Computacenter encounters "growing pains"

London-listed giant willing to take short-term hit to guarantee long-term prosperity of services business

Computacenter appears to be in the adolescent phase of its transition from a reseller to a services player as it blamed a fall in first-half profits on "growing pains".

The London-listed firm saw pre-tax profit for the six months to 30 June fall by 21 per cent to £20.8m as it encountered additional start-up costs associated with new services wins.

Group revenue rose 4.2 per cent to £1.42bn, with its contractual services base growing 9.4 per cent to £595m in constant currencies.

However – as Computacenter revealed in June – its recent services success has come at a cost to the firm, particularly in Germany where it had problems bringing on board new contracts.

Chief executive Mike Norris said: "While we are clearly pleased with the services revenue growth in all countries, our success in business take-on in the UK must be replicated across the group. This is not a simple or quick process and much work needs to be done.

"However, our uncompromising approach to customer satisfaction, whatever the short-term financial consequences, we believe is in the long-term interest of all our stakeholders, particularly our shareholders."

Computacenter's net funds, excluding customer-specific financing, fell slightly to £101.6m on the previous year.

Chairman Greg Lock added: "We are not pleased that we did not properly anticipate the operational impact of winning so many contracts at the same time, but growing pains are a challenge we have the financial strength to absorb."

Revenue in the UK, where Computacenter has just bagged a £50m, five-year contract with Rolls-Royce, rose by 5.7 per cent to £578.2m and adjusting operating profit by 5.2 per cent to £17.6m.

UK revenue from "supply chain" (Computacenter's corporate slang for product) rose "marginally", "albeit with much of this growth coming from Windows 7-led sales".

"The UK profitability in the period owes much to the efficient and effective take-on of the new contracts, which we won at the end of last year and the beginning of this year," said Norris. "This demonstrates that our investment into improving our take-on processes in the UK is delivering returns."