Computacenter plc (LON: CCC), a leading independent technology partner trusted by large corporate and public sector organisations, today announced its results, based on unaudited financial information, for the six month period ended 30th June 2019.
|Financial Highlights:||H1 2019||H1 2018||PercentageChangeIncrease/(Decrease)|
|Services revenue (£ million)||595.7||574.8||3.6|
|Technology Sourcing revenue (£ million)||1,831.3||1,434.1||27.7|
|Revenue (£ million)||2,427.0||2,008.9||20.8|
|Adjusted1 profit before tax (£ million)||53.5||52.1||2.7|
|Adjusted1 diluted earnings per share (pence)||34.5||32.7||5.5|
|Dividend per share (pence)||10.1||8.7||16.1|
|Statutory profit before tax (£ million)||50.8||52.0||(2.3)|
|Statutory diluted earnings per share (pence)||33.2||31.6||5.1|
|Cash and cash equivalents (£ million)||114.3||72.9|
|Adjusted net (debt)/funds3 (£ million)||(3.1)||53.7|
|Net (debt)/funds* (£ million)||(114.1)||49.7|
|Net cash (outflow)/inflow from operating activities (£ million)||(1.1)||8.4|
|Reconciliation between Adjusted1 and Statutory Performance|
|Adjusted1 profit before tax (£ million)||53.5||52.1|
|Exceptional and other adjusting items:|
|Costs related to acquisition (£ million)||(0.5)||–|
|Amortisation of acquired intangibles (£ million)||(2.2)||(0.1)|
|Statutory profit before tax (£ million)||50.8||52.0|
*The Group recognised £110.2 million of right-of-use assets and £111.0 million of lease liabilities as at 30 June 2019 under the new IFRS 16 accounting standard. The Group includes lease liabilities within its net (debt)/funds measure. Due to the distortive effect of the capitalised lease liabilities on the overall liquidity position of the Group, these lease liabilities recognised under the new IFRS 16 accounting standard, are excluded from its non-GAAP adjusted net (debt)/funds3 measure.
· The Group’s total revenues grew 20.8 per cent or £418.1 million during the first half of the year, and by 21.6 per cent or £431.5 million during the period in constant currency2. Excluding the impact of acquisitions the Group was ahead of the same period last year, which presented a challenging comparison with the prior period, on an adjusted1 profit before tax basis.
· France has had a pleasing start to the year with an increase in revenues of 18.9 per cent, led by a buoyant Technology Sourcing marketplace where we are growing our customer breadth, and an increase in adjusted1 operating profit of 190.5 per cent, both on a constant currency2 basis. An outstanding result that has underpinned the Group’s performance in the period.
· Germany delivers another strong performance with revenue growth of 4.1 per cent during the period driven by a resilient Technology Sourcing performance and a strong Professional Services result leading to a 2.8 per cent increase in adjusted1 operating profit, both on a constant currency2 basis. This was a very good performance given the material spend reduction from a key customer, which declined by 60.1 per cent down to normal volumes rather than those seen in the prior period, which created such a challenging comparison.
· The UK saw a reduction in revenues of 7.8 per cent as both Services and Technology Sourcing revenues declined. The prior period comparative result contained two very large margin-dilutive Technology Sourcing deals that, being one-off in nature, contributed to this decline. Adjusted1 operating profit fell by 9.3 per cent during the period, despite improvements in both Services and Technology Sourcing margins, due to increased administrative expenses.
· The US acquisition made halfway through the second half of last year has seen a more subdued performance in the first half of 2019, as compared to the last quarter of 2018, due to an increase in operational costs, increased investment in the business, and a decline in operating margins leading to the combined US business making only a small adjusted1 operating profit. We have seen an improvement in performance more recently.
The result has benefited from £416.8 million of revenues, and £1.3 million of adjusted1 profit before tax, resulting from the acquisitions made since 30 June 2018. All figures reported throughout this announcement include the results of the acquired entities.
The Group has adopted IFRS 16 from 1 January 2019 which has resulted in changes in accounting policies and adjustments to the amounts recognised in the Financial Statements. Importantly, and in accordance with the modified retrospective approach, the comparative results for the period ended 30 June 2018 have not been restated under the accounting policies adopted as a result of transition to IFRS 16. The current period results include an overall decrease in profitability before tax of £0.8 million on both statutory and adjusted1 basis due to the impact of IFRS 16 which has seen increased interest costs exceed the net of increased depreciation and reduced rental costs due to the timing difference effect of the new accounting standard. An analysis of the impact of transition is presented in note 3 to the summary financial information contained within this announcement. Further information on the implementation of, and transition to, IFRS 16 is included within the Group Finance Director’s review contained in this announcement.
A reconciliation between key adjusted1 and statutory measures is provided within the Group Finance Director’s review contained in this announcement. Further details are provided in note 5 to the summary financial information contained within this announcement.
Mike Norris, Chief Executive of Computacenter plc, commented:
‘The Board’s outlook remains in line with its expectations, which were upgraded as per the Trading Update on 31 July 2019.
Whilst the performance of the first half of 2018 presented a very difficult challenge to beat, the opposite is true of the second half. The Board expects that the full year 2019 profit growth, in monetary value, will be the best in the company’s history. This performance will be predominantly achieved without the aid of acquisitions, however we expect to see a more significant contribution from our acquired business in the USA during the second half.
Looking further ahead will always be challenging but the momentum in the industry remains positive as customers continue to invest in technology to digitalise their business. This industry’s momentum is backed up by an improving operational capability which both increases the quality we deliver to customers and reduces operational cost. While Computacenter will continue to remain predominantly an organic growth company, which has served us so well for many years, this has been enhanced by our acquisitions over the last 12 months which gives us additional growth drivers.
Whilst we are fully aware of macroeconomic challenges and take nothing for granted, we remain as positive about the future as we have ever been.’
1 Adjusted operating profit or loss, adjusted net finance income or expense, adjusted profit or loss before tax, adjusted tax, adjusted profit or loss, adjusted earnings per share and adjusted diluted earnings per share are, as appropriate, each stated before: exceptional and other adjusting items including gain or losses on business acquisitions and disposals, amortisation of acquired intangibles, utilisation of deferred tax assets (where initial recognition was as an exceptional item or a fair value adjustment on acquisition), and the related tax effect of these exceptional and other adjusting items, as Management do not consider these items when reviewing the underlying performance of the Segment or the Group as a whole. Prior to the adoption of IFRS 16, adjusted gross profit or loss and adjusted operating profit or loss included the interest paid on customer-specific financing (CSF) which Management considered to be a cost of sale. A reconciliation between key adjusted and statutory measures is provided within the Group Finance Director’s review contained in this announcement which details the impact of exceptional and other adjusted items when compared to the non-Generally Accepted Accounting Practice financial measures in addition to those reported in accordance with IFRS. Further detail is provided within note 5 to the summary financial information contained in this announcement.
2 We evaluate the long-term performance and trends within our strategic objectives on a constant currency basis. Further, the performance of the Group and its overseas Segments are shown, where indicated, in constant currency. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information gives valuable supplemental detail regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period average exchange rates and comparing these recalculated amounts to our current period results or by presenting the results in the equivalent local currency amounts. Wherever the performance of the Group, or its overseas Segments, are presented in constant currency, or equivalent local currency amounts, the equivalent prior-period measure is also presented in the reported pound sterling equivalent using the exchange rates prevailing at the time. 2019 Interim Financial Highlights, as shown at the beginning of this announcement, and statutory measures, are provided in the reported pound sterling equivalent.
3 Adjusted net funds or adjusted net debt includes cash and cash equivalents, other short or other long-term borrowings and current asset investments. Following the adoption of IFRS 16 this measure excludes all finance lease liabilities which now includes CSF balances which were previously included within this measure. A table reconciling this measure, including the impact of finance lease liabilities, is provided within note 13 to the summary financial information contained in this announcement.