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Logica lifts profits 54% despite Y2K downturn

Bill McIntosh
Thursday 07 September 2000 00:00 BST
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Exponential growth in the use of mobile phone text messages pushed up full-year pretax profits at Logica, the software firm whose programs dominate applications in the telecoms sector, by 54 per cent to £97.4m.

Exponential growth in the use of mobile phone text messages pushed up full-year pretax profits at Logica, the software firm whose programs dominate applications in the telecoms sector, by 54 per cent to £97.4m.

It marked the seventh straight year that earnings gains have exceeded 40 per cent. The extension of that strong run came despite a sharp post-Y2K downturn in demand for the software and services Logica supplies to financial services firms. Martin Read, chief executive, said: "Clearly we've had a lot of growth in short messaging systems [SMS] and that growth is set to continue. But it's not just SMS; we've already started to secure the first third-generation system contracts."

Telecoms services and software sales jumped 69 per cent to £343m for the year to the end of June, a rise that was partly softened by the strength of sterling. Within telecoms, sales to mobile network operators, driven by SMS software, doubled to £189m. "The growth in the short term will come through GSM messaging, prepay and roaming," Mr Read said. "That's not dependent on third-generation applications. Our position is strong across the board."

Despite surpassing analysts' forecasts of £95m Logica stock succumbed to a weaker technology sector and profit-taking. Its shares eased 37p to 2,138p.

However, the post-Y2K slowdown hit revenues from finance sector customers, which fell 21 per cent to £120m. Mr Read was hesitant about predicting a rebound, but expressed confidence that the sector had bottomed out. "We're being cautious. Earlier we thought [financial sector sales] would recover faster but we misread that. It will still be a good area."

Logica said that future orders stand at £1bn, up 40 per cent. Among them is a £50m-plus order to design, build and operate a new electricity trading system in England and Wales.

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