Logica UK ‘star performer’ as orders crash

“What planet is this guy on?” was the unexpected interruption to Logica CFO, Himanshu Raja’s opening comments on the Q1 investor call this morning, as (I assume) technical gremlins left caller lines unmuted. What prompted this outburst was Raja’s comment that orders were off to a ‘solid start’ which, it must be said, rather jars with the reported 24% yoy decline in Q1 orders worldwide, and a massive 80% drop in the UK!

Raja made heroic efforts to put a positive spin on the numbers, mitigating Logica’s performance based on unfavourable ‘comps’ (i.e. bumper numbers for the year-ago period), fewer working days, and economic and political turmoil throughout Europe. But I’m not sure many were placated.

So let’s look at the headline numbers. Worldwide revenues were flat (like for like) at £971m, contrasting with Capgemini’s 4% like-for-like rise. Yes, Logica UK was the ‘star performer’ in terms of revenue growth – up by 7% to £191m, ahead of Capgemini’s organic UK growth of 4% (see Capgemini UK and its two 'halves').

But UK order intake fell off the proverbial cliff, plunging from £515m to £101m as Logica won no new major deals of the likes of SOCA (see here) and Shell (see here).  Indeed Raja stressed the point that there are now very few £100m+ deals up for grabs – perhaps a few towards the end of the year and into 2013; the pipeline mostly contained smaller and medium size opportunities.

Raja confirmed CEO Andy Green’s prior FY guidance of flat revenues (plus or minus 2%) and a boost to last year’s 6.5% operating margin. I have made my views on this very clear in Logica's margin challenge – 2012. We will undoubtedly have more to say in due course.