Tue. Oct 19th, 2021

Computer Center PLC Update

If Google and Apple are the celebrities of the tech world, Computacenter ensures that the program always runs. The task of installing and managing the IT hardware of enterprises may not be glamorous. But companies that strengthened their technical capabilities after the pandemic put hardware resellers in the middle. As a result, Computacenter, even with a stagnant second half, expect its profit is rising a tenth higher this year than expected.

Investors applauded this growth story. Shares in the UK-listed group have risen more than two-thirds since the beginning of last year. It surpasses German rival Bechtle, but follows British rival Softcat. Both counterparts trade at price to multiply the earnings much higher than the 21 times of Computacenter. Softcat is valued at double that Computacenter receives. All three had similar valuations about five years ago.

However, a recent expansion to the US should help him close part of this discount and increase its market value. Computacenter boosted its U.S. ambitions late last year with the acquisition of Canada’s Pivot Technology for $ 300 million. The purchase adds more than $ 1 billion to North America’s group revenue, increasing sales in the region to $ 2.5 billion this year, the largest by about a quarter of the total.

However, CEO Mike Norris needs to integrate the poorly performing Pivot and increase its margins. The operating profitability in North America of only 1.5 percent last year was already behind the group margin of almost 4 percent last year. But at Pivot they were even lower. If Norris can reverse his sluggish operation, it could make a difference.

The doubling of North American margins this year alone will put an additional 12 percent of operating profit on top of the newly issued lead. Greater US scale and geographic coverage should also attract the type of multinational corporate clients that make up the more profitable European business.

A fragmented US market combined with the group’s healthy net cash position means further opportunities for growth. Investors can expect Computacenter to come into the spotlight.

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