2nd Nov 2011 07:00
2 November 2011
Logica reports revenue up 4% for the nine months to September(1)
Headlines
Group orders up 10% for the nine months to September driven by continued strong growth in Outsourcing
Revenue for the nine months to September up 4%, with third quarter revenue up 2% on last year to £914 million
Outsourcing revenue growth still strong, up 10% on a year to date basis and up 8% in the quarter
Consulting and Professional Services broadly stable for the nine months to September despite third quarter revenue down 3% and mixed trends across our markets
Revenue up in all geographies except the Benelux on a year to date basis, with particularly strong third quarter growth in the UK
Revenue growth expected to be above 3% for the year, with adjusted operating margin now to be in the range of 6.5% to 7.0%
Year endnet debt/EBITDA expected to be comfortably below 1.0x; strong second half cash conversion expected
For the three months and nine months ended 30 September 2011, results were asfollows: NINE MONTHS TO THREE MONTHS TO 30 SEPTEMBER 30 SEPTEMBER Growth YTD Growth '11 Growth '11 '11 on '10 on'10 on '10 pro forma 2010 pro forma reported 2011 better/ 2011 pro better/ 2010 better/ actual (worse)%* actual forma* (worse) %* reported (worse)% Orders (£m) 3,267 10 799 788 1 758 5 Revenue (£m) 2,910 4 914 897 2 863 6
*Q3 2010 revenue adjusted to Q3 2011 exchange rates and including the impact of acquisitions and disposals
Commenting on today's announcement, Andy Green, CEO said:
"Logica has continued to respond to client needs and to win new orders, with Outsourcing orders up 22% so far this year and a solid book to bill in Consulting and Professional Services. This will continue to drive growth in revenue in the fourth quarter.
The pockets of softness that became apparent in September mean we now expect 2011 margin to be in the range of 6.5% and 7.0%, with the clear actions we are taking in the Benelux and Sweden expected to drive benefits over the medium term."
__________________
(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 6.
Outlook
A strong Outsourcing backlog and the good balance of our business means we expect our business to grow in the fourth quarter, with revenue growth expected to be above 3% for the year and the UK back to growth.
Achieving better levels of utilisation in the Benelux before the year end will remain a challenge and progress in Sweden has been slower than expected. While we anticipate further progress in these areas through the fourth quarter, we are also seeing pockets of market softness. We now expect that adjusted operating margin will be in the range of 6.5% to 7.0% for the year. This includes the net impact of £25 million of previously announced restructuring charges.
Financial position
We expect net debt/EBITDA to be comfortably below 1.0x at year end including the impact of our acquisition of Grupo Gesfor. Similarly to last year, we expect strong second half cash generation with full year cash conversion approaching 100%.
Employees
We employed 41,742 people at the end of September which represents a 4% organic increase over the third quarter of last year, as well as the impact of the Grupo Gesfor acquisition (2010 actual: 39,036).
Attrition for the group was slightly up on the same time last year at 14% (2010: 13%).
We have continued to strengthen our capacity in our offshore and nearshore centres, ending the third quarter with around 6,900 people in these locations, up 3% from June 2011 and representing 17% of our employees. By the end of October 2011, our Indian operations had reached 5,000 people.
Group orders and book to bill
Orders are now up 10% on a year to date basis to £3,267 million. New orders in the quarter totalled £799 million (2010: £788 million), with strong orders growth in France and Northern and Central Europe in the third quarter.
At the end of the third quarter, our Outsourcing order backlog was £2.7 billion. Outsourcing orders are up 7% for the quarter and up 22% on a year to date basis. Importantly, we saw some new additions in the UK Public Sector, which included a new contract with the UK Skills Funding Agency, as well as extensions of work at SINTEF in Norway. We also signed a five year contract with Statoil Fuel & Retail (SFR) for the operation and management of solutions for card and payment transactions for petrol stations across Scandinavia, Holland, the Baltics and Russia. Since the end of the quarter, we were also awarded a five year outsourcing contract at French water utility, Agence de l'Eau Seine Normandie (AESN).
Consulting and Professional Services book to bill is broadly unchanged on last year on a year to date basis at 106% (2010: 105%), with UK and Northern and Central European orders well ahead of last year and solid orders in France offsetting a slower order intake elsewhere. Third quarter book to bill was also broadly unchanged on last year at 95% (2010: 94%). Wins in the third quarter included new work for HR integration at SITA (a GDF SUEZ subsidiary) and geographic systems integration with Veolia Eau.
Pipeline
Our client intimacy strategy is driving a strong pipeline built on our existing client relationships. Our pipeline is dominated by opportunities in the Public Sector and with clients in the Transport, Trade and Industrial sector. A high proportion of the opportunities are in Applications Management and BPO.
Revenue by service line
Outsourcing revenue was up 10% year to date to £1,292 million and continued to show good growth in the third quarter with revenue up 8% to £413 million (2010: £381 million). As we start delivering newer contracts awarded in 2011, some of the expected slowing in Sweden and Northern and Central Europe is being offset by growth in the UK. With a strong order backlog, Outsourcing will continue to drive group revenue growth for the remainder of the year.
On a year to date basis, revenue in our Consulting and Professional Services remained stable at £1,618 million. Mixed trends across our geographies in the third quarter resulted in a 3% decline to £501 million (2010: £516 million). The pockets of softness we saw were mainly attributable to particular clients in Financial Services.
Revenue and orders by geography
NINE MONTHS TO THREE MONTHS TO 30 SEPTEMBER 30 SEPTEMBER Growth YTD Growth '11 Growth '11 '11 on '10 on '10 pro on '10 pro forma 2010 forma reported 2011 better/ 2011 pro better/ 2010 better/REVENUE (£m) actual (worse)%* actual forma* (worse) %* reported (worse)% France 653 8 198 192 3 188 5 Northern and 629 9 194 185 5 182 7Central Europe UK 544 1 183 172 6 172 6 Sweden 457 4 133 135 (1) 125 6 Benelux 352 (3) 110 113 (3) 110 0 International 275 1 96 100 (4) 86 12 Total 2,910 4 914 897 2 863 6
*Q3 2010 revenue adjusted to Q3 2011 exchange rates and including the impact of acquisitions and disposals
France
Revenue was up 8% on a year to date basis, despite a slower growth rate in the third quarter. Third quarter revenue was up 3% to £198 million against strong comparatives last year.
Lower resource availability constrained growth, despite good demand from larger commercial sector clients in TTI and Financial Services on the back of previously awarded work. Across most sectors, Applications Management continued to be the main engine of Outsourcing growth.
Orders were up 12% in the third quarter, resulting in a solid book to bill at 115% (2010: 107%). On a year to date basis, book to bill is 111% (2010:113%).
Northern and Central Europe
Revenue in the region was up 5% to £194 million in the third quarter. On a year to date basis, revenue was up 9%, with good growth in Germany continuing to drive Consulting and Professional Services growth.
Strong growth in Denmark and Finland on a year to date basis was on the back of our larger Outsourcing contracts, despite some weakening of demand in the Telecoms sector.
Orders were up 18% in the third quarter and up 1% to £657 million on a year to date basis. Book to bill was 101% (2010: 89%). On a year to date basis, book to bill is 104% (2010: 113%).
UK
Having been down 2% in the first half of the year, the UK was our fastest growing geography in the third quarter and was back to growth on a year to date basis, with revenue up 1% to £544 million. Third quarter revenue was up 6% to £183 million.
Public Sector revenue levels have now been stable for the last five quarters and the commercial sector growth also improved for the third consecutive quarter. Energy and Utilities is the key driver of growth as we deploy smart meter trials and the Shell fuel card contract awarded earlier this year.
Book to bill was 150% on a year to date basis (2010: 79%), with Q3 book to bill at 73% in line with that of 2010.
Sweden
Having grown significantly earlier this year as we deployed a number of large Outsourcing contracts with clients in both the public and commercial sectors, Swedish growth slowed as we had expected in the third quarter. Revenue was up 4% on a year to date basis to £457 million, with third quarter revenue down 1% at £133 million.
Although we made progress on transitioning contracts, slower demand than we had expected meant we were less able to move resources onto other work.
On a year to date basis, book to bill in Sweden was 90% (2010: 132%), with third quarter book to bill at 60% (2010: 76%). We continue to have a good long term pipeline and have for example recently launched new cloud offerings with Microsoft in Sweden.
Benelux
On a year to date basis, revenue was down 3% to £352 million. Revenue decline in the third quarter was at the same level as that experienced in the first half. While there were some pockets of slower spend in Financial Services, the remaining commercial sectors overall continued to grow. The Public Sector market remains challenging but our revenue levels in the sector are stabilising. The year on year decline in the Public Sector slowed to 6% in the third quarter.
Achieving better levels of utilisation in the Benelux before the year end will remain a challenge with some signs of weaker Financial Services demand. Pricing also remained competitive in this market through the third quarter, maintaining pressure on margin.
Book to bill for the third quarter was 87% (2010: 93%). On a year to date basis orders are up 19%, resulting in a stronger book to bill than last year at 126% (2010: 103%).
International
Revenue was down 4% in the third quarter to £96 million, against strong comparatives in 2010 and a tougher market in both Portugal and Australia. On a year to date basis, revenue is up 1%, with the North American and Brazilian businesses being the strongest performers.
Book to bill was 69% in the third quarter (2010: 87%) and was 78% on a year to date basis (2010: 94%).
Financial calendar
The next scheduled statements are:
22 February 2012 FY 2011 preliminary results11 May 2012 AGM and Q1 2012 Interim Management Statement
For further information, please contact:
Logica investor / media relations: Karen Keyes +44 (0) 7801 723682 / Jose Cano +44 (0) 20 7446 1338
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.
Comparative figures for 2010 are pro forma constant currency revenues, unless otherwise stated. Pro forma adjustments have been made to take account of changes in composition of the group through acquisitions and disposals
Our 2010 pro forma revenue was £3,812 million (2010 reported: £3,697 million), based on current exchange rates.
Exchange rates used are as follows:
Q3 2011 Q3 2010
YTD average YTD average
£1 / € 1.15 1.17 £1 / SEK 10.34 11.25 £1 / USD 1.62 1.53
PINXRelated Shares:
LOG.L