Computacenter laments 'disappointing' UK performance

Tom Wright
clock • 3 min read

UK arm struggles as Germany and France excel

Computacenter has reported a 6.3 per cent revenue increase for 2016 despite a "disappointing" UK performance that saw UK operating profit drop 21 per cent to £46.8m.

For the 12 months ending 31 December 2016 the overall group saw adjusted revenue grow 6.3 per cent year on year to £3.2bn, while adjusted profit before tax fell 0.6 per cent to £86.4m.

Revenue in the UK fell 1.1 per cent to just under £1.4bn, but this was countered by strong performances in France and Germany, according to CEO Mike Norris.

"While in 2016 we had record adjusted diluted EPS [earnings per share], it was a year of mixed fortune, with the UK business profitability reducing materially but the overall group performance showing resilience due to the strength in Germany and the turnaround in France," he said.

"The group should have a year of progress in 2017, with a rebalancing of profits between the first and second halves of the year towards the historical pattern.

"We expect the UK to see modest improvements due to professional services and supply chain helping the overall performance. While Germany will be coming off a strong year, and therefore a difficult comparison, the business has strong momentum and potential to improve services margins.

"New technologies and the drive to digitalisation within our core customer base is driving our customers to invest capital in new projects, which is unlikely to abate. However, this is coupled with a resolute desire to reduce run rate operating costs. As a business, we have to step up to this challenge and improve our competitive position by focusing on productivity gains and automation."

UK Struggles

While Computacenter saw supply chain revenue increase in the UK, both managed services and professional services struggled, leading UK managing director Kevin James to label the UK unit's performance as "disappointing".

Services revenue declined 7.6 per cent year on year in the UK to £481.9m, with professional services dropping 13.7 per cent and managed services down 5.5 per cent.

"Services revenues declined in both managed services and professional services, which reflected the successful conclusion of significant projects in the latter stages of 2015 and the lower-than-expected managed services wins in 2015," James said.

"This led to resource management challenges across our central operations. Wherever practical we reviewed these and flexed down appropriately, mainly by reducing contractors.

"We are pleased with the number of new customers added during 2016, particularly in our public sector business, and this bodes well for the future. While we saw erosion in the managed services contract base, through foreseen changes, we were pleased with our renewals rate and renewed some contracts early, leaving less risk moving forward. We also saw a number of significant new contract wins."

Peter Roe, research director at TechMarketView, said Computacenter needs to focus more on cloud to turnaround its UK fortunes.

"We repeat our view that Computacenter needs to place greater emphasis on helping its customer base move to cloud, driving greater automation, lower costs and productivity improvements both in the customer organisations, but also internally within Computacenter," he said.

Germany and France star performers

Despite the UK woes, Computacenter saw its German and French businesses outperform expectations, with Germany seeing revenue up 16.1 per cent year on year to £1.4bn and French revenue up 1.7 per cent to £404.7m.

Germany managing director Reiner Louis picked out the German unit's professional services arm as the highlight of Computacenter's 2016.

"The German business performed well in 2016 and ended the year ahead of our expectations, reflecting customers' willingness to invest in IT infrastructure and new solutions," he said.  

"Performance in 2016 was driven by significant services growth and good supply chain performance.

"Our German professional services business was probably the group's star performer in 2016. The growth in our consulting and project business demonstrates that our customers trust our skills and expertise.

"Professional services activity was dominated by services relating to the digital workplace, security, and building and expanding cloud infrastructures for our customers. In particular, we were delighted to be chosen by a federal government customer to help build a new cloud infrastructure for several government departments."

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