Logica says it will return to profit growth

City A.M. Reporter
IT SERVICES firm Logica said it will return to growth in 2011 as its main UK and Dutch markets recover and consulting picks up pace after reporting a flat profit for the last year.

Chief executive Andy Green said the level of growth would depend on the economic recovery in Europe, but he expected to see an improvement in the Anglo-Dutch company’s home markets and a stronger performance in consulting.

He said: “We are expecting between one and three per cent economic growth across most of our markets; we expect to do a bit better than that. A point or two more than that.”

He also said he expected “modest” margin improvement after two years of stable margins of 7.4 per cent, when Logica cuts costs to tackle a drop in demand for major IT projects. He said: “This is the year when we believe we can start to move the margins up.”

Brokerage Numis said the sting in the tail was a £30m restructuring charge that would drag first-half margins below the level seen a year ago, meaning the group would have to deliver a challenging second-half margin of more than nine per cent.

Numis said: “The demand backdrop is improving, costs appear well controlled and Logica’s improvement is gathering momentum, but this first half outlook feels like it has taken the wind out of Logica’s sails.”

The European environment for IT services has started to improve after a tough two years when companies cut IT upgrade projects to save costs.

Logica’s rival Cap Gemini has guided for nine to ten per cent revenue growth this year and Atos Origin is also looking for growth.

Logica has received a boost from banks seeking guidance on how to comply with tough new regulation.