In these dark times it is a real joy to comment on a success story. Computacenter (CCC) is certainly having a great coronavirus crisis as figures for the first half of 2020, covering the worst of the shutdown, demonstrate.
We were not due for a trading update until interim results due in September but the technology company, with customers in the public and private sectors, has been forced to alert the stock market to the fact that profits are substantially ahead of the same period last year. While most of the industrial clients have been in hibernation, there has been a surge in demand elsewhere in the client base for IT equipment for home working.
It is possible that life will slowly get back to normal but Computacenter believes the trend will continue through the second half, which should turn out even better than indicated in the previous assessment two months ago, when Computacenter was not sufficiently confident to give meaningful guidance for the full year. Unlike most companies that are suffering from increased uncertainty, Computacenter reports “improved clarity”.
Demand for services has improved and there is a strong pipeline of opportunities to help clients to expand the ability of staff to work from home. That will make this year even better than the record-breaking performance in 2019.
The shares have climbed back above the pre-crisis peak of £19.20 set on 7 February. Although there are not many companies you can say that about, there could be further to go.
Fellow IT provider Sage (SGE) has also had a good run as it attracts customers to its business cloud. Total revenue was 4.1% ahead in the nine months to June but what was particularly pleasing was a 9% increase in recurring sales.
Life is not quite as encouraging as at Computacenter, as Sage did suffer a slowdown in the three months to June, but total and recurring revenue were still ahead of the corresponding period last year and momentum is likely to continue. The one worry is that Sage’s customers are mainly small and medium sized businesses, and these are likely to be more vulnerable to the impact of Covid-19.
At around 750p the shares are not yet back to mid-February’s levels but that should be achieved before the summer is out.
Bodycote Confident
Something of a surprise package is Bodycote (BOY), which supplies parts for the vehicle and aerospace industries. Output and sales have inevitably been hit by the pandemic but the company acted quickly to control costs and is sufficiently confident to pay the 13.3p dividend deferred from last year in September. Margins have held up well and so has free cash flow.
There is a long way to go before life gets back to normal at Bodycote but those willing to take a risk could take a look while the shares languish just above 600p, well below the pre-crisis level.
Enough DIY for Now
I feel much less confident about do-it-yourself chain Kingfisher (KGF), whose shares were already above pre-crisis levels before the most optimistic update for several years prompted a further surge.
Lockdown prompted citizens to escape boredom by buying gardening products and decorating equipment and sales have maintained momentum as more B&Q and Screwfix stores reopened. Like-for-like sales in the UK and Ireland are running 18.7% ahead this month compared with July 2019. In France, where the Brico Depot and Castorama stores have struggled in the past, sales have been as much as 27.4% ahead.
Certainly Kingfisher management deserves praise for the way it ramped up online sales to offset the temporary closure of stores but it is worrying that, despite the buoyant trading, “visibility remains low” for the rest of the year and guidance on sales and profits remains suspended.
The shares trade at around 255p after slumping from 220p in February to a low of 125p in March. That surely is enough uplift for a company surrounded by so much uncertainty.
