UPDATE 1-Computacenter winds back growth outlook, shares slip
* Sees weakness in France continuing
* Expects costs to rise on "problem contracts" in Germany
* Stock falls 14 pct; top loser in FTSE 250 Midcap Index (Adds analyst comments, details; updates share movement)
By Abhirup Roy
April 24 (Reuters) - Computacenter Plc wound back its growth outlook as high contract costs in Germany and weakness in France weigh on the IT equipment and services provider, sending it shares down as much as 14 percent.
The stock was the biggest percentage loser in the FTSE 250 Midcap Index on Wednesday morning, falling to a low of 460.8 pence.
Computacenter said last month that higher start-up costs from new contracts ate into margins in its services business in Germany, as an unusually high number of contracts stretched the company's resources, exposing weaknesses in its internal procedures.
The company, which supplies and services IT equipment and advises customers on IT strategy, said on Wednesday that three contracts in Germany "remain stubbornly financially and operationally challenging" and may result in an increased provision this year for costs in future reporting periods.
Revenue from Germany - its second largest market - fell 7 percent to 280.6 million pounds ($428.9 million).
Computacenter said revenue from France grew 2 percent to 107.4 million pounds, but warned that 2013 would be a tough year for the company in the country.
"The challenging economic environment in France has resulted in a distinct lack of professional services projects which affects our services margin and our performance on the bottom line. We see very little prospect of this abating this year," the company said.
Jefferies & Co analyst Milan Radia said the company was facing intense competition and pricing pressure in France.
"They've got the big renewal coming up, which I think is the French Army renewal, in the second half and I think there is a good chance they will lose that, and that's going to create additional pressure on the French business," Radia told Reuters.
Revenue in the UK, Computacenter's largest market, increased 6 percent to 294 million pounds.
Investec analyst Julian Yates cut his 2013 earnings estimates for the company saying he had previously factored in the worst of the 2012 contract issues into the numbers and had viewed the French business as being stable.
"The progress in the UK is being hindered by these headwinds ... Progress has been made, but we were too early in drawing a line under 2012 issues."
($1 = 0.6542 British pounds) (Additional reporting by Brenton Cordeiro in Bangalore; Editing by Roshni Menon)
- Malaysia air probe finds scant evidence of attack: sources |
- Search widened as Malaysia air probe finds scant evidence of attack |
- Confrontation in Ukraine as diplomacy stalls |
- Exclusive: Chinese raw materials also found on U.S. B-1 bomber, F-16 jets
- Freescale loss in Malaysia tragedy leads to travel policy questions