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France and Germany are holding us back, moans Computacenter

Everything's just super in Blighty, though

Tech resell monster Computacenter (CC) today warned investors that troubled services contracts and economic woes in its mainland Euro ops will dampen group growth for 2013.

London-based CC provided the guidance as it rolled out an interim management statement reporting sales of £659.4m, flat relative to Q1 a year ago, with a seven per cent rise in services and a three per cent decline in product sales.

The UK team is keeping up its end of the bargain, and the "momentum" built in 2012 - following a tough 2011 - continued with turnover up six per cent to £294.9m. This included an 11 per cent hike in services revenues and four per cent in product.

CC warned however that "the comparator from 2012 for services growth will get more challenging from now, but our prospect pipeline has increased since we last reported, giving us more confidence that our services growth will be maintained for some time".

Troubles for CC's German business - which started last year - come on two fronts: it lowballed services contracts and struggled to deliver them at agreed prices, and the product business is down.

Revenues in the Teutonic operation declined seven per cent to £280.6m - service sales dipped two per cent in constant currency and the product side dived 17 per cent, largely related to a one-off low margin deal.

"The two fundamental issues for our business in Germany are the performance of our problem contracts this year, and our ability to secure new and profitable contracts going forward," said CC.

Progress has been made on the majority of problem contracts but three "remain stubbornly financially and operationally challenging".

"It is important to note that maintaining our overall relationship with these customers, as well as our reputation in the marketplace, makes us determined to ensure that we deliver on agreed service levels, in spite of any short or medium-term impact that this approach may have on profitability," the firm added.

Turnover for CC France was up two per cent to £107.4m but declined three per cent in constant currency - service revenues declined seven per cent and the product unit dipped two per cent.

CC said the "challenging economic environment" across the English channel "resulted in a distinct lack of professional services projects" that hit the services margins and the bottom line.

The company warned it sees little prospect of the dynamics in France abating this year meaning it will be a tough 2013 for that country operation.

So business in Blighty is "encouraging" and tracking to expectations, CC France is performing below expectations, "broadly at break even for the year" and the German contractual difficulties remain a thorn in the side.

"We now expect to make only modest progress against the overall group performance achieved in 2012," said CC.

"It has clearly been a mixed performance for the business through this quarter, but we have a great deal to be excited about, particularly the UK performance and the underlying growth in our managed services pipeline across the group.

"However, this fundamental improvement in the business is being masked by the remaining three problem contracts in Germany and the challenging market conditions in France," the firm added. ®

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