UPDATE: Logica 3Q Revenue, Orders Up; Keeps Fiscal Year Margin Guidance

Anglo-Dutch computer services group Logica PLC (LOG.LN) Wednesday posted higher revenues and orders for the third quarter as it secured more outsourcing work, and maintained its full-year margin guidance, helped in part by further cost-cutting.

Logica, which provides consulting, outsourcing and information technology services to companies in Europe, said it would further cut costs in markets with weaker demand, such as Benelux and Sweden. The cuts will result in cost savings of GBP15 million from next year, although there will be a one-off cost of about GBP20 million in 2009.

The company is already undertaking a GBP145 million cost-cutting program by 2010.

Revenue rose 2% to GBP862 million in the quarter ended Sept. 30, up from GBP845 million a year earlier and ahead of market expectations of about GBP853 million.

Pro forma revenue--which strips out acquisitions and disposals as well as currency movements--fell 4% over the same period, hurt by the tough trading environment, particularly in Benelux and Sweden. In the second quarter of 2009, revenue was up 2%, but on a pro forma basis revenue was down 4%.

Logica revised its pro forma revenue guidance for 2009, forecasting a decline of around 3% compared with its previous guidance for a fall of around 2%. Prior to Wednesday's trading update, the market was expecting a 4% fall, Chief Financial Officer Seamus Keating told reporters on a conference call.

Logica, which counts Airbus, Finnair Oyj AKT (FNNNF), Statoil SA (STO.OS), Coca-Cola Co. (KO), Cie Generale des Etablissements Michelin (ML.FR) and the U.K. Ministry of Defence among its customers, reported a 16% jump in third-quarter orders. On a pro forma basis, orders were up 6%.

At 0856 GMT, Logica shares were up 5 pence, or 1.2%, at 120 pence, valuing the company at GBP1.92 billion, in a higher London market. The stock has risen 74% since January on hopes of improving trading conditions.

KBC Peel Hunt analyst Simon Strong said the group's "outsourcing strength has been offset by consulting weakness." While more cost is coming out of the business, Strong foresees "increasing risk servicing the government sector." He retains a hold rating on the stock and a 95 pence target price.

The company, which competes with International Business Machines Corp. (IBM), and France's CapGemini (CAP.FR) and Atos Origin (ATO.FR), said outsourcing revenue rose 11% to GBP329 million in the third quarter, as companies and governments seek out cost savings during the tough trading environment by outsourcing IT work.

The U.K. remains the group's strongest performer with revenue up 7%, driven by strong demand from government departments for its services. But Benelux and Sweden continued to struggle with revenue down 23% and 6%, respectively.

The group maintained its full-year margin guidance of around 7.5%.

Chief Executive Andy Green said in a statement that the group's "pipeline of outsourcing opportunities remains strong, balanced by continued market weakness in consulting and professional services."

Logica will report its 2009 results on Feb. 24.

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; [e-mail]