31st Mar 2009 12:45
31 March 2009
Publication of Logica Annual Report 2008
Logica plc (Logica) has today published the following documents on its website at www.logica.com:
1. Annual Report and Accounts 2008
2. Notice of Annual General Meeting for 2009
Logica has also submitted to the UK Listing Authority two copies of the documents listed above and the Proxy form for the Annual General Meeting 2009, in compliance with Listing Rule 9.6.1.
Copies of the above documents will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:
The Financial Services Authority
25 The North ColonnadeCanary WharfLondonE14 5HS
Telephone: +44 (0) 20 7066 1000
The Annual General Meeting will be held in London on 30 April 2009.
In accordance with Rule 6.3.5 of the Disclosure and Transparency Rules, extracted below from the Annual Report is a management report in full unedited text which contains a responsibility statement, principal risk factors and details of related party transactions. Accordingly, page numbers refer to those in the Annual Report. A condensed set of financial statements was included in the final results announcement issued on 25 February 2009.
For further information please contact:
Logica Investor relations: Karen Keyes/Frances Gibbons +44 (0) 20 7446 1338/+44 (0) 7801 723682
Logica Media relations: Carolyn Esser/Anna Brog +44 (0) 7841 602391
ADDITIONAL INFORMATION
Management Responsibilities
Each of the Directors, whose names and functions are referred to on pages 36 to 37 confirm that, to the best of their knowledge:
* the Group financial statements, which have been prepared in accordance with IFRSs, as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and * the Business Review and Risk Factors on pages 4 to 33 and pages 66 to 67 respectively includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
Risk Management
The Board recognises the need to understand and control the variety of risks to which the Company is exposed. In order to address these challenges on behalf of the Board during the year, the Audit Committee oversaw a Risk Management Committee (RMC), chaired by the Chief Financial Officer, which exercised a framework for managing risk within the Group. Five practice panels responsible respectively for the areas of delivery, operations, finance, human resources, and sales and marketing, supported the RMC. In conjunction with these panels, the RMC took responsibility for the regular evaluation of generic and specific risks within the business and the implementation of mitigation plans to address them.
The risk process identifies, evaluates and manages significant risks faced by the Group. Risks are assessed with reference to the achievement of the Group's business objectives and according to current market and economic issues. The continuous monitoring of strategic and operational risks is the responsibility of the Board and line management respectively. The risk process has been in place for the year under review and up to the date of this annual report.
As referred to in the Internal Control section above, clearly defined delegation of responsibilities and authorisation levels contribute to a comprehensive system which exists for controlling these risks and ensuring they are adequately addressed. Core operating procedures common to all areas of the Group are clearly documented in the Cortex business management system also referred to in the Internal Control section. Regular internal control reviews are presented to the Audit Committee. Audit Committee papers, including internal control reviews, are circulated to all Board members.
Major contract related risks
The complexity, variability and duration of solution and service contracts all place risk management and control at a premium. If the Group fails to adequately assess its risks, implement the required controls or monitor its position diligently, any resulting failure to deliver a contract could adversely affect its relationship with the client and Logica's reputation and ultimately affect the results of the Group.
The Group manages project and operational risk through the application of process, underpinned by a comprehensive, well proven quality management system detailed in Cortex. Communication, training and adoption of Cortex by all staff are essential. Feedback from audits, lessons learnt and the capture of revised metrics leads to updates on a regular basis. We are currently evaluating making Cortex development tools and methodologies more prescriptive and automating more. A review of our Opportunity, Bid, Delivery and Risk Management processes is also in progress across the Group.
Business continuity risks associated with operational failure, information systems and data security
Logica enjoys a leading position in many markets and geographies based on our domain expertise, repeatable and leading edge solutions and services, our reputation for technical excellence and reliable delivery, and a significant number of long standing clients. However, a failure of our systems, or a failure of our operational and company management processes, could lead to a loss of confidence in the Group which would undermine our market perception and brand.
Actions are in hand to improve our focus on customer satisfaction. Our account and delivery management processes include both active and reactive mechanisms. Our goal is to ensure that management reacts to issues before damage results. There is a focus on standardisation of processes, systems and tools across the Group aimed at improving operational effectiveness and resilience through the One Logica programme.
Business continuity risks associated with a pandemic, terrorist incident or other external event, including exposure to geopolitical, economic and social disruption, particularly in parts of Europe and in India
There is increasing concern generally about the threat of a continental or global influenza or related virus pandemic, and the threat of a terrorist attack. An incident affecting a key group of staff could impact the operation of the Company, and in turn confidence in Logica's ability to deliver. As the Group operates on an international basis, it is also exposed to the risk of political, financial, economic and social unrest in the territories in which it operates. These risks are generally outside the control of the Group but could still result in the loss of services that would prejudice our ability to respond to agreed service levels or fulfil other obligations.
Business continuity plans are maintained and are being tested for range of disaster scenarios in each geographic location in which the Company operates. Lessons are learnt from incidents across the Group and improvements to these plans are in progress. The Group has also established an approach to the pandemic threat and monitors the World Health Organisation Pandemic Alert status. The Group adopts a balanced business and market portfolio to endeavour to protect itself against risks that are restricted to individual territories and market sectors.
Achieving the objectives set for the Programme for Growth
The Programme for Growth is the basis on which Logica expects to improve returns to shareholders. A programme of significant cost reductions is taking place, in order to fund a number of investments which will deliver revenue growth above the market. The key risks are delivering sufficient cost savings in an uncertain economic climate, ensuring that the investment reaches the right programmes and can be reduced if conditions deteriorate, achieving the right balance of management attention between business as usual and change and failing to hit externally reported milestones impacting our reputation with investors and customers.
Each work stream is sponsored by an Executive Committee (EC) member who is personally responsible to the Group Chief Executive for ensuring the objectives are achieved. Seamus Keating, CFO, oversees and manages the whole project. A programme plan for each work stream details key dates and milestones. A project manager leads each work stream with responsibility for resourcing and ensuring delivery on time and to budget. Progress is reviewed monthly by the Executive Committee. Investment levels are adjusted in the light of trading conditions and business forecasts.
Dependence on recruitment and retention of suitably qualified personnel
The ability of the Group to meet the demands of the market and compete effectively with other IT suppliers is, to a large extent, dependent on the skills, experience and performance of its personnel and an appropriate balance of onshore, nearshore and offshore resources. The loss of key personnel or significant numbers of staff, or the failure to attract a sufficient number of suitably qualified and experienced personnel in our key onshore, near shore and offshore locations, could have serious consequences on the Group's ability to service client contracts.
The Group has well established recruitment processes and adopts a range of proven methods to maximise key staff retention. The Group also provides an infrastructure which supports the development of its personnel through a range of structured career development programmes focused on each key competency, which include succession planning as well as leadership, talent management and personal development.
Achieving operational process excellence in our global blended delivery model
The market is increasingly demanding the ability to deliver globally, exploiting the benefits of our growing global presence. The ITIL service management processes currently being adopted will strengthen the ability of the Group to deliver services and application management on a global basis from any delivery centre. The next challenge is to develop, supported by tools, the industrialisation of design and development. Our challenge is to achieve the changes necessary in a sufficiently timely manner, and within normal business constraints.
The Group is investing in the development and industrialisation of our processes (known as Cortex), and our Management Information Systems. We are introducing more prescription, efficiencies and automation where possible. Global Operations is focused on improving the efficiency of our IT and offshore delivery processes and accelerating the development of our blended delivery model.
Regulatory compliance risks
Given the enlarged group and increasing compliance, the Group needs to ensure that the various compliance risks are effectively understood and managed. The main risk areas are 1) data and information security, including Data Protection regulations, 2) environmental standards and Corporate Responsibility, and 3) global staff mobility issues including adherence to immigration and tax regulations.
Our Risk and Compliance Management processes have been revised. They now include pro-active monitoring of the complete breadth of compliance requirements across the individual geographies and regulatory domains. Formal risk assessments are being used to identify specific mitigating actions required. Standard governance processes are being implemented across the Group.
Major client dependencies and regional market sector risks
The Group has a number of significant global and regional clients and operates in key markets in the main European geographies. A change in the strategy or in the buying pattern of a key client, or changes in those local markets, may affect the Group's results. A more macro level change in any one market could also adversely affect the results of the Group, and this is addressed in the risk below.
As well as maintaining a geographical spread, the Group has a well balanced spread of business across market sectors and a wide range of clients. It manages more local regional shifts of focus and resource in response to country market fluctuations. We have identified 57 focus accounts from across the Group which are receiving particular attention to ensure stability, account growth and customer satisfaction are all achieved. In 2008, no customer accounted for more than 2% of revenue.
Macro economic and industry level trends and changes affecting the global competitive landscape
The Group is exposed to unrest in world market sectors, such as finance, oil and gas, due to a range of factors largely outside of its control. Many market sectors in which the Group operates have been susceptible to rapidly changing technologies, regulation, variations in market economic conditions and fluctuations in client demand. The geographies we operate in have expanded in response to global trends, including offshoring and the changing economic position of India and China. The Group needs to be able to continue to respond and adapt whilst, in a timely and cost-efficient manner, continuing to deliver existing products and services. Failure to do so will be a risk to the Group's success.
To meet market demands, the Group's Industry Boards are tasked with producing innovative solution and service propositions, essential to both stimulate new client revenue opportunities and meet existing needs. The Programme for Growth has also identified a number of key focus areas where we see both market demand and particular opportunity for Logica in the near future. A proactive knowledge management programme across the Group, combined with increased collaborative competency team development, an Innovation team and the recent institution of Global Operations helps to ensure that technology advancement challenges are met.
Loss of authorisation or accreditation from vendors or disruption of key supplier relationships
A portion of the Group's revenue is dependent on continued authorisation and accreditation by certain vendors of IT software and hardware. Without these service authorisations and accreditations, the Group may be unable to offer certain products and services. Failure to maintain authorisations and accreditations may also result in the Group failing to fulfil contractual obligations.
Alliance management is tasked with developing engagement plans with key suppliers that link Logica to these organisations at management levels and across functions, maintaining a mutually positive and beneficial business arrangement.
40. Related party transactions
Remuneration of key management personnel
The remuneration of the Directors of the Company and the Group's Executive Committee, who are the key management personnel of the Group, is set out below in aggregate for each of the categories required by IAS 24 `Related Party Disclosures'. Further information about the remuneration of individual directors is disclosed in the Directors' Remuneration Report on pages 52 to 65.
2008 2007 £'m £'m
Short-term employee benefits 7.8 6.5
Post-employment benefits 0.6 0.9 Termination benefits 1.2 3.0 Share-based payment 3.2 3.8 12.8 14.2
The amount for share-based payment is that calculated in accordance with IFRS 2 `Share-based payment'.
vendorRelated Shares:
LOG.L