Will Computacenter (LON:CCC) need to be turned off and on again following next Friday’s interim results?
It took until mid-spring for IT services firm Computacenter to burst into lift. For the first few months of the year the stock gradually slipped lower, from an opening price of £7.92 to a 4 month nadir of £7.09 in late-March. During that period the company posted two updates, both helping to explain its steady slide.
The first came at the end of January. While Computacenter stated it was all set to meet its full year pre-tax profit targets, the fact that annual revenue was flat at a constant currency rate – it was up 6% when factoring in currency movements – following declines in France and the UK didn’t best please investors.
They were even unhappier with March’s full year report (as you can guess the inspiration for that aforementioned 4 month low). Statutory pre-tax profit plunged 31% to £86.4 million, with the UK continuing to be one of the company’s key areas of weakness after it failed to secure as many new contracts as it had anticipated. Computacenter did somewhat mitigate the negative reaction, however, by hiking its dividend 3.7% to 22.2p per share.
While it spent the subsequent weeks stranded between £7.25 and £7.50, the stock received a major shot in the arm at the end of April. For the first quarter of 2017 Computacenter revealed a 16% surge in revenue after seeing increased interest in its professional services and supply chain businesses. This in turn led to a flurry of ratings and price upgrades from Investec and Credit Suisse (SIX:CSGN), sending the stock nearly 13% higher in the space of a week.
The firm rode this wave of good vibes all the way to £8.75 by the end of May, only for the UK’s pre-election jitters and post-election uncertainty to drag the stock back below the £8 mark by early July. Luckily another ratings upgrade, this time from Barclays (LON:BARC), rescued the stock from these lows, rocketing Computacenter all the way back to £8.75 in the space of a few days. Since then the stock has largely traded laterally, though it did hit a fresh 17 year high of £9.04 on August 15th. Computacenter PLC now sits at a current trading price of £8.74 (Spreadex, 18/08/2017).
In terms of next week’s half year update, analysts at Barclays are expecting a Germany-boosted 2.4% rise in revenue at constant currency rates to £1.6 billion, alongside a 41% increase in adjusted pre-tax profit to £35.7 million. However, UBS did warn on the ‘challenging trading conditions’ in the UK division, conditions that could impact the company for the next few years.
Computacenter PLC has a consensus rating of ‘Buy’ with an average target price of £8.60.