Investors shouldn't be too surprised by disappointing third-quarter numbers at Computacenter (CCC). Management had repeatedly warned that a “challenging comparison” would make it difficult to maintain growth in the three months to September and acknowledged it had “set a high bar to outperform in 2018” when it announced its 2017 full-year results. But that didn't stop disappointment in a 3 per cent decline in like-for-like sales – the shares fell by nearly a fifth following the announcement.
But that shouldn't take away from the fact that the group’s performance in recent years has been impressive. Management upgraded profit expectations twice in 2017, before reporting a 27 per cent increase in revenues in the third quarter. Momentum was maintained in the first half of 2018: the group beat first-quarter expectations and then upgraded forecasts again at the interims. However, the momentum appears to have fed into outsized expectations for the group, which would explain such a large drop in the share price following the announcement.
As expected, the group failed to maintain the particularly strong growth in its French business, while the UK division reported a 9 per cent drop in sales. However the latter should deliver strong growth for the full year after winning two large technology sourcing contracts in the first half of the year.
Share price reaction aside, the group’s prospects appear unchanged. Management maintained expectations for the full-year results, forecasting improved growth in the final quarter of the year, even before the group’s two recent acquisitions are taken into account. Analyst estimates remained unchanged following the announcement. The consensus for adjusted EPS in 2018 is 74.3p, according to Bloomberg.
