Computacenter plc
Incorporated in England
Registration number:
03110569
LEI: 549300XSXUZ1I19DB105
ISIN: GB00BV9FP302
Computacenter plc
Final results for the year
ended 31 December 2023
Computacenter plc ("Computacenter" or
the "Group"), a leading independent technology and services
provider, today announces audited results for the year ended 31
December 2023.
Financial highlights
|
2023
|
2022
|
Change
|
Change in constant
currency1
|
Technology Sourcing gross invoiced
income (£m)
|
8,444.9
|
7,481.6
|
12.9%
|
13.1%
|
Services revenue (£m)
|
1,636.5
|
1,570.6
|
4.2%
|
3.1%
|
Gross invoiced income1
(£m)
|
10,081.4
|
9,052.2
|
11.4%
|
11.3%
|
Technology Sourcing revenue
(£m)
|
5,286.3
|
4,899.9
|
7.9%
|
8.1%
|
Services revenue (£m)
|
1,636.5
|
1,570.6
|
4.2%
|
3.1%
|
Revenue (£m)
|
6,922.8
|
6,470.5
|
7.0%
|
6.9%
|
Gross profit (£m)
|
1,044.0
|
947.1
|
10.2%
|
9.8%
|
Gross margin (%)
|
15.1%
|
14.6%
|
+44bps
|
|
Adjusted1 operating
profit (£m)
|
271.5
|
269.1
|
0.9%
|
0.6%
|
Adjusted1 profit before
tax (£m)
|
278.0
|
263.7
|
5.4%
|
5.1%
|
Adjusted1 diluted
earnings per share (p)
|
174.8
|
169.7
|
3.0%
|
|
Dividend per share (p)
|
70.0
|
67.9
|
3.1%
|
|
Net cash inflow from operating
activities (£m)
|
410.6
|
242.1
|
69.6%
|
|
Adjusted1 net funds
(£m)
|
459.0
|
244.3
|
87.9%
|
|
Statutory measures
|
2023
|
2022
|
Change
|
|
Operating profit (£m)
|
268.8
|
256.4
|
4.8%
|
|
Profit before tax (£m)
|
272.1
|
249.0
|
9.3%
|
|
Diluted EPS (p)
|
173.2
|
159.1
|
8.9%
|
|
Net funds (£m)
|
343.6
|
117.2
|
193.2%
|
|
1Alternative performance measures (APMs) and other terms are
used throughout this announcement. These are defined in full in the
appendix to this announcement.
Financial highlights - 19th consecutive year of
adjusted EPS growth
·
Another record year of revenue, gross profit and
adjusted EPS while continuing to invest for future
growth
·
Gross invoiced income of over £10bn, up 11.4%,
driven by strong growth in Technology Sourcing and solid growth in
Services, with gross profit up 10.2%
·
Adjusted PBT up 5.4% reflecting higher levels of
strategic investment; adjusted diluted EPS up 3.0%
·
Excellent cash generation driven by effective
inventory management with adjusted net funds increasing by £214.7m
to £459.0m
Operational and strategic highlights
·
Strong Group performance reflects the benefits of
our integrated Technology Sourcing and Services model as well as
our broad geographic diversity
·
Technology Sourcing gross invoiced income growth
of 13.1% in constant currency, driven by resilient large enterprise
spend and further market share gains
·
Services revenue growth of 3.1% in constant
currency, with gross margin performance improving across the
year
·
Continued momentum in Germany with adjusted
operating profit increase of 13.8% in constant currency,
reinforcing our leading market position
·
Strong growth in North America with adjusted
operating profit increase of 24.0% in constant currency,
demonstrating the scale of the long-term growth
opportunity
·
£28.1m of investment in strategic initiatives
(2022: £14.8m) to improve our capabilities, enhance productivity
and secure future growth
·
2032 mid-term and 2040 Net Zero targets approved
by SBTi as part of our Sustainability roadmap
Shareholder returns
·
Proposed final dividend of 47.4p, increasing the
full year dividend by 3.1% to 70.0p
·
Given the strength of our balance sheet we
continue to evaluate a number of capital allocation
options
Outlook
·
Expect to make further progress in 2024 with
growth weighted to the second half of the year, reflecting a
significantly more challenging comparison in the first half of the
year than in the second half
Mike Norris, Chief Executive Officer of Computacenter plc,
commented:
"We delivered our nineteenth
consecutive year of growth in adjusted earnings per share,
outperforming our markets in 2023, as our large customers continued
to invest heavily in new technology. We managed an uncertain
macroeconomic backdrop and inflationary pressures effectively,
reduced our inventory significantly, resulting in a record net cash
position. As planned, we stepped up our investment in strategic
initiatives to underpin our competitiveness and future
growth.
"Overall we expect 2024 to be another
year of progress with growth weighted to the second half, while
continuing to invest for future growth. Looking further ahead, the
combination of the strength of our integrated Technology Sourcing
and Services model and our geographic diversity, gives us continued
confidence in our long-term growth prospects."
Enquiries:
Computacenter plc
|
|
Mike Norris, CEO
|
+44 (0) 1707 631 601
|
Chris Jehle, CFO
|
+44 (0) 1707 631 346
|
Christian Cowley, Investor
Relations
|
+44 (0) 1707 631 132
|
|
|
Teneo
|
|
James Macey White / Matt
Low
|
+44 (0) 207 353 4200
|
About Computacenter:
Computacenter is a leading
independent technology and services provider, trusted by large
corporate and public sector organisations. We are a responsible
business that believes in winning together for our people and our
planet. We help our customers to Source, Transform and Manage their
technology infrastructure to deliver digital transformation,
enabling people and their business. Computacenter plc is a public
company quoted on the London Stock Exchange (CCC.L) and a member of
FTSE 250. Computacenter employs over 20,000 people
worldwide.
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 2023 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.
Chief Executive Officer's
review
2023 was another record year for
Computacenter, with further growth in gross profit, adjusted profit
before tax and adjusted earnings per share. This reflects the
strength and benefits of our integrated Technology Sourcing and
Services model, as well as our geographic diversity. We achieved
this result despite the uncertain macroeconomic backdrop and
elevated inflation, while increasing our investment in strategic
initiatives to secure future growth.
By staying faithful to our strategy
and focusing on customer needs, over the last five years
we have grown organically and also significantly
expanded our geographic footprint through targeted acquisitions in
North America. This enlarged platform has delivered a step change
in profits, with adjusted profit before tax and adjusted earnings
per share more than doubling over the same period.
We now have more than 20,000
colleagues worldwide and their commitment to our customers drives
our success. We believe in empowering our people and helping them
to make good business decisions. With an average service length of
over nine years, many have devoted significant parts of their
careers to Computacenter and I thank them all for their
contribution and agility, especially in navigating the various
significant unexpected events of recent years.
Outperforming our markets
In 2023 we grew faster than both the
market and our major competitors and have gained further market
share as a result. We benefited from our target market, the largest
organisations, proving the most resilient and continuing to invest
in technology, combined with the breadth of our capability across
Technology Sourcing and Services. Notable features of 2023 have
been the ongoing growth of our share with some existing large
customers, in addition to acquiring some strategically significant
new customers, with whom we expect to grow in the coming years. We
are grateful for their faith in us and look forward to supporting
their ambitions.
Technology Sourcing
Technology Sourcing grew by 12.9% on
a gross invoiced income basis and by 13.1% in constant currency,
fuelled by strong growth in networking and data center.
Workplace-related activity remained subdued following the
significant spend during the pandemic but will naturally recover as
customers refresh the workplace environment and implement new
technologies, including AI. During the year, and notably in the
first half of 2023 we benefited from exceptional demand from
certain customers, which we expect to normalise in 2024. Gross
margin performance was robust, reflecting our scale benefits and
changes in product mix.
Industry supply chains and customer
ordering behaviours have returned to pre-Covid normalised levels,
with customers no longer placing long lead-time orders due to the
improved availability of product. Backlogs for most of our
geographies have therefore decreased and as a consequence we
responded by managing down our inventory position very effectively,
which has helped drive very strong cash generation.
We continue to invest in and develop
our value-added services to ensure our customers have consistently
great experiences. Our Integration Centers are benefiting from
investment in greater automation to improve efficiency and agility.
Our international reach, which matches the footprint of many of our
large multi-national customers, is helping us to win new business
and is an ongoing source of differentiation. Our Circular Services
capability is also helping customers deliver on their
sustainability agendas.
Services
Services, which encompasses
Professional and Managed Services, is critical to our business
model. In 2023 Services revenue increased by 4.2% and by 3.1% in
constant currency. Our Services gross margin was impacted by
inflation during the year. However it remains healthy versus
historical levels and improved as the year progressed, as we made
efficiencies and took advantage of contractual opportunities to
recover cost increases.
Customers value our highly skilled
consultants, engineers and programme managers across our
Professional Services business, using them to deploy new digital
technology, from complex network and data center integrations to
workplace rollouts. Professional Services has been a strong driver
of growth for Services over the last five years, and we see it as
an important future revenue and profit-growth driver for the
Group.
In 2023, we grew Professional
Services revenue by 6.6% and by 5.7% in constant currency, fuelled
by another strong performance in Germany, which reflects the
strength and breadth of our capability and depth of relationships
with large corporate and public sector customers. We are committed
to growing and enhancing Professional Services by having a broader
and scalable portfolio across all countries, based on a common
operating framework and a strong sales approach.
Managed Services generates visible
long-term contract revenue, as we maintain, support and manage our
customers' IT infrastructure and operations, to improve quality and
flexibility while reducing costs. These services are important to
the longevity of our customer relationships, with more than
three-quarters of our major European headquartered customers
contracting with us, supported by our Service Centers
globally.
In 2023, we grew Managed Services
revenue by 2.5% and by 1.3% in constant currency. Managed 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 which helped our
margin performance as the year progressed. Towards the end of the
year, we won some significant new contracts which will contribute
from 2024 onwards.
To offer increased value to our
customers we continue to invest in new and improved systems,
greater automation and offshoring. We now have nearly 1,400
colleagues in India versus 1,100 at the end of 2022, serving our
customers. The market opportunity for Managed Services is
substantial in our core areas of workplace, networking,
infrastructure and cloud.
Diversified across markets
Germany had an excellent year,
continuing its strong growth trajectory in 2023 as it consolidated
its market-leading position for large corporate and public sector
customers. Germany's performance reflects our deep capabilities in
technology areas such as networking and cyber and our ability to
support customers at every stage of the IT lifecycle.
In North America, the largest market
globally, we have a clear long-term growth opportunity as we
continue to leverage Computacenter's broader capability and
resources. In 2023, we further integrated the businesses we have
acquired and at the same time delivered a strong financial
performance.
We are also pleased to see positive
momentum in France, where our enlarged business is starting to
deliver on its potential, as well as strong performances in Belgium
and the Netherlands. Our UK performance was disappointing,
reflecting in part higher exposure to subdued workplace demand. We
responded by making changes to our UK leadership team and our sales
approach and saw the benefits start to come through at the end of
last year.
Investing to secure future growth
2023 has been a year of significant
additional investment in critical strategic initiatives, which will
improve our capabilities and productivity, enable us to further
leverage AI solutions, and underpin our systems for the future.
This investment increased by £13m to £28m and we expect to maintain
our spending at this level in 2024.
Most of the investment is focused on
our systems. We are not just upgrading but also moving to new
systems to obtain the security and support we need and to develop
competitive advantage through new toolsets and processes, all of
which will help secure future growth.
Cyber security remains one of the
greatest risks to our business. It also presents one of the
greatest opportunities to differentiate ourselves from our
competitors, both through our own resilience and by helping our
customers to overcome the same challenges. We will continue to
invest significantly to mitigate cyber risks.
Strong inventory management driving excellent cash generation
and balance sheet strength
As noted above, the easing of supply
chain challenges and better availability of product in 2023 meant
customers reverted to more normal ordering patterns and we reduced
our inventory significantly as a result. Consequently we generated
excellent levels of cash that exceeded our expectations.
The Group had £216.0m of inventory
as at 31 December 2023, a decrease of 48.3% since 31 December 2022
(£417.7m). Adjusted net funds increased by £214.7m to £459.0m at
the year end.
The strength of our balance sheet
provides us with significant optionality, and we continue to
evaluate a number of capital allocation options, including
potential inorganic growth and the return of surplus capital to
shareholders.
Outlook
Looking ahead to 2024, in the
context of a continuing uncertain macroeconomic backdrop, the Group
is well positioned to continue to compete and gain further market
share.
As anticipated, we expect to see
Technology Sourcing volumes normalise in 2024 as some of the
high-volume, lower-margin projects we delivered, especially in the
first half of 2023, were completed. In Services we expect continued
growth while inflationary pressures are expected to moderate
further.
We will continue to invest in
strategic initiatives to enhance our systems and improve our
competitive position to sustain our long-term performance. At the
same time, we are increasingly focused on delivering productivity
benefits across the Group.
Overall we expect to make further
progress in 2024 with growth weighted to the second half of the
year, reflecting a significantly more challenging comparison in the
first half of the year than in the second half.
Looking further ahead, we are excited
by the pace of innovation and growth in demand for technology. With
our strength in Technology Sourcing, Professional Services and
Managed Services, and focus on retaining and maximising customer
relationships over the long term, we believe that we are well
placed to deliver profitable growth and sustained cash
generation.
Technical guidance for
2024:
·
Strategic initiatives spend expected to be
£28-30m
·
Adjusted effective tax rate expected to be
28.5%-30.5%
·
Capex expected to be £35-40m
·
Dividend cover of 2-2.5x adjusted diluted
EPS
Our strategic
focus
Focus on Target Market Customers: We focus only on a target market of the largest corporate and
public sector organisations in each of our Sales countries. These
target market customers require us to offer significant flexibility
to meet their specific needs while also being competitive in each
part of our portfolio. We invest in sales and customer engagement
teams to build long-term relationships which earn customer loyalty.
We work hard to get to know our customers, understand their needs
and put them at the heart of everything we do.
Build Service Line scale and competitive
advantage: We want to be the logical
choice for our target market customers in the activities in which
we focus. Our Service Lines of Technology Sourcing, Professional
Services and Managed Services are focused on building and
leveraging capabilities to meet customer needs efficiently and
consistently and to build economic advantage.
Empower our People: We work
hard to understand the needs of our customers and allow our
customer-facing people to make responsible decisions that help us
meet the needs of our customers faster. It is an essential part of
our culture and helps us to differentiate from our competition,
ensuring that we are focused on the needs of our target market
customers and that our investments deliver an effective return. We
empower our customer-facing people, while ensuring that all
decisions are taken within a clear governance framework, supported
by strong customer profitability reporting and clear remuneration
plans.
We measure our strategic progress as
follows:
Customer relationships: retain
and maximise the relationships with our large corporate and public
sector customers over the long term
In 2023, we finished with 183
customers generating over £1m of gross profit, a decline of five
from the previous year. This decline is unusual in a year in which
we have maintained positive performance momentum. It is due to a
diversity of performance from our customer base - a small number of
customers have contributed significantly to our overall gross
profit through significant investment programmes, while others have
temporarily fallen below the £1m threshold, although they have
continued to spend with us. While the decline is due to customer
spending patterns, we are not complacent about this measure and
have placed renewed focus on improvement in this KPI in the years
ahead, through both growth in spend with existing customers as well
as new customer acquisition. At the same time, we are pleased that
the diversity and breadth of our customer base has delivered
resilience in our performance.
Services growth: lead with and
grow Services
In 2023, we grew Services revenue by
3.1% in constant currency in the context of a market where some
services competitors have been showing revenue decline. Group
Professional Services revenue grew by 5.7% in constant currency,
despite a decline in the UK. Our Germany business, where we
have built greater scale and competitive advantage, continues to
set a benchmark for the levels of Professional Services growth
achievable, with an increase of 13.5% in constant currency.
We believe that we can grow Professional Services across the Group
significantly. We have organised our previously disparate
Professional Services resources into a single Group Service Line to
provide the necessary focus and to leverage our success in Germany
across the Group.
Group Managed Services revenue grew
by 1.3% in constant currency. Our Managed Services business
has continued to make reasonable progress in challenging market
conditions. Despite the impact of inflation and resulting upward
pressure on our cost base, customers continue to expect
productivity gains through systems and automation, the development
of which requires sustained and consistent investment. We are
particularly pleased with some new Managed Services contract wins
towards the end of 2023, which will support our continued growth in
the years ahead.
Productivity: increase the
adjusted operating profit we retain as a proportion of our gross
profit
Productivity is an important driver
of value for the Group and we have broadened the way we measure
this KPI. We are using gross profit conversion as the best overall
productivity measure for our business across all our activities. It
measures how much of our gross profit we convert into adjusted
operating profit and helps measure how effectively we use our scale
to improve operational leverage.
Management has already been
incentivised on this KPI internally for some years. Gross profit
conversion increased to 30.1% in 2021, as a result of both
increased gross profit generation and improved Services
productivity as a result of the Covid-19 pandemic. In 2022,
Services productivity returned to more normal levels while
inflation increased selling, general and administrative costs,
resulting in a decline of gross profit conversion to
28.4%.
At the end of 2022 and throughout
2023 we have increased central corporate costs, primarily driven by
the increased spend in strategic initiatives, resulting in a
reduction in gross profit conversion to 26.0%. We believe this
investment is essential to underpin our long-term competitiveness
and will continue at an increased level in 2024.
Responsible
business
Computacenter continues to make good
progress in line with our Sustainability Strategy, maintaining
Carbon Neutrality for Scope 1 and 2 emissions for the second year.
In 2023, we became one of the first in our industry to have our
near-term, long-term and 2040 Net Zero targets approved by SBTi.
During the same period, we saw our annual CDP disclosure ranking
increase again, this time to A-.
In parallel, we have been creating
positive impact for our people, customers and communities as part
of our Social Strategy. Within our business, we have increased the
percentage of senior roles held by women and the percentage of
women across our workforce; we now have 1,400 more women than we
did four years ago. This is just one of the areas of progress
across our Diversity and Inclusion programmes.
We have also continued in our
support of the communities around us, combining fundraising for
charities with our own outreach and volunteering initiatives.
During 2023, in the UK alone, we reached 21,135 young people
through our social outreach programmes delivered by our volunteer
network.
Underpinning our responsible
business approach is our Sustainable Operations Strategy, which
combines the systems and actions we need to ensure our
environmental, social and compliance goals are addressed across our
business and supply chain.
Summary of 2023 Group
performance
In 2023, we continued to see strong
demand for Technology Sourcing, with our target market, the largest
customers, proving the most resilient and continuing to invest in
technology. We grew our share within existing customers and also
acquired new customers.
Our Services business delivered solid growth during the year, with
Professional Services revenue growing faster than Managed Services.
Total gross invoiced income
increased by 11.4% and by 11.3% in constant currency and total
revenue increased by 7.0% and by 6.9% in constant currency. Gross
profit increased by 10.2% on a reported basis and by 9.8% in
constant currency, driven by the strength of Technology Sourcing.
Group gross margin increased by 44 basis points to 15.1%,
reflecting a 74 basis points increase in Technology Sourcing and a
32 basis points decline in Services.
Adjusted operating profit increased
by 0.9% on a reported basis and by 0.6% in constant currency,
largely reflecting the impact of inflation and incremental
investment in strategic initiatives. By geography, Germany and
North America delivered strong growth in adjusted operating profit,
more than offsetting a weaker performance in the
UK.
Adjusted profit before tax increased
by 5.4% on a reported basis and by 5.1% in constant currency,
benefiting from higher net finance income. Adjusted diluted EPS
increased by 3.0%, reflecting an increase in the effective tax rate
to 27.6% (2022: 25.5%). Profit before tax increased by 9.3%. The
difference between profit before tax and adjusted profit before tax
relates to the Group's net costs of £5.9m from exceptional and
other adjusting items, related to exceptional and other adjusting
items associated with the acquisitions of Pivot and BITS. Diluted
EPS increased by 8.9%.
Our cash performance was excellent as
we reduced inventory, resulting in an increase of adjusted net
funds of £214.7m to £459.0m.
Group performance
Results
|
2023
£m
|
2022
£m
|
Change
|
Change in constant
currency
|
Technology Sourcing gross invoiced income
|
8,444.9
|
7,481.6
|
12.9%
|
13.1%
|
Services revenue
|
1,636.5
|
1,570.6
|
4.2%
|
3.1%
|
Professional Services
revenue
|
678.8
|
636.6
|
6.6%
|
5.7%
|
Managed Services revenue
|
957.7
|
934.0
|
2.5%
|
1.3%
|
Total gross invoiced
income
|
10,081.4
|
9,052.2
|
11.4%
|
11.3%
|
|
|
|
|
|
Technology Sourcing revenue
|
5,286.3
|
4,899.9
|
7.9%
|
8.1%
|
Services revenue
|
1,636.5
|
1,570.6
|
4.2%
|
3.1%
|
Professional Services
revenue
|
678.8
|
636.6
|
6.6%
|
5.7%
|
Managed Services revenue
|
957.7
|
934.0
|
2.5%
|
1.3%
|
Total revenue
|
6,922.8
|
6,470.5
|
7.0%
|
6.9%
|
|
|
|
|
|
Gross profit
|
1,044.0
|
947.1
|
10.2%
|
9.8%
|
Adjusted total administrative
expenses
|
(772.5)
|
(678.0)
|
13.9%
|
13.5%
|
Adjusted operating profit
|
271.5
|
269.1
|
0.9%
|
0.6%
|
Net adjusted finance income /
(costs)
|
6.5
|
(5.4)
|
|
|
Adjusted profit before tax
|
278.0
|
263.7
|
5.4%
|
5.1%
|
Adjusted diluted earnings per share
(p)
|
174.8
|
169.7
|
3.0%
|
|
|
|
|
|
|
Gross profit
|
1,044.0
|
947.1
|
10.2%
|
|
Total administrative
expenses
|
(783.3)
|
(690.7)
|
13.4%
|
|
Other income related to acquisition
of subsidiary
|
5.3
|
-
|
|
|
Gain on acquisition of
subsidiary
|
2.8
|
-
|
|
|
Operating profit
|
268.8
|
256.4
|
4.8%
|
|
Net finance income /
(costs)
|
3.3
|
(7.4)
|
|
|
Profit before tax
|
272.1
|
249.0
|
9.3%
|
|
Diluted EPS (p)
|
173.2
|
159.1
|
8.9%
|
|
Technology
Sourcing
Technology Sourcing achieved strong
growth during the year, driven by the
spread of the customer base across multiple market segments,
technology lines and geographies, which create durability and
sustainability through diversification. After a very strong performance in the first half driven by
certain high-volume projects, as expected, the second half saw more
normalised activity levels as these were completed.
Group Technology Sourcing gross
invoiced income grew by 13.1% in constant currency. Technology
Sourcing gross margin increased by 74 basis points, reflecting
broad-based improvements largely offsetting the impact of certain
projects with lower-margin volumes, and a higher-software
mix.
By technology area demand has been
strongest in networking and data center. Workplace has been subdued
reflecting high levels of investment during the pandemic. Customers
continue 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. The heightened cyber
threat landscape continues to drive demand in this area.
By geography, Germany and North
America were the key drivers of growth. North America benefited in
particular from certain high-volume, lower-margin projects which
are expected to normalise in 2024.
Our product order backlog, which is
the total value of committed outstanding purchase orders placed
with our technology vendors against non-cancellable sales orders
for delivery within 12 months, as at 31 December 2023, is
significantly lower than the prior-year equivalent. The reduction
largely reflects the completion of certain high-volume projects in
North America and the return to usual customer ordering behaviour
as industry supply chains returned to normal. The product order
backlog at 31 December 2023 was £1,222.3m, on a gross invoiced
income basis, a 56.3% decrease since 31 December 2022 (£2,794.6m)
in constant currency.
The Technology Sourcing backlog,
alongside the Managed Services contract base and the Professional
Services forward order book, provide visibility of future revenues
in these areas.
Services
Our Services performance for the
year was solid. Total Services revenue grew by 3.1% in constant
currency. Services gross margin decreased by 32 basis points during
the year, mainly reflecting the impact of inflation and some
onboarding costs for contracts won in 2022. We managed our margin
recovery more effectively across the year, resulting in a better
margin performance in the second half.
Professional Services revenue grew
by 5.7% in constant currency and accounted for 41% of total
Services revenue. Germany, our largest source of Professional
Services revenue, grew strongly during the year across all
solutions lines. This outweighed the weaker performance in the UK,
which reflected the softer environment for workplace.
Managed Services revenue grew by
1.3% in constant currency and accounted for 59% of total Services
revenue. Germany, our largest source of Managed Services revenue,
grew well during the year reflecting contracts won in 2022. The UK
experienced a slight decline in revenue in 2023, although a number
of contract wins towards the end of the year are expected to
support growth in 2024 and beyond.
Trading reviews by
geography
United Kingdom
Results
|
2023
£m
|
2022
£m
|
Change
|
Technology Sourcing gross invoiced income
|
1,938.1
|
1,864.2
|
4.0%
|
Services revenue
|
441.9
|
460.3
|
(4.0%)
|
Professional Services
revenue
|
132.2
|
147.5
|
(10.4%)
|
Managed Services revenue
|
309.7
|
312.8
|
(1.0%)
|
Total gross invoiced income
|
2,380.0
|
2,324.5
|
2.4%
|
Technology Sourcing revenue
|
771.8
|
809.1
|
(4.6%)
|
Services revenue
|
441.9
|
460.3
|
(4.0%)
|
Professional Services
revenue
|
132.2
|
147.5
|
(10.4%)
|
Managed Services revenue
|
309.7
|
312.8
|
(1.0%)
|
Total revenue
|
1,213.7
|
1,269.4
|
(4.4%)
|
|
|
|
|
Gross profit
|
250.8
|
259.2
|
(3.2%)
|
Adjusted administrative
expenses
|
(192.0)
|
(178.7)
|
7.4%
|
Adjusted operating profit
|
58.8
|
80.5
|
(27.0%)
|
The UK delivered a weaker result in
a soft market, especially for workplace activity. Total gross
invoiced income increased by 2.4% reflecting growth in Technology
Sourcing, partly offset by a 4.0% decline in Services revenue.
Total revenue decreased by 4.4% reflecting a higher mix of
software. Gross profit decreased by 3.2% with gross margin
increasing by 24 basis points. Administrative expenses increased by
7.4% largely reflecting inflation and higher people costs,
resulting in adjusted operating profit decreasing by
27.0%.
The UK market softened during the
year due to unsettled economic conditions, with businesses and
organisations delaying project implementations and investment
decisions.
Early in the year, we implemented
new leadership followed by significant structural changes, to
enhance our focus on our target market of large corporate and
public sector organisations and maximise growth. 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.
While near-term demand remains uncertain, we are encouraged by some
significant Services contract wins towards the end of the
year.
Technology Sourcing
Technology Sourcing gross invoiced
income increased by 4.0%. Volumes started the year strongly but
softened as the year progressed. Gross margin increased by 31 basis
points.
Demand for hardware was subdued,
particularly in the workplace, although we increased share with our
key vendors. This follows customers' significant investments
through the pandemic to support home and hybrid working and the
completion of a number of large Windows 10 rollouts. As
anticipated, this has led to a lag in customer adoption of Windows
11. Workplace activity is an important driver of utilisation at our
Integration Centers, where our costs remain largely fixed. Software
demand was stronger in areas such as data center and
cloud.
We expect the adoption of Windows 11
to gain momentum during the second half of 2024. This will likely
drive increased demand for new hardware, as customers upgrade their
systems to align with the new operating system.
The product order backlog at 31
December 2023 was £364.3m. This represents a 10.1% increase since
31 December 2022 (£331.0m).
Services
Services revenue declined by 4.0%,
with Managed Services decreasing by 1.0% and Professional Services
by 10.4%. Gross margin increased by 11 basis points, reflecting
good recovery of cost inflation.
The lower demand in Technology
Sourcing has had a ripple effect in Professional Services, which
led to lower demand for workplace-related activities. This
outweighed the significant growth achieved in supporting customers'
adoption of public cloud and expanding and securing their
networks.
In Managed Services, we concluded a
large number of contract renewals during the year. Encouragingly,
towards the end of the year we secured a large public sector
contract as well as a number of smaller corporate contracts, all of
which also provide growth opportunities in Technology Sourcing and
Professional Services.
Germany
Results
|
2023
£m
|
2022
£m
|
Change
|
Change in constant
currency
|
Technology Sourcing gross invoiced income
|
2,111.5
|
1,704.7
|
23.9%
|
21.7%
|
Services revenue
|
765.7
|
690.4
|
10.9%
|
8.7%
|
Professional Services
revenue
|
365.4
|
315.7
|
15.7%
|
13.5%
|
Managed Services revenue
|
400.3
|
374.7
|
6.8%
|
4.7%
|
Total gross invoiced
income
|
2,877.2
|
2,395.1
|
20.1%
|
17.9%
|
|
|
|
|
|
Technology Sourcing revenue
|
1,261.8
|
1,153.1
|
9.4%
|
7.5%
|
Services revenue
|
765.7
|
690.4
|
10.9%
|
8.7%
|
Professional Services
revenue
|
365.4
|
315.7
|
15.7%
|
13.5%
|
Managed Services revenue
|
400.3
|
374.7
|
6.8%
|
4.7%
|
Total revenue
|
2,027.5
|
1,843.5
|
10.0%
|
8.0%
|
|
|
|
|
|
Gross profit
|
374.5
|
325.1
|
15.2%
|
13.1%
|
Adjusted administrative
expenses
|
(211.5)
|
(184.2)
|
14.8%
|
12.5%
|
Adjusted operating profit
|
163.0
|
140.9
|
15.7%
|
13.8%
|
Germany delivered another strong
year of growth, reflecting the depth and breadth of our
capabilities and customer relationships. Total gross invoiced
income increased by 17.9% in constant currency, driven by very
strong growth in Technology Sourcing and strong growth in Services
revenue. Gross profit increased by 13.1% in constant currency with
gross margin increasing by 84 basis points, largely reflecting the
strength of the Technology Sourcing performance. Administrative
expenses increased by 12.5% in constant currency reflecting higher
commissions and inflation, resulting in adjusted operating profit
growth of 13.8% in constant currency.
We are benefiting from our strong
focus on public sector and enterprise business. We significantly
broadened our portfolio with existing customers and expanded our
customer base. Our investments in the salesforce and broadening the
technology and skills base are showing clear benefits and creating
the basis for further growth.
The breadth of our portfolio is a
key driver of our growth. 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 will run for five years. We will continue to equip,
modernise, and operate IT infrastructure in all schools for a large
southern German state capital in the coming years. This is an
important milestone as we develop our offer to the German education
market. In the transport sector, we expanded our scope with the
largest German transport company and we will now provide a large
part of its personal computer client infrastructure from next year
onwards. Towards the end of the year, we won a significant IT
infrastructure framework agreement with one of Germany's largest
airports. In chemical and pharmaceuticals, we won Managed Services
business with a global producer and will be responsible for the
Global Service Desk. In addition, we significantly expanded our app
development and cloud management business following investment in
developers based in Cluj, Romania, to support our solution
designers and project managers in Germany.
Technology Sourcing
Technology Sourcing gross invoiced
income increased by 21.7% in constant currency, well ahead of
market growth. This was driven by networking and security but data
center and workplace also showed good growth. Technology Sourcing
gross margin was very strong, increasing by 255 basis points over
the period due to strong product mix and increased share of
software volumes.
In addition to the increasingly
strong software demand, we are seeing greater customer demand to
bundle procurements in bigger framework contracts. This
particularly applies to the global requirements of large
international customers and to the high demand for infrastructure
from our major public sector clients at state and federal
level.
We also see demand for the
combination of innovative and flexible financing solutions with
asset management, deployment and maintenance services. The first
international implementation of Computacenter's Device as a Service
(DaaS) solution went live for a large German financial institution
during the year.
The product order backlog at 31
December 2023 was £234.9m, a 25.6% decrease in constant currency
since 31 December 2022 (£315.6m). This decrease largely reflects
customer ordering patterns returning to normal.
Services
Services revenue increased by 8.7%
in constant currency with 13.5% growth in Professional Services and
4.7% growth in Managed Services. Services gross margin declined by
205 basis points as Managed Services experienced an increase in
costs, most of which was inflation-related. 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-reduction measures.
Professional Services saw continuing
strong demand from public sector customers for support, engineering
and consultancy services. 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. We expect demand to be robust
in the coming years and these areas will remain our focus. We also
see a continuing need for project support and skills in our
corporate 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, which we have grown organically, continues to
be in high demand with our customers.
In Managed Services we are working
hard to mitigate cost inflation by passing on the higher costs to
our customers, where contractually appropriate, and by achieving
additional savings, for example by using more automation. Our
second challenge was to complete the transformational activities
and technology refresh at a small number of customers in
2023. We have a very solid pipeline
particularly in workplace and networking, where we are very well
positioned. An increasing number of our international customers are
looking for IT infrastructure service providers with a global
capability for these services to improve quality and flexibility
while reducing costs.
France
Results
|
2023
£m
|
2022
£m
|
Change
|
Change in constant
currency
|
Technology Sourcing gross invoiced income
|
728.5
|
606.7
|
20.1%
|
18.2%
|
Services revenue
|
183.6
|
178.1
|
3.1%
|
1.0%
|
Professional Services
revenue
|
50.8
|
41.7
|
21.8%
|
19.2%
|
Managed Services revenue
|
132.8
|
136.4
|
(2.6%)
|
(4.6%)
|
Total gross invoiced
income
|
912.1
|
784.8
|
16.2%
|
14.3%
|
|
|
|
|
|
Technology Sourcing revenue
|
479.9
|
435.8
|
10.1%
|
8.3%
|
Services revenue
|
183.6
|
178.1
|
3.1%
|
1.0%
|
Professional Services
revenue
|
50.8
|
41.7
|
21.8%
|
19.2%
|
Managed Services revenue
|
132.8
|
136.4
|
(2.6%)
|
(4.6%)
|
Total revenue
|
663.5
|
613.9
|
8.1%
|
6.2%
|
|
|
|
|
|
Gross profit
|
87.3
|
76.7
|
13.8%
|
12.3%
|
Adjusted administrative
expenses
|
(78.6)
|
(69.6)
|
12.9%
|
10.9%
|
Adjusted operating profit
|
8.7
|
7.1
|
22.5%
|
26.3%
|
France continued its momentum into
2023 and delivered further strong growth during the period. Total
gross invoiced income increased by 14.3% in constant currency,
driven by strong growth in Technology Sourcing and a slight
increase in Services revenue. Gross profit rose 12.3% in constant
currency with gross margin increasing by 66 basis points, largely
due to higher infrastructure and software mix. Administrative
expenses increased by 10.9% in constant currency, reflecting
targeted investment in sales headcount and inflation, resulting in
adjusted operating profit increasing by 26.3% in constant currency
to £8.7m.
Demand for Technology Sourcing was
stronger than for Managed Services, where decision making was
slower. During the year we continued to strengthen our position in
networking and data center, aided by the full integration of CCNS,
the business we acquired towards the end of
2020.
Technology Sourcing
Technology Sourcing gross invoiced
income increased by 18.2% in constant currency, with a strong
performance across both our corporate and public sector businesses.
Technology Sourcing gross margin increased by 111 basis points,
largely reflecting a higher-margin product mix.
The public sector remains the
biggest contributor and this is mainly related to growth in
multi-year framework agreements. We increased our presence in this
area and were successful in winning new software and networking
contracts, which we expect to drive growth. We continue to invest
in our technical skills and are committed to maintaining the
highest levels of accreditations for our priority technology
vendors, especially in networking.
The product order backlog at 31
December 2023 was £124.1m representing a 7.9% increase in constant
currency since 31 December 2022 (£115.0m).
Services
Services revenue increased by 1.0%
in constant currency, with 19.2% growth in Professional Services
offset by a 4.6% decline in Managed Services. Services gross margin
decreased by 87 basis points, reflecting volume declines in Managed
Services and the impact of inflation.
Growth in Professional Services was
mainly driven by large workplace and data center projects in the
public sector. Our Managed Services contracts are predominantly
with corporate customers. We saw a decrease in volume reflecting
the lack of significant new contract wins in 2022. It was a good
year for contract renewals in 2023 and in many instances, we have
been able to expand our scope of work. However, decisions on new
contract awards are taking longer, with some larger outcomes now
expected in 2024.
North America
Results
|
2023
£m
|
2022
£m
|
Change
|
Change in constant
currency
|
Technology Sourcing gross invoiced income
|
3,454.4
|
3,131.7
|
10.3%
|
11.8%
|
Services revenue
|
146.1
|
149.4
|
(2.2%)
|
(0.9%)
|
Professional Services
revenue
|
118.7
|
122.5
|
(3.1%)
|
(1.7%)
|
Managed Services revenue
|
27.4
|
26.9
|
1.9%
|
2.7%
|
Total gross invoiced
income
|
3,600.5
|
3,281.1
|
9.7%
|
11.2%
|
|
|
|
|
|
Technology Sourcing revenue
|
2,602.6
|
2,357.9
|
10.4%
|
11.8%
|
Services revenue
|
146.1
|
149.4
|
(2.2%)
|
(0.9%)
|
Professional Services
revenue
|
118.7
|
122.5
|
(3.1%)
|
(1.7%)
|
Managed Services revenue
|
27.4
|
26.9
|
1.9%
|
2.7%
|
Total revenue
|
2,748.7
|
2,507.3
|
9.6%
|
11.0%
|
|
|
|
|
|
Gross profit
|
267.5
|
238.3
|
12.3%
|
13.7%
|
Adjusted administrative
expenses
|
(202.5)
|
(185.3)
|
9.3%
|
10.7%
|
Adjusted operating profit
|
65.0
|
53.0
|
22.6%
|
24.0%
|
North America delivered a strong
performance for the year. Gross invoiced income increased by 11.2%
in constant currency and by 10.2% on an organic1 basis,
driven by excellent growth in Technology Sourcing, with Services
slightly down.
Gross profit increased by 13.7% in
constant currency with gross margin increasing by 23 basis points,
reflecting an underlying improvement across most of the business,
offsetting the impact of high-volume lower-margin business.
Administrative expenses increased by 10.7% in constant currency
driven by higher commissions and wage inflation, resulting in
adjusted operating profit increasing by 24.0% in constant currency
and by 22.3% on an organic basis.
During the year, we significantly
simplified the way that we go to market in North America. We have
reduced the number of customer sectors we work in from 13 to seven,
to ensure that we are targeting markets with appropriate sizes and
that we can support them effectively. We continue to expand the
number of salespeople to support our growth.
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. We received orders from 24 of
these organisations during 2023 and we expect them to become
significant customers for us in the future. We continue to focus
heavily on operational improvements within the North American
business and consolidated our CRM system in 2023. Implementing our
Group ERP system remains a top priority.
Technology Sourcing
Technology Sourcing gross invoiced
income grew by 11.8% in constant currency and by 10.8% on an
organic basis, reflecting exceptional growth with a hyperscale
customer. Our gross margin in Technology Sourcing increased by 23
basis points, with the underlying margin improvement across most of
the business outweighing the impact of the growth in the hyperscale
customer noted above, which commands a lower margin.
We continued to see a higher level of
'drop-ship' revenue driven by hyperscale customers, where products
are delivered directly from the vendor rather than passing through
our Integration Centers. Utilisation has however improved across
the year and we have a significant pipeline of opportunities to
grow Integration Center volumes.
We have continued to increase the
number of technology vendors we work with and our US presence is
helping to strengthen our relationships and programmes with
existing vendor partners globally.
BITS, which we acquired in July
2022, delivered good growth for the year, with a large customer
order that was deferred in the first half of the year fulfilled in
the second half.
The product order backlog at 31
December 2023 was £487.1m, a 75.8% decrease in constant currency
since 31 December 2022 (£2,009.0m). This decrease largely reflects
the completion of certain high-volume, lower-margin projects.
In 2024 we expect Technology
Sourcing volumes to normalise, following the exceptionally strong
growth we achieved with certain high-volume, lower-margin customers
in 2023. We believe we are well positioned to manage this over time
given the structural improvements we have made and our progress
with other large corporate
customers.
Services
Services revenue declined by 0.9% in
constant currency, reflecting a 1.7% decline in Professional
Services and 2.7% growth in Managed Services. Services gross margin
increased by 23 basis points. Services revenues are currently small
but we are excited by the opportunity to expand and leverage our
Group-wide tools and systems, in both Professional and Managed
Services.
Professional Services was impacted
by unsatisfactory returns from one large customer, which has now
been addressed. We continue to focus on efficiency to drive margin
improvement.
The Managed Services business
continues to execute our slow-and-steady growth plan. We went live
with a large new customer in the US and won two new contracts in
Canada, including one to provide helpdesk, asset and software
license management services to a healthcare customer. 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.
Towards the end of the year we won a contract with a global
automotive customer which will start in 2024, through successful
collaboration with our German business.
International
Results
|
2023
£m
|
2022
£m
|
Change
|
Change in constant
currency
|
Technology Sourcing gross invoiced income
|
212.4
|
174.3
|
21.9%
|
19.5%
|
Services revenue
|
99.2
|
92.4
|
7.4%
|
5.8%
|
Professional Services
revenue
|
11.7
|
9.2
|
27.2%
|
21.9%
|
Managed Services revenue
|
87.5
|
83.2
|
5.2%
|
3.9%
|
Total gross invoiced
income
|
311.6
|
266.7
|
16.8%
|
14.8%
|
|
|
|
|
|
Technology Sourcing revenue
|
170.2
|
144.0
|
18.2%
|
15.9%
|
Services revenue
|
99.2
|
92.4
|
7.4%
|
5.8%
|
Professional Services
revenue
|
11.7
|
9.2
|
27.2%
|
21.9%
|
Managed Services revenue
|
87.5
|
83.2
|
5.2%
|
3.9%
|
Total revenue
|
269.4
|
236.4
|
14.0%
|
12.0%
|
|
|
|
|
|
Gross profit
|
63.9
|
47.8
|
33.7%
|
34.8%
|
Adjusted administrative
expenses
|
(44.1)
|
(36.5)
|
20.8%
|
20.8%
|
Adjusted operating profit
|
19.8
|
11.3
|
75.2%
|
81.7%
|
The International Segment comprises
a number of trading entities, nearshore and offshore Service Center
locations and countries in which we have other support
operations.
The trading entities include
Computacenter Switzerland, Computacenter Belgium and Computacenter
Netherlands. As in other markets, we focus on working with the
largest corporate and public sector customers. Our target corporate
customers in these geographies typically have an international
footprint and we are well placed to support them outside their
domestic markets. We have a small number of important Managed
Services customers that are managed from our International Segment
and delivered using our Group Managed Services
capability.
Emerge 360 Japan k.k (Emerge), which
we acquired in May 2022, has Services delivery locations in Japan,
Australia, Singapore and Hong Kong. These trading entities are
joined in the Segment by the offshore 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. We established
further delivery locations in the Philippines and Brazil during the
year.
Financial performance
Total gross invoiced income
increased by 14.8% in constant currency, with strong growth in both
Technology Sourcing and Services revenue. Gross profit increased by
34.8% in constant currency, with gross margin up 350 basis points.
Technology Sourcing gross margin increased by 72 basis points and
Services gross margin grew by 972 basis points. Administrative
expenses increased by 20.8% in constant currency, resulting in
adjusted operating profit rising 81.7% in constant
currency.
Belgium delivered a strong
performance, driven primarily by growth in Technology Sourcing,
especially networking, outweighing weaker demand for workplace.
Managed Services also performed strongly helped by new business
with existing customers and a new multi-year outsourcing contract
with a global customer in the financial settlement services
industry.
The Netherlands achieved strong
growth and made good progress with new business targets. However,
one of the largest public sector Technology Sourcing contracts was
not renewed in the second half, which is expected have an impact on
2024 performance.
Switzerland had a challenging year,
as customers reviewed their hybrid working approach following the
pandemic, resulting in a significant decline in volumes in our main
Services contracts. We have taken action including increasing our
sales activity for national and international opportunities, while
resizing our delivery teams. In Technology
Sourcing, we have won some significant public sector contracts,
especially in the education sector, and won new business by working
closely with our preferred technology vendors.
The combined product order backlog
at 31 December 2023 was £12.0m, a 50.3% decrease in constant
currency since 31 December 2022 (£24.1m) in constant
currency.
Chief Financial Officer's review
2023 was another record year for
Computacenter, with growth in gross invoiced income, revenue and
all adjusted profit measures. Our cash performance was excellent,
driven by strong inventory management, resulting in adjusted net
funds of £459.0m at the end of the year. These strong results have
been achieved while continuing to invest in the business to secure
future growth.
Gross profit
Gross profit grew by 10.2% in the
year reflecting strong growth in gross invoiced income and revenue
and a robust gross margin performance. Group gross margin increased
by 44 basis points with an increase in Technology Sourcing gross
margin outweighing a slight decline in Services, as we managed
inflationary pressures effectively.
Overall, Group gross margin,
expressed as gross profit as a percentage of revenue, increased to
15.1% (2022: 14.6%).
Operating profit
Operating profit grew by 4.8% to
£268.8m (2022: 256.4m). Adjusted operating profit grew by 0.9% to
£271.5m (2022: £269.1m), and by 0.6% in constant
currency.
Administrative expenses increased by
13.4% to £783.3m (2022: £690.7m). We continue to monitor
cost-management initiatives across the Group to drive unnecessary
cost out of the business. However, we have balanced this with the
need to invest to ensure future growth is protected. During the
year we increased our spend on strategic corporate initiatives by
89.8% to £28.1m (2022: £14.8m). Adjusted administrative expenses
increased by 13.9% to £772.5m (2022: £678.0m), and by 13.5% in
constant currency.
Group gross profit conversion,
expressed as adjusted operating profit as a percentage of gross
profit, fell to 26.0% (2022: 28.4%) partly reflecting the increase
in investment during the year.
Profit before tax
The Group's profit before tax for
the year increased by 9.3% to £272.1m (2022: £249.0m). Adjusted
profit before tax increased by 5.4% to £278.0m (2022: £263.7m) and
by 5.1% in constant currency.
The acquisitions of BITS and Emerge,
completed in 2022, added £221.4m of revenue (2022: £187.1m) and
£9.3m of adjusted profit before tax (2022: £7.1m) to the Group's
reported results.
The difference between profit before
tax and adjusted profit before tax relates to the Group's net costs
of £5.9m (2022: net costs of £14.7m) from exceptional and other
adjusting items, associated with the acquisitions of Pivot and BITS
and the amortisation of acquired intangibles as a result of these
and other North American acquisitions. Further information on these
items can be found below.
Reconciliation to adjusted measures for the year ended
2023
|
Reported
full-year
results
£m
|
|
Adjustments
|
|
|
Principal element on agency
contracts
£m
|
Amortisation
of acquired intangibles
£m
|
Exceptionals
and others
£m
|
Adjusted
full-year
results
£m
|
Revenue
|
6,922.8
|
3,158.6
|
-
|
-
|
10,081.4
|
Cost of sales
|
(5,878.8)
|
(3,158.6)
|
-
|
-
|
(9,037.4)
|
Gross profit
|
1,044.0
|
-
|
-
|
-
|
1,044.0
|
Administrative expenses
|
(783.3)
|
-
|
10.8
|
-
|
(772.5)
|
Other income related to acquisition
of subsidiary
|
5.3
|
-
|
-
|
(5.3)
|
-
|
Gain related to acquisition of
subsidiary
|
2.8
|
-
|
-
|
(2.8)
|
-
|
Operating profit
|
268.8
|
-
|
10.8
|
(8.1)
|
271.5
|
Finance income
|
13.8
|
-
|
-
|
-
|
13.8
|
Finance costs
|
(10.5)
|
-
|
-
|
3.2
|
(7.3)
|
Profit before tax
|
272.1
|
-
|
10.8
|
(4.9)
|
278.0
|
Income tax expense
|
(72.7)
|
-
|
(4.0)
|
-
|
(76.7)
|
Profit for the year
|
199.4
|
-
|
6.8
|
(4.9)
|
201.3
|
Reconciliation to adjusted measures for the year ended
2022
|
Reported
full-year
results
£m
|
|
Adjustments
|
|
|
Principal element on agency
contracts
£m
|
Amortisation
of acquired intangibles
£m
|
Exceptionals
and others
£m
|
Adjusted
full-year
results
£m
|
Revenue
|
6,470.5
|
2,581.7
|
-
|
-
|
9,052.2
|
Cost of sales
|
(5,523.4)
|
(2,581.7)
|
-
|
-
|
(8,105.1)
|
Gross profit
|
947.1
|
-
|
-
|
-
|
947.1
|
Administrative expenses
|
(690.7)
|
-
|
10.9
|
1.8
|
(678.0)
|
Operating profit
|
256.4
|
-
|
10.9
|
1.8
|
269.1
|
Finance income
|
2.4
|
-
|
-
|
-
|
2.4
|
Finance costs
|
(9.8)
|
-
|
-
|
2.0
|
(7.8)
|
Profit before tax
|
249.0
|
-
|
10.9
|
3.8
|
263.7
|
Income tax expense
|
(64.8)
|
-
|
(2.3)
|
(0.2)
|
(67.3)
|
Profit for the year
|
184.2
|
-
|
8.6
|
3.6
|
196.4
|
Net
finance income
Net finance income in the year
amounted to £3.3m (2022: £7.4m charge). The main items included
within the net income for the year were £4.7m of interest charged
on lease liabilities recognised under IFRS 16 (2022: £4.9m) and
exceptional interest costs of £3.2m relating to the unwinding of
the discount on the contingent consideration for the purchase of
BITS, which was excluded on an adjusted basis (2022: £2.0m).
Outside of the specific items above, net finance income of £11.2m
was recorded (2022: net finance costs of £0.5m). On an adjusted
basis, the net finance income was £6.5m during the year (2022: net
finance cost of £5.4m).
Taxation
The tax charge was £72.7m (2022:
£64.8m) on profit before tax of £272.1m (2022: £249.0m). This
represented a tax rate of 26.7% (2022: 26.0%).
The tax credit related to the
amortisation of acquired intangibles was £4.0m (2022: £2.3m). The
£10.8m of amortisation of intangible assets was almost entirely a
result of the North American acquisitions (2022: £10.9m). As the
amortisation is recognised outside of our adjusted profitability,
the tax benefit on the amortisation is also reported outside of our
adjusted tax charge.
The adjusted tax charge for the year
was £76.7m (2022: £67.3m), on an adjusted profit before tax for the
year of £278.0m (2022: £263.7m). The effective tax rate (ETR) was
therefore 27.6% (2022: 25.5%) on an adjusted basis.
Overall, the adjusted ETR, is
continuing to trend upwards due to an increasing reweighting of the
geographic split of adjusted 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% to 25%.
The adjusted ETR is therefore within
the full-year range that we indicated at the time of our 2023
Interim Results, which showed an expected ETR for 2023 of 27% to
29.5%. We expect that the full year ETR in 2024 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 Group Tax Policy was reviewed
during the year and approved by the Audit Committee and the Board,
with no material changes from the prior year. We make every effort
to pay all the tax attributable to profits earned in each
jurisdiction that we operate. We do not artificially inflate or
reduce profits in one jurisdiction to provide a beneficial tax
result in another and maintain approved transfer pricing policies
and programmes, to meet local compliance requirements. Virtually
all of the tax charge in 2023 was incurred in either the United
Kingdom, Germany or United States tax jurisdictions, as it was in
2022. Computacenter France, which includes the Computacenter NS
acquisition within a tax group, has returned to being in a
profit-making position, increasing the amount of tax paid
locally.
There are no material tax risks
across the Group. Computacenter will recognise provisions and
accruals in respect of tax where there is a degree of estimation
and uncertainty, including where it relates to transfer pricing,
such that a balance cannot fully be determined until accepted by
the relevant tax authorities. For 2023, the Group Transfer Pricing
policy implemented in 2013 resulted in a licence fee of £36.9m
(2022: £38.7m), charged by Computacenter UK to Computacenter
Germany, Computacenter France and Computacenter Belgium. The
licence fee is equivalent to 1.0% of revenue and reflects the value
of the best practice and know-how that is owned by Computacenter UK
and used by the Group. It is consistent with the requirements of
the Organisation for Economic Co-operation and Development (OECD)
base erosion and profit shifting. The licence fee is recorded
outside the Segmental results found in note 4 to the summary
financial information within this announcement, which analyses
Segmental results down to adjusted operating profit.
The table below reconciles the tax
charge to the adjusted tax charge for the years ended 31 December
2023 and 31 December 2022.
|
2023
£m
|
2022
£m
|
Tax charge
|
72.7
|
64.8
|
Items to exclude from adjusted
tax:
|
|
|
Tax credit on amortisation of
acquired intangibles
|
4.0
|
2.3
|
Tax on exceptional items
|
-
|
0.2
|
Adjusted tax charge
|
76.7
|
67.3
|
Effective tax rate
|
26.7%
|
26.0%
|
Adjusted effective tax
rate
|
27.6%
|
25.5%
|
Profit for the year
The profit for the year increased by
8.3% to £199.4m (2022: £184.2m). The adjusted profit for the year
increased by 2.5% to £201.3m (2022: £196.4m) and by 1.8% in
constant currency.
Exceptional and other adjusting items
The net loss from exceptional and
other adjusting items in the year was £1.9m (2022: loss of £12.2m).
Excluding the tax items noted above, which resulted in a gain of
£4.0m (2022: gain of £2.5m), the profit before tax impact was a net
loss from exceptional and other adjusting items of £5.9m (2022:
loss of £14.7m).
A $9.3m (£7.4m) 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, $6.7m (£5.3m) has been recognised as
other income relating to the acquisition of a subsidiary for the
refunded sales tax amount. Further amounts of $1.6m (£1.3m) and
$1.0m (£0.8m) have been credited to adjusted interest income, for
the refund of statutory overpayment interest receivable on the
original payment, and adjusted administrative expenses, to
reimburse legal expenses incurred since acquisition, respectively.
The element related to the refunded sales tax amount is
non-operational in nature, significant 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 and 2023 earnings before interest,
taxation, depreciation and amortisation (EBITDA) and indebtedness.
During the year, and in accordance with the share purchase
agreement, the Group made its first earn-out payment amounting to
£17.4m ($21.2m) 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 £21.2m under the revised agreement should be recorded
as contingent consideration of £20.2m on a discounted basis as at
31 December 2023. The impact of changes to the payment structures
under the renegotiated agreement has resulted in a release during
the year of £2.8m. This release related to the acquisition is
non-operational in nature, significant in size and has therefore
been classified as an exceptional item.
A further £3.2m relating to the
unwinding of the discount on the contingent consideration for the
purchase of BITS has been removed from the adjusted net finance
expense and classified as exceptional interest costs.
During 2022, an exceptional loss
during the year of £1.8m resulted from costs directly relating to
the acquisitions made during the year of BITS and Emerge. These
costs include professional advisor fees and seller's fees that were
paid on completion of the transaction. These costs are
non-operational in nature, significant in size and unlikely to
recur and have therefore been classified as outside our adjusted
results. A further £2.0m relating to the unwinding of the discount
on the contingent consideration for the purchase of BITS has been
removed from the 2022 adjusted net finance expense and classified
as exceptional interest costs.
We have continued to exclude, as an
'other adjusting item', the amortisation of acquired intangible
assets in calculating our adjusted 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 £10.8m (2022: £10.9m), primarily relating to
the amortisation of the intangibles acquired as part of the recent
North American acquisitions.
Earnings per share
Diluted EPS increased by 8.9% to
173.2p per share (2022: 159.1p per share). Adjusted diluted EPS
increased by 3.0% to 174.8p per share (2022: 169.7p per
share).
|
|
|
|
2023
|
2022
|
Basic weighted average number of
shares (excluding own shares held) (m)
|
112.9
|
112.8
|
Effect of dilution:
|
|
|
Share options
|
1.2
|
2.1
|
Diluted weighted average number of
shares
|
114.1
|
114.9
|
|
|
|
Profit for the year attributable to
equity holders of the Parent (£m)
|
197.6
|
182.8
|
Basic earnings per share
(p)
|
175.0
|
162.1
|
Diluted earnings per share
(p)
|
173.2
|
159.1
|
|
|
|
Adjusted profit for the year
attributable to equity holders of the Parent (£m)
|
199.5
|
195.0
|
Adjusted basic earnings per share
(p)
|
176.7
|
172.9
|
Adjusted diluted earnings per share
(p)
|
174.8
|
169.7
|
Dividend
The Board recognises the importance
of dividends to shareholders and the Group has a long track record
of paying dividends and other special 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 is highly cash
generative enabling organic and inorganic investment in recent
years to be funded from cash reserves.
Dividends are paid from the
standalone balance sheet of the Parent Company and, as at 31
December 2023, the distributable reserves were £474.1m (31 December
2022: £257.4m). The distributable reserves have increased as a
result of the capital restructure described on below.
The Board is pleased to propose a
final dividend for 2023 of 47.4p per share (2022: 45.8p per share).
Together with the interim dividend, this brings the total ordinary
dividend for 2023 to 70.0p per share, representing a 3.1% increase
on the 2022 total dividend per share of 67.9p.
The Board has consistently applied
the Company's dividend policy, which states that the total dividend
paid will result in a dividend cover of 2 to 2.5 times based on
adjusted diluted EPS. In 2023, the cover was 2.5 times (2022: 2.5
times).
Subject to the approval of
shareholders at our Annual General Meeting on 14 May 2024, the
proposed dividend will be paid on Friday 5 July 2024. The dividend
record date is set as Friday 7 June 2024 and the shares will be
marked ex-dividend on Thursday 6 June 2024.
As a business that has returned
£945m 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. The strength of our balance sheet provides us with
significant optionality, and we continue to evaluate a number of
capital allocation options, including potential inorganic growth
and the return of surplus capital to shareholders.
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 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 £183.9m as at 31 December
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
separately as 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
administrative expenses.
Total central corporate costs were
significantly increased on last year with an 84.8% increase to
£43.8m (2022: £23.7m). 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 £12.8m (2022: £7.2m) due to
certain project costs, the dual running of several Group Executive
members handing over portfolios during the year, and the increase
in headcount aligned with central corporate costs;
· share-based payment charges associated with Group Executive
members as identified above, including the Group Executive
Directors, increased from £1.7m in 2022 to £2.8m in 2023, due
primarily to the value of Computacenter plc ordinary shares, the
overall outlook for the vesting of in-flight PSP awards and the
increase in management personnel aligned with central corporate
costs; and
· strategic corporate initiatives are designed to increase
capability and therefore competitive position, enhance productivity
or strengthen systems which underpin the Group. During the year
this spend was £28.1m, up 89.9% over 2022 (£14.8m), in line with
forecasts, as the Group increases the pace of its investment in new
systems, toolsets and cyber resilience.
Investments
In 2023 we nearly doubled our spend
on strategic corporate initiatives to £28.1m, all of which was
recognised through the income statement. This spend was spread
across projects that will improve our capabilities, productivity
and underpin our systems of the future.
Computacenter resells, deploys and
manages vendor technology for customers. This means we are
fundamentally a people-centric business. Customers remain loyal to
Computacenter because of the quality of our people and service and
this will always be the case. However there are a number of other
assets that we employ to deliver to our customers such as our
Service and Integration Center facilities, methodologies, best
practices and, in particular, great systems. We invest consistently
to improve and support these systems, which give us a competitive
advantage in a business which is about scale, repeatability and
agility.
Most of the spend is focused on our
systems to ensure that they continue to be secure and supportable.
We are not just upgrading, 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. We have continued to refine our systems
investment roadmap through to the end of 2027, with a programme to
replace legacy systems that enable our Technology Sourcing and
Services businesses. Investing in best-of-breed tools will lower
cost to serve, improve the quality of our offerings and enhance our
relevance to customers in the marketplace
Our systems need to be robust,
secure and able to handle large volumes. They also have to be
simple to use and adaptable to most customer eventualities. We
prioritise our plans for systems development, and other investments
in time and capital, in response to the ever-changing environment
in which we operate.
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
in cyber resilience.
Whilst cyber risk forms part of the
Group's overall Principal Risks, it could be argued that cyber risk
is the single major risk facing large corporates today.
Cash flow
The Group delivered a substantial
increase in net cash flow from operating activities, which totalled
£410.6m for 2023 (2022: £242.1m inflow).
During the year, net operating cash
inflows from working capital, including inventories, trade and
other receivables, and trade and other payables, were £136.7m
(2022: £60.8m outflow).
Throughout 2022, customers placed
advance orders of product, due to the significant product shortages
seen during the 18 months to 31 December 2022, to ensure continuity
of supply. 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, using
the strength of our balance sheet to support our customers during
product shortages. During 2023, supply chains returned to more
normal conditions and, as a result, customers have returned to
normal purchasing patterns. This has naturally led to both reduced
levels of inventory and product order backlogs. Our focus on
inventory control has delivered substantial reductions in
both Germany and North America, the two Segments where we
experienced the greatest inventory accumulation through
2022.
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 in our overall working capital
balance sheet position.
After interest, tax and gross
capital expenditure cashflows, our free cash flow was £339.9m
(2022: £150.9m).
|
|
|
|
31 December 2023
£m
|
31 December 2022
£m
|
Adjusted operating profit
|
271.5
|
269.1
|
Adjusting items
|
(2.7)
|
(12.7)
|
Operating profit
|
268.8
|
256.4
|
Other non-cash items and
adjustments
|
47.3
|
49.4
|
Change in working capital
|
136.7
|
(60.8)
|
Change in pensions and
provisions
|
(0.8)
|
(0.7)
|
Depreciation of right-of-use
assets
|
41.4
|
50.5
|
Cash generated from
operations
|
493.4
|
294.8
|
Interest and payments related to
lease liabilities
|
(46.1)
|
(55.2)
|
Adjusted operating cash
flow
|
447.3
|
239.6
|
Net interest
received/(paid)
|
10.5
|
(0.5)
|
Tax paid
|
(82.8)
|
(52.7)
|
Gross capital expenditure
|
(35.1)
|
(35.5)
|
Free cash flow
|
339.9
|
150.9
|
Dividends paid
|
(77.3)
|
(80.5)
|
Purchase of own shares net of
proceeds of exercise of employee share options
|
(28.8)
|
(28.2)
|
Acquisition of subsidiaries,
including contingent consideration and purchase of
non-controlling interests
|
(19.3)
|
(28.3)
|
Disposal of assets
|
-
|
1.1
|
Net cash flow
|
214.5
|
15.0
|
Net debt repayment
|
(6.9)
|
(16.6)
|
Increase/(decrease) in cash and cash
equivalents
|
207.6
|
(1.6)
|
Effect of exchange rates on cash and
cash equivalents
|
(0.8)
|
(7.2)
|
Cash and cash equivalents at the
beginning of the year
|
264.4
|
273.2
|
Cash and cash equivalents at the
year end
|
471.2
|
264.4
|
Opening net funds
|
117.2
|
95.3
|
Increase/(decrease) in cash and cash
equivalents including impact of exchange rates
|
206.8
|
(8.8)
|
Movements in borrowings
|
7.9
|
11.7
|
Movements in lease
liabilities
|
11.7
|
19.0
|
Closing net funds
|
343.6
|
117.2
|
|
|
|
Opening adjusted net
funds
|
244.3
|
241.4
|
Increase/(decrease) in cash and cash
equivalents including impact of exchange rates
|
206.8
|
(8.8)
|
Movements in borrowings
|
7.9
|
11.7
|
Closing adjusted net
funds
|
459.0
|
244.3
|
The Group had £216.0m of inventory
as at 31 December 2023, a decrease of 48.3% on the balance as at 31
December 2022 of £417.7m. The closing balance was materially lower
than the high point of £532.6m as at 30 September 2022, with a
reduction of £316.6m since that time. We expect that levels of
inventory will remain near the levels seen in the second half of
2023, in-line with historical operational norms. Whilst inventory
has materially improved, working capital cash flows during the year
were still impacted by the strong growth in revenue seen as the
business continues to expand.
Capital expenditure in the year was
£35.1m (2022: £35.5m) 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
£38.0m (2022: £34.4m) to satisfy maturing PSP awards and Sharesave
schemes and to reprovision the EBT in advance of future maturities.
During the year the Company received savings from employees of
£9.2m to purchase options within the Sharesave schemes (2022:
£6.2m).
During the year 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 $21.2m
(£17.4m) 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% of the voting shares in R.D. Trading Limited (RDC) were
acquired for a cash consideration of £1.9m. 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 during the
year by a net £6.9m (2022: £16.6m). We made regular repayments
towards the loan related to the construction of the German
headquarters in Kerpen and the customer financing facility in
Pivot.
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 typical period 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 31 December 2023
was £33.8m (31 December 2022: £45.1m).
The Group had no other debt
factoring at the end of 31 December 2023, outside this normal
course of business.
During December 2022, the Group
engaged in a limited factoring programme of trade receivables
within the German business, on a non-recourse basis, to provide
assurance against unforeseen liquidity issues which did not, in the
event, arise due to the continued aforementioned strength of cash
receipts in the final weeks of 2022. This factoring was for £46.1m
or 2.7% of the trade receivables before provisions balance as at 31
December 2022, the comparative balance sheet date. The Group had no
other debt factoring at the end of 31 December 2022, outside this
normal course of business.
Cash and cash equivalents and net funds
Cash and cash equivalents as at 31
December 2023 were £471.2m, compared to £264.4m at 31 December
2022. Net funds as at 31 December 2023 were £343.6m (31 December
2022: £117.2m).
The Group excludes £115.4m, as at 31
December 2023 (31 December 2022: £127.1m), of lease liabilities
from its non-GAAP adjusted net funds measure, to allow an
alternative view of the Group's overall liquidity position
excluding the effect of the lease liabilities required to be
capitalised the under the IFRS 16 accounting standard.
Adjusted net funds as at 31 December
2023 were £459.0m, compared to adjusted net funds of £244.3m as at
31 December 2022.
Net funds as at 31 December 2023 and
31 December 2022 were as follows:
|
31 December 2023
£m
|
31 December 2022
£m
|
Cash and short-term
deposits
|
471.2
|
264.4
|
Bank overdraft
|
-
|
-
|
Cash and cash equivalents
|
471.2
|
264.4
|
Bank loans - Pivot customer specific
facility
|
(4.5)
|
(7.7)
|
Bank loans - BITS
facility
|
-
|
(2.0)
|
Bank loans - Kerpen building
facility
|
(7.7)
|
(10.4)
|
Total bank loans
|
(12.2)
|
(20.1)
|
Adjusted net funds (excluding lease
liabilities)
|
459.0
|
244.3
|
Lease liabilities
|
(115.4)
|
(127.1)
|
Net funds
|
343.6
|
117.2
|
For a full reconciliation of net
funds and adjusted net funds, see note 9 to the to the summary
financial information within this announcement.
The Group had five specific credit
facilities in place during the year and no other material
borrowings.
The Group entered into a
multi-currency revolving loan committed facility of £200m on 9
December 2022. This facility had a term of five years plus two
one-year extension options exercisable on the first and second
anniversary of the facility and was due to expire on 8 December
2027. The Group has exercised the extension option on the first
anniversary of the commencement of the facility, extending the term
to six years with a revised expiry of 8 December 2028. A further
term extension option of one additional year remains available. 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 31
December 2023, the Group was in compliance with all covenants. To
improve short-term liquidity, £60m 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 31 December
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
£7.7m at 31 December 2023 (31 December 2022: £10.4m).
Pivot had £4.5m (31 December 2022:
£9.7m) financed with a major technology partner for hardware,
software and resold maintenance contracts that the Company had
purchased as part of a contract to lease these items to a key North
American customer.
Computacenter India Private Limited
has a local facility with HSBC India for local cash liquidity to
facilitate the continued growth of our operations in the country.
There was no interest-bearing debt drawn under this facility as at
31 December 2023.
The BITS subsidiary maintains a
ringfenced accounts receivable and inventory flooring arrangement
facility with Wells Fargo of up to $100m, 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 31 December
2023 (31 December 2022: £2.0m).
There were no other interest-bearing
trade payables as at 31 December 2023 (31 December 2022:
nil).
The Group's adjusted net funds
position contains no current asset investments (31 December 2022:
nil).
Trade creditor arrangements
Computacenter has a strong covenant
and enjoys a favourable credit rating from technology vendors and
other suppliers. Some suppliers provide standard credit directly on
their own credit risk, whereas other suppliers decide to sell the
debt to banks, which offer to purchase the receivables and manage
collection. The standard credit terms offered by suppliers are
typically between 30 and 60 days, whether provided directly or when
sold to a third-party finance provider. In the latter case, the
cost of the free-trade credit period is paid by the relevant
supplier, as part of the overall package of terms provided by
suppliers to Computacenter and our competitors.
Financial instruments
The Group's financial instruments
comprise borrowings, cash and liquid resources, and various items
that arise directly from its operations. The Group's policy is not
to undertake speculative trading in financial
instruments.
The Group enters into hedging
transactions, principally forward exchange contracts or currency
swaps, to manage currency risks arising from the Group's operations
and its sources of finance. As the Group continues to expand its
global reach and benefit from lower-cost operations in geographies
such as South Africa, Poland, Mexico and India, it has entered into
forward exchange contracts to help manage cost increases due to
currency movements.
The main risks arising from the
Group's financial instruments are interest rate, liquidity and
foreign currency risks. The overall financial instruments strategy
is to manage these risks in order to minimise their impact on the
Group's financial results. The policies for managing each of these
risks are set out below.
Interest rate risk
The Group finances its operations
through a mixture of retained profits, bank borrowings, leases and
loans for certain customer contracts. The Group's general bank
borrowings, other facilities and deposits are at floating rates. No
interest rate derivative contracts have been entered into. The
undrawn committed facility of £200m is at floating rates. However,
the borrowing facility for the operational headquarters in Germany
is at a fixed rate.
Liquidity risk
The Group's policy is to ensure that
it has sufficient funding and facilities to meet any foreseeable
peak in borrowing requirements. The Group's positive net cash was
maintained throughout 2023 and at the year end was £471.2m, with
net funds of £343.6m after including the Group's two specific
borrowing facilities and lease liabilities recognised under IFRS
16. Excluding lease liabilities, adjusted net funds was £459.0m at
the year end.
Due to strong cash generation over
many years, the Group can currently finance its operational
requirements from its cash balance, and it operates an informal
cash pooling arrangement for the majority of Group entities. The
Group has a committed facility of £200m, as noted above.
The Group has a Board-monitored
policy to manage its counterparty risk. This ensures that cash is
placed on deposit across a range of reputable banking
institutions.
Foreign currency risk
The Group operates primarily in the
United Kingdom, Germany, France and the United States, with smaller
operations in Australia, Belgium, Brazil Canada, China, Hong Kong,
Hungary, India, Ireland, Japan, Malaysia, Mexico, the Netherlands,
the Philippines, Poland, Romania, South Africa, Singapore, Spain
and Switzerland. The Group uses an informal cash pooling facility
to ensure that its operations outside the United Kingdom are
adequately funded, where principal receipts and payments are
denominated in euros and US dollars. For countries within the
Eurozone, the level of non-euro denominated sales is small and, if
material, the Group's policy is to eliminate currency exposure
through forward currency contracts. For our North American
operations, most transactions are denominated in US
dollars.
For the UK, the majority of sales
and purchases are denominated in pounds sterling and any material
trading exposures are eliminated through forward currency
contracts.
The Group has been successful in
winning international Services contracts, where Services are
provided in multiple countries. We aim to minimise currency
exposure by invoicing the customer in the same currency in which
the costs are incurred. For certain contracts, the Group's
committed contract costs are not denominated in the same currency
as its sales. In such circumstances, for example where contract
costs are denominated in South African rand, we eliminate currency
exposure for a foreseeable period on these future cash flows,
through forward currency contracts.
In 2023, the Group recognised a gain
of £2.8m (2022: loss of £2.5m) through other comprehensive income
in relation to the changes in fair value of related forward
currency contracts, where the cash flow hedges relating to firm
commitments were assessed to be highly effective.
The Group reports its results in
pounds sterling. The Group has seen relatively minor currency
translation movements, as the pound sterling fluctuations against
other currencies, particularly the US dollar and the euro, which
impacts us the most, largely offset each other.
The impact of restating 2022 results
at 2023 exchange rates would be an increase of £5.0m in 2022
revenue and an increase of £0.5m in 2022 adjusted profit before
tax.
Credit risk
The Group principally manages credit
risk through customer credit limits. The credit limit is set for
each customer based on its creditworthiness, using credit rating
agencies as a guide, and the anticipated levels of business
activity. These limits are determined when the customer account is
first set up and are regularly monitored thereafter. There are no
significant concentrations of credit risk within the Group. The
Group's major customer, disclosed in note 4 to the summary
financial information within this announcement, is a hyperscale
North American technology company which typically settles
outstanding amounts on shorter-than-average payment terms. The
maximum credit risk exposure relating to financial assets is
represented by their carrying value as at the balance sheet
date.
This Strategic Report was approved
by the Board on 19 March 2024 and was signed on its behalf
by:
MJ Norris
|
MC Jehle
|
Chief Executive Officer
|
Chief Financial Officer
|
Consolidated Income Statement
For the year ended 31 December
2023
|
Note
|
2023
£m
|
2022
£m
|
Revenue
|
4,5
|
6,922.8
|
6,470.5
|
Cost of sales
|
|
(5,878.8)
|
(5,523.4)
|
Gross profit
|
4
|
1,044.0
|
947.1
|
|
|
|
|
Administrative expenses
|
|
(783.3)
|
(690.7)
|
Other income related to acquisition
of a subsidiary
|
|
5.3
|
-
|
Gain related to acquisition of a
subsidiary
|
|
2.8
|
-
|
Operating profit
|
|
268.8
|
256.4
|
|
|
|
|
Finance income
|
|
13.8
|
2.4
|
Finance costs
|
|
(10.5)
|
(9.8)
|
Profit before tax
|
|
272.1
|
249.0
|
|
|
|
|
Income tax expense
|
7
|
(72.7)
|
(64.8)
|
Profit for the year
|
|
199.4
|
184.2
|
|
|
|
|
Attributable to:
|
|
|
|
Equity holders of the
Parent
|
|
197.6
|
182.8
|
Non-controlling interests
|
|
1.8
|
1.4
|
Profit for the year
|
|
199.4
|
184.2
|
|
|
|
|
Earnings per share:
|
|
|
|
- basic
|
8
|
175.0p
|
162.1p
|
- diluted
|
8
|
173.2p
|
159.1p
|
All of the activities of the Group
relate to continuing operations.
Consolidated Statement of Comprehensive
Income
For the year ended 31 December
2023
|
Note
|
2023
£m
|
2022
£m
|
Profit for the year
|
|
199.4
|
184.2
|
Items that may be reclassified to
the Consolidated Income Statement:
|
|
|
|
Gain/(loss) arising on cash flow
hedge
|
|
2.8
|
(2.5)
|
Income tax effect
|
7
|
(0.9)
|
1.0
|
|
|
1.9
|
(1.5)
|
Exchange differences on translation
of foreign operations
|
|
(25.8)
|
47.5
|
|
|
(23.9)
|
46.0
|
Items not to be reclassified to the
Consolidated Income Statement:
|
|
|
|
Remeasurement of defined benefit
plan
|
|
(2.8)
|
1.7
|
Other comprehensive expense for the
year, net of tax
|
|
(26.7)
|
47.7
|
|
|
|
|
Total comprehensive income for the
year
|
|
172.7
|
231.9
|
|
|
|
|
Attributable to:
|
|
|
|
Equity holders of the
Parent
|
|
171.3
|
229.9
|
Non-controlling interests
|
|
1.4
|
2.0
|
Total comprehensive income for the
year
|
|
172.7
|
231.9
|
Consolidated Balance Sheet
As at 31 December 2023
|
Note
|
2023
£m
|
2022
(restated*)
£m
|
1 January
2022*
£m
|
Non-current assets
|
|
|
|
|
Property, plant and
equipment
|
|
96.1
|
94.1
|
90.0
|
Right-of-use assets
|
|
104.5
|
119.4
|
138.1
|
Intangible assets
|
|
322.4
|
342.1
|
273.7
|
Investment in associate
|
|
0.1
|
0.1
|
0.1
|
Deferred income tax
assets
|
7
|
11.6
|
11.3
|
30.2
|
Trade and other
receivables*
|
|
21.1
|
9.9
|
-
|
Prepayments
|
5
|
10.3
|
19.4
|
16.6
|
|
|
566.1
|
596.3
|
548.7
|
Current assets
|
|
|
|
|
Inventories
|
|
216.0
|
417.7
|
341.3
|
Trade and other
receivables*
|
|
1,498.1
|
1,683.8
|
1,254.7
|
Income tax receivable
|
|
12.5
|
14.6
|
8.8
|
Prepayments
|
5
|
139.7
|
130.5
|
103.0
|
Accrued income*
|
5
|
151.9
|
129.2
|
148.1
|
Derivative financial
instruments
|
|
2.5
|
7.5
|
3.6
|
Cash and short-term
deposits*
|
9
|
471.2
|
264.4
|
285.2
|
|
|
2,491.9
|
2,647.7
|
2,144.7
|
Total assets
|
|
3,058.0
|
3,244.0
|
2,693.4
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Bank overdraft*
|
9
|
-
|
-
|
12.0
|
Trade and other payables
|
|
1,674.5
|
1,857.5
|
1,410.4
|
Deferred income
|
5
|
230.3
|
265.3
|
249.3
|
Financial liabilities
|
|
4.8
|
7.5
|
15.1
|
Lease liabilities
|
|
37.3
|
36.9
|
43.0
|
Derivative financial
instruments
|
|
6.3
|
8.7
|
2.5
|
Income tax payable*
|
|
16.9
|
30.9
|
27.4
|
Provisions
|
|
2.2
|
3.8
|
3.5
|
|
|
1,972.3
|
2,210.6
|
1,763.2
|
Non-current liabilities
|
|
|
|
|
Financial liabilities
|
|
7.4
|
12.6
|
16.7
|
Lease liabilities
|
|
78.1
|
90.2
|
103.1
|
Deferred income
|
5
|
4.3
|
7.9
|
8.3
|
Retirement benefit
obligation
|
|
26.2
|
23.0
|
21.8
|
Provisions
|
|
6.9
|
7.0
|
9.7
|
Deferred income tax
liabilities
|
7
|
13.4
|
20.7
|
25.8
|
|
|
136.3
|
161.4
|
185.4
|
Total liabilities
|
|
2,108.6
|
2,372.0
|
1,948.6
|
Net assets
|
|
949.4
|
872.0
|
744.8
|
|
|
|
|
|
Capital and reserves
|
|
|
|
|
Issued share capital
|
|
9.3
|
9.3
|
9.3
|
Share premium
|
|
4.0
|
4.0
|
4.0
|
Capital redemption
reserve
|
|
-
|
75.0
|
75.0
|
Own shares held
|
|
(140.4)
|
(127.7)
|
(115.5)
|
Translation and hedging
reserve
|
|
27.2
|
50.7
|
5.4
|
Retained earnings
|
|
1,041.6
|
854.4
|
762.3
|
Shareholders' equity
|
|
941.7
|
865.7
|
740.5
|
Non-controlling interests
|
|
7.7
|
6.3
|
4.3
|
Total equity
|
|
949.4
|
872.0
|
744.8
|
* Refer to note 2 for restatement of
prior-year comparatives.
Approved by the Board on 19 March
2024.
MJ Norris
|
MC Jehle
|
Chief Executive Officer
|
Chief Financial Officer
|
Consolidated Statement of Changes in Equity
For the year ended 31 December
2023
|
Attributable to equity holders of the Parent
|
|
|
|
|
Issued share capital
£m
|
Share
premium
£m
|
Capital
Redemption
reserve
£m
|
Own
shares
held
£m
|
Translation and hedging
reserves
£m
|
Retained earnings
£m
|
Share-
holders' equity
£m
|
Non-controlling interest
£m
|
Total
equity
£m
|
At 1 January 2023
|
9.3
|
4.0
|
75.0
|
(127.7)
|
50.7
|
854.4
|
865.7
|
6.3
|
872.0
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
197.6
|
197.6
|
1.8
|
199.4
|
Other comprehensive
(expense)
|
-
|
-
|
-
|
-
|
(23.5)
|
(2.8)
|
(26.3)
|
(0.4)
|
(26.7)
|
Total comprehensive
(expense)/income
|
-
|
-
|
-
|
-
|
(23.5)
|
194.8
|
171.3
|
1.4
|
172.7
|
Transactions with owners:
|
|
|
|
|
|
|
|
|
|
- Cost of share-based
payments
|
-
|
-
|
-
|
-
|
-
|
7.7
|
7.7
|
-
|
7.7
|
- Tax on share-based
payments
|
-
|
-
|
-
|
-
|
-
|
3.1
|
3.1
|
-
|
3.1
|
- Capital reduction
|
-
|
-
|
(75.0)
|
-
|
-
|
75.0
|
-
|
-
|
-
|
- Exercise of options
|
-
|
-
|
-
|
25.3
|
-
|
(16.1)
|
9.2
|
-
|
9.2
|
- Purchase of own shares
|
-
|
-
|
-
|
(38.0)
|
-
|
-
|
(38.0)
|
-
|
(38.0)
|
- Equity dividends
|
-
|
-
|
-
|
-
|
-
|
(77.3)
|
(77.3)
|
-
|
(77.3)
|
Total
|
-
|
-
|
(75.0)
|
(12.7)
|
-
|
(7.6)
|
(95.3)
|
-
|
(95.3)
|
At 31 December 2023
|
9.3
|
4.0
|
-
|
(140.4)
|
27.2
|
1,041.6
|
941.7
|
7.7
|
949.4
|
|
|
|
|
|
|
|
|
|
|
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 year
|
-
|
-
|
-
|
-
|
-
|
182.8
|
182.8
|
1.4
|
184.2
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
45.3
|
1.8
|
47.1
|
0.6
|
47.7
|
Total comprehensive
income
|
-
|
-
|
-
|
-
|
45.3
|
184.6
|
229.9
|
2.0
|
231.9
|
Transactions with owners:
|
|
|
|
|
|
|
|
|
|
- Cost of share-based
payments
|
-
|
-
|
-
|
-
|
-
|
8.6
|
8.6
|
-
|
8.6
|
- Tax on share-based
payments
|
-
|
-
|
-
|
-
|
-
|
(4.6)
|
(4.6)
|
-
|
(4.6)
|
- Exercise of options
|
-
|
-
|
-
|
22.2
|
-
|
(16.0)
|
6.2
|
-
|
6.2
|
- Purchase of own shares
|
-
|
-
|
-
|
(34.4)
|
-
|
-
|
(34.4)
|
-
|
(34.4)
|
- Equity dividends
|
-
|
-
|
-
|
-
|
-
|
(80.5)
|
(80.5)
|
-
|
(80.5)
|
Total
|
-
|
-
|
-
|
(12.2)
|
-
|
(92.5)
|
(104.7)
|
-
|
(104.7)
|
At 31 December 2022
|
9.3
|
4.0
|
75.0
|
(127.7)
|
50.7
|
854.4
|
865.7
|
6.3
|
872.0
|
Consolidated Cash Flow Statement
For the year ended 31 December
2023
|
Note
|
2023
£m
|
2022
£m
|
Operating activities
|
|
|
|
Profit before taxation
|
|
272.1
|
249.0
|
Net finance (income)/cost
|
|
(3.3)
|
7.4
|
Depreciation of property, plant and
equipment
|
|
20.4
|
21.5
|
Depreciation of right-of-use
assets
|
|
41.4
|
50.5
|
Amortisation of intangible
assets
|
|
18.9
|
18.9
|
Share-based payments
|
|
7.7
|
8.6
|
Loss on disposal of property, plant
and equipment
|
|
0.2
|
0.5
|
Net cash flow from
inventories
|
|
189.2
|
(7.0)
|
Net cash flow from trade and other
receivables (including contract assets)
|
|
107.7
|
(317.2)
|
Net cash flow from trade and other
payables (including contract liabilities)
|
|
(160.2)
|
263.4
|
Net cash flow from provisions and
employee benefits
|
|
(0.8)
|
(0.7)
|
Other adjustments
|
|
0.1
|
(0.1)
|
Cash generated from
operations
|
|
493.4
|
294.8
|
Income taxes paid
|
|
(82.8)
|
(52.7)
|
Net cash flow from operating
activities
|
|
410.6
|
242.1
|
Investing activities
|
|
|
|
Interest received
|
|
13.1
|
2.4
|
Acquisition of subsidiaries, net of
cash acquired
|
|
-
|
(28.3)
|
Contingent consideration
|
|
(17.4)
|
-
|
Purchases of property, plant and
equipment
|
|
(21.9)
|
(23.7)
|
Purchases of intangible
assets
|
|
(13.2)
|
(11.8)
|
Proceeds from disposal of property,
plant and equipment
|
|
-
|
1.1
|
Net cash flow from investing
activities
|
|
(39.4)
|
(60.3)
|
Financing activities
|
|
|
|
Interest paid
|
|
(2.6)
|
(2.9)
|
Interest paid on lease
liabilities
|
|
(4.7)
|
(4.9)
|
Purchase of non-controlling
interest
|
|
(1.9)
|
-
|
Dividends paid to equity
shareholders of the Parent
|
|
(77.3)
|
(80.5)
|
Proceeds from exercise of share
options
|
|
9.2
|
6.2
|
Purchase of own shares
|
|
(38.0)
|
(34.4)
|
Repayment of loans and credit
facility
|
|
(69.8)
|
(20.6)
|
Payment of capital element of lease
liabilities
|
|
(41.4)
|
(50.3)
|
Drawdown of borrowings
|
|
62.9
|
4.0
|
Net cash flow from financing
activities
|
|
(163.6)
|
(183.4)
|
|
|
|
|
Increase/(decrease) in cash and cash
equivalents
|
|
207.6
|
(1.6)
|
Effect of exchange rates on cash and
cash equivalents
|
|
(0.8)
|
(7.2)
|
Cash and cash equivalents at the
beginning of the year
|
9
|
264.4
|
273.2
|
Cash and cash equivalents at the
year end
|
9
|
471.2
|
264.4
|
1
General information
Computacenter plc is a limited
company incorporated and domiciled in England whose shares are
publicly traded. Its registered address is Hatfield Business Park,
Hatfield Avenue, Hatfield, AL10 9TW.
2
Summary of significant accounting policies
The accounting policies adopted are
consistent with those of the previous financial year as applied in
the 2022 Annual Report and Accounts.
New
or revised standards or interpretations
Some accounting pronouncements which
have become effective from 1 January 2023 and have therefore been
adopted do not have a significant impact on the Group's financial
results or position other than the change discussed
below.
IAS 12 does not specifically address
the tax effects of right-of-use assets and lease liabilities.
However, in May 2021 the IASB made amendments to IAS 12 which
narrow the scope of the initial recognition exemption in paragraphs
15 and 24 of IAS 12 and require entities to recognise deferred tax
on transactions that, on initial recognition, give rise to equal
amounts of taxable and deductible temporary differences. As a
consequence, entities are now required to recognise both a deferred
tax asset and a deferred tax liability on the initial recognition
of a lease. While these would typically qualify for offsetting in
the balance sheet, the notes to the financial statements need to
disclose the gross amounts. The amendments apply to annual
reporting periods beginning on or after 1 January 2023.
The Group was previously recording
deferred tax on right-of-use assets and lease liabilities on a net
basis. Upon adoption of the amendments, the cumulative effect of
initially applying the amendments at 1 January 2022 was not
material to the retained earnings position and therefore no
adjustment has been made for this date. The Group has now grossed
up deferred tax liabilities of £26.6m (2022: £31.1m) on
right-of-use assets and deferred tax assets of £27.9m (2022:
£32.4m) on lease liabilities which are disclosed in note 7. Due to
the offsetting of these deferred tax assets and liabilities on the
basis that they relate to income taxes levied by the same taxation
authority on the same taxable entity, there is no material impact
on the deferred tax position reported on the Consolidated Balance
Sheet. The application of these amendments to IAS 12 has had no
material impact on the Group's profit before tax or profit after
tax, net assets and earnings per share.
New standards, interpretations or
amendments not yet effective have not been early adopted and have
not been disclosed as they are not expected to have a material
effect on the Group's Consolidated Financial Statements. The Group
anticipates that all relevant pronouncements will be adopted for
the first period beginning on or after the effective date of the
pronouncement.
2.1
Basis of preparation
The summary financial information
set out above does not constitute the Group's Statutory
Consolidated Financial Statements for the years ended 31 December
2023 or 2022. The summary financial information set out above is
derived from the Statutory Consolidated Financial Statements for
the Group for the year ended 31 December 2022, prepared in
accordance with adopted IFRS, which have been delivered to the
Registrar of Companies and those for 2023 will be delivered in due
course. The auditor has reported on those accounts; their report
was (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of any emphasis
without qualifying their opinion and (iii) did not contain a
statement under Section 498 (2) or (3) of the Companies Act
2006.
This preliminary announcement does
not constitute the Group's full financial statements for 2023
within the meaning of Section 434 of the United Kingdom Companies
Act 2006.
The Consolidated Financial
Statements are prepared on the historical cost basis, other than
derivative financial instruments and contingent consideration,
which are stated at fair value.
The Consolidated Financial
Statements are presented in pound sterling (£) 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 through to 19 March 2025, as the
appropriate period for the going concern assessment and have based
their assessment on the relevant forecasts from the Plan for that
period. No events or conditions beyond the assessment period that
may cast significant doubt on the Group's ability to continue as a
going concern have been identified.
The potential impact of the
principal risks and uncertainties 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.
The combined effect of the potential
occurrence of several of the most impactful risks and uncertainties
is represented by a large adjustment to the cash flows over the
assessment period which is then compared to the cash position
generated by the Plan, throughout the assessment period, to model
whether the business will be able to continue in operation. This
application of the risk impact adjustment is performed under two
sensitivity scenarios.
For the current period, the primary
downside sensitivity relates to a modelled, but not predicted,
severe downturn in Group revenues, beginning in 2024, simulating a
continued impact for some of our customers from a reduction in
customer demand due to the current economic crisis, and ongoing
impact on the Group's revenues from this macroeconomic instability.
This sensitivity analysis models a continued market downturn
scenario, with slower-than-predicted recovery estimates, for some
of our customers whose businesses have been affected by the
downturn occurring for our customer base as a result of the
emerging negative global macroeconomic environment due to the
current economic crisis.
The second sensitivity scenario
includes a further extreme, but not predicted, severe downturn in
Group revenues and margins leading to a substantial loss-making
position over the assessment period. Included within this
sensitivity scenario is the modelled lack of access to our
committed facility.
Under both scenarios, the business
demonstrates modelled solvency and liquidity over the assessment
period where the supporting models were tested with rigorous
downside sensitivity analysis, which involved flexing a number of
the main assumptions underlying the forecasts.
Our cash and borrowing capacity
provides sufficient funds to meet the foreseeable needs of the
Parent and Group. At 31 December 2023, the Group had cash and
short-term deposits of £471.2m and bank debt, primarily related to
the recently built headquarters in Germany and operations in North
America, of £12.2m. On 9 December 2022, the Group entered into a
new unsecured multi-currency revolving loan facility of £200.0m 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 has exercised the extension option on the first
anniversary, extending the term to six years with one further
one-year extension option available.
The Group has a resilient balance
sheet position, with net assets of £949.4m as at 31 December 2023.
The Group made a profit after tax of £199.4m, and delivered net
cash flows from operating activities of £410.6m, for the year ended
31 December 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 Parent and Group are 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 Parent and Group will
be able to continue in operation and meet their liabilities as they
fall due over the period of not less than 12 months from the date
of signing the Consolidated Financial Statements and therefore have
prepared the Consolidated Financial Statements on a going concern
basis.
Consolidated Balance Sheet - restatement of comparative
information
At 31 December 2022, certain items
were incorrectly presented on the Consolidated Balance Sheet as
follows:
· Tax balances of £25.5m were included as part of 'Trade and
other receivables'. These have been re-presented by reclassifying
to 'Income tax payable' and netting these amounts against payable
balances in the same tax jurisdiction.
· Trade and other receivables relating to a contract of £6.0m
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 £9.9m has been
reclassified from 'Trade and other receivables' (current) to 'Trade
and other receivables' (non-current).
· A bank overdraft balance of £10.7m has been reclassified to
'Cash and short-term deposits' as the 'right of offset' has been
established.
Of the above, only the
reclassification of the tax balances has an impact on the
Consolidated Balance Sheet as at 1 January 2022, which is to
decrease Trade and other receivables by £20.5m and decrease Income
tax payable by the same amount. There is no impact on reported 'Net
funds' and 'Net assets' from the above changes for any of the
periods presented.
2.2
Basis of consolidation
The Consolidated Financial
Statements comprise the financial statements of the Parent Company
and its subsidiaries as at 31 December each year. The financial
statements of subsidiaries are prepared for the same reporting year
as the Parent Company, using existing GAAP in each country of
operation. Adjustments are made on consolidation for differences
that may exist between the respective local GAAPs and
IFRS.
All intra-group balances,
transactions, income and expenses and profit and losses resulting
from intra-group transactions have been eliminated in
full.
Subsidiaries are consolidated from
the date on which the Group obtains control and cease to be
consolidated from the date on which the Group no longer retains
control. Non-controlling interests represent the portion of profit
or loss and net assets in subsidiaries that is not held by the
Group and is presented separately from Parent shareholders' equity
in the Consolidated Balance Sheet.
2.2.1 Foreign currency translation
Each entity in the Group determines
its own functional currency and items included in the financial
statements of each entity are measured using that functional
currency. Transactions in foreign currencies are initially recorded
in the functional currency at the exchange rate ruling at the date
of the transaction, or where relevant, the rate of a specific
forward exchange contract. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the
functional currency rate of exchange ruling at the Consolidated
Balance Sheet date. All differences are taken to the Consolidated
Income Statement except foreign currency differences arising from
the translation of qualifying cash flow hedges, which are
recognised in the Consolidated Statement of Comprehensive Income,
to the extent that the hedges are effective.
Non-monetary items that are measured
in terms of historical cost in a foreign currency are translated
using the exchange rate as at the date of initial
transaction.
The functional currencies of the
main overseas subsidiaries are euro (€) and US dollar ($). The
Group's presentation currency is pound sterling (£). As at the
reporting date, the assets and liabilities of overseas subsidiaries
are translated into the presentation currency of the Group at the
rate of exchange ruling at the Consolidated Balance Sheet date and
their income statements are translated at the average exchange
rates for the year. Exchange differences arising on the
retranslation are recognised in the Consolidated Statement of
Comprehensive Income. On disposal of a foreign entity, the deferred
cumulative amount recognised in the Consolidated Statement of
Comprehensive Income relating to that particular foreign operation
is recognised in the Consolidated Income Statement.
2.3
Revenue
Revenue is recognised when the
Group's performance obligations are fulfilled to the extent of the
amount which is expected to be received from customers as
consideration for the transfer of goods and services to the
customer.
In multi-element contracts with
customers where more than one good (Technology Sourcing) or service
(Professional Services and Managed Services) is provided to the
customer, analysis is performed to determine whether the separate
promises are distinct performance obligations within the context of
the contract. To the extent that this is the case, the transaction
price is allocated between the distinct performance obligations
based upon relative standalone selling prices. The revenue is then
assessed for recognition purposes based upon the nature of the
activity and the terms and conditions of the associated customer
contract relating to that specific distinct performance
obligation.
The following specific recognition
criteria must also be met before revenue is recognised:
2.3.1 Technology Sourcing
The Group supplies hardware,
software and resold third-party services (together as 'goods') to
customers that are sourced from and delivered by a number of
suppliers.
Technology Sourcing revenue is
recognised when the Group's performance obligations are fulfilled
at a point in time when control of the goods has been transferred
to the customer. Typically, customers obtain control of the goods
when they are delivered to and have been accepted at their
premises, depending on individual customer arrangements. Invoices
are routinely generated at despatch from our Integration Centers
or, in the case of direct delivery by supplier, upon receipt at
customer locations. At each reporting date, a process is undertaken
to ensure revenue is not recognised for goods that have not been
received by customers at that reporting date. Payment for the goods
is generally received on, or before, industry-standard payment
terms, ordinarily within 30 days. Refer to note 3.2.1 for 'bill and
hold' transactions.
Revenue is recorded at the price
specified in sales invoices which is based on the customer
contracts, net of any agreed discounts and rebates, and exclusive
of value added tax on goods or services supplied to customers
during the year.
In limited instances, the Group
provides early payment discounts or rebates to its customers which
create variability in the transaction price. In determining the
variable consideration to be recognised, these discounts and
rebates are estimated based on the terms of contractually agreed
arrangements and the amount of consideration to which the Group
will be entitled in exchange for supplying the goods or services.
The level of estimation involved in assessing the variable
consideration is minimal given the arrangements are generally
prospective in nature and therefore deductions from revenue and
trade receivables are appropriately accounted for at the point
revenue is recognised.
Revenue is recognised to the extent
that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur.
Technology Sourcing principal versus agent
recognition
Management assesses the
classification of certain revenue contracts for Technology Sourcing
revenue recognition on either an agent or principal basis. Because
the identification of the principal in a contract is not always
clear, Management makes a determination by evaluating the nature of
our promise to our customer as to whether it is a performance
obligation to pass control of the specified goods or services
ourselves, in which case we are the principal, or to arrange for
those goods or services to be provided by the other party, where we
are the agent. We determine whether we are a principal or an agent
for each specified good or service promised to the customer by
evaluating the nature of our promise to the customer against a
non-exhaustive list of indicators that a performance obligation
could involve an agency relationship:
· we do not control each specified good or service before that
good or service is delivered to the customer;
· the vendor retains primary responsibility for fulfilling the
sale;
· we take no inventory risk before or after the goods have been
ordered, during shipping or on return;
· we do not have discretion to establish pricing for the
vendor's goods, limiting the benefit we can receive from the sale
of those goods; and
· our consideration is in the form of a, usually predetermined,
commission.
2.3.2 Professional Services
The Group provides skilled
professionals to customers either operating within a project
framework or on a 'resource on demand' basis.
For contracts operating within a
project framework, revenue is recognised based on the transaction
price with reference to the costs incurred as a proportion of the
total estimated costs (percentage of completion basis) of the
contract.
For those contracts which are
'resource on demand', where highly skilled employees work for a
customer on projects and engagements managed by the customer,
revenue is billed on a timesheet basis. The Group elects to use the
practical expedient in IFRS 15.B16, as we have a right to
consideration from our 'resource on demand' Professional Services
customers in an amount that corresponds directly with the value to
our customer of the Group's performance completed to date. The
practical expedient applied permits the Group to recognise these
'resource on demand' Professional Services revenues in the amount
to which the entity has a right to invoice. Professional Services
revenue is therefore recognised throughout the term of the
contract, as services are delivered, with amounts recognised based
on monthly invoiced amounts, as this corresponds to the service
delivered to the customer and the satisfaction of the Group's
performance obligations.
Under either basis, Professional
Services revenue is recognised over time. The majority of the
Group's Professional Services revenue is constituted by 'resource
on demand' arrangements, is recognised in this manner and
represents the primary area of growth in this business line. As the
majority of Professional Services revenue is recognised as
'resource on demand', the overall balance of risks to recognition
for this business is decreased as compared to the scenario where
the majority of Professional Services revenue would be recognised
on a percentage of completion basis. This is due to the monthly
timesheet nature of the billing which is agreed regularly with the
customer as the service is delivered.
If the total estimated costs and
revenues of a contract cannot be reliably estimated, revenue is
recognised only to the extent that costs have been incurred and
where the Group has an enforceable right to payment as work is
being performed.
A provision for forecast excess
costs over forecasted revenue is made as soon as a loss is foreseen
(see note 2.12.1 for further detail). Payment for the Services,
which are invoiced monthly, is generally on industry standard
payment terms.
2.3.3 Managed Services
The Group sells maintenance, support
and management of customers' IT infrastructures and
operations.
The specific performance obligations
and invoicing conditions in our Managed Services contracts are
typically related to the number of calls, interventions or users
that we manage and therefore the customer simultaneously receives
and consumes the benefits of the services as they are performed.
The Group elects to use the practical expedient in IFRS 15.B16, as
we have a right to consideration from our Managed Services
customers in an amount that corresponds directly with the value to
our customer of the Group's performance completed to date. The
practical expedient applied permits the Group to recognise Managed
Services revenue in the amount to which the entity has a right to
invoice. Managed Services revenue is therefore recognised
throughout the term of the contract, as services are delivered,
with amounts recognised based on monthly invoiced amounts, as this
corresponds to the service delivered to the customer and the
satisfaction of the Group's performance obligations.
Amounts invoiced relating to more
than one month are deferred into contract liabilities and
recognised over the relevant periods, where the Group has an
unconditional right of payment. Invoice payment is generally on
industry standard payment terms.
If the total estimated costs and
revenues of a contract cannot be reliably estimated, revenue is
recognised only to the extent that costs have been incurred and
where the Group has an enforceable right to payment as work is
being performed. A provision for forecast excess costs over
forecasted revenue is made as soon as a loss is foreseen (see note
2.12.1 for further detail). On occasion, the Group may have a
limited number of Managed Services contracts where revenue is
recognised on a percentage of completion basis, which is determined
by reference to the costs incurred as a proportion of the total
estimated costs of the contract.
Costs of obtaining and fulfilling revenue
contracts
The Group operates in a highly
competitive environment and is frequently involved in contract bids
with multiple competitors, with the outcome usually unknown until
the contract is awarded and signed.
When accounting for costs associated
with obtaining and fulfilling customer contracts, the Group first
considers whether these costs fit within a specific IFRS standard
or policy. Any costs associated with obtaining or fulfilling
revenue contracts which do not fall into the scope of other IFRS
standards or policies are considered under IFRS 15. All such costs
are expensed as incurred, other than the two types of costs noted
below:
1. Win fees
- The Group pays 'win fees' to certain employees as bonuses for
successfully obtaining customer contracts. As these are incremental
costs of obtaining a customer contract, they are deferred along
with any associated payroll tax expense to the extent they are
expected to be recovered. These balances are presented within
prepayments in the Consolidated Balance Sheet. The win fee balance
that will be realised after more than 12 months is disclosed as
non-current.
2.
Fulfilment costs - The Group often incurs costs upfront relating to
the initial set-up phase of an outsourcing contract, which the
Group refers to as 'Entry Into Service'. These costs do not relate
to a distinct performance obligation in the contract, but rather
are accounted for as fulfilment costs under IFRS 15 as they are
directly related to the future performance on the contract. They
are therefore capitalised to the extent that they are expected to
be recovered. These balances are presented within prepayments in
the Consolidated Balance Sheet.
Both types of assets resulting from
capitalised win fees and Entry Into Service costs are amortised on
a systematic basis that is consistent with the transfer to the
customer of the goods and services to which the asset relates over
the contract term. The amortisation charges on win fees and Entry
Into Service costs are recognised in the Consolidated Income
Statement within administration expenses and cost of sales,
respectively.
Any bid costs incurred by the
Group's Central Bid Management Engines are not capitalised or
charged to the contract, but instead directly charged to selling,
general and administrative expenses as they are incurred. These
costs associated with bids are not separately identifiable nor can
they be measured reliably as the Group's internal bid teams work
across multiple bids at any one time.
2.3.4 Contract assets and liabilities
A contract asset is recognised when
the Group has a right to consideration for goods or services which
have been transferred to the customer but have not been billed,
therefore excluding receivable balances. Contract assets typically
relate to longer-term Professional and Managed Services contracts
where work has been performed but has not been invoiced to the
customer, and are included within accrued income on the
Consolidated Balance Sheet.
A contract liability is recognised
when a customer pays the Group, or the Group has a right to
consideration that is unconditional, before the transfer of the
goods or services to which it relates. Contract liabilities
typically relate to longer-term Professional and Managed Services
contracts where consideration has been received under agreed
billing timelines for which work has yet to be performed, and are
included within deferred income on the Consolidated Balance
Sheet.
2.3.5 Finance income
Income is recognised as interest
accrues.
2.4
Exceptional items
The Group presents those items of
income and expense as exceptional items which, because of the
nature and expected infrequency of the events giving rise to them,
merit separate presentation to allow shareholders to understand the
elements of financial performance in the year, so as to facilitate
comparison with prior years and to assess trends in financial
performance.
2.5
Adjusted 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, set out below,
assist in providing additional useful information on the underlying
trends, performance and position of the Group. The non-GAAP
measures are 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 year. However, as
with all non-GAAP alternative performance measures, these adjusted
measures present some natural limitations in their usage to
understand the Group's performance. These limitations include the
lack of comparability with non-GAAP and GAAP measures used by other
companies and the fact that the results may, from time-to-time,
contain the benefit of acquisitions made but exclude the
significant costs associated with that acquisition or the
amortisation of acquired intangibles. It is therefore not a
complete record of the Group's financial performance as compared to
its GAAP results. The exclusion of other adjusting items may result
in adjusted earnings being materially higher or lower than reported
earnings. In particular, when significant acquisition related
charges are excluded, adjusted earnings will be higher than
reported GAAP-compliant earnings.
These non-GAAP measures comprise:
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.
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 from revenue, 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 to adjusted
measures is provided in the Chief Financial Officer's review 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 4, Segment information.
2.6
Impairment of assets
The Group assesses at each reporting
date whether there is an indication that an asset may be impaired.
If any such indication exists, or when annual impairment testing
for an asset is required, the Group makes an estimate of the
asset's recoverable amount. Where an asset does not have
independent cash flows, the recoverable amount is assessed for the
cash-generating unit (CGU) to which it belongs. These assets are
tested across an aggregation of CGUs that utilise the asset. The
recoverable amount is the higher of the fair value less costs to
sell and the value-in-use of the asset or CGU. Where the carrying
amount of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount.
In assessing value-in-use, the estimated future cash flows are
discounted to their present value using a post-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset. Impairment losses of
continuing operations are recognised in the Consolidated Income
Statement in those expense categories consistent with the function
of the impaired asset.
For assets excluding goodwill, an
assessment is made at each reporting date whether there is any
indication that previously recognised impairment losses may no
longer exist or may have decreased. If such indication exists, the
Group estimates the asset's or CGU's recoverable amount. A
previously recognised impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment was recognised. The
reversal is limited so that the carrying amount of the asset does
not exceed its recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. As
the Group has no assets carried at revalued amounts, such reversal
is recognised in the Consolidated Income Statement.
2.7
Property, plant and equipment
Property, plant and equipment is
stated at cost less accumulated depreciation and any accumulated
impairment losses. Depreciation, down to residual value, is
calculated on a straight-line basis over the estimated useful life
of the asset as follows:
· freehold buildings: 25-50 years
· short leasehold improvements: shorter of seven years and
period to expiry of lease
· fixtures and fittings:
- head office: 5-15
years
- other: shorter of seven
years and period to expiry of lease
· office machinery and computer hardware: 2-15 years
- motor vehicles: three
years
Freehold land is not depreciated. An
item of property, plant and equipment is derecognised upon disposal
or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on
derecognition of the asset (calculated as the difference between
the net disposal proceeds and the carrying amount of the item) is
included in the Consolidated Income Statement in the year the item
is derecognised.
2.8
Leases
2.8.1 Group as lessee
Recognition of a lease
The contracts are assessed by the
Group, to determine whether a contract is, or contains a lease. In
general, arrangements are a lease when all of the following
apply:
· it conveys the right to control the use of an identified asset
for a certain period, in exchange for consideration;
· the Group obtains substantially all economic benefits from the
use of the asset; and
· the Group can direct the use of the identified
asset.
The Group elects to separate the
non-lease components.
Measurement of a right-of-use asset and lease
liability
Right-of-use asset
The Group measures the right-of-use
asset at cost, which includes the following:
·
the initial amount of the lease liability,
adjusted for any lease payments made at or before the lease
commencement date;
·
any lease incentives received; and
·
any initial direct costs incurred by the Group as
well as an estimate of costs to be incurred by the Group in
dismantling and removing the underlying asset, restoring the site
on which it is located or restoring the underlying asset to the
condition required by the lease contract. Cost for dismantling,
removing or restoring the site on which it is located and/or the
underlying asset is only recognised when the Group incurs an
obligation to do so.
The right-of-use asset is
depreciated over the lease term, using the straight-line
method.
Lease liability
The lease liability is initially
measured at the present value of the unpaid lease payments,
discounted using the interest rate implicit in the lease, or if the
rate cannot be readily determined, the Group's incremental
borrowing rate. Lease payments included in the measurement comprise
fixed payments, variable lease payments that depend on an index or
a rate, amounts to be paid under a residual value guarantee and
lease payments in an optional renewal period, if the Group is
reasonably certain to exercise an extension option, as well as
penalties for early termination of a lease, if the Group is
reasonably certain to terminate early. If there is a purchase
option present, this will be included if the Group is reasonably
certain to exercise the option.
Leases of low-value assets and short term
Leases of low-value assets (<
£5,000) and short term leases with a term of 12 months or less are
not required to be recognised on the Consolidated Balance Sheet and
payments made in relation to these leases are recognised on a
straight-line basis in the Consolidated Income
Statement.
2.8.2 Group as a lessor
The Group has entered into lease
agreements as a lessor on certain items of IT equipment and
software. Leases for which the Group is a lessor are classified as
either operating or finance leases. The Group assesses whether it
transfers substantially all the risks and rewards of ownership.
Those leases that do not transfer substantially all the risks and
rewards are classified as operating leases. Rental income arising
from operating leases is accounted for on a straight-line basis
over the lease term.
If an arrangement contains lease and
non-lease components, then the Group applies IFRS 15 to allocate
the consideration of the contract.
The Group applies the derecognition
and impairment requirements in IFRS 9 to the net investment in the
lease.
In cases where the Group acts as an
intermediate lessor, it accounts for its interests in the
head-lease and the sub-lease separately.
2.9
Intangible assets
2.9.1 Software and software licences
Software and software licences
include computer software that is not integral to a related item of
hardware. These assets are stated at cost less accumulated
amortisation and any impairment in value. Amortisation is
calculated on a straight-line basis over the estimated useful life
of the asset. Currently software is amortised over four
years.
The carrying values of software and
software licences are reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not
be recoverable. If any such indication exists and where the
carrying values exceed the estimated recoverable amount, the assets
are written down to their recoverable amount.
2.9.2 Software under development
Costs that are incurred and that can
be specifically attributed to the development phase of management
information systems for internal use are capitalised only if the
expenditure can be measured reliably, the management information
system is technically and commercially feasible, future economic
benefits are probable, and the Group intends to and has sufficient
resources to complete development and to use the system.
Research expenditure and development
expenditure that do not meet the criteria above are recognised as
an expense as incurred. Development costs previously recognised as
an expense are not recognised as an asset in a subsequent
period.
Directly attributable costs that are
capitalised typically include professional fees and cost of
material/services consumed.
Capitalised development costs are
recorded as intangible assets and amortised over their useful life
from the point at which the management information system is ready
for use.
Costs associated with maintaining
in-use software programs are recognised as an expense as
incurred.
2.9.3 Other intangible assets
Intangible assets acquired as part
of a business combination are carried initially at fair value.
Following initial recognition intangible assets are carried at cost
less accumulated amortisation and any impairment in value.
Intangible assets with a finite life have no residual value and are
amortised on a straight-line basis over their expected useful
lives, with charges included in administrative expenses as
follows:
· order back log: within three months
· existing customer relationships: 10-15 years
· tools and technology: seven years.
The carrying value of intangible
assets is reviewed for impairment whenever events or changes in
circumstances indicate the carrying value may not be recoverable
and expected useful lives are reviewed on a yearly
basis.
2.9.4 Goodwill
Business combinations are accounted
for under IFRS 3 Business Combinations using the acquisition
method. Any excess of the cost of the business combination over the
Group's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities is recognised in the
Consolidated Balance Sheet as goodwill and is not amortised. Any
goodwill arising on the acquisition of equity-accounted entities is
included within the cost of those entities.
After initial recognition, goodwill
is stated at cost less any accumulated impairment losses, with the
carrying value being reviewed for impairment at least annually and
whenever events or changes in circumstances indicate that the
carrying value may be impaired.
For the purpose of impairment
testing, goodwill is allocated to the related CGU monitored by
Management, usually at business Segment level or statutory Company
level as the case may be. Where the recoverable amount of the CGU
is less than its carrying amount, including goodwill, an impairment
loss is recognised in the Consolidated Income Statement.
2.10 Inventories
Inventories are carried at the lower
of weighted average cost and net realisable value after making
allowance for any obsolete or slow-moving items. Costs include
those incurred in bringing each product to its present location and
condition, on a first-in, first-out basis.
Net realisable value is the
estimated selling price in the ordinary course of business, less
the estimated costs necessary to make the sale.
2.11 Financial assets
Financial assets are recognised at
their fair value, which initially equates to the sum of the
consideration given and the directly attributable transaction costs
associated with the investment. Subsequently, the financial assets
are measured at either amortised cost or fair value, depending on
their classification under IFRS 9. The Group currently holds only
debt instruments. The classification of these debt instruments
depends on the Group's business model for managing the financial
assets and the contractual terms of the cash flows.
2.11.1 Trade receivables
Trade receivables, which generally
have 30- to 90-day credit terms, are initially recognised and
carried at their original invoice amount less an allowance for any
uncollectable amounts. The business model for trade receivables is
that they are held for the collection of contractual cash flows,
therefore they are subsequently measured at amortised cost. The
trade receivables are derecognised on receipt of cash from the
customer. The Group sometimes uses debt factoring, without
recourse, to manage liquidity and, as a result, the business model
for factored trade receivables is that they are not held for the
collection of contractual cash flows.
As a result, subsequent to initial
recognition, they are measured at fair value through other
comprehensive income (except for the recognition of impairment
gains and losses and foreign exchange gains and losses, which are
recognised in profit or loss).
Factored trade receivables are
derecognised on receipt of cash from the factoring party. Given the
short lives of the trade receivables, there are generally no
material fair value movements between initial recognition and the
derecognition of the receivable.
The Group assesses for doubtful
debts (impairment) using the expected credit losses model as
required by IFRS 9. For trade receivables, the Group applies the
simplified approach, which requires expected lifetime losses to be
recognised from the initial recognition of the receivables.
Material or high-risk balances are reviewed and provided for
individually based on a number of factors including:
· the financial strength of the customer;
· the level of default that the Group has suffered in the
past;
· the age of the receivable outstanding; and
· the Group's trading experience with that customer.
2.11.2 Cash and cash equivalents
Cash and short-term deposits in the
Consolidated Balance Sheet comprise cash at bank and in hand, and
short-term deposits with an original maturity of three months or
less. Cash is held for the collection of contractual cash flows
which are solely payments of principal and interest and therefore
is measured at amortised cost subsequent to initial
recognition.
For the purpose of the Consolidated
Cash Flow Statement, cash and cash equivalents consist of cash and
short-term deposits as defined above, net of outstanding bank
overdrafts, as the bank overdrafts form an integral part of the
Group's cash management.
2.12 Financial liabilities
Financial liabilities are initially
recognised at their fair value and, in the case of loans and
borrowings (including credit facility), net of directly
attributable transaction costs.
The subsequent measurement of
financial liabilities is at amortised cost, unless otherwise
described below:
2.12.1 Provisions (excluding restructuring
provision)
Provisions are recognised when the
Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
If the effect of the time value of
money is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, where
appropriate, the risks specific to the liability. Where discounting
is used, the increase in the provision due to the passage of time
is recognised as a borrowing cost.
Customer contract provisions
Management continually monitors the
financial performance of contracts, and where there are indicators
that a contract could result in a negative margin, the future
financial performance of that contract will be reviewed in detail.
If, after further financial analysis, the full financial
consequence of the contract can be reliably estimated, and it is
determined that the contract is potentially loss-making, then the
best estimate of the losses expected to be incurred until the end
of the contract will be provided for.
In establishing if future costs are
forecast to exceed the future revenue, Management will take into
account the anticipated inflationary impact on the cost base,
offset by any rights to increase pricing under Cost of Living
Adjustment (COLA) clauses that have been incorporated in the
customer contract.
The Group applies IAS 37 -
'Provisions, Contingent Liabilities and Contingent Assets' in its
assessment of whether contracts are considered onerous and in
subsequently estimating the provision. The Group's approach is to
apply the full cost approach, which considers total estimated costs
(i.e. directly attributable variable costs and fixed allocated
costs) in the assessment of whether the contract is onerous or not
and in the measurement of the provision.
A provision for onerous contracts is
made as soon as a loss is foreseen and is measured at the present
value of the lower of the expected cost of terminating the contract
and the expected net cost of continuing with the contract, which is
determined based on incremental costs necessary to fulfil the
obligation under the contract. Before a provision is established,
the Group recognises any impairment loss on the assets associated
with that contract.
2.12.2 Pensions and other post-employment
benefits
The Group operates a defined
contribution pension scheme available to all UK employees and
similar schemes are operating, as appropriate for the jurisdiction,
for North America and Germany. Contributions are recognised as an
expense in the Consolidated Income Statement as they become payable
in accordance with the rules of the scheme. There are no material
pension schemes within the Group's overseas operations.
The Group has an obligation to make
a one-off payment to French employees upon retirement, the
Indemnités de Fin de Carrière (IFC).
French employment law requires that
a company pays employees a one-time contribution when, and only
when, the employee leaves the company on retirement at the
mandatory age. This is a legal requirement for all businesses which
incur the obligation upon departure, due to retirement, of an
employee.
Typically, the retirement benefit is
based on length of service of the employee and his or her salary at
retirement. The amount is set via a legal minimum, but the
retirement premiums can be improved by the collective agreement or
employment contract in some cases. For Computacenter's French
employees, the payment is based on accrued service and ranges from
one month of salary after five years of service to 9.4 months of
salary after 47 years of service.
If the employee leaves voluntarily
at any point before retirement, all liability is extinguished, and
any accrued service is not transferred to any new
employment.
Management continues to account for
this obligation according to IAS 19 (revised).
2.13 Derecognition of financial assets and
liabilities
2.13.1 Financial assets
A financial asset or, where
applicable, a part of a financial asset or part of a group of
similar financial assets, is derecognised where:
· the rights to receive cash flows from the asset have expired;
or
· the Group retains the right to receive cash flows from the
asset, but has assumed an obligation to pay them in full without
material delay to a third party under a pass-through arrangement;
or
· the Group has transferred its rights to receive cash flows
from the asset and either (a) has transferred substantially all the
risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset but
has transferred control of the asset.
2.13.2 Financial liabilities
A financial liability is
derecognised when the obligation under the liability is discharged,
cancelled or expired.
2.14 Derivative financial instruments and hedge
accounting
The Group uses foreign currency
forward contracts to hedge its foreign currency risks associated
with foreign currency fluctuations affecting cash flows from
forecast transactions and unrecognised firm commitments.
At the inception of a hedge
relationship, the Group formally designates and documents the hedge
relationship to which the Group wishes to apply hedge accounting
and the risk management objective and strategy for undertaking the
hedge. The documentation includes identification of both the
hedging instrument and the hedged item or transaction and then the
economic relationship between the two, including whether the
hedging instrument is expected to offset changes in cash flow of
the hedged item. Such hedges are expected to be highly effective in
achieving offsetting changes in cash flows. The Group designates
the full change in the fair value of the forward contract
(including forward points) as the hedging instrument. Forward
contracts are initially recognised at fair value on the date that
the contract is entered into and are subsequently remeasured at
fair value at each reporting date. The fair value of forward
currency contracts is calculated by reference to current forward
exchange rates for contracts with similar maturity profiles.
Forward contracts are recorded as assets when the fair value is
positive and as liabilities when the fair value is
negative.
For the purposes of hedge
accounting, hedges are classified as cash flow hedges when hedging
the exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognised
asset or liability, a highly probable forecast transaction, or the
foreign currency risk in an unrecognised firm
commitment.
Cash flow hedges that meet the
criteria for hedge accounting are accounted for as follows: the
effective portion of the gain or loss on the hedging instrument is
recognised directly in other comprehensive income in the cash flow
hedge reserve, while any ineffective portion is recognised
immediately in the Consolidated Income Statement in administrative
expenses.
Amounts recognised within the
Consolidated Statement of Comprehensive Income are transferred to
the Consolidated Income Statement, within administrative expenses,
when the hedged transaction affects the Consolidated Income
Statement, such as when the hedged financial expense is
recognised.
If the forecast transaction or firm
commitment is no longer expected to occur, the cumulative gain or
loss previously recognised in equity is transferred to the
Consolidated Income Statement within administrative expenses. If
the hedging instrument matures or is sold, terminated or exercised
without replacement or rollover, any cumulative gain or loss
previously recognised within the Consolidated Statement of
Comprehensive Income remains within the Consolidated Statement of
Comprehensive Income until after the forecast transaction or firm
commitment affects the Consolidated Income Statement.
Any other gains or losses arising
from changes in fair value on forward contracts are taken directly
to administrative expenses in the Consolidated Income
Statement.
2.15 Taxation
2.15.1 Current tax
Current tax assets and liabilities
for the current and prior years are measured at the amount expected
to be recovered from or paid to the tax authorities. The tax rates
and tax laws used to compute the amount are those that are enacted
or substantively enacted by the balance sheet date.
2.15.2 Deferred income tax
Deferred income tax is recognised on
all temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the Consolidated
Financial Statements, with the following exceptions:
· where the temporary difference arises from the initial
recognition of goodwill or from an asset or liability in a
transaction that is not a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss;
· in respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures, where
the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will
not reverse in the foreseeable future; and
· deferred income tax assets are recognised only to the extent
that it is probable that taxable profit will be available in the
future against which the deductible temporary differences, carried
forward tax credits or tax losses can be utilised.
Deferred income tax assets and
liabilities are measured on an undiscounted basis at the tax rates
that are expected to apply when the related asset is realised or
liability is settled, based on tax rates and laws enacted, or
substantively enacted, at the balance sheet date.
Income tax is charged or credited
directly to the Consolidated Statement of Comprehensive Income if
it relates to items that are credited or charged to the
Consolidated Statement of Comprehensive Income. Otherwise, income
tax is recognised in the Consolidated Income Statement.
2.16 Share-based payment transactions
Employees (including Executive
Directors) of the Group can receive remuneration in the form of
share-based payment transactions, whereby employees render services
in exchange for shares or rights over shares (equity-settled
transactions).
The cost of equity-settled
transactions with employees is measured by reference to the fair
value of the award at the date at which they are granted. The fair
value is determined by utilising an appropriate valuation model. In
valuing equity-settled transactions, no account is taken of any
performance conditions, as none of the conditions set are market
related.
The cost of equity-settled
transactions is recognised, together with a corresponding increase
in equity, over the period in which the performance and/or service
conditions are fulfilled, ending on the date on which the relevant
employees become fully entitled to the award (vesting
date).
The cumulative expense recognised
for equity-settled transactions at each reporting date, until the
vesting date, reflects the extent to which the vesting period has
expired and the Directors' best estimate of the number of equity
instruments that will ultimately vest. The Consolidated Income
Statement charge or credit for a period represents the movement in
cumulative expense recognised as at the beginning and end of that
period. As the schemes do not include any market-related
performance conditions, no expense is recognised for awards that do
not ultimately vest.
Movements in the estimated
employer's National Insurance liability related to the awards,
carried on the Consolidated Balance Sheet, are recognised in the
Consolidated Income Statement.
The dilutive effect of outstanding
options is reflected as additional share dilution in the
computation of earnings per share (see note 8).
The Group has an employee share
trust for the granting of non-transferable options to Executive
Directors and senior Management. Shares in the Group held by the
employee share trust are treated as investment in own shares and
are recorded at cost as a deduction from equity.
2.17 Own shares held
Computacenter plc shares held by the
Group are classified in shareholders' equity as 'own shares held'
and are recognised at cost. Consideration received for the sale of
such shares is also recognised in equity, with any difference
between the proceeds from sale and the original cost being taken to
reserves. No gain or loss is recognised in the performance
statements on the purchase, sale, issue or cancellation of equity
shares. These shares are held in Computacenter Employee Benefit
Trust which is called "Employee share ownership Plan" (ESOP).
Computacenter being the sponsoring entity has control over the ESOP
under IFRS 10 as Computacenter makes the decisions on how the ESOP
operates per the following criteria:
· Computacenter has power over the relevant activities of the
ESOP
· Computacenter has exposure, or rights, to variable returns
from its involvement with the ESOP
· Computacenter has the ability to use its power over the ESOP
to affect the amount of the ESOP returns
As the IFRS 10 criteria are
satisfied, Computacenter ESOP is accounted for under IFRS 10 and is
consolidated on the basis that the parent (Computacenter plc) has
control, thus the assets and liabilities of the ESOP are included
on the Company's Balance Sheet and the Group's Consolidated Balance
Sheet. The shares held by the ESOP are presented as a deduction
from equity within the Consolidated Statement of Changes in Equity
under the 'own shares held' column.
2.18 Fair value measurement
The Group measures certain financial
instruments at fair value at each balance sheet date.
Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date.
The fair value of an asset or a
liability is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming that market participants act in their economic best
interest.
The Group uses valuation techniques
that are appropriate in the circumstances and for which sufficient
data is available to measure fair value, maximising the use of
relevant observable inputs and minimising the use of unobservable
inputs.
3
Critical accounting estimates and judgements
The preparation of the Consolidated
Financial Statements requires Management to exercise judgement in
applying the Group's accounting policies. It also requires the use
of estimates and assumptions that affect the reported amounts of
assets, liabilities, income and expenses.
Due to the inherent uncertainty in
making these critical judgements and estimates, actual outcomes
could be different.
During the year, Management
reconsidered the critical accounting estimates and judgements for
the Group. This process included reviewing the last reporting
period's disclosures, the key judgements required on the
implementation of forthcoming standards and the current period's
challenging accounting issues. Where Management deemed there is a
change for an area of accounting to be considered a critical
estimate or judgement, an explanation for this decision is provided
in note 3.3.
3.1
Critical estimates
Estimates and underlying assumptions
are reviewed on an ongoing basis, with revisions recognised in the
year in which the estimates are revised and in any future years
affected. The are no areas involving significant risk resulting in
a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
3.2
Critical judgements
Judgements made by Management in the
process of applying the Group's accounting policies, which have the
most significant effect on the amounts recognised in the
Consolidated Financial Statements, are as follows:
3.2.1 Bill and hold
The Group generates some of its
revenue through its bill and hold arrangements with its customers.
These arise when the customer is invoiced but the product is not
shipped to the customer until a later date, in accordance with the
customer's request in a written agreement. In order to determine
the appropriate timing of revenue recognition, it is assessed
whether control has transferred to the customer.
A bill and hold arrangement is only
put in place when a customer lacks the physical space to store the
product or the product previously ordered is not yet needed in
accordance with the customer's schedule and the customer wants to
guarantee supply of the product. In order to determine whether an
arrangement is bill and hold and control has been transferred to
the customer, a customer request must have been approved and all of
the below criteria must have been met :
a) the reason for the bill and hold
arrangement must be substantive (for example, the customer has
requested the arrangement);
b) the product must be identified
separately as belonging to the customer;
c) the product currently must be
ready for physical transfer to the customer; and
d) the Group cannot have the ability
to use the product or to direct it to another customer.
Judgement is required to determine
if all of the criteria (a) to (d) have been met, to recognise a
bill and hold sale. This is determined by segregation and readiness
of inventory and the review and approval of all customer requests,
in order to assess whether the accounting policy had been correctly
applied to recognise a bill and
hold sale.
£407.6m of product sold is held by
the Group for bill and hold transactions as at 31 December 2023
(2022: £386.9m).
3.3
Change in critical estimates and critical
judgements
During the year, Management
reassessed the critical estimates and critical
judgements.
At its 20 April 2022 meeting, the
IFRS Interpretation Committee (the Committee) finalised and
approved its agenda decision in response to a submission from a
valued added reseller to determine whether an entity should treat
revenue from the resale of standard software licences on a
principal or agent recognition basis under IFRS 15 Revenue from
Contracts with Customers (IFRS 15).
As noted in our 2022 Annual Report
and Accounts, the Group revised its accounting policies accordingly
and implemented a series of system and process changes. The impact
of this is to make the determination of Agent vs Principal routine
and embedded within the transactional flows of the business,
reducing significantly the day-to-day judgement required.
Therefore, Management has concluded that the level of judgement now
involved in Technology Sourcing principal versus agent recognition
will not result in a significant effect on the amounts recognised
in the Consolidated Financial Statements and this is no longer
considered a critical judgement.
Exceptional items are no longer
considered a critical judgement by Management and have therefore
been removed from the above disclosure, as reported exceptional
items are not material and do not involve a significant level of
judgement.
Apart from the changes discussed
above, the critical accounting estimates and judgements reported in
the Group's 2022 Annual Report and Accounts are
unchanged.
4
Segment information
The Segment information is reported
to the Board and the Chief Executive Officer. The Chief Executive
Officer is the Group's Chief Operating Decision Maker (CODM). The
Group has the same operating Segments and reporting Segments and
these remain unchanged from those reported at 31 December
2022.
The Segmental reporting structure is
the basis on which internal reports are provided to the Chief
Executive Officer, as the CODM, for assessing performance and
determining the allocation of resources within the Group, in
accordance with IFRS 8.25. Segmental performance is measured based
on external revenues, gross profit, adjusted operating profit and
adjusted profit before tax. Central Corporate Costs continue to be
disclosed as a separate column within the Segmental
note.
Segmental performance for the years
ended 31 December 2023 and 31 December 2022 was as
follows:
Year ended
31
December 2023
|
UK
£m
|
Germany
£m
|
France
£m
|
North
America*
£m
|
International
£m
|
Central
Corporate
Costs
£m
|
Total
£m
|
Revenue
|
|
|
|
|
|
|
|
Technology Sourcing
revenue
|
|
|
|
|
|
|
|
Gross invoiced income
|
1,938.1
|
2,111.5
|
728.5
|
3,454.4
|
212.4
|
-
|
8,444.9
|
Adjustment to gross invoiced income
for income recognised as agent
|
(1,166.3)
|
(849.7)
|
(248.6)
|
(851.8)
|
(42.2)
|
-
|
(3,158.6)
|
Total Technology Sourcing
revenue
|
771.8
|
1,261.8
|
479.9
|
2,602.6
|
170.2
|
-
|
5,286.3
|
Services revenue
|
|
|
|
|
|
|
|
Professional Services
|
132.2
|
365.4
|
50.8
|
118.7
|
11.7
|
-
|
678.8
|
Managed Services
|
309.7
|
400.3
|
132.8
|
27.4
|
87.5
|
-
|
957.7
|
Total Services revenue
|
441.9
|
765.7
|
183.6
|
146.1
|
99.2
|
-
|
1,636.5
|
Total revenue
|
1,213.7
|
2,027.5
|
663.5
|
2,748.7
|
269.4
|
-
|
6,922.8
|
|
|
|
|
|
|
|
|
Results
|
|
|
|
|
|
|
|
Gross profit
|
250.8
|
374.5
|
87.3
|
267.5
|
63.9
|
-
|
1,044.0
|
Adjusted administrative
expenses
|
(192.0)
|
(211.5)
|
(78.6)
|
(202.5)
|
(44.1)
|
(43.8)
|
(772.5)
|
Adjusted operating
profit/(loss)
|
58.8
|
163.0
|
8.7
|
65.0
|
19.8
|
(43.8)
|
271.5
|
Adjusted net interest
|
5.5
|
1.0
|
(0.8)
|
1.7
|
(0.9)
|
-
|
6.5
|
Adjusted profit/(loss) before
tax
|
64.3
|
164
|
7.9
|
66.7
|
18.9
|
(43.8)
|
278.0
|
Exceptional items:
|
|
|
|
|
|
|
|
- unwinding of discount relating to
acquisition of a subsidiary
|
|
|
|
|
|
|
(3.2)
|
- gain relating to acquisition of a
subsidiary
|
|
|
|
|
|
|
2.8
|
- other income relating to
acquisition of a subsidiary
|
|
|
|
|
|
|
5.3
|
Total exceptional items
|
|
|
|
|
|
|
4.9
|
Amortisation of acquired
intangibles
|
|
|
|
|
|
|
(10.8)
|
Profit before tax
|
|
|
|
|
|
|
272.1
|
* Included within the North America
Segment total revenue of £2,748.7m is an amount of £2,703.4m
revenue for the United States of America.
The reconciliation of adjusted
operating profit to operating profit as disclosed in the
Consolidated Income Statement is as follows:
Year ended
31
December 2023
|
Total
£m
|
Adjusted operating profit
|
271.5
|
Amortisation of acquired
intangibles
|
(10.8)
|
Exceptional items
|
8.1
|
Operating profit
|
268.8
|
Year ended
31
December 2023
|
UK
£m
|
Germany
£m
|
France
£m
|
North
America*
£m
|
International
£m
|
Central
Corporate
Costs
£m
|
Total
£m
|
Other Segment information
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
31.7
|
40.7
|
5.5
|
9.9
|
8.3
|
-
|
96.1
|
Right-of-use assets
|
9.0
|
45.4
|
14.3
|
18.8
|
17.0
|
-
|
104.5
|
Intangible assets
|
54.8
|
17.1
|
10.2
|
225.8
|
14.5
|
-
|
322.4
|
|
|
|
|
|
|
|
|
Capital expenditure:
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
5.7
|
7.8
|
1.6
|
2.4
|
4.4
|
-
|
21.9
|
Right-of-use assets
|
3.5
|
13.2
|
1.7
|
2.8
|
12.6
|
-
|
33.8
|
Software
|
12.0
|
0.3
|
-
|
0.2
|
0.7
|
-
|
13.2
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and
equipment
|
6.2
|
6.9
|
1.6
|
3.6
|
2.1
|
-
|
20.4
|
Depreciation of right-of-use
assets
|
4.6
|
20.5
|
5.3
|
5.4
|
5.6
|
-
|
41.4
|
Amortisation of software
|
5.7
|
0.4
|
0.1
|
1.4
|
0.5
|
-
|
8.1
|
|
|
|
|
|
|
|
|
Share-based payments
|
2.7
|
1.8
|
0.1
|
0.3
|
-
|
2.8
|
7.7
|
* Included within the North America
segment Intangible assets of £225.8m is an amount of £218.4m
Intangible assets for the United States of America.
|
|
|
|
|
|
|
|
Year ended
31
December 2022
|
UK
£m
|
Germany
£m
|
France
£m
|
North
America*
£m
|
International
£m
|
Central
Corporate
Costs
£m
|
Total
£m
|
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
|
1,269.4
|
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
|
Adjusted administrative
expenses
|
(178.7)
|
(184.2)
|
(69.6)
|
(185.3)
|
(36.5)
|
(23.7)
|
(678.0)
|
Adjusted operating
profit/(loss)
|
80.5
|
140.9
|
7.1
|
53.0
|
11.3
|
(23.7)
|
269.1
|
Adjusted net interest
|
2.6
|
(2.2)
|
(0.8)
|
(4.2)
|
(0.8)
|
-
|
(5.4)
|
Adjusted 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
|
* Included within the North America
segment Total revenue of £2,507.3m is an amount of £2,470.0m
revenue for the United States of America.
The reconciliation of adjusted
operating profit to operating profit as disclosed in the
Consolidated Income Statement is as follows:
Year ended 31 December 2022
|
Total
£m
|
|
Adjusted operating profit
|
269.1
|
|
Amortisation of acquired
intangibles
|
(10.9)
|
|
Exceptional items
|
(1.8)
|
|
Operating profit
|
256.4
|
|
Year ended
31
December 2022
|
UK
£m
|
Germany
£m
|
France
£m
|
North
America*
£m
|
International
£m
|
Central
Corporate
Costs
£m
|
Total
£m
|
Other Segment information
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
29.6
|
40.7
|
5.6
|
11.7
|
6.5
|
-
|
94.1
|
Right-of-use assets
|
10.3
|
53.8
|
18.2
|
22.5
|
14.6
|
-
|
119.4
|
Intangible assets
|
49.5
|
17.5
|
10.4
|
250.6
|
14.1
|
-
|
342.1
|
|
|
|
|
|
|
|
|
Capital expenditure:
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
7.2
|
7.8
|
2.2
|
3.9
|
2.6
|
-
|
23.7
|
Right-of-use assets
|
2.6
|
22.6
|
4.8
|
10.5
|
4.5
|
-
|
45.0
|
Software
|
10.5
|
0.5
|
0.3
|
0.1
|
0.4
|
-
|
11.8
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and
equipment
|
6.9
|
6.8
|
2.2
|
3.3
|
2.3
|
-
|
21.5
|
Depreciation of right-of-use
assets
|
4.6
|
30.2
|
4.9
|
5.5
|
5.3
|
-
|
50.5
|
Amortisation of software
|
5.7
|
0.4
|
0.1
|
1.4
|
0.4
|
-
|
8.0
|
|
|
|
|
|
|
|
|
Share-based payments
|
4.2
|
1.9
|
0.1
|
0.7
|
-
|
1.7
|
8.6
|
|
|
|
|
|
|
|
|
| |
* Included within the North America
segment Intangible assets of £250.6m is an amount of £242.3m
Intangible assets for the United States of America.
Charges for the amortisation of
acquired intangibles (where initial recognition was an exceptional
item or a fair value adjustment on acquisition) are excluded from
the calculation of adjusted operating profit. This is because these
charges are based on judgements about their value and economic
life, are the result of the application of acquisition accounting
rather than core operations, and whilst revenue recognised in the
Consolidated Income Statement does benefit from the underlying
asset that has been acquired, the amortisation costs bear no
relation to the Group's underlying ongoing operational performance.
In addition, amortisation of acquired intangibles is not included
in the analysis of Segment performance used by the CODM.
Information about major customers
Included in revenues arising from
the North American Segment are revenues of approximately £1,511.0m
(2022: £963.1m) which arose from sales to the Group's largest
customer.
5
Revenue
Revenue recognised in the
Consolidated Income Statement is analysed as follows:
|
2023
£m
|
2022
£m
|
Revenue by type
|
|
|
Gross invoiced income
|
8,444.9
|
7,481.6
|
Adjustment to gross invoiced income
for income recognised as agent
|
(3,158.6)
|
(2,581.7)
|
Technology Sourcing
revenue*
|
5,286.3
|
4,899.9
|
Services revenue
|
|
|
Professional Services
|
678.8
|
636.6
|
Managed Services
|
957.7
|
934.0
|
Total Services revenue
|
1,636.5
|
1,570.6
|
Total revenue
|
6,922.8
|
6,470.5
|
* Included within the amount of
Technology Sourcing revenue shown above is £85.3m (2022: £42.1m)
recognised under IFRS 16. All other Technology Sourcing revenue is
recognised at a point in time under IFRS 15 as described in our
accounting policy 2.3.1.
Contract balances
The following table provides the
information about contract assets and contract liabilities from
contracts with customers.
|
|
31 December
2023
£m
|
31 December
2022
£m
|
Trade receivables
|
|
1,471.8
|
1,659.7
|
Contract assets, which are included
in prepayments
|
|
19.6
|
23.7
|
Contract assets, which are included
in accrued income
|
|
151.9
|
129.2
|
Contract liabilities, which are
included in deferred income
|
|
234.6
|
273.2
|
The prepayments balance within the
Consolidated Balance Sheet of £150.0m consists of £19.6m contract
assets and £130.4m other prepayments.
The Group has implemented an
expected credit loss impairment model with respect to contract
assets which are included in accrued income using the simplified
approach. These contract assets have been grouped on the basis of
their shared risk characteristics and a provision matrix has been
developed and applied to these balances to generate the loss
allowance. The majority of these contract asset balances are with
blue chip customers and the incidence of credit loss is low. There
has therefore been no material adjustment to the loss allowance
under IFRS 9. Specific provisions are made against material or
high-risk balances based on trading experience or where doubt
exists about the counterparty's ability to pay. The expected credit
losses on contract assets which are within accrued income are
considered to be immaterial.
Significant changes in contract assets and
liabilities
Contract assets are balances due
from customers under long-term contracts as work is performed and
therefore a contract asset is recognised over the period in which
the performance obligation is fulfilled. This represents the
Group's right to consideration for the services transferred to
date. Amounts are generally reclassified to trade and other
receivables when these have been certified or invoiced to a
customer. Refer to note 2.11.1 for credit terms of trade
receivables.
The decrease in trade receivables
mainly in the North American Segment is driven by higher cash
collections due to operational improvements and the continued
easing of supply chain conditions for the customers, in addition to
the impact of timing of large deals.
Win fees, deferred contract costs
and fulfilment costs are included in the prepayments balance above.
The Consolidated Income Statement impact of the win fees was a
recognition of a net loss in 2023 of £0.9m, with a corresponding
credit to income tax of £0.2m for the year. As at 31 December 2023,
the win fee balance was £10.5m. The Consolidated Income Statement
impact of fulfilment costs was a recognition of a net cost in 2023
of £0.1m, with a corresponding tax charge of £0.1m for the
year.
As at 31 December 2023, the deferred
contract costs balance was £4.2m and the fulfilment costs balance
was £4.9m. No impairment loss was recorded for win fees, deferred
contract costs or fulfilment costs during the year.
Revenue recognised in the reporting
period from movement in accrued income balances was £27.1m, with a
credit to foreign exchange of £4.4m. No impairment loss was
recorded for accrued income during the year.
Revenue recognised in the reporting
period that was included in the contract liability balance at the
beginning of the period was £122.3m. No revenue was recognised in
the reporting period from performance obligations that were
satisfied or partially satisfied in previous periods.
Remaining performance obligations (work in
hand)
Contracts which have remaining
performance obligations as at 31 December 2023 and 31 December 2022
are set out in the table below. The table below discloses the
aggregate transaction price relating to those remaining performance
obligations, excluding both (a) amounts relating to contracts for
which revenue is recognised as invoiced and (b) amounts relating to
contracts where the expected duration of the ongoing performance
obligation is one year or less.
Managed Services
|
Less than
one year
£m
|
One to
two years
£m
|
Two to
three years
£m
|
Three to
four years
£m
|
Four years
and beyond
£m
|
Total
£m
|
As at 31 December 2023
|
747.4
|
528.4
|
370.3
|
194.6
|
152.0
|
1,992.7
|
As at 31 December 2022
|
729.1
|
513.2
|
374.0
|
266.7
|
226.8
|
2,109.8
|
The duration of most contracts is
between one and five years. However some contracts will vary from
these typical lengths. Revenue is typically earned over these
varying timeframes.
6
Exceptional items
|
2023
£m
|
2022
£m
|
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
|
2.8
|
-
|
Exceptional operating
profit/(loss)
|
8.1
|
(1.8)
|
Interest cost relating to
acquisition of a subsidiary
|
(3.2)
|
(2.0)
|
Profit/(loss) on exceptional items
before taxation
|
4.9
|
(3.8)
|
|
|
|
Income tax
|
|
|
Tax credit relating to acquisition
of a subsidiary
|
-
|
0.2
|
Loss on exceptional items after
taxation
|
4.9
|
(3.6)
|
Included within 2023 are the
following exceptional items:
· £3.2m relating to the unwinding of the discount on the
contingent payment for the purchase of BITS has been classified as
exceptional interest costs. This is consistent with our prior-year
treatment.
· A $9.3m (£7.4m) 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, $6.7m (£5.3m)
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 $1.6m (£1.3m) and $1.0m (£0.8m) have been credited to adjusted
interest income, for the refund of statutory overpayment interest
receivable on the original payment, and adjusted administrative
expenses, to reimburse legal expenses incurred since acquisition,
respectively.
· £2.8m relating to a release of contingent consideration in
relation to the BITS acquisition. 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.
7
Income tax
a) Tax on profit from ordinary
activities
|
2023
£m
|
2022
£m
|
Tax
charged in the Consolidated Income Statement
|
|
|
Current income tax
|
|
|
UK corporation tax
|
13.6
|
15.1
|
Foreign tax:
|
|
|
- operating results before
exceptional items
|
64.0
|
49.0
|
- exceptional items
|
-
|
(0.2)
|
Total foreign tax
|
64.0
|
48.8
|
|
|
|
Adjustments in respect of prior
years
|
2.1
|
(5.1)
|
Total current income tax
|
79.7
|
58.8
|
|
|
|
Deferred income tax
|
|
|
Operating results before exceptional
items:
|
|
|
- origination and reversal of
temporary differences
|
0.3
|
1.0
|
- change in tax rates
|
(0.5)
|
0.6
|
- adjustments in respect of prior
years
|
(6.8)
|
4.4
|
Total deferred income tax
|
(7.0)
|
6.0
|
|
|
|
Tax
charge in the Consolidated Income Statement
|
72.7
|
64.8
|
|
|
|
b) Reconciliation of the total
tax charge
|
2023
£m
|
2022
£m
|
Profit before income tax
|
272.1
|
249.0
|
|
|
|
At the UK standard rate of
corporation tax of 23.5% (2022: 19%)
|
63.9
|
47.3
|
Expenses not deductible for tax
purposes
|
2.8
|
1.2
|
Non-deductible element of
share-based payment charge
|
(0.1)
|
2.3
|
Adjustments in respect of prior
years
|
(4.7)
|
(0.7)
|
Effect of different tax rates of
subsidiaries operating in other jurisdictions
|
12.0
|
17.6
|
Change in tax rate
|
(0.5)
|
0.6
|
Other differences
|
(0.1)
|
0.5
|
Overseas tax not based on
earnings
|
1.5
|
1.1
|
Previously unrecognised tax losses
used to reduce deferred income tax expense
|
-
|
(3.2)
|
Previously unrecognised tax losses
used to reduce current tax expense
|
(0.9)
|
(0.9)
|
Tax effect of income not taxable in
determining taxable profit
|
(1.2)
|
(1.0)
|
At effective income tax rate of
26.7% (2022: 26.0%)
|
72.7
|
64.8
|
Taxation for subsidiaries operating
in other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions, these being a blended rate of 31% in
Germany (2022: 32%) and a blended (Federal/State) rate of 26% in
the US (2022: 25%), which mainly drive the 'Effect of different tax
rates of subsidiaries operating in other jurisdictions'
above.
c)
Tax losses
Deferred income tax assets of £3.7m
(2022: £3.9m) have been recognised in respect of losses carried
forward, primarily in France.
In considering the probable
utilisation of the carried forward tax losses, and therefore the
likely recoverability of these assets, the Group makes an
assessment based upon a reasonably foreseeable timeframe, being
typically up to three years, taking into account the future
expected profit profile and business model of each relevant company
or country. The reasonably foreseeable timeframe is derived based
on the confidence the Group has in the performance of these
companies or countries and therefore the reliability of forecasts
over the timeframe in which the asset would be recovered. If the
reasonably foreseeable timeframe is extended to five years for our
French business, an additional £2.3m (2022: £0.9m) of deferred
income tax asset would be recognised.
As at 31 December 2023, there were
further unused tax losses across the Group of £284.2m (2022:
£293.5m) for which no deferred income tax asset has been
recognised. Of these losses, £256.1m (2022: £263.5m) arise in
France, £26.4m (2022: £26.3m) arise in Germany and £1.8m (2022:
£3.7m) arise in the Netherlands. No deferred tax has been
recognised on these losses due to the potential uncertainty around
whether future taxable profits would be available against which
these tax losses can be utilised. Following the merger of CC France
SAS and Computacenter NS (CCNS), a request has been made to the
French tax authorities to preserve the historic tax losses of CCNS
(£172.3m) and a decision is pending in this regard. A significant
proportion of the losses arising in Germany have been generated in
statutory entities that no longer have significant levels of
trade.
The Group has other timing
differences, primarily in France, of £30.1m (2022: £28.7m), for
which no deferred tax asset has been recognised. These timing
differences mainly relate to the retirement benefit obligation
which is of a long-term nature. The amount that would be recognised
over our reasonably foreseeable timeframe of up to three years
would therefore be immaterial.
In addition, there are unutilised
capital tax losses as at 31 December 2023 of £7.4m (2022: £7.4m)
but no deferred tax asset has been recognised as it is not
considered probable that these losses will be utilised in the
foreseeable future.
d)
Deferred income tax
Deferred income tax as at 31
December 2023 and 31 December 2022 relates to the
following:
|
|
|
|
|
|
|
|
Consolidated
Balance
Sheet
|
Consolidated
Income
Statement
|
Consolidated
Statement of Comprehensive
Income
|
|
2023
£m
|
2022
(restated*)
£m
|
2023
£m
|
2022
£m
|
2023
£m
|
2022
£m
|
Deferred income tax assets/(liabilities)
|
|
|
|
|
|
|
Property, plant and
equipment
|
(3.1)
|
(3.2)
|
(2.1)
|
(5.8)
|
-
|
-
|
Right-of-use assets
|
(26.6)
|
(31.1)
|
4.2
|
0.3
|
-
|
-
|
Intangible assets
|
(19.9)
|
(29.9)
|
8.0
|
(0.2)
|
-
|
-
|
Inventories
|
2.5
|
3.9
|
(2.0)
|
(0.9)
|
-
|
-
|
Derivative financial
instruments
|
0.1
|
1.2
|
-
|
-
|
(0.9)
|
1.0
|
Lease liabilities
|
27.9
|
32.4
|
(4.1)
|
(0.2)
|
-
|
-
|
Share-based payments
|
8.0
|
6.8
|
0.4
|
(0.8)
|
-
|
-
|
Tax losses carried
forward
|
3.7
|
3.9
|
-
|
3.2
|
-
|
-
|
Other temporary
differences
|
5.6
|
6.6
|
2.6
|
(1.6)
|
-
|
-
|
Deferred income tax
(charge)/credit
|
|
|
7.0
|
(6.0)
|
(0.9)
|
1.0
|
Net deferred income tax
asset/(liabilities)
|
(1.8)
|
(9.4)
|
|
|
|
|
|
|
|
|
|
|
|
Disclosed on the Consolidated Balance Sheet
|
|
|
|
|
|
|
Deferred income tax
assets
|
11.6
|
11.3
|
|
|
|
|
Deferred income tax
liabilities
|
(13.4)
|
(20.7)
|
|
|
|
|
Net deferred income tax
asset/(liabilities)
|
(1.8)
|
(9.4)
|
|
|
|
|
*Deferred tax on right-of-use assets
and lease liabilities has been grossed up in 2022 following the
adoption of IAS 12 amendments relating to the initial recognition
exemption (note 2). This has no impact on the Consolidated Balance
Sheet.
Deferred tax is not recognised in
respect of the Group's investments in subsidiaries where
Computacenter is able to control the timing of remittance, or other
realisation, of unremitted earnings and where remittance or
realisation is not probable in the foreseeable future.
e)
Factors affecting current and future tax charge
The March 2021 Budget announced that
a UK Corporation tax rate of 25% will apply with effect from 1
April 2023, and this change was substantively enacted on 11 March
2021. The deferred income tax in the summary financial information
within this announcement reflects this. The main rate of UK
Corporation tax in 2022 and up to 31 March 2023 was 19%, as enacted
in the Finance Act 2020.
The Group is within the scope of the
Organisation for Economic Cooperation and Development (OECD) Pillar
Two model rules. UK legislation has been enacted which introduces
the OECD's Pillar Two model Income Inclusion Rules into UK law,
where Computacenter Plc is incorporated. Finance (No2) Act received
Royal Assent on 11 July 2023 meaning the Income Inclusion Rule
(IIR) and the UK's Domestic Top-up Tax (DTT) will come into effect
for accounting periods beginning on or after 31 December 2023.
Draft legislation has now been published to introduce the OECD's
Undertaxed Profits Rule (UTPR) to the UK. This is due to be in
place for accounting periods commencing not before 31 December
2024.
Since the Pillar Two legislation was
not effective at the reporting date, the Group has no related
current tax exposure. The Group applies the exception to
recognising and disclosing information about deferred tax assets
and liabilities related to Pillar Two income taxes, as provided in
the amendments to IAS 12 issued in May 2023.
Under the legislation, the Group is
liable to pay a top-up tax for the difference between the Pillar
Two Global anti-Base Erosion (GloBE) effective tax rate per
jurisdiction and the 15% minimum rate. The Group is currently
engaged with tax specialists to assist it with applying the
legislation. An initial review by the tax specialist has indicated
that the Group does not expect to experience a material impact on
its effective tax rate as a result of the OECD Pillar Two model
rules.
f)
Uncertain tax positions
The Group operates in numerous
jurisdictions and has ongoing tax audits and open tax matters with
certain tax authorities which mainly relate to interpretation of
how relevant tax legislation applies to the Group's transfer
pricing arrangements. The matters under discussion can be complex
and often take several years to resolve. The Group records a
provision against uncertain tax positions based on Management's
estimate of either the most likely amount or the expected value
amount depending on which method is expected to better reflect the
resolution of the uncertainty.
The potential exposure of the Group
to an unfavourable outcome in any uncertain tax matter is not
expected to result in material additional tax expense or
liabilities and therefore the amounts, where already recognised,
are not material and are considered appropriate for the current
status of the matters under review.
8
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.
|
2023
£m
|
2022
£m
|
Profit attributable to equity
holders of the Parent
|
197.6
|
182.8
|
|
2023
m
|
2022
m
|
Basic weighted average number of
shares (excluding own shares held)
|
112.9
|
112.8
|
Effect of dilution:
|
|
|
Share options
|
1.2
|
2.1
|
Diluted weighted average number of
shares
|
114.1
|
114.9
|
|
2023
pence
|
2022
pence
|
Basic earnings per share
|
175.0
|
162.1
|
Diluted earnings per
share
|
173.2
|
159.1
|
9
Analysis of changes in net funds
|
At 1
January
2023
£m
|
Cash flows
in year
£m
|
Non-cash
flow
£m
|
Exchange
differences
£m
|
At 31
December
2023
£m
|
Cash and short-term
deposits
|
264.4
|
207.6
|
-
|
(0.8)
|
471.2
|
Cash and cash equivalents
|
264.4
|
207.6
|
-
|
(0.8)
|
471.2
|
Bank loans
|
(20.1)
|
6.9
|
-
|
1.0
|
(12.2)
|
Adjusted net funds (excluding lease
liabilities)
|
244.3
|
214.5
|
-
|
0.2
|
459.0
|
Lease liabilities
|
(127.1)
|
46.1
|
(30.7)
|
(3.7)
|
(115.4)
|
Net
funds
|
117.2
|
260.6
|
(30.7)
|
(3.5)
|
343.6
|
|
At 1 January
2022
£m
|
Cash flows
in year
£m
|
Non-cash
flow
£m
|
Exchange
differences
£m
|
At 31 December
2022
(restated*)
£m
|
Cash and short-term
deposits*
|
285.2
|
(13.6)
|
-
|
(7.2)
|
264.4
|
Bank overdrafts*
|
(12.0)
|
12.0
|
-
|
-
|
-
|
Cash and cash equivalents
|
273.2
|
(1.6)
|
-
|
(7.2)
|
264.4
|
Bank loans and credit
facility
|
(31.8)
|
12.9
|
-
|
(1.2)
|
(20.1)
|
Adjusted net funds
(excluding lease liabilities)
|
241.4
|
11.3
|
-
|
(8.4)
|
244.3
|
Lease liabilities
|
(146.1)
|
55.2
|
(28.7)
|
(7.5)
|
(127.1)
|
Net funds
|
95.3
|
66.5
|
(28.7)
|
(15.9)
|
117.2
|
* Refer to note 2 for restatement of
prior-year comparatives.
10
Related-party transactions
During the year, the Group entered
into transactions, in the ordinary course of business, with related
parties. Transactions entered into are as described
below:
Biomni Limited provides the
Computacenter e-procurement system used by many of Computacenter's
major customers. An annual fee has been agreed on a commercial
basis for use of the software for each installation. Both Peter
Ogden and Philip Hulme are Directors of and have a material
interest in Biomni Limited. Biomni Limited ceased to be a related
party on 22 December 2023.
The table below provides the total
amount of transactions that have been entered into with related
parties for the relevant financial year:
|
2023
£m
|
2022
£m
|
Biomni Limited
|
|
|
Sales to related parties
|
-
|
-
|
Purchase from related
parties
|
0.9
|
0.6
|
There was no outstanding balance as
at 31 December 2023 (31 December 2022: nil).
In addition to the above, a relative
of a Director of the Company is employed by a subsidiary of the
Company under normal terms and conditions and with remuneration
commensurate with the role. Total remuneration for 2023 was £0.2m
(2022: £0.2m).
Terms and conditions of transactions with related
parties
Outstanding balances at the year end
are unsecured and settlement occurs in cash. There have been no
guarantees provided or received for any related-party receivables.
The Group has not recognised any allowance for expected credit
losses relating to amounts owed by related parties. This assessment
is undertaken each financial year through examining the financial
position of the related party and the market in which the related
party operates.
Compensation of key management personnel (including
Directors)
The Board of Directors is identified
as the Group's key management personnel. A summary of the
compensation of key management personnel is provided
below:
|
2023
£m
|
2022
£m
|
Short-term employee
benefits
|
3.7
|
2.1
|
Social security costs
|
0.9
|
0.5
|
Share-based payment
transactions
|
1.9
|
3.7
|
Pension costs
|
0.1
|
0.1
|
Total compensation paid to key
management personnel
|
6.6
|
6.4
|
Appendix:
Alternative performance measures
Alternative Performance Measures are
used by the Group to understand and manage performance. These are
not defined under International Financial Reporting Standards
(IFRS) or UK-adopted International Accounting Standards (UK-IFRS)
and are not intended to be a substitute for any IFRS or UK-IFRS
measures of performance but have been included as Management
considers them to be important measures, alongside the comparable
Generally Accepted Accounting Practice (GAAP) financial measures,
in assessing underlying performance. Wherever appropriate and
practical, we provide reconciliations to relevant GAAP measures.
The table below sets out the basis of calculation of the
Alternative Performance Measures and the rationale for their
use.
|
|
|
Measure
|
Description
|
Rationale
|
Adjusted net funds and net
funds
|
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 recognised
under IFRS 16.
Net funds is adjusted net funds
including all lease liabilities recognised under IFRS
16.
|
A table reconciling this measure,
including the impact of lease liabilities, is provided within note
9 to the summary financial information within this
announcement.
|
Adjusted (expense and profit)
measures
|
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,
are 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.
· Recurring items include purchase price adjustments, including
amortisation of acquired intangible assets and adjustments made to
reduce deferred income arising on acquisitions and
acquisition-related items. Recurring items are adjusted each period
irrespective of materiality, to ensure consistent
treatment.
· Non-recurring items are those that Management judge to be
one-off or non-operational, such as gains and losses on the
disposal of assets, impairment charges and reversals, and
restructuring related costs.
|
Adjusted measures exclude items
which in Management's judgement need to be disclosed separately by
virtue of their size, nature or frequency to aid understanding of
the performance for the year or comparability between
periods.
Adjusted measures allow Management
and investors to compare performance without these recurring or
non-recurring items.
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 within the Chief Financial Officer's review, which details
the impact of exceptional and other adjusted items when compared to
the non-GAAP financial measures, in addition to those reported in
accordance with IFRS. Further detail is provided within note 4 to
the summary financial information within this
announcement.
|
Constant currency
|
We evaluate the long-term
performance and trends within our strategic KPIs 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.
|
Free cash flow
|
Free Cash Flow is Cash Flow from
Operations minus net interest received, interest and payments
related to lease liabilities, income tax paid and gross capital
expenditure.
|
To measure the cash generated by the
operating activities during the period that is available to repay
debt, undertake acquisitions or distribute to
shareholders.
|
Gross invoiced income and IFRS
revenue
|
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. 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 4 to the
summary financial information within this announcement.
IFRS revenue refers to revenue
recognised in accordance with International Financial Reporting
Standards including IFRS 15 ' Revenue from Contracts with
Customers' and IFRS 16 'Leases'.
|
Gross invoiced income reflects the
cash movements to assist Management and the users of the Annual
Report and Accounts 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.
|
Organic (revenue and profit)
measures
|
In addition to the adjustments made
for adjusted measures, organic measures:
· exclude the contribution from discontinued operations,
disposals and assets held for sale of standalone businesses in the
current and prior period;
· exclude the contribution from acquired businesses until the
year after the first full year following acquisition;
and
· adjust the comparative period to exclude prior-period acquired
businesses if they were acquired part-way through the prior
period.
Acquisitions and disposals where the
revenue and contribution impact would be immaterial are not
adjusted.
|
Organic measures allow management
and investors to understand the like-for-like revenue and
current-period margin performance of the continuing
business.
The result for the year benefited
from £221.4m of revenue (2022: £187.1m), and £9.3m of adjusted
profit before tax (2022: £7.1m), resulting from all acquisitions
made since 1 January 2022. All figures reported throughout this
Annual Report and Accounts include the results of these acquired
entities. The results of these acquisitions are excluded where
narrative discussion refers to 'organic' growth in this Annual
Report and Accounts.
|
Product order backlog
|
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, on a gross invoiced income
basis.
|
The Technology Sourcing backlog,
alongside the Managed Services Contract Base and the Professional
Services forward order book, allows us visibility of future
revenues in these
areas.
|
Return on capital employed
(ROCE)
|
ROCE is calculated as adjusted
operating profit, divided by capital employed, which is the closing
total net assets excluding adjusted net funds.
|
As an indicator of the current period
financial return on the capital invested in the company.
|