Logica Plc on Wednesday celebrated the tenth birthday of its international telecommunications tariffs survey, Tarifica, which has been providing those who care with various PTT’s tariff information every two months for the past decade. The publication combines updated statistics, prices and textual reviews of the major national PTTs and has provided Logica with a small but lucrative revenue stream for next to nothing, and from what is essentially the statistical flotsam of its own in-house market research. Over tea and slices of Logica-flavoured birthday cake, chairman Philip Hughes sounded confident that City investors would not be disappointed with his company’s financial performance for the first six months of the current year, the results of which should be made public within the next few weeks. Analysts are looking for a pre-tax figure of somewhere between UKP10m and UKP11m for the full year in this, its first full year since disposing of the troublesome VTS office systems manufacturing subsidiary. It was VTS which, in the year to June 1985, caused pre-tax results for the group fall dramatically to a UKP2.33m loss, after profits in 1984 of UKP5.22m. In the year to June 30 1986, VTS was closed and the remains of its business sold or given away – that allowed Logica to resurface with UKP6.8m pre-tax profits, proving that it could still do what it was best at produce software systems. The current year should see Logica with profits in excess of UKP10m placing the shares, currently traded at 290 pence on a prospective price-earnings multiple of 20 times. That may seem expensive in comparison to the sector’s historical average of 16.5 times but the software houses are usually more highly rated: CAP is traded at 26.5 times historical earnings; and even the troubled Systems Designers – which suffered two sharp share price falls last year as the brokers, and then the company, went pessimistically public on its own profits forecasts – is traded on a historical multiple of 23.5. Logica should at least be at parity with CAP, implying a share price of closer to 350p than the current 290. It seems unlikely now that there will be a great deal of movement upwards for two reasons: firstly, it will have to be exceptionally good results that cause any price rise as investors are already expecting good results; secondly, the shares have already had a strong rise following British Aerospace’s dawn raid on Systems Designers. Aerospace took a stake of just below 15% of Systems Designers last Tuesday morning, paying 98p for shares traded at 77p. Logica was caught up in the limelight and saw its own shares rise 22p on the day to end at 292p. We still see Logica as a worthy investment.
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