12th Sep 2006 07:01
Computacenter PLC12 September 2006 COMPUTACENTER PLC Interim Results Announcement Computacenter plc, the European IT infrastructure services provider, todayannounces interim results for the six months ended 30 June 2006. Financial Highlights: • Group revenues of £1.11 billion (2005: £1.15 billion)• Profit before tax of £14.5 million (2005: £8.2 million)• Earnings per share of 4.3p (2005: 1.2p)• Interim dividend of 2.5p per share (2005: 2.5p)• Strong balance sheet with net funds of £90.6 million at period end• Return of £74.4 million to shareholders completed in July 2006 Operational Highlights: • Encouraging performance of UK Technology Solutions, our consulting and systems integration business, with a number of significant projects undertaken• Recently established Computacenter Direct, our telesales mid-market provider, continued to grow aggressively• Good progress in embedding our shared services delivery model into our customer propositions• Newly formed software business unit delivered strong growth in revenues• German business returned to profit and successfully secured several new Managed Services contracts• Improved French performance, although product margin pressures intensified Ron Sandler, Chairman of Computacenter plc, commented: "The improvement in Computacenter's profitability is encouraging. I havereported in the past on the market challenges faced in recent years byComputacenter, and on the significant efforts underway to improve ourcompetitiveness and focus our resources on higher margin activities. Whilst thevarious transformation programmes are essentially long-term in nature and it isfar too early to comment definitively on their success, we are increasinglyconfident that we are on the right track as today's results demonstrate. "Looking ahead, we anticipate that the improvements we are seeing in the Group'smarket positioning and performance will continue as the year progresses. Theoutlook for the full year remains in line with expectations." 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 ofcharge from www.vismedia.co.uk Chairman's Statement Computacenter made steady progress in the first half of 2006. Although Grouprevenues were largely unchanged at £1.11 billion (2005: £1.15 billion), profitbefore tax increased by 76.7% to £14.5 million (2005: £8.2 million) due to amore favourable business mix. The balance sheet remained strong, although arequirement for greater working capital across the Group, largely as a result ofrevenue growth in France and the lengthening of terms of payment with some keycustomers in the UK, meant that net funds fell by £9.8 million to £90.6 millionat the period end. The intention of the Board to return surplus cash to shareholders, subject tothe resolution of various tax matters, was announced in March. I am pleased toreport that the tax uncertainties were satisfactorily resolved during the periodand on 4 July 2006, £74.4 million was returned to shareholders by way of a Bshare issue. As a part of this process, a 5 for 6 share consolidation wasundertaken. I am pleased to announce the payment of an interim dividend of 2.5p per share(2005: 2.5p) to be paid on 20 October 2006 to shareholders on the register as at22 September 2006. This reflects the available cash resources in the businessand is consistent with our policy of seeking to keep the interim dividend at alevel equal to one-third of the preceding year's total dividend. The improvement in the Group's profitability is encouraging. I have reported inthe past on the market challenges faced in recent years by Computacenter, and onthe significant efforts underway in each of our three principal Europeanbusinesses to improve our competitiveness. Whilst the various transformationprogrammes are essentially long-term in nature and it is far too early tocomment definitively on their success, we are increasingly confident that we areon the right track. In recent years our growth in sales of enterprise products (including servers),software and services has outstripped our performance in the area of desktops,notebooks and peripherals. This trend continued in the first half of 2006 tosuch an extent that PC and peripheral business revenues now account for only 33% of the Group total. This figure varies widely by country; it is just 13% inGermany and 35% in the UK; whilst in France, this business still accounts for60% of revenues. In the UK, Computacenter's operating profit increased by 10.3% to £16.4 million(2005: £14.9 million), with both the Services and Product Divisions contributingto this improvement. Within the Services Division, the performance of TechnologySolutions, our consulting and systems integration unit, was particularlyencouraging with a number of significant projects undertaken in such areas asserver virtualisation, datacentre relocation and security solutions.Considerable efforts have been made in recent years to increase the breadth andsophistication of Computacenter's technology integration capabilities, and it ispleasing to see these increasingly recognised by customers. Within our contractual services business units, Support Services and ManagedServices, good progress was made in further embedding a shared services deliverymodel. Through centralisation of core resources, such as the help desk, andrigorous adherence to key processes and routines, the consistency, reliabilityand cost effectiveness of our services delivery are being improved. The increase in profitability of the Product Division in the UK is due toimproved gross margins and reduction in the cost base. Gross margin improvementhas arisen primarily from better execution, more effective sales incentives anda more favourable customer mix. Cost reduction has been the result of a numberof projects carried out during the second half of 2005. Software revenues alsogrew strongly as a result of the creation last year of a specialist businessunit to focus on this segment of the market. Computacenter Direct, our telesales mid-market provider, continued on itsaggressive growth path, achieving in excess of 60% organic revenue growthcompared to H1 2005. Our German business returned a small operating profit of £0.5 million (2005:operating loss of £1.5 million) on revenues that were largely unchanged at£297.7 million. Much of this is due to improving the performance within a numberof specific service contracts. More significantly, the German business securedseveral new Managed Services contracts during the period, the revenues fromwhich will start to flow during the second half of the year. As in the UK, therewas a discernible shift in the German business away from desktop products andservices towards higher-margin datacentre and networking technologies. Revenues from Computacenter France grew strongly to £141.7 million (2005: £126.2million), although in part this simply reflects the temporary withdrawal fromthe market of a key customer in the first half of 2005 pending the renegotiationof the supply contract. However, product margins were under pressure in theFrench market as vendors increasingly sought to sell direct, with the resultthat our operating loss only reduced to £5.4 million (2005: £7.9 million). Turning to matters of governance, there have been two Board changes in recentmonths. I am pleased to welcome Dr Ian Lewis to the Board as a non-executiveDirector. Ian has had a distinguished career as an IT director, initially infinancial services and latterly in academia, and I very much look forward to hisinvolvement with the Group. As previously announced, pressures on his time haveled Nick Cosh to resign from the Board. Nick has made a significant contributionto the Group over the last four years and we are sorry to see him leave. Anexecutive search firm has been appointed to assist in recruiting a suitablecandidate to replace Nick on the Board and its sub-committees, including hisrole as Chair of the Audit Committee. I am delighted that Cliff Preddy hasagreed to take on the role of Senior Independent Non-Executive Director. Computacenter has made considerable efforts in recent years, particularly in theUK, to transform itself in response to some fundamental changes in the way ourmarkets operate. Whilst this process is far from complete, a great deal ofprogress has been made. Changes of this nature are never easy and new demandsare continually being made on our employees, whose dedication and commitmenthave been exemplary and to whom I am pleased to record my thanks. Looking ahead, we anticipate that the improvements we are seeing in the Group'smarket positioning and performance will continue as the year progresses. Theoutlook for the full year remains in line with expectations. Review of Operations UK In the UK, improved profitability across both Services and Product Divisionsresulted in overall operating profit growth of 10.3% to £16.4 million. This wasdespite a 7.6% decline in revenues, which was predominately due to hardwareprice decline. Services Division The total services revenue of the Division for H1 2006 was £134.5 million. OurTechnology Solutions unit grew strongly on the back of a number of projects,while our Managed and Support Services businesses achieved modest growth incomparison. Within the Services Division, we made further progress on standardisation andthe implementation of a 'shared services factory', our delivery model thatenables services to be easily repeated across clients, improving both thequality and cost-effectiveness of our delivery. Managed Services Whilst our Managed Services business unit saw a growing pipeline ofopportunities in H1, revenue growth was somewhat disappointing. However, wecontinued to lay the foundations for future growth through the launch of anumber of new propositions. These include offerings particularly designed toaddress a growing market for the contractual management of datacentre and otherbusiness-critical systems. We were successful in securing a number of significant Managed Servicescontracts in H1 2006. These include a five-year contract with IT services firmParity Group plc, worth more than £6 million, where Computacenter Services willbe responsible for managing Parity's entire IT infrastructure, including itsdatacentre. The contract is expected to reduce Parity's IT operational costs byapproximately 25% over the term. Technology Solutions Increased demand for technology change projects to support business growthhelped drive strong profit and revenue growth in H1. As with Managed Services,client datacentres were a particular focus in 2006, with a newly launched servervirtualisation proposition for client datacentres generating a significantnumber of projects. The strong performance of our Technology Solutions business is in part due tothe increased value of our offerings to clients, for whom we increasinglyunderwrite some of the risk of technology integration projects. Approximatelytwo thirds of our technology services billing is now based on delivered outcomesrather than on day rates. A significant development in the first half was an agreement with Oracle toprovide an application migration service for the company's large number ofindependent software vendors. The service, which is designed to offer fast,low-risk and low-cost migrations, will be offered through our Solutions Centre. Support Services Our Support Services business has sought to capitalise on the growing trend forglobal outsourcing companies to subcontract IT support services to thirdparties. We have created a specialist sales team to target the systemsintegrator marketplace and, as a result, are now starting to see an encouragingpipeline of opportunities for 2007. We have also extended our off-site disaster recovery activities, with our newWork Area Recovery service providing 200 fully provisioned user desks availableat locations across the UK for client staff unable to occupy their usualpremises. We also now offer a Fixed Server Recovery service, providing clientswith access to a constantly available server facility that exactly matches theirlive configuration. Key wins include a three-year contract with John Lewis Partnership for thesupport of all their desktops, laptops, printers and networks across the UK. Product Division Total UK products revenue declined to £518.8 million, largely attributable tosubstantial desktop and laptop price declines, in the order of 10% compared withH1 2005. However, improved product margins more than compensated for thisrevenue deterioration. The margin improvement came principally from a morefavourable mix of business, including increased datacentre spend, strong demandfrom the financial services sector and a decline in low margin tradedistribution sales. A key development in the first half of the year was the launch of our revisedwebshop, Connect v6, which adds significantly to the competitiveness of ourproduct offerings by reducing cost of sale and maximising cross-sellingopportunities. The proportion of product sales completed over the internetcontinues to grow, with 16% of orders by volume now placed via our webshop,compared with 11% in 2005. Corporate Hardware We continued to see a shift in product mix towards enterprise server andnetworking products, and strengthening relationships with enterprise vendorssuch as Sun, IBM and Cisco. Hardware sales were particularly strong in the financial markets and we sawgrowing interest in our range of value-added deployment services, includingadvisory services in the area of reducing operational costs. Software Our new Software business unit, created in 2005, continued to record strongrevenue and profit growth, with gross profit from software sales up more than50% on H1 2005. Some of this growth has been driven by merger and acquisitionactivity, with customers auditing and consolidating software expenditure acrossthe merged entities to ensure compliance and reduce costs. As well as actively targeting these organisations, we have also launched newsystems that allow us to track customers' software procurement cycles andidentify licence renewal or extension opportunities at an early stage.Approximately £12 million of renewal opportunities have been identified in thisway and £3.5 million closed to date. Computacenter is increasingly considered a key value-added software partner tolarge organisations, as evidenced by the decision of the UK Association of ChiefPolice Officers to appoint us one of only three preferred suppliers for itsmulti-million pound framework agreement. The three-year agreement is expected tobe worth up to £5 million per year. Computacenter Direct Our division targeting the growing market for IT product and services in themedium-sized business sector continued to grow strongly, with improved productmargins and organic revenue growth of more than 60% over H1 2005. Computacenter Direct continues to attract substantial numbers of new customersin its segment - averaging approximately 100 new customers per month in thefirst half. We expect this number to increase further following the launch ofour new transactional website in June, which enables us to target and servicecustomers whose preference is online procurement, whilst dramatically loweringour cost of sale. We continue to invest for growth in this business, with 15 new telesales staffjoining over the period and further recruitment anticipated for H2. CCD Despite an improvement in the profit performance of our trade distribution armfollowing the cost reduction programme in 2005, CCD continued to experiencechallenging conditions, with particularly fierce price competition in the highvolume segment of the market. Changes were made to the senior management of this unit and significant stepshave been taken to increase the breadth of relationships across both customersand vendor partners. Whilst these are anticipated to bring longer-term benefits,CCD's margins are expected to remain under pressure for the remainder of 2006. RDC Whilst trading conditions remain very competitive, RDC saw early signs in H1that improvements initiated at the end of 2005 are beginning to take effect. Inparticular, the launch of the Computacenter Asset Recovery Services togetherwith the creation of a new frontline sales team, have been instrumental in anumber of significant service wins. Overall RDC remains profitable and somemajor wins in H1 from existing accounts are expected to boost performancefurther in H2. Germany Our German business recorded an H1 operating profit of £0.5 million (2005: lossof £1.5 million) on revenues that were broadly unchanged. 35% of revenues came from services where growth in the Managed Services contractbase helped drive a 5.1% year-on-year revenue increase. We also began to seeincreasing client interest in converged phone and data networks and concernsover security compliance. As in the UK, Computacenter Germany experienced a continuing shift in productmix, in terms of both volumes and revenues, towards products that attract highermargins, with increased demand for datacentre and networking technology and asubdued market for desktop systems. To increase our share of the medium-sized business market, where we believethere are significant opportunities for growth, we created a national accountteam dedicated to winning new customers in this market. An important development was the implementation of a centrally provided,shared-resource approach for the delivery of managed desktop and datacentreservices. To support this approach, we have established a new computer centre inFrankfurt, enabling all services and applications managed on behalf of theclient to be located and managed on our own systems. The first client for thisoffering is Cognis, with which we have signed a seven-year Managed Servicecontract covering 120 locations across 30 countries. We expect our investment inthis shared services model, together with the creation of new national accountteams and our focus on long-term client contracts to lead to future salesgrowth. Significant wins in the period include the renewal of a worldwide ManagedServices contract with Deutsche Borse, worth several million Euros, in which wewill provide user support, management of moves and changes and engineeringservices for 5,000 IT seats across Germany, USA, Hong Kong and Dubai. France Our French business recorded an improvement on the first half of 2005, withrevenue growth of 12.3% to £141.7 million (2005: £126.2 million) and operatingloss reducing to £5.4 million (2005: £7.9 million). The operating lossimprovement was due to the effects of the ongoing cost reduction programme and,in part, attributable to the non-recurring costs of that programme in H1 2005,of approximately £1.7 million. We made progress in addressing the poor utilisation levels across our servicesactivities, which had a significant impact on profit performance. At the sametime, we improved maintenance customer service levels and continue to see agrowing pipeline of new contracts in our projects business. To accelerate growth and address rising demand for enterprise technology,particularly related to IBM products, Computacenter France invested in thedevelopment of specialist technical and sales skills in the enterprise solutionsmarket. We saw a marked decline in product margins in H1, largely fuelled by majorvendors bypassing the channel and selling direct to clients. It is too early tosay whether this margin decline will continue into the second half of the yearand beyond. Significant wins include a three-year Managed Services contract renewal withElior Services, worth over £1.6 million covering user help desk, maintenance andinstallations, moves and changes for 6,000 users across 2,500 catering sites. Wealso won a maintenance contract with a leading French insurance company,covering the provision of laptop and printer maintenance services toapproximately 4,000 users. Belgium, Netherlands, and Luxembourg Overall, our small Benelux operation showed a reduced loss of £82,000 (2005:£105,000 loss). Gross profit performance was strongest from Managed Services andproduct supply, with project and consultancy services remaining weak. Key wins include a £4.6 million Belgian government-sponsored employee PCpurchase contract, international procurement deals secured with Campbell andWorld Directories, and a major CRM deployment project, covering 19 countries,with OMRON in the Netherlands. Consolidated income statementFor the six months ended 30 June 2006 Unaudited Unaudited Year six months six months ended ended 30 ended 30 31 Dec June 2006 June 2005 2005 £'000 £'000 £'000 Revenue 1,114,939 1,151,553 2,285,209Cost of sales (969,619) (1,009,276) (1,996,381) --------- --------- ---------Gross profit 145,320 142,277 288,828 Distribution costs (9,304) (10,290) (19,928)Administrative expenses (124,013) (127,227) (241,634)+-------------------------------------------------------------------------+|Operating profit: ||Before share based payments 12,003 4,760 27,266 ||Share based payments (568) 662 392 |+-------------------------------------------------------------------------+Operating profit 11,435 5,422 27,658 Finance costs (1,053) (1,275) (2,002)Finance income 4,044 3,956 8,127Share of profit of associate 98 118 229 --------- --------- ---------Profit before tax 14,524 8,221 34,012 Income tax expense (6,434) (6,078) (13,579) --------- --------- ---------Profit for the period 8,090 2,143 20,433 ========= ========= ========= Attributable to:Equity holders of the parent 8,090 2,184 20,406Minority interests - (41) 27 --------- --------- --------- 8,090 2,143 20,433 ========= ========= =========Earnings per share- basic for profit for the year 4.3p 1.2p 10.9p- diluted for profit for the year 4.3p 1.2p 10.9p Consolidated balance sheetAs at 30 June 2006 Unaudited Unaudited Year six months six months ended ended 30 ended 30 31 Dec June 2006 June 2005 2005 £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 77,456 86,243 81,601Intangible assets 9,748 9,576 9,493Investment accounted for using the equity method 184 173 288Deferred income tax asset 5,582 1,548 5,528 --------- --------- --------- 92,970 97,540 96,910 --------- --------- ---------Current assetsInventories 87,733 88,205 100,233Trade and other receivables 365,120 388,269 382,970Prepayments 68,421 59,751 63,476Forward currency contracts 26 - 191Cash and short-term deposits 161,862 144,832 164,797 --------- --------- --------- 683,162 681,057 711,667 --------- --------- ---------Total assets 776,132 778,597 808,577 ========= ========= ========= Current liabilitiesTrade and other payables 269,250 299,577 315,997Deferred income 80,313 78,505 73,827Financial liabilities 70,519 57,867 64,131Forward currency contracts - 351 -Income tax payable 8,006 5,005 5,712Provisions 1,585 1,700 2,190 --------- --------- --------- 429,673 443,005 461,857 --------- --------- ---------Non-current liabilitiesFinancial liabilities 704 664 275Provisions 13,384 14,722 14,007Other non-current liabilities 12 2,716 371Deferred income tax liabilities 837 1,455 1,393 --------- --------- --------- 14,937 19,557 16,046 --------- --------- ---------Total liabilities 444,610 462,562 477,903 --------- --------- ---------Net assets 331,522 316,035 330,674 ========= ========= =========Capital and reservesIssued capital 9,543 9,504 9,505Share premium 76,004 74,628 74,680Capital redemption reserve 100 100 100Own shares held (2,503) (2,503) (2,503)Other reserves (1,524) (2,517) (1,757)Retained earnings 249,883 236,818 250,630 --------- --------- ---------Shareholders' equity 331,503 316,030 330,655Minority interest 19 5 19 --------- --------- ---------Total equity 331,522 316,035 330,674 ========= ========= ========= Consolidated statement of changes in shareholder's equity Attributable to equity holders of the parent --------------------------------------------------------- Foreign Capital Own currency Issued Share redemption shares translation Retained Minority Total capital premium reserve held reserve earnings Total interest equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2005 9,489 73,920 100 (2,503) (911) 244,965 325,060 46 325,106Exchange differences on retranslation offoreignoperations - - - - (1,606) - (1,606) - (1,606) ------ ------ ------ ----- ------- ------- ------- ------ -------Net income/ (expenses)recogniseddirectly inequity - - - - (1,606) - (1,606) - (1,606)Profit for the period - - - - - 2,184 2,184 (41) 2,143 ------ ------ ------ ----- ------- ------- ------- ------ -------Total recognised income andexpenses for theperiod - - - - (1,606) 2,184 578 (41) 537Exercise of options 15 708 - - - - 723 - 723Cost of share based payments - - - - - (596) (596) - (596)Equity dividends - - - - - (9,735) (9,735) - (9,735) ------ ------ ------ ----- ------- ------- ------- ------ ------- 15 708 - - (1,606) (8,147) (9,030) (41) (9,071) ------ ------ ------ ----- ------- ------- ------- ------ -------At 30 June 2005 9,504 74,628 100 (2,503) (2,517) 236,818 316,030 5 316,035Exchange differences on retranslation offoreignoperations - - - - 760 - 760 - 760 ------ ------ ------ ----- ------- ------- ------- ------ -------Net income/ (expenses)recogniseddirectly inequity - - - - 760 - 760 - 760Profit for the period - - - - - 18,222 18,222 14 18,236 ------ ------ ------ ----- ------- ------- ------- ------ -------Total recognised income andexpenses for theperiod - - - - 760 18,222 18,982 14 18,996Exercise of options 1 52 - - - - 53 - 53Cost of share based payments - - - - - 230 230 - 230Equity dividends - - - - - (4,640) (4,640) - (4,640) ------ ------ ------ ----- ------- ------- ------- ------ ------- 1 52 - - 760 13,812 14,625 14 14,639 ------ ------ ------ ----- ------- ------- ------- ------ -------At 31 December 2005 9,505 74,680 100 (2,503) (1,757) 250,630 330,655 19 330,674Exchange differences on retranslation offoreignoperations - - - - 233 - 233 - 233 ------ ------ ------ ----- ------- ------- ------- ------ -------Net income/ (expenses)recogniseddirectly inequity - - - - 233 - 233 - 233Profit for the period - - - - - 8,090 8,090 - 8,090 ------ ------ ------ ----- ------- ------- ------- ------ -------Total recognised income andexpenses for theperiod - - - - 233 8,090 8,323 - 8,323Exercise of options 38 1,324 - - - - 1,362 - 1,362Cost of share based payments - - - - - 568 568 - 568Equity dividends - - - - - (9,405) (9,405) - (9,405) ------ ------ ------ ----- ------- ------- ------- ------ ------- 38 1,324 - - 233 (747) 848 - 848 ------ ------ ------ ----- ------- ------- ------- ------ -------At 30 June 2006 9,543 76,004 100 (2,503) (1,524) 249,883 331,503 19 331,522 ====== ====== ====== ===== ======= ======= ======= ====== ======= Consolidated cash flow statementFor the six months ended 30 June 2005 Unaudited Unaudited Year six months six months ended ended 30 ended 30 31 Dec June 2006 June 2005 2005 £'000 £'000 £'000 Operating activitiesOperating profit from operations 11,435 5,422 27,658Adjustments to reconcile Group operatingprofit to net cash inflows from operatingactivitiesDepreciation 6,869 8,032 15,535Amortisation 850 885 1,784Share based payment 568 (637) (366)Loss/(profit) on disposal of property, plant and equipment 260 (155) (85)Loss on disposal of intangibles 9 - -Dividend received from associate 203 303 303Decrease in inventories 12,846 27,770 16,824Decrease/(increase) in trade and other receivables 14,240 29,832 (25,904)(Decrease)/increase in trade and other payables (41,629) (5,423) 29,925Currency and other adjustments (73) 609 287 --------- --------- ---------Cash generated from operations 5,578 66,638 65,961Income taxes paid (4,744) (12,591) (18,366) --------- --------- ---------Net cash flow from operating activities 834 54,047 47,595 --------- --------- ---------Investing activitiesInterest received 4,066 4,721 9,086Sale of subsidiary net of cash disposed of - (252) (252)Sale of property, plant and equipment 22 89 205Purchases of property, plant and equipment (1,400) (5,284) (6,950)Purchases of intangible assets (1,115) (1,403) (3,385)Funds received from settlement of net asset claim on previously acquired subsidiary - - 26,918 --------- --------- ---------Net cash flow from investing activities 1,573 (2,129) 25,622 --------- --------- ---------Financing activitiesInterest paid (1,293) (1,071) (2,063)Dividends paid to equity holders of the parent (9,405) (9,735) (14,418)Proceeds from issue of shares 1,362 722 776Repayment of capital element of finance leases (1,320) (250) (321)Increase/(decrease) in factor financing 2,066 (20,498) (6,401) --------- --------- ---------Net cash flows from financing activities (8,590) (30,832) (22,427) --------- --------- ---------(Decrease)/increase in cash and cash equivalents (6,183) 21,086 50,790Effect of exchange rates on cash and cash equivalents (156) 2,493 1,576Cash and cash equivalents at beginning of period 132,911 80,545 80,545 --------- --------- ---------Cash and cash equivalents at end of period 126,572 104,124 132,911 ========= ========= ========= Analysis of net fundsCash and cash equivalents 126,572 104,124 132,911Factor financing (33,805) (16,804) (31,542)Finance leases (646) (694) (652)Loans (1,482) (326) (326) --------- --------- ---------Net funds 90,639 86,300 100,391 ========= ========= ========= Notes to the accounts 1 Accounting policies Basis of preparation The unaudited interim financial statements have been prepared on the basis ofthe accounting policies set out in the Group's statutory accounts for the yearended 31 December 2005. The taxation charge is calculated by applying theDirectors' best estimate of the annual tax rate to the profit for the period.Other expenses are accrued in accordance with the same principles used in thepreparation of the annual accounts. 2 Segment information The Group's primary reporting format is geographical segments and its secondaryformat is business segments. The Group's geographical segments are determined by the location of the Group'sassets and operations. The Group's business in each geography is managedseparately and held in separate statutory entities. Segmental performance for the period to 30 June 2006 was as follows: Segmental analysis Unaudited Unaudited six months six months ended 30 ended 30 Year ended June 2006 June 2005 31 Dec 2005 £'000 £'000 £'000 Revenue by geographic marketUK 661,095 715,517 1,351,307Germany 297,671 299,983 618,238France 141,732 126,206 295,784Benelux 14,441 9,847 19,880 --------- --------- ---------Total 1,114,939 1,151,553 2,285,209 ========= ========= ========= Gross profit by geographic marketUK 91,115 88,130 169,876Germany 40,397 40,720 87,709France 12,606 12,383 28,941Benelux 1,202 1,044 2,302 --------- --------- ---------Total 145,320 142,277 288,828 ========= ========= ========= Operating profit/(loss) by geographic marketUK 16,432 14,904 32,079Germany 450 (1,457) 5,001France (5,365) (7,920) (9,313)Benelux (82) (105) (109) --------- --------- ---------Total 11,435 5,422 27,658 ========= ========= ========= Revenue by business segmentProduct 846,831 893,753 1,757,967Technology solutions 59,263 52,820 114,236Support and managed services 208,845 204,980 413,006 --------- --------- ---------Total revenue 1,114,939 1,151,553 2,285,209 ========= ========= ========= 3 Income tax The charge based on the profit for the period comprises: Unaudited Unaudited six months six months ended 30 ended 30 Year ended June 2006 June 2005 31 Dec 2005 £'000 £'000 £'000 UK Corporation tax- Current 6,988 5,793 12,872- Prior - 196 (202)- Deferred tax (569) (37) 997Foreign tax 15 2 31 --------- --------- --------- 6,434 5,954 13,698Share of joint venture's tax - 124 (119) --------- --------- --------- 6,434 6,078 13,579 ========= ========= ========= 4 Dividends The proposed final dividend for 2005 of 5.0p per ordinary share was approved atthe AGM in May 2006 and was paid on 31 May 2006. An interim dividend in respectof 2006 of 2.5p per ordinary share, amounting to a total dividend of £3,910,000,was declared by the Directors at their meeting on 11 September 2006. Thisinterim report does not reflect this dividend payable. 5 Earnings per share Basic earnings per share is calculated by dividing the net profit for the periodattributable to ordinary equity holders of the parent by the weighted averagenumber of ordinary shares in issue during the period. Diluted earnings per share is calculated by dividing the net profit attributableto ordinary shareholders by the weighted average number of ordinary shares inissue during the period adjusted for the effect of dilutive share options. The following reflects the income and share data used in the total operationsbasic and diluted earnings per share computations: Unaudited Unaudited six six Year months months ended ended 30 ended 30 31 Dec June 2006 June 2005 2005 £'000 £'000 £'000 Profit attributable to equity holders of the parent 8,090 2,184 20,406 -------- -------- ------- No '000 No '000 No '000Weighted average number of ordinary shares for basic earnings per share 187,753 187,147 187,210Effect of dilution:Share options 725 1,010 658 -------- -------- -------Adjusted weighted average number of ordinary shares for diluted earnings per share 188,478 188,157 187,868 ======== ======== ======= 6 Cash and cash equivalents Unaudited Unaudited Year six months six months ended ended 30 ended 30 31 Dec June 2006 June 2005 2005 £'000 £'000 £'000 Cash and cash equivalents as at the end of the period comprises:Cash at bank and in hand 161,862 142,832 164,797Short term deposits - 2,000 -Bank overdrafts (35,290) (40,708) (31,886) -------- -------- -------- 126,572 104,124 132,911 ======== ======== ======== 7 Post balance sheet event On 3 July 2006 the company effected a capital reorganisation under which eachordinary share of 5p was divided into one ordinary share of 6p and one B shareof 39p. Following this sub-division every 6 ordinary shares of 5p wereconsolidated into 5 ordinary shares of 6p. The B shares were immediately redeemed and cancelled. As a result of the 5 for 6 consolidation, 190,876,000 ordinary shares of 5pbecame 159,063,000 ordinary shares of 6p. 8 Publication of non-statutory accounts The financial information contained in the interim statement does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Theauditors have issued an unqualified opinion on the Group's statutory financialstatements under International Accounting Standards for the year ended 31December 2005. Those accounts have been delivered to the Registrar of Companies. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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