As expected, Logica Plc has recorded pre-tax profits down by more than a half on marginally higher sales for the year to June 30. The City reacted favourably – shares rose tuppence to 152 pence – to yesterday’s difficult economic conditions type announcement in the belief that better times are, if not just around the corner, at least somewhere on the horizon for the London W1-based software systems and consultancy group. Depressed financial sectors on both sides of the Atlantic have meant that Logica has had to sacrifice its traditionally high profit margins of 9% to 10% for something in the 5% area. Chairman Philip Hughes claimed that the widespread job losses some 40 in the US, 60 in the UK – and office closures that have already been included in these figures, would in themselves start to push margins back to a more acceptable level. In the UK, Hughes was banking on some medium term cheeriness from the clients in the financial sector that still account for a third of Logica’s business; in the US, Logica can look forward to extra business as banks move to the Swift II upgrade of the international banking network for which Logica supplies DEC and Tandem equipment. Luckily, there have been some significant contracts from the large utilities to bolster sales during this bleak period: Hughes cited systems contracts from Gas Uni in Holland, Powergen, and a deal with British Petroleum for a funds transfer system linking 1,700 petrol stations in the UK. Moreover, the Gulf conflict could have the effect of making marginal oilfields viable propositions for exploitation – if that were the case, suggested Hughes, Logica’s Aberdeen operation would be ready and waiting for associated business. Hughes continued that Logica’s activities in the health sector were, alas, virtually non-existent, but was confident of future growth in sales to the telecommunications market with its Unix-based C3 network management system and a partnership with the telecommunications services arm of Tandem Computers Inc in the US. Despite dhe fact that continental Europe now makes up almost a quarter of Logica’s sales – with the Netherlands operation particularly strong – Hughes admitted that German operations were still disappointing and that it had not yet found a way of entering the French market – which Hughes perceived as a gap that needed plugging some time ago. But for the moment, Hughes, who is soon to retire from the chair at Logica, believes the main objective is to get back to those nice margins of previous years, while making sure any growth is covered in the long-term.
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