TIDMCCC
RNS Number : 2152Z
Computacenter PLC
13 March 2017
Computacenter plc
Final results for the year ended 31 December 2016
Computacenter plc ("Computacenter" or the "Group"), the
independent provider of IT infrastructure and services that enables
users and their business, today announces audited results for the
year ended 31 December 2016.
Financial Highlights 2016 2015 Percentage
Change
Increase/
(Decrease)
Financial Performance
Adjusted(1) revenue (GBP million) 3,245.4 3,054.2 6.3
Adjusted(1) profit before
tax (GBP million) 86.4 86.9 (0.6)
Adjusted(1) diluted earnings
per share (pence) 54.0 53.4 1.1
Dividend per share (pence) 22.2 21.4 3.7
Statutory revenue (GBP million) 3,245.4 3,057.6 6.1
Statutory profit before tax
(GBP million) 87.1 126.8 (31.3)
Statutory diluted earnings
per share (pence) 52.3 82.1 (36.3)
Cash Position
Net funds(3) (GBP million) 144.5 120.8 19.6
Net cash flow from operating
activities (GBP million) 68.2 94.3 (27.7)
Revenue Performance by Sector
Adjusted(1) Services revenue
(GBP million) 1,037.9 990.3 4.8
Adjusted(1) Supply Chain revenue
(GBP million) 2,207.5 2,063.9 7.0
Statutory Services revenue
(GBP million) 1,037.9 990.5 4.8
Statutory Supply Chain revenue
(GBP million) 2,207.5 2,067.1 6.8
Reconciliation between Adjusted(1)
and Statutory Performance
Adjusted(1) profit before
tax (GBP million) 86.4 86.9
Exceptional and other adjusting
items:
Exceptional gain on reversal 3.0 -
of fair value adjustments
(GBP million)
Increase in costs of redundancy
and other restructuring in
the French business (GBP million) (1.1) (1.5)
Exceptional (loss)/gain on
disposal of a subsidiary (GBP
million) (0.5) 42.2
Release of provision for onerous
German contracts (GBP million) - 0.4
Pre-disposal earnings of RDC
in the year
(GBP million) - 0.3
Amortisation of acquired intangibles
(GBP million) (0.7) (1.5)
Statutory profit before tax
(GBP million) 87.1 126.8
Operational Highlights:
-- Record adjusted(1) diluted earnings per share (EPS) of 54.0
pence (2015: 53.4 pence), an increase of 1.1 per cent.
-- The Group has reported annual Services revenues of over GBP1
billion for the first time in 2016.
-- In the UK, strong second half revenue growth was unable to
prevent a 1.1 per cent full year adjusted(1) revenue decline.
Supply Chain margin challenges and Services revenue decline
contributed to a 21.1 per cent reduction in adjusted(1) operating
profit.
-- Germany delivers another full year constant currency(2)
revenue growth across both Supply Chain and Services, alongside a
15.4 per cent increase in adjusted(1) operating profit, also in
constant currency(2) .
-- France performs ahead of Management's expectation for 2016,
with a GBP4.5 million increase in adjusted(1) operating profit to
GBP2.9 million driven by continuing strength in Supply Chain
margins.
Mike Norris, Chief Executive Officer of Computacenter plc,
commented:
'Whilst in 2016 we had record adjusted(1) diluted EPS, it was a
year of mixed fortune with the UK business profitability reducing
materially but the overall Group performance showing resilience due
to the strength in Germany and the turnaround in France. The Group
should have a year of progress in 2017, with a rebalancing of
profits between the first and second halves of the year towards the
historical pattern.
We expect the UK to see modest improvements due to Professional
Services and Supply Chain helping the overall performance. While
Germany will be coming off a strong year, and therefore a difficult
comparison, the business has strong momentum and potential to
improve Services margins. For the French business we would be happy
to repeat the same bottom line, with some deterioration in our
Supply Chain compensated by improvement in Services revenue.
New technologies and the drive to digitalisation within our core
customer base is driving our customers to invest capital in new
projects which is unlikely to abate, however, this is coupled with
a resolute desire to reduce run rate operating costs. As a business
we have to step up to this challenge and improve our competitive
position by focusing on productivity gains and automation.'
(1) Adjusted revenue, adjusted Services revenue, adjusted
Professional Services revenue, adjusted Supply Chain revenue, and
adjusted administrative expenses excludes the revenue and
administrative expenses from a disposed subsidiary, R.D. Trading
Ltd (RDC), for the comparative reporting periods. RDC was sold on 2
February 2015.
Adjusted operating profit or loss, adjusted profit or loss
before tax, adjusted tax, adjusted profit or loss for the year,
adjusted earnings per share and adjusted diluted earnings per share
are, as appropriate, each stated before: exceptional and other
adjusting items including gain or loss on business disposals,
amortisation of acquired intangibles, utilisation of deferred tax
assets (where initial recognition was as an exceptional item or a
fair value adjustment on acquisition), and the related tax effect
of these exceptional and other adjusting items, as Management do
not consider these items when reviewing the underlying performance
of the Segment or the Group as a whole. Each of these measures also
excludes the results of RDC for the comparative periods.
Additionally, adjusted gross profit or loss and adjusted operating
profit or loss includes the interest paid on customer-specific
financing (CSF) which Management considers to be a cost of sale. A
reconciliation between key adjusted and statutory measures is
provided in the Group Finance Director's Review included within
this announcement which details the impact of Exceptional and other
adjusted items when comparing to the non-GAAP financial measures in
addition to those reported in accordance with IFRS. Further detail
is also provided within note 4 to the summary financial information
included within this announcement, Segment Information.
(2) We evaluate the long-term performance and trends within our
strategic key performance indicators (KPIs) on a constant currency
basis. Further, the performance of the Group and its overseas
Segments are shown, where indicated, in constant currency. The
constant currency presentation, which is a non-GAAP measure,
excludes the impact of fluctuations in foreign currency exchange
rates. We believe providing constant currency information gives
valuable supplemental detail regarding our results of operations,
consistent with how we evaluate our performance. We calculate
constant currency percentages by converting our prior-year local
currency financial results using the current year average exchange
rates and comparing these recalculated amounts to our current year
results or by presenting the results in the equivalent local
currency amounts. Wherever the performance of the Group, or its
overseas Segments, are presented in constant currency, the
equivalent prior-year measure is also presented in actual currency
using the exchange rates prevailing at the time. Financial
Highlights, as shown at the beginning of this announcement, and
statutory measures, are provided in actual currency.
(3) Net funds includes cash and cash equivalents, CSF, other
short or long-term borrowings and current asset investments.
Enquiries:
Computacenter plc:
Mike Norris, Chief
Executive Officer 01707 631601
Tony Conophy, Group
Finance Director 01707 631515
Tulchan Communications:
James Macey White 0207 353 4200
Matt Low
DISCLAIMER - FORWARD-LOOKING STATEMENTS
This announcement includes statements that are, or may be deemed
to be, 'forward-looking statements'. These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms 'anticipates', 'believes',
'estimates', 'expects', 'intends', 'may', 'plans', 'projects',
'should' or 'will', or, in each case, their negative or other
variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, future events or intentions.
These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
announcement and include, but are not limited to, statements
regarding the Group's intentions, beliefs or current expectations
concerning, amongst other things, results of operations, prospects,
growth, strategies and expectations of its respective
businesses.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Forward-looking statements are not guarantees of future performance
and the actual results of the Group's operations and the
development of the markets and the industry in which they operate
or are likely to operate and their respective operations may differ
materially from those described in, or suggested by, the
forward-looking statements contained in this announcement. In
addition, even if the results of operations and the development of
the markets and the industry in which the Group operates are
consistent with the forward-looking statements contained in this
announcement, those results or developments may not be indicative
of results or developments in subsequent periods. A number of
factors could cause results and developments to differ materially
from those expressed or implied by the forward-looking statements,
including, without limitation, those risks in the risk factor
section of the 2015 Annual Report and Accounts, as well as general
economic and business conditions, industry trends, competition,
changes in regulation, currency fluctuations or advancements in
research and development.
Forward-looking statements speak only as of the date of this
announcement and may, and often do, differ materially from actual
results. Any forward-looking statements in this announcement
reflect the Group's current view with respect to future events and
are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Group's operations,
results of operations and growth strategy.
Neither Computacenter plc nor any of its subsidiaries undertakes
any obligation to update the forward-looking statements to reflect
actual results or any change in events, conditions or assumptions
or other factors unless otherwise required by applicable law or
regulation.
LETTER FROM THE CHAIRMAN
an interesting year
We were disappointed with our performance in the UK in 2016 but
heartened by strong results in Germany and France. Our adjusted(1)
revenues are now GBP3.2 billion including, for the first time,
Services revenue of over GBP1 billion, and we delivered a solid
profit, meeting expectations we had set for the year.
Our job, on your behalf, is to focus on our strengths and the
opportunities they offer to our business, while recognising and
acting in those areas where we need to improve our performance.
Almost everything we need to do to deliver this is in our own
hands. We believe our strengths and our actions will deliver
progress in 2017 and we are well positioned in all our business
lines and geographies. Of particular note has been the careful
establishment of our capability in the USA and Mexico. We have some
630 employees across the region, serving a number of large
international enterprises.
This report focuses on our strategy and its execution. We have
invested in our ability to enable users of IT in an increasingly
digital world and the nature and number of our Managed Services
contracts reflects this. We strive herein to balance our optimism
with a clear explanation of the risks we face and the way in which
we deal with them.
Please pay particular attention to our Remuneration Report, once
published, and the link between the Company's performance and what
our Executive Directors were paid. We seek to be a well-managed and
conservative business, preferring to serve our customers and be
measured by them, rather than seeking publicity directly.
During December and January we conducted an external evaluation
of the Board and its Committees. We have agreed on a series of
actions to improve our efficiency, by having a more focused
approach to the information provided to Board members. We have also
concluded that we will benefit from increased focus on our
competition, so that we continually challenge management on the
details of our strategy and its execution. I take this opportunity
to welcome Ros Rivaz to our Board, she brings with her significant
operational executive experience in large enterprises, our target
market.
Our future depends in no small part on recruiting and developing
talent. During 2016, we recruited graduates into our Sales
Associate, Project and Service Management programmes, reached out
to a significant number of schools and universities and continued
to increase our Apprenticeship programme. We believe this talent
recruitment to be a very important activity and will continue to
focus and improve on it.
Last, but certainly not least, I thank all of our employees for
their work and their results. Their enthusiasm for our Company and
their focus on our customers are exemplary.
Greg Lock
Chairman
13 March 2017
OUR PERFORMANCE
the effects of digital
Financial performance
The Group's adjusted(1) revenues decreased by 0.5 per cent in
constant currency(2) to GBP3,245.4 million, and increased by 6.3
per cent in actual currency(2) (2015: GBP3,054.2 million). The
Group's statutory revenues increased by 6.1 per cent to GBP3,245.4
million (2015: GBP3,057.6 million) in actual currency(2) .
The Group's adjusted(1) profit before tax decreased by 4.3 per
cent in constant currency(2) to GBP86.4 million, and by 0.6 per
cent in actual currency(2) (2015: GBP86.9 million). In 2016, we saw
another year of progress for the Group with adjusted(1) diluted
earnings per share, the Group's primary measure, increasing by 1.1
per cent to 54.0 pence. This is despite the fact that our 2015
results included a GBP3 million gain from the unusual timing of
contract lifecycles which, as we highlighted in our 2015 Interim
Report, would not repeat in future years.
The Group made a statutory profit before tax of GBP87.1 million,
a decrease of 31.3 per cent in actual currency(2) , having been
significantly assisted by a gain on the disposal of the Group's
subsidiary, RDC, during 2015. This resulted in the Group's
statutory diluted earnings per share decreasing by 36.3 per cent to
52.3 pence in 2016 (2015: 82.1 pence).
The significant decline in the value of sterling against most
currencies during 2016, in particular the euro, has resulted in
significant growth in actual currency(2) of our revenues and
profitability as a result of the conversion of our foreign
earnings. This has increased 2016 adjusted(1) profit before tax by
circa GBP3.5 million. In 2015, the movement in the foreign exchange
rates impacted earnings adversely by circa GBP2 million.
In 2016, the Group reported a net gain of GBP1.4 million (2015:
GBP41.1 million) from exceptional items. The Group reversed GBP3.0
million of fair value adjustments made on acquisition of a German
subsidiary in 2009, as an exceptional gain. The exceptional cost of
the French restructuring remains in line with that reported in our
2016 Interim Report, with a full year cost of GBP1.1 million.
SERVICES PERFORMANCE
The Group now has reported annual Services revenues of over GBP1
billion for the first time.
The Group's adjusted(1) Services revenue decreased by 1.0 per
cent on a constant currency(2) basis to GBP1,037.9 million, and was
up by 4.8 per cent in actual currency(2) (2015: GBP990.3 million).
The Group's statutory Services revenue increased by 4.8 per cent to
GBP1,037.9 million (2015: GBP990.5 million) in actual currency(2)
.
The UK Services business was disappointing in 2016. The win rate
in 2015 was weak and has not provided the momentum into 2016
required for both the Contract Base and the utilisation of the
resources in the Professional Services business, which saw record
levels of engagement in 2015 driving volumes and margins. Whilst
the UK business remains successful in renewing contracts, customer
cost pressures and an emerging trend of mid-life contract renewals
is impacting on the size of the Contract Base.
After a breakthrough year in 2015 for Computacenter Germany's
Services growth rate, the business continued to win new work, hit
renewal targets and took on 14 new contracts. Whilst several of the
take-on contracts had cost overruns, these are now complete and are
profitably delivering in the 'run' phase. There was some difficulty
in the delivery of certain contracts, which constrained Services
margin and reduced the overall result. Revenue recognition
adjustments have been made during the year, for any future losses,
within operating costs where appropriate.
The Contract Base renewal and growth during 2016 will continue
to drive the German business through 2017. The German Professional
Services business grew strongly in 2016, with utilisation of what
is an increasingly scarce resource in the marketplace at record
levels and with the projects and consulting business lines seeing
material growth.
The recent Managed Services revenue decline in France has
halted, with small gains recorded in 2016. More promisingly, the
business had a number of significant wins in 2016, which will help
to diversify the business away from the reliance on a small group
of material contracts. Service quality delivered by our French
business continues to improve alongside customer satisfaction,
providing the local referenceability to generate further bid
opportunities for the pipeline. The Professional Services business
has seen further declines. Lack of volume continues to depress
utilisation of the French central services engines, which increases
margin pressures. The business took further steps in the second
half of the year, as indicated in our 2016 Interim Report, to
reduce over-resourcing in this area and address the cost base.
The pipeline for Services opportunities that we will be bidding
for in 2017 remains strong and varied in Germany, but less so in
the UK where the outsourcing market is more mature. We continue to
refine our propositions in the UK, in order to address
opportunities as they arise. In France, we are focused on a handful
of material opportunities to continue to develop the business.
SUPPLY CHAIN PERFORMANCE
The Group's adjusted(1) Supply Chain revenue was down by 0.3 per
cent on a constant currency(2) basis at GBP2,207.5 million, and
increased by 7.0 per cent in actual currency(2) (2015: GBP2,063.9
million). The Group's statutory Supply Chain revenue increased by
6.8 per cent to GBP2,207.5 million (2015: GBP2,067.1 million) in
actual currency(2) .
Revenues for the UK Supply Chain business accelerated through
the fourth quarter, to recover from the poor start to 2016. Whilst
still below Management's expectation for the year as a whole, this
late strength was pleasing. Of concern was the continued
significant pressure on margins within the UK, which impacted the
overall result. These margin pressures have not been seen within
our other geographies or within our competitors, and partly related
to a different customer mix.
The German Supply Chain business delivered further growth, on
top of the outstanding performance in 2015. With modest growth at a
headline level, the shift away from Workplace into Security,
Network and Cloud infrastructure that occurred during the year has
been managed successfully, whilst maintaining overall
performance.
The French Supply Chain volumes continued to decline, in line
with expectations, as the business began to reach the conclusion of
its strategy to exit mid-market, low-margin generating business,
particularly in Software. As the business has focused on enterprise
level customers and rebalanced its sales mix towards Datacenter and
Networking related product sales, the margins have returned
strongly as hoped.
Following the completion of the Windows 7 work programmes in
2015, the business has, largely, managed the changing portfolio of
opportunities to leverage our strengths in Security, Datacenter and
Networking and grow the overall Supply Chain business successfully.
Throughout the Group, customer demand for Windows 10 workplace
infrastructure refreshes is gathering momentum and we expect to see
incremental benefit from the return of the Workplace business.
Cash
The net funds(3) position of the Group strengthened by GBP23.7
million from GBP120.8 million at 31 December 2015 to GBP144.5
million at 31 December 2016.
The Group remains conscious of the responsibility to
shareholders to maximise the return on its cash assets and
continues to investigate opportunities to make best use of the
funds available.
Dividend
The Board is pleased to propose a final dividend of 15.0 pence
per share. The interim dividend paid on 14 October 2016 was 7.2
pence per share. Together with the final dividend, this brings the
total ordinary dividend for 2016 to 22.2 pence per share,
representing a 3.7 per cent increase on the 2015 total dividend per
share of 21.4 pence.
Subject to the approval of shareholders at our Annual General
Meeting on 4 May 2017, the proposed dividend will be paid on Friday
9 June 2017. The dividend record date is set as Friday 12 May 2017,
and the shares will be marked ex-dividend on 11 May 2017.
The Board has consistently applied the Company's dividend
policy, which states that the total dividend paid will result in a
dividend cover of 2 to 2.5 times. Further detail on the Company's
dividend policy can be found in the Group Finance Director's Review
included in this announcement.
Investment
Computacenter has continued the investment made through the
Income Statement, that has been a feature in recent years, in order
to maintain its organic growth. This pace of investment looks set
to be maintained through 2017.
During the year, we saw the pilot launch of Field Force
Enablement, our new automation toolset for our field and site
engineering workforce, which will increase productivity by
assisting the move from a resource-based operating model to an
event-based model. We have also launched our Digital Workplace
proposition, Digital Me, which underpins our enabling users
strategy. The demand for our Next Generation Service Desk (NGSD)
offering remains encouraging, both from an existing customer base
but also as a differentiator in Managed Services bids. Rollouts of
NGSD range from the standard deployments of our toolset through to
a bespoke NGSD, built within customer toolsets. Other investments
include extending and deepening our ServiceNow capabilities, and
further provisioning within our Mobility, Cloud and Security
offerings.
In addition, we will continue to invest in our internal systems
to improve the productivity of our Services resources, particularly
to enable our field force with technology. Whilst we have completed
the refurbishment of our Blackfriars property in London, and
returned from our temporary leased accommodation, we are close to
finalising plans to replace our German headquarters in Kerpen with
a new facility, including an office complex and warehouse.
Outlook
Whilst in 2016 we had record adjusted(1) diluted EPS, it was a
year of mixed fortune with the UK business profitability reducing
materially but the overall Group performance showing resilience due
to the strength in Germany and the turnaround in France. The Group
should have a year of progress in 2017, with a rebalancing of
profits between the first and second halves of the year towards the
historical pattern.
We expect the UK to see modest improvements due to Professional
Services and Supply Chain helping the overall performance. While
Germany will be coming off a strong year, and therefore a difficult
comparison, the business has strong momentum and potential to
improve Services margins. For the French business we would be happy
to repeat the same bottom line, with some deterioration in our
Supply Chain compensated by improvement in Services revenue.
New technologies, and the drive to digitalisation within our
core customer base, are driving our customers to invest capital in
new projects which is unlikely to abate, however, this is coupled
with a resolute desire to reduce run rate operating costs. As a
business we have to step up to this challenge and improve our
competitive position by focusing on productivity gains and
automation.
Mike Norris
Chief Executive Officer
13 March 2017
United Kingdom
Financial performance
The overall performance of the UK business was disappointing.
Whilst Supply Chain revenues increased, driven by a particularly
strong second half, gross margins came under pressure throughout
the year. Services revenues declined in both Managed Services and
Professional Services, which reflected the successful conclusion of
significant projects in the latter stages of 2015 and the lower
than expected Managed Services wins in 2015. This led to resource
management challenges across our central operations. Wherever
practical we reviewed these and flexed down appropriately, mainly
by reducing contractors.
We are pleased with the number of new customers added during
2016, particularly in our Public Sector business, and this bodes
well for the future. Whilst we saw erosion in the Managed Services
Contract Base, through foreseen changes, we were pleased with our
renewals rate and renewed some contracts early, leaving less risk
moving forward. We also saw a number of significant new contract
wins.
Adjusted(1) revenue in the UK business declined by 1.1 per cent
to GBP1,391.7 million (2015: GBP1,407.4 million). Adjusted(1)
operating profit decreased by 21.1 per cent to GBP46.8 million
(2015: GBP59.3 million), whilst statutory profit before tax
decreased by 54.0 per cent to GBP47.0 million (2015: GBP102.1
million).
Services performance
Adjusted(1) Services revenue declined by 7.6 per cent to
GBP491.9 million (2015: GBP532.4 million), with revenue decreases
of 5.5 per cent in Managed Services and 13.7 per cent in
Professional Services. This reflected a lower than expected win
rate across our Services business. However, retaining our existing
customers is always a key focus and retention remained high. As
signposted last year, the UK benefited by GBP3 million, both on a
revenue and profitability basis, in 2015 from the unusual timing of
contract lifecycles.
Managed Services had another busy year of contract renewals, and
customers continued to bring renewals forward prior to the end of
their initial term. We firmly believe that this reflects the
quality of service and commitment that the business provides for
its customers. During the year, we were pleased to see some new
in-year Managed Services wins with a combined Annual Contract Value
(ACV) of circa GBP24 million, and we continued to focus on
developing our Managed Services pipeline. We are confident that we
enter 2017 in a stronger position to develop these opportunities
and to grow our Contract Base, whilst continuing to renew and
extend our current contracts.
The renewal rate inevitably puts pressure on revenue and margins
within those contracts. During the year, we undertook successful
initiatives across our Managed Services business in order to drive
operational efficiency through further use of centralised services
and site-based operational effectiveness, resulting in an improved
Managed Services margin. This helped, in part, to mitigate the
lower rate of new contracts that were won in 2015 and the resulting
lower Managed Services revenues in 2016, both in running the
Managed Services contracts, and in business take-on activity which
drives our Professional Services engagements. Our UK business
continues to be recognised for its service quality in independent
customer satisfaction surveys carried out, for the industry as a
whole, by KPMG and the Whitelane Research Group during the year. In
the Whitelane survey, we were ranked first place for end user
services.
During the year, Professional Services saw an increase in demand
for Workplace Infrastructure solutions across our customer base,
primarily with Windows 10 transformations. However, 2016 revenue
from these projects was lower than expected, as they slipped to
later in the year and also into 2017. Our improved execution
enhanced our margin in 2016. As we enter 2017, we are confident of
achieving our growth targets in this key area, with strong demand
for our services to support existing and new customers in
delivering their digital strategies.
In 2017, we expect significant Windows 10 project rollouts and
infrastructure transformation in Cloud, Networking and Security
across our customer base, which will continue to drive growth.
Supply Chain Performance
This was a year of two contrasting halves, with volumes and
momentum clearly increasing over the summer and into the autumn,
post the significant uncertainty and reduced confidence prior to
the Referendum to leave the European Union in June 2016.
Adjusted(1) Supply Chain revenue declined by 3.9 per cent in the
first half, including circa GBP20 million of very low margin
transactions. Pleasingly, the second half was stronger than the
second half of 2015, with revenue growth of 9.2 per cent. This
meant we saw growth of 2.8 per cent to GBP899.8 million for the
year as a whole (2015: GBP875.0 million), following a flat
performance in 2015. However, gross margins came under significant
pressure throughout 2016, partly through customer mix and some
decline in specific accounts.
Kevin James
Managing Director, UK
13 March 2017
Germany
Financial performance
The German business performed well in 2016 and ended the year
ahead of our expectations, reflecting customers' willingness to
invest in IT infrastructure and new solutions.
Performance in 2016 was driven by significant Services growth
and good Supply Chain performance. High customer demand for
Professional Services related to our core technology areas
delivered strong results. We improved margins in Supply Chain and
successfully shifted the business mix into Cloud and Networking. A
small number of critical deals underperformed in our Managed
Services business but overall this area is growing and generating
good margins. We are starting 2017 with strong pipelines in every
business.
Total revenue increased by 3.1 per cent on a constant
currency(2) basis to EUR1,702.6 million (2015: EUR1,651.9 million),
and by 16.1 per cent in actual currency(2) . Adjusted(1) operating
profit for the German business increased by 15.4 per cent in
constant currency(2) to EUR43.5 million (2015: EUR37.7 million),
and by 29.6 per cent in actual currency(2) . Statutory profit
before tax increased by 28.3 per cent in constant currency(2) to
EUR46.2 million (2015: EUR36.0 million), and increased by 44.3 per
cent in actual currency(2) .
Services performance
Services revenue grew by 7.2 per cent in constant currency(2) to
EUR560.1 million (2015: EUR522.5 million), and grew by 20.7 per
cent in actual currency(2) . This included growth of 14.3 per cent
in Professional Services and 4.4 per cent in Managed Services, both
on a constant currency(2) basis.
In 2016, the Managed Services business focused on a number of
big renewals where contracts ended or will end in 2017. We
successfully renewed most of these contracts, including with a
global chemical company and a leading German investment bank. We
believe this reflects our strong customer relationships and quality
of service. We were particularly pleased to renew two contracts
that we had previously designated as onerous, on improved financial
terms. We also had some significant new wins, which will contribute
to future growth. Most notably, we won a three-and-a-half year
Managed Services contract with National Aeronautics and Space
Research Centre (DLR), where we will take over Workplace,
Communication, Networking and Datacenter Services in the second
half of 2017.
During 2016, we took on 14 new contracts. Of these, three had
significant cost overruns which are now behind us. While the vast
majority of in-life contracts are performing satisfactorily, we
still have two problem contracts where we made losses in 2016 and
took revenue recognition adjustments for future losses within
operating costs. Both of these present a significant opportunity
for improvement to the bottom line in 2017. The Managed Services
pipeline remains strong, with some significant opportunities.
Our German Professional Services business was probably the
Group's star performer in 2016. The growth in our consulting and
project business demonstrates that our customers trust our skills
and expertise. Professional Services activity was dominated by
services relating to the digital workplace, security, and building
and expanding cloud infrastructures for our customers. In
particular, we were delighted to be chosen by a federal government
customer to help build a new cloud infrastructure for several
government departments. The scarcity of Professional Services
resource continued during the year, and whilst the business took
many new engineers and experts on board, it is likely that this
will remain the case in 2017. This is a challenge for recruitment
but an opportunity for margins.
Supply Chain Performance
The German Supply Chain business performed well in 2016,
achieving revenue growth of 1.2 per cent on a constant currency(2)
basis to EUR1,142.5 million (2015: EUR1,129.4 million), and 13.9
per cent in actual currency(2) . We benefited from a strong
Security, Networking and Cloud business, which compensated for a
decline in our Workplace business. Because we grew these businesses
and managed margins properly, the overall growth in contribution
from Supply Chain was strong.
In Networking and Security, we have seen particularly strong
growth across the core Networking refresh, Cloud Building and
Security infrastructure sub-segments. In Datacenter, we continued
to benefit from our Cloud Building strategy and from a growing
interest in SAP Hana infrastructure installations. We expect that
Windows 10 will drive demand for Workplace infrastructure
refreshes, beginning in the second half of 2017. With strong
momentum in our core segment comprising of Networking, Cloud and
Security, 2017 should be a good year for Supply Chain.
Reiner Louis
Managing Director, Germany
13 March 2017
FRANCE
Financial performance
The Group's French business performed well ahead of our
expectations in 2016. The benefits of the major restructuring
exercise in 2014 began to come through towards the end of 2015 and
this trend continued throughout 2016, turning our 2015 operating
loss into an operating profit in 2016.
Total revenue for the French business declined in constant
currency(2) by 9.7 per cent to EUR495.0 million (2015: EUR548.1
million), and increased by 1.7 per cent in actual currency(2) . As
in the previous year, this revenue reduction resulted from our
decision to move the Supply Chain business away from high volume,
low margin and working capital intensive activities. This improved
product gross margins, which now lead Group standards.
During the year, the adjusted(1) operating loss evolved towards
an adjusted(1) operating profit in constant currency(2) of EUR3.5
million (2015: loss of EUR2.2 million), an increase of GBP4.5
million in actual currency(2) . The statutory operating loss before
tax, on a Segmental basis, also turned into a profit during the
year increasing from a loss of EUR4.3 million in 2015 to a profit
of EUR2.1 million in 2016 on a constant currency(2) basis, an
increase of GBP4.8 million on an actual currency(2) basis.
Services performance
Services revenue decreased by 2.6 per cent in constant
currency(2) to EUR84.5 million (2015: EUR86.8 million), and
increased by 9.5 per cent in actual currency(2) .
We were pleased with the performance of our Managed Services
business, which grew revenue by 1.5 per cent in constant
currency(2) , and by 14.0 per cent in actual currency(2) . Our
French Managed Services business is now taking full advantage of
the standardised best practice approach offered by our GSD
facilities, from the GSD centres in France, USA and Mexico. Despite
this operational change, we have maintained overall customer
satisfaction levels. This was confirmed in the IT outsourcing study
from Whitelane Research Group. This study, that Whitelane performs
for the industry as a whole, measured the performance of major
outsourcing providers in France. Computacenter France retained
first place for customer satisfaction in end user Managed Services
contracts.
Towards the end of the year, we signed major contracts with
Dassault Aviation and a leading tyre manufacturer, which increased
our local annual Managed Services Contract Base by 19.6 per cent.
Both contracts will be fully operational in the first half of 2017
and will help us to fulfil our Managed Services ambitions for the
year.
We continue to invest in developing our Professional Services
business and see a good opportunity to expand our skills, by
offering our expertise for existing Supply Chain and Managed
Services customers. Examples of this include the recent win of a
Windows 10 migration project for a large public sector customer.
Following market trends and customer demand, we continue to develop
further skills in Cloud and Datacenter transformation, Security,
Mobility and Networking.
Key success factors for our Services business in 2017 will be
the implementation of the new Managed Services wins, renewing and
expanding some existing contracts and gaining market share in
projects relating to Mobility, Datacenter, Network and
Security.
Supply Chain Performance
Despite 2016 revenue declining by 11.0 per cent in constant
currency(2) to EUR410.5 million (2015: EUR461.3 million), and
increasing by 0.2 per cent in actual currency(2) , we significantly
improved the contribution from Supply Chain and continued to reduce
the working capital utilised. We have achieved this improvement in
three ways. First, our strategic choice to concentrate on large
organisations in France is now fully in place. Second, we have
completed the integration of the French business into the Group
operating model, which gives the French business full access to an
extended set of resources, tools and processes. Finally, we have
continued to refine our governance process, resulting in a better
understanding of both risks and opportunities for the bid
teams.
Although we are pleased with the improved margins, much work
remains to be done in 2017. We continue to face the challenge of
moving our business mix towards Datacenter and Networking. We are
encouraged to achieve this goal in 2017 by the recent win of a
major purchasing framework contract for storage and servers with
UniHA, a French public-sector customer, mainly active in the
hospital sector.
Cost base, strategic initiatives and outlook
While performance significantly improved, administrative
expenses rose in recognition of the increased variable commission
and bonus paid along with enhanced 'interressement' costs within
our employee profit-sharing scheme, increasing administrative
expenses by 4.5 per cent in constant currency(2) , and by 17.5 per
cent in actual currency(2) .
To make our French business more sustainable, we have
successfully concluded our strategic project to outsource the
delivery of our French field maintenance business to channel
partners. In addition, we have refined the structure of our sales
organisation and appointed a new director to develop our
infrastructure solutions offering in France.
After a few years of transforming our business model in France,
we are confident that we now have all the elements in place for
further expanding our local customer base and growing our
profitability in 2017.
Lieven Bergmans
Managing Director, France
13 March 2017
Belgium
Financial performance
The Group's Belgian business delivered a variable performance in
2016. It continued to generate solid top line growth, with total
revenue increasing by 2.7 per cent in constant currency(2) to
EUR69.4 million (2015: EUR67.6 million) and by 15.7 per cent in
actual currency(2) . However, adjusted(1) operating profit
decreased by 57.1 per cent in constant currency2 to EUR1.2 million
(2015: EUR2.8 million), and by 50.0 per cent in actual currency(2)
. Statutory profit before tax was 60.0 per cent lower in constant
currency(2) to EUR1.0 million (2015: EUR2.5 million), and 55.6 per
cent lower in actual currency(2) .
Profitability in 2016 was affected by a minor restructuring
exercise and by strategically important local investments, to give
the business the capacity it needs to fully integrate into the
Group and take full advantage of Group capabilities. The benefits
of this investment began to materialise towards the end of 2016,
with a new five-year end user Managed Services contract. There are
also important scale advantages which we can now deliver in our
Belgian target market.
Services performance
In 2016, total Services revenue increased by 9.0 per cent in
constant currency(2) to EUR23.1 million (2015: EUR21.2 million),
and by 22.7 per cent in actual currency(2) . This increase was
mainly driven by service extensions with existing customers, as
well as by taking on a new Managed Services customer at the end of
the year.
During the year, there was a significant focus on delivering the
different geographical contract waves for the UCB contract, which
is now fully operational with services spanning Europe, Middle
East, Asia Pacific and the USA. Additionally, we won a new Managed
Services contract for Toyota Motor Europe, providing end user
services to 4,500 users and device lifecycle services for 15,000
devices across Europe.
Our Supply Chain and Professional Services capabilities,
particularly in consulting, enabled us to win a number of
infrastructure projects in 2016. These included supporting TI
Automotive with refurbishing its global datacenters.
Supply Chain Performance
Supply Chain revenue remained flat in constant currency(2) and
amounted to EUR46.3 million (2015: EUR46.4 million), which was an
increase of 12.5 per cent in actual currency(2) . Whilst
competition remains strong in the local market, we continue to
benefit from the loyalty of our customers and maintained our
position in difficult economic conditions in Belgium, with a
general slowdown in IT spend in the first half of the year.
Jurgen Strijkers
Managing Director, Belgium
13 March 2017
GROUP FINANCE DIRECTOR'S REVIEW
Maximising shareholder value
The Group saw a recovering performance in France and an
improving Germany provide resilience to the Group result, which was
adversely affected by a disappointing UK performance, more so in
the first half of the year as we saw revenue growth in the second
half of the year. The comparison with 2015 is difficult for both
statutory and adjusted(1) profit before tax, due to significant
one-off items as disclosed in the prior year, but performance of
the business excluding these one-off items showed modest
improvement in a year of significant underlying change. The Supply
Chain business has had to quickly change focus from Workplace sales
to the more complex Networking and Datacenter infrastructure,
whilst the German Services business saw a busy period of contract
take-on.
A reconciliation between key adjusted(1) and statutory measures
is provided below. Further details are provided in note 4 to the
summary financial information included within this announcement,
Segment Information.
Revenue
Adjusted(1) revenue for the Group grew by 6.3 per cent to
GBP3,245.4 million (2015: GBP3,054.2 million). On a constant
currency(2) basis, turnover decreased by 0.5 per cent, reflecting
the weakness of the pound sterling against all currencies, but
primarily against the euro. Statutory revenue for the Group,
including the results of RDC for January 2015, grew 6.1 per cent
from GBP3,057.6 million to GBP3,245.4 million.
Operating profit
Adjusted(1) operating profit for the Group decreased 1.0 per
cent to GBP86.2 million (2015: GBP87.1 million). On a constant
currency(2) basis, the decrease was 4.9 per cent. The UK Segment
saw a disappointing decrease of 21.1 per cent in adjusted(1)
operating profit. The German Segment remained a key growth factor
for the Group this year, with an increase in adjusted(1) operating
profit of 15.4 per cent in constant currency(2) and 29.6 per cent
in actual currency(2) . The French Segment returned to
profitability, with an adjusted(1) operating profit in constant
currency(2) of EUR3.5 million (2015: EUR2.2 million loss). The
Group's statutory operating profit of GBP87.5 million was 2.7 per
cent higher than the previous year (2015: GBP85.2 million).
Profit before tax
Adjusted(1) profit before tax decreased by 0.6 per cent from
GBP86.9 million to GBP86.4 million, or 4.3 per cent in constant
currency(2) . It should be noted that the comparative performance
in 2015 benefited from a one-off gain of approximately GBP3
million, which, as we explained in our 2015 Interim Report, was not
expected to repeat in future years. Statutory profit before tax
fell 31.3 per cent to GBP87.1 million (2015: GBP126.8 million),
primarily due to the exceptional gain on disposal of RDC of GBP42.2
million that occurred in 2015.
Profit for the year
The adjusted(1) profit for the year decreased 1.9 per cent to
GBP65.8 million in actual currency(2) (2015: GBP67.1 million), and
by 5.6 per cent in constant currency(2) . The statutory profit for
the year decreased by GBP39.3 million to GBP63.8 million (2015:
GBP103.1 million).
Reconciliation from statutory to adjusted1 measures for the year
ended 2016
Adjustments
========================== =========== =============================================== ===========
Utilisation
Statutory CSF of deferred Exceptionals Adjusted
results RDC interest tax and others results
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================== =========== ======== ========= ============ ============ ===========
Revenue 3,245,397 - - - - 3,245,397
========================== =========== ======== ========= ============ ============ ===========
Cost of sales (2,817,350) - (219) - - (2,817,569)
========================== =========== ======== ========= ============ ============ ===========
Gross profit 428,047 - (219) - - 427,828
========================== =========== ======== ========= ============ ============ ===========
Administrative expenses (341,668) - - - - (341,668)
========================== =========== ======== ========= ============ ============ ===========
Operating profit:
=====================================================================================================
Before amortisation
of acquired intangibles
and exceptional items 86,379 - (219) - - 86,160
========================== =========== ======== ========= ============ ============ ===========
Amortisation of acquired
intangibles (710) - - - 710 -
========================== =========== ======== ========= ============ ============ ===========
Exceptional items 1,876 - - - (1,876) -
========================== =========== ======== ========= ============ ============ ===========
Operating profit 87,545 - (219) - (1,166) 86,160
========================== =========== ======== ========= ============ ============ ===========
Exceptional loss on
disposal of a subsidiary (522) - - - 522 -
========================== =========== ======== ========= ============ ============ ===========
Finance revenue 1,629 - - - - 1,629
========================== =========== ======== ========= ============ ============ ===========
Finance costs (1,579) - 219 - - (1,360)
========================== =========== ======== ========= ============ ============ ===========
Profit before tax 87,073 - - - (644) 86,429
========================== =========== ======== ========= ============ ============ ===========
Income tax expense:
=====================================================================================================
Before exceptional items (23,108) - - 2,580 (72) (20,600)
========================== =========== ======== ========= ============ ============ ===========
Exceptional items (192) - - - 192 -
========================== =========== ======== ========= ============ ============ ===========
Profit for the year 63,773 - - 2,580 (524) 65,829
========================== =========== ======== ========= ============ ============ ===========
Reconciliation from statutory to adjusted1 measures for the year
ended 2015
Adjustments
========================== =========== =============================================== ===========
Utilisation
Statutory CSF of deferred Exceptionals Adjusted
results RDC interest tax and others results
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================== =========== ======== ========= ============ ============ ===========
Revenue 3,057,615 (3,448) - - - 3,054,167
========================== =========== ======== ========= ============ ============ ===========
Cost of sales (2,654,468) 2,773 (340) - - (2,652,035)
========================== =========== ======== ========= ============ ============ ===========
Gross profit 403,147 (675) (340) - - 402,132
========================== =========== ======== ========= ============ ============ ===========
Administrative expenses (315,380) 355 - - - (315,025)
========================== =========== ======== ========= ============ ============ ===========
Operating profit:
=====================================================================================================
Before amortisation
of acquired intangibles
and exceptional items 87,767 (320) (340) - - 87,107
========================== =========== ======== ========= ============ ============ ===========
Amortisation of acquired
intangibles (1,553) - - - 1,553 -
========================== =========== ======== ========= ============ ============ ===========
Exceptional items (1,029) - - - 1,029 -
========================== =========== ======== ========= ============ ============ ===========
Operating profit 85,185 (320) (340) - 2,582 87,107
========================== =========== ======== ========= ============ ============ ===========
Exceptional gain on
disposal of a subsidiary 42,155 - - - (42,155) -
========================== =========== ======== ========= ============ ============ ===========
Finance revenue 1,598 - - - - 1,598
========================== =========== ======== ========= ============ ============ ===========
Finance costs (2,171) - 340 - - (1,831)
========================== =========== ======== ========= ============ ============ ===========
Profit before tax 126,767 (320) - - (39,573) 86,874
========================== =========== ======== ========= ============ ============ ===========
Income tax expense:
=====================================================================================================
Before exceptional items (23,605) 72 - 4,045 (314) (19,802)
========================== =========== ======== ========= ============ ============ ===========
Exceptional items (52) - - - 52 -
========================== =========== ======== ========= ============ ============ ===========
Profit for the year 103,110 (248) - 4,045 (39,835) 67,072
========================== =========== ======== ========= ============ ============ ===========
United Kingdom
The UK Segment adjusted(1) revenues decreased by 1.1 per cent in
2016, falling to GBP1,391.7 million (2015: GBP1,407.4 million).
Adjusted(1) Supply Chain revenues increased 2.8 per cent, with
strong growth through the fourth quarter after recovering from a
poor start to the year. The Workplace PC market remains depressed
but the business has continued to transition its focus through to
our Datacenter and Networking business, which finished the year
strongly. Our ability to remain agile in the marketplace allows us
to respond to our customers' changing priorities.
Adjusted(1) Services revenues decreased 7.6 per cent during
2016. Within this, Managed Services revenue decreased 5.5 per cent,
due to the lack of material wins towards the end of 2015 negatively
impacting the Contract Base and due to the effect of continued
pricing pressure on contract renewals.
Professional Services adjusted(1) revenue decreased 13.7 per
cent during 2016. The previous year saw exceptional utilisation
levels, with the UK central service engines at maximum capacity due
to the volume of large Managed Services contract take-on driving
growth. As the number and scope of take-on activities reduced
during 2016, the Professional Services business was underutilised
and with excess short and medium-term capacity. Resourcing levels
have been readjusted through the year through natural attrition and
contractor cessation, to enter 2017 more efficiently resourced.
Margin rate in the Supply Chain business came under sustained
pressure throughout 2016 and was a leading indicator in the UK's
overall performance disappointing against Management expectations.
Whilst volumes held up in the fourth quarter and there were some
particularly pleasing margin-rich headline deals, the overall
progress in this area was disappointing.
Services reduced by 7.6 per cent due to the lack of significant
Managed Services wins in 2015 which impacted both Managed Services
and Professional Services revenues. The UK continues to operate
within a margin range that leads the Group in efficiency of
delivery on Managed Services customers and is also near the ceiling
of what can be reasonably achieved, whilst delivering a premium
customer user experience at a price that creates value. Total
adjusted(1) gross profit in the UK has fallen from 15.4 per cent to
14.6 per cent of adjusted(1) revenue, due mainly to declining
Supply Chain margins, and the impact of overcapacity due to a lower
contribution from the central resource engines.
Adjusted(1) administrative expenses reduced by 0.8 per cent.
Increasing salary costs were offset by a reduction in the
performance bonus attributable to Management and employees, due to
the nature of the local performance. The UK Segment continues to
absorb the majority of the Group's investment costs through its
Consolidated Income Statement. Where permissible, certain Group
Management and Governance costs are recharged to other Group
Segments. However, the UK Segment continues to incur the majority
of Senior Management and Group Governance costs due to the Group
being UK domiciled.
Overall, this resulted in a 21.1 per cent decrease in
adjusted(1) operating profit from GBP59.3 million to GBP46.8
million. However, it should be noted that the UK's 2015 profit also
benefited by GBP3 million from the unusual timing of contract
lifecycles, which was first disclosed in the 2015 Interim
Report.
Germany
German revenue built on the strong performance of 2015,
increasing by 16.1 per cent in actual currency(2) during 2016 to
GBP1,392.2 million (2015: GBP1,199.6 million). In constant
currency(2) , revenue increased 3.1 per cent.
Supply Chain revenue growth in 2016 was 1.2 per cent on a
constant currency(2) basis and 13.9 per cent in actual currency(2)
, continuing the momentum seen in 2015. The performance through the
middle two quarters of the year gave hope of an even stronger
performance, but growth plateaued towards the end of the fourth
quarter. Whilst the growth was steady overall, the customer-driven
switch away from Workplace solutions towards Security, Networking
and Cloud infrastructure created some portfolio volatility. The
business managed these changes successfully, to achieve the margin
increases expected with the move towards more complex
infrastructure sales and achieve an overall contribution
increase.
Services revenues were stronger, with 7.2 per cent growth in
2016 on a constant currency(2) basis and an increase of 20.7 per
cent in actual currency(2) , with both Professional Services and
Managed Services delivering strong performances.
The business entered the year focused on renewing a number of
critical Managed Services contracts, to refresh the Contract Base.
This was largely achieved, with the business simultaneously winning
a number of new significant contracts to further extend the
Contract Base. The contract wins in 2015 resulted in 14 separate
contracts being taken on during 2016, and whilst these were largely
successful and all contributed to revenue growth, several contracts
experienced cost overruns, which have been incurred in the 2016
results. Furthermore, several contracts that have completed take-on
and are in the 'run' operating phase have disappointing levels of
margin, albeit in environments with high customer satisfaction. Two
of these contracts have had revenue recognition adjustments made in
2016, within operating costs, for future operating losses.
Continuing negotiations with these customers present future
improvement opportunities. The pipeline remains strong into
2017.
Our Professional Services business was strong throughout the
year and continued the momentum seen in the second half of 2015.
The number of Managed Services contracts taken on provided volumes
for the central engines that were overlaid on the growth in our
consulting and project business, driven primarily by building cloud
infrastructure environments for our customers.
Given the challenges in managing the change in focus of the
Supply Chain business away from Workplace and towards more complex
infrastructure, the business was pleased to achieve a substantial
increase in margins through the year. Given the strong growth
within both Professional Services and Managed Services revenue, and
the less than desirable performance of a number of Managed Services
contracts, the slight reduction in Services margin was an
acceptable performance. There is some disappointment in knowing
what could have been achieved without the difficulties certain
contracts experienced, which indicates the continuing room for
improvement in German Services margin performance. Overall
adjusted(1) gross profit margin within the German business
increased from 12.3 per cent in 2015 to 12.6 per cent in 2016, with
increasing Supply Chain margins being slightly diluted by the
Services margin performance.
Administrative expenses increased by 3.4 per cent in constant
currency(2) and by 16.5 per cent in actual currency(2) , as the
business experienced increasing challenges in skilled resource
recruitment and higher bonuses paid as a reflection of the overall
performance. The German Segment adjusted(1) operating profit
increased by 29.6 per cent from GBP27.4 million to GBP35.5 million
in actual currency(2) , which was an increase of 15.4 per cent in
constant currency(2) .
France
Revenue in the French Segment increased by 1.7 per cent to
GBP404.7 million (2015: GBP398.1 million) during 2016 but declined
by 9.7 per cent in constant currency(2) , due primarily to the
continued deliberate contraction of the Supply Chain business.
Supply Chain revenue decreased by 11.0 per cent on a constant
currency(2) basis and increased by 0.2 per cent in actual
currency(2) . Management's strategy over the last three years has
been to reposition the Supply Chain business away from low-margin,
high working capital intensive activities, and to only serve the
Group's core target market of large customers. This strategy is
nearly complete and, other factors being constant, we feel we are
nearing the bottom of the revenue performance readjustment cycle.
After reducing the core portfolio of customers, the business is now
concentrating on growing this refocused target market to reduce
dependencies on several large customers that are now responsible
for significant volumes and margins. Services revenues reduced by
2.6 per cent during 2016 in constant currency(2) and increased by
9.5 per cent in actual currency(2) . Whilst Professional Services
volumes continued to decline and further exacerbated the levels of
utilisation and over-resourcing in this area, the Managed Services
business saw encouraging signs of growth. Several important new
contract wins and a more positive pipeline provide some
encouragement, albeit tempered by several Managed Services
contracts that are up for renewal in 2017 that are critical to the
Group overall.
Given the headwinds created by the continued underperformance of
the Professional Services business, it was pleasing to see an
overall increase in service margins for France. This is being
driven by the continued refinement of local execution of key
Managed Services contracts. Whilst service margins are still
significantly lower than those across the rest of the Group,
further improvement is available as the business continues to
reduce the cost base associated with the over-capacity in its
Professional Services business, as evidenced by the restructure of
the sub-scale Field Maintenance business and the alignment of the
Professional Services business to the wider Group Operating Model.
Gross margins in the Supply Chain business exceeded those of both
the UK and Germany, demonstrating the effectiveness of Management's
French recovery strategy. Overall gross margin increased from 8.1
per cent to 10.5 per cent.
Administrative expenses increased by 4.5 per cent on a constant
currency(2) basis and by 17.5 per cent in actual currency(2) . This
increase was driven by non-exceptional restructuring costs
alongside increased variable bonus, commission and 'interressement'
costs, largely contributing to, or driven by, the increased
performance of the business. As indicated in our 2016 Interim
Report, an additional cost of GBP1.1 million in strategic
restructuring has been recorded as
an exceptional item in 2016.
Overall, the French adjusted(1) operating profit increased from
a loss in actual currency(2) of GBP1.6 million in 2015 to a profit
of GBP2.9 million in 2016, materially improving the overall
performance of the Group.
Belgium
Revenue increased by 15.7 per cent to GBP56.8 million (2015:
GBP49.1 million) in actual currency(2) and increased by 2.7 per
cent in constant currency(2) .
Supply Chain revenue was flat on a constant currency(2) basis
and increased by 12.5 per cent in actual currency(2) , in an
environment of increasing competition and slowing IT spend, due to
local economic difficulties.
Services revenue increased by 9.0 per cent on a constant
currency(2) basis during 2016, which was an increase of 22.7 per
cent in actual currency(2) . In 2015, the business adopted a
strategy to renew existing contracts to underpin the Contract Base,
albeit at reduced overall ACV reflecting shared contract
efficiencies made for these long-term customers. This strategy has
been validated, with a number of in-life contract scope extensions
increasing the overall volumes seen. The take-on of a significant
new customer during 2016, and the win towards the end of the year
of another major customer, should sustain growth into 2017.
Overall, Belgium increased its gross profit margin from 12.7 per
cent in 2015 to 13.2 per cent in 2016.
Administrative expenses increased 35.6 per cent in constant
currency(2) and by 51.2 per cent in actual currency(2) , primarily
due to continuing costs as the business moved fully onto the Group
ERP system and the Group Operating Model that it underpins. These
costs include strategic local investments, to provide the scale to
fully benefit from leveraging Group expertise.
Overall there has been a 50.0 per cent decrease in adjusted(1)
operating profit, from GBP2.0 million in 2015 to GBP1.0 million in
2016, which was a 57.1 per cent decrease in constant currency(2)
.
Adjusted1 revenue
Half Half
1 2 Total
GBPm GBPm GBPm
======== ======= ======= =======
2014 1,435.4 1,627.9 3,063.3
======== ======= ======= =======
2015 1,438.0 1,616.2 3,054.2
======== ======= ======= =======
2016 1,478.2 1,767.2 3,245.4
======== ======= ======= =======
2016/15 2.8% 9.3% 6.3%
======== ======= ======= =======
Adjusted1 profit before tax
Half 1 Half 2 Total
======== ================== =============== =================
GBPm % Revenue GBPm % Revenue GBPm % Revenue
======== ======= ========= ==== ========= ====== =========
2014 25.6 1.8% 55.5 3.4% 81.1 2.6%
======== ======= ========= ==== ========= ====== =========
2015 29.1 2.0% 57.8 3.6% 86.9 2.8%
======== ======= ========= ==== ========= ====== =========
2016 25.3 1.7% 61.1 3.5% 86.4 2.7%
======== ======= ========= ==== ========= ====== =========
2016/15 (13.1%) 5.7% (0.6%)
======== ======= ========= ==== ========= ====== =========
Adjusted1 Revenue by country
2016 2015
======== ========================= =========================
Half Half Half
1 2 Total Half 1 2 Total
GBPm GBPm GBPm GBPm GBPm GBPm
======== ======= ======= ======= ======= ======= =======
UK 652.7 739.0 1,391.7 688.7 718.7 1,407.4
======== ======= ======= ======= ======= ======= =======
Germany 607.8 784.4 1,392.2 535.4 664.2 1,199.6
======== ======= ======= ======= ======= ======= =======
France 193.2 211.5 404.7 189.8 208.3 398.1
======== ======= ======= ======= ======= ======= =======
Belgium 24.5 32.3 56.8 24.1 25.0 49.1
======== ======= ======= ======= ======= ======= =======
Total 1,478.2 1,767.2 3,245.4 1,438.0 1,616.2 3,054.2
======== ======= ======= ======= ======= ======= =======
Adjusted1 operating profit by country
2016
======== =================================================
Half 1 Half 2 Total
======== =============== =============== ===============
GBPm % Revenue GBPm % Revenue GBPm % Revenue
======== ==== ========= ==== ========= ==== =========
UK 14.0 2.1% 32.8 4.4% 46.8 3.4%
======== ==== ========= ==== ========= ==== =========
Germany 9.5 1.6% 26.0 3.3% 35.5 2.5%
======== ==== ========= ==== ========= ==== =========
France 0.9 0.5% 2.0 0.9% 2.9 0.7%
======== ==== ========= ==== ========= ==== =========
Belgium 0.6 2.4% 0.4 1.2% 1.0 1.8%
======== ==== ========= ==== ========= ==== =========
Total 25.0 1.7% 61.2 3.5% 86.2 2.7%
======== ==== ========= ==== ========= ==== =========
2015
======== ===================================================
Half 1 Half 2 Total
======== ================ =============== ================
GBPm % Revenue GBPm % Revenue GBPm % Revenue
======== ===== ========= ==== ========= ===== =========
UK 22.9 3.3% 36.4 5.1% 59.3 4.2%
======== ===== ========= ==== ========= ===== =========
Germany 8.5 1.6% 18.9 2.8% 27.4 2.3%
======== ===== ========= ==== ========= ===== =========
France (3.0) (1.6%) 1.4 0.7% (1.6) (0.4%)
======== ===== ========= ==== ========= ===== =========
Belgium 1.1 4.6% 0.9 3.6% 2.0 4.1%
======== ===== ========= ==== ========= ===== =========
Total 29.5 2.1% 57.6 3.6% 87.1 2.9%
======== ===== ========= ==== ========= ===== =========
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 customer-specific financing (CSF) is
included within net funds(3) for statutory reporting purposes, this
balance is offset by contracted future receipts from customers.
Computacenter retains the credit risk on these customers and
ensures that credit risk is only taken on customers with a strong
credit rating.
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 customers' marginal cost of
finance.
Net finance income
Net finance income amounted to GBP0.1 million on a statutory
basis in the year (2015: expense of GBP0.6 million) and was
impacted by a number of one-off items, including historical
interest charges of GBP0.3 million relating to routine tax audits
completed in Computacenter Germany.
The comparative 2015 finance charges were impacted by the final
interest charges relating to the unwind of the discount on the
deferred consideration for the purchase of Damax AG of GBP0.7
million, which was finalised and agreed in June 2015.
On an adjusted(1) basis, prior to interest on CSF, net finance
income was GBP0.3 million in 2016 (2015: expense of GBP0.2
million).
Taxation
The adjusted(1) tax charge on ordinary activities was GBP20.6
million (2015: GBP19.8 million), on an adjusted(1) profit before
tax of GBP86.4 million (2015: GBP86.9 million). The Effective Tax
Rate (ETR) was 23.8 per cent (2015: 22.8 per cent). The 2016 ETR is
higher than the previous year, primarily due to increasing cash tax
in Germany as the historical tax losses readily available for use
expire. The ETR is lower than Management's expectations, due to a
change in the geographic split of adjusted(1) profit before tax,
with France's return to profit being the primary driver.
The statutory tax charge was GBP23.3 million (2015: GBP23.7
million) on statutory profit before tax of GBP87.1 million (2015:
GBP126.8 million). This represents a statutory tax rate of 26.8 per
cent (2015: 18.7 per cent). The exceptional gain on the sale of RDC
of GBP42.2 million recorded in the statutory profit before tax for
the year ended 31 December 2015 was not subject to taxation and is
the major reason for the movement in the statutory tax rate.
The Group's adjusted(1) tax rate continues to benefit from
losses utilised on earnings in Germany and also from the reducing
corporation tax rate in the UK. As the German tax losses continue
to be utilised, the deferred tax asset, previously recognised as an
exceptional tax item, is no longer replenishing. The utilisation of
the asset impacts the statutory tax rate but is considered to be
outside of our adjusted(1) tax measure. In 2016, this impact
increased the statutory tax rate by 3.0 per cent.
From 2017 onwards the Group expects an increasing adjusted(1)
tax rate, as the impact of the German loss utilisation manifests
itself through an increasing cash tax payment. In 2017, the German
statutory ETR is expected to increase to circa 28 per cent from
circa 26 per cent in 2016, then increase to and settle at circa 32
per cent in 2018, with a direct effect on the Group adjusted(1)
ETR. At 2016 levels of profitability, the increase in German cash
tax would raise the Group adjusted(1) ETR from 23.8 per cent in
2016 to circa 28 per cent by 2019, without regard to other factors
that could influence the Group's adjusted(1) ETR.
The Group Tax Policy was updated during the year and approved by
the Audit Committee and the Board. 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 and maintains approved transfer pricing policies
and programmes, to meet local compliance requirements, particularly
given the implementation of the Group Operating Model. Virtually
all of the statutory tax charge in 2016 was incurred in either the
UK or German tax jurisdictions. Computacenter will recognise
provisions and accruals in respect of tax where there is a degree
of estimation and uncertainty, including where it relates to
transfer pricing, such that a balance cannot fully be determined
until accepted by the relevant tax authorities. There are no
material tax risks across the Group. For 2016, a revised Group
Transfer pricing policy was implemented that resulted in a royalty
payment charged by Computacenter UK to Computacenter Germany
equivalent to one per cent of revenue or GBP14.2 million. This
royalty charge was driven by the Group's Tax Advisors'
interpretation of the Organisation for Economic Co-operation and
Development (OECD) base erosion and profit shifting requirements
and as it is purely tax compliance driven, it is recorded outside
of the Segmental results found in note 4 to the summary financial
information included within this announcement, Segment
Information.
The table below reconciles the statutory tax charge to the
adjusted(1) tax charge for the year ended 31 December 2016.
2016 2015
GBP'000 GBP'000
============================================ ======== ========
Statutory tax charge 23,300 23,658
============================================ ======== ========
Adjustments to exclude:
================================================================
Utilisation of German deferred tax assets (2,580) (4,045)
============================================ ======== ========
Tax on amortisation of acquired intangibles 72 314
============================================ ======== ========
Tax on exceptional items (192) (52)
============================================ ======== ========
RDC - (71)
============================================ ======== ========
Adjusted1 tax charge 20,600 19,804
============================================ ======== ========
Statutory ETR 26.8% 18.7%
============================================ ======== ========
Adjusted1 ETR 23.8% 22.8%
============================================ ======== ========
Exceptional items
The gain from net exceptional items in the year was GBP1.4
million (2015: GBP41.1 million).
The most significant item within exceptional items during 2016
was the GBP3.0 million release of historical fair value adjustments
made on the 2009 acquisition of becom Informationssysteme GmbH
(becom). This followed the final payment of the contingent
consideration to the vendor during 2016. For further information,
refer to note 5 to the summary financial information included
within this announcement. Due to the materiality and nature of the
item, Management decided to classify this one-off gain as
exceptional.
As outlined in our 2016 Interim Report, a Line of Business
restructure was agreed with Computacenter's business in France.
This initiative to reduce the under-utilised resources within our
Professional Services arm completed in the second half of 2016, for
a cost of GBP1.0 million. This restructure has seen Computacenter
France exit the direct provision of Group Field Maintenance
Services. This Line of Business had materially decreased over time,
leading to significant resourcing overcapacity. Any residual
customer requirement will be sub-contracted to an existing third
party provider. Additionally, as also detailed in the 2016 Interim
Report, further provisioning to the existing 2014 Social Plan in
France of GBP0.1 million was also required during the period.
During the third quarter, a Group subsidiary domiciled in
Luxembourg, Computacenter PSF SA, was disposed of for a net loss of
GBP0.5 million. As the principal item in the year to 31 December
2015 was the gain on the disposal of a Group subsidiary, R.D.
Trading Limited (RDC), of GBP42.2 million, the current year loss on
disposal of a subsidiary has also been classified as
exceptional.
Earnings per share
Adjusted(1) diluted earnings per share increased slightly from
53.4 pence in 2015 to 54.0 pence in 2016, due to a lower weighted
average number of shares. The statutory diluted earnings per share
decreased from 82.1 pence in 2015 to 52.3 pence in 2016, primarily
driven by the impact of the gain on disposal of RDC in 2015.
2016 2015
=================================================== ======= =======
Basic weighted average number of shares (excluding
own shares held) (no. '000) 120,540 122,948
=================================================== ======= =======
Effect of dilution:
=================================================== ======= =======
Share options 1,344 2,655
=================================================== ======= =======
Diluted weighted average number of shares 121,884 125,603
=================================================== ======= =======
Statutory profit for the year attributable
to equity holders of the parent (GBP'000) 63,773 103,110
=================================================== ======= =======
Basic earnings per share (pence) 52.9 83.9
=================================================== ======= =======
Diluted earnings per share (pence) 52.3 82.1
=================================================== ======= =======
Adjusted1 profit for the year attributable
to equity holders of the parent (GBP'000)
including RDC 65,829 67,320
=================================================== ======= =======
Adjusted1 basic earnings per share (pence)
including RDC 54.6 54.8
=================================================== ======= =======
Adjusted1 diluted earnings per share (pence)
including RDC 54.0 53.6
=================================================== ======= =======
RDC - 248
=================================================== ======= =======
Adjusted1 profit for the year attributable
to equity holders of the parent (GBP'000) 65,829 67,072
=================================================== ======= =======
Adjusted1 basic earnings per share (pence) 54.6 54.6
=================================================== ======= =======
Adjusted1 diluted earnings per share (pence) 54.0 53.4
=================================================== ======= =======
Dividends
The Board has consistently applied the Company's dividend
policy, which states that the total dividend paid will result in a
dividend cover of 2 to 2.5 times by adjusted(1) diluted earnings
per share. In 2016, the cover was 2.4 times (2015: 2.5 times).
The Group remains highly cash generative and net funds(3)
continue to build on the Consolidated Balance Sheet.
Computacenter's approach to capital management is to ensure that
the Group has a robust capital base and to maintain a strong credit
rating, whilst aiming to maximise shareholder value. If further
funds are not required to be available for investment within the
business, either for fixed assets or working capital support, and
the distributable reserves are available in the Parent Company, we
will aim to return the additional cash to investors through one-off
returns of value. Dividends are paid from the standalone Balance
Sheet of the Parent Company, and as at 31 December 2016, the
distributable reserves were approximately GBP262.5 million (2015:
GBP166.7 million).
The Board is pleased to propose a final dividend of 15.0 pence
per share. The interim dividend paid on 14 October 2016 was 7.2
pence per share. Together with the final dividend, this brings the
total ordinary dividend for 2016 to 22.2 pence per share,
representing a 3.7 per cent increase on the 2015 total dividend per
share of 21.4 pence.
Subject to the approval of shareholders at our Annual General
Meeting on 4 May 2017, the proposed dividend will be paid on Friday
9 June 2017. The dividend record date is set as Friday 12 May 2017,
and the shares will be marked ex-dividend on 11 May 2017.
Net funds
Net funds(3) increased from GBP120.8 million at the end of 2015
to GBP144.5 million as at 31 December 2016.
The Group had no material borrowings.
The Group saw a reduction in its overall cash generation from
operations in 2016, with net cash flow from operating activities of
GBP68.2 million (2015: GBP94.3 million).
Whilst it is encouraging that the year end cash position was
strong, it is clear that we have experienced increased cash
volatility due to higher product sales, particularly in the fourth
quarter, and have agreed longer credit terms with some new
product-based customers. In addition we have seen in the second
half of the year an adverse revenue mix changing towards customers
with longer credit terms.
Capital expenditure in the year was GBP22.6 million (2015:
GBP20.6 million), primarily on investments in IT equipment in our
business and software tools, to enable us to deliver improved
service to our customers, and on the refurbishment of our London
office at 100 Blackfriars Road.
Whilst the cash position remains robust, the Group continued to
benefit from the extension of an improvement in credit terms with a
significant vendor. This was equivalent to GBP69.1 million as at 31
December 2016, an increase of GBP21.3 million from 31 December 2015
(GBP47.8 million). 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. The amount of benefit at any one time fluctuates as a
direct result of the volume of business with that vendor.
CSF decreased in the year from GBP5.9 million to GBP3.9 million.
CSF remains low compared to historical levels, due to a decision to
restrict this form of financing in light of the current credit
environment and reduced customer demand.
At 31 December 2016 the Group had interest-bearing trade
payables of GBP13.3 million (2015: nil) where we have taken
advantage of supplier extended payment-term credit facilities
within the UK. This was a short term position taken to provide
additional operational payment flexibility and was closed out
immediately after balance sheet date. The interest bearing
extended-term payable balances remain classified within trade
payables, and are therefore net funds(3) enhancing, at 31 December
2016.
The Group's net funds(3) position takes account of current asset
investments of GBP30 million (2015: GBP15 million). Net funds(3)
excluding CSF increased from GBP126.7 million to GBP148.4 million
by the end of the year.
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
geographies such as South Africa, it has entered into forward
exchange contracts to help manage cost increases due to currency
movements. The Group's policy remains that it will not undertake
speculative trading in financial instruments. 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(3) position was
maintained throughout 2016, and at year end was GBP148.4 million
excluding CSF, and GBP144.5 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 an informal cash pooling
arrangement for the majority of Group entities. During 2015, the
Group extended an existing specific committed facility of GBP40.0
million for a three-year term through to February 2018.
The Group has a Board monitored policy in place to manage its
counterparty risk. This ensures that cash is placed on deposit
across a range of reputable banking institutions. CSF facilities
are committed.
Foreign currency risk
The Group operates primarily in the United Kingdom, Germany and
France, with smaller operations in Belgium, China, Hungary, India,
Malaysia, Mexico, South Africa, Spain, Switzerland and the United
States of America.
The Group uses an informal cash pooling facility to ensure that
its operations outside the UK are adequately funded, where
principal receipts and payments are denominated in euros. For those
countries within the Eurozone, 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 2016, the Group recognised a gain of GBP5.3 million (2015:
GBP1.2 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.
The Group reports its results in pounds sterling. The weakening
of sterling, particularly against the euro, positively impacted
2016 adjusted(1) operating profit by circa GBP3.5 million.
Credit risk
The Group principally manages credit risk through customer
credit limits. The credit limit is set for each customer based on
the creditworthiness of the customer, assessed by using credit
rating agencies, and the anticipated levels of business activity.
These limits are initially determined when the customer account is
first set up and are regularly monitored thereafter.
There are no significant concentrations of credit risk within
the Group. The Group's major customer, disclosed in note 4 to the
summary financial information included within this announcement,
Segment Information, consists of entities under the control of the
UK Government. The maximum credit risk exposure relating to
financial assets is represented by their 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 includes a requirement for the
Board to consider whether the Annual Report and Accounts are 'fair,
balanced and understandable' and 'provide the information necessary
for shareholders to assess the Group's performance, business model
and strategy.' Management undertakes a formal process through which
it can provide comfort to the Board in making this statement.
Tony Conophy
Group Finance Director
13 March 2017
Consolidated income statement
For the year ended 31 December 2016
2016 2015
Note GBP'000 GBP'000
============================================ ==== =========== ===========
Revenue 4 3,245,397 3,057,615
============================================ ==== =========== ===========
Cost of sales (2,817,350) (2,654,468)
============================================ ==== =========== ===========
Gross profit 428,047 403,147
============================================ ==== =========== ===========
Administrative expenses (341,668) (315,380)
============================================ ==== =========== ===========
Operating profit:
============================================ ==== =========== ===========
Before amortisation of acquired intangibles
and exceptional items 86,379 87,767
============================================ ==== =========== ===========
Amortisation of acquired intangibles (710) (1,553)
============================================ ==== =========== ===========
Exceptional items 5 1,876 (1,029)
============================================ ==== =========== ===========
Operating profit 87,545 85,185
============================================ ==== =========== ===========
Exceptional (loss)/gain on disposal
of a subsidiary 5 (522) 42,155
============================================ ==== =========== ===========
Finance revenue 1,629 1,598
============================================ ==== =========== ===========
Finance costs (1,579) (2,171)
============================================ ==== =========== ===========
Profit before tax 87,073 126,767
============================================ ==== =========== ===========
Income tax expense:
============================================ ==== =========== ===========
Before exceptional items (23,108) (23,605)
============================================ ==== =========== ===========
Exceptional items 5 (192) (52)
============================================ ==== =========== ===========
Income tax expense 6 (23,300) (23,657)
============================================ ==== =========== ===========
Profit for the year 63,773 103,110
============================================ ==== =========== ===========
Attributable to:
============================================ ==== =========== ===========
Equity holders of the parent 63,773 103,110
============================================ ==== =========== ===========
Profit for the year 63,773 103,110
============================================ ==== =========== ===========
Earnings per share:
============================================ ==== =========== ===========
- basic 7 52.9p 83.9p
============================================ ==== =========== ===========
- diluted 7 52.3p 82.1p
============================================ ==== =========== ===========
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
2016 2015
GBP'000 GBP'000
=============================================== ======== ========
Profit for the year 63,773 103,110
=============================================== ======== ========
Items that may be reclassified to consolidated
income statement
=============================================== ======== ========
Gain arising on cash flow hedge, net of amount
transferred to consolidated income statement 5,353 1,191
=============================================== ======== ========
Income tax effect (879) (244)
=============================================== ======== ========
4,474 947
=============================================== ======== ========
Exchange differences on translation of foreign
operations 29,374 (7,783)
=============================================== ======== ========
33,848 (6,836)
=============================================== ======== ========
Items not to be reclassified to consolidated
income statement:
=============================================== ======== ========
Remeasurement of defined benefit plan (710) 24
=============================================== ======== ========
Other comprehensive income for the year,
net of tax 33,138 (6,812)
=============================================== ======== ========
Total comprehensive income for the year 96,911 96,298
=============================================== ======== ========
Attributable to:
=============================================== ======== ========
Equity holders of the parent 96,909 96,299
=============================================== ======== ========
Non-controlling interests 2 (1)
=============================================== ======== ========
96,911 96,298
=============================================== ======== ========
Consolidated balance sheet
AS AT 31 December 2016
2016 2015
GBP'000 GBP'000
================================= ========= =========
Non-current assets
================================= ========= =========
Property, plant and equipment 63,020 57,132
================================= ========= =========
Investment property 10,033 10,260
================================= ========= =========
Intangible assets 76,285 81,533
================================= ========= =========
Investment in associate 55 40
================================= ========= =========
Deferred income tax asset 10,537 12,840
================================= ========= =========
159,930 161,805
================================= ========= =========
Current assets
================================= ========= =========
Inventories 44,015 45,647
================================= ========= =========
Trade and other receivables 740,371 621,756
================================= ========= =========
Prepayments 58,959 44,735
================================= ========= =========
Accrued income 80,554 61,785
================================= ========= =========
Derivative financial instruments 8,127 2,220
================================= ========= =========
Current asset investments 30,000 15,000
================================= ========= =========
Cash and short-term deposits 118,676 111,770
================================= ========= =========
1,080,702 902,913
================================= ========= =========
Total assets 1,240,632 1,064,718
================================= ========= =========
Current liabilities
================================= ========= =========
Trade and other payables 679,538 581,855
================================= ========= =========
Deferred income 102,112 93,861
================================= ========= =========
Financial liabilities 2,352 4,279
================================= ========= =========
Derivative financial instruments 273 922
================================= ========= =========
Income tax payable 17,410 10,981
================================= ========= =========
Provisions 3,075 4,050
================================= ========= =========
804,760 695,948
================================= ========= =========
Non-current liabilities
================================= ========= =========
Financial liabilities 1,832 1,703
================================= ========= =========
Provisions 5,732 5,094
================================= ========= =========
Deferred income tax liabilities 341 523
================================= ========= =========
7,905 7,320
================================= ========= =========
Total liabilities 812,665 703,268
================================= ========= =========
Net assets 427,967 361,450
================================= ========= =========
Capital and reserves
================================= ========= =========
Issued share capital 9,299 9,297
================================= ========= =========
Share premium 3,913 3,830
================================= ========= =========
Capital redemption reserve 74,957 74,957
================================= ========= =========
Own shares held (12,115) (10,571)
================================= ========= =========
Translation and hedging reserves 22,685 (11,161)
================================= ========= =========
Retained earnings 329,214 295,086
================================= ========= =========
Shareholders' equity 427,953 361,438
================================= ========= =========
Non-controlling interests 14 12
================================= ========= =========
Total equity 427,967 361,450
================================= ========= =========
Approved by the Board on 13 March 2017
MJ Norris FA Conophy
Chief Executive Group Finance Director
Officer
Consolidated statement of changes in equity
For the year ended 31 December 2016
Attributable to equity holders
of the parent
================= ================================================================= ================================
Translation
Issued Capital Own and Non-
share Share redemption shares hedging Retained controlling Total
capital premium reserve held reserves 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
2016 9,297 3,830 74,957 (10,571) (11,161) 295,086 361,438 12 361,450
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Profit for the
year - - - - - 63,773 63,773 - 63,773
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Other
comprehensive
income - - - - 33,846 (710) 33,136 2 33,138
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Total
comprehensive
income - - - - 33,846 63,063 96,909 2 96,911
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Cost of
share-based
payments - - - - - 3,345 3,345 - 3,345
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Tax on
share-based
payments - - - - - 236 236 - 236
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Exercise of
options - - - 7,449 - (5,714) 1,735 - 1,735
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Issue of shares 2 83 - - - - 85 - 85
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Purchase of own
shares - - - (8,993) - - (8,993) - (8,993)
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Equity dividends - - - - - (26,802) (26,802) - (26,802)
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
At 31 December
2016 9,299 3,913 74,957 (12,115) 22,685 329,214 427,953 14 427,967
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
At 1 January
2015 9,283 4,597 74,957 (10,760) (4,326) 311,648 385,399 13 385,412
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Profit for the
year - - - - - 103,110 103,110 - 103,110
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Other
comprehensive
income - - - - (6,835) 24 (6,811) (1) (6,812)
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Total
comprehensive
income - - - - (6,835) 103,134 96,299 (1) 96,298
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Cost of
share-based
payments - - - - - 4,670 4,670 - 4,670
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Tax on
share-based
payments - - - - - 1,659 1,659 - 1,659
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Exercise of
options - - - 9,967 - (4,635) 5,332 - 5,332
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Return of Value
(RoV) - - - - - (97,916) (97,916) - (97,916)
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Expenses on RoV - (753) - - - - (753) - (753)
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Issues of B
shares
relating to RoV 14 (14) - - - - - - -
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Purchase of own
shares - - - (9,778) - - (9,778) - (9,778)
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Equity dividends - - - - - (23,474) (23,474) - (23,474)
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
At 31 December
2015 9,297 3,830 74,957 (10,571) (11,161) 295,086 361,438 12 361,450
================= ======== ======== =========== ======== =========== ========= ======== ============ ========
Consolidated cash flow statement
For the year ended 31 December 2016
2016 2015
GBP'000 GBP'000
================================================== ======== ==========
Operating activities
================================================== ======== ==========
Profit before tax 87,073 126,767
================================================== ======== ==========
Net finance (income)/ costs (50) 573
================================================== ======== ==========
Depreciation of property, plant and equipment 15,631 18,885
================================================== ======== ==========
Depreciation of investment property 227 227
================================================== ======== ==========
Amortisation of intangible assets 13,197 13,311
================================================== ======== ==========
Share-based payments 3,345 4,670
================================================== ======== ==========
Loss on disposal of property, plant and equipment 168 388
================================================== ======== ==========
Loss on disposal of intangibles 25 9
================================================== ======== ==========
Exceptional loss/(gain) from disposal of
a subsidiary 522 (42,155)
================================================== ======== ==========
Net cash flow from inventories 7,185 (4,530)
================================================== ======== ==========
Net cash flow from trade and other receivables (73,980) 46,023
================================================== ======== ==========
Net cash flow from trade and other payables 31,377 (43,073)
================================================== ======== ==========
Net cash flow from provisions (2,149) (8,009)
================================================== ======== ==========
Other adjustments 374 (137)
================================================== ======== ==========
Cash generated from operations 82,945 112,949
================================================== ======== ==========
Income taxes paid (14,711) (18,611)
================================================== ======== ==========
Net cash flow from operating activities 68,234 94,338
================================================== ======== ==========
Investing activities
================================================== ======== ==========
Interest received 1,629 1,598
================================================== ======== ==========
Increase in current asset investments (15,000) (15,000)
================================================== ======== ==========
Proceeds from disposal of a subsidiary, net
of cash disposed of (319) 56,145
================================================== ======== ==========
Proceeds from disposal of property, plant
and equipment 112 653
================================================== ======== ==========
Purchases of property, plant and equipment (17,641) (13,303)
================================================== ======== ==========
Purchases of intangible assets (4,943) (7,294)
================================================== ======== ==========
Net cash flow from investing activities (36,162) 22,799
================================================== ======== ==========
Financing activities
================================================== ======== ==========
Interest paid (1,579) (2,171)
================================================== ======== ==========
Dividends paid to equity shareholders of
the parent (26,802) (23,474)
================================================== ======== ==========
Return of Value - (97,916)
================================================== ======== ==========
Expenses on Return of Value - (753)
================================================== ======== ==========
Proceeds from share issues 1,820 5,332
================================================== ======== ==========
Purchase of own shares (8,993) (9,778)
================================================== ======== ==========
Repayment of capital element of finance leases (2,679) (3,223)
================================================== ======== ==========
Repayment of loans (1,101) (1,713)
================================================== ======== ==========
New borrowings 1,512 1,030
================================================== ======== ==========
Net cash flow from financing activities (37,822) (132,666)
================================================== ======== ==========
Decrease in cash and cash equivalents (5,750) (15,529)
================================================== ======== ==========
Effect of exchange rates on cash and cash
equivalents 12,746 (1,937)
================================================== ======== ==========
Cash and cash equivalents at the beginning
of the year 111,680 129,146
================================================== ======== ==========
Cash and cash equivalents at the year end 118,676 111,680
================================================== ======== ==========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2016
1 AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS
The Consolidated Financial Statements of Computacenter plc
(Parent Company or the Company) and its subsidiaries (the Group)
for the year ended 31 December 2016 were authorised for issue in
accordance with a resolution of the Directors on 13 March 2017. The
Consolidated 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 2016 and
applied in accordance with the Companies Act 2006.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies adopted in the preparation of these
Consolidated Financial Statements are consistent with those
followed in the preparation of the Consolidated Financial
Statements for the year ended 31 December 2016, except for the
adoption of new and amended IFRS that are applicable to the Group
for the year ended 31 December 2016. 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.
The following new or revised standards and interpretations
issued by the International Accounting Standards Board have not
been applied in preparing these accounts as their effective dates
fall in years beginning after 31 December 2016.
Effective for the year ending 31 December 2017
IAS 16 and IAS 38 Amendments relating to Clarification of
Acceptable Methods of Depreciation and Amortisation.
IAS 27 Amendments relating to Equity Method in Separate
Financial Statements.
IFRS 10 and IAS 28 Amendments relating to Sale or Contribution
of Assets between an Investor and its Associate or Joint Venture.
IFRS 11 Amendments relating to Acquisitions of Interests in Joint
Operations.
Effective for the year ending 31 December 2018
IFRS 15 Revenue from Contracts with Customers (IFRS 15).
IFRS 9 Financial Instruments - Finalised version, incorporating
requirements for classification and measurement, impairment,
general hedge accounting and derecognition.
Effective for the year ending 31 December 2019
IFRS 16 Leases.
Management's assessment of the impact and accepted best practice
is ongoing. Certain of these standards and interpretations will,
when adopted, require addition to or amendment of disclosures in
the accounts. With the exception of IFRS 15 and IFRS 16, it is not
anticipated that the adoption of these standards and
interpretations will have a material impact on the Group's
Financial Statements.
Management is currently assessing the implication of IFRS 16 on
the Group Financial Statements but has not yet formed a
conclusion.
IFRS 15, Revenue from Contracts with Customers, becomes
effective for the Group on 1 January 2018. The guidance permits two
methods of adoption: retrospectively to each prior reporting period
presented (full retrospective method), or retrospectively with the
cumulative effect of initially applying the guidance recognised at
the date of initial application (the cumulative catch-up transition
method).
The Group is currently performing a detailed analysis of the
impact of IFRS 15 on its business. The preliminary analysis has
identified various areas in which adjustments may be required in
revenue and cost recognition and in the related procedures and
processes. The most significant of these is expected to be that
some of our Supply Chain revenue, which has previously been
presented gross, will be presented net under IFRS 15 as 'agency'
revenue. This change is likely to impact our Software sales and
certain Resold Services, which contributed GBP337 million and
GBP298 million to the Group's gross revenue in 2016
respectively.
Additional areas of difference identified include:
-- the method in which we recognise revenue over time on some of
our Managed Services and Professional Services contracts may need
to change, for example to utilise output-driven as opposed to
input-driven methods to determine the amount of revenue to be
recognised, or to recognise revenue upon achievement of certain
performance milestones in the contracts;
-- the identification and recognition of revenue for separate,
distinct performance obligations in our Professional Services
contracts may change, for example in areas such as Transition and
Transformation; and
-- certain costs, such as win fees (a form of commission), may
need to be capitalised and spread over the life of the contract, as
opposed to being expensed as incurred.
The impact of these items, individually or in aggregate, may be
material to the revenue and profits in any given financial year,
however there will be no impact on cash in any given financial year
nor is there expected to be any ultimate long-term impact on the
cumulative profits of the Group. The Group's IFRS 15 impact
assessment and implementation work remains ongoing, alongside a
quantification exercise which is expected to be finalised during
the year ending 31 December 2017.
2.1. Basis of preparation
The summary financial information set out above does not
constitute the Group's statutory Consolidated Financial Statements
for the years ended 31 December 2016 or 2015. Statutory
Consolidated Financial Statements for the Group for the year ended
31 December 2015, prepared in accordance with adopted IFRS, have
been delivered to the Registrar of Companies and those for 2016
will be delivered in due course. The auditors have reported on
those accounts; their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditors drew
attention by way of any emphasis without qualifying their opinion
and (iii) did not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006.
The summary financial information for the year ended 31 December
2016 has been prepared by the directors based upon the results and
position that are reflected in the Consolidated Financial
Statements of the Group.
The Consolidated Financial Statements are prepared on the
historical cost basis other than derivative financial instruments,
which are stated at fair value.
The Consolidated Financial Statements are presented in Pounds
Sterling (GBP) and all values are rounded to the nearest thousand
(GBP'000) except when otherwise indicated.
2.2. 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.
2.2.1. Foreign currency translation
The Group's presentation currency is Pounds Sterling (GBP). Each
entity in the Group determines its own functional currency and
items included in the Financial Statements of each entity are
measured using that functional currency. Transactions in foreign
currencies are initially recorded in the functional currency at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are
retranslated at the functional currency rate of exchange ruling at
the balance sheet date. All differences are taken to the
Consolidated Income Statement.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rate as at
the date of initial transaction.
The functional currencies of the material overseas subsidiaries
are Euro (EUR), US Dollar (US$), South African Rand (ZAR) and Swiss
Franc (CHF). As at the reporting date, the assets and liabilities
of these overseas subsidiaries are translated into the presentation
currency of the Group at the rate of exchange ruling at the Balance
Sheet date and their Income Statements are translated at the
average exchange rates for the year. Exchange differences arising
on the retranslation are recognised in the Consolidated Statement
of Comprehensive Income. On disposal of a foreign entity, the
deferred cumulative amount recognised in the Consolidated Statement
of Comprehensive Income relating to that particular foreign
operation is recognised in the Consolidated Income Statement.
2.3. Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. Revenue is measured at the fair value of the
consideration received or receivable, excluding discounts and
rebates given to customers, VAT and other sales tax or duty. In
contracts with customers, where more than one good (Supply Chain)
or service (Professional Services or Managed Services) is provided
to the customer, consideration is allocated between Supply Chain,
Professional Services and Managed Services using relative fair
value principal. The following specific recognition criteria must
also be met before revenue is recognised:
2.3.1. Supply Chain
The Group supplies hardware and software (together as 'goods')
to customers that is sourced from and delivered by a number of
suppliers.
Supply Chain revenue is recognised when the significant risks
and rewards of ownership of the goods have passed to the buyer,
usually on dispatch of goods.
2.3.2. Professional Services
The Group provides skilled professionals to customers either on
a 'resource on demand' basis where the revenue is billed on a
timesheet basis, or operating within a project framework where
revenue is recognised with reference to the costs incurred as a
proportion of the total estimated costs (percentage of completion
basis) of the contract. Unbilled revenue is recognised within
accrued income. If the total estimated costs and revenues of a
contract cannot be reliably estimated, revenue is recognised only
to the extent that costs have been incurred. A provision is made as
soon as a loss is foreseen.
2.3.3. Managed Services
The Group sells maintenance, support and management of
customer's IT infrastructures and operations.
The Group identifies individual revenue generating activities or
performance obligations within each contract and allocates revenue
between them. This revenue is then assessed for recognition
purposes based on the nature of the activity.
Managed Services revenue is recognised over the term of the
contract as services are delivered. Unearned Managed Services
revenue is included within deferred income in the Consolidated
Balance Sheet. Amounts invoiced relating to more than one year are
deferred and recognised over the relevant period. Where a contract
contains several elements, the individual elements are accounted
for separately where appropriate and revenue thereon is measured at
the fair value of the consideration received. The related costs are
recognised as they are incurred. However, a portion of costs
incurred in the initial phase of outsourcing contracts (transition
and/or transformation costs) may be deferred when they are specific
to a given contract and/or will generate future economic benefits,
and are recoverable. These costs are allocated to work-in-progress
and any reimbursement by the client is recorded as a deduction from
the costs incurred.
On a limited number of Managed Services contracts revenue is
recognised on a percentage of completion basis which is determined
by reference to the costs incurred as a proportion of the total
estimated costs of the contract (see note 3.1.1 to the summary
financial information included within this announcement, for
further detail). Unbilled revenue is recognised within accrued
income. If a contract cannot be reliably estimated, revenue is
restricted to the extent that it is probable that costs incurred
will be recoverable.
2.3.4. Bid and set-up costs
The Group operates in a highly competitive environment and is
frequently involved in contract bids with multiple competitors with
the outcome usually unknown until the contract is awarded and
signed.
Any bid costs incurred by the Group's Central Bid Management
Engines are not capitalised or charged to the contract, but instead
directly charged to selling, general and administrative expenses as
they are incurred. These costs associated with bids are not
separately identifiable nor can they be measured reliably as the
Group's internal bid teams work across multiple bids at any one
time. Further, it cannot be assessed as probable that the contract
will be obtained until the tender process has completed and the
contract has been awarded.
2.3.5. Finance income
Income is recognised as interest accrues.
2.3.6. Operating lease income
Rental income arising from operating leases is accounted for on
a straight-line basis over the lease term.
2.4. Exceptional items
The Group presents as exceptional items on the face of the
Income Statement, those material items of income and expense which,
because of the nature and expected infrequency of the events giving
rise to them, merit separate presentation to allow shareholders to
understand better elements of financial performance in the year, so
as to facilitate comparison with prior years and to assess better
trends in financial performance.
2.5. Adjusted(1) measures
The Group uses a number of non-Generally Accepted Accounting
Practice (non-GAAP) financial measures in addition to those
reported in accordance with IFRS. The Directors believe that these
non-GAAP measures, listed below, are important when assessing the
underlying financial and operating performance of the Group.
These non-GAAP measures comprise of:
Adjusted revenue, adjusted Services revenue, adjusted
Professional Services revenue, adjusted Supply Chain revenue, and
adjusted administrative expenses excludes the revenue and
administrative expenses from a disposed subsidiary, RDC, for the
comparative reporting year. RDC was sold on 2 February 2015.
Adjusted operating profit or loss, adjusted profit or loss
before tax, adjusted tax, adjusted profit or loss for the year,
adjusted earnings per share and adjusted diluted earnings per share
are, as appropriate, each stated before: exceptional and other
adjusting items including gain or loss on business disposals,
amortisation of acquired intangibles, utilisation of deferred tax
assets (where initial recognition was as an exceptional item or a
fair value adjustment on acquisition), and the related tax effect
of these exceptional and other adjusting items, as Management do
not consider these items when reviewing the underlying performance
of the Segment or the Group as a whole. Each of these measures also
excludes the results of RDC for the comparative periods.
Additionally, adjusted gross profit or loss and adjusted
operating profit or loss includes the interest paid on
customer-specific financing (CSF) which Management considers to be
a cost of sale.
A reconciliation between key adjusted and statutory measures is
provided in the Group Finance Director's Review included within
this announcement which details the impact of Exceptional and other
adjusted items when comparing to the non-GAAP financial measures in
addition to those reported in accordance with IFRS. Further detail
is also provided within note 4 to the summary financial information
included within this announcement, Segment Information.
2.6. Impairment of assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset's recoverable amount.
Where an asset does not have independent cash flows, the
recoverable amount is assessed for the CGU to which it belongs.
Certain other corporate assets are unable to be allocated against
specific CGUs. These assets are tested across an aggregation of
CGUs that utilise the asset. The recoverable amount is the higher
of the fair value less costs to sell and the value in use of the
asset or CGU. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. Impairment losses of continuing operations are
recognised in the Income Statement in those expense categories
consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each
reporting date whether there is any indication that previously
recognised impairment losses may no longer exist or may have
decreased. If such indication exists, the Group estimates the
asset's or CGU's recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset's recoverable amount since
the last impairment was recognised. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. As the Group has no assets
carried at revalued amounts, such reversal is recognised in the
Income Statement.
2.7. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses.
Depreciation, down to residual value, is calculated on a
straight-line basis over the estimated useful life of the asset as
follows:
-- Freehold buildings: 25-50 years
-- Short leasehold improvements: shorter of 7 years and period to expiry of lease
-- Fixtures and fittings
- Head office: 5-15 years
- Other: shorter of 7 years and period to expiry of lease
-- Office machinery and computer hardware: 2-15 years
-- Motor vehicles: 3 years
Freehold land is not depreciated. An item of property, plant and
equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the
carrying amount of the item) is included in the Income Statement in
the year the item is derecognised.
2.8. Leases
Assets held under finance leases, which transfer to the Group
substantially all the risks and benefits incidental to ownership of
the leased item, are capitalised at the inception of the lease at
the fair value of the leased asset or, if lower, at the present
value of the minimum lease payments. Lease payments are apportioned
between the finance charges and reduction of the lease liability so
as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly against
income.
Capitalised leased assets are depreciated over the shorter of
the estimated useful life of the asset and the lease term.
Leases where the lessor retains substantially all the risks and
benefits of ownership of the asset are classified as operating
leases. Operating lease payments are recognised as an expense in
the Income Statement on a straight-line basis over the lease
term.
2.9. Investment property
Investment property is defined as land and/or buildings held by
the Group to earn rental income or for capital appreciation or
both, rather than for sale in the ordinary course of business or
for use in the supply of goods or services or for administrative
purposes. The Group recognises any part of an owned (or leased
under a finance lease) property that is leased to third parties as
investment property, unless it represents an insignificant portion
of the property.
Investment property is measured initially at cost including
transaction costs. Subsequent to initial recognition, the Group
elects to measure investment property at cost less accumulated
depreciation and accumulated impairment losses, if any (i.e.
applying the same accounting policies (including useful lives) as
for property, plant and equipment). The fair values reflect the
market conditions as at the balance sheet date.
2.10. Intangible assets
Software and software licences
Software and software licences include computer software that is
not integral to a related item of hardware. These assets are stated
at cost less accumulated amortisation and any impairment in value.
Amortisation is calculated on a straight-line basis over the
estimated useful life of the asset. Currently software is amortised
over four years.
The carrying values of software and software licences are
reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable. If any
such indication exists and where the carrying values exceed the
estimated recoverable amount, the assets are written down to their
recoverable amount.
2.10.1. Software under development
Costs that are incurred and that can be specifically attributed
to the development phase of management information systems for
internal use are capitalised and amortised over their useful life,
once the asset becomes available for use.
2.10.2. Other intangible assets
Intangible assets acquired as part of a business combination are
carried initially at fair value. Following initial recognition
intangible assets are carried at cost less accumulated amortisation
and any impairment in value. Intangible assets with a finite life
have no residual value and are amortised on a straight-line basis
over their expected useful lives with charges included in
administrative expenses as follows:
-- Existing customer contracts: 5 years
-- Existing customer relationships: 10 years
-- Tools and technology: 7 years
The carrying value of intangible assets is reviewed for
impairment whenever events or changes in circumstances indicate the
carrying value may not be recoverable.
2.10.3. Goodwill
Business combinations are accounted for under IFRS 3 Business
Combinations using the acquisition method. Any excess of the cost
of the business combination over the Group's interest in the net
fair value of the identifiable assets, liabilities and contingent
liabilities is recognised in the Consolidated Balance Sheet as
goodwill and is not amortised. Any goodwill arising on the
acquisition of equity accounted entities is included within the
cost of those entities.
After initial recognition, goodwill is stated at cost less any
accumulated impairment losses, with the carrying value being
reviewed for impairment at least annually and whenever events or
changes in circumstances indicate that the carrying value may be
impaired.
For the purpose of impairment testing, goodwill is allocated to
the related CGU monitored by Management, usually at business
Segment level or statutory Company level as the case may be. Where
the recoverable amount of the CGU is less than its carrying amount,
including goodwill, an impairment loss is recognised in the
Consolidated Income Statement.
2.11. Inventories
Inventories are carried at the lower of weighted average cost
and net realisable value after making allowance for any obsolete or
slow-moving items. Costs include those incurred in bringing each
product to its present location and condition, on a first-in,
first-out basis.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs necessary to
make the sale.
2.12. Financial assets
Financial assets are recognised at their fair value which
initially equates to the consideration given plus directly
attributable transaction costs associated with the investment.
The subsequent measurement of financial assets depends on their
classification as described in each category below:
2.12.1. Trade and other receivables
Trade receivables, which generally have 30 to 90-day credit
terms, are recognised and carried at their original invoice amount
less an allowance for any uncollectable amounts. An estimate for
doubtful debts is made when collection of the full amount is no
longer probable. Balances are written off when the probability of
recovery is assessed as being remote.
2.12.2. Current asset investments
Current asset investments comprise deposits held for a term of
greater than three months from the date of deposit and which are
not available to the Group on demand. Subsequent to initial
measurement, current asset investments are measured at fair
value.
2.12.3. Cash and cash equivalents
Cash and short-term deposits in the Consolidated Balance Sheet
comprise cash at bank and in hand, and short-term deposits with an
original maturity of three months or less.
For the purpose of the Consolidated Cash Flow Statement, cash
and cash equivalents consist of cash and short-term deposits as
defined above, net of outstanding bank overdrafts.
2.13. Financial liabilities
Financial liabilities are initially recognised at their fair
value and, in the case of loans and borrowings, net of directly
attributable transaction costs.
The subsequent measurement of financial liabilities depends on
their classification as described in each category below:
2.13.1. Provisions (excluding Restructuring provision)
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions
are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision
due to the passage of time is recognised as a borrowing cost.
Customer contract provisions
In respect of contracts where revenue is recognised on a
percentage of completion basis, and where the performance of one of
these limited number of contracts results in a margin that was less
than anticipated at the time that it was agreed, then the future
financial performance of that contract will be reviewed in detail.
If, after further financial analysis, the full financial
consequence of the contract can be reliably estimated, and it is
determined that the contract is potentially loss-making, then the
best estimate of the losses expected to be incurred until the end
of the contract will be provided for.
The Group has elected to apply IAS 11 in its assessment of
whether contracts are considered onerous and in subsequently
estimating the provision as IAS 18 considers the requirements of
IAS 11 are generally applicable to the recognition of revenue and
the associated expenses for a transaction involving the rendering
of services.
A contract that is accounted for under IAS 11 that is considered
potentially onerous is assessed according to the recognition of
expected losses in IAS 11 ahead of the onerous contract guidance in
IAS 37 and considers total estimated costs (i.e. directly
attributable variable costs and fixed allocated costs) as included
in the assessment of whether the contract is onerous or not and in
the measurement of the provision.
2.13.2. Restructuring provisions
The Group recognises a 'restructuring' provision when there is a
programme planned and controlled by Management that changes
materially the scope of the business or the manner in which it is
conducted.
Further to the Group's general provision recognition policy, a
restructuring provision is only considered when the Group has a
detailed formal plan for the restructuring identifying, as a
minimum; the business or part of the business concerned; the
principal locations affected; the location, function and
approximate number of employees who will be compensated for
terminating their services; the expenditures that will be
undertaken and when the plan will be implemented.
The Group will only recognise a specific restructuring provision
once a valid expectation in those affected that it will carry out
the restructuring by starting to implement that plan or announcing
its main features to those affected by it.
The Group only includes incremental costs associated directly
with the restructuring within the restructuring provisions such as
employee termination benefits and consulting fees. The Group
specifically excludes from recognition in a restructuring provision
any costs associated with ongoing activities such as the costs of
training or relocating staff that are redeployed within the
business rather than retrenched and costs for employees who
continue to be employed in ongoing operations, regardless of the
status of these operations post restructure.
2.13.3. Pensions and other post-employment benefits
The Group operates a defined contribution pension scheme
available to all UK employees. Contributions are recognised as an
expense in the Income Statement as they become payable in
accordance with the rules of the scheme. There are no material
pension schemes within the Group's overseas operations.
The Group has an obligation to make a one-off payment to French
employees upon retirement, the Indemnités de Fin de Carrière
(IFC).
French employment law requires that a company pays employees a
one-time contribution when (and only when) the employee leaves the
Company for retirement at the mandatory age. This is a legal
requirement for all businesses who incur the obligation upon
departure, due to retirement, of an employee.
Typically the retirement benefit is based on length of service
of the employee and his or her salary at retirement. The amount is
set via a legal minimum but the retirement premiums can be improved
by the collective agreement or employment contract in some cases.
In Computacenter France, the payment is based on accrued service
and ranges from 1 month of salary after 5 years of service to 9.4
months of salary after 47 years of service.
If the employee leaves voluntarily at any point before
retirement, all liability is extinguished and any accrued service
is not transferred to any new employment.
Management continues to account for this obligation according to
IAS 19 (revised). Due to the materiality of the obligation,
Management considers no further disclosures are relevant at this
time.
2.14. Derecognition of financial assets and liabilities
Financial assets
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised where:
-- the rights to receive cash flows from the asset have expired; or
-- the Group retains the right to receive cash flows from the
asset, but has assumed an obligation to pay them in full without
material delay to a third party under a 'pass-through' arrangement;
or
-- the Group has transferred its rights to receive cash flows
from the asset and either (a) has transferred substantially all the
risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
Financial liabilities
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expired.
2.15. Derivative financial instruments and hedge accounting
The Group uses foreign currency forward contracts to hedge its
foreign currency risks associated with foreign currency
fluctuations affecting cash flows from forecasted transactions and
unrecognised firm commitments.
At the inception of a hedge relationship, the Group formally
designates and documents the hedge relationship to which the Group
wishes to apply hedge accounting and the risk management objective
and strategy for undertaking the hedge. The documentation includes
identification of the hedging instrument, the hedged item or
transaction, the nature of the risk being hedged and how the entity
will assess the effectiveness of changes in the hedging
instrument's fair value in offsetting the exposure to changes in
the hedged item's fair value or cash flows attributable to the
hedged risk. Such hedges are expected to be highly effective in
achieving offsetting changes in cash flows and are addressed on an
ongoing basis to determine that they actually have been highly
effective throughout the financial reporting years for which they
are designated.
Forward contracts are initially recognised at fair value on the
date that the contract is entered into and are subsequently
remeasured at fair value at each reporting date. The fair value of
forward currency contracts is calculated by reference to current
forward exchange rates for contracts with similar maturity
profiles. Forward contracts are recorded as assets when the fair
value is positive and as liabilities when the fair value is
negative.
For the purposes of hedge accounting, hedges are classified as
cash flow hedges when hedging the exposure to variability in cash
flows that is either attributable to a particular risk associated
with a recognised asset or liability or a highly probable forecast
transaction or the foreign currency risk in an unrecognised firm
commitment.
Cash flow hedges that meet the strict criteria for hedge
accounting are accounted for as follows: the effective portion of
the gain or loss on the hedging instrument is recognised directly
in other comprehensive income in the cash flow hedge reserve, while
any ineffective portion is recognised immediately in the Income
Statement in administrative expenses.
Amounts recognised within other comprehensive income are
transferred to the Income Statement, within administrative
expenses, when the hedged transaction affects the Income Statement,
such as when the hedged financial expense is recognised.
If the forecast transaction or firm commitment is no longer
expected to occur, the cumulative gain or loss previously
recognised in equity is transferred to the Income Statement within
administrative expenses. If the hedging instrument expires or is
sold, terminated or exercised without replacement or rollover, or
if its designation as a hedge is revoked, any cumulative gain or
loss previously recognised within other comprehensive income
remains within other comprehensive income until after the forecast
transaction or firm commitment affects the Income Statement.
Any other gains or losses arising from changes in fair value on
forward contracts are taken directly to administrative expenses in
the Income Statement.
2.16. Taxation
2.16.1. Current tax
Current tax assets and liabilities for the current and prior
years are measured at the amount expected to be recovered from or
paid to the tax authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively
enacted by the balance sheet date.
2.16.2. Deferred tax
Deferred income tax is recognised on all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the Financial Statements, with the following
exceptions:
-- where the temporary difference arises from the initial
recognition of goodwill or from an asset or liability in a
transaction that is not a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss;
-- in respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures, where
the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will
not reverse in the foreseeable future; and
-- deferred income tax assets are recognised only to the extent
that it is probable that taxable profit will be available in the
future against which the deductible temporary differences, carried
forward tax credits or tax losses, can be utilised.
Deferred income tax assets and liabilities are measured on an
undiscounted basis at the tax rates that are expected to apply when
the related asset is realised or liability is settled, based on tax
rates and laws enacted or substantively enacted at the balance
sheet date.
Income tax is charged or credited directly to the statement of
comprehensive income if it relates to items that are credited or
charged to the statement of comprehensive income. Otherwise, income
tax is recognised in the Income Statement.
2.17. Share-based payment transactions
Employees (including Executive Directors) of the Group can
receive remuneration in the form of share-based payment
transactions, whereby employees render services in exchange for
shares or rights over shares ('equity-settled transactions').
The cost of equity-settled transactions with employees is
measured by reference to the fair value of the award at the date at
which they are granted. The fair value is determined by utilising
an appropriate valuation model. In valuing equity settled
transactions, no account is taken of any performance conditions as
none of the conditions set are market-related ones.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled to
the award ('vesting date'). The cumulative expense recognised for
equity-settled transactions at each reporting date, until the
vesting date, reflects the extent to which the vesting period has
expired and the Directors' best estimate of the number of equity
instruments that will ultimately vest. The Income Statement charge
or credit for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period. As
the schemes do not include any market-related performance
conditions, no expense is recognised for awards that do not
ultimately vest.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of earnings per share
(see note 7 to the summary financial information included within
this announcement).
The Group has an employee share trust for the granting of
non-transferable options to executives and senior employees. Shares
in the Group held by the employee share trust are treated as
investment in own shares and are recorded at cost as a deduction
from equity.
2.18. Fair value measurement
The Group measures certain financial instruments at fair value
at each balance sheet date.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
2.19. Own shares held
Computacenter plc shares held by the Group are classified in
shareholders' equity as 'own shares held' and are recognised at
cost. Consideration received for the sale of such shares is also
recognised in equity, with any difference between the proceeds from
sale and the original cost being taken to reserves. No gain or loss
is recognised in the performance statements on the purchase, sale,
issue or cancellation of equity shares.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of Financial Statements requires Management to
exercise judgement in applying the Group's accounting policies. It
also requires the use of estimates and assumptions that affect the
reported amounts of assets, liabilities, income and expenses. Due
to the inherent uncertainty in making these critical judgements and
estimates, actual outcomes could be different.
During the year, Management set aside time to consider the
critical accounting estimates and judgements for the Group. This
process included reviewing the last reporting period's disclosures
and the current period's challenging accounting issues. Where
Management deemed an area of accounting to be no longer a critical
estimate or judgement, an explanation for this decision is found in
the relevant accounting note to the Consolidated Financial
Statements.
3.1. Critical estimates
Estimates and underlying assumptions are reviewed on an ongoing
basis, with revisions recognised in the year in which the estimates
are revised and in any future years affected. The areas involving
significant risk resulting in a material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are as follows:
3.1.1. Services revenue recognition
The Group accounted for certain Services contracts using the
percentage of completion method, recognising revenue by reference
to the stage of completion of the contract which is determined by
actual costs incurred as a proportion of total forecast contract
costs. This method places considerable importance on accurate
estimates of the extent of progress towards completion of the
contract and may involve estimates on the scope of services
required for fulfilling the contractually defined obligations.
These significant estimates include total contract costs, total
contract revenues, contract risks, including technical risks, and
other assumptions. Under the percentage of completion method, the
changes in these estimates and assumptions may lead to an increase
or decrease in revenue recognised at the balance sheet date with
the in-year revenue recognition appropriately adjusted as required.
When the outcome of the contract cannot be estimated reliably,
revenue is recognised only to the extent that expenses incurred are
eligible to be recovered. No revenue is recognised if there are
significant uncertainties regarding recovery of the
consideration.
The key judgements are the extent to which revenue should be
recognised and also, where total contract costs are not covered by
total contract revenue, the extent to which an adjustment is
required.
Additionally, where contracts are renegotiated mid-life,
Management will consider when to make a revenue adjustment. A major
contract was under renegotiation at year end with the terms largely
agreed but not yet signed. Shortly after the balance sheet date, an
agreement was signed including settlement of outstanding revenue
claims relating to the second half of 2016. This additional
information resulted in an update to the original revenue estimate
with an adjustment of GBP1.7 million made to increase 2016 revenue
and margins.
During the year, Management held a number of 'difficult'
contracts under review that were considered to be performing below
expectation. The number of contracts under review fluctuated during
the year between eight and 12. Each contract was subject to a
detailed review to consider the reasons behind the lower than
anticipated performance and the potential accounting impacts
related effect on revenue recognition estimates.
For a limited number of these 'difficult' contracts, where there
was no immediate operational or commercial remedy for the
performance, a range of possible outcomes for the estimate of the
total contract costs and total contract revenues was considered to
determine the best estimate of stage of completion.
The gross revenue recognised in the year from these contracts
under review was approximately GBP10.4 million. The range of
potential scenarios considered by management in respect of these
specific contracts included a reduction in revenue, and margins,
recognised in 2016 of GBP4.1 million. Also, based on Management's
best estimate, the total cost to complete on these contracts were
GBP26.6 million.
3.2. Critical judgements
Judgements made by Management in the process of applying the
Group's accounting policies, that have the most significant effect
on the amounts recognised in the Financial Statements, are as
follows:
3.2.1. Exceptional items
Exceptional items remain a core focus of Management with the
recent Alternative Performance Measure regulations providing
further guidance in this area.
Management is required to exercise its judgement in the
classification of certain items as exceptional and outside of the
Group's adjusted(1) results. The overall goal of Management is to
present the Group's underlying performance without distortion from
one-off or non-trading events regardless of whether they be
favourable or unfavourable to the underlying result.
To achieve this, Management have considered the materiality,
infrequency and nature of the various items classified as
exceptional this year against the requirements and guidance
provided by IAS 1, our Group accounting policies and the recent
regulatory interpretations and guidance.
In reaching their conclusions, Management consider not only the
effect on the overall underlying Group performance but also where
an item is critical in understanding the performance of one of its
component Segments which is of relevance to investors and analysts
when assessing the Group result and its future prospects as a
whole.
Further details of the individual exceptional items, and the
reasons for their disclosure treatment, are set out in note 5 to
the summary financial information included within this
announcement.
3.3. Change in critical estimates and critical judgements
During the year, Management reassessed the critical estimates
and critical judgements and resolved that the following were no
longer considered critical.
3.3.1. Critical estimates
Provisions
The Group's provisions principally relate to obligations arising
from onerous lease property provisions, customer contract
provisions, restructuring provisions and retirement benefit
obligations.
Management has considered each element that makes up the total
provision balance as at the year end and decided that assumptions
used to estimate these elements of provisions were not sensitive
enough to change the provision balance materially hence provisions
are no longer considered a critical estimate.
Providing for doubtful debts
The level of provision for doubtful debts has decreased
significantly from previous years and hence is no longer a critical
estimate as the range of possible outcomes resulting from various
assumptions applied by management are now not considered material.
This was previously considered a critical estimate due to the
higher than normal trade receivables balances in our French Segment
at 31 December 2014.
3.3.2. Critical judgements
Asset held for sale
At the time of approving the 2014 year end Annual Report and
Accounts, Management made a judgement in deciding that the sale of
its subsidiary, RDC, should not be accounted for as an asset held
for sale under the Group's relevant accounting policy disclosed at
the time. However, the Group did not carry any assets classified as
'held for sale' or have any 'discontinued operations' as at 31
December 2016 therefore this is no longer considered an area of
critical judgement by Management.
4 SEGMENT INFORMATION
For Management purposes, the Group is organised into
geographical Segments, with each Segment determined by the location
of the Group's assets and operations. The Group's business in each
geography is managed separately and held in separate statutory
entities.
No operating Segments have been aggregated to form the below
reportable operating Segments.
Management monitors the operating results of its geographical
Segments separately for the purposes of making decisions about
resource allocation and performance assessment. Segment performance
is evaluated based on adjusted(1) operating profit or loss which is
measured differently from statutory operating profit or loss in the
Consolidated Financial Statements as defined above.
Segmental performance for the years ended 31 December 2016 and
2015 was as follows:
Year ended 31 December 2016
UK Germany France Belgium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
===================================== ========= ========= ======== ======== =========
Revenue
==========================================================================================
Adjusted1 Supply Chain revenue 899,822 934,214 335,612 37,907 2,207,555
===================================== ========= ========= ======== ======== =========
Adjusted1 Services revenue
===================================== ========= ========= ======== ======== =========
Adjusted1 Professional Services
revenue 118,636 138,218 15,470 1,868 274,192
===================================== ========= ========= ======== ======== =========
Managed Services revenue 373,292 319,744 53,627 16,987 763,650
===================================== ========= ========= ======== ======== =========
Total adjusted1 Services revenue 491,928 457,962 69,097 18,855 1,037,842
===================================== ========= ========= ======== ======== =========
Total adjusted1 revenue 1,391,750 1,392,176 404,709 56,762 3,245,397
===================================== ========= ========= ======== ======== =========
RDC
==========================================================================================
Supply Chain revenue - - - - -
===================================== ========= ========= ======== ======== =========
Professional Services revenue - - - - -
===================================== ========= ========= ======== ======== =========
Total RDC revenue - - - - -
===================================== ========= ========= ======== ======== =========
Statutory revenue 1,391,750 1,392,176 404,709 56,762 3,245,397
===================================== ========= ========= ======== ======== =========
Results
==========================================================================================
Adjusted1 gross profit 202,556 175,273 42,520 7,479 427,828
===================================== ========= ========= ======== ======== =========
Adjusted1 administrative expenses (155,812) (139,683) (39,649) (6,524) (341,668)
===================================== ========= ========= ======== ======== =========
Adjusted1 operating profit 46,744 35,590 2,871 955 86,160
===================================== ========= ========= ======== ======== =========
Adjusted1 net interest 717 (212) (208) (28) 269
===================================== ========= ========= ======== ======== =========
Adjusted1 profit before tax 47,461 35,378 2,663 927 86,429
===================================== ========= ========= ======== ======== =========
Exceptional items:
==========================================================================================
- onerous contracts trading
losses - - - - -
===================================== ========= ========= ======== ======== =========
- onerous contracts provision
for future losses - - - - -
===================================== ========= ========= ======== ======== =========
- exceptional losses on redundancy
and other restructuring costs - - (1,169) - (1,169)
===================================== ========= ========= ======== ======== =========
- gain on reversal of fair
value adjustments - 3,045 - - 3,045
===================================== ========= ========= ======== ======== =========
Total exceptional items - 3,045 (1,169) - 1,876
===================================== ========= ========= ======== ======== =========
Exceptional loss on disposal
of a subsidiary (522) - - - (522)
===================================== ========= ========= ======== ======== =========
Amortisation of acquired intangibles - (627) - (83) (710)
===================================== ========= ========= ======== ======== =========
RDC - - - - -
===================================== ========= ========= ======== ======== =========
Statutory profit before tax 46,939 37,796 1,494 844 87,073
===================================== ========= ========= ======== ======== =========
The reconciliation for adjusted(1) operating profit to statutory
operating profit as disclosed in the Consolidated Income Statement
is as follows:
UK Germany France Belgium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
===================================== ======== ======== ======== ======== ========
Adjusted(1) operating profit 46,744 35,590 2,871 955 86,160
===================================== ======== ======== ======== ======== ========
Add-back interest on CSF 9 210 - - 219
===================================== ======== ======== ======== ======== ========
Amortisation of acquired intangibles - (627) - (83) (710)
===================================== ======== ======== ======== ======== ========
Exceptional items - 3,045 (1,169) - 1,876
===================================== ======== ======== ======== ======== ========
RDC - - - - -
===================================== ======== ======== ======== ======== ========
Statutory operating profit 46,753 38,218 1,702 872 87,545
===================================== ======== ======== ======== ======== ========
Other segment information
===================================== ======== ======== ======== ======== ========
Property, plant and equipment 39,636 14,825 6,830 1,729 63,020
===================================== ======== ======== ======== ======== ========
Investment property 10,033 - - - 10,033
===================================== ======== ======== ======== ======== ========
Intangible assets 54,817 19,416 39 2,013 76,285
===================================== ======== ======== ======== ======== ========
Capital expenditure:
===================================== ======== ======== ======== ======== ========
Property, plant and equipment 12,076 5,026 501 38 17,641
===================================== ======== ======== ======== ======== ========
Software 3,179 1,754 9 1 4,943
===================================== ======== ======== ======== ======== ========
Depreciation of property,
plant and equipment 6,966 6,681 1,820 164 15,631
===================================== ======== ======== ======== ======== ========
Depreciation of investment
property 227 - - - 227
===================================== ======== ======== ======== ======== ========
Amortisation of software 11,536 846 29 2 12,413
===================================== ======== ======== ======== ======== ========
Share-based payments 2,702 607 36 - 3,345
===================================== ======== ======== ======== ======== ========
Year ended 31 December 2015
UK Germany France Belgium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
===================================== ========= ========= ======== ======== =========
Revenue
==========================================================================================
Adjusted1 Supply Chain revenue 875,041 820,196 335,024 33,686 2,063,947
===================================== ========= ========= ======== ======== =========
Adjusted1 Services revenue
===================================== ========= ========= ======== ======== =========
Adjusted1 Professional Services
revenue 137,390 107,416 16,101 1,645 262,552
===================================== ========= ========= ======== ======== =========
Managed Services revenue 394,943 272,006 46,934 13,785 727,668
===================================== ========= ========= ======== ======== =========
Total adjusted1 Services revenue 532,333 379,422 63,035 15,430 990,220
===================================== ========= ========= ======== ======== =========
Total adjusted1 revenue 1,407,374 1,199,618 398,059 49,116 3,054,167
===================================== ========= ========= ======== ======== =========
RDC
==========================================================================================
Supply Chain revenue 3,158 - - - 3,158
===================================== ========= ========= ======== ======== =========
Professional Services revenue 290 - - - 290
===================================== ========= ========= ======== ======== =========
Total RDC revenue 3,448 - - - 3,448
===================================== ========= ========= ======== ======== =========
Statutory Supply Chain revenue 878,199 820,196 335,024 33,686 2,067,105
===================================== ========= ========= ======== ======== =========
Statutory Services revenue
===================================== ========= ========= ======== ======== =========
Statutory Professional Services
revenue 137,680 107,416 16,101 1,645 262,842
===================================== ========= ========= ======== ======== =========
Statutory Managed Services
revenue 394,943 272,006 46,934 13,785 727,668
===================================== ========= ========= ======== ======== =========
Total statutory Services revenue 532,623 379,422 63,035 15,430 990,510
===================================== ========= ========= ======== ======== =========
Statutory revenue 1,410,822 1,199,618 398,059 49,116 3,057,615
===================================== ========= ========= ======== ======== =========
Results
==========================================================================================
Adjusted1 gross profit 216,445 147,346 32,083 6,258 402,132
===================================== ========= ========= ======== ======== =========
Adjusted1 administrative expenses (157,110) (119,937) (33,715) (4,263) (315,025)
===================================== ========= ========= ======== ======== =========
Adjusted1 operating profit/(loss) 59,335 27,409 (1,632) 1,995 87,107
===================================== ========= ========= ======== ======== =========
Adjusted1 net interest 601 (577) (178) (79) (233)
===================================== ========= ========= ======== ======== =========
Adjusted1 profit/(loss) before
tax 59,936 26,832 (1,810) 1,916 86,874
===================================== ========= ========= ======== ======== =========
Exceptional items:
===================================== ========= ========= ======== ======== =========
- onerous contracts trading
losses - (1,123) - - (1,123)
===================================== ========= ========= ======== ======== =========
- onerous contracts provision
for future losses - 1,559 - - 1,559
===================================== ========= ========= ======== ======== =========
- exceptional losses on redundancy
and other restructuring costs - - (1,465) - (1,465)
===================================== ========= ========= ======== ======== =========
Total exceptional items - 436 (1,465) - (1,029)
===================================== ========= ========= ======== ======== =========
Exceptional gain on disposal
of a subsidiary 42,155 - - - 42,155
===================================== ========= ========= ======== ======== =========
Amortisation of acquired intangibles (361) (1,116) - (76) (1,553)
===================================== ========= ========= ======== ======== =========
RDC 320 - - - 320
===================================== ========= ========= ======== ======== =========
Statutory profit/(loss) before
tax 102,050 26,152 (3,275) 1,840 126,767
===================================== ========= ========= ======== ======== =========
The reconciliation for adjusted(1) operating profit to statutory
operating profit as disclosed in the Consolidated Income Statement
is as follows:
UK Germany France Belgium Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
===================================== ======== ======== ======== ======== ========
Adjusted(1) operating profit/(loss) 59,335 27,409 (1,632) 1,995 87,107
===================================== ======== ======== ======== ======== ========
Add-back interest on CSF 56 284 - - 340
===================================== ======== ======== ======== ======== ========
Amortisation of acquired intangibles (361) (1,116) - (76) (1,553)
===================================== ======== ======== ======== ======== ========
Exceptional items - 436 (1,465) - (1,029)
===================================== ======== ======== ======== ======== ========
RDC 320 - - - 320
===================================== ======== ======== ======== ======== ========
Statutory operating profit/(loss) 59,350 27,013 (3,097) 1,919 85,185
===================================== ======== ======== ======== ======== ========
Other segment information
=======================================================================================
Property, plant and equipment 34,037 14,286 7,210 1,599 57,132
===================================== ======== ======== ======== ======== ========
Investment property 10,260 - - - 10,260
===================================== ======== ======== ======== ======== ========
Intangible assets 63,173 16,520 56 1,784 81,533
===================================== ======== ======== ======== ======== ========
Capital expenditure:
=======================================================================================
Property, plant and equipment 5,904 5,224 1,307 868 13,303
===================================== ======== ======== ======== ======== ========
Software 6,052 1,186 50 6 7,294
===================================== ======== ======== ======== ======== ========
Depreciation of property,
plant and equipment 10,667 6,121 1,687 410 18,885
===================================== ======== ======== ======== ======== ========
Depreciation of investment
property 227 - - - 227
===================================== ======== ======== ======== ======== ========
Amortisation of software 11,059 635 59 5 11,758
===================================== ======== ======== ======== ======== ========
Share-based payments 4,095 542 33 - 4,670
===================================== ======== ======== ======== ======== ========
Information about major customers
Included in revenues arising from the UK segment are revenues of
approximately GBP271 million (2015: GBP281 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.
5 Exceptional items
2016 2015
GBP'000 GBP'000
================================================== ======== ========
Operating profit
======================================================================
Redundancy and other restructuring costs (1,169) (1,465)
================================================== ======== ========
Onerous contracts - 436
================================================== ======== ========
Gain on reversal of fair value adjustments 3,045 -
================================================== ======== ========
1,876 (1,029)
================================================== ======== ========
Exceptional (loss)/gain on disposal of a
subsidiary (522) 42,155
================================================== ======== ========
Exceptional items before taxation 1,354 41,126
================================================== ======== ========
Income tax
======================================================================
Tax on onerous contracts included in operating
profit - (52)
================================================== ======== ========
Tax on gain on reversal of fair value adjustments (192) -
================================================== ======== ========
Exceptional items after taxation 1,162 41,074
================================================== ======== ========
2016: Included within the current year are the following
exceptional items:
-- As outlined in our 2016 Interim Report, a Line of Business
restructure was agreed with the business in France. This initiative
to reduce the underutilised resources within our Professional
Services arm completed in the second half of 2016, for a cost of
GBP1.0 million. This restructure has seen France exit the direct
provision of Group Field Maintenance Services. This Line of
Business had materially decreased over time, leading to significant
resourcing overcapacity. Any residual customer requirement will be
sub-contracted to an existing third party provider. Additionally,
as also detailed in the 2016 Interim Report, further provisioning
to the existing 2014 Social Plan in France of GBP0.1 million was
also required during the period.
-- The most significant item within exceptional items during
2016 was the GBP3.0 million release of historical fair value
adjustments made on the 2009 acquisition of becom
Informationssysteme GmbH (becom). This followed the final payment
of the contingent consideration to the vendor during 2016. Due to
the materiality and nature of the item, Management decided to
classify this one-off gain as exceptional.
-- During the third quarter, a Group subsidiary domiciled in
Luxembourg, Computacenter PSF SA, was disposed of for a net loss of
GBP0.5 million. As the principal item in the year to 31 December
2015 was the gain on the disposal of a Group subsidiary, R.D.
Trading Limited (RDC), of
GBP42.2 million, the current year loss on disposal activity has
also been classified as exceptional.
2015: Included within the prior year are the following
exceptional items:
-- Computacenter (UK) Limited disposed of its wholly-owned
subsidiary RDC during the year. An exceptional gain of GBP42.2
million was recognised on the disposal. In line with our accounting
policy, Management has elected under IAS 1 to report this gain as a
separate line item on the face of the Consolidated Income Statement
due to the materiality, infrequency and nature of this gain. As
noted within the summary of significant accounting policies the
adjusted(1) results exclude this gain. 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.
-- Computacenter France continued with its substantial
restructuring exercise that began in 2014. An additional cost of
GBP1.5 million has been recognised as part of the Social Plan. As
the redundancy and restructuring costs were treated as an
exceptional item on recognition, the further provision has also
been treated as an exceptional item. Within this balance,
Management has provided for legal expenses of GBP0.4 million
directly related to individual legal challenges to termination
settlements provided under the Social Plan.
-- The Group's remaining two onerous contracts continue to show
operational improvements therefore Management has revised its
estimates of the losses to be incurred. On this basis, the Group
has released GBP0.4 million of the provision. As the onerous
contracts were treated as an exceptional item on recognition, the
write-back of the provision has also been released as an
exceptional item.
6 Income tax
a) Tax on profit from ordinary activities
2016 2015
GBP'000 GBP'000
==================================================== ======== ========
Tax charged in the consolidated income statement
========================================================================
Current income tax
========================================================================
UK corporation tax 12,992 14,639
==================================================== ======== ========
Foreign tax
========================================================================
- operating results before exceptional items 7,702 6,485
==================================================== ======== ========
Total foreign tax 7,702 6,485
==================================================== ======== ========
Adjustments in respect of prior years (170) (232)
==================================================== ======== ========
Total current income tax 20,524 20,892
==================================================== ======== ========
Deferred tax
========================================================================
Operating results before exceptional items:
========================================================================
- origination and reversal of temporary differences 194 (1,276)
==================================================== ======== ========
- adjustments in respect of prior years (360) (276)
==================================================== ======== ========
- changes in recoverable amounts of deferred
tax assets 2,750 4,265
==================================================== ======== ========
Exceptional items 192 52
==================================================== ======== ========
Total deferred tax 2,776 2,765
==================================================== ======== ========
Tax charge in the consolidated income statement 23,300 23,657
==================================================== ======== ========
b) Reconciliation of the total tax charge
2016 2015
GBP'000 GBP'000
============================================== ======== ========
Accounting profit before income tax 87,073 126,767
============================================== ======== ========
At the UK standard rate of corporation tax
of 20 per cent (2015: 20.25 per cent) 17,415 25,670
============================================== ======== ========
Expenses not deductible for tax purposes 962 1,187
============================================== ======== ========
Non-deductible element of share-based payment
charge 665 128
============================================== ======== ========
Adjustments in respect of current income
tax of previous years (519) (599)
============================================== ======== ========
Higher tax on overseas earnings 3,106 3,140
============================================== ======== ========
Other differences 71 (39)
============================================== ======== ========
Effect of changes in tax rate on deferred
tax 170 220
============================================== ======== ========
Overseas tax not based on earnings 1,152 1,065
============================================== ======== ========
Non-chargeable exceptional gain on disposal
of subsidiary - (8,529)
============================================== ======== ========
Deferred tax not recognised on current year
losses 278 1,414
============================================== ======== ========
At effective income tax rate of 26.8 per
cent (2015: 18.7 per cent) 23,300 23,657
============================================== ======== ========
c) Tax losses
Deferred tax assets of GBP5.9 million (2015: GBP7.4 million)
have been recognised in respect of losses carried forward.
In addition, at 31 December 2016, there were unused tax losses
across the Group of GBP150.8 million (2015: GBP130.9 million) for
which no deferred tax asset has been recognised. Of these losses,
GBP40.4 million (2015: GBP33.5 million) arise in Germany and
GBP110.4 million (2015: GBP93.3 million) arise in France. A
significant proportion of the losses arising in Germany have been
generated in statutory entities that no longer have significant
levels of trade. The remaining unrecognised tax losses relate to
other loss-making overseas subsidiaries.
d) Deferred tax
Deferred income tax at 31 December relates to the following:
Consolidated
income statement
and other
Consolidated comprehensive
balance sheet income
====================================== ================== ===================
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
====================================== ======== ======== ========= ========
Deferred income tax liabilities
===============================================================================
Accelerated capital allowances - 1,197 (1,197) (584)
====================================== ======== ======== ========= ========
Revaluations of foreign exchange
contracts to fair value 559 370 189 370
====================================== ======== ======== ========= ========
Amortisation of intangibles 554 661 (117) (315)
====================================== ======== ======== ========= ========
Gross deferred income tax liabilities 1,113 2,228
====================================== ======== ======== ========= ========
Deferred income tax assets
===============================================================================
Relief on share option gains 1,797 2,590 793 (945)
====================================== ======== ======== ========= ========
Other temporary differences 3,244 4,348 396 (364)
====================================== ======== ======== ========= ========
Revaluations of foreign exchange
contracts to fair value 308 176 132 (122)
====================================== ======== ======== ========= ========
Losses available for offset against
future taxable income 5,960 7,431 2,580 4,725
====================================== ======== ======== ========= ========
Gross deferred income tax assets 11,309 14,545
====================================== ======== ======== ========= ========
Deferred income tax charge 2,776 2,765
====================================== ======== ======== ========= ========
Net deferred income tax assets 10,196 12,317
====================================== ======== ======== --------- --------
Disclosed on the consolidated balance sheet
===============================================================================
Deferred income tax assets 10,537 12,840
====================================== ======== ======== --------- --------
Deferred income tax liabilities (341) (523)
====================================== ======== ========
Net deferred income tax assets 10,196 12,317
====================================== ======== ======== --------- --------
At 31 December 2016, there was no recognised or unrecognised
deferred income tax liability (2015: GBPnil) for taxes that would
be payable on the unremitted earnings of the Group's subsidiaries
as the Group expects that future remittances of earnings from its
overseas subsidiaries will be covered by the UK dividend
exemption.
e) Impact of rate change
The main rate of UK Corporation will be reduced to 19 per cent
from 1 April 2017 and 17 per cent from 1 April 2020, as enacted in
the Finance Act 2015. The deferred tax in these Financial
Statements reflects this.
7 Earnings per 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).
To calculate diluted earnings per share, the weighted average
number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential shares. Share options granted to
employees where the exercise price is less than the average market
price of the Company's ordinary shares during the year are
considered to be dilutive potential shares.
2016 2015
GBP'000 GBP'000
========================================= ======== ========
Profit attributable to equity holders of
the parent 63,773 103,110
========================================= ======== ========
2016 2015
GBP'000 GBP'000
=================================================== ======== ========
Basic weighted average number of shares (excluding
own shares held) 120,540 122,948
=================================================== ======== ========
Effect of dilution:
=======================================================================
Share options 1,344 2,655
=================================================== ======== ========
Diluted weighted average number of shares 121,884 125,603
=================================================== ======== ========
2016 2015
Pence pence
=========================== ====== ======
Basic earnings per share 52.9 83.9
=========================== ====== ======
Diluted earnings per share 52.3 82.1
=========================== ====== ======
8 Dividends paid and proposed
2016 2015
GBP'000 GBP'000
============================================= ======== ========
Declared and paid during the year
=================================================================
Equity dividends on Ordinary Shares:
=================================================================
Second interim dividend for 2015: 15.0 pence
(2014: nil pence) 18,106 -
============================================= ======== ========
Final dividend for 2015: nil pence (2014:
13.1 pence) - 15,776
============================================= ======== ========
Interim dividend for 2016: 7.2 pence (2015:
6.3 pence) 8,696 7,698
============================================= ======== ========
26,802 23,474
============================================= ======== ========
Proposed (not recognised as a liability as at 31 December)
=================================================================
Equity dividends on Ordinary Shares:
=================================================================
Second interim dividend for 2016: nil pence
(2015: 15.0 pence) - 18,399
============================================= ======== ========
Final dividend for 2016: 15.0 pence (2015:
nil pence) 18,399 -
============================================= ======== ========
9 Analysis of changes in net funds
At Cash At
1 January flows Non-cash Exchange 31 December
2016 in year flow differences 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ========== ======== ======== ============ ============
Cash and short-term deposits 111,770 (5,840) - 12,746 118,676
============================== ========== ======== ======== ============ ============
Bank overdraft (90) 90 - - -
============================== ========== ======== ======== ============ ============
Cash and cash equivalents 111,680 (5,750) - 12,746 118,676
============================== ========== ======== ======== ============ ============
Current asset investments 15,000 15,000 - - 30,000
============================== ========== ======== ======== ============ ============
Bank loans (5) (278) - (11) (294)
============================== ========== ======== ======== ============ ============
Net funds excluding CSF 126,675 8,972 - 12,735 148,382
============================== ========== ======== ======== ============ ============
CSF leases (4,373) 1,167 377 (648) (3,477)
============================== ========== ======== ======== ============ ============
Customer-specific other loans (1,514) 1,101 - - (413)
============================== ========== ======== ======== ============ ============
Total CSF (5,887) 2,268 377 (648) (3,890)
============================== ========== ======== ======== ============ ============
Net funds 120,788 11,240 377 12,087 144,492
============================== ========== ======== ======== ============ ============
At Cash At
1 January flows Non-cash Exchange 31 December
2015 in year flow differences 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ========== ======== ======== ============ ============
Cash and short-term deposits 129,865 (16,113) - (1,982) 111,770
============================== ========== ======== ======== ============ ============
Bank overdraft (719) 584 - 45 (90)
============================== ========== ======== ======== ============ ============
Cash and cash equivalents 129,146 (15,529) - (1,937) 111,680
============================== ========== ======== ======== ============ ============
Current asset investments - 15,000 - - 15,000
============================== ========== ======== ======== ============ ============
Bank loans (120) 107 - 8 (5)
============================== ========== ======== ======== ============ ============
Other loans non-CSF (517) 517 - - -
============================== ========== ======== ======== ============ ============
Net funds excluding CSF 128,509 95 - (1,929) 126,675
============================== ========== ======== ======== ============ ============
CSF leases (6,696) 2,193 (175) 305 (4,373)
============================== ========== ======== ======== ============ ============
Customer-specific other loans (2,616) 1,089 - - (1,514)
============================== ========== ======== ======== ============ ============
Total CSF (9,312) 3,282 (175) 305 (5,887)
============================== ========== ======== ======== ============ ============
Net funds 119,197 3,377 (175) (1,624) 120,788
============================== ========== ======== ======== ============ ============
10 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.
Triage Services Limited mainly provides IT hardware repair
services to many of Computacenter's customers. MJ Norris is a
Director of and has a material interest in Triage Services
Limited.
The table below provides the total amount of transactions that
have been entered into with related parties for the relevant
financial year:
Purchases Amounts
Sales from owed
to related related to related
parties parties parties
GBP'000 GBP'000 GBP'000
======================== =========== ========= ===========
Biomni Limited 3 817 -
======================== =========== ========= ===========
Triage Services Limited - 1,142 55
======================== =========== ========= ===========
3 1,959 55
======================== =========== ========= ===========
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.
Compensation of key management personnel (including
Directors)
The Board of Directors is identified as the Group's key
management personnel. A summary of the compensation of key
management personnel is provided below:
2016 2015
GBP'000 GBP'000
========================================== ======== ========
Short-term employee benefits 1,407 2,092
========================================== ======== ========
Social security costs 604 374
========================================== ======== ========
Share-based payment transactions 1,565 942
========================================== ======== ========
Pension costs 19 29
========================================== ======== ========
Total compensation paid to key management
personnel 3,595 3,437
========================================== ======== ========
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UUAURBWAOAUR
(END) Dow Jones Newswires
March 13, 2017 03:01 ET (07:01 GMT)
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