Slide 1: Interim Results 2005
Interim Results 2005 13th September, 2005
Slide 2: Financial Highlights
Financial Highlights z Turnover down 6% to £1.15 billion z Profit before tax down 73% to £8.2 million z EPS down 89% to 1.2p z Net cash up by £42 million to £87 million z Interim dividend increased to 2.5p Page 2
Slide 3: Operational Highlights
Operational Highlights z UK product margins declined steeply z Price competition z Vendor rebates z Modest progress in UK Managed Services z Disappointing performance in Continental Europe z Challenging market conditions in France and Germany z Cost reduction programmes frustratingly slow z Satisfac
Slide 4: Looking Ahead
Looking Ahead z Outlook for full year in line with expectations z Major strategic reassessment undertaken in UK z Reorganisation now completed z Platform for growth and profit recovery z Profit improvement efforts intensified in France and Germany z Focus on cost reduction z Board considering best u
Slide 5: Financial Review
Financial Review Tony Conophy
Slide 6: Group – Profit and Loss Account
Group – Profit and Loss Account H1 2004 Growth H1 2005 2005 / 2004 IFRS IFRS £m £m % Continuing operations Revenue 1,151.6 1,228.9 (6.3%) Cost of sales (1,009.3) (1,060.8) (4.9%) Gross profit 142.3 168.1 (15.4%) Gross profit % 12.4% 13.7% (1.3%) Other Operating Expenses (136.9) (138.3) (1.0%) Operat
Slide 7: Group - IFRS vs UK GAAP
Group - IFRS vs UK GAAP H1 2005 H1 2004 FY 2004 TOTAL TOTAL TOTAL £m £m £m UK GAAP : Profit before tax and exceptions 10.3 33.2 67.3 1a Positive goodwill 0.1 0.1 0.3 1b Negative goodwill 0.0 (0.5) (0.5) 2 Share based payment 0.7 (0.6) (0.9) 3 Employee benefits (2.7) (2.5) 0.0 4 Accounting for joint
Slide 8: UK – Revenue and Operating Profit
UK – Revenue and Operating Profit UK Revenue 900 829 800 768 756 758 700 716 675 700 600 500 £m 400 300 200 100 0 Half 1 2002 Half 2 2002 Half 1 2003 Half 2 2003 Half 1 2004 Half 2 2004 Half 1 2005 UK Operating Profit 40 34.6 35 31.9 31.4 30.4 29.3 30 25.7 25 £m 20 14.9 15 10 UK GAAP 5 0 IFRS Half 1
Slide 9: UK – Profit and Loss Account
UK – Profit and Loss Account H1 2005 H1 2004 Growth 2005/2004 IFRS IFRS £m £m % Revenues 715.5 758.4 (5.7%) Gross Profit 88.1 107.9 (18.3%) 12.3% 14.2% Other Operating Expenses (73.2) (78.6) (6.9%) (10.2%) (10.4%) Operating Profit 14.9 29.3 (49.1%) 2.1% 3.9% Headcount *: Direct 3,192 3,199 (0.2%) In
Slide 10: Germany – Revenue and Operating Profit
Germany – Revenue and Operating Profit Germany Revenue 400 344 350 316 319 312 300 300 250 £m 200 150 100 50 0 Half 1 2003 Half 2 2003 Half 1 2004 Half 2 2004 Half 1 2005 Germany Operating Profit 7 6.5 6 5.5 5 4 3.2 3 2.5 £m 2 1 UK GAAP 0 Half 1 2003 Half 2 2003 Half 1 2004 Half 2 2004 Half 1 2005 -
Slide 11: Germany – Profit and Loss Account
Germany – Profit and Loss Account Growth H1 2005 H1 2004 2005 / 2004 IFRS IFRS £m £m % Revenues 300.0 311.9 (3.8%) Gross Profit 40.7 42.4 (4.1%) 13.6% 13.6% Other Operating Expenses (42.2) (39.9) 5.7% (14.1%) (12.8%) Operating Profit (1.5) 2.5 (157.4%) (0.5%) 0.8% Headcount *: Direct 2,488 2,468 0.8
Slide 12: France – Revenue and Operating Profit
France – Revenue and Operating Profit France Revenue 200 177 176 180 148 147 153 160 140 140 126 120 £m 100 80 60 40 20 0 Half 1 2002 Half 2 2002 Half 1 2003 Half 2 2003 Half 1 2004 Half 2 2004 Half 1 2005 France Operating Profit 4.0 2.2 2.0 0.2 0.0 Half 1 2002 Half 2 2002 Half 1 2003 Half 2 2003 Ha
Slide 13: France – Profit and Loss Account
France – Profit and Loss Account H1 2005 H1 2004 Growth 2005 / 2004 IFRS IFRS £m £m % Revenues 126.2 147.1 (14.2%) Gross Profit 12.4 16.6 (25.3%) 9.8% 11.3% Other Operating Expenses (20.3) (18.6) 9.1% (16.1%) (12.7%) Operating Profit (7.9) (2.0) 291.2% (6.3%) (1.4%) Headcount *: Direct 614 661 (7.1%
Slide 14: BeLux – Profit and Loss Account
BeLux – Profit and Loss Account H1 2005 H1 2004 Growth 2005 / 2004 £m £m % Revenues 9.8 11.5 (14.5%) Gross Profit 1.0 1.2 (12.5%) 10.6% 10.4% Other Operating Expenses (1.1) (1.1) 2.2% (11.7%) (9.8%) Operating Profit (0.1) 0.1 (254.2%) (1.1%) 0.6% Headcount *: Direct 87 87 0.6% Indirect 18 17 9.1% (*
Slide 15: Group – Revenue by Business Segment
Group – Revenue by Business Segment Growth H1 2005 H1 2004 2005 / 2004 IFRS IFRS £m £m % Technology sourcing 893.8 998.8 (10.5%) Infrastructure integration 52.8 58.7 (10.0%) Managed services 205.0 197.4 3.8% Total group 1,151.6 1,254.9 (8.2%) Discontinued operation 0.0 (26.0) (100.0%) Total continui
Slide 16: Group – Operating Cash Flow
Group – Operating Cash Flow H1 2005 H1 2004 Growth 2005 / 2004 IFRS IFRS £m £m % Cash flows from operating activities Operating profit 5.4 29.6 (81.7%) Depreciation / amortisation 8.9 9.5 (6.0%) Share based payments (0.6) 0.5 n/a Profit / loss on disposal of fixed assets & investments (0.2) 0.5 (130
Slide 17: Group – Summary Cash Flow
Group – Summary Cash Flow H1 2005 H1 2004 Growth 2005 / 2004 £m £m % Net cash flows from operating activities 57.7 24.7 133.3% Net cash flows used in investing activities (6.8) (5.1) 33.7% Net cash flows from/(used in) financing activities (9.3) (9.0) 2.8% Net increase in cash and cash equivalents 4
Slide 18: Group – Balance Sheet
Group – Balance Sheet H1 2005 H1 2004 Growth 2005 / 2004 £m £m % Property, plant, equipment 86.2 92.5 (6.7%) Intangible assets 9.6 6.9 39.5% Investments 0.2 3.7 (95.4%) Deferred Tax Asset 1.5 3.1 (50.2%) Non-current assets 97.5 106.1 (8.1%) Inventories 88.2 119.9 (26.4%) Trade and other receivables
Slide 19: Group – Key Ratios
Group – Key Ratios Jun 2005 Jun 2004 Dec 2004 Stock (days) 20 25 26 Debtor (days) - IFRS 46 48 50 - UK GAAP 44 41 45 Creditor (days) 34 31 32 Working Capital (days) - IFRS 32 43 44 - UK GAAP 30 36 39 Page 19
Slide 20: Operational Review
Operational Review Mike Norris
Slide 21: H1 2005 Update – UK
H1 2005 Update – UK • UK Product contribution will be down 27.7% or £18.2 million • Product revenue down 9.6% (in real terms) • Reduction in vendor terms • Revenue down causes targets to be missed • Increased margin pressure from vendors direct • The UK Services Business grew slowly in H1 • MS still
Slide 22: Revenue Split – UK
Revenue Split – UK H1 2004 H1 2005 Government 30.6% 29.5% Financial Services 14.2% 14.8% Corporate 15.0% 13.3% Commercial 9.1% 8.1% Scotland 12.4% 11.4% Trade Distribution 18.0% 17.7% CC Direct n/a 2.2% Other 0.7% 2.9% Page 22
Slide 23: Vendor Share Analysis – UK
-40% -20% 0% 100% 20% 40% 60% 80% Toshiba (26.1%) IBM - Lenovo (13.9%) Fujitsu Siemens (13.0%) HP (12.0%) NEC (9.3%) Vendor Share Analysis – UK Page 23 Microsoft 7.8% Sun 12.8% Cisco 17.3% IBM 92.4% EMC 249.5%
Slide 24: Contract Base – UK
- £M 50 100 150 200 250 300 Dec-01 Feb-02 Apr-02 Jun-02 Aug-02 Oct-02 Dec-02 Contract Base – UK Feb-03 Apr-03 Jun-03 Aug-03 Page 24 Oct-03 Dec-03 UK UK Feb-04 Apr-04 Jun-04 Europe Aug-04 Europe Oct-04 Dec-04 Feb-05 Apr-05 Jun-05
Slide 25: H1 2005 Update – Germany
H1 2005 Update – Germany • Germany has had a weak H1 • Operating loss £1.5 million • Re-organisation at the end of 2004 caused disruption early in 2005 • Product volumes were marginally down • Product margins have shown some deterioration (lower enterprise mix) • Service revenues have improved by 6.
Slide 26: H1 2005 Update – France
H1 2005 Update – France • France has had an extremely poor financial result in H1 however underlying progress has been made • Operating loss increased to £7.9 million • Revenue declined by 14.2% • Our largest customer of the last few years suspended all expenditure • Headcount reductions took place
Slide 27: Objectives of UK Strategic Review
Objectives of UK Strategic Review z Accelerate top line growth z Innovate propositions and introduce accountability z Increase penetration of large customer segment z Start serving medium* (and small) customers z Improve cost base z Reduce cost of sales z Increase competitiveness of service delivery
Slide 28: Product Price Decline
Product Price Decline •The Euro/US Channel ASPs (€) Top 7 countries dollar exchange 1400 rate changes 1300 showed through at the end of the 1200 second quarter, 1100 with both ASP € 1000 consumer and 900 business desktops the clearest sign 800 so far that 700 Business Desktop Business Notebooks alth
Slide 29: H2 Outlook
H2 Outlook z UK z July and August have not performed well z Product revenue is difficult to predict as it becomes more end of quarter loaded z Pricing pressure, vendors selling direct and lack of corporate investment look set to continue z Improvement to the underlying contract base as contracts we
Slide 30: H2 Outlook – Germany and France
H2 Outlook – Germany and France z Germany z Improved performance in July and August z H1’s loss making contract should at least break even in H2 z Overall confidence improving marginally z France z Seasonal improvement z MOD spending again z No material redundancy costs z Benefits of H1 cost saving
Slide 31: Looking Ahead
Looking Ahead z Outlook for full year in line with expectations z Major strategic reassessment undertaken in UK z Reorganisation now completed z Platform for growth and profit recovery z Profit improvement efforts intensified in France and Germany z Focus on cost reduction z Board considering best u
Slide 32: Interim Results 2005
Interim Results 2005 13th September, 2005