Computacenter Regulatory News (CCC)

11 Mar 2008 07:02

Computacenter PLC11 March 2008 COMPUTACENTER PLC Preliminary Results Announcement Computacenter plc, the European IT infrastructure services provider, todayannounces preliminary results for the twelve months ended 31 December 2007. FINANCIAL HIGHLIGHTS Financial performance • Group revenues up 4.8% to £2.38 billion (2006: £2.27 billion) • Adjusted* profit before tax up 12.3% to £42.7 million (2006: £38.0 million) • Adjusted* diluted earnings per share up 34.1% to 18.5p (2006: 13.8p) • Final dividend of 5.5p per share, total dividend 8.0p (2006: 7.5p) • Net borrowings before customer-specific financing of £16.2 million (2006: net funds of £29.4 million) Statutory performance • Profit before tax up 27.7% to £42.1 million (2006: £32.9 million) • Diluted earnings per share up 67.0% to 18.2p (2006: 10.9p) • Net borrowings of £79.8 million (2006: net funds of £10.8 million) OPERATING HIGHLIGHTS • First Group revenue growth since 2003 • UK business enters 2008 with a record contract base and a strong pipeline of new business across market sectors • Best ever performance from Computacenter Germany since acquisition with growth across both product and services • Significant progress achieved in France driven by key management initiatives Mike Norris, Chief Executive of Computacenter plc, commented: "Computacenter made encouraging progress across the Group in 2007. The strongperformance in the UK in the second half of the year and the gains madethroughout the course of 2007 in Germany and France, allow us to look to thefuture with confidence. "We have for some years been pursuing a strategy of strengthening our servicescapabilities, restructuring the cost base of our product supply business,increasing our mid-market penetration, and upgrading our sales capabilities. Webelieve that we have made, and are continuing to make, strong progress in all ofthese areas." * Adjusted for exceptional items and amortisation of acquired intangibles. For further information, please contact: Computacenter plc.Mike Norris, Chief Executive 01707 631 601Tessa Freeman, Investor Relations 01707 631 514www.computacenter.com Tulchan Communications 020 7353 4200Stephen Malthousewww.tulchangroup.com High resolution images are available for the media to view and download free of charge from www.vismedia.co.uk BUSINESS REVIEW Executive summary There were many encouraging aspects to Computacenter's performance in 2007. Mostsignificantly, the Group delivered a 34.1% increase in adjusted* dilutedearnings per share (adjusted* EPS) to 18.5p (2006: 13.8p). This was underpinnedby a strong underlying improvement in adjusted* profit before tax, up 12.3% to£42.7 million (2006: £38.0 million). The main contributors to profit growth wereour European operations and Germany in particular. Overall Group sales increased4.8% to £2.38 billion (2006: £2.27 billion). Even allowing for the modest impactof acquisitions, this is the first time in several years that Computacenter hasachieved revenue growth, and reflects the success that we are having in multiplemarket sectors. On a statutory basis, Group profit before tax increased 27.7% to £42.1 million(2006: £32.9 million) and diluted earnings per share grew 67.0% to 18.2p (2006:10.9p). Efficient use of capital is central to our strategy of delivering shareholdervalue. It was with this in mind that we returned £74 million of cash toshareholders in 2006 and, more recently, have begun to use the strength of ourbalance sheet to purchase shares in the market for subsequent cancellation. Thisprogramme began in November and by year-end, 1.5 million shares, representing0.9% of the issued share capital, had been purchased for this purpose. This wasin addition to the purchase of 4.3 million shares by the Computacenter EmployeeShare Ownership Plan to satisfy awards made under the Group's share schemes. Therepurchase programme has continued into 2008 and as at 10 March a further 3.5million shares had been purchased. The strong balance sheet continues to serve Computacenter well. At year-end, netborrowings prior to customer-specific financing were £16.2 million, after cashacquisition expenses during the year of £32.6 million and £11.3 million spent onshare purchases. The Board is pleased to recommend a final dividend of 5.5p pershare, bringing the total dividend for the year to 8.0p (2006: 7.5p). Theincreased dividend is consistent with our stated policy of maintaining the levelof dividend cover within the target range of 2 - 2.5x. The dividend will be paidon 12 June 2008 to shareholders on the register as at 16 May 2008. Our performance in Germany, after a lacklustre 2006, was the highlight of theyear. Adjusted* operating profit grew substantially, from £2.6 million in 2006to £10.4 million, partly due to a substantial reduction in losses associatedwith two shared datacentre services contracts announced last year and partly dueto underlying improvements in the business. This is a record performance forComputacenter Germany. Undoubtedly we were assisted by stronger marketconditions, but this should in no way detract from the achievements of theGerman management team, who have been particularly successful in extending ourpenetration of the datacentre and networking markets. There is still scope toimprove the service margins in our German business and the prospects for furthergrowth are encouraging. The French performance also improved strongly in 2007, with operating lossesreducing to £1.8 million (2006: £6.5 million, prior to £5.0 million ofexceptional charges). Computacenter France remains heavily dependent upontraditional lines of business, and in particular, the reselling of desktop andlaptop systems. Nonetheless, our efforts to increase the services component ofthe business mix there are bearing fruit, with services share of revenue growingfrom 11.1% in 2006 to 12.8% in 2007. The management team in France has beenstrengthened considerably in recent years and the benefits of this areincreasingly evident. We expect the performance of Computacenter France tocontinue to improve, although the business remains heavily dependent on a smallnumber of key contracts and further effort is needed to broaden the customerbase. There is also encouragement to be derived from the UK performance. Whilstadjusted* operating profit decreased to £33.1 million (2006: £37.4 million),this conceals some significant underlying improvements. Second half performancewas considerably better than the first half and also ahead of the comparableperiod in 2006. This arises from the fact that we achieved substantial servicescontract base growth during the second half of the year, enabling us to recoverfrom the 2006 contract losses and to enter 2008 with a considerably strongerpipeline of business. Our strategy in the UK has led us to focus increasingly on datacentreopportunities, and we made useful further progress here in 2007. The acquisitionof Digica was intended to accelerate this development and this business isperforming well. In 2007, sales of personal systems accounted for only 31% ofour UK revenues, down from over 40% in 2004, demonstrating just how muchprogress Computacenter has made in shifting its business mix towards theless-commoditised end of the market. As stated previously, it is not possible to draw any meaningful conclusionsabout current trading until the first quarter has been completed. Like manycompanies we are concerned that the current credit crisis will have a negativeeffect on market conditions, however to date there is no obvious sign of thismaterialising. The strong performance in the UK in the second half of last yearand the gains made throughout the course of 2007 in Germany and France, allow usto look to the future with confidence. We have for some years been pursuing astrategy of strengthening our services capabilities, restructuring the cost baseof our product supply business, increasing our mid-market penetration, andupgrading our sales capabilities. We believe that we have made, and arecontinuing to make, strong progress in all of these areas. Due to his new commitment at Northern Rock, Ron Sandler resigned asNon-Executive Chairman and from the Computacenter Board on 18 February 2008. Asearch to find a permanent replacement led by our senior independentNon-Executive Director Cliff Preddy is currently in progress. We would like to thank Ron Sandler for his contribution to Computacenter andwish him every success. As ever, the credit for the company's performance belongs to the staff. Theircommitment and hard work throughout the year has been exemplary, and we offerthem our wholehearted thanks. * Adjusted for exceptional items and amortisation of acquired intangibles.Adjusted operating profit is stated after charging costs on customer-specificfinancing. Operating statement Group strategic performance In 2007, Computacenter made further progress in each of the five strategicinitiatives aimed at ensuring long-term earnings growth. Accelerating the growth of our contractual services businesses Our contract base, comprising contract terms typically of five years, is ourmost predictable source of revenue and profit. Excluding acquisitions, theGroup's contract base grew a pleasing 15% year on year at constant exchangerates, with particularly strong UK growth in the second half of the yearresulting in a full recovery from that operation's contract losses of 2006. Anumber of high-value long-term contracts were secured, including a new Groupcontract with BT, under which Computacenter takes responsibility for fulfilment,support and related services for BT's 112,000 global desktops across 54countries. This is the largest services contract negotiated by Computacenter todate. Broadening the range and depth of our services activities Across the Group, we endeavoured to enhance our capability in those areas whichcommand higher margins and where specialist expertise is in high demand. Inparticular, Computacenter sought to extend its capability and its marketpenetration in the enterprise service areas of networking and datacentre hostingand support. To that end, two significant developments in 2007 were theacquisition of Digica, a datacentre hosting and support company, and Allnet, anetwork integration and cabling company. Together, these acquisitions have added£23 million to the Group's contract base. Extending our presence in growth markets, and in particular the medium-sizedbusiness segment. At the smaller-scale end of our client base, our push into the growingmid-market continued, particularly in the UK, where we invested an additional £4million through the 2007 income statement, mainly in recruitment of new salesstaff. We are gradually building a presence in this market, with approximately1,000 new customers trading with us in 2007, and look forward to the return onthis investment in coming years. In addition, our investment in the growingmarket for datacentre services yielded a number of important new managedservices contracts and led to increased utilisation of our professional servicesstaff, lowering operating costs. Improving the efficiency of our operations by deploying shared servicesfacilities across our customer base. We continued to focus on reducing operational costs and improving customerservice through the more effective use of shared resources and tools for servicedelivery. In the UK we have established the Shared Services Factory (SSF), astandard set of tools, facilities and processes that ensures we deliver servicesthat consistently meet customer requirements at low cost. One component of theSSF is our new purpose-built International Service Centre in Barcelona. Progressis being made with similar shared resource initiatives in Germany. Improving our competitiveness by reducing the cost of sale in our product supplybusiness. We continued to implement improved business controls relating to productpurchasing and supply and to invest in our e-commerce systems in order tostreamline the supply business and reduce operating costs. UK UK revenues grew by 5.9% to £1.36 billion (2006: £1.28 billion), driven bystrong sales in the datacentre services arena and an improvement in productrevenues. Adjusted* operating profit declined 11.6% to £33.1 million (2006:£37.4 million), partly due to the 2006 contract losses previously reported andthe renegotiation of our relationship with BT. Services revenues, excluding the effect of acquisitions, declined 3.5%, withprofessional services growth partially compensating for a decline in contractualrevenues. However, a strong H2 recovery in the UK services contract baseresulted in a small contract base increase for the year as a whole, whichtranslates to an 8.5% increase in the year when taking account of product supplyembedded within services contracts. We therefore enter 2008 with a businesspipeline that more than compensates for the losses of 2006. During the year, we began to see the results of our strategic initiative aimedat greater use of shared service facilities, tools and processes. Customers areincreasingly choosing to broaden their relationship with Computacenter due toour ability to make cost and service commitments based on the use of repeatableprocesses and embedded best practice. Our investment in this area led to usachieving BSI certified accreditation to the ISO/IEC20000 standard for ourcentralised Service Desks, including the integrated operations of our Digicaacquisition. This shared services approach helped secure a number of managed servicescontracts. These include a five-year contract with Marks and Spencer worthapproximately £19 million in service revenues and covering product supply andsoftware licensing, the management of all infrastructure moves and changes,desktop and server support, managed security, asset management and technologydisposals. We enjoyed particular success in datacentre services. The strong performance inthis area reported in the first half continued through the rest of the year andwas a key driver of a 19% year-on-year increase, excluding the effect ofacquisitions, in professional services revenues. Our server virtualisation andconsolidation solutions were in particular demand due to the benefits of reducedcosts and increased manageability, as well as related environmental benefits,which include a significantly reduced power consumption and carbon footprint.Indeed we won a Supplier Innovation Award from BT for our work on virtualisingand consolidating a number of their UK datacentres, through which we cut theirpower consumption by 5,000KW and their carbon footprint by 85%, as well asreducing their operational expenditure considerably. In the managed datacentre segment we saw some recovery following a disappointingstart to the year. Our managed datacentre and hosting business, Digica, acquiredin January, performed well in H2, with revenue growth of 11.1% over H1 and animproved operating profit ahead of expectations. Our datacentre services were in particular demand in the financial services andtelecoms sectors. An important technology solutions win was with Norwich Union,where we worked with the customer to consolidate and virtualise its environmentat two datacentres, as well as deploying a new server operating system andhardware. The project has helped simplify IT management and reduce serverprovisioning time from six weeks to less than one. We also secured a contractwith a major financial organisation for a UNIX server architecture redesign andinfrastructure replacement, enabling the customer to expedite its deployment ofnew customer products and so reduce time to market. The acquisition of Allnet in April, a leading provider of network integrationand structured cabling services, has doubled the size of our business in thissector and we believe will enable us to win increased market share in thehigh-growth areas of converged IP based networks and unified communicationsprojects. The success of our continuing investment in our software services business ledto 18.7% software revenue growth. In particular, we captured an increased shareof the high value Microsoft licensing market, with our UK market share reachinga record 9%. A significant win was with a major bank, for which we will beproviding managed procurement and software licence management services. Lookingforward, we expect to see further growth and increased return from our softwarebusiness. Growth in technology solutions projects was a significant driver of relatedproduct sales, where we saw 4.0% growth in sales of networking, server andstorage technology. Sales of personal systems remained broadly flat. There were indications of customers turning away from purchasing direct fromvendors in favour of vendor-independent services and solutions providers such asourselves. Whilst we welcome this as beneficial to organisations looking forlong-term value and service flexibility from their IT partner, it is still tooearly to say whether this indicates a long-term trend. Our continuing success in implementing improved business controls relating toproduct purchasing and supply contributed towards an increase in product grossmargins from end-user sales. We also continued to lower the cost of sale throughuse of a lighter-touch sales model for product-only clients, enabled through ourdeployment of improved e-commerce systems. Significant product supply wins include technology benchmarking and desktopsupply for Leeds City Council, which also includes disposals management via RDC.In addition, we secured a nationwide technology refresh contract withconstruction company Morgan Sindall, covering supply, asseting, configurationand installation services. Our remarketing and recycling arm, RDC, had a good year with a strong finish.Increased business interest in environmental services contributed towards athree-fold growth in profits, driven by a 22% increase in service revenues and36% growth in remarketing revenues. Continuing the trend of recent years, our UK trade distribution arm, CCD, whichoperates in a particularly competitive market, saw sales decline 6.7%. Howeverour focus on margin generation continues to bear fruit, leading to an increasein gross profit. The UK business enters 2008 with a record services contract base and a strongpipeline of new business. This provides a firm foundation on which to buildrevenue and profit growth in 2008 and beyond. Germany Computacenter Germany enjoyed strong growth, with revenues increasing 8.2% to£708.6 million (2006: £654.7 million). More significantly, adjusted* operatingprofit grew markedly to £10.4 million (2006: £2.6 million), albeit aided by asubstantial reduction in the losses from the two shared datacentre servicescontracts. This is, by some distance, the best profit performance sinceComputacenter acquired the CompuNet business from GE at the beginning of 2003. Revenue growth was across the German business. Services revenues increased by13.1% and product revenues by 5.8%. This meant our business mix was broadlyunchanged, with around 35% of our revenues coming from services, and 65% fromproducts. Growth came from the return on the significant investment we have made inservices and solutions over the last few years, particularly on developing ourmanaged services and consulting businesses. Our managed services contract basegrew by 22.8% in local currency, including contracts with embedded productsupply, and our professional services revenues grew 9.5%, resulting in a verypleasing 39.7% revenue growth over just two years. Networking and datacentregrowth also helped boost product sales through the related supply of servers andother enterprise products. In addition, we are seeing the benefits of a significant restructure of oursales organisation, which has led to a more diversified customer base andenabled us to grow business in the medium-sized enterprise sector. An upturn in the German IT market, driven by general economic factors, furtherhelped financial performance. In addition, we benefited from a customer trendaway from contracting out comprehensive outsourcing deals to large enterpriseservice providers and towards the kind of selective managed services contractsin which we specialise. Growth was achieved with no significant impact on indirect expenses, enablingthe additional volumes and margins to contribute directly to profit. This wasaided by the implementation of new cost control mechanisms during 2006. We are increasingly recognised in the German services market, with IDC listingus as one of the country's top ten IT services providers. Significant winsincluded a three-year contract with BMW Group for the supply and maintenance ofall network equipment in Germany and a datacentre outsourcing contract withImmobilienscout 24, which operates Germany's largest Internet real estatemarketplace. We also secured a four-year managed services contract with leadingchemicals manufacturer Solvay, in which we take responsibility for managing thecompany's desktops and Wintel servers, as well as providing helpdesk servicesacross Germany, Austria and Switzerland. Service margins continued to be under pressure and we began a number ofinitiatives in the first half to improve this area. As a result, we sawsignificant margin improvement towards the end of 2007 and expect theseinitiatives to bear further fruit in years to come. Our product business enjoyed growth in all areas in 2007. Performance wasparticularly strong in our security products business, which grew 23.7% andreflected organisations' increased concern over data security. Other majorcontributors to sales growth were our unified communications and networkingactivities. Sales of personal systems increased by 14.2%, reversing a longstanding trend ofrevenue decline in this segment, which was largely attributable to continuingunit price deterioration. A notable success was the award of a three-year contract for the supply ofdesktop, laptop and PDA equipment, with management of installations, moves andchanges, to healthcare services provider B.Braun. Our remarketing and recycling arm, RDC, enjoyed sales growth and anotherprofitable year in Germany, with two major wins from 2006 making a significantcontribution to remarketing margins. The relocation of RDC's new sales andservice delivery team at the German Operations Centre at Kerpen is expected tohelp grow RDC business in existing Computacenter accounts. We expect the economic situation in Germany to support further growth in 2008and are confident that the business is well placed to make further contributionsto Group profits in years to come. France 2007 saw a fundamental improvement in the performance of our French business.Operating loss reduced 73.0% to £1.8 million (2006: loss of £6.5 million priorto exceptional charges of £5.0 million). This was despite a revenue decline of7.0% to £285.7 million (2006: £307.3 million), due largely to a challengingproduct market. This dramatic improvement was brought about by a number of keymanagement initiatives. In order to address the issues of a highly competitive product marketplace and a15% average price decline in product prices, we adopted a more commerciallyinnovative and selective approach to the provisioning of hardware. This wassupported by the introduction of a new reward scheme for our sales force at thestart of the year and by a new focus on the growth of our regional business. Theresult was improved gross profit in the product business, despite theanticipated 8.8% fall in product revenues. A similarly selective approach in our services business, together with asharpened focus on quality of service and customer satisfaction, yielded a 7.1%improvement in services revenues and a substantial 24.1% increase in grossprofit. The continuing success of our maintenance services also contributed to theimproved financial performance. Our maintenance business recorded a 19% increasein revenue and a substantial increase in gross profit, despite an overall Frenchmarket for these services that shows zero growth. The cost of running the business was again managed down, with operating costsfalling by 4.2%. The second half of 2007 saw Computacenter France record a profit for the firsttime since 2001. Significant renewals included a five-year extension of ourglobal hardware and maintenance service for a leading medical services company,a four-year renewal of our third largest managed services contract with a majorpharmeceuticals company and a four-year extension of our product supply contractwith the CEA, the French Government's Atomic Research Authority. New customer wins include a four-year product supply and maintenance contractwith the Paris Mayor's office, Marie de Paris, worth £17 million, and athree-year contract to provide most of the Northern French hospitals, GroupementInter-Hospitalier du Nord, with services including product specification,installation, helpdesk and support worth up to £24 million. 2007 represents a step change in the performance of our French operation. Whilstmuch remains to be done, particularly in broadening the customer base, we havean opportunity to build on this progress in 2008 and beyond. Benelux Our Benelux operation recorded a reduced operating loss of £44,000 (2006: lossof £191,000). The small loss was principally due to increased investment in theLuxembourg sales organisation. Product supply activities recorded an improved performance, both fromtraditional volume business as well as new enterprise solutions business. Theprofit contribution from managed services also grew significantly on the back ofhigh IT resource demand, particularly in Belgium. Major wins included enterprise solutions projects at CMI, Pioneer Europe, andBDO Atrio in Belgium as well as a unified communications project at Luxpet inLuxembourg. *Operating profit is adjusted for exceptional items and amortisation of acquiredintangibles and is stated after charging costs on customer-specific financing Adjusted operating profit Management measure the Group's operating performance using adjusted operatingprofit, which is stated prior to amortisation of acquired intangibles andexceptional items, and after charging finance costs on customer-specificfinancing for which the Group receives regular rental income. The table belowshows the reconciliation between statutory and adjusted operating profit bygeographical segment for 2007 and 2006: UK Germany France Benelux Total £'000 £'000 £'000 £'000 £'000 2007Operating profit 33,957 10,942 (1,754) (44) 43,101Add backAmortisation of acquired intangibles 481 132 - - 613After chargingFinance costs on customer-specific financing (1,339) (686) - - (2,025) -------- -------- -------- -------- --------Adjusted Operating Profit 33,099 10,388 (1,754) (44) 41,689 ======== ======== ======== ======== ======== 2006Operating profit 37,470 2,788 (11,526) (191) 28,541Add backExceptional items - - 5,031 - 5,031Amortisation of acquired intangibles - 46 - - 46After chargingFinance costs on customer-specific financing (39) (262) - - (301) -------- -------- -------- -------- --------Adjusted Operating Profit 37,431 2,572 (6,495) (191) 33,317 ======== ======== ======== ======== ======== Consolidated income statementFor the year ended 31 December 2007 2007 2006 Note £'000 £'000 Revenue 3 2,379,141 2,269,903Cost of sales (2,053,333) (1,974,437) ---------- ----------Gross profit 325,808 295,466 Distribution costs (18,344) (19,075)Administrative expenses (263,750) (242,773) ---------- ---------- Operating profit:Before amortisation of acquired 43,714 33,618intangibles and exceptional itemsAmortisation of acquired intangibles (613) (46) ---------- ---------- Operating profit before exceptional items 43,101 33,572Impairment of non-current assets - (2,606)Redundancy costs - (2,425) ---------- ---------- Operating profit 43,101 28,541 Finance revenue 3,910 6,677Finance costs (4,952) (2,289) ---------- ---------- Profit before tax:Before amortisation of acquired 42,672 38,006intangibles and exceptional itemsAmortisation of acquired intangibles (613) (46) ---------- ---------- Profit before tax before exceptional 42,059 37,960itemsImpairment of non-current assets - (2,606)Redundancy costs - (2,425) ---------- ---------- Profit before tax 42,059 32,929 Income tax expense 4 (13,161) (13,994) ---------- ---------- Profit for the year 28,898 18,935 ---------- ---------- Attributable to:Equity holders of the parent 28,888 18,927Minority interests 10 8 ---------- ---------- 28,898 18,935 ---------- ---------- Earnings per share 5- basic for profit for the year 18.5p 11.0p- diluted for profit for the year 18.2p 10.9p Consolidated balance sheetAs at 31 December 2007 2007 2006 Note £'000 £'000Non-current assetsProperty, plant and equipment 116,444 84,874Intangible assets 45,185 9,945Deferred income tax asset 8,190 6,166 -------- -------- 169,819 100,985 -------- --------Current assetsInventories 110,535 94,586Trade and other receivables 454,155 427,319Prepayments 27,936 28,729Accrued income 33,445 21,706Forward currency contracts - 111Cash and short-term deposits 7 29,211 77,882 -------- -------- 655,282 650,333 -------- --------Total assets 825,101 751,318 -------- -------- Current liabilitiesTrade and other payables 336,971 315,846Deferred income 74,686 77,714Financial liabilities 74,363 55,736Forward currency contracts 369 -Income tax payable 7,899 8,394Provisions 2,180 2,132 -------- -------- 496,468 459,822 -------- --------Non-current liabilitiesFinancial liabilities 34,652 11,362Provisions 12,225 12,839Other non-current liabilities 1,685 917Deferred income tax liabilities 1,875 1,249 -------- -------- 50,437 26,367 -------- --------Total liabilities 546,905 486,189 -------- --------Net assets 278,196 265,129 ======== ======== Capital and reservesIssued capital 9,504 9,571Share premium 2,890 2,247Capital redemption reserve 74,627 74,542Own shares held (11,380) (2,503)Foreign currency translation reserve 1,507 (2,455)Retained earnings 201,035 183,700 -------- --------Shareholders' equity 278,183 265,102Minority interest 13 27 -------- --------Total equity 278,196 265,129 ======== ======== Approved by the Board on 10 March 2008 MJ Norris Chief Executive FA Conophy Finance Director Consolidated statement of changes in equityFor the year ended 31 December 2007 Attributable to equity holders of the parent -------------------------------- Issued Share Capital Own Foreign Retained Total Minority Total capital premium redemption shares currency earnings interest equity reserve held translation reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 January 2006 9,505 74,680 100 (2,503) (1,757) 250,630 330,655 19 330,674Exchange differences onretranslationof foreignoperations - - - - (698) - (698) - (698) ------- ------- -------- ------ ------- ------- ------ ------ --------Net expenses recogniseddirectly inequity - - - - (698) - (698) - (698)Profit for the year - - - - - 18,927 18,927 8 18,935 ------- ------- -------- ------ ------- ------- ------ ------ --------Total recognisedincome andexpenses forthe year - - - - (698) 18,927 18,229 8 18,237Cost of share-basedpayment - - - - - 1,411 1,411 - 1,411Exercise of 66 2,317 - - - - 2,383 - 2,383optionsBonus issue 74,442 (74,442) - - - - - - -Expenses on - (308) - - - - (308) - (308)bonus issueShare redemption (74,442) - 74,442 - - (73,886) (73,886) - (73,886)Expenses on share redemption - - - - - (56) (56) - (56)Equity dividends - - - - - (13,326) (13,326) - (13,326) ------- ------- -------- ------ ------- ------- ------ ------ -------- 66 (72,433) 74,442 - (698) (66,930) (65,553) 8 (65,545) ------- ------- -------- ------ ------- ------- ------ ------ --------At 31 9,571 2,247 74,542 (2,503) (2,455) 183,700 265,102 27 265,129December 2006 ======= ======= ======== ====== ======= ======= ====== ====== ======== At 1 January 2007 9,571 2,247 74,542 (2,503) (2,455) 183,700 265,102 27 265,129Exchange differences onretranslationof foreign operations - - - - 3,962 - 3,962 - 3,962 ------- ------- -------- ------ ------- ------- ------ ------ --------Net income recogniseddirectly inequity - - - - 3,962 - 3,962 - 3,962Profit for the year - - - - - 28,888 28,888 10 28,898 ------- ------- -------- ------ ------- ------- ------ ------ --------Total recognisedincome andexpenses forthe year - - - - 3,962 28,888 32,850 10 32,860Cost of share-basedpayment - - - - - 2,659 2,659 - 2,659Exercise of options 18 643 - 49 - - 710 - 710Purchase of own shares - - - (11,332) - - (11,332) - (11,332)Cancellation of own shares (85) - 85 2,406 - (2,406) - - -Equity dividends - - - - - (11,806) (11,806) - (11,806)Acquisition of minority interests - - - - - - - (24) (24) ------- ------- -------- ------ ------- ------- ------ ------ -------- (67) 643 85 (8,877) 3,962 17,335 13,081 (14) 13,067 ------- ------- -------- ------ ------- ------- ------ ------ --------At 31 December 2007 9,504 2,890 74,627 (11,380) 1,507 201,035 278,183 13 278,196 ======= ======= ======== ====== ======= ======= ====== ====== ======== Consolidated cash flow statementFor the year ended 31 December 2007 2007 2006 Notes £'000 £'000Operating activitiesOperating profit 43,101 28,541Adjustments to reconcile Group operatingprofit to net cash inflows from operatingactivitiesDepreciation 27,130 14,585Amortisation 3,547 1,907Share-based payment 2,659 1,411Impairment of property, plant and equipment - 2,492Loss on disposal of property, plant and 190 353equipmentImpairment of intangible assets 86 114Loss on disposal of intangible assets - 9Dividend received from associate - 202(Increase)/decrease in inventories (8,724) 4,560Increase in trade and other receivables (1,470) (35,498)(Decrease)/increase in trade and other (19,976) 6,895payablesCurrency and other adjustments (218) 5 -------- --------Cash generated from operations 46,325 25,576Income taxes paid (13,853) (11,994) -------- --------Net cash flow from operating activities 32,472 13,582 -------- -------- Investing activitiesInterest received 3,885 6,600Acquisition of subsidiaries, net of cash (32,600) -acquiredSale of property, plant and equipment 336 24Purchases of property, plant and equipment (8,620) (7,504)Purchases of intangible assets (5,619) (2,499)Acquisition of minority interests (30) -Sale of interest in associate - 364 -------- --------Net cash flow from investing activities (42,648) (3,015) -------- -------- Financing activitiesInterest paid (5,333) (2,152)Dividends paid to equity shareholders of the (11,806) (13,326)parentProceeds from share issues 661 2,383Purchase of own shares (11,332) -Repayment of capital element of finance (12,195) (2,629)leasesRepayment of loans (11,103) (5,527)New borrowings 19,832 12,447Return of capital - (74,442)Expenses on return of capital - (365)Decrease in factor financing (8,743) (1,377) -------- --------Net cash flow from financing activities (40,019) (84,988) -------- -------- Decrease in cash and cash equivalents (50,195) (74,421)Effect of exchange rates on cash and cash (1,521) 492equivalentsCash and cash equivalents at the beginning of 7 58,982 132,911the year -------- --------Cash and cash equivalents at the year end 7 7,266 58,982 ======== ======== Analysis of changes in net funds At 1 Cash flows Non-cash Exchange At 31 January in year flow differences December 2007 2007 £'000 £'000 £'000 £'000 £'000Cash and cash equivalents 58,982 (50,195) - (1,521) 7,266Factor financing (29,549) 8,743 - (2,647) (23,453) -------- --------- -------- -------- --------Net funds/(debt) prior to 29,433 (41,452) - (4,168) (16,187)customer-specific financingFinance leases (11,403) 12,195 (47,768) (666) (47,642)Other loans (7,246) (8,729) - - (15,975) -------- --------- -------- -------- --------Net funds/(debt) 10,784 (37,986) (47,768) (4,834) (79,804) ======== ========= ======== ======== ======== Notes to the consolidated financial statementsFor the year ended 31 December 2007 1 Authorisation of financial statements and statement of compliance with IFRS The consolidated financial statements of Computacenter plc for the year ended 31December 2007 were authorised for issue in accordance with a resolution of theDirectors on 10 March 2008. The balance sheet was signed on behalf of the Boardby MJ Norris and FA Conophy. Computacenter plc is a limited company incorporatedand domiciled in England whose shares are publicly traded. The Group's financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS), as adopted by the EuropeanUnion as they apply to the financial statements of the Group for the year ended31 December 2007 and applied in accordance with the Companies Act 1985. 2 Summary of significant accounting policies Basis of preparation The consolidated financial statements are presented in sterling and all valuesare rounded to the nearest thousand (£'000) except when otherwise indicated. Basis of consolidation The consolidated financial statements comprise the financial statements ofComputacenter plc and its subsidiaries as at 31 December each year. Thefinancial statements of subsidiaries are prepared for the same reporting year asthe parent company, using existing GAAP in each country of operation.Adjustments are made to translate any differences that may exist between therespective local GAAPs and IFRS. All intra-group balances, transactions, income and expenses and profit andlosses resulting from intra-group transactions that are recognised in assets,have been eliminated in full. Subsidiaries are consolidated from the date on which the Group obtains controland cease to be consolidated from the date on which the Group no longer retainscontrol. Minority interests represent the portion of profit or loss and net assets insubsidiaries that is not held by the Group and is presented separately withinequity in the consolidated balance sheet, separately from parent shareholders'equity. Changes in accounting policy and disclosures The accounting policies adopted are consistent with those of the previousfinancial year except as described below: The Group has adopted the following new and amended IFRS and IFRICinterpretations during the year. Adoption of these standards did not have anyeffect on the financial performance or position of the Group. They did howevergive rise to additional disclosures: IFRS 7 Financial Instruments: Disclosures This standard requires disclosures that enable users of the financial statementsto evaluate the significance of the Group's financial instruments and the natureand extent of risks arising from those financial instruments. The newdisclosures are included throughout the financial statements. Whilst there hasbeen no effect on the financial position or results, comparative information hasbeen revised where needed. IAS 1 Presentation of Financial Statements The amendment requires the Group to make new disclosures to enable users of thefinancial statements to evaluate the Group's objectives, policies and processesfor managing capital. These new disclosures are shown in note 24. IFRIC 11 IFRS 2 Group and Treasury Share Transactions The Group has elected to early adopt IFRIC Interpretation 11 as of January 2007,insofar as it applies to consolidated financial statements. This interpretationrequires arrangements whereby an employee is granted rights to an entity'sequity instruments to be accounted for as an equity-settled scheme. 3 Segmental analysis The Group's primary reporting format is geographical segments and its secondaryformat is business segments. The Group's geographical segments are determined bythe location of the Group's assets and operations. The Group's business in eachgeography is managed separately and held in separate statutory entities. Each geographical business contains the following three business segments: - • the Product segment supplies computer hardware and software to large and medium corporate and government customers and to other distributors. It includes the resale of third party services for which the group retains no risks or rewards post sale; and • the Professional Services segment provides technical and project management skills to enable customers in the corporate and government sectors to implement and integrate new technologies into their infrastructures; and • the Support and Managed Services segment provides an outsourcing service for specific areas of infrastructure management to customers in the corporate and government sectors. The sale of goods is reported in the Product segment. The rendering of servicesis reported in the Professional Services and Support and Managed Servicessegments. Transfer prices between geographical segments are set on an arm's length basisin a manner similar to transactions with third parties. The impact ofinter-segment sales on operating profit by segment is not significant. Geographical segments The following tables present revenue, expenditure and certain asset informationregarding the Group's geographical segments for the years ended 31 December 2007and 2006: UK Germany France Benelux Total £'000 £'000 £'000 £'000 £'000Year ended 31 December2007RevenueSales to external customers 1,357,305 708,581 285,698 27,557 2,379,141Inter-segment sales 13,094 19,529 1,373 4,014 38,010 ------- ------- ------- ------- --------Segment revenue 1,370,399 728,110 287,071 31,571 2,417,151 ======= ======= ======= ======= ======== ResultGross profit 197,185 94,202 31,501 2,920 325,808 Distribution costs (10,572) (3,700) (3,855) (217) (18,344)Administrative expenses (152,175) (79,428) (29,400) (2,747) (263,750) ------- ------- ------- ------- --------Operating result before amortisation of acquiredintangibles 34,438 11,074 (1,754) (44) 43,714Amortisation of acquired intangibles (481) (132) - - (613) ------- ------- ------- ------- --------Segment operating result 33,957 10,942 (1,754) (44) 43,101 ------- ------- ------- ------- -------- Net finance income/ (expense) 2,536 (1,842) (1,613) (123) (1,042) ------- ------- ------- ------- --------Profit before tax 36,493 9,100 (3,367) (167) 42,059Income tax expense (13,161) --------Profit for the year 28,898 ======== Assets and liabilitiesTotal segment assets 578,522 186,480 56,379 3,720 825,101 ======= ======= ======= ======= ======== Total segment liabilities 293,033 152,534 95,763 5,575 546,905 ======= ======= ======= ======= ======== Other segment informationCapital expenditure:Property, plant and equipment 42,914 12,759 648 67 56,388Intangible fixed assets 3,195 2,239 185 - 5,619 ======= ======= ======= ======= ======== Depreciation 22,319 4,705 - 106 27,130Amortisation 2,985 451 111 - 3,547 ======= ======= ======= ======= ======== Share-based payment 2,197 326 136 - 2,659 ------- ------- ------- ------- -------- UK Germany France Benelux Total £'000 £'000 £'000 £'000 £'000Year ended 31 December2006RevenueSales to external customers 1,281,498 654,671 307,264 26,470 2,269,903Inter-segment sales 8,601 11,734 764 3,336 24,435 ------- ------- ------- ------- --------Segment revenue 1,290,099 666,405 308,028 29,806 2,294,338 ======= ======= ======= ======= ======== ResultGross profit 181,900 83,405 27,711 2,450 295,466 Distribution costs (11,765) (3,646) (3,521) (143) (19,075)Administrative expenses (132,665) (76,925) (30,685) (2,498) (242,773) ------- ------- ------- ------- --------Operating result before amortisation of acquiredintangibles andexceptional items 37,470 2,834 (6,495) (191) 33,618Amortisation of acquired - (46) - - (46)intangibles ------- ------- ------- ------- --------Operating result before exceptional items 37,470 2,788 (6,495) (191) 33,572Exceptional items - - (5,031) - (5,031) ------- ------- ------- ------- --------Segment operating result 37,470 2,788 (11,526) (191) 28,541 ======= ======= ======= ======= ======== Net finance income/ (expense) 6,834 (882) (1,475) (89) 4,388 ------- ------- ------- ------- --------Profit before tax 44,304 1,906 (13,001) (280) 32,929Income tax expense (13,994) --------Profit for the year 18,935 ======== Assets and liabilitiesTotal segment assets 506,177 166,611 76,342 2,188 751,318 ------- ------- ------- ------- -------- Total segment liabilities 223,296 145,382 112,679 4,832 486,189 ------- ------- ------- ------- -------- Other segment informationCapital expenditure:Property, plant and equipment 10,387 9,557 852 89 20,885Intangible fixed assets 1,922 495 82 - 2,499 ------- ------- ------- ------- -------- Depreciation 11,262 2,283 936 104 14,585Amortisation 1,551 293 63 - 1,907 ------- ------- ------- ------- -------- Share-based payment 1,173 202 28 8 1,411 ------- ------- ------- ------- -------- Business segments The following tables present revenue information regarding the Group's businesssegments for the years ended 31 December 2007 and 2006. Product Professional Support Total Services and Managed ServicesYear ended 31 £'000 £'000 £'000 £'000December 2007RevenueSales to external customers 1,774,164 158,488 446,489 2,379,141Inter-segment sales 7,563 9,559 20,888 38,010 ------- --------- --------- -------Segment revenue 1,781,727 168,047 467,377 2,417,151 ======= ========= ========= ======= Product Professional Support Total Services and Managed ServicesYear ended 31 £'000 £'000 £'000 £'000December 2006RevenueSales to external customers 1,735,210 128,895 405,798 2,269,903Inter-segment sales 3,865 2,723 17,847 24,435 ------- --------- --------- -------Segment revenue 1,739,075 131,618 423,645 2,294,338 ======= ========= ========= ======= Business segments provide the Group with common business performance reportingacross geographic segments that are structured and organised differently. Due toinvoice bundling and shared service and business support structures, revenue andgross profit involves allocation judgements. Each geographic segment principallyconsists of a single entity with shared assets, liabilities and capitalexpenditure. Investment decisions are made either at the level of or within ageographic segment, but are not made at a business segment level. It is,therefore, not possible to split out assets, liabilities and capital expenditureinformation by business segments. 4 Income tax a) Tax on profit on ordinary activities 2007 2006 £'000 £'000Tax charged in the income statementCurrent income taxUK corporation tax 13,420 14,421Foreign tax 113 212Adjustments in respect of prior periods (385) 76Consortium relief - 59 -------- --------Total current income tax 13,148 14,768 ======== ======== Deferred taxOrigination and reversal of temporary differences (1,372) (499)Losses utilised 3,417 -Effect of changes in tax rate on deferred tax (49) -Effect of changes in tax rate on German deferred tax asset 635 -Changes in recoverable amounts of deferred tax assets (2,747) (275)Adjustments in respect of prior periods 129 -------- --------Total deferred tax 13 (774) -------- --------Tax charge in the income statement 13,161 13,994 ======== ======== b) Reconciliation of the total tax charge 2007 2006 £'000 £'000Accounting profit before tax 42,059 32,929 -------- -------- At the UK standard rate of corporation tax of 30% (2006: 30%) 12,618 9,879Expenses not deductible for tax purposes 643 724Relief on share option gains (78) (218)Non-deductible element of share-based payment charge 506 423Adjustments in respect of current income tax of previous periods (256) (214)Higher tax on overseas earnings 859 49Effect of changes in tax rate on deferred tax (49) -Accounting depreciation in excess of tax depreciation - 21Other differences (149) (616)Changes in recoverable amounts of deferred tax assets (2,747)Effect of change in rate of overseas deferred tax asset 635Consortium relief - 59Profit of overseas undertakings not taxable due to brought forward loss offset - (154)Losses of overseas undertakings not available for relief 1,179 4,041 -------- --------At effective income tax rate of 31.3% (2006: 42.6%) 13,161 13,994 ======== ======== Corporation tax is calculated at 30% of the estimated assessable profit for theyear. Based on future legislation of the Government in the United Kingdom thecorporation tax will be calculated at 28% of assessable profit from 1 April2008. This has resulted in an increase to the closing deferred tax balances inthe UK of £49,000. From 1 January 2008 the Corporate Tax rate in Germany reduced to 30% from 40%.This has resulted in a £635,000 reduction in the deferred tax asset recognisedin respect of losses carried forward. c) Tax losses Deferred tax assets of £6.5 million (2006: £5.5 million) have been recognised inrespect of losses carried forward. In addition, at 31 December 2007, there wereunused tax losses across the Group of £169.6 million (2006 : £153.1 million) forwhich no deferred tax asset has been recognised. Of these losses, £116.5 million(2006 : £107.6 million) arise in Germany, albeit a significant proportion havebeen generated in statutory entities that no longer have significant levels oftrade. The remaining unrecognised tax losses relate to other loss-makingoverseas subsidiaries. 5 Earnings per ordinary share Earnings per share (EPS) amounts are calculated by dividing profit attributableto ordinary equity holders by the weighted average number of ordinary sharesoutstanding during the year (excluding own shares held). Diluted earnings per share amounts are calculated by dividing profitattributable to ordinary equity holders by the weighted average number ofordinary shares outstanding during the year (excluding own shares held) adjustedfor the effect of dilutive options. Adjusted basic and adjusted diluted EPS are presented to provide more comparableand representative information. Accordingly the adjusted basic and adjusteddiluted EPS figures exclude amortisation of acquired intangibles and exceptionalitems. 2007 2006 £'000 £'000Profit attributable to equity holders of the parent 28,888 18,927Amortisation of acquired intangibles 613 46Tax on amortisation of acquired intangibles (184) (14)Exceptional items attributable to equity holders - 5,031of the parent -------- --------Before amortisation of acquired intangibles and exceptional items 29,317 23,990 ======== ======== 2007 2006 000's 000'sBasic weighted average number of shares (excluding 156,117 172,312own shares held)Effect of dilution:Share options 2,202 1,232 -------- --------Diluted weighted average number of shares 158,319 173,544 ======== ======== 2007 2006 pence penceBasic earnings per share 18.5 11.0Diluted earnings per share 18.2 10.9Adjusted basic earnings per share 18.8 13.9Adjusted diluted earnings per share 18.5 13.8 Subsequent to the reporting date the Company has repurchased a further 3,537,600of its own shares for cancellation. 6 Dividends paid and proposed 2007 2006 £'000 £'000Declared and paid during the year:Equity dividends on ordinary shares:Final dividend for 2006: 5.0p (2005: 5.2p) 7,872 9,405Interim for 2007: 2.5p (2006: 2.5p) 3,934 3,921 -------- -------- 11,806 13,326 ======== ======== Proposed for approval at AGM (not recognised asa liability as at 31 December)Equity dividends on ordinary shares:Final dividend for 2007: 5.5p (2006: 5.0p) 7,997 7,856 ======== ======== 7 Cash and short-term deposits 2007 2006 £'000 £'000 Cash at bank and in hand 19,211 17,882Short-term deposits 10,000 60,000 -------- -------- 29,211 77,882 ======== ======== Cash at bank and in hand earns interest at floating rates based on daily bankdeposit rates. Short-term deposits are made for varying periods of between oneday and three months depending on the immediate cash requirements of the Group,and earn interest at the respective short-term deposit rates. The fair value ofcash and cash equivalents is £29,211,000 (2006: £77,882,000). At 31 December 2007, the Group had available £148.1 million (2006:£ 132.9million) of uncommitted overdraft and factoring facilities. For the purposes of the consolidated cash flow statement, cash and cashequivalents comprise the following at 31 December: 2007 2006 £'000 £'000 Cash at bank and in hand 19,211 17,882Short-term deposits 10,000 60,000Bank overdrafts (21,945) (18,900) -------- -------- 7,266 58,982 ======== ======== 8 Customer-specific leases and loans a) Other loans The other loans are unsecured borrowings to finance equipment sold to customerson specific contracts. The table below summarises the maturity profile of these loans: 2007 2006 £'000 £'000Not later than one year 11,571 4,443After one year but not more than five years 4,404 2,803 -------- -------- 15,975 7,246 ======== ======== b) Finance lease commitments The finance leases are only secured on the assets that they finance. Theseassets are used to satisfy specific customer contracts. The present value of the net minimum lease payments are as follows: 2007 2006 £'000 £'000Within one year 17,394 2,844After one year but not more than 30,248 8,559five years -------- -------- 47,642 11,403 ======== ======== c) Operating lease commitments where the Group is lessor During the year the Group entered into commercial leases with customers oncertain items of machinery. These leases have remaining terms of between one andfive years. Future amounts receivable by the Group under the non-cancellable operatingleases as at 31 December are as follows: 2007 2006 £'000 £'000Not later than one year 26,064 8,541After one year but not more than 27,752 12,723five years ------- -------- 53,816 21,264 ======= ======== The amounts receivable are directly related to the finance lease obligationsdetailed in note 8b. 9 Post balance sheet event On 10 January 2008 the Company entered into an agreement with its stockbrokers,Credit Suisse, to purchase during the Close Period, its own Ordinary Shares to amaximum of four million shares with a maximum value of £8,000,000. A further3,537,600 shares had been repurchased for cancellation between the reportingdate and 10 March 2008 for a value of £6,054,000. 10 Publication of non-statutory accounts The financial information in the preliminary statement of results does notconstitute statutory accounts within the meaning of Section 240 of theCompanies Act 1985 (the "Act"). The financial information for the year ended 31December 2007 has been extracted from the statutory accounts on which anunqualified audit opinion has been issued. Statutory accounts for the yearended 31 December 2007 will be delivered to the Registrar of Companies followingthe Company's Annual General Meeting. The financial statements, and this preliminary statement, of the Group for theyear ended 31 December 2007 were authorised for issue by the Board of Directorson 10 March 2008 and the balance sheet was signed on behalf of the Board by MJNorris and FA Conophy. The statutory accounts have been delivered to the Registrar of Companies inrespect of the year ended 31 December 2006 and the Auditors of the Company madea report thereon under Section 235 of the Act. That report was an unqualified report and did not contain a statement under Section 237(2) or (3) of the Act. This information is provided by RNS The company news service from the London Stock Exchange