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August 7, 2009

Logica logs surprise 6% rise in profits

Turnover slips slightly but cost-cutting drives margins

By CBR Staff Writer

Logica’s restructuring and cost-cutting strategy has started to come good, helping drive profits up 6% on a turnover for the six months to end-June down slightly at £1.88 billion.

The company said today cost savings ran to £30 million for the period. The IT and business services group performed better than expected, as a result.

The vendor has steadfastly maintained its focus on developing a cost-sensitive blend of onshore, nearshore and offshore resources to support its outsourcing customers. 

As a result, the outsourcing operations has performed relatively well in a challenging market, but analysts reckon there is more to be done.

Anthony Miller of services market-watcher TechMarketView noted in his blog, “I do wonder whether Logica is pushing blended delivery hard enough, especially in the UK. Sure, the UK is Public Sector heavy, but other players have shown this work does not all have to be onshore. With half its UK business coming from outsourcing, there should be a bigger opportunity for Logica to move more work offshore – and I struggle to see how else Logica could protect let alone expand margins otherwise.”

On its current performance in the services sector, CEO Andy Green said, “The impact of our investments in customer facing teams is particularly clear in outsourcing services where orders are up 18%, and in the UK where revenues are up 7%.” 

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Logica has been cutting costs and adding jobs in cheaper locations such as Morocco, is ramping its presence in the Philippines, and in India its headcount is expected to double.

Logica also expects to see growth in near-shore centres like Morocco and the Czech and Slovak Republics.

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