Interim Results
Computacenter PLC
05 September 2002
For Release at 0700hrs, Thursday 5th September 2002
COMPUTACENTER PLC
Interim Results Announcement
Computacenter plc, the specialist provider of IT infrastructure services, today
announces interim results for the six months ended 30 June 2002.
Financial Results:
• Turnover of £975.0 million (2001: £1,173.7 million)
• Profit before tax of £24.4 million (2001: £29.3 million)
• Diluted earnings per share of 8.6p (2001: 10.6p)
• £25.0m of cash generated during H1 (2001: £56.0 million) leaving closing
net cash position of £66.3 million
• Strong improvement over second half of 2001 - turnover up 6.0%, profit* up
32.0%
* profit before tax, excluding non-operating exceptional items
incurred in 2001
Operational Highlights:
• UK Managed Services contract base growth of 32.3% since start of the year
• 19.7% improvement in UK Professional Services revenues
• Revenues from UK product reselling down 20.3%
• 12.0% reduction in UK indirect costs
• Softening market and integration costs impact performance in France
Ron Sandler, Chairman of Computacenter plc, commented:
'Computacenter performed well in difficult trading conditions, delivering a set
of results slightly ahead of market expectations.
Whilst a further deterioration in market conditions is unlikely, we are not yet
detecting any signs of an upturn. If current conditions continue, we expect
profit performance for the full year to be similar to the £51.1 million achieved
last year, with any profit growth being dependent upon an improvement in the
market.
Looking further ahead, we have growing confidence in the future prospects of the
Group. Our strategy of building the services capabilities to leverage the core
product logistics business continues to make strong progress. It has already
delivered greater resilience to the Group's earnings and access to new and
attractive growth opportunities. The pipeline of new Managed Services tenders is
excellent. Computacenter has strong and proven management, and a robust balance
sheet. It remains extremely well positioned for the longer term.'
For further information, please contact:
Computacenter plc.
Mike Norris, Chief Executive 01707 631601
Tessa Freeman, Investor Relations 01707 631514
www.computacenter.com
Tulchan Communications 020 7353 4200
Julie Foster/Tim Lynch
www.tulchangroup.com
Chairman's Statement
Corporate IT expenditure in Computacenter's markets remained subdued during the
first six months of 2002. Against this background, the Group performed well,
with revenues of £975.0 million (2001: £1,173.7 million) and profit before tax
of £24.4 million (2001: £29.3 million), slightly ahead of market expectations.
The decline in revenues and profit, when compared with the previous year,
reflects the exceptionally buoyant market conditions in early 2001 arising from
the strong post-millennium recovery in IT expenditure. An alternative, and
perhaps more relevant, comparison can be made with the second half of 2001, a
period in which market conditions were broadly similar to those in the first
half of 2002. Measured against the second half of 2001, profit before tax,
excluding non-operating exceptional items, increased by 32.0% on revenues that
were 6.0% higher. This is a pleasing improvement in performance and one that
reflects the Group's continuing progress in building its services capabilities,
coupled with rigorous attention to controlling costs.
The Group's balance sheet remained strong, with £25.0 million of cash generated
from operations and net cash at the period end of £66.3 million. Capital
expenditure and investments in the half-year amounted to £8.2 million.
The development of Computacenter's services activities has been central to the
Group's strategy in recent years. In Managed Services, considerable investment
has been made in developing skills, tools and best practices, and this has
enabled the Group to bid for and win contracts of ever-increasing scope and
complexity. In March, BT awarded Computacenter a five-year contract to manage
its entire desktop estate, comprising some 100,000 seats. This is understood to
be the largest desktop outsourcing contract ever awarded in the UK and confirms
Computacenter's standing as a leading competitor in this field. The BT account
contributed 25.6% to an overall UK Managed Services contract base growth of
32.3% since December 31 2001.
In the UK, considerable performance improvement was also achieved in
Professional Services, with a 19.7% growth in revenues over the previous year.
Utilisation levels over the period were close to the maximum realistically
achievable. In January, Computacenter commissioned the new Solutions Centre, a
facility for customers to test alternative enterprise infrastructures, and this
has been well utilised from inception.
UK product sales were down 20.3% on the same period last year.
Computacenter has maintained tight control over costs. While Managed Services
headcount has increased by approximately 300 since the start of the year, a
programme of cost control has resulted in an equivalent headcount reduction in
other parts of the business. This was achieved without recourse to any
exceptional charges.
During the period, Computacenter France successfully completed the acquisition
of the French business of GE Capital IT Solutions (GECITS) and the integration
of this business has proceeded according to plan. As in the UK, a high priority
has been attached to developing our Managed Services activities. In France,
Computacenter produced revenues of £140.1 million (2001: £117.1 million) and an
operating profit of £0.2 million (2001: £2.1million). This performance reflects
the softening in French market conditions in the early part of the year and the
costs of the GECITS acquisition.
As regards the outlook for the remainder of the year, we anticipate that market
conditions in both the UK and France will remain challenging. Whilst a further
deterioration in demand is unlikely, we are not yet detecting any signs of an
upturn. If current conditions continue, we expect profit performance for the
full year to be similar to the £51.1 million achieved last year, with any profit
growth being dependent upon an improvement in the market.
Looking further ahead, we have growing confidence in the future prospects of the
Group. Our strategy of building the services capabilities to leverage the core
product logistics business continues to make strong progress. It has already
delivered greater resilience to the Group's earnings and access to new and
attractive growth opportunities. The pipeline of new Managed Services tenders is
excellent. Computacenter has strong and proven management, and a robust balance
sheet. It remains extremely well positioned for the longer term.
The success of Computacenter is attributable to the skills of our staff and
their commitment to delivering the highest standards of customer service. I
should like to thank all of them for their hard work and dedication.
Ron Sandler
Chairman
Review of Operations
UK Operations
Against a background of continuing weakness in corporate IT expenditure, which
has resulted in a fall in operating profit compared with the equivalent half of
2001, our focus on building Computacenter's services capability and controlling
costs has contributed to a marked improvement in profitability compared with the
second half of 2001.
Our investment in our Managed Services business continues to yield pleasing
results, with contracted revenues growing strongly. However, this was partially
offset by a decrease in the additional non-contractual work billed through our
Managed Services contracts, due to customers cutting back on their IT spend,
particularly in financial services. A major achievement in March was the award
of a desktop services support contract with BT, as a result of which some 350
former BT staff have since transferred to Computacenter under TUPE regulations.
I am pleased to report that end-user service levels have shown ongoing
improvement since the onset of this contract. Other major Managed Services wins
included contracts with the UK Government's Environment Agency, Freemantle Media
and a three-year contract extension with Scottish Power.
A number of our services customers view Computacenter as a partner for the
delivery of IT services externally as well as internally. With Computacenter, BT
launched the first UK-wide subscription computing service, which provides a
managed IT infrastructure on a cost-per-seat basis and makes it easier for
medium-sized organisations to meet their IT needs without prohibitive capital
expenditure.
We saw a significant improvement in Professional Services billing in the first
six months, delivering a number of major implementation and integration
projects. These included part of a Windows 2000 migration project for Nationwide
Building Society, covering 6,000 users and 500 servers. We were also awarded a
three-year support contract for Nationwide's Sun Enterprise server
infrastructure.
Computacenter delivered a new IS infrastructure for the Greater London Authority
(GLA) and won the contract for implementing a data and voice infrastructure at
the GLA's new City Hall. Other Professional Services wins included a contract
for the design, build and implementation of a new Windows 2000 office
infrastructure for Orange UK.
The increased capacity and state-of-the-art technology of our new operations
centre in Hatfield allows us to expand the range of services we offer and the
technologies we can support. Early this year, Computacenter won a major
technology refresh contract to support NCR's delivery of new Point of Sale
devices to a large high street retailer. The contract includes survey, storage,
build and installation services, together with the preparation and installation
of over 1,500 back-end servers.
To ensure our services continue to evolve to meet customer demands, we have made
significant investments in research and development over the past year. The most
significant of these was the commissioning in February of our Solutions Centre,
which allows customers to test their choice of technology before purchase, or
verify the performance and scalability of new applications before deployment.
Market pressure has been most evident in the product resale side of our
business, although performance has differed considerably across sectors. Sales
to Government departments continued to grow, while financial services revenues
continued to decline, particularly in investment banking. As our financial
services business has a higher proportion of enterprise products and more
demanding service levels, this change in mix has had an overall adverse effect
on Group margins.
A potentially significant development in our product resale business for the
longer term has been the merger, in May, of Compaq and HP, two of our major
vendor partners. However we do not anticipate that this will impact our trading
performance in the near-term.
International operations
Market conditions and integration costs adversely affected profit performance in
France. However service revenues grew 67% in the first half and we won some
significant new business. New French customers included Ministere des Finances,
Valeo and l'Oreal. In February, Computacenter successfully completed the
acquisition of the French GECITS business, involving the transfer of some 350
former GECITS staff and major accounts such as Eurotunnel and Renault France
Automobiles.
The French GECITS business was loss-making and on acquisition the Group received
a contribution to offset the losses that would be incurred and the cost of
restructuring. These amounted to £2.8 million in the first half, which has been
partly offset by a release of £1.6 million negative goodwill to operating
profit.
After two difficult years, our businesses in Belgium and Luxembourg showed some
slight improvement. Major contract wins included project management services for
Nestle and operational support services for Lilly's European helpdesk.
Other businesses
Our recycling and re-marketing arm, RDC, continued to respond to our customers'
growing need for the effective management of end-of-life IT equipment. In April,
the company won the Queen's Award for Enterprise in Innovation for its unique
service model, which provides organisations with a better return from their
unwanted equipment and maximises the potential for recycling. Compared to the
same period last year, RDC achieved a 55% increase in service revenues.
Our e-commerce joint venture, Biomni, performed to budget, with Computacenter's
share of Biomni's loss reducing to £0.2 million (2001: £1.4 million).
Organisation
We maintained our focus on programmes designed to reduce our cost base and to
leverage our resources more effectively. As a result, we achieved a 12.0%
reduction in indirect costs to the UK business compared with the second half of
2001. Computacenter has always placed a high priority on operational
effectiveness. To that end we recently launched new quality and management
development initiatives and in July, we merged our Retail Finance and City
sectors into a single 'Financial Services' sector, reflecting the smaller
proportion of our revenues arising from investment banking and insurance.
We are confident that our continuing focus on tightly controlled and effective
operations provides a strong platform for future growth.
Mike Norris
Chief Executive
Group profit and loss account
For the six months ended 30 June 2002
Unaudited Unaudited Audited Unaudited
six months six months year six months
ended ended ended ended
30 June 2002 30 June 2001 31 Dec 2001 31 Dec 2001
£'000 £'000 £'000 £'000
Turnover: group and share of joint venture's 976,958 1,175,570 2,097,224 921,654
turnover
Less: share of joint venture turnover (1,936) (1,917) (3,801) (1,884)
Continuing operations 975,022 1,124,959 2,030,803 905,844
Discontinued operations - 48,694 62,620 13,926
Group Turnover 975,022 1,173,653 2,093,423 919,770
Operating Costs (949,618) (1,138,233) (2,038,340) (900,107)
Operating Profit/(loss)
Continuing operations 25,404 38,844 59,608 20,764
Discontinued operations - (3,424) (4,525) (1,101)
Group Operating Profit 25,404 35,420 55,083 19,663
Share of operating loss in joint venture (187) (1,420) (2,174) (754)
Share of operating profit/(loss) in 13 40 (67) (107)
associate
Total operating profit: Group and share of 25,230 34,040 52,842 18,802
associate and joint venture
Exceptional loss on termination of - (3,362) (16,213) (12,851)
operations
Profit on ordinary activities before 25,230 30,678 36,629 5,951
interest and taxation
Interest receivable and similar income 2,843 2,851 7,815 4,964
Interest payable and similar charges (3,668) (4,270) (9,544) (5,274)
Profit on ordinary activities before 24,405 29,259 34,900 5,641
taxation
Tax on profit on ordinary activities (8,174) (9,457) (15,799) (6,342)
Profit on ordinary activities after taxation 16,231 19,802 19,101 (701)
Minority interests - equity 5 (6) (43) (37)
Profit attributable to members of the parent 16,236 19,796 19,058 (738)
company
Dividends - ordinary dividends on equity - (52) (5,435) (5,383)
shares
Retained profit for the period 16,236 19,744 13,623 (6,121)
Earnings per share
- Basic 8.9p 11.0p 10.5p
- Diluted 8.6p 10.6p 9.9p
Diluted (Excluding impact of joint venture 8.7p 12.4p 17.9p
and effect of termination costs)
Dividends per ordinary share - - 2.9p
Group statement of total recognised gains and losses
For the six months ended 30 June 2002
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
Profit for the financial year excluding share of 16,354 20,736 20,647
joint venture and associate
Share of joint venture's loss for the year (131) (980) (1,522)
Share of associates profit/(loss) for the year 13 40 (67)
Profit attributable to members of the parent company 16,236 19,796 19,058
for the financial year
Exchange differences on retranslation of net assets
of associated and subsidiary undertakings 1,336 (214) 254
Total Recognised gains for the year 17,572 19,582 19,312
Group balance sheet
At 30 June 2002
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
Fixed assets
Intangible assets 8,358 6,067 7,957
Goodwill (7,070) - -
Negative goodwill 1,288 6,067 7,957
Tangible assets 102,286 106,931 103,523
Investments 14,259 12,888 13,531
117,833 125,886 125,011
Current assets
Stocks 102,238 97,425 95,385
Debtors 277,554 281,688 295,837
Cash at bank and in hand 118,012 109,422 109,665
497,804 488,535 500,887
Creditors: amounts falling due (368,789) (346,196) (395,695)
within one year
Net current assets 129,015 142,339 105,192
Total assets less current liabilities 246,848 268,225 230,203
Creditors: amounts falling due after more than one (852) (38,335) (2,006)
year
Provision for joint venture deficit
Share of gross assets 4,159 3,927 3,380
Share of gross liabilities (8,280) (7,375) (7,370)
(4,121) (3,448) (3,990)
Provision for liabilities and charges (2,189) (1,931) (2,189)
Total assets less liabilities 239,686 224,511 222,018
Capital and reserves
Called up share capital 9,335 9,251 9,281
Share premium account 68,941 68,256 68,710
Profit and loss account 161,397 146,836 143,825
Shareholders' funds - equity 239,673 224,343 221,816
Minority interests - equity 13 168 202
239,686 224,511 222,018
Approved by the Board on 04 September 2002
R Sandler, Chairman MJ Norris, Chief Executive
Group statement of cash flows
For the six months ended 30 June 2002
Unaudited Unaudited Audited
Six months Six months year
Ended Ended ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
Cash inflow from operating activities 24,988 55,989 86,576
Returns on investments and servicing of finance (718) (1,312) (1,515)
Taxation
Corporation tax paid (5,605) (6,050) (17,770)
Capital expenditure and financial investment (8,181) (7,120) (18,687)
Acquisitions and disposals 7,643 - (4,437)
Equity dividends paid (5,324) (5,292) (5,294)
Cash inflow before financing 12,803 36,215 38,873
Financing
Issue of shares 285 737 1,222
Decrease in debt - - (1,500)
Increase in cash in the period 13,088 36,952 38,595
.
Reconciliation of net cash flow to movement in net funds
For the six months ended 30 June 2002
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
Net funds at 1 January 2002 53,288 13,407 13,407
Increase in cash in the year 13,088 36,952 38,595
Cash outflow from repayment of debt and lease - - 1,500
finance
Change in net cash resulting from cash flows 13,088 36,952 40,095
Amortisation of debt issue costs (107) (108) (214)
Net funds at 30 June 2002 66,269 50,251 53,288
Analysis of changes in net funds
At 1 January Cash flows in Other non-cash At 30 June
2002 year charges 2002
£'000 £'000 £'000 £'000
Cash at bank and in hand 109,665 8,347 - 118,012
Bank overdrafts (17,934) 4,741 - (13,193)
Debt due within one year (38,117) - (107) (38,224)
Debt due after one year (326) - - (326)
Total 53,288 13,088 (107) 66,269
NOTES TO THE ACCOUNTS
1. Accounting Policies
Basis of preparation
The unaudited 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 2001 with the exception of the implementation of FRS
19, Deferred tax. 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. During the period ended 30
June 2002 the Group implemented FRS 19, Deferred tax, which requires full
provision for deferred tax. The results are unchanged as a result of
implementing this standard.
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 by destination and origin and operating profit is given
below:
Turnover by Destination Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
UK
Continuing 820,557 1,002,148 1,744,226
Discontinued - 1,641 54
Total 820,557 1,003,789 1,744,280
France, Belgium & Luxembourg 145,529 122,304 280,765
Germany
Continuing 2,431 - -
Discontinued - 45,536 62,889
Total 2,431 45,536 62,889
Rest of the World 6,505 2,024 5,489
Total 975,022 1,173,653 2,093,423
Turnover by Origin Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
UK
Continuing 828,874 999,366 1,753,999
Discontinued - 1,641 54
Total 828,874 1,001,007 1,754,053
France, Belgium & Luxembourg 146,148 125,593 276,804
Germany - discontinued - 47,053 62,566
Total 975,022 1,173,653 2,093,423
Operating Profit Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
UK
Continuing 25,657 37,833 54,438
Discontinued - (3,424) (3,105)
Total 25,657 34,409 51,333
France, Belgium & Luxembourg (253) 1,636 5,170
Germany - discontinued - (625) (1,420)
Total group excl associate & joint venture 25,404 35,420 55,083
undertakings
Share of operating result of associates and joint (174) (1,380) (2,241)
venture
Total operating profit 25,230 34,040 52,842
During the period Computacenter France acquired the business of GE Capital IT
Solutions (GECITS) 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 contribution that the acquisition has made
to the turnover and operating profit of the Group.
3 Operating Costs
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
(Increase)/decrease in stocks of finished goods (6,853) 22,138 23,818
Goods for resale and consumables 765,976 919,381 1,615,792
Staff costs 124,427 141,736 232,623
Depreciation and other amounts written off tangible 8,737 8,592 18,176
and intangible assets
Other operating charges 57,331 46,386 147,931
949,618 1,138,233 2,038,340
4 Interest receivable and similar income
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
Bank interest 2,843 2,851 6,375
Other interest receivable - - 1,440
2,843 2,851 7,815
5 Interest payable and similar charges
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
Bank loans and overdraft 5 393 1,456
Other loans 3,663 3,877 8,088
3,668 4,270 9,544
6 Tax on profit on ordinary activities
The charge based on the profit for the year comprises:
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
UK Corporation tax
Current 8,230 9,897 15,681
Deferred tax - - 206
Foreign tax - - 564
8,230 9,897 16,451
Share of Joint Venture's tax (56) (440) (652)
8,174 9,457 15,799
7 Earnings per share
The calculation of earnings per ordinary share is based on profit attributable
to members of the holding Company of £16,235,551 (2001: £19,796,152) and on
183,160,531(2001: 180,504,204) 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
£16,235,551 (2001: £19,796,152) and on 188,368,095 (2001: 186,961,489) ordinary
shares, calculated as the basic average number of ordinary shares, plus
5,207,564 (2001: 6,457,285 ) dilutive share options.
Additional earnings per share ratios were calculated for current and prior
periods to provide a better view of Group activities. The ratio of 8.7p is based
on earnings of £16,422,795 (2001: £23,102,907)
8 Reconciliation of operating profit to operating cash flows
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2002 30 June 2001 31 Dec 2001
£'000 £'000 £'000
Operating profit 25,404 35,420 55,083
Depreciation 8,737 8,432 17,847
Impairment provision - - 2,099
Amortisation of goodwill (1,407) 160 329
Loss on disposal of fixed assets - 56 836
Loss on termination of business operation - (1,166) (2,531)
Decrease in debtors 18,283 57,936 42,983
(Increase)/decrease in stocks (6,897) 22,138 24,059
Decrease in creditors (20,219) (66,886) (54,755)
Currency and other adjustments 1,087 (101) 626
Net cash inflow from operating activities 24,988 55,989 86,576
9. 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 2001. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
This information is provided by RNS
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