ii view: North America behind Computacenter’s sales beat

First-half results to 30 June

• Currency adjusted revenue up 31% to £3.99 billion
• Adjusted operating profit up 4% to £82 million
• Adjusted pre-tax profit down 4% to £81.5 million
• Adjusted net funds held down 31% to £278 million
• Interim dividend up 1.3% 23.6p per share

Guidance:

• Continues to expect full-year adjusted operating profit to be ahead of the prior year, including an adverse £4 million currency translation impact need

Chief executive Mike Norris said:

"We executed well during the first half delivering growth in both Technology Sourcing and Services against a backdrop of significant macroeconomic and political uncertainty. Furthermore, we have significantly expanded our base of major customers over the past year, reinforcing our resilience and positioning ourselves for sustainable growth. 

"Looking to the full year, we have a healthy order backlog position and have made a strong start to our third quarter, especially in North America.”

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ii round-up:

Computacenter (LSE:CCC) today detailed sales that comfortably beat City forecasts, with the reseller of hardware and software items flagging a strong start to the third quarter, especially in North America.

Ten new major customers from a year ago helped push first-half revenues to late June up by close to a third to £3.99 billion, surpassing forecasts of £3.3 billion. Stellar sales in North America and a return to growth in the UK helped counter public sector weakness in Germany and France. Adjusted operating profit improved 4% to £82 million, driving a 1.3% rise in the interim dividend to 23.6p per share.

Shares in the FTSE 250 company rose 6% in early UK trading although later eased to gain of 3% having come into these latest results up by a tenth year-to-date. That’s similar to fellow UK IT company Kainos Group (LSE:KNOS). The FTSE 250 index is up 5% so far in 2025. 

As well as supplying IT equipment, Computacenter also advises organisations on IT strategy, implements the most appropriate technology, optimises performance, and manages customer infrastructure. 

A further record performance in North America, driven by growth in hyperscale and enterprise customers, pushed sales up 74% to £2 billion with operating profit almost doubling.

UK-related sales climbed 18% to £640 million, improving from a fall of 21% a year ago and aided by the benefits of a more targeted approach and greater proximity to customers.  

Currency adjusted German sales fell 1.1% to £879 million, with sales for Western Europe encompassing France, Belgium, Switzerland and the Netherlands down 12% to £358 million. 

A product order backlog up 23.7% year-over-year and, as of late June, continues to underpin management’s expectation for current full-year adjusted operating profits to be ahead of last year. 

Broker UBS reiterated its ‘buy’ stance on the shares post the results. A third-quarter trading update is scheduled for 30 October. 

ii view:

Started in 1981, Computacenter today employs more than 20,000 people, helping customers source, transform and manage their technology infrastructure. Hardware and software sourcing generate most revenues at almost four-fifths with service-related sales the balance. Group customers either include or have included Microsoft, IBM, Dell Technologies, Cisco, and Transport for London.

For investors, soft sales and weak public sector demand is being seen across Germany and France. Costs such as IT wages and increased UK government employee taxes should not be ignored. A forecast price/earnings (PE) ratio broadly in line with the three-year average may suggest the shares are not necessarily cheap, while corporate investment in technology is cyclical and subject to ups and downs. 

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On the upside, AI requirements, IT efficiency, digitalisation and cyber security all remain key focuses for companies, organisations, and governments globally. Customer sector and geographical diversification exist. New customer wins are being made with major customers totalling 58, while shareholder returns total nearly £1.3 billion since floating on the stock market, with the shares now on a forecast dividend yield of around 3%. 

On balance, and despite ongoing risks, a consensus analyst estimate of fair value above £27 per share is likely to keep investors interested in this UK tech company. 

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