ii view: Computacenter shares slump 10% today

Shares in this FTSE 250 company are down by almost a quarter so far this year. We assess prospects. 

First-half results to 30 June

• Revenue up 16.6% to £2.83 billion
• Pre-tax profit down 6.4% to £108 million
• Interim dividend of 22.1p per share
• Cash held up 22% to £193.5 million

Chief executive Mike Norris said:

“As we have predicted and announced on multiple occasions, profitability for Computacenter was down in the first half of 2022 compared to the same period last year, however, we remain on track to deliver our stated expectations of profit growth for the year as a whole.”

ii round-up:

IT equipment and solutions provider Computacenter (LSE:CCC) detailed mixed first-half results, impacted by recent supply shortages and tough comparatives with the Covid pandemic.

Pre-tax profit fell 6.4% to £108 million for the Hertfordshire headquartered company, marginally below City forecasts. Overall sales rose 16.6% to £2.83 billion, below the near 30% growth reported for the half year 2021. 

Computacenter shares slumped 10% in UK trading, leaving them down by around a quarter year-to-date. Shares for fellow IT company Kainos Group (LSE:KNOS) are down by a similar amount during 2022, while bid target Micro Focus International (LSE:MCRO) are up by around a quarter. The wider FTSE 250 has fallen by close to a fifth during 2022. 

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Along with supplying equipment, Computacenter also advises organisations on IT strategy, implements the most appropriate technology, optimises performance, and manages its customers’ infrastructures. 

Tough sales comparatives and a return of costs following a move back to normal operations following the Covid crisis both hindered profits. 

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An increase in cash held to £193.5 million aided a near one-third increase in the interim dividend year-over-year to 22.1p per share. 

A third-quarter trading update is scheduled for 28 October. 

ii view:

Set up in 1981 and listed on the stock market in 1998, FTSE 250 constituent Computacenter is today a substantial reseller business. It employs around 18,000 people worldwide. Customers have included the Met Office, William Hill, and Transport for London. 

For investors, elevated inflation, rising interest rates and high economic uncertainty offer a tough backdrop for its customers to spend and invest money on its products and services. The boost from the pandemic needs to be remembered, while costs generally for businesses are rising.  

More favourably, full-year expectations remain unchanged, with product order backlogs across all geographies still robust. Some easing in supply chain challenges has been seen, while exposure to data centre customers and growth in cloud data also warrants consideration. For now, and while today's dive reminds investors to be cautious, a consensus analyst estimate of fair value sat a over £30 per share implies scope for longer-term optimism. 

Positives: 

• Product and customer sector diversity
• Forecast dividend yield of over 2.5% (not guaranteed)

Negatives:

• IT sales are often volatile
• Currency moves can impact

The average rating of stock market analysts:

Buy