Our people
Our communities
Our customers
Our Technology Providers
Computacenter plc Annual Report and Accounts 2019
ENABLING
SUCCESS
Computacenter at a glance
CENTRED AROUND OUR CUSTOMERS
Who we are
Computacenter is a leading independent
technology partner trusted by large
corporate and public sector
organisations.
What we do
We help our customers 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.
SOURCE
CIO
USERS
BUSINESS
MANAGE
TRANSFORM
REVENUE CHARACTERISTICS
Computacenter has an integrated offering which provides three complementary entry points for our customers, giving us a balanced
business portfolio and helping us to achieve long-term growth.
SOURCE: Technology Sourcing
We help our customers to determine
their technology needs and, supported
by our Technology Providers, we arrange
the commercial structures, integration
and supply chain services to meet
them reliably.
Revenue characteristics
We earn revenue from large contracts,
with thinner margins and lower visibility.
TRANSFORM: Professional Services
We provide structured solutions and
expert resources to help our customers
to select, deploy and integrate
digital technology to achieve their
business goals.
MANAGE: Managed Services
We maintain, support and manage
IT infrastructure and operations for
our customers to improve quality
and flexibility while reducing costs.
Revenue characteristics
Our revenue depends on our forward
order book, which contains a multitude of
short, medium and long-term projects.
Revenue characteristics
Our revenue under contract has high
visibility and is long term and stable.
Technology Sourcing revenue
£m
+20.3%
Professional Services revenue
£m
+13.7%
Managed Services revenue
£m
+1.3%
3,822.2
366.1
864.5
2019
2018
2017
2016
2015
3,822.2
3,177.6
2,636.2
2,207.5
2,067.1
2019
2018
2017
2016
2015
366.1
321.9
319.2
274.2
262.8
2019
2018
2017
2016
2015
864.5
853.1
838.0
763.7
727.7
OUR PURPOSE
Our Purpose is to enable success by building long-term trust with our customers, our partners, our people and our communities. If we do this,
we will earn the trust of our shareholders.
We’re proud of what we’ve achieved
But we could be even better
We can help our customers deliver faster
Together, we’ve created a can-do culture where people
matter and are encouraged to thrive. Our business
has grown in capability, reach and reputation. We’ve
built powerful partnerships with the world’s leading
technology providers. We deliver digital technology
to some of the world’s greatest organisations.
We have many opportunities to better enable our
people and improve our business. As we grow, we
need to remain agile and relevant to our customers.
We must never forget what makes us different and
why customers rely on us.
Our customers can be confident in our skills and
solutions. They can trust our independence and
experience. Our partners can rely on our reach
and scale. This means we can help customers make
wise choices in a complex and changing world.
By acting with pace and confidence
And together, becoming the best
We’ll be the trusted enablers of success
We are giving our teams the freedom to make
responsible decisions that meet customer needs
faster; investing to make our services more innovative
and competitive; building on the capabilities of our
people, supported by better systems and processes;
focusing on delivering digital technology at scale,
where we can play to our strengths.
We’ll understand what our customers need so we
remain fundamental to their success. We’ll work hard
to keep our promises and always be honest and
straightforward. We’ll build more collaborative
relationships and continue to treat people as we
expect to be treated. We’ll act for the long term and
always strive to improve what we do.
Our customers will strongly recommend us for the
way we help them achieve their goals. We’ll be the
preferred route to market for Technology Providers.
People will want to join us and stay with us, proud of
our reputation, as we learn, earn and have fun. We’ll
be a trusted, agile and innovative provider of digital
technology around the world.
WORLDWIDE REACH AND CUSTOMER FOCUS
SAN FRANCISCO, WEST COAST, CA, USA
LIVERMORE, CA, USA
DALLAS, TX, USA
MEXICO CITY, MEXICO
NEW YORK, EAST COAST, NY, USA
BODEGRAVEN, NETHERLANDS
BRUSSELS, BELGIUM
HATFIELD, MILTON KEYNES,
NOTTINGHAM, SHEFFIELD, UK
HATFIELD, BRAINTREE, UK
HATFIELD, UK, EMEA
BARCELONA, SPAIN
GONESSE, FRANCE
MONTPELLIER,
PERPIGNAN, FRANCE
POZNAN, POLAND
SAN FRANCISCO, WEST COAST, CA, USA
LIVERMORE, CA, USA
DALLAS, TX, USA
MEXICO CITY, MEXICO
NEW YORK, EAST COAST, NY, USA
BUDAPEST, HUNGARY
BERLIN, DRESDEN, ERFURT,
LEIPZIG, KERPEN, GERMANY
KERPEN, GERMANY
CAPE TOWN, SOUTH AFRICA
ZURICH, SWITZERLAND
BODEGRAVEN, NETHERLANDS
BRUSSELS, BELGIUM
HATFIELD, MILTON KEYNES,
NOTTINGHAM, SHEFFIELD, UK
HATFIELD, BRAINTREE, UK
HATFIELD, UK, EMEA
BARCELONA, SPAIN
DALIAN, CHINA
GONESSE, FRANCE
MONTPELLIER,
PERPIGNAN, FRANCE
BANGALORE, INDIA
KUALA LUMPUR, MALAYSIA
KUALA LUMPUR, MALAYSIA, APAC
POZNAN, 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
SERVICE CENTERS
INTEGRATION CENTERS
COMPUTACENTER’S COVERAGE
REGIONAL HEADQUARTERS
We Source,
Transform and
Manage technology
for our customers
in 70 countries
worldwide.
We sell to customers
in nine countries
UK | Ireland | Germany
France | Belgium | Switzerland
Netherlands | USA | Spain
We also have operations/entities
in another 12 countries
Hungary | Poland | India | Mexico | China
Malaysia | Japan | Australia | Hong Kong
Singapore | Canada | South Africa
We source for
and support
customers in
another 49
countries
SERVICE CENTERS
INTEGRATION CENTERS
COMPUTACENTER’S COVERAGE
REGIONAL HEADQUARTERS
Our communities
The result has benefited from £857.6 million
of revenue (2018: £270.9 million), and
£6.5 million of adjusted1 profit before tax
(2018: £2.2 million), resulting from the
acquisitions made since 30 June 2018.
All figures reported throughout this Annual
Report and Accounts include the results
of the acquired entities.
The Group has adopted IFRS 16 from
1 January 2019 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
2019 have not been restated under the
accounting policies adopted as a result
of transition to IFRS 16. The current year’s
results include an overall decrease in
profitability before tax of £1.7 million on
both a statutory and an adjusted1 basis,
due to the impact of IFRS 16 which has seen
increased interest costs exceed the net of
increased depreciation and reduced rental
costs, due to the timing difference effect
of the new accounting standard. An analysis
of the impact of transition is presented in
note 2 summary of significant accounting
policies on page 128 of this Annual Report
and Accounts. Further information on the
implementation of, and transition to, IFRS
16 is included within the Group Finance
Director’s Review on page 58 of this Annual
Report and Accounts.
A reconciliation between key adjusted1 and
statutory measures is provided on page 53
of the Group Finance Director’s Review.
Further details are provided in note 4 to
the Consolidated Financial Statements,
segment information.
2019 Highlights
Revenue £m
5,052.8
2019
2018
2017
2016
2015
16.1%
Dividend per share Pence
22.1%
37.0
5,052.8
4,352.6
3,793.4
3,245.4
3,057.6
2019
2018
2017
2016
2015
37.0
30.3
26.1
22.2
21.4
Statutory profit before tax £m
30.4%
Adjusted1 profit before tax £m
23.8%
141.0
2019
2018
2017
2016
2015
146.3
141.0
108.1
111.7
87.1
126.8
2019
2018
2017
2016
2015
Statutory diluted earnings
per share Pence
27.0%
Adjusted1 diluted earnings
per share Pence
89.0
2019
2018
2017
2016
2015
92.5
89.0
70.1
66.5
52.3
82.1
2019
2018
2017
2016
2015
146.3
118.2
106.2
86.4
87.2
22.2%
92.5
75.7
65.1
54.0
53.6
1.
Adjusted operating profit or loss, adjusted net finance income
or expense, adjusted profit or loss before tax, adjusted tax,
adjusted profit or loss, adjusted earnings per share and
adjusted diluted earnings per share are, as appropriate, each
stated before: exceptional and other adjusting items including
gain or losses on business acquisitions and disposals,
amortisation of acquired intangibles, utilisation of deferred
tax assets (where initial recognition was as an exceptional
item or a fair value adjustment on acquisition), and the related
tax effect of these exceptional and other adjusting items, as
Management do not consider these items when reviewing the
underlying performance of the Segment or the Group as a
whole. Prior to the adoption of IFRS 16, adjusted gross profit or
loss and adjusted operating profit or loss included the interest
paid on customer-specific financing (CSF) which Management
considered to be a cost of sale. A reconciliation between key
adjusted and statutory measures is provided on page 53 of the
Group Finance Director’s Review which details the impact of
exceptional and other adjusted items when compared to the
non-Generally Accepted Accounting Practice financial
measures in addition to those reported in accordance with
IFRS. Further detail is provided within note 4 to the
Consolidated Financial Statements, segment information.
2.
We evaluate the long-term performance and trends within
our Strategic Priorities on a constant currency basis. Further,
the performance of the Group and its overseas Segments are
shown, where indicated, in constant currency. The constant
currency presentation, which is a non-GAAP measure, excludes
the impact of fluctuations in foreign currency exchange rates.
We believe providing constant currency information gives
valuable supplemental detail regarding our results of
operations, consistent with how we evaluate our performance.
We calculate constant currency percentages by converting our
prior-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. 2019 highlights, as shown above,
and statutory measures, are provided in the reported pound
sterling equivalent.
3.
Adjusted net funds or adjusted net debt includes cash and cash
equivalents, other short or long-term borrowings and current
asset investments. Following the adoption of IFRS 16 this
measure excludes all lease liabilities. CSF balances which were
previously included within this measure are now also excluded
as they form part of lease liabilities. A table reconciling this
measure, including the impact of finance lease liabilities,
is provided within note 31 to the Consolidated Financial
Statements, analysis of changes in net funds.
Contents
Some highlights from 2019
New Chairman and Non-Executive Directors
ENABLING SUCCESS
by building long-term trust
See page 70
Group ERP into Netherlands
See page 51
New 1,000 seat facility for Cape Town
Service Center
See page 21
New Germany Headquarters and
Integration Center in Kerpen
•
•
•
Our Purpose is to enable success by building long-term trust.
This means enabling the success of our:
•
customers, by helping them to navigate the complex digital
environment and to Source, Transform and Manage their
digital technology;
people, by creating a business framework and culture,
underpinned by strong values, which allows them to build
rewarding careers;
Technology Providers, by providing the scale, reach and
stable infrastructure to successfully deploy their
technologies; and
communities, by acting responsibly and building
a sustainable business.
See page 18
Reducing environmental impact
If we do this, we will earn the trust and loyalty of our
shareholders.
See page 28
Updated Go To Market propositions
See page 6
New global Human Resources system
See page 24
US integration
See page 48
Strategic Report
IFC 2019 Highlights
02
04
06
10
12
14
16
20
Chairman’s Statement
Chief Executive’s Strategic Review
Our Customer Offering
Our Marketplace
Our Business Model and Differentiation
Our Strategic Priorities
Technology Sourcing
Managed Services and Professional
Services
Section 172 Statement
24 Our People and Culture
28 Our Community
31
33 Non-financial Information Statement
34
Powerful Partnerships – our customers
Our Performance in 2019
40
52 Group Finance Director’s Review
Principal Risks and Uncertainties
63
Governance Report
70
72
74
78
82
Chairman’s Governance Overview
Board of Directors
Corporate Governance Report
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
88
110 Directors’ Report
115 Directors’ Responsibilities
Financial Statements
116
123
124
Independent auditor’s report to the
members of Computacenter plc
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
125 Consolidated Balance Sheet
126
Consolidated Statement of Changes
in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial
Statements
127
128
171 Company Balance Sheet
172
173
Company Statement of Changes in Equity
Notes to the Company Financial
Statements
Group five-year financial review
178
178 Financial calendar
179 Corporate information
180 Principal offices
01
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Chairman’s Statement
BUILDING A BUSINESS
THAT DELIVERS
WHAT IT PROMISES
Computacenter’s
success has
always been driven
by the effort, talent
and dedication of
its people.
Peter Ryan
Chairman
02
The Board in 2019
There have been several changes to the
Board’s composition this year, in addition
to the Chairmanship transition.
Regine Stachelhaus retired from the Board
at the AGM on 16 May 2019. On the same day,
Ljiljana Mitic was appointed to the Board.
Ljiljana brings expertise in large technology
enterprises operating in our Western
European geographies, particularly France
and Germany. This ensures that we continue
to have a European voice on the Board with
experience in our Services sector.
We were pleased to announce the
appointment of Rene Haas, a US citizen, on
20 August 2019. He has global experience
with a US focus and can bring his insights
into the leading edge of long-term
technological thinking. He is currently
President, IP Products Group, at Arm Limited.
Rene’s appointment returned the Board
to its full complement of independent
Non-Executive Directors.
The independent external evaluator who
facilitated our recent Board evaluation noted
that whilst the Board was collegiate in its
approach, Members provided real challenge
to Management in an open environment.
Our continued commitment to sustainability
During the year, the Board has addressed a
variety of areas of the Company’s approach
to sustainability.
Whilst our footprint remains small compared
to those of our Technology Providers and
customers, we hope to make a difference
to the overall impact of the IT industry by
continuing to focus on and improve our
impact on the environment in our part of
the supply chain.
The Board agrees that it is both the right
thing to do morally and a business
imperative, to be able to support our
customers’ increasing efforts to improve
the sustainability of their businesses.
We have also increased the targets for
gender diversity across all levels of the
organisation and set the Executive Directors
and senior management specific
measurable objectives in this area.
This is my first statement since succeeding
Greg Lock as Chairman in May 2019. Firstly,
I would like to thank Greg, on behalf of both
the Board and the Company, for his service
and impact over the 11 years of his tenure
as Chairman of the Board.
I have spent this year learning more about
our business by engaging with key members
of senior management and our stakeholders.
Computacenter’s success has always been
driven by the effort, talent and dedication of
its people. As I get to know the culture and
values that our employees live by, I am
continuously impressed by their passion
for Our Purpose. I, along with all of the Board,
would like to thank the team for their
contribution to our record-breaking year.
The CEO, Mike Norris, and I visited a number
of our USA Technology Providers. I came away
pleased by the Company’s reputation with
these key stakeholders.
Enabling Success
This has been a year of strong progress
for Computacenter. Revenues surpassed
£5 billion for the first time, with the 2018
acquisitions contributing £586.6 million of
the £700.2 million of revenue growth. Our
USA acquisition, FusionStorm, performed
significantly better in the second half of the
year, after we made some adjustments and
learned how to drive the business. The
overall progress across the Company in the
year was very pleasing, with an increase in
statutory profit before tax of 30.4 per cent
to £141.0 million (2018: £108.1 million),
following revenue growth of 16.1 per cent to
£5,052.8 million. The Group’s adjusted1 profit
before tax increased by 23.8 per cent to
£146.3 million (2018: £118.2 million) and by
24.9 per cent in constant currency2.
Statutory diluted earnings per share (EPS)
increased by 27.0 per cent to 89.0 pence for
the year (2018: 70.1 pence). Adjusted1 diluted
earnings per share grew 22.2 per cent to
92.5 pence (2018: 75.7 pence). In line with our
policy of paying a dividend that is covered
between 2.0 and 2.5 times by adjusted1
diluted earnings per share, we propose to
pay a final dividend of 26.9 pence per share,
bringing our full-year dividend to 37.0 pence
per share, an increase of 22.1 per cent.
We continue to monitor our growing adjusted
net funds3, which reached £137.1 million at
the end of the year. The Board reviews
investment opportunities to ensure these
remain aligned strategically with Our
Purpose of Enabling Success and, if none are
suitable, will look to return excess capital to
shareholders at the appropriate time.
The year ahead
Before addressing the coming year, we need
to acknowledge the unprecedented levels
of change in both the external and internal
operating environments for Computacenter
in 2019. In nearly all areas that touch our
business, we have seen challenges
stemming from change.
Governance and regulatory requirements
have increased. The geopolitical impacts of
Brexit, trade disputes and general elections
in our key markets have all weighed on
customer sentiment.
As we look to 2020, the pace of change, and
the challenges that accompany that change,
look set to increase even further. Our business
model, to date, has proved resilient and helped
us to weather these challenges effectively.
We have considered, and will continue to
monitor closely, the potential impact of the
COVID-19 virus on our business, global trade,
and the macro-economic outlook. The
Company’s Principal Risks and Uncertainties
have been updated to reflect the emerging
situation. We consider that the sensitivity
analysis conducted to support the Directors’
reasonable expectation of the impact of
risks, and assessment of viability, to be
sufficiently robust given what we know
today, although considerable uncertainties
remain surrounding the duration and impact
of the COVID-19 virus.
As the pace of change continues to accelerate,
we must continue to adapt just to keep up.
Trust from our stakeholders remains
paramount to our success and we can
achieve that by always delivering on our
existing commitments and by evolving our
offer to lead the industry through the
changes and challenges ahead.
For nearly 40 years, Computacenter has
endured and adapted. Mike continues to lead
the management team along with Tony, and
they remain true survivors of the industry.
They, the Board, and the rest of the senior
management team, still feel the energy and
excitement of the opportunities ahead.
This has been a landmark year for
Computacenter, both in terms of the results
we are announcing and our progress with
strengthening the Company, to enable the
success of our stakeholders.
Peter Ryan
Chairman
11 March 2020
03
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Chief Executive’s
Strategic Review
I would like to thank
our customers for
the trust they have
in us.
Mike Norris
Chief Executive Officer
04
In the 25 years I have been running
Computacenter as Chief Executive, 2019 has
been the best financial performance. Many of
the trends that we have seen for the last few
years have continued, as our customers
have invested in digitising their businesses
in order to enhance their competitiveness.
In addition to our customers’ investment, we
significantly improved our execution in 2019
when compared to 2018, which translated to
enhanced performance of our bottom line.
The problem contracts that hindered our
performance in 2018 have materially
improved and not been replicated elsewhere.
Within our Professional Services business,
there is a war for talent in many of the
technologies we are involved in. While this
presents challenges, it is clearly preferable
to the opposite situation, where you have
more resources than the market needs.
Our customers continually turn to
Computacenter to augment their own IT
functions, as the business need to deploy
new technologies continues apace.
Our customers will always look to strike
a balance between the support and service
they deliver to their user community, and the
cost of delivering such services. Customers
always want to reduce the cost over time,
which makes our Managed Services business
challenging, because inherently it is driven
by this ongoing drive for efficiency, to
produce gains which are deflationary to the
business as a whole. However, this creates
an opportunity to develop competitive
advantage, which in turn leads to market
share gain and superior economics, which
drive the business forward. Across our
established customer base of large
organisations in Western Europe, we feel
we have a strong competitive position,
particularly around end user services, which
will enable us to grow and expand our
geographical footprint into other markets
we serve.
In 2019, Technology Sourcing remained
strong, as it has done for a few years.
We made gains in our target market of large
customers, as the superior alternative to
customers buying directly from vendors.
We achieve this by simplifying the
procurement process, delivering multi-
vendor solutions and integrating product
closely with our service offerings. This
enables us to take market share, both from
our reseller competitors and by clearly
demonstrating to our Technology Providers
how delivering through Computacenter
enhances their offering and simplifies their
routes to market.
During 2019, we made progress in all of our
geographies. In Germany we saw revenue
growth despite the substantial reduction in
spend from a customer that was our largest in
2018, with the top line enhanced by our success
in the Public Sector. The success of the French
financial performance is obvious to see and the
expansion of the customer base, particularly
in the private sector, bodes well for future
stability, even though the 2019 performance
will be challenging to repeat in the short term.
The UK, after a quiet couple of years, saw
its largest contribution performance ever,
beating the number in 2015. Within the rest
of our European operations, the small but
very successful acquisition of PathWorks in
Switzerland was noteworthy, as was the
successful implementation of our Group ERP
system in the Netherlands business, which
was acquired in 2018.
2019 was the first full year of operations for the
USA Technology Sourcing business we acquired
in 2018. While performance was somewhat
subdued in the first half, it bounced back
strongly in the second. Some of this enhanced
performance was the result of genuinely better
operational execution, as we learnt more about
the acquired entity. However, some of the
performance increase was simply down to
the spend pattern of customers, which will
have its ups and downs due to the nature of
the business and the size of the customers.
After significant change to the management
team towards the end of 2018, the only
change of note during 2019 was the
recruitment of our new Chief People Officer,
Sarah Long. Sarah rejoined Computacenter
after leaving the business approximately
10 years ago and brings with her knowledge
and experience from elsewhere in the
industry, as well as a deep understanding
of Computacenter’s culture.
I would like to thank our customers for the
trust they have in us, which enables us to
deliver for their businesses. Over many years,
we have built a substantial base of customers
who return to us again and again. We will never
take this customer loyalty for granted and
always strive to be the best we can, enabling
them to achieve their business goals.
We are a people business, so we are only as
good as the people we employ. I thank our
staff for their commitment, not just in 2019,
but for the 25 years it has been my privilege
to lead them.
Mike Norris
Chief Executive Officer
11 March 2020
STRATEGIC
PRIORITIES
Strategic Priority 1
TO LEAD WITH
AND GROW
OUR SERVICES
BUSINESS
Strategic Priority 2
TO IMPROVE
OUR SERVICES
PRODUCTIVITY AND
ENHANCE OUR
COMPETITIVENESS
Strategic Priority 3
TO RETAIN AND
MAXIMISE THE
RELATIONSHIP WITH
OUR CUSTOMERS
OVER THE LONG TERM
Strategic Priority 4
TO INNOVATE
OUR SERVICES
OFFERINGS TO BUILD
FUTURE GROWTH
OPPORTUNITIES
05
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 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
which we can deliver at scale.
This section describes Computacenter’s
breadth of capability and our go-to-
market messaging.
In this section
• Our Service Centers
• Our complete customer offer
• Our breadth of skills
• Our strategic propositions
Members of the Group Development
leadership team
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 20 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.
Maintenance & Network Support
Our operation hubs provide remote
diagnostics, monitoring and spares
capability to underpin our Maintenance
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.
Customer Experience Center –
Hatfield, UK
06
OUR COMPLETE CUSTOMER OFFER
Our comprehensive capabilities help
customers to Source, Transform and Manage
digital technology across the domains of
Workplace, Data & Analytics, Cloud & Data
Center, Networking and Security.
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 the 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.
Transform
By combining our Technology Providers 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.
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.
This increases quality and flexibility,
while reducing costs. Our Services deliver
engagement and enablement for over
3.7 million users.
In the Workplace 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.
OUR 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.
Workplace
Data &
Analytics
Cloud & Data
Center
Networking
Security
IT Strategy & Advisory Services
Technology Sourcing
Transformation Services
Support & Maintenance Services
Managed Services
Transform
Source
Transform
Manage
Manage
07
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our Customer Offering
continued
OUR STRATEGIC PROPOSITIONS
We reflect the voice of the customer by
consolidating our broad portfolio of
capability into four strategic go-to-market
propositions designed to address an
emerging market trend with a specific
value proposition and vision:
08
Digital Me
Digital Workplace
Designed for people, engineered for business
our Workplace solutions accelerate the digital
agenda with agile solutions that unleash the
power of people and enable business success.
Our solutions are centred on people and are
increasingly powered by analytics,
AI and automation to reduce cost and provide
a proactive digital experience.
Digital Power
Cloud & Data Center
We provide sourcing, advisory and support
Services that help our customers to navigate their
cloud and data centers, building platforms that
power their business. For some, this means
building out platforms that support the rapid
growth that their success in the global digital
economy is delivering.
Digital Trust
Security
Our customers continue to face an ever-expanding
cyber-threat landscape, with more demanding
compliance requirements and a shortage of
security talent to address it. We have the skills
and partnerships to deliver complete Security
solutions, helping our customers protect their data
and information, secure their workplaces and
people, defend their technology platforms and
achieve compliance and manage IT risk. We enable
Public Sector, industry and service organisations
to undertake digital transformation securely.
Digital Connect
Networking
We provide Technology Sourcing, transformation
and Managed Service expertise, with innovation
and delivery across every aspect of Enterprise
Networking for large corporates and Public Sector
organisations; from business-critical Data Center,
local & wide area wireless to industrial networks.
• EquipMe: Appropriate technology for effective working
– Technology Sourcing
– Modern Device Management
– Application Lifecycle Management
• EmpowerMe: Intuitive collaboration for increased
productivity
– Collaboration Productivity
– Smart Spaces
• AssistMe: Intelligent support aligned to personal
preference
– Service Desk
– Smart On-site Services
– Analytics & Automation
• Analytics and Big Data
• Service Management Platforms
• Cloud Native Platforms
• Multi-Cloud
• Public Cloud
• Server and Storage
• Converged and Hyperconverged Infrastructure
• Software-Defined Infrastructure and Networks
• Data Center Networks
• Next Generation Data Centers
• Cyber Defence Services
• Identity and Access Management
• Infrastructure Security
• Workplace Security
• IoT Security
• Cloud Security
• Industrial Security
• IT Governance, Risk and Compliance
• Software and automation are at the core of every
future-proof network architecture
• Increasing demand for unrestricted access to Services
and applications; anytime, anywhere
• Hybrid IT and Multi-Cloud becoming the norm for the
Data Center
• Increasing regulatory requirements and accelerated
demand for enterprise Security
• People, devices and everyday objects (‘things’)
connected, to increase collaboration and efficiency
• New devices and smart sensors necessitate a different
approach to Networking
EmpowerMe
INTUITIVE COLLABORATION
FOR INCREASED PRODUCTIVITY
EquipMe
AssistMe
APPROPRIATE TECHNOLOGY
FOR EFFECTIVE WORKING
INTELLIGENT SUPPORT ALIGNED
TO PERSONAL PREFERENCE
ACCELERATE DIGITAL BUSINESS
ADOPT PUBLIC CLOUD
ENABLE MULTI-CLOUD
MODERNISE THE DATA CENTER
INDUSTRIAL
SECURITY
d managin g r i s k
hieving co m
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SECURITY
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C C ELERATING DIGITAL
A
09
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019
Our Marketplace
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 and
considers our competitive environment.
In this section
• The global market
• The competitive market
Vendor Village at Group Kick-Off –
Berlin, Germany
10
THE GLOBAL MARKET
Four major trends are shaping our
markets worldwide.
Major trend 1:
The shift to digital
The requirement to connect the business
directly to IT and for the IT function to
understand how its services directly
influence market share and profits
continues to drive new ways of working,
service delivery and productivity.
Organisations are adopting new methods,
such as Agile, Design Thinking and DevOps.
They are also using technologies where
service is primarily provided with or through
software and augmented with analytics and
Artificial Intelligence (AI). These changes
result in increasing complexity. The pace
of change is also rising with, for example,
the proliferation of devices and apps with
ever-shorter lifecycles. In addition, almost
every digital innovation raises security and
privacy risks that need to be tackled at the
same time.
What this means for Computacenter
Being independent of our Technology
Providers remains a key strength for us,
due to our ability to assess our customers’
business requirements and help them to
select and integrate 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
“Through 2021, digital transformation
initiatives will take large traditional
enterprises, on average, twice as long and
cost twice as much as anticipated.” –
Gartner, Top Strategic Predictions for 2020
and Beyond, October 2019
Major trend 2:
Multi-Cloud becomes
the norm
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 have embraced the initial benefits of
increased pricing transparency 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
Multi-Cloud and Hybrid IT represents a huge
market opportunity for Computacenter,
both for our Technology Sourcing and our
Professional Services and Managed Services
businesses. Customers are seeking our
support to Source, Transform and Manage
their Multi-Cloud environments. We are
investing in new capabilities and our
customers, including some hyperscalers, are
already leveraging our existing investments
and ability to integrate and deploy
technology at scale and globally.
Example
“Although most organizations are integrating
applications and services across service
boundaries, we estimate approximately 15%
of large enterprises have implemented
hybrid cloud computing beyond this basic
approach.” – Gartner, Hype Cycle for Cloud
Computing 2019, August 2019
Major trend 3:
Security risks become
a business inhibitor
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
“Companies that use enterprise customer
data to improve the experiences of B2B
clients of their products and services will
see organizations choosing to opt out of
data sharing due to concerns about
anonymization, privacy, and accidental
disclosure. In fact, 20% of enterprise
customers will prohibit the use of their data
for AI in 2020.” – Forrester, Predictions
2020, 2019
Major trend 4:
Shortage of talent
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.
In addition, organisations will increasingly
invest in automation and AI technologies to
improve the productivity and efficiency of
their existing workforce.
What this means for Computacenter
The shortage of people emphasises the
importance of Computacenter having the
right culture and values. Combined with an
attractive workplace and exciting work for
our customers, this helps us to attract and
retain talent. Customers can also benefit
from our broad technology skills, which
include automation solutions such as Blue
Prism and UiPath, as well as the ServiceNow
consulting practice we built with the
acquisition of TeamUltra.
Example
“By 2023, the number of people with
disabilities employed will triple, due to AI and
emerging technologies reducing barriers to
access.” – Gartner, Top Strategic Predictions
for 2020 and Beyond, October 2019
See pages 24 to 27 for more on how we
manage and develop our people.
THE COMPETITIVE MARKET
In addition to the major trends described
above, a number of factors are influencing
the way we compete in our markets.
Market segments – Save to innovate
With IT budgets staying flat or growing very
slowly, IT decision makers need to save on
costs in order to fund new digital initiatives.
Procurement departments push to reduce
cost in existing contracts and legacy
platforms, which puts pressure on renewals
and hence we continue to drive efficiencies
in our scale operations to remain competitive.
At the same time, we help CIOs to select,
implement and manage technology
platforms such as Multi-Cloud, 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 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 other parts of the
business as digital transformation rises to
the top of all departments’ agendas. 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 with cloud-based services. This could
affect demand for our Technology Sourcing
business over the coming years. However,
the process of moving to the cloud offers
considerable Professional Services
opportunity and the knock-on effect for
customer’s network, security and workplace
environments will support growth in all parts
of our portfolio associated with those
technology areas. 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. In response we
continue to expand our portfolio and, in
particular, our partnerships building on
those we already have with the world’s
leading technology providers and the mature
processes to adopt partner technologies
and take them to market. We will also
continue to integrate Services partners to
ensure a comprehensive Services portfolio.
11
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019
Our Business Model and
Differentiation
HOW WE CREATE
SUSTAINABLE
VALUE
Computacenter is a trusted technology
partner to large corporate and Public
Sector organisations. We help them to
Source, Transform and Manage their
digital technology 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
the long-term investment in our
infrastructure and physical assets and
place great confidence in the depth of
skills and knowledge of our teams.
Members of the Group Executive team
12
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
nine 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 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 Services
and Managed Services as each part of our
portfolio supports the others.
More information about how we create value
is on pages 6 to 9.
Our people
Together, we have created a can-do culture
where people matter and are encouraged to
thrive. Computacenter employs over 16,000
people worldwide. This includes more than
5,000 engineers, 4,500 support staff in our
Service Centers, 1,600 project and service
managers and 1,500 consultants. Between
them, our teams hold over 10,000 technical
certifications. These service delivery teams
are backed by the skills and 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 is on pages
24 to 27.
Our partners
We have built powerful partnerships with
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 customers to make wise
choices in a complex and changing world.
More information about our partners and
Technology Sourcing is on pages 16 to 19.
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
inspiring success. Our goal is ‘Enabling
Success’ by building long-term trust with
our customers, people, Technology Providers
and communities. 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 26.
Our infrastructure and physical assets
We have operations in 21 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 Managed Services
contracts and are underpinned by a common
technology infrastructure to allow customers
to be supported by multiple centers. In 2019,
we opened new Service Centers in Perpignan,
France and Bangalore, India.
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 from over
30 years of experience to be amongst the
leading facilities of its type in Europe.
In 2020, we will open a new Silicon Valley
Integration Center in Livermore, California.
This will provide a significant increase in
capacity over our existing facilities which
will be retired. 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.
Our Service Offerings
We drive engagement with our customers
through our Strategic Propositions and these
are underpinned by a range of Service
Offerings which are designed to deliver
solutions to our customers.
BUSINESS MODEL AT A GLANCE
Making all of the elements of our business model work together.
Our resources
Our
people
Digital technology
from our partners
Our
brand and values
Our
service offerings
Our infrastructure
and physical assets
Our leverage
Technology
Provider
independence
Scale
Infrastructure
Powerful
partnerships
SOURCE
CIO
USERS
BUSINESS
Service
offerings
MANAGE
TRANSFORM
Depth of
experience
Financial
stability
Breadth
of skills
Worldwide
reach
Our customer offer sits at the
heart of our strategy.
See page 6 for more information
Creating value for all stakeholders
Our
customers
Our
people
Our
communities
Our
partners
Our
shareholders
13
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our Strategic Priorities
Strategic Priority 1
TO LEAD WITH
AND GROW
OUR SERVICES
BUSINESS
Services Contract Base £m
787
2019
2018
2017
2016
2015
1.0%
787
779
755
744
719
Strategic Priority 2
TO IMPROVE
OUR SERVICES
PRODUCTIVITY
AND ENHANCE OUR
COMPETITIVENESS
Services revenue generated
per Services head £’000
4.5%
93
89
90
89
92
93
2019
2018
2017
2016
2015
14
Growth in our Contract Base improves our revenue visibility and increases the predictability of
our business. More importantly, it improves the quality of our relationship with customers and
increases our customer retention rate. This in turn enables us to cross sell our Professional
Services and Technology Sourcing offerings.
Progress in 2019
After taking on some problem contracts during 2018, we overhauled our governance process
at the start of 2019, with very pleasing results. The take-on of new contracts during the last
12 months has been extremely effective from both a customer service and financial viewpoint.
The overall Contract Base grew by one per cent in constant currency2 and stood at £787 million
at the end of the year.
Target for 2020
During the latter half of 2018 and first half of 2019, we were conservative with our approach
to new business with Contractual Services. However, we are now marketing more robustly
and are significantly growing our pipeline. We are pleased with the prospects for enhanced
growth in 2020, against a backdrop of deflationary pressures in this part of our business,
due to customers’ desire to always reduce the cost of support.
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 2019
During 2019, we made significant progress in automating areas of our Service Desk solution
and reducing the number of calls requiring human intervention, which in turn enables us to
improve our productivity and competitiveness. While many of these technologies are in their
infancy we are pleased with our progress, as we are able to show our customers innovation
that enables superior customer experience, while demonstrating clear commercial benefits.
This objective is always held back as we move more of our Services to lower-cost locations, as
we share these lower costs with our customers, enabling our offerings to remain competitive.
Of particular note, during 2019, was the success we had at our German-speaking near-shore
location in Poland, which is now full and will be expanding in 2020. We also made significant
senior hires at our fledgling Service Center in India, preparing for expansion.
Target for 2020
During 2020, we will be completing the rollout of a new suite of Data Center automation tools,
to reduce costs and significantly simplify deployment. We will also continue to enhance our
Service Desk operations and, more importantly, deploy what we have developed to date within
more of our customers’ solutions.
Our off-shore operations will be enhanced by the relocation to a new facility in Cape Town
early in the year, as well as the doubling in size of our facility in Poznan and the scaling up
of our resources in Bangalore.
Strategic Priority 3
TO RETAIN AND
MAXIMISE THE
RELATIONSHIP
WITH OUR
CUSTOMERS OVER
THE LONG TERM
Number of customer accounts with
contributions of over £1 million
135
2019
2018
2017
2016
2015
14.4%
135
118
107
104
94
Strategic Priority 4
TO INNOVATE
OUR SERVICES
OFFERINGS TO
BUILD FUTURE
GROWTH
OPPORTUNITIES
Services revenue £m
1,231
2019
2018
2017
2016
2015
5.2%
1,231
1,170
1,156
1,078
1,089
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, and therefore growing
the number of customers who contribute more than £1 million of margin is a key driver
for Computacenter.
Progress in 2019
In 2019, the number of Group customers who generated more than £1 million per year of gross
profit, measured in constant currency2, increased from 124 to 135. These incremental major
customers were won evenly across our business, with no country seeing a decline. France
was particularly noteworthy, with the number of major customers increasing from 11 to 15.
This reduces the reliance we have historically had on one large customer, although it remains
extremely significant.
Target for 2020
Growing the number of major customers will always be a key driver of Computacenter’s
business. We have continued our expansion into additional territories where such customers
exist, notably our organic expansion into Spain early in 2020.
Over the last few years, we have expanded our relationships by cross selling our Services and
Technology Sourcing offerings, and thereby lifting more of our customers above £1 million
contribution. However, we need a concerted effort to bring new customers to the Group,
to avoid the obvious limit to growth that exists if we rely only on expanding our existing
customer base.
Annual Services revenue, which comprises our Managed Services and Professional Services
businesses, is the key measure for this Strategic Priority. 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 2019
In 2019, total Services revenue across the Group increased by 5.2 per cent, in constant
currency2. Expanding our Services revenue is always more challenging than growing
Technology Sourcing, as it often requires us to hire and expand our skills base. Shortage of
skills in the marketplace, particularly in certain geographies, acts as a limiter to growth.
However, this creates an opportunity to differentiate from our competition in the eyes of both
our customers and employees, as we strive to be a company where skilled resources want to
work. Our German Professional Services business proved this case in 2019 by continuing
several years of significant growth, as customers rely on our expertise and employees see
us as a destination of choice. Of significant note has been our expansion in our Security and
Networking consultancy practices, where we have added substantial value to customers.
Target for 2020
After an improvement in growth in 2019, we feel we are building momentum. While we take
nothing for granted, we are hopeful of an improved growth rate in 2020 for our Services
business, as we increase our skills by hiring, training and improving our solutions through our
strategic investments. As our industry shifts gradually towards software and Services as
a solution, the requirement for skills to deploy new technology increases. While this creates
a challenge, it also represents a significant opportunity.
The acquisition of RDC, an IT asset disposal business that we sold five years ago, will marginally
add to our service offerings and revenue in 2020.
15
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019
Technology Sourcing
OUR PARTNERS
CAN RELY ON
OUR REACH
AND SCALE
Technology Sourcing is our traditional
core business and we continue to see it
as both fundamental to our customers
and a significant growth driver. We help
our customers to determine their
technology needs and, supported by our
Technology Providers, we provide the
commercial structures, integration and
supply chain services to meet those
needs reliably. We earn revenue from
large contracts, with thinner margins and
lower visibility than for Services, but with
amazing customer loyalty, which we earn
through reliability, agility and scale.
In this section
• Growth drivers
• Technology Sourcing is a Service
• Powerful Partnerships
Members of the Group Technology
Sourcing leadership team
Vendor Village at Group Kick-Off –
Manchester, UK
16
Livermore
Kerpen
Hatfield
Gonesse
Brussels
Bodegraven
Braintree
Zurich
TECHNOLOGY SOURCING
We provide our customers with huge
flexibility, adapting our processes to fit,
often very specific, quotation, order
management, shipment, receipt and
documentation requirements. This flexibility
comes from significant long-term
investment in our people, systems and
Integration Centers. Our supply chain
services range from pre-configuration
of all types of technology to end-of-use
management. Our customers value our
ability to support them across the entire
hardware and software lifecycle and to act
as a partner who can deliver at scale and
increasingly globally.
Growth drivers
A number of key drivers in the market are
underpinning our customers’ continuing
investment in new digital technology.
In particular, our customers want to:
• modernise their workplaces, to enable
users through better technology that
attracts and retains talent, increases
collaboration 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); and
• connect their users, data and new IoT
devices to better leverage existing
know-how and improve efficiency and
productivity of their workforce
(Digital Connect).
Our objectives to support our growth
in the coming years include:
• Replacing feature-rich but old-
fashioned legacy systems, for greater
internal efficiency.
• Introducing new customer-facing
systems to provide better access
to information and enable better
international procurement
consolidation.
• Maintaining the relevance of our
service offerings, with greater focus
on Networking, Data Center and
Circular Services.
• Reducing our Technology Sourcing cost
to serve, to ensure that we remain
competitive in the evolving market.
• Continue to deliver improved
capabilities for global contracts.
RDC Integration Center – Braintree, UK
Helping customers make a positive impact
at the end of the IT lifecycle.
Headquarters and Integration Center – Kerpen, Germany
Long-term investment in the German market through our new Kerpen facilities.
Integration Center – Livermore, California
Technical Services: expert rack integration.
17
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Technology Sourcing
continued
Technology Sourcing is a Service
We integrate and deploy across Workplace,
Data Center, 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.
Following the successful cut-over in 2018,
our new 29,600 m2 Integration Center in
Kerpen, near Cologne, was formally
opened in April 2019. It provides us with
considerably more capacity and capability
to meet the growth needs of our European
businesses and provide enhanced
Services to our customers.
Our new Silicon Valley Integration Center
in Livermore, California, will open in March
2020 and will also significantly upgrade
our capacity and capability. Our existing
facility nearby in Newark, California, will
be retired.
In 2019, we completed the acquisition of
RDC, five years after selling the business to
Arrow. Sustainability has risen high on the
agenda of most organisations and the
acquisition allows us to help our customers
to meet the challenges posed by the
‘Circular Economy’. Leveraging our
specialist Circular Services Integration Center
in Braintree, UK, and supported by our facility
in Kerpen, we help our customers to repair,
reuse, refurbish and recycle end-of-use IT
equipment across their workplace, mobile,
network and data center asset estates.
Powerful Partnerships
The increasing pace of technological change
and the diversity of the vendor landscape
has made our ‘Technology Provider
independence’ more critical to our
customers. We are trusted to provide
impartial and knowledgeable advice and to
integrate solutions comprising products
from multiple Technology Providers.
Computacenter is one of the largest partners
worldwide for most of the major Technology
Providers. 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
Technology Provider partnerships allows us
to help our customers navigate the
complexity and speed of change in the
current market.
Our expertise in our Technology Providers’
solutions is unrivalled, with our people
holding more than 10,000 certifications.
Our strong working relationships and our
desire to collaborate and seek innovation
and new Services help us remain relevant,
so we are increasingly seen as the partner
of choice.
We are not just working with our established
Technology Providers. There is increasing
demand for new vendors and innovative
approaches, which are often integrated
with core vendor technology to provide
complete solutions.
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 – Germany Enterprise Partner of the
Year & Partner of the Year. Our French
business was awarded Cisco Gold Status
for the first time during the year.
HPE – Netherlands Enterprise Storage
Partner of the Year
Dell Technologies – UK Partner of the Year
Oracle – France Systems Partner of the Year
VMware – UK Partner of the Year
NetApp – EMEA Converged Partner of the Year
Palo Alto – Western Europe Partner of the Year
Integration Center – Livermore, California
A key milestone in the FusionStorm
integration.
Vendor Village at Group Kick-Off 2020 – Manchester, UK
Building Powerful Partnerships with the world’s leading Technology Providers.
Integration Center – Kerpen, Germany
Technical Services: volume device
configuration.
18
STRATEGIC REPORT
ANNUAL REPORT AND ACCOUNTS 2019
TECHNOLOGY PROVIDER SOLUTIONS
We hold over 200 partner accreditations
and our people hold over 10,000
certifications.
OUR ESTABLISHED TECHNOLOGY PROVIDERS
Leading Cisco Gold Partner
Leading Enterprise Partner
One of eight global Titanium Black Partners
Highest level of accreditation across
HPE Portfolio
Highest accredited – Personal System –
Imaging & Printing
Leading Partner in Workplace and
Data Center
Leading Global Partner
EMEA Converged Partner of the Year
One of only a few ServiceNow Global
Elite Partners
One of only six global strategic launch
partners for Microsoft Managed Desktop
Vendor Village at Group Kick-Off –
Berlin, Germany
19
19
Managed Services and
Professional Services
OUR CUSTOMERS
CAN BE CONFIDENT
IN OUR SKILLS
AND SOLUTIONS
We employ over 12,000 people globally
to deliver Services to our customers.
These range from IT Strategy, Advisory &
Transformations Services (Professional
Services) to Support, Maintenance and
Managed Services (Managed Services).
In this section
• Managed Services
• Professional Services
Members of the Group Services
leadership team
Members of the Group Delivery
leadership team
Milton Keynes
Barcelona
Montpellier
Kuala Lumpur
Budapest
Berlin
Bangalore
Cape Town
Mexico City
Group Delivery extended leadership
meeting – London, UK
Dallas
20
MANAGED SERVICES
We maintain, support and manage IT
infrastructure and operations for our
customers, to improve quality and flexibility
while reducing costs. Despite competitive
pricing in the market, our revenue under
contract has high visibility and is long term
and stable. We see this recurring income as
a strategic means of balancing our business.
Customers will continue to ask us to reduce
their costs by running some of their support
operations and our activities in this area
remain an essential part of our customer offer.
As we have grown this part of our business,
we have often experienced very different
results. In some cases, we have incorrectly
designed or implemented services, leading
to material costs to correct. In other cases,
we have delivered very high-quality Services
with great customer satisfaction and
achieved our planned financial returns.
To avoid a recurrence of these historic
issues, we have refocused our complex
outcome-based Managed Services activities,
leveraging our shared engines (such as our
Service Centers), to Workplace service
offerings where we already have scale,
such as Service Desk and Infrastructure
Management. This also allows us to maximise
the impact of our investments and reduce
the technical risk from complex customer
transformations. In addition, we have
implemented a new Managed Services
operating model, underpinned by a stronger
policy framework, clearer technical
standards, improved cost and pricing tools
and improved contract assurance.
Managed Services also includes core support
and Maintenance Services, which are a
historic bedrock for our business. In other
areas of our portfolio, including Networking
and Security, we take less risk in Managed
Services contracts, but see significant growth
opportunities by helping customers to
operate and support their digital technology
through access to our engineering skills and
Service Centers.
Our Service Centers are the core of our
Managed Services capability and we have
continued to invest in improving and
updating the technology underpinning
them. This includes implementing a new
ScienceLogic-based support platform and
continued development of our Artificial
Intelligence, Automation & Analytics (AIMY)
collection of tools.
We continue to see significant opportunities
to grow our Managed Services business.
Our objectives to support our growth
in the coming years include:
• Ensuring the effectiveness of our new
Managed Services operating model,
to avoid problem contracts as we grow.
• Re-invigorating our core maintenance
offerings and looking for opportunities
to expand the depth and reach of our
Networking maintenance activities.
• Continuing to evolve our Service Center
location strategy, to provide the right
balance of skills, pricing and compliance
for our customers. We opened a new
Service Center in Perpignan, France,
this year to provide increased local
capacity in our France-based operations.
We also opened a new Service Center
in Bangalore, India, to help us better
leverage skills and support our existing
India-based engineering and support
teams. In addition, we have opened a
brand new building for our Cape Town
Service Center, which has a capacity
of 1,000 people and is built to very high
environmental standards.
• Reducing our Managed Services ‘cost to
serve’, to ensure we remain competitive
in the evolving market.
Service Center – Bangalore, India
The team after the opening of our new
Service Center in Bangalore, India.
Group Kick-Off 2020 – Manchester, UK
Computacenter’s stand at Group Kick-Off, exhibiting our capabilities to our sales force and key
Technology Providers.
Service Center – Montpellier, France
21
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Managed Services and Professional Services
continued
PROFESSIONAL SERVICES
We provide structured solutions and expert
resources to help our customers to select,
deploy and integrate digital technology, so
they can achieve their business goals. Our
revenue depends on our forward order book,
which contains a multitude of short, medium
and long-term projects.
As the technology landscape has become
more complex, our 1,500 consultants play
an increasingly important role in advising
our customers. Our Professional Services
and Technology Sourcing businesses have
always been linked and we see this linkage
increasing, as our clients need our help to
make wise choices in the complex technology
landscape and to then deploy and integrate
these technologies.
Our Professional Services revenue also
includes some of our 5,000 engineering staff
and 1,000 project managers, who are charged
as part of customer integration and
deployment projects. These Services range
from Workplace rollouts to complex Network
and Data Center solution integrations.
We see significant opportunity to grow our
Professional Services business across all our
portfolio areas (Workplace, Data & Analytics,
Cloud & Data Center, Networking and Security).
Our objectives to support our growth
in the coming years include:
• Ensuring that clear technical standards
underpin our transformation service
offerings, supported by strong
technical deal assurance.
• Continuing to evolve our peoples’
skills profile so they remain relevant
to customers, while maintaining
strong utilisation.
• Developing new modular ways of
delivering Professional Services
solutions, which are less reliant on
local headcount.
• Identifying emerging technology
areas where we can gain scale and
add increased value to our customers.
• Reducing our Professional Services
‘cost to serve’, to ensure we remain
competitive in the evolving market.
Engineering & Maintenance Services
We help customers support and maintain
their technology across the world.
New Service Center – Cape Town, South Africa
Enhancing our capabilities and ensuring the highest environmental standards.
InfoSecurity Conference – London, UK
Leading the way in a complex and
changing world.
22
OUR SERVICE CENTERS
SAN FRANCISCO, WEST COAST, CA, USA
DALLAS, TX, USA
MEXICO CITY, MEXICO
NEW YORK, EAST COAST, NY, USA
HATFIELD, MILTON KEYNES,
NOTTINGHAM,
SHEFFIELD, UK
HATFIELD, UK, EMEA
BARCELONA, SPAIN
MONTPELLIER,
PERPIGNAN, FRANCE
POZNAN, POLAND
BUDAPEST, HUNGARY
BERLIN, DRESDEN, ERFURT,
LEIPZIG, KERPEN, GERMANY
CAPE TOWN, SOUTH AFRICA
DALIAN, CHINA
BANGALORE, INDIA
KUALA LUMPUR, MALAYSIA
KUALA LUMPUR, MALAYSIA, APAC
SERVICE CENTERS
COMPUTACENTER’S COVERAGE
REGIONAL HEADQUARTERS
New Service Center – Perpignan, France
Increasing capacity and resilience.
23
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our People and Culture
OUR BUSINESS
IS ABOUT
TECHNOLOGY.
BUT FIRST OF
ALL IT’S ABOUT
PEOPLE.
Computacenter is a people-centric
company that depends on its employees
to deliver real value to our customers.
We therefore need to attract talented
people and engage and inspire them to
do their best for our customers,
Computacenter and themselves.
This requires us to provide the right tools,
training and development, so our people
feel valued and work for a company they
believe in.
In this section
• Transforming Human Resources
• Talent acquisition and development
• Diversity and inclusion
• Culture and values
• Employee engagement
• Health, safety and wellbeing
Non-financial information statement
The content of this section forms our
non-financial information statement,
with the exception of the Business Model
which can be found on pages 12 to 13,
Principal Risks and Uncertainties (pages
63 to 68) and Strategic Priorities (pages
14 to 15).
Members of the Group Human Resources
leadership team
Group headquarters – Hatfield, UK
24
OUR PEOPLE
Transforming the Human Resources
(HR) function
As Computacenter has grown over the years a
Group Operating Model has been adopted and
SAP enterprise capability was introduced to
the business in 2011. It covered a basic core
SAP solution, Human Capital Management
(HCM) in three of our main countries, UK,
Germany and France. During 2018 a project
to standardise, simplify and harmonise the
systems and processes within HR across the
whole Group was developed called the AHEAD
programme, creating a digital transformation
of our HR systems and tools.
The objectives for the AHEAD programme are
the following:
• Simplify processes for Group managers.
• Harmonise processes required to support
business growth.
• Rationalise multiple systems to enable
self-service for our managers and
employees.
• Implement a common set of tools that are
usable across the Group.
As a result of the programme we will
rationalise 74 systems to 15 across the
Group. The change provides the ability to
consolidate, simplify and create self-service
capability for all the Group users, enabling
HR professionals and managers to support
the development and growth of the business.
The bulk of administrative tasks will be
driven towards HR helpdesks located in
Hungary and Germany, allowing our HR
professionals and managers to focus on
service delivery, supporting the business
functions through growth with automated
systems and processes.
This digital transformation of our HR function
has seen us create a global HR structure,
introduce a standard HR system and implement
SAP Success Factors tools in a number of
areas, including recruitment, variable pay,
pay review, digital records management and
a learning management system. This ensures
we operate to common standards across the
Group, enabling us to manage and support
our people globally, and providing meaningful
data and insights, on a real-time basis. In
turn, this helps us to:
• make informed people-based decisions,
for example around workforce planning
or pay and reward; and
• track important issues such as attrition
rates or diversity characteristics, so we
can drive improvements effectively.
Attracting talent
In 2019 we developed our Group Talent
Acquisition function which allows our
recruitment teams to be agile, flexible and
scalable, and is helping us to meet peak
recruiting requirements in a number of
countries by leveraging multi-lingual
recruitment specialists across the Group
filling over 2,000 vacancies during 2019. By
applying best practice across all countries,
we have also improved the performance of
several recruiting activities.
Our new Global Employer Branding team
focuses on rolling out our employer value
proposition in all our candidate
communications. This ensures our messages
connect to Our Purpose and that we represent
Computacenter consistently to candidates,
enhancing our candidate attraction rates.
Another important initiative in 2019 was our
new Applicant Tracking System. This focuses
on the candidate journey, starting with
providing consistent job advertisements on
a single global portal. It offers the ability to
register in seconds using social media
profiles and provides self-service
functionality, such as confirming interview
times online. The system also enables our
people to see what roles are available within
Computacenter, improving the visibility and
opportunity for role changes, promotions
and global mobility.
We continue to invest in our Future Talent
programmes to attract school leavers,
students and graduates. More than 15 per
cent of all external hires go through one of
our award-winning programmes in the UK
and Germany. Best Training Company (Capital
Magazine – Germany); Industrial Apprentice
Award (The Chamber of Commerce –
Germany); No 1 Medium-Sized Undergraduate
Employer (NUE – UK); No 1 Graduate Employer,
IT and Telecoms (The JobCrowd – UK). In
2020, we plan to extend the programmes to
other countries, with a pilot already
underway in Belgium.
We will continue to focus on improving our
selection process, and thereby diversity of
hires as we strive to make our recruitment
processes as evidence-based and objective
as possible.
Managing and developing talent
Managing talent is an important task for our
leaders, with HR providing support through
processes and development content. To help
our leaders manage talent effectively, we
run training sessions such as Leadership
Basics and Coaching for Success and provide
forums on topics such as leading in the
digital age and inclusive leadership. In 2019,
we established peer reviews and exchanges,
which bring our managers together to
discuss their teams and identify talented
individuals. This enables managers to improve
succession planning and development
opportunities to benefit Computacenter and
the individuals concerned.
To help our people plan their development,
we have created a central learning page on
our intranet. This shows our people the skills
and experience they would need to take on
another role, and therefore the training and
development they require. This makes career
paths more visible and signposts the
resources available to support our people.
We also have a number of career
development academies in the business,
which we will look to build on in 2020. We
define career paths where we believe they
will be beneficial. For expert roles, we have
dedicated programmes to define formal
requirements and certifications to advance
people in those senior roles. In general we
position a career at Computacenter as
offering a wide range of opportunities that
build on our people’s individual strengths.
Performance management
During the year, we piloted a new performance
management approach in Germany and
implemented the necessary supporting
tools and process. The approach focuses on
continuous dialogue between employees and
managers enabling open dialogue about
in-role performance and career development.
Early feedback is very positive, and we will
optimise the process globally during 2020.
Diversity and inclusion (D&I)
One of the most important factors in
Computacenter’s growth as a global
business is ensuring that all our people are
valued and supported to reach their full
potential. Having a diverse and inclusive
organisation enables us to:
• attract, retain and promote the best
talent;
• create strong leaders;
• use the diverse experiences, skillsets and
ways of thinking that our employees
provide;
• understand and reflect our diverse
customers, enabling us to provide them
with the best possible service;
• improve performance; and
• be more innovative and forward thinking.
Our People Panel is chaired by Mike Norris,
our CEO, and brings together more than 35
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,
measures progress and communicates.
The People Panel has helped us to embed D&I
in everything we do, through one of our core
Winning Together values: understanding
people matter. To focus our efforts, we have
concentrated on six subject pillars:
• accessibility and wellbeing;
• life balance;
• LGBT+ allies;
• future talent;
• focus on women; and
• culture.
Key themes that run alongside the six pillars
are recruitment and retention and
organisational culture.
The Group has a dedicated D&I manager,
who centrally coordinates all of our
activities. We have also established a D&I
project team, made up of 20 people from
across the Group, who look at how we can
drive D&I in every part of our hiring, retention
and engagement processes.
Other key D&I activities in the year included:
• redesigning our diversity monitoring
questions at every stage of hiring, which
allows us to track, for example, how many
women apply and how many reach each
subsequent stage of the recruitment
process;
• rolling out inclusive decision-making
training to all leaders and managers, to
make people aware of unconscious bias;
and
• piloting our new inclusive leadership
forum, which brings together leaders from
around the business with a passion for
D&I, to generate ideas and ensure we are
doing the right things to be an inclusive
employer.
Gender diversity
The table below shows our gender diversity
at the year end:
2019
2018
Women
2
Men Women
2
7
24
91
21
Men
7
87
4,062 11,890
3,874 12,065
4,088 11,988
3,897 12,159
Board
Senior
managers
Other
employees
Total
Although the proportion of women employed
in Computacenter is in line with industry
norms, we are committed to increasing it.
25
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our People and Culture
continued
Initiatives specifically aimed at improving
gender diversity include our Growing
Together (UK) and Women@Work (Germany)
networks, which are delivering real benefits.
For example, 52 women have been through
the Growing Together programme so far, of
which over one-third have been promoted or
taken a new role within a year. This is a direct
result of the mentoring and coaching
provided. During the second half of 2019,
a senior female development programme
has been researched and developed with
launch planned for Q2 2020.
We are delighted that four of our women
were recognised at the CRN Women in
Channel Awards 2019 in the UK and in
Germany we had three winners in the
Women’s IT Network awards. These wins
showcase Computacenter’s female talent
and our commitment to increasing gender
diversity within the Group.
Our winning together values are:
Culture and values
Computacenter has a highly positive culture,
based on having committed people who
deliver fantastic results for our customers
every day, who feel engaged and motivated
and enjoy coming to work. Our culture
contributes to an average length of service
of more than nine years. We also frequently
see people rejoining the Group after taking
roles elsewhere or having career breaks.
Our culture directly supports Our Purpose
(see inside front cover) and is underpinned
by our Winning Together values. These values
are at the heart of how we operate as a
business and underpin our leadership
principles of driving success by collaborating,
being inclusive, having an open mindset,
innovating and leading as a coach.
Winning
Together
Our Values
We win by:
We do this together by:
Putting customers first
We work hard to get to know our customers
and really understand their needs. That lets
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.
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.
26
As we grow, maintaining our values and
culture 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 use our values in every aspect of our
people engagement from recruitment,
recognition and throughout our peoples’
career development.
Engagement
Towards the end of the previous year, we ran
an engagement survey with responses from
around 10,000 of our people. Key themes
from across the business were identified as
areas of strength and areas for improvement.
Throughout 2019, teams from within each
business area have worked with the
leadership of each part of the business and
with HR to create improvement plans in the
areas identified as needing focus.
We have a number of different forums for
engaging with our people. In the UK, we have
MyForum and we have Works Councils in
Germany, France, Spain, Belgium and
Switzerland, as well as a European Works
Council. All of these meet regularly with the
executive team and other senior managers,
to provide business insight and inform how
the business is managed.
We also have forums for Future Talent in the
UK and Germany, known as FreshMinds and
Future Talent Connect respectively. We
provide support and funding for these
groups, which help to bring ideas to our
senior management.
Our Senior Independent Director, Ros Rivaz,
is our nominated Non-Executive Director
aligned to our people. She has performed
this role for two years and has engaged with
employee representatives such as our
European Works Council as well as attending
a number of People Panel sessions in order
to gain direct insight from employee
representatives across the Group. These
insights are shared with the Board and are
brought into Board discussions to ensure
that the employees’ input is heard and taken
into account. Feedback from employees to
Ros’ engagement is unanimously positive.
Improving the employee experience
In March 2020, we are launching a global
peer-to-peer recognition tool called Bravo!
This allows our people to immediately
recognise the contributions of their peers
and to thank them for it. The tool is mobile
enabled to allow for fast and frequent
recognition. This helps to reinforce our
values and outcomes, based on behaviours
and best practice. The tool also allows
managers to award points for exceptional
performance and behaviours, which can be
redeemed with selected retailers or donated
to our chosen charities in-country. This new
tool provides the Group with a global ability
to recognise and reward exceptional
behaviour and outcomes across all areas
of the business, encouraging collaborative
working across the Group.
Our people policies
Computacenter has a range of people-
related polices, covering topics such as
equality and respect 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
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.
HEALTH, SAFETY AND WELLBEING
Protecting those who work for and with us,
as well as customers and members of the
public, is extremely important.
Our Health & Safety policy
In April 2019 a new Health & Safety policy
was issued.
It is Computacenter’s policy that in so far
as is reasonably practicable, an environment
is created and maintained that includes
a commitment to eliminate and/or reduce
Health & Safety risks to employees,
customers, suppliers, contractors, visitors
and members of the public.
The approach to Health & Safety shall be
based on the identification and control
of hazards, the prevention of incidents,
particularly those involving personal
ill-health, injury and damage to equipment/
property. Near miss reports (i.e. identifying
unsafe acts or conditions) are also
investigated as Computacenter recognises
these as being an essential method of
avoiding future incidents. This approach is an
important and integral part of the efficient
operation of the business.
Computacenter recognises that it is not
sufficient merely to have a General Health &
Safety Policy Statement, but that it is more
important that everyone concerned is
made aware of their responsibilities in
implementing the policy. All line managers
shall ensure that the policy, which contains
procedures for safe methods and conditions
for work, is implemented within their areas
of responsibility.
In addition to the above arrangements
Computacenter shall:
• maintain a constant and continuing
improvement culture in Health & Safety
performance and encourage all
employees to set an example in safe
behaviour;
• promote participation and consultation
between employees and management
concerning matters of Health & Safety;
• provide the necessary resources in the
form of finance, equipment, personnel and
time to ensure the implementation and
maintenance of the Health & Safety policy;
and
• maintain and monitor an online legal
compliance register, which will include
a commitment to fulfil legal and other
statutory requirements.
Employees shall take reasonable care of their
own Health & Safety and that of others who
may be affected by their act or omissions.
The Group’s Health & Safety policy is to
create and maintain, as far as reasonably
practicable, a working environment which
does not pose an undue risk to Health &
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 2019, we have seen a solid Health &
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 2.19 in the
UK, and the Accident Frequency Rate (AFR),
which is the number of accidents per 100,000
working hours, to 0.41 in the UK.
Health & Safety performance
Average results for 2019:
UK
Germany
France
AIR
2.19
2.36
1.58
AFR
0.41
0.49
0.33
We have had a continual uptake on the
courses being rolled out with over 10,566
courses completed so far – Display Screen
Equipment (1,104), Manual Handling (971),
Environmental Awareness (382) and Safe
Driving (766).
Wellbeing
Supporting mental health at work is a priority
for us. We are therefore looking carefully at
how we can help our people to manage
stress, ensure they understand how to ask
for help and how to provide support. As part
of this, we now have 50 wellbeing champions
trained in mental health first aid across the
UK. More than 1,000 UK employees have taken
part in our wellbeing webinars. This has
contributed to a 4.0 per cent reduction in
referrals to Occupational Health for mental
health needs. We have also contracted
Remploy to allow managers to book training
on mental health as needed.
In Germany, we have established the ‘Health
Circle’ to raise awareness of conditions that
can limit people’s activities and set up
preventative measures. We conducted
a webinar and online training on mental
health for line managers and offered
courses on subjects such as stress. Our
awareness programme for employees runs
campaigns on a quarterly basis on a variety
of wellbeing topics.
27
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our Community
WE’LL ACT FOR
THE LONG TERM
AND ALWAYS
STRIVE TO
IMPROVE WHAT
WE DO
Headquarters – Germany, Kerpen
By 2019, CO2 emissions per employee
had fallen from 4.3 tonnes in 2010 to
2.7 tonnes.
Solar panel installation – Hatfield, UK
This is believed to be the largest rooftop
installation in the UK in 2019.
Service Center – Cape Town, South Africa
The facility is the 23rd largest office to be
certified by Green Building Council of
South Africa in the Western Cape.
28
Environment
Our environmental policy commits us to
continuously improving the environmental
impact of our business activities. We enact
the policy through an environmental
management system (EMS) covering major
sites and operational areas, which among
other things ensures we comply fully with
all relevant environmental legislation,
regulations and other requirements. We use
the EMS to provide a framework for setting
and reviewing environmental objectives
and targets.
We continue to actively manage our
environmental impact and look to ensure our
buildings are environmentally sustainable,
including when designing new facilities.
Since 2004, our facilities at Kerpen have been
certified to the international standard ISO
14001, which specifies requirements for an
effective EMS. In 2020, our new Integration
Center and German headquarters in Kerpen
will be recertified for the first time. The
Integration Center uses solar heating for
washing water and rainwater for toilet
flushing. We have also redefined the way we
handle waste at Kerpen, removing the need
for manual handling and making waste
easier to transport.
The office building at Kerpen includes
a wide range of energy efficiency and other
environmental measures. It complies with
the energy efficiency standard KFW 70 for
buildings and includes highly dimensioned
insulation, triple glazing, indoor and outdoor
LED lighting, a green electricity power
supply and the ability to recover waste heat
from the canteen. Outside, there are ten
charging stations for electric cars and a
further 90 parking spaces with charging
infrastructure. Charging stations for e-bikes
are also planned. Landscaping includes more
than 150 trees, a natural hedge and a
wildflower meadow.
The environmental measures at Kerpen will
help the German business to meet its target
of reducing CO2 emissions per employee by
20 per cent between 2010 and 2020. By 2019,
CO2 emissions per employee had fallen from
4.3 tonnes in 2010 to 2.7 tonnes. The German
business has also switched its energy supply
to green power and limited the maximum
emissions per kilometre from company cars.
Computacenter has continued its low-energy
investment programme, with the recent
installation of nearly 7,000 photovoltaic
panels on its Hatfield Integration Center.
This is believed to be the largest rooftop
installation in the UK in 2019. It will produce
approximately 2.08 million kWh of electricity
annually, saving approximately 1.1 million kg
of CO2 emissions and paying for itself in just
over five years. This project was combined
with the overall upgrading of electrical
appliances used throughout the business.
Computacenter will continue to investigate
emerging energy-saving technologies
where possible.
In South Africa, our new building has a four
star rating in the Green Star certification
issued by the Green Building Council of South
Africa. We identified three guiding principles
when designing the building to create a
sustainable, desirable and premium facility.
The facility is the 23rd largest office to be
certified by the Green Building Council of
South Africa in the Western Cape.
The building achieves a 55 per cent reduction
in greenhouse gas emissions by using a
variable refrigerant volume air-conditioning
system that together with optimal building
design, shading and natural light penetration,
minimises energy use. All energy used is
sub-metered and monitored to ensure
optimal energy performance.
Building materials were carefully selected to
reduce indoor pollution, by specifying low
VOC paints, sealants and adhesives. The goal
of achieving a more sustainable building was
also strengthened through, for example,
specifying recycled content in steel.
The project scored highest in the water
category through the use of potable water
and using water-efficient sanitaryware,
together with a borehole, and capture and
re-use of rainwater for toilet flushing.
Landscape irrigation is by using indigenous,
water-efficient planting and a drip
irrigation system.
Information on our greenhouse gas emissions
can be found on page 29 of this report.
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 2019.
Emissions = metric tonnes of CO2e
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 3.92
metric tonnes per £m value of Group
revenue: (2018: 4.53 metric tonnes,
a reduction of 13.6 per cent).
Emissions as reported above 1.23 metric
tonnes per Group employee (2018: 1.30
metric tonnes, a reduction of 5.3 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.
With the help of 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 ISO 14001: 2015
standard (EMS 71255).
Group properties included in this report are all
current locations in the UK, Germany, France,
Belgium, Spain, South Africa, USA, Switzerland,
Malaysia, Hungary, Mexico and the Netherlands.
We have reported on all of the emission sources
required under the Companies Act 2006 (Strategic
Report and Directors’ Reports) Regulations 2013.
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 55 per cent of the
total for the UK. These Data Centers host customer’s
IT 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.
Manchester Data Center cooling system upgrade
We are undertaking an air conditioning unit
refresh, replacing the existing units with more
energy efficient ones. We have currently upgraded
to new state of the art dual cool air conditioning
unit and are also upgrading the chilled water
system to take full advantage of the free cooling
from the water chillers. A new ACIS Building
Management System is currently being installed
that will control the Data Center environment to
ASHRAE guidelines whilst making it more energy
efficient reducing electrical consumption by
12.5 per cent (1,202,774 kWh pa) thus improving
the PUE Data Center efficiency metric.
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.
The UK continues to fully comply with this scheme registered as a participant.
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 legislation by submitting our energy report which covers the period
1 April 2018 to 31 March 2019.
Energy Efficiency Scheme (CRC)
(CRC8804716)
Packaging Waste Regulation
ISO 14001:2015
(EMS 71255)
Energy Savings Opportunity Scheme (ESOS)
Emissions = 19,808 metric tonnes of CO2e
1 2 3
6
5
4
1 Belgium 1.65%
2 France 2.48%
3 Germany 41.31%
4 South Africa 7.05%
5 UK 39.64%
6 Others:
Hungary 0.60%
India 0.0%
Malaysia 4.59%
Mexico 0.10%
Netherlands 0.10%
Poland 0.04%
Spain 1.13%
Switzerland 0.76%
USA 0.54%
1 Data Center 53%
2 Facilities 47%
UK Energy Usage
1
2
29
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019
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.
Group Internal Audit tests compliance with
our policies and our control regime is
supported by our external whistleblowing
hotline, which is provided by Safecall.
No material breaches of our policies were
identified during the year.
We continued our zero-tolerance approach
to Anti-Bribery and Corruption in 2019.
Anti-Bribery and Corruption training is an
integral part of our induction process across
the Group and during 2019 we refreshed
and relaunched this training across all the
countries where we employ people. 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 confidentially report any issues
concerning them.
How we do business
Protecting human rights
Being a socially responsible business benefits
the environment, the community, our
shareholders, customers and employees alike.
We remain signatories of the United Nations
Global Compact (UNGC) and are committed to
carrying out business responsibly. As part of
this, we incorporate the Ten Principles of the
UNGC into our strategy, culture and day-to-
day operations, as part of our ethical and
responsible business practices. For
Computacenter, human rights falls 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 our
people and Health & Safety policies. Human
rights in the supply chain primarily relate to
the risk of modern slavery. We published our
most recent Modern Slavery Statement,
covering our 2018 financial year, in March
2019, with our report covering the 2019 year
due to be published imminently. 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 ten principles in the
UNGC, which include human rights, and we
expect our suppliers to abide by these. 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.
Our Community
continued
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 Moroccan populations
isolated in the desert and provide access
to education for children. We have also
continued our partnership with Aide et
Action, to support the 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
Comitè Català per als Refugiats, a local
branch of United Nations High Commissioner
for Refugees (UNCHR).
In the UK, we have continued to provide
considerable support to the charity partners
selected by employees – Make-a-Wish
Foundation, British Heart Foundation and
Dementia UK. We do this through fundraising
steered by the charity committee, which
comprises a cross section of employees,
from branch administrators to senior
management. 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.
30
Section 172 Statement
Directors’ duties – compliance with section 172 of the Companies Act 2006
Section 172 of the Companies Act 2006 requires directors to promote the success of the company for the benefit of the members as a whole and
in doing so have regard to the interests of stakeholders including clients, employees, suppliers, regulators and the wider society in which it
operates. On pages 31 to 33, we have set out how we have engaged with our key stakeholders and how the Board has considered their interests
during the year. The Chairman’s Statement on page 2 outlines how the Board considered the Group’s environmental impact in 2019, and
information on our environmental performance can be found on pages 28 to 29.
Section 172 also places a number of other obligations on company directors, namely to consider the likely consequences of any decision in the
long term, the desirability of the company maintaining a reputation for high standards of business conduct, and the need to act fairly between
members of the company.
Computacenter’s Board naturally takes a long-term view in its decision making and this is reflected in our Winning Together values (on page 26).
The Group’s business is based on developing multi-year relationships with customers, as evidenced by more than half of our top 50 customers
having been with us for more than a decade. The Directors also have a substantial combined shareholding in Computacenter, totalling 42.2 per
cent of total voting rights, and therefore have a significant interest in ensuring the business’s continued success in the long term.
The Group has a reputation for high standards of business conduct, including putting customers first and delivering on its promises. This is shown
both by our Winning Together values and by the work we have done in recent years to turn around problem contracts. Maintaining a strong
reputation in the market is also important to our Technology Providers, who are crucial stakeholders for our business.
The size of the Directors’ shareholding directly aligns their interests with other shareholders, while the Board has a majority of independent
Non-Executive Directors. Both these factors ensure that all shareholders are treated fairly in the Board’s decision making.
Information on the matters considered by the Board during the year can be found on page 76.
Stakeholder engagement
Our stakeholders are an important part of our operations and are referenced throughout this report. Details of our key stakeholders and how
we engage with them are set out below.
Who they are
Shareholders
Why they are important
• We rely on the support and
How we engage and consider their interests
• The Chairman, on appointment, contacted significant shareholders offering each
engagement of our
shareholders, to allow us
to operate the Company
effectively and enable
success for them and the
rest of our stakeholders.
the opportunity to meet him.
• The Chairman and Company Secretary conduct a governance roadshow with significant
shareholders, following the release of the Annual Report and Accounts.
• The Executive Directors undertook investor roadshows throughout the year and in
multiple geographies.
• The Board approves the half-year and full-year results, and the Annual Report
• Our shareholder base
and Accounts.
supports the Company’s
focus on delivering
success over the long term
rather than relying on
short-term results.
Community
• The Board considers the
impact of our operations
on the communities in
which we are present,
during Board discussions.
• The Chief Executive Officer and Group Finance Director deliver half year and full year
results presentations to sell-side research analysts and institutional shareholders.
• The Board attended the 2019 Annual General Meeting.
• Investor feedback is presented to the Board through monthly reports and regular
broker notes.
• The Senior Independent Director writes annually to significant shareholders, offering
the opportunity for an individual meeting to discuss any concerns.
• The Remuneration Committee Chair wrote to significant shareholders, proxy firms and
other interested parties regarding the renewal of the Directors’ Remuneration Policy
and engaged with those that responded.
• The Company runs biennial Capital Markets days, to engage with sell-side
research analysts.
• Community engagement is typically co-ordinated by local management teams.
An example is our renewed sponsorship of the next generation of the Hertfordshire Fire
and Rescue fire investigation dog.
• A charity committee comprising a cross section of employees organises fundraising for
our UK charity partners.
• The Board has dedicated the use of the funds received during 2019 as a result of the
share forfeiture exercise towards charitable purposes.
• The Company remains committed to paying our fair share of tax in the jurisdictions
in which we operate. Our adjusted1 effective tax rate has increased from 22.8 per cent
in 2015 to 27.8 per cent in 2019. The Audit Committee reviews the Company’s tax
strategy and policy each year, to ensure this remains in line with our commitments
to our communities.
• The Board strives to maintain high standards of governance across the Company, to
ensure that we can engage with our communities’ environmental and societal concerns.
31
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Section 172 Statement
continued
Who they are
Regulators
Customers
Why they are important
• Our other stakeholders’
interests are best served
through proactive
engagement with our
regulatory bodies.
• Customers are at the core
of what we do. Our focus on
building trust by always
delivering on our
commitments underpins
the culture of the Company.
• Staying close to our
customers’ evolving needs
allows us to adapt our
strategic approach, to
ensure we stay relevant in
an ever-changing industry.
Technology
Providers
• Our Technology Providers
are crucial to the ongoing
success of the Company.
• These are typically leaders
in the IT industry who
supply the Technology
Sourcing solutions that
we sell to our customers.
• We remain Technology
Provider independent and
maintain relationships
across the industry, so we
can provide the best
technology solutions for
our customers’ needs.
32
How we engage and consider their interests
• From time to time, we engage with regulators and policymakers to ensure that our
business understands and contributes to evolving regulatory requirements.
• During the year, the Audit Committee directed senior management to respond to
a Financial Reporting Council consultation on proposed changes to auditing standards,
to ensure that the Company’s view was considered.
• The Board receives regular reports that outline the material changes in the regulatory
environment in which the Group operates and reviews the response of senior
management to these changes.
• The CEO meets regularly with key customers and updates the Board on his discussions
and any concerns raised. The Board considers this feedback when reviewing and
assessing the Company’s strategy.
• Materially adverse customer feedback is reported to the Board.
• Client Directors and Account Managers lead teams that build lasting relationships with
current and potential customers, to develop a clear view of customer objectives and
how these will evolve.
• Service Directors and Service Managers lead teams that monitor day-to-day operational
performance of key Services contracts, to ensure that our commitments to delivering
the service our customers expect are met.
• The Board ensures that succession planning for key Client Directors and Service
Directors is in place, as part of their annual review with each Country management team.
• The Board reviews regular reports on the achievements of the Client Director, Account
Manager and Sales Solution Specialist community, to ensure that they have the tools
needed to enable their success.
• Key contracts where customer contractual commitments are not met are reviewed
at every Audit Committee meeting and escalated to the Board where appropriate.
• The Board reviews contract governance improvements, to ensure that the Company
is empowered to deliver on our promises to customers.
• The Board receives regular reports on the Contract Base and the number of significant
customers providing over £1 million of contribution for the Company. These reports
measure and monitor two of our Strategic Priorities, demonstrating the need to
maintain and grow significant relationships with our customers.
• The Board received a number of presentations on Company initiatives to improve the
service and capability that we can provide to our customers.
• During the year, the Chairman of the Board and the CEO conducted a vendor roadshow
to the biggest US technology companies located in Silicon Valley. Through a series of
meetings, the Chairman and CEO improved their understanding of the future changes
in technology, the impact on both our Technology Providers and customers, and the
ever-changing requirements of the Company from these key stakeholders. Following
the roadshow, a report was presented to the rest of the Board, to assist with their
understanding of our Technology Providers and their expectations of the Company.
• We hold an annual Group Kick-Off sales event in early February. Key vendors from across
the industry attend to address our sales force directly and demonstrate the latest in
innovation in a Technology Village that accompanies the event. Over half of the Board
attended the most recent event in February 2020 and had the opportunity to engage
with our Technology Providers directly. We engage proactively with our suppliers and
have a Supplier Code of Conduct that sets out the high standards and behaviours we
expect from them.
• The code requires our suppliers to incorporate the prohibition of forced labour and
human trafficking, together with the ethical and responsible sourcing of goods or
services, into their sourcing governance and execution process.
• The Board monitors changes in key accreditations in our core geographies, to ensure
that we remain relevant to both our Technology Providers and customers. These
accreditations are considered when making significant acquisitions.
• The Board monitors developments in these relationships and the emergence of new
critical Technology Providers.
Who they are
Our people
Why they are important
• Our people are the primary
reason for the ongoing
success of our business.
• We are proud of the
recognition that we receive
for our efforts to
continually improve the
Company as a workplace of
choice for our people and
this is reflected in the
lengthy average tenure
of employment.
How we engage and consider their interests
• Ros Rivaz, the Senior Independent Director, is the designated Non-Executive Director
responsible for gathering workforce feedback, a key requirement of the 2018 Code
which requires that the Board engage with the wider workforce. Ros was appointed
to this role in November 2017 and has engaged with a wide variety of employee
representative groups, to hear directly from employees on the issues that concern
them. Ros reports to the Board on each engagement, with recommendations for action
by senior management.
• Ljiljana Mitic, our German-based Non-Executive Director, has engaged with various
representatives of our German business, including Human Resources, to ensure that
any specific issues are raised at the Board.
• We engage through a variety of channels, including management briefings, videos and
presentations by the Chief Executive Officer, to discuss progress made by the business,
together with future objectives and challenges.
• Employee shareholders had the opportunity to meet the Board at our AGM and
ask questions.
• The Board approved a significant investment in a new Group-wide people toolset, which
allows a common approach to rewarding our employees and monitoring their progress
against objectives and through the Company. The Board will continue to review this
implementation, to ensure it is delivering for our people.
• People-related topics including diversity and talent management are scheduled on the
Board agenda.
• We conduct an employee engagement survey and have invested in our corporate
communications, to help employees understand and deliver our Strategic Priorities.
The Board discussed the results of the 2018 employee engagement survey and reviewed
an action plan to address the issues raised.
• The Board considers the Group’s employees to be an important stakeholder and the
consideration of their interests forms a part of many Board discussions.
Non-Financial Information Statement
Computacenter aims to comply with the Non-Financial Reporting Directive requirements contained in sections 414CA and 414CB of the Companies
Act 2006. The table below sets out where more information on non-financial matters can be found within this Annual Report and also on our
website. The due diligence carried out for each policy is contained within each respective policy’s documentation.
Reporting requirement
1. Business model
2. Principal risks and impact of business activity
3. Employees
4. Social matters
5. Human rights
6. Anti-corruption and anti-bribery
7. Environmental matters
Relevant information
• Business model
• Strategic priorities
• Principal risks and uncertainties
• Viability Statement
• Employees
• Diversity policy
• Health & Safety
• Stakeholder engagement
• Supporting charity and community
• Human rights
• Suppliers
• Details of our Supplier Code of Conduct, as well as our
approach to protecting human rights, can be found on
our website
• Whistleblowing
• Our Code of Business Conduct and other related
policies, can be found on our website
• Environmental matters
• Greenhouse gas emissions
• Energy use and emissions
Page
12
14
63
61
24
25
27
26
30
30
30
30
28
29
29
33
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Powerful Partnerships
EXTENDING ‘A PEERLESS
IT SERVICE’ BY ANOTHER
FIVE YEARS
What we did
We won a five-year extension to core Data
Center and cross-functional services
(including Wintel, Mid-range and Mainframe
support and hosting), plus new Workplace
refresh with Windows 10 Evergreen and
Managed Print support.
How this helped our client
By understanding NFU Mutual’s business,
we were able to add value, innovate and
provide thought leadership on future IT
challenges, while delivering infrastructure
stability and smooth-running IT services.
This enabled the client to concentrate on
other strategic objectives.
Number of years Managed Services
contract extended:
5
6,000
Number of Workplace device upgrades:
Computacenter has
established a totally
reliable service at
NFU Mutual. With our
renewed contract,
and new Workplace,
I’m therefore looking
forward to the next
five years of peerless
IT service.
Tim Mann
CIO, NFU Mutual
34
35
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Powerful Partnerships
SECURE AND EFFICIENT
INTERNET ACCESS
USING BROMIUM
SECURE BROWSER
What we did
Provided encapsulated internet access for
users, enforcing greater security. Processing
now takes place in separate micro-virtual
machines, which are deleted after closing
the browser – thus isolating any malware
from Dataport’s infrastructure.
How this helped our client
Vastly improved both security and the user
experience, thanks to significantly improved
performance, an increase in available
access points for simultaneous use, and
more efficient uploads, downloads and
data transfers.
Number of clients involved in successful
pilot project:
50
Number of users migrated to Bromium
Secure Browser:
10,000
Computacenter
has been an
outstanding partner
for many years.
For the Bromium
project, we were
once again able
to rely on their
expertise, which
enabled the project
to run extremely
smoothly.
Jan-Eric Hein
Bromium Product Manager, Dataport
36
37
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Powerful Partnerships
UGAP SELECTS
QUALITY PRODUCTS
AND SERVICES FOR
ITS CUSTOMERS
What we did
We won two three-year public contracts for
the provision of infrastructure and a rich
Network product kit of over 800 Lenovo
servers (from small office to data centers)
and over 300 Cisco Network products
and Services.
How this helped our client
Our service ensures UGAP’s customers a quick
access to top-of-the-range technology at the
right price, thanks to a simplification of the
public procurement procedure. UGAP’s
customers are assured by having
Computacenter experts to advise them.
Number of products available:
1,100+
22,000+
Number of UGAP customers:
To offer their
customers quality
products and
services, UGAP
selected
Computacenter’s
offer for prices,
technical solutions
and wealth of
services proposed.
Réza Bacha
Head of IT and Telecom
Product Marketing Department
UGAP
38
39
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our Performance in 2019
Financial performance
The Group’s revenues increased by
16.1 per cent to £5,052.8 million (2018:
£4,352.6 million) and were 16.9 per cent
higher in constant currency2.
The Group made a statutory profit before tax
of £141.0 million, an increase of 30.4 per cent
(2018: £108.1 million). The Group’s adjusted1
profit before tax increased by 23.8 per cent
to £146.3 million (2018: £118.2 million) and by
24.9 per cent in constant currency2.
The difference between statutory profit
before tax and adjusted1 profit before tax
primarily relates to the Group’s reported
net charge of £5.3 million (2018: charge of
£10.1 million) from exceptional and other
adjusting items. These relate principally
to the Group’s acquisition of FusionStorm.
Further information on these can be found
on page 56.
It should be noted that these results include
an overall decrease of £1.7 million in both
statutory and adjusted1 profit before tax,
due to the impact of IFRS 16. The timing
difference effect of the new accounting
standard has resulted in increased interest
costs exceeding the net of reduced rental
costs and increased depreciation. Excluding
the impact of IFRS 16, statutory profit before
tax was 32.0 per cent better than the prior
year, whilst adjusted1 profit before tax was
25.2 per cent higher. Further information on
the impact of IFRS 16 can be found on pages
58 and 128.
With the increase in the Group’s overall
statutory profit after tax, statutory diluted
earnings per share (EPS) increased by 27.0
per cent to 89.0 pence for the year (2018:
70.1 pence). Adjusted1 diluted EPS, the Group’s
primary EPS measure, increased by 22.2 per
cent to 92.5 pence for 2019 (2018: 75.7 pence).
The result has benefited from £857.6 million
of revenues (2018: £270.9 million) and
£6.5 million of adjusted1 profit before tax
(2018: £2.2 million), resulting from the
acquisitions made since 30 June 2018.
All figures reported throughout this Annual
Report and Accounts include the results of
the acquired entities.
40
Revenue by business type
1
6
5
4
3
2
1 Workplace 22%
2 Data Center, Networking & Security 33%
3 Software 14%
4 Resold Services 7%
5 Professional Services 7%
6 Managed Services 17%
2019 was one of the most successful years
in Computacenter’s history. We recorded our
best-ever revenue, profit, EPS and cash
generation from ongoing operations, and
increased our profit by the largest absolute
amount ever. The acceleration shown in 2019
in the progress of Computacenter’s adjusted1
profitability and adjusted1 earnings per share,
two key financial measures for the Group,
shows a business growing both organically
and through leveraging recent acquisitions.
This improvement on the prior year was
evident across the board, although it was
stronger in some areas than others. German
Services gross profit showed the greatest
increase across the Group, driven by strong
growth in Professional Services and an
excellent recovery in Services margins from
the lows of 2018. The German Technology
Sourcing business saw solid growth and an
improvement in margins, even with the
slow-down of its largest customer, which
significantly reduced its spend back to
normal levels after the surge in 2018. UK
margins showed significant improvement,
with pleasing Technology Sourcing growth
once the large one-off deals from 2018 are
excluded. The French business had another
year of exceeding expectations and internal
targets, with strong revenue growth and
margin gains across the business. The
acquired business in the USA had a very
strong second half of the year, with adjusted1
operating profit exceeding that of the
disappointing first half by a factor of 10, as
some early issues in operating the business
were mitigated and sales volumes returned.
Our International business, primarily
the ‘Rest of Europe’ trading group, has
contributed pleasing profit growth whilst
absorbing the significant investment of
aligning the Netherlands to the Group
Operating Model. The acquisition of
PathWorks during the year has been very
successful and has rounded out the full
business model in Switzerland.
Technology Sourcing performance
The Group’s Technology Sourcing revenue
increased by 20.3 per cent to £3,822.2 million
(2018: £3,177.6 million) and by 21.3 per cent
on a constant currency2 basis.
As noted in our 2018 Interim Report and
Accounts, the prior year revenue performance
was flattered by two one-off software
licence sales in the UK totalling £70.8 million,
at very low margins. Once these deals are
adjusted out from the comparative, and the
£820.0 million of revenues resulting from the
acquisitions made since 30 June 2018 are
adjusted out from the current year result
(2018: £254.7 million), the Group saw a 5.3 per
cent increase in organic Technology Sourcing
revenue over the prior year comparative.
The UK Technology Sourcing business saw
pleasing growth, excluding the one-off deals
noted above. Margins improved, with the
subtle shift in the product mix towards
higher-margin Data Center, Networking and
Security products continuing throughout
the year.
The Technology Sourcing business in
Germany saw a significant reduction in
revenue with one key software hyperscale
customer, which has reduced investment in
Cloud infrastructure build out. Pleasingly,
this loss in volumes was exceeded by growth
in other areas of the business, particularly in
the Public Sector, leading to 4.2 per cent of
revenue growth in constant currency2 over
what has been a sustained period of success
for the business. German Technology
Sourcing margins improved significantly
from the prior year, driven by the improving
product mix and the replacement of the
lower-margin hyperscale business with
higher margin business.
Outlook
As we stated back in January, the results for
2019 set a high bar for the business in 2020.
It is too early to predict the outcome for the
year as a whole and there is still much work
to be done, particularly as we have not yet
completed our first quarter. Our Services
pipeline is the strongest we have seen for
some time in both Professional Services and
Managed Services. While we still believe
customers will continue to invest in product,
particularly in the areas of Security,
Networking and Cloud, it may well be difficult
to achieve the same growth rates we have
seen in recent years.
The current COVID-19 outbreak makes
forecasting the future even more
challenging. In the short term, we are
urgently supporting our customers focused
on their business continuity plans which
involves the need for a greater degree of
remote working. We have seen a surge in
demand for laptop computers for this
purpose. To-date, supply constraints from
our Technology Providers have been minimal,
although there are some concerns going
forward. We do, however, have some
concerns that in the medium term,
customers may postpone significant IT
infrastructure projects while the current
uncertainty remains. In the longer term, we
feel more certain, either because when this
crisis is behind us, life will return to normal
and the fundamental business drivers for IT
growth remain or, if there is a long-term
reduction in business travel and commuting
with a consequent upsurge in remote
working, it can only drive the need for
technology even further.
Our current focus is on maintaining continuity
for our customers for the services and
products we supply as well as doing whatever
we can to protect the health of our employees,
customers and the wider community.
French Technology Sourcing revenues grew
faster than expected, at improved margins,
due to the widening portfolio of target
customers, particularly in the Public Sector.
The key Public Sector account that was
renewed in the prior year unexpectedly saw
much increased volumes, in contrast to
historic trends following previous renewals.
French Technology Sourcing margins
increased and remain the best and most
consistent across the Group.
Overall, Group Technology Sourcing margins
increased by 26 basis points during the year,
when compared to the prior year.
Services performance
The Group’s Services revenue increased by
4.7 per cent to £1,230.6 million (2018:
£1,175.0 million) and was up 5.2 per cent on
a constant currency2 basis. Within this, Group
Professional Services revenue increased
by 13.7 per cent to £366.1 million (2018:
£321.9 million), and by 14.5 per cent on a
constant currency2 basis. Group Managed
Services revenue increased by 1.3 per cent
to £864.5 million (2018: £853.1 million), and by
1.7 per cent on a constant currency2 basis.
The overall Services result benefited from
£37.6 million of revenue resulting from the
acquisitions made since the second half of
the previous year (2018: £16.3 million).
UK Services revenue reduced during 2019,
with both Professional Services and Managed
Services activity declining. Professional
Services was challenged by lower than
forecast volumes, as the customer pipeline
elongated, but continued strength in the mix
of work towards higher-end consulting and
less transformation projects reinforced
margins. Whilst Managed Services revenues
were down due to renewals, as reduced
prices caused decline in the Contract Base,
the business stabilised the ‘difficult’
contracts from 2018 and strongly improved
margins elsewhere in the portfolio. The
improvement in the core Managed Services
contracts, along with an improved
Professional Services margin mix, both
contributed to an overall increase in
Services margins.
The German Services business was buoyed
by exceptionally high Professional Services
volumes, particularly within the Public
Sector, which is becoming a key specialism
in Germany. High-end work on our traditional
key strengths in Security, Networking and
Cloud have driven growth in this area,
alongside Windows 10 transformations.
Ongoing high demand for IT personnel with
quality technical skills continues to make the
market challenging to address. In Managed
Services, the ‘difficult’ contracts have now
stabilised and the margin improvement was
a significant driver for the Group’s profitability.
This contributed to the overall growth in
Services margins, supported by the strong
Professional Services business.
Following the non-renewal of the Group’s
largest Managed Services customer in the
year, the French business has signed a
number of new contracts, providing
continued optimism about the longer-term
prospects for Managed Services in France
as the customer base diversifies. Our
Professional Services business in France
has seen a step-change in the scale and
complexity of projects which we have won.
The business continues to set new records
for the size of projects that it has worked on,
with a strong pipeline. Services margins
improved, as increasing Professional
Services demand drove higher utilisation
and complemented the margins made on
established Managed Services contracts.
Overall growth in the USA business was
driven by the acquisition of FusionStorm
in the second half of 2018. Whilst full-year
performance across the Segment was
slightly below our internal targets, this
was weighed down by a poor first-half
performance. As we noted at the half year,
the FusionStorm Professional Services
business, whilst small, underperformed
against expectations. This was due to two
challenging projects that resulted in lower
margins and growth than forecast and which
affected utilisation rates, in a business that
was investing in resource as demand fell.
Key contract renewals and expansions of
scope supported the Managed Services
business, which also added new opportunities
to the Contract Base. Margins reduced from
the prior year, heavily impacted by the
Professional Services business.
Overall Group Services margins increased
by 248 basis points during the year.
41
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our Performance in 2019
continued
UNITED
KINGDOM
Revenue £m
1,581.6
-1.8%
Adjusted1 operating profit £m
+10.6%
64.5
Services Contract Base £m
-3.8%
292.6
Members of the UK leadership team
The outlook for
Managed Services
is encouraging
with a significant
pipeline ahead.
Neil Hall
Managing Director, UK and Ireland
Group headquarters – Hatfield, UK
42
Financial performance
Revenues in the UK business decreased
by 1.8 per cent to £1,581.6 million (2018:
£1,611.3 million).
The UK business reported modestly lower
revenues across Technology Sourcing,
Professional Services and Managed Services.
However, Technology Sourcing revenues for
the prior year were flattered by the inclusion
of two one-off software licence sales
totalling £70.8 million, at very low margins.
After adjusting the 2018 comparative for
these deals, Technology Sourcing showed
good revenue growth and total revenues
in the UK increased by 2.2 per cent.
We increased the number of large customers
during 2019, which are those who contribute
over £1 million of adjusted1 gross profit per
year, with six added to the list. Greater
investment in our front-end Sales and
Service Management teams should further
increase the number of new customers
during 2020.
Overall margins in the UK increased by
122 basis points, with total adjusted1 gross
profit increasing from 12.8 per cent to
14.0 per cent of revenues. Adjusted1 gross
profit grew by 7.5 per cent to £221.2 million
(2018: £205.7 million).
Administrative expenses increased by 6.3 per
cent to £156.7 million (2018: £147.4 million),
due to increased variable remuneration,
functional changes and improvements to
broaden our capabilities and skills portfolio.
This resulted in adjusted1 operating profit
growing by 10.6 per cent to £64.5 million
(2018: £58.3 million).
We have taken measures to manage our cost
base, ensure we have only the right skills
going forward and retain high utilisation levels
for our Consulting and Engineering teams.
This involved reducing the volume of legacy
skills and ensuring we have the new and
emerging skills our customers need, such as
those related to adopting Public Cloud and
enabling Multi-Cloud environments.
-1.8%
1,581.6
1,611.3
1,468.2
1,352.0
1,379.8
Revenue £m
1,581.6
2019
2018
2017
2016
2015
Revenue by business type
6
5
4
1
3
2
1 Workplace 26%
2 Data Center, Networking & Security 18%
3 Software 20%
4 Resold Services 8%
5 Professional Services 8%
6 Managed Services 20%
The Managed Services decline was driven
by the loss of a large customer in 2018,
coupled with embedded year-on-year price
reductions within our existing Contract Base,
as we pass operational efficiency savings to
our customers at renewal.
This was also a strong year for renewing
existing contracts, notably with two large
central government clients, where we signed
multi-year renewals.
The outlook for Managed Services is
encouraging with a significant pipeline
ahead in our core markets of Finance,
Public Sector, Technology Media & Telecoms
and core industries such as Pharmaceuticals,
Utilities and Oil & Gas. The type of
opportunities are across all areas from
Workplace to Networking including Public
Cloud adoption and are spread across the
year meaning, should we execute effectively,
we will have the resource to take on in line
with customer expectations.
In Professional Services, we closed the year
with an increased order book, which gives
us confidence of a return to growth through
2020. In Managed Services, the strong
renewals performance in 2019 gives us a
good platform to grow the Contract Base
again in 2020. Our customers have held back
on a straightforward migration to Windows
10 in favour of greater collaboration and
value through a new Digital Workplace. This
creates an opportunity to return to some of
the larger-volume Professional Services work
we have seen previously.
Services margins increased by 276 basis
points over the year, as a result of greater
efficiency and through improvements in the
quality of Services we deliver for customers,
meaning we could achieve our year-on-year
commitments to reduce the cost of those
Services while also improving profitability.
Technology Sourcing performance
Technology Sourcing revenue decreased
by 1.3 per cent to £1,142.7 million (2018:
£1,157.9 million).
As noted above, revenue in 2018 contained
two large, one-off and very low-margin
software deals worth £70.8 million. Excluding
these deals, Technology Sourcing revenues
grew by 4.5 per cent during the year.
The revenue mix in 2019 moved marginally
towards Workplace business and away from
Enterprise business, with customers
typically purchasing new technology in
advance of implementing Digital Workplace
transformations.
Technology Sourcing margins grew by 70
basis points compared to the prior year,
benefiting from some improvement in
product mix.
With Brexit negotiations ongoing, we have
taken the decision to create the ability to
serve the European arms of some of our
UK-headquartered customers from our new
facility in Kerpen, Germany. This will give us
the flexibility to continue to support our
customers’ requirements, whatever the
outcome of the trade negotiations.
We are confident that our progress in
Technology Sourcing will continue through
2020, with new participation on two key
Public Sector frameworks along with good
demand from our existing customers to
transform their environments. We are seeing
more global consolidation of our customers’
requirements for Technology Sourcing and
are well positioned through our acquisition
of FusionStorm to take advantage of these
larger Enterprise volumes.
Services performance
Services revenue declined by 3.2 per cent
to £438.9 million (2018: £453.4 million).
This resulted from a decline in Professional
Services of 0.9 per cent to £117.7 million
(2018: £118.8 million) and a decline in
Managed Services of 4.0 per cent to
£321.2 million (2018: £334.6 million).
We were disappointed that Professional
Services revenues did not grow during 2019.
This was partly due to delays in the uptake
of Windows 10, as a result of Microsoft’s
decision to extend support for Windows 7.
Professional Services benefited from work
with existing customers, with more complex
technology projects along with some key
transformational programmes, typically
driven by Digital Workplace and Public
Cloud adoption.
43
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our Performance in 2019
continued
GERMANY
Revenue €m
2,226.6
+5.2%
Adjusted1 operating profit €m
+27.9%
96.7
Services Contract Base €m
+2.0%
420.1
Members of the German leadership team
We expect demand
to remain strong,
especially in the
Public Sector.
Reiner Louis
Managing Director, Germany
German headquarters – Kerpen, Germany
44
Financial performance
Total revenue increased by 5.2 per cent to
€2,226.6 million (2018: €2,115.7 million) and
by 3.8 per cent in reported pound sterling
equivalents2.
After a slow start, the financial year ended
slightly above expectations as a result of
a good third quarter and a very strong
fourth quarter.
Sales growth of 5.2 per cent was good,
particularly given the significant decline in
business with one of our largest customers.
Despite the continuing problems in the
automotive and chemical sectors, we
maintained our growth path of previous
years in these sectors. We also saw
above-average growth in the Public Sector
business and in some other sectors, such as
the construction industry, trade and auditing
firms. The customer base expanded further
and there were particular initial successes
in increasing the number of customers new
to Computacenter.
The overall result was driven by a continued
strong Technology Sourcing business and
a strong Services business, particularly
in Professional Services. Above all,
Computacenter benefited from the
continuing strong demand for skills and
technology projects in the Cloud, Security,
Networking and collaboration areas, as well
as strong demand for Windows 10 migration
projects. In addition, we succeeded in
winning three new major contracts in
Managed Services, while stabilising the
remaining problem contracts or bringing
them into profitability.
Overall margins in Germany increased by
107 basis points, with adjusted1 gross profit
increasing from 12.3 per cent to 13.4 per
cent of revenues. Adjusted1 gross profit grew
by 14.3 per cent to €298.7 million (2018:
€261.4 million) and by 12.8 per cent in
reported pound sterling equivalents2.
Administrative expenses increased by 8.7 per
cent to €202.0 million (2018: €185.8 million),
and by 7.2 per cent in reported pound sterling
equivalents2. The cost increase was slightly
above target, due to higher pre-sales costs
and in particular the expansion of the sales
support units. Investing in new opportunities
should contribute to future growth and has
already led to some new business.
Adjusted1 operating profit for the German
business increased by 27.9 per cent to €96.7
million (2018: €75.6 million) and by 26.5 per
cent in reported pound sterling equivalents2.
Profits grew faster than revenue, despite the
increase in indirect costs. This was mainly
due to the continued strong Technology
Sourcing margin but the margin development
in Services also contributed. In particular,
Professional Services growth significantly
exceeded expectations.
We expect the German business to continue
on its growth path in 2020. Despite the
ongoing problems in the German economy,
especially in the automotive industry and its
suppliers, mechanical engineering and the
chemical industry, we expect demand to
remain strong, especially in the Public Sector.
Digitalisation driven by the Government and
the associated investment in solutions and
infrastructure will provide us with additional
opportunities. Customers are signalling
continued high demand in the areas of
Security, Multi-Cloud management, Data
Centers and Networking refreshes, followed
by the first major investments in setting up
and expanding collaboration environments.
Ongoing Windows 10 migrations and
implementations of Windows Evergreen
Services will also ensure that demand
remains high in 2020. It should be possible to
expand the customer base through a major
customer contract campaign initiated in
2019, which will continue in 2020. We should
also benefit from the positive effects of the
improved difficult contract performance in
Managed Services.
Technology Sourcing performance
Technology Sourcing revenue grew by
4.2 per cent to €1,566.5 million (2018:
€1,502.9 million) and by 2.7 per cent in
reported pound sterling equivalents2.
Our Technology Sourcing business benefited
from ongoing strong Networking and
Security demand, supported by our
partnership with Cisco, as well as strong
Workplace business, driven by Windows 10
and the associated replacement
investments. Growth in Public Sector
business meant overall performance in the
year was reasonable, despite the significant
decline in Data Center sales to our largest
customer, a German software hyperscaler,
which reverted to more normal levels of
business. Adjusting for the impact of that
customer, Technology Sourcing grew by
13 per cent, which should be above market.
We also saw a couple of wins benefiting from
our new Kerpen Integration Center capabilities.
Most of our customer base attended full day
workshops in Kerpen, to demonstrate our
strengthened delivery capabilities, resulting
in very good feedback. This should generate
positive momentum for future business.
Technology Sourcing margins increased by
15 basis points over last year and remained
at a high level. The improvement was
predominantly driven by the product mix,
with more high-value Networking and Data
Center business.
Services performance
Services revenue grew by 7.7 per cent to
€660.1 million (2018: €612.8 million) and by
6.5 per cent in reported pound sterling
equivalents2. This included Professional
Services growth of 25.8 per cent to
€236.8 million (2018: €188.2 million), an
increase of 24.3 per cent in reported pound
sterling equivalents2, and a small reduction
in Managed Services of 0.3 per cent to
€423.3 million (2018: €424.6 million),
a decline of 1.4 per cent in reported pound
sterling equivalents2.
In 2019, we reported strong Services growth
ahead of the market average, especially in
Professional Services. After a rather subdued
first half of the year, we saw a very strong
second half, with growth in almost all
industries and especially in the Public Sector.
Thanks to the headcount expansion in the
technology areas, especially Security, Cloud
and Networking, which we initiated in 2018,
we were able to satisfy the continuing high
level of customer demand to some extent.
Nevertheless, the issue of resource scarcity
remains a major challenge for all IT
companies in Germany.
In the Managed Services Segment, we closed
the year with revenues slightly above
expectations. We focused on service stability
for the problem deals in this area rather than
growth, but were still able to maintain revenue
at the previous year’s level. However, three
major wins should provide growth impetus in
the coming year. These wins included a
worldwide Workplace on-site and IMAC support
for one of the largest German pharmaceutical
companies, as well as a complete Workplace
contract for a public health insurance
company. Good results were also achieved
in the extension of existing contracts, with
almost all major contracts extended or
renegotiated. This reflects an increase in
customer satisfaction in this area, compared
with the problems of previous years, with
Services significantly stabilised and creating
the basis for contract extensions.
+5.2%
2,226.6
2,115.7
1,954.2
1,690.1
1,633.1
Revenue €m
2,226.6
2019
2018
2017
2016
2015
Revenue by business type
6
5
4
2
1
3
1 Workplace 17%
2 Data Center, Networking & Security 31%
3 Software 16%
4 Resold Services 6%
5 Professional Services 11%
6 Managed Services 19%
Overall, the Services margin was 309 basis
points higher than last year. Increasing
Services profitability was one of the key
goals for 2019, with the business achieving
good results through stabilising and
improving the profitability of the historical
difficult contracts. This was a particular
contributor to increased Services profits,
along with the higher than expected
Professional Services revenue.
45
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our Performance in 2019
continued
FRANCE
Revenue €m
644.7
+15.7%
Adjusted1 operating profit €m
+76.3%
14.1
Services Contract Base €m
+11.7%
101.3
Members of the French leadership team
This year was
also important
in demonstrating
our ability to
execute large
technological
projects.
Arnaud Lepinois
Managing Director, France
New Service Center – Perpignan, France
46
Financial performance
Total revenue increased by 15.7 per cent
to €644.7 million (2018: €557.4 million).
In reported pound sterling equivalents2,
total revenue was up 14.1 per cent.
Our French business significantly increased
its revenues in a positive market, as it
refocused its sales activities on winning the
right business with target customers,
without reducing the size of the sales force.
We were pleased to increase the number of
large customers, including some high-profile
new names, while working very well with
our installed base, which has also showed
good growth.
We were also pleased with good growth in
our two business sectors. The Public Sector
delivered good growth with existing
customers, thanks to numerous wins in large
framework contracts. In the private sector
we also grew business with existing
customers by diversifying the activities
delivered and won two significant new
Managed Services contracts. We renewed
100 per cent of our Managed Services
contracts in 2018, and achieved many gains
in 2019, however we suffered a setback on
a very large international account, which will
have a negative impact on 2020 and in
particular 2021.
The restructuring of the teams in the
private sector continues to deliver results
and we were pleased with the very good
integration of new starters. The successful
strengthening of the Sales Specialists’ teams
is also continuing, to ensure the sales system
has the skills necessary to support
increasingly complex businesses.
We saw very good growth in Technology
Sourcing and Services activities, after a very
good year in 2018. We achieved this growth
by working on the right customer set, with
the right value proposition, by optimising our
delivery capabilities, automating more and
keeping our cost structures under control,
leading to net results improving significantly.
This year was also important in
demonstrating our ability to execute large
technological projects, with an exceptional
result on the two largest projects ever
delivered by Computacenter in France. 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 Group propositions and
Services capabilities remains key. To enforce
this alignment and support further growth,
The rebalancing of our technological
activities is continuing as well, supported
by the go-to-market propositions produced
by the Group. We have seen significant
improvement in our product mix alongside
growth in all Segments.
Finally, in 2019 we launched a financing
activity dedicated to France, in order to
support new consumption patterns among
our customers. We now have dedicated local
teams to offer relevant as-a-service models.
Overall, Technology Sourcing margins
increased by 84 basis points.
Services performance
Services revenue increased by 7.3 per cent
to €120.7 million (2018: €112.5 million) and
by 5.9 per cent in reported pound sterling
equivalents2. Professional Services revenue
increased by 27.6 per cent to €27.3 million
(2018: €21.4 million), which was an increase
of 25.9 per cent in reported pound sterling
equivalents2. Managed Services revenues
increased by 2.5 per cent to €93.4 million
(2018: €91.1 million), an increase of 1.2 per
cent in reported pound sterling equivalents2.
With many large wins over the last 18
months, Managed Services activity grew
in 2019 despite the year-on-year revenue
reduction on existing contracts. However,
a large international contract was not
renewed, which will affect our activity levels
in 2020 and especially in 2021, as the
contract comes to an end in the first half
of 2020. This will also impact some of our
international Service Centers which provided
significant volumes of the customer-
facing work.
However, 2020 will benefit from a full year of
the major new contracts signed with CAC40
accounts that were in transition in 2019,
enabling us to continue to grow Managed
Services in France. Our two Service Centers
in France are now running at good capacity,
while we continue to invest.
Although Professional Services activity
remains relatively low compared to our
Group colleagues, the business made
pleasing progress and had strong growth in
2019, with ambitious growth plans in 2020
as well.
+15.7%
644.7
557.4
581.3
514.3
565.4
Revenue €m
644.7
2019
2018
2017
2016
2015
Revenue by business type
6
5
4
3
1
2
1 Workplace 49%
2 Data Center, Networking & Security 25%
3 Software 5%
4 Resold Services 2%
5 Professional Services 4%
6 Managed Services 15%
In 2019, we demonstrated the excellence of
our Professional Services activities on very
successful large projects. This was an
important step in building the credibility of
these activities with our target customer set,
in order to support their major
transformation projects. This performance
was the result of joint efforts by the Sales
and Delivery teams and we intend to
continue in this direction. To support the
resurgence of resource-on-demand type
requests, we have set up a system dedicated
to the sale and sourcing of expert profiles.
We are confident in our ability to continue to
develop the Services business in 2020, while
continuing to improve our margins.
Services margins increased by 82 basis
points over last year.
we invested in 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 modern
Workplace management and Multi-Cloud
spaces. We have recruited and trained more
than 30 new people in our Consultancy team
and, for the first time, this is now bigger than
our Project Management team.
We also launched our new Service Center in
Perpignan, with the recruitment of more
than 30 people. The Service Center is on track
to grow to more than 150 employees in the
coming months, to support the growth of
Managed Services activities.
Overall, margins in France increased by
80 basis points, with adjusted1 gross profit
increasing from 11.3 per cent to 12.1 per cent
of revenues.
Overall adjusted1 gross profit grew by 24.3
per cent to €78.2 million (2018: €62.9 million)
and by 22.4 per cent in reported pound
sterling equivalents2.
Administrative expenses increased by 16.8
per cent to €64.1 million (2018: €54.9 million),
and by 15.0 per cent in reported pound
sterling equivalents2 as we have continued
to invest to support the growth.
Adjusted1 operating profit for the French
business increased by 76.3 per cent to
€14.1 million (2018: €8.0 million), and by
73.2 per cent in reported pound sterling
equivalents2.
Technology Sourcing performance
Technology Sourcing revenue increased
by 17.8 per cent to €524.0 million
(2018: €444.9 million) and by 16.2 per cent
in reported pound sterling equivalents2.
2019 was a very good year for Technology
Sourcing, thanks to the investment in the
Sales Specialists teams, who were able to
bring additional expertise to win major
projects. We also worked very well with
our Technology Providers, to maintain our
margins in a market under strong pressure.
Finally, our investments in technical
resources allow us to manage this growth
internally and we are working to develop an
ecosystem with other partners, to better
respond to important requests from
customers and the shortage of talent
on the market.
47
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our Performance in 2019
continued
USA
Revenue $m
986.6
+180.6%
Adjusted1 operating profit $m
+107.1%
11.6
Members of the USA leadership team
A newly formed
Partner
Management
function is already
driving significant
bottom line
results.
Mike Keogh
Managing Director, USA
Integrated rack – Livermore, California
48
During the second half of 2018, the Group
completed the material acquisition of
FusionStorm. This business was combined
with our existing Services-focused USA
business, to create the USA Segment from
1 January 2019. Prior year segmental
numbers have been restated but are not
comparable, due to the size of the acquired
Technology Sourcing-focused business
against the existing USA Services business.
Financial performance
Total revenue increased by 180.6 per cent
to $986.6 million (2018: $351.6 million).
In reported pound sterling equivalents2,
total revenue was up 183.1 per cent.
The USA performance was driven by
Technology Sourcing, which saw its first
full-year contribution to the Segment flatter
headline results. Overall, revenue was below
forecast due to a slowdown in volumes with
several hyperscale Silicon Valley customers,
particularly in the first half, with a recovery
in the second half to more expected baseline
performance, driven by stronger orders
combined with strong backlog conversion.
Services revenues were impacted by
particular challenges in the Professional
Services business.
Overall, margins in the USA decreased by
84 basis points, with adjusted1 gross profit
decreasing from 9.9 per cent to 9.0 per cent
of revenues.
The Technology Sourcing business increased
margin performance, due primarily to
customer mix during the reporting period.
The Professional Services business
recovered somewhat from the first half due
to cost reductions, but reported margins
were still significantly below expectations
overall. The Managed Services business
reported flat margins year-on-year.
Overall adjusted1 gross profit grew by 153.9
per cent to $88.6 million (2018: $34.9 million)
and by 157.4 per cent in reported pound
sterling equivalents2. These headline
numbers reflect the full-year inclusion of
acquired entities.
Administrative expenses increased by 162.8
per cent to $77.0 million (2018: $29.3 million),
and by 166.1 per cent in reported pound
sterling equivalents2. This was due to
increasing variable remuneration,
investments in our business development
programme to hire and train our next
generation of sales professionals, a newly
formed Partner Management function that
is already driving significant bottom line
results, as well as continuing focus on
scaling our technical capabilities to enhance
our value to customers and deploy our
portfolio framework to enable our
customers’ success.
Adjusted1 operating profit for the USA business
increased by 107.1 per cent to $11.6 million
(2018: $5.6 million), and by 111.6 per cent in
reported pound sterling equivalents2.
Overall, performance in the first half of 2019
was challenging, as sustaining last year’s
record growth in the underlying annualised
comparative performance of FusionStorm
proved difficult to repeat. The necessary
action plans were put in place and tracked,
and as a result performance moved back
above our baseline business case projection.
Significant expenses continue to affect
profits, as the acquired entity had a
significant investment backlog that we are
correcting within our multi-year investment
programme, including systems, facilities and
people. We have a significant amount of work
to do but the overall customer situation
remains favourable, in terms of both
retention and our predicted performance
going forward.
Margins in the USA decreased by 90 basis
points, with adjusted1 gross profit
decreasing from 9.9 per cent to 9.0 per cent
of revenues. There remains considerable
scope, through the adoption of Group
processes and practices, to increase the
margin performance of the USA business.
Technology Sourcing performance
Technology Sourcing revenue increased by
204.0 per cent to $934.0 million (2018:
$307.2 million) and by 206.8 per cent in
reported pound sterling equivalents2.
The Technology Sourcing business
consolidated after the prior year’s strong
performance. We saw a similar technology
spending mix amongst major partners and
technologies, particularly in the Data
Center and Networking lines of business.
We benefited from significant continuing
investments by our customers, as they
continue to digitise their operations and
modernise their infrastructure. We continue
to see customers seeking to simplify their
operations by consolidating to fewer suppliers,
resulting in long-term commitments and larger
transactions. Simplifying supply chains via
consolidation and process integration
remain powerful value propositions to our
target market customers.
USA Technology Sourcing margins improved 90
basis points over last year but remain 185 basis
points behind the Group Technology Sourcing
margin for the year, with the mix of hardware
OEM vendors a key driver of our margins.
Throughout the first half of the year,
Management initiated a number of activities
to improve the underlying efficiency and
effectiveness of the Technology Sourcing
business. As a result of implementing a
Partner Management organisation, modelled
on similar functional teams in our European
operations, we have been able to enhance
our focus on driving mutual value with
partners and increase our margins. There is
still additional work in progress to drive our
results as far as possible towards those
achieved in Group Technology Sourcing.
Services performance
Services revenue increased by 18.5 per cent
to $52.6 million (2018: $44.4 million) and by
19.4 per cent in reported pound sterling
equivalents2. Professional Services declined
by 1.7 per cent to $17.4 million (2018:
$17.7 million), which was a decrease of 1.4 per
cent in reported pound sterling equivalents2.
Managed Services increased by 31.8 per cent
to $35.2 million (2018: $26.7 million), an
increase of 33.3 per cent in reported pound
sterling equivalents2.
There were particular challenges in the
Professional Services business, which was
scaled up to accommodate predicted growth
that did not materialise. Necessary
adjustments were made in the second
quarter to return the business to the level
of profitability seen in 2018. This resulted
in over $3 million in annual costs being
removed from Professional Services at the
end of the first half, with those reductions
proving sustainable at similar business
volumes to those experienced during
the period.
The overall Services performance was
subdued but showed an improving trend
from the first half to the second half of 2019.
It is notable that we have continued to see
double-digit growth for our Integration
Center projects, including complex
distributed branch rollouts, as well as global
Data Center build-out projects for our
hyperscale customers.
We continued to renew and extend key
contracts, which created expected
headwinds in our Managed Services business
through certain reductions in pricing and
volumes, as well as transitioning new
customers into our Services Contract Base.
One of the major French-headquartered USA
Managed Service customers did not renew its
contract and managing that contract down
properly is a priority. However, we have a
major customer going live in the region with
a similar Managed Services scope that will
partially offset this loss. The retention and
expansion of core Managed Services
+180.6%
986.6
351.6
32.5
31.2
28.0
Revenue $m
986.6
2019
2018
2017
2016
2015
Revenue by business type
5 6
1 2
4
3
1 Workplace 2%
2 Data Center, Networking & Security 72%
3 Software 6%
4 Resold Services 15%
5 Professional Services 2%
6 Managed Services 3%
contracts typically helps drive our overall
business, as customers ask us to deliver
associated transformation activity and also
leverage our Technology Sourcing capability.
Accordingly, a renewed focus on expanding
our Contract Base with US-originated
contracts remains a strategic priority for
the business.
We also continue to invest in and develop our
operating models and practices for efficiency,
with our customers increasingly leveraging
centrally delivered shared services,
particularly in our near-shore Service Center
in Mexico City, as they strive to minimise
operational expenditure.
Services margins decreased by 471 basis
points but were 45 basis points ahead of the
overall combined Group Services margin.
Service margins were largely driven by
under-utilisation of resources within the
Professional Services segment, and flat
margins within Managed Services.
49
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Our Performance in 2019
continued
INTERNATIONAL
Revenue £m
191.4
+87.3%
Adjusted1 operating profit £m
+9.3%
8.2
Services Contract Base £m
+8.4%
38.5
Members of the Rest of Europe
leadership team – part of International
The Netherlands
successfully
implemented our
Group ERP systems.
Lieven Bergmans
Managing Director, Rest of Europe
Integration Center – Bodegraven,
Netherlands
50
The International Segment comprises
a number of trading entities and offshore
Global Service Desk delivery locations.
The trading entities include Computacenter
Switzerland, Computacenter Belgium and
Computacenter Netherlands. In addition to
their operational delivery capabilities, these
entities have in-country sales organisations,
which enable us to engage with local
customers. During the year, Computacenter
Switzerland acquired PathWorks GmbH
(PathWorks), a value-added reseller based
in Neudorf (Luzern), Switzerland.
These trading entities are joined in the
Segment by the offshore Global Service Desk
entities in Spain, Malaysia, India, South Africa,
Hungary, Poland, China and Mexico, which
have limited external revenues.
Financial performance
Revenues in the International business
increased by 87.3 per cent to £191.4 million
(2018: £102.2 million) and by 88.0 per cent in
constant currency2.
This significant increase was the result of
modest growth in our existing businesses
in Belgium and Switzerland, together with
the revenues generated by the Dutch
business acquired in September 2018
(2019: £86.2 million, 2018: £24.9 million) and
PathWorks, which was acquired earlier this
year in Switzerland (2019: £18.4 million).
Adjusted1 gross profit increased by 51.6 per
cent to £43.5 million (2018: £28.7 million),
and by 52.1 per cent in constant currency2.
Approximately £11.2 million of the increase
was from the acquired entities.
Administrative expenses increased by 66.5
per cent to £35.3 million (2018: £21.2 million)
and by 67.3 per cent in constant currency2
with approximately £10.1 million of this
increase due to the acquired entities.
Administrative expenses outside the
acquired entities grew according to our
investment plans. We have increased our
Belgian sales force and further reshaped our
sales organisation in the Netherlands.
Overall adjusted1 operating profit increased
by 9.3 per cent to £8.2 million (2018:
£7.5 million) and by the same percentage
in constant currency2, with the acquired
entities contributing £1.2 million of growth,
in line with our ambitions.
Revenue £m
191.4
2019
2018
2017
2016
2015
Revenue by business type
1
+87.3%
191.4
102.2
75.3
68.0
62.9
6
45
3
2
1 Workplace 38%
2 Data Center, Networking & Security 17%
3 Software 8%
4 Resold Services 2%
5 Professional Services 2%
6 Managed Services 33%
The Belgian business delivered a small profit
growth, in line with our plans. In 2019, our
focus was to establish significant growth in
our sales capacity, with the aim of gaining
further market share in the coming years.
Thanks to the acquisition of PathWorks, our
Swiss business showed an increase in profit
for the fifth consecutive year. While our
first-half performance was excellent in all
business lines, our Services performance
was less strong in the second half of the
year, mainly because of delayed starts on
some customer projects. The integration
of PathWorks is on track and we are pleased
to see that customers now use our full
capabilities in Technology Sourcing,
Professional Services and Managed Services.
Our business in the Netherlands made
very good progress in 2019. We have turned
around the business from loss making
towards profitability. The team also
successfully implemented our Group ERP
systems within the planned deadlines and
integrated the local team within the Group
Operating Model. While much remains to
be done, we feel encouraged by the good
progress in 2019 and aim for further growth
in 2020.
Technology Sourcing performance
Technology Sourcing revenue increased
by 118.0 per cent to £123.6 million (2018:
£56.7 million) and by 121.1 per cent in
constant currency2.
Technology Sourcing in the International
Segment benefited from £65.0 million of
revenue from the acquisitions noted above.
In Belgium, the Workplace and Data Center
business saw a small decline in contribution,
mainly because our 2018 performance in
both areas was exceptional. This decline was
largely compensated for by the significant
growth in our Networking business. We have
further aligned with our Group’s Digital Connect
offering and booked some encouraging
successes in this business area.
While our acquired PathWorks business in
Switzerland was primarily focused on Public
Sector customers, we have been able to offer
our Technology Sourcing capabilities to our
existing Services customers, mainly in the
private sector. In comparison to PathWorks’
2018 full-year performance, year-on-year
revenues grew over 50 per cent.
Technology Sourcing revenues in the
Netherlands increased by 7.0 per cent, while
the total contribution improved by 5.0 per
cent. Although overall Technology Sourcing
margins are healthy, we believe that the
implementation of Group systems and the
integration into the wider Group Operating
Model will help us to further optimise our
Technology Sourcing contribution in the
coming years.
Services performance
Services revenue increased by 49.0 per cent
to £67.8 million (2018: £45.5 million) and by
47.7 per cent in constant currency2.
Professional Services revenue was flat at
£4.0 million (2018: £3.9 million) whilst
Managed Services increased 53.4 per cent to
£63.8 million (2018: £41.6 million), which was
an increase of 51.5 per cent in constant
currency2. The Segment benefited from an
increase of £14.7 million in Services revenue
due to the acquisitions noted above.
The Belgian operation grew in both
Professional Services and Managed Services,
although we still have an opportunity to
increase our Professional Services
contributions, hence our investment in our
pre-sales capabilities around infrastructure
solutions. Our existing Managed Services
contracts deliver good contributions and we
continue to work on an improved long-term
Managed Services pipeline.
Although the Swiss operation saw a revenue
increase in both Managed Services and
Professional Services we saw a decrease in
the total Services contribution. As mentioned
above, this was due to the investments made
in our Services capabilities, which we have
not been able to fully utilise during the year.
The Services pipeline continues to grow and
we remain confident that these investments
will show returns in 2020.
Compared to its pre-acquisition performance,
the Dutch business saw a decline in Services
revenue. This was partly due to our strategic
decision to align our target customer base
with that of the Group. On top of the aspiration
to grow new Services opportunities within
new targeted customers, we also use Group
ERP system information to compare our
Services performance with other
Computacenter entities, with the aim of
identifying optimisation opportunities
in 2020.
51
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Group Finance
Director’s Review
Customers
continue to invest
in technology even
in challenging
market and
geopolitical
conditions.
Tony Conophy
Group Finance Director
52
The continued success of Technology
Sourcing and margin improvements in the
Services business drove the Group’s
performance in 2019.
The Group result saw significant double-digit
increases in adjusted1 operating profit
across the UK, France and Germany, with a
solid contribution from the USA in the second
half of the year. Margins improved almost
everywhere across both Services and
Technology Sourcing, capitalising on a year
where the headline was once again
significant Technology Sourcing growth.
Customers continue to invest in technology
to drive business efficiencies, improve IT
Security and implement Multi-Cloud, even
in challenging market and geopolitical
conditions. As a result, France and Germany
had another year of very strong growth,
with Germany significantly exceeding
expectations. The UK also returned to growth
when the one-off low-margin contracts of
2018 are normalised out. Both the UK and
France benefited from customers investing
in Security, Networking and Workplace
in particular.
Professional Services revenue was very
strong across the Group, driven by high
demand for increasingly complex skills
across France and Germany. We continue to
look for ways of increasing the capacity of
the German business to meet the strong
demand for the diverse blend of offerings
within Professional Services.
Managed Services revenue was flat overall,
with reductions in Germany and the UK due to
several key losses and renewal-led Contract
Base attrition, offset by gains in France and
elsewhere and flattered by the acquired
businesses. However, recent wins within our
core countries lead us to believe that the
Contract Base remains secure in the medium
term. Significantly, the problems of the
difficult contracts that we saw in 2018 are
behind us, with the stabilised contracts, and
improvements in other contracts, leading to
a strong increase in margins.
A reconciliation between key adjusted1 and
statutory measures is provided on page 53
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 40 to 51
of this Strategic Report.
Reconciliation from statutory to adjusted1 measures for the year ended 2019
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
5,052,779
(4,389,665)
663,114
(516,090)
147,024
980
(7,046)
140,958
(39,397)
101,561
Adjustments
CSF
interest
£’000
–
–
–
Amortisation
of acquired
intangibles
£’000
–
–
–
Utilisation of
deferred tax
£’000
–
–
–
Exceptionals
and others
£’000
–
–
–
Adjusted1
results
£’000
5,052,779
(4,389,665)
663,114
–
–
–
–
–
–
–
4,374
4,374
–
–
4,374
(1,149)
3,225
–
–
–
–
–
733
733
94
94
–
825
919
(878)
41
(511,622)
151,492
980
(6,221)
146,251
(40,691)
105,560
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
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
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
53
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019
Group Finance Director’s Review
continued
Profit before tax
The Group’s statutory profit before tax
increased by 30.4 per cent to £141.0 million
(2018: £108.1 million). Adjusted1 profit
before tax increased by 23.8 per cent to
£146.3 million (2018: £118.2 million) and by
24.9 per cent in constant currency2.
The difference between statutory profit
before tax and adjusted1 profit before tax
primarily relates to the Group’s reported
net costs of £5.3 million (2018: net costs of
£10.1 million) from exceptional and other
adjusting items which is principally the
amortisation of acquired intangibles as a
result of the acquisition of FusionStorm on
30 September 2018. Further information on
these items can be found on page 56.
The Group has adopted IFRS 16 from
1 January 2019 which has resulted in
changes in accounting policies and
adjustments to the amounts recognised in
the Financial Statements. The comparative
results for the year ended 31 December 2019
have not been restated under the accounting
policies adopted. The current year results
include an overall decrease in profitability
before tax of £1.7 million on both statutory
and adjusted1 basis due to the impact of IFRS
16. Right-of-use assets and lease liabilities of
£120.6 million were recorded as of 1 January
2019, with no net impact on retained
earnings. The Group recognised £110.9 million
of right-of-use assets and £116.8 million of
lease liabilities as at 31 December 2019. An
analysis of the impact of transition is
presented in note 2 to the Consolidated
Financial Statements Summary of significant
accounting policies on page 128 of this
Annual Report and Accounts. Further
information on the implementation of, and
transition to, IFRS 16 is included later within
the Group Finance Director’s Review on page
58 of this Annual Report and Accounts.
Profit for the year
The statutory profit for the year increased
by 25.6 per cent to £101.6 million (2018:
£80.9 million). The adjusted1 profit for the
year increased by 20.8 per cent to
£105.6 million (2018: £87.4 million) and by
22.1 per cent in constant currency2.
Net finance income
Net finance charge in the year amounted
to £6.1 million on a statutory basis (2018:
charge of £1.2 million). The charge includes
£3.7 million of interest on lease liabilities
recognised following the adoption of IFRS 16
on 1 January 2019. This now includes the CSF
charge previously excluded on an adjusted1
basis (2018: £0.3 million) but now included
within the wider charge on lease liabilities
under IFRS 16. See page 58 for more
54
information on the transition to IFRS 16.
A further £1.8 million of cost relates to
interest on the term loan drawn down for the
FusionStorm acquisition (2018: £0.5 million),
along with a £0.1 million cost for the unwind
of the discount on the deferred consideration
for acquisitions (2018: cost of £0.4 million)
and £0.4 million cost on the term loan for the
Kerpen facility (2018: cost of £0.2 million).
The statutory net finance charge also includes
exceptional interest costs of £0.8 million
relating to the unwind of the discount on the
deferred consideration for the purchase of
FusionStorm (2018: £0.4 million) which is
excluded on an adjusted1 basis.
Outside of the items above, net finance
income of £0.7 million was recorded (2018:
income of £0.5 million). On an adjusted1 basis,
the net finance cost was £5.2 million during
the year (2018: £0.5 million).
Taxation
The statutory tax charge was £39.4 million
(2018: £27.2 million) on statutory profit
before tax of £141.0 million (2018: £108.1
million). This represents a statutory tax rate
of 27.9 per cent (2018: 25.2 per cent). The
Group’s adjusted1 tax rate has benefited
from the historical tax losses in Germany,
the final residual of which was utilised during
the year. The utilisation of the asset of
£0.7 million (2018: £1.9 million) increased the
statutory tax rate by 0.5 per cent (2018: 1.8
per cent) but is considered to be outside of
our adjusted1 tax measure.
During 2019, a tax credit of £0.8 million
(2018: £3.1 million) was recorded due to
post-acquisition activity in FusionStorm.
This benefit derived from 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, consistent with the
treatment in 2018.
The tax credit related to the amortisation of
acquired intangibles was £1.1 million (2018:
£1.2 million). This relates primarily to the
£4.1 million of amortisation of intangible
assets that were recognised as a result of the
FusionStorm acquisition (2018: £4.2 million).
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 for the year was
£40.7 million (2018: £30.9 million), on an
adjusted1 profit before tax for the year of
£146.3 million (2018: £118.2 million). The
effective tax rate (ETR) was therefore 27.8
per cent (2018: 26.1 per cent) on an adjusted1
basis. The ETR during the year was higher
than the previous year due to the large
increase in profitability in Germany, which
also saw an increase in the German cash tax
rate due to the now fully utilised German tax
losses, and in the significant increase in
profitability in the USA, primarily in the second
half of the year, which has a significantly
higher ETR than the Group. The ETR, excluding
the impact of FusionStorm, is within the
range that we indicated during the year at
27.2 per cent (H1 2019: 26.6 per cent).
We expect that the ETR in 2020 will remain
under upwards pressure, due to the
increasing reweighting of the geographic
split of adjusted1 profit before tax from the
UK to Germany and the USA, 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 2019 was
incurred in either the UK, German or USA
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 2019, the revised
Group Transfer Pricing policy, implemented in
2013, resulted in a licence fee for the use of
intellectual property equivalent to 1.0 per
cent of revenue charged by Computacenter
UK to Computacenter Germany,
Computacenter France and Computacenter
Belgium of £25.6 million (2018: £19.5 million).
The licence fee reflects the value of the best
practice and know-how that is owned by
Computacenter UK and used by the Group.
It is consistent with the requirements of the
Organisation for Economic Co-operation and
Development (OECD) base erosion and profit
shifting. The licence fee 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.
Revenue
2017
2018
2019
2019/18
Adjusted1 profit before tax
2017
2018
2019
2019/18
Revenue by Segment
UK
Germany
France
USA
International
Total
Adjusted1 operating profit by Segment
UK
Germany
France
USA
International
Central Corporate Costs
Total
UK
Germany
France
USA
International
Central Corporate Costs
Total
Half 1
£m
1,700.3
2,008.9
2,427.0
20.8%
Half 2
£m
2,093.1
2,343.7
2,625.8
12.0%
Total
£m
3,793.4
4,352.6
5,052.8
16.1%
Half 1
Half 2
Total
% Revenue
2.5%
2.6%
2.2%
£m
41.9
52.1
53.5
2.7%
£m
64.3
66.1
92.8
40.4%
% Revenue
3.1%
2.8%
3.5%
£m
106.2
118.2
146.3
23.8%
% Revenue
2.8%
2.7%
2.9%
Half 1
£m
793.9
889.0
271.4
380.4
92.3
2,427.0
Half 1
£m
23.5
32.6
6.1
1.2
4.6
(11.9)
56.1
Half 1
£m
25.9
32.2
2.1
0.4
2.9
(11.4)
52.1
2019
Half 2
£m
787.7
1,054.7
291.5
392.8
99.1
2,625.8
% Revenue
3.0%
3.7%
2.2%
0.3%
5.0%
(0.5%)
2.3%
% Revenue
3.0%
3.7%
0.9%
3.0%
7.7%
(0.6%)
2.6%
Total
£m
1,581.6
1,943.7
562.9
773.2
191.4
5,052.8
Half 1
£m
861.1
866.0
230.7
13.4
37.7
2,008.9
2018
Half 2
£m
750.2
1,006.7
262.6
259.7
64.5
2,343.7
2019
Half 2
£m
41.0
51.9
6.2
7.9
3.6
(15.2)
95.4
2018
Half 2
£m
32.4
34.6
5.0
3.9
4.6
(13.8)
66.7
% Revenue
5.2%
4.9%
2.1%
2.0%
3.6%
(0.6%)
3.6%
% Revenue
4.3%
3.4%
1.9%
1.5%
7.1%
(0.6%)
2.8%
Total
£m
64.5
84.5
12.3
9.1
8.2
(27.1)
151.5
Total
£m
58.3
66.8
7.1
4.3
7.5
(25.2)
118.8
Total
£m
1,611.3
1,872.7
493.3
273.1
102.2
4,352.6
% Revenue
4.1%
4.3%
2.2%
1.2%
4.3%
3.0%
% Revenue
3.6%
3.6%
1.4%
1.6%
7.3%
2.7%
55
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019
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 2019 and 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
2019
£’000
39,397
(733)
839
1,149
39
40,691
27.9%
27.8%
2018
£’000
27,199
(1,933)
3,091
1,169
1,353
30,879
25.2%
26.1%
Exceptional and other adjusting items
The net loss from exceptional and other adjusting items in the year was £4.0 million (2018: loss of £6.4 million). Excluding the tax items noted
above which resulted in a statutory gain of £1.3 million (2018: gain of £3.7 million), the profit before tax impact was a net loss from exceptional and
other adjusting items of £5.3 million (2018: loss of £10.1 million).
An exceptional loss during the year of £0.1 million (2018: £5.2 million) resulted from costs directly relating to the acquisition of FusionStorm.
These costs include social taxes on a severance payment for the FusionStorm Chief Executive Officer, agreed as part of the acquisition. This cost
is non-operational in nature, unlikely to recur, and related to the prior-year exceptional items recognised and has therefore been classified as
outside our adjusted1 results. A further £0.8 million (2018: £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.
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 amortisation of acquired intangible assets was £4.4 million (2018: £4.5 million), primarily relating to the amortisation of the intangibles
acquired as part of the FusionStorm acquisition. The 2018 value includes the write-off of a number of short-term acquired intangibles relating
to the valuation of order backlogs. This has not recurred in 2019 due to the expiration of the valued assets in 2018.
Earnings per share
Statutory diluted earnings per share increased by 27.0 per cent to 89.0 pence per share (2018: 70.1 pence per share). Adjusted1 diluted earnings
per share increased by 22.2 per cent to 92.5 pence per share (2018: 75.7 pence per share).
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)
2019
112,514
1,655
114,169
101,655
90.3
89.0
105,654
93.9
92.5
2018
113,409
1,984
115,393
80,931
71.4
70.1
87,359
77.0
75.7
Dividend
The Group remains highly cash generative and adjusted net funds3 continue to regenerate on the Consolidated Balance Sheet, following the share
buyback and the acquisition of FusionStorm in 2018. 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, working capital support or acquisitions, 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.
56
Dividends are paid from the standalone
Balance Sheet of the Parent Company and,
as at 31 December 2019, the distributable
reserves were approximately £165 million
(2018: £184 million).
The Board is pleased to propose a final
dividend of 26.9 pence per share. The interim
dividend paid on 11 October 2019 was 10.1
pence per share. Together with the final
dividend, this brings the total ordinary
dividend for 2019 to 37.0 pence per share,
representing a 22.1 per cent increase on the
2018 total dividend per share of 30.3 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
diluted earnings per share. In 2019, the cover
was 2.5 times (2018: 2.5 times).
Subject to the approval of shareholders at
our Annual General Meeting on 14 May 2020,
the proposed dividend will be paid on Friday
26 June 2020. The dividend record date is set
as Friday 29 May 2020 and the shares will be
marked ex-dividend on Thursday 28 May 2020.
Central Corporate Costs
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 year, total Central Corporate Costs
were £27.1 million, an increase of 7.5 per cent
(2018: £25.2 million).
Within this:
• Board expenses, related public company
costs and costs associated with Group
Executive members not aligned to a
specific geographic trading entity were
slightly down at £7.1 million (2018:
£7.5 million);
• share-based payment charges associated
with the Group Executive members
identified above, including the Group
Executive Directors, increased from
£2.7 million in 2018 to £3.0 million in 2019,
due primarily to the increased value of
Computacenter plc ordinary shares; and
• strategic corporate initiatives increased
from £15.0 million in 2018 to £17.1 million
in 2019, primarily due to increased spend on
projects designed to increase capability,
enhance productivity or strengthen
systems which underpin the Group.
Cash and cash equivalents and net funds
Cash and cash equivalents as at
31 December 2019 were £217.9 million,
compared to £200.4 million at
31 December 2018.
The Group delivered an operating cash inflow
of £200.2 million for the year to 31 December
2019 (2018: £115.2 million inflow).
Net funds3 as at 31 December 2019 was
£20.3 million, compared to net funds3 of
£57.3 million as at 31 December 2018.
Adjusted net funds3 as at 31 December 2019
was £137.1 million, compared to adjusted net
funds3 of £66.2 million as at 31 December 2018.
The Group had two specific term loans at
the end of the year and no other material
borrowings. The Group drew down a
£100 million term loan on 1 October 2018,
to complete the acquisition of FusionStorm.
This loan is on a seven-year repayment cycle,
with a renewal of the facility due on
30 September 2021. The Group took
advantage of stronger than anticipated cash
generation to make an unplanned repayment
of £30 million of this loan in the second half
of the year. As at 31 December 2019,
£56.0 million remained of the loan (2018:
£100.5 million).
The Group also has a specific term loan for
the build and purchase of our new German
headquarters and Integration Center in
Kerpen, which stood at £24.8 million at
31 December 2019 (2018: £31.4 million). The
Integration Center opened in November 2018
and the office facility opened in March 2019,
which concluded the project.
For a full reconciliation of net funds3 and
adjusted net funds3, see note 30 to the
Consolidated Financial Statements, analysis
of changes in net funds.
The Group returned £100 million to
shareholders in the first quarter of the
previous year.
Capital expenditure in 2019 was £29.2 million
(2018: £51.4 million), with the decrease due to
the investment in our German headquarters,
which primarily occurred in 2018. Current
year spend included the final elements of the
German facility, other investments in IT
equipment and software tools to enable us
to deliver improved service to our customers
and the establishment of a new Integration
Center in Livermore, California.
The Group continued to manage its cash and
working capital positions appropriately using
standard mechanisms, to ensure that cash
levels remained within expectations
throughout the year. The Group had no debt
factoring at the end of the year outside the
normal course of business. From time to
time, some customers request credit terms
longer than our standard of 30-60 days. In
certain instances we will arrange for the sale
of the receivables on a true sale basis to a
finance institution on the customers’ behalf.
We would receive funds typically on 45-day
terms from the finance institution who will
then recover payment from the customer on
terms agreed with them. The cost of such an
arrangement is borne by the customer and
enables us to receive the full amount of
payment in line with our standard terms.
The benefit to the cash and cash equivalents
position of such arrangements as at
31 December 2019 is £33.8 million.
The Group excludes finance lease liabilities
from its non-GAAP adjusted net funds3
measure, due to the distorting effect of the
capitalised lease liabilities on the Group’s
overall liquidity position under the new IFRS
16 accounting standard. More details on
these leases and the transition to IFRS 16 can
be found below.
There were no interest-bearing trade
payables as at 31 December 2019 (2018: nil).
The Group’s adjusted net funds3 position
contains no current asset investments
(2018: nil).
57
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Group Finance Director’s Review
continued
Net funds as at 31 December 2019 and 31 December 2018 were as follows:
Cash and short-term deposits
Cash and cash equivalents
Bank loans
Adjusted net funds3 (excluding CSF and lease liabilities)
CSF
Lease liabilities
Net funds
Implementation of, and transition to,
IFRS 16 Leases
A new accounting standard, IFRS 16 Leases,
became effective for the Group from
1 January 2019 and replaces IAS 17 Leases.
IFRS 16 provides a single lessee accounting
model, specifying how leases are recognised,
measured, presented and disclosed.
The Group elected to apply the modified
retrospective approach for transition to IFRS
16, meaning the Group has not restated the
comparatives for 2018.
The Group has recognised an asset
representing its right as a lessee to use a
leased item and a liability for future lease
payments, for all properties, equipment and
vehicles previously held under operating
leases. The costs of such leases have been
recognised in the Consolidated Income
Statement, split between depreciation of the
right-of-use asset and an interest cost on
the lease liability. This is similar to the
accounting for finance leases under IAS 17,
but substantively different to the accounting
for operating leases, under which no
right-of-use asset or lease liability was
recognised, and rentals payable were
expensed to the Consolidated Income
Statement on a straight-line basis.
IFRS 16 therefore results in an increase to
operating profit, which is reported prior to
interest being deducted. Depreciation of the
right-of-use asset is charged on a straight-
line basis but interest is charged on
outstanding lease liabilities and therefore
reduces over the life of the lease. As a result,
the impact on the Consolidated Income
Statement below operating profit depends
on the average lease maturity in any
particular year. For an immature portfolio,
depreciation and interest are higher than
the rental charge they replace in any year
and therefore IFRS 16 is dilutive to EPS.
For a mature portfolio, they are lower and
therefore IFRS 16 is accretive to EPS.
58
Finance leases previously capitalised under
IAS 17 Leases have been reclassified to the
right-of-use asset category under IFRS 16.
The Group took the benefit of the two key
practical expedients on adoption of IFRS 16,
which relate to either short-term contracts
in which the lease term is 12 months or less,
or low-value assets (less than £5,000), which
are expensed to other operating expenses.
Refer to page 128 for further detail on the
practical expedients applied on adoption
of IFRS 16.
The judgements made by the Group on
adoption of IFRS 16 included the selection of
an appropriate discount rate to calculate the
lease liability.
The adoption of IFRS 16 has had a significant
impact on the presentation of the Group’s
assets and liabilities. The right-of-use assets
are included within property, plant and
equipment and corresponding lease liabilities
are included within financial liabilities on the
face of the Consolidated Balance Sheet. The
cash and cash equivalents or the total cash
flow at the year end are not affected by the
adoption of IFRS 16. However, cash generated
from operations and free cash flow measures
increase, as operating lease rental expenses
are no longer recognised as operating cash
outflows. Cash outflows are instead split
between interest paid and repayments of
obligations under leases, which both increase.
On initial application, the Group has elected
to record right-of-use assets based on the
corresponding lease liability. Right-of-use
assets and lease liabilities of £120.6 million
were recorded as of 1 January 2019, with no
net impact on retained earnings. The Group
recognised £110.9 million of right-of-use
assets and £116.8 million of lease liabilities
as at 31 December 2019. During the year,
the Group recognised £40.3 million of
depreciation charge and £3.7 million
of interest costs from these leases.
2019
£’000
217,881
217,881
(80,772)
137,109
–
(116,766)
20,343
2018
£’000
200,442
200,442
(134,234)
66,208
(8,928)
–
57,280
In the previous year, the rental expense of
£42.3 million was charged to the
Consolidated Income Statement under IAS 17.
Had IAS 17 continued in operation during
2019, Group profit before tax, on both an
adjusted1 and statutory basis, would have
been £1.7 million higher.
Asset reunification
Following the changes to our Articles of
Association approved at our AGM on 16 May
2019, the Company, in conjunction with our
Registrar, conducted an asset reunification
exercise during the year. We are aware that
shareholders can lose touch with us due to
a number of reasons. The Board wanted
to re-unite as many shareholders as possible
with their unclaimed assets. Our Registrar
engaged a specialist company, to help us
trace shareholders with unclaimed assets.
Following this process, all shares in the
names of shareholders who had not cashed
dividend cheques in over 12 years, and that
could not be traced through the asset
unification process, were sold with the
resultant funds returned to the company
alongside all uncashed dividends. A total of
21,458 shares were forfeited from 355
shareholders with a total of £0.2 million
returned to the Company from the sale of
the shares. These funds have been allocated
by the Board to be used to support the
charitable partners selected by our employees.
RDC acquisition
During the year we bought back R.D. Trading
Limited (RDC), to ensure that we have an
organic capability dedicated to the
repurposing and recycling of IT equipment
our customers no longer need. This allows
us to have a positive impact at the end of
the IT lifecycle, rather than assuming our
responsibilities stop when we sell product
to customers. See note 17, Investments,
on page 153 for further information on
the acquisition.
Segmental reporting structure changes
Due to the acquisitions made in 2018,
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’),
during the first half of the year. As a result of
this analysis, the Board has adopted a new
Segmental reporting structure for the year
ended 31 December 2019.
In accordance with IFRS 8 Operating
Segments, the Group has identified five
revised operating Segments:
• UK;
• Germany;
• France;
• USA; and
• International.
The Group has now added a fifth operating
Segment which comprises the FusionStorm
business acquired in 2018 and the existing
USA operations, which transfer in from the
International Segment.
The UK Segment now includes the TeamUltra
trading operations from the International
Segment, reflecting the fact that the majority
of the work performed by TeamUltra is for UK
customers. The TeamUltra operations have
been absorbed into the UK trading entity,
reflecting the importance of this capability
to the UK business. This has also resulted in
the combination of the previously separate
cash-generating units for these businesses
as, post-absorption, the ongoing operation is
now assessed at this level. The reacquisition
of RDC has been added to the UK Segment in
the year, as the business primarily serves our
UK customer base.
The International Segment now comprises
a core ‘Rest of Europe’ presence, with key
trading operations in Belgium, the
Netherlands and Switzerland, along with the
international Global Service Desk locations in
South Africa, Spain, Hungary, Mexico, Poland,
Malaysia, India and China. During the year,
Computacenter Switzerland acquired
PathWorks, a value-added reseller, based in
Neudorf (Luzern), Switzerland. This acquisition
allows us to add Technology Sourcing to our
existing Swiss portfolio, completing the
Group’s Source, Transform and Manage
offering. The Global Service Desk locations
have limited external revenues, and a cost
recovery model that suggests better than
break-even margins to ensure compliance
with transfer pricing regulations.
The French and German Segments remain
unchanged from those reported at
31 December 2018.
As noted on page 57, Central Corporate Costs
continue to be disclosed as a separate
column within the Segmental note.
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 year
performance, historical segment
information for the year ended 31 December
2018 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 and the resultant
prior-year restatements.
Trade creditor arrangements
Computacenter has a strong covenant and
enjoys a favourable credit rating from IT
vendors and suppliers. Some suppliers
provide standard credit directly on their own
credit risk, whereas some suppliers decide to
sell the debt to banks, who offer to purchase
the receivables and manage collection.
The standard 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
use this facility.
Capital management
Details of the Group’s capital management
policies are included in note 27 to the
Consolidated Financial Statements.
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, Poland, Mexico and India,
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,
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
was maintained throughout 2019 and at the
year end was £217.9 million, with net funds3
of £20.3 million after including the Group’s
two specific borrowing facilities and lease
liabilities recognised under IFRS 16. Excluding
these lease liabilities, adjusted net funds3
was £137.1 million at the year end.
59
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Group Finance Director’s Review
continued
Due to strong cash generation over the past
four 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 with an expiry
date of 22 May 2021. The Group has never
drawn 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.
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.
In 2019, the Group recognised a loss of
£0.8 million (2018: loss of £3.2 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.
60
The Group reports its results in pound
sterling. The ongoing weakness in the value
of sterling against most currencies during
2019, 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 2019 were not materially dissimilar to
those seen in 2018. The impact of restating
2018 results at 2019 exchange rates would
be a decrease of approximately £32.0 million
in 2018 revenue and a decrease of £1.2 million
in 2018 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 set up
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.
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 considerable uncertainty
around the structure of the future trading
relationship between the UK and EU, following
the UK’s legal departure from the EU on
31 January 2020, 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, Technology
Provider 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 Technology
Providers, 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 impact
of the UK leaving the EU. We will continue to
work with our customers and partners to
deliver leading IT infrastructure products
and services 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 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 Technology
Sourcing 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. For one large customer, we have
already transferred the responsibility for its
EU27 shipments from our UK Integration
Center to our German Integration Center and
can manage similar changes for other
customers if required.
Technology Sourcing
Computacenter does not manufacture
products, and instead sources and resells
products manufactured by leading
Technology Providers worldwide. We have
over 30 years of Technology Sourcing
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.
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 trade deal following the
UK’s departure from EU are known, we will
work with our major Technology Providers
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 ultimate outcome of the trade
negotiations that are expected to be
resolved in 2020, to avoid a final ‘no-deal’
type departure from the EU on 31 December
2020, and the impact that this may 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, Strategic Priorities and its
performance are set out within this Strategic
Report from the inside front cover to page 68.
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 57 to 58.
In addition, notes 27 and 28 to the
Consolidated Financial Statements include
Computacenter’s objectives, policies and
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 123 to 176 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 31 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.
61
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Group Finance Director’s Review
continued
Viability timeframe
The Directors have assessed the Group’s
viability over a period of three years from
31 December 2019. 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;
• Technology Sourcing has seen greater
recent growth than the Group’s Services
business, increasing the revenue mix
towards the part of the business that has
less medium-term visibility and is
therefore more difficult to forecast; and
• the continuing macro-economic 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 63 to 68, 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 Services and Managed Services
businesses, and it is the responsibility of the
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 Group
continues to provide a valuable service to
customers and vendors alike, as described
on pages 16 to 19.
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.
62
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 (2020) and forecast
information for two further years (2021 and
2022), 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 financial target for 2020 was considered
and approved by the Board on 17 December
2019, with amendments and enhancements
to the target as part of the full three-year
plan considered and approved by the Board
on 5 March 2020.
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, the 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 63 to
68, 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
eventual ‘no-deal’ departure of the UK from
the EU on 31 December 2020 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 a ‘no-deal’ basis on
31 December 2020. Whilst the immediate risk
of such an exit has receded following the
successful passage of the Withdrawal
Agreement and the legal departure from the
EU on 31 January 2020, the robust sensitivity
analysis remains in place throughout the
2020 transition period ahead of the deadline
to agree a trade deal by 31 December 2020.
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 2022.
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 2020 and signed on its
behalf by:
MJ Norris
Chief Executive Officer
FA Conophy
Group Finance Director
Principal Risks and
Uncertainties
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 Delivery
Group Services
Group Finance
Group Information Security
Group Human Resources
Group Legal/Compliance
Group Information Assurance
Country-specific Take-On
Group Quality Management &
Assurance
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.
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 (see
pages 61 to 62).
Lower-level risks are identified and analysed
in two distinct ways. These are:
1) 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.
2) Via the Group Compliance Steering
Committee (see risk governance model)
which assesses reports from the
Compliance Management System for
the areas under its remit.
5. Risk trends
The overall risk landscape has remained
static relative to last year, although issues
such as the UK’s departure from the EU have
become more immediate. Additionally, we
continue to monitor the effects of the
COVID-19 outbreak in China and around the
globe for its potential impact on our
business. (See also Strategic Risks below)
We use the three lines of defence model with
regards to the governance of key risks. This
includes a mapping exercise which considers
the level of assurance afforded by each of
the compliance and oversight functions
when considering the overall level of
assurance provided over each risk.
Strategic: The strategic-level risk profile is
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.
For the first time, we have recognised in
this category the increasing globalisation
of customer demand for products and
Services, resulting in a changing global
competitive landscape.
While we continue to monitor the effects of
the COVID-19 outbreak in China and beyond
some elements will remain outside of our
control, such as a major escalation of the
crisis and a production shutdown.
Nevertheless, we remain in close and regular
contact with our major vendors with
production facilities in China. Internally,
we have plans in place should a major
outbreak occur in any country in which
we have operations.
63
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Financial: While risks relating to the UK’s
departure from the EU remain under review,
we nevertheless continue to concentrate on
the fundamentals important to our business.
Further details on the UK’s departure from
the EU can be found on pages 60 to 61 in the
Group Finance Director’s Review.
People: Our people remain integral to the
continued success of our business. The risks
reflect the importance we place on
experience, openness and collaboration.
Strategic
Priority 1:
To lead with and grow
our Services business
Strategic
Priority 2:
To improve our
Services productivity
and enhance our
competitiveness
Strategic
Priority 3:
To retain and
maximise the
relationship with our
customers over the
long term
Strategic
Priority 4:
To innovate our
Services offerings to
build future growth
opportunities
Principal Risks and Uncertainties
continued
Contractual/Operational: Our main focus
remains on the effective governance of
contracts, both in the pre-deal phase and in
delivery. This includes the emphasis we place
on data privacy.
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.
Our four Strategic Priorities
Risk categories:
Strategic Risks
Market shift in technology usage
Not investing appropriately
Geo-political risk
Increasing globalisation of customer demand
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
64
Group risk log 2019 heat map
1. Strategic Risks
d
o
o
h
i
l
e
k
i
L
Unchanged risk
Decreased risk
Increased risk
3
1
2
4
5
Impact
1: Strategic Risks
2: Contractual/
Operational Risks
3: Infrastructure Risks
4: Financial Risks
5: People Risks
Alert status
New risk recognised in relation to the
increased globalisation of customer
demand. Allied to geo-political risk, the
COVID-19 outbreak may impact on our
supply chain and we continue to monitor
developments closely.
Risks
• Market shift in technology usage,
making what we do less relevant or
superfluous (DD)
• Not investing appropriately to
enhance our competitiveness (DD)
• Geo-political risk arising from our
increasingly global operations (CEO)
• Increasing globalisation of customer
demand (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)
• Group Development Director (DD)
65
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Principal Risks and Uncertainties
continued
2. Contractual/Operational Risks
Alert status
Contract risks reduced due to governance enhancements.
Risks
• Lack of effective pre-contract
processes, resulting in poor design,
costing and pricing (GSD/CMD)
• Lack of effective post-contract delivery
(GSD/GDD)
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
• Independent assurance provided by
the Group Quality Management &
Assurance function over key bids and
delivery programmes
Risk owners
• Country Managing Directors (CMD)
• Head of Legal & Contracting (HL&C)
• Group Delivery Director (GDD)
• Group Chief Information Officer (GCIO)
• Data privacy failure (HL&C/GCIO)
• Failure to integrate FusionStorm
effectively (DD/PA)
• 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 Services Director (GSD)
• Group Development Director (DD)
• President Americas (PA)
66
3. Infrastructure Risks
Alert status
Unchanged.
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)
Principal impacts
• Inability to deliver business services
• 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 and threat analysis by
Computacenter’s Cyber Defence Center
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
67
STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2019 Principal Risks and Uncertainties
continued
4. Financial Risks
Alert status
Unchanged. Whilst the UK has now officially left the EU and is in a transition period until
31 December 2020 and there is still a risk relating to the final agreement on EU free market
access, the risk of a hard Brexit is less likely now and the clear direction from a strong
Government has been helpful.
• Under-investing in our indirect costs,
particularly Sales, leading to missed
opportunities and top line impact (CEO)
• Failure to manage working capital
effectively (FD)
• Financial impact through bad debts,
obsolete inventory and/or other
working capital movements
• Inventory management controls and
monitoring
• Monthly review by Management to
assess sales teams’ ongoing
performance and future effectiveness
Risks
• Brexit effect on the Computacenter
business. This may manifest itself as
either a risk (threat to the business as
a result of negative customer
sentiment, forex volatility, effect and
impact of data residency issues) or a
business opportunity as existing and
potential customers establish
operations in EU countries, requiring
Computacenter product and services
as a result
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.
Executive-level committee meets
regularly and reviews risks and
mitigations in more detail
• Implementation of debt management
best practice after centralising
Group-wide collection functions at the
Budapest Finance Shared Service Center
Risk owners
• Chief Executive Officer (CEO)
• Group Finance Director (FD)
5. People Risks
Alert status
Unchanged.
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 (CPO)
• Inadequate succession planning or
insufficient depth within key senior
executive positions (CPO/CEO)
• Failure to ensure adequate diversity,
thereby restricting the talent we
employ (CPO)
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
• Chief People Officer (CPO)
• Chief Executive Officer (CEO)
68
GOVERNANCE
REPORT
Chairman’s Governance Overview
Board of Directors
Corporate Governance Report
Leadership
Effectiveness
Nomination Committee Report
Accountability
Audit Committee Report
Directors’ Remuneration Report
70
72
74
74
76
78
80
82
88
109 Relations with Shareholders
110 Directors’ Report
115 Directors’ Responsibilities
69
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 CHAIRMAN’S
GOVERNANCE
OVERVIEW
It is critical that
the Board has the
right composition.
Peter Ryan
Non-Executive Chairman
70
Dear Shareholder,
I am pleased to present Computacenter’s
Corporate Governance Report for the year
ended 31 December 2019. This Report aims to
assist our shareholders in understanding the
Group’s approach to corporate governance.
It outlines and explains the Group’s
governance policies and practices, and sets
out how we applied the 2018 UK Corporate
Governance Code (‘the Code’) during the year.
The Board believes that effective governance
practices are fundamental to 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 Code, which was
published in July 2018 and has applied from
1 January 2019, the year under review. The
Code is published by the Financial Reporting
Council and can be found at www.frc.org.uk.
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, with an exception noted below,
the Company has complied with the Code
throughout the year and anticipates remaining
compliant for the 2020 reporting period.
At the AGM on 16 May 2019, Greg Lock and
Regine Stachelhaus stepped down from
their respective positions on the Board as
Non-Executive Chairman and Independent
Non-Executive Director and I assumed the
Chairmanship from my position as an
Independent Non-Executive Director. On the
same day, immediately following the AGM,
Ljiljana Mitic was appointed to the Board as
an Independent Non-Executive Director.
Following these changes, and for the period
from 16 May 2019 to 20 August 2019, the
Board was not compliant with provision 11
of the Code which requires at least half of
the Board, excluding the Chairman, to be
Independent Non-Executive Directors.
Following the appointment of
Rene Haas on 20 August 2019 as an
Independent Non-Executive Director, the
Board reached its full complement of
Independent Non-Executive Directors and
resumed compliance with provision 11 of
the Code.
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 unanimous in its view that all
three of these factors will be enhanced by
the appointments of Ljiljana Mitic and Rene
Haas and we were very pleased to welcome
them onto the Computacenter plc Board.
Ljiljana has more than 25 years of experience
in the IT industry. This includes four years as
Global Head of the financial services market
and serving on the executive committee
at Atos SE, as an Executive Vice President.
This followed Atos’s takeover of Siemens IT
Solutions and Services GmbH, where she was
Senior Vice President heading up the
worldwide banking and insurance sales
business. Ljiljana also worked for six years
at Hewlett-Packard, where she was Sales
Director for financial services in Germany.
Prior to that, she spent five years at WestLB
AG, a large German bank at that time. Her
significant management and sales expertise
within global technology enterprises,
particularly in the financial services
markets, will be an asset to our Board and
the Company. Ljiljana’s experience within
our core Western European geographies,
particularly France and Germany, and deep
knowledge of the IT services industry,
complements the skills and backgrounds
of our other Board members.
Rene is a US national currently based in the
UK. He leads the Intellectual Property Group
of Arm Limited, the world leader in
semiconductor IP and a provider of IoT device
and data management platforms. In this
global role as a Group President of Arm,
he spends considerable time in the major
technology centres across Europe, the US
and Asia. Rene is an Arm Executive
Committee Member and reports directly to
the Chief Executive Officer. Rene is a global
business leader, with more than 30 years of
executive and general management,
marketing and sales experience, ranging
from Fortune 1000 technology companies
with revenues up to $4 billion to well-funded,
high-profile technology start-ups. Prior to his
current role, Rene was, amongst other
appointments, Chief Commercial Officer and
Executive Vice President Sales and Marketing
at Arm. He also spent seven years as Vice
President and General Manager Computing
Products at NVIDIA Corporation. His
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
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
2019, the Board had two female Non-Executive
Directors, Ros Rivaz and Ljiljana Mitic,
representing 22.2 per cent of the total Board
membership. This is in line with the
representation as at 31 December 2018.
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 109.
Peter Ryan
Non-Executive Chairman
11 March 2020
significant management and sales expertise
within large enterprises, particularly those
at the leading edge of technological
development, will be an asset to our Board
and the Company. Rene’s global experience
with a US focus complements the skills and
backgrounds of our other Board members.
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 the Company’s procedure
for new Directors, both Ljiljana and Rene
undertook a full induction which was tailored
to their knowledge and experience. This
included 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 and Audit
Committees, both were provided with a
detailed briefing on executive remuneration
from the Group’s Chief People Officer and
presentations from a number of the Group’s
Financial Senior Management team. Ljiljana
and Rene are also members of the
Nomination Committee.
Biographies of each of the Directors are set
out on pages 72 to 73.
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 12 to 13, for ensuring that the Group
has the right strategy to drive stakeholder
value, and for providing appropriate support
and challenge to the Group Executive senior
management team. The Board dedicates a
day-long session each year to receiving
strategy-related presentations from senior
Management and discussing and shaping the
Group’s strategic direction with Management.
In addition to regular discussions on the
development of the Group’s strategy, the
Board receives an in-depth topical presentation
from Management on a specific strategic
initiative at every Board meeting.
Board effectiveness
An external evaluation of the Board and its
Committees took place during the year.
Further details of the process and the
findings can be found on pages 76 to 77.
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
stakeholders.
In accordance with the 2018 Code, all of the
Directors will stand for election or re-election
at the 2020 AGM.
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’s Chief
People Officer on how the Group manages
and develops talent immediately below
Board level.
Governance framework
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
below. 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.
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 office in Kerpen, Germany, where
it received presentations from the German
Managing Director and senior members of his
team. This focused on talent identification
and succession planning for key personnel,
data residency challenges following Brexit
and the shortage of skilled employees in the
German marketplace.
71
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 BOARD OF
DIRECTORS
The recent
appointments
complement the
skills and
background of
our other Board
members.
Peter Ryan
Non-Executive Chairman
72
Peter Ryan
Non-Executive Chairman and Chairman
of the Nomination Committee
Mike Norris
Chief Executive Officer
Committee membership: A, N, R
Board member attendance: 9/9*
Peter (1961) has, since 1980, had a
successful international career in
technology encompassing all dimensions
of the industry including software, services,
systems integration, outsourcing and
infrastructure. Over the last 10 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: 9/9
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. Mike was awarded
an honorary Doctorate of Science from the
University of Hertfordshire in 2010.
Philip Hulme
Founder Non-Executive Director
Tony Conophy
Group Finance Director
Board member attendance: 7/9
Board member attendance: 9/9
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.
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 Ogden
Founder Non-Executive Director
Board member attendance: 7/9
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 & Co.
Minnow Powell
Non-Executive Director and Chairman
of the Audit Committee
Ros Rivaz
Senior Independent Non-Executive Director
and Chair of the Remuneration Committee
Committee membership: A, N, R
Board member attendance: 9/9
Committee membership: A, N, R
Board member attendance: 9/9
Minnow (1954) was a Non-Executive Director
and Chairman of the Audit Committee of
Superdry plc from 2012 to 2019. 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. Minnow’s 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.
Ros (1955) is a Non-Executive Director of
ConvaTec Group plc, where she is Chair of the
Remuneration Committee and a member of
the Audit & Risk and Nomination Committees,
and the MOD Defence Equipment and Support
Board, where she is a member of the
Remuneration and Nomination Committees.
She was a Non-Executive Director of RPC
Group plc, CEVA Logistics AG and Deputy Chair
of the Council of the University of
Southampton for 10 years. Ros was
previously Chief Operating Officer for Smith
& Nephew plc and held senior management
positions in global companies including
Exxon, Diageo, ICI and Tate & Lyle Group.
Dr. Ljiljana Mitic
Independent Non-Executive Director
Rene Haas
Independent Non-Executive Director
Committee membership: A, N, R
Board member attendance: 6/6**
Committee membership: A, N, R
Board member attendance: 3/3***
Retirement
Ljiljana (1969) has more than 25 years’
experience in the IT industry. She was Global
Head of financial services and a member of
the executive committee at Atos SE, following
its takeover of Siemens IT Solutions and
Services GmbH, where she headed the
worldwide banking and insurance sales
business. Ljiljana has also held senior roles at
Hewlett-Packard and WestLB AG. Since 2016,
she has focused on technology start-ups as
a Senior Partner of Impact51 AG. Ljiljana is a
Non-Executive Director of Grenke AG, a global
financing partner for small and medium-
sized companies.
Rene (1962) is a US national currently based
in the UK. He has over 30 years’ experience in
executive and general management,
marketing and sales. He is currently a Group
President of Arm Limited, the world leader in
semiconductor IP and provider of IoT device
and data management platforms. Rene
leads Arm’s Intellectual Property Group and
is an Executive Committee Member. Prior to
his current role, Rene was, amongst other
appointments, Chief Commercial Officer and
Executive Vice President Sales and Marketing
at Arm and spent seven years as Vice
President and General Manager Computing
Products at NVIDIA Corporation.
Greg Lock and Regine Stachelhaus retired
from the Board on 16 May 2019 and attended
all the Board meetings scheduled during the
time until their retirement.
*
**
Peter Ryan was appointed to the position of Chairman of the
Company on 16 May 2019.
Ljiljana Mitic was appointed to the position of Non-Executive
Director of the Company with effect from 16 May 2019.
*** Rene Haas was appointed to the position of Non-Executive
Director of the Company with effect from 20 August 2019.
Committee membership key
A – Audit Committee
N – Nomination Committee
R – Remuneration Committee
73
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 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 2019. It can be found on our website
at investors.computacenter.com.
Day-to-day management and operational
activities are delegated to the 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 76, 82 and 88 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 2019 appears on pages 78, 82
and 99, as do reports from the Chairman of
each Committee setting out the primary
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 Priorities. 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.
When assessing and monitoring the
Company’s culture, the Board benefits from
the experience and institutional knowledge
of both the Executive Directors, who have
each accumulated well over 30 years of
service with the Company, and the Founder
Non-Executive Directors, who formulated
and grew the culture of the Company from its
inception. Whilst the knowledge of these four
Board Members is invaluable in articulating
the culture that the Company strives for,
a number of other activities have been
conducted throughout the year, to support
the Board’s overall assessment of the
Company’s culture and the monitoring of its
development.
The Board, through the Audit Committee,
receives regular reports on any
whistleblowing events that would indicate
a breach of the Company’s culture, and
monitors the resolution of identified issues.
The Board also received a presentation on
the results of the Company’s employee
engagement survey, which highlighted
aspects of the Company’s culture. The CEO
monitors the implementation of various
sales force pay plan initiatives, to ensure
that they enhance the behaviours
demonstrated by this key community and
that these behaviours remain aligned with
the Company’s culture and strategy. Over
half of the Board attended the 2020 Group
Kick-Off event for our sales force and
Technology Providers and observed the
culture of the sales force first hand. The
Board approved a significant investment in
a new Group-wide HR system, which allows
centralised monitoring of our people’s
progress and development and has
standardised the Company’s approach to
variable pay, to ensure that all employees’
remuneration is directly linked to Executive
remuneration and therefore the Company’s
strategy. During the due diligence process
for the Company’s acquisitions in 2018, the
cultural fit of the people in the acquired
entities was one of the Board’s key
considerations. The cultural fit was assessed
as being very close and the Board will
continue to monitor it, recognising it will be
one of the drivers, and measures, of the
acquisitions’ continued success.
CORPORATE
GOVERNANCE
REPORT
74
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 also 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.
The Board’s key activities during the year
The Board held nine 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 2019, the Board considered:
Regular items
• Terms of Reference for each of its
Committees;
• Matters Reserved for the Board and
Delegated Class Transactions review;
• role of the Chairman, CEO and Senior
Independent Director;
• Annual and Interim Reports;
• dividend policy;
• reports from the Committee Chairmen
on the Committees’ key activities;
• the annual budget and three-year plan;
• the Viability Statement;
• gender pay gap reporting;
• diversity and inclusion;
• employee stakeholder engagement;
• the culture of the Group;
• cyber security;
• cash deposit strategy;
• Group insurance coverage;
• market abuse regulations;
• Management’s strategic planning
and execution;
• the performance of the Group and
Management; and
• Executive succession planning.
The Composition of the Board
The membership of the Board as at
31 December 2019 is set out on pages 72 to
73. 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
72, 73, 78, 82 and 99.
The Board has considered the independence
of each Director, taking into account the
guidance provided by the 2018 Code. The
Chairman, Peter Ryan, was considered by the
Board to meet the independence criteria set
out in the Code on appointment, and each of
Minnow Powell, Ros Rivaz, Ljiljana Mitic and
Rene Haas are considered by the Board to be
independent in their character and
judgement. Philip 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 either an Executive or
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 78.
Non-Executive Directors are appointed to the
Board for an initial three-year term, the
renewal of which is timed to co-terminate at
the close of an AGM. The Executive Directors
are appointed for 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
2018 Code, all Directors should be subject to
election or re-election at the Company’s next
AGM on 14 May 2020. 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.
75
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 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 external Board
evaluation completed for 2019, 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. No such positions have
been taken by the Executive Directors.
Information and support
All Directors receive appropriate
documentation in advance of each 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
In accordance with the requirements of the
2018 Code, the Board carries out a review of
the effectiveness of its performance and that
of its Committees and Directors each year. The
evaluation is facilitated externally every third
year. The 2019 Board effectiveness review was
facilitated by an external board evaluation
specialist from Independent Audit Limited,
between October and December 2019.
Independent Audit Limited has no other
connection with the Company.
Corporate Governance Report
continued
Additional items
• asset reunification and share forfeiture
process for untraced shareholders;
• RDC and PathWorks acquisitions;
• other acquisition and disposal
opportunities;
• integration of recent acquisitions;
• IT project updates;
• corporate governance changes;
• General Data Protection Regulation;
• significant new Managed Services bids;
• significant in-life Managed Services
contract reviews;
• planning for the United Kingdom exiting
the European Union; and
• Non-Executive Director appointments.
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.
76
The Board is considering all of the
recommendations of the Board
evaluation report.
The internal evaluation conducted in 2018
and reported on page 73 of the 2018 Annual
Report and Accounts stated the need for
the Board 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. Over the year the Board has
devoted a session at each Board meeting to
a strategic topic which has assisted in
increasing this understanding.
External evaluation process
Conducted tender process, resulting in
Independent Audit Limited being appointed
to facilitate the evaluation.
Independent Audit Limited was briefed by the
Chairman and the Company Secretary.
The Board completed a series of tailored
online questionnaires. Independent Audit
Limited attended the Board and Committee
meetings held in November and December,
to observe Directors and the dynamics of
the meetings.
Independent Audit Limited prepared a report
setting out their findings and
recommendations on further performance
improvements, which were discussed with
the Chairman, prior to presenting to the
Board in February.
Independent Audit Limited was appointed
following an extensive tender process, which
involved drawing up a list of providers and
narrowing it down to five, each having
extensive experience of facilitating
effectiveness reviews. Each firm completed
a request for proposal, after which a formal
assessment process was undertaken by the
Chairman and the Company Secretary,
resulting in Independent Audit Limited
being selected.
The aim of the review was to assess the
effectiveness of the Board as a whole in
order to identify and implement any actions
required to become a more effective Board.
The review was designed to encourage
Directors to optimise their contribution to
Computacenter’s success and add value
beyond their statutory requirements, by
building on existing strengths, agreeing
on the challenges ahead and preparing for
the future.
The self-assessment highlighted that all
Directors demonstrated commitment to
their roles and the boardroom culture was
deemed effective and conducive to enabling
participation and challenge by Non-Executive
Directors. The review identified opportunities
for the Board to focus on the areas
summarised below:
• continuing to discuss strategy, to refine
the alignment with the organisation’s
purpose and to consider developments
within the industry;
• reviewing the processes for assessing
and managing risk, to ensure lessons
are learned;
• scheduling time to further consider
culture, in order to clarify the culture
the Group wants to achieve and ensure
the Board questions any assumptions
being made;
• refining and focusing materials presented
to the Board, through the continued
development of senior management; and
• examining whether there are further
opportunities for the Executive to increase
the Board’s input, to add value and
challenge Management’s activities.
77
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Current members
1. Peter Ryan1 (Chairman)
2. Rene Haas2
3. Ljiljana Mitic3
4. Minnow Powell
5. Ros Rivaz
Former members
6. Greg Lock4
7. Regine Stachelhaus5
Role
Non-Executive Chairman
of the Board
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Chairman
of the Board
Non-Executive Director
Attendance
record
5/5
1/1
2/2
5/5
5/5
2/2
2/2
1.
2.
3.
Peter Ryan was appointed to the position of Chairman of the Company on 16 May 2019 and became Chairman of the Nomination Committee
at that time.
Rene Haas was appointed to the position of Non-Executive Director of the Company with effect from 20 August 2019 and became a Member
of the Nomination Committee at that time.
Ljiljana Mitic was appointed to the position of Non-Executive Director of the Company with effect from 16 May 2019 and became a Member
of the Nomination Committee at that time.
4. Greg Lock retired from his position of Chairman of the Company and Chairman of the Nomination Committee on 16 May 2019.
5.
Regine Stachelhaus retired from her position as a Non-Executive Director on 16 May 2019.
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 Committee’s membership 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, experience and diversity
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 Executives 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 2019
The Nomination Committee met on five
occasions during 2019 and its work included
the following:
Board appointment
Prior to the retirements of Greg Lock and
Regine Stachelhaus at the 2019 AGM, the
Nomination Committee appointed Russell
Reynolds Associates (‘Russell Reynolds’) to
search for two Independent Non-Executive
Directors to fill the upcoming vacancies.
Russell Reynolds is a global leader in
assessment, recruitment and succession
planning for boards of directors. It has no
connection to the Company other than to
provide this service and was appointed as it
had led the Chairmanship succession review.
In conjunction with the Nomination
Committee, Russell Reynolds developed a
candidate specification that highlighted the
necessary areas of competence to join the
Board. The most important of these included
a strong commercial track record within our
sector including international experience,
preferably within either our core continental
European markets or our American market.
Candidates were also required to demonstrate
the communication skills and personal
characteristics to ensure a cultural fit for
our Company.
NOMINATION
COMMITTEE
REPORT
We will continue
to ensure that
diversity and
inclusion remain
a key input to our
succession
planning.
Peter Ryan
Chairman of the Nomination Committee
78
Having identified individuals suitable for
appointment as Independent Non-Executive
Directors from a shortlist of candidates, the
Board confirmed the appointment of Ljiljana
Mitic to the Board shortly following the 2019
AGM. The appointment of Rene Haas was
confirmed at a Board meeting held on
20 August 2019. The Chairman noted that
Ljiljana’s experience in the Company’s core
Western European geographies, particularly
France and Germany, and Rene’s global
experience with a US focus complemented
the skills and background of the other
Board members.
Prior to formally recommending their
appointments to the Board, the Committee
considered and agreed that both Ljiljana and
Rene would be independent in character and
judgement, as defined under provision 10 of
the 2018 UK Corporate Governance Code.
Ljiljana and Rene were also appointed as
members of the Company’s Remuneration,
Nomination and Audit Committees.
Succession planning
Developing future leaders and successor
candidates is central to our strategy of
creating and maintaining a culture that
builds customer relationships. Succession
is also one of the Company’s principal risks,
as disclosed on pages 63 to 68 of this Annual
Report and Accounts. The Committee
therefore focuses on effective succession
planning, to ensure Computacenter’s future
prosperity. Whilst recognising that internal
talent development is primarily
Management’s responsibility, the Committee
has reviewed Management’s pipeline of
executive talent, both for emergency use and
its long-term potential. In response to the
evaluation of the Committee during the year
(see below), the Committee will also look to
extend its oversight of succession planning
beneath the Executive level.
Performance of the Committee
During the year, a review of the Committee
was independently facilitated by
International Audit Limited. 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. This will
include ensuring that appropriate steps are
taken to develop internal candidates for CEO
and FD succession. We will continue to ensure
that diversity and inclusion remain a key
input when considering these plans. Further
detail on how the Committee evaluation was
conducted is disclosed on pages 76 to 77.
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 2020 AGM. The results of the
Company’s most recent Board evaluation
process were considered, alongside each
individual’s contribution.
Following this review, the Committee
proposed to put forward Ljiljana Mitic and
Rene Haas for election by the Company’s
shareholders at the 2020 AGM and
recommended that each of the other
Directors on the Board as at 31 December
2019 be put forward for re-election at the
2020 AGM.
Diversity
The Committee, and the Board as a whole,
continue to recognise the benefits that
diverse skills, experience and points of view
can bring to an organisation, and how
diversity may assist the Board’s decision-
making, thereby increasing its effectiveness.
Appointments to the Board have been made
primarily based on merit, and the Committee
has not therefore previously set any
measurable targets in this area. The
Committee has assessed this approach
during the year and reviewed the
composition of the Board and the tenure of
its Members, against the background of
recent developments including the Sir John
Parker review on ethnic diversity and the
Hampton-Alexander review on gender
diversity. The Committee recognises that
improving the diversity of both the Board and
senior Management will further align both
bodies with the wider representation seen
within the Company’s workforce.
As at 31 December 2019, the Computacenter
Board had two female Non-Executive
Directors, Ros Rivaz and Ljiljana Mitic,
representing 22.2 per cent of the total Board
membership, and no Directors that identified
as being from an ethnic minority
background. Female representation on the
first layer of management below Board level,
including the Company Secretary, has risen
from none out of 12 at 31 December 2018 to
two out of 13 as at 31 December 2019 (15.4
per cent). The number of women directly
reporting to the first layer of management
below Board level, including the Company
Secretary, has risen from 23/88 (26.1 per
cent) in 2018 to 24/91 (26.3 per cent) in 2019.
Peter Ryan
Chairman of the Nomination Committee
11 March 2020
79
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 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 62 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 61 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 68 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 63
to 68 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 the Group faces.
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, through the Group
Risk Committee, receives updates from the
Group Planning for the United Kingdom
Exiting the European Union Committee, on
the Company’s response to the risk of the
80
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 Priorities.
• 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
assesses observance of 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
assesses the latest information on the
status of the UK’s trade negotiations with
the EU, assessing known risks from a
failure to agree a deal with the EU before
the end of the transition period on
31 December 2019 and identifies
mitigating activities that the Group can
undertake to reduce any short-term
disruption to the Group’s activities as
a result.
United Kingdom failing to agree a trade deal
with the European Union in time for when the
transition period ends on 31 December 2019,
leaving UK to trade with the EU on a ‘no-deal’
basis from that date.
Through an assessment programme,
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
Priorities. These Strategic Priorities 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
UK Corporate Governance 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.
There were several enhancements to the
risk framework and processes over the last
year, including:
• The Quality Management & Assurance
function changed reporting lines from
November 2018, to enhance its
independence and objectivity, and formed
a core part of the third line of defence
from 2019 onwards.
• 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.
• A new strategic risk, Increasing
Globalisation of Customer Demand, was
elevated to a principal risk during 2019.
Internal control
The Board has overall responsibility for
maintaining and reviewing the Group’s
systems of internal control, and 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
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 & 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 activities
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 82 to 87.
81
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 AUDIT COMMITTEE
REPORT
The Committee,
as a whole, has
competence
relevant to the
sector in which
the Company
operates.
Minnow Powell
Chairman of the Audit Committee
82
Current members
1. Minnow Powell (Chairman)
4. Rene Haas1
3. Ljiljana Mitic2
2. Ros Rivaz
Former members
5. Peter Ryan3
6. Regine Stachelhaus4
Role
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Attendance
record
4/4
1/1
3/3
4/4
1/1
1/1
1.
2.
3.
4.
Rene Haas was appointed to the position of Non-Executive Director of the Company with effect from 20 August 2019 and became a Member
of the Audit Committee at that time.
Ljiljana Mitic was appointed to the position of Non-Executive Director of the Company with effect from 16 May 2019 and became a Member
of the Audit Committee at that time.
Peter Ryan was appointed to the position of Chairman of the Company on 16 May 2019 and stood down as a member of the Audit Committee
at that time.
Regine Stachelhaus retired from her position as a Non-Executive Director on 16 May 2019.
Composition of the Committee
As at 31 December 2019, the Audit Committee
(the ‘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 24, one member of the Committee,
Minnow Powell, is considered to have recent
and relevant financial experience. The
Committee notes the requirements of the
2018 Code and confirms that, 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 72 to 73.
Meetings of the Committee
The Committee met four times during 2019.
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.
Meetings are also attended by the Company
Secretary, who acts as Secretary to the
Committee. The meetings cover a standing
list of agenda items, which is based on the
Committee’s Terms of Reference, and
consider additional matters when the
Committee deems it necessary.
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 & Risk Management, without
Management present. From time to time,
I also attend meetings of the Group Risk
Committee.
Prior to each meeting of the Committee,
I meet separately with those responsible
for presenting papers to the Committee to
ensure that they are of sufficient quality and
rigour. I am satisfied that the flow of
supporting information to the Committee is
appropriate and provided in good time, to
allow members enough opportunity to
review matters due for consideration at each
Committee meeting. I am also satisfied that
meetings were scheduled to allow adequate
time to enable full and informed debate.
Principal responsibilities of the Committee
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 relating to the Company’s
financial performance, and to review
significant financial reporting judgements
contained in them;
• provide advice (where requested by 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 Company’s
position and performance, business
model and strategy;
• review the Company’s internal financial
controls and internal control and risk
management systems;
• monitor and review the effectiveness of
the Company’s Internal Audit function;
• conduct the tender process and make
recommendations to the Board about the
appointment, reappointment and removal
of the external auditor, and approve the
external auditor’s remuneration and
terms of engagement;
• review and monitor the external auditor’s
independence and objectivity;
• review the effectiveness of the external
audit process, taking into consideration
relevant UK professional and regulatory
requirements;
• develop and implement policy on engaging
the external auditor to supply non-audit
services, ensure there is prior approval of
non-audit services, consider the impact
this may have on independence, take into
account the relevant regulations and
ethical guidance in this regard, and report
to the Board on any improvement or action
required; and
• report to the Board on how it has
discharged its responsibilities.
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.
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. In reviewing these matters, the
Committee also took account of the views of
the external auditor, KPMG LLP.
New lease accounting standard (IFRS 16)
effective 1 January 2019
During the year, the Committee reviewed
the disclosures for IFRS 16 within the Interim
Report and Annual Report and Accounts.
The Company has elected to implement the
standard using the modified retrospective
approach to adoption and has not restated its
comparatives for the 2018 reporting period.
The Company has taken care to highlight the
disclosure throughout the Annual Report and
Accounts, to indicate that the comparative
results have not been restated and are
prepared under a different GAAP.
Professional Services and Managed
Services contract accounting
The Committee continued to focus on
Services contract accounting during the
year. It received an 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 because there were complex revenue
recognition elements to the contract.
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.
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 continue
to be formulated to address material lessons
learnt from the execution of these contracts.
Technology Sourcing revenue recognition
and ‘bill and hold’ cut-off procedures
Given the level of sales around year end,
the Audit Committee supported the auditor’s
approach to increasing its testing of
Technology Sourcing revenue cut-off,
particularly in regard to ‘bill and hold’
arrangements where customers purchase
inventory that remains in our Integration
Centers following revenue recognition. We
encouraged Management to continue to
review and improve ‘bill and hold’ procedures,
particularly in recently acquired entities
where such procedures initially diverged
from Group policies.
The Committee was pleased to note that no
significant errors were found as a result of
the auditor’s work in this area at year end.
Acquisition accounting
During 2019, the Group acquired PathWorks
GmbH (‘PathWorks’), a small Technology
Sourcing reseller in Switzerland, and
reacquired R.D. Trading Limited (‘RDC’) in the
UK, a former subsidiary of the Group which
was sold in February 2015. The Committee
reviewed the acquisition accounting
judgements and the differences between
the provisional fair values and the book
values at acquisition.
For RDC, the Committee reviewed the
structure of the transaction, noting the
receipt of £8.1 million which reflected
onerous property costs within the business.
The Committee noted Management’s fair
value provisions, including the above-market
rental on a property lease where there was
significant under-occupation, and
considered these appropriate.
The initial accounting for RDC has only been
provisionally determined at the end of the
reporting period and the Committee will
review the position close to the anniversary
of the acquisition.
During 2018, the Group acquired FusionStorm
in the USA and Misco Solutions B.V. (‘Misco’) in
the Netherlands. The initial accounting for
the acquisitions was only provisionally
determined at the end of the 2018 reporting
period and the Committee reviewed the final
position close to the anniversary of the
acquisition. The accounting for the
acquisitions is now complete. There were
no material changes to the fair values or the
book values at acquisition for Misco. The
Committee noted a change made to the
initial accounting for the acquisition of
FusionStorm resulting in an increase of the
recognised amounts of net assets acquired
of £4.1 million and a corresponding decrease
in the goodwill arising on acquisition.
Risk of impairment of FusionStorm goodwill
and acquired intangible assets
The Committee considered Management’s
review of the value of goodwill and acquired
intangibles in the FusionStorm cash-
generating unit. This review assessed
factors which could affect the recoverability
of these assets and whether they could give
rise to an impairment. Management’s review
noted the inherent uncertainty involved in
forecasting and discounting future cash
flows, which are the basis of the assessment
of the value-in-use.
The Committee reviewed Management’s
assumptions. This included:
• reviewing trading forecasts and related
cash flows;
• assessing the discount rates used in the
FusionStorm cash flow forecasts;
• referencing the discount rates used by
comparable companies;
• comparing the projected growth rates
to externally derived data; and
• reviewing sensitivity analysis on the
assumptions noted above.
The Committee also reviewed the adequacy
of the Group’s disclosures in respect of
goodwill, including disclosures regarding the
sensitivity of the outcome of the impairment
assessment to changes in key assumptions,
and the disclosure of key estimates and
judgements related to the carrying amount.
The Committee considered that the carrying
value of the goodwill and acquired intangible
assets remains appropriate.
The Committee reviewed the audit plan for
the acquired entities for the part-year ended
31 December 2019 with the Group’s external
auditor, KPMG LLP, to ensure that adequate
procedures were in place to ensure audit
coverage was appropriate.
83
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Audit Committee Report
continued
Segmental information
During the first half of the year, Management
reviewed the way Segmental performance is
reported to the Board and the Chief Executive
Officer, who is the Group’s Chief Operating
Decision Maker (‘CODM’). This followed the
acquisitions made in 2018 and in particular
FusionStorm.
as exceptional interest costs. Whilst this item
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
FusionStorm. 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 affects the
understanding of our Group and Segmental
operating results.
A tax credit of £0.8 million (2018: £3.1 million)
was recorded which related to the acquisition.
As this credit was 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, consistent with the treatment of the
item for the year ended 31 December 2018.
The Committee was satisfied that the costs
associated with the acquisition of
FusionStorm, the interest from unwinding of
the discount on the deferred consideration,
the tax effect of both items and the
exceptional tax credit taken should be
classified as exceptional, due to the
collective materiality of the initial acquisition
recognition, ongoing consistency with that
recognition and the nature of the items.
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 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 differences between these
measures and the reasons thereon. The
Committee concluded that the presentation
of adjusted1 profit provided clarity on
performance and had sufficient equal
prominence with statutory profit.
As a result of this analysis, the Committee
endorsed a revised Segmental reporting
structure, which the Board adopted. The
Committee reviewed the analysis used to
identify the new Segments in accordance
with IFRS 8 Operating Segments and noted
that the rationale appeared appropriate for:
• introducing the new USA Segment;
• adding RDC and TeamUltra to the
UK Segment;
• reshaping the International Segment to
include a core ‘Rest of Europe’ presence,
with key trading operations in Belgium,
the Netherlands and Switzerland
(including PathWorks), along with the
international Global Service Desk locations
in South Africa, Spain, Hungary, Mexico,
Poland, Malaysia, India and China; and
• continuing to allocate ‘Central Corporate
Costs’ out of the UK Segment.
The Committee was satisfied that the new
Segmental reporting structure was the basis
on which internal reports are to be provided
to the Chief Executive Officer, as the CODM,
for assessing performance and determining
the allocation of resources within the Group.
The Committee noted that the change in
Segmental reporting has no impact on
reported Group numbers and, to enable
comparisons with prior period performance,
it reviewed the historical Segmental
information for the periods ended 30 June
2018 and 31 December 2018, which were
restated in accordance with the revised
Segmental reporting structure.
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 2019 Annual Report and Accounts.
The Committee noted that an exceptional
operating loss during the period of
£0.1 million (2018: £5.2 million) resulted
from residual costs directly relating to the
acquisition of FusionStorm.
A further £0.8 million (2018: £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
84
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 future trading
assumptions of each subsidiary. No
impairment of carrying value in the
investment in subsidiaries was identified
during the year and the Committee remains
satisfied that the carrying value of each
subsidiary remains appropriate.
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 the Group’s financial plans and its
liquidity, including 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 that expires in
May 2021 and was not drawn down during
the year, and challenged Management’s
forecasts concerning trading performance.
The Committee also 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 2019
Consolidated Financial Statements. Following
its considerations, the Committee was
satisfied that the going concern basis of
preparation continues to be appropriate and
recommended its adoption to the Board.
The statement and explanation from the
Directors can be found within the Strategic
Report on page 61.
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 sets 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 by the Brexit deadline date or
failing to agree a comprehensive trade
agreement by the end of the transition
period at the end of 2020. As a result, the
Committee recommended to the Board that
it could make the statement required for the
assessment period without qualification.
The statement and explanation from the
Board can be found within the Strategic
Report on pages 61 to 62.
Other significant activity
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;
• the Company’s distributable reserves
prior to the declaration of both the interim
and final dividends in respect of the
reporting period;
• reports on the capability of the finance
team, including the Finance Shared Service
Center in Hungary;
• policies, processes and controls relating
to the Group’s tax and treasury functions
and the Company’s public Tax Strategy;
• controls around purchase to pay and order
to cash;
• ongoing integration plans for the recent
acquisitions, including the provision of the
Group’s Enterprise Resource Planning
systems and the wider internal control,
risk management and compliance
frameworks;
• reports from the Group Information
Assurance (‘GIA’) function on its role and
how it fits into the overall control
structures of the Company, as a key part
of the ‘second line of defence’ within the
risk management framework. GIA also
reported on the programme of
enhancements for the Cyber Defence
Center and cyber security;
• reports on improvements to the General IT
Control Environment, including the
establishment of an independent
governance team to improve the
monitoring of compliance with policies
through regular audits, as well as the
completion of the SAP access control
project, which improved the segregation
of duties controls within the Finance
function by circa 85 per cent;
• regular updates on major Group internal
governance enhancement initiatives,
including the Group Opportunity and In-life
Service Management programmes, which
strengthen the internal controls around
in-life contract performance
management; and
• several presentations on lessons learned
from recent difficult contracts and
comparisons of these to historical
loss-making contracts, with indications of
how the enhanced contract governance
procedures could have reduced the
likelihood of contract losses had they been
in place earlier.
Having been requested to do so by the Board
in accordance with Code provision 27, 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.
Performance of the Committee
No major matters were raised in the
externally facilitated annual evaluation of
the Committee’s performance.
Refer to pages 76 to 77 for further details
on the evaluation carried out.
The effectiveness of internal controls and
of the risk management framework
On behalf of the Board, the Committee is
responsible for overseeing the effectiveness
of the Group’s systems of internal control
and the risk management framework.
The Group Risk Committee (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 ‘Risk Heat Map’. They are then
reviewed in conjunction with accompanying
risk mitigation plans. The GRC minutes,
or a summary thereof, are circulated to the
Committee for review, with any matters of
note highlighted and explained to the
Committee by the GRC Chairman. 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.
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 and
improving the compliance and control
environment within FusionStorm.
Compliance Steering Committee
The Compliance Steering Committee (CSC)
reports to the GRC. It meets quarterly,
two weeks before the GRC, and since
12 November 2019 has been chaired by
the Group Compliance Manager, who was
recruited into this role on 12 July 2019, to
continue to improve its operations. The
Group Head of Legal & Contracting, the Chief
People Officer, the Group Data Protection
Officer, the Group Head of Internal Audit
& Risk Management and the Company
Secretary make up the rest of the CSC.
The CSC determines which areas of law or
regulation apply to the Group, assigns these
to members of Management and identifies
levels of compliance and associated risk,
with the aim of ensuring that these are
appropriate to the Group. Critical areas
within the CSC’s remit include anti-bribery
& corruption, whistleblowing, data
protection and export control.
During the year, the CSC launched a
compliance framework it had developed
to provide appropriate and consistent
governance across a number of business-
critical compliance areas. The framework
utilises the lessons from the GDPR project,
to enable the Group to successfully monitor
or re-implement other critical compliance
policies and deal more consistently with
changes and additions arising from new
business activities, including acquisitions.
The framework also includes monitoring
compliance with the Group Ethics policy.
85
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Audit Committee Report
continued
The CSC has now begun to reinvigorate the
Group’s anti-bribery & corruption policies
and processes within the new framework
and continues to monitor further critical
compliance areas to be regulated within it,
as well as the associated changes to its own
composition, to deliver better against its
Terms of Reference. The CSC has also reviewed
the efficacy of our whistleblowing procedures.
The Committee reviewed the CSC’s progress
with bringing the recently acquired entities
into the Group’s compliance framework,
noting further work is required in respect
of the acquired operations in the USA.
The Committee noted that the Group-wide
whistleblowing platform was made available
to the operations in the Netherlands and
the USA, in May 2019 and February 2019
respectively. Further training on the platform
in the USA was carried out in November 2019
following a visit from Internal Audit.
Whistleblowing
The Committee confirms that it is satisfied
that, as at the date of this report,
arrangements are in place to ensure that
staff are able, in confidence, to raise
concerns about possible improprieties in
financial and other matters, and for the
proportionate and independent investigation
of such concerns, including appropriate
follow-up action. During the year, no
incidents were reported to the Committee.
As at the date of this report, all of the Group’s
operating entities had access to the same
whistleblowing platform.
The effectiveness of the Internal
Audit function
The Group has an Internal Audit function
which reports to me, as Chairman of the
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 Committee and senior
Management, and to assist the Board in
meeting its corporate governance and
regulatory responsibilities. A formal audit
charter, which was updated during the year,
is in place to guide the function’s work
and procedures.
The Board, acting through the 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 Committee approves a
rolling audit programme, ensuring that all
significant areas of the business are
independently reviewed over, approximately,
a four-year period. The programme and the
86
audit findings are assessed continually,
to ensure they take account of the latest
information and, in particular, the results of
the annual review of the effectiveness of
internal control and any shifts in the focus
areas of the various businesses.
Each year, the Committee reviews the
effectiveness of the Internal Audit
department and the Group’s risk management
programme. The formal review typically
consists of an evaluation of Internal Audit
activities by members of the 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. Such an
assessment normally covers areas such
as departmental organisation, business
understanding, skills and experience,
communication and performance. During the
year, the Internal Audit function, in lieu of its
normal evaluation process, participated in
an external effectiveness review with a peer
function at a FTSE 100 company, providing
and receiving feedback and best practice
benchmarking on its activities. The review
was encouraging and has led to several
process enhancements within the function.
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 the results of completed audits. 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 function’s activities. Following the
acquisition of FusionStorm, the Committee
agreed to keep Internal Audit’s staffing levels
under review throughout 2020.
The Committee has challenged and approved
the Internal Audit plan and the mapping of
that plan to the Group’s principal risks and
related mitigating controls, as set out on
pages 63 to 68. The plan 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. This includes reviewing and providing
assurance to the Committee regarding the
effectiveness of controls over bid management
and contract reporting and the control
environment of material acquired entities.
The integrity of the Group’s relationship
with the auditor and the effectiveness
of the external audit process
External audit
The Committee oversees the Group’s
relationship with its auditor and makes
recommendations to the Board concerning
the appointment, re-appointment and
remuneration of the auditor.
Reappointment of the auditor
Following a review of the external auditor’s
effectiveness and further Committee
discussions, 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 2020 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.
Rotation of lead audit engagement partner
The lead audit engagement partner for the
year ended 31 December 2019 is Mr Tudor Aw,
who has now completed five years in this role.
Towards the end of the year, the Committee
reviewed the candidates recommended by
KPMG LLP to succeed Mr Aw. The Committee
sought the advice of Management who, along
with the Chairman of the Committee,
interviewed each candidate. Following this
process, the Committee recommended
Mr David Neale to replace Mr Aw as the lead
audit engagement partner for the year
commencing 1 January 2020.
During the reporting period, the Company
complied with The Statutory Audit Services
for Large Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and 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;
• enquiring about the testing sample sizes;
Auditor’s remuneration:
– Audit of the Financial Statements
– Audit of subsidiaries
Total audit fees
Audit-related assurance services
Taxation compliance services
Other assurance services
Other non-audit services
Total non-audit services
Total fees
• reviewing the audit scope with the lead
audit engagement partner, to ensure
adequate coverage of full-scope audit
components over the Group’s operations.
This included KPMG LLP’s external audit of
FusionStorm as a full-scope component
of the audit engagement for the first time,
for the year ended 31 December 2019. The
Committee noted that the overall Group
full scope audit coverage was circa 99 per
cent of Group adjusted1 profit before tax,
circa 97 per cent of Group revenue and
circa 95 per cent of Group total assets;
• receiving reports on the results of the
audit work performed; and
• considering the report of the FRC’s Audit
Quality Review Team on KPMG LLP. The
Committee reviewed the report and
discussed it with the lead audit
engagement partner.
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 KPMG LLP
employees that comprise the audit team,
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
To help maintain the auditor’s independence,
the Committee has established a policy
regarding the scope and extent of non-audit
services provided 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
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.
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’s 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 Committee.
In each case where the Group auditor is
authorised to perform a Permitted Service,
the Committee will properly assess 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 consider alternative
suppliers and competitive tenders and then
2019
£’000
60
829
889
62
1
7
–
70
959
2018
£’000
50
722
772
50
9
17
132
208
980
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
7.9 per cent of the KPMG LLP overall audit fee
during 2019 (2018: 26.9 per cent), as set out
below. The Group auditor will, in no
circumstances, undertake non-audit
services for the Group to the extent that 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 the year, KPMG LLP provided only trivial
non-audit services to the Group. Any trivial
non-audit services provided were subject to
KPMG LLP’s review of the impact on its own
independence against the Group’s non-audit
services policy. None of the trivial engagements
constituted a prohibited non-audit service
and the Committee were satisfied that the
independence of KPMG LLP, as Group auditor,
was not affected.
Minnow Powell
Chairman of the Audit Committee
11 March 2020
87
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 DIRECTORS’
REMUNERATION
REPORT
The Committee
believes that the
amount paid to
the Executive
Directors should
be clearly linked to
their performance
and the value
delivered to
shareholders.
Ros Rivaz
Chair of the Remuneration Committee
88
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 31 December 2019.
The report is split into three sections:
• this Annual Statement;
• the revised Directors’ Remuneration Policy
(the ‘Policy’) on pages 91 to 98, which will
be subject to a binding vote by
shareholders at the Company’s AGM to be
held on 14 May 2020; and
• the Annual Report on Remuneration on
pages 99 to 108, which includes
information concerning the amount paid
to the Executive and Non-Executive
Directors in respect of 2019 and details of
how the Policy will be implemented in
2020, which will be subject to an advisory
vote by shareholders at the Company’s
2020 AGM.
The Committee believes that the amount
paid to the Executive Directors should be
clearly linked to their performance and
the value delivered to shareholders.
Remuneration for the Group Chief Executive
Officer (CEO) and Group Finance Director (FD)
is heavily weighted towards variable pay,
principally based on the achievement of
stretching financial targets set by the
Committee. This variability of award
outcomes is set out on page 107 (CEO pay
history). The Committee monitors 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. The
Committee considers that the remuneration
arrangements promote the Company’s
long-term success within a suitable risk
framework, are suitably aligned to
shareholder interests and that the actual
remuneration earned by the Executive
Directors continues to be a fair reflection
of their individual and the Group’s overall
performance. The Committee is therefore
comfortable that the Policy has operated as
intended. The Board remains committed to
retaining a remuneration framework which is
simple, transparent and can be understood
by all of the Group’s stakeholders.
Share ownership 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 37 and 92 times salary
respectively, which is significantly above our
minimum shareholding policy. This ensures
that there is a material alignment of interests
between the Executive Directors and
shareholders. As set out later on in this letter,
we are also introducing a post-cessation of
employment shareholding policy.
The year under review
During the reporting period, the Group has
performed very well in all its core
geographical markets and has seen
promising recent progress from the
significant acquisition in the USA made in the
fourth quarter of 2018. We have again seen
strong growth and improving margins in
Germany, driven by the Public Sector in
Technology Sourcing and a Professional
Services business operating at full capacity.
The continued performance in France in
particular is pleasing and the French
business has returned its best-ever year
as part of the Group. The UK margins have
improved materially, contributing to an
increase in profit, albeit with flat revenue.
Overall, Group adjusted1 profit before tax
increased by 23.8 per cent during 2019, our
adjusted net funds3 significantly increased,
and we have made additional cost savings
during the year. Our shareholders have
enjoyed significant returns when compared
to the wider market.
During 2019, shareholders have seen a return
of circa 81 per cent on the value of their
investment through share price appreciation
and dividends, and shareholder value has
doubled over the three-year period from
2017 to 2019. Further details can be found
on page 106.
The Committee has been mindful of
Corporate Governance and best practice
developments and, supported by external
advisors, has kept these areas under review
during the year. The Committee has
completed its implementation of changes
required by the 2018 Code into both its
Terms of Reference, available at
investors.computacenter.com, and the
proposed Policy, as discussed further below.
We were already well placed in a number of
areas, for example, the Committee’s remit
already covered the Group Executive senior
Management team and the pension rates for
Executive Directors were already in line with
those available to the wider workforce.
During the year, the Committee reviewed
information on broader workforce pay and
practices, as well as the Company’s gender
pay gap reporting. This information provided
valuable context for the Policy review. I have
acted as the designated Non-Executive
Workforce Engagement Director since my
appointment to this role by the Board on
9 November 2017.
The Committee has decided that the basic
salary of the CEO and FD will be increased by
two per cent for 2020, consistent with the
average increase for the wider UK workforce.
In line with last year, any bonus paid in 2020
will have 50 per cent deferred into
Computacenter shares, with half the shares
payable after one year and the remaining
half after two years and the PSP awards to
be granted to the Executive Directors in 2020
will be subject to a two-year holding period.
Further details on how our Directors’
Remuneration Policy will be applied for the
2020 financial year are set out on page 108.
The Committee’s role is to ensure that the
remuneration paid out to Executive Directors
reflects and underpins the Group’s
performance. 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.
The Committee and I would welcome any
comments you may have on the contents
of this report.
Ros Rivaz
Chair of the Remuneration Committee
11 March 2020
During the year, a review of the Committee
was independently facilitated. The results of
this evaluation have been analysed and, in
response to some of the observations made,
we will continue to discuss and review the
executive remuneration strategy to ensure
that it remains current over the three-year
life of the Directors’ Remuneration Policy and
fit for purpose against an ever-evolving
regulatory and competitive environment,
taking into account the views of our
broader stakeholders.
Remuneration outcomes
The Committee reviewed performance
against the conditions set for the potential
bonus opportunity in 2019. 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 profit, Services contribution growth
and cash in each case exceeded the
maximum target set by the Committee,
resulting in a full payout for these elements.
The cost savings and personal objectives
measures partially paid out.
As a result of this performance, the CEO
received 92.5 per cent and the FD 92 per cent
respectively of their total potential bonus for
the year. Fifty per cent of the bonus will be
deferred into Computacenter shares, with
half of this payable after one year in 2021
and the remainder payable after two years
in 2022. Of the Computacenter Performance
Share Plan (PSP) awards granted in March
2017, 80.78 per cent will vest in March 2020,
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 EPS and growth in Group Services
revenue for the three financial years ended
31 December 2019. The payout reflects the
significant value creation enjoyed by
shareholders during this period and no
discretion was exercised to adjust
the amount.
Revisions to Remuneration Policy and
shareholder engagement
Over the past few months the Committee has
undertaken a comprehensive review of the
Policy for our Executive Directors, taking into
account the Company’s strategy and values,
evolving shareholder expectations and the
new provisions introduced as part of the UK
Corporate Governance Code.
The Committee is of the view that the current
remuneration framework continues to
support the Group’s strategic ambitions,
is aligned with shareholders’ interests and
promotes the attraction, motivation and
retention of the Executives required to
successfully drive our strategy. As a result,
we are not proposing to make any changes in
the overall reward opportunity or structures
at this time.
We are proposing a number of minor
revisions to the Policy, primarily to reflect the
Code, including formalising the Committee’s
ability to apply discretion to the formulaic
outcomes of incentive plans, the extension
of the malus and clawback terms and the
introduction of a post-cessation of
employment shareholding policy.
The Committee sought feedback from the
Group’s major shareholders in respect of
Executive remuneration and the planned
renewal of the Policy and are grateful for
the feedback received.
The key strengths of the current
arrangements, detailed in the proposed
Policy, include:
• Simple structure – fixed pay, bonus (with
deferral into shares) and performance
shares (with a two-year holding period).
• Strategically aligned – our incentive
arrangements are aligned to the strategy
of the business and our stated priorities of
long-term EPS growth, prudent cash
generation and increased Services revenue.
• Performance aligned – we have a track
record over a number of years of paying
overall levels of remuneration that track
the performance of the business, with
variability of reward outcomes.
• Significant shareholdings – the CEO and FD
continue to have very significant
shareholdings which currently exceed 37
and 92 times salary respectively.
Therefore, the Committee recommends the
proposed Policy set out on pages 91 to 98 for
approval at the Group’s forthcoming AGM.
The year ahead
The Committee believes that the Policy
approved by shareholders continues to
provide an appropriate framework by which
to incentivise and reward our Executive
Directors and no changes in incentive
opportunity or performance measures
are being considered.
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continued
In approving the Policy, the Committee has considered the factors below.
UK Corporate Governance Code – Provision 40
Clarity – remuneration arrangements should be transparent and promote
effective engagement with shareholders and the workforce.
Simplicity – remuneration structures should avoid complexity and their
rationale and operation should be easy to understand.
Risk – remuneration arrangements should ensure reputational and other
risks from excessive rewards, and behavioural risks that can arise from
target-based incentive plans, are identified and mitigated.
Consideration of how this is addressed for Computacenter
• Executive Director remuneration arrangements are designed to support
the financial objectives and Strategic Priorities of the Company,
as publicly stated and communicated to employees.
• The Board is committed to effective engagement with employees and
has appointed a Designated Non-Executive Director to be responsible
for feeding back the views of the workforce to the Board.
• The Committee actively engaged with shareholders as part of the
development of the new Policy.
• The remuneration framework at Computacenter is simple and
comprised of three main elements: i) fixed pay (base salary, benefits
and pension); ii) annual bonus; and iii) Performance Share Plan awards.
• The performance measures used to determine variable pay awards are
drawn from the Company’s business plans.
• The operation including: form of awards, time horizons, and
performance measures, is designed in such a way to avoid complexity
and is fully disclosed in the Directors’ Remuneration Report.
Initial incentive awards are capped and are not considered excessive.
•
• The Committee follows a robust process when setting performance
targets, taking into account a number of reference points, to ensure
that targets are sufficiently stretching and balanced so as not to distort
individual behaviours.
In line with the Code, when determining variable pay outcomes the
Committee will look at performance in the round, including from a risk
perspective, to ensure that pay-outs are reflective of overall
performance and the shareholder experience.
•
Predictability – the range of possible values of rewards to individual
Directors and any other limits or discretions should be identified and
explained at the time of approving the Policy.
Proportionality – the link between individual awards, the delivery of
strategy and the long-term performance of the company should be clear.
Outcomes should not reward poor performance.
Alignment to culture – incentive schemes should drive behaviours
consistent with Company purpose, values and strategy.
• Part of the annual bonus is subject to deferral, and PSP awards are
subject to a holding period following vesting. All variable pay awards are
subject to malus and clawback.
• The range of possible values are set out in the performance scenario
charts in the Remuneration Policy.
• Limits and ability to exercise discretion are also set out in the Policy.
• A balanced scorecard of different performance measures linked to
company strategy are used as part of the annual bonus and PSP,
measuring performance over both the short and long term.
• The performance targets are considered stretching and the Committee
has the flexibility to exercise discretion to avoid rewards for poor
performance.
• The variable incentive schemes, including quantum, time horizons,
form of award and performance measures are all designed with the
Company’s purpose, values and strategy in mind.
• The pay arrangements for the Executive Directors are aligned with those
of the broader workforce and senior team.
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Computacenter’s Remuneration Policy report
This section is the Group’s Remuneration Policy (the ‘Policy’), as reviewed and approved by the Board. As required, it complies with Schedule 8
to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended).
It is intended that the Policy will be put before shareholders for approval by way of a binding vote at the Company’s AGM on 14 May 2020.
If approved by shareholders, the Policy will have effect immediately thereafter. Prior to that date, the Company’s existing Remuneration Policy
will continue to apply.
Summary of decision-making process and changes to policy
The Policy has been updated to reflect the new UK Corporate Governance Code, as well as recent developments in best practice. In determining
the new Remuneration Policy, the Committee followed a robust process which included discussions on the content of the Policy at four
Remuneration Committee meetings. The Committee considered input from Management and our independent advisors, and sought the views of
Computacenter’s major shareholders. The Committee also assessed the Policy against the principles of clarity, simplicity, risk management,
predictability, proportionality and alignment to culture. Further information on the Committee’s decision-making process is set out in the Annual
Remuneration Report. A summary of the differences between the Company’s current Directors’ Remuneration Policy and the proposed Policy is
set out below.
• Retirement benefits – Our practice has always been that the pension benefits for Executive Directors be aligned with those of the broader
workforce. In order to align the Policy with our practice, the maximum potential pension contribution in the Policy for Executive Directors will be
reduced to be in line with that available to the wider workforce.
• Post-cessation of employment shareholding policy – In line with the new UK Corporate Governance Code, a post-cessation shareholding policy
has been introduced for Executive Directors.
• Malus and clawback provisions – Malus and clawback provisions have been extended under both the annual bonus and the Performance
Share Plan.
• Other minor changes to the Policy have been made to clarify its intentions and to align with updated investor guidance and market practice.
Policy table
Base salary
Purpose and link to strategy
Operation
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 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 2020 financial year are:
Group Chief Executive Officer: £562,000
Maximum opportunity
Performance measures
Group Finance Director: £364,000
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 are taken into consideration when deciding salary levels.
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continued
Annual bonus
Purpose and link to strategy
Operation
Maximum opportunity
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.
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 in respect of dividends paid over the period from
grant of the award to the date on which the Executive Director is first able to acquire shares pursuant to the award,
calculated on such basis as the Committee determines.
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 in appropriate circumstances, including
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 in respect of any financial year is 150 per cent of base salary.
In respect of 2020, 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.
Performance measures
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.
Financial measures will normally be used to calculate at least a majority of bonus achievement and the remainder
of the annual bonus will normally be attributed to non-financial measures.
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 overall bonus award which is payable for threshold performance will not normally exceed
30 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 in respect of dividends paid over the period from the end of
the performance period to the date on which the Executive Director is first able to acquire shares pursuant to the
award, calculated on such basis as the Committee determines.
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 in appropriate
circumstances, including if it considers that the outcome would otherwise not be a fair and complete reflection
of performance over the plan cycle.
Awards are subject to malus and clawback provisions, as set out in the notes to this table.
Performance Share Plan (PSP)
Purpose and link to strategy
Operation
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Maximum opportunity
The maximum opportunity under the plan in respect of any financial year 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 respect of 2020 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 in the Annual Remuneration Report for the relevant year.
Retirement benefits
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Other 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.
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.
The maximum pension contribution or allowance for Executive Directors will be in line with that available to UK
employees or to participants in the pension plan relevant to the country where they are employed, if different. For UK
employees this is currently 5.0 per cent of salary.
N/A
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
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,
relocation benefits may be provided, which may include a cash payment 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 any all-employee share plan operated by the Company, is limited to the
maximum award levels permitted by the plan rules from time to time and, in the case of any UK tax qualifying plan,
the limits prescribed by the relevant tax legislation.
N/A
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GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Directors’ Remuneration Report
continued
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 may be reviewed annually. 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 and may also be paid to reflect additional time commitments and responsibilities. Fees are
normally paid in cash.
Travel expenses, hotel costs and other benefits related to the performance of the role, including any tax due, are also
paid where necessary.
2020 fee levels for the incumbents are as follows:
Non-Executive Chairman: £210,000
Non-Executive Director base fee: £55,000
Founder Non-Executive Director base fee: £50,000
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.
N/A
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, and shares subject to deferred bonus awards
and PSP awards which are in the holding period but which are no longer subject to performance conditions, will be
included on a net of tax basis, for the purposes of calculating shareholdings, as will shares held by an Executive’s
spouse or dependents.
Post-cessation of employment, Executive Directors are also expected to remain aligned with the interests of
shareholders for an extended period after leaving the Company, other than in exceptional circumstances. Details of the
application of this policy are set out in the Annual Report on Remuneration.
Maximum opportunity
Performance measures
Share ownership guidelines
Purpose and link to strategy
Operation
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 deferred bonus awards and PSP awards which vest (net of tax) until such time as this level of holding is met.
N/A
94
Malus and clawback
Malus and clawback provisions apply to the
annual bonus and Performance Share Plan.
For awards paid or granted in respect of
2020 onwards, the provisions are set
out below.
The Committee reviews potential
performance criteria and targets for the
annual bonus and PSP annually, resulting in
the performance criteria structure outlined
in the Policy. The measures for 2020 are
outlined on page 108.
Malus and/or clawback may apply to annual
bonus awards, including deferred awards for
a period of two years and to Performance
Share Plan awards in the period up to the
fifth anniversary of grant, in the event of:
• a material misstatement of results;
• gross or serious misconduct;
• an error or misstatement which has
resulted in a material overpayment to
the participants;
• a significant failure of risk management
within the Company or any Group Member;
• significant reputational damage to the
Company or any Group Member;
• the participant leaving in circumstances
which, had all the facts been known, would
have resulted in the award lapsing; or
• any other circumstances that the
Committee, in its discretion, considers to be
similar in nature or effect to those above.
The malus and clawback provisions that
apply to awards prior to the dates set out
above are in line with the relevant policy in
force at the time the awards were made.
Explanation of performance measures
The performance measures in respect of
variable remuneration outlined within the
Policy are based on a combination of
financial and strategic measures, with an
emphasis on the financial performance of
the Group, and therefore to the value that
the business delivers to its shareholders.
The Company is committed to long-term
earnings per share growth through
increased profitability and prudent use of
cash generation, with a services-led
strategy. This commitment is reflected in the
measures used to motivate and incentivise
our management team through the annual
bonus and PSP.
Performance conditions applying to any
award may be amended or substituted by
the Committee if an event occurs which
causes the Committee to determine an
amended or substituted performance
condition would be more appropriate and
not materially less difficult to satisfy.
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. First, that it allows the Group to
retain the level of talent necessary to
implement the strategy as set by the CEO and
Board. Second, 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
or divisional profit and other relevant metrics.
Whilst only Executive Directors and senior
executives participate in the PSP, other
employees can participate in the Company’s
all-employee share schemes, which are
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 toward 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 meetings the CEO and Chief People
Officer conduct with staff representative
bodies in each of our major geographies.
The Remuneration Committee Chair, Ros
Rivaz, was appointed as the Designated
Non-Executive Director on 9 November 2017
to facilitate engagement with the wider
workforce, to assist the Board in
understanding the views of Computacenter’s
employees. During 2019, this involved
attending Works Council meetings and other
employee events, and feeding back the views
raised by employees to the Board. Whilst
Executive pay has not been a specific topic
in these discussions, these events have
provided a valuable opportunity for
employees to share their views freely on a
range of topics and Ros welcomed questions
on a broad range of topics including
Executive remuneration and how the
Company measures success. Further
information on the role and the activities
of the Designated Non-Executive Director
is on page 26.
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GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Directors’ Remuneration Report
continued
Statement of consideration of
shareholders’ views
The Remuneration Committee takes very
seriously the view of shareholders when
making any changes to Executive
remuneration arrangements. It continues
to welcome shareholders’ views on
Executive remuneration.
The Group consulted with its major
shareholders during the second half of 2019
on the proposed Policy and welcomed the
feedback received.
Approach to recruitment remuneration
When hiring a new Executive Director or
promoting to the Board from within the
Group, the Committee will offer a package
that is sufficient to attract, retain and
motivate the right talent, whilst at all times
aiming to pay no more than is necessary.
Each component will be subject to the limits
as specified in the Policy table above.
In determining an appropriate remuneration
package, the Committee will take into
consideration all relevant factors including,
but not limited to, the candidate’s location,
skills and experience, external market
influences and internal pay relativities.
Salary would be provided at such a level as
required to attract the most appropriate
candidate and may be set initially at below
market level, on the basis that it may
progress towards the market level once
expertise and performance have been
proven and sustained.
In order to facilitate recruitment, the
Committee may offer additional cash and/or
share-based elements in respect of any
incentive or deferred pay awards forfeited
by an Executive Director as a result of
terminating prior employment to join the
Company, including utilising Listing Rule 9.4.2
if necessary. The Committee would seek to
ensure, where possible, that these awards
would be consistent with awards forfeited in
terms of form of award, time horizons, value
and performance conditions. For an internal
Executive Director appointment, any variable
pay element awarded in respect of the prior
role may be allowed to pay out according to
its terms. In addition, any other ongoing
remuneration obligations existing prior to
appointment may continue. For external and
internal appointments, the Committee may
agree that certain incidental expenses will
be met as appropriate.
Where a newly appointed Executive Director
is required to relocate, the Group may pay
the costs of relocation including housing,
travel, taxation advice, shipping costs and
education for dependents. Additionally, any
Executive Director based outside of the UK
will be eligible to participate in insurance and
other benefits, in line with local practice.
Any awards made on recruitment will be
subject to such malus and clawback
provisions that the Remuneration Committee
deems to be appropriate.
Service contracts
The Directors’ service contracts and letters
of appointment are available for inspection
at our registered office during normal hours
of business and will also be available at our
AGM to be held on 14 May 2020. Details of the
duration of the Directors’ service contracts
are set out on page 106.
Executive Directors
The current Executive Directors each have
a service contract with the Company which
provides for a notice period of up to 12
months from either party. It is intended that
this policy would also apply to new
appointments of Executive Directors.
With the consent of the Board, where an
appointment can enhance an individual
Executive Director’s experience and add
value to the Company, Executive Directors
are able to accept non-executive
appointments outside the Company.
Retention of any fees received by the
Executive Director is at the discretion
of the Committee.
Non-Executive Directors
Non-Executive Directors are appointed
pursuant to a letter of appointment for an
initial period of three years, which may be
subject to renewal thereafter. Appointments
may be terminated by either the Company or
the Non-Executive Director giving three
months’ notice. Save in respect of retirement
by rotation, a Non-Executive Director being
removed from office may receive an amount
equal to the fee during any remaining
notice period.
Loss of office payments
We are committed to ensuring a consistent
approach, so that we do not pay more than is
necessary in circumstances leading to loss
of office. In the event of an early termination
of a contract, the policy is to seek to
minimise any liability. If an Executive
Director’s employment is terminated, any
compensation arrangements will not
normally be beyond those set out in their
service contract and the rules of the relevant
incentive plans.
When managing such situations, the
Committee takes a range of factors into
account, including contractual obligations,
shareholder interests, organisational stability
and the need to ensure an effective handover.
In the normal course of events, an Executive
Director will work their contractual notice
period and receive usual salary payments
and benefits during this time. In the event
of a termination where Computacenter
requests that the Executive Director ceases
work immediately, a payment in lieu of notice
may be made that is equal to fixed pay,
pension entitlements and other benefits.
Payments may be made on a phased basis.
Alternatively, an Executive Director may be
placed on garden leave for the duration of
some or all of their notice period. Where an
Executive Director leaves during a financial
year, an annual bonus may be payable
with respect to the period of the financial
year worked, although it will be pro-rated for
time and normally paid at the normal
payment date(s).
96
In the event of a takeover or winding-up of
Computacenter which is not part of an
internal reorganisation of the Group, awards
may also vest to the extent determined by
the Committee taking into account the
period that has elapsed since the awards
were granted, and the performance achieved
against any applicable performance targets.
Early vesting may also be permitted in the
event of a demerger or other transaction
which, in the Committee’s opinion, would
affect the value of awards. Share plan
awards may be adjusted in the event of any
variation of the Company’s share capital or
any demerger, delisting, special dividend or
other event that may affect the Company’s
share price.
Where the Executive Director participates in
one or more of the Company’s all-employee
share schemes, awards may vest upon
termination or in the event of a takeover or
other relevant event, in accordance with
applicable scheme rules.
As is consistent with market practice,
we may pay a contribution towards an
Executive Director’s legal fees for entering
into a statutory agreement and may pay a
contribution towards fees for outplacement
services or repatriation, as part of
a negotiated settlement.
There are no agreements currently in place
between the Company and any of its Directors
providing for additional compensation for
loss of office or employment, other than as
disclosed in this report.
In any event, the Committee will not sanction
rewards for failure and will seek to mitigate
any termination payments where possible.
Exceptions to the Policy
The Policy, as set out in this report,
comprises the full suite of possible
components for the remuneration of
Directors at Computacenter.
Notwithstanding the restrictions laid out
in the Policy, where the Company has made
a commitment to a Director which:
• was in accordance with the prevailing
remuneration policy at the time that the
commitment was made; and/or
• was made before the Director became
a Director and, in the opinion of the
Committee, the commitment was not in
consideration for the individual becoming
a Director of Computacenter; and/or
• was made before 15 May 2014 (the date on
which the Company’s first binding Directors’
Remuneration Policy took effect), the
Company will continue to give effect to it,
even if it is inconsistent with the
Remuneration Policy of the Company
which is in effect at that time.
Earlier Remuneration Policies of the Company
will continue to apply in relation to awards
granted under any company PSP and options
granted under the Company’s all-employee
Sharesave Scheme, prior to the approval of
the Policy, as these may be granted under
one policy and vest or be exercised under
a later one. Details of these previous
commitments are included within previous
Computacenter Annual Reports which are
available at investors.computacenter.com
The Committee may make minor
amendments to the Policy set out above for
regulatory, exchange control, tax, or
administrative purposes, or to take account
of a change in legislation without obtaining
shareholder approval for such amendments.
In the event of termination for cause (e.g.
gross misconduct or negligence), neither
notice nor a payment in lieu of notice would
be given and the Executive Director would
cease to perform services immediately.
Any share-based entitlements granted to an
Executive Director under our share plans will
be determined based on the relevant plan
rules. The default treatment is that any
unvested awards lapse on cessation of
employment during the relevant
performance or deferral period. However,
in certain prescribed circumstances, such
as ill-health, injury, disability, redundancy,
retirement (for all Deferred Bonus Plan (DBP)
awards and for PSP awards made prior to
March 2019), sale of the employing company
or business outside the Group or any other
circumstances at the discretion of the
Committee, ‘good leaver’ status may be
applied. For good leavers, awards will
normally vest on their normal vesting date,
and for awards made under the PSP, be
subject to the satisfaction of the relevant
performance conditions at that time and
reduced pro-rata to reflect the proportion
of the performance period actually served.
The Committee may allow awards to vest at
the time of cessation on the basis outlined
above. PSP awards will typically remain
subject to the holding period and will be
released at the end of it, although the
Committee has discretion to release the
awards at the date of cessation or at some
other time after cessation but before the
end of the holding period.
PSP awards which are subject only to the
holding period following vesting will lapse in
the event of cessation of employment for
cause (e.g. gross misconduct or negligence).
In the event of the death of an Executive
Director, awards vest at cessation with
no performance assessment. In such
circumstances, unless the Committee
determines otherwise, awards will be
reduced pro-rata to reflect the proportion
of the performance period actually served.
97
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Directors’ Remuneration Report
continued
CEO – Mike Norris
Total remuneration (£)
FD – Tony Conophy
Total remuneration (£)
£’000
3,000
2,500
2,000
1,500
1,000
500
0
616
100%
Minimum
2,442
46%
29%
25%
1,529
37%
23%
40%
3,004
19%
37%
23%
20%
£’000
3,000
2,500
2,000
1,500
1,000
500
0
In line with
expectations
Maximum
Maximum and
Share Price
Growth (50%)
396
100%
Minimum
897
36%
20%
44%
In line with
expectations
1,397
46%
26%
28%
Maximum
1,716
19%
37%
21%
23%
Maximum and
Share Price
Growth (50%)
Total fixed
Annual Bonus
PSP
Share Price Growth
Total fixed
Annual Bonus
PSP
Share Price Growth
The charts above show the level of remuneration that is projected to be received by the Directors above in accordance with the Policy in 2020. The
charts above show four outcome scenarios: (a) Minimum receivable pay; (b) Remuneration for performance in line with expectations; (c) Maximum
remuneration achievable; and (d) Maximum remuneration achievable with, in the case of the PSP, the additional impact of share price appreciation
of 50 per cent over the three-year performance period.
In developing the scenarios, the following assumptions have been made:
Minimum pay receivable
• Only total fixed pay is received (i.e. base salary, benefits and pension), and there is no vesting of any of Computacenter’s variable pay schemes;
• Salary is the salary that applies in 2020;
• Benefits are those projected to be received by the Executive Director in 2020; and
• Pension is measured by applying a cash in lieu rate against salary in 2020.
In line with expectations
This is based on what an Executive Director would receive if performance was in line with the Company’s expectations, which would result in the
following scenario:
• Fixed pay is received;
• Annual bonus pays out at 50 per cent of total potential bonus award for performance in line with expectations; and
• PSP award pays out at 50 per cent of maximum.
Maximum
This is based on what an Executive Director would receive assuming that the variable pay awards set out above pay out in full (i.e. a bonus of
125 per cent of base salary and a PSP award with a face value of 200 per cent of base salary for the CEO; and a bonus of 100 per cent of base salary
and a PSP award with a face value of 175 per cent of base salary for the FD).
Maximum with additional share price appreciation impact
This is based on the same assumptions as the ‘Maximum’ scenario, with the additional impact of share price appreciation of 50 per cent over the
three-year performance period applied to the PSP awards.
The impact of share price appreciation has not been taken into account in any of the other three scenarios.
98
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 are 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, are provided below.
Current members
1. Ros Rivaz
2. Peter Ryan
3. Rene Haas1
4. Ljiljana Mitic2
5. Minnow Powell
Former members
6. Greg Lock3
7. Regine Stachelhaus4
Role
Senior Independent Director
Non-Executive Chairman of the Board (from 16 May 2019)
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Chairman of the Board (until 16 May 2019)
Non-Executive Director (until 16 May 2019)
1.
2.
3.
4.
Rene Haas was appointed to the Board and the Committee on 20 August 2019.
Ljiljana Mitic was appointed to the Board and the Committee on 16 May 2019.
Greg Lock stepped down as Chairman and a Non-Executive Director of the Company on 16 May 2019.
Regine Stachelhaus stepped down as a Non-Executive Director of the Company on 16 May 2019.
Attendance record
6/6
6/6
2/2
3/3
6/6
3/3
3/3
The CEO attends meetings by invitation, as does the Chief People Officer. The Company Secretary is the secretary to the Committee.
The principal advisor to the Committee is Deloitte LLP (Deloitte), which was 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 2019 were £68,900 (2018: £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.
99
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Directors’ Remuneration Report
continued
A
Single Figure of Total Remuneration
The total amount paid by the Company to each of the Directors, in respect of the financial years ended 31 December 2019 and 2018, is set out in
the table below:
Executive
Mike Norris
Tony Conophy
Non-Executive
Peter Ryan6
Rene Haas7
Philip Hulme
Greg Lock8
Ljiljana Mitic9
Peter Ogden
Minnow Powell
Ros Rivaz10
Regine Stachelhaus11
Philip Yea12
Total (£’000)
Salary or fees
£’000
Benefits
£’000
Annual bonus
£’000
PSP awards
£’000
Pension
£’000
Total
£’000
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
550.8
357.0
540.0
350.0
29.4¹
16.72
36.5¹
16.72
150.3
20.2
50.0
73.5
34.5
50.0
70.4
70.4
18.8
–
1,445.9
44.2
–
50.0
195.0
–
50.0
66.0
61.0
50.0
22.0
1,428.2
–
–
–
–
–
–
–
–
–
–
46.1
–
–
–
–
–
–
–
–
–
–
53.2
636.9
328.4
–
–
–
–
–
–
–
–
–
–
965.3
557.8
306.7
–
–
–
–
–
–
–
–
–
–
864.5
1,672.13
947.53
923.74
525.34
–
–
–
–
–
–
–
–
–
–
2,619.6
–
–
–
–
–
–
–
–
–
–
1,449.0
24.2
15.7
–
–
–
–
–
–
–
–
–
–
39.9
23.7
15.45
2,913.4
1,665.3
2,081.7
1,214.1
–
–
–
–
–
–
–
–
–
–
39.1
150.3
20.2
50.0
73.5
34.5
50.0
70.4
70.4
18.8
–
5,116.8
44.2
–
50.0
195.0
–
50.0
66.0
61.0
50.0
22.0
3,834.0
1.
2.
3.
4.
5.
The benefits figure represents the taxable benefit arising from the provision of a driver service and other travel-related benefits for Mike Norris.
The benefits figure represents the taxable benefit arising from cash allowances paid in lieu of the provision of company car and other travel-related benefits for Tony Conophy. The benefit figure for 2018 (nil in the
2018 report) has been restated on this basis having previously been excluded. This change has also been reflected in the 2018 total figure.
This relates to the 2017 PSP awards which will be paid out in March 2020 and had a performance period of 1 January 2017 to 31 December 2019. The relevant performance criteria were partially achieved and
therefore 80.78 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 2019 being £14.52. The PSP
value attributable to share price growth since the awards were granted is £824,000 and £467,000 for the CEO and FD respectively. The Committee did not exercise its discretion to change the value of awards vesting
based on the share price appreciation or depreciation during the period.
The value of the 2016 PSP awards have been updated to reflect the actual share price at vesting on 21 March 2019 of £11.89.
The pension figure for Tony Conophy in the 2018 Annual Report, £41,500, included pension contributions in respect of 2017 that were paid during 2018, and has been restated to reflect the pension contributions
in respect of 2018.
Peter Ryan was appointed to the Board on 13 February 2018 and was further appointed to the role of Chairman on 16 May 2019.
Rene Haas was appointed to the Board on 20 August 2019.
Greg Lock stepped down from the Board on 16 May 2019.
Ljiljana Mitic was appointed to the Board on 16 May 2019.
6.
7.
8.
9.
10. Ros Rivaz was appointed to the role of Senior Independent Director and Chair of the Remuneration Committee on 24 April 2018.
11. Regine Stachelhaus stepped down from the Board on 16 May 2019 and was paid in euros prior to that date.
12. Philip Yea stepped down from the Board on 24 April 2018.
Remuneration paid in 2019: Executive Directors
2019 base salary
The annual salaries of the Executive Directors were increased by 2.0 per cent in 2019 to £550,800 for the CEO and £357,000 for the FD.
2019 annual bonus
The maximum bonus opportunity in 2019 was 125 per cent of base salary for the CEO and 100 per cent of base salary for the FD. Half 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 2019 annual bonus opportunity was driven by the financial performance of the business and individual targets for each Director. For the year
ended 31 December 2019, 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 Priorities,
integration of acquisitions and certain people-related objectives, including progress on diversity and inclusion.
100
A
The table below sets out details of the annual bonus criteria which applied for the Executive Directors for 2019 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%
125.4
10%
247.1
5%
107.7
5%
131.3
20%
260.8
7.5%
125.6
7.5%
137.1
35%
274.6
10%
143.6
10%
144.0
50%
274.6
10%
143.6
10%
(324.5)
(322.0)
(319.5)
(319.5)
5%
7.5%
10%
10%
148.51
50%
280.5
10%
146.9
10%
(324.5)
5%
344.3
178.4
68.8
35.7
68.8
35.7
34.4
17.9
20%
100%
0%
25.0%
7.5%
50%
15%
80.0%
20%
100%
17.5%
17%
120.4
60.7
92.5%
92%
636.9
328.4
1.
Profit before tax represents Group adjusted1 profit before tax on a currency adjusted basis, excluding both the results of the entities acquired during the year and the 2019 net adjusted1 profit before tax impact of
IFRS 16, under which the targets were not formulated.
The personal objectives for the Executive Directors are subject to a profit performance underpin and are related to the following:
Objectives
CEO
Build and integrate the new Management team.
Increase the competitiveness of our service offerings.
Integrate, maintain the value and develop our acquisition of FusionStorm.
Increase gender and international diversity of the senior team.
Continue the Board’s strategy education programme.
Progress in the year
In late 2018 and early 2019 there were a number of promotions and
external hires made to the Executive team. The team is now well established
and working well together to resolve Company challenges and deliver
on opportunities.
Services revenues and the Contract Base grew in 2019. The percentage of
work delivered by lower cost locations increased, assisting with a reduction
in cost to serve. In addition, there was a promising take up of new service
offering such as Windows 10 Evergreen and TechCenters during the year.
The integration of FusionStorm progressed well in 2019, with key personnel
retained and the brand change completed successfully. The second half of
the year produced strong results after a disappointing first half. Investment
in offices in New York and Boston as well as the new Integration Center in
California, scheduled for Q1 2020, builds out our US footprint and capability.
Two women were appointed to the Group Executive team in 2019, which was
previously all male.
In addition, our Group international diversity and gender diversity figures
improved for the Executive Team’s direct reports.
The Board’s strategy education continued apace throughout 2019 with key
topics covered by the Executive team at each Board meeting to enable
better insight and input to Group operations and strategy.
101
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Directors’ Remuneration Report
continued
Objectives
FD
Continue to develop the long-term plan of reducing working capital
especially in the Services business by improving systems and processes
as well as developing the controls for our acquired US business.
Ensure the appropriate level of governance for the bid management
process to control without disempowering the front end of the business.
Drive SG&A efficiency.
Integrate the newly acquired companies in the US and the Netherlands
into the management reporting systems of Computacenter.
Continue to expand the leasing operations across our geographies.
Progress in the year
In Europe, performance is good and predictable and in the US working
capital cycles and our working capital position are now well understood and
better controlled. The cash position for 2019 is a good reflection of this.
The new comprehensive governance system implemented in 2018 to
improve our bid management and sales processes has enabled us to serve
our customers better. Its success is demonstrated by our 2018 difficult
contracts that have substantially improved during the year and we have had
no significant new difficult contracts in 2019. At the same time we have seen
growth and new contracts won.
Our focus has been to ensure that we retain more of our gross profit as
operating profit. SG&A as a percentage of gross profit has reduced during
2019 (excluding acquisitions).
Work has been undertaken in both the USA and the Netherlands during 2019
to ensure that the Group has good reporting and operational oversight of
our acquired businesses. In order to fully integrate, it is necessary to
underpin this activity with deployment of our core systems. The Netherlands
successfully went live with ERP in November 2019 and the US is on track to go
live in Q1 2021.
The team has been expanded successfully in the UK, Germany and France
with a shared approach. Progress within the past 12 months has been better
than expected with good business growth.
PSP
The PSP awards granted to Executive Directors with a performance period ending on 31 December 2019 paid out at 80.78 per cent, pursuant to the
2017 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 in between these thresholds.
Adjusted1 diluted
EPS growth CAGR
12.5%
8.33%
5%
The growth in adjusted1 diluted EPS during the period 1 January 2017 to 31 December 2019 was 19.65 per cent per annum. This resulted in 100 per
cent of this element vesting. The EPS number used for the base year of this award (i.e. EPS in 2016) is consistent with the EPS number that was
used to calculate the vesting of the 2014–2016 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)
*
Vesting occurs on a straight-line basis in between these thresholds.
The Services revenue growth was 4.37 per cent, resulting in 35.92 per cent of this element vesting.
Services revenue
growth CAGR
7.5%
5.5%
3.5%
102
Remuneration awards granted in 2019: Executive Directors
A
Share scheme interests awarded during the year
The table below details awards made during 2019 under the PSP scheme. The performance conditions for these awards are set out in more detail
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
PSP – nil
cost option
90,604
£1,080,0001
PSP – nil
cost option
51,384
£612,4971
CEO
FD
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
Three financial years
from 1 January 2019
Three financial years
from 1 January 2019
1.
This is based on the average mid-market share price of Computacenter plc on the three immediately preceding business days from grant, being £11.92.
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
*
Vesting occurs on a straight-line basis in between these thresholds.
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 2019 under the Deferred Bonus Plan (DBP) scheme.
CEO
FD
Scheme/type of award
Number of
shares
Face value
DBP2 – Conditional Share
23,396
£278,8801
DBP2 – Conditional Share
12,865
£153,3511
Vesting date
50% – 21 March 2020
50% – 21 March 2021
50% – 21 March 2020
50% – 21 March 2021
This is based on the average mid-market share price of Computacenter plc on the three immediately preceding business days from grant, being £11.92.
1.
2. These are not subject to any other performance conditions.
103
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Directors’ Remuneration Report
continued
A
Executive Director outstanding Share Awards as at 31 December 2019
Directors’ interests in Share Schemes (audited)
Mike Norris
Tony Conophy
Schemes
Sharesave*
Sharesave*
PSP
PSP
PSP
PSP
DBP
DBP
Sharesave*
PSP
PSP
PSP
PSP
DBP
DBP
Note
1
1
2
3
4
5
6
6
1
2
3
4
5
6
6
Exercise/
share price
524.0p
1011.0p
Nil
Nil
Nil
Nil
Nil
Nil
1054.0p
Nil
Nil
Nil
Nil
Nil
Nil
Exercise period
01/12/19 – 31/05/20
01/12/24 – 31/05/25
22/03/19 – 21/03/26
22/03/20 – 21/03/27
22/03/23 – 21/03/28
21/03/24 – 20/03/29
21/03/19 – 21/03/20
21/03/20 – 21/03/21
01/12/23 – 31/05/24
22/03/19 – 21/03/26
22/03/20 – 21/03/27
22/03/23 – 21/03/28
21/03/24 – 20/03/29
21/03/19 – 21/03/20
21/03/20 – 21/03/21
At
1 January
2019
5,782
–
118,305
142,566
88,782
–
25,622
–
2,846
67,286
80,788
50,310
–
13,059
–
Granted
during
the year
–
2,967
–
–
–
90,604
–
23,396
–
–
–
–
51,384
–
12,865
Exercised
during
the year
–
–
77,703
–
–
–
12,811
–
–
44,193
–
–
–
6,529
–
Lapsed
during
the year
–
–
40,602
–
–
–
–
–
–
23,093
–
–
–
–
–
At
31 December
2019
5,782
2,967
–
142,566
88,782
90,604
12,811
23,396
2,846
–
80,788
50,310
51,384
6,530
12,865
1.
2.
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 23 October
2019, the Company granted 2,967 options to acquire ordinary shares pursuant to the Rules of the Computacenter 2019 Sharesave Plan at an Option Price of £10.11 to Mike Norris.
Issued under the terms of the Computacenter Performance Share Plan 2005, as amended at the AGM held on 19 May 2015. These awards vested during the year at 65.68 per cent, and accordingly 34.32 per cent of the
shares under award lapsed.
(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.
(b) In respect of 30 per cent of the total award: the award will start to vest if the compound annual Services revenue growth rate over the Performance Period equals 3.5 per cent. If the compound annual Services
revenue 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 revenue 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.
3.
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.
(b) In respect of 30 per cent of the total award: the award will start to vest if the compound annual Services revenue growth rate over the Performance Period equals 3.5 per cent. If the compound annual Services
revenue 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 revenue 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.
4.
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.
(b) In respect of 30 per cent of the total award: the award will start to vest if the compound annual Services revenue growth rate over the Performance Period equals 3.5 per cent. If the compound annual Services
revenue 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 revenue 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.
5.
Any awards vesting are subject to a two-year holding period following the end of the performance period.
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.
(b) In respect of 30 per cent of the total award: the award will start to vest if the compound annual Services revenue growth rate over the Performance Period equals 3.5 per cent. If the compound annual Services
revenue 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 revenue 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.
Any awards vesting are subject to a two-year holding period following the end of the performance period.
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
21/03/2019
21/03/2019
Scheme
PSP
PSP
Number of
shares
77,703
44,193
Exercise
price
Nil
Nil
Market price
at exercise
£11.89
£11.89
Notional
gain made
£923,699
£525,347
The closing market price of ordinary shares at 31 December 2019 (being the last trading day of 2019) was £17.73 (31 December 2018: £10.06).
The highest price during the year was £18.29 and the lowest was £9.65.
104
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 also expected
that the Executive Director will achieve these levels within five years of appointment. For the purposes of these requirements, deferred bonuses,
shares subjected to the holding period and 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.
In addition, when an Executive Director steps down from the Board they will be expected to retain an interest in Computacenter shares based on
their in-employment share ownership guideline (or actual shareholding at the date of stepping down from the Board if lower) for a period of two
years. This policy will be supported by the use of nominee accounts.
The Committee has the discretion to disapply or reduce this requirement in extenuating circumstances, for example in compassionate
circumstances.
Both the CEO and the FD 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 2019, is as follows:
Current Directors
Mike Norris
Tony Conophy
Peter Ryan
Rene Haas
Philip Hulme
Ljiljana Mitic
Peter Ogden
Minnow Powell
Ros Rivaz
Greg Lock
Regine Stachelhaus
Number of shares in
the Company as at
31 December 2019
1,145,630
1,851,961
900
–
9,411,695
–
18,699,389
1,340
1,382
700,0005
–5
Percentage of
requirement
achieved
1,844%3
4,599%3
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Interests in shares
SAYE
8,7491,4
2,8461
–
–
–
–
–
–
–
–
–
PSP
321,9522
182,4822
–
–
–
–
–
–
–
–
–
DBP
36,2071
19,3951
–
–
–
–
–
–
–
–
–
Total
1,512,538
2,056,684
900
–
9,411,695
–
18,699,389
1,340
1,382
700,000
–
Note: There has been no grant of, or trading in, shares of the Company between 1 January 2020 and 11 March 2020.
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 104.
Based on the Company’s closing share price as at 31 December 2019, being £17.73.
On 23 October 2019, the Company granted 2,967 options to acquire ordinary shares pursuant to the Rules of the Computacenter 2019 Sharesave Plan at an Option Price of £10.11 to Mike Norris.
1.
2.
3.
4.
5. Represents shareholding as at 16 May 2019, at which point Greg Lock and Regine Stachelhaus ceased to be Directors.
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 5.0 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, the
Company intends 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 were no payments made to past Directors and no payments made for loss of office during the period.
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.
105
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Directors’ Remuneration Report
continued
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 2019, neither Executive Director held any outside fee-paying directorships.
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, and 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 14 May 2020.
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
Peter Ryan
Rene Haas
Philip Hulme
Ljiljana Mitic
Peter Ogden
Minnow Powell
Ros Rivaz
Date of latest letter of
appointment
16 May 2019
20 August 2019
4 May 2019
16 May 2019
4 May 2019
14 December 2017
11 November 2019
Expiry date
Close of the Company’s Annual General Meeting in 2022
Close of the Company’s Annual General Meeting in 2022
Close of the Company’s Annual General Meeting in 2022
Close of the Company’s Annual General Meeting in 2022
Close of the Company’s Annual General Meeting in 2022
14 December 2020
Close of the Company’s Annual General Meeting in 2022
Notice period
3 months
3 months
3 months
3 months
3 months
3 months
3 months
In 2020, the Chairman will be paid a single consolidated fee of £210,000, an increase of 2.0 per cent on 2019, a rise consistent with average
increases made within the wider UK workforce. The Non-Executive Directors are paid a basic fee, plus additional fees for Chairmanship of Board
Committees or Senior Independent Director duties.
Non-Executive Directors’ fees were last benchmarked in December 2018. No changes are proposed to the Non-Executive Directors’ annual fees,
which are 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
Performance of the Company
Total shareholder return performance
(Computacenter versus FTSE Software and Computer Services sector)
2019 Annual
fees (£)
55,000
50,000
18,000
10,000
8,000
2020 Annual
fees (£)
55,000
50,000
18,000
10,000
8,000
1,000
800
600
400
200
0
Dec
2009
Dec
2010
Dec
2011
Dec
2012
Dec
2013
Dec
2014
Dec
2015
Dec
2016
Dec
2017
Dec
2018
Dec
2019
Computacenter
FTSE All Share – Software and Computer Services
106
In this graph, TSR performance shows the value, in December 2019, of £100 invested in the Company’s shares in December 2009, assuming that all
dividends received between December 2009 and December 2019 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 ten 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
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
1,910,675
1,878,675 1,085,300
937,300 1,506,300 2,763,900
1,807,600 2,291,500
2,081,700 2,913,398
98.5%
63.7%
26.8%
61.2%
69.39%
84.54%
49.12%
92.35%
82.63%
467,875
350,350
161,000
367,000
451,035
803,200
319,280
606,047
557,753
100%
100%
58.5%
0%
35.34%
71.5%
85.13%
68.01%
65.68%
92.5%
636,863
80.78%
938,201
997,351
385,355
–
478,679 1,384,500
891,800
1,101,400
923,699
1,672,109
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 2018 and 31 December 2019.
CEO
Computacenter UK-based employees
Salary
2.0%
1.8%
Benefits
(19.45)%
(6.35)%
Annual bonus
14.18%
22.0%
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. Note that this group excludes a number of UK employees whose pay review is processed outside of the
normal annual pay award cycle.
CEO pay ratio
The CEO pay ratio table shows the ratio of pay between the CEO of Computacenter and Computacenter’s UK employees. The ratio compares the
total remuneration of the CEO against the total remuneration of the median UK employee and those who sit at the 25th and 75th percentiles
(lower and upper quartiles).
Computacenter’s CEO pay ratios have been calculated using Option B, based on the availability of data at the time the Annual Report was
published. This uses the most recent gender pay data to identify the three employees that represent our 25th, 50th and 75th percentile
employees. The total remuneration for these individuals has then been calculated based on all components of pay for 2019, including base salary,
performance-based pay, pension and benefits. The Committee considers that this provides an outcome that is representative of the employees
at these pay levels.
Where an identified employee was part-time, their figures have been converted to a full-time equivalent. No other adjustments were necessary
and no elements of employee remuneration have been excluded from the pay ratio calculation.
The day by reference to which the Company determined the 25th, 50th and 75th percentile employees was 20 December 2019.
Computacenter’s employer pension contributions, Company-paid benefits and voluntary benefit scheme options are consistent for all UK
employees, including the CEO. In addition, the CEO is eligible to participate in the Company’s annual bonus and Performance Share Plan, in line with
other members of the senior Management team. The value of these variable pay awards is affected by performance delivered and, in the case of
the Performance Share Plan, share price movement over three years.
Year
2019
Method
Option B
25th percentile pay ratio
93:1
Median pay ratio
62:1
75th percentile pay ratio
43:1
Employees
Total pay and benefits
Salary
25th percentile
£31,435
£26,839
Median
£47,335
£39,166
75th percentile
£67,083
£60,835
107
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Directors’ Remuneration Report
continued
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*
2019
2018
£779.5m
£735.2m
2019
2018
£35.8m
£30.9m
2019
2018
£146.3m
£118.2m
*
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 2020 will be in accordance with the terms of our Directors’ Remuneration Policy table, as set out on pages 91
to 98 of this report.
2020 base salaries
The base salary of the CEO and the FD will increase by 2.0 per cent to £562,000 and £364,000 respectively from 1 January 2020.
2020 annual bonus
The performance measures and weightings for the 2020 annual bonus will be as follows:
Mike Norris – CEO
(2020)
Tony Conophy – FD
(2020)
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 2020 have been set to be challenging relative to our 2020 business plan. The targets themselves, as they relate to the 2020 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 2020 Annual Report and Accounts.
The maximum bonus opportunity for the Executive Directors in 2020 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 92.
2020 PSP
The award levels for the Executive Directors in the 2020 financial year are 200 per cent of salary for the CEO and 175 per cent of salary for the FD.
The 2020 financial year PSP awards will be subject to the same performance measures and targets as for the 2019 PSP awards as set out above.
The 2020 financial year PSP awards will be subject to a two-year holding period.
Statement of voting
The results of voting on the Directors’ Remuneration Report at the Company’s 2019 AGM are outlined in the table below:
Votes cast in favour/discretionary
97,425,913
99.7%
Votes cast against
302,615
0.3%
Total votes cast
97,728,528
Votes withheld/abstentions
4,976
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. To ensure that this continues, the Committee will consult with shareholders
on major issues where 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 2020
108
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 March and April 2020, to
address any areas of discussion prior to the
Company’s next AGM. 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
Thursday 14 May 2020 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 110.
This Corporate Governance Report was
approved, by order of the Board, and signed
on its behalf by:
Raymond Gray
Company Secretary
11 March 2020
109
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 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 2019.
The pages from the inside front cover to
115 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 68. 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, strategic objectives,
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 69 to 109, and
the reports of the Audit, Remuneration and
Nomination Committees on pages 78, 82 and
88 respectively, all of which are incorporated
into the Directors’ Report by reference.
110
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 £141.0 million (2018:
£108.1 million). The Group profit for the year,
attributable to shareholders, amounted to
£101.6 million (2018: £80.9 million).
The Directors recommend a final dividend
of 26.9 pence per share (2018: 21.6 pence
per share) totalling £30.7 million (2018:
£24.4 million). The dividend record date is set
on Friday 29 May 2020, and the shares will be
marked ex-dividend on Thursday 28 May
2020. 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 2019 of 10.1 pence per share on
11 October 2019, the total dividend per share
for 2019 will be 37.0 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 pages 56 to 57.
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 2019 Annual Report and
Accounts, as described in note 14, is made
up of the 2018 final dividend (21.6 pence
per share) and the 2019 interim dividend
(10.1 pence per share).
Articles of Association
The Company’s Articles of Association sets
out the procedures for governing the
Company. A copy of the Articles of
Association, which were amended during
the reporting period at the Company’s AGM
on 16 May 2019, is available on the Company’s
website: investors.computacenter.com.
The Company’s Articles of Association may
only be amended by a special resolution at
a general meeting of the shareholders.
Directors and Directors’ authority
The Directors who served during the year
ended 31 December 2019 were Tony Conophy,
Philip Hulme, Greg Lock, Mike Norris, Peter
Ogden, Minnow Powell, Ros Rivaz, Peter Ryan,
Regine Stachelhaus, Ljiljana Mitic and Rene
Haas. Greg Lock and Regine Stachelhaus both
retired from the Board with effect from
16 May 2019. Biographical details of each
Director, as at 31 December 2019, are given
on pages 72 to 73.
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 between three and 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).
Members have previously approved a
resolution to give the Directors authority to
allot shares, and a renewal of this authority
is proposed at the 2020 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.
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.
Two resolutions allowing a limited waiver of
these rights were passed by the members at
last year’s AGM. At the Company’s 2019 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 the earlier
of 30 June 2020 or the conclusion of the
Company’s 2020 AGM. The Directors will seek
to renew each of the authorities at the 2020
AGM, and full details are provided in the
Notice of AGM. As at 28 February 2020, none of
these authorities approved by shareholders
at the 2019 AGM had been exercised.
Directors’ conflicts of interest
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, who may authorise the
situation. The register of notifications and
authorisations is reviewed by the Board
twice a year. Where the Board approves an
actual or potential conflict, the conflicted
Director cannot participate in any discussion
or decision affected by the conflict.
Directors’ interests in shares
The Directors’ interests in the Company’s share capital, at the start and end of the reporting period, were as follows:
Executive Directors
Mike Norris
Tony Conophy
Non-Executive Directors
Peter Ryan
Rene Haas
Philip Hulme
Ljiljana Mitic
Peter Ogden
Minnow Powell
Ros Rivaz
Greg Lock*
Regine Stachelhaus**
As at 31 December 2019
As at 1 January 2019
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
1,145,630
1,851,961
900
–
9,411,695
–
18,699,389
1,340
1,382
–
–
–
–
1,132,819
1,851,961
–
–
–
–
8,983,293
–
8,103,356
–
–
–
–
900
–
9,621,695
–
18,699,389
1,340
1,382
700,000
–
–
–
9,757,381
–
8,103,356
–
–
100,000
–
Greg Lock retired from the Board on 16 May 2019 and had 800,000 ordinary shares at that time, held beneficially and non-beneficially.
*
** Regine Stachelhaus retired from the Board on 16 May 2019 and had no ordinary shares at that time.
Major interests in shares
In accordance with Disclosure and Transparency Rule 5, between 1 January 2019 and 31 December 2019 the Company was notified of the
following incremental updates to disclosable interests in its issued ordinary shares:
Name of major shareholder
JPMorgan Asset Management (UK) Limited
JPMorgan Asset Management (UK) Limited
The Hadley Trust*
JPMorgan Asset Management (UK) Limited
JPMorgan Asset Management (UK) Limited
Date of notification
12 December 2019
31 October 2019
28 August 2019
14 August 2019
1 August 2019
Percentage of total
voting rights held
5.55
5.45
6.15
5.29
5.01
*
A non-beneficial holding of Philip Hulme, a Non-Executive Director of the Board.
No further interests have been disclosed to the Company between 31 December 2019 and 28 February 2020. An updated list of the Company’s
major shareholders is available at investors.computacenter.com.
111
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Directors’ Report
continued
Capital structure and rights attaching
to shares
As at 28 February 2020, 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 shareholders
may use as the denominator when calculating
if they are required to notify their interest in
the Company or a change to that interest,
under the Disclosure and Transparency
Rules, is 114,141,109. The percentage of voting
rights attributable to those shares the
Company holds in treasury 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.
The rights attaching to each of the
Company’s ordinary shares and deferred
shares are set out in its Articles of
Association. As at 28 February 2020,
there were no deferred shares in issue.
Pursuant to the Company’s share schemes,
there are two employee benefit trusts which,
as at the year end, held a total of 1,497,857
ordinary shares of 75⁄9 pence each,
representing approximately 1.22 per cent of
the issued share capital. During the year, the
trusts purchased a total of 1,189,752 shares
in order to ensure that the maturities
occurring pursuant to these share option
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 2019 financial year, no ordinary
shares in the Company were issued for
cash to satisfy the exercise of options
exercised under the Company’s outstanding
option schemes.
If another entity or individual takes control of
the Company, the employee share schemes
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. 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.
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
57 to 58. 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. The Group’s longer-term Services
contracts may also 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 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
59 to 60.
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 (2018: nil shares).
The Company also operates a Performance
Share Plan (PSP) to incentivise employees.
During the year, 504,975 ordinary shares of
75⁄9 pence each were conditionally awarded
(2018: 501,643 shares). At the year end,
awards over 1,798,533 shares remained
outstanding under this scheme (2018:
1,810,126 shares). During the year, awards
over 392,765 shares were transferred to
participants and awards over 123,803 shares
lapsed. In addition, the Company operates a
Sharesave scheme for the benefit of
employees. As at the year end, 3,964,537
options granted under the Sharesave
scheme remained outstanding (2018:
4,209,927).
On 21 March 2019, in accordance with the
rules of the Computacenter 2017 Deferred
Bonus Plan, the Company granted 36,261
conditional awards over ordinary shares of
75⁄9 pence each (2018: 38,681).
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 24 to 30,
which covers matters regarding Health &
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.
112
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 61.
Long-term Viability Statement
The Directors’ statement regarding the
long-term viability of the Company is set out
within the Strategic Report on pages 61 to 62.
Auditor
A resolution to reappoint KPMG LLP as auditor
of the Group was approved by the Company’s
shareholders at the Company’s 2019 AGM.
A resolution to reappoint KPMG LLP as the
auditor of the Group will be put to
shareholders at the forthcoming 2020 AGM.
Disclosure of information to auditor
In accordance with Section 418 of the
Companies Act 2006, each of the Directors
at the date of approval of this report
confirms that:
• to the best of their 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.
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 after
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. 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 it. Team
briefings are the primary method for
engaging and consulting with employees,
with managers tasked with ensuring regular
information sharing, discussion and feedback.
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
employees’ views on a wide range of
business matters. Where there are cross-
jurisdictional issues to discuss, a European
forum is engaged, 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 report a summary of
this engagement to the Board.
The Group regularly reviews employees’
performance 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 Group’s current and future needs. 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.
The Group operates a Save As You Earn (SAYE)
share scheme for eligible employees, who
are encouraged to save a fixed monthly sum
for a period of either three and/or five years.
When the scheme matures, participants can
purchase shares in the Company at a price
set at the start of the savings period.
Further information can be found in the
report on pages 24 to 27 covering employee
involvement and employee development.
Business ethics
The Group Ethics policy 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.
113
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019 Directors’ Report
continued
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:
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 2020
FA Conophy
Group Finance Director
11 March 2020
N/A
N/A
Details of the Company’s performance share plan can be found in the
Remuneration Committee Report on pages 102 to 104.
N/A
N/A
N/A
N/A
Details of significant contracts are set out in the Group Finance
Director’s Review on pages 57 to 60. Details of transactions with related
parties are set out on page 169 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 remained
the case as at 31 December 2019, but will keep the matter under review.
114
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 115 was approved by the Board of
Directors and authorised for issue on
11 March 2020 and signed for and on behalf
of the Board by:
Mike Norris
Chief Executive
Officer
Tony Conophy
Group Finance
Director
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.
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.
115
GOVERNANCE REPORTANNUAL REPORT AND ACCOUNTS 2019
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 2019 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 2019 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 five financial years
ended 31 December 2019. 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
£6.0 million (2018: £5.0 million)
4.3 per cent of profit before tax (2018: 4.4 per cent of normalised profit before tax)
95 per cent (2018: 99 per cent) of Group profit before tax
vs 2018
< >
< >
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The impact of uncertainties due to the UK exiting the European Union on our audit
Professional Services and Managed Services – loss making contracts
Technology Sourcing bill and hold revenue cut-off
Recoverability of Parent Company’s investment in subsidiaries (Parent)
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 four 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. 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.
We no longer perform procedures over the Valuation of FusionStorm intangible assets, as this matter related to the acquisition of FusionStorm
that occurred in the prior year. We have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not
separately identified in our report this year.
We continue to perform procedures over Professional Services and Managed Services contract accounting. However, following a reassessment
of the risk, we have not assessed the revenue recognition element of Professional Service and Managed Service contracts as one of the most
significant risks in our current year audit and, we have excluded it from our report this year, and have only identified the loss-making contracts
element separately.
116
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Recoverability of Parent
Company’s investment in
subsidiaries (Parent)
Vendor management,
rebates and cost
management
Impairment
of non-current
assets*
Tax positions and
transfer pricing
Deferred tax assets*
Bad debt exposure*
Share option
judgements and
accounting
FusionStorm
intangible impairment
Professional Services
and Managed Services
– loss-making contracts
Technology Sourcing
bill and hold revenue
cut-off
Technology Sourcing
revenue recognition
Fraud risk from
Management override
of controls
Presentation of exceptional
items and alternative
performance measures
New lease accounting
standard (IFRS 16)
Segmental reporting
disclosure
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 85 (Audit
Committee Report).
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 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: 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
• We found the disclosures in relation to going concern to be
proportionate (2018 finding: 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.
The risk
Unprecedented levels of
uncertainty:
All audits assess and challenge
the reasonableness of estimates,
in particular the appropriateness
of the going concern basis of
preparation of the financial
statements. This depends 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 its
effects are subject to
unprecedented levels of uncertainty
of consequences, with the full range
of possible effects unknown.
117
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019
Independent Auditor’s Report
to the members of Computacenter plc continued
Professional Services and
Managed Services – loss-
making contracts
(Revenue – £1,231.5 million;
2018: £1,175.0 million)
(Onerous contract provisions
– £7.8 million; 2018:
£16.4 million)
Refer to page 83 (Audit
Committee Report), page
131 (accounting policy) and
page 142 (financial
disclosures).
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.
Where an onerous contract provision
is required, estimation is required in
assessing the level of provision,
including estimated cost 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 forecasts have
a high degree of estimation
uncertainty, with a potential range of
reasonable outcomes greater than
our materiality for the financial
statements as a whole.
Revenue – Technology
Sourcing Bill and Hold
revenue cut-off
Refer to page 83 (Audit
Committee Report), page
139 (accounting policy) and
page 142 (financial
disclosures).
2019/2020 sales:
Technology Sourcing revenue
includes revenues from bill and hold
transactions.
There is judgement required to
determine if all of the criteria have
been met to recognise a bill and hold
sale. This gives rise to some risk that
bill and hold revenue is recognised
too early.
Recoverability of Parent
Company’s investment in
subsidiaries
(£334.0 million; 2018:
£319.5 million)
Refer to page 84 (Audit
Committee Report), page
174 (accounting policy) and
page 176 (financial
disclosures).
Low risk, high value:
The carrying amount of the Parent
Company’s investments in
subsidiaries represents 87 per cent
(2018: 74 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.
118
Our response
Our procedures included:
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: 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: Considering contradictory evidence for future
forecast costs including the risks and estimates within these
forecasts by obtaining evidence through discussions with key
management personnel (including project managers, commercial
finance and Group finance), relevant correspondence with customers
and delivery performance to date.
• Historical comparisons: Comparing the previous contract forecasts
to historic 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 onerous contract
provisions relating to Managed and Professional Services contracts.
Our findings
• We found the estimates in relation to onerous contract provisions to
be mildly cautious. We found the Group’s disclosures to be proportionate
in their description of the estimation uncertainty regarding
Professional Services and Managed Services – loss making contracts.
Our procedures included:
• Tests of details: For a sample of orders selected close to year end, we
inspected signed bill and hold agreements, evaluated the segregation
and readiness of inventory, and considered if the reason for the
arrangement was substantive, in order to assess whether revenue
had been recognised in the appropriate period. This sample was
selected on the basis of a risk-based sampling methodology
combined with items over a determined threshold.
Our findings
• In determining the treatment of Technology Sourcing bill and hold
revenue cut-off outcome there is room for judgement and we found
that within that, the Group’s judgement was balanced.
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 (2018: 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 £6.0 million (2018: £5.0 million), determined with reference to a benchmark of
Group profit before tax of £141.0 million (2018: £113.8 million normalised in the prior year to exclude the prior year’s exceptional items as disclosed
in note 8), of which it represents 4.3 per cent (2018: 4.4 per cent). In addition, we applied materiality of £0.1 million (2018: £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 £2.0 million (2018: £4.5 million), determined with reference to a
benchmark of Company total assets, of which it represents 0.5 per cent (2018: 1.0 per cent). We reduced the Parent Company materiality to reduce
the aggregation risk across the components that we audit.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.6 million (2018: £0.5 million) in
respect of misstatements which relate solely to reclassifications within the balance sheet, and £0.30 million (2018: £0.25 million) in respect of all
other misstatements, in addition to other identified misstatements that warranted reporting on qualitative grounds.
Group profit before tax
£141.0 million (2018: £113.8 million Group profit
before tax, normalised to exclude exceptional items)
Group materiality
£6.0 million (2018: £5.0 million)
£6.0 million (2018: £5.0 million)
Whole financial statements materiality
£4.0 million (2018: £2.0 million to £4.5 million)
Range of materiality at five components
(£2.0 million to £4.0 million)
£0.3 million (2018: £0.25 million)
Misstatements reported to the Audit Committee
Group profit before tax
Group materiality
The Group operates a Shared Service Centre (SSC) in Budapest, Hungary, the outputs of which are included in the financial information of three
of the five 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.
Of the Group’s 19 (2018: 17) reporting components, we subjected five (2018: four) to full scope audits for Group purposes and none (2018: one) to
specified risk-focused audit procedures. 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 98 per cent of total Group revenue, 95 per cent of Group profit before tax and 96 per cent of
total Group assets is represented by 14 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 £4.0 million (2018:
£2.0 million to £4.5 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 (2018: three of the five 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 (2018: three) overseas component locations in France, Germany and the US, in addition to the Shared Service
Centre in Hungary (2018: France, Germany, US and Shared Service Centre in Hungary). 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.
119
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Independent Auditor’s Report
to the members of Computacenter plc continued
Group revenue
Group profit before tax
98
91
6
98%
(2018: 97%)
95
95
4
95%
(2018: 99%)
Group total assets
Group profit before exceptional items and tax
96
85
10
96%
(2018: 95%)
95
93
1
95%
(2018: 94%)
Full scope for Group audit purposes 2019
Specified risk-focused audit procedures 2018
Full scope for Group audit purposes 2018
Residual components
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 Group and Company’s business model and analysed how
those risks might affect the Group’s and 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 Group’s and Company’s available financial resources over this period were:
• A contraction in Technology Sourcing and service margins.
• The impact of a significant business continuity issue affecting a number of the Group’s key customers and suppliers.
As these were risks that could potentially cast significant doubt on the Group’s and Company’s ability to continue as a going concern, we
considered sensitivities over the level of available financial resources indicated by the Group’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.
120
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 61 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 12 months from the date of approval of the financial statements; or
• the related statement under the Listing Rules set out on page 114 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 61 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 and Uncertainties 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 provisions of the
UK Corporate Governance Code specified by the Listing Rules for our review.
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.
121
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Independent auditor’s report
to the members of Computacenter plc continued
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 115, 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 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.
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. 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.
Through these procedures, we became aware of actual or suspected non-compliance and considered the effect as part of our procedures on the
related financial statement items. The identified actual or suspected non-compliance was not sufficiently significant to our audit to result in our
response being identified as a key audit matter.
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 2020
122
Consolidated Income
Statement
For the year ended 31 December 2019
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance income
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
Note
4,5
2019
£’000
5,052,779
(4,389,665)
663,114
2018
£’000
4,352,570
(3,804,019)
548,551
(516,090)
147,024
(439,183)
109,368
10
11
12
980
(7,046)
140,958
(39,397)
101,561
101,655
(94)
101,561
1,250
(2,490)
108,128
(27,199)
80,929
80,931
(2)
80,929
13
13
90.3p
89.0p
71.4p
70.1p
123
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Consolidated Statement
of Comprehensive Income
For the year ended 31 December 2019
Profit for the year
Items that may be reclassified to Consolidated Income Statement:
Loss 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
Total comprehensive income for the year
Note
2019
£’000
101,561
2018
£’000
80,929
26
(915)
176
(739)
(18,175)
(18,914)
(786)
(19,700)
(3,231)
490
(2,741)
7,828
5,087
(1,000)
4,087
81,861
85,016
81,956
(95)
81,861
85,013
3
85,016
124
Consolidated Balance Sheet
As at 31 December 2019
Non-current assets
Property, plant and equipment
Intangible assets
Investment in associate
Deferred income tax assets
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 2020.
MJ Norris
Chief Executive Officer
FA Conophy
Group Finance Director
Note
15
16
18a
12d
5
19
20
5
5
24
21
22
5
23
24
26
23
26
12d
29
29
29
29
29
2019
£’000
2018
£’000
212,325
175,670
54
9,204
3,520
400,773
122,189
996,462
82,315
94,030
3,218
217,881
1,516,095
1,916,868
978,220
174,258
56,606
1,707
39,278
7,703
1,257,772
140,932
13,982
11,698
166,612
1,424,384
492,484
9,270
3,942
74,957
(113,563)
14,028
503,928
492,562
(78)
492,484
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
125
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019
Attributable to equity holders of the Parent
Issued
share
capital
£’000
9,270
–
–
–
–
–
–
–
–
–
9,270
9,299
–
–
–
–
–
–
–
–
–
(29)
–
9,270
Share
premium
£’000
3,942
–
–
–
–
–
–
–
–
–
3,942
3,913
–
–
–
–
–
–
–
–
–
29
–
3,942
Capital
redemption
reserve
£’000
Own
shares
held
£’000
74,957 (113,474)
–
–
–
–
–
15,798
(15,887)
–
–
74,957 (113,563)
–
–
–
–
–
–
–
–
–
Translation
and
Retained
hedging
earnings
reserves
£’000
£’000
440,119
32,941
101,655
–
(18,913)
(786)
(18,913) 100,869
6,775
1,790
(10,071)
–
210
(35,764)
503,928
–
–
–
–
–
–
14,028
74,957
–
–
–
–
–
–
–
–
–
–
–
74,957
(11,360)
–
–
–
–
–
11,158
(13,274)
(99,998)
–
–
–
(113,474)
27,859
–
5,082
5,082
–
–
–
–
–
–
–
–
32,941
390,725
80,931
(1,000)
79,931
6,425
2,706
(7,592)
–
–
(1,196)
–
(30,880)
440,119
Share-
holder’s
equity
£’000
447,755
101,655
(19,699)
81,956
6,775
1,790
5,727
(15,887)
210
(35,764)
492,562
495,393
80,931
4,082
85,013
6,425
2,706
3,566
(13,274)
(99,998)
(1,196)
–
(30,880)
447,755
Non-
Total
controlling
equity
interests
£’000
£’000
447,772
17
(94) 101,561
(19,700)
(1)
81,861
(95)
6,775
–
1,790
–
5,727
–
(15,887)
–
210
–
(35,764)
–
(78) 492,484
14
(2)
5
3
–
–
–
–
–
–
–
–
17
495,407
80,929
4,087
85,016
6,425
2,706
3,566
(13,274)
(99,998)
(1,196)
–
(30,880)
447,772
Consolidated Statement
of Changes in Equity
For the year ended 31 December 2019
At 1 January 2019
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
Asset reunification
Equity dividends
At 31 December 2019
At 1 January 2018
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
126
Consolidated Cash
Flow Statement
For the year ended 31 December 2019
Operating activities
Profit before taxation
Net finance cost
Depreciation of property, plant and equipment (excluding right-of-use assets)
Depreciation of right-of-use assets
Amortisation of intangible assets
Share-based payments
Loss on disposal of intangibles
Loss 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
Net cash flow from investing activities
Financing activities
Interest paid
Interest expense on lease liabilities
Dividends paid to equity shareholders of the Parent
Return of Value (RoV)
Expenses on RoV
Asset reunification
Proceeds from share issues
Purchase of own shares
Repayment of capital element of finance leases
Repayment of loans
Payment of lease liabilities
New borrowings – finance leases
New borrowings – bank loan
Net cash flow from financing activities
Increase/(decrease) 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
Note
2019
£’000
2018
£’000
140,958
6,066
21,456
40,266
11,543
6,775
116
347
(27,422)
136,682
(108,799)
10,670
(2,414)
236,244
(34,231)
202,013
980
6,116
(30,132)
(8,737)
1,009
(30,764)
(3,318)
(3,728)
(35,764)
–
–
210
5,727
(15,887)
–
(51,755)
(42,346)
–
–
(146,861)
24,388
(6,949)
200,442
217,881
15
15
16
10
15
16
11
11
14
23
21
21
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
127
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated
Financial Statements
For the year ended 31 December 2019
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 2019 were authorised for issue in accordance with a resolution of the Directors on 11 March 2020. 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 2019 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 2018 Annual Report and Accounts
except for lease accounting where the Group has adopted the new accounting standard, IFRS 16 ‘Leases’ (‘IFRS 16’), as it became effective for the
Group from 1 January 2019.
IFRS 16
IFRS 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right-of-use assets
representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting
remains similar to previous accounting policies.
Effective 1 January 2019, the Group adopted IFRS 16 using the modified retrospective approach and accordingly the information presented for
FY2018 has not been restated. It remains as previously reported under IAS 17 and related interpretations.
As permitted by IFRS 16, the Group has elected to adopt the following practical expedients on transition:
• not to capitalise a right-of-use asset or related lease liability where the lease expires before 31 December 2019;
• not to reassess contracts to determine if the contract contains a lease and not to separate lease and non-lease elements;
• to use hindsight in determining the lease term if the contract contains options to extend or terminate the lease;
• lease payments for contracts with a duration of 12 months or less and contracts for which the underlying asset is of a low value will continue
to be expensed to the Consolidated Income Statement on a straight-line basis over the lease term;
• to exclude initial direct costs from the measurement of the right-of-use assets related to leases existing at 31 December 2018; and
• to apply the portfolio approach where a group of leases has similar characteristics.
Impact of adoption of IFRS 16
Consolidated Balance Sheet
On initial application, the Group has elected to record right-of-use assets based on the corresponding lease liability. Right-of-use assets and lease
obligations of £120.6 million were recorded as of 1 January 2019. When measuring lease liabilities, the Group discounted lease payments using its
incremental borrowing rate at 1 January 2019. The average rate applied is 4.0 per cent.
The Group has recognised £110.9 million of right-of-use assets and £116.8 million of lease liability as at 31 December 2019.
Consolidated Income Statement
Under IFRS 16, the Group has seen a different categorisation of expense within the Consolidated Income Statement, as the IAS 17 operating lease
expense is replaced by depreciation and interest costs. During the year ended 31 December 2019, the Group has recognised £40.3 million of
depreciation costs and £3.7 million of interest costs from these leases and has seen a decrease of £42.3 million of operating lease rental expense.
Had IAS 17 continued in operation during the year, Group profit before tax, on both an adjusted1 and statutory basis, would have been £1.7 million
higher.
Consolidated Cash Flow Statement
The change in presentation because of the adoption of IFRS 16 has seen an improvement in 2019 of cash flow generated from operating activities,
offset by a corresponding decline in cash flow from financing activities. There is no overall cash flow impact from the adoption of IFRS 16.
Reconciliation between the Group’s operating lease commitments and lease liability
The following table reconciles the Group’s operating lease commitments as a lessee at 31 December 2018, as previously disclosed in the
Consolidated Financial Statements, to the lease obligations recognised on initial application of IFRS 16 at 1 January 2019:
128
Operating lease commitments at 31 December 2018 as disclosed in the Financial Statements
Discounted using the incremental borrowing rate at 1 January 2019
Recognition exemption for leases of low-value assets and with less than 12 months of lease term at transition
Other adjustment relating to implementation of IFRS 16
Total additional lease liabilities recognised on adoption of IFRS 16
Existing finance lease liabilities at 31 December 2018
Lease liabilities recognised at 1 January 2019
Accounting policies
Group as lessee
£’000
137,032
(9,913)
(18,378)
3,098
111,839
8,767
120,606
Recognition of a lease
The contracts are assessed by the Group, to determine whether a contract is, or contains a lease. In general, arrangements are a lease when all
of the following apply:
• It conveys the right to control the use of an identified asset for a certain period in exchange for consideration;
• The Group have substantially all economic benefits from the use of the asset; and
• The Group can direct the use of the identified asset.
The policy is applied to contracts entered into, or changed, on or after 1 January 2019. The Group has elected to separate the non-lease
components and elected to apply several practical expedients as stated above. In cases where the Group acts as an intermediate lessor,
it accounts for its interests in the head-lease and the sub-lease separately.
Measurement of a right-of-use asset and lease liability
Right-of-use asset
As at 1 January 2019, the Group measured the right-of-use asset at cost, which included the following:
• the initial amount of the lease liability adjusted for any lease payments made at or before 1 January 2019;
• any lease incentives received; and
• any initial direct costs incurred by the Group as well as an estimate of costs to be incurred by the Group in dismantling and removing the
underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the lease contract.
Cost for dismantling, removing or restoring the site on which it is located and/or the underlying asset is only recognised when the Group incurs
an obligation to do so.
The right-of-use asset is depreciated over the lease term, using the straight-line method.
Lease liability
As at 1 January 2019, the lease liability is initially measured at the present value of the unpaid lease payments, discounted using the interest
rate implicit in the lease, or if the rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments included in the
measurement comprise of fixed payments, variable lease payments that depend on an index or a rate, amounts to be paid under a residual value
guarantee and lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option as well as
penalties for early termination of a lease, if the Group is reasonably certain to terminate early. If there is a purchase option present, this will be
included if the Group is reasonably certain to exercise the option.
Leases of low-value assets and short term
Leases of low-value assets (<£5,000) and short term with a term of 12 months or less are not required to be recognised on the Consolidated
Balance Sheet and payments made in relation to these leases are recognised on a straight-line basis in the Consolidated Income Statement.
Effective for the year ending 31 December 2020
No new standards, interpretations and amendments not yet effective are expected to have a material effect on the Group’s future financial
statements.
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.
129
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
2 Summary of significant accounting policies continued
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
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 ($), South African rand (ZAR) and Swiss franc (CHF). The
Group’s presentation currency is pound sterling. 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 has passed to the customer, usually on despatch.
Payment for the goods is generally received on industry-standard payment terms.
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.
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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.
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 2.12.1 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 2.12.1 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 an 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.
131
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
2 Summary of significant accounting policies continued
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.
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, assist in providing additional useful information on the
underlying trends, performance and position of the Group. The non-GAAP measures also used to enhance the comparability of information
between reporting periods by adjusting for non-recurring or uncontrollable factors which affect IFRS measures, to aid the user in understanding
the Group’s performance.
Consequently, non-GAAP measures are used by the Directors and management for performance analysis, planning, reporting and incentive-
setting purposes and have remained consistent with prior year.
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, expenses 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 53 of the Group Finance Director’s Review which details the
impact of exceptional and other adjusting 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.
132
Depreciation, down to residual value, is calculated on a straight-line basis over the estimated useful life of the asset as follows:
• freehold buildings: 25-50 years
• 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
• right-of-use assets: over respective lease term
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
Group as lessee – from 1 January 2019
Recognition of a lease
The contracts are assessed by the Group, to determine whether a contract is, or contains a lease. In general, arrangements are a lease when all
of the following apply:
• it conveys the right to control the use of an identified asset for a certain period in exchange for consideration;
• the Group have substantially all economic benefits from the use of the asset; and
• the Group can direct the use of the identified asset.
The policy is applied to contracts entered into, or changed, on or after 1 January 2019. The Group has elected to separate the non-lease
components and elected to apply several practical expedients as stated above. In cases where the Group acts as an intermediate lessor,
it accounts for its interests in the head-lease and the sub-lease separately.
Measurement of a right-of-use asset and lease liability
Right-of-use asset
The Group measures the right-of-use asset at cost, which includes the following:
• the initial amount of the lease liability adjusted for any lease payments made at or before 1 January 2019;
• any lease incentives received; and
• any initial direct costs incurred by the Group as well as an estimate of costs to be incurred by the Group in dismantling and removing the
underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the lease contract.
Cost for dismantling, removing or restoring the site on which it is located and/or the underlying asset is only recognised when the Group incurs
an obligation to do so.
The right-of-use asset is depreciated over the lease term, using the straight-line method.
Lease liability
The lease liability is initially measured at the present value of the unpaid lease payments, discounted using the interest rate implicit in the lease,
or if the rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments included in the measurement comprise of
fixed payments, variable lease payments that depend on an index or a rate, amounts to be paid under a residual value guarantee and lease
payments in an optional renewal period if the Group is reasonably certain to exercise an extension option as well as penalties for early
termination of a lease, if the Group is reasonably certain to terminate early. If there is a purchase option present, this will be included if the Group
is reasonably certain to exercise the option.
Leases of low-value assets and short term
Leases of low-value assets (<£5,000) and short term with a term of 12 months or less are not required to be recognised on the Consolidated
Balance Sheet and payments made in relation to these leases are recognised on a straight-line basis in the Consolidated Income Statement.
Group as lessee – until 31 December 2018
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.
133
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
2 Summary of significant accounting policies continued
2.9 Intangible assets
2.9.1 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.
2.9.2 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.
2.9.3 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 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.
2.9.4 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.
2.10 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.
2.11 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.
2.11.1 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). The
trade receivables are derecognised on receipt of cash from the factoring party. 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.
134
2.11.2 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.
2.11.3 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, where there is a legal right of set off.
2.12 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:
2.12.1 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.
2.12.2 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.
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 and costs for employees who continue
to be employed in ongoing operations, regardless of the status of these operations post-restructure.
2.12.3 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.
135
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
2 Summary of significant accounting policies continued
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 on 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 33 for further disclosure.
2.13 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.
2.14 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.
Amounts recognised within the Consolidated Statement of 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 matures or is sold, terminated
or exercised without replacement or rollover, any cumulative gain or loss previously recognised within the Consolidated Statement of
Comprehensive Income remains within the Consolidated Statement of 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.
136
2.15 Taxation
2.15.1 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.
2.15.2 Deferred income 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 Consolidated Statement of Comprehensive Income if it relates to items that are credited or
charged to the Consolidated Statement of Comprehensive Income. Otherwise, income tax is recognised in the Consolidated Income Statement.
2.16 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 30. 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 13).
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 29).
2.17 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.
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.
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 27.
137
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
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.
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 (2018: 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 £31.5 million (2018: £30.1 million). The range of potential
scenarios considered by management in respect of these specific contracts resulted in a reduction in margins, recognised in 2019 of £23.7 million
(2018: £13.6 million), in the year. At 31 December 2019, based on Management’s best estimate, there was a provision of £7.8 million (2018: £16.4 million)
against future losses with the total costs to complete on these contracts estimated at £54.7 million (2018: £76.9 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.
Management is required to exercise its judgement in the classification of certain items as exceptional and outside of the Group’s adjusted 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.
138
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 8.
3.2.2 Bill and hold
The Group generates some of its revenue through its ‘bill and hold’ arrangement with its customers. This arises when the customer is invoiced but
the product is not shipped to the customer until a later date, in accordance with the customer’s request in a written agreement. In order to
determine the appropriate timing of revenue recognition, it is assessed whether control has transferred to the customer.
A bill and hold arrangement is only put in place when a customer lacks the physical space to store the product or the product previously ordered
is not yet needed in accordance with the customer’s schedule, the customer wants to guarantee supply of an identical product. In order to
determine the bill and hold arrangements, the following criteria must be met:
a) the reason for the bill and hold arrangement must be substantive (for example: the customer has requested the arrangement);
b) the product must be identified separately as belonging to the customer;
c) the product currently must be ready for physical transfer to the customer; and
d) the entity cannot have the ability to use the product or to direct it to another customer.
Judgement is required to determine if all of the criteria (a) to (d) has been met to recognise a bill and hold sale. This is determined by segregation
and readiness of inventory, review of customer requests, test of a sample of orders in order to assess whether the accounting policy had been
correctly applied to recognise a bill and hold sale.
3.3 Change in critical estimates and critical judgements
During the year, Management reassessed the critical estimates and critical judgements. Technology Sourcing principal versus agent recognition
was taken out as the level of judgement involved for this does not elevate to a critical judgement in the current year. Management spent a
reduced amount of time on this judgement, after spending a greater amount of time due to the adoption of IFRS 15 in the prior year. Bill and hold
has been included in the current year within critical judgements due to an increased volume of bill-and-hold transactions and hence is elevated
to a critical judgement.
4 Segment information
Due to the acquisitions made in 2018, Management has further 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’), during the first half of the year. As a result of this analysis the Board
has adopted a new Segmental reporting structure for the year ended 31 December 2019.
In accordance with IFRS 8 Operating Segments, the Group has identified five revised operating Segments:
• UK;
• Germany;
• France;
• USA; and
• International.
In the new USA Segment, the Group has now added a fifth operating Segment which comprises the business acquired in 2018 and the existing USA
operations which transfer in from the International Segment.
The UK Segment now includes the TeamUltra trading operations from the International Segment reflecting the fact that the majority of the work
performed by TeamUltra is either on UK customers or for UK bids. The TeamUltra operations have been absorbed into the UK trading entity,
reflecting the importance of the capability to the UK business. This has also resulted in the combination of the previously separate cash-
generating units for these businesses as, post-absorption, this is now the level that the ongoing operation is assessed at. The re-acquisition
of R.D. Trading Limited has been added to the UK Segment in the year as the business primarily serves our UK customer base.
The International Segment now comprises a core ‘Rest of Europe’ presence with key trading operations in Belgium, the Netherlands and
Switzerland along with the international Global Service Desk locations in South Africa, Spain, Hungary, Mexico, Poland, Malaysia, India and China.
During the year, Computacenter Switzerland acquired PathWorks GmbH. (‘PathWorks’), a value added reseller, based in Neudorf (Luzern),
Switzerland. This acquisition allows us to add Technology Sourcing to our existing Swiss portfolio completing the Group’s Source, Transform
and Manage offering. The Global Service Desk locations have limited external revenues, and a cost recovery model that suggests better than
breakeven margins to ensure compliance with transfer pricing regulations.
The French and German Segments remain unchanged from that reported at 31 December 2018.
Certain expenses, such as those for the Board 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 continue to be disclosed as a separate
column, ‘Central Corporate Costs’, within the segmental note.
139
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
4 Segment information continued
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/(loss) and adjusted1 profit/
(loss) before tax.
The change in Segmental reporting has no impact on reported Group numbers.
To enable comparisons with prior year performance, historical Segment information for the year ended 31 December 2018 are restated in
accordance with the revised Segmental reporting structure. All discussion within this Annual Report and Accounts on Segmental results reflects
this revised structure and the resultant prior period restatements.
Segmental performance for the years ended 31 December 2019 and 31 December 2018 were as follows:
UK
£’000
Germany
£’000
France
£’000
USA
£’000
International
£’000
1,142,746
1,366,392
457,454
732,009
123,626
117,685
321,175
438,860
1,581,606
207,038
370,232
577,270
1,943,662
23,844
81,633
105,477
562,931
13,512
27,634
41,146
773,155
4,004
63,795
67,799
191,425
Central
Corporate
Costs
£’000
–
–
–
–
–
Total
£’000
3,822,227
366,083
864,469
1,230,552
5,052,779
221,208
(156,673)
64,535
(1,286)
63,249
260,677
(176,199)
84,478
(1,987)
82,491
68,195
(55,884)
12,311
(524)
11,787
69,493
(60,369)
9,124
(871)
8,253
43,541
(35,358)
8,183
(573)
7,610
–
(27,139)
(27,139)
–
(27,139)
663,114
(511,622)
151,492
(5,241)
146,251
(825)
(94)
(919)
(4,374)
140,958
Total
£’000
151,492
–
(4,374)
(94)
147,024
Year ended 31 December 2019
Revenue
Technology Sourcing revenue
Services revenue
Professional Services
Managed Services
Total Services revenue
Total revenue
Results
Adjusted1 gross profit
Administrative expenses
Adjusted1 operating profit/(loss)
Adjusted1 net interest
Adjusted1 profit/(loss) before tax
Exceptional items:
– unwinding of discount relating to
acquisition of a subsidiary
– costs relating to acquisition of a subsidiary
Total exceptional items
Amortisation of acquired intangibles
Statutory profit before tax
Year ended 31 December 2019
Adjusted1 operating profit
Add back interest on CSF
Amortisation of acquired intangibles
Exceptional items
Statutory operating profit
140
Other Segment information
Property, plant and equipment
Intangible assets
Capital expenditure:
Property, plant and equipment
Software
Depreciation of property, plant and
equipment (excluding right-of-use assets)
Depreciation of right-of-use assets
Amortisation of software
UK
£’000
Germany
£’000
France
£’000
USA
£’000
International
£’000
57,496
54,035
112,074
16,678
14,353
108
12,013
93,696
16,389
11,153
13,482
7,903
34,891
616
9,968
3,056
5,616
6,356
27,007
1,187
2,574
13
1,788
4,076
45
119
5,449
–
748
2,224
–
150
8,707
205
2,596
3,903
321
–
Share-based payments
5,089
1,417
Year ended 31 December 2018
UK
£’000
Germany
£’000
France
£’000
USA
£’000
International
£’000
1,157,916
1,330,616
393,769
238,600
56,680
118,900
334,578
453,478
1,611,394
166,471
375,591
542,062
1,872,678
18,914
80,568
99,482
493,251
13,763
20,718
34,481
273,081
3,867
41,619
45,486
102,166
205,708
(147,467)
58,241
(158)
58,083
231,191
(164,332)
66,859
45
66,904
55,655
(48,601)
7,054
(162)
6,892
27,007
(22,666)
4,341
(200)
4,141
28,697
(21,238)
7,459
(55)
7,404
–
(25,188)
(25,188)
–
(25,188)
Revenue
Technology Sourcing revenue
Services revenue
Professional Services
Managed Services
Total Services revenue
Total revenue
Results
Adjusted1 gross profit
Administrative expenses
Adjusted1 operating profit/(loss)
Adjusted1 net interest
Adjusted1 profit/(loss) before tax
Exceptional items:
– unwinding of discount relating to
acquisition of a subsidiary
– costs relating to acquisition of a subsidiary
Total exceptional items
Amortisation of acquired intangibles
Statutory profit before tax
Central
Corporate
Costs
£’000
–
–
–
–
–
–
–
–
Central
Corporate
Costs
£’000
–
–
–
–
–
Total
£’000
212,325
175,670
65,103
8,737
21,456
40,266
7,169
6,775
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
141
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
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
Intangible assets
Capital expenditure:
Property, plant and equipment
Software
Depreciation of property, plant and
equipment (excluding right-of-use assets)
Depreciation of right-of-use assets
Amortisation of software
UK
£’000
Germany
£’000
41,505
51,730
50,558
18,444
12,103
4,870
30,408
730
7,910
–
9,449
7,287
–
1,275
Share-based payments
5,034
1,334
USA
£’000
International
£’000
Central
Corporate
Costs
£’000
1,099
105,732
60
–
260
–
–
–
7,493
8,559
2,004
169
2,293
–
203
–
–
–
–
–
–
–
–
–
France
£’000
5,612
148
867
166
1,630
–
50
57
Total
£’000
118,766
293
(4,451)
(5,240)
109,368
Total
£’000
106,267
184,613
45,442
5,935
19,380
–
10,669
10,977
Charges for the amortisation of acquired intangibles and utilisation of deferred tax assets (where initial recognition was an exceptional item or
a fair value adjustment on acquisition) are excluded from the calculation of adjusted1 operating profit. This is because these charges are based
on judgements about their value and economic life, are the result of the application of acquisition accounting rather than core operations, and
whilst revenue recognised in the Consolidated Income Statement does benefit from the underlying technology that has been acquired, the
amortisation costs bear no relation to the Group’s underlying ongoing operational performance. In addition, amortisation of acquired intangibles
is not included in the analysis of Segment performance used by the CODM.
Information about major customers
Included in revenues arising from the UK Segment are revenues of approximately £317 million (2018: £277 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.
5 Revenue
Revenue recognised in the Consolidated Income Statement is analysed as follows:
Revenue by type
Technology Sourcing revenue
Services revenue
Professional Services
Managed Services
Total Services revenue
Total revenue
142
2019
£’000
2018
£’000
3,822,227
3,177,581
366,083
864,469
1,230,552
5,052,779
321,915
853,074
1,174,989
4,352,570
Contract balances
The following table provides the information about contract assets and contract liabilities from contracts with customers.
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
20
31 December
2019
£’000
996,462
5,959
94,030
174,258
31 December
2018
£’000
1,180,394
6,451
101,899
143,080
The Group has implemented an expected credit loss impairment model with respect to contract assets using the simplified approach. Contract
assets have been grouped on the basis of their shared risk characteristics and a provision matrix has been developed and applied to these
balances to generate the loss allowance. The majority of these contract asset balances are with blue chip customers and the incidence of credit
loss is low. There has therefore been no material adjustment to the loss allowance under IFRS 9.
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. Refer to note 20 for
credit terms of trade receivables.
Win fees and fulfilment costs are included in the prepayments balance above. Refer to 2.3.3 for accounting policy of these costs. The Consolidated
Income Statement impact of win fees was a recognition of a net cost in FY2019 of £0.2 million with a corresponding credit to tax of £0.05 million
for the year. As at 31 December 2019, the win fee balance was £6.0 million. The Consolidated Income Statement impact of fulfilment costs was
a recognition of a net cost in FY2019 of £0.05 million with a corresponding credit to tax of £0.05 million for the year. As at 31 December 2019, the
fulfilment costs balance was £6.6 million. No impairment loss was recorded for win fees or fulfilment costs during the year.
Revenue recognised in the reporting period from accrued income balance was £2.8 million with a credit to foreign exchange of £5.1 million.
No impairment loss was recorded for accrued income during the year.
Revenue recognised in the reporting period that was included in the contract liability balance at the beginning of the period was £96.8 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.
Remaining performance obligations (Work in hand)
Contracts which have remaining performance obligations as at 31 December 2019 and 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.
Managed Services
As at 31 December 2019
As at 31 December 2018
Less than
one year
£m
588
613
One to
two years
£m
317
323
Two to
three years
£m
198
216
Three to
four years
£m
70
146
Four years
and beyond
£m
34
48
Total
£m
1,207
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.
143
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
6 Group operating profit
This is stated after charging/(crediting):
Depreciation of property, plant and equipment (excluding right-of-use assets)
Depreciation on right-of-use assets
Loss on disposal of property, plant and equipment
Amortisation of software
Loss on disposal of software
Amortisation of acquired intangible assets
Severance cost
Gain on net foreign currency differences
Costs of inventories recognised as an expense
Operating lease payments
Expense relating to short-term leases
Expense relating to low-value leases
7 Auditor’s remuneration
Auditor’s remuneration:
– Audit of the Financial Statements
– Audit of subsidiaries
Total audit fees
Audit-related assurance services
Taxation compliance services
Other assurance services
Other non-audit services
Total non-audit services
Total fees
The other non-audit services of £0.1 million in FY2018 relates to the financial due diligence conducted by KPMG LLP in connection with the
acquisition of FusionStorm.
8 Exceptional items
Operating profit
Costs relating to acquisition of a subsidiary
Exceptional operating loss
Interest cost relating to acquisition of a subsidiary
Loss on exceptional items before taxation
Income tax
Tax credit on exceptional items
Tax credit relating to acquisition of a subsidiary
Loss on exceptional items after taxation
144
2019
£’000
(94)
(94)
(825)
(919)
39
839
(41)
2019
£’000
21,456
40,266
347
7,169
116
4,374
16,275
2018
£’000
19,380
–
177
10,977
164
4,451
5,949
(1,090)
(2,209)
3,426,307
2,852,157
–
611
233
39,764
–
–
2019
£’000
2018
£’000
60
829
889
62
1
7
–
70
959
50
722
772
50
9
17
132
208
980
2018
£’000
(5,240)
(5,240)
(417)
(5,657)
1,353
3,091
(1,213)
2019: Included within the current year are the following exceptional items:
• An exceptional operating loss during the year of £0.1 million resulted from residual costs directly relating to the acquisition of FusionStorm.
These costs were non-operational in nature, material in size and unlikely to recur and have therefore been classified as outside our adjusted1
results. The current year loss resulted from social charges relating to the severance payment for the FusionStorm Chief Executive Officer and
has been treated as an exceptional item for consistency with the disclosure in the year to 31 December 2018. A further £0.8 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 £0.04 million arising from the tax benefit on the FusionStorm exceptional acquisition costs has been recognised as tax on the above
exceptional item. A further tax credit of £0.8 million was recorded due to post-acquisition activity in FusionStorm, related to the transaction,
which has resulted in an in-year tax benefit. This activity was 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 as an exceptional tax item.
2018: Included within the prior 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 as an exceptional tax item.
9 Staff costs
The average monthly number of employees (including Executive Directors) during the year was made up as follows:
UK
Germany
France
USA
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.
10 Finance income
Bank interest receivable
Other interest received
2019
No.
4,264
6,511
1,595
604
2,842
15,816
2019
£’000
779,462
113,162
6,754
27,966
927,344
2018
No.
4,182
6,124
1,528
642
2,641
15,117
2018
£’000
735,234
110,758
6,425
24,667
877,084
2019
£’000
823
157
980
2018
£’000
792
458
1,250
145
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
11 Finance costs
Bank loans and overdrafts
Finance charges payable on CSF
Interest expense on lease liabilities
Other interest
12 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 (2018: 19 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 27.9 per cent (2018: 25.2 per cent)
146
2019
£’000
2,406
–
3,728
912
7,046
2018
£’000
756
293
–
1,441
2,490
2019
£’000
2018
£’000
13,213
12,528
26,724
(878)
25,846
(460)
38,599
311
487
798
20,942
(4,444)
16,498
148
29,174
(1,830)
(145)
(1,975)
39,397
27,199
2019
£’000
140,958
2018
£’000
108,128
26,782
1,474
432
266
8,876
32
1,604
(69)
–
39,397
20,544
987
589
(384)
6,736
(334)
1,390
(2,427)
98
27,199
c) Tax losses
Deferred tax assets of £2.0 million (2018: £4.2 million) have been recognised in respect of losses carried forward.
In addition, at 31 December 2019, there were unused tax losses across the Group of £143.0 million (2018: £152.6 million) for which no deferred tax
asset has been recognised. Of these losses, £39.8 million (2018: £40.1 million) arise in Germany and £103.2 million (2018: £112.5 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.
d) Deferred tax
Deferred income tax at 31 December 2019 and 31 December 2018 relates to the following:
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 liabilities
Revaluations of foreign exchange contracts to fair value
Amortisation of intangibles
Gross deferred income tax liabilities
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
Consolidated Income Statement
and Consolidated Statement
of Comprehensive Income
2019
£’000
2018
£’000
432
(285)
247
(2,131)
(2,000)
(277)
119
1,934
(71)
1,186
(555)
(1,196)
(622)
(1,975)
Consolidated Balance Sheet
2019
£’000
5,300
6,575
369
1,343
13,587
809
15,272
16,081
2018
£’000
4,868
4,887
121
4,167
14,043
738
16,727
17,465
(2,494)
(3,422)
9,204
(11,698)
(2,494)
9,587
(13,009)
(3,422)
At 31 December 2019, there was no recognised or unrecognised deferred income tax liability (2018: £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.
147
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
13 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
14 Dividends paid and proposed
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2018: 21.6 pence (2017: 18.7 pence)
Interim dividend for 2019: 10.1 pence (2018: 8.7 pence)
Proposed (not recognised as a liability as at 31 December)
Equity dividends on ordinary shares:
Final dividend for 2019: 26.9 pence (2018: 21.6 pence)
2019
£’000
101,655
2019
£’000
112,514
1,655
114,169
2019
pence
90.3
89.0
2018
£’000
80,931
2018
£’000
113,409
1,984
115,393
2018
pence
71.4
70.1
2019
£’000
2018
£’000
24,366
11,398
35,764
21,075
9,805
30,880
30,704
24,654
148
15 Property, plant and equipment
Cost
At 1 January 2018
Relating to acquisition of subsidiaries
Additions
Disposals
Foreign currency adjustment
At 31 December 2018
Transfer
Implementation of IFRS 16
Relating to acquisition of subsidiaries (note 18)
Additions
Disposals
Foreign currency adjustment
At 31 December 2019
Accumulated depreciation and impairment
At 1 January 2018
Relating to acquisition of subsidiaries
Provided during the year
Disposals
Foreign currency adjustment
At 31 December 2018
Implementation of IFRS 16
Relating to acquisition of subsidiaries (note 18)
Provided during the year
Disposals
Foreign currency adjustment
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 1 January 2018
Freehold land
and buildings
£’000
Short leasehold
improvements
£’000
Fixtures, fittings,
equipment
and vehicles
£’000
Right-of-
use assets
£’000
77,484
–
8,604
(989)
358
85,457
–
–
–
1,414
–
(1,110)
85,761
40,442
–
1,509
(989)
10
40,972
–
–
1,965
–
(45)
42,892
42,869
44,485
37,042
29,469
1,859
6,243
(15,798)
329
22,102
–
–
2,223
6,713
(1,385)
(795)
28,858
20,163
1,255
2,215
(15,732)
119
8,020
–
1,724
3,808
(1,345)
(361)
11,846
17,012
14,082
9,306
133,195
6,480
30,595
(33,290)
1,408
138,388
(15,348)
–
2,765
22,005
(6,270)
(3,790)
137,750
101,639
1,771
15,656
(29,233)
855
90,688
(6,581)
2,579
15,683
(3,602)
(2,579)
96,188
–
–
–
–
–
–
15,348
111,839
958
34,971
(3,021)
(5,435)
154,660
–
–
–
–
–
–
6,581
–
40,266
(2,309)
(760)
43,778
Total
£’000
240,148
8,339
45,442
(50,077)
2,095
245,947
–
111,839
5,946
65,103
(10,676)
(11,130)
407,029
162,244
3,026
19,380
(45,954)
984
139,680
–
4,303
61,722
(7,256)
(3,745)
194,704
41,562
110,882
212,325
47,700
31,556
–
–
106,267
77,904
The Group leases various properties, equipment and cars. Rental contracts are typically made for fixed periods of two to 10 years, but might have
extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants, but leased assets cannot be used as security for borrowing purposes.
As at 31 December 2019, the net book value of recognised right-of-use assets relating to land and buildings was £68.0 million and plant and
equipment £42.9 million. The depreciation charge for the year relating to those assets was £16.8 million and £23.5 million, respectively.
Gross finance lease arrangements of £15.3 million and related depreciation of £6.6 million previously presented within plant and equipment,
have been reclassified to the right-of-use assets’ heading. There has been no change in the amount recognised.
149
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
16 Intangible assets
Cost
At 1 January 2018
Relating to acquisition of subsidiaries
Additions
Disposals
Foreign currency adjustment
At 31 December 2018
Relating to acquisition of subsidiaries (note 18)
Additions
Disposals
Adjustment within measurement period
Foreign currency adjustment
At 31 December 2019
Accumulated amortisation and impairment
At 1 January 2018
Relating to acquisition of subsidiaries
Provided during the year
Disposals
Foreign currency adjustment
At 31 December 2018
Relating to acquisition of subsidiaries (note 18)
Provided during the year
Disposals
Foreign currency adjustment
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 1 January 2018
Acquired intangible assets
Goodwill
£’000
Software
£’000
Customer
relationship
£’000
Others
£’000
Total
£’000
66,245
45,704
–
–
1,948
113,897
3,111
–
–
(4,131)
(3,360)
109,517
10,816
–
–
–
166
10,982
–
–
–
(709)
10,273
99,244
102,915
55,429
102,276
1,057
5,935
(9,354)
173
100,087
1,394
8,737
(1,321)
–
(633)
108,264
78,156
890
10,977
(9,190)
136
80,969
1,377
7,169
(1,295)
(523)
87,697
20,567
19,118
24,120
–
61,090
–
–
1,935
63,025
–
–
–
–
(2,314)
60,711
–
–
1,049
–
293
1,342
–
4,161
–
(443)
5,060
55,651
61,683
–
20,140
3,070
–
(1,315)
691
22,586
–
–
(1,376)
–
(718)
20,492
19,354
–
3,402
(1,315)
248
21,689
–
213
(1,326)
(292)
20,284
188,661
110,921
5,935
(10,669)
4,747
299,595
4,505
8,737
(2,697)
(4,131)
(7,025)
298,984
108,326
890
15,428
(10,505)
843
114,982
1,377
11,543
(2,621)
(1,967)
123,314
208
897
786
175,670
184,613
80,335
17 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
• FusionStorm
• Computacenter Netherlands (formerly Misco Solutions B.V.)
• PathWorks GmbH
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.
150
Movements in goodwill
1 January 2018
Relating to acquisition
of subsidiaries
Foreign currency
adjustment
31 December 2018
Relating to acquisition
of subsidiaries
Integration
of CGU
Adjustment within
measurement period
Foreign currency
adjustment
31 December 2019
Market
growth rate
Discount rate
CC* – Computacenter.
CC* (UK)
Limited
£’000
30,429
TeamUltra
Limited
£’000
4,620
CC*
Germany
£’000
15,906
CC* AG
£’000
1,016
cITius AG
£’000
1,992
CC* Belgium
£’000
1,466
Fusion
-Storm
£’000
–
CC*
Netherlands
£’000
–
PathWorks
GmbH
£’000
–
–
–
–
–
–
–
42,415
3,289
–
30,429
–
4,620
244
16,150
53
1,069
104
2,096
90
1,556
1,276
43,691
15
3,304
–
–
–
Total
£’000
55,429
45,704
1,782
102,915
–
–
4,620
(4,620)
–
–
–
(856)
15,294
–
–
–
1.6%
8.7%
1.0%
10.0%
–
–
–
(17)
1,052
1.5%
9.7%
–
–
–
–
–
–
(33)
2,063
1.5%
9.7%
(121)
1,435
1.4%
11.3%
–
–
(4,131)
(1,399)
38,161
1.8%
11.0%
–
–
–
(176)
3,128
1.3%
10.7%
3,138
3,138
–
–
–
(4,131)
(76)
3,062
(2,678)
99,244
1.5%
9.7%
–
–
35,049
1.6%
8.7%
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 1.0 per cent
and 1.8 per cent (2018: between 1.5 and 2.0 per cent) thereafter.
Key assumptions used in the value-in-use calculation for all CGUs for 31 December 2019 and 31 December 2018 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 8.7 per cent to 11.3 per cent (2018: 11.0 per cent 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.
151
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
18 Investments
a) Investment in associate
The following table illustrates summarised information of the investment in associates:
Cost
At 1 January
Liquidation
Exchange rate movement
At 31 December
Impairment
At 1 January
Liquidation
At 31 December
Carrying value
2019
£’000
606
(549)
(3)
54
(549)
549
–
54
2018
£’000
605
–
1
606
(549)
–
(549)
57
Gonicus GmbH
The Group has a 20 per cent (2018: 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 (ICS)
ICS was liquidated on 4 September 2019. The Group had a 25 per cent (2018: 25 per cent) interest in ICS.
b) Investment in subsidiaries
The Group’s subsidiary undertakings are as follows:
Name
Computacenter NV/SA
Computacenter Beijing Var Company Ltd
Computacenter Hong Kong Limited
Computacenter (UK) Limited
TeamUltra Limited
R.D. Trading Limited
Computacenter France SAS
Computacenter AG & Co oHG
Computacenter Aktiengesellschaft
Computacenter Management GmbH
Computacenter Managed Services GmbH
Computacenter Germany AG & Co oHG
Computacenter Holding GmbH
Alfatron GmbH Elektronik – Vertrieb
C’NARIO Informationsprodukte Vertriebs-GmbH
E’ZWO Computer vertriebs
Computacenter Ireland Limited
Computacenter B.V.
Computacenter NV
Computacenter Netherlands B.V.
Computacenter (Pty) Limited
Computacenter AG
Computacenter PS AG
152
Country of incorporation
Belgium¹
China²
China³
England⁴
England⁴
England⁵
France⁶
Germany⁷
Germany⁸
Germany⁸
Germany⁸
Germany⁹
Germany⁹
Germany⁹
Germany⁹
Germany⁹
Ireland¹⁰
Netherlands¹¹
Netherlands¹²
Netherlands¹³
South Africa¹⁴
Switzerland¹⁵
Switzerland¹⁶
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
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
Proportion of voting rights
and shares held
2019
100%vi
100%v
100%v
100%
100%i
100%
100%
100%
100%
100%
100%
100%ii
100%
100%ii
100%ii
99.09%ii
100%
100%
100%
100%v
100%i
100%
100%iii
2018
100%vi
100%v
100%v
100%
100%i
–
100%
100%
100%
100%
100%
100%ii
100%
100%ii
100%ii
99.09%ii
–
100%
100%
100%v
100%i
100%
100%iii
Name
PathWorks GmbH
Computacenter Fusionstorm Inc.
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.
Computacenter Services (Iberia) SLU
FusionStorm Netherlands Cooperatief
Computacenter Quest Trustees Limited
Computacenter 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 Group Limited
Digica Group Holdings Limited
Digica SMP Limited
Digica (FMS) Limited
ICG Services Limited
M Services Limited
Merchant Business Systems Limited
Merchant Systems Limited
Logival (SARL)
Damax GmbH
Computacenter (US) Defense Inc.
Country of incorporation
Switzerland¹⁷
USA¹⁸
USA¹⁸
USA¹⁸
USA¹⁹
England⁴
Germany⁷
China²⁰
Hungary²¹
India²²
Malaysia²³
Mexico²⁴
Poland²⁵
Spain²⁶
Netherlands¹³
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
France⁶
Switzerland¹⁵
USA¹⁹
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
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
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
2019
100%
100%v
100%v
100%v
100%
100%i
100%
100%i
100%i
100%viii
100%i
100%viii
100%vii
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%iv
100%iii
100%v
2018
100%
100%v
100%v
100%v
100%
100%i
100%
100%i
100%i
100%viii
100%i
100%viii
100%viii
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%iv
100%iii
100%v
153
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
18 Investments continued
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 99.09 per cent
iii
Includes indirect holdings of 100 per cent via Computacenter AG
iv
Includes indirect holdings of 100 per cent via Computacenter France SAS
Includes indirect holdings of 100 per cent via Computacenter (U.S.) Inc.
v
vi
Includes indirect holdings of 1 per cent via Computacenter (UK) Limited
vii Includes indirect holdings of 99 per cent via Computacenter (UK) Limited
viii Includes indirect holdings of 99.99 per cent via Compuatcenter (UK) Limited
Ikaroslaan 31, B-1930 Zaventem
1.
2. 2/F, Building 6, Tian Tan East Road 31, Dongcheng District, Beijing City
3. 3806 Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
4. Hatfield Avenue, Hatfield, Hertfordshire AL10 9TW
5. Tekhnicon, Springwood, Braintree, Essex CM7 2YN
6.
Agence de Roissy, 229 rue de la Belle Etoile, ZI Parid Nord II, BP 52387, 95943 Roissy
CDG Cedex
7. Computacenter Park 1, 50170 Kerpen, Germany
8. Kattenbug 2, 50667 Koln
9. Werner-Eckert-Str. 16 - 18, 81829 Munchen
Computacenter plc is the ultimate Parent entity of the Group.
10. Skybridge House, Corballis Road North, Dublin Airport, Swords, Co. Dublin, K67P6K2
11. Gondel 1, 1186 MJ Amstelveen, Netherlands
12. Beech Avenue 54 - 80 1119 PW Schipol-Rjik
13. Prins Bernhardplein 200, 1097JB Amsterdam
14. Building 1, Parc du Cap, Mispel Road, Belville, 7535, Cape Town
15. Riedstrasse 14, CH-8953 Dietikon
16. Giessereistrasse 4, CH-8620 Wetzikon
17. Luzernerstrasse 52c, CH 6025 Neudorf
18. 1 University Ave, Suite 102, Westwood, MA 02090
19. 250 Pehle Avenue, Suite 311 Plaza One, Saddle Brook
20. Unit 229, Block 2, Building 1, Huanhu West 2nd Road no. 888 Nanhui New Town, Putong
District Shanghai
21. Haller Gardens, Building D. 1st Floor, Soroksari ut 30 - 34, Budapest 1095
22. No.135/1, Purva Premiere, Residency Road, Ward No: 76, Bangalore, 560025, Karnataka
23. Level 9, Tower 1, Puchong Financial Corporate Centre, Jalan Puteri 1/2, Bandar Puteri
47100 Puchong, Selangor Darul Ehsan
24. Av. Paseo de la Reforma, No.412 floor 5, Col.Juarez, Delegacion Cuauhtemoc, CP06600,
Mexico City
25. Ul. Glogowska 31/33, 60 - 702, Poznan, Poland
26. Carrer de Sancho De Avila 52 - 58, 08018, Barcelona
R.D. Trading Limited (RDC)
On 10 August 2019, the Group acquired 90 per cent of the voting shares of RDC for a consideration of 90 pence. The Group received a cash
consideration of £8.1 million from the seller of RDC. The acquisition-related costs amounted to £0.3 million and are included in the Consolidated
Income Statement. RDC is based in the UK and is an IT assets disposer. 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:
Non-current assets
Property, plant and equipment (including right-of-use assets)
Software
Inventories
Trade and other receivables
Prepayments
Cash and short-term deposits
Trade and other payables
Property provisions
Lease liabilities
Net liabilities acquired
Goodwill arising on acquisition
Discharged by:
Cash received on acquisition
Cash and cash equivalents acquired
Cash and short-term deposits
Cash inflow on acquisition
Provisional
fair value to
the Group
£’000
1,643
17
2,641
1,590
875
869
(8,619)
(2,000)
(5,128)
(8,112)
–
(8,112)
(8,112)
(869)
(8,981)
The initial accounting for the acquisition of RDC has only been provisionally determined at the date of finalisation of these Consolidated Financial
Statements based on Management’s best estimates. It is expected that adjustments could be made to the allocation of value between property,
plant and equipment, trade and other payables, property provisions, lease liabilities and deferred taxes.
From the date of acquisition to 31 December 2019, RDC contributed £7.5 million to the Group’s revenue and a loss of £0.4 million to the Group’s
profit after tax.
154
PathWorks GmbH (PathWorks)
On 1 March 2019, the Group acquired 100 per cent of the voting shares of PathWorks for an initial consideration of €3.9 million and agreed to an
undiscounted contingent consideration of €0.5 million, dependent upon the achievement of agreed performance criteria over the next three
years from the date of acquisition. The acquisition-related costs amounted to €0.1 million and are included in the Consolidated Income Statement.
PathWorks is based in Switzerland 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:
Inventories
Trade and other receivables
Cash and short-term deposits
Prepayments
Trade and other payables
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
Final fair value
to the Group
£’000
75
737
585
367
(1,452)
312
3,138
3,450
3,107
343
3,450
(585)
2,865
The accounting for the acquisition of PathWorks has now been finalised at the date of finalisation of these Financial Statements. Included in the
£3.1 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 Technology Sourcing business in Switzerland and the skillset of the workforce.
From the date of acquisition to 31 December 2019, PathWorks contributed £18.4 million to the Group’s revenue and a profit of £0.8 million to the
Group’s profit after tax.
Contingent consideration
Based on the performance of the business in FY2019 and the forecasted performance for FY2020 and FY2021, Management’s assessment is that
it is highly probable that the contingent consideration of €0.5 million will become payable and accordingly the discounted contingent
consideration (using a discount rate of 9.7 per cent) 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 the vendor
shareholders due to be paid the consideration were not required to remain in employment post-acquisition.
Results of acquisition from 1 January 2019
If the acquisition of RDC and PathWorks were completed on 1 January 2019, the Group’s revenue for the year would have been £5,093 million and
the Group’s profit after tax would have been £98.1 million.
Acquisitions in previous periods
In FY2019, the provisional fair values recorded for the FY2018 acquisition of FusionStorm were finalised resulting in a decrease to goodwill of
£4.1 million at 31 December 2019. The changes to fair values were mainly due to a change in Management’s assessment of realisation of deferred
tax liabilities that existed in the acquired liabilities. No change was recorded in the fair values of Computacenter Netherlands, which was also
acquired in FY2018.
155
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
19 Inventories
Inventories for re-sale
20 Trade and other receivables
Trade receivables
Other receivables
2019
£’000
122,189
2018
£’000
99,524
2019
£’000
948,334
48,128
996,462
2018
£’000
1,128,456
51,938
1,180,394
For terms and conditions relating to related party receivables, refer to note 34.
Trade receivables are non-interest bearing and are generally on 30 to 90-day credit terms. Note 27 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
2019
£’000
19,858
13,354
(6,874)
(3,534)
(894)
21,910
2018
£’000
12,480
14,709
(6,565)
(5,001)
4,235
19,858
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:
2019
Expected loss rate
Gross carrying amount
Provision
2018
Expected loss rate
Gross carrying amount
Provision
21 Cash and short-term deposits
Cash at bank and in hand
Neither past
due nor
impaired
£’000
0.31%
831,180
2,546
Total
£’000
2.26%
970,244
21,910
1.73%
1,148,314
19,858
0.43%
1,003,452
4,287
Past due but not impaired
<30 days
£’000
30–60 days
£’000
60–90 days
£’000
90–120 days
£’000
>120 days
£’000
3.14%
88,197
2,773
4.21%
89,008
3,749
8.18%
22,218
1,817
3.63%
30,785
1,118
18.73%
9,932
1,860
3.70%
11,697
433
41.81%
4,518
1,889
74.62%
1,852
1,382
77.65%
14,199
11,025
77.16%
11,520
8,889
2019
£’000
217,881
2018
£’000
200,442
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 £217,881,000 (2018: £200,442,000).
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
£13.1 million at 31 December 2019 (2018: £11.7 million). During 2013, the Group entered into a specific committed facility of £40.0 million. In 2018,
this facility was renewed for a second time to a value of £60.0 million and expires on 22 May 2021.
156
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
Expected credit loss on cash and cash equivalents is negligible and therefore no provision is held.
22 Trade and other payables
Trade payables
Other payables
2019
£’000
217,881
2018
£’000
200,442
2019
£’000
643,377
334,843
978,220
2018
£’000
885,834
256,794
1,142,628
For terms and conditions relating to related parties, refer to note 34.
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 (2018: 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.
23 Financial liabilities
Current
Bank loan
Lease liabilities
Current obligations under finance leases – ‘CSF’
Non-current
Bank loan
Lease liabilities
Non-current obligations under finance leases – ‘CSF’
2019
£’000
20,032
36,574
–
56,606
60,740
80,192
–
140,932
2018
£’000
7,472
–
3,168
10,640
126,762
–
5,760
132,522
There are no material differences between the fair value of financial liabilities and their book value.
Bank loans
The Group has two principal bank loans:
• A loan of £100 million was drawn at 2.05 per cent interest rate to finance the acquisition of FusionStorm. The outstanding balance as at
31 December 2019 was £56 million at a revised interest rate of 2.10 per cent. Repayment of this loan commenced in H1 2019 and will continue
for two years, with an option to repay early. Management has made early repayments of £30 million during the year; and
• A total loan of €38.5 million was drawn at various stages between December 2017 and July 2018 to finance the fit out of the new German
headquarters building and Integration Center in Kerpen. Further details are shown below:
– €8.0 million drawn in December 2017, carries fixed interest rate at 1.65 per cent per annum. The balance on this loan as at 31 December 2019
was €4.8 million. Repayments commenced in H1 2018 and will continue for three years;
– €8.9 million drawn in December 2017 carries fixed interest rate at 1.95 per cent per annum. The balance on this loan as at 31 December 2019
was €7.1 million. Repayments commenced in H1 2018 and will continue for eight years;
– €8.5 million drawn in July 2018, carries fixed interest rate at 0.95 per cent per annum. The balance on this loan as at 31 December 2019 was
€5.8 million. Repayments commenced in H2 2018 and will continue for four years; and
– €13.1 million was taken out in 2018, carries fixed interest rate at 0.75 per cent per annum. The balance on this loan as at 31 December 2019
was €11.3 million. Repayments commenced in H2 2018 and will continue for eight years.
157
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
23 Financial liabilities continued
Lease liabilities
Implementation of IFRS 16
Additions during the year
Relating to acquisition of a subsidiary
Payment of lease liabilities
Interest relating to lease liabilities
Cancellations during the year
Exchange adjustment
At 31 December 2019
Current 2019
Non-current 2019
£’000
120,606
35,720
5,128
(42,346)
3,728
(772)
(5,298)
116,766
36,574
80,192
116,766
Finance leases – FY2018
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 2019, the Group had available £13.1 million of uncommitted overdraft facilities (2018: £11.7 million).
24 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
2019
£’000
(852)
2018
£’000
(39)
2,363
1,511
3,278
3,239
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 £2,363,000 (2018: £3,278,000)
with a deferred tax liability of £440,000 (2018: £616,000) 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 £2,363,000 (2018: £3,278,000)
are expected to mature and affect the Consolidated Income Statement between 2020 and 2024.
158
Forward currency contracts
At 31 December 2019 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 2019
UK
Germany
31 December 2018
UK
Germany
25 Obligations under leases
Buy currency
Sterling
Sterling
Sterling
US dollars
Euros
Swiss francs
Hungarian forint
Norwegian krone
SA rand
Polish zloty
Singapore dollar
Euros
US dollars
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
£2,703,761
£9,784,231
£5,137,156
$38,764,047
€27,579,307
CHF 2,750,000
HUF 188,000,000
NOK 1,825,000
ZAR 147,937,146
PLN 6,630,000.00
SGD35,000
$76,959,468
€9,000,000
Euros
SA rand
US dollars
Sterling
Sterling
Sterling
Sterling
Sterling
Sterling
Sterling
Sterling
US dollars
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 20 – Dec 21
Jan 20 – Nov 24
Jan 20 – Mar 20
Jan 20 – Jan 22
Jan 20 – Apr 20
Mar 20 – Dec 20
Jan 20 – Dec 20
Jan 20
Jan 20 – Oct 22
Jan 20 – Jun 20
Jan 20
Jan 20 – Mar 20
Jan 20 – Mar 20
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 – 1.174
18.374 – 27.262
1.286 – 1.331
1.225 – 1.422
0.847 – 0.851
1.2630 – 1.2776
386.028 – 391.177
11.649
18.443 – 23.505
5.005 – 5.041
1.784
1.104 – 1.124
1.124 – 1.128
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
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
2019
£’000
209
2018
£’000
159
159
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
26 Provisions
At 1 January 2018
Reclassification from other payables
Amounts reversed
Arising during the year
Utilised
Exchange adjustment
At 31 December 2018
Arising during the year
Utilisation
Relating to acquisition of a subsidiary
Exchange adjustment
At 31 December 2019
Current 2019
Non-current 2019
Current 2018
Non-current 2018
Customer
contract
provisions
£’000
–
8,196
(1,100)
14,734
(5,645)
209
16,394
2,535
(10,639)
–
(475)
7,815
5,786
2,029
7,815
10,271
6,123
16,394
Retirement
benefit
obligation
£’000
5,904
–
–
1,440
(47)
119
7,416
1,344
(34)
–
(415)
8,311
–
8,311
8,311
–
7,416
7,416
Property
provisions
£’000
2,913
–
–
–
(173)
11
2,751
404
3
2,000
(44)
5,114
1,472
3,642
5,114
1,249
1,502
2,751
Other
provisions
£’000
463
–
–
–
–
7
470
–
–
–
(25)
445
445
–
445
470
–
470
Total
provisions
£’000
9,280
8,196
(1,100)
16,174
(5,865)
346
27,031
4,283
(10,670)
2,000
(959)
21,685
7,703
13,982
21,685
11,990
15,041
27,031
Customer contract provision
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
2.12.3 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 £34,000 of payments during 2019 under this obligation (2018: £47,000).
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 2019 in respect of the Group’s French retirement benefit obligations
under the IFC was £8.3 million (2018: £7.4 million). Key movements during the year include a charge to the Consolidated Income Statement of
£0.5 million for the service cost and an actuarial loss taken through reserves of £0.8 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 which primarily include retraining and resettlement costs for redundant employees are
expected to be utilised in 2020.
160
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.
27 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.
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.
2019
Sterling
Euro
US dollars
2018
Sterling
Euro
US dollars
Change in
basis points
Effect on profit
before tax
£’000
+25
+25
+25
+25
+25
+25
(25)
38
374
(153)
150
26
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.
161
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
27 Financial instruments continued
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 (USD), 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 USD, €, ZAR and HUF.
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
Forecast future cash flow (net)
Forward exchange contracts
Net exposure
31 December 2019
£’000
31 December 2018
£’000
USD
167,317
(144,328)
21,941
44,930
EUR
615,233
(649,600)
18,951
(15,416)
USD
272,944
(260,980)
(123,767)
(111,803)
EUR
755,899
(725,789)
(10,018)
20,092
(44,930)
15,416
111,803
(20,092)
–
–
–
–
Liquidity risk
The table below summarises the maturity profile of the Group’s financial liabilities as at 31 December based on contractual undiscounted payments:
On demand
£’000
<3 months
£’000
3–12 months
£’000
1–5 years
£’000
>5 years
£’000
Total
£’000
–
–
–
–
12,311
1,449
978,122
991,882
44,295
155
–
44,450
125,906
103
–
126,009
15,026
–
–
15,026
197,538
1,707
978,122
1,177,367
Year ended 31 December 2019
Financial liabilities
Derivative financial instruments
Trade and other payables
162
Year ended 31 December 2018
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
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 2019 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 £1,511,000 (2018: £3,239,000).
The realised gains from forward currency contracts in the year to 31 December 2019 of £3,278,000 (2018: £6,510,000) with a deferred tax liability
of £616,000 (2018: £1,107,000), are offset by broadly equivalent realised losses on the related underlying transactions.
28 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 2019, the cover was 2.5 times on an
adjusted1 profit basis (2018: 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 Technology Sourcing 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 loan. 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 Technology Sourcing 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 31.
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 21 for details on
uncommitted overdraft facilities available to the Group.
163
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
29 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 have
been amended to reflect this change.
Issued share capital – ordinary shares
Issued and fully paid
At 1 January 2019 and 31 December 2019
During the year, the issued share capital remained unchanged.
75⁄9p ordinary
shares
No. ’000
122,688
Total
£’000
9,270
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 30).
Asset reunification
Following the changes to our Articles of Association approved at our AGM on 16 May 2019, the Company, in conjunction with our Registrar,
conducted an asset reunification exercise during the year. A total of 21,458 shares were forfeited from 355 shareholders with a total of
£0.2 million returned to the Company from the sale of the shares. These funds have been allocated by the Board to be used to support the
charitable partners selected by our employees.
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 (2018: nil).
Own shares held
Own shares held comprise the following:
i) Computacenter Employee Share Ownership Plan (ESOP)
Shares in the Parent undertaking comprise 1,277,699 ordinary shares of 75⁄9 pence each in Computacenter plc (2018: 1,411,245) 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 1.04 per cent (2018: 1.15 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 1,277,699 ordinary shares of 75⁄9 pence each (2018: 1,411,245) that it owns
which are all unallocated shares.
ii) Computacenter Qualifying Employee Share Trust (‘the Quest’)
The total shares held are 228,965 ordinary shares of 75⁄9 pence each (2018: 336,181), which represents 0.19 per cent (2018: 0.27 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 2019 was £4,059,549 (2018: £3,563,519). 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 (2018: nil).
iii) Treasury shares
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.
164
As at 31 December 2019, 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.
30 Share-based payments
Executive share option scheme
During the year, nil options were exercised with respect to 75⁄9 pence ordinary shares (2018: nil) at a nominal value of nil (2018: nil) at an aggregate
premium of nil (2018: nil). Under the Computacenter Employee Share Option Scheme 1998 and the Computacenter Services Group Executive Share
Scheme, options in respect of nil (2018: 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, 541,236 shares were awarded (2018: 540,324), 412,105 shares were exercised (2018: 469,256) and 123,803 shares lapsed (2018:
216,046). At 31 December 2019 the number of shares outstanding was as follows:
Date of grant
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
21/03/2019
21/03/2019
21/03/2019
Maturity date
23/03/2015
21/03/2016
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
18/05/2021
21/03/2020
21/03/2021
21/03/2022
Share price at
date of grant
433.0p
440.0p
682.5p
720.0p
847.0p
736.5p
1182.67p
1182.67p
1182.67p
1182.67p
1314.00p
1314.00p
1192.00p
1192.00p
1192.00p
2019
Number
outstanding
2,285
6,614
68,645
66,329
94,953
631,319
–
19,341
255,240
139,092
22,334
14,985
18,130
18,131
496,737
1,854,135
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
The weighted average share price at the date of exercise for the options exercised is £11.06 (2018: £11.75).
The weighted average remaining contractual life for the options outstanding as at 31 December 2019 is 1.1 years (2018: 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, 1,016,492 options were granted (2018: 865,055) with a fair value of £3,974,764
(2018: £2,079,828).
165
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
30 Share-based payments continued
Under the scheme the following options have been granted and are outstanding at the year end:
Date of grant
October 2013
October 2014
October 2015
October 2015
October 2016
October 2016
October 2017
October 2017
October 2018
October 2018
October 2019
October 2019
October 2019
Exercisable between
01/12/2018 – 31/05/2019
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
01/12/2022 – 01/06/2023
01/12/2024 – 01/06/2025
01/12/2021 – 01/06/2022
Share
price
430.00p
524.00p
675.00p
600.00p
649.00p
577.00p
888.00p
789.00p
1186.00p
1054.00p
1138.00p
1011.00p
1138.00p
2019
Number
outstanding
–
95,890
–
561,503
41,921
509,661
306,288
645,958
271,327
519,633
305,802
636,697
69,857
3,964,537
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
The following table illustrates the number (No.) and weighted average exercise price (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
2019
No.
4,209,927
1,016,492
(234,666)
(1,027,216)
3,964,537
2019
WAEP
£7.41
£10.58
£8.19
£5.56
£8.65
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
Exercisable at the end of the year
163,790
£6.20
321,346
£5.40
Note
*** The weighted average share price at the date of exercise for the options exercised is £14.37 (2018: £10.94).
The weighted average remaining contractual life for the options outstanding as at 31 December 2019 is 3.1 years (2018: 3.0 years).
166
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 2019 and 31 December 2018:
2019
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
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
PSP
scheme
21/03/19
PSP
scheme
21/03/19
PSP
scheme
21/03/19
PSP
scheme
21/03/19
DBP
scheme
21/03/19
DBP
scheme
21/03/19
SAYE
scheme
01/12/19
SAYE
scheme
01/12/19
SAYE
scheme
01/12/19
305,505
nil
42,701
nil
141,988
nil
14,781
nil
18,130
nil
18,131
nil
69,914
£11.38
308,814
£11.38
637,764
£10.11
£11.92
£11.92
£11.92
£11.92
£11.92
£11.92
£15.11
£15.11
£15.11
3
See note 1
below
n/a
3
n/a
2.60%
3
See the Annual
Remuneration
Report on
page 84 in 2018
Annual Report
and Accounts
n/a
5
See the Annual
Remuneration
Report on
page 84 in 2018
Annual Report
and Accounts
n/a
3
n/a
2.60%
5
n/a
2.60%
3
See note 1
below
n/a
3
n/a
2.60%
1
See the Annual
Remuneration
Report on
page 84 in 2018
Annual Report
and Accounts
n/a
2
See the Annual
Remuneration
Report on
page 84 in 2018
Annual Report
and Accounts
n/a
2
3
5
Two-year
service period
and savings
requirement
35.60%
Three-year
service period
and savings
requirement
32.70%
Five-year
service period
and savings
requirement
29.90%
1
n/a
2.60%
2
n/a
2.60%
2
2.50%
2.37%
3
2.50%
2.37%
5
2.50%
2.37%
£11.05
£11.05
£10.49
£11.05
£11.62
£11.33
£4.32
£4.33
£4.92
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
3
See the Annual
Remuneration
Report on
page 74 in 2017
Annual Report
and Accounts
3
3
See note 1
below
See note 1
below
1
See the Annual
Remuneration
Report on
page 74 in 2017
Annual Report
and Accounts
2
See the Annual
Remuneration
Report on
page 74 in 2017
Annual Report
and Accounts
n/a
5
n/a
2%
n/a
3
n/a
2%
n/a
3
n/a
1.8%
n/a
3
n/a
2%
n/a
1
n/a
2%
n/a
2
n/a
2%
3
5
Three-year
service period
and savings
requirement
Five-year
service period
and savings
requirement
29.1%
27.9%
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
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.
167
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
30 Share-based payments continued
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.
31 Analysis of changes in net funds
Cash and short-term deposits
Cash and cash equivalents
Bank loans
Adjusted net funds3 (excluding CSF and lease liabilities)
CSF leases
Lease liabilities
Total lease liabilities
Net funds
At
1 January
2019
£’000
200,442
200,442
(134,234)
66,208
(8,928)
–
(8,928)
57,280
Implementation
of IFRS 16
£’000
–
–
–
–
8,928
(120,606)
(111,678)
(111,678)
Cash flows
in year
£’000
24,388
24,388
51,755
76,142
–
42,346
42,346
118,488
Non-cash
flow
£’000
–
–
–
–
–
(43,793)
(43,793)
(43,793)
Exchange
differences
£’000
(6,949)
(6,949)
1,707
(5,241)
–
5,287
5,287
46
At
31 December
2019
£’000
217,881
217,881
(80,772)
137,109
–
(116,766)
(116,766)
20,343
The financing cash flows included in the table above are repayment of bank loans of £51.8 million and lease liabilities of £42.3 million during the
year. The repayment of lease liabilities also included interest payment of £3.7 million.
Cash and short-term deposits
Bank overdraft
Cash and cash equivalents
Bank loans
Adjusted net funds3 (excluding CSF)
CSF leases
Total CSF
Net funds
At
1 January
2018
£’000
206,605
(6)
206,599
(10,667)
195,932
(4,745)
(4,745)
191,187
Cash flows
in year
£’000
(7,743)
6
(7,737)
(122,946)
(130,683)
(4,322)
(4,322)
(135,005)
Non-cash
flow
£’000
–
–
–
–
–
433
433
433
Exchange
differences
£’000
1,580
–
1,580
(621)
959
(294)
(294)
665
At
31 December
2018
£’000
200,442
–
200,442
(134,234)
66,208
(8,928)
(8,928)
57,280
32 Capital commitments
At 31 December 2019, the Group held no significant commitments for capital expenditure (2018: £4.3 million, in relation to the fit-out of the new
German headquarters and Integration Center in Kerpen).
168
33 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 9. 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
2019
£’000
8,311
2019
£’000
7,416
492
107
599
752
750
–
2
(423)
329
(33)
(33)
8,311
2019
%
1.50
0.76
17.20
12.60
10.20
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
At 31 December 2019, the discount rate used was 1.5 per cent (2018: 1.5 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)
2019
£’000
Increase
959
(1,112)
641
Decrease
(1,130)
964
(721)
2018
£’000
Increase
862
(1,006)
586
Decrease
(1,014)
872
(658)
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.
169
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019
34 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
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
Purchase from related parties
Amounts owed to related parties
2019
£’000
32
654
6
2018
£’000
23
838
–
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 100 for details of compensation given. 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
2019
£’000
2,447
422
2,623
40
5,532
2018
£’000
1,791
433
1,367
65
3,656
The interests of the key management personnel in the Group’s share incentive schemes are disclosed in the Annual Remuneration Report on
pages 103 to 104.
35 Contingent liabilities
The Company has given a guarantee in the normal course of business to suppliers of subsidiary undertakings for an amount not exceeding
£130.1 million (2018: £158.3 million).
170
Company Balance Sheet
As at 31 December 2019
Non-current assets
Intangible assets
Investment property
Investments
Current assets
Debtors
Prepayments
Cash at bank and in hand
Total assets
Current liabilities
Trade and other payables
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 2020.
MJ Norris
Chief Executive Officer
FA Conophy
Group Finance Director
Note
2019
£’000
2018
£’000
3
4
5
6
7
8
8
33,721
14,000
333,961
381,682
135
348
278
761
382,443
16,709
15,107
331
32,147
40,890
40,890
73,037
309,406
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
(113,563)
278,810
309,406
9,270
3,942
74,957
55,990
(113,474)
297,835
328,520
171
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019
Company Statement
of Changes in Equity
For the year ended 31 December 2019
At 1 January 2019
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
Asset reunification
At 31 December 2019
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
Issued
share
capital
£’000
9,270
–
–
–
–
–
–
–
9,270
9,299
–
–
–
–
–
–
–
(29)
–
9,270
Share
premium
£’000
3,942
–
–
–
Capital
redemption
reserve
£’000
74,957
–
–
–
–
–
–
–
3,942
3,913
–
–
–
–
–
–
–
29
–
3,942
–
–
–
–
74,957
74,957
–
–
–
–
–
–
–
–
–
74,957
Merger
reserve
£’000
55,990
–
–
–
–
–
–
–
55,990
55,990
–
–
–
–
–
–
–
–
–
55,990
Own shares
held
£’000
(113,474)
–
–
15,798
–
(15,887)
–
–
(113,563)
(11,360)
–
–
11,158
–
(13,274)
(99,998)
–
–
–
(113,474)
Retained
earnings
£’000
297,835
19,825
19,825
(10,071)
6,775
–
(35,764)
210
278,810
310,284
20,794
20,794
(7,592)
6,425
–
–
(1,196)
–
(30,880)
297,835
Shareholders’
equity
£’000
328,520
19,825
19,825
5,727
6,775
(15,887)
(35,764)
210
309,406
443,083
20,794
20,794
3,566
6,425
(13,274)
(99,998)
(1,196)
–
(30,880)
328,520
172
Notes to the Company
Financial Statements
For the year ended 31 December 2019
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 2019 were authorised for issue by
the Board of Directors on 11 March 2020 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 2019. 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
173
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019
Notes to the Company Financial Statements continued
For the year ended 31 December 2019
2 Summary of significant accounting policies continued
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.
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.
174
3
Intangible assets
Cost
At 1 January 2019 and 31 December 2019
Accumulated amortisation
At 1 January 2019
Charge in the year
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
4
Investment properties
Cost
At 1 January 2019 and 31 December 2019
Accumulated depreciation
At 1 January 2019
Charge in the year
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
Intellectual
property
£’000
169,737
127,516
8,500
136,016
33,721
42,221
Freehold land
and buildings
£’000
42,350
27,314
1,036
28,350
14,000
15,036
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 £38.4 million at 31 December 2019 (2018: £37.6 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 2019.
175
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 Notes to the Company Financial Statements continued
For the year ended 31 December 2019
5
Investments
Cost
At 1 January 2019
Additions
Share-based payments
At 31 December 2019
Amounts provided
At 1 January 2019 and at 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
Investments in
subsidiary
undertakings
£’000
Loans to
subsidiary
undertakings
£’000
Investment
£’000
Total
£’000
435,516
7,659
6,775
449,950
2,754
–
–
2,754
25
–
–
25
438,295
7,659
6,775
452,729
115,989
2,754
25
118,768
333,961
319,527
–
–
–
–
333,961
319,527
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 18 to the Consolidated Financial Statements.
6 Debtors
Amount owed by subsidiary undertaking
Other debtors
Deferred tax
7 Trade and other payables
Amount owed to subsidiary undertaking
8 Financial liabilities
Current
Bank loan
Non-current
Bank loan
2019
£’000
–
127
8
135
2019
£’000
16,709
2019
£’000
2018
£’000
51,783
127
12
51,922
2018
£’000
–
2018
£’000
15,107
13,929
40,890
86,583
There are no material differences between the fair value of financial liabilities and their book value.
Bank loans
A loan of £100 million was drawn at 2.05 per cent interest rate to finance the acquisition of FusionStorm. The outstanding balance as at
31 December 2019 was £56 million at a revised interest rate of 2.10 per cent. Repayment of this loan commenced in H1 2019 and will continue
for two years, with an option to repay early. Management has made early repayments of £30 million during the year.
176
9 Contingent liabilities
The Company has given a guarantee in the normal course of business to suppliers of subsidiaries undertaking for an amount not exceeding
£130.1 million (2018: £158.3 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 2019 is £nil (2018: £nil).
10 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 £125,000 (2018: £115,000), 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 7 to the Consolidated Financial Statements).
11 Distributable reserves
Dividends are paid from the standalone Balance Sheet of Computacenter plc, and as at 31 December 2019, the distributable reserves are
approximately £165 million (2018: £184 million).
12 Issued share capital
Asset reunification
Following the changes to our Articles of Association approved at our AGM on 16 May 2019, the Company, in conjunction with our Registrar,
conducted an asset reunification exercise during the year. A total of 21,458 shares were forfeited from 355 shareholders with a total of
£0.2 million returned to the Company from the sale of the shares. These funds have been allocated by the Board to be used to support the
charitable partners selected by our employees.
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.
177
FINANCIAL STATEMENTSANNUAL REPORT AND ACCOUNTS 2019 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
Adjusted net funds3
Headcount (monthly average)
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
178
2015
£m
3,057.6
87.4
87.2
103.1
53.6p
125.2
12,993
2016
£m
3,245.4
86.2
86.4
63.8
54.0p
148.7
13,373
2017
£m
3,793.4
105.5
106.2
81.3
65.1p
195.2
14,026
2018
£m
4,352.6
118.8
118.2
80.9
75.7p
66.2
15,117
2019
£m
5,052.8
151.5
146.3
101.6
92.5p
137.1
15,816
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
2019
£m
212.3
–
175.6
0.1
9.2
3.5
122.2
996.5
176.3
3.3
–
217.9
(1,257.8)
(166.6)
492.5
Date
14 May 2020
28 May 2020
29 May 2020
26 June 2020
9 September 2020
Corporate information
Board of Directors
Peter Ryan (Non-Executive Chairman)
Mike Norris (Chief Executive Officer)
Tony Conophy (Group Finance Director)
Rene Haas (Non-Executive Director)
Philip Hulme (Non-Executive Director)
Ljiljana Mitic (Non-Executive Director)
Peter Ogden (Non-Executive Director)
Minnow Powell (Non-Executive Director)
Ros Rivaz (Senior Independent 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
179
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 (U.S.), Inc.
250 Pehle Avenue
Suite 311, Plaza One
Saddle Brook
NJ 07663
United States of America
Tel: +1 (201) 690-5237
Computacenter Fusionstorm Inc.
1 University Avenue
Suite 102, Westwood
MA 02090
United States of America
Tel:+ 1 800-228-8324
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
Mexico
Computacenter México S.A. de C.V.
Av. Paseo de la Reforma, No. 412-5
Col. Juarez
Delegacion Cuauhtemoc
CP 06600
México City
Mexico
Tel: +52 (55) 6844 0700
Netherlands
Computacenter B.V.
Gondel 1
1186 MJ Amstelveen
Netherlands
Tel: +31 (0) 88 435 8000
South Africa
Computacenter (Pty) Ltd
Building 1
Parc du Cap
Mispel Road
Bellville, 7535
Cape Town
South Africa
Tel: +27 (0) 21 957 4900
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
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
180
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 16,000 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.
© 2020 Computacenter.
All rights reserved.