Computacenter's decision to exit low-margin PC and printer distribution has impacted on its third-quarter 2009 turnover, but services revenue has continued to rise.
The infrastructure and services giant appeared bullish as it revealed its interim management statement today, which showed an eight per cent drop in group revenue to £552m. For the nine months, revenue has dropped five per cent to £1.76bn.
However, services have grown 10 per cent in Q3, and the statement said the firm was starting to benefit from contract wins earlier in the year, particularly in the UK.
It has also secured 'additional services wins' in Q3, the firm said, but warned these would not make a 'significant contribution' to group performance until 2010.
By region, the UK saw service revenue leap 10 per cent, but product revenue was down 25 per cent.
"UK operating profit for the third quarter was ahead of the same period the previous year, mainly due to the accelerating services revenue growth and material cost reductions," the statement said.
Germany saw Q3 services revenue down five per cent and product revenue down seven per cent, and France saw a 17 per cent increase in services revenue, but a nine per cent drop in product revenue.
The group also had a net cash balance of £56m, compared to a net debt of £16m at the end of Q3 2008. Net debt dropped to about £4m, compared to £89m in Q3 2008.
Cost-reduction plans are also going well, the statement said, with an expected £20m expense reduction per annum by the end of 2009 - an increase of £5m against its previous target.
Looking forward, the firm was cautiously optimistic for the year ahead.
"The encouraging performance we experienced in the first half, particularly in services growth, has continued into the third quarter. This, coupled with the strong list of recent wins and encouraging pipeline for the future, particularly in the UK, continues to improve Computacenter's visibility for 2010 and beyond, " the statement said.
"We are particularly encouraged by the high percentage of customers that are renewing and extending their contracts, which we see as testament to our ability to deliver on our promises and reduce their operating costs.
"The current economic climate has had a significant effect on capital projects, and consequently, on our product business.
"However, our cost control measures have more than offset the reduction of contribution from the decline in product revenue and have enabled us to increase Computacenter's operational leverage, so we are positioned to take full advantage of any upturn, no matter how small.
"While much remains to be done, as we enter into the all-important fourth quarter, the business remains on track for the year as a whole," the statement said.
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