Computacenter UK revenue drops amid weaker demand

But Mike Norris claims that supply challenges have 'eased materially' over last three months

Computacenter claims it has started to see supply chain issues ease, although revenues for its UK arm declined amid reduced demand.

The reseller has released its interim results for the six months ending 30 June 2022 in its latest trading update.

While the business as a whole saw its revenue increase 16.6 per cent year over year to £2.84bn, there were drops in performance from the UK side.

Revenue in the UK business decreased by 7.1 per cent to £653.8m, with the technology sourcing business seeing a 10.5 per cent reduction in revenue.

Computacenter said this was largely down to reduced demand for workplace rollouts which also affected technology roll outs in professional services, where revenues were down by 3.3 per cent.

Computacenter's shares fell by more than 10 per cent this morning following the trading update.

"Whilst demand from public sector customers is not as buoyant as during the pandemic, and is unlikely to reach those levels again in the near-term, we are confident that spending remains at normal pre-pandemic levels," the reseller said in a statement.

Despite supply chain issues having affected businesses amid economic headwinds, chief executive Mike Norris felt the issue has started to ease recently but said customers still hold concerns.

"Supply chain challenges have eased materially in the last three months," he said.

"However, our customers have become extremely sensitive about supply chain shortages, and as such require us to hold more inventory, impacting our balance sheet. In almost all cases there is a guaranteed sale on the inventory items.

"The continuing strength of our balance sheet gives us a significant competitive advantage in being able to support our customers' requirements in this manner. How this will unravel as customers get used to the freeing up of supply remains to be seen."

In the UK, revenues in managed services were slightly up as new contract wins were offset by contracts lost in the prior year.

Overall gross margins in the UK also increased by 101 basis points, with total adjusted gross profit at 19.9 per cent of revenues (H1 2021: 18.9 per cent).

This gross margin ratio increase was assisted by a higher proportion of software and resold services in H1 2022 where the margins are recorded directly as net revenue.

"The private sector is performing better, particularly as customers return to their offices," Computacenter added.

"Overall, we remain on track to deliver growth in both revenue and profit in the second half of the year and for the full year as a whole."

Meanwhile, the German business saw revenues increase 10.2 per cent on a constant currency basis while the French arm saw technology sourcing revenues return to growth as "significant" customers increased spend.

Norris said: "While the pandemic has accelerated new ways of working the major effects of Covid-19 are firmly behind us and we believe current market conditions are the new normal.

"Our customers commitment to investment in technology feels extremely robust despite well publicised and difficult economic conditions around the world. This gives us confidence for 2023 and beyond."