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MAKING DIGITAL WORK

Summary Annual Report and Accounts 2016

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Highlights 2016

OUR AMBITION IS TO BE EUROPE’S PREFERRED IT PROVIDER TO ENABLE USERS AND THEIR BUSINESS IN A DIGITAL WORLD.

Adjusted1 revenue (£m)

+6.3%
3,245.4
2016 3,245.4
2015 3,054.2
2014 3,063.3
2013 3,030.2
2012 2,878.0

Adjusted1 profit before tax (£m)

-0.6%
86.4
2016 86.4
2015 86.9
2014 81.1
2013 78.0
2012 75.7

Adjusted1 diluted earnings per share (pence)

+1.1%
54.0
2016 54.0
2015 53.4
2014 44.1
2013 41.3
2012 38.9

Dividend per share (pence)

+3.7%
22.2
2016 22.2
2015 21.4
2014 19.0
2013 17.5
2012 15.5

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LETTER FROM THE CHAIRMAN

AN INTERESTING YEAR

Our future depends in no small part on
recruiting and developing talent. I thank all of
our employees for their work and their results.
Their enthusiasm for our Company and their
focus on our customers are exemplary.

Greg Lock Chairman 13 March 2017
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What we do

AN INTEGRATED OFFER

Three complementary entry points for our customers and a balanced portfolio for Computacenter to achieve long-term growth.

CONSULT & CHANGE

Delivering a set of predictable, proven solutions that optimise customers’ technology, enabling effective change and achievement of business goals.

Revenue characteristics

Dependent on forward order book.

Professional Services
revenue (£m)

+4.3%
274.2
2016 274.2
2015 262.8
2014 259.7
2013 242.1
2012 220.3
SOURCE & DEPLOY

Determining and providing appropriate products and commercials to address customers’ technology requirements, providing a complete service and support throughout the product lifecycle.

Revenue characteristics

Large contracts, low margins and low visibility.

Supply Chain
revenue (£m)

+6.8%
2,207.5
2016 2,207.5
2015 2,067.1
2014 2,122.3
2013 2,106.2
2012 2,005.6
MANAGE & TRANSFORM

Providing maintenance, support, transformation and management of customers’ IT infrastructures and operations improving quality and flexibility of service, while significantly reducing costs.

Revenue characteristics

High visibility, long term and stable.

Managed Services
revenue (£m)

+4.9%
763.7
2016 763.7
2015 727.7
2014 725.8
2013 723.8
2012 688.4

OUR SOLUTIONS & SERVICES PORTFOLIO

BUSINESS MODEL

EUROPEAN IT SERVICES PROVIDER WITH A GLOBAL REACH


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CHIEF EXECUTIVE’S REVIEW

THE EFFECTS OF DIGITAL

Digitalisation is changing our customers’
businesses and encouraging them to
invest in new technologies. We are well
placed to meet their needs and deliver
superior financial returns in the future.

Mike Norris Chief Executive Officer 13 March 2017
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OUR STRATEGY

THE SHIFT TO DIGITAL

DIGITAL TRANSFORMATION

Digital transformation means radically improving customer experience, operational processes and business models by using technology*. This transformation is a fundamental driver of our markets.

In a digital world, we see three principles for success:

  1. Engage the user: Making it simple, intuitive and even fun for your customers to interact with you.
  2. Establish a platform: Putting in place a central service, to which you can add value-enhancing solutions or services. Customers only need to sign-up once and can get continuous benefits through the solutions available to them on the platform.
  3. Automate the delivery: Developing processes that are delivered without any human intervention, which offer scalability, improved efficiency and lower cost.

IT MARKETS ARE SHIFTING TO DIGITAL

Traditional IT markets are in decline. Where services are performed on devices by people, this decline is primarily due to price pressure. This pressure must be countered by relentlessly driving service cost down, through standardisation, off-shoring and automation. Services affected are those such as desktop outsourcing, helpdesks and client device support.

In contrast, new ‘digital’ market segments are growing. In these markets, the service is primarily delivered with or through software. Examples include mobile device and application management, public and private Cloud services, and Network Security. These provide opportunities for Supply Chain, Professional and Managed Services.

Computacenter understands how the ‘Shift to Digital’ is affecting customers. This means we can help them to engage their users, build and run platforms and automate their delivery.






BUILDING FOR THE LONG TERM

Our services-led strategy is focused on enabling users and their business. The Group’s progress against its strategic objectives is transparently measured by the following four key performance indicators.


1. TO LEAD WITH AND GROW OUR SERVICES
BUSINESS

+3.5%Services contract base2 (£m)
 
719 Neil Hall Director of Business Enablement & Contractual Services

2. TO IMPROVE OUR SERVICES PRODUCTIVITY
AND ENHANCE OUR COMPETITIVENESS

-3.4%Adjusted1 Services revenue generated
per Services head2 (£’000)
86 Chris Webb Group Chief Operating Officer

3. TO RETAIN AND MAXIMISE THE RELATIONSHIP
WITH OUR CUSTOMERS OVER THE LONG TERM

+11.1%Number of customer accounts with
contribution over £1 million2
100 Mike Norris Chief Executive Officer

4. TO INNOVATE OUR SERVICES OFFERINGS TO
BUILD FUTURE GROWTH OPPORTUNITIES

-1.0%Adjusted1 Services revenue2 (£m)
 
1,038 Michael Weiss Head of Group Strategy & Marketing

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RISK MANAGEMENT

SAFEGUARDING OUR FUTURE

Computacenter applies a rigorous and multi-layered approach to risk management. By blending appetite, model and process, we can manage and control our risks while remaining a customer-centric organisation.

We are well known for putting our customers first and empower our lead customer-facing people, to provide the flexibility and speed of response our customers want. Our governance process underscores this empowerment, by ensuring risks are identified and assessed at an appropriate level in the organisation.


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Identifying and assessing risk at the right level of our organisation allows us to empower our people, so they can provide the speed and flexibility our customers want.

Chris Webb Group Chief Operating Officer

PERFORMANCE REVIEW

OUR PERFORMANCE

FINANCIAL PERFORMANCE

The Group’s adjusted1 revenues decreased by 0.5 per cent in constant currency2 to £3,245.4 million, and increased by 6.3 per cent in actual currency2 (2015: £3,054.2 million). The Group’s statutory revenues increased by 6.1 per cent to £3,245.4 million (2015: £3,057.6 million) in actual currency2.

The Group’s adjusted1 profit before tax decreased by 4.3 per cent in constant currency2 to £86.4 million, and by 0.6 per cent in actual currency2 (2015: £86.9 million). In 2016, we saw another year of progress for the Group with adjusted1 diluted earnings per share, the Group’s primary measure, increasing by 1.1 per cent to 54.0 pence. This is despite the fact that our 2015 results included a £3 million gain from the unusual timing of contract lifecycles which, as we highlighted in our 2015 Interim Report, would not repeat in future years.

The Group made a statutory profit before tax of £87.1 million, a decrease of 31.3 per cent in actual currency2, having been significantly assisted by a gain on the disposal of the Group’s subsidiary, RDC, during 2015. This resulted in the Group’s statutory diluted earnings per share decreasing by 36.3 per cent to 52.3 pence in 2016 (2015: 82.1 pence).

The significant decline in the value of sterling against most currencies during 2016, in particular the euro, has resulted in significant growth in actual currency2 of our revenues and profitability as a result of the conversion of our foreign earnings. This has increased 2016 adjusted1 profit before tax by circa £3.5 million. In 2015, the movement in the foreign exchange rates impacted earnings adversely by circa £2 million.

In 2016, the Group reported a net gain of £1.4 million (2015: £41.1 million) from exceptional items. The Group reversed £3.0 million of fair value adjustments made on acquisition of a German subsidiary in 2009, as an exceptional gain. The exceptional cost of the French restructuring remains in line with that reported in our 2016 Interim Report, with a full year cost of £1.1 million.

2016 was a mixed year for Computacenter.
We have continued to invest in our capabilities and focused on productivity, and we expect a year of progress in 2017.

Mike Norris Chief Executive Officer 13 March 2017

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THE EFFECTS OF DIGITAL

MAXIMISING SHAREHOLDER VALUE
 

The Group saw a recovering performance in France and an improving Germany provide resilience to the Group result, which was adversely affected by a disappointing UK performance, more so in the first half of the year as we saw revenue growth in the second half of the year. The comparison with 2015 is difficult for both statutory and adjusted1 profit before tax, due to significant one-off items as disclosed in the prior year, but performance of the business excluding these one-off items showed modest improvement in a year of significant underlying change. The Supply Chain business has had to quickly change focus from Workplace sales to the more complex Networking and Datacenter infrastructure, whilst the German Services business saw a busy period of contract take-on.

The Group saw a recovering performance in France and an improving Germany provide resilience to the Group result, which was adversely affected by a disappointing UK performance, more so in the first half of the year as we saw revenue growth in the second half of the year.

Tony Conophy Group Finance Director
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1 Adjusted revenue, adjusted Services revenue, adjusted Professional Services revenue, adjusted Supply Chain revenue, and adjusted administrative expenses excludes the revenue and administrative expenses from a disposed subsidiary, R.D. Trading Ltd (RDC), for the comparative reporting periods. RDC was sold on 2 February 2015. Adjusted operating profit or loss, adjusted profit or loss before tax, adjusted tax, adjusted profit or loss for the year, adjusted earnings per share and adjusted diluted earnings per share are, as appropriate, each stated before: exceptional and other adjusting items including gain or loss on business disposals, amortisation of acquired intangibles, utilisation of deferred tax assets (where initial recognition was as an exceptional item or a fair value adjustment on acquisition), and the related tax effect of these exceptional and other adjusting items, as Management do not consider these items when reviewing the underlying performance of the Segment or the Group as a whole. Each of these measures also excludes the results of RDC for the comparative periods. Additionally, adjusted gross profit or loss and adjusted operating profit or loss includes the interest paid on customer-specific financing (CSF) which Management considers to be a cost of sale. A reconciliation between key adjusted and statutory measures is provided on page 46 of the Group Finance Director’s Review. Further detail is provided within note 4 to the Financial Statements.

2 We evaluate the long-term performance and trends within our strategic key performance indicators (KPIs) on a constant currency basis. Further, the performance of the Group and its overseas Segments are shown, where indicated, in constant currency. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information gives valuable supplemental detail regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our prior-year local currency financial results using the current year average exchange rates and comparing these recalculated amounts to our current year results or by presenting the results in the equivalent local currency amounts. Wherever the performance of the Group, or its overseas Segments, are presented in constant currency, the equivalent prior-year measure is also presented in actual currency using the exchange rates prevailing at the time. Highlights 2016, as shown on page 1, and statutory measures, are provided in actual currency.

3 Net funds includes cash and cash equivalents, CSF, other short or other long-term borrowings and current asset investments.