TIDMCCC
RNS Number : 7935L
Computacenter PLC
08 September 2023
Computacenter plc
Incorporated in England
Registration number: 03110569
LEI: 549300XSXUZ1I19DB105
ISIN: GB00BV9FP302
Computacenter plc
Interim results for the six months ended 30 June 2023
Computacenter plc ("Computacenter" or the "Group"), a leading
independent technology partner trusted by large corporate and
public sector organisations, today announces results , based on
unaudited financial information, for the six month period ended 30
June 2023.
Financial highlights H1 2023 H1 2022 Percentage Change Increase / (Decrease)
Financial Performance
Technology Sourcing gross invoiced income (GBP million) 4,341.7 3,219.4 34.9%
Services revenue (GBP million) 816.5 752.5 8.5%
Gross invoiced income (GBP million) 5,158.2 3,971.9 29.9%
Technology Sourcing revenue (GBP million) 2,768.4 2,074.2 33.5%
Services revenue (GBP million) 816.5 752.5 8.5%
Revenue (GBP million) 3,584.9 2,826.7 26.8%
Adjusted(1) profit before tax (GBP million) 121.8 111.9 8.8%
Adjusted(1) diluted earnings per share (pence) 73.5 69.8 5.3%
Dividend per share (pence) 22.6 22.1 2.3%
Profit before tax (GBP million) 122.8 107.8 13.9%
Diluted earnings per share (pence) 76.5 67.3 13.7%
Cash Position
Cash and cash equivalents (GBP million) 301.6 193.5
Adjusted net funds(3) (GBP million) 285.1 159.3
Net funds (GBP million) 164.8 12.1
Net cash inflow from operating activities (GBP million) 116.5 8.1
Reconciliation to Adjusted(1) Measures
Adjusted(1) profit before tax (GBP million) 121.8 111.9
Exceptional and other adjusting items:
Amortisation of acquired intangibles (GBP million) (5.5) (4.1)
Other income related to acquisition of a subsidiary (GBP
million) 5.3 -
Gain related to acquisition of a subsidiary (GBP million) 3.2 -
Interest cost relating to acquisition of a subsidiary (GBP
million) (2.0) -
Profit before tax (GBP million) 122.8 107.8
Operational Highlights:
-- On track for the nineteenth consecutive year of adjusted(1)
diluted earnings per share growth.
-- Continued significant programme of strategic initiative
expenditure to underpin our long-term resilience, competitiveness
and growth with an additional expected spend of circa GBP13 million
in FY23 compared to FY22.
-- Cash has improved as inventory levels have reduced towards
normal levels. Inventory is down by GBP217.2 million since the
highpoint in Q3 2022.
-- Revenue across the Group has grown by 26.8 per cent in H1
2023 vs H1 2022 with broad growth across our diversified geographic
markets and service lines.
Mike Norris, Chief Executive of Computacenter plc,
commented:
Our performance in the first half sets us on course for our
nineteenth year of uninterrupted full-year adjusted(1) diluted
earnings per share growth. Coupled with this first half
performance, we have seen good progress in Q3 to date. Due to the
industry returning to normal supply conditions we have seen a
significant generation of cash as our inventory has reduced in the
first half of 2023. We expect this to continue in the second half
which will leave Computacenter with a strong balance sheet by the
end of the year.
We are pleased with our progress towards both our short-term
financial objectives and our long-term aspirations. The investments
we are making, predominantly through our profit and loss account to
make Computacenter a more secure and competitive organisation, are
progressing well and continue at pace.
We are as excited and optimistic about the future as we have
ever been.
Following a recently approved interpretation of the revenue
accounting standard by the International Accounting Standards
Board, we, and a number of our peer value-added resellers, have
changed the way we recognise revenues for standalone software and
resold third-party services contracts and revised our accounting
policies to reflect this change. Accordingly, we have restated our
prior-period revenues down from 2021 onwards, as we have now
determined that we are an agent for these transactions and will
recognise revenue on a net basis, with only the gross profit on
these types of deals, being the gross invoiced income less the
costs of the resold software or third-party services, showing as
revenue, with nothing recorded in cost of goods sold. This change
has been applied from 2022 and, retrospectively, we have restated
our prior-year 2021 revenues. The equivalent adjustment is not
available for years prior to 2021 as it is not practicable to
calculate. Further information on this change, including the
retrospective restatement of the financial statements, and the
revised accounting policy, is available in note 3 to the 2022
Consolidated Financial Statements. The result for the period
benefited from GBP85.5 million of revenue (H1 2022: GBP0.4
million), and GBP2.4 million of adjusted(1) profit before tax (H1
2022: nil), resulting from all acquisitions made since 1 January
2022. All figures reported throughout this announcement include the
results of these acquired entities. The results of these
acquisitions are excluded where narrative discussion refers to
'organic' growth within this announcement.
(1) Adjusted administrative expense, adjusted operating profit
or loss, adjusted profit or loss before tax, adjusted tax, adjusted
profit or loss, adjusted earnings per share and adjusted diluted
earnings per share are, as appropriate, each stated before:
exceptional and other adjusting items, including gains or losses on
business acquisitions and disposals, amortisation of acquired
intangibles, utilisation of deferred tax assets (where initial
recognition was as an exceptional item or a fair value adjustment
on acquisition), and the related tax effect of these exceptional
and other adjusting items, as Management does not consider these
items when reviewing the underlying performance of the Segment or
the Group as a whole. A reconciliation to adjusted measures is
provided in the Chief Financial Officer's review, which details the
impact of exceptional and other adjusted items when compared to the
non-Generally Accepted Accounting Practice (GAAP) financial
measures, in addition to those reported in accordance with IFRS.
Further detail is provided within note 4 to the summary financial
information contained within this announcement.
(2) We evaluate the long-term performance and trends within our
strategic priorities on a constant-currency basis. The performance
of the Group and its overseas Segments are also shown, where
indicated, in constant currency. The constant currency
presentation, which is a non-GAAP measure, excludes the impact of
fluctuations in foreign currency exchange rates. We believe
providing constant currency information gives valuable supplemental
detail regarding our results of operations, consistent with how we
evaluate our performance.
We calculate constant currency percentages by converting our
prior-period local currency financial results using the current
period average exchange rates and comparing these recalculated
amounts to our current period results or by presenting the results
in the equivalent local currency amounts. Wherever the performance
of the Group, or its overseas Segments, is presented in constant
currency, or equivalent local currency amounts, the equivalent
prior-period measure is also presented in the reported pound
sterling equivalent, using the exchange rates prevailing at the
time. 2023 interim highlights, as shown above, are provided in the
reported pound sterling equivalent.
(3) Adjusted net funds or adjusted net debt includes cash and
cash equivalents, other short- or long-term borrowings and current
asset investments. Following the adoption of IFRS 16, this measure
excludes all lease liabilities. A table reconciling this measure,
including the impact of lease liabilities, is provided within note
13 to the summary financial information contained within this
announcement.
(4) Gross invoiced income is based on the value of invoices
raised to customers, net of the impact of credit notes and
excluding VAT and other sales taxes. This reflects the cash
movements to assist Management and the users of this announcement
in understanding revenue growth on a 'principal' basis and to
assist in their assessment of working capital movements in the
Consolidated Balance Sheet and Consolidated Cash Flow Statement.
This measure allows an alternative view of growth in adjusted gross
profit, based on the product mix differences and the accounting
treatment thereon. Gross invoiced income includes all items
recognised on an 'agency' basis within revenue, on a gross income
billed to customers basis, as adjusted for deferred and accrued
revenue. A reconciliation of revenue to gross invoiced income is
provided within note 5 to the summary financial information
contained within this announcement.
The term Group refers to Computacenter plc and its
subsidiaries.
Enquiries:
Computacenter plc
Mike Norris, Chief
Executive 01707 631601
Chris Jehle, Finance
Director 01707 631515
Teneo
020 7353
James Macey White 4200
Matt Low
DISCLAIMER - FORWARD LOOKING STATEMENTS
This announcement includes statements that are, or may be deemed
to be, 'forward-looking statements'. These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms 'anticipates', 'believes',
'estimates', 'expects', 'intends', 'may', 'plans', 'projects',
'should' or 'will', or, in each case, their negative or other
variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, future events or intentions.
These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
announcement and include, but are not limited to, statements
regarding the Group's intentions, beliefs or current expectations
concerning, amongst other things, results of operations, prospects,
growth, strategies and expectations of its respective
businesses.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Forward-looking statements are not guarantees of future performance
and the actual results of the Group's operations and the
development of the markets and the industry in which they operate
or are likely to operate and their respective operations may differ
materially from those described in, or suggested by, the
forward-looking statements contained in this announcement. In
addition, even if the results of operations and the development of
the markets and the industry in which the Group operates are
consistent with the forward-looking statements contained in this
announcement, those results or developments may not be indicative
of results or developments in subsequent periods. A number of
factors could cause results and developments to differ materially
from those expressed or implied by the forward-looking statements,
including, without limitation, those risks in the risk factor
section of the Computacenter plc 2022 Annual Report and Accounts,
as well as general economic and business conditions, industry
trends, competition, changes in regulation, currency fluctuations
or advancements in research and development.
Forward-looking statements speak only as of the date of this
announcement and may, and often do, differ materially from actual
results. Any forward-looking statements in this announcement
reflect the Group's current view with respect to future events and
are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Group's operations,
results of operations and growth strategy.
Neither Computacenter plc nor any of its subsidiaries undertakes
any obligation to update the forward-looking statements to reflect
actual results or any change in events, conditions or assumptions
or other factors unless otherwise required by applicable law or
regulation.
OUR INTERIM PERFORMANCE IN 2023
GROUP
Financial performance
Our strong trading performance during the period to 30 June 2023
is testament to the diversity of our business model. We operate in
multiple geographies, multiple business lines, selling a variety of
technologies.
We have seen extraordinary growth in gross invoiced income and
revenue despite well published challenging macro-economic
conditions. During the period we have grown significantly faster
than the market as a whole and also our major competitors.
Therefore, we have gained market share. Without doubt we have
benefited from the fact our target market, the largest customers,
have proved the most resilient and continued to invest in
technology. Additionally, we have grown our share within our
existing customers and also acquired new customers.
In 2005, we pivoted Computacenter's strategy to dramatically
grow our Services business, and I'm pleased to say we've grown our
adjusted(1) earnings per share (EPS) every year since. That change
was made simply because the diversification allows us to be in
control of our own destiny.
We now have the largest services business of any value-added
reseller, as well as the largest value-added reseller capability of
any services business worldwide. Executing our business model,
built on the three primary service lines of Technology Sourcing,
Professional Services and Managed Services, supports Our Purpose of
helping our customers change the world.
Over the last 18 years this strategy has worked, particularly in
Europe where we continue to work on behalf of our customers across
these primary service lines whilst remaining independent from our
technology vendors even though we work together in partnership with
all of them.
Our expanding global reach has enabled us to serve numerous
significant customers across their various locations. Providing a
single point of accountability for products and services has been
well received and our delivery capabilities across multiple
geographies offer us a competitive advantage in meeting cost
requirements, while delivering exceptional customer service.
As we entered 2023 we continued to focus on a number of areas of
our business identified during 2022. Whilst we were pleased with
how the second half of last year progressed there remained much to
do in the first half of 2023 in order to be truly satisfied with
our ongoing performance for the period and the full year as a
whole.
We continue to make progress in each of the following areas,
described below, particularly with the challenges facing the
broader market.
Increasing the spend on targeted investments through the income
statement, ensuring another year of adjusted(1) diluted earnings
per share growth, achieving gross invoiced income growth in the
United Kingdom Segment, arresting the growth in our inventory to
improve our cash position and stabilising our Services margins
remain key to our ongoing success.
Results H1 2023 H1 2022 Percentage change H1 2022 Percentage change
GBPm GBPm GBPm
constant currency(2)
Professional Services revenue 333.7 298.4 11.8% 308.4 8.2%
Managed Services revenue 482.8 454.1 6.3% 466.3 3.5%
Services revenue 816.5 752.5 8.5% 774.7 5.4%
Technology Sourcing gross invoiced
income 4,341.7 3,219.4 34.9% 3,319.3 30.8%
Total gross invoiced income 5,158.2 3,971.9 29.9% 4,094.0 26.0%
Professional Services revenue 333.7 298.4 11.8% 308.4 8.2%
Managed Services revenue 482.8 454.1 6.3% 466.3 3.5%
Services revenue 816.5 752.5 8.5% 774.7 5.4%
Technology Sourcing revenue 2,768.4 2,074.2 33.5% 2,151.3 28.7%
Total revenue 3,584.9 2,826.7 26.8% 2,926.0 22.5%
Gross profit 505.7 424.9 19.0% 437.4 15.6%
Adjusted(1) total administrative
expenses (387.2) (310.7) 24.6% (320.5) 20.8%
Adjusted(1) operating profit 118.5 114.2 3.8% 116.9 1.4%
Net adjusted(1) finance costs 3.3 (2.3) (243.5%) (2.4) (237.5%)
Adjusted(1) profit before tax 121.8 111.9 8.8% 114.5 6.4%
Gross profit 505.7 424.9 19.0%
Total administrative expenses (392.7) (314.8) 24.7%
Other income related to acquisition of
a subsidiary 5.3 - -
Gain related to acquisition of a
subsidiary 3.2 - -
Operating profit 121.5 110.1 10.4%
Net finance costs 1.3 (2.3) (156.5%)
Profit before tax 122.8 107.8 13.9%
Investments
Those of you who follow Computacenter closely will know that
this year will see significant incremental targeted strategic
investment project spend through our income statement.
Spend on our critical strategic corporate initiatives has
increased by more than double to GBP11.9 million in the first half
of the year (H1 2022: GBP5.5 million) split between projects that
will improve capabilities, productivity and underpin our systems of
the future, now. This increase in spend we expect to continue
throughout 2023 and 2024.
While general market conditions are good, they are not as robust
as they have been for the last couple of years. However, we are not
letting that affect our investment strategy.
Most of the spend is focused on our systems to ensure that they
continue to be secure and supportable. We are not just upgrading,
that simply isn't enough, but also moving to new systems in order
to obtain the security and support we need and develop competitive
advantage through continued operational leverage of these new
toolsets and processes.
Cyber risk remains one of the greatest risks to our business,
but also presents one of the greatest opportunities to
differentiate from our competitors through our internal resilience
and by helping our customers to overcome these same challenges. We
will continue to invest heavily to prevent a cyber breach.
Whilst cyber risk forms part of the Group's overall Principal
Risks, as detailed on pages 74 to 81 of our 2022 Annual Report and
Accounts, it could be argued that cyber risk is the single major
risk facing large corporates today.
In light of recent significant, well-published cyber attacks in
the last year against certain of its key strategic suppliers, the
UK Government has sent a clear and simple message: they want to
make cyber security one of the top priorities for their strategic
suppliers, alongside the many other demands on large
corporates.
Adjusted(1) diluted EPS
We are pleased to see the growth in adjusted(1) profit before
tax for the first half of 2023 over the first half of 2022
following the expected re-emergence of seasonality that is closer
to our historical norms. Historically, revenues have been higher in
the second half of the year than in the first six months,
principally due to customer buying behaviour. This typically leads
to a more pronounced effect on operating profit.
The result for the period benefited from GBP85.5 million of
revenue (H1 2022: GBP0.4 million), and GBP2.4 million of
adjusted(1) profit before tax (H1 2022: nil), resulting from all
acquisitions made since 1 January 2022. All figures reported
throughout this announcement include the results of these acquired
entities.
Our growth performance in the first half of 2023 has been
assisted by currency movements and the BITS acquisition made in the
second half of last year. This was far outweighed by the challenges
presented by cost inflation, salary increases and demand
variability. Despite these headwinds, our continued growth means
that Computacenter remains poised to achieve a nineteenth
consecutive year of adjusted(1) diluted EPS growth.
Adjusted(1) diluted EPS, the Group's primary EPS measure,
increased by 5.3 per cent in H1 2023 to 73.5 pence (H1 2022: 69.8
pence). Diluted EPS increased by 13.7 per cent to 76.5 pence (H1
2022: 67.3 pence).
Inventory
The supply chain constraints that we saw during the last 18
months to 31 December 2022 have now eased materially with
availability of product now largely returning to normal.
The Group had GBP315.4 million of inventory as at 30 June 2023,
a decrease of 21.0 per cent since 30 June 2022 (GBP399.3 million),
and a decrease of 19.4 per cent in constant currency(2) . In the
last six months, inventory has fallen GBP102.3 million (31 December
2022: GBP417.7 million). Whilst we have already been paid for some
of this inventory, customers are committed, through individual
non-cancellable purchase orders, to taking nearly all of the rest
of the holding, so it is a largely risk-free position.
Total inventory across the Group has fallen by GBP217.2 million
since 30 September 2022 at the high point of the product supply
issues.
During 2021 and 2022, customers switched to ordering much
further in advance of their requirement than normal. This spiked
our inventory levels and our product order backlogs.
The Group continues to carry more inventory than normal, however
customers are becoming more assured that they no longer need to
order significantly further in advance of their requirement and are
becoming confident that even large orders are addressable in
standard time frames.
This positivity in customer outlook is naturally reducing our
inventory as inventory was accumulated well in advance of dispatch
and also our product order backlogs as delivery lead-times are able
to be reduced. Further, manufacturers are more able to deliver
complete orders ready for shipment rather than supplying product
into inventory when an order was only partly available. Finally, we
are holding significantly less stock for orders that are delayed
pending a critical part or where customers had ordered early and
subsequently delayed delivery, as their data center facilities or
other project requirements were not ready.
Further commentary on progress and initiatives in reducing our
inventory and improving our cash generation is available in the
Chief Financial Officer's Review.
United Kingdom performance
The United Kingdom saw 8.7 per cent growth in gross invoiced
income during the first half of the year. Within this top-line
growth, the product mix has changed significantly from hardware,
which decreased, towards software and resold services where, with
software in particular, longer-term framework contracts are
becoming prevalent.
Whilst gross invoiced income and revenue growth remains robust
in a challenging market, we remain unsatisfied with the overall UK
profitability performance. Reducing Services margins, the change in
Technology Sourcing product mix towards lower margin revenues and
increasing administrative expenses have all impacted the UK
profitability in the period. We will look to achieve a stronger
second half performance to drive the Group result.
Services margins
Computacenter, like most companies, is affected by wage
inflation associated with the macroeconomic disruption. Whilst the
Services business continues to offer us opportunities to
differentiate from our competition and the ability to penetrate
customers with the three elements of our business model, it remains
a people-intensive operation and therefore is more exposed to these
inflationary pressures.
Pay rises in our Services business often precede price rises to
our customers. Services contracts generally have specific cost of
living adjustment clauses within them that enable us to increase
our rate card prices and recover increases in our costs at a later
date.
Services margins are 156 basis points down from that achieved in
H1 2022. This is not far below pre-Covid-19 levels and a marginally
better performance than we had anticipated.
We feel that we have managed these inflationary pressures well
during the first half of the year with margins down less than
expected within our early forecasts for the performance over the
first six months.
We believe that we have absorbed the majority of the cost
increases foreseen within a flat overall Services gross profit
performance in H1 2023 and expect that the continued robustness of
the Services top-line growth, which saw H1 2023 Services revenue
grow by 8.5 per cent compared to H1 2022, will flow through to
gross profit unhindered by this short-term reversal in Services
margins.
Less than 20 per cent of our employees now reside in the United
Kingdom, so the impact of these inflationary pressures should be
considered on a more global basis than simply on the macroeconomic
performance within the United Kingdom itself.
Technology Sourcing trading performance
Our Technology Sourcing product sales continued the extremely
strong performance seen in the second half of 2022 throughout the
first half of 2023, with very strong demand in all countries in
which we operate. Trading across all of our major geographies was
pleasing throughout the year, with double-digit growth, again, in
gross invoiced income in each Segment.
Group Technology Sourcing gross invoiced income grew by 34.9 per
cent including the effects of acquisitions made in the middle of
2022, and by 30.8 per cent in constant currency(2) .
Product order backlogs have fallen sharply as customer ordering
behaviour returns to normal, however demand and gross invoiced
income growth has remained very high. The recent driver of
customers' IT purchasing has focused on the near-term impacts of
the economic downturn, as they look to re- engineer IT structures
and employ digital transformation to cope with the ever-evolving
technology landscape and the need to reduce non-IT operating costs.
This, coupled with an escalatory cyber threat landscape will
continue to sustain demand in the short to medium term.
We believe that IT spend remains strategic to our customers and
will be amongst the last expenditure categories to be retrenched if
the forecast global-economic recession becomes a reality.
The strength of the overall Technology Sourcing result is driven
by the spread of the customer base across multiple market segments,
technology lines and geographies, which create durability and
sustainability within the business model through
diversification.
Our product order backlogs, which are the total value of
committed outstanding purchase orders placed with our technology
vendors against non-cancellable sales orders received from our
customers for delivery within 12 months, across all geographies,
remain buoyant against historical trends, but are considerably
lower than as at 30 June 2022. As described above, both the product
supply situation and the ordering behaviour of customers has also
returned to normal, with customers no longer placing long-lead-time
orders due to the availability of product. The product order
backlog at 30 June 2023 was GBP1,521.2 million, on a gross invoiced
income basis, a 48.3 per cent decrease since 30 June 2022
(GBP2,943.3 million) in constant currency(2) . The June 2022
backlog is impacted by a one-off order from a single customer
placed in May 2022 for $847 million that has now been
delivered.
The Technology Sourcing backlog, alongside the Managed Services
Contract Base and the Professional Services forward order book
allow us visibility of future revenues in these areas. This gives
us confidence that the Technology Sourcing business will be well
placed in the year ahead.
Overall Group Technology Sourcing margins, based on gross profit
as a percentage of revenue, held firm experiencing a slight drop of
38 basis points during the year, mainly due to customer and product
mix changes.
Services trading performance
Our Services revenue performance was robust during the period
and we are confident of continued Services revenue growth fuelled
by the continuing success story that is our Professional Services
business and the strength of recent wins within Managed Services
that will deliver growth over the next 12 months.
Professional Services is an essential part of our integrated
business model - to help us create significant value for our
customers and to be a volume-revenue and profit-growth driver for
our business. We now have a Professional Services business with
more than 6,000 people who completed over 1,900 projects in 2022,
with more than 1.4 million billed consultancy hours in that time.
We are committed to growing and enhancing our Professional Services
business even further by having a broader and scalable portfolio
across all countries, based on a common operating framework and a
strong sales approach.
We continue to focus on the importance of our Services
businesses within the context of our overall business model
offering to our customers. Managed Services in particular is
important to the longevity of customer relationships with us. The
ability to cross-sell and upsell Professional Services and
Technology Sourcing to our Managed Services customers increases our
share of the overall IT wallet in those customers and makes those
customers stick with Computacenter. More than three-quarters of our
major European headquartered customers contract with us for our
Managed Services.
Our Services margin performance was impacted in H1 2023 through
the effects of price inflation on our delivery models which we
expect to continue, albeit stabilise, into H2 2023 as noted
above.
United Kingdom
Financial performance
In the UK, the well-publicised unsettled economic conditions
impacted our business in the first half of 2023. Businesses and
organisations have experienced delays in project implementations
and have been deferring critical technology investment decisions,
resulting in the market softening as the year has progressed.
Early in the year, we implemented new leadership followed by
significant structural changes, to enhance our focus on our target
market and maximise growth opportunities. As part of this, we
expanded our sales sectors from four to five, allowing us to get
closer to our customers, better understand their needs and
preferences, and ultimately drive increased sales opportunities.
Our focus on large customers has never been more evident and we
continue to identify opportunities in this area of the market. Our
strategy has been streamlined to cater to a core set of enterprise
organisations in the private and public sectors, ensuring a
targeted, efficient and differentiated approach.
With the backdrop of the increased cost of living in the UK, the
action we have taken to restructure the business has enabled us to
keep tight control of our cost base. We believe this sets us up
well for growth in the second half of the year.
Overall, gross margins in the United Kingdom decreased by 139
basis points, with total adjusted(1) gross profit at 18.5 per cent
of revenues (H1 2022: 19.9 per cent).
Results H1 2023 H1 2022 Percentage change
GBPm GBPm
Professional Services revenue 65.6 72.5 (9.5%)
Managed Services revenue 154.6 159.4 (3.0%)
Services revenue 220.2 231.9 (5.0%)
Technology Sourcing gross invoiced income 1,051.0 937.8 12.1%
Total gross invoiced income 1,271.2 1,169.7 8.7%
Professional Services revenue 65.6 72.5 (9.5%)
Managed Services revenue 154.6 159.4 (3.0%)
Services revenue 220.2 231.9 (5.0%)
Technology Sourcing revenue 465.9 421.9 10.4%
Total revenue 686.1 653.8 4.9%
Gross profit 127.2 130.3 (2.4%)
Adjusted(1) administrative expenses (101.7) (85.3) 19.2%
Adjusted(1) operating profit 25.5 45.0 (43.3%)
Technology Sourcing performance
Technology Sourcing volumes started the year strongly but
softened as the first half of the year progressed. This challenge
was accentuated by two very large transactions that were concluded
earlier in the period. The variability in demand also resulted in a
particular squeeze on margins. This resulted in our Technology
Sourcing margins, based on gross profit as a percentage of revenue,
reducing by 123 basis points during H1 2023. We see evidence to
suggest that margins will continue to improve in the second half of
the year but not to the levels of 2022.
In the first half of 2023, we experienced a continued dampening
in demand for hardware, particularly in the workplace area. This
can be attributed to the significant investments customers made
through the pandemic to support home and hybrid working and the
completion of a number of large Windows 10 rollouts. As anticipated
in our previous statement, this has led to a lag in customer
adoption of Windows 11, a trend that is likely to continue into the
rest of 2023 and 2024. Workplace activity is critical for
sustaining our margins within our Integration Centers. This
facility plays a crucial role in configuring devices for our
customers and provides a comprehensive set of value-added services.
Decreased hardware demand has affected margins associated with
these activities as our costs remain largely fixed even as volumes
decline.
As we move further into 2023 and approach 2024, we expect the
adoption of Windows 11 to gain momentum. This will likely drive
increased demand for new hardware, as customers upgrade their
systems to align with the new operating system. We are well
prepared to support our customers to transition seamlessly to
Windows 11.
In the enterprise space, we are pleased to report good growth in
our data center and cloud businesses. Our efforts to assist
customers in adopting public cloud offerings have yielded positive
results. We are also seeing increasing regulatory pressure on some
of our largest customers, which is resulting in more balance
between public and private cloud requirements.
The product order backlog at 30 June 2023 was GBP303.4 million
of committed outstanding purchase orders placed with our technology
vendors against non-cancellable sales orders received from our
customers for delivery within 12 months, on a gross invoiced income
basis - a 19.7 per cent increase since 30 June 2022 (GBP253.5
million), and an 8.3 per cent decrease since 31 December 2022
(GBP331.0 million). The UK has seen several large customers place
significant hardware orders leading to a recent overall increase in
the product order backlog, against the trend seen within the rest
of the Group.
Services performance
In Managed Services, customers are increasingly looking to
achieve cost and efficiency benefits by outsourcing elements of
their IT infrastructure. We have concluded a large number of
contract renewals already this year and have some exciting new
business campaigns coming to an imminent conclusion. Services
volumes and margins increased as the first half of the year
progressed and with an improving pipeline of opportunities, we are
confident this trajectory will continue.
While revenue in Managed Services has remained relatively
stable, we have observed an uptick in logistics-based and
maintenance services, indicating potential growth avenues in these
areas. This is in addition to the continued interest in our
established global end-user services, where we are highly confident
in our delivery capabilities and growth opportunities with our
network Managed Services.
In 2021, we secured a significant Managed Services contract with
a large retail bank, encompassing a Device as a Service (DaaS)
model with worldwide support coverage and integrated Technology
Sourcing. We continue to transition some of the customer's key
countries to the new model at the end of H1 2023, with further
countries set to follow in the second half of 2023. This successful
implementation showcases our expertise and strengthens our position
as a reliable partner for complex and globally-scaled projects. In
addition to this contract, we have actively engaged in a multitude
of opportunities related to DaaS. Customers are showing interest in
optimising their end-user compute into a single service offering,
and with a strong international product and large complementary
services business, we are well positioned to meet their needs.
The lower demand in Technology Sourcing has had a ripple effect
in Professional Services, where our teams roll out technology
solutions sold to our customers. However, we have witnessed
significant growth in supporting customers' adoption of public
cloud and expanding and securing their networks. Our Professional
Services have become increasingly sought after in this area, as we
help our customers navigate through this complexity.
The pipeline for Professional Services remains robust for the
next 12 months. This strong pipeline instils confidence in our
ability to capitalise on growth opportunities and drive positive
outcomes for our customers.
There has been a slight decline in the number of large
outcome-based commercial projects executed in the period. The
reduction in Professional Services volumes against a fixed resource
base, and the cost inflation seen across both Services businesses
has seen Services margins decrease by 117 basis points when
compared to the prior period.
As we move into the second half of 2023 and beyond, we remain
focused on leveraging growth opportunities and optimising our
service offerings. While challenges persist, our unwavering
commitment to excellence and customer satisfaction positions us for
continued positive momentum in the market.
Germany
Financial performance
We closed the first half successfully, with very good revenue
and profit growth driven by an exceptionally strong Technology
Sourcing business. Professional Services achieved good double-digit
growth and a strong pipeline. There are some challenges, especially
in Managed Services, which impacted the results and will continue
in the second half of the year.
Despite the uncertain economic and political situation, with
high inflation and significant cost increases, especially in
personnel and energy costs, the economy is proving stable and
robust. We are benefiting from our strong focus on enterprise and
public sector business. We expanded our customer base and
significantly broadened our portfolio with existing customers. Our
investments in expanding the sales force and broadening the
technology and skills base are showing clear benefits and creating
the basis for further sustained growth.
Supply bottlenecks and interrupted logistics chains had a very
negative impact on business in 2022 but will only have a minor
effect in 2023. Our investments in our logistics and warehouse
capacities have proven beneficial.
We achieved some good successes on the customer side, which show
our portfolio breadth and our ability to help our customers with
their IT challenges. For example, we concluded the largest Cisco
Whole Portfolio Agreement contract in Europe, with a major
international industrial technology group headquartered in Germany.
This contract covers the full Cisco software portfolio, which we
will implement and support for at least five years. We will
continue to equip, modernise, and operate IT infrastructure of all
schools for a large southern German state capital in the coming
years. This is an important success in our initiative to develop
the German education market and to improve schools' technical
equipment, with modern and innovative infrastructure and solutions.
In the transport sector, we already configure and deliver more than
100,000 mobiles per year for the largest German transport company,
and we will now provide a large part of its personal computer
client infrastructure from next year onwards.
In addition, we significantly expanded our app development and
cloud management business. The investment in our near-shore
location in Cluj, Romania, gives us a perfect combination of skills
in state-of-the-art development technologies in Cluj and solution
designers and project managers from our German business, to support
the many customers cannot, or do not want to, outsource these tasks
off-shore.
We are looking positively to the second half of the year. Even
though the challenges in Managed Services will continue, our
current forecast shows strong top-line growth for the year as a
whole. We will also show good growth in earnings, despite the
significant increase in our cost base, which is mainly due to
inflation.
The ongoing investments, especially in sales but also in
technological skills, create a good basis for continued growth
beyond 2023.
Margins in Germany increased by 72 basis points, with
adjusted(1) gross profit increasing from 17.7 per cent to 18.4 per
cent of revenues, as explained below.
Results H 1 2023 H 1 2022 Percentage change H 1 2023 H 1 2022 Percentage change
GBPm GBPm EURm EURm
Professional Services revenue 181.8 149.0 22.0% 207.4 177.0 17.2%
Managed Services revenue 199.1 179.0 11.2% 226.9 212.5 6.8%
Services Revenue 380.9 328.0 16.1% 434.3 389.5 11.5%
Technology Sourcing gross invoiced
income 1,042.5 668.1 56.0% 1,188.8 793.7 49.8%
Total gross invoiced income 1,423.4 996.1 42.9% 1,623.1 1,183.2 37.2%
Professional Services revenue 181.8 149.0 22.0% 207.4 177.0 17.2%
Managed Services revenue 199.1 179.0 11.2% 226.9 212.5 6.8%
Services revenue 380.9 328.0 16.1% 434.3 389.5 11.5%
Technology Sourcing revenue 592.8 464.1 27.7% 676.5 551.5 22.7%
Total revenue 973.7 792.1 22.9% 1,110.8 941.0 18.0%
Gross profit 179.1 140.0 27.9% 204.3 166.3 22.9%
Adjusted(1) administrative expenses (105.8) (84.6) 25.1% (120.7) (100.6) 20.0%
Adjusted(1) operating profit 73.3 55.4 32.3% 83.6 65.7 27.2%
Technology Sourcing performance
The first-half result was outstanding, with growth very much
above previous periods, and ahead of the market. Growth was driven
by networking and security but data center and workplace also
showed good growth.
It was important not to sacrifice margin for revenue growth and
we are more than satisfied with the result. Despite the significant
increase in the share of software in total Technology Sourcing
revenue, the percentage margin was stable, at a good level.
In addition to the increasingly strong software business, we are
seeing greater customer demand to bundle procurements in bigger
framework contracts. This particularly applies to the global
requirements of large international customers.
Another trend is to combine innovative and flexible financing
solutions with asset management, deployment and maintenance
services. The DaaS solution, developed by Computacenter based on
ServiceNow and an Asset Intelligence Hub, is exactly the right
solution for this. The first international implementation of this
solution went live for a large German financial institution at the
end of the first half.
Technology Sourcing margins, based on gross profit as a
percentage of revenue, were very strong increasing by 243 basis
points over the period.
The product order backlog at 30 June 2023 was EUR168.7 million
of committed outstanding purchase orders placed with our technology
vendors against non-cancellable sales orders received from our
customers for delivery within 12 months, on a gross invoiced income
basis - a 63.0 per cent decrease since 30 June 2022 (EUR456.4
million), and a 53.5 per cent decrease since 31 December 2022
(EUR362.9 million).
Services performance
While Professional Services showed good revenue and profit
growth, Managed Services faced some challenges. Although we
achieved slight turnover growth in Managed Services, the cost base
increased significantly. Most of this was inflation-related, with a
significant rise in personnel expenses in particular. In addition,
there were one-off costs for onboarding new service contracts won
in 2022 and technology refreshes of existing contracts that were up
for renewal. Not all of these cost increases could be passed on to
customers or offset by cost-reducing measures.
The Professional Services business saw continuing strong demand
for support, engineering and consultancy services from public
sector customers. We are excellently positioned here, with a broad
base of framework agreements and a very good customer structure,
primarily with federal and state authorities and larger local
country departments and cities. This demand will be robust in the
coming years and will remain our focus. However, we also see a
continuing need for project support and skills in our enterprise
customer segment, especially in networking and security, data
center consolidation and cloud management, as well as for expanding
modern workplace infrastructures. Our application development
business, that we have grown organically, continues to be in high
demand with our customers.
The picture in Managed Services is complex, with both challenges
and opportunities. One challenge is to mitigate the increased cost
base, either by passing on the higher costs to our customers or by
achieving additional savings, for example by using more automation.
An initiative we launched in 2022 is showing good success here. The
second challenge is to successfully conclude the current
transformation projects and transfer the services to ongoing
operations.
The opportunities come from an increasing number of our
international customers looking for IT infrastructure service
providers who can deliver these services themselves, with a high
proportion of their own input, own toolings and interfaces like we
have in our new DaaS offering. In workplace and networking we have
positioned ourselves precisely for this and see clear opportunities
to differentiate ourselves from the competition.
Overall, we are not completely satisfied with the results in
Services with margins falling 154 basis points in the period.
However, the very different pictures in the two services lines also
show that we can compensate for weaknesses in one area with
strengths in the other. This is a great advantage of
Computacenter's strategic orientation, with its three service lines
of Technology Sourcing, Professional Services and Managed
Services.
France
Financial performance
Building on a very strong 2022 year-end performance, our French
business continued its excellent momentum into 2023 and delivered
good growth over the same period last year. As expected, this
progress was mainly driven by our Technology Sourcing business,
with higher volumes and improved contribution due to a better mix,
with more enterprise technology sales. We were also pleased to add
a new multi-year networking public framework contract to our
portfolio.
Simultaneously, we have developed our competencies in software
licensing solutions. We made good progress in 2022 leveraging these
new capabilities and this has helped us deliver some significant
new wins in this area in H1 2023. We are confident this trend will
continue in the remainder of 2023, as the majority of our
technology vendors continue to move their businesses to software
and subscription services.
Towards the end of 2020, we acquired BT's domestic services
operations in France and renamed the subsidiary Computacenter NS
(CCNS). CCNS has significantly improved our capabilities around
networking and security in France and brought our capability much
more in line with other Computacenter territories. Since 1 January
2023, all CCNS operations teams have been fully integrated within
our Computacenter operating model. During the period, we drove the
merger project consultation process in conjunction with the two
Works Councils, leading to a single company in France.
Compared to the previous year, our operating profit improved in
the first half. Nevertheless, we are still working to increase this
further, mainly through higher resources utilisation across Managed
Services departments. At the end of the first half, we appointed a
new Managed Services Sales Director to increase the focus on
Managed Services selling.
The French market continues to be affected by inflation,
although this is now at a lower rate. We have been working with
customers to apply new rates where appropriate and our contracts
permit it. Customers are still strongly investing in IT but
decision making is taking longer and this has impacted sales
cycles. We remain very focused on our core target market and
driving business with new customers, to increase our share of the
market and improve our visibility.
Margins in France increased by 62 basis points, with adjusted(1)
gross profit increasing from 12.0 per cent to 12.6 per cent of
revenues.
Results H1 2023 H1 2022 Percentage change H1 2023 H1 2022 Percentage change
GBPm GBPm EURm EURm
Professional Services revenue 25.5 19.1 33.5% 29.1 22.8 27.6%
Managed Services revenue 67.9 66.4 2.3% 77.4 78.9 (1.9%)
Services revenue 93.4 85.5 9.2% 106.5 101.7 4.7%
Technology Sourcing gross invoiced income 337.7 255.6 32.1% 385.6 303.0 27.3%
Total gross invoiced income 431.1 341.1 26.4% 492.1 404.7 21.6%
Professional Services revenue 25.5 19.1 33.5% 29.1 22.8 27.6%
Managed Services revenue 67.9 66.4 2.3% 77.4 78.9 (1.9%)
Services revenue 93.4 85.5 9.2% 106.5 101.7 4.7%
Technology Sourcing revenue 227.9 183.1 24.5% 260.2 217.1 19.9%
Total revenue 321.3 268.6 19.6% 366.7 318.8 15.0%
Gross profit 40.4 32.1 25.9% 46.2 37.9 21.9%
Adjusted(1) administrative expenses (37.6) (31.6) 19.0% (43.0) (37.4) 15.0%
Adjusted(1) operating profit 2.8 0.5 460.0% 3.2 0.5 540.0%
Technology Sourcing performance
Technology Sourcing performance was very strong in the first
half of the year, across both our public and private sector
businesses. The public sector remains the biggest contributor and
this is mainly related to multi-year framework agreements. We are
pleased to have increased our presence in this area and were
successful in winning new software and networking contracts in the
period, which will continue to drive growth.
The first half saw increased revenue in the networking business,
due to the improved availability of products and high product order
backlog in this category. The mix of products we are now selling is
less reliant on workplace technology and more evenly balanced with
enterprise technology (data center and network), resulting in
improved margins.
Our product order backlog was stable in H1 and is running at a
slightly lower level than the 2022 monthly average, due to the
better availability of products, although it is still 35 per cent
higher than the 2021 average. The backlog has been bolstered by
strong software growth, mainly in the public sector.
We continue to invest in our technical skills in France and are
committed to maintaining the highest levels of accreditations for
our priority technology vendors. This is true for our portfolio and
specifically in the networking area.
Our Integration Center in Gonesse was busy in the first half of
the year, with a slight decrease in utilisation compared to H2 last
year. Our spike in the storage of customer equipment is now more
controlled, with inventory levels being managed through weekly
analysis and regular challenge, to ensure we are meeting customer
needs but not holding stock unnecessarily.
This resulted in our Technology Sourcing margins, based on gross
profit as a percentage of revenue, increasing by 140 basis points
during H1 2023.
The product order backlog at 30 June 2023 was EUR68.8 million of
committed outstanding purchase orders placed with our technology
vendors against non-cancellable sales orders received from our
customers for delivery within 12 months, on a gross invoiced income
basis - a 60.3 per cent decrease since 30 June 2022 (EUR173.1
million), and a 48.0 per cent decrease since 31 December 2022
(EUR132.2 million).
Services performance
Our Services performance was broadly in line with our
expectation, with growth in Professional Services and a slight
decrease in Managed Services, resulting in stable volumes overall.
Services margins decrease by 204 basis points.
Growth in Professional Services was mainly correlated with large
outcome-based projects in the public sector. Maintaining this level
of growth is directly related to having the right skills available
at the right time and in the right place, which is still a
challenge due to the low availability in some areas, despite the
acquisition of CCNS. Recruitment is a key success factor for future
growth in Professional Services and a new campaign around
Computacenter as an employer is planned for launch in H2.
In Managed Services, we saw a slight decrease in volume and
performance. Managed Services contracts are predominantly in the
private sector rather than the public sector, with a high level of
price competition for end user services. Contracts won in 2022
around networking maintenance are delivering the planned profit but
we need to win more contracts that utilise our infrastructure to
improve our margins. Despite the loss of a high revenue but
low-margin contract, H1 was good for contract renewals through
proactive discussions with our customers, and in many instances, we
have been able to expand the scope of these contracts.
We have initiated a refreshed plan, with the support of wider
Group resources, to ensure contract base growth in 2024 and 2025,
as we know that sales cycles for our Managed Services can be very
long. The finalisation of the Group operating model around Managed
Services, the integration of CCNS on 1 January this year and the
merger will support our growth aspirations.
North America
Financial performance
North America's financial results for the period include revenue
of $102.8 million and adjusted(1) operating profit of $3.0 million
from Business IT Source (BITS), which we acquired on 1 July 2022.
The comparative figures for the first half of 2022 do not include
any results for BITS.
North America had a positive first half, finishing well against
both our target and the prior period. Excluding BITS, organic
revenue growth was 30.9 per cent in constant currency(2) . This
performance was driven by Technology Sourcing, with revenue in
Services up modestly.
During the period, we significantly simplified the way that the
North America business goes to market. We have reduced the number
of customer sectors we work in from thirteen to seven, to ensure
that we are targeting markets with appropriate sizes and that we
can support them effectively. In addition, we have consolidated the
senior leadership team beyond the sales area, to give us a more
streamlined and strategic approach to managing the business.
We continue to expand the number of salespeople to support our
growth. Towards the end of the period, we received signed offers
from all 13 finalists that participated in our early careers
programme. This approach is well established in our European
businesses and we are excited to introduce it to North America. The
13 finalists distinguished themselves throughout a rigorous process
that showcased sales skills, creativity and perseverance. We
received over 5,000 applications for the roles and we are delighted
to be welcoming significant new talent to Computacenter. At the
same time, we continue to add experienced sellers in markets such
as Texas, where there is abundant opportunity.
At the beginning of the year, we identified a number of
prospective customers that we consider to be strategic for us in
the long term. In the first half, we received orders from nearly 20
of these organisations and we expect them to become significant
customers for us in the future. We also moved the bottom 10 per
cent of revenue customers to highly effective Inside Sales teams,
which lowers our cost to serve without compromising customer
quality.
Margins in North America decreased by 106 basis points, with
adjusted(1) gross profit decreasing from 10.1 per cent to 9.0 per
cent of revenues. The acquisition of BITS did not significantly
impact the overall margin percentage.
We maintained tight cost control, with administrative costs
coming in below budget. The growth in Technology Sourcing has
resulted in higher commissions and we have also seen a shift
towards next-generation technologies in this business, which
results in greater initial selling costs. Pay awards to our
services and back-office people resulted in annualised growth in
salaries of approximately five per cent, higher than usual but
justified due to inflationary macroeconomic conditions.
We continue to focus heavily on operational improvements within
the North American business. We have broad transformational
programmes ongoing and also celebrate small '1 per cent'
improvements to our operations. Consolidation of our ERP and CRM
systems continue to be top priorities and will see major milestones
in the second half of 2023 and the first half of 2024. Meanwhile,
we launched a new Professional Services solutioning tool in June
that allows our business to more accurately and efficiently scope
projects. For sales support, we established regional hubs at
Computacenter facilities in Atlanta, Dallas and Irvine, to provide
same time zone support for our East, Central and West customers.
From a systems standpoint, we continued to invest in our SmartHub
Asset Intelligence portal and HyperScale Configuration Automation
Platform (HCAP), both of which offer unique value to our North
American customers.
Excluding BITS, North America's adjusted(1) operating profit was
up by 26.6 per cent to $33.3 million.
Results H1 2023 H1 2022 Percentage change H1 2023 H1 2022 Percentage change
GBPm GBPm $m $m
Professional Services revenue 55.7 53.1 4.9% 68.8 68.8 -
Managed Services revenue 14.6 13.2 10.6% 18.0 17.1 5.3%
Services revenue 70.3 66.3 6.0% 86.8 85.9 1.0%
Technology Sourcing gross invoiced income 1,805.6 1,277.9 41.3% 2,223.0 1,651.3 34.6%
Total gross invoiced income 1,875.9 1,344.2 39.6% 2,309.8 1,737.2 33.0%
Professional Services revenue 55.7 53.1 4.9% 68.8 68.8 -
Managed Services revenue 14.6 13.2 10.6% 18.0 17.1 5.3%
Services revenue 70.3 66.3 6.0% 86.8 85.9 1.0%
Technology Sourcing revenue 1,398.6 938.4 49.0% 1,720.4 1,215.8 41.5%
Total revenue 1,468.9 1,004.7 46.2% 1,807.2 1,301.7 38.8%
Gross profit 132.7 101.4 30.9% 163.7 131.6 24.4%
Adjusted(1) administrative expenses (103.4) (81.1) 27.5% (127.4) (105.3) 21.0%
Adjusted(1) operating profit 29.3 20.3 44.3% 36.3 26.3 38.0%
Technology Sourcing performance
Excluding BITS, Technology Sourcing gross invoiced income grew
by 28.0 per cent on an organic basis. This was driven significantly
by one hyperscale customer, although numerous other customers also
delivered good growth. We have continued to increase the number of
technology vendors we work with, which helps us to support
customers with their transformation programmes but also increases
our cost base.
Driven by hyperscale customers, the higher level of
drop-shipping revenue we saw in 2022 has continued during H1 2023,
where products are delivered directly from the vendor rather than
passing through our North American Integration Centers. This gives
us fewer opportunities to add value for the customer and results in
lower utilisation of our facilities and personnel, leading to lower
cost absorption. We have a pipeline of opportunities to drive
volume through our Integration Centers and we continue to monitor
the situation closely.
BITS delivered a slow performance in the period, as a large
customer deferred spending until new technology is available in the
second half of the year. We therefore anticipate a stronger finish
to 2023 for this business, as the new technology set becomes
generally available.
Our gross margin in Technology Sourcing was largely unchanged,
reflecting underlying margin improvement across most of the
business, offset by the hyperscale customer growth noted above,
which commands a lower margin. We expect our margin in the second
half to improve, with our performance being less dominated by the
hyperscale customer. BITS has a similar margin profile to the rest
of the business and did not significantly affect the overall margin
in Technology Sourcing.
The product order backlog at 30 June 2023 was $1,269.7 million
of committed outstanding purchase orders placed with our technology
vendors against non-cancellable sales orders received from our
customers for delivery within 12 months, on a gross invoiced income
basis - a 52.5 per cent decrease since 30 June 2022 ($2,672.5
million), and a 50.4 per cent decrease since 31 December 2022
($2,557.4 million).
This was due to conditions in the supply chain continuing to
ease, reducing the need for customers to place orders significantly
ahead of time to guarantee delivery. In recent months, we have seen
the volume of orders we receive being broadly in line with the
volume of product we have supplied to customers.
Services performance
North American Services revenue was somewhat disappointing, with
only modest growth in the period. This gives us available capacity
and we have an improving pipeline of opportunities, making us
confident of growth in the medium term. BITS does not have a
services business and therefore had no effect on our Services
results in the first half.
In Professional Services, we were held back by one large account
where we have taken action to focus our sales on services with
appropriate returns. Margins were lower, although the underlying
margin excluding this customer was up. This is encouraging for us,
after absorbing increased employee costs in the period.
The Managed Services business continues to execute against our
slow and steady growth plan. During the first half of the year, we
went live with a large new customer in the United States and won
two new contracts in Canada, including one to provide helpdesk,
asset and software license management services to a healthcare
client. We also secured a contract to provide a multi-year storage
and backup service for a large government entity, which will allow
us to sell to a broad range of public sector and non-profit
organisations. Whilst margins in the Managed Services business were
robust in the period, overall Services margins were down by 316
basis points.
International
The International Segment comprises a number of trading
entities, near-shore and off-shore Service Center locations and
countries in which we have other support operations.
The trading entities include Computacenter Switzerland,
Computacenter Belgium and Computacenter Netherlands. In addition to
their operational delivery capabilities, these entities have
in-country sales organisations, which enable us to engage with
local customers. The newly acquired Emerge 360 Japan k.k (Emerge)
business has joined the International Segment, with Services
delivery locations in Japan, Australia, Singapore and Hong
Kong.
These trading entities are joined in the Segment by the
off-shore Group Service Center entities in Spain, Malaysia, India,
South Africa, Hungary, Poland, China and Mexico, and the
Professional Services Delivery Center in Romania, which have
limited external revenues as they charge the relevant Group
subsidiaries for the services provided. Further delivery locations
have been stood up in the Philippines and Brazil during the
period.
Financial performance
Our performance varied in each of our International entities.
Our Belgian business delivered a strong first half of growth
compared to H1 2022. Performance improved primarily due to
excellent project wins in the infrastructure product line and
Managed Services, while our continued investments in our solutions
business are delivering growth and additional value for our
customers. The quality of our offering in the Belgian market was
again reflected in the 2023 Whitelane Survey, which awarded us
number one positions in both General Satisfaction and End User
Computing.
We continued to see excellent growth in our Dutch business in
the first half of 2023. We are increasingly focused on the biggest
private and public sector customers in the Netherlands, selling to
them locally and increasingly using our Group Technology Sourcing
and Services capabilities to deliver internationally. This has been
working well and we are making progress with our new business
customer list, which is reflected in our results for the first half
of the year.
Our Swiss operations had a challenging start to the year, as the
scope of our main Services contracts were temporarily changed as
customers reviewed their hybrid working approach after the
pandemic. In line with the strategies of the other international
entities, we have positioned our Group capabilities towards
international customers with Swiss headquarters. We celebrated an
important workplace-based International procurement and support
win, and while we are only at the beginning of the contract
implementation, we are confident it will deliver stable and ongoing
contribution in the future.
Overall, margins in the International Segment were broadly flat
with a slight decrease of 13 basis points, with adjusted(1) gross
profit decreasing from 19.6 per cent to 19.5 per cent of
revenues.
Results H1 2023 H1 2022 Percentage change H1 2022 Percentage change
GBPm GBPm GBPm
constant
currency(2)
Professional Services revenue 5.1 4.7 8.5% 4.9 4.1%
Managed Services revenue 46.6 36.1 29.1% 37.7 23.6%
Services revenue 51.7 40.8 26.7% 42.6 21.4%
Technology Sourcing gross invoiced income 104.9 80.0 31.1% 83.5 25.6%
Total gross invoiced income 156.6 120.8 29.6% 126.1 24.2%
Professional Services revenue 5.1 4.7 8.5% 4.9 4.1%
Managed Services revenue 46.6 36.1 29.1% 37.7 23.6%
Services revenue 51.7 40.8 26.7% 42.6 21.4%
Technology Sourcing revenue 83.2 66.7 24.7% 69.7 19.4%
Total revenue 134.9 107.5 25.5% 112.3 20.1%
Gross profit 26.3 21.1 24.6% 21.4 22.9%
Adjusted(1) administrative expenses (19.6) (16.5) 18.8% (17.1) 14.6%
Adjusted(1) operating profit 6.7 4.6 45.7% 4.3 55.8%
Technology Sourcing performance
In Belgium, Technology Sourcing was weak in the workplace area,
due to demand being pulled forward post-Covid-19 and customers
reducing spend. This was offset by significant growth in the
infrastructure product line, primarily networking. We have a
differentiated offering in this area which is resonating well with
customers. We have invested in skills and resources to help our
customers maximise their investments and to support the adoption of
technology over the lifecycle of new long-term software
agreements.
Our business in the Netherlands is highly dependent on a small
number of large customer contracts. As these contracts have
matured, we have seen profitability improve over time. We have
increased our focus on software and we are already seeing new wins.
These are typically at lower initial margins and we will monitor
this closely moving forwards. We are currently in a competitive
process with one of our largest public sector customers and the
successful renewal of this contract is important to maintain our
growth trajectory.
In our Swiss business, we achieved good growth by securing and
extending key contracts, winning significant public sector clients,
boosting our manufacturer relationships and up-selling
opportunities. We also made strong headway in the education sector,
seeing a 40 per cent year-on-year revenue increase.
The Technology Sourcing pipeline in all countries remains strong
and despite elongated customer decision-making cycles, we see the
continued reliance on and investment in IT as a strong tail wind
for the remainder of the year.
The product order backlog at 30 June 2023 was GBP7.0 million of
committed outstanding purchase orders placed with our technology
vendors against non-cancellable sales orders received from our
customers for delivery within 12 months, on a gross invoiced income
basis - a 76.2 per cent decrease since 30 June 2022 (GBP29.4
million), and a 70.5 per cent decrease since 31 December 2022
(GBP23.7 million), both in constant currency(2) .
Technology Sourcing margins have increased by 26 basis points,
based on gross profit as a percentage of revenue.
Services performance
We have a small number of very important Managed Services
customers that are managed from our International Segment and
delivered using our Group Managed Services capability. We
successfully renewed our key contracts in the first half of the
year, including our longest-standing customer, which has now been
with us for over 25 years. This gives us stability to focus on
continuing to deliver a fantastic quality of service as the year
progresses.
Our Swiss business has seen a significant decline in volume in
its two largest Services contracts. The business has therefore
focused throughout the year on reviewing the size and structure of
our delivery teams. We now have a more flexible and optimised
delivery model to meet future needs and we are pleased that we were
able to start some projects in the public and corporate sectors. We
have also mitigated the volume decline by strengthening
Computacenter Group cooperation, targeting international clients in
Switzerland, and improving our services. In addition, we have made
good progress in completing our services and solutions portfolio,
increasing our sales capacity, optimising various processes through
ServiceNow and acquiring important certifications to win new
customers, such as the ISO 27001 information security
certification.
Overall, Services margins decreased by 98 basis points when
compared to the prior period.
We have a small number of prioritised Services deals that are
progressing well through the campaign cycles and we remain
committed to adding a new material Services contract by the end of
the year.
In summary, we believe we have a strong opportunity for growth,
particularly by increasing our presence in the public sector, and
will be focused on executing our plans in the second half of the
year.
Group Finance Director's review
During the first half of 2023, the Group generated continued
strong revenue growth in both Technology Sourcing and Services.
Growth across all Segments and services line was generally
excellent, apart from the United Kingdom where there was a
softening of Services volumes.
Margins have remained robustly ahead of forecasts as we continue
to minimise the impact of inflationary cost increases.
As cash continued to grow, primarily due to the unwind of record
high inventory positions seen in 2022, we have restructured the
Company's equity accounts to create more distributable reserves in
anticipation of a cash return.
We remain extremely pleased by the scale of our growth in North
America which, after removing the impact of the BITS acquisition,
still saw 28.0 per cent growth in Technology Sourcing gross
invoiced income during the period on a constant currency basis(2) .
Overall Technology Sourcing gross invoiced income is now nearly 380
per cent higher in H1 2023 than H1 2019 in North America. We
anticipate all of our key North American subsidiaries will be on
our core ERP platform by the end of 2024, leading to greater
process efficiency and operational leverage.
The French business continued to strengthen, particularly in
Technology Sourcing, led by a product mix that continued to include
higher proportions of data center and networking products, as
opposed to workplace product, as the business continues to evolve
to be as differentiated as our other key geographies.
Reconciliation to ad justed(1) measures for the period ended 30
June 2023
Adjustments
Reported
Interim Principal element on Amortisation Exceptionals Adjusted(1)
results agency contracts of acquired intangibles and others Interim results
GBPm GBPm GBPm GBPm GBPm
Revenue 3,584.9 1,573.3 - - 5,158.2
Cost of sales (3,079.2) (1,573.3) - - (4,652.5)
Gross profit 505.7 - - - 505.7
Administrative expenses (392.1) - 5.5 - (386.6)
Impairment loss on trade
receivables and
contract assets (0.6) - - - (0.6)
Other income related to
acquisition of
subsidiary 5.3 - - (5.3) -
Gain related to
acquisition of
subsidiary 3.2 - - (3.2) -
Operating profit 121.5 - 5.5 (8.5) 118.5
Finance income 6.6 - - - 6.6
Finance costs (5.3) - - 2.0 (3.3)
Profit before tax 122.8 - 5.5 (6.5) 121.8
Income tax expense (33.4) - (2.4) - (35.8)
Profit for the period 89.4 - 3.1 (6.5) 86.0
Reconciliation to ad justed(1) measures for the period ended 30
June 2022
Adjustments
Reported
Interim Principal element on Amortisation Exceptionals Adjusted(1)
results agency contracts of acquired intangibles and others Interim results
GBPm GBPm GBPm GBPm GBPm
Revenue 2,826.7 1,145.2 - - 3,971.9
Cost of sales (2,401.8) (1,145.2) - - (3,547.0)
Gross profit 424.9 - - - 424.9
Administrative expenses (315.3) - 4.1 - (311.2)
Impairment loss on trade
receivables and
contract assets 0.5 - - - 0.5
Operating profit 110.1 - 4.1 - 114.2
Finance income 1.0 - - - 1.0
Finance costs (3.3) - - - (3.3)
Profit before tax 107.8 - 4.1 - 111.9
Income tax expense (30.0) - (1.2) - (31.2)
Profit for the period 77.8 - 2.9 - 80.7
Profit before tax
The Group's profit before tax for the period increased by 13.9
per cent to GBP122.8 million (H1 2022: GBP107.8 million).
Adjusted(1) profit before tax increased by 8.8 per cent to GBP121.8
million (H1 2022: GBP111.9 million) and by 6.4 per cent in constant
currency(2) .
The difference between profit before tax and adjusted(1) profit
before tax relates to the Group's net income of GBP1.0 million (H1
2022: net costs of GBP4.1 million) from exceptional and other
adjusting items, which relates wholly to events associated with the
acquisitions of Pivot and BITS and the amortisation of acquired
intangibles as a result of these and other North American
acquisitions.
Net finance income/charge
Net finance income in the year amounted to GBP1.3 million (H1
2022: GBP2.3 million charge). The main items included within the
net charge for the period were GBP2.3 million of interest charged
on lease liabilities recognised under IFRS 16 (H1 2022: GBP2.5
million) and exceptional interest costs of GBP2.0 million relating
to the unwinding of the discount on the contingent consideration
for the purchase of BITS, which was excluded on an adjusted(1)
basis (H1 2022: nil). Outside of the specific items above, net
finance income of GBP5.6 million was recorded (H1 2022: GBP0.2
million).
On an adjusted(1) basis, the net finance income was GBP3.3
million during the period (H1 2022: GBP2.3 million charge).
Taxation
The tax charge was GBP33.4 million (H1 2022: GBP30.0 million) on
profit before tax of GBP122.8 million (H1 2022: GBP107.8 million).
This represented a tax rate of 27.2 per cent (H1 2022: 27.8 per
cent).
The tax credit related to the amortisation of acquired
intangibles during the period was GBP2.4 million (H1 2022: GBP1.2
million). The GBP5.5 million of amortisation of intangible assets
was almost entirely a result of the recent North American
acquisitions (H1 2022: GBP4.1 million). As the amortisation is
recognised outside of our adjusted(1) profitability, the tax
benefit on the amortisation is also reported outside of our
adjusted(1) tax charge.
The adjusted(1) tax charge for the period was GBP35.8 million
(H1 2022: GBP31.2 million), on an adjusted(1) profit before tax for
the period of GBP121.8 million (H1 2022: GBP111.9 million). The
effective tax rate (ETR) for the period was therefore 29.4 per cent
(H1 2022: 27.9 per cent) on an adjusted(1) basis.
The prior period result included the recognition of a EUR2.4
million deferred tax asset representing the probable benefit of
future utilisation of losses within the French business due to a
forecast improvement in the short- to medium-term profitability in
this geography. Combined with an additional recognition of a
deferred tax asset for the future utilisation of carry forward
losses in the Netherlands, this resulted in an overall one-time
credit to the tax expense of GBP3.1 million in H1 2022. These
one-off tax items substantially reduced the tax charge, and
therefore the adjusted(1) ETR, for the prior period and prior year
as a whole.
Excluding the recognition of the GBP3.1 million tax credit, the
prior-period adjusted(1) ETR would have been 30.7 per cent as
compared on a like-for-like basis to the current period adjusted(1)
ETR of 29.4 per cent.
Overall, the adjusted(1) ETR on this like-for-like basis,
excluding the one-off impacts, is continuing to trend upwards due
to an increasing reweighting of the geographic split of adjusted(1)
profit before tax away from the United Kingdom to Germany and the
United States, where tax rates are higher. Further, a substantively
enacted tax increase has taken effect in the United Kingdom from 1
April 2023, with a rise from 19 per cent to 25 per cent.
The adjusted(1) ETR is therefore slightly above the full-year
range that we indicated in the presentation that accompanied our
2022 full-year results, which showed an expected ETR for 2023 of 27
to 29 per cent.
We expect that the full year ETR in 2023 will be subject to
increasing upwards pressure, due to the changing mix in where
profits are earned geographically to where tax rates are higher, as
noted above, and also as governments across our primary
jurisdictions come under fiscal and political pressure to increase
corporation tax rates.
The table below reconciles the tax charge to the adjusted(1) tax
charge for the periods ended 30 June 2023 and 30 June 2022 and the
year ended 31 December 2022.
H1 2023 H1 2022 Year 2022
GBPm GBPm GBPm
Tax charge 33.4 30.0 64.8
Adjustments to exclude:
Tax on amortisation of acquired intangibles 2.4 1.2 2.3
Tax on exceptional items - - 0.2
Adjusted 1 tax charge 35.8 31.2 67.3
Effective tax rate 27.2% 27.8% 26.0%
Adjusted 1 effective tax rate 29.4% 27.9% 25.5%
Profit for the period
The profit for the period increased by 14.9 per cent to GBP89.4
million (H1 2022: GBP77.8 million). The adjusted(1) profit for the
period increased by 6.6 per cent to GBP86.0 million (H1 2022:
GBP80.7 million) and by 3.2 per cent in constant currency(2) .
Exceptional and other adjusting items
The net gain from exceptional and other adjusting items in the
period was GBP3.4 million (H1 2022: loss of GBP2.9 million).
Excluding the tax items noted above, which resulted in a gain of
GBP2.4 million (H1 2022: gain of GBP1.2 million), the profit before
tax impact was a net gain from exceptional and other adjusting
items of GBP1.0 million (H1 2022: loss of GBP4.1 million).
A $9.3 million (GBP7.4 million) settlement was received on 8 May
2023 from the Washington State Department of Revenue. The
settlement related to litigation contesting a historic,
pre-acquisition, sales tax assessment that was paid by antecedent
companies relating to the acquired Pivot group of companies. Of
this amount, $6.7 million (GBP5.3 million) has been recognised as
other income relating to acquisition of a subsidiary for the
refunded sales tax amount. Further amounts of $1.6 million (GBP1.3
million) and $1.0 million (GBP0.8 million) have been credited to
adjusted(1) interest income, for the refund of statutory
overpayment interest receivable on the original payment, and
adjusted(1) administrative expenses, to reimburse legal expenses
incurred since acquisition, respectively. The element related to
the refunded sales tax amount is non-operational in nature,
material in size and unlikely to recur and has therefore been
classified as exceptional.
At acquisition, contingent consideration was agreed which
required the Group to pay former owners of Business IT Source
Holdings, Inc. (BITS), two earn-out payments based on BITS's 2022
EBITDA & 2023 EBITDA and indebtedness. During the period and in
accordance with the share purchase agreement, the Group made its
first earn-out payment amounting to GBP17.4 million ($21.2 million)
which was broadly in line with the estimate made as at 31 December
2022.
On 30 June 2023, a renegotiated agreement was signed with the
former owners following which, the second earn-out is now based on
BITS's 2023 EBIDTA, H1 2024 EBIDTA, and indebtedness over these
periods. Having considered a range of possible earn out scenarios,
Management has determined that a gross liability of $26.0 million
under the revised agreement should be recorded as contingent
consideration of $24.2 million on a discounted basis. The impact of
changes to the payment structures under the renegotiated agreement
has resulted in a release during the period of GBP3.2 million which
has been recognised as an exceptional item.
A further GBP2.0 million relating to the unwinding of the
discount on the contingent consideration for the purchase of BITS
has been removed from the adjusted(1) net finance expense and
classified as exceptional interest costs.
There were no exceptional items in H1 2022.
We have continued to exclude, as an 'other adjusting item', the
amortisation of acquired intangible assets in calculating our
adjusted(1) results. Amortisation of intangible assets is non-cash,
does not relate to the operational performance of the business, and
is significantly affected by the timing and size of our
acquisitions, which distorts the understanding of our Group and
Segmental operating results.
The amortisation of acquired intangible assets was GBP5.5
million during the period (H1 2022: GBP4.1 million), primarily
relating to the amortisation of the intangibles acquired as part of
the North American acquisitions.
Earnings per share
Diluted EPS increased by 13.7 per cent to 76.5 pence per share
(H1 2022: 67.3 pence per share). Adjusted(1) diluted EPS increased
by 5.3 per cent to 73.5 pence per share (H1 2022: 69.8 pence per
share).
H1 2023 H1 2022 Year 2022
Basic weighted average number of shares (excluding own shares held) (m) 113.4 112.9 112.8
Effect of dilution:
Share options 1.3 1.8 2.1
Diluted weighted average number of shares 114.7 114.7 114.9
Profit attributable to equity holders of the Parent (GBPm) 87.7 77.2 182.8
Basic earnings per share (pence) 77.3 68.4 162.1
Diluted earnings per share (pence) 76.5 67.3 159.1
Adjusted 1 profit attributable to equity holders of the Parent (GBPm) 84.3 80.1 195.0
Adjusted1 basic earnings per share (pence) 74.3 70.9 172.9
Adjusted1 diluted earnings per share (pence) 73.5 69.8 169.7
Dividend
The Board recognises the importance of dividends to shareholders
and the Group prides itself on a long track record of paying
dividends and other special one-off cash returns.
Computacenter's approach to capital management is to ensure that
the Group has a robust capital base and maintains a strong credit
rating, whilst aiming to maximise shareholder value. The Group
remains highly cash generative and adjusted net funds(3) continues
to increase on the Consolidated Balance Sheet, which allowed
acquisitions such as FusionStorm in 2018, Pivot in 2020 and BITS in
2022, alongside a number of other small acquisitions.
If further funds are not required for investment within the
business, either for fixed assets, working capital support or
acquisitions, and the distributable reserves are available in the
Parent Company, we will aim to return the additional cash to
shareholders through one-off returns of value, as we did in
February 2018. As a business that has returned GBP919 million
through a combination of dividends and share buybacks since
flotation, with no additional investment required from shareholders
over that time, we are committed to managing the cash position for
shareholders and would look to return up to 10 per cent of the
market capitalisation of the Company as soon as cash reserves have
replenished to enable us to do so and, assuming no further
acquisitions, we would aim to do this by the end of 2024 at the
latest.
Dividends are paid from the standalone balance sheet of the
Parent Company and, as at 30 June 2023, the distributable reserves
were GBP378.2 million (30 June 2022: GBP143.7 million, 31 December
2022: GBP246.3 million).
The Board has consistently applied the Company's dividend
policy, which states that the interim dividend will be
approximately one third of the previous year's total dividend and
that the total dividend paid will result in a dividend cover of 2
to 2.5 times based on adjusted(1) diluted EPS. In 2022, the cover
was 2.5 times (2021: 2.5 times).
The Board is therefore pleased to announce an interim dividend
of 22.6 pence per share (H1 2022: 22.1 pence per share).
The interim dividend will be paid on Friday 27 October 2023. The
dividend record date is set as Friday 29 September 2023 and the
shares will be marked ex-dividend on Thursday 28 September
2023.
Central corporate costs
Certain expenses are not specifically allocated to individual
Segments because they are not directly attributable to any single
Segment. These include the costs of the Board itself, related
public company costs, Group Executive members not aligned to a
specific geographic trading entity and the cost of centrally funded
strategic initiatives that benefit the whole Group.
Accordingly, these expenses are disclosed as a separate column,
central corporate costs, within the Segmental note. These costs are
borne within the Computacenter (UK) Limited legal entity and have
been removed for Segmental reporting and performance analysis but
form part of the overall Group adjusted(1) administrative
expenses.
Total central corporate costs were significantly increased on
last year with a 64.7 per cent increase to GBP19.1 million (H1
2022: GBP11.6 million). Within this:
-- Board expenses, related public company costs and costs
associated with Group Executive members not aligned to a specific
geographic trading entity, increased to GBP5.9 million (H1 2022:
GBP4.2 million).
-- share-based payment charges associated with Group Executive
members as identified above, including the Group Executive
Directors, decreased from GBP1.9 million in H1 2022 to GBP1.3
million in H1 2023, due primarily to the decreased value of
Computacenter plc ordinary shares and the overall outlook for the
vesting of in-flight PSP awards; and
-- strategic corporate initiatives are designed to increase
capability and therefore competitive position, enhance productivity
or strengthen systems which underpin the Group. During the period
this spend was GBP11.9 million, up 116.4 per cent over H1 2022
(GBP5.5 million), in line with forecasts, as the Group increases
the pace of its investment in modern systems, toolsets and cyber
defences.
Cash flow
The Group delivered an operating cash inflow of GBP116.5 million
for the six months to 30 June 2023 (H1 2022: GBP8.1 million).
During the period, net operating cash outflows from working
capital, including inventories, trade and other receivables and
trade and other payables, were GBP3.4 million (H1 2022: GBP120.5
million).
Throughout 2022, a number of hyperscale customers continued to
place advance orders of product with delayed delivery, due to the
significant product shortages seen during the 18 months to 31
December 2022, to ensure continuity of supply. These significant
product shortages have now largely eased to standard operating
conditions. Additionally, inventory increased as we deliberately
invested in working capital by pre-ordering inventory, once a
committed purchase order had been received from the customer,
thereby using the strength of our balance sheet to support our
customers during product shortages. The sales teams continue to
work with customers to realign inventory support expectations, now
that the supply situation has materially improved across the
industry. As a result, customers have returned to normal purchasing
patterns and are no longer placing large advance orders of product
with the significant delayed delivery seen through 2022.
This has naturally led to both reduced levels of inventory and
product order backlogs. Inventory has, pleasingly, seen substantial
reductions in both Germany and North America, the two Segments
where we experienced the greatest inventory accumulation through
2022.
Further, a number of rack build orders took longer than expected
to complete during 2022, sometimes due to shortages of smaller
components required to complete the rack build, which increased
inventory. Again, this situation has largely eased and rack builds
are progressing as normal.
An additional Integration Center facility was added near to the
existing facility in Kerpen, which was running at record levels of
capacity and utilisation, and had provided additional inventory
storage space and processing capacity which has, in turn, increased
the throughput overall allowing orders that were backed up in the
Integration Center, waiting for additional components and confirmed
customer delivery dates before shipping to customers, to be cleared
down.
The implementation of additional inventory holding approval
controls in the final quarter of 2022, the continued focus from the
Group Technology Sourcing and Finance teams, and the
re-implementation of internal inventory holding charges across the
sales teams from April 2023 have also all contributed to this
improvement.
The Group had GBP315.4 million of inventory as at 30 June 2023,
a decrease of 21.0 per cent on the balance as at 30 June 2022 of
GBP399.3 million and a decrease of 24.5 per cent in the six months
since 31 December 2022 (GBP417.7 million). The closing balance was
materially lower than the high point of GBP532.6 million seen as at
30 September 2022 with a reduction of GBP217.2 million since that
time.
We expect that levels of inventory will continue to reduce,
albeit more slowly, towards historical operational norms during
second half of 2023.
Whilst inventory has materially improved, working capital cash
flows during the period are still impacted by the excellent growth
in revenue seen as the business continues to expand.
Capital expenditure in the year was GBP17.1 million (H1 2022:
GBP15.5 million) representing, primarily, investments in IT
equipment and software tools, to enable us to deliver improved
service to our customers.
The Group's Employee Benefit Trust (EBT) made market purchases
of the Company's ordinary shares of GBP26.1 million (H1 2022:
GBP34.4 million) to satisfy maturing PSP awards and Sharesave
schemes and to reprovision the EBT in advance of future maturities.
During the period the Company received savings from employees of
GBP3.2 million to purchase options within the Sharesave schemes (H1
2022: GBP1.6 million).
During the period the Group made two additional payments related
to previous acquisitions. The first was for BITS where, in
accordance with the share purchase agreement, the Group made its
first earn-out payment amounting to $21.2 million (GBP17.4 million)
which was broadly in line with the estimate made as at 31 December
2022. The second was on 7 June 2023, where the remaining 5.0 per
cent of the voting shares in R.D. Trading Limited (RDC) were
acquired for a cash consideration of GBP1.9 million. This completes
the acquisition of RDC which is a central component of our Circular
Services offering to customers where we repurpose or recycle
end-of-life IT equipment and a key element of our Sustainability
strategy.
The Group reduced loans and credit facilities during the period
by a net amount of GBP2.7 million (H1 2022: GBP1.3 million). We
made regular repayments towards the loan related to the
construction of the German headquarters in Kerpen and the customer
financing facility in Pivot, offset by the drawdown of a new
facility in India as detailed below.
The Group continued to manage its cash and working capital
positions appropriately, using standard mechanisms, to ensure that
cash levels remained within expectations throughout the year. From
time to time, some customers request credit terms longer than our
standard of 30-60 days. In certain instances, we will arrange for
the sale of the receivables on a true sale basis to a finance
institution on the customers' behalf. We would typically receive
funds on 45-day terms from the finance institution, which will then
recover payment from the customer on terms agreed with them. The
cost of such an arrangement is borne by the customer, either
directly or indirectly, enabling us to receive the full amount of
payment in line with our standard terms. The benefit to the cash
and cash equivalents position of such arrangements as at 30 June
2023 was GBP48.4 million (30 June 2022: GBP46.3 million, 31
December 2022: GBP45.1 million).
The Group had no other debt factoring at the end of the period,
outside this normal course of business.
As at 30 June 2022, the comparative balance sheet date, there
were two further activities impacting the cash position. Towards
the end of June 2022, the Group elected to factor an additional
EUR26 million of trade receivables within the German business.
There was no other debt factoring activity in June 2022 outside the
normal course of business described above. Also in June 2022, the
Group used a pre-arranged vendor finance facility to delay payment
of circa GBP15 million of trade payables. This balance was paid
after the period end. There were no other interest-bearing trade
payables as at 30 June 2022.
Cash and cash equivalents and net funds
Cash and cash equivalents as at 30 June 2023 were GBP301.6
million compared to GBP193.5 million as at 30 June 2022. Cash and
cash equivalents have increased by GBP37.2 million from GBP264.4
million as at 31 December 2022 (H1 2022: decrease of GBP79.7
million from GBP273.2 million as at 31 December 2021).
Net funds as at 30 June 2023 were GBP164.8 million, compared to
net funds of GBP12.1 million as at 30 June 2022 and net funds of
GBP117.2 million as at 31 December 2022.
The Group excluded GBP120.3 million, as at 30 June 2023 (30 June
2022: GBP147.2 million and 31 December 2022: GBP127.1 million), of
lease liabilities from its non-GAAP adjusted net funds(3) measure,
due to the distorting effect of the capitalised lease liabilities
on the Group's overall liquidity position under the IFRS 16
accounting standard.
Adjusted net funds(3) as at 30 June 2023 were GBP285.1 million,
compared to adjusted net funds(3) of GBP159.3 million as at 30 June
2022 and GBP244.3 million as at 31 December 2022.
Net funds as at 30 June 2023, 30 June 2022 and 31 December 2022
were as follows:
30 June 30 June
2023 2022 31 December 2022
GBPm GBPm GBPm
Cash and short-term deposits 301.6 199.0 264.4
Bank overdraft - (5.5) -
Cash and cash equivalents 301.6 193.5 264.4
Bank loans - Pivot customer specific facility (6.0) (9.0) (9.7)
Bank loans - Kerpen building facility (8.6) (12.7) (10.4)
Bank loans - Computacenter India facility (1.9) - -
Bank loans - Pivot facility - (11.9) -
Other bank loans - (0.6) -
Total bank loans (16.5) (34.2) (20.1)
Adjusted net funds 3 (excluding lease liabilities) 285.1 159.3 244.3
Lease liabilities (120.3) (147.2) (127.1)
Net funds 164.8 12.1 117.2
The Group had five specific credit facilities in place during
the current period and no other material borrowings.
On 9 December 2022, the Group entered into a multicurrency
revolving loan committed facility of GBP200 million. This replaced
the previous committed facility of GBP60 million which was
terminated and all security was released. This new facility has a
term of five years plus two one-year extension options exercisable
on the first and second anniversary of the facility. The Group is
subject to certain key financial covenants under this syndicated
facility with Barclays, Lloyds, HSBC, BNP Paribas, JPMorgan Chase
and PNC Bank. These covenants, as defined in the agreement, are
monitored regularly to ensure compliance. As at 30 June 2023, the
Group was in compliance with all covenants. To improve short-term
liquidity, GBP60 million was drawn down on Friday 6 April 2023 and
was repaid in full on Tuesday 9 May 2023. April is typically the
lowest point of the cash cycle for the Group and cash can be
impacted, from time-to-time, by individual large deals with
hyperscale customers depending on the payment terms specific to
that deal or customer. This facility is undrawn as at 30 June
2023.
The Group also has a specific term loan for the build and
purchase of our German office headquarters and fit out of the
Integration Center in Kerpen, which stood at GBP8.6 million at (30
June 2022: GBP12.7 million, 31 December 2022: GBP10.4 million).
Pivot had GBP6.0 million (30 June 2022: GBP9.0 million, 31
December 2022: GBP9.7 million) financed with a major technology
partner for hardware, software and resold technology partner
maintenance contracts that the Company had purchased as part of a
contract to lease these items to a key North American customer. At
the start of 2022, Pivot had a substantially unutilised $100
million senior secured asset-based revolving credit facility, from
a lending group represented by JPMorgan Chase Bank, N.A. As at 30
June 2022, GBP11.9 million was drawn on this facility. This was
repaid in full during the second half of 2022 and all security was
released on termination of the arrangement.
Computacenter India Private Limited has a local facility with
HSBC India for GBP1.9 million as at 30 June 2023 (30 June 2022:
nil) for local cash liquidity to facilitate the continued growth of
our operations in the country.
The BITS subsidiary maintains a ringfenced 'accounts receivable
and inventory flooring arrangement' facility with Wells Fargo of up
to $100 million, secured on the assets of that subsidiary. The
facility is provided on a rolling basis and the latest amendment
was signed on 20 July 2023. There was no interest-bearing debt
drawn under this facility as at 30 June 2023.
There were no other interest-bearing trade payables as at 30
June 2023 (30 June 2022: nil, 31 December 2022: nil).
The Group's adjusted net funds(3) position contains no current
asset investments (30 June 2022: nil, 31 December 2022 nil).
Capitalisation issue and capital reductions
The Company's cash generation over recent years has enabled it
to have a strong dividend policy and to periodically return
additional value to its shareholders, most recently by way of a
tender offer in the first quarter of 2018. While the Company has
sufficient profits available for distribution (also known as
'distributable reserves') to fund its projected distributions in
the immediate future, the Board recently undertook an assessment of
the balance sheet to identify any reserves that were not
distributable, and which could be converted into distributable
reserves to provide flexibility for future returns of value to the
Company's shareholders.
Following that assessment, the Board identified certain reserves
and commenced a programme of reductions of capital during the first
half of 2023 (each a 'capital reduction' and together the 'capital
reductions'). In order to achieve this, it was necessary first to
convert certain of these reserves into share capital by issuing New
Deferred Shares (the 'Capitalisation Issue'), and then cancelling
those shares as part of the first capital reduction. The second
capital reduction involved the cancellation of the Company's
capital redemption reserve. The capitalisation issue, the changes
to the Company's articles of association required in order to
effect it, and the subsequent capital reductions were each approved
at the Company's Annual General Meeting held on 17 May 2023. The
capital reductions were then confirmed by the court in order to
become effective.
The capitalisation issue and capital reductions did not result
in any change to the nominal value of the Company's ordinary
shares, had no impact on the Company's cash position or on its net
assets, did not involve any repayment or distribution of capital by
the Company, and did not result in any changes to the Company's
existing dividend policy.
The capitalisation issue and capital reductions should not
result in any UK tax charge for the shareholders.
As a result of the capitalisation issue and capital reductions,
the distributable reserves of the Company have been increased by
GBP183.9 million as at 30 June 2023. The Board will continue to
review its cash position and will provide an update on any proposed
future return of value when appropriate.
Currency
The Group reports its results in pounds sterling. The weakness
in the value of sterling against most currencies during the first
half of 2022, in particular the US Dollar, has begun to impact our
revenues and profitability, as a result of the conversion of our
foreign earnings. However, the exchange rates seen during the
period, in aggregate effect, were not materially dissimilar to
those seen in the first half of 2021.
Restating the first half of 2022 at 2023 exchange rates would
increase H1 2022 revenue by approximately GBP99.3 million, whilst
H1 2022 adjusted(1) profit before tax would be higher by GBP2.6
million.
If the 30 June 2023 spot rates were to continue through the
remainder of 2023, the impact of restating 2022 at 2023 exchange
rates would be to decrease 2022 revenue by approximately GBP37.2
million and 2022 adjusted(1) profit before tax by approximately
GBP0.3 million.
Principal risks and uncertainties
The Group's activities expose it to a variety of economic,
financial, operational and regulatory risks. Our principal risks
continue to be concentrated in the availability and resilience of
systems, our people, our cost base, technology change, and in the
design, entry into service and running of large Services contracts.
The principal risks and uncertainties facing the Group are set out
on pages 74 to 81 of the 2022 Annual Report and Accounts, a copy of
which is available on the Group's website at
investors.computacenter.com.
The Group's risk management approach and the principal risks,
potential impacts and primary mitigating activities are unchanged
from those set out in the 2022 Annual Report and Accounts. Our risk
management approach operated effectively in the six months to 30
June 2023, with systems and controls functioning as designed.
Whilst we have not identified any new principal risks during the
period, we acknowledge the heightened level of overall risk across
several risk categories, due to the current macroeconomic
uncertainty and its impact on our operating environment in
general.
This Strategic Report was approved by the Board on 7 September
2023 and signed on its behalf by:
MJ Norris MC Jehle
Chief Executive Officer Chief Financial Officer
Directors' Responsibilities
Responsibility statement of the directors in respect of the
half-yearly financial report.
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted
for use in the UK;
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
MJ Norris MC Jehle
Chief Executive Officer Chief Financial Officer
Consolidated Income Statement
For the six months ended 30 June 2023
H1 2023 H1 2022 Year 2022
Note GBPm GBPm GBPm
Revenue 5 3,584.9 2,826.7 6,470.5
Cost of sales (3,079.2) (2,401.8) (5,523.4)
Gross profit 5 505.7 424.9 947.1
Administrative expenses (392.1) (315.3) (691.8)
Impairment (loss)/reversal on trade receivables and contract assets (0.6) 0.5 1.1
Other income related to acquisition of a subsidiary 8 5.3 - -
Gain related to acquisition of a subsidiary 8 3.2 - -
Operating profit 121.5 110.1 256.4
Finance income 6.6 1.0 2.4
Finance costs (5.3) (3.3) (9.8)
Profit before tax 122.8 107.8 249.0
Income tax expense (33.4) (30.0) (64.8)
Profit for the period/year 89.4 77.8 184.2
Attributable to:
Equity holders of the Parent 87.7 77.2 182.8
Non-controlling interests 1.7 0.6 1.4
Profit for the period/year 89.4 77.8 184.2
Earnings per share:
- basic for profit for the period/year 10 77.3p 68.4p 162.1p
- diluted for profit for the period/year 10 76.5p 67.3p 159.1p
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023
H1 2023 H1 2022 Year 2022
GBPm GBPm GBPm
Profit for the period/year 89.4 77.8 184.2
Items that may be reclassified to the Consolidated Income Statement:
Gain/(loss) arising on cash flow hedge 2.5 5.6 (2.5)
Income tax effect (0.9) (1.4) 1.0
1.6 4.2 (1.5)
Exchange differences on translation of foreign operations (26.3) 36.8 47.5
(24.7) 41.0 46.0
Items not to be reclassified to the Consolidated Income Statement:
Remeasurement of defined benefit plan - 5.6 1.7
Other comprehensive income/(expense) for the period/year, net of tax (24.7) 46.6 47.7
Total comprehensive income for the period/year 64.7 124.4 231.9
Attributable to:
Equity holders of the Parent 63.3 123.3 229.9
Non-controlling interests 1.4 1.1 2.0
Total comprehensive income for the period/year 64.7 124.4 231.9
Consolidated Balance Sheet
As at 30 June 2023
H1 2022 Year 2022
H1 2023 (restated*) (restated*)
Note GBPm GBPm GBPm
Non-current assets
Property, plant and equipment 93.0 88.3 94.1
Right-of-use assets 112.9 138.5 119.4
Intangible assets 328.6 296.5 342.1
Investment in associate 0.1 0.1 0.1
Deferred income tax assets 11.4 22.2 11.3
Trade and other receivables* 16.0 - 9.9
Prepayments 16.5 16.5 19.4
578.5 562.1 596.3
Current assets
Inventories 315.4 399.3 417.7
Trade and other receivables* 1,261.4 1,350.2 1,683.8
Income tax receivable 12.2 8.5 14.6
Prepayments 154.9 136.2 130.5
Accrued income* 178.7 162.0 129.2
Derivative financial instruments 12 3.7 15.1 7.5
Cash and short-term deposits* 13 301.6 199.0 264.4
2,243.9 2,270.3 2,657.7
Total assets 2,806.4 2,832.4 3,244.0
Current liabilities
Bank overdraft* 13 - 5.5 -
Trade and other payables 1,421.1 1,411.3 1,857.5
Deferred income 249.8 308.4 265.3
Financial liabilities 13 6.7 19.0 7.5
Lease liabilities 13 36.7 43.6 36.9
Derivative financial instruments 12 4.2 3.5 8.7
Income tax payable* 22.7 24.3 30.9
Provisions 4.3 4.3 3.8
1,745.5 1,819.9 2,210.6
Non-current liabilities
Financial liabilities 13 9.8 15.2 12.6
Lease liabilities 13 83.6 103.6 90.2
Deferred income 5.5 8.6 7.9
Retirement benefit obligation 22.4 17.4 23.0
Provisions 5.2 6.5 7.0
Deferred income tax liabilities 15.1 20.9 20.7
141.6 172.2 161.4
Total liabilities 1,887.1 1,992.1 2,372.1
Net assets 919.3 840.3 872.0
Capital and reserves
Issued share capital 14 9.3 9.3 9.3
Share premium 4.0 4.0 4.0
Capital redemption reserve 14 - 75.0 75.0
Own shares held (131.4) (141.3) (127.7)
Translation and hedging reserve 26.3 45.9 50.7
Retained earnings 1,003.4 842.0 854.4
Shareholders' equity 911.6 834.9 865.7
Non-controlling interests 7.7 5.4 6.3
Total equity 919.3 840.3 872.0
* Refer note 2 for restatement of prior period comparatives.
Approved by the Board on 7 September 2023.
MJ Norris MC Jehle
Chief Executive Officer Chief Financial Officer
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2023
Attributable to equity holders of the Parent
Issued Capital Own Translation Non-
share Share redemption shares and hedging Retained Share-holders' controlling Total
capital premium reserve held reserves earnings equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2022 9.3 4.0 75.0 (115.5) 5.4 762.3 740.5 4.3 744.8
Profit for the
period - - - - - 77.2 77.2 0.6 77.8
Other
comprehensive
income/(expense) - - - - 40.5 5.6 46.1 0.5 46.6
Total
comprehensive
income/(expense) - - - - 40.5 82.8 123.3 1.1 124.4
Cost of
share-based
payments - - - - - 5.2 5.2 - 5.2
Tax on
share-based
payments - - - - - (1.3) (1.3) - (1.3)
Exercise of
options - - - 8.6 - (7.0) 1.6 - 1.6
Purchase of own
shares - - - (34.4) - - (34.4) - (34.4)
At 30 June 2022 9.3 4.0 75.0 (141.3) 45.9 842.0 834.9 5.4 840.3
Profit for the
period - - - - - 105.6 105.6 0.8 106.4
Other
comprehensive
income/(expense) - - - - 4.8 (3.8) 1.0 0.1 1.1
Total
comprehensive
income/(expense) - - - - 4.8 101.8 106.6 0.9 107.5
Cost of
share-based
payments - - - - - 3.4 3.4 - 3.4
Tax on
share-based
payments - - - - - (3.3) (3.3) - (3.3)
Exercise of
options - - - 13.6 - (9.0) 4.6 - 4.6
Equity dividends - - - - - (80.5) (80.5) - (80.5)
At 31 December
2022 9.3 4.0 75.0 (127.7) 50.7 854.4 865.7 6.3 872.0
Profit for the
period - - - - - 87.7 87.7 1.7 89.4
Other
comprehensive
income/(expense) - - - - (24.4) - (24.4) (0.3) (24.7)
Total
comprehensive
income/(expense) - - - - (24.4) 87.7 63.3 1.4 64.7
Cost of
share-based
payments - - - - - 4.0 4.0 - 4.0
Tax on
share-based
payments - - - - - 1.5 1.5 - 1.5
Exercise of
options - - - 22.4 - (19.2) 3.2 - 3.2
Purchase of own
shares - - - (26.1) - - (26.1) - (26.1)
Capital reduction - - (75.0) - - 75.0 - - -
At 30 June 2023 9.3 4.0 - (131.4) 26.3 1,003.4 911.6 7.7 919.3
Consolidated Cash Flow Statement
For the six months ended 30 June 2023
H1 2023 H1 2022 Year 2022
Note GBPm GBPm GBPm
Operating activities
Profit before taxation 122.8 107.8 249.0
Net finance (income)/cost (1.3) 2.3 7.4
Depreciation of property, plant and equipment 10.0 10.3 21.5
Depreciation of right-of-use assets 20.9 26.2 50.5
Amortisation of intangible assets 9.4 8.0 18.9
Share-based payments 4.0 5.2 8.6
Loss on disposal of property, plant and equipment - 0.4 0.5
Net cash flow from inventories 90.6 (33.0) (7.0)
Net cash flow from trade and other receivables (including contract assets) 293.6 (67.6) (317.2)
Net cash flow from trade and other payables (including contract liabilities) (387.6) (19.9) 263.4
Net cash flow from provisions and employee benefits (1.2) (1.9) (0.7)
Other adjustments 0.2 0.1 (0.1)
Cash generated from operations 161.4 37.9 294.8
Income taxes paid (44.9) (29.8) (52.7)
Net cash flow from operating activities 116.5 8.1 242.1
Investing activities
Interest received 6.7 1.0 2.4
Acquisition of subsidiaries, net of cash acquired (1.9) (2.3) (28.3)
Contingent consideration 12 (17.4) - -
Purchases of property, plant and equipment (11.4) (8.7) (23.7)
Purchases of intangible assets (5.7) (6.8) (11.8)
Proceeds from disposal of property, plant and equipment 0.1 1.0 1.1
Net cash flow from investing activities (29.6) (15.8) (60.3)
Financing activities
Interest paid (1.0) (0.7) (2.9)
Interest paid on lease liabilities (2.3) (2.5) (4.9)
Dividends paid to equity shareholders of the Parent - - (80.5)
Proceeds from exercise of share options 3.2 1.6 6.2
Purchase of own shares (26.1) (34.4) (34.4)
Repayment of loans (64.6) (5.8) (20.6)
Payment of capital element of lease liabilities (20.9) (25.9) (50.3)
Borrowings 61.9 4.5 4.0
Net cash flow from financing activities (49.8) (63.2) (183.4)
(Decrease)/increase in cash and cash equivalents 37.1 (70.9) (1.6)
Effect of exchange rates on cash and cash equivalents 0.1 (8.8) (7.2)
Cash and cash equivalents at the beginning of the period/year 264.4 273.2 273.2
Cash and cash equivalents at the end of the period/year 13 301.6 193.5 264.4
1 Corporate information
The Interim Condensed Consolidated Financial Statements
(Financial Statements) of the Group for the six months ended 30
June 2023 contained in this announcement were authorised for issue
in accordance with a resolution of the Directors on 7 September
2023. The Consolidated Balance Sheet was signed on behalf of the
Board by MJ Norris and MC Jehle.
Computacenter plc is a limited company incorporated and
domiciled in England whose shares are publicly traded.
2 Basis of preparation
The Financial Statements for the six months ended 30 June 2023
have been prepared in accordance with International Accounting
Standard 34 'Interim Financial Reporting', as adopted by the United
Kingdom. They do not include all of the information and disclosures
required in the annual financial statements, and should be read in
conjunction with the Group's 2022 Annual Report and Accounts which
have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the United Kingdom. The
Financial Statements contained in this announcement are
unaudited.
The Financial Statements are presented in pound sterling (GBP)
and all values are rounded to the nearest hundred thousand, except
when otherwise indicated.
In determining whether it is appropriate to prepare the
Financial Statements on a 'going concern' basis, the Group prepares
a three-year Plan (the 'Plan') annually by aggregating top down
expectations of business performance across the Group in the second
and third year of the Plan with a detailed 12-month bottom-up
budget for the first year, which was approved by the Board. The
Plan is subject to rigorous downside sensitivity analysis which
involves flexing a number of the main assumptions underlying the
forecasts within the Plan. The forecast cash flows from the Plan
are aggregated with the current position, to provide a total
three-year cash position against which the impact of potential
risks and uncertainties can be assessed. In the absence of
significant external debt, the analysis also considers access to
available committed and uncommitted finance facilities, the ability
to raise new finance in most foreseeable market conditions and the
ability to restrict dividend payments.
The Directors have identified a period of not less than 12
months from the date of signing the Financial Statements, through
to 6 September 2024, as the appropriate period for the going
concern assessment and have based their assessment on the relevant
forecasts from the Plan for that period.
The potential impact of the principal risks and uncertainties,
as set out on pages 74 to 81 of the 2022 Annual Report and
Accounts, is then applied to the Plan. This assessment includes
only those risks and uncertainties that, individually or in
plausible combination, would threaten the Group's business model,
future performance, solvency or liquidity over the assessment
period and which are considered to be severe but reasonable
scenarios. It also takes into account an assessment of how the
risks are managed and the effectiveness of any mitigating
actions.
For the current period, the primary downside sensitivity relates
to a modelled, but not predicted, severe downturn in Group
revenues, beginning in the second half of 2023, simulating a
reduction in customer demand due to the current economic crisis,
and ongoing impacts on the Group's revenues from supply shortages.
This sensitivity analysis models a continued market downturn
scenario, with slower-than-predicted recovery estimates, for our
customer base as a result of the emerging negative global
macroeconomic environment due to the current economic crisis. A
further impact on the Group's Technology Sourcing revenues through
the second half of 2023 from possible ongoing vendor-related supply
shortage issues has also been included in the sensitivity
analysis.
Our cash and borrowing capacity provides sufficient funds to
meet the foreseeable needs of the Group. At 30 June 2023, the Group
had cash and short-term deposits of GBP301.6 million and bank debt,
primarily related to the headquarters in Germany and operations in
North America, of GBP16.5 million. On 9 December 2022, the Group
entered into a new unsecured multicurrency revolving loan facility
of GBP200.0 million in order to rationalise its treasury
operations. The new facility has a term of five years plus two
one-year extension options exercisable on the first and second
anniversary of the facility. The Group-specific committed facility
of GBP60.0 million that was due to expire on 8 September 2023 was
terminated and all security was released. The revolving credit
facility which its subsidiary, Pivot, had with JPMorgan Chase Bank,
N.A. (JPMC) of $100.0 million that was due to expire on 14 May 2024
was also repaid in full and all security was released.
The Group has a resilient balance sheet position, with net
assets of GBP919.3 million as at 30 June 2023. The Group made a
profit after tax of GBP89.4 million and delivered net cash flows
from operating activities of GBP116.5 million, for the period ended
30 June 2023.
As the analysis continues to show a strong forecast cash
position, even under the severe economic conditions modelled in the
sensitivity scenarios, the Directors continue to consider that the
Group is well placed to manage business and financial risks in the
current economic environment. Based on this assessment, the
Directors confirm that they have a reasonable expectation that the
Group will be able to continue in operation and meet its
liabilities as they fall due over the period of not less than 12
months from the date of signing Financial Statements, through to 6
September 2024, and therefore have prepared the Financial
Statements on a going concern basis.
Consolidated Balance Sheet
At 30 June 2022 and 31 December 2022, certain items were
incorrectly presented on the consolidated balance sheet as
follows:
-- Tax balances of GBP18.4 million at 30 June 2022 (31 December
2022: GBP25.5 million) were included as part of 'Trade and other
receivables'. These have been re-presented by reclassifying and
netting these amounts within 'Income tax payable'.
-- Trade and other receivables relating to a contract at 31
December 2022 of GBP6.0 million was included as part of 'Accrued
income'. This has now been reclassified to 'Trade and other
receivables'. Further to this, and related to the same contract, an
amount of GBP9.9 million has been reclassified from 'Trade and
other receivables' (current) to 'Trade and other receivables'
(non-current).
-- Bank overdraft balance of GBP10.7 million at 31 December 2022
has been reclassified to 'Cash and short-term deposits' as this
should have been netted off against 'Cash and short-term
deposits'.
There is no impact on reported 'Net funds' and 'Net assets' from
the above changes.
3 Significant Accounting Policies
The accounting policies adopted are consistent with those of the
previous financial year as disclosed in the Computacenter plc 2022
Annual Report and Accounts.
4 Adjusted(1) measures
The Group uses a number of non-Generally Accepted Accounting
Practice (non-GAAP) financial measures in addition to those
reported in accordance with IFRS. The Directors believe that these
non-GAAP measures, listed below, assist in providing additional
useful information on the underlying trends, performance and
position of the Group. The non-GAAP measures also used to enhance
the comparability of information between reporting periods by
adjusting for non-recurring or uncontrollable factors which affect
IFRS measures, to aid the user in understanding the Group's
performance.
Consequently, non-GAAP measures are used by the Directors and
management for performance analysis, planning, reporting and
incentive setting purposes. Adjusted measures have remained
consistent with the prior period.
These non-GAAP measures comprise of: gross invoiced income,
adjusted administrative expenses, adjusted operating profit or
loss, adjusted profit or loss before tax, adjusted tax, adjusted
profit or loss for the year, adjusted earnings per share and
adjusted diluted earnings per share. They are, as appropriate, each
stated before: exceptional and other adjusting items including gain
or loss on acquisitions, expenses related to material acquisitions,
amortisation of acquired intangibles, utilisation of deferred tax
assets (where initial recognition was as an exceptional item or a
fair value adjustment on acquisition), and the related tax effect
of these exceptional and other adjusting items, as Management does
not consider these items when reviewing the underlying performance
of the Segment or the Group as a whole.
A reconciliation to adjusted measures is provided in the Chief
Financial Officer's Review contained in this announcement which
details the impact of exceptional and other adjusting items when
comparing to the non-GAAP financial measures, in addition to those
reported in accordance with IFRS. Further detail is also provided
within note 5, Segment information, and note 8, Exceptional
items.
5 Segment information
The operating Segments remain unchanged from those reported at
31 December 2022. Central Corporate Costs continue to be disclosed
as a separate column within the Segmental note.
Segmental performance for the periods to H1 2023, H1 2022 and
Full Year 2022 were as follows:
Six months ended 30 June 2023
North Central Corporate
UK Germany France America International Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Technology Sourcing revenue
Gross invoiced income 1,051.0 1,042.5 337.7 1,805.6 104.9 - 4,341.7
Adjustment to gross invoiced income
for income recognised as agent (585.1) (449.7) (109.8) (407.0) (21.7) - (1,573.3)
Total Technology Sourcing revenue 465.9 592.8 227.9 1,398.6 83.2 - 2,768.4
Services revenue
Professional Services 65.6 181.8 25.5 55.7 5.1 - 333.7
Managed Services 154.6 199.1 67.9 14.6 46.6 - 482.8
Total Services revenue 220.2 380.9 93.4 70.3 51.7 - 816.5
Total revenue 686.1 973.7 321.3 1,468.9 134.9 - 3,584.9
Results
Gross profit 127.2 179.1 40.4 132.7 26.3 - 505.7
Adjusted(1) administrative expenses (101.7) (105.8) (37.6) (103.4) (19.6) (19.1) (387.2)
Adjusted(1) operating profit/(loss) 25.5 73.3 2.8 29.3 6.7 (19.1) 118.5
Net interest 3.8 0.3 (0.6) 0.2 (0.4) - 3.3
Adjusted(1) profit/(loss) before tax 29.3 73.6 2.2 29.5 6.3 (19.1) 121.8
Exceptional items:
- unwinding of discount relating to
acquisition of a subsidiary (2.0)
- gain related to acquisition of a
subsidiary 3.2
- other income relating to
acquisition of a subsidiary 5.3
Total exceptional items 6.5
Amortisation of acquired intangibles (5.5)
Profit before tax 122.8
The reconciliation of a djusted(1) operating profit to operating
profit as disclosed in the Consolidated Income Statement is as
follows:
Six months ended 30 June 2023
Total
GBPm
Adjusted(1) operating profit 118.5
Amortisation of acquired intangibles (5.5)
Exceptional items 8.5
Operating profit 121.5
Six months ended 30 June 2022
North Central Corporate
UK Germany France America International Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Technology Sourcing revenue
Gross invoiced income 937.8 668.1 255.6 1,277.9 80.0 - 3,219.4
Adjustment to gross invoiced income
for income recognised as agent (515.9) (204.0) (72.5) (339.5) (13.3) - (1,145.2)
Total Technology Sourcing revenue 421.9 464.1 183.1 938.4 66.7 - 2,074.2
Services revenue
Professional Services 72.5 149.0 19.1 53.1 4.7 - 298.4
Managed Services 159.4 179.0 66.4 13.2 36.1 - 454.1
Total Services revenue 231.9 328.0 85.5 66.3 40.8 - 752.5
Total revenue 653.8 792.1 268.6 1,004.7 107.5 - 2,826.7
Results
Gross profit 130.3 140.0 32.1 101.4 21.1 - 424.9
Adjusted(1) administrative expenses (85.3) (84.6) (31.6) (81.1) (16.5) (11.6) (310.7)
Adjusted(1) operating profit/(loss) 45.0 55.4 0.5 20.3 4.6 (11.6) 114.2
Net interest 1.2 (1.2) (0.3) (1.5) (0.5) - (2.3)
Adjusted(1) profit/(loss) before tax 46.2 54.2 0.2 18.8 4.1 (11.6) 111.9
Amortisation of acquired intangibles - - - - - - (4.1)
Profit before tax - - - - - - 107.8
The reconciliation of a djusted(1) operating profit to operating
profit as disclosed in the Consolidated Income Statement is as
follows:
Six months ended 30 June 2022
Total
GBPm
Adjusted(1) operating profit 114.2
Amortisation of acquired intangibles (4.1)
Operating profit 110.1
Year ended 31 December 2022
North Central Corporate
UK Germany France America International Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Technology Sourcing revenue
Gross invoiced income 1,864.2 1,704.7 606.7 3,131.7 174.3 - 7,481.6
Adjustment to gross invoiced
income for income recognised as
agent (1,055.1) (551.6) (170.9) (773.8) (30.3) - (2,581.7)
Total Technology Sourcing revenue 809.1 1,153.1 435.8 2,357.9 144.0 - 4,899.9
Services revenue
Professional Services 147.5 315.7 41.7 122.5 9.2 - 636.6
Managed Services 312.8 374.7 136.4 26.9 83.2 - 934.0
Total Services revenue 460.3 690.4 178.1 149.4 92.4 - 1,570.6
Total revenue 1,269.40 1,843.5 613.9 2,507.3 236.4 - 6,470.5
Results
Gross profit 259.2 325.1 76.7 238.3 47.8 - 947.1
A djusted(1) administrative
expenses (178.7) (184.2) (69.6) (185.3) (36.5) (23.7) (678.0)
A djusted(1) operating
profit/(loss) 80.5 140.9 7.1 53.0 11.3 (23.7) 269.1
Net interest 2.6 (2.2) (0.8) (4.2) (0.8) - (5.4)
A djusted(1) profit/(loss) before
tax 83.1 138.7 6.3 48.8 10.5 (23.7) 263.7
Exceptional items:
- unwinding of discount relating
to acquisition of a subsidiary (2.0)
- costs relating to acquisition of
a subsidiary (1.8)
Total exceptional items (3.8)
Amortisation of acquired
intangibles (10.9)
Profit before tax 249.0
The reconciliation of a djusted(1) operating profit to operating
profit as disclosed in the Consolidated Income Statement is as
follows:
Year ended 31 December 2022
Total
GBPm
Adjusted(1) operating profit 269.1
Amortisation of acquired intangibles (10.9)
Exceptional items (1.8)
Operating profit 256.4
6 Seasonality of operations
Historically, revenues have been higher in the second half of
the year than in the first six months. This is principally driven
by customer buying behaviour in the markets in which we operate.
Typically, this leads to a more pronounced effect on operating
profit.
The Company saw the historical patterns of seasonality change
due to the unpredictability created first by the impact of
Covid-19, beginning in 2020, and then the more recent impact of
supply shortages. Certain customers pulled orders of information
technology equipment forward into the first half of 2021 that would
otherwise have naturally occurred in the second half of 2021. Both
of these events have materially impacted customer buying behaviours
impacting the timing of sales volumes between the first and second
halves of the year for 2020 and 2021 and therefore our historical
seasonality of operations patterns.
During 2022 and the first half of 2023 we have seen these
unusual buying patterns reversing and the re-emergence of
seasonality that is closer to our historical norms. Whilst still
somewhat affected by supply shortages in networking IT equipment,
we expect customer buying to be more weighted towards the second
half of the year leading, once again, to a more pronounced effect
on operating profit in the second half which we expect to have a
higher proportion of the full-year operating profit than we have
seen over the period from 2020 to 2021.
7 Dividends paid and proposed
A final dividend for 2022 of 45.8 pence per ordinary share was
paid on 14 July 2023. An interim dividend in respect of 2023 of
22.6 pence per ordinary share, amounting to a total dividend of
GBP25.8 million, was declared by the Directors at their meeting on
6 September 2023. The expected payment date of the dividend
declared is 27 October 2023. This announcement does not reflect
this dividend payable.
8 Exceptional items
H1 2023 H1 2022 Year 2022
GBPm GBPm GBPm
Operating profit
Other income related to acquisition of a subsidiary 5.3 - -
Costs related to acquisition of a subsidiary - - (1.8)
Gain related to acquisition of a subsidiary 3.2 - -
Exceptional operating gain/(loss) 8.5 - (1.8)
Interest cost relating to acquisition of a subsidiary (2.0) - (2.0)
Profit/(Loss) on exceptional items before taxation 6.5 - (3.8)
Income tax
Tax relating to exceptional items - - 0.2
Loss on exceptional items after taxation (6.5) - (3.6)
Included within H1 2023 are the following exceptional items:
-- A further GBP2.0 million relating to the unwinding of the
discount on the contingent payment for the purchase of BITS have
been classified as exceptional interest costs. This is consistent
with our prior-year treatment of acquisition costs.
-- A $9.3 million (GBP7.4 million) settlement was received on 8
May 2023 from the Washington State Department of Revenue. The
settlement related to litigation contesting a historic,
pre-acquisition, sales tax assessment that was paid by antecedent
companies related to the acquired Pivot group of companies. Of this
amount, $6.7 million (GBP5.3 million) has been recognised as other
income relating to acquisition of a subsidiary for the refunded
sales tax amount. This other income is non-operational in nature,
material in size and unlikely to recur and has therefore been
classified as exceptional. Further amounts of $1.6 million (GBP1.3
million) and $1.0 million (GBP0.8 million) have been credited to
adjusted(1) interest income, for the refund of statutory
overpayment interest receivable on the original payment, and
adjusted(1) administrative expenses, to reimburse legal expenses
incurred since acquisition, respectively.
-- GBP3.2 million relating to a release of contingent
consideration in relation to BITS acquisition (refer note 12). As
this release is related to the acquisition and not operational
activity within BITS and is of a one-off nature, it was classified
as an exceptional item.
Included within the 12 months to 31 December 2022 are the
following exceptional items:
-- An exceptional cost of GBP1.8 million resulted from costs
directly relating to the acquisition of BITS and Emerge. These
costs primarily related to advisor's fees and seller's costs that
were paid on completion of the transaction. As these costs are
non-operational and unlikely to recur, they have been classified as
exceptional items, consistent with our prior-year treatment of
acquisition costs on material transactions.
-- GBP2.0 million relating to the unwinding of the discount on
the contingent payment for the purchase of BITS have been
classified as exceptional interest costs. As this credit is related
to the acquisition and not operational activity within BITS and is
of a one-off nature, it was classified as an exceptional item.
-- A credit of GBP0.2 million arising from the tax benefit on
the BITS exceptional acquisition costs has been recognised as tax
on the above exceptional items. As this credit is related to the
acquisition and not operational activity within BITS and is of a
one-off nature, it was classified as an exceptional tax item.
9 Income tax
Tax for the six-month period is charged at 27.2 per cent (six
months ended 30 June 2022: 27.8 per cent; year ended 31 December
2022: 26.0 per cent), representing the best estimate of the average
annual effective tax rate expected for the full year, applied to
the pre-tax income of the six-month period.
10 Earnings per share
Earnings per share amounts are calculated by dividing profit
attributable to ordinary equity holders by the weighted average
number of ordinary shares outstanding during the year (excluding
own shares held).
To calculate diluted earnings per share, the weighted average
number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential shares. Share options granted to
employees where the exercise price is less than the average market
price of the Company's ordinary shares during the year are
considered to be dilutive potential shares.
H1 2023 H1 2022 Year 2022
GBPm GBPm GBPm
Profit attributable to equity holders of the Parent 87.7 77.2 182.8
H1 2023 H1 2022 Year 2022
m m m
Basic weighted average number of shares (excluding own shares held) 113.4 112.9 112.8
Effect of dilution:
Share options 1.3 1.8 2.1
Diluted weighted average number of shares 114.7 114.7 114.9
H1 2023 H1 2022 Year 2022
pence pence pence
Basic earnings per share 77.3 68.4 162.1
Diluted earnings per share 76.5 67.3 159.1
11 Investments
R.D. Trading Limited (RDC)
On 10 August 2019, the Group acquired 90 per cent of the voting
shares of RDC for a consideration of 90 pence and on 26 October
2021, the Group acquired a further 5.0 per cent of the voting
shares for a cash consideration of GBP1.4 million from the seller
of RDC. On 7 June 2023, the remaining 5.0 per cent of the voting
shares were acquired for a cash consideration of GBP1.9 million.
RDC is based in the UK and is an IT assets disposal business. This
acquisition has been accounted for using the purchase method of
accounting.
Business IT Source Holdings, Inc. (BITS)
On 1 July 2022, the Group acquired 100 per cent of the voting
shares of Business IT Source Holdings, Inc. (BITS) and the
acquisition has been accounted for using the purchase method of
accounting. The provisional fair values presented in the 2022
Annual Report and Accounts for customer relationship and tax
balances relating to the acquisition of BITS remain unchanged as at
30 June 2023.
12 Fair value measurements recognised in the Consolidated Balance Sheet
Financial instruments which are recognised at fair value
subsequent to initial recognition are grouped into Levels 1 to 3
based on the degree to which the fair value is observable. The
three levels are defined as follows:
1. Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
2. Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
3. Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
At 30 June 2023 the Group had forward currency contracts, which
were measured at Level 2 fair value subsequent to initial
recognition, to the value of an asset of GBP3.7 million and a
liability of GBP4.2 million (30 June 2022: asset of GBP15.1 million
and liability of GBP3.5 million; 31 December 2022: asset of GBP7.5
million and liability of GBP8.7 million). The net realised loss
from forward currency contracts, designated as cashflow hedges, in
the period to 30 June 2023 of GBP0.5 million (30 June 2022: losses
of GBP0.5 million; 31 December 2022: losses of GBP0.5 million) are
offset by broadly equivalent realised losses/gains on the related
underlying transactions.
The foreign currency forward contracts are measured based on
observable spot exchange rates, the yield curves of the respective
currencies as well as the currency basis spreads between the
respective currencies. All contracts are fully cash collateralised,
thereby eliminating both counterparty and the Group's own credit
risk.
The carrying value of the Group's short-term receivables and
payables is a reasonable approximation of their fair values. The
fair value of all other financial instruments carried within the
Financial Statements is not materially different from their
carrying amount.
Contingent consideration
At acquisition, contingent consideration was agreed which
required the Group to pay former owners of Business IT Source
Holdings, Inc. (BITS), two earn-out payments based on BITS's 2022
EBITDA & 2023 EBITDA and indebtedness. During the period and in
accordance with the share purchase agreement, the Group made its
first earn-out payment amounting to GBP17.4 million ($21.2 million)
which was broadly in line with the estimate made as at 31 December
2022.
On 30 June 2023, a renegotiated agreement was signed with the
former owners following which, the second earn-out is now based on
BITS's 2023 EBIDTA, H1 2024 EBIDTA, and indebtedness over these
periods. Having considered a range of possible earn out scenarios,
Management has determined that an accrual of $24.2 million under
the revised agreement should be recorded as contingent
consideration. Therefore, subsequent to initial recognition, this
will continue to be measured at Level 3 fair value using discounted
cash flows (DCF) as an estimation technique. The impact of changes
to the payment structures under the renegotiated agreement has
resulted in a release during the period of GBP3.2 million which has
been recognised as an exceptional item. The carrying value at 30
June 2023 of GBP19.2 million ($24.2 million) is included within
Trade and other payables.
13 Net funds
H1 2023 H1 2022 Year 2022
GBPm GBPm GBPm
Cash and short-term deposits 301.6 199.0 264.4
Bank overdrafts - (5.5) -
Cash and cash equivalents 301.6 193.5 264.4
Bank loans and credit facility (16.5) (34.2) (20.1)
Adjusted net funds(3) (excluding lease liabilities) 285.1 159.3 244.3
Lease liabilities (120.3) (147.2) (127.1)
Net funds 164.8 12.1 117.2
Current
Financial liabilities: Bank loans (6.7) (19.0) (7.5)
Lease liabilities (36.7) (43.6) (36.9)
Non-current
Financial liabilities: Bank loans (9.8) (15.2) (12.6)
Lease liabilities (83.6) (103.6) (90.2)
14 Issued Share Capital and Reserves
0.01 pence
7 pence ordinary shares deferred shares Total
Issued and fully paid No. '000 No. '000 GBP'm
At 1 January 2022 and 1 January 2023 122,688 - 9.3
Deferred shares issued during the year for the capitalisation
of reserves - 10,895,383.8 109.0
Deferred shares capital reduction - (10,895,383.8) (109.0)
At 30 June 2023 122,688 - 9.3
During the year, the issued share capital was increased by
GBP109.0 million by the issue of deferred shares of 0.01 pence each
(the 'New Deferred Shares'). The New Deferred Shares were issued
through the capitalisation of the following reserves (together the
'Capitalised Amount') in Computacenter plc (the 'Company'):
i. an amount of up to GBP55.9 million, being the full amount
standing to the credit of the merger reserve account of the Company
as at 31 December 2022 (being the date of the latest audited
accounts of the Company); and
ii. an amount of up to GBP53.1 million, being part of the amount
standing to the credit of the Company's retained earnings reserve
as at 31 December 2022 (being the date of the latest audited
accounts of the Company) and attributable to the dividend in specie
made to the Company by Computacenter (UK) Limited in December 2020
in respect of shares in Pivot Technology Solutions, Ltd.
The Capitalised Amount was applied in paying up in full and at
par 10,895,383,765 New Deferred Shares in the capital of the
Company.
These New Deferred Shares were allotted and issued to a nominee
appointed by the Company on behalf of the holders of ordinary
shares entered in the register of members of the Company at the
Capitalisation Record Time (in proportion, as nearly as practicable
to the aggregate nominal amount of the ordinary shares held by such
holders at the Capitalisation Record Time, subject to such
adjustments as the Directors saw fit to deal with any fractional
entitlements).
The holders of the New Deferred Shares were conferred no
material rights from the New Deferred Shares including no rights to
receive any dividend or other distribution of the Company, nor any
right to participate in the profits of the Company, with further
details of these rights limitations available within the 2023
Notice of General Meeting. The New Deferred Shares were then
subject to a Capital Reduction and creation of distributable
reserves within the Company for GBP109.0 million.
Capital Redemption Reserve
The capital redemption reserve is used to maintain the Company's
capital following the purchase and cancellation of its own shares.
During the year, the Company repurchased nil of its own shares for
cancellation (2022: nil).
The High Court of Justice of England and Wales on 20 June 2023
confirmed an application for a Capital Reduction that subsequently
became effective on 21 June 2023 following the necessary regulatory
filings. This Capital Reduction reduced the Company's Capital
Redemption Reserve of GBP75.0 million to nil and created
distributable reserves for this same amount.
15 Publication of non-statutory accounts
The financial information contained in this announcement does
not constitute statutory accounts as defined in section 435 of the
Companies Act 2006.
The comparative figures for the financial year ended 31 December
2022 are not the company's statutory accounts for that financial
year. Those accounts have been reported on by the company's auditor
and delivered to the registrar of companies. The report of the
auditor was (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
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END
IR EADNXEAKDEAA
(END) Dow Jones Newswires
September 08, 2023 02:00 ET (06:00 GMT)
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