The key to Logica's success is increasing sales faster than its payroll. Last year's warning was prompted by a recruitment shortfall, which raised fears that the company's growth would be restrained by skills shortages. Those worries now look overblown. Revenues increased by 46 per cent on staff numbers up by about a third.
Chief executive Martin Read waxes lyrical about his strategy of aiming the company at three key markets - finance, telecoms and utilities - while concentrating on projects which can be repeated several times over in different countries. So, for example, Logica is selling systems developed for the UK electricity industry - especially those designed to cope with competition in the domestic electricity market - to utilities in the US.
Acquisitions chipped in profits of pounds 1.66m on sales of pounds 18.3m. The French business, which gives Logica a customer base it can sell its services to, has low margins but they are improving. And Aldiscon, the telecom software supplier Logica bought last year, lifted revenues by 61 per cent even though it has yet to reap the benefits of cross-selling to Logica's existing customer base. Further deals, especially in the US, are a priority going forward.
Despite their meteoric rise, Logica shares still trade at a discount to other groups such as Sema and CMG. Upgraded forecasts predict full- year profits of about pounds 40m - a forward p/e ratio of 34. Still, at these heady levels, other companies' ratings are more likely to fall than Logica's is to rise. A solid hold.