Logica reports preliminary results for the year ended 31 December 2007

Headlines

• Revenue up 3% on a pro forma basis
• Strong revenue growth across major European countries and in the UK Public Sector offset by weakness in the UK commercial sectors
• Solid underlying profit performance in major geographies outside the UK
• Weaker operating profit offset by lower tax rate at EPS level
• Strong cashflow with cash conversion of 126%
• Net debt of £483.2 million, after the £130.0m share buyback completed in Q4 2007
• Continued growth in dividend, up 4% to 5.8p
• New CEO in place since 1 January; outcome of review to be communicated by the beginning of May
• Logica name adopted across the group from today; important step in wider integration of the business

For the year ended 31 December 2007, results were as follows:

Commenting on today’s announcement, Andy Green, CEO, said:

“Everyone at Logica understands the need to improve on our 2007 performance. We are committed to delivering value to shareholders and customers alike.

“In my first few weeks, I have heard from our customers that they see us as open, flexible and local. The launch of the Logica brand creates a real opportunity to add to these strengths, with innovative services from across the group backed by best-in-class blended delivery from around the world. We will set out how we expect this to create value for our shareholders by the beginning of May.”

A separate press release regarding the Logica name change has been issued today.

Download a pdf version of our 2007 preliminary results

For further information, please contact:

Logica Media relations:
Carolyn Esser/Louise Fisk +44 (0) 7841 602391/+44 (0) 7798 857 770

Logica Investor relations:
Karen Keyes/Frances Gibbons +44 (0) 20 7446 4341 (mobile: +44 (0) 7801 723682)

Brunswick:
Tom Buchanan/Craig Breheny +44 (0) 20 7404 5959

_Notes:

_{1. 2006 reported figures have been restated to reflect the disposal of the Telecoms Products business. See notes to the accounts for details.}

_{2. Cash conversion represents net cash inflow from trading operations divided by adjusted operating profit. Net cash inflow from trading operations is cash generated from operations before cash flows from the purchase of property, plant , equipment, intangibles and restructuring and integration activities.}

_{3. Unless otherwise stated, the Logica information in this release relates to pro forma results. Comparatives are based on pro forma IT services and:}

• _{reflect average 2007 exchange rates}
• _{exclude businesses disposed of in 2006 (pdv.com and No Limits)}
• _{excludes French passthrough revenue}
• _{are adjusted to include Caran (sold in June 2007) to the beginning of June 2006 and the rest of WM-data (Wm-data acquisition completed in October 2006) for the full year (i.e. from January to December 2006)}
• _{are adjusted to include the acquired Siemens Business Services (acquired in March 2007) for the nine months from March 2006}
• _{are adjusted to include the disposals and acquisitions of certain non-core businesses that took place during the year.}

_{4. Adjusted operating profit and margin are from continuing operations and, where applicable, before exceptional items and amortisation of intangible assets initially recognised at fair value in a business combination.}

	FY ’07 £’m	Pro forma FY ’06 £’m	Restated FY ’06 £’m	Pro forma growth %	Restated growth %
Operating profit	109.7		141.9		(22.7)
Add back impact of:
Exceptional items	23.2		23.9
Amortisation of acquisition related intangibles	74.7		37.6
Adjusted operating profit	207.6	254.5	203.4	(18.4)	2.1

_{5. Adjusted earnings per share is based on net profit attributable to ordinary shareholders, excluding the following items:}

• _{discontinued operations}
• _{exceptional items}
• _{mark-to-market gains or losses on financial assets and financial liabilities designated at fair value through profit or loss}
• _{amortisation of intangible assets initially recognised at fair value in a business combination}
• _{tax on the items above, where applicable}

_{6. Exchange rates used are as follows:}

	FY ’07	H2 ’07	H1 ’07	FY ’06
£1 / €
Average	1.46	1.44	1.48	1.47
End of period	1.36	1.36	1.49	1.48
£1 / SEK
Average	13.51	13.35	13.67	13.57
End of period	12.87	12.87	13.76	13.39

Financial overview

Group revenue was £3,073.2 million, up 27% on a reported basis (2006 restated: £2,420.7 million). This represented pro forma growth of just over 3%, in line with our most recent guidance. Group adjusted operating profit was £207.6 million (2006 restated: £203.4 million), representing an adjusted operating margin of 6.8%. This was below the 8.4% restated level achieved in 2006. The weaker 2007 operating performance was somewhat offset by a lower tax rate, giving adjusted EPS from continuing operations of 10.2p, a 2% reduction over 2006. Cash flow was strong in the second half, with full year cash conversion of 126%. The proposed final dividend is 3.5p, representing a 4% increase in the total dividend for the year to 5.8p. Closing net debt was £483.2 million, with adequate headroom in our current bank facilities even after we redeem the €303 million convertible bonds maturing in September 2008.

Review of the business

Andy Green joined the business as CEO in January and has been spending time with customers, employees and other stakeholders. We will communicate the conclusions from our review of the business by the beginning of May.

Priority areas are increasing customer focus, accelerating integration across the group, building on the current global delivery capability and establishing a more competitive cost structure. Focus in all these areas will be particularly important in the UK where the progress we have made to date has not been sufficient to return the commercial sectors to revenue growth in line with the market or to a sufficient level of profitability.

Rebranding to Logica

The Logica brand is being adopted across the company from today and will replace all existing brands. The move to one Logica is an important step in the integration of the group. As previously communicated, we will incur an incremental cost of around £5 million in 2008 to implement this.

Outlook

Our outlook for 2008 is set against an uncertain market environment. Although we have seen a few incidences of slower spending, market activity levels generally appear resilient.

We remain alert to changes in customer sentiment and are carefully monitoring utilisation levels and recruitment. We are planning more flexible resourcing through the use of subcontractors and our blended delivery capability.

We expect the recently-announced Outsourcing Services division to lead to further growth in revenue from outsourcing and in the percentage of work delivered from offshore locations.

Based upon our order backlog and the pipeline of opportunities in our major markets, we currently expect 2008 constant currency revenue growth will be around a similar level to 2007.

Recent contract wins

Order momentum improved over the last few months of 2007 and into the first months of 2008.

Outsourcing wins in the UK include a new applications management contract with airport authority BAA and an IT outsourcing contract win with the UK housing division of Taylor Wimpey. In the Netherlands, we have signed a €40m deal with KPN to outsource its “best in class” HR shared service centre and we are developing an integrated back office solution for travel and toll services provider Movenience. In France, we have signed a €15 million applications management outsourcing contract with a major French bank.

Order momentum has been particularly strong in the Nordics, where we have signed our first major cross-selling project involving a significant offshore component with Swedbank. We have seen a number of new wins in the Public Sector, which include IT outsourcing contracts with the Norwegian Department of Labour, the Oslo Department of Education, the Finnish pensions agency and several Finnish government agencies in the transport sector. We have also signed a €10m IT cooperation agreement with Bankgirocentralen, Sweden’s clearing services provider, and an applications management contract with the City of Gothenburg.

We continue to consolidate current partnerships and develop new ones. Ford of Europe has elected Logica in the UK as a preferred supplier for IT resources, extending the relationship into its 25th year. In the Netherlands, DSM has extended its 2005 manufacturing IT contract and we continue to build on the work we are doing with EDF in France. We have also put a €10m framework agreement in place with the European Patent Office.

Operating performance – continuing operations

REVENUE BY GEOGRAPHY

	FY’07 £’m	FY’06 Pro forma £’m	FY’06 Restated £’m	Growth FY’07 on FY’06 Pro forma %	Growth FY’07 on FY’06 Restated %
Nordics	836.9	790.1	190.5	5.9	339.3
UK	662.5	718.4	718.4	(7.8)	(7.8)
France	588.2	530.5	560.0	10.9	5.0
Netherlands	484.7	449.2	447.6	7.9	8.3
Germany	179.6	164.4	168.6	9.2	6.5
International	321.3	328.1	335.6	(2.1)	(4.3)
Total continuing	3,073.2	2,980.7	2,420.7	3.1	27.0

Our major continental European geographies performed well through the year, with growth above the market in France, Germany, the Netherlands and the Nordics. The UK Public Sector, which continued to account for over half of UK revenue, delivered growth well above the market, up 14% in the second half. However, weakness in our UK commercial sectors continued to have a dampening effect on overall group performance. The Energy and Utilities business in the UK returned to growth, with second half revenue up 8%. In the International business, revenue was down 2% as a result of contractual price reductions in the Edinfor business and the completion of a major telecoms contract in Asia in early 2007. Excluding the UK commercial business, revenue growth for the group was ahead of the market at 7%.

Our top 10 customers accounted for 15% of group revenue in 2007 (2006, excluding WM-data: 21%).

ADJUSTED OPERATING PROFIT BY GEOGRAPHY

	FY’07 £’m	FY’07 Margin %	FY’06 Pro forma £’m	FY’06 Restated £’m	Growth FY’07 on FY’06 Pro forma %	Growth FY’07 on FY’06 Restated %
Nordics	76.7	9.2	68.0	16.9	12.8	353.8
UK	30.5	4.6	77.8	77.8	(60.8)	(60.8)
France	40.8	6.9	46.2	46.8	(11.7)	(12.8)
Netherlands	42.9	8.9	44.4	44.2	(3.4)	(2.9)
Germany	8.1	4.5	(1.4)	(1.4)	n/a	n/a
International	8.6	2.7	19.5	19.1	(55.9)	(55.0)
Total continuing	207.6	6.8	254.5	203.4	(18.4)	2.1

Adjusted operating margin for the year of 6.8% was disappointing compared to the pro forma 8.5% achieved in 2006, with second half adjusted operating margin at 7.6% (2006: 9.8%). The most significant impact on group margin was in the UK business, reflecting charges in respect of a project cost overrun and weaker performance in the commercial sectors. The cost of management changes affected the margin in France despite a strong operational performance. The impact of price reductions coupled with the timing of cost savings in the Edinfor business in Portugal reduced margins in the International segment. More positively, margins in the Nordics increased from 8.6% to 9.2% as acquisition cost savings of £5 million were achieved. The business in Germany was profitable through the year, building on a well executed integration programme in 2006.

Additionally, as we closed 2007, we have taken a more conservative near-term view of a number of programmes across the group and have resolved a longstanding UK customer dispute. As a result of these actions, 2007 operating profit was lower than our previous expectations in the UK and the Netherlands. At a group level, the combined one-off impact for the year of these provisions and charges was a reduction of around 0.8 per cent of margin.

Review of continuing operations by geography

Nordics

Revenue by market sector	FY’07 £’m	FY’06 Pro forma £’m	FY’06 Restated £’m	Growth FY’07 on FY’06 Pro forma %	Growth FY’07 on FY’06 Restated %
Public Sector	252.3	246.7	55.8	2.3	352.2
Industry, Distribution and Transport	382.4	335.5	81.9	14.0	366.9
Energy and Utilities	50.1	50.5	13.0	(0.8)	285.4
Financial Services	86.8	76.4	20.2	13.6	329.7
Telecoms and Media	65.3	81.0	19.6	(19.4)	233.2
Total	836.9	790.1	190.5	5.9	339.3
Outsourcing (%)	33	-	31
Adjusted operating profit (£’m)	76.7	68.0	16.9
Adjusted operating margin (%)	9.2	8.6	8.9

Revenue was up 6% on a pro forma basis to £836.9 million, with fourth quarter growth of 5% on a pro forma basis when compared to a strong quarter in 2006. Adjusted operating profit was up 13% on a pro forma basis to £76.7 million (2006: £68.0 million), giving an adjusted operating margin of 9.2%.

IDT grew well ahead of the market, with good growth at customers such as Volvo and Schenker where we secured contract renewals in 2007. The Public Sector business grew in line with the market, with work in the defence sector continuing to be an important contributor. In Financial Services, growth was driven by good customer demand and higher volumes of work with both existing and new customers as we began to leverage the skills of the wider group into the Nordics. E&U was broadly stable while lower revenue in the Telecoms and Media business was the result of anticipated lower license sales within billing solutions.

Utilisation remained good across the Nordics and subcontracting levels remain stable. We continue to see good demand for ERP, especially SAP. Appetite for global delivery is on the increase. Initial internal product development work has been transferred to India and use of offshore delivery on customer contracts has increased through the year in both Finland and weden.

Through a year of integration, we saw almost no attrition at senior levels. The improvement in adjusted operating profit was largely due to anticipated integration cost savings of £5 million as we transitioned some product development work offshore, closed the Logica office in the Nordics and reduced some central overheads. We continue to expect an incremental £8 million of cost savings in 2008, with annualised cost savings of £15 million by 2009.

Excluding the impact of integration cost savings, margin was broadly unchanged. Although improved utilisation and increasing use of offshore resource has had a positive impact on margin, managing higher wage inflation in the context of tough recruitment markets remains the key challenge to increasing margin further in the region.

UK

Revenue by market sector	FY’07 £’m	FY’06 Pro forma £’m	FY’06 Restated £’m	Growth FY’07 on FY’06 Pro forma %	Growth FY’07 on FY’06 Restated %
Public Sector	372.0	337.1	337.1	10.4	10.4
Industry, Distribution and Transport	89.3	136.7	136.7	(34.7)	(34.7)
Energy and Utilities	104.7	104.7	104.7	-	-
Financial Services	60.6	85.7	85.7	(29.3)	(29.3)
Telecoms and Media	35.9	54.2	54.2	(33.8)	(33.8)
Total	662.5	718.4	718.4	(7.8)	(7.8)
Outsourcing (%)	39	40	40
Adjusted operating profit (£’m)	30.5	77.8	77.8
Adjusted operating margin (%)	4.6	10.8	10.8

Revenue was down 8% on a pro forma basis to £662.5 million. The fourth quarter decline of 7% was similar to that experienced in the third quarter. Adjusted operating profit for the year was £30.5 million, compared to a £77.8 million adjusted operating profit in 2006.

The largest contributor to the decrease in adjusted operating profit was the previously disclosed provision on a long-term contract taken in the first half. We have also resolved a longstanding UK customer dispute. These costs, added to a more conservative view taken on elements of some UK contracts, resulted in a £20 million impact on adjusted operating profit for the year. Absent these charges, adjusted operating margin for the year would have been 7.6%.

Public Sector revenue was up 10% and represented 56% of UK revenue in 2007. Second half revenue growth was particularly strong at 14%, as we delivered under contracts with the Crown Prosecution Service, the Ministry of Justice, and to the NHS Connecting for Health Programme through arrangements with BT. Space and Defence continued to account for around a third of UK Public Sector revenue. In 2007, we delivered further software for the UK’s next generation military satellite communications system, Skynet 5, and continued to deliver under Ministry of Defence contracts such as the Defence Information Infrastructure (DII) programme.

Outside the Public Sector, Energy and Utilities revenue was stable year on year. We made significant improvements in this business through the year, resulting in revenue up 8% in the second half. The IDT sector continued to be affected through the year by the conclusion of a major transport contract in 2006. However, our new contract with BAA and the win with Taylor Wimpey booked at the end of 2007 have contributed to a strengthening order backlog. Across the commercial sectors, our exposure to a smaller number of clients has contributed to weakness through the year, with M&A activity in Financial Services having an impact on consulting revenue in 2007. Our focus will remain on reinvigorating the sales capability across the UK business through 2008.

Book to bill for the year was 0.97:1. While we enter 2008 with a good pipeline in Energy and Utilities and a good order backlog in the Public Sector, we expect slower growth in the Public Sector than in 2007. This should be offset by improvements in parts of the commercial sector with a gradual return to a modest level of growth as we go through 2008.

With the majority of the £20 million of costs incurred in the first half, margin improved to 8.0% (2006: 12.6%) in the second half. Margins also benefited from some cost savings achieved as a result of overhead reductions in the first half. Utilisation was lower throughout the year as a result of reduced volume of business in the commercial sectors. We took action to reduce the level of subcontractors through the year although they continue to be deployed in specialist roles where required.

France

Revenue by market sector	FY’07 £’m	FY’06 Pro forma £’m	FY’06 Restated £’m	Growth FY’07 on FY’06 Pro forma %	Growth FY’07 on FY’06 Restated %
Public Sector	64.1	61.2	60.8	4.7	5.4
Industry, Distribution and Transport	221.4	206.6	238.2	7.2	(7.1)
Energy and Utilities	86.2	66.8	66.4	29.0	29.8
Financial Services	161.3	146.0	145.0	10.5	11.2
Telecoms and Media	55.2	49.9	49.6	10.6	11.3
Total	588.2	530.5	560.0	10.9	5.0
Outsourcing (%)	32	30	30
Adjusted operating profit (£’m)	40.8	46.2	46.8
Adjusted operating margin (%)	6.9	8.7	8.4

Revenue was up 11% on a pro forma basis to £588.2 million, with strong fourth quarter growth. Adjusted operating profit was £40.8 million (after one-off costs related to management changes), compared to £46.2 million on a pro forma basis in 2006.

Revenue grew across all market sectors, with Public Sector growth at 5% in line with the market and growth in all other sectors above 7%. The fastest growing sector through 2007 continued to be E&U, as we deployed a major programme for EDF. Financial Services was also up on the back of the cross-selling contract signed in 2006. We expect slower growth in Energy and Utilities and Financial Services to be balanced against stronger public sector growth in the absence of election activity in 2008.

Half of our major accounts posted growth of more than 10%, with EDF, a number of financial services institutions and our project with the Ministry of Defence driving growth. Roll-out of our contract for Carrefour was also a contributor.

Management changes made in mid 2007 did not hamper recruitment efforts. We recruited successfully in the French market, exceeding internal targets.

Excluding the one-off costs related to management changes, adjusted operating margin was 7.8% (2006 pro forma: 8.7%) with some second half dilution compared to 2006 as a result of higher use of subcontractors and a more conservative view on costs related to some contracts where we intend to accelerate the offshore transition. Doubling of our Moroccan headcount through 2007 reflects an increased demand for a blended delivery model among French clients, hich we expect to be a positive contributor to margin in 2008.

Netherlands

Revenue by market sector	FY’07 £’m	FY’06 Pro forma £’m	FY’06 Restated £’m	Growth FY’07 on FY’06 Pro forma %	Growth FY’07 on FY’06 Restated %
Public Sector	145.3	122.4	121.9	18.7	19.2
Industry, Distribution and Transport	105.7	102.7	103.0	2.9	2.6
Energy and Utilities	50.9	49.7	49.4	2.4	3.0
Financial Services	155.8	148.2	147.3	5.1	5.8
Telecoms and Media	27.0	26.2	26.0	3.1	3.8
Total	484.7	449.2	447.6	7.9	8.3
Outsourcing (%)	18	13	13
Adjusted operating profit (£’m)	42.9	44.4	44.2
Adjusted operating margin (%)	8.9	9.9	9.9

Revenue was up 8% to £484.7 million, marking growth ahead of the market for the third consecutive year. Growth slowed in the fourth quarter in line with our expectations. Book to bill for the year was 1.04:1. Adjusted operating profit was £42.9 million, giving an adjusted operating margin of 8.9%.

For the year, revenue growth was driven by a strong Public Sector, with revenue up 19%. Financial Services revenue was broadly stable in the second half when compared to last year, leading to full year revenue growth of 5%, while Energy and Utilities saw stronger revenue growth in the second half. In IDT, revenue was stable.

In the Financial Services and IDT areas, customers are adopting higher levels of offshore resource to ensure they remain cost competitive globally which has driven a doubling of the use of our blended delivery model in 2007. While we expect a continued increase in volumes of work, this is likely to contribute to lower revenue growth rates in the Dutch market in 2008.

Although we continued to recruit successfully in the Netherlands, the labour market remained very competitive. Higher prices than in 2006 combined with increased use of subcontractors were contributors to increased costs through the year. We also recognised a level of increased cost relative to one long term contract but continue to see opportunities in our Dutch contracts to transition more work offshore in 2008. The combined impact of these factors was a reduction in operating margin when compared to 2006.

Germany

Revenue by market sector	FY’07 £’m	FY’06 Pro forma £’m	FY’06 Restated £’m	Growth FY’07 on FY’06 Pro forma %	Growth FY’07 on FY’06 Restated %
Public Sector	6.1	12.2	12.1	(50.0)	(49.6)
Industry, Distribution and Transport	72.3	68.8	67.5	5.1	7.1
Energy and Utilities	25.6	25.1	24.9	2.0	2.8
Financial Services	53.5	33.6	39.5	59.2	35.4
Telecoms and Media	22.1	24.7	24.6	(10.5)	(10.2)
Total	179.6	164.4	168.6	9.2	6.5
Outsourcing (%)	16	20	20
Adjusted operating profit (£’m)	8.1	(1.4)	(1.4)
Adjusted operating margin (%)	4.5	(0.9)	(0.8)

Revenue was up 9 % at £179.6 million, driven by particularly strong fourth quarter growth at 13%. Adjusted operating profit was £8.1 million, resulting in an adjusted operating margin of 4.5%. This compares to a loss of £1.4 million in 2006.

Revenue growth was driven by a strong performance in the Financial Services sector as we deployed a program for a major international bank and risk management solutions for a number of customers in the sector.

IDT was up 5% as a result of consulting and services projects undertaken for InBev as well as clients in the automotive sector.

The business in Germany achieved profitability through the year, building on a well executed integration programme in 2006 and driven by revenue growth in the business in 2007.

International

Revenue by market sector	FY’07 £’m	FY’06 Pro forma £’m	FY’06 Restated £’m	Growth FY’07 on FY’06 Pro forma %	Growth FY’07 on FY’06 Restated %
Public Sector	33.2	31.1	31.6	6.8	5.1
Industry, Distribution and Transport	50.1	35.5	36.6	41.1	36.9
Energy and Utilities	164.7	166.2	169.1	(0.9)	(2.6)
Financial Services	46.7	45.8	47.3	2.0	(1.3)
Telecoms and Media	26.6	49.5	51.0	(46.3)	(47.8)
Total	321.3	328.1	335.6	(2.1)	(4.3)
Outsourcing (%)	37	34	33
Adjusted operating profit (£’m)	8.6	19.5	19.1
Adjusted operating margin (%)	2.7	5.9	5.7

Revenue for the year was down 2% to £321.3 million.

The fourth quarter decline of 5% was largely attributable to a major Telecoms and Media contract with Natrindo in Asia which completed last year. Book to bill for the year was 0.90:1. Adjusted operating profit was £8.6 million, giving an adjusted operating margin of 2.7%. The lower operating profit was largely due to costs related to improving the efficiency of our business in Portugal, with headcount reduced by around 10% over the course of 2007. The phasing of the cost reduction coupled with planned price reductions reduced margins in the International segment despite improvements in profitability in the US and Australian businesses.

Edinfor revenue continued to account for around a third of International revenue. It also remained the largest contributor to Energy and Utilities revenue in the region. While EDP remains Edinfor’s major client, customers in the Portuguese water utilities market continued to represent around a fifth of revenue. We also continue to see good opportunities in Brazil where our revenue was up in 2007, mainly under our contract with natural gas distribution company Comgás.

Growth in the IDT business continued to be driven by roll-out of the InBev contract while Australia and the Middle East continued to see good Public Sector demand.

Creation of new Outsourcing Services division

In 2007, revenue from outsourcing was £959 million (2006: £708 million), representing 31% of group revenue. We have recently established Outsourcing Services as a new division, which develops our existing outsourcing model, and have been working internally to ensure the right organisation is in place to take this business forward. The new model will become operational in key European geographies from Q1 2008 and will be in place across the whole organisation by 2009.

European customers are increasingly demanding a blended delivery model. The new division will take end-to-end responsibility for outsourcing services, ensuring that customers have access to the most efficient and cost effective blend of onshore, nearshore and offshore support. It will provide outsourcing sales and design specialists to all Logica’s customers via our local organisations. It will accelerate the standardisation of tools and processes and drive efficiencies across the organisation.

The division will incorporate around 9,000 Logica employees working today in our onshore, nearshore and offshore centres. This includes around 2,000 employees in our infrastructure management centres in Sweden.

We expect our largest offshore centres in India and the Philippines to continue to grow within this division. They are already an important element of delivering outsourcing services to customers. In conjunction with our plan to continue to strengthen our Indian presence, we are appointing a new CEO for our business in India. We also expect growth in our onshore centres as well as in nearshore centres like Morocco and the Czech and Slovak Republics, which allows us to meet the varying language and cultural needs of our customers.

We expect to report performance metrics for this new division from the second half of 2008.

Employees

At the end of 2007, we had 38,740 employees (2006, restated for the disposal of Telecoms Products: 38,789). Over the course of the year, we recruited over 8,500 new employees. We met or exceeded internal recruitment targets in most of our markets.

Employee churn through annualised voluntary attrition was broadly stable on last year at around 16% and was in line with the market. The other significant movement in 2007 was the exit of approximately 1,100 employees as part of the disposal of the Caran business in the Nordics at the beginning of June. While selective price increases remained possible through the year, wage inflation in our major geographies continued to impact our ability to improve margins further. While UK utilisation has been impacted by weakness in the commercial sectors, utilisation in our other major geographies remains good.

Financial items

Amortisation of intangible assets from acquisitions was £74.7 million (2006: £37.6 million), with the increase being mainly attributable to intangible assets acquired as part of the WM-data acquisition.

The net exceptional items of £23.2 million (2006: £23.9 million) include a loss of £9.7 million related to non-core disposals completed during the year (excluding the Telecoms Products disposal which is reported as a discontinued operation). The £9.7 million loss includes a £2.6 million impairment loss on buildings in Portugal (occupied by the Copidata activity prior to its disposal). Also included are £13.5 million of restructuring costs associated with offshoring activities and IT infrastructure as part of the WM-data integration. A further £8.3 million of costs are expected to be incurred in 2008 in respect of the WM-data integration.

Finance costs were broadly unchanged in 2007. Higher amortisation of intangibles compared to 2006 and lower adjusted operating profit resulted in a profit before tax of £84.1 million (2006: £116.6 million).

Adjusted basic earnings per share from continuing operations were 10.2p (2006: 10.4p) on a weighted average number of shares of 1,494.6 million. Basic earnings per share from continuing operations, which included higher amortisation of acquisition-related intangibles than last year, were 5.4p (2006: 6.4p).

The fourth quarter showed good operational management of working capital across the group. Cash generated from continuing operations was £232.4 million (2006: £209.5 million). The net cash inflow from trading operations was £261.0 million, giving a cash conversion of 126% (2006: 119%).

Profit from discontinued operations for the year was £89.4 million (2006: £3.7 million), as a result of the disposal of the Telecoms Products business. This resulted in a net profit for the group of £168.1 million (2006: £89.1 million).

Group net debt at 31 December 2007 was £483.2 million, compared to £399.1 million at 30 June 2007. This increase is largely attributable to a net outflow from the £130 million share buyback completed in November 2007.

Taxation

Based on the progress of the legal structure integration following the acquisitions in recent years, we have been able to accelerate the benefit of historic tax losses in 2007. The effective tax rate on continuing operations for the year, before share of post-tax profits from associates, exceptional items and amortisation of intangible assets initially recognised on acquisition, was 17.6% (2006: 25.4%).

The effective tax rate for 2008 is expected to be around 23%.

The total tax charge for the year ended 31 December 2007 was £5.4 million (2006: £31.2 million) of which a tax credit of £26.4 million (2006: £14.0 million credit) relates to exceptional items and amortisation of intangible assets initially recognised on acquisition. The remaining decrease is mainly due to the use of previously unrecognised tax losses brought forward.

Minority interests

At the time of the WM-data transaction, Logica acquired 95.33% of the company’s issued share capital. The compulsory redemption process to acquire the remaining 4.67% from WM-data minority shareholders is progressing. We currently expect the redemption process to complete by the fourth quarter of 2008.

Acquisitions and disposals

In addition to the acquisition of Siemens Business Systems AS in Norway in the first half of the year, the group made the following small acquisitions during 2007:

• the remaining 63.7% of Medici Data Oy, a Finnish company specialising in patient care applications and information management services for the health care sector
• the remaining 55% interest in Internet Telecom Payment Solutions AB, a Swedish company providing billing solutions and services for the telecoms sector
• Karttakone Oy, a Finnish company providing digital and paper-based mapping products.

The provisional fair value of the identifiable assets and liabilities acquired in all acquisitions in the year was £15.1 million. Total cash due on these acquisitions was £23.6 million.

In addition to the disposals of the Telecoms Products and Caran businesses disclosed in the first half of 2007, the group completed the sale of the following non-core businesses during 2007:

• an element of the payroll business in the Netherlands which provided solutions for the SME and local government market;
• the Copidata integrated graphic services business in Portugal;
• the business providing staff augmentation and hosting services to the automotive industry in the United States;
• the former WM-data subsidiary operating in Germany, WM-data Deutschland GmbH;
• the subsidiary operating the group’s IT services business in Austria, LogicaCMG GmbH;
• small finance BPO businesses in Norway and Sweden; and
• a part of the IT services business in Denmark, providing services and products to tax authorities around the world.

The aggregate net assets of these businesses, which are not individually significant, at their date of disposal was £17.7 million. The loss on disposal was £9.9 million. Net cash inflow arising on disposal was £12.8 million.

The total consideration for the sale of non-core businesses (excluding Telecoms Products and Caran) was £15.6 million, of which £15.2 million was received in cash during the year and £0.4 million is receivable during first half of 2008.

Since the end of 2007, Logica has also acquired a small BPO business in Sweden and has disposed of its print and mail operations in Bridgend, Wales.

Balance sheet items

The group’s policy is to maintain adequate headroom to meet its foreseeable financing requirements. With our €303 million convertible bonds due to be redeemed in September 2008, we have ensured that we have sufficient capacity to repay this at the redemption date. In November 2007, we extended the £150 million tranche of our existing bank facilities (which was due to mature in August 2008). This amendment to the loan grants the option to extend until November 2010. The other commercial terms of the loan, which is provided by a group of eight of the company's relationship banks, remain unchanged.

Logica’s other principal bank facilities are a €348 million term loan and a £330 million multi-currency revolving credit facility, which is largely undrawn. Both of these fully committed facilities mature in September 2010. These facilities provide us with adequate headroom to repay our convertible debt at the redemption date, while remaining well within our banking covenants.

Events after the balance sheet date

At the time of the announcement of the Telecoms Products disposal in early 2007, we earmarked a portion of the proceeds to be used to buy out remaining minority interests in Edinfor and WM-data.

EDP has a put option in respect of its remaining 40% interest in Edinfor. This became exercisable on 21 April 2007. On 19 February 2008, we received formal notification that EDP intended to exercise this option and we expect to complete the payment for the remaining 40% of the business in March 2008.

Dividend

The directors have proposed a final dividend of 3.5 pence to be paid on 15 May 2008 to eligible shareholders on the register at the close of business on 18 April 2008. This year’s proposed total dividend of 5.8 pence represents a 4% increase on last year.

Next financial calendar dates

Logica’s next scheduled communications to the market are:

• Wednesday 14 May 2008 Q1 Interim, Management Statement and AGM
• Thursday 14 August 2008 2008 Interim results
• Wednesday 5 November 2008 Q3 Interim Management Statement

Consolidated income statement

For the year ended 31 December 2007

					Restated*
			2007		2006
	Note		£’m		£’m
Continuing operations:
Revenue	2		3,073.2		2,420.7
Net operating costs			(2,963.5)		(2,278.8)
Operating profit			109.7		141.9
Analysed as:
Operating profit before exceptional items			132.9		165.8
Exceptional items	3		(23.2)		(23.9)
Operating profit	2		109.7		141.9
Finance costs			(37.8)		(34.3)
Finance income			11.0		8.7
Share of post-tax profits from associates			1.2		0.3
Profit before tax			84.1		116.6
Taxation	6		(5.4)		(31.2)
Profit for the year from continuing operations			78.7		85.4
Discontinued operation:
Profit from discontinued operation	7		89.4		3.7
Net profit for the year			168.1		89.1
Attributable to:
Equity holders of the parent			169.9		82.0
Minority interests			(1.8)		7.1
			168.1		89.1
Earnings per share from continuing operations			p / share		p / share
- Basic	9		5.4		6.4
- Diluted	9		5.3		6.3
Earnings per share from total operations
- Basic	9		11.4		6.7
- Diluted	9		11.2		6.6

* Restated as described further in note 7.

Consolidated statement of recognised income and expense

For the year ended 31 December 2007

			2007		2006
			£’m		£’m
Exchange differences on translation of foreign operations			97.4		(4.1)
Exchange differences recycled on disposal of foreign operations			5.1		-
Cash flow hedges transferred to income statement on settlement			-		(2.0)
Actuarial gains on defined benefit plans			3.6		17.5
Tax on items taken directly to equity			-		(3.9)
Net income recognised directly in equity			106.1		7.5
Profit for the year			168.1		89.1
Total recognised income and expense for the year			274.2		96.6
Attributable to:
Equity holders of the parent			274.0		89.4
Minority interests			0.2		7.2
			274.2		96.6

Details of dividends paid and proposed are provided in note 8.

Consolidated balance sheet

31 December 2007

			2007		2006
	Note		£’m		£’m
Non-current assets
Goodwill			1,604.0		1,552.1
Other intangible assets			358.0		415.1
Property, plant and equipment			132.1		136.6
Investments in associates			2.4		6.0
Financial assets			11.0		10.1
Retirement benefit assets			12.0		18.7
Deferred tax assets			54.5		50.6
			2,174.0		2,189.2
Current assets
Inventories			1.4		2.9
Trade and other receivables			1,021.2		1,070.2
Current tax assets			40.5		31.2
Cash and cash equivalents			108.7		177.3
			1,171.8		1,281.6
Current liabilities
Convertible debt			(220.0)		(202.4)
Other borrowings			(97.2)		(33.1)
Trade and other payables			(868.2)		(886.4)
Current tax liabilities			(56.1)		(32.3)
Provisions			(9.1)		(20.8)
			(1,250.6)		(1,175.0)
Net current (liabilities)/assets			(78.8)		106.6
Total assets less current liabilities			2,095.2		2,295.8
Non-current liabilities
Borrowings			(274.7)		(498.9)
Retirement benefit obligations			(50.6)		(64.1)
Deferred tax liabilities			(125.0)		(164.4)
Provisions			(18.9)		(13.2)
Other non-current liabilities			(0.7)		(0.8)
			(469.9)		(741.4)
Net assets			1,625.3		1,554.4
Equity
Share capital	10		145.8		153.6
Share premium account	11		1,098.9		1,097.0
Other reserves			352.3		274.4
Total shareholders’ equity			1,597.0		1,525.0
Minority interests			28.3		29.4
Total equity			1,625.3		1,554.4

Consolidated cash flow statement

For the year ended 31 December 2007

					Restated*
			2007		2006
	Note		£’m		£’m
Cash flows from continuing operating activities
Net cash inflow from trading operations			261.0		242.5
Cash outflow related to restructuring and integration activities			(28.6)		(33.0)
Cash generated from continuing operations	12		232.4		209.5
Finance costs paid			(40.2)		(26.3)
Income tax paid			(45.8)		(31.5)
Net cash inflow from continuing operating activities			146.4		151.7
Net cash inflow/(outflow) from discontinued operating activities			7.0		(1.3)
Cash flows from continuing investing activities
Finance income received			7.0		5.1
Dividends received from associates			1.0		-
Proceeds on disposal of property, plant and equipment			2.2		2.2
Purchases of property, plant and equipment			(35.3)		(28.2)
Expenditure on intangible assets			(13.0)		(17.1)
Purchase of minority interests			(2.2)		-
Deferred consideration and acquisition of subsidiaries, net of cash acquired			(34.2)		(398.3)
Disposal of subsidiaries and other businesses, net of cash disposed			42.0		1.9
Disposal of discontinued operation, net of cash disposed			213.2		-
Net cash inflow/(outflow) from continuing investing activities			180.7		(434.4)
Net cash outflow from discontinued investing activities			-		(5.5)
Cash flows from continuing financing activities
Proceeds from issue of equity shares			2.5		3.4
Payment for share issue costs			-		(5.4)
Purchase of own shares			(130.8)		-
Proceeds from transfer of shares by ESOP trust			0.8		-
Proceeds from bank borrowings			34.5		480.6
Repayments of bank borrowings			(204.2)		(208.0)
Repayments of finance lease principal			(4.7)		(2.1)
Repayments of borrowings assumed in acquisitions			-		(3.8)
Proceeds from other borrowings			-		0.4
Repayments of other borrowings			-		(0.4)
Payments on forward contracts designated as a net investment hedge			(6.3)		-
Dividends paid to the company’s shareholders			(85.9)		(61.1)
Dividends paid to minority interests			(0.4)		(1.8)
Net cash (outflow)/inflow from continuing financing activities			(394.5)		201.8
Net decrease in cash, cash equivalents and bank overdrafts			(60.4)		(87.7)
Cash, cash equivalents and bank overdrafts at the beginning of the year	13		150.9		245.3
Net decrease in cash, cash equivalents and bank overdrafts	13		(60.4)		(87.7)
Effect of foreign exchange rates	13		9.1		(6.7)
Cash, cash equivalents and bank overdrafts at the end of the year			99.6		150.9

* Restated as described further in note 12.

Continues... 1. Accounting policies and basis of preparation

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