Germany
Our German business recorded an H1 operating profit of £0.5 million (2005: loss of £1.5 million) on revenues that were broadly unchanged.
35% of revenues came from services where growth in the Managed Services contract base helped drive a 5.1% year-on-year revenue increase. We also began to see increasing client interest in converged phone and data networks and concerns over security compliance.
As in the UK, Computacenter Germany experienced a continuing shift in product mix, in terms of both volumes and revenues, towards products that attract higher margins, with increased demand for datacentre and networking technology and a subdued market for desktop systems.
To increase our share of the medium-sized business market, where we believe there are significant opportunities for growth, we created a national account team dedicated to winning new customers in this market.
An important development was the implementation of a centrally provided, shared-resource approach for the delivery of managed desktop and datacentre services. To support this approach, we have established a new computer centre in Frankfurt, enabling all services and applications managed on behalf of the client to be located and managed on our own systems. The first client for this offering is Cognis, with which we have signed a seven-year Managed Service contract covering 120 locations across 30 countries. We expect our investment in this shared services model, together with the creation of new national account teams and our focus on long-term client contracts to lead to future sales growth.
Significant wins in the period include the renewal of a worldwide Managed Services contract with Deutsche Börse, worth several million Euros, in which we will provide user support, management of moves and changes and engineering services for 5,000 IT seats across Germany, USA, Hong Kong and Dubai.
France
Our French business recorded an improvement on the first half of 2005, with revenue growth of 12.3% to £141.7 million (2005: £126.2 million) and operating loss reducing to £5.4 million (2005: £7.9 million). The operating loss improvement was due to the effects of the ongoing cost reduction programme and, in part, attributable to the non-recurring costs of that programme in H1 2005, of approximately £1.7 million.
We made progress in addressing the poor utilisation levels across our services activities, which had a significant impact on profit performance. At the same time, we improved maintenance customer service levels and continue to see a growing pipeline of new contracts in our projects business.
To accelerate growth and address rising demand for enterprise technology, particularly related to IBM products, Computacenter France invested in the development of specialist technical and sales skills in the enterprise solutions market.
We saw a marked decline in product margins in H1, largely fuelled by major vendors bypassing the channel and selling direct to clients. It is too early to say whether this margin decline will continue into the second half of the year and beyond.
Significant wins include a three-year Managed Services contract renewal with Elior Services, worth over £1.6 million covering user help desk, maintenance and installations, moves and changes for 6,000 users across 2,500 catering sites. We also won a maintenance contract with a leading French insurance company, covering the provision of laptop and printer maintenance services to approximately 4,000 users.
Belgium, Netherlands and Luxembourg
Overall, our small Benelux operation showed a reduced loss of £82,000 (2005: £105,000 loss). Gross profit performance was strongest from Managed Services and product supply, with project and consultancy services remaining weak.
Key wins include a £4.6 million Belgian government-sponsored employee PC purchase contract, international procurement deals secured with Campbell and World Directories, and a major CRM deployment project, covering 19 countries, with OMRON in the Netherlands.
