REG - Computacenter - 2014 Final Results <Origin Href="QuoteRef">CCC.L</Origin> - Part 2

ComputacenterAnnouncement

12/03/2015 07:01

- Part 2: For the preceding part double click  ID:nRSL2255Ha 

terms with a significant vendor,
equivalent to £38.6 million at 31 December 2014, a decrease of £2.5 million
from 31 December 2013. This improvement in credit terms has been in operation
since 2009 and whilst the continuation of these terms is not guaranteed and
can be withdrawn at any time, the terms are generally available to all
material partners of that significant vendor. We no longer feel it is
necessary to continue to highlight these terms in the Performance Review.
However we will continue to reference this item in this report, but we will
not routinely report the number in Interim Management Statements, similar
external updates or within the accounts themselves. 
 
Customer Specific Financing decreased in the year from £18.9 million to £9.3
million. CSF remains low compared to historical standards due to a decision to
restrict this form of financing in light of the current credit environment and
reduced customer demand. 
 
Taking CSF into account, net funds at the end of the year were £119.2 million,
compared to £71.4 million at the start of the year. 
 
Customer specific financing 
 
In certain circumstances, the Group enters into customer contracts that are
financed by leases or loans. The leases are secured only on the assets that
they finance. Whilst the outstanding balance of CSF is included within the net
funds for statutory reporting purposes, the Group excludes CSF when managing
the net funds of the business, as this CSF is matched by contracted future
receipts from customers. 
 
Whilst CSF is repaid through future customer receipts, Computacenter retains
the credit risk on these customers and ensures that credit risk is only taken
on customers with a strong credit rating. 
 
The committed CSF facilities, are thus outside of the normal working capital
requirements of the Group's product resale and service activities. 
 
The Group does not expect a material increase in the level of CSF facilities,
partly as the Group applies a higher cost of finance to these transactions
than customer's marginal cost of finance. 
 
Financial instruments 
 
The Group's financial instruments comprise borrowings, cash and liquid
resources, and various items that arise directly from its operations. The
Group enters into hedging transactions, principally Forward Exchange contracts
or currency swaps. The purpose of these transactions is to manage currency
risks arising from the Group's operations and its sources of finance. As the
Group continues to expand its global reach and benefit from lower cost
operations in certain geographies such as South Africa, it has entered into
Forward Exchange contracts to help manage cost increases due to currency
movement. 
 
The Group's policy remains that no speculative trading in financial
instruments shall be undertaken. 
 
The main risks arising from the Group's financial instruments are interest
rate, liquidity and foreign currency risks. The overall financial instruments
strategy is to manage these risks in order to minimise their impact on the
financial results of the Group. The policies for managing each of these risks
are set out below. Further disclosures in line with the requirements of IFRS 7
are included in the financial statements. 
 
Interest rate risk 
 
The Group finances its operations through a mixture of retained profits, bank
borrowings and finance leases and loans for certain customer contracts. The
Group's bank borrowings, other facilities and deposits are at floating rates.
No interest rate derivative contracts have been entered into. 
 
Liquidity risk 
 
The Group's policy is to ensure that it has sufficient funding and facilities
in place to meet any foreseeable peak in borrowing requirements. The Group's
positive net funds position was maintained throughout 2014, and at the
year-end was £128.5 million excluding CSF, and £119.2 million including CSF. 
 
Due to strong cash generation over the past three years, the Group is
currently in a position where it can finance its requirements from its cash
balance, and the Group operates a cash pooling arrangement for the majority of
Group entities. 
 
During 2013 the Group entered into a specific committed facility of £40.0
million for a three-year term which expires in May 2016. In February 2015 this
facility was extended at the same value through to February 2018. 
 
The Group has a Board monitored policy in place to manage its counterparty
risk that places cash on deposit across a range of reputable banking
institutions. 
 
Customer specific financing facilities are committed. 
 
Foreign currency risk 
 
The Group operates primarily in the UK, Germany, France, and with smaller
operations in Belgium, Hungary, India, Malaysia, Luxembourg, Spain, South
Africa, Switzerland and the United States of America. The Group uses a cash
pooling facility to ensure that its operations outside of the UK are
adequately funded, where principal receipts and payments are denominated in
Euros. For those countries within the Euro zone, the level of non-Euro
denominated sales is small and, if material, the Group's policy is to
eliminate currency exposure through forward currency contracts. For the UK,
the majority of sales and purchases are denominated in Sterling and any
material trading exposures are eliminated through forward currency contracts. 
 
The Group has been increasingly successful in winning international services
contracts where services are provided in multiple countries. The Group aims to
minimise this exposure by invoicing the customer
in the same currency in which the costs are incurred. For certain contracts,
the Group's committed contract costs are not denominated in the same currency
as its sales. In such circumstances, for example where contract costs are
denominated in South African Rand, the Group eliminates currency exposure for
a foreseeable future period on these future cash flows through forward
currency contracts. In 2014, the Group recognised a loss of £0.3 million
(2013: loss of £1.4 million) through other comprehensive income in relation to
the changes in fair value of related forward currency contracts, where the
cash flow hedges relating to firm commitments were assessed to be highly
effective. 
 
Credit risk 
 
The Group principally manages credit risk through management of customer
credit limits. The credit limits are set for each customer based on the
creditworthiness of the customer and the anticipated levels of business
activity. These limits are initially determined when the customer account is
first set up and are regularly monitored thereafter. 
 
There are no significant concentrations of credit risk within the Group. The
Group's major customer, disclosed in Note 3 to the financial statements,
consists of entities under the control of the UK Government.
The maximum credit risk exposure relating to financial assets is represented
by carrying value as at the balance sheet date. 
 
Going concern 
 
As disclosed in the Directors' Report, the directors have a reasonable
expectation that the Group has adequate resources to continue its operations
for the foreseeable future. Accordingly they continue to adopt
the going concern basis in preparing the consolidated financial statements. 
 
Fair, balanced and understandable 
 
The UK Corporate Governance Code has a requirement for the Board to consider
whether the Annual Report and Accounts are 'fair, balanced and understandable'
and 'provides the information necessary
for shareholders to assess the company's performance, business model and
strategy'. 
 
We have continued to formalise the process through which we can provide
comfort to the Board to make the relevant assertions within the Annual Report
and Accounts. 
 
Tony Conophy 
 
Group Finance Director 
 
11 March 2015 
 
Directors' responsibilities 
 
Statement of Directors' responsibilities in relation to the financial
statements 
 
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable company law and regulations
and those International Financial Reporting Standards as adopted by the
European Union. Under Company law, the Directors must not approve the Group
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and of the profit or loss of the
Group for that period. 
 
The Directors are required to prepare financial statements for each financial
year which present fairly the financial position of the Company and of the
Group and the results and cash flows of the Group for that period. In
preparing the financial statements, the Directors are required to: 
 
·     select suitable accounting policies and then apply them consistently; 
 
·     make judgements and estimates that are reasonable; 
 
·     state whether applicable accounting standards have been followed,
subject to any material departures being disclosed and explained in the
accounts; and 
 
·     prepare the accounts on the going concern basis unless it is
inappropriate to presume that the Group and the Company will continue in
business. 
 
The Directors are responsible for keeping proper and adequate accounting
records, which disclose with reasonable accuracy, at any time, the financial
position of the Group and enable them to ensure that the accounts and the
Directors' Remuneration report comply with the Companies Act 2006 and Article
4 of the IAS Regulation. They are also responsible for safeguarding the assets
of the Group and hence, taking reasonable steps for the prevention and
detection of fraud and other irregularities. 
 
The Directors are responsible for the maintenance and integrity of the
financial and corporate governance information as provided on the
Computacenter plc website (www.computacenter.com). 
 
Disclosure of information to auditor 
 
In accordance with Section 418 of the Companies Act 2006, each of the persons
who is a Director at the date of approval of this report confirms that: 
 
·     to the best of each Director's knowledge and belief, there is no
information relevant to the preparation of their report of which the Group's
auditors are unaware; and 
 
·     each Director has taken all steps a Director might reasonably be
expected to have taken, to be aware of relevant audit information and to
establish that the Group's auditors are aware of that information. 
 
Directors' responsibility statement 
 
·     The financial statements, prepared in accordance with International
Financial Reporting Standards, as adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and profit for the Company and
undertakings included in the consolidation taken as a whole; 
 
·     Pursuant to the Disclosure and Transparency Rules, the Company's Annual
Report and Accounts include a fair review of the development and performance
of the business and the position of the Company and the undertakings included
in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face; and 
 
·     The Directors consider that the Annual Report and Accounts taken as a
whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's and the Group's
performance, business model and strategy. 
 
The Annual Report from pages 1 to 75 was approved by the Board of Directors
and authorised for issue on 11 March 2015 and signed for and on behalf of the
Board by: 
 
Mike Norris                                        Tony Conophy 
 
Chief Executive Officer                   Group Finance Director 
 
11 March 2015                                   11 March 2015 
 
Consolidated income statement 
 
For the year ended 31 December 2014 
 
                                                                          2014         2013         
                                                                    Note  £'000        £'000        
 Revenue                                                            3     3,107,759    3,072,075    
 Cost of sales                                                            (2,697,842)  (2,668,814)  
 Gross profit                                                             409,917      403,261      
                                                                                                    
 Administrative expenses                                                  (323,814)    (321,096)    
 Operating profit:                                                                                  
 Before amortisation of acquired intangibles and exceptional items        86,103       82,165       
 Amortisation of acquired intangibles                                     (1,868)      (2,375)      
 Onerous contracts                                                        1,540        (15,739)     
 Non-cash impairment                                                      -            (12,195)     
 Other exceptional items                                                  (9,128)      (830)        
 Exceptional items                                                  4     (7,588)      (28,764)     
 Operating profit                                                         76,647       51,026       
                                                                                                    
 Finance revenue                                                          1,615        1,351        
 Finance costs                                                            (1,844)      (1,852)      
                                                                                                    
 Profit before tax:                                                                                 
 Before amortisation of acquired intangibles and exceptional items        85,874       81,664       
 Amortisation of acquired intangibles                                     (1,868)      (2,375)      
 Onerous contracts                                                        1,540        (15,739)     
 Non-cash impairment                                                      -            (12,195)     
 Other exceptional items                                                  (9,128)      (830)        
 Exceptional items                                                  4     (7,588)      (28,764)     
 Profit before tax                                                        76,418       50,525       
                                                                                                    
 Income tax expense:                                                                                
 Before amortisation of acquired intangibles and exceptional items        (21,353)     (19,325)     
 Tax on amortisation of intangibles                                       238          244          
 Tax on onerous contracts                                                 (185)        1,889        
 Tax on non-cash impairment                                               -            1,014        
 Tax on other exceptional items                                           -            (700)        
 Total tax on exceptional items                                           (185)        2,203        
 Exceptional tax items                                                    -            (489)        
 Income tax expense                                                 5     (21,300)     (17,367)     
 Profit for the year                                                      55,118       33,158       
                                                                                                    
 Attributable to:                                                                                   
 Equity holders of the parent                                             55,117       33,160       
 Non-controlling interests                                                1            (2)          
 Profit for the year                                                      55,118       33,158       
                                                                                                    
 Earnings per share                                                                                 
 - basic for profit for the period                                  6     40.5p        23.2p        
 - diluted for profit for the period                                6     40.0p        23.0p        
 
 
Consolidated statement of comprehensive income 
 
For the year ended 31 December 2014 
 
                                                            Note  2014£'000  2013£'000  
 Profit for the year:                                             55,118     33,158     
                                                                                        
 Items that may be reclassified to profit or loss:                                      
 Loss arising on cash flow hedge                                  (251)      (1,403)    
 Income tax effect                                          5     54         326        
                                                                  (197)      (1,077)    
 Exchange differences on translation of foreign operations        (10,976)   4,326      
                                                                  (11,173)   3,249      
 Items not to be reclassified to profit or loss:                                        
 Remeasurement of defined benefit plan                            (1,177)    -          
 Other comprehensive income for the year, net of tax              (12,350)   3,249      
                                                                                        
 Total comprehensive income for the period                        42,768     36,407     
                                                                                        
 Attributable to:                                                                       
 Equity holders of the parent                                     42,768     36,407     
 Non-controlling interests                                        -          -          
                                                                  42,768     36,407     
 
 
Consolidated balance sheet 
 
As at 31 December 2014 
 
                                       Note  2014£'000  2013£'000  
 Non-current assets                                                
 Property, plant and equipment               79,940     89,044     
 Intangible assets                           90,344     98,870     
 Investment in associate                     42         45