13th Mar 2007 07:03
Computacenter PLC13 March 2007 Computacenter PLC13 March 2007 COMPUTACENTER PLC Preliminary Results Announcement Computacenter plc, the European IT infrastructure services provider, today announces preliminary results for the twelve months ended 31 December 2006. Financial Highlights: - Group revenues of £2.27 billion (2005: £2.29 billion)- Operating profit of £33.6 million before exceptional items (2005: £29.3 million)- Pre-exceptional profit before tax of £38.0 million (2005: £35.7 million)- Pre-exceptional diluted earnings per share of 13.8p (2005: 11.8p)- Final dividend of 5p per share, total dividend 7.5p (2005: 7.5p)- Return of £74.4 million to shareholders in July 2006- Net funds before customer-specific financing of £29.4 million (2005 : £101.0 million) Operating Highlights: - UK Product business showing benefits of re-engineering with improved performance and market share- In UK Services, a strong performance from Technology Solutions division compensated for slower growth from Support and Managed Services divisions- Continued effort to expand and strengthen the Group's services capability, augmented by the acquisition post year-end of Digica- Good underlying progress in the German business, however higher than expected costs for the implementation of new shared datacentre contracts Ron Sandler, Chairman of Computacenter plc, commented: "The results reported today show the early signs of progress arising from the considerable efforts in recent years to improve the strategic positioning and operating performance of Computacenter. These initiatives position the Group well for 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 4200Stephen Malthousewww.tulchangroup.com High resolution images are available for the media to view and download free of charge from www.vismedia.co.uk Chairman's Statement Computacenter made steady progress during 2006. In each of the Group's threeprincipal markets, management continued to make determined efforts to improveboth strategic focus and operating performance. The steep fall in revenue in recent years was arrested in 2006. Despitecontinuing product price erosion, revenues of £2.27 billion were only marginallylower than the previous year (2005: £2.29 billion), reflecting improvements inthe competitiveness of our offerings and the increased focus on mid-market salesopportunities. Operating profit, before exceptional charges, increased by 14.5%to £33.6 million (2005: £29.3 million) and this figure includes approximately£6.2 million of losses arising in Germany associated with the start-up of twoshared datacentre contracts. Taking into account non-operating exceptionalcharges of £5.0 million in France, operating profit increased by 3.2% to £28.5million (2005: £27.7 million). A reduction in net interest receipts followingthe return to shareholders of £74.4 million in July resulted in a 3.2% fall inprofit before tax to £32.9 million (2005: £34.0 million). The shareconsolidation that accompanied the return of capital had a beneficial impact onthe Group's diluted earnings per share, which rose by 16.9% to 13.8 pence (2005:11.8 pence) on a pre-exceptional basis, and by 1% to 11.0 pence (2005: 10.9pence) after taking exceptional items into account. Notwithstanding the £74.4 million return of capital, the balance sheet remainedstrong, with year-end net cash of £29.4 million (2005: £101.0 million), prior tocustomer-based loans and finance leases. Inclusive of these, the net funds ofthe Group finished the year at £10.8 million (2005: £100.4 million). The Board is pleased to recommend a final dividend of 5.0p per share, bringingthe total dividend for 2006 to 7.5p (2005: 7.5p). This is consistent with ourstated policy of maintaining the level of dividend until earnings have risensufficiently to bring the cover to within the target range of 2 - 2.5x. Thefinal dividend will be paid on 31 May 2007 to shareholders on the register as at4 May 2007. Operating profit in the UK increased by 16.8% to £37.5 million (2005: £32.1million), principally as a result of improved gross margins on product sales.Our UK Product Division has been re-engineered in recent years to serve ourcustomers more cost effectively, involving considerable investment in newe-commerce systems and a reorganisation of resources. These improvements arebeginning to show benefit, both in terms of margin and in our market share. Wealso continue to target the mid-market segment through our telesales operation,Computacenter Direct, where revenues in 2006 grew in excess of 40%. Technology Solutions, the consulting and systems integration unit within our UKServices Division, performed strongly and continued to enhance its reputationfor technical excellence, particularly in datacentre-related activities.Professional services revenues grew by 10.6% in 2006. Elsewhere within theServices Division, performance was mixed. Margins in our contractual servicesbusiness units, Support Services and Managed Services, remained attractive,partly as a result of further centralisation of resources within a sharedservices delivery model; however, in a disappointing year for contract renewals,revenues for contractual services increased by just 1.0% from the previous year. In January 2007, we concluded the acquisition of Digica Limited for aconsideration of £28 million, including the settlement of approximately £12million of debt. Digica is a leading provider of infrastructure management andapplication services for medium sized public and private sector organisations,with particular expertise in datacentre managed services. Its operations arehighly complementary to those of Computacenter, and the combination will giveboth businesses the opportunity to deliver a far broader offering to theirrespective client bases. This acquisition fits neatly with Computacenter'sstrategy of developing its contractual services businesses. Computacenter Germany produced revenue growth of 5.9%, stimulated in the lattermonths of 2006 by the impending change to German VAT, which became effective inearly 2007. Profit performance in Germany was less encouraging, with operatingprofit falling to £2.8 million (2005: £5.0 million), although this decline canbe attributed to higher than anticipated start-up losses of £6.2 millionassociated with two shared datacentre services contracts. Nevertheless, thisshould not be allowed to obscure the encouraging underlying improvement in theGerman business. Services revenues, which account for over a third of the Germantotal, grew strongly, particularly in managed services (both desktop anddatacentre) and in telephony projects, including Voice Over IP. The performance of Computacenter France remained unsatisfactory, althoughpre-exceptional operating losses for the year reduced from £7.6 million to £6.5million. The restructuring during the first half of 2005 contributed to thisimprovement, although its benefits were mitigated by intense price competitionin the French market and further product margin erosion as a consequence.Additional restructuring of the French cost base took place towards the end of2006, resulting in an exceptional charge of £2.4 million, and we expect thebusiness to show further progress in 2007 towards an eventual return toprofitability. The financial statements also show a non-cash exceptional chargeof £2.6 million representing an impairment of the French non-current asset base. In October, I was pleased to announce that John Ormerod had joined the Board asa Non-Executive Director and also assumed the chairmanship of the AuditCommittee. John brings a wealth of experience to both roles and I very much lookforward to his involvement with the Group in the years ahead. As we have stated before, it is difficult to draw any meaningful insights fromcurrent trading until we have completed the first quarter. Notwithstanding this,a considerable amount of work has taken place in recent years to improve thestrategic positioning of Computacenter, through developing significantly theservices capabilities and restructuring the cost base of our product businesses.Alongside these initiatives have been a series of operational enhancements,aimed at improving efficiencies in our core processes and at upgrading our salescapabilities. The combination of these activities positions the Group well forthe future. As always, the credit for the Group's performance belongs to the staff, to whomI offer my wholehearted thanks for their dedication and hard work. Review of Operations UK UK revenues declined by 5.2% to £1.28 billion (2005: £1.35 billion). Modestservices growth partially mitigated a product sales decline of 7.2%, which wasprincipally due to our withdrawal from selected low margin volume sales in tradedistribution. Operating profit grew 16.8% to £37.5 million (2005: £32.1 million). Theimprovement came mainly from better product margins, but also reflected oursuccess in penetrating new markets and delivering operational efficiencies. Services Division Overall services revenues grew 3.1%, with strong Technology Solutions growthcompensating for a disappointing 1.0% increase in contractual revenues. We continued to focus on reducing operational costs and improving customerservice. In particular, we sought to make more effective use of shared resourcesand tools for service delivery. The increased use of the Technical ResourceGroup, a flexible, shared engineering resource, across our client base, helpedreduce our operational overheads significantly and made our offerings morecompetitive. Throughout 2006, we saw a growth in contractual opportunities arising from anincrease in the number of organisations seeking to split their service contractsacross a range of specialist partners. These were typically for contracts offrom three to five-year terms, rather than the ten-year service engagementstraditionally placed with large systems integrators. The Services Division comprises three business units: Managed Services, SupportServices and Technology Solutions. Managed Services Despite a disappointing year for contract renewals, our Managed Servicesbusiness unit grew revenues by 6.6% and improved its profit contribution. The UK outsourcing market continues to grow at 4-5% annually. Promising marketdevelopments for Computacenter's business include increased interest frommedium-sized organisations for desktop and datacentre managed services. Our growth plans include the continued expansion and enhancement of our servicedesk and datacentre capabilities. This strategic focus led to the acquisition inearly 2007 of Digica, a provider of infrastructure management and applicationservices with a particular focus on medium-sized public and private sectororganisations. Managed Services successes in 2006 include a five-year £28 million distributedIT and datacentre outsourcing contract with Eversheds, a five-year £6 millioncontract with IT firm Parity to manage its entire IT infrastructure includingits datacentre, and an extension in scope and terms of our contract with theNuclear Decommissioning Authority. Support Services A highly cost-conscious market led to an overall decline in our Support Servicesrevenues. Performance from this business unit was strongest in the datacentreenvironment, where pressure on unit price was less intense. Market demand was driven by clients seeking to centralise and consolidate theirIT infrastructures to improve service and reduce both risk and costs. Growthalso came from an increase in the subcontracting of support by large outsourcingorganisations and systems integrators, a market upon which we placed particularfocus in 2006. Such a partnership approach helped us secure a BT-subcontractedthree-year hardware maintenance and support contract with Liverpool Direct. Support Services continues to be strong in the traditionally attractivefinancial services market. In addition, our more recent efforts to improve ourcoverage of the mid-market, where there is greater growth potential, helped uswin business with approximately 30 organisations that had not previously tradedwith Computacenter. We also saw growth in areas such as the retail sector, wherewe won a three-year contract with John Lewis Partnership for the support of alltheir desktops, laptops, printers and networks across the UK. Other significant wins in the period include a three-year contract for thesupport of Taylor Woodrow's entire server estate. Technology Solutions Our Technology Solutions business grew strongly, with much of the growth comingfrom an increase in datacentre projects. With a majority of Technology Solutionsprojects in 2006 including a datacentre component, we sought to develop newofferings to answer client demand in this area. As a result, we are now able tooffer an end-to-end datacentre solution for reducing operating costs, speedingup business applications deployment and improving environmental efficiency. In addition, we benefited from closer integration with our product supplybusiness, as an increasing number of clients chose to couple product supply withthe purchase of project services. A 15% increase in revenues from consulting and project management led to veryhigh professional services activity, and helped the overall profitability of theTechnology Solutions business. We now have a substantial pipeline forprofessional services projects in the UK and we anticipate further growth inthis area. We continued to refine our propositions to answer changing client requirements.For example, our shared risk approach to Technology Solutions projects, whichanswers a growing demand for assured outcomes rather than hired expertise,proved of interest to organisations seeking to reduce the risk and fix the costof projects. Significant new business in the period included a five-year contract withDoncaster College of Further Education, worth £6 million, for its new 35,000 sq.m. campus. Product Division Our ongoing programme of re-engineering our product business to deliver improvedprofitability and growth began to bear fruit in 2006. Following a decline inproduct revenues in 2005, we saw a stabilisation in revenues from end-user salesin 2006. A 1.7% increase in product gross margins reflects our success in implementingimproved business controls relating to product purchasing and supply. We alsocontinued to lower the cost of sale through use of a lighter-touch sales modelfor product-only clients, enabled through our deployment of improved e-commercesystems. We benefited from our evolving product mix, with a still greater proportion ofsales coming from network, server and other enterprise technologies. This waspartly driven by the increased criticality of enterprise systems and partly bythe growth of our Technology Solutions business, where such technology is oftenpart of a bundled solution. The Product Division comprises four business units: Corporate Hardware,Software, Computacenter Direct and CCD. Corporate Hardware Technology sales to end-users increased slightly, although following a majorinvestment in the latest version of our webshop, Connect 6, we experienced 28%growth in online revenues. Web sales now comprise over 16% of all hardwareorders. Product margins benefited from an increase in business with the financialsector, as well as the growing enterprise technology proportion in the productmix. We saw particularly strong growth in our Sun, EMC, Cisco and IBM enterprisebusiness. With price competition still intense in the product market, the CorporateHardware business sought to enhance the range of supply-related valuepropositions it provides to customers. In particular, we focused on developingand communicating our offerings in the areas of managed multi-vendor procurementcontracts, extensive multi-site deployments and environmental advisory services. Significant new product business includes a £50 million contract with the ATLASConsortium, covering managed supply and deployment services to support theDefence Information Infrastructure (Future) programme within the UK Ministry ofDefence. Software Our Software business grew revenues 7% during 2006. Growth was across our vendorbase, and partly a result of an expanding software services market. The increased threat of vendor audits, rising merger activity and the businessdisruption of off-shoring, all drove clients to look for greater security,efficiency and agility in software purchasing. Many of these organisationssought help to ensure compliance, consolidate multi-vendor agreements andrenegotiate licence terms. To capture better these opportunities, we increased our investment in dedicatedsales and marketing resources. Whilst this has had some short-term impact onthis unit's profit contribution, it is envisaged that future software businessgrowth will be achieved without the requirement to add further to the cost base. Significant successes in 2006 include a renewal of Microsoft licences with BAAin a three-year Direct Enterprise Agreement. Computacenter Direct This business unit, targeting the growing medium-sized business market,continued to grow strongly, with improved product margins and revenue growth inexcess of 40%. Recruitment of additional sales staff helped drive a 23% increase in productvolumes, predominantly related to server technology. This, together with ourincreasing success in attaching deployment and integration services totechnology supply, contributed to an increased profit contribution from thisunit. Computacenter Direct continues to attract new clients, and now has over 1,500trading customers. We are confident of continuing growth in the mid-marketsector. CCD Following a management reorganisation in 2006, CCD, our trade distribution arm,sought to reduce its exposure in a small number of unprofitable, high volumeaccounts. As a result, we saw rising margins and profitability in the secondhalf of the year. Profit performance also benefited from a merger of the two operating unitscomprising CCD, reducing our operating costs and streamlining the salesoperation. Increased sales focus led to a number of notable successes during theyear, in particular the growth of our IBM System X server revenues, whichsignificantly increased CCD's market share in these systems, and the successfulintroduction of a focused server-based computing initiative in partnership withHP. The management team was further strengthened in the last quarter and acomprehensive sales development plan has been initiated to underpin the businessduring 2007 and beyond. Although market conditions are expected to remainfiercely competitive, management believe that we are well placed to build on theimprovements seen in 2006. RDC After breaking even in the previous year, RDC, our technology recycling andremarketing operation, returned to profit in 2006. Our margin on remarketingservices increased by 15.1% and we continued to be profitable in Germany. Our success in 2006 was in part due to a renewed sales focus in the first halfof the year, with the launch of Computacenter Asset Recovery Services and thecreation of a new frontline sales team instrumental in a number of service wins. Throughout 2006 we saw significant successes in both our direct business, andbusiness won with Computacenter accounts. We now see a healthy sales pipeline,which we anticipate should provide a secure platform for profit and revenuegrowth in 2007. Germany Computacenter Germany recorded revenue growth of 5.9% to £654.7 million,although full-year operating profits declined 44.2% to £2.8 million (2005: £5.0million). The fall in profitability was largely due to the implementation of two shareddatacentre contracts, and the creation of the underlying infrastructure, whichcollectively produced a loss of approximately £6.2 million. Whilst elements ofthis were planned costs of start-up, these losses were on an unacceptable scaleand considerable efforts were made in the second half of the year to rectify thefailings. We are confident that this has now been achieved. This has obscured to some extent a marked underlying performance improvement inthe German business. Trading was particularly strong at the year-end. Althoughthis may signify a developing recovery in the German market, some of this growthappears to have arisen from additional spending by clients ahead of the VATincrease in Germany in early 2007. Sales growth also came from an increase in Managed Services business, as clientsturned to outsourcing to help reduce IT operational costs. Overall, we continuedto attract new business, with some significant wins and renewals leading to 22%contract base growth. As elsewhere, an increased proportion of our product business came from sales ofenterprise technology. We saw particular growth in networking offerings,reflecting the further commoditisation of the PC and laptop business and ourincreased focus on business-led solutions. In our Technology Solutions business, we continue to see the fruits of theinvestment made five years ago in the development of Voice Over IP telephony andVoice on Demand. Revenues from this competitive but highly profitable marketsegment were twice their 2005 value and we expect them to continue to growattractively in 2007. To support a growing requirement for the provision of a more internationalservice to large global customers such as Adidas, we took full responsibility inOctober for our Service Desk facility and its 120 employees in Erfurt. This waspreviously managed via a joint venture with Sellbytel. Through strongerintegration with our other facilities in Milton Keynes (UK) and Barcelona, thiswill help us build a more integrated international service centre network. Significant wins include a five-year outsourcing contract with Union InvestmentIT for DZ Bankgruppe, worth up to £60 million in product and service sales. Wewill provide an end-to-end service to include support of approximately 15,000workstations and the outsourcing of the client's datacentre, with all serviceand applications managed on our systems. Other successes include a three-year Europe-wide contract with Airbus, worth 30million euros, and major extensions of our contracts with Daimler Chrysler, fornetwork support of its Mercedes Technology Centre, and with Bosch, to includethe support of 38,000 workstations over a three-year term. France Performance in France remains unsatisfactory, although pre-exceptional operatinglosses reduced 15.0% to £6.5 million (2005: £7.6 million) as revenues grew 3.9%to £307.3 million (2005: £295.8million). Taking into account the effect ofexceptional charges, which related to additional restructuring of the Frenchbusiness, operating loss increased from £9.3 million in 2005 to £11.5 million. Despite further product margin erosion over 2006, we saw a slowdown of the trendover the first nine months and a slight improvement in margins in the lastquarter. Encouragingly, services margins improved over the year and we completedthe final stages of business take-on of our largest multinational servicescontract. We benefited from our ongoing focus on reducing the cost base in France in bothpeople and non-people expenses and we intend to continue with these measures in2007. We also saw some promising product and services sales growth, particularlyin the second half of the year. The growth of our profitable maintenance business was another key focus, withthe launch of a comprehensive sales training programme designed to improve theidentification, qualification and capture of these opportunities. We are alreadystarting to see the benefits of this programme, with a significant increase inmaintenance business over the period and into 2007. A similar sales trainingprogramme for enterprise products, which are less subject to price pressuresthan desktop systems, led to an expansion of our team of IBM technicalconsultants and helped grow our IBM revenues by 13%. Significant wins include a three-year managed services contract with TexasInstruments France, worth approximately £2 million. The contract scope includeshelp desk provision, installations, maintenance, disposal and support for morethan 3,500 devices. We also secured a five-year enterprise and professionalservices contract with the Centre National d'Etudes Spatiales (CNES) worth £13million. Benelux Our Benelux operation recorded an operating loss of £191,000 (2005: £109,000).The Belgium and Netherlands business achieved a break-even result, in spite ofcosts arising from the development of new communication and storage businessunits to address rising demand in those markets. Our sub-scale Luxembourgoperation recorded an overall loss. Product supply performed strongly, with an increased profit contribution, as didManaged Services, mainly from the growing financial sector. Key wins included a renewal on product supply with Pioneer, a technology refreshproject at SWIFT, a desktop managed services contract with Burgo Ardennes, and aCRM project for the European salesforce of Ansell. International We saw increasing client interest in our international capabilities in 2006,with a number of contract wins and extensions having a multi-country component.Typically these were with multinational organisations headquartered in Europe,such as Cognis, which outsourced its global IT infrastructure to Computacenter,including management of its datacentre and service desk. Our service facilities have been extended through the building of amulti-lingual shared service desk in Barcelona and through the service deskcapability in Cape Town, RSA that comes as part of the Digica acquisition. Thisenables Computacenter to determine the most suitable location, in terms of bothquality of service and cost, when configuring service contracts for customers. Consolidated income statementFor the year ended 31 December 2006 2006 2005 Note £'000 £'000 Revenue 3 2,269,903 2,285,209Cost of sales (1,974,437) (1,996,381) -------- --------Gross profit 295,466 288,828 Distribution costs (19,075) (19,928)Administrative expenses (241,408) (239,959)+--------------------------------------------------------------------------+ | Operating profit: || Before share based payments and exceptional 34,983 28,941 || items || Share based payments (1,411) 392 || -------- -------- || Operating profit before exceptional items 33,572 29,333 || Impairment of non-current assets 4 (2,606) - || Redundancy costs 4 (2,425) (1,675)|+--------------------------------------------------------------------------+ Operating profit 28,541 27,658 Finance revenue 6,677 8,127Finance costs (2,289) (2,002)Share of profit of associate - 229+--------------------------------------------------------------------------+| Profit before tax: || Before exceptional items 37,960 35,687 || Impairment of non-current assets 4 (2,606) - || Redundancy costs 4 (2,425) (1,675)|+--------------------------------------------------------------------------+Profit before tax 32,929 34,012 Income tax expense 5 (13,994) (13,579) -------- --------Profit for the year 18,935 20,433 -------- -------- Attributable to:Equity holders of the parent 6 18,927 20,406Minority interests 8 27 -------- -------- 18,935 20,433 -------- -------- Earnings per share 6- basic for profit for the year 11.0p 10.9p- basic for profit before exceptional items 13.9p 11.8p- diluted for profit for the year 10.9p 10.9p- diluted for profit before exceptional 13.8p 11.8pitems Consolidated balance sheetAs at 31 December 2006 2006 2005 Notes £'000 £'000Non-current assetsProperty, plant and equipment 84,874 81,601Intangible assets 9,945 9,493Investment accounted for using the equity - 288methodDeferred income tax asset 6,166 5,528 -------- -------- 100,985 96,910 -------- --------Current assetsInventories 94,586 100,233Trade and other receivables 427,319 382,970Prepayments 50,435 63,476Forward currency contracts 111 191Cash and short-term deposits 8 77,882 164,797 -------- -------- 650,333 711,667 -------- --------Total assets 751,318 808,577 -------- -------- Current liabilitiesTrade and other payables 315,846 315,997Deferred income 77,714 73,827Financial liabilities 55,736 64,131Income tax payable 8,394 5,712Provisions 2,132 2,190 -------- -------- 459,822 461,857 -------- --------Non-current liabilitiesFinancial liabilities 11,362 275Provisions 12,839 14,007Other non-current liabilities 917 371Deferred income tax liabilities 1,249 1,393 -------- -------- 26,367 16,046 -------- --------Total liabilities 486,189 477,903 -------- --------Net assets 265,129 330,674 ======== ======== Capital and reservesIssued capital 9,571 9,505Share premium 2,247 74,680Capital redemption reserve 74,542 100Own shares held (2,503) (2,503)Other reserves (2,455) (1,757)Retained earnings 183,700 250,630 -------- --------Shareholders' equity 265,102 330,655Minority interest 27 19 -------- --------Total equity 265,129 330,674 ======== ======== Approved by the Board on 12 March 2007 MJ Norris Chief Executive FA Conophy Finance Director Consolidated statement of changes in equityFor the year ended 31 December 2006 Attributable to equity holders of the parent ------------------------------- Issued Share Capital Own Foreign Retained Total Minority Total capital premium redemption shares currency earnings interest equity reserve held translation reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 31 December 9,489 73,920 100 (2,503) (911) 245,113 325,208 46 325,2542004Adoption of - - - - - (148) (148) - (148)IAS 32 & IAS ------ ------ ------- ------- ------- ------ ------ ------ ------39At 1 January 9,489 73,920 100 (2,503) (911) 244,965 325,060 46 325,1062005Exchange - - - - (846) - (846) - (846)differences on retranslationof foreignoperations ------ ------ ------- ------- ------- ------ ------ ------ ------Net income/ - - - - (846) - (846) - (846)(expenses)recogniseddirectly inequityProfit for the - - - - - 20,406 20,406 (27) 20,379period ------ ------ ------- ------- ------- ------ ------ ------ ------Total - - - - (846) 20,406 19,560 (27) 19,533recognisedincome andexpenses forthe yearCost of - - - - - (366) (366) - (366)share-basedpaymentsExercise of 16 760 - - - - 776 - 776optionsEquity - - - - - (14,375) (14,375) - (14,375)dividends ------ ------ ------- ------- ------- ------ ------ ------ ------ 16 760 - - (846) 5,665 5,595 (27) 5,568 ------ ------ ------- ------- ------- ------ ------ ------ ------At 31 December 9,505 74,680 100 (2,503) (1,757) 250,630 330,655 19 330,6742005 ====== ====== ======= ======= ======= ====== ====== ====== ====== At 1 January 9,505 74,680 100 (2,503) (1,757) 250,630 330,655 19 330,6742006Exchange - - - - (698) - (698) - (698)differences on retranslationof foreignoperations ------ ------ ------- ------- ------- ------ ------ ------ ------Net income/ - - - - (698) - (698) - (698)(expenses)recogniseddirectly inequityProfit for the - - - - - 18,927 18,927 8 18,935period ------ ------ ------- ------- ------- ------ ------ ------ ------Total - - - - (698) 18,927 18,229 8 18,237recognisedincome andexpenses forthe yearCost of - - - - - 1,411 1,411 - 1,411share-basedpaymentExercise of 66 2,317 - - - - 2,383 - 2,383optionsBonus issue 74,442 (74,442) - - - - - - -Expenses on - (308) - - - - (308) - (308)bonus issueShare (74,442) - 74,442 - - (73,886) (73,886) - (73,886)redemptionExpenses on - - - - - (56) (56) - (56)shareredemptionEquity - - - - - (13,326) (13,326) - (13,326)dividends ------ ------ ------- ------- ------- ------ ------ ------ ------ 66 (72,433) 74,442 - (698) (66,930) (65,553) 8 (65,545) ------ ------ ------- ------- ------- ------ ------ ------ ------ At 31 December 9,571 2,247 74,542 (2,503) (2,455) 183,700 265,102 27 265,1292006 ====== ====== ======= ======= ======= ====== ====== ====== ====== Consolidated cash flow statementFor the year ended 31 December 2006 2006 2005 Notes £'000 £'000 Operating activitiesOperating profit: 28,541 27,658Adjustments to reconcile Group operatingprofit to net cash inflows from operatingactivitiesDepreciation 14,585 15,535Amortisation 1,907 1,784Share based payment 1,411 (366)Impairment of property, plant and equipment 2,492 -Loss/(profit) on disposal of property, plant 353 (85)and equipmentImpairment of software 114 -Loss on disposal of software 9 -Dividend received from associate 202 303Decrease in inventories 4,560 16,824Increase in trade and other receivables (35,498) (25,904)Increase in trade and other payables 6,895 29,925Currency and other adjustments 5 287 -------- --------Cash generated from operations 25,576 65,961Income taxes paid (11,994) (18,366) -------- --------Net cash flow from operating activities 13,582 47,595 -------- -------- Investing activitiesInterest received 6,600 9,086Sale of subsidiary net of cash disposed of - (252)Sale of property, plant and equipment 24 205Purchase of property, plant and equipment (7,504) (8,068)Sale of intangible assets - -Purchases of intangible assets (2,499) (2,267)Sale of interest in associate 364 -Funds received from settlement of net asset - 26,918claim on previously acquired subsidiary -------- --------Net cash flow from investing activities (3,015) 25,622 -------- -------- Financing activitiesInterest paid (2,152) (2,063)Dividends paid to equity shareholders of the (13,326) (14,418)parentProceeds from share issues 2,383 776Repayment of capital element of finance leases (2,629) (321)Repayment of loans (326) -Repayment of other loans (5,201) -New borrowings 12,447 -Return of capital (74,442) -Expenses on return of capital (365)Decrease in factor financing (1,377) (6,401) -------- --------Net cash flow from financing activities (84,988) (22,427) -------- -------- (Decrease)/increase in cash and cash (74,421) 50,790equivalentsEffect of exchange rates on cash and cash 492 1,576equivalentsCash and cash equivalents at the beginning of 8 132,911 80,545the year -------- --------Cash and cash equivalents at the year end 8 58,982 132,911 ======== ========Analysis of changes in netfunds At 1 Cash Non-cash Exchange At 31 January flows in flow differences December 2006 year 2006 £'000 £'000 £'000 £'000 £'000Cash and cash equivalents 132,911 (74,421) - 492 58,982Factor financing (31,542) 1,377 - 616 (29,549)Bank loan (326) 326 - - - -------- ------- ------- --------- --------Net funds prior to 101,043 (72,718) - 1,108 29,433customer-specific loans andfinance leasesFinance leases (652) 2,629 (13,380) - (11,403)Other loans - 5,201 (12,447) - (7,246) -------- ------- ------- --------- --------Net funds 100,391 (64,888) (25,827) 1,108 10,784 ======== ======= ======= ========= ======== Notes to the consolidated financial statementsFor the year ended 31 December 2006 1 Authorisation of financial statements and statement of compliance with IFRS The consolidated financial statements of Computacenter plc for the year ended 31December 2006 were authorised for issue in accordance with a resolution of thedirectors on 12 March 2007. The balance sheet was signed on behalf of the Boardby MJ Norris and FA Conophy. Computacenter plc is a limited company incorporatedand domiciled in England whose shares are publicly traded. The Group's financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS), as adopted by the EuropeanUnion as they apply to the financial statements of the Group for the year ended31 December 2006 and applied in accordance with the Companies Act 1985. 2 Summary of significant accounting policies Basis of preparation The consolidated financial statements are presented in sterling and all valuesare rounded to the nearest thousand (£'000) except when otherwise indicated. Basis of consolidation The consolidated financial statements comprise the financial statements ofComputacenter plc and its subsidiaries as at 31 December each year. Thefinancial statements of subsidiaries are prepared for the same reporting year asthe parent company, using existing GAAP in each country of operation.Adjustments are made to translate any differences that may exist between therespective local GAAPs and IFRS. All intra-group balances, transactions, income and expenses and profit andlosses resulting from intra-group transactions that are recognised in assets,have been eliminated in full. Subsidiaries are consolidated from the date on which the Group obtains controland cease to be consolidated from the date on which the Group no longer retainscontrol. Minority interests represent the portion of profit or loss and net assets insubsidiaries that is not held by the Group and is presented separately withinequity in the consolidated balance sheet, separately from parent shareholders'equity. 3 Segmental analysis The Group's primary reporting format is geographical segments and its secondaryformat is business segments. The Group's geographical segments are determined bythe location of the Group's assets and operations. The Group's business in eachgeography is managed separately and held in separate statutory entities. Each geographical business contains the following three business segments: - o the Product segment supplies computer hardware and software to large andmedium corporate and government customers, and to other distributors. Itincludes the resale of third party services for which the group retains no risksor rewards post sale; o the Professional Services segment provides technical and project managementskills to enable customers in the corporate and government sectors to implementand integrate new technologies into their infrastructures. o the Support and Managed Services segment provides an outsourcing service forspecific areas of infrastructure management to customers in the corporate andgovernment sectors. The sale of goods is reported in the Product segment. The rendering of servicesis reported in the Professional Services and Support and Managed Servicessegments. Transfer prices between geographical segments are set on an arm's length basisin a manner similar to transactions with third parties. The impact ofinter-segment sales on operating profit by segment is not significant. Geographical segments The following tables present revenue, expenditure and certain asset informationregarding the Group's geographical segments for the years ended 31 December 2006and 2005. Year ended 31 December 2006 UK Germany France Benelux Total £'000 £'000 £'000 £'000 £'000 RevenueSales to external 1,281,498 654,671 307,264 26,470 2,269,903customersInter-segment sales 8,601 11,734 764 3,336 24,435 ------- ------- ------- ------- --------Segment revenue 1,290,099 666,405 308,028 29,806 2,294,338 ======= ======= ======= ======= ======== ResultGross profit 181,900 83,405 27,711 2,450 295,466 Distribution costs (11,765) (3,646) (3,521) (143) (19,075)Administrative (132,665) (76,971) (30,685) (2,498) (242,819)expenses ------- ------- ------- ------- --------Operating profit 37,470 2,788 (6,495) (191) 33,572pre-exceptionalsExceptional items - - (5,031) - (5,031) ------- ------- ------- ------- --------Operating profit 37,470 2,788 (11,526) (191) 28,541 ------- ------- ------- ------- -------- Net finance income 6,834 (882) (1,475) (89) 4,388 ------- ------- ------- ------- --------Profit before tax 44,304 1,906 (13,001) (280) 32,929Income tax expense (13,994) --------Profit for the year 18,935 ======== Assets andliabilitiesTotal segment assets 506,177 166,611 76,342 2,188 751,318 ======= ======= ======= ======= ======== Total segment 223,296 145,382 112,679 4,832 486,189liabilities ======= ======= ======= ======= ======== Other segmentinformationCapital expenditure:Property, plant and 10,387 9,557 852 89 20,885equipmentIntangible fixed 1,922 495 82 - 2,499assets ======= ======= ======= ======= ======== Depreciation 11,262 2,283 936 104 14,585Amortisation 1,551 293 63 - 1,907 ======= ======= ======= ======= ======== Share-based payments 1,173 202 28 8 1,411 ======= ======= ======= ======= ======== Year ended 31 December 2005 UK Germany France Benelux Total £'000 £'000 £'000 £'000 £'000 RevenueSales to external 1,351,307 618,238 295,784 19,880 2,285,209customersInter-segment sales 8,401 24,604 293 3,539 36,837 ------- ------- ------- ------- -------Segment revenue 1,359,708 642,842 296,077 23,419 2,322,046 ======= ======= ======= ======= ======= ResultGross profit 169,876 87,709 28,941 2,302 288,828 Distribution Costs (11,315) (5,160) (3,360) (93) (19,928)Administrative (126,482) (77,548) (33,219) (2,318) (239,567)expenses ------- ------- ------- ------- -------Operating profit 32,079 5,001 (7,638) (109) 29,333pre-exceptionalsExceptional items - - (1,675) - (1,675) ------- ------- ------- ------- -------Operating profit 32,079 5,001 (9,313) (109) 27,658 ------- ------- ------- ------- ------- Net finance income 8,055 (553) (1,347) (30) 6,125Share of associate's - 229 - - 229profit ------- ------- ------- ------- ------- Profit before tax 40,134 4,677 (10,660) (139) 34,012Income tax expense (13,579) -------Net profit for the 20,433year ======= Assets andliabilitiesSegment assets 569,043 136,784 100,880 1,582 808,289Investment in an - 288 - - 288associate ------- ------- ------- ------- -------Total assets 569,043 137,072 100,880 1,582 808,577 ======= ======= ======= ======= ======= Segment liabilities 233,129 116,895 123,952 3,927 477,903 ------- ------- ------- ------- -------Total liabilities 233,129 116,895 123,952 3,927 477,903 ======= ======= ======= ======= ======= Other segmentinformationCapital expenditure:Property, plant and 6,138 1,020 555 124 7,837equipmentIntangible fixed 3,083 284 18 - 3,385assets ======= ======= ======= ======= ======= Depreciation 11,570 2,981 882 102 15,535Amortisation 1,093 295 358 38 1,784 ======= ======= ======= ======= ======= Share-based payments (559) 138 21 8 (392) ======= ======= ======= ======= ======= Business segments The following tables present revenue and profit information regarding theGroup's business segments for the years ended 31 December 2006 and 2005. Product Professional Support Total services and managed servicesYear ended 31 £'000 £'000 £'000 £'000December 2006RevenueSales to external 1,735,210 128,895 405,798 2,269,903customersInter-segment sales 3,865 2,723 17,847 24,435 ------- --------- -------- -------Segment revenue 1,739,075 131,618 423,645 2,294,338 ======= ========= ======== ======= Product Professional Support Total services and managed servicesYear ended 31 £'000 £'000 £'000 £'000December 2005(Restated)RevenueSales to external 1,770,410 114,236 400,563 2,285,209customersInter-segment sales 23,694 3,775 9,368 36,837 ------- --------- -------- -------Segment revenue 1,794,104 118,011 409,931 2,322,046 ======= ========= ======== ======= For the year ended 31 December 2005 an amount of £12,443,000 has beenreclassified from Support and Managed Services to Product. This amount is inrespect of 3rd party resold services in Germany for which the Group retains norisks or rewards. Historically these amounts could not be separately identified. It is not possible to split out assets, liabilities and capital expenditureinformation by business segments. Assets and liabilities within geographicalsegments are not allocated to business segments. 4 Exceptional items 2006 2005 £'000 £'000Impairment of property, plant and equipment 2,492 -Impairment of intangible assets 114 -Redundancy costs 2,425 1,675 -------- -------- 5,031 1,675 ======== ======== Forecast cash flows for Computacenter France no longer support the value ofthe non-current assets in the business, and accordingly a full impairment tothese assets was recorded at 31 December 2006. Restructuring costs of £2,425,000 (2005: £1,675,000) were incurred during theyear ended 31 December 2006. These principally relate to headcount reductionsrequired to restructure the indirect cost base. The 2005 comparatives have beenrestated to classify these costs as exceptional items accordingly. 5 Income tax a) Tax on profit on ordinary activitiesTax charged in the income statement 2006 2005 £'000 £'000Current income taxUK corporation tax 14,421 12,872Foreign tax 212 31Adjustments in respect of current income tax of 76 (202)previous yearsConsortium relief 59 (119) -------- --------Total current income tax 14,768 12,582 ======== ======== Deferred taxRelating to origination and reversal of (499) 997temporary differencesPrior year adjustments (275) - -------- --------Total deferred tax (774) 997 -------- --------Tax charge in the income statement 13,994 13,579 ======== ======== Tax relating to items charged or credited toequityDeferred taxRelief on share option gains - 16 -------- --------Tax charge in the statement of changes in equity - 16 ======== ======== b) Reconciliation of the total tax charge 2006 2005 £'000 £'000Accounting profit before income tax 32,929 34,012 -------- -------- At the UK standard rate of corporation tax of 9,879 10,20430% (2005: 30%)Expenses not deductible for tax purposes 1,147 673Relief on share option gains (218) -Adjustments in respect of current income tax of (214) (202)previous yearsHigher tax on overseas earnings 49 1Accounting depreciation in excess of tax 21 518depreciationOther timing differences (616) (761)Consortium relief 59 (119)Profit of overseas undertakings not taxable due (154) (4)to brought forward loss offsetLosses of overseas undertakings not available 4,041 3,269for relief -------- --------At effective income tax rate of 42.6% (2005: 13,994 13,57939.9%) ======== ======== 6 Earnings per ordinary share Basic earnings per share amounts are calculated by dividing net profit for theyear attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net profitattributable to ordinary shareholders by the weighted average number of ordinaryshares outstanding during the year adjusted for the effect of dilutive options. The following reflects the income and share data used in the total operationsbasic and diluted earnings per share computations: 2006 2005 £'000 £'000 Profit attributable to equity holders of 18,927 20,406the parentExceptional items attributable to equity 5,031 1,675holders of the parent -------- --------Profit before exceptional items 23,958 22,081attributable to equity holders of the -------- --------parent 2006 2005 000's 000'sBasic weighted average number of shares 172,312 187,210(excluding own shares held)Effect of dilution:Share options 1,232 658 -------- --------Diluted weighted average number of 173,544 187,868shares ======== ======== There have been no other transactions involving ordinary shares or potentialordinary shares since the reporting date and before the completion of thesefinancial statements. 7 Dividends paid and proposed 2006 2005 £'000 £'000Declared and paid during the year: Equity dividends on ordinary shares:Final dividend for 2005: 5.0p (2004: 5.2p) 9,405 9,735Interim for 2006: 2.5p (2005: 2.5p) 3,921 4,590 -------- -------- 13,326 14,325 ======== ======== Proposed for approval at AGM (not recognisedas a liability as at 31 December)Equity dividends on ordinary shares:Final dividend for 2006: 5.0p (2005: 5.0p) 7,856 9,400 ======== ======== 8 Cash and short-term deposits 2006 2005 £'000 £'000Cash at bank and in hand 17,882 164,797Short-term deposits 60,000 - -------- -------- 77,882 164,797 ======== ======== Cash at bank and in hand earns interest at floating rates based on daily bankdeposit rates. Short-term deposits are made for varying periods of between oneday and three months depending on the immediate cash requirements of the Group,and earn interest at the respective short-term deposit rates. The fair value ofcash and cash equivalents is £77,882,000 (2005: £164,797,000). At 31 December 2006, the Group had available £10,000,000 (2005: £9,100,000) ofundrawn committed borrowing facilities in respect of which all conditionsprecedent had been met. In addition the Group has £79,000,000 (2005:£59,200,000)of overdraft facilities. For the purposes of the consolidated cash flow statement, cash and cashequivalents comprise the following at 31 December: 2006 2005 £'000 £'000Cash at bank and in hand 17,882 164,797Short-term deposits 60,000 -Bank overdrafts (18,900) (31,886) -------- -------- 58,982 132,911 ======== ======== 9 Customer-specific leases and loans a) Other loans Other loans comprise of borrowings relating to specific assets that are used tosatisfy specific customer contracts. The table below summarises the maturity profile of these loans: 2006 2005 £'000 £'000Not later than one year 4,443 -After one year but not more than five years 2,803 - -------- -------- 7,246 - ======== ======== b) Finance lease commitments The finance leases are only secured on the assets that they finance. Theseassets are used to satisfy specific customer contracts. The present value of the net minimum lease payments are as follows: 2006 2005 £'000 £'000 Within one year 2,844 377 After one year but not more 8,559 275 than five years -------- -------- Present value of minimum lease 11,403 652 payments ======== ======== c) Operating lease commitments where the Group is lessor During the year the Group entered into commercial leases with customers oncertain items of machinery. Future amounts receivable by the Group under the non-cancellable operatingleases as at 31 December are as follows: 2006 2005 £'000 £'000Not later than one year 8,541 -After one year but not more 12,723 -than five years ------ ----- 21,264 - ====== ===== The amounts receivable are directly related to the finance lease obligations andother loans of £18,649,000 detailed in notes 8 a) and 8 b). 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 2006, 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:
Computacenter