Computacenter : Interim Report 2021

ENABLING

SUCCESS

Computacenter plc

half-year results to 30 June 2021

2021 Interim Highlights

Revenue £m	+29.2%
3,180.0
2021
		3,180.0
2020		2,462.2

Profit before tax £m	+59.1%
115.2
2021
		115.2
2020			72.4

Diluted earnings	+56.1%
per share Pence
70.7
2021
		70.7
2020			45.3

Dividend per share Pence	+37.4%
16.9
2021
		16.9
	2020			12.3

Adjusted1 profit before tax £m	+59.4%
118.9
2021
			118.9
	2020			74.6

Adjusted1 diluted earnings	+56.5%
per share Pence
73.1
2021
			73.1
	2020			46.7

The Group has experienced significant operational impacts due to the COVID-19 pandemic during the period to 30 June 2021. All results in these Interim Report and Accounts include these COVID-19 impacts and no attempt has been made to adjust for or exclude these impacts whether they be positive or negative. Further information on the COVID-19 impacts on the Group, and our response, can be found within the Performance Review on pages 2 to 17. The continued adoption of the going concern basis by the Directors in the preparation of the Interim Condensed Consolidated Financial Statements is set out on page 32 in note 2 to the Interim Condensed Consolidated Financial Statements.

The result for the half-year has benefited from £541.9 million of revenue (H1 2020: nil), and £6.8 million of adjusted1 profit before tax (H1 2020: nil), resulting from all acquisitions made since 1 January 2020. All figures reported throughout this Interim Report and Accounts include the results of these acquired entities. The results of

OPERATIONAL HIGHLIGHTS

• The Group's total revenues grew 29.2 per cent during the first half of the year, by 31.4 per cent in constant currency2, and by 9.0 per cent in constant currency2 organically, without the impact of acquisitions made since 1 January 2020. Significant increases in expenditure from industrial customers have complemented continuing business within the public and financial services sector. Ongoing COVID-19 related cost reductions and further improved Services and Technology Sourcing margins has resulted in an increase in adjusted1 profit before tax of 59.4 per cent during the period to £118.9 million.
• The UK saw an increase in revenues of 9.4 per cent as Technology Sourcing revenues saw further strong growth to cope with the residual demand generated by the COVID-19 crisis and Professional Services revenues saw very encouraging growth as previously delayed projects recommenced and customers began new transformation programmes. Strong Services margins, due to increased utilisation and reduced external contractor costs and stable Technology Sourcing margins have resulted in an increase in adjusted1 operating profit of 12.6 per cent during the period.
• Germany saw overall revenues increase by 10.5 per cent on a constant currency2 basis with excellent growth in Managed Services and Technology Sourcing and another very strong performance in Professional Services. The increase in Professional Services volumes, at higher margins, coupled with overall margin improvements have resulted in an increase of 74.6 per cent in adjusted1 operating profit on a constant currency2 basis.
• France has had a difficult start to the year, being impacted by the ongoing slow-down of its large industrial private sector customer base, lower than expected orders from its largest Technology Sourcing customer and the expected downturn in its Services business due to the cessation of the Group's largest Managed Services contract which impacted from H2 2020. This has resulted in an 8.5 per cent decrease in organic revenues on a constant currency2 basis, decreasing gross profits and a reduction in overall adjusted1 operating profit from €4.3 million to a loss of €2.3 million including the results of the Computacenter NS acquisition.
• North America has seen strong organic revenue growth of 18.1 per cent increasing to 164.7 including the Pivot acquisition, both on a constant currency2 basis. The combined growth has meant that, during the first half of the year, the North American business had the largest Technology Sourcing revenues of any Segment within the Group with over $1.2 billion of Technology Sourcing sales, up from virtually nil in H1 2018. The hyperscale FusionStorm customers and mid-market clients of Pivot both saw a good return to growth in the period. Services revenue saw modest improvements in revenue organically with the Pivot acquisition contributing a further $43.5 million of Services revenue in the period. Adjusted1 operating profit, including the impact of Pivot, has increased from $6.0 million in H1 2020 to $25.9 million in H1 2021.

these acquisitions are assumed to be excluded where narrative discussion refers to 'organic' growth in this Interim Report and Accounts.

A reconciliation to Group adjusted1 measures is provided on page 19 of the Group Finance Director's review. Further details are provided in note 5 to the Interim Condensed Consolidated Financial Statements, Segment Information.

Some of the images that appear in this report were taken before COVID-19.

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ENABLING

SUCCESS BY

BUILDING

LONG-TERM

TRUST

Our Purpose is enabling success by building long-term trust. This means enabling the success of our:

• customers, by helping them to navigate the complex digital environment and to Source, Transform and Manage their digital technology;
• people, by creating a business framework and culture, underpinned by strong values, which allows them to build rewarding careers;
• Technology Partners, by providing the scale, reach and stable infrastructure to successfully deploy their technologies; and
• communities, by acting responsibly and building a sustainable business.

If we do this, we will earn the trust and loyalty of our shareholders.

STRATEGIC REPORT

INTERIM REPORT AND ACCOUNTS 2021

Strategic Report

02 2021 Interim Highlights

1. Our Interim Performance in 2021

1. Group Finance Director's Review

1. Director's Responsibilities

Financial Statements

1. Independent Review Report to the members of Computacenter plc
2. Consolidated Income Statement
3. Consolidated Statement of Comprehensive Income
4. Consolidated Balance Sheet
5. Consolidated Statement of Changes in Equity
6. Consolidated Cash Flow Statement
7. Notes to the Consolidated Financial Statements

1. Corporate information

1. Adjusted operating profit or loss, adjusted net finance income or expense, adjusted profit or loss before tax, adjusted tax, adjusted profit or loss, adjusted earnings per share and adjusted diluted earnings per share are, as appropriate, each stated before: exceptional and other adjusting items including gains or losses on business acquisitions and disposals, amortisation of acquired intangibles, utilisation of deferred tax assets (where initial recognition was as an exceptional item or a fair value adjustment on acquisition), and the related tax effect of these exceptional and other adjusting items, as Management do not consider these items when reviewing the underlying performance of the Segment or the Group as a whole. A reconciliation to adjusted measures is provided on page 19 of the Group Finance Director's Review which details the impact of exceptional and other adjusted items when compared to the non-Generally Accepted Accounting Practice financial measures in addition to those reported in accordance with IFRS. Further detail is provided within note 5 to the Interim Condensed Consolidated Financial Statements, Segment Information.
2. We evaluate the long-term performance and trends within our Strategic Priorities on a constant currency basis. Further, the performance of the Group and its overseas Segments are shown, where indicated, in constant currency. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information gives valuable supplemental detail regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period average exchange rates and comparing these recalculated amounts to our current period results or by presenting the results in the equivalent local currency amounts. Wherever the performance of the Group, or its overseas Segments, are presented in constant currency, or equivalent local currency amounts, the equivalent prior-period measure is also presented in the reported pound sterling equivalent using the exchange rates prevailing at the time. 2021 interim highlights, as shown on page 2, are provided in the reported pound sterling equivalent.
3. Adjusted net funds or adjusted net debt includes cash and cash equivalents, other short or long-term borrowings and current asset investments. Following the adoption of IFRS 16 this measure excludes all lease liabilities. A table reconciling this measure, including the impact of lease liabilities, is provided within note 13 to the Interim Condensed Consolidated Financial Statements, Analysis of Changes in Net Funds.

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Our Interim Performance in 2021

ENABLING SUCCESS BY

BUILDING

LONG-TERM

TRUST

This is the first time that the Group has exceeded

£3 billion of revenues in a six- month period and first half revenues are higher than any of the annual revenues recorded by the Group prior to and including 2016.

Mike Norris

Chief Executive Officer

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GROUP

Revenue £m	+29.2%
3,180.0
Adjusted1 profit before tax £m	+59.4%
118.9

Financial performance

The six months of trading to 30 June 2021, as reported in this Interim Report and Accounts, demonstrate the resilience of the Computacenter business model, which is built on the three primary business lines of Technology Sourcing, Professional Services and Managed Services.

The Group's revenues increased by 29.2 per cent to £3,180.0 million (H1 2020: £2,462.2 million) and were 31.4 per cent higher in constant currency2. This is the first time that the Group has exceeded £3 billion of revenues in a six-month period and first half revenues are higher than any of the annual revenues recorded by the Group prior to and including 2016.

The Group made a profit before tax of £115.2 million, an increase of 59.1 per cent (H1 2020: £72.4 million). The Group's adjusted1 profit before tax increased by 59.4 per cent to £118.9 million (H1 2020: £74.6 million) and by

61.1 per cent in constant currency2. This result for the first half of the year is greater than any full year profit made by the Group prior to 2019 and would be the third largest annual profit in the history of the Group.

The difference between profit before tax and adjusted1 profit before tax relates to the Group's net charge of £3.7 million (H1 2020: charge of £2.2 million) from exceptional and other adjusting items. This difference is the amortisation of the acquired intangible assets resulting from the Group's 2018 acquisition of FusionStorm and the H2 2020 acquisition of Pivot which has driven the period on period increase. Further information on these can be found on page 21.

With the increase in the Group's profit after tax, the diluted earnings per share ('EPS') increased by 56.1 per cent to 70.7 pence for the period (H1 2020: 45.3 pence). Adjusted1 diluted EPS, the Group's primary EPS measure, increased by 56.5 per cent to 73.1 pence (H1 2020: 46.7 pence) in the first half of 2021.

The result has benefited from £541.9 million of revenue (H1 2020: nil), and £6.8 million of adjusted1 profit before tax (H1 2020: nil), resulting from all acquisitions made since 1 January 2020. All figures reported throughout this Interim Report and Accounts include the results of these acquired entities.

Excluding the impact of the acquisitions made since 1 January 2020, revenues grew organically by 9.0 per cent on a constant currency2 basis.

Trading across all of our major geographies, apart from France, was pleasing throughout the period with significant strength at the end of the second quarter with June 2021 being the most profitable month in the Group's history. The Group has seen increasing levels of business returning from key industrial customers, some of which were largely suppressed during 2020. This is coupled with ongoing public sector spend and has created significant organic revenue growth for the Group.

Similar to the situation in 2020, we continued to benefit from cost savings, however, there has been no further pandemic-related surge in spend on Technology Sourcing as compared to the prior period. The Group received c £0.6 million in government employment related assistance during the period entirely related to the Group's Belgian operations. No other government assistance has been received in any other jurisdiction during the period, including the UK. The period saw continuing challenges from operating in a COVID-19 environment, with most of our major geographies continuing to experience lockdowns or restrictions on office-based working during the period. The vast majority of our staff worked from home during the period, however we were generally able to perform services on customer sites as required. We thank all of employees for the flexibility and dedication they have shown to cope with this changing environment.

Revenues from public sector customers, such as local and central government, increased by approximately 27.1 per cent, as compared to the increase seen in non-public sector customers of 30.1 per cent. Public sector accounts have grown slightly less due to the rebound in business from industrial customers in the period. Public sector now accounts for 30.6 per cent of our revenues (H1 2020: 31.1 per cent). Whilst significant volumes of this public sector business were at lower than normal margins, particularly through the first quarter of the year, we are pleased that we maintained efficiencies and reduced costs within the business delivery areas, such that margins showed a slight rise

STRATEGIC REPORT

INTERIM REPORT AND ACCOUNTS 2021

overall. Our other European operations, with a much greater share of private sector revenue, have also seen good growth as the non-public sector accounts have started to return to normal levels of trading.

Product shortages have materially impacted supply of key technologies for our customers. In some instances, these shortages have resulted in orders being delayed into the second half of the year, restricting revenues and profitability in the period as a result. Further, as certain orders are part-filled with available products, inventory levels have risen across the business, particularly in North America, to £254.4 million as at 30 June 2021 (30 June 2020: £153.2 million), with £53.7 million of the period-end balance arising in Pivot. This has led to temporary working capital related operating cash outflows. We have also seen substantial indications that suggests a number of large hyperscale customers have pulled forward orders that were due to be placed in the second half of the year into the first half in order to secure product in advance of when it is required. This has pulled forward revenues and profitability into the first half of the year that would otherwise have been recorded later in the year and exacerbated inventory levels on unfulfilled orders. However whilst supply has been restricted, demand has continued to rise substantially with our product order backlogs, across all geographies, at a record high which gives us a high degree of comfort that once supply of key components is restored, the Technology Sourcing business will be well placed to benefit further from the pent-up demand. Supply of key components is hoped to improve by the end of the year, however the return of product availability will most likely not be consistent across the Group with those segments with naturally larger overall market presences able to command an earlier supply with greater volumes than those jurisdictions where our operations are proportionately smaller to the size of the local Technology Sourcing market.

Whilst the Group has seen significant currency translation headwinds as the pound sterling has strengthened against other currencies, particularly the US Dollar and the Euro, which has reduced profitability in the period. Further information on currency impacts is available on page 24 of this Interim Report and Accounts. This impact has been mostly offset by the Group benefiting from circa £3 million of net mark-to-market gains on forward currency contracts over the period. These gains are on contracts taken out to hedge currency movement on significant foreign exchange flows across the Group.

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