RNS Number:2048H
Computacenter PLC
14 March 2000
COMPUTACENTER PLC
PRELIMINARY RESULTS
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 preliminary
results for the year ended 31 December 1999.
Highlights
* Group turnover increased 11.0% to #1.76 billion (1998: #1.59
billion)
* Profit before tax increased 16.3% to #75.1 million (1998: #64.6
million)
* Earnings per share (diluted) up 19.6% to 28.1p (1998: 23.5p)
* Strong services growth across the Group
* Strong sales growth in France (up 34.5%) and Germany (up 94.9%)
Commenting on the results, Chief Executive Mike Norris said:
"I am pleased to be able to report another strong year of profit and
earnings growth for Computacenter. We have made significant progress in
developing our service portfolio and delivering value added services to
both existing and new customers. We fully expect this to continue in 2000
across all our businesses."
For further information:
Computacenter plc 07801 452854
Mike Norris, Chief Executive
Phil Williams, Corporate Development Manager
Brunswick Group Limited 0207 404 5959
Rob Pinker
Catriona Booth
Sara Musgrave
CHAIRMAN'S STATEMENT
I am delighted to be able to report another record year for Computacenter -
our seventeenth successive year of turnover and profits growth in the UK.
In the financial year ended 31 December 1999, Group turnover grew by 11% to
#1.76 billion and profit before tax grew by 16.3% to #75.1 million. Diluted
earnings per share grew by 19.6% to 28.1p.
These results are particularly pleasing because 1999 was an exceptionally
difficult year to forecast. Most of Computacenter's customers spent
heavily in preparation for the new millennium but a great deal of this work
was completed in the early part of 1999 and in 1998. The consequence was
that the sales of product slowed, as expected, towards the end of 1999 as
customers endeavoured to 'lock-down' their IT systems. In our interim
report we said that the indications were that demand would slow but that
the effect would be modest. I am pleased to report that this was the case,
although the overall impact of Y2000 was that Computacenter's growth in
turnover in 1999 as a whole was less than we have enjoyed in recent years.
The slower growth in product sales was offset by continued strong growth in
our service businesses. By the end of 1999, over half of our staff were
employed directly in the provision of professional and managed support
services to our clients. The rapid growth of services is the principal
reason for the improvement in net profit margins at both the UK and Group
level.
The Group's success in developing our service business is the direct result
of a strategy of sustained high investment in the development of our
services capability over a number of years. This investment - in
recruitment, training, systems and the development of best practices -
continued in 1999 and was, as always, expensed through the profit and loss
account. The Board was very satisfied with the rate at which we were able
to grow our service businesses in 1999 and remains confident in our ability
to grow service revenues strongly in the future.
Another major area of investment for the Group began to come on-stream in
the second half of the year as over 800 of our staff moved into our new
European headquarters building in Hatfield, Hertfordshire. Work on our new
operations centre is continuing and we expect it to become operational in
the second half of 2000. This state-of-the-art facility is intended to be
the source of significant competitive advantage in future years.
Our French operation also moved into a new headquarters and operations
centre in the first half of 1999. This move helped to fuel significant
sales growth, particularly in the second half of the year. The full year
turnover of Computacenter France, at #223.0 million, was up 34.5% compared
to 1998 and operating profits, at #4.6 million, grew by 67.3%.
Computacenter France is now established as one of the top three competitors
in the French market providing an excellent base for further growth.
Computacenter Germany also grew substantially, albeit from a much smaller
base and turnover nearly doubled to #72.3 million. However, operating
losses were larger than expected at #2.9 million, reflecting our rapid
growth rate in the face of a relatively weak, pre-millennial market.
There were a number of other notable developments during the course of
1999. In November the Group announced an exclusive agreement with Gateway
Computers to market 'Service-Direct', a unique approach that combines the
speed and cost advantages of Gateway's built-to-order manufacturing with
Computacenter's service expertise.
Our On-Trac electronic procurement system continued to expand with 150 new
customers coming on-line in 1999. Trading electronically with our
customers in this way enables us to reduce costs and increase service
levels to the benefit of both parties. 1999 saw the launch of a fully web-
enabled version of On-Trac.
In November Computacenter plc formed Biomni, a joint venture with
Computasoft e-Commerce Ltd, the developer of On-Trac, to target the wider
business-to-business e-commerce opportunity. In February 2000, the Board
announced its decision to explore the possibility of a public listing for
Biomni.
The iGroup, Computacenter's e-business division, also grew rapidly in 1999
and launched several new and innovative products and services. The total
investment made in this area and expensed through the profit and loss
account during the year, exceeded #3 million. We are very enthusiastic
about the Group's ability to develop e-commerce products and services and
the scale of the opportunity open to us in this burgeoning market.
As always, Computacenter remains a people business. Our commercial success
depends on the quality of our service and that, in turn, depends on the
quality, training, motivation and teamwork of our staff. Widespread share
ownership remains our goal and in the last year we have continued to
encourage employee share ownership via our popular ShareSave scheme. Today
I am pleased to report that over 55% of Group employees are shareholders.
Once again I would like to thank all of our staff for their commitment,
enthusiasm and hard work. They are the driving-force behind
Computacenter's success.
The new developments described above, combined with the solid progress made
in the last twelve months, particularly the development of our service
businesses, provide a sound base from which to go forward. Factors such as
the introduction of Windows 2000 and the widespread adoption of e-commerce
solutions will continue to drive the market forward and we are confident
that Computacenter is well positioned to take advantage of the expected
growth in demand.
Finally, consistent with the dividend policy set out in our flotation
prospectus, I am pleased to recommend a final dividend of 2.9p per share,
payable on 29 May 2000 to registered shareholders as at 8 May 2000.
PW Hulme, Chairman.
Chief Executive's Review
During 1999 Computacenter continued to invest across all of its businesses,
consolidating its position as the leading supplier of distributed IT and
related services to the European corporate and public sector marketplace.
In 1999 this investment strategy resulted in a Group turnover of #1.76
billion, a growth of 11.0%. Profit before tax increased by 16.3% from #64.6
million to #75.1 million and our after-tax earnings by 22.1% from #43.4
million to #53.0 million.
International sales grew significantly in 1999, with #300.1million (17.0%)
of the total Group turnover coming from sales in France, Germany and
Belgium. The greater part of revenues, the remaining #1.46 billion, or
83.0%, was again generated by our UK businesses.
As in previous years, recruitment and training remained our biggest
investment with headcount across the Group growing by 22.6% to 5,618 at the
end of 1999.
During the year, we also continued to increase our investment in the
development of best practices and systems that allow us to deliver our
growing range of services cost effectively and to the highest quality
standards. These included PRIDE 3, the latest release of our established
project management methodology and LINX, the help-desk system used by our
international call-centre.
We believe that the increasing economies of scale we enjoy in these areas
are a significant source of competitive advantage for the Group.
Market performance
1999 was an exceptional year. A major focus of our customers for the first
half of the year was investment to ensure Y2000 compliance of mainframe and
associated business systems. As anticipated, growth in the market for
distributed IT products slowed in the second half as compliance projects
were completed and other projects postponed. Demand for our services
however remained strong throughout the second half of the year, with the
result that, overall, our managed services contract base grew 32% over
1999.
We anticipate increased customer focus on distributed IT investment during
2000 as organisations re-focus on deployment of IT for competitive
advantage. The huge anticipated growth of business-to-business e-commerce
systems and the arrival of Microsoft's Windows 2000 operating system will
both serve as significant growth drivers for the Group over the coming
year, particularly in the second half.
1999 saw a continued decline in PC prices across the Group. We welcome the
long-term decline in hardware prices, as it opens up new applications for
distributed IT - enabling our customers to increase their investment in new
technology, so fuelling demand for the Group's services.
UK Operations
The continuing growth in demand for our services has necessitated some
reorganisation to streamline our service provision. We have therefore
established three dedicated service divisions in the Group employing
specialist staff to develop and deliver solutions to our customers. The
three divisions: Supply-Chain Services, Managed Services and Professional
Services, engage with customers through Computacenter's account management
team. Our account managers provide the vital link in identifying and
managing customer requirements and engaging the appropriate service
providers within the Group.
Supply-Chain Services
Although the rate in growth of product sales slowed in 1999 compared to the
previous year, we continued to invest in people, systems and infrastructure
to support the anticipated release of pent-up demand in 2000. Development
of our new headquarters offices and operations centre in Hatfield,
Hertfordshire, continued apace, with our office complex, housing more than
1,000 staff, opening in October 1999. This move has brought together both
staff and management previously located in the surrounding area, into a
much-improved working environment with corresponding benefits. Our new
34,000-sq. metre operations centre on the same site remains on target to
open in the second half of 2000.
Our On-Trac electronic commerce system continued to be a major investment
area for the Group. 1999 saw the successful implementation of our fully web-
enabled customer system. Over 550 customers across the Group currently use
the system, a growth of more than 37% in the last year.
In November we entered into a commercial agreement with Gateway Computers,
a global supplier of PCs. Our goal was to develop an optimised customer
delivery model that combines the benefits of Gateway's built-to-order PC
assembly with Computacenter's value-added services. We believe this is a
unique approach, offering customers increased value and flexibility. We
anticipate that the superior logistics capability offered by our new
Hatfield operations centre will allow us to develop this model further in
due course.
Managed Services
Much of Computacenter's growth in 1999 was due to expanding relationships
with existing long-term corporate customers such as Scottish & Southern
Energy plc. In particular, this was reflected in the demand for our managed
services, where the growth in our contract base was greater than for the
company as a whole. UK staff numbers in our Managed Services Division grew
to 1,907, an increase of 22.2%. We were also successful in attracting a
number of new managed service contract customers during the year, including
Avis Europe plc and Save the Children UK.
Professional Services
Demand for our technical consulting services has again been one of the
fastest areas of growth within the Group. The appointment of Computacenter
as a Microsoft Alliance Partner in October 1998 has helped to fuel this
demand and enabled us to invest in training additional Microsoft accredited
professionals in 1999 to fulfil customers' requirements. This brings our
number of personal Microsoft accreditations in the UK to over 1,300.
During 1999 we have seen the first successes of The iGroup, our e-business
division formed in 1998. We continued to invest in The iGroup in 1999,
establishing a group of over 60 specialists with Internet and Intranet
design, development and consulting skills. During the year we brought to
market a number of innovative e-commerce products and services, which have
been taken up by our customer base. We are very encouraged by progress made
and anticipate significant growth as the move to streamline business
processes via e-commerce based solutions accelerates in 2000.
Computacenter was also appointed as a member of Microsoft's Rapid
Deployment Programme for Windows 2000 early in 1999. We anticipate healthy
demand for our Microsoft consulting services in 2000 and beyond with the
deployment of Windows 2000 by corporate and government organisations across
Europe.
During 1999, Y2000 compliance projects led to a corresponding rise in
demand for our project management capability. As the client-server platform
becomes the preferred technology base for many line-of-business
applications, the solutions we sell and support continue to increase in
scale, complexity and strategic importance to organisations. As a result,
customers are increasingly turning to Computacenter to project manage the
deployment of distributed technology.
Customer Relationships
Growth of the Group is dependent on our ability to retain existing
customers and deliver real value via our services. During 1999 we were
successful in extending our relationship with our largest customer, British
Telecom, with a new three year contract and an option to renew for a
further two years. The range of services now supplied to BT includes
maintenance, supply chain re-engineering and implementation of distributed
IT into BT's business units. Other contract extensions included Shell
Service, Credit Suisse First Boston (CSFB) and Cisco Systems.
Computacenter also grew its customer base in 1999 with a number of notable
new account wins during the year that included on-site Managed Services.
New UK customers included Royal & SunAlliance, The Houses of Parliament and
Vodafone Retail. 1999 was also a successful year for our UK Government
Division where we continued to invest in developing our Government
Catalogue (GCat) contractual business with staff numbers more than doubling
to 163. Notable new government customers included the Greater London
Authority and National Probation Services.
We believe that Computacenter's scale and ability to deliver value
consistently through its entire range of IT services, combined with our e-
commerce capability, provide significant competitive advantages that will
enable us to capture further market share in 2000.
International Operations
Computacenter continues to develop its international capability via its
direct subsidiaries in France, Germany and, more recently, Belgium. As a
whole, international operations increased as a percentage of Group revenue
from 13% in 1998 to 17% in 1999. Our focus remains to capture market share
rapidly and to deploy core Computacenter operational systems and business
practices already proven in our UK business operations.
Computacenter France
Computacenter France grew ahead of the market during 1999 with turnover up
34.5% to #223.0 million and profits up 67.3% to #4.6 million. Headcount
grew to 756, up 37.7% on 1998. A large part of our recruitment was in
service divisions, where growth exceeded that for Computacenter France as a
whole. Significant new customer account wins for the year included the DGA
(General Armament Delegation) at the French Ministry of Defence.
Due to the rapid expansion of the French business and our plans for future
growth, we moved into a new larger operations and headquarters facility in
Paris during the first half of the year. Computacenter France's
performance, during the second half of 1999 in particular, and the
investments we have made to accommodate future growth, promise well for
2000 and beyond.
Computacenter Germany
In Germany, as in other markets, trading conditions were influenced by
Y2000 issues and Computacenter's financial performance was impacted by the
relatively small scale of our German operations. However, as in France, we
continued to invest in Germany throughout the year with staff headcount
growing by 62.3% to 362 at the end of 1999. In the first half of 1999 we
moved to a new operations centre and opened new offices in Hanover,
Stuttgart and Nuremberg. Significant customer account wins for the year
included MEAG (Munich Re-insurance Group), and Preussag Group. Contract
extensions included Dresdner Bank Group, DVAG and Hapag-Lloyd.
ICG
International Computer Group (ICG), of which Computacenter was a founding
member in 1989, remains our core delivery mechanism for products and
services outside the European markets serviced directly by Computacenter.
This international joint venture now covers 53 countries throughout the
world.
Other Businesses
In November we announced the launch of Biomni Ltd, a 50% joint venture
between Computacenter plc and Computasoft e-Commerce Ltd. Computasoft has
been responsible for developing Computacenter's On-Trac electronic
procurement system since 1991. Biomni has been established to capitalise on
over nine years of experience in developing business-to-business e-commerce
solutions.
Acquisitions
In the second quarter of 1999 we made our first acquisition as a public
company, establishing a small subsidiary in Brussels, Belgium, which
employed 27 staff at the end of 1999. We also strengthened our services
capability by acquiring a UK based IT disposal services company, RDC, which
continues to operate under its own name. In the fourth quarter we acquired
the assets of Metrologie, a UK based subsidiary of CHS UK Holdings Ltd,
whose enterprise distribution business specialises in UNIX systems,
consulting and integration services. This has been successfully integrated
into our UK distribution business, Computacenter Distribution (CCD), which
provides hardware and a range of services to small and medium sized
resellers.
While our focus for 2000 clearly remains on investing for growth in our
existing businesses, we will continue to evaluate other market
opportunities as they arise.
Our Staff
I would like to thank all of our staff for their outstanding efforts.
Whether working alone or in teams they 'made the difference' to our
customers once again in 1999. This year we awarded 425 'Champions of
Quality' prizes to staff who demonstrated outstanding commitment to
delivering customer service, a record number of awards.
Our goal has always been to encourage widespread share ownership within the
company. During 1999 we launched our third Inland Revenue approved
ShareSave scheme, enabling qualifying staff to benefit from share ownership
within Computacenter. At the end of 1999, 55% of staff owned shares in the
Group.
Outlook
We have made considerable progress during 1999 in developing our service
portfolio and delivering value added services to both existing and new
customers. We anticipate continued strong growth for our services in 2000,
not only in the UK but also across Europe as our international businesses
develop further. We also believe that the significant pent-up demand within
our customer base due to Y2000 will start to be released during the first
half of the year. We anticipate this will accelerate in the second half, as
remaining compliance projects are completed and other projects, including
Windows 2000 roll-outs, are implemented. We strongly believe the
investments we made in 1999, and continue to make, will leave us well
positioned to take advantage of this future demand.
MJ Norris, Chief Executive.
GROUP PROFIT AND LOSS ACCOUNT
For the year ended 31 December 1999
1999 1998
#'000 #'000
TURNOVER 1,760,628 1,586,238
OPERATING COSTS (1,685,016) (1,519,942)
------- -------
OPERATING PROFIT 75,612 66,296
Share of operating loss of associate - (12)
Interest received and similar income 7,238 4,945
Interest payable and similar charges (7,714) (6,626)
------- -------
PROFIT ON ORDINARY
ACTIVITES BEFORE TAXATION 75,136 64,603
Tax on profit on ordinary activities (22,125) (21,232)
------- -------
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION 53,011 43,371
Minority interests - equity (48) (77)
------- -------
PROFIT ATTRIBUTABLE TO MEMBERS OF THE
PARENT COMPANY 52,963 43,294
Dividends - ordinary dividends on
equity shares (5,291) (4,302)
------- -------
RETAINED PROFIT FOR THE YEAR 47,672 38,992
====== ======
Earnings per share - Basic 30.6p 27.0p
- Diluted 28.1p 23.5p
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 December 1999
1999 1998
#'000 #'000
Profit attributable to members of the
parent company for the financial year 52,963 43,294
Exchange differences on retranslation of
net assets of associated and subsidiary
undertakings (2,029) 287
------- -------
Total Recognised gains for the year 50,934 43,581
====== ======
GROUP BALANCE SHEET
at 31 December 1999
1999 1998
#'000 #'000
FIXED ASSETS
Intangible assets 3,756 -
Tangible assets 96,647 59,768
Investments 2,815 1,467
------- -------
103,218 61,325
CURRENT ASSETS
Stocks 92,884 109,853
Debtors : gross 244,364 237,855
Less non returnable proceeds (187) (1,293)
------- -------
244,177 236,562
Cash at bank and in hand 63,688 63,601
400,749 410,016
CREDITORS: amounts falling due
within one year (292,753) (307,382)
NET CURRENT ASSETS 107,996 102,634
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 211,214 163,869
CREDITORS: amounts falling due after
more than one year (41,008) (42,013)
PROVISION FOR LIABILITIES
AND CHARGES (1,736) (1,035)
------- -------
TOTAL ASSETS LESS LIABILITIES 168,470 120,821
====== ======
CAPITAL AND RESERVES
Called up share capital 9,043 8,678
Share premium account 57,055 49,850
Profit and loss account 102,194 62,144
------- -------
Shareholders' funds - equity 168,292 120,672
Minority interests - equity 178 149
------- -------
168,470 120,821
====== ======
Approved by the Board of Directors
PW Hulme Chairman
MJ Norris Chief Executive
GROUP STATEMENT OF CASH FLOWS
For the year ended 31 December 1999
1999 1998
#'000 #'000
CASH INFLOW FROM OPERATING
ACTIVITIES 81,924 63,734
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE (262) (2,084)
TAXATION
Corporation tax paid (25,284) (17,486)
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT (49,778) (40,179)
ACQUISITIONS AND DISPOSALS (3,806) (71)
EQUITY DIVIDENDS PAID (4,482) -
------- -------
CASH (OUTFLOW)/INFLOW BEFORE
FINANCING (1,688) 3,914
FINANCING
Issue of shares 2,470 50,115
Decrease in debt (2,217) (4,257)
------- -------
(DECREASE)/INCREASE IN CASH IN THE
YEAR (1,435) 49,772
====== ======
GROUP STATEMENT OF CASHFLOWS
For the year ended 31 December 1999
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
31 December 31 December
1999 1998
#'000 #'000
NET CASH AT 1 JANUARY 1999 21,126 (32,689)
(Decrease)/increase in cash in the
year (1,435) 49,772
Cash outflow from repayment of debt
and lease finance 2,217 4,257
------- -------
Change in net cash resulting from
cash flows 782 54,029
Non cash changes in debt (214) (214)
Increase in debt on acquisition of
subsidiary (542) -
------- -------
NET CASH AT 31 DECEMBER 1999 21,152 21,126
====== ======
NOTES TO THE ACCOUNTS
1 ACCOUNTING POLICIES
Basis of preparation
The preliminary 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.
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 provision of
distributed information technology and related services.
An analysis of turnover by destination and origin, operating profit and net
assets is given below:
Turnover by Destination
1999 1998
#'000 #'000
UK 1,448,805 1,365,906
France & Belgium 226,640 165,764
Germany 77,164 39,020
Rest of the World 8,019 15,548
------- -------
1,760,628 1,586,238
====== ======
Turnover by Origin
1999 1998
#'000 #'000
UK 1,460,523 1,383,357
France & Belgium 227,789 165,773
Germany 72,316 37,108
------- -------
1,760,628 1,586,238
====== ======
Operating Profit
1999 1998
#'000 #'000
UK 74,028 64,929
France & Belgium 4,453 2,747
Germany (2,869) (1,380)
------- -------
75,612 66,296
====== ======
All turnover and operating profit relates to continuing operations.
3 OPERATING COSTS
1999 1998
#'000 #'000
Decrease/(Increase) in stocks 16,969 (1,608)
of finished goods
Goods for resale and 1,322,101 1,254,418
consumables
Staff costs 205,366 153,619
Depreciation and other amounts
written off tangible and
intangible assets 12,407 10,691
Other operating charges 128,173 102,822
------- -------
1,685,016 1,519,942
====== ======
4 TAX ON PROFIT ON ORDINARY ACTIVITES
The charge based on the profit for the year comprises:
1999 1998
#'000 #'000
UK Corporation tax
Current 21,424 20,197
Deferred tax 701 1,035
------- -------
22,125 21,232
====== ======
5 DIVIDEND
The Directors recommend the payment of a dividend of 2.9p per share (1998:
2.5p per share) representing and aggregate charge of #5,291,000 (1998:
#4,301,000). The Computacenter ESOP trust has waived the dividends payable
in respect of 1,432,595 (1998: 1,475,170) ordinary shares that it owns
which are not allocated to employees. The Computacenter Trustees Limited
have waived dividends in respect of 569,307 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
497,650 shares that it owns. Accordingly dividends payable have been
reduced by #72,000 in total.
6 EARNINGS PER SHARE
The calculation of earnings per ordinary share is based on profit
attributable to members of the holding Company of #52,963,000 (1998:
#43,294,000) and on 172,865,000 (1998: 160,535,000) 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,
the Computacenter Trustees Limited and the Computacenter Quest.
The diluted earnings per share is based on the same earnings figure of
#52,963,000 (1998:# 43,294,000) and on 188,366,000 (1998: 184,242,000)
ordinary shares, calculated as the basic weighted average number of
ordinary shares, plus 15,501,000 (1998: 23,707,000) dilutive share options.
7 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
1999 1998
#'000 #'000
Operating profit 75,612 66,296
Depreciation 12,345 -
Amortisation 62 10,691
(Profit) / loss on disposal of fixed
assets (490) 407
Increase in debtors (7,243) (70,842)
Decrease/(Increase) in stocks 17,030 (1,608)
Increase in creditors (13,632) 57,976
Currency and other adjustments (1,760) 814
Net cash inflow from operating
activities 81,924 63,734
8 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 1999 which contain an unqualified audit report.
END
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