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Let’s face it - we need as much good news as possible with the share price floundering at sub £1.
I find it very unsettling the fact that there is no news on the Legacy side of the business - which after all is loss making part.
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LUCY TOBIN | THE TIPSTER
Share tip: Bang the drums for Computacenter, the quiet guy of IT
Lucy Tobin
Sunday December 11 2022, 12.01am, The Sunday Times
Computacenter isn’t one of tech’s flashy firms; it’s the quiet IT guy who companies rely on. It works alongside some of tech’s showier businesses, including Google, Amazon and Apple, but mostly does the drudge work.
The FTSE 250-listed Computacenter helps the likes of the NHS, Kellogg’s and governments worldwide run their cloud data centres, cybersecurity and networking, and general IT maintenance contracts.
Its two main revenue streams are “technology sourcing” — selling firms computers and related products — and services. Reselling software is fairly low-margin, but it has helped the company to build relationships that lead to more lucrative, long-term maintenance contracts and cybersecurity work.
That strategy has played its part in Computacenter booking 17 straight years of earnings-per-share growth. Revenues have had a strong run too — up 16 per cent in the first half of the year, with a big contribution from the US, where savvy acquisitions have helped turnover grow almost 50 per cent to $1.3 billion (£1.1 billion), driven by contracts from huge data centres.
Yet Computacenter’s share price has been pummelled. At £19.74, it’s well off the near-£30 seen in March. Why? In part it’s because the numbers have fallen from their Covid peaks, when remote working drove revenues higher.
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“After two exceptional years, Computacenter believes 2022 will be a year of modest [profit] growth,” it said in October.
There are also concerns that the recession might encourage companies to trim IT budgets. However, this cash-generative business still delivered growth throughout the last financial crisis and is strong in tech’s more resilient areas of cloud computing and cybersecurity.
Computacenter is sitting on net cash of about £194 million, and it is reliably generous to investors. During years when it hasn’t made acquisitions (and it now looks to be bedding down existing US deals rather than going on a shopping spree), it has regularly returned cash to shareholders, offering a special dividend roughly every two years over the past eight, on top of its ordinary annual payout.
There is also the possibility of a bid approach; the cheap pound has encouraged foreign rivals to buy a gaggle of fast-growing UK tech firms, including software makers Micro Focus and Aveva and cybersecurity specialist Avast. Computacenter could be next. Meantime, the shares are trading on just 11 times forward earnings and IT spending isn’t going to fade away. Buy.
RKT and ULVR updated within a week of each other and with similar stories - sales up at the slight expense of volumes due to price increases. Yet, the two shares reacted differenty with the city taking a harsher view on RKT which is contrary to my expectations.
RKT has much more exposure to OTC/Health brands which should be more resilient than food to economic headwinds. Sometimes this investing gameis bewlidering and there must be other factors - such as hedge fund involvement as there is with ULVR currently !
I am wondering if I am missing something here? The fundamentals for Program Management seem sound and the 31st October update seemed positive.
On the Legacy Insurance I am not sure if it is exposed through the mini budget fiasco with pensions/bonds and if there is a shortfall risk there which would explain the weakness. There is nothing so far to indicate that they are not on track for their 2024 objectives of $90m Operating profit and dividend reinstatement.
It appears Phoenix are sellers after their fall out with the Chair so maybe it is this overhang which is driving the price down, but all other instritutional shareholders are with the management.
Any thoughts from others?
Can someone clarify and apologies for my ignorance but in today's results it reports net FTTP gains of 331k and broadband declines of 89k. Does that mean that net net BT had 242k new FTTP/Broadband customers in Q2 or is the broadband number inclusive of the 331k FFTP customer gains? It isn't altogether clear.
There's a trading update tomorrow and there's clearly nerves today with the share price down 1.8% currently.
It's is about time that Mr Nath showed his confidence in turning this ship around and bought some shares - it was unforgiveable that he sold a tranch on taking up the post (and a complete failure on the Board/remuneration committee that they hadn't stipulated lock-ins etc. on appointment!)
https://news.sky.com/story/veteran-city-banker-lined-up-to-chair-gkn-automotive-spin-off-12732559
Barrieprov, I don't think that Shell has been £26.50 since July 2018.....
I'm reluctantly flaunting the copyright rules but here is the first half of the article:-
Europe’s largest activist investor Cevian Capital has slashed its stake in Vodafone as scepticism grows that the UK-based telecoms group will be able to reverse its sluggish performance amid a challenging economic backdrop.
Cevian built a significant but undisclosed position in the FTSE 100 group last year through shares and derivatives, becoming one of the 10 largest shareholders according to people familiar with the matter. It was pushing for management to simplify the group’s sprawling international portfolio and sell poorly performing divisions.
However the activist investor sold the vast majority of its stake by the end of June, the people said, due to changes in the economic environment including indications that interest rates would rise, reducing the chances Vodafone would be able to secure favourable deals.
Vodafone has shed nearly 25 per cent of its value since then.
The group is looking at a series of deals across Europe but other investors have expressed impatience over the pace of change and prospects of its flagging share price being revived.
“Would management change be taken well? I think it would,” said one top 15 investor adding that chief executive Nick Read, who joined Vodafone in 2001 and took the top job in 2018, has “been there for a long time?.?.?.?and he has not transformed the business”.
Peter Schoenfeld, another shareholder and founder of New York-based hedge fund PSAM, said investors are “frustrated and fed up with Vodafone’s poor stock performance” and that “it’s very much a show me kind of situation now”.
“Read has committed to a strategy that he has so far failed to fulfil,” he added.
Short positions in the company — used by investors to bet that the share price will go down — peaked in May, with 10 per cent of the stock out on loan, according to S&P Global Market Intelligence. This has since dropped below 2 per cent.
But others are still betting the stock will rise. French telecoms billionaire Xavier Niel has built a 2.5 per cent stake in the group and is angling for a shake up.
Recent activity suggests Read is making good on his ambition to pursue deals. In August, Vodafone agreed to sell its Hungarian business for $1.8bn and earlier this month confirmed it was in advanced talks with CK Hutchison, owner of Three, to combine their UK businesses and create the biggest mobile operator in Britain. It also announced a deal to buy MasMovil’s telecoms assets in Portugal, and hired bankers to help look at selling its broadband business in Spain.
The article continues....
Slightly concerning article in the FT 15th Oct (I've been away for over a week so apologies if this has been highlighted already) - its shows that I am not alone in questionning Read's record in VOD and their appartent lack of speed in transformation of the business! There are some on this board who won't have a bad word said against him but we are getting to a point where he's had enough time to implement the change and debt reduction needed.
https://www.ft.com/content/4be57a17-216f-43b0-b616-c972266f39bc
Can anyone access and share the full article please?
Personally I don't hold too much credence by this column but I am sure that with strong US in roads for CCC that the likes of Mr Dell must be taking note.....
Software group Computacenter is ready for a reboot
Wednesday October 12 2022, 12.01am, The Times
London’s software sector has not been short of takeover interest — see the proposed buyout of Aveva and recent delisting of Avast. FTSE 250 constituent Computacenter supplies rather than creates the technology but it also has all the hallmarks of a takeover target.
The Hertfordshire-based group’s shares trade at a substantial discount to its own long-running average and international peers, the business is debt-free, highly cash-generative and has already made good inroads into the vast US corporate IT services market. Those attributes and a weak pound could make the group alluring for a larger international rival.
A 36 per cent fall in the shares this year marks the reversal of a stellar re-rating since the March 2020 stock market crash. An enterprise value of 5.6
Short seller on this, pushing it south.
I expect continued progress across the board but maybe not at pandemic growth levels. For me, they are still a buy at these levels.
Extremely pleased to see the push into the Indo- Asia sub- continent here:-
https://www.thehindubusinessline.com/info-tech/computacenter-to-hire-900-employees-by-december-expand-footprint-in-india/article65754747.ece/amp/
Tim V, Looks like your portfolio manager played a blinder...I'd keep hold of them!
It's times like these I wished I'd someone like them to listen to when your heart is shouting louder than your head:-)
Like many on this board I am heavily invested in SN and can see the potential long term BUT this statement is almost down beat FROM IT's NEW CEO!!? He should be polishing this thing to gain confidence in the city and some share price momentum instead of selling his first tranche of shares given like they are some hot potato.
What about some news on steps to open up the Malaysian factory which should improve efficiencies? No, just ambiguous statements about supply chain and executional challenges. We're adults, we can take it...just tell us the facts!
What about some news on post pandemic bounce back in joint replacement procedures?
You have to spoon feed the city, not leave them to fill in the gaps......soooo frustrating.
SN need to get slicker in their spin and news updates in between the scheduled RNS's!!
Dan, Very droll...magic wand (you're a comedian) but perhaps you can give some analytics and say how long you think you should pay one of the most highly rewarded CEO's in the FTSE100? n my book 4 years of share price declines is enough. Regarding the sum of the parts conversation, there was a very good thread a couple of months ago where it was generally well argued that the sum of the parts is significantly more than the current price. Why else would you think we've seen 2+ major investments from activist shareholders.
You'd be forgiven for forgetting that conversation - it was the one constructive one that took place on this board amongst the 30-40 pages of inane Friday close predictions!
Beached whale pretty much sums it up - no-one can say I have been impatient as I've held for over 10 years but Nick Read's deal making has been far from impressive and it fundamental that we need to merge and cut overheads.
This company needs to be broken up and the parts sold off IMO,as management constantly come up with some reason why the company has under-performed...a sign that the beast is too unwieldy.
The results throw up some very concerning figures if you compare some of the KPIs for FY 22 to Q1/23 - the Germany trend is worrisome.. only 3 months ago Germany was growing at 1.1% and is now declining by 0.5% but other KPI's get hidden by the comparison to the like for like quarter when it should look at quarter on quarter.
For example MPesa users have dropped from 52.4m users at year end to 49.7m now which is >5% drop!
African data user have dropped by 1.9m to 88m. I know Europe is the biggest market but if we can't show better growth that this when they've just put up prices by 9.3% then its clear their cost base is out of control!
Newtrader87, appreciated. It is a good article.
I am not a Times subscriber, but if anyone who is can copy/paste the article on the BB I promise to pay it back down the line if an article comes up in The Telegraph! Thanks!!
https://www.thetimes.co.uk/article/glaxo-can-provide-a-shot-in-the-arm-c7srfmb3s