Computacenter throwing money at German problems

Information technology services provider Computacenter is having to spend time and money getting service levels up to the required standard on some new German contracts, but things are going well in the home market.

Revenue in the third quarter of 2012 was up 1% to £656m from £648m in the third quarter of 2011, but was 6% higher on a constant currency basis. In the first nine months of the year revenue was up 3% (7% on a constant currency basis) to £2.07bn from £2.01bn the year before.

Group Services revenue grew by 9% in the third quarter, 13% in constant currency (CC), bringing the year-to-date position to 11% and 15% respectively.

Group Supply Chain revenue declined by 2% in the third quarter and grew by 2% in constant currency, bringing the year-to-date position to a decline of 1% and growth of 4%, respectively.

UK sparklesPerformance in the UK has been good, with revenues growing 12% in the third quarter to £265m, bringing the year-to-date growth to 8%.

Services revenues rose 18% while the Supply Chain top line improved 9% year-on-year, although the group pointed out that the third quarter of last year was a particularly poor one for the Supply Chain business.

The pipeline of orders on the Services side remains strong, the group revealed, while management is satisfied with the performance of new contracts, particularly given the growth rate of the Services business.

Germany stuttersThe picture is not so bright in Germany. Revenue in the third quarter declined 6% to £274m from £292m a year earlier, which represents flat revenue performance on a constant currency basis. This brings the year-to-date position to a decline of 2% (CC: growth of 5%).

Services revenue was flat in the third quarter (CC: growth of 7%), bringing the year-to date position to growth of 6% (CC: 13%).

Supply Chain revenue in the quarter declined by 9% (CC: decline of 3%), bringing the year-to-date position to a decline of 5% (CC: growth of 1%).

"While the third quarter showed decline in the Supply Chain business, for the year-to-date position, this represents a stabilisation from the performance in the second quarter. We have stated before that the comparison was challenging, given the strong growth achieved in the second and third quarters in the German Supply Chain business in 2011 by 46% and 22%, respectively, in constant currency," the firm said.

The group may have bitten off more than it can chew in terms of new contractual services arrangements in Germany. The group has seen a material deterioration in the more recent contracts it has taken on, as the transition stage is requiring more time and cost than anticipated.

In France, overall revenue performance was flat in the third quarter and 7% in constant currency. This brings the year-to date revenue growth position to 1% (CC: 8%).

Cash and outlookAt the end of the third quarter, net cash excluding customer specific financing was in the region of £86m, compared to £97m at the end of the third quarter of 2011.

"While the costs being incurred remediating our new contracts in Germany are likely to be higher than we previously expected, these costs are expected to be largely offset by a stronger performance in other parts of the business, particularly in the UK," the group statement revealed.

"Much remains to be done and whilst the Supply Chain business performance in the fourth quarter is not as critical as it once was to Computacenter's overall performance, it still remains an important factor. As a consequence, the group's trading result is expected to be broadly in line with the board's revised expectations for 2012," the statement concluded.

JH