TIDMCCC
RNS Number : 8088M
Computacenter PLC
30 August 2013
Computacenter plc
Interim Results for Six Months ended 30 June 2013
Computacenter plc, the independent provider of IT infrastructure
services and solutions, today announces unaudited results for the
six months ended 30 June 2013.
Financial Highlights:
-- Group revenue of GBP1.43 billion (H1 2012: GBP1.42 billion)
-- Group adjusted* profit before tax of GBP26.2 million (H1 2012
restated: GBP25.8 million), an increase of 1.9%
-- Adjusted* diluted earnings per share (Diluted EPS) of 12.5p (H1 2012 restated: 12.7p)
-- Net funds excluding customer specific financing (CSF) of
GBP82.1 million (H1 2012: GBP101.6 million), after remitting
GBP31.4 million to a third party escrow account during the period
as part of the return of value to shareholders of approximately
GBP75 million which completed in early July 2013
-- Interim dividend of 5.2p (H1 2012: 5.0p)
Statutory Highlights:
-- Total exceptional items of GBP29.3 million (H1 2012 restated : GBP3.6 million), including:
o Trading losses on three previously announced onerous contracts
in Germany of GBP5.1 million in H1 2013 (H1 2012 : GBP1.7
million)
o One-off provision of GBP10.7 million for future losses on the
three onerous contracts in Germany (in addition to the GBP2.1
million provision taken in December 2012)
o A non-cash impairment of goodwill and acquired intangibles in
France of GBP12.2 million, due to deterioration in business
performance
o Accordingly, 2012 results are re-stated to reclassify trading
losses on the three onerous contracts in Germany within exceptional
items
-- After exceptional items, H1 2013 Group statutory loss before
tax of GBP4.3 million (H1: profit of GBP20.8 million)
-- Statutory diluted loss per share of 5.7p (H1 2012: diluted earnings per share of 10.0p)
-- Net funds including CSF of GBP65.8 million (H1 2012: GBP83.8 million)
Operational Highlights:
-- Continued good progress towards objective of increasing the
proportion of Group revenue generated from Services
-- Group Services revenue increased by 3.0% in constant currency across the Group
-- Excellent momentum in the UK continues, with a very encouraging Managed Services pipeline
-- Pleasing underlying performance in Germany, also with a strong Managed Services pipeline
-- Trading performance of the three onerous contracts in Germany
has stabilised since our Interim Management Statement released on
24 April 2013 - provision has now been made for future losses over
their lifetime
-- Successful implementation of Group Operating Model in Germany
-- French business continues to face challenging market
conditions. Short-term adverse impact from its migration to the
Group ERP system. Confident of improved French business performance
in the long term
-- Successful Group ERP migration in the UK and Germany already
delivering important benefits, enabling the implementation of the
Group Operating Model
-- Financial flexibility of the Group increased through a GBP40
million committed facility secured in the period
* Adjusted profit before tax and diluted EPS is stated prior to
exceptional items and amortisation of acquired intangibles.
Adjusted operating profit is also stated after charging interest on
CSF. Exceptional items for 2012 have been restated to take account
of the reclassification of trading losses and provisions in respect
of three onerous German contracts.
Mike Norris, Chief Executive of Computacenter plc,
commented:
"Trading remains in line with the Board's expectations for the
year, with the exception of the provisions we have made in respect
of our three onerous contracts in Germany.
We believe that the performance of the Group during the first
half of 2013, excluding the three onerous contracts in Germany and
the issues we have faced in our French business, has been one of
our best ever. We are confident that we can maintain the momentum
of our general success and solve our isolated issues."
Enquiries:
Computacenter plc:
Mike Norris, Chief Executive 01707 631601
Tony Conophy, Finance Director 01707 631515
Tulchan Communications:
James Macey White 0207 353 4200
Christian Cowley
Chairman's Statement
The first half of 2013 has seen continued excellent progress in
the UK, stabilisation and reorganisation in Germany but a
disappointing performance in France. We have successfully
implemented our ERP system across the Group and delivered a capital
return of approximately GBP75 million to shareholders in addition
to our regular dividends. During the course of 2013 as a whole, we
will have returned a total of circa GBP98 million to
shareholders.
You will see from the detail which follows that we have
calculated the quantum of provisions for unprofitable German
contracts, and taken a non-cash impairment of goodwill and acquired
intangibles in France. In Germany, we underestimated the level of
resource required to meet our agreed service level commitments and
to provide the quality of service that befits our reputation.
Management has undertaken a thorough review of these contracts, and
the provision we have booked in this half-year reflects our
assessment of the losses that will be incurred over their remaining
lifetime. We are determined to ensure that we are able to support
appropriately the three customers affected so as to demonstrate our
long-term commitment to them and all other current and prospective
customers. Our pipeline of opportunities is healthy in the UK and
Germany and we are encouraged by the outlook for our business. It
would be easy to blame the environment for our disappointment in
France, but we take the view that we must improve those things we
can control whilst operating in a challenging environment.
I am very pleased to welcome Frau Regine Stachelhaus to our
Board. She brings a wealth of relevant experience with her as a
recent Management Board member at EON and as a former Hewlett
Packard Managing Director in Germany. Ian Lewis will be leaving the
Board after some seven years of valuable contribution and I take
the opportunity to thank him for his wisdom and counsel,
particularly in respect of the Group wide ERP implementation.
We are confident that we have invested wisely in the future
prospects of the Group and will continue our focus on Services
contract wins, margin growth and cash generation.
Greg Lock
29 August 2013
Operating statement
Group
Turnover and Adjusted Profitability
During the first six months of 2013, the Group's total
profitability was ahead of the same period in 2012, with adjusted*
profit before tax increasing by 1.9% to GBP26.2 million (H1 2012
restated: GBP25.8 million). There was one very small acquisition at
the end of 2012, which was not material to the Group's result, and
thus comparatives excluding acquisitions are not shown.
Total revenues were flat on a reported basis at GBP1.43 billion
and reduced by 1.7% in constant currency. However, we continue to
make good progress towards our objective of increasing the
contribution of Services within the mix of our business. In
constant currency, Services revenue increased by 3.0% across the
Group, primarily driven by another very strong performance by our
UK Services business, where our growing reputation and ability to
deliver operational excellence to large customers has enabled us to
achieve a number of new Services contract wins in the reporting
period.
Our continuing ability to on-board Services contracts
successfully in the UK using our Group Operating Model has played a
vital role in improving Services margins and Services growth. As
previously noted, there are some headwinds which will impact the
2013 operating profit, mainly due to strong margins and revenues on
new contract transition and transformation in 2012. We expect our
strong UK operating and financial performance to continue.
Group Supply Chain revenues reduced by 4.0% in constant
currency, largely due to a disappointing performance by our French
Supply Chain business. However, we are pleased that our UK business
has consolidated the significant Supply Chain revenue growth it saw
in 2012, notably against the backdrop of a market in which total
spend is broadly flat. We are very encouraged by the Supply Chain
performance of Germany in Q2 2013, which was up 15% against the
same period for 2012. However, it is as yet too early to determine
whether this represents simply a strong quarter for our German
business, or is the early sign of a more general and sustained
recovery in our German Supply Chain revenues.
Whilst the Group's adjusted* profit before tax increased, the
increased losses in France in 2013 resulted in a higher adjusted
tax rate of 27.8% (H1 2012: 23.9%), leading to a small decrease in
adjusted* diluted EPS for the period of 1.6% to 12.5p (H1 2012
restated: 12.7p).
Statutory Performance and Exceptional Items
The Group incurred GBP29.3 million of exceptional items in the
period. Therefore, on a statutory basis, taking account of these
exceptional items and amortisation of acquired intangibles, the
Group made a loss before tax of GBP4.3 million (H1 2012: profit of
GBP20.8 million), and a diluted loss per share of 5.7p (H1 2012:
diluted earnings per share of 10.0p).
As previously announced, the rapid growth of our Services
business in Germany during the fourth quarter of 2011, coupled with
insufficient contractual governance procedures in place within our
German business at that time, has resulted in a number of Managed
Services contracts failing to achieve the margins anticipated at
the time they were agreed. We are pleased to report that the
actions taken in response to these issues, including a full review
of our governance procedures, have had a positive effect, helping
to stabilise the business and turnaround a number of operational
issues. However, we announced in our trading update on 16 July 2013
that three of these contracts are likely to be loss-making over the
course of their lifetime.
Further customer negotiation and extensive financial analysis is
now at a sufficiently advanced stage to estimate the full financial
consequences of these contracts. The Group is therefore required to
make an exceptional one-off provision of GBP10.7 million
representing our best estimate of the losses expected to be
incurred between 1 July 2013 and the end of the three contracts.
Management will work diligently to ensure that the quantum of the
actual losses incurred on these contracts is minimised hereafter,
regardless of the provision made.
Additionally, in order to provide a clearer picture of the past
performance of the business, the Group has restated its 2012
accounts where necessary to reclassify trading losses and
provisions incurred on these contracts as exceptional items. The
impact of the reclassification is summarised in the table
below:
Restated Restated
Germany Segment H1 2012 FY 2012
Restatement of adjusted* operating
profit GBPm GBPm
--------- ---------
As restated in 2013 accounts 7.2 19.7
Onerous Contracts - trading losses (1.7) (5.9)
Onerous Contracts - provisions
for future losses - (2.1)
As reported in 2012 accounts 5.4 11.6
--------- ---------
Following the implementation of our Group Operating Model in
Germany and the UK, further overhead cost-saving activities have
been driven across the Group during the first half of 2013. This
has resulted in an exceptional charge of GBP1.3 million being
incurred during the reporting period, in addition to the GBP1.5
million taken in 2012. We expect that this will lead to a similar
value of cost savings annually. As a result of these actions, in
constant currency, Group administration expenses (SG&A) have
fallen marginally against the same period in 2012. Given that
similar cost saving activities will continue, such as the
realignment of our sales force in Germany, and that we will
endeavour to implement our Group Operating Model within our French
business during the second half of the year, we expect that this
trend will continue during the remainder of 2013.
Our French business continues to be adversely affected by the
state of the French macro-economy, which we noted was of some
concern in our full year report for 2012, and which remains
challenging. Whilst we are nonetheless disappointed with our
performance in France during the first half of 2013, we are pleased
that we have now implemented our new ERP system in France as it
will enable the implementation of our Group Operating Model. As
outlined above, we will endeavour to implement the operating model
within our French operation during the second half of 2013. Whilst
the ERP migration has caused short-term adverse impact to our
French business, we expect that these two major changes will help
to improve the financial performance of the business over the long
term.
However, the disappointing financial performance of our French
business in 2013 has resulted in a requirement for a non-cash
impairment to non-current assets in the French cash-generating
unit, relating to goodwill and acquired intangibles, of GBP12.2
million.
The table below summarises the adjusted* profitability and
exceptional items for the Group as a whole:
Restated Restated
H1 2012 FY 2012 H1 2013
From adjusted to statutory
(2012 restated) GBPm GBPm GBPm
-------------------------------------- --------- --------- --------
Adjusted operating profit 25.0 78.0 25.7
Adjusted net interest 0.8 1.3 0.5
--------- --------- --------
Adjusted profit before tax 25.8 79.3 26.2
Onerous German Contracts
- trading losses (1.7) (5.9) (5.1)
- provisions for future losses - (2.1) (10.7)
--------- --------- --------
(1.7) (8.0) (15.8)
Non-cash impairment - France - - (12.2)
Redundancy costs - (1.5) (1.3)
Costs in relation to relocation
of premises (1.9) (2.4) -
Total exceptional items (3.6) (11.9) (29.3)
Amortisation of acquired intangibles (1.3) (2.6) (1.3)
Statutory profit before tax 20.8 64.8 (4.3)
--------- --------- --------
Diluted earnings per share
measures
Adjusted diluted EPS - as 12.7 40.8 12.5
restated in 2013 p p p
Adjusted diluted EPS - as 11.7 36.1
reported in 2012 p p n/a
10.0 32.4
Statutory diluted EPS p p (5.7)p
Cash and Return of Value
Cash flow generation remained strong throughout the period and
net funds, excluding customer specific financing (CSF) but
including the outflow associated with the Return of Value to
shareholders outlined below, reduced to GBP82.1 million at the
period end. Including CSF of GBP16.4 million (2012: GBP17.9
million), our net funds position reduced to GBP65.8 million. Our
cash position continues to be enhanced by GBP26 million (2012:
GBP26 million), due to the ongoing improved payment terms from one
of our major vendors.
Continuing Computacenter's tradition of returning cash to
shareholders through our dividend policy and stand-alone corporate
actions, we announced on 24 May 2013 a one-off Return of Value to
shareholders totalling GBP75 million, or 48.7p for every existing
ordinary share held at the close of trading on 11 June 2013. The
outflow of cash associated with the Return of Value masked an
underlying net funds improvement of GBP13 million on a
like-for-like basis compared to the position as at 30 June
2012.
As part of the Return of Value, an associated share capital
reorganisation took place on 12 June 2013, whereby every 10
ordinary shares of 6p each in the Company were effectively
consolidated into 9 ordinary shares of 6 2/3p each. As part of the
transaction, the Company was required to pay an amount of GBP31.4
million into a third party escrow account on 20 June 2013. As a
result, this amount was included within the Group's financial
assets as at 30 June 2013, but given that it was not available to
the Group to finance its day-to-day operations, it was deemed to be
inappropriate to include it within cash and cash equivalents at the
reporting date.
The Return of Value will reduce our interest income by
approximately GBP1.0 million annually, with Diluted EPS augmented
by around 9% over the course of a full year. The effect on interest
and Diluted EPS was not material during H1 2013.
We are pleased to announce the payment of an interim dividend of
5.2p per share (H1 2012: 5.0p). This is in line with our policy
that the interim dividend will be approximately one-third of the
previous year's full dividend. The interim dividend will be paid on
18 October 2013 to shareholders on the register as at 20 September
2013.
Outlook
Trading remains in line with the Board's expectations for the
year, with the exception of the provisions we have made in respect
of our three onerous contracts in Germany.
Our UK business continues to make good progress and is likely to
finish the year ahead of our original expectations. The momentum of
the business in the UK, together with new contracts we expect to
close in the second half, bodes well for 2014 and beyond. Our
performance in Germany during the second quarter has been
encouraging, particularly within Supply Chain, and the third
quarter has started well. Some recent Services wins and a strong
pipeline should enable us to pick up speed again in our Services
growth next year, and with our Group governance model in place in
Germany we expect that further problem contracts will be avoided.
The performance of our three existing onerous contracts in Germany
has stabilised since our Interim Management Statement dated 24
April 2013, which is encouraging and enables us to begin focussing
on winning new contracts from the strong pipeline in Germany.
Whilst we are disappointed with the quantum of losses that we have
had to provide for, management will continue to be focussed on
minimising future trading losses on these onerous contracts to the
end of their life. Our main area of concern is clearly
Computacenter France. Given that our French ERP implementation is
behind us, we are in the final stages of negotiation on a major new
Services contract and we are endeavouring to deploy our Group
Operating Model in our French business, we expect that the
performance will improve, but this will not be without its
challenges.
We believe that the performance of the Group during the first
half of 2013, excluding our three onerous contracts in Germany and
the issues we have faced in our French business, has been one of
our best ever. We are confident that we can maintain the momentum
of our general success and solve our isolated issues.
United Kingdom
In the first half of 2013, our UK business has continued to
build on its excellent performance in 2012, and we are encouraged
by what has now been a sustained period of growth and
profitability. Total UK revenue increased by 2.4% to GBP592.1
million (H1 2012: GBP578.2 million) and overall adjusted* operating
profit improved by 14.2% to GBP20.1 million.
In a market where IT spend continues to remain broadly flat,
this performance has been driven by the UK Services business, which
achieved revenue growth of 5.9% during the reporting period. We are
especially pleased with this performance as it has been measured
against a very tough comparator for the first half of 2012, which
benefitted from a substantial volume of Services take-on billing.
The Services revenue growth seen in the first half of 2013 further
builds on a strong growth of 15.3% in 2012 as a whole.
Our ability to deliver long-term value and delight our customers
is undoubtedly enhancing our reputation. Following our number-one
ranking for customer reference-ability and satisfaction in the KMPG
UK Outsourcing Services Provider Performance and Satisfaction
Survey for 2012, our uncompromising approach to customer
satisfaction has again been evidenced by our joint top ranking
within a study, carried out by Whitelane Research, measuring the
performance of 24 outsourcing providers in the UK and 700 UK IT
outsourcing contracts worth GBP15 billion in total.
Our UK business has matured significantly over recent years in
identifying those bids for which it has the requisite expertise and
significant competitive advantage. This has allowed us to target
our sales and technical resource accordingly, resulting in a higher
bid win rate and an ability to deliver increased value for
customers. This approach continues to serve the business well, and
indeed the UK business has, post the period end, reached exclusive
negotiations on a number of new Services contracts which, if
successfully concluded, should assist in maintaining its Services
growth in the medium term. Our focus on delighting our customers
through delivering long-term customer value, enables us to further
cross-sell to them and reduce our cost of sale.
When a leading UK retailer's existing network support provider
went into administration, putting the retailer's business at risk,
Computacenter stepped in to provide support services within just 24
hours. Computacenter has since developed a new network support
framework for that retailer resulting in a two year agreement being
signed between the two organisations.
Our new wins have also included a large insurer, which has
awarded Computacenter a GBP45 million total contract value for
Supplier Rationalisation & Transformation Services and IT
Management Services. Under the terms of the agreement,
Computacenter will manage over 200 software vendors for the
insurance company, in addition to migrating circa 7,000 of their
end user devices to Windows 7. This insurer is also working with
Computacenter to benchmark and procure new workplace hardware,
ensuring they will be able to minimise risk and cost. Computacenter
will be providing the associated configuration and deployment
services for laptops, desktops, monitors and thin client
devices.
As we have previously made clear, we remain extremely aware of
the vital role that our governance processes and procedures have
played in the successful on-boarding of contracts and maintenance
of Services margins. They have continued to ensure the efficient
and effective take-on of new contracts in 2013, and we will
continue to invest in, develop and update these processes in
accordance with what we believe to be our best practice, as they
clearly deliver value for our customers and shareholders alike.
We anticipate that the significant demand for our Professional
Services offerings seen in the first half of the year will
continue, given that the Professional Services forward order book
is at a record level. We further believe that this will be
sustained in the short to medium term, as customers continue to
modernise their end-user workplace environments with Windows 7 and
Microsoft 2010 upgrades. In respect of our longer term Professional
Services outlook, we believe that demand will continue and be based
around Windows Server, mobility, datacenter and networking
infrastructure upgrades.
The demand for Professional Services, and in particular our
Windows 7 transformations, has continued to underpin our Supply
Chain business for which overall revenue growth was very marginally
up against the first half of 2012, at GBP369.1 million. The trend
of customers purchasing a higher volume, but lower margin mix of IT
product, seen throughout the course of 2012, has continued
throughout the first half of this year and we see no sign of this
trend abating in the second half of 2013.
The UK business has seen an underlying increase in SG&A of
approximately 6%. In 2013, this expenditure has been primarily
related to both a number of significant Managed Services win
commission payments and additionally to the recruitment of a number
of employees from 2e2 after it went into administration, which was
carried out in order to increase our Services revenue and
profitability. Despite these investments, SG&A growth is only
1.1%, which is mainly due to certain expenses which have been
reported in cost of sales with effect from the second half of 2012,
following alignment in structure after our ERP implementation.
Germany
With the exception of our three previously announced onerous
contracts in Germany, the underlying performance of our business
has been pleasing. Adjusted* operating profit for the German
segment, which excludes the three onerous contracts, increased by
31.0% to EUR11.4 million (H1 2012: EUR8.7 million). This increase
is encouraging because it has taken place against a backdrop of
significant change within our business, including the
implementation of the Group Operating Model and the restructuring
and realignment of our sales force.
Total revenue fell by 1.3% in constant currency which,
considering the changes in this business, is encouraging. These
changes have been implemented to ensure that future Services growth
is contracted appropriately, well implemented and governed in
accordance with Group procedures. These factors will play a
significant role in ensuring that Services margins acceptable to
the Group, and in accordance with projected bid forecasts, are
consistently delivered. Given that we have prioritised this
implementation over short-term growth of the Services business, we
are pleased that total Services revenue only fell modestly during
the period by 0.4% in constant currency. We believe that there are
significant Service growth opportunities in the German market which
are evidenced by the increased bid pipeline activity.
The recent implementation of Group processes within the German
business has significantly increased our confidence that new
Services wins will be contracted correctly and implemented
successfully, both from a customer services and financial
perspective. Services margins, excluding the three onerous
contracts, have been stable over the reporting period compared to
the first half of 2012. We are also encouraged by the fact that our
new processes appear to be taking effect, with Services margins
starting to improve during the second quarter of 2013. Whilst there
is still significant work to do in order to ensure that our German
business continues to successfully adjust to new bidding,
negotiation and on-boarding processes and changes in personnel, we
believe that the majority of incremental effort required to
implement appropriate procedures has now been made.
We have already seen evidence of the benefits that our new Group
Operating Model will bring to our business. During the first half
of 2013, we have completed one new material transition and
transformation process, under the Group model, completing it on
time, within budget and in accordance with agreed contracted
service levels.
We are now bidding for new Managed Services contracts, which are
being designed and negotiated in accordance with our Group
processes. The prospect pipeline looks strong and we are now
focused on driving Contractual Services growth in 2014.
We have been pleased with the performance of our Supply Chain
business, particularly given the very strong comparator in Q1 2012.
Margins have increased slightly, principally due to margin recovery
in our networking business. Overall, Supply Chain revenue reduced
by 1.8% in constant currency in the period compared to H1 2012,
with gross margin increasing slightly. Supply Chain revenue in Q2
increased by circa 15% compared to Q2 last year. However, it is too
early to assess whether this represents the early signs of an
ongoing IT product spend recovery in Germany, or simply a strong
Supply Chain quarter for our business. Within the reporting period,
we have been awarded a new 5 year contract by a large
telecommunications company to provide the main part of its business
customers' order processing for its data and voice product range.
With this award, Computacenter Germany has become the major
long-term strategic fulfilment partner for this part of the
customer's core business.
Total SG&A is down 3.2% in constant currency compared to H1
2012. This includes the early impact of a significant realignment
of the sales force and other management changes, and due to their
nature the one-off costs of implementing this will be included
within the Group financials as exceptional costs. We expect this
trend to continue as further restructuring will take place in the
second half of 2013, as the business continues to adjust its cost
base.
Turning specifically to the three loss-making contracts,
performance on these has stabilised since the Group's Interim
Management Statement dated 24 April 2013. We have seen service
levels improve on these contracts and expect that this trend will
continue during the second half of the year. As previously outlined
in this statement, we now believe that these three contracts will
be loss-making over the course of their lifetime and, as such, have
made an additional provision of EUR12.5 million (GBP10.7 million)
to reflect our best estimate of the losses expected to be incurred
after 1 July 2013. However, management will continue to be measured
on the absolute performance of these contracts before the
provision. It should be noted that, notwithstanding these losses,
the total business accruing from each of these customers still
makes a significant contribution to the Group's overall
profitability.
France
During the first six months of 2013, total revenue declined by
11.5% in constant currency, to EUR244.1 million. Overall, the
adjusted* operating loss increased from EUR0.9 million for the
first half of 2012 to EUR5.4 million in the first half of 2013.
The majority of the revenue decline was attributable to the
Supply Chain business, with revenues in constant currency declining
by 13.4%. The revenue decline was due to a combination of
challenging market conditions in France, and the fact that our ERP
migration went live on 1 June 2013 resulting in some Supply Chain
business being moved from H1 to H2, as there was insufficient time
to process all the relevant orders before the end of the period. We
anticipate that there will be a catch up in the third quarter of
the year. Whilst Supply Chain revenue was disappointing, it is
important to note that the Supply Chain gross margin percentage has
been maintained.
We are more disappointed by our Services performance where
revenue reduced by 1.6% and gross margin reduced by over 20%
compared to the first half of 2012. The demand for our Professional
Services offerings has declined by 16%, as decisions on significant
projects work were delayed, due to the uncertainty in the French
economy. Our maintenance business has also struggled to maintain
margins, as a significant number of high-margin maintenance
contracts have expired.
Additionally, we have faced some temporary implementation issues
in respect of the migration of our Group ERP system into the French
business, which has been a materially more significant business
change programme than the migration in either Germany or the UK.
Despite the slight disruption it has caused to our business in the
short term, we are pleased that our new Group ERP system is now in
place, and accordingly we will endeavour to begin implementing our
Group operating processes in the French business during the second
half of the year. We are confident that the implementation of the
Group ERP system and the Group Operating Model will go some way to
improving the financial performance of the business in the long
term.
We are encouraged by a significant large Services contract where
we are in the final contract negotiation stage. Given the material
size of this contract, the bid has been made in accordance with
Group governance processes and the contract will be implemented in
line with those procedures, if negotiations are successfully
concluded.
Computacenter has been selected by a leading European
electricity company to manage its office ICT infrastructure,
including its telephony network, under a three-year contract. As
well as providing support and maintenance services, we will assist
with future infrastructure transformation projects. This service
covers up to 40,000 users. Additionally, the regional council of
Midi-Pyrénées has partnered with Computacenter for the provision of
15,000 laptop bundles for high school students across 60 locations.
As a result, students will be supplied with a laptop and cover,
wireless mouse and USB key. The deal includes preparation,
warranty, insurance and user support for one year.
Whilst the underlying trend of SG&A in our French business
was broadly flat compared to the first half of 2012, it is worth
noting that the first half of 2013 included approximately EUR0.5
million of operational cost related to the ERP deployment, mainly
due to extra resource required to manage the additional workload
created by the project.
As mentioned in our Group overview, as a result of the
disappointing financial performance of the French business as a
whole over the first half of the year and our medium term
expectations in France, we have incurred a non-cash impairment in
the French cash-generating unit, relating to goodwill and acquired
intangibles.
Belgium
Total revenue for the reporting period was reduced by 15% to
EUR27.0 million in constant currency. As we indicated would be the
case within our 2012 Annual Report, the very strong rates of growth
seen throughout the course of 2011 and 2012 have not been
sustainable and have provided a very tough comparator against which
the results for the first half of this year have been measured.
Overall adjusted* operating profit reduced by 42.1% to EUR0.7
million in constant currency.
The reduction in revenue was predominantly caused by a drop in
demand for our Supply Chain offerings as a result of a very
significant one-off Supply Chain deal with one customer in the
first half of 2012. As a result, total Supply Chain revenue dropped
by 33% in constant currency. This has additionally been impacted by
the difficult market conditions in Belgium which we anticipate will
continue throughout the second half of the year.
Total Services revenue has grown significantly over the period.
Inclusive of the acquisition of Informatic Services IS in December
2012, the initial contribution from which has been pleasing, our
total Services revenue has increased by approximately 50% in
constant currency. Excluding the impact of the acquisition,
Services revenue grew by 5.3% in constant currency. This has been
aided by our ability to recently extend a number of Managed
Services contracts which were due for renewal. We have additionally
been able to integrate Informatic Services IS in accordance with
our forecast, which included retaining its existing contract base
post-acquisition.
Despite a reduction in total revenue and profitability during
the period, we feel confident of the Belgium businesses' prospects
as we move into the second half. Our infrastructure projects
pipeline is strong, and we have very recently closed a number of
enterprise storage opportunities, including both Veolia and Godiva,
for which implementation will take place during the remainder of
2013. We will continue to align our portfolio with the
Computacenter Group and invest further in sales capacity, local
branding and vendor certifications.
Note: The Group has calculated constant currency comparative
information by re-translating 2012 results into the Group's
functional currency (GBP) at the exchange rates prevailing in the
H1 2013 reporting period.
Risk
The principal risks to our business, and our overall approach to
risk mitigation, remain largely as set out on pages 24 to 25 of our
2012 Report and Accounts.
These were as follows:
Strategic objectives Principal risks
--------------------------- ---------------------------------------------------------------
Accelerating Our offerings may transpire to be uncompetitive within
the growth of the market or an unforeseen or sudden technology shift
our Contractual occurs where the market develops appetite for different
Services business equipment and solutions to those offered. Conversely,
we could be motivated into investing significantly into
an offering which transpires to amount to no more than
hype.
--------------------------- ---------------------------------------------------------------
Our growth aspirations are impacted by the economic
climate and with a certain level of uncertainty about
a full return to economic stability in the short term;
there is the potential for reduced capital expenditure
from customers.
--------------------------- ---------------------------------------------------------------
Reducing cost Failure to utilise established and repeatable processes,
through increased specifically designed for increased efficiency, can
efficiency and result in poor service delivery and threatened reputation.
industrialisation Margin erosion and significant cost increases need to
of our service be incurred to recover stability. The comprehensively
operations reported contract take-on challenges in Germany during
2012 was an unfortunate manifestation of this threat.
--------------------------- ---------------------------------------------------------------
Driving culture change from being a fragmented country
specific focussed organisation to becoming a single
Group, could prove challenging and time consuming to
embed.
--------------------------- ---------------------------------------------------------------
Maximising the Following significant progress over the years in reducing
return on working working capital through the disposal of the distribution
capital and business, as well as other working capital optimisation
freeing working initiatives, a material increase in working capital
capital where demand could harm further progress in this regard.
not optimally
used
--------------------------- ---------------------------------------------------------------
Growing our Resource demands could arise when transitioning multiple
profit margin new service business opportunities at or around the
through increased same time. Conversely, resource surplus could result
services and where a contract reaches end of term and is not renewed.
high-end supply
chain sales
--------------------------- ---------------------------------------------------------------
Our vendor partners compete in the high-end sales environment
and approach our customers directly. A challenged economy
does tend to impact supply chain activity adversely.
--------------------------- ---------------------------------------------------------------
Ensuring the With a project of this scale there is the potential
successful implementation that during early transition operational issues could
of the Group-wide occur which impact on customer service levels and ultimately,
ERP system overall financial performance of the Company.
--------------------------- ---------------------------------------------------------------
The final risk outlined in the table above, concerning the
implementation of our Group wide ERP system is now materially
behind us having gone live in our three main countries.
The Group Risk Committee (GRC) is comprised of senior managers
from across the Group, and is responsible for consolidating,
monitoring and reviewing risk on an ongoing basis.
Following our Group restructuring work, which has been carried
out both prior to and during the period, we have refined our Risk
Management roles, responsibilities and processes accordingly
to:
-- focus the GRC on the principal risks to our business;
-- provide robust and detailed challenge on the mitigations and
safeguards in place for those principal risks; and
-- ensure effective coordination between the top-down, renamed
Group Risk Log (GRL), which is regenerated quarterly, and the
bottom-up Business Risk Assessment (BRA), which is regenerated
annually.
Monitoring of the GRL risks, along with material BRA risks, is
carried out on a quarterly basis within each Group Risk Committee
meeting, and through subsequent discussion at Board meetings, where
there isa rolling review of a number of the GRL risks during each
quarter, in order to ensure that the safeguards and mitigations in
place are sufficient.
In addition to the above, a risk will on occasion be reviewed in
greater depth by the Audit Committee. By way of example, the risk
of Cyber attack/threats was considered by the Audit Committee
during its May meeting, where it received and considered
presentations from our internal and customer facing in-house
security professionals. Whilst our approach to prevention was
demonstrated to be wide-ranging and to-date effective, we recognise
that our rapid response to any breach, should it occur, is also key
given the broadness of the threat landscape and numerous
sources/routes of potential cyber attack.
To some degree owing to the issues we have encountered in our
German business around our three onerous Services contracts, we
have reinforced governance around all new business deals, not only
in Germany, but in all the major countries in which we operate. We
have imposed new compulsory business take-on processes with
operational, legal and commercial sign-offs designed to minimise
the likelihood of undue risk exposure or repeat. As a result of
these new processes, we have been able to charge a recently
on-boarded German customer additional revenues in addition to those
envisaged would be paid under the contract for unexpected incident
volume. Our ability to due this has flowed directly from our newly
imposed governance processes, and means that we can satisfy the
additional, unforeseen demands of our customer, whilst achieving
margins acceptable to the Group pursuant to the contract.
In France, where we have been down-selected for potentially one
of our largest Service Desk contracts the Group will have entered
into, we have engaged our new processes and controls early to
ensure we are able to satisfy the customer's demands and
requirements, whilst additionally avoiding known issues so that we
are able to add the value that they expect from us, and
additionally achieve our financial targets.
One of the current fifteen risks on our GRL concerns prevailing
macro-economic conditions, and the adverse effect that these may
have on our customer IT expenditure, particularly within hardware
or software. Mitigation of this risk is mainly around provision of
IS cost-cutting service options, which prove to be in greater
demand in challenging times. This mitigation is serving us well in
both the UK and Germany, although to a lesser extent in our French
business, within which our service offerings are less developed and
prevalent. As we move to our Group Operating Model in France and
leverage our Group service experience and expertise, we will be
able to reduce the impact of this risk.
Moving forward into the second half of 2013, a significant
benefit of both our new Group-wide ERP system and our Group-wide
Operating model is that managing risk across all of the countries
in which we do business, and achieving similar levels of governance
and diligence becomes easier to effect, oversee and achieve.
Mike Norris
29 August 2013
Responsibility statement
The Directors confirm that to the best of their knowledge:
-- This financial information has been prepared in accordance with IAS 34;
-- This interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year);and
-- This interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein.)
MJ Norris FA Conophy
Chief Executive Finance Director
29 August 2013 29 August 2013
On behalf of the Board
Independent review report to Computacenter plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2013 which comprises of the Consolidated
Income Statement, Consolidated Statement of Comprehensive Income,
Consolidated Balance Sheet, Consolidated Statement of Changes in
Equity, Consolidated Cash Flow Statement and the related
explanatory notes that have been reviewed. We have read the other
information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2013 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
29 August 2013
Consolidated income statement
For the six months ended 30 June
2013
Restated* Restated*
Unaudited unaudited unaudited
H1 2013 H1 2012 Year 2012
Note GBP'000 GBP'000 GBP'000
Revenue 5 1,426,346 1,422,264 2,914,214
Cost of sales (1,241,158) (1,239,953) (2,531,926)
------------ ----------------------- -----------------------
Gross profit 185,188 182,311 382,288
Administrative expenses (159,003) (156,776) (303,172)
Operating profit:
Before amortisation of intangibles
and exceptional items 26,185 25,535 79,116
Amortisation of acquired intangibles (1,296) (1,316) (2,608)
Onerous contracts
- trading losses (5,107) (1,743) (5,921)
- provision for future losses (10,673) - (2,108)
------------ ----------------------- -----------------------
Onerous contracts (15,780) (1,743) (8,029)
Non-cash impairment (12,195) - -
Other exceptional items (1,324) (1,882) (3,874)
------------ ----------------------- -----------------------
Exceptional items 7 (29,299) (3,625) (11,903)
-------------------------------------- ----- ------------ ----------------------- -----------------------
Operating (loss)/profit (4,410) 20,594 64,605
Finance revenue 1,001 1,023 1,971
Finance costs (941) (801) (1,778)
Profit before tax:
Before amortisation of intangibles
and exceptional items 5 26,245 25,757 79,309
Amortisation of acquired intangibles (1,296) (1,316) (2,608)
Onerous contracts
- trading losses (5,107) (1,743) (5,921)
- provision for future losses (10,673) - (2,108)
------------ ----------------------- -----------------------
Onerous contracts (15,780) (1,743) (8,029)
Non-cash impairment (12,195) - -
Other exceptional items (1,324) (1,882) (3,874)
------------ ----------------------- -----------------------
Exceptional items 7 (29,299) (3,625) (11,903)
-------------------------------------- ----- ------------ ----------------------- -----------------------
(Loss)/profit before tax 5 (4,350) 20,816 64,798
Income tax expense:
Before amortisation of intangibles
and exceptional items (7,304) (6,149) (17,461)
Tax on amortisation of intangibles 122 272 538
Tax on onerous contracts
- tax on trading losses 613 191 651
- tax on provision for future
losses 1,281 - 232
------------ ----------------------- -----------------------
Total tax on onerous contracts 1,894 191 883
Tax on non-cash impairment 1,014 - -
Tax on other exceptional items 146 322 362
------------ ----------------------- -----------------------
Total tax on exceptional items 7 3,054 513 1,245
Income tax expense 8 (4,128) (5,364) (15,678)
(Loss)/profit for the period (8,478) 15,452 49,120
============ ======================= =======================
Attributable to:
Equity holders of the parent (8,478) 15,452 49,121
Non-controlling interest - - (1)
(Loss)/profit for the period (8,478) 15,452 49,120
============ ======================= =======================
Earnings per share
- basic for (loss)/profit for the
period 9 (5.7)p 10.3p 32.9p
- diluted for (loss)/profit for the
period 9 (5.7)p 10.0p 32.4p
-------------------------------------- ----- ------------ ------------------- --- -----------------------
*Certain amounts here do not correspond to the interim condensed
consolidated and annual consolidated financial statements as at 30
June 2012 and 31 December 2012 respectively, and reflect
reclassifications which restate prior financial information in
respect of three onerous contracts as detailed further in notes 4
and 7.
Consolidated statement of comprehensive income
For the six months ended 30 June 2013
Unaudited Unaudited Audited
H1 2013 H1 2012 Year 2012
GBP'000 GBP'000 GBP'000
(Loss)/profit for the period (8,478) 15,452 49,120
Items that may be reclassified to profit
or loss:
(Loss)/gain arising on cash flow hedge (639) 233 494
Income tax effect 149 (58) (120)
---------- ---------------- ----------
(490) 175 374
Exchange differences on translation of
foreign operations 10,308 (5,542) (5,311)
---------- ---------------- ----------
9,818 (5,367) (4,937)
---------- ---------------- ----------
Total comprehensive income for the period 1,340 10,085 44,183
========== ================ ==========
Attributable to:
Equity holders of the parent 1,341 10,085 44,182
Non-controlling interest (1) - 1
1,340 10,085 44,183
========== ================ ==========
Consolidated balance sheet
As at 30 June 2013
Unaudited Unaudited Audited
H1 2013 H1 2012 Year 2012
Note GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 95,344 101,365 100,696
Intangible assets 12 94,393 101,758 104,612
Investment in associates 620 495 575
Deferred income tax asset 17,139 17,040 14,385
207,496 220,658 220,268
---------- ---------- ----------
Current assets
Inventories 69,549 87,992 67,782
Trade and other receivables 521,307 496,852 573,661
Prepayments 54,892 49,602 46,250
Accrued income 68,161 80,740 58,029
Forward currency contracts 83 - 30
Financial asset 11 31,412 - -
Current asset investment 16 10,000 10,000 10,000
Cash and short-term deposits 76,336 91,747 138,149
---------- ----------
831,740 816,933 893,901
---------- ---------- ----------
Total assets 1,039,236 1,037,591 1,114,169
========== ========== ==========
Current liabilities
Trade and other payables 476,412 507,204 527,539
Deferred income 107,860 99,481 128,540
Return of Value 11 74,965 - -
Financial liabilities 11,650 7,356 9,117
Forward currency contracts 548 226 584
Income tax payable 4,144 6,097 3,778
Provisions 13 8,203 2,551 4,373
683,782 622,915 673,931
---------- ---------- ----------
Non-current liabilities
Financial liabilities 8,974 10,631 10,406
Provisions 13 12,384 7,404 6,455
Other non-current liabilities - 31 -
Deferred income tax liabilities 1,012 684 1,034
22,370 18,750 17,895
---------- ---------- ----------
Total liabilities 706,152 641,665 691,826
Net assets 333,084 395,926 422,343
========== ========== ==========
Capital and reserves
Issued capital 9,250 9,233 9,234
Share premium 3,654 3,717 3,769
Capital redemption reserve 74,957 74,957 74,957
Own shares held (12,942) (12,211) (13,848)
Foreign currency translation
reserve 12,633 2,096 2,325
Retained earnings 245,520 318,122 345,893
---------- ---------- ----------
Shareholders' equity 333,072 395,914 422,330
Non-controlling interest 12 12 13
Total equity 333,084 395,926 422,343
========== ========== ==========
Approved by the Board on 29 August 2013
MJ Norris, Chief Executive FA Conophy, Finance Director
Consolidated statement of changes in equity
Attributable to equity holders of the parent
----------------------------------------------------------------------------------------------------------
Foreign
Capital Own currency
Issued Share redemption shares translation Retained Non-controlling Total
capital premium reserve held reserve earnings Total interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2012 9,233 3,717 74,957 (10,962) 7,638 319,152 403,735 12 403,747
Profit for the
period - - - - - 15,452 15,452 - 15,452
Other
comprehensive
income - - - - (5,542) 175 (5,367) - (5,367)
----------- ------------- ------------------ ------------- ---------------- --------- -------------- ---------------- --------------
Total
comprehensive
income - - - - (5,542) 15,627 10,085 - 10,085
Cost of
share-based
payments - - - - - 648 648 - 648
Tax on share-
based
payment
transactions - - - - - 338 338 - 338
Exercise of
options - - - 1,918 - (1,918) - - -
Purchase of
own
shares - - - (3,167) - - (3,167) - (3,167)
Equity
dividends - - - - - (15,725) (15,725) - (15,725)
----------- ------------- ------------------ ------------- ---------------- --------- -------------- ---------------- --------------
At 30 June
2012 9,233 3,717 74,957 (12,211) 2,096 318,122 395,914 12 395,926
Profit for the
period - - - - - 33,669 33,669 (1) 33,668
Other
comprehensive
income - - - - 229 199 428 2 430
----------- ------------- ------------------ ------------- ---------------- --------- -------------- ---------------- --------------
Total
comprehensive
income - - - - 229 33,868 34,097 1 34,098
Cost of
share-based
payments - - - - - 1,528 1,528 - 1,528
Tax on share-
based
payment
transactions - - - - - (122) (122) - (122)
Exercise of
options 1 52 - 15 - (15) 53 - 53
Purchase of
own
shares - - - (1,652) - - (1,652) - (1,652)
Equity
dividends - - - - - (7,488) (7,488) - (7,488)
----------- ------------- ------------------ ------------- ---------------- --------- -------------- ---------------- --------------
At 31 December
2012 9,234 3,769 74,957 (13,848) 2,325 345,893 422,330 13 422,343
Loss for the
period - - - - - (8,478) (8,478) - (8,478)
Other
comprehensive
income - - - - 10,308 (490) 9,818 (1) 9,817
----------- ------------- ------------------ ------------- ---------------- --------- -------------- ---------------- --------------
Total
comprehensive
income - - - - 10,308 (8,968) 1,340 (1) 1,339
Cost of
share-based
payments - - - - - 527 527 - 527
Tax on share-
based
payment
transactions - - - - - (268) (268) - (268)
Exercise of
options 1 57 - 906 - (906) 58 - 58
Bonus issue 15 (15) - - - - - - -
Expenses on
bonus
issue - (157) - - - - (157) - (157)
Return of
value - - - - - (74,965) (74,965) - (74,965)
Expenses on
share
redemption - - - - - (34) (34) - (34)
Equity
dividends - - - - - (15,759) (15,759) - (15,759)
----------- ------------- ------------------ ------------- ---------------- --------- ---------------- --------------
At 30 June
2013 9,250 3,654 74,957 (12,942) 12,633 245,520 333,072 12 333,084
=========== ============= ================== ============= ================ ========= ============== ================ ==============
Consolidated cash flow statement
For the six months ended 30 June 2013
Unaudited Unaudited Audited
H1 2013 H1 2012 Year 2012
Note GBP'000 GBP'000 GBP'000
Operating activities
(Loss)/profit before tax (4,350) 20,816 64,798
Net finance income (60) (223) (193)
Depreciation 11,705 11,620 24,337
Amortisation 12 4,269 3,971 9,573
Impairment of intangible assets 12,195 - -
Share-based payments 527 648 2,176
(Profit)/loss on disposal of property,
plant and equipment (442) (266) 363
Loss on disposal of intangibles 103 - 184
Decrease in inventories 1,047 7,510 27,477
Decrease/(increase) in trade and other
receivables 59,274 (1,509) (49,061)
(Decrease)/increase in trade and other
payables (74,992) (29,523) 18,863
Increase in provisions (10,745) - (2,108)
Other adjustments 267 4 74
---------- ---------- ----------
Cash (used in)/generated from operations (1,202) 13,048 96,483
Income taxes paid (8,582) (4,126) (13,111)
Net cash flow from operating activities (9,784) 8,922 83,372
---------- ---------- ----------
Investing activities
Interest received 956 755 1,926
Acquisition of subsidiaries, net of
cash acquired - - (1,754)
Acquisition of associate - - (100)
Sale of property, plant and equipment 51 291 1,074
Purchases of property, plant and equipment (4,245) (15,561) (22,906)
Purchases of intangible assets (3,095) (3,576) (8,981)
Net cash flow from investing activities (6,333) (18,091) (30,741)
---------- ---------- ----------
Financing activities
Interest paid (830) (1,039) (1,929)
Dividends paid to equity shareholders
of the parent (15,759) (15,725) (23,213)
Proceeds from issue of shares 58 - 53
Purchase of own shares - (3,167) (4,819)
Increase in other financial assets 11 (31,412) - -
Repayment of capital element of finance
leases (4,090) (5,534) (9,201)
Repayment of loans (651) (1,750) (2,353)
New borrowings - 726 1,577
Net cash flow from financing activities (52,684) (26,489) (39,885)
---------- ---------- ----------
(Decrease)/increase in cash and cash
equivalents (68,801) (35,658) 12,746
Effect of exchange rates on cash and
cash equivalents 3,579 484 (2,059)
Cash and cash equivalents at the beginning
of the period 137,471 126,784 126,784
Cash and cash equivalents at the end
of the period 72,249 91,610 137,471
========== ========== ==========
Notes to the accounts
1 Corporate information
The interim condensed consolidated financial statements of the
Group for the six months ended 30 June 2013 were authorised for
issue in accordance with a resolution of the Directors on 29 August
2013.
Computacenter plc is a limited company incorporated and
domiciled in England whose shares are publicly traded.
2 Basis of preparation
The interim condensed consolidated financial statements for the
six months ended 30 June 2013 have been preparedin accordance with
International Accounting Standard 34 'Interim Financial Reporting',
as adopted by the European Union. They do not include all of the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group's
annual financial statements as at 31 December 2012 which have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union.
The Group has maintained its positive cash position despite an
operating cash outflow in the period and, after committing to a
GBP75million return of value. In order to ensure that the Group can
maintain its strong liquidity position it has entered into a
GBP40million committed facility during the period, which was
unutilised at the reporting date. The Group's forecast and
projections, which allow for reasonably possible variations, show
that the Group will continue to maintain its strong liquidity
position, and therefore supports the Directors' view that the Group
has sufficient funds available to meet its foreseeable
requirements. The Directors have concluded therefore that the going
concern basis remains appropriate.
3 Significant accounting policies
The accounting policies applied by the Group in these condensed
consolidated interim financial statements are the same as those
applied by the Group in its consolidated financial statements for
the year ended 31 December 2012, except for the adoption of new
standards and interpretations as of 1 January 2013, which did not
have any impact on the accounting policies, financial position or
performance of the Group, as noted below:
-- IAS1 - Presentation of Items of Other Comprehensive Income - Amendments to IAS 1
-- IAS1 - Clarification of the requirement for comparative information (Amendment)
-- IAS 34 - Interim financial reporting and segment reporting
for total assets and liabilities (Amendment)
-- IFRS 13 - Fair Value Measurement
-- IFRS 7 - Financial instruments: Disclosures - Offsetting
financial assets and financial liabilities
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
4 Restatement of 2012 results
The rapid growth of our Services business in Germany during the
fourth quarter of 2011, coupled with insufficient contractual
governance procedures in place within our German business at that
time has resulted in a number of Managed Services contracts failing
to achieve the margins anticipated at the time they were
agreed.
Actions taken in response to these issues, including a full
review of our governance procedures, have had a positive effect,
helping to stabilise the business and turnaround a number of
operational issues. However the Group has determined that three of
these contracts, following further customer negotiation and
extensive financial analysis, will be loss-making over the course
of their remaining life.
The Group is therefore required to make an exceptional one-off
provision of GBP10.7 million representing our best estimate of the
losses expected to be incurred between 1 July 2013 and the end of
the three contracts.
In order to give investors a clearer picture of the past
performance of the business, the Group has reclassified trading
losses and provisions previously incurred on these three onerous
contracts in 2012 as exceptional items, and has accordingly
restated its 2012 results for the German segment and the Group as a
whole results, as follows :
H1 2012
Restated in
As reported in 2012 2013
------------------------------------------------------------ --------------------------------
Onerous German Contracts
--------------------------------
Provision
Total Group in Trading for future Rest of
GBP'000 losses losses Total Group Group Reclass-ification Group
---------------------- -------- ------------ -------- ------------ ------------ ------------------ ------------
Turnover 4,831 - 4,831 1,417,433 1,422,264 - 1,422,264
Cost of Sales (6,574) - (6,574) (1,235,674) (1,242,248) 1,743 (1,240,505)
-------- ------------ -------- ------------ ------------ ------------------ ------------
Adjusted Gross Profit (1,743) - (1,743) 181,759 180,016 1,743 181,759
Administrative
expenses - - - (156,776) (156,776) - (156,776)
Adjusted Operating
Profit (1,743) - (1,743) 24,983 23,240 1,743 24,983
Adjusted net interest - - - 774 774 - 774
Adjusted Profit
before tax (1,743) - (1,743) 25,757 24,014 1,743 25,757
Exceptional Items - - - (1,882) (1,882) (1,743) (3,625)
Intangibles
amortisation - - - (1,316) (1,316) - (1,316)
Statutory Profit
before tax (1,743) - (1,743) 22,559 20,816 - 20,816
-------- ------------ -------- ------------ ------------ ------------------ ------------
Adjusted gross profit and adjusted operating profit for the
group that is shown in the segment information note, includes
interest on CSF of GBP552,000 that is reported in finance costs on
the consolidated income statement.
Restated in
As reported in 2012 2013
--------------------------------------------------------------- ------------------------------
Onerous German Contracts
-------------------------------------
Provision
for Rest
Germany segment Trading future of Germany Germany Germany
in GBP'000 losses losses Total Segment Segment Reclass-ification Segment
--------------------- -------- ----------------- -------- ------------ ---------- ------------------ ----------
Turnover 4,831 - 4,831 586,201 591,032 - 591,032
Cost of Sales (6,574) - (6,574) (515,529) (522,103) 1,743 (520,360)
-------- ----------------- -------- ------------ ---------- ------------------ ----------
Adjusted Gross
Profit (1,743) - (1,743) 70,672 68,929 1,743 70,672
Administrative
expenses - - - (63,516) (63,516) - (63,516)
Adjusted Operating
Profit (1,743) - (1,743) 7,156 5,413 1,743 7,156
Adjusted net
interest - - - 220 220 - 220
Adjusted Profit
before tax (1,743) - (1,743) 7,376 5,633 1,743 7,376
Exceptional Items - - - - - (1,743) (1,743)
Intangibles
amortisation - - - (604) (604) - (604)
Statutory Profit
before tax (1,743) - (1,743) 6,772 5,029 - 5,029
-------- ----------------- -------- ------------ ---------- ------------------ ----------
Full year 2012
Restated in
As reported in 2012 2013
------------------------------------------------------------ --------------------------------
Onerous German Contracts
--------------------------------
Provision
for
Total Group in Trading future Rest of
GBP'000 losses losses Total Group Group Reclass-ification Group
----------------- --------- ---------- --------- ------------ ------------ ------------------ ------------
Turnover 15,427 - 15,427 2,898,787 2,914,214 - 2,914,214
Cost of Sales (21,348) (2,108) (23,456) (2,517,571) (2,541,027) 8,029 (2,532,998)
--------- ---------- --------- ------------ ------------ ------------------ ------------
Adjusted Gross
Profit (5,921) (2,108) (8,029) 381,216 373,187 8,029 381,216
Administrative
expenses - - - (303,172) (303,172) - (303,172)
Adjusted
Operating
Profit (5,921) (2,108) (8,029) 78,044 70,015 8,029 78,044
Adjusted net
interest - - - 1,265 1,265 - 1,265
Adjusted Profit
before tax (5,921) (2,108) (8,029) 79,309 71,280 8,029 79,309
Exceptional
Items - - - (3,874) (3,874) (8,029) (11,903)
Intangibles
amortisation - - - (2,608) (2,608) - (2,608)
Statutory Profit
before tax (5,921) (2,108) (8,029) 72,827 64,798 - 64,798
--------- ---------- --------- ------------ ------------ ------------------ ------------
Adjusted gross profit and adjusted operating profit for the group that
is shown in the segment information note includes interest on CSF of
GBP1,072,000 that is reported in finance costs on the consolidated income
statement.
Restated in
As reported in 2012 2013
------------------------------------------------------------ --------------------------------
Onerous German Contracts
--------------------------------
Provision
for Rest of
Germany segment Trading future Germany Germany Germany
in GBP'000 losses losses Total Segment Segment Reclass-ification Segment
----------------- --------- ---------- --------- ------------ ------------ ------------------ ------------
Turnover 15,427 - 15,427 1,178,369 1,193,796 - 1,193,796
Cost of Sales (21,348) (2,108) (23,456) (1,033,348) (1,056,804) 8,029 (1,048,775)
--------- ---------- --------- ------------ ------------ ------------------ ------------
Adjusted Gross
Profit (5,921) (2,108) (8,029) 145,021 136,992 8,029 145,021
Administrative
expenses - - - (125,356) (125,356) - (125,356)
Adjusted
Operating
Profit (5,921) (2,108) (8,029) 19,665 11,636 8,029 19,665
Adjusted net
interest - - - 228 228 - 228
Adjusted Profit
before tax (5,921) (2,108) (8,029) 19,893 11,863 8,029 19,893
Exceptional
Items - - - (1,484) (1,484) (8,029) (9,513)
Intangibles
amortisation - - - (1,194) (1,194) - (1,194)
Statutory Profit
before tax (5,921) (2,108) (8,029) 17,215 9,186 - 9,186
--------- ---------- --------- ------------ ------------ ------------------ ------------
5 Segment information
For management purposes, the Group is organised into
geographical segments, with each segment 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.
No operating segments have been aggregated to form the below
reportable operating segments.
Management monitors the operating results of its geographical
segments separately for the purposes of making decisions about
resource allocation and performance assessment. Segment performance
is evaluated based on adjusted operating profit or loss which is
measured differently from operating profit or loss in the
consolidated financial statements. Adjusted operating profit or
loss takes account of the interest paid on customer-specific
financing ('CSF') which management consider to be a cost of sale.
Excluded from adjusted operating profit is the amortisation of
acquired intangibles and exceptional items as management do not
consider these items when reviewing the underlying performance of a
segment.
Restatement of prior year comparative information
Included within exceptional items in the German segment results
in 2012 are losses and provisions incurred in relation to three
onerous contracts that were previously classified within operating
profit. Further details of the restatement have been provided
within note 4.
Segmental performance for the periods to H1 2013, H1 2012 and
Full Year 2012 were as follows:
Six months ended 30 June 2013 (unaudited)
UK Germany France Belgium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Supply Chain revenue 369,054 400,016 170,356 14,227 953,653
------------------------ ----------------------- --------------------- ------------------- ----------
Services revenue
Professional Services 52,798 47,736 10,690 1,230 112,454
Contractual Services 170,297 155,676 26,711 7,555 360,239
------------------------ ----------------------- --------------------- ------------------- ----------
Total Services revenue 223,095 203,412 37,401 8,785 472,693
------------------------ ----------------------- --------------------- ------------------- ----------
Total revenue 592,149 603,428 207,757 23,012 1,426,346
------------------------ ----------------------- --------------------- ------------------- ----------
Results
Adjusted gross profit 90,528 73,308 18,198 2,714 184,748
Administrative expenses (70,475) (63,605) (22,832) (2,091) (159,003)
------------------------ ----------------------- --------------------- ------------------- ----------
Adjusted operating profit/(loss) 20,053 9,703 (4,634) 623 25,745
Adjusted net interest 625 144 (207) (62) 500
------------------------ ----------------------- --------------------- ------------------- ----------
Adjusted profit/(loss) before
tax 20,678 9,847 (4,841) 561 26,245
Exceptional items:
- onerous contracts trading
losses - (5,107) - - (5,107)
- onerous contracts provision
for future losses - (10,673) - - (10,673)
* impairment of intangibles - - (12,195) - (12,195)
- exceptional costs - (1,324) - - (1,324)
------------------------ ----------------------- --------------------- ------------------- ----------
(17,104 (29,299
- ) (12,195) - )
Amortisation of acquired
intangibles (396) (613) (242) (45) (1,296)
------------------------ ----------------------- --------------------- ------------------- ----------
Statutory profit/(loss) before
tax 20,282 (7,870) (17,278) 516 (4,350)
------------------------ ----------------------- --------------------- ------------------- ----------
Other segment information
Share-based payments 378 64 85 - 527
------------------------ ----------------------- --------------------- ------------------- ----------
Six months ended 30 June 2012 (unaudited and restated)
UK Germany France Belgium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Supply Chain revenue 367,638 393,622 190,091 20,568 971,919
--------- --------- --------- ----------- ----------
Services revenue
Professional Services 47,501 46,327 12,299 1,401 107,528
Contractual Services 163,103 151,083 24,425 4,206 342,817
--------- --------- --------- ----------- ----------
Total Services revenue 210,604 197,410 36,724 5,607 450,345
--------- --------- --------- ----------- ----------
Total revenue 578,242 591,032 226,815 26,175 1,422,264
--------- --------- --------- ----------- ----------
Results
Adjusted gross profit 87,264 70,672 20,918 2,905 181,759
Administrative expenses (69,698) (63,516) (21,697) (1,865) (156,776)
--------- --------- --------- ----------- ----------
Adjusted operating profit/(loss) 17,566 7,156 (779) 1,040 24,983
Adjusted net interest 702 220 (103) (45) 774
--------- --------- --------- ----------- ----------
Adjusted profit/(loss) before
tax 18,268 7,376 (882) 995 25,757
Exceptional items:
- onerous contracts trading
losses - (1,743) - - (1,743)
- exceptional costs (364) - (1,518) - (1,882)
--------- --------- --------- ----------- ----------
(364) (1,743) (1,518) - (3,625)
Amortisation of acquired intangibles (240) (604) (472) - (1,316)
--------- --------- --------- ----------- ----------
Statutory profit/(loss) before
tax 17,664 5,029 (2,872) 995 20,816
--------- --------- --------- ----------- ----------
Other segment information
Share-based payments 551 70 27 - 648
--------- --------- --------- ----------- ----------
Year ended 31 December 2012 (unaudited
and restated)
UK Germany France Belgium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Supply Chain revenue 764,215 801,447 405,432 34,490 2,005,584
---------- ---------- --------- -------- ----------
Services revenue
Professional Services 104,308 89,602 23,897 2,447 220,254
Contractual Services 327,124 302,747 49,977 8,528 688,376
---------- ---------- --------- -------- ----------
Total Services revenue 431,432 392,349 73,874 10,975 908,630
---------- ---------- --------- -------- ----------
Total revenue 1,195,647 1,193,796 479,306 45,465 2,914,214
---------- ---------- --------- -------- ----------
Results
Adjusted gross profit 183,915 145,020 47,297 4,984 381,216
Administrative expenses (131,686) (125,356) (43,033) (3,097) (303,172)
---------- ---------- --------- -------- ----------
Adjusted operating profit 52,229 19,664 4,264 1,887 78,044
Adjusted net interest 1,439 228 (327) (75) 1,265
---------- ---------- --------- -------- ----------
Adjusted profit before tax 53,668 19,892 3,937 1,812 79,309
Exceptional items:
- onerous contracts trading
losses - (5,921) - - (5,921)
- onerous contracts provision
for future losses - (2,108) - - (2,108)
- exceptional costs (364) (1,484) (2,026) - (3,874)
---------- ---------- --------- -------- ----------
(364) (9,513) (2,026) - (11,903)
Amortisation of acquired intangibles (481) (1,194) (933) - (2,608)
---------- ---------- --------- -------- ----------
Statutory profit before tax 52,823 9,185 978 1,812 64,798
---------- ---------- --------- -------- ----------
Other segment information
Share-based payments 1,613 522 41 - 2,176
---------- ---------- --------- -------- ----------
6 Seasonality of operations
Historically revenues have been higher in the second half of the
year than in the first six months. This is principally driven by
customer buying behaviour in the markets in which we operate.
Typically this leads to a more pronounced effect on operating
profit. In addition the effect is compounded further by the
tendency for the holiday entitlements of our employees to accrue
during the first half of the year and to be utilised in the second
half.
7 Exceptional items
Restated Restated
Unaudited Unaudited Unaudited
H1 2013 H1 2012 Year 2012
GBP'000 GBP'000 GBP'000
Operating profit
Onerous contracts -trading losses (5,107) (1,743) (5,921)
Onerous contracts - provision for future
losses (10,673) - (2,108)
Impairment of acquired intangible assets (12,195) - -
Redundancy costs (1,324) - (1,484)
Costs in relation to relocation of premises - (1,882) (2,390)
(29,299) (3,625) (11,903)
Income tax
Tax on onerous contracts included in operating
profit 1,894 191 883
Tax on impairment of acquired intangible
assets 1,014 - -
Tax on exceptional items included in operating
profit 146 322 362
3,054 513 1,245
Exceptional items after taxation (26,245) (3,112) (10,658)
======================= ========== ==========
2013
In Germany three managed service contracts have been identified
as onerous. A GBP2.1 million provision was made in December 2012
for these contracts. A further provision for estimated future
losses of GBP10.7 million has been made at June 2013. This further
provision has been classified as an exceptional item due to its
size and nature and the 2012 result has been restated to be
consistent.
Included within the German segment results in 2012 and H1 2013
are losses incurred in relation to these onerous contracts. In
order to provide a clearer understanding of the performance of the
remainder of the business, losses previously recognised within the
German operating result for these contracts have now been
reclassified within exceptional items. In H1 2012 trading losses of
GBP1.7 million were incurred on revenue of GBP4.8 million and for
2012 as whole trading losses of GBP5.9 million were incurred on
revenues of GBP15.4 million. In H1 2013 trading losses of GBP5.1
million have been incurred on turnover of GBP11.1 million.
The deterioration in the performance of Computacenter France has
led to an assessment of their non-current assets. It has been
concluded that the forecasted cash flows for the French cash
generating unit do not fully support the value of non-current
assets in the business. This has resulted in an impairment of
GBP12.2 million of intangible assets in the French cash generating
unit.
In the first half of 2013 Computacenter Germany continued its
programme, from late 2012, to reduce its net operating expenses. As
a result, redundancy costs of GBP1.3 million were incurred during
the half, which due to their size and nature have been included
within exceptional items.
2012
Included within H1 2012 and the year ended 31 December 2012 are
the following items:
During the year, Computacenter France consolidated its
operations in a new Office and began the move to a new Warehouse.
In January 2012, RDC located to new premises in Braintree. The
one-off costs in relation to the relocation of these premises of
GBP2.4 million that have been disclosed as an exceptional item
relate principally to:
-- operating lease rental expense charged on new properties
during the fit out period and prior to occupation,
-- redundancy expenses paid as a result of the relocation, and
-- rental expense related to legacy properties once they had been vacated.
In the second half of 2012, Computacenter Germany undertook a
programme to reduce its net operating expenses by approximately
GBP1.2 million annually. The related redundancy expenses of GBP1.5
million, due to their size and nature, have been included within
exceptional items.
The income statement tax impact of the above items have been
shown as exceptional tax items.
8 Income tax
The Group calculates the period income tax expense using the tax
rate that would be applicable to the total expected total annual
earnings.
The charge based on the (loss)/profit for
the period comprises:
Restated Restated
Unaudited Unaudited Unaudited
H1 2013 H1 2012 Year 2012
GBP'000 GBP'000 GBP'000
UK corporation tax
* operating result 5,329 4,945 14,914
* exceptional items - (94) (94)
---------- ---------- ----------
Total UK corporation tax 5,329 4,851 14,820
Foreign tax
* operating result 2,196 1,726 3,988
* exceptional items (613) (191) (651)
---------- ---------- ----------
Total foreign tax 1,583 1,535 3,337
Adjustments in respect of prior periods - (124) (2,952)
Deferred tax
* operating result (489) (898) 705
* exceptional items (2,295) - (232)
---------- ---------- ----------
Total deferred tax (2,784) (898) 473
4,128 5,364 15,678
========== ========== ==========
The main rate of corporation tax will be reduced to 21% from 1
April 2014 and to 20% from 1 April 2015, as enacted in the July
2013 Finance Act. The new rates will be applied, as appropriate, in
the year-end accounts.
9 Earnings per ordinary share
Earnings per share (EPS) amounts are calculated by dividing
profit attributable to ordinary equity holders by the weighted
average number of ordinary shares outstanding during the year
(excluding own shares held).
Diluted earnings per share amounts are calculated by dividing
profit attributable to ordinary equity holders by the weighted
average number of ordinary shares outstanding during the year
(excluding own shares held) adjusted for the effect of dilutive
options.
Adjusted basic and adjusted diluted EPS are presented to provide
more comparable and representative information. Accordingly the
adjusted basic and adjusted diluted EPS figures exclude the
amortisation of acquired intangibles and exceptional items.
Restated Restated
Unaudited Unaudited Unaudited
H1 2013 H1 2012 Year 2012
GBP'000 GBP'000 GBP'000
(Loss)/profit attributable to equity holders
of the parent (8,478) 15,452 49,121
Amortisation of acquired intangibles attributable
to equity holders of the parent 1,296 1,316 2,608
Tax on amortisation of acquired intangibles (122) (272) (538)
Exceptional items within operating profit 29,299 3,625 11,903
Tax on exceptional items included in operating
profit (3,054) (513) (1,245)
Adjusted profit after tax 18,941 19,608 61,849
---------- ---------- ----------
No '000 No '000 No '000
Basic weighted average number of shares (excluding
own shares held) 149,512 149,415 149,387
Effect of dilution:
Share options 1,416 4,702 2,179
Diluted weighted average number of shares 150,928 154,117 151,566
========== ========== ==========
H1 2013 H1 2012 Year 2012
pence pence pence
Basic earnings per share (5.7) 10.3 32.9
Diluted earnings per share (5.7) 10.0 32.4
Adjusted basic earnings per share 12.7 13.1 41.4
Adjusted diluted earnings per share 12.5 12.7 40.8
-------- -------- ----------
10 Dividends paid and proposed
A final dividend for 2012 of 10.5p per ordinary share was paid
on 14 June 2013. An interim dividend in respect of 2013 of 5.2p per
ordinary share, amounting to a total dividend of GBP7,026,000, was
declared by the Directors at their meeting on 29 August 2013. This
interim report does not reflect this dividend payable.
11 Return of Value and Post Balance Sheet Event
Return of Value
On 12 June 2013 the Company effected a capital reorganisation
under which each ordinary share of 6p was divided into one ordinary
of 6 2/3 p and one B share of 0.01p (with the B shares to be
redeemed and cancelled at a future date). Following this
sub-division every 10 ordinary shares of 6p were consolidated into
9 ordinary shares of 6 2/3p. As a result of the 9 for 10
consolidation, 153,931,830 ordinary shares of 6p became 138,538,647
ordinary shares of 6 2/3p.
The holders of the B shares could elect to either sell the
shares or receive a one-off dividend income. Both options to be
remitted to shareholders on 5(th) July. For those who elected to
sell the shares, the Company was required to pay an amount of
GBP31.4 million into an escrow account on 20 June 2013 in order to
satisfy the purchase. The funds for the remaining return of value
of GBP43.6 million, were remitted to the share registrars on 2(nd)
July for settlement with shareholders on 5(th) July. The holders of
B shares are then not entitled to any further profits of the
Company.
Other Financial Asset
As a result of the above the Company had GBP31.4 million
included within financial assets at 30 June, which represents the
amount held in escrow. As this amount was no longer available to
the Company to finance its day-to-day operations it was not
appropriate to include this within cash and cash equivalents at the
reporting date.
Return of Value Payable
As the Return of Value was declared and authorised as at the
balance sheet date, the payment to shareholders in early July has
been accrued as at 30 June 2013.
Liquidity
In the period the Company has entered into a new GBP40 million
committed facility which was not utilised at the balance sheet
date. This is a three year facility which expires in May 2016.
12 Intangible assets
Acquired
intangible
Goodwill Software assets Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2012 56,227 64,218 18,253 138,698
Additions - 3,576 - 3,576
Foreign currency adjustment (857) (621) (150) (1,628)
----------------- ----------------- ---------------- --------
At 30 June 2012 55,370 67,173 18,103 140,646
Additions 1,080 5,405 850 7,335
Acquired via subsidiary - 3 - 3
Disposals - (364) (333) (697)
Foreign currency adjustment 325 287 (176) 436
----------------- ----------------- ---------------- --------
At 31 December 2012 56,775 72,504 18,444 147,723
Additions - 4,406 - 4,406
Disposals - (3,499) - (3,499)
Foreign currency adjustment 1,399 424 201 2,024
----------------- --------
At 30 June 2013 58,174 73,835 18,645 150,654
================= ================= ================ ========
Amortisation and impairment
At 1 January 2012 - 28,124 6,332 34,456
Charged during the year - 2,655 1,316 3,971
Foreign currency adjustment - 337 124 461
----------------- ----------------- ---------------- --------
At 30 June 2012 - 31,116 7,772 38,888
Charged during the year - 4,310 1,292 5,602
Disposals - (180) (333) (513)
Foreign currency adjustment - (663) (203) (866)
----------------- ----------------- ---------------- --------
At 31 December 2012 - 34,583 8,528 43,111
Charged during the year - 2,973 1,296 4,269
Impairment 9,271 - 2,924 12,195
Disposals - (3,396) - (3,396)
Foreign currency adjustment 59 681 (658) 82
At 30 June 2013 9,330 34,841 12,090 56,261
================= ================= ================ ========
Net book value
At 30 June 2013 48,844 38,994 6,555 94,393
----------------- ----------------- ---------------- --------
At 30 June 2012 55,370 36,057 10,331 101,758
----------------- ----------------- ---------------- --------
At 31 December 2012 56,775 37,921 9,916 104,612
----------------- ----------------- ---------------- --------
Management have considered that the deterioration in the
performance of Computacenter France in the first half of 2013
provides sufficient evidence to test the non-financial assets in
the business for impairment as at 30 June 2013. Computacenter
France, which is equivalent to the France segment, is the
cash-generating unit ("CGU") at which impairment is assessed. The
recoverable amount of the Computacenter France CGU has been
determined based on a value-in-use calculation. The discount rate
used is 12% (2012: 12%). As a result of the deterioration in
performance, an impairment of GBP12.2 million has been recognised
in this CGU, which has resulted in an impairment to goodwill and
acquired customer relationships. In France, adverse changes to the
assumptions, such as a 0.5% increase in the discount rate, a 0.5%
reduction in the market growth rate or a 5% fall in long-term
operating profit, would cause the carrying value of the remaining
non-current assets in the French cash-generating unit to exceed the
carrying amount.
13 Provisions
Customer
contract Property Total
provisions provisions provisions
Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000
At 1 January 2012 - 11,748 11,748
Arising during the period - 413 413
Utilised - (1,032) (1,032)
Amounts unused reversed - (1,021) (1,021)
Exchange adjustment - (153) (153)
------------ ----------------- ------------
At 30 June 2012 - 9,955 9,955
Arising during the period 2,108 (240) 1,868
Utilised - (682) (682)
Amounts unused reversed - (342) (342)
Exchange adjustment - 29 29
------------ ----------------- ------------
At 31 December 2012 2,108 8,720 10,828
Arising during the period 10,672 - 10,672
Utilised - (1,015) (1,015)
Amounts unused reversed - (281) (281)
Exchange adjustment 193 190 383
------------ -----------------
At 30 June 2013 12,973 7,614 20,587
------------ ----------------- ------------
Current June 2013 6,282 1,921 8,203
Non-current June 2013 6,691 5,693 12,384
------ ------ -------
Current June 2012 - 2,551 2,551
Non-current June 2012 - 7,404 7,404
------ ------ -------
Current December 2012 2,108 2,265 4,373
Non-current December 2012 - 6,455 6,455
------ ------ -------
Customer contract provisions are based on the Directors' best
estimate of the amount of future losses to completion on certain
contractual services contracts in Germany.
Assumptions used to calculate the property provisions are based
on the market value of the rental charges plus any contractual
dilapidation expenses on empty properties and the Directors' best
estimates of the likely time before the relevant leases can be
reassigned or sublet, which ranges between one and six years. The
provision in relation to the UK properties are discounted at a rate
based upon the Bank of England base rate. Those in respect of the
European operations are discounted at a rate based on Euribor.
14 Fair value measurements recognised in the consolidated
balance sheet
Financial instruments which are recognised at fair value
subsequent to initial recognition are grouped into Levels 1 to 3
based on the degree to which the fair value is observable. The
three levels are defined as follows:
1. Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
2. Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
3. Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
At 30 June 2013 the Group had a current asset investment, which
was measured at Level 2 fair value subsequent to initial
recognition, to the value of GBP10.0 million (30 June 2012 and 31
December 2012: GBP10.0 million).
At 30 June 2013 the Group had forward currency contracts, which
were measured at Level 2 fair value subsequent to initial
recognition, to the value of a net liability of GBP465,000 (30 June
2012: GBP226,000, 31 December 2012: GBP554,000).
The realised gains from forward currency contracts in the period
to 30 June 2013 of GBP89,000 (30 June 2012: GBP58,000 loss, 31
December 2012: GBP386,000 loss), are offset by broadly equivalent
realised losses/gains on the related underlying transactions.
15 Adjusted management cash flow statement
The adjusted management cash flow has been provided to explain
how management view the cash performance of the business. There are
two primary differences to this presentation compared to the
statutory cash flow statement, as follows:
1) Factor financing and current asset investment, where cash is
placed on deposit but is not available on demand, is not included
within the statutory definition of cash and cash equivalents, but
operationally is managed within the total net funds/borrowings of
the businesses; and
2) Items relating to customer-specific financing ("CSF") are adjusted for as follows:
a. Interest paid on CSF is reclassified from interest paid to adjusted operating profit; and
b. Where customer-specific assets are financed by finance leases
and the liabilities are matched by future amounts receivable under
customer operating lease rentals, the depreciation of leased assets
and the repayment of the capital element of finance leases are
offset within net working capital; and
c. Where assets are financed by loans and the liabilities are
matched by amounts receivable under customer operating lease
rentals, the movement on loans within financing activities is also
offset within working capital.
3) Net funds excluding CSF is stated inclusive of current asset
investments. Current asset investments consists of a deposit held
for a term of greater than 3 months from the date of deposit which
is available to the Group with 30 days notice. The fair value of
the current asset investment as at 30 June 2013 is not materially
different to the carrying value.
Adjusted management cash flow statement
For the six months ended 30 June 2013
Restated Restated
Unaudited unaudited unaudited
H1 2013 H1 2012 Year 2012
GBP'000 GBP'000 GBP'000
Adjusted profit before tax 26,245 25,757 79,309
Adjusted net interest (500) (774) (1,265)
Depreciation and amortisation 12,822 10,443 24,384
Share-based payments 527 648 2,176
Trading losses on onerous contracts (5,107) (1,743) (5,921)
Working capital movements (41,117) (27,675) (13,819)
Other adjustments 735 (722) 377
---------- ---------- ----------
Adjusted operating cash (outflow)/inflow (6,395) 5,934 85,241
Net interest received 502 269 1,118
Income taxes paid (8,582) (4,126) (13,111)
Capital expenditure and investments (7,289) (18,846) (30,813)
Acquisitions - - (1,854)
Equity dividends paid (15,759) (15,725) (23,213)
---------- ---------- ----------
Cash (outflow)/inflow before financing (37,523) (32,494) 17,368
Proceeds from issue of shares 58 - 53
Return of value (31,412) - -
Purchase of own shares - (3,167) (4,819)
---------- ---------- ----------
(Decrease)/increase in net funds excluding
CSF in the period (68,877) (35,661) 12,602
---------- ---------- ----------
(Decrease)/increase in net funds excluding
CSF (68,877) (35,661) 12,602
Effect of exchange rates on cash and cash
equivalents 3,692 487 (2,059)
Net funds excluding CSF at beginning of
period 147,327 136,784 136,784
---------- ---------- ----------
Net funds excluding CSF at end of period 82,142 101,610 147,327
========== ========== ==========
16 Analysis of net funds
Unaudited Unaudited Audited
H1 2013 H1 2012 Year 2012
GBP'000 GBP'000 GBP'000
Cash and short term deposits 76,336 91,747 138,149
Bank overdraft (4,087) (137) (678)
------------ -------------- ------------
Cash and cash equivalents 72,249 91,610 137,471
Current asset investment 10,000 10,000 10,000
Bank loans (107) - (144)
------------ -------------- ------------
Net funds excluding CSF 82,142 101,610 147,327
Finance leases (16,329) (17,294) (17,999)
Other loans (53) (556) (702)
Total CSF (16,382) (17,850) (18,701)
------------ -------------- ------------
Net funds 65,760 83,760 128,626
============ ============== ============
Net funds excluding CSF of GBP82.1 million is stated after
remitting GBP31.4 million in respect of the Return of Value but
prior to the remaining remittance of GBP43.6 million on the 5(th)
July.
17 Publication of non-statutory accounts
The financial information contained in the interim statement
does not constitute statutory accounts as defined in section 435 of
the Companies Act 2006. The auditors have issued an unqualified
opinion on the Group's statutory financial statements under
International Accounting Standards for the year ended 31 December
2012 and did not include a statement under section 498(2) or (3) of
the Companies Act 2006. Those accounts have been delivered to the
Registrar of Companies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UKOKROVAWUAR
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