IT firm Computacenter said on Thursday its first-half adjusted profit would be ahead of market expectations, helped by growth in its contractual services business and significant cost cuts.
The company said it was confident about growing its contractual services business in the second half, but said a return to growth in capital expenditure on IT equipment across its geography was unlikely.
Panmure Gordon analyst George O’Connor raised his price target on the company’s stock to 240 pence from 236 pence, and retained a “buy” rating.
In the six months ended June 30, overall revenue fell by 3 percent. On a constant currency basis, it declined 8 percent.
“The trading environment remains very challenging and neither Computacenter nor its customers are immune. It is therefore no surprise that our product sales are down in the period,” Chief Executive Mike Norris said in a statement.
Annual service contract base rose 11 percent to 510 million pounds ($820 million), based on constant currency.
Computacenter’s German unit signed one of its largest managed services contracts to date, which will start in the second half, but will not make a significant contribution to the business until 2010, the company said.
Computacenter said the majority of its planned cost reductions in the UK have taken place, which, along with the exiting of trade distribution, will have a positive effect on margins.
Computacenter ended the sale of PCs, laptops and printers in November, choosing instead to focus on the higher-margin server, storage and networking sectors.
The company’s shares, whose value has more than doubled in the year to date, were up 2 pence at 208.5 pence by 0916 GMT on the London Stock Exchange. They touched a high of 212 pence earlier in the session.