governance

135Annual Report and Accounts 2023 Softcat plc

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 Position Date of appointment

G Watt Chairman Appointed as a Chief Executive on 1 April 2018 and Chairman on

1August2023

M Hellawell Chair Appointed as a Director on 24 March 2006, Chair on 1 April 2018

andresigned on 31 July 2023

G Charlton Chief Executive Appointed Chief Financial Ofﬁcer on 19 March 2015 and Chief Executive

on1 August 2023

K Mecklenburgh Chief Financial Ofﬁcer Appointed 19 June 2023

V Murria Independent Non-Executive Director Appointed 3 November 2015

K Slatford Independent Non-Executive Director Appointed 5 December 2019 and resigned on 17 January 2023

R Perriss Independent Non-Executive Director Appointed 1 July 2019

L Weedall Independent Non-Executive Director Appointed 3 May 2022

M Prakash Independent Non-Executive Director 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.

DIRECTORS’ REPORT CONTINUED

13 6 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.

Corporate governance

137Annual Report and Accounts 2023 Softcat plc

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.

As at 31 July 2023 As at 23 October 2023

Ordinary

Voting

rights

Ordinary

Voting

rights

Peter Kelly

64,976,058 32.6% 64,976,058 32.6%

Mawer Investment Management Limited 9,946,370 5.0% 9,946,370 5.0%

John Nash

7,244,714 3.6% 7,244,714 3.6%

Note:

1. The ordinary shares held by Peter Kelly and John Nash include shares held beneﬁcially via various entities or connected persons.

Principal shareholder and Relationship Agreement

In accordance with Listing Rule 9.8.4R(14), the Company has

set out below a statement describing the Relationship Agreement

entered into by the Company with its principal shareholder (the

‘Relationship Agreement’). As at 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.

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.

13 8 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 Location in Annual Report

A statement of the amount of interest capitalised during the period under review and details

of any related tax relief.

Not applicable

Information required in relation to the publication of unaudited ﬁnancial information. Not applicable

Details of any long-term incentive schemes and Directors’ interests. Directors’ Remuneration Report,

pages 114 to 134

Details of any arrangements under which a Director has waived emoluments, or agreed

towaiveany future emoluments, from the Company.

Directors’ Remuneration Report,

pages 114 to 134

Details of any non-pre-emptive issues of equity for cash. Directors’ Report, page 137

Details of any non-pre-emptive issues of equity for cash by any unlisted major

subsidiaryundertaking.

No such share allotments

Details of parent participation in a placing by a listed subsidiary. Not applicable

Details of any contract of signiﬁcance in which a Director is or was materially interested. Not applicable

Details of any contract of signiﬁcance between the Company (or one of its subsidiaries)

and a controlling shareholder.

Not applicable

Details of waiver of dividends by a shareholder. 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.

Corporate governance

139Annual Report and Accounts 2023 Softcat plc

DIRECTORS’ 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.

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

14 0 Softcat plc Annual Report and Accounts 2023

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.

Corporate governance

141Annual Report and Accounts 2023 Softcat plc

DIRECTORS’ 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.

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 Katy Mecklenburgh

Chief Executive Ofﬁcer Chief Financial Ofﬁcer

23 October 2023 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

142 Softcat plc Annual Report and Accounts 2023

14 3Annual Report and Accounts 2023 Softcat plc

Financial statements

14 4 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

FINANCIAL

STATEMENTS

INDEPENDENT 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.

14 4 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.

14 5Annual Report and Accounts 2023 Softcat plc

Financial statements

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.

Our response to the risk

Key observations communicated

to the Audit Committee

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.

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.

INDEPENDENT AUDITOR’S REPORT CONTINUED

TO THE MEMBERS OF SOFTCAT PLC

14 6 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.

Our response to the risk

Key observations communicated

to the Audit Committee

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.

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.

147Annual Report and Accounts 2023 Softcat plc

Financial statements

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.

Our response to the risk

Key observations communicated

to the Audit Committee

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.

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 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.

INDEPENDENT AUDITOR’S REPORT CONTINUED

TO THE MEMBERS OF SOFTCAT PLC

Key audit matters continued

14 8 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.

149Annual Report and Accounts 2023 Softcat plc

Financial statements

INDEPENDENT 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.

15 0 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

151Annual Report and Accounts 2023 Softcat plc

Financial statements

Notes

2023

£’000

2022

£’000

Revenue 2 985,300 1,077,946

Cost of sales (611,466) (750,736)

Gross proﬁt 373,834 327,210

Administrative expenses (232,936) (191,065)

Operating proﬁt 3 140,898 136,145

Finance income 4 1, 171 252

Finance cost 4 (205) (253)

Proﬁt before tax 141,864 136,144

Income tax expense 5 (29,835) (25,739)

Proﬁt for the year 112,029 110,405

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 (204) 3,562

Net (loss) on cash ﬂow hedge (799) —

Total other comprehensive income (1,003) 3,562

Total comprehensive income for the year 111 , 0 2 6 113,967

Proﬁt attributable to:

Owners of the Company 112,029 110,405

Total comprehensive income attributable to:

Owners of the Company 111 , 0 2 6 113,967

Earnings per ordinary share (p)

Basic 18 56.2 55.5

Diluted 18 56.0 55.3

The Statement of proﬁt or loss and other comprehensive Income has been prepared on the basis that all operations are

continuingoperations.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 JULY 2023

152 Softcat plc Annual Report and Accounts 2023

Notes

2023

£’000

2022

£’000

Non-current assets

Property, plant and equipment 7 11,348 11,270

Right-of-use assets 8 9,969 6,162

Intangible assets 9 7, 155 7, 9 78

Deferred tax asset 15 2,997 2,508

31,469 27, 918

Current assets

Inventories 10 3,591 5,104

Trade and other receivables 11 490,041 541,424

Income tax receivable — 296

Cash and cash equivalents 14 122,621 9 7, 316

616,253 644,140

Total assets 647,722 672,058

Current liabilities

Trade and other payables 12 (359,627) (419,108)

Contract liabilities 13 (23,851) (31,564)

Income tax payable (6) —

Lease liabilities 8 (2,734) (2,716)

(386,218) (453,388)

Non-current liabilities

Contract liabilities 13 (3,032) (3,620)

Lease liabilities 8 (7,027) (3,950)

(10,059) (7,570)

Total liabilities (396,277) (460,958)

Net assets 251,445 211,100

Equity

Issued share capital 17 100 100

Share premium account 4,979 4,979

Cash ﬂow hedge reserve (799) —

Reserves for own shares — —

Foreign exchange translation reserve 3,358 3,562

Retained earnings 243,807 202,459

Total equity 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 Katy Mecklenburgh

Chief Executive Ofﬁcer Chief Financial Ofﬁcer

Softcat plc company registration number: 02174990

STATEMENT OF FINANCIAL POSITION

AS AT 31 JULY 2023

15 3Annual Report and Accounts 2023 Softcat plc

Financial statements

Equity attributable to owners of the Company

capital

£’000

premium

account

£’000

Cash ﬂow

hedge reserve

£’000

Foreign

exchange

translation

reserve

£’000

Reserves for

own shares

£’000

Retained

earnings

£’000

Total

£’000

Balance at 1 August 2021 100 4,979 — — — 174,065 179,144

Proﬁt for the period — — — — — 110,405 110,405

Other comprehensive income — — — 3,562 — — 3,562

Total comprehensive income for the year — — — 3,562 — 110,405 113,967

Share-based payment transactions — — — — — 2,541 2,541

Dividends paid — — — — — (84,020) (84,020)

Dividend equivalents paid — — — — — (215) (215)

Tax adjustments — — — — — (317) (317)

Balance at 31 July 2022 100 4,979 — 3,562 — 202,459 211,100

Proﬁt for the period — — — — — 112,029 112,029

Impact of foreign exchange on reserves — — — (204) — — (204)

Net (loss) on cash ﬂow hedge — — (799) — — — (799)

Total comprehensive income for the year — — (799) (204) — 112,029 111 , 0 2 6

Share-based payment transactions — — — — — 3,330 3,330

Dividends paid — — — — — (74,175) (74,175)

Dividend equivalents paid — — — — — (66) (66)

Tax adjustments —

— — — 230 230

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).

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 JULY 2023

154 Softcat plc Annual Report and Accounts 2023

Notes

2023

£’000

2022

£’000

Net cash generated from operating activities 19 104,802 83,644

Investing activities

Finance income 4 1, 171 252

Purchase of property, plant and equipment 7 (2,544) (1,890)

Purchase of intangible assets 9 (701) (3,334)

Net cash used in investing activities (2,074) (4,972)

Financing activities

Issue of share capital — —

Dividends paid 6 (74.175) (84,020)

Payment of principal portion of lease liabilities 8 (2,839) (2,369)

Payment of interest portion of lease liabilities 4,8 (205) (253)

Net cash used in ﬁnancing activities (77,219) (86,642)

Net (decrease)/increase in cash and cash equivalents 25,509 (7,970)

Cash and cash equivalents at beginning of year 14 97, 316 101,724

Exchange gains/losses on cash and cash equivalents (204) 3,562

Cash and cash equivalents at end of year 14 122,621 9 7, 316

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 JULY 2023

15 5Annual Report and Accounts 2023 Softcat plc

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.

15 6 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.

Financial statements

157Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

1 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.

15 8 Softcat plc Annual Report and Accounts 2023

1 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.

Financial statements

15 9Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

1 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

1 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.

Financial statements

161Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

1 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

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.

Financial statements

163Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

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

1 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.

Financial statements

165Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

1 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:

Notes

2023

£’000

2022

£’000

Net cash generated from operating activities 19 104,802 83,644

Income taxes paid 29,793 25,344

Cash generated from operations 134,595 108,988

Purchase of property, plant and equipment (2,544) (1,890)

Purchase of intangible assets (701) (3,334)

Cash generated from operations, net of capital expenditure 131,350 103,764

Operating proﬁt 140,898 136,145

Cash conversion ratio 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:

2023

£’000

2022

£’000

Software 188,797 150,000

Hardware 610,638 797,897

Services 185,865 130,049

985,300 1,077,946

Gross invoiced income by type:

2023

£’000

2022

£’000

Software 1,543,501 1,365,343

Hardware 617,844 810,241

Services 401,963 331,953

2,563,308 2,507,537

Revenue and gross invoiced income can also be disaggregated by type of business

Revenue by type of business:

2023

£’000

2022

£’000

Small and medium 555,541 535,823

Enterprise 253,229 222,064

Public sector 176,530 320,059

985,300 1,077,946

166 Softcat plc Annual Report and Accounts 2023

2 Segmental information continued

Gross invoiced income by type of business:

2023

£’000

2022

£’000

Small and medium 1,103,851 1,169,255

Enterprise 512,839 427,249

Public sector 946,618 911,033

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.

2023

£’000

2022

£’000

Gross invoiced income 2,563,308 2,507,537

Income to be recognised as agent under IFRS 15 (1,578,008) (1,429,573)

Revenue 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:

2023

£’000

2022

£’000

Depreciation of property, plant and equipment 2,466 2,373

Depreciation of right-of-use assets 2,127 1,594

Amortisation of intangible assets 1,525 558

Low value asset and short-term lease expense 83 32

Foreign exchange (gain)/loss (1,052) 2,938

Inventories expensed in the year 515,477 705,539

Movement in trade receivables provision as potentially uncollectable, recovered or written off during the year (1,038) 1,544

Auditor’s remuneration

Fees payable for the audit of the Company’s annual accounts 733 545

Fees payable for audit-related services — 133

Total for statutory audit services 733 678

Fees payable for the half year review of the condensed ﬁnancial statements 42 40

Total for non-audit-related services 42 40

For details on employee numbers and employee costs, please see note 24.

4 Finance income and ﬁnance cost

2023

£’000

2022

£’000

Bank interest income 1, 171 60

Interest on tax — 192

Lease liability interest cost (205) (253)

Financial statements

167Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

5 Income tax

The major components of the income tax expense for the years ended 31 July 2023 and 31 July 2022 are:

2023

£’000

2022

£’000

Statement of Proﬁt or Loss

Current income tax charge in the year 30,414 25,979

Adjustment in respect of current income tax of previous years (160) 52

Foreign tax relief/ other relief — (2)

Foreign tax suffered — 3

Total current income tax charge 30,254 26,032

Deferred tax

Current year (275) (110)

Adjustments in respect of prior periods 229 7

Effect of changes in tax rates (373) (190)

Deferred tax credit (419) (293)

Total tax charge 29,835 25,739

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 141,864 136,144

Proﬁt on ordinary activities before taxation multiplied by the standard rate of UK

corporation tax of 21% (2022: 19%) 29,791 25,867

Effects of:

Non-deductible expenses 267 112

Adjustment to previous periods 69 59

Effect of changes in tax rates (373) (190)

Effects of overseas tax rates 1 1

Share options 74 (110)

Other differences 6 —

44 (128)

Income tax charge reported in proﬁt or loss 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

2023

£’000

2022

£’000

Declared and paid during the year

Special dividend on ordinary shares (12.6p per share (2022: 20.5p)) 25,122 40,806

Final dividend on ordinary shares (16.6p per share (2022: 14.4p)) 33,098 28,663

Interim dividend on ordinary shares (8.0p per share (2022: 7.3p)) 15,955 14,551

74,175 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

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

Freehold

land and

buildings

£’000

Building

improvements

£’000

Computer

equipment

£’000

Fixtures,

ﬁttings and

equipment

£’000

Motor

vehicles

£’000

Total

£’000

Cost

At 1 August 2021 2,649 7,963 1,292 3,721 15 2 15,777

Additions — 98 647 1,082 63 1,890

At 31 July 2022 2,649 8,060 1,940 4,803 215 17,667

Additions 168 966 324 528 558 2,544

At 31 July 2023 2,817 9,026 2,264 5,331 773 20,211

Depreciation

At 1 August 2021 231 1,926 623 1,141 102 4,024

Charge for the year 25 1,149 512 642 45 2,373

At 31 July 2022 256 3,075 1, 135 1,783 14 8 6,397

Charge for the year 25 1, 151 514 717 59 2,466

At 31 July 2023 281 4,226 1,649 2,500 207 8,863

Net book value

At 31 July 2023 2,536 4,800 615 2,831 566 11,348

At 31 July 2022 2,393 4,985 805 3,020 67 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).

Financial statements

169Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

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

2023

£’000

2022

£’000

Opening right-of-use asset as at 1 August 6,162 7, 0 2 2

Lease additions and modiﬁcations 5,934 734

Depreciation (2,127) (1,594)

Closing right-of-use asset as at 31 July 9,969 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

2023

£’000

2022

£’000

Opening lease liability as at 1 August 6,666 8,302

Lease additions and modiﬁcations 5,934 734

Accretion of interest 205 253

Payments (3,044) (2,623)

Closing lease liability as at 31 July 9,761 6,666

Split as:

Short-term 2,734 2,716

Long-term 7,027 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

Within ﬁve

years

£’000

More than

ﬁve years

£’000

Total

£’000

Termination options expected to be exercised — — —

As at 31 July 2022

Within ﬁve

years

£’000

More than

ﬁve years

£’000

Total

£’000

Termination options expected to be exercised 4,376 1,279 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

9 Intangible assets

Software

under

development

£’000

Computer

software

£’000

Total

Intangibles

£’000

Cost

At 1 August 2021 4,833 888 5,721

Additions 3,195 13 9 3,334

Reclassiﬁcations (8,028) 8,028 —

At 31 July 2022 — 9,055 9,055

Additions — 702 702

Reclassiﬁcations — — —

At 31 July 2023 — 9,757 9,757

Amortisation

At 1 August 2021 — 519 519

Charge for the year — 558 558

At 31 July 2022 — 1,077 1,077

Charge for the year — 1,525 1,525

At 31 July 2023 — 2,602 2,602

Net book value

At 31 July 2023 — 7, 155 7,155

At 31 July 2022 — 7, 9 78 7, 9 78

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

2023

£’000

2022

£’000

Finished goods and goods for resale 3,591 5,104

The amount of any write down of inventory recognised as an expense in the year was £Nil (2022: £Nil).

11 Trade and other receivables

2023

£’000

2022

£’000

Trade and other receivables 429,569 497,308

Provision against receivables (3,920) (4,958)

Net trade receivables 425,649 492,350

Unbilled receivables 34,508 26,192

Prepayments 6,344 4,338

Accrued income 9,270 10,534

Deferred costs 14,270 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.

Financial statements

171Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

11 Trade and other receivables continued

The ageing proﬁle of trade receivables was as follows:

2023

£’000

provision

£’000

Net

£’000

2022

£’000

provision

£’000

Net

£’000

Current 309,006 (2,478) 306,528 335,579 (3,453) 332,126

0–30 days 76,269 (396) 75,873 79,981 (622) 79,359

31–60 days 22,331 (194) 22,137 28,402 (227) 28,175

61–90 days 11,892 (140) 11 , 75 2 26,332 (43) 26,289

Over 90 days 10,071 (712) 9,358 2 7, 014 ( 613 ) 26,401

Total due 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:

2023

£’000

2022

£’000

Balance at beginning of year 4,958 3,415

Increase for trade receivables regarded as potentially uncollectable 604 4,207

Decrease in provision for trade receivables recovered, or written off, during the year (1,642) (2,663)

Balance at end of year 3,920 4,958

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

>91 days

£’000

Total

£’000

Expected credit loss rate 0.80% 0.52% 0.87% 1.18% 7.07% 0.91%

Estimated total gross carrying amount at default 309,006 76,269 22,331 11,892 10,071 429,569

Expected credit loss (2,478) (396) (194) (140) (712) (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 1.273% 0.78% 0.80% 0.16% 2.27% 1.00%

Estimated total gross carrying amount at default 335,579 79,981 28,402 26,332 2 7, 014 497,309

Expected credit loss (3,453) (622) (227) (43) ( 613 ) (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

2023

£’000

2022

£’000

Trade payables 254,907 280,769

Other taxes and social security 13,699 23,078

Accruals 90,222 115,261

Other creditors 799 —

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

13 Contract liabilities

2023

£’000

2022

£’000

Deferred income 26,883 35,184

Deferred income is split as follows:

2023

£’000

2022

£’000

Short term deferred income 23,851 31,564

Long term deferred income 3,032 3,620

26,883 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

2023

£’000

2022

£’000

Cash at bank and in hand 122,621 9 7, 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:

2023

£’000

2022

£’000

Accelerated capital allowances (313) 95

Share-based payments 1,969 1,442

Other temporary differences 1,341 971

Deferred tax assets 2,997 2,508

2023

£’000

2022

£’000

Reconciliation of deferred tax asset

Balance at 31 July 2022 (PY: 31 July 2021) 2,508 3,149

Adjustment in respect of prior years (229) (7)

Proﬁt and loss account 648 300

Credit/(charge) to equity 70 (934)

Balance at 31 July 2023 (PY: 31 July 2022) 2,997 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.

Financial statements

173Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

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.

2023 2022

Income

statement

£’000

SOCIE

£’000

Total

£’000

Income

statement

£’000

SOCIE

£’000

Total

£’000

Current tax

Movement in respect of prior years (160) — (160) 52 — 52

Movement in respect of current year 30,414 (160) 30,254 25,979 (617) 25,363

Total current tax 30,254 (160) 30,094 26,031 (617) 25,415

Deferred tax

Movement in respect of prior years — — — 7 — 7

Movement in respect of current year:

Share options (458) (70) (528) (222) 934 712

Fixed assets 408 — 408 18 — 18

Other temporary differences (369) — (369) 95 — 95

Total deferred tax (419) (70) (489) (293) 934 6 41

Total tax 29,835 (230) 29,605 25,739 317 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.

2023

£’000

2022

£’000

Contributions payable by the Company for the year 3,671 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.

2023

£’000

2022

£’000

Allotted and called up

199,555,082 (2022: 199,354,076) ordinary shares of 0.05p each 100 100

18,933 (2022: 18,933) deferred shares

of 1p each — —

100 100

Note:

At 31 July 2023 deferred shares had an aggregate nominal value of £189.33 (2022: £189.33).

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

18 Earnings per share

2023

2022

Earnings per share

Basic 56.2 55.5

Diluted 56.0 55.3

The calculation of the basic earnings per share and diluted earnings per share is based on the following data:

2023

£’000

2022

£’000

Earnings

Earnings for the purposes of earnings per share, being proﬁt for the year 112,029 110,405

The weighted average number of shares is given below:

2023

’000

2022

’000

Number of shares used for basic earnings per share 199,237 198,976

Number of shares expected to be issued at nil consideration following exercise of share options 922 884

Number of shares used for diluted earnings per share 200,159 199,443

19 Notes to the Statement of Cash Flows

Reconciliation of operating proﬁt to net cash inﬂow from operating activities

2023

£’000

2022

£’000

Operating proﬁt 140,898 136,145

Depreciation of property, plant and equipment 2,466 2,373

Depreciation of right-of-use assets 2,127 1,594

Amortisation of intangibles 1,525 558

Loss on disposal of ﬁxed assets — —

Dividend equivalents paid (66) (215)

Cost of equity-settled employee share schemes 3,330 2,541

Operating cash ﬂow before movements in working capital 150,280 142,996

Decrease in inventory 1, 513 33,307

Decrease/(increase) in trade and other receivables 51,383 (211,694)

(Decrease)/increase in trade and other payables and contract liabilities (68,581) 144,379

Cash generated from operations 134,595 108,988

Income taxes paid (29,793) (25,344)

Net cash from operating activities 104,802 83,644

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.

Financial statements

175Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

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:

2023

£’000

2022

£’000

Cash at bank and in hand 122,621 9 7, 316

Trade and other receivables 469,427 529,076

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:

2023

£’000

2022

£’000

Trade payables (254,907) (280,769)

Accruals (90,222) (115,261)

Lease liabilities (9,761) (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

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:

Within 1 year

£’000

1 to 2 years

£’000

2 to 5 years

£’000

Over 5 years

£’000

Total

£’000

2023

Trade payables (254,907) — — — (254,907)

Accruals (90,222) — — — (90,222)

Lease liabilities (2,734) (2,162) (5,060) (1,232) (11,188)

(347,863) (2,162) (5,060) (1,232) (356,317)

2022

Trade payables (280,769) — — — (280,769)

Accruals (115,261) — — — (115,261)

Lease liabilities (2,716) (1,829) (1,722) (1,098) (7,365)

(398,746) (1,829) (1,722) (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.

Financial statements

177Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

21 Financial instruments and ﬁnancial risk management continued

Capital risk management

The Company manages its capital to ensure that it will be able to continue as a going concern while also maximising the operating

potential of the business. The capital structure of the Company consists of equity attributable to equity holders of the Company, comprising

issued capital, reserves and retained earnings as disclosed in the Company Statement of Changes in Equity. The Company is not subject

to externally imposed capital requirements.

22 Capital commitments

At 31 July 2023 the Company had £Nil capital commitments (2022: £Nil).

23 Directors’ remuneration

2023

£’000

2022

£’000

Remuneration for qualifying services 2,521 2 , 619

Company pension contributions to deﬁned contribution schemes 3 15

2,524 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:

2023

Number

2022

Number

Sales 1,415 1, 141

Services 377 332

Administration 359 323

2,151 1,796

Employment costs

2023

£’000

2022

£’000

Salaries, commissions and bonus 157,680 131,296

Social security costs 18,535 16,205

Other pension costs 3,671 2,813

Employment costs – subtotal 179,886 150,314

Share option charge 3,330 2,541

Total employment costs including share option charge 183,216 152,855

178 Softcat plc Annual Report and Accounts 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:

2023

£’000

2022

£’000

LTIP 3,330 2,541

Share option charge 3,330 2,541

Employer’s national insurance contributions payable on all plans 464 220

Share option charge including employer’s national insurance 3,794 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:

31 July 2023 31 July 2022

EPS TSR EPS TSR

Proportion of LTIP award 60% 40% 50% 50%

Share price at grant date (£) 12.59 12.59 18.63 18.63

Weighted average exercise price at grant date — — — —

Risk-free interest rate 3.00% 3.00% 0.10% 0.10%

Expected volatility 51 % 51 % 51% 51%

Dividend yield —% —% —% —%

Performance period (years) 3 3 3 3

Fair value (£) 12.59 6.40 18.63 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).

Financial statements

179Annual Report and Accounts 2023 Softcat plc

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2023

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:

Weighted

average

exercise

price

No. of

as at

31 July 2023

Weighted

average

exercise

price

No. of

as at

31 July 2022

Outstanding at 1 August — 927,021 — 1,098,374

Granted during the year — 401,964 — 232,832

Forfeited during the year — (50,082) — (51,032)

Exercised during the year — (217,681) — (353,153)

Outstanding at 31 July 1,061,222 9 2 7, 0 21

Exercisable at 31 July 241,560 251,268

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.

18 0 Softcat plc Annual Report and Accounts 2023

27 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.

2023

£’000

2022

£’000

Short-term employee beneﬁts 2,955 3,061

Post-employment beneﬁts 6 23

Key management personnel share-based payment charges 1, 391 1,083

4,352 4,164

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

2023

£’000

2022

£’000

M Hellawell 1,563 1,773

G Watt 32 18

G Charlton 44 37

R Perriss 6 6

V Murria 62 70

K Mecklenburgh — —

K Slatford — —

L Weedall — —

1,707 1,904

Katy Mecklenburgh started on 19 June 2023.

Financial statements

181Annual Report and Accounts 2023 Softcat plc

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

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.

CBP021508

Softcat plc Annual Report and Accounts 2023

Softcat plc

Fieldhouse Lane

Marlow

Buckinghamshire SL7 1LW

Tel: 01628 403 403