Interim Results

Computacenter PLC 17 August 2000 COMPUTACENTER PLC INTERIM RESULTS 2000 Computacenter plc, the UK's largest company specialising in the provision of distributed information technology and related services to large corporate and public sector organisations, today announces interim results for the six months ended 30th June 2000. Highlights *Group turnover increased 2.4 per cent to £926.7 million (1999: £ 904.8 million) *Profit before tax, before investment in Biomni, £21.2 million (1999: £ 40.7 million) *Continued strong cash generation *Earnings per share (diluted) 7.1p (1999: 14.6p) *Earnings per share (diluted) excluding impact of Biomni, 7.8p *Increased service utilisation in the second quarter *Significant contract wins in the first half Commenting on the results, Chief Executive Mike Norris said: 'The first half of the year was a challenging one for Computacenter. The market was slower to recover than we originally anticipated and a reduction in project work meant lower levels of services billings. Despite this, we have continued to invest in developing the business and extending the range of services provided to our existing customers, as well as winning some significant new accounts across Europe. 'We remain confident that, for the remainder of 2000, both product and services revenues will continue to grow as customers increase their investments in e-business and accelerate deployment of Microsoft Windows 2000. The Group will continue to invest to ensure we are well positioned to take advantage of changing customer needs and future demands.' For further information: Computacenter plc 07801 452854 Mike Norris, Chief Executive Phil Williams, Investor Relations Brunswick Group Limited 0207 404 5959 Catriona Booth Sara Musgrave Computacenter PLC Interim Results for six months ended 30 June 2000 Chairman's Statement The first half of 2000 has been a challenging one for the Group. The first quarter was slow but in line with our expectations for the immediate post- millennium period. In the second quarter the expected recovery in the market failed to materialise at the rate that we had anticipated. The result was that Group revenues for the half-year, at £926.7 million, were up only 2.4 per cent compared to the corresponding period of 1999 and sales to our larger corporate customers were significantly down. Profit before tax, prior to our investment in our Biomni e-commerce joint venture, was £21.2 million, down 47.9 per cent compared to the first half of 1999. The Group's share of losses in Biomni Ltd was £2.0 million. The Group's cash flow generation remained very strong in the first half. Cash generated from operations was £36.4 million, representing 170 per cent of operating profit. After capital expenditure and investments of £20.7 million, tax payments and the payment of the 1999 dividend, net funds increased by £5.2 million to £26.3 million. The challenges facing corporate IT departments have changed substantially since 1999. Last year Y2000 compliance issues were a major concern. This year there has been a greater emphasis on e-business. In the first half, our Unix systems business, especially the deployment of Sun Microsystems solutions, performed very strongly on the back of this demand. However, in the same period there was a substantial reduction in the amount of large- scale PC deployment projects associated with IT infrastructure investments. This was partly due to the high level of spending in this area pre-Y2000 and partly due to the early stage of Windows 2000 adoption. The lower demand for project work significantly reduced utilisation in several of our service divisions and the overall level of service billings in the first half. This was the predominant reason for the reduced profitability of the Group. During the second quarter utilisation levels increased, reflecting the underlying recovery of the market and the Group's success in winning a number of large new projects including enterprise systems implementations, network infrastructure projects and some early Windows 2000 implementations. The growth of our Managed Services operations has continued strongly in the current year. Our UK customer contract base at the end of June was 21 per cent higher than at the same time in 1999 despite many customers deciding not to make outsourcing decisions in the Y2000 period. We remain committed to accelerating the rate of growth in our service businesses and have recently strengthened our senior management team to increase our capability in this area. Turning to our overseas operations, France and Germany were also affected by the post-millennium slowdown and both reported losses in this exceptionally difficult period. We expect France to return to profit in the second half although Germany will make a further loss. With regard to the outlook for the remainder of this year, the order book for the second half is encouraging. Prospects for our Unix systems business remain very strong and we expect that the rate of implementation of Windows 2000 infrastructure projects will accelerate as the year progresses. The third quarter will still be somewhat affected by the post-millennium slowdown and recent market conditions have increased the downward pressure on product margins which we expect to continue into 2001. Nevertheless, our expectations for the current year remain broadly in line with those indicated in our trading statement of 13th June this year. Despite the difficult market conditions we remain confident about the positioning of the Group. We will continue to build on the very strong and longstanding relationships that we enjoy with our customers by developing and extending the range of products and services we provide. The scale of our market presence and the depth of our technical resources mean that we are well positioned to identify and exploit emerging opportunities. The Group's strong cash position means that we are well placed to consider appropriate acquisitions and investments as opportunities arise. In June we acquired Inacom Services Europe SA, a services company based in Belgium, Luxembourg and the UK to further strengthen our international project management and services capability. Biomni Ltd, our e-commerce joint venture, is enjoying considerable sales success and it remains our intention to seek a UK public listing as soon as market conditions allow. As always, I would like to take this opportunity to thank all our staff for their hard work and their tremendous commitment to delivering the highest standards of customer service. The uncertainties surrounding the millennium period and the rapidly changing demands of the market have made their task unusually difficult. Finally, I am delighted to report that Ron Sandler has joined the Board of the company as a non-executive director. Ron's skills and experience will be of great value to Computacenter and I am confident that he will play a very significant role in the future development of the Group. Philip Hulme Chairman. Review of Operations Despite the slower than expected market recovery in the first half of the year, the Group continued to extend the range of services provided to existing customers, as well as winning some significant new customers across Europe. A major contract win in the first half of the year was BP, for whom we will provide international supply-chain and other services. These services will be delivered in partnership with the International Computer Group (ICG), across 61 countries. The project includes one of the largest European rollouts of Microsoft Windows 2000 to date. Additionally, Computacenter has extended the scope of its managed service contract with Shell Services International to include the deployment of Windows 2000 across Shell UK. Other new UK account wins during the first half included Corus (formerly British Steel) and a five year managed services contract with Unipart Group Ltd. Service contracts won with existing customers included BT Cellnet where we are providing a managed service utilising Biomni's e-procurement system. We also provided the equipment and services for the new London Assembly on behalf of the DETR, an Internet help-desk service for Banque Paribas and secured an extension to our managed services contract with UBS Warburg. We continued our investment in The iGroup, our e-business division, where headcount increased from 37 to 64 and revenues by over 1300 per cent compared to the same period last year. Major projects completed included www.jamjar.com, the new online motoring web site from Direct Line. We also successfully launched a number of additional hosting and support services during the period. In conjunction with The iGroup, Computacenter's Managed Services division delivered its first support services for web hosting infrastructures. With our customers' growing reliance on Sun Microsystems and other Unix systems for e-Business, we also created a dedicated UK engineering resource for midrange enterprise systems in the first quarter of 2000. Our new enterprise offering includes deployment, configuration and systems management services. Work continued in the first half on our new operations centre in Hatfield, Hertfordshire. Our staff are progressively moving into this 34,000 sq.m. facility, which remains on schedule to become operational by the end of this year. Our French business reported a loss due to the post-millennium slowdown, although we expect it to return to profitability in the second half of this year. New business won during the first half included a large migration project for Ernst & Young covering 3,500 PCs and 20 sites. We also won additional services business with a number of established customers, including managed services for Groupe Schneider and for GEMS Europe (General Electric Medical Systems), where we are now providing a managed service for all desktop installations and maintenance. In spite of the difficult trading conditions in the first half of the year, Computacenter Germany won some significant new contracts, including EDS and Sharp, while also extending the range of services provided to existing customers, including DVAG, Dresdner Bank and Deutsche Hypotheken Bank. Computacenter Belgium was strengthened with our new acquisition, Inacom Services Europe SA in June. The acquisition underpins Computacenter's existing capabilities in pan-European project management and multi-lingual support. It also consolidates our position as a leading IT solutions provider in Belgium & Luxembourg. Biomni Ltd, our joint venture with Computasoft e-Commerce Ltd, saw considerable success in the first half of 2000. New agreements entered into by Biomni include TRW Aerospace Systems, Greenwich NatWest and Royal & SunAlliance. Today, 27 of the UK FTSE 100 companies and 750 government organisations and departments use Biomni's e-procurement solution. The company continues to invest in people and made significant new senior appointments in the first half of the year. Gordon Channon, formerly Information Services Director at BT, was appointed Computacenter's IT Director in January. In May, Ron Sandler, previously Chief Operating Officer of NatWest Group was appointed as a non-executive director and in July, David Courtley was appointed to a newly created position of Group Services Director. David joined from EDS where he was Managing Director for the UK Information Solutions Business and has taken responsibility for overall management and direction of Computacenter's services operations. Despite the difficult market conditions we have been experiencing, we remain confident that, for the remainder of 2000, both product and services revenues will continue to grow as customers increase their investments in e- business and accelerate deployment of Windows 2000. The Group will continue to invest to ensure we are well positioned to take advantage of changing customer needs and future demand. Mike Norris Chief Executive. AUDITORS' INDEPENDENT REVIEW REPORT TO COMPUTACENTER PLC Introduction We have been instructed by the Company to review the financial information set out on pages 7 to 12 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquires of management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2000. Ernst & Young 16 August 2000 Computacenter PLC Summarised Profit And Loss Account For the six months ended 30 June 2000 Unaudited Unaudited Audited Six months Six months Year Ended Ended Ended 30 June 30 June 31 Dec 1999 2000 1999 £'000 £'000 £'000 Turnover 926,725 904,816 1,760,628 Operating costs (905,289) (864,104) (1,685,016) --------- --------- --------- Group operating profit 21,436 40,712 75,612 Share of operating loss (1,970) - - in joint venture --------- --------- ----------- Total operating profit :Group and share of joint 19,466 40,712 75,612 venture Interest receivable and 3,310 3,481 7,238 similar income Interest payable and (3,589) (3,461) (7,714) similar charges --------- --------- ----------- Profit on ordinary activities before 19,187 40,732 75,136 taxation Tax on profit on ordinary (5,897) (13,210) (22,125) activities --------- --------- ----------- Profit on ordinary activities after taxation 13,290 27,522 53,011 Minority interests - 41 (5) (48) equity --------- --------- ----------- Profit attributable to members of the parent 13,331 27,517 52,963 company Dividends - ordinary dividends on equity (31) (90) (5,291) shares --------- --------- ----------- Retained profit for the 13,300 27,427 47,672 period ========= ========= =========== Earnings per share - Basic 7.5p 16.2p 30.6p - Diluted 7.1p 14.6p 28.1p - Diluted (excluding impact of loss of joint 7.8p 14.6p 28.1p venture) Dividends per ordinary - - 2.9p share Computacenter PLC Statement of Total Recognised Gains and Losses For the six months ended 30 June 2000 Unaudited Unaudited Audited Six months Six months Year Ended Ended Ended 30 June 30 June 31 Dec 2000 1999 1999 £'000 £'000 £'000 Profit for the financial period excluding share of 15,301 27,517 52,963 loss of joint venture Loss attributable to (1,970) - - joint venture Profit attributable to --------- --------- --------- members of the parent 13,331 27,517 52,963 company Exchange differences on retranslation of net assets of associated and 64 (1,300) (2,029) subsidiary undertakings --------- --------- --------- Total recognised gains 13,395 26,217 50,934 for the period ========= ========= ========= Computacenter PLC Summarised Balance Sheet At 30 June 2000 Unaudited Unaudited Audited 30 Jun 30 Jun 31 Dec 2000 1999 1999 £'000 £'000 £'000 Fixed assets Goodwill 6,988 1,612 3,756 Tangible assets 106,564 79,325 96,647 Investments joint venture Share of gross assets 943 - - Share of gross liabilities (2,888) - - --------- - - loans to joint venture (1,945) - - 1,975 - - --------- 30 - - associates 135 99 135 own shares 2,502 2,040 2,679 other 4,617 2,031 1 --------- -------- -------- 7,284 4,170 2,815 --------- --------- --------- 120,836 85,107 103,218 Current assets Stocks 76,865 116,045 92,884 Debtors 288,335 258,017 244,177 Cash at bank and in hand 79,536 75,984 63,688 --------- --------- --------- 444,736 450,046 400,749 CREDITORS: amounts falling due within one year (341,151) (343,387) (292,753) --------- --------- --------- Net current assets 103,585 106,659 107,996 --------- --------- --------- Total assets less current 224,421 191,766 211,214 liabilities CREDITORS: amounts falling due after more than one (39,863) (42,830) (41,008) year Provisions for liabilities (1,736) (1,035) (1,736) and charges --------- --------- --------- Total assets less 182,822 147,901 168,470 liabilities ========= ========= ========= Capital and reserves Called up share capital 9,170 8,876 9,043 Share premium account 66,733 51,106 57,055 Profit and loss account 106,782 87,777 102,194 --------- --------- --------- Shareholders' funds - 182,685 147,759 168,292 equity Minority interests - 137 142 178 equity --------- --------- --------- 182,822 147,901 168,470 ========= ========= ========= Approved by the board on 16 August 2000 Computacenter PLC Summarised Statement Of Cash Flows For the six months ended 30 June 2000 Unaudited Unaudited Audited Six months Six months Year Ended Ended Ended 30 Jun 30 Jun 31 Dec 2000 1999 1999 £'000 £'000 £'000 Cash inflow from 36,408 42,041 81,924 operating activities Returns on investments and servicing of finance 1,894 127 (262) Taxation Corporation tax (paid)/ (5,281) 1,536 (25,284) refunded Capital expenditure and financial investment (20,676) (26,295) (49,778) Acquisitions and (2,870) (1,974) (3,806) disposals Equity dividends paid (5,231) (4,392) (4,482) --------- --------- --------- Cash inflow/(outflow) 4,244 11,043 (1,688) before financing Financing Issue of shares 1,029 1,454 2,470 Decrease in debt - (114) (2,217) -------- --------- --------- Increase/(decrease) in cash in the period 5,273 12,383 (1,435) ======== ========= ========= Reconciliation of net cash flow to movement in net funds Net funds at 1 January 21,152 21,126 21,126 2000 Increase/(decrease) in 5,273 12,383 (1,435) cash Cash outflow from repayment of debt and - 114 2,217 lease finance --------- --------- --------- Changes in net funds arising from cash flows 5,273 12,497 782 Loans acquired on acquisition of subsidiary - (542) (542) undertaking Other non cash movements (107) (107) (214) --------- --------- --------- Net funds at 30 June/31 26,318 32,974 21,152 December ========= ========= ========= Computacenter PLC Notes to the Unaudited Interim Report At 30 June 2000 1. Basis of Preparation of Interim Financial Information The interim financial information has been prepared on the basis of the accounting policies set out in the Group's statutory accounts for the year ended 31 December 1999. The taxation charge is calculated by applying the Directors' best estimate of the annual tax rate to the profit for the period. Other expenses are accrued in accordance with the same principles used in the preparation of the annual accounts. 2.Turnover and Segmental Analysis Turnover represents the amounts derived from the provision of goods and services which fall within the Group's ordinary activities, stated net of VAT. The Group operates in one principal activity, that of the design, supply, project management and long-term support of information technology systems. An analysis of turnover by destination and origin and operating profit is given below: Unaudited Unaudited Audited Six months Six months Year ended Ended Ended 30 Jun 30 Jun 31 Dec 2000 1999 1999 £'000 £'000 £'000 Turnover by destination UK 791,075 757,451 1,448,805 France & Belgium 92,088 110,117 226,640 Germany 35,433 33,536 77,164 Rest of the World 8,129 3,712 8,019 --------- --------- --------- Total 926,725 904,816 1,760,628 ========= ========= ========= Turnover by origin UK 799,483 762,981 1,460,523 France & Belgium 92,754 109,399 227,789 Germany 34,488 32,436 72,316 --------- --------- --------- Total 926,725 904,816 1,760,628 ========= ========= ========= Operating profit UK 24,800 40,197 74,028 France & Belgium (1,612) 1,262 4,453 Germany (1,752) (747) (2,869) --------- --------- --------- Total Group excluding associated undertakings 21,436 40,712 75,612 ========= ========= ========= All turnover and operating profit relates to continuing operations. Computacenter PLC Notes to the Unaudited Interim Report At 30 June 2000 3 Operating Costs Unaudited Unaudited Audited Six Six months Year months Ended Ended Ended 30 Jun 31 Dec 30 Jun 1999 1999 2000 £'000 £'000 £'000 Decrease/(Increase) in stocks of finished goods 16,018 (6,192) 16,969 Goods for resale and consumables 714,216 706,312 1,322,101 Depreciation and other amounts written off tangible and intangible assets 6,236 6,001 12,407 Staff costs 98,978 97,554 205,366 Other operating charges 69,841 60,429 128,173 --------- --------- --------- 905,289 864,104 1,685,016 ========= ========= ========= 4 Interest receivable and similar income Unaudited Unaudited Audited Six Six months Year months Ended Ended Ended 30 Jun 31 Dec 30 Jun 1999 1999 2000 £'000 £'000 £'000 Bank Interest received 3,310 3,481 7,154 Other interest receivable - - 84 --------- --------- --------- 3,310 3,481 7,238 ========= ========= ========= 5 Interest Payable and Similar Charges Unaudited Unaudited Audited Six Six months Year months Ended Ended Ended 30 Jun 31 Dec 30 1999 1999 Jun2000 £'000 £'000 £'000 Bank loans and overdraft 301 18 99 Other loans 3,288 3,431 7,613 Finance charges payable under finance leases and - 12 2 hire purchase contracts --------- --------- --------- 3,589 3,461 7,714 ========= ========= ========= Computacenter PLC Notes to the Unaudited Interim Report At 30 June 2000 6 Tax on Profit on Ordinary Activities The charge for the period is based on the estimated effective tax rate for the year ending 31 December 2000 and comprises the following: Unaudited Unaudited Audited Six Six months Year months Ended Ended Ended 30 Jun 31 Dec 30 1999 1999 Jun2000 £'000 £'000 £'000 UK corporation tax at 31 per cent Current 5,897 13,210 21,424 Deferred tax - - 701 --------- --------- --------- Total 5,897 13,210 22,125 ========= ========= ========= 7 Reconciliation of Operating Profit to Operating Cash Flows Unaudited Unaudited Audited Six Six months Year months Ended Ended Ended 30 Jun 31 Dec 30 1999 1999 Jun2000 £'000 £'000 £'000 Operating profit 21,436 40,712 75,612 Depreciation 6,143 6,001 12,345 Amortisation 93 - 62 Loss on disposal of fixed - - (490) assets Increase in debtors (44,074) (21,052) (7,243) Decrease/(increase) in 16,018 (6,160) 17,030 stocks Increase/(decrease) in 36,732 23,852 (13,632) creditors Currency and other 60 (1,312) (1,760) adjustments --------- --------- --------- Net cash inflow from 36,408 42,041 81,924 operating activities ========= ========= ========= 8 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 preceding year is based on the statutory accounts for the financial year ended 31 December 1999. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies.

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