Computacenter: IT services group is a future star
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If Google and Apple are the celebrities of the tech world then Computacenter ensures the show always goes on. The job of installing and managing companies’ IT hardware may not be glamorous. But companies beefing up their tech capabilities after the pandemic have put hardware resellers centre stage. As a result Computacenter, even with a stagnant second half, expects its profits to climb a tenth higher than expected this year.
Investors have applauded this growth narrative. Shares in the UK listed group have climbed more than two-thirds since the start of last year. That trumps German competitor Bechtle but trails UK rival Softcat. Both peers trade at price to forward earnings multiples far higher than Computacenter’s 21 times. Softcat is valued at double what Computacenter receives. All three had similar valuations about five years ago.
Nevertheless, a recent expansion into the US should help it close some of this discount as well as lift its market value. Computacenter furthered its US ambitions late last year with the acquisition of Canada’s Pivot Technology for $300m. The purchase adds more than $1bn to group North American revenues, lifting sales in the region to about $2.5bn this year, the largest at about a quarter of the total.
Chief executive Mike Norris must, however, integrate the underperforming Pivot and boost its margins. Operating profitability in North America of just 1.5 per cent last year already lagged behind the group margin of almost 4 per cent last year. But at Pivot they were even lower. If Norris can turn round its sluggish operation that could make a difference.
Doubling North American margins alone this year would layer an additional 12 per cent of operating profits on top of the newly issued guidance. Greater US scale and geographical coverage should also help attract the type of multinational corporate clients who make up its more profitable European operation.
A fragmented US market combined with the group’s healthy net cash position mean further opportunities for growth. Investors can expect Computacenter to step forward into the limelight.