Government spending cuts and a shrinking of IT budgets at UK financial services companies have failed to prevent Computacenter from recording its sixth consecutive year of double-digit profit growth.

The Hertfordshire-based IT services group’s switch of focus to continental Europe appears to be paying off after demand from France and Germany pushed up full-year pre-tax profits by 10.3 per cent year-on-year.

The move by continental European customers to upgrade their IT infrastructure offset a shrinking of UK revenues, which have been hit by constricted government spending and heightened competition in the financial services sector.

In the UK underlying revenues at the FTSE 250 group fell 12.9 per cent to £1.1bn, as several large customers reined back their IT budgets.

However, moves by manufacturing companies to invest in their IT systems resulted in a 21.8 per cent increase in German revenues to £1.2bn, and a 7.9 per cent rise in France, the company said.

“In general the economic environment in France and Germany is more conducive to investment,” Mike Norris, Computacenter’s chief executive for the past 17 years, told the Financial Times.

“Our portfolio of customers in Germany is industrially-focused – big manufacturers, chemical companies, pharmaceuticals, whereas in the UK it has a bit more of a financial services bias. And the financial services market hasn’t been as resilient as the industrial services market.”

Computacenter’s larger UK customers include Barclays Bank, Lloyds and BT Group, while Germany’s bigger clients include Bayer, BMW and Daimler.

In the 12 months to December 31, Computacenter reported pre-tax profit up from £65.4m to £72m, from revenues that rose from £2.68bn to £2.85bn.

During 2011 Computacenter acquired Top Info, HSD and Damax at a total cost of £25m, which the group said “consolidated and enhanced our geographic footprint and added new services capabilities”.

However, when additional revenues from acquisitions are excluded, underlying revenues grew by only 2.2 per cent.

Diluted earnings per share rose from 32.6p to 39.3p, and a final dividend of 10.5p was proposed, bringing the total payout for 2011 to 15p – up 13.6 per cent from the previous year’s 13.2p.

Computacenter shares rose in afternoon trading by 5 per cent, or 20.4p, to 430.4p.

FT Comment

Ever since the 2010 comprehensive spending review throttled UK government budgets, Computacenter has – with good reason – switched its focus abroad. Although the economies of continental Europe have not exactly been booming of late, the IT services group has picked its targets wisely, including countries with resilient manufacturing-led economies, such as Germany. Although a recovery in IT spending among cash-strapped UK financial services companies appears some way off, Computacenter’s solid services pipeline of orders and clearly defined strategy put it in good stead during a tough period. Trading on a 2012 forward price/earnings ratio of 11, the shares appear good value, especially when compared with the technology sector average of 23.

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