The usual stronger second half helped Logica Plc lift its profits to more than 10% of turnover. Just six months ago, at the interim stage (CI No 644), then managing director Len Taylor set the 10% level as a long-term goal for the company, but reaching the target earlier than expected did little to stop the shares getting caught up in the general malaise caused by the trade figures and they lost 5p to end the day at 406p. The UKP11.3m profits were achieved despite heavy investment in new staff and corporate infrastructure which, according to chairman Philip Hughes, will ensure powerful growth for the future. The main growth in 1986-7 came from Logica’s traditionally strong fin-ancial sector and from increasing work from computer manufacturers such as Data General (CI No 773) and IBM for whom Logica wrote the software controlling the Personal System/2’s graphics. Broadcasting, automotive manufacturing control, water control systems and space also did well although all from a small base. Hughes is confident that space will continue to grow but he warns that if the government does not change its attitude to funding the European Space Agency all UK space contractors, including Marcol Group Plc (CI No 774) and British Aerospace, will suffer. The other potential problem sector is defence which is the least international of Logica’s business and has grown less than the remainder of the company due to the change in UK procurement policies. Hughes, however, is hopeful that Logica will land at least one of the three major UK military contracts for which it has been shortlisted. Logica is unlikely to rely just on internal growth to boost profits over the next year. With a share price that has more than tripled over the past year and cash balances believed to be in excess of UKP12m, the company is poised to make acquisitions. Hughes says that he is already talking to specific companies outside the UK. Areas where he particularly wants to expand either organically or through acquisition are West Germany and France; the US, which is starting to grow again; and Japan where Logica is involved in projects without having a serious presence on the ground. Logica’s medium-term target is 35% turnover growth per year with a similar increase in profits. Even without any acquisitions, it therefore looks set for substantial growth. But, the shares, at 406 pence, are on a price-earnings multiple of over 29 and do not look a bargain.
