Image may be NSFW.
Clik here to view.
This morning’s interim statement from Computacenter outlines strong headline growth in the first three months of 2012. But the company is also highlighting the margin impact of that growth. Shares are currently down 2.4% in early trading.
Overall Group revenue growth in Q1 was 9% (or 11% in constant currency), with around a third of that coming from acquisition. Services revenue was up 9% (12% constant currency), almost all of which was organic. Supply chain (i.e. product) was up by similar amounts, but about half the growth was due to the acquisition of Top Info in France.
The UK shows a marked improvement in performance from 2011 (see Computacenter confirms year of contrasts). Overall Q1 revenue in the UK was flat, helped by a pick-up (and 8% growth) in services business. This services pick-up was expected (see Computacenter: benefitting from infrastructure service fragmentation), following the company’s wins towards the end of 2011 and despite its recent lack of closure on a major deal in local government (see Cumbria and Computacenter: no deal).
This services growth is coming at a price, however, as also expected. Paying commission on large deals and the on-boarding of new contracts had a “not unexpected impact on margin in the period”.
The challenge for Computacenter, like all IT services providers competing for today’s shorter, price-pressured infrastructure contracts, is to reach contract profitability fast. Only then can you get revenue and margin growth improvements from services.
In the longer-term, the shift towards BYOT (bring your own technology) will bring new challenges to the desktop support and product revenue streams of players in those areas of the market, including Computacenter. That's a trend we highlight in our report BYOT: opportunities and threats from disruption.
