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A poor start to the year in the UK and the expansion of its services arm saw profits fall at Computacenter. Its shares slipped 13 per cent, baffling chief executive Mike Norris. "The results are well publicised - there should be nothing surprising in there," he said, referring to July's trading statement.
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Operating profits in the UK fell 21 per cent to £8.9m - despite a 5.5 per cent revenue increase - on investment and restructuring costs, but Mr Norris points out that "the transfer to strategic services comes at a cost."
The market may also have been spooked by the underlying weakness in its European product businesses, which was masked by the strength of the euro - PC revenues in Germany, for example, slipped 7.7 per cent at constant currencies.
But the impact of price pressure on Computacenter's traditional business has been apparent for many years, and the decision to shift towards services is starting to compensate. Low-margin distribution now accounts for less than 30 per cent of sales, and the services business grew strongly in all regions.
Broker Cazenove expects flat underlying full-year pre-tax profits of £43.3m and EPS of 20.3p (up from 18.6p).
COMPUTACENTER (CCC) |
||||
|---|---|---|---|---|
| ORD PRICE: | 118p | MARKET VALUE: | £180.6m | |
| TOUCH: | 117-120p | 12-MONTH HIGH: | 215p | LOW: 110p |
| DIVIDEND YIELD: | 6.9% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 179p | NET CASH: | 35% | |
| Half-year to 30 Jun |
Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 1.16 | 12.8 | 4.8 | 2.5 |
| 2008 | 1.25 | 11.0 | 5.3 | 2.7 |
| % change | +8 | -14 | +10 | +8 |
Ex-div:17 Sep Payment:16 Oct |
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The market's reaction to specific areas of weakness looks overdone, and Mr Norris believes that "forward visibility is better than ever". So, on a forecast PE ratio of six, the shares rate good value.
Last IC view: Fairly priced, 187p, 11 March 2008.
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
