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Computacenter hamstrung by UK contract shortfall

The IT service provider's performance on the continent was undermined by a lacklustre showing at home.
March 14, 2017

The steep decline in pre-tax profit for Computacenter's (CCC) full-year figures was attributable to a £42.2m gain on the sale of subsidiary company RDC in the previous financial year. The IT service provider benefited from reduced amortisation charges and a reversal of a fair value adjustment, but adjusted profit was basically flat at £86.4m as improved trading in both Germany and France was offset by a disappointing showing in the domestic market.

IC TIP: Buy at 757p

Despite improving revenue streams in the second half, margins were under pressure at the group's UK operations throughout, leading to a 21 per cent reduction in adjusted operating profit. Timing issues played a part, with a number of significant projects in both managed services and professional services finalising in the latter stages of 2015, although the former segment won fewer new business contracts through the year than anticipated.

Demand is strengthening in Germany, highlighted by significant services growth and improved margins at the supply chain business, complemented by a shift of the business mix into cloud computing and networking. The end result was a 28.3 per cent rise in statutory profit to €46.2m (£40.4m) at constant currencies.

Broker Investec gives adjusted pre-tax profit and EPS of £90.5m and 56.4p for the 2017 year-end (from £90.5m and 56.4p in 2016).

COMPUTACENTER (CCC)
ORD PRICE:757pMARKET VALUE:£928m
TOUCH:755-757p12-MONTH HIGH:861pLOW: 669p
DIVIDEND YIELD:2.9%PE RATIO:14
NET ASSET VALUE:349p*NET CASH:£145m

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20122.8164.832.915.5
2013 †3.0750.523.217.5
2014 †3.1176.440.519.0
20153.06126.883.921.4**
20163.2587.152.922.2
% change+6-31-37+4

Ex-div: 11 May

Payment: 9 Jun

*Includes intangible assets of £76.3m, or 62p a share

**Excludes special dividend of 71.9p a share

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