Interim Results
Computacenter PLC
13 September 2005
Interim Results Announcement
Computacenter plc, the European IT infrastructure services provider, today
announces interim results for the six months ended 30 June 2005.
Financial Highlights*:
• Group revenues £1.15 billion (2004: £1.23 billion)
• Profit before tax £8.2 million (2004: £30.1 million)
• Earnings per share 1.2p (2004: 10.7p)
• Interim dividend of 2.5p per share (2004: 2.3p)
• Strong balance sheet with net cash increasing by £41.6 million to £87.3
million
*All figures restated to IFRS
Ron Sandler, Chairman of Computacenter plc, commented:
'The first half of 2005 has been a challenging time for Computacenter. The
decline in performance is largely attributable to a steep fall in product
margins in the UK business. On a more positive note, our UK Managed Services
continued to make progress.
We believe that for the foreseeable future our UK product business will continue
to face the challenges of intense price competition, vendors seeking to sell
direct to large accounts and substantially lowered vendor rebates.
In anticipation of these developments, we embarked last year upon a major
strategic reassessment and, in the first half of 2005, we completed a
fundamental reorganisation of our UK business to create a platform for
implementing our new strategy. These initiatives represent a significant
programme of activity.
Following the satisfactory resolution of the dispute with GE, the Board is now
able to consider how best to utilise the Group's cash resources for the benefit
of shareholders.
Trading has been subdued in July and August, particularly in the UK.
Nevertheless, we anticipate a stronger profit performance in the second half and
the outlook for the full year remains in line with market expectations. Looking
further ahead, the Board is confident that the Group's profits can be improved
in the future.'
For further information, please contact:
Computacenter plc.
Mike Norris, Chief Executive 01707 631 601
Tessa Freeman, Investor Relations 01707 631 514
www.computacenter.com
Tulchan Communications 020 7353 4200
Tim Lynch
www.tulchangroup.com
Chairman's Statement
The first half of 2005 has been a challenging time for Computacenter. Group
revenues declined to £1.15 billion (2004: £1.23 billion) and profit before tax
fell 72.7% to £8.2 million (2004: £30.1 million). The balance sheet remained
strong, with net cash increasing by £41.6 million during the period to £87.3
million.
Despite the disappointing earnings, the Board has approved an interim dividend
of 2.5p per share (2004: 2.3p) to be paid on 21 October 2005 to shareholders on
the register as at 23 September 2005. This is consistent with our policy of
seeking to keep the interim dividend at a level equal to one-third of the
preceding year's total dividend, and reflects the cash resources of the
business.
The decline in performance is largely attributable to a steep fall in product
margins in the UK business. This has been due to the combination of lacklustre
market demand and intense price competition, which adversely impacted our
product revenues and the level of vendor rebates. On a more positive note, our
UK Managed Services business continued to make progress, with revenue growth of
1.3% in the period and a number of significant new contracts secured.
We do not consider the deterioration in the competitive environment for our UK
product business to be temporary. We believe that for the foreseeable future we
will continue to face the challenges of intense price competition, vendors
seeking to sell direct to large accounts and substantially lowered vendor
rebates. In anticipation of these developments, we embarked last year upon a
major strategic reassessment. In the first half of 2005, we completed a
fundamental reorganisation of our UK business to create a platform for
implementing our new strategy, the principal elements of which include:
• Re-engineering our product business to deliver lower cost account
management and sales;
• Building a sizeable presence in the medium-sized business segment;
• Creating a specialist software business unit to increase our share of
this market;
• Broadening the depth and range of our technical services activities;
• Capturing greater value from the superior scale of our engineering and
maintenance activities, by sharing more resource across our customer base;
• Seeking to accelerate the growth of our Managed Services business.
Taken together, these initiatives represent a significant programme of activity.
The performance of our European businesses in the first half of 2005 was also
disappointing. Computacenter Germany recorded an operating loss of £1.5 million
(2004: profit of £2.5 million) on a 3.8% fall in revenues. The German economy
remained weak, leading to pressure on both product and service margins. Our
efforts to reduce the cost base of the German business to combat the lower
margins are continuing. With market conditions in France remaining equally
challenging, the revenues of our French business declined 14.2% and the
operating loss widened to £7.9 million (2004: £2.0 million). Under-utilisation
of our services staff and a reduction in product revenues were the main cause of
this deterioration. A new management team in Computacenter France has been
installed and further efforts to rectify the poor profitability are underway,
principally directed towards significant cost reduction.
I am pleased to say that, shortly after the period end, the tax assets claim
raised by GE, relating to our acquisition of GE CompuNet in Germany and GECITS
Austria in 2003 (noted as a contingent liability in the Group's 2004 accounts),
was satisfactorily resolved. Following the purchase of GE's share of the tax
assets, Computacenter has now received €40 million.
With the resolution of this dispute the Board is now able to consider how best
to utilise the Group's cash resources for the benefit of shareholders.
Trading has been subdued in July and August, particularly in the UK.
Nevertheless, we anticipate a stronger profit performance in the second half and
the outlook for the full year remains in line with market expectations. Looking
further ahead, the Board is confident that the Group's profits can be improved
in the future.
There is no escape from the fact that trading in 2005 has been difficult and
Computacenter's performance has been extremely disappointing. Nonetheless,
Computacenter's staff have continued to deliver outstanding customer service in
difficult trading circumstances, and I am pleased to record my appreciation for
their considerable dedication and hard work.
Review of Operations
UK
During the first half, difficult trading conditions for our Technology Sourcing
activities adversely affected profitability. Declining product revenues, driven
by continuing intense price competition, had a particular impact, together with
the previously announced deterioration in our trading terms and conditions with
HP, our major vendor partner. Substantially lower product sales resulted in
Computacenter failing to achieve many of our revenue-related vendor targets.
These factors were mainly responsible for a decline in H1 2005 UK operating
profit of 49.1%, from £29.3 million to £14.9 million.
Overall the contribution from our product sales fell by £18.2 million, of which
£14.6 million is attributable to lower vendor rebates. This performance
underlines the need for the fundamental re-engineering of our Technology
Sourcing business model that is now underway.
Some attractive new Managed Services contract wins and high levels of
Professional Services resource utilisation helped mitigate the impact of the
decline in Technology Sourcing activity. Significant new Managed Services
business included the award of five-year contracts by British American Tobacco
(BAT) and the UK Highways Agency. Under the former agreement, Computacenter will
provide a range of services to help manage BAT's 3,500-plus desktop/laptop
estate and file and print servers. Under the terms of the Highways Agency
contract, which is worth more than £8 million, Computacenter will deliver a
range of services in partnership with information and communications technology
specialist Vivista to support the Agency's new Regional Control Centres. We also
secured a number of important contract renewals, including a two-year extension
of our Managed Services contract with Tradeteam.
Under the terms of our DCSA Catalogue contract we were awarded additional
Technology Sourcing business with a number of Ministry of Defence agencies,
including the Royal Military Academy Sandhurst and the Defence Procurement
Agency.
Following the results of a comprehensive strategy review initiated last year, a
major change programme is underway in Computacenter's UK business. This aims to
achieve top line growth, reduce further the cost base, and re-organise the
business to achieve improved operational performance in the present difficult
competitive environment.
To help drive services growth and ensure tighter management of our Technology
Sourcing activities in the face of continuing price competition, we have created
a greater organisational separation between the product and service areas of our
business. Consequently we will, for the first time, be in a position to report
separate financial results for these businesses at the end of 2006.
To increase market penetration and sharpen our customer offerings, we have
created a number of focused business units, within both our product and services
activities. These were formally established on July 1 and are responsible for
defining and delivering suites of related propositions to the market. Specialist
sales teams, together with all personnel required to deliver those offerings,
have been allocated to these business units, with the business unit managers
having full profit and loss responsibility.
Freed from the operational management of large, often complex service
implementations, our sales organisation will concentrate on identifying and
realising incremental sales opportunities and on customer relationship
management. A slimmed-down sales force will operate across multiple customer
segments and a new more accountable commission-led pay plan has been introduced
to encourage greater sales entrepreneurship.
We have also established a specific business unit with its own tele-sales
capability to address the medium-size business sector. We continue to believe
that this sector offers considerable opportunity for Computacenter in the UK,
using the leverage provided by our existing logistics and back office
infrastructure.
Through these and related initiatives we are confident we can grow the UK
business, as well as improve our competitiveness whilst reducing our cost base.
RDC, our re-cycling and re-marketing arm, and CCD, our trade distribution
division, also had challenging half-years. The slowdown in hardware sales and
related recycling of old equipment reduced RDC volumes by 25%. CCD saw a
significant decline in profitability due to margin challenges in a fairly
stagnant market and changes to vendor terms.
Germany
Our German business recorded an operating loss of £1.5 million (2004: profit of
£2.5 million) on revenues that were 3.8% lower than in H1 2004.
This disappointing result reflects the continuing weak economic climate, with
German organisations still focusing heavily on cost reduction and delaying
capital investment. We saw an increased number of 'Wintel' implementations,
although expenditures in the more profitable areas of datacentre and networking
technologies were particularly subdued, adversely affecting the product mix and
resulting in a 0.7% product margin decline.
Services fared rather better, and although margins declined slightly, overall
services revenues were up 6.5% on H1 2004, with good levels of resource
utilisation, particularly for customer engineering projects. We also saw strong
Professional Services growth, fuelled by customer interest in IT security,
combined voice/data telephony and mobile technology solutions.
Intense price pressure affected services margins, however, which declined by
3.9%. The tendency for many German organisations to frequently re-tender
contracts to lower their costs was an important factor in this reduction. A
difficult start-up of one new contract in particular impacted service margins;
however we expect this situation to improve in the second half of this year.
Although we are making good progress with our programme to encourage customers
to transfer to longer-term managed service contracts, with built-in cost and
service improvements, the conversion to this type of contract is inevitably
taking some time.
Since December there has been a further 5.7% growth in our Managed Services
contract base. Important wins included the award of a contract by Sparkasse
Hannover under the framework of our partnership with FinanzIT, a major IT
supplier to the German Savings Banks Organisation. The Sparkasse Hannover
contract covers end-to-end management for 3,500 IT workstations as well as
servers, infrastructure and telecommunications systems. We were also awarded a
seven-year contract, partnering Helpbycom, for the management of the German
Federal Labour Office's IT user helpdesk, which serves 120,000 users.
At the start of 2005, we changed the organisational structure of Computacenter
Germany, although the full benefits of this are yet to be realised. The
re-organisation has four main objectives. It will improve our focus on the
medium-sized business market, where we believe there are significant
opportunities for growth; it will improve our ability to sell a broader range of
products and services into existing customers; it will sharpen our focus on the
growth industry sectors of Government and Financial Services; and finally, it
will improve and leverage relationships with our key vendor partners.
In addition to these initiatives, which aim at generating revenue growth, we are
determined to lower the cost base of the business. To that end, a programme is
already underway to further reduce indirect expenses.
Although we anticipate a stronger H2, partly due to the effect of Government
year-end purchasing, the full impact of our improvement plan is unlikely to be
evident until 2006.
France
Our French business traded poorly, with revenues declining 14.2% to £126.2
million (2004: £147.1 million) and operating losses increasing to £7.9 million
(2004: £2.0 million).
The adverse effects of falling hardware prices in the Technology Sourcing
business were exacerbated by low services resource utilisation and a cost base
that is still too high. In addition, our largest French account, Le Ministere de
la Defense, suspended expenditure for a period whilst the contract renewal was
put out to competitive tender, which had a material impact on our overall H1
revenues. The contract was subsequently renewed with Computacenter for a further
four years.
Significant new business included a €7 million Infrastructure Integration
project for Agence Centrale des Organismes de Securite Sociale, and Technology
Sourcing contracts for France Telecom and Union des Groupements d'Achats
Publics, worth €6 million and €5 million respectively.
However the performance of Computacenter France continues to be unsatisfactory
and the appointment of Chris Webb, formerly responsible for UK sales and
services delivery, as Managing Director of Computacenter France has added
impetus to the major transformation project that is underway.
A substantial cost savings programme has been implemented, focusing on
Professional Services, which has a high headcount and a weak revenue and
utilisation pipeline. As a result 56 Professional Services staff entered the
formal redundancy process in H1 2005. It is anticipated that this, together with
other measures, will yield significant savings in 2006.
To encourage revenue growth, a restructuring of the sales organisation, with the
objective of ensuring greater responsiveness and accountability, was undertaken
during the period. A new pay plan has been introduced, to provide more effective
incentives, and we have invested in the recruitment of new business specialists
to help identify and close new opportunities.
In addition, the re-engineering of our maintenance operation, which began in
2004, has started to give us a strong and growing pipeline of new maintenance
contracts for H2.
Customer satisfaction is also improving, as evidenced by a 15% improvement in
performance against Service Level Agreements since January 2005.
Though the full benefits will take some time to be realised we believe the
initiatives now underway provide a sound foundation for Computacenter's eventual
return to profit in France. Our aim is to reduce loss in 2006 and break even in
2007.
Belgium and Luxembourg
Our small 'BeLux' operation also suffered from a slowdown in capital spending,
with operating profits declining to a loss of £105,000 (2004: £68,000 profit) on
revenues that were 14.5% lower than in H1 2004.
Product revenues improved somewhat in the second quarter, based on a new
international procurement contract with Recticel and a technology refresh
project for Astron. The services business grew profitably on the back of
existing Managed Services contracts and new migration projects for companies
such as Banksys and Nomura.
Consolidated income statement
For the six months ended 30 June 2005
Unaudited six Restated Restated year
months ended 30 unaudited six ended 31 Dec
June 2005 months ended 30 2004
June 2004
£'000 £'000 £'000
Continuing operations
Revenue 1,151,553 1,228,941 2,410,590
Cost of sales (1,009,276) (1,060,821) (2,080,392)
---------- ---------- ----------
Gross profit 142,277 168,120 330,198
Distribution costs (10,290) (9,868) (20,626)
Administrative expenses (126,565) (128,393) (243,394)
---------- ---------- ----------
Operating profit from
continuing operations 5,422 29,859 66,178
Finance costs (1,275) (1,722) (3,537)
Finance income 3,956 1,995 5,247
Share of loss of joint venture - (205) (226)
Share of profit of associate 118 135 266
---------- ---------- ----------
Profit before tax 8,221 30,062 67,928
Income tax expense (6,078) (9,801) (19,639)
---------- ---------- ----------
Profit for the year from
continuing operations 2,143 20,261 48,289
Discontinued operation
Loss for the period from
discontinued operation - (304) (3,923)
---------- ---------- ----------
Profit for the period 2,143 19,957 44,366
========== ========== ==========
Attributable to:
Equity holders of the parent 2,184 19,987 44,435
Minority interests (41) (30) (69)
---------- ---------- ----------
2,143 19,957 44,366
========== ========== ==========
Earnings per share
- basic for profit for the year 1.2p 10.7p 23.8p
- diluted for profit for the year 1.2p 10.5p 23.5p
Consolidated balance sheet
At 30 June 2005
Restated
Unaudited unaudited Restated
six months six months year
ended ended ended
30 June 2005 30 June 2004 31 Dec 2004
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 86,243 92,455 89,914
Intangible assets 9,576 6,864 7,923
Investment in a joint venture
accounted for using the equity
method - 20 -
Investment in an associate
accounted for using the equity
method 173 649 373
Listed investment - 3,047 -
Deferred income tax asset 1,548 3,107 1,486
-------- -------- --------
97,540 106,142 99,696
-------- -------- --------
Current assets
Inventories 88,205 119,910 118,914
Trade and other receivables:
gross 388,269 416,604 438,452
Less: non returnable proceeds - (55,643) (39,043)
-------- -------- --------
Trade and other receivables 388,269 360,961 399,409
Prepayments 59,751 60,048 55,135
Cash and short-term deposits 144,832 99,327 138,218
-------- -------- --------
681,057 640,246 711,676
Non-current assets classified as
held for sale - 9,184 9,208
-------- -------- --------
Total assets 778,597 755,572 820,580
======== ======== ========
Equity and liabilities
Equity attributable to equity
holders of the parent
Issued capital 9,504 9,447 9,489
Share premium 74,628 71,778 73,920
Capital redemption reserve 100 100 100
Investment in own shares (2,503) (2,503) (2,503)
Other reserves (2,517) (1,860) (904)
Retained earnings 236,818 224,672 245,113
Amounts recognised directly in
equity relating to non-current
assets held for sale - (85) (7)
-------- -------- --------
316,030 301,549 325,208
Minority interest 5 83 46
-------- -------- --------
Total equity 316,035 301,632 325,254
-------- -------- --------
Non-current liabilities
Interest-bearing loans and
borrowings 664 326 429
Provisions 14,722 14,628 15,233
Other non-current liabilities 2,716 3,221 2,691
Deferred income tax liabilities 1,455 1,667 1,455
-------- -------- --------
19,557 19,842 19,808
-------- -------- --------
Current liabilities
Trade and other payables 299,577 298,188 306,964
Deferred income 78,505 79,834 89,083
Interest-bearing loans and
borrowings 57,867 38,279 58,706
Forward currency contracts 351 - -
Income tax payable 5,005 8,788 11,519
Provisions 1,700 1,667 2,358
-------- -------- --------
443,005 426,756 468,630
Liabilities directly associated
with non-current assets
classified as held for sale - 7,342 6,888
-------- -------- --------
Total liabilities 462,562 453,940 495,326
-------- -------- --------
Total equity and liabilities 778,597 755,572 820,580
======== ======== ========
Approved by the Board on 12 September 2005
MJ Norris, Chief Executive FA Conophy, Finance Director
Consolidated statement of changes in equity
Attributable to equity holders of the parent
------------------------
Issued Share Capital Investment Other Retained Total Minority Total
capital premium redemption in own reserves earnings interest equity
reserve shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January
2004 9,441 71,486 100 (2,503) - 213,423 291,947 113 292,060
Currency
translation
differences - - - - (1,860) - (1,860) - (1,860)
Amounts
relating to
non-current
assets held
for sale - - - - (85) - (85) - (85)
Cost of share
based payments - - - - - 498 498 - 498
----- ------ ------- ------- ------ ------ ------ ------ ------
Net
income/(expenses)
recognised
directly in
equity - - - - (1,945) 498 (1,447) - (1,447)
Profit for the
period - - - - - 19,987 19,987 (30) 19,957
Exercise of
options 6 292 - - - - 298 - 298
Equity
dividends - - - - - (9,236) (9,236) - (9,236)
----- ------ ------- ------- ------ ------ ------ ------ ------
At 30 June
2004 9,447 71,778 100 (2,503) (1,945) 224,672 301,549 83 301,632
Currency
translation
differences - - - - 956 - 956 - 956
Amounts
relating to
non-current
assets held
for sale - - - - 78 - 78 - 78
Cost of share
based payments - - - - - 309 309 - 309
----- ------ ------- ------- ------ ------ ------ ------ ------
Net
income/(expenses)
recognised
directly in
equity - - - - 1,034 309 1,343 - 1,343
Profit for the
period - - - - - 24,448 24,448 (37) 24,411
Exercise of
options 42 2,142 - - - - 2,184 - 2,184
Equity
dividends - - - - - (4,316) (4,316) - (4,316)
----- ------ ------- ------- ------ ------ ------ ------ ------
At 31 December
2004 9,489 73,920 100 (2,503) (911) 245,113 325,208 46 325,254
Adoption of
IAS 32 & IAS
39 - - - - - (148) (148) - (148)
----- ------ ------- ------- ------ ------ ------ ------ ------
At 1 January
2005 9,489 73,920 100 (2,503) (911) 244,965 325,060 46 325,106
Currency
translation
differences - - - - (1,606) - (1,606) - (1,606)
----- ------ ------- ------- ------ ------ ------ ------ ------
Net
income/(expenses)
recognised
directly in
equity - - - - (1,606) - (1,606) - (1,606)
Profit for the
period - - - - - 2,184 2,184 (41) 2,143
Exercise of
options 15 708 - - - - 723 - 723
Cost of share
based payments - - - - - (596) (596) - (596)
Equity
dividends - - - - - (9,735) (9,735) - (9,735)
----- ------ ------- ------- ------ ------ ------ ------ ------
At 30 June
2005 9,504 74,628 100 (2,503) (2,517) 236,818 316,030 5 316,035
-------------- ----- ------ ------- ------- ------ ------ ------ ------ ------
Consolidated cash flow statement
For the six months ended 30 June 2005
Restated
Unaudited unaudited
six months six months Restated year
ended ended ended
30 June 2005 30 June 2004 31 Dec 2004
£'000 £'000 £'000
Cash flows from operating
activities
Operating profit from
continuing operations 5,422 29,859 66,178
Operating loss of
discontinued
operation - (282) (1,547)
Depreciation 8,032 8,818 17,017
Amortisation 885 670 1,365
Share based payment (637) 498 898
Loss/profit on
disposal of property,
plant and equipment (155) 502 756
Loss on disposal of
intangibles - 2 48
Profit on disposal of
investment - - (1,603)
Dividend received
from associate 303 - 509
Decrease/(increase)
in trade and other
receivables 29,832 4,313 (23,156)
Decrease in
inventories 27,770 10,173 14,278
Decrease in trade and
other payables (5,423) (23,346) (14,604)
Currency and other
adjustments 609 322 181
Borrowing costs (1,071) (1,945) (3,439)
Interest received 4,721 1,517 4,359
Income tax paid (12,591) (6,365) (12,296)
-------- -------- --------
Net cash flows from
operating activities 57,697 24,736 48,944
-------- -------- --------
Cash flows from investing
activities
Proceeds from sale of
subsidiary net of
cash disposed of (252) - -
Proceeds from sale of
property, plant and
equipment 89 1,250 1,756
Purchases of
property, plant and
equipment (5,284) (5,649) (11,615)
Proceeds from sale of
intangibles - - 211
Purchases of
intangible assets (1,403) (723) (2,593)
Dividend received - - 23
Proceeds from sale of
listed investment - - 4,650
-------- -------- --------
Net cash flows used
in investing
activities (6,850) (5,122) (7,568)
-------- -------- --------
Cash flows from financing
activities
Proceeds from issue
of shares 722 298 2,482
Repayment of finance
leases (250) - (39)
Dividends paid to
equity holders of the
parent (9,735) (9,305) (13,587)
-------- -------- --------
Net cash flows used
in financing
activities (9,263) (9,007) (11,144)
-------- -------- --------
Net increase in cash
and cash equivalents 41,584 10,607 30,232
Net foreign exchange
difference 4,235 1,896 (149)
Cash and cash
equivalents at
beginning of period 80,545 50,462 50,462
Adoption of IAS 32 &
IAS 39 (39,043) - -
-------- -------- --------
Cash and cash
equivalents at end of
period 87,321 62,965 80,545
======== ======== ========
Notes to the accounts
1 Accounting policies
Basis of preparation
Computacenter plc is required to report its consolidated financial statements
under International Financial Reporting Standards (IFRS), as adopted by the
European Union, for all accounting periods beginning on or after 1 January 2005.
Previously the Group has applied UK Generally Accepted Accounting Principles (UK
GAAP).
The results for the six months ended 30 June 2005 represent the first interim
financial statements that the Group has prepared in accordance with its
accounting policies under IFRS. The first annual report under IFRS will be for
the year ended 31 December 2005. A description of how the Group's reported
performance and financial position are affected by this change, including
reconciliations from UK GAAP to IFRS for prior years and the revised summary of
significant accounting policies under IFRS, is available on the Investors
Section of the corporate website at www.computacenter.com.
The unaudited interim financial information has been prepared, for the first
time, in accordance with IFRS and is covered by IFRS 1 'First-time adoption of
IFRS'. The information has been prepared in accordance with those IFRS' issued
and effective as at the time of preparation, and has been applied
retrospectively except where certain exceptions apply.
As listed companies are adopting IFRS for the first time, there is limited
established practice upon which to draw in matters of interpretation and
application. Furthermore, it is possible that new standards, revisions to
existing standards and new interpretations may be issued which affect the Group.
Consequently it is possible that the comparative information in the 2005 annual
report may differ from that presented in this document.
Change in accounting policy
From 1 January 2005 the Group has adopted the financial instruments standards
IAS 32 and IAS 39. The only material changes on adoption of these standards has
been on accounting for foreign currency forward contracts and non-recourse debt
financing.
Foreign currency forward contracts
The fair values of both the hedging instruments and the hedged item are
recognised at each reporting date.
Non-recourse debt financing
Under UK GAAP, the Group adopted a linked presentation for its non-recourse debt
financing. This presentation method is not permissible under IFRS and
accordingly the non-recourse financing element has been reclassified as
borrowings for 2005.
As permitted under IFRS1, first time adoption of International Financial
Reporting Standards, the Group has elected not to restate comparative
information for the financial instruments standards IAS 32 and IAS 39. A
restatement of the opening balance sheet at 1 January 2005 to present the
Group's opening position under IAS 32 and 39 is included in these interim
financial statements as Appendix A.
2 Segment information
The Group's primary reporting format is geographical segments and its secondary
format is business segments.
The Group's geographical segments are determined by the location of the Group's
assets and operations. The Group's business in each geography is managed
separately and held in separate statutory entities.
Segmental performance for the period to 30 June 2005 was as follows:
Segmental analysis
Unaudited six Restated Restated year
months ended 30 unaudited six ended 31 Dec
June 2005 months ended 30 2004
June 2004
£'000 £'000 £'000
Revenue by geographic market
Continuing operations:
UK 715,517 758,425 1,433,685
Germany 299,983 311,937 655,501
France 126,206 147,065 300,380
Belgium &
Luxembourg 9,847 11,514 21,024
---------- ---------- ----------
Continuing
operations 1,151,553 1,228,941 2,410,590
Discontinued
operation - 25,977 45,162
---------- ---------- ----------
Total 1,151,553 1,254,918 2,455,752
========== ========== ==========
Gross profit by geographic market
UK 88,130 107,904 205,657
Germany 40,720 42,440 90,479
France 12,383 16,583 31,771
Belgium &
Luxembourg 1,044 1,193 2,291
---------- ---------- ----------
Continuing
operations 142,277 168,120 330,198
Discontinued
operation - 3,115 5,203
---------- ---------- ----------
Total 142,277 171,235 335,401
========== ========== ==========
Operating profit/(loss) by geographic market
UK 14,904 29,259 63,845
Germany (1,457) 2,537 8,999
France (7,920) (2,005) (6,682)
Belgium &
Luxembourg (105) 68 16
---------- ---------- ----------
Continuing
operations 5,422 29,859 66,178
Discontinued
operation - (282) (3,903)
---------- ---------- ----------
Total 5,422 29,577 62,275
========== ========== ==========
Revenue by business segment
Technology
sourcing 893,753 998,841 1,931,569
Infrastructure
integration 52,820 58,688 115,502
Managed
services 204,980 197,389 408,681
---------- ---------- ----------
Continuing
operations 1,151,553 1,254,918 2,455,752
Discontinued
operation - (25,977) (45,162)
---------- ---------- ----------
Total revenue
from
continuing
operations 1,151,553 1,228,941 2,410,590
========== ========== ==========
3 Income tax
The charge based on the profit for the period
comprises:
Unaudited six Restated Restated year
months ended 30 unaudited six ended 31 Dec
June 2005 months ended 30 2004
June 2004
£'000 £'000 £'000
UK Corporation tax
- Current 5,793 10,384 21,652
- Prior 196 (868) (3,249)
- Deferred tax (37) 346 1,717
Foreign tax 2 - (544)
------- ------- --------
5,954 9,862 19,576
Share of joint
venture's tax 124 (61) 63
------- ------- --------
6,078 9,801 19,639
======= ======= ========
4 Dividends
The proposed final dividend for 2004 of 5.2p per ordinary share was approved at
the AGM in April 2005 and was paid on 31 May 2005. An interim dividend in
respect of 2005 of 2.5p per ordinary share, amounting to a total dividend of
£4,680,000, was declared by the Directors at their meeting on 12 September 2005.
This interim report does not reflect this dividend payable.
5 Earnings per share
Basic earnings per share is calculated by dividing the net profit for the period
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares in issue during the period.
Diluted earnings per share is calculated by dividing the net profit attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the period adjusted for the effect of dilutive share options.
The following reflects the income and share data used in the total operations
basic and diluted earnings per share computations:
Unaudited six Restated Restated year
months ended 30 unaudited six ended 31 Dec
June 2005 months ended 30 2004
June 2004
£'000 £'000 £'000
Profit
attributable
to equity
holders of the
parent 2,184 19,987 44,435
------- ------- --------
No '000 No '000 No '000
Weighted
average number
of ordinary
shares for
basic earnings
per share 187,147 186,032 186,441
Effect of dilution:
Share options 1,010 3,730 2,538
------- ------- --------
Adjusted
weighted
average number
of ordinary
shares for
diluted
earnings per
share 188,157 189,762 188,979
======= ======= ========
6 Investments
Disposal of subsidiary
On 2 January 2005 the Group disposed of its Austrian subsidiary, Computacenter
GmbH (Computacenter Austria), a company that was a separate geographical segment
of the Group.
As at 30 June and 31 December 2004, Computacenter Austria was classified as an
asset held for sale, and was stated at the lower of carrying value and fair
value less costs to sell, and income and expenses for the year ended 31 December
2004 were included within the income statement.
7 Cash and cash equivalents
Unaudited six Restated Restated year
months ended 30 unaudited six ended 31 Dec
June 2005 months ended 30 2004
June 2004
£'000 £'000 £'000
Cash and cash equivalents as at
the end of the period comprise:
Cash at bank
and in hand 142,832 54,327 98,218
Short term
deposits 2,000 45,000 40,000
Bank
overdrafts (40,708) (38,068) (58,637)
Non-recourse
financing (16,803) - -
-------- ------- --------
87,321 61,259 79,581
Cash at bank
and in hand
attributable
to
discontinued
operation - 1,706 964
-------- ------- --------
87,321 62,965 80,545
======== ======= ========
Had IAS 32 and 39 been applied to the 2004 comparatives, cash and cash
equivalents would have been reduced for non-recourse financing by £55,643,000 as
at June 2004, and £39,043,000 as at December 2004. Further details on the
adoption of IAS 32 and 39 are provided within Note 1 and Appendix A.
8 Post balance sheet event
Further to the German and Austrian acquisition update contained in note 14 of
the 2004 Annual Report and Accounts and the press release dated 19th May 2005 on
the outcome of the work of the independent Expert, PricewaterhouseCoopers,
Computacenter plc is pleased to announce the resolution of the tax assets claim
noted as a contingent liability in the Accounts of Computacenter plc.
On the 15th October 2003 the vendors claimed that the Group had breached a
provision of the German Purchase Agreement concerning an adjustment relating to
tax assets, and issued a claim for EUR52,165,292 (£36,892,800) plus interest,
for upfront payment of the tax assets as opposed to payment as the assets are
utilised. Computacenter is pleased to announce that following a recent
arbitration hearing, Computacenter has reached an agreement with the vendors
under which the vendors claim has been withdrawn and Computacenter will purchase
the tax assets outright. Although the arbitral tribunal did not render a final
decision on the merits of the tax claim, it proposed a settlement which did not
allocate value to this claim.
The Net Asset Value claim of £32,448,000 as noted in the 19th May 2005 press
release is included as a receivable in debtors at 31st December 2004, the net
result of this agreement is that Computacenter has received EUR40,000,00 . The
upfront purchase of the tax assets will result in a deferred tax asset on the
Group balance sheet.
9 Publication of non-statutory accounts
The financial information contained in the interim statement does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
auditors have issued an unqualified opinion on the Group's statutory financial
statements under UK GAAP for the year ended 31 December 2004. Those accounts
have been delivered to the Registrar of Companies.
Appendix A: restatement of balance sheet and equity at 1 January 2005 for the
effects of IAS 32 and IAS 39
Under IFRS 1, first time adoption of international financial reporting
standards, the Group is not required to present comparative information which
complies with IAS 32 and IAS 39. The Group's hedging strategy is unchanged in
respect of covering the risk of foreign currency purchases. The accounting
differences for which the 2005 opening balance sheet is restated and which will
apply to the 2005 accounts are noted below:
Balance sheet at 1
January 2005
IFRS pre Hedging of Non-recourse Restated IFRS
restatement for forward financing
IAS 32 & IAS 39 currency
contracts
£'000 £'000 £'000 £'000
Assets
Non-current assets
Property,
plant and
equipment 89,914 - - 89,914
Intangible
assets 7,923 - - 7,923
Investment in
an associate
accounted for
using the
equity method 373 - - 373
Deferred
income tax
asset 1,486 - - 1,486
-------- -------- ------- -------
99,696 - - 99,696
-------- -------- ------- -------
Current assets
Inventories 118,914 - - 118,914
Trade and
other
receivables:
gross 438,452 1,736 - 440,188
Less:
non-returnable
proceeds (39,043) - 39,043 -
-------- -------- ------- -------
399,409 1,736 39,043 440,188
Prepayments 55,135 - - 55,135
Cash and
short-term
deposits 138,218 - - 138,218
-------- -------- ------- -------
711,676 1,736 39,043 752,455
Non-current
assets
classified as
held for sale 9,208 - - 9,208
-------- -------- ------- -------
Total assets 820,580 1,736 39,043 861,359
======== ======== ======= =======
Equity and
liabilities
Equity attributable to
equity holders of the
parent
Issued capital 9,489 - - 9,489
Share premium 73,920 - - 73,920
Capital
redemption
reserve 100 - - 100
Investment in
own shares (2,503) - - (2,503)
Other reserves (904) - - (904)
Amounts
recognised
directly in
equity
relating to
non-current
assets held
for sale (7) - - (7)
Retained
earnings 245,113 (148) - 244,965
-------- -------- ------- -------
325,208 (148) - 325,060
Minority
interest 46 - - 46
-------- -------- ------- -------
Total equity 325,254 (148) - 325,106
-------- -------- ------- -------
Non-current
liabilities
Interest-beari
ng loans and
borrowings 429 - - 429
Provisions 15,233 - - 15,233
Other
non-current
liabilities 2,691 - - 2,691
Deferred
income tax
liabilities 1,455 (63) - 1,392
-------- -------- ------- -------
19,808 (63) - 19,745
-------- -------- ------- -------
Current liabilities
Trade and other payables 306,964 - - 306,964
Deferred Income 89,083 - - 89,083
Interest-bearing loans
and borrowings 58,706 - 39,043 97,749
Forward currency contracts - 1,947 - 1,947
Income tax payable 11,519 - - 11,519
Provisions 2,358 - - 2,358
-------- -------- ------- -------
468,630 1,947 39,043 509,620
Liabilities directly
associated with
non-current assets
classified as held
for sale 6,888 - - 6,888
-------- -------- ------- -------
Total liabilities 495,326 1,884 39,043 536,253
-------- -------- ------- -------
Total equity and
liabilities 820,580 1,736 39,043 861,359
======== ======== ======= =======
The Group has applied hedge accounting under IAS 39 for certain foreign currency
exposures. The fair values of both the hedging instruments and the hedge item
are recognised in the income statement at each measurement date.
Under UK GAAP, the Group adopted a linked presentation for its non-recourse debt
financing. This presentation method is not permissible under IFRS and
accordingly the finance element has been reclassified as borrowings for 2005.
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