Logica profits hit by misers in public sector

Plan A: still hurting

Logica is continuing to shift its order book from the public sector toward the commercial markets following a tough first half-year that challenged margins and gave operating profits a pounding.

The IT service provider and consultancy's sales for calendar H1 were up 5 per cent to just shy of £2bn and it expects similar growth in the second half of 2011.

CEO Andy Green said Logica had taken market share from rivals and saw gains in outsourcing deals across France, Northern and Central Europe "and in the commercial sectors in the UK".

Outsourcing revenues were up 11 per cent to £880m as Consulting and Professional services turnover returned to growth – albeit at just 1 per cent – to £1.12bn. Group sales to the private sector were up 10 per cent, but fell 5 per cent in the public sector.

UK revenues – 18 per cent of group turnover – fell 2 per cent to £208m on the back of a 10 per cent slide in public sector sales to £208m. The energy and utilities and other sectors grew double digits to £70m and £83m respectively.

Sales in the Benelux were also hit, down 3 per cent to £242m, and fell 11 per cent in Logica's international operations to £179m. All other operations – France, northern and central Europe and Sweden – pushed up the top line.

However, a 16 per cent slide in operating margins to 4.2 per cent, an 11 per cent dip in operating profits to £83m, and a 13 per cent decline in profit before tax to £75m took the shine off revenue gains, with the Benelux and UK worst hit.

"Our public sector clients continued to implement spending cuts, with a particularly sharp decline in the Netherlands leading to disappointing profitability in the Benelux. We grew revenue and margin in half of our six regions," said Green.

Logica said margin improvement was "now dependent" on progress in the Benelux region redirecting resources. ®