Logica reports strong Q1 orders

30 April 2009

Logica is today issuing an interim management statement based on unaudited results for the first quarter ended 31 March 2009.

	2009 actual	2008 reported	Q1 growth % (pro forma*)	Q1 growth % (actual)
Q1 REVENUE (£m)	954	856	0	11

* ^{Q1 2008 revenue adjusted for the impact of acquisitions and disposals at Q1 2009 exchange rates was £958 million}

Revenue for the first quarter in line with 2008 on a pro forma basis and up 11% on a reported basis despite a challenging economic environment
First quarter orders increased 16% over 2008 on a pro forma basis, with two major outsourcing deals driving book to bill of 122%
Accelerated cost savings of £75 million on track
Cash performance in the first quarter underpinning year end net debt/EBITDA guidance
Second half market conditions unlikely to be much different from first half of 2009

Andy Green, CEO of Logica, said:
“I am pleased that we maintained revenues for the first quarter at last year’s level. Order performance remained strong, boosted by outsourcing wins with TeliaSonera and the UK’s National Policing Improvement Agency. We are executing against our Programme for Growth, which we expect will deliver margins at least in line with 2008 despite difficult market conditions.”

Overview

Revenue for the first quarter of 2009 was £954 million, with positive currency impact contributing to 11% reported revenue growth (2008 reported: £856 million). On a pro forma basis, first quarter revenue was in line with 2008 with expected weakness in Financial Services and IDT offset by growth elsewhere.

Outsourcing Services revenue was up 9% and represented 33% of total revenue (2008: 30%). Revenue in the more cyclical non-outsourcing business (Consulting and Professional Services) declined 4%, with the most significant impact in the Netherlands and some slowing in Sweden.

Strong first quarter order intake, with orders up 16% over 2008, resulted in a book to bill for the first three months of 122% (2008: 105%). This was driven by particularly good order intake in Outsourcing Services, with book to bill at 131% (2008: 99%). Orders growth in the non-outsourcing business was 6% on a pro forma basis, resulting in a book to bill of 118% (2008: 107%). We had a number of significant new wins in our high growth areas. While the overall pipeline of opportunities remains good, the level of orders and revenue in Consulting and Professional Services in the first half is likely to be impacted by increased pricing pressure, longer customer decision-making cycles and a lower number of working days in the second quarter than in 2008.

Programme for Growth

The Programme for Growth remains at the core of our strategy to deliver real value to our shareholders. The plan, which we initially set out in April 2008, aims to reduce costs and reinvest in strengthening the sales capability of Logica and to improve execution with the intention of making us our customers’ most trusted innovation partner. In November 2008 and February 2009, we announced that we intended to accelerate the cost savings which underpin the programme and to slow the investments in light of market conditions. Our 2009 cost savings of £75 million and investments of £30 million in sales and marketing remain on track and the expected overall cost of the programme remains at £145 million.

Outlook

Our strategic shift over the last twelve months to improve our sales capability and contest and win more long-term, outsourcing contracts resulted in a strong order intake in the last quarter of 2008 and in the first quarter of 2009. As a result, we expect to see Outsourcing revenue benefiting increasingly through 2009. In Consulting and Professional Services, the market has become more difficult through the first quarter, as customers look to reduce costs in the context of a more challenging economic environment. In light of this, overall first half revenue is likely to show a slight decline.

Second half market conditions are unlikely to be much different from those in the first half of 2009. Despite market conditions, we expect to deliver full year adjusted operating margin at least in line with last year.

Employees

We had 39,812 employees at the end of March, compared to 39,937 as at the end of December 2008. Six month annualised attrition was 11% at the end of March (14% at the end of December 2008). We now expect it to be below 8% for the full year.

With attrition declining significantly, we have largely stopped recruiting in our larger European geographies and are taking action to maximise utilisation. In addition, we are acting decisively to reduce headcount further in the geographies where we see significant weakness. At the end of March, we had around 5,150 employed in our nearshore and offshore centres. We will continue to prioritise growing these centres as onshore headcount declines.

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