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By | Paul Kunert 18th April 2012 09:28

Computacenter UK biz hit by spending 'freeze' in banks

Continental operations lift group numbers

Computacenter's UK profits and kit sales were dampened by a capital expenditure "freeze" among banking customers, but this was more than offset at group level by a stronger turnout in Europe.

In a trading update to the LSE, Computacenter (CC) said group revenues for the first calendar quarter were up 9 per cent year-on-year, lifted by the year ago acquisition of Top Info in France as well as several services wins.

CC estimated that Top Info "contributed about one-third of our overall growth [at group level] for the period", and half of the 9 per cent rise in total product sales.

The vitally important services segment – which allows CC to reduce its reliance on vendors and take greater control over its destiny – was also up 9 per cent on the year-ago period

Bidding for large services deals that have yet to go live hit its margins, the firm said, but not unexpectedly so. It said this trend is expected to continue in the short term but should feather CC's nest longer term.

UK revenues remained flat – better than the slide the firm reported last year – with an 8 per cent rise in services biz countered by a 5 per cent drop in product sales.

CC said: "While government IT expenditure remains weak, we have previously explained that this does not have a material effect on our profitability.

"We have, however, seen a capital spending freeze during the period, from many of our investment banking customers and this adverse customer and product mix has had a negative effort on our profit," it added.

The operation in Germany fared better, with turnover rising 14 per cent – or 19 per cent in constant currency. This includes a 20 per cent and 16 per cent rise (both local currency) in supply chain product and services sales respectively.

CC France pushed up the top line by 24 per cent or 29 per cent in constant currency. Product numbers grew 34 per cent but extracting Top Info from the equation, they would have fallen 6 per cent. Services were up 10 per cent.

The integration of Top Info is now complete, logistics facilities are set to be transferred during Q3 and the French unit will migrate to CC's group ERP in 2013.

"However, we have been somewhat disappointed with this financial performance in the first quarter, particularly the challenge to our services margins, partly due to new business take-on," the firm said.

The CC group expects the rate of service growth experienced in the year to date to continue for the remainder of 2012.

"While our new contract cost of sale and the on-boarding challenges should not be underestimated, this services opportunity has the potential to underpin our growth rates in the years ahead," it added.

Expectations for the year remain unchanged. ®

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