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Computacenter slides on a weaker UK outlook

The IT services and equipment group posted solid underlying growth but warned of challenges ahead.
March 14, 2016

Shares in Computacenter (CCC) slid 5 per cent after management warned that profit would probably fall in the first half of 2016 and ruled out a speedy recovery in France. But ignore currency movements and revenue rose, driving the IT services and equipment provider's underlying pre-tax profit up a tenth to £86.9m in 2015.

IC TIP: Buy at 789p

Underlying sales climbed more than 5 per cent in both the services and supply chain segments. The German business was the star: it cashed in on strong demand for security, networking and data centre equipment and inked managed services contracts with new automotive, aviation and financial services customers. Management also refocused the company's French operation, narrowing its underlying operating loss by four-fifths to €2.2m (£1.7m). But a slowdown in the key UK division led it to forecast weaker revenue growth there in 2016.

Computacenter netted about £42m from the sale of recycling subsidiary RDC. That explains the sharp rise in statutory earnings. Management returned some of the windfall to investors, meaning it has now paid out about £242m in three years. But it still thinks strong cash generation could drive net funds to record levels in 2016. Broker Investec expects adjusted pre-tax profit of £88.3m in 2016, giving EPS of 54.8p (from £86.9m and 53.4p in 2015).

COMPUTACENTER (CCC)
ORD PRICE:789pMARKET VALUE:£968m
TOUCH:789-791p12-MONTH HIGH:885pLOW: 665p
DIVIDEND YIELD:2.7%PE RATIO:9
NET ASSET VALUE:295p*NET CASH:£121m

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)†
20112.8572.141.015.0
20122.8164.832.915.5
20133.0750.523.217.5
20143.1176.440.519.0
20153.06126.883.921.4**
% change-2+66+107+13

Ex-div: 23 Mar

Payment: 5 Apr

*Includes intangible assets of £81.5m, or 66p a share

**Excludes special dividend of 71.9p per share

†Dividends per share of 19.6p in 2013 and 19.8p in 2014 when adjusted for share consolidation in February 2015