Investing.com -- Computacenter (LON:CCC)’s stock climbed more than 12% on Tuesday following the release of its latest financial results, which aligned with expectations and provided a steady outlook for 2025.
For the fiscal year 2024, Computacenter reported revenue of £6.96 billion, reflecting a slight 0.6% increase, surpassing the consensus estimate of a 4% decline.
Adjusted profit before tax came in at £254 million, down 8.6% year-over-year but in line with expectations. Gross profit rose 1.2%, defying market projections of a 1.3% decline. Earnings per share fell by 7% to 164.1p, though EPS is expected to recover by 8% in 2025.
Computacenter also announced a dividend increase of 1% to 70.7p per share, slightly above the market consensus of 68.3p, indicating confidence in cash flow sustainability. Free cash flow per share for 2024 stood at 266.35p, though a notable decline from 301.06p in 2023.
Technology Sourcing was the standout performer, growing 3.2% on a constant-currency basis. North America played a key role in this expansion, with Computacenter securing two new hyperscale customers.
The order backlog increased significantly, rising 116% year-over-year and 35% compared to the first half of 2024. This backlog strength signals continued demand and positions the company well for future revenue growth.
Professional Services saw a robust 11.9% increase in revenue, benefiting from the company’s new operating framework and improved sales execution.
Growth was particularly strong in Germany and the United States, while the UK returned to positive territory.
Managed Services, however, underperformed, with revenues declining by 5.3%. This drop was attributed to delays in onboarding large contracts and two major underperforming contracts in Germany and the UK. Management acknowledged these setbacks but remains optimistic about long-term improvement.
Looking ahead, Computacenter’s management reaffirmed their outlook, stating, "We expect to make progress in FY 2025, with earnings per share benefiting fully from the impact of the share buyback."
The company remains cautious of macroeconomic and political headwinds but sees continued opportunities, especially in North America.
Consensus estimates for 2025 indicate a 5.2% revenue growth and a 6.2% rise in adjusted PBT, figures that compare favorably with industry peers.
Investor sentiment has been volatile over the past year, with the stock down nearly 20% in the last 12 months due to concerns over contract losses and weaker IT spending.
However, the latest earnings report appears to have shifted the narrative, with Tuesday’s sharp rally suggesting renewed confidence in Computacenter’s ability to execute its strategy and capitalize on its growing backlog.
Key downside risks include ongoing supply chain challenges, potential IT budget constraints among enterprise clients, and execution risks in the Managed Services segment.
However, upside risks include continued momentum in Technology Sourcing, successful contract execution, and increased enterprise IT spending, particularly in artificial intelligence-related infrastructure.
As Stifel noted in its report, "Despite a sluggish market, Computacenter appears to be making market share gains and is well positioned to benefit from potential AI spend given its exposure to large enterprise customers."