TIDMCCC
RNS Number : 3351S
Computacenter PLC
16 March 2021
Computacenter plc
Incorporated in England
Registration number: 03110569
LEI: 549300XSXUZ1I19DB105
ISIN: GB00BV9FP302
FOR IMMEDIATE RELEASE
Final results for the year ended 31 December 2020
Computacenter plc ("Computacenter" or the "Group"), a leading
independent technology partner trusted by large corporate and
public sector organisations, today announces audited results for
the year ended 31 December 2020.
Financial Highlights 2020 2019 Percentage
Change
Increase/
(Decrease)
Financial Performance
Technology Sourcing revenue
(GBP million) 4,180.1 3,822.2 9.4
Services revenue (GBP million) 1,261.2 1,230.6 2.5
Revenue (GBP million) 5,441.3 5,052.8 7.7
Adjusted(1) profit before tax
(GBP million) 200.5 146.3 37.0
Adjusted(1) diluted earnings
per share (pence) 126.4 92.5 36.6
Dividend per share (pence) 50.7 10.1 402.0
Profit before tax (GBP million) 206.6 141.0 46.5
Diluted earnings per share
(pence) 133.8 89.0 50.3
Cash Position
Cash and cash equivalents (GBP
million) 309.8 217.9 42.2
Adjusted net funds(3) (GBP
million) 188.6 137.1 37.6
Net funds (GBP million) 51.2 20.3 152.2
Net cash inflow from operating
activities (GBP million) 236.8 198.3 19.4
Reconciliation to Adjusted(1) Measures
Adjusted(1) profit before tax (GBP
million) 200.5 146.3
Exceptional and other adjusting
items:
Gain on acquisition of a subsidiary 14.0 -
(GBP million)
Costs related to acquisition (GBP
million) (0.6) (0.9)
Other exceptional items (GBP million) 0.1 -
Amortisation of acquired intangibles
(GBP million) (7.4) (4.4)
Profit before tax (GBP million) 206.6 141.0
Operational Highlights:
-- The Group's revenues increased by 7.7 per cent and were 6.6
per cent higher in constant currency(2) . Significant reductions in
expenditure from industrial customers have been offset by new
business within the Public Sector and financial services.
COVID-19-related cost reductions and improving Services and
Technology Sourcing margins has resulted in an increase in
adjusted(1) profit before tax of 37.0 per cent during the year.
-- The UK saw an increase in revenues of 11.0 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 40.2 per cent for the year.
-- Germany saw overall revenues decline by 2.5 per cent, on a
constant currency(2) basis, 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 a fall in administrative expenses have resulted in
an increase of 38.1 per cent in adjusted(1) operating profit, on a
constant currency(2) basis.
-- France has had a difficult year, being more impacted by a
slow-down of its large industrial customer base, and a switch to
lower margin workplace product, and the downturn in its Services
business which resulted in modest revenue growth but decreasing
gross profits and a reduction in adjusted(1) operating profit of
27.3 per cent on a constant currency(2) basis.
-- North America saw a weaker than expected year with a marked
reduction in activity by its higher-margin mid-market customer base
which resulted in slightly declining revenues overall in constant
currency(2) , excluding the impact of the Pivot acquisition. Pivot
added $292.7 million of revenue and $6.8 million of adjusted(1)
operating profit in the last two months of the year.
The Group has experienced significant operational and financial
impacts from the unprecedented effect of the COVID-19 crisis. All
results in this announcement include these COVID-19 impacts and no
attempt has been made to adjust for or exclude these impacts
whether they be positive or negative. Further information on the
COVID-19 impacts on the Group, and our response, can be found
within the COVID-19 Impact Statement. The continued adoption of the
going concern basis by the Directors in the preparation of the
Consolidated Financial Statements is within note 2.1 to the summary
financial information contained in this announcement.
The result has benefited from GBP261.0 million of revenue (2019:
GBP26.0 million), and GBP6.5 million of adjusted(1) profit before
tax (2019: GBP0.2 million), resulting from all acquisitions made
since 1 January 2019. Of this, for the entities acquired in 2020,
the result has benefited from GBP232.6 million of revenue, and
GBP3.2 million of adjusted(1) profit before tax. All figures
reported throughout this announcement include the results of these
acquired entities.
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 2 to the summary financial
information contained within this announcement.
Mike Norris, Chief Executive of Computacenter plc,
commented:
'At the start of last year, our performance in 2019 set us a
high bar for 2020. The COVID related lockdowns towards the end of
the first quarter made improving on 2019 feel even more
challenging.
After multiple upgrades during the year and today's excellent
results it is clear that the 2020 performance has exceeded all
expectations and 2020 has seen the fastest profit growth
Computacenter has achieved in its 22 years as a public company.
Clearly, the challenge it gives us is to grow again in 2021.
While Computacenter will always focus on the long term and
resist the temptation of short-term actions to maintain growth, we
feel the opportunity for progression this year, while not certain,
is real. We have come into 2021 with solid momentum and have
experienced a very positive start to the year. As always, we will
give an update to shareholders in our April statement once we have
completed our first quarter at the end of March.
Growth rates are obviously difficult to predict as our
geographies will come out of lockdown at different times, but our
experiences of the last 12 months has convinced us more than ever
that our customers will continue to invest in Information
Technology and will require the services of Computacenter to enable
them to do so. This, combined with the fact that we are growing in
more geographies and across more technology platforms than we have
ever done before, makes us even more excited about our long-term
growth potential.'
(1) Adjusted operating profit or loss, adjusted net finance
income or expense, adjusted profit or loss before tax, adjusted
tax, adjusted profit or loss, adjusted earnings per share and
adjusted diluted earnings per share are, as appropriate, each
stated before: exceptional and other adjusting items including
gains or losses on business acquisitions and disposals,
amortisation of acquired intangibles, utilisation of deferred tax
assets (where initial recognition was as an exceptional item or a
fair value adjustment on acquisition), and the related tax effect
of these exceptional and other adjusting items, as Management do
not consider these items when reviewing the underlying performance
of the Segment or the Group as a whole. A reconciliation to
adjusted measures is provided within the Group Finance Director's
review contained in this announcement which details the impact of
exceptional and other adjusted items when compared to the
non-Generally Accepted Accounting Practice financial measures in
addition to those reported in accordance with IFRS. Further detail
is provided within note 6 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-year local currency financial
results using the current year average exchange rates and comparing
these recalculated amounts to our current year 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-year measure is also presented in the
reported pound sterling equivalent using the exchange rates
prevailing at the time. 2020 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 lease liabilities. A table reconciling this
measure, including the impact of lease liabilities, is provided
within note 9 to the summary financial information contained in
this announcement.
Enquiries:
Computacenter plc
Mike Norris, Chief
Executive 01707 631601
Tony Conophy, Finance
Director 01707 631515
Tulchan Communications
020 7353
James Macey White 4200
Matt Low
DISCLAIMER - FORWARD LOOKING STATEMENTS
This announcement includes statements that are, or may be deemed
to be, 'forward-looking statements'. These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms 'anticipates', 'believes',
'estimates', 'expects', 'intends', 'may', 'plans', 'projects',
'should' or 'will', or, in each case, their negative or other
variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, future events or intentions.
These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
announcement and include, but are not limited to, statements
regarding the Groups' intentions, beliefs or current expectations
concerning, amongst other things, results of operations, prospects,
growth, strategies and expectations of its respective
businesses.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Forward-looking statements are not guarantees of future performance
and the actual results of the Group's operations and the
development of the markets and the industry in which they operate
or are likely to operate and their respective operations may differ
materially from those described in, or suggested by, the
forward-looking statements contained in this announcement. In
addition, even if the results of operations and the development of
the markets and the industry in which the Group operates are
consistent with the forward-looking statements contained in this
announcement, those results or developments may not be indicative
of results or developments in subsequent periods. A number of
factors could cause results and developments to differ materially
from those expressed or implied by the forward-looking statements,
including, without limitation, those risks in the risk factor
section of the 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.
COVID-19 IMPACT STATEMENT
We are a technology company supporting customers worldwide, at a
time when technology has proven critical to mitigating COVID-19's
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.
As we stepped into 2020, we could never have planned for the
impact of COVID-19. By mid-March our internal crisis response team,
including the Chief Executive Officer (CEO), was meeting daily to
implement plans to protect our people and enable them to continue
to deliver for our customers, whilst acting for the Company's
long-term success.
Looking after our people
The safety and wellbeing of our employees remains 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, amounting to nearly 90
per cent of our workforce. We used leading technology solutions
that we were implementing for our customers to ensure the continued
integrity of our working environment, whilst ensuring that our
people's health and safety was paramount in our decision-making,
including setting up response teams to support their physical and
mental wellbeing.
Throughout 2020, we provided extensive communication and support
to all employees, including working from home assistance, mental
health support and training, and global employee assistance
programmes. In addition, we ran seven separate 'spotlight surveys'
across the Group, to gain insight into how supported employees were
feeling and to check their engagement. The feedback suggested very
high levels of satisfaction amongst participants. Remote working
has been an unqualified success but we believe that, when the time
is right, employees will return to our offices part-time.
Approximately 10 per cent of our staff remained working at
customer locations, providing critical on-site support services,
and also at our key Integration Centers, in line with applicable
guidelines. This ensured that we could provide laptops and other
essential technology to enable our customers, including key parts
of government, to respond to COVID-19. We implemented enhanced
cleaning and safety procedures for these key locations and
expressly thank all those who provided this vital service for our
customers. The challenge was immense and we were pleased to
accomplish it with minimal disruption. Additionally, we have
redeployed field engineers to support our Hatfield Integration
Center, which has seen a surge in activity and moved, for a period,
to 24/7 shift working to meet demand.
Supporting our customers
The resilience of our Services and infrastructure was
demonstrated during 2020 as never before. Within four weeks of the
start of the pandemic we were able to move 95 per cent of our
12,600 service delivery team members to homeworking. We achieved
this without any impact on customer service, despite an increase of
40 per cent in incident volumes. Our people showed enormous
resilience and commitment in responding to customer challenges,
often supporting critical government pandemic response initiatives
and helping customers to Source, Transform and support new digital
initiatives in weeks, rather than the months that may normally have
been planned for such projects.
The deep relationships we have developed with customers enabled
us to connect quickly with them and respond to their requests.
Understanding how they operated and how we could best assist them
made the difference, as we positioned ourselves as an extension of
their own IT teams. During the early months, we quickly developed
new Services to enable our customers to serve their businesses
effectively, such as our 'Home Swap Service' and 'Virtual Tech
Bar'. This demonstrated both our agility and our innovative
approach to meeting the needs of customers during the pandemic.
We have also offered our customers a variety of bespoke support
during the crisis, including the flexibility in enabling them to
scale their services consumption up or down, as their own business
demands shifted. This flexibility has enabled us to secure new
business, build relationships for the future and encourage
customers to commit to contract renewals.
The 'near-shore' location strategy for our 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 our offices and at home, has meant
little to no disruption to our Services. Further, our Service
Centers' single worldwide telecommunications system and unified
software toolsets have allowed seamless capacity flows between
Service Centers, enabling us to rapidly adapt to short-term spikes
in utilisation from our customer base.
In addition, our scale and breadth of service meant that we were
a natural choice as an aggregator of technology, which positioned
us as a strong contender for mass rollouts for large customers. Our
ability to quickly scale up volumes through our vendor partnerships
and our flexibility in creating solutions for mass rollout to
multiple locations helped us to secure significant new business.
Customer surveys conducted during the year, and feedback from
business leaders across our portfolio, demonstrated that we have
strengthened relationships and built credibility through our
agility and speed to serve.
The Chief Information Officers (CIOs) of our customers have had
an incredibly busy year, leading their organisations through the
challenges presented by COVID-19 to transform quickly their IT
architecture and ways of working. In partnership with these
leaders, Computacenter has provided the solutions to these
challenges. The performance in the year, with growing 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.
As the crisis intensified, we became a critical partner for
governments across Europe and the UK in particular. Computacenter
responded at short notice to significant requests for tender from
the UK Government on a range of projects. We proved that we were
the only reseller with the scalable infrastructure in the country
that could deliver large projects in a timely and low-cost manner,
and have been added to the UK Government's list of 36 Strategic
Suppliers across local and central government. We supported the UK
Government in standing up the infrastructure for a variety of
emergency NHS projects, including the NHS Nightingale hospital
sites, as well as delivering over a million laptops to
disadvantaged children for home schooling.
Protecting employment
At the start of the pandemic, the Group decided to participate
in various national employee retention schemes. The schemes
primarily supported our operations in the UK, Germany and France,
with minor participation in smaller markets including Spain,
Belgium, Switzerland and the Netherlands. We are clear that this
allowed us to avoid otherwise necessary redundancies in late March
and early April, in the face of an unfolding and unpredictable
crisis. Approximately 1,300 employees across the Group were
initially supported by wage-subsidy programmes, utilising various
government initiatives and Company schemes, although this reduced
to an average of circa 150 staff on any scheme over the second half
of the year. We enhanced the government supported schemes, for
which the rate was different in each country, as a result of works
councils, employee forums and local legislation.
At the same time Computacenter's CEO, Mike Norris, and FD, Tony
Conophy, volunteered 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.
The financial impact of COVID-19
The Group has experienced significant operational and financial
impacts from the unprecedented effect of the COVID-19 crisis. All
results in this Annual Report and Accounts include these COVID-19
impacts and no adjustments have been made to exclude these impacts,
whether they be positive or negative.
Overall, we estimate that the COVID-19 crisis has had a net
positive impact in the year of approximately GBP30 million of
adjusted(1) profit before tax, primarily comprised of the key
components highlighted below.
During 2020, the cost to the Group of furloughed employees'
remuneration was approximately GBP19.5 million. Against this, the
Group has received approximately GBP6.4 million in direct grants
from European governments, excluding the UK. The Group also
benefited from GBP3.9 million in indirect savings, such as reduced
social charges, and a reduction of GBP2.1 million in furloughed
employee remuneration. Against a normal year, this has had a net
negative impact of approximately GBP7.1 million of adjusted(1)
profit before tax. All of these grants and costs are included in
our adjusted(1) results within administrative expenses.
The Company received GBP1.1 million from the UK Government, for
the April 2020 claim for furloughed employee costs on the Job
Retention Scheme. However, we repaid this during the second half of
2020, once the Board was assured of the Company's ongoing
resilience in the face of the pandemic. We have committed to making
no claims under the Job Retention Bonus scheme. As at 31 December
2020 a very small number of UK employees remain furloughed at
enhanced rates and entirely at the Group's expense, and a minority
of Belgian employees were on part-time working arrangements. All
other employees across the Group have fully returned to work
regardless of the availability of local government employment
support schemes.
Offsetting the cost of furloughed staff, we have had significant
COVID-19-related cost savings, resulting from less travel and using
fewer contractors, although some of this was due to lower Services
activity, as a result of being unable to work on some customer
sites. We estimate these savings to be approximately GBP45 million
of adjusted(1) profit before tax. We have also seen benefits in
utilisation, with previously on-site or mobile employees able to
use time they would have spent travelling to solve issues remotely
for our customers, increasing their billable hours. This has had a
material impact on our Services margins.
Whilst difficult to measure, we estimate that the loss of
business from COVID-impacted customers materially outweighed
incremental COVID-specific business in the year, with a net
decrease in adjusted(1) profit before tax of GBP15 million.
Cash flow and adjusted net funds(3)
There have been certain COVID-19-related one-off benefits
included in the 2020 full year cash flow and end of year cash
positions. This includes extended free-of-charge supplier credit
with a major vendor of approximately GBP15 million as at 31
December 2020. Temporary tax payment timing benefits from various
governments that were utilised during the year were fully repaid as
at 31 December 2020.
Adjusted net funds(3) of GBP188.6 million as at 31 December
2020, including GBP309.8 million of cash and cash equivalents, give
us a robust platform to manage the business in support of our
customers through challenging market conditions.
Looking forward
Today, the long-term impact of the COVID-19 crisis remains
unknown. However, we are more certain that the ongoing volatility
within our markets and worldwide locations will begin to settle,
with vaccination programmes begun globally and the continued
application of science and technology to meet the medical and
societal challenges that the crisis has brought.
Continued customer investment in technology has provided
short-term growth opportunities and proven the strength of our
business model. Longer term, the crisis has accelerated the drive
to digital across industries, customers and governments worldwide.
We continue to monitor the impact on the Group and maintain our
focus on controlling costs, in order to position the Company for
long-term success.
Chairman's Statement
Many words have been used to describe 2020 - unprecedented,
challenging, chaotic. The global pandemic has had a significant
impact on all countries and communities in which we do business.
Our customers, our partners and our employees and their families,
have all been impacted. We have provided support for our employees'
wellbeing throughout the many challenges, which have varied country
by country. This has been a continuous priority, recognising the
mental health pressure that the confined, and sometimes isolated,
environment can bring. We have, very sadly, lost employees to COVID
and colleagues have also lost loved ones. We send our thoughts and
condolences to their families, friends and colleagues.
Amidst the crisis that has engulfed much of the world, many
small and large demonstrations of the power of the human spirit
became evident - individuals, groups and whole communities finding
ways to persevere. This has been similar in our business lives. We
have adapted to a changed way of working, whether digitally at home
or socially distanced and COVID-secure in factories, offices,
warehouses, shops and hospitality venues.
Computacenter's employees around the world adapted very quickly
to the evolving reality in our markets. The way they adopted new
methods of working, to help our customers and partners meet their
own challenges, was admirable. This focus on doing what was needed
for our customers, in both the private and Public Sectors, was very
well received and significantly strengthened many of our
relationships for the long term.
There was significant uncertainty and unpredictability in
trading, from the beginning of the pandemic until the end of our
financial year. In many ways, 2020 was a most severe test of the
strategy, operational execution and resilience of our business. By
the end of the year, we had seen both a strong financial
performance and the acceleration of our strategy, with the
acquisitions of Pivot Technology Solutions, Inc. ('Pivot') and BT
Services France SAS ('BT Services France'), which we have renamed
Computacenter NS.
Enabling success
This has been an incredible year of progress for Computacenter,
as we have adapted to the challenges and supported our customers.
Revenues again surpassed GBP5 billion, with the acquisitions made
in early November 2020 contributing GBP232.6 million of the
GBP388.5 million of revenue growth. The overall progress across the
Group in the year was very pleasing, with an increase in profit
before tax of 46.5 per cent to GBP206.6 million (2019: GBP141.0
million), following revenue growth of 7.7 per cent to GBP5,441.3
million (2019: GBP5,052.8 million). The Group's adjusted(1) profit
before tax increased by 37.0 per cent to GBP200.5 million (2019:
GBP146.3 million) and by 35.5 per cent in constant currency(2)
.
Diluted earnings per share ('EPS') increased by 50.3 per cent to
133.8 pence for the year (2019: 89.0 pence). Adjusted(1) diluted
EPS grew 36.6 per cent to 126.4 pence (2019: 92.5 pence).
Following the resumption of our dividend payments in October
2020, and in line with our policy of paying a dividend that is
covered between 2.0 and 2.5 times by adjusted(1) diluted EPS, we
propose to pay a final dividend of 38.4 pence per share, bringing
our full year dividend to 50.7 pence per share. This represents an
increase of 37.0 per cent over the 37.0 pence proposed for the 2019
full year dividend, including the 26.9 pence final 2019 dividend
proposed, but not paid, and an increase of 402.0 per cent over the
10.1 pence actually paid for the 2019 full year dividend.
We continue to monitor our growing adjusted net funds(3) , which
reached GBP188.6 million (2019: GBP137.1 million) at the end of the
year. The Board reviews investment opportunities to ensure these
remain aligned strategically with our purpose of enabling success,
as seen with the acquisition of Pivot and BT Services France, and,
if none are suitable, will look to return excess capital to
shareholders at the appropriate time.
Climate change and sustainability
The Board has continued to address a number of areas of the
Group's approach to climate change and sustainability. We hope to
make a difference to the overall impact of the IT industry, by
continuing to focus on and improve our environmental impact in our
part of the supply chain. The Board agrees that it is both the
right thing to do morally and a business imperative, so we can
support our customers' increasing efforts to improve the
sustainability of their businesses.
This includes focusing on how we continue to evolve our own
offices and Integration Center infrastructure, to reduce our carbon
footprint. Our initiatives have included solar power provision and
reducing the use of plastic and unnecessary packaging in our
facilities and solutions. In addition, we play a key role in
refurbishing, recycling and end-of-life disposal of technology
products.
We believe that having a company and board that is diverse in
both representation and thought is key to our continued success. We
will continue to focus on this at Board level. We are making steady
progress against our targets for gender diversity across all levels
of the organisation and set the Executive Directors and senior
Management specific and measurable objectives in this area.
The year ahead
We remain focused on strengthening Computacenter to enable the
success of all of our stakeholders, and I thank them for their
continued trust and support.
As we look to 2021, we do so with the COVID-19 situation still
uncertain across all of our markets. There is much hope associated
with the rollout of the various vaccine programmes around the world
that, at some point in 2021, we may see a more stable and
predictable trading environment.
That said, we have considered, and will continue to monitor
closely, the impact of the COVID-19 virus on our business, global
trade and the macro-economic outlook. The Company's Principal Risks
and Uncertainties reflect the Board's view. We consider that the
sensitivity analysis conducted to support the Directors' reasonable
expectation of the impact of risks, and assessment of viability, to
be sufficiently robust given what we know today, although
considerable uncertainties remain surrounding the duration and
impact of COVID-19.
This year has presented many challenges but our response and
financial results have been strong. One thing is ever-more clear in
these uncertain times - digital technology, solutions and services
are key enablers to help governments and businesses respond to
their challenges, disruption and necessary transformations. This,
allied to our business momentum and our US acquisition, makes us
believe that 2021 can be a year of continued progress for
Computacenter.
Peter Ryan
Chairman
15 March 2021
OUR PERFORMANCE IN 2020
Financial performance
The results for 2020 demonstrate the resilience of the
Computacenter business model, which is built on the three primary
business lines of Technology Sourcing, Professional Services and
Managed Services.
The Group's revenues increased by 7.7 per cent to GBP5,441.3
million (2019: GBP5,052.8 million million) and were 6.6 per cent
higher in constant currency(2) .
Whilst it took 36 years for the Group to reach GBP100 million of
adjusted(1) profit before tax, we are very pleased that it only
took another three years to reach GBP200 million. The Group made a
profit before tax of GBP206.6 million, an increase of 46.5 per cent
(2019: GBP141.0 million). The Group's adjusted(1) profit before tax
increased by 37.0 per cent to GBP200.5 million (2019: GBP146.3
million) and by 35.5 per cent in constant currency(2) .
The difference between profit before tax and adjusted(1) profit
before tax relates to the Group's net gain of GBP6.1 million (2019:
charge of GBP5.3 million) from exceptional and other adjusting
items. These relate principally to the gain on acquisition of the
BT Services France subsidiary, partially offset by the amortisation
of the acquired intangible assets resulting from the Group's recent
North American acquisitions.
With the increase in the Group's profit after tax, the diluted
EPS increased by 50.3 per cent to 133.8 pence for the year (2019:
89.0 pence). Adjusted(1) diluted EPS, the Group's primary EPS
measure, increased by 36.6 per cent to 126.4 pence for 2020 (2019:
92.5 pence).
The result has benefited from GBP261.0 million of revenue (2019:
GBP26.0 million), and GBP6.5 million of adjusted(1) profit before
tax (2019: GBP0.2 million), resulting from all acquisitions made
since 1 January 2019. Of this, for the entities acquired in 2020,
the result has benefited from GBP232.6 million of revenue, and
GBP3.2 million of adjusted(1) profit before tax. All figures
reported throughout this Annual Report and Accounts include the
results of these acquired entities.
Revenues from Public Sector customers, such as local and central
government, increased by approximately 37 per cent, offsetting
material falls in revenues from, primarily, our industrial
customers. Public Sector now accounts for 32 per cent of our
revenues (2019: 25 per cent). Whilst significant volumes of this
Public Sector business were at lower than normal margins,
particularly through the second half of the year, we are pleased
that we maintained efficiencies and reduced costs within the
business delivery areas, such that margins showed a slight rise
overall. Where we had significant Public Sector relationships
within our Segments, the local businesses have quickly switched
focus to supporting them, particularly in our core established
geographies of the UK, Germany and France. Our other European
operations, with a much greater share of private sector revenue,
were not able to respond in the same manner and suffered revenue
attrition as a result.
Excluding the impact of the acquisitions made since 1 January
2019, revenues grew organically by 2.0 per cent on a constant
currency(2) basis. This modest growth understated 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 considerable difficulty in
forecasting how the business would perform throughout the year, as
the COVID-19 crisis escalated. We are pleased with the overall
result and, with 5.0 per cent organic revenue growth in the second
half of the year excluding the impact of acquisitions, are
confident that further growth and market share remain on offer, as
many customers' activities return to normal. 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 one of the few
resellers that could rapidly react to serve customers' needs, as
they transformed from office-based working to remote working.
The UK, in particular, has seen very strong demand within Public
Sector and financial services, as organisations relied heavily on
the Group to urgently support their Technology Sourcing needs, to
enable working from home, other emergency IT responses and a small
number of very large national infrastructure projects. Professional
Services in Germany has grown spectacularly against a very strong
comparative period, as the business supported customers
transitioning to remote working. This business remains one of the
key drivers for the Group as a whole and continues its growth
trajectory year after year. In the US business, some customers
materially reduced spend during the year, whilst large data
center-based customers increased spend, with an overall
satisfactory revenue and profit performance. The French business
had a significantly better second half of 2020, with improving
Technology Sourcing performance partially offsetting the impact of
the previously announced loss of our large Managed Services
contract.
The International Segment was the only part of the business that
was disappointing throughout the year. Technology Sourcing revenues
were impacted as industrial customers reduced expenditure, whilst
Services revenues also fell, driven by lower volumes. In Belgium in
particular, the business suffered from not having sufficient scale
in the market to replace quickly volumes with new customers or look
to Public Sector customers for growth. 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 year within the
International Segment.
Whilst overall revenues held up in the challenging environment,
margins and profits increased as costs reduced across the Group.
Overall Group gross margins increased slightly by 12 basis points
to 13.2 per cent of revenues during the year (2019: 13.1 per cent)
and administrative expenses decreased by 0.5 per cent in constant
currency(2) , when compared to the prior year. A combination of
good quality Technology Sourcing deals supporting pricing, 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.
As a UK-headquartered IT company, we are pleased to have been
added as a Strategic Supplier to the UK Government's list of the 36
most-important cross-government vendors, reflecting our growth in
Public Sector over the past seven years, but accelerated due to our
support for a number of critical infrastructure IT projects during
the pandemic. The most visible of these projects was our successful
support for the Department for Education, as its primary partner on
its programme to roll out more than a million laptops to
disadvantaged children. The list encompasses Whitehall's largest
and most important suppliers, with whom relationships are managed
on a Government-wide basis by a named 'Crown Representative'.
Technology Sourcing performance
The Group's Technology Sourcing revenue increased by 9.4 per
cent to GBP4,180.1 million (2019: GBP3,822.2 million) and by 8.3
per cent on a constant currency(2) basis.
The overall Technology Sourcing result benefited from GBP239.8
million of revenue resulting from the acquisitions made since 1
January 2019 (2019: GBP24.6 million) with GBP209.5 million of this
as a result of the Pivot acquisition.
The UK Technology Sourcing business saw exceptional growth,
driven by workplace contracts to support our customers' emergency
transition to homeworking in the first half of the year and
significant Public Sector critical national infrastructure support
to the UK Government in the second half of the year. A small number
of massive projects has materially assisted the business over the
course of the year. The strength and scale of our Integration
Center capabilities have enabled us to efficiently address this
growth, as we have proven ourselves to be the only reseller in the
country that can handle the volumes driven through these
contracts.
In Germany, Technology Sourcing revenue declined, in particular
as automotive and other industrial customers reduced spend through
large framework agreements, given the COVID-19-related business
challenges. This was partially offset by successfully directing
more sales activity towards the Public Sector and healthcare
sectors, which saw good growth through the period.
The French Technology Sourcing revenue saw excellent growth in
the second half of the year, following a stable first six months. A
number of new and expanded Public Sector framework contracts drove
higher than anticipated volumes through the business. We saw
significant growth in workplace within the product mix which,
whilst reducing the average margin rates achieved, helped lift the
contribution overall.
The North American Technology Sourcing business saw revenues
decline, excluding the impact of the Pivot acquisition. Whilst
hyperscalers remained largely unaffected by the pandemic, the
mid-market core of the business slowed significantly. The
acquisition of Pivot adds substantial volumes to the business, with
opportunities to reach a wider addressable market and more US
locations and through complementary business lines with the
existing business.
Overall Group Technology Sourcing margins increased by 15 basis
points during the year, when compared to the prior year, partially
due to customer and product mix changes. Significant volume growth
of low-margin workplace product sold through to the Public Sector
has been offset by the decline in some large low-margin industrial
customers.
Services performance
The Group's Services revenue increased by 2.5 per cent to
GBP1,261.2 million (2019: GBP1,230.6 million) and by 1.4 per cent
on a constant currency(2) basis. Within this, Group Professional
Services revenue increased by 16.2 per cent to GBP425.4 million
(2019: GBP366.1 million), and by 14.8 per cent on a constant
currency(2) basis, whilst Group Managed Services revenue decreased
by 3.3 per cent to GBP835.8 million (2019: GBP864.5 million), and
by 4.3 per cent on a constant currency(2) basis.
The overall Services result benefited from GBP21.2 million of
revenue from the acquisitions made since 1 January 2019 (2019:
GBP1.3 million).
UK Services revenue reduced slightly, 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 with several significant wins in the second half of
the year increasing the optimism in the business. Professional
Services revenues were up strongly in the second half of the year,
even with the constraints on face-to-face working, as customers
undertook a number of business continuity projects to assist with
their migration to remote working or brought forward planned
investments in their IT estates.
German Services revenues have followed a similar but more
pronounced pattern to the UK business. Managed Services has
declined slightly 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. Demand from these customers remains depressed, reflecting
subdued demand for their products. The Professional Services
business has seen extraordinarily 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 an increasing emphasis on material Public Sector framework
contracts, which provides stability to revenue flows and
utilisation rates.
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 in the first half of the year. The French
Professional Services business is more reliant on on-site activity
than the equivalent businesses in the UK or Germany. These staff
have now returned to work, and whilst the order book for
consultancy returns to a more sustainable footing, revenues remain
below expectations. The Managed Services business 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
some of the volumes by winning several significant global
contracts, which have 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 North America, Professional Services revenue fell as COVID-19
led to project delays or cancellations. Mid-market customers, which
generate much of the Professional Services revenue in the USA, were
the weakest business area. Unlike the core geographies, the North
American business has very little Public Sector business to support
a downturn in the private sector. The new Integration Center,
however, has had early success at expanding higher-end data center
project work and looks to continue to grow this area, as overall
project levels return to normal.
Overall Group Services margins increased by 65 basis points
during the year, when compared to the prior year. The reduction of
travel costs, lower subcontractor costs and improved Professional
Services utilisation all contributed to this increase.
Outlook
At the start of last year, our performance in 2019 set us a high
bar for 2020. The COVID related lockdowns towards the end of the
first quarter made improving on 2019 feel even more
challenging.
After multiple upgrades during the year and today's excellent
results it is clear that the 2020 performance has exceeded all
expectations and 2020 has seen the fastest profit growth
Computacenter has achieved in its 22 years as a public company.
Clearly, the challenge it gives us is to grow again in 2021.
While Computacenter will always focus on the long term and
resist the temptation of short-term actions to maintain growth, we
feel the opportunity for progression this year, while not certain,
is real. We have come into 2021 with solid momentum and have
experienced a very positive start to the year. As always, we will
give an update to shareholders in our April statement once we have
completed our first quarter at the end of March.
Growth rates are obviously difficult to predict as our
geographies will come out of lockdown at different times, but our
experiences of the last 12 months has convinced us more than ever
that our customers will continue to invest in Information
Technology and will require the services of Computacenter to enable
them to do so. This, combined with the fact that we are growing in
more geographies and across more technology platforms than we have
ever done before, makes us even more excited about our long-term
growth potential.
United Kingdom
Financial performance
Revenues in the UK business increased by 11.0 per cent to
GBP1,773.4 million (2019: GBP1,597.0 million).
The UK business reported increased revenues in Technology
Sourcing, with modest declines in Services. The restrictive
measures arising from COVID-19 affected all of our core markets,
and we saw materially increased demand for Technology Sourcing and
integration services, to facilitate remote working for employees.
Some customer digital transformation plans accelerated, whilst
other programmes were deferred due to the pandemic, as a result of
restricted access to customer sites. Some customers redirected
resources to support their business continuity activities,
following a material decline in their revenues, with others needing
to reduce their costs.
Our commitment to long-term partnerships with our customers
required us to be flexible about contract delivery and terms,
including agreeing service levels to reflect COVID-19 requirements,
which impacted the fees to support our customers and the cost of
delivery. Critical National Infrastructure organisations in the
Public Sector and across all verticals increased their demand for
technologies and Services during this period, whilst other
industries saw a material decline in their own markets, resulting
in reduced requirements for our Services.
The investment in our front-end sales and services management
teams in 2019 gave us the capacity to take on more new customers
during 2020, which balanced some of the impact to markets affected
by the virus.
We have established new, longer-term contracts, which secure a
more predictable future for our customers and for
Computacenter.
Overall gross margins in the UK increased by 20 basis points,
with total adjusted(1) gross profit increasing from 13.9 per cent
to 14.1 per cent of revenues. Adjusted(1) gross profit grew by 12.7
per cent to GBP249.2 million (2019: GBP221.2 million).
Administrative expenses increased by 1.3 per cent to GBP158.8
million (2019: GBP156.7 million), with reduced travel and expenses
being offset by increased variable pay outcomes related to the
performance of the business.
This resulted in adjusted(1) operating profit growing by 40.2
per cent to GBP90.4 million (2019: GBP64.5 million).
Resource utilisation was better than expected for both our
consulting and engineering teams, as we adapted our ways of working
to cope with the national lockdown. Our investment in new and
emerging skills has helped to build a strong pipeline of
multi-cloud related demand.
Technology Sourcing performance
Technology Sourcing revenue increased by 16.2 per cent to
GBP1,328.0 million (2019: GBP1,142.7 million).
The Technology Sourcing revenue mix was dominated by workplace
business in 2020, with a small decline in enterprise business. This
was due to our customers' materially higher demand for homeworking
capabilities and reduced focus on core infrastructure
transformation during the year.
Technology Sourcing margins grew by 43 basis points compared to
the prior year.
Given the growth in 2020, we expect moderate growth in
Technology Sourcing in 2021, with our customers continuing to
invest in workplace technologies under a number of private and
Public Sector frameworks. We also expect higher demand for
enterprise technologies, reflecting the growth potential we see in
our existing clients.
The Pivot acquisition in the US supports our strategy to meet
the international needs of our existing customers and may see
reciprocal benefit for the UK, as we gain access to sell into the
UK subsidiaries of Pivot's North American customer base.
Services performance
Services revenue declined by 2.0 per cent to GBP445.4 million
(2019: GBP454.3 million). Professional Services grew 9.7 per cent
to GBP129.1 million (2019: GBP117.7 million) despite a decline in
cabling projects due to the COVID-19 crisis. Managed Services
declined by 6.0 per cent to GBP316.3 million (2019: GBP336.6
million).
Given the global context, we were pleased to increase
Professional Services revenues in 2020. Alongside accelerated
digital workplace transformation, we rapidly designed, contracted
and transitioned new Services to address directly our customers'
challenges in ensuring their business continuity, including new
solutions to equip remote workforces directly. We closed the year
with an increased Professional Services order book again,
particularly with respect to multi-cloud consultancy demand. This
reflects our investment in people and technology partnerships
throughout 2020.
Despite the decline in Managed Services revenue in 2020, which
resulted from challenges in core industries such as manufacturing,
travel and tourism and high street retail, we were pleased to
recently be awarded a large contract in the telecoms sector. We
remain confident in the pipeline of opportunities for Managed
Services, which relate to and build on our workplace credentials,
alongside managed security and cloud adoption.
Services margins increased by 153 basis points over the year.
This was the result of the efficiency gains we realised through new
service solutions and changes to ways of working enabling lower use
of sub-contractors, along with our continued attention to driving
quality through our Services, as we transition between on,
near or offshore delivery models.
Germany
Computacenter Germany finished 2020 significantly above target
and the previous year. This was the result of a strong Professional
Services business, a Managed Services business delivering above
expectations, a slightly weaker performance in Technology Sourcing
due to the COVID-19 pandemic, and lower indirect costs.
The pandemic made 2020 the most extraordinary and challenging
year in the history of Computacenter Germany. After starting the
year well, we were confronted, like all other companies, with a
crisis of unprecedented proportions. Concerns about the health of
employees, a looming shutdown of the global economy and the
resulting potential loss of business for Computacenter, as well as
the personal fears of many employees, had to be taken into account
at very short notice.
From a business point of view, what particularly distinguished
us were the sustained high motivation of all employees and our
excellent and resilient relationships with our existing customers.
Working closely with customers during the crisis to overcome the
challenges together has tended to strengthen these relationships
even further.
While business with existing customers has held up well so far
in the crisis, new customer acquisition has proved very
challenging.
We benefited from the high share of Public Sector and healthcare
customers in our customer base and were able to expand the business
significantly. By contrast, business suffered with customers in the
automotive industry and the retail sector.
Even though it is not currently possible to assess fully the
future course of the pandemic, and some cost-saving benefits from
2020 can only be repeated to a limited extent, we expect a positive
business performance in 2021, characterised by growth.
Financial performance
Total revenue decreased by 2.5 per cent to EUR2,108.2 million
(2019: EUR2,161.9 million) and by 0.6 per cent in reported pound
sterling equivalents(2) .
The top line benefited in 2020 from the Professional Services
business, which performed well above expectations. After strong
growth in the previous year, Professional Services growth in 2020
was just under 20 per cent. In our Managed Services business,
despite COVID-19-related revenue shortfalls in the middle of the
year, we almost achieved our minimum target of maintaining revenue
at the prior-year level. Only in our Technology Sourcing business,
which has seen sustained growth for years, did business decline.
This was mainly due to the pandemic and to lower revenues from a
few large customers which were strongly impacted by the
pandemic.
Overall margins in Germany increased by 150 basis points, with
adjusted(1) gross profit increasing from 13.4 per cent to 14.9 per
cent of revenues. Adjusted(1) gross profit grew by 8.2 per cent to
EUR313.8 million (2019: EUR290.1 million) and by 10.5 per cent in
reported pound sterling equivalents(2) .
Although revenue was down slightly on the previous year's level,
we were pleased with the significant adjusted(1) gross profit
growth achieved. Product margins were maintained at the high level
of the previous year, while margins in both service lines increased
significantly. This was particularly pleasing for our Managed
Services business, as improved performance in this area was one of
our goals for 2020. In addition, we benefited from COVID-19-related
cost savings in all delivery units and especially in consultancy
delivery. Increased remote working also improved both efficiency
and margins. The largest profit growth was achieved in Professional
Services, resulting from its strong top line growth, the increased
margin and efficiency effects.
Administrative expenses decreased by 5.5 per cent to EUR188.1
million (2019: EUR199.1 million), and by 3.7 per cent in reported
pound sterling equivalents(2) .
Indirect costs were below the previous year and our target. This
was due to savings in travel costs and events and to a
significantly lower headcount increase than originally planned.
However, in order to ensure future growth, further investments in
the sales force are required, which were suspended in 2020 due to
COVID-19.
Adjusted(1) operating profit for the German business increased
by 38.1 per cent to EUR125.7 million (2019: EUR91.0 million) and by
41.6 per cent in reported pound sterling equivalents(2) .
For 2021, it is important to continue to develop the Services
business, to use market trends to grow the product business and to
limit the increase in indirect costs. Another year of earnings
growth is therefore achievable.
Technology Sourcing performance
Technology Sourcing revenue reduced by 5.4 per cent to
EUR1,457.4 million (2019: EUR1,541.3 million) and by 3.5 per cent
in reported pound sterling equivalents(2) .
The product business was characterised by some good growth in
2020 in the Public Sector and healthcare, partly due to COVID-19.
However, we also had pandemic-related counteracting effects,
especially with customers from the automotive industries. As these
are among our major customers, it was not possible to compensate
fully for these effects.
We recorded slight growth in workplace, a stable network and
security business and a declining data center business. In the
latter area, the decline was also driven, among other things, by
significantly fewer procurements from a German hyperscaler
customer.
Technology Sourcing margins increased by 20 basis points over
last year and remained at a high level. Margins remained at a good
level in all areas, with slight improvements in workplace and
slight deteriorations on the data center side.
Services performance
Services revenue grew by 4.9 per cent to EUR650.8 million (2019:
EUR620.6 million) and by 6.6 per cent in reported pound sterling
equivalents(2) . This included Professional Services growth of 19.8
per cent to EUR262.8 million (2019: EUR219.4 million), an increase
of 21.8 per cent in reported pound sterling equivalents(2) , and a
reduction in Managed Services of 3.3 per cent to EUR388.0 million
(2019: EUR401.2 million), a decline of 1.7 per cent in reported
pound sterling equivalents(2) .
While revenue in Managed Services reduced slightly, we were able
to achieve significant double-digit growth in the Professional
Services project and consulting businesses. This is particularly
remarkable because, in a pandemic such as we are currently
experiencing, customers might have been expected to reduce their
investments significantly. Instead, customers made additional
investments in expanding infrastructure to quickly support remote
working and projects already planned were continued under new
framework conditions. This mainly concerned the areas of network,
security, workplace enablement and identity and access
management.
We successfully concluded many contract extensions but were
unable to retain three existing contracts. In addition, we
succeeded in concluding a major new contract, which secures
additional business for the next five years. The pipeline is strong
and shows additional growth potential.
Overall, the Services margin was 380 basis points higher than
last year.
One of our goals for 2020 was to continue to stabilise service
quality in our Managed Services business. We took a more proactive
approach to managing quality in deals, with less need to react to
issues that have previously had a negative impact on business
performance. Further progress is expected in 2021, as the service
quality management framework which underpins the way we work
expands and matures, with the potential to increase significantly
both performance and delivery quality, especially in the area of
problem contracts. This is due in particular to the measures we
implemented in 2019. For all contracts, we achieved or even
exceeded our target. Only one new contract had implementation
problems and exceeded the transition budget. However, this contract
was stabilised in the course of the year. Overall, we are very
satisfied with this improvement in performance.
France
On 2 November 2020, the Group acquired BT Services France, now
known as Computacenter NS. The acquisition contributed EUR15.0
million of revenue and an adjusted(1) operating loss of EUR1.6
million in the two months of trading to 31 December 2020 and all
results below reflect this contribution.
Financial performance
Total revenue increased by 5.3 per cent to EUR753.9 million
(2019: EUR715.8 million). In reported pound sterling equivalents(2)
, total revenue was up 7.6 per cent.
Although revenues in the first half of 2020 were flat compared
to 2019, we were pleased that business volumes accelerated
significantly in the second half of the year. This resulted in a
good performance for the year as a whole, which was particularly
pleasing given the challenges we faced in 2020. We saw the expected
impact of a large international contract that was not renewed in
2019, whilst the COVID-19 crisis had a severe effect on many
customers, which resulted in reduced business volumes.
Our two business sectors showed different performance patterns.
The Public Sector continued to deliver excellent growth with
existing customers, with more and more organisations consolidating
their infrastructure services and solutions requirements into large
framework tenders. We have grown our market share by winning
several of these large framework contracts. Winning these contracts
is important, but it is essential that we then create a good
account team to define the best solutions for our customers, with
specialised sales and technical experts supported by our delivery
organisations and our Technology Partners.
Our private sector business had a reasonable year but the
COVID-19 crisis made it impossible to reach the same volumes as
2019. At the start of the pandemic, multiple customers in the
private sector put a stop on investments. Some of these investment
decisions were finally approved during the summer but there are
still numerous large organisations that remain very cautious about
their IT spending, as COVID-19 continues to have a severe impact on
their core businesses. It was encouraging that we successfully
transitioned a new large Managed Services contract for an
international transport company, in the first half of the year.
On 2 November 2020 we reached an important milestone for our
French business, as we completed the acquisition of BT's domestic
Services operations in France and welcomed over 540 new people to
our French operations. This subsidiary has been renamed
Computacenter NS. The acquisition is a step change for our French
business, significantly increasing our capabilities, especially in
networking design, IT and networking operations and support. Whilst
much remains to be done, we have made good progress with
integrating our teams and processes and we are encouraged by our
first business successes as one sales team, with our joint
customers.
The Computacenter NS business contributed to revenue for the
last two months of 2020 and therefore had only a limited impact on
our overall financial performance in France. The business was loss
making at acquisition, and will remain so for some time, which will
reduce reported profits in 2021. However, we are able to utilise
the spare capacity in the business as we sell the capability to our
Computacenter France customers, which will improve the
performance.
As the French business continues to grow, we are focused on
reviewing and improving our quality processes. These should help us
to maintain a high level of customer satisfaction and improve the
consistency and certainty of our business performance. This
improvement process is expected to continue in 2021, as we
introduce the 'improvement and lessons learned' components of our
service quality management framework, which have already proven
beneficial in the UK and Germany.
Overall, margins in France decreased by 105 basis points, with
adjusted(1) gross profit decreasing from 12.1 per cent to 11.1 per
cent of revenues.
Overall adjusted(1) gross profit reduced by 3.9 per cent to
EUR83.3 million (2019: EUR86.7 million) and by 1.7 per cent in
reported pound sterling equivalents(2) .
Administrative expenses increased by 3.0 per cent to EUR68.9
million (2019: EUR66.9 million), and by 5.1 per cent in reported
pound sterling equivalents(2) as we have continued to invest to
support long-term growth.
Adjusted(1) operating profit for the French business decreased
by 27.3 per cent to EUR14.4 million (2019: EUR19.8 million), and by
24.9 per cent in reported pound sterling equivalents(2) .
Technology Sourcing performance
Technology Sourcing revenue increased by 7.4 per cent to
EUR590.0 million (2019: EUR549.2 million) and by 9.8 per cent in
reported pound sterling equivalents(2) .
We grew our Technology Sourcing volumes in 2020, thanks to
winning some significant framework contracts, our continued
investment in presales resources and our excellent relationships
with our Technology Partners.
The COVID-19 crisis had several impacts on the Technology
Sourcing business. In particular, the workplace business has become
a greater part of our product mix, as large end-user communities
needed to move rapidly to a new working environment that enabled
them to work from home or remotely. This resulted in a significant
increase in demand for our Digital Me proposition, mainly through
the sale of workplace and mobility solutions.
We have worked hard throughout the year to maintain and grow our
vendor certifications. We are proud to have obtained both the Apple
Authorized Enterprise Reseller and Apple Authorized Education
Specialist certifications.
Overall, Technology Sourcing margins reduced by 61 basis points,
primarily due to the shift towards the lower margin workplace
business within the product mix.
Services performance
Services revenue decreased by 1.6 per cent to EUR163.9 million
(2019: EUR166.6 million) and increased by 0.5 per cent in reported
pound sterling equivalents(2) . Professional Services revenue
decreased by 10.3 per cent to EUR40.0 million (2019: EUR44.6
million), which was a decrease of 8.5 per cent in reported pound
sterling equivalents(2) . Managed Services revenues increased by
1.6 per cent to EUR123.9 million (2019: EUR122.0 million), an
increase of 3.8 per cent in reported pound sterling equivalents(2)
.
Despite the COVID-19 situation, the Services business in France
continued to deliver strong results. We knew that our revenues in
2020 would be affected by the loss of a large international
contract that was not renewed in 2019, but we have largely overcome
this challenge by improving overall service margins.
We started the year with a good pipeline of Managed Services
opportunities. The COVID-19 crisis caused many organisations to
stop their tender processes or to put their decisions on hold.
Despite this difficult situation, we were pleased to win and
successfully transition several international Managed Services
contracts. Additionally, we have been able to extend our Services
scope at three of our largest existing support contracts.
Based on the existing Contract Base, the pipeline and the fact
that some of the campaigns that were put on hold in 2020 will
restart, we are looking forward to further growth in our Managed
Services business in 2021.
Our Professional Services business faced a challenging year with
a decline in revenues, mainly due to the COVID-19 situation. As our
Professional Services business in France is relatively small
compared to the capabilities in the Group, the impact on the
overall result was modest. Moreover, we were able to minimise the
contribution loss, as we benefited from Government temporary
unemployment support programmes in the second quarter, to
compensate for the reduced utilisation of resources during
lockdown. The Computacenter NS team has significantly strengthened
our Services capabilities in France and we are looking forward to
significant improvement in our Professional Services market share
and profitability in 2021.
Services margins decreased by 247 basis points over last
year.
North America
During the second half of 2020, the Group completed the material
acquisition of Pivot. This business was combined with our existing
US Segment to create the North America Segment from 2 November
2020. The acquisition contributed $292.7 million of revenue and an
adjusted(1) operating profit of $6.8 million in the two months of
trading to 31 December 2020 and all results below reflect this
result.
With the acquisition of Pivot, North America will further scale
our technical capabilities to enhance our value to customers and
deploy our expanding portfolio framework to enable our customers'
success.
Financial performance
Total revenue increased by 27.8 per cent to $1,223.8 million
(2019: $957.8 million). In reported pound sterling equivalents(2) ,
total revenue was up 25.8 per cent.
Growth in North America was driven by the acquisition of Pivot,
which contributed $292.7 million in revenue. Organically, North
American revenue was down 2.8 per cent due to reduced spending by
our mid-market customers, primarily because of the COVID-19
pandemic, partially offset by the strength of hyperscale data
center customers. Overall, revenue was slightly ahead of forecast
for the year, on an organic basis, in both Technology Sourcing and
Services.
Overall, margins in North America decreased by 12 basis points,
with adjusted(1) gross profit decreasing from 9.3 per cent to 9.1
per cent of revenues.
The Technology Sourcing business increased its margin due to the
acquisition of Pivot. Pivot's technology sourcing margins are
approximately 1 per cent higher than the FusionStorm business, as
its customer mix is not as focused on hyperscale customers, who
tend to drive lower margins. Excluding Pivot, Technology Sourcing
margins rose by 44 basis points, primarily due to improved vendor
rebate performance through a change in the mix of vendors towards
those with higher rebate structures, more in line with our European
businesses. Investments in the partner management function in the
prior year also resulted in improved Technology Sourcing
margins.
Professional Services margins were down compared to the prior
year, as customer projects were deferred due to COVID-19, which
resulted in lower staff utilisation. The Managed Services business
reported higher margins year-on-year due to improved mix, currency
benefits and leveraging lower-cost regions for some of its work.
Reported margins were below expectations overall.
Overall adjusted(1) gross profit grew by 26.6 per cent to $112.2
million (2019: $88.6 million) and by 24.2 per cent in reported
pound sterling equivalents(2) .
Administrative expenses increased by 21.8 per cent to $93.8
million (2019: $77.0 million), and by 19.7 per cent in reported
pound sterling equivalents(2) . This was due to the acquisition of
Pivot, which added $23.0 million of administrative expenses for the
period after acquisition. Excluding the impact of acquisition,
administrative expenses were reduced year-on-year. Reduced travel
costs due to COVID-19 were partially offset by other increases in
administrative expenses, which were driven by higher variable
remuneration, continued long-term investments in our new Livermore
Integration Center and the deployment of our Group ERP system,
which will underpin our future systems strategy in the region.
Adjusted(1) operating profit for the North America business
increased by 58.6 per cent to $18.4 million (2019: $11.6 million),
and by 53.8 per cent in reported pound sterling equivalents(2)
.
The increase in operating profit was largely due to the
acquisition of Pivot, which contributed $6.8 million of operating
profit since it was acquired. December was by far Pivot's most
profitable month of the year and this level of performance should
not be extrapolated. Excluding Pivot, North America adjusted(1)
operating profit was largely flat, despite the impacts of COVID-19,
as hyperscale customers continued to purchase in volume. The
Integration Center continued to perform well in the second half of
2020, while operating expenses were reduced due primarily to the
inability to travel as a result of COVID-19.
Technology Sourcing performance
Technology Sourcing revenue increased by 27.3 per cent to
$1,189.2 million (2019: $934.1 million) and by 25.4 per cent in
reported pound sterling equivalents(2) .
The addition of Pivot results in significant growth in our
Technology Sourcing business. Pivot contributed $280.0 million of
Technology Sourcing revenue since acquisition. Excluding Pivot,
Technology Sourcing revenue declined by 2.7 per cent, as mid-market
customers reduced their spending as a result of COVID-19, while
hyperscale customers were not significantly impacted. We saw a
similar technology spending mix amongst major partners and
technologies, particularly in the data center and networking lines
of business. We benefited from significant continuing investments
by our customers, as they digitise their operations and modernise
their infrastructure. We continue to see customers seeking to
simplify their operations by consolidating to fewer suppliers,
resulting in long-term commitments and larger transactions. By
adding the Pivot volume, driving consistent supply chain via
consolidation and process integration remain powerful value
propositions to our target market customers.
North America Technology Sourcing margins improved 65 basis
points over last year, as a result of a number of activities to
improve the underlying efficiency and effectiveness of the
business. The addition of Pivot improved margins by 20 basis
points, while the implementation of the partner management
organisation provided margin improvement that was partially offset
by customer mix, as large hyperscale customers comprised a larger
portion of revenue than the prior year.
Services performance
Services revenue increased by 46.0 per cent to $34.6 million
(2019: $23.7 million) and by 44.1 per cent in reported pound
sterling equivalents(2) . Professional Services increased by 48.8
per cent to $25.6 million (2019: $17.2 million), which was an
increase of 45.2 per cent in reported pound sterling equivalents(2)
. Managed Services increased by 38.5 per cent to $9.0 million
(2019: 6.5 million), an increase of 41.2 per cent in reported pound
sterling equivalents(2) .
Excluding Pivot, Services revenues decreased by 7.9 per cent as
project activity slowed, with customers either delaying expected
spend or cancelling projects while they responded to COVID-19.
The overall Services performance was mixed. Our pre-acquisition
Professional Services business decreased, driven by
COVID-19-related project delays or cancellations. The majority of
the Professional Services business is with our mid-market customers
and that segment was most affected by COVID-19. A bright spot
remains our rack fabrication business, which is delivered from our
new Integration Center and experienced a strong year. We continue
to see significant growth for our Integration Center projects,
including complex distributed branch rollouts, as well as global
data center build-out projects for our hyperscale customers.
Services margins decreased and are now 431 basis points below
the overall combined Group Services margin. While we saw reduced
spending on Services, we were not able to reduce costs as much as
revenue was impacted. Managed Services improved its gross margin,
due to certain higher-margin non-recurring activities.
International
The International Segment comprises a number of trading entities
and offshore Global Service Desk delivery locations.
The trading entities include Computacenter Switzerland,
Computacenter Belgium 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. As of January 2020, 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 9.7 per cent
to GBP174.3 million (2019: GBP193.0 million) and by 11.5 per cent
in constant currency(2) .
2020 was challenging for our trading entities in the
International Segment, especially at the start of the year. Due to
the COVID-19 crisis, the business saw a significant decline in both
revenues and profitability during the first six months of the year.
However, in the second half we saw a remarkable recovery of
business volumes and profitability. This positive trend and the
promising pipeline at the beginning of 2021 make us confident about
our growth ambitions for the coming years.
Adjusted(1) gross profit decreased by 29.4 per cent to GBP30.7
million (2019: GBP43.5 million), and by 29.6 per cent in constant
currency(2) .
Administrative expenses decreased by 23.2 per cent to GBP27.1
million (2019: GBP35.3 million) and by 23.9 per cent in constant
currency(2) .
Overall adjusted(1) operating profit decreased by 56.1 per cent
to GBP3.6 million (2019: GBP8.2 million), and by 55.0 per cent in
constant currency(2) .
In 2019 we invested significantly to increase our sales
capabilities in Belgium, the Netherlands and Switzerland. Due to
the COVID-19 crisis, we did not see immediate returns on these
investments.
The Belgian business saw a small decline in profitability in
2020, mainly because of a reduction in contribution in Technology
Sourcing. This was due to its focus on customers in the private
sector, which we believe has suffered more from the COVID-19 crisis
than Public Sector customers. Our Managed Services contribution has
grown year-on-year as key private customers continue to count on
Computacenter to support the business with the new normal: users
working from home.
The Swiss business was also affected by the pandemic. However, a
more important reason for the profitability decline in 2020 was the
significant scope change in our two major Managed Services
contracts. As we anticipated that this could happen, we invested in
2019 and early 2020 in additional sales capacity and Technology
Sourcing capabilities. We are pleased that we have been able to
offset part of the Managed Services profitability decline with
these new capabilities.
Our business in the Netherlands had a difficult first half but
its performance improved in the last five months of the year.
Whilst Public Sector spending was very slow at the start of the
year, we have been able to win and develop significant contracts
that started to become very active towards the end of the year.
Additionally, we are encouraged by the win of an international
procurement and services contract with a large petrochemical
company. This is particularly pleasing as this is an international
contract where we will be able to leverage our worldwide
capabilities, either through our own operations or through
strategic partners.
In early 2020, we started to build a sales team in Spain. This
business has currently onboarded a team of around 15 account
managers and specialist salespeople. Whilst it was difficult to
gain market share during the pandemic, the Spanish team has
progressed well in developing a local sales pipeline and leveraging
some existing international contracts. Furthermore, the team has
been concentrating on achieving vendor certifications with Cisco
and the ISO 9001 and 14001 quality accreditations.
Technology Sourcing performance
Technology Sourcing revenue decreased by 10.7 per cent to
GBP110.5 million (2019: GBP123.7 million) and by 12.4 per cent in
constant currency(2) .
During the early months of the COVID-19 crisis clients reduced
spend, particularly in the private sector. Investments around the
workplace remained important, as organisations were required to
enable their end users with new ways of working. We struggled,
however, to maintain the same volumes as previous years in the data
center, networking and security business lines.
As we want to build a business for the long term, we have
continued to work with organisations to identify their future
requirements, even when they were not clear that investment
decisions could be made. As it was difficult to meet customers in
the traditional way, we have been creative in developing new ways
of presenting our offering, discussing their needs and creating
proposals. For example, in Belgium we have developed virtual
'meet-the-expert' information sessions, where we share insights
such as how organisations can better anticipate new challenges like
those we all faced in 2020 or discuss new technology trends.
Towards the end of the year, Technology Sourcing business
volumes returned to normal, as some organisations decided to push
ahead with infrastructure projects that were put on hold earlier in
the year. Additionally, the workplace business remained very busy
throughout the year. We could have had an even stronger end to the
year in this business line, but we were confronted by reduced
availability of systems from all of our main vendors. On the other
hand, this has resulted in a strong order book to start 2021. We
are confident that in the coming years we will continue to reap the
benefits of the investments we have made to increase our sales
capacity in the entire International Segment.
Services performance
Services revenue decreased by 7.9 per cent to GBP63.8 million
(2019: GBP69.3 million) and by 10.0 per cent in constant
currency(2) . Professional Services revenue increased by 80 per
cent to GBP7.2 million (2019: GBP4.0 million), and by 75.6 per cent
in constant currency(2) whilst Managed Services decreased 13.3 per
cent to GBP56.6 million (2019: GBP65.3 million), and by 15.3 per
cent in constant currency(2) .
In general, we were pleased with the performance of our Managed
Services business. All major contract renewals were concluded
successfully and we have been able to increase our Contract Base
slightly. As mentioned, our Swiss business was affected by the
revised service scope for two of its major contracts, but we are
committed to continuing to help our customers succeed and look
forward to new extension opportunities in the future.
Our Professional Services business suffered from the COVID-19
crisis, as many customers were forced to reduce projects due to
financial pressure or for practical site access reasons.
Whilst 2020 was a difficult year for the International Segment,
we are encouraged by the way we returned to good business levels
towards the end of the year. Additionally, we have a continued
opportunity to gain further market share in each of our operations,
mainly by leveraging the offering we have developed as a Group and
by using our strength on an international level.
Group Finance Director's Review
In 2020, the Group benefited from Technology Sourcing growth in
the UK, particularly in the Public Sector, and the continuing
strong growth of Professional Services volumes in Germany. This
offset revenue slowdowns in some other businesses across the Group,
principally due to the COVID-19 crisis.
The Group's return to organic revenue growth in the second half
of the year, which excludes the impact of acquisitions, was
pleasing, given the significant reduction of spend seen in a number
of key industrial customers, as they focused on other priorities.
Across the business, we had more customer accounts with declining
revenues than those with growth. However, a small number of
accounts performed very strongly, which more than offset the
weakness elsewhere. The business remained agile and innovative,
enabling us to adapt and support our customers in both the private
and Public Sectors, as they migrated to a remote-working IT
environment in the first half of the year and then faced the
ongoing challenges brought by the continued COVID-19 crisis. We are
immensely proud of the way that our people have responded to our
customers' challenges, generating innovative solutions to ensure
the business remains a key partner for customers through this
period.
The revenue performance was driven by our biggest markets, the
UK and Germany, and was supported by increases in gross margins
across all business lines. This margin performance was due to a
changed customer mix within Technology Sourcing and a reduction of
expenses within costs of goods sold, benefiting both Technology
Sourcing and the Services businesses. Whilst some of these costs,
such as travel, fleet and contractors, will partially return as the
Group goes back to its pre-COVID-19 mode of operation, we aim to
manage this carefully within certain 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. North America saw significant growth in profitability,
against a weak comparative year.
Professional Services revenue continued its very strong and
sustained growth pattern in Germany, with continuing high demand
for our highly skilled people to work on digital transformation,
cloud and security projects for customers. The German business is
clearly the leader in this area for the Group and has seen demand
increase through the COVID-19 crisis. There remains significant
appetite to expand our Professional Services capacity in Germany,
whilst rolling out this capability across the Group. The UK
Professional Services revenue saw a significant rebound in the
second half of the year, as customers re-engaged on projects that
were temporarily paused by the COVID-19 crisis in the first half,
whilst modest decreases were seen in France, mainly due to the
inability to access customer sites.
Managed Services saw revenue reductions across the UK and
Germany, continuing the deflationary trend over recent years, but
the top line was affected by a number of contracts which are based
on price times quantity, rather than a fixed periodic 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. Despite this revenue
reduction, margins improved due to significantly increased
utilisation of our now remote-working engineers, who no longer have
to spend otherwise billable time travelling to customer sites, and
a significant reduction in the use of external contractors.
The acquisition of Pivot and BT Services France on 2 November
2020 was very pleasing, being achieved in the middle of the
pandemic and during a series of rolling national lockdowns. Pivot
increases the scale and breadth of our North American business,
allowing us to serve a wider range of customers in more locations
in the United States. BT Services France will, over time, enhance
the network Services offering of our existing French business,
improving our go-to-market propositions and aligning the business
with our capabilities in Germany, albeit on a smaller scale. Much
remains to be done to transform the business and bring it back to
break-even and beyond. Combined, these acquisitions added GBP232.6
million of revenue and GBP3.2 million of adjusted(1) profit before
tax to the Group's 2020 results.
A reconciliation to key adjusted(1) measures is provided on
Group Finance Director's Review included within this
announcement.
Further details are provided in note 4 to the summary financial
information within this announcement, Segment information.
Reconciliation to adjusted(1) measures for the year ended
2020
Adjustments
=========== ======================================== ===========
Amortisation Utilisation Adjusted(1)
Full-year of acquired of deferred Exceptionals full-year
results intangibles tax and others results
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=========== ============ ============ ============ ===========
Revenue 5,441,258 - - - 5,441,258
================================== =========== ============ ============ ============ ===========
Cost of sales (4,720,717) - - - (4,720,717)
================================== =========== ============ ============ ============ ===========
Gross profit 720,541 - - - 720,541
================================== =========== ============ ============ ============ ===========
Administrative expenses (522,054) 7,434 - 540 (514,080)
================================== =========== ============ ============ ============ ===========
Operating profit 198,487 7,434 - 540 206,461
================================== =========== ============ ============ ============ ===========
Gain on acquisition of subsidiary 14,030 - - (14,030) -
================================== =========== ============ ============ ============ ===========
Finance income 475 - - - 475
================================== =========== ============ ============ ============ ===========
Finance costs (6,421) - - - (6,421)
================================== =========== ============ ============ ============ ===========
Profit before tax 206,571 7,434 - (13,490) 200,515
================================== =========== ============ ============ ============ ===========
Income tax expense (52,415) (1,695) - (715) (54,825)
================================== =========== ============ ============ ============ ===========
Profit for the year 154,156 5,739 - (14,205) 145,690
================================== =========== ============ ============ ============ ===========
Reconciliation to adjusted(1) measures for the year ended
2019
Adjustments
=========== ======================================== ===========
Amortisation Utilisation Adjusted(1)
Full-year of acquired of deferred Exceptionals full-year
results intangibles tax and others results
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=========== ============ ============ ============ ===========
Revenue 5,052,779 - - - 5,052,779
======================== =========== ============ ============ ============ ===========
Cost of sales (4,389,665) - - - (4,389,665)
======================== =========== ============ ============ ============ ===========
Gross profit 663,114 - - - 663,114
======================== =========== ============ ============ ============ ===========
Administrative expenses (516,090) 4,374 - 94 (511,622)
======================== =========== ============ ============ ============ ===========
Operating profit 147,024 4,374 - 94 151,492
======================== =========== ============ ============ ============ ===========
Finance income 980 - - - 980
======================== =========== ============ ============ ============ ===========
Finance costs (7,046) - - 825 (6,221)
======================== =========== ============ ============ ============ ===========
Profit before tax 140,958 4,374 - 919 146,251
======================== =========== ============ ============ ============ ===========
Income tax expense (39,397) (1,149) 733 (878) (40,691)
======================== =========== ============ ============ ============ ===========
Profit for the year 101,561 3,225 733 41 105,560
======================== =========== ============ ============ ============ ===========
Profit before tax
The Group's profit before tax increased by 46.5 per cent to
GBP206.6 million (2019: GBP141.0 million). Adjusted(1) profit
before tax increased by 37.0 per cent to GBP200.5 million (2019:
GBP146.3 million) and by 35.5 per cent in constant currency(2)
.
The difference between profit before tax and adjusted(1) profit
before tax primarily relates to the Group's reported net gain of
GBP6.1 million (2019: net costs of GBP5.3 million) from exceptional
and other adjusting items. This is principally the gain on
acquisition of BT Services France, partially offset by the
amortisation of acquired intangibles as a result of the acquisition
of FusionStorm on 30 September 2018 and Pivot on 2 November
2020.
The Group adopted IFRS 16 'Leases' from 1 January 2019, which
has resulted in changes in accounting policies and adjustments to
the amounts recognised in the Financial Statements, as disclosed in
the 2019 Annual Report and Accounts. The current year results
include an overall decrease in profit before tax of GBP2.0 million,
including on an adjusted(1) basis, due to the impact of IFRS 16
(2019: GBP1.7 million).
Net finance charge
The net finance charge in the year amounted to GBP5.9 million
(2019: GBP6.1 million). The charge includes GBP4.5 million of
interest on lease liabilities recognised following the adoption of
IFRS 16 on 1 January 2019 (2019: GBP3.7 million). A further GBP0.8
million of cost relates to interest on the term loan drawn down for
the FusionStorm acquisition (2019: GBP1.8 million), along with a
GBP0.3 million cost on the term loan for the Kerpen facility (2019:
GBP0.4 million) and GBP0.4 million of cost related to the Pivot
facility. Interest costs of GBP0.1 million related to the French
retirement benefit obligation were incurred in the year (2019:
nil). The prior year net finance charge also included exceptional
interest costs of GBP0.8 million relating to the unwind of the
discount on the deferred consideration for the purchase of
FusionStorm and a further GBP0.1 million cost for the unwind of the
discount on the deferred consideration for acquisitions, the former
of which was excluded on an adjusted(1) basis.
Outside of the specific items above, net finance income of
GBP0.2 million was recorded (2019: GBP0.7 million). On an
adjusted(1) basis, the net finance cost was GBP5.9 million during
the year (2019: GBP5.2 million).
Taxation
The tax charge was GBP52.4 million (2019: GBP39.4 million) on
profit before tax of GBP206.6 million (2019: GBP141.0 million).
This represents a tax rate of 25.4 per cent (2019: 27.9 per cent).
The tax rate has fallen primarily due to the inclusion of the gain
on acquisition of BT Services France of GBP14.0 million, recognised
on consolidation of the acquired entity. This is not taxable, as no
chargeable gain has been realised in any legal entity. Further, the
Group's adjusted(1) tax rate has previously benefited from the
historical tax losses in Germany, the final part of which was
utilised during the previous year. The utilisation of the asset of
GBP0.7 million in 2019 increased the tax rate by 0.5 per cent but
was considered to be outside of our adjusted(1) tax measure.
During 2020, a tax credit of GBP0.7 million (2019: GBP0.8
million) was recorded due to post-acquisition activity in
FusionStorm. This benefit derived from payments which were settled
by the vendor, out of the consideration paid, via post-acquisition
capital contributions to FusionStorm. As this credit was related to
the acquisition and not operational activity within FusionStorm, is
a one-off and material to the overall tax result, we have
classified this as an exceptional tax item, consistent with the
treatment in 2018 and 2019.
The tax credit related to the amortisation of acquired
intangibles was GBP1.7 million (2019: GBP1.1 million). The GBP7.4
million of amortisation of intangible assets is nearly entirely a
result of the recent North American acquisitions (2019: GBP4.4
million). As the amortisation is recognised outside of our
adjusted(1) profitability, the tax benefit on the amortisation is
also reported outside of our adjusted(1) tax charge.
The adjusted(1) tax charge for the year was GBP54.8 million
(2019: GBP40.7 million), on an adjusted(1) profit before tax for
the year of GBP200.5 million (2019: GBP146.3 million). The
effective tax rate (ETR) was therefore 27.3 per cent (2019: 27.8
per cent) on an adjusted(1) basis. The ETR during the year was
lower than the previous year due to the large increase in
profitability in the UK, which has lower tax rates than the Group
average, particularly Germany and the US. The ETR is within the
full-year range that we indicated in our 2020 Interim Results,
which showed an ETR of 28.1 per cent (H1 2019: 26.6 per cent).
We expect that the ETR in 2021 will remain under upwards
pressure, due to an increasing reweighting of the geographic split
of adjusted(1) profit before tax away from the UK to Germany and
the US, where tax rates are substantially higher, and also as
governments across our primary jurisdictions come under fiscal and
political pressure to increase corporation tax rates.
The Group Tax Policy was reviewed during the year and approved
by the Audit Committee and the Board, with no material changes from
the prior year. We make every effort to pay all the tax
attributable to profits earned in each jurisdiction that we operate
in. We do not artificially inflate or reduce profits in one
jurisdiction to provide a beneficial tax result in another and
maintain approved transfer pricing policies and programmes, to meet
local compliance requirements. Virtually all of the tax charge in
2020 was incurred in either the UK, German or US tax jurisdictions,
as it was in 2019, with Computacenter France, excluding the BT
Services France acquisition, now also moving into a taxpaying
position.
There are no material tax risks across the Group. Computacenter
will recognise provisions and accruals in respect of tax where
there is a degree of estimation and uncertainty, including where it
relates to transfer pricing, such that a balance cannot fully be
determined until accepted by the relevant tax authorities. For
2020, the Group Transfer Pricing policy implemented in 2013
resulted in a licence fee of GBP27.9 million (2019: GBP25.6
million), charged by Computacenter UK to Computacenter Germany,
Computacenter France and Computacenter Belgium. The licence fee is
equivalent to 1.0 per cent of revenue and reflects the value of the
best practice and know-how that is owned by Computacenter UK and
used by the Group. It is consistent with the requirements of the
Organisation for Economic Co-operation and Development (OECD) base
erosion and profit shifting. The licence fee is recorded outside
the Segmental results found in note 4 to the summary financial
information within this announcement, Segment information, which
analyses Segmental results down to adjusted(1) operating
profit.
The table below reconciles the tax charge to the adjusted(1) tax
charge for the years ended 31 December 2020 and 31 December
2019.
2020 2019
GBP'000 GBP'000
======== ========
Tax charge 52,415 39,397
============================================ ======== ========
Adjustments to exclude:
============================================ ======== ========
Exceptional tax items 715 839
============================================ ======== ========
Tax on amortisation of acquired intangibles 1,695 1,149
============================================ ======== ========
Utilisation of German deferred tax assets - (733)
============================================ ======== ========
Tax on exceptional items - 39
============================================ ======== ========
Adjusted(1) tax charge 54,825 40,691
============================================ ======== ========
ETR 25.4% 27.9%
============================================ ======== ========
Adjusted(1) ETR 27.3% 27.8%
============================================ ======== ========
Profit for the year
The profit for the year increased by 51.8 per cent to GBP154.2
million (2019: GBP101.6 million). The adjusted(1) profit for the
year increased by 38.0 per cent to GBP145.7 million (2019: GBP105.6
million) and by 36.7 per cent in constant currency(2) .
Exceptional and other adjusting items
The net gain from exceptional and other adjusting items in the
year was GBP8.5 million (2019: loss of GBP4.0 million). Excluding
the tax items noted above, which resulted in a gain of GBP2.4
million (2019: gain of GBP1.3 million), the profit before tax
impact was a net gain from exceptional and other adjusting items of
GBP6.1 million (2019: loss of GBP5.3 million).
The acquisition of BT Services France resulted in an exceptional
gain of GBP14.0 million, which was recognised on consolidation of
the subsidiary. The gain arose because the net assets acquired for
consideration of EUR1 totalled GBP14.0 million after fair value
adjustments, including GBP27.6 million of cash. The business
acquired comprised BT's domestic French services operations which,
on acquisition, was loss making on a stand-alone basis. The Company
considers that the exceptional gain reflects the future losses that
the acquired business will incur over the medium term, as it is
brought onto a sustainable footing through a combination of
upskilling employees, cross-selling into the Group's customers,
alignment with Group processes and systems, and the general
improvement of its operating activities. Where possible, future
charges relating to this reconfiguration of the business will be
disclosed separately to the Group's adjusted(1) results. This will
mean that, over time, the future costs incurred can be attributed
against the exceptional gain on acquisition recognised in the
current year.
An exceptional loss during the year of GBP0.7 million resulted
from the acquisition of Pivot and primarily related to fees paid to
the Company's advisors. This cost is non-operational, unlikely to
recur and is consistent with our prior-year treatment of
acquisition costs on material transactions as exceptional items. It
has therefore been classified as outside our adjusted(1)
results.
An exceptional gain of GBP0.1 million related to the release of
accrued costs for the French Social Plan. Whilst not material, this
has been classified outside our adjusted(1) results to be
consistent with where the cost was recognised in 2016, as an
additional provision for the effect of winding-down the Social
Plan.
In the prior year, an exceptional loss of GBP0.1 million was
recognised, comprising costs directly relating to the acquisition
of FusionStorm. A further GBP0.8 million was also removed from the
adjusted(1) net finance expense and classified as exceptional
interest costs in 2019. This related to the unwinding of the
discount on the deferred consideration for the purchase of
FusionStorm.
We have continued to exclude the amortisation of acquired
intangible assets in calculating our adjusted(1) results.
Amortisation of intangible assets is non-cash, does not relate to
the operational performance of the business, and is significantly
affected by the timing and size of our acquisitions, which distorts
the understanding of our Group and Segmental operating results.
The amortisation of acquired intangible assets was GBP7.4
million (2019: GBP4.4 million), primarily relating to the
amortisation of the intangibles acquired as part of the recent
North American acquisitions. The current year value includes the
write-off of a number of short-term acquired intangibles relating
to the valuation of Pivot order backlogs, due to the expiration of
the valued assets.
Other items within adjusted(1) profit before tax
The two items below have been absorbed by the Group within its
adjusted(1) profit before tax result and, whilst not exceptional,
are one-off in nature.
Group EPS target achievement bonus
Since 2013, the Company has had an internal ambition to exceed
adjusted(1) EPS of GBP1. The Company has grown, developing its
capability, reach and reputation to the extent that the goal was
achieved during 2020. The Company decided to mark the achievement
with a one-off bonus, to recognise those who have been with the
Company along this journey. The bonus was given to approximately 80
per cent of employees globally. Senior managers and those with
commission-based rewards were excluded, with the focus on those
longest serving. For those eligible, the award was GBP200 or
equivalent for an employee who had completed their first year of
service, rising to GBP500 for those with more than seven years of
service.
The Company does not intend to make similar payments on a
regular basis but reserves the right to share the rewards of
success with its employees, if another long-term goal is achieved.
The total cost to the Group of the bonus was GBP5.2 million, which
was paid from cash reserves prior to 31 December 2020.
North American restructuring costs
Following the acquisition of Pivot, the senior Management was
amalgamated with that of the existing businesses in the US. Whilst
a formal restructuring programme is not expected to start until the
rollout of the Group's ERP systems and processes is complete
throughout the North American operation, several positions were
left with an overlap of senior employees. As a result, the Company
has agreed with certain senior employees that their positions are
in excess of the business's needs and exit packages totalling $1.7
million have been accrued as at 31 December 2020.
Earnings per share
Diluted EPS increased by 50.3 per cent to 133.8 pence per share
(2019: 89.0 pence per share). Adjusted(1) diluted EPS increased by
36.6 per cent to 126.4 pence per share (2019: 92.5 pence per
share).
2020 2019
======= =======
Basic weighted average number of shares (excluding own
shares held) (no.'000) 112,894 112,514
======================================================= ======= =======
Effect of dilution:
======================================================= ======= =======
Share options 2,005 1,655
======================================================= ======= =======
Diluted weighted average number of shares 114,899 114,169
======================================================= ======= =======
Profit for the year attributable to equity holders of
the Parent (GBP'000) 153,750 101,655
======================================================= ======= =======
Basic EPS (pence) 136.2 90.3
======================================================= ======= =======
Diluted EPS (pence) 133.8 89.0
======================================================= ======= =======
Adjusted(1) profit for the year attributable to equity
holders of the Parent (GBP'000) 145,284 105,654
======================================================= ======= =======
Adjusted(1) basic EPS (pence) 128.7 93.9
======================================================= ======= =======
Adjusted(1) diluted EPS (pence) 126.4 92.5
======================================================= ======= =======
Dividend
The Board recognises the importance of dividends to shareholders
and the Group prides itself on a long track record of paying
dividends and other special one-off cash returns. However, 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 cash flow and preserve cash balances,
in light of the heightening uncertainty about the scale and
duration of the pandemic. The Group has approved a number of
requests from customers, immaterial in aggregate, for extended
payment terms and continues to look for ways to support the
short-term cash flow 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 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 Group continues to monitor the COVID-19 crisis and the
resultant cash flow implications. With the strong results for the
period to 30 June 2020 and the corresponding cash flow performance,
the Board considered it appropriate to resume distributing cash to
shareholders by returning to the Group's normal interim and
full-year dividend cycle. The Board was therefore pleased to
announce the interim dividend of 12.3 pence per share, which was
paid on Friday 23 October 2020.
Computacenter's approach to capital management is to ensure that
the Group has a robust capital base and maintains a strong credit
rating, whilst aiming to maximise shareholder value. The Group
remains highly cash generative and adjusted net funds(3) continue
to regenerate on the Consolidated Balance Sheet, which allows
acquisitions such as FusionStorm in 2018 and Pivot in 2020,
alongside a number of other small acquisitions.
If further funds are not required for investment within the
business, either for fixed assets, working capital support or
acquisitions, and the distributable reserves are available in the
Parent Company, we will aim to return the additional cash to
investors through one-off returns of value, as we last did in
February 2018.
Dividends are paid from the standalone balance sheet of the
Parent Company and, as at 31 December 2020, the distributable
reserves were approximately GBP268 million (2019: GBP165
million).
The Board is pleased to propose a final dividend for 2020 of
38.4 pence per share. Together with the interim dividend, this
brings the total ordinary dividend for 2020 to 50.7 pence per
share, representing a 37.0 per cent increase on the 2019 total
proposed dividend per share of 37.0 pence, including the final 2019
dividend of 26.9 pence per share that was proposed but not paid as
described above.
The Board has consistently applied the Company's dividend
policy, which states that the total dividend paid will result in a
dividend cover of 2 to 2.5 times based on adjusted(1) diluted EPS.
In 2020, the cover was 2.5 times (2019: 2.5 times).
Subject to the approval of shareholders at our Annual General
Meeting on 20 May 2021, the proposed dividend will be paid on
Friday 2 July 2021. The dividend record date is set as Friday 4
June 2021 and the shares will be marked ex-dividend on Thursday 3
June 2021.
Segmental reporting structure changes
During the first half of the year, Management reviewed the way
it reported Segmental performance to the Board and the CEO, who is
the Group's Chief Operating Decision Maker ('CODM'). Subsequently,
from 1 January 2020 the Group has revised where the results of
certain Managed Services contracts are reported within its
operating Segments. The operating Segments remain unchanged in all
other respects from those reported at 31 December 2019. 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. We have therefore restated the results
for the French and German Segments for the year ended 31 December
2019, to assist with understanding the growth in each business and
to ensure year-on-year results are comparable.
Computacenter USA performs Managed Services work for other
Computacenter entities, on behalf of several key European
contracts. These revenues were originally recorded in the USA
Segment, where the associated underlying subsidiary recognises the
revenues in its statutory accounts. However, to be consistent with
practices across the Group, Management has reallocated these
revenues to the UK, German, French and International Segments which
have responsibility for the customer contracts. This reflects
better where the portfolio co-ordination and operational
responsibility lies and, therefore, where the benefits should
accrue on a Segmental basis. This treatment also means that for the
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 to assist with understanding
the growth in each business and to ensure year-on-year comparisons
reflect true underlying growth. This has no impact on Segmental
profitability, as the margins were previously shared on the same
basis that the revenue now reflects. Further, with the acquisition
of Pivot on 2 November 2020, which includes a material business in
Canada, the USA Segment has been renamed as the North American
Segment and is referred to as such throughout this Annual Report
and Accounts.
This new Segmental reporting structure is the basis on which
internal reports are provided to the CEO, 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. As noted below, Central Corporate Costs continue to be
disclosed as a separate column within the Segmental note to the
summary financial information within this announcement.
Further details of the Segmental changes and the associated
restatement of 2019 Segment information can be found in note 4 to
the summary financial information within this announcement. All
discussion within this Annual Report and Accounts of Segmental
results reflects this revised structure and the resultant
prior-year restatements.
Central Corporate Costs
Certain expenses are not allocated to individual Segments
because they are not directly attributable to any single Segment.
These include costs for the Board itself and 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 included in
the summary financial information included within this
announcement. These costs are borne within the Computacenter (UK)
Limited legal entity and have been removed for Segmental reporting
and performance analysis but form part of the overall Group
administrative expenses.
During the year, total Central Corporate Costs were steady at
GBP27.1 million (2019: GBP27.1 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 down at GBP6.8 million (2019: GBP7.1
million);
-- share-based payment charges associated with the Group
Executive members identified above, including the Group Executive
Directors, increased from GBP3.0 million in 2019 to GBP3.2 million
in 2020, due primarily to the increased value of Computacenter plc
ordinary shares; and
-- strategic corporate initiatives were flat at GBP17.1 million
(2019: GBP17.1 million), with spend primarily focused on projects
designed to increase capability, enhance productivity or strengthen
systems which underpin the Group.
Cash flow
The Group delivered an operating cash inflow of GBP236.8 million
for the year to 31 December 2020 (2019: GBP198.3 million
inflow).
Certain COVID-related one-off benefits were included in the 2020
full-year cash flow and net cash positions. This includes extended
free-of-charge supplier credit with a major vendor of approximately
GBP15.0 million as at 31 December 2020. Temporary tax payment
timing benefits utilised during the year were fully repaid as at 31
December 2020.
Our usual strong year-end net funds position was strengthened
further, as a number of our customers paid ahead of normal payment
cycles, partly, we believe, where overseas customers looked to
avoid sometimes negative interest rates. This has been exacerbated
by a shift towards government customers during the year, resulting
in improvements in cash collection as governments, particularly in
Europe, have been settling debts as quickly as possible and well
ahead of industry standard payment terms. The Group, in turn, paid
a number of its suppliers early, to reduce the temporary excess
cash on the balance sheet at the year end. However, the volume of
early payments from customers received in the final days of the
year was unprecedented. The Company estimates, broadly, that
unforeseen receipts from customer payments in advance of the due
date exceeded the Company's ability to pay its own suppliers early
by roughly GBP50 million.
Capital expenditure in the year was GBP27.5 million (2019:
GBP38.9 million), with the decrease primarily relating to the
prior-year investment in the final elements of the German facility
and establishing a new Integration Center in Livermore, California.
The spend in 2020 primarily comprises 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 31 December 2020 was GBP38.9 million (31
December 2019: GBP33.8 million).
Cash and cash equivalents and net funds
Cash and cash equivalents as at 31 December 2020 were GBP309.8
million, compared to GBP217.9 million at 31 December 2019. Net
funds(3) as at 31 December 2020 were GBP51.2 million (31 December
2019: GBP20.3 million). Adjusted net funds(3) as at 31 December
2020 were GBP188.6 million, compared to adjusted net funds(3) of
GBP137.1 million as at 31 December 2019.
Net funds as at 31 December 2020 and 31 December 2019 were as
follows:
2020 2019
GBP'000 GBP'000
========= =========
Cash and cash equivalents 309,844 217,881
==================================================== ========= =========
Bank loans and credit facility (121,194) (80,772)
==================================================== ========= =========
Adjusted net funds(3) (excluding lease liabilities) 188,650 137,109
==================================================== ========= =========
Lease liabilities (137,474) (116,766)
==================================================== ========= =========
Net funds 51,176 20,343
==================================================== ========= =========
For a full reconciliation of net funds and adjusted net funds(3)
, see note 9 to the summary financial information within this
announcement.
The Group had three specific credit facilities in place during
the year 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 year, 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, as part of a wider cash-preservation strategy in the light of
the COVID-19 pandemic. As at 31 December 2020, GBP41.6 million
remained of the loan (31 December 2019: GBP56.0 million). Pivot has
a $225.0 million senior secured asset-based revolving credit
facility, from a lending group represented by JPMorgan Chase Bank,
N.A. This can be used for revolving loans, letters of credit,
protective advances, over advances, and swing line loans, and
GBP58.4 million was drawn on the facility as at 31 December 2020.
The Group also has a specific term loan for the build and purchase
of our German office headquarters and fit out of the Integration
Center in Kerpen, which stood at GBP20.9 million at 31 December
2020 (31 December 2019: GBP24.8 million).
The Group excludes 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 31 December 2020 (31 December
2019: nil). The Group's adjusted net funds(3) position contains no
current asset investments (31 December 2019: nil).
Revenue
Half 1 Half 2 Total
GBPm GBPm GBPm
======= ======= =======
2018 2,008.9 2,343.7 4,352.6
======== ======= ======= =======
2019 2,427.0 2,625.8 5,052.8
======== ======= ======= =======
2020 2,462.2 2,979.1 5,441.3
======== ======= ======= =======
2020/19 1.5% 13.5% 7.7%
======== ======= ======= =======
Adjusted(1) profit before tax
Half 1 Half 2 Total
================ ================ ================
GBPm % Revenue GBPm % Revenue GBPm % Revenue
===== ========= ===== ========= ===== =========
2018 52.1 2.6% 66.1 2.8% 118.2 2.7%
======== ===== ========= ===== ========= ===== =========
2019 53.5 2.2% 92.8 3.5% 146.3 2.9%
======== ===== ========= ===== ========= ===== =========
2020 74.6 3.0% 125.9 4.2% 200.5 3.7%
======== ===== ========= ===== ========= ===== =========
2020/19 39.4% 35.7% 37.0%
======== ===== ========= ===== ========= ===== =========
Revenue by Segment
2020 2019 (restated)
========================= =========================
Half 1 Half 2 Total Half 1 Half 2 Total
GBPm GBPm GBPm GBPm GBPm GBPm
======= ======= ======= ======= ======= =======
UK 858.8 914.6 1,773.4 800.8 796.2 1,597.0
============== ======= ======= ======= ======= ======= =======
Germany 843.7 1,032.6 1,876.3 862.9 1,024.3 1,887.2
============== ======= ======= ======= ======= ======= =======
France 304.3 368.5 672.8 300.2 324.8 625.0
============== ======= ======= ======= ======= ======= =======
North America 378.2 566.3 944.5 369.9 380.7 750.6
============== ======= ======= ======= ======= ======= =======
International 77.2 97.1 174.3 93.2 99.8 193.0
============== ======= ======= ======= ======= ======= =======
Total 2,462.2 2,979.1 5,441.3 2,427.0 2,625.8 5,052.8
============== ======= ======= ======= ======= ======= =======
Adjusted(1) operating profit by Segment
2020
=======================================================
Half 1 Half 2 Total
================= ================= =================
GBPm % Revenue GBPm % Revenue GBPm % Revenue
====== ========= ====== ========= ====== =========
UK 45.9 5.3% 44.5 4.9% 90.4 5.1%
======================== ====== ========= ====== ========= ====== =========
Germany 35.6 4.2% 77.0 7.5% 112.6 6.0%
======================== ====== ========= ====== ========= ====== =========
France 3.8 1.2% 9.2 2.5% 13.0 1.9%
======================== ====== ========= ====== ========= ====== =========
North America 4.7 1.2% 9.3 1.6% 14.0 1.5%
======================== ====== ========= ====== ========= ====== =========
International 0.2 0.3% 3.4 3.5% 3.6 2.1%
======================== ====== ========= ====== ========= ====== =========
Central Corporate Costs (12.9) (0.5%) (14.2) (0.5%) (27.1)
======================== ====== ========= ====== ========= ====== =========
Total 77.3 3.1% 129.2 4.3% 206.5 3.8%
======================== ====== ========= ====== ========= ====== =========
2019 (restated)
=======================================================
Half 1 Half 2 Total
================= ================= =================
GBPm % Revenue GBPm % Revenue GBPm % Revenue
====== ========= ====== ========= ====== =========
UK 23.5 2.9% 41.0 5.1% 64.5 4.0%
======================== ====== ========= ====== ========= ====== =========
Germany 30.4 3.5% 49.1 4.8% 79.5 4.2%
======================== ====== ========= ====== ========= ====== =========
France 8.3 2.8% 9.0 2.8% 17.3 2.8%
======================== ====== ========= ====== ========= ====== =========
North America 1.2 0.3% 7.9 2.1% 9.1 1.2%
======================== ====== ========= ====== ========= ====== =========
International 4.6 4.9% 3.6 3.6% 8.2 4.2%
======================== ====== ========= ====== ========= ====== =========
Central Corporate Costs (11.9) (0.5%) (15.2) (0.6%) (27.1)
======================== ====== ========= ====== ========= ====== =========
Total 56.1 2.3% 95.4 3.6% 151.5 3.0%
======================== ====== ========= ====== ========= ====== =========
Trade creditor arrangements
Computacenter has a strong covenant and enjoys a favourable
credit rating from IT vendors and suppliers. Some suppliers provide
standard credit directly on their own credit risk, whereas other
suppliers decide to sell the debt to banks, who offer to purchase
the receivables and manage collection. The standard credit terms
offered by suppliers are typically between 30 and 60 days, whether
provided directly or when sold to a third-party finance provider.
In the latter case, the cost of the free trade credit period is
paid by the relevant supplier, as part of the overall package of
terms provided by suppliers to Computacenter and our competitors.
The finance providers offer extended credit terms at relatively low
interest rates. However, these rates are always higher than the
rate at which we deposit and therefore we do not currently use
these facilities.
Financial instruments
The Group's financial instruments comprise borrowings, cash and
liquid resources, and various items that arise directly from its
operations. The Group's policy is not to undertake speculative
trading in financial instruments.
The Group enters into hedging transactions, principally forward
exchange contracts or currency swaps, to manage currency risks
arising from the Group's operations and its sources of finance. As
the Group continues to expand its global reach and benefit from
lower-cost operations in geographies such as South Africa, Poland,
Mexico and India, it has entered into forward exchange contracts to
help manage cost increases due to currency movements.
The main risks arising from the Group's financial instruments
are interest rate, liquidity and foreign currency risks. The
overall financial instruments strategy is to manage these risks in
order to minimise their impact on the Group's financial results.
The policies for managing each of these risks are set out below.
Further disclosures in line with the requirements of IFRS 7 are
included in the Consolidated Financial Statements.
Interest rate risk
The Group finances its operations through a mixture of retained
profits, bank borrowings, leases and loans for certain customer
contracts. The Group's general bank borrowings, other facilities
and deposits are at floating rates. No interest rate derivative
contracts have been entered into. The Group's specific borrowing
facility for the purchase of FusionStorm, and the undrawn committed
facility of GBP60 million, are at floating rates. However, the
borrowing facility for the operational headquarters in Germany is
at a fixed rate.
Liquidity risk
The Group's policy is to ensure that it has sufficient funding
and facilities in place to meet any foreseeable peak in borrowing
requirements. The Group's positive net cash was maintained
throughout 2020 and at the year end was GBP309.8 million, with net
funds(3) of GBP51.2 million after including the Group's three
specific borrowing facilities and lease liabilities recognised
under IFRS 16. Excluding lease liabilities, adjusted net funds(3)
was GBP188.6 million at the year end.
Due to strong cash generation over many years, the Group can
currently finance its operational requirements from its cash
balance, and it operates an informal cash pooling arrangement for
the majority of Group entities. The Group has a committed facility
of GBP60.0 million, which was extended in September 2020 and now
has an expiry date of 7 September 2023. The Group has never drawn
on this committed facility.
The Group has a Board-monitored policy to manage its
counterparty risk. This ensures that cash is placed on deposit
across a range of reputable banking institutions.
Foreign currency risk
The Group operates primarily in the United Kingdom, Germany,
France and the United States of America, with smaller operations in
Belgium, Canada, China, Hungary, India, Malaysia, Mexico, the
Netherlands, Poland, South Africa, Spain and Switzerland.
The Group uses an informal cash pooling facility to ensure that
its operations outside the UK are adequately funded, where
principal receipts and payments are denominated in euros and US
dollars. For those countries within the Eurozone, the level of
non-euro denominated sales is small and, if material, the Group's
policy is to eliminate currency exposure through forward currency
contracts. For our US operations, most transactions are denominated
in US dollars. For the UK, the majority of sales and purchases are
denominated in pounds sterling and any material trading exposures
are eliminated through forward currency contracts.
The Group has been successful in winning international Services
contracts, where Services are provided in multiple countries.
We aim to minimise currency exposure by invoicing the customer
in the same currency in which the costs are incurred. For certain
contracts, the Group's committed contract costs are not denominated
in the same currency as its sales. In such circumstances, for
example where contract costs are denominated in South African rand,
we eliminate currency exposure for a foreseeable period on these
future cash flows, through forward currency contracts.
In 2020, the Group recognised a loss of GBP1.9 million (2019:
loss of GBP0.9 million) through other comprehensive income in
relation to the changes in fair value of related forward currency
contracts, where the cash flow hedges relating to firm commitments
were assessed to be highly effective.
The Group reports its results in pounds sterling. The ongoing
weakness in the value of sterling against most currencies during
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 in 2020 were not
materially dissimilar to those seen in 2019. The impact of
restating 2019 results at 2020 exchange rates would be an increase
of approximately GBP49.5 million in 2019 revenue and an increase of
GBP1.8 million in 2019 adjusted(1) profit before tax.
Credit risk
The Group principally manages credit risk through customer
credit limits. The credit limit is set for each customer based on
its creditworthiness, using credit rating agencies as a guide, and
the anticipated levels of business activity. These limits are
determined when the customer account is first set up and are
regularly monitored thereafter.
There are no significant concentrations of credit risk within
the Group. The Group's major customer, disclosed in note 4 to the
summary financial information within this announcement, consists of
entities under the control of the UK Government. The maximum credit
risk exposure relating to financial assets is represented by their
carrying value as at the balance sheet date.
Brexit update
In the 2019 Annual Report and Accounts and the 2020 Interim
Report and Accounts, we provided a detailed update on our
positioning from a Brexit risk and preparation perspective. In
summary, we explained that we were in a low-risk category and that
we had made considerable efforts to reduce the risk to our business
as much as possible.
Since 1 January 2021, we believe that our risk position and
preparation has served us well.
The Brexit deal announced on 24 December 2020 was helpful for
the UK generally and removed the cliff edge risk position,
especially the avoidance of customs tariffs on most goods shipped
to and from the EU, depending on the country of origin. We have not
yet seen, since 1 January 2021, very long queues of lorries at UK
or French ports. There clearly have been some issues arising on
customs tariffs on UK exports to the EU generally, where the goods
are not of British origin. However, this issue has little impact on
Computacenter as most of the products that we sell are zero rated
under WTO terms.
There are still issues unresolved from a UK perspective, such as
services and euro denominated trading which negatively impacts the
City of London. However, we operate in all major cities in the
principal EU countries that will benefit from this and should be
able to offset any impact.
Imports into the UK
We have seen short delays arising from issues relating to
customs checks and customs documentation for goods coming from the
EU, which are typically one or two days and a week with one large
supplier. These have not materially impacted our business to
date.
A small number of our suppliers operate under International
Commercial Terms similar to Carriage and Insurance Paid, which
requires Computacenter to operate as the importer of record when
they export from the EU. This has increased the administrative
burden for us on these deliveries, although this has limited
financial impact on the UK business as a whole.
Exports from the UK to the EU
A major part of our Brexit preparation was to move circa 90 per
cent of the business for UK customers requiring deliveries in the
EU from Computacenter UK to Computacenter Germany, thereby avoiding
the need for export documentation and potential border delays. This
has been very successful. We have also implanted some
export-specific software on our Group ERP system, to ease the
administration of exports, production of customs invoices etc.
Despite this, there have been some challenges on the remaining 10
per cent of this business in terms of service level achievement,
problems with documentation and couriers for EU countries. Some
courier operations are not as well prepared as they should be,
which has caused some confusion and delay. However, we are
addressing these issues and do not expect any material impact.
Whilst Northern Ireland is part of the UK, the invisible border
in the Irish Sea, and initial lack of clarity on how to export
there, has resulted in some issues on shipments from Great Britain
to Northern Ireland. These issues are quite small and have largely
been resolved.
People
As noted in the 2019 Annual Report and Accounts, we do not have
many EU nationals working in our UK business or UK nationals in our
EU businesses. We were well prepared for this and have had no
material issues.
Whilst there is limited travel expected in 2021, we are aware
that UK nationals who need to visit EU countries to work on
specific projects will require a work visa. We will be able to make
arrangements to minimise the impact of this issue.
Data transfer regulation
As noted in our 2019 Annual Report and Accounts we are well
prepared to meet data transfer regulations, having adopted
EU-approved standard contractual clauses concerning data adequacy
into our intra-Group agreements in 2018 and 2019. The Brexit deal
included a form of data adequacy clause for four months, which can
be extended by a further two months, whilst negotiations take place
on longer-term arrangements.
Going Concern
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are set out within this Group
Finance Director's Review.
The Directors have, after due consideration, and as set out in
note 2 to the summary financial information within this
announcement, a reasonable expectation that the Group has adequate
resources to continue in operational existence for a period of 12
months from the date of approval of the Consolidated Financial
Statements.
Thus, they continue to adopt the Going Concern basis of
accounting in preparing the Consolidated Financial Statements.
Viability Statement
In accordance with provision 31 of the UK Corporate Governance
Code, the Directors have assessed the Group's prospects over a
longer period than the 12 months required by the Going Concern
Statement.
Viability timeframe
The Directors have assessed the Group's viability over a period
of three years from 31 December 2020. This period was selected as
an appropriate timeframe for the following reasons:
-- the Group's rolling strategic review, as considered by the Board, covers a three-year period;
-- the period is aligned to the length of the Group's Managed
Services contracts, which are typically three to five years
long;
-- the short lifecycle and constantly evolving nature of the
technology industry lends itself to a period not materially longer
than three years;
-- Technology Sourcing has seen greater recent growth than the
Group's Services business, increasing the revenue mix towards the
part of the business that has less medium-term visibility and is
therefore more difficult to forecast;
-- the continuing macro-economic, diplomatic and trade
environment, following the departure of the UK from the European
Union, introduces greater uncertainty into a forecasting period
longer than three years; and
-- the prolonged impact of COVID-19, and in particular the
effect on certain of our customers from the worsening global
economic outlook, and the current increasing pace of change of
technology adoption as a result.
Whilst the Directors have no reason to believe the Group will
not be viable over a longer period than three years, we believe
that a three-year period presents shareholders with a reasonable
degree of confidence, while providing a longer-term
perspective.
With regard to the principal risks, the Directors remain assured
that the business model will be valid beyond the period of this
Viability Statement. There will continue to be demand for both our
Professional Services and Managed Services businesses, and
Management is responsible for ensuring that the Group remains able
to meet that demand at an appropriate cost to our customers. The
Group's value-added product reselling Technology Sourcing business
only appears vulnerable to disintermediation at the low end of the
product range, as the Group continues to provide a valuable service
to customers and vendors alike. The Group has seen significant
business growth in the UK throughout the COVID-19 pandemic, due to
the end-to-end Technology Sourcing capability that it can deliver
from its UK Integration Center, which is a significant
differentiating factor in this market.
Prospects of the Group assessment process and key
assumptions
The assessment of the Group's prospects derives from the annual
strategic planning and review process. This begins with an annual
away day for the Board, where Management presents the strategic
review for discussion against the Group's current and future
operating environments. High-level expectations for the following
year are set with the Board's full involvement and are delivered to
Management, who prepare the detailed bottom-up financial target for
the following year. This financial target is reviewed and agreed by
Management before presentation to the Board for approval at the
December Board meeting.
On a rolling annual basis, the Board considers a three-year
business plan (the 'Plan') consisting of the detailed bottom-up
financial target for the following year (2021) and forecast
information for two further years (2022 and 2023), which is driven
by top-down assumptions overlaid on the detailed target year. Key
assumptions used in formulating the forecast information include
organic revenue growth, margin improvement and cost control,
continued strategic investments through the Consolidated Income
Statement, and forecast Group effective tax rates, with no changes
to dividend policy or capital structure beyond what is known at the
time of the forecast. The financial target for 2021 was considered
and approved by the Board on 10 December 2020, with amendments and
enhancements to the target as part of the full Plan considered and
approved by the Board on 9 March 2021.
Impact of risks and assessment of viability
The Plan is subject to rigorous downside sensitivity analysis,
which involves flexing a number of the main assumptions underlying
the forecasts within the Plan. The forecast cash flows from the
Plan are aggregated with the current position, to provide a total
three-year cash position against which the impact of potential
risks and uncertainties can be assessed. The analysis 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 is
then applied to the Plan. This assessment includes only those risks
and uncertainties that, individually or in plausible combination,
would threaten the Group's business model, future performance,
solvency or liquidity over the assessment period and which are
considered to be severe but reasonable scenarios. It also takes
into account an assessment of how the risks are managed and the
effectiveness of any mitigating actions.
The combined effect of the potential occurrence of several of
the most impactful risks and uncertainties is then compared to the
cash position generated throughout the sensitised 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 2021, due to a worsening impact on our
customers from the COVID-19 crisis. This sensitivity analysis
models a continued market downturn scenario for some of our
customers whose businesses have been affected by COVID-19 and a
similar downturn occurring for the remainder of our customer
base.
Additionally, the risks related to continued disruption from the
departure of the UK from the EU on 31 December 2020 have been
reflected within our underlying business plans.
Conclusion
Based on the period and assessment above, the Directors have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities, as they fall due, over the
three-year period to 31 December 2023.
Fair, balanced and understandable
The UK Corporate Governance Code requires the Board to consider
whether the Annual Report and Accounts, taken as a whole, are
'fair, balanced and understandable' and 'provide the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy'.
Management undertakes a formal process through which it can
provide comfort to the Board in making this statement.
This Strategic Report was approved by the Board on 15 March 2021
and was signed on its behalf by:
MJ Norris
Chief Executive Officer
FA Conophy
Group Finance Director
Consolidated Income Statement
For the year ended 31 December 2020
2020 2019
Note GBP'000 GBP'000
==== =========== ===========
Revenue 4,5 5,441,258 5,052,779
==================================== ==== =========== ===========
Cost of sales (4,720,717) (4,389,665)
==================================== ==== =========== ===========
Gross profit 720,541 663,114
==================================== ==== =========== ===========
Administrative expenses (522,054) (516,090)
==================================== ==== =========== ===========
Operating profit 198,487 147,024
==================================== ==== =========== ===========
Gain on acquisition of a subsidiary 14,030 -
==================================== ==== =========== ===========
Finance income 475 980
==================================== ==== =========== ===========
Finance costs (6,421) (7,046)
==================================== ==== =========== ===========
Profit before tax 206,571 140,958
==================================== ==== =========== ===========
Income tax expense 7 (52,415) (39,397)
==================================== ==== =========== ===========
Profit for the year 154,156 101,561
==================================== ==== =========== ===========
Attributable to:
==================================== ==== =========== ===========
Equity holders of the Parent 153,750 101,655
==================================== ==== =========== ===========
Non-controlling interests 406 (94)
==================================== ==== =========== ===========
Profit for the year 154,156 101,561
==================================== ==== =========== ===========
Earnings per share:
==================================== ==== =========== ===========
- basic 8 136.2p 90.3p
==================================== ==== =========== ===========
- diluted 8 133.8p 89.0p
==================================== ==== =========== ===========
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
2020 2019
GBP'000 GBP'000
======== ========
Profit for the year 154,156 101,561
==================================================== ======== ========
Items that may be reclassified to the Consolidated
Income Statement:
=================================================== ======== ========
Loss arising on cash flow hedge (1,894) (915)
==================================================== ======== ========
Income tax effect 369 176
==================================================== ======== ========
(1,525) (739)
=================================================== ======== ========
Exchange differences on translation of foreign
operations 3,217 (18,175)
==================================================== ======== ========
1,692 (18,914)
=================================================== ======== ========
Items not to be reclassified to the Consolidated
Income Statement:
=================================================== ======== ========
Remeasurement of defined benefit plan (4,329) (786)
==================================================== ======== ========
Other comprehensive expense for the year, net of
tax (2,637) (19,700)
==================================================== ======== ========
Total comprehensive income for the year 151,519 81,861
==================================================== ======== ========
Attributable to:
=================================================== ======== ========
Equity holders of the Parent 151,113 81,956
==================================================== ======== ========
Non-controlling interests 406 (95)
==================================================== ======== ========
Total comprehensive income for the year 151,519 81,861
==================================================== ======== ========
Consolidated Balance Sheet
As at 31 December 2020
2020 2019
Note GBP'000 GBP'000
==== ========= =========
Non-current assets
================================= ==== ========= =========
Property, plant and equipment 106,974 101,443
================================= ==== ========= =========
Right-of-use assets 129,622 110,882
================================= ==== ========= =========
Intangible assets 274,732 175,670
================================= ==== ========= =========
Investment in associate 57 54
================================= ==== ========= =========
Deferred income tax assets 7d 10,081 9,204
================================= ==== ========= =========
Prepayments 23,605 3,520
================================= ==== ========= =========
545,071 400,773
================================= ==== ========= =========
Current assets
================================= ==== ========= =========
Inventories 211,279 122,189
================================= ==== ========= =========
Trade and other receivables 1,095,875 979,917
================================= ==== ========= =========
Income tax receivable 9,978 11,288
================================= ==== ========= =========
Prepayments 102,745 82,315
================================= ==== ========= =========
Accrued income 5 125,433 96,971
================================= ==== ========= =========
Derivative financial instruments 1,643 3,218
================================= ==== ========= =========
Cash and short-term deposits 309,844 217,881
================================= ==== ========= =========
1,856,797 1,513,779
================================= ==== ========= =========
Total assets 2,401,868 1,914,552
================================= ==== ========= =========
Current liabilities
================================= ==== ========= =========
Trade and other payables 1,116,741 975,904
================================= ==== ========= =========
Deferred income 5 273,947 174,258
================================= ==== ========= =========
Financial liabilities 105,475 20,032
================================= ==== ========= =========
Lease liabilities 41,683 36,574
================================= ==== ========= =========
Derivative financial instruments 5,066 1,707
================================= ==== ========= =========
Income tax payable 39,158 39,278
================================= ==== ========= =========
Provisions 4,132 7,703
================================= ==== ========= =========
1,586,202 1,255,456
================================= ==== ========= =========
Non-current liabilities
================================= ==== ========= =========
Financial liabilities 15,719 60,740
================================= ==== ========= =========
Lease liabilities 95,791 80,192
================================= ==== ========= =========
Deferred income 5 18,630 -
================================= ==== ========= =========
Provisions 35,730 13,982
================================= ==== ========= =========
Deferred income tax liabilities 7d 18,873 11,698
================================= ==== ========= =========
184,743 166,612
================================= ==== ========= =========
Total liabilities 1,770,945 1,422,068
================================= ==== ========= =========
Net assets 630,923 492,484
================================= ==== ========= =========
Capital and reserves
================================= ==== ========= =========
Issued share capital 9,270 9,270
================================= ==== ========= =========
Share premium 3,942 3,942
================================= ==== ========= =========
Capital redemption reserve 74,957 74,957
================================= ==== ========= =========
Own shares held (111,613) (113,563)
================================= ==== ========= =========
Translation and hedging reserve 15,720 14,028
================================= ==== ========= =========
Retained earnings 635,523 503,928
================================= ==== ========= =========
Shareholders' equity 627,799 492,562
================================= ==== ========= =========
Non-controlling interests 3,124 (78)
================================= ==== ========= =========
Total equity 630,923 492,484
================================= ==== ========= =========
Approved by the Board on 15 March 2021.
MJ Norris FA Conophy
Chief Executive Group Finance Director
Officer
-----------------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Attributable to equity holders
of the Parent
=============================================================== ============== =========== ========
Issued Capital Own Translation Non-
share Share redemption shares and hedging Retained Share-holder's controlling Total
capital premium reserve held reserves earnings equity interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======= ======= ========== ========= =========== ========= ============== =========== ========
At 1 January 2020 9,270 3,942 74,957 (113,563) 14,028 503,928 492,562 (78) 492,484
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Relating to
acquisition
of subsidiary - - - - - - - 2,796 2,796
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Profit for the
year - - - - - 153,750 153,750 406 154,156
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Other
comprehensive
income/(expense) - - - - 1,692 (4,329) (2,637) - (2,637)
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Total
comprehensive
income - - - - 1,692 149,421 151,113 406 151,519
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Cost of
share-based
payments - - - - - 7,954 7,954 - 7,954
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Tax on
share-based
payments - - - - - 3,390 3,390 - 3,390
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Exercise of
options - - - 20,901 - (15,227) 5,674 - 5,674
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Purchase of own
shares - - - (18,951) - - (18,951) - (18,951)
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Equity dividends - - - - - (13,943) (13,943) - (13,943)
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
At 31 December
2020 9,270 3,942 74,957 (111,613) 15,720 635,523 627,799 3,124 630,923
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
At 1 January 2019 9,270 3,942 74,957 (113,474) 32,941 440,119 447,755 17 447,772
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Profit for the
year - - - - - 101,655 101,655 (94) 101,561
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Other
comprehensive
expense - - - - (18,913) (786) (19,699) (1) (19,700)
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Total
comprehensive
income/(expense) - - - - (18,913) 100,869 81,956 (95) 81,861
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Cost of
share-based
payments - - - - - 6,775 6,775 - 6,775
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Tax on
share-based
payments - - - - - 1,790 1,790 - 1,790
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Exercise of
options - - - 15,798 - (10,071) 5,727 - 5,727
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Purchase of own
shares - - - (15,887) - - (15,887) - (15,887)
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Asset
reunification - - - - - 210 210 - 210
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Equity dividends - - - - - (35,764) (35,764) - (35,764)
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
At 31 December
2019 9,270 3,942 74,957 (113,563) 14,028 503,928 492,562 (78) 492,484
================= ======= ======= ========== ========= =========== ========= ============== =========== ========
Consolidated Cash Flow Statement
For the year ended 31 December 2020
2020 2019(*)
Note GBP'000 GBP'000
===== ========= ==========
Operating activities
======================================================== ===== ========= ==========
Profit before taxation 206,571 140,958
=============================================================== ========= ==========
Net finance cost 5,946 6,066
=============================================================== ========= ==========
Depreciation of property, plant and equipment 24,033 21,456
=============================================================== ========= ==========
Depreciation of right-of-use assets 45,154 40,266
=============================================================== ========= ==========
Amortisation of intangible assets 14,635 11,543
=============================================================== ========= ==========
Share-based payments 7,954 6,775
=============================================================== ========= ==========
Loss on disposal of intangibles 321 116
=============================================================== ========= ==========
Loss on disposal of property, plant and equipment 200 347
=============================================================== ========= ==========
Net cash flow from inventories (50,448) (27,422)
=============================================================== ========= ==========
Net cash flow from trade and other receivables
(including contract assets) 48,276 136,682
=============================================================== ========= ==========
Net cash flow from trade and other payables (including
contract liabilities) (26,169) (108,799)
=============================================================== ========= ==========
Gain on acquisition of a subsidiary (14,030) -
=============================================================== ========= ==========
Net cash flow from provisions 1,919 10,670
=============================================================== ========= ==========
Other adjustments(*) 85 (6,142)
=============================================================== ========= ==========
Cash generated from operations 264,447 232,516
=============================================================== ========= ==========
Income taxes paid (27,645) (34,231)
=============================================================== ========= ==========
Net cash flow from operating activities 236,802 198,285
=============================================================== ========= ==========
Investing activities
======================================================== ===== ========= ==========
Interest received 475 980
=============================================================== ========= ==========
Acquisition of subsidiaries, net of cash acquired (30,095) 6,116
=============================================================== ========= ==========
Purchases of property, plant and equipment (23,141) (30,132)
=============================================================== ========= ==========
Purchases of intangible assets (4,360) (8,737)
=============================================================== ========= ==========
Proceeds from disposal of property, plant and equipment 1,652 1,009
=============================================================== ========= ==========
Net cash flow from investing activities (55,469) (30,764)
=============================================================== ========= ==========
Financing activities
======================================================== ===== ========= ==========
Interest paid (1,942) (3,318)
=============================================================== ========= ==========
Interest paid on lease liabilities (4,479) (3,728)
=============================================================== ========= ==========
Dividends paid to equity shareholders of the Parent (13,943) (35,764)
=============================================================== ========= ==========
Asset reunification - 210
=============================================================== ========= ==========
Proceeds from share issues 5,674 5,727
=============================================================== ========= ==========
Purchase of own shares (18,951) (15,887)
=============================================================== ========= ==========
Repayment of loans and credit facility (20,021) (51,755)
=============================================================== ========= ==========
Payment of capital element of lease liabilities(*) (43,200) (38,618)
=============================================================== ========= ==========
New Borrowings - bank loan 289 -
=============================================================== ========= ==========
Net cash flow from financing activities (96,573) (143,133)
=============================================================== ========= ==========
Increase in cash and cash equivalents 84,760 24,388
=============================================================== ========= ==========
Effect of exchange rates on cash and cash equivalents 7,203 (6,949)
=============================================================== ========= ==========
Cash and cash equivalents at the beginning of the
year 217,881 200,442
=============================================================== ========= ==========
Cash and cash equivalents at the year end 309,844 217,881
=============================================================== ========= ==========
* Interest paid on lease liabilities of GBP3.7 million was
included as part of 'Payment of Capital element of lease
liabilities' in the prior year. The prior year comparative has been
re-presented for this amount. This has also resulted in an
adjustment to 'Other adjustments' of GBP3.7 million.
1 Authorisation of Consolidated Financial Statements and
statement of compliance with IFRS
The Consolidated Financial Statements of Computacenter plc
(Parent Company or the Company) and its subsidiaries (the Group)
for the year ended 31 December 2020 were authorised for issue in
accordance with a resolution of the Directors on 15 March 2021. The
Consolidated Balance Sheet was signed on behalf of the Board by MJ
Norris and FA Conophy. Computacenter plc is a limited company
incorporated and domiciled in England whose shares are publicly
traded.
The Consolidated financial statements of the Company have been
prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board
('IASB'), in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and in
accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union ('IFRSs as adopted by the EU').
2 Summary of 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 within
administration expenses 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 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.
Effective for the year ending 31 December 2021
No new standards, interpretations and amendments not yet
effective are expected to have a material effect on the Group's
future financial statements.
2.1 Basis of preparation
The summary financial information set out above does not
constitute the Group's statutory Consolidated Financial Statements
for the years ended 31 December 2020 or 2019. Statutory
Consolidated Financial Statements for the Group for the year ended
31 December 2019, prepared in accordance with adopted IFRS, have
been delivered to the Registrar of Companies and those for 2020
will be delivered in due course. The auditors have reported on
those accounts; their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditors drew
attention by way of any emphasis without qualifying their opinion
and (iii) did not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006.
The Consolidated Financial Statements are prepared on the
historical cost basis other than derivative financial instruments,
which are stated at fair value.
The Consolidated Financial Statements are presented in pound
sterling (GBP) and all values are rounded to the nearest thousand
(GBP'000) except when otherwise indicated.
In determining whether it is appropriate to prepare the
Financial Statements on a 'going concern' basis, the Group prepares
a three-year Plan (the 'Plan') annually by aggregating top down
expectations of business performance across the Group in the second
and third year of the Plan with a detailed 12-month 'bottom-up'
budget for the first year, which were approved by the Board. The
Plan is subject to rigorous downside sensitivity analysis which
involves flexing a number of the main assumptions underlying the
forecasts within the Plan. The forecast cash flows from the Plan
are aggregated with the current position, to provide a total
three-year cash position against which the impact of potential
risks and uncertainties can be assessed. In the absence of
significant external debt, the analysis also considers access to
available committed and uncommitted finance facilities, the ability
to raise new finance in most foreseeable market conditions and the
ability to restrict dividend payments.
The directors have identified a period of not less than 12
months as the appropriate period for the going concern assessment
and have based their assessment on the relevant forecasts from the
Plan for that period.
The potential impact of the principal risks and uncertainties is
then applied to the Plan. This assessment includes only those risks
and uncertainties that, individually or in plausible combination,
would threaten the Group's business model, future performance,
solvency or liquidity over the assessment period and which are
considered to be severe but reasonable scenarios. It also takes
into account an assessment of how the risks are managed and the
effectiveness of any mitigating actions.
For the current period, the primary downside sensitivity relates
to a modelled, but not predicted, severe downturn in Group
revenues, beginning in 2021, due to a worsening impact on our
customers from the COVID-19 crisis. This sensitivity analysis
models a continued market downturn scenario for some of our
customers whose businesses have been affected by COVID-19 and a
similar downturn occurring for the remainder of our customer
base.
Our cash and borrowing capacity provides sufficient funds to
meet the foreseeable needs of the Group. At 31 December 2020, the
Group had cash and cash equivalents of GBP309.8 million and bank
debt, primarily related to the recent North American acquisitions
and the headquarters in Germany, of GBP121.2 million. In addition,
the Group has in place a three-year committed facility of GBP60.0
million that was originally entered into during 2013 for a value of
GBP40.0 million and has never been drawn upon.
The Group has a resilient balance sheet position, with net
assets of GBP630.9 million as at 31 December 2020. The Group made a
profit after tax of GBP154.2 million, and delivered net cash flows
from operating activities of GBP236.8 million, for the year ended
31 December 2020.
As the analysis continues to show a strong forecast cash
position, even under the severe economic conditions modelled in the
sensitivity scenarios, the Directors continue to consider that the
Group is well placed to manage business and financial risks in the
current economic environment. Based on this assessment, the
Directors confirm that they have a reasonable expectation that the
Group will be able to continue in operation and meet its
liabilities as they fall due over the period of not less than 12
months from the date of this announcement and therefore have
prepared the Financial Statements on a going concern basis.
2.2 Basis of consolidation
The Consolidated Financial Statements comprise the Financial
Statements of the Parent Company and its subsidiaries as at 31
December each year. The Financial Statements of subsidiaries are
prepared for the same reporting year as the Parent Company, using
existing GAAP in each country of operation. Adjustments are made on
consolidation for differences that may exist between the respective
local GAAPs and IFRS.
All intra-Group balances, transactions, income and expenses and
profit and losses resulting from intra-Group transactions have been
eliminated in full.
Subsidiaries are consolidated from the date on which the Group
obtains control and cease to be consolidated from the date on which
the Group no longer retains control. Non-controlling interests
represent the portion of profit or loss and net assets in
subsidiaries that is not held by the Group and is presented
separately within equity in the Consolidated Balance Sheet,
separately from Parent shareholders' equity.
2.2.1 Foreign currency translation
Each entity in the Group determines its own functional currency
and items included in the Financial Statements of each entity are
measured using that functional currency. Transactions in foreign
currencies are initially recorded in the functional currency at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are
retranslated at the functional currency rate of exchange ruling at
the Consolidated Balance Sheet date. All differences are taken to
the Consolidated Income Statement.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rate as at
the date of initial transaction.
The functional currencies of the material overseas subsidiaries
are euro (EUR), US dollar ($), South African rand (ZAR) and Swiss
franc (CHF). The Group's presentation currency is pound sterling.
As at the reporting date, the assets and liabilities of these
overseas subsidiaries are translated into the presentation currency
of the Group at the rate of exchange ruling at the balance sheet
date and their Consolidated Income Statements are translated at the
average exchange rates for the year. Exchange differences arising
on the retranslation are recognised in the Consolidated Statement
of Comprehensive Income. On disposal of a foreign entity, the
deferred cumulative amount recognised in the Consolidated Statement
of Comprehensive Income relating to that particular foreign
operation is recognised in the Consolidated Income Statement.
2.3 Revenue
Revenue is recognised to the extent of the amount which is
expected to be received from customers as consideration for the
transfer of goods and services to the customer.
In multi-element contracts with customers where more than one
good (Technology Sourcing) or service (Professional Services and
Managed Services) is provided to the customer, analysis is
performed to determine whether the separate promises are distinct
performance obligations within the context of the contract. To the
extent that this is the case, the transaction price is allocated
between the distinct performance obligations based upon relative
standalone selling prices. The revenue is then assessed for
recognition purposes based upon the nature of the activity and the
terms and conditions of the associated customer contract relating
to that specific distinct performance obligation.
The following specific recognition criteria must also be met
before revenue is recognised:
2.3.1 Technology Sourcing
The Group supplies hardware and software (together as 'goods')
to customers that are sourced from and delivered by a number of
suppliers.
Technology Sourcing revenue is recognised at a point in time
when control of the goods has passed to the customer, usually on
delivery.
Payment for the goods is generally received on industry-standard
payment terms.
Technology Sourcing principal versus agent recognition
Management assesses the classification of certain revenue
contracts for Technology Sourcing revenue recognition on either an
agent or principal basis.
Because the identification of the principal in a contract is not
always clear, albeit the level of judgement required is low,
Management make a determination by evaluating the nature of our
promise to our customer as to whether it is a performance
obligation to provide the specified goods or services ourselves, in
that we are the principal, or to arrange for those goods or
services to be provided by the other party, where we are the agent.
We determine whether we are a principal or an agent for each
specified good or service promised to the customer by evaluating
the nature of our promise to the customer against a non-exhaustive
list of indicators that a performance obligation could involve an
agency relationship:
-- Evaluating who controls each specified good or service before
that good or service is transferred to the customer;
-- The vendor retains primary responsibility for fulfilling the sale;
-- We take no inventory risk before or after the goods have been
ordered, during shipping or on return;
-- We do not have discretion to establish pricing for the
vendor's goods limiting the benefit we can receive from the sale of
those goods; and
-- Our consideration is in the form of a usually predetermined commission.
2.3.2 Professional Services
The Group provides skilled professionals to customers either on
a 'resource on demand' basis or operating within a project
framework.
For those contracts which are 'resource on demand', where the
revenue is billed on a timesheet basis, revenue is recognised based
on monthly invoiced amounts as this corresponds to the service
delivered to the customer and the satisfaction of the Group's
performance obligations.
For contracts operating within a project framework, revenue is
recognised based on the transaction price with reference to the
costs incurred as a proportion of the total estimated costs
(percentage of completion basis) of the contract. Under either
basis, Professional Services revenue is recognised over time.
If the total estimated costs and revenues of a contract cannot
be reliably estimated, revenue is recognised only to the extent
that costs have been incurred and where the Group has an
enforceable right to payment as work is being performed.
A provision for forecast excess costs over forecasted revenue is
made as soon as a loss is foreseen (see note 2.12.1 to the summary
financial information within this announcement for further
detail).
Unbilled Professional Services revenue is classified as a
contract asset and is included within accrued income in the
Consolidated Balance Sheet.
Unearned Professional Services revenue is classified as a
contract liability and is included within deferred income in the
Consolidated Balance Sheet. Payment for the Services, which are
invoiced monthly, are generally on industry standard payment
terms.
2.3.3 Managed Services
The Group sells maintenance, support and management of
customers' IT infrastructures and operations.
Managed Services revenue is recognised over time, throughout the
term of the contract, as services are delivered. The specific
performance obligations and invoicing conditions in our Managed
Services contracts are typically related to the number of calls,
interventions or users that we manage and therefore the customer
simultaneously receives and consumes the benefits of the services
as they are performed. Revenue is recognised based on monthly
invoiced amounts as this corresponds to the service delivered to
the customer and the satisfaction of the Group's performance
obligations.
Unbilled Managed Services revenue is classified as a contract
asset and is included within accrued income in the Consolidated
Balance Sheet. Unearned Managed Services revenue is classified as a
contract liability and is included within deferred income in the
Consolidated Balance Sheet.
Amounts invoiced relating to more than one year are deferred and
recognised over the relevant period. Payment for the services is
generally on industry standard payment terms.
If the total estimated costs and revenues of a contract cannot
be reliably estimated, revenue is recognised only to the extent
that costs have been incurred and where the Group has an
enforceable right to payment as work is being performed. A
provision for forecast excess costs over forecasted revenue is made
as soon as a loss is foreseen (see note 2.12.1 to the summary
financial information within this announcement for further detail).
On occasion, the Group may have a limited number of Managed
Services contracts where revenue is recognised on a percentage of
completion basis, which is determined by reference to the costs
incurred as a proportion of the total estimated costs of the
contract (see note 3.1.1 to the summary financial information
within this announcement for further detail).
Costs of obtaining and fulfilling revenue contracts
The Group operates in a highly competitive environment and is
frequently involved in contract bids with multiple competitors,
with the outcome usually unknown until the contract is awarded and
signed.
When accounting for costs associated with obtaining and
fulfilling customer contracts, the Group first considers whether
these costs fit within a specific IFRS standard or policy. Any
costs associated with obtaining or fulfilling revenue contracts
which do not fall into the scope of other IFRS standards or
policies are considered under IFRS 15. All such costs are expensed
as incurred other than the two types of costs noted below:
1. Win fees - The Group pays 'win fees' to certain employees as
bonuses for successfully obtaining customer contracts. As these are
incremental costs of obtaining a customer contract, they are
capitalised along with any associated payroll tax expense to the
extent they are expected to be recovered. These balances are
presented within prepayments in the Consolidated Balance Sheet. The
win fee balance that will be realised after more than 12 months is
disclosed as non-current.
2. Fulfilment costs - The Group often incurs costs upfront
relating to the initial set-up phase of an outsourcing contract,
which the Group refers to as Entry Into Service. These costs do not
relate to a distinct performance obligation in the contract, but
rather are accounted for as fulfilment costs under IFRS 15 as they
are directly related to the future performance on the contract.
They are therefore capitalised to the extent that they are expected
to be recovered. These balances are presented within prepayments in
the Consolidated Balance Sheet.
Both win fees and Entry Into Service costs are amortised on a
straight-line basis over the contract term, as this is equivalent
to the pattern of transfer of services to the customer over the
contract term. The amortisation charges on win fees and Entry Into
Service costs are recognised in the Consolidated Income Statement
within administration expenses and cost of sales, respectively.
Any bid costs incurred by the Group's Central Bid Management
Engines are not capitalised or charged to the contract, but instead
directly charged to selling, general and administrative expenses as
they are incurred. These costs associated with bids are not
separately identifiable nor can they be measured reliably as the
Group's internal bid teams work across multiple bids at any one
time.
2.3.4 Finance income
Income is recognised as interest accrues.
2.3.5 Operating lease income
Rental income arising from operating leases is accounted for on
a straight-line basis over the lease term.
2.4 Exceptional items
The Group presents those material items of income and expense as
exceptional items which, because of the nature and expected
infrequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand better elements of
financial performance in the year, so as to facilitate comparison
with prior years and to assess better trends in financial
performance.
2.5 Adjusted(1) measures
The Group uses a number of non-Generally Accepted Accounting
Practice (non-GAAP) financial measures in addition to those
reported in accordance with IFRS. The Directors believe that these
non-GAAP measures, 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 4 to the summary
financial information included within this announcement, Segment
information.
2.6 Impairment of assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset's recoverable amount.
Where an asset does not have independent cash flows, the
recoverable amount is assessed for the cash-generating unit (CGU)
to which it belongs. Certain other corporate assets are unable to
be allocated against specific CGUs. These assets are tested across
an aggregation of CGUs that utilise the asset. The recoverable
amount is the higher of the fair value less costs to sell and the
value-in-use of the asset or CGU. Where the carrying amount of an
asset exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. In
assessing value-in-use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset. Impairment losses of
continuing operations are recognised in the Consolidated Income
Statement in those expense categories consistent with the function
of the impaired asset.
For assets excluding goodwill, an assessment is made at each
reporting date whether there is any indication that previously
recognised impairment losses may no longer exist or may have
decreased. If such indication exists, the Group estimates the
asset's or CGU's recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset's recoverable amount since
the last impairment was recognised. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. As the Group has no assets
carried at revalued amounts, such reversal is recognised in the
Consolidated Income Statement.
2.7 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses.
Depreciation, down to residual value, is calculated on a
straight-line basis over the estimated useful life of the asset as
follows:
-- freehold buildings: 25-50 years
-- short leasehold improvements: shorter of seven years and period to expiry of lease
-- fixtures and fittings:
o head office: five-15 years
o other: shorter of seven years and period to expiry of
lease
-- office machinery and computer hardware: two-15 years
-- motor vehicles: three years
Freehold land is not depreciated. An item of property, plant and
equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the
carrying amount of the item) is included in the Consolidated Income
Statement in the year the item is derecognised.
2.8 Leases
Group as lessee
Recognition of a lease
The contracts are assessed by the Group, to determine whether a
contract is, or contains a lease. In general, arrangements are a
lease when all of the following apply:
-- it conveys the right to control the use of an identified
asset for a certain period in exchange for consideration;
-- the Group have substantially all economic benefits from the use of the asset; and
-- the Group can direct the use of the identified asset.
The policy is applied to contracts entered into, or changed, on
or after 1 January 2019. The Group elects to separate the non-lease
components and elected to apply several practical expedients as
stated above. In cases where the Group acts as an intermediate
lessor, it accounts for its interests in the head-lease and the
sub-lease separately.
Measurement of a right-of-use asset and lease liability
Right-of-use asset
The Group measures the right-of-use asset at cost, which
includes the following:
-- the initial amount of the lease liability adjusted for any
lease payments made at or before 1 January 2019;
-- any lease incentives received; and
-- any initial direct costs incurred by the Group as well as an
estimate of costs to be incurred by the Group in dismantling and
removing the underlying asset, restoring the site on which it is
located or restoring the underlying asset to the condition required
by the lease contract. Cost for dismantling, removing or restoring
the site on which it is located and/or the underlying asset is only
recognised when the Group incurs an obligation to do so.
The right-of-use asset is depreciated over the lease term, using
the straight-line method.
Lease liability
The lease liability is initially measured at the present value
of the unpaid lease payments, discounted using the interest rate
implicit in the lease, or if the rate cannot be readily determined,
the Group's incremental borrowing rate. Lease payments included in
the measurement comprise of fixed payments, variable lease payments
that depend on an index or a rate, amounts to be paid under a
residual value guarantee and lease payments in an optional renewal
period if the Group is reasonably certain to exercise an extension
option as well as penalties for early termination of a lease, if
the Group is reasonably certain to terminate early. If there is a
purchase option present, this will be included if the Group is
reasonably certain to exercise the option.
Leases of low-value assets and short term
Leases of low-value assets (<GBP5,000) and short term with a
term of 12 months or less are not required to be recognised on the
Consolidated Balance Sheet and payments made in relation to these
leases are recognised on a straight-line basis in the Consolidated
Income Statement.
2.9 Intangible assets
2.9.1 Software and software licences
Software and software licences include computer software that is
not integral to a related item of hardware. These assets are stated
at cost less accumulated amortisation and any impairment in value.
Amortisation is calculated on a straight-line basis over the
estimated useful life of the asset. Currently software is amortised
over four years.
The carrying values of software and software licences are
reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable. If any
such indication exists and where the carrying values exceed the
estimated recoverable amount, the assets are written down to their
recoverable amount.
2.9.2 Software under development
Costs that are incurred and that can be specifically attributed
to the development phase of management information systems for
internal use are capitalised and amortised over their useful life,
once the asset becomes available for use.
2.9.3 Other intangible assets
Intangible assets acquired as part of a business combination are
carried initially at fair value. Following initial recognition
intangible assets are carried at cost less accumulated amortisation
and any impairment in value. Intangible assets with a finite life
have no residual value and are amortised on a straight-line basis
over their expected useful lives with charges included in
administrative expenses as follows:
-- order back log: within three months
-- existing customer relationships: 10-15 years
-- tools and technology: seven years.
The carrying value of intangible assets is reviewed for
impairment whenever events or changes in circumstances indicate the
carrying value may not be recoverable.
2.9.4 Goodwill
Business combinations are accounted for under IFRS 3 Business
Combinations using the acquisition method. Any excess of the cost
of the business combination over the Group's interest in the net
fair value of the identifiable assets, liabilities and contingent
liabilities is recognised in the Consolidated Balance Sheet as
goodwill and is not amortised. Any goodwill arising on the
acquisition of equity accounted entities is included within the
cost of those entities.
After initial recognition, goodwill is stated at cost less any
accumulated impairment losses, with the carrying value being
reviewed for impairment at least annually and whenever events or
changes in circumstances indicate that the carrying value may be
impaired.
For the purpose of impairment testing, goodwill is allocated to
the related CGU monitored by Management, usually at business
Segment level or statutory Company level as the case may be. Where
the recoverable amount of the CGU is less than its carrying amount,
including goodwill, an impairment loss is recognised in the
Consolidated Income Statement.
2.10 Inventories
Inventories are carried at the lower of weighted average cost
and net realisable value after making allowance for any obsolete or
slow-moving items. Costs include those incurred in bringing each
product to its present location and condition, on a first-in,
first-out basis.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs necessary to
make the sale.
2.11 Financial assets
Financial assets are recognised at their fair value, which
initially equates to the sum of the consideration given and the
directly attributable transaction costs associated with the
investment. Subsequently, the financial assets are measured at
either amortised cost or fair value depending on their
classification under IFRS 9. The Group currently holds only debt
instruments. The classification of these debt instruments depends
on the Group's business model for managing the financial assets and
the contractual terms of the cash flows.
2.11.1 Trade and other receivables
Trade receivables, which generally have 30 to 90-day credit
terms, are initially recognised and carried at their original
invoice amount less an allowance for any uncollectable amounts. The
business model for trade receivables is that they are held for the
collection of contractual cash flows, therefore are subsequently
measured at amortised cost. The trade receivables are derecognised
on receipt of cash from the customer. The Group sometimes uses debt
factoring to manage liquidity and, as a result, the business model
for factored trade receivables is that they are not held for the
collection of contractual cash flows. As a result, subsequent to
initial recognition, they are measured at fair value through other
comprehensive income (except for the recognition of impairment
gains and losses and foreign exchange gains and losses, which are
recognised in profit or loss). Factored trade receivables are
derecognised on receipt of cash from the factoring party. Given the
short lives of the trade receivables, there are generally no
material fair value movements between initial recognition and the
derecognition of the receivable.
The Group assesses for doubtful debts (impairment) using the
expected credit losses model as required by IFRS 9. For trade
receivables, the Group applies the simplified approach which
requires expected lifetime losses to be recognised from the initial
recognition of the receivables.
For impairment assessment of other receivables, refer to Note
2.6 to the summary financial information included within this
announcement, Impairment of assets, which details the impairment
approach adopted where an asset considered to be impaired would be
written down to its recoverable amount which, given the nature of
the assets, would most likely be its fair value less costs to
sell.
2.11.2 Current asset investments
Current asset investments comprise deposits held for a term of
greater than three months from the date of deposit and which are
not available to the Group on demand. The business model for
current asset investments is that they are held for the collection
of contractual cash flows, which are not solely payments of
principal and interest. As a result, subsequent to initial
measurement, current asset investments are measured at fair value
with fair value movements recognised in profit and loss.
2.11.3 Cash and cash equivalents
Cash and short-term deposits in the Consolidated Balance Sheet
comprise cash at bank and in hand, and short-term deposits with an
original maturity of three months or less. Cash is held for the
collection of contractual cash flows which are solely payments of
principal and interest and therefore is measured at amortised cost
subsequent to initial recognition.
For the purpose of the Consolidated Cash Flow Statement, cash
and cash equivalents consist of cash and short-term deposits as
defined above, net of outstanding bank overdrafts, where there is a
legal right of set off.
2.12 Financial liabilities
Financial liabilities are initially recognised at their fair
value and, in the case of loans and borrowings (including credit
facility), net of directly attributable transaction costs.
The subsequent measurement of financial liabilities is at
amortised cost, unless otherwise described below:
2.12.1 Provisions (excluding restructuring provision)
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions
are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision
due to the passage of time is recognised as a borrowing cost.
Customer contract provisions
A provision for forecast excess costs over forecasted revenue is
made as soon as a loss is foreseen.
Management monitor continually the financial performance of
contracts, and where there are indicators that a contract could
result in a negative margin, the future financial performance of
that contract will be reviewed in detail. If, after further
financial analysis, the full financial consequence of the contract
can be reliably estimated, and it is determined that the contract
is potentially loss-making, then the best estimate of the losses
expected to be incurred until the end of the contract will be
provided for.
The Group applies IAS 37 in its assessment of whether contracts
are considered onerous and in subsequently estimating the
provision. An agenda decision published by the IFRS Interpretations
Committee outlined that the current wording of IAS 37 allows for
two interpretations of what can constitute 'unavoidable' costs when
determining whether a contract is onerous. One of the acceptable
interpretations noted by the Committee is in line with our current
practice, which is to consider costs such as overhead allocations
as 'unavoidable'. The matter has been put on the agenda for future
discussion at the IFRS Interpretations Committee, with a view to
drafting clarifications to IAS 37. Until there is clarity on this
matter, we have concluded that our current approach, that considers
total estimated costs (i.e. directly attributable variable costs
and fixed allocated costs) as included in the assessment of whether
the contract is onerous or not and in the measurement of the
provision, remains appropriate.
2.12.2 Restructuring provisions
The Group recognises a 'restructuring' provision when there is a
programme planned and controlled by Management that changes
materially the scope of the business or the manner in which it is
conducted.
Further to the Group's general provision recognition policy, a
restructuring provision is only considered when the Group has a
detailed formal plan for the restructuring identifying, as a
minimum: the business or part of the business concerned; the
principal locations affected; the location, function and
approximate number of employees who will be compensated for
terminating their services; the expenditures that will be
undertaken; and when the plan will be implemented.
The Group will only recognise a specific restructuring provision
once a valid expectation in those affected that it will carry out
the restructuring by starting to implement that plan or announcing
its main features to those affected by it.
The Group only includes incremental costs associated directly
with the restructuring within the restructuring provisions such as
employee termination benefits and consulting fees. The Group
specifically excludes from recognition in a restructuring provision
any costs associated with ongoing activities such as the costs of
training or relocating staff that are redeployed within the
business and costs for employees who continue to be employed in
ongoing operations, regardless of the status of these operations
post-restructure.
2.12.3 Pensions and other post-employment benefits
The Group operates a defined contribution pension scheme
available to all UK employees and similar schemes are operating, as
appropriate for the jurisdiction, for North America and Germany.
Contributions are recognised as an expense in the Consolidated
Income Statement as they become payable in accordance with the
rules of the scheme. There are no material pension schemes within
the Group's overseas operations.
The Group has an obligation to make a one-off payment to French
employees upon retirement, the Indemnités de Fin de Carrière
(IFC).
French employment law requires that a company pays employees a
one-time contribution when, and only when, the employee leaves the
company on retirement at the mandatory age. This is a legal
requirement for all businesses who incur the obligation upon
departure, due to retirement, of an employee.
Typically, the retirement benefit is based on length of service
of the employee and his or her salary at retirement. The amount is
set via a legal minimum, but the retirement premiums can be
improved by the collective agreement or employment contract in some
cases. In Computacenter France, the payment is based on accrued
service and ranges from one month of salary after five years of
service to 9.4 months of salary after 47 years of service.
If the employee leaves voluntarily at any point before
retirement, all liability is extinguished, and any accrued service
is not transferred to any new employment.
Management continues to account for this obligation according to
IAS 19 (revised).
2.13 Derecognition of financial assets and liabilities
2.13.1 Financial assets
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised where:
-- the rights to receive cash flows from the asset have expired; or
-- the Group retains the right to receive cash flows from the
asset, but has assumed an obligation to pay them in full without
material delay to a third party under a 'pass-through' arrangement;
or
-- the Group has transferred its rights to receive cash flows
from the asset and either (a) has transferred substantially all the
risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset but
has transferred control of the asset.
2.13.2 Financial liabilities
A financial liability is derecognised when the obligation under
the liability is discharged, cancelled or expired.
2.14 Derivative financial instruments and hedge accounting
The Group uses foreign currency forward contracts to hedge its
foreign currency risks associated with foreign currency
fluctuations affecting cash flows from forecast transactions and
unrecognised firm commitments.
At the inception of a hedge relationship, the Group formally
designates and documents the hedge relationship to which the Group
wishes to apply hedge accounting and the risk management objective
and strategy for undertaking the hedge. The documentation includes
identification of both the hedging instrument and the hedged item
or transaction and then the economic relationship between the two,
including whether the hedging instrument is expected to offset
changes in cash flow of the hedged item. Such hedges are expected
to be highly effective in achieving offsetting changes in cash
flows. The Group designates the full change in the fair value of
the forward contract (including forward points) as the hedging
instrument. Forward contracts are initially recognised at fair
value on the date that the contract is entered into and are
subsequently remeasured at fair value at each reporting date. The
fair value of forward currency contracts is calculated by reference
to current forward exchange rates for contracts with similar
maturity profiles. Forward contracts are recorded as assets when
the fair value is positive and as liabilities when the fair value
is negative.
For the purposes of hedge accounting, hedges are classified as
cash flow hedges when hedging the exposure to variability in cash
flows that is either attributable to a particular risk associated
with a recognised asset or liability, a highly probable forecast
transaction, or the foreign currency risk in an unrecognised firm
commitment.
Cash flow hedges that meet the criteria for hedge accounting are
accounted for as follows: the effective portion of the gain or loss
on the hedging instrument is recognised directly in other
comprehensive income in the cash flow hedge reserve, while any
ineffective portion is recognised immediately in the Consolidated
Income Statement in administrative expenses.
Amounts recognised within the Consolidated Statement of
Comprehensive Income are transferred to the Consolidated Income
Statement, within administrative expenses, when the hedged
transaction affects the Consolidated Income Statement, such as when
the hedged financial expense is recognised.
If the forecast transaction or firm commitment is no longer
expected to occur, the cumulative gain or loss previously
recognised in equity is transferred to the Consolidated Income
Statement within administrative expenses. If the hedging instrument
matures or is sold, terminated or exercised without replacement or
rollover, any cumulative gain or loss previously recognised within
the Consolidated Statement of Comprehensive Income remains within
the Consolidated Statement of Comprehensive Income until after the
forecast transaction or firm commitment affects the Consolidated
Income Statement.
Any other gains or losses arising from changes in fair value on
forward contracts are taken directly to administrative expenses in
the Consolidated Income Statement.
2.15 Taxation
2.15.1 Current tax
Current tax assets and liabilities for the current and prior
years are measured at the amount expected to be recovered from or
paid to the tax authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively
enacted by the balance sheet date.
2.15.2 Deferred income tax
Deferred income tax is recognised on all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the Consolidated Financial Statements, with the
following exceptions:
-- where the temporary difference arises from the initial
recognition of goodwill or from an asset or liability in a
transaction that is not a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss;
-- in respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures, where
the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will
not reverse in the foreseeable future; and
-- deferred income tax assets are recognised only to the extent
that it is probable that taxable profit will be available in the
future against which the deductible temporary differences, carried
forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an
undiscounted basis at the tax rates that are expected to apply when
the related asset is realised or liability is settled, based on tax
rates and laws enacted, or substantively enacted, at the balance
sheet date.
Income tax is charged or credited directly to the Consolidated
Statement of Comprehensive Income if it relates to items that are
credited or charged to the Consolidated Statement of Comprehensive
Income. Otherwise, income tax is recognised in the Consolidated
Income Statement.
2.16 Share-based payment transactions
Employees (including Executive Directors) of the Group can
receive remuneration in the form of share-based payment
transactions, whereby employees render services in exchange for
shares or rights over shares ('equity-settled transactions').
The cost of equity-settled transactions with employees is
measured by reference to the fair value of the award at the date at
which they are granted. The fair value is determined by utilising
an appropriate valuation model. In valuing equity-settled
transactions, no account is taken of any performance conditions as
none of the conditions set are market related.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled to
the award ('vesting date').
The cumulative expense recognised for equity-settled
transactions at each reporting date, until the vesting date,
reflects the extent to which the vesting period has expired and the
Directors' best estimate of the number of equity instruments that
will ultimately vest. The Consolidated Income Statement charge or
credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period. As the
schemes do not include any market-related performance conditions,
no expense is recognised for awards that do not ultimately
vest.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of earnings per share
(see note 8 to the summary financial information included within
this announcement ).
The Group has an employee share trust for the granting of
non-transferable options to Executive Directors and senior
Management. Shares in the Group held by the employee share trust
are treated as investment in own shares and are recorded at cost as
a deduction from equity.
2.17 Own shares held
Computacenter plc shares held by the Group are classified in
shareholders' equity as 'own shares held' and are recognised at
cost. Consideration received for the sale of such shares is also
recognised in equity, with any difference between the proceeds from
sale and the original cost being taken to reserves. No gain or loss
is recognised in the performance statements on the purchase, sale,
issue or cancellation of equity shares.
2.18 Fair value measurement
The Group measures certain financial instruments at fair value
at each balance sheet date.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
3 Critical accounting estimates and judgements
The preparation of the Consolidated Financial Statements
requires Management to exercise judgement in applying the Group's
accounting policies. It also requires the use of estimates and
assumptions that affect the reported amounts of assets,
liabilities, income and expenses.
Due to the inherent uncertainty in making these critical
judgements and estimates, actual outcomes could be different.
During the year, Management reconsidered the critical accounting
estimates and judgements for the Group. This process included
reviewing the last reporting period's disclosures, the key
judgements required on the implementation of forthcoming standards
and the current period's challenging accounting issues. Where
Management deemed an area of accounting to be no longer a critical
estimate or judgement, an explanation for this decision is found in
note 3.3 to the summary financial information included within this
announcement.
3.1 Critical estimates
Estimates and underlying assumptions are reviewed on an ongoing
basis, with revisions recognised in the year in which the estimates
are revised and in any future years affected. The areas involving
significant risk resulting in a material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are as follows:
3.1.1 Services revenue recognition and contract provisions
Percentage of completion revenue recognition
On occasion, the Group accounts for certain Services contracts
using the percentage of completion method, recognising revenue by
reference to the stage of completion of the contract which is
determined by actual costs incurred as a proportion of total
forecast contract costs. This method places considerable importance
on accurate estimates of the extent of progress towards completion
of the contract and may involve estimates on the scope of services
required for fulfilling the contractually defined obligations.
These significant estimates include total contract costs, total
contract revenues, contract risks, including technical risks, and
other assumptions. Under the percentage of completion method, the
changes in these estimates and assumptions may lead to an increase
or decrease in revenue recognised at the balance sheet date with
the in-year revenue recognition appropriately adjusted as required.
When the outcome of the contract cannot be estimated reliably,
revenue is recognised only to the extent that expenses incurred are
eligible to be recovered. No revenue is recognised if there are
significant uncertainties regarding recovery of the
consideration.
The key judgements are the extent to which revenue should be
recognised and also, where total contract costs are not covered by
total contract revenue, the extent to which an adjustment is
required.
3.1.2 Accounting for business combinations and valuation of
intangibles
Pivot acquisition
Business combinations are accounted for at fair value. The
valuation of goodwill and acquired intangibles is calculated
separately on each individual acquisition. In attributing value to
intangible assets arising on acquisition, management has made
certain assumptions in relation to the expected growth rates,
attrition rates and the appropriate weighted average cost of
capital ('WACC').
The value attributable to the intangible assets acquired on
acquisitions also impacts the deferred tax provision relating to
these items.
The total carrying value of acquired intangible - Customer
relationship arising from Pivot acquisition amounted to $67.0
million for the USA cash generating unit (CGU) and $4.7 million for
the Canada CGU.
In order to assess the impact of the key assumptions on the
values disclosed in the accounts for customer relationship
intangible asset, the Directors have applied the following
sensitivities to the acquisitions;
Intangible asset - Customer Relationship - US CGU
Rate applied Value
in the of intangible
financial Sensitivity assets
Key assumption statements tested $'000
============ =========== ==============
Long-term growth rate 2.0% 1.0% (3,100)
====================== ============ =========== ==============
WACC 11.9% 12.9% (4,200)
====================== ============ =========== ==============
Attrition rate 5.0% 7.0% (7,900)
====================== ============ =========== ==============
Growth rates are estimated based on the current conditions at
the date of each acquisition with reference to inflation adjusted
terms.
The attrition rates are estimated based on a review of recent
historic attrition levels across the customer portfolio alongside
management views on longer-term attrition expectations.
At the date of acquisition, the resulting valuation provides a
reasonable approximation as to the value of the intangibles
acquired and that any reasonably possible change in any one of the
estimations in isolation would not have a material impact on the
financial statements.
3.2 Critical judgements
Judgements made by Management in the process of applying the
Group's accounting policies, that have the most significant effect
on the amounts recognised in the Consolidated Financial Statements,
are as follows:
3.2.1 Exceptional items
Exceptional items remain a core focus of Management with the
recent alternative performance measure regulations providing
further guidance in this area.
Management is required to exercise its judgement in the
classification of certain items as exceptional and outside of the
Group's adjusted(1) results. The overall goal of Management is to
present the Group's underlying performance without distortion from
one-off or non-trading events regardless of whether they are
favourable or unfavourable to the underlying result.
To achieve this, Management have considered the materiality,
infrequency and nature of the various items classified as
exceptional this year against the requirements and guidance
provided by IAS 1, our Group accounting policies and the recent
regulatory interpretations and guidance.
In reaching their conclusions, Management consider not only the
effect on the overall underlying Group performance but also where
an item is critical in understanding the performance of its
component Segments which is of relevance to investors and analysts
when assessing the Group result and its future prospects as a
whole.
Further details of the individual exceptional items, and the
reasons for their disclosure treatment, are set out in note 6 to
the summary financial information included within this
announcement.
3.2.2 Bill and hold
The Group generates some of its revenue through its 'bill and
hold' arrangement with its customers. This arises when the customer
is invoiced but the product is not shipped to the customer until a
later date, in accordance with the customer's request in a written
agreement. In order to determine the appropriate timing of revenue
recognition, it is assessed whether control has transferred to the
customer.
A bill and hold arrangement is only put in place when a customer
lacks the physical space to store the product or the product
previously ordered is not yet needed in accordance with the
customer's schedule and the customer wants to guarantee supply of
the product. In order to determine the bill and hold arrangements,
the following criteria must be met:
a) the reason for the bill and hold arrangement must be
substantive (for example: the customer has requested the
arrangement);
b) the product must be identified separately as belonging to the customer;
c) the product currently must be ready for physical transfer to the customer; and
d) the entity cannot have the ability to use the product or to
direct it to another customer.
Judgement is required to determine if all of the criteria (a) to
(d) has been met to recognise a bill and hold sale. This is
determined by segregation and readiness of inventory and the review
and approval of all customer requests in order to assess whether
the accounting policy had been correctly applied to recognise a
bill and hold sale.
3.3 Change in critical estimates and critical judgements
During the year, Management reassessed the critical estimates
and critical judgements. The assessment of contract provisions was
removed as a critical estimate as the 'difficult' contracts that
Management held under review and included within the contract
provision have reduced such that Management no longer consider that
the outcomes of any of these 'difficult' contracts identified and
provided for as at 31 December 2020 contained assumptions that were
sufficiently sensitive to affect the provision materially.
Accordingly, Management has concluded that the 'difficult' contract
provisions should not be included as a critical estimate, as
defined under IAS 1.125 as a 'major source of estimation
uncertainty.'
Accounting for business combinations and valuation of
intangibles has been included as a critical estimate during the
current year as the material nature of the Pivot acquisition means
that a number of the estimates used in determining the value
attributable to the intangible assets acquired on acquisition
contain assumptions that are sensitive enough to affect the
valuations materially.
4 Segment information
During the first half of the year, 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'). As a result, from 1 January 2020 the Group has
revised where the results of certain Managed Services contracts are
reported within its operating Segments. The operating Segments
remain unchanged in all other respects from those reported at 31
December 2019. 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. We have therefore restated the results
for the French and German Segments for the year ended 31 December
2019, to assist with understanding the growth in each business and
to ensure year-on-year results are comparable.
Computacenter USA performs Managed Services work for other
Computacenter entities, on behalf of several key European
contracts. These revenues were originally recorded in the USA
Segment, where the associated underlying subsidiary recognises the
revenues in its statutory accounts. However, to be consistent with
practices across the Group, Management has reallocated these
revenues to the UK, German, French and International Segments which
have responsibility for the customer contracts. This reflects
better where the portfolio coordination and operational
responsibility lies and therefore where the benefits should accrue
on a Segmental basis. This treatment also means that for the
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 to assist with understanding
the growth in each business and to ensure year-on-year comparisons
reflect true underlying growth. This has no impact on Segmental
profitability, as the margins were previously shared on the same
basis that the revenue now reflects. Further, with the acquisition
of Pivot Technology Solutions, Inc. on 2 November 2020, which
includes a material business in Canada, the USA Segment has been
renamed as the North American Segment and is referred to as such
throughout this Annual Report and Accounts.
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. As noted on Group Finance Directors'
review included within this announcement, 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 has been
restated in accordance with the revised Segmental reporting
structure.
Segmental performance for the years ended 31 December 2020 and
31 December 2019 were as follows:
Year ended 31 December 2020
Central
North Corporate
UK Germany France America International Costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========= ========= ======== ======== ============= ========== =========
Revenue
============================= ========= ========= ======== ======== ============= ========== =========
Technology Sourcing
revenue 1,328,049 1,297,444 526,436 917,654 110,501 - 4,180,084
============================= ========= ========= ======== ======== ============= ========== =========
Services revenue
============================= ========= ========= ======== ======== ============= ========== =========
Professional Services 129,058 233,817 35,698 19,645 7,185 - 425,403
============================= ========= ========= ======== ======== ============= ========== =========
Managed Services 316,291 345,001 110,688 7,146 56,645 - 835,771
============================= ========= ========= ======== ======== ============= ========== =========
Total Services revenue 445,349 578,818 146,386 26,791 63,830 - 1,261,174
============================= ========= ========= ======== ======== ============= ========== =========
Total revenue 1,773,398 1,876,262 672,822 944,445 174,331 - 5,441,258
============================= ========= ========= ======== ======== ============= ========== =========
Results
============================= ========= ========= ======== ======== ============= ========== =========
Adjusted (1) gross profit 249,258 279,889 74,380 86,333 30,681 - 720,541
============================= ========= ========= ======== ======== ============= ========== =========
Administrative expenses (158,889) (167,308) (61,394) (72,295) (27,117) (27,077) (514,080)
============================= ========= ========= ======== ======== ============= ========== =========
Adjusted(1) operating
profit/(loss) 90,369 112,581 12,986 14,038 3,564 (27,077) 206,461
============================= ========= ========= ======== ======== ============= ========== =========
Adjusted(1) net interest (1,194) (2,158) (575) (909) (1,110) - (5,946)
============================= ========= ========= ======== ======== ============= ========== =========
Adjusted(1) profit/(loss)
before tax 89,175 110,423 12,411 13,129 2,454 (27,077) 200,515
============================= ========= ========= ======== ======== ============= ========== =========
Exceptional items:
============================= ========= ========= ======== ======== ============= ========== =========
- costs relating to
acquisition of a subsidiary (684)
============================= ========= ========= ======== ======== ============= ========== =========
- redundancy and other
restructuring credit 144
============================= ========= ========= ======== ======== ============= ========== =========
- gain on acquisition
of a subsidiary 14,030
============================= ========= ========= ======== ======== ============= ========== =========
Total exceptional items 13,490
============================= ========= ========= ======== ======== ============= ========== =========
Amortisation of acquired
intangibles (7,434)
============================= ========= ========= ======== ======== ============= ========== =========
Profit before tax 206,571
============================= ========= ========= ======== ======== ============= ========== =========
Year ended 31 December 2020
Total
GBP'000
========
Adjusted(1) operating profit 206,461
===================================== ========
Amortisation of acquired intangibles (7,434)
===================================== ========
Exceptional items (540)
===================================== ========
Operating profit 198,487
===================================== ========
Central
North Corporate
UK Germany France America International Costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======== ======== ======== ======== ============= ========== ========
Other Segment information
============================= ======== ======== ======== ======== ============= ========== ========
Property, plant and
equipment 40,872 42,575 7,991 9,020 6,516 - 106,974
============================= ======== ======== ======== ======== ============= ========== ========
Right-of-use assets 12,757 61,500 18,856 15,495 21,014 - 129,622
============================= ======== ======== ======== ======== ============= ========== ========
Intangible assets 51,629 17,061 1,954 192,491 11,597 - 274,732
============================= ======== ======== ======== ======== ============= ========== ========
Capital expenditure:
============================= ======== ======== ======== ======== ============= ========== ========
Property, plant and
equipment 8,404 5,909 2,943 4,476 1,409 - 23,141
============================= ======== ======== ======== ======== ============= ========== ========
Right-of-use assets 3,774 16,670 10,445 - 17,629 - 48,518
============================= ======== ======== ======== ======== ============= ========== ========
Software 3,683 428 5 - 244 - 4,360
============================= ======== ======== ======== ======== ============= ========== ========
Depreciation of property,
plant and equipment 11,065 6,565 2,244 1,513 2,646 - 24,033
============================= ======== ======== ======== ======== ============= ========== ========
Depreciation of right-of-use
assets 4,566 29,514 4,163 2,170 4,741 - 45,154
============================= ======== ======== ======== ======== ============= ========== ========
Amortisation of software 5,799 917 41 103 341 - 7,201
============================= ======== ======== ======== ======== ============= ========== ========
Share-based payments 5,601 1,708 221 424 - - 7,954
============================= ======== ======== ======== ======== ============= ========== ========
Year ended 31 December 2019
North Central
UK Germany France America 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/(loss) 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/(loss)
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
===================================== ========
Central
North Corporate
UK Germany France America International Costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======== ======== ======== ======== ============= ========== ========
Other Segment information
============================= ======== ======== ======== ======== ============= ========== ========
Property, plant and
equipment 43,734 41,347 4,558 4,060 7,744 - 101,443
============================= ======== ======== ======== ======== ============= ========== ========
Right-of-use assets 13,762 70,727 9,795 7,953 8,645 - 110,882
============================= ======== ======== ======== ======== ============= ========== ========
Intangible assets 54,035 16,678 108 93,696 11,153 - 175,670
============================= ======== ======== ======== ======== ============= ========== ========
Capital expenditure:
============================= ======== ======== ======== ======== ============= ========== ========
Property, plant and
equipment 11,632 9,277 1,126 3,921 4,176 30,132
============================= ======== ======== ======== ======== ============= ========== ========
Right-of-use assets 1,850 25,614 1,448 1,528 4,531 34,971
============================= ======== ======== ======== ======== ============= ========== ========
Software 7,903 616 13 - 205 - 8,737
============================= ======== ======== ======== ======== ============= ========== ========
Depreciation of property,
plant and equipment 9,968 6,356 1,788 748 2,596 - 21,456
============================= ======== ======== ======== ======== ============= ========== ========
Depreciation of right-of-use
assets 3,056 27,007 4,076 2,224 3,903 - 40,266
============================= ======== ======== ======== ======== ============= ========== ========
Amortisation of software 5,616 1,187 45 - 321 - 7,169
============================= ======== ======== ======== ======== ============= ========== ========
Share-based payments 5,089 1,417 119 150 - - 6,775
============================= ======== ======== ======== ======== ============= ========== ========
Charges for the amortisation of acquired intangibles and
utilisation of deferred tax assets (where initial recognition was
an exceptional item or a fair value adjustment on acquisition) are
excluded from the calculation of adjusted(1) operating profit. This
is because these charges are based on judgements about their value
and economic life, are the result of the application of acquisition
accounting rather than core operations, and whilst revenue
recognised in the Consolidated Income Statement does benefit from
the underlying asset that has been acquired, the amortisation costs
bear no relation to the Group's underlying ongoing operational
performance. In addition, amortisation of acquired intangibles is
not included in the analysis of Segment performance used by the
CODM.
Information about major customers
Included in revenues arising from the UK Segment are revenues of
approximately GBP556.3 million (2019: GBP317.0 million) which arose
from sales to the Group's largest customer. For the purpose of this
disclosure, a single customer is considered to be a group of
entities known to be under common control. This customer consists
of entities under control of the UK Government.
5 Revenue
Revenue recognised in the Consolidated Income Statement is
analysed as follows:
2020 2019
GBP'000 GBP'000
========= =========
Revenue by type
============================ ========= =========
Technology Sourcing revenue 4,180,084 3,822,227
============================ ========= =========
Services revenue
============================ ========= =========
Professional Services 425,403 366,083
============================ ========= =========
Managed Services 835,771 864,469
============================ ========= =========
Total Services revenue 1,261,174 1,230,552
============================ ========= =========
Total revenue 5,441,258 5,052,779
============================ ========= =========
A revenue amount of GBP231.3 million for the year ended 2020
(2019: GBP191.0 million) is represented by items still 'held' by
the Group for 'Bill and hold' transactions at the balance sheet
date.
Contract balances
The following table provides the information about contract
assets and contract liabilities from contracts with customers.
31 December 31 December
2020 2019
GBP'000 GBP'000
=========== ===========
Trade receivables 1,065,061 948,334
============================================================ =========== ===========
Contract assets, which are included in prepayments 27,725 5,959
============================================================ =========== ===========
Contract assets, which are included in accrued income 125,433 96,971
============================================================ =========== ===========
Contract liabilities, which are included in deferred income 292,577 174,258
============================================================ =========== ===========
The Group has implemented an expected credit loss impairment
model with respect to contract assets using the simplified
approach. Contract assets have been grouped on the basis of their
shared risk characteristics and a provision matrix has been
developed and applied to these balances to generate the loss
allowance. The majority of these contract asset balances are with
blue chip customers and the incidence of credit loss is low. There
has therefore been no material adjustment to the loss allowance
under IFRS 9.
Significant changes in contract assets and liabilities
Contract assets are balances due from customers under long-term
contracts as work is performed and therefore a contract asset is
recognised over the period in which the performance obligation is
fulfilled. This represents the Group's right to consideration for
the services transferred to date. Amounts are generally
reclassified to trade and other receivables when these have been
certified or invoiced to a customer.
Trade receivables balance increased during the year by GBP156.0
million due to acquisition of subsidiaries during the year (2019:
nil)
Win fees, deferred contract costs and fulfilment costs are
included in the prepayments balance above. The Consolidated Income
Statement impact of the win fees was a recognition of a net income
in 2020 of GBP1.8 million with a corresponding cost to tax of
GBP0.3 million for the year. As at 31 December 2020, the win fee
balance was GBP8.6 million. The Consolidated Income Statement
impact of fulfilment costs was a recognition of a net cost in 2020
of GBP1.4 million with a corresponding credit to tax of GBP0.3
million for the year.
As at 31 December 2020, the fulfilment costs balance was GBP5.6
million. Contract assets, which are included in prepayments,
increased by GBP39.2 million due to acquisition of a subsidiary
during the year. No impairment loss was recorded for win fees or
fulfilment costs during the year.
As at 31 December 2020, deferred contract costs of GBP19.1
million were included within prepayments following the acquisition
of subsidiaries during the year.
Revenue was accrued in the reporting period amounting to GBP1.6
million with a debit to foreign exchange of GBP3.1 million. Accrued
income balance also increased by GBP18.4 million due to acquisition
of subsidiaries during the year (2019: nil). No impairment loss was
recorded for accrued income during the year.
Revenue recognised in the reporting period that was included in
the contract liability balance at the beginning of the period was
GBP89.4 million. Contract liabilities, which are included in
deferred income, increased by GBP42.3 million due to the
acquisition of subsidiaries during the year. Revenue recognised in
the reporting period from performance obligations satisfied or
partially satisfied in previous periods was nil. Partially
satisfied performance obligations continue to incur revenue and
costs in the period.
Remaining performance obligations (Work in hand)
Contracts which have remaining performance obligations as at 31
December 2020 and 31 December 2019 are set out in the table below.
The table below discloses the aggregate transaction price relating
to those unsatisfied or partially unsatisfied performance
obligations, excluding both (a) amounts relating to contracts for
which revenue is recognised as invoiced and (b) amounts relating to
contracts where the expected duration of the ongoing performance
obligation is one year or less.
Managed Services
Three
Two to to
Less than One to three four Four years
one year two years years years and beyond Total
GBPm GBPm GBPm GBPm GBPm GBPm
========= ========== ====== ====== =========== =====
As at 31 December 2020 540 343 211 170 93 1,357
======================= ========= ========== ====== ====== =========== =====
As at 31 December 2019 588 317 198 70 34 1,207
======================= ========= ========== ====== ====== =========== =====
6 Exceptional items
2020 2019
GBP'000 GBP'000
======== ========
Operating profit
====================================================== ======== ========
Costs relating to acquisition of a subsidiary (684) (94)
====================================================== ======== ========
Gain on release of French Social Plan provision 144 -
====================================================== ======== ========
Gain on acquisition of a subsidiary 14,030 -
====================================================== ======== ========
Exceptional operating profit/(loss) 13,490 (94)
====================================================== ======== ========
Interest cost relating to acquisition of a subsidiary - (825)
====================================================== ======== ========
Profit/(loss) on exceptional items before taxation 13,490 (919)
====================================================== ======== ========
Income tax
====================================================== ======== ========
Tax credit on exceptional items - 39
====================================================== ======== ========
Tax credit relating to acquisition of a subsidiary 715 839
====================================================== ======== ========
Profit/(loss) on exceptional items after taxation 14,205 (41)
====================================================== ======== ========
2020: Included within the current year are the following
exceptional items:
-- An exceptional cost during the year of GBP0.7 million
resulted from the acquisition of Pivot and primarily related to
fees paid to the Company's advisors. This cost is non-operational,
unlikely to recur and is consistent with our prior-year treatment
of acquisition costs on material transactions as exceptional
items.
-- A credit of GBP0.1 million arising on an expense previously
put in exceptional costs within the financial statements of 2016 in
relation to the 2014 French Social plan.
-- The acquisition of BT Services France resulted in an
exceptional gain of GBP14.0 million, which was recognised on
consolidation of the subsidiary. The gain arose because the net
assets acquired for consideration of EUR1 totalled GBP14.0 million
after fair value adjustments, including GBP27.6 million of cash.
The business acquired comprised BT's domestic French services
operations which, on acquisition, were making considerable losses
on a stand-alone basis. The Company considers that the exceptional
gain reflects the future losses that the acquired business will
incur over the medium term, as it is brought onto a sustainable
footing through a combination of upskilling employees,
cross-selling into the Group's customers, alignment with Group
processes and systems, and the general improvement of its operating
activities. These costs are non-operational in nature, material in
size and unlikely to recur and have therefore been classified as
exceptional.
-- A further tax credit of GBP0.7 million was recorded due to
post-acquisition activity in FusionStorm. This benefit derived from
payments which were settled by the vendor, out of the consideration
paid, via post-acquisition capital contributions to FusionStorm. As
this credit was related to the acquisition and not operational
activity within FusionStorm, is a one-off and material to the
overall tax result, we have classified this as an exceptional tax
item, consistent with the treatment in 2018 and 2019.
2019: Included within the prior year are the following
exceptional items:
-- 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.
7 Income tax
a) Tax on profit from ordinary activities
2020 2019
GBP'000 GBP'000
======== ========
Tax charged in the Consolidated Income Statement
==================================================== ======== ========
Current income tax
==================================================== ======== ========
UK corporation tax 18,176 13,213
==================================================== ======== ========
Foreign tax:
==================================================== ======== ========
- operating results before exceptional items 36,375 26,724
==================================================== ======== ========
- exceptional items (715) (878)
==================================================== ======== ========
Total foreign tax 35,660 25,846
==================================================== ======== ========
Adjustments in respect of prior years 350 (460)
==================================================== ======== ========
Total current income tax 54,186 38,599
==================================================== ======== ========
Deferred tax
==================================================== ======== ========
Operating results before exceptional items:
==================================================== ======== ========
- origination and reversal of temporary differences (710) 311
==================================================== ======== ========
- change in tax rates (522) -
==================================================== ======== ========
- adjustments in respect of prior years (539) 487
==================================================== ======== ========
Total deferred tax (1,771) 798
==================================================== ======== ========
Tax charge in the Consolidated Income Statement 52,415 39,397
==================================================== ======== ========
b) Reconciliation of the total tax charge
2020 2019
GBP'000 GBP'000
======== ========
Profit before income tax 206,571 140,958
========================================================== ======== ========
At the UK standard rate of corporation tax of 19 per cent
(2019: 19 per cent) 39,249 26,782
========================================================== ======== ========
Expenses not deductible for tax purposes (34) 1,474
========================================================== ======== ========
Non-deductible element of share-based payment charge 69 432
========================================================== ======== ========
Adjustments in respect of prior years (189) 266
========================================================== ======== ========
Effect of different tax rates of subsidiaries operating
in other jurisdictions 14,305 8,876
========================================================== ======== ========
Change in tax rate (522) -
========================================================== ======== ========
Other differences 1,246 32
========================================================== ======== ========
Overseas tax not based on earnings 1,427 1,604
========================================================== ======== ========
Tax effect of income not taxable in determining taxable
profit (3,136) (69)
========================================================== ======== ========
At effective income tax rate of 25.4 per cent (2019: 27.9
per cent) 52,415 39,397
========================================================== ======== ========
c) Tax losses
Deferred tax assets of GBP0.4 million (2019: GBP2.0 million)
have been recognised in respect of losses carried forward.
In addition, at 31 December 2020, there were unused tax losses
across the Group of GBP307.6 million (2019: GBP143.0 million) for
which no deferred tax asset has been recognised. Of these losses,
GBP24.7 million (2019: GBP39.8million) arise in Germany and
GBP282.9 million (2019: GBP103.2 million) arise in France. A
significant proportion of the losses arising in Germany have been
generated in statutory entities that no longer have significant
levels of trade. The remaining unrecognised tax losses relate to
other loss-making overseas subsidiaries.
d) Deferred tax
Deferred income tax at 31 December 2020 and 31 December 2019
relates to the following:
Consolidated
Income Statement
and Consolidated
Statement
Consolidated of Comprehensive
Balance Sheet Income
================== ===================
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
======== ======== ========= ========
Deferred income tax assets
============================================ ======== ======== ========= ========
Relief on share option gains 7,012 5,300 1,712 432
============================================ ======== ======== ========= ========
Other temporary differences 10,310 6,575 547 (285)
============================================ ======== ======== ========= ========
Revaluations of foreign exchange contracts
to fair value 987 369 619 247
============================================ ======== ======== ========= ========
Losses available for offset against future
taxable income 341 1,343 (994) (2,131)
============================================ ======== ======== ========= ========
Gross deferred income tax assets 18,650 13,587
============================================ ======== ======== ========= ========
Deferred income tax liabilities
============================================ ======== ======== ========= ========
Revaluations of foreign exchange contracts
to fair value 1,058 809 (250) (71)
============================================ ======== ======== ========= ========
Amortisation of intangibles 26,384 15,272 1,705 1,186
============================================ ======== ======== ========= ========
Gross deferred income tax liabilities 27,442 16,081
============================================ ======== ======== ========= ========
Deferred income tax charge 3,339 (622)
============================================ ======== ======== ========= ========
Net deferred income tax liabilities (8,792) (2,494)
============================================ ======== ======== --------- --------
Disclosed on the Consolidated Balance Sheet
============================================ ======== ======== --------- --------
Deferred income tax assets 10,081 9,204
============================================ ======== ======== --------- --------
Deferred income tax liabilities (18,873) (11,698)
============================================ ======== ======== --------- --------
Net deferred income tax liabilities (8,792) (2,494)
============================================ ======== ======== --------- --------
At 31 December 2020, there was no recognised or unrecognised
deferred income tax liability (2019: GBPnil) for taxes that could
be payable on the unremitted earnings of the Group's subsidiaries
as the Group expects that future remittances of earnings from its
overseas subsidiaries will continue to be covered by relevant
dividend exemptions. Where, following the departure of the UK from
the European Union, the Group's European subsidiaries' unremitted
earnings are no longer covered by a dividend exemption, appropriate
mitigating steps are envisaged that would eliminate the incidence
of withholding tax.
e) Impact of rate change
The main rate of UK Corporation tax for financial year 2020 is
19 per cent, as enacted in the Finance Act 2020. The deferred tax
in these Consolidated Financial Statements reflects this.
8 Earnings per share
Earnings per share amounts are calculated by dividing profit
attributable to ordinary equity holders by the weighted average
number of ordinary shares outstanding during the year (excluding
own shares held).
To calculate diluted earnings per share, the weighted average
number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential shares. Share options granted to
employees where the exercise price is less than the average market
price of the Company's ordinary shares during the year are
considered to be dilutive potential shares.
2020 2019
GBP'000 GBP'000
======== ========
Profit attributable to equity holders of the Parent 153,750 101,655
==================================================== ======== ========
2020 2019
GBP'000 GBP'000
======== ========
Basic weighted average number of shares (excluding own
shares held) 112,894 112,514
======================================================= ======== ========
Effect of dilution:
======================================================= ======== ========
Share options 2,005 1,655
======================================================= ======== ========
Diluted weighted average number of shares 114,899 114,169
======================================================= ======== ========
2020 2019
pence pence
====== ======
Basic earnings per share 136.2 90.3
=========================== ====== ======
Diluted earnings per share 133.8 89.0
=========================== ====== ======
9 Analysis of changes in net funds
At At
1 January Cash flows Non-cash Exchange 31 December
2020 in year flow differences 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========== ========== ======== ============ ============
Cash and cash equivalents 217,881 84,760 - 7,203 309,844
======================================= ========== ========== ======== ============ ============
Bank loans and credit facility (80,772) (42,493) - 2,071 (121,194)
======================================= ========== ========== ======== ============ ============
Adjusted net funds(3) (excluding lease
liabilities) 137,109 42,267 - 9,274 188,650
======================================= ========== ========== ======== ============ ============
Lease liabilities (116,766) 47,679 (65,338) (3,049) (137,474)
======================================= ========== ========== ======== ============ ============
Net funds 20,343 89,946 (65,338) 6,225 51,176
======================================= ========== ========== ======== ============ ============
At Implementation At
1 January of IFRS Cash flows Non-cash Exchange 31 December
2019 16 in year flow differences 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========== ============== ========== ======== ============ ============
Cash and cash equivalents 200,442 - 24,388 - (6,949) 217,881
================================= ========== ============== ========== ======== ============ ============
Bank loans (134,234) - 51,755 - 1,707 (80,772)
================================= ========== ============== ========== ======== ============ ============
Adjusted net funds(3) (excluding
CSF and lease liabilities) 66,208 - 76,143 - (5,242) 137,109
================================= ========== ============== ========== ======== ============ ============
CSF leases (8,928) 8,928 - - - -
================================= ========== ============== ========== ======== ============ ============
Lease liabilities - (120,606) 42,346 (43,793) 5,287 (116,766)
================================= ========== ============== ========== ======== ============ ============
Total lease liabilities (8,928) (111,678) 42,346 (43,793) 5,287 (116,766)
================================= ========== ============== ========== ======== ============ ============
Net funds 57,280 (111,678) 118,489 (43,793) 45 20,343
================================= ========== ============== ========== ======== ============ ============
10 Related party transactions
During the year, the Group entered into transactions, in the
ordinary course of business, with related parties. Transactions
entered into are as described below:
Biomni provides the Computacenter e-procurement system used by
many of Computacenter's major customers. An annual fee has been
agreed on a commercial basis for use of the software for each
installation. Both PJ Ogden and PW Hulme are Directors of and have
a material interest in Biomni Limited.
The table below provides the total amount of transactions that
have been entered into with related parties for the relevant
financial year:
2020 2019
GBP'000 GBP'000
======== ========
Biomni Limited
================================= ======== ========
Sales to related parties 64 32
================================= ======== ========
Purchase from related parties 648 654
================================= ======== ========
Receivables from related parties 18 -
================================= ======== ========
Amounts owed to related parties 6 6
================================= ======== ========
Terms and conditions of transactions with related parties
Outstanding balances at the year end are unsecured and
settlement occurs in cash. There have been no guarantees provided
or received for any related party receivables. The Group has not
recognised any provision for doubtful debts relating to amounts
owed by related parties. This assessment is undertaken each
financial year through examining the financial position of the
related party and the market in which the related party
operates.
Compensation of key management personnel (including
Directors)
The Board of Directors is identified as the Group's key
management personnel. A summary of the compensation of key
management personnel is provided below:
2020 2019
GBP'000 GBP'000
======== ========
Short-term employee benefits 2,237 2,447
==================================================== ======== ========
Social security costs 435 422
==================================================== ======== ========
Share-based payment transactions 2,275 2,623
==================================================== ======== ========
Pension costs 41 40
==================================================== ======== ========
Total compensation paid to key management personnel 4,988 5,532
==================================================== ======== ========
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