TIDMCCC
RNS Number : 2255H
Computacenter PLC
12 March 2015
Computacenter plc
2014 Final Results
Computacenter plc ("Computacenter" or the "Group"), the
independent provider of IT infrastructure and services that enables
users, today announces its final results for the twelve month
period ended 31 December 2014.
Financial Highlights
FY 2014 FY 2013 Change
Financial Key Performance Indicators **
Group revenue (GBP million) 3,107.8 3,072.1 1.2%
Adjusted* profit before tax
(GBP million) 85.9 81.7 5.1%
Adjusted* diluted earnings
per share (pence) 46.8 43.3 8.1%
Dividend (pence per share)
*** 19.0 17.5 8.6%
Statutory Performance **
Statutory profit before tax
(GBP million) 76.4 50.5 51.3%
Exceptional Items (GBP million) (7.6) (28.8) 73.6%
Statutory diluted earnings
per share (pence) 40.0 23.0 73.9%
Cash Position
Net funds (GBP million) 119.2 71.4 66.9%
Revenue Performance by Sector
**
Group Services revenue (GBP
million) 985.5 965.9 2.0%
Group Supply Chain revenue
(GBP million) 2,122.3 2,106.2 0.8%
Reconciliation between the Group's Adjusted* and Statutory
Performance in FY 2014
Adjusted* profit before tax (GBP
million) 85.9
Exceptional Item: Estimated costs
of
restructuring in French business
(GBP million) (9.1)
Exceptional Item: Release of
provision taken
for onerous German contracts
(GBP million) 1.5
Amortisation of acquired intangibles
(GBP million) (1.9)
Statutory profit before tax (GBP
million) 76.4
Operational Highlights:
-- The Group reported record revenues of GBP3.1 billion,
following a fifth successive year of revenue growth
-- Services revenue up by 4.8 per cent in constant currency to
GBP985.5 million, and by 2.0 per cent on an as reported basis
-- UK reported strong revenue and profit growth across both services and supply chain
-- The overall performance in Germany was disappointing,
although the business finished the year strongly and enters 2015 in
a more positive position than it started 2014
-- Poor performance by the French business, and charge of GBP9.1
million taken in respect of the comprehensive restructuring in
France to improve competitiveness
-- Post the year-end, the Group completed a GBP100 million
Return of Value to shareholders, driven by the disposal of our
non-core asset R.D Trading Limited and our strong cash generation
through the year
* Adjusted profit before tax and adjusted diluted earnings per
share is stated prior to exceptional items and amortisation of
acquired intangibles. Adjusted operating profit is also stated
after charging interest on customer specific financing.
** Figures provided are on an as reported basis.
*** Please note that the dividend (pence per share) figures
provided have not been adjusted for the share capital consolidation
that took place on 20 February 2015. The dividend (pence per share)
figures for 2013 and 2014, as adjusted for the share capital
consolidation, have been provided within the Chief Executive's
Performance Review under the section entitled 'Dividend'.
Mike Norris, Chief Executive of Computacenter plc,
commented:
'The ongoing strategic development of the Group, the associated
investments it has made since the beginning of 2013 and our recent
services wins, particularly in the UK but also more latterly in
Germany, gives us confidence for the future.
The short-term will not be without its challenges. In the UK,
there will be a significant number of our 2014 services wins taken
on during this year, and these will take time to mature. Whilst we
are encouraged by the fourth quarter performance in Germany, it is
too early to tell whether this is a substantial move in the right
direction, or simply represents a good quarter.
The Group has transitioned over the last few years to become a
business with greater visibility of earnings due to increased
services content. Our French business clearly remains in the early
stages of making this transition, and whilst it has a small number
of attractive existing contracts, it otherwise remains out of date
and uncompetitive. Whilst we are confident of reducing the loss
materially in France during 2015, a return to profitability is some
way off.
However, our business remains highly cash generative, as
evidenced by the recent Return of Value to shareholders, and
notwithstanding the challenges outlined above, we are determined to
make 2015 a year of progress for the Group.'
Enquiries:
Computacenter plc:
Mike Norris, Chief Executive 01707 631601
Tony Conophy, Finance Director 01707 631515
Tulchan Communications:
James Macey White 0207 353 4200
Chairman's Statement
2014 saw excellent progress in our UK business, where the
Contractual Services contract base grew by 9.9 per cent, as we won
a number of significant bids and expanded our customer base. In
Germany, our focus on the long term and integrating processes into
our Group model delivered encouraging progress, and in France we
were uncompetitive and undertook a restructuring programme in the
second half of the year to address this. Nevertheless, we delivered
solid financial results at a Group level, whilst making appropriate
investments in our services offerings and risk management.
We are here to enable users of IT and support Chief Information
Officers ("CIOs") in their increasingly demanding tasks. To that
end we have, and will continue to, invest in our service
capability, mobile platform management, cloud and security
capabilities.
We seek continued improvement in our financial performance in
2015, as we continue on our long haul journey. Our ambition is to
become Europe's preferred IT services provider. As with all great
ambitions it should always be tantalisingly close, but we are
determined never to declare victory in its pursuit.
After the year closed, we announced the sale of our recycling
business, R.D. Trading Limited, and an agreement to continue using
its services under new ownership. The proceeds of that sale and our
healthy cash generation in 2014 have allowed us to propose and
deliver a return of GBP100 million to shareholders, just 18 months
or so after returning GBP75 million. We will continue to manage
this enterprise, which has no debt, with a relentless focus on
working capital improvement and winning business. We owe you, our
shareholders, customers and employees no less. I thank all three
constituents for your faith, business, hard work and talent
respectively.
Greg Lock
Chairman
11 March 2015
Chief Executive's Performance review
Group
2014 was a year of solid financial progress for the Group, in
which it continued to focus on, and invest in, its strategy of
delivering organic revenue and profit growth, primarily through its
IT Services business.
Turnover, Adjusted* and Statutory Financial Performance
Total revenue grew for the fifth successive year, increasing by
1.2 per cent on a reported basis to GBP3.108 billion, and by 4.2
per cent in constant currency.
The Group's adjusted* profit before tax increased on an as
reported basis by 5.1 per cent to GBP85.9 million, and by 6.8 per
cent in constant currency. This increase in profitability resulted
in the Group's adjusted* diluted earnings per share increasing by
8.1 per cent to 46.8 pence in 2014.
On a statutory basis, taking account of exceptional items and
the amortisation of acquired intangibles, the Group made a profit
before tax of GBP76.4 million, which represented an increase of
51.3 per cent against the comparative performance in 2013 on an as
reported basis. This increase resulted in the Group's diluted
earnings per share increasing by 73.9 per cent to 40.0 pence in
2014.
Revenue and operating profit growth performance varied across
our main operating geographies during the year. Adjusted* operating
profit growth of approximately 16.5 per cent in the UK more than
offset the reduction in adjusted* operating profit of 8.0 per cent
in constant currency (reduction of 12.4 per cent on an as reported
basis) in the Group's German business. In France, the level of
adjusted* operating loss increased on a constant currency basis by
27.9 per cent to EUR11.0 million (2013: adjusted* operating loss of
EUR8.6 million) and by 20.5 per cent on an as reported basis, as
the completion of a restructuring exercise to reduce our cost base
and make the business more competitive and the ongoing rigorous
implementation of our Group Operating Model has created short-term
disruption and uncertainty throughout the year.
During the year, the Group incurred GBP7.6 million (2013:
GBP28.8 million) of exceptional items. These included GBP9.1
million of exceptional costs relating to the estimated final costs
of the restructuring that the Group undertook within its French
business in the second half of the year. The actual final costs of
the restructuring will not be known until the end of 2015 at the
earliest.
As announced by the Group in July 2014, its French business was
uncompetitive due to the size of its cost base which impacted its
cost and pricing models, and therefore its ability to win new
business. As the main driver of growth across the Group has been
its ability to win large international services contracts with
customers headquartered in Western Europe, failure to address this
issue would have impacted the competitiveness of the Group on such
bids going forward. This exercise will enable a fundamental
re-shaping of the business which will provide a solid foundation
for it to provide our core Group services offerings to our target
customer market. It lowers our cost base and alters our
organisational and reporting structure to support the primary aim
of maintaining the competitiveness of the wider business in
achieving our goals.
Additionally, the Group's three onerous contracts entered into
by its German business have performed within the provision
previously taken for the losses expected to be incurred on them
from July 2013 to the end of the contracts. As a result of ongoing
operational improvements on these contracts during 2014, and the
conclusion of one of the contracts and settlement of an associated
legal dispute during Q3 2014, we have released as an exceptional
item GBP1.5 million of the provision taken. In line with our
approach of developing and maintaining our customer relationships
over the long-term, we are pleased that we have managed to improve
materially the levels of customer satisfaction in respect of each
of these contracts from that being achieved at the time the
provision was taken.
Services Performance
Group services revenue increased by 2.0 per cent on an as
reported basis to GBP985.5 million, and by 4.8 per cent in constant
currency. As a result, our services business now represents 31.7
per cent of total Group revenue.
The Group continues to focus on leading with its services
offerings, and increasing its capability to enable, and improve the
IT experience of the users of large corporate organisations
headquartered in Western Europe, wherever they operate globally and
locally. We have continued to invest in our related tools and
processes, especially in the areas of IT self-service automation
and mobility. Our primary focus on end-users, and our plans for
innovation and development in this area, has resonated well with
existing and prospective customers.
Our services business in the UK continued to flourish in 2014,
benefitting from its growing reputation for delivering operational
excellence to customers. The team has delivered a number of
significant Managed Services wins during the year, which has
resulted in associated transformational IT project and consulting
work, and incremental Supply Chain business. The UK Professional
Services forward order book has, for a second consecutive year,
finished at a record high level.
Revenue within our services business in Germany was flat,
largely as a result of the Group's decision to selectively bid for
Managed Services opportunities in Germany in 2013, so that
appropriate focus and resource could be dedicated to the
implementation of our Group Operating Model. We are particularly
encouraged by the strengthening of the Managed Services pipeline
throughout the year, which should underpin services growth in 2015.
Our strong consulting capabilities in Germany allowed our
Professional Services business there to grow by almost 10 per cent
in constant currency, and by 4.4 per cent on an as reported
basis.
Our service quality in France has improved during the year,
assisted by the availability of Group Management input. However,
general market conditions in France have remained difficult and we
have continued to suffer from poor service quality delivered by the
business in 2013, albeit that service quality has now improved. The
loss of a number of small services contracts during the year has
reduced utilisation of the Group's central services delivery
engines, and as a result, the services margins delivered by the
French business have been, and remain, poor. Our priority in 2015
will be to rebuild our services pipeline in France.
Supply Chain Performance
In 2014, Supply Chain revenue across the Group grew by 0.8 per
cent on an as reported basis to GBP2,122.3 million, and by 4.0 per
cent in constant currency.
This was principally driven by a strong performance,
particularly during the first half of the year, by the UK business,
which benefitted from Supply Chain demand from new Managed Services
wins, and improving conditions for business generally in the UK.
The Supply Chain performance of our German business was especially
disappointing during the first half of 2014, but improved
significantly in the fourth quarter of the year. Our Supply Chain
performance is reliant on the short and medium-term buying
behaviour of our customers.
Whilst Supply Chain revenues grew in our French business during
2014, a significant proportion of this business remains in
low-margin, working capital intensive deals. The performance is
also flattered by a quiet second half of 2013. We have taken action
to alter both the product and customer mix in this area, to build
on the delivery of efficiencies generated as a result of
implementing the Group Operating Model.
Investments
We have continued to spend principally to achieve three
outcomes. Firstly, to enable and improve the IT experience of our
customers' end-users, through the use of innovation and development
of our tools such as our Next Generation Service Desk and Mobile
offerings.
Secondly, we have invested in our global reach, and expanded our
capacity, to serve our customers' needs wherever they operate in
the world. This has included the opening of new service desk
locations in Montpellier (France), Budapest (Hungary) and Pittston
(USA), as well as increasing the capacity at existing locations in
Kuala Lumpur (Malaysia) and Cape Town (South Africa). Thirdly, we
have invested in the relentless standardisation of our processes
and procedures across the Group, including the roll-out of our
Group service desk platform across our businesses.
Cash Position
Cash flow was again strong during the period, but particularly
over the second half of 2014. Group net funds increased during the
year by GBP47.8 million, to GBP119.2 million.
POST-YEAR END EVENTS
Sale of R.D. Trading Limited
On 2 February 2015, the Company announced that its UK business
had completed the disposal of the entire issued share capital of
R.D. Trading Limited ("RDC") to Arrow Electronics UK Holding
Limited for a total consideration of GBP56 million. This followed a
year of good progress at RDC, with total adjusted* operating profit
up during the reporting period by 29.8 per cent to GBP4.8 million
(2013: GBP3.7 million).
RDC's business provides IT Disposal and Asset Recovery Services,
which are focused on generating value from used information and
communication technologies, and creating an environmentally
sustainable disposal solution for anything unsuitable for re-use.
These activities are non-core to the Group, and the disposal will
allow the Company to focus its investment for growth on the
delivery and implementation of its services-led strategy.
Return of value to shareholders
The Group's strong levels of cash generation during the
reporting period, alongside the sale of RDC, has allowed the
Company to announce its second significant one-off return of value
to shareholders in two years. This Return of Value, totalling
approximately GBP100 million, or 71.9 pence for every share held as
at the close of trading on 19 February 2015, has now been
successfully completed. As part of the Return of Value, an
associated share capital reorganisation took place on 20 February
2015, whereby every 17 ordinary shares of 6 (2) /(3) pence each in
the Company were effectively consolidated into 15 ordinary shares
of 7 (5) /(9) pence each. The Board will continue to evaluate the
requirement to maintain an efficient balance sheet, and endeavour
to use our ability to generate free cash in order to deliver
incremental value to our shareholders.
Dividend
The Board has proposed a final dividend of 13.1p per share. The
interim dividend paid on 17 October 2014 was 5.9p per share (the
"Interim Dividend Amount"). Adjusting this payment for the share
consolidation on 20 February 2015 (the "Share Consolidation")
increases the Interim Dividend Amount to 6.7p, resulting in a total
dividend per share of 19.8p, for those shares in existence
immediately after the Share Consolidation. The total dividend per
share for 2013 was 17.5p per share or 19.6p per share on a pro
forma basis, after taking account of the Share Consolidation. The
Board has consistently applied the Group's Dividend Policy, which
states that the total dividend paid will result in a dividend cover
of 2 to 2.5 times. Subject to the approval of our shareholders at
our Annual General Meeting on Tuesday 19 May 2015, the proposed
dividend will be paid on Friday 19 June 2015. The dividend record
date is set on Friday 22 May 2015, and the shares will be marked
ex-dividend on Thursday 21 May 2015.
Outlook
The ongoing strategic development of the Group, the associated
investments it has made since the beginning of 2013 and our recent
services wins, particularly in the UK but also more latterly in
Germany, gives us confidence for the future.
The short-term will not be without its challenges. In the UK,
there will be a significant number of our 2014 services wins taken
on during this year, and these will take time to mature. Whilst we
are encouraged by the fourth quarter performance in Germany, it is
too early to tell whether this is a substantial move in the right
direction, or simply represents a good quarter.
The Group has transitioned over the last few years to become a
business with greater visibility of earnings due to increased
services content. Our French business clearly remains in the early
stages of making this transition, and whilst it has a small number
of attractive existing contracts, it otherwise remains out of date
and uncompetitive. Whilst we are confident of reducing the loss
materially in France during 2015, a return to profitability is some
way off.
However, our business remains highly cash generative, as
evidenced by the recent Return of Value to shareholders, and
notwithstanding the challenges outlined above, we are determined to
make 2015 a year of progress for the Group.
Computacenter in the United Kingdom
Computacenter in the United Kingdom performed strongly in 2014,
achieving significant levels of revenue and profit growth across
its services and Supply Chain businesses.
Overall Financial Performance
As a result, total revenue for the year increased by 10.2 per
cent to GBP1,416.9 million (2013: GBP1,286.1 million). Adjusted*
operating profit in 2014 also grew by 16.5 per cent to GBP65.5
million (2013: GBP56.2 million). Statutory profit in the year
increased by 10.6 per cent to GBP65.9 million (2013: GBP59.6
million).
Services Performance
Services revenue grew by 8.6 per cent during the reporting
period to GBP497.6 million (2013: GBP458.0 million), which
incorporated growth of 6.9 per cent within our Managed Services
business and 14.0 per cent within Professional Services.
This services growth has been primarily driven by ongoing
customer requirements for technology transformation, and continued
selective IT outsourcing to best-of-breed IT infrastructure
companies to support, manage and transform their IT environments to
enable their end-users and their businesses. Therefore, the
delivery of high levels of customer satisfaction and the creation
of advocacy and referencing from our existing customers remains
fundamental to our future growth in services. Maximising the
efficiency of our services delivery is also important in allowing
the business to remain competitive, and the delivery of services
volume growth in 2014 has allowed the preservation of gross margin
rates through the high utilisation levels of the Group's central
services delivery engines. We also continue to strengthen and
invest in our commercial bid governance procedures to ensure that
the business is delivering highly refined and standardised core
offerings to its target corporate and government customer base.
Our continual focus on these areas has allowed the business to
deliver a number of large new Managed Services contracts during the
year. The Royal Mail Group signed a desktop services contract with
Computacenter that will increase efficiency across its head office,
sorting and distribution locations and improve the user experience
for more than 30,000 employees. Additionally, the Post Office has
agreed a new IT Managed Services contract with Computacenter
focused on the provision of IT services for its end users, and this
will cover 11,500 branch users and 4,000 head office users.
In addition to these new services wins, the business has also
renewed a significant number of its existing contracts,
particularly in the final quarter of 2014. As part of AstraZeneca's
global IT transformation programme, Computacenter will now be
delivering onsite IT services to 51,500 users in the UK, France,
Germany, US and Scandinavia, helping its business to improve
productivity and drive down costs.
There will be a headwind to Managed Services growth in 2015, due
to the significant reduction of one particular contract, as
previously disclosed in our October 2014 Interim Management
Statement. However, our new wins and renewals will underpin the
Managed Services revenue base during the coming year.
Our Professional Services business has seen strong levels of
activity during the year, driven by a number of one-off substantial
projects from our existing customers, and a significant level of
business related to transformational activity arising out of
Managed Services wins in 2014. This has included key technology
transformation activity for the Post Office. The significant growth
within our Professional Services business continues to be dominated
by projects focused on the modernisation of our customers' users
workplace. Whilst our Professional Services forward order book
finished the year at a record high level, giving us confidence that
current levels of growth can be sustained in 2015, we continue to
invest in the long-term requirements of our customers, and remain
committed to further accelerating our Professional Services
activity through related Datacenter and Networking upgrade and
transformation activity.
Supply Chain Performance
Supply Chain revenue in 2014 increased by 11.0 per cent to
GBP919.3 million (2013: GBP828.1 million). This has been
principally facilitated by the ongoing delivery of new Managed
Services wins and renewals immediately prior to and during the
year. This growth is the direct result of the strength of our
services business which drives associated 'pull-through' Supply
Chain business. It is additionally supported by the excellent
relationships we have with our vendors, due to the added value that
we deliver through our Professional Services business, in which we
deploy and maximise customer benefit from our vendor's
technologies.
As we have previously explained, sustaining our ongoing Supply
Chain growth rates will be challenging and difficult to predict,
due to the short and medium-term nature of associated customer
demands. However, there is a strong correlation between our
services and Supply Chain growth, whereby strong Professional and
Managed Services growth results in increasing Supply Chain demand
which, in turn, leads to greater predictability within our Supply
Chain business.
Computacenter in Germany
We were disappointed to see total revenue decline in 2014.
However, the performance of the business improved significantly
towards the end of the year, with Q4 2014 representing a record
quarter, by revenue, for the German business. As a result,
following a challenging year, the German business enters 2015 in a
more positive position than it entered 2014.
Overall Financial Performance
Total revenue reduced by 3.3 per cent on a constant currency
basis to EUR1,448.3 million (2013: EUR1,497.8 million), and by 8.2
per cent on an as reported basis. This was primarily as a result of
a reduction in revenue generated by our Supply Chain business.
Adjusted* operating profit for the German segment, which excludes
the three onerous contracts, reduced by 8.0 per cent in constant
currency to EUR33.2 million (2013: EUR36.1 million), and by 12.4
per cent on an as reported basis. Statutory profit increased by
169.3 per cent in constant currency to EUR34.2 million (2013:
EUR12.7 million), and by 154.6 per cent on an as reported
basis.
Services Performance
Services revenues grew by 0.3 per cent during the year in
constant currency, but reduced by 4.8 per cent on an as reported
basis. We have been pleased with the performance of our
Professional Services business, which grew by 9.9 per cent in
constant currency and by 4.4 per cent on an as reported basis,
building on the momentum it generated in 2013. It continues to
benefit from our strong consulting capabilities and significant
investment by the business in the cross-selling of Professional
Services to its existing Managed Services customers, particularly
in the areas of Mobility, Cloud and Security. The business is now
also reaping the benefit of implementing a number of recent
internal initiatives to increase levels of collaboration between
its sales force and Professional Services consulting unit, leading
to a higher overall quality of bid proposals being submitted. The
implementation of the Group Operating Model in 2013 has also
resulted in appropriate governance procedures being in place to
ensure service quality and the delivery of projects on time and to
budget.
Our Professional Services business continued to benefit
throughout 2014 from significant demand for our workplace
offerings. We currently have a strong Professional Services forward
order book in place, and anticipate further growth in 2015. In
2014, KVH renovated its IT infrastructure and introduced a Private
Cloud environment for over 100 applications used by the business,
in order to provide a more cost-effective and faster solution for
its customers. Computacenter planned, designed and installed the
complete solution within 12 months of the initial instruction by
the customer.
Whilst revenue in our Managed Services business reduced by 3.0
per cent in constant currency and by 7.9 per cent on an as reported
basis, this performance was impacted by our prioritisation of
governance procedures over investment in new Managed Services bids
during 2013, and as previously explained, the loss of a significant
customer contract in the fourth quarter of 2013. Our Managed
Services pipeline has strengthened gradually through the year,
which should underpin Services growth in 2015. Managed Services
margin levels have also improved as the efficiencies delivered by
the implementation of our Group Operating Model continue to take
effect. This has also been accompanied by a significant increase in
the levels of customer satisfaction being generated by our services
business. This improvement has been recognised externally within a
survey by the Whitelane Research Group, which evaluated the top 100
IT spending organisations and over 300 IT outsourcing contracts.
The survey listed Computacenter as the number one provider of
end-user computing services in Germany.
The Group's strategy of focusing on the enablement of IT
end-users has been well-received, both internally and by our
customers, and we believe it is well suited to the ongoing move of
German enterprise and corporate organisations towards the
tower-based procuring of IT services, as has previously been seen
in the UK. Our focus on end users has contributed to the business
winning a number of Managed Services bids during the year,
including what we believe is the biggest IT service help-desk
contract put out to tender in Germany in 2014. We believe that
current Managed Services market opportunities in Germany align well
with our specific portfolio of offerings, and in order to support
Managed Services growth in 2015, and drive further efficiency
gains, the business will invest in areas such as field force
automation, IT asset management and business take-on.
Supply Chain Performance
Our Supply Chain business had a challenging year in 2014.
Notwithstanding a very strong performance in the fourth quarter
which saw revenue growth of 16.0 per cent in constant currency,
Supply Chain revenue for the year as a whole reduced by 5.0 per
cent in constant currency and by 9.8 per cent on an as reported
basis. A disappointing product sales performance during the first
half of the year was exaggerated by the loss of a single low margin
software licence of circa EUR30 million sold in the second quarter
of 2013 and not repeated during the year, as previously disclosed
in our 2014 Interim Results. The Supply Chain business was also
materially impacted by the loss of one significant customer
contract during the second quarter of 2013 and a weaker performance
by our datacenter business in the first half of the year.
Computacenter in France
General market conditions remained difficult in France
throughout 2014, our business suffered from the poor service
quality that it delivered in 2013 and has failed to manage its cost
base appropriately in the past. During the year, the business has
required sustained transformational and restructuring activity to
attempt to increase its future competitiveness. This has inevitably
led to disruption of the day-to-day running of operations which, in
turn, has impacted the 2014 financial performance.
Overall Financial Performance
2014 was a difficult year for our French business. Total revenue
increased on a constant currency basis by 6.4 per cent to EUR584.7
million, and by 1.0 per cent on an as reported basis, but it should
be noted that this growth was generated from low-margin areas of
our Supply Chain business. In addition to reduced underlying
services volumes, this has resulted in gross margins remaining
challenging across the business. During the reporting period, the
adjusted* operating loss incurred by the business increased by 27.9
per cent on a constant currency basis to EUR11.0 million (2013:
adjusted* operating loss of EUR8.6 million), and by 20.5 per cent
on an as reported basis. The statutory loss reduced by 7.5 per cent
to EUR23.4 million (2013: EUR25.3 million) in constant currency,
and by 12.1 per cent on an as reported basis.
Services Performance
Computacenter in France has continued its journey to becoming
services-led, with a business model more aligned with that seen in
the Group's UK and German subsidiaries.
Total services revenue in 2014 increased on a constant currency
basis by 6.5 per cent to EUR96.4 million, and by 1.2 per cent on an
as reported basis. However, this performance reflects the benefit
of the first year of taking on one very large Managed Services
contract, and without this services revenue would have been down by
9.6 per cent in constant currency against the 2013 performance.
This underlying reduction in volumes was principally caused by the
loss of a small number of important services contracts at the end
of 2013 as a result of poor service levels being delivered prior to
that time. It has led to the under-utilisation of staff within
Managed Services throughout 2014 and a consequential dilution of
gross services margins.
Our Professional Services business has continued to perform
well, driven by good levels of demand for our Projects business,
particularly on transformational work around Windows 7 migrations.
We anticipate that this demand will continue into 2015. We are also
pleased with the progress made in taking on the Group's largest
ever Managed Services contract by revenue, referred to above, in
accordance with processes and procedures implemented as part of the
Group Operating Model.
We continue to invest in our services business, including the
recruitment of Managed Services sales staff and operational
experience with a proven track-record in the industry. Our newly
opened service desk location in Montpellier has been designed, and
will function, in accordance with the Group Operating Model
processes referred to above.
Supply Chain Performance
Total Supply Chain revenue over the period grew by 6.4 per cent
on a constant currency basis to EUR488.2 million, and by 1.0 per
cent on an as reported basis. Following the implementation of Group
Operating Model processes and procedures, our Supply Chain business
is now delivering improved levels of customer service and
satisfaction. The growth in low margin software revenue during the
period has off-set the revenue impact of reduced spend from other
customers.
The business is currently too reliant on workplace product sales
and software revenue from the public sector. These tend to be both
low-margin and working capital intensive, and therefore a key focus
for the business in 2015 will be improving our product mix to focus
on higher-margin sales of datacenter and networking related
products, and building our volume of sales deals with the private
sector. Whilst we have taken significant action in the second half
of 2014 to provide the foundation to achieve these objectives in
the medium term, the performance of our Supply Chain business in
2015 will ultimately be dependent on the short and medium-term
spending patterns of our customers.
Restructuring and transformational activity
Significant restructuring and transformational activity has
taken place throughout the course of 2014. This aims to develop, in
the medium-term, a business capable of industrialised design, sales
and delivery of IT Services, which is competitive in all areas in
which it does business and generates appropriate financial returns
given its level of capital investment.
This commenced with the implementation of the Group Operating
Model at the beginning of the year, following which the business is
now beginning to benefit from the expertise and experience of Group
Management, and the industrialised processes and methodologies
which are in place within the Group's UK and German businesses.
As a result, our customer service offering has improved during
the course of the year and the operating costs of our warehouse at
Gonesse have reduced. We have implemented Group tools and processes
in the service delivery functions, and have improved our target
customer focus to align more closely to the UK and Germany. This is
being done with a particular focus on our services pipeline, which
follows a full review by the business of its customer base. This
was completed with a view to ensuring that it delivers IT value for
those customers that it serves whilst delivering appropriate rates
of return for the Group. This exercise has resulted in a renewed
focus on certain areas, which has included ensuring that the
business has a sufficient quality of sales resource within them to
drive volumes and additionally margins through increased
utilisation of the Group's central services delivery engines.
During the first half of 2014, the business was uncompetitive
due to the size of its cost base. In order to address this issue,
the Group undertook a comprehensive restructuring, or Social Plan,
during the second half of the year. This should help improve the
financial performance in 2015 and enable the business to compete
more effectively.
Computacenter in Belgium
Our Belgian business has performed well in 2014, achieving
growth across the business against the prior year performance.
Overall Financial Performance
Total revenue grew by 15.1 per cent on a constant currency basis
to EUR65.4 million, and by 9.3 per cent on an as reported basis.
Adjusted* operating profit increased on a constant currency basis
by 18.2 per cent to EUR2.6 million, and by 16.7 per cent on an as
reported basis. Statutory profit increased on a constant currency
basis by 21.1 per cent to EUR2.3 million, and by 18.8 per cent on
an as reported basis.
Services Performance
Total services revenue increased by 0.4 per cent in constant
currency, but decreased by 4.7 per cent on an as reported basis.
After the acquisition of Informatic Services, the business has
successfully concluded the integration of its service management
teams and Managed Services contracts, and as of 2015 is now
operating under a fully integrated reporting structure. During the
reporting period, there has been a strong focus on underpinning our
future contract revenue base through the renewal of our existing
Managed Services contracts.
This has included the renewal of our Managed Services contract
with SWIFT for a further five-year term, which was in no small part
facilitated by the investment that the Group is making in its
ability to support its customers on a global scale, and to improve
their users' IT experience and productivity. The renewal includes
the transfer of part of the existing service-desk to Kuala Lumpur,
Malaysia, and the accompanying implementation of a contact desk
specifically focused on providing end-users with effective
diagnosis and troubleshooting support. There remain a number of
significant Managed Services contract renewals ahead of us in 2015,
and we will further explore and leverage the Group's services
offering, as we are confident that these will offer us a local
competitive advantage.
We have also made significant progress in developing our
Professional Services and solutions portfolio during the year,
although given ongoing rapid changes in technology, this remains a
work-in-progress. Our increasing Supply Chain and consulting
capabilities have enabled us to win a number of infrastructure
projects. These included the installation of a 'connected lounge'
project in Brussels Airport for our customer, Brussels Airlines,
which required our Supply Chain, software licensing and
Professional Services teams to work in collaboration to deliver
consulting expertise, hardware and software licenses which allow
Brussels Airlines customers to borrow a Microsoft Surface tablet
whilst in the customer waiting lounge at Brussels Airport.
Supply Chain Performance
Our total Supply Chain revenue grew on a constant currency basis
by 24.7 per cent to EUR42.9 million, and by 18.5 per cent on an as
reported basis. In contrast to the significant Supply Chain growth
achieved by the business in 2012 which was based on a small number
of significant one-off large deals, Supply Chain growth in 2014 has
been based on winning a significantly larger number of smaller
projects with a variety of international customers, which we
believe will make our Supply Chain business less prone to a repeat
of the sharp decline in revenue seen during 2013. The Supply Chain
mix within the business remains unchanged and is broadly in line
with that seen at a Group level.
Mike Norris
Chief Executive
11 March 2015
Group Finance Director's review 2014
In 2014, Computacenter Group delivered the fifth successive year
of turnover growth and improved both statutory and adjusted
profitability in the face of variable Supply Chain demand within
our German business and ongoing strategic refocusing of our French
business.
Turnover and profit
Group turnover grew by 1.2 per cent to GBP3,107.8 million. On a
constant currency basis turnover growth was 4.2 per cent. Adjusted*
profit before tax increased by 5.1 per cent from GBP81.7 million to
GBP85.9 million, or 6.8 per cent in constant currency.
After taking account of exceptional items relating to the
restructuring programme in France ("Social Plan") and the improving
outlook for the German onerous contracts, statutory profit before
tax improved by 51.3 per cent from GBP50.5 million to GBP76.4
million.
Adjusted operating profit
Management measure the Group's segmental 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 costs. The reconciliation of
statutory to adjusted results is further explained in the segmental
reporting note (note 3 to the financial statements). For the
purposes of this statement, all subsequent references are to
adjusted measures.
Group profitability continues to be led by the UK segment which
increased adjusted* operating profit by 16.5 per cent. German
performance slipped with a 12.4 per cent decrease in adjusted*
operating profit whilst the French segment declined a further 20.5
per cent in adjusted* operating profit, both on an as reported
basis.
United Kingdom
The UK segment saw 10.2 per cent revenue growth in 2014,
increasing to GBP1,416.9 million. Supply Chain revenues increased
by 11.0 per cent, driven by continuing demand from a growing
Contractual Services customer base, which resulted in incremental
opportunities for the Supply Chain business. Growth also came from
more sustained purchasing from existing customers driven by the
continued economic improvement within the UK economy. Services
revenues increased the rate of growth from 6.2 per cent in 2013 to
8.6 per cent growth in 2014. Within this, Contractual Services
revenue grew 6.9 per cent as the wins recorded in 2013 had a full
year of delivery. Professional Services, in turn, generated 14.0
per cent growth in revenues with utilisation rates at
near-maximum.
Margin rate in the Supply Chain business built on the stability
seen in 2013 with a small improvement throughout 2014 due to an
improving product mix. The improved mix was partially attributable
to the effect
of order "pull-through" from the services business and also due
to the focus placed on enhancing vendor relationships and
opportunities. Services margin reduced slightly from last year
mainly due to the expected impact of new business in Contractual
Services. This was a great performance largely maintaining,
throughout 2014, the gains achieved from improved execution and
high utilisation that were consolidated in 2013. This resulted in
UK total adjusted gross profit reducing slightly from 15.6 per cent
to 15.5 per cent of sales. Adjusted operating expenses ("SG&A")
rose by 7.2 per cent, slowing from the 9.3 per cent increase across
2013. The UK segment absorbed the majority of the Group's
investment costs. It also incurs the majority of senior management
and Group Governance costs due to the Group being UK domiciled.
Overall this has resulted in a 16.5 per cent increase in
adjusted operating profit from GBP56.2 million to GBP65.5
million.
Germany****
**** Unless specifically stated, comments on growth rates in
overseas segments are stated in local/constant currency.
German revenue declined in 2014 with revenue, as reported,
reducing by 8.2 per cent to GBP1,167.1 million (2013: GBP1,271.4
million). In constant currency revenue fell 3.3 per cent.
Supply Chain revenues fell by 5.0 per cent in 2014, driven by a
series of coinciding material events. The underlying demand from
customers fell away in the first half and did not recover until the
fourth quarter of the year. This was further impacted by the loss
of a previously recurring software licence resale of circa EUR30
million that occurred for the last time in the second quarter of
2013. Whilst the year as a whole was disappointing, real momentum
returned with strong growth of 16.0 per cent during the final
quarter of 2014.
Services revenues were flat with 0.3 per cent growth in 2014.
The business continues to focus on the quality of offering and
targeting strategic partnerships for the Contractual Services
pipeline, whilst expanding the Professional Services business. As
the business becomes more confident in the bidding and execution of
Contractual Services deals, we expect services revenue growth to
return, as evidenced by several recent key Contractual Services
wins.
The quality of offering, and the focus on the profitability of
those offerings, has seen gross margin within the German business
increase from 12.4 per cent in 2013 to 13.0 per cent in 2014.
Supply Chain gross margin was broadly flat which was a considerable
result in a declining sales environment and was supported through a
material increase in services margins which are continuing to
improve and close the gap on UK services margins.
SG&A has increased by 3.3 per cent in constant currency, but
has fallen 2.0 per cent in reported currency.
Overall, the German segment adjusted operating profit decreased
by 12.4 per cent from GBP30.6 million to GBP26.8 million as
reported, a decrease of 8.0 per cent in constant currency.
France****
The revenue in the French segment increased by 6.4 per cent in
the year but is still below the levels of 2012. Supply Chain
revenue grew by 6.4 per cent. However this was flattered by a
significant increase in the level of activity with lower margin
customers. Whilst most of the operational issues related to the
unsatisfactory implementation of our ERP system have been resolved
and corrective action taken in our warehouse operation, both of
which have materially improved the overall customer experience, the
business now needs to focus on customer quality and the impact on
total cost to serve.
Services revenues grew 6.5 per cent during 2014, although this
is primarily related to the take-on of the Group's largest
Contractual Services win. The take-on of this contract has been
completed successfully, but hides an underlying decline in activity
and opportunities within the French services business. This has
resulted in an under-utilisation of resources which leaves the
French business uncompetitive and, for international deals
involving France, renders the Group uncompetitive.
Services gross profit in 2014 has been impacted throughout the
year by the weak growth in demand for our Professional Services
business where revenue was broadly flat on 2013. This continues the
capacity utilisation issues seen in 2013, which in France are
difficult to correct over the short term. This spare capacity
continues to have a significant impact on gross margins
achieved.
In addition, gross margins in the Supply Chain business have
continued to reduce as the quality of product mix has deteriorated
with 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 8.2 per cent to 6.7 per cent.
SG&A expenses have decreased by 6.2 per cent, largely
reflecting the initial benefit from the French Social Plan and
business transformation which is targeted to reduce costs in the
business to improve the competitive position. The SG&A
reduction was impacted by a EUR2 million additional cost to provide
for doubtful debts. The cost of implementing the Social Plan has
been recorded as an exceptional cost in 2014 of GBP9.1 million.
Overall, the adjusted operating result as reported in France has
increased from a GBP7.3 million loss in 2013 to a GBP8.8 million
loss in 2014.
Belgium****
Reported revenue increased by 9.3 per cent to GBP52.7 million
(2013: GBP48.2 million) equating to an increase of 15.1 per cent in
local currency. Supply Chain revenue increased 24.7 per cent
rebuilding the business to 2012 levels which saw a very significant
one-off Supply Chain order from one customer. This is especially
pleasing as the customer base has broadened and become more
international reducing the opportunity for future revenue declines
to be related to large individual customers.
Services revenue was largely flat in 2014, growing 0.4 per cent,
in a year of consolidation due to the full integration of the
business acquired at the end of 2012. The focus was on renewing key
Contractual Services customers to provide stability in the contract
base to continue to grow the business through 2015.
Whilst both service and product margin increased through the
year, the large increase in product sales compared to the flat
services revenue growth has resulted in an overall decrease in
gross profit return on sales for Belgium from 12.5 per cent in 2013
to 11.6 per cent in 2014.
SG&A in 2014 is broadly flat compared to 2013 with an
increase of 2.7 per cent. Overall there has been a 16.7 per cent
increase in reported adjusted operating profit from GBP1.8 million
in 2013 to GBP2.1 million in 2014 which is equivalent to an 18.2
per cent increase in constant currency.
Exceptional items
The three onerous contracts in Germany have continued to perform
in line with our original forecast throughout 2014. One of the
contracts ceased in the final quarter of the year with the other
two contracts due to complete in 2016. The performance outlook on
these two contracts continues to improve and coupled with the
settlement of an associated legal claim, has given Management
confidence to release GBP1.5 million of the provision as an
exceptional gain, partly reversing the previously recorded
exceptional loss incurred in establishing the provision. The scale
of the remaining two contracts means that any significant deviation
from the projections considered at the year-end could result in a
further material change to the provisioning required. However,
Management remains confident in the level of provisioning held at
the end of 2014.
Computacenter France has implemented a programme to reduce its
SG&A and restructure the business and cost model in line with
the Group Operating Model in an attempt to make the business more
competitive both within France and as part of the Group. This
programme will position the business to enable it to embark on
transformative activity in its approach to winning and servicing
new customers, both in services and, more importantly in the short
term, its Supply Chain business. As previously mentioned the supply
chain business features a number of very large but very low-margin
contracts supplemented by numerous small volume contracts where
individual relationship margins do not sufficiently contribute to
justify the business relationship.
This programme, or Social Plan, has incurred GBP9.1 million of
costs in 2014, with the majority of the cashflows to occur in
2015.
Finance income and costs
Net finance costs of GBP0.2 million were incurred on a statutory
basis in 2014 (2013: GBP0.5 million). This takes account of finance
costs on CSF of GBP0.6 million (2013: GBP0.8 million). On an
adjusted basis, prior to the interest on CSF, net finance income
was GBP0.3 million in 2014 (2013: GBP0.3 million).
Taxation
The effective adjusted tax rate for 2014 was 24.9 per cent
(2013: 23.7 per cent). The deterioration was due to a lower mix of
overseas earnings in 2014 compared to 2013, with the continuing
lack of profitability in France significantly impacting the overall
rate. 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.
The Group makes every effort to pay all the tax attributable to
profits earned in each jurisdiction that it operates in. The Group
does not artificially inflate or reduce profits in one jurisdiction
to provide a beneficial tax result in another.
Deferred tax assets of GBP12.2 million (2013: GBP13.6 million)
have been recognised in respect of losses carried forward. At 31
December 2014, there were unused tax losses across the Group of
GBP115.8 million (2013: GBP125.4 million) for which no deferred tax
asset has been recognised. Of these losses, GBP35.9 million (2013:
GBP54.5 million) arise in Germany and GBP78.9 million (2013:
GBP67.6 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.
Earnings per share and dividend
The adjusted* diluted earnings per share has increased in line
with profit performance by 8.1 per cent from 43.3 pence in 2013 to
46.8 pence in 2014. The statutory diluted earnings per share has
increased from 23.0 pence in 2013 to 40.0 pence in 2014, primarily
driven by the impact of exceptional charges in 2013 being
significantly higher than in 2014.
The Board has proposed a final dividend of 13.1p per share. The
interim dividend paid on 17 October 2014 was 5.9p per share (the
"Interim Dividend Amount"). Adjusting this payment for the share
consolidation on 20 February 2015 (the "Share Consolidation")
increases the Interim Dividend Amount to 6.7p, resulting in a total
dividend per share of 19.8p, for those shares in existence
immediately after the Share Consolidation. The total dividend per
share for 2013 was 17.5p per share or 19.6p per share on a pro
forma basis, after taking account of the Share Consolidation. The
Board has consistently applied the Group's Dividend Policy, which
states that the total dividend paid will result in a dividend cover
of 2 to 2.5 times. Subject to the approval of our shareholders at
our Annual General Meeting on Tuesday 19 May 2015, the proposed
dividend will be paid on Friday 19 June 2015. The dividend record
date is set on Friday 22 May 2015, and the shares will be marked
ex-dividend on Thursday 21 May 2015.
Disposal of R.D. Trading Ltd
On 2 February, 2015, the Group announced that it was disposing
of its wholly-owned IT disposal and recycling subsidiary, R.D.
Trading Ltd ("RDC").
The Group reached agreement with Arrow Electronics UK Holding
Limited for the disposal of the entire issued share capital of RDC.
For the year ended 31 December 2014, RDC generated revenues of
GBP44.1 million (2013: GBP41.9 million) and statutory profit before
tax of GBP4.8 million (2013: GBP3.7 million).
Gross consideration for the disposal is GBP56 million payable in
cash (on a cash free and debt free basis), before transaction costs
and subject to certain post-completion adjustments. Completion of
the disposal
is not subject to any outstanding conditions and has now taken
place. There is no provision for the payment of deferred
consideration under the sale agreement.
The proceeds of the disposal were used as part of the one-off
Return of Value to Shareholders outlined below.
Return of Value to Shareholders
The Group also announced on 2 February, 2015, that it proposed
to make a one-off Return of Value to shareholders of 71.9 pence per
Existing Ordinary Share, equivalent to approximately GBP100 million
or approximately 11.2 per cent of Computacenter's market
capitalisation, based on the middle market price of 643 pence per
Existing Ordinary Share on 29 January 2015.
Cash flow
Net funds excluding CSF increased from GBP90.3 million to
GBP128.5 million by the end of the year. The Group continued to
deliver strong cash generation from its operations in 2014, with
net cash flow from operating activities of GBP94.4 million (2013:
GBP62.9 million).
Challenges remain within working capital due to legacy and
systemic issues that have materially impacted our French business
and its cash collection in particular. These issues stem from the
poor ERP implementation in 2013, which led to backlogs preventing
the timely processing of transactions impacting cash collection and
payment of invoices. These backlogs have continued to grow in 2014
as the French business entered the Social Plan which caused some
disruption to the teams responsible for collecting cash and
monitoring debt levels within the business. During the second half
of the year a new Finance Shared Service Centre was set up in
Budapest, Hungary, which, after the normal transition and start-up
challenges has stabilised and is on an improving trend. Whilst the
debt position in France remains a top priority for both local and
Group management, significant headway has been made in
understanding and resolving legacy collection and system related
invoicing issues that are reducing the overdue debt and increasing
the rates of collection amongst new debt. In the year we spent over
GBP17 million on capital expenditure primarily on investments in IT
equipment in our business and software tools to enable us to
deliver improved service to our customers.
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 GBP38.6 million at 31 December
2014, a decrease of GBP2.5 million from 31 December 2013. 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
Performance Review. However we will continue to reference this item
in this report, but we will not routinely report the number in
Interim Management Statements, similar external updates or within
the accounts themselves.
Customer Specific Financing decreased in the year from GBP18.9
million to GBP9.3 million. CSF remains low compared to 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
GBP119.2 million, compared to GBP71.4 million at the start of the
year.
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 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 facilities, partly as the Group applies a higher cost of
finance to these transactions than customer's marginal cost of
finance.
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 help manage cost increases due to
currency movement.
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 2014, and at the year-end was GBP128.5
million excluding CSF, and GBP119.2 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 2013 the Group entered into a specific committed facility
of GBP40.0 million for a three-year term which expires in May 2016.
In February 2015 this facility was extended at the same value
through to February 2018.
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 small and, if material, the Group's policy is 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 eliminates currency exposure for a
foreseeable future period on these future cash flows through
forward currency contracts. In 2014, the Group recognised a loss of
GBP0.3 million (2013: loss of GBP1.4 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 3 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 requirement for the Board
to consider whether the 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
Group Finance Director
11 March 2015
Directors' responsibilities
Statement of Directors' responsibilities in relation to the
financial statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable company
law and regulations and those International Financial Reporting
Standards as adopted by the European Union. Under Company law, the
Directors must not approve the Group financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group and of the profit or loss of the Group for
that period.
The Directors are required to prepare financial statements for
each financial year which present fairly the financial position of
the Company and of the Group and the results and cash flows of the
Group for that period. In preparing the financial statements, the
Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable;
-- state whether applicable accounting standards have been
followed, subject to any material departures being disclosed and
explained in the accounts; and
-- prepare the accounts on the going concern basis unless it is
inappropriate to presume that the Group and the Company will
continue in business.
The Directors are responsible for keeping proper and adequate
accounting records, which disclose with reasonable accuracy, at any
time, the financial position of the Group and enable them to ensure
that the accounts and the Directors' Remuneration report comply
with the Companies Act 2006 and Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the Group
and hence, taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the financial and corporate governance information as provided
on the Computacenter plc website (www.computacenter.com).
Disclosure of information to auditor
In accordance with Section 418 of the Companies Act 2006, each
of the persons who is a Director at the date of approval of this
report confirms that:
-- to the best of each Director's knowledge and belief, there is
no information relevant to the preparation of their report of which
the Group's auditors are unaware; and
-- each Director has taken all steps a Director might reasonably
be expected to have taken, to be aware of relevant audit
information and to establish that the Group's auditors are aware of
that information.
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;
-- 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; and
-- The Directors consider that the Annual Report and Accounts
taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
and the Group's performance, business model and strategy.
The Annual Report from pages 1 to 75 was approved by the Board
of Directors and authorised for issue on 11 March 2015 and signed
for and on behalf of the Board by:
Mike Norris Tony Conophy
Chief Executive Officer Group Finance Director
11 March 2015 11 March 2015
Consolidated income statement
For the year ended 31 December 2014
2014 2013
Note GBP'000 GBP'000
--------------------------------------------- ----- ---------------------- ------------
Revenue 3 3,107,759 3,072,075
Cost of sales (2,697,842) (2,668,814)
--------------------------------------------- ----- ---------------------- ------------
Gross profit 409,917 403,261
Administrative expenses (323,814) (321,096)
--------------------------------------------- ----- ---------------------- ------------
Operating profit:
Before amortisation of acquired intangibles
and exceptional items 86,103 82,165
Amortisation of acquired intangibles (1,868) (2,375)
Onerous contracts 1,540 (15,739)
Non-cash impairment - (12,195)
Other exceptional items (9,128) (830)
--------------------------------------------- ----- ---------------------- ------------
Exceptional items 4 (7,588) (28,764)
--------------------------------------------- ----- ---------------------- ------------
Operating profit 76,647 51,026
Finance revenue 1,615 1,351
Finance costs (1,844) (1,852)
Profit before tax:
Before amortisation of acquired intangibles
and exceptional items 85,874 81,664
Amortisation of acquired intangibles (1,868) (2,375)
Onerous contracts 1,540 (15,739)
Non-cash impairment - (12,195)
Other exceptional items (9,128) (830)
--------------------------------------------- ----- ---------------------- ------------
Exceptional items 4 (7,588) (28,764)
--------------------------------------------- ----- ---------------------- ------------
Profit before tax 76,418 50,525
Income tax expense:
Before amortisation of acquired intangibles
and exceptional items (21,353) (19,325)
Tax on amortisation of intangibles 238 244
Tax on onerous contracts (185) 1,889
Tax on non-cash impairment - 1,014
Tax on other exceptional items - (700)
--------------------------------------------- ----- ---------------------- ------------
Total tax on exceptional items (185) 2,203
Exceptional tax items - (489)
---------------------------------------------
Income tax expense 5 (21,300) (17,367)
--------------------------------------------- ----- ---------------------- ------------
Profit for the year 55,118 33,158
--------------------------------------------- ----- ---------------------- ------------
Attributable to:
Equity holders of the parent 55,117 33,160
Non-controlling interests 1 (2)
--------------------------------------------- ----- ---------------------- ------------
Profit for the year 55,118 33,158
--------------------------------------------- ----- ---------------------- ------------
Earnings per share
- basic for profit for the period 6 40.5p 23.2p
- diluted for profit for the period 6 40.0p 23.0p
--------------------------------------------- ----- ---------------------- ------------
Consolidated statement of comprehensive income
For the year ended 31 December 2014
Note 2014 2013
GBP'000 GBP'000
-------------------------------------------------- ----- -------- --------
Profit for the year: 55,118 33,158
Items that may be reclassified to profit or loss:
Loss arising on cash flow hedge (251) (1,403)
Income tax effect 5 54 326
-------------------------------------------------- ----- -------- --------
(197) (1,077)
Exchange differences on translation of foreign
operations (10,976) 4,326
-------------------------------------------------- ----- -------- --------
(11,173) 3,249
Items not to be reclassified to profit or loss:
Remeasurement of defined benefit plan (1,177) -
Other comprehensive income for the year, net
of tax (12,350) 3,249
-------------------------------------------------- ----- -------- --------
Total comprehensive income for the period 42,768 36,407
-------------------------------------------------- ----- -------- --------
Attributable to:
Equity holders of the parent 42,768 36,407
Non-controlling interests - -
-------------------------------------------------- ----- -------- --------
42,768 36,407
-------------------------------------------------- ----- -------- --------
Consolidated balance sheet
As at 31 December 2014
2014 2013
Note GBP'000 GBP'000
------------------------------------- ---- ----------------- ---------
Non-current assets
Property, plant and equipment 79,940 89,044
Intangible assets 90,344 98,870
Investment in associate 42 45
Deferred income tax asset 5 15,049 15,172
------------------------------------- ---- ----------------- ---------
185,375 203,131
------------------------------------- ---- ----------------- ---------
Current assets
Inventories 50,006 58,618
Trade and other receivables 695,915 667,722
Prepayments 52,688 61,579
Accrued income 50,869 53,140
Forward currency contracts 2,434 -
Cash and short-term deposits 129,865 91,098
------------------------------------- ---- ----------------- ---------
981,777 932,157
------------------------------------- ---- ----------------- ---------
Total assets 1,167,152 1,135,288
------------------------------------- ---- ----------------- ---------
Current liabilities
Trade and other payables 635,279 604,945
Deferred income 106,862 115,986
Financial liabilities 6,850 8,147
Forward currency contracts 389 2,360
Income tax payable 9,810 10,239
Provisions 9,808 6,005
------------------------------------- ---- ----------------- ---------
768,998 747,682
------------------------------------- ---- ----------------- ---------
Non-current liabilities
Financial liabilities 3,818 11,540
Provisions 8,176 10,449
Deferred income tax liabilities 5 748 947
------------------------------------- ---- ----------------- ---------
12,742 22,936
------------------------------------- ---- ----------------- ---------
Total liabilities 781,740 770,618
------------------------------------- ---- ----------------- ---------
Net assets 385,412 364,670
------------------------------------- ---- ----------------- ---------
Capital and reserves
Issued capital 9,283 9,271
Share premium 4,597 4,362
Capital redemption reserve 74,957 74,963
Own shares held (10,760) (11,976)
Foreign currency translation reserve (4,326) 6,649
Retained earnings 311,648 281,388
------------------------------------- ---- ----------------- ---------
Shareholders' equity 385,399 364,657
Non-controlling interests 13 13
------------------------------------- ---- ----------------- ---------
Total equity 385,412 364,670
------------------------------------- ---- ----------------- ---------
Approved by the Board on 11 March 2015
MJ Norris FA Conophy
Chief Executive Finance Director
Consolidated statement of changes in equity
For the year ended 31 December 2014
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
2014 9,271 4,362 74,963 (11,976) 6,649 281,388 364,657 13 364,670
Profit for the
year - - - - - 55,117 55,117 1 55,118
Other
comprehensive
income - - - - (10,975) (1,373) (12,348) (1) (12,349)
-------------- -------- -------- ----------- -------- ----------- --------- -------- --------------- --------
Total
comprehensive
income - - - - (10,975) 53,744 42,769 - 42,769
Prior period
corrections 6 - (6) 695 - (695) - - -
Cost of
share-based
payments - - - - - 2,810 2,810 - 2,810
Tax on
share-based
payment
transactions - - - - - 39 39 - 39
Exercise of
options 6 235 - 2,804 - (965) 2,080 - 2,080
Purchase of
own shares - - - (2,283) - - (2,283) - (2,283)
Equity
dividends - - - - - (24,673) (24,673) - (24,673)
-------------- -------- -------- ----------- -------- ----------- --------- -------- --------------- --------
At 31 December
2014 9,283 4,597 74,957 (10,760) (4,326) 311,648 385,399 13 385,412
-------------- -------- -------- ----------- -------- ----------- --------- -------- --------------- --------
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 - 3,364 - (1,872) 2,714 - 2,714
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)
Purchase of
own shares - - - (1,492) - - (1,492) - (1,492)
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
-------------- -------- -------- ----------- -------- ----------- --------- -------- --------------- --------
Consolidated cash flow statement
For the year ended 31 December 2014
Restated
2014 2013
Note GBP'000 GBP'000
------------------------------------------------------ ---- --------------------- --------
Operating activities
Profit before taxation 76,418 50,525
Net finance income 229 501
Depreciation 20,398 22,735
Amortisation 12,675 9,839
Impairment of intangible assets - 12,195
Share-based payments 2,810 1,070
Loss/(profit) on disposal of property, plant
and equipment 676 (215)
Loss on disposal of intangibles 1 642
Decrease in inventories 5,834 10,596
Increase in trade and other receivables (51,167) (94,982)
Increase in trade and other payables 50,275 54,814
(Decrease)/increase in provisions (1,851) 5,626
Other adjustments (473) (815)
------------------------------------------------------ ---- --------------------- --------
Cash generated from operations 115,825 72,531
Income taxes paid (21,408) (9,624)
------------------------------------------------------ ---- --------------------- --------
Net cash flow from operating activities 94,417 62,907
------------------------------------------------------ ---- --------------------- --------
Investing activities
Interest received 1,615 1,741
Decrease in current asset investment - 10,000
Acquisition of subsidiaries, net of cash acquired (465) -
Proceeds from sale of property, plant and equipment 44 921
Purchases of property, plant and equipment (12,189) (9,609)
Proceeds from sale of intangible assets 1 -
Purchases of intangible assets (5,494) (15,544)
------------------------------------------------------ ---- --------------------- --------
Net cash flow from investing activities (16,488) (12,491)
------------------------------------------------------ ---- --------------------- --------
Financing activities
Interest paid (1,275) (2,663)
Dividends paid to equity shareholders of the
parent 7 (24,673) (22,797)
Return of Value - (73,115)
Expenses on Return of Value - (586)
Proceeds from share issues 1,791 2,910
Purchase of own shares (2,283) (1,492)
Repayment of capital element of finance leases (4,983) (8,066)
Repayment of loans (7,767) (2,766)
New borrowings 3,908 9,267
Net cash flow from financing activities (35,282) (99,308)
------------------------------------------------------ ---- --------------------- --------
Increase/(decrease) in cash and cash equivalents 42,647 (48,892)
Effect of exchange rates on cash and cash equivalents (3,835) 1,755
Cash and cash equivalents at the beginning of
the year 90,334 137,471
------------------------------------------------------ ---- --------------------- --------
Cash and cash equivalents at the year-end 129,146 90,334
------------------------------------------------------ ---- --------------------- --------
Notes to the consolidated financial statements
For the year ended 31 December 2014
1 Authorisation of financial statements and statement of compliance with IFRS
The consolidated financial statements of Computacenter plc for
the year ended 31 December 2014 were authorised for issue in
accordance with a resolution of the Directors on 11 March 2015. 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
2014 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:
Offsetting financial assets and financial liabilities -
amendments to IAS 32
These amendments clarify the meaning of 'currently has a legally
enforceable right to set-off' and the criteria for non-simultaneous
settlement mechanisms of clearing houses to qualify for offsetting
and is applied retrospectively. These amendments have no impact on
the Group, since none of the entities in the Group has any
offsetting arrangements.
Novation of derivatives and continuation of hedge accounting -
amendments to IAS 39
These amendments provide relief from discontinuing hedge
accounting when novation of a derivative designated as a hedging
instrument meets certain criteria and retrospective application is
required. These amendments have no impact on the Group as the Group
has not novated its derivatives during the current or prior
periods.
Annual improvements 2010-2012 cycle
In the 2010-2012 annual improvements cycle, the IASB issued
seven amendments to six standards, which included an amendment to
IFRS 13 Fair Value Measurement. The amendment to IFRS 13 is
effective immediately and, thus, for periods beginning at 1 January
2014, and it clarifies in the Basis for Conclusions that short-term
receivables and payables with no stated interest rates can be
measured at invoice amounts when the effect of discounting is
immaterial. This amendment to IFRS 13 has no impact on the
Group.
Annual improvements 2011-2013 cycle
In the 2011-2013 annual improvements cycle, the IASB issued four
amendments to four standards, which included an amendment to IFRS 1
First-time Adoption of International Financial Reporting Standards.
The amendment to IFRS 1 is effective immediately and, thus, for
periods beginning at 1 January 2014, and clarifies in the Basis for
Conclusions that an entity may choose to apply either a current
standard or a new standard that is not yet mandatory, but permits
early application, provided either standard is applied consistently
throughout the periods presented in the entity's first IFRS
financial statements. This amendment to IFRS 1 has no impact on the
Group, since the Group is an existing IFRS preparer.
3 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.
Segmental performance for the years ended 31 December 2014 and
2013 was as follows:
Year ended 31 December 2014
UK Germany France Belgium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Revenue
Supply Chain revenue 919,342 774,913 393,406 34,580 2,122,241
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Services revenue
Professional Services 128,901 108,950 19,752 2,113 259,716
Contractual Services 368,663 283,203 57,957 15,979 725,802
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Total Services revenue 497,564 392,153 77,709 18,092 985,518
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Total revenue 1,416,906 1,167,066 471,115 52,672 3,107,759
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Results
Adjusted gross profit 219,789 151,682 31,757 6,120 409,348
Administrative expenses (154,259) (124,906) (40,592) (4,057) (323,814)
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Adjusted operating profit/(loss) 65,530 26,776 (8,835) 2,063 85,534
Adjusted net interest 942 452 (929) (125) 340
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Adjusted profit/(loss) before
tax 66,472 27,228 (9,764) 1,938 85,874
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Exceptional items:
- onerous contracts - 1,540 - - 1,540
- exceptional items - - (9,128) - (9,128)
------------------------------------ --------------- ------------------ --------------- ------------- -----------
- 1,540 (9,128) - (7,588)
Amortisation of acquired
intangibles (551) (1,232) - (85) (1,868)
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Statutory profit/(loss) before
tax 65,921 27,536 (18,892) 1,853 76,418
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Other segment information
Property, plant and equipment 53,719 16,540 8,009 1,672 79,940
Intangible assets 70,431 17,833 69 2,011 90,344
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Capital expenditure:
Property, plant and equipment 4,802 7,344 759 1,172 14,077
Software 5,078 412 4 - 5,494
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Depreciation 10,719 7,505 2,047 127 20,398
Amortisation of software 10,018 706 83 - 10,807
------------------------------------ --------------- ------------------ --------------- ------------- -----------
Share- based payments 2,531 215 64 - 2,810
------------------------------------ --------------- ------------------ --------------- ------------- -----------
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
Property, plant and equipment 60,332 18,063 9,948 701 89,044
Intangible assets 75,734 20,901 155 2,114 98,904
-------------------------------------- ---------- ---------- --------- --------- ----------
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
Information about major customers
Included in revenues arising from the UK segment are revenues of
approximately GBP285 million (2013: GBP280 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.
4 Exceptional items
2014 2013
GBP'000 GBP'000
------------------------------------------------------------ --------------------- --------
Operating profit
Redundancy and other restructuring costs (9,128) (4,291)
Onerous contracts 1,540 (15,739)
Impairment of acquired intangible assets - (12,195)
Impairment of investment in associate - (539)
Services contracts re-valuation - 4,000
(7,588) (28,764)
------------------------------------------------------------ --------------------- --------
Income tax
Tax on onerous contracts included in operating profit (185) 1,889
Tax on impairment of acquired intangible assets - 1,014
Tax on exceptional items included in operating profit - (700)
------------------------------------------------------------ --------------------- --------
Total tax on exceptional items (185) 2,203
Exceptional tax items
-Deferred tax asset in respect of France - (2,184)
-Tax credit in relation to prior year R&D claim - 1,695
(185) 1,714
------------------------------------------------------------ --------------------- --------
Exceptional items after taxation (7,773) (27,050)
------------------------------------------------------------ --------------------- --------
Included within the current year are the following exceptional
items:
Computacenter France has incurred an exceptional charge of
GBP9.1 million relating to the estimated costs of a comprehensive
restructuring plan with the Group's French business.
The substantial restructuring exercise currently underway aims
to reduce the cost base, improve the competitiveness and therefore
the profitability of the Group's French business.
In line with our accounting policy, Management has elected under
IAS 1 to report this provision under the heading of "Exceptional
Items" due to the materiality, infrequency and nature of the
restructuring plan. This election provides the best guidance to
users of our external reporting as to the underlying profitability
trends within the Group and to present the results of the Group in
a way that is fair, balanced and understandable. Excluding the
costs related to the restructuring plan is consistent with
treatments of similar costs in prior periods and presents the
adjusted profit before tax in a way that enables users to assess
the quality of the Group's underlying profitability.
The Group's three onerous contracts have performed within the
provisions previously taken, and one of these contracts came to an
end as of 30 September 2014. A related legal dispute with a
sub-contractor on one of these contracts, that was previously
provided for, has now been resolved. Given these factors and
ongoing operational improvements within two remaining contracts,
Management has revised its estimates of the losses to be incurred.
On this basis the Group has released GBP1.5m of the provision. As
the onerous contracts were previously treated as an exceptional
item on recognition, the write back of the provision has also been
released as an exceptional item.
Included within the prior year are the following exceptional
items:
In Germany three Managed Service contracts were 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
was classified as an exceptional item due to its size and nature
and the 2012 result was restated to be consistent.
Included within the German segment results in 2012 and 2013 were
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 were 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 were incurred on turnover of GBP23.0 million.
The deterioration in the performance of Computacenter France led
to an assessment of their non-current assets. It was concluded that
the forecasted cash flows for the French cash generating unit did
not fully support the value of non-current assets in the business.
This 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 were included within exceptional
items.
Similarly, Computacenter France 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 were included in the 2013 result.
Due to the continued adverse performance of our equity accounted
associate, ICS Solutions Limited, we decided to fully impair the
GBP0.5 million recorded value of our investment.
As part of our normal processes, we carried out a detailed
evaluation of other long-term Services contracts across the Group.
As a result of this on going evaluation, Management calculated that
a positive change in certain estimates 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 was decided to highlight
this as an exceptional item. This is consistent with the treatment
of the previously identified onerous contracts and provided a
fairer and more balanced understanding of our underlying growth in
profitability.
During 2013 a deferred tax asset relating to losses carried
forward in France was written off for GBP2.2 million.
Tax relief from a prior period Research and Development project
spend on the Group ERP platforms resulted in a prior year
adjustment credited in the statutory tax charge for year. Due to
the timing, materiality and one-off nature of this relief, it was
decided to classify it as an exceptional tax item.
5 Income tax
a) Tax on profit on ordinary activities
2014 2013
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Tax charged in the income statement
Current income tax
UK corporation tax
* operating result 17,048 14,395
* exceptional items - (891)
Total UK corporation tax 17,048 13,504
Foreign tax
* operating result 5,820 5,031
* exceptional items (459) (1,994)
----------------------------------------------------------- -------- --------
Total foreign tax 5,361 3,037
Adjustments in respect of prior periods 191 (509)
Total current income tax 22,600 16,032
----------------------------------------------------------- -------- --------
Deferred tax
Operating result
* origination and reversal of temporary differences (1,340) 139
* adjustments in respect of prior periods (604) 25
Exceptional items 644 1,171
Total deferred tax (1,300) 1,335
----------------------------------------------------------- -------- --------
Tax charge in the income statement 21,300 17,367
----------------------------------------------------------- -------- --------
b) Reconciliation of the total tax charge
2014 2013
GBP'000 GBP'000
-------------------------------------------------------------------- -------- --------
Accounting profit before income tax 76,418 50,525
-------------------------------------------------------------------- -------- --------
At the UK standard rate of corporation tax of 21.49 per cent (2013:
23.25 per cent) 16,422 11,747
Expenses not deductible for tax purposes 1,173 802
Non-deductible element of share-based payment charge 60 54
Adjustments in respect of current income tax of previous periods (413) (485)
Higher tax on overseas earnings 1,417 1,511
Other differences (688) 766
Effect of changes in tax rate on deferred tax - (262)
Utilisation of previously unrecognised deferred tax assets (3,238) (3,169)
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 1,345 1,554
Tax credit in relation to prior year R&D claim - (1,695)
Deferred tax not recognised on current year losses 5,222 5,373
-------------------------------------------------------------------- -------- --------
At effective income tax rate of 27.9 per cent (2013: 34.4 per cent) 21,300 17,367
-------------------------------------------------------------------- -------- --------
c) Tax losses
Deferred tax assets of GBP12.2 million (2013: GBP13.5 million)
have been recognised in respect of losses carried forward.
In addition, at 31 December 2014, there were unused tax losses
across the Group of GBP115.8 million (2013: GBP125.4 million) for
which no deferred tax asset has been recognised. Of these losses,
GBP35.9 million (2013: GBP54.5 million) arise in Germany and
GBP78.9 million (2013: GBP67.6 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.
None of the recognised or unrecognised losses referred to above
are subject to an expiry date under existing regulation enacted at
the period end.
d) Deferred tax
Deferred income tax at 31 December relates to the following:
Consolidated balance Consolidated income
sheet statement
---------------------- ---------------------
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- ---------- ---------- ---------
Deferred income tax liabilities
Accelerated capital allowances 1,781 1,970 (189) 258
Effect of changes in tax rate on
opening liability - - - 267
Amortisation of intangibles 976 1,354 (309) 1,277
Gross deferred income tax liabilities 2,757 3,324
--------------------------------------- ---------- ----------
Deferred income tax assets
Relief on share option gains 1,645 1,142 (502) (55)
Other temporary differences 3,204 2,501 (1,118) 1,562
Effect of changes in tax rate on
opening asset - - - (109)
Revaluations of foreign exchange
contracts to fair value 54 326 273 320
Losses available for offset against
future taxable income 12,155 13,580 545 (2,185)
--------------------------------------- ---------- ----------
Gross deferred income tax assets 17,058 17,549
--------------------------------------- ---------- ---------- ---------- ---------
Deferred income tax (credit)/charge (1,300) 1,335
--------------------------------------- ---------- ---------- ---------- ---------
Net deferred income tax asset 14,301 14,225
--------------------------------------- ---------- ----------
Disclosed on the balance sheet
Deferred income tax asset 15,049 15,172
Deferred income tax liability (748) (947)
--------------------------------------- ---------- ----------
Net deferred income tax asset 14,301 14,225
--------------------------------------- ---------- ----------
At 31 December 2014, there was no recognised or unrecognised
deferred income tax liability (2013: 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 tax will be reduced to 20 per
cent from 1 April 2015, as enacted in the Finance Act 2013. The
deferred tax in these financial statements reflects this.
6 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 assist
with the understanding of the underlying performance of the Group.
Accordingly the adjusted basic and adjusted diluted EPS figures
exclude amortisation of acquired intangibles and exceptional
items.
2014 2013
GBP'000 GBP'000
------------------------------------------------------------------- --------------------- ----------------
Profit attributable to equity holders of the parent 55,117 33,160
Amortisation of acquired intangibles 1,868 2,375
Tax on amortisation of acquired intangibles (238) (244)
Exceptional items within operating profit 7,588 28,764
Tax on exceptional items included in operating profit 185 (2,203)
Exceptional tax items - 489
------------------------------------------------------------------- --------------------- ----------------
Profit before amortisation of acquired intangibles and exceptional
items 64,520 62,341
------------------------------------------------------------------- --------------------- ----------------
2014 2013
000's 000's
-------------------------------------------------------------------- ------- -------
Basic weighted average number of shares (excluding own shares held) 135,985 142,665
Effect of dilution:
Share options 1,784 1,428
-------------------------------------------------------------------- ------- -------
Diluted weighted average number of shares 137,769 144,093
-------------------------------------------------------------------- ------- -------
2014 2013
pence pence
------------------------------------ ------ -------
Basic earnings per share 40.5 23.2
Diluted earnings per share 40.0 23.0
Adjusted basic earnings per share 47.4 43.7
Adjusted diluted earnings per share 46.8 43.3
------------------------------------ ------ -------
7 Dividends paid and proposed
2014 2013
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Declared and paid during the year:
Equity dividends on Ordinary Shares:
Final dividend for 2013: 12.3 pence (2012: 10.5 pence) 16,636 15,759
Interim dividend for 2014: 5.9 pence (2013: 5.2 pence) 8,037 7,038
----------------------------------------------------------- -------- --------
24,673 22,797
----------------------------------------------------------- -------- --------
Proposed (not recognised as a liability as at 31 December)
Equity dividends on Ordinary Shares:
Final dividend for 2014: 13.1 pence (2013: 12.3 pence) 15,737 16,706
----------------------------------------------------------- -------- --------
8 Analysis of changes in net funds
At
At 1 January Cash flows Non-cash Exchange 31 December
2014 in year flow differences 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ---------- -------- ------------ ------------
Cash and short-term deposits 91,098 42,682 - (3,915) 129,865
Bank overdraft (764) (35) - 80 (719)
-------------------------------------- ------------ ---------- -------- ------------ ------------
Cash and cash equivalents 90,334 42,647 - (3,835) 129,146
Bank loans (63) (61) - 4 (120)
Other loans non-CSF - (517) - - (517)
-------------------------------------- ------------ ---------- -------- ------------ ------------
Net funds excluding customer specific
financing 90,271 42,069 - (3,831) 128,509
Customer specific finance leases (11,577) 4,983 (342) 240 (6,696)
Customer specific other loans (7,280) 4,664 - - (2,616)
-------------------------------------- ------------ ---------- -------- ------------ ------------
Total customer specific financing (18,857) 9,647 (342) 240 (9,312)
-------------------------------------- ------------ ---------- -------- ------------ ------------
Net funds 71,414 51,716 (342) (3,591) 119,197
-------------------------------------- ------------ ---------- -------- ------------ ------------
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) - - -
Factor financing (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
----------------------------------- ------------ ---------- ------------------- ------------------ --------------
9 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 28 996 - 28
--------------- -------- ------------- ---------------- ----------------
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.
10 Events after the reporting period
Detailed below are the significant events that happened after
the Group's year end date of 31 December 2014 and before the
signing of this annual report and accounts on 11 March 2015.
Disposal of RD Trading Limited
On 2 February, 2015, the Group announced that it was disposing
of its wholly-owned IT disposal and recycling subsidiary, RD
Trading Limited ("RDC").
The Group reached agreement with Arrow Electronics UK Holding
Limited for the disposal of the entire issued share capital of the
RDC. For the year ended 31 December 2014, RDC generated revenues of
GBP44.1 million (2013: GBP41.9 million), statutory profit before
tax of GBP4.8 million (2013: GBP3.7 million) and as at 31 December
2014 had net assets of GBP16.2 million (2013: GBP12.5 million).
Gross consideration for the disposal is GBP56 million payable in
cash (on a cash-free and debt-free basis), before transaction costs
and subject to certain post-completion adjustments. Completion of
the disposal is not subject to any outstanding conditions and has
now taken place. There is no provision for the payment of deferred
consideration under the agreement.
The disposal of RDC did not warrant classification as a
non-current asset held for sale at the reporting date as management
judged, in accordance with the Group's accounting policy that the
sale was not highly probable at the reporting date, nor was the
Board committed to a sale plan where there was an expectation that
the assets would be sold within one year. RDC also does not meet
the requirements for a discontinued operation as it is not a major
line of business or discrete geographical area (i.e. an operating
segment).
The proceeds of the disposal will be used as part of the one-off
Return of Value to Shareholders outlined below.
Return of Value to Shareholders
The Group announced on 02 February 2015, that it proposed to
make a one-off Return of Value to Shareholders of 71.9 pence per
Existing Ordinary Share, equivalent to approximately GBP100 million
or approximately 11.2 per cent of Computacenter's current market
capitalisation, based on the middle market price of 643 pence per
Existing Ordinary Share on 29 January 2015. The return is being
made using a B Share structure with an associated Share Capital
Consolidation of 15 New Ordinary Shares for every 17 Existing
Ordinary Shares. The approval of Shareholders was required for the
Return of Value and Share Capital Consolidation. Accordingly, the
Group posted a circular to its Shareholders and convening an
Extraordinary General Meeting, held on 19 February 2015, where the
Return of Value was approved.
The Return of Value consisted of a Capital Reorganisation,
including the issue and allotment of B Shares and an associated
Share Capital Consolidation.
Under the terms of the Return of Value, Shareholders received
for every 1 Existing Ordinary Share held at the Record Date 1 B
Share; and in place of every 17 Existing Ordinary Shares held at
the Record Date 15 New Ordinary Shares.
Following Shareholder approval, Shareholders were able to elect
between the following alternatives in relation to their B
Shares.
Alternative 1 - Single B Share Dividend ("Income")
Shareholders could have elected to receive the Single B Share
Dividend of 71.9 pence per B Share in respect of all of their B
Shares.
Alternative 2 - Purchase Offer ("Capital")
Alternatively, Shareholders (other than US Shareholders) could
have elected to for all of their B Shares to be purchased by
Investec Bank plc, acting as principal on 23 February 2015, at 71.9
pence per B Share, free of all dealing expenses and
commissions.
The payment of the consideration under the purchase offer and of
the Single B Share Dividend was in each case completed on 10 March
2015.
Management reviewed the financial position of the Group just
prior to the announcement of the Return of Value and continue to
regard the going concern assumption as appropriate and the
financial statements continue to be prepared on this basis.
11 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 2014 but is derived from those accounts and
the accompanying Directors' report. Statutory accounts for the year
ended 31 December 2014 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 2014 were authorised for issue
by the Board of Directors on 11 March 2015 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 2013. 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
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