22nd Feb 2012 07:00
22 February 2012
Logica reports full year results in line with 14 December guidance(1,2)
Headlines
Full year orders up 13% to £4.6 billion, driven by Outsourcing orders up 23% to £2.2 billion
Full year revenue up 3% to £3.9 billion; adjusted operating profit down significantly on last year at £114 million including the impact of the £132 million of restructuring and contract charges announced on 14 December 2011.
Underlying revenue was up 4% to £3.9 billion. Underlying performance was:
Outsourcing revenue up 9%, with second half revenue up 7%
Consulting and Professional Services revenue flat, with second half revenue down 1%
Revenue in the commercial sectors was up 7%, offset by a 3% decline in Public Sector
Fourth quarter weakness seen particularly in the Benelux and Sweden
Underlying adjusted operating profit at £247 million was in line with December guidance
Full year cash conversion of 92% resulted in operating cash inflow of £226 million
Net debt/EBITDA at 0.9x, with net debt at £295 million at year end (2010: £280 million)
Full year dividend recommended to be 4.4p, up 5% over 2010
For the year ended 31 December 2011, results were as follows:
Twelve months to December Twelve months to December £'m 2011 2010 Change 2010 Change Pro forma Actual Orders 4,633 4,090 13% 3,972 17% Underlying revenue 3,950 3,806 4% 3,697 7% Underlying adjusted operating 247 278 (11)% 272 (9)%profit Underlying adjusted operating 6.2% 7.3% (110)bps 7.4% (120)bpsmargin Operating cash inflow 226 270 (16)% 270 (16)% Underlying adjusted basic EPS 11.3p 12.3p (8)% 12.3p (8)% Operating profit 55 211 (74)% 211 (74)% Operating margin 1.4% 5.7% (430)bps 5.7% (430)bps Basic EPS 1.7p 9.6p (82)% 9.6p (82)%
1 Unless otherwise stated, comparatives in the statement relate to the pro forma numbers. For definition of pro forma, adjusted operating profit, adjusted operating margin and basic adjusted EPS, please see notes on page 15.
2 Underlying numbers have been included here for ease of comprehension and reflect numbers before the impact of £39 million of contract charges and £93 million of restructuring charges announced on 14 December 2011, please see notes on page 17.
Commenting on today's announcement, Andy Green, CEO, said:
"2011 was a more difficult year then we had expected. While our order book at £ 4.6 billion was strong and revenue was up 3%, restructuring and contract charges resulted in a lower adjusted operating profit.
Building on our successful long-term relationships with clients, we signed significant orders with clients such as Shell and Michelin. We had important wins with new clients such as BAE Systems and the Swedish Pensions Agency.
The revenue outlook remains uncertain but we are on track in implementing theactions we announced in December. As a result, we expect our Benelux businessto return to profit in 2012, our Swedish business to deliver an improved marginand our Outsourcing business to be strongly competitive. Even in tough marketconditions, we expect our full year operating margin for 2012 to be above6.5%."
For further information, please contact:
Logica Investor Relations: Karen Keyes +44 (0) 7801 723682 / Jose Cano+44 (0) 20 7446 1338Logica Media relations: Louise Fisk +44 (0) 7798 857770Brunswick: Sarah West/Jonathan Glass: +44 (0) 207404 5959 Financial overview1
Group orders reached £4,633 million for the full year (2010 actual: £3,972 million), with Outsourcing orders up 23% to £2,179 million.
Revenue for the full year was £3,921 million (2010 actual: £3,697 million), up 6%.
Adjusted operating profit was £114 million (2010 actual: £272 million), withmargin at 2.9% (2010 actual: 7.4%) including £39 million of contract chargesand £93 million of restructuring charges announced on 14 December 2011.Underlying adjusted operating margin was 6.2% (2010 pro forma: 7.3%) Revenue Twelve months to December £'m 2011 Actual Revenue 3,921 Contract charges 29 Underlying revenue 3,950 Operating Profit Adjusted operating profit 114 Adjusted operating margin 2.9% Contract charges 39 Restructuring 93
Underlying adjusted operating profit 247 Underlying adjusted operating margin 6.2%
EPS Adjusted basic EPS 4.5p
Underlying adjusted basic EPS 11.3p 1 Underlying numbers have been included where appropriate for ease ofcomprehension and reflect numbers before the impact of £39 million of contractcharges and £93 million of restructuring charges announced on 14 December 2011.Numbers in the tables are rounded. In addition to the charges announced in December, the adjusted operating profitalso includes the benefit of a £7 million pension curtailment gain in theBenelux and the impact of the previously announced £24 million of additionalrestructuring charges mainly taken in the first half of the year. After £59 million of charges, mainly related to amortisation of intangibles and£5 million of exceptional cost related to our Grupo Gesfor acquisition,operating profit was £55 million (2010 actual: £211 million). Operating marginwas 1.4% (2010 actual: 5.7%).
Adjusted basic EPS was 4.5p and underlying adjusted basic EPS was 11.3p (2010 actual: 12.3p).
As expected, cash generation in the second half was strong. Full year cash conversion of 92% resulted in a net cash inflow for the year of £226 million. Closing net debt was £295 million (31 December 2010: £280 million). This represented net debt/EBITDA of 0.9x.
Outlook We finished the year with a strong order performance with a number ofsignificant long term contracts signed both in the first and last quarters of2011. We have a healthy multi-year order backlog that we will deliver over thenext few years. Our Consulting and Professional Services book to bill remainedsolid through the second half at 112%. This was despite the pockets of weaknesswe saw at a client level through the second half of 2011, with some clientsreducing discretionary spend in the face of an uncertain economic climate. We continue to be cautious about the economic outlook in our main markets andour guidance for 2012 remains unchanged, with revenue growth expected to be
inthe range of -2% to +2%. Our restructuring programme is on track. In the Benelux and Sweden, we expectto see benefits as the bench reduces and utilisation improves with a largenumber of people leaving the business. Exits and the first phase ofrationalisation of facilities in the Benelux will mainly occur through thesecond and third quarters with £25 to £35 million of savings largely in thesecond half. This underpins our continued expectation that our Beneluxbusiness will return to profit in 2012; our Swedish business will deliver animproved margin and our IM business will be strongly competitive going forward.Overall, these actions lead us to a view that full year 2012 operating marginwill be above 6.5% even if difficult market conditions prevail.
Our balance sheet is strong. After the 2012 cash impact of restructuring of between £60 to £70 million, the bulk of which will be in the first half, net debt/EBITDA at the end of 2012 will be around 1.0x.
The Board has confirmed its commitment to a dividend payout of at least 40% ofafter tax profit in 2012. Progress with clients Revenue Six months to December Twelve months to December Change Change£'m 2011 2010 2011 2010 Trade, Transport and Industrial 573 518 11% 1,147 1,056 9% Public Sector 556 562 (1)% 1,122 1,160 (3)% Energy and Utilities 361 327 10% 719 652 10% Financial Services 312 330 (5)% 638 624 2% Telecoms and Media 155 170 (9)% 324 314 3% Total 1,957 1,907 3% 3,950 3,806 4% We continued to improve our position with clients and our investment in salesand marketing resulted in better qualification of our pipeline at the earlierstages. Revenue from our top 50 clients was up 11% despite a difficult market. Secondhalf growth slowed due to our Public Sector clients and we saw some softness ata client level in other sectors. Overall, revenue from our top 50 clientsrepresented 44% of group revenue, compared to 42% at the end of 2010. Despite agrowing concentration of revenue with our largest clients, this remains wellspread with no client accounting for more than 3% of revenue. Progress on labour
Our Group headcount has risen to 41,784 (31 December 2010: 39,284 employees) with around 1,200 Grupo Gesfor employees joining Logica.
About 7,100 or 17% (2010 actual: 15%) of our total headcount was located in ournearshore and offshore centres, compared to 5,800 at the end of 2010. We haveopened a second site in Bangalore and at the end of 2011, we are approaching1,000 employees in the Philippines.
Gross recruitment in the second half was around 2,400 taking the overall number for the year to around 6,500. This was offset by attrition, which remained stable at around 13% and is broadly in line with industry averages.
Wage increases averaged around 3% across the business with a strong emphasis onretaining key skills. We continue to recruit new graduates and increase the
useof offshore labour. Progress on cash
The net cash inflow from trading operations was £226 million (2010 actual: £270 million), leading to a cash conversion ratio of 92% (2010 actual: 99%) on underlying adjusted operating profit of £247 million.
Group net debt at 31 December 2011 was £295 million (2010 actual: £280 million), leading to net debt/EBITDA of 0.9x in line with our guidance. We expect net debt/EBITDA at December 2012 to be around 1.0x including for the £60 to £70 million outflow relating to restructuring activities.
In December 2011 and January 2012, we signed a total of €150 million of newfive-year bilateral bank facilities. This continued to diversify our sourcesand maturity of funding. Debt facilities currently stand at £872 million.
Service line performance Outsourcing Six months to December Twelve months to December £'m Change Change 2011 2010 2011 2010 Backlog at end of period 2,632 2,270 16% 2,632 2,270 16% Orders 950 817 16% 2,179 1,776 23% Underlying revenue 879 821 7% 1,757 1,614 9%
Underlying adjusted operating profit 71 66 8% 125 118 6%
Underlying adjusted operating margin
% 8.1 8.0 10bps 7.1 7.3 (20)bps Orders by type Applications Management (AM) 531 449 18% 1,062
957 11%
Infrastructure Management (IM) 294 321 (8)% 712 708 1%
Business Process Outsourcing (BPO) 125 47 166% 405 111 265% Underlying revenue by type Applications Management 444 420 6% 909 826 10% Infrastructure Management 338 325 4% 666 638 4% Business Process Outsourcing 97 76 28% 182 150 21%
Outsourcing orders were up 23%, driving outsourcing order backlog up 13% to £2.6 billion (end 2010: £2.3 billion). BPO and applications management remainedthe fastest growing areas. In the second half, we saw good growth particularlyin the UK on the back of the BAE Systems HR BPO contract win. Full year underlying revenue was up 9% to £1,757 million and represented 45% ofGroup revenue (2010: 43%). Our largest areas, applications and infrastructuremanagement, both grew well. Our BPO revenue was up 21% in the year to 10% oftotal outsourcing revenue.
Underlying adjusted operating profit was £125 million, reflecting an underlying adjusted operating margin of 7.1%.
Consulting and Professional Services
Six months to December Twelve months to December £'m Change Change 2011 2010 2011 2010 Book to bill % 113 108 n.a. 112 105 n.a. Orders 1,212 1,100 10% 2,454 2,314 6% Underlying revenue 1,078 1,086 (1)% 2,193 2,192 0%
Underlying adjusted operating profit 63 85 (26)% 122 161 (24)%
Underlying adjusted operating margin % 5.8 7.9 (210)bps 5.5 7.3 (180)bps
Consulting and Professional Services achieved a solid book to bill ratio of112%, with orders up 6% on last year. Revenue for the full year was flat on2010. In the second half, revenue was down 1% to £1,078 million, reversal ofthe 1% growth we saw during the first six months of the year. As the result ofthe weakness in Sweden and the Benelux and the incorporation of restructuringcharges during the first half, the underlying adjusted operating profit was £122 million with an underlying adjusted operating margin of 5.5%. Revenue mix in this part of the business continued to shift in 2011, withBusiness Consulting revenue up 14%. It now represents 20% of the Consulting andProfessional Services total revenue and about 9% of total group headcount, with3,700 people at the end of 2011. Within Business Consulting, we continue torecruit capability in our Microsoft Cloud, Customer Analytics and BusinessIntelligence practices, although we are being cautious in light of uncertaindemand. Segmental performance France Six months to Twelve months to December December £'m Change Change 2011 2010 2011 2010 Reported
Consulting and Professional Services book
to bill % 130 117 n.a. 119 111 n.a. Orders 558 468 19% 1,056 949 11% Revenue 420 409 3% 875 824 6% Adjusted operating profit 33 36 (8)% 74 69 7% Adjusted operating margin % 7.9 8.7 (80)bps 8.5 8.4 10bps Underlying Revenue 423 409 3% 878 824 7% Adjusted operating profit 36 36 0% 77 69 12% Adjusted operating margin % 8.5 8.7 (20)bps 8.8 8.4 40bps Revenue analysis: By sector
Trade, Transport and Industrial 172 154 12% 346
314 10% Financial Services 113 108 5% 225 211 7% Other Sectors 138 147 (6)% 307 299 3% By service line Outsourcing 190 182 4% 398 356 12% Consulting and Professional Services 233 227 3% 480 468 3%
For the first time, orders in France exceeded £1 billion ending at £1,056million. A strong finish to the year was driven by good orders in bothOutsourcing and Consulting and Professional Services, including a seven-yearcontract for the implementation of the first open data portal launched by theFrench State. We expect to see some slowing in decision making in FinancialServices and in the Public Sector ahead of the election in 2012. Underlying revenue for the full year was up 7% to £878 million above the marketand one of the strongest in the group. In the second half, the level of growthwas 3%, lower than during the first six months as a result of the conclusion ofseveral projects in the Energy and Utilities sector. Our largest sectorTransport, Trade and Industrial reached double-digit growth for the full yearas demand in the retail and transportation arenas continued to be strong duringthe second half. Underlying adjusted operating margin was 8.8%. On a reported basis, margin was 8.5%, including £3 million of contract chargestaken in December. This was slightly above 2010 as we focused on higher marginservices and expanded the use of our blended delivery approach with ourclients.
Northern and Central Europe
Six months to Twelve months to December December £'m Change Change 2011 2010 2011 2010 Reported
Consulting and Professional Services book
to bill % 116 99 n.a. 116 103 n.a. Orders 436 434 0% 896 921 (3)% Revenue 426 413 3% 860 805 7% Adjusted operating profit 35 36 (3)% 65 62 5% Adjusted operating margin % 8.2 8.8 (60)bps 7.5 7.7 (20)bps Underlying Revenue 426 413 3% 860 805 7% Adjusted operating profit 37 36 3% 67 62 8% Adjusted operating margin % 8.7 8.8 (10)bps 7.8 7.7 10bps Revenue analysis: By sector Trade, Transport and Industrial 150 119 26% 297 262 13% Public Sector 124 119 4% 244 238 3% Other Sectors 152 175 (13)% 319 305 5% By service line Outsourcing 134 127 6% 278 242 15% Consulting and Professional Services 292 286 2% 582 563 3% Orders for the full year were down 3% . Outsourcing orders were down 33%against strong comparatives offset by good second half order intake inConsulting and Professional Services. Overall, Consulting and ProfessionalServices finishing the year with a book to bill of 116%, with a number ofsmaller wins across the cluster. Among the orders recorded during the year wereorders with eToll audit in Poland and the National digital library in CzechRepublic. Since the end of December, we have signed a seven-year OutsourcingBPO contract for meter-2-cash and customer management services for a Danishutility, Tre-for.
For the full year, underlying revenue was up 7% to £860 million, with growth of 9% in Finland and 8% in Germany. Revenue in Norway was broadly stable.
As expected, we saw a lower level of revenue growth in the second half, up 3%to £426 million. Excellent performance with our Trade, Transport and Industrialclients compensated for the decline in the Telecoms sector. Finland and Germanywere up 5% and 3.5% respectively in the second half of the year and Denmarkreached a steady state of business entering into the second year of thePostNord contract.
On a reported basis, margin was 7.5%, slightly below 2010 due to a £2 million restructuring charge we took in December relating to the IM business. Underlying operating margin was broadly stable on 2010 at 7.8%.
Utilisation remained strong and we made progress on expanding the use of our blended delivery approach and increased our focus on service delivery.
UK Six months to Twelve months to December December £'m Change Change 2011 2010 2011 2010 Reported
Consulting and Professional Services book
to bill % 129 96 n.a. 128 92 n.a. Orders 498 248 101% 1,179 551 114% Revenue 364 342 6% 725 709 2% Adjusted operating profit 2 34 (94)% 16 60 (73)% Adjusted operating margin % 0.7 10.0 n.a. 2.2 8.5 n.a. Underlying Revenue 381 342 11% 742 709 5% Adjusted operating profit 33 34 (3)% 47 60 (22)% Adjusted operating margin % 8.8 10.0 (120)bps 6.3 8.5 (220)bps Revenue analysis: By sector Public Sector 210 209 0% 418 439 (5)% Energy and Utilities 93 50 86% 163 108 51% Other Sectors 78 83 (6)% 161 162 0% By service line Outsourcing 223 183 22% 425 377 13% Consulting and Professional Services 158 159 (1)% 317 332 (5)%
The volume of orders signed during 2011 reached £1,179 million, more thandouble the £551 million of 2010. This was a result of two 10-year contractsbooked in the first quarter in 2011 with the Serious Organised Crime Agency andShell as well as a number of contract extensions with existing clients in thefourth quarter.
Underlying revenue for the full year was up 5% to £742 million, driven by a 20%revenue increase in the commercial sectors. Public sector was flat in thesecond half of the year. The build phase on a number of contracts saw fullyear revenue grow more than 15% in Financial Services and Telecoms and a strongperformance in Energy and Utilities.
On an underlying basis, excluding restructuring, margin was 6.3% (2010: 8.5%).
On a reported basis, margin was 2.2%. This is after the £10 millionrestructuring charge we took in the first half of 2011 as well as the £28million of the contract charges and £3 million of the restructuring charges weannounced in December. Sweden Six months to Twelve months to December December £'m Change Change 2011 2010 2011 2010 Reported
Consulting and Professional Services book
to bill % 101 113 n.a. 109 125 n.a. Orders 300 323 (7)% 628 797 (21)% Revenue 300 303 (1)% 622 605 3% Adjusted operating profit (18) 24 n.a. (9) 41 n.a. Adjusted operating margin % (6.1) 7.9 n.a. (1.4) 6.7 n.a. Underlying Revenue 300 303 (1)% 622 605 3% Adjusted operating profit 13 24 (46)% 23 41 (44)% Adjusted operating margin % 4.4 7.9 n.a. 3.6 6.7 n.a. Revenue analysis: By sector
Trade, Transport and Industrial 142 136 4% 292
269 9% Public Sector 81 81 0% 165 164 1% Other Sectors 77 86 (10)% 165 172 (4)% By service line Outsourcing 189 185 2% 374 360 4% Consulting and Professional Services 111 118 (6)% 248 245 1%
After four consecutive quarters of orders decline, we saw a positive end to theyear. Fourth quarter orders were up 1% on 2010 as we renewed a series ofOutsourcing orders with our clients in the Public Sector and Transport, Tradeand Industrial. We signed contracts with new clients such as the SwedishPensions Agency which runs for five years with an opportunity to extend by twoyears and an estimated value of £13 million. Underlying revenue for the full year was up 3%. However, the second half wasdown 1% against tougher comparatives and continuing weakness in most commercialsectors.
The underlying margin was 3.6% (2010: 6.7%). The margin was particularly impacted by the transition of a number of large contracts and the short-term use of extra resources including subcontracting to support these transitions.
On a reported basis, margin for the full year was (1.4)%. In December, we tooka restructuring charge of £31 million in order to accelerate the transformationof our IM business and prepare the business to face a more uncertain economicenvironment. This resulted in a full year loss of £9 million compared to a
£41million profit in 2010.
We expect our Swedish business to deliver an improved margin in 2012 and our IM business to be strongly competitive going forward.
Benelux Six months to Twelve months to December December £'m Change Change 2011 2010 2011 2010 Reported
Consulting and Professional Services book
to bill % 113 108 n.a. 106 103 n.a. Orders 237 257 (8)% 586 525 12% Revenue 222 240 (8)% 464 490 (5)% Adjusted operating profit (73) 2 n.a. (72) 14 n.a. Adjusted operating margin % (33.1) 0.9 n.a. (15.6) 2.9 n.a. Underlying Revenue 231 240 (4)% 473 490 (4)% Adjusted operating profit (8) 2 n.a. (7) 14 n.a. Adjusted operating margin % (3.3) 0.9 n.a. (1.4) 2.9 n.a. Revenue analysis: By sector Financial Services 63 75 (16)% 134 147 (9)% Public Sector 69 75 (8)% 140 162 (14)%
Trade, Transport and Industrial 49 44 11% 102
87 17% Other Sectors 50 46 9% 97 94 3% By service line Outsourcing 45 39 15% 85 79 8% Consulting and Professional Services 186 201 (7)% 388 411 (6)%
Orders for the full year were up 12%. This was due to good Outsourcing wins inthe first half with Ahold and a Financial Services client, combined with thehighest order intake in Consulting and Professional Services since the end of2008, finishing the year with a book to bill of 106%.
The underlying revenue fell from £490 million in 2010 to £473 million in 2011 which resulted in a negative underlying adjusted operating margin of (1.4)%.
Since the end of the third quarter, we continued to see further deteriorationwith our Financial Services clients, ending the fourth quarter 20% below thefourth quarter of 2010. Over the second half, we have seen good momentum in allother commercial sectors up 10% on last year. While the quarterly rate ofrevenue in the Public Sector was broadly stable through 2011, revenue was down8% on second half of 2010. Utilisation was in the low to mid seventies throughthe second half of 2011. The full year saw a loss of £72 million on a reported basis. This included theaccounting for the profit benefit of a curtailment gain of £7 million followingthe closure of the CMG Netherlands Defined Benefit Pension Scheme to futuresalary accruals; the cost of restructuring charges taken in the first half andin December totaling £57 million; and finally £9 million of contract charges. International Six months to December Twelve months to December Change Change£'m 2011 2010 2011 2010 Reported Consulting and Professional Services book to bill % 48 136 n.a. 70 102 n.a. Orders 139 183 (24)% 287 352 (18)% Revenue 196 200 (2)% 375 373 1% Adjusted operating profit 22 19 16% 40 31 29% Adjusted operating margin % 11.1 9.5 160bps 10.7 8.4 230bps Underlying Revenue 196 200 (2)% 375 373 1% Adjusted operating profit 22 19 16% 40 31 29% Adjusted operating margin % 11.1 9.5 160bps 10.7 8.4 230bps Revenue analysis: By sector Energy and Utilities 121 121 0% 244 234 4% Financial Services 24 28 (14)% 42 40 5% Other Sectors 51 51 0% 89 99 (10)% By service line Outsourcing 98 105 (7)% 197 200 (2)% Consulting and Professional Services 98 95 3% 178 173 3%
Orders for the second half were down 24% on 2010, against strong comparatives in 2010 when we renewed a number of major contracts.
Underlying revenue for the International cluster was up 1% at £375 million (2010: £373 million).
Iberia revenue accounted for 33% (2010: 33%) of the total at £122 million andwas down 1% in a difficult economic environment. Approximately £28 million ofrevenue from our acquisition of Grupo Gesfor was consolidated, predominantly inIberia.
Rest of World revenue was up 1% to £252 million. Australia remains the largest component in the Rest of World cluster. Good growth in the US was offset by weakness in Australia.
Adjusted operating margin was 10.7%, up from last year (2010: 8.4%), where a £5million charge was taken related to project overruns in the Brazilian business.Margin was underpinned by tight cost management and high utilisation rates
inour key geographies. Financial position Summary cash flow Twelve months to December £'m 2011 2010 114 Adjusted operating profit 272
Depreciation and amortisation of intangibles not 65
58recognised on acquisition Movement in working capital (63) (56) Other non-cash movements (22) (4)
Non-cash movements from restructuring and contract charges 132
0
Net cash inflow from continuing operations 226
270
Cash conversion on underlying adjusted operating profit 92% 99%
Cash flow related to restructuring and other non-operating (14) (45)items Net financing cost paid (15) (16) Income tax paid (36) (51) Capex less disposals of property, plant & equipment and (79) (74)intangible assets
Impact of acquisitions and disposals (27)
(6)
Dividends paid to shareholders (70) (67) Opening net debt (280) (291) Closing net debt (295) (280)
The net cash inflow from trading operations was £226 million (2010 actual: £270million inflow), driven by lower operating profit offset by non-cash movementsrelated to the charges announced in December. This represented 92% cashconversion, which has been calculated using the underlying adjusted operatingprofit in order to take into account the non-cash impact of the contract andrestructuring charges.
The movement in working capital was an outflow of £63 million which was materially driven by the growth in outsourcing.
Payment in respect of dividends was £70 million (2010: £67 million).
The net debt number includes £27 million related to our acquisition of Grupo Gesfor.
Net debt at 31 December 2011 was £295m with leverage of 0.9, in line with our guidance.
Other information
Profit before tax and earnings per share
Profit before tax was £33 million (2010 actual: £193 million). Basic adjustedearnings per share from continuing operations were 4.5p (2010: 12.3p) on aweighted average number of shares of 1,597 million (2010: 1,589 million). Basicearnings per share from continuing operations were 1.7p (2010: 9.6p). Alloperations were continuing. TaxationThe effective tax rate, before exceptional items and amortisation of intangibleassets initially recognised on acquisition, was 23% (2010: 23%). The total taxcharge for the year ended 31 December 2011 was £5.5 million (2010: £41million). The overall tax rate for the period was 16.8% (2010: 21%).
The effective tax rate for 2012 is expected to be at around 24%.
Acquisitions
On 24 May 2011, Logica completed the acquisition of Grupo Gesfor, a privatelyheld Spanish consulting and professional services business. Grupo Gesfor hasaround 1,200 employees and operations in Spain and across Latin America.Approximately £28 million of revenue has been consolidated in the year ended 31December 2011. Grupo Gesfor had combined revenues of €64 million (£55 million)for the year ended 31 December 2010. The total cost is expected to be up to €31million (£25 million) of which €24 million (£21 million) was paid in cash uponcompletion. We had a £17 million cash outflow, net of cash acquired, related tothe acquisition in the first half. Dividend The Board's policy is to ensure a return to shareholders which flows throughour dividend policy, while continuing to provide sufficient funds to invest inthe long term sustainability of the business. As a result, the Board hasreaffirmed its recommendation for a dividend payout ratio of at least 40%. The proposed full year dividend of 4.4p (2010: 4.2p) represents a payout ofaround 39% of underlying adjusted EPS of 11.3p and a 5% increase in the fullyear dividend over last year. The directors are therefore proposing that thefinal dividend of 2.3p (2010: 2.3p) be paid on 16 May 2012 to eligibleshareholders on the register at the close of business on 13 April 2012.
Next financial calendar dates
Logica's next scheduled communications to the market are:
Friday, 11 May 2012 Q1 2012 Interim Management Statement and AGMFriday, 3 August 2012 H1 2012 Preliminary resultsWednesday, 31 October 2012 Q3 2012 Interim Management Statement Notes:
1.Unless otherwise stated, comparatives in the statement relate to the pro forma numbers. For definition of pro forma, adjusted operating profit, adjusted operating margin and basic adjusted EPS, see notes below.
2.Underlying numbers have been included here for ease of comprehension and reflect numbers before the impact of £39 million of contract charges and £93 million of restructuring charges announced on 14 December 2011.
3. With the exception of adjusted operating margin percentages, all numbers inthis release have been rounded. Adjusted operating margin reflects the adjustedoperating margin reported in the consolidated financial statements. 4.Cash conversion represents net cash inflow from trading operations divided byunderlying adjusted operating profit. Net cash inflow from trading operationsis cash generated from operations before cash flows from proceeds on forwardcontracts, the purchase of property, plant, equipment, intangibles andrestructuring and integration activities.
5.Book to bill percentage is a measure of the level of orders relative to revenue in the period.
6.Unless otherwise stated, the comparatives in this release relate to pro forma results for 2010 which:
a.reflect average 2011 exchange rates by retranslating prior period actual numbers at average 2011 exchange rates. This increased 2010 revenue by £87 million and adjusted operating profit by £5 million.
b.are adjusted to include the acquisition and disposals that took place during2010 and 2011 by adjusting the actual prior period numbers for the relevantperiod owned. This increased 2010 revenue by £22 million and increased adjustedoperating profit by £1 million.
c.includes a number of changes to the scope of outsourcing activities in some of our geographies
7Adjusted operating profit and margin are from continuing operations and beforeexceptional items and amortisation of intangible assets initially recognised atfair value in a business combination. Six months to Twelve months to December December 2010 £'m 2011 2011 Pro 2010 Change Change forma Actual Pro Actual forma Operating profit/(loss) (28) 55 - - - (74)% Add back impact of: Exceptional items 2 5 - - - - Amortisation of acquisition 54 - related intangibles 27 - - - Adjusted operating profit 1 114 278 272 (59)% (58)%
8.Adjusted earnings per share is based on net profit attributable to ordinary shareholders, excluding the following items, whenever such items occur:
a.discontinued operations
b.exceptional items
c.mark-to-market gains or losses on financial assets designated as fair value hedges through profit or loss
d.amortisation of intangible assets initially recognised at fair value in a business combination
tax on the items above
9.Exchange rates used are as follows:
Six months Six months Twelve months Six months Six months Twelve months to June to December to December to June to December to December 2011 2011 2011 2010 2010 2010 £1 / € Average 1.15 1.15 1.15 1.15 1.18 1.17 End of period 1.11 1.20 1.20 1.22 1.17 1.17 £1 / SEK Average 10.28 10.53 10.41 11. 26 10.99 11.12 End of period 10.13 10.65 10.65 11.64 10.53 10.53 Appendix 1
Geography and sector performance
The following tables show reported revenue and profit at actual exchange rates.
Performance by geography actual 2011 vs actual 2010
Six months to December Twelve months to December £'m 2011 2010 Change 2011 2010 Change Actual Actual Actual Actual France Revenue 420 395 6% 875 810 8% Adj operating profit 33 34 (3)% 74 68 9% Margin % 7.9 8.7 (80)bps 8.5 8.4 10bps Northern and Central Europe Revenue 426 398 7% 860 788 9% Adj operating profit 35 35 0% 65 61 7% Margin % 8.2 8.9 (70)bps 7.5 7.8 30bps UK Revenue 364 342 6% 725 709 2% Adj operating profit 2 34 (94)% 16 60 (73)% Margin % 0.7 10.0 n.a. 2.2 8.5 n.a. Sweden Revenue 300 287 5% 622 566 10% Adj operating profit (18) 23 n.a. (9) 38 n.a. Margin % (6.1) 7.9 n.a. (1.4) 6.7 n.a. Benelux Revenue 222 231 (4)% 464 488 (5)% Adj operating profit (73) 2 n.a. (72) 14 n.a. Margin % (33.1) 0.9 n.a. (15.6) 2.9 n.a. International Revenue 196 173 13% 375 336 12% Adj operating profit 22 19 16% 40 31 29% Margin % 11.1 10.7 40bps 10.7 9.0 170bps Total Revenue 1,928 1,826 6% 3,921 3,697 6% Adj operating profit 1 147 (99)% 114 272 (58)% Margin % 0.1 8.1 n.a. 2.9 7.4 n.a.
Sector performance by geography 2011 vs actual 2010
Six months to December Twelve months to December £'m 2011 2010 Change 2011 2010 Change Actual Actual Actual Actual France Trade, Transport and 171 148 16% 345 308 12%Industrial Financial Services 113 105 8% 225 208 8% Other sectors 136 142 (4)% 305 294 4% Northern and Central Europe Trade, Transport and 150 115 30% 297 257 16%Industrial Public Sector 124 115 8% 244 233 5% Other sectors 152 168 (10)% 319 298 7% UK Public Sector 193 209 (8)% 401 439 (9)% Energy and Utilities 93 50 86% 163 108 51% Other sectors 78 83 (6)% 161 162 (1)% Sweden Trade, Transport and 142 129 10% 292 252 16%Industrial Public Sector 81 77 5% 165 153 8% Other sectors 77 81 (5)% 165 161 2% Benelux Financial Services 63 73 (14)% 134 146 (8)% Public Sector 60 72 (17)% 131 161 (19)% Trade, Transport and 49 42 17% 102 89 15%Industrial Other sectors 50 44 14% 97 92 5% International Energy and Utilities 121 118 3% 244 228 7% Financial Services 24 14 71% 42 24 75% Other sectors 51 41 24% 89 84 6%
Consolidated statement of comprehensive income
For the year ended 31 December 2011
2010 2011 Note £'m £'m Revenue 2 3,921.3 3,696.8 Net operating costs (3,866.8) (3,486.2) Operating profit 2,4 54.5 210.6 Analysed as: Operating profit before 59.3 212.3exceptional items Exceptional items 3 (4.8) (1.7) Operating profit 2,4 54.5 210.6 Finance costs (36.1) (27.2) Finance income 13.3 8.9
Share of post-tax profits from 1.0
0.6associates Profit before tax 32.7 192.9 Taxation 6 (5.5) (40.8) Net profit for the year 27.2 152.1 Other comprehensive income/ (expense) Actuarial gains/(losses) on 26.7 (3.1)retirement benefit schemes
Tax on items taken directly to (7.3)
0.6equity Cash flow hedges (3.2) -
Interest rate swaps fair value 0.1
(0.1)difference Exchange differences on (54.0) 11.4
translation of foreign operations
Other comprehensive income/ (37.7) 8.8
(expense) for the year, net of tax
Total comprehensive income/ (10.5) 160.9(expense) for the year Profit attributable to: Owners of the parent 27.2 152.1 27.2 152.1 Total comprehensive income/ (expense) attributable to: Owners of the parent (10.5) 160.9 (10.5) 160.9 Earnings per share p / p / share share - Basic 8 1.7 9.6 - Diluted 8 1.7 9.4
Consolidated statement of financial position
31 December 2011 2011 2010 Note £ £ 'm 'm Non-current assets Goodwill 1,883.4 1,906.5 Other intangible assets 174.0 200.7 Property, plant and equipment 139.7 138.5 Investments in associates 2.6 2.7 Financial assets 41.5 12.5 Retirement benefit assets 52.4 38.7 Deferred tax assets 84.0 70.3 2,377.6 2,369.9 Current assets Inventories 0.8 1.0 Trade and other receivables 1,262.0 1,252.3 Current tax assets 24.8 11.4 Cash and cash equivalents 9 89.6 56.4 1,377.2 1,321.1 Current liabilities Other borrowings 10 (35.1) (204.3) Trade and other payables (1,061.9) (1,062.4) Current tax liabilities (89.3) (66.6) Provisions 11 (90.0) (29.4) (1,276.3) (1,362.7)
Net current assets/(liabilities) 100.9
(41.6) Total assets less current 2,478.5 2,328.3liabilities Non-current liabilities Borrowings 10 (376.1) (132.3)
Retirement benefit obligations (69.7)
(95.2) Deferred tax liabilities (46.0) (61.1) Provisions 11 (47.7) (37.1)
Other non-current liabilities (5.8)
(1.4) (545.3) (327.1) Net assets 1,933.2 2,001.2 Equity Share capital 12 161.2 160.2 Share premium account 13 1,110.6 1,107.4 Other reserves 661.4 733.5 Total shareholders' equity 1,933.2 2,001.1 Non-controlling interests 0.1 - Total equity 1,933.2 2,001.2
Consolidated statement of cash flows
For the year ended 31 December 2011
2010 2011 Note £'m £'m Cash flows from operating activities
Net cash inflow from trading 226.4
270.1operations Cash outflow related to (18.4) (36.8)
restructuring and integration
activities Cash outflow related to (2.7) (4.8)
business acquired/ disposed of Cash generated from operations 14 205.3
228.5 Finance costs paid (21.5) (20.1) Income tax paid (36.4) (50.9)
Net cash inflow from operating 147.4
157.5activities Cash flows from investing activities Finance income received 6.8 3.8 Dividends received from 1.0 0.4associates Proceeds on disposal of 0.3 0.2
property, plant and equipment Purchases of property, plant (49.7)
(45.8)and equipment
Expenditure on other intangible (29.2)
(28.8)assets Repurchase of non-controlling (0.1) -interests
Acquisition of subsidiaries and (16.7)
(8.9)other businesses, net of cash acquired Proceeds on disposal of - 3.2subsidiaries and other businesses, net of cash disposed
Net cash outflow from investing (87.6)
(75.9)activities Cash flows from financing activities Proceeds from issue of shares 3.6 0.4allotted under share plans Refund of expenses related to - 5.6shares issued in prior years Proceeds from bank borrowings 30.0 230.9 Repayments of bank borrowings (179.8) (399.8)
Proceeds from private placement 187.8
88.9debt notes, net of issuance cost Repayments of finance leases (2.4) (3.4)
Repayments of other borrowings (1.3)
(0.7) Net proceeds from forward (0.4) (17.7)contracts
Dividends paid to the Company's (70.2)
(66.8)shareholders
Net cash outflow from financing (32.7)
(162.6)activities Net increase/(decrease) in 27.1 (81.0)
cash, cash equivalents and bank
overdrafts
Cash, cash equivalents and bank 9 30.6
110.1
overdrafts at the beginning of
the year Net increase/(decrease) in 27.1 (81.0)
cash, cash equivalents and bank
overdrafts Effect of foreign exchange 9 (1.1) 1.5rates
Cash, cash equivalents and bank 9 56.6
30.6overdrafts at the end of the year
Consolidated statement of changes in equity
For the year ended 31 December 2011
Share Share Retained Other Total Non- Total capital premium earnings reserves shareholders controlling Equity interests Equity £'m £'m £'m £'m £'m £'m £'m At 1 January 2011 160.2 1,107.4 (239.1) 972.6 2,001.1 0.1 2,001.2 Net profit for the year - - 27.2 - 27.2 27.2
Other comprehensive income/(expense):
Actuarial gains on
retirement benefit schemes - - 26.7 -
26.7 - 26.7 Tax on items taken to equity - - (7.3) - (7.3) - (7.3) Cash flow hedges (3.2) (3.2) - (3.2) Interest rate swaps fair value difference - - 0.1 - 0.1 - 0.1 Exchange differences - - (54.0) (54.0) - (54.0) Total comprehensive income/(expense) - - 46.7 (57.2) (10.5) - (10.5)
Transactions with owners:
Dividends paid (Note 7) - - (70.2) - (70.2) - (70.2) Repurchase of non-controlling interests - - - - (0.1) (0.1) Share-based payment - - 9.2 - 9.2 - 9.2 Shares allotted undershare plans 1.0 3.2 (0.6) - 3.6 - 3.6 Total transactions with owners 1.0 3.2 (61.6) - (57.4) (0.1) (57.5) At 31 December 2011 161.2 1,110.6 (254.0) 915.4 1,933.2 - 1,933.2 At 1 January 2010 160.0 1,107.1 (331.1) 961.2 1,897.2 0.1 1,897.3 Net profit for the year - - 152.1 - 152.1 - 152.1
Other comprehensive income/(expense) Actuarial losses on retirement benefit schemes - - (3.1) - (3.1) - (3.1) Tax on items taken to equity - - 0.6 - 0.6 - 0.6 Interest rate swaps fair value difference - - (0.1) - (0.1) - (0.1) Exchange differences - - - 11.4 11.4 - 11.4 Total comprehensive income - - 149.5 11.4 160.9 - 160.9 Transactions with owners: Dividends paid (Note 7) - - (66.8) - (66.8) - (66.8) Share-based payment - - 9.4 - 9.4 - 9.4 Shares allotted under share plans 0.2 0.3 (0.1) - 0.4 - 0.4 Total transactions with owners 0.2 0.3 (57.5) - (57.0) - (57.0) At 31 December 2010 160.2 1,107.4 (239.1) 972.6 2,001.1 0.1 2,001.2 Note 12 13 1.General information Basis of preparation The financial information in this preliminary announcement has been extractedfrom the Group's consolidated financial statements for the year ended 31December 2011. These consolidated financial statements have been prepared inaccordance with International Financial Reporting Standards (IFRSs) as adoptedby the European Union (EU), IFRIC interpretations and those parts of theCompanies Act 2006 (the Act) that are applicable to companies reporting underIFRSs.
The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of certain financial instruments, share options and pension scheme assets.
This preliminary announcement was approved by the Board of Directors on 21February 2012. The financial information in this preliminary announcement doesnot constitute the statutory accounts of Logica plc ('the Company') within themeaning of section 435 of the Act. The statutory accounts of the Company for the year ended 31 December 2011,which include the Group's consolidated financial statements for that year, wereunaudited at the date of this announcement. The auditors' report on thoseaccounts is expected to be signed following approval by the Board of Directorson 8 March 2012 and subsequently delivered to the Registrar of Companies afterthe Annual General Meeting on 11 May 2012. The statutory accounts for the yearended 31 December 2010, which were prepared under IFRS, have been filed withthe Registrar of Companies. The auditors' report on those accounts wasunqualified and did not contain a statement under section 498(2) and 498(3)
theAct.
Adoption of new and revised International Financial Reporting Standards
Other than restructuring programmes that are not treated as exceptional item,the accounting policies adopted in these consolidated financial statements areconsistent with those of the annual financial statements for the year ended 31December 2010, with the exception of the following standards, amendments to andinterpretations of published standards adopted during the year:
(a) New and amended standards adopted by the Group
There have been only minor improvements to existing International FinancialReporting Standards and interpretations that are effective for the first timefor the financial year beginning on or after 1 January 2011 which have beenadopted by the Group with no impact on its consolidated results or financialposition.
(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January
2011 and not early adopted
IAS 19, 'Employee benefits' was amended in June 2011. The impact on the Groupwill be: to eliminate the corridor approach and recognise all actuarial gainsand losses in OCI as they occur; to immediately recognise all past servicecosts; and to replace interest cost and expected return on plan assets with anet interest amount that is calculated by applying the discount rate to the netdefined benefit liability/ (asset). Amendment to IFRS 7 'Financial instruments: Disclosures', effective on or after1 July 2011, improving transparency in the reporting of transfer transactionsand improve user's understanding of the risk exposures relating to transfer offinancial assets and its effect on entity's financial position, particularlythose involving securitisation of financial assets. IFRS 9, 'Financial instruments', effective on or after 1 January 2015,addresses the classification, measurement and recognition of financial assetsand financial liabilities. It replaces the parts of IAS 39 that relate to theclassification and measurement of financial instruments. IFRS 9 requiresfinancial assets to be classified into two measurement categories: thosemeasured as at fair value and those measured at amortised cost. Thedetermination is made at initial recognition. The classification depends on theentity's business model for managing its financial instruments and thecontractual cash flow characteristics of the instrument. For financialliabilities, the standard retains most of the IAS 39 requirements. The mainchange is that, in cases where the fair value option is taken for financialliabilities, the part of a fair value change due to an entity's own credit riskis recorded in other comprehensive income rather than the income statement,unless this creates an accounting mismatch. IFRS 10, 'Consolidated financial statements', effective on or after 1 January2013, builds on existing principles by identifying the concept of control asthe determining factor in whether an entity should be included within theconsolidated financial statements of the parent Company. The standard providesadditional guidance in the determining the control. IFRS 12, 'Disclosures of interests in other entities', effective on or after 1January 2013, includes the disclosure requirements for all forms of interestsin other entities, including joint arrangements, associates, special purposevehicles and other off balance sheet vehicles. IFRS 13, 'Fair value measurement', effective on or after 1 January 2013, aimsto improve consistency and reduce complexity by providing a precise definitionof fair value, guidance on its application and a single source of fair valuemeasurement and disclosure requirements for use across IFRSs.
1.General information (continued)
IFRS 11 'Joint Arrangement', effective on or after 1 January 2013, provides fora more realistic reflection of joint arrangements by focusing on the rights andobligations of the arrangement, rather than its legal form. Proportionalconsolidation of joint ventures is not permitted.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
2.Segment information In accordance with IFRS 8 'Operating Segments', Logica has derived theinformation for its operating segments using the information used by the ChiefOperating Decision Maker. The Group has identified the Executive Committee asthe Chief 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. At 31 December 2011, Logica is organised into six operating segments based onthe location of assets. Segment revenue and profit after tax are disclosedbelow: Revenue Profit/(loss 2011 2010 2011 2010 £'m £'m £'m £'m France 874.7 810.0 61.4 49.2 Northern and 860.4 787.8 46.5 42.6Central Europe United 725.4 709.4 15.6 60.2Kingdom Sweden 622.3 565.9 (30.8) 16.8 Benelux 463.8 488.0 (72.4) 12.5 International 374.7 335.7 34.2 29.3 Revenue and 3,921.3 3,696.8 54.5 210.6operating profit Finance costs (36.1) (27.2) Finance 13.3 8.9income Share of 1.0 0.6post-tax profits from associates Taxation (5.5) (40.8) Profit after 27.2 152.1tax
The share of post-tax profits from associates in the years ended 31 December 2011 and 2010 was attributable to the Benelux and the Northern and Central Europe segments.
Adjusted operating profit/(loss) analysis per operating segment was as follows: 2011 Operating Exceptional Amortisation Adjusted Profit/(loss) of intangibles* operating items profit/ (loss) £'m £'m £'m £'m France 61.4 - 13.0 74.4 Northern and 46.5 - 18.3 64.8Central Europe United 15.6 - - 15.6Kingdom Sweden (30.8) - 22.2 (8.6) Benelux (72.4) - - (72.4) International 34.2 4.8 1.0 40.0 54.5 4.8 54.5 113.8
2. Segment information (continued)
2010 Operating Exceptional Amortisation Adjusted of intangibles* operating profit Profit items £'m £'m £'m £'m France 49.2 - 19.0 68.2 Northern and 42.6 - 18.5 61.1Central Europe United 60.2 - - 60.2Kingdom Sweden 16.8 - 21.1 37.9 Benelux 12.5 1.7 - 14.2 International 29.3 - 1.0 30.3 210.6 1.7 59.6 271.9
* Amortisation of intangible assets initially recognised on acquisition.
Other profit and loss disclosures
2011 Depreciation Amortisation Contract charges Accelerated of other intangibles restructuring charges £'m £'m £'m £'m France 6.4 1.9 2.7 - Northern and Central Europe 10.9 4.0 - 2.1 United Kingdom 6.4 4.4 28.0 2.9 Sweden 5.8 2.5 - 31.3 Benelux 2.6 0.8 8.7 57.1 International 14.5 4.7 - - 46.6 18.3 39.4 93.4 2010 Depreciation Amortisation of other intangibles £'m £'m France 5.8 1.5 Northern and Central Europe 9.8 4.9 United Kingdom 5.5 3.0 Sweden 5.3 1.0 Benelux 1.9 0.5 International 14.4 4.5 42.7 15.3
Analysis of revenue by product and
services 2011 2010 £'m £'m Sales of goods 196.2 164.9 Revenue from services 3,725.1 3,531.9 3,921.3 3,696.8 Outsourcing 1,730.6 1,600.7
Consulting and professional services 2,190.7
2,096.1 3,921.3 3,696.8
Revenue above included £2,315.3 million which related to contracts accounted for under the percentage-of-completion method (2010: £2,151.1 million).
Analysis of revenue by customer
No single customer contributes more than 10% of the Group's revenue.
2. Segment information (continued)
Analysis of total assets 2011 2010 £'m £'m France 941.3 941.6 Northern and Central Europe 749.5 776.3 United Kingdom 531.8 521.9 Sweden 784.2 798.9 Benelux 182.1 205.8 International 336.4 299.7 3,525.3 3,544.2 Unallocated assets Cash and cash equivalents 89.6 56.4 Tax assets 108.8 81.7 Derivative financial assets 31.1 8.7 Total assets 3,754.8 3,691.0
Analysis of non-current assets
2011 Goodwill Other intangible Property, plant and assets equipment Total £'m £'m £'m £'m France 563.1 14.6 18.6 596.3 Northern and 474.8 35.8 28.0 538.6 Central Europe United 167.6 38.5 33.7 239.8 Kingdom Sweden 506.2 63.8 14.8 584.8 Benelux 26.6 1.8 6.1 34.5 International 145.1 19.5 38.5 203.1 1,883.4 174.0 139.7 2,197.1 2010 Goodwill Other intangible Property, plant and assets equipment Total £'m £'m £'m £'m France 577.5 27.9 18.1 623.5 Northern and 486.8 54.4 23.9 565.1 Central Europe United 167.6 29.0 31.9 228.5 Kingdom Sweden 511.9 77.6 16.8 606.3 Benelux 27.3 0.5 5.9 33.7 International 135.4 11.3 41.9 188.6 1,906.5 200.7 138.5 2,245.7 3.Exceptional items
The exceptional items recognised within operating profit were as follows:
2011 2010 £'m £'m
Acquisition and integration costs (4.4)
-Disposal of businesses (0.4) (1.7) (4.8) (1.7)
A charge of £4.4 million related to the acquisition and integration of Grupo Gesfor business in Spain and Latin America in May 2011 (Note 15).
In 2010, the Group completed the disposal of its HR Payroll business in the Netherlands. The disposal generated a net loss of £1.7 million.
4.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. 2011 2010 £'m £'m Operating profit 54.5 210.6 Exceptional items (Note 3) 4.8 1.7
Amortisation of intangible assets 54.5
59.6
initially recognised on acquisition
Adjusted operating profit 113.8 271.9 5.Employee benefit expense
The number of employees (including executive Directors) was:
Year end Average 2011 2010 2011 2010 Number Number Number Number France 9,353 9,215 9,235 8,982 Northern and Central Europe 7,068 6,997 7,084 6,961 United Kingdom 5,472 5,448 5,542 5,407 Sweden 5,158 5,256 5,240 5,222 Benelux 4,770 4,901 4,844 5,200 International 9,963 7,467 8,953 7,191 41,784 39,284 40,898 38,963
The employee expense for the year
amounted to: 2011 2010 £'m £'m
Salaries and short-term employee benefits 1,752.5
1,617.3(including bonus) Social security costs 336.5 310.7 Pension costs 139.1 143.2 Share-based payments 7.0 12.1 2,235.1 2,083.3 6.Taxation 2011 2010 £'m £'m Current tax: UK corporation tax 10.3 15.7 Overseas tax 35.7 34.5 46.0 50.2 Deferred tax: UK corporation tax 5.4 (1.2) Overseas tax (45.9) (8.2) (40.5) (9.4) 5.5 40.8
The effective tax rate on operations for the year, before the share of post-tax profits from associates, exceptional items and amortisation of intangible assets initially recognised on acquisition, was 23% (2010: 23%), of which a charge of £15.7 million (2010: £14.5 million) related to the United Kingdom.
The effective tax rate on exceptional items was nil% (2010: 23.5%) and the effective tax rate on amortisation of intangible assets initially recognised on acquisition was 28.8% (2010: 28.9%).
6.Taxation (continued) The tax charge from operations is lower than the standard rate of corporationtax in the UK applied to profit before tax. The differences are explainedbelow. 2010 2011 £'m £'m Profit before tax 32.7 192.9
Less: share of post-tax profits from (1.0)
(0.6)associates
Profit before tax excluding share of 31.7
192.3
post-tax profits from associates
Tax at the UK corporation tax rate 8.4
53.8of 26.5% (2010: 28.0%)
Adjustments in respect of previous 8.7
(12.3)years
Adjustment in respect of foreign tax 16.9
11.8rates Tax loss utilisation (21.5) (7.1) Income not subject to tax (9.4) (16.5)
Deferred tax assets not recognised 2.4
11.1 Tax charge 5.5 40.8
The current tax related to exceptional items for the year ended 31 December 2011 was £nil (2010: tax credit £0.4 million).
In addition to the changes in rates of Corporation tax disclosed above a numberof further changes to the UK Corporation tax system were announced in the March2011 UK Budget Statement. Further reductions to the main rate are proposed toreduce the
rate by 1% per annum to 23% by 1 April 2014. These further changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements.
7.Dividends The Directors are proposing a final dividend in respect of the year ended 31December 2011 of 2.3 pence per share, which would reduce shareholders' funds byapproximately £36.8 million. The proposed dividend is subject to approval atthe AGM on 11 May 2012 and has not been recognised as a liability in thesefinancial statements. The final dividend will be paid on 16 May 2012 toshareholders on the share register on 13 April 2012. The amounts recognised as distributions to equity holders were as follows:
2011 2010 2011 2010 p / p / share share £'m £'m Interim dividend, relating 2.10 1.90 33.6 30.3 to 2011 / 2010 Final dividend, relating 2.30 2.30 36.6 36.5 to 2010 / 2009 4.40 4.20 70.2 66.8
Dividends payable to employee share ownership trusts are excluded from the amounts recognised as distributions in the table above.
8.Earnings per share 2011 Weighted Earnings average number Earnings of shares per share
Earnings per share from continuing £'m million
Penceoperations
Profit for the year from continuing 27.2
operations
Earnings attributable to ordinary 27.2 1,597.2
1.7shareholders Basic EPS 27.2 1,597.2 1.7
Effect of share options and share awards - 41.6
- Diluted EPS 27.2 1,638.8 1.7
Adjusted earnings per share from continuing
operations
Earnings attributable to ordinary 27.2 1,597.2
1.7shareholders Add back: Exceptional items, net of tax 4.8 - 0.2
Fair value adjustment on financial assets/
liabilities, net of tax 1.5 - 0.2
Amortisation of intangible assets initially recognised on acquisition, net
of tax 38.9 - 2.4 Basic adjusted EPS 72.4 1,597.2 4.5
Effect of share options and share awards 41.6
- -
Effect of fair value adjustment on financial (1.5) - assets/liabilities, net of tax
(0.2) Diluted adjusted EPS 70.9 1,638.8 4.3 2010 Weighted Earnings per Earnings average Share number of shares Earnings per £'m million Penceshare Profit for the 152.1 year Earnings 152.1 1,589.4 9.6attributable to ordinary shareholders Basic EPS 152.1 1,589.4 9.6 Effect of share - 35.7 (0.2)options and share awards Diluted EPS 152.1 1,625.1 9.4 Adjusted earnings per share Earnings 152.1 1,589.4 9.6attributable to ordinary shareholders Add back: Exceptional 1.3 - -items, net of tax Amortisation of 42.4 - 2.7intangible assets initially recognised on acquisition, net of tax Basic adjusted 195.8 1,589.4 12.3EPS Effect of share - 35.7 (0.2)options and share awards Diluted 195.8 1,625.1 12.1adjusted EPS
Adjusted earnings per share, both basic and diluted, have been shown as theDirectors consider this helpful for a better understanding of the performanceof the Group's underlying business. The earnings measure used in adjustedearnings per share excludes, whenever such items occur: the results ofdiscontinued operations; exceptional items; mark-to-market gains or losses onfinancial assets/ liabilities designated as fair value hedges through profit orloss; and amortisation of intangible assets initially recognised at fair valuein a business combination. All items adjusted are net of tax where applicable.
The weighted average number of shares excludes the shares held by employee share ownership plan (ESOP) trusts, which are treated as cancelled.
9.Reconciliation of movements in net debt
The Group defines net debt as borrowings, including related derivatives, lesscash: At Other At 1 January non-cash Exchange 31 December 2011 Cash flows movements Aquisitions differences 2011 £'m £'m £'m £'m £'m £'m Cash and cash 56.4 51.0 - (16.7) (1.1) 89.6equivalents Bank (25.8) (7.2) - - - (33.0) overdrafts 30.6 43.8 - (16.7) (1.1) 56.6 Finance (4.2) 2.4 (0.6) (0.8) 0.1 (3.1)leases Bank loans (216.3) 149.8 (1.7) (3.6) (0.2) (72.0) Private placement (88.7) (187.8) (17.7) - (3.1) (297.3)debt notes Other (1.6) 1.3 (0.1) (5.5)
0.1 (5.8)borrowings Derivatives in respect - - 12.2 - 14.4 26.6of net debt Net debt (280.2) 9.5 (7.9) (26.6) 10.2 (295.0) 10.Borrowings 2011 2010 £'m £'m Current Bank overdrafts 33.0 25.8 Bank loans 0.2 175.2 Finance lease obligations 1.5 2.7 Other borrowings 0.4 0.6 35.1 204.3 Presented as: Other borrowings 35.1 204.3 35.1 204.3 Non-current Bank loans 71.8 41.1 Private placement debt notes 297.3 88.7 Finance lease obligations 1.6 1.5 Other borrowings 5.4 1.0 376.1 132.3 Borrowing facilities
At 31 December 2011, the Group had the following unsecured principal debt facilities:
Bank facilitiesa €307.5 million revolving credit facility maturing on 26 November 2013. At 31December 2011, €36 million (£30.0 million) was drawn down under the facility(2010: nil). The facility paid interest at an average rate of 2.64% (2010:2.67%);
a £100 million receivables facility. The facility matures on 22 July 2015 and was undrawn at both 31 December 2011 and 31 December 2010;
a €50 million bilateral term loan. The term loan matures on 26 January 2014. The term loan was available from 10th September 2010, and was fully drawn at 31December 2011;
a €25 million bilateral revolving credit facility maturing on 21 December 2013. The facility was undrawn at 31 December 2011 and 31 December 2010;
a €25 million bilateral revolving credit facility. The facility reduces inannual increments from 1 August 2013, with a final maturity on 31 July 2016. The facility was undrawn at 31 December 2011;
a €25 million bilateral revolving credit facility signed 1 July 2011, maturing on 1 July 2016. The facility was undrawn at 31 December 2011;
a €25 million bilateral revolving credit facility signed 6 July 2011, maturing on 6 July 2016. The facility was undrawn at 31 December 2011;
a €30 million bilateral revolving credit facility signed 20 December 2011, maturing on 20 December 2016. The facility was undrawn at 31 December 2011;
a €40 million bilateral revolving credit facility signed 21 December 2011, maturing on 21 December 2016. The facility was undrawn at 31 December 2011.
Since 1 January 2012, the Group signed the following additional unsecured debt facilities
a €40 million bilateral revolving credit facility maturing on 6 January 2017; and
10.Borrowings (continued)
a €40 million bilateral revolving credit facility maturing on 17 January 2017.
Private placement notesa €56.2 million (£46.8 million) (2010: £48 million) private placement. TrancheA €18.7 million (£16.0 million) matures on 21 April 2015 and pays interest at4.5175%, Tranche B €18.7 million (£16.0 million) matures on 21 April 2016 andpays interest at 4.85% and Tranche C €18.7 million (£16.0 million) matures on21 April 2017 and pays interest at 5.2075%;
a £40 million private placement. The debt pays interest at 5.26% and matures on 25 November 2020;
a €20 million (£16.7 million) private placement signed on 7 July 2011, maturing on 7 July 2016 and pays interest at 3.71%;
a $25 million (£16.1 million) private placement signed on 7 July 2011, maturing on 7 July 2016 and pays interest at 4.27%;
a £25 million private placement signed on 7 July 2011, maturing on 7 July 2018 and pays interest at 4.39%;
a $110 million (£71.0 million) private placement signed on 7 July 2011, maturing on 7 July 2018 and pays interest at 4.63%;
a $100 million (£64.5 million) private placement signed on 7 July 2011, maturing on 7 July 2021 and pays interest at 5.06%.
The obligations of the borrowers listed above are guaranteed by the principal UK subsidiary, Logica UK Limited.
11.Provisions Vacant Restructuring Other properties Total £'m £'m £'m £'m At 1 January 31.9 16.4 18.2 66.52011 Charged to 15.5 96.1 3.4 115.0the statement of comprehensive income Utilised in (8.2) (28.8) (3.5) (40.5)the year Unused (2.7) - (1.1) (3.8)amounts reversed Unwinding of 1.3 - - 1.3discount Exchange - (0.1) (0.7) (0.8)differences At 31 37.8 83.6 16.3 137.7December 2011 Analysed as: Current 90.0liabilities Non-current 47.7liabilities 137.7 Vacant properties
At 31 December 2011, provisions for vacant properties represented residuallease commitments, together with associated outgoings, for the remaining periodon certain property leases, after taking into account sub-tenant arrangements.The property costs provided for are mainly related to properties located mainlyin the United Kingdom, Netherlands, Sweden, and Australia. At 31 December2011, non-current vacant property provisions amounted to £25.0 million (2010: £23.4 million) of which £10.2 million was payable between one and two years, £10.9 million between two and five years, and the balance thereafter.
Restructuring
At 31 December 2011, the restructuring provision mainly related to therestructuring of the businesses announced on 14 December 2011. Therestructuring programme comprised property rationalisation, a reduction inheadcount and other measures to reduce the cost base. Where appropriate,provisions arising from the property rationalisation are categorised as vacantproperty. At 31 December 2011, £73.2 million of the restructuring provision waspayable within one year, with the remaining balance payable between one and
twoyears. OtherAt 31 December 2011, the other provisions related to the value of legalclaims. At 31 December 2011, £4.0 million of the other provision was payablewithin one year, with the remaining balance payable between two and five years. 12.Share capital 2011 2010 Allotted, called-up Number £'m Number £'mand fully paid At 1 1,601,941,495 160.2 1,600,615,806 160.0January Allotted 1,325,689 0.2under 1.0 share 10,032,071 plans At 31 1,611,973,566 161.2 1,601,941,495 160.2December The Company has one class of issued share capital, comprising ordinary sharesof 10p each. Subject to the Company's Articles of Association and applicablelaw, the Company's ordinary shares confer on the holder: the right to receivenotice of and vote at general meetings of the Company; the right to receive anysurplus assets on a winding-up of the Company; and an entitlement to receiveany dividend declared on ordinary shares. 13.Share premium 2011 2010 £'m £'m At 1 January 1,107.4 1,107.1
Premium on shares allotted under share 3.2
0.3plans At 31 December 1,110.6 1,107.4
14.Reconciliation of operating profit to cash generated from operations
2011 2010 £'m £'m
Operating profit from operations 54.5
210.6 Adjustments for: Share-based payment expense 7.0 12.1
Depreciation of property, plant and 46.6
42.7equipment
Loss on disposal of non-current assets 0.8
2.5
Net movement in provision for impairment (0.3)
-of trade receivables
Loss on sale of subsidiaries and disposed -
1.7of/held-for-sale businesses
Unrealised foreign exchange differences (2.8)
- Government grant income (2.6) -
Amortisation of intangible assets 72.8
74.9
Non-cash element of expense for defined (17.6)
(7.1)benefit plans 103.9 126.8
Net movements in provisions 70.7
(52.7)
Movements in working capital:
Financial assets - (0.1) Inventories 0.2 0.1 Trade and other receivables (27.7) (116.1) Trade and other payables 3.7 59.9 (23.8) (56.2)
Cash generated from operations 205.3
228.5
Add back: Cash outflow related to 18.4
36.8
restructuring and integration activities Add back: Cash outflow related to 2.7
4.8
business acquired/disposed of Net cash inflow from trading operations 226.4
270.1 15.Acquisitions On 24 May 2011 Logica acquired Grupo Gesfor S.A. ("Gesfor"), a privately heldSpanish consulting and professional services business. Gesfor has around 1,200employees and operations in Spain and across Latin America. Gesfor hadcombined revenues of €64 million for the year ended 31 December 2010. Logicainvested €23.4 million (£20.4 million) in cash to acquire these businesses andrecognised goodwill of €15.7 million (£13.7 million). A further payment of upto €7.5 million will be payable in 2013 depending on future businessperformance. If it is payable, it will be part of net operating costs.
Full IFRS 3 "Business combinations" disclosures have not been added on the grounds of materiality.
16.Contingent liabilities The size, structure and geographic spread of the Group and its activitiesnaturally exposes it to potential scrutiny and possible legal claims includingtax and other regulatory authorities in the normal course of operations. Theresults of tax audits and other similar enquiries are normally reflected in theaccounts on an accruals basis where a recovery or liability can be predictedwith reasonable certainty. Occasionally claims may be levied against the Groupby such authorities, the outcomes of which cannot be predicted with reasonablecertainty. While Logica strongly believes it complies with all relevant lawsand regulations, and would vigorously defend itself against any such claims, ifit was unsuccessful the enforcement of such claims could from time to time havea potentially material impact on the Group's results and financial position. In2009, the Group received a €46 million, which is net of €13 million tax, VATclaim from the French tax authorities. The claim relates to the VAT treatmentof goods exported from France during the years 2004 to 2006. The Group hascarefully analysed these claims and obtained external experts' advice, as aresult of which it considers that they are without merit. The Group is robustlycontesting these claims through the appropriate channels albeit this isexpected to be a protracted process.
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 cashflows into euros to assist users of the financial statements more familiar withthat currency. The statement of comprehensive income and statement of cashflows in euros have been calculated by converting the consolidated sterlingfigures to euros at an average rate of €1.15 to £1 (2010: €1.17 to £1) exceptthe opening and closing net cash balance in the statement of cash flow, whichuses the same rates as used in the statement of financial position as mentionedbelow. The statement of financial position has been calculated by convertingthe pound sterling figures to euros at the closing rate of €1.20 to £1 (2010: €1.17 to £1).
Euro translation of consolidated statement of comprehensive income
For the year ended 31 December 2011
. 2011 2010 €'m €'m Revenue 4,509.5 4,325.3 Net operating costs (4,446.8) (4,078.9) Operating profit 62.7 246.4 Analysed as: Operating profit before exceptional 68.2 248.4items Exceptional items (5.5) (2.0) Operating profit 62.7 246.4 Finance costs (41.5) (31.8) Finance income 15.3 10.4
Share of post-tax profits from associates 1.2
0.7 Profit before tax 37.7 225.7 Taxation (6.3) (47.7) Net profit for the year 31.4 178.0
Other comprehensive income/(expense) Actuarial gains/(losses) on defined 30.7
(3.6)benefit schemes
Tax on items taken directly to equity (8.4)
0.7 Cash flow hedges (3.7) -
Interest rate swaps fair value difference 0.1
(0.1)
Exchange differences on translation of (62.1)
13.3foreign operations
Other comprehensive income/(expense) for (43.4)
10.3the period, net of tax
Total comprehensive income/(expense) for (12.0)
188.3the period Profit attributable to: Owners of the parent 31.4 178.0 31.4 178.0
Total comprehensive income/(expense)
attributable to: Owners of the parent (12.0) 188.3 (12.0) 188.3 Earnings per share cents/ share cents/ share - Basic 2.0 11.2 - Diluted 2.0 11.0
Euro translation of consolidated statement of financial position (unaudited)
31 December 2011
See page 32 for basis of translation.
2010 2011 €'m €'m Non-current assets Goodwill 2,260.1 2,230.6 Other intangible assets 208.8 234.8
Property, plant and equipment 167.6
162.0 Investments in associates 3.2 3.2 Financial assets 49.7 14.6 Retirement benefit assets 62.9 45.3 Deferred tax assets 100.8 82.3 2,853.1 2,772.8 Current assets Inventories 1.0 1.2 Trade and other receivables 1,514.4 1,465.2 Current tax assets 29.8 13.3 Cash and cash equivalents 107.4 66.0 1,652.6 1,545.7 Current liabilities Other borrowings (42.0) (239.1) Trade and other payables (1,274.2) (1,243.0) Current tax liabilities (107.3) (77.9) Provisions (108.0) (34.4) (1531.5) (1,594.4) Net current liabilities 121.1 (48.7) Total assets less current 2,974.2 2,724.1liabilities Non-current liabilities Borrowings (451.3) (154.8)
Retirement benefit obligations (83.6)
(111.4) Deferred tax liabilities (55.3) (71.5) Provisions (57.2) (43.4)
Other non-current liabilities (7.0)
(1.6) (654.4) (382.7) Net assets 2,319.8 2,341.4 Equity Share capital 193.4 187.4 Share premium account 1,332.7 1,295.7 Reserves 793.7 858.2 Total shareholders' equity 2,319.8 2,341.3 Non-controlling interests - 0.1 Total equity 2,319.8 2,341.4
Euro translation of consolidated statement of cash flows (unaudited)
For the year ended 31 December 2011
See page 32 for basis of translation.
2011 2010 €'m €'m Cash flows from operating activities Net cash inflow from trading 260.4 316.0operations Cash outflow related to (21.1) (43.1)restructuring and integration activities Cash outflow related to (3.1) (5.6)business acquired/disposed of Cash generated from 236.2 267.3operations Finance costs paid (24.7) (23.4) Income tax paid (41.8) (59.6) Net cash inflow from 169.7 184.3operating activities Cash flows from investing activities Finance income received 7.8 4.4 Dividends received from 1.2 0.5associates Proceeds on disposal of 0.3 0.2property, plant and equipment Purchases of property, plant (57.2) (53.5)and equipment Expenditure on intangible (33.6) (33.7)assets Purchase of non-controlling (0.1) -interests Acquisition of subsidiaries (19.2) (10.4)and other businesses, net of cash acquired Proceeds on disposal of - 3.7subsidiaries and other businesses, net of cash disposed Net cash outflow from (100.8) (88.8)investing activities Cash flows from financing activities Proceeds from issue of shares 4.1 0.5allotted under share plans Refund of expenses related to - 6.6shares issued in prior years Proceeds from bank borrowings 34.5 270.1 Repayments of bank borrowings (206.8) (467.8) Proceeds from private 216.0 104.0placement debt notes, net of issuance cost Repayments of finance leases (2.8) (4.0) Repayments of other (1.5) (0.8)borrowings Net proceeds from forward (0.5) (20.7)contracts Dividends paid to the (80.7) (78.2)Company's shareholders Net cash outflow from (37.7) (190.3)financing activities Net increase/(decrease) in 31.2 (94.8)cash, cash equivalents and bank overdrafts Cash, cash equivalents and 35.8 124.4bank overdrafts at the beginning of the year Net increase/(decrease) in 31.2 (94.8)cash, cash equivalents and bank overdrafts Effect of foreign exchange 0.9 6.2rates Cash, cash equivalents and 67.9 35.8bank overdrafts at the end of the year
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