Interim Results
Computacenter PLC
12 September 2006
COMPUTACENTER PLC
Interim Results Announcement
Computacenter plc, the European IT infrastructure services provider, today
announces interim results for the six months ended 30 June 2006.
Financial Highlights:
• Group revenues of £1.11 billion (2005: £1.15 billion)
• Profit before tax of £14.5 million (2005: £8.2 million)
• Earnings per share of 4.3p (2005: 1.2p)
• Interim dividend of 2.5p per share (2005: 2.5p)
• Strong balance sheet with net funds of £90.6 million at period end
• Return of £74.4 million to shareholders completed in July 2006
Operational Highlights:
• Encouraging performance of UK Technology Solutions, our consulting and
systems integration business, with a number of significant projects
undertaken
• Recently established Computacenter Direct, our telesales mid-market
provider, continued to grow aggressively
• Good progress in embedding our shared services delivery model into our
customer propositions
• Newly formed software business unit delivered strong growth in revenues
• German business returned to profit and successfully secured several new
Managed Services contracts
• Improved French performance, although product margin pressures
intensified
Ron Sandler, Chairman of Computacenter plc, commented:
'The improvement in Computacenter's profitability is encouraging. I have
reported in the past on the market challenges faced in recent years by
Computacenter, and on the significant efforts underway to improve our
competitiveness and focus our resources on higher margin activities. Whilst the
various transformation programmes are essentially long-term in nature and it is
far too early to comment definitively on their success, we are increasingly
confident that we are on the right track as today's results demonstrate.
'Looking ahead, we anticipate that the improvements we are seeing in the Group's
market positioning and performance will continue as the year progresses. The
outlook for the full year remains in line with expectations.'
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
Stephen Malthouse
www.tulchangroup.com
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Chairman's Statement
Computacenter made steady progress in the first half of 2006. Although Group
revenues were largely unchanged at £1.11 billion (2005: £1.15 billion), profit
before tax increased by 76.7% to £14.5 million (2005: £8.2 million) due to a
more favourable business mix. The balance sheet remained strong, although a
requirement for greater working capital across the Group, largely as a result of
revenue growth in France and the lengthening of terms of payment with some key
customers in the UK, meant that net funds fell by £9.8 million to £90.6 million
at the period end.
The intention of the Board to return surplus cash to shareholders, subject to
the resolution of various tax matters, was announced in March. I am pleased to
report that the tax uncertainties were satisfactorily resolved during the period
and on 4 July 2006, £74.4 million was returned to shareholders by way of a B
share issue. As a part of this process, a 5 for 6 share consolidation was
undertaken.
I am pleased to announce the payment of an interim dividend of 2.5p per share
(2005: 2.5p) to be paid on 20 October 2006 to shareholders on the register as at
22 September 2006. This reflects the available cash resources in the business
and is consistent with our policy of seeking to keep the interim dividend at a
level equal to one-third of the preceding year's total dividend.
The improvement in the Group's profitability is encouraging. I have reported in
the past on the market challenges faced in recent years by Computacenter, and on
the significant efforts underway in each of our three principal European
businesses to improve our competitiveness. Whilst the various transformation
programmes are essentially long-term in nature and it is far too early to
comment definitively on their success, we are increasingly confident that we are
on the right track.
In recent years our growth in sales of enterprise products (including servers),
software and services has outstripped our performance in the area of desktops,
notebooks and peripherals. This trend continued in the first half of 2006 to
such an extent that PC and peripheral business revenues now account for only 33%
of the Group total. This figure varies widely by country; it is just 13% in
Germany and 35% in the UK; whilst in France, this business still accounts for
60% of revenues.
In the UK, Computacenter's operating profit increased by 10.3% to £16.4 million
(2005: £14.9 million), with both the Services and Product Divisions contributing
to this improvement. Within the Services Division, the performance of Technology
Solutions, our consulting and systems integration unit, was particularly
encouraging with a number of significant projects undertaken in such areas as
server virtualisation, datacentre relocation and security solutions.
Considerable efforts have been made in recent years to increase the breadth and
sophistication of Computacenter's technology integration capabilities, and it is
pleasing to see these increasingly recognised by customers.
Within our contractual services business units, Support Services and Managed
Services, good progress was made in further embedding a shared services delivery
model. Through centralisation of core resources, such as the help desk, and
rigorous adherence to key processes and routines, the consistency, reliability
and cost effectiveness of our services delivery are being improved.
The increase in profitability of the Product Division in the UK is due to
improved gross margins and reduction in the cost base. Gross margin improvement
has arisen primarily from better execution, more effective sales incentives and
a more favourable customer mix. Cost reduction has been the result of a number
of projects carried out during the second half of 2005. Software revenues also
grew strongly as a result of the creation last year of a specialist business
unit to focus on this segment of the market.
Computacenter Direct, our telesales mid-market provider, continued on its
aggressive growth path, achieving in excess of 60% organic revenue growth
compared to H1 2005.
Our German business returned a small operating profit of £0.5 million (2005:
operating loss of £1.5 million) on revenues that were largely unchanged at
£297.7 million. Much of this is due to improving the performance within a number
of specific service contracts. More significantly, the German business secured
several new Managed Services contracts during the period, the revenues from
which will start to flow during the second half of the year. As in the UK, there
was a discernible shift in the German business away from desktop products and
services towards higher-margin datacentre and networking technologies.
Revenues from Computacenter France grew strongly to £141.7 million (2005: £126.2
million), although in part this simply reflects the temporary withdrawal from
the market of a key customer in the first half of 2005 pending the renegotiation
of the supply contract. However, product margins were under pressure in the
French market as vendors increasingly sought to sell direct, with the result
that our operating loss only reduced to £5.4 million (2005: £7.9 million).
Turning to matters of governance, there have been two Board changes in recent
months. I am pleased to welcome Dr Ian Lewis to the Board as a non-executive
Director. Ian has had a distinguished career as an IT director, initially in
financial services and latterly in academia, and I very much look forward to his
involvement with the Group. As previously announced, pressures on his time have
led Nick Cosh to resign from the Board. Nick has made a significant contribution
to the Group over the last four years and we are sorry to see him leave. An
executive search firm has been appointed to assist in recruiting a suitable
candidate to replace Nick on the Board and its sub-committees, including his
role as Chair of the Audit Committee. I am delighted that Cliff Preddy has
agreed to take on the role of Senior Independent Non-Executive Director.
Computacenter has made considerable efforts in recent years, particularly in the
UK, to transform itself in response to some fundamental changes in the way our
markets operate. Whilst this process is far from complete, a great deal of
progress has been made. Changes of this nature are never easy and new demands
are continually being made on our employees, whose dedication and commitment
have been exemplary and to whom I am pleased to record my thanks.
Looking ahead, we anticipate that the improvements we are seeing in the Group's
market positioning and performance will continue as the year progresses. The
outlook for the full year remains in line with expectations.
Review of Operations
UK
In the UK, improved profitability across both Services and Product Divisions
resulted in overall operating profit growth of 10.3% to £16.4 million. This was
despite a 7.6% decline in revenues, which was predominately due to hardware
price decline.
Services Division
The total services revenue of the Division for H1 2006 was £134.5 million. Our
Technology Solutions unit grew strongly on the back of a number of projects,
while our Managed and Support Services businesses achieved modest growth in
comparison.
Within the Services Division, we made further progress on standardisation and
the implementation of a 'shared services factory', our delivery model that
enables services to be easily repeated across clients, improving both the
quality and cost-effectiveness of our delivery.
Managed Services
Whilst our Managed Services business unit saw a growing pipeline of
opportunities in H1, revenue growth was somewhat disappointing. However, we
continued to lay the foundations for future growth through the launch of a
number of new propositions. These include offerings particularly designed to
address a growing market for the contractual management of datacentre and other
business-critical systems.
We were successful in securing a number of significant Managed Services
contracts in H1 2006. These include a five-year contract with IT services firm
Parity Group plc, worth more than £6 million, where Computacenter Services will
be responsible for managing Parity's entire IT infrastructure, including its
datacentre. The contract is expected to reduce Parity's IT operational costs by
approximately 25% over the term.
Technology Solutions
Increased demand for technology change projects to support business growth
helped drive strong profit and revenue growth in H1. As with Managed Services,
client datacentres were a particular focus in 2006, with a newly launched server
virtualisation proposition for client datacentres generating a significant
number of projects.
The strong performance of our Technology Solutions business is in part due to
the increased value of our offerings to clients, for whom we increasingly
underwrite some of the risk of technology integration projects. Approximately
two thirds of our technology services billing is now based on delivered outcomes
rather than on day rates.
A significant development in the first half was an agreement with Oracle to
provide an application migration service for the company's large number of
independent software vendors. The service, which is designed to offer fast,
low-risk and low-cost migrations, will be offered through our Solutions Centre.
Support Services
Our Support Services business has sought to capitalise on the growing trend for
global outsourcing companies to subcontract IT support services to third
parties. We have created a specialist sales team to target the systems
integrator marketplace and, as a result, are now starting to see an encouraging
pipeline of opportunities for 2007.
We have also extended our off-site disaster recovery activities, with our new
Work Area Recovery service providing 200 fully provisioned user desks available
at locations across the UK for client staff unable to occupy their usual
premises. We also now offer a Fixed Server Recovery service, providing clients
with access to a constantly available server facility that exactly matches their
live configuration.
Key wins include a three-year contract with John Lewis Partnership for the
support of all their desktops, laptops, printers and networks across the UK.
Product Division
Total UK products revenue declined to £518.8 million, largely attributable to
substantial desktop and laptop price declines, in the order of 10% compared with
H1 2005. However, improved product margins more than compensated for this
revenue deterioration. The margin improvement came principally from a more
favourable mix of business, including increased datacentre spend, strong demand
from the financial services sector and a decline in low margin trade
distribution sales.
A key development in the first half of the year was the launch of our revised
webshop, Connect v6, which adds significantly to the competitiveness of our
product offerings by reducing cost of sale and maximising cross-selling
opportunities. The proportion of product sales completed over the internet
continues to grow, with 16% of orders by volume now placed via our webshop,
compared with 11% in 2005.
Corporate Hardware
We continued to see a shift in product mix towards enterprise server and
networking products, and strengthening relationships with enterprise vendors
such as Sun, IBM and Cisco.
Hardware sales were particularly strong in the financial markets and we saw
growing interest in our range of value-added deployment services, including
advisory services in the area of reducing operational costs.
Software
Our new Software business unit, created in 2005, continued to record strong
revenue and profit growth, with gross profit from software sales up more than
50% on H1 2005. Some of this growth has been driven by merger and acquisition
activity, with customers auditing and consolidating software expenditure across
the merged entities to ensure compliance and reduce costs.
As well as actively targeting these organisations, we have also launched new
systems that allow us to track customers' software procurement cycles and
identify licence renewal or extension opportunities at an early stage.
Approximately £12 million of renewal opportunities have been identified in this
way and £3.5 million closed to date.
Computacenter is increasingly considered a key value-added software partner to
large organisations, as evidenced by the decision of the UK Association of Chief
Police Officers to appoint us one of only three preferred suppliers for its
multi-million pound framework agreement. The three-year agreement is expected to
be worth up to £5 million per year.
Computacenter Direct
Our division targeting the growing market for IT product and services in the
medium-sized business sector continued to grow strongly, with improved product
margins and organic revenue growth of more than 60% over H1 2005.
Computacenter Direct continues to attract substantial numbers of new customers
in its segment - averaging approximately 100 new customers per month in the
first half. We expect this number to increase further following the launch of
our new transactional website in June, which enables us to target and service
customers whose preference is online procurement, whilst dramatically lowering
our cost of sale.
We continue to invest for growth in this business, with 15 new telesales staff
joining over the period and further recruitment anticipated for H2.
CCD
Despite an improvement in the profit performance of our trade distribution arm
following the cost reduction programme in 2005, CCD continued to experience
challenging conditions, with particularly fierce price competition in the high
volume segment of the market.
Changes were made to the senior management of this unit and significant steps
have been taken to increase the breadth of relationships across both customers
and vendor partners. Whilst these are anticipated to bring longer-term benefits,
CCD's margins are expected to remain under pressure for the remainder of 2006.
RDC
Whilst trading conditions remain very competitive, RDC saw early signs in H1
that improvements initiated at the end of 2005 are beginning to take effect. In
particular, the launch of the Computacenter Asset Recovery Services together
with the creation of a new frontline sales team, have been instrumental in a
number of significant service wins. Overall RDC remains profitable and some
major wins in H1 from existing accounts are expected to boost performance
further in H2.
Germany
Our German business recorded an H1 operating profit of £0.5 million (2005: loss
of £1.5 million) on revenues that were broadly unchanged.
35% of revenues came from services where growth in the Managed Services contract
base helped drive a 5.1% year-on-year revenue increase. We also began to see
increasing client interest in converged phone and data networks and concerns
over security compliance.
As in the UK, Computacenter Germany experienced a continuing shift in product
mix, in terms of both volumes and revenues, towards products that attract higher
margins, with increased demand for datacentre and networking technology and a
subdued market for desktop systems.
To increase our share of the medium-sized business market, where we believe
there are significant opportunities for growth, we created a national account
team dedicated to winning new customers in this market.
An important development was the implementation of a centrally provided,
shared-resource approach for the delivery of managed desktop and datacentre
services. To support this approach, we have established a new computer centre in
Frankfurt, enabling all services and applications managed on behalf of the
client to be located and managed on our own systems. The first client for this
offering is Cognis, with which we have signed a seven-year Managed Service
contract covering 120 locations across 30 countries. We expect our investment in
this shared services model, together with the creation of new national account
teams and our focus on long-term client contracts to lead to future sales
growth.
Significant wins in the period include the renewal of a worldwide Managed
Services contract with Deutsche Borse, worth several million Euros, in which we
will provide user support, management of moves and changes and engineering
services for 5,000 IT seats across Germany, USA, Hong Kong and Dubai.
France
Our French business recorded an improvement on the first half of 2005, with
revenue growth of 12.3% to £141.7 million (2005: £126.2 million) and operating
loss reducing to £5.4 million (2005: £7.9 million). The operating loss
improvement was due to the effects of the ongoing cost reduction programme and,
in part, attributable to the non-recurring costs of that programme in H1 2005,
of approximately £1.7 million.
We made progress in addressing the poor utilisation levels across our services
activities, which had a significant impact on profit performance. At the same
time, we improved maintenance customer service levels and continue to see a
growing pipeline of new contracts in our projects business.
To accelerate growth and address rising demand for enterprise technology,
particularly related to IBM products, Computacenter France invested in the
development of specialist technical and sales skills in the enterprise solutions
market.
We saw a marked decline in product margins in H1, largely fuelled by major
vendors bypassing the channel and selling direct to clients. It is too early to
say whether this margin decline will continue into the second half of the year
and beyond.
Significant wins include a three-year Managed Services contract renewal with
Elior Services, worth over £1.6 million covering user help desk, maintenance and
installations, moves and changes for 6,000 users across 2,500 catering sites. We
also won a maintenance contract with a leading French insurance company,
covering the provision of laptop and printer maintenance services to
approximately 4,000 users.
Belgium, Netherlands, and Luxembourg
Overall, our small Benelux operation showed a reduced loss of £82,000 (2005:
£105,000 loss). Gross profit performance was strongest from Managed Services and
product supply, with project and consultancy services remaining weak.
Key wins include a £4.6 million Belgian government-sponsored employee PC
purchase contract, international procurement deals secured with Campbell and
World Directories, and a major CRM deployment project, covering 19 countries,
with OMRON in the Netherlands.
Consolidated income statement
For the six months ended 30 June 2006
Unaudited Unaudited Year
six months six months ended
ended 30 ended 30 31 Dec
June 2006 June 2005 2005
£'000 £'000 £'000
Revenue 1,114,939 1,151,553 2,285,209
Cost of sales (969,619) (1,009,276) (1,996,381)
--------- --------- ---------
Gross profit 145,320 142,277 288,828
Distribution costs (9,304) (10,290) (19,928)
Administrative expenses (124,013) (127,227) (241,634)
+-------------------------------------------------------------------------+
|Operating profit: |
|Before share based payments 12,003 4,760 27,266 |
|Share based payments (568) 662 392 |
+-------------------------------------------------------------------------+
Operating profit 11,435 5,422 27,658
Finance costs (1,053) (1,275) (2,002)
Finance income 4,044 3,956 8,127
Share of profit of associate 98 118 229
--------- --------- ---------
Profit before tax 14,524 8,221 34,012
Income tax expense (6,434) (6,078) (13,579)
--------- --------- ---------
Profit for the period 8,090 2,143 20,433
========= ========= =========
Attributable to:
Equity holders of the parent 8,090 2,184 20,406
Minority interests - (41) 27
--------- --------- ---------
8,090 2,143 20,433
========= ========= =========
Earnings per share
- basic for profit for the year 4.3p 1.2p 10.9p
- diluted for profit for the year 4.3p 1.2p 10.9p
Consolidated balance sheet
As at 30 June 2006
Unaudited Unaudited Year
six months six months ended
ended 30 ended 30 31 Dec
June 2006 June 2005 2005
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 77,456 86,243 81,601
Intangible assets 9,748 9,576 9,493
Investment accounted for using
the equity method 184 173 288
Deferred income tax asset 5,582 1,548 5,528
--------- --------- ---------
92,970 97,540 96,910
--------- --------- ---------
Current assets
Inventories 87,733 88,205 100,233
Trade and other receivables 365,120 388,269 382,970
Prepayments 68,421 59,751 63,476
Forward currency contracts 26 - 191
Cash and short-term deposits 161,862 144,832 164,797
--------- --------- ---------
683,162 681,057 711,667
--------- --------- ---------
Total assets 776,132 778,597 808,577
========= ========= =========
Current liabilities
Trade and other payables 269,250 299,577 315,997
Deferred income 80,313 78,505 73,827
Financial liabilities 70,519 57,867 64,131
Forward currency contracts - 351 -
Income tax payable 8,006 5,005 5,712
Provisions 1,585 1,700 2,190
--------- --------- ---------
429,673 443,005 461,857
--------- --------- ---------
Non-current liabilities
Financial liabilities 704 664 275
Provisions 13,384 14,722 14,007
Other non-current liabilities 12 2,716 371
Deferred income tax liabilities 837 1,455 1,393
--------- --------- ---------
14,937 19,557 16,046
--------- --------- ---------
Total liabilities 444,610 462,562 477,903
--------- --------- ---------
Net assets 331,522 316,035 330,674
========= ========= =========
Capital and reserves
Issued capital 9,543 9,504 9,505
Share premium 76,004 74,628 74,680
Capital redemption reserve 100 100 100
Own shares held (2,503) (2,503) (2,503)
Other reserves (1,524) (2,517) (1,757)
Retained earnings 249,883 236,818 250,630
--------- --------- ---------
Shareholders' equity 331,503 316,030 330,655
Minority interest 19 5 19
--------- --------- ---------
Total equity 331,522 316,035 330,674
========= ========= =========
Consolidated statement of changes in shareholder's equity
Attributable to equity holders of the parent
---------------------------------------------------------
Foreign
Capital Own currency
Issued Share redemption shares translation Retained Minority Total
capital premium reserve held reserve earnings Total interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2005 9,489 73,920 100 (2,503) (911) 244,965 325,060 46 325,106
Exchange
differences on
retranslation of
foreign
operations - - - - (1,606) - (1,606) - (1,606)
------ ------ ------ ----- ------- ------- ------- ------ -------
Net income/
(expenses)
recognised
directly in
equity - - - - (1,606) - (1,606) - (1,606)
Profit for the
period - - - - - 2,184 2,184 (41) 2,143
------ ------ ------ ----- ------- ------- ------- ------ -------
Total recognised
income and
expenses for the
period - - - - (1,606) 2,184 578 (41) 537
Exercise of
options 15 708 - - - - 723 - 723
Cost of share
based payments - - - - - (596) (596) - (596)
Equity dividends - - - - - (9,735) (9,735) - (9,735)
------ ------ ------ ----- ------- ------- ------- ------ -------
15 708 - - (1,606) (8,147) (9,030) (41) (9,071)
------ ------ ------ ----- ------- ------- ------- ------ -------
At 30 June 2005 9,504 74,628 100 (2,503) (2,517) 236,818 316,030 5 316,035
Exchange
differences on
retranslation of
foreign
operations - - - - 760 - 760 - 760
------ ------ ------ ----- ------- ------- ------- ------ -------
Net income/
(expenses)
recognised
directly in
equity - - - - 760 - 760 - 760
Profit for the
period - - - - - 18,222 18,222 14 18,236
------ ------ ------ ----- ------- ------- ------- ------ -------
Total recognised
income and
expenses for the
period - - - - 760 18,222 18,982 14 18,996
Exercise of
options 1 52 - - - - 53 - 53
Cost of share
based payments - - - - - 230 230 - 230
Equity dividends - - - - - (4,640) (4,640) - (4,640)
------ ------ ------ ----- ------- ------- ------- ------ -------
1 52 - - 760 13,812 14,625 14 14,639
------ ------ ------ ----- ------- ------- ------- ------ -------
At 31 December
2005 9,505 74,680 100 (2,503) (1,757) 250,630 330,655 19 330,674
Exchange
differences on
retranslation of
foreign
operations - - - - 233 - 233 - 233
------ ------ ------ ----- ------- ------- ------- ------ -------
Net income/
(expenses)
recognised
directly in
equity - - - - 233 - 233 - 233
Profit for the
period - - - - - 8,090 8,090 - 8,090
------ ------ ------ ----- ------- ------- ------- ------ -------
Total recognised
income and
expenses for the
period - - - - 233 8,090 8,323 - 8,323
Exercise of
options 38 1,324 - - - - 1,362 - 1,362
Cost of share
based payments - - - - - 568 568 - 568
Equity dividends - - - - - (9,405) (9,405) - (9,405)
------ ------ ------ ----- ------- ------- ------- ------ -------
38 1,324 - - 233 (747) 848 - 848
------ ------ ------ ----- ------- ------- ------- ------ -------
At 30 June 2006 9,543 76,004 100 (2,503) (1,524) 249,883 331,503 19 331,522
====== ====== ====== ===== ======= ======= ======= ====== =======
Consolidated cash flow statement
For the six months ended 30 June 2005
Unaudited Unaudited Year
six months six months ended
ended 30 ended 30 31 Dec
June 2006 June 2005 2005
£'000 £'000 £'000
Operating activities
Operating profit from operations 11,435 5,422 27,658
Adjustments to reconcile Group operating
profit to net cash inflows from operating
activities
Depreciation 6,869 8,032 15,535
Amortisation 850 885 1,784
Share based payment 568 (637) (366)
Loss/(profit) on disposal of property,
plant and equipment 260 (155) (85)
Loss on disposal of intangibles 9 - -
Dividend received from associate 203 303 303
Decrease in inventories 12,846 27,770 16,824
Decrease/(increase) in trade and other
receivables 14,240 29,832 (25,904)
(Decrease)/increase in trade and other
payables (41,629) (5,423) 29,925
Currency and other adjustments (73) 609 287
--------- --------- ---------
Cash generated from operations 5,578 66,638 65,961
Income taxes paid (4,744) (12,591) (18,366)
--------- --------- ---------
Net cash flow from operating activities 834 54,047 47,595
--------- --------- ---------
Investing activities
Interest received 4,066 4,721 9,086
Sale of subsidiary net of cash disposed
of - (252) (252)
Sale of property, plant and equipment 22 89 205
Purchases of property, plant and
equipment (1,400) (5,284) (6,950)
Purchases of intangible assets (1,115) (1,403) (3,385)
Funds received from settlement of net
asset claim on previously acquired
subsidiary - - 26,918
--------- --------- ---------
Net cash flow from investing activities 1,573 (2,129) 25,622
--------- --------- ---------
Financing activities
Interest paid (1,293) (1,071) (2,063)
Dividends paid to equity holders of the
parent (9,405) (9,735) (14,418)
Proceeds from issue of shares 1,362 722 776
Repayment of capital element of finance
leases (1,320) (250) (321)
Increase/(decrease) in factor financing 2,066 (20,498) (6,401)
--------- --------- ---------
Net cash flows from financing activities (8,590) (30,832) (22,427)
--------- --------- ---------
(Decrease)/increase in cash and cash
equivalents (6,183) 21,086 50,790
Effect of exchange rates on cash and
cash equivalents (156) 2,493 1,576
Cash and cash equivalents at beginning
of period 132,911 80,545 80,545
--------- --------- ---------
Cash and cash equivalents at end of
period 126,572 104,124 132,911
========= ========= =========
Analysis of net funds
Cash and cash equivalents 126,572 104,124 132,911
Factor financing (33,805) (16,804) (31,542)
Finance leases (646) (694) (652)
Loans (1,482) (326) (326)
--------- --------- ---------
Net funds 90,639 86,300 100,391
========= ========= =========
Notes to the accounts
1 Accounting policies
Basis of preparation
The unaudited interim financial statements have been prepared on the basis of
the accounting policies set out in the Group's statutory accounts for the year
ended 31 December 2005. 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 Segment information
The Group's primary reporting format is geographical segments and its secondary
format is business segments.
The Group's geographical segments are determined by the location of the Group's
assets and operations. The Group's business in each geography is managed
separately and held in separate statutory entities.
Segmental performance for the period to 30 June 2006 was as follows:
Segmental analysis
Unaudited Unaudited
six months six months
ended 30 ended 30 Year ended
June 2006 June 2005 31 Dec 2005
£'000 £'000 £'000
Revenue by geographic market
UK 661,095 715,517 1,351,307
Germany 297,671 299,983 618,238
France 141,732 126,206 295,784
Benelux 14,441 9,847 19,880
--------- --------- ---------
Total 1,114,939 1,151,553 2,285,209
========= ========= =========
Gross profit by geographic market
UK 91,115 88,130 169,876
Germany 40,397 40,720 87,709
France 12,606 12,383 28,941
Benelux 1,202 1,044 2,302
--------- --------- ---------
Total 145,320 142,277 288,828
========= ========= =========
Operating profit/(loss) by geographic market
UK 16,432 14,904 32,079
Germany 450 (1,457) 5,001
France (5,365) (7,920) (9,313)
Benelux (82) (105) (109)
--------- --------- ---------
Total 11,435 5,422 27,658
========= ========= =========
Revenue by business segment
Product 846,831 893,753 1,757,967
Technology solutions 59,263 52,820 114,236
Support and managed services 208,845 204,980 413,006
--------- --------- ---------
Total revenue 1,114,939 1,151,553 2,285,209
========= ========= =========
3 Income tax
The charge based on the profit for the period comprises:
Unaudited Unaudited
six months six months
ended 30 ended 30 Year ended
June 2006 June 2005 31 Dec 2005
£'000 £'000 £'000
UK Corporation tax
- Current 6,988 5,793 12,872
- Prior - 196 (202)
- Deferred tax (569) (37) 997
Foreign tax 15 2 31
--------- --------- ---------
6,434 5,954 13,698
Share of joint venture's tax - 124 (119)
--------- --------- ---------
6,434 6,078 13,579
========= ========= =========
4 Dividends
The proposed final dividend for 2005 of 5.0p per ordinary share was approved at
the AGM in May 2006 and was paid on 31 May 2006. An interim dividend in respect
of 2006 of 2.5p per ordinary share, amounting to a total dividend of £3,910,000,
was declared by the Directors at their meeting on 11 September 2006. This
interim report does not reflect this dividend payable.
5 Earnings per share
Basic earnings per share is calculated by dividing the net profit for the period
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares in issue during the period.
Diluted earnings per share is calculated by dividing the net profit attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the period adjusted for the effect of dilutive share options.
The following reflects the income and share data used in the total operations
basic and diluted earnings per share computations:
Unaudited Unaudited
six six Year
months months ended
ended 30 ended 30 31 Dec
June 2006 June 2005 2005
£'000 £'000 £'000
Profit attributable to equity holders of the parent 8,090 2,184 20,406
-------- -------- -------
No '000 No '000 No '000
Weighted average number of ordinary shares for basic
earnings per share 187,753 187,147 187,210
Effect of dilution:
Share options 725 1,010 658
-------- -------- -------
Adjusted weighted average number of ordinary shares
for diluted earnings per share 188,478 188,157 187,868
======== ======== =======
6 Cash and cash equivalents
Unaudited Unaudited Year
six months six months ended
ended 30 ended 30 31 Dec
June 2006 June 2005 2005
£'000 £'000 £'000
Cash and cash equivalents as at the
end of the period comprises:
Cash at bank and in hand 161,862 142,832 164,797
Short term deposits - 2,000 -
Bank overdrafts (35,290) (40,708) (31,886)
-------- -------- --------
126,572 104,124 132,911
======== ======== ========
7 Post balance sheet event
On 3 July 2006 the company effected a capital reorganisation under which each
ordinary share of 5p was divided into one ordinary share of 6p and one B share
of 39p. Following this sub-division every 6 ordinary shares of 5p were
consolidated into 5 ordinary shares of 6p.
The B shares were immediately redeemed and cancelled.
As a result of the 5 for 6 consolidation, 190,876,000 ordinary shares of 5p
became 159,063,000 ordinary shares of 6p.
8 Publication of non-statutory accounts
The financial information contained in the interim statement does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
auditors have issued an unqualified opinion on the Group's statutory financial
statements under International Accounting Standards for the year ended 31
December 2005. Those accounts have been delivered to the Registrar of Companies.
This information is provided by RNS
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