RNS No 1270k
COMPUTACENTER PLC
16th March 1999
PRELIMINARY RESULTS FOR THE YEAR TO 31 DECEMBER 1998
"Record Results"
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 preliminary results:
* Turnover - up 39.9% to #1,586 million
* Pre-tax profit - up 37.2% to #64.6 million
* Profit after tax - up 39.4% to #43.4 million
* Earnings per share - up 30.4% to 27.0p per share
diluted - up 34.3% to 23.5p per share
* Net funds position - #21.1 million (1997: net debt #32.7 million)
* Dividend - 2.5p per share (1997: notional dividend 2.0p
per share)
Commenting, Philip Hulme, Chairman, Computacenter plc, said:
"These are another outstanding set of results. Both turnover and profits
exceeded expectations and 1998 was Computacenter's sixteenth consecutive year
of turnover and profits growth in the UK."
"The growth of the Group in 1998 was significantly in excess of market
growth. This was the result of our continued focus on expanding the range of
services offered to our existing customers, new account wins and the
outstanding performance of our overseas operations."
"We have taken advantage of our financial strength to increase the level of
investment in each of our three country subsidiaries."
"The prospects for the Group for 1999 and beyond remain strong. In fact, our
confidence has been further strengthened by the achievements of 1998. The
rate of investment in the business continues at a high level and we will
continue to focus on the long-term development of the Group."
Mike Norris, Chief Executive, said
"Our primary focus is to build upon existing long-term customer
relationships. However, Computacenter also grew its customer base in 1998.
A significant percentage of new account wins during the year included on-site
Support Services."
"The support and management of distributed technology remains a constant
challenge for many large organisations. Our customers have seen how, by the
migration of best practice across our customer sites, we can deliver superior
service at reduced cost."
"Our On-Trac electronic commerce system continues to be a major investment
area for the Group. Orders taken and processed via On-Trac exceeded #284
million during 1998, with over 400 of our customers currently using the
system."
"Computacenter France achieved an exceptional year, growing turnover by over
70% to #165.8 million. This was achieved through development of some
significant accounts. Computacenter Germany, which was acquired in June
1997, increased its contribution to Group turnover from #3.7 million in 1997
to #37.1 million in 1998, its first full year of trading as part of the
Group."
"The Euro, the growth of e-commerce applications and the approach of
Microsoft's Windows 2000 operating system will all be increasingly important
growth drivers for our business over the coming year."
Enquiries:
Computacenter plc
Mike Norris, Chief Executive 0171 620 2222
Tony Conophy, Finance Director
Media enquiries:
Phil Williams, Head of
Corporate Marketing 0171 593 4554
Analyst enquiries:
Melanie Leibert,
Investor Relations 0171 593 4635
Citigate Dewe Rogerson
Anthony Carlisle 0171 638 9571
0973 611 888
Duncan Murray 0171 638 9571
Chairman's statement
I am delighted to be able to report another outstanding set of results for
the Group for the year to 31 December 1998, our first as a quoted company.
Both turnover and profits exceeded expectations and 1998 was Computacenter's
sixteenth consecutive year of turnover and profits growth in the UK.
The high rate of sales growth reported in the first half accelerated in the
second half and turnover for the full year, at #1,586 million, was up by
39.9% compared to 1997. Profit before tax, at #64.6 million was up by more
than 37%.
The balance sheet remains very strong and the Group ended the year with a net
funds position of #21.1 million compared to net debt at the end of 1997 of
#32.7 million.
The growth of the Group in 1998 was significantly in excess of market growth.
This was the result of our continued focus on expanding the range of services
offered to our existing customers, new account wins and the outstanding
performance of our overseas operations. The directors believe that the
results confirm that the Group has further consolidated its position as the
preferred partner for organisations seeking to implement and support
distributed IT.
As anticipated at the time of Computacenter's flotation, we have taken
advantage of our financial strength to increase the level of investment in
each of our three country subsidiaries. Headcount in the UK increased by over
a third from 2,843 to 3,810 staff. Office space was expanded in a number of
areas and the investment in the Group's new operations centre, in Hatfield,
continued apace. We also continued to develop our range of services and to
invest in the tools and systems that enable us to deliver these services to
the highest quality standards. For example, the Group has made a substantial
investment in e-commerce. In 1998 over #284 million of customer orders were
placed and processed electronically with corresponding benefits in increased
efficiency and improved customer service. These and other investments, the
majority of which were expensed, will help to secure the future growth of the
Group.
The growth of our businesses in France and Germany was well ahead of
expectations. Turnover in France grew by over 70% to #165.8 million and
operating profit by 34% to #2.7 million. Headcount increased by 84% to 549.
New offices were opened in Nice, Rouen and Pau and the company signed a lease
for new logistics and headquarters premises in Paris which will substantially
increase the size of our central operations facility during 1999. The Group
also continued to add to the range of services offered in France. As
expected, the very high rate of growth and investment depressed net margins
slightly.
The growth in Germany was even greater, with the business increasing its
contribution to Group turnover from #3.7 million in 1997 to #37.1 million in
1998, its first full year of trading as part of the Group. Headcount doubled
during the year to 223 staff. The operating loss for the year was lower than
forecast at #1.4 million. Management is extremely satisfied with the
progress of both France and Germany and believes that the investments being
made will secure future growth.
In my interim statement, I commented that it was difficult to forecast the
net impact on the Group of Y2000. Some clients have brought projects forward
as a result of the millennium but, similarly, many projects have been
temporarily deferred. In the opinion of management, the net impact of Y2000
on overall Group sales in 1998 was small. Y2000 compliance upgrades to
Computacenter's internal systems are largely completed with the remaining
upgrades on track for completion during 1999.
Computacenter's flotation, which took place on 21 May, was extremely well
received. Since then the Group's share price has fluctuated widely in common
with other companies in the sector. I would like to take this opportunity to
emphasise that, in the opinion of management, the prospects for the Group for
1999 and beyond remain strong. In fact, our confidence has been further
strengthened by the achievements of 1998. The rate of investment in the
business continues at a high level and management will continue to focus on
the long-term development of the Group.
In January 1999, one of our longest standing venture capital investors, Apax,
disposed of all of its remaining beneficial holdings in Computacenter, in
excess of 14 million shares. The shares were placed with a number of large
financial institutions. This placing has significantly increased the free-
float, which now stands at over 44%, and has had a positive effect on market
sentiment.
Computacenter remains, above all, a people business. Our success depends on
the quality of our service, which in turn depends on the quality, motivation
and teamwork of our staff. It is a tribute to their efforts that we have
again achieved outstanding results. At the time of the flotation free shares
were issued to all qualifying staff who were on our payroll as at 31 March
1998. The cost of these shares, #2.8 million, was expensed through the
profit and loss account. By the end of 1998 over 60% of employees were
shareholders and over half had elected to participate in the Group's new
share save scheme. I would like to thank all of our staff once again for
their commitment and enthusiasm, as well as their hard work. Management's
task is to continue to earn the loyalty of staff, customers and shareholders
alike.
Finally, consistent with the dividend policy set out in our flotation
prospectus, I am pleased to recommend a final dividend of 2.5p per share
payable on 21 of May 1999 to registered shareholders as of 30 of April 1999.
Philip Hulme, Chairman
Chief Executive's Review
During 1998 Computacenter continued to invest across all of its businesses,
consolidating its position as the leading supplier of distributed IT and
related services to the corporate and public sector marketplace.
Computacenter provides a wide range of services covering the entire lifecycle
of distributed IT, from planning and requisition of appropriate technology to
its successful implementation within an organisation's infrastructure,
through to its subsequent support and management.
In 1998 this strategy of investment resulted in an exceptional year's
results. Group turnover grew 39.9%. Profit before tax increased from #47.1
million to #64.6 million and our after-tax earnings from #31.1 million to
#43.4 million. Headcount increased by over a third from 3,245 at the end of
1997 to 4,582 at the end of 1998.
93% of our turnover came from the provision of products and services to
corporate and public sector organisations. The remaining 7% was generated by
our distribution business, Computacenter Distribution (CCD), which supplies
hardware and a range of services to small and medium-sized computer
resellers.
Although international sales grew faster than UK sales in 1998, the greater
part of revenues came from our UK business. Of the total Group turnover of
#1.6 billion, #1.4 billion, or 87%, was generated by our UK businesses, the
remaining 13% coming from sales in France and Germany.
This outstanding year has allowed us to further increase the level of
investment in our business to secure long-term growth. With the exception of
capital used in developing our new Hatfield operations centre, the majority
of this investment has been expensed through the profit and loss account.
Market growth
Despite a partial slow-down in the UK economy, demand for IT systems and
services remained strong in 1998. A major focus of our customers for the year
was IT investment to ensure Y2000 compliance of mainframe and associated
business systems. As compliance projects end, we anticipate increased
customer focus on distributed IT investment as organisations refocus on its
deployment for competitive advantage. The Euro, the growth of e-commerce
applications and the approach of Microsoft's Windows 2000 operating system
will all be increasingly important growth drivers for our business over the
coming year.
The continuing decline in PC hardware prices is also a major positive factor
driving industry growth rates enabling our customers to increase their level
of investment in new technology. Falling capital costs and advancing
technology continually open up new opportunities for organisations to use IT
to derive competitive advantage.
Building customer value
Much of Computacenter's growth in 1998 was due to expanding relationships
with existing long-term corporate customers. In particular, this was
reflected in the demand for our support services, where our contract base
grew at a faster rate than the company as a whole.
The support and management of distributed technology remains a constant
challenge for many large organisations. Our customers have seen how, by the
migration of best practice across our customer sites, we can deliver superior
service at reduced cost.
During 1998, we have taken further strides in increasing our support and
management capability through the centralisation of support services and the
deployment of enhanced technology. Our Milton Keynes based CallCenter now
handles our customers' Help Desk requirements either full-time, part-time or
as an overflow capability. I am also pleased to report that some customers
are now supported by our 24-hour remote network management facilities from
our CallCenter. Our staff are able to remotely monitor distributed IT
systems, warning the customer, or providing a resolution remotely, if a
problem occurs. These have been major investment areas for Computacenter in
1998 which, we believe, are starting to build significant competitive
advantage.
The growth in demand for technical consultancy has been one of the fastest
areas of growth within the group. The appointment of Computacenter as a
Microsoft Alliance Partner in October has not only increased this demand but
will enable us to invest in employing up to 1,000 additional Microsoft
accredited professionals over the next three years to fulfil customers'
requirements.
As the client-server platform becomes the preferred technology base for many
line-of-business applications, the products we sell and support continue to
increase in scale, complexity and strategic importance to organisations. As a
result, customers are increasingly turning to Computacenter to become
involved in major project work and we have seen a corresponding rise in
demand for our project management capability.
Our On-Trac electronic commerce system continues to be a major investment
area for the Group. Orders taken and processed via On-Trac exceeded #284
million during 1998, with over 400 of our customers currently using the
system. On-Trac employs both Internet and Intranet technologies and is
continually being enhanced in order to support the provision of all our
services.
During 1998, not only did we increase the diversity of services sold to our
growing customer base but the range of products also increased. 1998 saw
particular emphasis on Internet technologies, enterprise systems and
enterprise networking. Computacenter became one of only a handful of Cisco
partners accredited to gold status and also became a HP Unix system partner
and a Microsoft Alliance Partner as reported earlier.
The quality of service that we deliver to both new and existing customers is,
without doubt, the over-riding factor in the success of the business. In
November we were delighted to receive an award for 'Quality of Product and
Service' from BT, our largest customer. We were one of only four BT
suppliers to receive such an award in 1998.
Winning new customers
Computacenter's primary focus is to build upon its existing long-term
customer relationships. However Computacenter also grew its customer base in
1998. A significant percentage of new account wins during the year included
on-site Support Services. New UK customers included the Post Office, the
Automobile Association and Seeboard. We believe that Computacenter's ability
to deliver value through its entire range of services combined with our e-
commerce capability constitutes a significant competitive advantage.
Investing for growth
To support our increased market share and lay the foundations for future
growth, Computacenter continues to re-invest in its people. Our biggest
investment during 1998 was in training and recruitment with overall Group
headcount growing by over a third during the year. We also invested in new
premises and facilities. New offices were opened in London and in Hatfield
to accommodate the rapid expansion of our sales and support operations. To
accommodate the significant growth in Computacenter's enterprise systems
business, we also opened a dedicated facility in Blackfriars providing a
testing resource for customer systems.
I have already made reference to Computacenter's high level of investment in
best practices and in systems that enable us to deliver our services cost-
effectively and to the highest quality standards. We believe that the
economies of scale we enjoy in such developments are a significant source of
competitive advantage.
A major current development is the construction of our new, #70 million, 20-
acre operations centre in Hatfield, Hertfordshire. This project remains on
schedule with our logistics facility due to open for pilot operations in Q3
1999 with the entire project planned for completion in 2000.
International
Computacenter continues to develop its international capability via its
direct subsidiaries in France and Germany. As a whole, international
operations increased as a percentage of group revenue from 9% in 1997 to 13%
in 1998. The deployment of Computacenter's core operational systems and
business practices, proven in our UK business, continue to yield competitive
advantage in these markets.
Computacenter France
Computacenter France achieved an exceptional year, growing turnover by over
70% to #165.8 million. This was achieved through development of some
significant accounts, including two of France's largest organisations France
Telecom and EDF.
Revenue growth was mirrored by headcount, almost doubling from 298 staff at
the end of 1997 to 549 at the end of 1998. A large part of our recruitment
was in service divisions, where growth exceeded the percentage for
Computacenter France as a whole.
Due to the rapid expansion of the French company and our future growth plans,
we have signed the lease on a new logistics and headquarters facility in
Paris, which is approximately three times the size of our current premises.
In addition, three new branches were opened in Nice, Rouen and Pau during
1998. Computacenter France's rapid expansion during 1998 and the investments
we have made to accommodate future growth promise well for 1999 and beyond.
Computacenter Germany
Computacenter Germany, which was acquired in June 1997, increased its
contribution to Group turnover from #3.7 million in 1997 to #37.1 million in
1998, its first full year of trading as part of the Group. During 1998, our
biggest investment was in people, with headcount growing from 104 at the end
of 1997 to over 220 at the end of 1998. Significant new customer account
wins include DVAG, Dresdner Bank Group, Hapag-Lloyd and Electrolux.
New offices were opened in Munich and Hamburg, and an additional sales office
was opened in Bremen. In October we signed a lease on a new, larger,
logistics facility in Frankfurt and have since opened offices in Hanover and
Stuttgart. During 1999 we will continue to explore the possibility of opening
additional offices and invest to win business and increase market share.
ICG
The International Computer Group (ICG), of which Computacenter was a founding
shareholder in 1989, remains our core delivery mechanism for products and
services outside of the three European markets serviced directly by
Computacenter. This international joint venture now covers 58 countries
throughout the world.
Whilst our focus for 1999 clearly remains in investing for growth in our UK,
French and German businesses, we will continue to evaluate other market
opportunities as these arise.
Our people
1998 was a historic year for Computacenter, notable for financial performance
as well as the flotation of the company. However, it was the individual
efforts of our staff - working alone or in teams - that made the difference.
Following the flotation of the company in May, free shares were offered to
all qualifying staff at that time. Since then we have also initiated an
Inland Revenue approved share save scheme in which over half of our staff
have elected to participate.
Computacenter remains, essentially, a people company. Long-term staff
retention will always remain a critical success factor for Computacenter. It
is the task of management to earn the loyalty of employees by providing a
rewarding work environment, ongoing training programmes, exciting
opportunities and attractive benefits. We are delighted with the progress we
have made in 1998. I believe that the quality, commitment and enthusiasm of
our staff bodes well for our continuing success.
Mike Norris, Chief Executive
SUMMARISED GROUP PROFIT AND LOSS ACCOUNT
For the year ended 31 December 1998
1998 1997
#'000 #'000
TURNOVER 1,586,238 1,133,523
OPERATING COSTS (1,519,942) (1,081,041)
---------- ---------
OPERATING PROFIT 66,296 52,482
Loss from interests
in associated undertakings (12) (176)
Other income 4,945 1,429
Interest payable and similar charges (6,626) (6,636)
---------- ---------
PROFIT ON ORDINARY
ACTIVITES BEFORE TAXATION 64,603 47,099
Taxation (21,232) (15,990)
---------- ---------
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION 43,371 31,109
Minority interests - equity (77) (22)
---------- ---------
PROFIT ATTRIBUTABLE TO MEMBERS OF
THE PARENT COMPANY 43,294 31,087
Dividends - ordinary dividends
on equity shares (4,302) (4,983)
---------- ---------
RETAINED PROFIT FOR
THE YEAR 38,992 26,104
========== =========
Earnings per share - Basic 27.0p 20.7p
- Diluted 23.5p 17.5p
SUMMARISED GROUP BALANCE SHEET
For the year ended 31 December 1998
1998 1997
#'000 #'000
FIXED ASSETS
Tangible assets 59,768 30,589
Investments 1,467 1,408
------- -------
61,235 31,997
CURRENT ASSETS
Stocks 109,853 108,245
Debtors: gross 237,855 186,270
Less non returnable proceeds (1,293) (20,549)
------- -------
236,562 165,721
Cash at bank and in hand 63,601 13,829
------- -------
410,016 287,795
CREDITORS amounts falling due
within one year (307,382) (245,001)
------- -------
NET CURRENT ASSETS 102,634 42,794
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 163,869 74,791
CREDITORS: amounts falling due after
more than one year (42,013) (43,448)
PROVISION FOR LIABILITIES
AND CHARGES (1,035) -
------- -------
TOTAL ASSETS LESS
LIABILITIES 120,821 31,343
======= =======
CAPITAL AND RESERVES
Called up share capital 8,678 7,876
Share premium account 49,850 537
Profit and loss account 62,144 22,865
------- -------
Shareholders' funds - equity 120,672 31,278
Minority interests - equity 149 65
------- -------
120,821 31,343
======= =======
Approved by the board on 15 March 1999
Philip Hulme
Chairman
Mike Norris
Chief Executive
SUMMARISED GROUP STATEMENT OF CASH FLOWS
For the year ended 31 December 1998
1998 1997
#'000 #'000
CASH INFLOW FROM OPERATING ACTIVITIES 63,734 42,625
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (2,084) (4,748)
TAXATION
Corporation tax paid (17,486) (11,294)
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (40,179) (20,787)
ACQUISITIONS AND DISPOSALS (71) (2,756)
EQUITY DIVIDENDS PAID - (4,983)
------- -------
CASH INFLOW/(OUTFLOW) BEFORE FINANCING 3,914 (1,943)
FINANCING
Issue of shares 50,115 217
Decrease in debt (4,257) (2,312)
------- -------
INCREASE /(DECREASE) IN CASH
IN THE YEAR 49,772 (4,038)
======= =======
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
#'000
NET DEBT AT 1 JANUARY 1997 (30,749)
Decrease in cash in the year (4,038)
Cash outflow from repayment of debt and lease finance 2,312
-------
Change in net debt resulting from cash flows (1,726)
Non cash changes in debt (214)
-------
NET DEBT AT 31 DECEMBER 1997 (32,689)
Increase in cash in the year 49,772
Cash outflow from repayment of debt and lease finance 4,257
-------
Change in net debt resulting from cash flows 54,029
Non cash changes in debt (214)
-------
NET FUNDS AT 31 DECEMBER 1998 21,126
=======
NOTES TO THE ACCOUNTS
at 31 December 1998
1 BASIS OF PREPARATION OF PRELIMINARY INFORMATION
The preliminary 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 1998.
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, operating profit and net
assets is given below:
Turnover by Destination
1998 1997
#'000 #'000
UK 1,365,906 1,031,143
France 165,764 96,308
Germany 39,020 3,933
Rest of the World 15,548 2,139
--------- ---------
1,586,238 1,133,523
========= =========
Turnover by Origin
1998 1997
#'000 #'000
UK 1,383,357 1,033,820
France 165,773 96,039
Germany 37,108 3,664
--------- ---------
1,586,238 1,133,523
========= =========
Operating Profit
1998 1997
#'000 #'000
UK 64,929 51,111
France 2,747 2,054
Germany (1,380) (683)
--------- ---------
66,296 52,482
========= =========
All turnover and operating profit relates to continuing operations.
3 OPERATING COSTS
1998 1997
#'000 #'000
Increase in stocks of finished goods (1,608) (24,841)
Goods for resale and consumables 1,254,418 916,453
Staff costs 153,619 104,403
Other operating charges 113,513 85,026
--------- ---------
1,519,942 1,081,041
========= =========
4 TAX ON PROFIT ON ORDINARY ACTIVITES
The charge based on the profit for the year comprises
1998 1997
#'000 #'000
UK Corporation tax
Current 20,197 16,189
Deferred tax 1,035 (199)
------- -------
21,232 15,990
======= =======
5 DIVIDEND
The directors recommend the payment of a dividend of 2.5p per share. Had the
Directors implemented the dividend policy set out in the flotation prospectus
by paying 10% of attributable profits in 1997, the total dividend payable in
that year would have been #3,109,000. On the basis of the number of shares
in issue at 31 December 1997 this represents a notional dividend of 2.0p per
share. The Computacenter ESOP trust has waived the dividends payable in
respect of 1,475,170 (1997: 1,475,170) ordinary shares that it owns which
are not allocated to employees. Accordingly, dividends payable have been
reduced by #37,000.
6 EARNINGS PER SHARE
The calculation of earnings per ordinary share is based on profit
attributable to members of the holding company of #43,294,000 (1997:
#31,087,000) and on 160,535,000 (1997: 150,454,000) ordinary shares, being
the weighted average number of ordinary shares in issue during the year after
excluding the shares owned by the Computacenter Employee Share Trust.
The diluted earnings per share is based on the same earnings figure of
#43,294,000 (1997: #31,087,000) and on 184,242,000 (1997: 177,279,000)
ordinary shares calculated as the basic weighted average number of ordinary
shares plus 23,707,000 (1997: 26,825,000) dilutive share options.
The figures for 1997 have been restated in accordance with FRS 14.
7 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
1998 1997
#'000 #'000
Operating profit 66,296 52,482
Depreciation 10,691 8,390
Loss on disposal of fixed assets 407 228
Increase in debtors (70,842) (18,568)
Increase in stocks (1,608) (24,841)
Increase in creditors 57,976 25,302
Currency and other adjustments 814 (368)
------- -------
Net cash inflow from operating
activities 63,734 42,625
======= =======
8 PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this preliminary statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information set out in the announcement is extracted
from the full group financial statements for the year ended 31 December 1998
which contain an unqualified audit report.
END
FR BRGBXRSBCCCU
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