UPDATE: Logica 3Q Revenue, Orders Up; Keeps Fiscal Year Margin Guidance
November 04 2009 - 3:45AM
Dow Jones News
Anglo-Dutch computer services group Logica PLC (LOG.LN)
Wednesday posted higher revenues and orders for the third quarter
as it secured more outsourcing work, and maintained its full-year
margin guidance, helped in part by further cost-cutting.
Logica, which provides consulting, outsourcing and information
technology services to companies in Europe, said it would further
cut costs in markets with weaker demand, such as Benelux and
Sweden. The cuts will result in cost savings of GBP15 million from
next year, although there will be a one-off cost of about GBP20
million in 2009.
The company is already undertaking a GBP145 million cost-cutting
program by 2010.
Revenue rose 2% to GBP862 million in the quarter ended Sept. 30,
up from GBP845 million a year earlier and ahead of market
expectations of about GBP853 million.
Pro forma revenue--which strips out acquisitions and disposals
as well as currency movements--fell 4% over the same period, hurt
by the tough trading environment, particularly in Benelux and
Sweden. In the second quarter of 2009, revenue was up 2%, but on a
pro forma basis revenue was down 4%.
Logica revised its pro forma revenue guidance for 2009,
forecasting a decline of around 3% compared with its previous
guidance for a fall of around 2%. Prior to Wednesday's trading
update, the market was expecting a 4% fall, Chief Financial Officer
Seamus Keating told reporters on a conference call.
Logica, which counts Airbus, Finnair Oyj AKT (FNNNF), Statoil SA
(STO.OS), Coca-Cola Co. (KO), Cie Generale des Etablissements
Michelin (ML.FR) and the U.K. Ministry of Defence among its
customers, reported a 16% jump in third-quarter orders. On a pro
forma basis, orders were up 6%.
At 0856 GMT, Logica shares were up 5 pence, or 1.2%, at 120
pence, valuing the company at GBP1.92 billion, in a higher London
market. The stock has risen 74% since January on hopes of improving
trading conditions.
KBC Peel Hunt analyst Simon Strong said the group's "outsourcing
strength has been offset by consulting weakness." While more cost
is coming out of the business, Strong foresees "increasing risk
servicing the government sector." He retains a hold rating on the
stock and a 95 pence target price.
The company, which competes with International Business Machines
Corp. (IBM), and France's CapGemini (CAP.FR) and Atos Origin
(ATO.FR), said outsourcing revenue rose 11% to GBP329 million in
the third quarter, as companies and governments seek out cost
savings during the tough trading environment by outsourcing IT
work.
The U.K. remains the group's strongest performer with revenue up
7%, driven by strong demand from government departments for its
services. But Benelux and Sweden continued to struggle with revenue
down 23% and 6%, respectively.
The group maintained its full-year margin guidance of around
7.5%.
Chief Executive Andy Green said in a statement that the group's
"pipeline of outsourcing opportunities remains strong, balanced by
continued market weakness in consulting and professional
services."
Logica will report its 2009 results on Feb. 24.
-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290;
lilly.vitorovich@dowjones.com
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