Computacenter profits hit by costs of German contracts

published 12 March 2013

Computacenter posted a drop in 2012 profits as the IT company invested heavily in France and underestimated the cost of projects in Germany.

Pre-tax profits came to £64.8m for the year to December 31st, down 10.1% from £72.1m in 2011. Diluted earnings per share decreased by 17.6% to 32.4p, compared to 39.3p the year earlier.

Chairman Greg Lock said last year the company "stumbled in Germany, invested significantly in France and reaped the reward of three years of building and investing in the UK".

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

"We were disappointed with our underestimations of the resource demands and associated costs of starting a significant number of contracts simultaneously in Germany," he said.

"Taken together with our out-performance in the UK, the impact upon our potential earnings was approximately £7.5m."

Nevertheless, group revenues grew 2.2% to £2.91bn, buttressed by an increase in contracts.

The group annual services contract base rose 11% in constant currency to a record £615m, with strong performance in the UK where adjusted operating profit increased 40.2% to £52.2m.

A total dividend of 15.5p per share was issued to shareholders, up 3.3% from the previous year.

During the course of 2013, the company intends to return up to £75m to shareholders, in addition to the normal dividend.

"We expect 2013 to be a year of progress for Computacenter," said Chief Executive Officr, Mike Norris.

"While the group financial outcome for 2013 will be dependent on the in-year performance of Germany and the speed at which we recover from our problem contracts, which is unpredictable, we are confident that these contracts will improve.

"More importantly, winning, contracting and taking on new contracts successfully, is more fundamental to the long-term growth of the business and its strategic development. This will be underpinned by our new group operating model, which has taken effect in the UK and Germany, since the start of 2013."