Computacenter says £459m war chest could fund M&A or investor payouts

FTSE 250-listed Computacenter is considering how to spend a record £459m net cash amassed last year, with buybacks and investor payouts under consideration.

The group, which sells technology and related services to the public and private sectors, posted record revenues and profits last year as major companies invested huge sums in their IT systems.

London-based Computacenter saw its annual turnover rise 7 per cent to £6.9 billion, while total sales rose 11.3 per cent to more than £10 billion. of pounds sterling.

Adjusted operating profit increased 0.9 per cent to £271.5 million on a reported basis and 0.6 per cent at constant currencies, largely reflecting the impact of inflation and “additional investments in strategic initiatives,” the group said.

Computacenter actions fell 6.8 per cent or 200.02p to 2,741.98p on Wednesday, after rising more than 38 per cent last year.

UBS analysts said the drop reflected “disappointment” with revenues, which were 6% below market consensus, and “particularly weak performance in the UK” in the second half.

The group’s net cash reached £459 million, up 88% on the previous year, reflecting IT destocking used to manage post-Covid supply chain disruptions.

The company’s board said the war chest provides it with a “significant option” and that it is evaluating “a number of capital allocation options,” including possible merger activity. and acquisition and “the return of excess capital to shareholders”.

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Despite a “still uncertain macroeconomic context”, the group said it was well placed to maintain a competitive advantage over its rivals and gain more market share.

Mike Norris, the group’s chief executive, added: “We achieved our nineteenth consecutive year of adjusted earnings per share growth, outperforming our markets in 2023, as our large customers continued to invest heavily in new technologies.

“We effectively managed an uncertain macroeconomic environment and inflationary pressures, significantly reduced our inventories, resulting in a record net cash position. As planned, we have increased our investments in strategic initiatives aimed at supporting our 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. Longer term, 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.