20th Jul 2005 06:00
20 July 2005LogicaCMG: HALF YEAR TRADING UPDATELogicaCMG has issued the following trading update for the six months ended 30June 2005. Results for 2005 will be presented under International FinancialReporting Standards (IFRS). The comparable numbers for 2004, both full year andinterim, were released on 17 May. As previously indicated, LogicaCMG willannounce its interim results on 31 August.First half performance has been in line with the guidance given at the AGM inMay:- IT Services - gradual recovery continues with very strong order taking in thefirst half- Wireless Networks - solid performance underpinned by resilience of the SMSmarketGroup order intake was very strong in the first half, up 50% over last year.The excellent progress on orders reflects the benefits of the size and scale ofthe merged company and our strategy of focusing on value propositions. Ordergrowth was driven primarily by outsourcing, including contracts with the UKMinistry of Defence and Energias de Portugal (EDP), Transport for London,Metropolitan Police and Thames Water. Revenue growth was also strong at 11% (9%excluding Edinfor which joined the group on 20 April 2005). It acceleratedthrough the second quarter during the start up phase of several outsourcingcontracts which included significant materials revenues. Group operating profitfor the first half was in line with market expectations. As in previous years,cash flow was seasonally weaker in the first half from the effect of annualinsurance premium payments with some additional impact due to the accelerationin revenue growth.The UK performed well with the Industry, Distribution & Transport sector inparticular showing a marked recovery from the last year and the Public Sectorcontinuing its strong trend. Some pricing pressure was felt in short term, timeand materials assignments, notably in the Telecoms sector. The Netherlandscontinued to achieve good revenue growth with Financial Services performingvery strongly. While we are still using a relatively high number of contractorsto meet short-term demand, we expect this to reduce through the year as we makegreater use of our offshore resources and recruit key skills.Whilst the market in Germany remains difficult, we expect a significantimprovement in the operating performance compared to 2004 as the yearprogresses. We are making good progress in Outsourcing and Financial Servicesbut the Industry, Distribution and Transport market remains very difficult,slowing the return to profitability of the business. In France, we carriedthrough some reductions in the overhead structure in the first half as plannedand focused attention on targeting our pre-sales effort more effectively. Weexpect to see the benefit of these actions progressively as we come through thesecond half.We have continued to recruit aggressively in Bangalore where we expect toexceed 2,000 staff by year end and are now commencing the next phase of ourcampus development. We have also outsourced a significant proportion of our ownback office systems and processes to our offshore facility.As mobile, fixed line and broadcast technologies converge around broadbandservices and customers need to manage and distribute content to many differenttypes of device, we are increasingly delivering synergies from the skills inour Wireless Networks and system integration businesses. Recent examplesinclude contracts from T-Mobile, the Bridge Mobile Alliance and Optus.In Wireless Networks, revenues from the traditional text messaging (SMS) marketare holding up better than originally expected as developing countries installcapacity to meet demand and existing customers add IP-based functionality.Revenues on a like for like basis were similar to the same period last yearand, with the benefit of our reduced cost base, the business was marginallyprofitable. Good first half order intake increases our confidence that revenuefor the year will be slightly ahead of last year and that in consequenceprofitability will be significantly improved.Organic revenue growth for the group, excluding Edinfor, is likely to be at thetop end of our previously indicated range of 4-5% for the year as a whole,driven by higher start-up revenue on several outsourcing contracts in the firsthalf. On a comparable basis, performance for the year is expected to show asignificant improvement over 2004, in line with our expectations.Commenting on the half year trading update, Dr Martin Read, LogicaCMG Group Chief Executive, said:"While the market recovery remains gradual and cost control is still theprimary driver for our customers, we are beginning to benefit from our focus ongrowth. We continue to expand our outsourcing business, underpinned by deliverycapability which is increasingly global."Note: All comparative numbers are expressed at constant exchange ratesFor further information please contact:Carolyn Esser - media relations 020 7446 1786 (mobile: 07841 602391)Tony Richards - investor relations 020 7446 4372 (mobile: 07733 260393)Toby Mountford - Citigate Dewe Rogerson 020 7638 9571 (mobile: 07710 356611)Seb Hoyle - Citigate Dewe Rogerson 020 7638 9571 (mobile: 07799 476804)ENDLOGICACMG PLCRelated Shares:
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