Computacenter share price soars on FY 2009 statement

Mike Norris: Computacenter is feeling confident of future progress in 2010

Bullish Computacenter is expecting to beat market expectations for its 2009 year-end financials, fuelled by the sale of its CCD trade distribution division last year and its ongoing cost reduction exercise.

The infrastructure and services giant saw its share price rocket by seven per cent after it released a trading statement to the London Stock Exchange today, that its pre-tax profit is expected to be "materially ahead of consensus market expectations of £48.4m".

At the end of the period, net cash for the group (excluding customer-specific financing - CSF) was £87m compared to £4.6m at the end of FY 2008. Including CSF, net funds were £37m, compared to a net debt of £84.6m at 31 December 2008.

Exceptional items for the year 2009 are expected to be in the region of £4.5m, £1.5m less than previously predicted, due to the exceptional gain on the disposal of CCD last November.

Focusing on the UK, turnover dropped by 11 per cent to approximately £1.25bn, but with the CCD sale factored in, this reduced to six per cent. In the fourth quarter, turnover from continuing operations grew two per cent.

UK services revenue grew eight per cent compared to 2008, but this included an 11 per cent decline in professional services revenue due to a lack of new infrastructure projects throughout 2009.

The VAT increase on 1 January has helped boost UK product revenue as well, the trading statement said, although the extent of this is not known.

The UK business has also saved in the region of £23m through its cost-cutting strategy introduced a year ago.

In Germany, the firm has high hopes for its acquisition of becom, which is expected to increase German revenue by 10 per cent in 2010. For 2009, revenue is expected to drop slightly by one per cent to €1.03bn.

The French business saw a slight decline compared to 2008, but it is still ahead of Computacenter’s expectations at the beginning of the year, the statement claimed. Services revenue grew 11 per cent for the year.

Overall the Group has managed to reduce operating costs by almost £30m, twice the estimate made 12 months ago, the statement said.

The Group has continued to develop its contractual services offerings during 2009, with investments in new datacentre facilities, incremental capacity in its service desks, enhancements to its customer-facing software tools and continual development of employee skills. At a Group level Computacenter’s annual services contract base exceeds £500m, representing a growth of more than seven per cent, compared to 2008.

Computacenter has also embarked on a major group-wide systems upgrade, implementing a single group-wide ERP system at a cost of approximately £32m. The rollout of this programme will start in the second half of 2010, and be fully operational across all major group countries in the second half of 2011.

Despite the positive news, the statement hinted there was more to come.
“We are pleased with the progress that the Group has made in 2009, particularly against the strategic objectives laid out a year ago, but we are far from satisfied and believe that the Group can still make further improvements in the years ahead,” it read.

Mike Norris, chief executive of Computacenter, said: “Our performance has constantly improved as the year has progressed and it is worth remembering that consensus market expectations have already been upgraded by more than £10 million throughout the course of 2009.

“The actions we have taken to restructure and focus our business have enabled us to significantly reduce our costs in the year and create a step change in our profits. We are also pleased with the growth in our contract base that underpins profit growth into the future.

“While the side of our business that is reliant on capital expenditure remains uncertain, the contractual services growth and structural changes we have made, make us confident in the business and future progress in 2010," he said.