Logica feels public sector pinch

8 August 2011

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8 August 2011 | Adam Leach

Public sector spending cuts hit profits at Anglo-Dutch IT and consultancy firm Logica, according to its financial results.

The company, which has contracts with the UK government, saw profits fall by £112 million in the first half of this year. Revenues in the public sector dropped by £23 million or four per cent for the same period, with activity in the UK and Benelux region hit particularly hard. UK revenue for the company for the first six months of the year dropped by two per cent (based on actual revenues) with Benelux revenue dropping by six per cent.

Logica CEO Andy Green said: “Our public sector clients continued to implement spending cuts, with a particularly sharp decline in the Netherlands leading to disappointing profitability in the Benelux region. Margin improvement is now dependent on progress in Benelux.”

In September, the company, which provides IT services to the Metropolitan Police and Foreign & Commonwealth Office, agreed to renegotiate existing contracts with the government. Following meetings with cabinet office minister Francis Maude, it agreed to continue to run all its contracts while making efficiency savings.

Overall, Logica saw profits fall to £113 million from £125 million last year, which meant its operating profit margin contracted by one per cent to 5.7 per cent. The company’s results said poor performance in the Benelux region, transitional costs in Sweden (where it has outsourced certain operations) and £20 million restructuring costs contributed to the drop. 

In contrast, activity in the media and telecoms sector grew by 17 per cent compared with the first half of last year, holding an overall share of 9 per cent of company revenues.

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