Logica first quarter driven by strong growth in Outsourcing

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Algemeen advies 05/05/2010 08:52
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.

d.d. 6 mei 2010
tijd 12.01
Logica EUR 1,647 +0,069 ct



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