RNS No 8824v
COMPUTACENTER PLC
20th August 1998
Interim Results for the half year to 30 June 1998
Record results show strong continued momentum
Following its flotation in May this year, Computacenter plc, the largest UK
company specialising in the provision of distributed information technology
and related services to large corporate and public sector organisations,
announces record interim results
* Turnover - up 39% to #776 million
* Pre-tax profit - up 42% to #31.3 million
* EPS - up 42% to 11.4p per share fully diluted
* Net pre-tax margin - Steady at 4% of sales
* Net cash position - #18.7 million compared with #41.9 million net
debt
* French and German subsidiaries exceed plan
* Some exceptional factors in the first half
* Underlying performance strong
* New account wins include the Post Office, SEEBOARD Plc and the
Automobile Association
* Accelerated investment programme
* 626 new staff positions
Philip Hulme, Chairman, Computacenter plc, said
These are another set of record results. They were achieved after
expensing #2.8 million through the profit and loss account to fund free
shares for employees at the time of our flotation.
The results demonstrate the strong underlying demand for Computacenter's
services and the Group s ability to build market share.
Growth in the first half was ahead of expectations. This was partly
the result of some exceptional factors which are unlikely to be repeated
in the second half. However, even allowing for these factors, the
underlying growth rate remained at a very encouraging level.
The Group is taking advantage of its financial strength to accelerate
investment in people, systems and infrastructure to capitalise on the
opportunities we see.
We remain confident of the outcome for the full year and the prospects
for future growth.
Mike Norris, Chief Executive, said
We have won some important new accounts, as well as growing business
with our existing customers. We also see further opportunities to widen
our service base.
Successful growth fuels a virtuous circle which enables us to increase
value to customers, to increase investment in our people, systems and
infrastructure and to create healthy returns for our shareholders.
The vast majority of Computacenter s staff are now shareholders. This
high level of financial participation, and the corresponding level of
enthusiasm which is apparent within the Group, bodes well for our future
success.
For further information
Computacenter plc
Media enquiries: Mike Norris, Chief Executive 0171 620 2222
Analyst enquiries: Tony Conophy, Finance Director 01923 256040
Dewe Rogerson
Anthony Carlisle 0171 638 9571
0973 611 888
Duncan Murray 0171 638 9571
Chairman's statement
I am pleased to be able to report another set of record results for the Group
in the half year to 30 June.
Turnover, at #776 million, was up 39% over the same period last year and
profit before tax, at #31.3 million, was up 42%. The Group's net margin
before tax as a percentage of sales remained steady at 4% and fully-diluted
earnings per share grew by 42% to 11.4 pence.
The Group maintained a strong positive cash flow with a net inflow of #1.8
million compared with a net outflow of #11.2 million for the same period last
year. This was before taking account of #49.6 million received as a result of
the Group's successful flotation. The net cash position, after debt, was
#18.7 million at the half year.
Our businesses in France and Germany both exceeded plan. Turnover for
Computacenter France grew by 56% to #69 million and operating profit grew 75%
to #1.15 million. Our business in Germany is at an earlier stage of
development but achieved sales of #12.9 million with an operating loss of
#0.6 million.
The growth rates exhibited in the first half were ahead of expectations. This
was partly the result of a number of exceptional factors which are unlikely
to be repeated in the second half. These include substantial gains in public
sector turnover which is typically weighted to the first half of the year,
changes in the corporate licensing arrangements for Microsoft software which
resulted in some particularly large deals in the first half and the
outstanding growth of Computacenter France. However, even allowing for these
factors, the underlying growth rate of the Group remained at a very
encouraging level.
The Group's financial strength has enabled management to further accelerate
our investment in people, systems and infrastructure. Many of these
investments are expensed through the profit and loss account. Recruitment
continues apace and the Group has expanded its office space in several
regions. The development of the new logistics, engineering and administration
centre in Hatfield is proceeding according to plan. We are also continuing to
develop and extend our range of services. All of these investments will help
to secure the future growth of the Group.
Turning to the future, there is much talk about the possible effects of Year
2000 and EMU, as well as general economic conditions. I am pleased to report
that current trading remains strong and, allowing for the exceptional factors
noted above, there is no evidence of any slowdown in the underlying growth
rate of the Group's business. Consequently, management remains confident of
the likely outcome for the full year.
With respect to the Year 2000 issue, on previous occasions we have noted that
it is difficult to predict the net effect on the Group. Some customers have
accelerated hardware replacement as part of their Year 2000 compliance
programmes, but in other instances significant projects are being deferred
until the next millennium. In the last few months we have begun to see some
evidence that there may be an accelerating net pull-forward of business but
we estimate that the impact on our results so far has been minimal.
EMU is a factor which will drive future growth as companies adapt their IT
systems to cope with the new currency. This will be true regardless of
whether the UK chooses to enter the system. However, again, there has been
little, if any, effect on our business to date.
Our flotation, which took place on 21 May, was an important landmark for the
Group and an undoubted success. The offer was more than 12 times
oversubscribed. As part of the flotation process, free shares were offered to
all qualifying staff who were on the payroll as at 31 March this year.
Consequently over 90% of Computacenter staff are now shareholders in the
Group. It is worth noting that the cost of these free shares, #2.8 million,
was expensed through the profit and loss account in the first half. Since the
flotation the Group has also initiated a Sharesave scheme in which 56% of
staff have elected to participate.
Our people remain, as always, our greatest asset. It is a tribute to their
efforts that we have once more achieved record results. This is particularly
satisfying in a period when many of our staff have spent significant amounts
of time preparing the Group for our flotation. I thank them all and look
forward to reporting on our results, and declaring a full year dividend, at
the end of the financial year.
Philip Hulme, Chairman
Review of operations
Computacenter is the largest UK-owned company specialising in the provision
of distributed information technology and related services to large corporate
and public sector organisations.
Our overall strategic objective is to establish Computacenter as the
preferred partner of such organisations for the purpose of implementing the
supporting distributed IT.
The Group offers a full range of services including Planning, Requisition,
Implementation, Support and Management and markets these services as PRISM .
During the first half the Group continued to make progress by further
developing the range of services sold into existing accounts and by winning a
number of significant contracts with new customers. Notably, we expanded the
range of services provided to many of our managed services customers. New
account wins in the first six months included the Post Office, SEEBOARD Plc
and the Automobile Association.
During the first half of 1998 the GCat contract with the CCTA, won jointly
with EDS in September 1997, resulted in significant sales gains in the
government sector. Due to the traditional purchasing patterns of the public
sector we expect that this contract will have less impact in the second half
of the financial year. The first six months were also given a boost by
Microsoft's introduction of new corporate software licensing arrangements
which resulted in a number of major incremental sales.
The demand for the Group's support and managed services offerings continued
to increase. In the first half of the year the UK company merged its on-site
maintenance and managed services operations into a single unit. This new
division comprises some 900 people, the majority of whom work full time on
customer sites managing and supporting distributed technology. In addition,
we enhanced our central support capability, thus creating a significant
opportunity to share best practices and to create operational leverage.
The Group continued to invest in skills and infrastructure in the rapidly
growing enterprise networking market and attained the much-coveted Cisco Gold
accreditation in the UK in March. The UK company also expanded its investment
in higher end UNIX services and became authorised for the sale and support of
HP/9000 and DEC Alpha platforms.
The growth of the Internet and corporate Intranets is creating numerous
opportunities for the Group. However, many of these originate outside our
traditional IT contacts within customer organisations and the range of
services required differs from our core offering. For these reasons, a new
division has been formed in the UK dedicated to e-business which will, in
due course, be marketed under its own identity.
The UK company continued to develop its expertise in the area of channel
assembly whereby manufacturers supply part-built machines and Computacenter
adds the final components, such as disk and memory, against final customer
orders. An initial pilot scheme was successfully completed with IBM and that
programme is now fully implemented and live. A similar pilot is currently
underway with Hewlett-Packard.
Construction has commenced at the new logistics, engineering and
administration facility in Hatfield and work is on schedule. New offices were
opened in London and Hatfield to accommodate the continued expansion of our
sales and support operations.
In France, new offices were opened in Nice, Pau and Rouen and an agreement
was signed for a significantly larger headquarters and operations centre to
accommodate continued growth. Occupation of these premises is expected in the
first half of 1999. Our German subsidiary is in the process of implementing
Computacenter's systems and business practices and we remain very satisfied
with the company's progress to date.
The millennium date issue has a mixed impact on Computacenter. As the year
progresses it will become clearer whether we can expect to see a net pull-
forward of business. Our own project to ensure compliance of internal systems
is proceeding on schedule.
The Group has increased investment in recruitment to cope with current and
future demand and a total of 626 new positions were created in the first half
of the year. As the Chairman indicated in his statement, the vast majority of
Computacenter's staff are now shareholders and the majority of them have also
elected to participate in our new Sharesave scheme. This high level of
financial participation, and the corresponding level of enthusiasm which is
apparent within the Group, is extremely encouraging and bodes well for our
continued success.
Mike Norris, Chief Executive
Auditors' review report
To Computacenter plc
We have reviewed the interim financial information in respect of the six
months ended 30 June 1998, which is the responsibility of, and has been
approved by, the Directors. Our responsibility is to report on the results
of our review.
Our review was carried out having regard to the Bulletin, Review of interim
financial information, issued by the Auditing Practices Board. This review
consisted principally of obtaining an understanding of the process for the
preparation of the interim financial information, applying analytical
procedures to the underlying financial data, assessing whether accounting
policies have been consistently applied, and making enquiries of the Group's
management responsible for financial and accounting matters. The review
excluded audit procedures such as tests of controls and verification of
assets and liabilities and was therefore substantially less in scope than an
audit performed in accordance with Auditing Standards. Accordingly we do not
express an audit opinion on the interim financial information.
On the basis of our review
* we are not aware of any material modification that should be made to the
interim financial information as presented; and
* in our opinion the interim financial information has been prepared using
accounting policies consistent with those adopted by Computacenter
plc (formerly Computacenter Services Group plc) in its accounts for
the year ended 31 December 1997.
Ernst & Young
Reading
19 August 1998
Secretary Registered Office
Mr A J Pottinger FCIS Computacenter House
93-101 Blackfriars Road
London SE1 8HW
Registered Number
3110569
Computacenter plc
Summarised Profit and Loss Account
For the six months ended 30 June 1998
____________________________________________________________________________
Unaudited Unaudited Audited
Six Six Year
months months ended
ended ended 31
30 June 30 June December
1998 1997 1997
# 000 # 000 # 000
Turnover 775,746 558,917 1,133,523
Operating Costs (742,451) (534,033) (1,081,041)
Loss from interests in
associated undertakings - (88) (176)
____________________________________________________________________________
Operating profit 33,295 24,796 52,306
Other income 1,495 582 1,429
Interest payable and
similar charges (3,458) (3,283) (6,636)
____________________________________________________________________________
Profit on ordinary
activities before taxation 31,332 22,095 47,099
Taxation (10,402) (7,745) (15,990)
____________________________________________________________________________
Profit on ordinary
activities after taxation 20,930 14,350 31,109
Minority interests - equity (15) (5) (22)
____________________________________________________________________________
Profit attributable to
members of the parent company 20,915 14,345 31,087
Dividends - ordinary
dividends on equity shares - - (4,983)
____________________________________________________________________________
Retained profit for the period 20,915 14,345 26,104
____________________________________________________________________________
Earnings per share - basic 12.7p 9.2p 19.8p
- fully 11.4p 8.0p 17.4p
diluted
Dividends per ordinary share - - 3.2p
Computacenter plc
Summarised Balance Sheet
At 30 June 1998
____________________________________________________________________________
Unaudited Unaudited Audited
30 June 30 June 31 December
1998 1997 1997
# 000 # 000 # 000
Fixed assets
Tangible assets 37,522 21,588 30,589
Investments 2,805 3,215 3,009
____________________________________________________________________________
40,327 24,803 33,598
Current assets
Stocks 122,868 100,459 108,245
Debtors gross 257,126 166,931 186,270
Less non returnable proceeds (36,032) (16,546) (20,549)
____________________________________________________________________________
221,094 150,385 165,721
Cash at bank and in hand 64,136 5,525 13,829
____________________________________________________________________________
408,098 256,369 287,795
Creditors amounts falling
due within one year (293,783) (206,934) (246,602)
____________________________________________________________________________
Net current assets 114,315 49,435 41,193
____________________________________________________________________________
Total assets less current 154,642 74,238 74,791
liabilities
Creditors amounts falling
due after more than one year (52,816) (54,586) (43,448)
____________________________________________________________________________
Total assets less
liabilities 101,826 19,652 31,343
____________________________________________________________________________
Capital and reserves
Called up share capital 8,601 7,851 7,876
Share premium account 49,410 482 537
Profit and loss account 43,736 11,271 22,865
____________________________________________________________________________
Shareholders' funds equity - 101,747 19,604 31,278
Minority interests - equity 79 48 65
____________________________________________________________________________
101,826 19,652 31,343
____________________________________________________________________________
Approved by the board on
19 August 1998
Computacenter plc
Summarised Statement of Cash Flows
For the six months ended 30 June 1998
____________________________________________________________________________
Unaudited Unaudited Audited
Six Six months Year ended
months ended 31 December
ended 30 June 1997
30 June 1997
1998
# 000 # 000 # 000
Cash inflow/(outflow) from
operating activities 16,172 (270) 42,625
Returns on investments and
servicing of finance (1,963) (2,512) (4,748)
Taxation
Corporation tax paid - - (11,294)
Capital expenditure and
financial investment (12,416) (5,666) (20,787)
Acquisitions and disposals - (2,732) (2,756)
Equity dividends paid - - (4,983)
____________________________________________________________________________
Cash inflow/(outflow) 1,793 (11,180) (1,943)
before financing
Financing
Issue of shares 49,598 137 217
Decrease in debt (1,104) (1,298) (2,312)
____________________________________________________________________________
Increase/(decrease) in cash 50,287 (12,341) (4,038)
in the period
Reconciliation of net cash
flow to movement in net
debt
Increase/(decrease) in cash 50,287 (12,341) (4,038)
Cash decrease from 1,098 975 1,878
repayment of loans
Repayment of capital 114 322 434
elements of finance lease
rentals
____________________________________________________________________________
Changes in net debt arising 51,499 (11,044) (1,726)
from cash flows
Other non cash movements (108) (107) (214)
____________________________________________________________________________
Movement in net debt 51,391 (11,151) (1,940)
Net debt at 1 January (32,689) (30,749) (30,749)
Net funds/(debt) at 30 18,702 (41,900) (32,689)
June/31 December
Computacenter plc
Notes to the Unaudited Interim Report
At 30 June 1998
1 Basis of preparation of interim financial information
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year
ended 31 December 1997. The taxation charge is calculated by applying the
directors best estimate of the annual tax rate to the profit for the
period. Other expenses are accrued in accordance with the same principles
used in the preparation of the annual accounts.
2. Turnover and segmental analysis
Turnover represents the amounts derived from the provision of goods and
services which fall within the Group's ordinary activities, stated net of
VAT. The Group operates in one principal activity, that of the design,
supply, project management and long-term support of information technology
systems.
An analysis of turnover by destination and origin and operating profit is
given below
Unaudited Unaudited Audited
Six Six months Year ended
months ended 31 December
ended 30 June 1997
30 June 1997
1998
# 000 # 000 # 000
Turnover by destination
UK 688,237 513,428 1,031,143
France 70,080 44,368 96,308
Germany 13,917 36 3,933
Rest of the World 3,512 1,085 2,139
____________________________________________________________________________
Total 775,746 558,917 1,133,523
____________________________________________________________________________
Turnover by origin
UK 693,863 514,691 1,033,820
France 68,998 44,226 96,039
Germany 12,885 - 3,664
____________________________________________________________________________
Total 775,746 558,917 1,133,523
____________________________________________________________________________
Operating profit
UK 32,723 24,229 51,111
France 1,146 655 2,054
Germany (574) - (683)
____________________________________________________________________________
Total Group excluding
associated undertakings 33,295 24,884 52,482
Associated undertakings
UK - - 3
France - (88) (179)
____________________________________________________________________________
Total 33,295 24,796 52,306
____________________________________________________________________________
All turnover and operating profit relates to continuing operations.
Computacenter plc
Notes to the Unaudited Interim Report
At 30 June 1998
3 Operating costs
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 1997
1998 1997
# 000 # 000 # 000
Increase in stocks of (14,623) (17,055) (24,841)
finished goods
Goods for resale and 635,561 462,145 916,453
consumables
Staff costs 83,196 58,157 104,403
Other operating charges 38,317 30,786 85,026
____________________________________________________________________________
742,451 534,033 1,081,041
____________________________________________________________________________
4 Tax on profit on ordinary activities
The charge for the period is based on the estimated effective tax rate for
the year ending 31 December 1998 and comprises the following
Six months Six months Year
ended ended ended
30 June 30 June 31 December
1998 1997 1997
# 000 # 000 # 000
UK Corporation tax at 31%
Current 10,402 7,944 16,189
Deferred tax - (199) (199)
____________________________________________________________________________
10,402 7,745 15,990
____________________________________________________________________________
Computacenter plc
Notes to the Unaudited Interim Report
At 30 June 1998
5 Reconciliation of operating profit to operating cash flows
Six months Six months Year ended
ended ended 31 December
30 June 30 June 1997
1998 1997
# 000 # 000 # 000
Operating profit 33,295 24,796 52,306
Depreciation 4,846 2,602 8,390
Loss on disposal of 637 - 228
fixed assets
Share of loss of
associated undertakings - 88 176
Increase in debtors (55,374) (3,232) (18,568)
Increase in stocks (14,623) (17,055) (24,841)
Increase/(decrease) in
creditors 47,420 (7,214) 25,302
Currency and other
adjustments (29) (255) (368)
____________________________________________________________________________
Net cash inflow from
operating activities 16,172 (270) 42,625
____________________________________________________________________________
6 Publication of non-statutory accounts
The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies
Act 1985. The financial information for the full preceding year is based on
the statutory accounts for the financial year ended 31 December 1997. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
END
IR GBUGARBGRPPB
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