Computacenter hits the right keys

A good set of results for Computacenter (CCC) wasn’t unexpected, given that the company released several earnings upgrades over the last year. But investors should still be pleased with confirmation of robust growth across key metrics. The IT services provider boosted the dividend on the back of its performance, which saw revenue climb by a quarter and pre-tax profit jump by a fifth, as it delivered its seventeenth consecutive year of growth in earnings per share.  

 “Our acquisitions in North America and Western Europe have materially increased our total addressable market,” said chief executive Mike Norris.

This was demonstrated in the results. Acquisitions made since the start of 2020 delivered £1.1bn of revenue and £13.9mn of adjusted profit before tax, significant jumps on the prior year figures of £233mn and £3.3mn. The North American Pivot acquisition, a technology buy which completed at the tail-end of 2020, drove a 114 per cent jump in organic revenue in that region as it contributed £968mn to technology sourcing sales and $105mn (£80mn) to services sales in its first full year as part of the business.

The company’s German market, with sales of £2.02bn, remains its biggest revenue contributor, followed closely by the UK on £1.95bn) and North America with £1.91bn. Both the German and UK markets benefited from major industrial customers returning to a form of operational normality as the Covid-19 outlook improved. Performance in France was a notable disappointment in a year of growth across other regions. Industrial clients contributed lower volumes than expected, technology sourcing order volumes underperformed, and the loss of the largest managed services contract all contributed to a 3 per cent fall in revenue to £653mn.

Indeed, the impact of Covid-19 was seen across the business. Remote working diverted revenues to Computacenter's high-margin enterprise product. Pandemic-related discounts were reduced. Costs, encouragingly, were below pre-pandemic levels albeit they are expected to increase with offices reopening.

Management warned that the first half of 2022 will face off against a tough comparator due to the way that an “abnormally high” amount of profits were recorded in the first six months of 2021. That is something to keep an eye on, but with the shares trading on a consensus 17 times forward earnings, which looks undemanding given this performance and we see nothing here which would force a material change in our recommendation. Buy.

Last IC View: Buy, 3,089p, 09 Sep 2021