Services and cost cuttingboosts Computacenter profits

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Services and cost cuttingboosts Computacenter profits

Paul Kunert

Computacenter has warned hardware kit remains vulnerable to the fragile economic recovery but the pipeline for contractual services looks healthy.

The firm today updated the City on 2009 results, stating that profit before tax and exceptional items is forecast to be materially ahead of analysts expectations of £48.4m. Net cash at 31 December was £87m, up from £4.6m a year earlier.

The bottom line was certainly helped cost cutting measures implemented by Computacenter last year, particularly in the UK where overheads went down by £23m.

"The actions we have taken to restructure and focus our business have enabled us to significantly reduce our costs in the year and create a step change in our profits," said Mike Norris, CEO at the services led reseller.

In the UK, revenues for 2009 fell 11% to around £1.25bn, though excluding the impact of selling CCD to Ingram Micro the drop was 6%. However, the trend in Q4 was promising, the company said as turnover from continuing operations grew 2%.

Norris predicted at the start of last year that services would take centre stage in 2009 and the importance it appears was not overstated; total services sales rose 8% on 2008, with 13% growth in contractual services offsetting an 11% decline in professional services as customers deferred infrastructure projects.

The pipeline for upgrades and refreshes was improving toward the end of the year, ably assisted by the 1 January increase in VAT which spurred some customers to start spending again.

The picture in Germany was one of a 1% decline in sales to €1.03bn excluding the acquisition of become late last year - which should increase revenues 10% in 2010 - but this translates to 11% growth when converted into sterling.

The operation in France declined marginally in 2009 but an 11% growth in services was a bright spot and CC said it had laid the foundations for future growth in this business.

The interest outsourcing services that help customers cut costs had continued in 2010 but it remains to be seen whether the Q4 improvements in Computacenter's hardware sales were temporary or a fundamental shift in demand, it said.

"While the side of our business that is resilient on capital expenditure remains uncertain, the contractual services growth and structural changes we have made, make us confident in the business and future progress in 2010," said Norris.

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