Release Details

com:20090113:RnsM5146L
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RNS Number : 5146L  
  
Computacenter PLC  
  
13 January 2009  
  
Pre-Close Trading Update  
  
Computacenter is today holding an investor and analyst meeting to provide an 
update on trading for the year ended 31st December 2008 and an overview of the 
Group's strategic developments. Group adjusted profit before tax* for 2008 is 
expected to be materially ahead of consensus market expectation of £38.1million, 
with group adjusted operating profit* marginally ahead of 2007. The Group's EPS 
is expected to be substantially ahead of consensus expectation, as a result of 
higher than expected profits, the reduced number of shares in issue and a lower 
tax rate.   
  
The lower tax rate is due to improved profit performance in Germany and France 
and some 'one off' tax benefits in the UK, in addition to a review of the level 
of the deferred tax asset in Germany.  
  
At the period end, net cash was £6.0million [net borrowing of £16.2million at 
31st December 2007] before customer specific financing ("CSF"). Including CSF, 
net debt was £84.5million [£79.8million at 31st December 2007]. In the UK, for 
the year as whole, sales grew by 2.5% to £1.39billion. Services grew by 6% over 
2007, but more significant was the number of long term services contracts won, 
renewed and/or extended, as customers turned to our service offerings to reduce 
their operating costs. These new contracts made little impact on 2008, but will 
begin their positive impact during the first half of 2009. This success results 
from previous investments in our shared service offerings. UK product sales grew 
by 1.7%, with growth in excess of 5% in end user business, off set by a 14% 
reduction in trade distribution. The weakness of Sterling has meant that product 
prices have not had their historical reductions and there have been some small 
price rises in some product areas, in recent months.    
  
After an encouraging 2007, 2008 has been another year of good progress for 
Computacenter in Germany, in particular Services margin improvement has been the 
major success of the year, with the second half at levels we believe are 
sustainable. We have, throughout the year, continued to trade ahead of 2007, 
both in revenue and profit. Revenue for the year was E1.05billion, a growth of 
1%, which translates to an 18% growth in Sterling terms. Services business wins 
were strong, as customers in Germany, as in the UK, look to Computacenter to 
reduce their operating costs.  
  
While Computacenter France has performed better in 2008, with a reduction in 
operating loss and an operating profit in the second half, we are concerned that 
we have not made the strategic change needed to deliver a long term, acceptable 
level of profit and much remains to be done.  
  
At a group level, our annual services contract base stands at £480million on 
31st December 2008, representing a growth in excess of 6% over 31st December 
2007, based on constant currency.   
  
In our interim management statement ("IMS") on 17th October 2008, we stated that 
we had incurred a bad debt of £1.2million, following the bankruptcy of a major 
financial services client.   
  
This loss has subsequently been reduced to £850k and we are also able to confirm 
the release of a provision held in relation to an empty property, alluded to in 
the IMS, which more that offsets the bad debt.    
  
During the latter half of 2008, we conducted an in-depth review of our 
capabilities, organisation, competitive position and profitability. As a result 
of this work, we took the decision (inter alia) to stop the trade distribution 
of personal computers and printers, choosing to focus our distribution business 
on server, storage and associated products, with higher margins. This is likely 
to reduce our 2009 revenue by approximately £70million without reducing our 
operating profits, while freeing approximately £15million of working capital. In 
addition, we will increasingly focus our full infrastructure services offerings 
on those companies and sectors where we offer considerable competitive 
advantage. These initiatives are part of a major program to improve 
Computacenter's margin mix and use of capital. While pleased with the results 
for 2008, we are far from satisfied. We will be implementing structural changes 
in our UK operations, aimed at significantly improving our effectiveness and 
competitive position. These changes will result in fewer layers of management, 
increased spans of control and have the not inconsiderable subsidiary benefit of 
reducing our ongoing expense base by more than £15million per annum, by the end 
of 2009.   
  
We have also embarked upon a major group-wide systems upgrade which will start 
to deliver benefits in the second half of 2010 and be fully operational by 2011. 
This single group-wide ERP system will deliver cost savings and greater 
flexibility to our Company and represents a capital investment of c.£25 million 
over the next 3 years, of which c.£8 million was paid by the year end .  
  
While Computacenter is not immune from a major reduction in capital expenditure 
amongst its clients, we are encouraged by the performance of the Company in the 
last three quarters, particularly the success of our service offerings, which is 
continuing to see major growth. While we are pleased with performance in these 
uncertain and challenging times we are not satisfied, and that is why we have 
chosen to focus on making the investments and changes in our systems, 
organisation and use of capital necessary to make us more competitive. The 
combination of current performance and these enhancements to the Company, gives 
us cause for optimism for 2009 and beyond.   
  
Computacenter will announce preliminary results for the year ended 31st December 
2008 on Tuesday 10th March 2009.  
  
  
*adjusted operating profit is stated after charging interest costs on customer 
specific financing and excludes amortisation of acquired intangibles.  
  
 
  Enquiries:                                      
  Computacenter plc                               
  Mike Norris, Chief Executive     01707 631601   
  Tony Conophy, Finance Director   01707 631515   
  Tessa Freeman, PR Manager        01707 631514   
                                                  
  Tulchan Communications           020 7353 4200  
  Andrew GrantStephen Malthouse                   
  
  
 
This information is provided by RNS  
  
The company news service from the London Stock Exchange  
  
  END  
  
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