Computacenter PLC said it expects adjusted pretax profits for 2008 to be materially ahead of consensus market expectation of £38.1 million, positively impacted by a lower tax rate which is due to improved profit performance in Germany and France and some one-off tax benefits in the UK, in addition to a review of the level of the deferred tax asset in Germany.
In the UK, for the year as whole, sales grew by 2.5 percent to £1.39 billion. A number of long term services contracts was won, renewed and/or extended, as customers turned to the company’s service offerings to reduce their operating costs, it said. These new contracts made little impact on 2008, but will begin their positive impact during the first half of 2009.
After an encouraging 2007, 2008 has been another year of good progress for Computacenter in Germany, it said, adding that in particular Services margin improvement has been the major success of the year, with the second half at levels it believes are sustainable. Revenue for the year was €1.05 billion, a growth of 1 percent, which translates to an 18 percent growth in Sterling terms.
“While Computacenter France has performed better in 2008, with a reduction in operating loss and an operating profit in the second half, we are concerned that we have not made the strategic change needed to deliver a long term, acceptable level of profit and much remains to be done,” Computacenter said.
The bad debt position of £1.2 million it incurred following the bankruptcy of a major financial services client and which it informed the market of in October 2008, has been reduced to £850,000 and it confirmed the release of a provision held in relation to an empty property, which more than offsets the bad debt.
Computacenter said it will be implementing structural changes in its UK operations in 2009, aimed at significantly improving its effectiveness and competitive position. These changes will result in fewer layers of management, increased spans of control and will reduce the ongoing expense base by more than £15 million per annum by the end of the year.
It has also embarked upon a major group-wide systems upgrade which will start to deliver benefits in the second half of 2010 and be fully operational by 2011. This single group-wide ERP system will require capital investment of around £25 million over the next 3 years.
“The combination of current performance and these enhancements to the company, gives us cause for optimism for 2009 and beyond,” it said.