Computacenter shows results of services shift

Share price of UK's largest reseller is below the May initial public offering price of 670p.

Computacenter helped shore up its volatile share price last week byc offering price of 670p. recording a 37 per cent increase in pre-tax profit to #64.6 million for the year ended 31 December 1998.

Annual turnover also grew 39.9 per cent from 1997 to #1.6 billion. Computacenter's shares rose 23.5p to 523.5p on the strength of the figures. Although still trading well below the May 1998 IPO price of 670p, the stocks are gradually recovering from its recent plunge triggered by a slump in IT stocks and City nervousness about Computacenter's reliance on its reseller business for revenue.

But industry analyst Richard Holway said the figures will please shareholders and brokers. 'Computacenter claimed that about 20 per cent of its revenue came from services, which would work out at about #300 million. We estimate it's actually closer to #200 million, but services have increased by about 70 per cent on last year which is a very high growth rate.'

He added: 'I don't think it will ever be re-rated as a services company, but the more services revenue it generates, the higher its rating will get.'

Holway told PC Dealer he believed Computacenter's share price was still undervalued by about 20 per cent. 'The company should get back to its listing price in 1999, but it has to make sure it keeps growing its revenue.'

Turnover in its French operation swelled 73 per cent from 1997 to #165.8 million, while UK revenue increased 34 per cent to #1.4 billion. Operating profits grew 33 and 27 per cent respectively.

Computacenter Germany also exceeded pre-tax profit predictions by recording a loss of only #1.4 million in its first full year of operation. Revenue increased to #37.1 million from #3.7 million in 1997.