Computacenter Anual Report 2008


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Computacenter Anual Report 2008

  1. 1. Annual report and accountsComputacenter plc 2008
  2. 2. Who we areComputacenter is a leading ITinfrastructure services provider.We add value to our customers by advising onIT strategy, deploying appropriate technologies,and managing elements of their infrastructureson their behalf.What we offerManaged and Support ServicesWe can take contractual responsibility for the management ofour customers’ IT infrastructures, to reduce their costs andimprove service levels. We also provide support services suchas installation and maintenance of desktops, datacentres andnetworks, user help-desk support and disaster recovery.Consulting and IntegrationWe provide professional services, including integration andproject management expertise, and expert advice across arange of platforms and technologies. We cover all key areasof the IT infrastructure, from desktop to datacentre.Supply Chain ServicesWe source, configure and deploy hardware and softwarefrom a wide portfolio of leading vendors. We also provideprocurement consulting, software licence management,technology disposal and asset management services.
  3. 3. Highlights 01Group revenues up Adjusted profit before tax up Corporate overview Group revenue by business type2+7.6 % +1.0 % 5 1Adjusted diluted earnings Dividend per share up 4 2per share up+13.5 +2.5 3 % % 1 2 3 28% 27% 13% Personal systems Network, server and storage Software 4 27% Services 5 4% Third party services Computacenter plc Annual report and accounts 2008Financial highlights Group revenue by country••Group revenues increased 7.6% to £2.56 billion (2007: £2.38 billion) 4 1••Adjusted1 profit before tax increased 1.0% to £43.1 million 3 (2007: £42.7 million)••Adjusted1 diluted earnings per share increased 13.5% to 21.0p (2007: 18.5p)••Final dividend of 5.5p per share, total dividend 8.2p (2007: 8.0p)••Net cash before customer-specific financing (‘CSF’) of £4.6 million 2 (2007: net debt of £16.2 million) 1 54% UKStatutory performance 2 32% 3 12% Germany France••Profit before tax decreased 6.0% to £39.5 million 4 1% Benelux (2007: £42.1 million)••Diluted EPS increased 33.0% to 24.2p (2007: 18.2p)••Net debt after CSF of £84.6 million (2007: net debt of £79.8 million)Operating highlights••Group annual services contract base grew over 10% to £498 million, based on constant currency••Major UK change programme launched in Q4 2008 to accelerate transition to higher margin services and solutions business and improve capital return••UK contract base grew 7.5% to £217 million, with new wins and extensions expected to add a further £23 million by end Q1 2009••Substantial improvement in German profitability driven by improved services margin and an increased focus on networking and datacentre solutions••Continued steady improvement in French performance and improved services mixContents01 Highlights 38 Consolidated income statement 1 Adjusted profit before tax, income tax expense and EPS are stated prior to amortisation of acquired intangibles and exceptional impairment02 Our strategy and performance 39 Consolidated balance sheet charges. Adjusted operating profit is also stated after charging finance www.computacenter.com04 International operations 40 Consolidated statement of changes costs on CSF.06 Chairman’s statement in equity 2 Definitions08 Operating review 41 Consolidated cash flow statement Personal systems14 Finance Director’s review 42 Notes to the consolidated financial Desktop, laptop, monitor, printers, peripherals, consumables.19 Risk management statements Network, server, storage20 Corporate sustainable development 71 Statement of Directors’ responsibilities Intel and Unix servers, storage, networking and security23 Board of Directors 72 Company balance sheet Services24 Corporate governance statement 73 Notes to the Company financial statements Professional, support and managed services.28 Directors’ remuneration report 77 Group five year financial review Third party services Third party resold services.33 Report of the Directors 77 Group summary balance sheet37 Independent auditor’s report to the 78 Group financial calendar members of Computacenter plc 79 Corporate information
  4. 4. 02 Our strategy and performance In 2008, Computacenter made furtherCorporate overview progress in each of the following strategic initiatives aimed at ensuring long-term earnings growth. Our strategy Computacenter plc Annual report and accounts 2008 1 2 3 4 5 Accelerating Improving the Broadening the Extending Reducing the the growth of efficiency of range and depth our presence cost of sale in our contractual our service of our services in markets our supply chain services operations activities that offer activities businesses greatest growth opportunity In 2008 our Group Our investment in common We continued to enhance Following a disappointing Our decision to stop contract base grew over solutions and approaches our capability in areas, return on investment the trade distribution of 10%, as a difficult continues to help us such as networking and from sales to our smaller personal computers and economic environment improve service efficiency datacentre, that command customer base, we took printers via CCD in the led customers to turn and lower costs for higher margins and where the decision at the second half of the year, led to Computacenter for customers. In the UK, specialist expertise is in beginning of 2009 to to a reduction in operating contractual services the Shared Services high demand. Following refocus our efforts on costs and a significantly to help them reduce IT Factory (SSF) helped us the completed merger with sales of our full service improved Group cash operational costs and standardise customer Digica, our new capability proposition and position due to the lower compete in a difficult engagement in 2008 and in datacentre, applications higher-end product sales stockholding requirement. market. ensure we deliver value and network infrastructure to organisations of over In addition, we continued to our customers beyond services and enhanced 500 seats, where we to implement improved simply meeting defined offshore operations made enjoyed considerable business controls relating service levels. Progress a significant contribution to success in 2008. to product purchasing is being made with similar services growth. and supply in order to shared resource initiatives streamline the supply across the Group. business and reduce operating costs.
  5. 5. 03 Corporate overviewOur Key Performance Indicators Computacenter plc Annual report and accounts 2008 Earnings per share growth Pence+13.5 % Adjusted* Diluted EPS improved 13.5% 2008 21.0 from 18.5p to 21.0p as a result of higher profitability, a reduced number of shares in 2007 18.5 issue and a lower tax rate. This is the third successive year in which Computacenter 2006 13.8 has delivered strong EPS growth. * Adjusted for exceptional items and amortisation of 2005 11.8 acquired intangibles. Operating profit growth £ million+1.0% Adjusted* Group Operating profit improved 2008 42.1 1.0%, from £41.7 million to £42.1 million, driven mainly by improved profit 2007 41.7 performance in Germany and improved exchange rates. 2006 33.3 * Adjusted for exceptional items and amortisation of acquired intangibles and stated after charging finance costs on customer-specific financing. 2005 29.7 Services revenue growth £ million+13.1% Services revenue* increased 13.1% from 2008 684.3 £605.0 million to £684.3 million, as Computacenter continued to target the 2007 605.0 less commoditised end of the market. * Comprises professional services and support and 2006 534.7 managed services revenues. 2005 514.8 Product revenue growth £ million+5.7% Product revenue* grew 5.7% from 2008 1,875.9 £1,774.2 million to £1,875.9 million, driven largely by network, server and 2007 1,774.2 storage sales. * Comprises revenue from the resale of all hardware, 2006 1,735.2 software, third party services and logistics services. 2005 1,770.4 Contract base growth £ million+10.8% Our Group annual service contract base 2008 498.2 grew 10.8% to £498.2 million*. As a result, over 45% of the gross profit of the Group 2007 449.6 is now earned from our higher-margin services business. 2006 363.3 * Based on constant currency at 31 December 2008. 2005 342.0
  6. 6. 04 International operations Computacenter operates in the UK, Germany,Corporate overview France, and the Benelux countries, as well as providing transnational services across the globe. Its activities are supported by service facilities in the UK, Germany, Spain, South Africa and Malaysia. Computacenter plc Annual report and accounts 2008 United Kingdom Revenues Adjusted operating profit £1,391.2m £27.9m Highlights ••Revenues increased by 2.5% to £1.39 billion (2007: £1.36 billion) ••Adjusted operating profit declined 15.6% to £27.9 million (2007: £33.1 million) ••Contract base grew 7.5% to £217 million ••UK change programme to deliver estimated £15 million annualised reduction in SG&A costs United Kingdom 5 1 4 2 3 1 29% Personal systems 2 28% Network, server and storage 3 15% Software 4 24% Services 5 4% Third party services
  7. 7. 05 Corporate overviewComputacenterservice facilities• Hatfield, UK• Leeds, UK UK• Manchester, UK• Milton Keynes,• Nottingham, UK• Erfurt, Germany• Kerpen, Germany• Paris, France• Barcelona, Spain Africa• Cape Town, South ■ Computacenter operations and partnerships• Kuala Lumpur, Malaysia • Computacenter service facilities Computacenter plc Annual report and accounts 2008 France Benelux GermanyRevenues Adjusted Revenues Adjusted Revenues Adjusted operating profit operating profit operating profit£308.2m –£1.0m £30.0m –£0.1m £830.7m £15.3mHighlights Highlights Highlights••Revenue increased to £308.2 million ••Revenues increased by 8.9% to ••Revenues increased 1.0% in local (2007: £285.7 million), despite a £30.0 million (2007: £27.6 million) currency and 17.2% in sterling to decline of 7.1% in local currency ••Adjusted operating loss increased £830.7 million (2007: £708.6 million)••Growth in service revenue of to £96,000 (2007: £44,000) ••Adjusted operating profit grew 47.2% 12.2% partially mitigated decline to £15.3 million (2007: £10.4 million) in product sales ••Operating profit in Belgium offset••Adjusted operating loss reduced by a loss in Luxembourg ••Sales performance strong in 44.9% to £1.0 million (2007: loss ••Services revenues grew 16.6% networking and datacentre solutions of £1.8 million) ••Annual contract base for managed••Services accounted for 15.4% services grew 11.7% of total revenue (2007: 12.8%) France Benelux Germany 5 1 5 1 5 1 4 2 3 4 3 4 2 2 3 1 47% Personal systems 1 51% Personal systems 1 19% Personal systems 2 16% Network, server and storage 2 6% Network, server and storage 2 30% Network, server and storage 3 16% Software 3 7% Software 3 10% Software 4 16% Services 4 34% Services 4 36% Services 5 5% Third party services 5 1% Third party services 5 5% Third party servicesDefi nitionsPersonal systems Network, server, storage Services Third party servicesDesktop, laptop, monitor, printers, peripherals, consumables Intel and Unix servers, storage, networking and security Supply chain, professional, support and managed services Third party resold services
  8. 8. 06 Chairman’s statement Our results were better thanDirectors’ report the market expected of us, but not good enough. Since joining Computacenter on determination will be to do that better Computacenter plc Annual report and accounts 2008 1 July 2008 I have been pleased and more often than our competition, with what I have found. The people with a more effective and efficient of our company are straightforward, ‘engine’ than they have. To that end, enthusiastic and talented. The we are removing layers of management management is experienced and and exiting from businesses that use wholeheartedly committed to our working capital inefficiently. We are success. Our processes and offerings investing significantly in our future, are robust and attractive to our not least with a single Group wide customers. Together, these qualities ERP system, a capital investment give us significant growth potential in which will make us more effective those markets we choose to address. and reduce our future expense burden. The short-term changes I am pleased, yes, but not satisfied in organisation and focus, which are that we are properly exploiting that aimed at winning in the market, will potential. Our profitability is not good have the added benefit of delivering an enough and our organisation structure annualised reduction in our expense was cumbersome. Our results for by c. £15 million, which will be fully 2008 were better than the market delivered in 2010 and have a positive expected of us, but not good enough. impact in 2009. During the latter half of 2008, led by I am very pleased to be part of our CEO Mike Norris, we engaged in Computacenter today. For its many an in-depth review of our capabilities, achievements, and for the strong organisation, competitive position, services capability it has built since its profitability and our customers’ view foundation in 1981, it is a fine exemplar of us. As a result we have made a of the entrepreneurial spirit. We face number of changes to our use of the future determined to help our working capital and our organisation customers improve their business structure. We have sharpened our performance, and in so doing improve market focus to concentrate on the our own. customer segments that ascribe most value to our offerings and our people. Greg Lock Chairman The business environment we face is challenging to be sure, but full of opportunity for our company. We can, and do, help businesses reduce costs Greg Lock and become more competitive. Our Chairman
  9. 9. 07Four principles of employee behaviour Directors’ reportdefine the Computacenter attitude andunderpin our customer relationships.Wherever we work, we strive to be:Focused Computacenter plc Annual report and accounts 2008We recognise and acknowledge ourcustomers’ priorities and take actionaccordinglyAccountableWe take responsibility for our actionsand always deliver on our promisesClearWe are open and straightforward in ourdiscussions and our feedbackEnterprisingWe think proactively about what elsewe can do for our customers
  10. 10. 08 Operating review We launched a UK changeDirectors’ report programme to improve our capital return and sharpen our focus as a services and solutions company. business, the fourth quarter of 2008 Computacenter plc Annual report and accounts 2008 saw the launch of a UK change programme designed to ensure an improved capital return and further sharpen our focus as a services and solutions company. These changes will deliver an estimated £15 million annualised reduction in UK Sales General and Administration costs, with a positive impact in 2009. Similar, albeit much smaller, change programmes are being implemented in other countries. The major components of the change programme are as follows: Mike Norris Chief Executive Officer 1) Exit from businesses that use working capital inefficiently In November 2008 we ended the sale Group Summary Group revenues grew a further 7.6% of PCs, laptops and printers through Computacenter delivered a strong in 2008 to £2,560.1 million (2007: CCD, our trade distribution arm. performance for 2008 and laid the £2,379.1 million), aided by the effects Volume distribution of these products foundations for an encouraging future. of a stronger euro and continuing is highly price-competitive and gives The Group delivered a 1.0% increase services revenue growth. By year-end us insufficient return. CCD will instead in adjusted* profit before tax to £43.1 our Group annual services contract sharpen its focus on the higher-margin million (2007: £42.7 million), largely base stood at £498 million, representing server, storage and networking due to improved profit performance a growth in excess of 10% over business. We expect this to result in a in Germany and aided by exchange 31 December 2007, based on reduction in 2009 revenues in the order rates. Group adjusted* operating profit constant currency. of £70 million without any reduction in increased 1.1% to £42.1 million. As a profit, while freeing approximately result of higher profitability, a reduced Our balance sheet remains strong. At £15 million of working capital. number of shares in issue and a lower year-end, net cash prior to customer- tax rate, adjusted* diluted earnings per specific financing (CSF) was £4.6 In addition, following a disappointing share (adjusted* EPS) grew 13.5% to million (2007: net debt £16.2 million). return on investment from product 21.0p (2007: 18.5p). Including CSF, net debt was £84.6 sales to our smaller customer base, million (2007: £79.8 million). The Board we took the decision to refocus our On a statutory basis, taking into is pleased to recommend a final UK sales efforts more sharply on our account amortisation of acquired dividend of 5.5p per share, bringing higher margin services and solutions intangibles and exceptional the total dividend for the year to 8.2p business, where we see the greatest impairments of intangible assets, (2007: 8.0p). The increased dividend growth opportunity. Group profit before tax declined 6.0% is consistent with our stated policy of to £39.5 million (2007: £42.1 million). maintaining the level of dividend cover 2) Restructure to reduce costs Exceptional impairment charges within the target range of 2 to 2.5 and encourage higher-margin consist of Group ERP charges that times. Subject to shareholder sales growth can be directly attributed to France, approval, the dividend will be paid on At the beginning of 2009 we and the non-cash impairment of the 11 June 2009 to shareholders on the implemented a new UK structure, acquired Digica trademark, following register as at 15 May 2009. aimed at increasing our customer the cessation of its use. With the focus and growing our more profitable benefit of an exceptional income tax The main contributors to profit growth services and solutions business. The credit, Group profit after tax increased were again our European operations restructure reduces organisational by 29.2% to £37.3 million (2007: £28.9 particularly our German business, with duplication and complexity, with million) and diluted earnings per share a lacklustre performance in the UK. fewer management layers and grew 33.0% to 24.2p (2007: 18.2p). Following an in-depth review of our wider accountability. * Adjusted profit before tax, income tax expense and EPS are stated prior to amortisation of acquired intangibles and exceptional impairment charges. Adjusted operating profit is also stated after charging finance costs on CSF.
  11. 11. 09 Channel 4 boosts Directors’ report business agility with IT outsourcing3) Leverage scale via Group-wide Computacenter plc Annual report and accounts 2008IT capital investment Channel 4In 2008 we embarked on a £25 million To help Channel 4 improve businesscapital investment in IT systems that agility, reduce costs and improve servicewill, over the next three years, enable levels, Computacenter was givenus to standardise financial reporting responsibility for the broadcaster’sand management tools across the network, server and desktop infrastructureGroup. Adopting a common, Group and the provision of a service desk.Enterprise Resource Planning (ERP)system will enable more effective Computacenter’s Service Support Centrefinancial planning and skills and handles around 2,500 contacts a monthresource management, helping from Channel 4’s permanent staff andus reduce our costs and leverage large freelance community. Theour scale for competitive advantage. broadcaster also uses Computacenter’sApproximately £8 million of this Services Operation Centre for remotecapital investment was paid by management of its 170 corporate servers, enabling the on-site team to focus onthe end of 2008. projects and strategic development. Continuous improvement is a key driverUK as the five-year partnership between theUK revenues grew by 2.5% to £1.39 two companies evolves.billion (2007: £1.36 billion) for the yearas a whole, largely as a result of strongsales growth in datacentre services, Business challengeconsulting/integration activities and insales to the medium-sized business Ensure IT systems and services can keepsector. Adjusted operating profit up with business change, while reducingdeclined 15.6% to £27.9 million (2007: costs and improving user service levels.£33.1 million). This was mainly due tothe poor start to the year, continuedsignificant investment in our services The solutioncapability and the resourcing of our Selectively outsource key IT infrastructuresales operation targeting product sales support organisations of fewer than 500seats. Operating profit was alsoimpacted by £1.8 million costs of Resultsinternal effort related to the ERPupgrade programme that has been Estimated savings of 15%charged to the UK, principally from Access to new skillsthe German business. Simplified supplier management Staff freed up for strategic enablementAs previously reported, the mergingof our Managed Services and Digicaoperations, together with a numberof smaller cost-cutting initiatives, also Services www.computacenter.comresulted in a restructuring cost to the Service deskUK business, adversely affecting Desktop supportoperating profit in the first half of theyear by some £1.0 million. Request management Infrastructure support Supply chain services Asset managementcontinued 
  12. 12. 10 Operating review continued In the UK, we secured a number ofDirectors’ report long-term services contracts, which we expect to positively impact performance in 2009. Services revenues overall grew by sector. Our new three-year contract as a safe pair of hands for customers Computacenter plc Annual report and accounts 2008 4.3% over 2007, as the economic with Rok Plc is for the outsourcing of concerned over environmental downturn drove customers to seek to the company’s entire IT infrastructure, disposal, recycling and data security improve the cost-effectiveness of their covering its ‘Wintel’ and UNIX server for their end-of-life equipment. infrastructures. This helped grow the estate, storage management and the UK contract base a further 7.5% to delivery of a hosted datacentre service. Germany £217 million. However this does not The scope of our datacentre hosted Computacenter Germany again made include a number of significant services contract with Crest Nicholson good progress in 2008. After achieving long-term services contracts, secured was also extended to cover desktop 8.2% full year sales growth in 2007, in the second half of the year, which services for 650 users and management revenue growth levelled off in 2008 as did not make any contribution to of 100 sites across the UK, leveraging the German economy was hit by the revenue in 2008 but are expected to Computacenter’s capabilities in both severe economic downturn. However, have a positive impact on our 2009 South Africa and the UK. while revenues increased just 1.0% performance. These successes in local currency and 17.2% in sterling include new five-year managed Our consulting and integration to £830.7 million (2007: £708.6 million), services contracts with Nationwide, activities again recorded revenue adjusted* operating profit grew 47.2% for the end-to-end management of its growth in 2008, with an increasing to £15.3 million (2007: £10.4 million), desktop and related IT infrastructure number of project wins utilising our driven mainly by further improvements services and with Hays, for the full capability. in service margins and the recovery provision of all datacentre and desktop of costs of £1.4 million recharged services in the UK. We anticipate that The trend for integration or to the UK in relation to the ERP these and other contracts will result in transformation projects to include upgrade programme. a UK contract base of approximately hardware and software sales also £240 million by the end of Q1 2009. continued, reflecting our customers’ Services revenues grew by 4.3% in increased dependence on highly local currency. This continuing growth Other important wins during 2008 resilient and flexible datacentre, came largely from our networking and include a major five-year contract with storage and network infrastructures. datacentre solutions business, which Unipart, worth more than £18 million, Profit margins on this infrastructure is benefiting from our strategic focus through which we will provide end- remain materially higher than our on higher-margin services and our user, datacentre and network transactional business due to the ongoing investment in IT solutions and managed services. Marks & Spencer additional value that customers place outsourcing. Sales performance was (M&S) also expanded its IT managed on end-to-end solutions. particularly strong in networking, services agreement, with where double-digit growth rates have Computacenter, which now has Overall UK product sales grew by helped double networking volumes end-to-end accountability for the 2.0%. However, outside of trade since 2005. We also saw strong sales delivery of IT services to M&S’s six distribution, sales grew a more growth from our energy efficiency office sites, servicing approximately satisfactory 5.4%, driven by strong related consulting services and from 4,000 end-users. sales of storage, virtualisation and our security solutions. audio-visual technology in particular. The completed merger of Digica This was offset by a 14.2% reduction The improved services profitability is into our core operations made an in revenues from CCD, our trade the result of management initiatives important contribution to our win distribution arm. The rise in product launched in 2007 that yielded, in 2008, and renewal success, our improved revenues was also in part attributable a three percentage point margin datacentre capability enhancing our to the weakness of sterling, which led improvement over the previous year, historical strengths in the desktop to some small price rises in certain most of which came from our and networking areas. product areas. networking and datacentre business. We are confident that this services Our ability to assist organisations to Our remarketing and recycling arm, margin improvement can be sustained reduce operational expenditure and RDC, continued to perform well, and built upon. compete in a difficult market helped recording nearly 17.5% revenue growth us win new business in the construction overall. RDC is seen increasingly
  13. 13. 11 Michael Page controls Directors’ report costs through scalable licensingGrowing market recognition of our Computacenter plc Annual report and accounts 2008capabilities helped grow our annual Michael Pagecontract base for managed services Internationala further 11.7% in 2008. While this Michael Page International needed togrowth is somewhat less than in ensure its software licensing arrangementsprevious years, this was attributable for key Microsoft software were bothlargely to our strategic focus on cost-effective and scalable. With tightimproving the profitability of a number timescales to close the negotiations,of large outsourced datacentre Michael Page turned to Computacentercontracts, which had a significant to ensure it selected the right agreementpositive impact on our overall for its business needs.performance but required substantialmanagement attention. Following a benchmarking exercise across the company’s multiple MicrosoftImportant managed services wins platforms, Computacenter helped toinclude a 58-month international negotiate a three-year global Enterprisedesktop services and service desk Agreement for 6,000 users. The new agreement provides licences for morecontract with BMW Group, covering users than the deal Michael Page was70,000 users in Germany, Austria and originally offered – and at a lower perthe UK, and a 10-year contract with unit cost. The agreement will also helpNRW.Bank, the development bank to enhance licensing compliance, freeof North Rhine-Westphalia, for the up internal resources and increasemanagement of its office and business agility.datacentre infrastructure.An increasingly competitive market, Business challengeespecially in the Intel server area,adversely affected the product To help minimise cost and business risk, ensure software licensing is cost-effective,business, where sales declined 0.8% scalable and local currency. This was largelydriven by a fall in ‘Wintel’ server salesin two of our largest customers.However, sales of large enterprise The solutionservers and storage products Benchmark licence usage and negotiateremained strong. a new three-year global Enterprise agreement.Initiatives aimed at increasingnetworking product sales, launchedin 2007, yielded strong growth in 2008, Resultsnotably in the areas of security andunified communications. As a result Provided additional resources to ensureof US Dollar to Euro exchange rate the best negotiation strategyfluctuations, networking product Reduced business risk from non-margins decreased slightly, driving compliance www.computacenter.comdown product margin percentage Achieved significant savings and improvedlevels overall. Customer demand cost controlfor next generation client/serverarchitecture also helped grow salesof software 10.6%. Services Software licensing consultancycontinued  Benchmarking
  14. 14. 12 Operating review continued In Germany operatingDirectors’ report profit grew 47.2% driven by further improvements in service margins. Our overall business mix is largely As with 2007, we saw margin laptops and screens, and a significant Computacenter plc Annual report and accounts 2008 unchanged, with services accounting improvement across both products roll-out for 5,000 users for a customer for 36% of total revenue. More than and services. In products, this was in the retail sector. 60% of our business is now from the due to our more commercially sale of networking and datacentre selective approach to the provisioning We are aware that much remains solutions, demonstrating that our effort of hardware and an increased focus to be done to deliver a long-term, to focus our business mix on the on regional business, together with acceptable level of profit. To that end, less-commoditised end of the market more effective sales incentives. changes to the French management is yielding results. Services margins also improved team, and additional sales investment, thanks to volume increase, better were made in early 2009 to help We are pleased to welcome Oliver management of resources, and tight accelerate the trend in performance Tuszik, who has held a number of management of costs. improvement. Our strategic focus is on management positions within the improving sales efficiency, developing Company, to the German Board as Computacenter France also delivered our services offerings, increasing the CEO of Computacenter Germany. an improved financial situation, thanks use of standardised tools and best We offer him our best wishes in his to improved debt collection, a better practice, increasing quality as a new role. control of inventories and a tighter market differentiator, and tighter management of cash. Despite average management of overall resources, France interest rates increasing in 2008, efficiency and costs. We continued to see a steady finance costs reduced by 12.3% improvement in the performance over 2007 in local currency. Henri Viard, formerly our French of our French business in terms of operation’s Finance Director, has operating performance, financial We saw some pleasing contract recently been appointed CEO of structure and commercial wins. successes in 2008. The second half Computacenter France. We offer saw us renew and extend our major him our best wishes in his new role. After a difficult first quarter, operating services contracts with EDF and Air performance gradually improved over Liquide, and renew our software Benelux the course of the year, resulting in an licensing contract with the French Our Belgium and Netherlands adjusted operating loss reduction public purchasing agency, UGAP. We business showed an operational profit of 44.9% to £1.0 million (2007: loss won a new global solutions three-year of £137,000 (2007: £125,000), with a of £1.8 million). contract with Eiffage, including profit in Belgium offset by a small loss e-procurement, supply chain services, in Luxembourg. Revenues increased A product market that remains highly installations, moves and changes, by 8.9% to £30.0 million (2007: £27.6 challenging contributed to an overall maintenance and product recycling. We million), which equates to a reduction revenue decline of 7.1% in local also won a significant deal with Société of 6.2% in local currency, with services currency. However, due to beneficial Générale covering supply chain growth of 16.6% offset by a 14.9% currency movements, reported solutions, a roll-out project with Conseil reduction in product sales. revenue increased to £308.2 million Régional d’Ile de France (Paris region), (2007: £285.7 million). The decline and a four-year managed services Key Benelux wins include a five- in product revenues hides a strong contract with Chambre de Commerce year renewal of the SWIFT desktop increase in services revenues of 12.2% et d’Industrie des Bouches du Rhône. managed services outsourcing (2007: 8.0%) in local currency helped contract, European procurement by the consolidation of our short-term 2009 looks very challenging for our contracts at UCB and Artenius professional services contract base French business, with performance PetPackaging, an Exchange migration into managed services business, contingent to some extent on our and encryption project at Millicom, where revenues grew 24.5%. success in securing the renewal and a Cisco Unified Communications of our contract with the French Army, project at McDonalds Belgium. This strong services growth, which was our largest French customer, which well ahead of the market, demonstrates expires at the end of Q1 2009. further progress in our efforts to Amongst early successes in 2009, we increase the services mix of the won the right to bid with Ministère de business. Services account now for l’Economie et des Finances for all 15.4% of total revenue (2007: 12.8%). ultraportable and portable desktops,
  15. 15. 13 Wolfsburg City Council Directors’ report focuses on service with new phone systemOutlook Computacenter plc Annual report and accounts 2008As we state every year in our results Wolfsburg City Councilannouncement, it is impossible to To help it improve services to 122,000draw any meaningful conclusion about local residents and ensure privacy ofthe current year until we have information, Wolfsburg City Councilcompleted the first quarter. needed a high-availability telephone system that would also offer integratedThe current economic conditions are security features such as call encryption.undoubtedly affecting the markets in Following a successful pilot,which we operate. Our customers’ Computacenter was commissioned to replace the Council’s outdateddesire to reduce their operating costs telephone system with an advancedmakes our managed services offerings Voice over IP solution.more compelling, as our recentcontract base growth illustrates.We expect this growth to continue The customer’s IT department canat a similar pace throughout the year, administer the system themselves, thereby optimising operating and maintenancethough our product revenues are costs. The solution is also highly scalable,under pressure. We enter 2009 with allowing the customer to easily extend thea strong balance sheet, which means system, with the option of integratingwe are well placed to capture further additional functions in future.opportunities and market share.Our appreciation and thanks go to the Business challengeemployees of Computacenter for theiroutstanding commitment, energy and Improve Council services and ensurehard work. privacy of information by replacing outdated legacy phone system. The solution Migrate to a Voice over IP solution including two backup call servers to provide the required level of availability.Mike NorrisGroup Chief Executive Officer Results A high performance, high availability IP telephony solution that is easy to extend and offers considerable cost and security benefits. Services Project design Product evaluation Product delivery Migration services
  16. 16. 14 Finance Director’s review Growth in services was achievedDirectors’ report in all countries, with lower margin product revenues reducing in Germany and France. Adjusted profit before tax improved Adjusted operating expenses Computacenter plc Annual report and accounts 2008 by 1.0% from £41.7 million to £42.1 increased by 2.6%, reflecting the million. After taking account of growth in 2008 of investment in sales exceptional impairments and to our smaller customer base, and amortisation of acquired intangibles, redundancy costs c. £1.0 million higher statutory profit before tax reduced by than in previous years. However, 6.0% from £42.1 million to £39.5 million. due to a disappointing return on investment, our UK sales efforts Adjusted operating profit will in future be re-focused towards Statutory operating profit reduced from our higher margin solutions and £43.1 million to £42.6 million. However, services business. This action forms management measure the Group’s part of the UK change programme, operating performance using adjusted for which no significant costs were operating profit, which is stated prior to incurred in 2008. amortisation of acquired intangibles and exceptional items, and after Also included in the expense base in charging finance costs on customer- 2008 was £1.8 million of internal effort specific financing (CSF), for which the related to the ERP upgrade programme Group receives regular rental income. that has been charged to the UK, Gross profit is also adjusted to take principally from the German business. account of CSF finance costs. Germany Table 1, on page 16, shows the Overall revenue in constant currency reconciliation between statutory and increased by 1.0%, with services adjusted gross profit and operating revenues growing by 4.3%, offset by profit by geographical segment for a contraction in product revenues of 2008 and 2007. 0.8%. Product revenues reductions were principally in supply of lower UK margin product. When translated into Tony Conophy Finance Director The UK business again delivered sterling, German revenues increased revenue growth in 2008, despite a in 2008 by 17.2% to £830.7 million. 14.2% reduction in trade distribution Turnover and profitability sales. Excluding this reduction, UK The key element of profitability Following on from the growth in 2007, product sales increased by 5.4%, improvement in Germany was the Group revenues increased by 7.6% to which taken together with an improvement in margins, principally £2.60 billion. Whilst the increase was improvement in services revenues within services. Much of this substantially attributable to currency of 4.3% resulted in overall growth of improvement was due to a number movements, Group revenues at 5.1% in end user sales. The services of management initiatives launched constant currency increased by 0.6%. revenue performance does not include during 2007, which led to a three Growth in the UK business was offset the impact of a number of long-term percentage point increase in services by a 14.2% reduction in trade contract wins during the second margins, which in turn led to an distribution sales. Growth in services half of 2008 which commence billing increase in the gross profit percentage was achieved in all countries, with lower in 2009. for Germany as a whole from 13.2% to margin product revenues reducing in 13.7% of sales. Germany and France. The growth in Adjusted gross profit reduced from service revenues across the Group has 14.4% to 14%. This drop was driven Net operating expenses continue to contributed to a position where over by a reduction in product margins be well controlled increasing by 2.0% 45% of the gross profit of the Group is due to reduced profitability in trade in local currency. The outcome was now earned from services, which distribution, a business which was an improvement in adjusted operating improves the forward visibility of gross partially exited in late 2008, along with profit from £10.4 million to £15.3 million margin generation and earnings growth in lower margin product sales in 2008. This result benefits from the resilience. to our smaller customer base. operating costs that have been
  17. 17. 15 EDF targets systems Directors’ report performance in leading Vista deploymentrecharged to the UK related to the Computacenter plc Annual report and accounts 2008ERP upgrade programme. EDF Group EDF Energy EDF Group needed to improve serviceFrance levels to its IT users and ensure ITThe French business continued maintainability through the deploymentto reduce its loss in 2008, with a of an upgraded and standardisedcombination of a more selective infrastructure. The company decided toapproach in a challenging product roll out its chosen Microsoft technologymarket and additional services suite of Windows Vista, Windows Serverrevenue growth. In local currency, 2008, together with System Centre Configuration Manager (SCCM) 2007.product revenues reduced by 9.9%, Computacenter provides consulting andwhereas services revenue grew by project management services in order12.2%. When translated into sterling to ensure successful completion of thethis led to a growth in revenues of principal Vista implementation in Europe,7.9% in 2008 to £308.2 million. covering over 75,000 users across 1,045 locations in just two years. ComputacenterGross profit return increased from was chosen for its past experience,11.0% of sales to 12.6% of revenues particularly its project managementdue to the change in services mix advisory services and IT infrastructure knowledge.and improved margins in products,together with higher margins inservices largely as a result ofimproved utilisation. Business challenge Define and apply the optimisedOther operating expenses increased deployment solutions for this standardby 3.0% in local currency, remaining software portfolio while controlling costs,under control despite the increased avoiding delays and minimising risks.commission costs resulting from theimproved margin performance. Thistranslates into a 19.6% increase when The solutionreported in sterling. Provide project management advisoryAs a result of these improvements the services on each main project activity, from technical architecture building tooperating loss, prior to an exceptional deployment governance through risksimpairment, reduced to £1.0 million assessment and project communication.(2007: £1.8 million).Benelux ResultsRevenues in the Benelux regionreduced in local currency in 2008, with The project was still in progress as wea 16.6% increase in services revenues went to press.offset by a 14.9% fall in productrevenues. Whilst this change in mixresulted in an improved gross profit Services www.computacenter.comreturn, the operating loss of thebusiness increased to £96,000 (2007: Project management consulting£44,000). The increased loss was Risk assessmentgenerated in Luxembourg, with the Deployment planning and designbusiness in Belgium generating a Communication expertisesmall operating profit. Training sessions planning Global support to field operation teamscontinued  Support for methods and solutions appropriation