Computacenter shares slide despite year of growth

Computacenter shares were sliding on Wednesday morning, despite the company reporting a record year for revenue, gross profit and adjusted earnings per share.

The FTSE 250 technology and services firm reported gross invoiced income of over £10bn, an increase of 11.4% from the prior year, propelled by a robust performance in both technology sourcing and services.

Its revenue saw a 7% uplift to reach £6.92bn, with technology sourcing revenue climbing 7.9% to £5.29bn, and services revenue growing 4.2% to £1.64bn.

Gross profit rose 10.2% to £1.04bn, reflecting an improved gross margin of 15.1%, up by 44 basis points.

Adjusted operating profit marginally increased by 0.9% to £271.5m, while adjusted profit before tax rose 5.4% to £278m.

Earnings per share also saw growth, with adjusted diluted earnings up 3% to 174.8p per share.

The company’s dividend per share increased by 3.1% to 70p, backed by a substantial net cash inflow from operating activities, which was ahead 69.6% at £410.6m.

That was further underscored by an 87.9% increase in adjusted net funds to £459m.

Computacenter said it was its 19th consecutive year of adjusted earnings per share growth, attributing success to its strategic investments and effective inventory management.

The company's operational and strategic highlights included significant growth in technology sourcing and services, particularly in Germany and North America, underpinned by a broad geographic diversity and a strong market position.

Computacenter said it had continued to invest in strategic initiatives, totaling £28.1m, aimed at enhancing productivity and securing future growth.

The firm said it was also committed to its sustainability goals, with its 2032 mid-term and 2040 net zero targets receiving approval from the Science Based Targets initiative (SBTi).

Looking ahead, Computacenter was optimistic about making further progress in 2024, despite anticipating a more challenging first half of the year.

“We delivered our nineteenth consecutive year of growth in adjusted earnings per share, outperforming our markets in 2023, as our large customers continued to invest heavily in new technology,” said chief executive officer Mike Norris.

“We managed an uncertain macroeconomic backdrop and inflationary pressures effectively, reduced our inventory significantly, resulting in a record net cash position.”

Norris said that as planned, Computacenter “stepped up” its investment in strategic initiatives to underpin its competitiveness and future growth.

“Overall we expect 2024 to be another year of progress with growth weighted to the second half, while continuing to invest for future growth.

“Looking further ahead, the combination of the strength of our integrated technology sourcing and services model and our geographic diversity, gives us continued confidence in our long-term growth prospects.”

Russ Mould, investment director at AJ Bell, quipped that it “always provokes” discomfort among investors when a company flags a second-half weighting for the year ahead.

“That, plus a strong run for the shares for the past year, explains the negative reaction to IT reseller Computacenter’s latest results,” he noted.

“Judged purely by looking in the rear-view mirror today’s announcement was cause for celebration.

“Computacenter posted record revenue and profit as businesses and organisations look to digitise their operations and draw on the company’s computer systems and software services.”

Mould added that the company was also taking market share - encouraging for its longer-term prospects.

“However, a stellar 2023 will be a hard act to follow in 2024 and the guidance for growth to be weighted towards the second half will provoke fear that ultimately any first-half shortfall cannot be made up and the result will be a cut to guidance.

“Typically, this is how such situations play out; although to be fair, the reason for the second-half weighting is tough comparison with a particularly strong first half of 2023.

“There may be some impatience about the company’s failure to clarify what it will do with a growing cash pile, with only a modest increase in the ordinary dividend delivered.”

At 0844 GMT, shares in Computacenter were down 6.82% at 2,741.26p.

Reporting by Josh White for Sharecast.com.