15th Mar 2005 07:02
Computacenter PLC15 March 2005 Preliminary Results Announcement Computacenter plc, the European IT infrastructure services provider, todayannounces preliminary results for the twelve months ended 31 December 2004. Financial Highlights:• Group revenues broadly unchanged at £2.46 billion (2003: £2.48 billion)• Profit before tax* up 3.2% to £67.3 million (2003: £65.2 million)• Earnings per share* up 2.0% to 25.5p (2003: 25p)• Diluted earnings per share* increased by 2.0% to 25.1p (2003: 24.6p)• Final dividend of 5.2p per share, total dividend up 7.1% to 7.5p (2003: 7.0p)• Strong operating cash flow and balance sheet with net funds of £80.0 million at year-end *excluding non-operating exceptional charges of £2.6 million relating to the disposal of the Austrian business and the dilution of the Biomni shareholding. Operational Highlights:• Strong UK Managed Services revenue growth of 16.6% (2003: 10.9%)• Integration of Computacenter Germany on plan; operating profit up to £9.0 million• New management in place in France and Germany• Substantial investment in France to restore profitability• As previously announced, HP renegotiation likely to have £10 million adverse impact on 2005 profit Ron Sandler, Chairman of Computacenter plc, commented: "2004 was a year of further good progress for Computacenter. In particular, ourManaged Services revenues in the UK grew by 16.6% and we began to see clearevidence of success in our efforts to transfer our Managed Services bestpractices to Computacenter Germany." "We have intensified our focus on services growth and we are also seeking toextend our penetration of the small and medium-size business sector." "These developments, taken together with the prospects of growth in our Germanoperations and the potential for recovery in France, give me confidence that theGroup is well positioned to deliver attractive levels of earnings growth in theyears ahead." 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 4200Tim Lynchwww.tulchangroup.com High resolution images are available for the media to view and download free ofcharge from www.vismedia.co.uk Chairman's Statement 2004 was a year of further good progress for Computacenter. Whilst revenues forthe Group were broadly unchanged at £2.46 billion (2003: £2.48 billion), thisrepresents a considerable achievement in markets where core product pricescontinued to decline in the order of 12% - 15%. Profit before tax rose 3.2% to£67.3 million (2003: £65.2 million), excluding non-operating exceptional chargesrelating to the disposal of the Austrian business and the dilution of ourinterest in Biomni. Diluted earnings per share increased by 2.0% to 25.1p (2003:24.6p). Including the exceptional charges, profit before tax was £64.6 millionand diluted earnings per share was 23.7p. Cash generation from operations wasextremely strong, and the Group ended the year with net funds of £80.0 million(2003: £49.9 million). I am pleased to recommend a final dividend of 5.2p per share, bringing the totaldividend for the year to 7.5p (2003: 7.0p), an increase of 7.1%. The finaldividend will be paid on 31 May 2005 to shareholders on the register as at 6 May2005. There are many encouraging features of Computacenter's performance in 2004. Inparticular, our Managed Services revenues in the UK grew by 16.6% and we secureda number of significant new contracts, in addition to extending the scope ofmany existing engagements. Our Managed Services performance contributed to anincrease in UK operating profit of 4.2% to £64.4 million. We also began to see clear evidence of success in our efforts to transfer ourManaged Services best practices to Computacenter Germany. We now have anannualised Managed Services contract base in excess of £82 million in Germany,and are confident that this will continue to grow strongly in the years ahead. More generally, we are pleased with the overall progress made in integrating andbuilding our German business. Although operating profit in Computacenter Germanyrose only modestly to £9.0 million (2003: £8.7 million), this does not fullyreflect the achievements of the integration programme since the acquisition inearly 2003. The changes made to the management, organisation and workingpractices have been considerable, and a sound platform has now been created forfuture growth. Early in 2005, we announced our decision to dispose of our loss-making Austrianoperation, which we acquired as a condition of the acquisition of our Germanbusiness in 2003. Computacenter Austria is to be acquired by S&T SystemIntegration & Technology Distribution AG, which will also become Computacenter'sinternational partner for service delivery in Austria and other countries acrossCentral and Eastern Europe. The disposal is expected to complete in March 2005. The performance of Computacenter France continued to disappoint, with operatinglosses deepening to £6.2 million (2003: loss of £2.7 million). Whilst thispartly reflects the substantial investment we made during the year on variousbusiness improvement initiatives, the benefits of which have yet to be realised,this is clearly an unacceptable financial performance. A leading presence in theFrench market remains a core part of our strategy, and we are determined torestore Computacenter France to financial and competitive health. The managementteam in this business has now been substantially re-constituted, and Chris Webb,one of our most senior executives and previously responsible for our UK salesand services delivery, has been placed in charge of the French business from thestart of 2005. More encouragingly, growth in our BeLux business was strong, particularly inManaged Services, and for the first time, the Belgium operation showed a profit. In November, we announced that the outcome of the annual renegotiation of termswith HP, our principal trading partner, would have a material adverse impact onComputacenter's profits in 2005. This outcome reflects the intensity ofcompetition in the IT infrastructure market, which is unlikely to moderate inthe foreseeable future. Trading in the first two months of 2005 has been subdued and below anticipatedlevels. However, given Computacenter's seasonal sales patterns it is too earlyto know whether this will have any impact on the overall result for the year. Looking ahead, and in response to market developments, we haveintensified our efforts to accelerate the growth of the services side of ourbusiness and to broaden the range of our services activities. We are alsodetermined to extend the penetration of our product sales into the small andmedium-sized business segment. In addition, we have stepped up our investmentsin new technology to improve the efficiency of our core product sales processes.These developments, taken together with the prospects of growth in our Germanoperations and the potential for recovery in France, give me confidence that theGroup is well positioned to deliver attractive levels of earnings growth in theyears ahead. Computacenter has a long history of successfully adapting its business model tomeet changing market conditions. This has been possible due to the staff ofComputacenter, who have continued to demonstrate a deep commitment to the Groupand an enthusiasm to deliver ever higher levels of performance, and to whom Ioffer my wholehearted thanks. Review of Operations UK In 2004, we saw 16.6% growth in our Managed Services revenues as customerscontinued to look to Computacenter to help them improve the quality and reducethe cost of IT infrastructure management. This growth in Managed Services helpedto mitigate the impact of intense price competition in the technology supplymarket. Consequently, whilst revenues in the UK declined slightly to £1.43billion (2003: £1.46 billion), UK operating profit grew 4.2% to £64.4 million(2003: £61.8 million). Our commitment to reduce costs and improve service helped persuade EDF Energy,in the second half of the year, to award us a major Managed Services contract.Under the terms of the agreement, Computacenter will manage in excess of 10,000desktops and laptops, as well as printers and servers, at more than 100 sitesacross the UK. The contract is for three years, with an option to extend for afurther two years. Improved end-user service was the main focus of the award of a seven-yearManaged Services contract, valued at £11 million, by South Lanarkshire Council.Computacenter will be responsible for the entire lifecycle of the council's5,000 desktops, laptops and printers, from procurement and installation tomaintenance and disposal. Other Managed Services successes included a five-year contract with Channel 4Television, valued at £7 million, for a full end-to-end Managed Service, and theaward of additional business worth £1.2 million per year on our currentfive-year contract with BAA. We also saw increased interest in our Infrastructure Integration services.Particularly notable was a large-scale roll-out for English Welsh and ScottishRailways, including server and desktop product supply and configuration, projectmanagement and installation. Also notable was a project for the UK Government'sPrescription Pricing Authority, for which we deployed a consolidated enterprisestorage, server and support solution. Our Technology Sourcing business performed well during 2004. Revenues declinedby 3.2%, although this is in the context of continued price erosion in themarket in the order of 12-15%. Product margins overall were stable. However, asannounced in November, the renegotiation of terms with HP, our principal tradingpartner, is likely to have an adverse effect on UK profits in 2005 in the orderof £10 million. Substantial new Technology Sourcing business in 2004 included an additional £19million of product supply for BT Retail, arising out of our BT Managed Servicescontract, and a three-year contract with Geest, covering vendor management andsupply, with order placement via our Computacenter Connect webshop. Revenues of CCD, our trade distribution division, declined slightly as a directresult of changes to HP's reseller end-user pricing model. This affected allsimilar distributors, but did not impact either our leading position with thevendor nor our overall profitability. RDC, our re-cycling and re-marketing arm, saw a 25% growth in throughput overthe full year and recorded its best ever half-year profit performance in H12004. This performance is partly attributable to organisations looking toimprove their waste management to conform to European Waste Electrical andElectronic Equipment (WEEE) directives. Germany Despite continuing price pressure we saw increased demand for outsourcingservices in the second half of the year. As a result, and following a slightlydisappointing first half, we recorded 7.7% growth in German H2 revenues comparedto the same period in 2003, resulting in full year revenue growth of 3.2%. Inlocal currency this growth was 10.1% in H2 and 5.2% for the year. Full yearprofits showed a modest increase of 3.1% to £9.0 million (2003: £8.7 million). In June, and consistent with our determination to share senior managementexpertise across the Group, we appointed Colin Brown as CEO of ComputacenterGermany (formerly CC CompuNet). Colin previously ran the highly successful UKGovernment business. Growing our services business and improving our ability to respond quickly tochanging customer requirements have been key priorities in ComputacenterGermany. This has led to a restructuring of our sales organisation to align itmore closely with the market, and the centralisation of our project managementand consulting resources. These initiatives are similar to changes that haveproved successful in the UK. To reduce operational overheads and streamline our branch network, weconsolidated our premises in Essen and Cologne, creating a new salesheadquarters in Ratingen, near Dusseldorf. There were a number of substantial Managed Services contract wins and extensionsin 2004, which helped to grow Computacenter Germany's Managed Services contractbase by 28.0% to £82.9 million. These include the award of a five-year ManagedServices contract by FinanzIT Servicegesellschaft, a major IT supplier to theGerman Savings Banks Organisation, covering 4,500 users and valued atapproximately €12 million. Other successes included the award of a three-year Managed Services contract byDaimlerChrysler Services, and a contract for Managed Services and TechnologySourcing with leading German insurance company R+V Versicherung. We were alsoawarded a three-year Managed Services extension on our contract with BMW Group. France Our French business traded poorly throughout 2004 and was subject to someextensive re-engineering, particularly in the second half. France recorded anoperating loss of £6.2 million (2003: £2.7 million) on revenues of £300.4million (2003: £324.5 million). Excluding amortisation of negative goodwill, thelosses were broadly similar to those of the previous year. These results reflect a substantial investment in a major transformationproject, the full benefits of which are still to be realised. Nevertheless, thislevel of performance is clearly unsatisfactory and significant changes were madeduring the year to improve the business and the effectiveness of the managementteam. New managers were recruited to run our maintenance, finance and logisticsfunctions, and in January 2005 we appointed Chris Webb, formerly responsible forUK sales and services delivery, as Managing Director of Computacenter France. We continue to focus on the three core activities of product logistics,implementation and maintenance. In these areas we are seeking to improve servicelevels and delivery times, developing our capability for large project roll-outsand investing in training to ensure we have the right mix of skills to supportfuture growth. Significant improvements in operational performance in logistics are alreadytaking place. For example, a record 97% of shipments to customers were made fromour Roissy operations centre on the same day as the orders were received by us.The efficiency of the operations centre has benefited from a designreconfiguration and introduction of a new stock location management system. Togive us greater logistics flexibility and capacity we also opened a new 3,000m2warehouse with its own Goods-In and Goods-Out facility. We see the improved performance of our maintenance services as critical tofinancial recovery in Computacenter France. This has led us to redesign ourmaintenance organisation, which now reports directly to the Managing Director.We have also successfully introduced into France our UK parts management system,which has been a key contributor to the improved commercial performance of theUK's maintenance business in recent years. At the same time, we have substantially improved our financial management andcontrol disciplines. By the year-end, we succeeded in reducing accountsreceivable days by 33%. Computacenter France continued to win significant new business. A new customer,DIM, awarded us a Managed Services contract, covering help desk, assetmanagement, desktop support and management of moves and changes. We also won anextension on our Managed Services contract with Elior, covering an off-site helpdesk, maintenance and network and server administration. Other notable winsincluded Infrastructure Integration consultancy and storage solutions for theFrench government's Agence Centrale des Organismes de Securite Sociale, and amajor Technology Sourcing agreement with Biomerieux. Belgium and Luxembourg In 2004 our 'BeLux' operation became profitable for the first time, on thestrength of a 21.4% revenue growth to £21.0 million. Managed Services activities made a strong and growing contribution, led byongoing contracts with SWIFT and Group Deutsche Boerse/Clearstream, as well assignificant technology refresh projects with customers such as Banksys, EliLilly, and the King Baudouin Foundation. New customer wins included server deployment projects for BT Global Services andCampbell Foods. Significant services projects were undertaken for the NationalResearch Fund and the NATO Maintenance and Supply Agency. We continue to look at opportunities for expanding our BeLux business. InLuxembourg, following new legislation introduced for the financial sector, wewere licensed by the Ministry of Finance in March 2005 as a specialised IToperator for banks and investment funds, where we see significant opportunitiesfor growth. Disposals Following a disappointing performance in 2004, we reached agreement in earlyJanuary 2005 to sell our Austrian subsidiary, Computacenter GmbH, to S&T SystemIntegration & Technology Distribution AG. S&T is a Central and Eastern Europeanregional market leader in IT, with revenues of approximately €230 million. Thecompany employs 1,300 people and is listed on the Austrian stock market. We believe S&T's local scale and depth of resource will offer the best prospectsfor our staff and our customers in Austria. S&T will also become Computacenter'sInternational Partner for service delivery in Austria and other countries acrossCentral and Eastern Europe, allowing Computacenter to offer an improved serviceto our international customers in these geographies.The disposal is expected tocomplete in March 2005. During the year, we took the decision to invest no further funds in Biomni, oure-commerce joint venture. At the year-end, our ownership interest in Biomni hadfallen to 41.7%, and subsequent to year end reduced further, producing anon-operating exceptional net charge of £0.3 million. Business Development In the expectation of further pressure on our product margins, we haveintensified our focus on services growth. We are also seeking to extend ourpenetration of the small and medium-size business sector. We are confident thatthe competitive advantage we enjoy from our investment in high quality logisticspresents a significant opportunity for extending our product supply leadershipin the corporate and public sector markets to smaller organisations. The Group continues to invest in systems and processes to support businessgrowth. The next version of our integrated Services Management Tool Suite (SMTSv3.0) will begin to be deployed with UK Managed Services customers in H1 2005and will ultimately be made available across the Group. SMTSv3.0 willsignificantly enhance our Managed Services offering, improving our ability toaudit and manage our customers' technology assets on their behalf. We are also focusing our efforts on further streamlining our sales processes,aided by the introduction of a new web-enabled sales administration system inthe UK, to be implemented in H1 2005, and a major revision of our ComputacenterConnect web-shop. These new e-commerce systems will begin to be implementedacross the rest of the Group towards the end of 2005. In addition, it remains our strategy to establish leading positions in each ofthe major European markets for IT products and services. To that end, therecovery of our business in France and further growth in Germany remain corepriorities. Group profit and loss accountFor the year ended 31 December 2004 Restated 2004 2003 Note £'000 £'000TurnoverTurnover: Group and share of joint venture'sturnover 2,456,575 2,482,713Less: share of joint venture's turnover (823) (1,418)Continuing operations 2,410,590 2,432,283Discontinued operations 45,162 49,012 Group turnover 2 2,455,752 2,481,295Cost of sales 3 (2,120,351) (2,136,647) -------- --------Gross profit 2 335,401 344,648Other operating expenses (net) 3 (269,658) (278,710) -------- --------Operating profit 2Continuing operations 67,290 67,440Discontinued operations (1,547) (1,502) -------- --------Group operating profit 65,743 65,938Share of operating loss in joint venture (411) (333)Share of operating profit in associate 266 510 -------- --------Total operating profit: Group and share ofassociate and joint venture 65,598 66,115Provision for loss on termination of operation 4 (2,356) -Net loss on investment in joint venture 4 (286) - -------- --------Profit on ordinary activities before interestand taxation 62,956 66,115Interest receivable and similar income 5,262 3,249Interest payable and similar charges (3,573) (4,203) -------- --------Profit on ordinary activities before taxation 64,645 65,161Tax on profit on ordinary activities 5 (19,860) (18,902) -------- --------Profit on ordinary activities after taxation 44,785 46,259Minority interests 69 45 -------- --------Profit attributable to members of the parentcompany 44,854 46,304Dividends - ordinary dividends on equityshares 6 (14,101) (13,011) -------- --------Retained profit for the period 30,753 33,293 ======== ======== Earnings per share- Basic 7 24.1p 25.0p- Diluted 7 23.7p 24.6p- Diluted (excluding effect of non-operatingexceptional items) 7 25.1p 24.6pDividends per ordinary share 6 7.5p 7.0p Group statement of total recognised gains and lossesFor the year ended 31 December 2004 2004 2003 £'000 £'000Profit for the financial year excluding share of jointventure and associate 45,168 46,231 Share of joint venture's loss for the year (474) (233) Share of associate's profit for the year 160 306 -------- -------- Profit attributable to members of the parent company forthe financial year 44,854 46,304 Exchange differences on retranslation of net assets ofassociated and subsidiary undertakings (911) 4,159 -------- --------Total recognised gains for the year 43,943 50,463 ======== ======== Group balance sheetAt 31 December 2004 2004 2003 £'000 £'000Fixed assetsIntangible assetsPositive goodwill 4,474 4,755Negative goodwill - (532) -------- -------- 4,474 4,223Tangible assets 93,430 100,549Investments 8 6,021 11,036 -------- -------- 103,925 115,808 -------- --------Current assetsStocks 120,087 134,133Debtors : gross 501,741 520,701Less non returnable proceeds (39,043) (78,390) -------- --------Debtors 462,698 442,311Cash at bank and in hand 139,182 96,997 -------- -------- 721,967 673,441Creditors: amounts falling due within one year (482,572) (466,816) -------- --------Net current assets 239,395 206,625 -------- -------- Total assets less current liabilities 343,320 322,433Creditors: amounts falling due after more than oneyear (3,017) (13,923)Provision for joint venture deficitShare of gross assets 222 385Share of gross liabilities (6,341) (7,609) -------- -------- (6,119) (7,224) Provision for liabilities and charges (19,046) (18,403) -------- --------Total assets less liabilities 315,138 282,883 ======== ======== Capital and reservesCalled up share capital 9,489 9,441Share premium account 73,920 71,486Capital redemption reserve 100 100Investment in own shares (2,503) (2,503)Profit and loss account 234,086 204,244 -------- --------Shareholders' funds - equity 315,092 282,768Minority interests - equity 46 115 -------- -------- 315,138 282,883 ======== ======== Approved by the Board on 14 March 2005 MJ Norris FA ConophyChief Executive Finance Director Group statement of cash flowsFor the year ended 31 December 2004 2004 2003 £'000 £'000 Cash inflow from operating activities 9 60,320 53,521 Returns on investments and servicing of finance 943 (954) Taxation (12,296) (22,456) Capital expenditure and financial investment (7,591) (14,562) Acquisitions and disposals - (37,303) Equity dividends paid (13,587) (14,437) -------- -------- Cash inflow/(outflow) before financing 27,789 (36,191) Financing 2,443 2,207 -------- --------Increase/(decrease) in cash in the period 30,232 (33,984) ======== ======== Reconciliation of net cash flow to movement in net funds 2004 2003 £'000 £'000 Net funds at 1 January 2004 49,925 83,430 Increase/(decrease) in cash in the year 30,232 (33,984)Cash outflow from repayment of debt and lease finance 39 479 -------- --------Change in net cash resulting from cash flows 30,271 (33,505)Exchange movement (149) -Net funds at 31 December 2004 80,047 49,925 ======== ======== Notes to the financial statements 1 Accounting policies Basis of preparationThe financial statements are prepared under the historical cost convention andin accordance with applicable accounting standards. The format of the Group Profit and Loss Account has been changed to Format 1 ofschedule 4 of the Companies Act 1985. Operating costs, as reported in prioryears under Format 2, have been split between cost of sales and other operatingexpenses (net). It is the Directors' opinion that a change in the format isappropriate to provide additional disclosure of gross profit and that theallocation between cost of sales and other operating expenses (net) isconsistent across the Group. 2. Turnover and segmental analysis The Group operates in one principal activity, that of the provision ofdistributed information technology and related services. Turnover represents theamounts derived from the provision of goods and services which fall within theGroup's ordinary activities, stated net of VAT. An analysis of turnover, gross profit, operating profit and net assets is givenbelow: 2004 2003 £'000 £'000Turnover by originUK 1,433,685 1,455,296Germany 655,501 635,150France 300,380 324,517Belgium & Luxembourg 21,024 17,320 --------- --------Continuing operations 2,410,590 2,432,283Austria - discontinued 45,162 49,012 --------- --------Total 2,455,752 2,481,295 ========= ======== Turnover by destination is not materially different to turnover by origin andhas, therefore, not been disclosed. Restated 2004 2003 £'000 £'000Gross profitUK 205,657 201,573Germany 90,479 95,695France 31,771 39,793Belgium & Luxembourg 2,291 1,924 -------- --------Continuing operations 330,198 338,985Austria - discontinued 5,203 5,663 -------- --------Total 335,401 344,648 ======== ======== The gross profit for 2003 has been restated to account for distribution costswithin other operating expenses, as prescribed in Format 1 of schedule 4 of theCompanies Act 1985. Previously these amounts were included in the calculation ofgross profit, as described in note 1. 2004 2003 £'000 £'000Operating profit/(loss)UK 64,426 61,829Germany 8,999 8,728France (6,151) (2,727)Belgium & Luxembourg 16 (390) -------- --------Continuing operations 67,290 67,440Austria - discontinued (1,547) (1,502) -------- --------Total Group excluding associate & joint ventureundertakings 65,743 65,938Share of operating result of German associate and UK jointventure (145) 177 -------- --------Total 65,598 66,115 ======== ======== 2004 2003 £'000 £'000Net assets/(liabilities) employedUK 178,854 187,167Germany 34,596 21,042France 32,234 33,326Belgium & Luxembourg (7,250) (6,397) -------- -------- 238,434 235,138Austria - discontinued (3,716) (2,690) -------- --------Subtotal 234,718 232,448Net assets of associated undertaking 373 510 -------- --------Net assets employed 235,091 232,958Net funds 80,047 49,925 -------- --------Total 315,138 282,883 ======== ======== 3 Cost of sales and operating costs Restated 2004 2003 £'000 £'000Cost of sales 2,120,351 2,136,647 --------- --------- Distribution costs 20,759 22,606Administrative costs 248,899 256,104 --------- ---------Other operating expenses (net) 269,658 278,710 ========= ========= The total figures for 2004 include the following amounts in relation to thediscontinued operation Computacenter Austria: cost of sales £39,959,000 (2003: £43,349,000), distribution costs £133,000 (2003 £156,000), administrativeexpenses £6,617,000 (2003 £7,009,000) and other operating expenses £6,750,000(2003: £7,165,000). 4 Exceptional items 2004 2003 £'000 £'000 Recognised below operating profit:AustriaProvision for loss on disposal 2,356 -Joint ventureDeemed disposal on dilution of share holding (1,516) -Provision for impairment of investment 1,802 - -------- -------- 2,642 - ======== ======== 5 Taxation a) The charge based on the profit for the year comprises: 2004 2003 £'000 £'000 UK Corporation Tax 21,374 17,612Tax overprovided in previous years (2,701) (621) -------- -------- 18,673 16,991Foreign tax current year 4 20Foreign tax prior year (548) - -------- --------Group current tax 18,129 17,011Share of joint venture's tax 63 (100) -------- --------Total current tax 18,192 16,911 Deferred taxOrigination and reversal of timing differences 1,797 1,542Prior year adjustments (129) 449 -------- --------Group deferred tax 1,668 1,991 -------- --------Tax on profit on ordinary activities 19,860 18,902 ======== ======== b) Factors affecting the current tax charge The tax charge for the year is different than the standard rate of CorporationTax in the UK of 30%. The principal reasons for this difference are set outbelow: 2004 2003 £'000 £'000 Total profit before taxation 64,645 65,161 ======== ======== At 30% 19,393 19,548 Expenses not deductible for tax purposes 234 640Relief on share option gains (54) (2,845)Goodwill amortised (75) (919)Impairment of goodwill - 11Adjustments in respect of previous periods (616) -Adjustment following agreement of certain items forearlier years (2,447) -Higher tax on overseas earnings 1 -Provision for loss on disposal of subsidiary 686 -Provision for net loss on investment in joint venture 86 -Disposal of investment (569) -Accounting depreciation in excess of tax depreciation 80 (284)Other timing differences 238 -Profits of overseas undertakings not taxable due tobrought forward loss offset (1,887) (2,590)Losses of overseas undertakings not available for relief 3,122 3,350 -------- --------Current tax charge 18,192 16,911 ======== ======== 6 Dividends 2004 2003 £'000 £'000Equity dividends on ordinary shares :interim paid 2.3p (2003 : 2.0p) 4,316 3,775final proposed 5.2p (2003 : 5.0p) 9,785 9,236 -------- -------- 14,101 13,011 ======== ======== The Computacenter ESOP trust has waived the dividends payable in respect of1,427,042 (2003: 1,427,042) ordinary shares that it owns which are not allocatedto employees. The Computacenter Trustees Limited have waived dividends inrespect of 457,796 (2003:457,796) shares which it owns which are not allocatedto employees and the Computacenter Quest ("Qualifying Employee Scheme Trust")has similarly waived dividends in respect of 927,640 (2003: 1,031,134) sharesthat it owns. 7 Earnings per share The calculation of earnings per ordinary share is based on profit attributableto members of the holding Company of £44,854,000 (2003: £46,304,000) and on186,441,000 (2003: 184,853,000) ordinary shares, being the weighted averagenumber of ordinary shares in issue during the year after excluding the sharesowned by the Computacenter Employee Share Trust, Computacenter Trustees Limitedand the Computacenter Quest. The diluted earnings per share is based on the same earnings figure of £44,854,000 (2003: £46,304,000) and on 188,979,000 (2003: 188,610,000) ordinary shares,calculated as the basic weighted average number of ordinary shares, plus2,537,346 (2003: 3,757,000) dilutive share options. An additional earnings per share ratio of 25.1p was presented to provide ameasure of Group operating activities, excluding the exceptional items. Thisadditional earnings per share ratio is based on earnings of £47,496,000, whichcomprises the profit attributable to members of the holding company of£44,854,000, excluding the exceptional loss of £2,642,000, and on 188,979,000ordinary shares. 8 Investments 2004 2003 £'000 £'000GroupLoan to joint venture (a) 5,648 7,450Associated undertakings (b) 373 539Other listed investments (c) - 3,047 -------- -------- 6,021 11,036 ======== ======== (a) Loan to joint venture £'000CostAt 1 January 2004 and 31 December 2004 7,450ProvisionAt 1 January 2004 -Charge in the year 1,802 ----------At 31 December 2004 1,802 ==========Net book valueAt 31 December 2004 5,648 ==========At 31 December 2003 7,450 ========== (b) Associated undertakings Share of net tangible assets £'000 At 1 January 2004 510Increase in investment 110Dividend received (509)Share of profit of associated undertaking 266Exchange adjustments (4) --------At 31 December 2004 373 ======== (c) Other listed investments £'000CostAt 1 January 2004 4,617Disposal (4,617) --------At 31 December 2004 - ======== ProvisionAt 1 January 2004 1,573Disposal (1,573) --------At 31 December 2004 - ======== Net Book Value At 31 December 2004 - ========At 31 December 2003 3,047 ======== Details of the principal investments at 31 December 2004 in which the Group orthe Company holds more than 20% of the nominal value of ordinary share capitalare as follows:- Subsidiary and associated Country of Nature of Proportionundertaking registration Business Held Computacenter (UK) Limited England IT 100% Infrastructure services Computacenter France SA France IT 99.4% Infrastructure services Computacenter Holding GmbH Germany IT 100% Infrastructure services Computacenter GmbH Germany IT 100% Infrastructure services CC Managed Services GmbH Germany IT 100% Infrastructure services Computacenter NV/SA Belgium IT 100% Infrastructure services RD Trading Limited England IT Asset *100% Management Computacenter NV Luxembourg IT 100% Infrastructure Services Biomni Limited England Software 41.7% development HelpByCom GmbH Germany IT **49% Infrastructure services ICG Services Limited England International ***100% IT Infrastructure services * includes indirect holdings of 100% via Computacenter (UK) Limited** includes indirect holdings of 49% via Computacenter Holding GmbH*** includes indirect holdings of 35.7% via Computacenter Holding GmbH During the period CC CompuNet was renamed Computacenter Germany. Update on acquisitions - Germany and AustriaOn 2 January 2003, the Group acquired the trade and assets of GE CompuNet inGermany and GECITS in Austria for an initial consideration of £38,134,000. There has been no change in the circumstances that has resulted in a change tothe Board's view of the value of goodwill to the Group. Because the audited value of the net assets at completion was lower thanstipulated in the purchase agreement, Computacenter anticipates receiving arepayment of £32,448,000 from GE Capital, the vendors, resulting in a netconsideration for the acquisition of £4,683,000. Elements of this repaymentcalculation are disputed by GE Capital and in accordance with the purchaseagreement, PricewaterhouseCoopers has been appointed, as an independent expert,to settle the matter. The Board has reviewed the likely outcome, taking accountof the proceedings to date, and is still of the view that this is properlyreflected in the Group's accounts. The assets of each of the acquired companies have been included in the Group'sbalance sheet at their fair values at the date of acquisition. Furtherconsideration may be payable to the vendor, contingent on the result of theacquired businesses in 2004. No provision has been made for further payments,based on the actual performance in 2004. Update on contingent liabilityOn 15 October 2003 the vendors claimed that the Group had breached a provisionof the German purchase agreement concerning an adjustment relating to taxassets, and have issued a claim for €52,165,292 (£36,892,000), plus interest,for upfront payment for the tax assets as opposed to payment as the assets areutilised. The Group rejects this adjustment and legal proceedings are nowpending between the parties. On the basis of legal advice received, the Board isconfident that this claim is without merit and will be defended accordingly. Noprovision for this claim has been made in the Group's accounts. Analysis of the acquisition of GE CompuNet and GECITS Austria: Net assets at date of acquisition: Book value Adjustments Provisional fair value to Group £'000 £'000 £'000 Tangible fixedassets 15,457 (4,003) 11,454Investments 81 - 81Stocks 34,438 (1,074) 33,364Debtors 103,881 5,380 109,261Creditors duewithin one year (132,704) (4,948) (137,652)Creditors dueafter one year - (2,690) (2,690)Provisions forliabilities andcharges - (9,135) (9,135) -------- --------- -------- 21,153 (16,470) 4,683 ======== ========= ======== Discharged by:Fair value of netconsideration 4,683 --------Goodwill arising on acquisition - ======== Adjustments relate to the adoption of Computacenter's Group accounting policiesand recognition of property provisions. 9 Reconciliation of operating profit to operating cash flows 2004 2003 £'000 £'000 Operating profit 65,743 65,938Depreciation 18,382 22,665Amortisation of positive goodwill 281 544Impairment of positive goodwill - 46Amortisation of negative goodwill (532) (4,261)Revaluation of listed investment - (292)Loss on disposal of fixed assets 804 914Profit on disposal of investment (1,603) -Dividend received from associate 509 -Increase in debtors (23,081) (16,963)Decrease / (increase) in stocks 14,278 (4,908)Decrease in creditors (13,532) (8,432)Currency and other adjustments (929) (1,730) -------- --------Net cash inflow from operating activities 60,320 53,521 ======== ======== 10 Publication of non statutory accounts The financial information contained in this preliminary statement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The financial information set out in this announcement is extracted fromthe full Group financial statements for the year ended 31 December 2004, theauditor's report on which has yet to be signed. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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