Computacenter (LSE: CCC) shares staged a partial recovery on Friday, yet the market's cautious stance persists following this week's earnings upgrade. The stock traded at 5,245p by 3:14 p.m. BST on September 11, up 2.34% in delayed London trading, according to Sharecast's FTSE 100 movers report. Despite this rebound, the shares remained 6.3% below Monday's close of 5,600p.
Strong Results, But Concerns Linger
The initial reaction to Computacenter's September 8 half-year report was telling. The company delivered exceptional figures: first-half revenue surged 71.6% to £6.85 billion, gross profit rose 30.5% to £657.9 million, adjusted operating profit jumped 86.5% to £153.1 million, and adjusted diluted earnings per share nearly doubled to 101.9p. Management also raised its full-year 2026 adjusted profit-before-tax guidance to at least £380 million, an 11.5% increase over the consensus of £340.9 million.
However, the share price reaction on results day was stark. CCC opened at 5,875p, touched an intraday high of 6,045p, but closed at 5,165p—down 7.8% from the prior Monday. Even after Friday's recovery, the stock remained 13.2% below that results-day peak.
The Backlog: A Double-Edged Sword
The company's committed product-order backlog reached £9.3 billion at June 30, up 323% year-over-year and 29.5% from December on a constant-currency basis. This provides unusual visibility into future revenue, but it also highlights a fundamental shift in the business mix. Gross margin fell 303 basis points to 9.6%, driven by rapid growth in high-volume, lower-margin Technology Sourcing in North America and the UK.
While operating leverage remains evident—adjusted operating profit rose 87.6% at constant currency—the mix is a concern. Managed Services revenue declined 4.5%, while organic Professional Services grew 23.9%. Investors are watching whether higher-value services can keep pace with product volumes, preventing the group from becoming overly reliant on thin-margin hardware.
North America Concentration and Cash Flow
North America now contributes 62% of adjusted operating profit before central costs, up from 44% a year earlier, with adjusted operating profit up 148.4% at constant currency. This concentration is a growth advantage while AI-infrastructure spending remains robust, but it raises customer-mix and currency sensitivity if the investment cycle cools.
The real test lies in cash conversion. Inventory ballooned to £1.26 billion from £482.8 million at the end of 2025, tied to committed orders. Working capital consumed £245.1 million in the half, leading to negative operating cash flow of £82.6 million and negative free cash flow of £138.9 million. Adjusted net funds dropped to £308.7 million from £606 million, partly due to £124.2 million in acquisition payments for AgreeYa and GAI.
Invoice financing also drew attention, with non-recourse financed receivables rising to £140.5 million from £38.8 million at year-end. Management describes it as a limited programme for specific projects, but it underscores the need to assess backlog conversion through cash flow, not just reported profit. Additionally, provisions for underperforming customer contracts increased to £24.8 million from £14.8 million.
Valuation and Outlook
Based on the new profit floor, CCC trades at roughly 20.6 times earnings—not obviously cheap for an IT reseller with lower-margin growth. The bull case rests on the backlog driving sustained profit growth, improved services mix, and working capital normalisation. The bear case warns that hyperscale ordering could slow before the cash cycle recovers.
The next catalyst is the interim dividend, with shares going ex-dividend on September 24. More critical will be evidence that inventory and receivables convert into cash without undermining the £380 million profit promise. That would transform Friday's rebound into a durable rerating.
