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Our journeyComputacenter plcAnnual Report and Accounts 2010                                    Reduce       Boost         ...
PerformanceHow are we doing againstour strategic objectives?2010 strategicobjectives                      Accelerating    ...
Maximising the                                           Growing our profit                                    Ensuring th...
Welcometo our journeyWho we areComputacenter is a leading IT infrastructure services provider.We add value to our customer...
Highlightsof the year                                                                                                     ...
Group overviewA European businesstransacting across the worldRegion                                                % of Gr...
4                                3                                                             1                          ...
Chairman’s statementIn 2011, we will continue to invest in our infrastructure, our talents and skills,as well as enhancing...
Operating reviewComputacenter has again delivered a strong profit performance in 2010.This leaves us confident that Comput...
Operating review continuedOur balance sheet has further strengthened            Over the last two years, we have done much...
Increase                                                          competitive                                             ...
Operating review continuedHelping Severn Trent Water to cutcosts and boost efficiency with flexibleworking initiative     ...
UK                                                  Together with growing the contract base,                              ...
Operating review continuedGermany                                            Union IT Services GmbH, as the IT services   ...
Greater                                                                       staff                                       ...
Operating review continued                                                                                                ...
France                                              Towards the end of 2010, we won a four-                               ...
Operating review continuedBenelux                                                In recognising the business needs of     ...
Computacenter helps Best BuyUK open new stores on timewith repeatable IT solution                              Customer ch...
Market overviewOutperforming the marketAuthor:John Simcox, Current Analysis           -0.1%           Decline in value    ...
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
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Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
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Computacenter Anual Report 2010
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Computacenter Anual Report 2010
Computacenter Anual Report 2010
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Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
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Computacenter Anual Report 2010
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Computacenter Anual Report 2010
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Computacenter Anual Report 2010
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Computacenter Anual Report 2010
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Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
Computacenter Anual Report 2010
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Computacenter Anual Report 2010

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Computacenter plc - Annual report and accounts 2010

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Computacenter Anual Report 2010

  1. 1. Our journeyComputacenter plcAnnual Report and Accounts 2010 Reduce Boost carbon productivity emissions by and agility 1,239 tonnes Increase competitive advantage
  2. 2. PerformanceHow are we doing againstour strategic objectives?2010 strategicobjectives Accelerating Reducing the growth of cost through our Contractual increased Services efficiency and business industrialisation of our service operationsProgress against In 2010 our Group contract base grew by 9.3 per cent in constant currency; We continue to invest and derive value from the Shared Services Factory (‘SSF’), our2010 strategic evidence that in a difficult economic environment, customers continue to turn ‘industrialised’ approach, which helps to standardise customer engagement, serviceobjectives to Computacenter for contracted services, offerings and also reduce the cost of to reduce cost and ensure a high quality service delivery. This includes investments of service delivery. we have made in our offshore service delivery capability, to take advantage of the lower costs available, such as in South Africa. In addition, we have made significant investments in industry leading tools, which enable us to provide an enhanced service at lower cost in areas such as major incident management and the remote management of datacenter infrastructure.Key performance Increase contract base in constant currency £m Increase revenue per services head £’000/headindicators 2007 409 2007 85 2008 453 2008 86 2009 493 2009 85 2010 539 2010 88 +9.3% +3.0%
  3. 3. Maximising the Growing our profit Ensuring the return on working margin through successful capital and freeing increased services implementation working capital and high-end of the Group-wide where not product sales ERP system optimally usedIn November 2009, we sold the remaining Overall, 2010 Group revenue increased by The Group-wide ERP system is anpart of our trade distribution business. 6.9 per cent, whilst adjusted profit before extensive IT implementation, as well as aThis, combined with the use of enhanced tax increased by 21.8 per cent. This reflects significant business process change. Theprocurement tools for purchasing from the success achieved through the sale of system covers virtually all of our operatingthe distribution marketplace, has enabled the trade distribution business, the growth activities with entirely new resourcea working capital inflow of £21 million for in higher margin sales to large organisations scheduling, call logging and maintenancethe Group, despite a revenue increase and growth in services revenues of 6.5 systems that are at the heart of ourof 6.9 per cent. Overall net cash, prior per cent – combined with virtually static business. In addition, as we are managingto Customer Specific Finance (‘CSF’), selling, general and administration costs. the Group-wide implementation, we haveimproved from £86.4 million at the end of This resulted in EBIT to net revenue (overall had substantial internal discussion to agree2009, to £139.4 million at the end of 2010; revenue less the cost of product for resale) the alignment of Group-wide processes, ina major improvement from the net debt increasing from 6.0 per cent in 2009 to order to drive maximum efficiency and costposition of £16.2 million at the end of 2007. 6.6 per cent in 2010. reduction across the Group. We are pleased to report that Germany, the first country to go ‘live’ on this system at the end of January 2011, has been implemented without material disruption to the German business. The UK is scheduled to follow during the third quarter, with France in 2012.Increase adjusted operating Increase EBIT as a percentage Delivery against the implementation plancash flow £m of net revenue* 2007 38 2007 5.2% 2008 79 2008 4.9% Q3 2009 138 2009 6.0% Q1 2011 2012 2013 2010 108 2010 6.6%-21.6% +0.6pts* EBIT to net revenue % is defined as adjusted operating profit as a percentage of net revenue. Computacenter defines net revenue as turnover less the cost of product for re-sale recognised as an expense.
  4. 4. Welcometo our journeyWho we areComputacenter is a leading IT infrastructure services provider.We add value to our customers by advising on IT strategy,deploying appropriate technologies, and managing elementsof their infrastructures on their behalf.Our journeyWe are on a journey to become Europe’s best IT company. Wewill achieve this objective by constantly delivering IT servicesand solutions that enable our customers to achieve their goals.Our strategyOur strategy is to deliver long-term earnings growth. To helpmeasure our success, we have five key strategic initiativesagainst which to benchmark our performance (see over page). T ‘10 ‘09 ‘07
  5. 5. Highlightsof the year 2 4 5 Overview Group overview Chairman’s statement Operating review 16 Market overviewRevenue £bn Adjusted* operating profit £m 2007 2.38 2007 41.7 Overview 2008 2.56 2008 42.1 2009 2.50 2009 53.9 2010 2.68 2010 64.4+6.9% +19.5% Business review 18 Finance Director’s review 22 Risk management 24 Corporate Sustainable Development (CSD)Diluted earnings per share p Total dividend per share p 2007 18.5 2007 8.0 Business review 2008 21.0 2008 8.2 2009 27.7 2009 11.0 2010 33.0 2010 13.2+19.1% +20.0%FINANCIAL HIGHLIGHTS OPERATING HIGHLIGHTS Governance 28 Board of DirectorsUnderlying performance • Revenues improved significantly in all 30 Corporate governance statement our major geographies 35 Directors’ remuneration report• Ongoing^ revenues increased 10.7 per 41 Directors’ report cent to £2.68 billion (2009: £2.42 billion) • Ongoing^ Group product revenue grew• Adjusted* profit before tax increased markedly, up 12.5 per cent (14.7 per 21.8 per cent to £66.1 million (2009: cent in constant currency) as a result of £54.2 million) strong customer demand for upgraded• Adjusted* diluted earnings per share and improved IT infrastructure (‘EPS’) increased 19.1 per cent to • Our Group annual services contract Governance 33.0 pence (2009: 27.7 pence) base grew over 7.1 per cent (9.3 per• Total dividend for 2010 of 13.2 pence cent in constant currency) to £539.4 per share (2009: 11.0 pence) million (2009: £503.6 million) in excess of market growth predictions#• Net cash prior to customer specific financing (‘CSF’) was £139.4 million • Our Group-wide ERP project remains (2009: £86.4 million) on track with a successful migration onto the new platform in GermanyStatutory performance • On 15 February 2011 we announced, Financial statements• Group revenues increased 6.9 per cent subject to the approval of the French 46 Independent auditor’s report to £2.68 billion (2009: £2.50 billion) Competition Board, our agreement to 47 Consolidated income statement acquire Top Info for an initial debt free 48 Consolidated statement of• Profit before tax increased 35.1 per cent comprehensive income to £65.4 million (2009: £48.4 million) cash consideration of €21 million 49 Consolidated balance sheet• Diluted EPS increased by 30.9 per cent • Launch of C3Mail, the first in a suite 50 Consolidated statement of changes in equity of cloud-based offerings Financial statements to 32.6 pence (2009: 24.9 pence) 51 Consolidated cash flow statement• Net cash after CSF of £111.0 million 52 Notes to the consolidated financial statements (2009: £37.3 million) 87 Statement of Directors’ responsibilities 88 Independent auditor’s report 89 Company balance sheet 90 Notes to the Company financial statements 94 Group five-year financial review 94 Group summary balance sheet 95 Financial calendar* Adjusted profit before tax and EPS is stated prior to amortisation of acquired intangibles and exceptional items. 96 Corporate information Adjusted operating profit is also stated after charging finance costs on CSF.# Source: Gartner.^ Ongoing revenues exclude revenues from the disposed Trade Distribution business. Computacenter plc Annual Report and Accounts 2010 1
  6. 6. Group overviewA European businesstransacting across the worldRegion % of Group revenue Financial highlightsUnited Kingdom 47% Revenue £1,265.4m Adjusted* operating profit £43.3mGermany 38% Revenue £1,005.8m Adjusted* operating profit £20.5mFrance 13% Revenue £359.6m Operating profit +£1.0mBenelux 2% Revenue £45.6m Operating loss -£0.4m2 Computacenter plc Annual Report and Accounts 2010
  7. 7. 4 3 1 2 6 1 5Group revenue by region Group revenue by business type1. United Kingdom 47% 1. Workplace 23%2. Germany 38% Desktop, laptop, monitor,3. France 13% printers, peripherals and consumables.4. Benelux 2% 2. Datacenter & Networking 29% Overview 4 Intel and Unix servers, storage, networking and security. 3. Software product 13% 2 4. Professional services 8% Professional services delivered 3 by Computacenter. 5. Support and managed services 22% Support and managed services delivered by Computacenter. 6. Third party services 5% Third party resold services. Business review2010 highlights Contract wins Revenue by business types• Revenues, excluding trade distribution, improved • Extended existing desktop managed services 6 1. Workplace 21% by 10.8 per cent in 2010, to £1.27 billion agreements with AEGON and OB10 1 2. Datacenter & (2009: £1.14 billion) • Signed a five-year contract with Waitrose providing 5 Networking 29%• Adjusted* operating profit in the UK increased by hardware support to 269 stores, covering electronic point 3. Software product 15% 14.5 per cent to £43.3 million (2009: £37.8 million) of sale equipment, back office IT and network devices 4 4. Professional services 8%• Services revenue grew by 13.9 per cent to £380.5 • £10 million infrastructure management outsourcing 2 5. Support and managed million (2009: £334.0 million) – services revenues contract agreed with Gatwick Airport; scope includes 3 services 23% for the total UK market declined by 0.1% in 2010** managing two datacenters at the airport, along with 6. Third party services 4%• RDC revenues increased by 30.3% to £38.2 million 26 critical IT node rooms (2009: £29.3 million); profits grew by 30.9 per cent • A large global financial institution selected Computacenter as the sole supplier of cabling installation services to its new EMEA locations• Adjusted* operating profit for the year grew by • Signed a three-year €9 million framework agreement 6 1. Workplace 17% 1 8.8 per cent to €23.9 million (2009: €22.0 million) with Dataport for the supply and deployment of Cisco 2. Datacenter &• Revenue increased by 12.2 per cent to €1,173.1 million datacenter hardware and related services, consultation 5 Networking 34% (2009: €1,045.1 million) and by 6.2 per cent, excluding work and maintenance 3. Software product 9% the becom business acquired in 2009 • Volkswagen commissioned Computacenter Germany 4. Professional services 7%• Services contract base grew by 8.7 per cent to to implement its Windows 7/Office 2010 strategy 4 2 5. Support and managed €290.0 million (2009: €266.8 million) materially • Union IT Services GmbH renewed an existing 3 services 26% outperforming the German market** outsourcing contract until 2017 6. Third party services 7% Governance• The integrated becom business has started to deliver real value, especially within the datacenter product business• Operating profit of €1.2 million (2009: operating loss • The French Army, an existing customer, awarded 6 1. Workplace 43% 5 €3.1 million), flattered by €1.0 million compared to us its comprehensive hardware supply contract 2. Datacenter & 2009, by a change in classification of certain French • Product supply contract win for the virtualised 4 Networking 17% tax expenses workplace environment of Europ Assistance 1 3. Software product 19%• Strong revenue growth, materially outperforming the • Four-year product supply contract with SAE, the 3 4. Professional services 6% French market**, reported revenue increasing by Government Purchasing Agency, led by the Minister 5. Support and managed 16.9 per cent to €419.4 million (2009: €358.7 million) of Finance 2 services 11%• Product revenue grew by 19.7 per cent; services • Agreed a three-year global software licensing contract 6. Third party services 4% revenue grew at 4.6 per cent with EDF• Proposed acquisition of Top Info, subject to approval by the French Competition Authority, is anticipated to deliver further revenue enhancement in 2011 Financial statements• Adjusted operating loss of €0.46 million in 2010 • Awarded a €10.2 million datacenter project by a 6 1. Workplace 28% (2009: loss of €0.85 million) wireless technology provider; as well as a licensing 5 1 2. Datacenter &• Significantly increased revenue, up by 81 per cent contract with a market leader in the field of local search Networking 34% to €53.2 million (2009: €29.4 million) and advertising – valued at circa €1.2 million 4 3. Software product 10%• Integrated the Luxembourg team structure into the • VOIP project, worth €0.14 million, for the Red Cross 4. Professional services 5% 3 German organisation, effective from 1 January 2011 Flanders, and a €0.12 million MS System Center 5. Support and managed project for De Lijn, a regional public transport provider 2 services 19% • A datacenter technology related contract, for storage 6. Third party services 4% implementation, valued at €0.23 million, awarded by Pentair Europe – a leading provider of water solutions and related technical products* Adjusted operating profit is stated prior to amortisation of acquired intangibles, exceptional items and finance costs on CSF.**Based on Gartner figures. Computacenter plc Annual Report and Accounts 2010 3
  8. 8. Chairman’s statementIn 2011, we will continue to invest in our infrastructure, our talents and skills,as well as enhancing our customers’ experience.2010 was another year of strong designed to create long-term competitiveprogress for our Company. Adjusted* advantage. The services contract base uponprofit before tax once more grew by which these improvements operate grew bymore than 20 per cent. It is worth noting more than seven per cent in 2010 and thethat Computacenter has delivered benefits will increase as time passes. Wegreater than 20 per cent compound will continue our relentless focus on costannual growth in earnings per share and expense management while supportingover the last four years. We gained these significant investments.market share and grew our servicesrevenues by 6.5 per cent. The German This year marks the 30th anniversary of thebusiness showed great resilience in founding of Computacenter. Since thenrecovering from a poor first quarter, the Company has grown considerablyand our French business became in size and this evolution has requiredprofitable again. We are pleased with Computacenter to adapt to the everthis performance, not least because it changing legislative environment. We havecame as a result of the execution of our in place a governance framework, alignedstrategy, rather than simply as a result to the principles of the UK Corporateof an improving economic backdrop. Governance Code, not simply because we must do so, but rather because it is theIf 2009 was about cost and expense right thing to do. In this regard, I draw yourreduction and simplifying our structure, attention to pages 30 to 34 of this reportthen 2010 showed disciplined sales and and give you my commitment to upholdservice delivery. Pleasing as it was, this only the merits of the Code, as it applies toconfirms that we have the opportunity to do Computacenter.much more in growing share in our chosenmarkets and improving our profitability in a I thank all of our employees for their effortssustainable way. and our customers for their business. We have much to do in 2011, on our journeyIn 2011 we will continue to invest in our of continuous improvement, to achieveinfrastructure, our talents and skills as well our potential.as enhancing our customers’ experience.We are on course to successfully implementa single Group-wide ERP system, themajor benefits of which will not manifestthemselves until 2012 and beyond. Ourefforts to ‘industrialise’ our services arealready showing margin improvement Greg Lockand better customer satisfaction and are Chairman *Adjusted profit before tax and EPS is stated prior to amortisation of acquired intangibles and exceptional items.4 Computacenter plc Annual Report and Accounts 2010
  9. 9. Operating reviewComputacenter has again delivered a strong profit performance in 2010.This leaves us confident that Computacenter continues to meet the ITinvestment needs of our customers and is evidence that our customersrely on Computacenter to help them in reducing their operating costs,over the longer term. Overview Business reviewComputacenter has again delivered Group services revenue, as reported,a strong profit performance in 2010. increased by 6.5 per cent and 8.7 per centGroup adjusted* profit before tax grew in constant currency. Different to the productby 21.8 per cent to £66.1 million (2009: revenue growth, the services revenue£54.2 million). The Group’s adjusted* growth was achieved, as expected, largelydiluted earnings per share (‘EPS’) during the second half of 2010. Particularlygrew by 19.1 per cent to 33.0 pence pleasing, as this is fundamental to the long-(2009: 27.7 pence), primarily due to term success of Computacenter, is that thethis increase in profitability. We have annual services contract base at Decemberdelivered in excess of 20 per cent 2010, has increased by 7.1 per cent on thecompound annual EPS growth over services contract base level at December Governancethe last four years. 2009 and 9.3 per cent in constant currency. This leaves us confident that ComputacenterOn a statutory basis, taking into account continues to meet the IT investment needsamortisation of acquired intangibles and of our customers and is evidence that ourexceptional items, Group profit before tax customers rely on Computacenter to helpincreased by 35.1 per cent to £65.4 million them in reducing their operating costs, over(2009: £48.4 million) and diluted EPS the longer term. The Group annual servicesincreased by 30.9 per cent to 32.6 pence contract base stood at £539.4 million at the(2009: 24.9 pence). end of the year (2009: £503.6 million).Group revenue, as reported, increased In 2009, we reduced operating expensesin 2010 by 6.9 per cent to £2.68 billion (‘SG&A’) by over £30 million in constant(2009: £2.50 billion). After the significant currency and the increase gained inproduct revenue decline experienced in operational leverage has in no small way2009, during 2010 customers embarked on contributed to these encouraging results.refreshing, upgrading and improving their Financial statements Furthermore, the early indication of improvingIT infrastructures. This resulted in strong corporate capital expenditure, first detectedGroup product revenue growth of 12.5 per some 12 months ago, has persisted, tocent or 14.7 per cent in constant currency, the extent that we have now gained a highexcluding the effect of the CCD disposal level of confidence that Computacenter’stowards the end of 2009, but including the progress is sustainable and not of aacquisitions made late in 2009. This growth short-term nature. The Group incurred nowas achieved steadily over the year as exceptional costs during 2010 and thisa whole and we also believe that, subject to should, in all likelihood, continue until theperformance of the overall macroeconomic ERP benefits start being realised.conditions, growth should continueduring 2011. Computacenter plc Annual Report and Accounts 2010 5
  10. 10. Operating review continuedOur balance sheet has further strengthened Over the last two years, we have done muchconsiderably. At the end of the year, net to identify those Computacenter offerings,cash prior to Customer Specific Financing where we have competitive advantage(‘CSF’) was £139.4 million (2009: net cash of and for which there is market appetite. We£86.4 million). Including CSF, net funds were believe that this is where our future success£111.0 million (2009: £37.3 million). This lies and our focus is on repeating delivery ofmaterial improvement in our cash position these offerings, in an efficient and high qualitywas primarily due to increased profitability manner. We are investing into tools andand prudent working capital management, processes, which support repetitive deliverywhich we believe is largely sustainable. of these services, whilst ensuring efficiencyHowever, the figures are flattered by and quality.approximately £38 million (2009: £30 million)with the continuation of extended credit As the infrastructure demands of ourterms from one of our major vendors, which customers grow, so their appetite forhave been made available to all of their increased efficiency solutions has alsobusiness partners. These terms could return grown. This has been the driving forceto normal in the second half of 2011. behind the notable interest in cloud related services. Computacenter has respondedThe Board has decided to recommend a with the recent launch of C3Mail, the first infinal dividend of 9.7 pence, bringing the a suite of cloud-based offerings.total dividend paid for 2010 to 13.2 pence,representing a 20 per cent increase on the We maintained good progress in preparing2009 total dividend paid of 11.0 pence. The for our Group ERP implementation. Duringincrease in dividend is broadly consistent the first week of February 2011, the Releasewith our stated policy of maintaining 1 migration onto the new platform individend cover within our target range of Germany was delivered, without material2 to 2.5 times. Subject to the approval by disruption. However, the remainder of 2011shareholders at the Annual General Meeting will be important, as migration of the UK(‘AGM’) on 13 May 2011, the proposed system is scheduled to follow during thedividend will be paid on 10 June 2011 third quarter. The Release 1 migration hasto shareholders on the register as at significantly reduced implementation risk,13 May 2011. as the lessons we have learnt will assist during the subsequent migrations. As ourOur offerings continue to gain momentum people become familiar with the system,in the market, as customers choose the benefits related to a single Group-wideto outsource IT infrastructure support system will start to materialise. Due to theselectively, rather than opting for a commencement of the ERP depreciation,comprehensive IT outsourcing contract or we will incur an incremental charge ofundertaking the work in-house. Service desk £3 million in 2011.offshoring remains an attractive offering andwe continue to invest in the expansion of this We did not make any acquisitions duringresource. We currently employ in excess of 2010, but on 15 February 2011, we750 staff, outside of the UK, Germany and announced that our French business hadFrance, primarily within our multi-language agreed to acquire Top Info, subject to theservice desk in Barcelona and for an English approval of the French Competition Board.speaking desk in Cape Town. These facilities Top Info will be acquired for an initial debtare making significant contributions towards free cash consideration of €21 million, withfuelling the growth in contractual services, a further €1 million payable, subject tothrough addressing the increased demand the financial performance of the Top Infofrom customers for global and multi-lingual business in the period to end Decemberservice delivery. 2011. A further circa €15 million will be paid on the closing date, for the cash on Top Info’s balance sheet at that time. We believe that Top Info’s attractive customer portfolio in France will provide our French business with new opportunities to deploy its services and infrastructure solutions further, whilst at the same time, strengthening its presence within the IT infrastructure supply market to large French corporations and the Government.6 Computacenter plc Annual Report and Accounts 2010
  11. 11. Increase competitive advantage OverviewProvisioningin days rather Betterthan weeks communication Computacenter helps Morrisons Business review increase competitive advantage with optimised IT Customer challenge “Computacenter helps us To retain its position as the UK’s fourth largest retailer, Morrisons optimise our IT systems must ensure its 439 stores, 15 distribution sites and 16 and services so we can warehouses are supported by highly available IT systems. In respond more effectively particular, the retailer’s 131,000 employees need continuous to demand from our customers. With its access to the Internet, email and other desktop-based services. industrialised processes The retailer also needs to ensure store shelves remain well and broad skills base, it stocked by enabling rapid product picking at its warehouses. Governance has also helped us make Computacenter solution financial savings.” We have helped Morrisons transform its IT infrastructure, Gary Barr, resulting in reduced cost and complexity. From designing IT Director, a new email platform and implementing a virtual desktop Morrisons Plc environment to deploying mini datacenters to support a new warehouse solution, Computacenter has assisted with a wide range of IT projects. We also provide ‘cradle to grave’ desktop services, including procurement, configuration, maintenance and disposal. Financial statements Results Morrisons’ staff now have faster and more reliable access to the technologies they need. For example, new desktops can now be provisioned in five days instead of four weeks. This, along with improved email availability, has increased staff productivity resulting in greater competitive advantage. The retailer has also been able to reduce desktop support costs and power consumption. Computacenter plc Annual Report and Accounts 2010 7
  12. 12. Operating review continuedHelping Severn Trent Water to cutcosts and boost efficiency with flexibleworking initiative Customer challenge “The IT transformation Severn Trent Water has embarked on a ground-breaking IT has enabled a step change in our working project that will enable it to adopt flexible working practices – practices. By embracing increasing staff productivity and reducing costs. The project is new technologies we can part of the company’s business transformation programme, also improve the quality which is designed to turn it into the best water company in and delivery of customer the UK, with the lowest charges, highest standards and services, which supports great people. the company’s goal of highest standards, lowest Computacenter solution charges and great people The IT transformation extends from the datacenter to the – in other words ‘being desktop and includes new solutions for back-up, security, the best’.” storage, networking and IT management, as well as Microsoft Windows 7. The new operating system will support a Citrix Myron Hrycyk, Chief Information Officer, virtual desktop infrastructure that will enable Severn Trent Severn Trent Water Water to support home working and desk-sharing – this is crucial as the company’s new office and wider accommodation programme is designed around a mobile workforce. Results By standardising, consolidating and virtualising its infrastructure, Severn Trent will be able to reduce the total cost of ownership of IT and create a more predictable expenditure profile. It will also be able to provide a better user experience by equipping staff with the latest productivity tools and ensuring reliable access to critical applications, such as the company’s recently implemented SAP Enterprise Resource Planning system. Enable mobility Predictable expenditure8 Computacenter plc Annual Report and Accounts 2010
  13. 13. UK Together with growing the contract base, our focus on retaining and ideally, expanding Revenue our activities with existing customers, is also delivering success. For example, we £1,265.4m extended our desktop managed services agreement with AEGON – to whom we’ve been providing IT support for over 10 years, Adjusted* operating profit with a continued end-to-end infrastructure £43.3m outsource worth over £12 million for a further five years until October 2015. We have also renewed our relationship with OB10, the global e-Invoicing company, for a further Excluding the effect of the exit of trade five years. The scope of this contract, distribution in 2009, UK revenues improved worth £6 million, has been expanded to by 10.8 per cent in 2010, to £1.27 billion incorporate our multi-site datacenter offering. (2009: £1.14 billion). This increase was delivered by healthy revenue growth in both We were also successful in winning a number the product and services businesses and of new services contracts. We signed a Overview was largely attributable to the continuing new five-year, £10 million infrastructure and increasing capital expenditure of our management outsourcing contract with customers. The rate of this increase in Gatwick Airport. The scope of work includes revenue was broadly consistent over the managing two datacenters at the airport, year, without a significant revenue spike in along with 26 critical IT node rooms. the fourth quarter and no obvious increased demand driven by the VAT rate change, but The infrastructure will be monitored and certainty in this regard is impossible. managed initially, from our facility in Hatfield and in the future, from Cape Town, with an onsite support presence at the airport. TheComputacenter UK’s services revenue grew by airport operator will have access to scalable and agile support models, as well as our13.9 per cent to £380.5 million (2009: £334.0 million). offshore capability and in the future, access to ‘utility’ based computer provisioning. Waitrose, the leading high street retailer, Business review Adjusted* operating profit in the UK increased by 14.5 per cent to £43.3 awarded us a five-year support contract. million (2009: £37.8 million). This profit Under the agreement, Computacenter will growth flowed from the strong increase in provide hardware support to 269 stores, revenues, as well as some services margin covering electronic point of sale equipment, improvement. We also continue to enjoy as well as back office IT and network leverage from the cost savings made devices. The service will ensure availability in 2009. of critical devices and also deliver increased efficiency for Waitrose. SG&A in 2010 increased by £3.0 million, from the significantly reduced base in 2009. RDC, our subsidiary which provides its This increase was largely due to investment customers with secure and environmentally into our Services capability, aimed at appropriate solutions to their end-of-life improving our delivery and as would be IT equipment, once again delivered expected, higher commissions were also exceptional performance, with overall earned by our sales teams during the year. revenue up by 30.3 per cent to nearly £38.2 million (2009: £29.3 million), while Computacenter UK’s services revenue grew profits grew by 30.9 per cent.Better user by 13.9 per cent to £380.5 million (2009: To an increasing extent, IT infrastructure £334.0 million), whereas services revenuesexperience for the total UK market declined by 0.1 refreshes require physical cabling solutions, prior and during projects. This is evidenced Governance per cent in 2010, according to Gartner figures. Revenue performance in contractual by the 73 per cent increase in contribution services was encouraging, as anticipated, of our cabling business on the previous accelerating towards the end of the year year. A large global financial institution is as new contract wins became active. due to relocate a large number of its current Particularly pleasing was the increase in the premises across Europe, the Middle East contractual services base, as it serves as an and Africa (‘EMEA’) and Computacenter’s encouraging lead indicator for this business’ cabling team has been selected as the sole revenue into 2011 and beyond. A clear supplier of cabling installation services to all indication of the return of capital expenditure the new EMEA locations. into the market can, in part, be seen in Throughout 2010, Computacenter UK has the strong revenue growth achieved in the continued to win and deliver more critical Professional Services Business. contracts, enabling our customers to operate a resilient infrastructure and to reduce their Financial statements operating costs. These contracts increase the opportunity of retaining such customers over the longer term. Computacenter plc Annual Report and Accounts 2010 9
  14. 14. Operating review continuedGermany Union IT Services GmbH, as the IT services provider to the financial service companyRevenue Union Investment, a leading real estate investment manager in Europe for private£1,005.8m and institutional investors, renewed the outsourcing contract with Computacenter Germany, until 2017. This end-to-endAdjusted* operating profit outsourcing contract has been expanded£20.5m to include the implementation and operation of a new and flexible IP telecommunication centre, as part of its unified communication and collaboration solution.In Germany, overall adjusted* operatingprofit for the year, grew by 8.8 per cent to€23.9 million (2009: €22.0 million). This result Market confidence improved substantially in therepresents a strong recovery from the slowstart to the year, when adjusted operating second half of the year, with IT infrastructureprofit declined by 46.7 per cent, compared investment into both services and products,to the 2009 first half result. accelerating towards the end of the year, with2010 can be viewed as a year of two halves.The expiry of some larger contracts at the a particularly strong revenue performance inend of 2009, as well as general hesitancy December 2010.in the market for capital expenditure,resulted in reduced services revenue in The integrated becom business has startedthe first half of 2010, although there were to deliver real value to Computacenterearly signs of recovery towards the end of Germany’s overall business, especially withinthis period. Market confidence improved the datacenter product business, whichsubstantially in the second half of the year, has seen much healthier activity than lastwith IT infrastructure investment into both year. Additionally, a close relationship withservices and products accelerating towards Microsoft has contributed to Computacenterthe end of the year, with a particularly strong Germany’s recent certification as a Microsoftrevenue performance in December 2010. Voice Specialist, in addition to the existingFor the year as a whole, in local currency certification as a Cisco Master Unifiedand including the acquired becom business, Communication Specialist.revenue increased by 12.2 per cent to€1,173.1 million (2009: €1,045.1 million) It is the first time in Germany thatand by 6.2 per cent, excluding the becom any provider has been awarded bothbusiness which was acquired in 2009. certifications and our response to current market requirements for multi-vendorOur services contract base grew by 8.7 per communication solutions has been materiallycent to €290.0 million (2009: €266.8 million). enhanced. Our overall relationship withBoth new and existing customers invested Cisco continues to grow, culminating in thein high-end products combined with our award of ‘Cisco Enterprise Partner of theservice offerings. Year-Europe’.We signed a three-year framework Revenue growth in the second half of 2010agreement, valued at circa €9 million with was, in part, derived from our reorganisationDataport, for the supply and deployment activities in the first six months. Theof Cisco datacenter hardware and related managed services delivery structures wereservices, including consultation work and integrated into a new Managed Servicemaintenance provision. Factory and the product and servicesIntelligent workplace and communication portfolios were merged. These changessolutions also combine our product and enabled Computacenter Germany toservice offerings. Volkswagen commissioned maximise its opportunities on the economicComputacenter Germany to implement rebound and even grow in excess of thethe car manufacturer’s Windows 7/Office German market in 2010.2010 strategy. The overall project lays the We are pleased with our overall performancefoundation for the future workplaces at the for the year, especially as many of our seniorVolkswagen Group, worldwide. staff members were focused on the design and implementation work for a smooth ERP system migration. This was achieved in early January 2011, an event which will provide lessons for the rest of the Group’s future migrations.10 Computacenter plc Annual Report and Accounts 2010
  15. 15. Greater staff productivity Overview Supporting future growthComputacenter cabling solution boostsproductivity and agility for IKEA Business review Customer challenge“The cabling project had to To provide an exceptional retail experience at its 301 stores, be carried out on a busy IKEA needs to ensure its 123,000 employees have continuous building site that was not yet wind or rainproof, where access to business-critical systems and information. To dozens of other contractors safeguard connectivity, IKEA needed to equip their new head were working at the same office with a robust cabling environment and also equip their time. Computacenter still 20,000+ m² flagship store with wireless access points covering managed to ensure that our the complete surface. Governance infrastructure was ready in time and to specification.” Computacenter solution We deployed a flexible and cost-effective structured cablingKen Struelens, environment at IKEA’s new Belgian store and office. ThanksIT Manager, to our extensive cabling experience, we were able to mitigateIKEA Belgium implementation risks and work alongside other contractors to ensure that the installation was completed on time for the store opening. Results IKEA is able to maximise data throughput at its head office and Financial statements new store, contributing to greater staff productivity and higher customer service levels. The cabling infrastructure has been scaled to support future growth in users, IT devices and access points, which increases business agility and facilitates change. A future-proofed and flexible cabling environment will also help IKEA avoid capital expenditure. Computacenter plc Annual Report and Accounts 2010 11
  16. 16. Operating review continued Reduce carbon emissions by 1,239 tonnes Minimise risk £1.8 million Cost savingsBAA makes cost savingsof more than £1.8 million withagile virtualised datacenter Customer challenge “By virtualising our As part of its efforts to reduce operational expenditure, BAA production systems we have been able to make a is currently undergoing an IT simplification programme. The significant contribution to sale of Gatwick Airport highlighted the need for a more flexible the company’s strategic IT infrastructure, BAA decided to virtualise its production goals for IT simplification datacenters to meet both its agility and cost reduction and cost reduction while goals. With all the airport operator’s key services reliant upon achieving greater business datacenter availability, it was crucial that BAA could minimise agility and IT performance, the risks associated with the project. which is critical to the running of BAA’s airports.” Computacenter solution BAA partnered with Computacenter to design, plan and Terry Fusco, implement a new virtual datacenter (‘VDC’) based on HP and Head of IT, VMware technologies. Computacenter assisted at every stage Heathrow, BAA of the project – from evaluating BAA’s existing datacenter environment and the best workloads to migrate to the virtual devices to testing and integration. The VDC includes in-built disaster recovery capabilities as well as network virtualisation to maximise uptime and flexibility. Results The VDC has enabled BAA to reduce its production environment by 246 servers, with spare capacity to support future growth. This has contributed to cost savings of £1.8 million. The new infrastructure will also reduce carbon emissions by 1,239 tonnes a year, minimise risk and enable greater business agility.12 Computacenter plc Annual Report and Accounts 2010
  17. 17. France Towards the end of 2010, we won a four- year product supply contract with SAE, Revenue the Government Purchasing Agency led by the Minister of Finance. EDF, a major £359.6m energy utilities company, has also awarded Computacenter France a three-year global software licensing contract with Operating profit two extension options of one year each. +£1.0m Our services business in 2010 grew at a slower rate than in 2009. However, while no significant existing contracts Computacenter France delivered an were lost during 2010, we experienced operating profit of €1.2 million (2009: a natural erosion of revenue from older operating loss €3.1 million), flattered to the maintenance contracts and new wins had extent of €1.0 million, when compared to not yet started contributing revenue. This 2009, by a change in classification of certain resulted in a margin decline of 0.1 per cent French tax expenses, from administration in local currency, in contractual services. Overview expenses in 2009, to income tax expense Encouraging though was the 15.3 per cent in 2010. growth in professional services revenue, which should be a natural consequence of We achieved strong revenue growth, strong product revenue growth, but which materially outperforming the French market, has not previously been realised in France, with reported revenue increasing by 16.9 per to this extent. cent to €419.4 million (2009: €358.7 million). Although both services and product revenue SG&A expenses were held flat through growth outperformed their respective effective controls and external costs were markets, product revenue grew by an reduced sufficiently, to allow for investment in impressive 19.7 per cent, whilst services enhancing and up-skilling our salesforce. We revenue growth was lower, at 4.6 per cent. rolled out an opportunity management tool Services now represent 16.5 per cent (2009: to enhance potential customer engagement 18.4 per cent) of the total business. across the Company and we created a sales specialist team to provide technical support Business review to the salesforce.We achieved strong revenue growth, materially Additionally, we comprehensively reviewedoutperforming the French market, with reported the salesforce incentivisation mechanisms,revenue increasing by 16.9 per cent to €419.4 million resulting in changes to individual targets and other incentive structures. Whilst this(2009: €358.7 million). investment was aimed at sales acceleration into 2011 and beyond, there have been Product growth resulted mainly from clear signs of early successes, making us increased higher-end enterprise and confident of further organic growth and software sales. Enterprise revenue growth profitability in 2011. In addition, the proposed in the year, by 53 per cent, was partly due acquisition of Top Info, subject to approval to the success in up-scaling our enterprise by the French Competition Authority, service offerings. The French Army, an is anticipated to deliver further revenue existing customer, additionally awarded us enhancement in 2011. a comprehensive hardware supply contract to support their storage consolidation and virtualisation project, from conception to roll-out and training, which supply is due to continue through 2011. There was further evidence of encouraging growth Governance in enterprise sales in the product supply contract win for the virtualised workplace environment of Europ Assistance, a major international provider of insurance and assurance services. Financial statements Computacenter plc Annual Report and Accounts 2010 13
  18. 18. Operating review continuedBenelux In recognising the business needs of our local customers, we integrated ourRevenue Luxembourg team structure into the German organisation, effective from 1 January 2011.£45.6m Going forward, performance of the Belgium and Netherlands based businesses will be reported separately from the LuxembourgOperating loss business, the latter which will be reported as-£0.4m part of the German business performance. Outlook statementThe Benelux operation showed an adjusted We believe that 2011, as a whole, willoperating loss of €0.46 million in 2010 be a year of continuing improvement(2009: loss of €0.85 million), resulting from for Computacenter’s performance. As wean operating profit for Belgium and the state every year, it is always a challengeNetherlands of €0.49 million (2009: loss drawing any meaningful conclusionsof €0.45 million) and an operating loss for about the new financial year until we haveLuxembourg of € 0.95 million (2009: loss completed at least the first quarter. This year,of €0.39 million). drawing conclusions from comparisons withThe business in Belgium and the prior first quarter results, will be particularlyNetherlands delivered significantly increased difficult. In the first quarter of 2010 in therevenue, up by 90.8 per cent to €49.6 UK, we had very buoyant market conditionsmillion (2009: €26.0 million), largely derived and a large one-off contract, which flatteredthrough product sales. However, a material revenue to a greater extent, than profit. Thisproportion of this revenue was derived from is a marked contrast to Germany, where thea single, one-off sale. Services revenues comparison is materially easier, due to theirincreased by 3.3 per cent to €9.6 million challenging start to 2010.(2009: €9.3 million) and our managedservices business maintained a stable long- We believe that 2011, as a whole, will beterm contract base. a year of continuing improvement forThis business has strengthened its Computacenter’s performance.competitive position by combining its localpresence with international shared servicesfacilities for licensing, service desk and Looking further ahead, we believe theredatacenter activities. This has allowed the are a number of growth drivers whichbusiness to compete for and win, major Computacenter will be able to takeproduct and licensing contracts, as is advantage of. End user demand for newevidenced by a €10.2 million datacenter technology is driving the requirement forproject to a high profile wireless technology investment in corporate IT infrastructure,provider, as well as a licensing contract with helped by economic improvement withina market leader in the field of local search our customers’ markets. Our servicesand advertising, valued at circa €1.2 million. marketplace continues to grow, albeit at a modest pace, but we feel increasinglyContinued investment into our Professional confident about our ability to continue toServices offering enabled some project outperform the market. This reflects ourcontract wins in the fields of unified customers’ desire not to outsource to aIP communications; for example, a single supplier, but to ‘smart source’ best of€0.14 million VOIP project for the Red breed suppliers, playing to Computacenter’sCross Flanders, as well as in Microsoft strengths. We believe that these growthtechnologies, as evidenced by a €0.12 drivers, coupled with the opportunity tomillion MS System Center project for De further reduce our operating cost over timeLijn, a regional public transport provider. due to our investment in systems, will enableAdditionally, a datacenter technology related Computacenter to continue our earningscontract, for storage implementation, with momentum.a value of €0.23 million was awarded byPentair Europe, a leading provider of watersolutions and related technical products.In Luxembourg, a restructuring project, at acost to the profit and loss account of circa€0.48 million, was undertaken to reducethe future cost base significantly and to Mike Norrisenhance focus on growing the long-term Chief Executivemanaged services contract base. An earlysuccess, in this context, is evident from *Adjusted profit before tax and EPS is stated prior tohaving been awarded a two-year contract, amortisation of acquired intangibles and exceptionalvalued at €0.47 million, by Enovos, a gas items. Adjusted operating profit is also stated afterand electricity utilities company. charging finance costs on CSF.14 Computacenter plc Annual Report and Accounts 2010
  19. 19. Computacenter helps Best BuyUK open new stores on timewith repeatable IT solution Customer challenge“By creating a repeatable Overview Best Buy Europe is a joint venture between The Carphone and reliable yet Warehouse and the US-based electronics retailer Best Buy customisable approach for implementing IT at our Co. Inc, and is designed to make it easier for consumers to new stores, we are able purchase technology. To meet its growth aspirations, Best to respond more quickly Buy UK needed to launch its first ‘big-box’ stores in a short to customer demand timeframe. Technology is fundamental to successful day-to-day and market changes.” retail operations and must be provisioned to a high standard with transparent costs from the outset.Trevor Lynch,Head of IT, Computacenter solutionBest Buy UK We developed a robust ‘new store in a box’ solution for Best Business review Buy UK, which will ensure a consistent level of IT quality and governance across its retail estate. Computacenter is responsible for provisioning, staging, configuring and installing the store infrastructure, which includes point of sale devices, desktops, printers, cabling, network connections and servers. We are also providing ongoing support under a three-year contract. Results By partnering with Computacenter, Best Buy UK has removed both unnecessary cost and complexity from the launch of new stores. As a result, it was able to guarantee the on-time opening of its first six UK stores in 2010. As well as delivering guaranteed costs, the Computacenter solution also supports continuous improvement. Governance ‘Store in a box’ Remove Financial statements unnecessary cost and complexity Computacenter plc Annual Report and Accounts 2010 15
  20. 20. Market overviewOutperforming the marketAuthor:John Simcox, Current Analysis -0.1% Decline in value in total UK IT market in 2010 2010 was a challenging year for many organisations and companies delivering technology related products and services were not immune from it. Economic recovery, whilst -2.3% welcome, was often patchy and the onset of Government action – required to address the high levels of annual public Decline in value sector borrowing built up during the previous few years – in total mainland dampened commercial and consumer confidence. Despite this, the IT Services segment of the marketplace in which Europe IT market Computacenter operates, saw only a modest overall decline in 2010 in value, and specifically was almost flat in the UK (0.1 per cent decline) and a 2.3 per cent decline for mainland Europe* (Germany, France and Benelux). The IT industry, as a whole, is in some ways well used to dealing with a market that is declining. It is almost taken as a given that the technology product you buy today will be superseded in the near future by a new version offering more features and more performance +13.9%** at a lower price. Against this background, the sector constantly has to look at ways to create new opportunities to expand the adoption Computacenter UK services of technology, in order to grow the overall size of the market. In part, the cause of the decline in the cost of technology also creates the revenue growth in 2010 opportunity, as solutions previously thought to be too complex or expensive become both possible and affordable. +4.3%** For the IT Services sector, the impact of external events resulting in an economic downturn is not always negative. Firstly, traditional IT Computacenter mainland Services contracts are usually for a number of years and therefore, Europe services revenue the impact of any downturn in the past few years is only really growth in 2010 seen when these contracts are being renewed or new contracts negotiated – and not so much in the revenue derived from existing contracts. This does, of course, present the potential for the recessionary effect to be felt in the services sector for a number of years after the economy returns to growth.16 Computacenter plc Annual Report and Accounts 2010

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