German costs hit Computacenter’s profits

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Computacenter’s push into offering IT services spurred a rise in first-half revenue even as problems surrounding several contracts in Germany weighed on pre-tax profits.

The IT services and hardware company has been refocusing its business over the past few years from mainly being a reseller of PCs and servers to also offering higher-margin services, such as running IT help desks for companies.

While contracts won in the services division have fuelled growth at the company, it issued a profit warning in June because it was having to spend an extra £7m on hiring 700 staff in order to deliver five big service contracts that it had won in Germany. Extra costs associated with new contracts in France, which accounts for about 16 per cent of group sales, also weighed on profits, the group said on Friday.

These resulted in a slide of group pre-tax profit of more than 20 per cent to £20.8m in the six months to June 30, on sales up 4.2 per cent to £1.42bn. Computacenter, which supplies IT hardware and software in more than 100 countries, raised its interim dividend 11.1 per cent to 5p.

Mike Norris, chief executive, said he was pleased to see double-digit organic revenue growth in the services division, which accounts for about 30 per cent of group sales, but said the group needed to focus on better integrating contracts.

“This is not a simple or quick process and much work needs to be done,” he said on Friday, adding that while he expected to see continued growth in the UK services business, this was likely to be slower outside its domestic market.

The Hertfordshire-based group’s focus on services continued to be a driver of growth in Germany and the UK, its two largest markets which account for 42 and 41 per cent of group revenues respectively. Overall revenue in Germany grew 7.5 per cent to €718.7m, within which was a 16 per cent rise in services revenue to €240.1m.

In the UK, services revenue growth leapt to 14.2 per cent compared with 0.7 per cent for the same period in 2011. Overall revenue in the UK grew 5.7 per cent to £578.2m.

Diluted earnings per share fell from 12.7p for the same period last year to 10p.

Shares in Computacenter were up 1.43 per cent to 375.2p in afternoon trading on Friday.

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