Computacenter Sees '08 Pretax Profit Ahead Of Market Views

Computacenter PLC (CCC.LN) Tuesday reiterated its positive outlook and said it expects 2008 full-year adjusted pretax profit to be "materially ahead" of market expectations, sending its shares sharply higher.

In a trading statement, the company said group adjusted pretax profit for the year ended Dec. 31 is expected to beat consensus estimates of GBP38.1 million, with group adjusted operating profitmarginally ahead of 2007 when it was GBP12.82 million.

At 1120 GMT, Computacenter shares were trading up 18% or 14.5 pence to 96.5 pence against a flat FTSE All Share Technology index.

The Hatfield, England-based IT services firm, which is chiefly focused on the U.K. market, also said it remained confident of its performance in Germany on greater demand for its computer services division while lower tax rates should bolster its overall European performance.

In addition, it said its full-year numbers would benefit from some one-off tax benefits in the U.K. while at the same time taking advantage of the greater margins from server and custom hardware sales.

However, while the company said its U.K. sales grew by 2.5% to GBP1.39 billion at the end of last year, it cautioned that the French division would require a "strategic change" to deliver long term profitability.

"Our pipeline is pretty strong, the vast majority of contracts we won towards the end of 2008 are for five years and they won't show up on the balance sheet until our interims", said chief executive Mike Norris in an interview with Dow Jones Newswires.

"We've noticed that a lot of our investment bank clients have polarised, they're either pushing the boat out with spending and going long or they're cutting back with transactions completely; the former is obviously more beneficial to us," Norris said.

The group, said that it had incurred bad debt of GBP1.2 million, following the bankruptcy of a major financial services client last year. Its customers in the financial segment include Royal Bank Of Scotland (RBS.LN), HBOS (HBOS.LN) and Banco Santander (SAN.ES). Other clients include Channel 4, Deutsche Telekom's (DT) T-Mobile, BAE Systems PLC (BA.LN) and U.K. councils and government offices.

"Our drive now is really to reduce our costs, and up our margins by growing our services division, we're managing our resources as efficiently as possible and acknowledge that there is much work to be done in the French division" Norris said.

Computacenter's decision to stop the trade distribution of personal computers and printers and instead focus its distribution business on server, storage and associated products with higher margins is likely to reduce its 2009 revenue by around GBP70 million, but won't hit operating profits.

"The group will stand to benefit from tweaking its business model, it now aims to focus on a 'customer intimacy' program where it will taylor its services specifically to clients", said George O'Connor, an analyst at Panmure Gordon.

"By cutting its orders for computers and focusing mainly on its servers and services business the group will get better returns with the higher margins. Structurally the group is in better shape after its restructuring incentives although it's still competing in a very unsettled macro-economic climate," O'Connor said.

Company Web site: www.computacenter.com

-By Elliott Ball, Dow Jones Newswires; 44-20-7842-9314; elliott.ball@dowjones.com

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