US Edition Computacenter
374.1p +4.6p
Questor says Buy
The key change is from a focus on "shifting boxes" - as chief executive Mike Norris describes the sale of IT hardware - to servicing those boxes. Yesterday's first-half results showed that services now represent 30pc of sales, compared with just 11pc in the same period back in 2007.
The strategy is sound. Services contracts last a number of years, making earnings more predictable. It is also a more profitable business than "shifting boxes".
Perhaps most significantly, the services business does better in a downturn. While companies will reduce their spending on new IT systems in a downturn, many will move to outsource their IT services for a better view of what they must spend that year.
A monthly bill from a services provider is, after all, easier to manage than sporadic costs for essential repairs or maintenance.
Mr Norris says services will continue to grow as a share of the business. In the six months to June, services revenues grew by 5.4pc, stripping out currency fluctuations. The company also increased its services contract base by nearly 6pc to £570m. That has already delivered results and Computacenter expects a larger contribution from those contract wins in the second half.
The other big change is in shifting Computacenter's focus from its home market in the UK to markets further afield. This has been central to the group's success. Over the past five years, the company's German division has driven group performance.
Yesterday's results were no exception with product sales up 37pc in Germany and services 10pc higher. Operating profit in the country was a staggering 144pc higher.
This more than offset a poor performance in the UK, where sales fell 16pc, when a few large customers cut their orders. But Computacenter showed its mettle by boosting margins in the UK from 12pc to 16.5pc, meaning operating profits declined just 8pc.
The shares look cheap on less than 10 times this year's earnings, with a forecast yield of 4pc. Buy.