Computacenter warns profits 'hard to predict'

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The Independent Online

Computacenter, a provider of IT hardware and services, yesterday warned the difficult trading conditions it experienced in the second quarter of the year were continuing. Its shares fell 9 per cent to 226p.

Ron Sandler, chairman of Computacenter, said if trading continued at current levels, he expected the company's 2001 profits, before exceptional items and its share of losses in Biomni, its ecommerce joint venture, would be broadly similar to the £55.6m of last year. Both trading conditions and the outlook for second-half profits were difficult to predict with confidence, he said.

The alert came as Computacenter posted figures for the six-months to the end of June in line with expectations. In a June trading statement, it had said those numbers would meet expectations after a "very strong" first-quarter performance made up for weaker second-quarter sales.

While Mike Norris, the company's chief executive, noted that Computacenter's first quarter is always seasonally stronger than its second quarter, he said the step-down this year was "considerably greater" than in previous years. "We've gone into a much more depressed marketplace in Q2 and it's continued to be depressed in Q3, and is liable to continue for some period to come," Mr Norris said.

"We think the best place to steer the market to is profits being in line with last year. If we weren't reasonably confident about doing that, we'd have steered them lower. We tell it the way it is," he added.

The company's June guidance proved accurate as Computacenter reported a 61 per cent jump in profits, before exceptional items and losses associated with Biomni, to £34m. Sales rose 27 per cent to £1.2bn. Analysts were quick to point out the results for the same period last year had been fairly weak.

Computacenter's first quarter was boosted by a backlog of work as customers started spending once the year 2000, and associated computer problems, were out of the way. However, in the second quarter, it was hurt as customers, especially those in the investment banking and telecoms sectors, spent less. Sales of Unix computer systems were particularly affected, it said.

Mr Norris said: "We've done as good a job as we could have done. In general, I think people have given us some credit for being very straight forward in our announcement in June and again now. We've set our stall out to be as upfront as we can."

Analysts, who had not lowered their numbers after the June update, yesterday slashed 10-20 per cent off their 2001 profit forecasts to levels of £55m-£56m.

In an effort to cut costs, Computacenter closed its loss-making iGroup operation, which produced knowledge management software, with the loss of around 50 jobs. That resulted in a £3.4m exceptional charge in the first-half figures.

The company's share of losses at Biomni totalled £1.4m in the period, although Computacenter hopes that venture will break even next year and move into profit in 2003.

One area of Computacenter's business proving resilient to the tougher conditions, however, was its services division. Sales in the unit increased by 22 per cent.

Mr Norris said the company was keen to make IT services acquisitions in the UK.