TIDMCCC
RNS Number : 1887L
Computacenter PLC
09 September 2021
Computacenter plc
Incorporated in England
Registration number: 03110569
LEI: 549300XSXUZ1I19DB105
ISIN: GB00BV9FP302
Computacenter plc
Interim results for the six months ended 30 June 2021
Computacenter plc ("Computacenter" or the "Group"), a leading
independent technology partner trusted by large corporate and
public sector organisations, today announces results , based on
unaudited financial information,
for the six month period ended 30 June 2021.
Financial Highlights H1 2021 H1 2020 Percentage
Change
Increase/
(Decrease)
Financial Performance
Technology Sourcing revenue (GBP
million) 2,473.9 1,867.8 32.4
Services revenue (GBP million) 706.1 594.4 18.8
Revenue (GBP million) 3,180.0 2,462.2 29.2
Adjusted(1) profit before tax
(GBP million) 118.9 74.6 59.4
Adjusted(1) diluted earnings
per share (pence) 73.1 46.7 56.5
Dividend per share (pence) 16.9 12.3 37.4
Profit before tax (GBP million) 115.2 72.4 59.1
Diluted earnings per share (pence) 70.7 45.3 56.1
Cash Position
Cash and cash equivalents (GBP
million) 158.6 222.1
Adjusted net funds(3) (GBP million) 121.9 149.1
Net (debt)/funds (GBP million) (29.4) 24.3
Net cash inflow from operating
activities (GBP million) 1.6 44.7
Reconciliation to Adjusted(1) Measures
Adjusted(1) profit before tax (GBP
million) 118.9 74.6
Exceptional and other adjusting items:
Amortisation of acquired intangibles
(GBP million) (3.7) (2.2)
Profit before tax (GBP million) 115.2 72.4
Operational Highlights:
-- The Group's total revenues grew 29.2 per cent during the first half of the year, by 31.4 per
cent in constant currency(2) , and by 9.0 per cent in constant currency(2) organically, without
the impact of acquisitions made since 1 January 2020. Significant increases in expenditure
from industrial customers have complemented continuing business within the public and financial
services sectors. Ongoing COVID-19 related cost reductions and further improved Services and
Technology Sourcing margins has resulted in an increase in adjusted(1) profit before tax of
59.4 per cent during the period to GBP118.9 million.
-- The UK saw an increase in revenues of 9.4 per cent as Technology Sourcing revenues saw further
strong growth to cope with the residual demand generated by the COVID-19 crisis and Professional
Services revenues saw very encouraging growth as previously delayed projects recommenced and
customers began new transformation programmes. Strong Services margins, due to increased utilisation
and reduced external contractor costs and stable Technology Sourcing margins have resulted
in an increase in adjusted(1) operating profit of 12.6 per cent during the period.
-- Germany saw overall revenues increase by 10.5 per cent on a constant currency(2) basis with
excellent growth in Managed Services and Technology Sourcing and another very strong performance
in Professional Services. The increase in Professional Services volumes, at higher margins,
coupled with overall margin improvements have resulted in an increase of 74.6 per cent in
adjusted(1) operating profit on a constant currency(2) basis.
-- France has had a difficult start to the year, being impacted by the ongoing slow-down of its
large industrial private sector customer base, lower than expected orders from its largest
Technology Sourcing customer and the expected downturn in its Services business due to the
cessation of the Group's largest Managed Services contract which impacted from H2 2020. This
has resulted in an 8.5 per cent decrease in organic revenues on a constant currency(2) basis,
decreasing gross profits and a reduction in overall adjusted(1) operating profit from EUR4.3
million to a loss of EUR2.3 million including the results of the Computacenter NS acquisition.
-- North America has seen strong organic revenue growth of 18.1 per cent increasing to 164.7
including the Pivot acquisition, both on a constant currency(2) basis. The combined growth
has meant that, during the first half of the year, the North American business had the largest
Technology Sourcing revenues of any Segment within the Group with over $1.2 billion of Technology
Sourcing sales, up from virtually nil in H1 2018. The hyperscale FusionStorm customers and
mid-market clients of Pivot both saw a good return to growth in the period. Services revenue
saw modest improvements in revenue organically with the Pivot acquisition contributing a further
$43.5 million of Services revenue in the period. Adjusted(1) operating profit, including the
impact of Pivot, has increased from $6.0 million in H1 2020 to $25.9 million in H1 2021.
The Group has experienced significant operational impacts due to
the COVID-19 pandemic during the period to 30 June 2021. All
results in this announcement include these COVID-19 impacts and no
attempt has been made to adjust for or exclude these impacts
whether they be positive or negative. Further information on the
COVID-19 impacts on the Group, and our response, can be found
within the Performance Review within this announcement. The
continued adoption of the going concern basis by the Directors in
the preparation of the Interim Condensed Consolidated Financial
Statements is set out in note 2 to the summary financial
information contained within this announcement.
The result for the half-year has benefited from GBP541.9 million
of revenue (H1 2020: nil), and GBP6.8 million of adjusted(1) profit
before tax (H1 2020: nil), resulting from all acquisitions made
since 1 January 2020. All figures reported throughout this
announcement include the results of these acquired entities. The
results of these acquisitions are assumed to be excluded where
narrative discussion refers to 'organic' growth in this
announcement.
A reconciliation between key adjusted(1) and statutory measures
is provided within the Group Finance Director's review contained in
this announcement. Further details are provided in note 5 to the
summary financial information contained within this
announcement.
Mike Norris, Chief Executive of Computacenter plc,
commented:
'Computacenter is 40 years old next month and our ability to
adapt to an ever-changing market has been paramount to our
continued success. This ability has been particularly prevalent
over the last 18 months during the pandemic. The vast majority of
our customers have returned to business as normal and, other than
the reduction to our cost base due to the inability to travel and a
continued improvement in the utilisation of our technical
resources, COVID-19 is now having very little impact on our
business. However, the ongoing supply shortages in the industry has
risen to the top of our challenges. The effects on our business are
difficult to fully quantify. While there has been, and will
continue to be, pressure on our revenues, our position in the
market as one of the larger players in most of the geographies in
which we operate has enabled us to gain market share. While we look
forward to the supply chain issues being behind us, we are not
expecting this until well into 2022 but, as you can see by the
performance in the first half, we are rising to this challenge.
As explained in our Trading Statement on 31 August 2021, while
the second half of the year presents a more difficult comparison,
the strength of our outlook means we will endeavour to beat last
year's second half performance not just match it. Computacenter is
therefore well set for our seventeenth year of uninterrupted
earnings per share growth. Customer demand is strong, we have
record order backlogs for both Technology Sourcing and Services and
we continue to push into new geographies and new markets both
through acquisition and organic growth, all supported by our strong
balance sheet.
We are confident the markets we serve will remain buoyant for
the foreseeable future, and we believe that the range of service
offerings we deliver have never been of such a high quality. We
embrace the future with optimism and confidence.'
(1) Adjusted operating profit or loss, adjusted net finance
income or expense, adjusted profit or loss before tax, adjusted
tax, adjusted profit or loss, adjusted earnings per share and
adjusted diluted earnings per share are, as appropriate, each
stated before: exceptional and other adjusting items including
gains or losses on business acquisitions and disposals,
amortisation of acquired intangibles, utilisation of deferred tax
assets (where initial recognition was as an exceptional item or a
fair value adjustment on acquisition), and the related tax effect
of these exceptional and other adjusting items, as Management do
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 Group Finance Director's
review contained in this announcement which details the impact of
exceptional and other adjusted items when compared to the
non-Generally Accepted Accounting Practice financial measures in
addition to those reported in accordance with IFRS. Further detail
is provided within note 5 to the summary financial information
contained in
this announcement.
(2) We evaluate the long-term performance and trends within our
Strategic Priorities on a constant currency basis. Further, the
performance of the Group and its overseas Segments are shown, where
indicated, in constant currency. The constant currency
presentation, which is a non-GAAP measure, excludes the impact of
fluctuations in foreign currency exchange rates. We believe
providing constant currency information gives valuable supplemental
detail regarding our results of operations, consistent with how we
evaluate our performance. We calculate constant currency
percentages by converting our prior-period local currency financial
results using the current period average exchange rates and
comparing these recalculated amounts to our current period results
or by presenting the results in the equivalent local currency
amounts. Wherever the performance of the Group, or its overseas
Segments, are presented in constant currency, or equivalent local
currency amounts, the equivalent prior-period measure is also
presented in the reported pound sterling equivalent using the
exchange rates prevailing at the time. 2021 interim highlights, as
shown above are provided in the reported pound sterling
equivalent.
(3) Adjusted net funds or adjusted net debt includes cash and
cash equivalents, other short or long-term borrowings and current
asset investments. Following the adoption of IFRS 16 this measure
excludes all lease liabilities .A table reconciling this measure,
including the impact of lease liabilities, is provided within note
13 to the summary financial information contained in this
announcement.
Enquiries:
Computacenter plc
Mike Norris, Chief
Executive 01707 631601
Tony Conophy, Finance
Director 01707 631515
Tulchan Communications
020 7353
James Macey White 4200
Matt Low
DISCLAIMER - FORWARD LOOKING STATEMENTS
This announcement includes statements that are, or may be deemed
to be, 'forward-looking statements'. These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms 'anticipates', 'believes',
'estimates', 'expects', 'intends', 'may', 'plans', 'projects',
'should' or 'will', or, in each case, their negative or other
variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, future events or intentions.
These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
announcement and include, but are not limited to, statements
regarding the Groups' 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 2020 Computacenter Annual Report and Accounts, as
well as general economic and business conditions, industry trends,
competition, changes in regulation, currency fluctuations or
advancements in research and development.
Forward-looking statements speak only as of the date of this
announcement and may and often do, differ materially from actual
results. Any forward-looking statements in this announcement
reflect the Group's current view with respect to future events and
are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Group's operations,
results of operations and growth strategy.
Neither Computacenter plc nor any of its subsidiaries undertakes
any obligation to update the forward-looking statements to reflect
actual results or any change in events, conditions or assumptions
or other factors unless otherwise required by applicable law or
regulation.
Our Interim Performance in 2021
GROUP
Financial performance
The six months of trading to 30 June 2021, as reported in this
announcement, demonstrate the resilience of the Computacenter
business model, which is built on the three primary business lines
of Technology Sourcing, Professional Services and Managed
Services.
The Group's revenues increased by 29.2 per cent to GBP3,180.0
million (H1 2020: GBP2,462.2 million) and were 31.4 per cent higher
in constant currency(2) . This is the first time that the Group has
exceeded GBP3 billion of revenues in a six-month period and first
half revenues are higher than any of the annual revenues recorded
by the Group prior to and including 2016.
The Group made a profit before tax of GBP115.2 million, an
increase of 59.1 per cent (H1 2020: GBP72.4 million). The Group's
adjusted(1) profit before tax increased by 59.4 per cent to
GBP118.9 million (H1 2020: GBP74.6 million) and by 61.1 per cent in
constant currency(2) . This result for the first half of the year
is greater than any full year profit made by the Group prior to
2019 and would be the third largest annual profit in the history of
the Group.
The difference between profit before tax and adjusted(1) profit
before tax relates to the Group's net charge of GBP3.7 million (H1
2020: charge of GBP2.2 million) from exceptional and other
adjusting items. This difference is the amortisation of the
acquired intangible assets resulting from the Group's 2018
acquisition of FusionStorm and the H2 2020 acquisition of Pivot
which has driven the period on period increase.
With the increase in the Group's profit after tax, the diluted
earnings per share ('EPS') increased by 56.1 per cent to 70.7 pence
for the period (H1 2020: 45.3 pence). Adjusted(1) diluted EPS, the
Group's primary EPS measure, increased by 56.5 per cent to 73.1
pence (H1 2020: 46.7 pence) in the first half of 2021.
The result has benefited from GBP541.9 million of revenue (H1
2020: nil), and GBP6.8 million of adjusted(1) profit before tax (H1
2020: nil), resulting from all acquisitions made since 1 January
2020. All figures reported throughout this announcement include the
results of these acquired entities.
Excluding the impact of the acquisitions made since 1 January
2020, revenues grew organically by 9.0 per cent on a constant
currency(2) basis.
Trading across all of our major geographies, apart from France,
was pleasing throughout the period with significant strength at the
end of the second quarter with June 2021 being the most profitable
month in the Group's history. The Group has seen increasing levels
of business returning from key industrial customers, some of which
were largely suppressed during 2020. This is coupled with ongoing
public sector spend and has created significant organic revenue
growth for the Group.
Similar to the situation in 2020, we continued to benefit from
cost savings, however, there has been no further pandemic-related
surge in spend on Technology Sourcing as compared to the prior
period. The Group received c GBP0.6 million in government
employment related assistance during the period entirely related to
the Group's Belgian operations. No other government assistance has
been received in any other jurisdiction during the period,
including the UK. The period saw continuing challenges from
operating in a COVID-19 environment, with most of our major
geographies continuing to experience lockdowns or restrictions on
office-based working during the period. The vast majority of our
staff worked from home during the period, however we were generally
able to perform services on customer sites as required. We thank
all of employees for the flexibility and dedication they have shown
to cope with this changing environment.
Revenues from public sector customers, such as local and central
government, increased by approximately 27.1 per cent, as compared
to the increase seen in non-public sector customers of 30.1 per
cent. Public sector accounts have grown slightly less due to the
rebound in business from industrial customers in the period. Public
sector now accounts for 30.6 per cent of our revenues (H1 2020:
31.1 per cent). Whilst significant volumes of this public sector
business were at lower than normal margins, particularly through
the first quarter of the year, we are pleased that we maintained
efficiencies and reduced costs within the business delivery areas,
such that margins showed a slight rise overall. Our other European
operations, with a much greater share of private sector revenue,
have also seen good growth as the non-public sector accounts have
started to return to normal levels of trading.
Product shortages have materially impacted supply of key
technologies for our customers. In some instances, these shortages
have resulted in orders being delayed into the second half of the
year, restricting revenues and profitability in the period as a
result. Further, as certain orders are part-filled with available
products, inventory levels have risen across the business,
particularly in North America, to GBP254.4 million as at 30 June
2021 (30 June 2020: GBP153.2 million), with GBP53.7 million of the
period-end balance arising in Pivot. This has led to temporary
working capital related operating cash outflows. We have also seen
substantial indications that suggests a number of large hyperscale
customers have pulled forward orders that were due to be placed in
the second half of the year into the first half in order to secure
product in advance of when it is required. This has pulled forward
revenues and profitability into the first half of the year that
would otherwise have been recorded later in the year and
exacerbated inventory levels on unfulfilled orders. However whilst
supply has been restricted, demand has continued to rise
substantially with our product order backlogs, across all
geographies, at a record high which gives us a high degree of
comfort that once supply of key components is restored, the
Technology Sourcing business will be well placed to benefit further
from the pent-up demand. Supply of key components is hoped to
improve by the end of the year, however the return of product
availability will most likely not be consistent across the Group
with those segments with naturally larger overall market presences
able to command an earlier supply with greater volumes than those
jurisdictions where our operations are proportionately smaller to
the size of the local Technology Sourcing market.
Whilst the Group has seen significant currency translation
headwinds as the pound sterling has strengthened against other
currencies, particularly the US Dollar and the Euro, which has
reduced profitability in the period. Further information on
currency impacts is available within Group Finance Director's
review contained in this announcement. This impact has been mostly
offset by the Group benefiting from circa GBP3 million of net
mark-to-market gains on forward currency contracts over the period.
These gains are on contracts taken out to hedge currency movement
on significant foreign exchange flows across the Group.
We do however remain concerned about product shortages within
the industry and obviously further strengthening of the pound would
create a stronger FX translation headwind, but we hope that we are
at the peak of both of these events and therefore do not anticipate
either of these headwinds to get any worse in the short term. These
near-term shortages of product have seen increases in prices from
vendors in response to demand outstripping the somewhat scarce
supply.
In markets where we operate at scale, notably the UK and
Germany, we have been able to leverage our world-class Integration
Centers. The UK in particular has continued to operate well-beyond
normal operating capacities, primarily during the first quarter of
the year, thereby proving ourselves as one of the few resellers
that can rapidly react to serve a broad range of new and existing
customers' needs as they continue to look to technology as the key
to sustaining their businesses through and beyond the COVID-19
emergency.
The UK, in particular, has seen very strong demand within public
sector during Q1 that has been supported by a return of private
sector customers, particularly industrials, in the second quarter
of the year. Professional Services growth has surged as customers
look to restart delayed projects or continue to invest in their
transformation journeys.
The German business has seen similar patterns to the UK
business, albeit in greater quantum. The Professional Services
business in Germany has once again grown spectacularly against a
very strong comparative period. This business remains one of the
key drivers for the Group as a whole and continues its growth
trajectory year after year. Technology Sourcing has seen good
growth as the large industrials, particularly automotive customers,
return to normal trading patterns.
In the US business, the mid-market customers who materially
reduced spend during H1 2020 returned during the period and,
coupled with the continuing success in hyperscale data center-based
customers, drove good overall organic revenue and profit
performance. The addition of Pivot in the second-half of 2020 has
further contributed to the Segment with a strong H1 2021
performance from the acquired business.
The French business had a disappointing first half of 2021, with
reductions in Technology Sourcing performance compounding the
impact of the previously announced loss of the Group's largest
Managed Services contract. Whilst the integration of Computacenter
NS remains on track, an adjusted(1) loss before tax in the acquired
Computacenter NS business of GBP1.8 million during the period,
which has performed as expected and in line with our forecasts, has
also worsened further the overall French Segment result. As we have
noted previously, we recorded an exceptional gain of GBP14.0
million which was recognised on consolidation of the subsidiary in
the 2020 Annual Report and Accounts. The Company considers that the
exceptional gain reflects the future losses that the acquired
business will incur over the medium term, as it is brought onto a
sustainable footing. The end of the half saw the French business
strengthen with important orders returning in the Technology
Sourcing business.
The International Segment has improved on 2020 with a good start
to the year. All of the primary European trading entities saw
improvements in trading with Belgium, Switzerland and the
Netherlands all experiencing encouraging growth in both revenues
and profitability.
With both organic and acquisitive revenues increasing during the
period, margins and profits increased as costs remained suppressed
across the Group as compared to pre-COVID-19 levels. Overall Group
gross margins increased even further by 47 basis points to 13.4 per
cent of revenues during the period (H1 2020: 12.9 per cent) and
administrative expenses increased by 27.6 per cent in constant
currency(2) , when compared to the comparative period, a rate
significantly behind the growth in adjusted(1) gross profit.
Continued growth of good quality Technology Sourcing deals
supporting pricing, and continued cost efficiencies when serving
our customers across the Services business have benefited the
result.
As the business continues to move to a more normal, yet altered,
operational footing, with offices re-opening across our major
geographies, we expect costs to return, but at a potentially
permanently lower level than before the COVID-19 crisis as the
business moves into the post-COVID environment having learned to be
leaner and more efficient. We therefore continue to analyse and
review individual cost reductions, to ensure that we only incur
costs truly necessary for the performance of the Group.
Technology Sourcing performance
The Group's Technology Sourcing revenue increased by 32.4 per
cent to GBP2,473.9 million (H1 2020: GBP1,867.8 million) and by
35.2 per cent on a constant currency(2) basis.
The overall Technology Sourcing result benefited from GBP479.1
million of revenue resulting from the acquisitions made since 1
January 2020 (H1 2020: nil) with GBP472.5 million of this as a
result of the Pivot acquisition. Excluding these revenues,
Technology Sourcing organic revenue growth was 9.0 per cent over
the prior period on a constant currency(2) basis.
The UK Technology Sourcing business saw continued excellent
growth, with the focus moving from workplace contracts driven by
the remote working needs of the COVID-19 working environment to the
more margin-significant enterprise product space in the first
quarter. The business was then impacted substantially by poor
hardware product supply in the second quarter which was partially
offset by large, lower-margin, software orders.
In Germany, Technology Sourcing revenue rebounded, in particular
as automotive and other industrial customers increased spend
through large framework agreements, given the COVID-19-related
business challenges. This was complemented by continuing sales
activity within the public sector, which built on the successes of
the prior period.
The French Technology Sourcing revenue declined on an organic
basis, but activity has increased substantially over the prior
period with product shortages causing significant slippages in
business that would have otherwise resulted in organic growth in
the period. Private sector business is returning, albeit at a
significantly slower pace than in our other major geographies.
The North American Technology Sourcing business saw revenues
improve on an organic basis, excluding the impact of the Pivot
acquisition. Whilst hyperscalers remained largely unaffected by the
pandemic and have indeed increased the level of business seen
before the COVID-19 crisis, the mid-market core of the business has
started to return after a significant slowdown in 2020. The
acquisition of Pivot adds substantial volumes to the business, with
opportunities to reach a wider addressable market via more US
locations and through complementary business lines with the legacy
operations.
Overall Group Technology Sourcing margins increased 34 basis
points during the first half of the year, when compared to the
prior period, partially due to customer and product mix changes.
Significant volume growth of low-margin workplace product sold
through to the public sector in the first half of 2020 has been
replaced by a bigger focus on enterprise product and assisted by
the return of industrial customers.
Services performance
The Group's Services revenue increased by 18.8 per cent to
GBP706.1 million (H1 2020: GBP594.4 million) and by 19.8 per cent
on a constant currency(2) basis. Within this, Group Professional
Services revenue increased by 38.3 per cent to GBP265.6 million (H1
2020: GBP192.0 million), and by 39.4 per cent on a constant
currency(2) basis, whilst Group Managed Services revenue increased
by 9.5 per cent to GBP440.5 million (H1 2020: GBP402.4 million),
and by 10.5 per cent on a constant currency(2) basis.
The overall Services result benefited from GBP62.8 million of
revenue from the acquisitions made since 1 January 2020 (H1 2020:
nil). Excluding these revenues, Services organic revenue growth was
9.2 per cent over the prior period on a constant currency(2)
basis.
UK Services revenue saw good growth, primarily due to a
significant increase in Professional Services offset by a small
decline in Managed Services, which was attributable to contract
attrition and COVID-19 impacts in the first quarter. Professional
Services has started the year very strong as customers re-engage
with our consultancy expertise to assist their post-pandemic IT
requirements. Managed Services is expected to strengthen through
the year as we convert opportunities within the healthy pipeline
into contracts and continue to look for efficiencies across the
existing portfolio.
German Managed Services has grown strongly as customer volumes
have returned to pre-COVID-19 levels with further contract wins
offsetting reductions in the contract base elsewhere. The
Professional Services business has seen extraordinarily strong
growth, with continuing high levels of demand for our Professional
Services skills. This included an increasing emphasis on material
public sector framework contracts, which provides stability to
revenue flows and utilisation rates. We continue to invest in
on-shore and near-shore resources to support the growth path of the
business.
Our French Services business saw further sharp falls in Services
on an organic basis. The COVID-19 crisis continues to impact our
Professional Services business with demand still well down compared
to pre-pandemic levels. The French Professional Services business
is more reliant on on-site activity than the equivalent businesses
in the UK or Germany. These staff have now returned to work, and
whilst the order book for consultancy returns to a more sustainable
footing, revenues remain below expectations. The Managed Services
business declined following the loss of a large global outsourcing
contract at the end of the contract term in 2019 which did not
impact revenues until the second half of 2020. The business remains
positive about future opportunities as they slowly come back to
market.
In North America, Professional Services revenue has recovered as
COVID-19 related delayed projects restarted. Mid-market customers,
which generate much of the Professional Services revenue in the
USA, were the weakest business area during the pandemic and the
downturn has now reversed.
Overall Group Services margins increased by 193 basis points
during the period, when compared to the prior period. The continued
reduction of travel costs, lower subcontractor costs and improved
Professional Services utilisation coupled with improving Managed
Services volumes have all contributed to this increase.
Outlook
Computacenter is 40 years old next month and our ability to
adapt to an ever-changing market has been paramount to our
continued success. This ability has been particularly prevalent
over the last 18 months during the pandemic. The vast majority of
our customers have returned to business as normal and, other than
the reduction to our cost base due to the inability to travel and a
continued improvement in the utilisation of our technical
resources, COVID-19 is now having very little impact on our
business. However, the ongoing supply shortages in the industry has
risen to the top of our challenges. The effects on our business are
difficult to fully quantify. While there has been, and will
continue to be, pressure on our revenues, our position in the
market as one of the larger players in most of the geographies in
which we operate has enabled us to gain market share. While we look
forward to the supply chain issues being behind us, we are not
expecting this until well into 2022 but, as you can see by the
performance in the first half, we are rising to this challenge.
As explained in our Trading Statement on 31 August 2021, while
the second half of the year presents a more difficult comparison,
the strength of our outlook means we will endeavour to beat last
year's second half performance not just match it. Computacenter is
therefore well set for our seventeenth year of uninterrupted
earnings per share growth. Customer demand is strong, we have
record order backlogs for both Technology Sourcing and Services,
and we continue to push into new geographies and new markets both
through acquisition and organic growth, all supported by our strong
balance sheet.
We are confident the markets we serve will remain buoyant for
the foreseeable future, and we believe that the range of service
offerings we deliver have never been of such a high quality. We
embrace the future with optimism and confidence.
United Kingdom
Financial performance
Revenues in the UK business increased by 9.4 per cent per cent
to GBP939.5 million (H1 2020: GBP858.8 million).
The UK business reported continued good growth of 10.0 per cent
in Technology Sourcing revenues. Professional Services delivered a
material revenue increase of 36.6 per cent, while Managed Services
decreased slightly across the period as a whole but is showing
positive momentum, with additional volume in existing customer
contracts and the addition of new contracts.
Through 2021 to date we have continued to support our employees
and our customers, and together we navigated the impact of the
COVID-19 pandemic. We augmented our employee health and wellbeing
initiatives for our people and exercised contract and commercial
flexibility to meet the needs of our customers. The pandemic
continues to drive customer demand for Technology Sourcing,
although following a very strong year in 2020 the workplace
business has declined during H1, in line with expectations.
Enterprise product has shown good demand, including continued
growth in the adoption of public cloud offerings. We have continued
to inform and support our customers' digital transformation
programmes, which span tactical initiatives through to strategic
transformations, some of which have been accelerated by the
pandemic. The product supply constraints that have prevailed since
Q1 2020 have not eased during this period, and we expect this to
continue to be a challenge throughout the remainder of the year in
the UK.
We have seen continued strength in the public sector through Q1,
with more normal trading levels in Q2. Many customers in the
private sector have now returned to more normal spending patterns,
which has meant growth in H1 especially with technology, media and
telecommunications customers and some financial services customers.
Customers in the travel and manufacturing industries are yet to
return to normal spending levels, which we anticipate may continue
beyond this year.
Our growth strategy in the UK is predicated on delivering for
our existing customers and expanding into new customer
relationships within our target market. Existing customers have
taken new services from our portfolio, with more customers adopting
public and hybrid cloud, for example. We have also seen growth in
more traditional services such as maintenance, configuration and
integration services within our customer base. In parallel we have
successfully opened new customer relationships, which provides us
with a very strong platform for growth over the coming periods and
we are pleased with our progress to date.
Overall gross margins in the UK decreased slightly by 11 basis
points, with total adjusted(1) gross profit decreasing to 14.2 per
cent of revenues in (H1 2020: 14.3 per cent). Adjusted(1) gross
profit grew by 8.6 per cent to GBP133.1 million (H1 2020: GBP122.6
million).
Administrative expenses increased by 6.1 per cent to GBP81.4
million (H1 2020: GBP76.7 million). We have maintained many of the
COVID-19 related cost savings that arose last year, through
continued reduction in travel and other costs. We remain focused on
ensuring that these costs do not return to pre-pandemic levels. To
support our growth plans, we have increased our salesforce by circa
70 people during the last 18 months, contributing to an increase in
SG&A expenses. This investment is expected to generate returns
over the coming years, enabling us to be engaged and relevant
within a broader set of target customers. The early signs are
promising, with a large number of new trading customers choosing
Computacenter for their Technology Sourcing needs.
Adjusted(1) operating profit was 12.6 per cent higher at GBP51.7
million (H1 2020: GBP45.9 million).
Technology Sourcing performance
Technology Sourcing revenue increased by 10.0 per cent to
GBP707.3 million (H1 2020: GBP643.2 million).
There was a shift in the Technology Sourcing revenue mix, as we
expected. Following the significant growth in workplace technology
sales last year, which were driven by the rapid migration to remote
working for our customers' employees, we saw a decline in workplace
revenues in the first half of 2021. Enterprise product has shown
good growth in all areas, including security, network, server and
storage. Many customers have also sought support with rationalising
and transforming their complex software estates.
The pandemic-related worldwide shortage of product has
encouraged some customers to place orders early. As a consequence,
our product order backlog (orders received but not delivered) is
presently at its highest in the last eight months.
The acquisition of Pivot in the US in 2020 is proving beneficial
for our UK business, as anticipated. We are seeing a pleasing level
of opportunity to support the UK subsidiaries of US customers, with
our portfolio offering relevant services on an international
scale.
Technology Sourcing margins reduced by 27 basis points compared
to the first half of 2020 due to increasing, lower-margin, software
sales and the lack of supply in certain higher-end product
categories.
Services performance
Services revenue increased by 7.7 per cent to GBP232.2 million
(H1 2020: GBP215.6 million). Professional Services grew by 36.6 per
cent to GBP75.0 million (H1 2020: GBP54.9 million). Managed
Services revenue was 2.2 per cent lower at GBP157.2 million (H1
2020: GBP160.7 million).
Our Professional Services business is seeing material growth,
driven largely by our customers' digital transformation needs
combined with additional requirements for consultancy and
engineering to support their change and deployment initiatives.
While our projects business has remained relatively flat during
this period, the forward demand for skills to augment customer
change programmes or run services has significantly increased.
Revenue in Managed Services was slightly down across the half,
slowing the trend seen in recent years of declining revenues driven
by customers benefiting from the efficiencies we have delivered.
The business grew in the second quarter and the trend is positive
going into the remainder of the year. We have successfully
implemented the significant expansion of a contract with an
existing telecommunications customer, which has transitioned to
live service and is delivering in line with customer
expectations.
We have been actively working on a significant pipeline in
Managed Services during the first half of this year, and we look
forward to maintaining the positive momentum in this area through
new wins and the continuation of our very strong renewal rate.
Services margins increased by 62 basis points when compared to
the prior period. This has been driven by service design changes
implemented to secure longer-term contracts with many existing
customers during the pandemic.
Germany
Financial performance
Total revenue increased by 10.5 per cent to EUR1,067.4 million
(H1 2020: EUR966.4 million) and by 9.8 per cent in reported pound
sterling equivalents(2) .
In the first half of the financial year, we were able to build
on the good results of the previous year and generate good top line
growth and excellent overall results.
The period was shaped by the ongoing pandemic. Contrary to our
assumptions at the end of last year, the restrictions on office
working have remained significant. The Government has urged all
companies to make maximum use of working from home, which we have
implemented. This meant that during the period most of our
employees were in remote working mode, which worked smoothly
overall.
In our Technology Center in Kerpen, we continued to work in two
strictly separate shifts until the middle of the year, so that we
could move to an isolated shift in an emergency due to a potential
worsening of the COVID-19 virus outbreak. At the start of the
second half of the year, falling infection figures mean we can make
more use of our offices and we will again increasingly rely on
face-to-face meetings. Nevertheless, we will continue to give our
employees the opportunity to work remotely for some time. For this
purpose, we have concluded an agreement with the Company's German
Works Council of local employee representatives, which gives us a
high degree of flexibility.
Similar developments can also be seen with our customers, with
many companies planning for greater use of remote working in the
future. While the current level of remote working will not be the
new norm, this does create the possibility for Computacenter to
maintain a higher proportion of remote working. We will evaluate
this development, as it will provide significant impetus for future
work models, such as the greater use of nearshore and offshore
locations.
From a macroeconomic perspective, our customer base has
stabilised significantly, and in some industries, we have seen
record increases in profitability. In particular, the automotive
industry, which is important to us, is currently emerging from the
crisis stronger than ever. However, it remains to be seen to what
extent the ongoing microprocessor shortage will impact the
automotive industry. In addition, we continue to see very strong
demand in the public sector. This applies particularly to skills
needed for the digital transformation of the federal and state
authorities, but can also promote change at the municipal level, in
cities and especially in the education and health sectors. We will
focus closely on this continuously increasing demand and implement
targeted measures and investments.
The industries that continue to suffer from the pandemic, such
as tourism, hotel and restaurants, are only a limited part of our
customer focus and have a negligible impact on our results.
What has certainly influenced our business in the first half,
and will continue to affect us until at least the end of the year,
is the shortage of many Technology Sourcing products. This
particularly affects network and workplace lines of business, but
we are also starting to see major problems in the supply of data
center components. The current order backlog has been around 70 -
80 per cent above the average of recent years for several
months.
Adjusted(1) gross profit grew by 25.7 per cent to EUR170.1
million (H1 2020: EUR135.3 million) and by 24.5 per cent in
reported pound sterling equivalents(2) . Overall, margins in
Germany increased by 187 basis points, with adjusted(1) gross
profit increasing from 14.0 per cent to 15.9 per cent of
revenues.
The result was the consequence of the growing Technology
Sourcing business with good and slightly increased margins, and a
Professional Services business with stable margins, which continued
to grow at a double-digit rate. In addition, we were able to
achieve a good margin improvement in our Managed Services business.
This reflects the success of the measures taken to stabilise and
improve critical contracts, as well as an increase in efficiency in
some existing contracts.
Administrative expenses increased by 4.9 per cent to EUR99.4
million (H1 2020: EUR94.8 million), and by 4.2 per cent in reported
pound sterling equivalents(2) .
Our indirect costs reflect a planned increase in personnel
costs. This is due partly to higher commissions resulting from the
increased total contribution, and partly to the expansion of the
sales force as a central element of our growth initiative. Travel
and event costs are at a consistently low level we expect a slight
increase in Q4 at the earliest.
Adjusted(1) operating profit for the German business increased
by 74.6 per cent to EUR70.7 million (H1 2020: EUR40.5 million) and
by 71.6 per cent in reported pound sterling equivalents(2) .
Technology Sourcing performance
Technology Sourcing revenue increased by 8.2 per cent to
EUR709.2 million (H1 2020: EUR655.3 million) and by 7.6 per cent in
reported pound sterling equivalents(2) .
Technology Sourcing margins remained strong and were up by 40
basis points over the same period last year and continue to lead
the Group.
As mentioned, we recorded a significant increase in sales, in
line with our plan. The growth was mainly recorded in our workplace
and networking business. The data center business was roughly at
the previous year's level. We also slightly improved margins,
especially in our security and networking business.
From the customer segmentation point of view, we have again
grown revenues in the public sector, and the automotive industry
has also contributed to growth. In addition, we have succeeded in
renewing some essential framework agreements, especially in the
areas listed above.
The business is currently experiencing availability problems
from manufacturers, which can lead to delayed delivery times of up
to three to six months. Under normal conditions, our sales growth
would have been even stronger in the first half of the year. We
currently have a very high order backlog and assume that problems
with product delivery delays will, whilst starting to improve,
continue until at least the end of the year.
Services performance
Services revenue grew by 15.1 per cent to EUR358.2 million (H1
2020: EUR311.1 million) and by 14.5 per cent in reported pound
sterling equivalents(2) . This included Professional Services
growth of 20.7 per cent to EUR156.2 million (H1 2020: EUR129.4
million), an increase of 19.8 per cent in reported pound sterling
equivalents(2) , and a Managed Services increase of 11.2 per cent
to EUR202.0 million (H1 2020: EUR181.7 million), an increase of
10.7 per cent in reported pound sterling equivalents(2) .
We achieved good growth in Services and a significant
improvement in gross margin in both Professional Services and
Managed Services.
The Professional Services business experienced sustained high
demand from existing framework agreements, as well as some new
orders, particularly for technology and transition projects. We see
increased demand from public sector clients, as well as an
increasing need to cover the global requirements of our
international customers. In addition, we benefited from
disproportionate growth in the area of application development and
support for our customers. Going forward, we will benefit from our
nearshore capacities in Cluj, Romania, which we launched in the
second quarter of 2021.
In order to meet the increasing demand for resources, we have
decided to invest in the expansion of our consulting and
engineering capacity and are planning up to 400 additional hires in
these two areas by the end of Q1 2022. We will also intensify
activities in the nearshore and offshore locations.
Within Managed Services, in contrast to the Professional
Services business, we see a stagnating overall market with
primarily global-scale competitors. Notwithstanding the overall
outlook we have had some success in our Managed Services business.
The first half of the year saw good growth, driven by three new
contracts and somewhat stronger existing business.
Three medium-sized contracts could not be renewed and will
expire by the end of the year. On the other hand, we have succeeded
in extending and increasing the value one of our largest workplace
contracts in the automotive sector for a further five years.
The pipeline is currently characterized by a mix of other
renewals as well as opportunities that, if we can successfully
conclude them, would lead to additional growth.
On the earnings side, we generated good margin improvement
compared to the same period last year and previous years. This was
mainly the result of our continued success in stabilising and
improving critical contracts and the successful implementation of
the new contracts won.
Services margins increased by 440 basis points over the
period.
France
Financial performance
Total revenue increased by 4.0 per cent to EUR360.4 million (H1
2020: EUR346.5 million). In reported pound sterling equivalents(2)
, total revenue was up by 2.9 per cent.
On 2 November 2020, we completed the acquisition of BT's
domestic Services operations in France. This subsidiary has been
renamed Computacenter NS. Our first half results therefore include
the financial performance of Computacenter NS, which was not the
case in H1 2020.
The acquired business, Computacenter NS, recorded revenues of
EUR43.2 million with an adjusted(1) operating loss of EUR2.3
million, which was broadly in line with our plan for the first half
of the year. It is important to note that we recorded an
exceptional gain of GBP14.0 million on acquisition of the business
in 2020 arising from a payment from the vendor that was primarily
to compensate for future losses. Under IFRS it is not possible to
allocate the exceptional gain against future incurred operating
losses, but it is important to note when considering the commercial
context of the Computacenter NS performance and our short to
medium-term expectations for the business.
Excluding the revenues earned within Computacenter NS, the
Computacenter France total revenue declined by 8.5 per cent to
EUR317.2 million.
The first half of 2021 was an unusual period for our French
business. The COVID-19 pandemic continued to affect Services
volumes as much of our service delivery relies on customer onsite
delivery and we were also confronted with the challenge of
worldwide component shortages and corresponding delivery issues in
Technology Sourcing. This shortage is an issue for all countries,
but we believe our French business has been more affected, as it is
focused on workplace solutions, an area that was harder hit by
these shortages.
We have focused on integrating the Computacenter NS business,
strengthening our capabilities in our Digital Connect and Digital
Trust offerings. Our priority was to integrate our sales teams. We
have worked hard to train our staff, so they are familiar with our
extended capabilities around networking and security. Whilst it is
too early to draw conclusions, we are pleased with the pipeline of
opportunities we have generated in our common customer base. In
addition to the sales integration, we are working intensively to
integrate our back-office processes and define our long-term
strategy for further integrating our operations.
Overall adjusted(1) gross profit increased by 6.8 per cent to
EUR37.8 million (H1 2020: EUR35.4 million) and by 5.5 per cent in
reported pound sterling equivalents(2) . Excluding the EUR5.6
million of adjusted(1) gross profit earned within Computacenter NS,
the Computacenter France adjusted(1) gross profit decreased by 9.0
per cent to EUR32.2 million.
Overall, margins in France increased by 26 basis points, with
adjusted(1) gross profit increasing from 10.2 per cent to 10.5 per
cent of revenues.
The decline in contribution was mainly due to the supply
challenges in Technology Sourcing. Our Services business performed
broadly in line with our expectations, taking into account the
impact of a large global outsourcing contract that was lost in 2019
and phased out in the first half of 2020. As noted in our 2020 full
year results, the Computacenter NS business was loss-making on
acquisition and it therefore reduced our profit for H1 2021 as
expected.
Over the last few years, we have recruited a significant number
of sales specialists and business development managers. They
support our ambitions to acquire a more significant market share in
France in all areas of the business and to further develop the
acquired portfolio of Computacenter NS services and solutions. This
investment impacts on overall cost control.
Including Computacenter NS, administrative expenses increased by
28.9 per cent to EUR40.1 million (H1 2020: EUR31.1 million).
Administrative expenses increased 27.5 per cent in reported pound
sterling equivalents(2) . Excluding the EUR7.9 million of
administrative expenses incurred by Computacenter NS, the
Computacenter France administrative expenses increased by 3.5 per
cent to EUR32.2 million.
Adjusted(1) operating profit for the French business decreased
by 153.5 per cent to a loss of EUR2.3 million (H1 2020: profit of
EUR4.3 million), and by 152.6 per cent in reported pound sterling
equivalents2. Excluding the EUR2.3 million operating loss from the
activities of Computacenter NS, the Computacenter France business
made nil operating profit in H1 2021.
The significant decline is a combination of the weaker
performance in our traditional business activities, primarily in
Technology Sourcing, and the negative contribution from
Computacenter NS noted above.
Technology Sourcing performance
Technology Sourcing revenue decreased by 2.8 per cent to
EUR260.9 million (H1 2020: EUR268.3 million) and by 3.7 per cent in
reported pound sterling equivalents(2) . Excluding the EUR7.5
million of Technology Sourcing revenues within Computacenter NS,
the Computacenter France Technology Sourcing revenues decreased by
5.6 per cent to EUR253.4 million.
Despite a decline in revenues, it was a very busy first half in
Technology Sourcing. The Technology Sourcing order backlog
increased significantly during the period, due to the worldwide
component shortages. If we had been able to ship all goods within
normal timescales and thereby maintain a backorder position
comparable with 2020, we would have generated good growth in
organic Technology Sourcing revenues during the period.
In the private sector, we are still not reaching the same
business volumes as before COVID-19 but we are pleased with the
increased activity within our customer base, compared with a year
ago. Our public sector business won or renewed a number of large
framework contracts, which we are currently implementing.
Meanwhile, revenues declined in the public sector, mainly due to
supply challenges.
We believe that the worldwide shortages will remain a challenge
in the second half of the year. Additionally, most of our
technology partners have begun to indicate or announce price
increases. We are staying in close contact with vendors and keeping
our customers up-to-date in the most transparent way.
Technology Sourcing margins decreased by 49 basis points,
excluding the impact of Computacenter NS, as the business saw a
change in mix towards lower margin product following a reduction in
large server orders from key customers.
Services performance
Services revenue increased by 27.2 per cent to EUR99.5 million
(H1 2020: EUR78.2 million) and by 25.6 per cent in reported pound
sterling equivalents(2) . Professional Services revenue increased
by 35.6 per cent to EUR23.6 million (H1 2020: EUR17.4 million),
which was an increase of 34.0 per cent in reported pound sterling
equivalents(2) . Managed Services revenue increased by 24.8 per
cent to EUR75.9 million (H1 2020: EUR60.8 million), an increase of
23.2 per cent in reported pound sterling equivalents(2) .
Computacenter NS recorded Services revenues of EUR35.7 million
comprising Professional Services revenues of EUR8.3 million and
Managed Services revenues of EUR27.4 million.
Excluding the Services revenues within Computacenter NS, the
Computacenter France Services revenues decreased by 18.4 per cent
to EUR63.8 million. Professional Services revenue decreased 12.1
per cent to EUR15.3 million with Managed Services revenues
decreasing by 20.2 per cent to EUR48.5 million.
As noted earlier, the main impact on Services revenue came from
a global outsourcing contract that ended in the first half of 2020,
which we therefore knew was going to cause a decline in revenues
compared to last year. Additionally, the pandemic continued to
cause lower activity in Professional Services, compared to the
situation before COVID-19.
Despite the slight decline in revenues, our Professional
Services business improved its bottom-line performance. This was
mainly because the services we delivered were more specialised than
in the same period last year and hence generated higher
contributions.
At the start of the pandemic in 2020, many companies decided to
postpone or even cancel their projects around new or renewed
Managed Services opportunities. They have mostly restarted their
campaigns and we are now facing a very healthy Managed Services
pipeline, with our service design teams and sales specialists being
very busy responding to these opportunities. We are delighted to
announce that we have recently won two Managed Services contracts,
with a combined annual contract value for a full year of EUR4.5
million, which will deliver solid contributions after the
transition phase.
Computacenter's overall strategy of expanding its Services
capabilities worldwide, combined with some good local references,
make us confident that our legacy French operations can further
gain market share in Managed Services. Together with the
acquisition of Computacenter NS, this will help us to improve our
mix of Services versus Technology Sourcing revenues and make our
financial performance more sustainable over time.
Services margins increased by 128 basis points, excluding the
impact of Computacenter NS.
North America
During the second half of 2020, the Group completed the material
acquisition of Pivot. This business was combined with our existing
US Segment to create the North America Segment from 2 November
2020. The acquisition contributed $699.8 million of revenue and an
adjusted(1) operating profit of $12.7 million in the six months of
trading to 30 June 2021 and all results below reflect this result.
The acquisition of Pivot has given us a platform to grow a
sustainable and scalable business in North America, with real
strength in Technology Sourcing and the ability to enhance our
value to customers by expanding our Services capabilities.
Financial performance
Total revenue increased by 164.7 per cent to $1,263.5 million
(H1 2020: $477.4 million). In reported pound sterling
equivalents(2) , total revenue was up 140.6 per cent.
Growth in North America was driven by the acquisition of Pivot.
Organically, North American revenue was up 18.1 per cent and by 7.4
per cent in reported pound sterling equivalents(2) , underpinned by
the continued growth in hyperscale data center customers, as well
as some increased spending by our mid-market customers, who were
less active in H1 2020 primarily because of the COVID-19 pandemic.
Overall, on an organic basis revenue was slightly ahead of forecast
for the period, in both Technology Sourcing and Services.
Overall, margins in North America increased by 219 basis points,
with adjusted(1) gross profit increasing from 8.2 per cent to 10.4
per cent of revenues.
The Technology Sourcing business increased its margin due to the
acquisition of Pivot. Pivot's Technology Sourcing margins are
approximately 230 basis points higher than the FusionStorm
business, as its customer mix is not as focused on hyperscale
customers, who tend to drive lower margins. Excluding Pivot,
Technology Sourcing margins rose by 87 basis points, due to
improved volumes through the Integration Center driving better cost
absorption, and better customer mix.
Professional Services margins improved compared to the prior
period due to the acquisition of Pivot, as well as customer
projects that were deferred due to COVID-19 starting to recover,
which resulted in higher staff utilisation. Pivot's Professional
Services margins are, on average, higher than the FusionStorm
business, due to higher volume resulting in better utilisation
across a larger Services organisation. Excluding Pivot,
Professional Services margins rose, due to improved volumes driving
employee utilisation. The Managed Services business reported lower
margins year-on-year, due to a combination of customer mix and the
acquisition of Pivot, whose Managed Services business is not
operating at scale and is generating lower gross margins. Reported
margins were ahead of expectations overall.
Overall adjusted(1) gross profit grew by 234.8 per cent to
$130.9 million (H1 2020: $39.1 million) and by 205.2 per cent in
reported pound sterling equivalents(2) . Excluding the $79.9
million of adjusted(1) gross profit earned by Pivot in the period,
adjusted(1) gross profit grew organically by 30.4 per cent to $51.0
million.
Administrative expenses increased by 217.2 per cent to $105.0
million (H1 2020: $33.1 million), and by 188.5 per cent in reported
pound sterling equivalents(2) . This was due to the acquisition of
Pivot, which added $67.2 million of administrative expenses in the
first half of 2021. Excluding Pivot, administrative expenses
increased 14.2 per cent to $37.8 million. Increased variable
remuneration due to the improved contribution, combined with
investments to address the hyperscale growth, were partially offset
by reduced travel costs due to COVID-19 and other decreases in
administrative expenses.
Adjusted(1) operating profit for the North America business
increased by 331.7 per cent to $25.9 million (H1 2020: $6.0
million), and by 297.9 per cent in reported pound sterling
equivalents(2) .
The increase in adjusted(1) operating profit was largely due to
the acquisition of Pivot, which contributed $12.7 million of
adjusted(1) operating profit in the first half of 2021. Excluding
Pivot, North America's adjusted(1) operating profit was up by $7.2
million, or 120 per cent, to $13.2 million, as existing and new
hyperscale customers continued to purchase in volume. The
Integration Center continued to perform well in the first half of
2021, while operating expenses increased at a slower pace than the
increase in gross profit.
Technology Sourcing performance
Technology Sourcing revenue increased by 158.5 per cent to
$1,209.1 million (H1 2020: $467.7 million) and by 135.1 per cent in
reported pound sterling equivalents(2) .
The addition of Pivot resulted in significant growth in our
Technology Sourcing business. Pivot contributed $656.3 million of
Technology Sourcing revenue in the period. Excluding Pivot,
Technology Sourcing revenue increased by 18.2 per cent, as
hyperscale customers have increased spending.
Compared to the same period in 2020, we saw a similar technology
spending mix amongst major partners and technologies, particularly
in the data center and networking lines of business. We currently
have a very high order backlog which no doubt has been impacted by
the well-publicised supply chain shortages. This supply shortage
has also resulted in high inventory levels which in the FusionStorm
business have increased by 147.4 per cent to $137.3 million
compared to the same time last year (as at 30 June 2020: $55.5
million). We believe that some hyperscale customers have ordered in
advance of the normal demand profile which may have an implication
for the strength of the second half of the year.
We benefited from significant continuing investments by our
customers, as they digitise their operations and modernise their
infrastructure. We continue to see customers seeking to simplify
their operations by consolidating to fewer suppliers, resulting in
long-term commitments and larger transactions. By adding the Pivot
volume, driving consistent supply chain via consolidation and
process integration remain powerful value propositions for our
target customers.
North America Technology Sourcing margins improved by 87 basis
points on an organic basis over the same period last year,
excluding the impact of the Pivot acquisition as a result of a
number of activities to improve the underlying efficiency and
effectiveness of the business, while efficiencies due to higher
volumes in our Integration Center also improved margins. The
addition of Pivot further improved margins by 123 basis points for
a combined overall improvement of 210 basis points. A bright spot
remains our rack fabrication business, which is delivered from our
new Integration Center and experienced a strong first half. We
continue to see significant growth for our Integration Center
projects, including complex distributed branch rollouts, as well as
global data center build-out projects for our hyperscale
customers.
Services performance
Services revenue increased by 460.8 per cent to $54.4 million
(H1 2020: $9.7 million) and by 409.1 per cent in reported pound
sterling equivalents(2) . Professional Services revenue increased
by 542.4 per cent to $42.4 million (H1 2020: $6.6 million), which
was an increase of 486.5 per cent in reported pound sterling
equivalents(2) . Managed Services revenue increased by 287.1 per
cent to $12.0 million (H1 2020: $3.1 million), which was an
increase of 248.0 per cent in reported pound sterling
equivalents(2) .
Pivot recorded Services revenues of $43.5 million comprising
Professional Services revenues of $34.6 million and Managed
Services revenues of EUR8.9 million.
Excluding the Services revenues within Pivot, the North American
Services revenues increased by 12.4 per cent to $10.9 million as
project activity started to recover after customers delayed
expected projects while they responded to COVID-19. Professional
Services revenue increased 18.2 per cent to $7.8 million with
Managed Services revenues flat at $3.1 million.
The overall Services performance was improved. Our
pre-acquisition Professional Services business increased,
recovering from a significant decrease in 2020 driven by
COVID-19-related project delays or cancellations. The majority of
the Professional Services business is with our mid-market customers
and that segment was most affected by COVID-19.
Services margins improved by 169 basis points, excluding the
impact of Pivot. The increased Services revenue allowed us to
recover more of our fixed costs, therefore improving our
margins.
International
The International Segment comprises a number of trading entities
and offshore Global Service Desk delivery locations.
The trading entities include Computacenter Switzerland,
Computacenter Belgium, Computacenter Netherlands and Computacenter
Spain. In addition to their operational delivery capabilities,
these entities have in-country sales organisations, which enable us
to engage with local customers.
These trading entities are joined in the Segment by the offshore
Global Service Desk entities in Spain, Malaysia, India, South
Africa, Hungary, Poland, China and Mexico, and the Professional
Services Centre of Excellence in Romania, which have limited
external revenues as they charge the relevant Group subsidiaries
for the services provided.
Financial performance
Revenues in the International business increased by 17.6 per
cent to GBP90.8 million (H1 2020: GBP77.2 million) and by 19.0 per
cent in constant currency(2) .
Adjusted(1) gross profit increased by 19.7 per cent to GBP17.6
million (H1 2020: GBP14.7 million), and by 20.5 per cent in
constant currency(2) .
After a difficult first half in 2020, we are pleased with a
significant performance improvement in the first six months of
2021.
The Belgian business's performance improved primarily thanks to
project wins in the server, storage and networking segment,
including both Technology Sourcing and Professional Services.
Growth in our Managed Services segment has also picked up
again.
Despite a difficult start to the year, our Swiss operation
significantly improved its results over the six months, with better
results in all business lines compared to last year. It is
particularly encouraging to note the performance and healthy
pipeline in Professional Services.
Our Dutch business was hit particularly hard by the COVID-19
crisis during the first half of 2020. We are pleased to see the
team has found its way back to profitability in the first half of
2021. Additionally, in close cooperation with our UK entity, we
have won an international Technology Sourcing and Services contract
with a large international organisation in the petrochemical
sector. Whilst much remains to be done, we saw the first
contributions from this contract win in the period.
In early 2020, we started to build a sales team in Spain, with
offices in Madrid and Barcelona. The local team focuses on
developing a pipeline within Computacenter's target customer base
and works closely with other Computacenter entities to identify
opportunities in large international organisations with a presence
in Spain, however progress has been slow to date. We have prepared
our operations to be compliant with all the requirements for
participating in public tenders in the Spanish market.
Administrative expenses decreased by 6.9 per cent to GBP13.5
million (H1 2020: GBP14.5 million) and by 6.3 per cent in constant
currency(2) .
We no longer benefit from any government support related to
COVID-19, apart from in our Belgian operations, where we are able
to cover COVID-19-related lack of utilisation impacting on
personnel costs through extended local government COVID-related
support.
Overall adjusted(1) operating profit increased by 1,950 per cent
in both actual and constant currency(2) to GBP4.1 million (H1 2020:
GBP0.2 million).
Over the past few years, we have been consistent in our strategy
of considering the long term in all our operations. We therefore
continued to invest in our sales capabilities and our capacity to
deliver our complete Computacenter portfolio in all countries.
After a difficult year in 2020, it is pleasing to see our
investments start to deliver the expected growth in all operations.
It is clear, however, that with our local investments supported by
our international capability, we can gain more market share in the
International Segment.
Technology Sourcing performance
Technology Sourcing revenue increased by 14.8 per cent to
GBP53.5 million (H1 2020: GBP46.6 million) and by 15.8 per cent in
constant currency(2) .
In common with other countries, we suffered from the worldwide
shortages of components and were not able to deliver all ordered
goods within normal timescales. We expect this trend to continue
for at least the rest of the year, combined with expected price
increases. We have worked proactively with our customers in all
countries to anticipate as much as possible the ongoing
challenges.
However, our International Segment addresses a greater
proportion of smaller customers and these customers are more
willing to purchase standardised workplace equipment than large
customers, who require a custom configuration for their business.
We therefore have more opportunity to serve these customers faster
as product becomes more readily available.
Our pipeline remains healthy for the rest of the year and we are
confident we will be able to deliver good results, even in these
difficult market conditions.
Technology Sourcing margins have decreased by 16 basis points as
the product mix moved towards workplace equipment.
Services performance
Services revenue increased by 21.9 per cent to GBP37.3 million
(H1 2020: GBP30.6 million) and by 23.9 per cent in constant
currency(2) .
Professional Services revenue increased by 17.6 per cent to
GBP4.0 million (H1 2020: GBP3.4 million) and by 21.2 per cent in
constant currency(2) . Managed Services revenue increased by 22.4
per cent to GBP33.3 million (H1 2020: GBP27.2 million), which was
an increase of 24.3 per cent in constant currency(2) .
Service revenues increased in all entities. In Belgium, we
extended our main Managed Services contracts and secured
sustainable contributions for the longer term. Our largest Managed
Services contracts in Switzerland were reviewed in scope in 2020.
We have now fully optimised our delivery model and identified
project extensions in these contracts. Moreover, the continued
effort by the presales teams to develop compelling infrastructure
offers is starting to pay off, by means of a healthy project order
book in Professional Services.
Our Dutch operations grew also in Services, although we see
opportunity to grow even further by leveraging our international
service capabilities for some of our large customers and by
developing our Managed Services base, mainly in the private
sector.
Services margins have increased by 38 basis points through
continued portfolio efficiencies and increasing volumes.
Group Finance Director's Review
In the first half of 2021, the Group benefited both from
continued strong organic Technology Sourcing growth across the
portfolio, apart from France, and the revenue increases from the
acquisitions made in 2020. This growth was driven by strong public
sector activity in the UK and Germany where the Group has deep
relationships, by the return of the industrial enterprise sector in
the UK and Germany as these large sectors returned to more normal
spend patterns and expanded their requirements and through the
rebound of the mid-market sectors in North America to complement
the sustained growth seen in the hyperscale markets. Whilst the
growth remains variable between customer segmentation and product
lines as customers continue to react to immediate needs, we have
also seen the resumption of longer-term IT transformations
directing purchasing decisions. The resilience of the Technology
Sourcing results over the last 18 months and the strong growth seen
over that time and in the most recent period highlights that the
spread of the customer base across multiple segmentations and
geographies has created durability and sustainability within the
business model.
The business model continued to show its strength with the
Services performance continuing to underpin any potential
variability within the otherwise excellent Technology Sourcing
results. Professional Services in Germany continues its
extraordinary recent track record with another excellent period of
growth and has been joined by the UK which has also seen robust
Professional Services growth.
Professional Services revenue continued its very strong and
sustained growth pattern in Germany, with continuing high demand
for our highly skilled people to work on digital transformation,
cloud and security projects for customers. The German business
remains the leader in this area for the Group and has seen demand
continue to increase throughout the COVID-19 crisis. The UK
Professional Services revenue saw a continuation of the significant
rebound seen in the second half of 2020, as customers re-engaged on
projects that were derailed by the COVID-19 crisis, whilst
decreases were seen in France, mainly due to the ongoing impacts of
COVID-19.
After a positive near-shore experience, we established a
presence in Romania by starting a new company in Cluj-Napoca.
Computacenter Romania is now a Professional Services Centre of
Excellence for the Group, focused on providing agile application
services including software development, application migration and
application support to customers in Germany and, in time, for all
other countries across the Computacenter Group. We chose
Cluj-Napoca because it is a dynamic center of IT talent and offers
us a good standing point in the region with good German language
capability. Our ambition is to gather a team of 500 professionals
within Computacenter Romania to expand our Professional Services
capacity and continue to capture the opportunities in this business
line.
Reconciliation to adjusted(1) measures for the period ended 30
June 2021
Adjustment
Amortisation Adjusted(1)
Interim of acquired interim
results intangibles results
GBP'000 GBP'000 GBP'000
------------
Revenue 3,180,023 - 3,180,023
----------- ------------ -----------
Cost of sales (2,754,749) - (2,754,749)
----------- ------------ -----------
Gross profit 425,274 - 425,274
----------- ------------ -----------
Administrative expenses (306,539) 3,725 (302,814)
----------- ------------ -----------
Operating profit 118,735 3,725 122,460
----------- ------------ -----------
Finance income 227 - 227
----------- ------------ -----------
Finance costs (3,794) - (3,794)
----------- ------------ -----------
Profit before tax 115,168 3,725 118,893
----------- ------------ -----------
Income tax expense (33,050) (992) (34,042)
----------- ------------ -----------
Profit for the period 82,118 2,733 84,851
----------- ------------ -----------
Reconciliation to adjusted(1) measures for the period ended 30
June 2020
Adjustment
Amortisation Adjusted(1)
Interim of acquired interim
results intangibles results
GBP'000 GBP'000 GBP'000
------------
Revenue 2,462,184 - 2,462,184
----------- ------------ -----------
Cost of sales (2,144,385) - (2,144,385)
----------- ------------ -----------
Gross profit 317,799 - 317,799
----------- ------------ -----------
Administrative expenses (242,685) 2,184 (240,501)
----------- ------------ -----------
Operating profit 75,114 2,184 77,298
----------- ------------ -----------
Finance income 324 - 324
----------- ------------ -----------
Finance costs (3,030) - (3,030)
----------- ------------ -----------
Profit before tax 72,408 2,184 74,592
----------- ------------ -----------
Income tax expense (20,394) (592) (20,986)
----------- ------------ -----------
Profit for the period 52,014 1,592 53,606
----------- ------------ -----------
Managed Services saw strong revenue increases in Germany, North
America and the International business, particularly as the top
line, which was affected, in 2020, by a number of contracts which
are based on price times quantity, rather than a fixed periodic
fee, returned to growth as call volumes began to return to
pre-pandemic levels and the field engineer workforce saw
significant increases in activity as customer sites began to
reopen. Margins remained healthy as we continued to enjoy
significantly increased utilisation of our now remote working
engineers, who no longer have to spend otherwise billable time
travelling to customer sites, and a significant reduction in the
use of external contractors. We expect both of these trends to
continue in the short to medium term as more efficient ways of
working have been proven to work for both the Group, our customers
and our employees. Our French business suffered, on an organic
basis, as the full effect of the loss of the Group's largest
Managed Services contract impacted comparatively for the first
time. The UK business saw a slight decline in revenues in the
period but has made significant strides in building resilience into
the contract base and the opportunity pipeline.
The business remains agile and innovative, enabling us to
continue to adapt and support our customers in both the private and
public sectors, as they continue to support a remote working IT
environment whilst looking to the future of hybrid working and the
complexity that can come with it.
The revenue performance was driven through our biggest markets,
the UK, Germany and North America, and was supported by increases
in gross margins across all business lines. This margin performance
was due to a changed customer mix within Technology Sourcing with a
move back to more profitable complex product lines and the ongoing
reduction of expenses within costs of goods sold, benefiting both
Technology Sourcing and the Services businesses. Whilst some of
these costs, such as travel, fleet and contractors, will partially
return as the Group goes back to its pre-COVID-19 mode of
operation, we continue to manage this carefully within certain cost
categories and therefore permanently lower the overall cost
base.
As part of our climate changes initiatives we have committed to
reduce travel emissions by 35 per cent in absolute terms from 2019
to 2025 and are implementing various initiatives to meet this
commitment which will also help to retain much of the pandemic
travel cost savings.
The Group result saw significant organic increases in
adjusted(1) operating profit across the UK, Germany, North America
and the International Segments, with a reduction in France the only
blemish.
We acquired ITL Logistics GmbH 'ITL' on 30 April 2021, an IT
logistics company that employees 80 people in three locations in
Germany. ITL provides IT logistics services as well as IT services
for large companies and public sector clients in Europe. Through
the acquisition, Computacenter is expanding its IT logistics
services and now operates its own IT logistics fleet with technical
couriers who deliver and collect IT products across Europe. ITL
logistics also operates small regional warehouses where IT products
are held locally to meet customer service-level agreements.
Computacenter intends to invest further in ITL logistics to
strengthen its business in Europe.
The acquisition of Pivot and Computacenter NS on 2 November 2020
continues to add capability to the Group. Pivot increases the scale
and breadth of our North American business, allowing us to serve a
wider range of customers and products in more locations in the
United States. Computacenter NS will, over time, enhance the
network Services offering of our existing French business,
improving our go-to-market propositions and aligning the business
with our capabilities in Germany, albeit on a smaller scale. Much
remains to be done to transform the business and bring it back to
break-even and beyond. The integration of Pivot and Computacenter
NS continues with significant projects underway to migrate to our
Group ERP systems. In North America, FusionStorm completed this
migration in early September 2021 and Pivot will follow in 2022.
Having these entities on our leading ERP platform technologies and
toolsets will further unlock their potential for growth and
efficiencies.
Combined, these acquisitions added GBP541.9 million of revenue
and GBP6.8 million of adjusted(1) profit before tax to the Group's
H1 2021 results.
A reconciliation to adjusted(1) measures is provided above.
Further details are provided in note 5 to the summary financial
information included within this announcement, adjusted
measures.
Profit before tax
The Group's profit before tax for the period increased by 59.1
per cent to GBP115.2 million (H1 2020: GBP72.4 million).
Adjusted(1) profit before tax increased by 59.4 per cent to
GBP118.9 million (H1 2020: GBP74.6 million) and by 61.1 per cent in
constant currency(2) .
The difference between profit before tax and adjusted(1) profit
before tax relates to the Group's net costs of GBP3.7 million (H1
2020: net costs of GBP2.2 million) from exceptional and other
adjusting items, which is the amortisation of acquired intangibles
as a result of the acquisition of FusionStorm on 30 September 2018
and Pivot on 2 November 2020. Further information on these items
can be found within Group Finance Director's review contained in
this announcement.
The Group adopted IFRS 16 'Leases' from 1 January 2019, which
has resulted in changes in accounting policies and adjustments to
the amounts recognised in the Financial Statements, as disclosed in
the 2019 Annual Report and Accounts. The current period results
include an overall decrease in profit before tax of GBP1.7 million,
including on an adjusted(1) basis, due to the impact of IFRS 16 (H1
2020: GBP1.0 million). The increase relates primarily to the
onboarding of the leases present within the entities acquired since
1 July 2020.
Net finance charge
Net finance charge in the period amounted to GBP3.6 million (H1
2020: GBP2.7 million). The main items included within the net
charge for the period are GBP2.7 million of interest charged on
lease liabilities (H1 2020: GBP2.3 million) and GBP0.7 million for
the Pivot facility (H1 2020: nil).
As there were no interest items excluded on an adjusted(1)
basis, the adjusted(1) net finance charge was also GBP3.6 million
during the period (H1 2020: GBP2.7 million).
Taxation
The tax charge was GBP33.1 million (H1 2020: GBP20.4 million) on
profit before tax of GBP115.2 million (H1 2020: GBP72.4 million).
This represents a tax rate of 28.7 per cent (H1 2020: 28.2 per
cent).
The tax credit related to the amortisation of acquired
intangibles was GBP0.9 million (H1 2020: GBP0.6 million). The
GBP3.7 million of amortisation of intangible assets is a result of
the recent North American acquisitions (H1 2020: GBP2.2 million).
As the amortisation is recognised outside of our adjusted(1)
profitability, the tax benefit on the amortisation is also reported
outside of our adjusted(1) tax charge.
The adjusted(1) tax charge during the period was GBP34.0 million
(H1 2020: GBP21.0 million), on an adjusted(1) profit before tax of
GBP118.9 million (H1 2020: GBP74.6 million). The effective tax rate
(ETR) was therefore 28.6 per cent (H1 2020: 28.1 per cent) on an
adjusted(1) basis. The increase in the ETR was primarily due to the
significant decrease in profitability in France, where historical
tax losses are readily available for use and which offset some of
the prior period charge. This has combined with increasing profits
in Germany and the US which have higher local effective rates of
taxation than the UK and the rest of the Group.
We expect that the ETR in 2021 will remain under upwards
pressure, due to an increasing reweighting of the geographic split
of adjusted(1) profit before tax away from the UK to Germany and
the US, where tax rates are substantially higher, and also as
governments across our primary jurisdictions come under fiscal and
political pressure to increase corporation tax rates.
The table below reconciles the tax charge to the adjusted(1) tax
charge for the period ended 30 June 2021.
H1 2021 H1 2020 Year 2020
GBP'000 GBP'000 GBP'000
Tax charge 33,050 20,394 52,415
-------- -------- ---------
Adjustments to exclude:
-------- -------- ---------
Exceptional tax items - - 715
-------- -------- ---------
Tax on amortisation of acquired intangibles 992 592 1,695
-------- -------- ---------
Tax on exceptional items - - -
-------- -------- ---------
Adjusted(1) tax charge 34,042 20,986 54,825
-------- -------- ---------
ETR 28.7% 28.2% 25.4%
-------- -------- ---------
Adjusted(1) ETR 28.6% 28.1% 27.3%
-------- -------- ---------
Profit for the period
The profit for the period increased by 57.9 per cent to GBP82.1
million (H1 2020: GBP52.0 million). The adjusted(1) profit for the
period increased by 58.4 per cent to GBP84.9 million (H1 2020:
GBP53.6 million) and by 59.0 per cent in constant currency(2) .
Exceptional and other adjusting items
The net loss from exceptional and other adjusting items in the
period was GBP2.8 million (H1 2020: loss of GBP1.6 million).
Excluding the tax items noted above, which resulted in a gain of
GBP0.9 million (H1 2020: gain of GBP0.6 million), the profit before
tax impact was a net loss from exceptional and other adjusting
items of GBP3.7 million (H1 2020: loss of GBP2.2 million).
There were no exceptional items in the period to 30 June 2021
(H1 2020: nil).
We have continued to exclude, as an 'other adjusting item', the
amortisation of acquired intangible assets in calculating our
adjusted(1) results. Amortisation of intangible assets is non-cash,
does not relate to the operational performance of the business, and
is significantly affected by the timing and size of our
acquisitions, which distorts the understanding of our Group and
Segmental operating results.
The amortisation of acquired intangible assets was GBP3.7
million (H1 2020: GBP2.2 million), all related to the amortisation
of the intangibles acquired as part of the recent North American
acquisitions.
The acquisition of BT Services France on 2 November 2020
resulted in an exceptional gain of GBP14.0 million, which was
recognised on consolidation of the subsidiary in the 2020 Annual
Report and Accounts. The gain arose because the net assets acquired
for consideration of EUR1 totalled GBP14.0 million after fair value
adjustments, including GBP27.6 million of cash. The business
acquired comprised BT's domestic French services operations which,
on acquisition, was loss making on a stand-alone basis. The Company
considers that the exceptional gain reflects the future losses that
the acquired business will incur over the medium term, as it is
brought onto a sustainable footing through a combination of
upskilling employees, cross-selling into the Group's customers,
alignment with Group processes and systems, and the general
improvement of its operating activities. Where possible, future
charges relating to this reconfiguration of the business will be
disclosed separately to the Group's adjusted(1) results. This will
mean that, over time, the future costs incurred can be attributed
against the exceptional gain on acquisition recognised in the prior
year. There have been no such costs incurred during the period to
30 June 2021.
Earnings per share
Diluted earnings per share increased by 56.1 per cent to 70.7
pence (H1 2020: 45.3 pence). Adjusted(1) diluted earnings per share
increased by 56.5 per cent to 73.1 pence (H1 2020: 46.7 pence).
H1 2021 H1 2020 Year 2020
Basic weighted average number of shares (excluding
own shares held) (no.'000) 112,977 112,930 112,894
------- ------- ---------
Effect of dilution:
------- ------- ---------
Share options 2,766 1,707 2,005
------- ------- ---------
Diluted weighted average number of shares 115,743 114,637 114,899
------- ------- ---------
Profit for the year attributable to equity holders
of the Parent (GBP'000) 81,870 51,987 153,750
------- ------- ---------
Basic earnings per share (pence) 72.5 46.0 136.2
------- ------- ---------
Diluted earnings per share (pence) 70.7 45.3 133.8
------- ------- ---------
Adjusted(1) profit for the period attributable
to equity holders of the Parent (GBP'000) 84,603 53,579 145,284
------- ------- ---------
Adjusted(1) basic earnings per share (pence) 74.9 47.4 128.7
------- ------- ---------
Adjusted(1) diluted earnings per share (pence) 73.1 46.7 126.4
------- ------- ---------
Dividend
We are pleased to announce an interim dividend of 16.9 pence per
share (H1 2020: 12.3 pence per share). This is in line with our
policy that the interim dividend will be approximately one third of
the previous year's full dividend. The interim dividend will be
paid on Friday 22 October 2021. The dividend record date is Friday
24 September 2021, and the shares will be marked ex-dividend on
Thursday 23 September 2021.
Central Corporate Costs
Certain expenses are not specifically allocated to individual
Segments because they are not directly attributable to any single
Segment. These include the costs of the Board itself, related
public company costs, Group Executive members not aligned to a
specific geographic trading entity and the cost of centrally funded
strategic initiatives that benefit the whole Group.
Accordingly, these expenses are disclosed as a separate column,
'Central Corporate Costs', within the Segmental note. These costs
are borne within the Computacenter (UK) Limited legal entity and
have been removed for Segmental reporting and performance analysis,
as they form part of the overall Group administrative expenses.
During the period, total Central Corporate Costs were GBP11.1
million, a decrease of 14.0 per cent (H1 2030: GBP12.9 million).
Within this:
-- Board expenses, related public company costs and costs associated with Group Executive members
not aligned to a specific geographic trading entity increased to GBP4.1 million (H1 2020:
GBP3.3 million) partially due to the Executive Directors and both Founder Non-Executive Directors
waiving their salary and fee respectively in the second quarter of 2020;
-- share-based payment charges associated with the Group Executive members identified above,
including the Group Executive Directors, increased from GBP1.3 million in H1 2020 to GBP1.4
million in H1 2021, due to the increased cost of Computacenter plc ordinary shares and the
overall increased performance of the Group; and
-- strategic corporate initiatives are designed to increase capability and therefore competitive
position, enhance productivity or strengthen systems which underpin the Group. During the
period this decreased from GBP8.3 million in H1 2020 to GBP5.6 million in H1 2021, primarily
due to reduced spend on projects that completed in the second half of 2020 and entered service
with the Group and lower than planned spend on certain other projects which is expected to
be incurred in the second half of 2021.
Cashflow
The Group delivered an operating cash inflow of GBP1.6 million
for the period to 30 June 2021 (H1 2020: GBP44.7 million
inflow).
As noted in the 2020 Interim Report and Accounts there were
certain COVID-19 related one-off benefits included in the H1 2020
cashflow and net cash positions including extended free-of-charge
supplier credit with a major vendor of approximately GBP29.2
million and temporary payment timing benefits from various
governments of GBP22.2 million as well as improvements arising from
customer mix. Most of these benefits had expired by 31 December
2020 and were material factors in the reduction in H1 2021
operating cash flow noted above, indeed the first half operating
cash is usually impacted by a significant working capital increase
as was the case in H1 2019 with an operating cash outflow of GBP1.1
million. There are other components of the working capital increase
which are explained below. During the period, net operating cash
outflows from working capital, including inventories, trade and
other receivables and trade and other payables were GBP143.9
million (H1 2020: GBP55.5 million).
As noted in our 2020 Annual Report and Accounts the year-end
cash position was abnormally high as a number of our customers paid
ahead of normal payment cycles, partly, we believe, where overseas
customers looked to avoid sometimes negative interest rates. This
was exacerbated by a shift towards government customers during the
year, resulting in improvements in cash collection as governments,
particularly in Europe, have been settling debts as quickly as
possible and well ahead of industry standard payment terms. Whilst
the Group, in turn, paid a number of its suppliers early, to reduce
the temporary excess cash on the balance sheet at the year end, the
volume of early payments from customers received in the final days
of the year was unprecedented. The Company estimated, broadly, that
unforeseen receipts from customer payments in advance of the due
date exceeded the Company's ability to pay its own suppliers early
by roughly GBP50 million. These positions have largely wound out
through the period and is reflected in the working capital
movements seen.
Working capital cashflows have been further impacted by both the
revenue growth over the period and the increased inventory levels
seen, in particular within our North American business. Due to the
significant product shortages seen in the first half of the year, a
number of hyperscale customers have made advance orders of product
with delayed delivery to ensure continuity of supply resulting.
Further, a number of rack build orders were incomplete at the
period end, sometimes due to shortages of smaller components
required to complete the rack build. This has resulted in inventory
levels increasing to GBP254.4 million as at 30 June 2021 (30 June
2020: GBP153.2 million), with GBP53.7 million present within Pivot
as at 30 June 2021.
Net cash positions no longer included extended free-of-charge
supplier credit with a major vendor as this temporary COVID-19
related arrangement was fully repaid during the period (31 December
2020: GBP15.0 million and 30 June 2020: GBP29.2 million).
Capital expenditure in the period was GBP11.1 million (H1 2020:
GBP13.2 million) representing, primarily, investments in IT
equipment and software tools, to enable us to deliver improved
service to our customers.
The Group's Employee Benefit Trust ('EBT') made market purchases
of the Company's ordinary shares of GBP20.3 million (H1 2020: nil)
to satisfy maturing PSP awards and Sharesave schemes and to
re-provision the EBT in advance of future maturities.
The Group repaid GBP93.3 million of loans and credit facilities
during the period (H1 2020: GBP9.7 million) as we retired the
facility associated with the FusionStorm acquisition, made regular
repayments towards the loan related to the construction of the
German headquarters in Kerpen and significantly reduced the amount
drawn under the Pivot credit facility as detailed below.
The Group continued to manage its cash and working capital
positions appropriately using standard mechanisms, to ensure that
cash levels remained within expectations throughout the year. From
time to time, some customers request credit terms longer than our
standard of 30-60 days. In certain instances, we will arrange for
the sale of the receivables on a true sale basis to a finance
institution on the customers' behalf. We would typically receive
funds on 45-day terms from the finance institution, who will then
recover payment from the customer on terms agreed with them. The
cost of such an arrangement is borne by the customer, either
directly or indirectly, enabling us to receive the full amount of
payment in line with our standard terms. The benefit to the cash
and cash equivalents position of such arrangements as at 30 June
2021 is GBP41.1 million (30 June 2020: GBP43.5 million, 31 December
2020: GBP38.9 million). The Group had no other debt factoring at
the end of the period outside this normal course of business.
Cash and cash equivalents and net funds/(debt)
Cash and cash equivalents as at 30 June 2021 were GBP158.6
million, compared to GBP222.1 million at 30 June 2020. Cash and
cash equivalents decreased by GBP151.2 million from GBP309.8
million as at 31 December 2020.
Net debt as at 30 June 2021 was GBP29.4 million, compared to net
funds of GBP24.3 million as at 30 June 2020 and net funds of
GBP51.2 million as at 31 December 2020.
Adjusted net funds as at 30 June 2021 was GBP121.9 million,
compared to adjusted net funds of GBP149.1 million as at 30 June
2020 and adjusted net funds of GBP188.7 million as at 31 December
2020.
Net (debt)/funds as at 30 June 2021, 30 June 2020 and 31
December 2020 were as follows:
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
Cash and short-term deposits 164,227 222,058 309,844
--------- --------- -----------
Bank overdraft (5,676) - -
--------- --------- -----------
Cash and cash equivalents 158,551 222,058 309,844
--------- --------- -----------
Current asset investments - - -
--------- --------- -----------
Bank loans (36,669) (72,949) (121,194)
--------- --------- -----------
Adjusted net funds (excluding lease liabilities) 121,882 149,109 188,650
--------- --------- -----------
Lease liabilities (151,232) (124,766) (137,474)
--------- --------- -----------
Net (debt)/funds (29,350) 24,343 51,176
--------- --------- -----------
For a full reconciliation of net debt and adjusted net funds,
see note 13 to the summary financial information included within
this announcement, net funds.
The Group had four specific credit facilities in place during
the period and no other material borrowings.
The Group drew down a GBP100 million term loan on 1 October 2018
to complete the acquisition of FusionStorm. This loan was on a
seven-year repayment cycle, with a renewal of the loan facility due
on 30 September 2021. The Group has taken advantage of stronger
than anticipated cash generation throughout 2020 to make further
unplanned repayments of this loan during the period, in addition to
the unplanned repayment of GBP30 million in the second half of
2019. As at 31 December 2020, GBP41.6 million remained of the loan
(30 June 2020: GBP48.8 million) and the Group has now retired the
credit facility by paying the remaining balance owing in full
during the period.
Pivot has a $225.0 million senior secured asset-based revolving
credit facility, from a lending group represented by JPMorgan Chase
Bank, N.A. This can be used for revolving loans, letters of credit,
protective advances, over advances, and swing line loans, and
GBP58.4 million was drawn on the facility as at 31 December 2020.
During the period, the Group has continued to reduce the amount
drawn on the facility and only GBP8.3 million remained drawn as at
30 June 2021. In addition, Pivot has GBP10.5 million financed with
a major IT vendor for hardware, software and resold vendor
maintenance contracts that the Company has purchased as part of a
contract to lease these items to a key North American customer.
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 GBP17.5 million at 30
June 2021 (30 June 2020: GBP23.9 million).
The Group excludes lease liabilities from its non-GAAP adjusted
net funds measure, due to the distorting effect of the capitalised
lease liabilities on the Group's overall liquidity position under
the IFRS 16 accounting standard.
There were no interest-bearing trade payables as at 30 June 2021
(30 June 2020: nil).
The Group's adjusted net funds position contains no current
asset investments (30 June 2020: nil).
Currency
The Group reports its results in pounds sterling. The recent
strength in the value of sterling against most currencies during
the first half of 2021, in particular the US Dollar, has begun to
impact our revenues and profitability as a result of the conversion
of our foreign earnings. However, the exchange rates seen during
the period were not materially dissimilar to those seen in the
first half of 2020.
Restating the first half of 2020 at 2021 exchange rates would
decrease H1 2020 revenue by approximately GBP43.0 million and H1
2020 adjusted(1) profit before tax by approximately GBP0.8
million.
If the 30 June 2021 spot rates were to continue through the
remainder of 2021, the impact of restating 2020 at 2021 exchange
rates would be to decrease 2020 revenue by approximately GBP152.8
million and 2020 adjusted(1) profit before tax by approximately
GBP5.7 million.
Principal risks and uncertainties
The Group's activities expose it to a variety of economic,
financial, operational and regulatory risks. Our principal risks
continue to be concentrated in the availability and resilience of
systems, our people, our cost base, technology change, and in the
design, entry into service and running of large Services contracts.
The principal risks and uncertainties facing the Group are set out
on pages 71 to 76 of the 2020 Annual Report and Accounts, a copy of
which is available on the Group's website.
The Group's risk management approach and the principal risks,
potential impacts and primary mitigating activities are unchanged
from those set out in the 2020 Annual Report and Accounts. Our risk
management approach operated effectively in the six months to 30
June 2021, with systems and controls functioning as designed even
though this period included the unprecedented challenges imposed by
the COVID-19 pandemic and the utilisation of previously well-tested
business continuity processes for remote working arrangements.
Whilst we have not identified any new principal risks during the
period, we acknowledge the heightened level of overall risk across
several risk categories, due to the nature of the pandemic and its
impact on our operating environment in general, particularly in
relation to our identified Strategic, Infrastructure and Financial
Risks. The Group continues to concentrate efforts and resources
into its risk management processes in order to monitor adequately
the impact of COVID-19 across the business. Whilst the longer-term
effects on customer relationships and customer contracts are not
clear, to date, the Group has not been adversely impacted by any
material market or operational risk events associated with the
COVID-19 pandemic.
This Strategic Report was approved by the Board on 8 September
2021 and signed on its behalf by:
MJ Norris
Chief Executive Officer
FA Conophy
Group Finance Director
Directors' Responsibilities
Responsibility statement of the directors in respect of the
half-yearly financial report.
We confirm that to the best of our knowledge:
the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted for
use in the UK; the interim management report includes a fair review
of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
MJ Norris
Chief Executive Officer
FA Conophy
Group Finance Director
Consolidated Income Statement
For the six months ended 30 June 2021
H1 2021 H1 2020 Year 2020
Note GBP'000 GBP'000 GBP'000
Revenue 5 3,180,023 2,462,184 5,441,258
---- ----------- ----------- -----------
Cost of sales (2,754,749) (2,144,385) (4,720,717)
---- ----------- ----------- -----------
Gross profit 425,274 317,799 720,541
---- ----------- ----------- -----------
Administrative expenses (306,539) (242,685) (522,054)
---- ----------- ----------- -----------
Operating profit 118,735 75,114 198,487
---- ----------- ----------- -----------
Gain on acquisition of a subsidiary - - 14,030
---- ----------- ----------- -----------
Finance income 227 324 475
---- ----------- ----------- -----------
Finance costs (3,794) (3,030) (6,421)
---- ----------- ----------- -----------
Profit before tax 115,168 72,408 206,571
---- ----------- ----------- -----------
Income tax expense (33,050) (20,394) (52,415)
---- ----------- ----------- -----------
Profit for the period/year 82,118 52,014 154,156
---- ----------- ----------- -----------
Attributable to:
---- ----------- ----------- -----------
Equity holders of the Parent 81,870 51,987 153,750
---- ----------- ----------- -----------
Non-controlling interests 248 27 406
---- ----------- ----------- -----------
Profit for the period/year 82,118 52,014 154,156
---- ----------- ----------- -----------
Earnings per share:
---- ----------- ----------- -----------
- basic for profit for the period/year 10 72.5p 46.0p 136.2p
---- ----------- ----------- -----------
- diluted for profit for the period/year 10 70.7p 45.3p 133.8p
---- ----------- ----------- -----------
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2021
H1 2021 H1 2020 Year 2020
GBP'000 GBP'000 GBP'000
Profit for the period/year 82,118 52,014 154,156
-------- -------- ---------
Items that may be reclassified to the Consolidated
Income Statement:
-------- -------- ---------
Gain/(loss) arising on cash flow hedge 227 (2,554) (1,894)
-------- -------- ---------
Income tax effect (57) 510 369
-------- -------- ---------
170 (2,044) (1,525)
-------- -------- ---------
Exchange differences on translation of foreign
operations (10,331) 24,079 3,217
-------- -------- ---------
(10,161) 22,035 1,692
-------- -------- ---------
Items not to be reclassified to the Consolidated
Income Statement:
-------- -------- ---------
Remeasurement of defined benefit plan - - (4,329)
-------- -------- ---------
Other comprehensive (expense)/income for the period/year,
net of tax (10,161) 22,035 (2,637)
-------- -------- ---------
Total comprehensive income for the period/year 71,957 74,049 151,519
-------- -------- ---------
Attributable to:
-------- -------- ---------
Equity holders of the Parent 71,751 74,022 151,113
-------- -------- ---------
Non-controlling interests 206 27 406
-------- -------- ---------
Total comprehensive income for the period/year 71,957 74,049 151,519
-------- -------- ---------
Consolidated Balance Sheet
As at 30 June 2021
H1 2021 H1 2020 Year 2020
Note GBP'000 GBP'000 GBP'000
Non-current assets
---- --------- --------- ----------
Property, plant and equipment 101,169 104,382 106,974
---- --------- --------- ----------
Right-of-use assets 141,922 117,879 129,622
---- --------- --------- ----------
Intangible assets 272,816 180,560 274,732
---- --------- --------- ----------
Investment in associate 49 58 57
---- --------- --------- ----------
Deferred tax assets 18,901 10,303 10,876
---- --------- --------- ----------
Prepayments 16,600 4,231 23,605
---- --------- --------- ----------
551,457 417,413 545,866
---- --------- --------- ----------
Current assets
---- --------- --------- ----------
Inventories 254,429 153,214 211,279
---- --------- --------- ----------
Trade and other receivables 2 1,069,643 812,901 1,095,875
---- --------- --------- ----------
Income tax receivable 2 9,565 1,844 9,978
---- --------- --------- ----------
Prepayments 112,550 92,053 102,745
---- --------- --------- ----------
Accrued income 142,843 112,951 125,433
---- --------- --------- ----------
Derivative financial instruments 3,212 1,298 1,643
---- --------- --------- ----------
Cash and short-term deposits 13 164,227 222,058 309,844
---- --------- --------- ----------
1,756,469 1,396,319 1,856,797
---- --------- --------- ----------
Total assets 2,307,926 1,813,732 2,402,663
---- --------- --------- ----------
Current liabilities
---- --------- --------- ----------
Bank overdraft 13 5,676 - -
---- --------- --------- ----------
Trade and other payables 1,076,669 797,303 1,116,741
---- --------- --------- ----------
Deferred income 224,138 179,969 273,947
---- --------- --------- ----------
Financial liabilities 13 15,786 20,067 105,475
---- --------- --------- ----------
Lease liabilities 13 44,104 38,649 41,683
---- --------- --------- ----------
Derivative financial instruments 1,558 1,924 5,066
---- --------- --------- ----------
Income tax payable 2 49,581 33,810 39,953
---- --------- --------- ----------
Provisions 14 3,249 4,564 4,132
---- --------- --------- ----------
1,420,761 1,076,286 1,586,997
---- --------- --------- ----------
Non-current liabilities
---- --------- --------- ----------
Financial liabilities 13 20,883 52,882 15,719
---- --------- --------- ----------
Lease liabilities 13 107,128 86,117 95,791
---- --------- --------- ----------
Deferred income 11,715 - 18,630
---- --------- --------- ----------
Provisions 14 32,645 15,280 35,730
---- --------- --------- ----------
Deferred tax liabilities 23,940 11,385 18,873
---- --------- --------- ----------
196,311 165,664 184,743
---- --------- --------- ----------
Total liabilities 1,617,072 1,241,950 1,771,740
---- --------- --------- ----------
Net assets 690,854 571,782 630,923
---- --------- --------- ----------
Capital and reserves
---- --------- --------- ----------
Issued share capital 9,270 9,270 9,270
---- --------- --------- ----------
Share premium 3,942 3,942 3,942
---- --------- --------- ----------
Capital redemption reserve 74,957 74,957 74,957
---- --------- --------- ----------
Own shares held (125,337) (107,876) (111,613)
---- --------- --------- ----------
Translation and hedging reserve 5,601 36,063 15,720
---- --------- --------- ----------
Retained earnings 719,091 555,477 635,523
---- --------- --------- ----------
Shareholders' equity 687,524 571,833 627,799
---- --------- --------- ----------
Non-controlling interests 3,330 (51) 3,124
---- --------- --------- ----------
Total equity 690,854 571,782 630,923
---- --------- --------- ----------
Approved by the Board on 8 September 2021.
MJ Norris FA Conophy
Chief Executive Group Finance Director
Officer
-----------------------
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2021
Attributable to equity holders of the
Parent
Issued Capital Own Translation Share- Non-
share Share redemption shares and hedging Retained holder's controlling Total
capital Premium reserve held reserves earnings equity interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ---------- --------- ----------- ---------
At 1 January 2020 9,270 3,942 74,957 (113,563) 14,028 503,928 492,562 (78) 492,484
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Profit for the
period - - - - - 51,987 51,987 27 52,014
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Other
comprehensive
income - - - - 22,035 - 22,035 - 22,035
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Total
comprehensive
income - - - - 22,035 51,987 74,022 27 74,049
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Cost of
share-based
payments - - - - - 3,799 3,799 - 3,799
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Tax on
share-based
payments - - - - - 417 417 - 417
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Exercise of
options - - - 5,687 - (4,654) 1,033 - 1,033
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
At 30 June 2020 9,270 3,942 74,957 (107,876) 36,063 555,477 571,833 (51) 571,782
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Relating to
acquisition
of subsidiary - - - - - - - 2,796 2,796
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Profit for the
period - - - - - 101,763 101,763 379 102,142
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Other
comprehensive
expense - - - - (20,343) (4,329) (24,672) - (24,672)
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Total
comprehensive
(expense)/income - - - - (20,343) 97,434 77,091 379 77,470
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Cost of
share-based
payments - - - - - 4,155 4,155 - 4,155
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Tax on
share-based
payments - - - - - 2,973 2,973 - 2,973
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Exercise of
options - - - 15,214 - (10,573) 4,641 - 4,641
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Purchase of own
shares - - - (18,951) - - (18,951) - (18,951)
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Equity dividends - - - - - (13,943) (13,943) - (13,943)
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
At 31 December
2020 9,270 3,942 74,957 (111,613) 15,720 635,523 627,799 3,124 630,923
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Profit for the
period - - - - - 81,870 81,870 248 82,118
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Other
comprehensive
expense - - - - (10,119) - (10,119) (42) (10,161)
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Total
comprehensive
(expense)/income - - - - (10,119) 81,870 71,751 206 71,957
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Cost of
share-based
payments - - - - - 4,567 4,567 - 4,567
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Tax on
share-based
payments - - - - - 2,259 2,259 - 2,259
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Exercise of
options - - - 6,580 - (5,110) 1,470 - 1,470
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Purchase of own
shares - - - (20,304) - - (20,304) - (20,304)
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Asset
reunification - - - - - (18) (18) - (18)
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
At 30 June 2021 9,270 3,942 74,957 (125,337) 5,601 719,091 687,524 3,330 690,854
-------- -------- ---------- --------- ----------- --------- --------- ----------- --------
Consolidated Cash Flow Statement
For the six months ended 30 June 2021
H1 2021 H1 2020 Year 2020
GBP'000 GBP'000 GBP'000
Operating activities
--------- ---------- ---------
Profit before tax 115,168 72,408 206,571
--------- ---------- ---------
Net finance cost 3,567 2,706 5,946
--------- ---------- ---------
Depreciation of property, plant and equipment 12,655 11,368 24,033
--------- ---------- ---------
Depreciation of right-of-use assets 26,336 22,182 45,154
--------- ---------- ---------
Amortisation of intangible assets 7,013 5,712 14,635
--------- ---------- ---------
Share-based payments 4,564 3,799 7,954
--------- ---------- ---------
Loss on disposal of intangibles 2 7 321
--------- ---------- ---------
Loss/(profit) on disposal of property, plant and
equipment 154 (37) 200
--------- ---------- ---------
Net cash flow from inventories (47,029) (23,251) (50,448)
--------- ---------- ---------
Net cash flow from trade and other receivables
(including contract assets) (27,936) 191,026 48,276
--------- ---------- ---------
Net cash flow from trade and other payables (including
contract liabilities) (68,901) (223,278) (26,169)
--------- ---------- ---------
Gain on acquisition of a subsidiary - - (14,030)
--------- ---------- ---------
Net cash flow from provisions (2,590) 3,757 1,919
--------- ---------- ---------
Other adjustments(1) 800 (5,549) 85
--------- ---------- ---------
Cash generated from operations 23,803 60,850 264,447
--------- ---------- ---------
Income taxes paid (22,252) (16,135) (27,645)
--------- ---------- ---------
Net cash flow from operating activities 1,551 44,715 236,802
--------- ---------- ---------
Investing activities
--------- ---------- ---------
Interest received 227 490 475
--------- ---------- ---------
Acquisition of subsidiaries, net of cash acquired (1,071) - (30,095)
--------- ---------- ---------
Purchases of property, plant and equipment (9,575) (11,210) (23,141)
--------- ---------- ---------
Purchases of intangible assets (7,927) (1,990) (4,360)
--------- ---------- ---------
Proceeds from disposal of property, plant and equipment/Intangibles 194 219 1,652
--------- ---------- ---------
Net cash flow from investing activities (18,152) (12,491) (55,469)
--------- ---------- ---------
Financing activities
--------- ---------- ---------
Interest paid (1,117) (929) (1,942)
--------- ---------- ---------
Interest paid on lease liabilities (2,678) (2,267) (4,479)
--------- ---------- ---------
Dividends paid to equity shareholders of the Parent - - (13,943)
--------- ---------- ---------
Asset reunification (18) - -
--------- ---------- ---------
Proceeds from exercise of share options 1,470 1,033 5,674
--------- ---------- ---------
Purchase of own shares (20,304) - (18,951)
--------- ---------- ---------
Repayment of loans and credit facility (93,314) (9,725) (20,021)
--------- ---------- ---------
Payment of capital element of lease liabilities(1) (24,646) (21,157) (43,200)
--------- ---------- ---------
New Borrowings - bank loan 10,409 287 289
--------- ---------- ---------
Net cash flow from financing activities (130,198) (32,758) (96,573)
--------- ---------- ---------
(Decrease)/increase in cash and cash equivalents (146,799) (534) 84,760
--------- ---------- ---------
Effect of exchange rates on cash and cash equivalents (4,494) 4,711 7,203
--------- ---------- ---------
Cash and cash equivalents at the beginning of the
period/year 309,844 217,881 217,881
--------- ---------- ---------
Cash and cash equivalents at the end of the period/year 158,551 222,058 309,844
--------- ---------- ---------
1 Interest paid on lease liabilities of GBP2.3 million was
included as part of 'Payment of Capital element of lease
liabilities' in June 2020. The prior period comparative has been
re-presented for this amount. This has also resulted in an
adjustment to 'Other adjustments' of GBP2.3 million.
1 Corporate information
The Interim Condensed Consolidated Financial Statements
(Financial Statements) of the Group for the six months ended 30
June 2021 were authorised for issue in accordance with a resolution
of the Directors on 8 September 2021. The Consolidated Balance
Sheet was signed on behalf of the Board by MJ Norris and FA
Conophy.
Computacenter plc is a limited company incorporated and
domiciled in England whose shares are publicly traded.
2 Basis of preparation
The Financial Statements for the six months ended 30 June 2021
have been prepared in accordance with International Accounting
Standard 34 'Interim Financial Reporting', as adopted by the United
Kingdom. They do not include all of the information and disclosures
required in the annual financial statements, and should be read in
conjunction with the Group's 2020 Annual Report and Accounts which
have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the United Kingdom. The
interim condensed consolidated financial statements contained in
this report are unaudited.
The Financial Statements are presented in pound sterling (GBP)
and all values are rounded to the nearest thousand (GBP'000) 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 were approved by the Board. The
first year of the Plan is subject to reforecasting during the year,
the most recent of which occurred in advance of the Trading Update
statement on 21 July 2021. This reforecast of the first year of the
Plan has been updated into the Plan alongside a revision of
cashflow assumptions for the year and a review of the second and
third years of the Plan. 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 as the appropriate period for the going concern assessment
and have based their assessment on the relevant forecasts from the
Plan for that period.
The potential impact of the principal risks and uncertainties,
as set out on pages 71 to 76 of the of the 2020 Annual Report and
Accounts, is then applied to the Plan. This assessment includes
only those risks and uncertainties that, individually or in
plausible combination, would threaten the Group's business mode
future performance, solvency or liquidity over the assessment
period and which are considered to be severe but reasonable
scenarios. It also takes into account an assessment of how the
risks are managed and the effectiveness of any mitigating
actions.
For the current period, the primary downside sensitivity relates
to a modelled, but not predicted, severe downturn in Group
revenues, beginning in the second half of 2021, simulating a
continued impact for some of our customers from the COVID-19 crisis
together with the Group's revenues being impacted by supply
shortages. This sensitivity analysis models a continued market
downturn scenario for some of our customers whose businesses have
been affected by COVID-19 and a similar downturn occurring for the
remainder of our customer base alongside a further impact on the
Group's Technology Sourcing revenues through the second half of
2021 from possible ongoing vendor-related supply shortage
issues.
Our cash and borrowing capacity provides sufficient funds to
meet the foreseeable needs of the Group. At 30 June 2021, the Group
had cash and cash equivalents of GBP158.6 million and bank debt,
primarily related to the recent North American acquisitions and the
headquarters in Germany, of GBP42.3 million. In addition, the Group
has a committed facility of GBP60.0 million, which was extended in
September 2020 and has an expiry date of 7 September 2023. The
Group has never drawn on this committed facility.
The Group has a resilient balance sheet position, with net
assets of GBP690.9 million as at 30 June 2021. The Group made a
profit after tax of GBP82.1 million and delivered net cash flows
from operating activities of GBP1.6 million, for the period ended
30 June 2021. As the analysis continues to show a strong forecast
cash position, even under the severe economic conditions modelled
in the sensitivity scenarios, the Directors continue to consider
that the Group is well placed to manage business and financial
risks in the current economic environment. Based on this
assessment, the Directors confirm that they have a reasonable
expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the period of not
less than 12 months from the date of signing this announcement and
therefore have prepared the Financial Statements on a going concern
basis.
Consolidated Balance Sheet - As at 30 June 2020
Certain 'trade and other receivables' and 'income tax payable'
balance in the prior period Consolidated Balance Sheet as at 30
June 2020 have been reclassified to income tax receivable, net
totalling to GBP1.9 million and re-presented to conform with the
presentation adopted as at 31 December 2020.
Consolidated Balance Sheet as at 31 December 2020
As at 31 December 2020, certain items relating to an operating
lessor arrangement within the newly acquired Pivot business were
incorrectly presented on the balance sheet as follows:
-- An amount of GBP11.7 million was incorrectly presented as
accrued income of GBP2.6 million and non-current deferred costs,
within prepayments, of GBP9.1 million rather than as property,
plant and equipment of GBP2.6 million, intangibles assets -
software of GBP4.3 million, accrued income of GBP1.1 million and
non-current deferred costs, within prepayments, of GBP3.7
million.
-- An amount of GBP11.1 million was incorrectly presented as
current deferred income of GBP2.9 million and non-current deferred
income of GBP8.2 million, rather than reflected as current
financial liabilities of GBP2.2 million and non-current financial
liabilities of GBP8.9 million.
Consolidated Cash Flow Statement for the year ended 31 December
2020
In relation to the above, the contract relating to the operating
lessor arrangement was entered into prior to the acquisition of
Pivot, therefore the impact to the Consolidated Cash Flow Statement
is limited to GBP0.4 million of financing repayments being
incorrectly presented. This outflow was recognised within net cash
flow from trade and other payables within the operating cashflow
caption, instead of as a repayment of loans and credit facility
within the financing cashflow caption.
Management have decided not to correct the prior year-end
presentation of the differences relating to the above items, as
they have no impact on the Consolidated Income Statement for the
year ended 31 December 2020 and individual reclassifications are
either not significant compared to the overall amount in the
Consolidated Balance Sheet and/or Consolidated Cash Flow Statement
captions affected by the mis-presentation or to the Consolidated
Balance Sheet or Consolidated Cash Flow Statement itself. The
revision has no impact on the operating profit, profit for the
period, assets and liabilities or cash flows for the period ended
30 June 2020, which is prior to the acquisition of the entity, or
for the period ended 30 June 2021, where the correct accounting
treatment has been adopted in the period.
3 Significant Accounting Policies
The accounting policies adopted are consistent with those of the
previous financial year as disclosed in the Group's 2020 Annual
Report and Accounts.
4 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, listed below, assist in providing additional
useful information on the underlying trends, performance and
position of the Group. The non-GAAP measures also used to enhance
the comparability of information between reporting periods by
adjusting for non-recurring or uncontrollable factors which affect
IFRS measures, to aid the user in understanding the Group's
performance.
Consequently, non-GAAP measures are used by the Directors and
management for performance analysis, planning, reporting and
incentive setting purposes and have remained consistent with prior
year.
These non-GAAP measures comprise of:
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
are, as appropriate, each stated before: exceptional and other
adjusting items including gain or loss on business disposals, gain
or loss on disposal of investment properties, 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 do not consider these items when reviewing the
underlying performance of the Segment or the Group as a whole.
A reconciliation between key adjusted and statutory measures is
provided within Group Finance Director 's Review included within
this announcement which details the impact of exceptional and other
adjusting items when comparing to the non-GAAP financial measures
in addition to those reported in accordance with IFRS. Further
detail is also provided below, Segment information.
5 Segment information
The operating Segments remain unchanged from those reported at
31 December 2020. Central Corporate Costs continue to be disclosed
as a separate column within the Segmental note.
Segmental performance for the periods to H1 2021, H1 2020 and
Full Year 2020 were as follows:
Six months ended 30 June 2021
Central
North Corporate
UK Germany France America International Costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
-------- -------- -------- -------- ------------- ---------- ---------
Technology Sourcing revenue 707,303 615,525 226,659 870,934 53,536 - 2,473,957
-------- -------- -------- -------- ------------- ---------- ---------
Services revenue
-------- -------- -------- -------- ------------- ---------- ---------
Professional Services 74,941 135,577 20,504 30,504 4,047 - 265,573
-------- -------- -------- -------- ------------- ---------- ---------
Managed Services 157,217 175,383 65,928 8,686 33,279 - 440,493
-------- -------- -------- -------- ------------- ---------- ---------
Total Services revenue 232,158 310,960 86,432 39,190 37,326 - 706,066
-------- -------- -------- -------- ------------- ---------- ---------
Total revenue 939,461 926,485 313,091 910,124 90,862 - 3,180,023
-------- -------- -------- -------- ------------- ---------- ---------
Results
-------- -------- -------- -------- ------------- ---------- ---------
Gross profit 133,053 147,508 32,830 94,257 17,626 - 425,274
-------- -------- -------- -------- ------------- ---------- ---------
Adjusted(1) administrative
expenses (81,365) (86,361) (34,822) (75,588) (13,541) (11,137) (302,814)
-------- -------- -------- -------- ------------- ---------- ---------
Adjusted(1) operating profit/(loss) 51,688 61,147 (1,992) 18,669 4,085 (11,137) 122,460
-------- -------- -------- -------- ------------- ---------- ---------
Net interest (247) (1,186) (336) (1,218) (580) - (3,567)
-------- -------- -------- -------- ------------- ---------- ---------
Adjusted(1) profit/(loss)
before tax 51,441 59,961 (2,328) 17,451 3,505 (11,137) 118,893
-------- -------- -------- -------- ------------- ---------- ---------
Amortisation of acquired
intangibles (3,725)
-------- -------- -------- -------- ------------- ---------- ---------
Profit before tax 115,168
-------- -------- -------- -------- ------------- ---------- ---------
The reconciliation of operating profit to adjusted(1) operating
profit, as disclosed in the Consolidated Income Statement, is as
follows:
Six months ended 30 June 2021
Total
GBP'000
Adjusted(1) operating profit 122,460
--------
Amortisation of acquired intangibles (3,725)
--------
Operating profit 118,735
--------
Six months ended 30 June 2020
Central
North Corporate
UK Germany France America International Costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
-------- -------- -------- -------- ------------- ---------- ---------
Technology Sourcing revenue 643,160 572,045 235,494 370,495 46,605 - 1,867,799
-------- -------- -------- -------- ------------- ---------- ---------
Services revenue
-------- -------- -------- -------- ------------- ---------- ---------
Professional Services 54,893 113,186 15,325 5,203 3,390 - 191,997
-------- -------- -------- -------- ------------- ---------- ---------
Managed Services 160,689 158,481 53,521 2,462 27,235 - 402,388
-------- -------- -------- -------- ------------- ---------- ---------
Total Services revenue 215,582 271,667 68,846 7,665 30,625 - 594,385
-------- -------- -------- -------- ------------- ---------- ---------
Total revenue 858,742 843,712 304,340 378,160 77,230 - 2,462,184
-------- -------- -------- -------- ------------- ---------- ---------
Results
-------- -------- -------- -------- ------------- ---------- ---------
Gross profit 122,626 118,456 31,060 30,921 14,736 - 317,799
-------- -------- -------- -------- ------------- ---------- ---------
Adjusted(1) administrative
expenses (76,689) (82,901) (27,263) (26,216) (14,567) (12,865) (240,501)
-------- -------- -------- -------- ------------- ---------- ---------
Adjusted(1) operating profit/(loss) 45,937 35,555 3,797 4,705 169 (12,865) 77,298
-------- -------- -------- -------- ------------- ---------- ---------
Net interest (597) (1,081) (187) (270) (571) - (2,706)
-------- -------- -------- -------- ------------- ---------- ---------
Adjusted(1) profit/(loss)
before tax 45,340 34,474 3,610 4,435 (402) (12,865) 74,592
-------- -------- -------- -------- ------------- ---------- ---------
Amortisation of acquired
intangibles (2,184)
-------- -------- -------- -------- ------------- ---------- ---------
Profit before tax 72,408
-------- -------- -------- -------- ------------- ---------- ---------
The reconciliation of operating profit to adjusted(1) operating
profit, as disclosed in the Consolidated Income Statement, is as
follows:
Six months ended 30 June 2020
Total
GBP'000
Adjusted(1) operating profit 77,298
--------
Amortisation of acquired intangibles (2,184)
--------
Operating profit 75,114
--------
Year ended 31 December 2020
Central
North Corporate
UK Germany France America International Costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
--------- --------- -------- -------- ------------- ---------- ----------
Technology Sourcing revenue 1,328,049 1,297,444 526,436 917,654 110,501 - 4,180,084
--------- --------- -------- -------- ------------- ---------- ----------
Services revenue
--------- --------- -------- -------- ------------- ---------- ----------
Professional Services 129,058 233,817 35,698 19,645 7,185 - 425,403
--------- --------- -------- -------- ------------- ---------- ----------
Managed Services 316,291 345,001 110,688 7,146 56,645 - 835,771
--------- --------- -------- -------- ------------- ---------- ----------
Total Services revenue 445,349 578,818 146,386 26,791 63,830 - 1,261,174
--------- --------- -------- -------- ------------- ---------- ----------
Total revenue 1,773,398 1,876,262 672,822 944,445 174,331 - 5,441,258
--------- --------- -------- -------- ------------- ---------- ----------
Results
--------- --------- -------- -------- ------------- ---------- ----------
Gross profit 249,258 279,889 74,380 86,333 30,681 - 720,541
--------- --------- -------- -------- ------------- ---------- ----------
Adjusted(1) administrative
expenses (158,889) (167,308) (61,394) (72,295) (27,117) (27,077) (514,080)
--------- --------- -------- -------- ------------- ---------- ----------
Adjusted(1) operating profit/(loss) 90,369 112,581 12,986 14,038 3,564 (27,077) 206,461
--------- --------- -------- -------- ------------- ---------- ----------
Net interest (1,194) (2,158) (575) (909) (1,110) - (5,946)
--------- --------- -------- -------- ------------- ---------- ----------
Adjusted(1) profit/(loss)
before tax 89,175 110,423 12,411 13,129 2,454 (27,077) 200,515
--------- --------- -------- -------- ------------- ---------- ----------
Exceptional items:
--------- --------- -------- -------- ------------- ---------- ----------
- costs relating to acquisition
of a subsidiary (684)
--------- --------- -------- -------- ------------- ---------- ----------
- redundancy and other restructuring
credit 144
--------- --------- -------- -------- ------------- ---------- ----------
- gain on acquisition of
subsidiary 14,030
--------- --------- -------- -------- ------------- ---------- ----------
Total exceptional items 13,490
--------- --------- -------- -------- ------------- ---------- ----------
Amortisation of acquired
intangibles (7,434)
--------- --------- -------- -------- ------------- ---------- ----------
Profit before tax 206,571
--------- --------- -------- -------- ------------- ---------- ----------
The reconciliation of operating profit to adjusted(1) operating
profit, as disclosed in the Consolidated Income Statement, is as
follows:
Year ended 31 December 2020
Total
GBP'000
Adjusted(1) operating profit 206,461
--------
Amortisation of acquired intangibles (7,434)
--------
Exceptional items (540)
--------
Operating profit 198,487
--------
6 Seasonality of operations
Historically, revenues have been higher in the second half of
the year than in the first six months. This is principally driven
by customer buying behaviour in the markets in which we operate.
Typically, this leads to a more pronounced effect on operating
profit. In addition, the effect is compounded further by the
tendency for the holiday entitlements of our employees to accrue
during the first half of the year and to be utilised in the second
half. The Company tempers the preceding guidance by noting that the
impact of COVID-19 remains unpredictable and that the historical
seasonality of operations could be materially impacted by changes
in customer buying behaviour impacting the timing of sales volumes
between the first and second halves of the year. We have seen
further impacts to our historical seasonality of operations in the
first half of 2021 due to the supply shortages in the information
technology equipment that our customers require which has led to
certain customers to pull forward orders into the first half of the
year that would otherwise have naturally occurred in the second
half of 2021.
7 Dividends paid and proposed
A final dividend for 2020 of 38.4 pence per ordinary share was
paid on 02 July 2021. An interim dividend in respect of 2021 of
16.9 pence per ordinary share, amounting to a total dividend of
GBP19.3 million, was declared by the Directors at their meeting on
7 September 2021. The expected payment date of the dividend
declared is 22 October 2021. The Interim Report and Accounts does
not reflect this dividend payable.
8 Income tax
Tax for the six-month period is charged at 28.7 per cent (six
months ended 30 June 2020: 28.2 per cent; year ended 31 December
2020: 25.4 per cent), representing the best estimate of the average
annual effective tax rate expected for the full year, applied to
the pre-tax income of the six-month period.
9 Exceptional items
H1 2021 H1 2020 Year 2020
GBP'000 GBP'000 GBP'000
Operating profit
-------- -------- ---------
Costs relating to acquisition of a subsidiary - - (684)
-------- -------- ---------
Gain on release of French Social Plan provision - - 144
-------- -------- ---------
Gain on acquisition of subsidiary - - 14,030
-------- -------- ---------
Exceptional operating profit - - 13,490
-------- -------- ---------
Profit on exceptional items after taxation - - 13,490
-------- -------- ---------
Income tax
-------- -------- ---------
Tax relating to acquisition of a subsidiary - - 715
-------- -------- ---------
Profit on exceptional items after taxation - - 14,205
-------- -------- ---------
H1 2021 & H1 2020: There were no exceptional items reported
within the H1 2021 and H1 2020 period.
YE 2020: Included are the following exceptional items:
-- An exceptional cost during the year of GBP0.7 million resulted from the acquisition of Pivot
and primarily related to fees paid to the Company's advisors. This cost is non-operational,
unlikely to recur and is consistent with our prior-year treatment of acquisition costs on
material transactions as exceptional items.
-- A credit of GBP0.1 million arising on an expense previously put in exceptional costs within
the financial statements of 2016 in relation to the 2014 French Social plan.
-- The acquisition of BT Services France resulted in an exceptional gain of GBP14.0 million,
which was recognised on consolidation of the subsidiary. The gain arose because the net assets
acquired for consideration of EUR1 totalled GBP14.0 million after fair value adjustments,
including GBP27.6 million of cash. Refer to note 18 d) of the Financial Statements for further
information on the calculation of the exceptional gain on acquisition. The business acquired
comprised BT's domestic French services operations which, on acquisition, were making considerable
losses on a stand-alone basis. The Company considers that the exceptional gain reflects the
future losses that the acquired business will incur over the medium term, as it is brought
onto a sustainable footing through a combination of upskilling employees, cross-selling into
the Group's customers, alignment with Group processes and systems, and the general improvement
of its operating activities. These costs are non-operational in nature, material in size and
unlikely to recur and have therefore been classified as exceptional.
-- A further tax credit of GBP0.7 million was recorded due to post-acquisition activity in FusionStorm.
This benefit derived from payments which were settled by the vendor, out of the consideration
paid, via post-acquisition capital contributions to FusionStorm. As this credit was related
to the acquisition and not operational activity within FusionStorm, is a one-off and material
to the overall tax result, we have classified this as an exceptional tax item, consistent
with the treatment in 2018 and 2019.
10 Earnings per share
Earnings per share ('EPS') amounts are calculated by dividing
profit attributable to ordinary equity holders by the weighted
average number of ordinary shares outstanding during the period
(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 period are
considered to be dilutive potential shares.
H1 2021 H1 2020 Year 2020
GBP'000 GBP'000 GBP'000
Profit attributable to equity holders of the Parent 81,870 51,987 153,750
-------- -------- ---------
H1 2021 H1 2020 Year 2020
No.'000 No.'000 No.'000
Basic weighted average number of shares (excluding
own shares held) 112,977 112,930 112,894
-------- -------- ---------
Effect of dilution:
-------- -------- ---------
Share options 2,766 1,707 2,005
-------- -------- ---------
Diluted weighted average number of shares 115,743 114,637 114,899
-------- -------- ---------
H1 2021 H1 2020 Year 2020
pence pence pence
Basic earnings per share 72.5 46.0 136.2
------- ------- ---------
Diluted earnings per share 70.7 45.3 133.8
------- ------- ---------
11 Investments
On 30 April 2021, the Group acquired 100 per cent of the voting
shares of ITL logistics GmbH (ITL) for a consideration of EUR1.68
million. ITL is an IT logistics provider based in Germany. The
acquisition has been accounted for using the purchase method of
accounting.
Apart from customer relationship and order book intangibles,
Cash and short-term deposits and credit facility, which has been
finalised, the initial accounting for the acquisition of Pivot is
still provisional at the date of finalisation of this summary
financial information included within this announcement based on
Management's best estimates. The accounting in these areas remains
provisional as certain areas, including working capital balances
impacted by a disputed balance with a supplier, are still in the
course of resolution.
Apart from the Customer relationship intangible and Cash and
short-term deposits which has been finalised, the initial
accounting for the acquisition of Computacenter NS is still
provisional at the date of finalisation of this summary financial
information included within this announcement based on Management's
best estimates. The accounting in these areas remains provisional
as certain areas, including working capital balances impacted by
ongoing negotiations, are still in the course of resolution.
The provisional fair values presented in the 2020 Annual Report
and Accounts for the acquisitions of Pivot and Computacenter NS
remain unchanged as at 30 June 2021.
12 Fair value measurements recognised in the consolidated
Balance Sheet
Financial instruments which are recognised at fair value
subsequent to initial recognition are grouped into Levels 1 to 3
based on the degree to which the fair value is observable. The
three levels are defined as follows:
1. Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
2. Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
3. Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
At 30 June 2021 the Group had forward currency contracts, which
were measured at Level 2 fair value subsequent to initial
recognition, to the value of a net asset of GBP1,654,000 (30 June
2020: net liability of GBP626,000, 31 December 2020: net liability
of GBP3,423,000). The net realised loss from forward currency
contracts in the period to 30 June 2021 of GBP468,000 (30 June
2020: GBP2,363,000, 31 December 2020: GBP2,363,000) are offset by
broadly equivalent realised losses/gains on the related underlying
transactions.
At 30 June 2021 the Group had Interest rate swaps, which were
measured at Level 2 fair value subsequent to initial recognition,
to the value of a net asset of GBP10,000 (31 December 2020: net
liability of GBP246,000).
The foreign currency forward contracts are measured based on
observable spot exchange rates, the yield curves of the respective
currencies as well as the currency basis spreads between the
respective currencies. All contracts are fully cash collateralised,
thereby eliminating both counterparty and the Group's own credit
risk.
The carrying value of the Group's short-term receivables and
payables is a reasonable approximation of their fair values. The
fair value of all other financial instruments carried within the
Financial Statements is not materially different from their
carrying amount.
13 Net funds
H1 2021 H1 2020 Year 2020
GBP'000 GBP'000 GBP'000
Cash and short-term deposits 164,227 222,058 309,844
--------- --------- ---------
Bank overdraft (5,676) - -
--------- --------- ---------
Cash and cash equivalents 158,551 222,058 309,844
--------- --------- ---------
Bank loans/ Credit facility (36,669) (72,949) (121,194)
--------- --------- ---------
Adjusted net funds 3 (excluding lease liabilities) 121,882 149,109 188,650
--------- --------- ---------
Lease liability (151,232) (124,766) (137,474)
--------- --------- ---------
Net funds/(debt) (29,350) 24,343 51,176
--------- --------- ---------
Bank loans /Credit facility (15,786) (20,067) (105,475)
--------- --------- ---------
Lease liability (44,104) (38,649) (41,683)
--------- --------- ---------
Financial liabilities - Current (59,890) (58,716) (147,158)
--------- --------- ---------
Bank loans (20,883) (52,882) (15,719)
--------- --------- ---------
Lease liability (107,128) (86,117) (95,791)
--------- --------- ---------
Financial liabilities - Non-current (128,011) (138,999) (111,510)
--------- --------- ---------
14 Provisions
Customer Retirement
contract benefit Property Other Total
provisions obligation provisions provisions provisions
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2021 9,554 23,276 4,939 2,093 39,862
----------- ----------- ----------- ----------- -----------
Amount unused reversed (1,674) - - - (1,674)
----------- ----------- ----------- ----------- -----------
Arising during the period - 823 - 51 874
----------- ----------- ----------- ----------- -----------
Utilised (1,538) - (74) - (1,612)
----------- ----------- ----------- ----------- -----------
Exchange adjustment (317) (1,109) (29) (101) (1,556)
----------- ----------- ----------- ----------- -----------
At 30 June 2021 6,025 22,990 4,836 2,043 35,894
----------- ----------- ----------- ----------- -----------
Current 2,135 - 1,049 65 3,249
----------- ----------- ----------- ----------- -----------
Non-current 3,890 22,990 3,787 1,978 32,645
----------- ----------- ----------- ----------- -----------
6,025 22,990 4,836 2,043 35,894
----------- ----------- ----------- ----------- -----------
Customer contract provision
During the period GBP1.5 million of customer contract provisions
had been utilised in line with individual contract forecasts.
15 Publication of non-statutory accounts
The financial information contained in the Interim Report and
Accounts does not constitute statutory accounts as defined in
section 435 of the Companies Act 2006.
The comparative figures for the financial year ended 31 December
2020 are not the company's statutory accounts for that financial
year. Those accounts have been reported on by the company's auditor
and delivered to the registrar of companies. The report of the
auditor was (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
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END
IR EANNPEEFFEFA
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