TIDMCCC
RNS Number : 9055E
Computacenter PLC
16 March 2022
Computacenter plc
Incorporated in England
Registration number: 03110569
LEI: 549300XSXUZ1I19DB105
ISIN: GB00BV9FP302
Computacenter plc
Final results for the year ended 31 December 2021
Computacenter plc ("Computacenter" or the "Group"), a leading
independent technology partner trusted by large corporate and
public sector organisations, today announces unaudited results for
the year ended 31 December 2021.
Financial Highlights 2021 2020 Percentage
Change
Increase/
(Decrease)
Financial Performance
Technology Sourcing revenue (GBP
million) 5,274.9 4,180.1 26.2
Services revenue (GBP million) 1,450.9 1,261.2 15.0
Revenue (GBP million) 6,725.8 5,441.3 23.6
Adjusted(1) profit before tax
(GBP million) 255.6 200.5 27.5
Adjusted(1) diluted earnings
per share (pence) 165.6 126.4 31.0
Dividend per share (pence) 66.3 50.7 30.8
Profit before tax (GBP million) 248.0 206.6 20.0
Diluted earnings per share (pence) 160.9 133.8 20.3
Cash Position
Cash and cash equivalents (GBP
million) 273.2 309.8
Adjusted net funds(3) (GBP million) 241.4 188.6
Net funds (GBP million) 95.3 51.1
Net cash inflow from operating
activities (GBP million) 224.3 236.9
Reconciliation to Adjusted(1) Measures
Adjusted(1) profit before tax (GBP
million) 255.6 200.5
Exceptional and other adjusting
items:
Amortisation of acquired intangibles
(GBP million) (7.6) (7.4)
Gain on acquisition of a subsidiary
(GBP million) - 14.0
Costs related to acquisition (GBP
million) - (0.7)
Other exceptional items (GBP million) - 0.2
Profit before tax (GBP million) 248.0 206.6
Our strong financial and operational performance in 2021 has
been facilitated by the consistent implementation of our strategy.
It has also been underpinned by our focus on the long-term
consequences of our decision-making across the organisation, and
the actions we have taken to understand the needs, views and
interests of our stakeholders.
Following 16 consecutive years of growth in adjusted(1) diluted
earnings per share, we increased our adjusted(1) profit before tax
by over 30 per cent in constant currency(2) during 2021, and have
more than doubled it over the last three years. Our adjusted(1)
profit before tax results for both the first and second halves of
the year are individually greater than any full-year adjusted(1)
profit before tax we achieved prior to 2019.
We have achieved improvement across each of the four key metrics
that the Board uses to measure performance against our strategic
priorities.
We have seen progress in the delivery of our Sustainability
Strategy, winning together for our people and our planet. Our Scope
1 and 2 carbon emissions have fallen by 62 per cent in 2021, from
13,856 metric tonnes of CO2e in 2020 to 5,210 metric tonnes, we
were certified as a Top Employer across a number of our major
operating geographies, and we were recognised at the CRN Women in
Channel Awards 2021 for our community outreach programme.
We continue to work diligently to enable the consistent delivery
of value for our stakeholders, and make decisions to ensure the
long-term sustainable success of our organisation and the
achievement of our Purpose.
Operational Highlights:
-- The Group's total revenues grew by 23.6 per cent during the
year, by 26.9 per cent in constant currency(2) , and by 10.9 per
cent in constant currency(2) organically, without the impact of
acquisitions made since 1 January 2020. Significant increases in
expenditure from industrial customers and hyperscale technology
customers have complemented continuing business within the public
and financial services sectors. Ongoing, but reducing, COVID-19
related cost reductions and further improved Services margins and
stable Technology Sourcing margins has resulted in an increase in
adjusted(1) profit before tax of 31.5 per cent in constant
currency(2) during the year to GBP255.6 million. The doubling in
adjusted(1) profit before tax in the three years since our 2018
results is the first time that we have achieved such an increase
since we have been a public company.
-- The UK saw an increase in revenues of 9.9 per cent balanced
between Technology Sourcing and Services. Enterprise orders more
than offset the decline in workplace as the short-term demand from
COVID-19 dissipated. Professional Services revenues saw very strong
growth as customers looked to their longer-term IT transformation
programmes. Strong Services margins, due to increased utilisation
and reduced external contractor costs and stable Technology
Sourcing margins have resulted in an increase in adjusted(1)
operating profit of 14.0 per cent during the year.
-- Germany saw overall revenues increase by 11.6 per cent on a
constant currency(2) basis with growth in Managed Services
supporting a very strong performance in both Technology Sourcing
and Professional Services. The increase in Professional Services
volumes, at higher margins, coupled with overall Services margin
improvements and secure Technology Sourcing margins have resulted
in an increase of 27.8 per cent in adjusted(1) operating profit on
a constant currency(2) basis.
-- France had a slightly disappointing year, being impacted by
the slower than anticipated return of volumes from its large
industrial private sector customer base, lower than expected orders
from its largest Technology Sourcing customer and the expected
downturn in its Services business due to the cessation of the
Group's largest Managed Services contract which impacted from H2
2020. This has resulted in a 6.6 per cent decrease in organic
revenues on a constant currency(2) basis, decreasing gross profits
and a 70.8 per cent reduction in overall adjusted(1) operating
profit to EUR4.2 million including the results of the Computacenter
NS acquisition.
-- North America has seen strong organic revenue growth of 27.9
per cent increasing to 114.3 per cent including the Pivot
acquisition, both on a constant currency(2) basis. The combined
growth has meant that the North American business now has the
largest Technology Sourcing revenues of any Segment within the
Group with $2.5 billion of Technology Sourcing sales, up from
virtually nil in H1 2018. The hyperscale FusionStorm customers saw
a good return to growth in the year. Services revenue saw 27.5 per
cent organic growth, including the first major North American
Managed Services customer won by the local team, with the Pivot
acquisition contributing a further $104.5 million of Services
revenue in the year. Adjusted(1) operating profit, including the
impact of Pivot, has increased by 131.5 per cent to $42.6
million.
Mike Norris, Chief Executive of Computacenter plc,
commented:
'The more than doubling of profits that Computacenter has
achieved over the last three years has been the result of
deliberate actions that we have previously taken to enable growth.
Our acquisitions in North America and Western Europe have
materially increased our total addressable market. The organic
investments we have made, including the expansion of our sales
force, recruiting technical expertise and investing in systems to
enhance our productivity, have been substantial. Collectively,
these have put us in a position to take advantage of the ongoing
buoyant market conditions, as our customers invest in digitalising
their businesses. While we live in uncertain times and much work
remains to be done, these investments and current market conditions
make us confident that 2022 will be a year of further progress.
Given the profile of our profitability in 2021, we have a more
challenging comparison in the first half of 2022 compared to the
second, due to the fact that an abnormally high percentage of our
profits came in the first half of the year. As a business, we feel
as confident as we have ever been about our target market,
competitive position and investment strategy, and we look forward
to the future in 2022 and beyond with enthusiasm and
excitement.'
The result for the year benefited from GBP1,105.1 million of
revenue (2020: GBP232.6 million), and GBP13.9 million of
adjusted(1) profit before tax (2020: GBP3.3 million), resulting
from all acquisitions made since 1 January 2020. All figures
reported throughout this Annual Report and Accounts include the
results of these acquired entities. The results of these
acquisitions are excluded where narrative discussion refers to
'organic' growth in this Annual Report and Accounts. A
reconciliation between key adjusted(1) and statutory measures is
provided within the Group Finance Director's review contained in
this announcement.
(1) Adjusted administrative expense, adjusted operating profit
or loss, adjusted profit or loss before tax, adjusted tax, adjusted
profit or loss, adjusted earnings per share and adjusted diluted
earnings per share are, as appropriate, each stated before:
exceptional and other adjusting items including gains or losses on
business acquisitions and disposals, amortisation of acquired
intangibles, utilisation of deferred tax assets (where initial
recognition was as an exceptional item or a fair value adjustment
on acquisition), and the related tax effect of these exceptional
and other adjusting items, as Management 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.
(2) We evaluate the long-term performance and trends within our
strategic priorities on a constant currency basis. The performance
of the Group and its overseas Segments are also shown, where
indicated, in constant currency. The constant currency
presentation, which is a non-GAAP measure, excludes the impact of
fluctuations in foreign currency exchange rates. We believe
providing constant currency information gives valuable supplemental
detail regarding our results of operations, consistent with how we
evaluate our performance. We calculate constant currency
percentages by converting our prior-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. 2021 highlights, as shown above are
provided in the reported pound sterling equivalent.
(3) Adjusted net funds or adjusted net debt includes cash and
cash equivalents, other short or long-term borrowings and current
asset investments. Following the adoption of IFRS 16 this measure
excludes all lease liabilities. A table reconciling this measure,
including the impact of lease liabilities, is provided within note
8 to the summary financial information contained in this
announcement.
(4) Gross invoiced income is based on the value of invoices
raised to customers, net of the impact of credit notes. This
reflects the cash movements from revenue, to assist Management and
the users of the Annual Report and Accounts in understanding
revenue growth on a 'Principal' basis and to assist in their
assessment of working capital movements in the Consolidated
Statement of Financial Position and Consolidated Cashflow
Statement. This measure allows an alternative view of growth in
adjusted gross profit, based on the product mix differences and the
accounting treatment thereon. Gross invoiced income includes all
items recognised on an 'Agency' basis within revenue, on a gross
income billed to customers basis, as adjusted for deferred and
accrued revenue. A reconciliation of revenue to gross invoiced
income is provided within note 4 to the summary financial
information contained in this announcement.
The term Group refers to Computacenter plc and its
subsidiaries.
Enquiries:
Computacenter plc
Mike Norris, Chief
Executive 01707 631601
Tony Conophy, Finance
Director 01707 631515
Tulchan Communications
020 7353
James Macey White 4200
Matt Low
DISCLAIMER - FORWARD LOOKING STATEMENTS
This announcement includes statements that are, or may be deemed
to be, 'forward-looking statements'. These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms 'anticipates', 'believes',
'estimates', 'expects', 'intends', 'may', 'plans', 'projects',
'should' or 'will', or, in each case, their negative or other
variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, future events or intentions.
These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
announcement and include, but are not limited to, statements
regarding the Groups' intentions, beliefs or current expectations
concerning, amongst other things, results of operations, prospects,
growth, strategies and expectations of its respective
businesses.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Forward-looking statements are not guarantees of future performance
and the actual results of the Group's operations and the
development of the markets and the industry in which they operate
or are likely to operate and their respective operations may differ
materially from those described in, or suggested by, the
forward-looking statements contained in this announcement. In
addition, even if the results of operations and the development of
the markets and the industry in which the Group operates are
consistent with the forward-looking statements contained in this
announcement, those results or developments may not be indicative
of results or developments in subsequent periods. A number of
factors could cause results and developments to differ materially
from those expressed or implied by the forward-looking statements,
including, without limitation, those risks in the risk factor
section of the 2020 Computacenter Annual Report and Accounts, as
well as general economic and business conditions, industry trends,
competition, changes in regulation, currency fluctuations or
advancements in research and development.
Forward-looking statements speak only as of the date of this
announcement and may and often do, differ materially from actual
results. Any forward-looking statements in this announcement
reflect the Group's current view with respect to future events and
are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Group's operations,
results of operations and growth strategy.
Neither Computacenter plc nor any of its subsidiaries undertakes
any obligation to update the forward-looking statements to reflect
actual results or any change in events, conditions or assumptions
or other factors unless otherwise required by applicable law or
regulation.
Chair's statement
We are extremely concerned and saddened by the ongoing situation
in Ukraine following the invasion by Russia. We offer our deepest
sympathies and support to Ukraine. Computacenter will be launching
a campaign page for its employees to donate to Disaster Emergency
Committee (DEC) - Ukraine Humanitarian Appeal. Computacenter will
make a corporate donation and also match funds raised by our
employees.
Sanctions have been widely imposed by a number of national
governments and the European Union on the Russian Federation,
related organisations and individuals ('Sanctioned Parties'). We
have undertaken, as a consequence, a review of our operations to
ensure that we are not directly or indirectly conducting business
activities with Sanctioned Parties, supplying sanctioned or
restricted goods or software services, or conducting business
activities with individuals and organisations who are known to be
closely related to Sanctioned Parties. We have also implemented
review processes to ensure that we modify our activities to adhere
to any future changes in sanctions requirements.
Whilst the scope of our business in Russia and the Ukraine is
extremely limited, we recognise the likely short- to medium-term
impact of the situation on the global macro-economic environment,
including an exacerbation of supply chain issues currently being
experienced.
Computacenter in 2021
The Computacenter team continued to execute incredibly well in
2021 and delivered our 17th consecutive year of adjusted(1)
earnings per share ('EPS') growth, which was fitting as the Company
celebrated its 40th anniversary.
Across the 40 years Computacenter has navigated many trends in
technology, adapted to be able to deliver what customers valued,
evolved a culture that attracted great talent and sustained an
environment that persuaded a significant number of our people to
build their careers here. During this journey, the Company has
significantly expanded its technology partner base, services
portfolio, geographic markets and customers it serves. This has
created the foundation for the sustained growth we delivered in
2021. We are also pleased with the performance of the acquired
American businesses and the addressable market potential that it
highlights.
The continuing Covid-19 pandemic
The global pandemic has continued to weigh heavily on our
people, customers, partners and communities around the world and we
send our thoughts and best wishes to all those who have been
affected. The leadership team has resolutely focused on both the
human and business aspects of this crisis, and the results from our
recent employee survey indicate that this difficult balance was
achieved.
Financial performance and dividend
Revenue for the full-year increased to GBP6,725.8 million (2020:
GBP5,441.3 million), with the Group generating adjusted(1) profit
before tax of GBP255.6 million (2020: GBP200.5 million), and
adjusted(1) diluted EPS of 165.6 pence (2020: 126.4 pence).
We are proposing an increase in the final dividend to 49.4 pence
per share, reflecting both our performance and confidence in the
outlook for the Group. If approved by shareholders at
Computacenter's 2022 Annual General Meeting, this will bring the
full-year dividend for 2021 to 66.3 pence per share. This
represents an increase of 30.8 per cent over that paid for 2020.
This remains in line with our stated long-term dividend policy of
paying a dividend that is covered between 2.0 and 2.5 times by
adjusted(1) diluted EPS.
The Group's cash position finished strongly at the end of the
year, with adjusted net funds(3) of GBP241.4 million as at 31
December 2021. The Board continues to review our approach to
capital allocation, so that it ensures balance sheet efficiency and
appropriate returns for shareholders. Whilst our use of cash
continues to prioritise the organic growth and development of our
business, and merger and acquisitions activity which aligns with
our strategy, where available opportunities to invest in this way
are limited, the Board will consider returning value to
shareholders.
The Board in 2021
During 2021, there was one significant change to the Board.
Minnow Powell decided to retire from his roles as Chair of the
Audit Committee and Non-Executive Director.
We followed a robust process to identify his successor, led by
the Nomination Committee and assisted by an external search firm.
This produced an impressive and diverse list of candidates and we
were delighted to be able to announce the appointment of Pauline
Campbell as his successor as Audit Committee Chair. Pauline had
recently retired from a long and successful career in the audit
profession with PwC.
Pauline's appointment results in at least half the Board
(excluding the Chair) remaining as Independent Non-Executive
Directors. It also means we have just over 33 per cent female
representation on the Board, in line with the recommendations from
the Hampton-Alexander review.
Environmental, social and governance
The Board has continued its focus on sustainability, diversity
and inclusion and ensuring our governance practices evolve. These
subjects are regarded as very important by both the Board and the
people across Computacenter.
In terms of concrete commitments, we aim to be Carbon Neutral in
2022 for Scope 1 & 2 emissions. Scope 1 & 2 emissions
include all of our direct emissions, such as our facilities and
some of our indirect emissions such as electricity purchased. This
will be achieved by a combination of increases in our own renewable
energy generation, continued investment in energy-efficient
lighting and equipment, the purchase of electricity generated by
renewable sources and the purchase of carbon offsetting
credits.
The Board has also agreed a target of being Net Zero for Scopes
1, 2 and 3 emissions by 2040, ten years ahead of our previous
target. Scope 3 emissions include all other indirect emissions,
including our business travel and transportation, as well as those
from sources that we do not own or directly control, including our
supply chain.
The year ahead
We are unwavering in our focus on continuing to strengthen and
grow Computacenter to enable the success of all our stakeholders. I
thank them all for their continued trust and support.
The demand drivers for our business look strong as we enter
2022. Many market commentators have noted a global acceleration in
the efforts of governments and businesses to take advantage of the
opportunities afforded by digital transformation. This is true
across all areas of how organisations run their internal operations
effectively and how they engage with their customers and broader
stakeholder communities. In concrete terms, there is more demand
for technology and services to support the vast array of
transformation projects and this, combined with our business
momentum, makes us believe that 2022 will be another year of
continued progress.
Peter Ryan
Chair
15 March 2022
Chief Executive's strategic review
2021 was an excellent year for Computacenter. Our relentless
focus on understanding and addressing the needs of our customers,
and taking decisions that prioritise the long-term success of our
Company, has again served us well. Our strong in-year growth has
been underpinned by recent investments we have made. These have
spread the business geographically, increased our productivity,
broadened the range of offerings we deliver for our customers, and
positioned us well to take advantage of buoyant market conditions
during the year.
Our focus remains on consistent financial performance and the
delivery of value for our stakeholders. Following the very strong
growth of adjusted(1) diluted earnings per share that the Company
achieved in 2020, we grew again by over 30 per cent in constant
currency(2) during the year. The Group has now doubled its profit
over the past three years, a feat we last achieved in the middle of
the 1990s, prior to becoming a public company.
Our financial success can only be achieved through the delivery
of superb quality to our customers. I would like to take this
opportunity to thank all of our people for their hard work and
dedication, which is reflected in our financial outcome for 2021,
as well as a recent independent survey of client satisfaction
carried out by Whitelane Research.
There has been high demand for Professional Services skills
across the Group, as many of our customers have continued to roll
out new digital solutions to their users and their own customers.
Our ability to recruit and retain employees in this area is
therefore crucial to our success. At a Group level, Computacenter
recruited 3,200 new people into our business in 2021, bringing our
total number of employees to over 18,000.
While Professional Services was the main driver of Services
growth during the year, we also saw improved performance from our
Managed Services business. We have strengthened our offerings to
the marketplace, grown our off-shore capability and increased the
use of automation to deliver solutions to customers. These measures
have both improved service to our customers and resulted in the
highest gross margins we have ever achieved in this area of the
business.
Technology Sourcing saw significant demand for software and
hardware across all of our main operating geographies, as customers
invested in new technology to support their businesses. While
supply chain shortages were an issue, these gave us an opportunity
to outperform our competition through the performance of our
well-developed supply chain. Many of our larger customers are
highly reliant on deploying new technology and they have taken to
ordering much further in advance. While this gives us greater
visibility, it has also meant an increase in the inventory we are
carrying. We do expect our inventory to return to more normal
levels as supply chain constraints ease. We have continued to
invest in our Integration Centers to increase service quality and
throughput volumes, as we expect demand to continue to grow.
Our German business had an outstanding year and continues to go
from strength to strength, particularly in Professional Services
and Technology Sourcing. We performed solidly in the UK, with some
major renewals and an outstanding performance from Technology
Sourcing. In France, although our performance was slightly
disappointing, we successfully integrated the acquisition we made
in late 2020. The financial performance of the acquisition was in
line with expectations, and we are confident we will turn this
around in the coming years. We saw a significant upturn in
performance from our Belgian business, as well as better
performances from our businesses in the Netherlands and
Switzerland.
In North America, we have brought together the acquisitions made
in 2018 and 2020. Although there remains work to do on integrating
back-office systems, the Management teams are now highly
integrated. We are extremely excited by the opportunity for future
organic and inorganic growth in North America and very pleased with
the 2021 performance there.
Throughout 2021, we continued to invest in our operations,
particularly in India, Romania, Poland and South Africa. We now
have a total workforce in near-shore and off-shore operations of
approximately 3,000 people.
The strong cash generation we have achieved over many years
continued last year, despite the increase in inventory. The
strength of our balance sheet gives us strategic options as we move
forward, either through further acquisitions or the return of cash
to our shareholders.
Our Management team remained unchanged throughout 2021. Kevin
James, who first started at Computacenter in 1990 and has been our
Chief Commercial Officer for the last four years, has decided to
retire at the end of the first quarter in 2022. I would like to
thank Kevin for his loyal and dedicated service to Computacenter
and congratulate John Beard, who steps up into Kevin's role. John
joined Computacenter as a graduate trainee back in 1995 and is a
great example of our strength in depth. Computacenter's continued
investment in people over many years has enabled this smooth
transition, along with many others, and holds us in good stead for
the future.
As always, I would like to thank our customers for the faith
they continue to show in us. We will always remember that they have
a choice. Our job is to make sure that their decision to place
business with Computacenter above the competition is the right
one.
We look forward to the challenge of 2022 and continuing our
success.
Mike Norris
Chief Executive Officer
15 March 2022
Our Performance in 2021
Group
Financial performance
Our strong financial and operational performance in 2021 saw the
Company deliver its 17th consecutive year of earnings per share
growth. This continues to demonstrate the resilience of our
business model, and reinforces our motivation to have the largest
Services business of any value-added reseller, as well as the
largest value-added reseller capability of any Services business
worldwide.
The Group's revenues increased by 23.6 per cent to GBP6,725.8
million (2020: GBP5,441.3 million) and were 26.9 per cent higher in
constant currency(2) . This is the first time that the Group has
exceeded GBP6 billion of revenues in a year, and it saw revenues in
the second half of the year higher than any of the annual revenues
recorded by the Group up to and including 2016. Gross invoiced
income(4) increased by 21.1 per cent to GBP6,923.5 million (2020:
GBP5,715.0 million).
The Group has more than doubled its adjusted(1) profit before
tax over the last three years. This is the first time that we have
achieved such an increase since we have been a public company. The
Group made a profit before tax of GBP248.0 million, an increase of
20.0 per cent (2020: GBP206.6 million). The Group's adjusted(1)
profit before tax increased by 27.5 per cent to GBP255.6 million
(2020: GBP200.5 million) and by 31.5 per cent in constant
currency(2) . The adjusted(1) profit before tax results for both
the first and second halves of the year are individually greater
than any full-year adjusted(1) profit before tax we achieved prior
to 2019 and each would be the third-largest annual profit in the
Group's history.
The difference between profit before tax and adjusted(1) profit
before tax relates to the net charge of GBP7.6 million (2020: gain
of GBP6.1 million) from exceptional and other adjusting items. In
the current year, this comprises the amortisation of the acquired
intangible assets resulting from the Group's 2018 acquisition of
FusionStorm and the 2020 acquisition of Pivot.
With the increase in the Group's profit after tax, the diluted
earnings per share ('EPS') increased by 20.3 per cent to 160.9
pence for the year (2020: 133.8 pence). Adjusted(1) diluted EPS,
the Group's primary EPS measure, increased by 31.0 per cent to
165.6 pence (2020: 126.4 pence) in 2021.
The result has benefited from GBP1,105.1 million of revenue
(2020: GBP232.6 million), and GBP13.9 million of adjusted(1) profit
before tax (2020: GBP3.3 million), from all acquisitions made since
1 January 2020. All figures reported throughout this announcement
include the results of these acquired entities. Excluding the
impact of the acquisitions made since 1 January 2020, revenues grew
organically by 10.9 per cent on a constant currency(2) basis.
Trading across all of our major geographies, apart from France,
was pleasing throughout the year, with particular strength at the
end of the second quarter, and in our traditionally strongest month
of December.
The Group only received EUR0.2 million of government
employment-related assistance during the year, which was entirely
related to the Group's Belgian operations and ceased in May 2021. A
further $1.3 million was recognised as a credit to the income
statement in North America during the year due to funds received
relating to a payroll protection programme in Pivot that was
applied for prior to acquisition. This has subsequently been
converted to a permanent grant by the US Federal Government. The
year saw continuing, but reduced, challenges from Covid-19, with
most of our major geographies experiencing lockdowns or
restrictions on office-based working during the year. The vast
majority of our staff worked from home for significant periods
during the year, although we were generally able to perform
services on customer sites as required. We thank all of our people
for the flexibility and dedication they have shown to cope with the
continually changing external environment and acknowledge their
successes, as they have driven the Company to new heights of
performance.
The Group has seen business with key industrial customers return
to near pre-pandemic levels, after this spend was largely
suppressed during 2020. Combined with strong public sector
activity, this has continued to create organic revenue growth
opportunities for the Group. As in 2020, we benefited from some
Covid-19 related cost savings, but to a much lower extent.
Additionally, there was no further pandemic-related surge in spend
on Technology Sourcing, compared to the prior year. Whilst demand
has remained high, the driver has shifted from short-term pandemic
responses to more medium-term re-engineering of IT structures, as
organisations employ digital transformation to cope with the
ever-evolving technology landscape and increasing cyber
threats.
Revenues from public sector customers, such as local and central
government, increased by 10.1 per cent, against growth with
non-public sector customers of 29.9 per cent. Public sector
accounts have grown less than last year, whereas demand from other
customer sectors has recovered strongly as the marketplace
normalises towards pre-Covid-19 patterns. The public sector now
accounts for 28.2 per cent of our revenues (2020: 32.0 per cent).
While significant volumes of this Public Sector business were at
lower than normal gross margins, particularly through the first
quarter of the year, we maintained efficiencies and reduced costs
within business delivery areas, so that margins remained very close
to the record levels seen in 2020.
Throughout the year, product shortages have materially impacted
the supply of key equipment for our customers, with some orders
being materially delayed or only partly fulfilled. Whilst product
availability increased during December, the unexpected impact on
working capital through the year was significant. Inventory levels
have increased across the business, as a result of carrying stock
for orders that we cannot deliver without a critical part or,
increasingly through the year and particularly in North America
where customers have ordered early and subsequently delayed
delivery, as data center facilities are not ready. We do not expect
inventory to return to normal levels until there is a longer-term
supply improvement.
The Group had GBP341.3 million of inventory as at 31 December
2021, an increase of 61.5 per cent on the balance sheet as at 31
December 2020 of GBP211.3 million. Over three quarters of this
increase was attributable to our North American Segment, which had
closing inventory of GBP212.5 million (2020: GBP103.2 million).
While supply has been restricted, demand has continued to rise,
with our product order backlogs across all geographies at all-time
highs and considerably larger than at the end of 2020. This gives
us a high degree of confidence that the Technology Sourcing
business will be well placed to benefit in the year ahead.
The Group has seen significant currency translation headwinds as
the pound sterling has strengthened against other currencies,
particularly the US dollar and the euro. This has reduced
profitability in the year. Had exchange rates in 2021 been
equivalent to the average rates seen in 2020, adjusted(1) profit
before tax would be GBP7.6 million higher, with revenues GBP234.0
million higher in 2021. Further information on currency impacts is
available in the Group Finance Director's review.
We remain alert to ongoing product shortages, and further
strengthening of the pound would create a stronger FX translation
headwind.
Looking at our performance by geography, the UK in particular
has seen very strong demand continue from both public and private
sector customers, with increased software sourcing and Enterprise
technology orders driving growth. Professional Services growth has
surged, as customers have restarted delayed projects and invested
in the ongoing transformation of their IT environments.
The German business has seen similar growth patterns to the UK.
Technology Sourcing delivered good growth as large industrial
customers, particularly in automotive, have returned to normal
trading patterns with less disruption from Covid-19. We were
pleased to sign a new supply framework agreement with our largest
customer in Germany, ensuring that the partnership remains central
to the success of both businesses.
In North America, the mid-market customers who materially
reduced spend during 2020 continued to return and complemented our
ongoing and growing success with hyperscale (data center-based)
customers, driving good overall organic revenue and profit
performance. The addition of the Pivot acquisition in the second
half of 2020 has further contributed to the Segment, with a
full-year of performance and complementary capabilities that
support our overall North American growth ambitions.
The French business had a slightly disappointing 2021, with
reductions in Technology Sourcing performance compounding the
impact of the previously announced non-renewal of the Group's
largest Managed Services contract. The integration of Computacenter
NS remains on track, with the transition to our Group ERP system
successfully completed. Computacenter NS performed in line with our
forecasts and contributed an adjusted(1) loss before tax of GBP3.8
million, which also worsened the overall French Segment result. As
we have noted previously, we recognised an exceptional gain of
GBP14.0 million on consolidation of the subsidiary in the 2020
Annual Report and Accounts, following the acquisition of the
business. This gain arose from cash maintained by the vendor within
the acquired balance sheet that was primarily to compensate the
Group for future losses. Under IFRS it is not possible to allocate
the exceptional gain against future incurred operating losses, but
it is important to remember when considering the commercial context
of the Computacenter NS performance and our short to medium-term
expectations for the business. We consider that the exceptional
gain reflects the losses that the acquired business will incur over
the medium term, as it is brought onto a sustainable footing.
The International Segment has improved significantly on 2020,
with a good finish to the year. All of the primary European trading
entities saw improved performance with Belgium, Switzerland and the
Netherlands all experiencing encouraging growth in both revenues
and profitability, and the commencement of a global contract with a
large industrial customer led from the Netherlands.
With both organic and acquired revenues increasing during the
year, profits increased as costs across the Group remained lower
than pre-Covid-19 levels and margins remained high. Overall, Group
gross margins were broadly flat at 12.9 per cent of revenues (2020:
13.2 per cent).
Administrative expenses increased by 20.5 per cent in constant
currency(2) , significantly behind the growth in gross profit as
pre-pandemic costs continued to return in a controlled manner. As
offices once again re-open across our major geographies, we expect
costs to return but at a lower level than before the Covid-19
crisis, with the business having learned to be leaner and more
efficient.
Technology Sourcing performance
The Group's Technology Sourcing revenue increased by 26.2 per
cent to GBP5,274.9 million (2020: GBP4,180.1 million) and by 29.7
per cent on a constant currency(2) basis.
The result benefited from GBP977.5 million of revenue from the
acquisitions made since 1 January 2020 (2020: GBP212.0 million)
with GBP967.7 million of this as a result of the Pivot acquisition
(2020: GBP209.5 million). Excluding these revenues, Technology
Sourcing organic revenue growth was 11.5 per cent on a constant
currency(2) basis.
The UK Technology Sourcing business saw continued excellent
growth, with the focus moving from workplace contracts driven by
the remote working needs of the Covid-19 environment to the higher
margin enterprise product.
In Germany, Technology Sourcing revenue returned strongly to
growth, in particular as automotive and other industrial customers
increased spend through large framework agreements, following the
sector-related Covid-19 and supply chain issues. We signed a key
framework agreement with our biggest customer in Germany, allowing
us to approach 2022 with confidence.
The French Technology Sourcing revenue declined on an organic
basis, due to reduced demand in the year from some major
customers.
The North American Technology Sourcing business saw revenues
improve on an organic basis. Our hyperscale customers have
significantly increased demand, and the mid-market core of the
business has remained stable after a slowdown in 2020. The
acquisition of Pivot has added material volume to the Segment, with
the business lines, geographical footprint and technical
capabilities almost entirely complementary to the pre-acquisition
US business. The combined operation provides opportunities to reach
a wider addressable market and to cross-sell across our
portfolio.
Overall Group Technology Sourcing margins reduced by 33 basis
points during the year, partially due to customer and product mix
changes.
Services performance
During the year we experienced the highest growth in our
Services revenue for the last 20 years. The Group's Services
revenue increased by 15.0 per cent to GBP1,450.9 million (2020:
GBP1,261.2 million) and by 17.8 per cent on a constant currency(2)
basis. Within this, the Group's Professional Services revenue
increased by 29.9 per cent to GBP552.4 million (2020: GBP425.4
million), and by 33.1 per cent on a constant currency(2) basis,
while the Group's Managed Services revenue increased by 7.5 per
cent to GBP898.5 million (2020: GBP835.8 million), and by 10.1 per
cent on a constant currency(2) basis.
The overall Services result benefited from GBP127.6 million of
revenue from the acquisitions made since 1 January 2020 (2020:
GBP20.6 million). Excluding these revenues, Services organic
revenue growth was 9.2 per cent on a constant currency(2)
basis.
UK Services revenue saw good growth, primarily due to a
significant increase in Professional Services with some new Managed
Services customers adding momentum during the second half of the
year. Professional Services continued its strong start to the year,
as customers re-engaged with our consultancy expertise to assist
their post-pandemic IT requirements. Managed Services strengthened
through the year, as we converted opportunities within the still
healthy pipeline into contracts and continued to realise
efficiencies across the existing portfolio.
Our German Managed Services have grown strongly, as customer
volumes have returned to pre-Covid-19 levels with further contract
wins and expanded scopes within some existing contracts. The
Professional Services business continues to see very strong growth
year after year, with the limiting factor being the supply of
appropriate resource. This has been helped by the recent investment
in our near-shoring initiative in Romania.
Our French Services business saw further sharp falls in Services
revenue on an organic basis. The French Professional Services
business is more reliant on on-site activity than the equivalent
businesses in the UK or Germany and continues to face significant
disruption from Covid-19 and the resulting government response. The
French Managed Services business declined, as expected, following
the non-renewal of a large global outsourcing contract at the end
of the contract term in 2019, which did not impact revenues until
the second half of 2020.
In North America, Professional Services revenue has recovered as
projects delayed by Covid-19 restarted. Mid-market customers, which
generate much of the Professional Services revenue in the US, were
the weakest business area during the pandemic and experienced a
recovery during 2021.
Overall Group Services margins increased by 60 basis points
during the year. The continued reduction of travel costs, lower
subcontractor costs and improved Professional Services utilisation,
coupled with improving Managed Services volume, have all
contributed to this increase.
Outlook
The more than doubling of profits that Computacenter has
achieved over the last three years has been the result of
deliberate actions that we have previously taken to enable growth.
Our acquisitions in North America and Western Europe have
materially increased our total addressable market. The organic
investments we have made, including the expansion of our sales
force, recruiting technical expertise and investing in systems to
enhance our productivity, have been substantial. Collectively,
these have put us in a position to take advantage of the ongoing
buoyant market conditions, as our customers invest in digitalising
their businesses.
While we live in uncertain times and much work remains to be
done, these investments and current market conditions make us
confident that 2022 will be a year of further progress.
Given the profile of our profitability in 2021, we have a more
challenging comparison in the first half of 2022 compared to the
second, due to the fact that an abnormally high percentage of our
profits came in the first half of the year.
As a business, we feel as confident as we have ever been about
our target market, competitive position and investment strategy,
and we look forward to the future in 2022 and beyond with
enthusiasm and excitement.
United Kingdom
Financial performance
Revenues in the UK business increased by 9.9 per cent to
GBP1,948.6 million (2020: GBP1,773.4 million) with gross invoiced
income(4) increasing by 5.8 per cent to GBP2,063.7 million (2020:
GBP1,949.8 million).
The UK business increased revenues in both Technology Sourcing
and Services. While the global pandemic continues to create
challenges in some of our core markets, we have seen acceleration
in demand for consultancy and project services, and in software
sourcing needs. We have also secured some significant Managed
Services contracts, which will deliver benefit in the long term.
Although some existing contracts were not renewed, overall, Managed
Services revenue saw good growth during the year.
During 2021, our customers increasingly benefited from our
expanded international presence, to meet their global Technology
Sourcing and Services requirements.
We have continued to invest in our people, further expanding our
sales force to engage new customers and drive growth through
existing customers. While we are already seeing the benefit of new
trading relationships arising from this expansion, the return will
be realised through the longer-term development of a broader client
base. This investment has helped to increase the number of
customers where we generate greater than GBP1 million of gross
profit, from 52 to 55 in 2021.
Our hybrid-working approach has proved successful, which is
reflected in our recent employee engagement survey results. We are
pleased to have retained our unique culture despite the challenges
of remote working, and proud to have been recognised as a Top
Employer in the UK. We are now making changes to our facilities to
allow the gradual return of our people to the office, whilst
enabling our people to continue to work flexibly and
collaboratively in line with their customers' needs.
Overall margins in the UK reduced slightly by 29 basis points,
with the gross profit margin decreasing from 14.1 per cent to 13.8
per cent of revenues. Gross profit grew by 7.6 per cent to GBP268.2
million (2020: GBP249.2 million).
Adjusted(1) administrative expenses increased by only 4.0 per
cent to GBP165.3 million (2020: GBP158.9 million), significantly
behind the growth of the business. This is an increase on the 1.3
per cent growth in adjusted(1) administrative expenses seen in
2020, following additional investments in the sales force during
2021 to better target our addressable customer opportunity.
This resulted in adjusted(1) operating profit growing by 14.0
per cent to GBP102.9 million (2020: GBP90.3 million).
Technology Sourcing performance
Technology Sourcing revenue increased by 10.4 per cent to
GBP1,466.4 million (2020: GBP1,328.0 million).
Revenues increased in line with expectations. While demand for
workplace technology has remained higher than pre-pandemic levels,
the exceptional spend attributed to customers' Covid-19 responses
has softened, resulting in a decline in workplace technology during
the year, as expected. The Enterprise Technology Sourcing business
has seen the predicted return to growth, with customers investing
in networking, security and data center hardware and software
solutions, with a particular focus on international Technology
Sourcing.
While supply chain constraints in some product categories have
led to unpredictable availability, we have been able to meet the
needs of our customers and, in parallel, we have built a strong
product order book for the year ahead. The Technology Sourcing
order book at 31 December 2021 was 26 per cent higher than at 31
December 2020.
Technology Sourcing margins reduced by 62 basis points compared
to the prior year. However, Technology Sourcing gross profit
increased by 3.5 per cent, reflecting the higher revenue.
Services performance
Services revenue increased by 8.3 per cent to GBP482.2 million
(2020: GBP445.4 million). Professional Services grew 19.8 per cent
to GBP154.6 million (2020: GBP129.1 million). Managed Services grew
by 3.6 per cent to GBP327.6 million (2020: GBP316.3 million).
While the pandemic has continued to affect where customers are
focusing their investment in some of our core markets, we are
pleased with the increase in demand for our Professional Services
skills and resources, with a notable increase in cloud advisory and
transformation services, as well as networking and security project
activity.
We have developed a strong Professional Services pipeline for
2022, which should result in continued growth in Enterprise
Professional Services in particular.
Managed Services revenues grew moderately during the year, with
some significant long-term contracts secured in the financial
services sector. We have successfully implemented the contracts
awarded during 2020, giving us confidence in the long-term value of
these arrangements.
We have experienced increased competitive pressure in our Public
Sector Managed Services business, with some losses during this
period. Our competitive position improves when the scope includes
Technology Sourcing embedded within a Managed Services opportunity.
We are pleased to have won a significant Managed Services contract
with a large financial services customer, with a worldwide support
coverage requirement including Technology Sourcing embedded in the
contract, in a 'device-as-a-service' model.
While the in-year growth has been pleasing, the losses during
the year combined with longer buying cycles for significant Managed
Services campaigns currently underway will make continued growth
challenging in 2022.
Services margins increased by 97 basis points over the year, as
we continue to operate an efficient blend of expert resources and
automated solutions. The use of our off-shore capabilities has
increased materially, with customers keen to benefit from a
right-shore model. One major contract which commenced during the
year added approximately 150 employees in Bangalore. Service
quality and innovation in our Bangalore Service Center has been
high and we anticipate further leverage of this capability.
Germany
The overall economic situation in Germany has largely stabilised
with only a few sectors, such as the tourism and retail industries,
still struggling with pandemic-related problems. Industries
relevant to our business, such as automotive, healthcare,
consulting, technology and the public sector, are almost all back
in IT investment mode, as they accelerate their digitisation
efforts to assist with solving their business IT challenges. This
has led to an increased demand for infrastructure refreshes and
digitisation projects. In addition, the expansion of existing
network infrastructure, implementation of ever-increasing security
requirements and the continual modernisation of workplace
environments are all positive factors for our business.
We recorded some pleasing successes with developing our customer
base and concluding renewals and new business. We again increased
the number of customers contributing more than GBP1 million of
gross profit from 51 to 55. In the public sector, we were able to
renew some very large volume framework contracts and win new ones.
In addition, we achieved further important successes and concluded
long-term contracts in the emerging application development
business line.
In the automotive sector, we renewed and concluded long-term
contracts with one of our most important customers, for both
worldwide network operations and field and onsite workplace
services. We secured and expanded a workplace services contract for
one of the world's largest global chemical groups. In addition, we
won an infrastructure Managed Services contract with a federal
state bank, and a workplace Managed Services contract with a
Telecommunications provider. Towards the end of the year, we again
concluded a long-term contract with a very large German hyperscaler
and software provider. This contract secures significant Technology
Sourcing and Services volumes in the area of data center and
networking.
We see the potential for top-line growth in 2022, which should
also lead to an increase in earnings. We will invest significantly
in our sales capacity, to support long-term customer development
and, above all, to expand our customer base. In addition, we plan
to significantly expand our Professional Services resources
(consulting, project and engineering), although this will certainly
be a challenge in the current labour market. These investments will
have an impact on the short-term overall result, but from a medium-
to long-term perspective, they are the right actions to ensure
growth.
Financial performance
Total revenue increased by 11.6 per cent to EUR2,352.5 million
(2020: EUR2,108.2 million) and by 7.7 per cent in reported pound
sterling equivalents(2) . Gross invoiced income(4) increased by
12.1 per cent to EUR2,386.0 million (2020: EUR2,129.2 million).
The 2021 financial year was characterised by revenue growth in
all three business areas.
We recorded significant growth of 11.8 per cent in Technology
Sourcing, which is a pleasing result considering the availability
problems with almost all hardware products. The strong
relationships with our technology partners, as well as the skills
and experience in our Computacenter teams, had a very positive
effect on performance. In addition, we were able to ensure
availability for our customers for important projects and plans
through significantly increased stocking of products at our
Integration Center in Kerpen.
We also showed good growth in both Professional Services and
Managed Services. We are seeing continued high demand for
technology refreshes and digitisation projects. This growth was
made possible by the actions we started in the previous year to
expand our near-shore and off-shore capacity, as well as the
expansion of our German capacity, especially in consulting. The
good growth in Managed Services was particularly pleasing. In a
persistently difficult and demanding market segment, we gained new
clients and expanded existing contracts.
Overall margins in Germany increased by 52 basis points, with
gross profit increasing from 14.9 per cent to 15.4 per cent of
revenues. Gross profit grew by 15.7 per cent to EUR363.2 million
(2020: EUR313.8 million) and by 11.5 per cent in reported pound
sterling equivalents(2) .
Along with the growth in revenue, we also recorded good
contribution growth. While we maintained product margins at a level
in line with the previous year, we significantly increased the
Services margin, especially in Managed Services. This was due in
particular to actions to optimise existing contracts, as well as
the significantly reduced number of problem contracts. In addition,
almost all new take-on projects were completed within or below the
expected range of costs. In Professional Services, we maintained
healthy margin levels, benefiting from a continuing high remote
delivery level and from strong utilisation. However, the measures
to retain existing employees and recruit new employees have
increased costs and will require further investments in the
future.
Adjusted(1) administrative expenses increased by 7.7 per cent to
EUR202.5 million (2020: EUR188.1 million), and by 4.1 per cent in
reported pound sterling equivalents(2) .
Indirect costs were in line with expectations. We again
benefited from lower travel, event and meeting costs which had a
positive impact on the cost base. However, increased commissions
due to the higher contribution, as well as proportionate costs for
the planned staff expansion in sales, have increased the cost base.
Stocking costs also increased, as we maintained product
availability within Technology Sourcing.
Adjusted(1) operating profit for the German business increased
by 27.8 per cent to EUR160.7 million (2020: EUR125.7 million) and
by 22.4 per cent in reported pound sterling equivalents(2) .
The growth in earnings for the year was primarily due to good
overall business growth and an increase in the Services margin.
For 2022, it is important to continue to develop in Services, to
use market demand to grow the Technology Sourcing business and to
profit from the new contracts won in Managed Services. We will also
invest in the sales force and in scaling the capacity of our
Professional Services business.
Technology Sourcing performance
Technology Sourcing revenue grew by 11.8 per cent to EUR1,628.9
million (2020: EUR1,457.4 million) and by 7.8 per cent in reported
pound sterling equivalents(2) . Technology Sourcing margins
decreased by 24 basis points over last year but remained at a high
level.
This area delivered a pleasing performance, despite the
worldwide supply problems for hardware products. We again benefited
from good growth in the public sector and healthcare sector.
Compared to the previous year, we saw increased demand, especially
from customers in the automotive and related supplier industries.
We recorded very good growth in workplace, saw good network and
security business and slight growth in data center business.
The Technology Sourcing order book at 31 December 2021 was 138.6
per cent higher than at 31 December 2020.
Margins remained at a very high level in all areas, with slight
improvements in the workplace business offsetting minor reductions
elsewhere, and leading to a slight overall decrease of 24 basis
points.
Services performance
Services revenue grew by 11.2 per cent to EUR723.6 million
(2020: EUR650.8 million) and by 7.5 per cent in reported pound
sterling equivalents(2) . This included Professional Services
growth of 21.2 per cent to EUR318.4 million (2020: EUR262.8
million), an increase of 17.1 per cent in reported pound sterling
equivalents(2) , and an increase in Managed Services of 4.4 per
cent to EUR405.2 million (2020: EUR388.0 million), an increase of
1.0 per cent in reported pound sterling equivalents(2) .
We achieved good growth and a significant improvement in
earnings in both Professional Services, which is our project and
consulting business, and in Managed Services, the maintenance and
management business.
As in previous years, we benefited from our strong consulting
and project business in 2021. Here, we see increasing demand for
the support of international projects in field, home office and
on-site services, as well as continuing high demand for the
realisation of digitalisation projects. We were able to
successfully leverage the near-shore services in Cluj, Romania,
which we started in second quarter of 2021 and have since expanded
to more than 80 people.
We are continuing with our plan of having 400 extra people in
the area of consulting and engineering in 2022 and have once again
significantly expanded our recruiting activities for this
purpose.
Our Managed Services business also developed positively over the
year. We see a stagnating market dominated by a few global
participants, but we were able to hold our ground, win new
contracts and expand our existing business. Profitability also
increased thanks to good contract management and the stabilisation
or expiry of some of our problem or loss-making contracts.
Nevertheless, this business will continue to be challenging in the
future and growth will only be possible by winning new
contracts.
Overall, the Services margin was 225 basis points higher than
last year.
France
In November 2020, we completed the acquisition of BT's domestic
Services operations in France. This subsidiary has been renamed
Computacenter NS. Our 2021 results therefore include the full-year
financial performance of Computacenter NS, whereas we only had two
months in the 2020 results.
Financial performance
Total revenue increased by 0.8 per cent to EUR760.0 million
(2020: EUR753.9 million). In reported pound sterling equivalents(2)
, total revenue was down 2.9 per cent.
As noted in our first half results, we were determined to
deliver a positive operational result for the full year. Thanks to
a good second half performance, we achieved this goal. However, the
year as a whole was challenging for our French business. We have
seen declining performance in all areas of the business and as
Computacenter NS was loss-making on acquisition, it further reduced
our profit for 2021, as expected.
The acquired business, Computacenter NS, recorded revenues of
EUR69.6 million (2020: EUR15.0 million) with an adjusted(1)
operating loss of EUR4.9 million (2020: EUR1.6 million), which was
broadly in line with our plan for the year.
Excluding the revenues earned within Computacenter NS,
Computacenter France total revenue declined by 6.6 per cent to
EUR690.4 million (2020: EUR738.9 million).
Throughout the year, we were confronted by the challenge of
worldwide component shortages, and corresponding delivery issues in
Technology Sourcing, mainly in the workplace area. This impacted
our public sector business, as we fulfil multiple public framework
contracts in this area. Our private sector performance was not
immune from the worldwide shortages but it showed encouraging
growth in the networking area and therefore compensated better for
the shortages in other areas.
We continued to integrate Computacenter NS, strengthening our
capabilities in our networking and security offerings. In November
2021, we reached an important milestone by finalising the migration
of Computacenter NS into our Group ERP systems, giving us the
opportunity to further align processes and resources. As
anticipated at the time of the acquisition, we had to relocate some
office locations for Computacenter NS. In June 2021, we opened our
new sales and administrative office in the centre of Paris. Despite
difficult circumstances due to Covid-19, this office has been
welcomed by customers, employees and technology partners as a
perfect location to meet and cooperate. We continue to review our
strategy for another three locations in the Paris region and aim to
reach a conclusion towards the end of 2022. From a business
integration point of view, we celebrated winning some pleasing
network maintenance contracts towards the end of the year.
We remain confident that our continued customer focus on large
public and private sector organisations, the further development of
our Group offerings and the continued focus on cost control offer
the best route to reach growth in 2022.
Overall, margins in France decreased by 64 basis points, with
gross profit decreasing from 11.1 per cent to 10.4 per cent of
revenues. Excluding the impact of Computacenter NS, margins
increased by 15 basis points, with gross profit increasing from
10.9 per cent to 11.0 per cent of revenues.
Overall gross profit decreased by 4.9 per cent to EUR79.2
million (2020: EUR83.3 million) and reduced by 8.5 per cent in
reported pound sterling equivalents(2) . Excluding the EUR3.2
million of gross profit earned within Computacenter NS (2020:
EUR3.1 million), the Computacenter France gross profit decreased by
5.2 per cent to EUR76.0 million (2020: EUR80.2 million).
Adjusted(1) administrative expenses increased by 8.9 per cent to
EUR75.0 million (2020: EUR68.9 million), and by 5.2 per cent in
reported pound sterling equivalents(2) as we have continued to
invest to support growth. Excluding the EUR8.2 million of
adjusted(1) administrative expenses incurred within Computacenter
NS (2020: EUR4.7 million), Computacenter France administrative
expenses increased by 4.0 per cent to EUR66.8 million (2020:
EUR64.2 million).
Adjusted(1) operating profit for the combined French business
decreased by 70.8 per cent to EUR4.2 million (2020: EUR14.4
million), and by 73.1 per cent in reported pound sterling
equivalents(2) . As noted in our 2020 Annual Report and Accounts,
the Computacenter NS business was loss-making on acquisition, and
it therefore reduced our combined profit for 2021 as expected.
Excluding the EUR4.9 million operating loss from the activities of
Computacenter NS (2020: EUR1.6 million), the Computacenter France
business made EUR9.1 million of operating profit in 2021 (2020:
EUR16.0 million).
Technology Sourcing performance
Technology Sourcing revenue decreased by 5.1 per cent to
EUR560.0 million (2020: EUR590.0 million) and by 8.5 per cent in
reported pound sterling equivalents(2) . Excluding the EUR11.3
million of Technology Sourcing revenues within Computacenter NS
(2020: EUR2.7 million), Computacenter France Technology Sourcing
revenues decreased by 6.6 per cent to EUR548.7 million (2020:
EUR587.3 million).
Despite a decline in revenues, it was a very busy year in
Technology Sourcing. The volume of outstanding Technology Sourcing
orders placed with us by our customers increased significantly
across the whole year, due to the worldwide component shortages. If
we had been able to ship all products within normal timescales and
thereby maintain a backorder position comparable with 2020, we
would have generated good growth in overall revenues. The
Technology Sourcing order book at 31 December 2021 was 74.6 per
cent higher than at 31 December 2020.
Despite the challenge of product shortages, the private sector
showed a revenue increase in Technology Sourcing, mainly thanks to
some networking contracts. Towards the end of the year in
particular we saw increased activity within our customer base,
albeit still lower than before Covid-19. Our Public Sector business
had a challenging year in Technology Sourcing, as we noticed a
declining spending pattern for the majority of these customers.
We expect that the worldwide shortages will remain a challenge
in 2022 but are hopeful that we will be able to provide better
visibility of delivery dates for our customers and eventually see
an overall reduction in delays. To ensure this, we are staying in
close contact with technology partners, both at local and Group
levels.
Overall, Technology Sourcing margins increased by 36 basis
points. Excluding the impact of Computacenter NS, Technology
Sourcing margins increased by 39 basis points.
Services performance
Services revenue increased by 22.0 per cent to EUR200.0 million
(2020: EUR163.9 million) and by 17.5 per cent in reported pound
sterling equivalents(2) . Professional Services revenue increased
by 10.3 per cent to EUR44.1 million (2020: EUR40.0 million), which
was an increase of 6.4 per cent in reported pound sterling
equivalents(2) . Managed Services revenues increased by 25.8 per
cent to EUR155.9 million (2020: EUR123.9 million), an increase of
21.0 per cent in reported pound sterling equivalents(2) .
Excluding the Services revenues within Computacenter NS, the
Computacenter France Services revenues decreased by 6.5 per cent to
EUR141.7 million (2020: EUR151.6 million). Professional Services
revenue decreased 15.4 per cent to EUR31.3 million (2020: EUR37.0
million), with Managed Services revenues decreasing by 3.7 per cent
to EUR110.4 million (2020: EUR114.6 million).
The main impact on Services revenue came from a global
outsourcing contract that ended in the first half of 2020, which we
knew was going to reduce 2021 revenues compared to last year. Apart
from a loss-making contract in the network operations area, we have
been able to maintain our Managed Services margins.
In 2020, the first year of the Covid-19 crisis, many customers
postponed or cancelled their upcoming Managed Services tenders. As
expected, many of these campaigns restarted in 2021. We have been
very busy responding to tenders and won a significant number of new
contracts. We are in the process of onboarding these contracts.
Once fully operational, they will allow us to maintain our 2022
Contract Base, by compensating for a Computacenter NS contract that
we knew on acquisition would end in 2021.
In addition to winning new contracts, we have been able to
extend our Services scope in three of our largest existing Managed
Services contracts.
Our Professional Services business in the private sector faced a
challenging year with a decline in revenues, mainly due to the
complicated Covid-19 situation and the lack of additional project
opportunities we normally have within our Managed Services
contracts. Public sector performance was flat in Professional
Services.
With the Computacenter NS business now integrated further into
our organisation, we believe we have a good opportunity to grow our
Professional and Managed Services businesses significantly in 2022.
With the integration and our continued effort to further develop
and train our entire Services staff, we should be able to position
skilled professionals in a market with high demand for specialised
resources.
Services margins decreased by 351 basis points over last year.
Excluding the impact of Computacenter NS, Services margins
decreased by 74 basis points.
North America
Performance in the year was heavily influenced by the
acquisition of Pivot on 2 November 2020. 2021 includes a full year
of Pivot, with revenues of $1,432.4 million and adjusted(1)
operating profit of $25.2 million recorded in the year, whereas the
prior year included $292.7 million of revenue and adjusted(1)
operating profit of $6.8 million, arising from the two months of
trading between the acquisition date and 31 December 2020.
During 2021, we completed the migration of the non-Pivot part of
the North American operations onto our Group ERP system, which was
a more challenging implementation than expected, due to most of the
preparation being managed remotely from Europe as a result of the
Covid-19 travel impacts. We are entering the next phase of the
implementation, which will bring the Pivot operation onto the Group
ERP platforms, at which point the North American business can be
fully integrated. This integration is not expected to complete
until 2023.
Financial performance
Total revenue increased by 114.3 per cent to $2,623.1 million
(2020: $1,223.8 million). In reported pound sterling equivalents(2)
, total revenue was up 102.4 per cent. Gross invoiced income(4)
increased by 103.4 per cent to $2,696.8 million (2020: $1,325.8
million).
Pivot Canada (now 'Computacenter Teramach') is included within
our North America segment. We are very pleased with the growth
achieved in Canada during the year, where revenue increased to
$144.1 million in 2021 from $20.7 million in the two months of
ownership in 2020. Growth was approximately 13 per cent in 2021,
compared to the full-year results in 2020.
Excluding the Pivot acquisition, our organic North American
revenue growth was 27.9 per cent. This is due to continued growth
of hyperscale customers, while spending by our mid-market customers
was flat, primarily because of the ongoing Covid-19 pandemic.
Overall, revenue was ahead of forecast for the year on an organic
basis, primarily due to Technology Sourcing.
Margins in North America increased by 29 basis points, with
gross profit increasing from 9.2 per cent to 9.4 per cent of
revenues. Excluding the impact of Pivot, margins fell by 103 basis
points, with gross profit decreasing from 8.8 per cent to 7.8 per
cent of revenues, as the increased volumes with lower-margin
hyperscale customers drove the revenue performance.
The Technology Sourcing margin remained consistent overall. The
acquisition of Pivot was beneficial to margins, as Pivot's
Technology Sourcing margins are approximately 2-3 percentage points
higher than the previously acquired FusionStorm business. This is
because Pivot's customer mix is not as focused on hyperscale
customers, who tend to drive lower margins. Excluding Pivot,
Technology Sourcing margins decreased by 85 basis points, primarily
due to customer mix, as the lower-margin hyperscale customers
comprised a larger portion of revenue.
Professional Services margins were up compared to the prior
year, as revenue recovered from a low in 2020, when customer
projects were deferred due to Covid-19, and were further increased
by Pivot, which has a larger Professional Services practice. The
increased revenue resulted in higher utilisation of services
personnel. The Managed Services business reported lower margins
year-on-year, due to lower margins on start-up efforts on new
programmes.
Overall gross profit grew by 120.7 per cent to $247.6 million
(2020: $112.2 million) and by 108.8 per cent in reported pound
sterling equivalents(2) . Excluding the $154.5 million of gross
profit earned by Pivot in the year (2020: $29.8 million), gross
profit grew organically 13.0 per cent to $93.1 million (2020: $82.4
million).
Adjusted(1) administrative expenses increased by 118.6 per cent
to $205.0 million (2020: $93.8 million), and by 106.4 per cent in
reported pound sterling equivalents(2) . This was due to the
acquisition of Pivot, which added $129.3 million of adjusted(1)
administrative expenses for 2021, compared to $23.0 million for the
two months in the prior year. Excluding Pivot, adjusted(1)
administrative expenses increased only 6.9 per cent to $75.7
million (2020: $70.8 million). Higher variable remuneration was the
primary driver of the increased costs, due to the increase in
margins. Travel costs rose, although they remained lower than
pre-Covid-19 levels.
Adjusted(1) operating profit for the North America business
increased by 131.5 per cent to $42.6 million (2020: $18.4 million),
and by 121.4 per cent in reported pound sterling equivalents(2)
.The increase in operating profit was due in part to the full year
contribution from Pivot. Pivot contributed $25.2 million of
operating profit in 2021, compared to $6.8 million of operating
profit for the two months of 2020.
Excluding Pivot, North America's adjusted(1) operating profit
was up by 50.0 per cent to $17.4 million (2020: $11.6 million), as
hyperscale customers continued to purchase in volume and cost
synergies from the acquisition were realised.
Technology Sourcing performance
Technology Sourcing revenue increased by 109.5 per cent to
$2,490.8 million (2020: $1,189.2 million) and by 97.8 per cent in
reported pound sterling equivalents(2) .
The addition of Pivot resulted in significant growth in our
Technology Sourcing business. Pivot contributed $1,327.9 million of
Technology Sourcing revenue (2020: $280.0 million for the two
months from acquisition). Excluding Pivot, Technology Sourcing
revenue increased by 27.9 per cent on an organic basis, as
hyperscale customers increased their volumes, and mid-market
customers remained consistent. We benefited from significant
continuing investments by our customers, as they digitise their
operations and modernise their infrastructure.
Excluding the impact of Pivot, North America Technology Sourcing
margins decreased by 85 basis points on an organic basis over the
same period last year, as a result of the growth in revenue being
driven by hyperscale and large customers, which generally have
lower margins. Partially offsetting this decrease was the addition
of Pivot volume, which generally has higher margins due primarily
to customer mix. We also continue to evolve our partner management
organisation with the larger scale provided by Pivot and are seeing
an improvement in margins as a result. Including the results of
Pivot, Technology Sourcing margins increased by 38 basis points
overall.
Services performance
Services revenue increased by 282.4 per cent to $132.3 million
(2020: $34.6 million) and by 258.6 per cent in reported pound
sterling equivalents(2) . Professional Services increased by 316.0
per cent to $106.5 million (2020: $25.6 million), which was an
increase of 295.4 per cent in reported pound sterling
equivalents(2) . Managed Services increased by 186.7 per cent to
$25.8 million (2020: $9.0 million), an increase of 158.3 per cent
in reported pound sterling equivalents(2) . Services revenue growth
was driven by having a full year of Pivot, combined with
significant growth in Pivot's deployment services, which are part
of our Professional Services.
Pivot recorded Services revenues of $104.5 million (2020: $12.8
million) comprising Professional Services revenues of $87.4 million
(2020: $10.2 million) and Managed Services revenues of $17.1
million (2020: $2.6 million).
Excluding the Services revenues within Pivot, the North American
Services revenues increased by 27.5 per cent to $27.8 million
(2020: $21.8 million). Professional Services revenue increased 24.0
per cent to $19.1 million (2020: $15.4 million) with Managed
Services revenues up 35.9 per cent at $8.7 million (2020: $6.4
million).
Project activity recovered after a slow 2020, when customers
either delayed expected spend or cancelled projects while they
responded to Covid-19. The increase was also driven by a Managed
Services win in the US market, representing the first significant
Managed Services contract win led from the US.
Services margins decreased by 592 basis points and are now 1,082
basis points below the overall combined Group Services margin.
While contribution from Services increased with the greater volume
and the addition of a full year of Pivot, margins were down from
the prior year, as the new Managed Services contract was in the
first year, where we often earn lower margins, and deployment
services average margins are lower than other parts of the Services
portfolio.
International
The International Segment comprises a number of trading entities
and near-shore and off-shore Service Center 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. These trading entities are joined in the Segment
by our Service Center entities in Spain, Malaysia, India, South
Africa, Hungary, Poland, Romania, China and Mexico, which have
limited external revenues.
Early in 2020, we set up offices in Madrid and Barcelona with
the aim of developing our business in Spain through a local sales
team. After careful consideration, we reviewed our international
sales strategy towards the end of 2021 and decided to serve our
customers in Spain through our other European operations. While we
remain active in Spain with a support team of over 500 Service
agents and engineers, we will no longer have a dedicated sales team
in the country.
Financial performance
Revenues in the International Segment increased by 9.6 per cent
to GBP191.0 million (2020: GBP174.3 million) and by 13.6 per cent
in constant currency(2) .
Our trading entities in the International Segment produced a
good performance in 2021. Whilst 2020 was challenging due to the
Covid-19 crisis, the business bounced back to healthy volumes and
profitability in all countries in 2021. We have not benefited from
any government support related to Covid-19 in 2021, apart from a
very small amount for a reduced period in our Belgian operations,
which ceased with effect from 1 May 2021.
Gross profit increased by 28.0 per cent to GBP39.3 million
(2020: GBP30.7 million), and by 32.8 per cent in constant
currency(2) .
Adjusted(1) administrative expenses increased by 3.3 per cent to
GBP28.0 million (2020: GBP27.1 million) and by only 6.5 per cent in
constant currency(2) .
Overall adjusted(1) operating profit increased by 213.9 per cent
to GBP11.3 million (2020: GBP3.6 million) and by 242.4 per cent in
constant currency(2) .
The Belgian business saw a significant increase in profitability
during 2021, thanks to a combination of good workplace and
infrastructure projects and an excellent performance in the Managed
Services area.
As expected, the Swiss business had to cope with a significant
scope change in two major Managed Services contracts, but
compensated for this by identifying other projects within the
contracts, winning new contracts with large organisations and a
continued focus on cost control.
After a difficult 2020, our business in the Netherlands saw a
remarkable profit increase. We have a traditionally strong Dutch
public sector business, and we were able to extend this, with a
significant win in the private sector delivering promising
contributions in 2021.
Technology Sourcing performance
Technology Sourcing revenue increased by 2.1 per cent to
GBP112.8 million (2020: GBP110.5 million) and by 5.9 per cent in
constant currency(2) .
The International Segment was affected by worldwide component
shortages, and we faced challenges to deliver goods on time to our
customers. Despite these difficult circumstances, our teams worked
hard to keep customers informed about the availability of goods and
possible alternatives.
As part of one of the world's largest value-added resellers, we
are well supported by the Group to defend local priorities with our
technology partners. We have also been successful in delivering
extended Services to local customers by leveraging Group
capabilities, both on a local and international scale.
We have invested locally in partnerships and certifications to
strengthen our relationships with technology partners. For example,
we have strengthened our relationship with Apple in both the
Netherlands and Switzerland. Our Belgian operation was the first
partner in Belgium to achieve the Cisco IOT Advantage
Specialization and was rewarded with the Cisco Customer Experience
award.
As in all other regions, we expect that the worldwide component
shortages will continue to challenge us in 2022 but we are
committed to working closely with our customers and technology
partners to keep the impact to a minimum.
Services performance
Services revenue increased by 22.6 per cent to GBP78.2 million
(2020: GBP63.8 million) and by 26.9 per cent in constant
currency(2) . Professional Services revenue increased by 18.1 per
cent to GBP8.5 million (2020: GBP7.2 million), which was an
increase of 23.2 per cent in constant currency(2) , whilst Managed
Services increased by 23.1 per cent to GBP69.7 million (2020:
GBP56.6 million), which was an increase of 27.4 per cent in
constant currency(2) .
In general, we were pleased with the performance of our Services
business.
Our Professional Services business suffered from the Covid-19
crisis in 2020 and recovered well in 2021, although we estimate
that activity has still not returned to pre-pandemic levels.
In Belgium, we secured and extended our main Managed Services
contracts. In Switzerland, we have fully optimised our delivery
model and identified project extensions in our largest Managed
Services contracts.
Our Dutch operations also grew in Services, although we see
opportunities to do significantly better in 2022.
2020 was a difficult year for the International Segment, and we
were pleased by the way we returned to good business levels in
2021. Furthermore, we see good opportunities to grow our business.
In each of the operations, we have identified opportunities to grow
by exploring new business sectors (such as the public sector in
Belgium and private sector in the Netherlands) or customers, for
example by further developing international customers, based on our
success in this area in 2021. We therefore have confidence that
there is still plenty of scope to grow further in 2022.
Group Finance Director's review
During 2021, the Group benefited from continued strong organic
revenue growth, balanced evenly between Technology Sourcing and
Services. Growth across the Segments was excellent, apart from
France where market conditions are weaker and some of our customers
spent less. On top of the organic growth, the revenue increases
from the acquisitions made in 2020 significantly boosted the
top-line performance during the year.
The Technology Sourcing growth was driven by robust public
sector activity in the UK and Germany, where the Group has a strong
track record, and by the industrial enterprise sector in the UK and
Germany, as these large sectors returned to more normal spending
patterns and expanded their requirements. In addition, the rebound
of the mid-market sectors in North America complemented the
sustained growth seen in the hyperscale markets. As customers have
less need to address immediate requirements caused by Covid-19, we
remain very encouraged by the resumption of longer-term IT
transformations, on a scale and timeline that appear strengthened
by the experiences of the last two years. The strength of the
overall Technology Sourcing result is driven by the spread of the
customer base across multiple Segments and geographies, which
create durability and sustainability within the business model.
Professional Services in Germany has continued its excellent
recent track record, with another period of rapid growth, and the
UK also saw robust Professional Services growth.
Our recently established presence in Cluj, Romania, has had a
successful start as it builds towards a specialist offering of up
to 500 professionals within Computacenter Romania. This will expand
our Professional Services capacity and allow us to continue to
capture the opportunities in this business line. Over 80
consultants within the Computacenter Romania Professional Services
'Centre of Excellence' are providing agile application services to
customers in Germany, including software development, application
migration and application support. In time, we will expand this
capability to all other countries across the Computacenter
Group.
Managed Services saw robust revenue increases in all
geographies, apart from France. A number of contracts which are
based on price times quantity, rather than a fixed periodic fee,
resumed growth as call volumes began to return to pre-pandemic
levels and the field engineer workforce saw significant increases
in activity, as customer sites began to reopen. In addition, we won
a number of new deals during the year, with contracts signed and
initial transitions progressing well. These contracts will support
future growth in this area.
Services margins remained healthy and increased overall. We
continued to enjoy increased utilisation of our now remote-working
engineers, who no longer have to spend otherwise billable time
travelling to customer sites, and a substantial reduction in the
use of external contractors. We expect both of these trends to
continue in the short to medium term, as more efficient ways of
working have proven effective for the Group, our customers and our
people. More importantly, the quality of the contract portfolio
continues to increase, as older underperforming contracts improve,
and enhanced bid governance processes result in better margins on
new contracts. Our French business suffered on an organic basis, as
the full effect of the non-renewal of the Group's largest Managed
Services contract affected its year-on-year performance for the
first time.
The business remains agile and innovative, enabling us to
continue to adapt and support our customers, as they move beyond
remote working towards the complexity of hybrid working and the
required structural adaptations of their IT environments.
The revenue performance was driven through our biggest markets,
the UK, Germany and North America, and was supported by strong
gross margins across all business lines. Technology Sourcing
margins were slightly reduced from 2020, as increasing volumes of
lower-margin software sourcing deals diluted an otherwise excellent
return from the higher-margin complex product lines. Both
Technology Sourcing and Services continued to benefit from the
ongoing reduction of expenses within costs of goods sold. Whilst
some of these costs, such as travel, fleet and contractors, have
partially come back as the Group increasingly returns to its
pre-Covid-19 operational footing, we continue to carefully manage
certain cost categories to ensure a permanent reduction in the
overall cost base. We have implemented an internal carbon levy on
travel, as part of our commitment to reduce business travel
emissions by 35 per cent when compared to pre-Covid-19 levels in
2019. This emphasis on post-Covid-19 cost control is also reflected
by the increase in gross profit (20.4 per cent) materially
outstripping the growth in administrative expenses (17.7 per
cent).
The Group result saw significant organic increases in
adjusted(1) operating profit across the UK, Germany, North America
and the International Segments, with the decline in France the only
disappointing result.
On 30 April 2021, we acquired ITL Logistics GmbH ('ITL'), which
employees 80 people in three locations in Germany. ITL provides IT
logistics services, as well as IT services, for large companies and
public sector clients in Europe. Through the acquisition,
Computacenter is expanding its IT logistics services and now
operates its own IT logistics fleet, with technical couriers who
deliver and collect IT products across Europe. ITL also operates
small regional warehouses, where IT products are held locally to
meet customer service-level agreements. We intend to invest further
in ITL, to strengthen its business in Europe.
The acquisition of Pivot and Computacenter NS on 2 November 2020
continues to add capability to the Group. Pivot increases the scale
and breadth of our North American business, allowing us to serve a
wider range of customers and products in more locations in the
United States and Canada. Computacenter NS will, over time, enhance
the network Services offering of our existing French business,
improving our go-to-market propositions and aligning the business
with our capabilities in Germany, albeit on a smaller scale. Much
remains to be done to transform the business and bring it back to
break-even and beyond.
The integration of Pivot and Computacenter NS continues, with
significant projects underway to migrate to our Group ERP systems.
In North America, FusionStorm and the legacy US business
transitioned to Group ERP in early September 2021 and was largely
completed by 31 December 2021. Computacenter NS successfully
completed its migration in the fourth quarter of 2021. Pivot will
follow in 2023. Having these entities on our leading ERP platform
technologies and toolsets will further unlock their potential for
growth and efficiencies.
Combined, these acquisitions added GBP1,105.1 million of revenue
(2020: GBP232.6 million) and GBP13.9 million of adjusted(1) profit
before tax (2020: GBP3.3 million) to the Group's reported
results.
A reconciliation to adjusted(1) measures is provided below.
Further details are provided in note 2.5 to the summary financial
information within this announcement, adjusted measures.
Reconciliation to adjusted(1) measures for the year ended
2021
Adjustments
Amortisation Adjusted(1)
Reported of acquired Exceptionals full-year
results intangibles and others results
GBPm GBPm GBPm GBPm
Revenue 6,725.8 - - 6,725.8
Cost of sales (5,858.0) - - (5,858.0)
Gross profit 867.8 - - 867.8
Administrative expenses (612.6) 7.6 - (605.0)
Operating profit 255.2 7.6 - 262.8
Finance income 0.3 - - 0.3
Finance costs (7.5) - - (7.5)
Profit before tax 248.0 7.6 - 255.6
Income tax expense (61.5) (2.1) - (63.6)
Profit for the year 186.5 5.5 - 192.0
Reconciliation to adjusted(1) measures for the year ended
2020
Adjustments
Amortisation Adjusted(1)
Reported of acquired Exceptionals full-year
results intangibles and others results
GBPm GBPm GBPm GBPm
Revenue 5,441.3 - - 5,441.3
Cost of sales (4,720.8) - - (4,720.8)
Gross profit 720.5 - - 720.5
Administrative expenses (522.0) 7.4 0.5 (514.1)
Operating profit 198.5 7.4 0.5 206.4
Gain on acquisition of subsidiary 14.0 - (14.0) -
Finance revenue 0.5 - - 0.5
Finance costs (6.4) - - (6.4)
Profit before tax 206.6 7.4 (13.5) 200.5
Income tax expense (52.4) (1.7) (0.7) (54.8)
Profit for the year 154.2 5.7 (14.2) 145.7
Profit before tax
The Group's profit before tax for the year increased by 20.0 per
cent to GBP248.0 million (2020: GBP206.6 million). Adjusted(1)
profit before tax increased by 27.5 per cent to GBP255.6 million
(2020: GBP200.5 million) and by 31.5 per cent in constant
currency(2) .
The difference between profit before tax and adjusted(1) profit
before tax relates to the Group's net costs of GBP7.6 million
(2020: net gain of GBP6.1 million) from exceptional and other
adjusting items, which is the amortisation of acquired intangibles
as a result of the acquisition of FusionStorm on 30 September 2018
and Pivot on 2 November 2020.
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 Consolidated Financial Statements, as
disclosed in the 2019 Annual Report and Accounts. The current
period results include an overall decrease in profit before tax of
GBP2.3 million, including on an adjusted(1) basis, due to the
impact of IFRS 16 (2020: GBP2.0 million).
Net finance charge
Net finance charge in the year amounted to GBP7.2 million (2020:
GBP5.9 million). The main items included within the net charge for
the year are GBP5.2 million of interest charged on lease
liabilities recognised under IFRS 16 (2020: GBP4.5 million) and
GBP1.5 million for the Pivot facility (2020: GBP0.4 million). Pivot
was only part of the Group for two months of the prior year, so
whilst overall the debt position is reduced at year-end compared to
the prior-year position, there is a full year of interest expense
from the Pivot debt facility incurred in the current year.
There were no interest items excluded on an adjusted(1)
basis.
Taxation
The tax charge was GBP61.5 million (2020: GBP52.4 million) on
profit before tax of GBP248.0 million (2020: GBP206.6 million).
This represents a tax rate of 24.8 per cent (2020: 25.4 per
cent).
In 2020, the tax rate reduced 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 was not
taxable, as no chargeable gain had been realised in any legal
entity. During 2020, a 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, this is a one-off and
material to the overall tax result, we 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 GBP2.1 million (2020: GBP1.7 million). The GBP7.6
million of amortisation of intangible assets is almost entirely a
result of the recent North American acquisitions (2020: GBP7.4
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 GBP63.6 million
(2020: GBP54.8 million), on an adjusted(1) profit before tax for
the year of GBP255.6 million (2020: GBP200.5 million). The
effective tax rate (ETR) was therefore 24.9 per cent (2020: 27.3
per cent) on an adjusted(1) basis.
During the second half of the year a number of one-off tax items
were processed that substantially reduced the tax charge, and
therefore the adjusted(1) ETR, for the year as a whole. Rebasing
certain deferred tax assets for the adjustment in the UK Corporate
Tax rate from 19 per cent to the 25 per cent rate that was
substantively enacted on 11 March 2021, with effect from 1 April
2023, has resulted in in a one-time credit to the tax expense of
GBP3.1 million. Several other one-off items incurred in the year
have reduced the tax expense by a further GBP2.4 million in
aggregate. These include a programme of recharging the costs of our
share-based payment schemes, our Sharesave and LTIP awards, to
those jurisdictions outside of the UK that also benefit from these
schemes which resulted in a positive tax impact for the Group in
2021 from catching up the 2020 recharging, and the closure of a
number of historical tax positions in North America. Together,
these combined items have resulted in a one-time credit benefit to
the tax expense of GBP5.5 million. Excluding these items, the
underlying adjusted(1) tax expense would be GBP69.1 million
resulting in an adjusted(1) ETR of 27.0 per cent. Had the one-off
items not impacted during the year, and the Group result reflected
an adjusted(1) ETR of 27.0 per cent, the adjusted(1) diluted EPS
would have been 160.9 pence per share. Assuming an unchanged
dividend payment policy, the proposed final dividend, and the total
dividend for the year, would have been 47.5 pence per share and
64.4 pence per share respectively. The ETR during the year was also
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 adjusted(1) ETR is
therefore outside the full-year range that we indicated in our 2021
Interim Results, which showed an ETR of 28.6 per cent (H1 2020:
28.1 per cent), due to the unforecasted positive impacts described
above.
We expect that the ETR in 2022 will be subject to 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. Looking
further ahead, substantially enacted tax increases will take effect
in the UK from 1 April 2023, with a rise from 19 per cent to 25 per
cent.
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
2021 was incurred in either the UK, German or US tax jurisdictions,
as it was in 2020. Computacenter France, which now includes the BT
Services France acquisition within a tax group, has returned to a
lossmaking position, reducing the amount of tax paid locally.
There are no material tax risks across the Group. Computacenter
will recognise provisions and accruals in respect of tax where
there is a degree of estimation and uncertainty, including where it
relates to transfer pricing, such that a balance cannot fully be
determined until accepted by the relevant tax authorities. For
2021, the Group Transfer Pricing policy implemented in 2013
resulted in a licence fee of GBP30.3 million (2020: GBP27.9
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 for further detail, 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 2021 and 31 December
2020.
2021 2020
GBPm GBPm
Statutory tax charge 61.5 52.4
Adjustments to exclude:
Exceptional tax items - 0.7
Tax on amortisation of acquired intangibles 2.1 1.7
Adjusted(1) tax charge 63.6 54.8
Effective Tax Rate 24.8% 25.4%
Adjusted(1) Effective Tax Rate 24.9% 27.3%
Profit for the year
The profit for the year increased by 20.9 per cent to GBP186.5
million (2020: GBP154.2 million). The adjusted(1) profit for the
year increased by 31.8 per cent to GBP192.0 million (2020: GBP145.7
million) and by 35.7 per cent in constant currency(2) .
Exceptional and other adjusting items
The net loss from exceptional and other adjusting items in the
year was GBP5.5 million (2020: gain of GBP8.5 million). Excluding
the tax items noted above, which resulted in a gain of GBP2.1
million (2020: gain of GBP2.4 million), the profit before tax
impact was a net loss from exceptional and other adjusting items of
GBP7.6 million (2020: gain of GBP6.1 million).
There were no exceptional items in the year to 31 December 2021
(2020: gain of GBP13.5 million).
We have continued to exclude, as an 'other adjusting item', the
amortisation of acquired intangible assets in calculating our
adjusted(1) results. Amortisation of intangible assets is non-cash,
does not relate to the operational performance of the business, and
is significantly affected by the timing and size of our
acquisitions, which distorts the understanding of our Group and
Segmental operating results.
The amortisation of acquired intangible assets was GBP7.6
million (2020: GBP7.4 million), primarily relating to the
amortisation of the intangibles acquired as part of the recent
North American acquisitions. The prior-year value includes the
amortisation of a number of short-term acquired intangibles
relating to the valuation of Pivot order backlogs, due to the
expiration of the valued assets.
The acquisition of BT Services France on 2 November 2020
resulted in an exceptional gain of GBP14.0 million, which was
recognised on consolidation of the subsidiary in the 2020 Annual
Report and Accounts. The gain arose because the net assets acquired
for consideration of EUR1 totalled GBP14.0 million after fair value
adjustments, including GBP27.6 million of cash. The business
acquired comprised BT's domestic French services operation which,
on acquisition, was loss making on a standalone basis. The Company
considers that the exceptional gain reflects the future losses that
the acquired business will incur over the medium term, as it is
brought onto a sustainable footing through a combination of
upskilling employees, cross-selling into the Group's customers,
alignment with Group processes and systems, and the general
improvement of its operating activities.
Where possible, future charges relating to this reconfiguration
of the business will be disclosed separately to the Group's
adjusted(1) results. This will mean that, over time, the future
costs incurred can be attributed against the exceptional gain on
acquisition recognised in the prior year. There have been no such
costs incurred during the year to 31 December 2021.
An exceptional loss during 2020 of GBP0.7 million resulted from
the acquisition of Pivot and primarily related to fees paid to the
Company's advisors. This cost was non-operational, unlikely to
recur and is consistent with our prior-year treatment of
acquisition costs on material transactions as exceptional items. It
was therefore classified as outside our adjusted(1) results.
In 2020, an exceptional gain of GBP0.2 million related to the
release of accrued costs for the French Social Plan. Whilst not
material, this was 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.
Earnings per share
Diluted EPS increased by 20.3 per cent to 160.9 pence per share
(2020: 133.8 pence per share). Adjusted(1) diluted EPS increased by
31.0 per cent to 165.6 pence per share (2020: 126.4 pence per
share).
2021 2020
Basic weighted average number of shares (excluding own
shares held) (m) 113.0 112.9
Effect of dilution:
Share options 2.2 2.0
Diluted weighted average number of shares 115.2 114.9
Profit for the year attributable to equity holders of
the Parent (GBPm) 185.3 153.8
Basic earnings per share (pence) 164.0 136.2
Diluted earnings per share (pence) 160.9 133.8
Adjusted(1) profit for the year attributable to equity
holders of the Parent (GBPm) 190.8 145.3
Adjusted(1) basic earnings per share (pence) 168.6 128.7
Adjusted(1) diluted earnings per share (pence) 165.6 126.4
Dividend
The Board recognises the importance of dividends to shareholders
and the Group prides itself on a long track record of paying
dividends and other special one-off cash returns.
Computacenter's approach to capital management is to ensure that
the Group has a robust capital base and maintains a strong credit
rating, whilst aiming to maximise shareholder value. The Group
remains highly cash generative and adjusted net funds(3) continues
to increase on the Consolidated Balance Sheet, which 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 did in February
2018.
Dividends are paid from the standalone balance sheet of the
Parent Company and, as at 31 December 2021, the distributable
reserves were GBP199.3 million (31 December 2020: GBP268.1
million).
The Board is pleased to propose a final dividend for 2021 of
49.4 pence per share (2020: 38.4 pence per share). Together with
the interim dividend, this brings the total ordinary dividend for
2021 to 66.3 pence per share, representing a 30.8 per cent increase
on the 2020 total dividend per share of 50.7 pence.
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 2021, the cover was 2.5 times (2020: 2.5 times).
Subject to the approval of shareholders at our Annual General
Meeting on 19 May 2022, the proposed dividend will be paid on
Friday 8 July 2022. The dividend record date is set as Friday 10
June 2022 and the shares will be marked ex-dividend on Thursday 9
June 2022.
Central Corporate Costs
Certain expenses are not specifically allocated to individual
Segments because they are not directly attributable to any single
Segment. These include the costs of the Board itself, related
public company costs, Group Executive members not aligned to a
specific geographic trading entity and the cost of centrally funded
strategic initiatives that benefit the whole Group.
Accordingly, these expenses are disclosed as a separate column,
'Central Corporate Costs', within the Segmental note. These costs
are borne within the Computacenter (UK) Limited legal entity and
have been removed for Segmental reporting and performance analysis
but form part of the overall Group adjusted(1) administrative
expenses.
During the year, total Central Corporate Costs were reduced at
GBP23.7 million (2020: GBP27.1 million).
Within this:
-- Board expenses, related public company costs, costs
associated with Group Executive members not aligned to a specific
geographic trading entity, and certain one-off costs in relation to
the cancellation of Group-wide central meetings, increased to
GBP9.1 million (2020: GBP6.8 million) partially due to the
Executive Directors waiving their salaries in the second quarter of
2020 and both Founder Non-Executive Directors waiving their fees
from 1 April to 31 December 2020;
-- share-based payment charges associated with the Group
Executive members identified above, including the Group Executive
Directors, increased from GBP3.2 million in 2020 to GBP3.8 million
in 2021, due primarily to the increased value of Computacenter plc
ordinary shares and the overall increased performance of the Group;
and
-- strategic corporate initiatives are designed to increase
capability and therefore competitive position, enhance productivity
or strengthen systems which underpin the Group. During the year
this spend was GBP10.8 million (2020: GBP17.1 million), primarily
due to reduced spend on projects that completed in the second half
of 2020 and lower than planned spend on certain other projects,
which is expected to be incurred in the first half of 2022. In
addition, during 2021 there was a significant review of certain
large software implementations, which will increase spend during
2022.
Cash flow
The Group delivered an operating cash inflow of GBP224.3 million
for the year to 31 December 2021 (2020: GBP236.9 million
inflow).
As noted in the 2020 Annual Report and Accounts, there were
certain Covid-19 related one-off benefits included in the 2020 cash
flow and net cash positions, including extended free-of-charge
supplier credit with a major technology partner as well as
improvements arising from customer mix. Most of these benefits had
expired by 31 December 2020 and were material factors in the
reduction in operating cash flow in the first half of 2021 year,
when compared to the first half of 2020.
Net cash positions no longer include extended free-of-charge
supplier credit with a major technology partner, as this temporary
Covid-19 related arrangement was fully repaid during the year (31
December 2020: GBP15.0 million).
Other components of the working capital increase are explained
below.
During the year, net operating cash outflows from working
capital, including inventories, trade and other receivables and
trade and other payables, were GBP77.1 million (2020: GBP28.3
million outflow).
As noted in our 2020 Annual Report and Accounts the year-end
cash position was abnormally high, as a number of our customers
paid ahead of normal payment cycles, partly, we believe, where
overseas customers looked to avoid sometimes negative interest
rates. This was exacerbated by a shift towards government customers
during the year, resulting in improvements in cash collection as
governments, particularly in Europe, have been settling debts as
quickly as possible and well ahead of industry standard payment
terms. Whilst the Group, in turn, paid a number of its suppliers
early, to reduce the temporary excess cash on the balance sheet at
the year end, the volume of early payments from customers received
in the final days of the prior year was unprecedented. The Company
estimated, broadly, that unforeseen receipts from customer payments
in advance of the due date exceeded the Company's ability to pay
its own suppliers early by roughly GBP50 million. These positions
have largely unwound through the year, and this is reflected in the
working capital movements seen.
In 2021, working capital cash flows were further impacted by
both the revenue growth and the increased inventory levels, in
particular within our North American business. Due to the
significant product shortages seen during the year, a number of
hyperscale customers have made advance orders of product with
delayed delivery, to ensure continuity of supply. Additionally,
inventory has increased as we have deliberately invested in working
capital by pre-ordering inventory, thereby using the strength of
our balance sheet to support our customers during product
shortages. Further, a number of rack build orders were incomplete
at the year end, sometimes due to shortages of smaller components
required to complete the rack build. Finally, the transition of the
FusionStorm business to the Group ERP, whilst now complete, did
result in short-term operational issues that impacted working
capital, as the picking and shipping of complex inventory items,
invoicing and cash collection in particular experienced significant
delays late in the third quarter and early in the fourth quarter.
By the end of the year there was an improving position, as the
FusionStorm entity has gained experience in using the system and
tools and learned how to leverage their advantages. Considerable
improvement is still required, although at the date of this report,
the working capital impacts of the system migration have reduced
materially.
The Group had GBP341.3 million of inventory as at 31 December
2021, an increase of 61.5 per cent on the balance as at 31 December
2020 of GBP211.3 million. Over three quarters of this increase was
attributable to our North American Segment, which had closing
inventory of GBP212.5 million (2020: GBP103.2 million).
At the end of 2021, the Group again saw record levels of early
payments from suppliers. However, we elected to retain the cash on
the Group's balance sheet rather than make early payments to
suppliers, to offset the extraordinary investments in working
capital throughout 2021, as reflected in the closing inventory
levels.
Capital expenditure in the year was GBP30.3 million (2020:
GBP27.5 million) representing, primarily, investments in IT
equipment and software tools, to enable us to deliver improved
service to our customers.
The Group's Employee Benefit Trust ('EBT') made market purchases
of the Company's ordinary shares of GBP25.5 million (2020: GBP19.0
million) to satisfy maturing PSP awards and Sharesave schemes and
to re-provision the EBT in advance of future maturities. During the
year the Company received savings from employees of GBP6.2 million
to purchase options within the Sharesave schemes (2020: GBP5.7
million).
During the year the Group made two acquisitions. The first was
ITL, as described above, for GBP1.1 million. The second was to
acquire a further 5.0 per cent of the total voting rights within
R.D. Trading Ltd, taking the Group's ownership of the Company to 95
per cent.
The Group reduced loans and credit facilities during the year by
GBP89.0 million (2020: GBP19.7 million), as we retired the facility
associated with the FusionStorm acquisition, made regular
repayments towards the loan related to the construction of the
German headquarters in Kerpen and significantly reduced the amount
drawn under the Pivot credit facility, as detailed below.
The Group continued to manage its cash and working capital
positions appropriately, using standard mechanisms, to ensure that
cash levels remained within expectations throughout the year. From
time to time, some customers request credit terms longer than our
standard of 30-60 days. In certain instances, we will arrange for
the sale of the receivables on a true sale basis to a finance
institution on the customers' behalf. We would typically receive
funds on 45-day terms from the finance institution, who will then
recover payment from the customer on terms agreed with them. The
cost of such an arrangement is borne by the customer, either
directly or indirectly, enabling us to receive the full amount of
payment in line with our standard terms. The benefit to the cash
and cash equivalents position of such arrangements as at 31
December 2021 was GBP53.7 million (31 December 2020: GBP38.9
million). The Group had no other debt factoring at the end of the
year, outside this normal course of business.
Cash and cash equivalents and net funds
Cash and cash equivalents as at 31 December 2021 were GBP285.2
million, compared to GBP309.8 million at 31 December 2020. Net
funds as at 31 December 2021 were GBP95.3 million (31 December
2020: GBP51.1 million). Adjusted net funds(3) as at 31 December
2021 were GBP241.4 million, compared to adjusted net funds(3) of
GBP188.6 million as at 31 December 2020.
Net funds as at 31 December 2021 and 31 December 2020 were as
follows:
31 December 31 December
2021 2020
GBPm GBPm
Cash and short-term deposits 285.2 309.8
Bank overdraft (12.0) -
Cash and cash equivalents 273.2 309.8
Bank loans (31.8) (121.2)
Adjusted net funds(3) (excluding lease liabilities) 241.4 188.6
Lease liabilities (146.1) (137.5)
Net funds 95.3 51.1
For a full reconciliation of net funds and adjusted net funds(3)
, see note 8 to the summary financial information within this
announcement for further detail.
The Group had four 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 was on a
seven-year repayment cycle, with a renewal of the loan facility due
on 30 September 2021. The Group has made further unplanned
repayments of this loan during the year, in addition to the
unplanned repayment of GBP30 million in the second half of 2019,
which reduced the interest cost differential between loan rates and
cash deposit rates. As at 31 December 2020, GBP41.6 million
remained of the loan and the Group has now retired the credit
facility by paying the remaining balance in full during the first
half of the year.
At the start of the year, Pivot had a substantially unutilised
$225.0 million senior secured asset-based revolving credit
facility, from a lending group represented by JPMorgan Chase Bank,
N.A. To reduce bank fees, this was reduced to $100 million during
the year. The residual facility can be used for revolving loans,
letters of credit, protective advances, over advances, and swing
line loans. During the year, the Group has continued to reduce the
amount drawn on the facility and only GBP7.0 million remained drawn
as at 31 December 2021 (31 December 2020: GBP58.4 million). In
addition, Pivot has GBP9.4 million financed with a major technology
partner for hardware, software and resold technology partner
maintenance contracts that the Company has purchased as part of a
contract to lease these items to a key North American customer.
The Group also has a specific term loan for the build and
purchase of our German office headquarters and fit out of the
Integration Center in Kerpen, which stood at GBP14.7 million at 31
December 2021 (31 December 2020: GBP20.9 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
2021 (31 December 2020: nil).
The Group's adjusted net funds(3) position contains no current
asset investments (31 December 2020: nil).
Trade creditor arrangements
Computacenter has a strong covenant and enjoys a favourable
credit rating from technology partners and other 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.
Revenue
Half 1 Half 2 Total
GBPm GBPm GBPm
2019 2,427.0 2,625.8 5,052.8
2020 2,462.2 2,979.1 5,441.3
2021 3,180.0 3,545.8 6,725.8
2021/20 29.2% 19.0% 23.6%
Adjusted(1) profit before tax
Half 1 Half 2 Total
GBPm % Revenue GBPm % Revenue GBPm % Revenue
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%
2021 118.9 3.7% 136.7 3.9% 255.6 3.8%
2021/20 59.4% 8.6% 27.5%
Revenue by Segment
2021 2020
Half 1 Half 2 Total Half 1 Half 2 Total
GBPm GBPm GBPm GBPm GBPm GBPm
UK 939.5 1,009.1 1,948.6 858.8 914.6 1,773.4
Germany 926.5 1,094.7 2,021.2 843.7 1,032.6 1,876.3
France 313.1 340.3 653.4 304.3 368.5 672.8
North America 910.1 1,001.5 1,911.6 378.2 566.3 944.5
International 90.8 100.2 191.0 77.2 97.1 174.3
Total 3,180.0 3,545.8 6,725.8 2,462.2 2,979.1 5,441.3
Adjusted(1) operating profit by Segment
2021
Half 1 Half 2 Total
GBPm % Revenue GBPm % Revenue GBPm % Revenue
UK 51.7 5.5% 51.2 5.1% 102.9 5.3%
Germany 61.1 6.6% 76.7 7.0% 137.8 6.8%
France (2.0) (0.6%) 5.5 1.6% 3.5 0.5%
North America 18.7 2.1% 12.3 1.2% 31.0 1.6%
International 4.1 4.5% 7.2 7.2% 11.3 5.9%
Central Corporate Costs (11.1) (12.6) (23.7)
Total 122.5 3.9% 140.3 4.0% 262.8 3.9%
2020
Half 1 Half 2 Total
GBPm % Revenue GBPm % Revenue GBPm % Revenue
UK 45.9 5.3% 44.4 4.9% 90.3 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) (14.2) (27.1)
Total 77.3 3.1% 129.1 4.3% 206.4 3.8%
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 $100 million North
American facility 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 to meet any foreseeable peak in borrowing
requirements. The Group's positive net cash was maintained
throughout 2021 and at the year end was GBP273.2 million, with net
funds of GBP95.3 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 GBP241.4
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, Ireland, Malaysia, Mexico,
the Netherlands, Poland, Romania, South Africa, Spain and
Switzerland. The Company also maintains entities in Singapore and
Hong Kong, in order to transact in those local markets with
Services and Technology Sourcing operations delivered from
elsewhere in the Group.
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 (USD). 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 2021, the Group recognised a loss of GBP0.9 million (2020:
loss of GBP1.9 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 strength
of sterling against most currencies during 2021, in particular the
euro, has begun to impact our revenues and profitability as a
result of the conversion of our foreign earnings. The USD exchange
rates during the year, in particularly the second half, were not
materially dissimilar to those seen in 2020.
The impact of restating 2020 results at 2021 exchange rates
would be a reduction of GBP142.9 million in 2020 revenue and a
decrease of GBP6.1 million in 2020 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.
Going Concern
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are set out within the 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 2021. This period was selected as
an appropriate timeframe for the following reasons, based on the
Group's business model:
-- 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; and
-- 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.
Further, the Directors' monitor conditions in the environment
external to the Group and have concluded that the current factors
continue to support the timeframe selected:
-- 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;
-- 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;
-- continuing short-term product shortages, resulting primarily
from the Covid-19 impact on supply chains; and
-- the likely short- to medium-term impact of the Russian
invasion of Ukraine on the global macro-economic environment,
including an exacerbation of supply chain issues currently being
experienced.
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 technology partners 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 (2022) and forecast
information for two further years (2023 and 2024), 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 2022 was considered
and approved by the Board on 9 December 2021, with amendments and
enhancements to the target as part of the full Plan considered and
approved by the Board on 8 March 2022.
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. In the absence of
significant external debt, 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 2022, simulating a continued impact for some
of our customers from the Covid-19 crisis together with the Group's
revenues being impacted by supply shortages. This sensitivity
analysis models a continued market downturn scenario for some of
our customers, whose businesses have been affected by Covid-19, and
a similar downturn occurring for the remainder of our customer base
alongside a further impact on the Group's Technology Sourcing
revenues throughout the first half of 2022 from possible ongoing
technology partner-related supply shortage issues.
Additionally, the risks related to continued disruption from the
departure of the UK from the European Union, and the potential for
a suspension or termination of the EU-UK Trade and Cooperation
Agreement 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 2024.
Fair, balanced and understandable
The Board considers the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides 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 2022
and was signed on its behalf by:
MJ Norris FA Conophy
Chief Executive Group Finance
Officer Director
Consolidated Income Statement
For the year ended 31 December 2021
2021 2020
Note GBPm GBPm
Revenue 4,5 6,725.8 5,441.3
Cost of sales (5,858.0) (4,720.8)
Gross profit 867.8 720.5
Administrative expenses (612.0) (521.6)
Impairment loss on trade receivables and contract
assets (0.6) (0.4)
Operating profit 255.2 198.5
Gain on acquisition of a subsidiary - 14.0
Finance income 0.3 0.5
Finance costs (7.5) (6.4)
Profit before tax 248.0 206.6
Income tax expense 6 (61.5) (52.4)
Profit for the year 186.5 154.2
Attributable to:
Equity holders of the Parent 185.3 153.8
Non-controlling interests 1.2 0.4
Profit for the year 186.5 154.2
Earnings per share:
- basic 7 164.0p 136.2p
- diluted 7 160.9p 133.8p
(Impairment loss on trade receivables and contract assets of
GBP0.4 million was included as part of 'Administrative expenses' in
the prior year. The prior year comparative has been re-presented
for this amount. There is no impact on reported 'Operating profit'
of this change.)
All of the activities of the Group relate to continuing
operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
GBPm GBPm
Profit for the year 186.5 154.2
Items that may be reclassified to the Consolidated
Income Statement:
Loss arising on cash flow hedge (0.9) (1.9)
Income tax effect 0.2 0.3
(0.7) (1.6)
Exchange differences on translation of foreign
operations (9.6) 3.2
(10.3) 1.6
Items not to be reclassified to the Consolidated
Income Statement:
Remeasurement of defined benefit plan 1.2 (4.3)
Other comprehensive expense for the year, net of
tax (9.1) (2.7)
Total comprehensive income for the year 177.4 151.5
Attributable to:
Equity holders of the Parent 176.2 151.1
Non-controlling interests 1.2 0.4
Total comprehensive income for the year 177.4 151.5
Consolidated Balance Sheet
As at 31 December 2021
2021 2020
Note GBPm GBPm
Non-current assets
Property, plant and equipment 90.0 107.0
Right-of-use assets 138.1 129.6
Intangible assets 273.7 274.7
Investment in associate 0.1 0.1
Deferred income tax assets 30.2 10.1
Prepayments 5 16.6 23.6
548.7 545.1
Current assets
Inventories 341.3 211.3
Trade and other receivables 1,275.2 1,095.9
Income tax receivable 8.8 10.0
Prepayments 5 103.0 102.8
Accrued income 5 148.1 125.4
Derivative financial instruments 3.6 1.6
Cash and short-term deposits 8 285.2 309.8
2,165.2 1,856.8
Total assets 2,713.9 2,401.9
Current liabilities
Bank overdraft 8 12.0 -
Trade and other payables 1,410.4 1,116.7
Deferred income 5 249.3 273.9
Financial liabilities 15.1 105.5
Lease liabilities 43.0 41.7
Derivative financial instruments 2.5 5.1
Income tax payable 47.9 39.2
Provisions 3.5 4.1
1,783.7 1,586.2
Non-current liabilities
Financial liabilities 16.7 15.7
Lease liabilities 103.1 95.8
Deferred income 5 8.3 18.6
Retirement benefit obligation(*) 21.8 23.3
Provisions(*) 9.7 12.5
Deferred income tax liabilities 25.8 18.9
185.4 184.8
Total liabilities 1,969.1 1,771.0
Net assets 744.8 630.9
Capital and reserves
Issued share capital 9.3 9.3
Share premium 4.0 4.0
Capital redemption reserve 75.0 75.0
Own shares held (115.5) (111.7)
Translation and hedging reserve 5.4 15.7
Retained earnings 762.3 635.5
Shareholders' equity 740.5 627.8
Non-controlling interests 4.3 3.1
Total equity 744.8 630.9
(*Retirement benefit obligation of GBP23.3 million was included
as part of 'Provisions' in the prior year. The prior year
comparative has been re-presented for this amount. There is no
impact on reported 'Non-current liabilities' and 'Net assets' from
this change.)
Approved by the Board on 15 March 2022.
MJ Norris FA Conophy
Chief Executive Group Finance
Officer Director
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Attributable to equity holders
of the Parent
Issued Capital Own Translation Non-
share Share redemption shares and hedging Retained Share-holders' controlling Total
capital premium reserve held reserves earnings equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2021 9.3 4.0 75.0 (111.7) 15.7 635.5 627.8 3.1 630.9
Profit for the
year - - - - - 185.3 185.3 1.2 186.5
Other
comprehensive
income/(expense) - - - - (10.3) 1.2 (9.1) - (9.1)
Total
comprehensive
income/(expense) - - - - (10.3) 186.5 176.2 1.2 177.4
Cost of
share-based
payments - - - - - 10.6 10.6 - 10.6
Tax on
share-based
payments - - - - - 7.6 7.6 - 7.6
Exercise of
options - - - 21.7 - (15.5) 6.2 - 6.2
Purchase of own
shares - - - (25.5) - - (25.5) - (25.5)
Equity dividends - - - - - (62.4) (62.4) - (62.4)
At 31 December
2021 9.3 4.0 75.0 (115.5) 5.4 762.3 740.5 4.3 744.8
At 1 January 2020 9.3 4.0 75.0 (113.6) 14.0 503.9 492.6 (0.1) 492.5
Relating to
acquisition
of subsidiary - - - - - - - 2.8 2.8
Profit for the
year - - - - - 153.8 153.8 0.4 154.2
Other
comprehensive
income/(expense) - - - - 1.7 (4.4) (2.7) - (2.7)
Total
comprehensive
income - - - - 1.7 149.4 151.1 0.4 151.5
Cost of
share-based
payments - - - - - 7.9 7.9 - 7.9
Tax on
share-based
payments - - - - - 3.4 3.4 - 3.4
Exercise of
options - - - 20.9 - (15.2) 5.7 - 5.7
Purchase of own
shares - - - (19.0) - - (19.0) - (19.0)
Equity dividends - - - - - (13.9) (13.9) - (13.9)
At 31 December
2020 9.3 4.0 75.0 (111.7) 15.7 635.5 627.8 3.1 630.9
Consolidated Cash Flow Statement
For the year ended 31 December 2021
2021 2020
Note GBPm GBPm
Operating activities
Profit before taxation 248.0 206.6
Net finance cost 7.2 5.9
Depreciation of property, plant and equipment 24.8 24.0
Depreciation of right-of-use assets 50.6 45.2
Amortisation of intangible assets 15.3 14.6
Share-based payments 10.6 8.0
Loss on disposal of intangibles 0.5 0.3
(Gain)/loss on disposal of property, plant and
equipment (1.3) 0.2
Net cash flow from inventories (131.5) (50.4)
Net cash flow from trade and other receivables
(including contract assets) (238.5) 48.3
Net cash flow from trade and other payables (including
contract liabilities) 292.9 (26.2)
Gain on acquisition of a subsidiary - (14.0)
Net cash flow from provisions (2.9) 1.9
Other adjustments 1.8 0.1
Cash generated from operations 277.5 264.5
Income taxes paid (53.2) (27.6)
Net cash flow from operating activities 224.3 236.9
Investing activities
Interest received 0.3 0.5
Acquisition of subsidiaries, net of cash acquired (2.5) (30.1)
Purchases of property, plant and equipment (18.8) (23.1)
Purchases of intangible assets (11.5) (4.4)
Proceeds from disposal of property, plant and equipment 7.5 1.6
Net cash flow from investing activities (25.0) (55.5)
Financing activities
Interest paid (2.3) (1.9)
Interest paid on lease liabilities (5.2) (4.5)
Dividends paid to equity shareholders of the Parent (62.4) (13.9)
Proceeds from share issues 6.2 5.7
Purchase of own shares (25.5) (19.0)
Repayment of loans and credit facility (99.7) (20.0)
Payment of capital element of lease liabilities (50.2) (43.2)
New borrowings - bank loan 10.7 0.3
Net cash flow from financing activities (228.4) (96.5)
(Decrease)/increase in cash and cash equivalents (29.1) 84.9
Effect of exchange rates on cash and cash equivalents (7.5) 7.1
Cash and cash equivalents at the beginning of the
year 8 309.8 217.8
Cash and cash equivalents at the year end 8 273.2 309.8
1 General information
Computacenter plc is a limited company incorporated and
domiciled in England whose shares are publicly traded. Its
registered address is Hatfield Business Park, Hatfield Avenue,
Hatfield, AL10 9TW.
2 Summary of significant accounting policies
The accounting policies adopted are consistent with those of the
previous financial year as disclosed in the 2020 Annual Report and
Accounts.
Effective for the year ending 31 December 2022
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 2021 or 2020. Computacenter has
completed its preparation of the Group's 2021 Annual Report and
Accounts. The Group has, however, been advised by its auditor,
KPMG, that their audit procedures are not yet fully complete and
that they are therefore not yet in a position to sign their audit
report on the annual financial statements. KPMG has confirmed to
Computacenter that at the present time KPMG are not aware of any
matters that may give rise to a modification to their audit report.
Based on the latest guidance from KPMG, the Group expects the 2021
full Financial Statements to be signed by the Directors on 23 March
2022. Statutory Consolidated Financial Statements for the Group for
the year ended 31 December 2020, prepared in accordance with
adopted IFRS, have been delivered to the Registrar of Companies.
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.
This preliminary announcement does not constitute the Group's
full financial statements for 2021. This report is based on
accounts which are in the process of being audited and will be
approved by the Board and subsequently filed with the Registrar of
Companies in the United Kingdom. Accordingly, the financial
information for 2021 is unaudited and does not constitute statutory
accounts within the meaning of Section 434 of the United Kingdom
Companies Act 2006.
The Consolidated Financial Statements are prepared on the
historical cost basis other than derivative financial instruments,
which are stated at fair value.
The Consolidated Financial Statements are presented in pound
sterling (GBP) and all values are rounded to the nearest hundred
thousand except when otherwise indicated.
In determining whether it is appropriate to prepare the
Financial Statements on a 'going concern' basis, the Group prepares
a three-year Plan (the 'Plan') annually by aggregating top down
expectations of business performance across the Group in the second
and third year of the Plan with a detailed 12-month 'bottom-up'
budget for the first year, which 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 year, the primary downside sensitivity relates
to a modelled, but not predicted, severe downturn in the Group's
revenues, beginning in 2022, simulating a continued impact for some
of our customers from the COVID-19 crisis together with the Group's
revenues being impacted by supply shortages. This sensitivity
analysis models a continued market downturn scenario, with slower
than predicted recovery estimates, 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. A further impact
on the Group's Technology Sourcing revenues through 2022 from
possible ongoing vendor-related supply shortage issues has also
been included in the sensitivity analysis.
Our cash and borrowing capacity provides sufficient funds to
meet the foreseeable needs of the Parent and Group. At 31 December
2021, the Group had cash and short-term deposits of GBP285.2
million and bank debt, primarily related to the recently built
headquarters in Germany and operations in North America, of GBP43.8
million. The Group's Pivot subsidiary has a revolving credit
facility via JPMorgan Chase Bank, N.A. of US$100.0 million which
can be used for revolving loans, letters of credit, and swing line
loans. In addition, the Group has a committed facility of GBP60.0
million, which was extended in September 2020 and has an expiry
date of 7 September 2023. The Group has never drawn on this
committed facility.
The Group has a resilient balance sheet position, with net
assets of GBP744.8 million as at 31 December 2021. The Group made a
profit after tax of GBP186.5 million, and delivered net cash flows
from operating activities of GBP224.3 million, for the year ended
31 December 2021.
As the analysis continues to show a strong forecast cash
position, even under the severe economic conditions modelled in the
sensitivity scenarios, the Directors continue to consider that the
Parent and Group are well placed to manage business and financial
risks in the current economic environment. Based on this
assessment, the Directors confirm that they have a reasonable
expectation that the Parent and Group will be able to continue in
operation and meet their liabilities as they fall due over the
period of not less than 12 months from the date of signing this
Annual Report and Accounts and therefore have prepared the
Financial Statements on a going concern basis.
Consolidated Balance Sheet - As at 31 December 2020
As at 31 December 2020, certain items relating to an operating
lessor arrangement within the acquired Pivot business were
incorrectly presented on the balance sheet in the 2020 Annual
Report and Accounts as follows:
-- An amount of GBP12.6 million was incorrectly presented as
accrued income of GBP2.6 million and non-current deferred costs,
within prepayments, of GBP10.0 million rather than as property,
plant and equipment of GBP2.8 million, intangibles assets -
software of GBP4.6 million, accrued income of GBP1.1 million and
non-current deferred costs, within prepayments, of GBP4.1
million.
-- An amount of GBP11.9 million was incorrectly presented as
current deferred income of GBP2.9 million and non-current deferred
income of GBP9.0 million, rather than reflected as current
financial liabilities of GBP2.2 million and non-current financial
liabilities of GBP9.7 million.
Consolidated Cash Flow Statement for the year ended 31 December
2020
In relation to the above, the contract relating to the operating
lessor arrangement was entered into prior to the acquisition of
Pivot, therefore the impact to the Consolidated Cash Flow Statement
is limited to GBP0.4 million of financing repayments being
incorrectly presented. This outflow was recognised within net cash
flow from trade and other payables within the operating cashflow
caption, instead of as a repayment of loans and credit facility
within the financing cash flow caption.
Management has decided not to correct the prior year-end
presentation of the differences relating to the above items, as
they have no impact on the Consolidated Income Statement for the
year ended 31 December 2020 and individual reclassifications are
either not significant compared to the overall amount in the
Consolidated Balance Sheet and/or Consolidated Cash Flow Statement
captions affected by the mis-presentation or to the Consolidated
Balance Sheet or Consolidated Cash Flow Statement itself. The
revision has no impact on the operating profit, profit for the
period, assets and liabilities or cash flows for the year ended 31
December 2021, where the correct accounting treatment has been
adopted in the year.
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 or where
relevant the rate of a specific forward exchange contract. Monetary
assets and liabilities denominated in foreign currencies are
retranslated at the functional currency rate of exchange ruling at
the Consolidated Balance Sheet date. All differences are taken to
the Consolidated Income Statement except foreign currency
differences arising from the translation of qualifying cash flow
hedges are recognised in Consolidated Statement of Comprehensive
Income, to the extent that the hedges are effective.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rate as at
the date of initial transaction.
The functional currencies of the main overseas subsidiaries are
euro (EUR), US dollar ($) 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 when the Group's
performance obligations are fulfilled at a point in time when
control of the goods has been transferred to the customer.
Typically, customers obtain control of the goods when they are
delivered to and have been accepted at their premises, depending on
individual customer arrangements. Invoices are routinely generated
at that point in time and payment for the goods is generally
received on, or before, industry-standard payment terms, ordinarily
within 30 days. Refer to note 3.2.2 for 'bill and hold'
transactions.
Revenue is recorded based on the price specified in sales
invoices, net of any agreed discounts and rebates, and exclusive of
value added tax on goods supplied to customers during the year.
There are a variety of discounts and rebates provided to
customers, which are assessed on a case-by-case basis as to whether
the resulting payment to customers is for a distinct good or
service (such as marketing) or for a promotional discount.
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 and, for certain elements including standalone
software licence sales and standalone resold third party service,
the level of judgement required can be high with the outcomes of
assessments finely balanced, 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. See note 3.2.1 Technology Sourcing principal versus
agent recognition for further information on the critical
judgement. 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:
-- 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;
-- Evaluating who controls each specified good or service before
that good or service is transferred to the customer; and
-- Our consideration is in the form of a usually predetermined commission.
2.3.2 Professional Services
The Group provides skilled professionals to customers either
operating within a project framework or on a 'resource on demand'
basis.
For contracts operating within a project framework, revenue is
recognised based on the transaction price with reference to the
costs incurred as a proportion of the total estimated costs
(percentage of completion basis) of the contract.
For those contracts which are 'resource on demand', revenue is
billed on a timesheet basis. The Group elects to use the practical
expedient in IFRS 15.B16, as we have a right to consideration from
our 'resource on demand' Professional Services customers in an
amount that corresponds directly with the value to our customer of
the Group's performance completed to date. The practical expedient
applied permits the Group to recognise these 'resource on demand'
Professional Services revenues in the amount to which the entity
has a right to invoice. Managed Services revenue is therefore
recognised throughout the term of the contract, as services are
delivered, with amounts recognised based on monthly invoiced
amounts as this corresponds to the service delivered to the
customer and the satisfaction of the Group's performance
obligations.
Under either basis, Professional Services revenue is recognised
over time. The vast majority of the Group's Professional Services
revenue is constituted by 'expert-leasing' arrangements and
recognised in this manner and represents the primary area of growth
in this business line. As the majority of Professional Services
revenue is recognised as 'resource on demand', the overall balance
of risks to recognition for this business is decreased as compared
to the scenario where the majority of Professional Services revenue
would be recognised on a percentage of completion basis. This is
due to the monthly timesheet nature of the billing which is agreed
regularly with the customer as the service is delivered.
If the total estimated costs and revenues of a contract cannot
be reliably estimated, revenue is recognised only to the extent
that costs have been incurred and where the Group has an
enforceable right to payment as work is being performed.
A provision for forecast excess costs over forecasted revenue is
made as soon as a loss is foreseen (see note 2.12.1 for further
detail).
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.
The specific performance obligations and invoicing conditions in
our Managed Services contracts are typically related to the number
of calls, interventions or users that we manage and therefore the
customer simultaneously receives and consumes the benefits of the
services as they are performed. The Group elects to use the
practical expedient in IFRS 15.B16, as we have a right to
consideration from our Managed Services customers in an amount that
corresponds directly with the value to our customer of the Group's
performance completed to date. The practical expedient applied
permits the Group to recognise Managed Services revenue in the
amount to which the entity has a right to invoice. Managed Services
revenue is therefore recognised throughout the term of the
contract, as services are delivered, with amounts recognised based
on monthly invoiced amounts as this corresponds to the service
delivered to the customer and the satisfaction of the Group's
performance obligations.
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 for further detail).
On occasion, the Group may have a limited number of Managed
Services contracts where revenue is recognised on a percentage of
completion basis, which is determined by reference to the costs
incurred as a proportion of the total estimated costs of the
contract.
Costs of obtaining and fulfilling revenue contracts
The Group operates in a highly competitive environment and is
frequently involved in contract bids with multiple competitors,
with the outcome usually unknown until the contract is awarded and
signed.
When accounting for costs associated with obtaining and
fulfilling customer contracts, the Group first considers whether
these costs fit within a specific IFRS standard or policy. Any
costs associated with obtaining or fulfilling revenue contracts
which do not fall into the scope of other IFRS standards or
policies are considered under IFRS 15. All such costs are expensed
as incurred other than the two types of costs noted below:
1. Win fees - The Group pays 'win fees' to certain employees as
bonuses for successfully obtaining customer contracts. As these are
incremental costs of obtaining a customer contract, they are
deferred along with any associated payroll tax expense to the
extent they are expected to be recovered. These balances are
presented within prepayments in the Consolidated Balance Sheet. The
win fee balance that will be realised after more than 12 months is
disclosed as non-current.
2. Fulfilment costs - The Group often incurs costs upfront
relating to the initial set-up phase of an outsourcing contract,
which the Group refers to as Entry Into Service. These costs do not
relate to a distinct performance obligation in the contract, but
rather are accounted for as fulfilment costs under IFRS 15 as they
are directly related to the future performance on the contract.
They are therefore capitalised to the extent that they are expected
to be recovered. These balances are presented within prepayments in
the Consolidated Balance Sheet.
Both 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.
2.4 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 the elements of
financial performance in the year, so as to facilitate comparison
with prior years and to assess trends in financial performance.
2.5 Adjusted(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 administrative
expenses, adjusted operating profit or loss, adjusted profit or
loss before tax, adjusted tax, adjusted profit or loss for the
year, adjusted earnings per share and adjusted diluted earnings per
share 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 does not consider these items when reviewing
the underlying performance of the Segment or the Group as a
whole.
A reconciliation to adjusted measures is provided on 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, Segment
information.
2.6 Impairment of assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset's recoverable amount.
Where an asset does not have independent cash flows, the
recoverable amount is assessed for the cash-generating unit (CGU)
to which it belongs. These assets are tested across an aggregation
of CGUs that utilise the asset. The recoverable amount is the
higher of the fair value less costs to sell and the value-in-use of
the asset or CGU. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value-in-use, the
estimated future cash flows are discounted to their present value
using a post-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. Impairment losses of continuing operations are
recognised in the Consolidated Income Statement in those expense
categories consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each
reporting date whether there is any indication that previously
recognised impairment losses may no longer exist or may have
decreased. If such indication exists, the Group estimates the
asset's or CGU's recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset's recoverable amount since
the last impairment was recognised. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. As the Group has no assets
carried at revalued amounts, such reversal is recognised in the
Consolidated Income Statement.
2.7 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses.
Depreciation, down to residual value, is calculated on a
straight-line basis over the estimated useful life of the asset as
follows:
-- freehold buildings: 25-50 years
-- short leasehold improvements: shorter of seven years and period to expiry of lease
-- fixtures and fittings:
- head office: 5-15 years
- other: shorter of seven years and period to expiry of lease
-- office machinery and computer hardware: 2-15 years
-- motor vehicles: three years
Freehold land is not depreciated. An item of property, plant and
equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the
carrying amount of the item) is included in the Consolidated Income
Statement in the year the item is derecognised.
2.8 Leases
2.8.1 Group as lessee
Recognition of a lease
The contracts are assessed by the Group, to determine whether a
contract is, or contains a lease. In general, arrangements are a
lease when all of the following apply:
-- it conveys the right to control the use of an identified
asset for a certain period in exchange for consideration;
-- the Group obtains substantially all economic benefits from the use of the asset; and
-- the Group can direct the use of the identified asset.
The Group elects to separate the non-lease components.
Measurement of a right-of-use asset and lease liability
Right-of-use asset
The Group measures the right-of-use asset at cost, which
includes the following:
-- the initial amount of the lease liability adjusted for any
lease payments made at or before the lease commencement date;
-- any lease incentives received; and
-- any initial direct costs incurred by the Group as well as an
estimate of costs to be incurred by the Group in dismantling and
removing the underlying asset, restoring the site on which it is
located or restoring the underlying asset to the condition required
by the lease contract. Cost for dismantling, removing or restoring
the site on which it is located and/or the underlying asset is only
recognised when the Group incurs an obligation to do so.
The right-of-use asset is depreciated over the lease term, using
the straight-line method.
Lease liability
The lease liability is initially measured at the present value
of the unpaid lease payments, discounted using the interest rate
implicit in the lease, or if the rate cannot be readily determined,
the Group's incremental borrowing rate. Lease payments included in
the measurement comprise 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.
2.8.2 Group as a lessor
The Group entered in to lease agreements as a lessor on certain
items of machinery and software. Leases for which the Group is a
lessor are classified as operating leases. Rental income arising
from operating leases is accounted for on a straight-line basis
over the lease term.
In cases where the Group acts as an intermediate lessor, it
accounts for its interests in the head-lease and the sub-lease
separately.
2.9 Intangible assets
2.9.1 Software and software licences
Software and software licences include computer software that is
not integral to a related item of hardware. These assets are stated
at cost less accumulated amortisation and any impairment in value.
Amortisation is calculated on a straight-line basis over the
estimated useful life of the asset. Currently software is amortised
over four years.
The carrying values of software and software licences are
reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable. If any
such indication exists and where the carrying values exceed the
estimated recoverable amount, the assets are written down to their
recoverable amount.
2.9.2 Software under development
Costs that are incurred and that can be specifically attributed
to the development phase of management information systems for
internal use are capitalised 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 and expected useful lives are
reviewed on a yearly basis.
2.9.4 Goodwill
Business combinations are accounted for under IFRS 3 Business
Combinations using the acquisition method. Any excess of the cost
of the business combination over the Group's interest in the net
fair value of the identifiable assets, liabilities and contingent
liabilities is recognised in the Consolidated Balance Sheet as
goodwill and is not amortised. Any goodwill arising on the
acquisition of equity accounted entities is included within the
cost of those entities.
After initial recognition, goodwill is stated at cost less any
accumulated impairment losses, with the carrying value being
reviewed for impairment at least annually and whenever events or
changes in circumstances indicate that the carrying value may be
impaired.
For the purpose of impairment testing, goodwill is allocated to
the related CGU monitored by Management, usually at business
Segment level or statutory Company level as the case may be. Where
the recoverable amount of the CGU is less than its carrying amount,
including goodwill, an impairment loss is recognised in the
Consolidated Income Statement.
2.10 Inventories
Inventories are carried at the lower of weighted average cost
and net realisable value after making allowance for any obsolete or
slow-moving items. Costs include those incurred in bringing each
product to its present location and condition, on a first-in,
first-out basis.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs necessary to
make the sale.
2.11 Financial assets
Financial assets are recognised at their fair value, which
initially equates to the sum of the consideration given and the
directly attributable transaction costs associated with the
investment. Subsequently, the financial assets are measured at
either amortised cost or fair value depending on their
classification under IFRS 9. The Group currently holds only debt
instruments. The classification of these debt instruments depends
on the Group's business model for managing the financial assets and
the contractual terms of the cash flows.
2.11.1 Trade 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, without recourse, to manage liquidity and, as a result,
the business model for factored trade receivables is that they are
not held for the collection of contractual cash flows. As a result,
subsequent to initial recognition, they are measured at fair value
through other comprehensive income (except for the recognition of
impairment gains and losses and foreign exchange gains and losses,
which are recognised in profit or loss). Factored trade receivables
are derecognised on receipt of cash from the factoring party. Given
the short lives of the trade receivables, there are generally no
material fair value movements between initial recognition and the
derecognition of the receivable.
The Group assesses for doubtful debts (impairment) using the
expected credit losses model as required by IFRS 9. For trade
receivables, the Group applies the simplified approach which
requires expected lifetime losses to be recognised from the initial
recognition of the receivables. Material or high-risk balances are
reviewed and provided for individually based on a number of factors
including:
-- the financial strength of the customer;
-- the level of default that the Group has suffered in the past;
-- the age of the receivable outstanding; and
-- the Group's trading experience with that customer.
For impairment assessment of other receivables, refer to Note
2.6, 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 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 the
overdrafts are repayable on demand and are part of the Group's cash
management.
2.12 Financial liabilities
Financial liabilities are initially recognised at their fair
value and, in the case of loans and borrowings (including credit
facility), net of directly attributable transaction costs.
The subsequent measurement of financial liabilities is at
amortised cost, unless otherwise described below:
2.12.1 Provisions (excluding restructuring provision)
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions
are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision
due to the passage of time is recognised as a borrowing cost.
Customer contract provisions
A provision for forecast excess costs over forecasted revenue is
made as soon as a loss is foreseen.
Management monitors 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 - 'Provisions, Contingent Liabilities
and Contingent Assets' (IAS 37) in its assessment of whether
contracts are considered onerous and in subsequently estimating the
provision. In line with recent amendments to IAS 37, the Group's
approach has been and continues to be to apply the "Full cost
approach" which 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.
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 7).
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.
2.19 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 and the USA 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.
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. There are no areas
involving significant risk resulting in a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year.
3.2 Critical judgements
Judgements made by Management in the process of applying the
Group's accounting policies, which have the most significant effect
on the amounts recognised in the Consolidated Financial Statements,
are as follows:
3.2.1 Technology Sourcing principal versus agent recognition
Management is required to exercise its judgement in the
classification of certain revenue contracts for Technology Sourcing
revenue recognition on either an agent or principal basis.
Because the identification of the principal in a contract is not
always clear, Management will make a determination by evaluating
the nature of our promise to our customer as to whether it is a
performance obligation to pass control of the specified goods or
services ourselves, in 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.
Management continues to monitor the primary indicators used to
assess the 'agent/principal' presentation of our Software and
certain Resold Services revenue against our general contractual
terms and conditions including detailed analysis of how terms and
conditions are applied in practice, the weighting applied to the
agent/principal indicators and evaluation of emerging practice.
Management has concluded that whilst this remains a finely balanced
judgement, no change to the presentation of our Software and
certain Resold Services revenues is currently required and revenue
for these items will continue to be presented gross where the
underlying facts and circumstances remain the same. Management
continues to monitor the development of new methods of transacting
business within the traditional vendor to reseller channel and on
the emergence of best practice in the revenue recognition treatment
and disclosure of all Technology Sourcing revenues.
Since the adoption of IFRS 15 on 1 January 2018, a line of
business emerged within our Technology Sourcing business where
vendors and customers typically approach us with an opportunity
where the vendor is taking the contract and performance risks and
sets the selling price, using Computacenter as a pass-through agent
in the channel to transact the deal for a set fee. To date, these
have been primarily large software deals where there is no ongoing
obligation of service on us following the transaction. We have no
say in the pricing or selection of the product and are merely
standing in the sales channel between the vendor and customer for
the predetermined fee. Management reviews the facts and
circumstances of these types of deals, case by case, with regards
to its specific terms and conditions against the Group's accounting
policy to determine whether our performance obligation is to
provide the good or service itself, where we are acting as the
principal in the deal, or to arrange for another party to provide
the good or service, where we are acting as an agent. Based on the
facts and circumstances of each deal we have classified several of
these deals as agency concluding that the fee received should be
booked as net revenue. Such agency deals would have increased
revenue by GBP197.7 million during 2021 if recognised on a
principal basis (2020: GBP273.7 million).
Following its meeting that concluded on 1 December 2021, the
IFRS Interpretation Committee (the 'Committee') published a
tentative agenda decision in response to a submission from a valued
added reseller to determine whether an entity should treat revenue
from the resale of standard software licences on a principal or
agent recognition basis under IFRS 15 Revenue from Contracts with
Customers ('IFRS 15').
The Committee did not reach a definitive conclusion on the
submission received, as it maintained that entities should apply
judgement in making its assessment under the principles contained
within IFRS 15 using the specific facts and circumstances relevant
to the entity and the transactions or contracts entered into.
However, the Committee did provide a number of discrete guidance
points on the application of various control criteria or indicators
that entities should consider under their IFRS 15 agent and
principal recognition criteria processes that specifically relate
to the resale of standard software and have an impact on those
resellers within the industry. A finalised agenda decision is not
expected until Q2 2022 following the consideration of public
comments which closed on 8 February 2022.
The Group typically recognises standalone software licence
revenue on a principal or gross invoiced income basis, with a small
number of material transactions, where the fact pattern remains
different to the standard terms and conditions, recognised as an
agent. Whilst the Committee is finalising its decision the Group is
working towards assessing changes to its accounting policies that
will result if the final agenda decision remains broadly
characteristic of the tentative decision. The resultant change in
policies would reflect that standalone revenue from standard
software sales ('software') would be recognised on an agency or
'net' basis where the margin earned on the contract would be
recognised as revenue with zero cost of goods sold. Other software
revenues, particularly where the Group has performed configuration
or customisation services, as part of the software sales agreement,
would most likely continue to be recognised on a principal basis.
Similarly, the Group has determined that third-party services
agreements resold on a standalone basis ('resold services'),
such
as vendor-provided maintenance support agreements would also be
changed to be recognised on an agent basis due to the similar fact
pattern of the transaction to that of software sales.
Such a change in policy would be accompanied by a programme of
system enhancements required to be able to accurately report on the
new basis. These changes, as required, will be allowed sufficient
time to be appropriately implemented in order that the reporting
under the new basis is as accurate as possible.
The Group estimates, without doing a detailed retrospective
contract by contract review, that the proposed potential changes in
policy would, with our current best estimate, have the following
impact on the Group's Financial Statements:
-- Revenue and cost of sales would decrease by the value of
revenue assessed as being recognised on an agency basis. Whilst the
work is not yet complete to determine the value for 2021, the total
value of the revenue categories under consideration for the change
in policy is estimated to be up to GBP1,800 million in 2021. We
estimate that the majority of that revenue in those categories will
be derecognised, leaving only the margins earned on the
transactions to be recognised as revenue.
-- Gross profit, operating profit, and profit before and after taxes will be unchanged.
These estimates are preliminary and subject to further
Management review, however, they provide an order of magnitude to
assess the future impact on reported revenues. These estimates are
for the total amount in these software and resold services revenue
categories as measured on a principal basis and include elements
that may, following Management review, continue to be recognised on
a principal or gross basis. The Group will continue to report, as
an alternative performance measure, all revenue recognised on a
principal basis as Gross Invoiced Income, to allow the reader of
the accounts to more accurately determine the linkage between
revenue and cash flows.
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) have been met to recognise a bill and hold sale. This is
determined by segregation and readiness of inventory and the review
and approval of all customer requests in order to assess whether
the accounting policy had been correctly applied to recognise a
bill and hold sale.
GBP281.9 million of product sold is 'held' by the Group for
'bill and hold' transactions as at 31 December 2021 (2020: GBP231.3
million).
3.3 Change in critical estimates and critical judgements
During the year, Management reassessed the critical estimates
and critical judgements.
Accounting for business combinations and valuation of
intangibles is no longer considered a critical estimate by
Management and has therefore been removed from the above disclosure
due to there being no material acquisitions made during the current
year. Accordingly, Management has concluded that accounting for
business combinations and valuation of intangibles should not be
included as a critical estimate.
Percentage of completion Services revenue recognition is no
longer considered a critical estimate by Management and has
therefore been removed from the above disclosure. The number of
contracts accounted for on this basis is reducing and forms a small
part of our overall contract base and Services revenues. Therefore,
it is no longer a major source of estimation uncertainty that has a
significant risk of resulting in a material adjustment within the
next financial year. Accordingly, Management has concluded that
percentage of completion Services revenue recognition should not be
included as a critical estimate.
Exceptional items was removed as a critical judgement as
Management no longer considers this to be a critical judgement due
to no exceptional items occurring in the year. Accordingly,
Management has concluded that exceptional items should not be
included as a critical judgement.
Technology Sourcing principal versus agent recognition has been
added as a critical judgement during the year as noted above at
3.2.1.
4 Segment information
The Segment information is reported to the Board and the Chief
Executive Officer. The Chief Executive Officer is the Group's Chief
Operating Decision Maker ('CODM'). The operating Segments remain
unchanged from those reported at 31 December 2020.
The Segmental reporting structure is the basis on which internal
reports are provided to the Chief Executive Officer, as the CODM,
for assessing performance and determining the allocation of
resources within the Group, in accordance with IFRS 8.25. Segmental
performance is measured based on external revenues, gross profit,
adjusted(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.
Segmental performance for the years ended 31 December 2021 and
31 December 2020 were as follows:
Year ended 31 December 2021
Central
North Corporate
UK Germany France America International Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Technology Sourcing
revenue
Gross invoiced income 1,581.5 1,427.7 481.4 1,869.2 112.8 - 5,472.6
Principal element on
agency contracts (115.1) (28.9) - (53.7) - - (197.7)
Total Technology Sourcing
revenue 1,466.4 1,398.8 481.4 1,815.5 112.8 - 5,274.9
Services revenue
Professional Services 154.6 273.8 38.0 77.5 8.5 - 552.4
Managed Services 327.6 348.6 134.0 18.6 69.7 - 898.5
Total Services revenue 482.2 622.4 172.0 96.1 78.2 - 1,450.9
Total revenue 1,948.6 2,021.2 653.4 1,911.6 191.0 - 6,725.8
Results
Gross profit 268.2 312.0 68.1 180.2 39.3 - 867.8
Adjusted(1) administrative
expenses (165.3) (174.2) (64.6) (149.2) (28.0) (23.7) (605.0)
Adjusted(1) operating
profit/(loss) 102.9 137.8 3.5 31.0 11.3 (23.7) 262.8
Net interest - (2.7) (0.8) (2.7) (1.0) - (7.2)
Adjusted(1) profit/(loss)
before tax 102.9 135.1 2.7 28.3 10.3 (23.7) 255.6
Amortisation of acquired
intangibles (7.6)
Profit before tax 248.0
The reconciliation for adjusted(1) operating profit to operating
profit as disclosed in the Consolidated Income Statement is as
follows:
Year ended 31 December 2021
Total
GBPm
Adjusted(1) operating profit 262.8
Amortisation of acquired intangibles (7.6)
Operating profit 255.2
Year ended 31 December 2021
Central
North Corporate
UK Germany France America International Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Other Segment information
Property, plant and
equipment 30.4 37.7 5.3 9.2 7.4 - 90.0
Right-of-use assets 12.5 77.2 17.4 15.0 16.0 - 138.1
Intangible assets 44.6 16.5 10.2 191.4 11.0 - 273.7
Capital expenditure:
Property, plant and
equipment 5.2 4.4 2.1 3.6 3.5 - 18.8
Right-of-use assets 3.0 52.3 8.0 4.1 2.8 - 70.2
Software 6.1 0.2 0.1 4.6 0.5 - 11.5
Depreciation of property,
plant and equipment 10.3 6.2 3.1 2.9 2.3 - 24.8
Depreciation of right-of-use
assets 3.2 31.7 4.4 4.8 6.5 - 50.6
Amortisation of software 5.6 0.6 0.1 1.2 0.2 - 7.7
Share-based payments 7.4 2.1 0.3 0.7 0.1 - 10.6
Year ended 31 December 2020
Central
North Corporate
UK Germany France America International Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Technology Sourcing
revenue
Gross invoiced income 1,504.4 1,316.2 526.4 996.3 110.5 - 4,453.8
Principal element on
agency contracts (176.4) (18.7) - (78.6) - - (273.7)
Total Technology Sourcing
revenue 1,328.0 1,297.5 526.4 917.7 110.5 - 4,180.1
Services revenue
Professional Services 129.1 233.8 35.7 19.6 7.2 - 425.4
Managed Services 316.3 345.0 110.7 7.2 56.6 - 835.8
Total Services revenue 445.4 578.8 146.4 26.8 63.8 - 1,261.2
Total revenue 1,773.4 1,876.3 672.8 944.5 174.3 - 5,441.3
Results
Gross profit 249.2 279.9 74.4 86.3 30.7 - 720.5
Adjusted(1) administrative
expenses (158.9) (167.3) (61.4) (72.3) (27.1) (27.1) (514.1)
Adjusted(1) operating
profit/(loss) 90.3 112.6 13.0 14.0 3.6 (27.1) 206.4
Net interest (1.1) (2.2) (0.6) (0.9) (1.1) - (5.9)
Adjusted(1) profit/(loss)
before tax 89.2 110.4 12.4 13.1 2.5 (27.1) 200.5
Exceptional items:
- costs relating to
acquisition of a subsidiary (0.7)
- redundancy and other
restructuring credit 0.2
- gain on acquisition
of a subsidiary 14.0
Total exceptional items 13.5
Amortisation of acquired
intangibles (7.4)
Profit before tax 206.6
The reconciliation for adjusted(1) operating profit to operating
profit as disclosed in the Consolidated Income Statement is as
follows:
Year ended 31 December 2020
Total
GBPm
Adjusted(1) operating profit 206.4
Amortisation of acquired intangibles (7.4)
Exceptional items (0.5)
Operating profit 198.5
Central
North Corporate
UK Germany France America International Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Other Segment information
Property, plant and
equipment 40.9 42.6 8.0 9.0 6.5 - 107.0
Right-of-use assets 12.8 61.5 18.8 15.5 21.0 - 129.6
Intangible assets 51.6 17.1 1.9 192.5 11.6 - 274.7
Capital expenditure:
Property, plant and
equipment 8.4 5.9 2.9 4.5 1.4 - 23.1
Right-of-use assets 3.8 16.7 10.5 - 17.6 - 48.6
Software 3.7 0.4 - - 0.3 - 4.4
Depreciation of property,
plant and equipment 11.1 6.6 2.2 1.5 2.6 - 24.0
Depreciation of right-of-use
assets 4.6 29.5 4.2 2.2 4.7 - 45.2
Amortisation of software 5.8 0.9 - 0.1 0.4 - 7.2
Share-based payments 5.5 1.7 0.2 0.5 - - 7.9
Charges for the amortisation of acquired intangibles (where
initial recognition was an exceptional item or a fair value
adjustment on acquisition) are excluded from the calculation of
adjusted(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 GBP651.7 million (2020: GBP556.3 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:
2021 2020
GBPm GBPm
Revenue by type
Gross invoiced income 5,472.6 4,453.7
Principal element on agency contracts (197.7) (273.7)
Technology Sourcing revenue 5,274.9 4,180.0
Services revenue
Professional Services 552.4 425.5
Managed Services 898.5 835.8
Total Services revenue 1,450.9 1,261.3
Total revenue 6,725.8 5,441.3
Contract balances
The following table provides the information about contract
assets and contract liabilities from contracts with customers.
31 December 31 December
2021 2020
GBPm GBPm
Trade receivables 1,239.8 1,065.1
Contract assets, which are included in prepayments 20.2 27.7
Contract assets, which are included in accrued
income 148.1 125.4
Contract liabilities, which are included in deferred
income 257.6 292.5
The prepayments balance per balance sheet of GBP119.6 million
consists of GBP20.2 million contract assets and GBP99.4 million
other prepayments.
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. Specific provisions are made against material or
high-risk balances based on trading experience or where doubt
exists about the counterparty's ability to pay. The expected credit
losses on Contract assets which are within prepayments and accrued
income are considered to be immaterial.
Significant changes in contract assets and liabilities
Contract assets are balances due from customers under long-term
contracts as work is performed and therefore a contract asset is
recognised over the period in which the performance obligation is
fulfilled. This represents the Group's right to consideration for
the services transferred to date. Amounts are generally
reclassified to trade and other receivables when these have been
certified or invoiced to a customer. Refer to note 2.11.1 for
credit terms of trade receivables.
Increase in trade receivables mainly in the UK, Germany and
North America segments is driven by growth in revenue as the Group
experienced a particularly strong fourth quarter of the year.
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 2021 of GBP0.6 million with a corresponding cost to tax of
GBP0.1 million for the year. As at 31 December 2021, the win fee
balance was GBP8.9 million. The Consolidated Income Statement
impact of fulfilment costs was a recognition of a net income in
2021 of GBP2.8 million with a corresponding tax of charge of GBP1.0
million for the year.
As at 31 December 2021, the fulfilment costs balance was GBP9.3
million. No impairment loss was recorded for win fees or fulfilment
costs during the year.
Revenue was accrued in the reporting period amounting to GBP28.7
million with a credit to foreign exchange of GBP6.0 million. 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
GBP161.4 million. 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 2021 and 31 December 2020 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
Two to Three
Less than One to three to Four years
one year two years years four years and beyond Total
GBPm GBPm GBPm GBPm GBPm GBPm
As at 31 December 2021 720.4 466.4 315.8 209.0 226.7 1,938.3
As at 31 December 2020 540.0 343.0 211.0 170.0 93.0 1,357.0
The average duration of contracts is between one and five years,
however some contracts will vary from these typical lengths.
Revenue is typically earned over these varying timeframes, however
more of the revenue noted above is expected to be earned in the
short term.
6 Income tax
a) Tax on profit from ordinary activities
2021 2020
GBPm GBPm
Tax charged in the Consolidated Income Statement
Current income tax
UK corporation tax 23.8 18.1
Foreign tax:
- operating results before exceptional items 45.1 36.4
- exceptional items - (0.7)
Total foreign tax 45.1 35.7
Adjustments in respect of prior years 0.2 0.4
Total current income tax 69.1 54.2
Deferred tax
Operating results before exceptional items:
- origination and reversal of temporary differences (4.2) (0.7)
- change in tax rates (3.3) (0.5)
- adjustments in respect of prior years (0.1) (0.6)
Total deferred tax (7.6) (1.8)
Tax charge in the Consolidated Income Statement 61.5 52.4
b) Reconciliation of the total tax charge
2021 2020
GBPm GBPm
Profit before income tax 248.0 206.6
At the UK standard rate of corporation tax of 19 per cent
(2020: 19 per cent) 47.1 39.2
Expenses not deductible for tax purposes 0.3 -
Non-deductible element of share-based payment charge 0.1 0.1
Adjustments in respect of prior years 0.1 (0.2)
Effect of different tax rates of subsidiaries operating
in other jurisdictions 16.2 14.3
Change in tax rate (3.3) (0.5)
Other differences 0.3 1.2
Overseas tax not based on earnings 1.6 1.4
Tax effect of income not taxable in determining taxable
profit (0.9) (3.1)
At effective income tax rate of 24.8 per cent (2020: 25.4
per cent) 61.5 52.4
c) Tax losses
Deferred tax assets of GBP0.6 million (2020: GBP0.3 million)
have been recognised in respect of losses carried forward.
In addition, as at 31 December 2021, there were unused tax
losses across the Group of GBP287.0 million (2020: GBP307.6
million) for which no deferred tax asset has been recognised. Of
these losses, GBP25.7 million (2020: GBP24.7 million) arise in
Germany and GBP261.3 million (2020: GBP282.9 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 unused tax losses relate
to other loss-making overseas subsidiaries.
d) Deferred tax
Deferred income tax as at 31 December 2021 and 31 December 2020
relates to the following:
Consolidated
Income Statement
and Consolidated
Statement
Consolidated of Comprehensive
Balance Sheet Income
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
Deferred income tax assets
Relief on share option gains 14.6 7.0 2.6 1.7
Other temporary differences 13.6 10.3 2.6 0.5
Revaluations of foreign exchange contracts
to fair value 0.7 1.0 (0.3) 0.6
Losses available for offset against future
taxable income 0.6 0.3 0.3 (1.0)
Gross deferred income tax assets 29.5 18.6
Deferred income tax liabilities
Revaluations of foreign exchange contracts
to fair value 0.5 1.0 0.5 (0.3)
Amortisation of intangibles 24.6 26.4 2.1 1.7
Gross deferred income tax liabilities 25.1 27.4
Deferred income tax charge 7.8 3.2
Net deferred income tax asset/(liabilities) 4.4 (8.8)
Disclosed on the Consolidated Balance Sheet
Deferred income tax assets 30.2 10.1
Deferred income tax liabilities (25.8) (18.9)
Net deferred income tax asset/(liabilities) 4.4 (8.8)
As at 31 December 2021, there was no recognised or unrecognised
deferred income tax liability (2020: 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. Following the departure of the UK from the
European Union, the Group's German subsidiaries' unremitted
earnings are no longer covered by a dividend exemption. As a result
of this situation, no dividend is currently planned until there is
more clarity regarding proposed changes in the bilateral treaties
between Germany and the UK.
e) Factors affecting current and future tax charge
The main rate of UK Corporation tax for financial year 2021 is
19 per cent, as enacted in the Finance Act 2020. The March 2021
Budget announced that a rate of 25 per cent will apply with effect
from 1 April 2023, and this change was substantively enacted on 11
March 2021. The deferred tax in these Consolidated Financial
Statements reflects this.
We are closely monitoring the Organisation for Economic
Co-operation and Development's Two Pillar Solution to Address the
Tax Challenges arising from the Digitalisation of the Economy,
which are expected to be enacted in 2022 with application from 1
January 2023. The accounting implications under IAS 12 will be
determined when the relevant legislation is available.
7 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.
2021 2020
GBPm GBPm
Profit attributable to equity holders of the Parent 185.3 153.8
2021 2020
GBPm GBPm
Basic weighted average number of shares (excluding own
shares held) 113.0 112.9
Effect of dilution:
Share options 2.2 2.0
Diluted weighted average number of shares 115.2 114.9
2021 2020
pence pence
Basic earnings per share 164.0 136.2
Diluted earnings per share 160.9 133.8
8 Analysis of changes in net funds
At At
1 January Cash flows Non-cash Exchange 31 December
2021 in year flow differences 2021
GBPm GBPm GBPm GBPm GBPm
Cash and short-term deposits 309.8 (17.1) - (7.5) 285.2
Bank overdrafts - (12.0) - - (12.0)
Cash and cash equivalents 309.8 (29.1) (7.5) 273.2
Bank loans and credit facility (121.2) 89.0 - 0.4 (31.8)
Adjusted net funds(3) (excluding lease
liabilities) 188.6 59.9 - (7.1) 241.4
Lease liabilities (137.5) 55.4 (71.5) 7.5 (146.1)
Net funds 51.1 115.3 (71.5) 0.4 95.3
At At
1 January Cash flows Non-cash Exchange 31 December
2020 in year flow differences 2020
GBPm GBPm GBPm GBPm GBPm
Cash and short-term deposits 217.8 84.9 - 7.1 309.8
Bank loans and credit facility (80.8) (42.5) - 2.1 (121.2)
Adjusted net funds(3) (excluding lease
liabilities) 137.0 42.4 - 9.2 188.6
Lease liabilities (116.8) 47.7 (65.3) (3.1) (137.5)
Net funds 20.2 90.1 (65.3) 6.1 51.1
9 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:
2021 2020
GBPm GBPm
Biomni Limited
Sales to related parties - 0.1
Purchase from related parties 0.6 0.7
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:
2021 2020
GBPm GBPm
Short-term employee benefits 2.8 2.2
Social security costs 0.4 0.4
Share-based payment transactions 3.9 2.2
Pension costs 0.1 0.1
Total compensation paid to key management personnel 7.2 4.9
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END
FR UVVORUWUOAUR
(END) Dow Jones Newswires
March 16, 2022 03:00 ET (07:00 GMT)
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