RNS Number:5129I
Computacenter PLC
15 August 2001
Wednesday 15th August 2001
COMPUTACENTER PLC
PRESS RELEASE
Interim Results Announcement
Computacenter plc, the specialist provider of IT infrastructure services to
large organisations, today announces its interim results for the six months
ended 30 June 2001.
Financial Highlights:
- Overall performance in line with expectations
- Sales of #1,173.7 million, up 26.6% (2000: #926.7 million)
- Operating profit from continuing operations of #38.8 million, up 78.0%
(2000: #21.8 million)
- Profit before tax of #34.0 million*, up 60.9% (2000: #21.2 million)
- Share of loss in Biomni of #1.4 million
- Exceptional charges of #3.4 million associated with the closure of the
iGroup
- Diluted EPS of 10.6 pence (2000: 7.1 pence)
- Cash generated from operations #56.0 million (2000: #36.4 million)
Operational Highlights:
- Exceptionally strong first quarter, evidence of downturn in second
quarter
- Improved profitability of European operations
- Higher proportion of UK revenues from Government Sector
- Growth in Managed Services revenues of 22.1%
- Hatfield logistics facility now fully operational
- Closure of the iGroup
Ron Sandler, Chairman of Computacenter plc, commented:
"The Group's overall performance in the first half of 2001 was in line with
expectations. Although these results are encouraging in aggregate, they
conceal a deterioration as the period progressed, as indicated at the time of
our trading update in June. Market conditions since the half year remain
similar to those experienced in May and June. Trading conditions and therefore
the outlook for profits in the second half are difficult to predict with
confidence. We have a strong and cash generative business, which is being
tightly managed to reflect market conditions. If trading continues at current
levels, we anticipate that Computacenter's profits* will be broadly similar to
those of last year"
*pre-exceptionals and Biomni
For further information, please contact:
Computacenter plc.
Mike Norris, Chief Executive 01707 631 601
Tulchan Communications 020 7353 4200
Andrew Grant, Julie Foster
The interim results statement will be posted on the website:
www.computacenter.com
Chairman's Statement
The Group's overall performance in the first half of 2001 was in line with our
expectations. Revenues of #1,173.7 million were 26.6 % ahead of the
corresponding period in 2000. Operating profit from continuing operations was
#38.8 million, an increase of 78.0% over the first half of last year. Prior to
losses of #1.4 million in our Biomni e-commerce joint venture and exceptional
charges of #3.4 million associated with the closure of the iGroup, profit
before tax increased by 60.9% to #34.0 million.
Although in aggregate these results are encouraging, they conceal a
deterioration in trading conditions as the first half progressed. Performance
in the early part of the year was exceptionally strong as the post-millennium
recovery in IT markets, which began in the latter half of 2000, continued to
gain momentum. The Group experienced buoyant demand for its products and
services, across all parts of the business, in the first quarter.
As we indicated at the time of our trading update in June, the first signs of
a significant slowdown became evident in April, as the weaker demand pattern
prevalent in the US started to appear in Europe. This was reflected in the
Group's second quarter performance. Sales of Unix systems were particularly
affected, as a result of the downturn in e-business investment. More
generally, in a climate of growing economic uncertainty, a slowdown in
corporate spending on IT development and deployment was experienced, most
noticeably in the telecoms and investment banking sectors. In recognition of
market conditions, Computacenter has continued to pay close attention to
keeping costs under tight control and, even allowing for the growth in on-site
Managed Services personnel, Group headcount during the period has been
essentially static.
During the first half, the decision was taken to close the iGroup, a
specialist e-business operation, which produced an operating loss of #5.0
million in the period. The decline in e-business investment meant that the
iGroup was no longer viable as a separate division. Some of its hosting
services have been transferred to Computacenter's core UK operations and its
knowledge management software activities, which had operating losses of #3.4
million, have been discontinued.
The Group's balance sheet remains strong. Cash generated from operations was #
56.0 million. Capital expenditure and investments amounted to #7.1 million.
For some years, Computacenter has pursued a strategy of adding services to its
core product logistics business. Our longstanding customer relationships and
the scale and depth of our technical resource leave us well placed to service
our customers' complex and diverse IT infrastructure requirements, which
encompass desktops, datacentres and networks.
It is pleasing to note the further progress made in the first half of the year
in the development of the Group's service activities. In the UK, revenues from
Managed Services contracts, where we manage elements of our customers' IT
support on their behalf, increased by 22.1% over the same period last year.
Investment in the development of skills, management tools and best practices
continued to be a high priority, and this is reflected in the ever-increasing
scope and complexity of the contracts we secure. Our recent success in
winning, together with CMG, the infrastructure management contract for the
Health and Safety Executive is particularly noteworthy, in that it is the
first ten-year contract awarded to the Group.
In our Professional Services activities, we have placed considerable emphasis
on delivering repeatable infrastructure solutions in such areas as server
consolidation, datacentre integration and business availability.
We continued to gain market share in France, where turnover, at #117.1 million
was 30.7% ahead of the same period last year, and operating profit was #2.1
million, compared with an operating loss of #1.2 million for the first half of
2000. A similar improvement in performance was seen in Germany, where
first-half losses were reduced from #1.8 million in 2000 to #0.6 million in
2001. A restructuring of Computacenter Germany, involving the closure of two
branches and a stronger focus on Unix and networking products, contributed to
this improvement. In all of our continental operations, the strategic emphasis
continues to be upon the development of the services offering to complement
the product supply business, following the path that the Group is pursuing
successfully in the UK.
The market downturn experienced in the second quarter was significant. Market
conditions since the half year remain similar to those experienced in May and
June. Trading conditions and therefore the outlook for profits in the second
half are difficult to predict with confidence. We have a strong and cash
generative business, which is being tightly managed to reflect market
conditions. If trading continues at current levels, we anticipate that
Computacenter's profits for 2001, before exceptional costs and the share of
losses in Biomni, will be broadly similar to those of last year.
The success of Computacenter is crucially dependent upon the skills,
resourcefulness and commitment of our staff, to whom I offer my thanks and
appreciation. The volatility of market conditions in the IT industry in the
past two years has placed considerable demands on our people, and their
response has been thoroughly praiseworthy in every respect.
Finally, this is an appropriate place to record, on behalf of everyone
involved with Computacenter, our thanks and best wishes to Philip Hulme, who
stepped down from his role as Executive Chairman after the AGM earlier this
year. Philip's contribution to Computacenter, from its foundation twenty years
ago through its public flotation and beyond, has been immense. I am delighted
that Philip has agreed to remain on the board as a non-executive director, and
I look forward to continuing to work with him in this capacity.
Ron Sandler
Chairman
UK operations
In the UK, the market recovery that began in the second half of 2000 continued
into the first half of 2001, particularly in the first quarter. Much of this
was driven by our customers' needs for an integrated array of infrastructure
services. For example, Boots awarded Computacenter a major desktop
infrastructure implementation project covering 10,000 users worldwide. As well
as product supply, the contract covers technical consultancy and application
migration services around Microsoft Windows 2000.
Many of our business-critical infrastructure projects rely on the integration
of complex enterprise-class technologies. We achieved significant growth in
our enterprise business, involving procurement, integration and consultancy
projects for customers including Bristol & West and the Bank of Scotland.
The provision of selective outsourcing services is an important component of
our focus on reducing the cost and increasing the value of IT for our
customers. For Shell Services International, for example, we were awarded the
UK roll-out of a major standardisation programme and a managed services
contract to support the new infrastructure.
Interest in our outsourcing services was not confined to the corporate sector.
The Traffic Area Network (TAN) unit of the Department of Transport, Local
Government and the Regions (DTLR) awarded us a five-year contract for the
support of the unit's entire desktop and server infrastructure, including the
maintenance and management of all applications and network connectivity.
We also won significant business in our traditional product supply activity,
where we are increasingly finding opportunities to take on a managed
procurement role. In another important public sector win, Consignia appointed
us as sole supplier for the procurement of all its hardware and software.
First half revenues from government business in the UK increased markedly over
the same period last year, with the proportion of Computacenter's UK revenues
derived from government clients increasing from 14.3% to 23.0%. Although
government business is generally lower margin by virtue of its lesser service
content, the relative buoyancy of this sector offers the Group some degree of
protection against the current downturn in corporate spending.
We expect to obtain significant benefits from our new Hatfield Operations
Centre, which represents a substantial investment in state-of-the-art
logistics and configuration technology. The facility, which is now fully
operational, enables the provision of faster, lower cost product delivery, and
an enhanced range of customised services, from managed configuration to
build-to-order.
To facilitate services growth and enhance our operational and marketing
effectiveness, the first six months of 2001 saw Computacenter successfully
implement a major re-organisation in the UK. Following the restructure, in
which our operating divisions were brought together into a single
customer-facing organisation, we have been engaged in a thorough review of
market requirements. This has included an audit of our services to ensure they
are underpinned by appropriate skills and tool sets, and that they represent
industry best practice.
A further development in the UK was the closure of the iGroup, and the
transfer of some of its hosting services to our enterprise division.
Computacenter remains committed to helping its customers manage their
e-commerce operations on stable, reliable, and scaleable IT infrastructures.
International operations
Our European businesses experienced broadly similar market conditions to those
in the UK and both France and Germany outperformed significantly the same
period last year. While our services business is less mature in Europe than
the UK, we were pleased to see some important integration and support wins in
the first half of 2001.
In France, Computacenter continued to win market share. There was good support
services growth across our French client base, as well as some noteworthy
supply wins, including contracts with the French army and with Alcatel,
covering over 100,000 and 40,000 users respectively. We expect the French
business to perform according to plan in the second half.
In Germany, following the rationalisation of branches in January, half-year
results are ahead of expectations. The strategy of placing greater emphasis on
services and enterprise activities is showing promise, and we were pleased to
implement our first enterprise-class Sun systems in Germany.
The performance of our Belgium and Luxembourg business was disappointing,
largely due to the complexities of integrating the acquired service activities
with Computacenter's traditional product supply business.
Other businesses
The addition of a technology asset recycling and remarketing service, via the
acquisition of RDC in 1999, enables Computacenter to offer cradle-to-grave IT
management. RDC volumes increased significantly in the first half of the year,
with the organisation processing over 320 tonnes of IT waste in the period,
60% being recycled for re-use. RDC became the first company in its field to
receive BSI ISO 9002 certification for its entire UK operation earlier this
year.
Our distribution business, CCD, which offers products and logistics services
to resellers, enjoyed a strong first half with revenues exceeding #150m. The
performance of Metrologie, the value-added enterprise distributor acquired in
1999, was particularly pleasing.
Biomni, our joint venture with Computasoft e-Commerce Ltd, continued to make
encouraging progress, including full-scale implementations of its
e-procurement solutions at Wincanton plc and the Foreign and Commonwealth
Office. In the first half, the company grew its revenues by over 100% on the
same period last year and continued to build a client base independent of
Computacenter, adding over 20 new customers to its B2B e-commerce community.
Appointments
There have been some significant new senior appointments this year. In June,
Tim Way joined Computacenter as Director of HR and Customer Satisfaction and
in August, Mark Slaven joins us as Director of Information Systems.
I am pleased to welcome Ron Sandler as our new Chairman. Since joining the
board last year, Ron has made a significant contribution to Computacenter and
his wide business experience will continue to prove invaluable.
Mike Norris
Chief Executive
GROUP PROFIT AND LOSS ACCOUNT
For the six months ended 31 June 2001
Unaudited Unaudited Audited
Six Six Year
months months Ended
Ended Ended 31 Dec
30 June 30 June 2000
2001 2000
#'000 #'000 #'000
TURNOVER
Turnover: group and share of joint ventures 1,175,570 927,487 1,990,620
turnover
Less: share of joint venture turnover (1,917) (762) (2,173)
Continuing Operations: 1,172,012 926,622 1,988,052
Discontinued operations 1,641 103 395
GROUP TURNOVER 1,173,653 926,725 1,988,447
OPERATING COSTS (1,138,233) (905,354) (1,927,040)
OPERATING PROFIT/ (LOSS)
Continuing operations 38,844 21,821 65,925
Discontinued operations (3,424) (450) (4,518)
GROUP OPERATING PROFIT 35,420 21,371 61,407
Share of operating loss in joint venture (1,420) (1,970) (3,551)
Share of operating profit in associate 40 65 90
TOTAL OPERATING PROFIT: GROUP AND SHARE OF 34,040 19,466 57,946
ASSOCIATE AND JOINT VENTURE
Exceptional loss on termination of operation (3,362) - -
PROFIT ON ORDINARY ACTIVITIES BEFORE 30,678 19,466 57,946
INVESTMENT INCOME, INTEREST AND TAXATION
Interest receivable and similar income 2,851 3,310 6,343
Interest payable and similar charges (4,270) (3,589) (8,718)
PROFIT ON ORDINARY 29,259 19,187 55,571
ACTIVITES BEFORE TAXATION
Tax on profit on ordinary activities (9,457) (5,897) (16,348)
PROFIT ON ORDINARY 19,802 13,290 39,223
ACTIVITIES AFTER TAXATION
Minority interests - equity (6) 41 14
PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT 19,796 13,331 39,237
COMPANY
Dividends - ordinary dividends on equity (52) (31) (5,269)
shares
RETAINED PROFIT FOR 19,744 13,300 33,968
THE PERIOD
Earnings per share
- Basic 11.0p 7.5p 22.0p
- Diluted 10.6p 7.1p 20.8p
Diluted (Excluding impact of joint venture) 11.1p 7.8p 22.1p
Diluted (Excluding impact of joint venture 12.4p 7.8p 22.1p
and effect of termination costs)
Dividends per ordinary share - - 2.9p
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the six months ended 31 June 2001
Unaudited Unaudited Audited
Six Six Year
months months Ended
Ended Ended 31 Dec
'30 June 30 June 2000
2001 2000
#'000 #'000 #'000
Profit for the financial period excluding 20,736 15,236 41,633
share of joint venture and associate
Share of joint venture's loss for the period (980) (1,970) (2,486)
Share of associates profit for the period 40 65 90
Profit attributable to members of the parent 19,796 13,331 39,237
company for the financial period
Exchange differences on retranslation of net (214) 64 (75)
assets of associated and subsidiary
undertakings
Total Recognised gains for the period 19,582 13,395 39,162
GROUP BALANCE SHEET
At 30 June 2001
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
'30 June 30 June 31 Dec
2001 2000 2000
#'000 #'000 #'000
FIXED ASSETS
Intangible assets 6,067 6,988 6,227
Tangible assets 106,931 106,564 109,402
Investments 12,888 9,229 11,825
125,886 122,781 127,454
CURRENT ASSETS
Stocks 97,425 76,865 119,563
Debtors 281,688 288,335 339,623
Cash at bank and in hand 109,422 79,536 71,647
488,535 444,736 530,833
CREDITORS: amounts falling due (346,196) (341,151) (410,095)
within one year
NET CURRENT ASSETS 142,339 103,585 120,738
TOTAL ASSETS LESS CURRENT LIABILITIES 268,225 226,366 248,192
CREDITORS: amounts falling due after more (38,335) (39,863) (39,504)
than one year
PROVISION FOR JOINT VENTURE DEFICIT
Share of gross assets 3,927 943 3,455
Share of gross liabilities (7,375) (2,888) (5,923)
(3,448) (1,945) (2,468)
PROVISION FOR LIABILITIES (1,931) (1,736) (1,983)
AND CHARGES
TOTAL ASSETS LESS LIABILITIES 224,511 182,822 204,237
CAPITAL AND RESERVES
Called up share capital 9,251 9,170 9,201
Share premium account 68,256 66,733 67,568
Profit and loss account 146,836 106,782 127,304
Shareholders' funds - equity 224,343 182,685 204,073
Minority interests - equity 168 137 164
224,511 182,822 204,237
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2001
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 30 June 31 Dec
2001 2000 2000
#'000 #'000 #'000
CASH INFLOW FROM OPERATING ACTIVITIES 55,989 36,408 54,277
RETURNS ON INVESTMENTS AND SERVICING OF (1,312) 1,894 (2,164)
FINANCE
TAXATION
Corporation tax paid (6,050) (5,281) (19,625)
CAPITAL EXPENDITURE AND FINANCIAL (7,120) (20,676) (35,983)
INVESTMENT
ACQUISITIONS AND DISPOSALS - (2,870) (702)
EQUITY DIVIDENDS PAID (5,292) (5,231) (5,229)
CASH OUTFLOW BEFORE FINANCING 36,215 4,244 (9,426)
FINANCING
Issue of shares 737 1,029 1,895
Decrease in debt - - (1,500)
INCREASE/ (DECREASE) IN CASH IN THE 36,952 5,273 (9,031)
PERIOD
GROUP STATEMENT OF CASHFLOWS
For the six months ended 30 June 2001
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Unaudited Unaudited Audited
Six Six Year
months months Ended
Ended Ended 31 Dec
30 June 30 June 2000
2001 2000
#'000 #'000 #'000
Net funds at 1 January 2001 13,407 21,152 21,152
Increase/ (decrease) in cash in the period 36,952 5,273 (9,031)
Cash outflow from repayment of debt and
lease finance - - 1,500
Change in net cash resulting from cash
flows 36,952 5,273 (7,531)
Amortisation of debt issue costs (108) (107) (214)
Net funds at 30 June 2001 50,251 26,318 13,407
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
Basis of preparation
The 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 2000. The taxation charge is calculated by applying the
Director's 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 distributed 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 by destination and origin, operating profit and
net assets is given below:
Turnover by Destination Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2001 30 June 2000 31 Dec
2000
#'000 #'000 #'000
UK
Continuing 1,002,148 790,972 1,668,536
Discontinued 1,641 103 395
Total 1,003,789 791,075 1,668,931
France, Belgium & Luxembourg 122,304 92,088 225,311
Germany 45,536 35,433 77,639
Rest of the World 2,024 8,129 16,566
Total 1,173,653 926,725 1,988,447
Turnover by Origin Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2001 30 June 2000 31 Dec
2000
#'000 #'000 #'000
UK
Continuing 999,366 799,380 1,686,143
Discontinued 1,641 103 395
Total 1,001,007 799,483 1,686,538
France, Belgium & Luxembourg 125,593 92,754 227,210
Germany 47,053 34,488 74,699
Total 1,173,653 926,725 1,988,447
Operating Profit Unaudited Unaudited Audited
Six Six Year
months months Ended
Ended Ended 31
30 June 30 June Dec
2001 2000 2000
#'000 #'000 #'000
UK
Continuing 37,833 25,185 68,179
Discontinued (3,424) (450) (4,518)
Total 34,409 24,735 63,661
France, Belgium & Luxembourg 1,636 (1,612) 1,215
Germany (625) (1,752) (3,469)
Total group excl associate 35,420 21,371 61,407
& Joint Venture undertakings
Share of operating result (1,380) (1,905) (3,461)
of associates and joint venture
Total operating profit 34,040 19,466 57,946
3. OPERATING COSTS
Unaudited Unaudited Audited
Six Six Year
months months Ended
Ended Ended 31 Dec
30 June 30 June 2000
2001 2000
#'000 #'000 #'000
Decrease/(Increase) in stocks
of finished goods 22,138 16,018 (26,679)
Goods for resale and consumables 919,381 714,216 1,586,023
Staff costs 141,736 98,978 222,454
Depreciation and other amounts
written off
tangible and intangible assets 8,592 6,236 13,465
Other operating charges 46,386 69,906 131,777
1,138,233 905,354 1,927,040
4. INTEREST RECEIVABLE AND SIMILAR INCOME
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2001 30 June 2000 31 Dec 2000
#'000 #'000 #'000
Bank interest received 2,851 3,310 6,343
5 INTEREST PAYABLE AND SIMILAR CHARGES
Unaudited Unaudited Audited
Six Six Year
months months Ended
Ended Ended 31 Dec
30 June 30 June 2000
2001 2000
#'000 #'000 #'000
Bank loans and overdraft 393 301 433
Other loans 3,877 3,288 8,284
Finance charges payable under finance leases - - 1
and hire purchase contracts
4,270 3,589 8,718
6 TAX ON PROFIT ON ORDINARY ACTIVITES
The charge based on the profit for the period comprises:
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 2001 30 June 2000 31 Dec 2000
#'000 #'000 #'000
UK Corporation tax
Current 9,897 6,488 17,118
Deferred tax - - 247
Foreign tax - - 48
9,897 6,488 17,413
Share of Joint Venture's tax (440) (591) (1,065)
9,457 5,897 16,348
The tax effect in the profit and loss account relating to the exceptional item
recognised below operating profit is a credit of #1,042,081
7. EARNINGS PER SHARE
Additional earnings per share ratios of 11.1p and 12.9p were calculated to
provide a better view of group activities. The ratio of 11.1p is based on
earnings of #20,783,436, which excludes the joint venture loss (#1,420,258 and
the related tax credit #440,280). The ratio of 12.4p is based on earnings of #
23,102,907, which excludes the joint venture loss (#1,420,258 and related tax
credit #440,280) and the effect of the termination cost (#3,361,552 less the
tax credit of #1,042,081).
8 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
30 June 30 June 31 Dec
2001 2000 2000
#'000 #'000 #'000
Operating profit 35,420 21,371 61,407
Depreciation 8,432 6,143 13,202
Amortisation 160 93 263
Own shares allocated - - 176
Loss/(profit) on disposal of fixed 56 - 87
assets
Loss on termination of business (1,166) - -
operation
Increase/ (decrease) in debtors 57,936 (44,074) (95,130)
(Increase)/decrease in stocks 22,138 16,018 (26,679)
Increase/(decrease) in creditors (66,886) 36,797 101,053
Currency and other adjustments (101) 60 (102)
Net cash inflow from operating
activities 55,989 36,408 54,277
9. 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 preceding year is based on the
statutory accounts for the financial year ended 31 December 2000. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
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