Due to supply chain bottlenecks and a change in demand toward lower-margin items, Computacenter’s profitability for the first half of the year has declined.
In the first half of the year, the Hertfordshire-based company that provides computing and cloud services to corporations and public sector institutions saw its profits fall by 5.2% to £77.8 million.
Despite a sales increase of almost £400 million to $2.83 billion on the strength of its technology sourcing division, this was the case.
North America was mostly responsible for the increase in revenue, as a small number of Californian hyperscale technology customers sought to modernize their infrastructure and digitize their processes.
Nonetheless, considering the size of the contracts involved, this type of business typically generates substantially lower margins for the group.
Additionally, the German branch of Computacenter’s margins has been impacted by rising handling costs, greater competition, and manufacturers’ preference for large-volume workplace contracts.
In turn, both categories are hurt by high inventory levels generated by an increase in consumers placing orders in advance and supply chain shortages, one of the most critical concerns impacting the global technology industry.
Since June of last year, one undisclosed hyperscale customer’s product order backlog has increased by more than $1.8 billion, according to Computacenter.
Mike Norris, the company’s chief executive, stated, “Except for networking products, where difficulties persist, supply chain challenges have improved significantly over the past three months.”
‘However, our clients have grown increasingly sensitive to supply chain bottlenecks, necessitating that we store additional inventory, which impacts our financial position. There is a guaranteed sale on the inventory products in practically all instances.
The continued health of our balance sheet provides us with a substantial competitive advantage, allowing us to meet the needs of our clients in this manner.
Computacenter shares fell 13.3 percent to £21.36 in late afternoon trade following the trading update, making it the second-worst performer on the FTSE 350 Index behind investment manager Bridgepoint Group.
Before today, though, the firm’s share price has been on a gradually decreasing trend as trading limits have been lifted and consumers spend more time outdoors.
Before 2022, they saw a large pandemic-induced boom caused by businesses adopting work-from-home policies in response to government directives and purchasing IT equipment for their staff.
Customers of Computacenter have included numerous prominent British businesses, such as the owner of Virgin Media, Liberty Global, the Yorkshire Building Society, Heathrow Airport, and the Magic Circle legal firm Linklaters.
