TIDMCCC
RNS Number : 9644B
Computacenter PLC
11 March 2014
Computacenter plc
2013 Final Results
Computacenter plc, the independent provider of IT infrastructure
services and solutions, today announces its final results for the
twelve months ended 31 December 2013.
'Another strong UK performance. Important progress in Germany
with revenue and profit growth.'
Financial Highlights:
-- Group revenues increased 5.4 per cent to GBP3.072 billion
(2012: GBP2.914 billion) and up 2.5 per cent in constant
currency
-- Adjusted* profit before tax increased by 3.0 per cent to
GBP81.7 million (2012 restated: GBP79.3 million) and was up by 1.4
per cent in constant currency
-- Adjusted* diluted earnings per share ('EPS') increased 6.1
per cent to 43.3 pence (2012 restated: 40.8 pence)
-- Net funds prior to customer specific financing (CSF) was
GBP90.3 million (2012: GBP147.3 million), after completing a Return
of Value of approximately GBP75 million to our shareholders in July
2013
-- Total dividend for 2013 of 17.5 pence per share up 12.9 per cent (2012: 15.5 pence)
Statutory Highlights:
-- After exceptional items, the 2013 Group statutory profit
before tax was GBP50.5 million (2012: GBP64.8 million)
-- Statutory diluted earnings per share of 23.0 pence (2012: 32.4 pence)
-- Net funds including CSF of GBP71.4 million (2012: GBP128.6 million)
Total exceptional items of GBP28.8 million (2012 restated:
GBP11.9 million), including:
-- Trading losses on three previously announced onerous
contracts in Germany of GBP15.7 million in 2013 (2012 restated:
GBP8.0 million)
-- Accordingly, 2012 results are re-stated to reclassify trading
losses on the three onerous contracts in Germany within exceptional
items
-- A non-cash impairment of goodwill and acquired intangibles in
France of GBP12.2 million, due to deterioration in business
performance
Operating Highlights:
-- 2013 has seen our fourth year of annual revenue growth and
total revenue broke through the GBP3 billion barrier for the first
time in Computacenter's history
-- Continued growth in Group Services revenue, up 3.7 per cent
to GBP965.9 million in constant currency, and now making up
approximately 31.4 per cent of the Group's total revenues
-- Another excellent performance in the UK driven by good
momentum in Services growth and a strong Supply Chain
performance
-- A year of financial and operational stability within our
German business, which reported a growth in total revenues and
profitability
-- France continues to be impacted by challenging market and
operating conditions although the issues arising from our Group ERP
system implementation are now substantially behind us
-- Group Operating Model successfully implemented in the UK and
Germany, already delivering benefits
* Adjusted profit before tax and diluted EPS are 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 the three onerous German contracts.
Mike Norris, Chief Executive of Computacenter plc,
commented:
The Board expects Computacenter to make further progress in
2014. At such an early stage of the year it is difficult to be very
specific about the outcome, but we believe all of our major
geographies will move in the right direction.
In 2014, we will continue to build on Computacenter's strong
platform by increasing its number of customers, broadening our
customer relationships, increasing our service productivity and
innovating our offerings. This should enable us to continue our
track record of cash generation and earnings per share growth.
Enquiries:
Computacenter plc:
Mike Norris, Chief Executive 01707 631601
Tony Conophy, Finance Director 01707 631515
www.computacenter.com
Tulchan Communications:
James Macey White 0207 353 4200
Christian Cowley
www.tulchangroup.com
Chairman's Statement
I am pleased to report a positive year for our Company with good
progress on many fronts for Computacenter.
Revenue grew 5.4 per cent to a record high of GBP3.072 billion,
our adjusted* profit before tax was a solid GBP81.7 million and our
strong consistent cash generation enabled us to make a special
return of approximately GBP75 million to our shareholders, in
addition to regular dividends.
We did not, however, meet our plan in France and were
disappointed with our performance there. While business conditions
in that country were challenging, most of the problems were of our
own making. We took too long to implement the Group ERP system and
this resulted in logistics issues that have depressed our profit
and temporarily increased our working capital requirements, which
have in turn negatively impacted our cash position in the
short-term.
We managed to stabilise our problem contracts in Germany and
reengineered our processes and organisation there. As a result, our
German business has performed well in 2013, and it is now better
positioned for the future. In the UK, the business was strong in
both product sales and Services revenues and profit, and we were
pleased with our progress across all fronts.
All of this added up to healthy revenue growth and solid profit
for the Group as a whole.
The implementation of our Group Operating Model in the UK and
Germany is substantially complete and we expect solid progress from
our businesses in each of these countries during 2014. The changes
in management and organisation we are making in France will not
deliver much profit improvement in the coming year, but we are
determined to focus on the long-term.
We have no borrowings, strong cash flow and healthy customer
relationships in all aspects of our business and we face the future
with confidence in our strategy and in our operational capability.
Where we have stumbled we have reacted vigorously to improve our
performance and our long term prospects.
I take this opportunity to thank our customers for their
confidence in us and the business they have given us, and our
employees for their skills, development and performance.
I trust you will find the above summary and the details which
follow to be fair, balanced and understandable.
Greg Lock
Chairman
10 March 2014
Chief Executive's Review
Group
Turnover and Adjusted Profitability
2013 was a year of good progress for the Group, notwithstanding
our disappointing business performance in France. The results
outlined in this section include only one very small acquisition by
our Belgian business at the end of 2012, and thus comparatives
excluding acquisitions are not shown.
Total revenue increased by 5.4 per cent on a reported basis, to
GBP3.072 billion, and by 2.5 per cent in constant currency. This
was our fourth successive year of turnover growth and represented
the first time that the Group has broken through the GBP3 billion
revenue barrier.
The Group continued to consolidate on its significant Services
growth seen in 2012. Group Services revenue increased by 6.3 per
cent to GBP965.9 million on an as reported basis, and by 3.7 per
cent in constant currency. This reflects our strategic focus on
growing our Services business, which now represents 31.4% of the
Group's total revenue.
Our Supply Chain businesses in the UK and Germany also performed
well, especially during the second half of the year. We believe
this is a testament to the strength of our customer relationships
within these markets, which themselves appear to be showing the
signs of a sustained economic recovery. These performances fuelled
Supply Chain revenue growth across the Group of 5.0 per cent on an
as reported basis, and by 2.0 per cent in constant currency.
Group profitability was mixed within our main operating units,
with adjusted* profit growth in the UK and Germany being
substantially offset by our issues in France which became apparent
during the course of the year. As a result, the Group's adjusted*
profit before tax increased by 3.0 per cent to GBP81.7 million.
As a result of the overall increase in profitability and the
Return of Value to shareholders, the Group's adjusted* diluted
earnings per share has increased by 6.1 per cent to 43.3 pence in
2013.
Statutory Performance and Exceptional Items
The Group incurred GBP28.8 million of exceptional items in the
period. On a statutory basis, taking account of exceptional items
and amortisation of acquired intangibles, the Group made a profit
before tax of GBP50.5 million.
As announced by the Group on 16 July 2013, a number of Managed
Services contracts entered into by our German business in 2011 have
failed to achieve the margins anticipated. Following a thorough
review of these contracts in the first half of the year, it was
established that three of these were forecast to be loss-making
over the course of their lifetime, and we continue to forecast that
this will be the case. The operational and financial performance of
these contracts has been stabilised over the second half of the
year, and they have continued to perform as forecast and in line
with the provision within our 2013 Interim Accounts. As we move
into 2014, Management remain committed to both maintaining our
relationship with these very important customers for the Group,
whilst attempting to minimise the actual level of losses incurred
regardless of the relevant provision made.
A number of cost-saving activities have been driven across the
Group during the course of 2013. As a result of implementing our
Group Operating Model in Germany, and simplifying the management
structure across the Group, we have incurred restructuring charges
of approximately GBP4.3 million during the course of 2013, in
addition to the GBP1.5 million taken in 2012. Whilst the underlying
trend of overall adjusted operating expenses ('SG&A') in France
increased by 1.2 per cent in constant currency in 2013 as a result
of the cost of implementing our Group ERP system, we have no doubt
that there will be a need to take action in 2014 to increase the
competitiveness of our French business. As a result of the activity
undertaken in 2013, we have already seen an SG&A reduction of
3.0 per cent in Germany during that year.
As reflected previously in our 2013 Interim Results, the
disappointing financial performance of our French business in 2013
has resulted in the requirement for a non-cash impairment to
non-current assets in its cash-generating unit, relating to
goodwill and acquired intangibles, of GBP12.2 million.
As part of our normal audit processes at the end of the
financial year, we have carried out a detailed evaluation of our
other long-term Services contracts across the Group. This has
resulted in a one-off gain of GBP4.0 million which, due to its
nature and size, has been classified by the Group as
exceptional.
The table below summarises the adjusted* profitability and
exceptional items for the Group as a whole:
Restated
FY 2012 FY 2013
From adjusted to statutory (2012
restated(1) ) GBPm GBPm
--------------------------------------- --------- --------
Adjusted* operating profit 78.0 81.4
Adjusted net interest 1.3 0.3
--------- --------
Adjusted* profit before tax 79.3 81.7
Onerous German Contracts
- trading losses (5.9) (8.2)
- provisions remaining for future
losses (2.1) (7.5)
--------- --------
(8.0) (15.7)
Non-cash impairment - France - (12.2)
Redundancy and other restructuring
costs (1.5) (4.4)
Impairment of investment in associate - (0.5)
Services contracts re-evaluation - 4.0
Costs in relation to relocation
of premises (2.4) -
Total exceptional items (11.9) (28.8)
Amortisation of acquired intangibles (2.6) (2.4)
Statutory profit before tax 64.8 50.5
--------- --------
Diluted earnings per share measures
Adjusted* diluted EPS - as restated 40.8
in 2013 p 43.3p
Adjusted* diluted EPS - as reported 36.1
in 2012 p n/a
32.4
Statutory diluted EPS p 23.0p
Note 1- FY 2012 has been restated for the impact of the onerous
German contracts
Summary of Operational Performance
Our UK business has performed well during the year, further
building on the significant levels of Services growth that it
achieved in 2012. The continuing ability of the UK Services
business to deliver operational excellence to large customers has
resulted in it being awarded the number one ranking within UK
customer satisfaction surveys carried out in 2013 by each of KPMG
and the Whitelane Research Group. In addition, this has helped the
UK Professional Services business to have a significant forward
order book, which is now at a record high level.
Computacenter in Germany saw a year of stable performance, which
was pleasing given the significant operational change which took
place in 2013 due to the implementation of our Group Operating
Model. This change was implemented due to the need to leverage the
Group's systems and processes consistently across its operating
geographies and has helped to resolve operational problems on the
three onerous contracts, as well as ensure robust contract
governance on new bids. It has been encouraging to see this action
now begin to take effect, with a gradual increase in Services
margins throughout the year from our existing Services business,
excluding our three onerous contracts.
We have been extremely disappointed by the Group's performance
in France. Whilst this has no doubt been impacted by the ongoing
and prolonged poor market conditions, it was also impacted by a
number of operational issues arising in part from the
implementation of our Group ERP system. Whilst these operational
issues are now substantially behind us, we are taking robust action
in order to improve the performance of the business in the medium
term. This includes the extension of our Group Operating Model into
France, alongside a strategic shift towards a more Services-based
business model, similar to those currently seen in the UK and
Germany. There remains significant work ahead over the next
eighteen months to ensure that these changes are implemented
successfully.
Cash and Return of Value
Cash flow generation remained strong during the period and, at
the end of 2013, net cash prior to customer specific financing
('CSF') was GBP90.3 million (2012: GBP72.3 million). Including CSF,
net funds were GBP71.4 million (2012: GBP53.6 million). It should
again be noted that this position continues to benefit by
approximately GBP41 million (2012: GBP34 million) from the extended
credit facility provided by one of our major suppliers. These
extended terms have been in place for over four years, and while
they can be withdrawn at any time, they have now been in place for
such a significant period that, moving forwards, it is our
intention to only report on these within our Annual Report and
Accounts document, and no longer within each external announcement
released by the Company.
The 2012 cash positions noted above exclude the GBP75 million of
value returned to shareholders during the year, in order to show a
like-for-like comparison against the cash position as at the end of
2013. Our year-end cash position clearly demonstrates once again
Computacenter's ability to turn operating profit into free cash,
notwithstanding the impact of our 2013 challenges in France, which
have temporarily tied up cash in working capital.
An additional 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, was successfully completed at the
beginning of July 2013. 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. The
Return of Value has reduced our interest income by approximately
GBP0.8 million annually, with adjusted* diluted EPS augmented, as a
result of the share consolidation, by approximately 9 per cent over
the course of a full year. As the share capital reorganisation
associated with the Return of Value took place in June 2013, the
Company's adjusted* diluted EPS was augmented by approximately 4.5
per cent during the second half of 2013.
The Board will continue to evaluate the requirement to maintain
an efficient balance sheet, and will endeavour to use our ability
to generate free cash in order to continue to deliver incremental
value for our shareholders.
Dividend
The Board has decided to propose a final dividend of 12.3 pence,
bringing the total ordinary dividend paid for 2013 to 17.5 pence,
representing a 12.9 per cent increase on the 2012 dividend paid of
15.5 pence. This regular dividend is consistent with our stated
policy of maintaining dividend cover within our target range of 2
to 2.5 times our annual adjusted* diluted EPS. Subject to the
approval of shareholders at our Annual General Meeting on 15 May
2014, the proposed dividend will be paid on Friday 20 June 2014.
The dividend record date is set on Friday 23 May 2014, and the
shares will be marked ex-dividend on Wednesday 21 May 2014.
Strategy and Investment
During the course of the year, we have undertaken a rigorous
strategy review process, which has resulted in some refinement to
the Group's strategic objectives, which are now as follows:
1. To lead with and grow our Services business;
2. To improve our Services productivity and enhance our competitiveness;
3. To retain and maximise the relationship with our customers over the long-term; and
4. To innovate our Services offerings to build future growth opportunities.
To enhance and implement the result of the strategy review
process, the Group has appointed a Head of Strategy recruited from
within our German business, and additionally a Service Innovation
Director who joined with a significant track-record for Services
innovation development.
We have continued to invest appropriately to ensure that we have
the technical and operational capability to meet our customers'
needs. To support the ongoing demand for our Service desk
offerings, we have invested in new supporting tool sets to ensure
high level resilience and enable the ongoing development of our
Service desk capability. In 2014, we will complete the upgrade of
our entire global Service desk estate to this platform.
In accordance with our strategic objectives, we will continue to
keep abreast of industry developments, particularly around the use
of knowledge management to help drive self-service, first contact
resolution and workplace efficiencies. This is facilitated by a
substantial investment in the upgrade of our BMC Remedy platform
involving the migration of all customers, where we manage incident
and request activities.
In addition to capability, we have also developed our capacity
to satisfy customer demand for low-cost European language service
desk operations. In February 2014, the first of our customers,
having recently renewed with us for a third term, transferred its
service to our new facility in Budapest, Hungary. We have
additionally increased the capacity of our Barcelona facilities and
now have additional capacity to increase our offshore remote
management facility in Cape Town.
Outlook
The Board expects Computacenter to make further progress in
2014. At such an early stage of the year it is difficult to be very
specific about the outcome, but we believe all of our major
geographies will move in the right direction.
In the UK, recent business wins and improving margins in our
Services business combined with positive momentum in the Supply
Chain business gives us scope for further improvement.
In Germany, we do not expect a significant improvement in
Services revenues until the second half of the year at the earliest
but nevertheless there is some progress to be gained through
Services margin improvement. The onerous contracts in Germany
should continue to perform in line with the provisions.
After a highly disappointing 2013 for our French business, we
expect the French loss to reduce but for the French business to
remain loss making as we take steps to position the business for
its longer term success.
In 2014, we will continue to build on Computacenter's strong
platform by increasing its number of customers, broadening our
customer relationships, increasing our service productivity and
innovating our offerings. This should enable us to continue our
track record of cash generation and earnings per share growth.
Chief Executive's Review
Computacenter in the UK
Our UK business has performed well in 2013, and we are
encouraged by what has now been a sustained period of growth in
both revenue and profitability.
Overall, total revenue for the year increased by 7.6 per cent to
GBP1,286.1 million (2012: GBP1,195.6 million). This was fuelled by
a Supply Chain revenue growth increase of 8.4 per cent, which was
primarily due to an increase in the size of our customer base,
following significant Contractual Services growth in the prior
year, and continued demand for our Windows 7 roll-outs.
Services revenue grew during the reporting period by 6.2 per
cent, consolidating and building on its 15.3 per cent growth in
2012. This incorporated a growth of 5.4 per cent within our
Contractual Services business and 8.4 per cent within our
Professional Services operations.
As expected, the significant level of profitability achieved in
2012 as a result of business take-on transition and transformation
work, which has not been repeated in 2013, has made profitability
growth more challenging than revenue growth to achieve during the
reporting period. Notwithstanding this, adjusted* operating profit
in the UK grew by 7.5 per cent.
Overall Supply Chain margin in the UK grew broadly in line with
its growth in revenue, but the trend of customers purchasing a
higher volume, but lower margin mix of product, has continued to be
seen throughout the course of 2013. We were pleased with our Supply
Chain performance, especially during the second half of the year,
which we see as a reflection of the strength of our customer and
vendor relationships in the UK, and gradually improving market
conditions. However, as we have previously explained, our Supply
Chain business is impacted significantly by the short and medium
term buying patterns of our customers, and is therefore difficult
to forecast in the medium term and is reliant on macro-economic
factors.
As a result, our primary focus will remain on the growth of our
Services business which, for a second successive year, has
underpinned our profitability growth in the UK. We have continued
to develop our Contractual Services governance and bidding
processes alongside the execution of Service delivery to our
customers, whilst operating efficiently through the high
utilisation of our Services staff.
The consistent achievement of Services operational excellence
has resulted in our retention of the number one ranking for
customer satisfaction and reference-ability within a survey carried
out by KPMG, for the second year running. We have additionally been
awarded the top-ranking position within a study by the Whitelane
Research Group, measuring the performance of 24 outsourcing
providers in the UK, and 700 UK IT outsourcing contracts worth
GBP15 billion in total.
Our UK Services business is benefiting from its increasingly
strong Services delivery reputation. 2013 saw a breakthrough deal
for the Company with the UK Central Government. We have signed a
Desktop Infrastructure Services Agreement with a UK Central
Government department, which includes the management and support of
their workplace, data centre and networking environments, allowing
the department to improve its end-user experience and safeguard
service continuity.
Additionally, a multi-million pound Managed Services contract
with Computacenter will help RWEIT improve the user experience and
reduce operational costs for parent company, RWE Group. The
five-year contract includes end user support for 13,000 UK
employees, major incident management for workplace IT and a Windows
7 transformation project.
We anticipate that the demand for our Professional Services
offerings will remain strong, given that our forward order book
finished the year at a record level. We additionally believe that
this will be sustained in the short and medium term as customers
need to upgrade their operating systems, due to user support coming
to an end for soon-to-be obsolete versions. As such, they will
continue to modernise their end-user workplace environments, for
example through Windows 7 and Microsoft Office 2010 upgrades. Our
approach to Professional Services business development will not be
solely reliant upon these upgrades, and in terms of a longer term
outlook, we believe that demand will continue and be based around
Windows Server, mobility, data centre and networking upgrades.
We remain aware of the critical role that our governance
processes and procedures have played in the maintenance of our
Services margins in 2013. Given their importance to our business,
we will continue to invest in and refine these on an ongoing basis.
The increasing focus on our target market throughout the bidding
process, which is well supported and monitored by our established
Group Operating Model governance procedures, has indeed resulted in
us withdrawing from one significant bid during the year where we
deemed the level of risk to be unacceptable. However, we believe
that this approach reflects our prioritisation of long-term
delivery of value to our customers, and ultimately shareholders,
over short term financial targets of the business.
In its second year at its new premises, 2013 was a year of
consolidation for our IT redeployment and recycling subsidiary RDC,
as the business absorbed the main impact of its ERP system
implementation. In 2013, adjusted* operating profit for the year
grew by 0.7 per cent, during a period in which all sales, service
delivery and operational staff migrated fully to its new Microsoft
AX software.
The RDC business enters 2014 with a stable IT system, and
without the significant burden of running two systems in parallel,
as was the case in 2013, and having trained its staff fully on the
new system now in place. In 2014, we anticipate that RDC will begin
to reap the benefits, through the improvement of operational
productivity, and the roll-out of more automation within its sales
and reporting processes.
Overall SG&A in the UK have increased by 9.3 per cent during
the year. This reflects our increased bid costs, increased bonus
and commission payments to our staff and further investment in our
governance processes. Despite our recent success in the UK, we are
mindful of the need to invest in a controlled and careful manner
and, as such, we will be monitoring our level of SG&A closely
during the course of 2014.
Chief Executive's Review
Computacenter in Germany
The reporting period saw our German business continue to
stabilise. Both revenue and adjusted* profitability grew during the
year, against a backdrop of significant change within the business,
including the implementation of our Group Operating Model and the
restructuring of its sales force.
Total revenue grew in 2013 by 6.5 per cent on an as reported
basis to EUR1,497.8 million, and 1.7 per cent in constant currency.
This growth came from our Supply Chain business, which enjoyed a
particularly strong second half of the year. Supply Chain revenues
grew by 7.2 per cent during 2013 on a reported basis, and by 2.4
per cent in constant currency.
Whilst this Supply Chain performance is pleasing and appears to
reflect a growing recovery within the German IT market which has
now been sustained for the best part of a year, it is clearly not
as predictable as our Services business. It is for this reason
that, in line with our updated strategic objectives, our primary
focus during 2014 will be in relation to the growth of our Services
business.
During 2013, Services revenue was broadly flat at EUR485.4
million. This was impacted by the significant reduction in size of
one customer contract, which affected the fourth quarter of the
year. However, it also illustrates the anticipated slow-down in our
Services business, as a result of our decision to only bid for
selective Managed Services opportunities during the year. This
enabled us to dedicate more resource to successfully resolving the
issues which had arisen from the substantial growth of our Services
business in the fourth quarter of 2011, and importantly addressing
the underlying causes of those issues.
These issues related primarily to the adequacy of contractual
governance procedures, and therefore during the year we have taken
decisive action to improve these through the implementation of our
Group Operating Model. This has already started to take effect, and
has enabled us to stabilise and improve the operational and
financial performance of a number of our difficult Managed Services
contracts. As a result, excluding our three onerous contracts, we
have seen a gradual improvement in our Services margins through the
year.
Our Professional Services business generated significant
momentum during the year, with its total revenue growing by 12.6
per cent. This performance was largely driven by our Workplace
Solutions business delivering significant volumes of Windows 7 and
8 roll-outs, and our network security offering.
In addition to our strong Supply Chain performance, and other
improvements in the business, adjusted* operating profit for the
German segment has increased by 48.8 per cent to EUR36.1 million.
Notwithstanding that this performance was against the backdrop of a
weak comparator in 2012, we are encouraged that the governance
changes we have implemented appear to be having their intended
impact.
This has been further evidenced by the new material transition
and transformation projects that have been executed in accordance
with new Group processes, albeit that these have been relatively
few in number during 2013. These have been completed in accordance
with agreed contractual Services levels and projected financial
outcomes. We are now in a better position to ensure that new
Services wins in 2014 will be contracted appropriately and
implemented successfully as a result of the new operating model,
and therefore have built a strong platform on which we can look to
pursue medium term Services growth.
Turning specifically to our three loss-making, or onerous,
contracts, we are pleased to report that the operational and
financial performance of these has been stable during the second
half of the year. We have resolved our operational issues and are
now delivering to contractually agreed levels of performance. As
explained within the Group overview, the contracts have performed
in line with the forecast set out in our 2013 Interim Results
during the second half of the year.
In addition to the governance changes outlined above, we have
also carried out a full review, restructuring and realignment of
our sales force. We are confident that, as a result of this, we are
now better prepared to take advantage of significant Services
growth opportunities within the German IT market. This review
process has included significant knowledge transfer between our UK
and German businesses, particularly within Managed Services, which
we anticipate will accelerate the learning progression of our sales
force in Germany to sell and interact with our customers in
accordance with Group strategy and business principles. Primarily
as a result of the action detailed above, which has additionally
resulted in a general de-layering of German management across the
business, SG&A has reduced by 3.0 per cent in 2013. Due to the
nature of these actions, redundancy and restructuring costs
totalling EUR3.7 million have been included within the Group
financials as exceptional costs.
Although 2013 Services revenue has broadly been flat, our
Services business has achieved a number of notable wins. Going
forward, Computacenter will be providing Dataport with operational
assistance for its IT workstations, Datacenter and Networking.
Dataport is the service provider for information and communications
technology of the public administration for the German Federal
States of Hamburg, Schleswig-Holstein and Bremen, as well as for
the tax administrations in Mecklenburg-Western Pomerania and Lower
Saxony. Additionally, a Computacenter overflow help desk in Berlin
will ensure that Dataport's user-help desk is provided with
additional capacity where required during peak times. The duration
of the contract is for three years.
Whilst we would clearly want to have avoided the Managed Service
contract issues that we have faced over the last two years, they
have forced us to re-evaluate ourselves internally, and we are
confident that our business prospects in the medium term have
emerged stronger as a result.
Chief Executive's Review
Computacenter in France
Clearly, 2013 was a disappointing year for our French business.
Total revenue for the reporting period reduced by 7.1 per cent in
constant currency. Overall the result reduced from an Adjusted*
operating profit of EUR5.3 million in 2012 to an Adjusted*
operating loss of EUR 8.6 million in 2013.
The majority of this decline was attributable to a significant
reduction in our Supply Chain revenues, which decreased by 8.3 per
cent in constant currency. This reduction was in itself due to two
primary factors. Firstly, our Supply Chain business was impacted by
the prolonged and continuing difficult market conditions in France,
which has caused customers to reduce their IT investment spend.
We do not expect market conditions in France to improve
materially in 2014, which has brought into sharp focus a
requirement for our business model in France to be aligned more
closely with our UK and German businesses. In the UK and Germany we
are less reliant on commodity Supply Chain business, and are thus
more likely to be able to withstand the impact of negative external
market conditions.
Secondly, the implementation of our Group ERP system in France
was expected to be a more significant challenge than was the case
in either the UK or Germany, as the extent of system and process
change was greater. However, the difficulties experienced were more
pronounced than expected and, as a result, a number of operational
issues arose within the business affecting its ability to manage
the delivery of product and parts through its logistics operation
and therefore to ship on time.
While it is clear that these issues impacted the performance of
our Supply Chain business materially during the second half of the
year, they have now been resolved and the relevant order backlogs
have been cleared. This is evident in the strong recovery of Supply
Chain sales during Q4 2013 with orders being delivered in
accordance with agreed service levels. Whilst we are aware that we
have lost Supply Chain orders as a result of these issues, we do
not believe that we have lost any of our material Supply Chain
customers.
Overall gross margin contribution within our Supply Chain
business has declined as a direct result of the reduction in
revenue outlined above, an increased proportion of low margin
software business and temporary increased warehouse operating costs
due to our Group ERP system implementation.
Services revenue in 2013 reduced by 0.8 per cent to EUR90.5
million, mainly due to a 16.9 per cent decline in Professional
Services revenue compared to 2012. This was as a result of weak
demand for our offerings throughout the year, which itself was
primarily due to weak market conditions. In addition, the impact of
the Group ERP system implementation on our maintenance and
logistics functions temporarily impacted our Services levels.
Whilst this has now improved significantly, it has lead to a
reduction in our Services contract base.
Overall Services gross margin generation has reduced materially
due to the decline in revenue and lower Professional Services
utilisation, resulting in spare capacity in the workforce with
associated margin dilution. Given our disappointing Services
performance in 2013, our strategic shift to become more
Services-focused in the medium term will be no easy task, and
considerable work remains to be done in 2014 and beyond to achieve
this goal.
However, we are encouraged by the fact that our French and
International teams have worked very well together in collaboration
during the year to secure the Group's largest ever Managed Services
contract, for which the relevant bid had been made in accordance
with Group processes.
In line with our Group Operating Model strategy and following
its successful implementation in Germany, we started the process of
implementing our Group Operating Model into our French business in
early 2014. The Group ERP implementation was essential in order to
enable this to happen and will allow us to drive efficiencies
within the business, for example within the utilisation of our
resources and the implementation of the Group's best practices.
Given the issues experienced in France in 2013 and as a result
of the implementation of the Group Operating Model, there have been
some senior management changes in France. Moving forward, we will
strengthen the management team in key areas to help facilitate the
implementation of the Group Operating Model. Whilst the underlying
trend of SG&A increased by 1.2 per cent in constant currency
during the course of 2013 as a result of the cost of implementing
our ERP system, we have no doubt that there will be a need to take
actions in 2014 to increase the competitiveness of our French
business.
As outlined in the Group overview and as previously highlighted
within our 2013 Interim Results, as a result of the continuing
disappointing performance in France during the year, and our
continued medium-term expectations for the business, we have
incurred a non-cash impairment in the French cash-generating unit
of GBP12.2 million, relating to goodwill and acquired
intangibles.
Chief Executive's Review
Computacenter in Belgium
Overall, our Belgian business has performed well in 2013. In
2011 and 2012 we enjoyed large, one-off, Supply Chain revenues with
a particular customer which, as we expected and as noted in our
2012 Annual Report, would impact comparators in 2013. Unless
specifically stated, the results below include the contribution
from the acquisition of Informatic Services ('IS') in December
2012.
Total revenue grew by 6.0 per cent on an as reported basis, and
by 1.2 per cent in constant currency. Adjusted* operating profit
reduced by 6.8 per cent to EUR2.2 million which, given the expected
decline in Product revenue noted above, was still encouraging,
albeit materially assisted by the acquisition of IS. Belgian
SG&A has increased by 34.4 per cent, however on a like-for-like
basis excluding the acquisition, in constant currency SG&A
increased by 0.5 per cent.
Clearly, Supply Chain revenue growth was materially impacted by
one-off deals noted above. As a result, during the year Supply
Chain revenue in constant currency reduced by 19.2 per cent.
However, in the fourth quarter Supply Chain revenue was only down
by 3.2 per cent in constant currency, reflecting the one-off deals
in the first half of 2012 outlined above, and a strengthening
Supply Chain demand environment towards the end of 2013.
Our total Services revenue grew by 65.2 per cent to EUR22.4
million. Excluding the effect of the acquisition, Services revenue
has still grown organically by over 18.4 per cent during the
period, which has been assisted by our ability to extend a number
of our Managed Services contracts during the year.
We have been pleased with the performance of IS in 2013, which
has exceeded our initial expectations and, although much remains to
be done, we have made significant progress towards integrating IS
into our business. We have also managed to retain a significant
majority of all major Managed Services contracts through the
integration process.
We were also able to renew our Managed Services contract with
Mercedes Benz Belgium and Luxembourg for another three years.
Activities include an SLA-driven local service desk and onsite
support activities.
In 2012, Services represented 24.1 per cent of our overall
revenues and assisted by the acquisition of IS, which is 100 per
cent Services focused, Services now represent 39.4 per cent of our
revenues. This will provide us with increased revenue visibility as
we move forward in 2014.
Mike Norris
Chief Executive
10 March 2014
* Adjusted profit before tax and diluted EPS are 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 the three onerous German contracts.
Finance Director's review 2013
Turnover and profitability
In 2013, Computacenter Group delivered its fourth successive
year of turnover growth and achieved adjusted* profitability growth
in the face of significant headwinds in our French business.
At a headline level, turnover grew by 5.4 per cent and broke
through the GBP3 billion barrier for the first time to reach
GBP3,072.1 million. On a constant currency basis turnover growth
was 2.5 per cent. Adjusted* profit before tax increased by 3.0 per
cent from GBP79.3 million to GBP81.7 million, with the impact of
exchange rates accounting for half of this increase.
After taking account of exceptional items primarily relating to
the German onerous contracts and the non cash impairment in France,
statutory profit before tax decreased by 22.0 per cent from GBP64.8
million to GBP50.5 million.
The Group profitability performance was mixed across our main
geographies. The German business has stabilised and returned a 48.8
per cent increase in adjusted* operating profit in constant
currency, whilst the UK segment generated a 7.5 per cent increase.
These improvements were largely offset by problems in France noted
below which has fallen from a reported GBP4.3 million adjusted*
operating profit in 2012 to a loss of GBP7.3 million in 2013.
Adjusted operating profit
Management measure the Group's operating performance using
adjusted operating profit, which is stated prior to amortisation of
acquired intangibles, exceptional items, and after charging finance
costs on customer specific financing ('CSF') for which the Group
receives regular rental income. Gross profit is also adjusted to
take account of CSF finance costs. The reconciliation of statutory
to adjusted results is further explained in the segmental reporting
note (Note 4) to the financial statements. For the purposes of this
statement, all subsequent references are to adjusted measures.
United Kingdom
UK revenues grew in 2013 by 7.6 per cent, increasing to
GBP1,286.1 million. Supply Chain revenues increased by 8.4 per
cent, driven by a larger customer base following the Contractual
Services wins and further demand for workplace and Windows 7
roll-outs. Services revenues overall grew a further 6.2 per cent
following a strong 15.3 per cent growth in 2012. Within this,
Contractual Services revenue grew 5.4 per cent despite the one-off
impact of large transition billing in 2012. Professional Services
in turn generated 8.4 per cent growth in revenues mainly due to
migrations to Windows 7.
Margin in the Supply Chain business was broadly flat, following
the decline in 2012, due to increasing work place product sales and
continually evolving vendor partner terms of trade. However,
Services margin increased due to improved execution, maturity of
contracts and high utilisation of staff. This resulted in a UK
total adjusted gross profit increase from 15.4 per cent to 15.6 per
cent of sales. SG&A rose by 9.3 per cent, reflecting increased
bid costs, increased commission and bonus for staff due to the UK
performance and increased investment in improved governance
required by the Group Operating Model, net of recharges to other
Group Segments.
Overall this has resulted in a 7.5 per cent increase in
adjusted* operating profit from GBP52.2 million to GBP56.2
million.
Germany **
**Unless specifically stated, comments on growth rates in
overseas segments are stated in local/constant currency.
German revenue growth recovered in 2013 as the business
continued to stabilise after a disappointing 2012. Revenue, as
reported, grew in 2013 by 6.5 per cent to GBP1,271.4 million (2012:
GBP1,193.8 million), albeit in local currency revenue increased by
1.7 per cent.
Supply Chain revenues grew by 2.4 per cent in 2013, increasing
the rate of growth over 2012 (2.0 per cent). Services revenues were
flat with 0.3 per cent growth in 2013. We expected low Service
revenue growth as the focus was on ensuring that business is
conducted in accordance with increased governance in line with the
Group Operating Model and the effort on resolving the onerous
contracts. As the business grows more confident operating within
the enhanced Group governance procedures we expect Services revenue
growth to return.
Gross margin return of the German business has increased from
the restated 12.1 per cent in 2012 to 12.4 per cent in 2013. Supply
Chain gross margin increased mainly due to a favourable product mix
and, excluding the three onerous contracts highlighted in
exceptional costs, Service margins increased due to improvement in
other difficult contracts.
SG&A has continued to reduce following the reduction in the
latter part of 2012 with a real focus on cost base reduction driven
by the new German leadership team. One-off charges related to the
restructuring of the German business have been incurred and
disclosed as an exceptional item.
Overall, the German segment adjusted* operating profit increased
by 55.9 per cent from GBP19.7 million to GBP30.6 million as
reported, an increase of 48.8 per cent in constant currency.
France **
The revenue in the French segment decreased by 7.1 per cent in
the year. Supply Chain revenue fell by 8.3 per cent due to
continuing weakness in French macroeconomic conditions and the
impact of the unsatisfactory implementation of our Group ERP system
on 1 June 2013 which affected our ability to ship orders on time
resulting in an order backlog and a drop in customer service
levels.
Services revenues contracted by 0.8 per cent when compared to
2012 which featured a number of new contract wins. The impact of
the Group ERP implementation on the logistics function and
specifically the maintenance parts business has adversely affected
service levels leading to a decline in contract value.
Gross profit in 2013 has been impacted throughout the year by
the weak demand for our Professional Services business which
declined by 16.9 per cent, resulting in spare capacity which has
had a significant impact on gross margins achieved. In addition,
Services gross margins have been reduced by increased costs arising
from the difficult Group ERP implementation from 1 June 2013.
In addition, gross margins in the Supply Chain business reduced
mainly due to mix factors, in particular an increased proportion of
low margin software business which has had a positive effect on
revenue but generated little incremental contribution.
The result of these two issues is that overall gross margin
reduced from 9.9 per cent to 8.2 per cent.
SG&A expenses have increased by 1.2 per cent, largely
reflecting the increased cost of the implementation of the Group
ERP system in France and the increased time from Group resources
cross-charged into the business as part of the efforts to realign
local procedures with the Group Operating Model.
Overall, adjusted* operating profit as reported in France has
therefore fallen from a profit of GBP4.3 million in 2012 to a loss
of GBP7.3 million in 2013.
Belgium**
Reported revenue increased by 6.0 per cent to GBP48.2 million
(2012: GBP45.5 million) equating to an increase of 1.2 per cent in
local currency. Excluding the results of IS which was acquired in
December 2012, revenue decreased by 10.4 per cent. Supply Chain
revenue fell by 19.2 per cent (19.6 per cent excluding IS) mainly
due to a very significant one-off Supply Chain order from one
customer in the first half of 2012. However in the second half of
2013 Supply Chain revenues were 2.6 per cent higher than in the
second half of 2012.
Services revenue, including the results of IS, grew 65.2 per
cent. Excluding the results of the acquisition, organic Services
revenue growth was 18.4 per cent.
As the service mix of the business has increased, gross profit
return on sales for Belgium overall has also lifted from 11.0 per
cent in 2012 to 12.5 per cent in 2013. Excluding the results of the
acquisition, which has a services focus, gross profit margin has
fallen to 10.5 per cent.
SG&A, excluding the acquisition has increased 0.5 per cent
and has increased by 28.3 per cent including the acquisition.
Overall there has been a 2.4 per cent decrease in reported
adjusted* operating profit from GBP1.9 million in 2012 to GBP1.8
million in 2013. This is a 6.8 per cent decrease in local currency
and without the acquisition would have been a 39.0 per cent
decrease.
Exceptional items
As described in our Group Interim Results in August 2013, 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 that they were agreed.
Three of these contracts were deemed to be likely to be loss making
over the course of their lifetime. Detailed analysis and customer
re-negotiation was conducted and an exceptional one-off provision
of GBP10.7 million representing our best estimate of the losses
expected to be incurred until the end of the contracts was made as
outlined in our 2013 Group Interim Results.
The three onerous contracts in Germany have continued to perform
in line with our forecasts. Contractual performance has remained
stable with improving service levels. We continue to forecast that
these three contracts will be loss making over the course of their
lifetime and are comfortable with the level of further
provisioning, GBP10.7 million, made in the results disclosed in the
Group Interim Report. Whilst any further movement away from our
forecasts would also be deemed to be an exceptional item, local
management will continue to be measured on the absolute performance
of these contracts before the provision. It should be noted that,
notwithstanding these specific contractual losses, the total
business accruing from these three customers still makes an
important contribution to the Group's overall profitability.
As part of our normal processes, we have carried out a detailed
evaluation of other long-term Services contracts across the Group.
As a result of this on-going evaluation, management have calculated
that a positive change in certain estimates has resulted in a
one-off gain of GBP4.0 million. Due to the nature of the change in
the estimates, and the size of the gain, it has been decided to
highlight this as an exceptional item. This is consistent with the
treatment of the previously identified onerous contacts and will
provide a fairer and more balanced understanding of our underlying
growth in profitability.
As a result of the continued management restructure in Germany
following the stabilisation of the contracts above, we have
recognised related redundancy expenses of GBP3.1 million in the
year. Due to the transformational nature of the restructuring and
the events which preceded it, we have continued to classify these
as exceptional costs.
Similarly, Computacenter in France has begun a programme to also
reduce its SG&A and restructure its business and senior
management in line with the Group Operating Model. Redundancy
related expenses of GBP1.2 million have been included in the 2013
result.
Our French business transferred onto the Group ERP system on 1
June 2013 and has gone live in our Group Operating Model effective
of 1 January 2014. These milestones, along with the changes in
business focus and governance that underpin them will be the
drivers of change to transform our French business in the coming
years.
The combination of the decline in the French economy leading to
a reduction in demand for our Services, operational problems
arising from the Group ERP implementation and the resulting
financial impact has led to the requirement for a GBP12.2 million
impairment of non-current assets as detailed in our Interim Results
in August 2013. There arose a further requirement to fully
write-off a GBP2.2 million deferred tax asset as at 31 December
2013.
Due to the continued adverse performance of our equity accounted
associate ICS Solutions Limited we have decided to fully impair the
GBP0.5 million recorded value of our investment.
Restatement
As reported in the 2013 Interim Report, the 2012 accounts have
been restated, where necessary, to reclassify trading losses and
provisions relating to the three onerous German contracts to
provide a clearer picture of the performance of the business. The
impact of the reclassification is summarised in the table
below:
Germany Segment: Restatment of adjusted*
operating profit
Restated
FY 2012
------------------------------------ ---------
GBP m
As restated in 2013 accounts 19.7
Onerous Contracts - trading losses (5.9)
Onerous Contracts - provisions
for future losses (2.1)
As reported in 2012 accounts 11.6
------------------------------------ ---------
Finance income and costs
Net finance costs of GBP0.5 million were incurred on a statutory
basis in 2013 (2012: net finance income of GBP0.2 million). This
takes account of finance costs on CSF of GBP0.8 million (2012:
GBP1.1 million). On an adjusted basis, prior to the interest on
CSF, net finance income decreased from GBP1.3 million in 2012 to
GBP0.3 million in 2013. The decrease is primarily due to the
reduced cash holdings impacting interest received as a result of
our Return of Value to our shareholders and lower deposit
rates.
Taxation
The effective adjusted tax rate for 2013 was 23.7 per cent (2012
restated: 22.0 per cent). The deterioration was due to a lower mix
of overseas earnings in 2013 compared to 2012. However, the Group's
tax rate continues to benefit from losses utilised on earnings in
Germany and further benefits from the reducing corporation tax rate
in the UK.
Deferred tax assets of GBP13.5 million (2012: GBP15.7 million)
have been recognised in respect of losses carried forward. During
the year, an asset of GBP2.2 million relating to losses carried
forward in France has been written off. At 31 December 2013, there
were unused tax losses across the Group of GBP125.4 million (2012:
GBP115.5 million) for which no deferred tax asset has been
recognised. Of these losses, GBP54.5 million (2012: GBP61.6
million) arise in Germany and GBP67.6 million (2012: GBP50.6
million) arise in France. A significant proportion of the losses
arising in Germany have been generated in statutory entities that
no longer have significant levels of trade. The remaining
unrecognised tax losses relate to other loss-making overseas
subsidiaries.
The Group considers all movement in the recoverable amount of
deferred tax assets relating to the recognition, de-recognition, or
utilisation of previously recognised losses, to be outside our
adjusted results. Management's view is that, due to their material
nature and irregular timing, the inclusion of these movements
within our adjusted tax charge distorts the underlying cash tax
base and annual performance of the Group as a whole.
This has no impact on the adjusted or statutory results for this
year. However, we expect net movements to be charged to exceptional
tax in future periods as the utilisation of the previously
recognised deferred tax assets in Germany exceeds the recognition
of further tax losses.
Earnings per share and dividend
The adjusted* diluted earnings per share has increased in line
with profit performance by 6.1 per cent from 40.8 pence in 2012 to
43.3 pence in 2013. Due to the impact of exceptional charges in
2013, the statutory diluted earnings per share has reduced from
32.4 pence in 2012 to 23.0 pence in 2013.
The Board is recommending a final dividend of 12.3 pence per
share, bringing the total dividend for the year to 17.5 pence
(2012: 15.5 pence). Subject to the approval of shareholders at the
Annual General Meeting ('AGM') on 15 May 2014, the proposed
dividend will be paid on 20 June 2014. The dividend record date is
set as 23 May 2014, and the shares will be marked ex-dividend on 21
May 2014.
Acquisitions
On 28 December 2012 the Group acquired 100 per cent of the
voting shares of NEWIS SA and its subsidiary, Informatic Services
IS SA.
The book and provisional fair values of the net assets acquired
that were disclosed in note 16 of the 31 December 2012 Annual
Report and Accounts, are now final and are unchanged.
Return of Value
While the Group intends to continue to maintain a robust and
prudent balance sheet, we decided that it was appropriate to
undertake a Return of Value to shareholders, in addition to the
normal dividend. We announced on 24 May 2013 a one-off Return of
Value to shareholders totalling GBP75 million, or 48.7 pence for
every existing ordinary share held at the close of trading on 11
June 2013. Computacenter will continue to monitor its balance sheet
to ensure that it is efficient. Computacenter also returned GBP74.4
million to shareholders by way of a one-off capital return via a B
Share structure in 2006 equating to 39 pence per share.
Cash flow
The Group's trading net funds position takes account of factor
financing and current asset investments but excludes customer
specific financing. There is an adjusted cash flow statement
provided in note 30 that restates the statutory cash flow to take
account of this definition.
Net funds excluding CSF decreased from GBP147.3 million to
GBP90.3 million by the end of the year. However, this reduced
figure is after the circa GBP75.0 million Return of Value to
shareholders which masked an underlying net funds improvement of
GBP18.0 million on a like-for-like basis compared to the position
at 31 December 2012. The Group continued to deliver strong cash
generation from its operations in 2013, with adjusted operating
cash flow of GBP70.5 million (2012: GBP85.2 million).
In the year we spent over GBP25 million on capital expenditure
primarily investments in IT equipment in our business and software
tools to enable us to deliver improved service to our
customers.
Challenges within working capital have built up in our French
business due to backlogs within our ERP system preventing the
timely processing of transactions impacting cash collection and
payment of invoices. We estimate that this has impacted our cash
flow by circa GBP10 million. We are confident of improving this
position in 2014 and as this occurs, working capital should be
released into cash.
Whilst the cash position remains robust, the Group continued to
benefit from the extension of an improvement in credit terms with a
significant vendor, equivalent to GBP41 million at 31 December
2013, an increase of GBP7 million from December 2012. This
improvement in credit terms has been in operation since 2009 and
whilst the continuation of these terms is not guaranteed and can be
withdrawn at any time, the terms are generally available to all
material partners of that significant vendor. We no longer feel it
is necessary to continue to highlight these terms in the operating
review. However we will continue to reference this item in our
Finance Director's report, but we will not routinely report the
number in Interim Management Statements and similar external
updates or within the accounts themselves.
Customer Specific Financing ('CSF') increased in the year from
GBP18.7 million to GBP18.9 million. CSF remains low against our
historical standards due to a decision to restrict this form of
financing in light of the current credit environment and reduced
customer demand.
Taking CSF into account, net funds at the end of the year were
GBP71.4 million, compared to GBP128.6 million at the start of the
year but after the circa GBP75.0 million Return of Value to
shareholders.
Customer specific financing
In certain circumstances, the Group enters into customer
contracts that are financed by leases or loans. The leases are
secured only on the assets that they finance. Whilst the
outstanding balance of CSF is included within the net funds for
statutory reporting purposes, the Group excludes CSF when managing
the net funds of the business, as this CSF is matched by contracted
future receipts from customers.
Whilst CSF is repaid through future customer receipts,
Computacenter retains the credit risk on these customers and
ensures that credit risk is only taken on customers with a strong
credit rating.
The committed CSF financing facilities, are thus outside of the
normal working capital requirements of the Group's product resale
and service activities.
The Group does not expect a material increase in the level of
CSF financing facilities, partly as the Group applies a higher cost
of finance to these transactions than customer's marginal cost of
finance. In addition, some of these requirements have been
satisfied through utilising a sale of receivables process.
Capital Management
Details of the Group's capital management policies are included
within Note 27 to the financial statements.
Financial instruments
The Group's financial instruments comprise borrowings, cash and
liquid resources, and various items that arise directly from its
operations. The Group enters into hedging transactions, principally
forward exchange contracts or currency swaps. The purpose of these
transactions is to manage currency risks arising from the Group's
operations and its sources of finance. As the Group continues to
expand its global reach and benefit from lower cost operations in
certain geographies, such as South Africa, it has entered into
Forward Exchange contracts to protect any further currency risk.
The Group's policy remains that no speculative trading in financial
instruments shall be undertaken.
The main risks arising from the Group's financial instruments
are interest rate, liquidity and foreign currency risks. The
overall financial instruments strategy is to manage these risks in
order to minimise their impact on the financial results of the
Group. The policies for managing each of these risks are set out
below. Further disclosures in line with the requirements of IFRS 7
are included in the financial statements.
Interest rate risk
The Group finances its operations through a mixture of retained
profits, bank borrowings and finance leases and loans for certain
customer contracts. The Group's bank borrowings, other facilities
and deposits are at floating rates. No interest rate derivative
contracts have been entered into.
Liquidity risk
The Group's policy is to ensure that it has sufficient funding
and facilities in place to meet any foreseeable peak in borrowing
requirements. The Group's positive net funds position was
maintained throughout 2013, and at the year-end was GBP90.3 million
excluding CSF, and GBP71.4 million including CSF.
Due to strong cash generation over the past three years, the
Group is currently in a position where it can finance its
requirements from its cash balance, and the Group operates a cash
pooling arrangement for the majority of Group entities.
During the year the Group entered into a specific committed
facility of GBP40.0 million for a three year term which expires in
May 2016.
The Group has a Board monitored policy in place to manage its
counterparty risk that places cash on deposit across a range of
reputable banking institutions.
Customer specific financing facilities are committed.
Foreign currency risk
The Group operates primarily in the UK, Germany, France, and
with smaller operations in Belgium, Hungary, India, Malaysia,
Luxembourg, Spain, South Africa, Switzerland and the United States
of America. The Group uses a cash pooling facility to ensure that
its operations outside of the UK are adequately funded, where
principal receipts and payments are denominated in Euros. For those
countries within the Euro zone, the level of non-Euro denominated
sales is very small and, if material, the Group's policy is to seek
to eliminate currency exposure through forward currency contracts.
For the UK, the majority of sales and purchases are denominated in
Sterling and any material trading exposures are eliminated through
forward currency contracts.
The Group has been increasingly successful in winning
international Services contracts where services are provided in
multiple countries. The Group aims to minimise this exposure by
invoicing the customer in the same currency in which the costs are
incurred. For certain contracts, the Group's committed contract
costs are not denominated in the same currency as its sales. In
such circumstances, for example where contract costs are
denominated in South African Rand, the Group seeks to eliminate
currency exposure for a foreseeable future period on these future
cash flows through forward currency contracts. In 2013, the Group
recognised a loss of GBP1.4 million (2012: gain of GBP0.5 million)
through other comprehensive income in relation to the changes in
fair value of related forward currency contracts, where the cash
flow hedges relating to firm commitments were assessed to be highly
effective.
Credit risk
The Group principally manages credit risk through management of
customer credit limits. The credit limits are set for each customer
based on the creditworthiness of the customer and the anticipated
levels of business activity. These limits are initially determined
when the customer account is first set up and are regularly
monitored thereafter.
There are no significant concentrations of credit risk within
the Group. The Group's major customer, disclosed in Note 4 to the
financial statements consists of entities under the control of the
UK Government. The maximum credit risk exposure relating to
financial assets is represented by carrying value as at the balance
sheet date.
Going concern
As disclosed in the Directors' Report, the directors have a
reasonable expectation that the Group has adequate resources to
continue its operations for the foreseeable future. Accordingly
they continue to adopt the going concern basis in preparing the
consolidated financial statements.
Fair balanced and understandable
The UK Corporate Governance Code has a new requirement for the
Board to state whether the Company's Annual Report and Accounts are
'fair, balanced and understandable' and 'provides the information
necessary for shareholders to assess the Company's performance,
business model and strategy'.
We have continued to formalise the process through which we can
provide comfort to the Board to make the relevant assertions within
the Annual Report and Accounts.
Tony Conophy
Finance Director
10 March 2014
* Adjusted profit before tax and diluted EPS are 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 the three onerous German contracts.
Directors' responsibility statement
The financial statements, prepared in accordance with
International Financial Reporting Standards, as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and profit for the Company and undertakings included in
the consolidation taken as a whole; and Pursuant to the Disclosure
and Transparency Rules the Company's annual report and accounts
include a fair review of the development and performance of the
business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they
face.
On behalf of the Board
Mike Norris Tony Conophy
Chief Executive Finance Director
10 March 2014
Consolidated income statement
For the year ended 31 December 2013
2013 Restated*
2012
Note GBP'000 GBP'000
--------------------------------------------- ----- ------------ ------------
Revenue 4 3,072,075 2,914,214
Cost of sales (2,668,814) (2,531,926)
--------------------------------------------- ----- ------------ ------------
Gross profit 403,261 382,288
Administrative expenses (321,096) (303,172)
--------------------------------------------- ----- ------------ ------------
Operating profit:
Before amortisation of acquired intangibles
and exceptional items 82,165 79,116
Amortisation of acquired intangibles (2,375) (2,608)
Onerous contracts (15,739) (8,029)
Non-cash impairment (12,195) -
Other exceptional items (830) (3,874)
--------------------------------------------- ----- ------------ ------------
Exceptional items 5 (28,764) (11,903)
--------------------------------------------- ----- ------------ ------------
Operating profit 51,026 64,605
Finance revenue 1,351 1,971
Finance costs (1,852) (1,778)
Profit before tax:
Before amortisation of acquired intangibles
and exceptional items 81,664 79,309
Amortisation of acquired intangibles (2,375) (2,608)
Onerous contracts (15,739) (8,029)
Non-cash impairment (12,195) -
Other exceptional items (830) (3,874)
--------------------------------------------- ----- ------------ ------------
Exceptional items 5 (28,764) (11,903)
--------------------------------------------- ----- ------------ ------------
Profit before tax 50,525 64,798
Income tax expense:
Before amortisation of acquired intangibles
and exceptional items (19,325) (17,461)
Tax on amortisation of intangibles 244 538
Tax on onerous contracts 1,889 883
Tax on non-cash impairment 1,014 -
Tax on other exceptional items (700) 362
--------------------------------------------- ----- ------------ ------------
Total tax on exceptional items 5 2,203 1,245
Exceptional tax items (489) -
--------------------------------------------- ------------
Income tax expense 6 (17,367) (15,678)
--------------------------------------------- ----- ------------ ------------
Profit for the year 33,158 49,120
--------------------------------------------- ----- ------------ ------------
Attributable to:
Equity holders of the parent 33,160 49,121
Non-controlling interests (2) (1)
--------------------------------------------- ----- ------------ ------------
Profit for the year 33,158 49,120
--------------------------------------------- ----- ------------ ------------
Earnings per share
- basic for profit for the period 7 23.2p 32.9p
- diluted for profit for the period 7 23.0p 32.4p
--------------------------------------------- ----- ------------ ------------
* Certain amounts here do not correspond to the annual
consolidated financial statements as at 31 December 2012, and
reflect reclassifications which restate prior financial information
in respect of three onerous contracts as detailed further in notes
3 and 5.
Consolidated statement of comprehensive income
For the year ended 31 December 2013
2013 2012
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Profit for the year: 33,158 49,120
Items that may be reclassified to profit or loss:
(Loss)/gain arising on cash flow hedge (1,403) 494
Income tax effect 326 (120)
-------------------------------------------------- -------- --------
(1,077) 374
Exchange differences on translation of foreign
operations 4,326 (5,311)
Other comprehensive income for the year, net
of tax 3,249 (4,937)
-------------------------------------------------- -------- --------
Total comprehensive income for the period 36,407 44,183
-------------------------------------------------- -------- --------
Attributable to:
Equity holders of the parent 36,407 44,182
Non-controlling interests - 1
-------------------------------------------------- -------- --------
36,407 44,183
-------------------------------------------------- -------- --------
Consolidated balance sheet
As at 31 December 2013
2013 2012
Note GBP'000 GBP'000
------------------------------------- ---- --------- ---------
Non-current assets
Property, plant and equipment 89,044 100,696
Intangible assets 98,870 104,612
Investment in associate 45 575
Deferred income tax asset 6 15,172 14,385
------------------------------------- ---- --------- ---------
203,131 220,268
------------------------------------- ---- --------- ---------
Current assets
Inventories 58,618 67,782
Trade and other receivables 667,722 573,661
Prepayments 61,579 46,250
Accrued income 53,140 58,029
Forward currency contracts - 30
Current asset investment - 10,000
Cash and short-term deposits 91,098 138,149
------------------------------------- ---- --------- ---------
932,157 893,901
------------------------------------- ---- --------- ---------
Total assets 1,135,288 1,114,169
------------------------------------- ---- --------- ---------
Current liabilities
Trade and other payables 604,945 527,539
Deferred income 115,986 128,540
Financial liabilities 8,147 9,117
Forward currency contracts 2,360 584
Income tax payable 10,239 3,778
Provisions 6,005 4,373
------------------------------------- ---- --------- ---------
747,682 673,931
------------------------------------- ---- --------- ---------
Non-current liabilities
Financial liabilities 11,540 10,406
Provisions 10,449 6,455
Other non-current liabilities - -
Deferred income tax liabilities 6 947 1,034
------------------------------------- ---- --------- ---------
22,936 17,895
------------------------------------- ---- --------- ---------
Total liabilities 770,618 691,826
------------------------------------- ---- --------- ---------
Net assets 364,670 422,343
------------------------------------- ---- --------- ---------
Capital and reserves
Issued capital 9,271 9,234
Share premium 4,362 3,769
Capital redemption reserve 74,963 74,957
Own shares held (11,976) (13,848)
Foreign currency translation reserve 6,649 2,325
Retained earnings 281,388 345,893
------------------------------------- ---- --------- ---------
Shareholders' equity 364,657 422,330
Non-controlling interests 13 13
------------------------------------- ---- --------- ---------
Total equity 364,670 422,343
------------------------------------- ---- --------- ---------
Approved by the Board on 10 March 2014
MJ Norris FA Conophy
Chief Executive Finance Director
Consolidated statement of changes in equity
For the year ended 31 December 2013
Attributable to equity holders of the
parent
------------------------------------------------------------------
Foreign
Capital Own currency Non-
Issued Share redemption shares translation Retained 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
2013 9,234 3,769 74,957 (13,848) 2,325 345,893 422,330 13 422,343
Profit for the
year - - - - - 33,160 33,160 (2) 33,158
Other
comprehensive
income - - - - 4,324 (1,077) 3,247 2 3,249
---------------- -------- -------- ----------- -------- ------------ --------- -------- ------------ --------
Total
comprehensive
income - - - - 4,324 32,083 36,407 - 36,407
Cost of
share-based
payments - - - - - 1,070 1,070 - 1,070
Tax on
share-based
payment
transactions - - - - - 126 126 - 126
Exercise of
options 28 1,194 - 1,872 - (1,872) 1,222 - 1,222
Bonus issue 15 (15) - - - - - - -
Expenses on
bonus
issue - (586) - - - - (586) - (586)
Redemption of
shares (6) - 6 - - - - - -
Return of Value - - - - - (73,115) (73,115) - (73,115)
Equity dividends - - - - - (22,797) (22,797) - (22,797)
---------------- -------- -------- ----------- -------- ------------ --------- -------- ------------ --------
At 31 December
2013 9,271 4,362 74,963 (11,976) 6,649 281,388 364,657 13 364,670
---------------- -------- -------- ----------- -------- ------------ --------- -------- ------------ --------
At 1 January
2012 9,233 3,717 74,957 (10,962) 7,638 319,152 403,735 12 403,747
Profit for the
year - - - - - 49,121 49,121 (1) 49,120
Other
comprehensive
income - - - - (5,313) 374 (4,939) 2 (4,937)
---------------- -------- -------- ----------- -------- ------------ --------- -------- ------------ --------
Total
comprehensive
income - - - - (5,313) 49,495 44,182 1 44,183
Cost of
share-based
payments - - - - - 2,176 2,176 - 2,176
Tax on
share-based
payment
transactions - - - - - 216 216 - 216
Exercise of
options 1 52 - 1,933 - (1,933) 53 - 53
Purchase of own
shares - - - (4,819) - - (4,819) - (4,819)
Equity dividends - - - - - (23,213) (23,213) - (23,213)
---------------- -------- -------- ----------- -------- ------------ --------- -------- ------------ --------
At 31 December
2012 9,234 3,769 74,957 (13,848) 2,325 345,893 422,330 13 422,343
---------------- -------- -------- ----------- -------- ------------ --------- -------- ------------ --------
Consolidated cash flow statement
For the year ended 31 December 2013
2013 2012
Note GBP'000 GBP'000
------------------------------------------------------ ---- -------- --------
Operating activities
Profit before taxation 50,525 64,798
Net finance income 501 (193)
Depreciation 22,735 24,337
Amortisation 9,676 9,573
Impairment of intangible assets 12,195 -
Share-based payments 1,070 2,176
(Profit)/loss on disposal of property, plant
and equipment (215) 363
Loss on disposal of intangibles 642 184
Decrease in inventories 10,596 27,477
Increase in trade and other receivables (94,982) (49,061)
Increase in trade and other payables 52,997 14,647
Increase in customer contract provisions 7,443 2,108
Other adjustments (456) 74
------------------------------------------------------ ---- -------- --------
Cash generated from operations 72,727 96,483
Income taxes paid (9,624) (13,111)
------------------------------------------------------ ---- -------- --------
Net cash flow from operating activities 63,103 83,372
------------------------------------------------------ ---- -------- --------
Investing activities
Interest received 1,741 1,926
Decrease in current asset investment 10,000 -
Acquisition of subsidiaries, net of cash acquired - (1,754)
Increase investment in associate - (100)
Proceeds from sale of property, plant and equipment 921 1,074
Purchases of property, plant and equipment (9,609) (22,906)
Purchases of intangible assets (15,544) (8,981)
------------------------------------------------------ ---- -------- --------
Net cash flow from investing activities (12,491) (30,741)
------------------------------------------------------ ---- -------- --------
Financing activities
Interest paid (2,663) (1,929)
Dividends paid to equity shareholders of the
parent 8 (22,797) (23,213)
Return of Value (73,115) -
Expenses on Return of Value (586) -
Proceeds from share issues 1,222 53
Purchase of own shares - (4,819)
Repayment of capital element of finance leases (8,066) (9,201)
Repayment of loans (2,766) (2,353)
New borrowings 9,267 1,577
Net cash flow from financing activities (99,504) (39,885)
------------------------------------------------------ ---- -------- --------
(Decrease)/increase in cash and cash equivalents (48,892) 12,746
Effect of exchange rates on cash and cash equivalents 1,755 (2,059)
Cash and cash equivalents at the beginning of
the year 137,471 126,784
------------------------------------------------------ ---- -------- --------
Cash and cash equivalents at the year-end 90,334 137,471
------------------------------------------------------ ---- -------- --------
Notes to the consolidated financial statements
For the year ended 31 December 2013
1 Authorisation of financial statements and statement of compliance with IFRS
The consolidated financial statements of Computacenter plc for
the year ended 31 December 2013 were authorised for issue in
accordance with a resolution of the Directors on 10 March 2014. The
balance sheet was signed on behalf of the Board by MJ Norris and FA
Conophy. Computacenter plc is a limited company incorporated and
domiciled in England whose shares are publicly traded.
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards
('IFRS'), as adopted by the European Union as they apply to the
financial statements of the Group for the year ended 31 December
2013 and applied in accordance with the Companies Act 2006.
2 Summary of significant accounting policies
Basis of preparation
The consolidated financial statements are presented in Sterling
and all values are rounded to the nearest thousand (GBP'000) except
when otherwise indicated.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of Computacenter plc and its subsidiaries as at 31
December each year. The financial statements of subsidiaries are
prepared for the same reporting year as the parent company, using
existing GAAP in each country of operation. Adjustments are made on
consolidation for differences that may exist between the respective
local GAAPs and IFRS.
All intra-group balances, transactions, income and expenses and
profit and losses resulting from intra-group transactions have been
eliminated in full.
Subsidiaries are consolidated from the date on which the Group
obtains control and cease to be consolidated from the date on which
the Group no longer retains control.
Non-controlling interests represent the portion of profit or
loss and net assets in subsidiaries that is not held by the Group
and is presented separately within equity in the consolidated
balance sheet, separately from parent shareholders' equity.
Changes in accounting policy and disclosures
The accounting policies adopted are consistent with those of the
previous financial year except as follows:
The Group has adopted the following new and amended IFRS and
IFRIC interpretations during the year. Except as noted below,
adoption of these standards did not have any effect on the
financial performance or position of the Group. They may however
give rise to additional disclosures. The other pronouncements which
came into force during the year were not relevant to the Group:
IFRS 12: Disclosure of interests in other Entities
IFRS 12 sets out the requirements for disclosures relating to an
entity's interests in subsidiaries, joint arrangements, associates
and structured entities. The requirements in IFRS 12 are more
comprehensive than the previously existing disclosure requirements
for subsidiaries. This amendment has had no effect on the Group's
financial position, performance or its disclosures.
IFRS 13: Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for
all fair value measurements. IFRS 13 does not change when an entity
is required to use fair value, but rather provides guidance on how
to measure fair value under IFRS. IFRS 13 defines fair value as an
exit price. As a result of the guidance in IFRS 13, the Group
re-assessed its policies for measuring fair values, in particular,
its valuation inputs such as non-performance risk for fair value
measurement of liabilities. IFRS 13 also requires additional
disclosures.
Application of IFRS 13 has not materially impacted the fair
value measurements of the Group. Additional disclosures
where required, are provided in the individual notes relating to
the assets and liabilities whose fair values were
determined.
IAS 1 Presentation of Items of Other Comprehensive Income -
Amendments to IAS 1
The amendments to IAS 1 introduce a grouping of items presented
in OCI. Items that will be reclassified ('recycled') to profit or
loss at a future point in time (e.g., net loss or gain on cash flow
hedges) have to be presented separately from items that will not be
reclassified (e.g. revaluation of land and buildings). The
amendments affect presentation only and have no impact on the
Group's financial position or performance.
IAS 1 Clarification of the requirement for comparative
information (Amendment)
These amendments clarify the difference between voluntary
additional comparative information and the minimum required
comparative information. An entity must include comparative
information in the related notes to the financial statements when
it voluntarily provides comparative information beyond the minimum
required comparative period. The amendments clarify that the
opening statement of financial position (as at 1 January 2012 in
the case of the Group), presented as a result of retrospective
restatement or reclassification of items in financial statements
does not have to be accompanied by comparative information in the
related notes. As a result, the Group has not included comparative
information in respect of the opening statement of financial
position as at 1 January 2012. The amendments affect presentation
only and have no impact on the Group's financial position or
performance.
3 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 has therefore held an exceptional one-off provision of
GBP7.5 million representing our best estimate of the losses
expected to be incurred between 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:
Year ended 31 December 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 11,864 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
--------- ---------- --------- ------------ ------------ ------------------ ------------
4 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 3.
Segmental performance for the years ended 31 December 2013 and
2012 was as follows:
Year ended 31 December 2013
UK Germany France Belgium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- ---------- --------- --------- ----------
Revenue
Supply Chain revenue 828,097 859,404 389,517 29,195 2,106,213
-------------------------------------- ---------- ---------- --------- --------- ----------
Services revenue
Professional Services 113,102 104,446 20,794 3,716 242,058
Contractual Services 344,930 307,592 56,008 15,274 723,804
-------------------------------------- ---------- ---------- --------- --------- ----------
Total Services revenue 458,032 412,038 76,802 18,990 965,862
-------------------------------------- ---------- ---------- --------- --------- ----------
Total revenue 1,286,129 1,271,442 466,319 48,185 3,072,075
-------------------------------------- ---------- ---------- --------- --------- ----------
Results
Adjusted gross profit 200,097 158,051 38,320 6,006 402,474
Administrative expenses (143,926) (127,403) (45,603) (4,164) (321,096)
-------------------------------------- ---------- ---------- --------- --------- ----------
Adjusted operating profit/(loss) 56,171 30,648 (7,283) 1,842 81,378
Adjusted net interest 791 173 (561) (117) 286
-------------------------------------- ---------- ---------- --------- --------- ----------
Adjusted profit/(loss) before
tax 56,962 30,821 (7,844) 1,725 81,664
-------------------------------------- ---------- ---------- --------- --------- ----------
Exceptional items:
- onerous contracts - (15,739) - - (15,739)
- impairment of intangibles - - (12,195) - (12,195)
- exceptional items 3,466 (3,105) (1,191) - (830)
-------------------------------------- ---------- ---------- --------- --------- ----------
3,466 (18,844) (13,386) - (28,764)
Amortisation of acquired intangibles (792) (1,225) (242) (116) (2,375)
-------------------------------------- ---------- ---------- --------- --------- ----------
Statutory profit/(loss) before
tax 59,636 10,752 (21,472) 1,609 50,525
-------------------------------------- ---------- ---------- --------- --------- ----------
Other segment information
Capital expenditure:
Property, plant and equipment 5,556 3,927 1,275 85 10,843
Software 14,883 597 64 - 15,544
-------------------------------------- ---------- ---------- --------- --------- ----------
Depreciation 11,658 8,850 2,111 116 22,735
Amortisation of software 6,516 816 131 1 7,464
-------------------------------------- ---------- ---------- --------- --------- ----------
Share- based payments 838 (2) 234 - 1,070
-------------------------------------- ---------- ---------- --------- --------- ----------
Year ended 31 December 2012 UK Germany France Belgium Total
(restated)
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 - (8,029) - - (8,029)
- 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
Capital expenditure: 11,311 6,992 10,622 12 28,937
Property, plant and equipment - - - 1,930 1,930
Software 7,803 1,022 156 - 8,981
-------------------------------------- ---------- ---------- --------- ------------- ----------
Depreciation 14,258 8,601 1,418 60 24,337
Amortisation of software 5,838 1,024 103 - 6,965
-------------------------------------- ---------- ---------- --------- ------------- ----------
Share- based payments 1,613 522 41 - 2,176
-------------------------------------- ---------- ---------- --------- ------------- ----------
Information about major customers
Included in revenues arising from the UK segment are revenues of
approximately GBP280 million (2012: GBP279 million) which arose
from sales to the Group's largest customer. For the purposes of
this disclosure a single customer is considered to be a group of
entities known to be under common control. This customer consists
of entities under control of the UK Government, and includes the
Group's revenues with central government, local government and
certain government controlled banking institutions.
5 Exceptional items
2013 2012
GBP'000 GBP'000
------------------------------------------------------------ -------- --------
Operating profit
Onerous contracts (15,739) (8,029)
Impairment of acquired intangible assets (12,195) -
Redundancy and other restructuring costs (4,291) (1,484)
Impairment of investment in associate (539) -
Services contracts re-valuation 4,000 -
Costs in relation to relocation of premises - (2,390)
(28,764) (11,903)
------------------------------------------------------------ -------- --------
Income tax
Tax on onerous contracts included in operating profit 1,889 883
Tax on impairment of acquired intangible assets 1,014 -
Tax on exceptional items included in operating profit (700) 362
------------------------------------------------------------ -------- --------
Total tax on exceptional items 2,203 1,245
Exceptional tax items
-Deferred tax asset in respect of France (2,184) -
-Tax credit in relation to prior year R&D claim 1,695 -
1,714 1,245
------------------------------------------------------------ -------- --------
Exceptional items after taxation (27,050) (10,658)
------------------------------------------------------------ -------- --------
Included within the current year are the following exceptional
items:
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 GBP7.5 million was held as at December 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 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 2012 trading losses of GBP5.9 million
were incurred on revenues of GBP15.4 million. In 2013 trading
losses of GBP8.2 million have been incurred on turnover of GBP23.0
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.
During 2013 Computacenter Germany continued its programme, from
late 2012, to reduce its net operating expenses. As a result,
redundancy costs of GBP3.1 million were incurred during the year,
which due to their size and nature have been included within
exceptional items.
Similarly, Computacenter France has begun a programme to also
reduce its SG&A and restructure its business and senior
management in line with the Group Operating Model. Redundancy
related expenses of GBP1.2 million have been included in the 2013
result.
Due to the continued adverse performance of our equity accounted
associate, ICS Solutions Limited, we have decided to fully impair
the GBP0.5 million recorded value of our investment.
As part of our normal processes, we have carried out a detailed
evaluation of other long-term Services contracts across the Group.
As a result of this on-going evaluation, management have calculated
that a positive change in certain estimates has resulted in a
one-off gain of GBP4.0 million. Due to the nature of the change in
the estimates, and the size of the gain, it has been decided to
highlight this as an exceptional item. This is consistent with the
treatment of the previously identified onerous contracts and will
provide a fairer and more balanced understanding of our underlying
growth in profitability.
During the year a deferred tax asset relating to losses carried
forward in France has been written off for GBP2.2 million.
Tax relief from prior period Research and Development project
spend on the Group ERP platforms has resulted in prior year
adjustment credited in the statutory tax charge for year. Due to
the timing, materiality and one-off nature of this relief, it has
been decided to classify it an exceptional tax item.
Included within the prior year are the following exceptional
items:
During the year, Computacenter France consolidated its
operations in a new office and began the move to a new warehouse.
In January 2013, RDC relocated 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 costs 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 impact of both items has been shown as an
exceptional tax item.
6 Income tax
a) Tax on profit on ordinary activities
2013 2012
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Tax charged in the income statement
Current income tax
UK corporation tax
* operating result 14,395 14,914
* exceptional items (891) (94)
Total UK corporation tax 13,504 14,820
Foreign tax
* operating result 5,031 3,988
* exceptional items (1,994) (651)
----------------------------------------------------------- -------- --------
Total foreign tax 3,037 3,337
Adjustments in respect of prior periods (509) (2,952)
Total current income tax 16,032 15,205
----------------------------------------------------------- -------- --------
Deferred tax
Operating result
* origination and reversal of temporary differences 139 (1,466)
* adjustments in respect of prior periods 25 2,171
Exceptional items 1,171 (232)
Total deferred tax 1,335 473
----------------------------------------------------------- -------- --------
Tax charge in the income statement 17,367 15,678
----------------------------------------------------------- -------- --------
b) Reconciliation of the total tax charge
2013 2012
GBP'000 GBP'000
-------------------------------------------------------------------- -------- --------
Accounting profit before income tax 50,525 64,798
-------------------------------------------------------------------- -------- --------
At the UK standard rate of corporation tax of 23.25 per cent (2012:
24.5 per cent) 11,747 15,876
Expenses not deductible for tax purposes 802 1,885
Non-deductible element of share-based payment charge 54 211
Adjustments in respect of current income tax of previous periods (485) (1,274)
Higher tax on overseas earnings 1,511 276
Other differences 766 (549)
Effect of changes in tax rate on deferred tax (262) (140)
Utilisation of previously unrecognised deferred tax assets (3,169) (2,098)
Exceptional changes in recoverable amounts of deferred
tax assets 2,185 -
Tax on impairment of acquired intangible assets (1,014) -
Overseas tax not based on earnings 1,554 1,491
Tax credit in relation to prior year R&D claim (1,695) -
Deferred tax not recognised on current year losses 5,373 -
-------------------------------------------------------------------- -------- --------
At effective income tax rate of 34.4 per cent (2012: 24.2 per cent) 17,367 15,678
-------------------------------------------------------------------- -------- --------
c) Tax losses
Deferred tax assets of GBP13.5 million (2012: GBP15.7 million)
have been recognised in respect of losses carried forward.
In addition, at 31 December 2013, there were unused tax losses
across the Group of GBP125.4 million (2012: GBP115.5 million) for
which no deferred tax asset has been recognised. Of these losses,
GBP54.5 million (2012: GBP61.6 million) arise in Germany and
GBP67.6 million (2012: GBP50.6 million) arise in France. A
significant proportion of the losses arising in Germany have been
generated in statutory entities that no longer have significant
levels of trade. The remaining unrecognised tax losses relate to
other loss-making overseas subsidiaries.
d) Deferred tax
Deferred income tax at 31 December relates to the following:
Consolidated balance Consolidated income
sheet statement
---------------------- ---------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- ---------- ---------- ---------
Deferred income tax liabilities
Accelerated capital allowances 1,970 2,486 258 (680)
Effect of changes in tax rate on
opening liability - - 267 (219)
Amortisation of intangibles 1,354 2,334 1,277 (440)
Arising on acquisition -- 255 - -
--------------------------------------- ---------- ----------
Gross deferred income tax liabilities 3,324 5,075
--------------------------------------- ---------- ----------
Deferred income tax assets
Relief on share option gains 1,142 1,100 (55) (42)
Other temporary differences 2,501 1,605 1,562 1,911
Effect of changes in tax rate on (109)
opening asset - - -
Revaluations of foreign exchange
contracts to fair value 326 6 320 59
Losses available for offset against
future taxable income 13,580 15,715 (2,185) (116)
--------------------------------------- ---------- ----------
Gross deferred income tax assets 17,549 18,426
--------------------------------------- ---------- ---------- ---------- ---------
Deferred income tax charge 1,335 473
--------------------------------------- ---------- ---------- ---------- ---------
Net deferred income tax asset 14,225 13,351
--------------------------------------- ---------- ----------
Disclosed on the balance sheet
Deferred income tax asset 15,172 14,385
Deferred income tax liability (947) (1,034)
--------------------------------------- ---------- ----------
Net deferred income tax asset 14,225 13,351
--------------------------------------- ---------- ----------
At 31 December 2013, there was no recognised or unrecognised
deferred income tax liability (2012: GBPnil) for taxes that would
be payable on the unremitted earnings of the Group's subsidiaries
as the Group expects that future remittances of earnings from its
overseas subsidiaries will be covered by the UK dividend
exemption.
e) Impact of rate change
The main rate of UK Corporation will be reduced to 21 per cent
from 1 April 2014 and to 20 per cent from 1 April 2015, as enacted
in the Finance Act 2013. Deferred tax has been restated accordingly
in these financial statements.
7 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
amortisation of acquired intangibles and exceptional items.
Restated
2013 2012
GBP'000 GBP'000
------------------------------------------------------------------- ---------------- --------
Profit attributable to equity holders of the parent 33,160 49,121
Amortisation of acquired intangibles 2,375 2,608
Tax on amortisation of acquired intangibles (244) (538)
Exceptional items within operating profit 28,764 11,903
Tax on exceptional items included in operating profit (2,203) (1,245)
Exceptional tax items 489 -
------------------------------------------------------------------- ---------------- --------
Profit before amortisation of acquired intangibles and exceptional
items 62,341 61,849
------------------------------------------------------------------- ---------------- --------
2013 2012
000's 000's
-------------------------------------------------------------------- ------- -------
Basic weighted average number of shares (excluding own shares held) 142,665 149,387
Effect of dilution:
Share options 1,428 2,179
-------------------------------------------------------------------- ------- -------
Diluted weighted average number of shares 144,093 151,566
-------------------------------------------------------------------- ------- -------
Restated
2013 2012
pence pence
------------------------------------ ------ --------
Basic earnings per share 23.2 32.9
Diluted earnings per share 23.0 32.4
Adjusted basic earnings per share 43.7 41.4
Adjusted diluted earnings per share 43.3 40.8
------------------------------------ ------ --------
8 Dividends paid and proposed
2013 2012
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Declared and paid during the year:
Equity dividends on Ordinary Shares:
Final dividend for 2012: 10.5 pence (2011: 10.5 pence) 15,759 15,725
Interim dividend for 2013: 5.2 pence (2012: 5.0 pence) 7,038 7,488
----------------------------------------------------------- -------- --------
22,797 23,213
----------------------------------------------------------- -------- --------
Proposed (not recognised as a liability as at 31 December)
Equity dividends on Ordinary Shares:
Final dividend for 2013: 12.3 pence (2012: 10.5 pence) 16,706 15,589
----------------------------------------------------------- -------- --------
9 Analysis of changes in net funds
At
At 1 January Cash flows Non-cash Exchange 31 December
2013 in year flow differences 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------------ ---------- ------------------- ------------------ -------------------
Cash and short-term deposits 138,149 (48,865) - 1,814 91,098
Bank overdraft (678) (27) - (59) (764)
------------------------------ ------------ ---------- ------------------- ------------------ -------------------
Cash and cash equivalents 137,471 (48,892) - 1,755 90,334
Current asset investment 10,000 (10,000) - - -
Bank loans (144) 84 - (3) (63)
------------------------------ ------------ ---------- ------------------- ------------------ -------------------
Net funds excluding customer
specific
financing 147,327 (58,808) - 1,752 90,271
Customer specific finance
leases (17,999) 8,065 (1,235) (408) (11,577)
Customer specific other loans (702) (6,578) - - (7,280)
------------------------------ ------------ ---------- ------------------- ------------------ -------------------
Total customer specific
financing (18,701) 1,487 (1,235) (408) (18,857)
------------------------------ ------------ ---------- ------------------- ------------------ -------------------
Net funds 128,626 (57,321) (1,235) 1,344 71,414
------------------------------ ------------ ---------- ------------------- ------------------ -------------------
At
At 1 January Cash flows Non-cash Exchange 31 December
2012 in year flow differences 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ---------- -------- ------------ ------------
Cash and short-term deposits 128,437 11,806 - (2,094) 138,149
Bank overdraft (1,653) 940 - 35 (678)
-------------------------------------- ------------ ---------- -------- ------------ ------------
Cash and cash equivalents 126,784 12,746 - (2,059) 137,471
Current asset investment 10,000 - - - 10,000
Factor financing - (144) - - (144)
-------------------------------------- ------------ ---------- -------- ------------ ------------
Net funds excluding customer specific
financing 136,784 12,602 - (2,059) 147,327
Customer specific finance leases (21,624) 9,201 (6,031) 455 (17,999)
Customer specific other loans (1,524) 776 - 46 (702)
-------------------------------------- ------------ ---------- -------- ------------ ------------
Total customer specific financing (23,148) 9,977 (6,031) 501 (18,701)
-------------------------------------- ------------ ---------- -------- ------------ ------------
Net funds 113,636 22,579 (6,031) (1,558) 128,626
-------------------------------------- ------------ ---------- -------- ------------ ------------
10 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) Items relating to customer specific financing are adjusted for as follows:
a. Interest paid on customer specific financing 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
offset within working capital.
2) 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 three 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 31 December 2013 is not
materially different to the carrying value.
2013 2012
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Adjusted profit before taxation 81,664 79,309
Adjusted net interest (286) (1,265)
Depreciation and amortisation 25,764 24,384
Share-based payments 1,070 2,176
Trading losses on onerous contracts (8,201) (5,921)
Working capital movements (29,508) (13,819)
Other adjustments (47) 377
---------------------------------------------------- -------- --------
Adjusted operating cash inflow 70,456 85,241
Net interest received (135) 1,118
Income taxes paid (9,624) (13,111)
Capital expenditure and investments (24,231) (30,813)
Acquisitions - (1,854)
Equity dividends paid (22,797) (23,213)
---------------------------------------------------- -------- --------
Cash inflow before financing 13,669 17,368
Financing
Proceeds from issue of shares 1,222 53
Return of value (73,701) -
Purchase of own shares - (4,819)
---------------------------------------------------- -------- --------
Increase in net funds excluding CSF in the period (58,810) 12,602
---------------------------------------------------- -------- --------
Increase in net funds excluding CSF (58,810) 12,602
Effect of exchange rates on net funds excluding CSF 1,754 (2,059)
Net funds excluding CSF at beginning of period 147,327 136,784
---------------------------------------------------- -------- --------
Net funds excluding CSF at end of period 90,271 147,327
---------------------------------------------------- -------- --------
11 Related party transactions
During the year the Group entered into transactions, in the
ordinary course of business, with related parties. Transactions
entered into are as described below:
Biomni provides the Computacenter e-procurement system used by
many of Computacenter's major customers. An annual fee has been
agreed on a commercial basis for use of the software for each
installation. Both PJ Ogden and PW Hulme are Directors of and have
a material interest in Biomni Limited.
The table below provides the total amount of transactions that
have been entered into with related parties for the relevant
financial year:
Sales to Purchases Amounts Amounts
related from related owed by owed to
parties parties related parties related parties
GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- ------------- ---------------- ----------------
Biomni Limited 38 777 1 1
--------------- -------- ------------- ---------------- ----------------
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made on terms
equivalent to those that prevail in arm's length transactions.
Outstanding balances at the year-end are unsecured and settlement
occurs in cash. There have been no guarantees provided or received
for any related party receivables. The Group has not recognised any
provision for doubtful debts relating to amounts owed by related
parties. This assessment is undertaken each financial year through
examining the financial position of the related party and the
market in which the related party operates.
12 Publication of non-statutory accounts
The financial information in the preliminary statement of
results does not constitute the Group's statutory accounts for the
year ended 31 December 2013 but is derived from those accounts and
the accompanying Directors' report. Statutory accounts for the year
ended 31 December 2013 will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The
auditors have reported on those accounts; their report was
unqualified and did not contain statements under Section 498 (2) or
Section 498 (3) of the Companies Act 2006.
The financial statements, and this preliminary statement, of the
Group for the year ended 31 December 2013 were authorised for issue
by the Board of Directors on 10 March 2014 and the balance sheet
was signed on behalf of the Board by MJ Norris and FA Conophy.
The statutory accounts have been delivered to the Registrar of
Companies in respect of the year ended 31 December 2012. The report
of the auditors was unqualified and did not contain statements
under Section 498 (2) or Section 498 (3) of the Companies Act
2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR URVKRSAAOAAR
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