Logica more upbeat on 2009 than peers
Restructuring over the past year has helped Logica to report better than expected results for FY 2008, with revenue up 5% to £3.59 billion, and an operating margin of 7.5%. It now expects to generate growth of 10% in 1H09 (due to benefits from the UK currency) and modest growth in FY 2009, which is certainly more optimistic than some of its rivals.
Logica's chief executive Andy Green has arguably had a fortuitous headstart on his peers in preparing for the downturn. Having been brought on board in October 2007 to turnaround Logica's then ailing performance, Green got straight to work putting considerable emphasis on low-cost delivery from offshore, and accelerating Logica's outsourcing activities to generate a greater share of recurring revenue. This has also meant a focus on cost reduction onshore where 1,300 roles are to be cut, amounting to around 3% of its workforce.
Cost savings and a focus on sales growth pay dividends
Logica has trimmed £25 million of costs in 2008, and this is going to be accelerated further in 2009 to £75 million (up from the previous plan of £50 million). In 2010, this will grow to £110 million in annual savings (up from its previous plan of £80 million). We expect the brunt of the cost cutting will take place onshore as it beefs up its presence in low-cost territories. This shows that Logica is responding positively to the challenges in the broader economy. It also shows a recognition that offshore/nearshore delivery is not going away, and in fact will very likely accelerate during the down times to come. To this end, nearshore and offshore headcount now stands at 5,000 people (or 12% of the current workforce) and this is destined to grow to 8,000 by the end of 2009 (or around 20% of the workforce).
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