Computacenter beats market expectations

Computacenter sent its share price soaring today by revealing that its first half-year profitability will beat market expectations.

In a pre-close trading update released to the market, the VAR giant revealed it had seen good growth in its contractual services coupled with significant cost reductions, both of which contributed to the increased profitability.

This was despite a drop in product sales and professional services revenue, which is involved with the implementation of new systems and projects.

Overall group revenues dropped by three per cent in the period, but were down by eight per cent in constant currency. The firm also reiterated the exceptional charge of around £5m for the year as a whole, but claimed the majority of that had been expensed in the first half of the year. The statement mentioned a cash balance of around £49m.

Revenue in the UK was down eight per cent, excluding the impact of exiting the PC distribution market.

In the statement, the firm said: “We are pleased with the progress achieved in the first six months and the consistent improvement in group performance that we have been able to deliver.

“However, we are far from satisfied and much remains to be done to achieve the long-term performance we desire,” the statement added.

Looking ahead in the second half of 2009, the statement said Computacenter felt unlikely to see a return to growth in capital expenditure on IT equipment across its geography, but is confident of further progress in its contractual services business where it saves customers money.

“We will also continue to be rigorous in the cost management of our business,” the statement said. “We are obviously not immune to the broader economic environment but our performance to date gives us encouragement for the future.”

Mike Norris, chief executive of Computacenter, said: "The trading environment remains very challenging and neither Computacenter nor its customers are immune.

“It is therefore no surprise that our product sales are down in the period. However, the steps that we have taken to reduce our costs and win new service contracts have meant that we are again able to deliver another strong profit performance."

Computacenter is set to report its interim results on 27 August.