- EPS down 5% and misses expectations by nearly 6%
- Demand remains high, driving 17% sales rise
- Wage inflation becoming one of the larger threats
Shares in IT reseller Computacenter (CCC) were on the end of a hammering after missing profit targets in the first half. While the company had outlined that profits were expected to be impacted by higher costs as sales staff hit the road again (upping travel and entertainment expenses), investors were again in an unforgiving mood.
Computacenter, which provides software solutions from the likes of Microsoft (MSFT:NASDAQ), Adobe (ADBE:NASDAQ) and VMware (VMW:NYSE) to clients, saw its shares slump 11% to £21.92 as diluted earning per share of 67.3p fell 5% year-on-year and missed 71.3p forecasts, based on Investing.com consensus.
The FTSE 250 company’s technical help and advice remains in high demand, however, evidenced by a 17% jump in revenues to just shy of £2.83 billion, pointing to further progress ahead assuming profit expectations are realigned with the new cost base reality.
‘As we have predicted and announced on multiple occasions, profitability for Computacenter was down in the first half of 2022 compared to the same period last year, however, we remain on track to deliver our stated expectations of profit growth for the year as a whole,’ said long-standing Computacenter chief executive Mike Norris.
For context, for the full year to December 2022, the market is calling for £7.24 billion of revenue and £360 million EBITDA (earnings before interest, tax, depreciation and amortisation), according to Megabuyte analysts.
TIGHTENING COSTS SCREW
‘The ongoing supply chain constraints are still causing havoc even for the largest resellers while wage inflation and the return of normal costs are providing a tough comparable,’ said Megabuyte’s Tom Kennedy.
The worry is that with the already razor thin margins resellers operate on, wage inflation could have widespread impacts, adding to the plethora of challenges the tech sector faces in the medium-term.
CEO Norris remains positive though. ‘Our customers commitment to investment in technology feels extremely robust despite well publicised and difficult economic conditions around the world. This gives us confidence for 2023 and beyond.’
