logo-loader

UBS expects more challenging trading conditions for Computacenter as UK economy slows

Published: 10:48 16 Aug 2017 BST

windows 10
It’s not all bad news though; there might be a nice dividend coming for investors soon

Computacenter PLC (LON:CCC) could be set for a rough ride over the coming years as the UK economy continues to show signs of stalling, so say analysts at UBS.

Around 40% of the FTSE 250-listed computer services provider’s sales and more than half of all profits come from its UK business, making it an “important market” for the company.

READ: Computacenter expects to beat 2017 expectations after solid first-quarter growth

“As signs of a slowdown in the UK start to build, we see some reasons to be more cautious at current valuations,” wrote analyst Michael Briest.

Despite the “challenging trading conditions” in the UK division, Briest is a little more optimistic about the outlook for other parts of the business.

He notes that the “improving picture” across the Channel in continental Europe, while the Windows 10 cycle could also serve to boost sales.

There is also the possibility that Computacenter could return some of the £160mln or so in net cash to investors when it reports its interim results next week, although he thinks the money could instead be used on acquisitions.

“Management has indicated it is evaluating possible M&A, but if it does not pursue a move into an adjacent market a return of capital is likely.”

Briest added: “While  the  potential  for  a  capital  return  may  provide  some  near-term support, we feel a lot is in the price here and downgrade to ‘neutral’.”

The analyst has upped his price target to 900p (from 860p) though on the back of slightly higher estimates. That’s higher than where the share price finds itself today; it is down 2.3% to 885p.

FTSE rises ahead of Easter weekend, JD Sport gains on upbeat outlook -...

The FTSE 100 gained on the final morning of this shortened Easter trading week. Festive cheer was limited though, as Thames Water confirmed shareholders would not provide it with a £500 million rescue package, prompting speculation over the London supplier’s future. On a more positive...

5 minutes ago