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February 25, 2009

Logica restructuring hits profits, promises better 09

Costs to fall as jobs move offshore

By CBR Staff Writer

Restructuring costs hurt profits at Logica plc last year but the IT and business services group should be able to outperform the market in 2009, its chief said today as the company posted numbers that showed a 5% revenue uptick for the year.

Going forward the company’s plan is designed to deliver above-market growth, funded by a £110 million restructuring programme that will deliver increasing cost savings reaching an annualised amount of approximately £80 million from 2010. 

Approximately £70 million of this restructuring charge will be taken in 2008, with the remainder in 2009, the company confirmed today.

Logica produced a better than expected increase in revenue to £3.6bn for the year to December 31, but pre-tax profits dropped 48% to £43.8m

Commenting on this, Andy Green CEO of Logica said “We will be increasing our investment in growing the Logica business, funded by a cost-cutting programme that will reduce overheads. I am confident that this plan will allow us to outperform the market and revitalise Logica.”

Green, who joined the Anglo-Dutch concern on 1 January 2008 from BT, has outlined his plan for growth. The main areas for investment are sales and marketing, consulting, and a focus on high growth areas such as automated metering infrastructure and security, both of which are expected to grow faster than the market over the next few years. 

“Consulting resource will increase from 2,500 to 3,500 by 2010. Outsourcing will be our fastest growing area, increasing its share of Group revenue towards 35%” the company said in a statement.

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The vendor maintains that its European outsourcing customers are increasingly demanding a blended delivery model, that calls for a cost-effective balance of onshore, nearshore and offshore resources.

The CEO earmarked workforce reduction as one way the business will work to reduce costs and as many as 1,300 jobs will go in Europe, many from Holland. In the UK, the company anticipates that this programme could impact approximately 500 employees.

Conversely, its headcount in India is expected to double and other offshore locations like the Philippines will be ramped as well. Logica also expects to see growth in near-shore centres like Morocco and the Czech and Slovak Republics. Logica currently has a staff of 39,000.

The services vendor is said to be confident that it can outperform the IT services market in 2009, which is forecast to decline modestly.

 

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