Computacenter posts highest profit growth in 22 years as a public company

UK is star performer with revenues up 11 per cent year on year

Computacenter has posted its highest annual profit growth in 22 years as a public company after a strong financial year for the reseller giant in which its UK business was the star performer.

Group revenues increased by 7.7 per cent in 2020 to £5.44bn while profits before tax surged by 46.5 per cent to £206.6m.

The UK reseller has come in well above its previously raised pre-tax profit predictions for the year which projected more than £195m in pre-tax profits.

It took 36 years for Computacenter to reach £100m in adjusted pre-tax profits, but it only took three years for the firm to double that figure to £200m, it claims.

Computacenter's UK business was the star performer in the group thanks to strong demand from the public sector and financial services.

UK revenues jumped by 11 per cent to £1.77bn, thanks to strong demand from its Technology Sourcing business which enjoyed 16.2 per cent growth to £1.33bn.

Technology Sourcing revenues were driven by workplace business in 2020 due to a shift to home working. Although enterprise sales declined during the year, Computacenter is expecting higher demand in 2020.

UK services revenue declined by two per cent to £445.4m, with a six per cent drop in managed services sales to £316.3m being offset by 9.7 per cent growth in professional services to £129.1m.

The UK business enjoyed higher services margins thanks to increased utilisation and reduced dependence on contractors while the firm also enjoyed higher margins for its Technology Sourcing arm. As a result, UK adjusted operating profit increased by 40.2 per cent for the year, Computacenter claims.

Its Germany business suffered a 2.5 per cent decline in revenues on a constant currency basis, due to a drop in managed services and technology sources, which was partly offset by a strong professional services business. An increase in professional services volumes at higher margins and a sharp reduction in administrative expenses allowed the German business to grow adjusted operating profit by 38.1 per cent on a constant currency basis during the year.

Computacenter France had a "difficult year" in 2020 due to a "slow down" among its large industrial customer base, a switch to lower margin workplace products and a downturn in its services business. Its French arm saw "modest" revenue growth of 5.3 per cent to €753.9m, but a 27.3 per cent decline in adjusted operating profits on a constant currency basis.

Its North American business suffered a "weaker than expected" 2020 with revenues declining by 2.8 per cent in constant currency to $1.22bn, which Computacenter puts down to reduced activity by its higher-margin mid-market customers.

The figures exclude the impact of the Pivot acquisition which added $292.7m in revenue and $6.8m in adjusted operating profit to the group during the last two months of the year.

Acquisitions added £261m to the UK reseller's top line during the year following Computacenter's deals for North American VAR Pivot Technology Solutions and BT Services France which closed in November last year.

Computacenter believes that the Covid crisis had a net positive impact on the year to the tune of around £30m in adjusted pre-tax profits.

The firm claims that it made significant Covid cost savings during the year due to less travel and using fewer contractors. Computacenter added that it committed to making no claims under the Job Retention Bonus scheme during the year and paid back all furlough costs received by the UK government in the second half of 2020.

"After multiple upgrades during the year and today's excellent results it is clear that the 2020 performance has exceeded all expectations and 2020 has seen the fastest profit growth Computacenter has achieved in its 22 years as a public company. Clearly, the challenge it gives us is to grow again in 2021," said CEO Mike Norris in a statement.

"While Computacenter will always focus on the long term and resist the temptation of short-term actions to maintain growth, we feel the opportunity for progression this year, while not certain, is real. We have come into 2021 with solid momentum and have experienced a very positive start to the year.

"Growth rates are obviously difficult to predict as our geographies will come out of lockdown at different times, but our experiences of the last 12 months has convinced us more than ever that our customers will continue to invest in Information Technology and will require the services of Computacenter to enable them to do so. This, combined with the fact that we are growing in more geographies and across more technology platforms than we have ever done before, makes us even more excited about our long-term growth potential."