Final Results
Final Results
March 11, 2010 at 2:03 AM EST
Computacenter plc
Final results announcement
Computacenter plc, the European IT infrastructure services provider, today
announces final results for the twelve months ended 31 December 2009.
FINANCIAL HIGHLIGHTS
Financial performance
* Group revenues decreased 2.2% to £2.50 billion (2008: £2.56 billion)
* Adjusted* profit before tax increased 25.8% to £54.2 million (2008: £43.1
million)
* Adjusted* diluted earnings per share increased 31.9% to 27.7p (2008: 21.0p)
* Additional interim dividend of 8.0p, in lieu of final dividend, bringing the
total dividend for the year to 11.0p (2008: 8.2p)
* Net cash prior to customer specific financing (CSF) was £86.4 million (2008:
£4.6 million)
Statutory Performance
* Profit before tax increased 22.4% to £48.4 million (2008: £39.5 million)
* Diluted EPS increased 2.9% to 24.9p (2008: 24.2p)
* Net funds after CSF was £37.3 million (2008: net debt of £84.6 million)
OPERATING HIGHLIGHTS
* Group annual services contract base grew over 9% to £503.6 million, at
constant currency
* Contract wins and extensions included Produban (Santander Group IT Business),
Threadneedle, BP, Schroders and Severn Trent Water
* Operating expenses reduced by over £30 million, in constant currency
* Successful exit of trade distribution business which freed c. £20 million of
working capital
* Two acquisitions made during the year; TCS in UK and becom in Germany
* Group-wide ERP project remains on track
Mike Norris, Chief Executive of Computacenter plc, commented:
' Computacenter has delivered a strong performance in 2009 with increased
profits, earnings per share and a materially improved cash position. The
increase in the Group's annual service contract base is clear evidence that
customers are turning to Computacenter to help them to reduce their operating
costs. As a result we expect steady revenue growth in 2010.
' We enter 2010 in good shape with a lower cost base and having secured our
largest services contract win to date in the first quarter of the year. The
economic climate across Europe is still fragile and while the UK has begun the
year very well, Germany has experienced a challenging start. In spite of this we
believe that the investments we are making in our business, together with our
strong balance sheet, position the Group well to take advantage of market
opportunities and capture further share.'
* Adjusted for exceptional items and amortisation of acquired intangibles.
For further information, please contact:
Computacenter plc.
Mike Norris, Chief Executive 01707 631 601
Tessa Freeman, Investor Relations 01707 631 514
www.computacenter.com
Tulchan Communications 020 7353 4200
Stephen Malthouse
Lucy Legh
www.tulchangroup.com
Chairman's Statement
At Computacenter we provide services to our customers that save them money and
help them be more productive. In pursuit of this we made good progress in 2009.
We set out to enhance our profitability, optimise the use of working capital and
improve our cash flow. We invested in our people, processes and systems, whilst
significantly reducing the overall cost base within the Group. Our organisation
was simplified, we exited our trade distribution businesses, and bought
Thesaurus in the UK and Becom in Germany. Our services contribution saw
improvement in all three major geographic markets, focus on our target markets
was sharpened and we continued to invest in the implementation of our Group-wide
ERP system.
Results for the year are pleasing. Adjusted* profit before tax increased by
25.8% to £54.2 million. Net funds before customer specific financing increased
by £81.8 million to £86.4 million. The ERP implementation is on plan and budget.
Our customers gave us high and improved satisfaction ratings in independent
surveys and an increasing share of their business. We invested some £20 million
in our business in 2009, a sum which includes the ERP project, and at the same
time reduced the cost base by more than £30 million on a constant currency
basis.
We face the future encouraged by this progress and optimistic for our prospects
ahead, in particular with an annualised service contract base of over £500
million. We have won a number of major new contracts and have a solid retention
of existing customers. Competition is fierce and we must continuously improve
our performance in order to win in the market place; the economic environment
remains uncertain and our job is to help our customers address this, while
improving our own business. We are seeing a continued shift in our market to
'multi sourcing' of service offerings and 'single sourcing' of product
offerings, independent of the hardware and software makers. We are well
positioned to address these shifts as we strive to please our customers and
improve profitability, maximise the use of working capital and fulfil our
people's talent and ambition.
I thank the people of Computacenter for their hard work and commitment to our
Company and our customers for their support and, above all, their business. We
are pleased with our progress but not satisfied that we have exploited our
potential to the full.
Greg Lock.
OPERATING REVIEW
Group Overview
Computacenter has delivered a strong profit performance in 2009. Group adjusted*
profit before tax grew by 25.8% to £54.2 million (2008: £43.1 million).
Excluding the effects of a stronger Euro, Group adjusted* profit before tax
increased by 22.3%. Primarily due to this increased profitability and a reduced
tax rate, the Group's adjusted* diluted earnings per share (EPS) grew 31.9% to
27.7p (2008: 21.0p). On a statutory basis, taking into account amortisation of
acquired intangibles and exceptional items, Group profit before tax increased
22.4% to £48.4 million (2008: £39.5 million) and diluted EPS increased by 2.9%
to 24.9p (2008: 24.2p).
Group revenue declined in 2009 by 2.2% to £2.50 billion (2008: £2.56 billion).
Part of this decline was as a result of our strategic decision to exit trade
distribution; however revenue benefited from a strong Euro. Excluding these two
opposing effects revenue declined by 4.9%. As reported, Group services revenue
increased by 8.1% but particularly pleasing was the 12.2% increase in long-term
contractual revenues. The Group annual services contract base stood at £503.6
million at the end of the year, an increase of 3.9% over 31 (st )December 2008
or 9.0% in constant currency.
We reduced operating expenses by over £30 million in constant currency and as a
result the Group incurred exceptional costs as it restructured its workforce and
vacated the related property. Additionally, the disposal of our trade
distribution division ('CCD') in November 2009, generated an exceptional profit
of £1.9 million, net of goodwill written off. The net effect of these
exceptional items is a charge of £5.3 million.
Our balance sheet has strengthened considerably. At the end of the year net cash
prior to customer specific financing (CSF) was £86.4 million (2008: net cash of
£4.6 million). Including CSF net funds were £37.3 million (2008: net debt of
£84.6 million). This material improvement in our cash position was primarily due
to increased profitability, the sale of our distribution division, prudent
working capital management and is largely sustainable. However, the figures are
flattered by approximately £30 million due to the extended credit terms of one
of our major vendors which have been made available to all of their business
partners. These terms are likely to return to normal in the second half of 2010.
The Board has decided to pay an additional interim dividend of 8p in lieu of a
final dividend, bringing the total dividend for the year to 11p (2008: 8.2p).
The increase in dividend is broadly consistent with our stated policy of
maintaining dividend cover within our target range of 2 to 2.5 times. The
dividend will be paid on 1 April 2010 to shareholders on the register as at 19
March 2010.
The increase in the Group's annual services contract base is clear evidence that
customers are turning to Computacenter to help them reduce their operating
costs. Our offerings continue to gain momentum in the market as customers choose
to selectively outsource IT infrastructure support, rather than opting for a
comprehensive IT outsourcing contract or undertake the work in-house.
To meet this growing demand for our datacentre and distributed services we have
continued to invest in our assets and people during 2009. We have increased our
service desk capacity in Milton Keynes, Hatfield, Erfurt, Barcelona and Cape
Town as well as establishing a new helpdesk facility outside of Paris. The
enhancements we have made to our customer facing systems and tools, which enable
better workflow within IT departments, have caused a strong increase in use by
our customers. We now have as many customer employees using our software tools
as our own staff.
We have successfully transitioned a number of existing customers to our new
datacentre facility in Manchester. We received the award for Datacentre Team of
the Year after migrating more than 1,000 devices without any business
interruption, resulting in 100% positive customer feedback. Additionally, in the
datacentre area we have made a significant enhancement to the Group's offering
by investing in a new facility in Romford in the UK, which opened in early 2010.
This is the first datacentre outsourcing facility in Europe that will be
certified to the highest level of security and reliability, Tier IV.
We announced a year ago that the Group had embarked on a major ERP
implementation project. The project remains on track and within the capex budget
of £32 million of which £22 million had been spent by the end of 2009. We are
scheduled to roll out the new system in Germany in the second half of 2010 and
in the UK in the first half of 2011 with other Group countries following closely
behind. There will be a net cost to the P&L in the second half of 2010 and the
first half of 2011 as the cost savings that we expect to achieve from the new
implementation, will only be available to us once our two major countries have
gone live. In addition to the cost saving benefits, we believe the new system
will enable us to create greater efficiencies in many of the Group's activities
and improve our competitiveness.
The Group made two acquisitions in the year, both in late November, which
therefore had minimal impact on our 2009 performance. In the UK we acquired
Thesaurus Computer Services Limited ('TCS'). TCS gives Computacenter access to
IBM mainframe specialist skills and builds on our long-term relationship with
IBM. With this acquisition Computacenter will become the most sigificant
independent System Z provider of products and services in the UK outside of IBM.
In Germany we acquired systems provider becom Informationsysteme GmbH ('becom').
This acquisition also strengthens our relationship with IBM and positions
Computacenter as their largest business partner in Europe. We believe the
acquisition will increase our annual revenue in Germany by around 10% in 2010.
Whilst there will be some one-off integration costs post the acquisitions, we
expect a positive net operating profit in the year ahead.
The sale of CCD to Ingram Micro was finalised in November, completing our exit
from the trade distribution market. This disposal frees up approximately £20
million of working capital of which £15 million was realised in 2009. It will
have a negative impact on the Company's profitability of approximately £1.0
million in 2010.
UK
Excluding the effects of the exit from trade distribution, UK revenues fell by
7.3% in 2009 to £1.14 billion (2008: £1.23 billion). This fall was driven by
product revenue declines as the condition of the UK economy caused our customers
to reduce capital expenditure where possible. The fourth quarter showed a small
revenue increase of 2%. Whilst this is encouraging, the VAT rate increase at the
end of the period may have caused the increase in demand.
Adjusted* operating profit in the UK increased by 27.8% to £37.8 million (2008:
£29.6 million). This profit growth could not have been achieved without the
major cost reduction programme we entered into at the beginning of the year. In
2009 the UK's overhead costs have been reduced by approximately £22 million
compared to 2008.
Services revenue grew by 2.2% to £334.0 million (2008: £326.8 million). However,
more importantly long-term contractual revenue grew by 6.0% whilst professional
services revenue, which is more closely linked to product and shorter term
projects, declined by 6.8%. The decline in professional services revenue was
caused by the lack of new infrastructure projects throughout 2009, the pipeline
for which has improved steadily towards the end of the period.
As we have stated before our propositions, particularly in managed services,
have gained traction in the market over the last few years as we focus on
reducing the operating costs of our customers' IT infrastructure. We are pleased
to announce a number of significant new wins in our long-term contractual
services business.
We have won a ten-year managed services contract with global asset management
firm Threadneedle. This contract, which is now fully operational, is an £11
million agreement where Computacenter will host and manage the firm's datacentre
infrastructure. This has facilitated Threadneedle making savings in excess of
the contract value. NHS Oldham has signed a four-year contract that will see
Computacenter provide management and support of its IT infrastructure to reduce
costs and improve service.
At the beginning of 2010 we signed our largest services contract to date, with a
retail bank, to out-task desktop services as part of a five-year agreement
covering the bank's 140,000 users and 16,000 servers over its entire estate
including 3,000 branches. We also signed a new five-year full infrastructure
managed services deal worth in excess of £40 million with global asset
management firm Schroders. Both of these contracts will not start to add
significantly to our services revenue until the second half of 2010.
Whilst the number of new contracts won is extremely satisfying, we are even more
pleased with our retention rate, where we frequently not only retain the
customer but also increase the contract in scope and duration. Testament to this
is the new six-year desktop services contract signed with BT Group in 2009. In
retail banking we have signed a new contract with Produban (Santander Group IT
business) where we have agreed a five year extension, which supports its 31,000
UK employees.
Although there have been fewer significant infrastructure projects than in
previous years, we managed to secure a number of major successes. Wins include
the £45 million contract to supply and install the network infrastructure at two
new datacentres for a leading financial services group and a major business
transformation including datacentre and network implementations for a major
supermarket chain, within its distribution network.
We are encouraged by the number of customers evaluating and committing to
transformation programmes involving the migration to Microsoft Windows 7, which
we see as a key driver for growth in the coming years. An example of this is
where Severn Trent Water has engaged Computacenter as part of a £3.5 million
project, which will underpin new flexible working practices, increase staff
productivity and reduce costs.
We have also had success in the product supply side of our business where we
have seen customers consolidating suppliers and using the indirect channel to
help them reduce their costs. A good example of this is our recent win with BP,
which has consolidated hardware and software procurement with Computacenter in
Europe and CompuCom, our partner in the US. BP expects to see a 15% reduction in
capital expenditure as part of this programme.
With the ongoing focus on environmental issues, 2009 proved a great year for
RDC, our IT equipment disposal, remarketing and redeployment subsidiary. The
Company achieved record annual results as part of the Computacenter Group, with
overall revenue up by 20% to nearly £30 million, while profits grew by 46%.
In June, RDC was delighted to invite the new Chairman of the Environment Agency,
Lord Chris Smith, to open a new recycling area, and to celebrate its second
Queen's Award . The accolade for Enterprise for Sustainable Development is one
of only ten awarded in the whole of the UK.
Germany
In Germany we saw another year of encouraging adjusted* operating profit growth
of 21.9% to EUR22.0 million (2008: EUR18.0 million). This was achieved despite a
decline in revenues of 1.4% in local currency to EUR1.03 billion, excluding the
acquisition of becom in late November. As with elsewhere in Europe there was a
slowdown in product sales and continued margin pressure throughout the year,
particularly for low-end servers and PCs.
2009 can be characterised as a year of lots of small improvements. Services
margin was up a little, operating expenses were down a little and there was some
improvement towards higher-end products and services, all of which improved the
profit performance.
Our managed services contract base grew by 8.4% to EUR266.8 million compared to
the previous period. We signed a number of notable outsourcing contracts,
including a three-year agreement with aerospace company EADS Astrium. BASF IT
services has engaged Computacenter to provide on-site services and logistics
support for more than 50,000 desktops and laptops for the BASF Group in Europe.
The market for professional services has been challenging. However, our
networking solutions business saw good results; initiatives aimed at increasing
networking services sales yielded strong growth, notably in security and unified
communications. Margins grew considerably in 2009 and played an important role
in the operating results. Significant wins included a networking managed
services contract with EADS Astrium. This contract and the desktop agreement are
worth a total of EUR5.0 million.
Our datacentre product business performed poorly, with revenue and margins for
low-end servers below our expectations. Future growth in the datacentre business
will be assisted by the becom acquisition.
The opportunity created by customer concerns around energy and operational
efficiency also led to a number of new business wins in 2009, including a
datacentre optimisation project for a leading manufacturer of brake parts. We
are helping the manufacturer identify ways to enhance its energy efficiency as
part of the contract. While at Immoblienscout24, we are assisting the online
property portal company with the implementation of a new datacentre and also
providing ongoing support.
France
Whilst overall performance for Computacenter France declined slightly last year
to an adjusted* operating loss of EUR3.1 million (2008: EUR2.1 million) it was
still materially ahead of our internal, as well as external, expectations at the
beginning of the year.
In line with the market, revenue declined by 7.6% to EUR358.7 million (2008:
EUR388.0 million). However, encouragingly services revenues grew by 10.2% in
local currency, now representing18.4% of the total business.
Computacenter France continued to demonstrate improvements in its operating
controls and processes, with greater governance of forecasting and financial
structure. The simplified management structure implemented at the beginning of
2009 resulted in an 11.6% reduction in operating costs, in local currency.
To further support services growth in France, we opened a new helpdesk in
Roissy. This facility will be key to supporting and growing our desktop support
business, which benefited from a number of key wins in 2009. For example, the
Conseil Regional Midi-Pyrénées, a public administrative authority in the south
of France, has engaged Computacenter France to provide support services to 1,300
end-users, as part of a three year contract.
A full managed services contract with Electricité Réseau Distribution France was
another of our outsourcing success stories in 2009. Worth EUR4.8 million, the
contract includes support for 1,800 desktops as well as the electricity
Company's network and datacentres.
Datacentre solutions and services, especially consolidation and virtualisation,
will play a key role in the development of the French business. For example, we
won a four-year contract with SPEIG, a subsidiary of COLAS (the French building
construction and public works leader) for maintaining its datacentres across 40
countries.
Computacenter France's product revenue declined by 10.8% in local currency
compared to 2008. The most significant factor in this revenue decline was due to
our largest customer in France going through a hiatus in spend, due to the fact
that their contract with us had come to an end. We are pleased to announce that
we have secured a new contract with this customer with a slightly wider scope
for another four years. Excluding this customer, product revenue grew by 1%
which we believe is materially ahead of the market as a whole.
The software licensing market is a key development area for Computacenter
France, supported by a new specialist sales team. Among our software successes
during 2009 was a win with Airbus France, which involves the supply and the
implementation of an anti-virus package for 560 users.
We also won a global software licensing contract worth EUR9 million with energy
company GDF-SUEZ. The contract includes distribution to 51 countries and will
help GDF-SUEZ remove cost and complexity from its operations.
Computacenter France has made real progress in 2009. The local management team
have made a step change in 2009 as is evidenced by our services growth. We feel
confident that the business will make financial progress in 2010.
Benelux
Our Benelux operation showed an adjusted* operating loss of EUR851,000 in 2009
(2008: EUR120,000), with overall revenues dropping by 22.1%. This was due to a
major decline of 29% in product revenues. The product business had a difficult
year in a tough market, particularly within the corporate sector.
In the first half of 2009, we embarked on several initiatives to control the
cost base. We suspended product supply activities in Luxembourg and undertook a
restructuring project in Belgium.
Despite the decline in revenue, we saw a number of key managed services and
project wins during 2009. Techspace Aero, part of the Safran Group, has engaged
Computacenter Benelux to deploy a new storage infrastructure. The project, worth
EUR550,000 will help the company improve data management and reduce costs. We
are also helping Truvo Netherlands upgrade its telecommunication systems after a
project win worth EUR110,000.
The Group's global procurement capabilities also secured new business for
Computacenter Benelux during 2009 in the form of an international contract with
a leading biotechnology firm. The agreement covers the supply of hardware and
software.
Outlook
The outlook for our long-term contractual services business, where we save our
customers money, remains encouraging and we predict revenue growth, particularly
in the UK, in 2010 where contracts have already been secured. We also expect
some improvement in gross profit compared to 2009 due to improved business take
on and economies of scale.
Our professional services, coupled with our product supply, which is reliant on
capital expenditure, is more difficult to predict.
The encouraging signs we saw in the fourth quarter in the UK have continued into
the first quarter of 2010. Germany has seen a challenging start to the year when
compared with the first quarter of 2009. As is always the case, it is not until
we have gone through the end of the first quarter, that we can draw any
meaningful conclusions about the performance of the Group, for the year as a
whole.
In the longer-term we believe the investments we are making in our business,
together with our strong balance sheet, positions the Group well to take
advantage of market opportunities. While the economic outlook remains uncertain,
customers will continue to focus on reducing their operating costs and focusing
on core activities.
Mike Norris
* Adjusted profit before tax, income tax expense and EPS are stated prior to
amortisation of acquired intangibles and exceptional items. Adjusted operating
profit is also stated after charging finance costs on CSF, and prior to the
transfer of internal ERP implementation costs between segments.
Finance Director's review
Turnover and profitability
After two consecutive years of growth, Group revenues reduced in 2009 by 2.2%.
The exit from the trade distribution of PCs, laptops and printers at the end of
2008, and subsequent completion of the sale of the remaining trade distribution
('CCD') business on 27 November 2009 resulted in a reduction of revenues in that
business to £84.7 million (2008: £158.8 million). Excluding CCD, Group revenues
increased by 0.7%, with product revenues declining by 2.3% to £1.68 billion.
This reduction was partially offset by an increase in services revenues of 8.1%
to £740.0 million, with Managed Services growth offsetting a contraction in
Professional Services. The Professional Services and product revenue decline is
mainly due to the lack of large infrastructure projects as a result of the
recessionary environment. The growth in service revenues across the Group
improves the forward visibility of gross margin generation and earnings
resilience.
In both the UK and Germany, product revenues in December were stronger than
anticipated, partially due in both countries to strong year end activity by
customers to utilise existing budgets, augmented in the UK by the VAT rate
change on 1 January 2010.
Adjusted profit before tax improved by 25.8% from £43.1 million to £54.2
million. After taking account of exceptional items and amortisation of acquired
intangibles, statutory profit before tax increased by 22.4% from £39.5
million to £48.4 million.
Adjusted operating profit
Statutory operating profit increased from £42.6 million to £52.0 million.
However, management measure the Group's operating performance using adjusted
operating profit, which is stated prior to amortisation of acquired intangibles,
exceptional items and the transfer of internal ERP implementation costs, and
after charging finance costs on customer-specific financing ('CSF') for which
the Group receives regular rental income. Gross profit is also adjusted to take
account of CSF finance costs. The reconciliation of statutory to adjusted
results is further explained in the segmental reporting note (Note 3).
UK
UK revenues declined in 2009 by 11.8% overall but declined by 7.3% when the
impact of the staged withdrawal from trade distribution is removed. Ongoing
product sales declined 10.8% whilst Services revenues increased by 2.2%, driven
by a 6.0% growth in contractual services, offset by a reduction in Professional
Services revenues linked to the downturn in spending on capital projects.
The decline in product sales resulted in an improved gross profit mix, with
adjusted gross profit increasing from 14.0% to 14.8%. This is despite margin
challenges on the start-up of certain new Managed Service contracts and the more
difficult Professional Services market.
Adjusted operating expenses decreased by £22.0 million (13.3%), reflecting the
effects of the cost reduction programme which was initiated in 2008. The SG&A
cost reduction included the cost reduction from the partial exit from trade
distribution, the reduction in the mid-market product sales business and a
reorganisation aimed at the simplification of the organisation structure
including a reduction of the management layers. The cost reduction process was
assisted by the recessionary environment which resulted in lower staff
attrition, recruitment costs and lower travel and other costs, in total
approximately. £2.0 million. Exceptional charges incurred to achieve these
savings were £3.3 million in redundancy charges and £1.9 million of vacant
property costs.
Germany
Revenue increased by 12.0% to £930.7 million (2008: £830.7 million) whilst
revenue in constant currency decreased by 0.1%, however this included a revenue
contribution of £12.1 million from the acquisition of becom Informationsysteme
Gmbh ('becom'). Services revenues increased by 0.3% and product revenues
decreased by 0.3% in constant currency.
Gross profit percentage for Germany as a whole decreased from 13.7% to 13.4% of
sales, mainly due to an increasing proportion of sales of lower margin PCs
within product revenue.
SG&A reduced by 5.9% in constant currency mainly due to a tight focus on control
of all variable SG&A costs. The net outcome of the above factors was an
improvement in adjusted operating profit from £14.3 million to £19.6 million .
Included within the adjusted operating profit is £0.3 million from becom since
acquisition.
France
Revenue increased by 3.6% to £319.4 million (2008: £308.2 million) whilst
revenue in constant currency reduced by 7.6%. Constant currency product revenue
reduced by 10.8% whilst service revenue increased by 10.2%. Within this,
Professional Services reduced by 15.8% whilst Managed Services revenue increased
by 27.9%.
Gross profit decreased from 12.6% to 11.7% of revenues with the favourable mix
effect of increased services revenues being more than offset by a reduction in
margin due to the renewal of a major product contract .
Exceptional charges of £1.6 million were incurred to help reduce operating
expenses, which declined by 11.6% in constant currency, although this is
reported as a 0.8% reduction when translated into Sterling.
The adjusted* operating loss increased to £2.7 million (2008: £1.7 million),
which is a better than expected performance in the year, taking account of the
impact of the contract renewal with a large customer.
Benelux
Reported revenue reduced by 12.6% to £26.2 million (2008: £30.0 million) whilst
revenue in constant currency reduced by 22.1%. In constant currency, product
revenue reduced by 29.0% whilst service revenue reduced by 8.7%.
Exceptional costs of £0.2 million were incurred which helped to reduce SG&A by
7.5% in constant currency.
The net result of the above was an increase in the operating loss to £0.8
million (2008: £0.1 million)
Acquisitions
On 26 November 2009, the Group acquired 100% of the voting shares of becom
Informationssysteme GmbH ('becom') for a consideration of EUR2.3 million
inclusive of costs. The becom business is based in Germany and is a leading
provider of large IBM systems. The acquisition of becom has resulted in goodwill
arising of £12.1 million.
becom will be integrated fully with Computacenter Germany during 2010. As a
result, it is expected that going forward the cash flows will not be reliably
and separately identifiable and that the goodwill relating to this acquisition
will be tested for impairment against the Computacenter Germany cash-generating
unit.
On 27 November 2009 the Group acquired certain assets and liabilities of
Thesaurus Computer Services Limited from Thesaurus Computer Services Limited and
BDO LLP for a consideration of £0.9 million inclusive of costs. Thesaurus is a
private company based in the UK which provides mainframe service solutions.
The assets of Thesaurus were acquired by and the business was immediately
integrated within Computacenter UK. The goodwill arising on the acquisition of
£1.5 million has been tested against the Computacenter UK cash generating unit.
Disposals
On 27 November 2009, the Group disposed of CCD to Ingram Micro. The Group
received consideration of £3.0 million in cash. After the disposal of goodwill
of £1.0 million and disposal costs of £0.1m, a profit of £1.9 million was
realised.
The disposal does not represent a separate major line of business or
geographical area of operations and hence is not treated as a discontinued
operation.
Exceptional items
Statutory operating profit is stated after charging exceptional items of £5.3
million, which consist of the profit on the sale of CCD in the UK (£1.9
million), redundancy costs of £5.3 million and provisions for empty property of
£1.9 million, both related to restructuring activities across the Group.
Redundancy costs were principally incurred in the UK (£3.3 million) and France
(£1.6 million). This action contributed to a reduction in net operating expenses
of over £30 million across the Group (in constant currency).
Finance income and costs
Net finance costs on a statutory basis increased from £3.0 million in 2008 to
£3.7 million in 2009. This takes account of finance costs on customer
specific financing of £4.0 million (2008: £4.0 million). On an adjusted basis,
prior to the interest on customer specific finance ('CSF'), net finance income
reduced to £0.3 million from £1.0 million.
Taxation
Excluding the exceptional items, the adjusted effective tax rate was 22.6% (2008
was 24.9%). The improvement in 2009 is mainly attributable to the losses
utilised on earnings in Germany .
Deferred tax assets of £11.4 million (2008: £13.5 million) have been recognised
in respect of losses carried forward. In addition, at 31 December 2009, there
were unused tax losses across the Group of £188.1 million (2008: £212.0 million)
for which no deferred tax asset has been recognised. Of these losses, £111.1
million (2008: £138.8 million) arise in Germany, albeit a significant proportion
have been generated in statutory entities that no longer have significant levels
of trade. The remaining unrecognised tax losses relate to other loss-making
overseas subsidiaries.
Earnings per share and dividend
Whilst statutory diluted earnings per share has grown by 2.9% to 24.9p (2008:
24.2p), adjusted* diluted earnings per share provides a more appropriate
reflection of performance, increasing by 31.9% from 21.0p in 2008 to 27.7p in
2009
The earnings per share increase exceeds the profit growth mainly due to losses
utilised on earnings in Germany and the reduced corporation tax rate in the UK
from April 2008.
The Board is recommending an additional interim dividend of 8. 0p per share,
in lieu of a final dividend, bringing the total dividend for the year to 11.0p
(2008: 8.2p). This will be payable on 1 A pril 2010 to registered
shareholders as at 19 March 2010.
Cash flow
The Group's trading net funds position takes account of factor financing, but
excludes customer specific financing ('CSF'). There is an adjusted cash
flow statement provided in note 9 that restates the statutory cash
flow to take account of this definition.
The net funds (excluding CSF) improved from £4.6 million to £86.4 million by the
end of the year. The Group has a history of strong cash generation, however the
increase in 2009 was exceptional due to a number of factors. Firstly the exit
from CCD in the UK, partially in late 2008 and finally in late 2009, released an
estimated £30.0 million working capital; secondly the Group benefited by an
estimated £30.0 million from a temporary improvement in credit terms with a
significant vendor; cash receipts from customers at the end of December 2009
were stronger than usually experienced; and finally, there was a benefit of
£10.0 million due to early settlement on a customer contract that is financed by
a customer-specific financing arrangement. The increase in the year is achieved
after taking account of investment in the ERP system in the period of some £11
million.
Whilst the increase in net cash in the year is particularly strong, changes in
future periods are more likely to be in line with the underlying earnings of the
business, except if the improvement in credit terms with a significant vendor is
reversed.
CSF reduced in the year from £89.2 million to £49.1 million partially due to a
decision to restrict this form of financing in the light of the credit
environment and reduced customer demand. Taking CSF into account, total net cash
at the end of the year was £37.3 million, compared to net debt of £84.6 million
at the start of the year.
Customer specific financing
In certain circumstances, the Group enters into customer contracts that are
financed by leases or loans, which are secured only on the assets that they
finance. Whilst the outstanding balance of CSF is included within the net funds
for statutory reporting purposes, the Group excludes CSF when managing the net
funds of the business, as this CSF is matched by contracted future receipts from
custom ers.
Whilst CSF is repaid through future customer receipts, Computacenter retains the
credit risk on these customers and ensures that credit risk is only taken on
customers with a strong credit rating.
The committed CSF financing facilities, are thus outside of the normal working
capital requirements of the Group's product resale and service activities.
Capital Management
Details of the Group's capital management policies are included within
note 25 of the financial statements.
Financial instruments
The Group's financial instruments comprise borrowings, cash and liquid
resources, and various items that arise directly from its operations. The Group
occasionally 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.
The Group's policy remains that no trading in financial instruments shall be
undertaken.
The main risks arising from the Group's financial instruments are interest rate,
liquidity and foreign currency risks. The overall financial instruments
strategy is to manage these risks in order to minimise their impact on the
financial results of the Group . The policies for managing each of these risks
are set out below. Further disclosures in line with the requirements of IFRS 7
are included in note 24 of the financial statements.
Interest rate risk
The Group finances its operations through a mixture of retained profits, bank
borrowings, invoice factoring in France and the UK 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. When long-term borrowings are utilised, the Group's policy is
to maintain these borrowings at fixed rates to limit the Group's exposure to
interest rate fluctuations.
Liquidity risk
The Group's policy is to ensure that it has sufficient funding and committed
bank facilities in place to meet any foreseeable peak in borrowing requirements
. The Group's net funds position improved substantially during 2009, and at
the year-end was £86.4 million excluding customer-specific financing, and £37.3
million on a statutory basis.
At 31 December 2009, the Group had available £100.3 million (2008:£ 163.4
million) of uncommitted overdraft and factoring facilities. However, £8.9
million of these facilities will expire during March 2010 and will not be
renewed as they are no longer required as the Group has access to a £60.0
million 3 year committed facility established in May 2008, of which £42.9
million is not utilised at the balance sheet date. Customer-specific financing
facilities are committed.
The Group manages its counterparty risk by placing cash on deposit across a
panel of reputable banking institutions, with no more than £30.0 million
deposited at any one time except for Government backed counterparties where the
limit is £50.0 million.
Foreign currency risk
The Group operates primarily in the UK, Germany, France, and the 'Benelux'
countries, using local borrowings to fund its operations outside of the UK,
where principal receipts and payments are denominated in Euros. In each country
a small proportion of the sales are made to customers outside those countries.
For those countries within the Euro zone, the level of non-Euro denominated
sales is very small and, if material, the Group's policy is to eliminate
currency exposure through forward currency contracts. For the UK, the vast
majority of sales and purchases are denominated in Sterling and any material
trading exposures are eliminated through forward currency contracts.
Credit risk
The Group principally manages credit risk through management of customer credit
limits. The credit limits are set for each customer based on the
creditworthiness of the customer and the anticipated levels of business
activity. These limits are initially determined when the customer account is
first set up and are regularly monitored thereafter. In France, credit risk is
mitigated through a credit insurance policy which applies to non-Government
customers and provides insurance for approximately 50% of the relevant
credit risk exposure.
There are no significant concentrations of credit risk within the Group. The
Group's major customer, disclosed in note 3 to the financial statements consists
of entities under the control of the UK Government. The maximum credit risk
exposure relating to financial assets is represented by carrying value as at the
balance sheet date.
Going concern
As disclosed in the Directors Report, the directors have a reasonable
expectation that the Group has adequate resources to continue its operations for
the foreseeable future. Accordingly they continue to adopt the going concern
basis in preparing the consolidated financial statements.
Tony Conophy
Risk Management
The Group undertakes a formal annual process, facilitated by the Risk
Department, to identify and analyse the potential likelihood and impact that
various identified risks pose to the Group's strategic goals. Once a risk has
been identified and quantified, an associated mitigation strategy is developed.
The agreed mitigation strategy is followed by the nominated and most appropriate
'owner' of the risk and any associated programme of work is monitored by the
Group's Internal Audit Department.
Throughout the year any new risks of significance identified within the Group
are added to the Risk Log. The Group Risk Committee formally monitors the Risk
Log and the overall effectiveness of the risk mitigation strategy on a quarterly
basis.
Primarily, the risks contained in the Risk Log are categorised according to the
specific strategic objective potentially impacted and some of these principal
risks and their mitigations are highlighted below.
Strategic Objectives Principal Risks Principal
Mitigations
1. Accelerating the Failure to Follow the
growth of our contractual identify restructured account
services businesses. opportunities to planning and sales
promote to customers methodologies.
the benefits of
enhanced value
added services, in
addition to
traditional
services, results in
lost
opportunities.
Failure to adapt Continued investment
service offerings in and utilisation
that grow/enhance of the services and
the business, solutions
leading to functions that focus
inability to compete upon enhancing
service offerings.
Failure to compete Continued
effectively with the investment in a
current off-shoring programme to expand
trend, resulting in Computacenter's
lost opportunity. current off-shoring
facilities into
non-European
geographies.
2. Reducing cost Failure to deploy Continuation of
through increased appropriate service our investment
efficiency and automation tools to programme towards an
industrialisation of our minimise the need industrialised tool
service operations. for manual suite and embedded
intervention, targets into
leading to the lack management pay
of optimised plans.
resource.
3. Maximising the Increasing demand Apply appropriate
return on working capital for working capital incentive structures
and freeing working tied-up in large which also account
capital where not longer term services for working capital
optimally used. contracts, which elements.
would prevent
working capital from
being deployed
optimally.
Increasing demand Elevate extended
for extended credit credit requests to
from large the Board for
customers, which approval and apply
would delay and appropriate
reduce return on incentive
working capital and structures.
increase credit risk
exposure.
4. Growing our profit Failure to align Apply the recently
margin through increased operational and enhanced bid review
services and high-end commercial processes processes and
product sales. with contractual internal
requirements of approval/
complex or long term authorisation
services matrices to ensure
engagements, commercial and
resulting in operational
customer awareness and
dissatisfaction authorisation at the
and margin decline. appropriate level.
Delays or overruns In addition to the
in complex projects mitigation set out
(including above, implement the
transition and governance processes
transformation during and after
activity in larger contract take-on.
services contracts)
leading to lower
than expected
margins.
5. Ensuring the Failure to Follow the robust
successful implementation materialise the internal governance
of the Group-wide ERP expected benefits of structure at all
system. the Group-wide ERP relevant levels and
system, thereby ensure targets are
threatening the embedded into senior
anticipated return management pay
on investment. plans.
Ongoing business Dedicate specific
demands detract from resource exclusively
appropriate focus on to the ERP project
the ERP design and continuously
process, resulting monitor business
in either business resource demands.
interruption or ERP
go-live delays.
Directors' responsibility statement
* The financial statements, prepared in accordance with International Financial
Reporting Standards as adopted by the EU, give a true and fair view of the
assets, liabilities, financial position and profit for the Company and
undertakings included in the consolidation taken as a whole; and
* Pursuant to the Disclosure and Transparency Rules, the final results
announcement and the Company's annual report and accounts, includes a fair
review of the development and performance of the business and the position of
the Company and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that they
face.
On behalf of the Board
Mike Norris Tony Conophy
Chief Executive Finance Director
10 March 2010
Consolidated income statement
For the year ended 31 December 2009
Note 2009 2008
£'000 £'000
Revenue 3 2,503,198 2,560,135
Cost of sales (2,153,395) (2,205,276)
Gross profit 349,803 354,859
Distribution costs (19,032) (20,268)
Administrative expenses (272,876) (288,418)
Operating profit:
Before amortisation of acquired intangibles and 57,895 46,173
exceptional items
Amortisation of acquired intangibles (517) (525)
Exceptional items 4 (5,299) (3,046)
Operating profit 52,079 42,602
Finance income 1,307 3,095
Finance costs (4,977) (6,161)
Profit before tax:
Before amortisation of acquired intangibles and 54,225 43,107
exceptional items
Amortisation of acquired intangibles (517) (525)
Exceptional items (5,299) (3,046)
Profit before tax 48,409 39,536
Income tax expense:
Before exceptional items (12,113) (10,571)
Tax on exceptional items 4 1,415 -
Exceptional tax items 4 - 8,377
Income tax expense 5 (10,698) (2,194)
Profit for the year 37,711 37,342
Attributable to:
Equity holders of the parent 6 37,703 37,337
Non-controlling interests 8 5
37,711 37,342
Earnings per share 6
-basic 25.7p 24.7p
-diluted 24.9p 24.2p
Consolidated statement
of comprehensive income
For the year ended 31 December 2009
2009 2008
£'000 £'000
Profit for the year 37,711 37,342
Exchange differences on translation of foreign operations (10,173) 24,864
Total comprehensive income for the period 27,538 62,206
Attributable to:
Equity holders of the parent 27,543 62,198
Non-controlling interests (5) 8
27,538 62,206
Consolidated balance sheet
As at 31 December 2009
Notes 2009 2008
£'000 £'000
Non-current assets
Property, plant and equipment 105,290 123,315
Intangible assets 72,965 51,551
Investment in associate 57 -
Deferred income tax asset 5 16,444 16,672
194,756 191,538
Current assets
Inventories 67,086 105,831
Trade and other receivables 475,646 529,501
Prepayments 55,785 53,766
Accrued income 29,538 43,942
Forward currency contracts 726 -
Cash and short-term deposits 108,017 53,372
736,798 786,412
Total assets 931,554 977,950
Current liabilities
Trade and other payables 378,929 378,721
Deferred income 123,861 115,274
Financial liabilities 48,647 96,154
Forward currency contracts - 644
Income tax payable 3,815 10,275
Provisions 2,202 2,100
557,454 603,168
Non-current liabilities
Financial liabilities 22,022 41,809
Provisions 11,605 9,565
Other non-current liabilities 227 615
Deferred income tax liabilities 1,674 1,582
35,528 53,571
Total liabilities 592,982 656,739
Net assets 338,572 321,211
Capital and reserves
Issued capital 9,186 9,181
Share premium 2,929 2,890
Capital redemption reserve 74,950 74,950
Own shares held (9,657) (11,169)
Foreign currency translation reserve 16,208 26,368
Retained earnings 244,940 218,970
Shareholders' equity 338,556 321,190
Non-controlling interests 16 21
Total equity 338,572 321,211
Approved by the Board on 10 March 2010
MJ NorrisChief Executive FA ConophyFinance
Director
Consolidated statement of changes in equity
For the year ended 31 December 2009
Attributable to equity holders of the parent
Non-controlling Total
interests equity
£'000 £'000
Total
£'000
Issued capital Share premium Capital redemption Own Foreign currency Retained earnings
£'000 £'000 reserve shares translation reserve £'000
£'000 held £'000
£'000
At 1 January 2009 9,181 2,890 74,950 (11,169) 26,368 218,970 321,190 21 321,211
Profit for the year - - - - - 37,703 37,703 8 37,711
Other comprehensive - - - - (10,160) - (10,160) (13) (10,173)
income
Total comprehensive - - - - (10,160) 37,703 27,543 (5) 27,538
income
Cost of share-based - - - - - 2,555 2,555 - 2,555
payments
Deferred tax on - - - - - 298 298 - 298
share-based payment
transactions
Exercise of options 5 39 - 2,072 - (2,072) 44 - 44
Purchase of own shares - - - (560) - - (560) - (560)
Equity dividends - - - - - (12,514) (12,514) - (12,514)
At 31 December 2009 9,186 2,929 74,950 (9,657) 16,208 244,940 338,556 16 338,572
At 1 January 2008 9,504 2,890 74,627 (11,380) 1,507 201,035 278,183 13 278,196
Profit for the year - - - - - 37,337 37,337 5 37,342
Other comprehensive - - - - 24,861 - 24,861 3 24,864
income
Total comprehensive - - - - 24,861 37,337 62,198 8 62,206
income
Cost of share-based - - - - - 2,525 2,525 - 2,525
payments
Exercise of options - - - 298 - (298) - - -
Purchase of own shares - - - (9,695) - - (9,695) - (9,695)
Cancellation of own (323) - 323 9,608 - (9,608) - - -
shares
Equity dividends - - - - - (12,021) (12,021) - (12,021)
At 31 December 2008 9,181 2,890 74,950 (11,169) 26,368 218,970 321,190 21 321,211
Consolidated cash flow statement
For the year ended 31 December 2009
Notes 2009 2008
£'000 £'000
Operating activities
Profit before taxation 48,409 39,536
Net finance costs 3,670 3,066
Depreciation 35,326 36,719
Amortisation 4,631 4,764
Share-based payments 2,555 2,525
Loss on disposal of property, plant and equipment 23 526
Impairment of intangible assets - 3,046
Loss on disposal of intangible assets - 48
Profit on disposal of business 4 (1,879) -
Decrease in inventories 34,126 19,793
Decrease/(increase) in trade and other receivables 52,348 (34,844)
Increase in trade and other payables 10,960 16,190
Other adjustments 283 (760)
Cash generated from operations 190,452 90,609
Income taxes paid (17,500) (6,052)
Net cash flow from operating activities 172,952 84,557
Investing activities
Interest received 1,717 3,884
Acquisition of subsidiaries, net of cash acquired (9,742) -
Proceeds from sale of business 4 2,982 -
Sale of property, plant and equipment 7 30
Purchases of property, plant and equipment (9,511) (10,065)
Purchases of intangible assets (11,790) (14,278)
Net cash flow from investing activities (26,337) (20,429)
Financing activities
Interest paid (4,540) (7,254)
Dividends paid to equity shareholders of the parent 7 (12,514) (12,021)
Proceeds from share issues 44 -
Purchase of own shares (560) (9,695)
Repayment of capital element of finance leases (20,956) (25,713)
Repayment of loans (40,248) (28,633)
New borrowings 16,357 46,610
(Decrease)/increase in factor financing (25,600) 12,763
Net cash flow from financing activities (88,017) (23,943)
Increase in cash and cash equivalents 58,598 40,185
Effect of exchange rates on cash and cash equivalents (533) (562)
Cash and cash equivalents at the beginning of the year 8 46,889 7,266
Cash and cash equivalents at the year-end 8 104,954 46,889
Notes to the consolidated
financial statements
For the year ended 31 December 2009
1 Authorisation of financial statements and statement of compliance with IFRS
The consolidated financial statements of Computacenter plc for the year ended 31
December 2009 were authorised for issue
in accordance with a resolution of the
Directors on 10 March 2010. The balance sheet was signed on behalf of the Board
by
MJ Norris and FA Conophy. Computacenter plc is a limited company incorporated
and domiciled in England whose shares
are publicly traded.
The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS),
as adopted by the European
Union as they apply to the financial statements of the Group for the year ended
31 December 2009 and applied in accordance with the Companies Act 2006.
2 Summary of significant accounting policies
Basis of preparation
The consolidated financial statements are presented in Sterling and all values
are rounded to the nearest thousand (£'000) except when otherwise indicated.
Basis of consolidation
The consolidated financial statements comprise the financial statements of
Computacenter plc and its subsidiaries as at
31 December each year. The financial
statements of subsidiaries are prepared for the same reporting year as the
parent
company, using existing Generally Accepted Accounting Practice (GAAP) in
each country of operation. Adjustments are made on consolidation translating any
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.
3 Segmental analysis
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 above reportable
operating segments.
Management monitors the operating results of its geographical segments
separately for the purposes of making decisions about resource allocation and
performance assessment. Segment performance is evaluated based on adjusted
operating profit or loss which is measured differently from operating profit or
loss in the consolidated financial statements. At a Group level however
management measures performance on adjusted profit before tax. Adjusted
operating profit or loss takes account of the interest paid on customer-specific
financing (CSF) which management considers to be a cost of sale. Excluded from
adjusted operating profit is the amortisation of acquired intangibles,
exceptional items and the transfer of internal ERP implementation costs as
management do not consider these items when reviewing the underlying performance
of a segment.
Segmental performance for the years ended 31 December 2009 and 2008 was as
follows:
UK Germany France Benelux Total
£'000 £'000 £'000 £'000 £'000
For the year ended 31 December 2009
Results
Revenue 1,226,917 930,673 319,384 26,224 2,503,198
Adjusted gross profit 181,149 124,395 37,448 2,838 345,830
Adjusted net operating expenses (143,310) (104,831) (40,169) (3,597) (291,907)
Adjusted segment operating 37,839 19,564 (2,721) (759) 53,923
profit/(loss)
Adjusted net interest 302
Adjusted profit before tax 54,225
Other segment information
Capital expenditure:
Property, plant and equipment 11,042 8,107 783 118 20,050
Intangible fixed assets 11,891 15,301 71 - 27,263
Depreciation 24,015 10,064 1,118 129 35,326
Amortisation 3,302 1,209 120 - 4,631
Share-based payments 1,893 357 305 - 2,555
UK Germany France Benelux Total
£'000 £'000 £'000 £'000 £'000
For the year ended 31 December 2008
Results
Revenue 1,391,177 830,740 308,210 30,008 2,560,135
Adjusted gross profit 194,934 113,703 38,821 3,372 350,830
Adjusted net operating expenses (165,324) (99,386) (40,511) (3,465) (308,686)
Adjustedsegment operating 29,610 14,317 (1,690) (93) 42,144
profit/(loss)
Adjusted net interest 963
Adjusted profit before tax 43,107
Other segment information
Capital expenditure:
Property, plant and equipment 28,725 7,663 1,105 229 37,722
Intangible fixed assets 11,903 1,067 1,308 - 14,278
Depreciation 27,715 7,804 1,078 122 36,719
Amortisation 2,816 827 1,121 - 4,764
Share based payments 2,009 334 182 - 2,525
Reconciliation of adjusted results
Management reviews adjusted measures of performance as shown in the tables
above. Adjusted profit before tax excludes exceptional items and the
amortisation of acquired intangibles as shown below:
2009 2008
£'000 £'000
Adjusted profit before tax 54,225 43,107
Amortisation of acquired intangibles (517) (525)
Exceptional items (5,299) (3,046)
Profit before tax 48,409 39,536
Management also reviews adjusted measures for gross profit, operating expenses,
operating profit and net interest, which in addition takes account of interest
costs of CSF within cost of sales (as these are considered to form part of the
gross profit performance of a contract). The reconciliation for adjusted
operating profit to operating profit, as disclosed in the Consolidated Income
Statement, is as follows:
UK Germany France Benelux Total
£'000 £'000 £'000 £'000 £'000
For theyear ended 31 December 2009
Adjusted segment operating profit/(loss) 37,839 19,564 (2,721) (759) 53,923
Add back interest on CSF 2,921 1,051 - - 3,972
Amortisation of acquired intangibles (481) (36) - - (517)
Exceptional items (3,155) (291) (1,613) (240) (5,299)
ERP implementation costs (2,728) 2,728 - - -
Segment operating profit/(loss) 34,396 23,016 (4,334) (999) 52,079
For theyear ended 31 December 2008
Adjustedsegment operating profit/(loss) 29,610 14,317 (1,690) (93) 42,144
Add back interest on CSF 3,292 737 - - 4,029
Amortisation of acquired intangibles (481) (44) - - (525)
Exceptional items (1,922) - (1,124) - (3,046)
ERP implementation costs (1,673) 950 723 - -
Segment operating profit/(loss) 28,826 15,960 (2,091) (93) 42,602
Sources of revenue Each geographical segment principally consists of a single
entity with shared assets, liabilities and capital expenditure. The Group has
three sources of revenue, which are aggregated and shown in the table below. The
sale of goods is recorded within product revenues and the rendering of services
is split into Professional and Support and Managed Services.
Revenue performance is reported to the Chief Operating Decision Maker excluding
the UK Trade Distribution business, which was disposed of on 27 October 2009.
The table below reflects revenue performance before and after the impact of the
sold business.
2009 2008
£'000 £'000
Sources of revenue
Product revenue
Ongoing operations 1,678,613 1,717,269
Trade distribution 84,589 158,588
Total product revenue 1,763,202 1,875,857
Services revenue
Professional services 175,364 181,219
Support and managed services 564,632 503,059
Total services revenue 739,996 684,278
Total revenue 2,503,198 2,560,135
Information about major customers Included in revenues arising from the UK
segment are revenues of approximately £397 million (2008: £400 million) which
arose from sales to the Group's largest customer. For the purposes of this
disclosure a single customer is considered to be a group of entities known to be
under common control. This customer consists of entities under control of the UK
Government, and includes the Group's revenues with central government, local
government and certain government controlled banking institutions.
4 Exceptional items
2009 2008
£'000 £'000
Operating profit
Profit on disposal of business, net of goodwill 1,879 -
Restructuring costs (7,178) -
Impairment of intangible assets - (3,046)
(5,299) (3,046)
Income tax
Tax on exceptional itemsincluded in operating profit 1,415 -
Adjustment following agreement of certain items for earlier years - 3,611
Changes in recoverable amounts of deferred tax assets - 4,766
1,415 8,377
2009
The net gain on disposal of business of £1,879,000 arises from the Group
disposing of its trade distribution division to Ingram Micro in November 2009.
The disposal does not match the criteria of IFRS 5 'Non-current assets
held-for-sale and discontinued operations' as the disposal does not represent a
separate major line of business or geographical area of operations and hence was
not treated as a discontinued operation. The Group received consideration of
£2,982,000 in cash and cash equivalents, net of costs incurred in relation to
the sale. This is offset by the disposal of goodwill associated with the
business of £1,002,000. The directly attributable goodwill associated with the
Trade Distribution business originally arose from the acquisition of Metrologie
UK in 1999. Separately, related inventories of £8,574,000 were sold to Ingram
Micro at cost.
Restructuring costs arise from the change programme to reduce costs. They
include expenses from headcount reductions of £5,309,000 and vacant premises
costs of £1,869,000.
2008
The forecasted cash-flows for Computacenter France do not support the value
of the non-current assets in the business.
An exceptional impairment was
recognised in 2008 in relation to additions to intangible assets relating to the
Group ERP programme that were specifically allocated to the French
cash-generating unit.
After the 2008 year-end a decision was reached to cease using the Digica brand
following the integration of the Digica operations into those of Computacenter
(UK) Limited. An exceptional impairment of the trademark, generated at the time
of acquisition, was recognised accordingly.
The tax charge for 2008 contained two items which, due to their size, were
disclosed separately, as follows:
? during 2008 agreement was reached on certain significant items for earlier years;
and
? the deferred tax asset in respect of losses in Germany was re-assessed in line with
management's view of the entities future performance. Where the reassessment
exceeded the losses utilised in the year, the change in the recoverable amount of
the deferred tax asset was shown as an exceptional item.
5 Income tax a) Tax on profit on ordinary activities
2009 2008
£'000 £'000
Tax charged in the income statement
Current income tax
UK corporation tax 11,181 11,881
Foreign tax 1,394 673
Adjustments in respect of prior periods (853) (4,028)
Total current income tax 11,722 8,526
Deferred tax
Origination and reversal of temporary differences (2,284) (2,379)
Losses utilised 4,803 4,841
Changes in recoverable amounts of deferred tax assets (3,691) (4,145)
Exceptional changes in recoverable amounts of deferred tax assets - (4,766)
Adjustments in respect of prior periods 148 117
Total deferred tax (1,024) (6,332)
Tax charge in the income statement 10,698 2,194
b) Reconciliation of the total tax charge
2009 2008
£'000 £'000
Accounting profit before income tax 48,409 39,536
At the UK standard rate of corporation tax of 28.0% (2008: 28.5%) 13,555 11,268
Expenses not deductible for tax purposes 803 806
Exceptional expenses not deductible for tax purposes - 548
Non-deductible element of share-based payment charge 350 719
Exceptional adjustments in respect of current income tax of previous - (3,611)
periods
Adjustments in respect of current income tax of previous periods (853) (300)
Higher tax on overseas earnings 69 664
Other differences (309) (104)
Capital gain relieved by unrecognised losses brought forward (835) -
Changes in recoverable amounts of deferred tax assets - (4,766)
Losses utilised (3,691) (4,145)
Losses of overseas undertakings not available for relief 1,609 1,115
At effective income tax rate of 22.1% (2008: 5.5%) 10,698 2,194
c) Tax losses
Deferred tax assets of £11.8 million (2008: £13.5 million) have been recognised
in respect of losses carried forward. Where deferred tax assets have been
reassessed in excess of the losses utilised in the year, the change in the
recoverable amount of the deferred tax asset is shown as an exceptional item in
the income tax expense for the year, due to the material nature and expected
infrequency of this reassessment.
In addition, at 31 December 2009, there were unused tax losses across the Group
of £188.1 million (2008: £212.0 million) for which no deferred tax asset has
been recognised. Of these losses, £111.1 million (2008: £138.8 million) arise in
Germany, albeit
a significant proportion 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.
6 Earnings per ordinary share
Earnings per share (EPS) amounts are calculated by dividing profit attributable
to ordinary equity holders by the weighted average number of ordinary shares
outstanding during the year (excluding own shares held).
Diluted earnings per share amounts are calculated by dividing profit
attributable to ordinary equity holders by the weighted average number of
ordinary shares outstanding during the year (excluding own shares held) adjusted
for the effect of dilutive options.
Adjusted basic and adjusted diluted EPS are presented to provide more comparable
and representative information. Accordingly the adjusted basic and adjusted
diluted EPS figures exclude amortisation of acquired intangibles and exceptional
items.
2009 2008
£'000 £'000
Profit attributable to equity holders of the parent 37,703 37,337
Amortisation of acquired intangibles 517 525
Tax on amortisation of acquired intangibles (145) (150)
Exceptional items within operating profit 5,299 3,046
Tax on exceptional itemsincluded in profit before tax (1,415) -
Exceptional items within the total tax charge for the year:
-adjustment following agreement of certain items for earlier years - (3,611)
-changes in recoverable amounts of deferred tax assets - (4,766)
Profit before amortisation of acquired intangibles and exceptional 41,959 32,381
items
2009 2008
000's 000's
Basic weighted average number of shares (excluding own shares held) 146,918 151,279
Effect of dilution:
Share options 4,671 3,077
Diluted weighted average number of shares 151,589 154,356
2009 2008
pence pence
Basic earnings per share 25.7 24.7
Diluted earnings per share 24.9 24.2
Adjusted basic earnings per share 28.6 21.4
Adjusted diluted earnings per share 27.7 21.0
7 Dividends paid and proposed
2009 2008
£'000 £'000
Declared and paid during the year:
Equity dividends on ordinary shares:
Final dividend for 2008: 5.5pence (2007: 5.5 pence) 8,097 8,063
Interim for 2009: 3.0 pence (2008: 2.7 pence) 4,417 3,958
12,514 12,021
Proposed for approval at AGM (not recognised as a liability as at 31
December)
Equity dividends on ordinary shares:
Additionalinterim dividend for 2009: 8.0 pence (2008: nil pence) 11,863 -
Final dividend for approval at AGM for 2008 5.5 pence - 8,120
8 Analysis of changes in net (debt)/funds
At 1 January 2009 Cash flows Non-cash Exchange differences At
£'000 in year flow £'000 31 December 2009
£'000 £'000 £'000
Cash and cash equivalents 46,889 58,598 - (533) 104,954
Otherloans non-CSF - (3,705) - - (3,705)
Factor financing (42,280) 25,600 - 1,834 (14,846)
Net funds excluding 4,609 80,493 - 1,301 86,403
customer-specific
financing
Customer-specific finance (55,191) 21,056 (10,163) 1,731 (42,567)
leases
Customer-specific other (34,009) 27,496 - 25 (6,488)
loans
Total customer-specific (89,200) 48,552 (10,163) 1,756 (49,055)
financing
Net (debt)/funds (84,591) 129,045 (10,163) 3,057 37,348
At 1 January 2008 Cash flows Non-cash Exchange differences At
£'000 in year flow £'000 31 December 2008
£'000 £'000 £'000
Cash and cash equivalents 7,266 40,185 - (562) 46,889
Factor financing (23,453) (12,763) - (6,064) (42,280)
Net funds excluding (16,187) 27,422 - (6,626) 4,609
customer-specific
financing
Customer-specific finance (47,642) 25,713 (27,657) (5,605) (55,191)
leases
Customer-specific other (15,975) (17,977) - (57) (34,009)
loans
Total customer-specific (63,617) 7,736 (27,657) (5,662) (89,200)
financing
Net debt (79,804) 35,158 (27,657) (12,288) (84,591)
9 Adjusted management cash flow statement
The adjusted management cash flow has been provided to explain how management
view the cash performance of the business. There are two primary differences to
this presentation compared to the statutory cash flow statement, as follows:
1) Factor financing is not included within the statutory definition of cash and cash equivalents, but operationally
is managed within the total net funds/borrowings of the businesses; and
2) Items relating to customer-specific financing are adjusted for as follows:
a. Interest paid on customer-specific financing is reclassified from interest paid to
adjusted operating profit; and
b. Where customer-specific assets are financed by finance leases and the liabilities are
matched by future amounts receivable under customer operating lease rentals, the
depreciation of leased assets and the repayment of the capital element of finance leases
are offset within net working capital; and
c. Where assets are financed by loans and the liabilities are matched by amounts receivable
under customer operating lease rentals, the movement on loans within financing activities
and is also offset within working capital.
2009 2008
£'000 £'000
Adjusted profit before taxation 54,225 43,107
Net finance income (302) (963)
Depreciation and amortisation 17,695 18,055
Share-based payment 2,555 2,525
Working capital movements 65,337 16,306
Other adjustments (1,567) (186)
Adjusted operating cash inflow 137,943 72,792
Net interest received 1,149 659
Income taxes paid (17,500) (6,052)
Capital expenditure and investments (21,294) (24,313)
Acquisitions and disposals (6,775) -
Equity dividends paid (12,514) (12,021)
Cash inflow before financing 81,009 37,117
Financing
Proceeds from issue of shares 44 -
Purchase of own shares (560) (9,695)
Increasein net funds excluding CSF in the period 80,493 27,422
Increase in net funds excluding CSF 80,493 27,422
Effect of exchange rates on net funds excluding CSF 1,301 (6,626)
Net funds/(debt) excluding CSF at beginning of period 4,609 (16,187)
Net funds excluding CSF at end of period 86,403 4,609
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.
The table below provides the total amount of transactions that have been entered
into with related parties for the relevant financial year:
Sales to Purchases Amounts Amounts
related from related owed by owed to
parties parties related parties related parties
£'000 £'000 £'000 £'000
Biomni Limited 10 925 - -
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.
11 Publication of non-statutory accounts
The financial information in the preliminary statement of results does not
constitute the Group's statutory accounts for the year ended 31 December 2009
but is derived from those accounts and the accompanying Directors' report.
Statutory accounts for the year ended 31 December 2009 will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
The auditors have reported on those accounts; their report was unqualified and
did not contain statements under Section 49 8 (2) or Section 498 (3) of the
Companies Act 2006.
The financial statements, and this preliminary statement, of the Group for the
year ended 31 December 2009 were authorised for issue by the Board of Directors
on 10 March 2010 and the balance sheet was signed on behalf of the Board by MJ
Norris and FA Conophy.
The statutory accounts have been delivered to the Registrar of Companies in
respect of the year ended 31 December 2008. The report of the auditors was
unqualified and did not contain statements under Section 237 (2) or (3) of the
Companies Act 1985.
HUG1392765