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 2010.
Headlines1
- 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 of the attached PDF document.
|
Q1 2010 actual |
Q1 2009 pro
forma* |
Q1 2009
reported |
Q1 2010 growth
% actual |
Q1 2010 growth
% pro forma* |
| Orders (£m) |
1,093 |
1,170 |
1,168 |
(6) |
(7) |
| Revenue (£m) |
939 |
954 |
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.”
Outlook
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.
Our people
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 reintegration of the unemployed back
into work.
Outsourcing
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 cost reduction.
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 Posten Norden.
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 three quarters.
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 good volume of opportunities
and stabilisation in pricing levels on last year.
Revenue by
geography
| REVENUE (£m) |
Q1 2010 actual |
Q1 2009 pro
forma* |
Q1 2009
reported |
Q1 2010 growth
% actual |
Q1 2010 growth
% pro forma |
| France |
208 |
204 |
209 |
(1) |
2 |
| UK |
187 |
182 |
182 |
3 |
3 |
| Northern and Central Europe |
192 |
192 |
195 |
(2) |
- |
| 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
France
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.
UK
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 Agency contract. 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 last year.
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.
Benelux
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 2009. 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.
Sweden
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.
International
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 comparatives.
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.
Financial position
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.
Financial
calendar
The next scheduled statements in our financial calendar
are:
6 August 2010 H1 2010 interim results
3 November 2010 Q3
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 2009 annual report filed with
Notes:
- 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 |
