4 November 2009
Logica reports satisfactory third quarter
Logica is today issuing an interim management statement based on unaudited
results for the third quarter ended 30 September 2009.
Q3 2009 YTD 2009 Q3 2008 Q3 growth Q3 growth % YTD growth %
actual actual reported % (actual) (pro forma*) (pro forma)
Orders
(£m) 829 2,916 717 16 6 4
Revenue
(£m) 862 2,731 845 2 (4) (3)
*Q3 2008 revenue adjusted for the impact of acquisitions and disposals at Q3
2009 exchange rates
Highlights
Continued order momentum with orders up 6% in the third quarter, driven by
Outsourcing
Outsourcing orders year to date up 16% resulting in Outsourcing year to date
book to bill of 103% (2008: 99%)
Overall third quarter revenue performance in line with our expectations, with
Outsourcing growth of 11% and a 12% decline in Consulting and Professional
Services
Revenue decline for the third quarter stable on previous quarter at 4%; revenue
down 3% year to date to £2,731 million
By geography, the UK remains our strongest performer, with the Benelux our
weakest region
Additional cost reduction focused on markets with weaker demand will deliver
ongoing cost savings of £15 million from 2010 at a one-off cost of around £20
million in 2009
Full year revenue expected to show similar trends with decline expected to be
around 3%; margin guidance maintained at around 7.5%
Guidance for year end 2009 net debt/EBITDA of below 1.2x unchanged
Commenting on today's announcement, Andy Green, CEO, said:
"Logica continued to deliver well in the third quarter with our investments in
client facing activity showing through in good orders in a tough climate. Our
pipeline of Outsourcing opportunities remains strong, balanced by continued
market weakness in Consulting and Professional Services."
Outlook
The performance of our business in the third quarter has reflected similar
trends to those in the second quarter. Outsourcing has shown strong growth
while Consulting and Professional Services declined, based on lower volumes and
pricing agreed in the first half. Nevertheless, as we progress through the
fourth quarter, levels of utilisation and bench remain stable and we have good
visibility of fourth quarter revenue. Based on our current pipeline, we expect
full year revenue decline to be around 3%. Our full year adjusted operating
margin is expected to be in line with last year, at around 7.5%.
Programme for Growth
The Programme for Growth remains at the core of our strategy and continues to
help us to manage our way through the uncertain economic environment.
Our investments in growth areas have driven new contracts in 2009. In order to
fully align all our sales and marketing investments, we have created a new role
of Chief Client Officer. Amanda Mesler, who currently leads our North American
business, will assume this role from 1 January 2010 and will join the Executive
Committee.
Our cost saving programme for this year remains on track, with additional
headcount reductions and property exits in the third quarter. We continue to
take action to reduce costs, with particular emphasis on the areas where we
have seen weakness. In areas of shorter term concern, we are using the
flexible working programmes we introduced earlier in the year, ensuring that we
enter 2010 with a cost structure that is able to be responsive to changes in
the market. We expect the actions we are taking to address areas of weakness
to incur an additional cost of around £20 million in 2009 over the £145 million
total programme cost previously communicated, with the bulk of the additional
cash outflow occurring early next year. This will bring total headcount
reductions to around 2,200 since the beginning of 2008. We expect to save
ongoing savings of £15 million from 2010 as a result of this additional
restructuring, bringing total cost savings from the programme to £125 million
in 2010.
We have slowed the addition of headcount in our offshore and nearshore centres,
reflecting weaker market demand. The percentage of our workforce in these
centres was 13% at the end of September 2009, reflecting a headcount of 5,275.
We expect this to be at a similar level through to the end of 2009.
Employees
We had 39,157 employees at the end of September compared to 39,525 as at the
end of June. Attrition stabilised through the quarter, remaining at around
7%. We continued to manage our recruitment and subcontracting levels
carefully, resulting in good utilisation in most geographies outside the
Benelux.
Key orders and new wins
Group book to bill was 97% in the third quarter (2008: 87%) and is 107% on a
year to date basis (2008 99%). The largest orders booked in the period were
with the French Ministry of Finance (ONP - build and run of payroll services)
and the European Parliament, driving strong order growth in France. We have
also announced a contract extension expected to be worth £110 million with the
UK Crown Prosecution Service (CPS) since the end of the third quarter. This
will extend our work with the CPS to 2015.
On a year to date basis, this brings the number of deals greater than £20
million to seven, with an average deal size of around £50 million. In
addition, we secured important framework agreement wins in the quarter in the
Nordics and Benelux regions.
Outsourcing
Revenue in the third quarter was up 11% to £329 million, with growth reflecting
market trends for cost reduction. On a year to date basis, revenue was up
11%.
Book to bill was 77% in the third quarter (2008: 83%) and was 103% on a year to
date basis (2008: 99%). We expect the new orders booked in the early days of
the fourth quarter, along with other opportunities in the pipeline, to
contribute to a strong performance on a full year basis and to contribute to a
substantial outsourcing order backlog as we enter 2010.
Revenue by geography
REVENUE Q3 2009 YTD Q3 Q3 2008 Q3 Q3 YTD
(£m) actual 2009 2008 reported growth growth growth
actual pro (actual) (pro (pro
forma* forma) forma)
Nordics 226 745 231 220 3% (2%) (2%)
UK 193 572 180 180 7% 7% 7%
France 181 579 191 168 8% (5%) (3%)
Benelux 125 431 162 144 (13%) (23%) (17%)
International 137 404 138 133 3% (1%) (2%)
Total 862 2,731 902 845 2% (4%) (3%)
*Q3 2008 revenue adjusted for the impact of acquisitions and disposals at Q3
2009 exchange rates
Nordics
Revenue was down 2% in the third quarter to £226 million, driven by a 6%
decline in the Swedish market. We continued to perform well in Norway and
Finland, driven by a strong order intake at the end of 2008 and the beginning
of 2009. On a year to date basis, revenue is down 2%.
While Swedish customers continue to be cautious in their decision-making, we
have a good pipeline in the Nordics overall. Book to bill was 91% in the third
quarter (2008: 91%) and was 114% on a year to date basis (2008: 107%).
France
Revenue was down 5% in the third quarter to £181 million, with slower
recruitment and a reduction in subcontractors contributing to lower billable
headcount.
Book to bill in the third quarter was exceptionally strong at 167% (2008: 84%),
driven mainly by contract wins with the French Ministry of Finance (ONP) and
the European Parliament. On a year to date basis, book to bill was 137% (2008:
99%).
UK
Revenue was up 7% to £193 million in the third quarter. On a year to date
basis, revenue was up 7%. Public Sector represented 63% of revenue and was up
13% in the third quarter whilst revenue in the commercial sector stabilised.
Book to bill was 54% in the third quarter (2008: 69%) and was 83% on a year to
date basis (2008: 89%). As mentioned above, we have also booked a significant
order extension with the UK Crown Prosecution Service (CPS) since the end of
the third quarter.
Benelux
Revenue was down 23% to £125 million in the third quarter, reflecting continued
weakness in financial services and IDT. On a year to date basis, revenue was
down 17%.
The new structure we put in place in the first half of 2009 and our ongoing
actions to reduce headcount will ensure we enter 2010 with a more flexible cost
base. This should result in improved utilisation, contributing to
profitability improvements through 2010.
Book to bill was 85% in the third quarter (2008: 105%) and was 87% on a year to
date basis (2008: 97%).
International
Revenue was down 1% to £137 million in the third quarter, with Germany
declining and other geographies stable. On a year to date basis, revenue was
down 2%.
Book to bill was 90% in the third quarter (2008: 89%) and was 105% on a year to
date basis (2008: 102%).
Financial position
We have continued to make good progress on cash collection. Despite the
strengthening in the Euro in the third quarter, we remain confident that net
debt/EBITDA will be below 1.2x at the end of 2009, as previously indicated.
Financial calendar
In line with our revised financial calendar, the next scheduled statements are:
24 February 2010 FY 2009 preliminary results
5 May 2010 Q1 2010 interim management statement
Disclaimer
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 2008 annual report filed with the UK Listing Authority on 31 March 2009.
For further information please contact:
Logica Investor relations: Karen Keyes/Frances Gibbons +44 (0)7801 723682/
+44 (0)20 7446 4341
Logica Media relations: Louise Fisk +44 (0)7798 857770
Brunswick: Tom Buchanan +44 (0)20 7404 5959
Notes:
Book to bill percentage is a measure of the level of orders relative to revenue
in the period.
Comparative figures for 2008 are pro forma constant currency revenues, unless
otherwise stated. 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:
Q3 2009 Q3 2008
YTD average YTD average
£1 / € 1.13 1.28
£1 / SEK 12.06 12.05
£1/USD 1.55 1.95