RNS Number:8142S
Computacenter PLC
13 March 2007
Computacenter PLC
13 March 2007
COMPUTACENTER PLC
Preliminary Results Announcement
Computacenter plc, the European IT infrastructure services provider, today
announces preliminary results for the twelve months ended 31 December 2006.
Financial Highlights:
- Group revenues of #2.27 billion (2005: #2.29 billion)
- Operating profit of #33.6 million before exceptional items
(2005: #29.3 million)
- Pre-exceptional profit before tax of #38.0 million
(2005: #35.7 million)
- Pre-exceptional diluted earnings per share of 13.8p (2005: 11.8p)
- Final dividend of 5p per share, total dividend 7.5p (2005: 7.5p)
- Return of #74.4 million to shareholders in July 2006
- Net funds before customer-specific financing of #29.4 million
(2005 : #101.0 million)
Operating Highlights:
- UK Product business showing benefits of re-engineering with improved
performance and market share
- In UK Services, a strong performance from Technology Solutions
division compensated for slower growth from Support and Managed
Services divisions
- Continued effort to expand and strengthen the Group's services
capability, augmented by the acquisition post year-end of Digica
- Good underlying progress in the German business, however higher than
expected costs for the implementation of new shared datacentre
contracts
Ron Sandler, Chairman of Computacenter plc, commented:
"The results reported today show the early signs of progress arising from the
considerable efforts in recent years to improve the strategic positioning and
operating performance of Computacenter. These initiatives position the Group
well for the future."
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 during 2006. In each of the Group's three
principal markets, management continued to make determined efforts to improve
both strategic focus and operating performance.
The steep fall in revenue in recent years was arrested in 2006. Despite
continuing product price erosion, revenues of #2.27 billion were only marginally
lower than the previous year (2005: #2.29 billion), reflecting improvements in
the competitiveness of our offerings and the increased focus on mid-market sales
opportunities. Operating profit, before exceptional charges, increased by 14.5%
to #33.6 million (2005: #29.3 million) and this figure includes approximately
#6.2 million of losses arising in Germany associated with the start-up of two
shared datacentre contracts. Taking into account non-operating exceptional
charges of #5.0 million in France, operating profit increased by 3.2% to #28.5
million (2005: #27.7 million). A reduction in net interest receipts following
the return to shareholders of #74.4 million in July resulted in a 3.2% fall in
profit before tax to #32.9 million (2005: #34.0 million). The share
consolidation that accompanied the return of capital had a beneficial impact on
the Group's diluted earnings per share, which rose by 16.9% to 13.8 pence (2005:
11.8 pence) on a pre-exceptional basis, and by 1% to 11.0 pence (2005: 10.9
pence) after taking exceptional items into account.
Notwithstanding the #74.4 million return of capital, the balance sheet remained
strong, with year-end net cash of #29.4 million (2005: #101.0 million), prior to
customer-based loans and finance leases. Inclusive of these, the net funds of
the Group finished the year at #10.8 million (2005: #100.4 million).
The Board is pleased to recommend a final dividend of 5.0p per share, bringing
the total dividend for 2006 to 7.5p (2005: 7.5p). This is consistent with our
stated policy of maintaining the level of dividend until earnings have risen
sufficiently to bring the cover to within the target range of 2 - 2.5x. The
final dividend will be paid on 31 May 2007 to shareholders on the register as at
4 May 2007.
Operating profit in the UK increased by 16.8% to #37.5 million (2005: #32.1
million), principally as a result of improved gross margins on product sales.
Our UK Product Division has been re-engineered in recent years to serve our
customers more cost effectively, involving considerable investment in new
e-commerce systems and a reorganisation of resources. These improvements are
beginning to show benefit, both in terms of margin and in our market share. We
also continue to target the mid-market segment through our telesales operation,
Computacenter Direct, where revenues in 2006 grew in excess of 40%.
Technology Solutions, the consulting and systems integration unit within our UK
Services Division, performed strongly and continued to enhance its reputation
for technical excellence, particularly in datacentre-related activities.
Professional services revenues grew by 10.6% in 2006. Elsewhere within the
Services Division, performance was mixed. Margins in our contractual services
business units, Support Services and Managed Services, remained attractive,
partly as a result of further centralisation of resources within a shared
services delivery model; however, in a disappointing year for contract renewals,
revenues for contractual services increased by just 1.0% from the previous year.
In January 2007, we concluded the acquisition of Digica Limited for a
consideration of #28 million, including the settlement of approximately #12
million of debt. Digica is a leading provider of infrastructure management and
application services for medium sized public and private sector organisations,
with particular expertise in datacentre managed services. Its operations are
highly complementary to those of Computacenter, and the combination will give
both businesses the opportunity to deliver a far broader offering to their
respective client bases. This acquisition fits neatly with Computacenter's
strategy of developing its contractual services businesses.
Computacenter Germany produced revenue growth of 5.9%, stimulated in the latter
months of 2006 by the impending change to German VAT, which became effective in
early 2007. Profit performance in Germany was less encouraging, with operating
profit falling to #2.8 million (2005: #5.0 million), although this decline can
be attributed to higher than anticipated start-up losses of #6.2 million
associated with two shared datacentre services contracts. Nevertheless, this
should not be allowed to obscure the encouraging underlying improvement in the
German business. Services revenues, which account for over a third of the German
total, grew strongly, particularly in managed services (both desktop and
datacentre) and in telephony projects, including Voice Over IP.
The performance of Computacenter France remained unsatisfactory, although
pre-exceptional operating losses for the year reduced from #7.6 million to #6.5
million. The restructuring during the first half of 2005 contributed to this
improvement, although its benefits were mitigated by intense price competition
in the French market and further product margin erosion as a consequence.
Additional restructuring of the French cost base took place towards the end of
2006, resulting in an exceptional charge of #2.4 million, and we expect the
business to show further progress in 2007 towards an eventual return to
profitability. The financial statements also show a non-cash exceptional charge
of #2.6 million representing an impairment of the French non-current asset base.
In October, I was pleased to announce that John Ormerod had joined the Board as
a Non-Executive Director and also assumed the chairmanship of the Audit
Committee. John brings a wealth of experience to both roles and I very much look
forward to his involvement with the Group in the years ahead.
As we have stated before, it is difficult to draw any meaningful insights from
current trading until we have completed the first quarter. Notwithstanding this,
a considerable amount of work has taken place in recent years to improve the
strategic positioning of Computacenter, through developing significantly the
services capabilities and restructuring the cost base of our product businesses.
Alongside these initiatives have been a series of operational enhancements,
aimed at improving efficiencies in our core processes and at upgrading our sales
capabilities. The combination of these activities positions the Group well for
the future.
As always, the credit for the Group's performance belongs to the staff, to whom
I offer my wholehearted thanks for their dedication and hard work.
Review of Operations
UK
UK revenues declined by 5.2% to #1.28 billion (2005: #1.35 billion). Modest
services growth partially mitigated a product sales decline of 7.2%, which was
principally due to our withdrawal from selected low margin volume sales in trade
distribution.
Operating profit grew 16.8% to #37.5 million (2005: #32.1 million). The
improvement came mainly from better product margins, but also reflected our
success in penetrating new markets and delivering operational efficiencies.
Services Division
Overall services revenues grew 3.1%, with strong Technology Solutions growth
compensating for a disappointing 1.0% increase in contractual revenues.
We continued to focus on reducing operational costs and improving customer
service. In particular, we sought to make more effective use of shared resources
and tools for service delivery. The increased use of the Technical Resource
Group, a flexible, shared engineering resource, across our client base, helped
reduce our operational overheads significantly and made our offerings more
competitive.
Throughout 2006, we saw a growth in contractual opportunities arising from an
increase in the number of organisations seeking to split their service contracts
across a range of specialist partners. These were typically for contracts of
from three to five-year terms, rather than the ten-year service engagements
traditionally placed with large systems integrators.
The Services Division comprises three business units: Managed Services, Support
Services and Technology Solutions.
Managed Services
Despite a disappointing year for contract renewals, our Managed Services
business unit grew revenues by 6.6% and improved its profit contribution.
The UK outsourcing market continues to grow at 4-5% annually. Promising market
developments for Computacenter's business include increased interest from
medium-sized organisations for desktop and datacentre managed services.
Our growth plans include the continued expansion and enhancement of our service
desk and datacentre capabilities. This strategic focus led to the acquisition in
early 2007 of Digica, a provider of infrastructure management and application
services with a particular focus on medium-sized public and private sector
organisations.
Managed Services successes in 2006 include a five-year #28 million distributed
IT and datacentre outsourcing contract with Eversheds, a five-year #6 million
contract with IT firm Parity to manage its entire IT infrastructure including
its datacentre, and an extension in scope and terms of our contract with the
Nuclear Decommissioning Authority.
Support Services
A highly cost-conscious market led to an overall decline in our Support Services
revenues. Performance from this business unit was strongest in the datacentre
environment, where pressure on unit price was less intense.
Market demand was driven by clients seeking to centralise and consolidate their
IT infrastructures to improve service and reduce both risk and costs. Growth
also came from an increase in the subcontracting of support by large outsourcing
organisations and systems integrators, a market upon which we placed particular
focus in 2006. Such a partnership approach helped us secure a BT-subcontracted
three-year hardware maintenance and support contract with Liverpool Direct.
Support Services continues to be strong in the traditionally attractive
financial services market. In addition, our more recent efforts to improve our
coverage of the mid-market, where there is greater growth potential, helped us
win business with approximately 30 organisations that had not previously traded
with Computacenter. We also saw growth in areas such as the retail sector, where
we won a three-year contract with John Lewis Partnership for the support of all
their desktops, laptops, printers and networks across the UK.
Other significant wins in the period include a three-year contract for the
support of Taylor Woodrow's entire server estate.
Technology Solutions
Our Technology Solutions business grew strongly, with much of the growth coming
from an increase in datacentre projects. With a majority of Technology Solutions
projects in 2006 including a datacentre component, we sought to develop new
offerings to answer client demand in this area. As a result, we are now able to
offer an end-to-end datacentre solution for reducing operating costs, speeding
up business applications deployment and improving environmental efficiency.
In addition, we benefited from closer integration with our product supply
business, as an increasing number of clients chose to couple product supply with
the purchase of project services.
A 15% increase in revenues from consulting and project management led to very
high professional services activity, and helped the overall profitability of the
Technology Solutions business. We now have a substantial pipeline for
professional services projects in the UK and we anticipate further growth in
this area.
We continued to refine our propositions to answer changing client requirements.
For example, our shared risk approach to Technology Solutions projects, which
answers a growing demand for assured outcomes rather than hired expertise,
proved of interest to organisations seeking to reduce the risk and fix the cost
of projects.
Significant new business in the period included a five-year contract with
Doncaster College of Further Education, worth #6 million, for its new 35,000 sq.
m. campus.
Product Division
Our ongoing programme of re-engineering our product business to deliver improved
profitability and growth began to bear fruit in 2006. Following a decline in
product revenues in 2005, we saw a stabilisation in revenues from end-user sales
in 2006.
A 1.7% increase in product gross margins reflects our success in implementing
improved business controls relating to product purchasing and supply. We also
continued to lower the cost of sale through use of a lighter-touch sales model
for product-only clients, enabled through our deployment of improved e-commerce
systems.
We benefited from our evolving product mix, with a still greater proportion of
sales coming from network, server and other enterprise technologies. This was
partly driven by the increased criticality of enterprise systems and partly by
the growth of our Technology Solutions business, where such technology is often
part of a bundled solution.
The Product Division comprises four business units: Corporate Hardware,
Software, Computacenter Direct and CCD.
Corporate Hardware
Technology sales to end-users increased slightly, although following a major
investment in the latest version of our webshop, Connect 6, we experienced 28%
growth in online revenues. Web sales now comprise over 16% of all hardware
orders.
Product margins benefited from an increase in business with the financial
sector, as well as the growing enterprise technology proportion in the product
mix. We saw particularly strong growth in our Sun, EMC, Cisco and IBM enterprise
business.
With price competition still intense in the product market, the Corporate
Hardware business sought to enhance the range of supply-related value
propositions it provides to customers. In particular, we focused on developing
and communicating our offerings in the areas of managed multi-vendor procurement
contracts, extensive multi-site deployments and environmental advisory services.
Significant new product business includes a #50 million contract with the ATLAS
Consortium, covering managed supply and deployment services to support the
Defence Information Infrastructure (Future) programme within the UK Ministry of
Defence.
Software
Our Software business grew revenues 7% during 2006. Growth was across our vendor
base, and partly a result of an expanding software services market.
The increased threat of vendor audits, rising merger activity and the business
disruption of off-shoring, all drove clients to look for greater security,
efficiency and agility in software purchasing. Many of these organisations
sought help to ensure compliance, consolidate multi-vendor agreements and
renegotiate licence terms.
To capture better these opportunities, we increased our investment in dedicated
sales and marketing resources. Whilst this has had some short-term impact on
this unit's profit contribution, it is envisaged that future software business
growth will be achieved without the requirement to add further to the cost base.
Significant successes in 2006 include a renewal of Microsoft licences with BAA
in a three-year Direct Enterprise Agreement.
Computacenter Direct
This business unit, targeting the growing medium-sized business market,
continued to grow strongly, with improved product margins and revenue growth in
excess of 40%.
Recruitment of additional sales staff helped drive a 23% increase in product
volumes, predominantly related to server technology. This, together with our
increasing success in attaching deployment and integration services to
technology supply, contributed to an increased profit contribution from this
unit.
Computacenter Direct continues to attract new clients, and now has over 1,500
trading customers. We are confident of continuing growth in the mid-market
sector.
CCD
Following a management reorganisation in 2006, CCD, our trade distribution arm,
sought to reduce its exposure in a small number of unprofitable, high volume
accounts. As a result, we saw rising margins and profitability in the second
half of the year.
Profit performance also benefited from a merger of the two operating units
comprising CCD, reducing our operating costs and streamlining the sales
operation. Increased sales focus led to a number of notable successes during the
year, in particular the growth of our IBM System X server revenues, which
significantly increased CCD's market share in these systems, and the successful
introduction of a focused server-based computing initiative in partnership with
HP.
The management team was further strengthened in the last quarter and a
comprehensive sales development plan has been initiated to underpin the business
during 2007 and beyond. Although market conditions are expected to remain
fiercely competitive, management believe that we are well placed to build on the
improvements seen in 2006.
RDC
After breaking even in the previous year, RDC, our technology recycling and
remarketing operation, returned to profit in 2006. Our margin on remarketing
services increased by 15.1% and we continued to be profitable in Germany.
Our success in 2006 was in part due to a renewed sales focus in the first half
of the year, with the launch of Computacenter Asset Recovery Services and the
creation of a new frontline sales team instrumental in a number of service wins.
Throughout 2006 we saw significant successes in both our direct business, and
business won with Computacenter accounts. We now see a healthy sales pipeline,
which we anticipate should provide a secure platform for profit and revenue
growth in 2007.
Germany
Computacenter Germany recorded revenue growth of 5.9% to #654.7 million,
although full-year operating profits declined 44.2% to #2.8 million (2005: #5.0
million).
The fall in profitability was largely due to the implementation of two shared
datacentre contracts, and the creation of the underlying infrastructure, which
collectively produced a loss of approximately #6.2 million. Whilst elements of
this were planned costs of start-up, these losses were on an unacceptable scale
and considerable efforts were made in the second half of the year to rectify the
failings. We are confident that this has now been achieved.
This has obscured to some extent a marked underlying performance improvement in
the German business. Trading was particularly strong at the year-end. Although
this may signify a developing recovery in the German market, some of this growth
appears to have arisen from additional spending by clients ahead of the VAT
increase in Germany in early 2007.
Sales growth also came from an increase in Managed Services business, as clients
turned to outsourcing to help reduce IT operational costs. Overall, we continued
to attract new business, with some significant wins and renewals leading to 22%
contract base growth.
As elsewhere, an increased proportion of our product business came from sales of
enterprise technology. We saw particular growth in networking offerings,
reflecting the further commoditisation of the PC and laptop business and our
increased focus on business-led solutions.
In our Technology Solutions business, we continue to see the fruits of the
investment made five years ago in the development of Voice Over IP telephony and
Voice on Demand. Revenues from this competitive but highly profitable market
segment were twice their 2005 value and we expect them to continue to grow
attractively in 2007.
To support a growing requirement for the provision of a more international
service to large global customers such as Adidas, we took full responsibility in
October for our Service Desk facility and its 120 employees in Erfurt. This was
previously managed via a joint venture with Sellbytel. Through stronger
integration with our other facilities in Milton Keynes (UK) and Barcelona, this
will help us build a more integrated international service centre network.
Significant wins include a five-year outsourcing contract with Union Investment
IT for DZ Bankgruppe, worth up to #60 million in product and service sales. We
will provide an end-to-end service to include support of approximately 15,000
workstations and the outsourcing of the client's datacentre, with all service
and applications managed on our systems.
Other successes include a three-year Europe-wide contract with Airbus, worth 30
million euros, and major extensions of our contracts with Daimler Chrysler, for
network support of its Mercedes Technology Centre, and with Bosch, to include
the support of 38,000 workstations over a three-year term.
France
Performance in France remains unsatisfactory, although pre-exceptional operating
losses reduced 15.0% to #6.5 million (2005: #7.6 million) as revenues grew 3.9%
to #307.3 million (2005: #295.8million). Taking into account the effect of
exceptional charges, which related to additional restructuring of the French
business, operating loss increased from #9.3 million in 2005 to #11.5 million.
Despite further product margin erosion over 2006, we saw a slowdown of the trend
over the first nine months and a slight improvement in margins in the last
quarter. Encouragingly, services margins improved over the year and we completed
the final stages of business take-on of our largest multinational services
contract.
We benefited from our ongoing focus on reducing the cost base in France in both
people and non-people expenses and we intend to continue with these measures in
2007. We also saw some promising product and services sales growth, particularly
in the second half of the year.
The growth of our profitable maintenance business was another key focus, with
the launch of a comprehensive sales training programme designed to improve the
identification, qualification and capture of these opportunities. We are already
starting to see the benefits of this programme, with a significant increase in
maintenance business over the period and into 2007. A similar sales training
programme for enterprise products, which are less subject to price pressures
than desktop systems, led to an expansion of our team of IBM technical
consultants and helped grow our IBM revenues by 13%.
Significant wins include a three-year managed services contract with Texas
Instruments France, worth approximately #2 million. The contract scope includes
help desk provision, installations, maintenance, disposal and support for more
than 3,500 devices. We also secured a five-year enterprise and professional
services contract with the Centre National d'Etudes Spatiales (CNES) worth #13
million.
Benelux
Our Benelux operation recorded an operating loss of #191,000 (2005: #109,000).
The Belgium and Netherlands business achieved a break-even result, in spite of
costs arising from the development of new communication and storage business
units to address rising demand in those markets. Our sub-scale Luxembourg
operation recorded an overall loss.
Product supply performed strongly, with an increased profit contribution, as did
Managed Services, mainly from the growing financial sector.
Key wins included a renewal on product supply with Pioneer, a technology refresh
project at SWIFT, a desktop managed services contract with Burgo Ardennes, and a
CRM project for the European salesforce of Ansell.
International
We saw increasing client interest in our international capabilities in 2006,
with a number of contract wins and extensions having a multi-country component.
Typically these were with multinational organisations headquartered in Europe,
such as Cognis, which outsourced its global IT infrastructure to Computacenter,
including management of its datacentre and service desk.
Our service facilities have been extended through the building of a
multi-lingual shared service desk in Barcelona and through the service desk
capability in Cape Town, RSA that comes as part of the Digica acquisition. This
enables Computacenter to determine the most suitable location, in terms of both
quality of service and cost, when configuring service contracts for customers.
Consolidated income statement
For the year ended 31 December 2006
2006 2005
Note #'000 #'000
Revenue 3 2,269,903 2,285,209
Cost of sales (1,974,437) (1,996,381)
-------- --------
Gross profit 295,466 288,828
Distribution costs (19,075) (19,928)
Administrative expenses (241,408) (239,959)
+--------------------------------------------------------------------------+
| Operating profit: |
| Before share based payments and exceptional 34,983 28,941 |
| items |
| Share based payments (1,411) 392 |
| -------- -------- |
| Operating profit before exceptional items 33,572 29,333 |
| Impairment of non-current assets 4 (2,606) - |
| Redundancy costs 4 (2,425) (1,675)|
+--------------------------------------------------------------------------+
Operating profit 28,541 27,658
Finance revenue 6,677 8,127
Finance costs (2,289) (2,002)
Share of profit of associate - 229
+--------------------------------------------------------------------------+
| Profit before tax: |
| Before exceptional items 37,960 35,687 |
| Impairment of non-current assets 4 (2,606) - |
| Redundancy costs 4 (2,425) (1,675)|
+--------------------------------------------------------------------------+
Profit before tax 32,929 34,012
Income tax expense 5 (13,994) (13,579)
-------- --------
Profit for the year 18,935 20,433
-------- --------
Attributable to:
Equity holders of the parent 6 18,927 20,406
Minority interests 8 27
-------- --------
18,935 20,433
-------- --------
Earnings per share 6
- basic for profit for the year 11.0p 10.9p
- basic for profit before exceptional items 13.9p 11.8p
- diluted for profit for the year 10.9p 10.9p
- diluted for profit before exceptional 13.8p 11.8p
items
Consolidated balance sheet
As at 31 December 2006
2006 2005
Notes #'000 #'000
Non-current assets
Property, plant and equipment 84,874 81,601
Intangible assets 9,945 9,493
Investment accounted for using the equity - 288
method
Deferred income tax asset 6,166 5,528
-------- --------
100,985 96,910
-------- --------
Current assets
Inventories 94,586 100,233
Trade and other receivables 427,319 382,970
Prepayments 50,435 63,476
Forward currency contracts 111 191
Cash and short-term deposits 8 77,882 164,797
-------- --------
650,333 711,667
-------- --------
Total assets 751,318 808,577
-------- --------
Current liabilities
Trade and other payables 315,846 315,997
Deferred income 77,714 73,827
Financial liabilities 55,736 64,131
Income tax payable 8,394 5,712
Provisions 2,132 2,190
-------- --------
459,822 461,857
-------- --------
Non-current liabilities
Financial liabilities 11,362 275
Provisions 12,839 14,007
Other non-current liabilities 917 371
Deferred income tax liabilities 1,249 1,393
-------- --------
26,367 16,046
-------- --------
Total liabilities 486,189 477,903
-------- --------
Net assets 265,129 330,674
======== ========
Capital and reserves
Issued capital 9,571 9,505
Share premium 2,247 74,680
Capital redemption reserve 74,542 100
Own shares held (2,503) (2,503)
Other reserves (2,455) (1,757)
Retained earnings 183,700 250,630
-------- --------
Shareholders' equity 265,102 330,655
Minority interest 27 19
-------- --------
Total equity 265,129 330,674
======== ========
Approved by the Board on 12 March 2007
MJ Norris Chief Executive FA Conophy Finance Director
Consolidated statement of changes in equity
For the year ended 31 December 2006
Attributable to equity holders of the parent
-------------------------------
Issued Share Capital Own Foreign Retained Total Minority Total
capital premium redemption shares currency earnings interest equity
reserve held translation
reserve
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
At 31 December 9,489 73,920 100 (2,503) (911) 245,113 325,208 46 325,254
2004
Adoption of - - - - - (148) (148) - (148)
IAS 32 & IAS ------ ------ ------- ------- ------- ------ ------ ------ ------
39
At 1 January 9,489 73,920 100 (2,503) (911) 244,965 325,060 46 325,106
2005
Exchange - - - - (846) - (846) - (846)
differences on
retranslation
of foreign
operations ------ ------ ------- ------- ------- ------ ------ ------ ------
Net income/ - - - - (846) - (846) - (846)
(expenses)
recognised
directly in
equity
Profit for the - - - - - 20,406 20,406 (27) 20,379
period ------ ------ ------- ------- ------- ------ ------ ------ ------
Total - - - - (846) 20,406 19,560 (27) 19,533
recognised
income and
expenses for
the year
Cost of - - - - - (366) (366) - (366)
share-based
payments
Exercise of 16 760 - - - - 776 - 776
options
Equity - - - - - (14,375) (14,375) - (14,375)
dividends ------ ------ ------- ------- ------- ------ ------ ------ ------
16 760 - - (846) 5,665 5,595 (27) 5,568
------ ------ ------- ------- ------- ------ ------ ------ ------
At 31 December 9,505 74,680 100 (2,503) (1,757) 250,630 330,655 19 330,674
2005 ====== ====== ======= ======= ======= ====== ====== ====== ======
At 1 January 9,505 74,680 100 (2,503) (1,757) 250,630 330,655 19 330,674
2006
Exchange - - - - (698) - (698) - (698)
differences on
retranslation
of foreign
operations ------ ------ ------- ------- ------- ------ ------ ------ ------
Net income/ - - - - (698) - (698) - (698)
(expenses)
recognised
directly in
equity
Profit for the - - - - - 18,927 18,927 8 18,935
period ------ ------ ------- ------- ------- ------ ------ ------ ------
Total - - - - (698) 18,927 18,229 8 18,237
recognised
income and
expenses for
the year
Cost of - - - - - 1,411 1,411 - 1,411
share-based
payment
Exercise of 66 2,317 - - - - 2,383 - 2,383
options
Bonus issue 74,442 (74,442) - - - - - - -
Expenses on - (308) - - - - (308) - (308)
bonus issue
Share (74,442) - 74,442 - - (73,886) (73,886) - (73,886)
redemption
Expenses on - - - - - (56) (56) - (56)
share
redemption
Equity - - - - - (13,326) (13,326) - (13,326)
dividends ------ ------ ------- ------- ------- ------ ------ ------ ------
66 (72,433) 74,442 - (698) (66,930) (65,553) 8 (65,545)
------ ------ ------- ------- ------- ------ ------ ------ ------
At 31 December 9,571 2,247 74,542 (2,503) (2,455) 183,700 265,102 27 265,129
2006 ====== ====== ======= ======= ======= ====== ====== ====== ======
Consolidated cash flow statement
For the year ended 31 December 2006
2006 2005
Notes #'000 #'000
Operating activities
Operating profit: 28,541 27,658
Adjustments to reconcile Group operating
profit to net cash inflows from operating
activities
Depreciation 14,585 15,535
Amortisation 1,907 1,784
Share based payment 1,411 (366)
Impairment of property, plant and equipment 2,492 -
Loss/(profit) on disposal of property, plant 353 (85)
and equipment
Impairment of software 114 -
Loss on disposal of software 9 -
Dividend received from associate 202 303
Decrease in inventories 4,560 16,824
Increase in trade and other receivables (35,498) (25,904)
Increase in trade and other payables 6,895 29,925
Currency and other adjustments 5 287
-------- --------
Cash generated from operations 25,576 65,961
Income taxes paid (11,994) (18,366)
-------- --------
Net cash flow from operating activities 13,582 47,595
-------- --------
Investing activities
Interest received 6,600 9,086
Sale of subsidiary net of cash disposed of - (252)
Sale of property, plant and equipment 24 205
Purchase of property, plant and equipment (7,504) (8,068)
Sale of intangible assets - -
Purchases of intangible assets (2,499) (2,267)
Sale of interest in associate 364 -
Funds received from settlement of net asset - 26,918
claim on previously acquired subsidiary -------- --------
Net cash flow from investing activities (3,015) 25,622
-------- --------
Financing activities
Interest paid (2,152) (2,063)
Dividends paid to equity shareholders of the (13,326) (14,418)
parent
Proceeds from share issues 2,383 776
Repayment of capital element of finance leases (2,629) (321)
Repayment of loans (326) -
Repayment of other loans (5,201) -
New borrowings 12,447 -
Return of capital (74,442) -
Expenses on return of capital (365)
Decrease in factor financing (1,377) (6,401)
-------- --------
Net cash flow from financing activities (84,988) (22,427)
-------- --------
(Decrease)/increase in cash and cash (74,421) 50,790
equivalents
Effect of exchange rates on cash and cash 492 1,576
equivalents
Cash and cash equivalents at the beginning of 8 132,911 80,545
the year -------- --------
Cash and cash equivalents at the year end 8 58,982 132,911
======== ========
Analysis of changes in net
funds
At 1 Cash Non-cash Exchange At 31
January flows in flow differences December
2006 year 2006
#'000 #'000 #'000 #'000 #'000
Cash and cash equivalents 132,911 (74,421) - 492 58,982
Factor financing (31,542) 1,377 - 616 (29,549)
Bank loan (326) 326 - - -
-------- ------- ------- --------- --------
Net funds prior to 101,043 (72,718) - 1,108 29,433
customer-specific loans and
finance leases
Finance leases (652) 2,629 (13,380) - (11,403)
Other loans - 5,201 (12,447) - (7,246)
-------- ------- ------- --------- --------
Net funds 100,391 (64,888) (25,827) 1,108 10,784
======== ======= ======= ========= ========
Notes to the consolidated financial statements
For the year ended 31 December 2006
1 Authorisation of financial statements and statement of compliance with IFRS
The consolidated financial statements of Computacenter plc for the year ended 31
December 2006 were authorised for issue in accordance with a resolution of the
directors on 12 March 2007. The balance sheet was signed on behalf of the Board
by MJ Norris and FA Conophy. Computacenter plc is a limited company incorporated
and domiciled in England whose shares are publicly traded.
The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), as adopted by the European
Union as they apply to the financial statements of the Group for the year ended
31 December 2006 and applied in accordance with the Companies Act 1985.
2 Summary of significant accounting policies
Basis of preparation
The consolidated financial statements are presented in sterling and all values
are rounded to the nearest thousand (#'000) except when otherwise indicated.
Basis of consolidation
The consolidated financial statements comprise the financial statements of
Computacenter plc and its subsidiaries as at 31 December each year. The
financial statements of subsidiaries are prepared for the same reporting year as
the parent company, using existing GAAP in each country of operation.
Adjustments are made to translate any differences that may exist between the
respective local GAAPs and IFRS.
All intra-group balances, transactions, income and expenses and profit and
losses resulting from intra-group transactions that are recognised in assets,
have been eliminated in full.
Subsidiaries are consolidated from the date on which the Group obtains control
and cease to be consolidated from the date on which the Group no longer retains
control.
Minority interests represent the portion of profit or loss and net assets in
subsidiaries that is not held by the Group and is presented separately within
equity in the consolidated balance sheet, separately from parent shareholders'
equity.
3 Segmental analysis
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.
Each geographical business contains the following three business segments: -
o the Product segment supplies computer hardware and software to large and
medium corporate and government customers, and to other distributors. It
includes the resale of third party services for which the group retains no risks
or rewards post sale;
o the Professional Services segment provides technical and project management
skills to enable customers in the corporate and government sectors to implement
and integrate new technologies into their infrastructures.
o the Support and Managed Services segment provides an outsourcing service for
specific areas of infrastructure management to customers in the corporate and
government sectors.
The sale of goods is reported in the Product segment. The rendering of services
is reported in the Professional Services and Support and Managed Services
segments.
Transfer prices between geographical segments are set on an arm's length basis
in a manner similar to transactions with third parties. The impact of
inter-segment sales on operating profit by segment is not significant.
Geographical segments
The following tables present revenue, expenditure and certain asset information
regarding the Group's geographical segments for the years ended 31 December 2006
and 2005.
Year ended 31 December 2006
UK Germany France Benelux Total
#'000 #'000 #'000 #'000 #'000
Revenue
Sales to external 1,281,498 654,671 307,264 26,470 2,269,903
customers
Inter-segment sales 8,601 11,734 764 3,336 24,435
------- ------- ------- ------- --------
Segment revenue 1,290,099 666,405 308,028 29,806 2,294,338
======= ======= ======= ======= ========
Result
Gross profit 181,900 83,405 27,711 2,450 295,466
Distribution costs (11,765) (3,646) (3,521) (143) (19,075)
Administrative (132,665) (76,971) (30,685) (2,498) (242,819)
expenses ------- ------- ------- ------- --------
Operating profit 37,470 2,788 (6,495) (191) 33,572
pre-exceptionals
Exceptional items - - (5,031) - (5,031)
------- ------- ------- ------- --------
Operating profit 37,470 2,788 (11,526) (191) 28,541
------- ------- ------- ------- --------
Net finance income 6,834 (882) (1,475) (89) 4,388
------- ------- ------- ------- --------
Profit before tax 44,304 1,906 (13,001) (280) 32,929
Income tax expense (13,994)
--------
Profit for the year 18,935
========
Assets and
liabilities
Total segment assets 506,177 166,611 76,342 2,188 751,318
======= ======= ======= ======= ========
Total segment 223,296 145,382 112,679 4,832 486,189
liabilities ======= ======= ======= ======= ========
Other segment
information
Capital expenditure:
Property, plant and 10,387 9,557 852 89 20,885
equipment
Intangible fixed 1,922 495 82 - 2,499
assets ======= ======= ======= ======= ========
Depreciation 11,262 2,283 936 104 14,585
Amortisation 1,551 293 63 - 1,907
======= ======= ======= ======= ========
Share-based payments 1,173 202 28 8 1,411
======= ======= ======= ======= ========
Year ended 31 December 2005
UK Germany France Benelux Total
#'000 #'000 #'000 #'000 #'000
Revenue
Sales to external 1,351,307 618,238 295,784 19,880 2,285,209
customers
Inter-segment sales 8,401 24,604 293 3,539 36,837
------- ------- ------- ------- -------
Segment revenue 1,359,708 642,842 296,077 23,419 2,322,046
======= ======= ======= ======= =======
Result
Gross profit 169,876 87,709 28,941 2,302 288,828
Distribution Costs (11,315) (5,160) (3,360) (93) (19,928)
Administrative (126,482) (77,548) (33,219) (2,318) (239,567)
expenses ------- ------- ------- ------- -------
Operating profit 32,079 5,001 (7,638) (109) 29,333
pre-exceptionals
Exceptional items - - (1,675) - (1,675)
------- ------- ------- ------- -------
Operating profit 32,079 5,001 (9,313) (109) 27,658
------- ------- ------- ------- -------
Net finance income 8,055 (553) (1,347) (30) 6,125
Share of associate's - 229 - - 229
profit ------- ------- ------- ------- -------
Profit before tax 40,134 4,677 (10,660) (139) 34,012
Income tax expense (13,579)
-------
Net profit for the 20,433
year =======
Assets and
liabilities
Segment assets 569,043 136,784 100,880 1,582 808,289
Investment in an - 288 - - 288
associate ------- ------- ------- ------- -------
Total assets 569,043 137,072 100,880 1,582 808,577
======= ======= ======= ======= =======
Segment liabilities 233,129 116,895 123,952 3,927 477,903
------- ------- ------- ------- -------
Total liabilities 233,129 116,895 123,952 3,927 477,903
======= ======= ======= ======= =======
Other segment
information
Capital expenditure:
Property, plant and 6,138 1,020 555 124 7,837
equipment
Intangible fixed 3,083 284 18 - 3,385
assets ======= ======= ======= ======= =======
Depreciation 11,570 2,981 882 102 15,535
Amortisation 1,093 295 358 38 1,784
======= ======= ======= ======= =======
Share-based payments (559) 138 21 8 (392)
======= ======= ======= ======= =======
Business segments
The following tables present revenue and profit information regarding the
Group's business segments for the years ended 31 December 2006 and 2005.
Product Professional Support Total
services and
managed
services
Year ended 31 #'000 #'000 #'000 #'000
December 2006
Revenue
Sales to external 1,735,210 128,895 405,798 2,269,903
customers
Inter-segment sales 3,865 2,723 17,847 24,435
------- --------- -------- -------
Segment revenue 1,739,075 131,618 423,645 2,294,338
======= ========= ======== =======
Product Professional Support Total
services and
managed
services
Year ended 31 #'000 #'000 #'000 #'000
December 2005
(Restated)
Revenue
Sales to external 1,770,410 114,236 400,563 2,285,209
customers
Inter-segment sales 23,694 3,775 9,368 36,837
------- --------- -------- -------
Segment revenue 1,794,104 118,011 409,931 2,322,046
======= ========= ======== =======
For the year ended 31 December 2005 an amount of #12,443,000 has been
reclassified from Support and Managed Services to Product. This amount is in
respect of 3rd party resold services in Germany for which the Group retains no
risks or rewards. Historically these amounts could not be separately identified.
It is not possible to split out assets, liabilities and capital expenditure
information by business segments. Assets and liabilities within geographical
segments are not allocated to business segments.
4 Exceptional items
2006 2005
#'000 #'000
Impairment of property, plant and equipment 2,492 -
Impairment of intangible assets 114 -
Redundancy costs 2,425 1,675
-------- --------
5,031 1,675
======== ========
Forecast cash flows for Computacenter France no longer support the value of
the non-current assets in the business, and accordingly a full impairment to
these assets was recorded at 31 December 2006.
Restructuring costs of #2,425,000 (2005: #1,675,000) were incurred during the
year ended 31 December 2006. These principally relate to headcount reductions
required to restructure the indirect cost base. The 2005 comparatives have been
restated to classify these costs as exceptional items accordingly.
5 Income tax
a) Tax on profit on ordinary activities
Tax charged in the income statement
2006 2005
#'000 #'000
Current income tax
UK corporation tax 14,421 12,872
Foreign tax 212 31
Adjustments in respect of current income tax of 76 (202)
previous years
Consortium relief 59 (119)
-------- --------
Total current income tax 14,768 12,582
======== ========
Deferred tax
Relating to origination and reversal of (499) 997
temporary differences
Prior year adjustments (275) -
-------- --------
Total deferred tax (774) 997
-------- --------
Tax charge in the income statement 13,994 13,579
======== ========
Tax relating to items charged or credited to
equity
Deferred tax
Relief on share option gains - 16
-------- --------
Tax charge in the statement of changes in equity - 16
======== ========
b) Reconciliation of the total tax charge
2006 2005
#'000 #'000
Accounting profit before income tax 32,929 34,012
-------- --------
At the UK standard rate of corporation tax of 9,879 10,204
30% (2005: 30%)
Expenses not deductible for tax purposes 1,147 673
Relief on share option gains (218) -
Adjustments in respect of current income tax of (214) (202)
previous years
Higher tax on overseas earnings 49 1
Accounting depreciation in excess of tax 21 518
depreciation
Other timing differences (616) (761)
Consortium relief 59 (119)
Profit of overseas undertakings not taxable due (154) (4)
to brought forward loss offset
Losses of overseas undertakings not available 4,041 3,269
for relief -------- --------
At effective income tax rate of 42.6% (2005: 13,994 13,579
39.9%) ======== ========
6 Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year adjusted for the effect of dilutive options.
The following reflects the income and share data used in the total operations
basic and diluted earnings per share computations:
2006 2005
#'000 #'000
Profit attributable to equity holders of 18,927 20,406
the parent
Exceptional items attributable to equity 5,031 1,675
holders of the parent -------- --------
Profit before exceptional items 23,958 22,081
attributable to equity holders of the -------- --------
parent
2006 2005
000's 000's
Basic weighted average number of shares 172,312 187,210
(excluding own shares held)
Effect of dilution:
Share options 1,232 658
-------- --------
Diluted weighted average number of 173,544 187,868
shares ======== ========
There have been no other transactions involving ordinary shares or potential
ordinary shares since the reporting date and before the completion of these
financial statements.
7 Dividends paid and proposed
2006 2005
#'000 #'000
Declared and paid during the year:
Equity dividends on ordinary shares:
Final dividend for 2005: 5.0p (2004: 5.2p) 9,405 9,735
Interim for 2006: 2.5p (2005: 2.5p) 3,921 4,590
-------- --------
13,326 14,325
======== ========
Proposed for approval at AGM (not recognised
as a liability as at 31 December)
Equity dividends on ordinary shares:
Final dividend for 2006: 5.0p (2005: 5.0p) 7,856 9,400
======== ========
8 Cash and short-term deposits
2006 2005
#'000 #'000
Cash at bank and in hand 17,882 164,797
Short-term deposits 60,000 -
-------- --------
77,882 164,797
======== ========
Cash at bank and in hand earns interest at floating rates based on daily bank
deposit rates. Short-term deposits are made for varying periods of between one
day and three months depending on the immediate cash requirements of the Group,
and earn interest at the respective short-term deposit rates. The fair value of
cash and cash equivalents is #77,882,000 (2005: #164,797,000).
At 31 December 2006, the Group had available #10,000,000 (2005: #9,100,000) of
undrawn committed borrowing facilities in respect of which all conditions
precedent had been met. In addition the Group has #79,000,000 (2005:#59,200,000)
of overdraft facilities.
For the purposes of the consolidated cash flow statement, cash and cash
equivalents comprise the following at 31 December:
2006 2005
#'000 #'000
Cash at bank and in hand 17,882 164,797
Short-term deposits 60,000 -
Bank overdrafts (18,900) (31,886)
-------- --------
58,982 132,911
======== ========
9 Customer-specific leases and loans
a) Other loans
Other loans comprise of borrowings relating to specific assets that are used to
satisfy specific customer contracts.
The table below summarises the maturity profile of these loans:
2006 2005
#'000 #'000
Not later than one year 4,443 -
After one year but not more than five years 2,803 -
-------- --------
7,246 -
======== ========
b) Finance lease commitments
The finance leases are only secured on the assets that they finance. These
assets are used to satisfy specific customer contracts.
The present value of the net minimum lease payments are as follows:
2006 2005
#'000 #'000
Within one year 2,844 377
After one year but not more 8,559 275
than five years -------- --------
Present value of minimum lease 11,403 652
payments ======== ========
c) Operating lease commitments where the Group is lessor
During the year the Group entered into commercial leases with customers on
certain items of machinery.
Future amounts receivable by the Group under the non-cancellable operating
leases as at 31 December are as follows:
2006 2005
#'000 #'000
Not later than one year 8,541 -
After one year but not more 12,723 -
than five years
------ -----
21,264 -
====== =====
The amounts receivable are directly related to the finance lease obligations and
other loans of #18,649,000 detailed in notes 8 a) and 8 b).
10 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 2006, the
auditor's report on which has yet to be signed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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