Computer giant lines up pounds 1bn float

Founders of Computacenter could be worth pounds 250m each as company prepares to cash in on soaring demand for UK information technology shares
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The Independent Online
COMPUTACENTER, one of Britain's largest information technology companies, is preparing to join the Stock Exchange's booming IT index in a flotation which would value the group at around pounds 1bn.

The company has appointed Goldman Sachs, the US investment bank, to handle the flotation. It is expected to confirm the move within the next few weeks.

A flotation would make Computacenter's two founders among the richest men in the country. Philip Hulme, the chairman, and Peter Ogden, a director, each have a 27 per cent stake in the company which would be worth at least pounds 250m.

Computacenter, which distributes and installs computer systems for large corporate clients, has no need to raise any new money. The company has been consistently profitable and has funded most of its growth internally.

However, it is keen to provide a market for the shares held by its employees. About 700 of the group's 3,000 employees own 17 per cent of the company between them. A stock market listing would also allow the group to provide the rest of its workforce, which has expanded rapidly in recent years, with share options.

Moreover, it would give an opportunity for Computacenter's financial backers to exit.

Apax and Foreign & Colonial, the venture capital firms, have long-standing shareholdings of 22 per cent and 7 per cent, respectively.

With a valuation of pounds 1bn, Computacenter would be largest flotation of a UK information technology company to date. ICL, the Japanese-owned group which will be valued at pounds 1.5bn-pounds 2bn when it comes to the market, is not planning to float until the year 2000.

Computacenter would also become one of the largest companies in the Stock Exchange's fledgling IT sector. The largest company in the sector is Misys. The software group ,which narrowly missed out on joining the FTSE 100 index earlier this month, is worth pounds 3.4bn. The index includes four other companies which are currently worth more than pounds 1bn - Sema, Logica, CMG and Sage.

The introduction of the sector has generated a huge amount of interest in IT stocks from fund managers, who have driven up share prices to record levels. Since the Stock Exchange announced at the beginning of December that it planned to launch the sector, shares in the index's five largest constituents have risen by an average of almost 80 per cent.

Valuations have also risen rapidly. Software and services companies now regularly trade on price-earnings ratios of between 30 and 40. This is partly the erosion of the discount that UK-based IT companies have traditionally suffered compared to their US counterparts. However, valuations of IT services companies such as CMG and Sema are now higher than similar firms in the US, prompting fears among some investors that any small setback would send share prices tumbling.

Computacenter has grown rapidly by setting itself up as "one-stop-shop" to supply companies with all their computer needs. It counts a third of the countries 1,500 largest companies as its customers.

The last reported figures, for the year to December 1996, show that Computacenter made a pre-tax profit of pounds 34m on sales of pounds 880m.

Although 1997 results have yet to be published, they are expected to show that profits grew to pounds 45m on turnover of about pounds 1bn.

Computacenter is benefiting from the growing complexity of computer systems and increased demand for suppliers to help install products.

Rather than simply supply boxes, the company now also offers value-added service and training which allow it to compete on factors other than price.

Margins have risen sharply in recent years and, at 5 per cent, are well above the industry average.