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POWERFUL
PARTNERSHIPS
Annual Report and Accounts 2018
CENTRED AROUND OUR CUSTOMERS
Enabling success by building long-term
trust.
Who we are
Computacenter is a leading
independent technology partner
trusted by large corporate and public
sector organisations.
What we do
We help them to Source, Transform and
Manage their technology infrastructure
to deliver digital transformation,
enabling users and their business.
Our ambition
• Strongly recommended by
customers for the way we help them
achieve their goals
• The preferred route to market for
our technology providers
• People want to join and stay with us,
be proud of our reputation, as we
learn, earn and have fun
• Trusted as an agile and innovative
provider of digital technology
around the world.
WORLDWIDE REACH
AND CUSTOMER FOCUS
We sell to customers in eight
countries:
UK, Ireland, Germany, France, Belgium,
Switzerland, the Netherlands and USA.
We also have operations/entities
in another 12 countries:
Hungary, Poland, India, Mexico, China,
Spain, Malaysia, Japan, Australia,
Hong Kong, Singapore and Canada.
We source for and support customers
in another 50 countries.
SOURCE
CIO
USERS
BUSINESS
MANAGE
TRANSFORM
PITTSTON, PA, USA
SAN FRANCISCO, WEST COAST, CA, USA
REGIONAL HQ
NEWARK, CA, USA
PITTSTON, PA, USA
DALLAS, TX, USA
SAN FRANCISCO, WEST COAST, CA, USA
REGIONAL HQ
MEXICO CITY, MEXICO
NEWARK, CA, USA
NEW YORK, EAST COAST, NY, USA
REGIONAL HQ
DALLAS, TX, USA
MEXICO CITY, MEXICO
NEW YORK, EAST COAST, NY, USA
REGIONAL HQ
BODEGRAVEN, NETHERLANDS
BRUSSELS, BELGIUM
HATFIELD, MILTON KEYNES,
NOTTINGHAM, SHEFFIELD, UK
HATFIELD, UK
BODEGRAVEN, NETHERLANDS
HATFIELD, UK, EMEA
REGIONAL HQ
BRUSSELS, BELGIUM
BARCELONA, SPAIN
HATFIELD, MILTON KEYNES,
NOTTINGHAM, SHEFFIELD, UK
GONESSE, FRANCE
HATFIELD, UK
MONTPELLIER, FRANCE
HATFIELD, UK, EMEA
REGIONAL HQ
BARCELONA, SPAIN
GONESSE, FRANCE
MONTPELLIER, FRANCE
We Source, Transform and Manage
technology for our customers in
70 countries worldwide.
SERVICE CENTERS
INTEGRATION CENTERS
COMPUTACENTER’S COVERAGE
SERVICE CENTERS
INTEGRATION CENTERS
COMPUTACENTER’S COVERAGE
POZNAŃ, POLAND
POZNAŃ, POLAND
BUDAPEST, HUNGARY
BERLIN, DRESDEN, ERFURT,
LEIPZIG, KERPEN, GERMANY
KERPEN, GERMANY
CAPE TOWN, SOUTH AFRICA
BUDAPEST, HUNGARY
ZURICH, SWITZERLAND
BERLIN, DRESDEN, ERFURT,
LEIPZIG, KERPEN, GERMANY
KERPEN, GERMANY
CAPE TOWN, SOUTH AFRICA
ZURICH, SWITZERLAND
DALIAN, CHINA
BANGALORE, INDIA
DALIAN, CHINA
KUALA LUMPUR, MALAYSIA
KUALA LUMPUR, MALAYSIA, APAC
REGIONAL HQ
BANGALORE, INDIA
KUALA LUMPUR, MALAYSIA
KUALA LUMPUR, MALAYSIA, APAC
REGIONAL HQ
REVENUE CHARACTERISTICS
Computacenter has an integrated offer which provides three complementary entry points for our customers,
giving us a balanced business portfolio and helping us to achieve long-term growth.
Source
We determine our customers’ technology
requirements and provide appropriate
products and commercials to meet them,
with complete service and support
throughout the product lifecycle.
Revenue characteristics
We earn revenue from large contracts,
with thinner margins and lower visibility.
Transform
We deliver a set of proven and predictable
solutions to optimise our customers’
technology or expert resources to help
their internal teams. This enables them to
deploy digital technology effectively and
achieve their business goals.
Revenue characteristics
Our revenue depends on our forward
order book, which contains a multitude of
short-, medium- and long-term projects.
Manage
We maintain, support and manage our
customers’ IT infrastructure and
operations, improving the quality and
flexibility of service and reducing costs.
Revenue characteristics
Our revenue under contract has high
visibility and is long term and stable.
Technology Sourcing revenue £m +20.5%
Professional Services revenue £m +0.8%
Managed Services revenue £m
+1.8%
3,177.6
Title
321.9
Title
853.1
Title
2018
2017
2016
2015
2014
3,177.6
2,636.2
2,207.5
2,067.1
2,122.3
2018
2017
2016
2015
2014
321.9
319.2
274.2
262.8
259.7
2018
2017
2016
2015
2014
853.1
838.0
763.7
727.7
725.8
PITTSTON, PA, USA
SAN FRANCISCO, WEST COAST, CA, USA
REGIONAL HQ
NEWARK, CA, USA
DALLAS, TX, USA
MEXICO CITY, MEXICO
NEW YORK, EAST COAST, NY, USA
REGIONAL HQ
BODEGRAVEN, NETHERLANDS
BRUSSELS, BELGIUM
HATFIELD, MILTON KEYNES,
NOTTINGHAM, SHEFFIELD, UK
HATFIELD, UK
HATFIELD, UK, EMEA
REGIONAL HQ
BARCELONA, SPAIN
GONESSE, FRANCE
MONTPELLIER, FRANCE
SERVICE CENTERS
INTEGRATION CENTERS
COMPUTACENTER’S COVERAGE
POZNAŃ, POLAND
BUDAPEST, HUNGARY
BERLIN, DRESDEN, ERFURT,
LEIPZIG, KERPEN, GERMANY
KERPEN, GERMANY
CAPE TOWN, SOUTH AFRICA
ZURICH, SWITZERLAND
DALIAN, CHINA
BANGALORE, INDIA
KUALA LUMPUR, MALAYSIA
KUALA LUMPUR, MALAYSIA, APAC
REGIONAL HQ
2018 highlights
Revenue £m
+14.7%
Statutory profit before tax £m
-3.2%
4,352.6
Title
108.1
Title
Statutory diluted earnings
per share Pence
70.1
Title
2018
2017
2016
2015
2014
4,352.6
3,793.4
3,245.4
3,057.6
3,107.8
2018
2017
2016
2015
2014
108.1
111.7
126.8
2018
2017
2016
2015
2014
87.1
76.4
52.3
40.0
Dividend per share Pence
+16.1%
Adjusted1 profit before tax £m
+11.3%
118.2
Title
Adjusted1 diluted earnings
per share Pence
75.7
Title
30.3
26.1
2018
2017
2016
2015
2014
22.2
21.4
19.0
118.2
106.2
86.4
87.2
85.9
2018
2017
2016
2015
2014
54.0
53.6
46.8
30.3
Title
2018
2017
2016
2015
2014
+5.4%
70.1
66.5
82.1
+16.3%
75.7
65.1
POWERFUL
PARTNERSHIPS
Annual Report and Accounts 2018
The Group has adopted IFRS 15 from 1 January 2018 which has resulted in changes in accounting policies and adjustments to the
amounts recognised in the Financial Statements. Importantly, and in accordance with the modified retrospective approach, the
comparative results for the year ended 31 December 2017 have not been restated under the accounting policies adopted as a
result of transition to IFRS 15. An analysis of the impact of transition is presented in note 2 summary of significant accounting
policies on page 121 of this Annual Report and Accounts. Further information on the implementation of, and transition to, IFRS 15
is included within the Group Finance Director’s review on page 61 of this Annual Report and Accounts.
A reconciliation between key adjusted1 and statutory measures is provided on page 57 of the Group Finance Director’s review.
Further details are provided in note 4 to the Consolidated Financial Statements, segment information.
1 Adjusted operating profit or loss, adjusted profit or loss before tax, adjusted tax, adjusted profit or loss for the year, adjusted earnings per share and adjusted diluted earnings per share are, as
appropriate, each stated before: exceptional and other adjusting items including gain or loss on business disposals, gain or loss on disposal of investment properties, gains or losses related to
material acquisitions, 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.
Additionally, adjusted gross profit or loss and adjusted operating profit or loss includes the interest paid on customer-specific financing (CSF) which Management considers to be a cost of sale. A
reconciliation between key adjusted and statutory measures is provided on page 57 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 also provided within note 4 to the Consolidated
Financial Statements, segment information.
2 We evaluate the long-term performance and trends within our strategic objectives 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-year local currency financial results using the current year average exchange rates and comparing these recalculated amounts to our current year 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-year measure is also presented in the reported pound sterling equivalent using the exchange rates prevailing at the time. 2018 highlights, as shown above, and statutory measures,
are provided in the reported pound sterling equivalent.
3 Net funds includes cash and cash equivalents, CSF, other short-term or other long-term borrowings and current asset investments.
POWERFUL
PARTNERSHIPS
We are proud to have built powerful partnerships with the
world’s leading technology providers. These partnerships add
value to our customers in making digital work, helping us to
give impartial advice on the best choice of technology, how to
deploy and integrate it and ensure it is managed securely and
reliably. The partnerships are underpinned by significant and
continuing investments in our infrastructure, the skills and
experience of our people, and by the trust that we will deliver
what we promise to our customers.
Front cover:
Computacenter’s Technology Village at our Sales Conference in Berlin, February 2019.
This gave 51 of our technology partners the opportunity to showcase their solutions
and how we work together to ‘make digital work’ for our customers.
Strategic Report
Chief Executive’s strategic review
IFC 2018 highlights
02 Chairman’s statement
04
06 Our marketplace
10
Our customer offering
14 Our competitive markets
18 Our business model
20 Our strategic priorities
26 Powerful partnerships – our customers
36
40
46
56
Governance Report
Sustainability
Principal risks and uncertainties
Our performance in 2018
Group Finance Director’s review
Chairman’s governance overview
Board of Directors
Corporate Governance Report
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
68
70
72
74
78
84
102 Directors’ Report
108 Directors’ Responsibilities
Financial Statements
109
116
117
Independent auditor’s report to the
members of Computacenter plc
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
118 Consolidated Balance Sheet
119
Consolidated Statement of Changes in
Equity
120 Consolidated Cash Flow Statement
Notes to the Consolidated Financial
121
Statements
164 Company Balance Sheet
165
166
Company Statement of Changes in Equity
Notes to the Company Financial
Statements
Group five-year financial review
170
170 Financial calendar
171 Corporate information
172 Principal offices
01
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Chairman’s statement
I AM CONFIDENT
THAT OUR
PEOPLE’S
COMMITMENT TO
HELPING OUR
CUSTOMERS BE
MORE EFFICIENT
AND COMPETITIVE
WILL REFLECT IN
OUR FUTURE
PROGRESS.
Greg Lock
Chairman
02
2018 WAS A RECORD YEAR FOR
COMPUTACENTER BUT WE ARE FAR
FROM REALISING OUR FULL POTENTIAL.
REVENUES, ADJUSTED1 PROFITS
AND OPERATING CASH FLOW WERE
VERY STRONG, BUT MORE IMPORTANTLY
WE CONTINUED TO INVEST IN OUR
CUSTOMER RELATIONSHIPS, EMPLOYEES
AND OFFERINGS.
I am pleased with our progress in the
years I have been here, but I cannot say
that I am completely satisfied. Whilst there
is still much to be done, I am confident that
our people’s commitment to helping our
customers be more efficient and
competitive will reflect in our future
progress. I thank them for all they have
achieved and for making my time with the
Company so enjoyable.
I wish all of our employees, customers,
partners and shareholders fulfilment in
their future plans and relationships with
Computacenter.
Greg Lock
Chairman
11 March 2019
We were pleased to return £100 million of
cash to shareholders and were given the
ultimate accolade of the ‘Boring Award’
by trade publication TechMarketView, in
recognition of 10 consecutive years of
growth in adjusted1 earnings per share.
Of great significance was our acquisition
activity during the year. Two years ago we
launched direct operations in the United
States of America, with the intention of
proving our capability to support customers
before committing more investment. 2019
will see the integration of FusionStorm,
enabling us to deliver our full range of
customer offerings: Source, Transform
and Manage. This is a significant move for
us and we welcome our new colleagues
and customers to Computacenter.
On a personal note I say goodbye to you all,
after 11 years as Chairman – the best job I
have ever had! It is time for me to hand over
to Peter Ryan, who has been on our Board
for a year. I am confident in his personality,
experience and expertise, and I look forward
to watching how our investments deliver
continuous improvement in results.
03
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 COMPUTACENTER
IS ONLY AS GOOD
AS THE PEOPLE
THAT WE EMPLOY,
SO I THANK ALL OF
OUR PEOPLE FOR
WHAT TURNED
OUT TO BE A
RECORD YEAR
IN 2018.
Mike Norris
Chief Executive Officer
Chief Executive’s
strategic review
04
2018 was a very strong year for our
Technology Sourcing business as, just like
2017, customers invested heavily in new
technology. As we explained to investors at
our conference in April, we believe customers
will continue to invest in enhancing their
digital workplace, increasing the speed of
their networks, building out their cloud
capability for their customers and, most
of all, increasing their resilience against
cyberattacks. These investments are
significant across all industries but there has
been particular investment by companies
that sell Software-as-a-Service, as they build
their infrastructure to meet increased
demand. While individual customers will have
their highs and lows in spend, we believe the
general thrust in the marketplace will
remain positive.
Another continuing trend is customers’
desire to reduce the cost of ongoing support.
This has created significant pressure in the
market, as it leads to lower overall growth
rates and there is less business to go around.
There has been a noticeable increase in the
occasions where we have not won new
opportunities and seen the winning bidder
suffer significantly financially afterwards.
In short, the competitive pressure in the
marketplace is taking people to a financial
position that is unsustainable.
During 2018, we were successful with
renewals, particularly where we have
demonstrated innovation and cost savings
to customers through the life of previous
contracts. Current market conditions make it
even more critical that we invest to improve
our productivity and competitiveness, as we
strive to be the leader in our chosen areas
of expertise.
At our investor conference in April, we
indicated that we saw opportunity in
geographical expansion. We were therefore
pleased to announce two acquisitions in the
second half of 2018. In the Netherlands, we
have acquired a business that has been
under significant balance sheet stress. We
believe that over the next few years we can
establish a successful and profitable
business in the Netherlands, due to revenue
synergies, our expertise in this marketplace
and the strength of our balance sheet. More
significantly, we acquired FusionStorm at the
end of September, which is our largest
acquisition ever in terms of purchase price.
We had indicated to investors for some time
that we were interested in acquiring in the
USA and we are very pleased that the
acquisition fits well with our strategy and
culture. In 2016, we established a significant
presence in the USA by organically growing
a Services business that delivered to our
European customers’ requirements in
this market. This acquisition brings us a
Technology Sourcing capability, as well as
a significant number of new and exciting
customers.
In 2018, we passed the landmark of 20 years
as a public company. Tony Conophy, our
Group Finance Director, and I have been
proud to lead the business the entire time.
We do, however, continually search to
strengthen our Management team, to take
advantage of new growth opportunities.
In 2018 Mike Keogh, who has been with us
since 2015, joined the Group Executive
Management team to manage the combined
entities of our existing and acquired
business in the USA. In the middle of 2018,
Arnaud Lepinois took over the responsibility
of Managing Director of Computacenter
France, after a handover period from Lieven
Bergmans, who has stabilised the business
in the last few years. We believe that
Computacenter France is now in a position
to grow and that a French national is better
placed to source new opportunities. Lieven
Bergmans is now Managing Director for what
we will refer to going forwards as The Rest
of Europe, which today includes Switzerland,
Belgium and our newly acquired business
in the Netherlands.
This time last year I announced some
changes to our Management within Services.
Disappointingly, this did not work out as we
had expected. We have subsequently divided
responsibilities between Julie O’Hara, who
has been with us for the long term and who
will be responsible for major Service Centers
and resources, and Jim Yeats, who is new to
Computacenter and who will be responsible
for Service Management and major projects.
They will both join my Group Executive
Management team.
I would like to take this opportunity to thank
our customers, who entrust us with major
projects and significant support
responsibility. While we are often pleased
with what we achieve, we will always strive to
do better. Computacenter is only as good as
the people that we employ, so I thank all of
our people for what turned out to be a record
year in 2018. Finally, I would like to thank and
appreciate our shareholders for their
long-term support.
Mike Norris
Chief Executive Officer
11 March 2019
STRATEGIC HIGHLIGHTS
Our strategy has continued to
drive our business forward in 2018.
1 To lead with and grow our Services business
Through key renewals, we maintained the
annual Contract Base which grew by £6
million to £766 million in constant currency2.
2
To improve our Services productivity and
enhance our competitiveness
We continued our global expansion of our
Service Desk and Infrastructure Operations.
We established a new location in Poland,
helping us to meet the needs of our German
language clients.
3
To retain and maximise the relationship
with our customers over the long term
Through our acquisitions, we have added
14 Group customers who generate more than
£1 million per year of gross profit.
4
To innovate our Services offerings to build
future growth opportunities
A high rate of renewals and some new
contract additions have positioned us well
to learn the lessons from several difficult
contracts.
05
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our marketplace
Accelerating business
STAYING ABREAST
OF CHANGES IN THE
GLOBAL MARKET
Our customers need to respond faster
and more effectively to business
change. To stay competitive, they have
to innovate and enrich the digital
experiences of their users and
customers.
We need to act with pace and
confidence to help our customers
make the most of their existing
technology and select new
investments that support their digital
agenda in an increasingly complex
and fast-changing environment.
This section looks at the major trends
that are changing our markets,
considers our competitive
environment and explains the
dynamics of the key countries we
operate in.
In this section
• The global market
• The competitive market
• Our regional markets
Andreas Török
Business Lines Enterprise Director
06
THE GLOBAL MARKET
Four major trends are shaping
our markets worldwide.
Major trend 1:
The shift to digital
Description
The requirement to connect the business
directly to IT and for IT to understand how
its services directly influence market share
and profits continues to drive new ways of
working, service delivery and productivity.
This adoption of new methods such as Agile,
Design Thinking, DevOps and technologies
where service is primarily provided with or
through software and augmented with
analytics and artificial intelligence (AI), is
increasing complexity for organisations.
The pace of change is also rising with, for
example, the proliferation of devices and
apps which have ever-shorter lifecycles.
Added to this, almost every digital innovation
raises security and privacy risks that need
to be tackled at the same time.
What this means for Computacenter
Being vendor independent remains a key
strength for us, due to our ability to assess
our customers’ business requirements and
help them to select the appropriate solution
and service model, in an increasingly
complex environment. At the same time, we
need to keep up with the pace of innovation,
so that our offering remains relevant to
our customers.
Example
“IDC recently updated its forecasting of
worldwide digital transformation spend,
predicting that it will reach $1.97 trillion
in 2022.” – IDC, November 2018
Major trend 2:
Hybrid IT becomes
the norm
Description
Cloud services are the forefront of the IT
market’s transformation, with the cloud
quickly becoming a mainstay for many
businesses. Most of our customers are using
cloud technology in some form or another
and organisations have embraced the initial
benefits of increased transparency on
pricing and improved time to market for IT
services. Maturing cloud adopters are now
seeking a balanced environment, with
traditional data centers closely integrated
with private and public clouds. Depending
on regulatory requirements and data
compliance, customers can then select the
most suitable source for their specific
workloads and applications.
What this means for Computacenter
Hybrid IT represents a huge market
opportunity for Computacenter, both for
our Technology Sourcing and our
Professional Services and Managed Services
businesses. Customers seek our support to
Source, Transform and Manage their Hybrid IT
environment. While we are investing in some
new capabilities, our customers, including
some hyperscalers, are already leveraging
our existing investments and ability to
integrate and deploy technology at scale
and globally.
Example
“According to Gartner, by 2020, 75 per cent
of organizations will have deployed a
multicloud or hybrid cloud model for their
IT needs.” – Gartner, September 2018
Major trend 3:
Security risks become
a business inhibitor
Description
The accelerated adoption of new and
sometimes immature technologies
increases the risk of security and privacy
breaches. Additionally, our customers have
to react to regulatory requirements and
security legislation, such as the European
General Data Protection Regulation. To
protect themselves from financial and
reputational losses and to meet compliance
requirements, customers often implement
rigid and fragmented security concepts that
inhibit innovation and fast reactions to
market changes.
What this means for Computacenter
Our strong security practice, with more than
150 security consultants, represents a
competitive advantage and differentiates us
from some of our competitors. We help our
customers to implement a holistic security
concept, allowing them to stay ahead of
criminal threats and remain compliant with
regulatory requirements.
Example
“Gartner expects a CAGR of 13 per cent in
cloud security services from 2017 to 2022.”
– Gartner, Public Cloud Services End-User
Spending, Q4 2018
Major trend 4:
Shortage of talent
Description
The critical importance of digital technology
to modern businesses means that demand
for appropriately qualified people outstrips
supply. This makes it more difficult for our
customers to manage their IT services
in-house, encouraging them to turn to
providers such as us for support.
What this means for Computacenter
The shortage of people also emphasises the
importance to Computacenter of having the
right culture and values, combined with an
attractive workplace and exciting work for
our customers, which help us to attract and
retain talent.
Example
“40 per cent of employers globally report that
they are experiencing difficulty filling jobs.”
– Manpower Group’s 11th annual Talent
Shortage Survey
See pages 36 to 38 for more on how we
manage and develop our people.
07
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our marketplace
continued
THE COMPETITIVE MARKET
In addition to the major trends, a
number of factors are influencing
the way we compete in our markets.
Computacenter’s response to these
major trends:
Computacenter has a history of adapting
as the needs of our customers and the
market develop.
1980–1995
Technology Sourcing led
3-4 year lifecycle
• Configuration
• Hardware resale
• Rollout services
• Maintenance
• Break/fix service level agreements
• Onsite services
1995–2014
Managed Services led
3-5 year contracts
• Extensive bidding
• Landing a large and multi-year Managed
Workplace Service
• Pull-through of Technology Sourcing
• Pull-through of Professional Services
• Cross-sell to other Managed Services
2014+
Professional Services led
Hybrid IT, plug-and-play
• Users: user experience, productivity,
consumerisation
• CIO: cost pressure (still), as-a-service
demand, security
• Business: analytics and AI for competitive
advantage
• Cloud-players take business and margins
Since 2015, Computacenter has become an
enabler for digital business. We assess the
business requirements of our customers and
help them to select the appropriate services
and solutions modules from our portfolio, to
solve their specific challenges.
Market segments – Save to innovate
With IT budgets staying flat or growing very
slowly, IT decision makers need to save costs
in order to fund new digital initiatives.
Procurement departments are typically
seeking to reduce costs in traditional
hardware-related services. Our responses
to this trend are investments in analytics,
automation and the right balance of onshore,
nearshore and offshore delivery capabilities.
At the same time, we help CIOs to select,
implement and manage technology
platforms such as hybrid clouds, big data
and the Internet of Things, to become the
foundation for new digital business models.
Our ability to select the right solutions from
a wide range of options, paired with our
Security and Networking skills, put us in a
good position to exploit these increasing
digital business markets.
Shifting buying centres
The traditional buying centres in our industry
are our customers’ IT and procurement
departments. However, customers are now
shifting to include decision makers
representing their core business units. In
addition, they are introducing new roles such
as the Chief Digital Officer, to bridge the gap
between traditional technology sourcing and
new models which have business benefits
at their core, such as driving competitive
advantage. While this shift is real and we are
adapting with new value propositions, we
believe it is happening slowly and our core
services will continue to provide ongoing
differentiation and genuine value for our
customers.
Substitutes
Organisations that had previously bought
their own networking and data center
infrastructure are now able to substitute
them for cloud-based services. This could
affect demand for our sourcing business
over the coming years. However, this
complexity is also a positive for us, in our
role as a value-added provider. It creates
opportunities for us to provide consulting
and support transformational projects,
as customers require our help to migrate
applications and workloads to the cloud.
Transforming their IT also drives our
traditional infrastructure portfolio. In
addition, many hyperscale cloud providers
themselves are among our customers.
Partner ecosystems
With shifting buying centres and the trend
to cloud computing and Hybrid IT, customers
are looking for solutions addressing their
business needs and covering all aspects
from infrastructure to applications, as well
as business adoption. As a response, service
providers will have to start building
ecosystems of partners with good
knowledge of future application
architectures and methodologies such as
Agile or Design Thinking, as well as partners
with vertical specific expertise. This is an
advantage for Computacenter, as we already
have powerful partnerships with the world’s
leading technology providers and mature
processes to adopt partner technologies and
take them to market. We will also continue to
integrate services partners into services to
ensure a comprehensive service portfolio.
08
OUR REGIONAL MARKETS
We go where our clients operate.
United Kingdom and Ireland
Economic growth in the UK and Ireland stays
relatively robust despite the ongoing process of the
UK leaving the European Union. The IT infrastructure
services market is growing at a moderate rate and
is expected to stay stable. CIOs are continuously
looking to fund digital initiatives through savings
in non-strategic operational areas and are also
moving towards cloud services, with the help of
external providers. There are growth opportunities
in the financial services, retail and public sectors,
and in large-scale transformation programmes.
Rest of Europe (Switzerland, Belgium
and the Netherlands)
Economic growth is still stable in our Rest
of Europe countries, with markets in the
Netherlands being most fragile. With
Belgium’s production deeply embedded in
global value chains and the financial sector
in Switzerland remaining key for both the
market and Computacenter, overall
forecasts are positive for these markets.
France
The world’s fifth largest economy representing
20 per cent of the Euro-area GDP, continues to be an
important geography for Computacenter with a
significant number of industrial and public sector
customers. Political turbulence in the fourth quarter
of 2018 has affected the economic growth outlook.
However, the forecast for 2019 stays positive with
solid growth and we expect ongoing investment by
both manufacturing and government organisations.
Germany
2018 has been a strong year for the German economy
despite a second half below expectations and the
automotive sector with decreasing registrations
year on year in the last quarter. Trading tensions
between the US and China do have an impact on the
growth forecast for 2019 but expectations are still
positive and indicate an ongoing economic growth
with increasing investments in the public sector
as well as large initiatives to support digital
transformation such as Industrie 4.0 and the ‘Digital
Pact (Digitalisierungspakt)’ to improve IT in the
education sector.
USA
After 2018’s high growth, supported by the tax-cut stimulus
in 2017, the US economy is expected to cool down in 2019.
The current trade dispute with China does affect
investments by our customers. However, the US tech
industry including Computacenter partners such as
Microsoft, Amazon and Cisco still expect a solid year with
significant growth rates in many areas.
09
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our customer offering
EVOLVING A DIFFERENTIATED
AND COMPLETE CUSTOMER
OFFER
Our customers are confident in our
skills and capabilities to help them
make the right choices in the complex
and fast-changing world of digital
technology. To maintain this trust we
invest to stay relevant and competitive
and ensure we have a complete
offering of Services capable of
delivering at scale.
This section explores
Computacenter’s breadth of
capability supporting the complete
lifecycle for IT infrastructure and
how it underpins our go to market
messaging in the form of three
strategic propositions: Digital Me,
Digital Power and Digital Trust.
In this section
• Our complete customer offer
• Our breadth of skills
• Our Service Centers
• Our strategic propositions
Nat Ives
Managed Services Strategy
& Innovation Director
10
OUR COMPLETE CUSTOMER OFFER
Our comprehensive capabilities help
customers to Source, Transform and Manage
digital technology across the domains of End
User, Data & Analytics, Cloud & Data Center,
Networking and Security.
Transform
By combining our technology partners with
our own project managers, consultants,
engineers and test facilities we support
customers from initial planning through to
their digital transformations going live.
We provide holistic solutions and services,
within or across the five technology domains,
which enable genuine realisation of business
goals. Our engagements range from
long-term, complex transformation
programmes to shorter-term or expert-
leasing based consulting and
implementation engagement.
Source
Our powerful partnerships with the leading
technology providers in the market allow us
to help our customers to make informed and
wise choices in the selection of digital
technology. With our investments in our
Integration Centers, underpinned by our
people, systems and processes, we can then
help our customers to integrate and deploy
digital technology at scale across the world.
Increasingly, our customers are asking us to
take more responsibility in this area and help
them deliver faster both for their end users
and to underpin the digital strategies for
their businesses.
Manage
We use a broad range of operational skills,
across a network of international Service
Centers and distributed engineering teams,
to operate and manage customers’ IT
infrastructure. This increases quality and
flexibility, while reducing costs. Our
award-winning Service Desk offering and
a relentless focus on end users drive
engagement and enablement for over
3.7 million users globally.
In the end user domain in particular, we
increasingly sell a defined Managed Service,
with related service level agreements and
either fixed or consumption-based pricing.
Where customers want more flexibility or
control, we also provide support and skills on
a more transactional basis. Complementing
our Technology Sourcing services, we offer a
range of product lifecycle and maintenance
services, often on a per-device basis.
BREADTH OF SKILLS
Our portfolio of Sourcing, Transformation and Managed Services spans across all relevant
infrastructure areas ensuring our customers have access to a reliable, secure and flexible
technology platform to accelerate their business.
End User
Data &
Analytics
Cloud & Data
Center
Networking
Security
Source
Transform
Manage
Technology Sourcing
IT Strategy & Advisory Services
Design & Build Services
Integration & Migration Services
Support & Maintenance Services
Managed Services
11
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our customer offering
continued
OUR SERVICE CENTERS
Our Service Centers deliver a range of shared
and dedicated capabilities including:
Service Desk
Our goal is to provide a faster and smarter
response to users. We deliver end-to-end
user support, locally and globally, and
provide a ‘follow-the-sun’ service. Our global
Service Desks handle over 1.2 million
contacts per month, using 30 languages,
at a price point and quality tailored to meet
customer priorities. We leverage analytics,
chatbots and intelligent automation to
improve our agent productivity and each
end user’s experience.
Remote Infrastructure Management
The scale of our operation means we can
support users and systems anywhere in the
world, 24 hours a day, seven days a week.
From virtual servers to user devices, our
infrastructure services manage and improve
availability, performance and security.
Network Operations Center
Our Network Operations Center optimises
our customers’ network performance and
availability, to enable productive end users
and reliable connectivity for business
services.
Cyber Defence Center
We identify and highlight existing or potential
security breaches, hacks, malware or
vulnerabilities and ensure that they are
managed through to resolution. In doing so,
we help both Computacenter and our
customers to meet increasingly stringent
compliance standards, as well as protecting
users from cyber-crime and ensuring that our
customers’ businesses remain productive.
12
OUR STRATEGIC PROPOSITIONS
We reflect the voice of the customer by
consolidating our broad portfolio of
capability into three strategic go-to-market
propositions designed to address an
emerging market trend with a specific value
proposition and vision:
• Digital Me – Digital Workplace
• Digital Power – Hybrid IT
• Digital Trust – Security
Digital Me
We design, build and run secure, accessible
digital workplaces that drive productivity
and employee engagement for our
customers. These are differentiated through
a user-centric approach and increasingly
powered by analytics, AI and automation to
drive down cost to serve.
Digital Power
We provide sourcing, advisory and support
services that help our customers to navigate
the complex journey towards a hybrid and
multi-cloud future and create the digital
platforms that power their businesses. For
some, this means building out platforms that
support the rapid growth that their success
in the global digital economy is delivering.
Digital Trust
Our customers face an ever-expanding
cyber-threat landscape, more demanding
compliance requirements and a shortage of
security talent to address it. We have the
skills and partnerships to deliver complete
security solutions, from End Point and
Infrastructure Security through to Cyber
Defence. We enable public sector, industry
and service organisations to undertake
digital transformation securely.
• Workstyle Analysis
• Adoption
• Service Desk
• End User Experience Management
• Client Computing including Windows 10
Evergreen
• Enterprise Mobility
• Virtual Desktop
• Communication and Collaboration
• Application Lifecycle
• End User Connectivity and Local Area
Networks
• Digital Signage
• Print
L
A
T
I
G
I
D
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T
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-
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E
S
• Analytics and Big Data
• Service Management Platforms
• Cloud Native Platforms
• Multi-Cloud (Public)
• Hybrid Cloud
• Server and Storage
• Converged and Hyperconverged
Infrastructure
• Software Defined Infrastructure
and Networks
• Data Center Networks
Infrastructure Security
Information and Industrial Security
• End Point Security
•
•
• Cyber Defence
Information Security
•
•
Identity and Access
• Production Networks
Client Management
Enterprise Mobility
Hybrid Services
Connectivity
PLATFO R M
D I G
COLL
I T A L IDENTITY
A
B
Social Collaboration
Tech Bar
App Store
E
N
Integrated Request
Multi-channel Support
(NGSD)
G
A
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E
SECURITY & CO M P
MENT
N
L I A
N CE
I N F ORMATIO
O
R
A
T
I
O
N
Voice & Video
Messaging
Workspaces
Sync & Share
Analytics
Print
Content Management
INFORMATION SECURITY MANAGEMENT
CYBER DEFENCE
IDENTITY AND ACCESS MANAGEMENT
ENDPOINT SECURITY
INFRASTRUCTURE SECURITY
INDUSTRIAL IT
OFFICE IT
C
O
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13
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018
Our competitive markets
THE IMPORTANCE
OF TECHNOLOGY SOURCING
IN MAKING DIGITAL WORK
Fundamental drivers in the market are
underpinning growth in our Technology
Sourcing business across all our
operating countries. The drive to
digitise their businesses is forcing our
customers to invest more in technology.
Specifically, they are looking to:
• Modernise their workplaces to enable
users through better technology
that attracts and retains talent,
makes them more collaborative and
drives closer customer proximity
(Digital Me)
• Transform their legacy applications,
data centers and processes and
adopt cloud technology, to be more
scalable, flexible and agile
(Digital Power)
• Ensure that their networks and
communications can support their
digitisation and future operational
models and that everything is secure
(Digital Trust)
Our ability to support customers across
the entire hardware and software
lifecycle and to act as a partner who can
deliver at scale, increasingly globally, is
allowing us to increase market share.
Kevin James
Group Chief Commercial Officer
14
Integration Center, Hatfield, UK
We have invested for the long term and this
has increased our geographical coverage,
through the acquisitions of Misco Solutions
B.V. in the Netherlands and FusionStorm in
the USA. This increased coverage
strengthens our ability to execute at scale
and to meet our customers’ requirements
to transform at speed.
Our investment in Integration Centers,
Professional Services skills, powerful
partnerships with our vendors and full
lifecycle services allows us to execute with
precision and accuracy, in often complex
supply chains. Our experience and
investments in innovation allow us to take
solutions to our customers that transform
their thinking and ability to deliver
transformation.
Making it work for customers
A hyperscale cloud provider fitted out new
data centers across Europe, to meet its huge
customer demand and to comply with the
new General Data Protection Regulation
(GDPR) requirements during the year.
The lead time to install data center racks
was over 80 days, putting strain on the
procurement and IT operations teams.
Our ability to innovate and execute at
scale, drawing on our expertise, facilities,
relationships and skills, enabled us to reduce
the lead time to under 10 days. This allowed
the customer’s teams to meet demand
faster and to focus on future capacity
planning, to support its dramatic growth.
For another customer, we deployed many
components of our ‘Digital Me’ workplace
proposition to undertake a complete global
refresh for 55,000 devices. This included a
Windows 10 transformation programme and
our innovative ‘Evergreen’ support service,
which ensured the customer had the latest
Microsoft technology deployed, so it was
more agile and secure. Corporate demand
for Windows 10 transformation is likely to be
a significant driver over the next year, with
the end of support for Windows 7 and
demand for modern devices that fit a user’s
working digital persona.
Customers are also entering the next phase
of digital connectivity. Artificial Intelligence,
big data analytics, Internet of Things and
cloud technology automation are moving
more rapidly than ever before. These trends
are also driving upgrades to network and
security that are among our core areas of
expertise. Modern secure wireless networks,
software-defined networking solutions and
a complete holistic security proposition are
significant growth areas.
A leading financial services organisation
required a campus-based network
transformation to underpin a cultural shift to
remote and non-desk-based working, based
on deployment of new mobile devices. The
legacy user connectivity environment was
complex, unreliable and operationally
inefficient. Computacenter implemented
a software-defined network, leveraging
advanced user authentication and
automation to move the organisation to
a ‘wire free’ environment, simplifying the
network and transforming the secure
connected user experience.
In Germany, we installed a proactive
anti-virus solution for part of the Federal
Government to better protect more than
60,000 users. This has eliminated the risks
they faced from receiving several thousand
infected emails every day, making them
more secure and productive. We delivered
a proof of concept, rollout and a complete
security Managed Service to secure the
customer’s emails and website.
The rapid move to software-driven cloud
solutions is proving complex for many
customers. Our software lifecycle
management services have helped
customers facing the challenges of new and
increasingly complex licensing contracts.
For a major global bank, we provided
licensing, consultancy and strategy advice,
which enabled them to have an informed
position ahead of a major renewal. This
included benchmarking and dedicated
resources to help the customer reduce
complexity and significantly cut the cost
of their new contract.
Technology Sourcing is a service
We integrate and deploy across End User,
Data Centers, Networking and Security. Our
investment in Integration Centers in the UK,
Germany, France, Belgium, the Netherlands
and USA gives us the scale to meet even the
most demanding customer requirements.
Multi-vendor integration into customer-
specific solutions allows us to plan, create,
execute and deliver outcomes that meet
customers’ exact demands.
For example, we transformed the new
starter process for a leading financial
services company. This allowed the customer
to offer technology choice at the recruitment
stage and delivered a comprehensive ‘Digital
Me’ enabled user experience when they
started. Devices, phone, applications and
user enablement were all packaged and
delivered in a controlled process.
For a leading cloud provider, we integrated
over 27 different vendor technologies in
racks, to deploy to its European data centers.
New Kerpen Integration Center
We are delighted to have successfully
migrated to our new Integration Center in
Kerpen, Cologne in 2018. It will be formally
opened in April 2019 and provides us with
considerably more capacity to meet the
growth needs of our European businesses
and provide enhanced services to our
customers.
The new facility, comprising our German
headquarters office building and a 29,600m2
Integration Center, provides a considerable
upgrade in capability and capacity from our
existing facility.
15
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our competitive markets
continued
MULTI-VENDOR INTEGRATION FOR CUSTOMER NEEDS
Data Center and Network deployment
Volume configuration
Total solution configuration e.g. ‘store in a box’
Volume deployment
Mobility – User readiness
New Kerpen Integration Center
16
Powerful partnerships
Computacenter is one of the largest partners
worldwide for most of the major technology
vendors. We invest heavily in working closely
with our partners, to ensure we can
effectively help our customers to Source,
Transform and Manage their IT
infrastructure. The breadth and depth of our
vendor partnerships allows us to help our
customers navigate the complexity and
speed of change in the current market.
Our expertise in our partners’ solutions is
unrivalled, with our people holding more than
10,000 certifications. Our strong working
relationships, our desire to collaborate and
seek innovation and new services helps us
remain relevant, so we are increasingly seen
as the partner of choice.
We are not just working with our established
partners, there is increasing demand for new
vendors and innovative approaches, which
are often integrated with core vendor
technology to provide complete solutions.
The FusionStorm acquisition in
the USA has already widened our partner
network and introduced us to some
innovative solutions, which we look forward
to extending across the Group.
Our ability to design, source, integrate,
deploy and support means we can add
material value in delivering new digital
solutions. This is reflected in another year of
awards and recognition across the Group.
For example:
• Cisco – EMEAR Partner of the Year Award
2018
• Cisco – EMEAR Architectural Excellence
Partner of the Year: Security 2018
• Cisco – Germany – Enterprise Partner of
the Year 2018
• Symantec – EMEA Partner of the Year 2018
• Microsoft Modern Desktop Manager – one
of only six Global Launch Partners
VENDOR PARTNER SOLUTIONS
We hold over 200 partner accreditations
and our people hold over 10,000
certifications.
OUR ESTABLISHED PARTNERS
EMEAR Partner of the
Year 2018
Leading Enterprise Partner
One of eight global
Titanium Black Partners
Synergy Partner of Choice
EMEA 2018
Highest accredited –
Personal System –
Imaging & Printing
Leading Partner in Workplace
and Data Center
Globally third largest
Windows migration partner
Partner of the Year EMEA 2018
Only ServiceNow Gold
Accreditation for Sales
and Service in EMEA
Leading Global Partner
Data Center, Hatfield, UK
17
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our business model
HOW WE CREATE
SUSTAINABLE VALUE
and Managed Services as each part of our
portfolio supports the other.
More information about how we create value
on pages 10 to 13.
Our people
Together, we have created a can-do culture
where people matter and are encouraged to
thrive. Computacenter employs more than
15,000 people worldwide. This includes more
than 4,200 engineers, 4,000 support staff
in our Service Centers, 1,600 project and
service managers and 800 consultants.
Between them, our teams hold over 10,000
technical certifications as well as 200
partner accreditations in project and service
methodologies. These service delivery teams
are backed by the skills experience of our
sales and business services teams. Our aim
is that people want to join and stay with us,
be proud of our reputation, as we learn, earn
and have fun.
More information about how we attract,
retain and develop our people on pages 36
to 38.
Our partners
We have built powerful partnerships with
most of the world’s leading technology
providers, who can rely on our reach and
scale. We are among the largest partners in
EMEA for each of the technology providers
and are also being recognised for our
achievements at a global level. We use our
technology understanding to build solutions
for our customers across all parts of our
portfolio. We aim for our customers to be
confident in our skills and solutions and
trust in our independence and experience.
This means we can help our customer to
make wise choices in a complex and
changing world.
More information about our partners and
Technology Sourcing on pages 14 to 17.
Our brand
Our brand and reputation are underpinned
by our Winning Together values: we maintain
a strong brand by putting customers first,
being straightforward, keeping promises
and considering the long term, while
understanding that people matter and
inspire success. Our goal is ‘Enabling
Success’ by building long-term trust with our
customers, people and partners. We aim to
be strongly recommended by customers for
the way we help them achieve their goals
ensuring customer referenceability. Where
we make acquisitions, we usually transition
the acquired business quickly to the
Computacenter brand and embed our values.
More information about our values can be
found on page 37.
Our infrastructure and physical assets
We have operations in 20 countries and
source for and support customers across
70 countries worldwide. Our customers
demand that our operations are delivered to
high industry standards and we have a range
of ISO certifications including ISO 2001, ISO
20001, ISO 14001 and ISO 27001.
Our Service Centers on the inside front
cover map help us to support our end
user-focused Managed Service contracts
and are underpinned by a common
technology infrastructure to allow
customers to be supported by multiple
centers. In 2019, we opened our latest
Service Center in Poznan, Poland.
Our Integration Centers on the inside front
cover map allow us to stage, test and
integrate technology for our customers. Our
new Kerpen Integration Center is designed
using our knowledge and over 30 years of
experience to be amongst the leading
facilities of its type. Our US acquisition now
enables us to address the local market via
our Integration Center in Newark, CA, in the
heart of Silicon Valley.
In addition, we have a number of underlying
systems that support our business, including
our SAP ERP solution, systems that connect
us to our customers’ sourcing functions,
and systems that underpin our Managed
Services.
We also translate our experience into
intellectual property such as Inventox,
the Computacenter rollout and process
automation tool, and integrate it with vendor
products to create differentiated service
offerings such as Windows 10 Evergreen.
Mo Siddiqi
Group Development Director
Computacenter is a trusted technology
partner to large corporate and public sector
organisations. We help them to Source,
Transform and Manage their technology
infrastructure to deliver digital
transformation, enabling users and
their business.
Our business model is customer-centric,
based on enabling success by building
long-term trust with our customers, our
people and our partners. This underpins
our value to our communities and our
shareholders. In doing so, we leverage our
long-term investment in our infrastructure
and physical assets and place great
confidence in the depth of skills and
knowledge of our teams.
Our customers
We deliver digital technology to some of the
world’s greatest organisations. Our target
market is the largest 500 corporate and
government organisations in each of the
eight countries in which we sell. Our
operational model supports this aim through
having account managers, sales specialists,
consultants, project and service managers
aligned to our customers to build strong
customer intimacy. We give our customer
teams the freedom to make responsible
decisions that meet customer needs faster.
The majority of our customers have been
trading with us for over 10 years, showing the
value of these trusted relationships and the
value of our financial stability. We have a
balanced spread of business with most of
our customers, supporting them with
Technology Sourcing, as well as Professional
18
BUSINESS MODEL AT A GLANCE
Making all of the elements of our
business model work together.
OUR RESOURCES AND RELATIONSHIPS
Our
customers
Our
people
Our
partners
Our
brand
Our infrastructure
and physical assets
OUR LEVERAGE
Vendor
independence
Scale
Infrastructure
SOURCE
CIO
USERS
BUSINESS
MANAGE
TRANSFORM
Powerful
partnerships
Depth of
experience
End user
focus
Financial
stability
Our customer offer sits at the
heart of our strategy.
See page 11 for more information
Breadth
of skills
Worldwide
reach
CREATING VALUE FOR ALL STAKEHOLDERS
Our
customers
Our
people
Our
communities
Our partners
Our
shareholders
19
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our strategic priorities
ALIGNING OUR
CUSTOMER OFFER WITH
OUR MARKETPLACE
20
Group headquarters, Hatfield, UK
HOW IT ALL FITS TOGETHER
Linking our strategy to major trends,
customer offer, risk, performance and
remuneration.
Our four strategic
objectives
Strategic objective 1:
To lead with and grow our
Services business
Strategic objective 2:
To improve our Services
productivity and enhance
our competitiveness
Strategic objective 3:
To retain and maximise the
relationship with our
customers over the long
term
Strategic objective 4:
To innovate our Services
offerings to build future
growth opportunities
Major trends
Our customer
offer
Major trend 1: The shift to digital
Major trend 2: Hybrid IT becomes the norm
Major trend 3: Security risks become a business inhibitor
Major trend 4: Shortage of talent
END USER
DATA &
ANALYTICS
CLOUD &
DATA CENTER
NETWORKING
SECURITY
SOURCE
CIO
USERS
BUSINESS
MANAGE
TRANSFORM
Alignment to
relevant principal
risks and
uncertainties
Strategic
Contractual/Operational
Infrastructure
Financial
People
Strategic
Contractual/Operational
Infrastructure
Financial
People
Strategic
Contractual/Operational
Infrastructure
Financial
People
Strategic
Contractual/Operational
Infrastructure
Financial
People
Measuring
success
Why this is
important to
Computacenter:
Services Contract Base
With an ever increasing
demand from our customers
to make digital work, we are
confident of continuing to
grow our Services Contract
Base in 2019.
Services revenue generated
per Services head
Our relentless focus on
finding the most effective
and cost efficient method
of helping our customers
with their technology
challenges is key to our
competitiveness and hence
our future growth agenda.
Number of customer
accounts
Analysing growth in the
number of customers
generating more than £1
million of profit shows that
profitability increases at the
same rate, demonstrating
the importance of these
customers to our bottom
line.
Services revenue
The Services business is
strategically relevant in
two ways: Managed Services
are the prerequisite for
long-term customer
relationships and retention,
whereas Professional
Services give us visibility
and recognition, by helping
the CIO to make his IT
infrastructure suitable
for digital services.
Linked to
remuneration
21
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018
Description
Over the last three years, we have created a
central Group function that brings together
some of our key resources, tools and
processes focused on bidding. It aims to
grow our Services business beyond market
rates, whilst ensuring we take a disciplined
approach to contract quality. This is crucial,
as the Services market is highly competitive
and winning bidders can suffer significantly
financially if they price contracts too low. The
function incorporates design, architecture,
solution and sales resources, supported by
enabling functions such as account-based
marketing. It has helped to share best
practice and lessons learned, contributing
to key new wins and renewals.
Progress in 2018
Through key renewals in 2018, we maintained
the annual Contract Base which grew by
£6 million to £766 million. We were
particularly pleased with the number of
major renewals. Renewals can suppress the
Contract Base, as customers look for price
reductions. However, this can often be offset
by increasing the scope of our activities.
The acquisition in the Netherlands has added
£18 million of Services Contract Base,
bringing the Group total to £784 million.
Target for 2019
In 2019, the market will remain competitive
and price sensitive, as customers look to
reduce the cost of IT support and
competitors continue to be squeezed in a
low-growth environment. It is therefore
critical that Computacenter maintains high
levels of professionalism and quality, and
that we price as competitively as possible,
while always keeping the long term and
commercial viability in mind. While this
requires a strong nerve, we believe our
competitiveness and focus on the long term
will prove successful in the fullness of time
and competitors will fall by the wayside.
Why this is important to Computacenter
With an ever-increasing demand from our
customers to make digital work, we are
confident of continuing to grow our Services
Contract Base in 2019.
How we define Services Contract Base
This is our forward order book of committed
Managed Services spend as at the year end.
The prior year comparatives are restated on
a constant currency2 basis, to provide a
better indicator of underlying growth.
Our strategic priorities
continued
Strategic objective 1
To lead with
and grow
our Services
business
Services Contract Base £m
766
+0.8%
2018
2017
2016
2015
2014
22
766
760
749
723
709
Strategic objective 2
To improve our
Services
productivity and
enhance our
competitiveness
Services revenue generated
per Services head £’000
89
-1.1%
2018
2017
2016
2015
2014
89
90
89
93
92
Description
Technology encourages standardisation and
commoditisation. Organisations such as
ours must therefore differentiate the way we
deliver value to customers. We do this by
rigorously applying effective processes and
utilising the right resources, including
automation and robotics, in suitable
locations. This allows us to best meet the
needs of our global customers, at a
competitive price.
Progress in 2018
In 2018, we expanded our offshore service
desk operations. We successfully opened a
new low-cost German language service desk
location in Poland, and grew our operations
in a number of locations, not least Mexico
City, Montpellier and Cape Town. While
these operations often expand with new
customers, it is more common to see our
customers feel comfortable with us moving
operations that we originally performed
onshore to lower cost locations, as they gain
confidence in our ability to deliver. This often
happens at contract renewal.
We have established a strong global
automation team based in Budapest,
Hungary, where we look to use the latest
technologies, particularly robotics, to
automate customer-specific processes,
increasing accuracy and reducing cost. While
we do not believe automation is a ‘silver
bullet’ that will immediately change the way
in which we deliver services, it will change
the way we operate over time and as such it
is critical that Computacenter continues to
innovate and understand what is available.
In the Professional Services area, we saw
good growth in Germany and high utilisation,
which has enhanced productivity. However,
rework required on some UK projects has
dampened productivity and played a
significant part in the small reduction in
the productivity measure seen this year.
Target for 2019
Improved performance of the UK
Professional Services business should have
a positive effect on productivity, with the
measure bouncing back from the poor
performance in 2018. We also expect the
German Professional Services business to
continue the progress we have made in
recent years.
2019 will be a year of significant investment
in Service Desk technology, as we deploy
what we call ‘GSD2.0’ and seek to increase
our agents’ productivity. This new technology
will, amongst other things, give our agents
a better call history when customers place
service calls, as well as better access to
knowledge management and enhanced
routing of calls to the appropriate skills.
We are extending our Managed Services
capabilities by opening a new Service Center
location in France, in mid-2019, to increase
our capacity and resilience for Service Desk
operations. The pipeline of Services
opportunities may require us to expand
some of our locations further.
Why this is important to Computacenter
Our relentless focus on finding the most
effective and cost-efficient method of
helping our customers with their technology
challenges is key to our competitiveness and
hence our future growth agenda.
How we define Services revenue generated
per Services head
This is our Group Services revenue divided by
the number of employees directly involved in
the provision of either our Managed Services
or Professional Services offerings. The prior
year comparatives are restated on a constant
currency2 basis, to provide a better indicator
of underlying growth. This measure excludes
the impact of acquisitions made in 2018.
23
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018
Our strategic priorities
continued
Strategic objective 3
To retain and
maximise the
relationship with
our customers
over the long term
Number of customer accounts with
contributions of over £1 million
104
-2.8%
2018
2017
2016
2015
2014
24
104
107
103
95
90
Description
Computacenter focuses on the large account
market in both the public and private sectors,
and looks to maintain these customers for
the long term. The number of large
customers we have has a direct relationship
to our long-term profitability. Growing the
number of customers who contribute more
than £1 million of margin is therefore a key
driver of Computacenter’s profits.
Progress in 2018
In 2018, the number of Group customers who
generated more than £1 million per year of
gross profit, measured in constant
currency2, decreased from 107 to 104,
excluding the acquired entities in the USA and
the Netherlands. Both Germany and France
increased the number of major customers,
while the UK saw a reduction. The reduction
in major UK customers was due to buying
cycles and will bounce back in 2019. The two
acquisitions added 14 new customers that
each generated more than £1 million of gross
profit, bringing the Group total to 118. The
number of customers that generate more
than £5 million of gross profit for the Group
has doubled in the last three years, as many
of our large customers trust Computacenter
to deliver larger-scale projects and a more
significant percentage of their IT operations.
Target for 2019
We expect to see an increase in the number
of major customers in 2019. We are
particularly encouraged by the substantial
growth in the number of customers
generating between £500,000 and £1 million
of gross profit during 2018, which bodes well
for the future. It is also critical that we
secure the major accounts from the
acquired businesses for the long term, as
this is where we will maintain the value of the
acquisitions. We believe that the enhanced
geographical footprint, particularly in the
USA, will also enable us to achieve revenue
synergies, expanding the number of major
customers.
Why this is important to Computacenter
Analysing growth in the number of
customers generating more than £1 million
of profit shows that profitability increases
at the same rate, demonstrating the
importance of these customers to our
bottom line.
How we define customer accounts with
contributions of over £1 million
A customer account is the consolidated
spend by a customer and all of its
subsidiaries. Where our customer account
exceeds £1 million of contribution to Group
adjusted1 gross profit, it is included within
this measure. The prior year comparatives
are restated on a constant currency2
basis, to provide a better indicator of
underlying growth.
Description
Annual Services revenue, which comprises
our Managed Services and Professional
Services businesses, is the key measure for
this strategic objective. Our portfolio and
services development activities are focused
on improving our differentiation and building
competitive advantage, thus laying the
foundation for future Services growth.
Progress in 2018
In 2018, total Services revenue across the
Group, in constant currency2 and before
acquisitions, remained broadly flat. However,
there were some significant ups and downs
in the different parts of the business. In
Germany, we saw solid progress from our
Professional Services business, which grew
at 8.9 per cent. Given the size and scale of the
business and the challenge of hiring talent,
which is particularly difficult in the German
market, this is probably approaching the
maximum growth we can achieve in a
calendar year. Our Managed Services
business in Germany has not been as
successful. We have, without doubt, had
some operational challenges and while these
are predominantly behind us, they have
reduced our appetite for growth in this
challenging part of the market. In the UK,
Professional Services revenue looked weak
relative to 2017. However, this was
predominantly due to a large and very
successful contract that we completed
in 2017 with a UK central Government
department, which counted for more than
25 per cent of our entire Professional
Services business in 2017. Excluding this,
2018 was a year of progress. In UK Managed
Services, the year turned out better than we
had predicted although much remains to be
done. We achieved a high rate of renewals
and added some new contracts. In France,
revenue declined due to the loss of a
contract towards the end of 2017.
The two acquisitions have added £16 million
of Services revenue in 2018 which, whilst
included in the results of the Group, have
been excluded from this measure. The Group
Services revenues including acquisitions is
£1,175 million and 1.1 per cent higher than the
previous year in constant currency2.
Target for 2019
From a Professional Services point of view,
we should see steady progress again in
Germany, as we have done for the last few
years. The UK should show growth, given it
has a less challenging comparative than in
2018. The Managed Services marketplace is
challenging. However, the pipeline for new
business across our geographies is
somewhat more encouraging. There are
some significant renewals that will not have
a substantial effect on our 2019 revenues
but will need to be secured in order to
maintain progress in 2020. During 2019, we
expect to gradually introduce our Services
capability to the acquired entities in the
Netherlands and the USA.
Why this is important to Computacenter
The Services business is strategically
relevant in two ways: Managed Services are
the prerequisite for long-term customer
relationships and retention, whereas
Professional Services give us visibility and
recognition, by helping the CIO to make his IT
infrastructure suitable for digital services.
How we define Services revenue
Services revenue is the combined revenue
of our Professional Services and Managed
Services business. The prior year
comparatives are restated on a constant
currency2 basis, to provide a better indicator
of underlying growth.
Strategic objective 4
To innovate
our Services
offerings to build
future growth
opportunities
Services revenue £m
1,159
-0.3%
2018
2017
2016
2015
2014
1,159
1,162
1,082
1,094
1,039
25
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 POWERFUL PARTNERSHIPS
WE HELPED
MUNICH REDUCE
RISK TO THEIR IT
INFRASTRUCTURE
THE CITY OF MUNICH AND COMPUTACENTER HAVE A LONG-STANDING
PARTNERSHIP. TOGETHER, WE HAVE DEVELOPED A STANDARDISED
APPROACH TO RISK MANAGEMENT – A DEMANDING AND COMPLEX
UNDERTAKING IN VIEW OF THE DIVERSE REQUIREMENTS ACROSS THE
VARIOUS ORGANISATIONS. TODAY THERE IS A UNIFORM SOLUTION THAT
ENJOYS A HIGH LEVEL OF USER ACCEPTANCE AND DELIVERS
SIGNIFICANTLY IMPROVED SECURITY.
Manfred Lieske
Sector Director Germany, Computacenter
26
What we did
Computacenter analysed the security guidelines
and processes for the City of Munich’s IT (it@M)
and identified possible hazard scenarios. Based
on these results, we developed standardised
templates and assessment processes.
Computacenter now supports it@M in ongoing
risk management and process optimisation.
How this helped the City of Munich
The amount of time spent on risk analyses has
been significantly reduced. Through defined
procedures, risk management has been
embedded in IT development processes and the
results of the analyses can now be objectively
compared and remedial action implemented.
Risk analyses per year:
80
20,000
Devices:
Source
Transform
Manage
27
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 POWERFUL PARTNERSHIPS
SUPPORTING
THE FRENCH ARMED
FORCES’ DIGITAL
TRANSFORMATION
COMPUTACENTER HAS RENEWED THIS INFRASTRUCTURE
CONTRACT TWICE. WE ARE IDENTIFIED AS ONE OF THE IT
PARTNERS OF THE FRENCH MINISTRY OF DEFENCE FOR
THEIR DIGITAL TRANSFORMATION AND WE CAN BE VERY
PROUD AND HONOURED TO SUPPORT THE MINISTRY IN
THEIR MAIN CHALLENGE OF ENSURING THE EFFICIENCY
OF FRENCH ARMED FORCES.
Stéphane Bécue
Public Sector Director France, Computacenter
28
What we did
This supply and services contract is SLA-driven,
with Computacenter supporting the Armed
Forces’ IT function (DIRISI) in its role as a service
provider. The digital transformation includes
end user device refresh and security-cleared
technical support in infrastructure projects.
How this helped the French Ministry of Defence
The French Ministry of Defence needed to
strengthen its operational and contractual
processes, whilst upgrading the tools it deploys.
The Computacenter contract enables them to
undertake this transformation for end users and
the infrastructure, without compromising their
security or commercial transparency.
End users:
210,000
450,000
Device moves per year:
Source
Transform
Manage
29
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 POWERFUL PARTNERSHIPS
PROTECTING
PATIENT DATA
THROUGH
NETWORK
ANALYTICS
THE BUSINESS-ENABLING SECURITY SOLUTION DELIVERED BY
COMPUTACENTER AND CISCO PROVIDES NHS DIGITAL’S SECURITY
ANALYSTS WITH FULL VISIBILITY OF TRAFFIC PATTERNS AND POTENTIAL
THREATS ACROSS THE UK’S HEALTH AND SOCIAL CARE NETWORK. THE
NETWORK, WITH ITS ENHANCED SECURITY, ENABLES HEALTHCARE
PROFESSIONALS AT REGIONAL HOSPITALS, CLINICS AND GP SURGERIES
TO SHARE AND PROTECT VITAL DIGITAL PATIENT DATA, MAXIMISING
EFFICIENCY AND ENABLING BETTER QUALITY CARE.
Chris Price
Public Sector and Strategic Partners Director, UK, Computacenter
30
What we did
Computacenter designed and deployed a network analytics
solution and its hardware platform to provide an end-to-end
view of security events. Based on Cisco Stealthwatch and
Splunk Data Analytics, the solution identifies, tracks and
reports potentially malicious behaviour. These are resolved
using security playbooks created by Computacenter and Cisco.
How this helped NHS Digital
NHS Digital’s security analysts have full visibility of traffic
patterns and potential threats across their network, enabling
national responses to system-wide security incidents.
Healthcare professionals at regional hospitals, clinics and GP
surgeries will be able to share and protect vital digital patient
data, maximising efficiency and enabling better quality care.
Email accounts protected:
1.3m
99.9%
Security analytics availability:
Source
Transform
Manage
31
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 POWERFUL PARTNERSHIPS
TRANSFORMING
THE END USER
EXPERIENCE
WORLDWIDE
COMPUTACENTER’S EFFICIENT APPROACH TO GLOBAL TRANSITION
ENABLED US TO EXTEND AIR LIQUIDE’S EMEA END USER SERVICE TO THEIR
NORTH AMERICAN USERS WITH MINIMAL DISRUPTION IN THE SHORTEST
POSSIBLE TIMEFRAME. THIS MODEL WILL SUPPORT THE INTEGRATION
OF A FURTHER 30,000 USERS WORLDWIDE AND ENABLE THE GLOBAL
INNOVATION AND TRANSFORMATION PROGRAMME WHICH
COMPUTACENTER DEVELOPED DURING THE TRANSITION.
Mark Peter
Head of International Operations, Computacenter
32
STRATEGIC REPORT
ANNUAL REPORT AND ACCOUNTS 2018
What we did
Computacenter’s innovation strategy for Air Liquide
builds upon the existing European end user service
and extends it to the Americas. Helpdesk services
from Budapest and Mexico City complement onsite
support provided in each country. The transformation
includes analytics, automation and robotics,
chatbots and machine learning.
How this helped Air Liquide
Air Liquide now has a single point of contact for
all users, with Computacenter providing full
accountability for the service. This standardisation is
part of the customer’s globalisation plan for end user
support, driving innovation and reducing costs.
End users:
30,000
>13
Years service delivered for:
Source
Transform
Manage
33
POWERFUL PARTNERSHIPS
USER-DRIVEN
WINDOWS 10
DEPLOYMENT
WITH <1 HOUR
DOWNTIME
THANKS TO THE DETAILED PLANNING BY OUR LONG-TERM IT
SERVICE PROVIDER COMPUTACENTER, IN COMBINATION WITH
THE OPTIMAL USE OF THE INVENTOX ROLLOUT DATABASE, WE
WERE ABLE TO MIGRATE THE TARGET NUMBER OF CLIENTS TO
WINDOWS 10, EVEN IN PEAK PERIODS.
Lars Zellmer
Senior Manager, Group Leader Service Points
PwC IT Services Europe GmbH
34
STRATEGIC REPORT
ANNUAL REPORT AND ACCOUNTS 2018
What we did
With Computacenter’s best practice rollout tools, employees
could determine the time and place of migration for
themselves. New devices were shipped from Computacenter’s
Integration Center in Kerpen, ready-loaded with applications.
User data was transferred, and data securely wiped from the
returned devices.
How this helped PwC
11,000 notebooks and 10,000 docking stations were replaced
within 10 weeks at PwC. The waiting period for the largely
mobile employees was one hour maximum. This ensured
maximum efficiency for the users, and provided high levels
of transparency to PwC’s IT leadership.
Mobile users:
11,000
10
Number of weeks replaced within:
Source
Transform
Manage
35
Sustainability
Barry Hoffman
Group Human Resources Director
Computacenter and into the industry more
generally. In the UK, these include our
industrial placement programme, our
graduate and sales associate programmes
and our apprenticeships. We also attend
numerous careers fairs at schools and
universities and offer a range of support and
advice for young people, such as work
experience. The Group has won a number of
awards for its approach to employing young
people, including being recognised as a top
company for graduates to work for in the
2018/19 JobCrowd awards.
To attract young women into Science,
Technology, Engineering and Maths (STEM)
careers, we run an outreach programme in
schools, colleges and universities and help
young women to identify their skills and
career options through our Women in Science
and Engineering Ambassadors. We also
support a range of activities through our
STEMNET Ambassadors and link to schools
across the country through our Inspire the
Future Ambassadors.
In Germany, we train young people in digital
media and offer insight into working in the
IT industry. We also bring young women
together to learn about technical and
science careers and send apprentices to talk
to school students about training, work and
career opportunities.
Diversity and inclusion
One of our highest priorities is to make sure
that we support and protect our people and
suitably recognise their contribution. We
therefore want to foster a culture that allows
everyone to contribute fully and be
themselves at work. The more we do that,
the more we can leverage their potential,
which helps us to deliver better service to
our customers.
Our People Panel is chaired by Mike Norris,
our CEO, and brings together more than 30
people from across the Group, with a mission
to create a culture which is fair, where we
value and respect differences and
understand that people matter. To do this,
the People Panel:
• promotes a fair and inclusive culture;
•
researches best practice and shares it
across our business;
• encourages change in diversity and
inclusion; and
• measures progress and communicates.
The People Panel has helped us to embed
diversity and inclusion in everything we do,
through one of our core Winning Together
values, understanding people matter. To
focus our efforts, we have divided diversity
and inclusion into six subject pillars:
• accessibility and wellbeing;
•
life balance;
• LGBT+ allies;
future talent;
•
•
focus on women; and
• culture.
Throughout the year, we have undertaken
a wide range of activities in each of these
areas. For example, as part of our
accessibility and wellbeing agenda, our UK
business has signed up to be Level 1
Disability Confident. The Disability Confident
scheme aims to help employers make the
most of the opportunities provided by
employing disabled people. We have also
established a disability function in
Germany, so we manage disability in the
appropriate way.
Life balance is a major topic for the People
Panel and we want to make a good life
balance central to our culture. We are looking
at ways to offer more flexibility for our people
and, for example, published guidelines on
remote working during the year.
Ensuring our LGBT+ colleagues feel welcomed
and comfortable at work is particularly
important to us. We supported the annual
Pride Day and distributed specially made
Pride badges with the Computacenter logo.
We also have an online forum for employees
to network and build a community, and have
organised a series of themed events to bring
people together.
To help our future talent feel supported and
included, we have established FreshMinds in
the UK and Future Talent Connect in Germany.
These communities host events to connect
new joiners and encourage partnerships
between our country units.
Being socially responsible benefits the
environment, the community, our
shareholders, customers and employees
alike. We are therefore committed to
carrying out business responsibly and
remain a member of the United Nations
Global Compact (UNGC). This means we
incorporate the UNGC and its principles
into our strategy, culture and day-to-day
operations, focusing on three main areas
– our people, the environment and the wider
community. We also have a strong focus on
ethical business and preventing bribery and
corruption.
Non-financial information statement
The content of this section forms our
non-financial information statement for the
purposes of the Companies, Partnerships
and Groups (Accounts and Non-Financial
Reporting) Regulations 2016, with the
exception of the business model which can
be found on pages 18 to 19, principal risks
and uncertainties (pages 40 to 45) and key
performance indicators (pages 22 to 25).
Our people
Alongside the services we deliver to our
customers and the innovations we create,
our people are a major source of competitive
advantage for us. We therefore continually
develop our approach to attracting and
retaining talented individuals, to support
our business growth.
Managing talent
Ensuring we have the people we need
requires us to carefully manage the talent
we already have and to bring new talent into
Computacenter. Every year, the Group Human
Resources Director conducts a detailed
succession planning exercise with the Board,
which covers the three most senior levels
of management. This is supported by
succession planning exercises at every level
throughout the Group. In 2018, we also ran
a talent discovery programme, which helps
us to match our current and future strategic
resourcing needs with the talent in the
business, so we can identify gaps we will
need to fill.
We have continued with our wide range of
programmes to attract young talent into
36
Our focus on women has included
networking events and the Growing Together
initiative, which encompasses group
coaching and learning, mentoring, and talent
recognition, as well as addressing cultural
bias. We were pleased that two of our people,
Clare Parry-Jones and Angela Counsell, won
Manager of the Year and Graduate of the Year
respectively at the CRN Women in Channel
Awards 2018. Women@Work is well-
established in Germany and offers a wide
range of networking, coaching, mentoring
and learning opportunities. Computacenter
has ranked as one of the top companies for
women to work for in Germany, according to
Brigitte magazine.
Being a successful global company requires
us to understand and respect cultural and
language differences. We have run
unconscious bias training at a number of
locations and plan to roll this out across the
Group. We also have a range of other
initiatives, such as posting tips and
information to ensure we help colleagues
during Ramadan and introducing diversity
holidays in the USA, which recognises that
some national holidays may not be a good
fit for all employees and allows them to take
a culturally appropriate holiday of their
choice instead.
Gender diversity
The table below shows our gender diversity
at the year end:
2018
Women
2
Men Women
2
7
21
87
15
2017
Men
8
66
3,874 12,065
3,449 11,092
3,897 12,159
3,466 11,166
Board
Senior
managers
Other
employees
Total
The proportion of women employed in
Computacenter is in line with industry norms
and we are committed to increasing it
through the programmes described above.
Winning Together – our values
Our Winning Together values are
fundamental to Computacenter’s culture
and the way we work every day.
Winning
Together
Our Values
We win by:
Putting customers first
We work hard to get to know our customers
and really understand their needs. That let us
use our experience to help them in the right
way at the right time.
Being straightforward
We’re practical and pragmatic. We believe
in solutions over talk. We express ourselves
in the clearest possible way. And we’re open
and honest in all of our dealings.
Keeping promises
We do our very best to keep our promises.
And when that’s difficult, we help our
customers find other ways of solving
their problems.
We do this together by:
Understanding people matter
We build strong, rewarding, supportive
relationships. And we treat people as we
expect them to treat us.
Considering the long term
We’re building a business for the long term.
This leads our decisions and actions and
helps people really trust us.
Inspiring success
We’re proud of the people we work with.
We do the best to support each other through
the downs and we always celebrate the ups.
As we grow, maintaining the values and culture that we hold dear and that have made us the
Company that we are today becomes even more important. Reflecting this, our performance
management process links directly to our values and assesses how each of our people
behaves, as well as what they achieve. We also use our values in recruitment, so we bring in
people who are already aligned to them.
37
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Sustainability
continued
Engagement
Towards the end of the year we ran an
employee engagement survey, with around
10,000 of our people taking part. This showed
an improvement in employee engagement
and enablement, compared with our
previous survey in 2016. One of the largest
improvements was the proportion of
employees who would recommend
Computacenter as a great place to work. Our
people were also more likely to report that
their jobs were challenging and interesting.
However, the survey also identified areas
where more work is required, notably in
internal communication and opportunities
for career development within the Group.
Our Senior Independent Director, Ros Rivaz,
has engaged with employee representatives
such as our European Works Council during
the year. This gives us a firm foundation for
complying with the 2018 UK Corporate
Governance Code, which requires the Board
to engage with the wider workforce.
Our people policies
Computacenter has a range of people-
related polices, covering topics such as
dignity at work, health and wellbeing,
recognition and reward, and whistleblowing.
Together, they are designed to ensure that
our people are supported, protected and
suitably recognised for the contribution they
make, and that we are an inclusive and
ethical employer, with a diverse, talented and
motivated workforce.
Our people can report any HR policy
compliance issues to their line manager or
HR, or they can call our Safecall
whistleblowing hotline, which allows them to
report in confidence. All calls to the hotline
are handled by an independent third party
and the issues are monitored, resolved and
reported to the Audit Committee. All other
issues are dealt with operationally, through
the HR function.
We also monitor other indicators of policy
compliance, such as the number of
grievance or disciplinary proceedings, which
we aggregate at a country level. Our HR
managers review this data to see if there are
38
trends requiring Management action. No
material policy breaches were identified
during the year, either through the
whistleblowing hotline or our other reporting
and monitoring mechanisms.
Improving the way we work
In 2019, we will continue to enhance our
people-related processes and systems.
In particular, we will be modernising
performance management to make it an
ongoing process rather than an annual
event. We will also be creating a more
engaging employee experience. This will
make it easier for our managers and people
to access our processes, for example
through increased self-service, and ensure
a consistent approach to managing people
across the Group.
Health, safety and wellbeing
Health and safety policy
Protecting those who work for and with us,
as well as customers and members of the
public, is extremely important. The Group’s
health and safety policy is to create and
maintain, as far as reasonably practicable,
a working environment which does not pose
an undue risk to health and safety. Our
approach is based on identifying and
controlling hazards. Preventing all incidents,
particularly those involving personal injury
and damage to equipment or property, is a
priority. Line managers are required to
ensure that the policy is implemented in their
area of responsibility. It is a condition of
employment that our people observe the
policy and failure to do so can result in
disciplinary action.
During 2018, we have seen a solid health and
safety performance driven by an established
Health & Safety Management System. We
have continued to improve the Accident
Incident Rate (AIR), which is the number of
accidents per 1,000 employees to 2.47 in the
UK, and the Accident Frequency Rate (AFR),
which is the number of accidents per 100,000
working hours, to 0.46 in the UK.
Health and safety performance
Average results for 2018:
UK
Germany
France
AIR
2.47
2.99
1.51
AFR
0.46
0.62
0.31
Since moving our online training provider in
April 2017, we have had a continual uptake on
the courses being rolled out with over 6,044
courses completed so far – Display Screen
Equipment (2,284), Manual Handling (1,851),
Environmental Awareness (1,618), Fire
Warden (82), Asbestos Training (196), Ladder
Safety (5), Control of Substances Hazardous
to Health (4) and Risk Assessment (4).
Wellbeing
In 2018, we further increased our focus on
our people’s wellbeing, with initiatives across
the Group focusing on both physical and
mental wellbeing. For example, in the United
States we continue to work with Cigna, our
healthcare provider, to promote health and
wellbeing and making sure our people are
aware of the free health and wellness
resources available.
In Germany, we have introduced training for
leaders, to deepen their knowledge of
occupational safety and health protection
and to improve the sense of leadership
responsibility. We also strengthened our
workplace-specific instructions on
protecting occupational safety and health.
Our Spanish business has a dedicated Health
& Safety specialist and committee, who
make sure we have the healthiest
environment possible for our employees.
We also have incentive programmes such as
discounts at a local climbing centre, spa
and massages.
In the UK, we have introduced health and
wellbeing champions across the business,
who are trained in mental health first aid. We
have also launched a UK wellbeing policy and
promoted wellbeing initiatives at internal
conferences. Other initiatives include training
employees in CPR and working towards the
Safe, Effective, Quality Occupational Health
Service external accreditation standards for
our occupational health service.
The environment
During 2019, we will install a photovoltaic
system on the roof of our Operations Center
in Hatfield. The system will have a surface
area of 10,324m2 and will enable us to
generate 1.9 million kWh of electricity each
year, equivalent to 22 per cent of the
Operations Center’s annual usage. This will
reduce our CO2 emissions by more than
1.1 million kg a year, while also cutting costs
for us.
Wider community
We support our wider communities by
working with selected charities. While this is
important to us, we do not have a formal
policy setting out our approach in this area,
as we do not believe it has a material impact
on our business.
Our three main aims are to:
• demonstrate our commitment to the
wider community;
• motivate staff across the Group, by
encouraging teambuilding activities
in a worthwhile cause; and
• communicate Computacenter’s core
values to customers, staff and other
stakeholders.
Around the world, we continue to support
initiatives to raise money for local charities,
as well as supporting events and initiatives
proposed and run by our employees.
In France, we support the ‘Children of the
Desert’, who work with the Moroccan
populations isolated in the desert and
provide access to education for all children.
We have also continued our partnership with
Aide et Action, to provide support for
schooling of children who are forced into
child labour due to their circumstances. We
have run further blood donation campaigns
in Germany, in conjunction with the Red
Cross. In Spain, we continued to work with
our charity partner Acnur Comite Catala per
als refugiats, a local branch of United
Nations High Commissioner for Refugees
(UNCHR).
Our newly elected UK charity partners, which
were selected by employees, are Make A Wish
Foundation, Dementia UK and the British
Heart Foundation. Fundraising for these
charities is steered by a charity committee,
comprising a cross section of employees,
from branch administrators to senior
management. Each of these charities will
receive considerable support from us. We
also offer a Give as You Earn scheme, through
which employees can make monthly
contributions to any UK charity of their
choice through automatic deduction from
their salaries.
How we do business
Protecting human rights
As signatories to the UNGC, we are committed
to upholding internationally proclaimed human
rights. For Computacenter, human rights fall
into two areas: protecting the rights of our
employees and ensuring we are not complicit
in human rights abuses in our supply chain.
The human rights of our employees are
covered by the people policies and health
and safety policies described earlier.
Human rights in the supply chain primarily
relate to the risk of modern slavery. We have
published our second Modern Slavery
(Transparency in Supply Chain) Act, Section
54 statement. We continue to work with a
diverse set of suppliers and when selecting
who we want to work with, we ensure that
our terms of engagement are clear and that
they support both our Group values and our
wider corporate social responsibility
objectives. Our Supplier Code of Conduct sets
out the 10 principles in the UNGC, which
includes human rights. We expect all
suppliers to abide by these principles.
We have increased our focus on the risk of
modern slavery over the last year and have
worked across our business operations to
identify our risk areas. We will continue with
our commitment to ethical and responsible
business practices, ensuring that if modern
slavery is identified anywhere within our
supply chain, we will not tolerate it.
The Group publicises its whistleblowing
hotline to suppliers, to enable reporting of
any suspected human rights issues. There
were no significant issues identified during
the year.
Preventing bribery and corruption
Computacenter has a Group Business Ethics
Policy, covering matters ranging from how
we choose the companies we work with to
avoiding conflicts of interest. We also have
an Anti-Bribery and Corruption Policy,
supported by a Code of Conduct and a
number of guidance notes, covering subjects
such as due diligence on third parties,
communications and risk assessments.
Internal audit tests compliance with our
policies and our control regime is supported
by our Safecall whistleblowing hotline. No
material breaches of our policies were
identified during the year.
We continued our zero-tolerance approach
to anti-bribery and corruption in 2018.
Anti-bribery and corruption training is an
integral part of our induction process across
the Group. We have also continued to develop
the awareness of our external whistleblowing
hotline across the Group, ensuring that
employees, contractors, partners and
suppliers know how they can report any
issues concerning them in confidence.
39
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Principal risks
and uncertainties
Mitigation that helps us
to deliver our strategy
Our risk governance model
The Board
Nomination
Committee
Remuneration
Committee
Executive
Committee
Audit
Committee
First line
of defence
Risk ownership and application
of internal controls
Second line
of defence
Compliance, oversight
and assurance functions
Third line
of defence
Independent assurance
Group Internal Audit
Country-specific Management
Group Business Development
Group Information Security
Group Human Resources
Group Operations
Group Legal/Compliance
Group Information Assurance
Group Technical Assurance
Country-specific Take-On
Group Risk Committee
Group Compliance
Steering Committee
Anti-bribery & Corruption
Competition Law
Export Control
Whistleblowing
Data Protection
Environmental
Health & Safety
1. Risk overview/landscape
Our long-term success is built on a clear
strategic direction, contractual and
operational excellence and effective business
services functions, such as Finance, Human
Resources and Legal & Contracting which
support customer-facing staff to fulfil their
obligations effectively. All of this is
underpinned by a secure IT infrastructure,
hosting both internal and customer
platforms. Our strategic, contractual and
infrastructure risks are largely determined
by the industry we operate in and our
long-term approach to adding value. Our
financial and people risks are defined by the
wider economic environment, the way we run
our business day-to-day and our long-term
staffing needs. While outside factors are
beyond our control, our risk management
approach is committed to managing the
impact of these influences, while controlling
the internal elements vital to our success.
2. Risk appetite
Our risk appetite is strongly influenced by
our experience in the industry sector. At an
operational level, we have a higher risk
appetite for business development where we
have experience of the risks and a lower risk
appetite where we have less experience. This
is supported day-to-day by our operating
policies and governance processes which
include decision-making support and
authority over new contracts and contract
changes.
3. Risk culture
Risk management and governance processes
are well-established and understood within
the business and operate at all levels.
Strategic-level risks are monitored by the
Risk and Audit Committees, as well as by the
Board. Lower-level operational risks are
identified, analysed and mitigated at a
functional level on an ongoing basis, using
well-embedded processes.
40
4. Risk identification and impact
The Group Risk Committee reviews our
principal risks, which are the barriers to
meeting our strategic goals, on an annual
basis. This top-down approach includes
assessing whether emerging risks are
significant enough to warrant inclusion in
the Group Risk Log. If so, the likelihood of
occurrence and potential impact are
considered and the risk is subject to regular
review. The impact of existing risks is also
reviewed. The Group Risk Log is reviewed by
both the Audit Committee and the Board. The
key risks are considered further in relation
to the long-term Viability Statement.
Lower-level risks are identified and analysed
through the Group Operating Business Risk
Assessment process, the results of which are
also reviewed by the Group Risk Committee.
This includes validating them against the
principal risks to ensure that all potential
threats are considered. Lower-level risks
are often triggers for crystallising principal
risks so their careful management remains
an important consideration.
5. Risk trends
The overall risk landscape has increased
relative to last year as a result of external
factors affecting the business.
Strategic: The strategic-level risk profile is
largely one of long-term risk due to
technological change and Computacenter’s
ability or otherwise to innovate effectively.
Although our response continues to mature,
the level of technological change and our
continuing need to innovate to remain
competitive increases this risk over time.
We have also recognised geo-political risk in
this category for the first time, arising from
our increasingly global operations.
Contractual/Operational: Having
successfully completed our General Data
Protection Regulation (GDPR) compliance
project ahead of the due date in May 2018,
we have widened the definition of the risk
this year to one of overall data privacy failure.
Additionally, the failure to integrate
adequately the FusionStorm business
into the wider Group structure has been
recognised as a new risk.
HOW RISK LINKS TO STRATEGY
Our risk management process helps
maximise the chances of achieving our
strategic objectives.
Infrastructure: Although there has been
no overall change in the impact or likelihood
of occurrence, cyber security remains at the
forefront of discussions at both the Risk and
Audit Committees and will continue to do so.
Financial: Risks relating to the departure of
the UK from the EU remain under review. The
executive-level committee we established
last year continues to assess the potential
risks in more detail as well as our response to
them. Further details can be found on pages
56 to 66 in the Group Finance Director’s review.
People: This year we have recognised the risk
of failing to ensure adequate diversity in our
workforce and thereby restricting the talent
we employ.
Our four strategic objectives
Risk categories:
Strategic Risks
Market shift in technology usage
Not investing appropriately
Geo-political risk
Contractual/Operational Risks
Lack of effective pre-contract processes
Lack of effective post-contract delivery
Data privacy failure
FusionStorm integration
Infrastructure Risks
Cyber threat
Integrity failure of critical systems
Financial Risks
Poor control of debt management
Under-investment in indirect costs
UK’s departure from the EU
People Risks
Poor staff recruitment and retention
Inadequate succession planning
Failure to ensure adequate diversity
Related material:
How it all fits together – page 21
Accountability – page 76
Strategic
objective 1:
To lead with and grow
our Services business
Strategic
objective 2:
To improve our
Services productivity
and enhance our
competitiveness
Strategic
objective 3:
To retain and
maximise the
relationship with our
customers over the
long term
Strategic
objective 4:
To innovate our
Services offerings to
build future growth
opportunities
41
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Principal risks and uncertainties
continued
Group risk log 2018 heat map
Unchanged risk
Decreased risk
Increased risk
1. Strategic Risks
Alert status
Increased likelihood
New risk recognised in relation to
geo-politics
Risks
• Market shift in technology usage
making what we do less relevant or
superfluous (CEO)
• Not investing appropriately to
enhance our competitiveness (CEO)
• Geo-political risk arising from
our increasingly global operations (CEO)
Principal impacts
• Reduced margin
• Excess operational staff
• Contracts not renewed
• Missed business opportunities
Response to risks
• Well-defined Group strategy, backed
by an annual strategy process
that considers our offerings against
market changes
• Group Investment & Strategy Board
which considers strategic initiatives
• Additional measures including CEO-led
country, sector and win/loss reviews
Risk owner
• Chief Executive Officer (CEO)
3
2
1
4
5
Impact
1: Strategic Risks
2: Contractual/
Operational Risks
3: Infrastructure Risks
4: Financial Risks
5: People Risks
d
o
o
h
i
l
e
k
i
L
42
Related material:
Our strategic priorities – page 20
To lead with and grow our Services business
– page 22
2. Contractual/Operational Risks
Alert status
Increased likelihood
Broadened definition of data privacy failure
New risk recognised in relation to FusionStorm
Risks
• Lack of effective pre-contract
processes resulting in poor design,
costing and pricing (GSD/GQAD/CMD)
Principal impacts
• Customer dissatisfaction
• Financial penalties
• Contract cancellations
• Reputational damage
Response to risks
• Mandatory governance processes
relating to bids and new business
take-ons including risk-based
decision-making assessments and
new tooling
• Board oversight of significant bids
• Appointment of a Group Quality
Assurance Director to provide
independent quality assurance of key
bids and delivery programmes and to
improve the extraction of value from
our lessons learnt processes
Risk owners
• Country Managing Directors (CMD)
• Head of Legal & Contracting (HL&C)
• Group Delivery Director (GDD)
• Group Quality Assurance Director
(GQAD)
• Lack of effective post-contract
delivery (GSD/GQAD/GDD)
• Data privacy failure (HL&C/GCIO)
• Failure to integrate FusionStorm
effectively (DD)
• Reduced margins
• Loss-making contracts
• Reduced service and technical
innovation
• Regular commercial ‘deep dives’ into
troubled contracts and challenging
transformation projects
• Data privacy audit programme
• FusionStorm integration plan in place
with ongoing monitoring of key risks to
ensure its success
• Group Chief Information Officer (GCIO)
• Group Services Director (GSD)
• Group Development Director (DD)
43
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Principal risks and uncertainties
continued
Related material:
Our Service Centers – inside front cover
Group Finance Director’s review – page 56
Sustainability – page 36
3. Infrastructure Risks
Alert status
Unchanged risks, but some increase in activity
Risks
• Cyber threat to Computacenter’s
networks and systems, arising from
either internal or external security
breaches, leading to system failure,
denial of access or data loss. Cyber
threats introduced by Computacenter
to its customers’ networks and
systems for whatever reason (GCIO)
Inability to deliver business services
Principal impacts
•
• Reputational damage
• Customer dissatisfaction
Response to risks
• Well-communicated Group-wide
information security and virus
protection policies
• Specific inductions and training
for staff working on customer sites
and systems
• Specific policies and procedures for
staff working behind a customer’s
firewall
• Ongoing and regular programme
of external penetration testing
• Policies ensuring Computacenter
does not run customer applications
or have access to customer data
• Regular review of cyber security
controls
Risk owner
• Group Chief Information Officer (GCIO)
•
Integrity failure of our critical
systems (GCIO)
• Financial penalties
• Contract cancellations
• All Group standard systems built
and operated on high availability
infrastructure, designed to
accommodate failure of any single
technical component
• All centrally-hosted systems built
and operated on high availability
infrastructure, with multiple levels
of redundancy
• All centrally-hosted systems benefit
from dual network connectivity into
core data centers designed to
accommodate loss of network service
• Standing agenda item for each
meeting of the Group Risk Committee
44
4. Financial Risks
Alert status
Unchanged risks
Risks
• Potential effect of UK’s departure
from the European Union on our
business as a result of anti-UK
business sentiment, specific exit
strategies or short-term issues such
as foreign exchange volatility (FD)
• Under-investing in our indirect costs,
particularly Sales, leading to missed
opportunities and top line impact
(CEO/CMD)
Principal impacts
• Missed business opportunities
• Non-renewal of contracts
• Reduced revenue
• Reduced margin
Response to risks
• Potential effect of the UK’s departure
from the EU is subject to ongoing
review by the Group Risk Committee,
with particular short-term emphasis
on foreign exchange volatility and
hedging operations. Executive-level
committee reviews risks and
mitigations in more detail
Risk owners
• Chief Executive Officer (CEO)
• Group Finance Director (FD)
• Poor control of debt management (FD)
• Financial impact through bad debts
•
Implementation of debt management
best practice after centralising
Group-wide collection functions at the
Budapest Finance Shared Service
Centre
• Monthly review by Management to
assess sales teams’ ongoing
performance and future effectiveness
• Country Managing Directors (CMD)
5. People Risks
Alert status
Increased likelihood
New risk recognised in relation to diversity
Risks
• Failure to recruit and retain the right
calibre of staff to our talent pool with
focus on senior positions in Sales,
Services and Projects (GHRD)
Inadequate succession planning or
insufficient depth within key senior
executive positions (GHRD/CEO)
• Failure to ensure adequate diversity
thereby restricting the talent we
employ (GHRD)
•
Principal impacts
• Lack of adequate leadership
• Customer dissatisfaction
• Financial penalties
• Contract cancellations
• Reputational damage
Response to risks
• Succession planning in place for top
50 managers across the Group
• Regular remuneration benchmarking
•
•
Incentive plans to aid retention
Investment in management
development programmes
• Regular staff surveys to understand
and respond to employee issues
• Specific diversity projects in place
relating to accessibility and wellbeing,
life balance, LGBT+ and allies, future
talent, focus on women and culture
Risk owners
• Group Human Resources Director (GHRD)
• Chief Executive Officer (CEO)
45
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our performance in 2018
Four
Three
Two
One
Workplace
Datacenter and Networking
Software
Resold Services
Management Services
36%
12%
9%
7%
33%
Workplace
Software
Datacenter and Networking
Resold Services
Professional Services
Management Services
23%
19%
24%
6%
7%
21%
Five
Four
Three
Two
One
Two
One
Financial performance
A record year saw the Group surpass
£4 billion of revenue for the first time, having
only passed the £3 billion mark in 2013. The
Group’s revenues increased by 14.7 per cent,
or £559.2 million, to £4,352.6 million (2017:
£3,793.4 million) and were 14.2 per cent
higher in constant currency2.
The Group made a statutory profit before tax
of £108.1 million, a decrease of 3.2 per cent
(2017: £111.7 million). The Group’s adjusted1
profit before tax increased by 11.3 per cent to
£118.2 million (2017: £106.2 million) and by
11.3 per cent in constant currency2.
The difference between statutory profit
before tax and adjusted1 profit before tax
relates to the Group’s reported net loss of
£10.1 million (2017: net gain of £5.5 million
primarily from disposal of investment
property) from exceptional and other
adjusting items principally related to the
acquisition of FusionStorm. Further
information on these can be found on
page 60.
Notwithstanding the decrease in the Group’s
statutory profitability, statutory diluted
earnings per share increased by 5.4 per cent
to 70.1 pence for the period (2017: 66.5
pence), influenced, in part by the Return of
Value Tender Offer. Adjusted1 diluted earnings
per share, the Group’s primary measure,
increased by 16.3 per cent to 75.7 pence
(2017: 65.1 pence) during the year.
The full year of trading to 31 December 2018
showed considerable progress in
Computacenter’s adjusted1 profitability and
even further progress in adjusted1 earnings
per share, following the Return of Value
Tender Offer completed in February 2018.
The result has benefited from £270.9 million
of revenues, and £2.7 million of adjusted1
profit before tax, resulting from the
acquisitions made in the second half of the
year. All figures reported throughout this
Annual Report and Accounts include the
results of the acquired entities.
46
Revenue by business type
6
5
4
1
3
2
Six
Five
Four
Three
Two
One
1 Workplace 22%
2 Data Center, Networking & Security 29%
3 Software 16%
4 Resold Services 6%
5 Professional Services 7%
6 Managed Services 20%
Following a record breaking first half of the
year, the second half improved on it, and the
Three
challenging prior year comparative, in both
revenue and adjusted1 profitability. The
improvement for the year as a whole was
driven by the Technology Sourcing business,
One
with strong top line growth in both the UK
and Germany and improved margins in
France and Germany.
Two
As noted in our Pre-Close Trading Update on
23 January 2019, the results were marginally
ahead of the Board’s expectation, as
upgraded within the 12 July 2018 Trading
Update and confirmed both in the Interim
Results and the Q3 Trading Update on
31 October 2018. The results are therefore
materially above the Board’s expectations
held at the start of 2018.
Technology Sourcing performance
Technology Sourcing is the new name for the
Business Line previously referred to as
Supply Chain. Our Technology Sourcing and
lifecycle management services are
fundamental parts of our offering for our
customers. Reselling leading manufacturers’
hardware and software products enables us
to ‘Source’ technology solutions for
customers and underpins our Professional
Services transformation solutions. Most
customers require a comprehensive
solution, combining our services with the
systems they need to meet their IT and
business objectives. Our ability to integrate
vendor technology seamlessly into our
solutions for customers is therefore critical.
The Group’s Technology Sourcing revenue
increased by 20.5 per cent to £3,177.6 million
(2017: £2,636.2 million) and by 19.9 per cent
in constant currency2.
A strong performance in the first half set the
platform for a pleasing full year result in the
UK Technology Sourcing business. The UK
business has seen increased Software
volumes which have diluted the Technology
Sourcing margin performance, resulting in
overall flat margins and contribution growth
that is significantly lagging the strong
increase in revenue within the UK.
The Technology Sourcing business in
Germany saw significant growth during the
year, following on from two years of
extraordinary growth. Technology Sourcing
underpinned the Group’s performance for
the year, with continued success in the Public
Sector and from a hyperscale Data Center
customer. With growth across other sectors
and portfolios more in line with expectations,
overall growth could reduce if the Public
Sector business returns to more normal
patterns of growth or if volumes reduce for
this Data Center customer. Late in the year,
we opened a new Integration Center in
Kerpen, near Cologne, which will increase our
capacity to grow the business and meet
customer demand. The transition to this new
facility was seamless, with the old facility,
which was at maximum capacity, now
decommissioned.
French Technology Sourcing revenues
declined by 3.6 per cent in constant
currency2 but achieved better margins
through a favourable product mix with less
software. French Technology Sourcing
margins improved further from the already
Group-leading position in the prior period,
driven by this change in product mix towards
Data Center products. One key Public Sector
account saw reduced volumes, due to an
extensive rebid process that resulted in us
retaining the account once again. We expect
volumes on this key account to return to a
normal pattern throughout 2019, albeit at
reduced margins initially.
Overall, Group Technology Sourcing margins
grew by 29 basis points during the year, when
compared to the prior year.
Services performance
The Group’s Services revenue increased by
1.5 per cent to £1,175.0 million (2017: £1,157.2
million) and by 1.1 per cent in constant
currency2. Within this, Group Professional
Services revenue increased by 0.8 per cent to
£321.9 million (2017: £319.2 million), and by
0.3 per cent in constant currency2, whilst
Group Managed Services revenue increased
by 1.8 per cent to £853.1 million (2017: £838.0
million), and by 1.5 per cent in constant
currency2.
UK Services revenue reduced during 2018,
with a flat Managed Services result and
materially lower Professional Services
revenues. Professional Services faced a
difficult comparative against 2017, with the
prior period including one engagement that
provided significant revenue and most of the
growth in that year. This contract was
completed successfully in 2017 and the
extraordinary volumes achieved were not
replaced in 2018. The forward order book for
2019 is starting to rebuild and we expect an
improved performance in this area, building
in the second half of 2019, from what was a
challenging result that has reduced UK and,
consequentially, overall Group Services
revenue. Several Transformation projects
during the year experienced material cost
overspends, which constrained Services
margins. These projects are now complete
and behind us, again setting up 2019 for an
improved performance in this area. The
Managed Services business saw the Contract
Base decline despite renewing and extending
key contracts. Whilst renewals are always
pleasing, as they validate the long-term
commitment to customer value and
satisfaction, in order to grow, the focus
remains on winning tenders for new
business. Managed Services margin
performance was pleasing, with
improvements across the portfolio apart
from significant overspend on one new
Public Sector contract, which has weighed on
the overall result. A significant adjustment
for estimated losses over the remaining
lifetime of this difficult contract was booked
in the year, within cost of sales.
The German Services business continued to
drive the Group’s Services performance.
Demand for our Professional Services
business remained strong throughout the
year, after a weak first quarter. Professional
Services resources continue to be deployed
to assist with technical challenges on
difficult Managed Services contracts. This,
along with the now critical shortage of
appropriately skilled resource in the
marketplace, has constrained Professional
Services growth somewhat. In light of these
challenges, the growth is pleasing. The
Managed Services business saw steady
growth from prior period contract wins
which were implemented in 2018. Germany
has a number of contracts, including more
recent wins, that continue to underperform
against expectations, which is the lone
source of disappointment in an otherwise
fantastic year for the business. Services
margins have reduced, as cost overruns and
further adjustments for loss provisions on
these difficult contracts offset the
Professional Services performance and the
rest of the Managed Services portfolio, which
continues to perform well.
Our French Services business successfully
negotiated a year made difficult by the loss
of a significant Services contract at the end
of 2017 and the renewal, at reduced
revenues and margins, of three other
significant Managed Services contracts. This
important, but low margin contract loss, and
margin reduction were anticipated heading
into 2018 and overall, given the uncertainty,
the business is pleased to have come
through this period of change. We will
continue to focus on service improvements,
automation and pre-agreed cost
optimisations, to lift margins over the
lifetime of the contract extensions. The
focus for 2019 is to continue to broaden the
customer base and to renew the Group’s
largest Managed Services contract.
Overall, Group Services margins declined by
104 basis points during the year, when
compared to the prior year.
Outlook
2018 was a record year in revenue, adjusted1
operating profit and adjusted1 diluted
earnings per share for the Group. We have
also laid foundations for further growth in
the years ahead.
We have invested in the physical
infrastructure that enables our Technology
Sourcing, increased our Services capability
and expanded our geographical footprint
through acquisitions. In addition, we reduced
the number of shares in circulation by 6.97
per cent, through a Return of Value Tender
Offer of £100 million. Even after these
substantial investments, Computacenter
finished the year with a strong balance sheet
and a cash surplus, which underpins our
confidence in the future.
Specifically, while the Technology Sourcing
success of last year creates a difficult
comparison in 2019, particularly in the first
half, lower Services margins in 2018 give us a
significant opportunity to improve. We also
expect a profit contribution from our
acquired business in the USA.
As we look out further into the future, we
remain enthusiastic about our customers’
desire to enhance the digital experience,
grow their network capacity, modernise
their infrastructure and enhance their
competitiveness, by investing in technology.
47
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our performance in 2018
continued
UNITED KINGDOM
Neil Hall
Managing Director, UK and Ireland
Members of the UK Country Unit
Management team
Revenue
2018
2017
2016
2015
2014
Revenue by business type
1
6
5
4
2
3
1,605.8
1,463.4
1,351.9
1,376.3
1,347.9
Six
Five
Four
Three
Two
One
1 Workplace 23%
2 Data Center, Networking & Security 19%
3 Software 24%
4 Resold Services 6%
5 Professional Services 7%
6 Managed Services 21%
48
Three
Two
One
Financial performance
Revenues in the UK business increased
by 9.7 per cent to £1,605.8 million (2017:
£1,463.4 million).
The UK performance was driven by
Technology Sourcing, with strong revenue
growth remaining ahead of the market.
Our Managed Services revenue was flat in
the face of continual customer pressure to
reduce costs, meaning any additional work
contracted in 2018 ensured we prevented
any decline in this annuity-orientated
service line.
Professional Services revenues were down
along with isolated profitability challenges
on a small number of engagements also
impacting the return. Whilst it was a very
difficult comparison against the prior year,
the result in this area was still disappointing.
Margins in the UK declined 73 basis points
with total adjusted1 gross profit falling from
13.4 per cent to 12.7 per cent of revenues.
The change in product mix towards Software
suppressed Technology Sourcing margins
which were flat compared to 2017.
Professional Services margins suffered
due to three significantly challenged
Professional Services engagements coupled
with utilisation challenges. This more than
offset strong margin gains, excluding one
difficult contract, within Managed Services
which resulted from a mix of contract
service extensions, better execution and
additional project activity.
Adjusted1 gross profit grew by 3.7 per cent
to £203.5 million (2017: £196.2 million).
Administrative expenses increased by
0.8 per cent to £145.8 million (2017: £144.7
million), with a continued focus on cost
control offsetting increasing variable
remuneration. This resulted in adjusted1
operating profit growing by 12.0 per cent
to £57.7 million (2017: £51.5 million).
Five
Four
With some notable new customers, a
continued momentum in our Technology
Sourcing business and a more favourable
comparative in our Services business we
are on course to deliver in line with our
expectations for 2019.
Three
Two
Four
Three
Two
One
Operational Command
Center, Hatfield, UK
One
Two
One
Workplace
Datacenter and Networking
Software
Resold Services
Management Services
36%
12%
9%
7%
33%
Workplace
Software
Datacenter and Networking
Resold Services
Professional Services
Management Services
23%
19%
24%
6%
7%
21%
Managed Services saw another busy year
for successful contract extensions and
renewals. This reflects the quality of service
and long-term commitment to our
customers. As reported last year, customers
continue to bring renewal discussions
forward, prior to the end of their initial term.
Renewing contracts can put pressure on
both revenue and margins within those
contracts. During 2018, a multinational
customer that had decided to insource, as
reported last year, removed the service desk
element of the contract, but we retained the
end user support resulting in no material
contribution change.
The continued focus on the successful
initiatives undertaken over the past two
years to drive operational efficiency in the
Managed Services business has ensured
that margins have been enhanced and we
continue to focus on our end-to-end delivery
leveraging Group capability and geographic
global coverage.
Whilst new customers continued to be added
to our customer base during the year, the
high Managed Services renewals rate
reflected our strong capabilities and
offerings. Whilst the contract wins were
pleasing, we are yet to be satisfied with our
growth rate in this area and as a result we
continue to review and adapt our approach
and organisational structure across the
business to align end-to-end sales and
services management and delivery.
In Managed Services we will continue to focus
on innovation in design and delivery and to
ensure we deliver best practices to our
customers to drive their IT strategy and cost
management.
Technology Sourcing performance
Technology Sourcing revenue increased
by 17.1 per cent to £1,155.6 million (2017:
£986.7 million).
The Technology Sourcing business had an
extremely strong performance in the first
half of 2018 across all industry sectors and
a second half where growth declined against
a difficult comparison. We continued to
benefit from significant investment by our
customers, as they continue to digitise
their operations and modernise their
infrastructure and seek to enhance their
employee engagement.
We also experienced increasing utilisation
of our financing solutions, enabling our
customers to continue their investment in
line with their budget plans. We expect this
trend to continue which gives us confidence
for the full year and beyond.
The UK business has a higher percentage of
lower margin sales, particularly in Software
and Workplace, than our German and French
businesses and continues to lag these other
segments in Technology Sourcing margins.
Overall Software revenues grew by 139 per
cent in the year and increased the share
from 18 per cent to 24 per cent of Technology
Sourcing revenue in 2018. Technology
Sourcing margins were flat with an increase
of three basis points compared to the prior
year, with the move towards lower margin
Software continuing to supress this metric.
The opportunity to increase underlying
margin return remains the focus of
Management in the UK with small basis point
increases translating to significant
increases in overall adjusted1 profitability.
Services performance
Services revenue declined by 5.6 per cent
to £450.2 million (2017: £476.7 million). This
resulted from a decline in Professional
Services of 17.8 per cent to £116.4 million
(2017: £141.6 million) and a flat performance
from Managed Services which declined by
0.4 per cent to £333.8 million (2017: £335.1
million). Services margins declined by
41 basis points.
Revenue £m
+9.7%
1,605.8
Adjusted1 operating profit £m
+12.0%
57.7
Services Contract Base £m
-5.3%
304.1
The overall Services performance was
disappointing but the contrast in
performance between the two components
of Services was stark.
Professional Services had a challenging year.
The comparison against 2017 was difficult
where one contract in the prior year ensured
high levels of utilisation and was largely
responsible for the increase in revenues of
21.2 per cent seen against 2016. With this
contract completed in 2017, the business
was unsuccessful in replacing the volume
of work during 2018 leading to utilisation
impacts, particularly in the Workplace
Service Line. Compounding this has been
several other material customer
engagements, that have now been delivered,
that underperformed in terms of margin
achieved as costs incurred to complete the
engagements were in excess of what was
originally envisaged. Our focus, once again,
was to support and deliver the engagements
for our customers even in the face of
individual engagement cost pressures.
During 2018, we did not see the Professional
Services growth that we were expecting and
the challenged engagements significantly
impacted Services profitability. We do expect
improvement later in 2019 in Professional
Services both in year and in the pipeline
forward order book, with a greater focus on
our transformation services, particularly
driven by the need for our customers to
migrate their workplace environments to
the latest Windows platform.
49
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our performance in 2018
continued
GERMANY
Reiner Louis
Managing Director, Germany
Members of the German Country Unit
Management team
Revenue
2018
2017
2016
2015
2014
2,115.7
1,954.2
1,690.1
1,633.1
1,431.9
Revenue by business type
2
6
5
4
1
3
Six
Five
Four
Three
Two
One
1 Workplace 16%
2 Data Center, Networking & Security 35%
3 Software 14%
4 Resold Services 6%
5 Professional Services 9%
6 Managed Services 20%
50
Three
Two
One
Headquarters and Integration
Center, Kerpen, Germany
Financial performance
Total revenue increased by 8.3 per cent to
€2,115.7 million (2017: €1,954.2 million) and by
9.2 per cent in reported pound sterling
equivalents2.
The German business performed well in
2018 and ended the year ahead of our
expectations. Top line growth was strong
and, for the first time, the German business
exceeded €2 billion of revenue. Ongoing
demand for infrastructure replacements,
refreshes and implementing new
technologies drove Computacenter’s growth
in Germany, based on the investments
required by customers’ digitisation efforts.
We are pleased with the increase in the
number of customers who contribute more
than £1 million of margin and the
performance of the existing customer base.
The good performance in 2018 was again
driven by a strong Technology Sourcing
business, where we achieved strong growth
and improved margins. In our target market
of large and international companies,
Computacenter is very well positioned as the
number one provider for Cloud, Networking
and Security infrastructure. We have also
seen good performance in our Workplace
business, benefiting from Windows 10
projects and ongoing demand for
collaboration infrastructure.
Services growth was satisfactory but could
have been stronger. The lack of available
resources across the German employment
market remains a growth inhibitor, especially
in our Professional Services business.
Nevertheless, we achieved strong growth in
this area. We saw a different picture in our
Managed Services business, where we
experienced limited top-line growth and a
decline in margins. These challenges will
drive us to implement more nearshore and
offshore activities in the future.
Five
Margins in Germany decreased by 18 basis
points, with adjusted1 gross profit
decreasing from 12.5 per cent to 12.3 per
cent of revenues. Adjusted1 gross profit grew
by 6.9 per cent to €261.4 million (2017: €244.6
million) and by 7.6 per cent in reported pound
sterling equivalents2.
Three
Four
Two
One
Administrative expenses increased by 4.0 per
cent to €185.8 million (2017: €178.6 million),
and by 5.0 per cent in reported pound
sterling equivalents2. The cost increase was
in line with our expectations. We have
invested in areas where we need new talent
and special skills to support future growth.
Workplace
Indirect cost growth remains tightly
controlled. We have improved operational
processes and controls around cash
management and achieved good results,
especially at the year end.
Datacenter and Networking
Software
Resold Services
Management Services
Two
One
Workplace
Software
Datacenter and Networking
Resold Services
Professional Services
Management Services
23%
19%
24%
6%
7%
21%
Four
Three
Two
One
36%
12%
9%
7%
33%
Adjusted1 operating profit for the German
business increased by 14.5 per cent to €75.6
million (2017: €66.0 million) and by 14.6 per
cent in reported pound sterling equivalents2.
2018 was pleasing from a financial
performance perspective. Bottom-line
results benefited from strong top-line
growth in Technology Sourcing and
Professional Services. The outcome for
the year could have been stronger if we
had been able to perform better on a
handful of difficult contracts in our Managed
Services portfolio.
Although market conditions are weakening
and there are some uncertainties related to
the German economy and the political
environment in the European Union, there is
still a good chance for further growth in the
upcoming year. Computacenter´s Technology
Sourcing business in Germany might be
affected by declining demand for new Cloud
infrastructure from one of our major
customers. Technology Sourcing growth
may therefore be more difficult in 2019. We
expect to have strong Professional Services
growth and should see significant
improvements on Services margins in our
Managed Services business as we
turnaround the performance of our difficult
contracts. Whilst renewal activities will be
our focus, we have identified some strategic
opportunities in our existing customer base,
to create Contract Base growth.
Technology Sourcing performance
Technology Sourcing revenue grew by 9.9
per cent to €1,502.9 million (2017: €1,367.7
million) and by 10.8 per cent in reported
pound sterling equivalents2.
After an excellent Technology Sourcing
performance in both 2016 and 2017, the
business again performed well in 2018 and
was the major driver of the strong overall
performance.
Cloud, Security and Networking are still the
areas of strong customer demand. We saw
exceptional growth in the Data Center
market, with broad customer investments
in private and hybrid cloud infrastructures.
We also benefited from one hyperscale
customer, where we expanded the cloud
infrastructure for their software platform.
From a vertical perspective, we have seen
ongoing demand and strong investments
from Public Sector customers, especially to
renew, build and extend government-owned
cloud and networking infrastructures. After
a delay to approving the Federal Government
budgets, we saw a much stronger second
half of the year in the Public Sector. Other
industries such as automotive and
production also significantly invested in
Revenue €m
+8.3%
2,115.7
Adjusted1 operating profit €m
+14.5%
75.6
Services Contract Base €m
+6.1%
412.0
additional infrastructure, to support new
business models and digitisation efforts. We
also achieved good growth in our Workplace
business. After two years of lower growth
rates, we saw the first impact of Windows 10
migrations and the related infrastructure
refreshes. Our Industrie 4.0 initiative
delivered good results, generating new
business in the production areas of
customers we already do business with in
the traditional office environment.
We successfully opened our new Integration
Center based in Kerpen. The facility is
approximately 30,000m2, giving us more
space and flexibility for the future, especially
in the area of complex Data Center
integration projects with ‘Rack and Roll’
requirements. The move into the new facility
in November went well, without any impact
on the important year-end business. The
associated office building on the same site
for 650 people is still on schedule and will be
officially opened on 4 April 2019.
Technology Sourcing margins continued to
strengthen as the product mix moved to high
value elements and increased by 74 basis
points over last year.
Services performance
Services revenue grew by 4.5 per cent to
€612.8 million (2017: €586.5 million) and by
5.5 per cent in reported pound sterling
equivalents2. This included Professional
Services growth of 8.9 per cent to €188.2
million (2017: €172.8 million), an increase of
10.0 per cent in reported pound sterling
equivalents2, and Managed Services growth
of 2.6 per cent to €424.6 million (2017: €413.7
million), an increase of 3.6 per cent in
reported pound sterling equivalents2.
Whilst Services revenue growth was in line
with expectations for the year, bottom line
performance was impacted by additional
costs in Managed Services, to stabilise and
resolve technical challenges in new
contracts. In addition, we suffered from the
overall resource shortage in the German
employment market. Higher attrition rates
resulted in additional recruiting efforts and
larger salary increases which has impacted
the overall Services cost base. Some of these
additional costs have been covered by price
increases, however, it will take some time to
recover the cost base, especially in our
Managed Services business where we have
long-term commitments.
In our Professional Services business, the
year started a little weaker than planned but
we saw increasing demands from customers
in nearly all technology areas, over the rest
of the year. The outcome for the year was
strong, with near double-digit top-line
growth and improved margins. We have seen
increasing demand for Windows 10 proof of
concepts, migrations and rollouts. This
should drive further business throughout
2019. In addition, cloud infrastructure builds
and network refreshes continue to generate
strong Professional Services demand. Public
Sector investment continues to produce
good opportunities for the future and some
great new wins of long-term framework
contracts. We are still benefiting from our
infrastructure consultancy practice, where
we get excellent feedback from customers
regarding skills and capabilities.
Our Managed Services business is the larger
part of our Services portfolio but it is not
growing as quickly as the Professional
Services business. We have successfully
renewed some of our existing major
contracts but we also lost two contracts.
However, we also won two new material
contracts and, with a relatively stable
maintenance business, we were able to grow
our Contract Base by 6.1 per cent. Managed
Services margins were materially impacted
by Entry Into Service and Transformation
cost overruns for two deals won in 2017 and
implemented this year. During 2018, we
undertook some initiatives across our
Managed Services business to stabilise
operations and drive effectiveness. This has
generated some additional costs we had not
expected at the beginning of the year.
Overall, the Managed Services margin is still
below the level we should achieve, due to the
financial underperformance of these
challenging contracts. We should see major
improvements in the upcoming years, given
the investments we have made in 2018.
Overall, the Services margin was 214 basis
points lower than last year.
51
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our performance in 2018
continued
FRANCE
Arnaud Lepinois
Managing Director, France
Members of the French Country Unit
Management team
Revenue
2018
2017
2016
2015
2014
Revenue by business type
6
5
4
3
1
2
557.4
581.3
514.3
565.4
590.9
Six
Five
Four
Three
Two
One
1 Workplace 46%
2 Data Center, Networking & Security 22%
3 Software 10%
4 Resold Services 2%
5 Professional Services 4%
6 Managed Services 16%
52
Three
Two
One
Financial performance
Total revenue decreased by 4.1 per cent to
€557.4 million (2017: €581.3 million). In
reported pound sterling equivalents2, total
revenue was down 3.3 per cent.
The French business completed the
restructuring of its customer portfolio
during 2018, which leaves it with a stable
base of large customers within its target
customer set. Total revenue decreased
because of the loss of a very large software
contract in the Public Sector, which
generated very low margins. Whilst the loss
of the contract is disappointing, it is not that
impactful in terms of adjusted1 profitability.
We are pleased with the other highlights in
Technology Sourcing in 2018, having
developed our business offerings and signed
new customers who are sourcing higher-
margin products. The Services business was
challenged by a quiet first half in
Professional Services, the loss of a large
contract with a utility customer, noted last
year and year-on-year price reductions on
our three largest Managed Services
contracts, as a result of renewal
negotiations. New Managed Services
contracts signed in 2018 did not contribute
for a full 12 months and therefore did not
offset the overall revenue reduction on the
renewed contracts. The number of Managed
Services contract wins gives us confidence
that we can continue to develop our footprint
in the French market.
After a very good 2017, we expected that our
2018 performance would be challenging,
primarily because of renewals of several of
our largest customer contracts. We are
proud to have renewed them all in 2018. At
the same time, our strategy of focusing on
large accounts is performing well, with many
new customer wins in the Private Sector. We
completely reorganised our sales force by
industry within the Private Sector and
focused on the execution of very large
framework contracts within the Public
Sector. As a result, we refreshed 30 per cent
of our Sales Specialist positions, to fit with
our revised go-to-market propositions.
Five
Four
France headquarters, Roissy,
France
Three
Two
One
Two
One
Workplace
Datacenter and Networking
Software
Resold Services
Management Services
36%
12%
9%
7%
33%
Workplace
Software
Datacenter and Networking
Resold Services
Professional Services
Management Services
23%
19%
24%
6%
7%
21%
Four
Three
Two
One
We will continue to focus on large
organisations, helping their IT decision
makers to enable users with advanced
support and guidance and supporting their
businesses by delivering outstanding
infrastructure services and solutions. In this
context, our alignment with our Group
propositions and service capabilities
remains key. To enforce this alignment and
support further growth, we have signed off
an investment plan for 2019 to increase
significantly our resources in operations. To
support talent development and attraction,
we launched the Computacenter University
to recruit, train and certify new resources,
ready to support our growth in the Workplace
and Data Center spaces. We are extending
our Managed Services capabilities by opening
a new Service Center location in France, in
mid-2019, to increase our capacity and
resilience for Service Desk operations.
The transition to Arnaud Lepinois as the new
Managing Director has been completed and
the new management team is now in place to
execute the plan.
Margins in France increased by 80 basis
points, with adjusted1 gross profit increasing
from 10.5 per cent to 11.3 per cent of
revenues.
Overall adjusted1 gross profit grew by 3.3 per
cent to €62.9 million (2017: €60.9 million) and
by 4.1 per cent in reported pound sterling
equivalents2.
Management has continued to focus on cost
control within the French business, which
has seen an increase in administrative
expenses of only 0.5 per cent to €54.9 million
(2017: €54.6 million), and of 1.5 per cent in
reported pound sterling equivalents2.
Adjusted1 operating profit for the French
business increased by 27.0 per cent to €8.0
million (2017: €6.3 million), and by 26.8 per
cent in reported pound sterling equivalents2.
Services performance
Services revenue declined by 6.0 per cent
to €112.5 million (2017: €119.7 million) and
by 5.1 per cent in reported pound sterling
equivalents2. Professional Services
increased by 3.4 per cent to €21.4 million
(2017: €20.7 million), which was an increase
of 4.4 per cent in reported pound sterling
equivalents2. Managed Services declined by
8.0 per cent to €91.1 million (2017: €99.0
million), a decrease of 7.0 per cent in
reported pound sterling equivalents2.
The Managed Services performance was as
expected given the loss of a contract at the
end of 2017 with a utility customer and the
price reductions on our three largest
Managed Services contracts, due to
anticipated service improvements,
automation, volume reduction and pre-
agreed cost optimisations.
We implemented two new contracts in 2018
and recently won two others that are
currently in the Entry Into Service phase.
This has helped maintain stability within our
Managed Services Contract Base, which was
up 4.7 per cent at the end of the year
compared to the previous year. We will again
have to deal with large renewals in 2019 but
the mid-term pipeline is encouraging, and we
believe our Contract Base will continue the
growth seen this year.
Although activity remains relatively low, our
Professional Services business made
pleasing progress and has strong growth
ambitions for 2019. We are confident we can
achieve this, as we have further refined our
target customer base, improved vendor
partnerships and defined a clear portfolio of
solutions around End User, Data & Analytics,
Cloud & Data Center, Networking and
Security. Several projects signed at the end
of 2018 will support the growth in 2019.
Services margins were flat, increasing by
one basis point over last year. Services
margins were under significant pressure
in our Managed Services business, due to
the contract renewals. Professional Services
margins were constrained by a difficult
international project that ended in December.
Revenue €m
557.4
-4.1%
Adjusted1 operating profit €m
+27.0%
8.0
Services Contract Base €m
+4.7%
90.7
Technology Sourcing performance
Technology Sourcing revenue decreased by
3.6 per cent to €444.9 million (2017: €461.6
million) and by 2.8 per cent in reported pound
sterling equivalents2.
In 2018, we lost a very high revenue and
low-margin software contract in the Public
Sector. Private Sector revenue grew strongly
and included new wins in our target
customer set, which is a pleasing affirmation
of our strategy to broaden the customer
base. We will continue to drive growth by
securing our market share in the Public
Sector and striving for ambitious growth in
strategic Private Sector accounts. During the
year, we renewed our most important
Technology Sourcing framework contract.
Revenues declined whilst the contract was
being renewed, as volumes naturally fell, but
margins were not impacted. As we head into
2019, we see the volumes once again
increasing, albeit on tighter margins in the
short term.
Having achieved a real improvement in
Technology Sourcing margin during 2017, to
lead the Group, we were pleased to again see
an increase in our margin. This was mainly
due to a reduction in low-margin contracts
and a change in the business mix towards
higher value, higher margin products.
Improving our business mix towards Data
Center, Networking and Security was our
priority and we made good progress in 2018,
with revenue growth in Data Center and
Security, compared to a decrease in
Workplace. Overall, Technology Sourcing
margins increased by 102 basis points.
53
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Our performance in 2018
continued
INTERNATIONAL
Mike Keogh
Managing Director, US
Lieven Bergmans
Managing Director, Rest of Europe
Revenue
2018
2017
105.4
2016
91.0
2015
84.7
2014
129.9
Revenue by business type
1
2
6
5
4
3
380.8
Six
Five
Four
Three
Two
One
1 Workplace 9%
2 Data Center, Networking & Security 51%
3 Software 5%
4 Resold Services 12%
5 Professional Services 6%
6 Managed Services 17%
Integration Center,
Newark, California, USA
International Segment
The International Segment comprises a
number of trading entities and offshore
Global Service Desk delivery locations. The
trading entities include: Computacenter USA,
which provides local Services to the American
subsidiaries of a number of large Western
European Group customers; FusionStorm,
the US-based IT solutions provider acquired
on 30 September 2018; Computacenter
Switzerland, which mainly provides Services
to the Swiss subsidiaries of our global
customers as well as some local customers;
Computacenter Belgium; and Computacenter
Netherlands, which was formerly known as
Misco Solutions B.V. and was acquired by the
Group on 1 September 2018.
These trading entities are complemented by
the offshore Global Service Desk entities in
Spain, Malaysia, India, South Africa, Hungary,
Poland, China and Mexico, which have limited
external revenues.
FusionStorm and the Swiss, Belgian and
Dutch entities have in-country sales
organisations, which enable us to sell to
local customers.
Financial performance
Revenues in the International business
increased by 261.3 per cent to £380.8 million
(2017: £105.4 million) and by 264.8 per cent
in constant currency2.
Adjusted1 gross profit increased by 83.2 per
cent to £57.9 million (2017: £31.6 million), and
by 85.0 per cent in constant currency2.
Administrative expenses increased by 102.2
per cent to £45.5 million (2017: £22.5 million)
and by 104.0 per cent in constant currency2.
Overall adjusted1 operating profit increased
by 36.3 per cent to £12.4 million (2017: £9.1
million) and by 37.8 per cent in constant
currency2.
Five
The result has been driven by £270.9 million
of revenues, and £2.7 million of adjusted1
profit before tax, resulting from the
acquisitions made in the second half of the
year. All figures reported throughout this
Annual Report and Accounts include the
results of the acquired entities.
Three
Four
Two
One
Technology Sourcing Performance
Technology Sourcing revenue increased by
584.1 per cent to £297.6 million (2017: £43.5
million) and by 579.5 per cent in constant
currency2.
Following the acquisitions, FusionStorm
added £237.8 million and Computacenter
Netherlands added £16.8 million to
Technology Sourcing revenues in 2018.
Workplace
Datacenter and Networking
Software
Resold Services
Management Services
Four
Three
Two
One
36%
12%
9%
7%
33%
54
Three
Two
One
Two
One
Workplace
Software
Datacenter and Networking
Resold Services
Professional Services
Management Services
23%
19%
24%
6%
7%
21%
Services performance
Services revenue increased by 34.4 per cent
to £83.2 million (2017: £61.9 million) and by
37.3 per cent in constant currency2.
Professional Services revenue increased by
145.1 per cent in both actual and constant
currency2, to £20.1 million (2017: £8.2million).
Managed Services revenue increased by 17.5
per cent to £63.1 million (2017: £53.7 million),
an increase of 20.4 per cent in constant
currency2.
Following the acquisitions, FusionStorm
added £8.2 million of Professional Services
revenues during 2018, whilst Computacenter
Netherlands added £8.1 million of Managed
Services revenues.
Rest of Europe
The European trading entities within
International operate under an internal
management structure called Rest of
Europe.
Our Swiss operations continue to perform
well and saw pleasing growth in both
revenues and adjusted1 operating profitability
in 2018, with increases of 16.0 per cent and
22.3 per cent respectively, both in constant
currency2. The acquisition of cITius in
January 2017 has expanded the range of
services that the Swiss business can offer
and increased our ability to bid for
opportunities within our customer base.
Additionally, the take-on of a large
international Managed Services contract
across the Group has increased local revenue.
Our Belgian operations experienced a slight
fall in revenue of 1.6 per cent in constant
currency2, and an increase in adjusted1
operating profit of13.7 per cent in constant
currency2. Our Services business revenues
were down slightly. Expanding the Managed
Services Contract Base remains a key focus
for Management, to drive Services revenue
growth in line with our plans. Our Technology
Sourcing business was flat and the Intel chip
shortage had a negative effect on end of
year revenues within our Workplace line of
business. In the second half, we were able to
build an improved pipeline for more complex
infrastructure and networking opportunities.
We successfully closed some of these
towards the end of 2018 and we hope to
identify further opportunities in 2019.
On 1 September 2018, we acquired Misco
Solutions B.V. The business is a value-added
reseller and solutions provider to the Public
and Private sectors, based in Amstelveen
and Bodegraven, the Netherlands. We are
excited to enter this new territory, as the
Netherlands is an adjacent European market
+261.3%
Revenue £m
380.8
Adjusted1 operating profit £m
+36.3%
12.4
Services Contract Base £m
-7.4%
17.7
for us and we look forward to building
long-term relationships with local
customers. Our direct local presence in the
Netherlands will also enhance our support
to a number of Computacenter’s largest
international clients, for whom this is
a key location.
We have rebranded the business to
Computacenter Netherlands and focused
on integration into the Group. Whilst the
business made a small loss during the first
four months of operation, we are confident
that we will improve the performance to
be more like our similar Belgian operation
over time.
Our 2019 challenges for the Rest of Europe
grouping are focused on further integration
of tools and processes in the Netherlands.
We also look forward to expanding both
our customer base and capabilities in
Switzerland. The focus in Belgium will be
to grow our sales capacity and Managed
Services pipeline.
We continue to review opportunities to
extend our Western European footprint,
by entering into adjacent territories or
by increasing our capabilities in existing
locations by adding complementary
activities within either our Services or
Technology Sourcing businesses.
Computacenter USA & FusionStorm
Computacenter USA provides local services
to the American subsidiaries of a number of
large Western European Group customers.
FusionStorm is a value-added reseller of
hardware and software solutions, which we
acquired on 1 October 2018. These trading
entities are complemented by the Service
Center entity in Mexico, which has limited
external revenues. On top of their operational
delivery capabilities, the US and FusionStorm
entities have in-country sales organisations,
which enable us to engage with local
customers, and we have begun the
integration of these teams with effect from
1 January 2019, as part of our larger
integration efforts.
Computacenter USA is a Services business
which provides Managed Services to the US
subsidiaries of our Western European
headquartered customers. For the third
consecutive year, a large Group customer
extended its Services scope into the
Americas region which reflects the
increasing demand for global service
support. In addition, we continued to invest
in our nearshore Service Center location in
Mexico City which, since going live in 2016,
has exceeded service level and financial
performance targets.
The FusionStorm business exceeded the
Services and Technology Sourcing growth
targets we set as part of the acquisition
process. The Services growth was driven
primarily by hyperscale customer rollouts of
data center and networking infrastructure
projects plus an increase in its expert
services business. Following the acquisition,
the fourth quarter saw the two highest
revenue months of configured solution
shipments from our Integration Center in
Newark, CA, in the heart of Silicon Valley.
December was particularly notable, as it was
a record month which more than doubled the
monthly average Integration Center volumes
seen in the prior 12 months.
As we move into 2019, we see a number of
opportunities to enhance the acquired
business and to leverage revenue synergies
between the new and existing American
operations. We will open a new Integration
Center in California, tripling the capacity of
the existing facility and leveraging Group
knowledge on logistics, most recently
employed on the new Kerpen Integration
Center. We will also begin to pursue
opportunities to deliver Technology Sourcing
solutions into existing US Services
customers, a number of whom have already
enquired about this capability. We will look to
provide Technology Sourcing solutions to
other Western European customers for
whom we do not currently transact any
business in the USA. Early in 2019, we closed
our first deal of this nature with one of the
world’s leading betting and gaming
companies which is expanding its US
operations.
55
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Group Finance
Director’s review
Enabling success by building
long-term trust
WHILST THE UK’S
DEPARTURE FROM THE EU IS
FREQUENTLY SEEN AS ONLY A
RISK OR A NEGATIVE EVENT,
IT MAY ALSO CREATE NEW
OPPORTUNITIES AND WE
REMAIN WELL POSITIONED
TO SUPPORT OUR
CUSTOMERS WHATEVER THE
OUTCOME.
Tony Conophy
Group Finance Director
56
The strength of Technology Sourcing
continues to drive the Group’s performance.
The Group result was underpinned by an
improving performance in France, another
strong result in Germany and recovering
UK revenues.
Germany again significantly exceeded our
expectations from what was a very good
comparative in 2017. This was well supported
by strong Technology Sourcing growth in
both the UK and France as customers invest
in new technology, particularly in Security,
Networking and Workplace. Overall,
Professional Services revenue across the
Group was weaker than expected, mainly
due to a decline in the UK, following strong
growth in 2017. Demand for our Professional
Services resources in Germany has
continued to outstrip our capacity to service
new customers and assist with difficult
Managed Services business take-ons.
Managed Services growth was flat overall,
although a significant reduction in France
offset pleasing growth in Germany and a flat
performance in the UK. Several difficult
contracts in the UK and Germany reduced
the expected margin.
Across all Segments and revenue lines,
growth has been driven by the continued
performance of key existing customer
accounts, rather than the addition of
material new customers.
A reconciliation between key adjusted1 and
statutory measures is provided on page 57
of this Group Finance Director’s review.
Further details are provided in note 4 to the
Consolidated Financial Statements, segment
information. For the avoidance of
duplication, further information on the
Group’s financial performance can be found
on pages 46 to 55 of this Strategic Report.
Profit before tax
The Group’s statutory profit before tax
decreased by 3.2 per cent to £108.1 million
(2017: £111.7 million). Adjusted1 profit before
tax increased by 11.3 per cent to £118.2
million (2017: £106.2 million) and by the same
amount in constant currency2.
The difference between statutory profit
before tax and adjusted1 profit before tax
primarily relates to the Group’s reported net
loss of £10.1 million (2017: net gain of £5.5
million) from exceptional and other adjusting
items, primarily as a result of the acquisition
of FusionStorm on 30 September 2018.
Further information on these items can be
found on page 60.
Reconciliation from statutory to adjusted1 measures for the year ended 2018
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance income
Finance costs
Profit before tax
Income tax expense
Profit for the year
Statutory
results
£’000
4,352,570
(3,804,019)
548,551
(439,183)
109,368
1,250
(2,490)
108,128
(27,199)
80,929
Reconciliation from statutory to adjusted1 measures for the year ended 2017
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Gain on disposal of an investment property
Finance income
Finance costs
Profit before tax
Income tax expense
Profit for the year
Statutory
results
£’000
3,793,371
(3,297,142)
496,229
(389,437)
106,792
4,320
1,521
(938)
111,695
(30,381)
81,314
Adjustments
CSF
interest
£’000
–
(293)
(293)
Amortisation of
acquired
intangibles
£’000
–
–
–
Utilisation of
deferred tax
£’000
–
–
–
Exceptionals
and others
£’000
–
–
–
–
(293)
–
293
–
–
–
4,451
4,451
–
–
4,451
(1,169)
3,282
–
–
–
–
–
5,240
5,240
–
417
5,657
1,933
1,933
(4,444)
1,213
Adjustments
CSF
interest
£’000
–
(159)
(159)
Amortisation of
acquired
intangibles
£’000
–
–
–
Utilisation of
deferred tax
£’000
–
–
–
Exceptionals
and others
£’000
–
–
–
–
(159)
–
–
159
–
–
–
225
225
–
–
–
225
(31)
194
–
–
–
–
–
–
3,457
3,457
(1,371)
(1,371)
(4,320)
–
–
(5,691)
351
(5,340)
Adjusted1
results
£’000
4,352,570
(3,804,312)
548,258
(429,492)
118,766
1,250
(1,780)
118,236
(30,879)
87,357
Adjusted1
results
£’000
3,793,371
(3,297,301)
496,070
(390,583)
105,487
–
1,521
(779)
106,229
(26,604)
79,625
57
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018
Group Finance Director’s review
continued
Revenue
2016
2017
2018
2018/17
Adjusted1 profit before tax
2016
2017
2018
2018/17
Revenue by Segment
UK
Germany
France
International
Total
Adjusted1 operating profit by Segment
UK
Germany
France
International
Central Corporate Costs
Total
UK
Germany
France
International
Central Corporate Costs
Total
58
Half 1
£m
1,478.2
1,700.3
2,008.9
18.1%
Half 2
£m
1,767.2
2,093.1
2,343.7
12.0%
Total
£m
3,245.4
3,793.4
4,352.6
14.7%
Half 1
Half 2
Total
% Revenue
1.7%
2.5%
2.6%
£m
25.3
41.9
52.1
24.3%
% Revenue
3.5%
3.1%
2.8%
£m
61.1
64.3
66.1
2.8%
% Revenue
2.7%
2.8%
2.7%
£m
86.4
106.2
118.2
11.3%
Half 1
£m
858.1
866.0
230.7
54.1
2,008.9
Half 1
£m
25.8
32.2
2.1
3.4
(11.4)
52.1
Half 1
£m
21.4
20.7
1.5
5.0
(7.2)
41.4
2018
Half 2
£m
747.7
1,006.7
262.6
326.7
2,343.7
% Revenue
3.0%
3.7%
0.9%
6.3%
2.6%
% Revenue
3.2%
2.7%
0.7%
10.3%
2.4%
Total
£m
1,605.8
1,872.7
493.3
380.8
4,352.6
Half 1
£m
662.8
760.3
228.6
48.6
1,700.3
2017
Half 2
£m
800.7
954.4
281.3
56.8
2,093.1
2018
Half 2
£m
31.9
34.7
5.0
9.0
(13.8)
66.7
2017
Half 2
£m
30.1
37.6
4.1
4.1
(11.8)
64.1
% Revenue
4.3%
3.4%
1.9%
2.8%
2.8%
% Revenue
3.8%
3.9%
1.5%
7.2%
3.1%
Total
£m
57.7
66.8
7.1
12.4
(25.2)
118.8
Total
£m
51.5
58.3
5.6
9.1
(19.0)
105.5
Total
£m
1,463.4
1,714.7
509.9
105.4
3,793.4
% Revenue
3.6%
3.6%
1.4%
3.3%
2.7%
% Revenue
3.5%
3.4%
1.1%
8.6%
2.8%
Profit for the year
The statutory profit for the year decreased by 0.5 per cent to £80.9 million (2017: £81.3 million). The adjusted1 profit for the year increased by
9.8 per cent to £87.4 million (2017: £79.6 million) and by 9.9 per cent in constant currency2.
Net finance income
Net finance cost in the year amounted to £1.2 million on a statutory basis (2017: income of £0.6 million). The charge includes £0.5 million relating
to interest on the £100 million facility drawn down for the FusionStorm acquisition and £0.3 million for the unwind of the discount on the deferred
consideration for the purchase of TeamUltra (2017: cost of £0.1 million). It also includes exceptional interest costs relating to the unwind of the
discount on the deferred consideration for the purchase of FusionStorm of £0.4 million and CSF interest of £0.3 million (2017: £0.2 million), both
of which are excluded on an adjusted1 basis.
On an adjusted1 basis, the net finance cost was £0.5 million in 2018 (2017: income of £0.7 million).
Taxation
The statutory tax charge was £27.2 million (2017: £30.4 million) on statutory profit before tax of £108.1 million (2017: £111.7 million). This
represents a statutory tax rate of 25.2 per cent (2017: 27.2 per cent). The Group’s adjusted1 tax rate has benefited from the historical tax losses
in Germany, which were fully utilised during the year. The utilisation of the asset of £1.9 million (2017: £3.5 million) has impacted the statutory
tax rate but is considered to be outside of our adjusted1 tax measure. In 2018, this impact increased the statutory tax rate by 1.8 per cent
(2017: 3.1 per cent).
In 2018, a credit of £1.4 million arising from the tax benefit on the FusionStorm exceptional acquisition costs has been recognised as tax on
exceptional items. In 2017, a tax charge of £0.4 million was recorded as tax on exceptional items, related to the release of the remaining German
onerous contract provisions. A further tax credit of £3.1 million was recorded due to post-acquisition activity in FusionStorm, related to the
transaction, which has resulted in a material in-year tax benefit. This activity included settlement of phantom stock awards, deal bonus and
change of control payments which were settled by the vendor, out of the consideration paid, via post-acquisition capital contributions to
FusionStorm. As this credit was related to the acquisition and not operational activity within FusionStorm, is of a one-off nature and material to
the overall tax result, we have classified this as an exceptional tax item. Further, this tax benefit is larger than the adjusted1 profit before tax of
£2.9 million achieved by FusionStorm since the acquisition.
The tax credit related to the amortisation of acquired intangibles was £1.2 million (2017: £0.03 million). The significant increase relates to the
£4.2 million of amortisation of acquired intangible assets charged against the assets recognised as a result of the FusionStorm acquisition.
As the amortisation is recognised outside of our adjusted1 profitability, the tax benefit on the amortisation is also only recognised in the statutory
tax charge.
The adjusted1 tax charge on ordinary activities was £30.9 million (2017: £26.6 million), on an adjusted1 profit before tax of £118.2 million (2017:
£106.2 million). The effective tax rate (ETR) was therefore 26.1 per cent (2017: 25.0 per cent) on an adjusted1 basis. The 2018 ETR was higher than
the previous year primarily due to the increasing cash tax in Germany, as the historical tax losses readily available for use have now been fully
utilised. The ETR, excluding the impact of FusionStorm, is within the range that we indicated during the year at 26.5 per cent (H1 2018: 27.1 per cent).
The increasing adjusted1 tax rate in 2018 in Germany, as the last of the readily available losses have been utilised, has had a direct effect on the
Group adjusted1 ETR. At 2018 levels of profitability, the increase in German cash tax would raise the Group adjusted1 ETR from 26.1 per cent in 2018
to 27.8 per cent in 2019, without regard to other factors that could influence the Group’s adjusted1 ETR. Factors that could also increase the Group’s
adjusted1 ETR in 2019 include the increasing reweighting of the geographic split of adjusted1 profit before tax from the UK to Germany, where tax
rates are substantially higher.
The Group Tax Policy was reviewed during the year and approved by the Audit Committee and the Board, with no material changes from the prior
year. We make every effort to pay all the tax attributable to profits earned in each jurisdiction that we operate in. We do not artificially inflate or
reduce profits in one jurisdiction to provide a beneficial tax result in another and maintain approved transfer pricing policies and programmes, to
meet local compliance requirements. Virtually all of the statutory tax charge in 2018 was incurred in either the UK or German tax jurisdictions.
Computacenter will recognise provisions and accruals in respect of tax where there is a degree of estimation and uncertainty, including where it
relates to transfer pricing, such that a balance cannot fully be determined until accepted by the relevant tax authorities. There are no material tax
risks across the Group. For 2018, the revised Group Transfer Pricing policy, implemented in 2016, resulted in a royalty payment charged by
Computacenter UK to Computacenter Germany equivalent to one per cent of revenue or £19.5 million (2017: £17.4 million). This royalty charge was
driven by our tax advisors’ interpretation of the Organisation for Economic Co-operation and Development (OECD) base erosion and profit shifting
requirements. The royalty charge is recorded outside the Segmental results found in note 4 to the Consolidated Financial Statements, segment
information, which analyses Segmental results down to adjusted1 operating profit.
59
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Group Finance Director’s review
continued
The table below reconciles the statutory tax charge to the adjusted1 tax charge for the year ended 31 December 2018.
Statutory tax charge
Adjustments to exclude:
Utilisation of German deferred tax assets
Exceptional tax items
Tax on amortisation of acquired intangibles
Tax on exceptional items
Adjusted1 tax charge
Statutory ETR
Adjusted1 ETR
2018
£’000
27,199
(1,933)
3,091
1,169
1,353
30,879
25.2%
26.1%
2017
£’000
30,381
(3,457)
–
31
(351)
26,604
27.2%
25.0%
Exceptional and other adjusting items
The net loss from exceptional and other adjusting items in the year was £6.4 million (2017: gain of £1.7 million). Excluding the tax items noted
above which resulted in a statutory gain of £3.7 million (2017: loss of £3.8 million), the profit before tax impact was a net loss from exceptional and
other adjusting items of £10.1 million (2017: gain of £5.5 million).
An exceptional loss during the year of £5.2 million resulted from costs directly relating to the acquisition of FusionStorm. These costs include a
severance payment for the FusionStorm Chief Executive Officer, agreed as part of the acquisition, advisor fees and a finder’s fee that was paid on
completion of the transaction. These costs are non-operational in nature, material in size and unlikely to recur and have therefore been classified
as outside our adjusted1 results. A further £0.4 million relating to the unwinding of the discount on the deferred consideration for the purchase of
FusionStorm has been removed from the adjusted1 net finance expense and classified as exceptional interest costs. The amortisation of acquired
intangible assets was £4.5 million (2017: £0.2 million), with the increase due to the amortisation of the intangibles acquired as part of the
FusionStorm acquisition. We have continued to exclude the effect of amortisation of acquired intangible assets in calculating our adjusted1 results.
Amortisation of intangible assets is non-cash, and is significantly affected by the timing and size of our acquisitions, which distorts the
understanding of our Group and Segmental operating results.
The gain in 2017 resulted from the disposal of an investment property in Braintree, Essex, and the release of the remaining provisions for the last
two onerous contracts in Germany. The £4.3 million gain on disposal, net of disposal costs, was classified as exceptional due to the size and
non-operational nature of the transaction. The release of the remaining onerous contract provisions resulted in an exceptional gain of £1.4
million, as these provisions, originally booked as exceptional items, were no longer required.
Earnings per share
Adjusted1 diluted earnings per share increased from 65.1 pence in 2017 to 75.7 pence in 2018, due to the increased earnings generated by the
business and a lower diluted weighted average number of shares, as a result of the Tender Offer buyback of ordinary shares completed in
February 2018. The statutory diluted earnings per share increased from 66.5 pence in 2017 to 70.1 pence in 2018.
Basic weighted average number of shares (excluding own shares held) (no.’000)
Effect of dilution:
Share options
Diluted weighted average number of shares
Statutory profit for the year attributable to equity holders of the Parent (£’000)
Basic earnings per share (pence)
Diluted earnings per share (pence)
Adjusted1 profit for the year attributable to equity holders of the Parent (£’000)
Adjusted1 basic earnings per share (pence)
Adjusted1 diluted earnings per share (pence)
2018
113,409
1,984
115,393
80,929
71.4
70.1
87,357
77.0
75.7
2017
120,766
1,471
122,237
81,314
67.3
66.5
79,625
65.9
65.1
Net funds
Cash and cash equivalents decreased from £206.6 million at the end of 2017 to £204.4 million as at 31 December 2018. During the year the
Company completed a buyback of ordinary shares, by way of Tender Offer, for £100 million.
The Group saw an increase in its overall cash generation from operations in 2018, with record net cash flow from operating activities of £115.2
million (2017: £106.1 million). This continues our story of cash generation seen over recent years, with the year-end cash position again very
60
strong. Working capital trends continued to
affect cash volatility at the year end with
higher fourth-quarter product sales and an
increase in early customer payments, ahead
of the associated payment for product. The
Group days payables outstanding are
marginally higher than the Group days sales
outstanding and therefore when sales are
high we tend to have a lower working capital
requirement overall.
Net funds3 decreased from £191.2 million
at the end of 2017 to £57.3 million as at
31 December 2018.
The Group had two specific facilities at the
end of the year and no other material
borrowings. The Group drew down a £100
million facility on 1 October 2018 to complete
the acquisition of FusionStorm. This facility is
over a three-year term. The Group also had
the specific facility for the build and
purchase of our new German headquarters
and Integration Center in Kerpen which was
£31.4 million (2017: £10.7 million) as at
31 December 2018. The Integration Center
opened in November 2018 and is fully
operational. The office facility is due to open
in March 2019, which will conclude the project.
Capital expenditure in the year was £51.4
million (2017: £40.1 million) and was primarily
the investment in our German headquarters,
additional SAP licence spend and other
investments in IT equipment and software
tools, to enable us to deliver improved
service to our customers.
The Group continued to appropriately
manage its cash and working capital
positions using standard mechanisms, to
ensure that cash levels remained within
expectations throughout 2018. The Group
had no debt factoring at the end of the year
outside the normal course of business.
In certain circumstances, the Group enters
into customer contracts that are financed by
leases or loans. The leases are secured only
on the assets that they finance. Whilst the
outstanding balance of CSF is included within
net funds3 for statutory reporting purposes,
this balance is offset by contracted future
receipts from customers. Computacenter
retains the credit risk on these customers
and ensures that credit risk is only taken on
customers with a strong credit rating.
CSF increased in the year from £4.7 million to
£8.9 million, all within Germany. CSF remains
low compared to historical levels, due to
reduced customer demand in light of the
current credit environment. However, we are
seeing increasing use on a deal-by-deal
basis. Currently we apply a higher cost of
finance to these transactions than
customers’ marginal cost of finance to
discourage this activity.
diluted earnings per share. In 2018, the cover
was 2.5 times (2017: 2.5 times).
There were no interest-bearing trade
payables as at 31 December 2018 (2017: nil).
The Group’s net funds3 position contains
no current asset investments (2017: nil).
Trade Creditor arrangements
Computacenter has a strong covenant and
enjoys a favourable credit rating from IT
vendors and suppliers. Some suppliers
provide credit directly on their own credit
risk, whereas some suppliers decide to sell
the debt to banks which offer to purchase
the receivables and manage collection. The
credit terms offered by suppliers are
typically between 30 and 60 days, whether
provided directly or when sold to a third
party finance provider. In the latter case the
cost of the free trade credit period is paid by
the relevant supplier as part of the overall
package of terms provided by suppliers to
Computacenter and our competitors. The
finance providers offer extended credit
terms at relatively low interest rates,
however, these rates are always higher than
the rate at which we deposit and therefore
we do not currently avail of this facility.
Dividends
The Group remains highly cash generative
and net funds3 continue to regenerate on the
Consolidated Balance Sheet, following the
share buyback and the acquisition of
FusionStorm. Computacenter’s approach to
capital management is to ensure that the
Group has a robust capital base and
maintains a strong credit rating, whilst
aiming to maximise shareholder value.
If further funds are not required for
investment within the business, either for
fixed assets or working capital support, and
the distributable reserves are available in
the Parent Company, we will aim to return the
additional cash to investors through one-off
returns of value, as we did in February 2018.
Dividends are paid from the standalone
Balance Sheet of the Parent Company and,
as at 31 December 2018, the distributable
reserves were approximately £184.4 million
(2017: £298.9 million).
The Board is pleased to propose a final
dividend of 21.6 pence per share. The interim
dividend paid on 12 October 2018 was 8.7
pence per share. Together with the final
dividend, this brings the total ordinary
dividend for 2018 to 30.3 pence per share,
representing a 16.1 per cent increase on the
2017 total dividend per share of 26.1 pence.
The Board has consistently applied the
Company’s dividend policy, which states that
the total dividend paid will result in a dividend
cover of 2 to 2.5 times based on adjusted1
Subject to the approval of shareholders at
our Annual General Meeting on 16 May 2019,
the proposed dividend will be paid on Friday
28 June 2019. The dividend record date is set
as Friday 31 May 2019 and the shares will be
marked ex-dividend on Thursday 30 May 2019.
Capital management
Details of the Group’s capital management
policies are included in note 27 to the
Consolidated Financial Statements.
Implementation of, and transition to,
IFRS 15 Revenue Recognition
Basis of preparation
The Group has adopted IFRS 15 from
1 January 2018, which has resulted in
changes in accounting policies and
adjustments to the amounts recognised in
the Financial Statements. The standard
provides a single model for measuring and
recognising revenue arising from contracts
with customers. It supersedes all existing
revenue requirements in IFRS. Under IFRS 15,
revenue is recognised when customers
obtain control of goods or services and so
are able to direct the use, and obtain the
benefits, of those goods or services.
Importantly, and in accordance with the
modified retrospective transition approach,
the comparative results for the year ended
31 December 2017 have not been restated
under the accounting policies adopted as
a result of transition to IFRS 15. Under the
transition approach adopted, the
retrospective cumulative impact of IFRS 15
has been recognised within the opening
balance of retained earnings as at 1 January
2018. The overall net impact of all adjustments
was a credit to retained earnings of £6.5
million as at 1 January 2018.
An analysis of the impact of transition is
presented in note 2 summary of significant
accounting policies on page 121 of this
Annual Report and Accounts, and is
summarised below:
Implementation journey
Beginning in 2016, we performed a detailed
analysis of the impact of IFRS 15 on our
business. The preliminary analysis identified
various areas in which adjustments may be
required to revenue and cost recognition
and in the related procedures and processes.
As we moved through the project our
conclusions on the implementation of IFRS 15
evolved, which we documented in our Annual
and Interim Report and Accounts over the
period from 31 December 2016 to
31 December 2017.
61
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Group Finance Director’s review
continued
The most significant of these was expected
to be that some of our Technology Sourcing
revenue, which has previously been
presented gross, will be presented net under
IFRS 15 as ‘agency’ revenue due to the
change in the primary indicators used to
assess the ‘agent/principal’ presentation of
revenue, from the previous standard to IFRS
15. We thought at the time, after assessing
the changes in the standard against our
general contractual terms and conditions,
that this change was likely to impact our
Software sales and certain Resold Services,
which contributed £337 million and £298
million to the Group’s gross revenue in 2016
respectively. Our preliminary assessment
made in 2016 was based upon our general
contractual terms and conditions. Following
this process, we concluded that there was a
finely balanced judgement which would
result in a change in presentation of our
Technology Sourcing Software revenues and,
potentially, certain Resold Service revenues
to ‘agency’ revenue on a net basis compared
to the current presentation as gross
‘principal’ revenue.
As our IFRS 15 project continued through
2017, the judgements held under the previous
standard were reviewed again. Following
further evaluation, including detailed
analysis of how terms and conditions are
applied in practice, the weighting applied to
the agent/principal indicators and
evaluation of emerging practice, we updated
our findings and concluded that, whilst this
remains a finely balanced judgement, no
change to the presentation of those revenue
streams is required on transition to IFRS 15.
Revenue for these items have continued to
be presented gross from 1 January 2018,
when this assessment will form part of the
critical judgements for the Group.
Under IAS 11, certain costs, such as allocated
overheads, were allowed to be taken into
account when considering what constitutes
‘unavoidable’ costs of a contract, affecting
whether the contract is considered to be
onerous. From 1 January 2018 onwards,
IAS 11 was no longer applicable and onerous
contracts need to be considered under IAS 37,
‘Provisions, Contingent Liabilities and
Contingent Assets’. At the date of publication
of our 2017 Interim Report, we believed that
IAS 37 did not allow for the inclusion of
overheads as ‘unavoidable’ costs when
considering if a contract is onerous. We thus
concluded that our approach would need to
change from 1 January 2018. Subsequent to
the publication of our 2017 Interim Report,
we became aware of an agenda decision
published by the IFRS Interpretations
Committee outlining that the current
wording of IAS 37 allows for two
62
interpretations of what can constitute
‘unavoidable’ costs when determining
whether a contract is onerous. One of the
acceptable interpretations noted by the
Committee is in line with our current
practice, which is to consider costs such as
overhead allocations as ‘unavoidable’. The
matter has been put on the agenda for
future discussion at the IFRS Interpretations
Committee, with a view to drafting
clarifications to IAS 37. Until there is clarity
on this matter, we have concluded that our
current approach remains acceptable. As a
result, we did not change our method for the
assessment of onerous contracts upon
transition to IFRS 15.
Impact of transition
Following the implementation project, where
we reviewed all revenue streams as part of
our IFRS 15 impact assessment, we identified
the following principal areas which have
been affected on adoption of IFRS 15.
Adjustments were required in relation to:
• Certain costs, such as win fees (a form of
commission) and fulfilment cost (referred
to by the Group as Entry Into Service),
which are capitalised and spread over the
life of the contract, as opposed to being
expensed as incurred, as was the case
under the previous policy. This resulted
in an increase to retained earnings of
£7.6 million as at 1 January 2018, with
the corresponding entry to prepayments.
The tax impact of this adjustment is a
debit to equity of £1.4 million and a
corresponding increase in deferred tax
liabilities as at 1 January 2018. The net
impact on retained earnings as at
1 January 2018 is £6.2 million.
• Certain elements of Managed Services
contracts, for example those relating to
Entry Into Service, are not treated as
separate performance obligations under
the new policy. Under the new policy,
these services are treated as part of the
ongoing performance obligations in the
contract. This means the revenues and
costs associated with Entry Into Service
are recognised over the life of the
contracts with customers, rather than
being recognised as incurred as was the
case historically. This resulted in an
increase to retained earnings of £0.5
million as at 1 January 2018, with the
corresponding entry to prepayments. The
tax impact of this adjustment is a debit to
equity of £0.1 million and a corresponding
increase in deferred tax liabilities as at
1 January 2018. The net impact on
retained earnings as at 1 January 2018
is £0.4 million.
The specific performance obligations and
invoicing conditions in our Managed Services
contracts are typically related to the number
of calls, interventions or users that we
manage and therefore these contracts
typically generate variable revenues over
time and have not been impacted by the
implementation of IFRS 15.
As noted above, IFRS 15 has been adopted
using the modified retrospective approach,
therefore comparative amounts have not
been restated. For comparability purposes,
tables giving the impact of the adoption of
the new standard on the Consolidated
Balance Sheet and Consolidated Income
Statement for the year ended 31 December
2018 show what the results would have been
had they been prepared under the previous
accounting policies. These tables are on
pages 121 to 122.
Agent vs principal
Since the finalisation of the revised Group
revenue recognition accounting policies and
adoption of IFRS 15 on 1 January 2018, a new
line of business has emerged within our
Technology Sourcing business. Typically,
vendors and customers approach us with an
opportunity where the vendor is taking the
contract and performance risks, sets the
selling price and uses Computacenter as a
pass-through agent in the channel, to
transact the deal for a set fee. To date these
have been primarily large software deals
where there is no ongoing obligation of
service on us following the transaction. We
have no say in the pricing or selection of the
product and are merely standing in the sales
channel between the vendor and customer,
for the pre-determined fee. Based on the
facts and circumstances of each deal, we
assess how the terms and conditions of the
deal are applied in practice against our
revenue recognition policies, by reviewing
the weighting applied to the agent/principal
indicators. As a result, we have classified
several of these deals as agency, concluding
that the fee received should be booked as
net revenue. The total value of these deals
during the year, on an agency basis, was
£3.1 million.
Segmental reporting structure changes
During the first half of the year, Management
reviewed the way it reported Segmental
performance to the Board and the Chief
Executive Officer, who is the Group’s Chief
Operating Decision Maker (‘CODM’), to
determine whether it could improve the
transparency and understandability of the
trading performance of its core Group
Operating Model geographies. As a result of
this analysis, the Board has adopted a new
Segmental reporting structure from the
period ended 30 June 2018 and year ended
31 December 2018.
In accordance with IFRS 8 Operating
Segments, the Group has identified four
revised operating Segments:
• UK;
• Germany;
• France; and
•
International.
As the location of the Group’s headquarters,
the UK entity has also borne an increasing
share of corporate costs since the rollout of
the Group Operating Model from 2013.
Certain expenses such as those for the Board
itself and related public company costs,
Group Executive members not aligned to a
specific geographic trading entity and the
cost of centrally funded strategic corporate
initiatives that benefit the whole Group, are
not allocated to individual Segments
because they are not directly attributable
to any single Segment. Accordingly, these
expenses are disclosed as a separate
column, ‘Central Corporate Costs’, within
the segmental note.
Under the previous Segmental reporting
structure, the UK Segment included a number
of other operating entities, primarily
international Global Service Desk locations.
Whilst these entities have limited external
revenues, and a cost recovery model that
suggests better than breakeven margins to
ensure compliance with transfer pricing
regulations, this generated unnecessary
complexity when presenting the UK results
to the Board and the CODM, with the growth
in the number and scale of these other
operating entities blurring the underlying
performance of the core geography over
time. The revised UK Segment now only
comprises the trading performance of
Computacenter UK. The German Segment
has been revised to remove the
independently run Computacenter
Switzerland operation, including cITius,
which has been transferred to the
International Segment, leaving the German
country trading operations standing alone.
The new International Segment replaces the
Belgian Segment and includes the Belgium,
Switzerland, FusionStorm, Computacenter
USA and TeamUltra trading operations, along
with the international Global Service Desk
locations in South Africa, Spain, Hungary,
Mexico, Malaysia, Poland, India and China. The
International Segment has been created to
reflect the Group’s ambitions to continue to
expand its worldwide footprint. This includes
expanding trading operations into new
geographic locations, both within our
Western European heartland and beyond,
and the need to continue to identify
talent-rich offshore locations, to ensure that
we can remain both cost and resource
competitive in the Services marketplace.
The French Segment remains unchanged
from that reported at 31 December 2017.
This new Segmental reporting structure is
the basis on which internal reports are
provided to the Chief Executive Officer, as
the CODM, for assessing performance and
determining the allocation of resources
within the Group.
Segmental performance is measured based
on external revenues, adjusted1 gross profit,
adjusted1 operating profit and adjusted1
profit before tax.
The change in Segmental reporting has no
impact on reported Group numbers.
Further information on this Segmental
restatement can be found in note 4 to the
Consolidated Financial Statements where,
to enable comparisons with prior period
performance, historical segment
information for the year ended 31 December
2017 has been restated in accordance with
the revised Segmental reporting structure.
All discussion within this Annual Report and
Accounts on Segmental results reflects this
revised structure, the reclassification of
Central Corporate Costs and the resultant
prior period restatements.
Central corporate costs
As noted above within Segmental Reporting
Structure Changes, certain expenses such as
those for the Board itself, and related public
company costs, Group Executive members
not aligned to a specific geographic trading
entity, and the cost of centrally funded
strategic corporate initiatives that benefit
the whole Group, are not specifically
allocated to individual Segments because
they are not directly attributable to any
single Segment.
Accordingly, these expenses are disclosed as
a separate column, ‘Central Corporate Costs’,
within the segmental note. These costs are
borne within the Computacenter (UK) Limited
legal entity and have been removed for
segmental reporting and performance
analysis but form part of the overall Group
administrative expenses.
During the period, total Central Corporate
Costs were £25.2 million, an increase of 32.6
per cent (2017: £19.0 million). Within this:
• Board expenses and related public
company costs were £3.2 million (2017:
£3.7 million);
• costs associated with Group Executive
members not aligned to a specific
geographic trading entity were £4.3
million (2017: £4.3 million);
• share-based payment charges
associated with the Group Executive
members identified above, including the
Group Executive Directors, were £2.7
million (2017: £2.6 million); and
• strategic corporate initiatives increased
from £8.4 million in 2017 to £15.0 million in
2018, primarily due to increased spend on
projects designed to increase capability,
enhance productivity or strengthen
systems which underpin the Group.
Financial instruments
The Group’s financial instruments comprise
borrowings, cash and liquid resources, and
various items that arise directly from its
operations.
The Group enters into hedging transactions,
principally forward exchange contracts or
currency swaps, to manage currency risks
arising from the Group’s operations and its
sources of finance. As the Group continues
to expand its global reach and benefit from
lower cost operations in geographies such
as South Africa, it has entered into forward
exchange contracts to help manage cost
increases due to currency movements. The
Group’s policy is not to undertake speculative
trading in financial instruments. The main
risks arising from the Group’s financial
instruments are interest rate, liquidity and
foreign currency risks. The overall financial
instruments strategy is to manage these
risks in order to minimise their impact on
the Group’s financial results. The policies for
managing each of these risks are set out
below. Further disclosures in line with the
requirements of IFRS 7 are included in the
Consolidated Financial Statements.
Interest rate risk
The Group finances its operations through a
mixture of retained profits, bank borrowings,
finance leases and loans for certain
customer contracts. The Group’s general
bank borrowings, other facilities and
deposits are at floating rates. No interest
rate derivative contracts have been entered
into. The Group’s specific borrowing facility
for the purchase of FusionStorm, and the
undrawn committed facility of £60 million,
are at floating rates, however the borrowing
facility for the new operational headquarters
in Germany is at a fixed rate.
Liquidity risk
The Group’s policy is to ensure that it has
sufficient funding and facilities in place to
meet any foreseeable peak in borrowing
requirements. The Group’s positive net cash
63
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Group Finance Director’s review
continued
and cash equivalents position was
maintained throughout 2018, and at the year
end was £200.4 million, with net funds3 of
£57.3 million after including the Group’s two
specific borrowing facilities and CSF. Due to
strong cash generation over the past three
years, the Group can currently finance its
operational requirements from its cash
balance, and it operates an informal cash
pooling arrangement for the majority of
Group entities. During 2015, we extended an
existing specific committed facility of £40.0
million for a three-year term through to
February 2018. In January 2018, we extended
the facility to £60.0 million for a further three
years. The Group has never had to draw on
this committed facility.
The Group has a Board-monitored policy to
manage its counterparty risk. This ensures
that cash is placed on deposit across a range
of reputable banking institutions. CSF
facilities are committed.
Foreign currency risk
The Group operates primarily in the United
Kingdom, Germany, France and the United
States of America, with smaller operations
in Belgium, China, Hungary, India, Malaysia,
Mexico, the Netherlands, Poland, South Africa,
Spain and Switzerland.
The Group uses an informal cash pooling
facility to ensure that its operations outside
the UK are adequately funded, where
principal receipts and payments are
denominated in euros and US dollars. For
those countries within the Eurozone, the
level of non-euro denominated sales is small
and, if material, the Group’s policy is to
eliminate currency exposure through
forward currency contracts. For our US
operations, most transactions are
denominated in US dollars. For the UK, the
majority of sales and purchases are
denominated in sterling and any material
trading exposures are eliminated through
forward currency contracts.
The Group has been successful in winning
international Services contracts, where
Services are provided in multiple countries.
We aim to minimise currency exposure by
invoicing the customer in the same currency
in which the costs are incurred. For certain
contracts, the Group’s committed contract
costs are not denominated in the same
currency as its sales. In such circumstances,
for example where contract costs are
denominated in South African rand, we
eliminate currency exposure for a
foreseeable period on these future cash
flows, through forward currency contracts.
64
In 2018, the Group recognised a loss of £3.2
million (2017: gain of £0.2 million) through
other comprehensive income in relation to
the changes in fair value of related forward
currency contracts, where the cash flow
hedges relating to firm commitments were
assessed to be highly effective.
The Group reports its results in pound
sterling. The ongoing weakness in the value
of sterling against most currencies during
2018, in particular the euro, continued to
benefit our revenues and profitability as a
result of the conversion of our foreign
earnings. However, the exchange rates seen
in 2018 are not materially dissimilar to those
seen in 2017. The impact of restating 2018 at
2017 exchange rates would be an increase of
approximately £18.8 million in 2017 revenue
and no change in 2017 adjusted1 profit
before tax.
Credit risk
The Group principally manages credit risk
through customer credit limits. The credit
limit is set for each customer based on its
creditworthiness, assessed by using credit
rating agencies, and the anticipated levels
of business activity. These limits are
determined when the customer account is
first setup and are regularly monitored
thereafter.
There are no significant concentrations of
credit risk within the Group. The Group’s
major customer, disclosed in note 4 to the
Consolidated Financial Statements, consists
of entities under the control of the UK
Government. The maximum credit risk
exposure relating to financial assets is
represented by their carrying value as at
the balance sheet date.
Results of the Tender Offer
On 23 January 2018, the Company published
details of the timing and structure of a
Return of Value by way of a shareholder
circular (the ‘Circular’). On 13 February 2018,
the Company announced the results of the
Tender Offer set out in the Circular, which
closed on 9 February 2018.
A total of 8,546,861 ordinary shares were
purchased at a price per ordinary share of
1,170 pence, for a total cost of
£99,998,273.70. The Company holds the
ordinary shares purchased pursuant to the
Tender Offer in treasury. This represented
approximately 6.97 per cent of the issued
share capital of the Company as at
31 December 2017. Proceeds payable to the
Company’s shareholders for the certificated
ordinary shares purchased under the Tender
Offer were despatched by 19 February 2018
in the form of a cheque. CREST account
holders had their CREST accounts credited on
14 February 2018.
Further details are available at the
Company’s website, investors.
computacenter.com, and in the 2017 Annual
Report and Accounts. Capitalised terms used
in this section have the same meaning as
ascribed to them in the Circular.
Planning for the United Kingdom exiting the
European Union
Computacenter’s target clients are large
corporate customers and large government
departments. We operate in four principal
geographies, the UK, Germany, France and
the USA. This allows us to manage European
Union (EU) requirements from our EU
locations and we have a long history of
trading with the subsidiaries of large global
Western European headquartered
organisations, in many diverse locations
across the world. Therefore, the concept of
exporting to and importing from multiple
countries with the related systems
requirements is already functioning across
the business.
There remains, even at this late stage,
considerable uncertainty around the exact
nature and timing of the UK’s exit from the
EU, which makes it difficult to develop
specific plans for the various potential
outcomes. However, we established a
Committee for Planning for the United
Kingdom exiting the European Union (the
‘Committee’) in 2017, to consider the key risks
and changes that may be required.
This Committee is led by the Group Finance
Director and includes senior staff from the
key areas that may be affected including:
• Finance, including Group Tax & Treasury
and Group Commercial Finance;
• Group Human Resources, for employment
and related matters;
• Group Legal & Contracting, including
intellectual property, data protection and
supplier contracting;
• Group Information Services, including IT
systems, location of IT infrastructure and
location of data; and
• Group Technology Sourcing, including
Export/Import, Supply Chain Services,
Commercial Operations, Vendor Relations
and the potential impact of Waste
Electrical and Electronic Equipment (WEEE).
The Committee meets regularly to review
papers submitted by the subject matter
experts and monitors an action list, to
identify ways to minimise the impact of this
change. The Committee monitors
negotiation developments, actively
considers the possible impacts of the United
Kingdom’s departure from the EU on our
business and plans for changes to our
processes and procedures that may be
required. The Committee, through its
members, liaises with our customers and our
IT product and service partners, and is
supported in its work by specialist external
advisors. The Committee has issued a series
of briefing notes and FAQs to customer-
facing employees, so they can respond to
customer queries. The minutes of the
meetings and the subject-matter papers are
reviewed at the Group Risk Committee and
updates have been provided to both the Audit
Committee and the Board.
Initial position and preparation
We are committed to operating our business
and serving our customers in a way that
properly manages and mitigates the effects
of the UK leaving the EU. We will continue to
work with our customers and partners to
deliver leading IT infrastructure products
and services before, during and after the
UK’s departure from the EU, including any
period of transition.
While Computacenter advocates barrier-free
trade in products, services and data
between the UK and the EU, there remains
considerable uncertainty about what form
the UK’s departure from the EU will take and,
therefore, the changes to trade
arrangements that will occur. This makes it
difficult to take specific action and
communicate specific plans. Computacenter
believes however, that it is well placed to deal
effectively with any likely eventuality. The
Company, led by the Committee, has taken a
number of preparatory steps and assessed
what we currently consider could be the
main impacts on the Company of exiting the
EU and our initial views on managing those
impacts, so as to cause minimal disruption
to our customers.
Due to the already global nature of
Computacenter’s business, its in-house
logistics and service capabilities in the UK,
Germany, France, Belgium and the
Netherlands, and its placement in the IT
infrastructure industry, the Committee does
not currently consider that we will be
materially impacted by the UK’s departure
from the EU. All the same, the Committee is
paying particular attention to our IT product
supply business, where products routinely
cross between continental Europe and the
UK, and our IT Services business, where data
can flow across borders, especially within
the EU.
Technology Sourcing
Computacenter does not manufacture
products, and instead sources and resells
products manufactured by leading
information technology companies
worldwide. We have over 30 years of IT
product supply experience and routinely
trade with manufacturers, distributors and
customers located both inside and outside
the EU.
Any trade barriers created as a result of
the UK’s departure from the EU have the
potential to increase cross-border supply
complexity and cause delivery delays. We
have been in regular dialogue with our
suppliers to understand their strategies
to deal with these, and to put in place
appropriate mitigation strategies to reduce
the risk to us and our customers. Additionally,
we have been closely examining the
countries of origin and destination of the
deliveries we make to customers from each
Integration Center. The vast majority of
current customer Technology Sourcing
product supply is transacted on a country to
country basis. There are some instances
where our UK business ships to Germany and
our German business ships to the UK. This is
primarily due to local customer ordering
requirements. We have established a
process where EU27 requirements of our
UK customers will be shipped from Germany
and vice versa.
While the precise outcome of the UK’s
departure from the EU is not yet clear, we
are confident the imposition of new trade
barriers will not require Computacenter to
develop fundamentally new Technology
Sourcing systems and processes. We are
confident that adapting existing systems
and processes to cope with an additional
non-EU trading country, along with our
multinational Integration Centers and our
experience of international trade, will mean
that we are well positioned in this regard.
In anticipation of a new customs regime
following the UK’s departure from the EU,
and to mitigate the risk of delays from a
potential EU hard border, we have applied
for the Authorised Economic Operator (AEO)
certification that should facilitate smoother
customs clearance.
Data transfer regulation
By incorporating the EU Commission
approved Standard Contractual Clauses, the
Group has built data transfer adequacy into
its intra-Group agreements, to which all of
its relevant UK and EU legal entities are party.
In this regard, the Company establishes
appropriate safeguards for the purposes of
General Data Protection Regulation Article
46, when transferring personal data to third
countries not considered adequate by EU
data protection standards. Computacenter
has a strong desire for both the UK and EU
Governments to agree an adequacy
agreement on data protection, to ensure
the continued smooth transfer of data post
the UK’s departure from the EU.
People
Whilst we do not employ a significant number
of EU27 citizens in the UK or UK citizens in the
EU, and all indications suggest that the UK
Government and the EU have agreed that EU
citizens living and working in the UK will be
able to carry on doing so with undiminished
rights after the UK’s departure from the EU,
there is still uncertainty. We will continue to
closely support employees throughout the
process of the UK’s departure from the EU,
including helping them to be fully aware of
the applicable status/registration processes
as they become known.
Opportunities
We are not alone in our sector in facing these
challenges. A number of our European
competitors have strong presences within
the EU and sell from this base into the UK.
Equally, a number of our global competitors
have their European headquarters in the UK
and address the EU market from there. Once
the details of the UK’s departure from EU are
known, we will work with our major vendors
to address any concerns they may have
about end-customers currently serviced by
other resellers with single country
operations or those stranded on either side
of the UK-EU border.
It is likely that there will be additional
investment required in IT systems to manage
the transition. Whilst this will be a cost to us,
it will also be an opportunity, as our
customers, in some cases, may need to
increase investment in a similar manner.
Wider economic impact
There is significant uncertainty in relation
to the UK’s departure from the EU and the
impact that this can have on business
confidence and investment plans and
therefore the marketplaces in which we
operate. Whilst the UK’s departure from the
EU is frequently seen as only a risk or a
negative event, it may also create new
opportunities and we remain well positioned
to support our customers whatever the
outcome.
Going Concern
Computacenter’s business activities,
business model, its strategic goals and its
performance are set out within this Strategic
Report from the inside front cover to page 66.
The financial position of the Group, its cash
flows, liquidity position and borrowing
facilities are set out within this Group
Finance Director’s review on pages 60 to 65.
In addition, notes 26 and 27 to the
Consolidated Financial Statements include
Computacenter’s objectives, policies and
65
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 Group Finance Director’s review
continued
processes for managing its capital, its
financial risk management objectives,
details of its financial instruments and its
exposures to credit and liquidity risk.
The Directors have, after due consideration,
a reasonable expectation that the Group has
adequate resources to continue in operational
existence for a period of 12 months from the
date of approval of the Consolidated
Financial Statements, as set out on pages
116 to 169 of this Annual Report and Accounts.
Thus, they continue to adopt the going
concern basis of accounting in preparing
the Consolidated Financial Statements.
Viability Statement
In accordance with provision C.2.2 of the UK
Corporate Governance Code, the Directors
have assessed the Group’s prospects over
a longer period than the 12 months required
by the Going Concern statement.
Viability timeframe
The Directors have assessed the Group’s
viability over a period of three years from
31 December 2018. This period was selected
as an appropriate timeframe for the
following reasons:
• The Group’s rolling strategic review, as
considered by the Board, covers a
three-year period;
• The period is aligned to the length of the
Group’s Managed Services contracts,
which are typically three to five years long;
• The short lifecycle and constantly
evolving nature of the technology
industry lends itself to a period not
materially longer than three years; and
• The continuing macroeconomic and
political environment following the
Referendum on leaving the European
Union introduces greater uncertainty
into a forecasting period longer than
three years.
Whilst the Directors have no reason to believe
the Group will not be viable over a longer
period than three years, we believe that a
three-year period presents shareholders
with a reasonable degree of confidence,
while providing a longer-term perspective.
With regard to the principal risks set out on
pages 40 to 45, the Directors remain assured
that the business model will be valid beyond
the period of this Viability Statement. There
will continue to be demand for both our
Professional and Managed Services
businesses, and it is up to Management to
ensure that the Group remains able to meet
that demand at an appropriate cost to our
customers. The Group’s value-added product
reselling Technology Sourcing business only
appears vulnerable to disintermediation at
the low end of the product range, as the
66
Group continues to provide a valuable service
to customers and vendors alike, as described
on pages 14 to 17.
Prospects of the Group assessment
process and key assumptions
The assessment of the Group’s prospects
derives from the annual strategic planning
and review process. This begins with an
annual away day for the Board, where
Management presents the strategic review
for discussion against the Group’s current
and future operating environments.
High-level expectations for the following year
are set with the Board’s full involvement and
are delivered to Management, who prepare
the detailed bottom-up financial target for
the following year. This financial target is
reviewed and agreed by Management before
presentation to the Board for approval.
On a rolling annual basis, the Board considers
a three-year business plan consisting of the
detailed bottom-up financial target for the
following year (2019) and forecast
information for two further years (2020
and 2021), which is driven by top-down
assumptions overlaid on the detailed target
year. Key assumptions used in formulating
the forecast information include organic
revenue growth, margin improvement and
cost control, continued strategic
investments through the Consolidated
Income Statement, and forecast Group
effective tax rates, with no changes to
dividend policy or capital structure beyond
what is known at the time of the forecast.
The three-year plan was last considered and
approved by the Board on 13 December 2018,
with amendments and enhancements
considered and approved by the Board on
4 February 2019.
Impact of risks and assessment of viability
The three-year business plan is subject to
sensitivity analysis which involves flexing a
number of the main assumptions underlying
the forecast. The forecast cash flows from
the three-year plan are aggregated with the
current position, to provide a total three-year
cash position against which the impact of
potential risks and uncertainties can be
assessed. In the absence of significant
external debt, the analysis also considers
access to available committed and
uncommitted finance facilities, ability to
raise new finance in most foreseeable
market conditions and the ability to restrict
dividend payments as an instrument of
last resort.
The potential impact of the principal risks
and uncertainties, as set out on pages 40
to 45, is then applied to the sensitised
three-year business plan. This assessment
includes only those risks and uncertainties
that, individually or in plausible combination,
would threaten the Group’s business model,
future performance, solvency or liquidity
over the assessment period and which are
considered to be severe, but reasonable
scenarios. It also takes into account an
assessment of how the risks are managed
and the effectiveness of any mitigating
actions. The combined effect of the potential
occurrence of several of the most impactful
risks and uncertainties is then compared to
the cash position generated throughout the
sensitised three-year plan, to assess
whether the business will be able to continue
in operation.
For the current period, the risk related to an
immediate no-deal departure of the UK from
the EU on 29 March 2019 has been added to
the sensitivity analysis. The analysis now
includes assumptions of limited short-term
one-off costs required to adapt systems and
processes to changes in cross-border selling
and customs regimes, in order to avoid
Technology Sourcing friction and to
remediate any concerns over data storage
and transfer. These cost assumptions have
been aggregated into existing sensitivities,
which already model a general prolonged
market downturn scenario that represents
the ‘worst-case’ impact from the UK leaving
the EU under an immediate ‘no-deal’ basis on
29 March 2019.
Conclusion
Based on the period and assessment above,
the Directors have a reasonable expectation
that the Group will be able to continue in
operation and meets its liabilities as they
fall due over the three-year period to
31 December 2021.
Fair, balanced and understandable
The UK Corporate Governance Code requires
the Board to consider whether the Annual
Report and Accounts, taken as a whole, are
‘fair, balanced and understandable’ and
‘provide the information necessary for
shareholders to assess the Group’s position
and performance, business model and
strategy’.
Management undertakes a formal process
through which it can provide comfort to the
Board in making this statement.
This Strategic Report was approved by the
Board on 11 March 2019 and signed on its
behalf by:
MJ Norris
Chief Executive Officer
FA Conophy
Group Finance Director
GOVERNANCE
REPORT
STRATEGIC REPORT
ANNUAL REPORT AND ACCOUNTS 2018
THIS SECTION DESCRIBES HOW WE
RUN COMPUTACENTER.
OUR JOB, ON YOUR BEHALF, IS TO
MAINTAIN EFFECTIVE GOVERNANCE
PRACTICES WHICH ARE FUNDAMENTAL
TO THE GROUP’S ABILITY TO DELIVER
LONG-TERM SHAREHOLDER VALUE.
Governance Report
Chairman’s governance overview
Board of Directors
Corporate Governance Report
Leadership
Effectiveness
Nomination Committee Report
Accountability
68
70
72
72
73
74
76
78 Audit Committee Report
84
84
101
102 Directors’ Report
108 Directors’ Responsibilities
Remuneration
Directors’ Remuneration Report
Relations with shareholders
More online:
investors.computacenter.com
67
Chairman’s governance
overview
DEAR SHAREHOLDER
Greg Lock
Non-Executive Chairman
IT IS CRITICAL
THAT THE BOARD
HAS THE RIGHT
COMPOSITION.
68
I am pleased to present Computacenter’s
Corporate Governance Report for the year
ended 31 December 2018. The Board believes
that effective governance practices are
fundamental in underpinning the Group’s
ability to deliver long-term shareholder
value. The Board therefore supports and is
committed to the principles of corporate
governance set out in the 2016 UK Corporate
Governance Code (the ‘Code’), which has
applied for the year under review beginning
1 January 2018. The Code is published by the
Financial Reporting Council and can be found
at www.frc.org.uk.
This Corporate Governance Report outlines
and explains the Group’s governance policies
and practices, and sets out how we applied
the Code during the year. It aims to assist our
shareholders in understanding the Group’s
approach to corporate governance.
As a Company listed on the main market of
the London Stock Exchange, Computacenter
is required to review its practices against the
Code’s provisions and report to its
shareholders on its compliance with them.
The Board confirms that the Company has
complied with each provision of the Code
throughout the year and anticipates being
compliant with the 2018 UK Corporate
Governance Code (the ‘New Code’), which was
published in July 2018 and is effective from
1 January 2019, as at 31 December 2019.
This is my final report to you as Chairman as,
along with Regine Stachelhaus, I will not be
standing for re-election at the Company’s
Annual General Meeting (‘AGM’) on 16 May
2019. I ask shareholders to note that
following the expected appointment of Peter
Ryan to the role of Chairman at the AGM and
the subsequent appointment of two further
Independent Non-Executive Directors that
is expected to immediately follow the AGM,
membership of the Board will remain
compliant with provision 11 of the New Code
throughout 2019, which requires at least half
of the Board, excluding the Chairman, to be
Independent Non-Executive Directors.
Board composition
It is critical that the Board has the right
composition, so it can provide the best
possible leadership for the Group and
discharge its duties to shareholders. This
includes having the right balance of skills
and experience, ensuring that all of the
Directors have a good working knowledge
of the Group’s business, and retaining the
Board’s independence and objectivity.
The Board is conducting a thorough search
for two Independent Non-Executive Directors
and is unanimous in its view that all three of
these factors will be enhanced by the
subsequent appointments to the Board. Due
to the timing of the search as compared to
the date of the AGM, and the release of the
Notice of AGM, the selected candidates will
be confirmed as members of the Board
following the AGM and announced shortly
thereafter. It is anticipated that, in
accordance with the Company’s procedure,
both of the new Directors will have a full
induction which is tailored to their knowledge
and previous experience. This will include
meetings with the Chairmen of the Board and
its Committees, the Group Chief Executive
Officer (CEO) and Group Finance Director (FD).
Given their intended appointments to the
Remuneration Committee, both will be
provided with a detailed briefing on
executive remuneration by the Group’s
Human Resources Director. Further, with
their intended appointments to the Audit
Committee, both will receive presentations
from a number of the Group’s Financial Senior
Management team. Both new Directors will
also join the Nomination Committee.
The Board was unanimous in its support
for Peter Ryan, firstly as a candidate in
a thorough search process to replace me
as Chairman, and then as the preferred
candidate following a recommendation
from the Special Nomination Committee led
by the Senior Independent Director, Ros Rivaz.
The appointment of Peter Ryan to the Board
on 13 February 2018 brought a fresh
perspective to the Board’s discussions and
has complemented the continuity of service
and knowledge of the Company provided by
the remaining members of the Board. His
significant operational expertise in large
enterprises and deep knowledge of the
Company’s sector and its challenges,
complements the skills of our other Board
members and will assist him as he
transitions to the role of Chairman of the
Board. Peter has had a successful 37-year
international career in technology,
encompassing all dimensions of the industry
including software, services, systems
integration, outsourcing and infrastructure.
His deep and world-class experience within
Computacenter’s industry will allow him to
lead the Board through the next stages of the
Company’s growth and assist Management in
shaping the future strategy for the business.
Strategy
The Board is collectively responsible for
leading the Group and promoting its success,
within a framework of appropriate controls,
which enable risk to be assessed and
effectively managed. It is also responsible
for implementing the business model set out
on pages 18 to 19, for ensuring that the Group
has the right strategy to drive shareholder
value, and for providing appropriate support
and challenge to the Group Executive
Management team. The Board dedicates a
day-long session each year to receiving
strategy-related presentations and
discussing and shaping the strategic
direction of the Company with Management.
In April of this year an additional, day long
strategy session was held for the benefit of
the Independent Non-Executive Directors.
In addition to the regular discussions on the
development of the Group’s strategy, the
Board now also receives an in-depth topical
presentation from Management on a specific
strategic initiative at every Board meeting.
Board effectiveness
An internal evaluation of the Board and its
Committees took place during the year.
Further details of the process and the
findings can be found on page 73. After
carefully considering its findings, I am
satisfied that the Board continues to
function effectively and that its current
constitution and range of skills are
appropriate for protecting the long-term
interests of the Group and the Company’s
shareholders.
I also remain satisfied that the Board’s
members, and in particular the Non-
Executive Directors, have sufficient time
to undertake their current Board and
Committee roles. I will continue to assess
these judgements to ensure they remain
the case.
In accordance with both the Code and the
New Code, all of the Directors will stand for
election or re-election at the 2019 AGM, with
the exception of Regine Stachelhaus and I,
who will not be standing for re-election.
Succession planning
The Board continues to focus at length on
succession planning, which remains
particularly important given the tenure of
the current Executive Directors. Prior to the
date of this report, the Board reviewed the
succession plans for both the Executive and
Non-Executive Directors. It also received a
presentation from the Group Human
Resources Director on how the Group
manages and develops talent immediately
below Board level, in the long-term interests
of the Group.
Governance framework
As allowed by the Company’s Articles of
Association, the Board delegates a number
of its responsibilities to Committees, so it
can carry out its functions effectively. A
diagram of the Board governance structure
is set out on this page. As part of its ongoing
review of the Group’s governance procedures
and framework, the Board reviewed the
terms of reference for each of these
Committees. A number of the Group’s policies
were also reviewed and amended during the
year. The detail and format of information
provided to the Board by Management
continues to develop. The Board has also
reviewed and updated the Company’s
Articles of Association and these will be
presented to shareholders at the 2019 AGM.
Board Committees
Board
Audit Committee
Nomination
Committee
Remuneration
Committee
Board visits
To help develop and update the Directors’
knowledge of the Group’s operations, the
Board regularly visits our offices overseas.
During the year, the Board held a meeting at
the Group’s French headquarters in Paris,
where it received presentations from the
French Managing Director and senior
members of his team. This focused on the
sustainability of the business’s performance,
given its recent turnaround, the prospects
for continued growth within both the
Services and Technology Sourcing business,
and the local macroeconomic and
competitive environments.
Diversity
The Board recognises the benefits that
diverse skills, experience and points of view
can bring to an organisation, and how it may
assist the Board’s decision making and
hence its effectiveness. Whilst the Board
monitors the possibility of legislation in this
area, appointments to the Board will continue
to be primarily based on merit. As at
31 December 2018, the Board had two female
Non-Executive Directors, Regine Stachelhaus
and Ros Rivaz, representing 22.2 per cent of
the total Board membership. This is in line with
the representation as at 31 December 2017.
Shareholder engagement
The Board remains committed to
communicating with our shareholders and,
where appropriate, submitting its views for
consultation and feedback. Further detail
regarding engagement with our shareholders
can be found on page 101.
Greg Lock
Non-Executive Chairman
11 March 2019
69
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Board of Directors
Committee membership key
A – Audit Committee
N – Nomination Committee
R – Remuneration Committee
IT IS TIME FOR ME TO HAND OVER TO
PETER RYAN, WHO HAS BEEN ON OUR
BOARD FOR A YEAR. I AM CONFIDENT
IN HIS PERSONALITY, EXPERIENCE
AND EXPERTISE.
Greg Lock
Non-Executive Chairman
Ros Rivaz
Senior Independent Non-Executive Director
and Chair of the Remuneration Committee
Minnow Powell
Independent Non-Executive Director and
Chairman of the Audit Committee
Regine Stachelhaus
Independent Non-Executive Director
Committee membership: A, N, R
Board member attendance: 7/8*
Committee membership: A, N, R
Board member attendance: 8/8
Committee membership: A, N, R
Board member attendance: 7/8
Ros (1955) is a Non-Executive Director of
ConvaTec Group plc (where she is a member
of the Remuneration and Nomination
Committees), RPC Group plc (Remuneration,
Audit and Nomination Committees), Boparan
Holdings Limited (Audit and Remuneration
Committees), and the MOD Defence
Equipment and Support Board
(Remuneration Committee). She was Chief
Operating Officer for Smith & Nephew plc and
has held senior positions in global companies
including Exxon, Diageo, ICI and Tate & Lyle
Group. She was Deputy Chair of the Council of
the University of Southampton for 10 years,
where she holds an honorary doctorate.
Minnow (1954) is a Non-Executive Director
and Chairman of the Audit Committee of
Superdry plc. He was a Director and chaired
the Audit Committee of Tui Travel plc from
2011 to 2014 and was a member of the
Supervisory Board of Tui AG from December
2014 to February 2016. Minnow spent 35
years with Deloitte where he became a
Partner in 1985. His audit client portfolio
included companies within the same sector,
and with similar business models, as
Computacenter. He is a Chartered
Accountant and was a member of the
Auditing Practices Board for six years.
Regine (1955) is a member of the Board of
SPIE SA in Cergy and SPIE Deutschland und
Zentraleuropa GmbH, a member of the
Supervisory Board of Covestro AG and
Covestro Deutschland AG and a member of
the Supervisory Board of Ceconomy AG. She
was previously on the Board of Directors at
E.ON SE, a major energy company included
in the Eurostoxx 50 index, where she had
a broad range of operational responsibilities
including for Legal & Compliance, Group
Procurement, Group Human Resources and
Group IT. Before that, she worked for several
years as Vice President, Imaging and Printing
Group of HP Germany.
70
Greg Lock
Non-Executive Chairman and Chairman
of the Nomination Committee
Mike Norris
Chief Executive Officer
Tony Conophy
Group Finance Director
Committee membership: N, R
Board member attendance: 8/8
Greg (1947) has more than 45 years’
experience in the software and computer
services industry, including seven years as
Chairman of Kofax plc and four years as
Chairman of SurfControl plc. From 1998 to
2000, he was General Manager of IBM’s Global
Industrial sector. Greg also served as a
member of IBM’s Worldwide Management
Council and as a governor of the IBM Academy
of Technology. He is non-executive Chairman
of UBM plc.
Board member attendance: 8/8
Board member attendance: 8/8
Mike (1961) graduated with a degree in
Computer Science and Mathematics from
East Anglia University in 1983. He joined
Computacenter in 1984 as a salesman in the
City office. Following appointments in senior
roles, he became Chief Executive in
December 1994, with responsibility for all
day-to-day activities and reporting channels
across Computacenter. Mike also led the
Company through flotation on the London
Stock Exchange in 1998. He was awarded an
honorary Doctorate of Science from the
University of Hertfordshire in 2010.
Tony (1958) has been a member of the
Institute of Chartered Management
Accountants since 1982. He qualified with
Semperit (Ireland) Ltd and then worked for
five years at Cape Industries plc. He joined
Computacenter in 1987 as Financial
Controller, rising in 1991 to General Manager
of Finance. In 1996, he was appointed
Finance and Commercial Director of
Computacenter (UK) Limited with
responsibility for all financial, purchasing
and vendor relations activities. In March 1998
he was appointed Group Finance Director.
Peter Ryan
Independent Non-Executive Director
Philip Hulme
Founder Non-Executive Director
Peter Ogden
Founder Non-Executive Director
Committee membership: A, N, R
Board member attendance: 7/7**
Peter (1961) has had a successful 37-year
international career in technology
encompassing all dimensions of the industry,
including software, services, systems
integration, outsourcing and infrastructure.
Over the last 11 years, Peter has held roles
such as Chief Sales Officer with Hewlett
Packard Enterprise, Chief Client Officer at
Logica plc and Executive Vice President,
Global Sales and Services with Sun
Microsystems Inc. After starting his career at
the Home Office, Peter undertook various
senior management roles with Aspect
Development Inc, Parametric Technology Ltd,
IBM (UK) Ltd and ICL plc.
Board member attendance: 5/8
Board member attendance: 7/8
Philip (1948) founded Computacenter with
Peter Ogden in 1981 and worked for the
Company on a full-time basis until stepping
down as Executive Chairman in 2001. He was
previously a Vice President and Director of
the Boston Consulting Group.
Peter (1947) founded Computacenter with
Philip Hulme in 1981 and was Chairman of
the Company until 1998, when he became
a Non-Executive Director. Prior to founding
Computacenter, he was a Managing Director
of Morgan Stanley and Co.
* Note that Ros Rivaz gave her apologies for a Board meeting due to another commitment.
** Note that Peter Ryan was appointed on 13 February 2018, subsequent to the first Board Meeting of the year.
Note that Phil Yea attended both Board meetings that occurred before he stepped down from the Board on 24 April 2018.
71
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018
Corporate Governance
Report
LEADERSHIP
The role of the Board
The Board is responsible for the Group’s
management and performance, and for
providing effective leadership to it. There is a
schedule of Matters Reserved for the Board,
which includes considering and approving,
amongst other things, acquisitions, major
capital expenditure, Group strategy and
budgets, the Group’s Consolidated Financial
Statements and its dividend policy. This
schedule is reviewed annually as a standing
Board agenda item and it was updated
during 2018. It can be found on our website
at investors.computacenter.com.
Day-to-day management and operational
activities are delegated to an authorised
Group Executive Committee including,
amongst others, the Executive Directors.
Other Board-level matters are delegated to
the Nomination, Audit and Remuneration
Committees, details of which can be found
on pages 74, 78 and 84 respectively. The
Terms of Reference for each Committee can
be obtained from our website, investors.
computacenter.com, or from the Company
Secretary, upon request. The composition
of each Committee as at 31 December 2018
appears on pages 74, 78 and 90, as do
reports from the Chairman of each
Committee setting out the main
responsibilities of their respective
Committee and its main activities during
the year.
The Board plays a key role in discussing,
reviewing and approving the Group’s
strategic objectives. By reviewing the
business plans and budgets submitted by
the Executive Directors and senior
Management, it ensures that adequate
resources are in place to meet these aims.
The Board reviews the performance of the
Executive Directors and Group Executive
Management against targets relating to
these agreed objectives, including a monthly
review of the financial performance of each
of the Group’s Segments.
The Composition of the Board
The membership of the Board as at
31 December 2018 is set out on pages 70 to
71. On that date, the Board included seven
Non-Executive Directors and two Executive
Directors. The Directors’ attendance at Board
and Committee meetings is set out on pages
70, 71, 74, 78 and 90.
The Board has considered the independence
of each Director, taking into account the
guidance provided by the Code. The
Chairman, Greg Lock, was considered by the
Board to meet the independence criteria set
72
out in the Code on appointment, and each
of Minnow Powell, Ros Rivaz, Peter Ryan and
Regine Stachelhaus are considered by the
Board to be independent in their character
and judgement. Phillip Hulme and Peter
Ogden, the Founder Non-Executive Directors,
are not considered to be independent having
started the Company in 1981 and remained
on the Board in both an Executive and
Non-Executive capacity since that time.
There is no dominant individual or group
of individuals on the Board influencing its
decision-making and the Board is
comfortable that each Director makes
a valuable contribution to the Board.
Appointments to, and development of,
the Board
The Nomination Committee leads the
process for Board appointments. Further
detail on the Committee’s role, membership
and work during the year is set out on page 74.
The Non-Executive Directors have all been
appointed for three-year terms. The
Executive Directors are appointed on a rolling
12-month term. The terms and conditions of
appointment of all Directors are available for
inspection at the Company’s registered
office and at each AGM.
Whilst the Company’s Articles of Association
require a Director to be subject to election at
the first AGM following his or her appointment
and thereafter every third year, the Board
has decided that, in accordance with the
Code, all Directors should be subject to
election or re-election at the Company’s next
AGM on 16 May 2019. All Directors will then be
subject to election or re-election at each AGM
thereafter. If the shareholders do not elect or
re-elect a Director, or a Director is retired
from office under the Articles, the
appointment terminates immediately and
without compensation.
Upon joining the Board, all Directors receive
a comprehensive induction programme
organised by the Company Secretary,
tailored to their specific background and
requirements. New Directors receive an
induction pack which contains information
on the Group’s business, its structure and
operations, Board procedures, corporate
governance matters and details regarding
Directors’ duties and responsibilities. All new
Directors are introduced to the Group’s
Executive Management team. New Directors
are required to take advantage of
opportunities to meet major shareholders.
The Chairman regularly liaises with each
Director to discuss and agree their training
and development needs. The Board is
confident that all of its members have the
knowledge, ability and experience to perform
the functions required of a Director of a
listed company.
Division of responsibilities
The roles of the Chairman and Chief
Executive Officer (CEO) are separate and
their responsibilities are clearly set out in
writing, reviewed annually and agreed by
the Board. They are available for inspection
on the Company’s website at
investors.computacenter.com.
In summary, the Chairman’s role is to lead
and manage the Board, and to help facilitate
the Board’s discussion of the Group’s
strategy. The Chairman actively encourages
contributions from all Directors and is
responsible for ensuring constructive
interaction between the individual members
of the Board. The Chairman is also
responsible for setting the Board’s agenda
and ensuring that sufficient time is available
for discussion of all agenda items and, in
particular, strategic issues. The CEO is
responsible for the day-to-day management
of the Group’s operations and for the proper
execution of strategy, as set by the Board.
Senior Independent Director
Ros Rivaz is the Senior Independent Director.
She acts as a sounding board for the
Chairman and, where necessary, as an
intermediary between the Chairman and
other Directors. She is available to take
representations from shareholders who do
not want to raise their issue with the
Chairman. Ros also leads the annual
appraisal of the Chairman’s performance,
in consultation with the other Non-Executive
Directors and without the Chairman being
present. The feedback from this appraisal is
discussed at a subsequent Board meeting.
During the year, Ros led the process for
searching for, and recommending the
appointment to the Board of, a candidate
to replace Greg Lock as Chairman of the
Company.
The Board’s key activities during the year
The Board held eight scheduled meetings
during the year, to deal with the standing
items on its agenda and matters arising,
including reviewing and discussing any
information provided to it by senior
Management. The Board views this as
sufficient to discharge its duties effectively.
The Chairman and Non-Executive Directors
also met twice during the year, without the
Executive Directors being present.
In 2018, the Board considered:
Regular items
• Terms of Reference for each of its
Committees
• Annual and Interim Reports
• Dividend policy
• Reports from the Committee Chairmen
on the Committees’ key activities
• Matters Reserved for the Board &
Delegated Class Transactions review
• Role of the Chairman, CEO and Senior
Independent Director
• Gender pay gap reporting
• Diversity and inclusion
• The annual budget and three-year plan
• The Viability Statement
• Employee stakeholder engagement
• Cyber security
• Cash deposit strategy
• Group insurance coverage
• Market abuse regulations
• Management’s strategic planning and
execution
• The performance of the Group and
Management
• Executive succession planning
Additional Items
• Asset reunification and share forfeiture
process for untraced shareholders
• Extension of employee share savings
schemes to the USA
• Revised Articles of Association
• Cancellation of Deferred Shares
• FusionStorm and Misco Solutions B.V.
acquisitions
• Other acquisition and disposal
opportunities
IT project updates
•
• Corporate Governance changes
• General Data Protection Regulation
• Significant new Managed Services bids
• Significant in-life Managed Services
contract reviews
• The Return of Value
• Planning for the United Kingdom exiting
the European Union
• Chairmanship succession
Insurance and indemnities
The Company arranges insurance cover in
respect of legal action against the Directors
and, to the extent allowed by legislation, has
issued an indemnity to each Director against
claims brought by third parties.
EFFECTIVENESS
Time commitment
The Non-Executive Directors’ letters of
appointment set out the expected time
commitment required to execute their
duties. Although the nature of the roles
makes it difficult to be specific about the
maximum time commitment, a commitment
of up to two days per month is expected,
including attendance at and preparations
for regular Board meetings. In certain
circumstances, for instance when the
Company is engaged in acquisitions,
restructuring or other corporate
transactions, there may be additional Board
meetings and Non-Executive Directors are
expected to attend these where possible.
There has been no increase in the Chairman’s
significant external commitments during the
year, which would affect the time he has to
fulfil his role. In light of the internal Board
evaluation completed for 2018, the Board is
satisfied that each Director is able to allocate
sufficient time to the Company to discharge
his or her responsibilities effectively.
Provided the time commitment does not
conflict with the Director’s duties to the
Company, the Board may authorise the
Executive Directors to take Non-Executive
positions in other companies and
organisations, as this should broaden their
experience. The Board would not agree to a
full-time Executive Director taking on more
than one Non-Executive Directorship of a FTSE
100 company or the Chairmanship of such a
company. For the avoidance of doubt, no such
positions have been taken by the Executive
Directors. MJ Norris was a Director of the
private company Triage Services Limited until
his resignation, and cessation as a person
with significant control, on 9 April 2018.
Information and support
All Directors receive appropriate
documentation in advance of each of Board
and Committee meeting. This includes
detailed briefings on all matters, to enable
Directors to discharge their duties
effectively. Individual Directors can obtain
independent professional advice, at the
Company’s expense, where they believe it is
necessary to discharge their responsibilities.
The Company Secretary ensures that the
Board Committees are provided with
sufficient resources to undertake their duties.
Where Directors have concerns which cannot
be resolved, whether about the running of
the Company or a proposed action, their
concerns will be recorded in the Board
minutes. On resignation, a Non-Executive
Director would be required to provide a written
statement to the Chairman, for circulation to
the Board, if they had any such concerns.
The Company Secretary advises the Board
on all corporate governance matters and
advises the Chairman to ensure that all
Board procedures are followed. All Directors
have access to the advice and services of the
Company Secretary. The appointment or
removal of the Company Secretary requires
Board approval.
Evaluation
The Board evaluates its effectiveness each
year, as required by the Code. Between
December 2018 and January 2019, the
Company Secretary carried out an internal
evaluation of the Board and each of its
Committees. The review looked at key areas
of responsibility including strategy, decision
making, composition and dynamics,
leadership, talent development and
succession planning. The Board also
reviewed the balance of skills and diversity.
The review took the form of a series of
tailored online questionnaires, covering the
Board and each Committee. The Chairmen of
the Board and the Committees were able to
review and shape both the questionnaires
and the list of non-Board respondents, to
make best use of the process. The
questionnaire responses were collated and
analysed before inclusion in a report to the
Board. In February 2019, the Company
Secretary presented this report to the Board
and led a discussion of the key findings and
the implications for the Board’s development.
The evaluation found there to be open and
constructive dialogue between Board
members and a sound and challenging
relationship between Non-Executive and
Executive Directors. The Board is satisfied
that there is a clearly articulated strategy
and a good process for managing risk.
Despite the encouragingly high, and
improving, scores, the Directors concluded
that enhancements could continue to be
made in one key area. The Board addressed
the need to continue to grow their
understanding of the Company’s business
model and strategy so that they are better
able to monitor and contribute to the
strategic direction, and long-term thinking,
of the Company. An action plan, that builds on
measures taken as a result of the previous
evaluation, has therefore been drawn up,
against which progress will be monitored
regularly. The Board is encouraged by the
increased focus and emphasis in this area
planned for 2019.
The Board is required by the Code to conduct
an externally facilitated evaluation every
three years. This was last carried out
between December 2016 and January 2017.
The Board anticipates that its next externally
facilitated evaluation will be conducted over
the period December 2019 to January 2020.
The Senior Independent Director, Ros Rivaz,
reviewed the Chairman’s performance with
input from the other Non-Executive
Directors, and the feedback was discussed
formally at the following Board meeting.
73
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Role
Non-Executive Chairman
of the Board
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
1. Greg Lock (Chairman)
2. Minnow Powell
3. Ros Rivaz
4. Peter Ryan
5. Regine Stachelhaus
Former member
6. Philip Yea
* Note that Peter Ryan was appointed on 13 February 2018, subsequent to the first Committee meeting of the year.
** Note that Phil Yea attended the Committee meeting that occurred before he stepped down from the Board on 24 April 2018.
Non-Executive Director
Attendance
record
2/2
2/2
2/2
1/1*
2/2
1/1**
Membership and attendance
The members of the Nomination Committee
are the Independent Non-Executive Directors
and the Chairman of the Board. Further detail
on the membership of the Committee and
attendance at its meetings can be found
directly above. However, the Committee
seeks input from all the Directors and it
involves the Board when performing its key
responsibilities.
The Company Secretary is the secretary to
the Committee.
Responsibilities of the Nomination
Committee
The key responsibilities of the Nomination
Committee are to assist the Board with:
•
the search and selection process for the
appointment of both Executive and
Non-Executive Directors, and ensuring
that any such process is formal and
transparent;
• ensuring that the Board and its
Committees have the right balance of
skills, knowledge and experience to
enable each to discharge its duties and
responsibilities effectively;
reviewing whether to recommend a
Director for re-election at the
Company’s AGM;
reviewing whether each Director has
sufficient time to discharge his or her
duty to the Company and its
shareholders;
•
•
• succession planning for the Board and
senior Management of the Group; and
reviewing the membership of the Board’s
Committees.
•
The Committee’s full terms of reference are
available on the Company’s website at
investors.computacenter.com.
Main activities of the Committee in 2018
The Nomination Committee met on two
occasions during 2018 and its work included
the following:
Board appointment
Immediately following the 2017 AGM, the
Board initiated a process to identify a new
Chairman to succeed Greg Lock, who would
have served 10 years by the time of the 2018
AGM. The Board ran a competitive process to
select the search firm, noting the merits of
several providers. Notwithstanding the
quality of the process and an agreed
specification, the Board asked Greg Lock to
continue in office through 2018, which he
agreed to do.
During 2018, further discussions around
Chairmanship succession were held, noting
that Greg Lock’s tenure would be outside the
parameters defined by the New Code that is
effective from 1 January 2019. Mr Lock
informed the Board that he would be minded
to step down from the Board at the 2019 AGM,
if the Company had found a suitable
successor by then.
The Board felt it was important to identify a
successor who could lead the Board in the
coming years, and that this person would
require deep experience of the Company’s
sector. It was considered equally important
that the individual had extensive global
operational experience.
Corporate Governance Report
continued
NOMINATION COMMITTEE REPORT
Current members
Greg Lock
Chairman of the Nomination Committee
THE BOARD
FELT IT WAS
IMPORTANT TO
IDENTIFY A
SUCCESSOR WHO
COULD LEAD THE
BOARD IN THE
COMING YEARS,
AND THAT THIS
PERSON WOULD
REQUIRE DEEP
EXPERIENCE OF
THE COMPANY’S
SECTOR.
74
Members expressed their support for Mr Ryan
to be considered for the role. Mr Ryan was
appointed to the Board in 2018 and was
identified at the time as a potential
candidate for the Chairmanship succession.
A Special Nomination Committee (‘SNC’) was
tasked with the process of identifying the
successor to Mr Lock, comprising a mix of
Independent Non-Executive Directors and
other Directors, led by the Senior
Independent Director. The SNC engaged
Russell Reynolds to conduct a benchmarking
exercise using pools of known potential
Chairmanship candidates, to assess if there
were any other candidates meriting
consideration, and to validate Mr Ryan’s
candidacy. A detailed role specification was
developed with input from all members of
the Board excluding Mr Ryan. Russell
Reynolds is a global leader in assessment,
recruitment and succession planning for
boards of directors and had no connection
with the Company other than providing this
type of service.
This desktop search highlighted a number of
potential Chairmanship candidates, but none
was considered more qualified and suitable
for the position than Mr Ryan, and therefore
the SNC did not recommend progressing
these potential candidates beyond the
benchmarking stage. The SNC recommended
to the Board that Mr Ryan be considered as
successor for the Chairmanship, to which
the Board unanimously agreed. The Board
considered and agreed that Mr Ryan would
remain independent on appointment as
Chairman, as required under provision
nine, and defined under provision 10, of
the New Code. Mr Ryan will take over the
Chairmanship from Mr Lock at the conclusion
of the 2019 AGM.
Ms Regine Stachelhaus notified the Board of
her intention to retire from the Board at the
2019 AGM, after having completed six years
of service. The Nomination Committee
appointed Russell Reynolds to search for two
Independent Non-Executive Directors to fill
the vacancies created by Ms Stachelhaus and
Mr Lock. Russell Reynolds was appointed as it
was leading the parallel Chairmanship
succession review.
Russell Reynolds, in conjunction with the
Nomination Committee, developed a
candidate specification that highlighted
a number of areas of competence as
necessary pre-requisites to join the Board.
The most important of these included a
strong commercial track record within our
sector including international experience,
preferably within our core continental
European or American markets. It was
further required that the candidate must
demonstrate the appropriate
communication skills and desired personal
characteristics to ensure a suitable culture
fit for our Company.
As a result of the process and wider
candidate search, conducted by Russell
Reynolds, a shortlist of candidates has been
identified with individuals suitable for
appointment as Independent Non-Executive
Directors. The Board intends to confirm
appointments to the Board shortly following
the 2019 AGM.
Prior to formally recommending their
appointments to the Board, the Committee
will consider and agree that both candidates
will be independent in character and
judgement, as defined under provision ten
of the New Code. Both candidates will be
appointed as members of the Company’s
Remuneration, Nomination and Audit
Committees.
Performance of the Committee
During the year, an internal evaluation of the
Committee was undertaken. The results of
this evaluation have been analysed and, in
response to some of the observations made,
we will look to enhance our understanding of
succession planning through the wider
management structure beneath the Group
Executive Management team and continue to
ensure that diversity and inclusion remain at
the forefront when considering these plans.
Succession planning
The Committee focuses on effective
succession planning to ensure the future
prosperity of the Company and this is one of
the Company’s principal risks, as disclosed
on pages 40 to 45 of this Annual Report and
Accounts. Developing future leaders and
successor candidates is central to our
strategy of creating and maintaining a
culture that builds customer relationships.
The Committee, whilst recognising that
internal talent development is primarily the
responsibility of Management, has reviewed
Management’s pipeline of executive talent,
both for emergency use and its long-term
potential.
Election and re-election of Directors
The Committee reviewed in detail the
performance of the Directors who are
standing for election or re-election at the
Company’s 2019 AGM. The results of the
Company’s most recent Board evaluation
process were considered, alongside the
contribution made by each individual, with
the exercise being particularly rigorous in
respect of Non-Executive Directors who have
been in their role for six years or longer.
Following this review, with the exception of
Greg Lock and Regine Stachelhaus, who will
not be standing for re-election, the
Committee recommended that each Director
on the Board as at 31 December 2018 be put
forward for re-election by the Company’s
shareholders at the 2019 AGM.
Diversity
The Committee, and the Board as a whole,
continues to recognise the benefits that
diverse skills, experience and points of view
can bring to an organisation, and how
diversity may assist the decision-making
ability of the Board, thereby increasing its
effectiveness. However, appointments to the
Board will remain primarily based on merit,
and it has not therefore set any measurable
targets in this area. As at 31 December 2018,
the Computacenter Board had two female
Non-Executive Directors, Ros Rivaz and
Regine Stachelhaus, representing 22.2 per
cent of the total Board membership.
Greg Lock
Chairman of the Nomination Committee
11 March 2019
75
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Corporate Governance Report
continued
ACCOUNTABILITY
Financial and business reporting
The Directors are required to include the
following in this report, under the Code.
Please see:
• page 66 for the Board’s statement on the
Annual Report and Accounts being fair,
balanced and understandable and
providing the information necessary for
shareholders to assess the Group’s
position and performance, business
model and strategy;
•
• page 65 for the statement on the status
of the Company and the Group as a going
concern;
the Strategic Report from the inside front
cover to page 66 for an explanation of the
Group’s business model and the strategy
for delivering the Group’s objectives; and
the Risk Management section below for
confirmation that the Directors have
carried out a robust assessment of the
principal risks facing the Group, including
those that would threaten its business
model, future performance, solvency or
liquidity.
•
Risk management
The Board has carried out a robust
assessment of the principal risks facing the
Group, including those that threaten its
business model, future performance,
solvency or liquidity. Please refer to pages 40
to 45 for further information on the Group’s
principal risks and uncertainties, including
how they are being managed and mitigated.
Executive and senior Management have
primary responsibility for identifying and
managing the risks faced by the Group.
A comprehensive risk management
programme has been developed and is
monitored by the Group Risk Committee,
whose members include senior operational
managers from across the Group, the Group
Finance Director and the Group Head of
Internal Audit and Risk. The Group Finance
Director chairs the Committee.
The Board sets the Group’s risk appetite and,
through the Audit Committee, reviews the
operation and effectiveness of the Group’s
risk management activities. The Board
periodically reviews the Group’s strategic
risks and its key mitigation plans and,
through the Audit Committee, receives
regular reports from the Group Risk
Committee. The Board receives updates
from the Group Planning for the United
Kingdom Exiting the European Union
Committee, on the Company’s response to
the risk of a disorderly withdrawal of the
United Kingdom from the European Union.
76
Through a programme of assessment,
appropriate measures and systems of
control are maintained and, where
necessary, developed and implemented.
Detailed business interruption contingency
plans are in place for all key sites and these
are regularly tested, in accordance with an
agreed schedule.
As a sales-led and customer-focused
organisation, effective risk management
processes are vital to the Group’s continued
success. Therefore, the Board continues to
apply a robust risk management and
governance model to provide assurance
over the principal risks that might affect
the achievement of the Group’s strategic
objectives.
These strategic objectives are focused on
improving the Services business and
maintaining the longevity of the Group’s
customer relationships, which in turn rely
heavily on the contribution made by the
Group’s customer-facing staff and those
involved in innovation and design. The
Group’s risk management approach
recognises this, ensuring that risks are
identified and mitigated at the appropriate
level, leaving individuals empowered to make
their vital contributions.
The model and process comply fully with the
Code and the Financial Reporting Council’s
Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting.
The Group’s model uses the well-defined
Three Lines of Defence methodology:
• The First Line of Defence consists of
operational management, who own the
risks and apply the internal controls
necessary for managing risks day-to-day.
• The Second Line of Defence offers
guidance and direction and provides
oversight and challenge at the
appropriate level. Internal compliance
and assurance functions fall into
this category.
• The Third Line of Defence, provided by
Group Internal Audit, gives an
independent view of the effectiveness
of the risk management and internal
control processes. It reports to the Audit
Committee to ensure independence
from Management.
The Board reviews the operational
effectiveness of the risk management model
by directing the reinforcement of the
processes that underpin it and by making
sure it is embedded across all levels of the
organisation. For example:
• The Schedule of Matters Reserved for the
Board ensures that the Directors properly
address all significant factors affecting
Group strategy, structure, financing and
contracts.
• The Board and Executive Committee
consider the principal risks, which are the
barriers to achieving the Board’s strategic
objectives.
• The Group Risk Committee, consisting of
the Executive Directors, members of the
Group Executive Committee and senior
managers from across the Group,
challenges the effectiveness of the
mitigations of the principal risks.
• The Group Risk Committee considers
each principal risk in-depth at least
once a year, by receiving reports from
the risk owner.
• The Group Risk Committee’s deliberations,
along with the current status of each
principal risk, are reported to the Audit
Committee and the Board.
• The principal risk list is reviewed once a
year and leverages a bottom-up annual
operational risk review, where operational
management identify their everyday risks.
• The Group Compliance Steering
Committee, which was added to the
governance model during 2016, assesses
observance with laws and regulations,
and reports to the Group Risk Committee.
• The bid governance process reviews bids
or major changes to existing contracts,
which aligns with the Group’s risk appetite
and risk management process.
• The Group Planning for the United
Kingdom Exiting the European Union
Committee, which was established in
2017, assesses the latest information on
the nature of the UK’s withdrawal from
the EU, assesses known risks from a
disorderly withdrawal from the EU and
identifies mitigating activities that the
Group can undertake to reduce any
short-term disruption to the Group’s
activities.
There were several enhancements to the
risk framework and processes over the last
year, including:
•
Improvements in the governance of
contract bids and in-life contract
management that were formulated
during 2017 were implemented
during 2018.
• High-level and emerging risks continue to
be standing agenda items for the Group
Risk Committee. This includes cyber risk,
the risk surrounding the UK’s departure
from the EU and compliance with the
General Data Protection Regulation, which
the Group recognised as a new risk in 2017.
• Geopolitical risk, arising from the
Company’s increasingly global operations,
was elevated to a principal risk during 2018.
• The Quality Management Assurance
(‘QMA’) function has changed reporting
lines within the organisation from
November 2018, to enhance its
independence and objectivity. QMA will
now form a core part of the third line of
defence for 2019 and beyond.
Internal control
The Board has overall responsibility for
maintaining and reviewing the Group’s
systems of internal control, ensuring that
the controls are robust and enable risks to be
appropriately assessed and managed. The
Group’s systems and controls are designed
to manage risks, safeguard the Group’s
assets and ensure information used in the
business and for publication is reliable. This
system of control is designed to reduce the
risk of failure to achieve business objectives
to a level consistent with the Board’s risk
appetite, rather than eliminate that risk, and
can provide reasonable, but not absolute,
assurance against material misstatement
or loss.
The Board conducts an annual review of the
effectiveness of the systems of internal
control, including financial, operational and
compliance controls and risk management
systems. In the Board’s opinion, the Group
has complied with the Code’s internal control
requirements throughout the year. Where
material weaknesses or opportunities for
improvement are identified, changes are
implemented and monitored.
All systems of internal control are designed
to continuously identify, evaluate and
manage significant risks faced by the Group.
The key elements of the Group’s controls are
detailed below.
Responsibilities and authority structure
As discussed above, the Board has overall
responsibility for making strategic decisions.
There is a written schedule of Matters
Reserved for the Board.
The Group Executive Committee meets
formally on a quarterly basis and, more
informally, on a fortnightly basis, to discuss
day-to-day operational matters. With the
Group Operating Model in place across all of
the Group’s main operating entities, ultimate
authority and responsibility for operational
governance sits at Group level.
The Group operates defined authorisation
and approval processes throughout its
operations. Access controls continue to
improve, where processes have been
automated to secure data. Management
information systems have been developed to
identify risks and to enable assessment of
the effectiveness of the systems of internal
control. Accountability is reinforced, and
further scrutiny of costs and revenues
encouraged, by linking staff incentives to
customer satisfaction and profitability.
Proposals for capital expenditure are
properly reviewed and authorised, based on
the Group’s procedures and documented
authority levels. The cases for all investment
projects are reviewed and approved at
divisional level. Major investment projects are
subject to Board approval, and Board input
and approval is required for all merger and
acquisition proposals.
Planning and reporting processes
Each year, senior Management prepares
or updates the three-year strategic plan,
which is then reviewed by the Board. The
comprehensive annual budgeting process is
subject to Board approval. Performance is
monitored through a rigorous and detailed
financial and management reporting
system, through which monthly results are
reviewed against budgets, agreed targets
and, where appropriate, data for past
periods. The results and explanations for
variances are regularly reported to the
Board and appropriate action is taken
where variances arise.
Management and specialists within the
Finance Department are responsible for
ensuring that the Group maintains
appropriate financial records and processes,
which ensure that financial information is
relevant, reliable, in accordance with
applicable laws and regulations, and
distributed internally and externally in a
timely manner. Management reviews the
Consolidated Financial Statements, to
ensure that the Group’s financial position
and results are appropriately reflected.
The Audit Committee reviews all financial
information published by the Group.
Centralised treasury function
The Board has established and regularly
reviews key treasury policies, which cover
matters such as counterparty exposure,
borrowing arrangements and foreign
exchange exposure management. The Group
Treasury Function manages liquidity and
borrowing facilities for customer specific
requirements, ongoing capital expenditure
and working capital. The Group Treasury
Function reports to the Group Finance
Director, with regular reporting to the
Audit Committee.
The Group Treasury Committee enhances
Management oversight. It is responsible for
the ongoing review of treasury policy and
strategy, and for recommending any policy
changes for Board approval. The Committee
approves, on an ad hoc basis, any Treasury
activities which are not covered by existing
policies or which are Matters Reserved for
the Board, and also monitors hedging
activities for effectiveness. The Committee
is chaired by the Group Finance Director and
also comprises the Group Financial Controller,
the Group Head of Financial Reporting and
the Group Head of Tax and Treasury.
Quality and integrity of staff
The Group’s rigorous recruitment procedures
ensure that new employees are of a suitable
calibre. Management continuously monitors
training requirements and ongoing
appraisals ensure that required standards
are maintained across the Group. Resource
requirements are identified by managers
and reviewed by senior Management.
Compliance policies
The Group has a number of compliance
policies, including those relating to the
General Data Protection Regulation, Business
Ethics and Anti-Bribery and Corruption. Any
breach of these policies by an employee
is a disciplinary matter and is dealt with
accordingly. The internal control regime is
supported by a whistleblowing function,
which is now operated by an independent
third party.
The Compliance Steering Committee
supervises compliance-related activity and
issues across the Group and supports the
Group Risk Committee in that regard.
Audit Committee and the auditor
For further information on the Company’s
compliance with the Code provisions relating
to the Audit Committee, Group auditor and
Internal Audit, please refer to the Audit
Committee report on pages 78 to 83.
77
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Corporate Governance Report
continued
AUDIT COMMITTEE REPORT
Minnow Powell
Chairman of the Audit Committee
THE COMMITTEE
AS A WHOLE HAS
COMPETENCE
RELEVANT TO
THE SECTOR IN
WHICH THE
COMPANY
OPERATES.
78
Current members
1. Minnow Powell (Chairman)
2. Ros Rivaz
3. Regine Stachelhaus
4. Peter Ryan
Former member
5. Philip Yea
*
** Note that Peter Ryan was appointed on 13 February 2018, prior to the first Committee meeting of the year.
*** Note that Philip Yea attended the Committee meeting that occurred before he stepped down from the Board on 24 April 2018.
Role
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Note that Ros Rivaz gave her apologies for one Committee meeting due to another commitment.
Non-Executive Director
Attendance
record
4/4
3/4*
4/4
4/4**
1/1***
Composition of the Committee
As at 31 December 2018, the Audit Committee
comprised the four Independent Non-
Executive Directors. All members are
considered to be appropriately qualified and
experienced to fulfil their role and allow the
Committee to perform its duties effectively.
For the purposes of Code provision C.3.1, one
member of the Committee, Minnow Powell, is
considered to have recent and relevant
financial experience. The Committee notes
the requirements of the 2016 Code and
confirms that, after having considered the
requirements against feedback provided
through the Board and Committee
effectiveness review, the Committee as a
whole has competence relevant to the sector
in which the Company operates. Further
details of specific relevant experience can be
found in the Directors’ biographies on pages
70 and 71.
Meetings of the Committee
The Committee met four times during 2018.
Meetings are attended routinely by the
Chairman of the Board, Group Finance
Director, Group Head of Financial Reporting,
Group Head of Internal Audit & Risk
Management and the external auditor. The
meetings cover a standing list of agenda
items, which is based on the Committee’s
Terms of Reference, and consider additional
matters when I deem it necessary, as
Chairman of the Committee. Meetings are
also attended by the Group Company
Secretary, who acts as Secretary to the
Committee.
In addition to the Committee meetings, I also
met privately on occasion with individual
members of Management during the year, to
discuss the risks and challenges faced by the
business as well as accounting and reporting
matters and, importantly, how these are
being addressed. On two occasions during
the year, the Committee met separately with
the external auditor and the Group Head of
Internal Audit and Risk Management, without
Management present. From time to
time, I also attend meetings of the Group
Risk Committee.
I am satisfied that the flow of supporting
information to the Committee is appropriate
and provided in good time, to allow members
sufficient opportunity to review matters due
for consideration at each Committee
meeting. I am also satisfied that meetings
were scheduled to allow sufficient time to
enable full and informed debate.
Principal responsibilities of the Committee
Immediately following each Committee
meeting, I report to the Board on the
Committee’s activities and how it is
discharging its responsibilities as set out in
its Terms of Reference, which can be found
on the Company’s website at
investors.computacenter.com.
•
•
•
The Committee’s main responsibilities during
the year, as set out in the Code, were to:
• monitor the integrity of the Company’s
Financial Statements and any formal
announcements related to the Company’s
financial performance, and to review
any significant financial reporting
judgements contained therein;
review the effectiveness of internal
controls and of the risk management
framework;
review the effectiveness of the
Company’s Internal Audit;
review arrangements by which
employees may, in confidence, raise
concerns about possible improprieties
relating to financial or other matters, and
ensure that arrangements are in place for
the proportionate and independent
investigation of such matters;
review, on an ongoing basis, the
Company’s relationship with its external
auditor, including monitoring its
independence and objectivity and the
effectiveness of the audit process,
ensuring that an appropriate policy is in
place concerning any engagement of the
auditor for the provision of non-audit
services to the Company, and making
recommendations to the Board in respect
of the appointment, reappointment and
removal of the auditor and the
remuneration paid to them by the
Company; and
•
• advise the Board, to enable it to report on
whether the Annual Report and Accounts,
taken as a whole, are fair, balanced and
understandable and provide the
information necessary for shareholders
to assess the Group’s position and
performance, business model and strategy.
Activities of the Committee
The Committee’s activities during the year,
which are based on its Terms of Reference,
are set out below:
Key judgements and current financial
reporting standards
The Committee reviewed the integrity of the
Group’s Consolidated Financial Statements
and, in doing so, considered the following key
judgements made in their preparation. In
reviewing these matters, the Committee also
took account of the views of the external
auditor, KPMG LLP.
IFRS 15 Revenue Recognition
During the year, the Committee continued
to monitor the implementation of IFRS 15,
with emphasis on the progress towards
finalisation of the disclosures for the Interim
Report and Annual Report and Accounts.
The Company has elected to implement the
standard using the simplified approach to
adoption and has not restated its
comparatives for the 2017 reporting period.
Taking account of the informal review of the
Interim Report by the Financial Reporting
Review Panel, the Company increased the
disclosure within the Annual Report and
Accounts to highlight that the comparative
results have not been restated and are
prepared under a different GAAP.
Outside of the Audit Committee meetings,
I met Management, and the Group’s external
auditor, KPMG LLP, to review the revenue
recognition treatment on two Technology
Sourcing software contracts of a new type,
where the revenue was recognised on an
agency basis, rather than principal, based
on the terms and conditions of these two
contracts in accordance with the new
standard.
Professional Services and Managed
Services contract accounting
The Committee continued to focus on
Services contract accounting during the
year, as reported under IFRS 15. It received
a standing item update at each meeting
from Management on a number of material
contracts across the Group’s major
geographies. These contracts were selected
due to performance being lower than
anticipated at the bid stage of the contract,
or where there were complex revenue
recognition elements.
The Committee remains satisfied with the
revenue recognition accounting judgements
but will continue to monitor the performance
of several difficult contracts, in part to
ensure that appropriate responses are
formulated to address material lessons
from the execution of these contracts. As
judgements were adjusted throughout the
year the Committee, in addition to reviewing
the assumptions at a point in time, reviewed
when information underpinning the
judgements changed and the reasons for
the change.
Technology Sourcing revenue recognition
and cut-off procedures
Given the level of sales around year end, the
Audit Committee suggested to the auditor
that it should pay particular attention to
Technology Sourcing revenue cut-off.
The Committee noted that no significant
errors were found as a result of the auditor’s
work in this area.
IFRS 9 Financial Instruments
The Committee considered updates from
Management on IFRS 9. Whilst the impact of
the standard was not considered to be
comparable to that of IFRS 15 and IFRS 16, the
Committee noted several areas of additional
disclosure which have been made in this
Annual Report and Accounts.
Acquisition accounting
During 2018, the Group acquired FusionStorm
in the United States of America and Misco
Solutions B.V. (‘Misco’) in the Netherlands.
The Committee reviewed the acquisition
accounting judgements and the differences
between the provisional fair values and the
book values at acquisition.
The Committee was satisfied with
Management’s assessment that it is highly
probable that the maximum contingent
consideration will become payable and
accordingly the discounted maximum
contingent consideration has been included
in determining the provisional fair value to
the Group for FusionStorm.
For the FusionStorm acquisition, the
Committee enquired into whether contingent
consideration was actually consideration
or remuneration and concluded it was
consideration, on the basis that individuals
who were selling shareholders due the
contingent consideration were not required
to remain in employment post-acquisition.
The initial accounting for the Misco and
FusionStorm acquisitions has only been
provisionally determined at the end of the
reporting period and the Committee will
further review final positions close to the
anniversary of the respective acquisition
dates.
During 2017, the Group acquired TeamUltra
Ltd in the UK. The initial accounting for the
TeamUltra acquisition was only provisionally
determined at the end of the 2017 reporting
period and the Committee further reviewed
the final position close to the anniversary of
the acquisition date. The accounting of the
TeamUltra acquisition is now complete and
there were no changes to the fair values and
the book values at acquisition.
The Committee reviewed the audit plan for
the acquired entities for the part-year ended
31 December 2018 with the Group’s auditor,
KPMG LLP, to ensure that adequate procedures
were in place to ensure the audit coverage
was appropriate.
Valuation of acquired intangible assets
An independent accounting firm produced a
report on the valuation of intangible assets
within FusionStorm. The Committee
considered the report and its associated
review by Management. The Committee
considered the intangible assets identified
and those potential assets disregarded for
valuation. The Committee also reviewed the
valuation methodologies used for the
purchase price allocation and the valuation
outcomes that appropriately valued the
customer relationships and order backlog,
leaving an indicative residual goodwill of less
than 50 per cent of the enterprise value. The
Committee noted the principal reason for
the acquisition was to acquire a Technology
Sourcing business giving the Group a firm
base or footprint from which to grow in the
USA, rather than building such a business
from scratch and generating the vendor
accreditations, customers and sales team
required. The Committee regarded the
intangible assets valuation for customer
relationships acquired as consistent with the
initial information provided to the Committee
pre-acquisition, which emphasised the
number of significant long-term customers
within FusionStorm as one of the value
drivers of the potential acquisition.
The Committee considered that the lack of
identified intangible assets acquired within
Misco was appropriate. This is consistent
with the basis on which the Company decided
to make this investment, which was to
broaden the Group’s geographic presence
within Western Europe. The Committee noted
the difficult recent history of the business
and concluded that Management’s review
was appropriate.
79
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Corporate Governance Report
continued
Segmental information restatement
As the Group has grown in both operational
and geographical complexity, Management
has continued to monitor the relevance of
the IFRS 8 Segments that the Group reports
under. During the first half of the year,
Management reviewed the way it reported
segmental performance to the Board and
the Chief Executive Officer, who is the Group’s
Chief Operating Decision Maker (‘CODM’), to
determine whether it could improve the
transparency and understanding of the
trading performance of its core Group
Operating Model geographies. As a result of
this analysis, and as endorsed by the
Committee, the Board decided to adopt a
new Segmental reporting structure. The
Committee reviewed the methodology in
accordance with IFRS 8 Operating Segments,
noting that the rationale for the new
Segments, and the allocation of ‘Central
Corporate Costs’ out of the new UK Segment,
appeared appropriate. The Committee was
satisfied that the new Segmental reporting
structure was the basis on which internal
reports are provided to the Chief Executive
Officer, as the CODM, for assessing
performance and determining the allocation
of resources within the Group. The
Committee noted subsequently that the
feedback from investors suggested that the
revised Segmental presentation of the
Group’s results was helpful in providing
greater clarity on the operational
performance of the core UK, German and
French geographies.
Exceptional and other adjusting items
The Committee considered the nature and
quantum of those items disclosed as
exceptional or as other adjusting items
outside of adjusted1 profit before tax in the
Group’s 2018 Annual Report and Accounts.
The Committee reviewed Management’s
schedule of £5.2 million of costs directly
related to the acquisition which have been
classified as exceptional. The Committee
noted that these costs included a severance
payment for the FusionStorm Chief Executive
Officer, agreed as part of the acquisition,
advisor fees and a finder’s fee that was paid
on completion of the transaction.
The Committee found that these costs were
non-operational in nature, material in size
and unlikely to recur and therefore agree
that these costs should be classified as
outside our adjusted1 results. The Committee
noted that a further £0.4 million relating to
the unwinding of the discount on the
deferred consideration for the purchase of
FusionStorm has been removed from the
adjusted1 net finance expense and classified
as exceptional interest costs. Whilst this item
80
is, individually, not material, it forms part of
the collective overall cost of the acquisition
and the Committee agreed that, due to the
material size of the acquisition and the
impact on the underlying net finance
expense, this should also be treated as an
exceptional item.
The Committee noted that Management
continued to exclude the amortisation of
acquired intangible assets, and the tax
effect thereon, in calculating our adjusted1
results and that this charge had materially
increased with the acquisition of
FusionStom. The Committee agreed with
Management’s view that amortisation of
intangible assets is non-cash, and is
significantly affected by the timing and size
of our acquisitions, which distorts the
understanding of our Group and Segmental
operating results.
The Committee noted that a tax credit of £3.1
million was recorded due to post-acquisition
activity in FusionStorm, related to the
transaction, which has resulted in a material
in-year tax benefit. This activity included
settlement of phantom stock awards, deal
bonus and change of control payments
which were settled by the vendor, out of the
consideration paid, via post-acquisition
capital contributions to FusionStorm. The
Committee noted that this tax benefit is
larger than the adjusted1 profit before tax of
£2.9 million achieved by FusionStorm since
the acquisition. As this credit was related to
the acquisition and not operational activity
within FusionStorm, is of a one-off nature
and material to the overall tax result, the
Committee has agreed with Management’s
classification of this as an exceptional
tax item.
The Committee was satisfied that the costs
associated with the acquisition of
FusionStorm, the interest from unwinding of
the discount on the deferred consideration
and the tax effect of both items, and the
exceptional tax credit taken should be
classified as exceptional due to the collective
materiality and nature of the item.
The Committee also considered the
presentation of adjusted1 profit in the first
half of the Annual Report and Accounts, after
taking account of the European Securities
and Markets Authority Guidelines on
Alternative Performance Measures, which
promote the usefulness and transparency
of such measures. The Committee remains
satisfied with the detailed reconciliation
between statutory and adjusted1 measures
that the Group has presented since the 2015
Interim Report, and the level of disclosure
which explains both the variances between
these measures and the reasons behind
such variances. The Committee concluded
that the presentation of adjusted1 profit
gave clarity on performance and had
sufficient equal prominence with
statutory profit.
Parent Company investment in subsidiaries
carrying value
Investments in subsidiaries are the primary
asset on the Parent Company Balance Sheet.
The Committee considers the carrying value
of these investments annually, or when an
indicator of impairment is identified, as any
impairment of these investments would
reduce the Company’s distributable
reserves.
Management presented analysis to the
Committee to support the carrying value of
the investments in subsidiaries held by the
Parent Company, including assessing the
cash flow forecasts and assumptions of
each subsidiary. No impairment of carrying
value in the investment in subsidiaries has
been identified during the year and the
Committee remains satisfied that the
carrying value of each subsidiary remains
appropriate.
Pension disclosures
The Group has an obligation to make a
one-off payment to French employees upon
retirement, as French employment law
requires that a company pays employees
a one-time contribution when, and only
when, the employee leaves the Company
for retirement at the mandatory age.
Management continues to account for this
obligation according to IAS 19 (revised). Due
to the increasing size of the obligation, which
is now material, the Committee agreed with
Management’s judgement to provide full
IAS 19 disclosures.
Future financial reporting standards and
judgements
During the year, the Committee monitored
Management’s plans and progress in relation
to IFRS 16 as set out below. In reviewing the
implications of the new standard, the
Committee also took account of the views
of the external auditor, KPMG LLP.
New lease accounting standard (IFRS 16)
effective 1 January 2019
The Committee has maintained oversight of
Management’s implementation programmes
through specific IFRS 16 presentations. The
Committee continues to be reassured by the
progress that Management has made and
requested a further overview of the financial
impact on the 2019 results compared to
current GAAP, to ensure that this is
communicated appropriately.
Going concern basis for the Consolidated
Financial Statements
The Committee provides input to the Board’s
assessment of whether it is appropriate for
the Group to adopt the going concern basis
in preparing Consolidated Financial
Statements, at both the half year and full
year. In order to do so, the Committee
considered detailed reviews, based on the
Group’s financial plans, in relation to the
Group’s liquidity and solvency, taking into
consideration its cash position and
committed bank facilities. It considered the
Group’s financing requirements in the
context of available committed facilities,
including one of £60 million which was not
drawn during the year, and challenged
Management’s forecasts concerning trading
performance. The Committee noted the Code
requirement for the Directors to state
whether they consider it appropriate to
adopt the going concern basis of accounting
for a period of at least 12 months from the
date of approval of the Group’s 2018
Consolidated Financial Statements. Following
its considerations, the Committee was
satisfied that the going concern basis of
preparation continues to be appropriate.
The statement and explanation from the
Directors can be found within the Strategic
Report on page 65.
Viability Statement
The Code requires the Directors to explain
in the Annual Report and Accounts how they
have assessed the prospects of the Group,
taking into account the Group’s current
position and principal risks, over what period
they have done so and why they consider
that period to be appropriate. The Directors
are further required to state whether they
have a reasonable expectation that the
Group will be able to continue in operation
and meet its liabilities as they fall due over
the assessment period they have chosen,
drawing attention to any qualifications or
assumptions as necessary. This requirement
is known as a Viability Statement.
Following its review of Management’s
proposals, the Committee continues to
recommend to the Board that it set the
period of assessment for the Viability
Statement at three years, given the nature of
the Group’s business model and its strategic
time horizon. The Committee and Board also
reviewed Management’s financial forecasts
for the three-year period, and challenged the
process undertaken and assumptions made
by the Group’s Risk Committee, in assessing
how those forecasts would be affected by a
realistic concurrence of the Group’s principal
risks. The Committee also considered
additional contingencies made within the
forecast due to the risk of the UK exiting the
European Union without a Withdrawal
Agreement. As a result, the Committee
recommended to the Directors that they
could make the statement required for the
assessment period without qualification.
The statement and explanation from the
Directors can be found within the Strategic
Report on page 66.
Other significant activity
The Committee received an update at each
meeting on the Group’s readiness for
adoption of the GDPR. The Committee
challenged the project implementation team,
led by the Group Head of Legal & Contracting,
to ensure that the Group was on track for
compliance ahead of the 25 May 2018
adoption and that appropriate data
protection activities have continued to
become embedded across the Group
following the enforcement date. The
Committee has requested that Group
Internal Audit perform a post
implementation audit during 2019.
During the year, the Committee reviewed its
Terms of Reference against the Code and the
Guidance for Audit Committees, following
which the Terms of Reference were amended
and subsequently approved by the Board.
A review of the Company’s distributable
reserves was carried out prior to the
declaration of both the interim and final
dividends in respect of the reporting period.
Performance of the Committee
No major matters were raised in the
internally facilitated annual evaluation of the
Committee’s performance.
Refer to page 73 for further detail on the
evaluation carried out.
The effectiveness of internal controls and
of the risk management framework
On behalf of the Board, the Audit Committee
is responsible for overseeing the
effectiveness of the Group’s systems of
internal control and the risk management
framework.
The GRC meets on a quarterly basis to review
the key risks facing the business. These are
identified, and their likelihood and impact are
assessed, within the Group’s ‘Heat Risk Map’.
They are then reviewed in conjunction with
accompanying risk mitigation plans. The GRC
minutes are circulated to the Audit
Committee for review, with any matters of
note highlighted and explained to the
Committee. This includes an analysis of how
the Group’s exposure to these risks may have
moved during the previous three months and
how mitigations to the risks have been
introduced or developed, and also provides
the GRC’s assessment of the effectiveness of
the process. In addition, the Committee
received reports on the capability of the
finance team, including the Finance Shared
Service Centre in Hungary.
The Committee received regular updates on
major Group governance initiatives, including
the Group Opportunity and In-life Service
Management programmes.
The Committee reviewed policies, processes
and controls and the reporting of the Group’s
tax and treasury functions, and controls
around purchase to pay and order to cash.
Having been requested to do so by the Board
in accordance with Code provision C.3.4, the
Committee also advised the Board on
whether the Annual Report and Accounts,
taken as a whole is fair, balanced and
understandable and provides the
information necessary for shareholders to
assess the Group’s position and
performance, business model and strategy.
The Committee sought assurance as to the
review procedures performed by
Management, to support and provide
assurance to the Board in making this
statement. These include clear guidance
issued to all contributors to ensure a
consistent approach and a formal review
process, to ensure that the Annual Report
and Accounts are factually correct and
include all relevant information. Following
a review, the Committee advised the
Board that appropriate procedures had
been applied.
The Committee has received presentations
from Management on the strengthening of
the internal controls around in-life contract
performance and assumptions.
To assist the Board, the Committee monitors
the risk management processes and reports
from Internal Audit. The Committee
continues to monitor implementation of
agreed improvements, with an emphasis on
strengthening user access controls.
Compliance Steering Committee
The GRC established a Compliance Steering
Committee (CSC) during 2016. The CSC meets
quarterly, two weeks before the GRC, to
which it reports, and is chaired by the Group
Head of Legal & Contracting. The Group
Human Resources Director, the Group Head
of Internal Audit & Risk Management and
the Company Secretary make up the rest of
the CSC.
81
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Corporate Governance Report
continued
The CSC is responsible for defining relevant
areas of law or regulation applicable to the
Group, assigning these to members of
Management and identifying levels of
compliance and associated risk, with the aim
of ensuring that these are appropriate for
the Group. Critical areas within the CSC’s
remit include anti-bribery and corruption,
whistleblowing and data protection.
During 2016, the CSC implemented a
Group-wide whistleblowing hotline, provided
by a third party, to provide a secure and
anonymous means for employees to make
disclosures they would otherwise feel unable
to. The CSC continues to monitor compliance
with the Group Ethics policy, which has
completed its rollout across the Group. The
CSC is developing a compliance framework
for the Group in order to provide appropriate
and consistent governance across a number
of business critical compliance areas. This
framework will encompass and draw upon
the lessons and experience of the GDPR
project. As part of this, and influenced by an
Internal Audit report, the Committee has
directed the CSC to refresh the existing
Anti-Bribery and Corruption policies and
processes within the new framework,
as well as reviewing the efficacy of our
whistleblowing procedures. In addition, the
Committee noted the CSC’s plans to bring
FusionStorm and Computacenter
Netherlands into the Group’s compliance
network, including the provisioning of the
Group’s whistleblowing hotline.
Whistleblowing
The Committee confirms that it is satisfied
that, as at the date of this report,
arrangements are in place (i) to ensure that
staff are able, in confidence, to raise
concerns about possible improprieties in
financial and other matters, and (ii) for the
proportionate and independent investigation
of such concerns, including appropriate
follow-up action. During the year, no
incidents were reported to the Committee.
The effectiveness of the Internal Audit
function
The Group has an Internal Audit function
which reports to me, as Chairman of the
Audit Committee, and also has direct access
to the CEO. Its key objectives are to provide
independent and objective assurance on
risks, and the related mitigating controls, to
the Board, the Audit Committee and senior
Management, and to assist the Board in
meeting its corporate governance and
regulatory responsibilities. The Board, acting
through the Audit Committee, has directed
the work of the Internal Audit department
towards those areas of the business that are
considered to be the highest risk. The Audit
82
Committee approves a rolling audit
programme, ensuring that all significant
areas of the business are independently
reviewed over, approximately, a three-year
period. The programme and the review
findings are assessed continually, to ensure
they take account of the latest information
and, in particular, the results of the annual
review of internal control and any shifts in
the focus areas of the various businesses.
A formal audit charter, which was updated
during the year, is in place to guide the
function’s work and procedures.
The Audit Committee reviews the
effectiveness of the Internal Audit
department and the Group’s risk
management programme annually. The
formal review consists of an evaluation of
Internal Audit activities by members of the
Audit Committee, managers across the
business who have been subject to audit
during the year, and a self-assessment by
the Group Head of Internal Audit & Risk
Management. The assessment covers areas
such as departmental organisation,
business understanding, skills and
experience, communication and
performance. The positive results showed
improvements in work planning, execution
and reporting.
The Committee received an update from
the Group Head of Internal Audit & Risk
Management at each meeting during the
year. This covered current audit activities
and any associated issues resulting from
the completion of the function’s work. I met
the Group Head of Internal Audit & Risk
Management on a number of occasions
during the year, through which I was updated
on the activities of the Internal Audit function
and received a frequent assessment as to
whether the function is resourced
adequately.
The Committee has continued to work with
the Group Head of Internal Audit & Risk
Management on refining the audit universe,
challenging and approving the Internal Audit
plan and mapping that plan to the Group’s
principal risks and related mitigating
controls, as set out on pages 40 to 45. This is
kept under review to reflect the changing
needs of the business and to ensure that
new and emerging business risks are
appropriately considered within it, including
both reviewing and providing assurance to
the Committee regarding the effectiveness
of controls over bid management and
contract reporting and the control
environment of FusionStorm.
We will carry out an external independent
review of the effectiveness of the Internal
Audit function in 2019.
The integrity of the Group’s relationship
with the auditor and the effectiveness
of the external audit process
External audit
The Audit Committee is required to oversee
the Group’s relationship with its auditor and
to make recommendations to the Board
concerning the appointment, reappointment
and remuneration of the auditor.
Reappointment of the auditor
Following the results of a review of the
effectiveness of the external auditor, and
further discussions amongst the Committee,
the Committee has recommended to the
Board that it propose the reappointment of
KPMG LLP as the Group’s auditor, for approval
by the Company’s shareholders at its 2019
AGM. KPMG LLP was first appointed as the
Group’s auditor with effect from May 2015,
following a competitive tender process. The
Committee will continue to review the
performance of KPMG LLP, as set out below, on
an annual basis. The lead audit engagement
partner is Tudor Aw. He has been in place
since the firm’s appointment in 2015 and will
step down after the 2019 year end.
During the reporting period, the Company
complied with The Statutory Audit Services
for Large Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Audit Committee
Responsibilities) Order 2014.
Effectiveness of the external audit process
The Committee places great importance on
ensuring a high-quality and effective
external audit process. When conducting the
annual review, the Committee considers the
performance of the auditor as well as its
independence, compliance with relevant
statutory, regulatory and ethical standards,
and objectivity.
The Committee reviewed the effectiveness
and quality of the external audit process by:
reviewing the audit plan and monitoring
•
changes in response to new issues or
changing circumstances;
receiving reports on the results of the
audit work performed;
•
• considering the FRC’s report on KPMG LLP.
The Committee reviewed the report which
stated that KPMG LLP were on ‘special
watch’. The Committee read the report
and discussed it at its meeting on
21 August 2018; and
• considering the report of the FRC’s Audit
Quality Review Team (‘AQRT’) into the 2017
audit of the Group by KPMG LLP. We were
pleased to note that the report contained
only two findings, neither of which the
Committee deemed to be material. The
Committee noted that the AQRT was
Auditor’s remuneration:
– Audit of the Financial Statements
– Audit of subsidiaries
Total audit fees
Audit related assurance services
Taxation compliance services
Other assurance services
Taxation advisory services
Other non-audit services
Total non-audit services
Total fees
pleased to see certain elements of best
practice, including the provision of a joint
audit planning day between senior
members of the global audit team and
Management, and which I attend from
time to time.
The Committee further reviewed the
effectiveness of the external audit process
by means of a questionnaire, which was
completed by key stakeholders and relevant
Group Management. The matters covered by
the questionnaire included the quality of the
service and the KPMG LLP employees that are
delivering it, including their understanding of
the business and its audit risks, their degree
of scepticism and challenge, and their
competency. The results were discussed as
a specific agenda item at the Committee
meeting immediately following the
completion of the questionnaire process,
and actions requested by the Committee to
enhance effectiveness were followed up and
continue to be monitored as appropriate.
Auditor independence
The Committee places considerable
importance on ensuring the continuing
independence of the Group’s auditor. This
topic is reviewed at least annually with the
auditor, which confirms its independence
to the Committee twice a year.
Non-audit services
In support of maintaining the auditor’s
independence, the Committee has
established a policy in relation to the scope
and extent of provision of non-audit services
by the Group’s auditor, which is summarised
on this page.
The auditor is appointed primarily to report
on the annual and interim Consolidated
Financial Statements. The Committee places
a high priority on ensuring that the auditor’s
independence and objectivity is not
2018
£’000
2017
£’000
50
722
772
50
9
17
–
132
208
980
44
559
603
55
19
10
13
200
297
900
compromised either in appearance or in fact.
Equally, the Group should not be deprived of
expertise where it is needed and there may
be occasions where the external auditor is
best placed to undertake other accounting,
advisory and consultancy work, in view of its
knowledge of the business, as well as
confidentiality and cost considerations.
the total fee payable by the Group to its
auditor exceeds 70 per cent of the average
annual statutory fee payable by the Group
over the last three consecutive years.
The Group ceased using the Group’s
auditor for all taxation services within the
EU during 2017.
During 2017, after a competitive tender, KPMG
LLP was appointed to conduct financial due
diligence in connection with the FusionStorm
acquisition. The Committee reviewed the
tender documentation, Management’s
recommendations and KPMG LLP’s review of
the impact on its own independence against
the Group’s non-audit services policy. The
engagement did not constitute a prohibited
non-audit service and the Committee
concluded that KPMG LLP had provided the
best tender, both in terms of quality and
value, and were satisfied that the
independence of KPMG LLP, as Group auditor,
was not affected. The acquisition was
suspended in January 2018 and, when
discussions restarted in mid-2018, KPMG LLP
was retained in the same capacity to update
its previous due diligence findings.
Minnow Powell
Chairman of the Audit Committee
11 March 2019
Following the changes to the FRC’s Ethical
Standard (ES), the Committee revised its
non-audit services policy during 2016. Under
this policy, the Group auditor should not be
engaged to undertake work which
constitutes a prohibited non-audit service as
defined under provision 5.167 of the FRC ES.
Any other non-audit service (a ‘Permitted
Service’) must, to the extent that they are not
viewed as ‘trivial’, be approved in advance on
an individual basis by the Audit Committee.
In each case where the Group auditor is
authorised to perform a Permitted Service,
the Audit Committee will assess properly
threats to the auditor’s independence and
the proposed safeguards to be applied when
such Permitted Services are carried out. It
will also document what action was taken by
the Group auditor, including appropriate
safeguards where necessary, to ensure that
its independence was not compromised as
a result of performing the Permitted Service.
The Committee will also discuss and
document why it viewed the Group auditor as
the most appropriate party to perform the
Permitted Service.
The Committee monitors compliance with
this policy by monitoring the level of
non-audit work provided by the external
auditor, resulting in non-audit fees being
26.9 per cent of the KPMG LLP overall audit
fee during 2018 (2017: 49.3 per cent), as set
out below. The Group auditor will, in no
circumstances, undertake non-audit
services for the Group to the extent that
83
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Remuneration Report
The Committee continues to monitor closely
the link between the amount paid to the
Executive Directors, their performance and
the value delivered to shareholders and how
this relates to the broader workforce.
Performance-related pay is genuinely
variable and takes into account how the
Group has performed against the stretching
targets set by the Committee. This variability
of award outcomes is set out on page 98
(CEO pay history). The Committee has also
historically demonstrated restraint in
respect of CEO and FD salary increases, with
salaries having been frozen in seven of the
last 10 years for the CEO and six for the FD.
Consistent with the provisions of the New
Code, the pension benefits received by
Executive Directors are in line with those
provided to the broader workforce.
Taking all of this into account, the Committee
considers that remuneration is aligned
properly to shareholder interests and actual
remuneration earned by the Executive
Directors continues to be a fair reflection of
their individual contribution and the Group’s
overall performance.
The year under review
During the reporting period, the Group has
performed well overall. Group adjusted1 profit
before tax has increased by 11.3 per cent
over 2018. We have seen strong growth in
Germany and outperformance in France in
particular, measured on a constant currency2
basis. The UK Services margins continue to be
constrained by several difficult contracts
and UK Services growth is not as strong as
we would have liked, but this is balanced by
a good performance in our Technology
Sourcing capability. We have made two
important acquisitions during the year and
have returned a further £100 million to
shareholders by way of a Tender Offer whilst
maintaining strong generation of cash.
ANNUAL STATEMENT FROM THE CHAIR
OF THE REMUNERATION COMMITTEE
Dear Shareholder,
On behalf of the Board, I am pleased to
present the Directors’ Remuneration Report
for the financial year ended 2018.
The report is split into three sections:
• This Annual Statement.
• The Directors’ Remuneration Policy,
which was subject to a binding vote by
shareholders at the Company’s General
Meeting held on 12 February 2018, and is
summarised on pages 86 to 89 so that
shareholders can refer to this easily when
reviewing the Annual Report on
Remuneration.
• The Annual Report on Remuneration on
pages 90 to 100 which includes
information concerning the amount paid
to the Executive and Non-Executive
Directors in respect of 2018 and details of
how the Policy will be implemented in
2019, which will be subject to an advisory
vote by shareholders at the Company’s
2019 AGM.
The Committee remains committed to
retaining a remuneration framework which
is simple, transparent and can be
understood by all the Group’s stakeholders.
It is our philosophy that remuneration for the
Group Chief Executive Officer (CEO) and Group
Finance Director (FD) should be weighted
towards variable pay, principally based on
the achievement of financial targets, to
promote the Company’s long-term success
within a suitable risk framework.
Shareholdings by Executive Directors is
considered to be a key principle to support
shareholder alignment. The CEO and FD both
have a significant interest in Computacenter
shares with holdings equivalent to
approximately 11 and 27 times that required
under our minimum shareholding policy. This
ensures that there is a material alignment of
interests between the Executive Directors
and shareholders.
REMUNERATION
Ros Rivaz
Chair of the Remuneration Committee
The Directors’ Remuneration Report on
pages 84 to 100 explains the work of the
Remuneration Committee, and the level
and components of remuneration for
the Directors.
THE COMMITTEE
CONSIDERS THAT
REMUNERATION
IS ALIGNED
PROPERLY TO
SHAREHOLDER
INTERESTS.
84
Remuneration outcomes
The Committee reviewed performance
against the conditions set for the bonus in
2018. As in previous years these performance
conditions included profit, Services
contribution growth, Group cash, cost
savings and personal objectives. Financial
performance is measured on a constant
currency2 basis. Performance against the
profit and cash measures exceeded the
maximum target set by the Committee,
resulting in a full payout for these elements.
The cost savings, Services contribution
growth and personal objectives measures
partially paid out.
As a result of this performance, the CEO
received 82.63 per cent and the FD received
87.63 per cent of their total potential bonus
for the year. Fifty per cent of the bonus will
be deferred into Computacenter plc ordinary
shares, with half payable after one year in
2020 and the remainder payable after two
years in 2021.
Of the Computacenter Performance Share
Plan (PSP) awards granted in March 2016,
65.68 per cent will vest in March 2019, and will
be paid out to the Executive Directors. The
conditions for the vesting of these awards
are calculated by reference to the growth in
the Company’s adjusted1 diluted earnings per
share (subject to the discretion of the
Committee) and growth in Group Services
revenue for the three financial years ended
31 December 2018. The payout reflects the
significant value creation enjoyed by
shareholders during this period and no
discretion was exercised to adjust the
amount. Further details can be found on
pages 93 to 95.
The year ahead
The Committee continues to believe that
the remuneration policy approved by
shareholders delivers an appropriate
framework to motivate and reward our
Executive Directors.
The Committee has decided that the basic
salary of the CEO and FD will be increased by
2.0 per cent for 2019, consistent with the
average increase for the wider UK workforce.
In accordance with the policy approved by
shareholders, the PSP awards to be granted
to the Executive Directors in 2019 will be
subject to a two-year holding period. Further
details on how our Directors’ Remuneration
Policy will be applied for the 2019 financial
year are set out on page 99.
Supported by external advisors, the
Committee continues to monitor the various
developments in remuneration governance.
In particular, the Committee has begun work
on changes required by the New Code. We are
already well placed in a number of areas, for
example, the Committee’s remit already
covers the senior management team and the
pension rates for Executive Directors are
already in line with those available to the
wider workforce.
During the year, an internal evaluation of
the Committee was undertaken. The results
of this evaluation have been analysed and,
in response to some of the observations
made, we will look to enhance the
‘smartness’ of our objectives and continue
to focus on how we set and review
performance targets in the year.
I hope that, having read this report,
shareholders will be satisfied that the
Committee has discharged its duties
appropriately and in line with your interests.
I and the Committee would welcome any
comments that you may have on the
contents of this report.
Ros Rivaz
Chair of the Remuneration Committee
11 March 2019
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GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Remuneration Report
continued
Computacenter’s Remuneration Policy table
The table below sets out the main components of Computacenter’s Directors’ Remuneration Policy (including the details of the benefits which
Executive Directors may receive) which was approved by way of a binding vote at the Company’s General Meeting on 12 February 2018. The full
Policy can be found on the Company’s website at investors.computacenter.com
Supports the recruitment and retention of Executives of the calibre required to deliver the Group’s strategy.
Base salaries are paid in cash and reflect an individual’s responsibilities, performance, skills and experience.
Normally reviewed annually with any changes effective on 1 January, taking into account the level of pay settlements
across the Computacenter Group, the performance of the business and general market conditions. Salary levels at
other organisations of a similar size, complexity and business orientation will be reviewed for guidance.
A review may not necessarily result in an increase in base salary.
An exceptional review may take place to reflect a change in the scale or scope of a Director’s role, for example:
a major acquisition.
Salary levels for the current Executive Directors for the 2019 financial year are:
CEO: £550,800
FD: £357,000
There is no prescribed maximum base salary or maximum annual increase. Ordinarily any salary increase will reflect
our standard approach to increases for other employees in the Group. Higher increases may be considered in certain
circumstances as required, for example, to reflect:
• an increase in scope of role or responsibility;
• performance in role; or
• an Executive Director being moved to appropriate market positioning over time.
Individual and business performance is taken into consideration when deciding salary levels.
To incentivise the delivery of annual, short-term, stretching financial and non-financial objectives.
To align pay costs to affordability and the value delivered to shareholders.
Performance measures and targets are set at the beginning of each financial year. Performance is normally assessed
over one financial year.
For the bonus paid in respect of 2017 onwards, 50 per cent will be paid in cash and 50 per cent will be deferred into
Computacenter shares, with half the shares payable after one year and the remaining half after two years.
Deferred awards will include the right to receive dividend equivalents.
Malus and clawback provisions will apply, as set out in the notes to this table.
The Committee has discretion to vary bonus payments downwards or upwards if it considers the outcome would not
be a fair and complete reflection of the performance achieved by the Group and/or the Executive Director(s). To the
extent that this discretion is exercised, this will be disclosed in the relevant Directors’ Remuneration Report and may
be the subject of shareholder consultation if deemed appropriate.
The maximum annual bonus opportunity is 150 per cent of base salary.
In 2019 the maximum bonus opportunity will be 125 per cent of salary for the CEO, Mike Norris and 100 per cent of
salary for the FD, Tony Conophy.
Increases above the current opportunities, up to the maximum limit, may be made to take account of individual
circumstances, which may include an increase in the size or scope of role or responsibility.
Policy table
Base salary
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Annual bonus
Purpose and link to strategy
Operation
Maximum opportunity
86
Performance measures
Financial measures will normally be used to calculate at least a majority of bonus achievement and the remainder of
annual bonus will normally be attributed to non-financial measures.
Performance Share Plan (PSP)
Purpose and link to strategy
Operation
Financial measures may include profitability, cost management, cash management and other appropriate measures.
Non-financial targets will be stretching targets set by the Committee linked to the delivery of our strategy and the
Executive Directors’ personal objectives for the year.
Targets are reviewed and approved annually by the Committee to ensure that they are stretching and adequately
reflect the strategic aims of the Group.
The Committee determines the threshold and target payout levels each year taking into account the level of stretch in
the targets set. The level of award which is payable for threshold performance will not normally exceed 40 per cent of
the maximum opportunity.
To align the interests of Executive Directors and shareholders.
To incentivise the achievement of longer-term profitability and returns to shareholders, and growth of earnings in a
stable and sustainable manner.
Awards of nil-cost options (or equivalent) which are granted on a discretionary basis and will normally vest subject to
performance and continued employment at the end of a performance period of at least three years.
PSP shares will normally be subject to a two-year holding period following vesting. The shares held during the holding
period will include the right to receive dividend equivalents.
The Committee reviews the performance criteria, targets and weightings prior to each grant in line with business
priorities to ensure they are challenging and fair.
The Committee has discretion to vary the percentage of awards vesting downwards or upwards if it considers that the
outcome would otherwise not be a fair and complete reflection of performance over the plan cycle.
Maximum opportunity
Awards are subject to a malus and clawback provision as set out in the notes to this table.
The maximum opportunity under the plan is 200 per cent of annual base salary or 400 per cent of annual base salary
in exceptional circumstances.
The maximum face value of annual awards granted in 2019 will be 200 per cent of salary for the CEO and 175 per cent
of salary for the FD.
Performance measures
For achievement of a threshold performance level (which is the minimum level of performance that results in any part
of an award vesting), no more than 25 per cent of the award will vest.
Earnings per share is currently the primary measure for our Performance Share Plan, but the Committee may exercise
its discretion to introduce additional or alternative measures which are aligned to the delivery of the business strategy.
Details of the performance conditions applied to awards granted in the year under review and to be granted in the
forthcoming year are set out on pages 93 to 94 and 99 respectively.
Retirement benefits
Purpose and link to strategy
Operation
To provide an income for retirement.
No special arrangements are made for Executive Directors who are entitled to become members of the Group’s
defined contribution pension scheme, which is open to all UK employees or the pension plan relevant to the country
where they are employed if different.
Maximum opportunity
Performance measures
If the Executive Director so chooses, he/she may take some or all of the pension contribution as a cash alternative,
which will be the same percentage of salary as the pension contribution foregone.
Pension contributions or allowances will not exceed 15 per cent of base salary.
N/A
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GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Remuneration Report
continued
Other benefits
Purpose and link to strategy
Operation
To provide a competitive level of employment benefits.
No special arrangements are generally made for Executive Directors.
Benefits currently include:
• a car benefit appropriate for the role performed;
• participation in the Company’s private health and long-term sickness schemes;
•
• participation in all-employee share plans on the same basis as other eligible employees.
life insurance and income continuance schemes; and
All of the Group’s UK and German tax-resident employees are eligible to participate in the Company’s SAYE scheme,
if it is offered.
If new benefits are introduced for a wider employee group, the Executive Directors shall be entitled to participate
on the same basis as other eligible employees.
Maximum opportunity
If, in the opinion of the Committee, a Director must relocate to undertake and properly fulfil his/her executive duties,
a cash payment may be made to cover reasonable expenses.
There is no maximum level of benefits provided to an individual Executive Director as the cost of benefits is dependent
upon costs in the relevant market. Benefits will be set at levels which are competitive, but not excessive.
Performance measures
Participation by Executive Directors in the Sharesave scheme, and any other all-employee share plan operated in the
future, is limited to the maximum award levels permitted by HM Revenue and Customs.
N/A
Chairman and Non-Executive Director fees
Purpose and link to strategy
Operation
To ensure that the Group is able to attract and retain experienced and skilled Non-Executive Directors.
Fee levels are determined with reference to those paid by other companies of similar size and complexity and taking
into account the scope of responsibilities and the amount of time that is expected to be devoted during the year. No
individual is involved in the process of setting his/her own remuneration.
Fee levels are normally reviewed every two years and are next due for review in 2020. They may also be increased on
an ongoing or temporary basis to take into account changes in the working of the Board.
The Chairman of the Board receives a fixed fee. Other Non-Executive Directors receive a basic fee and additional fees
are payable for the Chairmanship of Board Committees and for the additional responsibility of being the Senior
Independent Director. Fees are normally paid in cash.
Travel expenses and hotel costs, including any tax due, are also paid where necessary.
2019 fee levels for the incumbents, to apply from the 2019 AGM are as follows:
Non-Executive Chairman: £210,000
Independent Non-Executive Director base fee: £55,000
Founder Non-Executive Director base fee: £50,000
Maximum opportunity
Performance measures
Supplementary fees:
Senior Independent Director: £8,000
Audit Committee Chair: £18,000
Remuneration Committee Chair: £10,000
Non-Executive Directors do not participate in any of the Group’s incentive arrangements or share schemes and are not
eligible for pension or other benefits.
Maximum in line with the Company’s Articles of Association.
The Chairman of the Board will review individual contributions annually and every three years an independent Board
Effectiveness review will be conducted.
88
Share ownership guidelines
Purpose and link to strategy
Operation
To strengthen alignment between Executives and shareholders.
Levels are set in relation to annual base salary, and are normally required to be built over a five-year period. The
Committee retains discretion to extend this period on an individual basis, if it believes that it is fair and reasonable to
do so.
Options which have vested unconditionally, but are as yet unexercised, will be included on a net basis, for the purposes
of calculating shareholdings, as will shares held by an Executive’s spouse or dependants.
Maximum opportunity
The Committee will regularly review the minimum shareholding guidelines.
There is no maximum, but minimum levels have been set at 200 per cent of base salary for both the current CEO and FD.
Non-Executive Directors are not required to hold shares in the Company.
Performance measures
Executive Directors who have not yet met their shareholding requirement will be expected to retain at least 50 per cent
of any PSP awards which vest (net of tax) until such time as this level of holding is met.
N/A
Malus and clawback
Malus and clawback provisions apply to the annual bonus and performance share plan as follows:
Annual bonus
Malus and/or clawback may apply for two years in the event of a material misstatement of the Group’s accounts for the relevant bonus year or
in cases of gross misconduct.
Performance Share Plan
Malus may apply prior to vesting in the event of:
• a material misstatement of results; or
• poor risk management resulting in a material reduction in profit; or
• some other substantial reason that the Committee deems appropriate.
Clawback may apply at any time prior to the fifth anniversary of grant in the event of:
• an overpayment to the participant; or
•
if the participant leaves in circumstances which, had all the facts been known, would have resulted in the award lapsing.
Remuneration arrangements across the Group
When setting Executive remuneration, consideration is given to pay policies and employment conditions of employees of the Company and
elsewhere in the Group.
The remuneration of employees across the Group is based on three fundamental principles. Firstly, that it allows the Group to retain the level of
talent necessary to implement the strategy as set by the Board. Additionally, that levels of remuneration should be sufficient to achieve this aim,
but should never be higher than is necessary to do so. Finally, with limited exceptions, the more significant the ability of an employee to influence
the Company’s financial results through their individual performance, the higher the proportion of their remuneration should be performance-based.
The level and design of variable pay takes into account the need to avoid incentivising the Group’s employees to act in a manner that is
inconsistent with the Group’s risk appetite, as set by the Board.
Consistent with the policy for Executive Directors, where annual bonuses are in place across the Group, they are linked to business performance
with a focus on underlying Group, divisional profit and other relevant metrics.
Whilst only Executive Directors and senior Executives participate in the PSP, other full time employees in the UK and Germany can participate in
the Company’s all-employee SAYE scheme which is designed to incentivise participants to build a shareholding in the Company, thus aligning their
interests with those of the Group’s shareholders. This plan is not subject to performance conditions, but requires the employee to remain
employed at the end of the term of the scheme which they have joined.
In line with local country practices, all employees are encouraged to contribute appropriate savings towards their retirement. In the UK, the
Company operates pension arrangements within the Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010.
Whilst the Company does not feel it appropriate to consult directly with employees when drawing up the Directors’ Remuneration Policy, the
Committee has considered any feedback received via employee engagement surveys and from the regular meeting the CEO and Group Human
Resources Director conduct with staff representative bodies in each of our major geographies.
89
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Remuneration Report
continued
Annual Remuneration Report
Responsibilities of the Remuneration Committee
The key responsibilities of the Remuneration Committee are to determine on behalf of the Board:
•
•
the Company’s general policy on Executive remuneration; and
the specific remuneration packages of the Executive Directors, the Chairman of the Board and senior Executives of the Group including, but not
limited to, base salary, pension, annual performance-related bonuses and PSP awards.
The fees of the Non-Executive Directors are determined by the Chairman and the Executive Directors. All Directors are subject to the overriding
principle that no person shall be involved in the process of determining his or her own remuneration.
The full responsibilities of the Committee are contained within its terms of reference, which is available on our website at
investors.computacenter.com.
Membership and attendance
The Remuneration Committee is made up of the Independent Non-Executive Directors and the Chairman of the Board, who was considered to be
independent on appointment. Details of the membership of the Committee and attendance of the members at Committee meetings during the
year, is provided below.
Role
Current members
1. Ros Rivaz (Chair from 24/4/18) Non-Executive Director (Senior Independent Director from 24/4/18)
2. Greg Lock
3. Minnow Powell
4. Regine Stachelhaus
5. Peter Ryan
Former member
6. Philip Yea (Chair until 24/4/18) Senior Independent Director (until 24/4/18)
*
Non-Executive Chairman of the Board
Non-Executive Director
Non-Executive Director
Non-Executive Director
Attendance record
3/3
3/3
3/3
3/3
2/3*
1/1**
Note that Peter Ryan was appointed on 13 February 2018, a week prior to the first Committee meeting of the year, Peter gave his apologies to the Chair for his absence as he had an unavoidable pre-existing
commitment.
** Note that Philip Yea attended the Committee meeting that occurred before he stepped down from the Board on 24 April 2018.
The CEO attends meetings by invitation, as does the Group Human Resources Director. The Group Company Secretary is the secretary to the
Committee.
The principal advisor to the Committee is Deloitte LLP (Deloitte), who were selected by the Committee in September 2016 by way of a tender
process. Minnow Powell receives a pension from Deloitte and, as such, recused himself from all discussions relating to the appointment of
Deloitte.
The total fees paid to Deloitte in relation to advice to the Committee in 2018 were £50,900. The Committee considers the advice that it receives
from Deloitte LLP to be independent. During the year, Deloitte also provided tax and share plan advice to the Company. Deloitte is a founding
member of the Remuneration Consultants Group and, as such, voluntarily adheres to its Code of Conduct.
Audited information
The audited tables and related notes are identified within this report, using an A key.
90
A
Single Figure of Total Remuneration
The total amount paid by the Company to each of the Directors, in respect of the financial years ending 31 December 2018 and 2017, is set out in
the table below:
Salary or fees
£’000
Benefits
£’000
Annual bonus
£’000
PSP awards
£’000
Pension
£’000
Total
£’000
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
540.0
350.0
525.0
340.0
36.5¹
–
36.01
–
557.8
306.7
606.0
308.9
871.82
495.82
1,101.45
626.45
195.0
50.0
50.0
66.0
61.0
50.0
22.0
44.2
1,428.2
195.0
50.0
50.0
66.0
50.0
50.0
66.0
–
1,392.0
–
–
–
–
–
–
–
–
36.5
–
–
–
–
–
–
–
–
36.0
–
–
–
–
–
–
–
–
864.5
–
–
–
–
–
–
–
–
914.9
–
–
–
–
–
–
–
–
1,367.6
–
–
–
–
–
–
–
–
1,727.8
23.7
41.5
–
–
–
–
–
–
–
–
65.2
23.1
27.46
2,029.8
1,194.0
2,291.5
1,302.7
–
–
–
–
–
–
–
–
50.5
195.0
50.0
50.0
66.0
61.0
50.0
22.0
44.2
3,762.0
195.0
50.0
50.0
66.0
50.0
50.0
66.0
–
4,121.2
Executive
Mike Norris
Tony Conophy
Non-Executive
Greg Lock
Philip Hulme
Peter Ogden
Minnow Powell
Ros Rivaz3
Regine Stachelhaus4
Philip Yea7
Peter Ryan8
Total (£’000)
1.
2.
3.
4.
5.
6.
7.
8.
The benefits figure represents the taxable benefit arising from the provision of a driver service and other travel related benefits for Mike Norris. The benefit figure for 2017 (62.0 in the 2017 report) has been
restated on this basis having previously included non-taxable business related expenses.
This relates to the 2016 PSP awards which will be paid out in March 2019 and had a performance period of 1 January 2016 to 31 December 2018. The relevant performance criteria was partially achieved and
therefore 65.68 per cent of the award vested for each of the Executive Directors. This calculation is based upon the average value of Computacenter plc shares over the last quarter of 2018 being £11.22.
Ros Rivaz was appointed to the role of Senior Independent Director and Chair of the Remuneration Committee on 24 April 2018.
Paid in Euros.
The value of the 2015 PSP awards have been updated to reflect the actual share price at vesting on 21 March 2018 of £11.66.
The pensions benefit for Tony Conophy includes £12,488.74 in respect of the year ended 31 December 2016 due to the timing of implementing his election of a revised pension arrangement whereby employees can,
under certain conditions, receive a cash payment in lieu of membership of a collective pension scheme.
Phillip Yea stepped down from the Board on 24 April 2018.
Peter Ryan was appointed to the Board on 13 February 2018.
Remuneration paid in 2018: Executive Directors
2018 base salary
The annual salaries of the Executive Directors were increased by 2.9 per cent in 2018 to £540,000 for the CEO and £350,000 for the FD.
2018 annual bonus
The maximum bonus opportunity in 2018 was 125 per cent of base salary for the CEO and 100 per cent of base salary for the FD. Fifty per cent of
the bonus will be deferred into Computacenter shares, with half payable after one year and half payable after two years. Bonus payments are
also subject to clawback for two years, in the event that the Group materially misstates its financial results for the reporting period or in the event
of misconduct by the Executive Director.
The 2018 annual bonus opportunity was driven by the financial performance of the business and individual targets for each Director. For the year
ended 31 December 2018, 80 per cent of this award was conditional on the achievement of criteria linked to the financial performance of the
Group. These targets were set by the Committee with reference to the Group’s strategic and financial plans, as approved by the Board of Directors.
The non-financial personal objectives set for the Executive Directors were based principally on delivery against the Group’s strategic objectives
and certain people-related objectives, including leadership development and progress on diversity and inclusion.
91
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018
Directors’ Remuneration Report
continued
A
The table below sets out details of the annual bonus criteria which applied for the Executive Directors for 2018 and performance delivered:
Measure
Financial criteria
Profit before tax (£m)
Percentage
payout
Services contribution
growth (£m)
Percentage
payout
Cash balance (£m)
Percentage
payout
Costs (£m)
Percentage
payout
Non-financial criteria
Personal objectives
Total
As a percentage of
Maximum Bonus
Opportunity
Performance required
Threshold
Target
Stretch
Maximum
Actual %
achieved
Payout
£’000
CEO
FD
CEO
FD
50%
10%
10%
10%
20%
100%
99.0
10%
231.5
5%
57.6
5%
(312.5)
5%
0%
25.0%
104.2
20%
244.4
7.5%
67.3
7.5%
(310.0)
7.5%
7.5%
50%
108.2
35%
257.2
10%
76.9
10%
112.2
50%
257.2
10%
76.9
10%
(307.5)
(307.5)
10%
10%
114.51
50%
233.3
5.36%
127.4
10%
(312.2)
5.27%
337.5
175.0
36.2
18.8
67.5
35.0
35.6
18.4
15%
80%
20%
100%
12%
17%
81.0
59.5
557.8
306.7
1.
Profit before tax represents Group adjusted1 profit before tax on a currency adjusted basis, excluding the results of the entities acquired during the year.
The personal objectives for the Executive Directors are subject to a profit performance underpin and are related to the following:
Objectives
CEO
Supporting and encouraging a Services revolution including key
new hires, establishing significant offshore deployment, automation
and execution.
Progress towards improving the Services margin of the Group by
5 per cent by the end of 2019.
Continuing to focus on gender and diversity initiatives as part of
leadership development.
Strategic leadership, including improving the internal understanding
of the industry, competition and Computacenter’s own capabilities.
Progress in the year
During the year a number of key senior Management hires were made
to provide expertise and experience in the areas of offshoring and
automation. However, not enough progress has been made in this area.
Group Services margin is currently showing improvement. It has had a
generic effect across a large number of contracts, however, the ‘difficult
contracts’ have materially moved the margin down to nullify any good work
that has been achieved.
Significant progress has been made via the People Panel and diversity and
inclusion has been elevated to a mainstream leadership topic. Further
progress is expected.
Board members have participated in a full strategy day with Management
as well as a nominated Board member attending a Management strategy
workshop. Board members have met regularly with Management and
feedback has been provided from industry analysts and commentators
to inform the Board’s thinking.
92
Objectives
FD
Implementing systems and processes in our Services business to drive a
sustainable one per cent increase in working capital within three years.
Delivering the ‘K2’ project on time and according to the approved budget.
Enhancing the bid management process to empower the front end of
the business.
Expanding Computacenter’s global footprint by sourcing customers,
who contribute more than £1 million of margin, in new locations.
Defining and implementing a plan for reducing the number of systems by
25 per cent in all geographies in which we operate.
Establishing and growing a leasing and financing business unit, including
through recruitment, to at least £1 million contribution and establishing
appropriate processes and controls.
Progress in the year
Working capital has had increased visibility with the senior Management
team and is now a regular item of management focus and despite the
challenging environment, cash generation has remained in line with
expectations.
Despite some initial challenges this project is largely completed with no
disruption to service or customer fulfilment. We are very pleased with our
new facility in Kerpen.
A comprehensive governance system has been introduced to improve our
bid management processes. This has been well received by employees and
has enabled us to better understand how we can serve our customers and
continuously improve our sales processes.
During 2018 the Group made several acquisitions in new and existing
territories which have been executed smoothly. The Group will profit
from this expansion and we look forward to seeing the benefits in 2019
and beyond.
A small number of systems programmes have been initiated and are on
track to deliver a reduction in the number of disparate systems being used
in various territories.
This has progressed well and is one of the main success stories of 2018.
A team has been established which is making a substantive financial
contribution.
PSP
The PSP awards granted to Executive Directors with a performance period ending on 31 December 2018 paid out at 65.68 per cent, pursuant to the
2016 PSP Scheme as the relevant performance criteria threshold was partially achieved.
Vesting of these awards to each Executive Director was dependent upon the achievement of the following performance measures over a
three-year period:
The compound annual growth rate of the Group’s adjusted1 diluted earnings per share (EPS) – 70 per cent weighting
Performance level*
Maximum (100 per cent vesting)
In line with expectations (50 per cent vesting)
Threshold (10 per cent vesting)
*
Vesting occurs on a straight-line basis on between these thresholds.
Adjusted1 diluted
EPS Growth CAGR
12.5%
8.33%
5%
The growth in adjusted1 diluted EPS during the period 1 January 2016 to 31 December 2018 was 11.99 per cent per annum. This resulted in 93.83
per cent of this element vesting. The EPS number used for the base year of this award (i.e. EPS in 2015) is consistent with the EPS number that was
used to calculate the vesting of the 2013–2015 PSP.
Services Revenue Growth – 30 per cent weighting (measured on a constant currency2 basis)
Performance level*
Maximum (100 per cent vesting)
In line with expectations (50 per cent vesting)
Threshold (25 per cent vesting)
The Services Revenue Growth was 1.95 per cent, resulting in nil per cent of this element vesting.
Services Revenue
Growth CAGR
7.5%
5.5%
3.5%
93
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Remuneration Report
continued
Remuneration awards granted in 2018: Executive Directors
A
Share scheme interests awarded during the year
The table below details awards made during 2018 under the PSP scheme. The performance conditions for these awards are set out in more detail
directly below. Any awards that vest will be subject to a two-year holding period.
Scheme/type
of award
Number of
shares
Face value at
time of grant
Group CEO
PSP – nil
cost option
88,782
£1,049,9981
Group FD
PSP – nil
cost option
50,310
£595,0011
Performance
conditions
applied
Compound growth of
Company EPS (70%)
Compound growth of
Services revenue (30%)
Compound growth of
Company EPS (70%)
Compound growth of
Services revenue (30%)
Amount vesting related to
threshold of performance
Threshold
performance
(% of face value)
Maximum
performance
(% of face value)
10%
25%
10%
25%
100%
100%
100%
100%
Performance
period set
3 financial years from
1 January 2018
3 financial years from
1 January 2018
1.
This is based on the average mid-market share price of Computacenter plc on the three immediately preceding business days from grant, being £11.83.
Vesting of these awards to each Executive Director will be dependent upon the achievement of the performance measures over a three-year
period, as follows:
The compound annual growth rate of the Group’s adjusted1 diluted earnings per share (EPS) (70 per cent weighting)
Performance level*
Maximum
In-line with expectations
Threshold
The compound annual growth rate of the Group’s Services Revenue (GSR) (30 per cent weighting) measured on a constant currency2 basis
Performance level*
Maximum
In line with expectations
Threshold
Adjusted1 diluted
EPS Growth CAGR
12.5%
8.33%
5.0%
Services Revenue
Growth CAGR
7.5%
5.5%
3.5%
*
Vesting occurs on a straight-line basis in-between these thresholds.
The table below details awards made during 2018 under the Deferred Bonus Plan (DBP) scheme.
Group CEO
Group FD
Scheme/type of award
Number of
shares
Face value
DBP2 – Conditional Share
25,622
£303,0241
DBP2 – Conditional Share
13,059
£154,4451
Vesting date
50% – 21 March 2019
50% – 21 March 2020
50% – 21 March 2019
50% – 21 March 2020
1.
2.
This is based on the average mid-market share price of Computacenter Plc on the three immediately preceding business days from grant, being £11.83.
These are not subject to any other performance conditions.
94
A
Executive Director outstanding Share Awards as at 31 December 2018
Directors’ interests in Share Schemes (audited)
Mike Norris
Tony Conophy
Schemes
Sharesave*
PSP
PSP
PSP
PSP
DBP
Sharesave*
PSP
PSP
PSP
PSP
DBP
Note
1
2
3
4
5
6
1
2
3
4
5
6
Exercise/
share price
524.0p
Nil
Nil
Nil
Nil
Nil
1054.0p
Nil
Nil
Nil
Nil
Nil
Vesting period/
exercise period
01/12/19 – 31/05/20
21/03/18 – 25/03/25
22/03/19 – 21/03/26
22/03/20 – 21/03/27
22/03/21 – 21/03/28
21/03/19 – 21/03/20
01/12/18 – 31/05/19
21/03/18 – 25/03/25
22/03/19 – 21/03/26
22/03/20 – 21/03/27
22/03/21 – 21/03/28
21/03/19 – 21/03/20
At
1 January
2018
5,782
138,889
118,305
142,566
–
–
8,175
78,993
67,286
80,788
–
–
Granted
during
the year
–
–
–
–
88,782
25,622
2,846
–
–
–
50,310
13,059
Exercised
during
the year
–
94,458
–
–
–
–
4,373
53,723
–
–
–
–
Lapsed
during
the year
–
44,431
–
–
–
–
3,802
25,270
–
–
–
–
At
31 December
2018
5,782
–
118,305
142,566
88,782
25,622
2,846
–
67,286
80,788
50,310
13,059
1
2.
3.
4.
5.
Issued under the Rules of the Computacenter 2018 Sharesave Plan, which is available to employees and full-time Executive Directors of the Computacenter Group. Eligible employees can save between £5 and £500
a month to purchase options in shares in Computacenter plc at a price fixed at the beginning of the scheme term. There are no conditions relating to the performance of the Company for this scheme. On 24 October
2018, the Company granted 2,846 options to acquire ordinary shares pursuant to the Rules of the Computacenter 2018 Sharesave Plan at an Option Price of £10.54 to Tony Conophy. The 3,802 options granted on
18 October 2017 lapsed in full on 22 January 2018.
Issued under the terms of the Computacenter Performance Share Plan 2005, as amended at the AGM held on 19 May 2015.
(a)
In respect of 70 per cent of the total award: 10 per cent of this portion of the award will vest if the compound annual EPS growth over the Performance Period equals 5 per cent per annum. If the compound
annual EPS growth rate over the Performance Period is between 5 per cent and 8.33 per cent, this portion of the award will vest on a straight-line basis up to one-half. This portion of the award will vest in full if
the compound annual EPS growth equals or exceeds 12.5 per cent per annum, with straight-line vesting between 50 per cent and 100 per cent.
In respect of 30 per cent of the total award: the award will start to vest if the compound annual Services growth rate over the Performance Period equals 3.5 per cent. If the compound annual Services growth
rate over the Performance Period is 7.5 per cent, this portion of the award will vest in full. If the compound annual Services growth rate over the period is between 3.5 per cent and 7.5 per cent, then this portion
of the award will vest on a straight-line basis between 25 per cent and 100 per cent.
(b)
Issued under the terms of the Computacenter Performance Share Plan 2005, as amended at the AGM held on 19 May 2015.
(a)
In respect of 70 per cent of the total award: 10 per cent of this portion of the award will vest if the compound annual EPS growth over the Performance Period equals 5 per cent per annum. If the compound
annual EPS growth rate over the Performance Period is between 5 per cent and 8.33 per cent, this portion of the award will vest on a straight-line basis up to one-half. This portion of the award will vest in full if
the compound annual EPS growth equals or exceeds 12.5 per cent per annum, with straight-line vesting between 50 per cent and 100 per cent.
In respect of 30 per cent of the total award: the award will start to vest if the compound annual Services growth rate over the Performance Period equals 3.5 per cent. If the compound annual Services growth
rate over the Performance Period is 7.5 per cent, this portion of the award will vest in full. If the compound annual Services growth rate over the period is between 3.5 per cent and 7.5 per cent, then this portion
of the award will vest on a straight-line basis between 25 per cent and 100 per cent.
(b)
Issued under the terms of the Computacenter Performance Share Plan 2005, as amended at the AGM held on 19 May 2015.
(a)
In respect of 70 per cent of the total award: 10 per cent of this portion of the award will vest if the compound annual EPS growth over the Performance Period equals 5 per cent per annum. If the compound
annual EPS growth rate over the Performance Period is between 5 per cent and 8.33 per cent, this portion of the award will vest on a straight-line basis up to one-half. This portion of the award will vest in full if
the compound annual EPS growth equals or exceeds 12.5 per cent per annum, with straight-line vesting between 50 per cent and 100 per cent.
In respect of 30 per cent of the total award: the award will start to vest if the compound annual Services growth rate over the Performance Period equals 3.5 per cent. If the compound annual Services growth
rate over the Performance Period is 7.5 per cent, this portion of the award will vest in full. If the compound annual Services growth rate over the period is between 3.5 per cent and 7.5 per cent, then this portion
of the award will vest on a straight-line basis between 25 per cent and 100 per cent.
(b)
Issued under the terms of the Computacenter Performance Share Plan 2005, as amended at the AGM held on 19 May 2015.
(a)
In respect of 70 per cent of the total award: 10 per cent of this portion of the award will vest if the compound annual EPS growth over the Performance Period equals 5 per cent per annum. If the compound
annual EPS growth rate over the Performance Period is between 5 per cent and 8.33 per cent, this portion of the award will vest on a straight-line basis up to one-half. This portion of the award will vest in full if
the compound annual EPS growth equals or exceeds 12.5 per cent per annum, with straight-line vesting between 50 per cent and 100 per cent.
In respect of 30 per cent of the total award: the award will start to vest if the compound annual Services growth rate over the Performance Period equals 3.5 per cent. If the compound annual Services growth
rate over the Performance Period is 7.5 per cent, this portion of the award will vest in full. If the compound annual Services growth rate over the period is between 3.5 per cent and 7.5 per cent, then this portion
of the award will vest on a straight-line basis between 25 per cent and 100 per cent.
(b)
6. Conditional shares issued under the terms of the Computacenter 2017 Deferred Bonus Plan. Awards vest in equal tranches on the first and second anniversary of the grant date.
*
The Sharesave scheme only requires that an employee remains employed by the Group at the end of the term of the scheme. There are no performance conditions attached.
Director gains
PSP
Director
Mike Norris
Tony Conophy
Date of vesting
21/03/2018
21/03/2018
Scheme
PSP
PSP
Number of
shares
94,458
53,723
Exercise
price
Nil
Nil
Market price
at exercise
£11.66
£11.66
Gain made
£1,102,201
£626,877
The closing market price of ordinary shares at 31 December 2018 (being the last trading day of 2018) was £10.06.
The highest price during the year was £16.20 and the lowest was £9.52.
95
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018
Directors’ Remuneration Report
continued
Minimum shareholding requirements
In accordance with the Group’s minimum shareholding guidelines, the CEO is required to build up a shareholding that is equal to 200 per cent of
his/her gross salary. In respect of the FD, the threshold that is expected to be achieved is 200 per cent of his/her gross salary. It is additionally
expected that the Executive Director will achieve these levels within five years of appointment. For the purposes of these requirements, options
which have vested unconditionally, but are as yet unexercised, will be included on a net basis, for the purposes of calculating shareholdings, as
will shares held by an Executive’s spouse or dependants. There is no requirement for the Non-Executive Directors of the Company to hold shares.
The Committee notes the new provision in the UK Corporate Governance Code relating to post-employment shareholdings. There is currently a
policy in place whereby any share-based awards normally continue on their original time horizons if ‘good leaver’ status has been awarded
including the application of a holding period for PSP awards, therefore requiring Executives to retain an interest in shares post-employment.
However, the Committee will continue to keep this under review.
Both the CEO and the FD have met and substantially exceed their shareholding requirement.
A
Directors’ shareholdings
The beneficial interest of each of the Directors in the shares of the Company, as at 31 December 2018, is as follows:
Current Directors
Mike Norris
Tony Conophy
Greg Lock
Philip Hulme
Peter Ogden
Minnow Powell
Ros Rivaz
Regine Stachelhaus
Peter Ryan
Philip Yea
Number of shares in
the Company as at
31 December 2018
1,132,819
1,851,961
700,000
9,621,695
18,699,389
1,340
1,382
–
900
8,0005
Percentage of
requirement
achieved
1,055%3
2,662%3
n/a
n/a
n/a
n/a
n/a
n/a
Interests in shares
SAYE
5,7821
2,8461,4
–
–
–
–
–
–
PSP
349,6532
198,3842
–
–
–
–
–
–
DBP
25,6221
13,0591
Total
1,513,876
2,066,250
700,000
9,621,695
18,699,389
1,340
1,382
–
900
8,000
n/a
–
–
Note: There has been no grant of, or trading in, shares of the Company between 1 January 2019 and 11 March 2019.
There are no conditions relating to the performance of the Company or individual for the vesting of this scheme.
There are performance conditions for this scheme as set out below the table on page 95.
1.
2.
3. Based on the Company’s closing share price as at 31 December 2018, being £10.06.
4
5.
On 24 October 2018, the Company granted 2,846 options to acquire ordinary shares pursuant to the Computacenter Sharesave Plus Scheme at an Option Price of £10.54 to Tony Conophy.
Represents shareholding as at 24 April 2018, at which point Philip Yea ceased to be a Director.
Dilution limits
Computacenter uses a mixture of both new issue and market purchase shares to satisfy the vesting of awards made under its PSP, DBP and
Sharesave schemes. In line with best practice, the use of new or treasury shares to satisfy awards made under all share schemes, is restricted to
10 per cent in any 10-year rolling period, with a further restriction for discretionary schemes of five per cent in the same period. The Company’s
current position against its dilution limit is under each of these thresholds. The Company regularly reviews its position against the dilution
guidelines and, should there be insufficient headroom within which to grant new awards which could be satisfied by issuing new shares, it is the
intention of the Company to continue its current practice of satisfying new awards with shares purchased on the market.
Payments to past Directors and payments for loss of office
There have been no payments made to past Directors and no payments made for loss of office during the period.
96
Executive service contracts
A summary of the Executive Directors’ contracts of employment is given in the table below:
Director
Mike Norris
Tony Conophy
Start date
23/04/1998
23/04/1998
Expiry date
n/a
n/a
Unexpired term
None specified
None specified
Notice period
(months)
12
12
All Executive Directors have a rolling 12-month service contract with the Company, which is subject to 12 months’ written notice by either the
Company or the Director.
External appointments for Executive Directors
Executive Directors are permitted to hold outside directorships, subject to approval by the Chairman of the Board, and any such Executive Director
is permitted to retain any fees paid for such services. During 2018, Mike Norris served as a Non-Executive Director of Triage Holdings Limited until
9 April 2018 and received a fee of £2,000.
Non-Executive Directors’ letters of appointment
The Non-Executive Directors have not entered into service contracts with the Company. They each operate under a letter of appointment which
sets out their terms, duties and responsibilities. Non-Executive Directors are appointed for an initial term, which runs to the conclusion of the third
AGM following their appointment, which may be renewed at that point. The letters of appointment provide that should a Non-Executive Director not
be re-elected at an AGM before he or she is due to retire, then his or her appointment will terminate. The Board has agreed that all Directors will be
subject to re-election at the AGM on 16 May 2019.
The terms and conditions of appointment of the Non-Executive Directors are available for inspection by shareholders at the Company’s registered
office. The appointments continue until the expiry dates set out below, unless terminated for cause or on the period of notice stated below:
Director
Greg Lock
Philip Hulme
Peter Ogden
Minnow Powell
Ros Rivaz
Regine Stachelhaus
Peter Ryan
Date of latest letter of
appointment
4 May 2017
4 May 2016
4 May 2016
Expiry date
14 May 2020
4 May 2019
4 May 2019
14 December 2017 14 December 2020
11 November 2016 11 November 2019
4 May 2019
13 February 2021
4 May 2016
13 February 2018
Notice period
3 months
3 months
3 months
3 months
3 months
3 months
3 months
During the year a review of Chairman and Non-Executive Director fees was undertaken. Following this review, it was determined that the
Chairman’s fee would be increased to £210,000 with effect from the 2019 AGM. The Non-Executive Directors are paid a basic fee, plus additional
fees for Chairmanship of Board Committees or SID duties. Following the review, it was determined that the basic fee paid to the Independent
Non-Executive Directors, the additional fee for the Chairmanship of the Audit Committee and the additional fee for the position of Senior
Independent Director would be increased with effect from the 2019 AGM, as set out in the table below:
Position
Independent Non-Executive Directors
Founder Non-Executive Directors
Additional fee for the Chairmanship of the Audit Committee
Additional fee for the Chairmanship of the Remuneration Committee
Additional fee for the position of Senior Independent Director
2018 Annual
fees (£)
50,000
50,000
16,000
10,000
6,000
2019 Annual
fees (£)
55,000
50,000
18,000
10,000
8,000
97
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Remuneration Report
continued
Performance of the Company
Total shareholder return performance
(Computacenter versus FTSE Software and Computer Services sector)
1,750
1,500
1,250
1,000
750
500
250
0
Dec
2008
Dec
2009
Dec
2010
Dec
2011
Dec
2012
Dec
2013
Dec
2014
Dec
2015
Dec
2016
Dec
2017
Dec
2018
Computacenter
FTSE All Share – Software and Computer Services
In this graph, TSR performance shows the value, in December 2018, of £100 invested in the Company’s shares in December 2008, assuming that all
dividends received between December 2008 and December 2018 were reinvested in the Company’s shares (source: Datastream).
CEO pay history
The table below shows the total remuneration figure for the CEO over the previous nine financial years. The total remuneration figure includes the
annual bonus and PSP awards which vested based on performance in those years. The annual bonus and PSP percentages show the payout for
each year as a percentage of the maximum.
CEO single figure of
remuneration
Annual bonus payout (as a %
of maximum opportunity)
Annual bonus
PSP vesting (as a % of
maximum opportunity)
PSP vesting
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
1,407,034
1,910,675
1,878,675 1,085,300
937,300 1,506,300 2,763,900
1,807,600 2,291,500 2,029,800
87%
98.5%
63.7%
26.8%
61.2%
69.39%
84.54%
49.12%
92.35%
413,250
467,875
350,350
161,000
367,000
451,035
803,200
319,280
606,047
100%
100%
100%
58.5%
0%
35.34%
71.5%
85.13%
68.01%
489,235
938,201
997,351
385,355
–
478,679 1,384,500
891,800
1,101,400
82.63%
557,753
65.68%
871,816
Percentage change in remuneration of CEO and employees
The table below sets out the percentage change in the salary, benefits and annual bonus of the CEO compared to the average amount paid to
Computacenter employees in the UK, between the year ended 31 December 2017 and 31 December 2018.
CEO
Computacenter UK-based employees
Salary
2.9%
2.1%
Benefits
1.4%
11.4%
Annual bonus
-8%
4.62%
The comparator Group of Computacenter UK-based employees was chosen as the Committee believes it provides a sufficiently large comparator
Group based on a similar incentive structure to the CEO and reduces any distortion arising from currency and cost of living differences in other
geographies in which the Group operates.
98
Relative importance of spend on pay
The charts below show the relative expenditure of the Group on the pay of its employees, against certain other key financial indicators of
the Group:
Expenditure on Group employees’ pay
Shareholder distributions
Group adjusted1 profit before tax*
18
17
£735.2m
£653.0m
18
17
£30.9m
£27.1m
18
17
£118.2m
£106.2m
*
As well as information prescribed by current remuneration reporting regulations, Group adjusted1 profit before tax has also been included as this is deemed to be a key performance indicator of the Group which is
linked to the delivery of value to our shareholders.
Statement of implementation of remuneration policy in the following financial year
Executive Director Remuneration for 2019 will be in accordance with the terms of our Directors’ Remuneration Policy table, as set out on pages
86 to 89 of this report.
2019 base salaries
The base salary of the CEO and the FD will increase by two per cent to £550,800 and £357,000 respectively from 1 January 2019.
2019 annual bonus
The performance measures and weightings for the 2019 annual bonus will be as follows:
Mike Norris – CEO
(2019)
Tony Conophy – FD
(2019)
1
2
3
4
5
1
2
3
4
5
1. Group adjusted1 profit before tax (up to 50%)
2 Services contribution growth (up to 10%)
3. Cash balance (up to 10%)
4. Cost savings (up to 10%)
5. Personal objectives (up to 20%)
1. Group adjusted1 profit before tax (up to 50%)
2 Services contribution growth (up to 10%)
3. Cash balance (up to 10%)
4. Cost savings (up to 10%)
5. Personal objectives (up to 20%)
The measures for 2019 have been set to be challenging relative to our 2019 business plan. The targets themselves, as they relate to the 2019
financial year, are deemed by the Committee to be commercially sensitive and therefore have not been disclosed. They will be disclosed at such
time as the Committee no longer deems them to be so, and it currently anticipates including these in the Company’s 2019 Annual Report and
Accounts.
The maximum bonus opportunity for the Executive Directors in 2019 will be 125 per cent of base salary for the CEO, and 100 per cent of base salary
for the FD. These awards will be subject to deferral in line with our Policy on page 86.
2019 PSP
The award levels for the Executive Directors in the 2019 financial year are 200 per cent of salary for the CEO and 175 per cent of salary for the FD.
The 2019 financial year PSP awards will be subject to the same performance measures and targets as for the 2018 PSP awards as set out above.
The 2019 financial year PSP awards will be subject to a two-year holding period.
99
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Remuneration Report
continued
Statement of voting
The results of voting on the Directors’ Remuneration Report at the Company’s 2018 AGM are outlined in the table below:
Votes cast in favour/discretionary
94,148,600
99.2%
Votes cast against
778,407
0.8%
Total votes cast
94,927,007
Votes withheld/abstentions
2,340
The results of voting on the Remuneration Policy at the Company’s 2018 General Meeting are outlined in the table below:
Votes cast in favour/discretionary
85,365,677
99.6%
Votes cast against
317,191
0.4%
Total votes cast
85,682,868
Votes withheld/abstentions
10,968
The Committee is grateful for the continuing support of shareholders, and in order to ensure that this continues, the Committee will ensure that it
consults with shareholders on major issues on which it feels it is appropriate to do so. It will also continue to adhere to its underlying principle of
decision-making that Executive Directors’ pay must be linked to performance and the sustainable delivery of value to our shareholders.
This Annual Remuneration Report has been approved by the Board of Directors and signed on its behalf by:
Ros Rivaz
Chair of the Remuneration Committee
11 March 2019
100
Relations with shareholders
The Board recognises and values the
importance of meeting shareholders to
obtain their views and has established a
programme to communicate with
shareholders, based on the Company’s
financial reporting calendar.
Dialogue with shareholders
The Board is informed of any substantial
changes in the ownership of the Company’s
shares, through monthly reports from the
Company’s corporate brokers, Investec plc
and Credit Suisse. In addition, meetings are
held with major shareholders following both
the Annual and Interim results. Normally,
these meetings are with the CEO and FD. The
Board is briefed on the outcome of these
meetings and discusses any issues raised. In
addition, the Board receives feedback
reports from the Group’s investor relations
firm, Tulchan Communications LLP, and the
corporate brokers.
Once a year, the Company’s top 15
shareholders are invited to meet individually
with the Chairman, Company Secretary and,
on request, the Senior Independent Director,
to provide feedback on the Group’s
Management, strategy and corporate
governance arrangements, and to raise
other comment. Only a few shareholders
take up this opportunity. These meetings will
next take place in April 2019, to address any
areas of discussion prior to the Company’s
next AGM, and to introduce the Chairman-
Designate, Peter Ryan. Again, the Board will
be briefed on the outcomes of these
meetings. Non-Executive Directors are
available to meet major shareholders at any
time and can be contacted through the
Company Secretary, at the Company’s
registered office address.
Constructive use of General Meetings
All of the Directors aim to attend the AGM and
value the opportunity to welcome individual
shareholders and other investors, to
communicate directly and address their
questions. In addition to mandatory
information, a full, fair and balanced
explanation of the business of all general
meetings is sent in advance to shareholders.
Resolutions at the Company’s general
meetings have been passed on a show of
hands and proxies for and against each
resolution (together with any abstentions)
are announced at the meetings, noted in the
minutes, made available on the Company’s
website and notified to the market.
Annual General Meeting (AGM)
The AGM of the Company will be held on Friday
16 May 2019 at Computacenter House, 100
Blackfriars Road, SE1 8HL. The AGM notice of
meeting sets out each of the resolutions
being proposed. This notice will shortly be
available at investors.computacenter.com,
and will be mailed to shareholders if they
have elected to receive hard copies.
Compliance with DTR
The information that is required by DTR 7.2.6,
relating to the share capital of the Company,
can be found within the Directors’ Report
from page 102.
This Corporate Governance Report was
approved, by order of the Board, and signed
on its behalf by:
Raymond Gray
Company Secretary
11 March 2019
101
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Report
Computacenter plc is incorporated as a
public limited company and is registered in
England and Wales with the registered
number 3110569. Computacenter plc’s
registered office address is Hatfield Avenue,
Hatfield, Hertfordshire AL10 9TW. The
Company’s registrar is Equiniti Limited, which
is situated at Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA.
The Directors present the Directors’ Report,
together with the audited accounts of
Computacenter plc and its subsidiary
companies (the Group) for the year ended
31 December 2018.
The pages from the inside front cover to
108 of this Annual Report and Accounts are
incorporated by reference into the Directors’
Report, which has been drawn up and
presented in accordance with English
company law, and the liabilities of the
Directors in connection with that report shall
be subject to the limitations and restrictions
provided by such law.
Strategic Report
The Companies Act 2006 requires the Group
to prepare a Strategic Report, which
commences at the start of this Annual
Report and Accounts up to page 66. The
Strategic Report includes information about
the Group’s operations and business model,
particulars of all important events affecting
the Company or its subsidiaries, the Group’s
financial performance in the year and likely
future developments, key performance
indicators, principal risks and information
regarding the Group’s sustainable
development plan.
Corporate governance
Under Disclosure and Transparency Rule 7.2,
the Company is required to include a
Corporate Governance Report within the
Directors’ Report.
Information on our corporate governance
practices can be found in the Corporate
Governance Report on pages 67 to 101, and
the reports of the Nomination, Audit and
Remuneration Committees on pages 74,
78 and 84 respectively, all of which are
incorporated into the Directors’ Report
by reference.
102
Directors and Directors’ authority
The Directors who served during the year
ended 31 December 2018 were Tony Conophy,
Philip Hulme, Greg Lock, Mike Norris, Peter
Ogden, Minnow Powell, Ros Rivaz, Peter Ryan,
Regine Stachelhaus and Philip Yea. Philip Yea
resigned from the Board with effect from
24 April 2018.
Biographical details of each Director, as at
31 December 2018, are given on pages 70 and
71. The Company’s Articles of Association
require that at each AGM, those Directors who
were appointed since the last AGM retire, as
well as one-third of the Directors who have
been the longest serving. The Board has
decided, in accordance with the Code, that all
Directors will retire at each forthcoming AGM
and offer themselves for re-election. The
Nomination Committee has considered each
Director who is standing for re-election and
recommends their re-election. Further
details on the Committee’s
recommendations for the re-election of the
Directors are set out in the Notice of AGM,
which summarises the skills and experience
that the Directors bring to the Board.
Subject to applicable law and the Company’s
Articles of Association, the Directors may
exercise all of the powers of the Company.
The Company’s Articles of Association
provide for a Board of Directors consisting of
not fewer than three, but not more than 20
Directors, who manage the business and
affairs of the Company. The Directors may
appoint additional or replacement Directors,
who shall serve until the following AGM of the
Company, at which point they will be required
to stand for election by the members. A
Director may be removed from office by the
Company as provided for by applicable law,
in certain circumstances set out in the
Company’s Articles of Association, and at
a General Meeting of the Company, by the
passing of an Ordinary Resolution (provided
special notice has been given in accordance
with the Companies Act 2006).
Management Report
This Directors’ Report, together with the
other reports, forms the Management Report
for the purposes of Disclosure and
Transparency Rule 4.1.8.
Results and dividends
The Group’s activities resulted in a profit
before tax of £108.1 million (2017: £111.7
million). The Group profit for the year,
attributable to shareholders, amounted to
£80.9 million (2017: £81.3 million).
The Directors recommend a final dividend of
21.6 pence per share (2017: 18.7 pence per
share) totalling £24.7 million (2017: £21.1
million). The dividend record date is set on
Friday 31 May 2019, and the shares will be
marked ex-dividend on Thursday 30 May
2019. This is in line with the normal dividend
procedure timetable as set by the London
Stock Exchange.
Following the payment of an interim dividend
for 2018 of 8.7 pence per share on 12 October
2018, the total dividend per share for 2018
will be 30.3 pence per share. The Board has
consistently applied the Company’s Dividend
Policy, which states that the total dividend
paid will result in a dividend cover of 2 to 2.5
times. Further detail on the Company’s
Dividend Policy can be found within the Group
Finance Director’s review on page 61.
Dividends are recognised in the accounts in
the year in which they are paid, or in the case
of a final dividend, when approved by the
shareholders. As such, the amount
recognised in the 2018 Annual Report and
Accounts, as described in note 12, is made up
of the 2017 final dividend (18.7 pence per
share) and the 2018 interim dividend (8.7
pence per share).
Articles of Association
The Company’s Articles of Association set out
the procedures for governing the Company.
A copy of the Articles of Association, which
were not amended during the reporting
period, is available on the Company’s website
at investors.computacenter.com. The
Company’s Articles of Association may only
be amended by a special resolution at a
general meeting of the shareholders. The
Company intends to present amended
Articles of Association for approval by special
resolution at the Annual General Meeting to
be held on 16 May 2019.
Members have previously approved a
resolution to give the Directors authority to
allot shares, and a renewal of this authority
is proposed at the 2019 AGM. This authority
allows the Directors to allot shares up to the
maximum amount stated in the Notice of AGM
(approximately one-third of the issued share
capital). In addition, the Company may not
allot shares for cash (unless pursuant to an
employee share scheme) without first
making an offer to existing shareholders in
proportion to their existing holdings. This is
known as rights of pre-emption. Two
resolutions allowing a limited waiver of these
rights were passed by the members at the
2018 AGM. Additionally, at the 2018 AGM,
members also approved a resolution giving
delegated authority allowing the Company to
make market purchases of its own shares,
up to a maximum of 10 per cent of the
Company’s issued share capital, subject to
certain conditions including price of
purchase, amongst others. Each of these
standard authorities will expire on 30 June
2019, or at the conclusion of the Company’s
2019 AGM, whichever is the earlier. The
Directors will seek to renew each of the
authorities at the 2019 AGM, and full details
are provided in the Notice of AGM. As at
28 February 2019, none of these authorities
approved by shareholders at the 2018 AGM
had been exercised.
Directors’ indemnities
The Company has executed deeds of
indemnity with each of the Directors. These
deeds contain qualifying third-party
indemnity provisions, indemnifying the
Directors to the extent permitted by law,
and remain in force at the date of this report.
The indemnities are uncapped and cover all
costs, charges, losses and liabilities the
Directors may incur to third parties, in the
course of acting as Directors of the Company
or its subsidiaries.
Directors’ conflicts of interest
The Board has put in place a process
whereby the Directors are required to notify
the Company Secretary of any situations
(appointments, holdings or otherwise), or
any changes to such, which may give rise to
an actual or potential conflict of interest with
the Company. These notifications are then
reviewed by the Board and recorded in a
register maintained by the Company
Secretary. If appropriate, they are then
considered further by the Directors who are
not conflicted in the matter, to (if deemed
appropriate) authorise the situation. The
register of notifications and authorisations
is reviewed by the Board twice a year. Where
the Board has approved an actual or
potential conflict, it has imposed the
condition that the conflicted Director
abstains from participating in any discussion
or decision affected by the conflicted matter.
Directors’ interests in shares
The interests of the Directors in the share capital of the Company, at the start and end of the reporting period, were as follows:
Executive Directors
Mike Norris
Tony Conophy
Non-Executive Directors
Greg Lock
Philip Hulme
Peter Ogden
Minnow Powell
Ros Rivaz
Peter Ryan
Regine Stachelhaus
Philip Yea*
* Note Philip Yea stepped down from the Board on 24 April 2018 and had 8,000 ordinary shares at this time.
As at 31 December 2018
As at 1 January 2018
or date of appointment
Number of
ordinary shares
Beneficial
Number of
ordinary shares
Non-beneficial
Number of
ordinary shares
Beneficial
Number of
ordinary shares
Non-beneficial
1,132,819
1,851,961
700,000
9,621,695
18,699,389
1,340
1,382
900
–
–
–
–
1,208,088
1,871,668
–
–
100,000
9,757,381
8,103,356
–
–
–
–
–
600,000
10,567,582
20,119,473
1,340
1,382
–
–
8,000
120,000
10,377,815
8,718,748
–
–
–
–
–
Major interests in shares
In accordance with Disclosure and Transparency Rule 5, between 1 January 2018 and 31 December 2018 the Company was notified by the
following shareholders of updates to the disclosable interests that they held in the voting rights of its issued share capital:
Name of major shareholder
JPMorgan Asset Management (UK) Limited*
Artemis Investment Management LLP
* Subsequent to this initial notification, the Company was notified that JPMorgan Asset Management (UK) Limited had reduced its holding below the minimum threshold of three per cent.
Percentage of total
voting rights held
5.04
4.99
No further interests have been disclosed to the Company between 31 December 2018 and 28 February 2019.
An updated list of the Company’s major shareholders is available at investors.computacenter.com.
103
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Report
continued
Capital structure and rights attaching
to shares
As at 28 February 2019, there were
122,687,970 fully paid ordinary shares in
issue, of which the Company held 8,546,861
ordinary shares in treasury. The total number
of voting rights in the Company which may be
used by shareholders as the denominator for
the calculations by which they can determine
if they are required to notify their interest in,
or a change to their interest in the Company,
under the Disclosure and Transparency
Rules, is 114,141,109. The percentage of voting
rights attributable to those shares it holds
in treasury following the share buy-back
completed in February 2018 is 6.97 per cent.
There are no specific restrictions on the
transfer of securities in the Company, which
is governed by its Articles of Association and
prevailing legislation.
The holders of ordinary shares are entitled,
subject to applicable law and the Company’s
Articles of Association, to:
• have shareholder documents made
•
available to them, including notice of any
general meetings of the Company; and
to attend, speak and exercise voting
rights at general meetings of the
Company, either in person or by proxy.
The Company is not aware of any
arrangements between shareholders which
may result in restrictions on the transfer of
securities or other voting rights.
As at 1 January 2018, there were 292,944,196
deferred shares in issue which carried no
voting rights. Of these, 228,443,966 deferred
shares, being all of the outstanding deferred
shares held by deferred shareholders in
connection with the return of value in 2013
and the return of value in 2015, were
transferred to the Company for nil
consideration and cancelled on 13 December
2018. The Company also cancelled
64,500,230 deferred shares that were held in
treasury by the Company on 13 December
2018. As at 28 February 2019, there were no
deferred shares in issue.
The rights attaching to each of the
Company’s ordinary shares and deferred
shares are set out in its Articles of
Association.
104
The Company does not have any agreements
with any Director or employee that would
provide compensation for loss of office or
employment resulting from a change of
control on takeover, except that provisions
of the Company’s share schemes and plans
may cause options and awards granted to
employees under share schemes and plans
to vest on a takeover.
Financial instruments
The Group’s financial risk management
objectives and policies are discussed in the
Group Finance Director’s review on pages
63 to 64.
Employee share schemes
The Company operates executive share
option schemes and a performance-related
option scheme for the benefit of employees.
During the year, no options were granted
under the executive share option schemes.
At the year end, the options remaining
outstanding under these schemes were in
respect of a total of nil ordinary shares of
75 ⁄9 pence each (2017: nil shares).
The Company also operates a Performance
Share Plan (PSP) to incentivise employees.
During the year, 501,643 ordinary shares of
75 ⁄9 pence each were conditionally awarded
(2017: 783,750 shares). At the year end, awards
over 1,810,126 shares remained outstanding
under this scheme (2017: 1,993,785 shares).
During the year, awards over 469,256 shares
were transferred to participants and awards
over 216,046 shares lapsed. In addition, the
Company operates a Sharesave scheme for
the benefit of employees. As at the year end,
4,209,927 options granted under the
Sharesave scheme remained outstanding
(2017: 4,307,465).
On 21 March 2018, in accordance with the
rules of the Computacenter 2017 Deferred
Bonus Plan, the Company granted 38,681
conditional awards over ordinary shares of
75 ⁄9 pence each.
Pursuant to the Company’s share schemes,
there are two employee benefit trusts which,
as at the year end, held a total of 1,747,426
ordinary shares of 75 ⁄9 pence each,
representing approximately 1.42 per cent of
the issued share capital and 1.53 per cent of
the voting rights. During the year, the trusts
purchased a total of 1,158,060 shares in
order to ensure that the maturities occurring
pursuant to these share schemes could be
satisfied. When shares are held by these
trusts before being transferred to employee
participants then, in line with good practice,
the Trustees do not exercise the voting rights
attaching to such shares. The Trustees also
have a dividend waiver in place in respect of
shares which are the beneficial property of
each of the trusts. During the 2018 financial
year, no ordinary shares in the Company
were issued for cash to satisfy the exercise
of options exercised under the Company’s
share schemes.
If another entity or individual takes control of
the Company, the employee share schemes
operated by the Company have change of
control provisions that would be triggered.
Participants may, in certain circumstances,
be allowed to exchange their existing options
for options of an equivalent value over
shares in the acquiring company.
Alternatively, the options may vest early.
Early vesting under the executive schemes
will generally be on a time-apportioned basis
and under the Sharesave scheme, employees
will only be able to exercise their options to
the extent that their accumulated savings
allow at that time. During the period, no
ordinary shares were purchased for
cancellation. Further detail on the results of
the Tender Offer completed in February 2018
can be found in the Group Finance Director’s
review on page 64.
Significant agreements and relationships
Details regarding the status of the Group’s
various borrowing facilities are provided in
the Group Finance Director’s review on pages
60 to 64. These agreements each include a
change of control provision, which may
result in the facility being withdrawn or
amended upon a change of control of the
Company. It is also not extraordinary within
our business sector for our longer-term
Services contracts to contain change of
control clauses that allow a counterparty to
terminate the relevant contract in the event
of a change of control of the Company.
The Group operates a Save As You Earn (SAYE)
share scheme, which is open to eligible
employees, where employees are
encouraged to save a fixed monthly sum for
a period of either three and/or five years.
Upon maturity of the scheme, participants
can purchase shares in the Company at a
price set at the start of the savings period.
Business ethics
A Group Ethics policy is in place, which
commits employees to the highest standards
of ethical behaviour in respect of customers,
suppliers, colleagues and other stakeholders
in the business. The policy includes a
requirement for all employees to report
abuses or non-conformance with the policy
and sets out the procedures to be followed.
Going concern
The Directors’ statement regarding adoption
of the going concern basis of accounting in
preparation of the annual Consolidated
Financial Statements is set out within the
Strategic Report on page 65.
Long-term Viability Statement
The Directors’ statement regarding the
long-term viability of the Company is set out
within the Strategic Report on page 66.
Corporate sustainable development and
political donations
The Board recognises that acting in a socially
responsible way benefits the community, our
customers, shareholders, the environment
and employees alike. Further information
can be found in the report on pages 36 to 39
and covers matters regarding health and
safety, equal opportunities, employee
involvement and employee development.
During the year, the Group did not make any
political donations to any political party or
organisation and it did not incur any political
expenditure within the meaning of Sections
362 to 379 of the Companies Act 2006.
Equal opportunities
The Group acknowledges the importance
of equality and diversity and is committed
to equal opportunities throughout the
workplace. The Group’s policies for
recruitment, training, career development
and promotion of employees, are based
purely on the suitability of the employee
and give those who may be disabled equal
treatment to their able bodied colleagues.
Where an employee becomes disabled
subsequent to joining the Group, all efforts
are made to enable that employee to
continue in their current job. However, if,
due to the specific circumstances, it is not
possible for an employee to continue in their
current job, they will be given suitable
training for alternative employment within
the Group or elsewhere.
The Group monitors and regularly reviews its
policies and practices to ensure that it meets
current legislative requirements, as well as
its own internal standards. The Group is
committed to making full use of the talents
and resources of all its employees and to
provide a healthy environment that
encourages productive and mutually
respectful working relationships within the
organisation. Policies dealing with equal
opportunities are in place in all parts of the
Group, which take account of the Group’s
overall commitment and also address local
regulatory requirements.
Employee involvement and development
The Group is committed to involving all
employees in significant business issues,
especially matters which affect their work
and working environment. A variety of
methods are used to engage with employees,
including team briefings, intranet, email and
in-house publications. The Group uses one or
more of these channels to brief employees
on the Group’s performance and the financial
and economic factors affecting the Group’s
performance. The primary method used to
engage and consult with employees is
through team briefings, where managers
are tasked with ensuring that information
sharing, discussion and feedback happen
on a regular basis.
Employee consultative forums exist in each
Group country, to consult staff on major
issues affecting employment and matters of
policy, and to enable Management to seek the
views and opinions of employees on a wide
range of business matters. Should there be
cross-jurisdictional issues to discuss, a
facility exists to engage a European forum
made up of representatives from each
country forum. The Senior Independent
Director attends at least one meeting per
year of this European forum to directly
engage with employee representatives and
subsequently report a summary of this
engagement back to the Board.
The Group regularly reviews the performance
of its employees through a formal review
process, to identify areas for development.
Managers are responsible for setting and
reviewing personal objectives, aligned to
corporate and functional goals. The Board
closely oversees and monitors Management
skills and the development of talent to meet
the current and future needs of the Group.
The Board directly monitors and closely
reviews succession and plans for developing
identified key senior managers.
The development of employee skills and
careers, as well as the communication of the
Group’s goals, are driven by our Winning
Together processes and tools. Annual
assessments via our Winning Together
processes and tools are a formal
requirement of all managers.
105
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Report
continued
Greenhouse gas emissions
The Company is required to state the annual quantity of emissions in tonnes of carbon dioxide equivalent from Group activities.
Details of this can be found below. Further details of our environmental policies and programmes can be found on our corporate website
investors.computacenter.com.
Computacenter plc mandatory greenhouse gas
emissions reporting
Global GHG emissions data for period:
1 January to 31 December 2018.
Emissions = metric tonnes of CO2e
Year
Scope 1
Scope 2
Total
2018
3,072
16,669
19,741
2017
3,352
19,310
22,662
Scope 1 = Combustion of fuel and
refrigerants usage
Scope 2 = Electricity, heat, steam and cooling
purchased for own use
Group’s chosen intensity measurements:
Emissions as reported above are 4.53 metric
tonnes per £m value of Group revenue: (2017:
6.20, a reduction of 13.5 per cent).
Emissions as reported above 1.30 metric
tonnes per Group employee (2017: 1.54,
a reduction of 11.8 per cent).
Methodology
We have used the main requirements of the
GHG Protocol Corporate Accounting and
Reporting Standard (revised edition).
Emission factors used are from the UK
Government’s Conversion Factors supplied
by Defra.
Based on external consultants Excel
spreadsheets were further developed
internally to include the full requirements
to collate the additional emissions such as
refrigerants.
This activity has been conducted as part of
our UK Environment Management System
which transitioned from the ISO 14001:2004
to ISO 14001:2015 standard (EMS 71255)
during 2018.
Group properties included in this report are all
current locations in the UK, Germany, France,
Belgium, Spain, South Africa, USA, Switzerland,
Malaysia, China, Mexico and Hungary.
We have reported on all of the emission
sources required under the Companies Act
2006 (Strategic Report and Directors’ Reports)
Regulations 2013.
Six
Recent UK-based emission reduction projects
Continued investments in new technology helping
reduce emissions in Data Centers. The electricity
used in the Data Centers is circa 53 per cent of the
total for the UK. These Data Centers host customer’s
Information Technology in the form of servers thus
reducing their carbon footprint however, this
increases the emissions for Computacenter as we
become the landlord.
Computacenter Data Centers continually adopt best
practices in this field and are signed up to the
European Code of Conduct for Data Centers. Our 2018
projects delivered a 10 per cent kWh reduction in Data
Centre energy consumption. We have more exciting
projects planned for 2019. The UK warehouse,
Nottingham office refurbishment and relocation of
the Milton Keynes office continued to have more
lighting replaced with energy efficient LED devices.
Environmental awareness training has been rolled
out to UK employees with the aim of making everyone
aware of energy waste and the potential savings that
could be made in the future.
Five
Five
Four
Limitations to data collection
Less than 5 per cent of emissions were
estimated or based on an average energy
usage per square foot of space occupied.
Two
The UK continues to fully comply with this scheme registered as a participant.
One
Three
Three
Four
Two
One
Via the compliance company Paperpak, the UK are registered as a distributor of product ensuring full
compliance since 2000.
The EMS of the UK has been registered to this standard since 2003.
Computacenter complied with this new law by submitting our energy report which covers the period
5 December 2015 to 4 December 2019. Computacenter will be submitting its ESOS report for phase 2
during 2019.
Workplace
Energy Efficiency Scheme (CRC)
(CRC8804716)
Packaging Waste Regulation
ISO 14001:2004
(EMS 71255)
Energy Savings Opportunity Scheme (ESOS)
Emissions = 22,662 metric tonnes of CO2e
65
4
1
3
106
Revenue by business type
1
Six
Five
Three
1 UK 43.57%
2 Germany 41.99%
3 South Africa 6.91%
Two
4 France 2.34%
One
5 Belgium 1.65%
6 Others:
Three
Spain 1.09%
Two
Malaysia 0.94%
Four
2
Switzerland 0.75%
One
Hungary 0.54%
USA 0.22%
2
Three
Two
One
Four
Three
Two
One
36%
12%
9%
7%
33%
Four
Three
Two
One
23%
19%
24%
6%
7%
21%
36%
12%
9%
7%
33%
Five
Four
Three
Two
One
Two
One
Datacenter and Networking
Software
Resold Services
Management Services
Two
1 Data Center 53%
2 Facilities 47%
One
Workplace
Datacenter and Networking
Software
Resold Services
Professional Services
Management Services
Workplace
Datacenter and Networking
Software
Resold Services
Management Services
Workplace
Software
Datacenter and Networking
Resold Services
Professional Services
Management Services
23%
19%
24%
6%
7%
21%
Auditor
A resolution to reappoint KPMG LLP as the auditor of the Group was approved by the Company’s shareholders at the Company’s 2018 AGM.
A resolution to reappoint KPMG LLP as the auditor of the Group will be put to shareholders at the forthcoming 2019 AGM.
Disclosure of information to auditor
In accordance with Section 418 of the Companies Act 2006, each of the persons who is a Director at the date of approval of this report confirms
that:
•
to the best of each Director’s knowledge and belief, there is no information relevant to the preparation of their report of which the Group’s
auditor is unaware; and
• each Director has taken all steps a Director might reasonably be expected to have taken, to be aware of relevant audit information and to
establish that the Group’s auditor is aware of that information.
Listing rule (LR) disclosures
For the purposes of LR 9.8.4CR, the information required to be disclosed by LR 9.8.4R is set out below along with cross references indicating where
the relevant information is otherwise set out in the Annual Report and Accounts or can be found in the following locations:
Interest capitalised
Publication of unaudited financial information
Details of performance share plans
Waiver of emoluments by a Director
Waiver of future emoluments by a Director
Non pre-emptive issues of equity for cash
Non pre-emptive issues of equity for cash in relation to major
subsidiary undertakings
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waiver of dividends
Shareholder waiver of future dividends
Agreements with controlling shareholder
MJ Norris
Chief Executive Officer
11 March 2019
FA Conophy
Group Finance Director
11 March 2019
N/A
N/A
Details of the Company’s performance share plan scheme can be found
in the Remuneration Committee Report on page 87.
N/A
N/A
N/A
N/A
Details of significant contracts are set out in the Group Finance
Director’s review on pages 61 to 64. Details of transactions with related
parties are set out on page 163 in note 33 to the Consolidated Financial
Statements.
N/A
The Trustees of the Company’s employee share schemes have a
dividend waiver in place in respect of shares which are the beneficial
property of each of the trusts.
The Trustees of the Company’s employee share schemes have a
dividend waiver in place in respect of shares which are the beneficial
property of each of the trusts.
Any person who exercises or controls on their own or together with any
person with whom they are acting in concert, 30 per cent or more of the
votes able to be cast on all or substantially all matters at general
meetings are known as ‘controlling shareholders’. The Financial Conduct
Authority’s Listing Rules now require companies with controlling
shareholders to enter into a written and legally binding agreement (a
Relationship Agreement) which is intended to ensure that the controlling
shareholder complies with certain ‘independence related’ provisions.
The Company confirms that it has undertaken a thorough process
during the reporting period to review whether it has any ‘controlling
shareholders’. Following this process, it was determined that there was
no requirement on the Company to enter into a Relationship Agreement
with any of its shareholders. The Company confirms that this remains
the case as at 31 December 2018, but will keep the matter under review.
107
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2018 Directors’ Responsibilities
Statement of Directors’ Responsibilities in
respect of the Annual Report and the
Financial Statements
The Directors are responsible for preparing
the Annual Report and the Group and Parent
Company Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to
prepare Group and Parent Company Financial
Statements for each financial year. Under
that law they are required to prepare the
Group Financial Statements in accordance
with International Financial Reporting
Standards as adopted by the European Union
(‘IFRSs as adopted by the EU’) and applicable
law and have elected to prepare the Parent
Company Financial Statements in
accordance with UK accounting standards,
including FRS 101 Reduced Disclosure
Framework.
Under company law the Directors must not
approve the Financial Statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Group
and Parent Company and of their profit or
loss for that period. In preparing each of the
Group and Parent Company Financial
Statements, the Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates that are
•
•
reasonable, relevant, reliable and
prudent;
for the Group Financial Statements,
state whether they have been prepared
in accordance with IFRSs as adopted by
the EU;
for the Parent Company Financial
Statements, state whether applicable UK
accounting standards have been
followed, subject to any material
departures disclosed and explained in the
Parent Company Financial Statements;
• assess the Group and Parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related
to going concern; and
• use the going concern basis of
accounting unless they either intend to
liquidate the Group or the Parent
Company or to cease operations or have
no realistic alternative but to do so.
108
We consider the Annual Report and Accounts,
taken as a whole, is fair, balanced and
understandable and provides the
information necessary for shareholders to
assess the Group’s position and
performance, business model and strategy.
The Annual Report from inside front cover
to page 108 was approved by the Board of
Directors and authorised for issue on
11 March 2019 and signed for on behalf of
the Board by:
Mike Norris
Chief Executive
Officer
Tony Conophy
Group Finance
Director
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Parent
Company’s transactions and disclose with
reasonable accuracy at any time the
financial position of the Parent Company and
enable them to ensure that its Financial
Statements comply with the Companies Act
2006. They are responsible for such internal
control as they determine is necessary to
enable the preparation of Financial
Statements that are free from material
misstatement, whether due to fraud or error,
and have general responsibility for taking
such steps as are reasonably open to them
to safeguard the assets of the Group and
to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the
Directors are also responsible for preparing
a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and
Corporate Governance Statement that
complies with that law and those regulations.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the UK
governing the preparation and dissemination
of Financial Statements may differ from
legislation in other jurisdictions.
Responsibility statement of the Directors in
respect of the Annual Report and Accounts
We confirm that to the best of our
knowledge:
•
•
the Financial Statements, prepared in
accordance with the applicable set of
accounting standards, give a true and fair
view of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole; and
the Strategic Report and Directors’ Report
includes a fair review of the development
and performance of the business and the
position of the issuer and the
undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.
Independent auditor’s report
to the members of
Computacenter plc
1. Our opinion is unmodified
We have audited the Financial Statements of Computacenter plc (‘the Company’) for the year ended 31 December 2018 which comprise the
Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of
Changes in Equity, Consolidated Cash Flow Statement, Company Balance Sheet and Company Statement of Changes in Equity, and the related
notes, including the accounting policies in note 2. In our opinion:
•
the Financial Statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2018 and
of the Group’s profit for the year then ended;
the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by
the European Union;
the Parent Company Financial Statements have been properly prepared in accordance with UK accounting standards, including FRS 101
Reduced Disclosure Framework; and
the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group
Financial Statements, Article 4 of the IAS Regulation.
•
•
•
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the Audit Committee.
We were first appointed as auditor by the shareholders on 19 May 2015. The period of total uninterrupted engagement is for the four financial
years ended 31 December 2018. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with,
UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that
standard were provided.
Overview
Materiality: Group Financial Statements as a whole
Coverage
Key audit matters
Recurring risks
Event driven
£5.0 million (2017: £4.5 million)
4.4 per cent (2017: 4.2 per cent) of normalised profit before tax
99 per cent (2017: 93 per cent) of Group profit before tax
vs 2017
< >
< >
< >
Professional Services and Managed Services contract accounting
Technology Sourcing revenue cut-off
Recoverability of Parent Company’s investment in subsidiaries (Parent)
New: The impact of uncertainties due to the UK exiting the European Union
on our audit
New: Valuation of FusionStorm intangible assets
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2. Key audit matters: including our assessment of risks of material misstatement
When planning our audit we made an assessment of the relative significance of the key risks of material misstatement to the Group financial
statements initially without taking account of the effectiveness of controls implemented by the Group. As part of our audit planning procedures,
we presented and discussed our initial assessment of key risks to the Audit Committee and subsequently discussed changes to our assessment.
Our final risk map is shown below. We identified five key audit matters that were expected to have the greatest effect on our audit. Throughout
our audit we continually reassess the significance of each of these key audit matters. Due to events during the audit period we added two new key
audit matters relating to:
• The impact of uncertainties due to the UK exiting the European Union on our audit; and
• Valuation of FusionStorm intangible assets
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the Financial Statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the
greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We
summarise below the key audit matters in arriving at our audit opinion above together with our key audit procedures to address those matters
and our findings from those procedures in order that the Company’s members as a body may better understand the process by which we arrived
at our audit opinion. These matters were addressed, and our findings are based on procedures undertaken, in the context of, and solely for the
purpose of, our audit of the Financial Statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion,
and we do not provide a separate opinion on these matters.
109
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018
Independent auditor’s report
to the members of Computacenter plc continued
Recoverability of Parent
Company’s investment in
subsidiaries (Parent)
Vendor management,
rebates and cost
management
Impairment
of non-current
assets*
New consolidation tool
Tax positions and
transfer pricing
Technology Sourcing
revenue recognition
Fraud risk from
Management override
of controls
Upcoming standard
disclosures (IFRS 16)
Professional Services
and Managed Services
contract accounting*
Valuation of FusionStorm
intangible assets*
Presentation of
exceptional items and
adjusted profit
Fraud risk from
revenue recognition
Deferred tax assets*
Share option
judgements and
accounting
Bad debt exposure*
New financial statement
disclosures (IFRS 9 and 15)
Segmental reporting
disclosure
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e
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t
c
a
p
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l
a
i
t
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e
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t
i
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M
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e
w
o
L
Technology Sourcing
revenue cut-off
Lower
Likelihood of occurrence
Higher
Key audit matter
Presumed fraud risk per auditing standards
Other financial statement risk
*Risks impacted by the uncertainties due to the UK exiting the European Union
The impact of uncertainties
due to the UK exiting the
European Union on our
audit
Refer to page 81 (Audit
Committee Report).
The risk
Unprecedented levels of
uncertainty:
All audits assess and challenge the
reasonableness of estimates, in
particular as described in Revenue
– Professional Services and Managed
Services contract accounting and
the valuation of FusionStorm
intangible assets below, and related
disclosures and the appropriateness
of the going concern basis of
preparation of the Financial
Statements. All of these depend on
assessments of the future economic
environment and the Group’s future
prospects and performance.
In addition, we are required to
consider the other information
presented in the Annual Report
including the principal risks
disclosure and the viability
statement and to consider the
Directors’ statement that the Annual
Report and Financial Statements
taken as a whole is fair, balanced and
understandable and provides the
information necessary for
shareholders to assess the Group’s
position and performance, business
model and strategy.
Brexit is one of the most significant
economic events for the UK and at
the date of this report its effects are
subject to unprecedented levels of
uncertainty of outcomes, with the
full range of possible effects
unknown.
110
Our response
Our procedures included:
We developed a standardised firm-wide approach to the consideration
of the uncertainties arising from Brexit in planning and performing our
audits. Our procedures included:
• Our Brexit knowledge: We considered the Directors’ assessment of
Brexit-related sources of risk for the Group’s business and financial
resources compared with our own understanding of the risks. We
considered the Directors’ plans to take action to mitigate the risks.
• Sensitivity analysis: When addressing revenue – Professional
Services and Managed Services contract accounting and the
valuation of FusionStorm intangible assets and other areas that
depend on forecasts, we compared the Directors’ analysis to our
assessment of the full range of reasonably possible scenarios
resulting from Brexit uncertainty and, where forecast cash flows are
required to be discounted, considered adjustments to discount rates
for the level of remaining uncertainty.
• Assessing transparency: As well as assessing individual disclosures
as part of our procedures on Revenue – Professional Services and
Managed Services contract accounting and the valuation of
FusionStorm intangible assets we considered all of the Brexit related
disclosures together, including those in the Strategic Report,
comparing the overall picture against our understanding of the risks.
Our findings
• As reported under Revenue – Professional Services and Managed
Services contract accounting and the valuation of FusionStorm
intangible assets, we found the resulting estimates to be mildly
cautious for Professional Services and Managed Services contract
accounting, and balanced for valuation of FusionStorm intangible
assets. We also found the related disclosures of Revenue –
Professional Services and Managed Services contract accounting and
the valuation of FusionStorm intangible assets, and disclosures in
relation to going concern to be proportionate. However, no audit
should be expected to predict the unknowable factors or all possible
future implications for a company and this is particularly the case
in relation to Brexit.
Professional Services and
Managed Services contract
accounting
(Revenue – £1,175.0 million;
2017: £1,157.2 million)
(Onerous contract
provisions – £16.4 million;
2017: £8.2 million)
Refer to page 79 (Audit
Committee Report), pages
124 to 125 (accounting
policy) and pages 131 and
153 (financial disclosures).
Revenue – Technology
Sourcing revenue cut-off
(£3,177.6 million; 2017:
£2,636.2 million)
Refer to page 79 (Audit
Committee Report), page
124 (accounting policy).
The risk
Subjective estimate:
The contractual arrangements that
underpin the measurement and
recognition of revenue by the Group
can be complex, with significant
estimation of future financial
performance in fulfilment of the
contract required. Key sources of
estimation uncertainty include:
• assessment of stage of
completion by reference to
estimated costs to complete a
contract. These significant
estimates include total contract
costs taking into consideration
contract risks, technical risks,
and other delivery assumptions;
and
• where an onerous contract
provision is required, estimation
is required in assessing the level
of provision, including estimated
costs to complete and total
contract revenue, taking into
account performance and
delivery risks to the end of the
contract, contractual obligations,
extension periods and customer
negotiations.
The effect of these matters is that,
as part of our risk assessment, we
determined that the revenue
recognition and the value of the
onerous contract provisions has a
high degree of estimation
uncertainty, with a potential range of
reasonable outcomes greater than
our materiality for the Financial
Statements as a whole. The Financial
Statements (note 3) disclose the
sensitivity estimated by the Group.
2018/2019 sales:
Technology Sourcing revenue
includes revenues from numerous
product groups each sold with
varying contractual terms and
conditions that in turn impact the
point in time at which all delivery
obligations, and therefore the
transfer of control has been fulfilled,
and hence revenue is recognised.
Whilst there is little judgement
required in identifying the
appropriate accounting policy, the
volume of orders close to year end
gives rise to some risk that revenue
is recognised too early or late.
Our response
Contracts were selected for substantive audit procedures based on
qualitative factors, such as commercial complexity, and quantitative
factors, such as financial significance and profitability that we
considered to be indicative of risk. Our audit testing for the contracts
selected included the following:
• Our sector expertise: Assessing whether the revenue recognition
methodology applied was consistent with accounting standards.
• Our sector expertise: Inspecting and challenging accounting papers
prepared by the Group to understand the support provided in respect
of key contract estimates and onerous contract provisions.
• Tests of detail: Inspecting the detailed contractual terms to identify
the service obligations and inspecting customer sign-off on
acceptance of the sample of deliverables to determine the
appropriateness of revenue recognition.
• Tests of detail: Consider the existence of contradictory evidence for
future forecast costs including the risks and estimates within these
forecasts by obtaining evidence through discussions with key
management personnel, relevant correspondence with customers
and delivery performance to date.
• Tests of detail: Inspecting relevant correspondence with customers
and third parties, in instances where contractual variations and
claims have arisen on selected contracts, to inform our assessment
of the revenue and costs recorded up to the balance sheet date on
those contracts.
• Historical comparisons: Comparing the previous contract forecasts
to historical and in year performance to assess the historical
accuracy of the forecasts for a sample of completed projects in the
year and specifically for those contracts where an onerous contract
provision is recorded.
• Assessing transparency: Assessing the adequacy of the Group’s
disclosure about estimation uncertainty regarding Managed and
Professional Services revenue and onerous contract provisions.
Our findings
• We found the resulting estimates of revenue to be mildly cautious
(2017 finding: mildly cautious). In addition, we found the estimates
in relation to onerous contract provisions to be mildly cautious
(2017 finding: mildly cautious). We found the Group’s disclosures to
be proportionate in their description of the estimation uncertainty
regarding Managed and Professional Services revenue and onerous
contract provisions.
Our procedures included:
• Control operation: Testing automated controls that are designed
to ensure that Technology Sourcing revenue transactions are
recognised in accordance with the Group’s accounting policies.
• Tests of details: Inspecting proof of delivery or signed buy and store
agreements for a sample of orders selected close to year end in order
to assess whether the policy had been correctly applied to recognise
revenue in the appropriate period. This sample is selected on the
basis of a statistical sample methodology combined with items over
a determined threshold.
• Tests of details: Inspecting sales invoices and proof of delivery for a
sample of credit notes raised subsequent to the year end in order to
assess whether Technology Sourcing revenue related to a valid sale
and was recognised in the correct period, and whether there were
any systemic issues around revenue cut-off.
Our findings
• Our testing over Technology Sourcing revenue cut-off found
uncorrected errors, for which we have reported an audit difference,
which was not considered to be material to the accounts (2017: no
errors found).
111
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Independent auditor’s report
to the members of Computacenter plc continued
Valuation of FusionStorm
intangible assets
(£66.2 million; 2017: £nil)
Refer to page 79 (Audit
Committee Report), page
127 (accounting policy) and
pages 143 and 157 (financial
disclosures).
Recoverability of Parent
Company’s investment in
subsidiaries
(£319.5 million; 2017: £206.8
million)
Refer to page 80 (Audit
Committee Report), page
166 (accounting policy)
and page 168 (financial
disclosures).
Forecast-based valuation
On 1 October 2018 Computacenter
plc acquired the entire Share Capital
of FusionStorm for consideration of
$90 million.
We identified the valuation of
FusionStorm intangibles as a risk
because of the inherent complexity
due to the judgements and
assumptions applied by
management in assessing the fair
value of the identified intangibles,
and because of the size of the
acquisition.
The effect of these matters is that,
as part of our risk assessment, we
determined that the valuation of
intangible assets has a high degree
of estimation uncertainty, with a
potential range of reasonable
outcomes greater than our
materiality for the Financial
Statements as a whole.
Low risk, high value:
The carrying amount of the Parent
Company’s investments in
subsidiaries represents 74 per cent
(2017: 47 per cent) of the Company’s
total assets. Their recoverability is
not at a high risk of significant
misstatement or subject to
significant judgement. However, due
to their materiality in the context of
the Parent Company Financial
Statements, this is considered to be
the area that had the greatest effect
on our overall Parent Company audit.
Our procedures included:
• Our valuation expertise: Use of our own valuation specialists to
assess the appropriateness of the valuation methodology applied.
• Benchmarking assumptions: Comparing the Group’s assumptions to
externally derived data in relation to key inputs such as revenue
growth rates, customer attrition rate and discount rates.
• Historical comparisons: Challenging the reasonableness of the
assumptions, particularly revenue growth rates and customer
attrition rates by assessing the historical accuracy of FusionStorm’s
ability to forecast accurately and comparing to previous
performance.
• Assessing transparency: Assess whether the Group’s disclosures
relating to the valuation of acquired intangibles are appropriately
comprehensive.
Our findings
• We found the resulting valuation of FusionStorm intangible assets to
be balanced. We found the Group’s disclosures to be proportionate in
their description of the forecast uncertainty regarding valuation of
FusionStorm intangible assets.
Our procedures included:
• Tests of detail: Comparing the carrying amount of material
investments with the relevant subsidiaries’ draft balance sheets to
identify whether their net assets, being an approximation of their
minimum recoverable amount, were in excess of their carrying
amount and assessing whether those subsidiaries have historically
been profit-making.
• Assessing subsidiary audits: Assessing the work performed by the
subsidiary audit teams of those subsidiaries where audits are
performed and considering the results of that work on those
subsidiaries’ profits and net assets.
• Our sector experience: For the investments where the carrying
amount exceeded the net asset value, comparing the carrying
amount of the investment with the expected value of the business
based upon a discounted cash flow model.
Our findings
• We found the Group’s assessment of the recoverability of the
investment in subsidiaries to be balanced (2017: balanced).
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Group Financial Statements as a whole was set at £5.0 million (2017: £4.5 million), determined with reference to a benchmark of
Group profit before tax of £113.8 million (2017: £106.0 million), normalised to exclude this year’s exceptional items as disclosed in note 6, of which it
represents 4.4 per cent (2017: 4.2 per cent). In addition, we applied materiality of £0.1 million (2017: £0.1 million) to related party transactions for
which we believe misstatements of lesser amounts than materiality for the Financial Statements as a whole could be reasonably expected to
influence the Company’s assessment of the financial performance of the Group.
Materiality for the Parent Company Financial Statements as a whole was set at £4.5 million (2017: £4.0 million), determined with reference to a
benchmark of Company total assets, of which it represents 1.0 per cent (2017: 0.9 per cent).
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.5 million (2017: £0.5 million) in
respect of misstatements which relate solely to reclassifications within the balance sheet, and £0.25 million (2017: £0.10 million) in respect of all
other misstatements, in addition to other identified misstatements that warranted reporting on qualitative grounds.
The Group operates a Shared Service Centre (SSC) in Budapest, Hungary, the outputs of which are included in the financial information of the three
reporting components subject to full scope audit and therefore it is not a separate reporting component. Audit procedures were performed at the
SSC which focus on the testing of trade receivables and trade payables transaction processing.
112
Of the Group’s 17 (2017: 16) reporting components, we subjected four (2017: four) to full scope audits for Group purposes and one (2017: none)
to specified risk-focused audit procedures. The latter was not individually financially significant enough to require a full scope audit for Group
purposes, but did present specific individual risks that needed to be addressed. The components within the scope of our work accounted for
the percentages illustrated opposite. For the residual components, we performed analysis at an aggregated Group level to re-examine our
assessment that there were no significant risks of material misstatement within these. The remaining 3 per cent of total Group revenue, 1 per
cent of Group profit before tax and 3 per cent of total Group assets is represented by 12 reporting components, none of which individually
represented more than 1 per cent of any of total Group revenue, Group profit before tax or total Group assets.
The Group team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above and the
information to be reported back. The Group team approved the component’s materialities, which ranged from £2.0 million to £4.5 million (2017:
£2.0 million to £4.0 million), having regard to the mix of size and risk profile of the Group across the components. The work on three of the five
components (2017: two of the four components) was performed by component auditors and the rest, including the audit of the Parent Company,
was performed by the Group team. For those items excluded from normalised Group profit before tax, the component teams performed
procedures on items relating to their components. The Group team performed procedures on the remaining excluded items.
The Group team visited the three (2017: two) overseas component locations in France, Germany and the US, in addition to the Shared Service
Centre in Hungary (2017: France, Germany and Shared Service Centre in Hungary) to assess the audit risk and strategy. At these visits and
meetings, the findings reported to the Group team were discussed in more detail, and any further work required by the Group team was then
performed by the component auditor.
Group profit before tax, normalised to exclude
exceptional items
£113.8 million (2017: £106.0 million)
Group materiality
£5.0 million (2017: £4.5 million)
£5.0 million (2017: £4.5 million)
Whole financial statements materiality
£4.5 million (2017: £2.0 million to £4.0 million)
Range of materiality at five components
(£2.0 million to £4.5 million)
Group revenue
6
91
97
97%
(2017: 97%)
Group profit before tax, normalised
to exclude exceptional items
Group materiality
£0.25 million (2017: £0.10 million)
Misstatements reported to the Audit Committee
Group profit before tax
Group total assets
Group profit before exceptional items and tax
4
95
93
99%
(2017: 93%)
85
97
10
95%
(2017: 97%)
1
93
91
94%
(2017: 91%)
Full scope for Group audit purposes 2018
Specified risk-focused audit procedures 2018
Full scope for Group audit purposes 2017
Residual components
113
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Independent auditor’s report
to the members of Computacenter plc continued
4. We have nothing to report on going
concern
The Directors have prepared the Financial
Statements on the going concern basis as
they do not intend to liquidate the Company
or the Group or to cease their operations, and
as they have concluded that the Company’s
and the Group’s financial position means that
this is realistic. They have also concluded that
there are no material uncertainties that
could have cast significant doubt over their
ability to continue as a going concern for
at least a year from the date of approval of
the Financial Statements (‘the going
concern period’).
Our responsibility is to conclude on the
appropriateness of the Directors’
conclusions and, had there been a material
uncertainty related to going concern, to
make reference to that in this audit report.
However, as we cannot predict all future
events or conditions and as subsequent
events may result in outcomes that are
inconsistent with judgements that were
reasonable at the time they were made,
the absence of reference to a material
uncertainty in this auditor’s report is not
a guarantee that the Group and the
Company will continue in operation.
In our evaluation of the Directors’
conclusions, we considered the inherent
risks to the Company’s business model and
analysed how those risks might affect the
Company’s financial resources or ability to
continue operations over the going concern
period. The risks that we considered most
likely to adversely affect the Company’s
available financial resources over this
period were:
• A contraction in technology sourcing
and service margins
• The impact of a significant business
continuity issues affecting a number
of the Company’s key customers
As these were risks that could potentially
cast significant doubt on the Company’s
ability to continue as a going concern, we
considered sensitivities over the level of
available financial resources indicated by
the Company’s financial forecasts taking
account of reasonably possible (but not
unrealistic) adverse effects that could arise
from these risks individually and collectively
and evaluated the achievability of the
actions the Directors consider they would
take to improve the position should the risks
materialise. We also considered less
predictable but realistic second order
impacts, such as Brexit.
114
Based on this work, we are required to report
to you if:
• we have anything material to add or draw
attention to in relation to the Directors’
statement on page 95 of this Annual
Report on the use of the going concern
basis of accounting with no material
uncertainties that may cast significant
doubt over the Group and Company’s use
of that basis for a period of at least twelve
months from the date of approval of the
Financial Statements; or
the related statement under the Listing
Rules set out on page 107 is materially
inconsistent with our audit knowledge.
•
We have nothing to report in these respects,
and we did not identify going concern as a
key audit matter.
5. We have nothing to report on the other
information in the Annual Report
The Directors are responsible for the other
information presented in the Annual Report
together with the Financial Statements. Our
opinion on the Financial Statements does not
cover the other information and, accordingly,
we do not express an audit opinion or, except
as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider
whether, based on our Financial Statements
audit work, the information therein is
materially misstated or inconsistent with the
Financial Statements or our audit knowledge.
Based solely on that work we have not
identified material misstatements in the
other information.
Strategic Report and Directors’ Report
Based solely on our work on the other
information:
• we have not identified material
•
•
misstatements in the Strategic Report
and the Directors’ Report;
in our opinion the information given in
those reports for the financial year is
consistent with the Financial Statements;
and
in our opinion those reports have been
prepared in accordance with the
Companies Act 2006.
Directors’ Remuneration Report
In our opinion the part of the Directors’
Remuneration Report to be audited has been
properly prepared in accordance with the
Companies Act 2006.
Disclosures of principal risks and longer-
term viability
Based on the knowledge we acquired during
our financial statements audit, we have
nothing material to add or draw attention to
in relation to:
•
•
•
the Directors’ confirmation within the
Viability Statement on page 105 that they
have carried out a robust assessment of
the principal risks facing the Group,
including those that would threaten its
business model, future performance,
solvency and liquidity;
the Principal Risks disclosures describing
these risks and explaining how they are
being managed and mitigated; and
the Directors’ explanation in the viability
statement of how they have assessed the
prospects of the Group, over what period
they have done so and why they
considered that period to be appropriate,
and their statement as to whether they
have a reasonable expectation that the
Group will be able to continue in operation
and meet its liabilities as they fall due
over the period of their assessment,
including any related disclosures drawing
attention to any necessary qualifications
or assumptions.
Under the Listing Rules we are required to
review the viability statement. We have
nothing to report in this respect.
Our work is limited to assessing these
matters in the context of only the knowledge
acquired during our Financial Statements
audit. As we cannot predict all future events
or conditions and as subsequent events may
result in outcomes that are inconsistent with
judgements that were reasonable at the time
they were made, the absence of anything to
report on these statements is not a
guarantee as to the Group’s and Company’s
longer-term viability.
Corporate governance disclosures
We are required to report to you if:
• we have identified material
inconsistencies between the knowledge
we acquired during our Financial
Statements audit and the Directors’
statement that they consider that the
Annual Report and Financial Statements
taken as a whole is fair, balanced and
understandable and provides the
information necessary for shareholders
to assess the Group’s position and
performance, business model and
strategy; or
the section of the Annual Report
describing the work of the Audit
Committee does not appropriately
address matters communicated by us to
the Audit Committee.
•
We are required to report to you if the
Corporate Governance Statement does not
properly disclose a departure from the
eleven provisions of the UK Corporate
Governance Code specified by the Listing
Rules for our review.
fraud, other irregularities or error and are
considered material if, individually or in
aggregate, they could reasonably be
expected to influence the economic
decisions of users taken on the basis of the
financial statements.
We have nothing to report in these respects.
6. We have nothing to report on the other
matters on which we are required to report
by exception
Under the Companies Act 2006, we are
required to report to you if, in our opinion:
• adequate accounting records have not
been kept by the Parent Company, or
returns adequate for our audit have not
been received from branches not visited
by us; or
the Parent Company financial statements
and the part of the Directors’
Remuneration Report to be audited are
not in agreement with the accounting
records and returns; or
•
• certain disclosures of Directors’
remuneration specified by law are not
made; or
• we have not received all the information
and explanations we require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set
out on page 108, the Directors are
responsible for: the preparation of the
Financial Statements including being
satisfied that they give a true and fair view;
such internal control as they determine is
necessary to enable the preparation of
Financial Statements that are free from
material misstatement, whether due to
fraud or error; assessing the Group and
Parent Company’s ability to continue as a
going concern, disclosing, as applicable,
matters related to going concern; and using
the going concern basis of accounting unless
they either intend to liquidate the Group or
the Parent Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable
assurance about whether the Financial
Statements as a whole are free from
material misstatement, whether due to
fraud or other irregularities (see below), or
error, and to issue our opinion in an auditor’s
report. Reasonable assurance is a high level
of assurance, but does not guarantee that an
audit conducted in accordance with ISAs (UK)
will always detect a material misstatement
when it exists. Misstatements can arise from
A fuller description of our responsibilities
is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations
that could reasonably be expected to have a
material effect on the Financial Statements
from our general commercial and sector
experience, through discussion with the
Directors and other management (as
required by auditing standards), and from
inspection of the Group’s regulatory and
legal correspondence and discussed with
the Directors and other management the
policies and procedures regarding
compliance with laws and regulations.
We communicated identified laws and
regulations throughout our team and
remained alert to any indications of
non-compliance throughout the audit. This
included communication from the Group to
component audit teams of relevant laws and
regulations identified at Group level.
The potential effect of these laws and
regulations on the Financial Statements
varies considerably.
Firstly, the Group is subject to laws and
regulations that directly affect the Financial
Statements including financial reporting
legislation (including related companies
legislation), distributable profits legislation,
and taxation legislation and we assessed the
extent of compliance with these laws and
regulations as part of our procedures on the
related Financial Statement items.
Secondly, the Group is subject to many other
laws and regulations where the
consequences of non-compliance could have
a material effect on amounts or disclosures
in the Financial Statements, for instance
through the imposition of fines or litigation
or the loss of the Group’s licence to operate.
We identified the following areas as those
most likely to have such an effect: health and
safety, anti-bribery, employment law, and
certain aspects of company legislation
recognising the nature of the Group’s
activities. Auditing standards limit the
required audit procedures to identify
non-compliance with these laws and
regulations to enquiry of the Directors and
other management and inspection of
regulatory and legal correspondence, if any.
These limited procedures did not identify
actual or suspected non-compliance
Owing to the inherent limitations of an audit,
there is an unavoidable risk that we may not
have detected some material
misstatements in the Financial Statements,
even though we have properly planned and
performed our audit in accordance with
auditing standards. For example, the further
removed non-compliance with laws and
regulations (irregularities) is from the events
and transactions reflected in the Financial
Statements, the less likely the inherently
limited procedures required by auditing
standards would identify it. In addition, as
with any audit, there remained a higher risk
of non-detection of irregularities, as these
may involve collusion, forgery, intentional
omissions, misrepresentations, or the
override of internal controls. We are not
responsible for preventing non-compliance
and cannot be expected to detect non-
compliance with all laws and regulations.
8. The purpose of our audit work and to
whom we owe our responsibilities
This report is made solely to the Company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006 and the terms of our engagement by
the Company. Our audit work has been
undertaken so that we might state to the
Company’s members those matters we are
required to state to them in an auditor’s
report, and the further matters we are
required to state to them in accordance with
the terms agreed with the Company, and for
no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other than
the Company and the Company’s members,
as a body, for our audit work, for this report,
or for the opinions we have formed.
Tudor Aw (Senior Statutory Auditor)
for and on behalf of KPMG LLP,
Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
11 March 2019
115
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Note
4
2018
£’000
4,352,570
(3,804,019)
548,551
2017
£’000
3,793,371
(3,297,142)
496,229
(439,183)
109,368
(389,437)
106,792
6
8
9
10
–
1,250
(2,490)
108,128
(27,199)
80,929
80,931
(2)
80,929
11
11
71.4p
70.1p
4,320
1,521
(938)
111,695
(30,381)
81,314
81,314
–
81,314
67.3p
66.5p
Consolidated Income
Statement
For the year ended 31 December 2018
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Gain on disposal of an investment property
Finance revenue
Finance costs
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Equity holders of the Parent
Non-controlling interests
Profit for the year
Earnings per share:
– basic
– diluted
116
Consolidated Statement
of Comprehensive Income
For the year ended 31 December 2018
Profit for the year
Items that may be reclassified to Consolidated Income Statement:
(Loss)/gain arising on cash flow hedge
Income tax effect
Exchange differences on translation of foreign operations
Items not to be reclassified to Consolidated Income Statement:
Remeasurement of defined benefit plan
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Attributable to:
Equity holders of the Parent
Non-controlling interests
2018
£’000
80,929
2017
£’000
81,314
(3,231)
490
(2,741)
7,828
5,087
(1,000)
4,087
217
(37)
180
4,994
5,174
(668)
4,506
85,016
85,820
85,013
3
85,016
85,820
–
85,820
117
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018
Consolidated Balance Sheet
As at 31 December 2018
Non-current assets
Property, plant and equipment
Intangible assets
Investment in associate
Deferred income tax asset
Prepayments
Current assets
Inventories
Trade and other receivables
Prepayments
Accrued income
Forward currency contracts
Cash and short-term deposits
Total assets
Current liabilities
Trade and other payables
Deferred income
Financial liabilities
Forward currency contracts
Income tax payable
Provisions
Non-current liabilities
Financial liabilities
Provisions
Deferred income tax liabilities
Total liabilities
Net assets
Capital and reserves
Issued share capital
Share premium
Capital redemption reserve
Own shares held
Translation and hedging reserves
Retained earnings
Shareholders’ equity
Non-controlling interests
Total equity
Approved by the Board on 11 March 2019.
MJ Norris
Chief Executive Officer
FA Conophy
Group Finance Director
118
Note
13
15
17a
10d
18
19
23
20
21
22
23
25
22
25
10d
28
28
28
28
28
2018
£’000
2017
£’000
106,267
184,613
57
9,587
3,524
304,048
99,524
1,180,394
69,320
101,899
3,851
200,442
1,655,430
1,959,478
1,142,628
143,080
10,640
612
42,184
11,990
1,351,134
132,522
15,041
13,009
160,572
1,511,706
447,772
9,270
3,942
74,957
(113,474)
32,941
440,119
447,755
17
447,772
77,904
80,335
56
9,063
–
167,358
69,289
835,446
59,679
102,922
8,209
206,605
1,282,150
1,449,508
791,980
113,875
3,755
1,196
28,422
1,681
940,909
11,663
7,599
477
19,739
960,648
488,860
9,299
3,913
74,957
(11,360)
27,859
384,178
488,846
14
488,860
Consolidated Statement
of Changes in Equity
For the year ended 31 December 2018
At 1 January 2018
Restatement – Implementation of IFRS 15
At 1 January 2018 – restated
Profit for the year
Other comprehensive income
Total comprehensive income
Cost of share-based payments
Tax on share-based payments
Exercise of options
Purchase of own shares
Return of Value (RoV)
Expenses relating to RoV
Cancellation of deferred shares
Equity dividends
At 31 December 2018
At 1 January 2017
Profit for the year
Other comprehensive income
Total comprehensive income
Cost of share-based payments
Tax on share-based payments
Exercise of options
Purchase of own shares
Equity dividends
At 31 December 2017
Attributable to equity holders of the Parent
Issued
share
capital
£’000
9,299
–
9,299
–
–
–
–
–
–
–
–
–
(29)
–
9,270
9,299
–
–
–
–
–
–
–
–
9,299
Share
premium
£’000
3,913
–
3,913
–
–
–
–
–
–
–
–
–
29
–
3,942
Capital
redemption
reserve
£’000
74,957
–
74,957
–
–
–
–
–
–
–
–
–
–
–
74,957
3,913
–
–
–
–
–
–
–
–
3,913
74,957
–
–
–
–
–
–
–
–
74,957
Own
shares
held
£’000
(11,360)
–
(11,360)
–
–
–
–
–
11,158
(13,274)
(99,998)
–
–
–
(113,474)
(12,115)
–
–
–
–
–
9,613
(8,858)
–
(11,360)
Translation
and
hedging
reserves
£’000
27,859
–
Retained
earnings
£’000
Total
£’000
384,178 488,846
6,547
6,547
27,859 390,725 495,393
80,931
80,931
4,082
(1,000)
85,013
79,931
6,425
6,425
2,706
2,706
3,566
(7,592)
(13,274)
–
(99,998)
–
(1,196)
(1,196)
–
–
(30,880)
(30,880)
447,755
440,119
–
5,082
5,082
–
–
–
–
–
–
–
–
32,941
Non-
controlling
interests
£’000
Total
equity
£’000
14 488,860
6,547
–
14 495,407
80,929
(2)
4,087
5
85,016
3
6,425
–
2,706
–
3,566
–
(13,274)
–
(99,998)
–
(1,196)
–
–
–
(30,880)
–
447,772
17
22,685
–
5,174
5,174
–
–
–
–
–
27,859
329,214
81,314
(668)
80,646
6,200
1,619
(6,389)
–
(27,112)
384,178
427,953
81,314
4,506
85,820
6,200
1,619
3,224
(8,858)
(27,112)
488,846
14
–
–
–
–
–
–
–
–
14
427,967
81,314
4,506
85,820
6,200
1,619
3,224
(8,858)
(27,112)
488,860
119
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Consolidated Cash
Flow Statement
For the year ended 31 December 2018
Operating activities
Profit before taxation
Net finance cost/(income)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Depreciation of investment property
Share-based payments
Gain on disposal of an investment property
Loss/(gain) on disposal of intangibles
Loss/(gain) on disposal of property, plant and equipment
Net cash flow from inventories
Net cash flow from trade and other receivables (including contract assets)
Net cash flow from trade and other payables (including contract liabilities)
Net cash flow from provisions
Other adjustments
Cash generated from operations
Income taxes paid
Net cash flow from operating activities
Investing activities
Interest received
Acquisition of subsidiaries, net of cash acquired
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds from disposal of property, plant and equipment
Decrease in current asset investments
Proceeds from disposal of an investment property
Proceeds from disposal of intangible assets
Net cash flow from investing activities
Financing activities
Interest paid
Dividends paid to equity shareholders of the Parent
Return of Value (RoV)
Expenses on RoV
Proceeds from share issues
Purchase of own shares
Repayment of capital element of finance leases
Repayment of loans
New borrowings – finance leases
New borrowings – bank loan
Net cash flow from financing activities
(Decrease)/increase in cash and cash equivalents
Effect of exchange rates on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the year end
120
Note
2018
£’000
2017
£’000
108,128
1,240
19,380
15,428
–
6,425
–
164
177
(28,887)
(274,968)
285,361
5,865
726
139,039
(23,821)
115,218
1,250
(55,970)
(45,442)
(5,935)
146
–
–
–
(105,951)
(2,490)
(30,880)
(99,998)
(1,196)
3,566
(13,274)
(803)
(1,119)
5,125
124,065
(17,004)
(7,737)
1,580
206,599
200,442
111,695
(583)
16,384
12,237
91
6,200
(4,320)
(688)
(535)
(23,583)
(94,718)
99,004
281
(477)
120,988
(14,881)
106,107
1,521
(7,376)
(30,439)
(9,618)
915
30,000
14,450
1,381
834
(938)
(27,112)
–
–
3,224
(8,858)
(1,676)
(632)
3,162
10,591
(22,239)
84,702
3,221
118,676
206,599
13
15
14
6
8
13
15
9
12
20
20
Notes to the Consolidated
Financial Statements
For the year ended 31 December 2018
1 Authorisation of Consolidated Financial Statements and statement of compliance with IFRS
The Consolidated Financial Statements of Computacenter plc (Parent Company or the Company) and its subsidiaries (the Group) for the year
ended 31 December 2018 were authorised for issue in accordance with a resolution of the Directors on 11 March 2019. The Consolidated Balance
Sheet was signed on behalf of the Board by MJ Norris and FA Conophy. Computacenter plc is a limited company incorporated and domiciled in
England whose shares are publicly traded.
The Group’s Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as
adopted by the European Union as they apply to the Consolidated Financial Statements of the Group for the year ended 31 December 2018 and
applied in accordance with the Companies Act 2006.
2 Summary of significant accounting policies
The accounting policies adopted are consistent with those of the previous financial year as disclosed in the 2017 Annual Report and Accounts
except that the Group has had to change its accounting policies and make material retrospective adjustments as a result of adopting IFRS 15
‘Revenue from Contracts with Customers’ (‘IFRS 15’). The impact of the adoption of IFRS 15 are disclosed below.
The Group has adopted IFRS 15 from 1 January 2018 which has resulted in changes in accounting policies and adjustments to the amounts recognised
in the Consolidated Financial Statements. In accordance with the transition provisions in IFRS 15, the Group has adopted the new rules using the
modified retrospective approach, meaning that the cumulative effect of applying the new accounting policies has been recognised as an adjustment
in equity as at 1 January 2018. The overall net impact of all adjustments was a credit to retained earnings of £6.5 million as at 1 January 2018.
Adjustments were required in relation to:
•
•
Certain costs, such as win fees (a form of commission) and fulfilment cost are capitalised and spread over the life of the contract, as opposed
to being expensed as incurred as was the case under the previous policy. This resulted in an increase to retained earnings of £7.6 million as at
1 January 2018, with the corresponding entry to prepayments. The tax impact of this adjustment is a debit to equity of £1.4 million and a
corresponding increase in deferred tax liabilities as at 1 January 2018. The net impact on retained earnings as at 1 January 2018 is £6.2 million.
This change in accounting policy resulted in a recognition of a net cost in FY2018 of £1.2 million with a corresponding credit to tax for the year,
as presented in the table below. As at 31 December 2018, the win fee balance was £6.2 million.
Certain elements of Managed Services contracts, for example those relating to Entry Into Service, are not treated as separate performance
obligations under the new policy. Under the new policy, these services are treated as part of the ongoing performance obligations in the
contract. This means the revenues and costs associated with Entry Into Service are recognised over the life of the contracts with customers
rather than being recognised as incurred as was the case historically. This resulted in an increase to retained earnings of £0.5 million as at
1 January 2018, with the corresponding entry to prepayments. The tax impact of this adjustment is a debit to equity of £0.1 million and a
corresponding increase in deferred tax liabilities as at 1 January 2018. The net impact on retained earnings as at 1 January 2018 is £0.4 million.
This change in accounting policy resulted in a reduction in revenue of £4.5 million and cost of sales of £4.8 million and in a recognition of a net
cost in FY2018 of £0.3 million with a corresponding credit to tax for the year, as presented in the table below. As at 31 December 2018, the
fulfilment cost balance was £0.3 million.
IFRS 15 has been adopted using the modified retrospective approach, therefore comparative amounts have not been restated. For comparability
purposes, the following table gives the impact of the adoption of the new standard on the Consolidated Balance Sheet and Consolidated Income
Statement for the year ended 31 December 2018 by showing what the results would have been had they been prepared under the previous
accounting policies.
Consolidated Income Statement
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Gain on disposal of an investment property
Finance revenue
Finance costs
Profit before tax
Income tax expense
Profit for the year
Earnings per share:
– basic
– diluted
Total comprehensive income for the year
2018 as
reported
£’000
4,352,570
(3,804,019)
548,551
(439,183)
109,368
–
1,250
(2,490)
108,128
(27,199)
80,929
71.4
70.1
85,016
Adjustments
£’000
(4,454)
4,756
302
1,216
1,518
–
–
–
1,518
(424)
1,094
0.9
0.9
1,094
Results without
adoption of
IFRS 15
£’000
4,348,116
(3,799,263)
548,853
(437,967)
110,886
–
1,250
(2,490)
109,646
(27,623)
82,023
72.3
71.0
86,110
121
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
2 Summary of significant accounting policies continued
Consolidated Balance Sheet
Non-current assets
Prepayments
Others
Current assets
Prepayments
Others
Total assets
Current liabilities
Others
Non-current liabilities
Deferred income tax liabilities
Others
Total liabilities
Net assets
Capital and reserves
Retained earnings
Opening balance adjustment to retained earnings
Others
Total equity
Consolidated Cash Flow Statement
Profit before taxation
Adjustments for non-cash operating items
Net cash flow from trade and other receivables
Others
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
(Decrease)/increase in cash and cash equivalents
Effect of exchange rates on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the year end
2018 as
reported
£’000
3,524
300,524
304,048
69,320
1,586,110
1,655,430
1,959,478
1,351,134
1,351,134
13,009
147,563
160,572
1,511,706
447,772
433,572
6,547
7,653
447,772
Results without
adoption of
IFRS 15
£’000
Adjustments
£’000
(3,524)
–
(3,524)
(2,720)
–
(2,720)
(6,244)
–
300,524
300,524
66,600
1,586,110
1,652,710
1,953,234
–
–
1,351,134
1,351,134
(791)
–
(791)
(791)
(5,453)
1,094
(6,547)
–
(5,453)
12,218
147,563
159,781
1,510,915
442,319
434,666
–
7,653
442,319
2018 as
reported
£’000
108,128
42,617
(274,968)
239,441
115,218
(105,951)
(17,004)
(7,737)
1,580
206,599
200,442
Results without
adoption of
IFRS 15
£’000
109,646
42,193
(276,062)
239,441
115,218
(105,951)
(17,004)
(7,737)
1,580
206,599
200,442
Adjustments
£’000
1,518
(424)
(1,094)
–
–
–
–
–
–
–
–
IFRS 9 –Financial Instruments (‘IFRS 9’)
IFRS 9 is effective for accounting periods beginning on or after 1 January 2018. IFRS 9 replaces the classification and measurement models for
financial instruments in IAS 39. The Group has assessed its balance sheet assets in accordance with the new classification requirements. There
has been no change in the measurement for any of the Group’s financial assets or liabilities.
In addition, IFRS 9 introduces an ‘expected loss’ model for the assessment of impairment of financial assets. The ‘incurred loss’ model under
IAS 39 required the Group to recognise impairment losses when there was objective evidence that an asset was impaired. Under the expected loss
122
model, impairment losses are recorded if there is an expectation of credit losses, even in the absence of a default event. However, as permitted
by IFRS 9, the Group applies the ‘simplified approach’ to trade receivable balances. Due to the general quality and short-term nature of the trade
receivables, there is no significant impact on introduction of the ‘simplified approach’.
The Group applies the hedge accounting requirements under IFRS 9 and its hedging activities are discussed in note 23 of the 2018 Annual Report
and Accounts with movements on hedging reserves disclosed on the Consolidated Statement of Changes in Equity. The Group’s existing hedging
arrangements have been assessed as compliant with IFRS 9. The adoption of IFRS 9 from 1 January 2018 does not have a material impact on the
Group’s reported results.
The following table presents the Group’s financial instruments, showing their original measurement category under IAS 39 and new measurement
categories under IFRS 9, as at 1 January 2018. There has been no measurement change to any of the financial instruments upon adoption of IFRS 9.
Financial instrument
Financial assets
Cash and cash equivalents
Current asset investments
Trade receivables
Other receivables
Derivatives used in designated hedge
relationships
Derivatives not in designated hedge
relationships
Financial liabilities
Trade and other payables
Borrowings
Derivatives used in designated hedge
relationships
Derivatives not in designated hedge
relationships
IAS 39 classification
IFRS 9 classification
Loan and receivable
Fair value through Consolidated Income Statement
Loan and receivable
Loan and receivable
Fair value – hedging instrument
Amortised cost
Fair value through Consolidated Income Statement
Fair value through Consolidated Statement of
Comprehensive Income – debt instrument
Amortised cost
Fair value – hedging instrument
Fair value through Consolidated Income Statement
Fair value through Consolidated Income Statement
Amortised cost
Amortised cost
Fair value – hedging instrument
Amortised cost
Amortised cost
Fair value – hedging instrument
Fair value through Consolidated Income Statement
Fair value through Consolidated Income Statement
Impairment
There has been no material adjustment required on transition to IFRS 9 to the loss allowance against financial assets.
Effective for the year ending 31 December 2019
IFRS 16 Leases (IFRS 16)
IFRS 16 will be effective for the accounting period beginning 1 January 2019. The new standard will require that the Group’s leased assets are
recorded as ‘right of use assets’ in the balance sheet within Property, plant and equipment with a corresponding lease liability which is based on
the present value of the future payments required under each lease.
The Group intends to use the simplified approach to transition, and to utilise various practical expedients in the standard, such as not recognising
lease liabilities for leases under 12 months in duration or for leases on assets with a value of under £5,000. In addition, the Group intends to use
the practical expedient available and, within its transition adjustment, only consider contracts previously identified as including leases.
The Group intends to take the option to measure the right of use asset at transition at the value of the lease liability, therefore there was no
impact on the net asset position of the Group at transition date. The Group’s leases primarily relate to office buildings, warehouses and vehicles.
As previously noted, the impact of IFRS 16 on the Consolidated Financial Statements will be material.
The existing operating lease expense currently recorded in cost of sales and administrative expenses will be replaced by a depreciation charge
which will be presented in cost of sales and administrative expenses and a separate financing expense, which will be recorded in interest
expense. For leases previously classified as operating leases, the profile of total expenses recognised over the course of a lease will change and
will no longer be on a straight-line basis but rather will be front-loaded to the earlier periods of the lease. This is because the finance expense
element will be higher in the earlier periods and reduce as the lease liability is paid down over time.
Net cash flows will not be impacted by the new standard, however, the lease payments will no longer all be presented as operating cash outflows
in the Consolidated Cash Flow Statement but rather will be presented as financing cash outflows, split between interest payments and repayment of
lease liabilities. This means that cash flows from operating activities will increase but cash flows from financing activities will decrease.
The Group does not currently intend to alter its approach as to whether assets should be leased or bought going forward.
123
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
2 Summary of significant accounting policies continued
The substantial majority of the Group’s operating lease commitments (some £137.0 million on an undiscounted basis, as shown in note 24 of the
Consolidated Financial Statements) will be brought onto the Consolidated Balance Sheet and amortised and depreciated separately.
2.1. Basis of preparation
The Consolidated Financial Statements are prepared on the historical cost basis other than derivative financial instruments, which are stated
at fair value.
The Consolidated Financial Statements are presented in pound sterling (£) and all values are rounded to the nearest thousand (£’000) except
when otherwise indicated.
2.2. Basis of consolidation
The Consolidated Financial Statements comprise the Financial Statements of the Parent Company and its subsidiaries as at 31 December each
year. The Financial Statements of subsidiaries are prepared for the same reporting year as the Parent Company, using existing GAAP in each
country of operation. Adjustments are made on consolidation for differences that may exist between the respective local GAAPs and IFRS.
All intra-Group balances, transactions, income and expenses and profit and losses resulting from intra-Group transactions have been eliminated
in full.
Subsidiaries are consolidated from the date on which the Group obtains control and cease to be consolidated from the date on which the Group no
longer retains control. Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries that is not held by the Group
and is presented separately within equity in the Consolidated Balance Sheet, separately from Parent shareholders’ equity.
2.2.1. Foreign currency translation
The Group’s presentation currency is pound sterling. Each entity in the Group determines its own functional currency and items included in the
Financial Statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the
functional currency at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency rate of exchange ruling at the Consolidated Balance Sheet date. All differences are taken to the
Consolidated Income Statement.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of
initial transaction.
The functional currencies of the material overseas subsidiaries are euro (€), US dollar (US$), South African rand (ZAR) and Swiss franc (CHF). As at
the reporting date, the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of the Group at the rate
of exchange ruling at the balance sheet date and their Consolidated Income Statements are translated at the average exchange rates for the
year. Exchange differences arising on the retranslation are recognised in the Consolidated Statement of Comprehensive Income. On disposal
of a foreign entity, the deferred cumulative amount recognised in the Consolidated Statement of Comprehensive Income relating to that
particular foreign operation is recognised in the Consolidated Income Statement.
2.3. Revenue
Revenue is recognised to the extent of the amount which is expected to be received from customers as consideration for the transfer of goods
and services to the customer.
In multi-element contracts with customers where more than one good (Technology Sourcing) or service (Professional Services and Managed
Services) is provided to the customer, analysis is performed to determine whether the separate promises are distinct performance obligations
within the context of the contract. To the extent that this is the case, the transaction price is allocated between the distinct performance
obligations based upon relative standalone selling prices. The revenue is then assessed for recognition purposes based upon the nature of the
activity and the terms and conditions of the associated customer contract relating to that specific distinct performance obligation.
The following specific recognition criteria must also be met before revenue is recognised:
2.3.1. Technology Sourcing
The Group supplies hardware and software (together as ‘goods’) to customers that is sourced from and delivered by a number of suppliers.
Technology Sourcing revenue is recognised at a point in time, when control of the goods have passed to the customer, usually on dispatch.
Payment for the goods is generally received on industry standard payment terms.
2.3.2 Professional Services
The Group provides skilled professionals to customers either on a ‘resource on demand’ basis or operating within a project framework.
For those contracts which are ‘resource on demand’, where the revenue is billed on a timesheet basis, revenue is recognised based on monthly
invoiced amounts as this corresponds to the service delivered to the customer and the satisfaction of the Company’s performance obligations.
For contracts operating within a project framework, revenue is recognised based on the transaction price with reference to the costs incurred as
a proportion of the total estimated costs (percentage of completion basis) of the contract. Under either basis, Professional Services revenue is
recognised over time.
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If the total estimated costs and revenues of a contract cannot be reliably estimated, revenue is recognised only to the extent that costs have
been incurred and where the Group has an enforceable right to payment as work is being performed.
A provision for forecast excess costs over forecasted revenue is made as soon as a loss is foreseen (see note 2.13.1 for further detail).
Unbilled Professional Services revenue is classified as a contract asset and is included within accrued income in the Consolidated Balance Sheet.
Unearned Professional Services revenue is classified as a contract liability and is included within deferred income in the Consolidated Balance
Sheet. Payment for the services, which are invoiced monthly, are generally on industry standard payment terms.
2.3.3 Managed Services
The Group sells maintenance, support and management of customers’ IT infrastructures and operations.
Managed Services revenue is recognised over time, throughout the term of the contract, as services are delivered. The specific performance
obligations and invoicing conditions in our Managed Services contracts are typically related to the number of calls, interventions or users that we
manage and therefore the customer simultaneously receives and consumes the benefits of the services as they are performed. Revenue is
recognised based on monthly invoiced amounts as this corresponds to the service delivered to the customer and the satisfaction of the
Company’s performance obligations.
Unbilled Managed Services revenue is classified as a contract asset and is included within accrued income in the Consolidated Balance Sheet.
Unearned Managed Services revenue is classified as a contract liability and is included within deferred income in the Consolidated Balance Sheet.
Amounts invoiced relating to more than one year are deferred and recognised over the relevant period. Payment for the services is generally on
industry standard payment terms.
If the total estimated costs and revenues of a contract cannot be reliably estimated, revenue is recognised only to the extent that costs have
been incurred and where the Group has an enforceable right to payment as work is being performed. A provision for forecast excess costs over
forecasted revenue is made as soon as a loss is foreseen (see note 2.13.1 for further detail). On occasion, the Group may have a limited number
of Managed Services contracts where revenue is recognised on a percentage of completion basis, which is determined by reference to the costs
incurred as a proportion of the total estimated costs of the contract (see note 3.1.1 for further detail).
Costs of obtaining and fulfilling revenue contracts
The Group operates in a highly competitive environment and is frequently involved in contract bids with multiple competitors, with the outcome
usually unknown until the contract is awarded and signed.
When accounting for costs associated with obtaining and fulfilling customer contracts, the Group first considers whether these costs fit within
a specific IFRS standard or policy. Any costs associated with obtaining or fulfilling revenue contracts which do not fall into the scope of other IFRS
standards or policies are considered under IFRS 15. All such costs are expensed as incurred other than the two types of costs noted below:
1. Win fees – The Group pays ‘win fees’ to certain employees as bonuses for successfully obtaining customer contracts. As these are incremental
costs of obtaining a customer contract, they are capitalised along with any associated payroll tax expense to the extent they are expected to
be recovered. These balances are presented within prepayments in the Consolidated Balance Sheet. The win fee balance that will be realised
after more than 12 months is disclosed as non-current.
2. Fulfilment costs – The Group often incurs costs upfront relating to the initial set-up phase of outsourcing contract, which the Group refers to
as Entry Into Service. These costs do not relate to a distinct performance obligation in the contract, but rather are accounted for as fulfilment
costs under IFRS 15 as they are directly related to the future performance on the contract. They are therefore capitalised to the extent that
they are expected to be recovered. These balances are presented within prepayments in the Consolidated Balance Sheet.
Both win fees and Entry Into Service costs are amortised on a straight-line basis over the contract term, as this is materially equivalent to the
pattern of transfer of services to the customer over the contract term. The amortisation charges on win fees and Entry Into Service costs are
recognised in the Consolidated Income Statement within administration expenses and cost of sales, respectively.
Any bid costs incurred by the Group’s Central Bid Management Engines are not capitalised or charged to the contract, but instead directly charged
to selling, general and administrative expenses as they are incurred. These costs associated with bids are not separately identifiable nor can they
be measured reliably as the Group’s internal bid team’s work across multiple bids at any one time.
2.3.4. Finance income
Income is recognised as interest accrues.
2.3.5. Operating lease income
Rental income arising from operating leases is accounted for on a straight-line basis over the lease term.
2.4. Exceptional items
The Group presents those material items of income and expense as exceptional items which, because of the nature and expected infrequency of
the events giving rise to them, merit separate presentation to allow shareholders to understand better elements of financial performance in the
year, so as to facilitate comparison with prior years and to assess better trends in financial performance.
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FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
2 Summary of significant accounting policies continued
2.5. Adjusted1 measures
The Group uses a number of non-Generally Accepted Accounting Practice (non-GAAP) financial measures in addition to those reported in
accordance with IFRS. The Directors believe that these non-GAAP measures, listed below, are important when assessing the underlying financial
and operating performance of the Group.
These non-GAAP measures comprise of:
Adjusted operating profit or loss, adjusted profit or loss before tax, adjusted tax, adjusted profit or loss for the year, adjusted earnings per share
and adjusted diluted earnings per share are, as appropriate, each stated before: exceptional and other adjusting items including gain or loss on
business disposals, gain or loss on disposal of investment properties, gains or losses related to material acquisitions, 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. Additionally, adjusted gross profit or loss and adjusted operating profit or loss includes the
interest paid on customer-specific financing (CSF) which Management considers to be a cost of sale.
A reconciliation between key adjusted and statutory measures is provided on page 57 of the Group Finance Director’s review which details the
impact of exceptional and other adjusted items when comparing to the non-GAAP financial measures in addition to those reported in accordance
with IFRS. Further detail is also provided within note 4, segment information.
2.6. Impairment of assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when
annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. Where an asset does not
have independent cash flows, the recoverable amount is assessed for the cash-generating unit (CGU) to which it belongs. Certain other corporate
assets are unable to be allocated against specific CGUs. These assets are tested across an aggregation of CGUs that utilise the asset. The
recoverable amount is the higher of the fair value less costs to sell and the value-in-use of the asset or CGU. Where the carrying amount of an
asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value-in-use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the Consolidated
Income Statement in those expense categories consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable
amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s
recoverable amount since the last impairment was recognised. The reversal is limited so that the carrying amount of the asset does not exceed
its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. As the Group has no assets carried at revalued amounts, such reversal is recognised in the Consolidated
Income Statement.
2.7. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.
freehold buildings: 25-50 years
Depreciation, down to residual value, is calculated on a straight-line basis over the estimated useful life of the asset as follows:
•
• short leasehold improvements: shorter of seven years and period to expiry of lease
•
fixtures and fittings
– head office: 5-15 years
– other: shorter of seven years and period to expiry of lease
• office machinery and computer hardware: 2-15 years
• motor vehicles: three years
Freehold land is not depreciated. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between
the net disposal proceeds and the carrying amount of the item) is included in the Consolidated Income Statement in the year the item is derecognised.
2.8. Leases
Assets held under finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item,
are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges are charged directly against income.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating
lease payments are recognised as an expense in the Consolidated Income Statement on a straight-line basis over the lease term.
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2.9. Investment property
Investment property is defined as land and/or buildings held by the Group to earn rental income or for capital appreciation or both, rather than for
sale in the ordinary course of business or for use in the supply of goods or services or for administrative purposes. The Group recognises any part
of an owned (or leased under a finance lease) property that is leased to third parties as investment property, unless it represents an insignificant
portion of the property.
Investment property is measured initially at cost including transaction costs. Subsequent to initial recognition, the Group elects to measure
investment property at cost less accumulated depreciation and accumulated impairment losses, if any (i.e. applying the same accounting
policies (including useful lives) as for property, plant and equipment). The fair values, which reflect the market conditions as at the balance sheet
date, are disclosed in note 14.
2.10. Intangible assets
2.10.1. Software and software licences
Software and software licences include computer software that is not integral to a related item of hardware. These assets are stated at cost less
accumulated amortisation and any impairment in value. Amortisation is calculated on a straight-line basis over the estimated useful life of the
asset. Currently software is amortised over four years.
The carrying values of software and software licences are reviewed for impairment when events or changes in circumstances indicate that the
carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the
assets are written down to their recoverable amount.
2.10.2. Software under development
Costs that are incurred and that can be specifically attributed to the development phase of management information systems for internal use
are capitalised and amortised over their useful life, once the asset becomes available for use.
2.10.3. Other intangible assets
Intangible assets acquired as part of a business combination are carried initially at fair value. Following initial recognition intangible assets are
carried at cost less accumulated amortisation and any impairment in value. Intangible assets with a finite life have no residual value and are
amortised on a straight-line basis over their expected useful lives with charges included in administrative expenses as follows:
• order back log: three months
• existing customer contracts: five years
• existing customer relationships: 10-15 years
•
tools and technology: seven years.
The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstances indicate the carrying value may
not be recoverable.
2.10.4. Goodwill
Business combinations are accounted for under IFRS 3 Business Combinations using the acquisition method. Any excess of the cost of the
business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised in
the Consolidated Balance Sheet as goodwill and is not amortised. Any goodwill arising on the acquisition of equity accounted entities is included
within the cost of those entities.
After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment
at least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill is allocated to the related CGU monitored by Management, usually at business Segment level or
statutory Company level as the case may be. Where the recoverable amount of the CGU is less than its carrying amount, including goodwill, an
impairment loss is recognised in the Consolidated Income Statement.
2.11. Inventories
Inventories are carried at the lower of weighted average cost and net realisable value after making allowance for any obsolete or slow-moving
items. Costs include those incurred in bringing each product to its present location and condition, on a First-In, First-Out basis.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale.
2.12. Financial assets
Financial assets are recognised at their fair value, which initially equates to the sum of the consideration given and the directly attributable
transaction costs associated with the investment. Subsequently, the financial assets are measured at either amortised cost or fair value
depending on their classification under IFRS 9. The Group currently holds only debt instruments. The classification of these debt instruments
depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.
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FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
2 Summary of significant accounting policies continued
2.12.1. Trade and other receivables
Trade receivables, which generally have 30- to 90-day credit terms, are initially recognised and carried at their original invoice amount less an
allowance for any uncollectable amounts. The Group sometimes uses debt factoring to managing liquidity and, as a result, the business model for
Trade receivables is that they are held for the collection of contractual cash flows, which are solely payments of principal and interest, and for
selling. As a result, IFRS 9 requires that, subsequent to initial recognition, they are measured at fair value through other comprehensive income
(except for the recognition of impairment gains and losses and foreign exchange gains and losses, which are recognised in profit or loss). Given
the short lives of the trade receivables, there are generally no material fair value movements between initial recognition and the derecognition
of the receivable.
The Group assesses for doubtful debts (impairment) using the expected credit losses model as required by IFRS 9. For trade receivables, the
Group applies the simplified approach which requires expected lifetime losses to be recognised from the initial recognition of the receivables.
2.12.2. Current asset investments
Current asset investments comprise deposits held for a term of greater than three months from the date of deposit and which are not available
to the Group on demand. The business model for current asset investments is that they are held for the collection of contractual cash flows,
which are not solely payments of principal and interest. As a result, subsequent to initial measurement, current asset investments are measured
at fair value with fair value movements recognised in profit and loss.
2.12.3. Cash and cash equivalents
Cash and short-term deposits in the Consolidated Balance Sheet comprise cash at bank and in hand, and short-term deposits with an original
maturity of three months or less. Cash is held for the collection of contractual cash flows which are solely payments of principal and interest and
therefore is measured at amortised cost subsequent to initial recognition.
For the purpose of the Consolidated Cash Flow Statement, cash and cash equivalents consist of cash and short-term deposits as defined above,
net of outstanding bank overdrafts.
2.13. Financial liabilities
Financial liabilities are initially recognised at their fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.
The subsequent measurement of financial liabilities is at amortised cost, unless otherwise described below:
2.13.1. Provisions (excluding Restructuring provision)
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is
used, the increase in the provision due to the passage of time is recognised as a borrowing cost.
Customer contract provisions
A provision for forecast excess costs over forecasted revenue is made as soon as a loss is foreseen.
Management continually monitor the financial performance of contracts, and where there are indicators that a contract could result in a negative
margin, the future financial performance of that contract will be reviewed in detail. If, after further financial analysis, the full financial
consequence of the contract can be reliably estimated, and it is determined that the contract is potentially loss-making, then the best estimate
of the losses expected to be incurred until the end of the contract will be provided for (see note 3.1.1 for further detail).
The Group applies IAS 37 in its assessment of whether contracts are considered onerous and in subsequently estimating the provision. An agenda
decision published by the IFRS Interpretations Committee outlined that the current wording of IAS 37 allows for two interpretations of what can
constitute ‘unavoidable’ costs when determining whether a contract is onerous. One of the acceptable interpretations noted by the Committee is
in line with our current practice, which is to consider costs such as overhead allocations as ‘unavoidable’. The matter has been put on the agenda
for future discussion at the IFRS Interpretations Committee, with a view to drafting clarifications to IAS 37. Until there is clarity on this matter, we
have concluded that our current approach, that considers total estimated costs (i.e. directly attributable variable costs and fixed allocated costs)
as included in the assessment of whether the contract is onerous or not and in the measurement of the provision, remains appropriate.
2.13.2. Restructuring provisions
The Group recognises a ‘restructuring’ provision when there is a programme planned and controlled by Management that changes materially the
scope of the business or the manner in which it is conducted.
Further to the Group’s general provision recognition policy, a restructuring provision is only considered when the Group has a detailed formal plan
for the restructuring identifying, as a minimum; the business or part of the business concerned; the principal locations affected; the location,
function and approximate number of employees who will be compensated for terminating their services; the expenditures that will be undertaken
and when the plan will be implemented.
128
The Group will only recognise a specific restructuring provision once a valid expectation in those affected that it will carry out the restructuring
by starting to implement that plan or announcing its main features to those affected by it.
The Group only includes incremental costs associated directly with the restructuring within the restructuring provisions such as employee
termination benefits and consulting fees. The Group specifically excludes from recognition in a restructuring provision any costs associated with
ongoing activities such as the costs of training or relocating staff that are redeployed within the business rather than retrenched and costs for
employees who continue to be employed in ongoing operations, regardless of the status of these operations post restructure.
2.13.3. Pensions and other post-employment benefits
The Group operates a defined contribution pension scheme available to all UK employees. Contributions are recognised as an expense in the
Consolidated Income Statement as they become payable in accordance with the rules of the scheme. There are no material pension schemes
within the Group’s overseas operations.
The Group has an obligation to make a one-off payment to French employees upon retirement, the Indemnités de Fin de Carrière (IFC).
French employment law requires that a company pays employees a one-time contribution when, and only when, the employee leaves the
Company for retirement at the mandatory age. This is a legal requirement for all businesses who incur the obligation upon departure, due to
retirement, of an employee.
Typically the retirement benefit is based on length of service of the employee and his or her salary at retirement. The amount is set via a legal
minimum but the retirement premiums can be improved by the collective agreement or employment contract in some cases. In Computacenter
France, the payment is based on accrued service and ranges from one month of salary after five years of service to 9.4 months of salary after
47 years of service.
If the employee leaves voluntarily at any point before retirement, all liability is extinguished and any accrued service is not transferred to any
new employment.
Management continues to account for this obligation according to IAS 19 (revised). Refer to note 32 for full disclosure.
2.14. Derecognition of financial assets and liabilities
Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:
•
•
the rights to receive cash flows from the asset have expired; or
the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to
a third party under a ‘pass-through’ arrangement; or
the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards
of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the
asset.
•
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired.
2.15. Derivative financial instruments and hedge accounting
The Group uses foreign currency forward contracts to hedge its foreign currency risks associated with foreign currency fluctuations affecting
cash flows from forecasted transactions and unrecognised firm commitments.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply
hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of both
the hedging instrument and, the hedged item or transaction and then the economic relationship between the two, including whether the hedging
instrument is expected to offset changes in cash flow of the hedged item. Such hedges are expected to be highly effective in achieving offsetting
changes in cash flows. The Group designates the full change in the fair value of the forward contract (including forward points) as the hedging
instrument. Forward contracts are initially recognised at fair value on the date that the contract is entered into and are subsequently
remeasured at fair value at each reporting date. The fair value of forward currency contracts is calculated by reference to current forward
exchange rates for contracts with similar maturity profiles. Forward contracts are recorded as assets when the fair value is positive and as
liabilities when the fair value is negative.
For the purposes of hedge accounting, hedges are classified as cash flow hedges when hedging the exposure to variability in cash flows that is
either attributable to a particular risk associated with a recognised asset or liability, a highly probable forecast transaction, or the foreign
currency risk in an unrecognised firm commitment.
Cash flow hedges that meet the criteria for hedge accounting are accounted for as follows: the effective portion of the gain or loss on the hedging
instrument is recognised directly in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised
immediately in the Consolidated Income Statement in administrative expenses.
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FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
2 Summary of significant accounting policies continued
Amounts recognised within other comprehensive income are transferred to the Consolidated Income Statement, within administrative expenses,
when the hedged transaction affects the Consolidated Income Statement, such as when the hedged financial expense is recognised.
If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in equity is
transferred to the Consolidated Income Statement within administrative expenses. If the hedging instrument expires or is sold, terminated or
exercised without replacement or rollover, any cumulative gain or loss previously recognised within Consolidated Other Comprehensive Income
remains within Consolidated Other Comprehensive Income until after the forecast transaction or firm commitment affects the Consolidated
Income Statement.
Any other gains or losses arising from changes in fair value on forward contracts are taken directly to administrative expenses in the
Consolidated Income Statement.
2.16. Taxation
2.16.1. Current tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the tax
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
2.16.2. Deferred tax
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts
in the Consolidated Financial Statements, with the following exceptions:
• where the temporary difference arises from the initial recognition of goodwill or from an asset or liability in a transaction that is not a
•
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of
the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future; and
• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available in the future against which
the deductible temporary differences, carried forward tax credits or tax losses, can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related
asset is realised or liability is settled, based on tax rates and laws enacted, or substantively enacted, at the balance sheet date.
Income tax is charged or credited directly to the statement of comprehensive income if it relates to items that are credited or charged to the
statement of comprehensive income. Otherwise, income tax is recognised in the Consolidated Income Statement.
2.17. Share-based payment transactions
Employees (including Executive Directors) of the Group can receive remuneration in the form of share-based payment transactions, whereby
employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).
The cost of equity-settled transactions with employees is measured by reference to the fair value of the award at the date at which they are
granted. The fair value is determined by utilising an appropriate valuation model, further details of which are given in note 29. In valuing equity-
settled transactions, no account is taken of any performance conditions as none of the conditions set are market-related.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance
and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date, until the vesting date, reflects the extent to which the
vesting period has expired and the Directors’ best estimate of the number of equity instruments that will ultimately vest. The Consolidated
Income Statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that
period. As the schemes do not include any market-related performance conditions, no expense is recognised for awards that do not ultimately
vest.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share (see note 11).
The Group has an employee share trust for the granting of non-transferable options to Executive Directors and senior management. Shares in the
Group held by the employee share trust are treated as investment in own shares and are recorded at cost as a deduction from equity (see note
28).
2.18. Fair value measurement
The Group measures certain financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest
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The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Fair value related disclosures for financial instruments that are measured at fair value or where fair values are disclosed, are summarised in note 26.
2.19. Own shares held
Computacenter plc shares held by the Group are classified in shareholders’ equity as ‘own shares held’ and are recognised at cost. Consideration
received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original cost being
taken to reserves. No gain or loss is recognised in the performance statements on the purchase, sale, issue or cancellation of equity shares.
3 Critical accounting estimates and judgements
The preparation of the Consolidated Financial Statements requires Management to exercise judgement in applying the Group’s accounting
policies. It also requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Due
to the inherent uncertainty in making these critical judgements and estimates, actual outcomes could be different.
During the year, Management set aside time to consider the critical accounting estimates and judgements for the Group. This process included
reviewing the last reporting period’s disclosures, the key judgements required on the implementation of forthcoming standards such as IFRS 16
and the current period’s challenging accounting issues. Where Management deemed an area of accounting to be no longer a critical estimate or
judgement, an explanation for this decision is found in the relevant accounting notes to the Consolidated Financial Statements.
3.1. Critical estimates
Estimates and underlying assumptions are reviewed on an ongoing basis, with revisions recognised in the year in which the estimates are revised
and in any future years affected. The areas involving significant risk resulting in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are as follows:
3.1.1. Services revenue recognition and contract provisions
Percentage of completion revenue recognition
On occasion, the Group accounts for certain Services contracts using the percentage of completion method, recognising revenue by reference
to the stage of completion of the contract which is determined by actual costs incurred as a proportion of total forecast contract costs. This
method places considerable importance on accurate estimates of the extent of progress towards completion of the contract and may involve
estimates on the scope of services required for fulfilling the contractually defined obligations. These significant estimates include total contract
costs, total contract revenues, contract risks, including technical risks, and other assumptions. Under the percentage of completion method, the
changes in these estimates and assumptions may lead to an increase or decrease in revenue recognised at the balance sheet date with the
in-year revenue recognition appropriately adjusted as required. When the outcome of the contract cannot be estimated reliably, revenue is
recognised only to the extent that expenses incurred are eligible to be recovered. No revenue is recognised if there are significant uncertainties
regarding recovery of the consideration.
The key judgements are the extent to which revenue should be recognised and also, where total contract costs are not covered by total contract
revenue, the extent to which an adjustment is required.
Additionally, where contracts are renegotiated mid-life, Management will consider when to make a revenue adjustment.
Contract provisions
During the year, Management held a number of ‘difficult’ contracts under review that were considered to be performing below expectation. The
number of contracts under review fluctuated during the year between seven and 12 (2017: seven and 12). Each contract was subject to a detailed
review to consider the reasons behind the lower than anticipated performance and the potential accounting impacts related effect on revenue
recognition estimates and contract provisions.
For a limited number of these ‘difficult’ contracts, where there was no immediate operational or commercial remedy for the performance, a
range of possible outcomes for the estimate of the total contract costs and total contract revenues was considered to determine whether a
provision is required and, if so, the best estimate of the provision.
The revenue recognised in the year from these contracts under review was approximately £30.1 million (2017: £53.6 million). The range of
potential scenarios considered by management in respect of these specific contracts resulted in a reduction in margins, recognised in 2018 of
£13.6 million (2017: £4.0 million), in the year. At 31 December 2018, based on Management’s best estimate, there was a provision of £16.4 million
(2017: £8.2 million) against future losses with the total costs to complete on these contracts estimated at £76.9 million (2017: £48.0 million).
The key judgements are determining which contracts are considered ‘difficult’ and estimating the provision from the range of possible outcomes.
3.2. Critical judgements
Judgements made by Management in the process of applying the Group’s accounting policies, that have the most significant effect on the
amounts recognised in the Consolidated Financial Statements, are as follows:
3.2.1. Exceptional items
Exceptional items remain a core focus of Management with the recent Alternative Performance Measure regulations providing further guidance
in this area.
131
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
3 Critical accounting estimates and judgements continued
Management is required to exercise its judgement in the classification of certain items as exceptional and outside of the Group’s adjusted1
results. The overall goal of Management is to present the Group’s underlying performance without distortion from one-off or non-trading events
regardless of whether they are favourable or unfavourable to the underlying result.
To achieve this, Management have considered the materiality, infrequency and nature of the various items classified as exceptional this year
against the requirements and guidance provided by IAS 1, our Group accounting policies and the recent regulatory interpretations and guidance.
In reaching their conclusions, Management consider not only the effect on the overall underlying Group performance but also where an item is
critical in understanding the performance of its component Segments which is of relevance to investors and analysts when assessing the Group
result and its future prospects as a whole.
Further details of the individual exceptional items, and the reasons for their disclosure treatment, are set out in note 6.
3.2.2. Technology Sourcing principal versus agent recognition
Management is required to exercise its judgement in the classification of certain revenue contracts for Technology Sourcing revenue recognition
on either an agent or principal basis.
Because the identification of the principal in a contract is not always clear, Management will make a determination by evaluating the nature of our
promise to our customer as to whether it is a performance obligation to provide the specified goods or services ourselves, in that we are the
principal, or to arrange for those goods or services to be provided by the other party, where we are the agent. We determine whether we are a
principal or an agent for each specified good or service promised to the customer by evaluating the nature of our promise to the customer
against a non-exhaustive list of indicators that a performance obligation could involve an agency relationship:
• Evaluating who controls each specified good or service before that good or service is transferred to the customer;
• The vendor retains primary responsibility for fulfilling the sale;
• We take no inventory risk before or after the goods have been ordered, during shipping or on return;
• We do not have discretion to establish pricing for the vendor’s goods limiting the benefit we can receive from the sale of those goods; and
• Our consideration is in the form of a, usually predetermined, commission.
Management continues to monitor the primary indicators used to assess the ‘agent/principal’ presentation of our Software and certain Resold
Services revenue against our general contractual terms and conditions including detailed analysis of how terms and conditions are applied in
practice, the weighting applied to the agent/principal indicators and evaluation of emerging practice. Management has concluded that whilst this
remains a finely balanced judgement, no change to the presentation of our Software and certain Resold Services revenues, which contributed
£704 million and £278 million to the Group’s revenue in 2018 respectively, is required and revenue for these items will continue to be presented
gross where the underlying facts and circumstances remain the same. Management continue to monitor the emergence of new methods of
transacting business within the traditional vendor to reseller channel.
A new line of business has recently emerged within our Technology Sourcing business where vendors and customers typically approach us with an
opportunity where the vendor is taking the contract and performance risks and sets the selling price, using Computacenter as a pass-through
agent in the channel to transact the deal for a set fee. To date, these have been primarily large software deals where there is no ongoing
obligation of service on us following the transaction. We have no say in the pricing or selection of the product and are merely standing in the sales
channel between the vendor and customer for the predetermined fee. Management review the facts and circumstances of these types of deals,
case by case, with regards to its specific terms and conditions against the Group’s accounting policy to determine whether our performance
obligation is to provide the good or service itself, where we are acting as the principal in the deal, or to arrange for another party to provide the
good or service, where we are acting as an agent. Based on the facts and circumstances of each deal we have classified several of these deals as
agency concluding that the fee received should be booked as net revenue. Such agency deals contributed £3.1 million to revenue during the year.
3.3. Change in critical estimates and critical judgements
During the year, Management reassessed the critical estimates and critical judgements and resolved that no change was needed from last year
in critical estimates and critical judgements except for the addition of 3.2.2 above.
4 Segment information
During the first half of the year, Management reviewed the way it reported Segmental performance to the Board and the Chief Executive Officer,
who is the Group’s Chief Operating Decision Maker (‘CODM’), to determine whether it could improve the transparency and understandability of the
trading performance of its core Group Operating Model geographies. As a result of this analysis, the Board has decided to adopt a new Segmental
reporting structure from the period ended 30 June 2018.
In accordance with IFRS 8 Operating Segments, the Group has identified four revised operating Segments:
• UK;
• Germany;
• France; and
•
International.
132
As the location of the Group’s headquarters, the UK entity has also borne an increasing share of corporate costs since the rollout of the Group
Operating Model from 2013. Certain expenses such as those for the Board itself, and related public company costs, Group Executive members not
aligned to a specific geographic trading entity and the cost of centrally funded strategic corporate initiatives that benefit the whole Group, are
not allocated to individual Segments because they are not directly attributable to any single Segment. Accordingly, these expenses are disclosed
as a separate column, ‘Central Corporate Costs’, within the segmental note.
Under the previous Segmental reporting structure, the UK Segment included a number of other operating entities, primarily international Global
Service Desk locations. Whilst these entities have limited external revenues, and a cost recovery model that suggests better than breakeven
margins to ensure compliance with transfer pricing regulations, this generated unnecessary complexity when presenting the UK results to the
Board and the CODM, with the growth in the number and scale of these other operating entities blurring the underlying performance of the core
geography over time. The revised UK Segment now only comprises the trading performance of Computacenter UK.
The German Segment has been revised to remove the independently run Computacenter Switzerland operation, including cITius, which has been
transferred to the International Segment, leaving the German country trading operations standing alone.
The new International Segment replaces the Belgian Segment and includes the Belgium, Switzerland, USA, FusionStorm, Netherlands and
TeamUltra trading operations, along with the international Global Service Desk locations in South Africa, Spain, Hungary, Mexico, Poland, Malaysia,
India and China. The International Segment has been created to reflect the Group’s ambitions to continue to expand its worldwide footprint. This
includes expanding trading operations into new geographic locations, both within our Western European heartland and beyond, and the need to
continue to identify talent-rich offshore locations, to ensure that we can remain both cost and resource competitive in the Services marketplace.
The French Segment remains unchanged from that reported at 31 December 2017.
This new Segmental reporting structure is the basis on which internal reports are provided to the Chief Executive Officer, as the CODM, for
assessing performance and determining the allocation of resources within the Group. Segmental performance is measured based on external
revenues, adjusted1 gross profit, adjusted1 operating profit and adjusted1 profit before tax. The change in Segment reporting has no impact on
reported Group numbers.
To enable comparisons with prior year performance, historical Segment information for the year ended 31 December 2017 is restated in
accordance with the revised Segmental reporting structure. All discussion within this Annual Report and Accounts on Segmental results reflects
this revised structure, the reclassification of Central Corporate Costs and the resultant prior year restatements.
Segmental performance for the years ended 31 December 2018 and 31 December 2017 were as follows:
Year ended 31 December 2018
Revenue
Technology Sourcing revenue
Services revenue
Professional Services revenue
Managed Services revenue
Total Services revenue
Total revenue
Results
Adjusted1 gross profit
Adjusted1 administrative expenses
Adjusted1 operating profit/(loss)
Adjusted1 net interest
Adjusted1 profit/(loss) before tax
Exceptional items:
– interest cost relating to acquisition of a subsidiary
– costs relating to acquisition of a subsidiary
– gain on disposal of an investment property
Total exceptional items
Amortisation of acquired intangibles
Statutory profit before tax
UK
£’000
Germany
£’000
France
£’000
International
£’000
Central
Corporate Costs
£’000
1,155,608
1,330,616
393,769
297,588
116,440
333,829
450,269
1,605,877
166,471
375,591
542,062
1,872,678
18,914
80,568
99,482
493,251
20,090
63,086
83,176
380,764
–
–
–
–
–
203,507
(145,856)
57,651
141
57,792
231,191
(164,332)
66,859
45
66,904
55,655
(48,601)
7,054
(162)
6,892
57,905
(45,515)
12,390
(554)
11,836
–
(25,188)
(25,188)
–
(25,188)
Total
£’000
3,177,581
321,915
853,074
1,174,989
4,352,570
548,258
(429,492)
118,766
(530)
118,236
(417)
(5,240)
–
(5,657)
(4,451)
108,128
133
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
4 Segment information continued
The reconciliation for adjusted1 operating profit to statutory operating profit as disclosed in the Consolidated Income Statement is as follows:
Year ended 31 December 2018
Adjusted1 operating profit
Add back interest on CSF
Amortisation of acquired intangibles
Exceptional items
Statutory operating profit
Other Segment information
Property, plant and equipment
Investment property
Intangible assets
Capital expenditure:
Property, plant and equipment
Software
Depreciation of property, plant and equipment
Depreciation of investment property
Amortisation of software
UK
£’000
Germany
£’000
France
£’000
International
£’000
Central
Corporate Costs
£’000
41,532
–
21,057
12,079
4,870
7,893
–
9,449
50,558
–
18,444
30,408
730
7,287
–
1,275
5,612
–
148
867
166
1,630
–
50
8,565
–
144,964
2,088
169
2,570
–
203
–
–
–
–
–
–
–
–
–
Share-based payments
5,035
1,334
56
–
UK
£’000
Germany
£’000
France
£’000
International
£’000
Central
Corporate Costs
£’000
986,677
1,200,871
405,139
43,507
141,507
335,145
476,652
1,463,329
151,306
362,481
513,787
1,714,658
18,120
86,684
104,804
509,943
196,170
(144,632)
51,538
607
52,145
214,743
(156,489)
58,254
472
58,726
53,539
(47,931)
5,608
(193)
5,415
8,223
53,711
61,934
105,441
31,618
(22,530)
9,088
(144)
8,944
–
–
–
–
–
–
(19,001)
(19,001)
–
(19,001)
Year ended 31 December 2017 – restated
Revenue
Technology Sourcing revenue
Services revenue
Professional Services revenue
Managed Services revenue
Total Services revenue
Total revenue
Results
Adjusted1 gross profit
Adjusted1 administrative expenses
Adjusted1 operating profit/(loss)
Adjusted1 net interest
Adjusted1 profit before tax
Exceptional items:
– onerous contracts provision for future losses
Total exceptional items
Gain on disposal of an investment property
Amortisation of acquired intangibles
Statutory profit before tax
134
Total
£’000
118,766
293
(4,451)
(5,240)
109,368
Total
£’000
106,267
–
184,613
45,442
5,935
19,380
–
10,977
6,425
Total
£’000
2,636,194
319,156
838,021
1,157,177
3,793,371
496,070
(390,583)
105,487
742
106,229
1,371
1,371
4,320
(225)
111,695
The reconciliation for adjusted1 operating profit to statutory operating profit as disclosed in the Consolidated Income Statement is as follows:
Year ended 31 December 2017
Adjusted1 operating profit
Add back interest on CSF
Amortisation of acquired intangibles
Exceptional items
Statutory operating profit
Other Segment information
Property, plant and equipment
Investment property
Intangible assets
Capital expenditure:
Property, plant and equipment
Software
Depreciation of property, plant and equipment
Depreciation of investment property
Amortisation of software
UK
£’000
Germany
£’000
France
£’000
International
£’000
Central
Corporate Costs
£’000
37,404
–
25,645
8,976
8,460
6,097
–
10,873
26,849
–
18,850
18,432
1,109
6,426
–
1,088
6,262
–
28
960
9
1,736
–
21
7,389
–
35,812
2,071
40
2,125
91
255
Total
£’000
105,487
159
(225)
1,371
106,792
Total
£’000
77,904
–
80,335
30,439
9,618
16,384
91
12,237
6,200
–
–
–
–
–
–
–
–
–
Share-based payments
5,068
1,211
(79)
–
Information about major customers
Included in revenues arising from the UK Segment are revenues of approximately £277 million (2017: £288 million) which arose from sales to the
Group’s largest customer. For the purpose of this disclosure, a single customer is considered to be a group of entities known to be under common
control. This customer consists of entities under control of the UK Government.
Contract balances
The following table provides the information about contract assets and contract liabilities from contracts with customers.
Contract assets, which are included in ‘trade and other receivables’
Contract assets, which are included in ‘prepayments’
Contract assets, which are included in ‘accrued income’
Contract liabilities, which are included in ‘deferred income’
Note
19
31 December
2018
£’000
1,180,394
6,451
101,899
143,080
1 January
2018*
£’000
835,446
7,926
102,922
113,875
*the balances in this column are subsequent to adjustments recorded on implementation of IFRS 15 on 1 January 2018.
Significant changes in contract assets and liabilities
Contract assets are balances due from customers under long-term contracts as work is performed and therefore a contract asset is recognised
over the period in which the performance obligation is fulfilled. This represents the Group’s right to consideration for the services transferred to
date. Amounts are generally reclassified to contract receivables when these have been certified or invoiced to a customer.
Revenue recognised in the reporting period that was included in the contract liability balance at the beginning of the period was £79.3 million.
Revenue recognised in the reporting period from performance obligations satisfied or partially satisfied in previous periods was £nil. Partially
satisfied performance obligations continue to incur revenue and costs in the period.
135
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
4 Segment information continued
Remaining performance obligations (Work in hand)
Contracts which have remaining performance obligations as at 31 December 2018 are set out in the table below. The table below discloses the
aggregate transaction price relating to those unsatisfied or partially unsatisfied performance obligations, excluding both (a) amounts relating
to contracts for which revenue is recognised as invoiced and (b) amounts relating to contracts where the expected duration of the ongoing
performance obligation is one year or less. As permitted under the transitional provisions in IFRS 15, the transaction price allocated to remaining
performance obligations as of 31 December 2017 is not disclosed.
Managed Services
FY2019
£m
613
FY2020
£m
323
FY2021
£m
216
FY2022
£m
146
FY2023 and
beyond
£m
48
Total
£m
1,346
The average duration of contracts is between one to five years, however some contracts will vary from these typical lengths. Revenue is typically
earned over these varying timeframes, however more of the revenue noted above is expected to be earned in the short term.
5 Group operating profit
This is stated after charging/(crediting):
Auditor’s remuneration:
– Audit of the Financial Statements
– Audit of subsidiaries
Total audit fees
Audit-related assurance services
Taxation compliance services
Other assurance services
Taxation advisory services
Other non-audit services
Total non-audit services
Total fees
2018
£’000
2017
£’000
50
722
772
50
9
17
–
132
208
980
44
559
603
55
19
10
13
200
297
900
The other non-audit services of £0.1 million (2017: £0.2 million) during the year, relates to the financial due diligence conducted by KPMG LLP in
connection with the acquisition of FusionStorm.
Depreciation of property, plant and equipment
Loss/(gain) on disposal of property, plant and equipment
Depreciation of investment property
Gain on disposal of an investment property
Amortisation of software
Loss/(gain) on disposal of software
Amortisation of acquired intangible assets
(Gain)/loss on net foreign currency differences
Costs of inventories recognised as an expense
Operating lease payments
136
2018
£’000
19,380
177
–
–
10,977
164
4,451
2017
£’000
16,384
(535)
91
(4,320)
12,020
(688)
217
(2,209)
1,565
2,852,157
2,362,861
39,764
34,469
6 Exceptional items
Operating profit
Onerous contracts
Costs relating to acquisition of a subsidiary
Interest cost relating to acquisition of a subsidiary
Gain on disposal of an investment property
(Loss)/gain on exceptional items before taxation
Income tax
Tax on onerous contracts included in operating profit
Tax on exceptional items
Tax relating to acquisition of a subsidiary
(Loss)/gain on exceptional items after taxation
2018
£’000
–
(5,240)
(5,240)
(417)
–
(5,657)
–
1,353
3,091
(1,213)
2017
£’000
1,371
–
1,371
–
4,320
5,691
(351)
–
–
5,340
2018: Included within the current year are the following exceptional items:
• An exceptional loss during the year of £5.2 million resulted from costs directly relating to the acquisition of FusionStorm. These costs include a
severance payment for the FusionStorm Chief Executive Officer, agreed as part of the acquisition, advisor fees and a finder’s fee that was paid
on completion of the transaction. These costs are non-operational in nature, material in size and unlikely to recur and have therefore been
classified as outside our adjusted1 results. A further £0.4 million relating to the unwinding of the discount on the deferred consideration for the
purchase of FusionStorm has been removed from the adjusted1 net finance expense and classified as exceptional interest costs.
• A credit of £1.4 million arising from the tax benefit on the FusionStorm exceptional acquisition costs has been recognised as tax on the above
exceptional items. A further tax credit of £3.1 million was recorded due to post-acquisition activity in FusionStorm, related to the transaction,
which has resulted in a material in-year tax benefit. This activity included settlement of phantom stock awards, deal bonus and change of
control payments which were settled by the vendor, out of the consideration paid, via post-acquisition capital contributions to FusionStorm. As
this credit was related to the acquisition and not operational activity within FusionStorm, is of a one-off nature and material to the overall tax
result, it was classified this as an exceptional tax item.
2017: Included within the prior year are the following exceptional items:
• The remaining provisions for the last two onerous contracts in Germany were released, for an exceptional gain of £1.4 million. These provisions
were originally booked in 2013 and the contracts have now returned to profitability, so the provisions are no longer required. As these
provisions were booked as exceptional items, this release has also been classified as such.
• The disposal of an investment property in Braintree, Essex, was completed on 26 May 2017 for £14.5 million. This property was associated with
a former subsidiary of the Group, R.D. Trading Limited, which was itself sold in February 2015. Due to the size and non-operational nature of the
transaction, the £4.3 million gain on disposal, net of £0.2 million disposal costs, has been classified as exceptional.
137
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
7 Staff costs
The average monthly number of employees (including Executive Directors) during the year was made up as follows:
UK
Germany
France
International
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Share-based payments
Pension costs
Share-based payments arise from transactions accounted for as equity-settled share-based payment transactions.
8 Finance income
Bank interest receivable
Other interest received
9 Finance costs
Bank loans and overdrafts
Finance charges payable on CSF
Other interest
138
2018
No.
4,125
6,124
1,528
3,340
15,117
2018
£’000
735,234
110,758
6,425
24,667
877,084
2018
£’000
792
458
1,250
2018
£’000
756
293
1,441
2,490
2017
No.
4,210
5,607
1,557
2,652
14,026
2017
£’000
652,988
102,121
6,200
23,186
784,495
2017
£’000
854
667
1,521
2017
£’000
355
159
424
938
10 Income tax
a) Tax on profit from ordinary activities
Tax charged in the Consolidated Income Statement
Current income tax
UK corporation tax
Foreign tax
– operating results before exceptional items
– exceptional items
Total foreign tax
Adjustments in respect of prior years
Total current income tax
Deferred tax
Operating results before exceptional items:
– origination and reversal of temporary differences
– adjustments in respect of prior years
Total deferred tax
Tax charge in the Consolidated Income Statement
b) Reconciliation of the total tax charge
Accounting profit before income tax
At the UK standard rate of corporation tax of 19 per cent (2017: 19.25 per cent)
Expenses not deductible for tax purposes
Non-deductible element of share-based payment charge
Adjustments in respect of current income tax of previous years
Effect of different tax rates of subsidiaries operating in other jurisdictions
Other differences
Overseas tax not based on earnings
Tax effect of income not taxable in determining taxable profit
Deferred tax not recognised on current year losses
At effective income tax rate of 25.2 per cent (2017: 27.2 per cent)
2018
£’000
2017
£’000
12,528
11,995
20,942
(4,444)
29,026
148
29,174
(1,830)
(145)
(1,975)
14,661
351
15,012
–
27,007
3,374
–
3,374
27,199
30,381
2018
£’000
108,128
2017
£’000
111,695
20,544
987
589
(384)
6,736
(334)
1,390
(2,427)
98
27,199
21,501
675
1,297
(58)
7,050
(683)
1,526
(832)
(95)
30,381
c) Tax losses
Deferred tax assets of £4.2 million (2017: £2.7 million) have been recognised in respect of losses carried forward.
In addition, at 31 December 2018, there were unused tax losses across the Group of £152.6 million (2017: £152.0 million) for which no deferred tax
asset has been recognised. Of these losses, £40.1 million (2017: £40.9 million) arise in Germany and £112.5 million (2017: £111.1 million) arise in
France. A significant proportion of the losses arising in Germany have been generated in statutory entities that no longer have significant levels
of trade. The remaining unrecognised tax losses relate to other loss-making overseas subsidiaries.
139
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
10 Income tax continued
d) Deferred tax
Deferred income tax at 31 December relates to the following:
Deferred income tax liabilities
Revaluations of foreign exchange contracts to fair value
Amortisation of intangibles
Gross deferred income tax liabilities
Deferred income tax assets
Relief on share option gains
Other temporary differences
Revaluations of foreign exchange contracts to fair value
Losses available for offset against future taxable income
Gross deferred income tax assets
Deferred income tax charge
Net deferred income tax assets
Disclosed on the Consolidated Balance Sheet
Deferred income tax assets
Deferred income tax liabilities
Net deferred income tax (liabilities)/assets
Consolidated Balance Sheet
Consolidated Income Statement
and Consolidated Statement
of Comprehensive Income
2018
£’000
(555)
(1,196)
(2,000)
(277)
119
1,934
2017
£’000
194
(49)
(1,072)
1,164
(157)
3,294
(1,975)
3,374
2018
£’000
738
16,727
17,465
4,868
4,887
121
4,167
14,043
2017
£’000
1,293
506
1,799
2,868
4,192
659
2,666
10,385
(3,422)
8,586
9,587
(13,009)
(3,422)
9,063
(477)
8,586
At 31 December 2018, there was no recognised or unrecognised deferred income tax liability (2017: £nil) for taxes that would be payable on the
unremitted earnings of the Group’s subsidiaries as the Group expects that future remittances of earnings from its overseas subsidiaries will
continue to be covered by relevant dividend exemptions. Where, following the departure of the UK from the European Union, the Group’s European
subsidiaries’ unremitted earnings are no longer covered by a dividend exemption, appropriate mitigating steps are envisaged that would
eliminate the incidence of withholding tax.
e) Impact of rate change
The main rate of UK Corporation tax is 19 per cent from 1 April 2017 and will be reduced to 17 per cent from 1 April 2020, as enacted in the Finance
Act 2015. The deferred tax in these Consolidated Financial Statements reflects this.
11 Earnings per share
Earnings per share amounts are calculated by dividing profit attributable to ordinary equity holders by the weighted average number of ordinary
shares outstanding during the year (excluding own shares held).
To calculate diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive
potential shares. Share options granted to employees where the exercise price is less than the average market price of the Company’s ordinary
shares during the year are considered to be dilutive potential shares.
Profit attributable to equity holders of the Parent
Basic weighted average number of shares (excluding own shares held)
Effect of dilution:
Share options
Diluted weighted average number of shares
Basic earnings per share
Diluted earnings per share
140
2018
£’000
80,931
2018
£’000
113,409
1,984
115,393
2018
pence
71.4
70.1
2017
£’000
81,314
2017
£’000
120,766
1,471
122,237
2017
pence
67.3
66.5
12 Dividends paid and proposed
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2017: 18.7 pence (2016: 15 pence)
Interim dividend for 2018: 8.7 pence (2017: 7.4 pence)
Proposed (not recognised as a liability as at 31 December)
Equity dividends on ordinary shares:
Final dividend for 2018: 21.6 pence (2017: 18.7 pence)
13 Property, plant and equipment
Cost
At 1 January 2017
Relating to acquisition of subsidiaries
Additions
Disposals
Foreign currency adjustment
At 31 December 2017
Relating to acquisition of subsidiaries (note 17)
Additions
Disposals
Foreign currency adjustment
At 31 December 2018
Accumulated depreciation and impairment
At 1 January 2017
Relating to acquisition of subsidiaries
Provided during the year
Disposals
Foreign currency adjustment
At 31 December 2017
Relating to acquisition of subsidiaries (note 17)
Provided during the year
Disposals
Foreign currency adjustment
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
At 1 January 2017
2018
£’000
2017
£’000
21,075
9,805
30,880
18,151
8,961
27,112
24,654
21,344
Freehold land
and buildings
£’000
Short
leasehold
improvements
£’000
Fixtures,
fittings,
equipment and
vehicles
£’000
66,799
–
10,449
–
236
77,484
–
8,604
(989)
358
85,457
38,919
–
1,507
–
16
40,442
–
1,509
(989)
10
40,972
44,485
37,042
27,880
27,723
19
1,695
(532)
564
29,469
1,859
6,243
(15,798)
329
22,102
18,177
–
1,980
(532)
538
20,163
1,255
2,215
(15,732)
119
8,020
135,558
282
18,295
(22,829)
1,889
133,195
6,480
30,595
(33,290)
1,408
138,388
109,964
20
12,897
(22,436)
1,194
101,639
1,771
15,656
(29,233)
855
90,688
Total
£’000
230,080
301
30,439
(23,361)
2,689
240,148
8,339
45,442
(50,077)
2,095
245,947
167,060
20
16,384
(22,968)
1,748
162,244
3,026
19,380
(45,954)
984
139,680
14,082
9,306
9,546
47,700
31,556
25,594
106,267
77,904
63,020
141
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
13 Property, plant and equipment continued
Included in the figures above are the following amounts relating to leased assets which are used to satisfy specific customer contracts:
Cost
At 1 January
Additions
Disposals
Foreign currency adjustment
At 31 December
Accumulated depreciation and impairment
At 1 January
Provided during the year
Disposals
Foreign currency adjustment
At 31 December
Net book value
14 Investment property
Cost
At 1 January
Disposals
At 31 December
Accumulated depreciation
At 1 January
Provided during the year
Disposals
At 31 December
Net book value
Fixtures, fittings, equipment
and vehicles
2018
£’000
2017
£’000
18,117
7,196
(10,316)
351
15,348
13,490
3,175
(10,316)
232
6,581
8,767
30,234
3,127
(15,430)
186
18,117
26,608
2,250
(15,430)
62
13,490
4,627
2018
£’000
2017
£’000
–
–
–
–
–
–
–
–
11,167
(11,167)
–
1,134
91
(1,225)
–
–
On 26 May 2017, the Group disposed its only investment property for £14.5 million. The property was in Braintree, Essex, and was owned by Digica
Group Finance Limited (a fully-owned subsidiary of the Group). A gain of £4.3 million was recorded on disposal, net of £0.2 million of disposal costs.
142
15 Intangible assets
Cost
At 1 January 2017
Relating to acquisition of subsidiaries
Additions
Disposals
Foreign currency adjustment
At 31 December 2017
Relating to acquisition of subsidiaries (note 17)
Additions
Disposals
Foreign currency adjustment
At 31 December 2018
Accumulated amortisation and impairment
At 1 January 2017
Provided during the year
Disposals
Foreign currency adjustment
At 31 December 2017
Relating to acquisition of subsidiaries (note 17)
Provided during the year
Disposals
Foreign currency adjustment
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
At 1 January 2017
Acquired intangible assets
Goodwill
£’000
Software
£’000
Customer
relationship
£’000
Others
£’000
Total
£’000
58,722
6,727
–
–
796
66,245
45,704
–
–
1,948
113,897
10,445
–
–
371
10,816
–
–
–
166
10,982
102,915
55,429
48,277
95,449
123
9,618
(3,243)
329
102,276
1,057
5,935
(9,354)
173
100,087
68,446
12,020
(2,551)
241
78,156
890
10,977
(9,190)
136
80,969
19,118
24,120
27,003
–
–
–
–
–
–
61,090
–
–
1,935
63,025
–
–
–
–
–
–
1,049
–
293
1,342
20,103
–
–
–
37
20,140
3,070
–
(1,315)
691
22,586
19,098
217
–
39
19,354
–
3,402
(1,315)
248
21,689
174,274
6,850
9,618
(3,243)
1,162
188,661
110,921
5,935
(10,669)
4,747
299,595
97,989
12,237
(2,551)
651
108,326
890
15,428
(10,505)
843
114,982
61,683
–
–
897
786
1,005
184,613
80,335
76,285
16 Impairment testing of goodwill, other intangible assets and other non-current assets
Goodwill acquired through business combinations have been allocated to the following CGUs:
• Computacenter (UK) Limited
• Computacenter Germany
• Computacenter France
• Computacenter AG
• cITius AG
• Computacenter Belgium
• TeamUltra Limited
• FusionStorm
• Computacenter Netherlands (formerly Misco Solutions B.V.)
These represent the lowest level within the Group at which goodwill is monitored for internal Management purposes. Certain other corporate
assets are unable to be allocated against specific CGUs. These assets are tested across an aggregation of CGUs that utilise the asset.
143
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
16 Impairment testing of goodwill, other intangible assets and other non-current assets continued
Movements in goodwill
Computacenter
(UK) Limited
£’000
30,429
TeamUltra
Limited
£’000
–
Computacenter
Germany
£’000
15,425
Computacenter
France
£’000
–
Computacenter
AG
£’000
1,068
cITius AG
£’000
–
Computacenter
Belgium
£’000
1,355
Fusion
-Storm
£’000
–
Computacenter
Netherlands
£’000
–
–
–
4,620
–
–
481
30,429
4,620
15,906
–
–
–
–
–
244
30,429
4,620
16,150
–
–
–
–
–
–
–
2,107
(52)
(115)
–
111
1,016
1,992
1,466
–
–
–
–
–
–
–
–
–
42,415
3,289
45,704
53
104
90
1,276
15
1,782
1,069
2,096
1,556
43,691
3,304
102,915
1.7%
11.0%
1.7%
11.0%
1.0%
11.0%
1.5%
12.0%
1.5%
12.0%
1.5%
12.0%
1.5%
15.0%
2.0%
12.0%
1.3%
12.0%
Total
£’000
48,277
6,727
425
55,429
1 January 2017
Relating to
acquisition of
subsidiaries
Foreign
currency
adjustment
31 December
2017
Relating to
acquisition of
subsidiaries
Foreign
currency
adjustment
31 December
2018
Market
growth rate
Discount rate
Key assumptions used in value-in-use calculations
The recoverable amounts of all CGUs have been determined based on a value-in-use calculation. To calculate this, cash flow projections are based
on financial budgets approved by Senior Management covering a three-year period and on long-term market growth rates of between 1.5 and 2.0
per cent (2017: between 1.5 and 2.5 per cent) thereafter.
Key assumptions used in the value-in-use calculation for all CGUs for 31 December 2018 and 31 December 2017 are:
• budgeted revenue, which is based on long-run market growth forecasts;
• budgeted gross margins, which are based on average gross margins achieved in the year immediately before the budgeted year, adjusted for
•
expected long-run market pricing trends; and
the discount rate applied to cash flow projections ranges from 11.0 to 15.0 per cent (2017: 11.0 to 15.0 per cent) which represents the Group’s
pre-tax discount rate adjusted for the risk profiles of the individual CGUs.
Each CGU generates value substantially in excess of the carrying value of goodwill attributed to each of them. Management therefore believes
that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its
recoverable amount.
Other acquired intangible assets
Other acquired intangible assets consist of order back log and tools and technology. The expected useful lives are shown in note 2.
Other non-current assets
When there is an indication of impairment within a CGU, the carrying value of the non-current assets are compared to their recoverable amount
which is the higher of the assets’ fair value less costs of disposal or the value-in-use of the CGU calculated as described above.
17 Investments
a) Investment in associate
The following table illustrates summarised information of the investment in associates:
Cost
At 1 January
Exchange rate movement
At 31 December
144
2018
£’000
605
1
606
2017
£’000
604
1
605
Impairment
At 1 January and 31 December
Carrying value
2018
£’000
(549)
57
2017
£’000
(549)
56
Gonicus GmbH
The Group has a 20 per cent (2017: 20 per cent) interest in Gonicus GmbH, whose principal activity is the provision of Open Source Software.
Gonicus is a private entity, incorporated in Germany, that is not listed on any public exchange and therefore there is no published quotation price
for the fair value of this investment. The reporting date of Gonicus is 31 December.
ICS Solutions Limited
The Group has a 25 per cent (2017: 25 per cent) interest in ICS Solutions Limited (ICS) whose principal activity is the delivering of both on-premise and
cloud-based services and solutions across the Microsoft technology stack. ICS is a private entity, incorporated in the United Kingdom, that is not listed
on any public exchange and therefore there is no published quotation price for the fair value of this investment. The reporting date of ICS is 30 June.
b) Investment in subsidiaries
The Group’s subsidiary undertakings are as follows:
Name
Computacenter NV/SA
FusionStorm Beijing VAR Company Limited
FusionStorm Hong Kong Limited
Computacenter (UK) Limited
TeamUltra Limited
Computacenter France SAS
Computacenter AG & Co oHG
Computacenter Aktiengesellschaft
Computacenter Management GmbH
Computacenter Managed Services GmbH
Computacenter Holding GmbH
Computacenter Germany AG & Co oHG
E’ZWO Computervertriebs
Alfatron GmbH Elektronik – Vertrieb
C’NARIO Informationsprodukte Vertriebs-GmbH
FusionStorm Netherlands, B.V.
Computacenter NV
Computacenter BV
Computacenter Services and Solutions (Pty) Limited
Computacenter AG
cITius AG
fusionstorm
FusionStorm Acquisition Corp.
FusionStorm International Inc.
Computacenter (U.S.) Inc.
Digica Group Finance Limited
Computacenter Immobilien GmbH
Computacenter Information Technology
(Shanghai) Company Limited
Computacenter Services Kft
Computacenter India Private Limited
Computacenter Services (Malaysia) Sdn Bhd
Computacenter México S.A. de C.V.
Computacenter Poland Sp. z o.o.
Country of incorporation
Belgium1
China2
Hong Kong3
England4
England4
France5
Germany6
Germany7
Germany7
Germany7
Germany8
Germany8
Germany8
Germany8
Germany8
Netherlands9
Netherlands10
Netherlands11
South Africa12
Switzerland13
Switzerland14
USA15
USA15
USA15
USA16
England4
Germany6
China17
Hungary18
India19
Malaysia20
Mexico21
Poland22
Proportion of voting rights
and shares held
Nature of business
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
2018
100%vi
100%v
100%v
100%
100%i
100%
100%
100%
100%
100%
100%
100%ii
IT infrastructure services
99.05%ii
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
IT infrastructure services
Investment property
Investment property
International call centre services
International call centre Services
International call centre services
International call centre services
International call centre services
International call centre services
100%ii
100%ii
100%v
100%
100%
100%i
100%
100%iii
100%v
100%v
100%v
100%
100%i
100%
100%i
100%i
100%viii
100%i
100%viii
100%vii
2017
100%vi
–
–
100%
100%i
100%
100%
100%
100%
100%
100%
100%ii
99.05%ii
100%ii
100%ii
–
100%
–
100%i
100%
100%iii
–
–
–
100%i
100%i
100%
100%i
100%i
100%viii
100%i
100%viii
–
145
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
17 Investments continued
Name
Computacenter Services (Iberia) SLU
FusionStorm Netherlands Cooperatief
Computacenter Trustees Limited
Computacenter Quest Trustees Limited
Allnet Limited
Amazon Computers Limited
Amazon Energy Limited
Amazon Systems Limited
CAD Systems Limited
Compufix Limited
Computacenter (FMS) Limited
Computacenter (Management Services) Limited
Computacenter (Mid-Market) Limited
Computacenter Consumables Limited
Computacenter Distribution Limited
Computacenter Leasing Limited
Computacenter Maintenance Limited
Computacenter Overseas Holdings Limited
Computacenter Services Limited
Computacenter Software Limited
Computacenter Solutions Limited
Computacenter Training Limited
Computadata Limited
Computer Services Group Limited
Digica (FMS) Limited
Digica Group Holdings Limited
Digica Group Limited
Digica Limited
Digica SMP Limited
ICG Services Limited
M Services Limited
Merchant Business Systems Limited
Merchant Systems Limited
Logival (SARL)
Computacenter (US) Defense Inc.
Country of incorporation
Spain23
Netherlands24
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
England4
France5
USA25
Proportion of voting rights
and shares held
Nature of business
International call centre services
Financial holdings
Employee share scheme trustees
Employee share scheme trustees
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
2018
100%i
100%v
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%iv
100%v
2017
100%i
–
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%i
100%iv
100%v
i
ii
Includes indirect holdings of 100 per cent via Computacenter (UK) Limited.
Includes indirect holdings of 100 per cent via Computacenter Holding GmbH,
excludes E’ZWO Computervertriebs which is 99.05 per cent.
Includes indirect holdings of 100 per cent via Computacenter AG.
iii
Includes indirect holdings of 100 per cent via Computacenter France SAS.
iv
Includes indirect holdings of 100 per cent via Computacenter (U.S.) Inc.
v
Includes indirect holdings of 1 per cent via Computacenter (UK) Limited.
vi
vii
Includes indirect holdings of 99 per cent via Computacenter (UK) Limited.
viii Includes indirect holdings of 99.99 per cent via Computacenter (UK) Limited.
10 Beech Avenue 54-80 1119 PW Schiphol-Rjik
11 Gondel 1, 1186 MJ Amstelveen, Netherlands
12 Building 1, Parc du Cap, Mispel Road, Bellville, 7535, Cape Town
13 Riedstrasse 14, CH-8953 Dietikon
14 Giessereistrasse 4, CH-8620 Wetzikon
15 124 Grove Street, Suite 311, Franklin, MA 02038
16
17
50 Tice Blvd, Suite 340, Woodcliff Lake, NJ 07677
Unit 229, Block 2, Building 1, Huanhu West 2nd Road no. 888 Nanhui New Town, Putong
District, Shanghai
Ikaroslaan 31, B-1930 Zaventem
2/F, Building 6, Tian Tan East Road 31, Dongcheng District, Beijing City
3806 Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
1
2
3
4 Hatfield Avenue, Hatfield, Hertfordshire AL10 9TW
5
Agence de Roissy, 229 rue de la Belle Étoile, ZI Paris Nord II, BP 52387, 95943
Roissy CDG Cedex
Computacenter Park 1, 50170 Kerpen, Germany
Kattenbug 2, 50667 Köln
Werner-Eckert-Str. 16-18, 81829 München
Prins Bernhardplein 200, 1097JB Amsterdam
6
7
8
9
Computacenter plc is the ultimate Parent entity of the Group.
146
18 Haller Gardens, Building D. 1st Floor, Soroksári út 30-34, Budapest 1095
19 No. 3093, 6A Main, 13th Cross, HAL 2nd Stage, Indiranagar, Bangalore, 560008
20
Level 9, Tower 1, Puchong Financial Corporate Centre, Jalan Puteri 1/2, Bandar Puteri,
47100 Puchong, Selangor Darul Ehsan
Av. Paseo de la Reforma, No. 412 floor 5, Col. Juárez, Delegación Cuauhtémoc, CP06600,
México City
21
22 Ul. Glogowska 31/33, 60-702, Poznań, Poland
23 Carrer de Sancho De Avila 52-58, 08018, Barcelona
24 Prins Bernhardplein 200, 1097JB, Amsterdam
25 250 Pehle Avenue, Suite 311 Plaza One, Saddle Brook
FusionStorm
On 1 October 2018, the Group acquired 100 per cent of the voting shares of FusionStorm for an initial consideration of $69.3 million and agreed to
a maximum undiscounted contingent consideration of $20.0 million, dependent upon the achievement of agreed performance criteria over the
next two and a half years from the date of acquisition. The acquisition-related costs amounted to $2.6 million and are included in the Consolidated
Income Statement. FusionStorm is based in the United States of America and is an IT product provider. The acquisition has been accounted for
using the purchase method of accounting.
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition:
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash and short-term deposits
Prepayments
Deferred tax assets
Trade and other payables
Deferred tax liabilities
Loans and borrowings
Net assets acquired
Goodwill arising on acquisition
Discharged by:
Cash paid on acquisition
Contingent consideration
Cash and cash equivalents acquired
Cash and short-term deposits
Cash outflow on acquisition
Provisional
fair value to
the Group
£’000
66,192
5,053
47,378
95,790
5,130
3,102
4,237
(161,649)
(20,622)
(18,916)
25,695
43,757
69,452
54,882
14,570
69,452
(5,130)
49,752
The initial accounting for the acquisition of FusionStorm has only been provisionally determined at the date of finalisation of these Consolidated
Financial Statements based on Management’s best estimates.
Included in the £43.8 million of goodwill that arose on acquisition are certain intangible assets that cannot be individually separated and reliably
measured under IFRS 3 Business Combination from the acquiree due to their nature. These mainly include a footprint from which to grow in the US
and skillset of the workforce.
From the date of acquisition to 31 December 2018, FusionStorm contributed £246.0 million to the Group’s revenue and a loss of £0.04 million to the
Group’s profit after tax.
Contingent consideration
Based on the performance of the business in FY2018 and the forecasted performance for FY2019, Management’s assessment is that it is highly
probable that the maximum contingent consideration will become payable and accordingly the discounted maximum contingent consideration
has been included in the provisional fair value to the Group.
Management concluded that the contingent consideration was actually consideration and not remuneration on the basis that individuals who
were selling shareholders due the consideration were not required to remain in employment post-acquisition.
147
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
17 Investments continued
Computacenter Netherlands
On 1 September 2018, the Group acquired 100 per cent of the voting shares of Computacenter Netherlands for a total consideration of €7.0 million.
The acquisition-related costs amounted to €161,000 and are included in the Consolidated Income Statement. Due to the size of the balance, the
acquisition cost is not treated as an exceptional item. Computacenter Netherlands is based in the Netherlands and is an IT service provider. The
acquisition has been accounted for using the purchase method of accounting.
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition:
Property, plant and equipment
Inventories
Trade and other receivables
Prepayments
Cash and short-term deposits
Trade and other payables
Financial liabilities
Net assets acquired
Goodwill arising on acquisition
Discharged by:
Cash paid on acquisition
Cash and cash equivalents acquired
Cash and short-term deposits
Cash outflow on acquisition
Provisional
fair value to
the Group
£’000
547
5,221
8,489
305
71
(7,967)
(3,666)
3,000
3,289
6,289
6,289
(71)
6,218
The initial accounting for the acquisition of Computacenter Netherlands has only been provisionally determined at the date of finalisation of these
Consolidated Financial Statements based on Management’s best estimates.
Included in the £3.3 million of goodwill that arose on acquisition are certain intangible assets that cannot be individually separated and reliably
measured under IFRS 3 Business Combination from the acquiree due to their nature. These items include the expected value of synergies, a
footprint from which to grow in the Netherlands and an assembled workforce. These intangible assets are not considered material to the
Consolidated Financial Statements.
From the date of acquisition to 31 December 2018, Computacenter Netherlands contributed £24.9 million to the Group’s revenue and a loss of
£0.2 million to the Group’s profit after tax.
If the acquisition of FusionStorm and Computacenter Netherlands were completed on 1 January 2018, the Group’s revenue for the year would have
been £4,965.0 million and the Group’s profit after tax would have been £84.3 million.
18 Inventories
Inventories for re-sale
19 Trade and other receivables
Trade receivables
Other receivables
148
2018
£’000
99,524
2017
£’000
69,289
2018
£’000
1,128,456
51,938
1,180,394
2017
£’000
808,037
27,409
835,446
For terms and conditions relating to related party receivables, refer to note 33.
Trade receivables are non-interest bearing and are generally on 30 to 90-day credit terms. Note 26 sets out the Group’s strategy towards credit risk.
The movements in the provision for doubtful debts were as follows:
At 1 January
Charge for the year
Utilised
Unused amounts reversed
Foreign currency adjustment
At 31 December
2018
£’000
12,480
14,709
(6,565)
(5,001)
4,235
19,858
2017
£’000
12,315
10,959
(6,891)
(3,639)
(264)
12,480
There was no change made to the level of provision for doubtful debts upon the adoption of IFRS 9. The doubtful debt provision is determined as
follows:
2018
Expected loss rate
Gross carrying amount
Provision
2017
Expected loss rate
Gross carrying amount
Provision
20 Cash and short-term deposits
Cash at bank and in hand
Neither past
due nor
impaired
£’000
Total
£’000
1.73%
1,148,314
19,858
0.43%
1,003,452
4,287
1.52%
820,517
12,480
0.29%
702,374
2,069
Past due but not impaired
<30 days
£’000
30–60 days
£’000
60–90 days
£’000
90–120 days
£’000
>120 days
£’000
4.21%
89,008
3,749
3.87%
68,976
2,667
3.63%
30,785
1,118
2.44%
28,923
706
3.70%
11,697
433
18.08%
4,193
758
74.62%
1,852
1,382
8.48%
4,527
384
77.16%
11,520
8,889
51.17%
11,524
5,896
2018
£’000
200,442
2017
£’000
206,605
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of
between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term
deposit rates. The fair value of cash and cash equivalents is £200,442,000 (2017: £206,605,000).
Due to strong cash generation over the past three years, the Group is now in a position where it can finance its operational requirements from its
cash balance. The Group does, however, retain overdraft facilities where required. The uncommitted overdraft facilities available to the Group are
£11.7 million at 31 December 2018 (2017: £10.0 million). During 2013, the Group entered into a specific committed facility of £40.0 million. This
facility was renewed for a second time for a further three years and extended to a value of £60.0 million.
For the purposes of the Consolidated Cash Flow Statement, cash and cash equivalents comprise the following at 31 December:
Cash at bank and in hand
Bank overdrafts (note 22)
Expected credit loss on cash and cash equivalents is negligible and therefore no provision is held.
2018
£’000
200,442
–
200,442
2017
£’000
206,605
(6)
206,599
149
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
21 Trade and other payables
Trade payables
Other payables
2018
£’000
885,834
256,794
1,142,628
2017
£’000
587,963
204,017
791,980
For terms and conditions relating to related parties, refer to note 33.
Trade payables are non-interest bearing and are normally settled on net monthly terms.
The Group had no short-term supplier extended-term interest-bearing credit facilities (2017: nil).
Other payables, which principally relate to other taxes, social security costs and accruals, are non-interest bearing and have an average term of
three months.
22 Financial liabilities
Current
Bank loan
Bank overdrafts
Current obligations under finance leases – ‘CSF’ (note 24)
Non-current
Bank loan
Non-current obligations under finance leases – ‘CSF’ (note 24)
2018
£’000
7,472
–
3,168
10,640
126,762
5,760
132,522
2017
£’000
2,213
6
1,536
3,755
8,454
3,209
11,663
There are no material differences between the fair value of financial liabilities and their book value.
Bank loans
The Group has three principal bank loans:
• A loan of £100 million was drawn down at 2.05 per cent interest rate to finance the acquisition of FusionStorm (see note 17). Repayment of this
loan will commence in H1 2019 and will continue for three years;
• a loan of €8 million was taken out on 21 December 2017. Repayments commenced in FY2018 and will continue for four years. The loan carries
fixed interest rate at 1.65 per cent per annum. The loan is taken out to finance the fit-out of the new German headquarters building and
Integration Center in Kerpen; and
• a loan of €4 million was taken out on 27 December 2017. Repayments commenced in FY2018 and will continue for nine years. The loan carries
fixed interest rate at 1.95 per cent per annum. The loan is taken out to finance the acquisition of the new German headquarters building in
Germany, which has been mortgaged to the lender.
Bank overdrafts
The bank overdrafts are unsecured and are subject to annual review.
Finance leases
The finance leases are only secured on the assets that they finance. These assets are in the main used to satisfy specific customer contracts.
There are a small number of assets that are utilised internally.
The finance lease and loan facilities are committed.
Facilities
At 31 December 2018, the Group had available £11.7 million of uncommitted overdraft facilities (2017: £10.0 million).
150
23 Forward currency contracts
Financial instruments at fair value through profit and loss
Foreign exchange forward contracts
Financial instruments at fair value through other comprehensive income
Cash flow hedges
Foreign exchange forward contracts
2018
£’000
(39)
2017
£’000
503
3,278
3,239
6,510
7,013
Cash flow hedges
Financial assets and liabilities at fair value through other comprehensive income
These amounts reflect the change in the fair value of foreign exchange forward contracts designated as cash flow hedges which are used to
hedge expected contract costs in South African rand and Hungarian forint where sales on those contracts are in pound sterling, based on highly
probable forecast transactions.
Financial assets and liabilities at fair value through profit or loss
The Group also enters into other foreign exchange forward contracts with the intention to reduce the foreign exchange risk of expected sales and
purchases. When these other contracts are not designated in hedge relationships they are measured at fair value through profit and loss within
administrative expenses.
The foreign exchange forward contract balances vary with the level of expected foreign currency costs and changes in the foreign exchange
forward rates.
Effectiveness of hedging
The terms of the foreign currency forward contracts have been negotiated for the expected highly probable forecast transactions to which hedge
accounting has been applied. No significant element of hedge ineffectiveness required recognition in the Consolidated Income Statement.
The cash flow hedges of the forecasted costs were assessed to be highly effective and a net unrealised gain of £3,278,000 (2017: £6,510,000)
with a deferred tax liability of £616,000 (2017: £1,107,000) relating to the hedging instruments is included in the Consolidated Statement of
Comprehensive Income. The amounts retained in the Consolidated Statement of Comprehensive Income of £3,278,000 (2017: £6,510,000) are
expected to mature and affect the Consolidated Income Statement between 2019 and 2021.
Forward currency contracts
At 31 December 2018 the Group held foreign exchange contracts as hedges of an inter-company loan and future expected payments to suppliers.
The exchange contracts are being used to reduce the exposure to foreign exchange risk. The terms of these contracts are detailed below:
31 December 2018
UK
Germany
Buy currency
Sterling
Sterling
Sterling
Sterling
US dollars
Euros
Australian dollars
Swiss francs
Hungarian forint
Norwegian krone
Swedish krona
SA rand
Euros
Euros
Sell currency Nominal value of contracts
£16,883,650
£525,253
£838,346
£6,883,563
$54,253,759
€3,482,554
AUD 267,000
CHF 1,960,000
HUF 614,700,000
NOK 437,0000
SEK 13,300,000
ZAR 291,452,508
€88,773,641
€3,512,731
Euros
Hungarian forint
Polish zloty
SA rand
Sterling
Sterling
Sterling
Sterling
Sterling
Sterling
Sterling
Sterling
US dollars
Hungarian forint
Maturity dates
Jan 19 – Apr 20
Jan 19 – Apr 19
Jun 19
Jan 19 – Oct 22
Jan 19 – Aug 21
Jan 19 – Mar 19
Jan 19
Jan 19 – Dec 19
Jan 19
Jan 19 – Feb 19
Feb 19
Jan 19 – Oct 22
Jan 19 – Nov 20
Jan 19 – Jun 20
Contract rates
1.059 – 1.143
368.560 – 369.203
4.7713
18.943 – 27.262
1.261 – 1.422
1.105 – 1.1192
1.811
1.236 – 1.257
358.167 – 358.211
11.026 – 11.028
11.303 – 11.429
18.443 – 23.505
1.138 – 1.221
311.50 – 327.10
151
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
23 Forward currency contracts continued
31 December 2017
UK
Germany
Belgium
Buy currency
Euros
Sterling
Sterling
Sterling
US dollars
SA rand
Sterling
Sterling
Sterling
Hungarian forint
Sterling
US dollars
Hungarian forint
Sterling
SA rand
Sterling
Sell currency Nominal value of contracts
€548,700
£5,067,217
£45,391,545
£1,986,063
$104,511,035
ZAR 440,841,213
£371,554
£146,361
£1,901,225
HUF 139,600,000
£332,962
$86,681,596
HUF 1,043,407
£5,319,723
ZAR 1,779,558
£365,333
Sterling
US dollars
Euros
Swiss francs
Sterling
Sterling
Swedish krona
Singapore dollars
Hungarian forint
Sterling
Hong Kong dollars
Euros
Euros
Euros
Euros
Euros
Maturity dates
Apr 18 – Apr 20
Jan 18 – Mar 18
Jan 18 – Apr 18
Jan 18 – Dec 18
Jan 18 – Aug 21
Jan 18 – Oct 22
Jan 18
Jan 18
Jan 18 – Mar 18
Jan 18 – Apr 18
Jan 18
Jan 18 – Dec 18
Jan 18
Jan 18
Jan 18 – May 22
Jan 18
Contract rates
1.059 – 1.079
1.340 – 1.355
1.112 – 1.137
1.304 – 1.335
1.303 – 1.432
16.864 – 33.050
11.035
1.811
347.016 – 351.136
363.959 – 365.056
10.662
1.169 – 1.221
322.75 – 323.58
0.881 – 0.891
16.1684 – 22.7142
1.1304
24 Obligations under leases
a) Finance lease commitments
The Group has finance leases for various items of plant and machinery; these leases have no terms of renewal or purchase options and escalation
clauses. Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:
Within one year
After one year but not more than five years
Future finance charges
Present value of finance lease obligation
2018
2017
Present value
of payments
£’000
3,168
5,760
8,928
Minimum
payments
£’000
3,409
5,952
9,361
(433)
8,928
Present value
of payments
£’000
1,536
3,209
4,745
Minimum
payments
£’000
1,712
3,399
5,111
(366)
4,745
b) Operating lease commitments where the Group is lessee
The Group has entered into commercial leases on certain properties, motor vehicles and items of small machinery. There are no restrictions
placed upon the Group by entering into these leases. Future commitments payable under non-cancellable operating leases as at 31 December
are as follows:
Within one year
After one year but not more than five years
More than five years
2018
£’000
45,183
80,970
10,879
137,032
2017
£’000
50,300
89,233
7,970
147,503
c) Operating lease receivables where the Group is lessor
The Group entered into commercial leases with customers on certain items of machinery. These leases have remaining terms of between one
and five years.
Future amounts receivable by the Group under the non-cancellable operating leases as at 31 December are as follows:
Within one year
152
2018
£’000
159
2017
£’000
158
25 Provisions
At 1 January 2018
Reclassification from other payables
Amounts reversed
Arising during the year
Utilised
Exchange adjustment
At 31 December 2018
Current 2018
Non-current 2018
Current 2017
Non-current 2017
Customer
contract
provisions
£’000
–
8,196
(1,100)
14,734
(5,645)
209
16,394
10,271
6,123
16,394
–
–
–
Retirement
benefit
obligation
£’000
5,904
–
–
1,440
(47)
119
7,416
–
7,416
7,416
–
5,904
5,904
Property
provisions
£’000
2,913
–
–
–
(173)
11
2,751
1,249
1,502
2,751
1,218
1,695
2,913
Other
provisions
£’000
463
–
–
–
–
7
470
470
–
470
463
–
463
Total
provisions
£’000
9,280
8,196
(1,100)
16,174
(5,865)
346
27,031
11,990
15,041
27,031
1,681
7,599
9,280
Customer contract provision
Following implementation of IFRS 15 and due to materiality of the provisions on difficult customer contracts, the provisions for difficult customer
contracts were reclassified from other payables to be disclosed as provisions. These provisions result from customer contracts where total cost
exceeds total revenue. Refer to note 3.1.1 for further details.
Retirement benefit obligation
The Group has a provision against the retirement benefit obligations in France under the Indemnités de Fin de Carrière (IFC) as described in note
2.13.3. Economic outflows under the obligation only occur if eligible employees reach the statutory retirement age whilst still in employment or
made redundant. The Group made £47,000 of payments during 2018 under this obligation (2017: £8,000).
In estimating the provision required, Management is required to make a number of assumptions. The key areas of estimation uncertainty are the
discount rate applied to future cash flows, the turnover rate of employed personnel and rate of salary increases over the length of their projected
employment. The level of unrealised actuarial gains or losses are sensitive to changes in the discount rate, which is affected by market conditions
and therefore subject to variation. Management makes use of an independent actuarial valuation in reaching its conclusions.
The net liability recognised in the Consolidated Balance Sheet at 31 December 2018 in respect of the Group’s French retirement benefit obligations
under the IFC was £7.4 million (2017: £5.9 million). Key movements during the year include a charge to the Consolidated Income Statement of
£0.4 million for the service cost and an actuarial loss taken through reserves of £1.0 million. The key driver of actuarial loss this year was the
change in demographic assumptions mainly due to change in staff turnover rates assumption in the actuarial valuation.
Property provisions
Assumptions used to calculate the property provisions are based on 100 per cent of the market value of the rental charges plus any contractual
dilapidation expenses on empty properties and the Directors’ best estimates of the likely time before the relevant leases can be reassigned or
sublet, which ranges between one and 15 years. The provisions in relation to the UK properties are discounted at a rate based upon the Bank of
England base rate. Those in respect of the European operations are discounted at a rate based on Euribor.
Other provisions
Included within other provisions are the residual estimated costs associated with elements of the comprehensive transformation of the Group’s
French business that occurred in 2014 for £0.1 million and the Line of Business restructure that occurred during 2016 for £0.1 million. The
remaining nature of the costs previously provided for primarily include retraining and resettlement costs for redundant employees are expected
to be utilised in 2019.
The 2014 transformation provision was based inter alia on assumptions concerning the duration of individual settlement payment programmes
and the uptake of retraining and resettlement packages. As disclosed last year, there remains some residual uncertainty relating to individual
legal challenges to the implementation of the Social Plan. These uncertainties arise both from technical arguments around whether the Social
Plan process followed was procedurally correct and had pre-existing approval from the multiple, potentially interested, regulatory authorities
and also from a challenge as to whether Computacenter France was damaging to the overall Group competitiveness and economic performance.
Having taken independent legal advice on this matter Management has applied judgements which it considers reasonable in establishing the
required provision. Management retains a provision, within the amount disclosed above, for legal expenses of £0.3 million directly related to these
individual legal challenges to termination settlements provided under the Social Plan.
153
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
26 Financial instruments
An explanation of the Group’s financial instrument risk management objectives, policies and strategies are set out in the Group Finance Director’s
review on pages 56 to 66.
Credit risk
The Group principally manages credit risk through management of customer credit limits. The credit limits are set for each customer based on
the creditworthiness of the customer and the anticipated levels of business activity. These limits are initially determined when the customer
account is first set up and are regularly monitored thereafter. The balance of trade receivables relates to customers for whom there is no recent
history of default.
In determining the recoverability of the trade receivables, the Group considers any change in the credit quality of the trade receivables from the
date the credit was initially granted up to the reporting date and considers forward-looking information to determine the appropriate expected
credit loss for the whole remaining life of the trade receivable. The maximum exposure on trade receivables, as at the reporting date, is their
carrying value.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, current asset
investment and forward currency contracts, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum
exposure equal to the carrying amount of cash and cash equivalents. The Group manages its counterparty credit risk by placing cash on deposit
across a panel of reputable banking institutions, with no more than £50.0 million deposited at any one time except for UK Government-backed
counterparties where the limit is £70.0 million.
Aside from the counterparty risk above, there are no significant concentrations of credit risk within the Group.
Interest rate risk
The Group finances its operations through a mixture of retained profits, bank borrowings, cash and short-term deposits and finance leases and
loans for certain customer contracts. The Group’s bank borrowings, existing committed and uncommitted facilities and deposits are at floating
rates. No interest rate derivative contracts have been entered into. If long-term borrowings were to be utilised in the future, the Group’s policy
would be to maintain these borrowings at fixed rates to limit the Group’s exposure to interest rate fluctuations.
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the
Group’s profit before tax (through the impact on floating rate borrowings). There is no impact on the Group’s equity.
2018
Sterling
Euro
US dollars
2017
Sterling
Euro
US dollars
Change in
basis points
Effect on profit
before tax
£’000
+25
+25
+25
+25
+25
+25
(153)
150
26
307
135
36
The impact of a reasonable possible decrease to the same range shown in the table would result in an opposite impact on the profit before tax of
the same magnitude.
Fair values
The carrying value of the Group’s short-term receivables and payables is a reasonable approximation of their fair values. The fair value of all other
financial instruments carried within the Consolidated Financial Statements is not materially different from their carrying amount.
Exchange rate sensitivity
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies in which sales,
purchases and receivables are denominated and the respective functional currencies of Group companies. The functional currencies of material
overseas subsidiaries are primarily the euro (€), US dollar (US$), South African rand (ZAR) and Swiss franc (CHF).
The Group’s risk management policy is to hedge all of its expected foreign currency exposure in respect of sales and purchases as soon as these
are committed. The Group uses forward exchange contracts to hedge its currency risk. The principal currencies hedged by forward foreign
exchange contracts are $, €, ZAR and HUF.
154
However, the hedge accounting is mainly applied to the expected trading cash flows denominated in ZAR, HUF and € where the exposure extends
beyond one year and there is a strong expectation that the expected future foreign currency cash flow will occur. The Group uses forward foreign
exchange contracts, designated as cash flow hedges, to hedge these cash flows. When a commitment is entered into, forward foreign exchange
contracts are normally used to increase the hedge to 100 per cent of the expected exposure although between 80 per cent and 110 per cent of the
expected exposure should be hedged to meet risk management policy. The Group designates all of its forward foreign exchange contracts to
hedge its currency risk and applies a hedge ratio of 1:1. The Group’s policy is for the critical terms of the forward exchange contracts to align with
the hedged item.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency,
amount and timing of their respective cash flows. The Group assesses whether the derivative designated in each hedging relationship is expected
to be and has been effective in offsetting changes in cash flows of the hedged item using the hypothetical derivative method.
In these hedge relationships, the main sources of ineffectiveness are:
•
the effect of the counterparties’ and the Group’s own credit risk on the fair value of the forward foreign exchange contracts, which is not
reflected in the change in the fair value of the hedged cash flows attributable to the change in exchange rates;
• actual cash flows in foreign currencies varying from forecast cash flows; and
• changes in the timing of the hedged transactions.
Other than differences arising from the translation of results of operations outside of the Group’s functional currency, reasonably foreseeable
movements in the exchange rates of +10 per cent or -10 per cent would not have a material impact on the Group’s profit before tax or equity.
The summary quantitative data about the Group’s exposure to currency risk as reported to the management of the Group is as follows:
Trade and other receivables
Trade and other payables
31 December 2018
£’000
31 December 2017
£’000
USD
272,944
(260,980)
EUR
755,899
(725,789)
USD
157,124
(136,309)
EUR
557,655
(484,941)
Net statement of financial position
11,964
30,110
20,815
72,714
Forward exchange contracts
Net exposure
111,803
(20,092)
188,881
(20,367)
123,767
10,018
209,696
52,347
Liquidity risk
The table below summarises the maturity profile of the Group’s financial liabilities as at 31 December based on contractual undiscounted
payments:
Year ended 31 December 2018
Financial liabilities
Derivative financial instruments
Trade and other payables
Year ended 31 December 2017
Financial liabilities
Derivative financial instruments
Trade and other payables
On demand
£’000
<3 months
£’000
3–12 months
£’000
1–5 years
£’000
Total
£’000
–
–
–
–
7,645
612
1,142,628
1,150,885
16,788
–
–
16,788
118,729
–
–
118,729
143,162
612
1,142,628
1,286,402
On demand
£’000
<3 months
£’000
3–12 months
£’000
1–5 years
£’000
Total
£’000
6
–
–
6
982
–
791,980
792,962
2,945
1,196
–
4,141
11,852
–
–
11,852
15,785
1,196
791,980
808,961
155
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
26 Financial instruments continued
Fair value measurements recognised in the Consolidated Balance Sheet
Financial instruments which are recognised at fair value subsequent to initial recognition are grouped into Levels 1 to 3 based on the degree to
which the fair value is observable. The three levels are defined as follows:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
Derivative financial instruments – forward currency contracts
At 31 December 2018 the Group had forward currency contracts, which were measured at Level 2 fair value subsequent to initial recognition, to
the value of a net asset of £3,239,000 (2017: £7,013,000).
The realised gains from forward currency contracts in the year to 31 December 2018 of £6,510,000 (2017: £6,293,000) with a deferred tax liability
of £1,107,000 (2017: £1,070,000), are offset by broadly equivalent realised losses on the related underlying transactions.
Contingent consideration
The contingent consideration that resulted from the acquisition of FusionStorm of $20.0 million, were measured at Level 3 fair value, subsequent
to initial recognition. The Group used discounted cash flows (DCF) as a valuation technique to derive fair value of the contingent consideration as
at 31 December 2018. Having considered a range of possible earn out scenarios, management determined that a full accrual of $20.0 million
discounted to £14.6 million using a weighted average discount rate of 11 per cent, should be recorded as contingent consideration. This estimate
is not considered to be sensitive to reasonable changes in underlying assumptions. The contingent consideration of £14.6 million is included in
Trade and other payables as at 31 December 2018.
27 Capital management
Computacenter’s approach to capital management is to ensure that the Group has a strong capital base to support the development of the
business and to maintain a strong credit rating, whilst aiming to maximise shareholder value. Consistent with the Group’s aim to maximise return
to shareholders, the Company’s Dividend Policy is to maintain a dividend cover of between 2 to 2.5 times. In 2018 the cover was 2.5 times on an
adjusted1 profit basis (2017: 2.5 times).
The Group’s capital base is primarily utilised to finance its fixed assets and working capital requirements. The Group seeks to optimise the use of
working capital and improve its cash flow. As a consequence, the UK has sourced an increasing proportion of its product business via distributors
in order to reduce the working capital requirements of the business.
Capital is allocated across the Group in order to minimise the Group’s exposure to exchange rates. Each country finances its own working capital
requirements, typically resulting in borrowings in France with cash on deposit in the UK and Germany. A notional cash pooling arrangement, which
was introduced in 2013, expired in early 2017. Subsequent to expiry, an internal cash pooling arrangement was implemented which utilises
internal Group financing arrangements.
In certain circumstances, the Group enters into customer contracts that are financed by leases, which are secured only on the assets that they
finance, or loans. Whilst the outstanding amounts of this CSF are included within net funds3 for statutory reporting purposes, the Group excludes
this CSF when managing the net funds3 of the business as this outstanding financing is matched by committed future revenues. These financing
facilities, which are committed, are thus outside of the normal working capital requirements of the Group’s product resale and services activities.
In certain circumstances, the Group deposits its funds in short-term investments that do not fulfil the criteria to be classified as cash and cash
equivalents. The Group considers these deposits when managing the net funds3 of the business, and accordingly includes these deposits within
net funds3 excluding CSF.
Capital, defined as net funds3, that the Group monitors is disclosed in note 30.
Each operating country manages its working capital in line with Group policies. The key components of working capital, i.e. trade receivables,
inventory and trade payables, are managed in accordance with an agreed number of days targeted in the budget process, in order to ensure
efficient capital usage.
An important element of the process of managing capital efficiently is to ensure that each operating country rewards behaviour at an account
manager and account director level to minimise working capital, at a transactional level. This is achieved by increasing commission payments
for early payment by customers and reduced commission payments for late payment by customers, which encourages appropriate behaviour.
The Group regularly reviews the adequacy of its facilities against any foreseeable peak borrowing requirement. See note 20 for details on
uncommitted overdraft facilities available to the Group.
28 Issued capital and reserves
Authorised share capital
In accordance with the Companies Act 2006, the Company no longer has an authorised share capital. The Company’s Articles of Association has
been amended to reflect this change.
156
Issued share capital – ordinary shares
Issued and fully paid
At 1 January 2018
Cancellation of deferred shares
At 31 December 2018
75⁄9p ordinary
shares
No.’000
122,688
–
122,688
0.01p
Deferred shares
No.’000
292,944
(292,944)
–
Total
£’000
9,299
(29)
9,270
During the year, the issued share capital remained unchanged.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the general
meetings of the Company. On a winding up of the Company, holders of ordinary shares may be entitled to the residual assets of the Company.
The Company has a number of share option schemes under which options to subscribe for the Company’s shares have been granted to Executive
Directors and certain senior management (note 29).
Cancellation of deferred shares
The Company announced on 14 December 2018 that, in accordance with the provisions of its articles of association, 228,443,966 deferred shares,
being all of the outstanding deferred shares held by deferred shareholders in connection with the return of value in 2013 and the return of value in
2015, were transferred to the Company for nil consideration and cancelled on 13 December 2018. The Company also announced, on the same date,
that the 64,500,230 deferred shares held in treasury were cancelled by the Company on 13 December 2018.
Share premium
The share premium account is used to record the aggregate amount or value of premiums paid when the Company’s shares are issued/redeemed
at a premium.
Capital redemption reserve
The capital redemption reserve is used to maintain the Company’s capital following the purchase and cancellation of its own shares. During the
year the Company repurchased nil of its own shares for cancellation (2017: nil).
Own shares held
Own shares held comprise the following:
i) Computacenter Employee Share Ownership Plan
Shares in the Parent undertaking comprise 1,411,245 (2017: 1,588,994) 75 ⁄9 pence ordinary shares of Computacenter plc purchased by the
Computacenter Employee Share Ownership Plan (the Plan). The principal purpose of the Plan is to be funded with shares that will satisfy
discretionary executive share plans. The number of shares held represents 1.15 per cent (2017: 1.3 per cent) of the Company’s issued share capital.
Since 31 December 2002, the definition of beneficiaries under the ESOP Trust has been expanded to include employees who have been awarded
options to acquire ordinary shares of 75 ⁄9 pence each in Computacenter plc under other employee share plans of the Group, namely the
Computacenter Service Group plc Approved Executive Share Option Plan, the Computacenter plc Employee Share Option Scheme 1998, the
Computacenter Service Group plc Unapproved Executive Share Option Scheme, the Computacenter Performance Related Share Option Scheme
1998, the Computacenter plc Sharesave Plus Scheme and any future similar share ownership schemes.
All costs incurred by the Plan are settled directly by Computacenter (UK) Limited and charged in the accounts as incurred.
The Plan Trustees have waived the dividends receivable in respect of 1,411,245 75 ⁄9 pence ordinary shares (2017: 1,588,994) that it owns which are
all unallocated shares.
ii) Computacenter Qualifying Employee Share Trust (‘the Quest’)
The total shares held are 336,181 (2017: 188,822) 75 ⁄9 pence ordinary shares, which represents 0.27 per cent (2017: 0.15 per cent) of the Company’s
issued share capital. All of these shares will continue to be held by the Quest until such time as the Sharesave options granted against them are
exercised. The market value of these shares at 31 December 2018 was £3,563,519 (2017: £2,177,118). The Quest Trustees have waived dividends in
respect of all of these shares. During the year the Quest subscribed for nil 75 ⁄9 pence ordinary shares (2017: nil).
iii) Treasury Shares
On 23 January 2018, the Company published details of the timing and structure of a Return of Value by way of a shareholder circular (the ‘Circular’).
On 13 February 2018, the Company announced the results of the Tender Offer set out in the Circular, which closed on 9 February 2018.
A total of 8,546,861 ordinary shares were purchased at a price per ordinary share of 1,170 pence, for a total cost of £99,998,273.70. This
represented approximately 6.97 per cent of the issued share capital of the Company as at 31 December 2017.
157
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
28 Issued capital and reserves continued
The Company holds the ordinary shares purchased pursuant to the Tender Offer in treasury. Immediately following the purchase, the Company’s
issued share capital consisted of 122,687,970 ordinary shares of 75 ⁄9 pence each, each carrying one voting right, of which the Company held
8,546,861 ordinary shares in treasury.
As at 31 December 2018, the total number of voting rights in the Company which may be used by shareholders as the denominator for the
calculations by which they can determine if they are required to notify their interest in, or a change to their interest in the Company, under the
Disclosure and Transparency Rules, is 114,141,109. The percentage of voting rights attributable to those shares it holds in treasury following the
share buy-back is 6.97 per cent.
Translation and hedging reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial Statements of
foreign subsidiaries. The hedging reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in
cash flow hedges.
29 Share-based payments
Executive share option scheme
During the year, nil options were exercised with respect to 75 ⁄9 pence ordinary shares (2017: nil) at a nominal value of nil (2017: £nil) at an
aggregate premium of nil (2017: £nil). Under the Computacenter Employee Share Option Scheme 1998 and the Computacenter Services Group
Executive Share Scheme, options in respect of nil (2017: nil) shares lapsed.
Computacenter Performance Share Plan (PSP)
Under the Computacenter PSP, shares granted will be subject to certain performance conditions as described in the Annual Remuneration Report.
During the year 540,324 (2017: 783,750) shares were awarded, 469,256 (2017: 542,692) were exercised and 216,046 (2017: 226,351) lapsed. At
31 December 2018 the number of shares outstanding was as follows:
Date of grant
17/03/2011
23/03/2012
03/05/2013
20/03/2014
26/03/2015
22/03/2016
22/03/2017
21/03/2018
21/03/2018
21/03/2018
21/03/2018
18/05/2018
01/10/2018
Maturity date
17/03/2014
23/03/2015
03/05/2016
20/03/2017
26/03/2018
22/03/2019
22/03/2020
21/03/2019
21/03/2020
21/03/2021
21/03/2023
18/05/2021
21/03/2021
Share price at
date of grant
423.00p
433.00p
440.00p
682.50p
720.00p
847.00p
736.50p
1,182.67p
1,182.67p
1,182.67p
1,182.67p
1,314.00p
1,281.30p
2018
Number
outstanding
–
2,285
21,306
81,239
76,156
510,666
666,724
19,340
19,341
275,339
139,092
22,334
14,985
1,848,807
2017
Number
outstanding
2,660
2,285
29,739
91,789
633,118
515,209
718,985
–
–
–
–
–
–
1,993,785
The weighted average share price at the date of exercise for the options exercised is £11.75 (2017: £7.30).
The weighted average remaining contractual life for the options outstanding as at 31 December 2018 is 1.2 years (2017: 1.2 years).
Computacenter Sharesave Scheme (SAYE)
The Group operates a Sharesave Scheme which is available to all employees and full time Executive Directors of the Group and its subsidiaries
who have worked for a qualifying period. All options granted under this scheme are satisfied at exercise by way of a transfer of shares from the
Computacenter Qualifying Employee Share Trust. During the year 865,055 (2017: 1,129,930) options were granted with a fair value of £2,079,828
(2017: £3,313,733).
158
Under the scheme the following options have been granted and are outstanding at the year end:
Date of grant
October 2012
October 2013
October 2014
October 2014
October 2015
October 2015
October 2016
October 2016
October 2017
October 2017
October 2018
October 2018
Exercisable between
01/12/2017 – 31/05/2018
01/12/2018 – 31/05/2019
01/12/2017 – 31/05/2018
01/12/2019 – 31/05/2020
01/12/2018 – 31/05/2019
01/12/2020 – 31/05/2021
01/12/2019 – 31/05/2020
01/12/2021 – 31/05/2022
01/12/2020 – 01/06/2021
01/12/2022 – 01/06/2023
01/12/2021 – 01/06/2022
01/12/2023 – 01/06/2024
Share
price
343.00p
430.00p
589.50p
524.00p
675.00p
600.00p
649.00p
577.00p
888.00p
789.00p
1,186.00p
1,054.00p
2018
Number
outstanding
–
186,185
–
569,299
124,962
599,478
269,886
566,920
331,750
705,644
304,283
551,520
4,209,927
2017
Number
outstanding
86,996
541,181
81,317
608,800
309,746
647,698
297,351
609,627
358,724
766,025
–
–
4,307,465
The following table illustrates the No. and WAEP of share options for the Sharesave Scheme:
Sharesave Scheme
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year***
Outstanding at the end of the year
2018
No.
4,307,465
865,055
(241,775)
(720,818)
4,209,927
2018
WAEP
£6.26
£11.01
£6.94
£5.01
£7.41
2017
No.
4,099,366
1,129,930
(213,777)
(708,054)
4,307,465
2017
WAEP
£4.28
£8.21
£5.89
£4.58
£6.26
Exercisable at the end of the year
321,346
£5.40
167,149
£5.44
Note
*** The weighted average share price at the date of exercise for the options exercised is £10.94 (2017: £10.08).
The weighted average remaining contractual life for the options outstanding as at 31 December 2018 is 3.0 years (2017: 3.2 years).
159
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
29 Share-based payments continued
The fair value of the PSP, DBP and SAYE plans are estimated as at the date of grant using the Black-Scholes valuation model. The following tables
give the assumptions made during the year ended 31 December 2018 and 31 December 2017:
2018
Nature of the
arrangement
Date of grant
Number of
instruments granted
Exercise price
Share price at
date of grant
Contractual life
(years)
Vesting conditions
Expected volatility
Expected option life
at grant date (years)
Risk-free interest rate
Dividend yield
Fair value per granted
instrument
determined at grant
date
2017
PSP
scheme
SAYE
scheme
21/03/2018 21/03/2018 21/03/2018 18/05/2018 01/10/2018 21/03/2018 21/03/2018 24/10/2018 24/10/2018
PSP
scheme
PSP
scheme
PSP
scheme
PSP
scheme
SAYE
scheme
DBP
scheme
DBP
scheme
233,823
nil
139,092
nil
83,793
nil
29,950
nil
14,985
nil
19,340
nil
19,341
nil
309,211
£11.86
555,844
£10.54
£11.83
£11.83
£11.83
£13.14
£12.81
£11.83
£11.83
£12.44
£12.44
3
See note 1
below
n/a
3
n/a
2%
5
See the Annual
Remuneration
Report on
page 74 in 2017
Annual Report
and Accounts
n/a
3
See the Annual
Remuneration
Report on
page 74 in 2017
Annual Report
and Accounts
n/a
3
3
See note 1
below
n/a
See note 1
below
n/a
1
See the Annual
Remuneration
Report on
page 74 in 2017
Annual Report
and Accounts
n/a
2
See the Annual
Remuneration
Report on
page 74 in 2017
Annual Report
and Accounts
n/a
3
5
Three-year
service period
and savings
requirement
29.1%
Five-year
service period
and savings
requirement
27.9%
5
n/a
2%
3
n/a
2%
3
n/a
1.8%
3
n/a
2%
1
n/a
2%
2
n/a
2%
3
2.23%
2.34%
5
2.23%
2.34%
£11.14
£10.71
£11.14
£12.44
£11.31
£11.59
£11.36
£2.65
£3.40
Nature of the arrangement
Date of grant
Number of instruments granted
Exercise price
Share price at date of grant
Contractual life (years)
Vesting conditions
Expected volatility
Expected option life at grant date (years)
Risk-free interest rate
Dividend yield
Fair value per granted instrument determined at grant date
PSP
scheme
04/07/2017
62,150
£nil
£8.04
3
See the Annual
Remuneration
Report on
page 75 in 2016
Annual Report
and Accounts
n/a
3
n/a
3.0%
£7.37
PSP
scheme
18/09/2017
10,648
£nil
£9.86
3
See note 1
below
n/a
3
n/a
2.4%
£9.18
PSP
scheme
22/03/2017
335,235
£nil
£7.37
3
See the Annual
Remuneration
Report on
page 75 in 2016
Annual Report
and Accounts
n/a
3
n/a
3.2%
£6.69
PSP
scheme
22/03/2017
375,717
£nil
£7.37
3
SAYE
scheme
01/12/2017
362,917
£8.88
£10.78
3
SAYE
scheme
01/12/2017
767,013
£7.89
£10.78
5
Three-year
service period
and savings
requirement
25.3%
3
0.74%
2.5%
£2.36
Five-year
service period
and savings
requirement
28.4%
5
0.74%
2.5%
£3.21
See note 1
below
n/a
3
n/a
3.2%
£6.69
Note
1.
Issued under the terms of the Computacenter Performance Share Plan 2005, as amended at the AGM held on 19 May 2015. One-quarter of the shares will vest if the compound annual EPS
growth over the performance period equals 5 per cent per annum. One-half of the shares will vest if the compound annual EPS growth over the performance period equals 7.5 per cent
and will vest in full if the compound annual EPS growth over the performance period equals 10 per cent. If the compound annual EPS growth over the performance period is between 5
and 10 per cent, shares awarded will vest on a straight-line basis. The performance period usually covers a period of three years from 1 January of the year the award is granted.
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur.
The expected volatility reflects the assumption that the recent historical volatility is indicative of future trends, which may also not necessarily be
the actual outcome. No other features of the options granted were incorporated into the measurement of fair value.
160
30 Analysis of changes in net funds
Cash and short-term deposits
Bank overdraft
Cash and cash equivalents
Bank loans
Net funds excluding CSF
CSF leases
Total CSF
Net funds
Cash and short-term deposits
Bank overdraft
Cash and cash equivalents
Current asset investments
Bank loans
Net funds excluding CSF
CSF leases
Customer-specific other loans
Total CSF
Net funds
At
1 January
2018
£’000
206,605
(6)
206,599
(10,667)
195,932
(4,745)
(4,745)
191,187
At
1 January
2017
£’000
118,676
–
118,676
30,000
(294)
148,382
(3,477)
(413)
(3,890)
144,492
Cash flows
in year
£’000
(7,743)
6
(7,737)
(122,946)
(130,683)
(4,322)
(4,322)
(135,005)
Cash flows
in year
£’000
84,708
(6)
84,702
(30,000)
(10,297)
44,405
(1,486)
338
(1,148)
43,257
Non-cash
flow
£’000
–
–
–
–
–
433
433
433
Non-cash
flow
£’000
–
–
–
–
–
–
366
–
366
366
Exchange
differences
£’000
1,580
–
1,580
(621)
959
(294)
(294)
665
Exchange
differences
£’000
3,221
–
3,221
–
(76)
3,145
(148)
75
(73)
3,072
At
31 December
2018
£’000
200,442
–
200,442
(134,234)
66,208
(8,928)
(8,928)
57,280
At
31 December
2017
£’000
206,605
(6)
206,599
–
(10,667)
195,932
(4,745)
–
(4,745)
191,187
31 Capital commitments
At 31 December 2018, the Group held significant commitments for capital expenditure of £4.3 million in relation to the fit-out of the new German
headquarters and Integration Center in Kerpen (2017: £25.3 million).
161
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2018
32 Pensions and other post-employment benefit plans
The Group has a defined contribution pension plan, covering substantially all of its employees in the UK. The amount recognised as an expense for
this plan is detailed in note 7. Details of the Retirement Benefit obligation for Computacenter France are given below.
Total defined benefit liability
Movements in total defined benefit liability
Balance at 1 January
Included in Consolidated Income Statement
Current service cost
Interest cost
Included in Consolidated Statement of Comprehensive Income
Remeasurements loss/(gain):
Actuarial loss/(gain) arising from:
– Changes in demographic assumptions
– Change in financial assumptions
– Experience adjustment
Effect of movements in exchange rates
Other
Contributions paid by the employer
Benefits paid
Balance at 31 December
Actuarial assumptions
The following are the principal actuarial assumptions at 31 December (expressed as weighted averages):
Discount rate
Future salary growth
Turnover rates:
– Non-managers
– Supervisors
– Executives
2018
£’000
7,416
2018
£’000
5,904
423
75
498
942
1,279
(144)
(193)
119
1,061
(47)
(47)
7,416
2018
%
1.50
1.50
17.20
12.60
10.20
2017
£’000
5,904
2017
£’000
4,714
361
63
424
593
–
–
593
182
775
(9)
(9)
5,904
2017
%
1.30
1.50
13.00
9.60
20.30
At 31 December 2018, the discount rate used was 1.5 per cent (2017: 1.3 per cent) with reference to the iBoxx € Corporate AA 10y + index.
Sensitivity analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have
affected the defined benefit obligation by the amounts shown below.
Discount rate (1 per cent movement)
Future salary growth (1 per cent movement)
Turnover rates (1 per cent movement)
31 December 2018
31 December 2017
Increase
862
(1,006)
586
Decrease
(1,014)
872
(658)
Increase
695
(810)
483
Decrease
(819)
702
(544)
Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the
sensitivity of the assumptions shown.
162
33 Related party transactions
During the year the Group entered into transactions, in the ordinary course of business, with related parties. Transactions entered into are as
described below:
• Biomni provides the Computacenter e-procurement system used by many of Computacenter’s major customers. An annual fee has been
agreed on a commercial basis for use of the software for each installation. Both PJ Ogden and PW Hulme are Directors of and have a material
interest in Biomni Limited; and
• Triage Services Limited mainly provides IT hardware repair services to many of Computacenter’s customers. MJ Norris is a Director of and has
a material interest in Triage Services Limited.
The table below provides the total amount of transactions that have been entered into with related parties for the relevant financial year:
Biomni Limited
Sales
to related
parties
£’000
23
Purchases
from related
parties
£’000
838
Amounts owed
to related
parties
£’000
–
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s-length transactions. Outstanding
balances at the year end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party
receivables. The Group has not recognised any provision for doubtful debts relating to amounts owed by related parties. This assessment is
undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
Compensation of key management personnel (including Directors)
The Board of Directors is identified as the Group’s key management personnel. Please refer to the information given in the remuneration table
in the Annual Remuneration Report on page 91 for details of compensation given to the Group’s key management personnel. A summary of the
compensation of key management personnel is provided below:
Short-term employee benefits
Social security costs
Share-based payment transactions
Pension costs
Total compensation paid to key management personnel
2018
£’000
1,791
433
1,367
65
3,656
2017
£’000
1,842
383
1,563
51
3,839
The interest of the key management personnel in the Group’s share incentive schemes are disclosed in the Annual Remuneration Report on pages
94 to 95.
34 Contingent liabilities
The Company has given a guarantee in the normal course of business to suppliers of subsidiaries undertaking for an amount not exceeding
£158.3 million (2017: £117.6 million).
163
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Note
2018
£’000
2017
£’000
3
4
5
6
7
7
42,221
15,036
319,527
376,784
51,922
691
212
52,825
429,609
13,929
577
14,506
86,583
86,583
101,089
328,520
9,270
3,942
74,957
55,990
(113,474)
297,835
328,520
50,721
16,071
206,813
273,605
169,870
–
154
170,024
443,629
–
546
546
–
–
546
443,083
9,299
3,913
74,957
55,990
(11,360)
310,284
443,083
Company Balance Sheet
As at 31 December 2018
Non-current assets
Intangible assets
Investment property
Investments
Current assets
Debtors
Prepayments
Cash at bank and in hand
Total assets
Current liabilities
Financial liabilities
Income tax payable
Non-current liabilities
Financial liabilities
Total liabilities
Net assets
Capital and reserves
Issued share capital
Share premium
Capital redemption reserve
Merger reserve
Own shares held
Retained earnings
Shareholders’ equity
Approved by the Board on 11 March 2019
MJ Norris
Chief Executive Officer
FA Conophy
Group Finance Director
164
Company Statement
of Changes in Equity
For the year ended 31 December 2018
At 1 January 2018
Profit for the year
Total comprehensive income for the year
Exercise of options
Share options granted to employees
of subsidiary companies
Purchase of own shares
Return of Value (RoV)
Expense relating to RoV
Cancellation of deferred shares
Equity dividends
At 31 December 2018
At 1 January 2017
Profit for the year
Total comprehensive income for the year
Exercise of options
Share options granted to employees
of subsidiary companies
Purchase of own shares
Equity dividends
At 31 December 2017
Issued
share
capital
£’000
9,299
–
–
–
–
–
–
–
(29)
–
9,270
9,299
–
–
–
–
–
–
9,299
Share
premium
£’000
3,913
–
–
–
–
–
–
–
29
–
3,942
3,913
–
–
–
–
–
–
3,913
Capital
redemption
reserve
£’000
74,957
–
–
–
–
–
–
–
–
–
74,957
74,957
–
–
–
–
–
–
74,957
Merger
reserve
£’000
55,990
–
–
–
–
–
–
–
–
–
55,990
55,990
–
–
–
–
–
–
55,990
Own
shares
held
£’000
(11,360)
–
–
11,158
–
(13,274)
(99,998)
–
–
–
(113,474)
(12,115)
–
–
9,613
–
(8,858)
–
(11,360)
Retained
earnings
£’000
310,284
20,794
20,794
(7,592)
6,425
–
–
(1,196)
–
(30,880)
297,835
274,625
62,960
62,960
(6,389)
6,200
–
(27,112)
310,284
Total
shareholders’
equity
£’000
443,083
20,794
20,794
3,566
6,425
(13,274)
(99,998)
(1,196)
–
(30,880)
328,520
406,669
62,960
62,960
3,224
6,200
(8,858)
(27,112)
443,083
165
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Notes to the Company
Financial Statements
For the year ended 31 December 2018
1 Authorisation of Financial Statements and statement of compliance with FRS 101
The Parent Company Financial Statements of Computacenter plc (the Company) for the year ended 31 December 2018 were authorised for issue by
the Board of Directors on 11 March 2019 and the Balance Sheet was signed on the Board’s behalf by MJ Norris and FA Conophy. Computacenter plc is a
public limited company incorporated and domiciled in England and Wales. The Company’s ordinary shares are traded on the London Stock Exchange.
These Financial Statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). The
Financial Statements are prepared under the historical cost convention.
No profit and loss account is presented by the Company as permitted by Section 408 of the Companies Act 2006. The results of Computacenter plc are
included in the Consolidated Financial Statements of Computacenter plc which are available from Computacenter plc, Hatfield Business Park, Hatfield
Avenue, Hatfield, AL10 9TW. The accounting policies which follow set out those policies which apply in preparing the Financial Statements for the year
ended 31 December 2018. The Financial Statements are prepared in pound sterling and are rounded to the nearest thousand pounds (£’000).
2 Summary of significant accounting policies
Basis of preparation
The Company has taken advantage of the following disclosure exemptions under FRS 101:
(a)
(b)
(c)
(e)
(f)
(i)
(ii)
(iii)
(iv)
(v)
(g)
(h)
(i)
(j)
(k)
(l)
the requirements of paragraphs 45(b) and 46-52 of IFRS 2 Share-based Payment;
the requirements of paragraphs 62, B64(d), B64(e), B64(g), B64(h), B64(j) to B64(m), B64(n)(ii), B64 (o)(ii), B64(p), B64(q)(ii), B66 and B67
of IFRS 3 Business Combinations;
the requirements of IFRS 7 Financial Instruments: Disclosures;
the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of:
paragraph 79(a)(iv) of IAS 1;
paragraph 73(e) of IAS 16 Property, Plant and Equipment;
paragraph 118(e) of IAS 38 Intangible Assets;
paragraphs 76 and 79(d) of IAS 40 Investment Property; and
paragraph 50 of IAS 41 Agriculture.
the requirements of paragraphs 10(d), 10(f), 39(c) and 134-136 of IAS 1 Presentation of Financial Statements;
the requirements of IAS 7 Statement of Cash Flows;
the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
the requirements of paragraph 17 of IAS 24 Related Party Disclosures;
the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members
of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; and
the requirements of paragraphs 134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of Assets.
The basis for all of the above exemptions is because equivalent disclosures are included in the Consolidated Financial Statements of the Group in
which the entity is consolidated.
Intellectual property
Licences purchased in respect of intellectual property are capitalised, classified as an intangible asset on the Balance Sheet and amortised on
a straight-line basis over the period of the licence, normally 20 years.
Depreciation of fixed assets
Freehold land is not depreciated. Depreciation is provided on all other tangible fixed assets at rates calculated to write off the cost, less
estimated residual value, of each asset evenly over its expected useful life, as follows:
Freehold buildings
25 years
Investment property
Investment property is defined as land and/or buildings held by the Company to earn rental income or for capital appreciation or both, rather than
for sale in the ordinary course of business or for use in supply of goods or services or for administrative purposes. The Company recognises any
part of an owned (or leased under a finance lease) property that is leased to third-parties as investment property, unless it represents an
insignificant portion of the property.
Investment property is measured initially at cost including transaction costs. Subsequent to initial recognition, the Company elected to measure
investment property at cost less accumulated depreciation and accumulated impairment losses, if any (i.e. applying the same accounting
policies (including useful lives) as for property, plant and equipment). The fair values, which reflect the market conditions at the balance sheet
date, are disclosed in note 4.
Investments
Fixed asset investments are shown at cost less provision for impairment.
166
Impairment of assets
The carrying values of assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not
be recoverable.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the profit and
loss account.
Share-based payment transactions
The accounting policy in relation to share-based payment transactions is disclosed in full in the Consolidated Financial Statements. In addition to
that, the financial effect of awards by the Company of options over its equity shares to employees of subsidiary undertakings are recognised by
the Company in its individual Financial Statements as an increase in its investment in subsidiaries with a credit to equity equivalent to the IFRS 2
cost in subsidiary undertakings.
On transition to IFRS, the Group did not apply the measurement rules of IFRS 2 to equity-settled awards granted before 7 November 2002 or
granted after that date and vested before 1 January 2005. However, later modifications of such equity instruments are measured under IFRS 2.
Taxation
Corporation tax payable is provided on taxable profits at the current tax rate. Where Group relief is surrendered from other subsidiaries in the
Group, the Company is required to pay to the surrendering company an amount equal to the loss surrendered multiplied by the current tax rate.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions
or events that result in an obligation to pay more, or a right to pay less, tax in the future have occurred at the balance sheet date.
Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in periods in which timing differences reverse,
based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Own shares held
Shares in the Company, held by the Company, are classified in shareholders’ equity as ‘own shares held’ and are recognised at cost. Consideration
received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original cost being
taken to revenue reserves. No gain or loss is recognised in the performance statements on the purchase, sale, issue or cancellation of equity shares.
Merger accounting and the merger reserve
Prior to 1 January 2013, certain significant business combinations were accounted for using the ‘pooling of interests method’ (or merger
accounting), which treats the merged groups as if they had been combined throughout the current and comparative accounting periods. Merger
accounting principles for these combinations gave rise to a merger reserve in the Consolidated Balance Sheet, being the difference between the
nominal value of new shares issued by the Parent Company for the acquisition of the shares of the subsidiary and the subsidiary’s own share
capital and share premium account. These transactions have not been restated, as permitted by the IFRS 1 transitional arrangements.
The merger reserve is also used where more than 90 per cent of the shares in a subsidiary are acquired and the consideration includes the issue
of new shares by the Company, thereby attracting merger relief under the Companies Act 1985 and, from 1 October 2009, the Companies Act 2006.
3
Intangible assets
Cost
At 1 January 2018 and 31 December 2018
Accumulated amortisation
At 1 January 2018
Charge in the year
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
Intellectual
property
£’000
169,737
119,016
8,500
127,516
42,221
50,721
167
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018
Notes to the Company Financial Statements continued
For the year ended 31 December 2018
4
Investment properties
Cost
At 1 January 2018 and 31 December 2018
Accumulated depreciation
At 1 January 2018
Charge in the year
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
Freehold land
and buildings
£’000
42,350
26,279
1,035
27,314
15,036
16,071
Investment property represents a building owned by the Company that is leased to Computacenter (UK) Ltd, a fully owned subsidiary of the Company.
The fair value of investment property amounted to £37.6 million at 31 December 2018 (2017: £37.3 million). The fair values for disclosure purposes
have been determined using either the support of qualified independent external valuers or by internal valuers with the necessary recognised
and relevant professional qualification, applying a combination of the present value of future cash flows and observable market values of
comparable properties. Management’s most recent external valuation of this property took place in February 2016. As this property is leased to
a subsidiary and is carried at depreciated cost value, an updated external valuation was not sought at 31 December 2018.
5
Investments
Cost
At 1 January 2018
Additions
Share-based payments
At 31 December 2018
Amounts provided
At 1 January 2018 and at 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
Investments in
subsidiary
undertakings
£’000
Loans to
subsidiary
undertakings
£’000
Investment
£’000
Total
£’000
322,802
106,289
6,425
435,516
2,754
–
–
2,754
25
–
–
25
325,581
106,289
6,425
438,295
115,989
2,754
25
118,768
319,527
206,813
–
–
–
–
319,527
206,813
Details of the principal investments at 31 December in which the Company holds more than 20 per cent of the nominal value of ordinary share
capital are given in note 17 to the Consolidated Financial Statements.
6 Debtors
Amount owed by subsidiary undertaking
Other debtors
Deferred tax
168
2018
£’000
51,783
127
12
51,922
2017
£’000
169,729
127
14
169,870
7 Financial liabilities
Current
Bank loan
Non-current
Bank loan
2018
£’000
13,929
86,583
2017
£’000
–
–
There are no material differences between the fair value of financial liabilities and their book value.
Bank loans
The loan of £100.3 million was drawn down at 2.05 per cent interest rate to finance the acquisition of FusionStorm (see note 17 in the Consolidated
Financial Statements of the Group). Repayment of this loan will commence in H1 2019 and will continue for seven years.
8 Contingent liabilities
The Company has given a guarantee in the normal course of business to suppliers of subsidiaries undertaking for an amount not exceeding
£158.3 million (2017: £117.6 million).
The Company has provided cross guarantees in respect of certain bank loans and overdrafts of its subsidiary undertakings. The amount
outstanding at 31 December 2018 is £nil (2017: £nil).
9 Auditor’s remuneration
All auditor’s remuneration is borne by Computacenter (UK) Ltd, a fully-owned UK subsidiary of the Company. The amount payable to the auditor
in respect of the audit of the Company is £115,000 (2017: £90,000), all of which is payable to KPMG LLP. The Company is exempt from providing
details of non-audit fees as it prepares Consolidated Financial Statements in which the details are required to be disclosed on a consolidated
basis (see note 5 to the Consolidated Financial Statements).
10 Distributable reserves
Dividends are paid from the standalone Balance Sheet of Computacenter plc, and as at 31 December 2018, the distributable reserves are
approximately £184 million (2017: £299 million).
Disclaimer: forward-looking statements
This Annual Report and Accounts includes statements that are, or may be deemed to be, ‘forward-looking statements’. These forward-looking
statements can be identified by the use of forward-looking terminology, including the terms ‘anticipates’, ‘believes’, ‘estimates’, ‘expects’, ‘intends’,
‘may’, ‘plans’, ‘projects’, ‘should’ or ‘will’, or, in each case, their negative or other variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts.
They appear in a number of places throughout this Annual Report and Accounts and include, but are not limited to, statements regarding the
Group’s intentions, beliefs or current expectations concerning, amongst other things, results of operations, prospects, growth, strategies and
expectations of its respective businesses.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-
looking statements are not guarantees of future performance and the actual results of the Group’s operations and the development of the
markets and the industry in which they operate or are likely to operate and their respective operations may differ materially from those
described in, or suggested by, the forward-looking statements contained in this Annual Report and Accounts. In addition, even if the results of
operations and the development of the markets and the industry in which the Group operates are consistent with the forward-looking
statements contained in this Annual Report and Accounts, those results or developments may not be indicative of results or developments in
subsequent periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the
forward-looking statements, including, without limitation, those risks in the risk factor section of this Annual Report and Accounts, as well as
general economic and business conditions, industry trends, competition, changes in regulation, currency fluctuations or advancements in
research and development.
Forward-looking statements speak only as of the date of this Annual Report and Accounts and may, and often do, differ materially from actual
results. Any forward-looking statements in this Annual Report and Accounts reflect the Group’s current view with respect to future events and are
subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group’s operations, results of operations
and growth strategy.
Neither Computacenter plc nor any of its subsidiaries undertakes any obligation to update the forward-looking statements to reflect actual
results or any change in events, conditions or assumptions or other factors unless otherwise required by applicable law or regulation.
169
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2018 Group five-year financial
review and dates
Group five-year
summary results
As of 31 December
Revenue
Adjusted1 operating profit
Adjusted1 profit before tax
Statutory profit for the year
Adjusted1 diluted earnings per share
Net cash excluding CSF
Year end headcount
2014
£m
3,107.8
86.1
85.9
55.1
46.8p
128.5
13,175
2015
£m
3,057.6
87.4
87.2
103.1
53.6p
126.7
12,993
2016
£m
3,245.4
86.2
86.4
63.8
54.0p
148.4
13,373
2017
£m
3,793.4
105.5
106.2
81.3
65.1p
195.9
14,026
2018
£m
4,352.6
118.8
118.2
108.1
75.7p
57.3
15,117
Note: The 2015 results above are presented including RDC. This subsidiary was disposed of during 2015 and was excluded, as an adjusted1 item, within the 2015 and 2016 Annual Report and
Accounts.
Group five-year summary
balance sheet
As at 31 December
Tangible assets
Investment property
Intangible assets
Investment in associate
Deferred tax asset
Non-current prepayments
Inventories
Trade and other receivables
Prepayments and accrued income
Forward currency contracts
Current asset investment
Cash
Current liabilities
Non-current liabilities
Net assets
Financial calendar
Title
AGM
Ex-dividend date
Dividend record date
Dividend payment date
Interim results announcement
170
2014
£m
79.9
–
90.3
–
15.1
–
50.0
695.9
103.6
2.4
–
129.9
(768.5)
(13.2)
385.4
2015
£m
57.1
10.3
81.5
–
12.8
–
45.7
621.8
106.5
2.2
15.0
111.8
(695.9)
(7.3)
361.5
2016
£m
63.0
10.0
76.3
0.1
10.5
–
44.0
740.4
139.5
8.1
30.0
118.7
(804.8)
(7.9)
428.0
2017
£m
77.9
–
80.3
0.1
9.1
–
69.3
835.4
162.6
8.2
–
206.6
(940.9)
(19.7)
488.9
2018
£m
106.3
–
184.6
0.1
9.6
3.5
99.5
1,180.4
171.2
3.9
–
200.4
(1,351.1)
(160.6)
447.8
Date
16 May 2019
30 May 2019
31 May 2019
28 June 2019
23 August 2019
Corporate information
Board of Directors
Greg Lock (Non-Executive Chairman)
Mike Norris (Chief Executive Officer)
Tony Conophy (Group Finance Director)
Ros Rivaz (Senior Independent Director)
Philip Hulme (Non-Executive Director)
Peter Ogden (Non-Executive Director)
Minnow Powell (Non-Executive Director)
Regine Stachelhaus (Non-Executive Director)
Peter Ryan (Non-Executive Director)
Principal banker
Barclays Bank plc
1 Churchill Place
Canary Wharf
London
E14 5HP
United Kingdom
Tel: +44 (0) 345 7345 345
HSBC Bank plc
8 Canada Square
London
E14 5HQ
United Kingdom
Tel: +44 (0) 345 740 4404
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
United Kingdom
Tel: +44 (0) 20 7311 1000
Company Secretary
Raymond Gray
Registered office
Hatfield Avenue
Hatfield
Hertfordshire
AL10 9TW
United Kingdom
Tel: +44 (0) 1707 631000
Stockbrokers and investment bankers
Credit Suisse
One Cabot Square
London
E14 4QJ
United Kingdom
Tel: +44 (0) 20 7888 8888
Investec Investment Banking
30 Gresham Street
London
EC2V 7QP
United Kingdom
Tel: +44 (0) 20 7597 4000
Registrar and transfer office
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
United Kingdom
Tel: +44 (0) 371 384 2027
(Calls to this number cost 8p per minute plus network extras)
Solicitor
Linklaters
One Silk Street
London
EC2Y 8HQ
United Kingdom
Tel: +44 (0) 20 7456 2000
Company registration number
3110569
Internet address
Computacenter Group
www.computacenter.com
171
Principal offices
UK and Group headquarters
Computacenter plc
Hatfield Avenue
Hatfield
Hertfordshire
AL10 9TW
United Kingdom
Tel: +44 (0) 1707 631000
Belgium
Computacenter NV/SA
Ikaroslaan 31
B-1930 Zaventem
Belgium
Tel: +32 (0) 2 704 9411
France
Computacenter France SAS
Agence de Roissy
229 rue de la Belle Étoile
ZI Paris Nord II
BP 52387
95943 Roissy CDG Cedex
France
Tel: +33 (0) 1 48 17 41 00
Germany
Computacenter AG & Co. oHG
Computacenter Park 1
50170 Kerpen
Germany
Tel: +49 (0) 2273 5970
Computacenter AG
Kattenbug 2
50667 Köln
Germany
Tel: +49 (0) 22142 07430
Computacenter Germany AG & Co. oHG
Werner-Eckert-Str. 16-18
81829 München
Germany
Tel: +49 (0) 8945 7120
Hungary
Computacenter Services Kft
Haller Gardens, Building D. 1st Floor
Soroksári út 30-34
Budapest 1095
Hungary
Tel: +36 1 777 7488
Malaysia
Computacenter Services (Malaysia) Sdn Bhd
Level 9, Tower 1
Puchong Financial Corporate Centre
Jalan Puteri 1/2, Bandar Puteri
47100 Puchong
Selangor Darul Ehsan
Malaysia
Tel: +603 7724 9626
172
Mexico
Computacenter México S.A. de C.V.
Avenida Paseo de la Reforma 412 Piso 5
Colonia Juarez
Delegacion Cuauhtemoc
CP 06600
México City
Mexico
Tel: +52 (55) 6844 0700
Netherlands
Computacenter BV
Gondel 1
1186 MJ Amstelveen
The Netherlands
Tel: +31 (0) 88 435 8000
South Africa
Computacenter Services and Solutions (PTY) Ltd
Building 1
Parc du Cap
Mispel Road
Bellville, 7535
Cape Town
South Africa
Tel: +27 (0) 21 957 4900
Spain
Computacenter Services (Iberia) S.L.U.
Carrer de Sancho De Avila 52-58
08018 Barcelona
Spain
Tel: +34 936 207 000
Switzerland
Computacenter AG
Riedstrasse 14
CH-8953 Dietikon
Switzerland
Tel: +41 (0) 43 322 40 80
USA
Computacenter (US), Inc.
250 Pehle Avenue
Suite 311, Plaza One
Saddle Brook
NJ 07663
United States of America
Tel: +1 (201) 690-5237
fusionstorm
124 Grove Street Suite 311
Franklin
MA 02038
United States of America
Tel: +1 800-228-8324
Design and production:
Gather
+44 (0) 20 7610 6140
www.gather.london
Printed on FSC® certified paper by an EMAS certified printing company, its Environmental
Management System is certified to ISO 14001. 100% of the inks used are vegetable oil
based, 95% of press chemicals are recycled for further use and, on average, 99% of any
waste associated with this production will be recycled. This document is printed on Edixion
Offset, a paper containing 100% virgin fibre sourced from well managed, responsible,
FSC® certified forests. The pulp used in this product is bleached using an elemental
chlorine free (ECF) process.
Computacenter is a leading independent technology
partner, trusted by large corporate and public sector
organisations. We help our customers to source,
transform and manage their IT infrastructure to
deliver digital transformation, enabling users and
their business. Computacenter is a public company
quoted on the London FTSE 250 (CCC.L) and employs
over 15,000 people worldwide.
Computacenter plc
Hatfield Avenue, Hatfield, Hertfordshire AL10 9TW, United Kingdom
Tel: +44 (0) 1707 631000
www.computacenter.com
E&OE. All trademarks acknowledged.
© 2019 Computacenter.
All rights reserved.
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