5 May 2010
Logica first quarter driven by strong growth in Outsourcing
At its Annual General Meeting being held today, Logica will comment on trading
for the first quarter of 2010. The following is the interim management
statement based on unaudited results for the first quarter ended 31 March
Improving trend with revenue down 2% compared to an average 4% decline in the
previous three quarters, benefiting from strong order bookings in 2009
Continued strong growth in Outsourcing Services revenue, up 11%
Consulting and Professional Services revenue down 8%, compared to an average
decline of 11% in the previous three quarters
Revenue stable or growing in all regions except Sweden and the Benelux, with
the most significant decline as expected in the Benelux
Orders of £1,093 million, resulting in a book to bill of 116%; book to bill was
123% in Outsourcing Services and 112% in Consulting and Professional Services
Guidance remains unchanged for 2010
Net debt/EBITDA expected to be in the region of 1.0x at the end of June 2010;
additional €56 million private placement facility in place
1 Unless otherwise stated, all headline numbers relate to pro forma numbers as
defined on page 5.
Q1 2010 Q1 2009 pro Q1 2009 Q12010growth % Q1 2010 growth %
actual forma* reported actual pro forma*
(£m) 1,093 1,168 (6) (7)
(£m) 939 954 (2) (2)
*Q1 2009 revenue adjusted for the impact of acquisitions and disposals at Q1
2010 exchange rates
Commenting on today's announcement, Andy Green, CEO, said:
"We saw some positive trends in the first quarter with particularly strong
demand in France and continued revenue growth in the UK balancing the
continuing difficult market conditions in the Benelux and to a lesser extent,
Sweden. The pipeline of opportunities to help our clients evolve their
businesses remains good as demonstrated by important wins at Posten Norden and
Swedish food processing companies, Lantmännen and Scan."
The performance of the business in the first quarter reflected the trends we
had signalled in February. We continue to expect revenue to decline modestly
in the first half, with full year revenue and adjusted operating margin
expected to be at a similar level to 2009 on a constant currency basis.
The effect of our continued cost reduction programme should offset the full
year impact of volume and pricing reductions agreed in 2009, which have the
greatest impact in the first half. As we indicated at the 2009 results, we do
not anticipate any restructuring charges in 2010. We expect the plans that we
have been implementing since 2008 to allow us to outperform the market and
improve margins over the medium term.
We had 38,689 employees at the end of March 2010 compared to 38,780 at the end
of December 2009. Attrition increased slightly through the quarter to around
9%, reflecting improved demand in countries such as France and India.
Utilisation improved through the quarter, with some improvement in the
Benelux. Onshore headcount was slightly down, with some recruiting in France
offset by around 150 exits in the Benelux in the first quarter.
Total offshore and nearshore headcount was around 5,200 compared to 5,100 at
the end of December 2009. Around 170 new trainees joined the business in
offshore locations at the end of the first quarter. We expect to grow our
nearshore and offshore headcount by around 10% in the second quarter.
Key orders and wins
New orders totalled £1,093 million over the quarter, a decline of 7% against a
strong comparative period in 2009 which reflected the large National Policing
Improvement Agency and TeliaSonera contract wins. Group book to bill was 116%
in the first quarter (2009: 123%). In the opening four months of the year, we
have signed two deals greater than £20 million, with an increase in the average
deal size of 25% compared to a year ago.
Important wins have included Posten Norden, Lantmännen and Scan, as well as
extensions with Morrison Utility Services and ING. We also extended the scope
of the work we do with the unemployment arm of the Dutch social security agency
UWV (formerly CWI) in the Netherlands. The 7-year, €18 million contract will
see us take on management of the Dutch public sector's largest case management
system which registers and supports the re-integration of the unemployed back
Outsourcing continued to be the main driver for growth with revenue for the
quarter up 11% to £369 million, with the increase reflecting market demand for
Book to bill was 123% in the first quarter (2009: 122%). The pipeline
continues to be strong and order intake remains solid with key wins including
Consulting and Professional Services
Consulting and Professional Services showed an improved trend in the first
quarter, declining by 8% compared to an average decline of 11% in the previous
Book to bill was strong at 112% (2009: 123%) with improving demand in France
and the Benelux as we came through the first quarter. We continued to see a
goodvolume of opportunities andstabilisation in pricing levels on last year.
Revenue by geography
Q1 2009 Q1 2010 Q1 2010
Q1 2010 pro forma Q1 2009 growth % % growth
REVENUE (£m) actual * reported actual pro forma
France 208 204 209 (1) 2
UK 187 182 182 3 3
Northern and (2) -
Central Europe 192 192 195
Benelux 136 159 163 (17) (14)
Sweden 135 139 130 4 (3)
International 81 78 75 8 4
Total 939 954 954 (2) (2)
*Q1 2009 revenue adjusted for the impact of acquisitions and disposals at Q1
2010 exchange rates
Revenue was up 2% to £208 million, reflecting orders signed in Q4 2009 with a
number of our key clients.
Book to bill of 126% (2009: 133%) remained strong on the back of a good overall
market environment and increased volume of orders in outsourcing, particularly
in application management.
Utilisation remains strong. We continue to recruit to meet demand and have
made some use of subcontracting in the first quarter.
Revenue was up 3% to £187 million, with Public Sector growth of 5%, drawing on
our good order backlog across Government departments and agencies.
Book to bill was 67% (2009: 121%). This was well below the strong comparative
recorded in 2009 when we signed the National Policing Improvement
Agencycontract. While we continue to see good medium term opportunities in the
public sector, we did see some slowing of decision making, as expected, as we
came through the first quarter.
Northern and Central Europe
Revenue was stable at £192 million, with continued strong growth in Finland
balancing a decline in other Nordic geographies against a strong performance
Book to bill was 149% (2009: 130%). Order backlog improved in the quarter,
with orders up 15%. This reflected an improvement in the German consulting
market, a continued strong performance with our Finnish clients and the recent
Posten Norden win in Denmark.
Revenue was down 14% to £136 million in line with our expectations, reflecting
the lower backlog at the end of last year and pricing reductions agreed in the
first half of 2009.
Book to bill was 103% (2009: 87%), with orders stable on the first quarter of
Pricing has largely stabilised at levels agreed in the first half of 2009.
Progress on initiatives like our newly extended framework agreement with ING,
which will allow more flexible resourcing in their commercial banking business
to meet their cost and client objectives, will contribute to improving
utilisation in the Netherlands.
The revenue decline of 3% to £135 million reflected pricing reductions agreed
in the first half of 2009 as well as slower recovery in the level of demand in
Sweden compared to other markets.
Book to bill was 144% (2009: 160%). Despite a difficult market in Consulting
and Professional Services, we continue to win opportunities to help clients
transform their business. Since the end of the first quarter, we have recorded
a win with Swedish food processing companies, Lantmännen and Scan.
Revenue was up 4% to £81 million, making the International region the strongest
performer in the Group on the back of continued strength in Australia and the
Middle East. There was some slowing in Brazil and Portugal against strong 2009
Book to bill was 104% (2009: 87%). Our pipeline reflects increased demand from
European clients expanding their presence in Asia as well as generally
improving markets in the International cluster.
We expect operating cash flow to exhibit the normal seasonal pattern, with
stronger cash flow in the second half leading to a further reduction in net
debt/EBITDA at the end of 2010. Net debt/EBITDA is expected to be in the
region of 1.0x at the end of June 2010 (December 2009: 0.9x).
In April the company signed a €56 million private placement debt agreement. The
agreement, which is fully drawn down, provides five, six and seven year funding
at an average interest rate of just under 5%. As well as lengthening the
maturity of the Group's borrowings the placement diversifies the Group's
sources of funding. The proceeds were used to make a further repayment on the
bank loan maturing in September 2010. We now expect this loan to be fully
repaid in the first half of the year.
Annual General Meeting
Our Annual General Meeting is being held this morning at 10:30am at Kings
Place, 90 York Way, London N1 9AG.
The next scheduled statements in our financial calendar are:
6 August 2010 H1 2010 interim results
3 November 2010 Q3 2010 interim management statement
This document contains forward-looking statements that involve risks and
uncertainties concerning the Group's expected growth and profitability in the
future. Actual events or results may differ from those described in this
document due to a number of risks and uncertainties that are described within
the 2009 annual report filed with the UK Listing Authority on 31 March 2010.
For further information please contact:
Logica Investor relations:
Karen Keyes/Frances Gibbons/Jose Cano +44 (0) 7801 723682/+44 (0) 20 7446 4341
Logica Media relations:
Louise Fisk +44 (0) 7798 857770
Tom Buchanan +44 (0) 20 7404 5959
Book to bill percentage is a measure of the level of orders relative to revenue
in the period.
Comparative figures for 2009 are pro forma constant currency revenues. Pro
forma adjustments have been made to take account of changes in composition of
the Group through acquisitions and disposals.
Exchange rates used are as follows:
Q1 2010 Q1 2009
£1 / € 1.13 1.10
£1 / SEK 11.23 12.06
£1/USD 1.57 1.44