RNS Number:2642P
Computacenter PLC
02 September 2003
COMPUTACENTER PLC
Interim Results Announcement
Computacenter plc, the IT infrastructure services provider, today announces
interim results for the six months ended 30 June 2003.
Financial Highlights:
* Profit before tax up 31.2% to #32.0 million (2002: #24.4 million)
* Group revenues up 28.7% to #1,254.7 million (2002: #975.0 million)
* Excluding impact of acquisitions, Group revenues down 6.5 %
* Closing net cash position of #24.4 million
* Diluted earnings per share up 34.9% to 11.6p (2002: 8.6p)
* Inaugural interim dividend of 2.0p per share
Operational Highlights:
* Strong performance in services businesses; UK Managed Services revenue
growth of 12.3%
* Encouraging pipeline for Managed Services and Microsoft XP deployments
* Strong profit performance achieved despite continuing weak markets for
IT capital expenditure
* Good progress in integration and reorganisation of CC CompuNet in
Germany
* Actions being taken to address weaknesses in Computacenter France
* Rigorous management of cost base and staff utilisation levels
Ron Sandler, Chairman of Computacenter plc, commented:
"Computacenter made further excellent progress during the first six months of
2003, with profit before tax growing by 31.2% to #32.0 million, ahead of market
expectations.
"We also made progress in our two main areas of strategic focus: strengthening
Computacenter's Managed Services capabilities and building on its position as a
leading IT infrastructure services provider across the major European markets.
"Reflecting the cash generative nature of the business, and to bring the payment
profile of dividends more closely into line with its peers, Computacenter has
also announced the payment of an inaugural interim dividend of 2.0p per share.
"With regards to the outlook for the remainder of the year, we anticipate that,
in the absence of any change in market conditions, the performance achieved thus
far by the Group should be sustainable."
For further information, please contact:
Computacenter plc.
Mike Norris, Chief Executive 01707 631 601
Tessa Freeman, Investor Relations 01707 631 514
www.computacenter.com
Tulchan Communications 020 7353 4200
Julie Foster/ Tim Lynch
www.tulchangroup.com
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Chairman's Statement
I am pleased to report that Computacenter made further excellent progress during
the first six months of 2003, with profit before tax growing by 31.2% to #32.0
million (2002: #24.4 million).
The Group's balance sheet remained strong, with net cash of #24.4 million at the
period end. Reflecting Computacenter's confidence in the cash generative nature
of its business, and bringing the payment profile of its dividends more closely
into line with its peers, Computacenter has decided to pay an inaugural interim
dividend of 2.0p per share on
10 October, 2003 to shareholders on the register as at 12 September, 2003. From
now onwards, the Board intends to target declaring approximately one third of
the total annual dividend at the interims.
The strong profit performance was achieved despite continuing weak markets for
IT capital expenditure. This is reflected in a decline of 6.5% in Group
revenues, excluding the impact of acquisitions, compared with the same period in
2002. Much of this decline can be attributed to price reductions for IT
hardware. However, Computacenter once again demonstrated an ability to overcome
revenue pressures through a strategy of building its higher-margin contracted
services base and maintaining rigorous control over its costs.
We have maintained our focus on developing Computacenter as a leading
multi-vendor IT infrastructure services provider, with continued investment in
enhancing our Managed Services capabilities. Two major new Managed Services
contracts in the first half of 2003, with Abbey National and HBOS, provide
further evidence of the success of this strategy. Managed Services revenues in
the UK grew by 12.3% over the previous year.
The second key thrust of Computacenter's strategy has been the building of
leading positions in the major European markets. The acquisition in January of
GE CompuNet, the market leader in Germany, was a significant step towards the
achievement of this goal. The integration and repositioning of GE CompuNet, now
renamed CC CompuNet, has been the subject of a comprehensive programme involving
much of the senior management team of Computacenter. Whilst a great deal remains
to be done, the early signs of progress are encouraging, and I am confident that
CC CompuNet will deliver fully the benefits to the Group envisaged at the time
of its acquisition.
The performance of Computacenter France has been disappointing, with an
operating loss of #1.7 million (2002: #0.2 million profit) in the first half of
the year. Steps are being taken to improve the operational efficiency of this
business and by the year end I hope to report that progress has been made.
As regards the outlook for the remainder of the year, we anticipate that, in the
absence of any change in market conditions, the performance achieved thus far by
the Group should be sustainable.
Finally, it is the staff of Computacenter, with their skills and commitment to
customer service, who are responsible for the continued success of the Group. I
am delighted to acknowledge their contribution and thank all of them for what
has been achieved.
Ron Sandler
Chairman
Review of Operations
UK
UK operating profit grew by 22.5%, from #25.7 million to #31.4 million, as we
continued to see strong demand from the government sector in the UK and a
substantial improvement in the telecommunications market. However, the financial
services and general commercial markets remained weak.
Our Managed Services activities made good progress, with a growing number of
customers looking to Computacenter to assist in reducing the costs and
complexities of managing their IT infrastructures. We were awarded two
significant new Managed Services contracts, by Abbey National and HBOS, in the
first half of the year. Under the terms of the former contract, valued at #70
million over five years and covering all of Abbey National's 28,000 employees,
Computacenter will assume responsibility for the design, implementation and
management of the entire desktop infrastructure. At HBOS, the scope of
Computacenter's existing Managed Services contract has been extended and from
August 2003, we will manage 35,000 desktop PCs, nearly half of the HBOS estate,
under a three-year agreement. Together, these two contracts will entail the
transfer of some 300 staff to Computacenter under TUPE regulations, during H2
2003 and H1 2004.
We have a strong pipeline of Managed Services bid opportunities for the
remainder of the year, which bodes well for further growth in our contracted
services base in 2004.
Overall, we maintained the high levels of Professional Services utilisation
achieved in 2002 and again delivered a number of major integration projects.
These included the implementation of a standardised IT infrastructure for Places
for People, a leading housing provider, which has led to an 18% reduction in
calls to its helpdesk. We also deployed a fully supported in-room entertainment
and business services system for London's Dorchester Hotel, to enhance service
delivery to their customers, and project managed the testing of 135 application
systems for Marks and Spencer plc.
Towards the end of the period we saw evidence of a developing demand for
Microsoft Windows XP roll-outs, offering increased business opportunities in the
months ahead.
The product resale market remained subdued, with corporate customers maintaining
their cautious approach to IT capital expenditure. However product margins
increased by almost 1% over the same period in 2002. This was mainly due to
large-scale corporate and government roll-outs, at lower margins, representing a
smaller proportion of UK revenues compared with the past two years.
Demand from small and medium-sized businesses has been stronger, which has
benefited CCD, our trade distribution division that supplies the second tier
resellers who service these customers. In the first half of 2003, CCD grew its
revenues by 14.8% and extended its leading market share with HP, its main
vendor. In May CCD was appointed as an authorised distributor for HP printers.
We now offer a single source for all HP trade distribution, from desktop PCs to
high-end enterprise servers.
Our recycling and re-marketing arm, RDC, saw profits grow 61.7% over the same
period in 2002, to #0.9 million. A move into new premises and the introduction
of a shift system enabled RDC to increase its throughput to over 50,000 units
per month.
We maintained our focus on reducing our cost base and making the most effective
use of our resources. As a result, over the first half of 2003, we achieved a
3.6% reduction in sales, general and administration costs within the UK business
compared to the first half of 2002.
Germany
The acquisition of GE CompuNet, subsequently renamed CC CompuNet, was completed
in early January 2003.
An extensive integration programme was initiated immediately following the
acquisition, focused upon sharing best practices around the Group and leveraging
central resources to improve the scope, quality and cost-effectiveness of CC
CompuNet's offerings. This has resulted in a major reorganisation of the German
business. Whilst the programme is still in its early phases, I am pleased with
the progress that has already been made, and with the enthusiasm and commitment
of the German management team.
CC CompuNet made an operating profit of #3.2 million in the first six months of
the year. Due to the continuing weakness of the German economy, revenues were
down 10.7% on H1 2002.
CC CompuNet worked with other Computacenter companies to secure the award of a
four-year international Managed Services contract with Deutsche Borse AG,
Frankfurt, servicing 4,500 employees across Germany, Luxembourg and the UK.
Other successes included a five-year contract for a Linux migration awarded by
the Deutscher Bundestag (the lower house of the German parliament).
France
Difficult market conditions had an adverse impact on the performance of
Computacenter France, which made an operating loss of #1.7 million for the first
six months of the year. The cost base of the French business remains too high,
partly due to the difficulties encountered in integrating the GECITS acquisition
in 2002. Utilisation of professional services staff in France was particularly
disappointing and significantly affected operating performance.
Measures to address these issues, including steps to increase utilisation in
professional services and reduce sales, general and administration expenses, led
to restructuring costs of #1.2 million in the first half, which are included in
the operating result. I am confident that these measures will lead to a material
improvement in performance.
Despite the weak market, Computacenter France continued to attract significant
new customers. New contract wins in France during the first half of this year
include Paris City Hall and the General Council of Paris, for whom we will
supply desktops, laptops and networking technology. We were also successful in
winning contract extensions with UNEDIC Assurance Chomage, Conseil Regional de
Haute Normandie and Gendarmerie Nationale. Computacenter France also designed,
installed, integrated and supported the IT infrastructure for the G8 summit in
Evian.
Other countries
Results in our Belgium and Luxembourg operation were encouraging, showing a
55.2% reduction in operating loss over H1 2002 to #0.2 million. A major
technology refresh project was delivered for the BP/Solvay joint venture company
and we won a two-year extension to our SWIFT desktop outsourcing contract.
In January 2003 we acquired GECITS Austria, which has been renamed Computacenter
Austria. Despite showing improved profitability over the figures reported by
GECITS for the second half of 2002, performance of this business was somewhat
disappointing, with an operating loss of #0.3 million for the first half.
Encouraging developments over this period included a contract for the hardware
maintenance of the entire desktop estate of BAWAG-PSK, a leading Austrian bank
and a systems roll-out for PriceWaterhouseCoopers Austria.
Summary
I am pleased with overall Group performance in the first half. We will continue
to take advantage of the many opportunities we see in the market whilst
maintaining a rigorous control over our cost base.
Mike Norris
Chief Executive
Group profit and loss account
For the six months ended 30 June 2003
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
Turnover: Group and share of 1,255,599 976,958 1,930,135
joint venture's turnover
Less: share of joint venture's (937) (1,936) (3,398)
turnover
Continuing operations:
Ongoing 911,291 975,022 1,926,737
Acquisitions 343,371 - -
Group Turnover 1,254,662 975,022 1,926,737
Operating Costs (1,222,211) (949,618) (1,870,570)
------------- ----------- -------------
Operating Profit
Continuing operations:
Ongoing 29,530 25,404 56,167
Acquisitions 2,921 - -
Group Operating Profit 32,451 25,404 56,167
Share of operating loss in joint (69) (187) (1,272)
venture
Share of operating profit/(loss) 163 13 (13)
in associate
------------ ----------- ------------
Total operating profit: Group 32,545 25,230 54,882
and share of associate and joint
venture
Release of provisions relating
to termination of operations - - 863
------------ ----------- ------------
Profit on ordinary activities 32,545 25,230 55,745
before interest and taxation
Interest receivable and similar 1,569 2,843 7,367
income
Interest payable and similar (2,094) (3,668) (8,031)
charges
------------ ----------- ------------
Profit on ordinary activities 32,020 24,405 55,081
before taxation
Tax on profit on ordinary (10,377) (8,174) (18,074)
activities
------------ ----------- ------------
Profit on ordinary activities 21,643 16,231 37,007
after taxation
Minority interests 20 5 25
------------ ----------- ------------
Profit attributable to members 21,663 16,236 37,032
of the parent company
Dividends - ordinary dividends (3,775) - (10,657)
on equity shares
------------ ----------- ------------
Retained profit for the period 17,888 16,236 26,375
============ =========== ============
Earnings per share
- Basic 11.8p 8.9p 20.4p
- Diluted 11.6p 8.6p 19.8p
Dividends per ordinary share 2.0p - 5.8p
Group statement of total recognised gains and losses
For the six months ended 30 June 2003
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
Profit for the financial year
excluding share of joint venture
and associate 21,581 16,354 37,978
Share of joint venture's loss for (48) (131) (933)
the year
Share of associates' profit/ 130 13 (13)
(loss) for the year
--------- --------- ---------
Profit attributable to members of
the parent company for the
financial year 21,663 16,236 37,032
Exchange differences on
retranslation of net assets of
associated and subsidiary
undertakings 1,271 1,336 1,238
--------- --------- ----------
Total recognised gains for the 22,934 17,572 38,270
year
========= ========= ==========
Group balance sheet
At 30 June 2003
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
Fixed assets
Intangible assets
Goodwill 4,899 8,358 5,039
Negative goodwill (2,663) (7,070) (4,793)
--------- --------- ----------
2,236 1,288 246
--------- --------- ----------
Tangible assets 106,237 102,286 96,733
Investments 12,815 14,259 12,366
--------- --------- ----------
121,288 117,833 109,345
--------- --------- ----------
Current assets
Stocks 117,616 102,238 95,742
Debtors 422,652 277,554 286,882
Cash at bank and in hand 65,834 118,012 92,072
--------- --------- ----------
606,102 497,804 474,696
Creditors: amounts falling due
within one year (429,299) (363,160) (320,569)
--------- --------- ----------
Net current assets 176,803 134,644 154,127
--------- --------- ----------
Total assets less current 298,091 252,477 263,472
liabilities
Creditors: amounts falling due
after more than one year (326) (852) (1,613)
--------- --------- ----------
Provision for joint venture
deficit
Share of gross assets 725 4,159 943
Share of gross liabilities (7,685) (8,280) (7,834)
--------- --------- ---------
(6,960) (4,121) (6,891)
Provision for liabilities and (22,190) (7,818) (9,696)
charges
--------- --------- ---------
Total assets less liabilities 268,615 239,686 245,272
========= ========= =========
Capital and reserves
Called up share capital 9,400 9,335 9,237
Share premium account 69,781 68,941 69,004
Capital redemption reserve 100 - 100
Profit and loss account 189,215 161,397 166,792
--------- --------- ---------
Shareholders' funds - equity 268,496 239,673 245,133
Minority interests - equity 119 13 139
--------- --------- ---------
268,615 239,686 245,272
========= ========= =========
Approved by the Board on 01 September 2003
MJ Norris, Chief Executive
FA Conophy, Finance Director
Group statement of cash flows
For the six months ended 30 June 2003
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
Cash inflow from operating 10,553 24,988 60,614
activities
Returns on investments and
servicing of finance (608) (718) (468)
Taxation
Corporation tax paid (10,253) (5,605) (17,485)
Capital expenditure and financial (10,866) (8,181) (9,097)
investment
Acquisitions and disposals (37,821) 7,643 7,559
Equity dividends paid (10,731) (5,324) (5,324)
---------- --------- ---------
Cash (outflow)/inflow before (59,726) 12,803 35,799
financing
Financing
Issue of shares 940 285 350
Repurchase of own shares - - (4,646)
Net Net repayment of capital (240) - (474)
element of finance leases
Decrease in debt - - (38,313)
---------- --------- ---------
(Decrease)/increase in cash in (59,026) 13,088 (7,284)
the period
========== ========= =========
.
Reconciliation of net cash flow to movement in net funds
For the six months ended 30 June 2003
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
Net funds at 1 January 2003 83,430 53,288 53,287
---------- --------- ---------
(Decrease)/increase in cash in (58,786) 13,088 (7,284)
the year
Cash outflow from repayment of
debt and lease finance (240) - 38,787
---------- --------- ---------
Change in net cash resulting from (59,026) 13,088 31,503
cash flows
New finance leases - - (1,164)
Amortisation of debt issue - (107) (196)
costs
---------- --------- ---------
Net funds at 30 June 2003 24,404 66,269 83,430
========== ========= =========
Analysis of changes in net funds
At 1 January Cash flows in At 30 June
2003 year 2003
#'000 #'000 #'000
Cash at bank and in hand 92,072 (26,238) 65,834
Bank overdrafts (7,626) (33,028) (40,654)
Finance leases (690) 240 (450)
Debt due after one year (326) - (326)
---------- --------- ---------
Total 83,430 (59,026) 24,404
========== ========= =========
NOTES TO THE ACCOUNTS
1 Accounting Policies
Basis of preparation
The unaudited interim financial information has been prepared on the basis of
the accounting policies set out in the Group's statutory accounts for the year
ended 31 December 2002. Certain comparative balance sheet information has been
reclassified so that property related liabilities are shown as provisions. The
taxation charge is calculated by applying the Directors' best estimate of the
annual tax rate to the profit for the period. Other expenses are accrued in
accordance with the same principles used in the preparation of the annual
accounts.
2 Turnover and Segmental Analysis
The Group operates in one principal activity, that of the provision of
information technology and related services. Turnover represents the amounts
derived from the provision of goods and services which fall within the Group's
ordinary activities, stated net of VAT.
An analysis of turnover, gross profit and operating profit by origin is given
below:
Turnover by Origin Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
UK 755,785 828,874 1,597,344
Germany - acquisition 316,008 - -
France 148,097 140,103 316,773
Austria - acquisition 27,362 - -
Belgium & Luxembourg 7,410 6,045 12,620
---------- ----------- -----------
Total 1,254,662 975,022 1,926,737
========== =========== ===========
Turnover by destination is not materially different to turnover by origin and
has, therefore, not been disclosed.
Gross Profit Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
UK 98,809 95,624 196,820
Germany - acquisition 46,439 - -
France 16,995 15,523 34,932
Austria - acquisition 3,245 - -
Belgium & Luxembourg 841 455 1,053
--------- ------------ -------
Total 166,329 111,602 232,805
========= ========= ---------
Operating Profit Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
UK 31,434 25,657 57,642
Germany - acquisition 3,228 - -
France (1,689) 225 2,389
Austria - acquisition (308) - -
Belgium & Luxembourg (214) (478) (3,864)
----------- ---------- -----------
Total group excluding
associate & joint venture
undertakings 32,451 25,404 56,167
Share of operating result of
associates and joint
venture 94 (174) (1,285)
----------- ---------- -----------
Total operating profit 32,545 25,230 54,882
=========== ========== ===========
3 Operating Costs
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
Decrease /(increase) in stocks of 12,243 (6,853) (357)
finished goods
Goods for resale and 879,521 765,976 1,484,202
consumables
Staff costs 201,009 124,427 227,175
Depreciation and other amounts
written off tangible and
intangible assets 10,020 8,737 16,758
Other operating charges 119,418 57,331 142,792
----------- --------- -----------
1,222,211 949,618 1,870,570
=========== ========= ===========
4 Interest receivable and similar income
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
Bank interest 1,284 2,843 5,802
Other interest receivable 285 - 1,565
-------- ---------- -------
1,569 2,843 7,367
------- ------- -------
5 Interest payable and similar charges
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
Bank loans and overdraft 704 5 3,256
Other loans 1,390 3,663 4,775
------- ------- -------
2,094 3,668 8,031
======= ======= =======
6 Tax on profit on ordinary activites
The charge based on the profit for the year comprises:
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
UK Corporation tax
Current 10,083 8,230 18,824
Deferred tax - - (446)
Foreign tax 315 - 35
---------- --------- ----------
10,398 8,230 18,413
Share of joint venture's tax (21) (56) (339)
---------- --------- ----------
10,377 8,174 18,074
========== ========= ==========
7 Earnings per share
The calculation of earnings per ordinary share is based on profit attributable
to members of the holding Company of #21,663,000 (2002: #16,236,000) and on
183,396,000 (2002: 183,160,000) ordinary shares, being the weighted average
number of ordinary shares in issue during the period after excluding the shares
owned by the Computacenter Employee Share Trust, Computacenter Trustees Limited
and the Computacenter Quest.
The diluted earnings per share is based on the same earnings figure of
#21,663,000 (2002: #16,236,000) and on 186,743,000 (2002: 188,368,000) ordinary
shares, calculated as the basic average number of ordinary shares, plus
3,347,000 (2002: 5,208,000 ) dilutive share options.
8 Investments
On 2 January 2003, Computacenter plc acquired GE CompuNet in Germany and GECITS
in Austria for an initial consideration of #37,153,000. As part of the on going
net asset valuation process, Computacenter plc anticipates receiving #34,436,000
from GE Capital, the vendors, resulting in a net consideration for the
acquisition of #2,717,000.
The assets of each of these companies have been included in the Group's balance
sheet at their provisional fair values at the date of acquisition. Further
consideration may be payable contingent on the results of the acquired
businesses dependent upon future profit performance.
Analysis of the acquisition of GE CompuNet and GECITS (Austria):
Net assets at date of acquisition:
Provisional
fair value to
group
Book value Adjustments
#'000 #'000 #'000
Tangible fixed assets 15,828 (5,547) 10,281
Current assets 138,029 (1,210) 136,819
Current liabilities (132,704) - (132,704)
Provisions - (11,679) (11,679)
------------- ----------- -----------
Net assets 21,153 (18,436) 2,717
Fair value of net consideration 2,717
Goodwill arising on acquisition -
==========
Adjustments relate to the adoption of Computacenter's group accounting policies
and recognition of property provisions.
9 Reconciliation of operating profit to operating cash flows
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'000 #'000 #'000
Operating profit 32,545 25,404 56,167
Depreciation 12,008 8,737 17,138
Impairment of listed investment - - 1,865
Amortisation of positive 142 224 449
goodwill
Impairment of positive goodwill - - 2,899
Amortisation of negative (2,130) (1,631) (3,728)
goodwill
Loss on disposal of fixed (1,143) - 110
assets
(Increase)/decrease in debtors (28,938) 18,283 8,955
Decrease/(increase) in stocks 13,176 (6,897) (282)
Decrease in creditors (15,994) (20,219) (23,708)
Currency and other adjustments 887 1,087 749
---------- ------------ ----------
Net cash flow from operating 10,553 24,988 60,614
activities
========== ============ ==========
10 Publication of non-statutory accounts
The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information for the full proceeding year is based on the
statutory accounts for the financial year ended 31 December 2002. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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