LogicaCMG Reports Revenue Fall

LONDON --

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:

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