Computacenter says consumers holding back

Shares in Computacenter fell sharply on Tuesday after the computer hardware and services reseller painted a gloomy picture of the current quarter and warned there would be no improvement this year.

In the latest of a series of warnings, the company said “difficult” trading conditions had continued into the second quarter and forecast that sales for the first half would be 10 per cent lower - although it added that the final figure would “rely heavily on the last few days of the quarter”.

In midday trade the shares were down nearly 19 per cent at 188¼p.

”The improving trend seen at the end of the first quarter was not sustained and product sales in the second quarter have been below our expectations,” the group said in a trading update. More details about trading and strategy would be discussed at its analyst day conference on July 5, the company added.

In April Computacenter cautioned that first quarter sales would be 10 per cent lower as customers bought fewer expensive products, following an earlier warning that unless trading improved full-year profits would be “substantially” lower than last year’s £64.6m. The group repeated the profit warning in its latest statement saying it did not see trading conditions improving for the remainder of 2005.

UK-based Computacenter, like many of its rivals, has suffered from a slowdown in corporate spending on computer equipment.

Industry analysts at Gartner have forecast PC sales would expand on average just 5.7 per cent a year from 2006 through 2008 compared with average growth of 11.3 per cent from 2003 through 2005.

At the same time, a number of computer hardware manufacturers are moving towards the Dell model of selling their products directly to customers rather than using resellers like Computacenter.

Reacting to this climate, Hewlett-Packard - Computacenter’s main hardware supplier - tightened its terms of trade with the company for this year. That is expected to result in a £10m fall in profit.

In response, Computacenter has been trying to build up its managed services business, which installs computer systems and provides technical support - but this is not expected to make a significant impact on profits for a couple of years. But the company said on Tuesday that the division was growing at a “lower level than anticipated”.