Logica Plc’s restructuring in the UK has paid immediate dividends. The shake-up into 17 market-oriented divisions has helped turnover in the division rise by 14% and operating profits by 21%. In particular, the finance, transport, energy and utility sectors were bouyant, but defence and government business continued to decline as contracts came to an end. The applications management division, which was formed eight months ago, has won four UK contracts so far but according to chairman Colin Roland, will not reach profitability until 1998. Overall, the London W-based software and systems integration company saw interim pre-tax profits rise by 125% to ú7.2m from turnover up 14% to ú122m. The US division has moved back into the black, just, as turnover increased here by 37%. This was attributed to growth in the funds transfer and multimedia activities. Synercom Software, acquired last September (CI No 2,501), has performed better than expected. This was offset, however by the bigger acquisition of last year, Precision Software Corp (CI No 2,407), which has taken longer than anticipated to develop. The completion of the Synercom acquisition was largely responsible for a drop in net cash balances of ú1.5m. Operational cash flow was neutral in the first half. Revenues in continental Europe edged up only slightly because of the disposal of some government business by the Italian joint venture, Logicasiel. Logica’s Belgian unit also had a rough time. European order intake grew overall, especially in the telecommunications and energy and utility sectors. The Asia-Pacific region returned to profit, but work is needed to establish a secure base there. Logica won its first contracts in Russia during the half, as well as two important finance contracts in the Middle East. A new subsidiary was also formed in the Czech Republic. The board looks for revenues and margins to continue growing during the second half, and recommends an interim dividend of 1.8 pence, a rise of 25%. The company is predicting that applications management will become the dominant sector within the outsourcing market, with facilities management taking a back seat. This view is backed by UK analyst Richard Holway who predicts the applications management outsourcing market will grow 57% to be worth around ú400m by 1997. The application management service covers support and maintenance, enhancements to existing software, software migration to open systems and development of new applications right up to collaboration over a company’s information technology strategy. Logica looks to build a sales team through internal and external recruitment of around 10 staff within the next 18 months.
