Logica Plc has reported discouraging interims with turnover at UKP91.3m, up 16% on last year, and profits down 19% to UKP6.02m. The company has also announced that chairman and founder, Philip Hughes, is stepping down at the next annual general meeting in November, although he will stay on as a non-executive director. Logica says that disappointing profit margins are entirely due to a poor performance in the US, which made an unspecified small loss, and contributed only 14% of revenue compared with 22% in March last year (CI No 1,137). US operations suffered from a lack of new business to compensate for the scheduled run-down of major projects, but also from what Logica describes as unsatisfactory project situations. Logica Data Architects Inc had to halt work on the San Francisco Bay Area Rapid Transit subway system in December (CI No 1,325), but Hughes says the situation has eased and the two companies are now discussing the disputed bills. Logica has also lost money on a fixed price contract on the Eastern seaboard, but says it has taken appropriate action to reduce costs and forecasts that the second half will see a turnaround in the US. The UK continues to form the backbone of business, contributing 46% of revenue. This is followed by continental Europe with 25%, an increase of 4% on the same period last year. Logica says that the Netherlands produced particularly satisfying results with revenue up by 30%, and European growth was generally good. However, France and West Germany remain weak spots. Germany had a difficult six months with a bad profit performance, largely because a team was kept on standby while a project with the Swiss Stock Exchange was delayed. Hughes believes that Logica should have a larger presence in both France and Germany, and acknowledges the logic of an acquisition, but he is uncertain whether it will actually lead to any action. Japan accounted for 5% of revenue, up 1% from September last year when the company said it was hoping to establish a permanent presence. Its business is mainly systems development for IBM Japan and the Japanese banks, but a permanent base has yet to materialise, although discussions are taking place.
Space-related activities
As regards revenue by client sector, finance is 31%, followed by computing and electronics with 14%, defence at 10%, energy and utilities with 9%, and space at 5%. Space has increased from 2% last March, and defence has fallen 1% from the year end results in September (CI No 1,268). Hughes believes that space-related activities will continue to grow, and says that the low period was primarily due to the Government virtually pulling out of the Columbus project, which had a very negative effect. Defence is still very significant, and Logica has just announced a contract with the UK Cabinet Office to install a DEC-based turnkey office automation and information management system. Although consultancy contributes 28% to worldwide revenue, the company is winding up Logica Consultancy Ltd and integrating the various specialists into other divisions. Logica Consultancy has experienced losses over the past six months, and Hughes says that there was a shortage of work. Is Logica more vulnerable to a takeover bid now that he has announced his departure? Hughes thinks not, and says that his successors are no less committed than he to keeping the company independent. The City reacted quickly to Logica’s results, and the share price fell 42 pence to UKP2.52. Philip Hughes of course has a parallel career as a painter, and a retrospective exhibition of his work sponsored by the company would make a suitable envoi on his departure – and if Logica at any time has any spare cash, investment in Hughes originals would probably serve shareholders better than the feeble if fashionable US passion of buying in its own shares.
