ii view: Computacenter results rally is short-lived

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First-half results to 30 June

• Currency adjusted revenue up 73% to £6.85 billion
• Adjusted pre-tax profit down 87% to £152 million
• Interim dividend up 14.8% to 27.1p per share
• Adjusted net funds held up 11% to £309 million

Guidance:

• Now expects full-year adjusted pre-tax profit of no less than £380 million

Chief Executive Mike Norris said:

"Computacenter delivered a record first half, significantly ahead of our expectations at the start of the year, as we converted strong and growing customer demand for digital infrastructure into substantial revenue, gross profit and operating profit growth.

“We were delighted that the hard work and dedication of all our people, as reflected in the strength and consistency of the progress we have made, was recognised in our promotion to the FTSE 100 in June.”

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ii round-up:

Tech hardware supplier and IT consultant Computacenter (LSE:CCC) has raised profit expectations again as strong demand from giant US tech companies continued into the second half of its financial year.

First-half revenues to 30June soared 73% to £6.85 billion, pushing adjusted pre-tax profit up 87% to £152 million. The Hertfordshire headquartered company now expects annual profit on the same basis of no less than £380 million. That’s comfortably ahead of analyst forecasts of around £341 million and compares with last year’s £272 million.

Shares in the FTSE 100 company were volatile following the announcement, rallying 6% before reversing to trade down over 5% by midday. However, they're still up 80% so far in 2026. FTSE 250 and software focused Kainos Group (LSE:KNOS) is up 22% during that time. The FTSE 100 and FTSE 250 indexes have each risen by around 8% year-to-date.

As well as being one of the world's six largest resellers of tech equipment, Computacenter also advises organisations on IT strategy, implements the appropriate technology and manages customer’s infrastructures for them.

Computacenter’s committed product order backlog stood at a record £9.3 billion as of late June, up from £7.1 billion in late December.

Technology Sourcing sales soared 89% on a constant currency basis, largely driven by North America, where rising networking and data centre volumes came via hyperscale, neocloud and enterprise customers.

Computacenter also flagged a reducing profit margin for technology sourcing sales as it continued to target growth from high-volume customers.

Service-related revenues rose 9% during the half-year, helped by a 24% increase in consultancy services demand, although hindered by a 4.5% fall in managed service requirements.  

Geographically, North America operating profit rose 148% to £118.5 million, with those for the UK up 53% to £26.4 million. Profits fell 13% in Germany to £43 million, with losses for Western Europe about halved to £4.9 million.

The number of major customers is up by 18 year-over-year to 216, with eight of those coming from the group’s acquisition of both AgreeYa and GAI during the period.

An interim dividend of 27.1p per share, payable to eligible shareholders on 23 October, is up 14.8% from a year ago.

A third-quarter trading update is likely late October.

ii view:

Started in 1981, Computacenter today employs around 20,000 people worldwide. Technology sourcing accounted for most revenues over the company’s last financial year at just over fourth-fifths, with service revenues the balance. Group customers do or have included Microsoft Corp (NASDAQ:MSFT), International Business Machines Corp (NYSE:IBM), Dell Technologies Inc Ordinary Shares - Class C (NYSE:DELL), Cisco Systems Inc (NASDAQ:CSCO), and Transport for London.

For investors, some pulling forward of future demand may be the case given shortages of hardware components such as microchips. Management’s previous outlook comments referencing tougher second-half comparatives are not to be forgotten. An estimated price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap, while corporate investment in technology is cyclical and subject to ups and downs.

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More favourably, AI requirements, IT efficiency, digitalisation and cyber security all remain key focuses for companies, organisations, and governments globally. Customer sector and geographical diversification exist. Adjusted net funds held of £309 million as of late June point to a robust balance sheet, while shareholder returns total £1.35 billion since coming to the stock market, with the shares now on a forward dividend yield of around 1.6%.

For now, and despite ongoing risks, vast sums of money being spent on AI by the huge tech companies like Alphabet Inc Class A (NASDAQ:GOOGL), Amazon.com Inc (NASDAQ:AMZN) and Meta Platforms Inc Class A (NASDAQ:META) look to offer grounds for continued investor optimism.

Positives:

• Product and customer sector diversity
• Exposure to potential AI requirements

Negatives:

• IT sales are often volatile
• Currency moves can impact

The average rating of stock market analysts:

Buy