18th Jan 2006 07:00
18 January 2006LogicaCMG: 2005 TRADING UPDATELogicaCMG has issued the following trading update for the twelve months ended31 December 2005. All references are to unaudited results as reported underInternational Financial Reporting Standards (IFRS). As previously indicated,LogicaCMG will announce its preliminary results on 1 March.Overall operating results for the year were in line with market estimatesproducing a significant improvement in profitability over 2004 with organicrevenue growth of some 5%. Second half operating cash flow was strong givingfull year cash conversion in line with our expectations.IT servicesIn the UK, high utilisation rates, effective use of offshore resources andlower materials revenues contributed to higher second half margins as expected.The Netherlands had a strong second half, benefiting from higher utilisationrates and a stabilisation in the use of contractors.Our existing French business has benefited from the improving marketenvironment and completed its previously planned rationalisation. We havealready made our first joint bids with Unilog to customers in France which hasconfirmed our view that the combination will be a powerful force. Germanyremained difficult, although revenues were stable in the second half comparedto the first half. We are continuing to recruit additional billable staff inthose areas where we are achieving growth. In Iberia, the Edinfor businesscontinued to develop well through the second half.We have been actively recruiting key skills across the business with thehighest numbers of new hires in our lower cost locations around the world. Theability to deploy resources from these locations as part of our Global ServiceDelivery organisation, underpinned by common methodologies, standards andprocesses, is a key differentiator in the market. Today some 15% of ourbillable staff are part of this capability, of whom more than 2,000 are nowlocated in our Bangalore facility.Wireless NetworksOur Wireless business continued to see good demand for its messaging productswith further significant upgrades to Internet-based working and additionalcapacity for operators in developing countries. Newer technologies have stillto attain consistent, demand-driven growth, but investment by operators isincreasing around areas such as IP voicemail, content management and delivery,and intelligent payments, allowing some revenue growth and further operatingmargin expansion in the second half.Accounting items related to the Unilog transaction and convertible debtOn 25 October, LogicaCMG acquired 32.3% of the issued share capital of Unilogfollowing a block purchase from its senior managers. The public tender offer inFrance for the remaining shares was launched on 21 November and while thatoffer was open, LogicaCMG was free to acquire shares in the open market atprices up to the offer price of ¢â€š¬73. As a result, at 31 December, LogicaCMGheld 46.8% of Unilog's share capital, with the weighted average shareholdingsince 25 October being 39.0%. This holding will be accounted for under theequity method in the Group's 2005 consolidated financial statements.Completion of the acquisition of Unilog took place on 13 January 2006 when weheld approximately 96.6% of the share capital and therefore had no directimpact on 2005 operational results. However, the following impacts on the Groupincome statement should be noted: * The impact of the financing of the transaction was to increase the Group's net interest expense by ‚£0.5 million. The principal constituents of this were the accelerated amortisation of the set-up fees associated with the previous revolving credit facility and the term loan interest cost, partially offset by interest received on the rights issue proceeds. * The Group's share of the post-tax profits of Unilog for the period from 25 October to 31 December will be shown as a separate line item below operating profit. * The weighted average number of shares for EPS purposes will reflect the bonus element of the rights issue. The number of shares used for 2005 basic EPS is expected to be 898.7 million. In addition to the effect of the financing of the Unilog transaction, the Groupalso incurred an interest expense of ‚£0.9 million for the twelve months relatedto the mark-to-market movement on the Group's convertible debt. This comparedwith interest income of ‚£3.5 million in the first half of the year.Commenting on the full year trading update, Dr Martin Read, LogicaCMG's GroupChief Executive, said:"We are very pleased to have achieved a significant improvement in operatingprofit in 2005. At the same time, we have taken two important strategic stepsforward this year. With Edinfor we have shown we can win a major outsourcingcontract against the largest international competition. With the acquisition ofUnilog, we have significantly increased our scale and geographical balancethereby creating an even stronger platform for the future development of thebusiness."< ENDS >For furtherinformation please contact:LogicaCMG investor relations - Tony Richards/Frances Gibbons +44 (0)20 74464341LogicaCMG media relations - Isabell Horvath +44 (0)20 7446 1259Citigate Dewe Rogerson - Toby Mountford/Justin Griffiths +44 (0)20 7638 9571ENDLOGICACMG PLCRelated Shares:
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