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Posts full-year revenues of £1.66B, a 2.2% decline from the previous year
March 2, 2005
LONDON --
Strong full year book-to-bill ratio of 1.13:1
Return to organic revenue growth in second half
Full year cash conversion of 104%
IT Services (86% of Group revenues):
Strong performance in UK (41% of Group revenues), notably in public sector
Sustained revenue growth in Benelux (24% of Group revenues)
Germany (6% of Group revenues) delivered restructuring to tight timetable and with stable second half revenues
Outsourcing grew from 20% to 23% of Group revenues
Edinfor acquisition with EUR 510 million outsourcing contract - expected completion March 2005
Wireless Networks (14% of Group revenues):
Increased revenues in second half and cost reduction programme delivered small full year profit from continuing operations
Disposal of loss-making businesses underpins improvement in 2005
Final dividend raised 2.9% to 3.5p
Commenting on the results, Dr Martin Read, Chief Executive, said:
"We closed 2004 with a strong book-to-bill ratio and a return to organic growth during the second half. We began this year with a good pipeline and expect to further strengthen the order book in the first quarter. We have also signed our largest ever outsourcing contract with Energias de Portugal and look to increase the momentum in our outsourcing business.
"In Wireless Networks we began 2005 with a significantly lower cost base, an improved mix of business and a solid revenue stream from long term service contracts.
"Overall, we expect to make significant progress in 2005, benefiting from the initiatives we have put in place during 2004."
Financial Headlines
For the year ended 31 December 2004, LogicaCMG plc financial results were as follows:
Book-to-bill ratio at 1.13:1 (2003: 1.12:1)
Revenues from continuing operations were GBP1,658.4 million (2.2% lower than 2003), with 6.2% organic growth in second half
Adjusted operating profit was GBP111.3 million (down 0.4% on 2003)
Statutory operating profit was GBP67.7 million (2003: loss of GBP19.8 million)
Group adjusted operating margin was 6.7% (up from 6.6% in 2003); 7.4% in second half
IT services adjusted operating margin at 7.8% (up from 7.2% in 2003); 8.0% in second half
Wireless Networks adjusted operating margin at 0.3% (3.4% in 2003); 4.5% in second half
Adjusted profit before tax was GBP97.2 million (2.8% lower than 2003)
Statutory profit before tax was GBP42.4 million (2003: loss of GBP33.0 million)
Adjusted operating cash flow was GBP113.6 million, giving a cash conversion of 104%
Basic earnings per share was 1.9p compared to (6.3)p in 2003
Adjusted basic earnings per share of 9.0p compared with 9.3p in 2003
Net debt at 31 December 2004 stood at GBP194.5 million (2003: GBP177.4 million)
Final dividend of 3.5p (2003: 3.4p), making a total for the year of 5.8p
Notes:
1. Adjusted results are from continuing operations and, where applicable, before goodwill amortisation, restructuring charges and other exceptional items.
2. Adjusted operating cash flow is from continuing and discontinued operations and before project financing, cash outflows from restructuring charges and other exceptional items.
3. 2003 comparatives have been restated, where applicable, for the effect of discontinued operations.
STATEMENT OF FULL YEAR RESULTS 2004
INTRODUCTION
The IT Services market generally saw a gradual recovery in 2004, which is expected to continue in 2005. IT services companies with a strong position in the public sector tended to fare best and LogicaCMG was no exception, posting year on year revenue growth of 17% in that part of our business. We continue to perform strongly in the UK and Benelux, our largest territories.
The best growth opportunities remain concentrated in the outsourcing arena where LogicaCMG continues to make good progress. The proportion of Group revenues derived from long-term outsourcing contracts rose from 20% to 23% during 2004 and we expect to make further progress in 2005, benefiting from the recent contract with Energias de Portugal and other initiatives. The acquisition of Edinfor, announced in January 2005 and expected to be completed shortly, strengthens our global energy and utilities business and should be modestly earnings accretive in 2005.
We made good progress with cost reduction in Germany, achieving the tight timetable for our restructuring, refocusing the business and thereby establishing a sound basis for better performance this year. In France, rates remained under pressure in a tough market. We continue to work on the business mix to create a more differentiated business capable of delivering sustainable profits. However, against the market backdrop, we were unable to make any significant progress during the second half of 2004. We have therefore taken action to reduce overheads and increase utilisation rates while we intensify our efforts to reposition the business.
Nearly all territories returned to revenue growth in the second half of the year. Moreover, sectors that were badly affected by the downturn of recent years, such as financial services and energy & utilities, also grew strongly in the second half. These are encouraging milestones in returning the IT services business to sustained organic growth. They also underpin our recruitment plans, including our aim to double the size of our offshore facility in India again in the current year to more than 2,000 people. We have recently opened a new facility in Bangalore that provides our growing workforce with a state-of-the-art working environment.
The process of building customers and volumes in new multimedia services continues to take time for the mobile operators, although we are beginning to install more significant capacity for a number of the most innovative companies. After a difficult start to the year, our Wireless Networks business increased its revenues in line with normal seasonality during the second half and, coupled with the benefits of cost cutting, the continuing operations made a small profit for the full year.
LogicaCMG is well positioned in 2005 to help its customers achieve their business goals. We are continuing to build our low cost delivery capability in multiple centres around the globe, whilst deepening our domain knowledge in our chosen sectors and service streams.
OUTLOOK
In IT services we entered 2005 against the backdrop of a strong book-to-bill ratio for 2004 as a whole and a return to organic growth during the second half. With a good pipeline, we expect to further strengthen the order book in the first quarter. Helped by gradually improving markets, our UK and Benelux businesses should continue to perform well. France remains challenging but initiatives are underway to improve performance. Germany continues to make good progress and the restructuring programme has established a sound basis for further improvement this year.
In Wireless Networks we began 2005 with a significantly lower cost base, an improved mix of business and a solid revenue stream from long term service contracts. With demand for new technology offerings gradually increasing, we expect to improve the profitability of this business in 2005 as a whole.
Overall, we expect to make significant progress in 2005, benefiting from the initiatives we have put in place during 2004.
LogicaCMG plc
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