REG - Computacenter - Half-year Report
09/09/2024 07:00
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RNS Number : 3188D Computacenter PLC 09 September 2024
Computacenter plc
2024 Half Year results
Computacenter plc ('Computacenter' or the 'Group'), a leading independent
technology and services provider, today announces unaudited half year results
for the six months ended 30 June 2024.
Change in constant currency(1)
Financial highlights H1 2024 H1 2023 Change
Technology Sourcing gross invoiced income (£m) 3,740.1 4,341.7 -13.9% -12.2%
Services revenue (£m) 796.5 816.5 -2.4% -0.6%
Gross invoiced income(1) (£m) 4,536.6 5,158.2 -12.1% -10.3%
Technology Sourcing revenue (£m) 2,307.3 2,768.4 -16.7% -14.8%
Services revenue (£m) 796.5 816.5 -2.4% -0.6%
Revenue (£m) 3,103.8 3,584.9 -13.4% -11.6%
Gross profit (£m) 472.2 505.7 -6.6% -4.8%
Gross margin (%) 15.2% 14.1% 111bps
Adjusted(1) operating profit (£m) 81.1 118.5 -31.6% -30.0%
Adjusted(1) profit before tax (£m) 87.2 121.8 -28.4% -26.8%
Adjusted(1) diluted earnings per share (p) 55.0 73.5 -25.2%
Dividend per share (p) 23.3 22.6 3.1%
Net cash inflow from operating activities (£m) 1.4 116.5 -98.8%
Adjusted(1) net funds (£m) 401.9 285.1 +41.0%
Statutory measures H1 2024 H1 2023 Change
Operating profit (£m) 78.4 121.5 -35.5%
Profit before tax (£m) 84.0 122.8 -31.6%
Diluted earnings per share (p) 52.9 76.5 -30.8%
Net funds (£m) 287.8 164.8 74.6%
( )
(1)Alternative performance measures (APMs) and other terms are used throughout
this announcement. These are defined in full in the Appendix to this
announcement.
Mike Norris, Chief Executive Officer, commented:
"Our performance in the first half largely reflected the expected
normalisation of Technology Sourcing volumes against an exceptionally strong
comparative. At the same time, we have executed well against our strategy by
adding seven 'podium' customers in the half, broadening our customer base in
North America. Professional Services has also delivered good growth,
leveraging our experience in Germany into other markets.
"We continue to invest in new systems and tools to ensure Computacenter's
continued success while maintaining our strong track record of delivering
shareholder returns. The previously announced £200m share buyback is ongoing,
which will take the total value of capital distributed to shareholders,
including ordinary dividends, to nearly £1bn since 2013.
"We have made an encouraging start to our third quarter and continue to expect
stronger momentum in the second half, resulting in progress in the full year
on a constant currency basis."
Financial highlights
· Gross profit declined by 4.8% and adjusted PBT by 26.8% in
constant currency driven by the expected normalisation of Technology Sourcing
volumes against exceptionally strong comparatives, solid underlying
performances in Germany and North America, softer UK market conditions and
planned increased strategic investment in the half
· Strong balance sheet position with adjusted net funds increasing
by £116.8m to £401.9m supporting a £200m return of capital by way of share
buyback
Strategic and operational highlights
· Continuing to deliver our strategic priorities of growing our
target market customers, scaling our activities and empowering our people
· Good progress in growing the number of customers generating over
£1m of gross profit p.a., with a net 7 added across the Group since the year
end, and 'podium' customers now totalling 190 (FY 2023: 183)
· In North America, new hyperscale and enterprise customer wins,
with 8 'podium' customers added in the half; we remain excited about the scale
of the long-term growth opportunity
· Product order backlog as at 30 June 2024 up 18.5% year on year in
constant currency, and up 47.8% since 31 December 2023, driven by strong
Technology Sourcing order intake in North America
· £17.6m of spend on strategic initiatives (H1 2023: £11.9m) to
improve our capabilities, enhance productivity and secure future growth
Shareholder returns
· Interim dividend increased by 3.1% to 23.3p
· £200m share buyback programme commenced in late July given
strength of balance sheet, and in line with our capital allocation policy;
£66.1m completed to date
Outlook
We have made an encouraging start to Q3 and, consistent with our July trading
update, we expect stronger momentum in the second half underpinned by the size
of our committed product order backlog and wider pipeline of opportunities.
While we are mindful of the backdrop of continuing geopolitical and macro
uncertainty across our markets we continue to expect to make progress in FY
2024 as a whole on a constant currency basis.
Enquiries:
Computacenter plc
Mike Norris, CEO +44 (0) 1707 631 601
Chris Jehle, CFO +44 (0) 1707 631 346
Christian Cowley, Investor Relations +44 (0) 1707 631 132
Teneo
James Macey White / Matt Low +44 (0) 207 353 4200
About Computacenter:
Computacenter is a leading independent technology and services provider,
trusted by large corporate and public sector organisations. We are a
responsible business that believes in winning together for our people and our
planet. We help our customers to Source, Transform and Manage their technology
infrastructure to deliver digital transformation, enabling people and their
business. Computacenter plc is a public company quoted on the London Stock
Exchange (CCC.L) and a member of FTSE 250. Computacenter employs over 20,000
people worldwide.
DISCLAIMER - FORWARD LOOKING STATEMENTS
This announcement includes statements that are, or may be deemed to be,
'forward-looking statements'. These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
'anticipates', 'believes', 'estimates', 'expects', 'intends', 'may', 'plans',
'projects', 'should' or 'will', or, in each case, their negative or other
variations or comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These forward-looking
statements include all matters that are not historical facts. They appear in a
number of places throughout this announcement and include, but are not limited
to, statements regarding the Group's intentions, beliefs or current
expectations concerning, amongst other things, results of operations,
prospects, growth, strategies and expectations of its respective businesses.
By their nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances. Forward-looking
statements are not guarantees of future performance and the actual results of
the Group's operations and the development of the markets and the industry in
which they operate or are likely to operate and their respective operations
may differ materially from those described in, or suggested by, the
forward-looking statements contained in this announcement. In addition, even
if the results of operations and the development of the markets and the
industry in which the Group operates are consistent with the forward-looking
statements contained in this announcement, those results or developments may
not be indicative of results or developments in subsequent periods. A number
of factors could cause results and developments to differ materially from
those expressed or implied by the forward-looking statements, including,
without limitation, those risks in the risk factor section of the
Computacenter plc 2023 Annual Report and Accounts, as well as general economic
and business conditions, industry trends, competition, changes in regulation,
currency fluctuations or advancements in research and development.
Forward-looking statements speak only as of the date of this announcement and
may, and often do, differ materially from actual results. Any forward-looking
statements in this announcement reflect the Group's current view with respect
to future events and are subject to risks relating to future events and other
risks, uncertainties and assumptions relating to the Group's operations,
results of operations and growth strategy.
Neither Computacenter plc nor any of its subsidiaries undertakes any
obligation to update the forward-looking statements to reflect actual results
or any change in events, conditions or assumptions or other factors unless
otherwise required by applicable law or regulation.
Chief Executive Officer's review
Summary of H1 2024 performance
As anticipated, Technology Sourcing volumes normalised during the first half
of 2024 against an exceptionally strong performance in H1 2023. While this
naturally impacted our overall financial performance in the short term, we
delivered solid underlying performances in Germany and North America. In the
UK, demand for hardware has been weaker than we expected at the start of the
year, with customers exercising greater caution and purchasing decisions
taking longer to conclude. The H1 result was also impacted by the timing of
fulfilment for certain large orders in North America, which moved into H2 and
are now being completed, as well as the phasing of our strategic initiatives
investments, where we spent an additional £5.7m versus the same period in
2023.
Encouragingly, our committed product order backlog has grown significantly
since the start of the year. This has been driven by notable Technology
Sourcing wins in North America and we have a healthy wider pipeline of
opportunities, leaving us well-positioned to deliver a stronger second half
performance, against a less challenging comparative.
As outlined at our June 2024 Capital Markets Day - "Delivering Long Term
Value" - we continue to execute on our strategic priorities of growing our
target market customers, scaling our activities and empowering our people. We
made good progress in growing the number of customers generating over £1m of
gross profit per annum, mainly driven by North America, with a net seven added
across the Group since the year end, with Group podium customers now totalling
190. This is an important measure of our ability to secure sustainable
long-term growth.
Well-positioned to meet customer needs
We outperformed the broader IT market in 2023, in the context of a challenging
macroeconomic backdrop, driven in part by growing our share with some of our
existing large customers. During the first half of 2024, customers have
continued to pursue their digital transformations with a degree of caution as
the uncertain macroeconomic environment persists. Areas such as security are
being prioritised over currently more discretionary areas, such as workplace
refreshes.
Hyperscalers continue to allocate increasing resources into AI-centric
infrastructure. In North America, we have established a track record of
delivering a high-quality service for hyperscale customers given our expertise
in the areas of high-performance compute, networking, low-latency storage,
datacenter infrastructure and software components. Encouragingly, we have
enjoyed success in broadening our customer base with this important community
during the first half.
Corporate and public sector organisations are assessing the opportunities and
returns that AI can deliver, with many now trialling and experimenting with
new products. While some of this innovation is most immediately accessible
through software, customers are also evaluating their own infrastructure
requirements.
Computacenter has always helped customers to evaluate new technologies, to
navigate rising complexity of their IT estates and to achieve the return on
investment they need. Our customers are looking to work with fewer suppliers,
and for their partners to have a deep understanding of their requirements as
well as the scale, flexibility and cost competitiveness to meet their specific
needs. This puts us in a strong position to support them, as our three core
activities - Technology Sourcing, Professional Services and Managed Services -
are all critical for helping customers to achieve their IT ambitions.
Demand for our broad Professional Services capability during the half has been
encouraging. Our commitment to growing and enhancing Professional Services by
having a broader and scalable portfolio across all countries, based on a
common operating framework and a stronger sales approach, is starting to gain
traction with continued growth in Germany, and now a return to growth in the
UK. Professional Services has been a strong driver of growth for Services over
the last five years, and we see it as an important future growth driver of
revenue and profit for the Group.
Managed Services saw revenues decline during the half, reflecting the timing
of certain contract losses, while the onboarding of several large contracts
has been extended and will start to contribute more significantly towards the
end of 2024 and beyond. Our margin performance was also impacted by one large
underperforming contract in Germany which we have now substantially addressed.
While global inflationary pressures have moderated, we remain vigilant and
continue to make efficiencies and take advantage of contractual opportunities
to recover cost increases.
To offer increased value to our customers we continue to invest in new and
improved systems, greater automation and offshoring. We now have approximately
1,800 colleagues serving our customers in India versus 1,400 at the end of
2023. The market opportunity for Managed Services is substantial in our core
areas of workplace, networking, infrastructure and cloud. These services are
important to the longevity of our customer relationships, with more than
three-quarters of our major European headquartered customers contracting with
us, supported by our Service Centers globally.
Diversified geographic exposure
While IT spending is expected to grow across all of our markets over the
long-term our diversified geographic exposure provides us with greater
protection from any short-term weakness in particular geographies. Although
Germany and North America both faced very challenging comparatives in the
first half, both delivered solid underlying performances.
In Germany, excluding the impact of a large networking contract in the prior
year and one significantly underperforming Managed Services contract during
the half, gross profit increased year on year. Our deep capabilities in
technology areas such as networking and cyber as well as our ability to
support customers at every stage of the IT lifecycle means we are strongly
positioned.
North America's performance was pleasing, in the context of an exceptionally
strong comparative, positioning us well for the second half. During the period
we won significant new hyperscale and enterprise business and have grown our
orderbook substantially since the year end, with an encouraging pipeline of
opportunities. We remain excited by the clear long-term growth opportunity, in
this highly fragmented market, as we continue to leverage Computacenter's
broader capability and resources.
Our UK performance remains disappointing with the market for hardware proving
weaker than anticipated at the start of the year. While current market
conditions have outweighed the improvements we have made in how we approach
the UK market, we have maintained the number of podium customers. Our
integrated offer remains compelling to our target market, as evidenced by the
award of a six-year contract worth approximately £1bn with an existing
customer, covering all three Service Lines. Furthermore, having grown
Professional Services during the half we are in a better position with
customers to take advantage as market conditions improve.
Investing to secure future growth
We continue at pace with the rollout of our strategic initiatives which will
improve our capabilities and productivity, enable us to further leverage AI
solutions, underpin our systems for the future and create competitive
advantage. This investment increased operating costs by £5.7m year on year to
£17.6m (H1 2023: £11.9m), with our expectation for the full year of £28-30m
unchanged (FY 2023: £28.4m).
While moving all our Service Desks onto a common platform, we are migrating
from our legacy service management tool to a new platform and building new
functionality within it for our modern workplace solutions such as Device
Lifecycle Management. We are upgrading all our Integration Centers across the
world to a new standard. This includes the latest warehouse management
software, a Group standard for configuration, new scanning functionality and a
more sophisticated capability for courier integration. We have finished the
rollout of our CRM system and will complete the implementation of a new
configuration and pricing tool, and ultimately an upgrade of our current ERP
system to a new cloud-based version. At the same time, we continue to invest
significantly to mitigate evolving cyber risks.
Returning surplus capital via share buyback programme
Given the Group's strong positive adjusted net funds position of £401.9m at
30 June, and currently anticipated capital needs, we announced in late July
that we will return up to £200m to shareholders via a share buyback
programme. This is in line with our disciplined capital allocation policy to
invest organically, make targeted acquisitions and distribute surplus capital
while retaining a strong balance sheet. Following the completion of the
buyback, we expect to maintain a strong balance sheet with positive adjusted
net funds.
Outlook - expecting stronger performance in H2
Looking to the full year, we have made an encouraging start to Q3 and,
consistent with our July trading update, we expect stronger momentum in the
second half underpinned by the size of our committed product order backlog and
wider pipeline of opportunities. While we are mindful of the backdrop of
continuing geopolitical and macro uncertainty across our markets, we continue
to expect to make progress in FY 2024 as a whole on a constant currency basis.
At current exchange rates we expect a negative c.£8m translation impact on
adjusted profit before tax in the full year.
Looking further ahead, we are excited by the pace of innovation and growth in
demand for technology. With our strength in Technology Sourcing, Professional
Services and Managed Services, and our focus on retaining and maximising
customer relationships over the long term, we believe that we are well placed
to deliver profitable growth and sustained cash generation.
Technical guidance for 2024:
· At current exchange rates a negative c.£8m translation impact
expected on adjusted PBT in the full year (previously c.£7m)
· Strategic initiatives opex expected to be £28-30m
· Adjusted effective tax rate expected to be 28.5%-30.5%
· Capex expected to be £35-40m
· Dividend cover of 2-2.5x adjusted diluted EPS
· £200m share buyback programme commenced in July
H1 2024 Group financial performance
Total gross invoiced income decreased by 12.1% and by 10.3% in constant
currency and total revenue decreased by 13.4% and by 11.6% in constant
currency, largely reflecting the normalisation of technology sourcing volumes
versus an exceptionally strong comparative. Gross profit declined by 6.6% on a
reported basis and by 4.8% in constant currency. Group gross margin increased
by 111 basis points to 15.2%, reflecting a 148 basis points increase in
Technology Sourcing and a 65 basis points decline in Services.
Adjusted operating profit decreased by 31.6% on a reported basis and by 30.0%
in constant currency, driven by the decline in gross profit combined with a
2.8% increase in administrative expenses in constant currency. By geography,
adjusted operating profit declined in UK reflecting weaker market conditions
than expected as we entered the year. Underlying performance in Germany and
North America was solid against strong comparatives.
Adjusted profit before tax decreased by 28.4% on a reported basis and by 26.8%
in constant currency. Adjusted diluted EPS decreased by 25.2% with an increase
in the effective tax rate to 30.2% (H1 2023: 29.4%). Profit before tax
decreased by 31.6%. The difference between profit before tax and adjusted
profit before tax relates to the Group's net costs of £3.2m from exceptional
and other adjusting items, related to the acquisitions of Pivot and BITS.
Diluted EPS decreased by 30.8%. We maintain a strong balance sheet with an
increase of adjusted net funds of £116.8m to £401.9m versus H1 2023.
Results H1 2024 H1 2023 Change Change in constant currency
£m £m
Technology Sourcing gross invoiced income 3,740.1 4,341.7 -13.9% -12.2%
Services revenue 796.5 816.5 -2.4% -0.6%
Total gross invoiced income 4,536.6 5,158.2 -12.1% -10.3%
Technology Sourcing revenue 2,307.3 2,768.4 -16.7% -14.8%
Services revenue 796.5 816.5 -2.4% -0.6%
Professional Services revenue(2) 365.7 348.3 5.0% 7.1%
Managed Services revenue(2) 430.8 468.2 -8.0% -6.3%
Total revenue 3,103.8 3,584.9 -13.4% -11.6%
Gross profit 472.2 505.7 -6.6% -4.8%
Adjusted total administrative expenses (391.1) (387.2) 1.0% 2.8%
Adjusted operating profit 81.1 118.5 -31.6% -30.0%
Net adjusted finance income / (costs) 6.1 3.3 84.8% 84.8%
Adjusted profit before tax 87.2 121.8 -28.4% -26.8%
Adjusted diluted earnings per share (p) 55.0 73.5 -25.2%
Gross profit 472.2 505.7 -6.6%
Total administrative expenses (396.3) (392.7) 0.9%
Other income related to acquisition of subsidiary - 5.3
Gain on acquisition of subsidiary 2.5 3.2
Operating profit 78.4 121.5 -35.5%
Net finance income / (costs) 5.6 1.3 330.8%
Profit before tax 84.0 122.8 -31.6%
Diluted earnings per share (p) 52.9 76.5 -30.8%
( )
(2) We have reallocated certain Services revenues between Professional
Services and Managed Services to better reflect the type of services provided
to customers. There is no change to Total Services revenue. Restated full year
2023 revenues are detailed in Note 5 to the Condensed Consolidated Financial
Statements within this announcement.
Technology Sourcing
Against an exceptionally strong performance in the first half of 2023, as
anticipated, Technology Sourcing activity normalised during the period. As a
result, group Technology Sourcing gross invoiced income declined by 12.2% in
constant currency. Technology Sourcing gross margin increased by 148 basis
points, reflecting less high-volume, lower-margin activity, broad-based
improvements and a higher software mix.
Encouragingly, our committed product order backlog has grown by 47.8% since
the start of the year driven by notable Technology Sourcing wins in North
America, and is higher than the prior year equivalent. Our product order
backlog measures the total value of committed outstanding purchase orders
placed with our technology vendors against non-cancellable sales orders for
delivery within 12 months. As at 30 June 2024, the product order backlog was
£1,795.7m on a gross invoiced income basis, an 18.5% increase since 30 June
2023 (£1,514.9m) in constant currency. The Technology Sourcing backlog,
alongside the Managed Services contract base and the Professional Services
forward order book, provide visibility of future revenues in these areas.
Services
Total Services revenue declined by 0.6% in constant currency during the half.
Services gross margin decreased by 65 basis points, mainly reflecting the
impact of an underperforming Managed Services contract in Germany, which has
now been substantially addressed, and onboarding costs for contracts won in
2023, which we expect to deliver benefits in the coming years.
Professional Services revenue grew by 7.1% in constant currency and accounted
for 46% of total Services revenue. Germany, our largest source of Professional
Services revenue, continued its strong performance growing by 6.3% in constant
currency, and encouragingly the UK grew by 7.9%.
Managed Services revenue declined by 6.3% in constant currency and accounted
for 54% of total Services revenue. The revenue decline reflects the timing of
certain contract losses while onboarding several large contracts that will
start to contribute more significantly towards the end of 2024 and beyond.
Trading reviews by geography
United Kingdom
Results H1 2024 H1 2023 Change
£m £m
Technology Sourcing gross invoiced income 864.6 1,051.0 -17.7%
Services revenue 220.1 220.2 0.0%
Total gross invoiced income 1,084.7 1,271.2 -14.7%
Technology Sourcing revenue 322.1 465.9 -30.9%
Services revenue 220.1 220.2 0.0%
Professional Services revenue(2) 71.0 65.8 7.9%
Managed Services revenue(2) 149.1 154.4 -3.4%
Total revenue 542.2 686.1 -21.0%
Gross profit 107.8 127.2 -15.3%
Adjusted administrative expenses (94.4) (101.7) -7.2%
Adjusted operating profit 13.4 25.5 -47.5%
The UK delivered a weaker result in a market that was softer than expected,
especially for hardware. Total gross invoiced income decreased by 14.7%
reflecting a decline in Technology Sourcing and flat Services revenue. Total
revenue decreased by 21.0% reflecting a higher mix of software. Gross profit
decreased by 15.3% with gross margin increasing by 134 basis points.
Administrative expenses decreased due to lower commissions and good cost
control, resulting in adjusted operating profit decreasing by 47.5%.
Customers exercised greater caution in the period, with purchasing decisions
taking longer to conclude. This behaviour was compounded by the surprise
election announcement in late May. While the competitive environment has
intensified, reflecting the more challenging backdrop, we were pleased to
renew a six-year contract worth approximately £1bn with a large UK customer
covering all three Service Lines.
In 2023, we implemented new leadership and made significant changes to enhance
our focus on our target market of large corporate and public sector
organisations. While prevailing market conditions in the UK have overshadowed
our organisational progress and changes in how we address the UK market
opportunity, we have maintained the number of podium customers. Having grown
Professional Services during the half we are in a better position with
customers to take advantage as market conditions improve.
Technology Sourcing
Technology Sourcing gross invoiced income decreased by 17.7%, with gross
margin increasing by 267 basis points, reflecting a higher mix of software.
Demand for workplace hardware remains weak despite the aging installed base of
PCs following significant investment during the pandemic. The adoption of
Windows 11 is also expected to provide an impetus for a device refresh
although this is now expected to be more of a feature of 2025. The product
order backlog at 30 June 2024 was £360.0m, representing an 18.7% increase
since 30 June 2023 (£303.4m).
Services
Services revenue was unchanged, with Professional Services increasing by 7.9%
and Managed Services decreasing by 3.4%. Gross margin decreased by 172 basis
points, reflecting the onboarding of a large customer which is now
substantially complete.
We are encouraged by the growth we have achieved in Professional Services
after a challenging 2023. This has been driven by good demand in networking
and Windows 11-related consultancy projects. While projects have typically
been smaller than in the past, there is good demand for our skills and the
pipeline for Professional Services is healthy.
In Managed Services, the onboarding of a large public sector contract that was
secured at the end of 2023 has been extended and is now expected to contribute
more materially in 2025. We are seeing strong interest in our Device Lifecycle
Management proposition, as evidenced by the six-year contract renewal
referenced above.
Germany
Results H1 2024 H1 2023 Change Change in constant currency
£m £m
Technology Sourcing gross invoiced income 812.9 1,042.5 -22.0% -20.0%
Services revenue 376.4 380.9 -1.2% 1.4%
Total gross invoiced income 1,189.3 1,423.4 -16.4% -14.3%
Technology Sourcing revenue 525.6 592.8 -11.3% -9.1%
Services revenue 376.4 380.9 -1.2% 1.4%
Professional Services revenue(2) 201.5 194.5 3.6% 6.3%
Managed Services revenue(2) 174.9 186.4 -6.2% -3.7%
Total revenue 902.0 973.7 -7.4% -5.0%
Gross profit 167.3 179.1 -6.6% -4.2%
Adjusted administrative expenses (107.8) (105.8) 1.9% 4.5%
Adjusted operating profit 59.5 73.3 -18.8% -16.7%
Germany delivered a solid underlying performance during the first half. Total
gross invoiced income decreased by 14.3% in constant currency, driven by a
reduction in Technology Sourcing against a very strong comparative, and modest
growth in Services revenue. Gross profit decreased by 4.2% in constant
currency with gross margin increasing by 15 basis points, with a strong margin
performance in Technology Sourcing outweighing a weaker Services margin.
Excluding the impact of a large networking contract in the prior year and one
significantly underperforming Managed Services contract during the half, gross
profit increased. Administrative expenses increased by 4.5% in constant
currency resulting in a decline in adjusted operating profit of 16.7% in
constant currency.
In the context of a challenging overall economic backdrop in Germany, we
continue to benefit from the breadth and depth of our portfolio, our
capabilities and the strength of our relationships with both public and
corporate sector customers. As a result, we continue to broaden our portfolio
with existing customers and expanded our customer base.
Technology Sourcing
Technology Sourcing gross invoiced income decreased by 20.0% in constant
currency against an exceptionally strong comparative, which included a large
networking contract. We delivered solid growth in datacenter, security and
also in workplace. Technology Sourcing gross margin was strong, increasing by
164 basis points due to strong execution and product mix.
In addition to strong software demand, we continue to see a trend towards
bundling procurements in bigger framework contracts, especially for global
requirements of large international customers and infrastructure demand from
our major public sector clients. Demand for security solutions remains buoyant
supported by new mandatory EU legislation aimed at enhancing cybersecurity and
operational resilience across a number of sectors. We are also starting to see
increasing demand for AI-related infrastructure. In particular, the pipeline
is growing for on-premise datacenter infrastructure for data training
purposes.
The demand for innovative and flexible workplace solutions with asset
management, deployment and maintenance services and an increasingly
international scope remains high. Following the successful implementation of
the Device Lifecycle Management solution at a global player in the financial
sector, we have been able to win further large and exciting projects in the
industrial, retail and travel sectors.
The product order backlog at 30 June 2024 was £175.6m, a 23.1% increase in
constant currency since 30 June 2023 (£142.7m). We are encouraged by the
scale of the wider pipeline of opportunities as we move into the second half
of the year.
Services
Services revenue increased by 1.4% in constant currency with 6.3% growth in
Professional Services outweighing a 3.7% decline in Managed Services. Services
gross margin declined by 210 basis points, largely reflecting one
significantly underperforming Managed Services contract. Following remedial
action, some of the losses incurred during the first half are expected to be
recovered during the second half.
Professional Services saw continued strong demand from public sector customers
for support, engineering and consultancy services. We also see continuing
demand for project support and skills from our corporate customers, especially
in networking and security, datacenter consolidation and cloud management, as
well as for expanding modern workplace infrastructures. In addition, we are
increasingly seeing a need for comprehensive advice on the use of AI in
general and AI-related infrastructure. During period, we advised a major
German automotive manufacturer on the efficient use of Microsoft Copilot.
In Managed Services, in the context of a large portfolio of contracts that
performed as expected, it was disappointing that one significantly
underperforming contract impacted our margin performance for the half. We
anticipate an improved performance in the second half of the year following a
number of wins including a long-term workplace contract with a global player
in the healthcare and agriculture sector, as well as a better performance from
the underperforming contract. Looking further ahead, we have a strong pipeline
particularly in workplace and networking, where we are very well-positioned.
Western Europe
Results H1 2024 H1 2023 Change Change in constant currency
£m £m
Technology Sourcing gross invoiced income 480.1 441.2 8.8% 11.6%
Services revenue 114.1 131.7 -13.4% -11.1%
Total gross invoiced income 594.2 572.9 3.7% 6.4%
Technology Sourcing revenue 299.2 309.7 -3.4% -1.0%
Services revenue 114.1 131.7 -13.4% -11.1%
Professional Services revenue(2) 32.0 32.1 -0.3% 2.2%
Managed Services revenue(2) 82.1 99.6 -17.6% -15.3%
Total revenue 413.3 441.4 -6.4% -4.0%
Gross profit 51.7 56.0 -7.7% -5.3%
Adjusted administrative expenses (49.6) (50.1) -1.0% 1.4%
Adjusted operating profit 2.1 5.9 -64.4% -62.7%
"Western Europe" is a new reporting segment which combines the previously
reported France with Belgium, Netherlands and Switzerland. The entities within
Belgium, the Netherlands and Switzerland have been transferred from the
previously reported "International" into Western Europe. This change separates
the entities that actively sell to local customers from the International
Segment. The previously reported International segment aggregated selling
entities with a number of purely operational support entities that provide
Services to the Group's global customers. The change makes a clearer
distinction between the countries in which we sell to customers and the other
countries in which we operate directly to support those customers. Full year
2023 restatements are available in Note 5 to the Condensed Consolidated
Financial Statements within this announcement.
Total gross invoiced income increased by 6.4% in constant currency, with
strong growth in Technology Sourcing partly offset by a decline in Services
revenue. Gross profit decreased by 5.3% in constant currency, with gross
margin down 18 basis points. Technology Sourcing gross margin increased by 4
basis points and Services gross margin decreased by 125 basis points.
Administrative expenses increased by 1.4% in constant currency, resulting in
adjusted operating profit declining by £3.8m and by 62.7% in constant
currency.
France delivered increased gross invoiced income driven by strong growth in
Technology Sourcing partly offset by a decline in Services revenue, largely
reflecting the termination of low-margin Managed Services contracts.
Technology Sourcing growth was driven by an increase in sales of lower margin
workplace hardware and software. We are onboarding several new Managed
Services contracts in the public and private sector during 2024 which we
expect to deliver benefits in the coming years. We continue to build on our
enhanced market position with combined strength in workplace, networking and
datacenter. Looking forward, however, we are mindful of the increase in
political uncertainty following recent elections.
Belgium continued to deliver a strong performance, driven by growth in
Technology Sourcing, especially networking, and in Managed Services. We
secured a multi-year storage framework agreement with an IT company serving
public institutions. In Managed Services we successfully onboarded a
multi-year outsourcing contract with a global customer in the financial
settlement services industry.
The Netherlands performed in line with our expectations with the result
significantly impacted by the loss of one of the largest public sector
Technology Sourcing contracts in the second half of last year. Excluding this,
performance was stable year on year.
Switzerland delivered an improved performance against a weak comparative
driven by growth in Services. Volumes increased for our main Services
contracts and we secured a five-year contract extension with a key customer.
Technology Sourcing activity was at similar levels to last year with recent
wins expected to deliver growth in the second half.
The combined product order backlog at 30 June 2024 was £141.7m, a 117.8%
increase in constant currency since 30 June 2023 (£65.1m) in constant
currency.
North America
Results H1 2024 H1 2023 Change Change in constant currency
£m £m
Technology Sourcing gross invoiced income 1,579.6 1,805.6 -12.5% -10.1%
Services revenue 74.2 70.3 5.5% 8.2%
Total gross invoiced income 1,653.8 1,875.9 -11.8% -9.4%
Technology Sourcing revenue 1,157.5 1,398.6 -17.2% -14.9%
Services revenue 74.2 70.3 5.5% 8.2%
Professional Services revenue(2) 61.2 55.7 9.9% 12.5%
Managed Services revenue(2) 13.0 14.6 -11.0% -8.3%
Total revenue 1,231.7 1,468.9 -16.1% -13.8%
Gross profit 127.8 132.7 -3.7% -1.2%
Adjusted administrative expenses (101.7) (103.4) -1.6% 0.9%
Adjusted operating profit 26.1 29.3 -10.9% -8.3%
North America delivered a solid underlying first half performance reflecting
the expected decrease in activity with a large hyperscale customer, partly
offset by growth with existing customers and new customer wins. The result was
also impacted by the timing of fulfilment of certain large orders which moved
from the end of the first half into the second half. Gross invoiced income
decreased by 9.4% in constant currency. Gross profit decreased by 1.2% in
constant currency, with gross margin increasing by 134 basis points,
reflecting the lower proportion of hyperscale business during the period and
an improved margin performance from rest of the business. Administrative
expenses increased by 0.9% in constant currency largely reflecting investment
in sales capacity and lower commissions, resulting in a decline in adjusted
operating profit of 8.3% in constant currency.
During the half we added eight podium customers including two new hyperscale
customers. We continue to add targeted sales capacity to capitalise on the
significant market opportunity. In April we successfully migrated Pivot onto
our group-wide ERP system.
Technology Sourcing
Technology Sourcing gross invoiced income decreased by 10.1% on a constant
currency basis and gross margin in Technology Sourcing increased by 143 basis
points, primarily due to mix impact of the expected decrease in activity with
our largest hyperscale customer and improved margin performance across the
rest of our portfolio of customers. Despite the normalisation of activity of
our largest hyperscale customer it remains a significant contributor with a
healthy orderbook.
Our strong track record of delivering IT infrastructure at scale is helping us
to win new customers and start to broaden our hyperscale customer base. During
the first half, we won significant new business with two hyperscale customers.
Some of these orders were rephased from the end of the first half into the
second half of the year.
The product order backlog at 30 June 2024 was £1,118.3m, an 11.4% increase in
constant currency since 30 June 2023 (£1,003.7m) reflecting the significant
business won during the half. We remain excited by the pipeline of
opportunities with both enterprise and hyperscale customers.
Services
Services revenue increased by 8.2% in constant currency, reflecting a 12.5%
increase in Professional Services and an 8.3% decline in Managed Services.
Services gross margin decreased by 25 basis points. We continue to focus on
leveraging Group-wide tools, expertise and systems to deliver accelerated
Services growth.
Professional Services revenue increased strongly during the half, reflecting
growth with existing and new enterprise and hyperscale customers. We continue
to focus our efforts on driving efficiency and improving utilisation.
Managed Services experienced a decline during the half, primarily due to lower
than expected activity from two customers coupled with the discontinuation of
some services previously offered by our Canadian business. This decline has
been partially offset by the successful onboarding of a large global
automotive manufacturer earlier in 2024, which is providing opportunities to
cross-sell other Service Lines this year.
Financial review
Gross profit
Gross profit fell by 6.6% in the period following the decline in gross
invoiced income and revenue. Group gross margin increased by 111 basis points,
with an increase in Technology Sourcing gross margin reflecting strong
execution and product mix, outweighing a slight decline in Services largely
reflecting the impact of an underperforming contract in Germany. Overall,
Group gross margin, expressed as gross profit as a percentage of revenue,
increased to 15.2% (H1 2023: 14.1%).
Operating profit
Operating profit fell by 35.5% to £78.4m (H1 2023: 121.5m). Adjusted
operating profit fell by 31.6% to £81.1m (H1 2023: £118.5m), and by 30.0% in
constant currency.
Administrative expenses increased by 3.1% to £396.3m (H1 2023: £392.7),
reflecting lower commission payments and increased investment. During the
period we increased our spend on strategic corporate initiatives by 47.4% to
£17.6m (H1 2023: £11.9m). Adjusted administrative expenses increased by 1.0%
to £391.1m (H1 2023: £387.2m) and by 2.8% in constant currency.
Profit before tax
The Group's profit before tax for the period decreased by 31.6% to £84.0m (H1
2023: £122.8m). Adjusted profit before tax decreased by 28.4% to £87.2m (H1
2023: £121.8m) and declined by 26.8% in constant currency.
The difference between profit before tax and adjusted profit before tax
relates to the Group's net costs of £3.2m (H1 2023: net gain of £1.0m) from
exceptional and other adjusting items, associated with the acquisitions of
Pivot and BITS and the amortisation of acquired intangibles as a result of
these and other North American acquisitions. Further information on these
items can be found below.
Reconciliation to adjusted measures for the period ended 30 June 2024
Reported Adjustments
Interim
results
£m
Principal element on agency contracts Amortisation Exceptionals Adjusted
of acquired intangibles
£m
£m and others Interim
£m results
£m
Revenue 3,103.8 1,432.8 - - 4,536.6
Cost of sales (2,631.6) (1,432.8) - - (4,064.4)
Gross profit 472.2 - - - 472.2
Administrative expenses (396.3) - 5.2 - (391.1)
Other income related to acquisition of subsidiary - - - - -
Gain related to acquisition of subsidiary 2.5 - - (2.5) -
Operating profit 78.4 - 5.2 (2.5) 81.1
Finance income 9.9 - - - 9.9
Finance costs (4.3) - - 0.5 (3.8)
Profit before tax 84.0 - 5.2 (2.0) 87.2
Income tax expense (25.5) - (0.8) - (26.3)
Profit for the period 58.5 - 4.4 (2.0) 60.9
Reconciliation to adjusted measures for the period ended 30 June 2023
Reported Adjustments
Interim
results
£m
Principal element on agency contracts Amortisation Exceptionals Adjusted
of acquired intangibles
£m
£m and others Interim
£m results
£m
Revenue 3,584.9 1,573.3 - - 5,158.2
Cost of sales (3,079.2) (1,573.3) - - (4,652.5)
Gross profit 505.7 - - - 505.7
Administrative expenses (392.7) - 5.5 - (387.2)
Other income related to acquisition of subsidiary 5.3 - - (5.3) -
Gain related to acquisition of subsidiary 3.2 - - (3.2) -
Operating profit 121.5 - 5.5 (8.5) 118.5
Finance income 6.6 - - - 6.6
Finance costs (5.3) - - 2.0 (3.3)
Profit before tax 122.8 - 5.5 (6.5) 121.8
Income tax expense (33.4) - (2.4) - (35.8)
Profit for the period 89.4 - 3.1 (6.5) 86.0
Net finance income
Net finance income in the period amounted to £5.6m (H1 2023: £1.3m income).
The main items included within the net income were £2.6m of interest charged
on lease liabilities recognised under IFRS 16 (H1 2023: £2.3m) and
exceptional interest costs of £0.5m relating to the unwinding of the discount
on the contingent consideration for the purchase of BITS, which was excluded
on an adjusted basis (H1 2023: £2.0m). Outside of the specific items above,
net finance income of £8.7m was recorded (H1 2023: net finance income of
£5.6m). On an adjusted basis, the net finance income was £6.1m during the
period (H1 2023: net finance income of £3.3m).
Taxation
The tax charge was £25.5m (H1 2023: £33.4m) on profit before tax of £84.0m
(H1 2023: £122.8m). This represented a tax rate of 30.4% (H1 2023: 27.2%).
The tax credit related to the amortisation of acquired intangibles was £0.8
(H1 2023: £2.4m). The £5.2m of amortisation of intangible assets was almost
entirely a result of the North American acquisitions (H1 2023: £5.5m). As the
amortisation is recognised outside of our adjusted profitability, the tax
benefit on the amortisation is also reported outside of our adjusted tax
charge.
The adjusted tax charge for the period was £26.3m (H1 2023: £35.8m), on an
adjusted profit before tax for the period of £87.2m (H1 2023: £121.8m). The
effective tax rate (ETR) was therefore 30.2% (H1 2023: 29.4%) on an adjusted
basis.
Overall, the adjusted ETR, is continuing to trend upwards due to an increasing
reweighting of the geographic split of adjusted profit before tax away from
the United Kingdom to Germany and the United States, where tax rates are
higher.
The adjusted ETR is therefore within the full-year range that we indicated at
the time of our 2023 Full Year Results, which showed an expected ETR for 2024
of 28.5% to 30.5%. We expect that the full year ETR in 2024 will remain in
this range and continue to be subject to increasing upwards pressure, due to
the changing mix in where profits are earned geographically to where tax rates
are higher, as noted above, and also as governments across our primary markets
come under fiscal and political pressure to increase corporation tax rates.
The table below reconciles the tax charge to the adjusted tax charge for the
periods ended 30 June 2024, 30 June 2023 and the year ended 31 December 2023.
H1 2024 H1 2023 Year 2023
£m £m £m
Tax charge 25.5 33.4 72.7
Items to exclude from adjusted tax:
Tax credit on amortisation of acquired intangibles 0.8 2.4 4.0
Tax on exceptional items - - -
Adjusted tax charge 26.3 35.8 76.7
Effective tax rate 30.4% 27.2% 26.7%
Adjusted effective tax rate 30.2% 29.4% 27.6%
Profit for the period
The profit for the period decreased by 34.6% to £58.5m (H1 2023: £89.4m).
The adjusted profit for the period decreased by 29.2% to £60.9m (H1 2023:
£86.0m) and by 27.5% in constant currency.
Exceptional and other adjusting items
The net loss from exceptional and other adjusting items in the period was
£2.4m (H1 2023: gain of £3.4m). Excluding the tax items noted above, which
resulted in a gain of £0.8m (H1 2023: gain of £2.4m), the profit before tax
impact was a net loss from exceptional and other adjusting items of £3.2m (H1
2023: gain of £1.0m).
At acquisition, contingent consideration was agreed which required the Group
to pay former owners of Business IT Source Holdings, Inc. (BITS), two earn-out
payments based on BITS's 2022 and 2023 earnings before interest, taxation,
depreciation and amortisation (EBITDA) and indebtedness. On 30 June 2023, a
renegotiated agreement was signed with the former owners following which, the
second earn-out is now based on BITS's 2023 EBITDA, H1 2024 EBITDA, and
indebtedness over these periods.
As the EBITDA for H1 2024 was lower than originally forecast in the agreement
with the vendors, due to the phasing of business within 2024, and having
considered a range of possible earn-out scenarios, Management has determined
that a liability under the revised agreement should be recorded as contingent
consideration of £3.6m on a discounted basis as at 30 June 2024. The impact
of this revised assessment has resulted in a release during the period of
£2.5m. This release related to the acquisition is non-operational in nature,
significant in size and has therefore been classified as an exceptional item.
A further £0.5m relating to the unwinding of the discount on the contingent
consideration for the purchase of BITS has been removed from the adjusted net
finance expense and classified as exceptional interest costs (H1 2023:
£2.0m).
We have continued to exclude, as an 'other adjusting item', the amortisation
of acquired intangible assets in calculating our adjusted results.
Amortisation of intangible assets is non-cash, does not relate to the
operational performance of the business, and is significantly affected by the
timing and size of our acquisitions, which distorts the understanding of our
Group and Segmental operating results.
The amortisation of acquired intangible assets was £5.2m (H1 2023: £5.5m),
primarily relating to the amortisation of the intangibles acquired as part of
the recent North American acquisitions.
Earnings per share
Diluted EPS decreased by 30.8% to 52.9p per share (H1 2023: 76.5p per share).
Adjusted diluted EPS decreased by 25.2% to 55.0p per share (H1 2023: 73.5p per
share).
H1 2024 H1 2023 Year 2023
Basic weighted average number of shares (excluding own shares held) (m) 112.9 113.4 112.9
Effect of dilution:
Share options 1.3 1.3 1.2
Diluted weighted average number of shares 114.2 114.7 114.1
Profit for the period attributable to equity holders of the Parent (£m) 60.4 87.7 197.6
Basic earnings per share (p) 53.5 77.3 175.0
Diluted earnings per share (p) 52.9 76.5 173.2
Adjusted profit for the period attributable to equity holders of the Parent 62.8 84.3 199.5
(£m)
Adjusted basic earnings per share (p) 55.6 74.3 176.7
Adjusted diluted earnings per share (p) 55.0 73.5 174.8
Dividend
The Board recognises the importance of dividends to shareholders and the Group
has a long track record of paying dividends and other special cash returns.
Dividends are paid from the standalone balance sheet of the Parent Company
and, as at 30 June 2024, the distributable reserves were £466.6m (30 June
2023: £378.2m, 31 December 2023: £474.1m).
The Board has consistently applied the Company's dividend policy, which states
that the interim dividend will be approximately one third of the previous
year's total dividend and that the total dividend paid will result in a
dividend cover of 2 to 2.5 times based on adjusted diluted EPS.
The Board is therefore pleased to announce a 3.1% increase in the interim
dividend to 23.3p per share (H1 2023: 22.6p per share). The interim dividend
will be paid on Friday 25 October 2024. The dividend record date is set as
Friday 27 September 2024 and the shares will be marked ex-dividend on Thursday
26 September 2024.
As a business that has already returned over £1bn through a combination of
dividends and share buybacks since flotation, with no additional investment
required from shareholders over that time, we are committed to managing the
cash position for shareholders.
Share buyback
Computacenter's approach to capital management is to ensure that the Group has
a robust capital base and maintains a strong credit rating, whilst aiming to
maximise shareholder value.
Given the Group's strong positive adjusted net funds position and currently
anticipated capital needs, Computacenter announced on 26 July 2024 that it
will return up to £200m to shareholders via a share buyback programme,
detailed below. This is in line with our capital allocation policy to invest
organically, make targeted acquisitions and distribute surplus capital while
retaining a strong balance sheet. Following the completion of the buyback we
expect to maintain a strong balance sheet with positive adjusted net funds.
Beginning on 26 July 2024, Computacenter plc commenced a share buyback
programme to repurchase up to 11,414,110 of its ordinary shares. The maximum
amount allocated to the programme is £200m which shall end on or before 30
June 2025. The sole purpose of the programme is to reduce the Company's share
capital. To date £66.1m of the programme has been completed.
Whilst the Company has received no indications at this stage, in line with the
approach taken on previous returns of value, Directors may undertake disposals
of shares during the course of the programme.
Central corporate costs
Central corporate costs primarily include the costs of the Board, related
public company costs, Group Executive members not aligned to a specific
geographic trading entity and the cost of centrally funded strategic
initiatives that benefit the whole Group. Accordingly, these expenses are
disclosed separately as central corporate costs, within the Segmental note.
These costs are borne within the Computacenter (UK) Limited legal entity and
have been removed for Segmental reporting and performance analysis but form
part of the overall Group adjusted administrative expenses.
Total central corporate costs have increased by 35.0% to £25.8m (H1 2023:
£19.1m). Within this:
· Board expenses, related public company costs and costs associated
with Group Executive members not aligned to a specific geographic trading
entity, increased to £6.6m (H1 2023: £5.9m);
· share-based payment charges associated with Group Executive members
as identified above, including the Group Executive Directors, increased from
£1.3m in H1 2023 to £1.6m in H1 2024; and
· strategic corporate initiatives are designed to increase capability
and therefore competitive position, enhance productivity or strengthen systems
which underpin the Group. During the period this spend was £17.6m, up 47.9%
over H1 2023 (£11.9m).
Investments
In 2023, we nearly doubled our spend on strategic corporate initiatives to
£28.1m, all of which was recognised through the income statement. This spend
was spread across projects that will improve our capabilities, productivity
and underpin our systems of the future. We have seen the pace of this spend
increase in H1 2024 (£17.6m) as the Group continues its investment in new
systems, toolsets and cyber resilience.
Computacenter resells, deploys and manages vendor technology for customers.
Customers choose Computacenter because of the quality of our people and
service. To deliver high-quality service to our customers, we need to invest
consistently in our systems and tools, Integration Centers and support
operations to provide us with competitive advantage, to derive benefits from
our Group scale, while ensuring consistency of service and agility.
We have continued to refine our systems investment roadmap through to the end
of 2027, with a programme to replace legacy systems that enable our Technology
Sourcing and Services businesses. Investing in best-of-breed tools will lower
cost to serve, improve the quality of our offerings and enhance our relevance
to customers in the marketplace.
Our systems need to be robust, secure and able to handle large volumes. They
also have to be simple to use and adaptable to most customer eventualities. We
prioritise our plans for systems development, and other investments in time
and capital, in response to the ever-changing environment in which we operate.
Cash flow
The Group delivered a net cash inflow from operating activities during the
period of £1.4m (H1 2023: £116.5m inflow). In the first half of 2024,
following the correction to working capital positions in 2023, we have seen
operating cashflows closer to our historical norms where, typically, the Group
sees modest to neutral operating cash inflows in the first half of the year
with substantial net operating cash inflows in the second half of the year.
During the period, net operating cash outflows from working capital, including
inventories, trade and other receivables, and trade and other payables, were
£89.7m (H1 2023: £3.4m outflow).
Seasonal trends in accounts receivable and accounts payable have been impacted
by the geographic mix of revenues and the timing of that revenue within the
half which has increased working capital by £32.6m.
During 2023, supply chains returned to more normal conditions and, as a
result, customers returned to normal purchasing patterns. This has naturally
led to both reduced levels of inventory and product order backlogs. Our focus
on inventory control in 2023 delivered substantial reductions in both Germany
and North America, the two Segments where we experienced the greatest
inventory accumulation through 2022. The Group had £271.2m of inventory as at
30 June 2024, a decrease of 14.0% on the balance as at 30 June 2023 of
£315.4m and an increase of 25.6% in the six months since 31 December 2023
(£216.0m). The £55.2m increase since 31 December 2023 is due to the timing
of large projects in North America, which have led to a temporary increase due
to the timing of completion of this activity. The closing balance was
materially lower than the high point of £532.6m seen as at 30 September 2022
with a reduction of £261.4m since that time. We expect that the stabilised
levels of inventory will continue to remain well-managed, with highs and lows
remaining within historical operational norms during the second half of 2024.
After interest, tax and gross capital expenditure cashflows, our free cash
outflow was £28.8m in the period (H1 2023: £82.0m free cash inflow).
30 June 30 June 31 December
2024
2023
2023
£m
£m
£m
Adjusted operating profit 81.1 118.5 271.5
Adjusting items (2.7) 3.0 (2.7)
Operating profit 78.4 121.5 268.8
Other non-cash items and adjustments 24.3 23.6 47.3
Change in working capital (89.7) (3.4) 136.7
Change in pensions and provisions 0.6 (1.2) (0.8)
Depreciation of right-of-use assets 20.3 20.9 41.4
Cash generated from operations 33.9 161.4 493.4
Interest and payments related to lease liabilities (23.5) (23.2) (46.1)
Adjusted operating cash flow 10.4 138.2 447.3
Net interest received/(paid) 8.0 5.7 10.5
Tax paid (32.5) (44.9) (82.8)
Gross capital expenditure (14.7) (17.0) (35.1)
Free cash flow (28.8) 82.0 339.9
Dividends paid - - (77.3)
Purchase of own shares net of proceeds of exercise of employee share options (7.5) (22.9) (28.8)
Acquisition of subsidiaries, including contingent consideration and purchase (14.7) (19.3) (19.3)
of
non-controlling interests
Disposal of assets - - -
Net cash flow (51.0) 39.8 214.5
Net debt repayment (2.5) (2.7) (6.9)
Increase/(decrease) in cash and cash equivalents (53.5) 37.1 207.6
Effect of exchange rates on cash and cash equivalents (6.3) 0.1 (0.8)
Cash and cash equivalents at the beginning of the period/year 471.2 264.4 264.4
Cash and cash equivalents at the end of the period/year 411.4 301.6 471.2
Opening net funds 343.6 117.2 117.2
Increase/(decrease) in cash and cash equivalents including impact of exchange (59.8) 37.2 206.8
rates
Movements in borrowings 2.7 3.6 7.9
Movements in lease liabilities 1.3 6.8 11.7
Closing net funds 287.8 164.8 343.6
Opening adjusted net funds 459.0 244.3 244.3
Increase/(decrease) in cash and cash equivalents including impact of exchange (59.8) 37.2 206.8
rates
Movements in borrowings 2.7 3.6 7.9
Closing adjusted net funds 401.9 285.1 459.0
Capital expenditure in the period was £14.7m (H1 2023: £17.0m) primarily
representing investments in IT equipment and software tools, to enable us to
deliver improved service to our customers.
The Group's Employee Benefit Trust (EBT) made market purchases of the
Company's ordinary shares of £10.2m (H1 2023: £26.1m) to satisfy maturing
PSP awards and Sharesave schemes and to reprovision the EBT in advance of
future maturities. During the period the Company received savings from
employees of £2.7m to purchase options within the Sharesave schemes (H1 2023:
£3.2m).
During the period, the Group made additional further payments of £14.7m
related to the previous BITS acquisition, in accordance with the share
purchase agreement, during Q1 2024.
The Group reduced loans during the period by a net £2.5m (H1 2023: £2.7m).
We made regular repayments towards the loan related to the construction of the
German headquarters in Kerpen and the customer financing facility in Pivot.
The Group continued to manage its cash and working capital positions
appropriately, using standard mechanisms, to ensure that cash levels remained
within expectations throughout the period. From time to time, some customers
request credit terms longer than our typical period of 30-60 days. In certain
instances, we will arrange for the sale of the receivables on a true sale
basis to a finance institution. We would typically receive funds on 45-day
terms from the finance institution, which will then recover payment from the
customer on terms agreed with them. The cost of such an arrangement is borne
by the customer, either directly or indirectly, enabling us to receive the
full amount of payment in line with our standard terms.
The benefit to the cash and cash equivalents position of such arrangements as
at 30 June 2024 was £26.7m (30 June 2023: £48.4m, 31 December 2023:
£33.8m).
During June 2024, the Group engaged in a limited factoring programme of trade
receivables within the German business, on a non-recourse basis, to provide
assurance against unforeseen liquidity issues which did not, in the event,
arise due to the continued aforementioned strength of cash receipts in the
final weeks of June 2024. This factoring was for £40.2m or 2.9% of the trade
receivables after provisions balance as at 30 June 2024. The Group had no
other debt factoring at the end of 30 June 2024, outside this normal course of
business.
Cash and cash equivalents and net funds
Cash and cash equivalents as at 30 June 2024 were £411.4m compared to
£301.6m as at 30 June 2023. Cash and cash equivalents have decreased by
£59.8m from £471.2m as at 31 December 2023 (H1 2023: increase of £37.2m
from £264.4m as at 31 December 2022).
Net funds as at 30 June 2024 were £287.8m, compared to net funds of £164.8m
as at 30 June 2023 and net funds of £343.6m as at 31 December 2023. The Group
excluded £114.1m, as at 30 June 2024 (30 June 2023: £120.3m and 31 December
2023: £115.4m), of lease liabilities from its non-GAAP adjusted net funds
measure, to allow an alternative view of the Group's overall liquidity
position excluding the effect of the lease liabilities required to be
capitalised under the IFRS 16 accounting standard.
Adjusted net funds as at 30 June 2024 were £401.9m, compared to adjusted net
funds of £285.1m as at 30 June 2023 and £459.0m as at 31 December 2023.
Net funds as at 30 June 2024, 30 June 2023 and 31 December 2023 were as
follows:
30 June 30 June 31 December 2023
2024
2023
£m
£m £m
Cash and short-term deposits 411.4 301.6 471.2
Cash and cash equivalents 411.4 301.6 471.2
Bank loans - Pivot customer specific facility (3.1) (6.0) (4.5)
Bank loans - Computacenter India facility - (1.9) -
Bank loans - Kerpen building facility (6.4) (8.6) (7.7)
Total bank loans (9.5) (16.5) (12.2)
Adjusted net funds (excluding lease liabilities) 401.9 285.1 459.0
Lease liabilities (114.1) (120.3) (115.4)
Net funds 287.8 164.8 343.6
For a full reconciliation of net funds and adjusted net funds, see note 12 to
the to the summary financial information within this announcement.
Currency
The Group reports its results in pounds sterling. The strength in the value of
sterling against most currencies during the first half of 2024, in particular
the US Dollar, has begun to impact our revenues and profitability, as a result
of the conversion of our increasingly substantial foreign earnings.
Restating the first half of 2023 at 2024 exchange rates would decrease H1 2023
revenue by approximately £75.1m, whilst H1 2023 adjusted profit before tax
would reduce by £2.7m. If the 30 June 2024 spot rates were to continue
through the remainder of 2024, the impact of restating 2023 at 2024 exchange
rates would be to decrease 2023 revenue by approximately £145.4m and 2023
adjusted profit before tax by approximately £6.2m. Restating H1 2024 results
at the exchange rates seen in H1 2023 would result in an increase in H1 2024
revenue of £63.4m and an increase in adjusted profit before tax of £2.4m
Principal risks and uncertainties
The Group's activities expose it to a variety of economic, financial,
operational and regulatory risks. Our principal risks continue to be
concentrated in the availability and resilience of systems, our people, our
cost base, technology change, and in the design, entry into service and
running of large Services contracts. The principal risks and uncertainties
facing the Group are set out on pages 64 to 73 of the 2023 Annual Report and
Accounts, a copy of which is available on the Group's website at
investors.computacenter.com.
The Group's risk management approach and the principal risks, potential
impacts and primary mitigating activities are unchanged from those set out in
the 2023 Annual Report and Accounts. Our risk management approach operated
effectively in the six months to 30 June 2024, with systems and controls
functioning as designed. Whilst we have not identified any new principal risks
during the period, we acknowledge the heightened level of overall risk across
several risk categories, due to the current macroeconomic uncertainty and its
impact on our operating environment in general.
This Strategic Report was approved by the Board on 6 September 2024 and was
signed on its behalf by:
MJ Norris MC Jehle
Chief Executive Officer Chief Financial Officer
Directors' Responsibilities
Responsibility statement of the directors in respect of the half-yearly
financial report.
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the UK;
• the interim management report includes a fair review of the information
required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
MJ Norris MC
Jehle
Chief Executive Officer Chief Financial Officer
Independent review report to Computacenter plc
Conclusion
We have been engaged by Computacenter plc (the 'company') to review the
condensed set of financial statements in the half-yearly financial report for
the six months ended 30 June 2024 which comprises the Consolidated Income
Statement, Consolidated Statement of Comprehensive Income, Consolidated
Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash
Flow Statement, and related explanatory notes. We have read the other
information contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with UK-adopted International Accounting
Standard (IAS) 34, 'Interim Financial Reporting' and Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by Financial Reporting Council
for use in the United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with UK-adopted international accounting standards. The
condensed set of financial statements included in this half yearly financial
report has been prepared in accordance with UK- adopted International
Accounting Standard 34, 'Interim Financial Reporting'.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE (UK), however future events or conditions may cause the entity to
cease to continue as a going concern.
In our evaluation of the directors' conclusions, we considered the inherent
risks associated with the group's business model including effects arising
from macro-economic uncertainties such as inflationary pressures and interest
rates, we assessed and challenged the reasonableness of estimates made by the
directors and the related disclosures and analysed how those risks might
affect the group's financial resources or ability to continue operations over
the going concern period.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with UK-adopted International
Accounting Standard (IAS) 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report.
Our conclusion, including our Conclusions relating to going concern, are based
on procedures that are less extensive than audit procedures, as described in
the Basis for conclusion paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our review work has been undertaken so that we might state to the company
those matters we are required to state to it in an independent review report
and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our
review work, for this report, or for the conclusion we have formed.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
6 September 2024
Consolidated Income Statement
For the six months ended 30 June 2024
Note H1 2024 H1 2023 Year 2023
£m £m £m
Revenue 5 3,103.8 3,584.9 6,922.8
Cost of sales (2,631.6) (3,079.2) (5,878.8)
Gross profit 5 472.2 505.7 1,044.0
Administrative expenses (396.3) (392.7) (783.3)
Other income related to acquisition of a subsidiary 8 - 5.3 5.3
Gain related to acquisition of a subsidiary 8 2.5 3.2 2.8
Operating profit 78.4 121.5 268.8
Finance income 9.9 6.6 13.8
Finance costs (4.3) (5.3) (10.5)
Profit before tax 84.0 122.8 272.1
Income tax expense 9 (25.5) (33.4) (72.7)
Profit for the period/year 58.5 89.4 199.4
Attributable to:
Equity holders of the Parent 60.3 87.7 197.6
Non-controlling interests (1.8) 1.7 1.8
Profit for the period/year 58.5 89.4 199.4
Earnings per share:
- basic for profit for the period/year 10 53.5p 77.3p 175.0p
- diluted for profit for the period/year 10 52.9p 76.5p 173.2p
All of the activities of the Group relate to continuing operations.
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2024
Note H1 2024 H1 2023 Year 2023
£m £m £m
Profit for the period/year 58.5 89.4 199.4
Items that may be reclassified to the Consolidated Income Statement:
Gain/(loss) arising on cash flow hedge 1.9 2.5 2.8
Income tax effect (0.6) (0.9) (0.9)
1.3 1.6 1.9
Exchange differences on translation of foreign operations (10.8) (26.3) (25.8)
(9.5) (24.7) (23.9)
Items not to be reclassified to the Consolidated Income Statement:
Remeasurement of defined benefit plan - - (2.8)
Other comprehensive expense for the period/year, net of tax (9.5) (24.7) (26.7)
Total comprehensive income for the period/year 49.0 64.7 172.7
Attributable to:
Equity holders of the Parent 50.8 63.3 171.3
Non-controlling interests (1.8) 1.4 1.4
Total comprehensive income for the period/year 49.0 64.7 172.7
Consolidated Balance Sheet
As at 30 June 2024
Note H1 H1 Year
2024 2023 2023
£m £m £m
Non-current assets
Property, plant and equipment 92.4 93.0 96.1
Right-of-use assets 103.8 112.9 104.5
Intangible assets 319.7 328.6 322.4
Investment in associate - 0.1 0.1
Deferred income tax assets 11.3 11.4 11.6
Trade and other receivables 20.1 16.0 21.1
Prepayments 7.0 16.5 10.3
554.3 578.5 566.1
Current assets
Inventories 271.2 315.4 216.0
Trade and other receivables 1,387.5 1,261.4 1,498.1
Income tax receivable 23.3 12.2 12.5
Prepayments 162.6 154.9 139.7
Accrued income 166.9 178.7 151.9
Derivative financial instruments 11 3.3 3.7 2.5
Cash and short-term deposits 12 411.4 301.6 471.2
2,426.2 2,227.9 2,491.9
Total assets 2,980.5 2,806.4 3,058.0
Current liabilities
Trade and other payables 1,571.2 1,421.1 1,674.5
Deferred income 224.2 249.8 230.3
Financial liabilities 4.6 6.7 4.8
Lease liabilities 35.6 36.7 37.3
Derivative financial instruments 11 1.7 4.2 6.3
Income tax payable 15.3 22.7 16.9
Provisions 1.6 4.3 2.2
1,854.2 1,745.5 1,972.3
Non-current liabilities
Financial liabilities 4.9 9.8 7.4
Lease liabilities 78.5 83.6 78.1
Deferred income - 5.5 4.3
Retirement benefit obligation 26.3 22.4 26.2
Provisions 7.1 5.2 6.9
Deferred income tax liabilities 12.7 15.1 13.4
129.5 141.6 136.3
Total liabilities 1983.7 1,887.1 2,108.6
Net assets 996.8 919.3 949.4
Capital and reserves
Issued share capital 9.3 9.3 9.3
Share premium 4.0 4.0 4.0
Own shares held (138.2) (131.4) (140.4)
Translation and hedging reserve 17.7 26.3 27.2
Retained earnings 1,098.1 1,003.4 1,041.6
Shareholders' equity 990.9 911.6 941.7
Non-controlling interests 5.9 7.7 7.7
Total equity 996.8 919.3 949.4
Approved by the Board on 6 September 2024.
MJ Norris MC Jehle
Chief Executive Officer Chief Financial Officer
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2024
Attributable to equity holders of the Parent
Issued share capital £m Share Capital Own Translation and hedging Retained earnings £m Share- Non-controlling interest Total
premium £m redemption reserve shares reserves holders' equity £m equity
£m held £m £m £m
£m
At 1 January 2023 9.3 4.0 75.0 (127.7) 50.7 854.4 865.7 6.3 872.0
Profit for the period - - - - - 87.7 87.7 1.7 89.4
Other comprehensive (expense) - - - - (24.4) - (24.4) (0.3) (24.7)
Total comprehensive (expense)/income - - - - (24.4) 87.7 63.3 1.4 64.7
Transactions with owners:
- Cost of share-based payments - - - - - 4.0 4.0 - 4.0
- Tax on share-based payments - - - - - 1.5 1.5 - 1.5
- Capital reduction - - (75.0) - - 75.0 - - -
- Exercise of options - - - 22.4 - (19.2) 3.2 - 3.2
- Purchase of own shares - - - (26.1) - - (26.1) - (26.1)
Total - - (75.0) (3.7) - 61.3 (17.4) - (17.4)
At 30 June 2023 9.3 4.0 - (131.4) 26.3 1,003.4 911.6 7.7 919.3
Profit for the period - - - - - 109.9 109.9 0.1 110.0
Other comprehensive (expense)/income - - - - 0.9 (2.8) (1.9) (0.1) (2.0)
Total comprehensive (expense)/income - - - - 0.9 107.1 108.0 - 108.0
Transactions with owners:
- Cost of share-based payments - - - - - 3.7 3.7 - 3.7
- Tax on share-based payments - - - - - 1.6 1.6 - 1.6
- Exercise of options - - - 2.9 - 3.1 6.0 - 6.0
- Purchase of own shares - - - (11.9) - - (11.9) - (11.9)
- Equity dividends - - - - - (77.3) (77.3) - (77.3)
Total - - - (9.0) - (68.9) (77.9) - (77.9)
At 31 December 2023 9.3 4.0 - (140.4) 27.2 1,041.6 941.7 7.7 949.4
Profit for the period - - - - - 60.3 60.3 (1.8) 58.5
Other comprehensive (expense) - - - - (9.5) - (9.5) - (9.5)
Total comprehensive (expense)/income - - - - (9.5) 60.3 50.8 (1.8) 49.0
Transactions with owners:
- Cost of share-based payments - - - - - 4.4 4.4 - 4.4
- Tax on share-based payments - - - - - 1.5 1.5 - 1.5
- Exercise of options - - - 12.4 - (9.7) 2.7 - 2.7
- Purchase of own shares - - - (10.2) - - (10.2) - (10.2)
- Equity dividends - - - - - - - - -
Total - - - 2.2 - (3.8) (1.6) - (1.6)
At 30 June 2024 9.3 4.0 - (138.2) 17.7 1,098.1 990.9 5.9 996.8
Consolidated Cash Flow Statement
For the six months ended 30 June 2024
Note H1 2024 H1 2023 Year 2023
£m £m £m
Operating activities
Profit before taxation 84.0 122.8 272.1
Net finance (income)/cost (5.6) (1.3) (3.3)
Depreciation of property, plant and equipment 10.4 10.0 20.4
Depreciation of right-of-use assets 20.3 20.9 41.4
Amortisation of intangible assets 9.3 9.4 18.9
Share-based payments 4.4 4.0 7.7
Loss on disposal of property, plant and equipment 0.2 - 0.2
Gain on disposal of intangibles (0.2) - -
Net cash flow from inventories (57.1) 90.6 189.2
Net cash flow from trade and other receivables (including contract assets) 56.1 293.6 107.7
Net cash flow from trade and other payables (including contract liabilities) (88.7) (387.6) (160.2)
Net cash flow from provisions and employee benefits 0.6 (1.2) (0.8)
Other adjustments 0.2 0.2 0.1
Cash generated from operations 33.9 161.4 493.4
Income taxes paid (32.5) (44.9) (82.8)
Net cash flow from operating activities 1.4 116.5 410.6
Investing activities
Interest received 9.3 6.7 13.1
Acquisition of subsidiaries, net of cash acquired - (1.9) -
Contingent consideration 11 (14.7) (17.4) (17.4)
Purchases of property, plant and equipment (8.3) (11.3) (21.9)
Purchases of intangible assets (6.4) (5.7) (13.2)
Net cash flow from investing activities (20.1) (29.6) (39.4)
Financing activities
Interest paid (1.3) (1.0) (2.6)
Interest paid on lease liabilities (2.6) (2.3) (4.7)
Purchase of non-controlling interest - - (1.9)
Dividends paid to equity shareholders of the Parent - - (77.3)
Proceeds from exercise of share options 2.7 3.2 9.2
Purchase of own shares (10.2) (26.1) (38.0)
Repayment of loans and credit facility (2.5) (64.6) (69.8)
Payment of capital element of lease liabilities (20.9) (20.9) (41.4)
Drawdown of borrowings - 61.9 62.9
Net cash flow from financing activities (34.8) (49.8) (163.6)
Increase/(decrease) in cash and cash equivalents (53.5) 37.1 207.6
Effect of exchange rates on cash and cash equivalents (6.3) 0.1 (0.8)
Cash and cash equivalents at the beginning of the period/year 471.2 264.4 264.4
Cash and cash equivalents at the end of the period/year 12 411.4 301.6 471.2
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2024
1 General information
The Interim Condensed Consolidated Financial Statements (Financial Statements)
of Computacenter plc (Parent Company or the Company) and its subsidiaries (the
Group) for the six months ended 30 June 2024 were authorised for issue in
accordance with a resolution of the Directors on 6 September 2024. The
Consolidated Balance Sheet was signed on behalf of the Board by MJ Norris and
MC Jehle.
Computacenter plc is a limited company incorporated and domiciled in England
whose shares are publicly traded. Its registered address is Hatfield Business
Park, Hatfield Avenue, Hatfield, AL10 9TW.
2 Basis of preparation
The Financial Statements for the six months ended 30 June 2024 contained in
this announcement have been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting', as adopted by the United
Kingdom. They do not include all the information and disclosures required in
the annual financial statements and should be read in conjunction with the
Group's 2023 Annual Report and Accounts which have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by the
United Kingdom. The Financial Statements contained in this announcement are
unaudited.
The Financial Statements are prepared on the historical cost basis, other than
derivative financial instruments and contingent consideration, which are
stated at fair value.
The Financial Statements are presented in pound sterling (£) and all values
are rounded to the nearest hundred thousand, except when otherwise indicated.
In determining whether it is appropriate to prepare the Financial Statements
on a going concern basis, the Group prepares a three-year Plan (the 'Plan')
annually by aggregating top-down expectations of business performance across
the Group in the second and third year of the Plan with a detailed 12-month
bottom-up budget for the first year, which was approved by the Board. The
forecast cash flows from the Plan are aggregated with the current position to
provide a total three-year cash position against which the impact of potential
risks and uncertainties can be assessed. In the absence of significant
external debt, the analysis also considers access to available committed and
uncommitted finance facilities, the ability to raise new finance in most
foreseeable market conditions and the ability to restrict dividend payments.
The Directors have identified a period of not less than 12 months from the
date of signing the Financial Statements contained in this announcement,
through to 30 September 2025, as the appropriate period for the going concern
assessment and have based their assessment on the relevant forecasts from the
Plan for that period. No events or conditions beyond the assessment period
that may cast significant doubt on the Group's ability to continue as a going
concern have been identified.
The potential impact of the principal risks and uncertainties, as set out on
pages 64 to 77 of the 2023 Annual Report and Accounts, is then applied to the
Plan. This assessment includes only those risks and uncertainties that,
individually or in plausible combination, would threaten the Group's business
model, future performance, solvency or liquidity over the assessment period
and which are considered to be severe but reasonable scenarios. It also takes
into account an assessment of how the risks are managed and the effectiveness
of any mitigating actions.
The combined effect of the potential occurrence of several of the most
impactful risks and uncertainties is represented by a large adjustment to the
cash flows over the assessment period which is then compared to the cash
position generated by the Plan, throughout the assessment period, to model
whether the business will be able to continue in operation. This application
of the risk impact adjustment is performed under a sensitivity scenario. The
supporting models of the Plan are subject to rigorous downside sensitivity
analysis which involves flexing a number of the main assumptions underlying
the forecasts within the Plan.
For the current period, the primary downside sensitivity relates to a
modelled, but not predicted, severe downturn in Group revenues, beginning in
the second half of 2024, simulating a continued impact for some of our
customers from a reduction in customer demand due to the current economic
crisis, and ongoing impact on the Group's revenues from this macroeconomic
instability. This sensitivity analysis models a continued market downturn
scenario, with slower-than-predicted recovery estimates, for some of our
customers whose businesses have been affected by the downturn occurring for
our customer base as a result of the emerging negative global macroeconomic
environment due to the current economic crisis. Under the sensitivity
scenario, the business demonstrates modelled solvency and liquidity over the
assessment period.
Our cash and borrowing capacity provide sufficient funds to meet the
foreseeable needs of the Parent and Group. At 30 June 2024, the Group had cash
and short-term deposits of £411.4m and bank debt, primarily related to the
recently built headquarters in Germany and operations in North America, of
£9.5m. On 9 December 2022, the Group entered a new unsecured multi-currency
revolving loan facility of £200.0m in order to rationalise its treasury
operations. The new facility has a term of five years plus two one-year
extension options exercisable on the first and second anniversary of the
facility. The Group has exercised the extension option on the first
anniversary, extending the term to six years with one further one-year
extension option available.
The Group has a resilient balance sheet position, with net assets of £996.8m
as at 30 June 2024. The Group made a profit after tax of £58.5m and delivered
net cash flows from operating activities of £1.4m, for the period ended 30
June 2024.
As the analysis continues to show a strong forecast cash position, even under
the severe economic conditions modelled in the sensitivity scenario, the
Directors continue to consider that the Parent and Group are well placed to
manage business and financial risks in the current economic environment. Based
on this assessment, the Directors confirm that they have a reasonable
expectation that the Parent and Group will be able to continue in operation
and meet their liabilities as they fall due over the period of not less than
12 months from the date of signing the Financial Statements contained in this
announcement and therefore have prepared the Financial Statements on a going
concern basis.
3 Significant accounting policies
The accounting policies adopted are consistent with those of the previous
financial year as applied in the Group's 2023 Annual Report and Accounts,
except for the estimation of income tax (see note 9).
4 Adjusted measures
The Group uses several non-Generally Accepted Accounting Practice (non-GAAP)
financial measures in addition to those reported in accordance with IFRS. The
Directors believe that these non-GAAP measures, set out below, assist in
providing additional useful information on the underlying trends, performance
and position of the Group. The non-GAAP measures are also used to enhance the
comparability of information between reporting periods by adjusting for
non-recurring or uncontrollable factors which affect IFRS measures, to aid the
user in understanding the Group's performance.
Consequently, non-GAAP measures are used by the Directors and Management for
performance analysis, planning, reporting and incentive-setting purposes.
Adjusted measures have remained consistent with the prior period. However, as
with all non-GAAP alternative performance measures, these adjusted measures
present some natural limitations in their usage to understand the Group's
performance. These limitations include the lack of comparability with non-GAAP
and GAAP measures used by other companies and the fact that the results may,
from time-to-time, contain the benefit of acquisitions made but exclude the
significant costs associated with that acquisition or the amortisation of
acquired intangibles. It is therefore not a complete record of the Group's
financial performance as compared to its GAAP results. The exclusion of other
adjusting items may result in adjusted earnings being materially higher or
lower than reported earnings. In particular, when significant acquisition
related charges are excluded, adjusted earnings will be higher than reported
GAAP-compliant earnings.
These non-GAAP measures comprise gross invoiced income, adjusted
administrative expenses, adjusted operating profit or loss, adjusted profit or
loss before tax, adjusted tax, adjusted profit or loss for the period/year,
adjusted earnings per share and adjusted diluted earnings per share.
The Appendix to this announcement sets out the description and basis of
calculation of the Alternative Performance Measures and the rationale for
their use.
A reconciliation to adjusted measures is provided in the Chief Financial
Officer's Review contained in this announcement which details the impact of
exceptional and other adjusting items when comparing to the non-GAAP financial
measures, in addition to those reported in accordance with IFRS. Further
detail is also provided within note 5, Segment information.
5 Segment information
The Segment information is reported to the Board and the Chief Executive
Officer. The Chief Executive Officer is the Group's Chief Operating Decision
Maker (CODM).
As disclosed in the 2023 Annual Report and Accounts, the Group reported six
segments: UK, Germany, France, North America, International, along with
Central Corporate Costs. During the first half of the year, Management
reviewed the way it reported Segmental performance to the Board and the CODM.
In accordance with IFRS 8, changes to the operating segments were made to
better reflect recent changes in management responsibility and how the Board
and CODM will review information about the Group. These operating segment
changes are explained below:
· The entities within Belgium, the Netherlands and Switzerland have
been transferred from the previously reported "International" Segment and into
the France Segment which has been renamed "Western Europe". This change
removes these entities that actively sell to local customers (selling
entities) from the International Segment, placing them in a segment that is a
purely selling entity segment.
The previously reported International segment aggregated selling entities with
a number of purely operational support entities that provide Services to the
Group's global customers. The change makes a clearer distinction between the
countries in which we sell to customers and the other countries in which we
operate directly to support those customers.
The change anticipates further alignment of operations between teams within
Belgium, the Netherlands and France.
As a result, we now have four segments describing the countries in which we
actively sell i.e. our markets: United Kingdom, Germany, Western Europe
(France, Belgium, Netherlands and Switzerland) and North America (USA &
Canada).
· The revised International segment now consolidates the other
countries in which we operate in support of our global customers.
· Finally, we have retained the Central Corporate Cost segment and
continues to be disclosed as a separate column.
In addition to the above Segmental changes, the Group also performed an
analysis of business activities included within the Services business. As a
result of this analysis, from 1 January 2024 the Group has reallocated revenue
of certain business activities from Managed Services to Professional Services.
This reflects better where the customer relationship and operational
responsibility lies and where the benefits should accrue. This change has no
impact on the reported Group or total Services revenue, however, Professional
services revenue increased and Managed Services decreased by £14.6m,
primarily in the Germany segment for H1 2023 (Year ended 31 December 2023:
£32.4m).
The above changes in reporting of segments and business activities within the
Services business has no impact on reported Group results. To enable
comparisons with prior period performance, comparative information for H1 2023
and the year ended 31 December 2023 has been restated in accordance with the
revised Segmental and business reporting structure.
The Group has the same operating Segments and reporting Segments. The new
Segmental reporting structure is the basis on which internal reports are now
provided to the Chief Executive Officer, as the CODM, for assessing
performance and determining the allocation of resources within the Group, in
accordance with IFRS 8.25. Segmental performance is measured based on external
revenues, adjusted gross profit, adjusted operating profit and adjusted profit
before tax.
Segmental performance for the periods ended 30 June 2024, 30 June 2023 and 31
December 2023 was as follows:
Six months ended UK Germany £m Western Europe North America *£m International £m Central Total
30 June 2024 £m £m Corporate Costs £m
£m
Revenue
Technology Sourcing revenue
Gross invoiced income 864.6 812.9 480.1 1,579.6 2.9 - 3,740.1
Adjustment to gross invoiced income for income recognised as agent (542.5) (287.3) (180.9) (422.1) - - (1,432.8)
Total Technology Sourcing revenue 322.1 525.6 299.2 1,157.5 2.9 - 2,307.3
Services revenue
Professional Services 71.0 201.5 32.0 61.2 - - 365.7
Managed Services 149.1 174.9 82.1 13.0 11.7 - 430.8
Total Services revenue 220.1 376.4 114.1 74.2 11.7 - 796.5
Total Revenue 542.2 902.0 413.3 1,231.7 14.6 - 3,103.8
Results
Gross Profit 107.8 167.3 51.7 127.8 17.6 - 472.2
Adjusted administrative expenses (94.4) (107.8) (49.6) (101.7) (11.8) (25.8) (391.1)
Adjusted operating profit/(loss) 13.4 59.5 2.1 26.1 5.8 (25.8) 81.1
Adjusted net interest 2.6 2.6 - 1.1 (0.2) - 6.1
Adjusted profit/(loss) before tax 16.0 62.1 2.1 27.2 5.6 (25.8) 87.2
Exceptional items:
- unwinding of discount relating to acquisition of a subsidiary (0.5)
- gain relating to acquisition of a subsidiary 2.5
Total exceptional items 2.0
Amortisation of acquired intangibles (5.2)
Profit before tax 84.0
* Included within the North America Segment total revenue of £1,231.7m is an
amount of £1,200.6m revenue for the United States of America.
The reconciliation of adjusted operating profit to operating profit as
disclosed in the Consolidated Income Statement is as follows:
Six months ended Total
30 June 2024 £m
Adjusted operating profit 81.1
Amortisation of acquired intangibles (5.2)
Exceptional items 2.5
Operating profit 78.4
Six months ended UK Germany £m Western Europe North International (restated) Central Corporate Costs Total
30 June 2023 £m (restated) £m America* £m £m £m £m
Revenue
Technology Sourcing revenue
Gross invoiced income 1,051.0 1,042.5 441.2 1,805.6 1.4 - 4,341.7
Adjustment to gross invoiced income for income recognised as agent (585.1) (449.7) (131.5) (407.0) - - (1,573.3)
Total Technology Sourcing revenue 465.9 592.8 309.7 1,398.6 1.4 - 2,768.4
Services revenue
Professional Services (restated) 65.8 194.5 32.1 55.7 0.2 - 348.3
Managed Services (restated) 154.4 186.4 99.6 14.6 13.2 - 468.2
Total Services revenue 220.2 380.9 131.7 70.3 13.4 - 816.5
Total revenue 686.1 973.7 441.4 1,468.9 14.8 - 3,584.9
Results
Gross profit 127.2 179.1 56.0 132.7 10.7 - 505.7
Adjusted administrative expenses (101.7) (105.8) (50.1) (103.4) (7.1) (19.1) (387.2)
Adjusted operating profit/(loss) 25.5 73.3 5.9 29.3 3.6 (19.1) 118.5
Adjusted net interest 3.8 0.3 (0.7) 0.2 (0.3) - 3.3
Adjusted profit/(loss) before tax 29.3 73.6 5.2 29.5 3.3 (19.1) 121.8
Exceptional items:
- unwinding of discount relating to acquisition of a subsidiary (2.0)
- gain relating to acquisition of a subsidiary 3.2
- other income relating to acquisition of a subsidiary 5.3
Total exceptional items 6.5
Amortisation of acquired intangibles (5.5)
Profit before tax 122.8
* Included within the North America Segment total revenue of £1,468.9m is an
amount of £1,444.7m revenue for the United States of America.
The reconciliation of adjusted operating profit to operating profit as
disclosed in the Consolidated Income Statement is as follows:
Six months ended Total
30 June 2023 £m
Adjusted operating profit 118.5
Amortisation of acquired intangibles (5.5)
Exceptional items 8.5
Operating profit 121.5
Year ended UK Germany Western Europe North International (restated) Central Total
31 December 2023 £m £m (restated) £m America* £m Corporate Costs £m
£m £m
Revenue
Technology Sourcing revenue
Gross invoiced income 1,938.1 2,111.5 929.7 3,454.4 11.2 - 8,444.9
Adjustment to gross invoiced income for income recognised as agent (1,166.3) (849.7) (290.0) (851.8) (0.8) - (3,158.6)
Total Technology Sourcing revenue 771.8 1,261.8 639.7 2,602.6 10.4 - 5,286.3
Services revenue
Professional Services (restated) 132.5 394.4 65.6 118.7 - - 711.2
Managed Services (restated) 309.4 371.3 196.0 27.4 21.2 - 925.3
Total Services revenue 441.9 765.7 261.6 146.1 21.2 - 1,636.5
Total revenue 1,213.7 2,027.5 901.3 2,748.7 31.6 - 6,922.8
Results
Gross profit 250.8 374.5 118.7 267.5 32.5 - 1,044.0
Adjusted administrative expenses (192.0) (211.5) (103.8) (202.5) (18.9) (43.8) (772.5)
Adjusted operating profit/(loss) 58.8 163.0 14.9 65.0 13.6 (43.8) 271.5
Adjusted net interest 5.5 1.0 (1.0) 1.7 (0.7) - 6.5
Adjusted profit/(loss) before tax 64.3 164.0 13.9 66.7 12.9 (43.8) 278.0
Exceptional items:
- unwinding of discount relating to acquisition of a subsidiary (3.2)
- gain relating to acquisition of a subsidiary 2.8
- other income relating to acquisition of a subsidiary 5.3
Total exceptional items 4.9
Amortisation of acquired intangibles (10.8)
Profit before tax 272.1
* Included within the North America Segment total revenue of £2,748.7m is an
amount of £2,703.4m revenue for the United States of America.
The reconciliation of adjusted operating profit to operating profit as
disclosed in the Consolidated Income Statement is as follows:
Year ended Total
31 December 2023 £m
Adjusted operating profit 271.5
Amortisation of acquired intangibles (10.8)
Exceptional items 8.1
Operating profit 268.8
6 Seasonality of operations
Historically, revenues have been higher in the second half of the year than in
the first six months. This is principally driven by customer buying behaviour
in the markets in which we operate. Typically, this leads to a more pronounced
effect on operating profit.
The Company saw the historical patterns of seasonality change due to the
unpredictability created first by the impact of Covid-19, beginning in 2020,
and then the more recent impact of supply shortages. Both of these events
materially impacted customer buying behaviours impacting the timing of sales
volumes between the first and second halves of the year for 2020 and 2021 and
therefore our historical seasonality of operations patterns. During 2022 and
2023 we have seen these unusual buying patterns reversing and the re-emergence
of seasonality that is closer to our historical norms.
During 2024 this trend has continued, and we expect customer buying to be more
weighted towards the second half of the year leading, once again, to a more
pronounced effect on operating profit in the second half which we expect to
have a higher proportion of the full-year operating profit than we have seen
over the period from 2020 to 2023.
7 Dividends paid and proposed
A final dividend for 2023 of 47.4 pence per ordinary share was paid on 5 July
2024. An interim dividend in respect of 2024 of 23.3 pence per ordinary share,
amounting to a total dividend of £26.6m, was declared by the Directors at
their meeting on 6 September 2024. The expected payment date of the dividend
declared is 25 October 2024. This announcement does not reflect this dividend
payable.
8 Exceptional items
H1 2024 H1 2023 Year 2023
£m £m £m
Operating profit
Other income related to acquisition of a subsidiary - 5.3 5.3
Gain related to acquisition of a subsidiary 2.5 3.2 2.8
Exceptional operating profit/(loss) 2.5 8.5 8.1
Interest cost relating to acquisition of a subsidiary (0.5) (2.0) (3.2)
Profit/(loss) on exceptional items before taxation 2.0 6.5 4.9
Income tax
Tax relating to exceptional items - - -
Profit/(Loss) on exceptional items after taxation 2.0 6.5 4.9
Included within H1 2024 are the following exceptional items:
· £0.5m relating to the unwinding of the discount on the contingent
payment for the purchase of BITS has been classified as exceptional interest
costs. This is consistent with our prior-year treatment.
· £2.5m relating to a release of contingent consideration in relation
to the BITS acquisition (note 11). As this release is related to the
acquisition and not operational activity within BITS and is of a one-off
nature, it was classified as an exceptional item.
Included within the 12 months to 31 December 2023 are the following
exceptional items:
· £3.2m relating to the unwinding of the discount on the contingent
payment for the purchase of BITS has been classified as exceptional interest
costs. This is consistent with our prior-year treatment.
· A $9.3m (£7.4m) settlement was received on 8 May 2023 from the
Washington State Department of Revenue. The settlement related to litigation
contesting a historic, pre-acquisition, sales tax assessment that was paid by
antecedent companies related to the acquired Pivot group of companies. Of this
amount, $6.7m (£5.3m) has been recognised as other income relating to
acquisition of a subsidiary for the refunded sales tax amount. This other
income is non-operational in nature, material in size and unlikely to recur,
and has therefore been classified as exceptional. Further amounts of $1.6m
(£1.3m) and $1.0m (£0.8m) have been credited to adjusted interest income,
for the refund of statutory overpayment interest receivable on the original
payment, and adjusted administrative expenses, to reimburse legal expenses
incurred since acquisition, respectively.
· £2.8m relating to a release of contingent consideration in relation
to the BITS acquisition. As this release is related to the acquisition and not
operational activity within BITS and is of a one-off nature, it was classified
as an exceptional item.
9 Income tax
Tax for the six-month period is charged at 30.4% (six months ended 30 June
2023: 27.2%; year ended 31 December 2023: 26.7%), representing the best
estimate of the average annual effective tax rate expected for the full year,
applied to the pre-tax income of the six-month period.
OECD Pillar two model
The Group is within the scope of the OECD Pillar Two model rules. Pillar Two
legislation was enacted in the UK, the jurisdiction in which Computacenter Plc
is incorporated, and came into effect from 1 January 2024. As the Pillar Two
legislation is effective at the reporting date, the Group has now assessed its
current tax exposure. The Group applies the IAS 12 exception to recognising
and disclosing information about deferred tax assets and liabilities related
to Pillar Two income taxes.
Under the legislation, the Group is liable to pay a top-up tax for the
difference between the Pillar Two Global anti-Base Erosion (GloBE) effective
tax rate per jurisdiction and the 15% minimum rate.
Our interim assessment, based on the full year forecast of profits, indicates
that the Group does not expect a material impact on its effective tax rate as
a result of the OECD Pillar Two model rules. For all material jurisdictions in
which it operates, the Group has estimated weighted average effective tax
rates that exceed 15%.
10 Earnings per share
Earnings per share amounts are calculated by dividing profit attributable to
ordinary equity holders by the weighted average number of ordinary shares
outstanding during the period/year (excluding own shares held).
To calculate diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all dilutive
potential shares. Share options granted to employees where the exercise price
is less than the average market price of the Company's ordinary shares during
the period/year are considered to be dilutive potential shares.
H1 2024 H1 2023 Year 2023
£m £m £m
Profit attributable to equity holders of the Parent 60.3 87.7 197.6
H1 2024 H1 2023 Year 2023
£m £m £m
Basic weighted average number of shares (excluding own shares held) 112.9 113.4 112.9
Effect of dilution:
Share options 1.3 1.3 1.2
Diluted weighted average number of shares 114.2 114.7 114.1
H1 2024 H1 2023 Year 2023
Pence pence pence
Basic earnings per share 53.5 77.3 175.0
Diluted earnings per share 52.9 76.5 173.2
11 Fair value measurements recognised in the Consolidated Balance Sheet
Financial instruments which are recognised at fair value subsequent to initial
recognition are grouped into Levels 1 to 3 based on the degree to which the
fair value is observable. The three levels are defined as follows:
· Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities;
· Level 2 fair value measurements are those derived from inputs other
than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices); and
· Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
At 30 June 2024 the Group had forward currency contracts, which were measured
at Level 2 fair value subsequent to initial recognition, to the value of an
asset of £3.3m and a liability of £1.7m (30 June 2023: asset of £3.7m and
liability of £4.2m; 31 December 2023: asset of £2.5m and liability of
£6.3m). The net realised loss from forward currency contracts, designated as
cashflow hedges, in the period to 30 June 2024 of £0.2m (30 June 2023:
£0.5m; 31 December 2023: £3.0m) are offset by broadly equivalent realised
losses/gains on the related underlying transactions.
The foreign currency forward contracts are measured based on observable spot
exchange rates, the yield curves of the respective currencies as well as the
currency basis spreads between the respective currencies. All contracts are
fully cash collateralised, thereby eliminating both counterparty and the
Group's own credit risk.
The carrying value of the Group's short-term receivables and payables is a
reasonable approximation of their fair values. The fair value of all other
financial instruments carried within the Financial Statements is not
materially different from their carrying amount.
Contingent consideration
On 1 July 2022, the Group acquired 100% of the voting shares of Business IT
Source Holdings, Inc. (BITS) and the acquisition has been accounted for using
the purchase method of accounting. In accordance with the share purchase
agreement, the Group made its first earn-out payment amounting to £17.4m
($21.2m) in 2023.
On 30 June 2023, a renegotiated agreement was signed with the former owners
following which, the second earn-out is based on BITS's 2023 EBITDA, H1 2024
EBITDA, and indebtedness over these periods. Accordingly, during the period,
the Group made payments against the second earn-out amounting to £14.7m
($18.6m).
The contingent consideration that resulted from the acquisition of BITS, was
measured at Level 3 fair value, subsequent to initial recognition. The Group
used discounted cash flows (DCF) as a valuation technique to derive the fair
value of the contingent consideration. Based on the H1 2024 results for BITS,
Management has determined that an accrual of $4.7m, discounted to $4.5m using
a weighted average discount rate of 12%, should be recorded for the remaining
balance of the second earn-out. Compared to previous forecasts, this has
resulted in a release during the period of £2.5m, which has been recognised
as an exceptional item. The carrying value at 30 June 2024 of £3.6m (30 June
2023: £19.2m; 31 December 2023: £20.2m) is included within Trade and other
payables.
12 Net funds
H1 2024 H1 2023 Year 2023
£m £m £m
Cash and short-term deposits 411.4 301.6 471.2
Cash and cash equivalents 411.4 301.6 471.2
Bank loans and credit facility (9.5) (16.5) (12.2)
Adjusted net funds (excluding lease liabilities) 401.9 285.1 459.0
Lease liabilities (114.1) (120.3) (115.4)
Net funds 287.8 164.8 343.6
Current
Financial liabilities: Bank and other loans (4.6) (6.7) (4.8)
Lease liabilities (35.6) (36.7) (37.3)
Non-current
Financial liabilities: Bank and other loans (4.9) (9.8) (7.4)
Lease liabilities (78.5) (83.6) (78.1)
13 Publication of non-statutory accounts
The Financial Statements contained in this announcement does not constitute
statutory accounts as defined in section 435 of the Companies Act 2006.
The comparative figures for the financial year ended 31 December 2023 are not
the company's statutory accounts for that financial year. Those accounts have
been reported on by the company's auditor and delivered to the registrar of
companies. The report of the auditor was (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
Appendix:
Alternative performance measures
Alternative Performance Measures are used by the Group to understand and
manage performance. These are not defined under International Financial
Reporting Standards (IFRS) or UK-adopted International Accounting Standards
(UK-IFRS) and are not intended to be a substitute for any IFRS or UK-IFRS
measures of performance but have been included as Management considers them to
be important measures, alongside the comparable Generally Accepted Accounting
Practice (GAAP) financial measures, in assessing underlying performance.
Wherever appropriate and practical, we provide reconciliations to relevant
GAAP measures. The table below sets out the basis of calculation of the
Alternative Performance Measures and the rationale for their use.
Measure Description Rationale
Adjusted net funds and net funds Adjusted net funds or adjusted net debt includes cash and cash equivalents, A table reconciling this measure, including the impact of lease liabilities,
other short- or long-term borrowings and current asset investments. Following is provided within note 12 to the summary financial information within this
the adoption of IFRS 16, this measure excludes all lease liabilities announcement.
recognised under IFRS 16.
Net funds is adjusted net funds including all lease liabilities recognised
under IFRS 16.
Adjusted (expense and profit) measures Adjusted administrative expense, adjusted operating profit or loss, adjusted Adjusted measures exclude items which in Management's judgement need to be
profit or loss before tax, adjusted tax, adjusted profit or loss, adjusted disclosed separately by virtue of their size, nature or frequency to aid
earnings per share and adjusted diluted earnings per share are, as understanding of the performance for the period/year or comparability between
appropriate, are each stated before: exceptional and other adjusting items, periods.
including gains or losses on business acquisitions and disposals, amortisation
of acquired intangibles, utilisation of deferred tax assets (where initial Adjusted measures allow Management and investors to compare performance
recognition was as an exceptional item or a fair value adjustment on without these recurring or non-recurring items.
acquisition), and the related tax effect of these exceptional and other
adjusting items. Management does not consider these items when reviewing the underlying
performance of the Segment or the Group as a whole. A reconciliation to
Recurring items include purchase price adjustments, including amortisation of adjusted measures is provided within the Chief Financial Officer's review,
acquired intangible assets and adjustments made to reduce deferred income which details the impact of exceptional and other adjusted items when compared
arising on acquisitions and acquisition-related items. Recurring items are to the non-GAAP financial measures, in addition to those reported in
adjusted each period irrespective of materiality, to ensure consistent accordance with IFRS. Further detail is provided within note 5 to the summary
treatment. financial information within this announcement.
Non-recurring items are those that Management judge to be one-off or
non-operational, such as gains and losses on the disposal of assets,
impairment charges and reversals, and restructuring related costs.
Constant currency We evaluate the long-term performance and trends within our strategic KPIs on We believe providing constant currency information gives valuable supplemental
a constant-currency basis. The performance of the Group and its overseas detail regarding our results of operations, consistent with how we evaluate
Segments are also shown, where indicated, in constant currency. The constant our performance.
currency presentation, which is a non-GAAP measure, excludes the impact of
fluctuations in foreign currency exchange rates.
Free cash flow Free Cash Flow is Cash Flow from Operations minus net interest received, To measure the cash generated by the operating activities during the period
interest and payments related to lease liabilities, income tax paid and gross that is available to repay debt, undertake acquisitions or distribute to
capital expenditure. shareholders.
Gross invoiced income and IFRS revenue Gross invoiced income is based on the value of invoices raised to customers, Gross invoiced income reflects the cash movements to assist Management and the
net of the impact of credit notes and excluding VAT and other sales taxes. users of the Annual Report and Accounts in understanding revenue growth on a
Gross invoiced income includes all items recognised on an 'agency' basis 'principal' basis and to assist in their assessment of working capital
within revenue, on a gross income billed to customers basis, as adjusted for movements in the Consolidated Balance Sheet and Consolidated Cash Flow
deferred and accrued revenue. A reconciliation of revenue to gross invoiced Statement. This measure allows an alternative view of growth in adjusted gross
income is provided within note 5 to the summary financial information within profit, based on the product mix differences and the accounting treatment
this announcement. thereon.
IFRS revenue refers to revenue recognised in accordance with International
Financial Reporting Standards including IFRS 15 'Revenue from Contracts with
Customers' and IFRS 16 'Leases'.
Organic (revenue and profit) measures In addition to the adjustments made for adjusted measures, organic measures: Organic measures allow management and investors to understand the
like-for-like revenue and current-period margin performance of the continuing
· exclude the contribution from discontinued operations, disposals and business.
assets held for sale of standalone businesses in the current and prior period;
The results for the half year did not benefit from any acquisitions made since
· exclude the contribution from acquired businesses until the year after 1 January 2023, with organic revenue and reported revenue being equivalent.
the first full year following acquisition; and
· adjust the comparative period to exclude prior-period acquired
businesses if they were acquired part-way through the prior period.
Acquisitions and disposals where the revenue and contribution impact would be
immaterial are not adjusted.
Product order backlog The total value of committed outstanding purchase orders placed with our The Technology Sourcing backlog, alongside the Managed Services Contract Base
technology vendors against non-cancellable sales orders received from our and the Professional Services forward order book, allows us visibility of
customers for delivery within 12 months, on a gross invoiced income basis. future revenues in these
areas.
Return on capital employed (ROCE) ROCE is calculated as adjusted operating profit, divided by capital employed, As an indicator of the current period financial return on the capital invested
which is the closing total net assets excluding adjusted net funds. in the company.
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