LOG.L Regulatory News (LOG)

18 Jul 2007 07:00

18 July 2007

LogicaCMG Update on Current Trading

* First half IT services revenue up 3.3% on a pro forma constant currency basis * Ongoing organic revenue growth above the market in the Nordics (7%), the Netherlands (8%), Germany (10%) and France (10%) * UK revenue down 9% in the first half, due to anticipated weakness in the commercial sectors; sequential UK revenue growth expected in the second half * Full year group revenue expectations unchanged * Interim results to be published on 29 August

LogicaCMG has today issued the following trading statement1:

Revenue in the first half was up 36% on last year to ‚£1,520 million (H1 2006 actual, IT services: ‚£1,120.1 million). This represented growth of 3.3% on a pro forma2 constant currency basis.

United Kingdom

Due to anticipated weakness in the commercial sectors, first half revenue was down 9% on last year. This weakness was partially offset by public sector revenue growth of 7% in the first half. The impact of the IDT contract concluded at the end of last year represented approximately half the decline in UK revenue in the first half.

Book to bill was 1.05:1. A strong public sector order intake continued to drive the book to bill, with the public sector representing just over 60% of the orders booked. Within the Public sector, demand for project work drove increased orders in Space and Defence. Within the commercial sectors, we have made progress on winning orders and identifying new opportunities within our existing framework agreements in the Energy, Utilities and Telecoms business. We have also been selected as the preferred supplier for managed testing within a major telecoms contract. Our contracted order backlog and expected renewals currently represent over 60% of our second half revenue forecast for the commercial sectors. Including the weighted pipeline of opportunities in these sectors, we have visibility of substantially all our commercial sector revenue. In line with our previous guidance, we expect sequential revenue growth in the second half, with full year UK revenue slightly lower than 2006.

Nordics

Revenue in the Nordics was up 7% on a pro forma basis, including Caran revenue of ‚£27 million up to 4 June 2007 (2006: ‚£25 million). The Swedish business continues to be the major driver of regional growth, with a steady demand for ongoing work with existing customers. Initial cross-selling wins are encouraging, with ‚£13 million of small cross-selling orders recorded in the first half. New or extended outsourcing agreements have also been signed with Volvo Cars, Alfa Laval and facilities services company ISS.

France

In France, revenue was up 10% on a pro forma basis, with increased headcount and greater use of subcontractors allowing us to meet demand to deliver a good first half across all sectors. Strong growth was seen in existing contracts with EDF, Carrefour and the French Ministry of Defence. Order intake was healthy, with good progress in the public sector and financial services. New public sector projects included the Foreign Ministry and the Employment Agency. We have been awarded six individual contracts greater than ¢â€š¬5 million, totalling approximately ¢â€š¬70 million. This includes a ¢â€š¬15 million applications management project for a major bank, following our selection as a preferred supplier earlier in the year.

Netherlands

In the Netherlands, revenue was up 8% compared to last year. The public sector growth was particularly strong in the first half and a major contributor to strong year on year revenue growth in the Netherlands. In the financial services sector, we have had a number of smaller wins with existing customers. The pipeline in the Netherlands remains solid with growth expected to outperform the market. In early July, we signed a letter of intent for the divestment of our non-core payroll business. The divestment will not have a material impact on 2007 revenue (it accounted for less than 2% of total Netherlands revenue in 2006). The business being divested provides solutions primarily for the SME and local government market and represented only one-quarter of the overall HR and payroll product services revenue in the Netherlands. We will continue to invest in the core HR and payroll BPO solutions business.

Germany

We have made further progress in Germany with revenue growth of 10% on a pro forma basis in the first half and continued profitability in the second quarter. Headcount increased by over 2% in the first half, with over 200 external recruits joining the business.

International

Despite lower revenue in Asia following the completion of the development phase of the Natrindo contract at the end of 2006, revenue in the International business was at the same level as last year on a pro forma basis. Revenue from the Edinfor business remains at a similar level to last year.

Employees

We had a total of 38,496 employees at the end of June. Excluding the impact of the previously-announced disposals of Telecoms Products and Caran, our headcount increased by 2% in the first half. In a competitive market, we have seen attrition at broadly similar levels to 2006. We expect to increase salaries slightly more than last year. As in the past, we expect to offset this through rate increases and a change in the mix of resources deployed on certain contracts.

Outlook

Our outlook on market demand remains unchanged, with European market growth expected to be between 4% and 6%. As indicated at the time of our May trading update, we still expect revenue growth around the lower end of this range for 2007. Adjusted operating profit will be slightly more second-half weighted than last year, mainly due to UK commercial sector weakness in the first half and first half costs disclosed previously.

Based on the progress of the legal structure integration following the acquisitions in recent years, we are now able to accelerate the benefit of historic tax losses in 2007. Combined with other anticipated tax deductions, we expect the effective tax rate in 2007 to be around 20%, compared to our previous guidance of 26%. The tax rate beyond 2007 is expected to be around 23%.

Following the completion of the Telecoms Products disposal on 19 June, we have begun the previously announced ‚£130 million share buyback. At the close of business on 17 July, we had purchased 14,975,000 shares in the market (representing approximately 1% of the issued share capital at the end of 2006) in the market at an average price of 1.5143p. We now expect the weighted average share count for the year for EPS purposes to be approximately 1,500 million.

In a separate announcement issued today, we have announced a number of changes to the LogicaCMG Board and management.

Interim results will be reported on 29 August 2007.

For further information, please contact:

LogicaCMG Media relations: Carolyn Esser/Louise Fisk +44 (0) 20 7446 1786 (mobile: +44 (0) 7841 602391)

LogicaCMG Investor relations: Karen Keyes/Frances Gibbons +44 (0) 20 7446 4341 (mobile: +44 (0) 7801 723682)

Brunswick: Tom Buchanan/Craig Breheny +44 (0) 20 7404 5959

Notes:

1. Percentages are based on unaudited numbers for the six months ended 30 June

2007.

2. Comparatives are based on pro forma IT services revenue and exclude pdv.com

and No Limits. Adjustments have been made for non-recurring passthrough revenue in France which was reported in 2006. The comparatives have also been adjusted to include Caran revenues to the beginning of June 2006 and Siemens Business Services for the nine months from March 2006 and to reflect current exchange rates for our principal currencies as listed below. 2006 pro forma constant currency numbers are as follows: 2006 H1 H2 FY UK 364.6 353.8 718.4 Nordics 395.2 370.1 765.3 France 262.8 260.5 523.3 Netherlands 219.1 225.5 444.6 Germany 73.9 87.5 161.4 International 158.7 168.1 326.8 Total 1,474.3 1,465.5 2,939.8

Exchange rates used are as follows:

H1 2007 Average H1 2006 Average ¢â€š¬/‚£ 1.48 1.46 SEK/‚£ 13.72 13.62