7th Aug 2009 07:00
7 August 2009
Logica delivers good first half results in challenging markets
Headlines1
Group orders up 3% on last year
Revenue down 2% (up 6% on a reported basis), driven by Outsourcing Services revenue up 10%
Adjusted operating margin maintained at 6.8%, in line with last year on a pro forma basis, underpinned by cost savings of 30 million
Operating cash conversion of 73%; net debt of 457 million at 30 June 2009
Programme for Growth continued to deliver results:
Full year 2009 cost savings on track
Plans implemented to deliver the 2010 cost savings objective of 110 million
Restructuring costs unchanged at 145 million
Full year 2009 guidance:
Margin expectations at same level as last year
Net debt/EBITDA now expected to be below 1.2x at year end
Improved debt maturity profile as a result of additional financing facilities
For the six months ended 30 June 2009, results were as follows:
Continuing Operations H1 2009 Actual H1 2008 Actual Growth Actual ProForma Book to Bill 111% 105% Revenue GBP1,876m GBP1,769m 6% (2%) Adjusted operating profit GBP127m GBP118m 8% (2%) Adjusted operating margin 6.8% 6.7% - - Basic adjusted EPS 5.5p 5.4p Dividend per share 1.0p 2.4p Statutory results: Operating profit GBP39m GBP29m Profit before tax GBP24m GBP13m Basic EPS 1.3p 0.4p
For definition of pro forma, adjusted operating profit, adjusted operating margin and basic adjusted EPS, please see note on page 17.
Commenting on today's announcement, Andy Green, CEO, said:
"Logica has produced good results in a challenging market by executing on ourstrategy. The impact of our investments in customer facing teams isparticularly clear in Outsourcing Services where orders are up 18%, and in theUK where revenues are up 7%. Our strong cost programme has ensured solidmargin delivery despite volume and price pressure. "While there is still uncertainty in the consulting and professional servicesmarket, we have taken swift action in more difficult geographies to protectmargins. We expect these actions and the strength of our outsourcing businessto allow us to maintain margin in line with last year."
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/+44 (0) 7595 612269
Brunswick: Tom Buchanan +44 (0) 20 7404 5959
1 All headline numbers relate to pro forma numbers as defined on page 17.
Financial overview - continuing operations
Group revenue was in line with guidance at 1,876 million, up 6% on a reportedbasis (2008 actual: 1,769 million). This represented a pro forma decline of2%. Revenue for the second quarter was up 2% on a reported basis, representinga pro forma decline of 4%. The impact of the fewer number of working days inthe second quarter was a decline in pro forma revenue of approximately 2%. Adjusted operating profit was 127 million (2008 actual: 118 million),representing an adjusted operating margin of 6.8% (2008 actual: 6.7%). Basicadjusted EPS was 5.5p (2008 actual: 5.4p). Operating profit of 39 million(2008 actual: 29 million) reflected amortisation of intangible assets fromacquisition of 44 million and the 44 million exceptional charges mainlyassociated with the Programme for Growth. Net cash inflow from trading operations was 93 million in the first half,leading to cash conversion of 73% (2008 actual: 83%). There was a cash outflowof 48 million related to the one-off minority buy-out of WM-data and arestructuring outflow of 31 million. Closing net debt was approximately 19%lower than at the end of the first half of 2008 at 457 million. Thisrepresented net debt/EBITDA of 1.3x. In line with the decision announced inDecember 2008, the proposed interim dividend is 1.0p (2008: 2.4p). It isexpected that the dividend will be maintained at a level of around 3p for 2009,with a plan to return to progressive increases in the dividend thereafter.Book to bill was 111% (2008: 105%), reflecting the strength in our outsourcingbusiness. The outsourcing book to bill was 115% (2008:107%). First half wins,which contributed to a strengthened outsourcing order backlog, werepredominantly booked in the first quarter. These included the 7 year, 76.5million contract to design, build and operate the UK's Police National Databaseand the contract with TeliaSonera to provide managed workspace services to34,000 IT users. We made good progress in the HR and BPO areas with wins inthe second quarter including Channel 4 and Ford. Market overview and outlook
The first half of 2009 reflected the reality of customers adjusting to an economic environment significantly more constrained than in 2008. For IT services, this has meant an increased focus from customers on their cost reduction, with a consequent increase in the pipeline of outsourcing opportunities for Logica. It has also led to a reduction in demand under consulting framework contracts and delays on systems integration projects. While pricing appears to have stabilised on our major consulting framework agreements in recent months, our visibility of shorter term consulting revenue streams for the fourth quarter remains limited. However, our visibility of total contracted revenue for the Group is higher than at this time last year.
In today's competitive environment, it is key throughout the Group that we enhance further our blended delivery model, manage utilisation and subcontractor levels effectively and implement our cost reduction programme decisively.
While uncertainty remains in the consulting and professional services market,we expect a broadly similar percentage decline in the Group's overall revenueon a pro forma basis in the second half, with trading patterns remainingunchanged. We expect the strength of our outsourcing business and thecontinued successful execution of our cost savings programmes to allow us tomaintain margin in line with last year.
Progress on Programme for Growth
Our Programme for Growth has enabled us to manage our way through a difficultfirst half, delivering a good set of results in a challenging marketenvironment. We grew revenue in three of our five market sectors. Investmentin strengthening our sales and account management, consulting leadership andoutsourcing deals team has led to a higher volume of opportunities and anincreasingly resilient business mix.
We made significant progress in building our outsourcing business. This now represents 36% of Group revenue, exceeding the target of 35% we set in 2008.
In November 2008 and February 2009, we announced our intention to acceleratethe cost savings which underpin the programme and to slow investments in lightof deteriorating market conditions. Our 2009 cost savings of 75 million andinvestments of 30 million in sales and marketing remain on track and theexpected overall one-off cost of the programme remains at 145 million, ofwhich 61 million are expected to be incurred in 2009.
We have flexed the plan to react to changing market developments. In particular, we have slowed onshore and offshore recruitment in light of adoption of blended delivery by clients, and have agreed with our European Works Council additional schemes in our European markets to increase our flexibility. We have implemented plans which we expect to deliver 110 million of savings in 2010.
Competitive costsOur competitive cost programme has focused on reducing employee numbers wheredemand was weakest; in the first half the most significant reduction occurredin the Netherlands. Overall we now expect a total headcount reduction of 1,900from the Programme. We continued with office rationalisation, including theexit of a building in Paris, space rationalisation in Portugal and relocationof the US head office. In addition, we achieved considerable savings throughthe execution of companywide procurement activities and processes.In the first half, we saw the initial benefits of the action taken tostreamline the organisation come through, particularly in the UK. Total costsavings were 30 million in the first half, with expected second half costsavings of around 45 million, compared with the cost base we had in place
atthe end of 2007.
Additional measures to improve flexibility
At 30 June 2009, we had 39,525 employees (31 December 2008: 39,937), withrecruitment in the first half limited to strengthening of our sales andmarketing and delivery capability in nearshore and offshore locations. 240staff from TeliaSonera in the Nordics transferred to Logica under the recentlyannounced contract. Six month annualised attrition was at 8% for the Group (31December 2008: 13%). We expect attrition to be in the range of 5%-8% across ourmajor geographies at the end of the year.
With the exception of previously agreed increases through collective agreements, of which the most significant are in the Nordics, we have not made general increases in salaries in 2009 and do not plan to do so.
The number of subcontractors has reduced significantly in all of our major geographies with the number of subcontractors down almost 20% over the second half of 2008. In addition, negotiations with subcontractors have led to significant rate reductions in these services.
We have worked with our European Works Council to agree a set of principleswhich will improve the proactive management of our global people resourcesincluding improved bench management, re-skilling our people for high demandskills and more effective assignment planning. We have also agreed a number offlexible working schemes that we can use to address overcapacity should marketconditions weaken over the coming months in any of our operations. Theseschemes include part paid sabbaticals, reduced hours working and holidayflexing which will give us further scope to improve utilisation on a geographyby geography basis where necessary. In the first half of 2009, these havealready been successfully implemented in Germany, with around 10% of staff onreduced hours working and in the Philippines, with around 15% of staff on partpaid sabbaticals. In addition, we are implementing these measures in France,where around 1% of staff are making use of holiday flexing. Focus for GrowthIn the first half of 2009, we continued to invest in strengthening our salescapability and made clear investment choices in the Focus for Growth areas toreflect the changing economic environment. As a result, we have prioritisedinvestments in outsourcing, consulting and in a number of our "High GrowthAreas".
Deepening and strengthening relationships with key customers is evident in Outsourcing Services, where almost half of the pipeline is with our 57 key accounts.
In consulting, whilst we continue to be cautious on recruitment, we haveinvested in selected areas where we see synergies with our key accounts. Wecontinued to make good progress in recruitment of senior consultancy leadersand now have 44 client lead consultants in place in our 57 key accounts. In our High Growth Areas we have tested our value propositions in each areagiven the changes in demand resulting from the current market environment. Investments in areas such as alliances, Enterprise Content Management, ServiceOriented Architecture and Business Intelligence, where we have built a strongpipeline through 2009, will deliver the most significant growth in the shortterm. In the first half, we leveraged our Business Intelligence expertise inthe Teliasonera and Total wins. We will continue to invest for longer termgrowth in verticals such as Intelligent Transport Systems where we had notablewins with clients such as Finnair in the first half. Accelerate Blended DeliveryGiven the current economic climate, there has been a slower than expected rateof headcount growth in our nearshore and offshore centres due to the size ofprojects being implemented. Nevertheless, we have seen many European customerscontinuing to move towards a blended model and expect our offshore andnearshore headcount to reach around 25% of total headcount over the mediumterm, as economies recover. Our UK client base continues to be the most aggressive consumer of offshoreresources, with the number of employees deployed onto UK contracts exceedingthe 25% target set for 2009. In all other major geographies, the level ofuptake ranges from 5% to 10%. In the Nordics, our progress is measured by anincrease in both the number of clients and projects deploying a blend in thedelivery of services.In the first half of 2009, the number of offshore and nearshore employees wasbroadly stable at 5,100 (5,000 at December 2008), accounting for c13% of thetotal workforce. Efficiency in our offshore and nearshore operations increasedover the first half, with the number of employees on the bench down by around20%. One Logica At the beginning of 2009 we created a centralised global organisation to alignour IT systems and processes across functions such as Finance, HR and KnowledgeManagement. Transformation of our HR and finance functions is well underway. HR functionshave been identified where global processes will be created and implemented inthe second half of 2009 and into 2010. Transforming the Group finance andadministration function will create a structure which will deliver significantbenefits to the Group. Significant opportunities were identified for processautomation with a mix of our blended delivery service, in line with our goal oftransforming finance through a blended operating model.
Operating performance - continuing operations
The basis on which we are reporting revenue and profit has changed to reflectour new management structure and the prior year comparatives have been restatedbelow. Germany is now reported within the International segment. Belgium,previously reported in the International segment, is reported in the Beneluxsegment. Outsourcing Services is reported as a separate division from the
beginning of 2009. Revenue by geography Growth Growth H1'09 on H1'09 on H1'08 H1'08 H1'08 H1'08 H1'09 Pro forma Actual Pro forma Actual GBP'm GBP'm GBP'm % % Nordics 519 526 497 (1) 4 France 401 408 354 (2) 13 UK 379 354 354 7 7 Benelux 309 357 309 (13) - International 268 275 255 (3) 5 Total 1,876 1,920 1,769 (2) 6
First half revenue performance was up 6% on a reported basis with currencybenefits contributing to flat or growing reported revenue in all geographies. On a pro forma basis, this represented a decline of 2%, in line with guidance. Strong growth in the UK was offset by declines in other geographies, mostnotably in Benelux which remains the most difficult market. In the Nordics,the expected weakening in IDT in the Swedish business was balanced by stronggrowth in Finland, leading to a slight decline overall. In France, revenuegrowth was impacted by a fewer number of working days in the first half. Revenue by sector Growth Growth H1'09 on H1'09 on H1'08 H1'08 H1'08 H1'08 H1'09 Pro forma Actual Pro forma Actual GBP'm GBP'm GBP'm % % 18Public Sector 608 550 517 11 Industry, Distribution and Transport 506 564 521 (10) (3) Energy and Utilities 324 306 282 6 15 Financial Services 283 357 319 (21) (11) Telecoms and Media 155 143 130 8 19 Total 1,876 1,920 1,769 (2) 6 The profile of our revenue by sector at Group level is naturally affected bywider market trends. As we had expected, there was weakness in the FinancialServices and IDT sectors, with revenue decline in all geographies, especiallythe Benelux. Public Sector, Energy and Utilities and Telecoms delivered goodgrowth in the first half. In Public Sector, we had growth across allgeographies with the strongest rise being in France and the UK (up 24% and
16%respectively).
Adjusted operating profit by geography
H1'08 H1'08 Pro forma H1'08 H1'09 H1'09 Pro forma Margin Actual GBP'm Margin % GBP'm % GBP'm Nordics 40 7.6 45 8.6 42 France 27 6.8 30 7.3 26 UK 29 7.6 22 6.3 22 Benelux 16 5.2 24 6.6 20 International 15 5.6 9 3.3 8 Total 127 6.8 130 6.8 118
Adjusted operating profit before exceptional items and amortisation of intangibles initially recognised on acquisition was 127 million.
Adjusted operating margin was unchanged from last year at 6.8%, with strongimprovements in the UK and International. The improvement in adjustedoperating margin in the UK was mainly due to property rationalisation and thetargeted redundancy programme undertaken through 2008 as part of the Programmefor Growth. International benefited from improved margins in the Iberiabusiness. Margin in Benelux was impacted by lower utilisation and reflectsrenegotiations on consulting framework agreements through the first quarter. Overall pricing reduction in professional services and consulting amounted tobetween 2-3% compared to last year, across our major geographies, with the mostsignificant effect in countries exposed to Financial Services and IDT such asthe Nordics, Benelux and France.
Operating profit by geography
H1'09 H1'09 Adjusted Operating H1'08 operating Amortisation Exceptional profit/ Operating profit of intangibles items (loss) profit/(loss) GBP'm GBP'm GBP'm GBP'm GBP'm Nordics 40 28 7 5 8 France 27 14 5 8 12 UK 29 - 14 15 (7) Benelux 16 - 17 (1) 19 International 15 2 1 12 (3) Total 127 44 44 39 29
Operating profit was 39 million (2008: 29 million).
Net exceptional items of 44 million (2008: 46 million) were mainly related to Programme for Growth costs with the remainder of the estimated 61 million charge for 2009 expected to be incurred in the second half.
Amortisation of intangible assets from acquisitions was 44 million (2008: 43million).Outsourcing Services Growth Growth H1'09 on H1'09 on H1'08 H1'08 H1'08 H1'08 H1'09 Pro forma Actual Pro forma Actual GBP'm GBP'm GBP'm % % Outsourcing revenue 681 617 550 10 24 Other revenue 1,195 1,303 1,219 (8) (2) Total Group revenue 1,876 1,920 1,769 (2) 6 H1'08 H1'09 Pro forma Revenue from Revenue from H1'09 outsourcing outsourcing Outsourcing as % of total GBP'm GBP'm country revenue Nordics 190 169 37 France 149 135 37 UK 186 158 49 Benelux 64 69 21 International 92 86 34 Total Outsourcing 681 617 36Services Strong growth in Outsourcing Services continued to compensate for lower revenuein consulting and professional services. Outsourcing Services revenue was up10% to 681 million and represented 36% of Group revenue, exceeding the Grouptarget of 35% set in 2008. The Nordics, France and the UK continue to be thegeographies with the strongest percentage of revenue from outsourcing. H1'09 H1'08 Pro forma
H1'09 adjusted operating profit 'm 44
37
H1'09 adjusted operating margin % 6.5
6.0
Adjusted operating profit was 44 million, giving an adjusted operating marginof 6.5%, up 0.5%, reflecting increasing efficiency and improved contractmanagement. H1'08 H1'08 H1'09 Orders H1'09 Revenue Orders Pro forma Revenue Pro forma GBP'm GBP'm GBP'm GBP'm
Applications Management (AM) 367 295 325
280
Infrastructure Management (IM) 341 295 294
287
Business Process Outsourcing (BPO) 74 71 62
50 Total Outsourcing Services 782 661 681 617 Book to bill 115% 107%
Applications Management represented 48% of first half revenue. Infrastructure Management represented 43%, with BPO at 9%.
Book to bill for the first half was 115%. The most significant contributors toorder backlog in the first half were TeliaSonera and the UK's Police NationalDatabase. Other significant wins included Finnair and Airbus. In the BPOarea, we strengthened our presence in delivering HR as a service with firsthalf wins at Channel 4 and Ford, following on from our BPO payroll contract winwith PricewaterhouseCoopers last year. While many deals are taking slightly longer to close, the volume ofopportunities remains high. The number and size of deals in the pipeline hasincreased dramatically with a 30% increase in value since the beginning of theyear and a 70% increase since September 2008. The strongest contribution isfrom the UK Public Sector where we continue to see opportunities aroundtransformation and cost reduction programmes within government departments andopportunities in the security and crime areas.
Review of continuing operations by geography
Nordics Growth Growth H1'09 on H1'09 onRevenue by market sector H1'08 H1'08 H1'08 H1'08 H1'09 Pro forma Actual Pro forma Actual GBP'm GBP'm GBP'm % % Public Sector 182 172 161 6 13 Industry, Distribution and 210 221 212 (5) (1)Transport Other sectors 127 133 124 (5) 2 Total 519 526 497 (1) 4 Outsourcing (%) 37 32
Adjusted operating profit ( 'm) 40 45
Adjusted operating margin (%) 7.6 8.6
Book to bill for the period was 124% (2008: 114%). The pipeline is improving due to an increased level of outsourcing opportunities in all industry sectors.
Revenue was down 1% on a pro forma basis to 519 million. The Finnish businessdelivered a strong performance on revenue, outperforming weak GDP. However,the expected weakness in IDT in the Swedish business led to a small decline inNordics revenue. Adjusted operating profit was 40 million giving an adjustedoperating margin of 7.6%.
There was strong growth in Public Sector revenue with the most significant growth in Finland. Strong order intake in the Swedish Public Sector in the second half of 2008 had a positive effect on revenue in the first half of 2009.
The Nordics market remains competitive with pricing pressure and reducedspending on consulting and SI projects due to customer focus on cost reductionprogrammes. To respond to weakness in Sweden, we have taken action to reduceheadcount and replaced subcontractors with our own staff, resulting in strongutilisation. The percentage of revenue from outsourcing has grown across all geographies inthe Nordics. We won a number of significant contracts in the first halfincluding TeliaSonera, Neste Oil and the Swedish Defence MaterialAdministration (FMV) and began delivering revenue under the TeliaSonera projectin the second quarter.Under the Programme for Growth, cost savings as well as overhead cost reductionwhich included transitioning some non-billable staff to billable roles willcontribute to margin improvement in the second half. We are also transitioningoffshore more customer application and infrastructure management business aswell as our own product development and maintenance activities. France Growth Growth H1'09 on H1'09 onRevenue by market sector H1'08 H1'08 H1'08 H1'08 H1'09 Pro forma Actual Pro forma Actual GBP'm GBP'm GBP'm % %
Industry, Distribution and Transport 143 158 137 (9)
4 Financial Services 101 110 96 (8) 5 Other sectors 157 140 121 12 30 Total 401 408 354 (2) 13 Outsourcing (%) 37 33
Adjusted operating profit ( 'm) 27 30 Adjusted operating margin (%) 6.8 7.3
Book to bill in the first half was very strong at 124% (2008: 106%) with animprovement in the pipeline as we enter the second half. We continued to seeblended delivery wins with French customers, supported out of our facilities inIndia and Morocco (where we now have a total of 500 employees). Order intakeincluded wins in several sectors: an infrastructure management win with CreditAgricole subsidiary Silca, an application management win with National HealthInsurance Agency (CNAMTS) and implementation of an Oracle project with SFR'ssubsidiary SRR. Revenue was down 2% on a pro forma basis to 401 million, impacted by a fewernumber of working days in the first half. Adjusted operating profit was 27million, giving an adjusted operating margin of 6.8%.Strong growth in Energy and Utilities and Public Sector was offset by weaknessin other sectors with revenue in IDT impacted by a weakening economicenvironment. As expected, Financial Services is the most challenging sectoralthough activity in the insurance sector was more encouraging. The adjusted operating margin was impacted by the fewer number of working daysin the first half. Improved utilisation, focus on cost management and asignificant reduction in the level of subcontractors will help to protectmargins in the second half. UK Growth Growth H1'09 on H1'09 onRevenue by market sector H1'08 H1'08 H1'08 H1'08 H1'09 Pro forma Actual Pro forma Actual GBP'm GBP'm GBP'm % % Public Sector 233 201 201 16 16 Energy and Utilities 55 57 57 (4) (4) Other sectors 91 96 96 (5) (5) Total 379 354 354 7 7 Outsourcing (%) 49 45
Adjusted operating profit ( 'm) 29 22 Adjusted operating margin (%) 7.6 6.3 Book to bill was in line with 2008 at 97% (2008: 98%) and contributed to a goodorder backlog. Significant wins in the first half included a 7 year, 76.5million contract to design, build and operate the UK's Police National Databaseand a 12 million five year outsourcing contract with The Law Society todeliver support services through a blended onshore and offshore delivery model.
The pipeline of opportunities is up significantly with second half order intake dependant on timing of outsourcing projects.
The UK business delivered strong revenue growth, up 7% to 379 million. Adjusted operating profit was 29 million, resulting in an improvement in the adjusted operating margin to 7.6%.
Public Sector revenue was up 16% and represented 61% of UK revenue in the firsthalf. The Public Sector benefited from the implementation of a number of majorprogrammes and double digit growth with customers in space and defence. Revenue in the Energy and Utilities sector, while slowing against a strong2008, continued to be driven by delivery against ongoing projects with existingcustomers. As expected, revenue declined in Financial Services and IDT, giventhat most of the work delivered in these sectors is in the less resilient areaof professional services. This was offset by a 75% increase inTelecommunications as we implemented a major contract in the sector. FinancialServices continued to be our most challenging sector, down 55% in the firsthalf.
The improvement in adjusted operating margin was mainly due to the property rationalisation and targeted redundancy programme undertaken through 2008 as part of the Programme for Growth. Pricing impact was limited as we took opportunities to revise and extend service contracts with our customers.
Benelux Growth Growth H1'09 on H1'09 onRevenue by market sector H1'08 H1'08 H1'08 H1'08 H1'09 Pro forma Actual Pro forma Actual GBP'm GBP'm GBP'm % % Public Sector 111 109 95 2 17 Industry, Distribution and 58 73 63 (21) (8)Transport Financial Services 76 111 97 (32) (22) Other sectors 64 64 54 - 19 Total 309 357 309 (13) - Outsourcing (%) 21 19
Adjusted operating profit ( 'm) 16 24
Adjusted operating margin (%) 5.2 6.6
Book to bill was 87% (2008: 94%) reflecting delays in decision making in a market heavily weighted to non-outsourcing business.
Revenue was down 13% to 309 million, reflecting our exposure to financial services and continued weakness in the Dutch economy. Adjusted operating profit was 16 million, resulting in an adjusted operating margin of 5.2%.
In the first quarter, customers significantly reduced their IT spend andimplemented restructuring and cost reduction programmes, particularly underconsulting framework agreements. However, the market showed signs ofstabilising through the second quarter. The Financial Services, Telecoms andIDT sectors continued to decline compared to slight growth in Public Sector andEnergy and Utilities. Adjusted operating margin was impacted by lower utilisation and a competitivepricing environment. We have taken decisive action to respond to thechallenging market in the Netherlands. Implementation of a consistentoperational model and new management structure enabled us to significantlylower our cost levels. As previously communicated, 300 employees exited thebusiness under redundancy programmes in the first half of 2009, of whichapproximately two-thirds were non-billable. The natural level of employee churndue to attrition and concerted action on subcontractors is also contributing toa lower cost base which will result in an improvement in second half margin.Utilisation is expected to improve as the new organisational model beds down inthe second half and the market continues to stabilise. International Growth Growth H1'09 on H1'09 onRevenue by area H1'08 H1'08 H1'08 H1'08 H1'09 Pro forma Actual Pro forma Actual GBP'm GBP'm GBP'm % % Rest of Europe 171 179 168 (4) 2 Rest of World 97 96 87 1 11 Total 268 275 255 (3) 5 Growth Growth H1'09 on H1'09 onRevenue by market sector H1'08 H1'08 H1'08 H1'08 H1'09 Pro forma Actual Pro forma Actual GBP'm GBP'm GBP'm % % Industry, Distribution and Transport 51 65 63 (22) (19) Energy and Utilities 129 120 111 7 16 Financial Services 36 45 41 (20) (12) Other sectors 52 45 40 16 30 Total 268 275 255 (3) 5 Outsourcing (%) 34 31 Adjusted operating profit ( 'm) 15 9 Adjusted operating margin (%) 5.6 3.3
Book to bill was 113% (2008: 108%). We made good progress in outsourcing, winning a 3 year application management contract with Airbus by leveraging our delivery blended model from centres in Germany, France and India.
Revenue for the six months was down 3% to 268 million. Growth in PublicSector, Energy and Utilities and Telecommunications was offset by weakness inFinancial Services and IDT. Adjusted operating profit was 15 million, givingan adjusted operating margin of 5.6%.Revenue in the Rest of Europe, which accounted for 64% of Internationalrevenue, declined by 4% with the decline in Germany partly offset by growth incentral Europe. Germany and Iberia are the largest geographies in thissegment, representing 55% and 31% respectively. Revenue in Germany declined by8% where strong growth in Public Sector and Telecommunications was offset byweakness in other sectors. Revenue in Portugal was stable on the back ofEnergy and Utilities, which is the major contributor to Portuguese revenue.
In
the Rest of World, our business in the Americas was the strongest performer, primarily as a result of 2008 contract wins.
The significant improvement in adjusted operating profit and margin was mainlydue to the focus on cost management in the German, Portuguese and Australianbusinesses and a weak 2008 comparative. Given the decline in the Germanbusiness in the first half, we have taken action to reduce working hours whichshould help our margins in the second half. Financial position Summary cash flow H1'09 H1'08 GBP'm GBP'm Adjusted operating profit 127 118
Depreciation and amortisation of intangibles not recognised on 28
26acquisition Movement in working capital (63) (51) Other non-cash movements 1 5
Net cash inflow from continuing operations 93
98 Cash conversion 73% 83%
Cash outflow related to restructuring: - Programme for growth (31)
(6)
- Integration, prior years restructuring & disposal costs -
(8) Net financing cost paid (18) (11) Income tax paid (26) 13 Capex less disposals of property, plant & equipment and intangible (28) (31)assets
Impact of acquisitions and disposals (47)
(49)
Dividends paid to shareholders (9)
(50) Exchange differences 61 (41) Other (14) 3 Opening net debt (438) (483) Closing net debt (457) (565) While we had a working capital outflow of 63 million compared to 51 millionin the first half of 2008, this masked continued focus on collections. The netcash inflow from trading operations was 93 million (2008: 98 million),leading to cash conversion at 73% (2008: 83%).One off items included exceptionals cash outflow of 31 million (2008: 14million) and a total cash outflow of 48 million related to the acquisition ofthe remaining 4.67% of the WM-data minority interest.
Net finance cost paid was 18 million (2008: 11 million). We now expect full year finance costs to be around 32 million.
Payment in respect of the second half 2008 dividend was 9 million (2008: 50 million).
Group net debt at 30 June 2009 was 457 million (H1 2008: 565 million and FY2008: 438 million), leading to net debt/EBITDA of 1.3x. We now expect netdebt/EBITDA to be below 1.2x at the end of 2009.Through the period, we have strengthened Logica's access to financingfacilities. Total facilities are now 835 million. This results from a smallincrease under Logica's principal bank facilities announced in November 2008and a new 100 million receivables-backed financing agreement signed in July2009. Under a new forward starting agreement with one of its relationshipbanks, Logica will also have access to an additional EUR50 million of financingfrom September 2010.
Profit before tax and earnings per share
Profit before tax was 24 million (2008: 13 million). Basic adjusted earnings per share from continuing operations were 5.5p (2008: 5.4p) on a weighted average number of shares of 1,585 million (2008: 1,446 million). Basic earnings per share from continuing operations were 1.3p (2008: 0.4p).
TaxationThe effective tax rate, before exceptional items and amortisation of intangibleassets initially recognised on acquisition, was 23% (2008: 23%). The total taxcharge for the first half was 3 million (2008: 7 million). The effective taxrate for 2009 is expected to remain at around 23%. Dividend
The directors have declared an interim dividend of 1.0 pence to be paid on 16October 2009 to eligible shareholders on the register at the close of businesson 18 September 2009. It is expected that the 2009 dividend will be maintainedat a level of around 3p, with progressive increases in the dividend thereafter. Board changes
As previously announced, non-executive director Roger Payne will retire at theAnnual General Meeting in May 2010, after six years on the Logica Board. Roger's successor as Chairman of the Audit Committee will be announced in duecourse.
Having joined the Logica Board as a non-executive director on 24 February 2009, Sergio Giacoletto took on the role of senior independent director from 30 April 2009.
Next financial calendar dates
Logica's next scheduled communications to the market are:
Wednesday 4 November 2009 Q3 2009 Interim Management StatementWednesday 24 February 2010 FY 2009 Preliminary results Risks and uncertainties
The Board has overall responsibility for the establishment and oversight of theGroup's risk management framework. The Board has an established, structuredapproach to risk management, which includes continuously assessing andmonitoring the key risks and uncertainties of the business. The key risks havebeen identified as the following:
Major contract related risks
Business continuity risks associated with operational failure, information systems and data security
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
Achieving the objectives set for the Programme for Growth
Dependence on recruitment and retention of suitably qualified personnel
Achieving operational process excellence in our global blended delivery model
Regulatory compliance risks
Major client dependencies and regional market sector risks
Macro economic and industry level trends and changes affecting the global competitive landscape
Loss of authorisation or accreditation from vendors or disruption of key supplier relationships
A description of these risks and the actions taken by the Group to mitigatethem are set out on pages 66 and 67 of the 2008 Annual Report, a copy of whichis available on the Group's website www.logica.com. Despite the currentuncertainty in the global economy, our key risks, uncertainties and mitigatingfactors have not significantly changed in the period since the Annual Reportwas published, nor are they expected to change materially in the remainder
ofthe year. Directors' responsibility
The directors confirm that this set of consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
- an indication of important events that have occurred during the first sixmonths and their impact on the financial statements, and a description of theprincipal risks and uncertainties for the remaining six months of the financialyear; and
- material related party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Logica at 31 December 2008 are listed in the Group's 2008Annual Report. A current list of directors is also maintained on the Group'swebsite: www.logica.com By order of the Board Andy Green Seamus KeatingChief Executive Officer Chief Financial Officer6 August 2009Notes:
With the exception of adjusted operating margin percentages, all numbers in this release have been rounded. Adjusted operating margin reflects the adjusted operating margin reported in the consolidated financial statements.
Cash conversion represents net cash inflow from trading operations divided byadjusted operating profit. Net cash inflow from trading operations is cashgenerated from operations before cash flows from proceeds on forward contracts,the purchase of property, plant, equipment, intangibles and restructuring andintegration activities.
Book to bill percentage is a measure of the level of orders relative to revenue in the period.
Unless otherwise stated, the comparatives in this release relate to pro forma results for the first half of 2008 which:
reflect average 2009 exchange rates by retranslating prior period actual numbers at average 2009 exchange rates. This increased H1'08 revenue by 163 million and adjusted operating profit by 11 million.
are adjusted to include the acquisitions and exclude disposals that took place during 2009 by adjusting the actual prior period numbers for the relevant period owned. This decreased H1'08 revenue by 12 million and increased adjusted operating profit by 1 million.
Adjusted operating profit and margin are from continuing operations and beforeexceptional items and amortisation of intangible assets initially recognised atfair value in a business combination. H1 '08 Pro H1 Pro H1 '08 forma Actual '09 forma Actual growth growth GBP'm GBP'm GBP'm % % Operating profit 39 29 34% Add back impact of: Exceptional items 44 46
Amortisation of acquisition related
intangibles 44 43 Adjusted operating profit 127 130 118 (2) 8%
Adjusted earnings per share is based on net profit attributable to ordinary shareholders, excluding the following items, whenever such items occur:
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
Exchange rates used are as follows:
H1 '09 H1 '08 H2 '08 FY '08 1 / EUR Average 1.12 1.29 1.21 1.25
End of period 1.17 1.26 1.03 1.03
1 / SEK Average 12.16 12.11 12.05 12.08
End of period 12.76 11.97 11.37 11.37
Consolidated statement of comprehensive income (unaudited)
Six months Six months ended ended 30 June 30 June 2009 2008 Note GBP'm GBP'm Revenue 2 1,876.1 1,769.4 Net operating costs (1,837.5) (1,740.4) Operating profit 2,4 38.6 29.0 Analysed as:
Operating profit before exceptional items 82.6
74.6 Exceptional items 3 (44.0) (45.6) Operating profit 2,4 38.6 29.0 Finance costs (19.1) (22.3) Finance income 4.3 5.5
Share of post-tax profits from associates 0.4
0.4 Profit before tax 24.2 12.6 Taxation 6 (3.0) (6.5) Net profit for the period 21.2 6.1 Other comprehensive income
Exchange differences on translation of (196.7)
109.9foreign operations
Actuarial losses on defined benefit plans (67.6)
(3.2)
Tax on items taken directly to equity 17.8
1.7
Other comprehensive income for the period, (246.5)
108.4net of tax
Total comprehensive income for the period (225.3)
114.5 Profit attributable to: Owners of the parent 21.2 5.2 Minority interest - 0.9 21.2 6.1
Total comprehensive income attributable
to: Owners of the parent (224.2) 111.8 Minority interests (1.1) 2.7 (225.3) 114.5 Earnings per share p p / share / share - Basic 7 1.3 0.4 - Diluted 7 1.3 0.4 Dividends recognised in the period amounted to 9.5 million (six months ended30 June 2008: 50.5 million), or 0.60p per share (six months ended 30 June2008: 3.5p per share). The interim dividend declared but not recognised inthese interim financial statements is 1.0p per share (six months ended 30 June2008: 2.4p per share) or approximately 15.9 million (six months ended 30 June2008: 34.8 million).
The notes on pages 22 to 30 form an integral part of this interim financial information.
Consolidated statement of financial position (unaudited)
30 June 31 December 30 June 2009 2008 2008 Note GBP'm GBP'm GBP'm Non-current assets Goodwill 1,823.1 1,994.2 1,735.4 Other intangible assets 277.1 354.4 352.9 Property, plant and equipment 8 131.8 149.0 130.2 Investments in associates 2.4 3.0 2.2 Financial assets 12.1 13.8 12.0 Retirement benefit assets 19.6 62.1 20.9 Deferred tax assets 63.4 59.1 47.8 Total non-current assets 2,329.5 2,635.6 2,301.4 Current assets Inventories 0.7 0.7 1.8 Trade and other receivables 1,172.2 1,365.7 1,180.4 Current tax assets 14.4 16.7 8.0 Cash and cash equivalents 61.2 126.9 88.2 Total current assets 1,248.5 1,510.0 1,278.4 Current liabilities Convertible debt - - (242.1) Other borrowings (17.9) (10.7) (113.3) Trade and other payables (935.4) (1,196.6) (966.7) Current tax liabilities (47.1) (62.1) (51.3) Provisions 9 (48.9) (36.4) (26.1) Total current liabilities (1,049.3) (1,305.8) (1,399.5)
Net current assets / (liabilities) 199.2 204.2
(121.1)
Total assets less current liabilities 2,528.7 2,839.8
2,180.3 Non-current liabilities Borrowings (500.7) (554.3) (297.4)
Retirement benefit obligations (87.9) (63.2)
(63.3) Deferred tax liabilities (84.7) (119.3) (115.4) Provisions 9 (42.1) (47.1) (26.3)
Other non-current liabilities (1.0) (1.0)
(0.9)
Total non-current liabilities (716.4) (784.9)
(503.3) Net assets 1,812.3 2,054.9 1,677.0 Equity Share capital 10 160.0 159.8 146.2 Share premium account 11 1,101.5 1,101.5 1,100.4 Reserves 550.7 780.2 417.9
Total shareholders' equity 1,812.2 2,041.5
1,664.5 Minority interests 0.1 13.4 12.5 Total equity 1,812.3 2,054.9 1,677.0
The notes on pages 22 to 30 form an integral part of this interim financial information.
Consolidated statement of cash flow (unaudited)
Six Six months months ended ended 30 June 30 June 2009 2008 Note GBP'm GBP'm
Cash flows from operating activities Net cash inflow from trading operations 12
93.1 97.8
Cash outflow related to restructuring and integration 12 (31.5) (13.8)activities Cash generated from operations 12 61.6 84.0 Finance costs paid (19.2) (14.6) Income tax (paid) / received (26.0) 13.1 Net cash inflow from operating activities 16.4 82.5
Cash flows from investing activities
Finance income received 1.7 4.0 Dividends received from associates
0.7 0.7
Proceeds on disposal of property, plant and equipment
0.1 0.1
Purchases of property, plant and equipment
(17.6) (18.4)
Expenditure on intangible assets
(10.5) (12.3)
Purchase of minority interests
(47.8) (42.1)
Acquisition of subsidiaries and other businesses, net of
- (2.0)cash acquired
Disposal costs of prior year disposals
- (7.4)
Disposal of subsidiaries and other businesses, net of cash 0.5 2.3disposed Net cash outflow from investing activities (72.9) (75.1)
Cash flows from financing activities Proceeds from issue of new shares
- 1.9 Proceeds from bank borrowings 18.4 51.7 Repayments of bank borrowings (0.5) (34.4) Repayments of finance lease principal
(2.2) (2.1)
Repayments of other borrowings
(0.8) -
(Payments) / proceeds from forward contracts
(12.3) 7.7
Dividends paid to the Company's shareholders
(9.5) (50.5)
Net cash outflow from financing activities (6.9) (25.7) Net decrease in cash, cash equivalents and bank overdrafts (63.4) (18.3) Cash, cash equivalents and bank overdrafts at the beginning 13 121.5 99.6of the period
Net decrease in cash, cash equivalents and bank overdrafts 13 (63.4) (18.3)
Effect of foreign exchange rates 13
(5.9) 5.8
Cash, cash equivalents and bank overdrafts at the end of the 13 52.2 87.1period
The notes on pages 22 to 30 form an integral part of this interim financial information.
Consolidated statement of changes in equity (unaudited)
Share Share Retained Translation Merger Other Minority capital premium earnings reserve reserve
reserve interest Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm At 1 January 159.8 1,101.5 (349.2) 462.5 696.6 (29.7) 13.4 2,054.92009 Net profit - - 21.2 - - - - 21.2for the year Other comprehensive income: Actuarial - - (67.6) - - - - (67.6)losses Tax on items - - 17.8 - - - - 17.8taken to equity Transfer of - - 75.9 - (75.9) - - -realised reserve Exchange - - - (197.6) - 2.0 (1.1) (196.7)differences Total - - 47.3 (197.6) (75.9) 2.0 (1.1) (225.3)comprehensive income Transactions with owners: Dividends - - (9.5) - - - - (9.5)paid Share-based - - 4.6 - - - - 4.6payment Shares issued 0.2 - (0.2) - - - - - Minority - - - - - - (12.2) (12.2)repurchases Other - - (0.2) - - - - (0.2) At 30 June 160.0 1,101.5 (307.2) 264.9 620.7 (27.7) 0.1 1,812.32009 At 1 January 145.8 1,098.9 (336.2) 93.9 619.0 (24.4) 28.3 1,625.32008 Net profit - - 5.2 - - - 0.9 6.1for the year Other comprehensive income: Actuarial - - (3.2) - - - - (3.2)losses Tax on items - - 1.7 - - - - 1.7taken to equity Exchange - - - 107.9 - 0.2 1.8 109.9differences Total - - 3.7 107.9 - 0.2 2.7 114.5comprehensive income Transactions with owners: Dividends - - (50.5) - - - - (50.5)paid Share-based - - 5.0 - - - - 5.0payment Shares issued 0.4 1.5 - - - - - 1.9 Minority - - - - - - (20.6) (20.6)repurchases Other - - (2.1) - 1.4 - 2.1 1.4 At 30 June 146.2 1,100.4 (380.1) 201.8 620.4 (24.2) 12.5 1,677.02008 Note 10 11
The notes on pages 22 to 30 form an integral part of this interim financial information.
Selected notes to the consolidated interim financial information
Accounting policies and basis of preparation
The consolidated interim financial information for the six months ended 30 June2009 has been prepared in accordance with the Disclosure and Transparency Rulesof the Financial Services Authority and with IAS 34, 'Interim financialreporting' as adopted by the European Union. Other than as described below, theaccounting policies applied are consistent with those of the annual financialstatements for the year ended 31 December 2008, which have been prepared inaccordance with IFRSs as adopted by the European Union, and the consolidatedinterim financial information should be read in conjunction with the annualfinancial statements.
(a) The following standards, interpretations, and amendments to standards were effective during the period to 30 June 2009 and have been adopted in this interim financial information:
IFRS 8 'Operating Segments' - The standard replaced IAS 14 'SegmentReporting', and aligns operating segments reported to those segments reportedinternally to senior management. The basis for the segments under IFRS 8 isset out in note 2 below. The standard does not change the recognition,measurement, or disclosure of transactions in the consolidated financialstatements. IAS 1 R 'Presentation of financial statements' - The amendment requires"non-owner" and "owner" changes in equity to be presented separately. It alsorequires that where a balance sheet is restated that the opening balance sheetis also disclosed. This will mean that where restatement occurs that threecolumns rather than two will be reported. Entities can also choose whether topresent one or two performance statements. The Group has chosen to present oneperformance statement. A further impact of the amendment is that the primarystatements have been renamed. IFRS 2 (Amendment), 'Share-based payment', effective for accounting periodsbeginning on or after 1 January 2009. The amendment to the standard limitsvesting conditions to service conditions and performance conditions. Theamendment also specifies that all cancellations, whether by the entity or byother parties, should receive the same accounting treatment, i.e. accelerationof the expense based on the grant date fair value. This amendment had nomaterial impact on the Group's consolidated interim financial statements. (b) The following standards, interpretations, and amendments to standards wereeffective during the period to 30 June 2009, but had no material impact on thisconsolidated interim financial information:
Amendments issued as part of annual improvements to IFRSs (May 2008).
IFRIC 13, 'Customer loyalty programmes'.
IFRIC 15 'Agreements for the construction of real estates'.
IFRIC 16, 'Hedges of a net investment in a foreign operation'.
IAS 23 R 'Borrowing costs' - the amendment requires that borrowing costs incurred in the construction and production of qualifying assets commenced after 1 January 2009 are capitalised.
(c) The following standards, interpretations, and amendments to existing standards are not yet effective and have not been early adopted by the Group:
IFRS 3 (Revised), 'Business combinations'- effective for the Group from 1 January 2010. The revised standard requires that all acquisition-related costs are to be expensed to the income statement in the period incurred. Furthermore, purchase accounting only applies at the point when control is achieved.
IAS 27 (Revised), 'Consolidated and Separate Financial Statements', effectivefor the Group for accounting periods beginning on or after 1 July 2009. Therevised standard requires that acquisitions and disposals that do not result ina change of control are accounted for within equity. Any difference betweenthe change in the minority interest and the fair value of the considerationpaid or received is recognised directly in equity and attributed to the ownersof the parent.
(d) The following standards, interpretations, and amendments to existing standards are not yet effective, have not yet been endorsed by the EU and have not been early adopted by the Group:
Amendments issued as part of annual improvements to IFRSs (April 2009), including IFRIC 18.
IFRIC 17 'Distributions of non-cash assets to owners'. Applies for periods beginning on or after 1 July 2009; clarifies the accounting where assets other than cash are distributed to shareholders
IAS 28 'Investments in Associates', effective on or after 1 July 2009, amended to reflect changes to IFRS 3.
IAS 31 'Interests in Joint Ventures', effective on or after 1 July 2009, amended to reflect changes to IFRS 3.
IAS 39 'Financial Instruments: Recognition and Measurement, effective on orafter 1 July 2009, amended to clarify how existing principles should be appliedin respect of 'a one sided risk in a hedged item' and 'inflation in a financialhedged item'. Inflation risk can only be hedged if contractually specified andit is possible to used purchased options as a hedging instrument.IAS 39 'Financial Instruments: Recognition and Measurement, effective on orafter 30 June 2009, amended to clarify the treatment of embedded derivativeswhere transactions are reclassified from Fair Value Through Profit or Loss(FVTPL). Where transactions are reclassified embedded derivatives may need tobe separated from the host and continue to be treated as FVTPL.
Selected notes to the consolidated interim financial information (continued)
1. Accounting policies and basis of preparation (continued)
This interim report does not constitute statutory accounts of the Group withinthe meaning of section 434 of the Companies Act 2006. Statutory accounts forthe year ended 31 December 2008, which were prepared under InternationalFinancial Reporting Standards, have been filed with the Registrar ofCompanies. The auditors' report on those accounts was unqualified and did notcontain a statement under section 237(2) and 237(3) of the Companies Act 1985.The most important foreign currencies for the Group are the euro and theSwedish Krona. The relevant exchange rates to pounds sterling were: 30 June 2009 30 June 2008 Average Closing Average Closing 1 = EUR 1.12 1.17 1.29 1.26 1 = SEK 12.16 12.76 12.11 11.97 Segment informationIn accordance with IFRS 8 'Operating Segments' Logica has derived theinformation for its operating segments using the information used by the ChiefOperating Decision Maker. Logica has identified the Executive Committee as theChief Operating Decision Maker as it is responsible for the allocation ofresources to operating segments and assessing their performance. The profitmeasure used by the Executive Committee is the adjusted operating profit, asdescribed in note 4. Operating segments are reported in a manner which isconsistent with the operating segments produced for internal managementreporting. The operating segments have not changed as a result of implementingIFRS 8. However, during the current period Logica has consolidated the Germanbusiness into the International segment, which has resulted in reclassificationof 101.4 million of revenue, 2.1 million of operating loss and 3.6 millionof adjusted operating profit (note 4) relating to six months ended 30 June 2008from Germany to the International segment. Also, the Netherlands and Belgiumbusinesses were consolidated into a newly created Benelux segment, which hasresulted in a reclassification of 25.8 million of revenue, 0.8 million ofoperating loss and 0.8 million of adjusted operating loss (note 4) relating tosix months ended 30 June 2008 from the International to the Benelux segment.Logica is organised into five operating segments based on the location ofassets. Revenue Operating profit/ (loss) Six Six months Six Six months months months ended ended ended ended 30 June 30 June 2008 30 June 30 June 2009 2009 2008 GBP'm GBP'm GBP'm GBP'm Nordics 518.5 496.9 5.3 7.7 France 401.5 354.3 8.3 11.9 United Kingdom 379.1 353.4 14.9 (7.1) Benelux 308.8 309.7 (1.4) 19.2 International 268.2 255.1 11.5 (2.7)
Revenue and operating profit 1,876.1 1,769.4 38.6
29.0 Finance costs (19.1) (22.3) Finance income 4.3 5.5 Share of post-tax profits 0.4 0.4from associates Taxation (3.0) (6.5) Profit after tax 21.2 6.1
Selected notes to the consolidated interim financial information (continued)
Exceptional items
The exceptional items recognised within operating profit were as follows:
Six months Six months ended ended 30 June 2009 30 June 2008 GBP'm GBP'm Restructuring costs (44.6) (41.0) Integration costs - (4.9)
Profit on disposal of business 0.6
0.3 (44.0) (45.6) During the six months ended 30 June 2009, the Group incurred a charge of 44.6million relating to the restructuring of the business following the Group'sbusiness review (2008: 41.0 million). The restructuring comprised costsassociated with the closure of offices in the UK and France, and redundancy ofstaff across the Group, primarily in the Netherlands. This year, the Group also completed the disposals of its two non-core Germanbusinesses, 'Integrata AG' and 'Cocq Datendienste GmbH'; generating a profit of 0.6 million. Adjusted operating profit
Adjusted operating profit excludes: the results of discontinued operations,exceptional items and amortisation of intangible assets initially recognised atfair value in a business combination, whenever such items occur. Adjustedoperating profit is not defined under IFRS and has been shown as the directorsconsider this to be helpful for a better understanding of the performance ofthe Group's underlying business. It may not be comparable with similarlytitled profit measurements reported by other companies and is not intended tobe a substitute for, or superior to, IFRS measures of profit. Six months Six months ended ended 30 June 30 June 2009 2008 GBP'm GBP'm Operating profit 38.6 29.0 Exceptional items 44.0 45.6
Amortisation of intangible assets initially recognised on 44.1
43.5acquisition Adjusted operating profit 126.7 118.1
Adjusted operating profit analysis per operating segment was as follows:
Six months ended 30 June 2009 Operating Exceptional Amortisation Adjusted profit/ (loss) items of
operating profit intangibles* GBP'm GBP'm GBP'm GBP'm Nordics 5.3 6.8 27.3 39.4 France 8.3 4.7 14.4 27.4 United 14.9 13.9 - 28.8Kingdom Benelux (1.4) 17.4 - 16.0 International 11.5 1.2 2.4 15.1 44.1 126.7 38.6 44.0
* Amortisation of intangible assets initially recognised on acquisition.
Selected notes to the consolidated interim financial information (continued)
4. Adjusted operating profit (continued)
Six months ended 30 June 2008 Operating Exceptional Amortisation Adjusted profit/ (loss) items of intangibles* operating profit GBP'm GBP'm GBP'm GBP'm Nordics 7.7 5.8 28.4 41.9 France 11.9 1.2 12.6 25.7 United (7.1) 29.2 - 22.1Kingdom Benelux 19.2 1.3 - 20.5 International (2.7) 8.1 2.5 7.9 29.0 45.6 43.5 118.1
* Amortisation of intangible assets initially recognised on acquisition.
Employees Six months Six months ended ended 30 June 2009 30 June 2008
The average number of employees during the period was: Number
Number Nordics 9,754 9,697 France 9,041 9,058 United Kingdom 5,400 5,589 Benelux 6,060 6,486 International 9,575 8,228 39,830 39,058 Six months Six months ended ended 30 June 2009 30 June 2008
The number of employees at the end of the period was: Number
Number Nordics 9,791 9,795 France 8,920 8,979 United Kingdom 5,385 5,536 Benelux 5,870 6,444 International 9,559 8,447 39,525 39,201 TaxationThe tax charge on continuing operations for the six months ended 30 June 2009,before exceptional items is 13.2 million (19.4 % effective tax rate) (sixmonths ended 30 June 2008:GBP11.1 million (19.2% effective tax rate)) and hasbeen based on an estimated effective tax rate for the full year excluding theimpact of any exceptional items.
The effective tax rate on operations for the six months ended 30 June 2009, before exceptional items and amortisation of intangible assets initially recognised on acquisition, is 22.8% (30 June 2008: 23.0%).
The total tax charge for the six months ended 30 June 2009 is 3.0 million (sixmonths ended 30 June 2008: 6.5 million) of which a tax credit of 22.6 million(six months ended 30 June 2008: 16.8 million) relates to exceptional items andamortisation of intangible assets initially recognised on acquisition.
The tax charge includes an overseas charge of 1.8 million (six months ended 30 June 2008: 8.5 million).
Selected notes to the consolidated interim financial information (continued) 7. Earnings per share Six months ended 30 June 2009 Weighted average Earnings Earnings number per of shares share Earnings per share GBP'm Million Pence Profit for the period 21.2 Minority interests - Earnings attributable to ordinary shareholders 21.2 1,585.1 1.3 Basic EPS 21.2 1,585.1 1.3 Effect of share options and share awards - 24.3 - Diluted EPS 21.2 1,609.4 1.3 Adjusted earnings per share Earnings attributable to ordinary shareholders 21.2 1,585.1 1.3 Add back: Exceptional items, net of tax 33.8 - 2.2
Amortisation of intangible assets initially 31.7 - 2.0recognised on acquisition, net of tax
Basic adjusted EPS 86.7 1,585.1 5.5 Effect of share options and share awards 24.3 (0.1) Diluted adjusted EPS 86.7 1,609.4 5.4
Selected notes to the consolidated interim financial information (continued)
7.Earnings per share (continued)
Six months ended 30 June 2008 Weighted average Earnings Earnings number per of share shares Earnings per share GBP'm Million Pence Profit for the period 6.1 Minority interests (0.9) Earnings attributable to ordinary shareholders 5.2 1,445.5 0.4 Basic EPS 5.2 1,445.5 0.4 Effect of share options and share awards - 14.7 - Diluted EPS 5.2 1,460.2 0.4 Adjusted earnings per share Earnings attributable to ordinary shareholders 5.2 1,445.5 0.4 Add back: Exceptional items, net of tax 41.0 - 2.8
Mark-to-market gain on convertible bonds designated at fair value through profit or loss, net of tax 0.9
- 0.1
Amortisation of intangible assets initially recognised
on acquisition, net of tax 31.3 - 2.1 Basic adjusted EPS 78.4 1,445.5 5.4 Effect of share options and share awards -
14.7 -
Effect of convertible bonds, excluding mark-to-market
gain, net of tax 2.4 64.6 (0.1) Diluted adjusted EPS 80.8 1,524.8 5.3
Adjusted earnings per share, both basic and diluted, have been shown as thedirectors consider this to be helpful for a better understanding of theperformance of the Group's underlying business. The earnings measure used inadjusted earnings per share excludes, whenever such items occur: the results ofdiscontinued operations; exceptional items; mark-to-market gains or losses onfinancial assets and financial liabilities designated at fair value throughprofit or loss; and amortisation of intangible assets initially recognised atfair value in a business combination. All items adjusted are net of tax whereapplicable.
The weighted average number of shares excludes the shares held by employee share ownership plan trusts, which are treated as cancelled.
The convertible bonds were not included in the calculation of diluted earningsper share for the six months ended 30 June 2008 as they were anti-dilutive;however, the convertible bonds were dilutive for the purposes of calculatingadjusted diluted earnings per share for the six months ended 30 June 2008.Continuing and total operations were equal for the six months ended 30 June2009 and 30 June 2008.
Selected notes to the consolidated interim financial information (continued)
Capital expenditure Additions to property, plant and equipment during the six months ended 30 June2009 amounted to 18.4 million (six months ended 30 June 2008: 20.2 million). The net book value of property, plant and equipment disposed during the sixmonths ended 30 June 2009 amounted to 0.9 million (six months ended 30 June2008: 0.8 million). Provisions Vacant properties Restructuring Other Total GBP'm GBP'm GBP'm GBP'm At 1 January 2009 43.9 24.3 15.3 83.5 Charged in the period 13.7 30.8 0.1 44.6 Utilised in the period (8.7) (22.9) (0.6) (32.2)
Unused amounts reversed in the period 0.0 (0.3)
0.0 (0.3) Unwinding of discount 0.9 0.0 0.0 0.9 Exchange differences (1.1) (2.9) (1.5) (5.5) At 30 June 2009 48.7 29.0 13.3 91.0 Analysed as: Current liabilities 48.9 Non-current liabilities 42.1 91.0
Share capital of Logica plc
30 30 June June 2009 2008 Authorised GBP'm GBP'm 2,250,000,000 (30 June 2008: 2,250,000,000) ordinary 225.0 225.0shares of 10p each 2009 2008 Allotted, called-up and fully paid Number GBP'm Number GBP'm At 1 January 1,598,359,521 159.8 1,457,646,079 145.8 Allotted under share option schemes 1,825,183 0.2 4,350,931 0.4 At 30 June 1,600,184,704 160.0 1,461,997,010 146.2 On 16 December 2008 the Company issued 135,000,000 ordinary shares at a priceof 67 pence per share with a nominal value of 13.5 million, for grossconsideration of 90.5 million via a cash box structure. No share premium wasrecognised as the Company has taken advantage of section 131 of the CompaniesAct 1985 regarding merger relief. Selected notes to the consolidated interim financial information (continued) Share premium 2009 2008 GBP'm GBP'm At 1 January 1,101.5 1,098.9
Premium on shares allotted under share -
1.5option schemes At 30 June 1,101.5 1,100.4
12. Reconciliation of operating profit to cash generated from operations
Six Six months months ended ended 30 June 30 June 2009 2008 GBP'm GBP'm Operating profit: Continuing operations 38.6 29.0 Adjustments for: Share-based payments 4.8 5.2
Depreciation of property, plant and equipment 22.4 19.8 Loss on disposal of non-current assets 0.4 0.5 Profit on sale of subsidiaries and other businesses (0.6) (0.3) Amortisation of intangible assets 49.5 49.5 Impairment of property, plant and equipment included in restructuring costs - 9.1 Non-cash element of expense for defined benefit plans
(2.3) (1.9) 74.2 81.9
Net movements in provisions
11.4 24.1
Movements in working capital:
Financial assets 0.5 -Inventories (0.1) (0.3) Trade and other receivables
51.7 (102.2) Trade and other payables (114.7) 51.5 (62.6) (51.0)
Cash generated from operations
61.6 84.0 Add back: Cash outflow related to restructuring and integration activities 31.5 13.8
Net cash inflow from trading operations 93.1 97.8
13. Reconciliation of movements in net debt
At Other At 1 January non-cash Exchange 30 June 2009 Cash flows movements differences 2009 GBP'm GBP'm GBP'm GBP'm GBP'm Cash and cash equivalents 126.9 (59.0) - (6.7) 61.2 Bank overdrafts (5.4) (4.4) - 0.8 (9.0) 121.5 (63.4) - (5.9) 52.2 Finance leases (7.5) 2.2 (0.8) 0.3 (5.8) Bank loans (548.5) (17.8) (1.6) 66.3 (501.6) Other loans (3.6) 1.3 - 0.1 (2.2) Net debt (438.1) (77.7) (2.4) 60.8 (457.4)
Selected notes to the consolidated interim financial information (continued)
14. AcquisitionsOn 10 March 2009 the Group acquired the remaining minority interest in WM Datafor a total consideration of 47.8 million (SEK 594.8 million). Thisacquisition resulted in goodwill of 35.8 million, attributable to anticipatedsynergies and the value of the workforce. 15. Disposals
During the period the Group disposed of two non-core businesses in Germany.
On 1 January 2009 the Group sold 'Cocq Datendienste GmbH' for consideration ofEUR1. The company operates a scan centre. The Group recorded an impairment lossof 0.3 million in the year ended 31 December 2008 on its investment and nofurther profit or loss was recorded on the disposal. The company contributed 0.9 million in revenue during the six months ended 30 June 2008 and 1.9million during the financial year 2008.On 27 January 2009 the Group sold its 91% interest in 'Integrata AG', a Germantraining business. The business was sold for consideration of EUR5 million,leading to a profit of 0.6 million on disposal. The company contributed 11.8million of revenue during the six months ended 30 June 2008 and 26.4 millionduring the financial year 2008. 16. Contingent liabilitiesThe Group's subsidiaries and the Company are currently, and may be from time totime, involved in a number of legal proceedings including inquiries from ordiscussions with governmental and taxation authorities. Whilst the outcome ofcurrent outstanding actions and claims remains uncertain, it is expected thatthey will be resolved without a material impact on the Group's financialposition. 17. Interim report
The interim report was approved by the board of directors on 6 August 2009 andcopies are available from the registered office, Logica plc, 250 Brook Drive,Green Park, Reading RG2 6UA, UK and Logica, Prof. W.H. Keesomlaan 14, 1183 DJAmstelveen, the Netherlands. The Company has its primary listing on the LondonStock Exchange.
Euro translation of selected financial information (unaudited)
The Group has presented a translation of the consolidated statement ofcomprehensive income, statement of financial position and statement of cashflow into euros to assist users of the interim financial statements morefamiliar with that currency. The statement of comprehensive income andstatement of cash flow in euros have been calculated by converting theconsolidated sterling figures to euros at an average rate of EUR1.12 to 1 (sixmonths ended 30 June 2008: EUR1.29 to 1) except the opening and closing net cashbalance in the statement of cash flow, which uses the same rates as used in thestatement of financial position as mentioned below. The statement of financialposition has been calculated by converting the sterling figures to euros at theclosing rate of EUR1.17 to 1 (31 December 2008: EUR1.03 to 1, 30 June 2008: EUR1.26to 1).
Euro translation of consolidated statement of comprehensive income
Six months Six months ended ended 30 June 30 June 2009 2008 EUR'm EUR''m Revenue 2,101.2 2,282.5 Net operating costs (2,058.0) (2,245.1) Operating profit 43.2 37.4 Analysed as:
Operating profit before exceptional items 92.5
96.2 Exceptional items (49.3) (58.8) Operating profit 43.2 37.4 Finance costs (21.4) (28.7) Finance income 4.8 7.1
Share of post-tax profits from associates 0.5
0.5 Profit before tax 27.1 16.3 Taxation (3.4) (8.4) Net profit for the period 23.7 7.9 Other comprehensive income
Exchange differences on translation of (220.3)
141.7foreign operations
Actuarial losses on defined benefit plans (75.7)
(4.1)
Tax on items taken directly to equity 20.0
2.2
Other comprehensive income for the period, (276.0)
139.8net of tax
Total comprehensive income for the period (252.3)
147.7 Profit attributable to: Owners of the parent 23.7 6.7 Minority interest - 1.2 23.7 7.9
Total comprehensive income attributable to:
Owners of the parent (251.1) 144.2 Minority interests (1.2) 3.5 (252.3) 147.7 Earnings per share cents / cents / share share - Basic 1.5 0.5 - Diluted 1.5 0.5
Euro translation of consolidated statement of financial position
See page 31 for basis of translation.
30 June 31 December 30 June 2009 2008 2008 EUR'm EUR'm EUR'm Non-current assets Goodwill 2,133.0 2,054.0 2,186.6 Other intangible assets 324.2 365.0 444.7 Property, plant and equipment 154.2 153.5 164.1 Investments in associates 2.8 3.1 2.8 Financial assets 14.2 14.2 15.1 Retirement benefit assets 22.9 64.0 26.3 Deferred tax assets 74.2 60.9 60.2 Total non-current assets 2,725.5 2,714.7 2,899.8 Current assets Inventories 0.8 0.7 2.3 Trade and other receivables 1,371.4 1,406.7 1,487.3 Current tax assets 16.9 17.2 10.1 Cash and cash equivalents 71.6 130.7 111.1 Total current assets 1,460.7 1,555.3 1,610.8 Current liabilities Convertible debt - - (305.0) Other borrowings (20.9) (11.0) (142.8) Trade and other payables (1,094.4) (1,232.5) (1,218.1) Current tax liabilities (55.1) (64.0) (64.6) Provisions (57.2) (37.5) (32.9) Total current liabilities (1,227.6) (1,345.0) (1,763.4)
Net current assets / (liabilities) 233.1 210.3
(152.6)
Total assets less current liabilities 2,958.6 2,925.0
2,747.2 Non-current liabilities Borrowings (585.8) (571.0) (374.7)
Retirement benefit obligations (102.8) (65.1)
(79.8) Deferred tax liabilities (99.1) (122.9) (145.4) Provisions (49.3) (48.5) (33.2)
Other non-current liabilities (1.2) (1.0)
(1.1)
Total non-current liabilities (838.2) (808.5)
(634.2) Net assets 2,120.4 2,116.5 2,113.0 Equity Share capital 187.2 164.6 184.2 Share premium account 1,288.8 1,134.5 1,386.5 Reserves 644.3 803.6 526.5 Total shareholders' equity 2,120.3 2,102.7 2,097.2 Minority interests 0.1 13.8 15.8 Total equity 2,120.4 2,116.5 2,113.0
Euro translation of consolidated statement of cash flow
See page 31 for basis of translation.
Six Six months months ended ended 30 June 30 June 2009 2008 EUR'm EUR'm
Cash flows from operating activities Net cash inflow from trading operations 104.3
126.2
Cash outflow related to restructuring and integration (35.3)
(17.8)activities
Cash generated from operations 69.0
108.4 Finance costs paid (21.5) (18.8) Income tax (paid) / received (29.1) 16.9
Net cash inflow from operating activities 18.4
106.5
Cash flows from investing activities
Finance income received 1.9 5.2
Dividends received from associates 0.8
0.9
Proceeds on disposal of property, plant and equipment 0.1
0.1
Purchases of property, plant and equipment (19.7)
(23.7)
Expenditure on intangible assets (11.8)
(15.9)
Purchase of minority interests (53.5)
(55.0)
Acquisition of subsidiaries and other businesses, net of cash -
(2.6)acquired
Disposal costs of prior year disposals -
(9.5)
Disposal of subsidiaries and other businesses, net of cash 0.6
3.0disposed
Net cash outflow from investing activities (81.6)
(97.5)
Cash flows from financing activities Proceeds from issue of new shares -
2.5 Proceeds from bank borrowings 20.6 66.7 Repayments of bank borrowings (0.6) (44.4)
Repayments of finance lease principal (2.5)
(2.7)
Repayments of other borrowings (0.9)
-
Proceeds from forward contracts (13.8)
9.9
Dividends paid to the Company's shareholders (10.6)
(65.1)
Net cash outflow from financing activities (7.8)
(33.1)
Net decrease in cash, cash equivalents and bank overdrafts (71.0)
(24.1)
Cash, cash equivalents and bank overdrafts at the beginning of 125.1
145.4the period Net decrease in cash, cash equivalents and bank overdrafts (71.0) (24.1)
Effect of foreign exchange rates 7.0
(11.6)
Cash, cash equivalents and bank overdrafts at the end of the 61.1
109.7period
Independent review report to Logica plc
Introduction
We have been engaged by the Company to review the consolidated financialstatements in the half-yearly financial report for the six months ended 30 June2009, which comprises the consolidated statement of comprehensive income,consolidated statement of financial position, consolidated statement of cashflow, consolidated statement of changes in equity and related notes. We haveread the other information contained in the half-yearly financial report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the information in the consolidated financial statements. Directors' responsibilitiesThe half-yearly financial report is the responsibility of, and has beenapproved by, the directors. The directors are responsible for preparing thehalf-yearly financial report in accordance with the Disclosure and TransparencyRules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The consolidated financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on theconsolidated financial statements in the half-yearly financial report based onour review. This report, including the conclusion, has been prepared for andonly for the Company for the purpose of the Disclosure and Transparency Rulesof the Financial Services Authority and for no other purpose. We do not, inproducing this report, accept or assume responsibility for any other purpose orto any other person to whom this report is shown or into whose hands it maycome save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the consolidated financial statements in the half-yearly financialreport for the six months ended 30 June 2009 is not prepared, in all materialrespects, in accordance with International Accounting Standard 34 as adopted bythe European Union and the Disclosure and Transparency Rules of the UnitedKingdom's Financial Services Authority. PricewaterhouseCoopers LLPChartered AccountantsLondon6 August 2009 Notes:
The maintenance and integrity of the Logica plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
vendorRelated Shares:
LOG.L