Final Results
Computacenter PLC
16 March 2004
Preliminary Results Announcement
Computacenter plc, the European IT infrastructure services provider, today
announces preliminary results for the twelve months ended 31 December 2003.
Financial Highlights:
• Group revenues up 28.8% to £2.48 billion (2002: £1.93 billion) including
acquisitions
• Profit before tax up 18.3% to £65.2 million (2002: £55.1 million)
• Earnings per share up 22.5% to 25.0p (2002: 20.4p)
• Final dividend of 5.0p per share, total dividend up 20.7% to 7.0p
(2002:5.8p)
• Strong operating cashflow and balance sheet with net funds of £49.9
million at year end
Operational Highlights:
• UK Managed Services revenue growth of 10.9%
• Encouraging pipeline of Managed Services contracts and XP roll-outs
• Significant product price decline, driven by weakness of the US dollar
• Integration of CC CompuNet in Germany on plan; first year operating
profit of £8.7 million
• Computacenter France turn-around programme underway in the second half
• New pan-European management structure to assist transfer of best
practice
Ron Sandler, Chairman of Computacenter plc, commented:
'These are excellent results. Our key priorities in 2003 were the further
development of our services activities and the integration of CC CompuNet in
Germany. We made good progress with both.
'The improvement in our product volumes in 2003, although clearly stimulated by
the large price declines, provides some evidence that our markets are beginning
to recover from the downturn of recent years. The growing demand for XP
roll-outs that we experienced as the year progressed is a further encouraging
sign. Whilst much depends upon the pace and sustainability of the broader
economic recovery in Europe, there are grounds for optimism that market
conditions may now improve.'
For further information, please contact:
Computacenter plc.
Mike Norris, Chief Executive 01707 631 601
Tessa Freeman, Investor Relations 01707 631 514
www.computacenter.com
Tulchan Communications 020 7353 4200
Julie Foster/ Tim Lynch
www.tulchangroup.com
High resolution images are available for the media to view and download free of
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Chairman's Statement
I am pleased to report an excellent set of results for Computacenter in 2003.
Profit before tax rose 18.3% to £65.2 million (2002: £55.1 million). Earnings
per share increased by 22.5% to 25.0p (2002: 20.4p). The Group continued to
generate cash from operations, and the balance sheet remained strong, with net
funds at the year-end of £49.9 million (2002: £83.4 million).
These results are particularly satisfying when viewed against the background of
an unprecedented price decline in the IT industry in Europe, driven largely by
the fall in the US dollar against both sterling and the euro. Over the course of
the year, the price of desktops, laptops and 'Wintel' servers in our three core
markets all declined in the order of 15% to 25% in local currency. Computacenter
buys and sells product in local currencies and therefore has no material foreign
exchange exposures arising from operations. Nevertheless, the falling prices
inevitably affected our revenues and product margins, although this was partly
mitigated by growth in our product volumes. In 2003, excluding the revenues of
the German and Austrian businesses acquired during the course of the year, Group
revenues fell 6.7% to £1.80 billion (2002: £1.93 billion). Group revenues,
including acquisitions, rose 28.8% to £2.48 billion.
I am pleased to recommend a final dividend of 5.0p per share, bringing the total
dividend for the year to 7.0p (2002: 5.8p), an increase of 20.7%. This is
consistent with our policy, announced last year, of maintaining a dividend cover
of broadly 3.5 times. The final dividend will be paid on 1 June 2004 to
shareholders on the register as at 7 May 2004.
Computacenter's strategy in recent years has been to build a strong services
business to complement its product logistics offering and to expand its presence
in the major European markets. Consistent with these goals, our key priorities
in 2003 were the further development of our services activities and the
integration of CC CompuNet in Germany. We made good progress with both.
In the UK, Managed Services revenues grew by 10.9%, making a significant
financial contribution. Of particular note was the five-year Managed Services
contract awarded to Computacenter by Abbey, through which we will provide a
company-wide end-to-end desktop service at all Abbey's offices and branches.
During the year, we continued to invest heavily in developing the skills and
technologies to maintain ourselves at the forefront of desktop outsourcing.
The German acquisition represents a major step forward for the Group. In
addition to its strong product logistics business, CC CompuNet has a significant
services element in its portfolio, which supports our objective of building
contracted revenue streams. Following the acquisition, an extensive integration
programme has been pursued to align CC CompuNet's operations with those of
Computacenter UK and adopt best practice across the Group. This has gone
according to plan and has established firm foundations for future profit growth.
In 2003, CC CompuNet produced an operating profit of £8.7 million. An ancillary
benefit of this integration programme is that it has led us to create a
pan-European management structure for Computacenter, which will enhance the
Group's ability to contribute to the management of the French operations.
Computacenter France performed poorly in a difficult market, with an operating
loss of £2.7 million (2002: profit of £2.4 million) after the release of
negative goodwill. However, determined efforts began in the second-half of the
year to transfer best practice to France from the UK and to improve the cost
efficiency of the French business. Considerable savings have already been
achieved. Although much remains to be done to bring the profit margin of
Computacenter France to an acceptable level, an intensive turn-around programme
is underway and I am confident that this will yield positive results.
It is appropriate that the increasingly international nature of our business is
reflected in the composition of the Computacenter Board, and I am delighted with
the appointment of Ghislain Lescuyer as a Non-Executive Director. Ghislain, who
joined the Board on 19 January 2004, brings a wealth of experience in managing
European technology businesses and we will benefit greatly from his skills and
background.
The improvement in our product volumes in 2003, although clearly stimulated by
the large price declines, provides some evidence that our markets are beginning
to recover from the downturn of recent years. The growing demand for XP
roll-outs that we experienced as the year progressed is a further encouraging
sign. Whilst much depends upon the pace and sustainability of the broader
economic recovery in Europe, there are grounds for optimism that market
conditions may now improve. Computacenter is well positioned to take advantage
of any such improvement.
As always, the credit for the Group's performance belongs to the staff. The
pleasing results in 2003 are attributable to the skills, enthusiasm and
commitment of our employees, to whom I offer my wholehearted thanks.
Review of Operations
UK
Our customers continue to look to us to reduce their costs, improve service
levels and free up their own resources by outsourcing discrete IT infrastructure
services. As a result, in 2003 we saw a further increase in service revenues and
a growth of 9.2% in our UK contract base. Our continuing focus on reducing our
own cost base achieved a 9.1% reduction in the sales, general and administration
expenses of Computacenter's UK business.
We were awarded two major Managed Services contracts, by Abbey and HBOS plc, 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 has responsibility for the design, implementation and management
of Abbey's entire desktop infrastructure. At HBOS, the scope of Computacenter's
existing Managed Services contract, announced in 2002, has been extended and we
now manage 38,000 desktop PCs, approximately half of the HBOS estate, under a
three-year agreement. Together, these two contracts entail the transfer of some
300 staff to Computacenter under TUPE regulations, during H2 2003 and H1 2004.
Government successes included a six-year Managed Services agreement with North
Yorkshire County Council for managing the council's IT infrastructure, other
than its communications equipment, and providing services such as systems
installation and maintenance. We secured a five-year contract with the Charity
Commission for England and Wales, for whom we are deploying a new Windows
XP-based infrastructure, integrated data network and IP telephony service. We
also won a contract to provide a disaster recovery solution and managed data
back-up services for the Department for Transport.
We saw a significant increase in Windows XP deployments in 2003, driving growth
in product volumes and fuelling demand for our broad range of Infrastructure
Integration Services. Major projects included the implementation of a
standardised IT infrastructure for Places for People, and a fully supported
in-room entertainment and business services system for London's Dorchester
Hotel. We also project managed the testing of 135 application systems for Marks
and Spencer plc.
The UK market for IT expenditure remained generally subdued, although demand
from the public sector remained strong and there was a substantial improvement
in the telecommunications market. Elsewhere, and particularly in financial
services, corporate customers maintained their cautious approach. Whilst product
volumes were satisfactory throughout the year, Computacenter's product revenues
in the UK fell by 11.3%. This was largely due to a substantial price decline,
driven by the weakness of the US dollar, of approximately 20% on desktop and
laptop computers.
The server product market was generally more buoyant, as organisations focused
on consolidating their legacy IT infrastructures by replacing large numbers of
network servers with fewer, but more powerful central computers. As a
consequence we saw increased sales of high-end servers, with revenues from the
sale of Sun Microsystems computers increasing by 12.8%.
We won a significant Technology Sourcing contract to provide technology and
services to the UK's Ministry of Defence via the Defence Communications Services
Agency Catalogue. This will be our third major catalogue procurement contract,
following the similar agreements we have with the Inland Revenue and the Office
of Government Commerce.
Our distribution business, comprising CCD and Metrologie, outperformed its
sector and grew revenue by approximately 14.9% on the previous year, maintaining
a close relationship with HP, its principal product partner.
RDC, our re-cycling and remarketing arm, saw its profits rise for the fifth
consecutive year since its acquisition by Computacenter in 1999.
We were delighted to receive the specialist award for Excellence in Sourcing and
Procurement at the 2003 European Supply Chain Excellence Awards, organised by
Logistics Europe and Cap Gemini Ernst & Young. The award recognised the quality
of our end-to-end approach to purchasing and expertise in areas such as
performance measurement, sourcing and supplier management.
We remain fully committed to meeting standards for quality, the environment and
equality of opportunity. During 2003 we achieved UK certification to
international environmental standard ISO14001 and the international quality
standard ISO 9001:2000, both by the British Standards Institute. In the area of
race relations, we renewed our partnership agreement with the Commission for
Racial Equality (CRE).
Germany
In 2003 CC CompuNet performed well in a difficult market. Operating profit grew
to £8.7 million, despite a revenue decline of 10.9% to £635.2 million.
Reductions in SG&A costs helped profitability and, as in the UK, we were able to
grow our Managed Services business.
Following the acquisition of CC CompuNet in early January 2003, an extensive
integration programme was initiated. This focused upon sharing best practice
across the Group and leveraging central resources to improve the scope, quality
and cost-effectiveness of CC CompuNet's offerings.
This programme led to the creation of a new services enablement function, to
allow transfer of best practice in the Managed Services area, and the
introduction of a new sales and management structure, similar to that in the UK.
We also made significant investments in new stock management and warehouse
systems and launched our e-commerce system, Computacenter Connect, in Germany.
We are confident that these developments, together with such initiatives as the
introduction of a new pay plan, customer profitability reporting and enhanced
financial management systems, establish a solid basis for future profit growth.
CC CompuNet worked with other Computacenter companies to secure a four-year
international Managed Services contract with Deutsche Borse AG, Frankfurt,
servicing their employees across Germany, Luxembourg and the UK. Other successes
included a contract for a Linux migration awarded by the Deutscher Bundestag
(the lower house of the German parliament). Noteworthy new Technology Sourcing
contracts included Wustenrot & Wurttembergische, and Aachener und Munchener
Versicherungsgruppe.
France
Difficult market conditions led to a disappointing performance from
Computacenter France, which made an operating loss of £2.7 million on revenues
of £324.5 million. The cost base of the French business remains too high, partly
due to the challenges of integrating the GECITS acquisition in 2002.
Additionally, utilisation of Professional Services staff in France was
particularly low in the first half and this contributed significantly to the
poor financial performance.
Measures to address these issues, including steps to increase Professional
Services utilisation and reduce SG&A expenses, led to an improvement in
underlying performance in the second half of the year. Computacenter France also
embarked upon a maintenance re-engineering initiative modelled on a similar
project completed successfully in the UK. The pan-European management structure,
established following the CC CompuNet acquisition, is proving to be of
particular benefit in addressing the turn-around of Computacenter France, which
remains a high priority for the Group.
Costs of £3.1 million relating to measures aimed at improving French performance
are included in the operating result for the year. These measures, together with
other initiatives currently underway, give us confidence that a strong
foundation is being built to return Computacenter France to profitability.
Despite the weak market, Computacenter France continued to attract significant
new customers. These included La Poste, RATP, Paris City Hall and the General
Council of Paris, for whom we will supply desktops, laptops and networking
technology. Our French business was also successful in winning important
contract extensions with customers, including UNEDIC Assurance Chomage, 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.
With the aim of growing its government business, Computacenter France acquired
AB Microconseil, a small IT reseller specialising in that sector. The
acquisition involved the transfer of some 30 employees and brought several new
accounts including the General Councils of Hauts de Seine, Seine Saint-Denis and
Seine et Marne.
Other Businesses
Austria
On January 2, 2003 we acquired GECITS Austria, subsequently renamed
Computacenter Austria. Despite showing improved performance over the figures
reported by GECITS for the second half of 2002, performance of this business has
been disappointing, with an operating loss of £1.5 million for the year on
revenues of £49.0 million. However some significant new business was won during
the year, including 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.
Belgium and Luxembourg
Our business in Belgium and Luxembourg (BeLux) saw 37.2% revenue growth during
2003, primarily from increased product sales in new customer accounts. Results
improved significantly, showing an 89.9% reduction in operating loss to £0.4
million, with the strongest contribution coming from existing Managed Services
contracts. Revenues in the year were £17.3 million.
During 2003 BeLux opened a new Luxembourg office in the city's financial
district. Major wins included technology sourcing for companies such as Clerical
Medical Investment Group (part of HBOS), Pioneer Europe and Reynaers
International. We also won a two-year extension to our SWIFT desktop outsourcing
contract and delivered major technology refresh projects for the BP/Solvay joint
venture company and Owens Corning.
Biomni
Computacenter's share of Biomni's operating losses reduced again in 2003 to £0.3
million (2002: £1.3 million).
Group
Across the Group, we maintained our focus on programmes designed to reduce our
cost base and to leverage our resources more effectively.
Following the German and Austrian acquisitions, we introduced a pan-European
management structure and made further progress in the closer integration of our
European businesses. This facilitates the transfer of expertise and best
practice across the Group, to enable the delivery of ever more competitive
service to our customers. This structure also allows us to work more closely
with major vendors who are operating, or intending to operate, pan-European
supply arrangements.
Associated with this approach, we have also begun to deploy tools and processes
across the Group. These include Computacenter Connect, our e-commerce system,
and the implementation of a Group-wide HR information system. We are also in the
process of making our integrated Services Management Tool Suite (SMTS), which we
use to track and manage customer support requests, available across the Group.
In July our former ICG (International Computer Group) partner network became an
extension of Computacenter International, the internal division responsible for
supporting customer operations across multiple countries. The former ICG
partners will remain independent, but will be the preferred partners of
Computacenter in international business. The move is designed to give
Computacenter greater control of international service delivery and to give our
partners greater access to our expertise and tools.
I am very pleased with overall Group performance in 2003. The increasingly
international character of Computacenter placed fresh demands upon the
management team, to whom I offer my thanks for their admirable response. We will
continue to take advantage of the many opportunities we see in our markets
whilst maintaining a rigorous control over our cost base.
GROUP PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2003
2003 2002
Note £'000 £'000
TURNOVER
Turnover: Group and share of joint 2,482,713 1,930,135
venture's turnover
Continuing operations:
Ongoing 1,797,133 1,926,737
----------- ----------
Acquisitions 684,162 -
------------ ----------
GROUP TURNOVER 2 2,481,295 1,926,737
OPERATING COSTS 3 (2,415,357) (1,870,570)
------------- -----------
OPERATING PROFIT 2
Continuing Operations:
Ongoing 58,712 56,167
Acquisitions 7,226 -
---------- -----------
GROUP OPERATING PROFIT 65,938 56,167
Share of operating loss in joint (333) (1,272)
venture
Share of operating profit / (loss) in 510 (13)
associates --------- -----------
TOTAL OPERATING PROFIT: GROUP AND SHARE 2 66,115 54,882
OF ASSOCIATES AND JOINT VENTURE
Release of provisions relating to - 863
termination of operations ---------- -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE 66,115 55,745
INTEREST AND TAXATION
Interest receivable and similar 3,249 7,367
income
Interest payable and similar charges (4,203) (8,031)
--------- --------
PROFIT ON ORDINARY 65,161 55,081
ACTIVITES BEFORE TAXATION
Tax on profit on ordinary activities 4 (18,902) (18,074)
---------- ---------
PROFIT ON ORDINARY 46,259 37,007
ACTIVITIES AFTER TAXATION
Minority interests - equity 45 25
----------- ---------
PROFIT ATTRIBUTABLE TO MEMBERS OF THE 46,304 37,032
PARENT COMPANY
Dividends - ordinary dividends on 5 (13,011) (10,657)
equity shares -------- --------
RETAINED PROFIT FOR THE YEAR 33,293 26,375
======== ========
Earnings per share
- Basic 6 25.0p 20.4p
- Diluted 6 24.6p 19.8p
Dividends per ordinary share 5 7.0p 5.8p
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 December 2003
2003 2002
£'000 £'000
Profit for the financial year excluding share of joint 46,231 37,978
venture and associates
Share of joint venture's loss for the year (233) (933)
Share of associates' profit / (loss) for the year 306 (13)
--------- ----------
Profit attributable to members of the parent company for
the financial year 46,304 37,032
Exchange differences on retranslation of net assets of
associated and subsidiary undertakings 4,159 1,238
-------- -------
Total recognised gains for the year 50,463 38,270
======== =======
In addition net assets were reduced by £2,503,000 during the year as a result of
a prior year adjustment in respect of the adoption of UITF 38 - Accounting for
ESOP trusts (see accounting policies).
GROUP BALANCE SHEET
at 31 December 2003
Restated
2003 2002
Note £'000 £'000
FIXED ASSETS
Intangible assets
Positive goodwill 4,755 5,039
Negative goodwill (532) (4,793)
------- -------
4,223 246
Tangible assets 100,549 96,733
Investments 7 11,036 9,863
------- -------
115,808 106,842
------- -------
CURRENT ASSETS
Stocks 134,133 95,742
Debtors: gross 520,701 286,882
Less non returnable proceeds (78,390) -
--------- --------
Debtors 442,311 286,882
Cash at bank and in hand 96,997 92,072
-------- --------
673,441 474,696
CREDITORS: amounts
falling due within one year (466,816) (320,569)
---------- ---------
NET CURRENT ASSETS 206,625 154,127
---------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 322,433 260,969
CREDITORS: amounts falling due after more
than one year (13,923) (1,613)
PROVISION FOR JOINT VENTURE DEFICIT
Share of gross assets 385 943
Share of gross liabilities (7,609) (7,834)
-------- ---------
(7,224) (6,891)
PROVISIONS FOR LIABILITIES
AND CHARGES (18,403) (9,696)
--------- ---------
TOTAL ASSETS LESS LIABILITIES 282,883 242,769
========= =========
CAPITAL AND RESERVES
Called up share capital 9,441 9,237
Share premium account 71,486 69,004
Capital redemption reserve 100 100
Investment in own shares (2,503) (2,503)
Profit and loss account 204,244 166,792
--------- ---------
Shareholders' funds - equity 282,768 242,630
Minority interests - equity 115 139
--------- -------
282,883 242,769
========= =========
Approved by the Board on 15 March 2004
MJ Norris Chief Executive
FA Conophy Finance Director
GROUP STATEMENT OF CASH FLOWS
For the year ended 31 December 2003
2003 2002
Note £'000 £'000
CASH INFLOW FROM OPERATING ACTIVITIES 8 53,521 60,614
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE (954) (468)
TAXATION
Corporation tax paid (22,456) (17,485)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (14,562) (9,097)
ACQUISITIONS AND DISPOSALS (37,303) 7,559
EQUITY DIVIDENDS PAID (14,437) (5,324)
---------- ---------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING (36,191) 35,799
FINANCING 2,207 (43,083)
---------- ---------
DECREASE IN CASH IN THE YEAR (33,984) (7,284)
========== =========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
2003 2002
£'000 £'000
Net funds at 1 January 2003 83,430 53,287
Decrease in cash in the year (33,984) (7,284)
Cash outflow from repayment of debt and
lease finance 479 38,787
------- --------
Change in net cash resulting from cash
flows (33,505) 84,790
New finance leases - (1,164)
Amortisation of debt issue costs - (196)
--------- --------
Net funds at 31 December 2003 49,925 83,430
======== ========
NOTES TO THE FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
Basis of preparation
The financial statements are prepared under the historical cost convention and
in accordance with applicable accounting standards.
In preparing the financial statements for the current year, the Group and
Company have adopted UITF 38 'Accounting for ESOP trusts'. This abstract had no
impact on the results for the period but shareholders funds have been reduced by
£2,503,000 following the recognition of the ESOP trust within reserves.
2 TURNOVER AND SEGMENTAL ANALYSIS
The Group operates in one principal activity, that of the provision of
distributed 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, operating profit and net assets is given below:
2003 2002
Turnover by Origin £'000 £'000
UK 1,455,296 1,597,344
France 324,517 316,773
Belgium & Luxembourg 17,320 12,620
----------- ------------
Continuing Operations 1,797,133 1,926,737
Germany - acquisition 635,150 -
Austria - acquisition 49,012 -
----------- ------------
Total 2,481,295 1,926,737
=========== ===========
Turnover by destination is not materially different to turnover by origin and
has, therefore, not been disclosed.
2003 2002
Gross Profit £'000 £'000
UK 188,369 196,820
France 36,059 34,932
Belgium & Luxembourg 1,842 1,053
--------- ----------
Continuing Operations 226,270 232,805
Germany - acquisition 90,709 -
Austria - acquisition 5,507 -
--------- ----------
Total 322,486 232,805
========= =========
Gross profit is defined as: Turnover less (increase) in stocks of finished
goods, goods for resale and consumables and less £408,475,000
(2002 :£210,087,000) for those staff costs, depreciation and other amounts
written off tangible and intangible assets and other operating charges that are
incurred in delivering technology sourcing, managed services and infrastructure
integration to the customer. Selling, general and administration ('SG&A') costs
are defined as the balance of staff costs, depreciation and other amounts
written off tangible and intangible assets and other operating charges.
2003 2002
£'000 £'000
Operating Profit/(Loss)
UK 61,829 57,642
France (2,727) 2,389
Belgium & Luxembourg (390) (3,864)
--------- ---------
Continuing Operations 58,712 56,167
Germany - acquisition 8,728 -
Austria - acquisition (1,502) -
-------- ---------
Total Group excluding
associates & joint venture
undertakings 65,938 56,167
Share of operating result of 177 (1,285)
associates and joint ------- ---------
venture
Total operating profit 66,115 54,882
======== ========
Net Assets/(Liabilities) Restated
Employed
2003 2002
£'000 £'000
UK 187,167 180,843
France 33,326 10,400
Belgium & Luxembourg (6,397) (4,426)
Germany - existing (291) (588)
--------- -----------
213,594 186,229
Germany - acquisition 21,333 -
Austria - acquisition (2,690) -
-------- -----------
Subtotal 232,238 186,229
Net Assets of associated
undertakings
UK - 46
Rest of the world 510 62
------- -----------
Net assets employed 232,959 186,337
Net funds 49,925 83,430
-------- ----------
Net operating assets 282,884 269,767
Non-operating liabilities - (26,998)
--------- ----------
Net assets 282,884 242,769
========= =========
During the period, Computacenter France acquired the businesses of Alsace
Informatique Investissement (AII) and AB Microconseil (ABM) in France. These
operations have been fully integrated under operating profit with those of
Computacenter France and therefore it is not possible to separately identify the
amounts relating to the acquired activities
3 OPERATING COSTS
2003 2002
£'000 £'000
Increase in stocks of finished goods (5,027) (357)
Goods for resale and consumables 1,755,361 1,484,202
Staff costs 406,061 227,175
Depreciation and other amounts written off tangible
and intangible assets
18,702 16,758
Other operating charges 240,260 142,792
---------- --------
2,415,357 1,870,570
========== ==========
The total figures for 2003 include the following combined amounts in relation to
the acquisition of GE CompuNet and GECITS Austria : decrease in stocks of
finished goods £958,000, goods for resale and consumables £420,585,000, staff
costs £154,415,000, depreciation and other amounts written off tangible and
intangible assets £6,112,000 and other operating charges £94,867,000.
4 TAXATION
a)The charge based on the profit for the year comprises:
2003 2002
£'000 £'000
UK Corporation tax 17,612 20,021
Tax overprovided in previous years (621) (1,197)
--------- ------
16,991 18,824
Foreign 20 35
--------- ------
Group Current tax 17,011 18,859
Share of Joint Venture's tax (100) (339)
------- -------
Total current tax 16,911 18,520
------ ------
Deferred tax
Origination and reversal of timing differences 1,542 (504)
----- -------
Prior year adjustments - accelerated capital
allowances 449 58
------- -------
Group deferred tax 1,991 (446)
------ --------
Tax on profit on ordinary activities 18,902 18,074
------- -------
b) Factors affecting the current tax charge
The tax charge for the year is lower than the standard rate of Corporation Tax
in the UK (30%). The principal reasons for this difference are set out below:
2003 2002
£'000 £'000
Total profit before taxation 65,161 55,081
======== ========
At 30% 19,548 16,524
Expenses not deductible for tax purposes 640 487
Relief on share option gains (2,845) -
Goodwill amortised (919) (984)
Impairment of Goodwill 11 870
Accounting depreciation in excess of tax depreciation
(284) (137)
Amount provided against investments
- 558
Profits of overseas undertakings not taxable due to brought
forward loss offset (2,590) -
Losses of overseas undertakings not available for relief 3,350 1,202
-------- ------
Current tax charge 16,911 18,520
======== ========
5 DIVIDENDS
2003 2002
Dividends £'000 £'000
Equity dividends on ordinary shares :
Interim Paid 2.0p (2002 - nil) 3,775 -
final Proposed 5.0p (2002 - 5.8p) 9,236 10,657
------ ------
13,011 10,657
======= ======
The Computacenter ESOP trust has waived the dividends payable in respect of
1,427,042 (2002: 1,427,042) ordinary shares that it owns which are not allocated
to employees. The Computacenter Trustees Limited have waived dividends in
respect of 457,796 (2002:457,796) shares which it owns which are not allocated
to employees and the Computacenter Quest ('Qualifying Employee Scheme Trust')
has similarly waived dividends in respect of 1,031,134 (2002:1,102,266) shares
that it owns.
6 EARNINGS PER SHARE
The calculation of earnings per ordinary share is based on profit attributable
to members of the holding Company of £46,304,000 (2002: £37,032,000) and on
184,853,000 (2002: 181,622,000) ordinary shares, being the weighted average
number of ordinary shares in issue during the year 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
£46,304,000 (2002: £37,032,000) and on 188,610,000 (2002: 186,632,000) ordinary
shares, calculated as the basic weighted average number of ordinary shares, plus
3,757,000 (2002: 5,010,000) dilutive share options.
7 INVESTMENTS
Group 2003 2002
£'000 £'000
Loan to joint venture, at cost 7,450 7,000
Associated undertakings (a) 539 108
Other listed investments (b) 3,047 2,755
------- -------
11,036 9,863
======= =======
(a) Associated undertakings Share of net
tangible assets
2003
£'000
At 1 January 2003 108
On acquisition of subsidiary 81
Share of profit of associated undertaking 510
Disposal (63)
Transfer to subsidiary undertaking (126)
-------
At 31 December 2003 510
-------
The Group's share of post acquisition accumulated profits of associated
undertakings at 31 December 2003 is £510,000 (2002:£26,000). The Group has
received £nil (2002: £710,000) from the associated undertakings for the
provision of administrative services and the reimbursement of costs incurred.
On 2 January 2003, the Group acquired GE CompuNet in Germany. This resulted in
the Group's shareholding in ICG Services Ltd increasing from 35.7% to 71.4%.
Since the purchase of GE CompuNet, the Group has acquired the remaining 28.6%
shareholding in ICG Services Ltd.
ICG BV was disposed of during the year for a consideration of £130,000.
(b) Other listed investments
£'000
Cost
At 1 January 2003 and 31 December 2003 4,617
=======
Provision
At 1 January 2003 1,862
Credit in the year 292
------
At 31 December 2003 1,573
-------
Net Book Value
At 31 December 2003 3,047
=======
At 31 December 2002 2,755
=======
At 31 December 2003, the market value of listed investments was £3,047,000
(2002: £2,755,000).
Details of the principal investments at 31 December 2003 in which the Group or
the Company holds more than 20% of the nominal value of ordinary share capital
are as follows:-
Subsidiary and associated Country of Nature of Proportion
undertakings registration Business Held
Computacenter (UK) Limited England IT Infrastructure 100%
services
Computacenter France SA France IT Infrastructure 99.4%
services
CC CompuNet GmBH Germany IT Infrastructure 100%
services
Computacenter Austria Austria IT Infrastructure 100%
services
Computacenter GmbH Germany IT Infrastructure 100%
services
Computacenter NV/SA Belgium IT Infrastructure 100%
services
RD Trading Limited England IT Asset 100%*
Management
Computacenter NV Luxembourg IT Infrastructure 100%
services
Biomni Limited England Software 50%
development
HelpByCom GmbH Germany IT Infrastructure 47.4%**
services
ICG Services Limited England International 100%***
IT Infrastructure
services
* includes indirect holdings of 100% via Computacenter (UK) Limited
** includes indirect holdings of 47.4% via CC CompuNet GmbH
*** includes indirect holdings of 35.7% via CC CompuNet GmbH
Acquisitions - Germany & Austria
On 2 January 2003, the Group acquired GE CompuNet in Germany and GECITS in
Austria for an initial consideration of £38,134,000. Because the audited value
of the net assets at completion was lower than stipulated in the purchase
agreement, Computacenter anticipates receiving a repayment of £32,448,000 from
GE Capital, the vendors, resulting in a net consideration for the acquisition of
£5,686,000. Elements of this repayment calculation are disputed by GE Capital
and in accordance with the purchase agreement, PricewaterhouseCoopers has been
appointed, as an independent expert, to settle the matter. The Board has
reviewed the likely outcome and is confident that this is properly reflected in
the Group's accounts.
The assets of each of the acquired companies have been included in the Group's
balance sheet at their fair values at the date of acquisition. Further
consideration may be payable to the vendor, contingent on the result of the
acquired businesses in 2004. No provision has been made for further payments,
based on the actual performance in 2003 and the likely performance for 2004.
Contingent liability
On 15 October 2003 the vendors claimed that the Group had breached a provision
of the German purchase agreement concerning an adjustment relating to tax
assets, and have issued a claim for €52,165,292 (£36,762,000), plus interest,
for upfront payment for the tax assets as opposed to payment as the assets are
utilised. The Group rejects this claim and legal proceedings are now pending
between the parties. On the basis of legal advice received, the Board is
confident that this claim is without merit and will be defended accordingly. No
provision for this claim has been made in the Group's accounts.
Analysis of the acquisition of GE CompuNet and GECITS Austria:
Net assets at date of acquisition:
Provisional
fair value to
Group
Book value Adjustments £'000
£'000 £'000
Tangible fixed assets 15,457 (4,003) 11,454
Investments 81 - 81
Stocks 34,438 (1,074) 33,364
Debtors 103,881 5,380 109,261
Creditors due within one year (132,704) (3,945) (136,649)
Creditors due after one year - (2,690) (2,690)
Provisions for liabilities and - (9,135) (9,135)
charges ------------- --------- ---------
21,153 (15,467) 5,686
-------- ---------- -------
Discharged by:
Fair value of net consideration 5,686
-------
Goodwill arising on acquisition -
-------
Adjustments relate to the adoption of Computacenter's Group accounting policies
and recognition of property provisions.
GE CompuNet and GECITS Austria together accounted for an outflow of £16,426,000
to the group's net operating cash flows, paid £638,000 in respect of net returns
on investments and servicing of finance and received £238,000 in respect of
taxation and utilised £2,738,000 for capital expenditure and financial
investment.
There was no trading in GE CompuNet and GECITS Austria in the period between 1
January 2003 and the date of acquisition. The combined loss after tax and
minority interest of GE CompuNet and GECITS Austria for the year ended 31
December 2002 was £2,846,000 and a loss of £14,000 respectively.
Acquisitions - France
During the year the Group acquired the trade and assets of 'ABM' and 'AII' in
France for a consideration of £448,000 and £102,000 respectively. There were no
fair value adjustments. The goodwill arising on these purchases totalled
£204,000 and £102,000 respectively.
8 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
2003 2002
£'000 £'000
Operating profit 65,938 56,167
Depreciation 22,665 17,138
Impairment of listed investment - 1,865
Amortisation of positive goodwill 544 449
Impairment of positive goodwill 46 2,899
Amortisation of negative goodwill (4,261) (3,728)
Revaluation of listed investment (292) -
Loss on disposal of fixed assets 914 110
(Increase)/decrease in debtors (16,963) 8,955
Increase in stocks (4,908) (282)
Decrease in creditors (8,432) (23,708)
Currency and other adjustments (1,730) 749
----------- ---------
Net cash inflow from operating activities 53,521 60,614
========== ==========
9 PUBLICATION OF NON STATUTORY ACCOUNTS
The financial information contained in this preliminary statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information set out in this announcement is extracted from
the full Group financial statements for the year ended 31 December 2003, the
auditor's report on which has yet to be signed.
This information is provided by RNS
The company news service from the London Stock Exchange
Monday, 20th May 2024
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