TIDMCCC
RNS Number : 4019Y
Computacenter PLC
09 September 2020
Computacenter plc
Incorporated in England
Registration number: 03110569
LEI: 549300XSXUZ1I19DB105
ISIN: GB00BV9FP302
Computacenter plc
Interim results for the six months ended 30 June 2020
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 2020.
Financial Highlights H1 2020 H1 2019 Percentage
Change
Increase/
(Decrease)
Financial Performance
Services revenue (GBP million) 594.4 595.7 (0.2)
Technology Sourcing revenue (GBP
million) 1,867.8 1,831.3 2.0
Revenue (GBP million) 2,462.2 2,427.0 1.5
Adjusted(1) profit before tax
(GBP million) 74.6 53.5 39.4
Adjusted(1) diluted earnings
per share (pence) 46.7 34.5 35.4
Dividend per share (pence) 12.3 10.1 21.8
Profit before tax (GBP million) 72.4 50.8 42.5
Diluted earnings per share (pence) 45.3 33.2 36.4
Cash Position
Cash and cash equivalents (GBP
million) 222.1 114.3
Adjusted net funds/(debt)(3)
(GBP million) 149.1 (3.1)
Net funds/(debt) (GBP million) 24.3 (114.1)
Net cash inflow/(outflow) from
operating activities (GBP million) 47.0 (1.1)
Reconciliation to Adjusted(1) Measures
Adjusted(1) profit before tax (GBP
million) 74.6 53.5
Exceptional and other adjusting items:
Costs related to acquisition (GBP
million) - (0.5)
Amortisation of acquired intangibles
(GBP million) (2.2) (2.2)
Profit before tax (GBP million) 72.4 50.8
Operational Highlights:
-- The Group's total revenues grew 1.5 per cent during the first
half of the year, and by 0.6 per cent in constant currency(2) .
Significant reductions in expenditure from industrial customers
have been offset by new business within the government and
financial services sector. COVID-19 related cost reductions and
improving Services and Technology Sourcing margins has resulted in
an increase in adjusted(1) profit before tax of 39.4 per cent
during the period.
-- The UK saw an increase in revenues of 7.2 per cent as
Technology Sourcing revenues surged to cope with the demand
generated by the COVID-19 crisis. Strong Services margins, due to
increased utilisation and reduced external contractor costs and
improving Technology Sourcing margins have resulted in an increase
in adjusted(1) operating profit of 95.3 per cent during the
period.
-- Germany saw overall revenues decline by 2.8 per cent with
falls in Managed Services and Technology Sourcing partially offset
by another strong performance in Professional Services. The
increase in Professional Services volumes, at higher margins,
coupled with overall margin improvements and static administrative
expenses have resulted in an increase of 15.4 per cent in
adjusted(1) operating profit, on a constant currency(2) basis.
-- France has had a difficult start to the year, being more
impacted by a slow-down of its large industrial private sector
customer base and the downturn in its Services business which
resulted in flat revenues but decreasing gross profits and a
reduction in adjusted(1) operating profit of 55.2 per cent on a
constant currency(2) basis.
-- The USA saw a slowdown in the second quarter with a marked
reduction in activity by its higher-margin mid-market customer base
which resulted in flat revenues for the period overall in constant
currency(2) . Significantly reduced administrative expenses as part
of a broader programme in the USA that began before, but was
accelerated by, the COVID-19 pandemic, have contributed an increase
of $4.3 million in adjusted(1) operating profit for the six months
to 30 June 2020 against a poor comparative period.
The Group has experienced significant operational and financial
impacts from the unprecedented effect of the COVID-19 crisis. All
results in these Interim Report and Accounts 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 CEO's Performance Review contained 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 on within the notes to
the summary financial information contained within this
announcement.
A reconciliation to adjusted(1) measures is provided within the
Group Finance Director's review contained in this announcement.
Further details are provided in note 4 to the summary financial
information contained within this announcement.
Mike Norris, Chief Executive of Computacenter plc,
commented:
'As previously stated, our business has performed well this year
to date and proven to be flexible in these extraordinary times.
While nothing can be taken for granted, it is the Board's view
that, based on current business activity levels, our adjusted(1)
profit before tax for the year is unlikely to be less than GBP180
million. We feel it is important to give specific guidance given
the broad range of market expectations concerning our likely
results.
Obviously, our markets have proved resilient as our customers
have invested in their infrastructure to support their businesses,
they have utilised the skills of our people and we have managed our
cost base.
It is impossible to predict exactly how the world will recover
in 2021, and beyond, and the implications for our customer base. We
do believe that our customers will continue to invest in technology
and that we have built a substantial reseller business with the
largest service capability of any reseller in the world and the
most substantial international footprint which should enable us to
deliver a reliable and consistent business for our customers,
employees and shareholders.'
(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 gain
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 4 to the summary financial information
contained in this announcement.
(2) We evaluate the long-term performance and trends within our
strategic objectives 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. 2020 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 other long-term borrowings and
current asset investments. Following the adoption of IFRS 16 this
measure excludes all finance lease liabilities. A table reconciling
this measure, including the impact of finance lease liabilities, is
provided within note 12 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
020 7353
Matt Low 4200
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 2019 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 2020
Financial performance
The Group's revenues increased by 1.5 per cent to GBP2,462.2
million (H1 2019: GBP2,427.0 million) and were 0.6 per cent higher
in constant currency(2) .
The Group made a profit before tax of GBP72.4 million, an
increase of 42.5 per cent (H1 2019: GBP50.8 million). The Group's
adjusted(1) profit before tax increased by 39.4 per cent to GBP74.6
million (H1 2019: GBP53.5 million) and by 37.9 per cent in constant
currency(2) .
The difference between profit before tax and adjusted(1) profit
before tax relates to the Group's net charge of GBP2.2 million (H1
2019: charge of GBP2.7 million) from exceptional and other
adjusting items. These relate principally to the amortisation of
the acquired intangible assets resulting from the Group's 2018
acquisition of FusionStorm.
With the increase in the Group's profit after tax, the diluted
earnings per share ('EPS') increased by 36.4 per cent to 45.3 pence
for the period (H1 2019: 33.2 pence). Adjusted(1) diluted EPS, the
Group's primary EPS measure, increased by 35.4 per cent to 46.7
pence (H1 2019: 34.5 pence) in the first half of 2020.
The six months of trading to 30 June 2020 have demonstrated 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 flat overall revenues belied the Group's underlying
performance. With a large number of very significant industrial
customers rapidly reducing their IT spend on both equipment and
services, there was significant difficulty in forecasting how the
business would perform as the COVID-19 crisis escalated through the
end of the first quarter of the year. The surge in revenues from
other customers has compensated for this but this could not be
predicted at the beginning of the crisis. In markets where we
operate at scale, notably the UK and Germany, we have been able to
leverage our world-class Integration Centers beyond normal
operating capacities, thereby proving ourselves as one of the few
resellers that could rapidly react to serve customers' needs, as
they transformed from an office-based IT operating environment to a
remote-working environment.
The UK, in particular, has seen very strong demand within
Government and Financial Services, as organisations relied heavily
on the Group to support urgently their Technology Sourcing needs to
enable working from home and other emergency IT responses.
Professional Services in Germany has grown spectacularly against a
very strong comparative period as the business supported customers
transitioning to remote working. This business is one of the key
drivers for the Group as a whole. The US business has shown
considerable improvement, albeit against a weak comparative. The
French business has slowed after a record couple of years, with a
customer base that has reduced spending more than that seen in
Germany and the UK. The International Segment was the only part of
the business that was disappointing in the first half of the year.
Technology Sourcing revenues were impacted as industrial customers
reduced expenditure, whilst Services revenues, driven by lower
volumes, also fell. In the Netherlands and Belgium in particular,
the business suffered from not having sufficient scale in the
market to quickly replace volumes with new customers. Expenditures
to grow the business with additional sales capacity in Switzerland
and new organic sales capacity in Spain continued as planned, which
also contributed to reduced profitability in the period within the
International Segment.
Whilst overall revenues held up in the challenging environment,
margins and profits increased as costs naturally reduced across the
business. Overall Group gross margins increased by 53 basis points
during the first half of the year and administrative expenses were
reduced by 2.6 per cent in constant currency(2) , when compared to
the prior period. A combination of good-quality Technology Sourcing
deals supporting pricing, with lower volumes from lower margin
customers, and a reduction in costs to serve our customers across
the Services business, as we moved to a remote-working environment,
all contributed. As the business moves to a more normal operational
footing we expect costs to return, but at a potentially permanently
lower level than before the COVID-19 crisis. 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.
COVID-19 impact
We are a technology company operating across the globe in
support of our customers, at a time when technology has proven
itself to be a critical mitigation to the disruption of normal
business practices. We have also executed our own business
continuity plans to great effect and remained sufficiently agile to
deal with issues as they arose.
The safety and wellbeing of our staff is our highest priority.
As the COVID-19 crisis intensified, we followed all available
government and scientific guidance and implemented remote-working
for all employees where possible, ensuring that their health and
safety was paramount in our decision-making. We used leading
technology solutions that we were implementing for our customers to
ensure the continued integrity of our working environment, whilst
standing up response teams to ensure the physical and mental
wellbeing of our employees. Remote working has been an unqualified
success, but we believe that, when the time is right, employees
will return to an office environment at least part-time.
At the same time as we were rapidly transitioning nearly our
entire workforce to home working, we were supporting and enabling
our customers to do the same with their employees. The challenge
was immense, and we were pleased to accomplish it with minimal
disruption. Additionally, we have redeployed field engineers to
support our Integration Centers, which have seen a surge in
activity and moved, for a period, to a 24/7 working pattern to meet
demand. We have seen other benefits in utilisation, with previously
on-site or mobile employees able to use time previously spent
travelling to solve issues remotely for our customers, increasing
their billable hours. This has had a material impact on our
Services margins.
The 'near-shore' location strategy for our offshore internal
service providers and Service Centers has proven successful, with
regional workforces able to support customers in the correct time
zone with the right capacity. Locating these centers in areas with
pervasive internet connectivity, both in an office and home working
environment, has meant little to no disruption to our services.
Further, the single worldwide telecommunications system and unified
software toolsets used by our Service Centers has allowed seamless
capacity flows between Service Centers, enabling us to rapidly
adapt to short-term spikes in utilisation from our customer
base.
The Chief Information Officers of our customers have had an
incredibly busy six months, leading their organisations through the
challenges presented by the COVID-19 crisis to quickly transform
their business's IT architecture and ways of working. In
partnership with these leaders, Computacenter has provided the
solutions to these challenges. The performance in the first half,
with resilient revenues, improving margins and a reduced cost base,
reflects both the demand seen by the IT sector and the quality of
our support for our customers, who recognise our ability to respond
fully in a crisis.
At the beginning of the crisis, the Group decided to participate
in various national employee retention schemes. These schemes
primarily supported our operations in the UK, Germany and France,
with minor participation in our smaller markets including Spain,
Belgium, Switzerland and the Netherlands. Over the period we have
had, on average, approximately 1,300 employees supported by one of
the schemes. We are clear that participation in these schemes
allowed Management to avoid otherwise necessary redundancies in
late March and early April, in the face of an unfolding and
unpredictable crisis, whose impact on Computacenter was not fully
known at that point. At the same time Computacenter's CEO, Mike
Norris, and Group Finance Director, Tony Conophy, voluntarily
elected to forego their base salary for the second quarter,
alongside the Founder Non-Executive Directors, Peter Ogden and
Philip Hulme, who waived their Directors' fees for the remainder of
the year.
As the extent of the Group's performance and resilience through
the second quarter became known, we reassessed our participation in
the employee retention schemes. The Group decided to make no
further claim on the UK Job Retention Scheme, following the first
monthly claim made for April 2020. Some UK Employees remained
supported on furlough, at enhanced rates, but entirely at the
Group's expense. In the period to 30 June 2020, the cost to the
Group of furloughed employees' remuneration has been approximately
GBP15 million. Against this, the Group has received approximately
GBP5.4 million in direct government grants as outlined in the
summary financial information included within this announcement. Of
this GBP5.4 million in grants, GBP1.1 million was received from the
UK Government and GBP4.3 million from other European governments.
The Group benefited further from GBP2.8 million in indirect savings
such as reduced social charges and a reduction of GBP1.8 million in
furloughed employee remuneration. Against a normal year, after
reducing the cost of furloughed employee remuneration by the grants
received and other changes outlined above, this has had a residual
net negative impact of approximately GBP5 million. All of these
grants and costs are included in our adjusted(1) results. Following
a further review, the Group has, subsequent to 30 June 2020,
decided to repay the GBP1.1 million received from the UK Government
for the April claim on the Job Retention Scheme and has committed
to make no claim under the Job Retention Bonus scheme. This
proposed repayment is not included in our results to 30 June
2020.
There are 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.
Today, the long-term impact of the COVID-19 crisis remains
unknown. This uncertainty means we could see ongoing volatility
within our markets and worldwide locations. Continued customer
investment in technology has provided short-term growth
opportunities and proven the strength of our business model. We
continue to monitor the impact on the Group and maintain our focus
on controlling costs. Adjusted net funds(3) of GBP149.1 million as
at 30 June 2020, including GBP222.1 million of cash and cash
equivalents, enable a robust platform to manage the business in
support of our customers through challenging market conditions.
Segmental reporting structure changes
Management reviewed the way it reported Segmental performance to
the Board and the Chief Executive Officer, who is the Group's Chief
Operating Decision Maker ('CODM'), during the first half of the
year. As a result of this analysis, from 1 January 2020 the Group
has revised where the results of certain Managed Services contracts
are reported within its operating Segments. The change in Segmental
reporting has no impact on reported Group results.
Operational responsibility for a significant European customer
was transferred from the German to the French business from 1
January 2020. The French Senior Management targets now include the
results from this customer. This has no impact on Group results but
does impact the Segment results, including revenue and
profitability. We have therefore restated the results for the
French and German Segments for the year ended 31 December 2019 and
the period ended 30 June 2019, to assist with understanding the
growth in each business and to ensure period-on-period results are
comparable.
Computacenter USA performs Managed Services work for other
Computacenter entities, on behalf of several key European
contracts. From 1 January 2019, with the creation of the USA
Segment, these revenues were recorded in the USA Segment, where the
associated underlying subsidiary recognises the revenues in its
statutory accounts. Following a review, and to be consistent with
practices across the Group, Management decided to reallocate these
revenues from the USA Segment to the UK, German, French and
International Segments which own the responsibility for the
customer contracts. This reflects better where the portfolio
coordination and operational responsibility lies and where the
benefits should accrue. This treatment also means that for
Segmental analysis, Computacenter USA, within the USA Segment, is
now treated similarly to the remainder of our offshore internal
service provider entities that are grouped within the International
Segment. We have therefore restated the Managed Services revenues
for the year ended 31 December 2019 and the period ended 30 June
2019, to assist with understanding the growth in each business and
to ensure period-on-period comparisons reflect true underlying
growth. This has no impact on Group revenue or on Segmental
profitability, as the margins were previously shared on the same
basis that the revenue now reflects.
This new Segmental reporting structure is the basis on which
internal reports are provided to the Chief Executive Officer, as
the CODM, for assessing performance and determining the allocation
of resources within the Group in accordance with IFRS 8.25.
Segmental performance is measured based on external revenues,
adjusted(1) gross profit, adjusted(1) operating profit and
adjusted(1) profit before tax.
The operating Segments remain unchanged in all other regards
from those reported at 31 December 2019. Central Corporate Costs
continue to be disclosed as a separate column within the Segmental
note.
Further information on this Segmental restatement can be found
in note 5 to the summary financial information included within this
announcement where, to enable comparisons with prior year
performance, historical segment information for the year ended 31
December 2019 and the period ended 30 June 2019 has been restated
in accordance with the revised Segmental reporting structure.
All discussion within this announcement on Segmental results
reflects this revised structure and the resultant prior-year and
prior-period restatements.
Technology Sourcing performance
The Group's Technology Sourcing revenue increased by 2.0 per
cent to GBP1,867.8 million (H1 2019: GBP1,831.3 million) and by 1.1
per cent on a constant currency(2) basis.
The UK Technology Sourcing business has seen exceptional growth,
particularly in the second quarter of the year, driven by workplace
contracts to support our customers' emergency transition to home
working. Rather than cancellation, the crisis has driven a number
of our customers to increase the pace of their technological
change. The strength and scale of our logistics and Configuration
Center capabilities have enabled us to efficiently address this
growth.
In Germany, Technology Sourcing revenue declined, in particular
as automotive and other industrial customers reduced spend through
large framework agreements in response to COVID-19. More
positively, the business benefited from ad hoc procurements to help
customers overcome the crisis, especially from public sector
customers.
The French Technology Sourcing revenue was stable, against an
exceptional prior-period performance, with activity from the
largest customers being higher than expected. The business also
benefited from its ability to expand existing public sector
frameworks. Although revenues from large private sector industrial
accounts declined, there was growth with smaller customers, which
were often less affected by the COVID-19 crisis.
We saw higher than expected activity from our largest Technology
Sourcing customers. We are pleased about our ability to expand
existing public frameworks. At the same time, we saw a reduction in
our large private accounts and a slight growth in some of our
smaller customers who were often less impacted by the crisis.
The USA Technology Sourcing business saw revenues remain flat.
It recorded a solid performance in the first quarter of 2020, as
COVID-19 did not significantly impact the business until mid-March.
There was little customer attrition and the beginning of the year
also benefited strongly from the investments made in 2019, to
establish a formal Partner Management function in the region.
Mid-market customers greatly curtailed their spending in the second
quarter, however.
Overall Group Technology Sourcing margins increased 65 basis
points during the first half of the year, when compared to the
prior period, partially due to customer mix changes.
Services performance
The Group's Services revenue decreased by 0.2 per cent to
GBP594.4 million (H1 2019: GBP595.7 million) and was down 0.9 per
cent on a constant currency(2) basis. Within this, Group
Professional Services revenue increased by 14.0 per cent to
GBP192.0 million (H1 2019: GBP168.4 million), and by 13.2 per cent
on a constant currency(2) basis, whilst Group Managed Services
revenue decreased by 5.8 per cent to GBP402.4 million (H1 2019:
GBP427.3 million), and by 6.4 per cent on a constant currency(2)
basis.
UK Services revenue reduced primarily due to a decline in
Managed Services volumes, which was attributable to contract
attrition and COVID-19 impacts. The pipeline for new opportunities
remains healthy however and the business continues to benefit from
investment in new and improved offerings. Professional Services
revenues were up slightly during the half, which was pleasing given
the constraints on face-to-face working in the first half of the
year. Further activity in the second half of the year is planned,
as customers ramp up investments in their IT estates and need
expert advice on cloud migration, security and infrastructure
improvements to support the new way of working.
German Services revenues have followed a similar but more
pronounced pattern to the UK business. Managed Services has
declined as customer volumes have decreased due to COVID-19.
Significant reductions have been seen particularly in industrial
customers, which experienced full manufacturing site closures and
had little to no opportunity to transition to remote working. The
Professional Services business has seen very strong growth, with
all existing contracted commitments met by our teams working
remotely and with significant increases in utilisation, driven by
time saved not travelling to customer sites. Further demand for our
Professional Services skills emerged during the crisis, to support
new and existing customers with their transition to remote working.
This included a material four-year public sector framework
contract, which has a minimum value of EUR20 million per annum.
Our French Services business saw sharp falls in Professional
Services, with nearly half of our deployable specialists placed on
government job retention schemes as demand fell away due to the
COVID-19 crisis, as the French Professional Services business is
more reliant on onsite activity than the equivalent business in the
UK or Germany. These individuals are now returning to work, as the
order book for consultancy returns to a more normal level. The
Managed Services business performed better than expected following
the loss of a large global outsourcing contract at the end of last
year, the impact of which was partially seen during the first half.
The business has done well to make up the volumes by winning
another significant global contract, which has been successfully
transitioned during the COVID-19 crisis. Other contract extensions
and additions have also materially assisted the recovery in the
Managed Services business.
In the USA, Professional Services revenue fell as COVID-19 led
to delays or cancellation of projects. Mid-market customers, which
generate much of the Professional Services revenue in the USA, was
the weakest business area.
Overall Group Services margins increased by 33 basis points
during the first half of the year, when compared to the prior
period. The reduction of travel costs, lower subcontractor costs
and improved Professional Services utilisation has contributed to
this increase.
Outlook
As previously stated, our business has performed well this year
to date and proven to be flexible in these extraordinary times.
While nothing can be taken for granted, it is the Board's view
that, based on current business activity levels, our adjusted(1)
profit before tax for the year is unlikely to be less than GBP180
million. We feel it is important to give specific guidance given
the broad range of market expectations concerning our likely
results.
Obviously, our markets have proved resilient as our customers
have invested in their infrastructure to support their businesses,
they have utilised the skills of our people and we have managed our
cost base.
It is impossible to predict exactly how the world will recover
in 2021, and beyond, and the implications for our customer base. We
do believe that our customers will continue to invest in technology
and that we have built a substantial reseller business with the
largest service capability of any reseller in the world and the
most substantial international footprint which should enable us to
deliver a reliable and consistent business for our customers,
employees and shareholders.
United Kingdom
Financial performance
Revenues in the UK business increased by 7.2 per cent to
GBP858.8 million (H1 2019: GBP800.8 million).
Technology Sourcing grew strongly in the second quarter, as our
customers accelerated transformation programmes they had already
planned and invested to keep their businesses running during the
COVID-19 pandemic. The product mix was weighted towards workplace
demand, as many organisations moved their staff to working from
home.
To keep our people safe during the pandemic and comply with
government guidelines, we switched most of our employees to remote
and home working. We were able to rapidly re-engineer many of our
ways of working to meet these changing requirements and ensure our
services were unaffected. We also created and launched several new
service solutions, which both existing and new customers quickly
adopted, and provided vital infrastructure and end user support to
over 45 critical national infrastructure organisations.
Professional Services revenue increased during the period, as we
continued to deliver project and consultancy engagements for many
of our customers, despite the difficulties of gaining access to
their premises during lockdown.
Managed Services revenue decreased slightly during the first
half. We saw some contracts come to an end as expected and other
customers also spent less as they adapted to the impact of the
virus. We also reduced service charges for some customers,
reflecting our commitment to nurturing long-term relationships.
We have successfully retained our contract base, as we renewed
and extended existing agreements. We also grew new business,
securing wins across all of our service lines.
We remain committed to attracting, retaining and developing a
diverse and talented workforce. We recruited additional people
during the first half and will continue to grow our workforce
through the remainder of the year.
Adjusted(1) gross profit grew by 20.8 per cent to GBP122.6
million (H1 2019: GBP101.5 million). This performance was above our
initial expectations.
Administrative expenses decreased by 1.7 per cent to GBP76.7
million (H1 2019: GBP78.0 million). Increases in variable pay,
functional changes and investments to broaden our capabilities and
skills were more than offset by savings on travel and other costs
due to COVID-19.
This resulted in adjusted(1) operating profit increasing 95.3
per cent to GBP45.9 million (H1 2019: GBP23.5 million).
The investment in our operating model will make our Professional
Services delivery more agile and help us to convert a strong
pipeline for Managed Services.
Technology Sourcing performance
Technology Sourcing revenue increased by 11.0 per cent to
GBP643.2 million (H1 2019: GBP579.7 million).
Customers increased investment during the period, particularly
in workplace technologies to help them adapt to new ways of working
during COVID-19. The strength and scale of our Integration Center
helped us to meet this demand effectively. We particularly
benefited from large increases in local and central government
spend, to support both remote working and a large number of
nationally important infrastructure initiatives related to
COVID-19. We expect growth in enterprise technology sales during
the second half of the year.
Margins improved during the first half, due to larger volumes
and increased sales of high-value added services such as bespoke
configuration in our Integration Center. This facility has the
scale to support customers nationally and, combined with recent
improvements we have made which make it easier for customers to
order directly through our systems, reflects the operating leverage
we enjoy in the UK market and our investments to improve our
offering. We have also adapted rapidly to offer new higher-value
services, such as shipping directly to the homes of our customers'
employees. Senior management at several customers have praised the
commitment of our people to delivering a high-quality service
during a fast-changing environment.
Technology Sourcing margins grew by 144 basis points compared to
the prior period. This reflected the ongoing improvement in our
relationships with a broad range of established and emerging vendor
partners and a change in product mix. This means that the UK is now
only slightly behind the Technology Sourcing margins seen in our
French and German businesses.
Services performance
Services revenue declined by 2.5 per cent to GBP215.6 million
(H1 2019: GBP221.1 million). This resulted from an increase in
Professional Services revenue of 0.5 per cent to GBP54.9 million
(H1 2019: GBP54.6 million) and a decline in Managed Services
revenue of 3.5 per cent to GBP160.7 million (H1 2019: GBP166.5
million). Our Services revenue performance was in line with
expectations, given the effects of COVID-19.
Despite the challenging conditions, Professional Services
volumes increased, and we see this continuing in the second half of
the year, as COVID-19 related restrictions continue to lift. Our
customers' investment in Public and Multi-Cloud and in Security
services continues to generate both short-term engagements and
longer-term strategic projects.
Managed Services revenue reduced in the period, as some existing
projects came to an end and as a consequence of COVID-19. We were
able to offset much of this impact by quickly switching to services
that address the new way of working for our customers. Our Managed
Services portfolio continues to perform well and we have a strong
pipeline for large, simple services with both existing and new
customers. Our continued investment in central operational and
service management efficiency has improved customer satisfaction
and margin performance.
We have seen additional demand for COVID-related services, to
help reduce the impact on our customers and move them to remote
working. This ensured high utilisation of our services teams
throughout the crisis. Our work to reduce over-capacity within
Professional Services, in preparation for the completion of several
contracts, enabled us to enter the crisis with the right number of
people and an appropriate skillset.
The Services business focused relentlessly on cost throughout
the period, in particular by reducing the use of contractors and by
not replacing employees who left, as we continue to shape the
workforce to meet the near-term challenges. Reduced travel to
customer sites has saved money and freed up time which our people
have spent supporting our customers. This has helped to offset the
cost of under-utilised employees, who remain ready to re-engage as
demand picks up again.
Services margins increased by 346 basis points over the
period.
Germany
Financial performance
Total revenue decreased by 2.8 per cent to EUR966.4 million (H1
2019: EUR994.3 million) and by 2.2 per cent in reported pound
sterling equivalents(2) .
The first half of the year was the most extraordinary and
challenging period in the history of Computacenter Germany, as a
result of the COVID-19 situation and the necessary crisis
management, which overshadowed all other business concerns.
The German business has come through the crisis well, so far,
and the financial figures for the first half show a very good
result. However, the new realities have led to a rethinking of some
aspects of business life, in particular relating to mobile working
and travel and meeting culture.
The longer-term effects on customer relationships and customer
contacts are not clear. The crisis has helped to strengthen many of
our customer relationships, especially among our key larger
customers, and we have received praise from our customers for our
professional support and pragmatic approach. However, new customer
wins have suffered, as these customers have focused on existing
partnerships during the crisis. Even so, not all of our competitors
have succeeded and we have seen some successes with new customers.
We need to observe how customer behaviour continues to change and
how addressing more complex issues onsite with customers can evolve
to function in a remote-collaboration environment.
The crisis has created winners and losers in the German customer
base. The losers are primarily companies in the automotive and
automotive supply industry, which were already challenged before
COVID-19 and whose situation has now deteriorated dramatically. In
addition, some retail companies and the chemical industry have
suffered. The clear winners are the technology companies, the
health industry, insurance companies and the entire public sector.
The demands on our public sector account teams have been
particularly challenging due to the crisis and we have
significantly improved our reputation in this area due to the
capabilities demonstrated in our response to urgent requests for
support.
Computacenter Germany's customer base covers a broad spectrum of
all these industries. On the one hand, we are directly affected by
the automotive crisis, as we serve almost the entire range of
customers here. The closure of customer plants and production
facilities has also prompted us to resort to short-time working, in
order to avoid compulsory redundancies. At peak times we had around
800 employees on short-time working. This has now reduced and will
fall further in the second half. On the other hand, we benefited in
particular from our strong public sector client base, which also
made additional investments in infrastructure during the
crisis.
A survey on the effects of the COVID-19 crisis on the business
activities of Computacenter Germany's Top 100 customers has shown
that only around 23 per cent have been significantly affected by
the crisis. This has also been confirmed in our business
development to date. What we also see, however, is that the
companies affected by the crisis are again using classic
outsourcing methods in order to reduce costs. This includes
extensive asset transfers, employee takeovers and above all global
delivery requirements. For Computacenter, this is both an
opportunity and a risk, and is why the current Managed Services
pipeline is substantial.
Looking ahead, we believe we can still achieve the expectations
we set ourselves at the beginning of the year despite the
circumstances. This is based on a somewhat weaker Technology
Sourcing business and a stronger Professional Services business,
helped by lower administrative costs.
The first half of the year was characterised by a cautious
start, then the emerging COVID-19 crisis and three strong months to
finish the first half. In particular, the positive trend of growing
Professional Services from 2019 was confirmed despite the crisis.
The additional infrastructure requirements that arose at the
beginning of the crisis have boosted the Technology Sourcing
business, while the last two months have shown that customers are
acting more carefully in regard to additional hardware investments.
Our Managed Services business performed in line with expectations,
although there were positive and negative fluctuations within this
business. The cost base benefited from reductions in travel,
meetings and events. Adjusted(1) gross profit grew by 5.1 per cent
to EUR135.3 million (H1 2019: EUR128.7 million) and by 6.0 per cent
in reported pound sterling equivalents(2) .
Total contribution was slightly above the target for the first
half of the year and also showed good year-on-year growth. While we
had to accept a small absolute decline on the Technology Sourcing
side despite higher margins, strong Services growth in particular
led to significant overall contribution growth.
Administrative expenses increased by 1.3 per cent to EUR94.8
million (H1 2019: EUR93.6 million), and by 1.8 per cent in reported
pound sterling equivalents(2) .
Indirect costs increased only slightly compared to the previous
period and were well below target, as a result of reduced travel,
meetings and events. In addition, the indirect headcount was kept
almost flat compared to the previous period.
Adjusted(1) operating profit for the German business increased
by 15.4 per cent to EUR40.5 million (H1 2019: EUR35.1 million) and
by 17.1 per cent in reported pound sterling equivalents(2) .
Taking into account the market conditions described above, we
consider the operating result to be very positive, as it is well
above target and the previous period.
Technology Sourcing performance
Technology Sourcing revenue reduced by 5.6 per cent to EUR655.3
million (H1 2019: EUR694.0 million) and by 5.0 per cent in reported
pound sterling equivalents(2) .
Technology Sourcing margins remained strong and were up by 56
basis points over the same period last year.
Technology Sourcing saw a decline in sales compared to the
previous period, but also a stronger relative margin position. This
was due to weaker COVID-19-related demand from large framework
agreements, especially from customers in the automotive industry.
These frameworks typically do not generate high margins. On the
other hand, we benefited from customers' additional ad hoc
procurements to overcome the crisis, especially in the public
sector. We made every effort to prioritise service to our critical
information infrastructure and security customers in particular,
which was very well received by them.
Services performance
Services revenue grew by 3.6 per cent to EUR311.1 million (H1
2019: EUR300.3 million) and by 4.2 per cent in reported pound
sterling equivalents(2) . This included Professional Services
growth of 29.8 per cent to EUR129.4 million (H1 2019: EUR99.7
million), an increase of 30.7 per cent in reported pound sterling
equivalents(2) , and a Managed Services decline of 9.4 per cent to
EUR181.7 million (H1 2019: EUR200.6 million), a decrease of 9.0 per
cent in reported pound sterling equivalents(2) .
Two different pictures emerge in relation to Services revenue
development. Our Professional Services business showed strong
growth, while our Managed Services business saw a significant
decline. We succeeded in serving all Professional Services
framework agreements and projects, despite a massive switch by
customers towards remote working. Additional customer requirements,
especially at the beginning of the crisis, further boosted growth.
In addition, we won another large framework contract in the public
sector, which guarantees approximately EUR20 million of revenue per
year for at least four years. In Managed Services, COVID-19
resulted in revenue shortfalls with some large customers. This was
mainly caused by plant closures or the significant shift to home
working. Consolidated across both areas, revenues increased
significantly.
A similar picture emerges on the margins side. While we
benefited from growth in Professional Services, the decline in
Managed Services affected the margin position. Despite the use of
government sanctioned reduced-time working, we were not able to
compensate for all revenue shortfalls on the cost side. The use of
reduced-time work prevented redundancies that would otherwise have
been necessary, which is the right approach as we assume that the
needs of these customers will recover. We achieved all our targets
in relation to the critical contracts existing from 2019.
Nevertheless, a new contract won in 2019 is in a critical
transformation phase and requires increased attention. We expect to
have this under control by the end of the year.
Services margins increased by 167 basis points over the
period.
France
Financial performance
Total revenue was flat at EUR346.5 million (H1 2019: EUR345.9
million). In reported pound sterling equivalents(2) , total revenue
was up by 1.4 per cent.
The COVID-19 outbreak is causing widespread concern and economic
hardship for businesses across the globe. Most companies already
have business continuity plans, but those may not fully address the
fast-moving and unknown variables of such an outbreak. Typical
contingency plans are intended to ensure operational effectiveness
following events such as natural disasters, cyber incidents and
power outages, among others.
To support our customers' continuity plans during this period,
we demonstrated agility, flexibility and innovation in order to
adapt our services to circumstances. Whether in the field of
healthcare, industry or essential services for the government, our
teams were present and ensured a very good transition of services.
In this unique context, we have seen several major upheavals in our
ecosystem of public and private sector customers. The large private
sector customer base has suffered the most, notably in sectors such
as transportation, manufacturing, retail and hospitality.
Product distribution in France has been affected quite heavily
in all segments, with a greater impact than in some other European
countries such as the UK and Germany. We are satisfied with our
performance in Technology Sourcing, which remained stable compared
to last year, which was an exceptional year. Nevertheless, the mix
of products distributed over the period saw growth in Workplace and
a fairly significant drop in infrastructure sales which has
affected our total contribution. On the Services side, Professional
Services activities suffered heavily because many projects were
stopped and the employees at customer locations were not all able
to work from home.
Despite government action in implementing the chômage partiel, a
government assistance scheme to support employees unable to work
via a partial unemployment program, the earnings and especially the
profitability of these activities were significantly affected. Our
teams in the Service Centers all switched to home working in less
than 48 hours and adapted to maintain the quality of services for
Managed Services customers.
Overall, despite a stable total revenue performance, the French
business saw a significant impact to its contribution for the first
half.
Overall adjusted(1) gross profit reduced by 13.7 per cent to
EUR35.4 million (H1 2019: EUR41.0 million) and by 12.4 per cent in
reported pound sterling equivalents(2) .
During the same period, we were able to keep our administrative
expenses broadly flat by balancing a reduction in some central
costs such as travel and accommodation, while continuing to invest
in our sales capabilities to support our growth plan.
To continue our development in the modern workplace management
world and in order to allow our customers to build very open
devices strategy, we decided to invest to obtain the Apple
Authorized Enterprise Reseller certification in the first half of
2020. We were awarded the certification by Apple in the second
quarter of the year and have built an Apple practice to expand our
footprint in that new landscape. We continue to invest to get
accredited for the Apple Education reseller programme.
Based on the Cisco Gold Certification we received last year and
our investments to develop our networking business, we have
continued to expand our Networking and Security teams, as our
business has grown significantly over the past few months in this
space. This is also encouraging in anticipation of the BT Services
France acquisition, which is planned to complete by the end of this
year and will reinforce our services capabilities. We have a
dedicated team working on the integration project.
As we anticipate some challenges with a couple of very large
private sector accounts, we need to continue to develop our
customer portfolio targeting large French organisations, to ensure
we can create new opportunities. The business will continue to
recruit sales specialists and business development managers in the
second half of the year, to further support our long-term
development plan and enable us to exploit addressable opportunities
within the marketplace and start leveraging the BT Services France
acquisition in early 2021.
Whilst Management continued to focus on cost control within the
French business, these investments resulted in administrative
expenses reducing by 1.0 per cent to EUR31.1 million (H1 2019:
EUR31.4 million). Administrative expenses increased 0.4 per cent in
reported pound sterling equivalents(2) .
Adjusted(1) operating profit for the French business decreased
by 55.2 per cent to EUR4.3 million (H1 2019: EUR9.6 million), and
by 54.2 per cent in reported pound sterling equivalents(2) .
The strong comparative period means the second half of the year
remains challenging but we are pleased with the business's
resilience, as it continues to develop its breadth of customers, to
increase stability and the potential for growth.
Technology Sourcing performance
Technology Sourcing revenue increased by 0.6 per cent to
EUR268.3 million (H1 2019: EUR266.6 million) and by 1.8 per cent in
reported pound sterling equivalents(2) .
In the first half of the year, we saw higher than expected
activity from our largest Technology Sourcing customers. We are
pleased that our ability to expand existing public frameworks is
benefiting us. At the same time, we saw a reduction in revenue from
our large private sector accounts and some growth from our base of
smaller customers, who were often less affected by the crisis.
As noted earlier, the mix between Workplace and Enterprise
product lines affected our contribution rate in the period.
As usual at this time of year, there is still much work to do to
secure Technology Sourcing business in the second half and
traditionally there is considerable focus on the last quarter of
the year. Despite a very difficult economic climate in France, we
have a strong short-term pipeline and with the recent wins of some
high-volume framework tenders in the public and private sectors, we
are confident about our chances of reproducing the overall
Technology Sourcing revenue achieved in the second half of last
year.
Technology Sourcing margins decreased by 79 basis points, due to
the change in product mix towards higher-value product with more
value-add Technology Sourcing activities.
Services performance
Services revenue decreased by 1.4 per cent to EUR78.2 million
(H1 2019: EUR79.3 million) and was flat in reported pound sterling
equivalents(2) . Professional Services revenue decreased by 14.3
per cent to EUR17.4 million (H1 2019: EUR20.3 million), which was a
decrease of 13.1 per cent in reported pound sterling equivalents(2)
. Managed Services revenue increased by 3.1 per cent to EUR60.8
million (H1 2019: EUR59.0 million), an increase of 4.5 per cent in
reported pound sterling equivalents(2) .
As a direct consequence of the national 'lockdown' in response
to COVID-19 and the subsequent hesitancy for companies to implement
on-site return strategies, our Professional Services activities
were significantly affected, particularly where resources were
supplied on demand to customers in an on-site situation. Almost 50
per cent of our technical resources were involved in the chômage
partiel partial unemployment programme during the second quarter,
with a strong impact on the utilisation rate and revenue. Despite
the unprecedented global situation, we have won more transformation
and deployment projects for the months to come, allowing us to
envisage a slightly less difficult second half of the year but
without resuming the normal level of activities in this area.
In Managed Services, we anticipated the loss of a large global
outsourcing contract at the end of last year, and while the
contract ended in the first half of the year, it generated some
extensions partly linked to COVID-19. At the same time, we won a
new global user support contract, distributed in more than 50
countries, and we have successfully transitioned the service
worldwide during the crisis and the containment period. We are very
proud of the work of our transition team in collaborating well with
the customer and the start is encouraging. We also have several
extensions of scope on some large international accounts, which
should help to reduce the impact on revenue associated with the end
of the contract mentioned above. Finally, after an exemplary move
to home working for our teams, we have to deal with a more
complicated return plan linked to the various health constraints in
each country and the operational conditions for some customers.
In the second half of the year, the new business will not cover
the reduction in the contract base, so we continue to expect a
decrease in our Services revenue for 2020 along with the negative
impact of the COVID-19 crisis on our margins.
Services margins decreased by 436 basis points over the same
period last year, due primarily to the very low usage of our
internal resources and one loss-making contract.
USA
Financial performance
Total revenue was flat at $477.4 million (H1 2019: $477.8
million). In reported pound sterling equivalents(2) , total revenue
was up by 2.2 per cent.
The USA performance was driven by Technology Sourcing, due to
its relative size within the Segment, with revenue remaining flat
in the period. Revenue was affected by the COVID-19 crisis, which
had a material impact in the second quarter. In particular, new
sales order performance fell from over $24 million gross margin in
the first quarter to $18 million in the second quarter of 2020.
This was materially behind plan, being around 25 per cent less than
our original forecast. Particular weakness was seen in the
mid-market customer segment, as multiple customers curtailed
hardware spending in the face of uncertain business conditions.
This was partially offset by the strength of the large enterprise
segment, which saw greater resilience in spend levels particularly
in hyperscale SaaS providers.
Overall Services revenues were flat during the first half of the
year, with particular challenges in the Professional Services
business, as project activity dramatically slowed as customers
either delayed expected spend or cancelled projects while they
responded to COVID-19. Several globally managed customer
engagements went live successfully during the period with support
from the USA Managed Services business and revenue-based headcount
reached an all-time high in the second quarter, as we hired staff
to fulfil new Group contract requirements. The overall business
backlog has remained relatively healthy and gives us some
confidence about our expectations for the second half of the year
in 2020 with further global contracts providing the potential for
further work to be performed in the USA.
Overall adjusted(1) gross profit reduced by 3.7 per cent to
$39.1 million (H1 2019: $40.6 million) and by 1.6 per cent in
reported pound sterling equivalents(2) .
Administrative expenses reduced by 14.9 per cent to $33.1
million (H1 2019: $38.9 million), and were down 13.2 per cent in
reported pound sterling equivalents(2) . There were cost reductions
of more than $1 million in the Managed Service business, as well as
the COVID-19 impact on travel, customer entertainment and corporate
events. Simultaneously, we continued our long-term investment
programmes, including in our new Livermore Integration Center and
deployment of our Group ERP system, which will underpin our future
systems strategy in the region.
Adjusted(1) operating profit for the USA business increased by
252.9 per cent to $6.0 million (H1 2019: $1.7 million), and by
291.7 per cent in reported pound sterling equivalents(2) ,
following a difficult H1 2019. Performance materially improved
versus the prior period, given a combination of cost controls
implemented in 2019 that effectively lowered the break-even point
for the business and above-plan results in vendor rebate
levels.
Overall, the performance in the first half has been challenging
and has been flattered by a relatively easy comparison to H1 2019.
We are cautious regarding the second half, as our new order book is
a leading indicator and has been weaker than expected. We do expect
continued administrative expenses savings that should help offset
some of the volume decline, but we are closely monitoring
utilisation and capacity within our delivery engines.
Technology Sourcing performance
Technology Sourcing revenue increased by 0.7 per cent to $467.7
million (H1 2019: $464.6 million) and by 3.0 per cent in reported
pound sterling equivalents(2) .
The Technology Sourcing business saw a solid performance in the
first quarter of 2020, as COVID-19 did not significantly impact our
business until mid-March. We saw very little customer attrition and
the beginning of the year also benefited strongly from the
investments made in 2019 to establish a formal Partner Management
function in the region. That team has increased rebate performance
by nearly 40 per cent versus the prior year. Our mix of partners
remained broadly the same with our 'go-to-market' focused heavily
on networking and data center technology. It is also worth noting
that we have also successfully ramped up the beginnings of a
workplace practice, including launching two customer engagements in
this space.
USA Technology Sourcing margins increased by 70 basis points
over the period ended 30 June 2020, with the mix of hardware OEM
vendors a key driver of our margins. At a customer segmentation
level, our largest SaaS hyperscale customers continued their spend
but given their scale and size these customers tend to be lower
margin by nature. Greatly curtailed spending by our mid-market
customers in the second quarter also had a negative effect on
margins, as that sector tends to drive a higher margin profile.
Services performance
Services revenue decreased by 26.5 per cent to $9.7 million (H1
2019: $13.2 million) and was down 25.2 per cent in reported pound
sterling equivalents(2) . Professional Services decreased by 34.7
per cent to $6.6 million (H1 2019: $10.1 million), which was a
decrease of 33.3 per cent in reported pound sterling equivalents(2)
. Managed Services revenues were flat at $3.1 million (H1 2019:
$3.1 million) and represent the USA Segment portion of the revenue
recognised from work performed on contracts for Western European
customer accounts that are primarily reported through the European
Segments.
The overall Services performance was a mixed result. Our
Professional Services business contracted, driven by COVID-19
delaying or cancelling previously budgeted technology projects. In
addition, much of the Professional Services business is with our
mid-market customers and that segment was the weakest in the
period. A bright spot remains our rack fabrication business, which
is delivered from our new Integration Center and experienced a
strong first half of the year.
The Managed Services business primarily operates as an internal
service provider to the Group's European Segments who retain
responsibility for the global operation of significant Managed
Services contracts. While the Group's largest customer ended its
contract during the period, and therefore the associated activity
performed in the USA Segment, we were able participate in the
go-live with three new major global contracts during the first
half.
We also continue to invest in training and developing our people
in order to continue scaling up this business, with a combination
of leveraging Group best practices and resources as well as
continuing to support a number of expatriate employees to bring
critical experience to our local market.
Services margins have decreased materially as a result of the
reduction in Professional Services activity and are now 876 basis
points below the overall combined Group Services margin.
International
International Segment
The International Segment comprises a number of trading entities
and offshore Global Service Desk delivery locations.
The trading entities include Computacenter Switzerland,
Computacenter Belgium and Computacenter Netherlands. In addition to
their operational delivery capabilities, these entities have
in-country sales organisations, which enable us to engage with
local customers. During the year, we started to develop a sales and
trading entity in Spain, with offices in Madrid and Barcelona.
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, which have limited
external revenues.
Financial performance
Revenues in the International business decreased by 17.2 per
cent to GBP77.2 million (H1 2019: GBP93.2 million) and by 18.1 per
cent in constant currency(2) .
On a like-for-like basis, revenues declined in each of the
trading entities, broadly following the local market trend of
reduced IT spending due to the COVID-19 crisis. In absolute
numbers, Swiss revenues remained flat but this was due to the
inclusion of a full period of Pathworks' revenues. Pathworks was
acquired in March 2019 and was therefore only included for four
months in H1 2019.
Adjusted(1) gross profit decreased by 27.6 per cent to GBP14.7
million (H1 2019: GBP20.3 million), and by 27.2 per cent in
constant currency(2) .
Belgian business performance declined mainly because of a
reduced contribution in Technology Sourcing. The Belgian business
is traditionally strong in the private sector and has limited
activities in the public sector. As we believe that the public
sector was less affected by the COVID-19 crisis, we faced an extra
challenge in Belgium to keep profitability under control. Services
contributions were less impacted, as we were able to keep a good
level of activity and control personnel costs through government
support.
Our Swiss business performance was mainly impacted by a decline
in Managed Services profitability and a utilisation decline in
Professional Services.
As we knew that the Dutch business would not be able to maintain
the same Service revenues as in 2019, we planned to compensate for
this with increased Technology Sourcing business. Unfortunately,
this did not materialise in the current challenging market
conditions.
Administrative expenses decreased by 7.6 per cent to GBP14.5
million (H1 2019: GBP15.7 million) and by 7.1 per cent in constant
currency(2) .
Our investment plans drove increases in our administrative
expenses that were offset by COVID-19 reductions related to reduced
travel expenditure. The Belgian team increased its sales capacity
significantly in 2019. Towards the end of 2019, we opened a new
regional sales office in St Gallen in Switzerland and we are
gradually growing the local sales and consultancy teams. In early
2020, we started to build a sales team in Spain. This business has
currently onboarded a team of around ten account managers and
specialist salespeople. Their focus is to develop a Spanish sales
pipeline based on leveraging locally some existing international
contracts and the development of local customer relationships. Our
Dutch business is now fully integrated into the Group ERP systems
and the corresponding Group Operating model.
Whilst short-term performance is under pressure, we remain
confident that these investments are the right thing to do, as they
will help us improve our international footprint and profitability
in the long term.
Overall adjusted(1) operating profit decreased by 95.7 per cent
in both actual and constant currency(2) to GBP0.2 million (H1 2019:
GBP4.6 million).
Technology Sourcing performance
Technology Sourcing revenue decreased by 20.3 per cent to
GBP46.6 million (H1 2019: GBP58.5 million) and by 20.9 per cent in
constant currency(2) .
Technology Sourcing business in Belgium and the Netherlands was
not immune to the declining local markets during the COVID-19
crisis. Moreover, we struggled at the start of the year in Belgium
with component shortages from some of our main vendors in the
workplace area. Overall, we have been able to keep margins stable
compared to last year.
Our acquired business in Switzerland continued to deliver solid
results in the Technology Sourcing area, mainly in education and
other public sector customers.
We are encouraged by an improved pipeline for the second half.
We are seeing many investment decisions that were put on hold in
the first half now being approved. Additionally, we see an
important pipeline of public tenders and the implementation of some
framework contracts with large organisations, mainly in the
Netherlands.
Technology Sourcing margins have decreased by 28 basis
points.
Services performance
Services revenue decreased by 11.8 per cent to GBP30.6 million
(H1 2019: GBP34.7 million) and by 13.6 per cent in constant
currency(2) .
Professional Services revenue increased by 88.9 per cent to
GBP3.4 million (H1 2019: GBP1.8 million) and by 78.9 per cent in
constant currency(2) . Managed Services revenue decreased by 17.3
per cent to GBP27.2 million (H1 2019: GBP32.9 million), which was a
decrease of 18.8 per cent in constant currency(2) .
In Belgium, local government support for working time reduction
allowed us to keep our cost base in the Services departments under
control and to keep Services margins healthy, despite a small
revenue decline.
Whilst we also benefited from government support in the
Netherlands and Switzerland, there was less opportunity to align
our Services cost base with the reduced Services income in both
countries.
We have been successful in leveraging Group offerings, mainly
around the mobile workplace. For the second half we have an
improved Services pipeline in all countries. However, much needs to
be done to reach the same level of Services opportunities and
contribution as before the COVID-19 crisis.
Services margins have decreased by 847 basis points.
Group Finance Director's Review
Technology Sourcing growth in the UK and continuing strong
growth of Professional Services volumes in Germany offset revenue
slowdowns elsewhere across the Group, due to the COVID-19 crisis.
The Group's ability to hold overall revenues flat has been more
than pleasing, given the significant reduction of spend seen in a
number of key industrial customers, as they look to preserve cash
and to delay, rather than cancel, required IT investments and
upgrades. We are immensely proud of the way that the business has
responded to replace these volumes with other sales, supporting our
customers in both the private and public sectors through their
migration to a remote-working IT environment.
The revenue performance was supported by increases in gross
margins across all business lines and was driven by our biggest
markets, the UK and Germany. This margin performance was due both
to a changed customer mix within the Technology Sourcing business
and a natural erosion of administrative expenses and costs of goods
sold, benefiting both Technology Sourcing and the Services
businesses. Whilst some of these costs such as travel, fleet and
contractor costs will return over time, when the Group returns to
its pre-COVID-19 mode of operation, we aim to control this to
prevent unnecessary costs returning within certain of these cost
categories and therefore permanently lower the overall cost
base.
The Group result saw significant double-digit increases in
adjusted(1) operating profit across the UK and Germany, more than
compensating for reductions in the French and International
Segments. The USA saw significant growth in profitability, against
a poor comparative period.
Professional Services revenue was very strong 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 is increasingly the leader in this area for the
Group and has proven more resilient to demand fluctuations through
the COVID-19 crisis. There remains significant appetite to increase
the capacity of the local workforce, whilst rolling out developed
skill sets across the Group. The UK Professional Services revenue
was flat, whilst modest decreases were seen elsewhere, mainly due
to the inability to access customer sites.
Managed Services saw revenue reductions across all geographies.
This business's top line has been affected by a number of contracts
which are based on price times quantity, rather than a fixed fee.
As call volumes to our Service Centers surged at the beginning of
the crisis, the field engineer workforce saw significant reductions
in activity due to customer sites being closed. However as revenue
has fallen, margins have improved due to the increased utilisation
of our now remote-working engineers, who no longer have to spend
otherwise billable time travelling to customer sites.
A reconciliation to adjusted(1) measures is provided below.
Further details are provided in note 4 to the summary financial
information included within this announcement, adjusted
measures.
Reconciliation to adjusted(1) measures for the period ended 30
June 2020
Amortisation Adjusted(1)
Interim of acquired Utilisation Exceptionals interim
results intangibles of deferred and others results
GBP'000 GBP'000 tax 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
----------- ------------ ------------ ------------ -----------
Reconciliation to adjusted(1) measures for the period ended 30
June 2019
Amortisation Adjusted(1)
Interim of acquired Utilisation Exceptionals interim
results intangibles of deferred and others results
GBP'000 GBP'000 tax GBP'000 GBP'000 GBP'000
------------ ------------ ------------
Revenue 2,427,014 - - - 2,427,014
----------- ------------ ------------ ------------ -----------
Cost of sales (2,126,523) - - - (2,126,523)
----------- ------------ ------------ ------------ -----------
Gross profit 300,491 - - - 300,491
----------- ------------ ------------ ------------ -----------
Administrative expenses (246,663) 2,175 - 79 (244,409)
----------- ------------ ------------ ------------ -----------
Operating profit 53,828 2,175 - 79 56,082
----------- ------------ ------------ ------------ -----------
Finance income 992 - - - 992
----------- ------------ ------------ ------------ -----------
Finance costs (3,971) - - 400 (3,571)
----------- ------------ ------------ ------------ -----------
Profit before tax 50,849 2,175 - 479 53,503
----------- ------------ ------------ ------------ -----------
Income tax expense (13,002) (570) 275 (918) (14,215)
----------- ------------ ------------ ------------ -----------
Profit for the period 37,847 1,605 275 (439) 39,288
----------- ------------ ------------ ------------ -----------
Profit before tax
The Group's profit before tax increased by 42.5 per cent to
GBP72.4 million (H1 2019: GBP50.8 million). Adjusted(1) profit
before tax increased by 39.4 per cent to GBP74.6 million (H1 2019:
GBP53.5 million) and by 37.9 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 GBP2.2 million (H1
2019: net costs of GBP2.7 million) from exceptional and other
adjusting items, which is principally the amortisation of acquired
intangibles as a result of the acquisition of FusionStorm on 30
September 2018.
Profit for the period
The profit for the period increased by 37.6 per cent to GBP52.0
million (H1 2019: GBP37.8 million). The adjusted(1) profit for the
period increased by 36.4 per cent to GBP53.6 million (H1 2019:
GBP39.3 million) and by 34.3 per cent in constant currency(2) .
Net finance charge
Net finance charge in the period amounted to GBP2.7 million (H1
2019: GBP3.0 million). The charge includes GBP2.3 million of
interest charged on lease liabilities (H1 2019: GBP1.9 million). A
further GBP0.5 million of cost relates to interest on the term loan
drawn down for the FusionStorm acquisition (H1 2019: GBP1.0
million), with GBP0.2 million of cost on the term loan for the
Kerpen facility (H1 2019: GBP0.1 million). In the prior period, the
charge included GBP0.1 million of cost for the unwinding of the
discount on the deferred consideration for the purchase of
TeamUltra and cITius AG (H1 2020: nil). The H1 2019 charge also
included exceptional interest costs of GBP0.4 million relating to
the unwinding of the discount on the deferred consideration for the
purchase of FusionStorm (H1 2020: nil), which was excluded on an
adjusted(1) basis.
In addition to the items above, net finance income of GBP0.2
million was recorded (H1 2019: GBP0.4 million). On an adjusted(1)
basis, the net finance cost was GBP2.7 million during the period
(H1 2019: GBP2.6 million).
Taxation
The tax charge was GBP20.4 million (H1 2019: GBP13.0 million) on
profit before tax of GBP72.4 million (H1 2019: GBP50.8 million).
This represents a tax rate of 28.2 per cent (H1 2019: 25.6 per
cent).
In the first half of 2019, a tax credit of GBP0.9 million (H1
2020: nil) was recorded due to post-acquisition activity in
FusionStorm, related to the transaction, which resulted in an
in-year tax benefit in that period.
The tax credit related to the GBP2.2 million amortisation of
acquired intangibles primarily recognised as a result of the
FusionStorm acquisition was GBP0.6 million (H1 2019: GBP0.6
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 GBP21.0 million
(H1 2019: GBP14.2 million), on an adjusted(1) profit before tax of
GBP74.6 million (H1 2019: GBP53.5 million). The effective tax rate
(ETR) was therefore 28.1 per cent (H1 2019: 26.6 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 the increase in the
German cash tax rate, which has risen due to the final part of the
German tax losses being utilised during the period. The utilisation
of the asset in the prior period of GBP0.3 million reduced the tax
rate by 0.5 per cent but was considered to be outside of our
adjusted(1) tax measure.
The table below reconciles the tax charge to the adjusted(1) tax
charge for the period ended 30 June 2020.
H1 2020 H1 2019 Year 2019
GBP'000 GBP'000 GBP'000
Tax charge 20,394 13,002 39,397
-------- -------- ---------
Adjustments to exclude:
-------- -------- ---------
Utilisation of German deferred tax assets - (275) (733)
-------- -------- ---------
Exceptional tax items - 879 839
-------- -------- ---------
Tax on amortisation of acquired intangibles 592 570 1,149
-------- -------- ---------
Tax on exceptional items - 39 39
-------- -------- ---------
Adjusted(1) tax charge 20,986 14,215 40,691
-------- -------- ---------
ETR 28.2% 25.6% 27.9%
-------- -------- ---------
Adjusted(1) ETR 28.1% 26.6% 27.8%
-------- -------- ---------
Exceptional and other adjusting items
The net loss from exceptional and other adjusting items in the
period was GBP1.6 million (H1 2019: loss of GBP1.5 million).
Excluding the tax items noted above, which resulted in a gain of
GBP0.6 million (H1 2019: gain of GBP1.2 million), the profit before
tax impact was a net loss from exceptional and other adjusting
items of GBP2.2 million (H1 2019: loss of GBP2.7 million).
There were no exceptional items in the period to 30 June 2020.
An exceptional loss during the prior period of GBP0.1 million
resulted from costs directly relating to the acquisition of
FusionStorm. A further GBP0.4 million relating to the unwinding of
the discount on the deferred consideration for the purchase of
FusionStorm was also removed from the adjusted(1) net finance
expense and classified as exceptional interest costs in the prior
period (H1 2020: nil).
We have continued to exclude the effect of amortisation of
acquired intangible assets in calculating our adjusted(1) results.
Amortisation of intangible assets is non-cash 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 GBP2.2 million (H1
2019: GBP2.2 million), nearly all related to the amortisation of
the intangibles acquired as part of FusionStorm.
Earnings per share
Diluted earnings per share increased by 36.4 per cent to 45.3
pence (H1 2019: 33.2 pence). Adjusted(1) diluted earnings per share
increased by 35.4 per cent to 46.7 pence (H1 2019: 34.5 pence).
H1 2020 H1 2019 Year 2019
Basic weighted average number of shares (excluding
own shares held) (no.'000) 112,930 112,616 112,514
------- ------- ---------
Effect of dilution:
------- ------- ---------
Share options (GBP'000) 1,707 1,215 1,655
------- ------- ---------
Diluted weighted average number of shares (GBP'000) 114,637 113,831 114,169
------- ------- ---------
Profit for the period attributable to equity holders
of the Parent (GBP'000) 51,987 37,847 101,655
------- ------- ---------
Basic earnings per share (pence) 46.0 33.6 90.3
------- ------- ---------
Diluted earnings per share (pence) 45.3 33.2 89.0
------- ------- ---------
Adjusted(1) profit for the period attributable
to equity holders of the Parent (GBP'000) 53,579 39,288 105,654
------- ------- ---------
Adjusted(1) basic earnings per share (pence) 47.4 34.9 93.9
------- ------- ---------
Adjusted(1) diluted earnings per share (pence) 46.7 34.5 92.5
------- ------- ---------
Dividend
The Group announced on 23 April 2020 that as a result of the
COVID-19 crisis, the previously proposed 2019 final dividend would
not be paid.
Whilst the Group's cash position at the time was strong and
trading was in-line with our expectations, we continued to explore
all opportunities to maintain cashflow and preserve cash balances,
in light of the heightening uncertainty about the scale and
duration of the macroeconomic impact of COVID-19. The Group has
received and approved a number of requests from customers for
extended payment terms and continues to look for ways to support
the short-term cashflow of smaller customers or those that have
been materially affected by the impact of COVID-19.
Accordingly, the Board believed at the time of the announcement
that it was prudent not to pay a final dividend in respect of the
financial year ended 31 December 2019. Resolution 4 set out in the
Notice of Annual General Meeting 2020 was therefore not put to a
vote at the AGM and the 2019 final dividend was not paid.
The Board recognises the importance of dividends to shareholders
and the Group prides itself on a long track record of paying
dividends and other special one-off in nature cash returns. The
Group continues to monitor the COVID-19 crisis and the resultant
cash flow implications. However, with the results for the period to
30 June 2020 and the corresponding cash flow performance, the Board
now considers it appropriate to resume distributing cash to
shareholders by returning to the Group's normal interim and
full-year dividend cycle.
We are therefore pleased to announce an interim dividend of 12.3
pence per share (H1 2019: 10.1 pence per share). Whilst the 2019
full-year dividend was not paid, we have continued with our normal
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 23 October 2020. The dividend record date is Friday
25 September 2020, and the shares will be marked ex-dividend on
Thursday 24 September 2020.
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 GBP12.9
million, an increase of 8.4 per cent (H1 2019: GBP11.9 million).
Within this:
-- Board expenses, related public company costs and costs
associated with Group Executive members not aligned to a specific
geographic trading entity were slightly reduced at GBP3.3 million
(H1 2019: GBP3.4 million);
-- share-based payment charges associated with the Group
Executive members identified above, including the Group Executive
Directors, increased from GBP1.1 million in H1 2019 to GBP1.3
million in H1 2020, due to the increased cost of Computacenter plc
ordinary shares and the overall increased performance of the Group;
and
-- strategic corporate initiatives increased from GBP7.4 million
in H1 2019 to GBP8.3 million in H1 2020, primarily due to greater
spend on projects designed to increase capability and therefore
competitive position, enhance productivity or strengthen systems
which underpin the Group.
Cashflow
The Group delivered an operating cash inflow of GBP47.0 million
for the period to 30 June 2020 (H1 2019: GBP1.1 million
outflow).
There are 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.
Capital expenditure in the period was GBP13.2 million (H1 2019:
GBP18.9 million), with the decrease primarily relating to the
investment in our German headquarters in the prior period. The
current period expenditure represents other investments in IT
equipment and software tools, to enable us to deliver improved
service to our customers.
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. The
Group had no debt factoring at the end of the year outside the
normal course of business. 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 2020 is GBP43.5 million (31
December 2019: GBP33.8 million).
Cash and cash equivalents and net funds/(debt)
Cash and cash equivalents as at 30 June 2020 were GBP222.1
million, compared to GBP119.3 million at 30 June 2019. Cash and
cash equivalents increased by GBP4.2 million from GBP217.9 million
as at 31 December 2019.
Net funds as at 30 June 2020 was GBP24.3 million, compared to
net debt of GBP114.1 million as at 30 June 2019 and net funds of
GBP20.3 million as at 31 December 2019.
Adjusted net funds(3) as at 30 June 2020 was GBP149.1 million,
compared to adjusted net debt(3) of GBP3.1 million as at 30 June
2019 and adjusted net funds(3) of GBP137.1 million as at 31
December 2019.
Net funds/(debt) as at 30 June 2020, 30 June 2019 and 31
December 2019 were as follows:
H1 2020 H1 2019 Year 2019
GBP'000 GBP'000 GBP'000
Cash and short-term deposits 222,058 114,314 217,881
--------- --------- ---------
Cash and cash equivalents 222,058 114,314 217,881
--------- --------- ---------
Current asset investments - 5,000 -
--------- --------- ---------
Bank loans (72,948) (122,442) (80,772)
--------- --------- ---------
Adjusted net funds/(debt)(3) (excluding lease liabilities) 149,110 (3,128) 137,109
--------- --------- ---------
Lease liabilities (124,767) (111,003) (116,766)
--------- --------- ---------
Net funds/(debt) 24,343 (114,131) 20,343
--------- --------- ---------
For a full reconciliation of net funds and adjusted net funds(3)
, see note 12 to the summary financial information included within
this announcement, net funds.
The Group had two specific term loans in place throughout 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 is on a
seven-year repayment cycle, with a renewal of the loan facility due
on 30 September 2021. The Group had intended to take advantage of
stronger than anticipated cash generation to make an unplanned
repayment of GBP20 million of this loan during the period, in
addition to the unplanned repayment of GBP30 million in the second
half of 2019. However, the Group elected to retain the balance as
cash at this time, as part of a wider cash-preservation strategy.
As at 30 June 2020, GBP48.8 million remained of the loan (H1 2019:
GBP93.3 million).
The Group also has a specific term loan for the build and
purchase of our German headquarters and Integration Center in
Kerpen, which stood at GBP23.9 million at 30 June 2020 (30 June
2019: GBP28.6 million).
The Group excludes finance lease liabilities from its non-GAAP
adjusted net funds(3) measure, due to the distorting effect of the
capitalised lease liabilities on the Group's overall liquidity
position under the IFRS 16 accounting standard.
There were no interest-bearing trade payables as at 30 June 2020
(30 June 2019: nil).
The Group's adjusted net funds(3) position contains no current
asset investments (30 June 2019: GBP5 million).
Currency
The Group reports its results in pounds sterling. The ongoing
weakness in the value of sterling against most currencies during
the first half of 2020, in particular the euro, continued to
benefit 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 2019.
Restating the first half of 2019 at 2020 exchange rates would
increase H1 2019 revenue by approximately GBP19.8 million and H1
2019 adjusted(1) profit before tax by approximately GBP0.6
million.
If the 30 June 2020 spot rates were to continue through the
remainder of 2020, the impact of restating 2019 at 2020 exchange
rates would be to increase 2019 revenue by approximately GBP58.5
million and 2019 adjusted(1) profit before tax by approximately
GBP1.9 million.
Planning for the United Kingdom exiting the European Union
Computacenter's target clients are large corporate customers and
large Government departments. We operate in four principal
geographies, the UK, Germany, France and the USA. This allows us to
manage European Union (EU) requirements from our EU locations and
we have a long history of trading with the subsidiaries of large
global Western European headquartered organisations, in many
diverse locations across the world. Therefore, the ability to
export to and import from multiple countries, with the related
systems requirements, is already functioning across the
business.
As described in our 2019 Annual Report and Accounts, there
remains considerable uncertainty around the structure of the future
trading relationship between the UK and EU, following the UK's
legal departure from the EU on 31 January 2020, which continues to
make it difficult to develop specific plans for the various
potential outcomes. However, we established a Committee for
Planning for the United Kingdom exiting the European Union in 2017,
to consider the key risks and changes that may be required, and
work continues to prepare the Group for a range of scenarios.
We are not alone in our sector in facing these challenges. A
number of our European competitors have strong presences within the
EU and sell from this base into the UK. Equally, a number of our
global competitors have their European headquarters in the UK and
address the EU market from there. Once the details of the trade
deal following the UK's departure from EU are known, we will work
with our major Technology Providers to address any residual
concerns they may have about end-customers currently serviced by
other resellers with single country operations or those stranded on
either side of the UK-EU border. It is likely that there will be
additional investment required in IT systems to manage the
transition. Whilst this will be a cost to us it will also be an
opportunity, as some customers may need to increase investment in a
similar manner.
We have already reviewed the changes, and proposed changes, by
our major vendors to manage supply into the UK in the event of a
no-deal Brexit. We have implemented changes with two major UK
customers where goods destined for EU 27 countries will be shipped
from our German Integration Center rather than our UK Integration
Center.
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 63 to 68 of the 2019 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 2019 Annual Report and Accounts. Our risk
management approach operated effectively in the six months to 30
June 2020, 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
2020 and signed on its behalf by:
MJ Norris FA Conophy
Chief Executive Group Finance
Officer 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
by the EU;
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure 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 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.
Mike Norris Tony Conophy
Chief Executive Group Finance
Officer Director
Consolidated Income Statement
For the six months ended 30 June 2020
H1 2020 H1 2019 Year 2019
Note GBP'000 GBP'000 GBP'000
Revenue 5 2,462,184 2,427,014 5,052,779
---- ----------- ----------- -----------
Cost of sales (2,144,385) (2,126,523) (4,389,665)
---- ----------- ----------- -----------
Gross profit 317,799 300,491 663,114
---- ----------- ----------- -----------
Administrative expenses (242,685) (246,663) (516,090)
---- ----------- ----------- -----------
Operating profit 75,114 53,828 147,024
---- ----------- ----------- -----------
Finance income 324 992 980
---- ----------- ----------- -----------
Finance costs (3,030) (3,971) (7,046)
---- ----------- ----------- -----------
Profit before tax 72,408 50,849 140,958
---- ----------- ----------- -----------
Income tax expense (20,394) (13,002) (39,397)
---- ----------- ----------- -----------
Profit for the period/year 52,014 37,847 101,561
---- ----------- ----------- -----------
Attributable to:
---- ----------- ----------- -----------
Equity holders of the Parent 51,987 37,847 101,655
---- ----------- ----------- -----------
Non-controlling interests 27 - (94)
---- ----------- ----------- -----------
Profit for the period/year 52,014 37,847 101,561
---- ----------- ----------- -----------
Earnings per share:
---- ----------- ----------- -----------
- basic for profit for the period/year 10 46.0p 33.6p 90.3p
---- ----------- ----------- -----------
- diluted for profit for the period/year 10 45.3p 33.2p 89.0p
---- ----------- ----------- -----------
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2020
H1 2020 H1 2019 Year 2019
GBP'000 GBP'000 GBP'000
Profit for the period/year 52,014 37,847 101,561
-------- -------- ---------
Items that may be reclassified to Consolidated
Income Statement:
-------- -------- ---------
(Loss)/gain arising on cash flow hedge, net of
amount transferred to Consolidated Income Statement (2,554) 263 (915)
-------- -------- ---------
Income tax effect 510 (51) 176
-------- -------- ---------
(2,044) 212 (739)
-------- -------- ---------
Exchange differences on translation of foreign
operations 24,079 (392) (18,175)
-------- -------- ---------
22,035 (180) (18,914)
-------- -------- ---------
Items not to be reclassified to Consolidated Income
Statement:
-------- -------- ---------
Remeasurement of defined benefit plan - - (786)
-------- -------- ---------
Other comprehensive income for the period/year,
net of tax 22,035 (180) (19,700)
-------- -------- ---------
Total comprehensive income for the period/year 74,049 37,667 81,861
-------- -------- ---------
Attributable to:
-------- -------- ---------
Equity holders of the Parent 74,022 37,667 81,956
-------- -------- ---------
Non-controlling interests 27 - (95)
-------- -------- ---------
Total comprehensive income for the period/year 74,049 37,667 81,861
-------- -------- ---------
Consolidated Balance Sheet
As at 30 June 2020
H1 2020 H1 2019 Year 2019
GBP'000 GBP'000 GBP'000
Non-current assets
--------- --------- ---------
Property, plant and equipment 222,261 213,296 212,325
--------- --------- ---------
Intangible assets 180,560 188,169 175,670
--------- --------- ---------
Investment in associate 58 57 54
--------- --------- ---------
Deferred income tax assets 9,508 9,364 9,204
--------- --------- ---------
Prepayments 4,231 2,787 3,520
--------- --------- ---------
416,618 413,673 400,773
--------- --------- ---------
Current assets
--------- --------- ---------
Inventories 153,214 126,144 122,189
--------- --------- ---------
Trade and other receivables 826,775 841,781 996,462
--------- --------- ---------
Prepayments 92,053 86,095 82,315
--------- --------- ---------
Accrued income 112,951 105,310 94,030
--------- --------- ---------
Derivative financial instruments 1,298 4,027 3,218
--------- --------- ---------
Current asset investments - 5,000 -
--------- --------- ---------
Cash and short-term deposits 222,058 114,314 217,881
--------- --------- ---------
1,408,349 1,282,671 1,516,095
--------- --------- ---------
Total assets 1,824,967 1,696,344 1,916,868
--------- --------- ---------
Current liabilities
--------- --------- ---------
Trade and other payables 797,303 782,685 978,220
--------- --------- ---------
Deferred income 179,969 147,972 174,258
--------- --------- ---------
Financial liabilities 58,716 54,435 56,606
--------- --------- ---------
Derivative financial instruments 1,924 769 1,707
--------- --------- ---------
Income tax payable 45,045 34,146 39,278
--------- --------- ---------
Provisions 4,564 8,240 7,703
--------- --------- ---------
1,087,521 1,028,247 1,257,772
--------- --------- ---------
Non-current liabilities
--------- --------- ---------
Financial liabilities 138,999 179,010 140,932
--------- --------- ---------
Provisions 15,280 13,470 13,982
--------- --------- ---------
Deferred income tax liabilities 11,385 12,391 11,698
--------- --------- ---------
165,664 204,871 166,612
--------- --------- ---------
Total liabilities 1,253,185 1,233,118 1,424,384
--------- --------- ---------
Net assets 571,782 463,226 492,484
--------- --------- ---------
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 (107,876) (110,068) (113,563)
--------- --------- ---------
Translation and hedging reserves 36,063 32,761 14,028
--------- --------- ---------
Retained earnings 555,477 452,347 503,928
--------- --------- ---------
Shareholders' equity 571,833 463,209 492,562
--------- --------- ---------
Non-controlling interests (51) 17 (78)
--------- --------- ---------
Total equity 571,782 463,226 492,484
--------- --------- ---------
Approved by the Board on 8 September 2020.
MJ Norris FA Conophy
Chief Executive Group Finance
Officer Director
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2020
Attributable to equity holders of the
Parent
Issued Capital Own Translation Non-
share Share redemption shares and hedging Retained Shareholder'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
2019 9,270 3,942 74,957 (113,474) 32,941 440,119 447,755 17 447,772
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Profit for the
period - - - - - 37,847 37,847 - 37,847
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Other
comprehensive
income - - - - (180) - (180) - (180)
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Total
comprehensive
income - - - - (180) 37,847 37,667 - 37,667
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Cost of
share-based
payments - - - - - 3,095 3,095 - 3,095
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Tax on
share-based
payments - - - - - 565 565 - 565
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Exercise of
options - - - 6,637 - (4,913) 1,724 - 1,724
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Purchase of
own
shares - - - (3,231) - - (3,231) - (3,231)
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Equity
dividends - - - - - (24,366) (24,366) - (24,366)
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
At 30 June
2019 9,270 3,942 74,957 (110,068) 32,761 452,347 463,209 17 463,226
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Profit for the
period - - - - - 63,808 63,808 (94) 63,714
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Other
comprehensive
income - - - - (18,733) (786) (19,519) (1) (19,520)
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Total
comprehensive
income - - - - (18,733) 63,022 44,289 (95) 44,194
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Cost of
share-based
payments - - - - - 3,680 3,680 - 3,680
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Tax on
share-based
payments - - - - - 1,225 1,225 - 1,225
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Exercise of
options - - - 9,161 - (5,158) 4,003 - 4,003
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Purchase of
own
shares - - - (12,656) - - (12,656) - (12,656)
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Asset
Reunification - - - - - 210 210 - 210
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Equity
dividends - - - - - (11,398) (11,398) - (11,398)
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
At 31 December
2019 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
------- -------- ---------- --------- ----------- --------- ------------- ----------- --------
Consolidated Cash Flow Statement
For the six months ended 30 June 2020
H1 2020 H1 2019 Year 2019
GBP'000 GBP'000 GBP'000
Operating activities
---------- --------- ---------
Profit before tax 72,408 50,849 140,958
---------- --------- ---------
Net finance cost 2,706 2,978 6,066
---------- --------- ---------
Depreciation of property, plant and equipment (excluding
right-of-use assets) 11,368 10,556 21,456
---------- --------- ---------
Depreciation of right-of-use assets 22,182 - 40,266
---------- --------- ---------
Amortisation of intangible assets 5,712 5,586 11,543
---------- --------- ---------
Share-based payments 3,799 3,095 6,775
---------- --------- ---------
Loss on disposal of intangibles 7 - 116
---------- --------- ---------
(Profit)/loss on disposal of property, plant and
equipment (37) 11 347
---------- --------- ---------
Net cash flow from inventories (23,251) (26,373) (27,422)
---------- --------- ---------
Net cash flow from trade and other receivables
(including contract assets) 191,026 306,584 136,682
---------- --------- ---------
Net cash flow from trade and other payables (including
contract liabilities) (223,278) (326,633) (108,799)
---------- --------- ---------
Net cash flow from provisions 3,757 (5,114) 10,670
---------- --------- ---------
Other adjustments (3,282) (4,611) (2,414)
---------- --------- ---------
Cash generated from operations 63,117 16,928 236,244
---------- --------- ---------
Income taxes paid (16,135) (18,054) (34,231)
---------- --------- ---------
Net cash flow from operating activities 46,982 (1,126) 202,013
---------- --------- ---------
Investing activities
---------- --------- ---------
Interest received 490 992 980
---------- --------- ---------
Increase in current asset investments - (5,000) -
---------- --------- ---------
Acquisition of subsidiaries, net of cash acquired - (2,865) 6,116
---------- --------- ---------
Purchases of property, plant and equipment (11,210) (8,905) (30,132)
---------- --------- ---------
Purchases of intangible assets (1,990) (7,108) (8,737)
---------- --------- ---------
Proceeds from disposal of property, plant and equipment/Intangibles 219 211 1,009
---------- --------- ---------
Net cash flow from investing activities (12,491) (22,675) (30,764)
---------- --------- ---------
Financing activities
---------- --------- ---------
Interest paid (929) (3,971) (3,318)
---------- --------- ---------
Interest expense on lease liabilities (2,267) - (3,728)
---------- --------- ---------
Dividends paid to equity shareholders of the parent - (24,366) (35,764)
---------- --------- ---------
Asset reunification - - 210
---------- --------- ---------
Proceeds from share issues 1,033 1,724 5,727
---------- --------- ---------
Purchase of own shares - (3,231) (15,887)
---------- --------- ---------
Payment of lease liabilities (23,424) (19,401) (42,346)
---------- --------- ---------
Repayment of loans (9,725) (9,644) (51,755)
---------- --------- ---------
New borrowings 287 - -
---------- --------- ---------
Net cash flow from financing activities (35,025) (58,889) (146,861)
---------- --------- ---------
(Decrease)/increase in cash and cash equivalents (534) (82,690) 24,388
---------- --------- ---------
Effect of exchange rates on cash and cash equivalents 4,711 (3,438) (6,949)
---------- --------- ---------
Cash and cash equivalents at the beginning of the
period/year 217,881 200,442 200,442
---------- --------- ---------
Cash and cash equivalents at the end of the period/year 222,058 114,314 217,881
---------- --------- ---------
Notes to the Consolidated Financial Statements
For the six months ended 30 June 2020
1 Corporate information
The Interim Condensed Consolidated Financial Statements
(Financial Statements) of the Group for the six months ended 30
June 2020 were authorised for issue in accordance with a resolution
of the Directors on 8 September 2020. 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 2020
have been prepared in accordance with International Accounting
Standard 34 'Interim Financial Reporting', as adopted by the
European Union. 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 2019 Annual Report and
Accounts which have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union.
The Financial Statements are presented in pound sterling (GBP)
and all values are rounded to the nearest thousand (GBP'000) except
when otherwise indicated.
During the six months ended 30 June 2020 and the subsequent
period up to the date of approval of the Financial Statements, the
COVID-19 pandemic has caused unprecedented changes to the way that
business is conducted with considerable disruption to global
economic patterns and local business performance. The pandemic
situation, as it impacts the Group's trading performance and
operational requirements, remains under ongoing review by the
Directors and Senior Management. Further discussion in relation to
COVID-19 is included in the Chief Executive Officer's Performance
Review included within this announcement.
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. 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 22 July 2020. This reforecast of the first year of the Plan has
been updated into the Plan alongside a revision of cashflow
assumptions for the year. The Plan is subject to rigorous downside
sensitivity analysis which involves flexing a number of the main
assumptions underlying the forecast. 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 potential impact of the principal risks and uncertainties,
as set out on pages 63 to 68 of the 2019 Annual Report and
Accounts, is then applied to the sensitised Plan. This assessment
includes only those risks and uncertainties that, individually or
in plausible combination, would threaten the Group's business
model, future performance, solvency or liquidity over the
assessment period and which are considered to be severe but
reasonable scenarios. It also takes into account an assessment of
how the risks are managed and the effectiveness of any mitigating
actions.
The combined effect of the potential occurrence of several of
the most impactful risks and uncertainties is then compared to the
cash position generated throughout the sensitised three-year plan,
to assess whether the business will be able to continue in
operation. 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 2020, due to a worsening
impact on our customers from the COVID-19 crisis. This sensitivity
analysis models a general prolonged market downturn scenario that
represents the 'worst-case' impact from COVID-19 crisis.
Our cash and borrowing capacity provides sufficient funds to
meet the foreseeable needs of the Group. At 30 June 2020, the Group
had cash and cash equivalents of GBP222.1 million. In addition, the
Group has in place a three-year committed facility of GBP60 million
that was originally entered into during 2013 for a value of GBP40
million and has never been drawn upon.
The Group has a resilient balance sheet position, with net
assets of GBP571.8 million as at 30 June 2020. The Group made a
profit after tax of GBP52.0 million, and delivered net cash flows
from operating activities of GBP47.0 million, for the period ended
30 June 2020.
As the analysis continues to show a strong forecast cash
position, even under the severe economic conditions modelled in the
sensitivity scenario, 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 this announcement and therefore have
prepared the financial statements on a going concern basis.
3 Significant accounting policies
The accounting policies adopted are consistent with those of the
previous financial year as disclosed in the 2019 Annual Report and
Accounts except for IAS 20 - Accounting for government grants and
disclosure of government assistance.
IAS 20 - Accounting for government grants and disclosure of
government assistance
IAS 20 defines government grants as assistance by government in
the form of transfers of resources to an entity in return for past
or future compliance with certain conditions relating to the
operating activities of the entity. If the conditions are met, then
a company recognises government grants in profit or loss on a
systematic basis and in line with its recognition of the expenses
that the grants are intended to compensate.
The Group has recognised unconditional government grants
relating to short-term schemes introduced by governments within
Europe, including the UK, Germany, France and the Netherlands as a
result of COVID-19 crisis for the purpose of protecting employment.
These grants compensate the Group for expenses incurred and are
recognised in the Consolidated Income Statement on a systematic
basis in the periods in which the expenses are recognised.
The total government grants received amounted to GBP5.4 million
for the period ended 30 June 2020.
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, set out below, assist in providing additional
useful information on the underlying trends, performance and
position of the Group. The non-GAAP measures are also used to
enhance the comparability of information between reporting periods
by adjusting for non-recurring or uncontrollable factors which
affect IFRS measures, to aid the user in understanding the Group's
performance.
Consequently, non-GAAP measures are used by the Directors and
management for performance analysis, planning, reporting and
incentive setting purposes 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 to adjusted measures is provided in the Group
Finance Director's Review which details the impact of exceptional
and other adjusting items when comparing to the non-GAAP financial
measures in addition to those reported in accordance with IFRS.
Further detail is also provided within note 5, Segment
information.
5 Segment information
Management reviewed the way it reported Segmental performance to
the Board and the Chief Executive Officer, who is the Group's Chief
Operating Decision Maker ('CODM'), during the first half of the
year. As a result of this analysis, from 1 January 2020 the Group
has revised where the results of certain Managed Services contracts
are reported within its operating Segments. The change in Segmental
reporting has no impact on reported Group results.
Operational responsibility for a significant European customer
was transferred from the German to the French business from 1
January 2020. The French Senior Management targets now include the
results from this customer. This has no impact on Group results but
does impact the Segment results, including revenue and
profitability. We have therefore restated the results for the
French and German Segments for the year ended 31 December 2019 and
the period ended 30 June 2019, to assist with understanding the
growth in each business and to ensure period-on-period results are
comparable.
Computacenter USA performs Managed Services work for other
Computacenter entities, on behalf of several key European
contracts. From 1 January 2019, with the creation of the USA
Segment, these revenues were recorded in the USA Segment, where the
associated underlying subsidiary recognises the revenues in its
statutory accounts. Following a review, and to be consistent with
practices across the Group, Management decided to reallocate these
revenues from the USA Segment to the UK, German, French and
International Segments which own the responsibility for the
customer contracts. This reflects better where the portfolio
coordination and operational responsibility lies and where the
benefits should accrue. This treatment also means that for
Segmental analysis, Computacenter USA has now been aligned to the
remainder of our offshore internal service provider entities that
are grouped within the International Segment. We have therefore
restated the Managed Services revenues for the year ended 31
December 2019 and the period ended 30 June 2019, to assist with
understanding the growth in each business and to ensure
period-on-period comparisons reflect true underlying growth. This
has no impact on Group revenue or on Segmental profitability, as
the margins were previously shared on the same basis that the
revenue now reflects.
This new Segmental reporting structure is the basis on which
internal reports are provided to the Chief Executive Officer, as
the CODM, for assessing performance and determining the allocation
of resources within the Group in accordance with IFRS 8.25.
Segmental performance is measured based on external revenues,
adjusted(1) gross profit, adjusted(1) operating profit and
adjusted(1) profit before tax.
The operating Segments remain unchanged in all other regards
from those reported at 31 December 2019. Central Corporate Costs
continue to be disclosed as a separate column within the Segmental
note.
To enable comparisons with prior year performance, historical
segment information for the year ended 31 December 2019 and the
period ended 30 June 2019 has been restated in accordance with the
revised Segmental reporting structure. All discussion within this
Interim Report and Accounts on Segmental results reflects this
revised structure and the resultant prior-year and prior-period
restatements.
Segmental performance for the periods to H1 2020, H1 2019 and
Full Year 2019 were as follows:
Six months ended 30 June 2020
Central
Corporate
UK Germany France USA 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
-------- -------- -------- -------- ------------- ---------- ---------
Adjusted(1) gross profit 122,626 118,456 31,060 30,921 14,736 - 317,799
-------- -------- -------- -------- ------------- ---------- ---------
Administrative expenses (76,689) (82,901) (27,263) (26,216) (14,567) (12,865) (240,501)
-------- -------- -------- -------- ------------- ---------- ---------
Adjusted(1) operating
profit 45,937 35,555 3,797 4,705 169 (12,865) 77,298
-------- -------- -------- -------- ------------- ---------- ---------
Adjusted(1) net interest (597) (1,081) (187) (270) (571) - (2,706)
-------- -------- -------- -------- ------------- ---------- ---------
Adjusted(1) profit before
tax 45,340 34,474 3,610 4,435 (402) (12,865) 74,592
-------- -------- -------- -------- ------------- ---------- ---------
Exceptional items:
-------- -------- -------- -------- ------------- ---------- ---------
- unwinding of discount
relating to acquisition
of a subsidiary -
-------- -------- -------- -------- ------------- ---------- ---------
- costs relating to -
acquisition of a subsidiary
-------- -------- -------- -------- ------------- ---------- ---------
Total exceptional items -
-------- -------- -------- -------- ------------- ---------- ---------
Amortisation of acquired
intangibles (2,184)
-------- -------- -------- -------- ------------- ---------- ---------
Profit before tax 72,408
-------- -------- -------- -------- ------------- ---------- ---------
The reconciliation for adjusted(1) operating profit to operating
profit, as disclosed in the Interim 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)
--------
Exceptional items -
--------
Operating profit 75,114
--------
Six months ended 30 June 2019
Central
UK Germany France USA International Corporate
(Restated) (Restated) (Restated) (Restated) (Restated) Costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
----------- ----------- ----------- ----------- ------------- ---------- ---------
Technology Sourcing
revenue 579,694 602,192 231,365 359,638 58,415 - 1,831,304
----------- ----------- ----------- ----------- ------------- ---------- ---------
Services revenue
----------- ----------- ----------- ----------- ------------- ---------- ---------
Professional Services 54,608 86,550 17,589 7,823 1,844 - 168,414
----------- ----------- ----------- ----------- ------------- ---------- ---------
Managed Services 166,524 174,143 51,219 2,480 32,930 - 427,296
----------- ----------- ----------- ----------- ------------- ---------- ---------
Total Services revenue 221,132 260,693 68,808 10,303 34,774 - 595,710
----------- ----------- ----------- ----------- ------------- ---------- ---------
Total revenue 800,826 862,885 300,173 369,941 93,189 - 2,427,014
----------- ----------- ----------- ----------- ------------- ---------- ---------
Results
----------- ----------- ----------- ----------- ------------- ---------- ---------
Adjusted(1) gross profit 101,524 111,725 35,548 31,368 20,326 - 300,491
----------- ----------- ----------- ----------- ------------- ---------- ---------
Administrative expenses (78,091) (81,288) (27,276) (30,151) (15,737) (11,866) (244,409)
----------- ----------- ----------- ----------- ------------- ---------- ---------
Adjusted(1) operating
profit 23,433 30,437 8,272 1,217 4,589 (11,866) 56,082
----------- ----------- ----------- ----------- ------------- ---------- ---------
Adjusted(1) net interest (2,311) 114 (126) (179) (77) - (2,579)
----------- ----------- ----------- ----------- ------------- ---------- ---------
Adjusted(1) profit before
tax 21,122 30,551 8,146 1,038 4,512 (11,866) 53,503
----------- ----------- ----------- ----------- ------------- ---------- ---------
Exceptional items:
----------- ----------- ----------- ----------- ------------- ---------- ---------
- unwinding of discount
relating to acquisition
of a subsidiary (400)
----------- ----------- ----------- ----------- ------------- ---------- ---------
- costs relating to
acquisition of a subsidiary (79)
----------- ----------- ----------- ----------- ------------- ---------- ---------
Total exceptional items (479)
----------- ----------- ----------- ----------- ------------- ---------- ---------
Amortisation of acquired
intangibles (2,175)
----------- ----------- ----------- ----------- ------------- ---------- ---------
Profit before tax 50,849
----------- ----------- ----------- ----------- ------------- ---------- ---------
The reconciliation for adjusted(1) operating profit to operating
profit, as disclosed in the Consolidated Income Statement, is as
follows:
Six months ended 30 June 2019
Total
GBP'000
Adjusted(1) operating profit 56,082
--------
Amortisation of acquired intangibles (2,175)
--------
Exceptional items (79)
--------
Operating profit 53,828
--------
Year ended 31 December 2019
Central
UK Germany France USA International Corporate
(Restated) (Restated) (Restated) (Restated) (Restated) Costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
----------- ----------- ----------- ----------- ------------- ---------- ---------
Technology Sourcing
revenue 1,142,746 1,344,423 479,423 732,009 123,626 - 3,822,227
----------- ----------- ----------- ----------- ------------- ---------- ---------
Services revenue
----------- ----------- ----------- ----------- ------------- ---------- ---------
Professional Services 117,685 191,866 39,016 13,512 4,004 - 366,083
----------- ----------- ----------- ----------- ------------- ---------- ---------
Managed Services 336,595 350,885 106,586 5,074 65,329 - 864,469
----------- ----------- ----------- ----------- ------------- ---------- ---------
Total Services revenue 454,280 542,751 145,602 18,586 69,333 - 1,230,552
----------- ----------- ----------- ----------- ------------- ---------- ---------
Total revenue 1,597,026 1,887,174 625,025 750,595 192,959 - 5,052,779
----------- ----------- ----------- ----------- ------------- ---------- ---------
Results
----------- ----------- ----------- ----------- ------------- ---------- ---------
Adjusted(1) gross profit 221,208 253,222 75,650 69,493 43,541 - 663,114
----------- ----------- ----------- ----------- ------------- ---------- ---------
Administrative expenses (156,673) (173,721) (58,362) (60,369) (35,358) (27,139) (511,622)
----------- ----------- ----------- ----------- ------------- ---------- ---------
Adjusted(1) operating
profit 64,535 79,501 17,288 9,124 8,183 (27,139) 151,492
----------- ----------- ----------- ----------- ------------- ---------- ---------
Adjusted(1) net interest (1,286) (1,987) (524) (871) (573) - (5,241)
----------- ----------- ----------- ----------- ------------- ---------- ---------
Adjusted(1) profit before
tax 63,249 77,514 16,764 8,253 7,610 (27,139) 146,251
----------- ----------- ----------- ----------- ------------- ---------- ---------
Exceptional items:
----------- ----------- ----------- ----------- ------------- ---------- ---------
- unwinding of discount
relating to acquisition
of a subsidiary (825)
----------- ----------- ----------- ----------- ------------- ---------- ---------
- costs relating to
acquisition of a subsidiary (94)
----------- ----------- ----------- ----------- ------------- ---------- ---------
Total exceptional items (919)
----------- ----------- ----------- ----------- ------------- ---------- ---------
Amortisation of acquired
intangibles (4,374)
----------- ----------- ----------- ----------- ------------- ---------- ---------
Profit before tax 140,958
----------- ----------- ----------- ----------- ------------- ---------- ---------
The reconciliation for adjusted(1) operating profit to operating
profit, as disclosed in the Consolidated Income Statement, is as
follows:
Year ended 31 December 2019
Total
GBP'000
Adjusted(1) operating profit 151,492
--------
Amortisation of acquired intangibles (4,374)
--------
Exceptional items (94)
--------
Operating profit 147,024
--------
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.
7 Dividends paid and proposed
The Company announced on 23 April 2020 that it was withdrawing
its 2019 final dividend resolution from the voting at the Annual
General Meeting held on 14 May 2020 and that the 2019 final
dividend would not be paid.
An interim dividend in respect of 2020 of 12.3 pence per
ordinary share, amounting to a total dividend of GBP14.1 million,
was declared by the Directors at their meeting on 7 September 2020.
The expected payment date of the dividend declared is 23 October
2020. This interim report does not reflect this dividend
payable.
8 Income tax
Tax for the six-month period is charged at 28.1 per cent (six
months ended 30 June 2019: 25.6 per cent; year ended 31 December
2019: 27.9 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 2020 H1 2019 Year 2019
GBP'000 GBP'000 GBP'000
Operating profit
-------- -------- ---------
Costs relating to acquisition of a subsidiary - (79) (94)
-------- -------- ---------
Exceptional operating loss - (79) (94)
-------- -------- ---------
Interest cost relating to acquisition of a subsidiary - (400) (825)
-------- -------- ---------
Loss on exceptional items before taxation - (479) (919)
-------- -------- ---------
Income tax
-------- -------- ---------
Tax credit on exceptional items - 39 39
-------- -------- ---------
Tax credit relating to acquisition of a subsidiary - 879 839
-------- -------- ---------
Gain/(loss) on exceptional items after taxation - 439 (41)
-------- -------- ---------
H1 2020:
There were no exceptional items reported within the H1 2020
period.
H1 2019:
An exceptional operating loss during the period of GBP0.1
million resulted from residual costs directly relating to the
acquisition of FusionStorm. The majority of these costs were
incurred in the year to 31 December 2018 and included a severance
payment for the FusionStorm Chief Executive Officer, agreed as part
of the acquisition, advisor fees and a finder's fee that was paid
on completion of the transaction. These costs were non-operational
in nature, material in size and unlikely to recur and have
therefore been classified as outside our adjusted(1) results. The
current period loss resulted from social charges relating to the
severance payment for the FusionStorm Chief Executive Officer and
has been treated as an exceptional item. A further GBP0.4 million
relating to the unwinding of the discount on the deferred
consideration for the purchase of FusionStorm has been removed from
the adjusted(1) net finance expense and classified as exceptional
interest costs.
A credit of GBP0.04 million arising from the tax benefit on the
FusionStorm exceptional acquisition costs has been recognised as
tax on the above exceptional item. A further tax credit of GBP0.9
million was recorded due to post-acquisition activity in
FusionStorm, related to the transaction, which has resulted in an
in-year tax benefit. This activity was 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 of
a one-off nature and material to the overall tax result, it was
classified as an exceptional tax item.
YE 2019:
An exceptional operating loss during the year of GBP0.1 million
resulted from residual costs directly relating to the acquisition
of FusionStorm These costs were non-operational in nature, material
in size and unlikely to recur and have therefore been classified as
outside our adjusted(1) results. The current year loss resulted
from social charges relating to the severance payment for the
FusionStorm Chief Executive Officer and has been treated as an
exceptional item for consistency with the disclosure in the year to
31 December 2018. A further GBP0.8 million relating to the
unwinding of the discount on the deferred consideration for the
purchase of FusionStorm has been removed from the adjusted(1) net
finance expense and classified as exceptional interest costs.
A credit of GBP0.04 million arising from the tax benefit on the
FusionStorm exceptional acquisition costs has been recognised as
tax on the above exceptional item. A further tax credit of GBP0.8
million was recorded due to post-acquisition activity in
FusionStorm, related to the transaction, which has resulted in an
in-year tax benefit. This activity was 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 of
a one-off nature and material to the overall tax result, it was
classified as an exceptional tax item.
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 2020 H1 2019 Year 2019
GBP'000 GBP'000 GBP'000
Profit attributable to equity holders of the Parent 51,987 37,847 101,655
-------- -------- ---------
H1 2020 H1 2019 Year 2019
'000 '000 '000
Basic weighted average number of shares (excluding
own shares held) 112,930 112,616 112,514
------- ------- ---------
Effect of dilution:
------- ------- ---------
Share options 1,707 1,215 1,655
------- ------- ---------
Diluted weighted average number of shares 114,637 113,831 114,169
------- ------- ---------
H1 2020 H1 2019 Year 2019
pence pence pence
Basic earnings per share 46.0 33.6 90.3
------- ------- ---------
Diluted earnings per share 45.3 33.2 89.0
------- ------- ---------
11 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 2020 the Group had forward currency contracts, which
were measured at Level 2 fair value subsequent to initial
recognition, to the value of a net liability of GBP626,000 (30 June
2019: net asset of GBP3,258,000, 31 December 2019: net asset of
GBP1,511,000).
The net realised gains from forward currency contracts in the
period to 30 June 2020 of GBP2,363,000 (30 June 2019: GBP3,541,000,
31 December 2019: GBP3,278,000) are offset by broadly equivalent
realised losses/gains on the related underlying transactions.
The foreign currency forward contracts are measured based on
observable spot exchange rates, the yield curves of the respective
currencies as well as the currency basis spreads between the
respective currencies. All contracts are fully cash collateralised,
thereby eliminating both counterparty and the Group's own credit
risk.
The carrying value of the Group's short-term receivables and
payables is a reasonable approximation of their fair values. The
fair value of all other financial instruments carried within the
Financial Statements is not materially different from their
carrying amount.
12 Net funds
H1 2020 H1 2019 Year 2019
GBP'000 GBP'000 GBP'000
Cash and short-term deposits 222,058 114,314 217,881
--------- --------- ---------
Cash and cash equivalents 222,058 114,314 217,881
--------- --------- ---------
Current asset investments - 5,000 -
--------- --------- ---------
Bank loans (72,948) (122,442) (80,772)
--------- --------- ---------
Adjusted net funds/(debt) (3) (excluding lease
liability) 149,110 (3,128) 137,109
--------- --------- ---------
Lease liability (124,767) (111,003) (116,766)
--------- --------- ---------
Net funds/(debt) 24,343 (114,131) 20,343
--------- --------- ---------
Bank loans (20,066) (19,882) (20,032)
--------- --------- ---------
Lease liability (38,650) (34,553) (36,574)
--------- --------- ---------
Financial liabilities - Current (58,716) (54,435) (56,606)
--------- --------- ---------
Bank loans (52,882) (102,560) (60,740)
--------- --------- ---------
Lease liability (86,117) (76,450) (80,192)
--------- --------- ---------
Financial liabilities - Non-current (138,999) (179,010) (140,932)
--------- --------- ---------
13 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 2020 7,815 8,311 5,114 445 21,685
----------- ----------- ----------- ----------- -----------
Arising during the period 1,093 - - - 1,093
----------- ----------- ----------- ----------- -----------
Utilised (3,710) - (47) - (3,757)
----------- ----------- ----------- ----------- -----------
Exchange adjustment 215 577 - 31 823
----------- ----------- ----------- ----------- -----------
At 30 June 2020 5,413 8,888 5,067 476 19,844
----------- ----------- ----------- ----------- -----------
Current 2,645 - 1,443 476 4,564
----------- ----------- ----------- ----------- -----------
Non-current 2,768 8,888 3,624 - 15,280
----------- ----------- ----------- ----------- -----------
5,413 8,888 5,067 476 19,844
----------- ----------- ----------- ----------- -----------
Customer contract provision
During the period GBP3.7 million of customer contract provisions
had been utilised in line with individual contract forecasts.
14 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
2019 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.
15 Events after the reporting period
On 24 March 2020, the Group announced that they had entered in
to exclusive negotiations on the acquisition of BT plc's domestic
operations in France. Following completion of the consultations
process with works councils, the Group announced on 16 July 2020
that they had agreed the acquisition with BT. The transaction,
which is complementary to our existing French business in the areas
of networking and datacenter capabilities, could add up to EUR100
million of revenue whilst being immaterial to the Group's
adjusted(1) profitability in the short to medium term, is expected
to complete before the end of 2020.
The Group announced today that on 8 September it entered into an
Arrangement Agreement pursuant to which Computacenter has agreed to
directly or indirectly acquire the entire issued share capital of
Pivot Technology Solutions, Inc. ("Pivot"), a company listed on the
Toronto Stock Exchange (TSX:PTG), by way of a Canadian Plan of
Arrangement with an all cash offer of CAD 2.60 per share. The offer
has the unanimous recommendation of Pivot's board. The directors
and officers of Pivot have provided support undertakings in respect
of the shares held or controlled by them, for a potential total of
4.86 million shares, (including options and Restricted Stock
Units), representing circa 12 per cent of the fully diluted share
capital.
The cash consideration of CAD 2.60 per share (the
"Consideration") represents CAD 105.8 million on a fully diluted
basis of 40,688,650 shares, options, and Restricted Stock Units,
payable upon completion of the acquisition. The arrangement is
subject to the approval by 66 2/3 per cent of the votes cast by
Pivot's shareholders at a special meeting of Pivot's shareholders
held to approve the arrangement, currently anticipated for 23
October 2020, the approval by the Canadian court of the Plan of
Arrangement, and certain other conditions precedent to closing. The
Consideration will be funded from Computacenter's existing cash
resources (Computacenter held cash and cash equivalents of GBP222.1
million at 30 June 2020). Pivot has a credit facility from a
lending group represented by JPMorgan Chase Bank, N.A. ("JPMC"),
which provides Pivot with a USD 225.0 million senior secured asset
based revolving credit facility ("JPMC Credit Facility"). The JPMC
Credit Facility may be used for revolving loans, letters of credit,
protective advances, over advances, and swing line loans. Amounts
owing by Pivot under the JPMC Credit Facility were USD 103.7
million and USD 106.7 million as at June 30, 2020 and December 31,
2019, respectively; and average undrawn availability was USD 47.8
million and USD 65.3 million for the periods ended June 30, 2020
and December 31, 2019,
respectively. Computacenter has agreed with JPMC to retain the
JPMC Credit Facility following completion of the acquisition.
For the year ended 31 December 2019, Pivot reported a statutory
profit before tax of USD 20.7 million on reported revenue of USD
1,218.1 million. The profit before tax figure for the year ended 31
December 2019 includes USD 6.0 million of finance expense, USD 8.0
million of amortisation of acquired intangibles, restructuring and
other non-recurring charges of USD 4.6 million and a gain on
disposal of USD 22.3 million. Pivot reported profit before
depreciation and amortisation, finance expense, restructuring and
other non-recurring costs, change in fair value of liabilities,
gains on disposal and other income of USD 26.8 million for the year
ended 31 December 2019. As at 30 June 2020, Pivot reported Gross
Assets of CAD 541.0 million. Computacenter expects that this
acquisition will be accretive to the Group's primary measure,
adjusted(1) diluted earnings per share, in 2021.
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