19th Jul 2006 07:00
19 July 2006LogicaCMG: Half Year Trading UpdateLogicaCMG has issued the following trading update for the six months ended 30June 2006.Trading for the first half was well ahead of last year and in line with our Maytrading update. The IT services market remains strong and we are particularlypleased with our progress in winning outsourcing contracts in continentalEurope. In addition to the Memorandum of Understanding with ING forapplications management outsourcing, development and testing which we expect tobe booked as an order in the second half of the year, we signed a ¢â€š¬70 million,5-year contract with InBev and a 2-year framework agreement with theNetherlands Workers' Insurance Authority (UWV). Under the InBev contract,LogicaCMG will be a key strategic partner for pan-European applicationsmanagement while the application development and maintenance contract with theUWV builds on our existing position in the public sector in the Netherlands. InFrance, we have had two major wins which build directly on Unilog customerrelationships and LogicaCMG expertise and which we expect to be able toannounce shortly. We are also seeing strong demand for shorter term consultingand project assignments, particularly in the UK and the Netherlands.Revenue in the first half was in line with our expectations. We continue toexpect 2006 organic revenue growth to be ahead of last year's 5.3%, withrevenue growth being driven in our major markets by improvements in FinancialServices and Industry, Distribution and Transport (IDT).As a result of the lower level of pass-through materials revenue in the firsthalf, UK revenue was slightly below last year. Increases from FinancialServices and IDT broadly offset lower Energy and Utilities revenue. UK publicsector revenue was stable despite the more challenging market as we recordedinitial revenue under our recently-announced ‚£80 million Defence MedicalInformation Capability Programme contract with the UK Ministry of Defence. Inthe Netherlands, strong demand in Financial Services and IDT as well as astrengthening public sector continued to drive revenue growth. French revenuegrowth was in line with our expectations, benefiting from a market thatcontinues to perform well. In Germany, revenue was stable despite the morecomplex integration process in merging two operations of similar size.Our Telecoms Products revenue continues to be slightly ahead of last year. Weare seeing increased interest in our Unified Messaging product portfolio,particularly in the North American market but remain cautious about the phasingof growth in this area.Our buy out of the remaining Unilog shareholders was completed on 10 July 2006and Unilog shares have now been delisted from Euronext Paris. The Unilogintegration and cost savings remain on track and we have seen encouraginginitial revenue synergies. Our focus in Germany in the first quarter was onplanning the cost synergies and implementing a new structure. With this newstructure implemented in the second quarter and with the accelerating pace ofour cost savings, we are increasingly confident of exiting the year with aprofitable run rate in our German business, in line with our previous guidance.In 2005, group adjusted operating margin on a pro forma basis was 7.2%, withthe first half at 5.3%, reflecting the normal seasonality of the business. Asexpected, group adjusted operating margin for the first half of 2006 wasstronger than in 2005. The profile of operating profit between the first andsecond halves is expected to follow the normal seasonal pattern. In addition,the cost savings from the Unilog acquisition will largely benefit the secondhalf. As in previous years, our cashflow was seasonally weaker in the firsthalf of 2006, influenced by a strong fourth quarter in 2005. Overall, ourexpectations for the year remain unchanged.As previously indicated, improving market conditions are resulting in atightening labour market and inevitably, there is increased use of contractlabour to satisfy demand. We are recruiting aggressively in our major marketsto ensure we have the right skills at all levels and to reduce the use ofsubcontractors. We also continue to make greater use of offshore resources.Commenting on the half year trading update, Dr. Martin Read, LogicaCMG GroupChief Executive, said:"We are pleased with our performance in the first half. The Unilog integrationand cost savings remain on track and we have seen encouraging initial revenuesynergies. Overall, our expectations for the year remain unchanged."As previously indicated, LogicaCMG's interim results presentation is scheduledfor 30 August 2006. We will provide unaudited 2005 pro forma numbers includingUnilog and Edinfor at the interim results.Note: Comparative numbers are on a pro forma basis, as if Unilog and Edinforwere consolidated from 1 January 2005.For further information, please contact:Media relationsCarolyn Esser +44 (0) 20 7446 1786 (mobile: +44 (0) 7841 602391)Investor relationsKaren Keyes/Frances Gibbons +44 (0) 20 7446 4341 (mobile: +44 (0) 7801 723682)Citigate Dewe RogersonToby Mountford/Seb Hoyle +44 (0) 20 7638 9571 (mobile: +44 (0) 7710 356611)ENDLOGICACMG PLCRelated Shares:
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