Computacenter interim results for the
six months ended 30 June 2003
Financial Highlights:
Operational Highlights:
Ron Sandler, Chairman of Computacenter plc, commented: “We also made progress in our two main areas of strategic focus: strengthening Computacenter’s Managed Services capabilities and building on its position as a leading IT infrastructure services provider across the major European markets. “Reflecting the cash generative nature of the business, and to bring the payment profile of dividends more closely into line with its peers, Computacenter has also announced the payment of an inaugural interim dividend of 2.0p per share. “With regards to the outlook for the remainder of the year, we anticipate that, in the absence of any change in market conditions, the performance achieved thus far by the Group should be sustainable.” Chairman’s Statement I am pleased to report that Computacenter made further excellent progress during the first six months of 2003, with profit before tax growing by 31.2% to £32.0 million (2002: £24.4 million). The Group’s balance sheet remained strong, with net cash of £24.4 million at the period end. Reflecting Computacenter’s confidence in the cash generative nature of its business, and bringing the payment profile of its dividends more closely into line with its peers, Computacenter has decided to pay an inaugural interim dividend of 2.0p per share on 10 October, 2003 to shareholders on the register as at 12 September, 2003. From now onwards, the Board intends to target declaring approximately one third of the total annual dividend at the interims. The strong profit performance was achieved despite continuing weak markets for IT capital expenditure. This is reflected in a decline of 6.5% in Group revenues, excluding the impact of acquisitions, compared with the same period in 2002. Much of this decline can be attributed to price reductions for IT hardware. However, Computacenter once again demonstrated an ability to overcome revenue pressures through a strategy of building its higher-margin contracted services base and maintaining rigorous control over its costs. We have maintained our focus on developing Computacenter as a leading multi-vendor IT infrastructure services provider, with continued investment in enhancing our Managed Services capabilities. Two major new Managed Services contracts in the first half of 2003, with Abbey and HBOS, provide further evidence of the success of this strategy. Managed Services revenues in the UK grew by 12.3% over the previous year. The second key thrust of Computacenter’s strategy has been the building of leading positions in the major European markets. The acquisition in January of GE CompuNet, the market leader in Germany, was a significant step towards the achievement of this goal. The integration and repositioning of GE CompuNet, now renamed CC CompuNet, has been the subject of a comprehensive programme involving much of the senior management team of Computacenter. Whilst a great deal remains to be done, the early signs of progress are encouraging, and I am confident that CC CompuNet will deliver fully the benefits to the Group envisaged at the time of its acquisition. The performance of Computacenter France has been disappointing, with an operating loss of £1.7 million (2002: £0.2 million profit) in the first half of the year. Steps are being taken to improve the operational efficiency of this business and by the year end I hope to report that progress has been made. As regards the outlook for the remainder of the year, we anticipate that, in the absence of any change in market conditions, the performance achieved thus far by the Group should be sustainable. Finally, it is the staff of Computacenter, with their skills and commitment to customer service, who are responsible for the continued success of the Group. I am delighted to acknowledge their contribution and thank all of them for what has been achieved. Ron Sandler Review of Operations UK UK operating profit grew by 22.5%, from £25.7 million to £31.4 million, as we continued to see strong demand from the government sector in the UK and a substantial improvement in the telecommunications market. However, the financial services and general commercial markets remained weak. Our Managed Services activities made good progress, with a growing number of customers looking to Computacenter to assist in reducing the costs and complexities of managing their IT infrastructures. We were awarded two significant new Managed Services contracts, by Abbey and HBOS, in the first half of the year. Under the terms of the former contract, valued at £70 million over five years and covering all of Abbey’s 28,000 employees, Computacenter will assume responsibility for the design, implementation and management of the entire desktop infrastructure. At HBOS, the scope of Computacenter’s existing Managed Services contract has been extended and from August 2003, we will manage 35,000 desktop PCs, nearly half of the HBOS estate, under a three-year agreement. Together, these two contracts will entail the transfer of some 300 staff to Computacenter under TUPE regulations, during H2 2003 and H1 2004. We have a strong pipeline of Managed Services bid opportunities for the remainder of the year, which bodes well for further growth in our contracted services base in 2004. Overall, we maintained the high levels of Professional Services utilisation achieved in 2002 and again delivered a number of major integration projects. These included the implementation of a standardised IT infrastructure for Places for People, a leading housing provider, which has led to an 18% reduction in calls to its helpdesk. We also deployed a fully supported in-room entertainment and business services system for London’s Dorchester Hotel, to enhance service delivery to their customers, and project managed the testing of 135 application systems for Marks and Spencer plc. Towards the end of the period we saw evidence of a developing demand for Microsoft Windows XP roll-outs, offering increased business opportunities in the months ahead. The product resale market remained subdued, with corporate customers maintaining their cautious approach to IT capital expenditure. However product margins increased by almost 1% over the same period in 2002. This was mainly due to large-scale corporate and government roll-outs, at lower margins, representing a smaller proportion of UK revenues compared with the past two years. Demand from small and medium-sized businesses has been stronger, which has benefited CCD, our trade distribution division that supplies the second tier resellers who service these customers. In the first half of 2003, CCD grew its revenues by 14.8% and extended its leading market share with HP, its main vendor. In May CCD was appointed as an authorised distributor for HP printers. We now offer a single source for all HP trade distribution, from desktop PCs to high-end enterprise servers. Our recycling and re-marketing arm, RDC, saw profits grow 61.7% over the same period in 2002, to £0.9 million. A move into new premises and the introduction of a shift system enabled RDC to increase its throughput to over 50,000 units per month. We maintained our focus on reducing our cost base and making the most effective use of our resources. As a result, over the first half of 2003, we achieved a 3.6% reduction in sales, general and administration costs within the UK business compared to the first half of 2002. Germany The acquisition of GE CompuNet, subsequently renamed CC CompuNet, was completed in early January 2003. An extensive integration programme was initiated immediately following the acquisition, focused upon sharing best practices around the Group and leveraging central resources to improve the scope, quality and cost-effectiveness of CC CompuNet’s offerings. This has resulted in a major reorganisation of the German business. Whilst the programme is still in its early phases, I am pleased with the progress that has already been made, and with the enthusiasm and commitment of the German management team. CC CompuNet made an operating profit of £3.2 million in the first six months of the year. Due to the continuing weakness of the German economy, revenues were down 10.7% on H1 2002. CC CompuNet worked with other Computacenter companies to secure the award of a four-year international Managed Services contract with Deutsche Börse AG, Frankfurt, servicing 4,500 employees across Germany, Luxembourg and the UK. Other successes included a five-year contract for a Linux migration awarded by the Deutscher Bundestag (the lower house of the German parliament). France Difficult market conditions had an adverse impact on the performance of Computacenter France, which made an operating loss of £1.7 million for the first six months of the year. The cost base of the French business remains too high, partly due to the difficulties encountered in integrating the GECITS acquisition in 2002. Utilisation of professional services staff in France was particularly disappointing and significantly affected operating performance. Measures to address these issues, including steps to increase utilisation in professional services and reduce sales, general and administration expenses, led to restructuring costs of £1.2 million in the first half, which are included in the operating result. I am confident that these measures will lead to a material improvement in performance. Despite the weak market, Computacenter France continued to attract significant new customers. New contract wins in France during the first half of this year include Paris City Hall and the General Council of Paris, for whom we will supply desktops, laptops and networking technology. We were also successful in winning contract extensions with UNEDIC Assurance Chômage, Conseil Regional de Haute Normandie and Gendarmerie Nationale. Computacenter France also designed, installed, integrated and supported the IT infrastructure for the G8 summit in Evian. Other countries Results in our Belgium and Luxembourg operation were encouraging, showing a 55.2% reduction in operating loss over H1 2002 to £0.2 million. A major technology refresh project was delivered for the BP/Solvay joint venture company and we won a two-year extension to our SWIFT desktop outsourcing contract. In January 2003 we acquired GECITS Austria, which has been renamed Computacenter Austria. Despite showing improved profitability over the figures reported by GECITS for the second half of 2002, performance of this business was somewhat disappointing, with an operating loss of £0.3 million for the first half. Encouraging developments over this period included a contract for the hardware maintenance of the entire desktop estate of BAWAG-PSK, a leading Austrian bank and a systems roll-out for PriceWaterhouseCoopers Austria. Summary I am pleased with overall Group performance in the first half. We will continue to take advantage of the many opportunities we see in the market whilst maintaining a rigorous control over our cost base. Mike Norris
Approved by the Board on 01 September 2003 MJ Norris, Chief Executive, FA Conophy, Finance Director
NOTES TO THE ACCOUNTS 1 Accounting Policies 2 Turnover and Segmental Analysis The Group operates in one principal activity, that of the provision of information technology and related services. Turnover represents the amounts derived from the provision of goods and services which fall within the Group's ordinary activities, stated net of VAT. An analysis of turnover, gross profit and operating profit by origin is given below:
7 Earnings per share The calculation of earnings per ordinary share is based on profit attributable to members of the holding Company of £21,663,000 (2002: £16,236,000) and on 183,396,000 (2002: 183,160,000) ordinary shares, being the weighted average number of ordinary shares in issue during the period after excluding the shares owned by the Computacenter Employee Share Trust, Computacenter Trustees Limited and the Computacenter Quest. The diluted earnings per share is based on the same earnings figure of £21,663,000 (2002: £16,236,000) and on 186,743,000 (2002: 188,368,000) ordinary shares, calculated as the basic average number of ordinary shares, plus 3,347,000 (2002: 5,208,000 ) dilutive share options. 8 Investments On 2 January 2003, Computacenter plc acquired GE CompuNet in Germany and GECITS in Austria for an initial consideration of £37,153,000. As part of the on going net asset valuation process, Computacenter plc anticipates receiving £34,436,000 from GE Capital, the vendors, resulting in a net consideration for the acquisition of £2,717,000. The assets of each of these companies have been included in the Group’s balance sheet at their provisional fair values at the date of acquisition. Further consideration may be payable contingent on the results of the acquired businesses dependent upon future profit performance. Analysis of the acquisition of GE CompuNet and GECITS (Austria): Net assets at date of acquisition:
Adjustments relate to the adoption of Computacenter's group accounting policies and recognition of property provisions.
10 Publication of non-statutory accounts The financial information contained in this interim statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the full proceeding year is based on the statutory accounts for the financial year ended 31 December 2002. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
With the help of Computacenter and the rollout of a pioneering workforce management solution, NTL has improved the efficiency of its engineers, reduced overheads and improved customer service.
European legislation means that businesses need to take even greater care when disposing of redundant IT equipment.
Our
audio-visual division offers a highly focused and specialist requisition & management
service, that delivers the very best in AV presentation systems.
At Computacenter we can fulfil all of your consumables requirements. We manage small orders through to a large-scale, fully managed consumables service, with most orders delivered on a next-day service.