Computacenter results highlight problems

Computacenter's explanation for its disappointing results last week has failed to appease shareholders and has left analysts worried that it may have more long-term problems than just a Y2k hangover.

Computacenter's explanation for its disappointing results last week has failed to appease shareholders and has left analysts worried that it may have more long-term problems than just a Y2k hangover.

The UK's biggest reseller announced that its pre-tax operating profit was halved in the six months ended 30 June, falling from £40.7m in the same period last year to £19.5m. Turnover amounted to £967m, an increase of only 2.4 per cent.

The results came as a shock to analysts who expected a boom in demand for services as soon as the millennium bug issue had been resolved.

Phil Williams, Computacenter's investor relations manager, said: "Project work has been hard hit. The first half of the year has been tough for everyone though."

Richard Holway, an IT services analyst, said Computacenter's traditional business will recover, but previous levels "will not be achieved for a long time".

Holway said that with the recent appointment of David Courtley from services giant EDS, Computacenter will be focusing on its services business. But he added: "It will have to look long and hard at its business and cost line, and take some tough and unpleasant decisions to restore both profitability and confidence."

Williams insisted that the next six months will yield the growth in profit that had been predicted for the first six months.

"Windows 2000 projects haven't happened, but the big roll-outs are going to happen now. People are starting to order PCs in big numbers, and with that comes all the services revenue," he said. A contract to supply BP with 35,000 PCs was announced last week.

Despite Computacenter having issued a profit warning, the financial markets still reacted adversely to the results. Its shares fell by 35 per cent last month, and by another 17 per cent on the day its results were announced.

Institutional investors could not offer explanations for failing to anticipate the profit slump.

First published in Computer Reseller News