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Track record suggests FTSE 250 IT company can continue to feed off digital transition
Thursday 02 May 2019 Author: Steven Frazer

In a modern world of technology dominated by US giants (Amazon, Microsoft, Apple) many investors might reasonably ask, Computacenter (CCC) who?

Yet this is a pan-European IT enterprise operator whose 14,000-odd staff annually ship more than 25m products to 4.2m end users, and provide valuable advice support and services before and after in 30 different languages. It has been part of the FTSE 250 index for most of the last 10 years.

In an era of unprecedented technological change there are thousands of organisations needing help with adaption and adoption, be it to stay competitive, engage better with customers, improve access to information and services, bolster efficiency or simply
trim costs.


Computacenter operates in three parts. On the infrastructure side it supplies customers with the PC desktops, tablets, smartphones and other devices on pretty skinny profit margins.

Professional services is where Computacenter experts consult and advise clients on a multitude of best-in-class software and applications, and resell what’s right for them. We’re talking about proper blue-chip venders, such as Microsoft, Oracle, Adobe, Cisco and Symantec.

Managed services go further still, providing an entire outsourced IT solution, which means clients don’t need to run their own large and expensive in-house IT teams. Computacenter effectively runs the IT show remotely on the client’s behalf, with 24/7 support, advice and problem solving available and local software engineers on-call when needed

It is a model that has worked for years thanks to steady growth, consistent profits and superb cash flows that feed into reliable dividends. Computacenter has an unbroken track record extending beyond 10 years for annual earnings increases.


Computacenter also hates to sit on idle cash. Since 2006 the company has handed back something like £350m to shareholders. This has made Computacenter shares an excellent investment over the years, producing an average 52.5% return per year over the past decade, according to calculations by Stifel analysts.

We believe this sort of performance will continue into the medium, even longer-term, and recent trading seems to back that view up.

The company recently said that its first three months to 31 March was ‘one of our best quarters ever’ and beyond management’s original expectations. It was also highly encouraging that even in the face of challenges such as Brexit, questions over global growth
and other concerns Computacenter has seen little or no impact on technology investment demand.

Current consensus for earnings per share of 77.3p imply a price to earnings multiple of 15.6 for 2019, falling to below 15 in 2020. This year’s anticipated 31.8p per share dividend implies a 2.6% income yield, plus there’s every chance of fresh cash returns on a longer-term view.


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