UPDATE: Logica 1st Half Net Profit Rises; Margins Protected
August 07 2009 - 5:16AM
Dow Jones News
Anglo-Dutch computer services company Logica PLC's (LOG.LN)
first-half net profit more than tripled in the first half on an
improved operating performance and lower taxes and finance costs,
as the company's concerted cost-cutting effort protected margins
amid the downturn.
Logica provides consulting, outsourcing and IT services to
companies in Europe, competing with International Business Machines
Corp. (IBM), and France's CapGemini (CAP.FR) and Atos Origin
(ATO.FR) for a share of the business market that has been shrinking
as companies scale back projects in the challenging economic
environment.
The company is carrying out a GBP185 million cost-cutting
program by 2010 designed to protect profitability, and the GBP30
million already achieved helped to maintain the group's earnings
before interest and tax, or EBIT, margin at 6.8%.
This, in turn, helped operating profit adjusted for exceptional
items and amortization to rise 7.6% to GBP127 million, ahead of
consensus estimates of GBP120 million.
Net profit rose to GBP21.2 million from GBP6.1 million on the
improved operating profit and lower taxes and finance costs.
First-half revenue climbed to GBP1.88 billion from GBP1.77
billion in the same period a year ago, up 6% on the weaker pound,
but down 2% excluding currency effects, which was in line with
company forecasts, and the second half is expected to reflect a
similar level of decline, the company said.
The company reiterated its outlook for the second half, saying
that it expected the remainder of the year to be similar to the
first half, and added that margins are expected to be at the same
level as last year.
This was a slight softening of the previous guidance which said
margins would be "at least" in line with last year, implying the
potential for upside that was lacking in Friday's statement.
Chief Executive Andy Green told reporters there had been a small
deterioration in the margin outlook since the previous guidance in
April, although he said it was a "very marginal" worsening.
Along with its peers, Logica has found its consulting business
suffering as client companies tighten their purse strings to new
projects, but is enjoying growing demand for outsourcing projects,
which companies use to save money in the downturn.
Strength in outsourcing, which accounts for around 36% of
revenue, helped the company's book to bill, which measures the
level of orders relative to revenue in the period, to rise to 111%
from 105% in 2008, which Panmure Gordon analyst George O'Connor
said gives comfort to second-half estimates.
Green said, "While there is still uncertainty in the consulting
and professional services market, we have taken swift action in
more difficult geographies to protect margins."
Singer analyst Tintin Stormont said the results were good and as
reassuring as investors could have hoped for, while management
guidance continues to be 10% to 13% above current market consensus
estimates.
At 0808 GMT, shares traded down a penny, or 1.2%, at 108 pence
after gaining over 30% in the past two weeks.
Company Web site: www.logica.co.uk
-By Kathy Sandler, Dow Jones Newswires; 44-207-842-9293;
kathy.sandler@dowjones.com