Computacenter warns of exchange rate impact on profits

Computacenter has updated investors on its progress in the first quarter, with professional services demand in the UK and Germany among the growth areas.

The firm also saw an increase in technology sourcing in the UK, helping profits to improve in the three months to 31 March.

But things were more difficult around its recent acquisitions in the US and France, with exchange rates and market conditions having an impact.

“The combined performance of our existing US business and the recently acquired Pivot has been ahead of our expectation and while there is still a lot to do, the two companies remain on track,” the firm said in its trading update. “The weakness of the US dollar creates an unavoidable headwind to the group’s performance and, if it stays at the current levels, would be expected to impact full-year profit by approximately £4m. 

“Our other acquisition in France, while as expected is loss-making, performed in line with our expectations and again the integration is on track.”

The channel player warned that those conditions would impact the numbers, but overall the business remained on track and was in a strong position.

“Due to the strong organic profit performance, we expect 2021 to be a year of good progress in our reported profits,” it added. “Although we will generate incremental positive growth from the Pivot acquisition in 2021, this will be almost negated by currency movements (if the current exchange rates remain the same) and the expected losses from our French acquisition.”

Investors have become used to getting positive news from Computacenter and the trading statement struck a cautiously optimistic note about prospects for the rest of 2021.

“Obviously, we are living through unpredictable times and much work remains to be done, but our good performance in Q1 and our internal forecast for the rest of the year gives us a great deal of confidence in our likely outcome,” the firm said.

Computacenter had a very robust 2020 with a 6.8% improvement in revenues to £5.44bn and adjusted pre-tax profits climbed by 35.5% to £200.5m.

It also made a couple of acquisitions against the backdrop of the Covid-19 pandemic, picking up Pivot, which added $292.7m of revenue and $6.8m of adjusted operating profit in the last two months of 2020.