Computacenter's pockets still empty – despite shiny UK biz

Service woes in Germany and weak economy in France let the side down

Computacenter (CC) has swung to a half-year loss despite reporting "excellent momentum" in the UK biz, as troublesome tech services contracts in Germany and woes in France hurt the bottom line.

The services-based reseller saw sales in the first six months of 2013 edge up 0.7 per cent year-on-year to £1.43bn, and after discounting the cost of doing that business, gross profit was £185.2m, up from £182.3m.

Admin expenses left CC with an operating profit of £26.1m, up 2.5 per cent on 2012, but £29.29m worth of exceptional charges wiped that out, leaving a pre-tax loss of £4.35m. Toss in an exceptional tax charge of £4.1m and it had a net loss of £8.47m.

The one-off costs included £5.1m trading losses for three onerous contracts in Germany, and a £10.67m provision against future losses. It also included a non-cash impairment charge of £12.2m in France due a "deterioration" in the operation.

"In Germany, we underestimated the level of resources required to meet our agreed service level commitments and to provide the quality of service that befits our reputation," said chairman Greg Lock in a statement.

He added there had been "continued excellent progress in the UK, stabilisation and reorganisation in Germany but a disappointing performance in France".

UK revenues grew 2.4 per cent to £592.1m and operating profit bounced more than 14 per cent to £20.1m, which is not bad going in a market where flat in the new growth.

The supply chain business – product reselling – was up "marginally" to £369.1m versus the same period a year ago, and services leaped 5.9 per cent to £203.4m against a tough comparison H1 last year.

"The trend of customers purchasing a higher volume, but lower margin mix of IT product, seen throughout the course of 2012, has continued throughout the first half of this year and we see no sign of this trend abating in the second half of 2013," the firm stated.

The operation in Germany saw revenues slide by 1.3 per cent in constant currency to £603.4m, and adjusted operating profit of £9.7m, compared to £7.1m a year ago.

"This increase is encouraging because it has taken place against a backdrop of significant change within our business," CC added.

Services revenue in Germany dipped 0.4 per cent to £203.4m and product sales fell 1.8 in constant currency to £400m, albeit again against a strong H1 last year.

Revenue slumped in France by 11.5 per cent to £207.7m due in large to declining product sales, which fell 13.4 per cent. The market was described as "challenging", and an ERP upgrade that went live on 1 June served to disrupt some sales that will now be banked in the second half of the year.

CC France reported an operating loss of £4.6m compared to an operating loss of £779,000 a year ago.

The small Belgium operation grew to £23m and made an operating profit of £623,000. This compared to sales of £26.1m and an operating profit of £1m a year ago.

So at the halfway point, CC is forecasting that its Blighty arm is likely to close the year ahead of expectations and revealed Germany got off to a better start in Q3 with a healthy services pipeline, and improvements in processes and systems that will help it avoid further problem contracts.

The "main area of concern" however is still the French biz, CC added.

"Given that our French ERP implementation is behind us, we are in the final stages of negotiation on a major new services contract and we are endeavouring to deploy our group operating model in our French business, we expect that the performance will improve, but this will not be without its challenges," said CC. ®

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