11th May 2012 07:00
11 May 2012
Logica reiterates full year guidance with its first quarter results
At its Annual General Meeting being held today, Logica will comment on trading for the first quarter of 2012. The following is the interim management statement based on unaudited results for the three months ended 31 March 2012.
Headlines1
New orders totalling £1,057 million, 23% of 2011 record order book of £4.6 billion
Revenue stable at 2011 level
Good progress on delivering our 2012 objectives
Restructuring programme fully on track
Full year guidance remains unchanged
1Unless otherwise stated, all headline numbers relate to pro forma numbers asdefined on page 8. Three months to March Three months to March 2011 2011 £m 2012 Pro Change Actual Change forma Orders 1,057 1,393 (24)% 1,399 (24)% Revenue 971 974 0% 978 (1)% Outsourcing backlog 2,513 2,623 (4)% 2,615 (4)% Consulting and Professional Services 108 114 n.a. 114 n.a.book to bill (%)
Commenting on today's announcement, Andy Green, CEO, said:
"This is a solid performance underpinning our full year guidance. We have made good progress with clients in delivering against current contracts as well as winning and implementing new business. Our restructuring actions are fully on track and will help drive improvement in profitability in the second half."
Outlook
Our full year revenue and margin guidance remains unchanged despite our expectation of a subdued second quarter given the impact of elections in several countries and a cautious economic outlook for our main markets. Full year revenue growth is expected to be in the range of -2% to +2% and we expect our full year 2012 operating margin to be above 6.5% even in tough market conditions.
We have made good progress with our restructuring programmes in the Benelux, Sweden and Infrastructure Management (IM). We continue to expect to see the savings of £25 to £35 million coming through, largely in the second half of the year.
We expect to deliver against our key 2012 objectives. Our Benelux business will return to profit in 2012; our Swedish business will deliver an improved margin and our IM business will be strongly competitive going forward.
Net debt/EBITDA at the end of 2012 is expected to be around 1.0x, after the expected cash impact of the restructuring of between £60 to £70 million (the bulk of which will be in the first half).
Progress on execution and control
Our continued focus on strengthening delivery assurance and our contract accounting Centre of Excellence are aimed at ensuring that we implement projects successfully for our clients, resolve issues as they arise and take a prudent view on contracts, to allow us to deliver high quality earnings. We are making good progress in fully embedding the processes across the organisation.
Progress with clients
Our progress with clients continues to be based on delivering against current contracts as well as winning and implementing new business. We are seeing a wide spread of smaller and medium sized orders in the pipeline with good opportunities in the Public Sector and Transport, Trade and Industrial (TTI).
We continue to deliver well against longer term contracts like the Crown Prosecution Service where our work successfully implementing case management reached its tenth year. Q1 also marked the first anniversary of our major contracts with Shell and SOCA, with transition completed on both contracts.
Our new orders in the quarter totalled £1,057 million, against a record order book in the first quarter of last year (Q1 2011: £1,393 million) when we signed a number of long term Outsourcing contracts.
Progress on labour
The increase in employee numbers over the last twelve months to 41,267 (Q1 2011:39,864) was due to the addition of 1,200 through the Grupo Gesfor acquisition in May 2011.
Growth in headcount in our offshore centres over the last year was 24%, with approximately 7,300 in these centres at the end of March (Q1 2011: 5,900). We have now reached 1,000 employees in the Philippines, a 40% increase since the first quarter of 2011.
With attrition running at around 13% (Q1 2011:14%), we are continuing to recruit in areas of high demand across most of our markets.
The restructuring programme announced on 14 December 2011 is fully on track.
Service line performance Outsourcing Three months to March £m 2012 2011 Change Backlog at end of period 2,513 2,623 (4)% Orders 448 749 (40)% Revenue 407 409 0% Orders by type 2012 2011 Change Applications Management (AM) 186 302 (38)%
Infrastructure Management (IM) 212 267 (21)%
Business Process Outsourcing (BPO) 50 180 (72)%
Revenue by type 2012 2011 Change Applications Management (AM) 196 211 (7)%
Infrastructure Management (IM) 166 155 7%
Business Process Outsourcing (BPO) 45 43 5%
Orders in the quarter were £448 million (Q1 2011: £749 million), reflecting the uneven nature of contract awards in this part of the business and the strong order performance in Q1 2011.
We signed a seven-year BPO contract for meter-2-cash and customer management services for Danish utility Tre-for. During the quarter we also signed new contracts with Energy and Utilities and Trade, Transport and Industrial clients in France. Since the end of the quarter we signed a five-year managed services contract with Queensland Rail worth AUD $33 million (£21 million) to transition and manage the State-owned rail company's newly-established ICT infrastructure platform.
Revenue for the quarter was stable on 2011 at £407 million, as we have reached a steady state of delivery into a number of significant contracts in Northern and Central Europe and Sweden. In the first quarter of 2011 we also saw the implementation of various Applications Management contracts in France.
Consulting and Professional Services
Three months to March £m 2012 2011 Change Book to bill % 108 114 n.a. Orders 609 644 (5)% Revenue 564 565 0%
Book to bill remains strong at 108% (Q1 2011: 114%), with a good level of orders signed particularly in Northern and Central Europe. This was partially offset by weaker performances in the UK and Sweden.
Consulting and Professional Services revenue showed a resilient performance -
flat at £564 million (Q1 2011: £565 million).
Segmental performance France Three months to March £m 2012 2011 Change Orders 240 222 8% Consulting and Professional Services book 96 103 n.a.to bill % Revenue 217 219 (1)%
Order intake for the first quarter was strong, up 8% on the first quarter of last year, with good performance in the Outsourcing business, particularly with our Trade, Transport and Industrial clients. During the quarter we also renewed a series of contracts with Energy and Utilities clients.
As anticipated, Consulting and Professional Services book to bill was below 2011 as a result of the uncertainty surrounding the French elections and slow decision making in Financial Services.
Revenue was down 1% to £217 million, as a result of lower utilisation than Q12011. This expected slowdown in activity was against a very strong start in2011, when we implemented a number of important Applications Managementcontracts. Northern and Central Europe Three months to March £m 2012 2011 Change Orders 340 241 41% Consulting and Professional Services book 162 132 n.a.to bill % Revenue 210 206 2%
Order intake saw a 41% increase on the first quarter of last year, primarily driven by orders signed in Denmark and a number of small wins in Finland and Germany.
Consulting and Professional Services book to bill was very strong at 162%.
We signed contracts with Finnish energy and utilities providers Savon Voima and Tripower, using Microsoft Dynamics in order to increase the range of services available online and allowing their customers to react faster to changes in the energy market. In Germany we signed a four-year Applications Management contract with Barmer GEK, the largest statutory health insurer in the country for the development, test and support of their operational application systems.
Revenue for the quarter was up 2% to £210 million, with growth in Energy and Utilities and Financial Services offsetting a weaker performance in Transport, Trade and Industrial and Telecoms.
UK Three months to March £m 2012 2011 Change Orders 101 515 (80)% Consulting and Professional Services book 74 101 n.a.to bill % Revenue 191 179 7%
Total orders in the first quarter were £101 million (2011 Q1: £515 million).
Total order intake and Consulting and Professional Services book to bill were down on a very strong first quarter in 2011, reflecting the uneven nature of contract awards in an Outsourcing-led business on the back of previously disclosed contracts with the Serious Organised Crime Agency (SOCA) and Shell. Excluding these orders, the underlying order performance was 5% down year on year.
Revenue was up 7% to £191 million with good performance in both Outsourcing andConsulting and Professional Services. System design and third partyimplementation work under our major contracts with Shell and SOCA, togetherwith good growth in Energy and Utilities and the Public Sector drove the strongperformance year on year. Sweden Three months to March £m 2012 2011 Change Orders 159 159 0% Consulting and Professional Services book 68 127 n.a.to bill % Revenue 154 155 (1)%
Order intake was £159 million, in line with the first quarter of last year. The increase of new Outsourcing orders signed was offset by a slow start to the year in Consulting and Professional Services.
Revenue was down 1% on 2011 at £154 million, with commercial sectors down 2% as a result of the weaker demand in Financial Services and Telecoms.
We have made good progress on implementing the restructuring programme. We continue to expect this to contribute to improved margin in Sweden.
Our expectation of second half growth is based on a solid longer term pipeline and backlog despite continued softness in shorter term work.
Benelux Three months to March £m 2012 2011 Change Orders 113 169 (33)% Consulting and Professional Services book 101 97 n.a.to bill % Revenue 111 118 (6)%
New orders signed in the quarter totalled £113 million and included a new case management project with the European Patent Office and a new SEPA win with a large Dutch financial services client.
The 33% decrease in orders was against a strong first quarter of 2011 when we won an €80 million (£66 million) Outsourcing contract with an important Dutch client.
Revenue was down 6% to £111 million as a result of weakness in the Financial Services sector.
The restructuring programme is on track with the majority of exits expected in the second and third quarters of the year. We remain confident that this will result in a return to profitability in 2012.
International Three months to March £m 2012 2011 Change Orders 104 87 20% Consulting and Professional Services book 110 122 n.a.to bill % Revenue 88 97 (9)%
We saw a strong start of the year in orders, up 20% on 2011 as a result of Outsourcing contract wins in our Australian business.
Revenue was down 9% against the first quarter of 2011. The phasing of new Australian contracts and the ramp down of growth in Brazil under a number of contracts slowed revenue in the quarter, despite good growth in North America.
Since the end of the quarter we also signed a five-year managed services contract with Queensland Rail worth AUD $33 million (£21 million) to transition and manage the State-owned rail company's newly-established ICT infrastructure platform.
The new orders signed in the quarter will be significant contributors to returning the cluster back to revenue growth in the second half.
Financial position
Net debt/EBITDA at the end of 2012 is expected to be around 1.0x, after the expected cash impact of the restructuring of between £60 to £70 million (the bulk of which will be in the first half).
As disclosed in the 2011 Annual Report and Accounts, the Group received a €59 million VAT claim from French tax authorities in 2009. This claim related to the VAT treatment of goods exported from France during the years 2004 to 2006. The Administrative Court of Montreuil has now rendered an adverse ruling on the claim and Logica is required to make a cash payment of €59 million to the French tax authorities, which includes penalties and interest.
The Group continues to consider this claim without merit and is exercising its right to appeal, including challenging the demand for payment through the appropriate channels. This is likely to result in a protracted legal process.
Annual General Meeting
Our Annual General Meeting is being held this morning at 10:30am at Kings Place, 90 York Way, London N1 9AG.
Financial calendar
The next scheduled statements in our financial calendar are:
3 August 2012 H1 2012 interim results31 October 2012 Q3 2012 interim management statement Disclaimer
This document contains forward-looking statements that involve risks and uncertainties concerning the Group's expected growth and profitability in the future. Actual events or results may differ from those described in this document due to a number of risks and uncertainties that are described within the 2011 annual report submitted to the National Storage Mechanism on 10 April 2012.
For further information please contact:
Logica Investor relations:
Karen Keyes/Jose Cano +44 (0) 7801 723682/+44 (0) 7525 273666/+44 (0) 20 7446 1338
Logica Media relations:
Louise Fisk +44 (0) 7798 857770
Brunswick:
Sarah West/Jonathan Glass: 44 (0) 20 7404 5959
Notes:
Book to bill percentage is a measure of the level of orders relative to revenue in the period, while backlog refers to the total value of orders booked over all previous periods but not yet recognised as revenue.
Unless otherwise stated, the comparatives in this release relate to pro forma results for 2011 which:
retranslate prior period actual numbers at average 2012 exchange rates. This decreased 2011 revenue by £16 million;and
are adjusted to include the acquisition of Grupo Gesfor adding £12 million to 2011 revenue.
Exchange rates used are as follows:
Q1 2012 Q1 2011 £1 / € 1.20 1.17 £1 / SEK 10.57 10.37 £1 / USD 1.60 1.61
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