The extensive restructuring that has taken place at Logica Plc over the past couple of years is starting to bear fruit. For the year to June 30, pre-tax profits rose some 92% to UKP7.1m, although turnover was largely flat at UKP200.4m up from UKP197.8m last time. The situation was helped by an improved tax rate of 40% down from 126% this time last year due to a reduction in previously unrelieved overseas losses. Most significantly, the software systems and consultancy house’s US subsidiary has seen a turnaround from a former damaging level of loss-making to a certain profitability, the Asia Pacific operations are now doing better than breaking even, and even the UK was said to have put in a resilient performance after showing signs of struggle last year. The return to profitability at operations in Los Angeles was viewed as the major achievement of this fiscal year. Its main markets are finance, computer vendors and telecommunications, but as levels of activity in the first two sectors are still weak, priority is being given to investment in sales and marketing activities. The subsidiary also continued to make important contributions to projects undertaken in conjunction with Logica companies elsewhere in the world, by supplying both products and skills to such ventures as installing the Hogan Systems Inc retail banking product at the Australian ANZ Banking Group. This area of business now accounts for 10% of Logica’s business as opposed to 11% last year, contributing approximately UKP500,000 to external operating profits, on turnover of UKP24m. Following the restructuring undertaken during 1990 and 1991 at operations in the Asia-Pacific, the Australian business was reported performing particularly well by the year-end, while the Far East saw the benefits of a major project for the Hong Kong Stock Exchange to develop a system for automatic order matching with regard to shares. External revenues here amounted to UKP14.5m, while contribution to profits stood at UKP500,000. And another very encouraging sign for Logica was the fact that the UK saw turnover grow by 7% to UKP122m despite the unfavourable economic climate. Britain currently makes up 53% of Logica’s business compared with 51% last year, and contributed UKP7m to operating profits.
Upturn in UK trading
This upturn in UK trading was attributed to the actions taken in 1991 to adjust resources to demand levels across most sectors as well as clients coming to terms with recessionary pressures and settling down to more predictable trading patterns. Good levels of growth were achieved in government and defence sectors, but the performance in finance was weak. Nonetheless, some major order were received here in the fourth quarter, such as the Econet joint development project with Hoskyns Group Plc. In the field of transport, business increased significantly, and the joint venture with British Airways Plc was quoted as developing rapidly. The only downside was continental Europe, which swung into loss. This was blamed on the deterioration of the German economy, the effects of which were felt not only there, but in the Netherlands, where the majority of Logica’s wholly-owned European operations are centred. The inevitable result was a reduction in staff numbers to 280 from 310 and a UKP700,000 provision for related costs meant a total loss of UKP1.7m. Although conditions are expected to remain difficult over the coming year, the group believes that early indications show the effectiveness of measures already taken. A quick bounce-back to profitability is not expected, but nonetheless, Logica is not expecting to be burdened with heavy losses either in the future. Work also continued on consolidating and developing the joint venture with Finsiel SpA in Italy. Finsiel controls 60% of this joint company, while Logica owns the remaining 40%. Logica now sees 20% of its business devoted to consultancy, 12% to software products and kernels, and 68% to custom-built systems, of which 63% is software and 5% is hardware. As regards spread of business according to market sector, t
hings have remained fairly static over the past year. Some 27% of clients are found in the financial world, 8% in computing and electronics, 11% in defence, 12% in energy and utilities, 9% in telecommunications, 8% in manufacturing, 16% in government, 5% in transport and 4% in the space industry. In the past, the W1A, London-based company has always attributed its success to its wide spread of business. Now, however, with market conditions continuing to be poor, managing director David Mann is linking growth in the year ahead to having cut staff numbers and therefore costs, in conjunction with the more stabilised trading patterns of his customers.
