Logica accelerates offshore delivery into Continental Europe

(By Anthony Miller – Wednesday 25th Feb. ’09 7:50am). There’s much to congratulate Logica CEO Andy Green about in today’s prelims (see here) but what really caught my eye was the following statement: “For the first time, the absolute number of offshore resources being deployed on customer projects into mainland Europe exceeded those working into the UK.” There’s a very clear message here for the ‘nay-sayers’ sceptical about the disposition of European companies to push work offshore. Indeed, Logica boosted ‘nearshore and offshore’ headcount to 5,000 (~13% of group headcount) of which 3,700 are in India. It’s still a long haul to take the total number up to the 8,000 target for 2009 that Green set in his major strategy statement last year, but now the number starts to look achievable. UK offshore mix rose from 17% in April ’08 to 23% and looks set to beat the 25% ’09 target. This is just great progress.

At first blush the FY numbers look good – indeed beating prior guidance. ‘Proforma’ growth was 5% and ‘adjusted’ margins hit 7.5%. UK revenues (20% of the group) grew 7% - sharing pole position with Nordics (28% of group revenues), and UK margins substantially recovered from the 4.6% in ‘07 to 7.8%. Weakest growth came from Netherlands (20% of group) and Germany (6% of group), both at 2% proforma. Nordics also had the best margins (8.8%) albeit down 40bps yoy. Public Sector and Energy & Utilities were the star verticals, growing 12% and 10% respectively proforma. Financial Services fell back 2%. It was slightly disappointing to see the outsourcing mix only rise 1% to 32%, somewhat short of Green’s 35% target.

Like some other players, management is taking a more cautious view on ’09 guidance, giving visibility just to the first half. That being said, overall progress certainly looks encouraging.

It always has to be said that the devil is in the (extensive) detail – especially on margins, which exclude most restructuring costs. I will be poring through the numbers during the course of the day and also speaking to Logica UK MD, Joe Hemming. More later.