13th Sep 2005 07:01
Computacenter PLC13 September 2005 Interim Results Announcement Computacenter plc, the European IT infrastructure services provider, todayannounces 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. Thedecline in performance is largely attributable to a steep fall in productmargins in the UK business. On a more positive note, our UK Managed Servicescontinued to make progress.We believe that for the foreseeable future our UK product business will continueto face the challenges of intense price competition, vendors seeking to selldirect to large accounts and substantially lowered vendor rebates. In anticipation of these developments, we embarked last year upon a majorstrategic reassessment and, in the first half of 2005, we completed afundamental reorganisation of our UK business to create a platform forimplementing our new strategy. These initiatives represent a significantprogramme of activity. Following the satisfactory resolution of the dispute with GE, the Board is nowable to consider how best to utilise the Group's cash resources for the benefitof shareholders. Trading has been subdued in July and August, particularly in the UK.Nevertheless, we anticipate a stronger profit performance in the second half andthe outlook for the full year remains in line with market expectations. Lookingfurther ahead, the Board is confident that the Group's profits can be improvedin the future." 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 Chairman's Statement The first half of 2005 has been a challenging time for Computacenter. Grouprevenues declined to £1.15 billion (2004: £1.23 billion) and profit before taxfell 72.7% to £8.2 million (2004: £30.1 million). The balance sheet remainedstrong, with net cash increasing by £41.6 million during the period to £87.3million. Despite the disappointing earnings, the Board has approved an interim dividendof 2.5p per share (2004: 2.3p) to be paid on 21 October 2005 to shareholders onthe register as at 23 September 2005. This is consistent with our policy ofseeking to keep the interim dividend at a level equal to one-third of thepreceding year's total dividend, and reflects the cash resources of thebusiness. The decline in performance is largely attributable to a steep fall in productmargins in the UK business. This has been due to the combination of lacklustremarket demand and intense price competition, which adversely impacted ourproduct revenues and the level of vendor rebates. On a more positive note, ourUK Managed Services business continued to make progress, with revenue growth of1.3% in the period and a number of significant new contracts secured. We do not consider the deterioration in the competitive environment for our UKproduct business to be temporary. We believe that for the foreseeable future wewill continue to face the challenges of intense price competition, vendorsseeking to sell direct to large accounts and substantially lowered vendorrebates. In anticipation of these developments, we embarked last year upon amajor strategic reassessment. In the first half of 2005, we completed afundamental reorganisation of our UK business to create a platform forimplementing 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 alsodisappointing. 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 economyremained weak, leading to pressure on both product and service margins. Ourefforts to reduce the cost base of the German business to combat the lowermargins are continuing. With market conditions in France remaining equallychallenging, the revenues of our French business declined 14.2% and theoperating loss widened to £7.9 million (2004: £2.0 million). Under-utilisationof our services staff and a reduction in product revenues were the main cause ofthis deterioration. A new management team in Computacenter France has beeninstalled 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 claimraised by GE, relating to our acquisition of GE CompuNet in Germany and GECITSAustria 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 taxassets, Computacenter has now received €40 million. With the resolution of this dispute the Board is now able to consider how bestto 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 andthe outlook for the full year remains in line with market expectations. Lookingfurther ahead, the Board is confident that the Group's profits can be improvedin the future. There is no escape from the fact that trading in 2005 has been difficult andComputacenter's performance has been extremely disappointing. Nonetheless,Computacenter's staff have continued to deliver outstanding customer service indifficult trading circumstances, and I am pleased to record my appreciation fortheir considerable dedication and hard work. Review of Operations UK During the first half, difficult trading conditions for our Technology Sourcingactivities adversely affected profitability. Declining product revenues, drivenby continuing intense price competition, had a particular impact, together withthe previously announced deterioration in our trading terms and conditions withHP, our major vendor partner. Substantially lower product sales resulted inComputacenter failing to achieve many of our revenue-related vendor targets.These factors were mainly responsible for a decline in H1 2005 UK operatingprofit 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 performanceunderlines the need for the fundamental re-engineering of our TechnologySourcing business model that is now underway. Some attractive new Managed Services contract wins and high levels ofProfessional Services resource utilisation helped mitigate the impact of thedecline in Technology Sourcing activity. Significant new Managed Servicesbusiness included the award of five-year contracts by British American Tobacco(BAT) and the UK Highways Agency. Under the former agreement, Computacenter willprovide a range of services to help manage BAT's 3,500-plus desktop/laptopestate and file and print servers. Under the terms of the Highways Agencycontract, which is worth more than £8 million, Computacenter will deliver arange of services in partnership with information and communications technologyspecialist Vivista to support the Agency's new Regional Control Centres. We alsosecured a number of important contract renewals, including a two-year extensionof our Managed Services contract with Tradeteam. Under the terms of our DCSA Catalogue contract we were awarded additionalTechnology Sourcing business with a number of Ministry of Defence agencies,including the Royal Military Academy Sandhurst and the Defence ProcurementAgency. Following the results of a comprehensive strategy review initiated last year, amajor change programme is underway in Computacenter's UK business. This aims toachieve top line growth, reduce further the cost base, and re-organise thebusiness to achieve improved operational performance in the present difficultcompetitive environment. To help drive services growth and ensure tighter management of our TechnologySourcing activities in the face of continuing price competition, we have createda greater organisational separation between the product and service areas of ourbusiness. Consequently we will, for the first time, be in a position to reportseparate financial results for these businesses at the end of 2006. To increase market penetration and sharpen our customer offerings, we havecreated a number of focused business units, within both our product and servicesactivities. These were formally established on July 1 and are responsible fordefining and delivering suites of related propositions to the market. Specialistsales teams, together with all personnel required to deliver those offerings,have been allocated to these business units, with the business unit managershaving full profit and loss responsibility. Freed from the operational management of large, often complex serviceimplementations, our sales organisation will concentrate on identifying andrealising incremental sales opportunities and on customer relationshipmanagement. A slimmed-down sales force will operate across multiple customersegments and a new more accountable commission-led pay plan has been introducedto encourage greater sales entrepreneurship. We have also established a specific business unit with its own tele-salescapability to address the medium-size business sector. We continue to believethat this sector offers considerable opportunity for Computacenter in the UK,using the leverage provided by our existing logistics and back officeinfrastructure. Through these and related initiatives we are confident we can grow the UKbusiness, as well as improve our competitiveness whilst reducing our cost base. RDC, our re-cycling and re-marketing arm, and CCD, our trade distributiondivision, also had challenging half-years. The slowdown in hardware sales andrelated recycling of old equipment reduced RDC volumes by 25%. CCD saw asignificant decline in profitability due to margin challenges in a fairlystagnant 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, withGerman organisations still focusing heavily on cost reduction and delayingcapital investment. We saw an increased number of 'Wintel' implementations,although expenditures in the more profitable areas of datacentre and networkingtechnologies were particularly subdued, adversely affecting the product mix andresulting in a 0.7% product margin decline. Services fared rather better, and although margins declined slightly, overallservices revenues were up 6.5% on H1 2004, with good levels of resourceutilisation, particularly for customer engineering projects. We also saw strongProfessional 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 by3.9%. The tendency for many German organisations to frequently re-tendercontracts to lower their costs was an important factor in this reduction. Adifficult 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 customersto transfer to longer-term managed service contracts, with built-in cost andservice improvements, the conversion to this type of contract is inevitablytaking some time. Since December there has been a further 5.7% growth in our Managed Servicescontract base. Important wins included the award of a contract by SparkasseHannover under the framework of our partnership with FinanzIT, a major ITsupplier to the German Savings Banks Organisation. The Sparkasse Hannovercontract covers end-to-end management for 3,500 IT workstations as well asservers, infrastructure and telecommunications systems. We were also awarded aseven-year contract, partnering Helpbycom, for the management of the GermanFederal Labour Office's IT user helpdesk, which serves 120,000 users. At the start of 2005, we changed the organisational structure of ComputacenterGermany, although the full benefits of this are yet to be realised. There-organisation has four main objectives. It will improve our focus on themedium-sized business market, where we believe there are significantopportunities for growth; it will improve our ability to sell a broader range ofproducts and services into existing customers; it will sharpen our focus on thegrowth industry sectors of Government and Financial Services; and finally, itwill improve and leverage relationships with our key vendor partners. In addition to these initiatives, which aim at generating revenue growth, we aredetermined to lower the cost base of the business. To that end, a programme isalready underway to further reduce indirect expenses. Although we anticipate a stronger H2, partly due to the effect of Governmentyear-end purchasing, the full impact of our improvement plan is unlikely to beevident until 2006. France Our French business traded poorly, with revenues declining 14.2% to £126.2million (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 Sourcingbusiness were exacerbated by low services resource utilisation and a cost basethat is still too high. In addition, our largest French account, Le Ministere dela Defense, suspended expenditure for a period whilst the contract renewal wasput out to competitive tender, which had a material impact on our overall H1revenues. The contract was subsequently renewed with Computacenter for a furtherfour years. Significant new business included a €7 million Infrastructure Integrationproject for Agence Centrale des Organismes de Securite Sociale, and TechnologySourcing contracts for France Telecom and Union des Groupements d'AchatsPublics, worth €6 million and €5 million respectively. However the performance of Computacenter France continues to be unsatisfactoryand the appointment of Chris Webb, formerly responsible for UK sales andservices delivery, as Managing Director of Computacenter France has addedimpetus to the major transformation project that is underway. A substantial cost savings programme has been implemented, focusing onProfessional Services, which has a high headcount and a weak revenue andutilisation pipeline. As a result 56 Professional Services staff entered theformal redundancy process in H1 2005. It is anticipated that this, together withother measures, will yield significant savings in 2006. To encourage revenue growth, a restructuring of the sales organisation, with theobjective of ensuring greater responsiveness and accountability, was undertakenduring the period. A new pay plan has been introduced, to provide more effectiveincentives, and we have invested in the recruitment of new business specialiststo help identify and close new opportunities. In addition, the re-engineering of our maintenance operation, which began in2004, has started to give us a strong and growing pipeline of new maintenancecontracts for H2. Customer satisfaction is also improving, as evidenced by a 15% improvement inperformance against Service Level Agreements since January 2005. Though the full benefits will take some time to be realised we believe theinitiatives now underway provide a sound foundation for Computacenter's eventualreturn to profit in France. Our aim is to reduce loss in 2006 and break even in2007. 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) onrevenues that were 14.5% lower than in H1 2004. Product revenues improved somewhat in the second quarter, based on a newinternational procurement contract with Recticel and a technology refreshproject for Astron. The services business grew profitably on the back ofexisting Managed Services contracts and new migration projects for companiessuch as Banksys and Nomura. Consolidated income statementFor 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 £'000Continuing operationsRevenue 1,151,553 1,228,941 2,410,590Cost 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 fromcontinuing operations 5,422 29,859 66,178 Finance costs (1,275) (1,722) (3,537)Finance income 3,956 1,995 5,247Share 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 fromcontinuing operations 2,143 20,261 48,289 Discontinued operationLoss for the period fromdiscontinued 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 44,435Minority 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 sheetAt 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 £'000AssetsNon-current assetsProperty, plant and equipment 86,243 92,455 89,914Intangible assets 9,576 6,864 7,923Investment in a joint ventureaccounted for using the equitymethod - 20 -Investment in an associateaccounted for using the equitymethod 173 649 373Listed investment - 3,047 -Deferred income tax asset 1,548 3,107 1,486 -------- -------- -------- 97,540 106,142 99,696 -------- -------- --------Current assetsInventories 88,205 119,910 118,914Trade and other receivables:gross 388,269 416,604 438,452Less: non returnable proceeds - (55,643) (39,043) -------- -------- --------Trade and other receivables 388,269 360,961 399,409Prepayments 59,751 60,048 55,135Cash and short-term deposits 144,832 99,327 138,218 -------- -------- -------- 681,057 640,246 711,676Non-current assets classified asheld for sale - 9,184 9,208 -------- -------- --------Total assets 778,597 755,572 820,580 ======== ======== ========Equity and liabilitiesEquity attributable to equityholders of the parentIssued capital 9,504 9,447 9,489Share premium 74,628 71,778 73,920Capital redemption reserve 100 100 100Investment in own shares (2,503) (2,503) (2,503)Other reserves (2,517) (1,860) (904)Retained earnings 236,818 224,672 245,113Amounts recognised directly inequity relating to non-currentassets held for sale - (85) (7) -------- -------- -------- 316,030 301,549 325,208Minority interest 5 83 46 -------- -------- --------Total equity 316,035 301,632 325,254 -------- -------- --------Non-current liabilitiesInterest-bearing loans andborrowings 664 326 429Provisions 14,722 14,628 15,233Other non-current liabilities 2,716 3,221 2,691Deferred income tax liabilities 1,455 1,667 1,455 -------- -------- -------- 19,557 19,842 19,808 -------- -------- --------Current liabilitiesTrade and other payables 299,577 298,188 306,964Deferred income 78,505 79,834 89,083Interest-bearing loans andborrowings 57,867 38,279 58,706Forward currency contracts 351 - -Income tax payable 5,005 8,788 11,519Provisions 1,700 1,667 2,358 -------- -------- -------- 443,005 426,756 468,630Liabilities directly associatedwith non-current assetsclassified 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 January2004 9,441 71,486 100 (2,503) - 213,423 291,947 113 292,060 Currencytranslationdifferences - - - - (1,860) - (1,860) - (1,860)Amountsrelating tonon-currentassets heldfor sale - - - - (85) - (85) - (85)Cost of sharebased payments - - - - - 498 498 - 498 ----- ------ ------- ------- ------ ------ ------ ------ ------Netincome/(expenses) recogniseddirectly inequity - - - - (1,945) 498 (1,447) - (1,447)Profit for theperiod - - - - - 19,987 19,987 (30) 19,957Exercise ofoptions 6 292 - - - - 298 - 298Equitydividends - - - - - (9,236) (9,236) - (9,236) ----- ------ ------- ------- ------ ------ ------ ------ ------ At 30 June2004 9,447 71,778 100 (2,503) (1,945) 224,672 301,549 83 301,632 Currencytranslationdifferences - - - - 956 - 956 - 956Amountsrelating tonon-currentassets heldfor sale - - - - 78 - 78 - 78Cost of sharebased payments - - - - - 309 309 - 309 ----- ------ ------- ------- ------ ------ ------ ------ ------Netincome/(expenses) recogniseddirectly inequity - - - - 1,034 309 1,343 - 1,343Profit for theperiod - - - - - 24,448 24,448 (37) 24,411Exercise ofoptions 42 2,142 - - - - 2,184 - 2,184Equitydividends - - - - - (4,316) (4,316) - (4,316) ----- ------ ------- ------- ------ ------ ------ ------ ------ At 31 December2004 9,489 73,920 100 (2,503) (911) 245,113 325,208 46 325,254Adoption ofIAS 32 & IAS39 - - - - - (148) (148) - (148) ----- ------ ------- ------- ------ ------ ------ ------ ------At 1 January2005 9,489 73,920 100 (2,503) (911) 244,965 325,060 46 325,106 Currencytranslationdifferences - - - - (1,606) - (1,606) - (1,606) ----- ------ ------- ------- ------ ------ ------ ------ ------Netincome/(expenses) recogniseddirectly inequity - - - - (1,606) - (1,606) - (1,606)Profit for theperiod - - - - - 2,184 2,184 (41) 2,143Exercise ofoptions 15 708 - - - - 723 - 723Cost of sharebased payments - - - - - (596) (596) - (596)Equitydividends - - - - - (9,735) (9,735) - (9,735) ----- ------ ------- ------- ------ ------ ------ ------ ------At 30 June2005 9,504 74,628 100 (2,503) (2,517) 236,818 316,030 5 316,035-------------- ----- ------ ------- ------- ------ ------ ------ ------ ------ Consolidated cash flow statementFor 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 £'000Cash flows from operatingactivitiesOperating profit fromcontinuing operations 5,422 29,859 66,178Operating loss ofdiscontinuedoperation - (282) (1,547)Depreciation 8,032 8,818 17,017Amortisation 885 670 1,365Share based payment (637) 498 898Loss/profit ondisposal of property,plant and equipment (155) 502 756Loss on disposal ofintangibles - 2 48Profit on disposal ofinvestment - - (1,603)Dividend receivedfrom associate 303 - 509Decrease/(increase)in trade and otherreceivables 29,832 4,313 (23,156)Decrease ininventories 27,770 10,173 14,278Decrease in trade andother payables (5,423) (23,346) (14,604)Currency and otheradjustments 609 322 181Borrowing costs (1,071) (1,945) (3,439)Interest received 4,721 1,517 4,359Income tax paid (12,591) (6,365) (12,296) -------- -------- --------Net cash flows fromoperating activities 57,697 24,736 48,944 -------- -------- -------- Cash flows from investingactivitiesProceeds from sale ofsubsidiary net ofcash disposed of (252) - -Proceeds from sale ofproperty, plant andequipment 89 1,250 1,756Purchases ofproperty, plant andequipment (5,284) (5,649) (11,615)Proceeds from sale ofintangibles - - 211Purchases ofintangible assets (1,403) (723) (2,593)Dividend received - - 23Proceeds from sale oflisted investment - - 4,650 -------- -------- --------Net cash flows usedin investingactivities (6,850) (5,122) (7,568) -------- -------- -------- Cash flows from financingactivitiesProceeds from issueof shares 722 298 2,482Repayment of financeleases (250) - (39)Dividends paid toequity holders of theparent (9,735) (9,305) (13,587) -------- -------- --------Net cash flows usedin financingactivities (9,263) (9,007) (11,144) -------- -------- -------- Net increase in cashand cash equivalents 41,584 10,607 30,232Net foreign exchangedifference 4,235 1,896 (149)Cash and cashequivalents atbeginning of period 80,545 50,462 50,462Adoption of IAS 32 &IAS 39 (39,043) - - -------- -------- --------Cash and cashequivalents at end ofperiod 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 statementsunder International Financial Reporting Standards (IFRS), as adopted by theEuropean Union, for all accounting periods beginning on or after 1 January 2005.Previously the Group has applied UK Generally Accepted Accounting Principles (UKGAAP). The results for the six months ended 30 June 2005 represent the first interimfinancial statements that the Group has prepared in accordance with itsaccounting policies under IFRS. The first annual report under IFRS will be forthe year ended 31 December 2005. A description of how the Group's reportedperformance and financial position are affected by this change, includingreconciliations from UK GAAP to IFRS for prior years and the revised summary ofsignificant accounting policies under IFRS, is available on the InvestorsSection of the corporate website at www.computacenter.com. The unaudited interim financial information has been prepared, for the firsttime, in accordance with IFRS and is covered by IFRS 1 'First-time adoption ofIFRS'. The information has been prepared in accordance with those IFRS' issuedand effective as at the time of preparation, and has been appliedretrospectively except where certain exceptions apply. As listed companies are adopting IFRS for the first time, there is limitedestablished practice upon which to draw in matters of interpretation andapplication. Furthermore, it is possible that new standards, revisions toexisting standards and new interpretations may be issued which affect the Group.Consequently it is possible that the comparative information in the 2005 annualreport may differ from that presented in this document. Change in accounting policy From 1 January 2005 the Group has adopted the financial instruments standardsIAS 32 and IAS 39. The only material changes on adoption of these standards hasbeen on accounting for foreign currency forward contracts and non-recourse debtfinancing. Foreign currency forward contracts The fair values of both the hedging instruments and the hedged item arerecognised at each reporting date. Non-recourse debt financing Under UK GAAP, the Group adopted a linked presentation for its non-recourse debtfinancing. This presentation method is not permissible under IFRS andaccordingly the non-recourse financing element has been reclassified asborrowings for 2005. As permitted under IFRS1, first time adoption of International FinancialReporting Standards, the Group has elected not to restate comparativeinformation for the financial instruments standards IAS 32 and IAS 39. Arestatement of the opening balance sheet at 1 January 2005 to present theGroup's opening position under IAS 32 and 39 is included in these interimfinancial statements as Appendix A. 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 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 marketContinuing operations:UK 715,517 758,425 1,433,685Germany 299,983 311,937 655,501France 126,206 147,065 300,380Belgium &Luxembourg 9,847 11,514 21,024 ---------- ---------- ----------Continuingoperations 1,151,553 1,228,941 2,410,590Discontinuedoperation - 25,977 45,162 ---------- ---------- ----------Total 1,151,553 1,254,918 2,455,752 ========== ========== ========== Gross profit by geographic marketUK 88,130 107,904 205,657Germany 40,720 42,440 90,479France 12,383 16,583 31,771Belgium &Luxembourg 1,044 1,193 2,291 ---------- ---------- ----------Continuingoperations 142,277 168,120 330,198Discontinuedoperation - 3,115 5,203 ---------- ---------- ----------Total 142,277 171,235 335,401 ========== ========== ========== Operating profit/(loss) by geographic marketUK 14,904 29,259 63,845Germany (1,457) 2,537 8,999France (7,920) (2,005) (6,682)Belgium &Luxembourg (105) 68 16 ---------- ---------- ----------Continuingoperations 5,422 29,859 66,178Discontinuedoperation - (282) (3,903) ---------- ---------- ----------Total 5,422 29,577 62,275 ========== ========== ========== Revenue by business segmentTechnologysourcing 893,753 998,841 1,931,569Infrastructureintegration 52,820 58,688 115,502Managedservices 204,980 197,389 408,681 ---------- ---------- ----------Continuingoperations 1,151,553 1,254,918 2,455,752Discontinuedoperation - (25,977) (45,162) ---------- ---------- ----------Total revenuefromcontinuingoperations 1,151,553 1,228,941 2,410,590 ========== ========== ========== 3 Income tax The charge based on the profit for the periodcomprises: Unaudited six Restated Restated year months ended 30 unaudited six ended 31 Dec June 2005 months ended 30 2004 June 2004 £'000 £'000 £'000UK Corporation tax- Current 5,793 10,384 21,652- Prior 196 (868) (3,249)- Deferred tax (37) 346 1,717Foreign tax 2 - (544) ------- ------- -------- 5,954 9,862 19,576Share of jointventure'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 atthe AGM in April 2005 and was paid on 31 May 2005. An interim dividend inrespect 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 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 six Restated Restated year months ended 30 unaudited six ended 31 Dec June 2005 months ended 30 2004 June 2004 £'000 £'000 £'000Profitattributableto equityholders of theparent 2,184 19,987 44,435 ------- ------- -------- No '000 No '000 No '000Weightedaverage numberof ordinaryshares forbasic earningsper share 187,147 186,032 186,441Effect of dilution:Share options 1,010 3,730 2,538 ------- ------- --------Adjustedweightedaverage numberof ordinaryshares fordilutedearnings pershare 188,157 189,762 188,979 ======= ======= ======== 6 Investments Disposal of subsidiary On 2 January 2005 the Group disposed of its Austrian subsidiary, ComputacenterGmbH (Computacenter Austria), a company that was a separate geographical segmentof the Group. As at 30 June and 31 December 2004, Computacenter Austria was classified as anasset held for sale, and was stated at the lower of carrying value and fairvalue less costs to sell, and income and expenses for the year ended 31 December2004 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 £'000Cash and cash equivalents as atthe end of the period comprise: Cash at bankand in hand 142,832 54,327 98,218Short termdeposits 2,000 45,000 40,000Bankoverdrafts (40,708) (38,068) (58,637)Non-recoursefinancing (16,803) - - -------- ------- -------- 87,321 61,259 79,581Cash at bankand in handattributabletodiscontinuedoperation - 1,706 964 -------- ------- -------- 87,321 62,965 80,545 ======== ======= ======== Had IAS 32 and 39 been applied to the 2004 comparatives, cash and cashequivalents would have been reduced for non-recourse financing by £55,643,000 asat June 2004, and £39,043,000 as at December 2004. Further details on theadoption 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 ofthe 2004 Annual Report and Accounts and the press release dated 19th May 2005 onthe outcome of the work of the independent Expert, PricewaterhouseCoopers,Computacenter plc is pleased to announce the resolution of the tax assets claimnoted as a contingent liability in the Accounts of Computacenter plc.On the 15th October 2003 the vendors claimed that the Group had breached aprovision of the German Purchase Agreement concerning an adjustment relating totax 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 areutilised. Computacenter is pleased to announce that following a recentarbitration hearing, Computacenter has reached an agreement with the vendorsunder which the vendors claim has been withdrawn and Computacenter will purchasethe tax assets outright. Although the arbitral tribunal did not render a finaldecision on the merits of the tax claim, it proposed a settlement which did notallocate value to this claim. The Net Asset Value claim of £32,448,000 as noted in the 19th May 2005 pressrelease is included as a receivable in debtors at 31st December 2004, the netresult of this agreement is that Computacenter has received EUR40,000,00 . Theupfront purchase of the tax assets will result in a deferred tax asset on theGroup balance sheet. 9 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 UK GAAP for the year ended 31 December 2004. Those accountshave been delivered to the Registrar of Companies. Appendix A: restatement of balance sheet and equity at 1 January 2005 for theeffects of IAS 32 and IAS 39Under IFRS 1, first time adoption of international financial reportingstandards, the Group is not required to present comparative information whichcomplies with IAS 32 and IAS 39. The Group's hedging strategy is unchanged inrespect of covering the risk of foreign currency purchases. The accountingdifferences for which the 2005 opening balance sheet is restated and which willapply to the 2005 accounts are noted below: Balance sheet at 1January 2005 IFRS pre Hedging of Non-recourse Restated IFRS restatement for forward financing IAS 32 & IAS 39 currency contracts £'000 £'000 £'000 £'000AssetsNon-current assetsProperty,plant andequipment 89,914 - - 89,914Intangibleassets 7,923 - - 7,923Investment inan associateaccounted forusing theequity method 373 - - 373Deferredincome taxasset 1,486 - - 1,486 -------- -------- ------- ------- 99,696 - - 99,696 -------- -------- ------- -------Current assetsInventories 118,914 - - 118,914Trade andotherreceivables:gross 438,452 1,736 - 440,188Less:non-returnableproceeds (39,043) - 39,043 - -------- -------- ------- ------- 399,409 1,736 39,043 440,188Prepayments 55,135 - - 55,135Cash andshort-termdeposits 138,218 - - 138,218 -------- -------- ------- ------- 711,676 1,736 39,043 752,455Non-currentassetsclassified asheld for sale 9,208 - - 9,208 -------- -------- ------- -------Total assets 820,580 1,736 39,043 861,359 ======== ======== ======= ======= Equity andliabilitiesEquity attributable toequity holders of theparentIssued capital 9,489 - - 9,489Share premium 73,920 - - 73,920Capitalredemptionreserve 100 - - 100Investment inown shares (2,503) - - (2,503)Other reserves (904) - - (904)Amountsrecogniseddirectly inequityrelating tonon-currentassets heldfor sale (7) - - (7)Retainedearnings 245,113 (148) - 244,965 -------- -------- ------- ------- 325,208 (148) - 325,060Minorityinterest 46 - - 46 -------- -------- ------- -------Total equity 325,254 (148) - 325,106 -------- -------- ------- ------- Non-currentliabilitiesInterest-bearing loans andborrowings 429 - - 429Provisions 15,233 - - 15,233Othernon-currentliabilities 2,691 - - 2,691Deferredincome taxliabilities 1,455 (63) - 1,392 -------- -------- ------- ------- 19,808 (63) - 19,745 -------- -------- ------- ------- Current liabilitiesTrade and other payables 306,964 - - 306,964Deferred Income 89,083 - - 89,083Interest-bearing loans and borrowings 58,706 - 39,043 97,749Forward currency contracts - 1,947 - 1,947Income tax payable 11,519 - - 11,519Provisions 2,358 - - 2,358 -------- -------- ------- ------- 468,630 1,947 39,043 509,620Liabilities directly associated withnon-current assets classified as heldfor 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 currencyexposures. The fair values of both the hedging instruments and the hedge itemare recognised in the income statement at each measurement date. Under UK GAAP, the Group adopted a linked presentation for its non-recourse debtfinancing. This presentation method is not permissible under IFRS andaccordingly the finance element has been reclassified as borrowings for 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Computacenter