annual report and accounts 2007 - jaarverslag · programme for rwe npower’s retail business in...

Lars has a question.

Annual report and accounts2007

R e l e a s i n g y o u r p o t e n t i a l

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Jean-Luc helps to find the answer.

Our customer approach is based on having a strong local presence in our core European geographies, with account facing teams well positioned to help guide their clients to the right answers from across the Logica organisation.

Rebecca’s team are building the solution.

Our teams work across geographies, combining their deep industry knowledge and technology expertise to deliver the best solution to meet their customers’ needs.

Manish and Peter are testing it.

We continue to invest in our blended mix of onsite, onshore, nearshore and offshore resources to ensure we service our customers in the most efficient way.

The implementation affects thousands.

We recognise that the effective implementation of technology solutions and services is critical to our customers’ business success.

It will reduce Lars’ costs, manage his risks and bring his product to market faster.

By entrusting their processes, and often their people, to us our customers are able to focus on their core business and launch their products and services faster and more effectively.

And we keep it working.

It works.

It’s our ability to transform our customers’ businesses that lies at the heart of what we do.

We are Logica.

In this report:

10 Business review11 Logica key metrics12 Our markets by industry16 Our presence

33 Governance34 Chairman and CEO’s statements 36 Board of Directors38 Executive Committee40 Report of the Directors44 Corporate governance report54 Risk factors 56 Report of the Remuneration Committee74 Group key performance indicators

77 Responsibility

83 Financial statements84 Our markets by geography86 Financial review96 Financial statements and notes 160 Euro translation of selected financial information163 Five year summary

165 Shareholder information

Business review Governance Responsibility Financial statements Shareholder information

9

Logica Annual report and accounts 2007

10

Business review

Logica – the new name for LogicaCMG – is a leading European IT and business services company with an established international presence which meets our customers’ needs.

We work closely with our customers to release their potential – enabling change that increases their efficiency, accelerates growth and manages risk. Using our deep industry knowledge, technical excellence and global delivery expertise, we help our customers build leadership positions in their markets.

P 11P 11 This is Logica

P 12P 12 Our markets by industry

P 16P 16 Our presence

P 18P 18 Where we are active

P 24P 24 How we deliver our services

P 29P 29 How we manage and measure our performance

P 31P 31 Our future direction

In this review:


11

This is Logica

Who are our customers

TheyaremainlyEuropeanheadquarteredcompanies,withreachbeyondtheEuropeanmarket.WealsohaveastrongpresenceinthepublicsectoracrossEurope.

Our principal services

Consultancy and professional services Logica’smanagementconsultingpracticeispartofourfull-servicepropositionforITandbusinessservices.Wepinpointspecificrequirementsanddeveloppragmaticsolutions.Ourinternationalteamsactasacatalystforchangethroughthedeliveryofend-to-endtransformationalprogrammes.WealsoprovideourcustomerswithdedicatedtechnologyconsultantswithspecialistindustryknowledgeacrossallmajormarketsectorstoaddresstheirspecificITrequirements.

Systems integration and development Logicaishighlyregardedasavendor-independentsystemsintegrator.Weareaneffectivepartnerforleadingsoftwareproviders,suchasMicrosoft,OracleandSAP,contributingexcellenttechnicalskillsandcomprehensiveindustryknowledgetocustomerslookingtoutilisethesecorebusinesssoftwarepackages.Wedevelopbespokesystemsorintegrateexistingsystemsasneededtomeetcustomerobjectives.

IT and business process outsourcingLogicaoffersafullrangeofIToutsourcingandbusinessprocesssolutionsandservices.Wecombineonsite,onshore,nearshoreandoffshoreresourcesthroughourblendedsourcingmodeltodeliverhighqualityservicescosteffectivelyandefficiently.

We focus on five industry sectors

Wearedeeplyembeddedinourchosenmarketsandshareskillsacrossthem.Forexample,wedevelopandmanagebillingsystemsineachofourkeysectors.InEnergy and Utilitieswearefurtheringtheenvironmentalandbusinessagendawithsmartmeteringandemissionsmanagementsolutions.InFinancial ServicesweareleadingthetransitiontoSEPApaymentsprocessingandMiFID,whileoursharedservicecentresaremanagingcomplexglobalITsystemsforbanksandinsurancecompanies.IntheIndustry, Distribution and Transportsectorwearetransformingsupplychainsforglobalbusinessesprimarilyinthetransport,retailandmanufacturingsectors.WeareactivepartnerswithPublic Sector agenciesacrossEurope.InTelecoms and Mediaourprojectsareenablingourcustomerstorespondbettertoconvergence.

P 12P 12 See pages 12 to 15 for more detail on our markets by industry

Revenue by market sector (pro forma growth)

£3,073m+3%

E&U£482m+4%

IDT£921m+4%

FS£565m+5%

T£232m–19%

PS £873m+8%

IDT Industry, Distribution and Transport

PS Public Sector FS Financial Services E&U Energy and Utilities T Telecoms and Media

Throughout this report, Key Performance Indicators (KPIs) are denoted by the symbol

See pages 74 and 75 for a glossary of our KPIs

P 74P 74

Revenue

3.1bn£

(2006 restated: £2.4 billion)

Adjusted operating profit*

208m£

(2006 restated: £203 million)

Operating profit

110m£

(2006 restated: £142 million)

Employees

39,000(2006 continuing operations: 39,000)

Logica key metrics 2007

*Adefinitionofadjustedoperatingprofitissetoutonpage111(Note8)


12

Our markets by industry

12

We have deep knowledge across five industry sectors. Each sector accounts for between 8% and 30% of Group revenue. £00m

0%Revenue split by geography and pro forma growth

Percentage revenue growth in 2007 (pro forma)

Total revenue

UK United KingdomNor Nordics NL Netherlands FR France DE Germany Int International

Revenue (Numbers rounded to nearest £million)

Industry, Distribution and Transport

30% of total Group revenue

Revenue Top five clients

ApoteketCarrefourDeutsche Post World Net EADSFord£921m

+4%

UK £89m-35%

NL£106m+3%

Nor£383m+14%

FR£221m+7%

DE£72m+5%

Int£50m+41%

Public Sector



UK Crown Prosecution ServiceUK Ministry of DefenceSwedish Ministry of Defence Dutch Social Economic Domain UK NHS £873m

+8%

UK £372m+10%

NL£146m+19%

Nor£252m+2%

FR£64m+5%

DE£6m-50%

Int£33m+7%


1313

Principal services Highlights of 2007 Looking aheadKey services we provide to our customers within this sector

Some of the most important projects within this sector in the last 12 months

Key anticipated trends within this sector

Continues

Principal services Highlights of 2007 Looking aheadIntelligent transport systems (ITS) including road pricing, smart card ticketing services, traffic management and smart logistics

Manufacturing IT including manufacturing executive systems (MES) and product life cycle management (PLM)

IT excellence and business transformation

Enterprise resource planning (ERP) implementations with a strong focus on SAP

Smart card ticketing services for Scottish Executive and Centro in the UK.

Mobile ticketing on trains and platforms for French national carrier SNCF.

Application Management Services (AMS) for road pricing and back office systems at Transurban, Australia.

Road pricing back office system for Movenience in the Netherlands.

Transport and logistics companies continue to require sustainable mobility services. In the transport area, ticketing and traffic management applications using Near Field Communications (NFC) and Galileo-based location services will become increasingly important.

In the retail sector, multi-channel convergence solutions and in manufacturing, large-scale international consolidation, together with MES and PLM projects, will be our focus.

Principal services Highlights of 2007 Looking aheadCase Management, Information Management and Data Sharing

Shared Services

e-Services

Security

Business Intelligence

Training

Transforming Health and Safety and delivering secure military satellite communications across the UK Ministry of Defence.

Applications services for the UK Home Office and web platform for the UK Foreign and Commonwealth Office.

Outsourced applications services for the Dutch Center for Work and Income (CWI).

Enhancing Social Care and improving health services with electronic patient record management in Sweden.

There is a growing emphasis on delivering better services more efficiently to businesses and citizens, based on information sharing, shared services and e-services.

We are committed to providing applications services and innovative solutions to our customers to meet their needs, deliver transformation and achieve tangible business benefits.


1414

Our markets by industry (continued)

Telecoms and Media



BTFrance TelecomTelefonica TeliasoneraVodafone£232m

-19%

UK £36m-34%

NL£27m+3%

Nor£65m-19%FR

£55m+11%

DE£22m-11%

Int£27m-46%

Energy and Utilities



ShellEnergias de PortugalElectricite de FranceTotalE.ON£482m

+4%

UK £105m

–

NL£51m+2%

Nor£50m-1%

FR£86m+29%

DE£25m+2%

Int£165m

-1%

Financial Services



ABN AMROBarclays BankBNP ParibasINGRabobank£565m

+5%

UK £61m-29%

NL£156m+5%

Nor£87m+14%

FR£161m+11%

DE£53m+59%

Int£47m+2%


1515

Principal services Highlights of 2007 Looking aheadOperational and business support systems (OSS and BSS)

Service fulfilment, service assurance, network inventory management solutions

Billing

Managed Virtual Network Operators (MVNO)

Customer relationship management (CRM) and business intelligence (BI)

Content, media and next-generation services

A €40 million HR outsourcing contract with KPN, the leading Dutch telco (see page 25).

Delivery of a complete MVNO solution for Swisscom and Migros within 11 weeks.

Design, development and operation of a complete IT, BSS and VAS (value added services) environment for a new operator in Malaysia.

We are continually developing our portfolio of services and solutions to meet the growing needs of full-service communications providers and the convergence of telco/media markets.

Particular focus will be on enabling telco’s to meet the demanding requirements of differentiation whilst reducing costs of delivery.

Principal services Highlights of 2007 Looking aheadOperational excellence Enterprise asset management (EAM), including mobile workforce management.

Competitive markets Advanced metering, central markets, trading and risk, billing and customer care.

Oil and Gas (upstream and downstream) EAM, supply chain optimisation, commercial, retail operational excellence.

Environment and regulatory compliance Emissions management, energy efficiency, Sarbanes-Oxley.

Designed and delivered the first phase of a wind farm management system for Energias de Portugal, covering over 1,000 wind generators on 48 farms in Portugal and Spain.

Completed a four-year business transformation and migration programme for RWE npower’s retail business in the UK, migrating 4 million customers on time and on budget.

We will continue to deploy advanced information technology to help produce and deliver energy more efficiently and reduce its environmental impact.

Specific areas of focus include renewable energy management, automated meter infrastructure, smart grids, emissions management and registration.

Principal services Highlights of 2007 Looking aheadPayments Processing costs, compliance, SEPA, shared service models.

Business transformation Centralising information platforms, distributing products and processes, developing new models for customer interaction.

Risk and compliance Implementing change programmes that meet regulatory requirements and capture measurable business benefits.

Insurance Insurance core systems, BPO services, hosting, fraud detection, consultancy.

A web-portal for tunemoney.com, the first no-frills online financial services company in Asia.

SEPA-compliant payments solution (Logica All Payments Solution) and associated integration services delivered to a major global bank.

Migrated two international banks from legacy bespoke systems to Logica’s CLS solution.

Piloted a mobile phone payment scheme in the Netherlands.

We will support our customers to respond to rapidly changing market conditions. This includes the necessity to meet new complex regulatory and compliance requirements.

Management of liquidity and payments capabilities will increasingly be a focus and we will bring innovative solutions to meet these needs and to exploit cost and business opportunities.


16

Our presence

16

Many of our European-based customers have operations around the globe. We have offices in 36 countries. We have a leading position in Europe and significant international operations in the United States, Brazil, the Middle East, Asia and Australia. Our global presence allows us to deliver uniform, high-quality services wherever our customers do business.

NetherlandsEmployees: 6,000Offices: 13

UKEmployees: 5,600Offices: 31

NorwayEmployees: 500Offices: 8

SwedenEmployees: 5,400Offices: 46

FinlandEmployees: 2,700Offices: 26

DenmarkEmployees: 700Offices: 8

GermanyEmployees: 2,100Offices: 26

BelgiumEmployees: 500Offices: 1

FranceEmployees: 9,100Offices: 24

We integrate our leading European presence ...

International competencies are shared across the Group. We have in-depth knowledge in five market segments, which are international in scope, and in functional areas common to all industries, such as finance and accounting and human resources. We act as global partners with our customers, offering a full-spectrum service including consultancy, systems integration and IT and business process outsourcing.

Other Europe: (<100 employees)LuxembourgRussiaSwitzerlandUkraine

International locations:AustraliaBrazilCanadaEgyptHong KongIndiaIndonesiaKuwaitMalaysiaMoroccoPhilippinesSaudi ArabiaSingaporeTaiwanUnited Arab EmiratesUSA

CEE(Czech Republic, Hungary, Poland, Slovakia, Estonia)Employees: 300Offices: 9

Spain & PortugalEmployees: 1,400Offices: 8

Figures are rounded to the nearest 100 and include Outsourcing Services employees


1717

Our Outsourcing Services division, established in January 2008, incorporates our previous global service delivery organisation. It includes around 9,000 Logica employees working in our onshore and offshore centres across the globe (see chart above). Our onshore delivery centres in the UK, Netherlands, Nordics, France, Portugal and Australia work closely with our offshore centres to deliver the optimal services to our clients.

Our integrated approach to outsourced service delivery provides maximum flexibility in meeting the differing needs of our European customers, allowing us to meet each one’s prescribed criteria for quality, performance, security and risk. We combine people, processes and technology to deliver integrated, uniform services that mirror each customer’s requirements.

... with a strong international delivery capability

IndiaEmployees: 2,500Countries served: India, UK, Netherlands, Germany, France, Nordics, USA, Australia, MalaysiaKey skills: Applications Development, Applications Management, Product Engineering, ERP Services, Testing Services, Infrastructure Management, Service Desk, BPO

PhilippinesEmployees: 200Countries served: UK, Netherlands, Sweden, Belgium, USAKey skills: BPO, ERP Services, Applications Development

MoroccoEmployees: 250Countries served: France, MoroccoKey skills: Applications Development, Applications Management, Testing Services, ERP Services

CEE (including Estonia)

Employees: 300Countries served: Czech Republic, Slovakia, Hungary, Ukraine, Russia, Croatia, Serbia, Montenegro, Romania, Bulgaria, USAKey skills: Applications Development, Applications Management, Product Engineering, Testing Services, ERP Services

... with a strong international delivery capability

Onshore delivery centresEmployees: 5,000 (see below)

MalaysiaEmployees: 200Countries served: Malaysia, Singapore, Hong Kong, India, Sri Lanka, Indonesia, Thailand, Taiwan, UKKey skills: Application Development, Applications Management, ERP Services, Testing Services, Infrastructure Management, Offshore Services

Onshore

Offshore


18

Where we are activeOur balanced geographic footprint is helping us to create a platform for sustained growth. It allows us to intimately understand the needs of our customers and their local markets.

Our recent acquisitions bring us closer to more customers in Europe

UnilogandWM-datacomplementedLogica’sstrengthstocreateoneofEurope’sleadingITandbusinessservicesorganisations.

WeareproudofourEuropeanheritage.OurUK,Dutch,FrenchandNordicbusinessesgrewintheirrespectiveterritoriesoverthreedecades.FewcompetitorscanmatchthisdepthofknowledgeandexperienceinEurope.

Culturaldistinctivenesshelpsourbusinessbykeepingusclosetoourcustomers.Differentmarketshavedifferentdynamics,usedifferentlanguagesandhavedifferentwaysofapproachingcomplexbusinessproblems.

Business review

About the Q&As

Research and consulting group IDC, a specialist in IT and business services, was commissioned to provide an input to the Logica 2007 Annual report and accounts to share with our investors an external view of the IT and business services market in 2007 and future prospects. This appears as a series of Q&As through this report. The answers represent the views of IDC.

The Q&As can be found as follows through the report:

p18 What does the Western European IT and business services market look like?

p20 Do buying patterns in outsourcing differ by geography and customer type?

p22 What will drive demand growth in IT and business services?

p23 Which are the ‘hot’ areas of end-user demand?

p24 What are the implications of the offshore challenge from India?

p26 Are issues like corporate responsibility and climate change relevant to the IT industry?

p27 How rapidly are IT and business services growing?

p29 What margins are achievable in outsourcing?

p30 How cyclical is the IT and business services industry and where are we in the cycle?

MultinationalorganisationswantITpartnersthatcandeliveraneffectiveservice,reducerisk,managecostandsupporttheminmultipleterritoriesinauniformway.

TheGroup’sservicesandsolutionsaddressdistinctcustomerprioritiesindifferentgeographies.InFrance,forexample,thereisconsiderabledemandforourconsultancyservices,especiallyintheCustomerRelationshipManagement(CRM),BusinessIntelligenceandService-orientatedArchitecture(SOA)arenas.End-to-endservicehasalwaysbeenanimportantstrengthintheNordics:wehaveamarketleadinginfrastructuremanagementcapabilityandareacknowledgedexpertsinMicrosoftsolutionsinthisterritory.

TheUK’stransformationalgovernmentprogrammeplaystoourstrengthasasystemsintegrator–weworkcloselywithpublicsectoragenciesandareoneoftheleadingITandbusinessservicessupplierstotheSpaceandDefencesector.Ourmarketleadingtestingcapabilityisattractingcustomers,notjustintheNetherlandswhereweinitiallydevelopedthisexpertise,butacrossallourgeographies.

What does the Western European IT and business services market look like?

The combined services market in Western Europe was worth $240 billion in 2007; 80% of demand was for IT services, the remaining 20% was for business services.

Project services contracts such as system integration, application development, and IT and business consulting make up 35% of the total, outsourcing contracts account for 45% and support services the remaining 20%.

IDC predicts that outsourcing will account for 50% of the market by 2012, with BPO contracts and payroll processing driving much of the growth. There will be marked geographical variations in that timeframe: the UK will remain easily the most outsourcing-oriented market.

(Source: IDC)

P 86P 86 See page 86 of the Financial review for further details on our financial performance

QA


19

The UK business

Our overall performance in 2007 demonstrated the benefit of a balanced geographic profile. Areas of strength across the Group partly offset a weaker performance elsewhere, such as that of our UK commercial sectors in 2007.

While the UK Public Sector business remained strong, the loss of a transport contract at the end of 2006 created a gap in UK commercial revenue which was difficult to replace. The UK commercial market, an early adopter of outsourcing and offshoring, remained competitive in 2007 and we under-performed the market. We are working to reinvigorate our sales effort in the UK commercial sectors and saw an improvement in Energy and Utilities in the second half of 2007.

Profit was also impacted by the weakness in the commercial sectors, cost provisions taken on a number of contracts and the resolution of a customer dispute.

P 89P 89 See page 89 of the Financial review for further information about the UK operation

Our acquisitions are delivering benefits today

Cost reductionsWearerealisingtheanticipatedcostbenefitsofintegratingUnilogandWM-dataintotheGroup.IntheFrenchandGermanbusinessestheexpectedcostsavingsin2007havebeenrealised.OurNordicoperationin2007achieved£5millioninannualisedcostsavings.Itisexpectedtodeliveranincremental£8millionin2008andannualisedcostsavingsof£15millionby2009.

Integrating Unilog2007wasayearofgoodprogressfortheformerUnilogbusiness.In2006theemphasiswasoncombiningtheUnilogandLogicabusinesses,primarilyinFranceandGermany.Withthisachieved,theemphasischangedduring2007andthroughout2008.WearenowfocusingonintroducingcommonprocessesandsystemswhichwillresultineconomiesofscaleandensuringwemarketpropositionseffectivelyacrosstheGrouptoboostrevenue.

WecontinuetoachieveprofitablegrowthinGermany,withrevenueup9%to£180millionin2007andmarginsof4.5%comparedtoalossin2006.WehavebeenactivelyrecruitingintheGermanmarkettomeetdemand.

TheFrenchoperationperformedstronglyduring2007.Itachieveddouble-digitorganicrevenuegrowth,demonstratingboththebenefitsfromcross-sellingandthattheseniormanagementchangesinthesecondhalfoftheyeardidnotaffectperformance.Werananeffectiverecruitmentcampaignin2007tomeetthegrowthindemandinFrance,exceedingourrecruitmenttargets.

Logica’sinternationalcredibilityispayingdividendsinFrance.Forinstance,CarrefourhadbeenanimportantUnilogclientformanyyearsatnationallevel,butonlynow,aspartofLogica,istheformerUnilogclientabletodiscussitsuseofLogica’swiderinternationalcapability,resultinginsignificantnewbusiness.Logica’sinternationalprofileandwillingnesstoinvestinfuturegrowthhavebeenpivotaltothegrowthinthisaccount.

StronglocaloperationsinfourkeyregionsofEuropealsomakethebusinessmoreresilient:wearelessvulnerabletoadownturninaparticularmarket.OurmorebalancedgeographicprofilemeantthataweakerperformanceintheUKin2007waspartlyoffsetbystrongrevenuegrowthandgoodoperationalperformanceintheNordicsandFrance.

OurInternationalbusiness,whichincludesouroperationsintheUnitedStates,Brazil,Portugal,CEE,theMiddleEast,AsiaandAustralia,enablesustodelivertoEuropeancustomersintheinternationalterritorieswheretheydobusinessandbringsfurtherknowledgeandskillstotheGroup.

WestrengthenedourrelationshipwithleadingFrenchutilitycompanyEDFEnergyandsignedseveralmajorcontractswiththemduringtheyear,whichdemonstratethebreadthofourcapabilities.WewonasignificantdealwithNatixisAssurance:a€15million18-monthconsultancy-ledprojecttosetupnewclaimshandlingprocessingsystems.

France’straditionalstrengthsinapplicationmanagementarenowsupplementedbyaglobaldeliverycapability.WehaveinvestedinouroperationinMoroccowhichhandleslanguage-specificfunctionstoserviceourFrenchoutsourcingclients.

Outsourcingwinsin2007include,amongothers,contractswithLafarge,AirLiquideandCarrefour.ForEADSwearemanagingapplicationsintheUK,Germany,ItalyandFrance.WeareimplementingsystemsforFranceTelecominPolandandtheUK.ForSuezweareworkinginBelgiumaswellasFrance.


20

Business reviewNordic cost savings in 2007

5mIntegrating WM-dataWearegrowingmarketshareintheNordics.Organicrevenuegrowth exceededthemarket,reaching6%in2007.Quarterbyquarter,therehasbeenasubstantialincreaseinthedealpipelinesincetheacquisition.AsaGroupwearebiddingfor,andwinning,largerdealswhichwouldnothavebeenavailabletoWM-dataonitsown.

OurNordicsoperationhasundoubtedlybenefitedfromLogica’sinternationalprofileandbroadercapabilities.InternationalreachwasinstrumentalinprojectwinsatEricsson,NokiaSiemensNetworks,DHLandIKEA.TheGroup’sSAPstrengthshelpedclosedealsatSandvik,YITandtheSwedishSocialInsuranceAgency.

OurleadingManufacturingExecutionSystems(MES)positionhasallowedustocloseprojectswithNokia,MölnlyckeandNutreco.SeveralprojectsalsoincludedevelopmentandtestingcomponentstobedeliveredoutofIndia.InFebruary2008,SwedbankawardedLogicaafive-yearcontractforITdevelopmentandapplicationsmanagement.Undertheagreement,LogicawillsetupadevelopmentandapplicationsmanagementcentreforSwedbankaspartofitsoperationsinBangalore,India.

Theearlystagesoftheintegrationarecomplete.OurfocusnowisonfurtherstreamliningoursystemsandprocessestoensurewegaineconomiesofscaleandleveragingthestrengthsoftheNordicbusiness,suchasitsleadingapproachtoinfrastructuremanagement,aswellasthestrongcapabilitiesandreferencesitcanbringtotherestoftheGroup,suchastheprojectatVattenfall(seeoppositepage).

P 88P 88 See pages 88 to 92 of the Financial review for further information on our Nordic, French and German businesses

Do buying patterns in outsourcing differ by geography and customer type?

Yes. Europe is currently split between an outsourcing fast track in Northern and Western Europe, and a slower track elsewhere.

UK organisations are Europe’s most enthusiastic outsourcers. Outsourcing accounts for 56% of their combined external IT and business services spending and there is much less ‘insourced’ activity. Outsourcing is also reasonably high in the Nordics and Benelux. The picture is more mixed in Germany, Spain and France. Some of the reluctance to outsource in continental European countries has traditionally come from labour-market regulations that make outsourcing expensive and cumbersome, but these regulations are being relaxed as enterprises put pressure on their governments to allow them to adopt structures similar to competitors based in less regulated countries.

(Source: IDC)

QA£

As a Group we are bidding for, and winning, larger deals which would not have been available to WM-data on its own


21

Vattenfall Group supplies energy to five million customers in Germany, the Nordics and Poland. It is Europe’s largest heat generator and its fourth largest electricity supplier.

When Swedish legislators decreed that all energy meters would have to be read at least monthly and set a deadline of July 2009, Vattenfall faced a major replacement programme. It chose to meet its obligations with an ambitious automated metering programme, which would deliver additional customer benefits.

Logica (then WM-data) played a pivotal role in the consortium-led programme which provided a complete turnkey solution. At its heart: WM-data’s AM Connect, which collects meter data over the GPRS network and forwards it to a data management system to be fed directly into billing systems.

By the end of the two-year project, Vattenfall had equipped 150,000 meters for automated reading. Despite very high volumes of data the system has exceeded its reliability targets. It has boosted customer satisfaction and reduced the number of customers querying bills. With all of its meters delivering daily values, the Swedish business can respond much more quickly if problems occur.

Similar systems will be implemented across Europe in the coming years as national governments set tough targets for more frequent metering, leading to increased costs. Vattenfall is one of the first major energy suppliers to incorporate smart metering into its business model. Its automated metering infrastructure is providing it with up-to-date information about energy flows and allowing it to predict and plan for its energy needs with far more certainty and at lower costs.

logica.com/casestudieslogica.com/casestudies

Vattenfall case study: rethinking utilities metering

How our international competencies are helping us to grow our company

Consultancy and professional servicesTheGroup’sManagementConsultingpracticeworkscloselywithfunctionalteamsanddomainspecialiststodeliverservicestailoredtoclients’particularneeds.Someareembeddedindomain-specificteamsandcontributeexpertisetosystemsintegrationanddevelopmentprojects.Othersworkinspecialistconsultinggroups.

Wearearecognisedmarketleaderintheprovisionofhigh-levelconsultancyinarchitectureandsystemsdesign.Thisstrengthhasbeenbuiltonastructurethatalignsspecialistteamsaroundspecificclientneeds.Unlikemanyofourdomain-specificcompetitorsourindustry-specificteamsalsoincludespecialistsinparticularfunctionalareas,suchasfinanceandaccounting,humanresourcesorCRM.

Ourbusinessteamsworkwithourcustomerstodeliververticalindustrysectorexpertise,dedicatedbusinessprocesses,efficientsolutionsandemergingandinnovativetechnologies.

InFrance,Logica’smanagementconsultancycapabilityiswellestablished.Withover1,000consultantsoperatingacrossallthemainmarketsegmentsweareatopfiveconsultancyinthismarket.

WehaveestablishedmanagementconsultancypracticesintheUK,theNetherlands,GermanyandtheNordicsandareapplyingacommonconsultancyframeworkacrossthewholeorganisationtogrowourinternationalconsultingcapability.WehavelaunchedLogicaManagementConsultingasadistinctsub-brandandaredevelopingarangeofconsultancy-ledinternationalbusinesspropositions.

Systems integration and developmentLogicaisarenownedvendor-independentsystemsdeveloperandintegrator.Weactaspartnerstosoftwarehousesandinfrastructureproviders.Wealsoworkwithourcustomerstohelpthemdevelopbespokesystemsorintegrateexistingsystems.

Wepaycloseattentiontotechnologytrendsandmonitorhowtheyimpactourclients’business.Globalisation,industrialisationoftechnologicalprocesses,andsecurityconcernsinaneraofpervasiveinternetconnectivityarefrontofmindforourcustomers.Weunderstandthemarketsowearewellplacedtoanticipatethesetrends.Wearethoughtleadersandinnovatorsinanumberofkeydomains.

Weinvestselectivelytoensurewehavetherighttechnologiesandknow-howinplacetohelpourclientsnavigatethechanginglandscape–bydevelopingnewvalue-creatingbusinessmodels,defendingtheircompetitivepositionandmaximisingtheefficiencyoftheirITestate.


22

Business review

We are a major international force in SAP services, one of the few companies with global partner status, and support more than 100,000 SAP end-users worldwide

SAP WeareamajorinternationalforceinSAPservices,oneofthefewcompanieswithglobalpartnerstatus,andsupportmorethan100,000SAPend-usersworldwide.WeareatopfiveproviderinEurope.OurSAPprofessionals,basedinover20countries,serveaglobalclientbaseofblue-chiporganisations.OurconsultantshaveextensiveexperienceofSAPimplementations.TheyhavetheknowledgeandexpertisetointegrateSAPsoftwareonmanydifferentsystems.

WehavebeenbuildingcloserpartnershipswithSAPandco-developingindustry-specificsolutions.Forinstance,increasedcompetitionandconsolidationinthegasmarketisgeneratingdemandforanintegratedEnterpriseResourcePlanning(ERP)platform,coveringelementsfromboththeUtilitiesandtheOilandGasindustries.

LogicaworkedwithSAPtocombineitsseparateIndustrySolutionsintoacompositesolution.AninternationalteamworkedcloselywithSAP’sproductdevelopmentcentretodesignandbuildanintegratedOilandGasandUtilitiesapplication.ThiswaslaunchedinMay2007:thetwocompaniesareco-marketingthenewsolutionandhaveestablishedastrongglobalpipeline.Followingthissuccess,LogicaandSAPareexploringotherareasforco-innovationinemergingverticalmarkets,notablyFinancialServicesandthePublicSector.

OurstrengthasaninnovatorgainedformalrecognitionduringtheyearwhenLogicawonSAP’sInnovationAwardintheNetherlands.TheawardcitedourEnterpriseSOAworkfortheTrafficandWaterMinistryintheNetherlands.Thesystem,thefirstofitskindfortheMinistry,allowscitizenstogetpermitsacrosstheinternetandmanagesreal-timedataflowsbetweenmultipleparties.Theproductissuitableforanypermitgrantingauthorityandweareexploringanumberofpromisingopportunities.

MicrosoftWedevelopinnovativesolutionsontheMicrosoftEnterpriseplatform.WehaveGoldPartnerstatusinnineseparatecategoriesandmoresoftwaredevelopmentlicencesthananyotherMicrosoftpartner.SixthousandLogicaemployeesworkinthisarea,1,900ofwhomhaveearnedMicrosoftcertifications.During2007,wegainedhighprofileprojectwinsineachofourterritories.Forexample,oursecuritysolutionforUSBsticks,developedinDenmark,wonMicrosoft’sGlobalSecuritySolutionoftheYearawardatitsDenver,Colorado,partnerconferenceinJune.Wealsoimplementedahighlyrefined,MicrosoftDynamics-basedCRMsystemforLaPosteinFranceforusebyitscustomers.NotonlyisthesystemdesignedbyLogica,itisalsomanagedbyusonanoutsourcedbasis.

What will drive demand growth in IT and business services?

From 2001-2005, enterprise spending on IT/BPO services was mainly about cost cutting. Key service lines were outsourcing, offshoring and IT and process consulting.

More recently, enterprises have used IT and BPO as ways to grow their revenues. Both private and public sector organisations are using technology to create online services, improve service quality and stimulate transformational programmes. The key services remain unchanged but they are now supplemented by niche technology deployment such as business intelligence and customer relationship management.

Although cost will remain the decisive factor, larger suppliers – Logica included – need a wide portfolio of services, including business consulting, IT consulting, systems integration and outsourcing services, to meet the changing demands of their major customers as they increasingly look to their IT services suppliers to help them deliver business value.

(Source: IDC)

QA


23

OurSharepoint-baseddocumentmanagementsystemiscurrentlybeingdeployedbyNATO.The22membercountrieswillbeabletoshareinformationseamlessly,greatlyimprovinginternationalcoordinationandWesternsecurity.Anotherdocumentmanagementsolution,acasemanagementsystemfortheUKJusticesystem,isacceleratingcaseprocessingfortheCrownProsecutionService.

OracleLogicahasbeenacertifiedadvantagepartnertoOraclesince1994.WithadedicatedOraclepracticeinEuropeincluding1,400Oracleapplicationsstaff,wehavebeenresponsibleforhundredsofimplementationsworldwide.WearethenumberoneOracleapplicationsoutsourcingproviderinFranceandhavetwicegainedtheprestigioustitleofOracleEuropeanPartneroftheyear.Wehavepracticalexpertiseinallofthekeybusinessandtechnicaldisciplines.WeofferfullcoverageofOracleactivitiesandexpertiseineBusinessSuite,Siebel,PeoplesoftandJDEdwardsrelatedactivities.

WeworkcloselywithOracleonproductdevelopmentandareactiveparticipantsintheOraclecommunity.OurglobalalliancewithOraclepaysdividendsforourcustomers.Thisyear,forinstance,wesignedanagreementforLogica’shumanresourcesandpayrollcustomerstogetpay-as-you-goaccesstoOracleHumanCapitalManagementSoftware,obviatingtheneedforthemtopayupfrontforOraclelicences.OracleawardedusInnovationPartneroftheYearforthework.WewerealsoawardedJointPartneroftheYearwithIBMfordevelopinganon-demandinfrastructureservicethatisidealforoutsourcingcustomers.

IT and Business Process Outsourcing Today’sbusinessesseeoutsourcinginstrategicterms–itisnotsimplyaboutreducingcosts.AsanITandbusinessservicescompanywhichfocusesontheuseoftechnologyforbusinesstransformationthishasalwaysbeenourapproach.Wecandrawonourexperienceofleadingthousandsofsuccessfulprojectstooptimisebusinessprocessesandtoimplementinnovativesolutionsforourcustomers.Weworkcloselywithourcustomerstodelivercost-effectiveoutsourcedservicesthatalsomeettheirstrategicpriorities.

Weprovideoutsourcedapplicationmanagementservicestonumerousbusinesses.OurinfrastructuremanagementcapabilitywashighlycommendedbyForresterResearchinits2007globalsurvey.Forresterhighlightedourclient-centricapproachandstrongEuropeanfocusasparticularstrengths.

Wehavebeenindustrialisingourremoteinfrastructuremanagementservicestopackageuptheseservicesandincreasetheeffectivenessofourblendeddeliverysystem.

OurOracle-basedRemoteInfrastructureManagement(RIM)systemprovidespay-as-you-goflexibilityandwearehelpingtofacilitatebusinesstransformationprogrammesatmajorinternationalbusinesseslikeInBev.

Inbusinessprocessoutsourcing(BPO)wearestronginvalue-addedservices.Ourcombinationofsectorknowledge,functionalexpertiseandglobalresourcesallowustoworkinpartnershipwithourclients.Wearebuildingontheserelationships.ForinstanceinApril2007,inasignificantcontractextensionforfundmanagerThreadneedle,wesuccessfullytransitioneditsemployeestoafullymanaged,SAP-basedpayrollprocessingsystem.

Logica’sstrongHRoutsourcingcapabilitiesaresupportedbysharedservicecentresandoffshorecapacity.Wedesign,developanddelivere-learningacrossEurope,wherewearethethirdlargestserviceprovider.TheLearningandSkillsCouncilrecognisedLogica’sstrengthinthesectorwhenitawardedusamajorcontracttodeliverthenationaleducationalinfrastructureundertheUKGovernment’sManagingInformationAcrossPartners(MIAP)programme.

Which are the ‘hot’ areas of end-user demand?

Areas driving new investments include wireless technologies and fixed/wireless convergence, business intelligence technologies, customer relationship management technologies, new media and Web 2.0 technologies, on-demand and utility IT services, and the ‘software as service’ concept.

Organisations are abandoning custom-built systems in favour of cheaper, off-the shelf solutions, such as the big enterprise software packages from SAP, Microsoft and Oracle. They are looking for full-range services suppliers that combine advisory capabilities with practical implementation skills as well as the ability to run major processes and applications under an outsourcing model. They also expect suppliers to collaborate effectively with other vendors who may often be competitors to deliver complex solutions.

(Source: IDC)

QA


24

Business reviewProcess industrialisationWehavebeensteadilyindustrialisingourprocessestoenhanceourabilitytoaddvalueforourcustomers.Weareassemblingvaluepropositionsbasedaroundcost-competitiveness,homogeneityandprocessinnovation.

Ensuringcost-effectivenessisaprerequisiteinthewaywedeployresourcesforourcustomers,butincreasingly,asourcustomersbecomemoreglobalitisalsoimportanttobeabletooperateuniformservicesinmultipleterritories.Homogeneityacrossbordersisakeydriveraswedevelopourservicecapabilities.Wearecommittedtocontinuedprocessinnovation.Forexample,increasedautomationallowsustoreducecosts,acceleratespeed-to-marketandimproveservicesforourcustomers,creatingvaluefortheirbusiness.

Offshore service centresOurlargestoffshorecentreisinBangalore.During2007weopenedanadditionaloffshorecentreinthePhilippinesandaround200peoplearealreadyemployedthere.WehavedoubledourstaffinglevelsinMorocco.Wenowoccupystate-of-the-artfacilitiesinCasablancaandRabat,whichfocusonsupportingourFrenchlanguage-basedactivities.TheMoroccoservicecentreacquiredCapabilityMaturityModelIntegration(CMMI®)level3statusduringtheyear.Inearly2008weestablishedanOutsourcingServicesdivisiontofurtherdevelopouroutsourcingmodel.Thisdivisionwilltakeend-to-endresponsibilityforoutsourcingservices,ensuringthatcustomershaveaccesstothemostefficientandcosteffectiveblendofonshore,nearshoreandoffshoresupport.Thisdivisionwillincorporatearound9,000Logicaemployeesworkinginouronshore,nearshoreandoffshorecentres.

Bringing our services togetherFromouronshore,nearshoreandoffshorecentresweareabletodeployworld-classservicestreamsthatmeetlocalculturalandlanguagerequirements.

Webringtheseservicestogetherbycollaboratingacrossborders.Ourapproachallowsustocombinemultipleservicestreamsfromarangeofdifferentlocationsintoasingle,seamlessserviceconfiguredaroundeachcustomer’srequirements.

What are the implications of the offshore challenge from India?

Indian vendors have won market share, particularly in the application-development and application-outsourcing markets, in part by offering services at very competitive prices.

This has forced Western-based players to move some of their own workforces to lower-cost locations, both offshore and nearshore.

Customers now expect their vendors to distribute workloads across several centres, not just in India, to reduce risk. However, they still expect innovation, added value and sometimes face-to-face interaction. Success in this market is as much about combining onshore (such as business consulting, project management and sales), nearshore and offshore (such as application management and systems integration) resources to good effect as it is to do with providing the lowest cost offering.

(Source: IDC)

QA

How we deliver our servicesOur blended service model combines the best competencies from around the world in the most cost effective and efficient way. The creation of our Outsourcing Services division in January 2008 will build on this model and extend it further through the business.

Logica’sscaleandinternationalpresencegivestheGroupthecapacitytodeliverworld-classITandbusinessservicestoitscustomers.Wefocusonprovidingvalue-addedservicestomeettheparticularneedsofourcustomersratherthanpurerelocationtomorecost-effectivelocations.ForCarrefour,forinstance,wehavenegotiatedyear-on-yearreductionsininfrastructuremanagementcostsintothethree-yearcontract,reflectingourconfidencethatwecangenerateadditionalsavingsthroughprocessimprovements.Wetaketheviewthat,whilecostsavingsareoftenanimportantdriverforoutsourcingactivities,customersgaingreaterlong-termefficiencieswhenoffshoringiscombinedwithprocessinnovation.


25

How we go to market

Becauseofourstrongdomainskillsandlocalexpertise,wehaveanexcellentunderstandingofourcustomers’businessissues.Wearealsotechnologyinnovators,oftenfirsttomarketwithnewideastoaddvalueandtransformourcustomers’business.Ourconsultancyworkoftenleadsontofurthersystemsintegrationandconsultingwork.

Our value propositions include:

SecurityAsorganisationsautomateandintegratetheirprocesses,theconsequencesofconfidentialinformationfallingintothewronghandsbecomemoresevere.Deliveringinformationcost-effectivelyandreliablywhileprotectingrestricteddatapresentsabigchallenge.Itisanespeciallysensitiveissueforbanksandthepublicsector.

LogicahasoneofEurope’slargestsecuritypractices.Ourinternationalsecuritygrouphasover250staffinnineterritoriesinEuropeandAsia.Wehelpedtodevelopmanyoftoday’ssecuritystandardsandwearetheUKleaderininformationsecuritymanagement.Weareinvolvedinallareas,fromdesigningsecurityarchitecturetovulnerabilityassessmentstobiometrics.

OurclientsincludeleadingnameslikeHP,OracleandNatWest.WearedevelopingsystemsfortheEuropeanSpaceAgencywhichwillensurethesecurityofGalileo,Europe’ssatellitenavigationsystemandsecurityfeaturesfortheNHSSpine,theworld’sbiggestcivilITprogramme.IntheFinancialServicesarenawecoordinateuseraccessmanagementonaworldwidebasisforRoyalBankofScotland.Wecompletedasuccessfulproof-of-concepttrialoffacialrecognitionsoftwareinaliveairportlocationduring2007.

Electronic paymentsLogicahasbeenprovidinginternationalelectronicpaymentssolutionsforover35years.PaymentsisaneconomiesofscalebusinessandweareleveragingouractivitiestoreducecostsandincreasethequalityofourofferingforFinancialServicesclients.WeworkwithleadingfinancialinstitutionsacrossEurope:inFrance,Germany,theUK,theNetherlands,BelgiumandtheNordics.

WeareassistingtheEuropeanPaymentsCouncil,thebank-ownedorganisationwhichmanagescompliancewithchangingregulatoryconditions,indevelopingtherulesandtheframeworkfortheSingleEuropeanPaymentsArea(SEPA).During2007wereviewedtherulesfortestability.

Logica’s relationship with KPN has evolved over more than a decade. Over the years Logica has developed, tested and integrated mission-critical systems and provided consultancy services for the Netherlands’ largest telecommunications services provider.

Over the past eight years KPN has progressively streamlined its HR support and payroll processing.

In 2005, KPN decided to consolidate its HR support services at a single HR Shared Service Centre (SSC) in the city of Voorburg. Its HR personnel were centralised in Voorburg from 15 separate locations.

KPN has always considered its HR SSC in Voorburg to be a stepping stone towards a fully outsourced HR support service. In 2007, KPN took the next step: it granted Logica a €40m seven-year contract to take over this centre and administer the personnel and payment records for KPN’s 17,000 employees.

Under the terms of the contract, 58 HR professionals from KPN have joined Logica. Our HR expertise and experience of KPN processes ensures quality and continuity. The Logica HR SSC for KPN now operates an identical service from its Rijswijk office near Voorburg.

In future we will optimise processes, organisation and IT at the SSC. We will develop generic functionality and upscale its services to develop a multi-client SSC. KPN will see increasing benefits as unit costs fall.


KPN case study: streamlining vital HR services


26

Business review

Ourownapplicationsmeetstringentcriteriaforreliabilityandperformance.EuropeanBankersAssociation(EBA)Clearing,theleadingprivateproviderofeuroclearingservices,hascertifiedLogica’sAllPaymentsSolution(LAPS)forsupportingitsCreditTransferservices.

SEPAprojectscallforacombinationofskills.Ourteamsconsultwhilealsoprovidingsystemsintegrationanddevelopmentcapabilities.Weadviseandassistbanksonexploitingstructuralchangesinthemarkettotransformtheirbusinessmodelsandderivecompetitiveadvantage.

SEPAwillinfuturebethesoleplatformforpaymentprocessingforalleurodenominatedeconomies.Ultimately,everycompanytransactingbusinessineuroswillneedtoconformtoSEPAstandards.

TestingLogicahasalwayshadahighlyeffectivetestingresource.Wehaveover3,150InternationalSoftwareTestingQualificationsBoard(ISTQB)certifiedcareertesters.AswellastailoredtestingservicesforspecificbusinesssituationslikeSEPA,theyconductlarge-scalemanagedtestingprogrammesandenvironments.Wearegrowingourabilitytoofferoutsourcedtestingenvironments.During2007wesetupatestingfactoryinIndiaandrecruited400testerstostaffit.

Forcustomers,integratingtestingintothedevelopmentprocessallowsthemtoreducetimetomarketandimprovequality.OurapplicationstestingserviceishelpingRoyalBankofScotlandtoreducecostsandtointegrateitstestingprocedures.WehaveconductedembeddedtestingofautomotivenavigationsystemsforPioneer.ForING,wetookon350full-timeemployees,aroundhalfofwhomworkintestingroles.Wearetransformingitstestingfromaresource-basedtoanoutsourced,results-basedservice.ForVodafone,weoperateamanagedstagingandtestenvironmentallowingfullend-to-endtestingofnewproductsandservicespriortonetworklaunch.

Smart meteringTheenvironmentalagendaisnowasignificantbusinessdriver.Smartmeteringtechnologyiswidelycitedasakeytoolforraisingenergyawareness.Smartmetersallowutilities,majorbusinessusersandpotentiallyconsumerstomonitortheirenergyconsumptionhour-by-hour.Byunderstandinghowenergycostsvaryovertime,consumerscanreduceenergyandutilitiescanironoutpeaksandtroughsinconsumptionpatterns.

Logica,withitslonghistoryofdeliveringmetersolutions,isattheforefrontoftheindustry.OurInstantEnergydataretrievalsolutioncouplesourprepaymenttechnologywiththeabilitytotakeremotemeterreadingsinrealtime.

RWEnpowerisoneofseveralUKsupplierspilotingInstantEnergy.Forsuppliers,thereareclearearlybenefits,includingpromptpaymentandsimplifiedadministration.Forcustomers,itmeansgreatercertaintyabouttheirenergyspend.

Inthelongerterm,smartmeteringcouldhavewiderimplications.Real-timebillingmakesitpossible,forinstance,forutilitiestotransformthemselvesintoenergyservicesproviders,buyingsmall-scaleenergygenerationfromhomesanddeliveringcombinedenergypackages.

Are issues like corporate responsibility and climate change relevant to the IT industry?

Very much so. Organisations are under pressure from shareholders, customers and other stakeholders to prove that they offer environmentally friendly products and services. They demand similarly high standards from their suppliers.

The IT industry is developing offerings that address power efficiency (particularly in data centres), recycling and other green issues.

This is only part of a broader agenda based around social responsibility: how an organisation interacts with its customers, employees, the community and the environment.

(Source: IDC)

P 78P 78 See Corporate responsibility report on page 78

Q

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27

As Logica, we are one of the leading IT and business services suppliers in Europe with great local strengths combined with great local delivery

Intelligent Transport Systems (ITS)Withtransportresponsiblefor28%ofEuropeanemissionsandwithfreighttrafficexpectedtogrowbyatleast50%overthenextfiveyears,Europe’sbusinessesrealisethatemissionscontrolisbecomingakeycompetitivedifferentiator.Increasinglytheyarelookingnotonlyatsavingtimeandmoney,butalsoatwaystominimiseenergyusage.Weareworkingwiththemtore-engineertheirvaluechainstomeetthesenewpriorities.

WeareamarketleaderintheITSarena.Ourworkspansroadpricing,trafficmanagement,smartticketingsystems,real-timetrafficandinformationsystems,assetmanagement,mobileworkforcesolutions,safetyandsecurity,andemissionmanagementsystems.

We are building Group-wide processes to pursue operational excellence, reduce costs and function as one Logica

Common systems, common processes, common valuesTheadoptionoftheLogicanameacrosstheGroupallowsustobuildaconsistentbrandimageandidentitywithourcustomersinallthegeographiesinwhichweoperate.AsLogica,weareoneoftheleadingITandbusinessservicessuppliersinEuropewithgreatlocalstrengthscombinedwithgreatlocaldelivery.Wehavethescale,capabilitiesandreachtoenableustocompeteeffectivelyformajoropportunitiesandlargercustomers.Asinglebrandidentityshowsourclientsthattheywillreceivethesamehighqualityservicefromus,wherevertheyareintheworld.

Inordertohelpusworkbetterasonecompanywehavebuiltastrongplatformtosupportthesharingofknowledgeandskills.Sharingknowledgeacrosstheorganisationisakeypartofimprovingourservicetoourcustomers.Weencourageinternationalcollaborationwithsharedapplicationsandbrowser-basedsoftware.Manyprojectsrequirecloseinternationalcollaborationandmulti-disciplinaryteams;soforinstance,Dutch,UKandMiddleEaststaffsharedexpertiseinbiometrics,smartcardsandsystemsintegrationwhendevelopinganationalIDsystemforamajorgovernment.

During2007,westartedtobringuniversalitytoourbusinesssystems.Ourknowledgemanagementplatform,Cortex,hasbeenintroducedacrosstheGroup.TheGroup’sAgresso-basedfinancesystemisnowinuseinFranceandbeingadoptedforuseintheNordics.Wehavedevelopedacommonsalesandmarketingapplicationandhaveunifiedourcommunicationssystems.

How rapidly are IT and business services growing?

Although IT services is by now a relatively mature industry in Western Europe, it still generally outperforms GDP growth. Overall, the market grew by over 6% in 2007; IDC forecasts around 5% CAGR between 2007 and 2012.

Among the fastest-growing IT services are application outsourcing (8.0% CAGR) and network and desktop outsourcing (6.6% CAGR).

Demand growth between vertical markets varies from some 4.5% in manufacturing to 5.7% in Public Sector. Financial Services and Transport are also amongst the faster-growing sectors.

In business services, IDC predicts 7.6% CAGR between 2007 and 2012, mostly fuelled by increased business process outsourcing.

(Source: IDC)

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Business review

Taylor Wimpey plc was created in July 2007 when Taylor Woodrow and George Wimpey merged. It is now the UK’s largest home builder.

Following the merger, integrating the two companies’ legacy systems became a strategic priority for the combined organisation. Taylor Wimpey chose to outsource all of its IT systems to Logica.

Logica’s £30 million five-year contract will provide a consistent IT service across the enlarged UK business. We will be working closely with Taylor Wimpey to transform the organisation’s IT systems, which will include hosting and project services.

Under the terms of the new contract we will provide core IT services, like infrastructure management and an improved service delivery model leveraging shared services which we anticipate will result in at least 20% in net savings over the life of the contract.

Importantly, Logica has also joined Taylor Wimpey’s IT leadership team. This unique partnership approach, based on the established and trusted relationship, will see Logica work with Taylor Wimpey to address their current IT issues.


Taylor Wimpey case study: delivering the benefits of outsourcing

Knowledge management (KM)WerecognisetheimportanceofhavingeffectiveprocessesinplacetofacilitatethesharingofknowledgeandexperienceacrosstheGroup.WeinvestcontinuouslyinourKMinfrastructure.WehaveupdatedtheknowledgestorebyincorporatingnewcontentfromtheFrenchandNordicbusinessesensuringthattheseareheldinboththeoriginallanguageandinEnglish.WecontinuetoimprovetheKMplatformtomakeitmoreaccessibleandrelevanttoourpeople,forexample,withmorecomprehensivesearchtools.OurknowledgemanagementinfrastructureandcontentmanagementactivitiesareallmanagedoffshorefromBangalore.

WewillcontinuetoembedCortexinourFrenchandNordicoperationsduring2008.WearecontinuingtoevolveCortextomeetthechangingrequirementsofthebusinessandanticipateanewdevelopment–Cortex2.WeanticipatetheincrementaladoptionofCortex2,whichwillalignoursystemsandprocessesevenmorecloselytobusinessobjectives.Cortex2willbespecificallydesignedtosupportgrowthinsoftwaredevelopmentandapplicationsmanagementcarriedoutinouroffshorecentres.

Internal systemsAnefficientbackofficeandbusinesssupportfunctionisvitalifwearetocompeteeffectively.Wewillutiliseourblendeddeliverymodeltotransferbackofficeprocesses,especiallyfornon-languagecriticalactivities,tooffshorelocations.Wearebuildingasharedservicefacilityforourfinanceandaccounting(F&A)processesbasedonstandardsystemsandprocesses.

TheprogrammehasbegunwiththetransferofourUKfinanceadministrationtoBangalore.WealsorelocatedourUKHRservicestoourManilasharedservicecentreinthePhilippinesin2007.HRservicesinotherpartsoftheGroupwillalsomovetheiractivityoffshorein2008,providinganessentialcorereferencesiteforclientsconsideringanoutsourcedsolutionfortheirHRneeds.

We will utilise our blended delivery model to transfer back office processes, especially for non-language critical activities, to offshore locations


29

How we manage and measure our performanceOur performanceWecontinuetomonitorperformanceagainsttheKPIssetoutinour2006Annualreport(listedhereinbold).

Our geographic profilecontinuedtogiveusanelementofbalanceinwhatwasachallengingyearfortheUK.Thismadeitdifficulttogrowrevenuefasterthanthemarket,whichweestimatedtobegrowingat4–6%in2007.Overall,theGroupgeneratedorganic revenue growthinITandbusinessservicesof3%to£3.1billion.

Wesharpenedourfocusoncoreactivitiesin2007,withtwonotabledisposals.Inearly2007,weannouncedthesaleoftheTelecomsProductsbusinesstoaprivateequityconsortium.InJune2007wedisposedofWM-data’sindustrialdesignandproductdevelopmentoperation,Caran.ThisallowsustobefocusedonITandbusinessservicesacrossfivesectors.

ThepathtobeingamorematureITservicesorganisation,withasignificantproportionofrevenuefromoutsourcing,alsocontinuedin2007.IntheNetherlands,ourrevenuefromoutsourcingincreasedfrom13%to18%andoutsourcingnowaccountsformorethan30%ofrevenuesinthreekeyterritories(theUK,FranceandtheNordics).AtGrouplevel,revenue from outsourcingwas31%in2007.

Our balance among market sectorsisfurtherdetailedonpages12to15.IDTandPublicSectorcontinuedtobestrongcomponentsoftotalGrouprevenue(at30%and28%respectively)whileEnergyandUtilitiesrepresentedaroundhalfthat.FinancialServicesrevenuesrepresented18%in2007.WiththedisposaloftheTelecomsProductsbusiness,theTelecomsandMediasegmentfelltolessthan10%ofGrouprevenue.

P 12P 12 See page 12 for our markets by industry

Withoneofourfourmainprofitgeneratinggeographies(theUK)disappointingin2007,adjusted operating marginfellshortofexpectationsat6.8%(2006proforma:8.5%).Wehavetakenactionstoredressthissituation.Aspartofourreviewofthebusiness,focuswillbeplacedonreturningtheUKcommercialsectorstogrowth.Theweaker2007operatingperformancewassomewhatoffsetbyalowertaxrate,givingadjusted EPSof10.2pence.(2006:10.4pence).

Cash conversion,ameasureofthebusiness’sabilitytoconvertprofittocash,remainedveryhealthy,risingto126%(2006proforma:119%).

P 86P 86 See page 86 of the Financial review for further details on our financial performance

Our peopleThroughoutthebusinessoursuccessdependsonrecruiting,developingandmotivatinghighlyskilledpersonnel.Weaimtoattractsmarttechnicalpeopleanddevelopthemonthejobandthroughformaltraining.Weworkwiththemtodesignsuitablecareerpaths.Weruncoursestopromotevirtualteamworkingandcross-culturalawareness.

Employeesatisfactionisakeymetric.Logica’s‘Agreatplacetowork’initiativeisdevelopingaclearsetofGroup-wideemployeepoliciesthatwillstrengthenthebusinessbyattractingthebrightestandthebestinourindustrytojointhebusinessandremainwithus.

Weassessemployeesatisfactionwithabasketofkeyquestionsfromourannualsurvey,whichweconductedacrossthewiderGroupforthefirsttimein2007.ThemeanoverallemployeesatisfactionrateforLogicaemployeeswasupfrom3.33to3.44,basedonanimprovedandveryhealthyresponserateof70%.(Formoredetails,seetheCorporateresponsibilityreportonpage80.)Wewerealsopleasedtoseestaffattritionheldat16%forthesecondyearinarowandweexceededrecruitmenttargetsinanumberofbusinesses.Thishelpedustoincreaseournetheadcount(aftertheimpactofdisposals)by1,000peopleduring2007.

What margins are achievable in outsourcing?

While hardware-centred infrastructure outsourcing (for example, running datacentres) can be lower-margin, areas such as application outsourcing and business-process outsourcing (BPO) are less commoditised. Double-digit operating margins are achievable in these areas.

There are also strategic considerations. Outsourcing generates stable and predictable revenues – it provides a ready-made customer base for cross-selling – and outsourcing contracts can embed suppliers more deeply into their customers’ businesses.

There’s a good operational fit between BPO, consulting and IT services. IT providers that combine consulting capabilities with deep technology expertise are well placed to deliver value-added services.

(Source: IDC)

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Business reviewInearly2008,wedefinedcommonvaluesforLogicawhichwebelievewillbecrucialinhelpingustoacceleratetheintegrationoftheGroupandtoutilisebetterourskillsfromaroundtheworldtohelpourcustomerssucceed.Thesevaluesare:Committed,InnovativeandOpen.

P 78P 78 See Corporate responsibility report on page 78

Twokeyappointmentsduring2007strengthenedthemanagementteam.AndyGreentookuphispostasCEOatthestartof2008.HejoinsDavidTylerwhobecameChairmaninNovember2007.TheirarrivalmarksthestartofanewchapterintheLogicastory.

TheLogicabrandhasbeenadoptedacrosstheCompanyfromtheendofFebruary2008andwillreplaceallexistingbrands.ThemovetooneLogicaisanimportantstepintheintegrationoftheGroup.Aspreviouslycommunicated,wewillincuranincrementalcostofaround£5millionin2008toimplementthis.

OutlookOuroutlookfor2008issetagainstanuncertainmarketenvironment.Althoughwehaveseenafewincidencesofslowerspending,marketactivitylevelsgenerallyappearresilient.

Weremainalerttochangesincustomersentimentandarecarefullymonitoringutilisationlevelsandrecruitment.Weareplanningmoreflexibleresourcingthroughtheuseofsubcontractorsandourblendeddeliverycapability.

Weexpecttherecently-announcedOutsourcingServicesdivisiontoleadtofurthergrowthinrevenuefromoutsourcingandinthepercentageofworkdeliveredfromoffshorelocations.

Baseduponourorderbacklogandthepipelineofopportunitiesinourmajormarkets,wecurrentlyexpect2008constantcurrencyrevenuegrowthwillbearoundasimilarlevelto2007.

Attrition

16 %(2006: 16%)

Overall employee satisfaction

3.44Overall staff satisfaction – Group mean score out of 5 for a basket of 9 questions (2006: 3.33)

How cyclical is the IT and business services industry and where are we in the cycle?

Today’s IT and business services industry remains cyclical, but is far removed from the rollercoaster cycle of the 1980s and 1990s.

There are two main reasons for this. Firstly, most major organisations have now implemented must-have technologies, such as ERP and e-commerce applications. The panic buying we saw with the Millennium Bug and the Internet ‘land-grab’ of the 1990s is a thing of the past. Secondly, outsourcing now accounts for a larger slice of the overall market than it did during the rollercoaster years. Outsourcing contracts are usually long-term. They cannot easily be terminated at short notice and supply services which are crucial to the day-to-day running of the customer’s business, at lower cost than when provided in-house.

The IT business cycle now mirrors the economic cycle and reduced growth is likely in the short-term. However, downturns also bring opportunities to grow market share for those industry players that are ready for them, for example, suppliers with strong outsourcing businesses and attractive cost-cutting propositions to sell to clients.

(Source: IDC)

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Recent contract winsOrdermomentumimprovedoverthelastfewmonthsof2007andintothefirstmonthsof2008.

OutsourcingwinsintheUKincludeanewapplicationsmanagementcontractwithairportauthorityBAAandanIToutsourcingcontractwinwiththeUKhousingdivisionofTaylorWimpey.IntheNetherlands,wehavesigneda€40milliondealwithKPNtooutsourceits“bestinclass”HRsharedservicecentreandwearedevelopinganintegratedbackofficesolutionfortravelandtollservicesproviderMovenience.InFrance,wehavesigneda€15millionapplicationsmanagementoutsourcingcontractwithamajorFrenchbank.

OrdermomentumhasbeenparticularlystrongintheNordics,wherewehavesignedourfirstmajorcross-sellingprojectinvolvingasignificantoffshorecomponentwithSwedbank.WehaveseenanumberofnewwinsinthePublicSector,whichincludeIToutsourcingcontractswiththeNorwegianDepartmentofLabour,theOsloDepartmentofEducation,theFinnishpensionsagencyandseveralFinnishgovernmentagenciesinthetransportsector.Wehavealsosigneda€10millionITcooperationagreementwithBankgirocentralen,Sweden’sclearingservicesprovider,andanapplicationsmanagementcontractwiththeCityofGothenburg.

Wecontinuetoconsolidatecurrentpartnershipsanddevelopnewones.FordofEuropehasselectedLogicaintheUKasapreferredsupplierforITresources,extendingtherelationshipintoits25thyear.IntheNetherlands,DSMhasextendedits2005manufacturingITcontractandwecontinuetobuildontheworkwearedoingwithEDFinFrance.Wehavealsoputa€10millionframeworkagreementinplacewiththeEuropeanPatentOffice.

Revenue from outsourcing

31 %(2006: 27%)

Adjusted operating margin

6.8 %(2006 pro forma*: 8.5%)

Organic revenue growth

3.1 %(2006 pro forma*: £2,981m)

+

Dividend

5.8 p(2006: 5.6p)

Throughout this report, Key Performance Indicators (KPIs) are denoted by the symbol

See pages 74 and 75 for a glossary of our KPIs

P 74P 74

Cash conversion

126 %(2006 pro forma*: 119%)

Adjusted earnings per share

10.2 p(2006 restated: 10.4p)

*Fordefinitionofproforma,seepage86

Measuring our performance

Our future directionAndy Green joined the business as CEO in January 2008 and has been spending time with customers, employees and other stakeholders.

Hehasbeenconductingareviewofthebusinessandhasidentifiedsomeareasthatneedtobeaddressed.

Priorityareasareincreasingcustomerfocus,acceleratingintegrationacrosstheGroup,buildingonthecurrentglobaldeliverycapabilityandestablishingamorecompetitivecoststructure.

ThedetailedconclusionsofourreviewofthebusinesswillbepublishedbythebeginningofMay2008.ThesewillpositionLogicawithacleardirectionforthefutureandaclearsenseofthemetricswewillusetodemonstratetoshareholdershowwearedeliveringvaluegoingforward.


32

2


3333

GovernanceIn this section:

34 Chairman and CEO’s statements 36 Board of Directors38 Executive Committee40 Report of the Directors44 Corporate governance report54 Risk factors56 Report of the Remuneration

Committee74 Group key performance indicators


34

Chairman’s statementI am pleased to introduce this year’s report, in my first year as Chairman.

Financial PerformanceThishasbeenanunsatisfactoryyearfortheCompanyanditsshareholders.Profitfailedtoreachourtargetsandfellwellbelowwheremarketexpectationswereayearago.Thisadverselyaffectedourshareprice,asdidthemarketre-ratingofthesectorwhichhasextendedintothefirstquarterof2008.

ThebrightspotsweretheencouragingperformancesintheNordics,FranceandGermanyandastrongPublicSectorperformanceintheUK.OutsidethePublicSector,wehadadifficultyearintheUK.Ourcommercialsectorsdeclinedandweencounteredaproblemwithacomplexcontractforalong-termcustomer,againstwhichwehadtotakeaprovision.

Ouroutlookfor2008isincludedonpage30.

BoardDrMartinReaddecidedtoretireinMay2007after14yearsasCEO.Inthankinghimforhiscontributionovertheyearswewishhimwellforthefuture.TheDirectorstheninvitedmetojointheBoardandtotaketheleadinfindinganewCEO.

Wearedelightedwiththeoutcomeofthissearch.AndyGreen,whojoineduson1January2008,istheidealpersontoleadthisGroup.HeworkedforBTforthelast21yearsandinrecentyearsplayedakeyroleastheBoardmemberresponsibleforthedevelopmentofBTGlobalServices.ItisalreadyclearinhisfirstthreemonthswithLogicathathebringsusaclearstrategicvisionandhighlyeffectiveoperationalskills.

IntheinterimbeforeAndy’sarrival,JimMcKennaledthebusinesscapablythroughaverychallengingperiod.Hehasnowdecidedtostepdownlaterin2008andIwouldliketothankhimforhisprofessionalismandcommitmentthroughouthis14yearsatLogica.

TheCompanyalsosaidgoodbyetomypredecessorasChairman,CorStutterheim,whoretiredinOctoberafter37yearswiththeGroup.WeowehimadebtofgratitudeandwillmisshiscommitmenttotheGroupaswellashisgreatsenseofhumour.

GeorgeLoudonalsoretiredinOctoberafternineyearsasanon-executivedirectorandAngelaKnightwillberetiringattheAGMafterasimilarlengthofservice.OnbehalfoftheBoard,IwouldliketothankthembothfortheirsignificantcontributionsandwiseadvicethroughanextraordinaryperiodintheGroup’shistory.

RiskInthesecondhalfof2007,theBoardre-examineditscontroloverrisks.Whileourinternalriskcontrolprocesseswerefoundtobeeffective,someimprovementshavebeenmade.Ourgoalistomanageandmitigaterisks*withoutinhibitingtheopenentrepreneurialculturewhichwilldrivegrowth.

Shareholder ValueAkeytosuccessfortheCompanyistoalignmanagementrewardstotheinterestsofshareholders.Asaresult,weintendinfuturetoensureasignificantportionofBoardandSeniorManagementremunerationisshare-based.AcomponentofourNon-ExecutiveDirectors’feesisthereforenowbeingpaidinsharesfrom2008.Wehavealsochangedourshareretentionpolicy,nowexpectingtheCEOtoholdsharesequivalentto200%ofhisannualsalaryandrequiringotherExecutiveDirectorstohold100%.

Lookingforward,theBoard’stoppriorityistomaximisevalueforshareholders.Giventhequalityofouremployees,Iamconfidentthat,underAndy’snewleadership,Logicahastheopportunitytodeliversuperiorreturnsintheyearsahead.

David TylerChairman

David Tyler, Chairman

*Seepages54to55foramoredetailedlistofourprincipalrisks.


35

CEO’s statement

Dear Shareholder, IamdelightedtohavejoinedLogicaasChiefExecutiveOfficer.WhilstIhaveonlybeeninpostforafewmonths,Icanseethatthisisastrongbusinesswithsignificantpotential–andIamveryexcitedbytheopportunitytohelpreleasethispotential.

MyfocussincejoininghasbeenonunderstandingquicklywhatweshouldbedoingtorespondtothechallengesthatfacedLogicaandhowweshouldbeworkingtobuildasuccessfulandsustainablebusinessoverthelongertermthatdeliversrealvaluetoyou,ourshareholders.However,thisyear’sannualreportisnottheplaceformetomakegrandpronouncementsaboutthefuture.Aswegotopressonthereport,Iamleadingareviewofthebusiness,workingcloselywiththemanagementteamtodeterminetherightwayforwardforLogica.

Anumberofthingshavestruckmeabouttheorganisation.SomeofthebestpeopleintheITservicesbusinesstodayworkatLogica–theyaretechnicalexpertswhoalsohaveadeepunderstandingoftheindustriesinwhichtheywork.Wehaveclose,long-termrelationshipswithourcustomerswhovalueusforourreliabilityandqualityofservice.And,importantly,wehavealeadingpositioninEuropewithanestablishedinternationalpresence.

WhilstIdonotwanttoprejudgetheconclusionsofthereviewofthebusiness,Idobelievethatthereareanumberofcriticalthingsthatweneedtodotobesuccessful:

We need to ensure we manage risk wellAswemigratetoamorematureservicesorganisation,itisessentialthatwecontinuetoevolveourriskmanagementandstrengthenourabilitytomonitorriskeffectively.

We must build one team with one purposeTheGroup’stransitiontotheLogicabrandnameacrossallitsmarketsattheendofFebruaryhasprovideduswithanexcellentopportunitytoestablishoneteamwithonepurpose.Wewillneedtointensifytheintegrationoftheconstituentpartsoftheorganisation–movingmorequicklytocommonsystemsandprocessesandinvestingingrowthacrosstheGroupwhilstnotlosingourlocalknowledge,arealdifferentiatorfortheGroup.

We will have to review our global delivery model and ensure we are globally competitive Althoughwehaveawell-developedblendeddeliverymodel,Ibelieveweneedtobedoingmoretoensurethatourbusinessisgloballycompetitive.Thiswillinevitablymeanreducingouroverheadcostsandbetterutilisinglabourfromaroundtheworldinablendeddeliverymodelthateffectivelymeetsourcustomers’needs.

SinceIstartedatLogica,wehavealsoreviewedourapproachtoCorporateResponsibility.ThisissomethingIfeelpassionatelyabout.Ibelieveresponsiblecompaniesaresimplybetteratattractingandretainingthebestpeople,winningnewbusinessandsuccessfullygrowingtheirbusinesses.

Finally,IwouldliketotakethisopportunitytothankthewholeLogicateamfortheirunwaveringcommitmentandhardworkduringadifficultperiod.2008willbeabusyyearatLogica.IgenuinelybelievethatwehavetheopportunitytobuildaEuropeanleaderinITandbusinessservicesandIlookforwardtoworkingwiththeteamtomakethishappen.

Andy GreenChiefExecutiveOfficer

Andy Green, CEO


36

Board of Directors

Andy Green*Chief Executive Officer, 52

AndywasappointedChiefExecutiveOfficerandamemberoftheBoardon1January2008.HeisamemberoftheNominationsCommitteeandtheExecutiveCommittee.

Previously,AndywasaBoardmemberatBTplcandCEOofGroupStrategyandOperations.UntilApril2007,AndywasCEOofBTGlobalServices.Duringhis21yearsatBT,Andyheldseveralseniorpositions,includingthatofCEO,BTOpenworld.

HebeganhiscareerwithShellandsubsequentlyjoinedDeloitteHaskins&Sells.HeisaNon-ExecutiveDirectorofNavteqInc,andaBoardmemberofe-skillsUK,theSectorSkillsCouncilforITandTelecoms.

Left: Seamus Keating. Right: Andy Green

Left to right: David Tyler; Noël Harwerth; Gérard Philippot

David TylerNon-Executive Chairman, 55

DavidjoinedLogicaasaNon-ExecutiveDirectorandJointDeputyChairmaninJuly2007andbecameNon-ExecutiveChairmaninNovember2007.HeistheChairmanoftheNominationsCommitteeoftheBoard.

DavidheldseniorfinancialandgeneralmanagementpositionswithUnileverplcfrom1974-1986,CountyNatWestLimitedfrom1986-1989andChristie’sInternationalplcfrom1989-1996.From1997to2006hewastheGroupFinanceDirectorofGUSplc.HeiscurrentlyChairmanof3iQuotedPrivateEquityLtd,andaNon-ExecutiveDirectorofReckittBenckiserplc,ExperianGroupLtdandBurberryGroupplc(wherehechairstheRemunerationCommittee).

Gérard PhilippotNon-Executive Director, 66

GérardwasappointedaNon-ExecutiveDirectoroftheBoardinOctober2005.

HehadbeenPresidentofUnilogsince1992.Duringhis13-yeartenurethereheoversawrapidgrowth.Unilogrosefrombeingthe23rdlargestITservicescompanyinFrancetoitsfourthlargest.

GraduatingfromEcolePolytechniquein1962,GérardbeganhiscareerasanengineerwiththeconsultancyCGO(CompagnieGénéraled’Organisation).In1968,heteamedupwithfourformercolleaguestoestablishtheUnilogGroup.GérardwasappointedamemberoftheManagementBoardofUnilogin1983andpresidentofUnilogIndustrieandUnilogMulti-Systèmesin1987.InFebruary2006hewasappointedtothesupervisoryboardofAmboiseInvestissementSCA.

HeisalsoamemberoftheCBIPresident’sCommitteeandaCompanionoftheCharteredManagementInstitute.HeholdsadegreeinChemicalEngineeringfromLeedsUniversity.

Seamus Keating*Chief Financial Officer, 44

SeamushasbeenChiefFinancialOfficerandamemberoftheBoardsinceFebruary2002,havingbeenitsDirectorofGroupFinancesince1999.

HecametoLogicafromGetronics,wherehehadbeenFinanceDirectorofitsOlivettiSolutionsbusiness.Priortothat,hehadbeenFinanceDirectorofOlivetti’sUKoperations,havingjoineditsfinancefunctionin1989.

DavidbringsextensivefinancialandgeneralmanagementexperiencetotheBoard,havingworkedintheFMCG,finance,servicesandretailsectors.HehasanMAinEconomicsfromCambridge,isaFellowoftheCharteredInstituteofManagementAccountantsandaMemberoftheACT.

Noël HarwerthNon-Executive Director, 60 Chairman, Remuneration Committee

NoëljoinedtheBoardasaNon-ExecutiveDirectorinJanuary2007,isChairmanoftheBoard’sRemunerationCommitteeandamemberoftheNominationsCommittee.

SheiscurrentlyaNon-ExecutiveDirectorandDeputyChairofSumitomoMitsuiBankingCorporationEurope,aNon-ExecutiveDirectorofRoyalSunAllianceInsuranceCompany,CorporateServicesGroupandAngloIrishBankCorporationplc.From1998to2003,NoëlwasChiefOperatingOfficerofCitibankInternationalplcinLondon,whereshecreatedagovernancemodelthatpermittedrapidgrowthandexpansionthroughoutEurope.Noëlhasextensiveexperienceincorporategovernance,includingtheUKCombinedCodeandSarbanes-Oxley,internationalfinanceandriskmanagement.ShewaseducatedattheUniversityofTexasinAustinandholdsaJurisdoctordegreefromtheUniversityofTexasLawSchool.

*alsomembersofGroupExecutiveCommittee


37

Left: Jim McKenna. Right: Crister Stjernfelt

Left: Wolfhart Hauser. Right: Angela Knight CBE

Left: Roger Payne. Right: Wim Dik

Jim McKenna*Chief Operating Officer, 52

JimwasappointedChiefOperatingOfficerinJanuary2005.HejoinedtheBoardinFebruary1998asChiefExecutiveforLogicaintheUKandIreland.HewaspreviouslyresponsibleforLogicaincontinentalEuropeandtheMiddleEast.PreviouslyJimworkedforGEC-MarconiandPlesseyCompanyplcandwasaNon-ExecutiveDirectorofAWGplc.HeisChairmanofAzzurriCommunications.

Crister Stjernfelt*Executive Director and Executive Vice President – Nordic Region, 64

CristerwasappointedtotheBoardwithresponsibilityfortheNordicRegioninOctober2006.TheformerWM-dataCEOhasoverthreedecades’experienceofITservicesintheregion.

CristerjoinedWM-datain1977asManagingDirectorofitsDanishoperations.HebecameSalesDirectorforapplicationsoftwareinSwedenbeforebeingappointedManagingDirectorforapplicationsoftwareoperations.HebecameamemberoftheExecutiveBoardofWM-datain1990andin1995wasappointedSeniorVicePresidentin

Wolfhart HauserNon-Executive Director, 58

WolfhartjoinedtheBoardasaNon-ExecutiveDirectorinJanuary2007.HeisamemberoftheAuditandRemunerationCommittees.

HeiscurrentlyChiefExecutiveOfficerofIntertekGroupplc,havingbeenappointedtotheirBoardasaNon-ExecutiveDirectorin2002.

Wolfhartstartedhiscareerasascientistinpharmacologyandergonomicsbeforeestablishingandleadingabroadrangeofsuccessfulinternationalserviceindustrybusinessesinthetestingindustry.For10yearshewasCEOofTÜVProductServiceGmbHandforfouryearsCEOofTÜVSüdAG,thelargesttesting,inspectionandcertificationcompanyinGermany.

Angela Knight CBENon-Executive Director, 57

AngelajoinedtheBoardinJuly1999.SheisamemberoftheAuditandRemunerationCommittees.

SheiscurrentlyChiefExecutiveoftheBritishBankers’Association,andaNon-ExecutiveDirectorofInternationalFinancialServicesLondon(IFSL)andBrewinDolphinHoldingsplc.Sheisalsoatrustmember(vicechairman)ofthePortofLondonAuthority.

FromSeptember1997toDecember2006AngelawasChiefExecutiveoftheAssociationofPrivateClientInvestmentManagersandStockbrokers(APCIMS).ShewasalsoDeputyChairmanofScottishWidowsandaNon-ExecutiveDirectorofLloydsTSBplcuntilOctober2006.AngelawastheMember

Roger PayneNon-Executive Director, 59 Chairman, Audit Committee

RogerjoinedtheBoardasaNon-ExecutiveDirectorinSeptember2004.AnFCCA-certifiedcharteredaccountant,heisChairmanoftheAuditCommitteeandamemberoftheNominationsCommittee.

InSeptember2005,heretiredfromhispositionasFinanceDirectorofRentokilInitialplc,aUK-listedFTSE-100company.InAugust2006,RogerwasappointedtheSeniorIndependentNon-ExecutiveDirectorofBiffaplcandChairmanofitsAuditCommittee.HeisalsoaNon-ExecutiveDirectorwithNelsonandRussellHoldingsLimitedandanindependentmemberoftheRemunerationCommitteeoftheAssociationofCharteredCertifiedAccountants.

Wim DikDeputy Chairman, 69

WimjoinedtheBoardasaNon-ExecutiveDirectorinDecember2002,havingbeenanon-executivedirectorofCMGsinceMay2001.HeistheSeniorIndependentNon-ExecutiveDirectorandamemberoftheAuditandNominationsCommittees.

AprofessorintheTechnologyandManagementFacultyoftheDelftTechnicalUniversity,hewaspreviouslyChairmanandCEOofKoninklijkeKPNNV,RoyalDutchTelecom.Priortothat,hewasChairmanandCEOofRoyalPTTNederland(telecomandpost),ChairmanofUnilever’sDutchoperationsandMinisterforForeignTradeintheDutchGovernment(1981–82).He

chargeofmarketingandinformation.HewasappointedPresidentandCEOoftheWM-dataGroupinApril2001.

ofParliamentforErewashfrom1992to1997andEconomicSecretarytoHMTreasurybetween1995and1997.

holdsnon-executivepositionswithUnileverNV,Unileverplc,AVIVAplc,TeleAtlasNVandZeskoHoldingBVandisanadvisertoSpencerStuartBV.


38

Executive Committee

Left to right: John Coleman; Serge Dubrana; Patrick Guimbal

John Coleman Chief Executive, International, 60

JohnwasappointedChiefExecutiveInternationalandamemberoftheExecutiveCommitteeofLogicainJune2003,havingpreviouslybeenManagingDirectoroftheUKTelecomsDivision.HejoinedLogicain1982,holdingavarietyofsales,linemanagementandseniorpositions,beforemovingtotheUSAtoruntheWestCoastoperation.JohnbrieflymanagedtheUKgovernmentteamin1993,beforethenmovingintoTelecoms,includingtwoyearsasTelecomsInternationallineofbusinessdirectorfrom2000to2002.

Serge DubranaGeneral Manager, Systems Integration and Outsourcing, France, 49

SergewasappointedGeneralManageroftheSystemsIntegrationandOutsourcingbusinessinFranceandamemberoftheExecutiveCommitteeofLogicainOctober2007,havingjoinedLogicaupontheacquisitionofUniloginOctober2005.

SergejoinedUnilogin1985asaconsultant,andfrom1994wasinchargeoftheirIndustryBusinessUnit.In2002hewasappointedCEOofUnilogGermanyandbecameamemberofUnilog’sExecutiveCommittee.SergejoinedtheBoardofUnilogin2005.

Patrick GuimbalChief Executive, Management Consulting; President, Logica in France, 52

PatrickwasappointedChiefExecutiveofLogicainFranceinSeptember2007andamemberoftheExecutiveCommitteeofLogica,inchargeofManagementandConsultinginJanuary2006.PatrickjoinedUnilogin1997inordertodesignandimplementanewstrategyforConsulting.Priortothis,herosethroughtherankswithBossard,aEuropeanmanagementconsultingcompanytobecomeanExecutiveCommitteemember.


39

Joe HemmingChief Executive, UK, 45

JoewasappointedChiefExecutiveofLogicaintheUKandamemberoftheExecutiveCommitteeinJanuary2007,havingbeenmanagingdirectorofLogica’sSpaceandDefencebusinesssinceJanuary2004.JoegainedhisearlyexperienceinthedefenceindustryatThornEMIElectronicsinMiddlesex,UKbeforejoiningEasams,theITbusinessoftheGEC-Marconigroupin1984.JoemovedtoLogicain1995ascommercialdirectorforthePublicSectorbusinessandwassubsequentlyappointedchiefoperationsofficerofLogicaNorthAmericain1998,whereheremaineduntil2001,whenhewasappointedcommercialdirectorofLogicaUKandamemberoftheUKmanagementboard.

Paul SchuytChief Executive, The Netherlands, 50

PaulwasappointedChiefExecutive,TheNetherlandsinFebruary2003andamemberoftheExecutiveCommitteeinApril2004.HavingworkedforPTTPost(nowTPG)PauljoinedCMGasamanagementconsultantin1987.HeheldvariousmanagementpositionsintheTelecomsandPublicSectormarketspriortohisbeingappointedcountrydirectorCMGBeneluxin2002.

Nick Caplan Chief Marketing Officer, 48

NickwasappointedamemberoftheExecutiveCommitteeofLogicainJanuary2005.HejoinedLogicainMay2003asManagingDirectorInternationalFinancialServices.PreviousexperiencehasincludedinterimChiefExecutiveoftwosoftwarehouseswherehewasresponsibleforturningthebusinessesaround.Priortothis,NickwasheadofCSC’sEuropeanfinancialservicesconsultancy,systemsintegrationandoutsourcingbusinessandpriortothatasoperationsdirectorofJIB,anorganisationprovidinginsuranceandriskadvisoryservicestobusinessesaroundtheworld.

Nigel PerksGroup Human Resources Director, 49

NigelwasappointedGroupHRDirectorandamemberoftheExecutiveCommitteeofLogicainMarch2004,havingbeencorporateHRDirectorsinceSeptember2001.PriortojoiningtheCompany,NigelwasaboardmemberandEuropeanHRDirectorofEquifaxplc.NigelpreviouslyheldavarietyofseniorinternationalHRroleswithPrudentialandDigitalEquipmentCo.(DEC).

Left: Joe Hemming. Right: Paul Schuyt

Left: Nick Caplan. Right: Nigel Perks


40

Report of the DirectorsThe Directors present their report together with the Financial statements of the Company and its subsidiaries for the year ended 31 December 2007. These will be laid before shareholders at the Annual General Meeting (AGM) to be held on 14 May 2008.

Business reviewTheBusinessreviewcanbefoundinthefollowingsectionsoftheAnnualReportandAccounts:

P 29P 29 A review of the development, performance and position of the business as well as an analysis of Key Performance Indicators (KPIs) on pages 29

P 31P 31 Our future direction/strategic objectives for the business on page 31

P 34P 34 Chairman’s statement on page 34

P 35P 35 Chief Executive Officer’s statement on page 35

P 54P 54 Risk Factors are on pages 54 to 55

P 74P 74 A glossary of KPIs on pages 74 to 75

ThesesectionsareincorporatedintothisReportbyreference.KPIsareidentifiedbythesymbol throughoutthisReport.

Principal ActivitiesThroughouttheyear,theGroupwasinthebusinessofprovidinginformationtechnologyservices,concentratingon:

• themarketing,design,production,integrationandmaintenanceofcustom-builtsoftwareandassociatedhardwaresystemsintegration

• consultancy,applicationsmanagementandprojectmanagementinthefieldofinformationtechnology

• thedesign,development,implementationandmarketingofsoftwareproductsandthereusableelementsofapplicationssoftware,calledsystemskernels

• theoutsourcingofinformationtechnologyandbusinessservices

Results and DividendsConsolidatedrevenueamountedto£3,073.2million,comparedwith£2,420.7million(restated)*fortheyearended31December2006.Theprofitbeforetaxwas£84.1millioncomparedwith£116.6million(restated)*fortheyearended31December2006.Theprofitattributabletoequityholdersoftheparentcompanywas£169.9millioncomparedwith£82.0millionforthepreviousyear.Basicearningspersharefromtotaloperationswere11.4pence(2006:6.7pence(restated)*).Adjustedbasicearningspersharefromcontinuingoperationswere10.2pence(2006:10.4pence(restated)*).Netdebtat31December2007stoodat£483.2million(2006:£557.1million).

TheDirectorshaveproposedafinaldividendof3.5pencepershare(2006:3.4pencepershare)which,whentakenwiththeinterimdividendof2.3pence(2006:2.2pencepershare)paidtoshareholderson19October2007willamounttoadividendfortheyearof5.8pence(2006:5.6pencepershare).Ifapproved,thefinaldividendwillbepaidon15May2008toeligibleshareholdersontheregisteratcloseofbusinesson18April2008.

TheBoard’sdividendpolicyistoensurethatshareholdersbenefitdirectlyfromthesuccessfulgrowthofthebusiness,whilecontinuingtoprovidesufficientfundstoinvestinfuturegrowth.

P 130P 130 Dividend waiver details are set out in note 31 on page 130

Share CapitalThesharecapitaloftheCompany,issuedandunissued,consistsentirelyofoneclassofordinarysharesof10penceeach.Eachshareranksequallyandcarriesthesamerightstovoteandreceivedividendsandotherdistributionsdeclared,madeorpaidbytheCompany.NorestrictionsexistonthetransferorholdingofsecuritiesintheCompanyundertheArticlesofAssociation.

AttheAGMheldon24May2007,theshareholdersapprovedaresolutiongivingtheCompanyauthoritytopurchaseupto153,701,812ofitsordinaryshares.FollowingthesaleoftheGroup’sTelecomProductsbusinessfor£265million,theBoarddeterminedthat£130millionshouldbereturnedtoshareholdersintheformofasharebuybackprogramme.TheCompanyrepurchased83,591,195ofitsordinarysharesrepresenting5.73%oftheissuedsharecapitalasat31December2007.Therepurchasedshareswerecancelled.ThesharebuybackprogrammeranfromJunetoNovember2007.TheDirectorswillbeseekingtorenewtheauthoritytomakemarketpurchasesuptoamaximumof10%oftheissuedsharecapitaloftheCompanyattheAGMon14May2008whenthecurrentauthoritywillexpire.AtthepresenttimetheCompanyhasnoplanstoexercisethisauthority.

Theissuedordinarysharecapitalwasincreasedby5,538,792ordinarysharesduringtheyearasaresultoftheexerciseofoptionsundertheSharesave,ExecutiveShareOptionSchemeandManagementIncentiveArrangement.However,duetothesharebuybackprogrammetheoverallsharecapitaldecreasedandat31December2007theissuedordinarysharecapitaltotalled1,457,646,079shares.

P 42P 42 Details of shareholders with a significant and disclosable holding are set out in the substantial shareholding note on page 42

TheCompanyoffersanumberofshareplansforitsemployees.TherightsattachedtoordinaryshareswhicharethesubjectofawardswithinanyoftheCompany’sshareplansarenotavailableuntilanyshareawardoroptiongrantedisexercisedandthesharesareallottedortransferredtothatawardee.

TheTrusteeofeachoftheCompany’semployeebenefittrustsisobligedtoactinthebestinterestsoftheshareplans’beneficiaries.AtGeneralMeetings,theTrusteemayexercisediscretionandvoteinrespectofsharesheldintheTrustalthoughtheymaynotalwayschoosetodoso.WheresharesarebeneficiallyheldbyanemployeewithinashareplantheymaydirecttheTrusteetovoteontheirbehalf.

* Restated:2006reportedfigureshavebeenrestatedtoreflectthedisposaloftheTelecomsProductsbusiness.Seenotestotheaccountsfordetails.

41


Restrictions on Voting RightsAllshareholdersentitledtoattendandvotemayappointaproxyorproxiestoattend,speakandvoteintheirplaceatGeneralMeetings.Amembermayappointmorethanoneproxyprovidedthateachproxyisappointedtoexercisetherightsattachedtoadifferentshareorsharesheldbytheshareholder.AproxyneednotbeashareholderoftheCompany.ProxyformsmustbereceivedbytheCompany’sRegistrarsatleast48hoursbeforethetimeappointedforholdingthemeetingassetoutinanyNoticesconcerningaGeneralMeetingorinanyformorproxysentbyoronbehalfoftheCompanyinrelationtotheMeeting.TheappointmentofaproxydoesnotprecludeashareholderfromattendingandvotinginpersonataGeneralMeeting.FurtherdetailsmaybefoundintheNoticeofMeetingandtheproxycard.

Issue of New Share CapitalInordertoallotequitysecuritiestheDirectorsrequireexpressauthorisationfromshareholders.Theauthoritycanbegrantedforaperiodoffiveyears.However,theCompanyfollowsbestpracticeandseeksshareholderapprovalannuallytoallottheCompany’sequitysecurities.UndertheCompaniesAct1985,theBoardmaynotallotsharesforcash,exceptpursuanttoemployeeshareplans,withoutfirstmakinganoffertoexistingshareholderstoallotsuchsharestothemonthesameormorefavourabletermsinproportiontotheirrespectiveshareholdings,unlessthisrequirementiswaivedbyaSpecialResolutionoftheshareholders.

AttheAGMheldon24May2007theDirectorsweregrantedtheauthoritytoallottheCompany’sunissuedsharesuptoanaggregatenominalamountof£50,721,597.ThisamountrepresentedonethirdoftheCompany’sissuedOrdinarySharecapitalasat29March2007.ShareholderswillbeaskedtorenewthisauthorityattheAGMon14May2008.

Creditor Payment Policy and PracticeTheCompaniesAct1985(Directors’Report)Regulations1997(StatementofPaymentPractice)requiretheCompanytomakeastatementofitspolicyandpracticeonthepaymentofcreditors.TheCompanyanditssubsidiariesseekthebestpossibletermsfromsuppliersappropriatetotheirbusinessesand,inplacingorders,giveconsiderationtoquality,delivery,priceandthetermsofpaymentwhichwillbeagreedwithsupplierswhenthedetailsofeachtransactionareagreed.TheCompanyanditssubsidiarieswillcontinuetohonourtheircontractualandotherlegalobligationsandtopaycreditorsonthedatesagreedincontractandpurchaseorders.At31December2007,thenumberofdaysofannualpurchasesrepresentedbyyear-endtradecreditorsfortheGroupamountedto55days(2006:53days)andfortheCompanyamountedtonildays(2006:13days).

Research and DevelopmentDuringtheyeartheGroupinvested£21.7million(2006:£40.2million)inresearchanddevelopmentonsoftwareproducts,ofwhich£6.7million(2006:£11.3million)wascapitalised.

Financial InstrumentsTheexposureoftheGrouptofinancialrisksincludingtheuseoffinancialinstrumentsandpoliciesforhedgingandtheexposuretoprice,credit,cashflowandliquidityriskcanbefoundinNote26totheFinancialstatements.

Amendment to the Articles of Association of the CompanyASpecialResolutionwillbeproposedattheAGMon14May2008toadoptnewArticlesofAssociation.TheamendmentstotheArticlesareprimarilytoreflecttheprovisionsoftheCompaniesAct2006whicharealreadyinforce,orwhichwillcomeintoeffectduring2008.UndertheCompaniesAct1985acompanymayonlyamenditsArticlesofAssociationifthememberspassaSpecialResolutiontothateffect.ASpecialResolutionispassedifmorethan75%ofthevotescast,inpersonorbyproxy,areinfavouroftheresolution.

AgreementsTherearenosignificantagreementstowhichtheCompanyisapartythattakeeffect,alterorterminateuponachangeofcontroloftheCompanyfollowingatakeoverbid.

TherearenoagreementsbetweentheCompanyanditsDirectorsoremployeesprovidingforcompensationforlossofofficeoremploymentthatoccursbecauseofatakeoverbid.

DirectorsInaccordancewiththeArticlesofAssociationtheappointmentofnewDirectorsmustberatifiedbytheshareholdersattheAnnualGeneralMeetingfollowingtheirappointment.Inaddition,one-thirdoftheDirectorsoftheCompany(notincludinganynewlyappointedDirectors)mustretirebyrotationandseekre-electionbytheshareholdersateachAGM.EveryDirectorshouldseekre-electionbyshareholdersatleasteverythreeyears.

P 45P 45 Further details of the election and re-election of the Directors can be found in the Corporate governance section on page 45

ThefollowingchangestotheBoardweremadeduringtheyear:24 May 2007 HelmutMamschretiredasDeputyChairmanand

SeniorIndependentDirector(SID) WimDikappointedasDeputyChairmanandSID18 July 2007 DavidTylerappointedasDeputyChairman24 July 2007 DidierHerrmannremovedasanExecutiveDirector21 Sept 2007 MartinReadretiredasChiefExecutiveOfficer

JimMcKennaappointedtoactasInterimChiefExecutiveOfficer

1 Nov 2007 CorStutterheimretiredasChairman GeorgeLoudonretiredasaNon-ExecutiveDirector DavidTylerappointedasChairman1 Jan 2008 AndyGreenappointedasChiefExecutiveOfficer

P 36P 36 The biographical details of the current Directors are listed on pages 36 and 37

P 44P 44 The current governance structure of the Board is illustrated on page 44


42

Report of the Directors

Directors’ and Officers’ InsuranceTheCompanymaintainsinsurancecoverforallDirectorsandOfficersofGroupcompaniesagainstliabilitieswhichmaybeincurredbythemwhileactingasDirectorsandOfficers.

Asatthedateofthisreport,indemnitiesareinforceunderwhichtheCompanyhasagreedtoindemnifytheDirectors,totheextentpermittedbylawandtheCompany’sArticlesofAssociation,againstallcosts,charges,lossesandliabilitiesthattheymayincurintheexecutionoftheirduties,powers,authoritiesanddiscretionsasDirectorsoftheCompany,oranyothercompanyofwhich,attherequestoftheCompany,theyareDirectorsorOfficers.CopiesoftheseindemnitiesarekeptattheCompany’sregisteredofficeandareopenforinspectionbyanymemberoftheCompany.However,theseindemnitiesdonotcovertheDirectorsorOfficersforfraudulentactivity.

Substantial ShareholdingsAt20March2008theCompanyhadbeennotifiedthatthefollowinghadaninterestin3%ormoreoftheCompany’ssharecapital.Thepercentagesbelowhavebeencalculatedonthecurrentshareinissuefigure.

Name Number of Shares %SchrodersInvestmentManagementLtd 179,834,325 12.33AvivaPlc 134,354,731 9.21UBSGlobalAssetManagement 101,455,905 6.95FidelityInternationalLtd 76,334,203 5.23Legal&GeneralGroupPlc 75,534,172 5.18AxaInvestmentManagers 72,043,934 4.94NewtonInvestmentManagementLtd 57,498,721 3.94

Employment PoliciesTheGroupoperatesinanumberofcountriesanditsemploymentpracticesvarytomeetlocalconditionsandrequirements.Inallcases,theyareestablishedonthebasisofbestpracticeinthatcountry.ThereisnodiscriminationagainstpeoplewithdisabilitieswhoapplytojointheGroupandanyonewithintheGroupwithadisabilityisawardedthesameopportunitiesforpromotion,trainingandcareerdevelopmentasotherstaff.

Employee InvolvementTheCompanyiscommittedtoensuringthatemployeesshareinthesuccessoftheCompany.Employeesareencouragedtoparticipateinshareoptionandsharepurchaseplans.

TheGroupcontinueditspolicyofinformingandinvolvingemployeesinmatterswhichconcernthemthroughtheuseofregularmeetingsbetweenmanagementandemployees,corporatenewsmagazines,intranets,theissueofbulletinsandbriefings.Toencouragefeedbackandsuggestionsfromemployees,anannualstaffsurveyisundertaken.TheresultsofthesurveyareprovidedtotheBoard,HRandallemployees.

P 78P 78 Further details on our Employment policies and employee involvement are included in the Corporate responsibility report on pages 78 to 81

Equal OpportunitiesTheGroupiscommittedtoprovidingequalopportunitiestoallemployeesirrespectiveoftheirgender,sexualorientation,maritalstatus,age,religion,raceordisability.ItistheGroup’spolicytogivefullandfairconsiderationtodisabledpersonswithrespecttoapplicationsforemployment,continuedemployment,training,careerdevelopmentandpromotion,havingregardtoeachindividual’sparticularaptitudesandabilities.

Branches TheGroupcontinuestooperateanumberofoverseasbranches.

Events after the Balance Sheet DateSeepage95andnote42,page145oftheFinancialstatements.

Remuneration Committee Report

P 56P 56 The Remuneration Committee report is set out on pages 56 to 73

AuditorsAfterdueandcarefulconsideration,theDirectorshaverecommendedthereappointmentofPricewaterhouseCoopersLLPastheCompany’sauditors.PricewaterhouseCoopersLLPhasexpresseditswillingnesstocontinueinofficeandthereforearesolutionfortheirreappointmentwillbeproposedattheforthcomingAGM.

Auditors’ Right to InformationEachpersonwhoisaDirectoroftheCompanyatthedateofapprovalofthisreportconfirmsthat:

(a) sofaraseachDirectorisaware,thereisnorelevantauditinformationofwhichtheCompany’sauditorsareunaware;

(b) eachDirectorhastakenallthestepsthatheorsheoughttohavetakenasaDirectortomakehimselforherselfawareofanyrelevantauditinformationandtoestablishthattheCompany’sauditorsareawareofthatinformation.

Directors’ Interests

P 67P 67 Directors’ Interests in the shares of the Company on 31 December 2007 are shown in the Remuneration Committee Report on page 67

TheRegisterofDirectors’InterestsisavailableforinspectionduringbusinesshoursattheGroup’sheadofficeandwillbeavailableforinspectionatthe2008AGM.

43


Annual General MeetingTheCompany’sAnnualGeneralMeeting(AGM)willbeheldon14May2008at3.00pmattheRadissonEdwardianGraftonHotel,130TottenhamCourtRoad,LondonW1T5AY.Asummaryoftheresolutionsbeingproposedatthe2008AGMissetoutbelow:

Ordinary Resolutions

• ToreceivetheDirectors’andAuditors’reportsandtheAuditedAccountsfortheyearended31December2007

• Toapprovethefinaldividendof3.5penceforeachordinarysharefortheyearended31December2007

• ToapprovetheRemunerationReportfortheyearended31December2007

• ToreappointPricewaterhouseCoopersLLPasauditorsoftheCompanyandtofixtheirremuneration

• ToelectDavidTylerasaNon-ExecutiveDirector

• ToelectAndyGreenasanExecutiveDirector

• Tore-electJimMcKennaasanExecutiveDirector

• Tore-electRogerPayneasaNon-ExecutiveDirector

• Tore-electWimDikasaNon-ExecutiveDirector

• Torenewtheauthoritytoincurpoliticalexpenditure

• TorenewtheauthoritygiventotheDirectorstoallotsecurities

Special ResolutionsUnderthetermsoftheCompaniesAct2006thefollowingapprovalsmustbesoughtasSpecialResolutions,suchresolutionswillbepassedif75%ormoreofthevotescastareinfavour:

• TochangetheCompanynametoLogicaplc

• TorenewtheauthoritygiventotheDirectorstoallotsecuritiesforcashotherthanonapro-ratabasistoshareholders

• TorenewtheCompany’sauthoritytopurchaseitsownshares

ThiswillallowtheCompanytorepurchasetheCompany’sOrdinarySharesuptoamaximumof10%oftheissuedsharecapital.FurtherinformationcanbefoundintheChairman’scircular

• ToadoptnewArticlesofAssociation

ThisisonlyasummaryofthebusinesstobeconductedattheAGM,thefulldetailsoftheresolutionscanbefoundintheNoticeofMeeting,acopyofwhichisavailableontheCompany’swebsiteatwww.logica.comorcanbeobtainedfromtheCompanySecretary.

logica.com/investorslogica.com/investors

CharityOurstaffcontinuetobegenerousintheirsupportforcharitablecauses.TheCompanysupports‘giveasyouearn’schemestofacilitatefinancialdonationsbystaffviathepayroll.Inaddition,theCompanyencouragesstafftosupportcharitiesandparticipateinlocalcharitableeventsand,wherepossible,donatessurpluscomputerstolocalgoodcauses.

Whenmakingcharitabledonations,theCompany’saimistodeveloppartnershipswithnationalcharitiesandnon-governmentalorganisationsinthecountriesinwhichitoperates.TotalUKcharitabledonationsin2007were£95,000(2006:£45,000).

Ourcommunityandcharitypolicyisaimedatdevelopingpeopleinneedtohelpthemreleasetheirpotential.GivenLogica’sroleintheknowledgeeconomywehavechosentheeducationofpeople,particularlychildren,asourpriorityareaofcommunitywork.Wesupportprojectsthatactivelyinvolveouremployeesand,wherepossible,makeuseoftheirtechnicalknowledgeandexpertise.Wealsoencourageouremployeestoraisemoneyforcausesthatsupporttheobjectiveofourcommunitypolicy.

Political Donations and ContributionsTheCompany’spolicyisnottomakeanydonationsorcontributionstopoliticalpartiesororganisationsandnosuchpaymentsweremadeduringtheyear.However,theUKPoliticalParties,ElectionsandReferendumsAct2000(the“Act”),definespoliticaldonationsandpoliticalexpendituresobroadlythatsomeofouractivitiesmayfallwithinthedefinitionsinthelegislation.ToensurethattherequirementsoftheAct,alongwiththerequirementsoftheCompaniesAct2006,aremet,wewillseekshareholderauthorityattheAGMforsuchexpenditure.

Future DevelopmentsFurtherinformationonthefuturedevelopmentscanbefoundonpage31oftheBusinessreviewpagesandtheChiefExecutive’sreportonpage35.

ByorderoftheBoard

P Weaver FCISCompanySecretary20March2008


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Corporate governance reportTheBoardendorsesandsupportsthebestpracticeguidelinescontainedinthe2006FinancialReportingCouncil’sCombinedCode(theCombinedCode)throughitscommitmenttothehigheststandardsofcorporategovernance.Apartfromafewlimitedexceptionsasdescribedbelow,theBoardbelievesthattheGrouphasfullycompliedwiththeCombinedCodethroughout2007;whereithasnot,anexplanationhasbeenprovided.TheCompanyhascompliedwiththelistingrequirementsoftheUKListingAuthorityandthoseoftheAuthorityfortheFinancialMarkets(AFM)intheNetherlands.TheCompanyalsocomplieswiththerulesandregulationsoftheNordicexchangeandtheSwedishfinancialsupervisoryauthority,(Finansinspektionen),whichauthorises,supervisesandmonitorsallcompaniesoperatingintheSwedishfinancialmarket.

The BoardTheBoardutilisesaframeworkofprudentandeffectivecontrolsinordertodetermineandmanagetheGroup’sgoals,togetherwiththenecessarystrategiesandpoliciestoachievethesegoals.TheCompany’svaluesandthestandardssetbytheBoardareupheldthroughouttheGroupwiththeassistanceoftheExecutiveManagement,InternalAudit,QualityAssuranceandRiskManagementfunctions.During2007theBoardhasconsideredreportsfromtheChiefExecutiveOfficer,theChiefFinancialOfficerandtheChiefOperatingOfficer,togetherwithreportsfromheadsofbusinessandspecialistfunctions.

TheBoardordinarilymeetssixtimesayearandisavailabletoholdadditionalmeetingswhencircumstancesrequire(fiveadditionalmeetingsin2007).ThenumberofroutinemeetingsisjudgedtobesufficienttodischargetheBoard’sdutieseffectively.InordertoreflectthegeographicalspreadoftheGroup,andtoprovidetheBoardwithahigherlevelofvisibilitytotheGroup’soverseasoperations,atleast

oneofthesemeetingsisnormallyheldoutsidetheUK,althoughnoBoardmeetingswereheldoutsidetheUKin2007.

P 52P 52 A table showing the attendance of Directors at scheduled meetings of the Board can be found on page 52

ProposedactionsarerecordedintheBoardminutesor,whereappropriate,inrelevantCommitteeminutes,togetherwithanyconcernsthatmembersoftheBoardmayhaveregardingtherunningoftheCompany.

logica.com/governancelogica.com/governance The Terms of Reference for the Board are available on the Company’s website or can be obtained from the Company Secretary

Board compositionAtthedateofthisreporttheBoardiscomprisedoftheChairman,fourExecutiveDirectorsandsixNon-ExecutiveDirectors.FollowingtheplanneddepartureofJimMcKennaandAngelaKnightlaterin2008,thenumberofDirectorswillreducetonine,comprisingtheChairman,threeExecutiveDirectorsandfiveNon-ExecutiveDirectors.TherolesoftheChairmanandChiefExecutiveOfficerareseparateandeachhasclearlydefinedresponsibilities.

Aspartofourongoingsuccessionplanningprogrammeandinlinewithfeedbackreceivedfromshareholdersduringtheyear,anumberofchangesweremadetotheBoardduring2007.DetailsofthechangesmadetotheBoardduringtheyearcanbefoundonpage41.

P 36P 36 Biographical details of the current Directors can be found on pages 36 to 37

Governance structure at 20 March 2008

Board of Directors

Executive Committee(see pages 38 to 39)

Audit Committee

Roger Payne (Chairman)Wim DikWolfhart HauserAngela Knight

Remuneration Committee

Noël Harwerth (Chairman)Wolfhart HauserAngela KnightDavid Tyler

Nominations Committee

David Tyler (Chairman)Wim DikAndy GreenNoël HarwerthRoger Payne


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TheBoardhasaNominationsCommitteetoevaluatethebalanceofskills,knowledgeandexperienceofindividualBoardmembersandtomake,whereappropriate,recommendationsforappointmentstotheBoard.During2007suitablecandidatesforthepositionofDeputyChairmanwereidentifiedwhileundertakinganexternalsearchforindependentNon-ExecutiveDirectors.Inaddition,independentexternalrecruitmentconsultantswereappointedtohelpidentifypotentialcandidatesfortheroleofChiefExecutiveOfficer.InterviewswithcandidateswereundertakenandrecommendedappointmentswereunanimouslyapprovedbytheBoard.CorStutterheim,withthesupportofWimDik,ledtheCommitteeintheprocessforappointingtheDeputyChairmanandDavidTylerledtheprocessforappointingtheChiefExecutiveOfficer.

FollowingtheappointmentofDirectorsbytheBoard,inaccordancewiththeArticlesofAssociation,NoëlHarwerthandWolfhartHauser’sappointmentswereratifiedbytheshareholdersattheAnnualGeneralMeetingin2007.AndyGreenandDavidTylerwillbeproposedforelectionattheforthcomingAGMin2008.TheNominationsCommittee,inaccordancewithitstermsofreferenceandtheCompany’sArticlesofAssociation,hasproposedJimMcKenna,RogerPayneandWimDikforre-electionatthe2008AGM.Directorssubmittingthemselvesforre-electionattheAGMhavebeensubjecttoarigorous,formalperformanceevaluationandwerefoundtohaveperformedeffectivelyduringtheyear.CopiesoftheDirectors’termsandconditionsofappointmentareavailableonrequestfromtheCompanySecretary.

AlthoughJimMcKennawillbeleavingtheCompanyduringthelatterhalfof2008,ithasbeenthreeyearssincehelastretiredbyrotationanditisthereforestillnecessaryforhimtostandforre-electionattheforthcomingAGM.

P 36P 36 The names and biographical details of the Directors, including those seeking election and re-election at the 2008 AGM, can be found on pages 36 to 37

Non-Executive Directors’ IndependenceTheBoardrecognisesthevaluablecontributionindependentDirectorscanmake.During2007theBoardconsideredtheindependenceoftheNon-ExecutiveDirectorsandconcludedthateachoftheNon-ExecutiveDirectorswereindependentincharacterandjudgement.However,undertheCombinedCode,CorStutterheim,whoretiredon1November2007,andGérardPhilippotwerenotconsideredindependentduringtheyearaccordingtoprovisionsA.2.2andA.3.1respectively,duetotheirpreviousexecutivepositionsinCMGplcandUnilogS.A.respectively.TheCompanybelievesthatallNon-ExecutiveDirectorsbringrelevantexperiencetotheBoardandmakevaluablecontributionstoachievingitsobjectives.Theydonotactwithself-interestandtheirprimaryaimsaretomaximiseshareholderwealthanddeveloptheCompanyinlinewithitsstrategicgoals.

Duringtheyear,theCompanybelievesthatnoneoftheNon-ExecutiveDirectorsheldsignificantcommitmentsoutsidetheCompanywhichwouldinterferewiththeirabilitytoexecutetheirresponsibilitieseffectively.

Chairman (non-executive, independent)

Executive DirectorsIndependent Non-Executive Directors

Non-Executive Director (not independent)

1

4

1

5

Balance of Non-Executive and Executive Directors at 20 March 2008


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Communication with shareholdersTheBoardgivesahighprioritytocommunicationwithshareholdersandtakestheopportunitiesaffordedbytheAGMandmeetingswithinstitutionalinvestorstoensureamutualunderstandingoftheCompany’sobjectivesandperformance.Duringtheyear,membersoftheBoardhavelistenedtoanumberofkeyinvestorsinordertounderstandtheirviewsfully.TheseexchangesledtotheNominationsCommitteeandtheBoardreconsideringthesizeandstructureoftheBoard,andledtoitsrestructuringduring2007.

AllshareholdersarewelcomedtotheAGMwheredevelopmentsinthebusinessareexplainedandshareholdershavetheopportunitytoaskquestionsofanyoftheDirectors.

TheCompany’swebsitewww.logica.comprovidesaccessforallshareholderstoinformationabouttheCompany,includingresultspresentationsandallpressreleases.FinancialreportingispresentedinsuchawayastoprovideabalancedandunderstandableassessmentoftheCompany’spositionandprospects.

TheBoardismadeawareofshareholders’viewsthroughfeedbackfromface-to-facemeetingsandpresentationswithinstitutionalshareholders.IfshareholdersorinvestorsdonotwishtofollowtheusualmethodsofcommunicationthroughtheChairman,ChiefExecutiveOfficerorChiefFinancialOfficer,theBoard’sSeniorIndependentDirector,WimDik,isavailabletomeetwithshareholdersorinvestorsandcanbecontactedthroughtheCompanySecretary.Directorsareregularlyupdatedonshareholderandmarketmattersthroughinternalbriefingsandtheprovisionofexternalanalysts’reports.TheCompany’sInvestorRelationsdepartmentisdedicatedtofacilitatingcommunicationwithinvestors,bothretailandinstitutional.

logica.com/investorslogica.com/investors Further information on Investor Relations can be found on the Company’s website

Chairman and Chief Executive Officer ThereisacleardivisionofresponsibilitybetweentherunningoftheBoardbytheChairman,andtheChiefExecutiveOfficer’sresponsibilityforrunningthebusiness.TheChairmanisresponsibleforensuringtheeffectivenessoftheBoardandisChairmanoftheNominationsCommittee.HealsoliaiseswiththeChiefExecutiveOfficeronstrategicissues.TheChiefExecutiveOfficerisresponsiblefortheoverallmanagementoftheCompanyandforleadingtheExecutiveDirectorsandtheExecutiveCommittee.

P 38P 38 Details of the Executive Committee can be found on pages 38 to 39

Induction and TrainingUponappointment,allDirectorsundergoacomprehensiveinductionprogramme,tailoredtotheirindividualrequirements.TheinductionisarrangedbytheCompanySecretaryandtheGroupHRDirector.TheinductionprogrammeincludestrainingonDirectors’dutiesandresponsibilities,Boardproceduresandvariousgovernance-relatedissues,includingproceduresfordealinginLogicaCMGplcshares.Inaddition,theymeetwiththeheadsofallthemajorbusinessunitsandreceiveappropriateongoingtrainingandupdatestoimprovetheirknowledgeandskillstoenablethemtodischargetheirdutieseffectively.TheDirectors’trainingrequirementsaresubjecttoregularreview.AspartoftheinductionprogrammeDirectorsalsomakeanumberofsitevisits.MembersofindividualCommitteesreceivespecifictraininginconnectionwiththeirduties,whichincludesattendanceatseminarsandbriefingsbyexternaladviserswhereapplicable.

Board SupportTheCompanySecretary,throughtheCompanySecretariatfunction,isresponsibleforprovidingadministrativeandlogisticalsupporttotheBoard.TheCompanySecretaryalsoprovidesadviceandsupportongovernance,complianceandregulatorymatters.AllDirectorshaveaccesstotheadviceandservicesoftheCompanySecretaryandaprocedureisinplacetoenableDirectorstoseekindependentprofessionaladviceattheCompany’sexpense.NosuchadvicewassoughtbyanyDirectorduringtheyear,otherthanMartinReadwhosoughtprofessionaladviceinrespectofhispension.TheRemunerationCommitteegavepriorapprovalinrespectofthisadvice.TheCompanySecretaryactsasSecretarytotheBoardanditsCommittees.

Corporate governance report


47

Board Performance 2007TheBoardissubjecttoanannualperformancereviewwhichcoverstheeffectivenessoftheBoard,itsCommitteesandindividualmembersandtakesintoaccountfactorssuchascomposition,expertise,informationflows,roles,responsibilitiesandprocedures.In2007,weconductedafullreviewinlinewiththisprocess.EachDirectorcompletedacomprehensivequestionnaire,followingwhichone-to-oneinterviewswereconductedbytheChairmanwitheachDirector.TheinformationfromthequestionnairesandinterviewswerecompiledintoareportwhichwaspresentedtotheBoardearlyin2008.

Aspartofthisprocess,anydirectorwhohasservedontheBoardforaperiodinexcessofsixyearsissubjecttoaparticularlyrigorousreview.

TheperformanceoftheChairmanwasassessedbytheNon-ExecutiveDirectors.TheprocessforthiswasledbytheSeniorIndependentDirectorwithallDirectorsprovidingfeedbackontheChairman’sperformance.TheresultswerediscussedwiththeChairmanbytheSeniorIndependentDirector.

During2007JimMcKenna,actingChiefExecutiveOfficerheldone-to-onemeetingswitheachoftheExecutiveDirectorstodiscusstheirperformanceattheendof2007andtosettargetsfortheyearahead.EachExecutiveDirectorreceivedasetofobjectivesforthecomingyear.

ThereareregularmeetingsbetweentheChairmanandtheNon-ExecutiveDirectorstodiscusstheperformanceoftheCompany,togetherwithanymattersofrelevanceorconcernatthattime,whereappropriateactionistakentoaddresstheconcernsoftheDirectors.

Follow up from 2006 Board EvaluationFollowingtheresultsofthe2006Boardevaluationprocess,theactionsimplementedin2007included:

•thereviewoftheBoard’ssuccessionplansandtheirimplementation

•thelevelofcommunicationbetweentheChairmanandindividualDirectors.ThiswasincreasedtofacilitatefasterfeedbackanddecisionmakingwithintheBoard

•thereviewofsuccessionplanningatseniormanagementlevel.ThisledtotheGroup’sHRDirectorpresentingaleadershipdevelopmentplantotheBoard.

Audit CommitteeThecompositionoftheCompany’sAuditCommitteeanditstermsofreferencereflecttheCombinedCodeandtheSmithGuidance.

TheCommitteeisauthorisedbytheBoardtoinvestigateanyactivitywithinitstermsofreferenceandtoseekanyinformationthatitrequiresfromanyemployeeoftheCompanyanditssubsidiaries.AllemployeesaredirectedtocooperatewithanyrequestmadebytheCommittee.TheCommitteehastherighttoconsulttheCompany’sprofessionaladvisersor,ifitisnotsatisfiedwiththeadvicereceived,seekfurtherindependentprofessionaladviceattheCompany’sexpenseinthefurtheranceofitsduties.TheCommitteebelievesthattheskills,qualificationsandcommercialexperienceofitsmembersareappropriateforthemtoperformtheirdutiesinaccordancewiththetermsofreferencelaiddownbytheBoard.

TheAuditCommittee,whichcomprisesallindependentNon-ExecutiveDirectors,ischairedbyRogerPayneand,for2007,includedAngelaKnight,GeorgeLoudon(retired1November2007),WimDikandWolfhartHauser.TheBoardconsidersRogerPaynetohaverecentandrelevantfinancialexperiencefollowinghisroleasaformerfinancialdirectorofaFTSE100listedcompany.TheCommitteemeetsatleastfourtimesayearandanytwomembersconstituteaquorum.

TheChairmanoftheAuditCommitteeandtheCommitteeitselfmeetwiththeexternalauditorsinprivateatleastfourtimesayear.TheChairman,ChiefExecutiveOfficer,ChiefFinancialOfficer,DeputyChiefFinancialOfficer,HeadofInternalAuditandotherappropriatespecialistfunctionalmanagersattendthescheduledmeetingsattherequestoftheCommittee.TheChairmanoftheAuditCommitteemeetswiththeHeadofInternalAuditinprivateatleastfourtimesayear.


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Inordertofulfilitstermsofreference,theCommitteereviews,challengesandapproves,asthecasemaybe,presentationsorreportsfromseniormanagement,consultingasnecessarywiththeexternalauditors.Duringtheyear,theCommitteehadasatisfactorylevelofdialoguewiththeCompany’sauditors.Duringtheyear,theCommitteespecificallyconsidered,amongstotherthings,thefollowingmatters:

•theperformanceofitsindependentauditor,PricewaterhouseCoopersLLP(PwC)(includingqualifications,expertiseandresource,effectiveness,objectivityandindependence),andrecommendedtotheBoardtheirre-electionastheCompany’sindependentauditorsfor2007

•thereviewandapprovalofPwC’s2007proposedfeeandauditprogramme.TheCommitteesubsequentlyreceivedandconsideredPwC’sreport,whichsummarisedtheconclusionsfromtheir2006audit.ThisreportincludedfeedbackfromPwConthestatusoftheCompany’scontrolenvironmentandmanagement’sresponsivenesstoauditresults

•theappropriatenessoftheCompany’saccountingpolicieswerealsoreviewedandapproved

•thereviewandapprovaloftheCompany’songoingpolicyforusingPwCfornon-auditwork.ThispolicyisdesignedtoensurePwC’sindependenceandthattheCompanycomplieswithbestpractice

•thereviewofthe2006full-yearpreliminaryand2007interimannouncements

•thereviewoftheCompany’s2006Annualreportandaccounts,inparticularthefinancialoverview,reportoftheDirectors,Financialstatements(includingnotestotheaccounts)andrelevantsectionsoftheCorporateGovernancereport.ThesewererecommendedforapprovaltotheBoard

•thesearchprocessforanewHeadofInternalAuditfollowingthemoveoftheincumbenttoafinancialroleandtheinterimmanagementarrangementsofthefunctionpendingtherecruitmentofanewHeadofInternalAudit

•thereportsandupdatesfromtheCompany’sinternalauditandqualityassurancefunctions.Theinternalauditandqualityassuranceplansfor2007werereviewedandapproved.ThesereportsandupdatesadditionallycoveredtheCompany’smanagementofitsinternalcontrols

•theappointmentofErnst&YoungLLPtoundertakeanindependentreviewoftheeffectivenessoftheInternalAuditfunction.Anumberofrecommendationsweremadefollowingthereviewwhichwillbeimplementedduringthecourseof2008

•thereportsfromtheCompany’sRiskManagementCommittee(RMC)regardingtheCompany’sriskmanagementpolicyandprogrammeofwork.TheCommitteeandtheBoardalsoreceivedreportsconcerningspecifickeyrisksidentifiedbytheRMC.Inaddition,theimpactofchanginglegislationandregulation,wereconsideredandwherenecessary,appropriateactionsweretaken

•thereviewofthefinancialpositionoftheCompany’sdefinedbenefitpensionschemes

•theimplementationofapolicyinrespectoftherecommendedinvestigationofpotential/actualfraud

•theannualreviewoftheCompany’staxandtreasurypoliciesinaccordancewithitstermsofreference.Bothpolicieswereapproved

•anextensivegoodwillevaluationcoveringtheGroup’sactivitieswhichsupportedthecarryingvaluethereofwithnoimpairmentdeemednecessary

•areviewoftheprocessesinrespectofthecosting,pricingandcontrolsonlarge,longtermcontracts,followingaprofitswarninginMay2007,involvingbothexecutivemanagementandtheCompany’sexternalauditorsPwC.Asaconsequenceofthis,additionalcontrolsandclosermonitoringofsuchcontrolswereputinplace

•ateachAuditCommitteemeeting,theCommitteereviewsanymatters,asrequired,relatingtoanumberofstandingitemsincludingmajoracquisitions/divestments;progressconcerningactionstakeninresponsetotheCommittee’srepresentations;relevantlegal,reportingpracticesandcompliancedevelopments,reportsfiledundertheCompany’sconfidentialdisclosurepolicy;compliancewiththeCompany’scodeofethicalconduct,including‘whistleblowing’,andanyotherspecialinvestigationsfallingunderthetermsofreferenceoftheAuditCommittee.



49

logica.com/governancelogica.com/governance The full Terms of Reference for the Audit Committee are available on the Company website or can be obtained from the Company Secretary

Internal controlTheAnnualreportprovidesinformationon,andanassessmentof,theCompany’sbusiness,operations,financialpositionandprospects.

TheBoardhasreviewedtheeffectivenessofitsinternalcontrolsystemsfortheaccountingyearandtheperiodtotheapprovaloftheFinancialstatementson20March2008.Exceptasspecificallymentionedintheprevioussection,nosignificantweaknesseswerenoted.ProcedureshavebeenestablishedtoensurethattheGroupcancomplywithguidanceoninternalcontrolsissuedbytheTurnbullCommitteeandthoseincludedintheCombinedCode.

ThereviewoftheGroup’ssystemofinternalcontrolcoveredallmaterialcontrols,includingfinancial,operationalandcompliancecontrolsandriskmanagementsystemsandisinaccordancewiththeTurnbullguidanceandtheCombinedCode.ActionhasbeentakentoensurethattheUnilogandWM-databusinesseshavesuitableinternalcontrolsinplace,whichareconsistentwiththeUKrequirements.

TheCompany’sapproachtointernalcontrolisbasedontheunderlyingprincipleoflinemanagement’saccountabilityforriskandcontrolmanagement.TheCompanyhasarisk-basedapproachtointernalcontrol,andmanagementareresponsibleforimplementing,operatingandmonitoringthesystem.Nosystemofinternalcontrolcancompletelyeliminatetheriskoffailuretoachievebusinessobjectivesorprovideabsoluteassuranceagainstmaterialmisstatementorloss.However,wearesatisfiedthatwehavetherightproceduresinplacetoguardagainstrelevantrisks.

Thekeyelementsofthecontrolsysteminoperationare:

•ahighlystructured,objectives-drivenapproachtofulfilitscorepurposeandgoalsinrespectofsustainedprofitabilityandgrowth.TheobjectivesoftheGrouparedevelopedbytheExecutiveCommitteeandapprovedbytheBoard,whichaddressesrevenueandassociatedcostsandnecessaryinvestment.ThisplanthenformsthebasisofannualrevenuegrowthandprofittargetsfortheoperatingunitsintheGroup

•theresearchanddevelopmentandcapitalinvestmentprogrammeswhicharesubjecttoaformalreviewprocedurerequiringthatrigorousqualificationcriteriabemetpriortoeachinstanceofmaterialinvestment.Evaluationandpost-investmentappraisalsareperformedbyreferencetodetailedbusinessplans

•themonitoringregimeestablishedbytheBoard,throughwhichtheperformanceindicatorsderivedfromthestrategicandannualplansareregularlyinterrogated.ThisensuresthateventswhichposesignificantrisktotheattainmentoftheGroup’sobjectivesorsignificantcontrollapsesarecommunicatedthroughaprocessofrapidescalationtoseniormanagement.Unitperformanceisevaluatedonamonthlybasis,andthisevaluationincludestheaddressingofidentifiedcontrolweaknessesandensuringtheconclusionofpreviouslyrecommendedcorrectiveactions

•businessunitmanagementthroughouttheGroupandspecificcorporatefunctionalmanagersarerequiredtocompleteafullassessmentofcontrolsannually.Withthecompletionofthisprocess,managementcanidentifyandquantifytherisksthatfacetheirbusinessesandfunctions.Thisprocessalsoprovidesassuranceastoriskandinternalcontrolmanagement,financialcontrolsandreporting,projectcontrol,treasurymanagementandinformationmanagement.


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Corporate governance reportRisk managementTheBoardrecognisestheneedtounderstandandcontrolthevarietyofriskstowhichtheCompanyisexposed.Inordertoaddressthesechallenges,theBoardthroughtheAuditCommitteeoverseestheRiskManagementCommittee(RMC)chairedbytheChiefFinancialOfficer.ThroughtheAuditCommitteeandtheRMCtheBoardexercisesaframeworkformanagingriskwithintheGroup.FivepracticepanelssupporttheRMCandareresponsiblefortheareasofdelivery,operations,finance,humanresources,andsalesandmarketing.Inconjunctionwiththesepanels,theRMCisresponsiblefortheregularevaluationofgenericandspecificriskswithinthebusinessandtheimplementationofmitigationplanstoaddressthem.

Theriskprocessidentifies,evaluatesandmanagessignificantrisksfacedbytheGroup.RisksareassessedwithreferencetotheachievementoftheGroup’sbusinessobjectivesandaccordingtocurrentmarketandeconomicissues.ThecontinuousmonitoringofstrategicandoperationalrisksistheresponsibilityoftheBoardandlinemanagementrespectively.TheriskprocesshasbeeninplacefortheyearunderreviewanduptothedateofthisAnnualreport.

Clearlydefineddelegationofresponsibilitiesandauthorisationlevelscontributetoacomprehensivesystemwhichexistsforcontrollingtheserisksandensuringtheyareadequatelyaddressed.CoreoperatingprocedurescommontoallareasoftheGroupareclearlydocumentedinCortex(seepage27).Theinternalauditandqualityassurancefunctionsperformregularauditsandarepartoflinemanagement’sriskmanagementresponsibilities.RegularinternalcontrolreviewsarepresentedtotheAuditCommitteeonatleastasix-monthlybasis.AuditCommitteepapers,includinginternalcontrolreviews,arecirculatedtoallBoardmembers.

P 54P 54 The key risks and measures to mitigate risks identified by the Board are listed on pages 54 to 55

ConclusionsfromtheGroup’sriskmanagementactivitiesaretakenintoaccountwhenevaluatingandmanagingtheCompany’sKPIs,whicharedetailedintheBusinessreviewonpage29.

External auditorsTheexternalauditorsprovideasupplementary,independentperspectiveontheoverallintegrityofthoseareasoftheinternalcontrolsystemwhichtheyassessinthecourseoftheirwork.TheirfindingsarereportedregularlytotheAuditCommittee.TheAuditCommitteeassessestheevidenceprovidedtothemandseekstoensurethattheriskmanagementprocessadequatelyaddressesallofthemajorriskstotheGroup.Toensureauditorobjectivityandindependencethereisastringentprocessinplacetoapprovenon-auditwork.ProposedworkmustbeapprovedbytheChiefFinancialOfficerbeforebeingpassedtotheAuditCommitteeforapproval.Copiesofallinternalauditreportsareautomaticallycopiedtoexternalauditorstoensurecommunicationisbothcomprehensiveandtransparent.

P 113P 113 Details regarding the remuneration of the external auditors for both audit and non-audit work can be found on page 113

Going concernTheDirectors,havingmadeenquiries,considerthattheCompanyandtheGrouphaveadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture,andthereforeitisappropriatetomaintainthegoingconcernbasisinpreparingtheFinancialstatements.

Nominations CommitteeTheNominationsCommittee,whichcomprisesamajorityofindependentNon-ExecutiveDirectors,waschairedbyCorStutterheimuntilhisretirementon1November2007,whenhewassucceededbyDavidTyler.ItsmembersalsoincludeRogerPayneandWimDik.HelmutMamsch,MartinRead,CorStutterheimandGeorgeLoudonalllefttheCommitteeduring2007upontheirretirementfromtheBoard.Inearly2008AndyGreenandNoëlHarwerthjoinedtheCommittee.OtherDirectorsareentitledtoattendattheinvitationoftheNominationsCommittee.TheCommitteereviewsthebalanceofskills,knowledgeandexperiencerepresentedontheBoardanditscommitteesandmakesrecommendationstotheBoardconcerninganyadjustmentsdeemedtobeappropriate.

UnderitstermsofreferencetheCommitteeoverseesthesearchandselectionprocessfornewDirectorsandaimstodosoasrecommendedbytheCombinedCode.TheCommitteecanengageexternalindependentprofessionaladviserstoassistwhenseekingpotentialBoardmembers.AshortlistofcandidateswillnormallybeestablishedandselectedcandidateswillbeinterviewedandrecommendedforconsiderationbytheBoard.TheCommitteewasconvenedonthreescheduledoccasionsduring2007.


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P 52P 52 The attendance schedule for Board and Committee meetings can be found on page 52

Othermeetingswereconvenedonanadhocbasisasrequired.

During2007theCommitteeundertookareviewofthesuccessionplanningfortheBoard,whichalsotookintoconsiderationthebalancebetweenindependentandnon-independentDirectors.TheNominationsCommitteeisalsoresponsibleforoverseeingtheBoardappraisalprocess.

TheCommitteemeetsatleasttwiceayearandanytwoCommitteemembersconstituteaquorum.

logica.com/governancelogica.com/governance The full Terms of Reference of the Nominations Committee are available on the Company’s website or can be obtained from the Company Secretary

Remuneration CommitteeTheCompany’sRemunerationCommitteeiscomprisedofatleastthreeindependentNon-ExecutiveDirectorsinaccordancewiththerecommendationsoftheCombinedCode.

AngelaKnightchairedtheRemunerationCommitteeuntil5November2007whenNoëlHarwerthassumedthechairmanship.AngelaremainedasamemberoftheCommitteetoensureasmoothhandovertoNoëlpriortoAngela’sretirementattheAnnualGeneralMeetingin2008.ItsothermembersarecurrentlyWolfhartHauserandDavidTyler.HelmutMamschandGeorgeLoudonbothretiredfromtheCommitteewhentheylefttheBoardon24May2007and1November2007respectively.

TheCommitteeisauthorisedbytheBoardtoinvestigateanyactivitywithinitstermsofreference.TheCommitteehastherighttoappointindependentadvisersand,ifitisnotsatisfiedwiththeadvicereceived,seekfurtherindependentprofessionaladviceattheCompany’sexpenseinthefurtheranceofitsduties.Fortheyearreported,KeplerAssociatesweretheprincipalindependentadviserstotheCommittee.

TheCommitteebelievesthattheskills,qualificationsandcommercialexperienceofitsmembersareappropriateforthemtoperformtheirdutiesinaccordancewiththetermsofreferencelaiddownbytheBoard.

TheCommittee’skeyroleistodeterminetheCompany’sseniorexecutiveremunerationpolicyandlevelsofremunerationfortheCompany’sExecutiveCommittee,thehigherpaidseniormanagement,CompanySecretaryandHeadofInternalAudit.TheCommitteetakesintoconsiderationthepayandconditionsofemploymentforemployeeswhenconsideringExecutives’remuneration.

P 56P 56 Details of the Committee’s main functions and its remuneration policies for Directors and senior management are set out on pages 56 to 58

TheChiefExecutiveOfficerandtheHRDirector(non-Boardmember)attendtheCommitteemeetingsattheinvitationoftheCommittee.

TheCommitteeroutinelymeetsatleastfourtimesayearandanytwoCommitteemembersconstituteaquorum.

logica.com/governancelogica.com/governance The full Terms of Reference of the Remuneration Committee are available on the Company’s website or can be obtained from the Company Secretary


52


* Board ChangesDavidTylerwasappointedtotheBoardwitheffectfrom18July2007andbecameChairmanoftheBoardon1November2007andChairmanoftheNominationsCommitteeon17November2007.HebecameamemberoftheRemunerationCommitteeon5November2007.HelmutMamschresignedfromtheBoardon24May2007.MartinReadresignedfromtheBoardon21September2007.DidierHerrmannwasremovedfromtheBoardon24July2007.GeorgeLoudonandCorStutterheimresignedfromtheBoardon1November2007.CorStutterheimalsoresignedasChairmanoftheNominationsCommitteeon1November2007.RogerPaynewasappointedtotheNominationsCommitteewitheffectfrom4June2007.AngelaKnightresignedasChairmanoftheRemunerationCommitteeon5November2007whenNoëlHarwerthtookoverthechairmanship.

Board attendance at scheduled meetings during 2007

MemberNon-member

Denotes Chairman of the Board or Committee

(C)

Board attendanceThetablebelowshowstheattendanceofDirectorsatscheduledmeetingsoftheBoardandAudit,RemunerationandNominationsCommitteesduring2007.

DirectorsarenormallyprovidedwiththeagendaandpapersforBoardandCommitteemeetingsoneweekpriortothemeetings.DirectorswhoareunabletoattendameetingprovidefeedbacktotheChairman,ChairmanoftheCommitteeortheCompanySecretaryandtheircommentsarethencommunicatedatthemeeting.

External appointmentsExecutiveDirectorsarenormallypermittedbytheCompanytoacceptandmaintainonenon-executiveappointmentatanyonetime.FeesearnedbyExecutiveDirectorsareretainedbytherelevantDirector,whichreflectsthepersonalriskassumedinsuchappointments.ThisremunerationisfullydisclosedintherelevantCompany’sAnnualreportandaccounts.

P 36P 36 See biographical details of the Directors on pages 36 to 37

Board Audit Remuneration Nominations meetings Committee Committee Committee

Member Attended Possible Attended Possible Attended Possible Attended PossibleDavidTyler* 2(C) 2 0(C) 0SeamusKeating 6 6 JimMcKenna 6 6 MartinRead* 5 5 2 2CristerStjernfelt 6 6 WimDik 6 6 6 6 3 3DidierHerrmann* 4 4 AngelaKnight 6 6 6 6 5(C) 5 GeorgeLoudon* 5 6 4 5 3 5 3 3HelmutMamsch* 2 3 2 3 1 2RogerPayne 6 6 6(C) 6 1 1GérardPhilippot 5 6 CorStutterheim* 6(C) 6 3(C) 3WolfhartHauser 6 6 5 6 5 5 NoëlHarwerth 6 6 5(C) 5


53

Statement of Directors’ responsibilities in respect of the Annual report, the Report of the Remuneration Committee and the Financial statementsTheDirectorsareresponsibleforpreparingtheAnnualreport,thereportoftheRemunerationCommitteeandtheGroupandtheParentCompanyFinancialstatementsinaccordancewithapplicablelawandregulations.

CompanylawrequirestheDirectorstopreparefinancialstatementsforeachfinancialyear.UnderthatlawtheDirectorshavepreparedtheGroupFinancialstatementsinaccordancewithInternationalFinancialReportingStandards(IFRSs)asadoptedbytheEuropeanUnion,andtheParentCompanyFinancialstatementsandthereportoftheRemunerationCommitteeinaccordancewithapplicablelawandUnitedKingdomAccountingStandards(UnitedKingdomGenerallyAcceptedAccountingPractice).InpreparingtheGroupFinancialstatements,theDirectorshavealsoelectedtocomplywiththeIFRSs,issuedbytheInternationalAccountingStandardsBoard(IASB).TheGroupandParentCompanyFinancialstatementsarerequiredbylawtogiveatrueandfairviewofthestateofaffairsoftheCompanyandtheGroupandoftheprofitorlossoftheGroupforthatperiod.

InpreparingthoseFinancialstatements,theDirectorsarerequiredto:

•selectsuitableaccountingpoliciesandthenapplythemconsistently

•makejudgementsandestimatesthatarereasonableandprudent

•statewhethertheGroupFinancialstatementscomplywithIFRSsasadoptedbytheEuropeanUnionandIFRSsissuedbytheIASB,andwithregardtotheParentCompany’sFinancialstatements,thatapplicableUKAccountingStandardshavebeenfollowed,subjecttoanymaterialdeparturesdisclosedandexplainedintheFinancialstatements.

TheDirectorsconfirmthattheyhavecompliedwiththeaboverequirementsinpreparingtheFinancialstatements.

TheDirectorsareresponsibleforkeepingproperaccountingrecordsthatdisclosewithreasonableaccuracyatanytimethefinancialpositionoftheCompanyandtheGroupandtoenablethemtoensurethattheGroupFinancialstatementscomplywiththeCompaniesAct1985andArticle4oftheIASRegulationandthattheparentcompany’sFinancialstatementsandthereportoftheRemunerationCommitteecomplywiththeCompaniesAct1985.TheyarealsoresponsibleforsafeguardingtheassetsoftheCompanyandtheGroupandfortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities.

TheDirectorsareresponsibleforthemaintenanceandintegrityofthecorporateandfinancialinformationincludedontheCompany’swebsite.LegislationintheUnitedKingdomgoverningthepreparationanddisseminationofFinancialstatementsmaydifferfromlegislationinotherjurisdictions.

Annual General MeetingAllDirectorsareexpectedtoattendtheAGMtoanswershareholders’questions.TheChairmenoftheAudit,RemunerationandNominationsCommitteesarepresentattheAGMtoansweranyquestionsontheresponsibilitiesandactivitiesoftheirCommittees.AllDirectorsattendedthe2007AGM.Toensuretheviewsofallshareholdersarereflectedproportionately,itistheCompany’spolicyforallresolutionstobevotedonapoll.

ByorderoftheBoardP Weaver FCISCompanySecretary20March2008


54

Risk factors

Risk area Potential impact Mitigation actions

Dependence on recruitment and retention of suitably qualified personnel

TheabilityoftheGrouptomeetthedemandsofthemarketandcompeteeffectivelywithotherITsuppliersis,toalargeextent,dependentontheskills,experienceandperformanceofitspersonnelandanappropriatebalanceofonshore,nearshoreandoffshoreresources.ThereisahighlevelofdemandforindividualswithappropriateknowledgeandexperienceintheITandbusinessservicesmarket,andanincreasingdependenceonsmallergroupsofkeystaffinkeylocations.Thelossofkeypersonnelorsignificantnumbersofstaff,orthefailuretoattractasufficientnumberofsuitablyqualifiedandexperiencedpersonnelinourkeyonshore,nearshoreandoffshorelocations,couldhaveseriousconsequencesontheGroup’sabilitytoserviceclientcontracts.

TheGrouphaswell-establishedrecruitmentprocessesandadoptsarangeofprovenmethodstomaximisekeystaffretention.TheGroupalsoprovidesaninfrastructurewhichsupportsthedevelopmentofitspersonnelthrougharangeofstructuredcareerdevelopmentprogrammesfocusedoneachkeycompetency,whichincludesuccessionplanningaswellasleadership,talentmanagementandpersonaldevelopment.Ourexpandingcorporateuniversityiscomplementedbylocal,tailoredlearninganddevelopmentprogrammesdesignedtomeettheneedsofeachmajorbusinessdependentonitsbusinessneeds.

Responsiveness to change or disruption to our business processes, including macro level economic trends and changes in the global competitive landscape

ManymarketsinwhichtheGroupoperateshavebeenparticularlysusceptibletorapidlychangingtechnologies,regulation,variationsinmarketeconomicconditionsandfluctuationsinclientdemand.Globaltrends,includingoffshoringandthechangingeconomicpositionofIndiaandChinainparticular,arechangingthemarketsinwhichweoperate.Failureofinternalsystemsorprocessesorinabilitytoshareinformationcouldleadtousbeingunabletomeetclientrequirementsordelivertonewopportunities.TheGroupneedstobeabletocontinuetorespondandadapttothesepressureswhilst,inatimelyandcost-efficientmanner,continuingtodeliverexistingproductsandservices.FailuretodosowillbearisktotheGroup’ssuccess.

Tomeetmarketdemands,theCompany’sIndustryGroupistaskedwithproducinginnovativesolutionandservicepropositions,essentialtobothstimulatenewclientrevenueopportunitiesandmeetexistingneeds.AproactiveknowledgemanagementprogrammeacrosstheGroup,combinedwithcollaborativecompetencyteamdevelopment,helpstoensurethattechnologyadvancementchallengesaremet.Systemsandbusinesscontinuityplansarealsomaintained.

Dependence on major clients and contracts

AsignificantpartoftheGroup’srevenueisderivedfromlargecontractsandframeworkagreements.

Noonecustomeraccountsformorethan3%ofrevenue.Whilstitispositivetogenerateincreasingrevenuebyfarmingexistingaccountsandtofocusonincreasingbusinesswithexistingcustomers,ouraccountandsalesmanagementfocusonmaintainingabalanceandondrivinganelementofnewbusinesswithnewclients.

Loss of authorisation or accreditation from vendors or disruption of key supplier relationships

AportionoftheGroup’srevenueisdependentoncontinuedauthorisationandaccreditationbycertainvendorsofITsoftwareandhardware.Withoutsuchserviceauthorisationsandaccreditationsbythesevendors,theGroupmaybeunabletooffercertainproductsandservices.FailuretomaintaintheseauthorisationsandaccreditationsmayalsoresultintheGroupfailingtofulfilcertaincontractualobligations.Therecanbenoassurancesthatavendorwillnotwithdrawanauthorisationoraccreditation,whichmayresultinanadverseeffectontheGroup’sbusiness.

Alliancemanagementistaskedwithdevelopingengagementplanswithkeysuppliersthatlinkbothorganisationsatmultimanagementlevelsandacrossmultifunctions,maintainingamutuallypositiveandbeneficialbusinessarrangement.

Exposure to country and regional risk (political, financial, economic, social), particularly in Europe and India

AstheGroupoperatesonaninternationalbasis,itisexposedtotheriskofpolitical,financialmarket,economicorsocialunrestintheterritoriesinwhichitoperates.Inaddition,thereisthepotentialfornaturaldisastersandmajorterroristactivity,suchas9/11intheUSAand7/7inLondon.TheserisksaregenerallyoutsidethecontroloftheGroupbutcouldstillresultinthelossofservicesthatwouldprejudiceourabilitytorespondtoagreedservicelevelsorfulfilotherobligations.TheGroupraisesdebtinthefinancialmarketstofundacquisitionsandworkingcapital.TheGroupisthereforeexposedtoadegreeofliquidityrisk.BycarryingdebtonitsbalancesheettheGroupisalsoexposedtointerestraterisk.TheGroupoperatesin36countriesandhasrevenueinavarietyofdifferentcurrencies.

TheGroupadoptsabalancedbusinessandmarketportfoliotoendeavourtoprotectitselfagainstmanyofthesefluctuations,especiallythosethatarerestrictedtoindividualterritoriesandmarketsectors.Liquidityriskismitigatedbyraisingdebtfromavarietyofsourcesandensuringthatthetenureofthedebtissufficientthatpre-emptiveactioncanbetakenintheeventofrestrictedliquidityinthefinancialmarkets.Interestrateriskismitigatedbycarryingaportionofthedebtatfixedratesofinterest.Theriskisfurthermitigatedbyensuringthattheoveralllevelofdebtasaproportionofearnings,andhencethelevelofinterestexpense,iswithinBoardapprovedlevels.Exchangerateriskofcashflowsdenominatedinnon-functionalcurrenciesismitigatedbyusingspotandforwardforeignexchangecontractsaspartofanoverallpolicyofmanagingforeignexchangerisk.



55


Increasing complexity and variability of client contracts

Thecomplexity,variabilityanddurationofsolutionandservicecontractsplaceriskmanagementandcontrolatapremium.IftheGroupfailstoadequatelyassessitsrisks,implementtherequiredcontrolsormonitoritspositiondiligently,anyresultingfailuretodeliverthecontractcouldadverselyaffecttheresultsoftheGroup,itsrelationshipwiththeclientoritsreputation.

TheGroupmanagesoperationalriskthroughtheapplicationofprocessunderpinnedbyacomprehensive,well-provenqualitymanagementsystemdetailedinCortex.Communication,trainingandadoptionofCortexbyallstaffareessential.However,Cortexisconstantlyunderreview,andfeedbackfromaudits,lessonslearntandthecaptureofrevisedmetricsleadstoupdatesonaregularbasis.AmoremajorreviewiscurrentlyunderwaytoevaluatetheprosandconsofmakingCortexmoreprescriptiveintermsofdevelopmenttoolsandmethodologies,andtoevaluatethebenefitsoffurtherautomation.

Exposure to global market sector risk*

TheGroupisexposedtounrestinworldmarketsectors,suchasfinance,oilandgas,duetoarangeoffactorslargelyoutsideitscontrol.

Aswellasmaintainingageographicalspread,theGrouphasawell-balancedspreadofbusinessinallthemajormarketsectorsgloballyandisfamiliarwithmanagingmorelocalregionalshiftsoffocusandresourceinresponsetocountrymarketfluctuations.However,amoremacrolevelchangeinanyonemarketcouldadverselyaffecttheresultsoftheGroup.

Risks of a pandemic or accident*

Thereisincreasingconcerngenerallyaboutthethreatofacontinentalorglobalinfluenzaorrelatedviruspandemic.AnincidentoraccidentaffectingakeygroupofstaffcouldimpacttheoperationoftheCompany,andinturnconfidenceinLogica’sabilitytodeliver.

Businesscontinuityplansaremaintainedineachgeographiclocationinwhichthecompanyoperates.TheGrouphasalsoestablishedanapproachtothepandemicthreatandmonitorstheWorldHealthOrganisationPandemicAlertstatus.Anactionplanhasbeenestablishedshouldthealertstatusincrease.

Damage to the Company’s brand, reputation or position in a given market

Logicaenjoysaleadingpositioninmanymarketsandgeographiesbasedonourdomainexpertise,repeatableandleadingedgesolutionsandservices,ourreputationfortechnicalexcellenceandreliabledelivery,andasignificantnumberoflongstandingclients.FailuretodeliverorlossofaclientmayleadtodamagetoourbrandormarketperceptionwhichcouldhaveanadverseeffectontheGroup.

Ouraccountanddeliverymanagementprocessesincludebothactiveandreactivemechanismstoensuredeliveryandthatmanagementreactstoissuesbeforedamageresults.

Extending the offshore delivery model from services and application management to software and application development*

Themarketisincreasinglydemandingtheabilitytodeliverglobally,exploitingthebenefitsofourgrowingglobalpresence.TheabilityoftheGrouptodeliverservicesandapplicationmanagementonaglobalbasisfromanyoneofanumberofdeliverycentresandtoachievethechangesnecessaryinasufficientlytimelymannerandwithinnormalbusinessconstraintsiskeytooursuccess.Thisistermedtheindustrialisationofdesignanddevelopment.

TheGroupisfocusingonandinvestinginglobalpropositions,inincreasingawarenessofandindevelopingourprocesses(knownasCortex),inourManagementInformationSystemsanddevelopingourknowledgeandknow-how,andinintroducingmoreprescription,efficienciesandautomationwherepossible.

Exploiting the potential business benefits of strategic business decisions*

TheGrouphasmadeanumberofmajoracquisitionsanddivestmentswhichrequirecarefulmanagementtoachievethenecessaryintegrationandrealignmentandinturnthepromisedbenefitstothebusiness.

Integrationanddivestmentprogrammesareaggressivelymanagedbydedicatedteams,andprogressmonitoredcarefullybytheBoard.ImprovementprogrammesaremanagedatGrouplevelensuringrapidcrossfertilisationofknowledgeandcapability.

Regulatory compliance risks* GiventheenlargedGroup,introducingfurtherjurisdictionsandcomplianceregimes,theincreasingbreadthandcomplexityofcompliancerequirementsingeneralandtheincreasingneedtodemonstratecompliance,theGroupneedstoensurethatthevariouscompliancerisksareeffectivelyunderstoodandmanaged.

Membershipofourriskmanagementandpracticegovernancecommitteeshasbeenextendedtoincludethenewsubsidiaries.CortexisbeingimplementedacrosstheenlargedGroup.

*Theseriskfactorsareinadditiontothosereportedinthe2006Annualreport.



56

Report of the Remuneration Committee

Introduction

ThisreporthasbeenpreparedbytheRemunerationCommitteeandhasbeenapprovedbytheBoardforsubmissiontoshareholders.Apartfromafewminorexceptions,explainedinthereport,theCommitteebelievesthereportcomplieswithSchedule7AoftheCompaniesAct1985andtherelevantrequirementsoftheListingRulesoftheUKListingAuthority.Thereportcomprisesthefollowing:

• Remunerationpolicyandarrangements:

– TheRemunerationCommittee

– RemunerationpolicyforExecutives

– Detailsofremunerationarrangements

– Directors’employmentcontracts

– Non-ExecutiveDirectorships

– FormerDirectors

– Non-ExecutiveDirectors

• Remunerationreview:includingtabularinformationonDirectors’emoluments,shareawardsanddefinedbenefitpensionarrangements(certainsectionsofwhichhavebeenaudited).

Remuneration policy and arrangements

The Remuneration CommitteeTheRemunerationCommitteeisresponsibletoboththeBoardandtheshareholders.TheCommittee’sresponsibilities,thekeyissuesconsideredduring2007andanoverviewoftheprincipalmattersthattheCommitteeintendstoreviewduring2008aresummarisedbelow.

logica.com/governancelogica.com/governance The Committee’s full terms of reference are available on the Company’s website at www.logica.com/governance or from the Company Secretary

Responsibilities

• determining the overall policy for senior management remuneration

• approving the remuneration packages and conditions of employment of the Chairman, the Executive Directors, the Executive Committee members, the Company Secretary, the Head of Internal Audit, and other senior management

• approving the annual bonus targets for the senior executives

• overseeing the policy and management of the Company’s employee share plans

• ensuring due consideration of corporate performance on environmental, social and corporate governance issues when setting remuneration of Executive Directors

• ensuring that the Company pays appropriately for the performance achieved

Noël Harwerth – Chairmanfrom05.11.07,memberfrom01.01.07

Angela Knight – retiringasNon-ExecutiveDirectorat2008AGM,Chairmanuntil05.11.07

Wolfhart Hauser –memberfrom01.01.07

George Loudon – retired01.11.07

Helmut Mamsch – retiredatthe2007AGM,24.05.07

David Tyler – memberfrom05.11.07

Remuneration Committee Composition and MeetingsThe Committee is composed entirely of independent Non-Executive Directors:

57


Key issues considered in 2007

• approving the bonus targets for the Executive Bonus Plan, and assessing the performance against these criteria in determining bonus payments

• approving the operation of the Company’s long-term incentive plans, including total grant size, individual grant levels and performance conditions

• approving the remuneration package and terms of engagement for Andy Green, Chief Executive Officer

• determining incentive arrangements during the period of leadership transition

• approving leaving arrangements for departing Executive Directors

• reviewing the performance appraisals of the senior executive team

• reviewing the pension arrangements for UK-based Executive Directors

• approving amendments to the share retention policy

• reviewing and approving the 2006 Report of the Remuneration Committee to shareholders

Key issues to be considered during 2008

reviewing the executive and employee share plans

reviewing the performance conditions for share plans

reviewing senior management bonus arrangements

TheCommitteeheldfivescheduledandthreeadhocmeetingsduring2007.Seepage52fordetailsofattendancebyindividualmembers.

TheCommitteetakesadvice,asappropriate,fromKeplerAssociates,theprincipalindependentexecutiveremunerationadvisers.KeplerdidnotprovideanyotheradviceorservicestotheGroup.

Inaddition,advicewasalsosoughtwhereappropriatefromothersources,namely:

• WatsonWyattLimited–advisers,actuariesandadministratorstotheLogicaCMGDefinedContributionPlan,advisersandactuariestotheLogicaCMGDefinedBenefitPlanandinvestmentadviserstotheCMGUKPensionScheme,

• TowersPerrin–inrelationtoAndyGreen’sremunerationpackage,

• GroupChiefExecutiveOfficer(MartinRead,priortohisretirement),

• ChiefFinancialOfficer(SeamusKeating),

• GroupHumanResourcesDirector(NigelPerks),

• CompanySecretary(PaulWeaver).

DavidTylerspokewithkeyshareholdersinadvanceofAndyGreen’sappointmentasGroupChiefExecutiveOfficer.

TheCommitteemayinviteanyoftheExecutiveDirectorstoattendallorpartofitsmeetingsbutnoindividualispresentwhentheirownremunerationisbeingdiscussed.


58


Remuneration policy for senior executives

• ItisthepolicyoftheCommitteetoprovideremunerationthatiscompetitive,attractstherightcalibreexecutivestotheGroup,andeffectivelyalignstheinterestsofshareholderswiththoseofthebusiness.Theremunerationpolicyforseniorexecutivesissetwithreferencetototalcompensation.

• Thepolicysupportsanddrivesaperformance-orientedculturethatlinksrewardstotheperformanceoftheindividual,thebusinesstheyareresponsibleforandtheGroupasawhole.

• ThecompetitiveremunerationprovidedtotheseniorexecutiveteamiscommensuratewiththeglobalnatureoftheGroup.ThemembersoftheseniorexecutiveteamarebasedintheUK,France,SwedenandtheNetherlandsandinexcessof85%oftheCompany’semployeesnowliveandworkoutsidetheUK.Targetlevelsofremunerationarebenchmarkedagainstsimilarly-sizedsuitableUK-listedcompaniesandselectedinternationalsectorcompetitors.Thesecomparatorcompanieswereselectedonthebasisofsize(inbothfinancialtermsandwithregardtonumberandtypeofemployees),complexityandinternationalscopeofoperations.

• ItisthepolicyoftheCommitteethatDirectors’contractarrangementsareinlinewithUKgovernanceguidelinesandcompetitivemarketpractice.

• TheCommitteeregularlyreviewsitsremunerationpolicyinthelightofsignificantregulatorydevelopments,marketpracticeandshareholderexpectations.TheCommitteealwaystakesaccountoftheoverallcostoftheexecutives’totalcompensation.

• Shareholderswillbeconsultedwhenmaterialchangestothepolicyarebeingconsidered.

Remuneration arrangements for senior executives

Key elements of remunerationTheremunerationofseniorexecutivescomprisesamixoffixed,variable,short-andlong-termremuneration,whichisreviewedeachyearbytheCommitteetoensurethattheDirectorsareappropriatelyincentivisedtoachievetheGroup’sgoalsandobjectives.

ThechartaboveshowsthatforontargetperformanceremunerationforExecutiveDirectorsisweightedmostheavilytowardstheperformance-relatedelements.Atstretchlevelsofperformance,ahigherproportionofthepackagewouldbedrivenbyperformance.

Thetableonpage59summarisesthekeyelementsofseniorexecutiveremunerationin2007.

TheGroupoperatesinmanydifferentcountriesallowingnomeaningfulcross-countrycomparisonofsalarieswithemployeesbelowseniorexecutivelevel.TheCompanypolicyistosetremunerationlevelswithreferencetolocalmarketconditions.

Logica Executive Director fair value pay mix 2007

Long-term incentives (LTIP & ExEPP)Cash bonusPensionSalary

NB: Calculation assumes investment of 20% of net annual bonus in the Executive Equity Participation Plan (ExEPP).

100%

80%

60%

40%

20%

0%Jim

McKennaSeamusKeating

CristerStjernfelt

MartinRead

DidierHerrmann

100%

80%

60%

40%

20%

0%

59


Key Elements of Executive Directors’ Remuneration in 2007 Element Objective Policy Award level

Total Toprovidecompetitivetotal Compensationprovidedshould Totalcompensationis compensation compensationtoexecutives, becommensuratewiththe determinedwithreferenceto allowingtheCompanyto executive’scontributiontothe theremunerationpolicyforsenior attractandretaintalented Company.TheCommitteeintends executivesoutlinedonpage58 leaders topayappropriatelybasedon skill,experienceandperformance achievedbytheexecutive

Annual base salary Reflectsanemployee’smarket Reviewedannuallyon1January. Salariesarereviewedagainst value,experience,contribution Market-competitivebasesalaries businessandpersonalperformance, totheGroupandindividual againstsuitablecomparator andlocalmarketconditions performance companies

Annual bonus Incentivisesexecutivestoachieve Paidincash.Maximumreward Bonusawardsrangefrom0% andexceedspecificshort-term onlyforoverachievingtargets. toamaximumof125%ofannual Groupfinancial,strategicand Requirementtoinvestbetween basesalary personalobjectives;deferred 20%and50%ofnetannual elementcontributestoretention bonusinsharesforthreeyears. Arevisedbonusplanisinplace for2008

Long Term Performanceshareplan. Shareawardsaremadeannually CEO:1.5xannualbasesalary Incentive Plan Incentivisesexecutivestoachieve toseniorexecutives,other ExecutiveDirectors:1to1.5xannual (LTIP) superiorlong-termperformance managementandhighperformers, basesalary andcommitmenttothegoals andareconditionalonGroup oftheGroup;toalignshareholder performanceoverthreeyears interestswithexecutives; retentionofkeyindividuals

Executive Equity Deferredbonusplan;toalign Executivesarerequiredtoinvest Seniorexecutivesandcertain Participation Plan interestsofshareholdersand partoftheirannualbonusin otherseniormanagersareeligible. (ExEPP) executivesthroughinvestingin shares.Inreturn,additional Therequirementistoinvest Companyshares;toencourage matchingsharesarereleased between20%and50%ofnet executivestobuildupasignificant conditionalonGroupperformance annualbonusinthisplan. shareholdingintheGroup overthreeyears Matchingawardonaone-to-one gross-of-taxbasissubjectto performanceconditions

Pension Providescompetitive UK-basedexecutivesparticipate EmployercontributionsforUK- retirementbenefits inthedefinedcontributionplan. basedDirectors: PensionfortheSweden-based CEO:35%ofannualbasesalary ExecutiveDirectorreflects salary;ExecutiveDirectors:20% pre-acquisitionprovisions

Share retention Requiresexecutivestobuildand Theshareholdingrequirement From2008increasedshareholding policy maintainasignificantshareholding forexecutivesisexpressedasa requirementsare: intheGroupandsupports percentageofannualsalary. CEO–200%ofsalary alignmentwithshareholder Arevisedpolicyisinplace (was100%) interests for2008 ExecutiveDirectors– 100%(was75%) ExecutiveCommittee– remainsat50%


60

Report of the Remuneration CommitteeTheEPStargetfor2007wasnotmetandnobonuseswerepaidtoExecutiveDirectors,withtheexceptionofCristerStjernfeltwho,inordertoretainfocusonthenewlyacquiredbusiness,had70%ofhisbonusbasedontheperformanceoftheNordicscluster,and30%onGroupperformance.HereceivedthemaximumbonuspayableforNordic’sperformanceof87.5%ofsalary,butnopaymentforGroupperformance.

Forthe2008ExecutiveBonusPlan,theCommitteehasreplacedEPSwithoperatingprofit(EBITA)asthemeansofmorecloselyfocusingexecutivesonfundamentalaspectsofthebusinesstheycaninfluenceandareresponsiblefor.

Seniorexecutivesinchargeofabusinesswillhave60%oftheirbaselinebonusbaseduponGroupoperatingprofitandcashflowconversiontargets,and40%ontheoperatingandcashflowconversionperformanceoftheirbusiness.TheGroupCEOandfunctionalheadswillhave100%oftheirbaselinebonustargetedonGroupoperatingprofitandcashflowconversion.

Inaddition,achievementofstrategicobjectiveswillberewardedthroughamultiplier(replacingthecashflowconversionmultiplierusedinpreviousyears).Apersonalperformancemultiplierwillbeawardedforperformanceagainstpersonalobjectives.BothsetsofobjectivesaimtohelpdriveachievementoftheGroup’sstrategicgoals.

Leadership Transition Incentive ArrangementInviewoftheExecutiveDirectors’keyroleinensuringtheGroup’sperformanceduringtheleadershiptransition,theCommitteeimplementedanadditionalincentivearrangementcoveringtheperiodfromAugust2007toAugust2008.Underthisarrangement,theExecutiveDirectorsmayreceiveamaximumpaymentof75%ofannualbasesalary.OnehalfofthisincentivewaspayableonachievingspecifiedGrouptargetsfor2007,andtheotherhalfonachievingbusinessperformancetargetsinthefirsthalfof2008.ThetargetforAugusttoDecember2007wasnotachievedandthereforethefirsthalfoftheincentivewasnotpaid.

Long Term Incentive PlansTheCommitteecontinuestoconsiderthattheuseofequity-basedincentivesremainsanimportantmechanismforaligningtheinterestsofexecutiveswiththoseofshareholders.

AwardsundertheplansarenormallygrantedafterthedeclarationoftheGroup’spreliminaryorinterimresults.

Thefollowingplansarecurrentlyinplace:

Annual base salaryTypicallysalarieswillbemarketmedianforanindividualdeemedtobefullyeffectiveintheirroleandwhoisaroundmid-career.LessexperiencednewappointeesmaybepaidbelowmarketmedianwhilstexperiencedindividualsandthoseregardedbytheCommitteeasparticularlykeytothefuturesuccessoftheCompanymaybepaidabasesalaryofaroundupperquartilewhereappropriate.Followingareviewofmarketdataandinlinewiththeabovepolicy,theCommitteehasimplementedthefollowingannualbasesalariesforExecutiveDirectorsfrom1January2008:

Annual base salaryThebasesalariesoftheExecutiveDirectorswerereviewedandthefollowingsalariesimplementedeffective1January2008:

Name 2007 2008 % increase AndyGreen n/a £700,000 n/a JimMcKenna £455,000 £455,000 nil SeamusKeating £400,000 £420,000 5% CristerStjernfelt* £229,460 £240,933 5%

*SalariesofSEK3,100,000(for2007)andSEK3,255,000(for2008)convertedatarateof13.51.

AnnualbasesalariesfortheExecutiveCommitteeincreasedintherangefrom0to5.7%.

Salaryincreasesaboveinflationreflectthegenerallevelofexecutivepayincreasesinthemarket,andprogressiontowardsthemedianforexecutivespaidbelowthemedian.

Annual bonusTheExecutiveBonusPlanisdesignedtoincentiviseseniorexecutivestoachievestretchinganddemandingfinancial,strategicandpersonaltargets,whichareapprovedannuallybytheRemunerationCommittee.

In2007thetargets,aspreviously,werebasedonEarningsPerShare(EPS^).EPStargetsarenotpublishedastheyareprice-sensitive.

Thediagrambelowshowsthekeyelementsofthe2007bonusplananddemonstrateshowthebonusamountiscalculated,expressedasapercentageofannualbasesalary.

1 Baseline bonus % (0%to125%–basedonGroupEPSperformance) ×2 Group cash flow conversion (multiplierrangingfrom0.5to1.3) ×3 Personal performance against objectives (multiplierrangingfrom0.0to1.5) =4 Total bonus % payable

(cappedat125%)

Themaximumbonusis125%ofannualbasesalaryforsuperiorperformance.Since2006,aminimumof20%ofanynetannualbonusmustbeinvestedinsharesthroughtheExEPP.

WhereappropriatetheCommitteemayexerciseitsdiscretionindetermininganybonusespaid.

^ThedefinitionofEPSforbonuspurposesin2007isEPSbasedonnetprofitattributabletoordinaryshareholders,excludingwheneversuchitemsoccur:discontinuedoperations,exceptionalitems,mark-to-marketgainsandlossesonfinancialassetsandfinancialliabilitiesdesignatedatfairvaluethroughprofitandloss,amortisationofintangibleassetsinitiallyrecognisedatfairvalueinabusinesscombinationandtaxonthoseitems,whereapplicable.

#Fortheperformanceconditionsappliedtothe2006LTIP,2006ExEPP,theEmEPP,theESOPandtheUnilogManagementIncentivefor2007,EPSmeanstheadjustedearningspersharebasedonnetprofitattributabletoordinaryshareholdersexcludingexceptionalitemsandrestructuringcostsrelatedtoacquisitions,mark-to-marketgainsandlossesonconvertiblebonds,amortisationofintangibleassetsinitiallyrecognisedinanacquisitionatfairvalue.

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Executive Equity Participation Plan (ExEPP)TheExEPPallowsparticipantstoinvestaminimumof20%anduptoamaximumof50%oftheirafter-taxannualbonuspaymentinCompanyshares.ParticipationiscompulsoryforExecutiveDirectorsandECmembersbutvoluntaryforotherseniormanagersinvitedtojointheplan.IftheyremainintheGroup’semploymentandretaintheirsharesforthreeyearsthen,providedtheperformanceconditionsaremet,theCompanywillmatchthesharesonaone-to-onegross-of-taxbasis.

Executive Share Option Plan (ESOP)TheCompanyhasretainedashareoptionplan,inparticularforthosecircumstanceswhereuseoftheLTIPmaybeinappropriate,forexample,duetolocaltaxationorsecuritiesregulations.Nooptionsweregrantedunderthisplanin2007.

Awards:

• arelimitedtoamaximumfacevalueoffourtimesannualsalary

• maybeexercisedbetweenthethirdandtenthanniversaryofthedateofthegrant,orreleasedimmediatelyinthecaseofconditionalshares,providedtheperformanceconditionhasbeenmet.

Performance conditionsTheCommitteesetsperformanceconditionseachtimeanawardismadeunderthelong-termincentiveplans.

EPS#growthandTSRarethetwoperformancemeasurescurrentlyappliedtotheLTIP,theExEPPandtheESOP.

EPS#growthremainssubstantiallywithinthecontrolofmanagementandthereforetheCommitteecontinuestoconsideritanappropriatemeasureoftheperformanceandunderlyingfinancialperformanceoftheCompany.

The Long Term Incentive Plan (LTIP)TheLTIPistheprimarylong-termincentivearrangementforseniorexecutives.Itsmainfeaturesare:

• anannualawardofshareswillbereleasedafterthreeyears,providedthatchallengingperformancetargetshavebeenachieved

• themaximumtotalmarketvalueofsharesoverwhichawardsmaybegrantedtoanyemployeeduringanyCompanyfinancialyearis200%oftheirannualbasesalary.However,theCommittee’sexpectationisthatnograntsgreaterthan150%ofannualbasesalarywillbeproposedinnormalcircumstances

• 50%ofeachawardissubjecttoachievementofEPS#performancetargets

• theother50%oftheawardissubjecttoTotalShareholderReturn(TSR)performancerelativetopeers.

For2007,theCommitteedecidedthatEPSandrelativeTSRwereappropriatemeasuresoftheCompany’slong-termperformance.

Thesestretchingthree-yearperformancecriteriaalsoapplytotheExEPPandExecutiveShareOptionPlanoutlinedonthispage.

P 69P 69 See page 69 for details of conditional shares awarded and award values under the ExEPP can be found on page 69

LTIP and ExEPP Vesting Schedules

30%

EPS > RPI + x% p.a.

50%

67%

81%

92%100%

0.6% 1.4 2.2 3.0 3.8 4.6 5.4 6.2 7.0 7.8

30%

Relative TSR percentile

50%

67%

81%

92%100%

35% 40 45 50 55 60 65 70 75 80

% s

har

es v

esti

ng

% s

har

es v

esti

ng

30%

50%

67%

81%

92%100%

30%

50%

67%

81%

92%100%

% s

har

es v

esti

ng

% s

har

es v

esti

ng

50% of the award vests on TSR 50% of the award vests on EPS


62

TSRmeasuresthereturnonanotionalinvestmentinaCompanyoveragivenperiod.TSRisdeterminedbyregardtoanindexmeasuringthegrowthinaCompany’ssharepriceoveraperiod,withtheindexassuminganydividendspaidarereinvestedintheCompany’ssharesonanetbasisontheex-dividenddate.TSRcanbeausefulmeasureofaCompany’sperformancerelativetothatwithinaselectedcomparatorGroup.

Thevestingschedulegraphsonpage61showhoweachhalfofanawardcouldvestattheendoftherelevantthree-yearperformanceperiodundertheEPSandtheTSRperformanceconditions.

TheTSRcomparatorgroupfor2007isshownbelow:

TSR comparator group for 2007

AtosOrigin IndraSistemasCapgemini iSOFTCGIGroup MisysComputerSciencesCorp. OrdinaDassaultSystems SageElectronicDataSystems(EDS) SAPGetronics SopraGroupGroupeSteria TietoEnatorIBM Xansa

ThesecompanieswereselectedforstronglyaligningtotheGrouponsomeorallofthefollowingcriteria:businessmix,companysize(primarilyintermsofmarketcapitalisation),geographicspreadandTSRcorrelationwiththeCompany.Followingareview,theCommitteehasdecidedtoaddAccenture,Capita,InfosysTechnologiesandUnisystothecomparatorgroupin2008.Getronics,iSOFTandXansahavebeenremoved,becausetheyarenownolongerlistedcompanies.WM-datawasoriginallyinthecomparatorgroup,untilitwasacquiredinOctober2006.

DilutionAwardsgrantedundertheCompany’sManagementIncentiveArrangementandtheUKandInternationalSharesavePlansaresatisfiedwithnewissueshares.OptionsgrantedundertheExecutiveShareOptionSchemeandawardsmadeundertheLTIPmaybesatisfiedeitherbysharespurchasedinthemarketbytheCompany’soffshoreemployeebenefittrustorbytheissueofnewshares.AwardsmadeundertheExecutiveEquityPartnershipPlan,theExecutiveEquityParticipationPlan,andtheEmployeeEquityPartnership


Outstanding % of issued Outstanding % of issued option/ share option/ share award as at capital at award as at capital at Share plan name 31.12.2006 31.12.2006 31.12.2007 31.12.20071996ExecutiveShareOptionScheme 19,066,158 1.2415% 14,549,281 0.9981%LongTermIncentivePlan2006 6,472,316 0.4215% 11,295,310 0.7749%ManagementIncentiveArrangement 1,790,000 0.1166% 345,000 0.0237%1995InternationalSharesavePlan 4,919,458 0.3203% 2,533,226 0.1738%2005InternationalSharesavePlan 1,158,082 0.0754% 2,460,002 0.1688%1995UKSharesavePlan 7,745,093 0.5043% 4,684,181 0.3214%2005UKSharesavePlan 917,560 0.0597% 2,061,570 0.1414% 42,068,667 2.7394% 37,928,570 2.6020%

Dilution table

PlanarealwayssatisfiedbysharespurchasedinthemarketbytheCompany’soffshoreemployeebenefittrusts.AwardsmadeundertheUSStockPurchasePlanaresatisfiedbymarketpurchasesharesonly.

ThetablebelowshowstheCompany’scurrentcommitmenttoissuenewsharesinrespectofitsshareplansassumingallperformanceconditionsaremetandalloptionandawardholdersremaininemploymenttothevestingdate.

PensionsPensionarrangementsforexecutivesreflectlocalpracticeintheirbasecountry.

UK-basedexecutivesmayjointheCompany’sDefinedContributionPensionScheme.ThisistheUK’smainpensionfundandtheonlyschemeavailabletonewUKemployees.WhereaUK-basedexecutivewishestochangetheirpensionarrangementsforpersonaltaxreasons,thepolicyistoconsideralternatives,providedtheyarecostneutraltotheCompany.FollowingareviewofUK-basedexecutivepensionarrangements,theCommitteehasimplementedthefollowingrevisedemployercontributionsfrom1January2007:UK Employer Pension Contributions 2007 Allowancefor contributions 2007 toapproved Allowance 2006 pension whenpension Allowance arrangements takenascash (%ofsalary) (%ofsalary) (%ofsalary)ChiefExecutiveOfficer* 30% 35% n/aExecutiveDirector 15% 20% 17.75%*ApplicabletoMartinReaduntilhisretirementon21September2007.Ofhistotalpensionallowance,anamountequivalentto25%ofsalarywascontributedtoanapprovedExecutivePensionPlanandtheremaining10%toanUnapprovedUnfundedRetirementBenefitScheme(UURBS).

JimMcKennareceiveshispensionallowanceascash.Thecontributionof17.75%includesareductionforemployer’sNationalInsuranceContributionstoensuretheoverallcosttotheCompanyisthesameasprovidingpensioncontributions.

SeamusKeating’sCompanycontributionswereheldinanUnfundedUnapprovedRetirementBenefitScheme(UURBS),whilstthemostappropriatepensionarrangementswerebeingdetermined.DuringtheyearthesewerepaidintotheCompanypensionscheme

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andemployercontributionstotheschemewerereinstated.TheCompanymakescontributionsof20%,withSeamusKeatingcontributing5%.

CristerStjernfeltcontinuestoreceivethesameannualpensionallowanceofSEK1,750,000(£129,534)ashereceivedin2006,reflectingarrangementsinplacepriortotheWM-dataacquisitionin2006.ThisisduetoexpireattheendofDecember2008andwillbereviewed.

Basepayistheonlyelementofremunerationthatispensionable.

BenefitsThebenefitsreceivedbytheExecutiveDirectorsaredetailedinthetableabove.BenefitentitlementsareinlinewithnormalpracticeintheUKandSweden.

All-employee share plansTheGroupoperatestwoshareplanstoprovideemployeeswiththeopportunitytoacquiresharesintheCompany.Themajorityofemployeesgloballycanparticipateinatleastoneoftheplans,subjecttolocallegalandtaxconstraints.ExecutiveDirectorsareeligibletoparticipateinSharesave,andmayparticipateintheEmployeeEquityPartnershipPlanonconditiontheyarenotparticipatingintheExEPPthatyear.US-basedemployeesareonlyentitledtoparticipateintheUSStockPurchasePlan.

During2007atotalof3,558,605optionswereawardedundertheUKandInternationalSharesaveplans,andatotalof226,199matchingawardsharesundertheEmployeeEquityPartnershipPlan.

For2008,toencouragegreaterparticipation,theCommitteehasdecidedtore-introducea20%discounttothemarketpriceatwhichemployeesmaypurchaseoptionsundertheSharesaveplansandtoremovetheCompanyperformanceconditionontheEmployeeEquityPartnershipPlan.Inaddition,certainemployeesinFrancemayparticipateinUnilogInsight(seepage135fordetailsoftheplans).

Share retention policyExecutiveDirectorsandExecutiveCommitteemembersreceivingdeferredsharesthroughtheExEPPareexpectedtoacquireandretainasignificantholdingintheCompanyundertheshareretentionpolicy.

Therequirementisexpressedasapercentageofannualbasesalary,whichtheCommitteeconsiderstobemostappropriatemeasureasitislessvolatilethanactualremuneration,easilyunderstoodandcomplianceiseasilymeasured.

In2007,fromthedateoftheirappointment,executivesmustinvest50%oftheirnetannualbonusinsharesuntiltheyhaveachievedtheCompany’sshareownershiprequirements.Theobligationtoinvest20%ofthenetannualbonusinsharesthroughtheExEPPisregardlessofshareholding.

Name Location Benefit entitlementJimMcKenna UK Pension,lifeinsurance,permanenthealthcover,privatemedicalinsuranceandSeamusKeating benefits,medicalcheck-ups,companycarandfuel(orcashallowancesinlieu), aninterestfreetravelticketloan,personalaccidentinsuranceCristerStjernfelt Sweden Pension,lifeassurance,permanenthealthcover,companycar, personalaccidentinsurance

Executive Directors’ benefits

Followingapolicyreview,theCommitteehasdecidedtoimplementincreasedshareownershiprequirementsfrom2008of200%(CEO)and100%(otherExecutiveDirectors)ofannualbasesalary,removingthethree-andfive-yeartimelimitswithinwhichtoachieveacertainlevelofshareholding.ExecutiveDirectorswillbeobligedtoinvest50%ofanyannualnetbonusinsharesuntiltheCompany’sownershiprequirementsaremet.ItisexpectedthatthiswillnormallybeachievedthroughparticipationintheExEPPandLTIP.ThecurrentandnewrequirementsforExecutiveDirectorsaresetoutinthetablebelow.

Attheendof2007thethree-yearshareholdingrequirementapplicabletoJimMcKennaandSeamusKeatingwasachieved.CristerStjernfelthasalreadyachievedashareholdingof100%ofannualbasesalary.

Share Retention Policy (percentage of annual base salary)

2007 2007 2008 (after 3 years) (after 5 years) (no time limit)CEO 50% 100% 200%ExecutiveDirectors 30% 75% 100%

NB:Sharesarevaluedattheirpurchasepriceortheaveragepriceoverthreemonthsto31December(whicheveristhehigher).

Remuneration arrangements for Andy Green

AndyGreenwasappointedastheGroup’sChiefExecutiveOfficeron1January2008.Hisremunerationpackageissummarisedbelow.

• Annualbasesalary:£700,000perannumatdateofappointment.

• Annualbonus:ParticipationintheExecutiveBonusPlanofferingamaximumbonusopportunityof125%ofannualbasesalary.

• LTIP:Agrantof150%ofannualbasesalarytobeawardedinApril2008.

• Pension:Acashpaymentequalto30%ofannualbasesalary.

• Benefits:BenefitsareinlinewiththoseofferedtoallUK-basedexecutives.

• Otherarrangements:Incompensationforforfeitedincentivesinplaceathispreviouscompany,BTplc,AndyGreenwillreceiveaone-offcashpaymentof£231,668(netofdeductions)inMarch2008.Hehasalsoreceivedarestrictedsharegrantofatotalof2,110,967ordinarysharestovestoveraperiodoffourconsecutiveyears.Thenumberofsharesthatvestateachtranchewillbeincreasedbyreferencetodividendspaidonsharesbetweenthegrantdateandvestingdate.TheshareswillbereleasedintranchesattheendofMarchineachofthefouryearsandvestimmediately,providedthatheisemployedbytheCompanyonthevestingdate.


64

Report of the Remuneration CommitteeRemuneration arrangements for former Executive Directors

Martin ReadMartinReadservedontheBoardasGroupChiefExecutiveuntilhisretirementon21September2007.Noseverancepaymentsweremadetohimonhisretirement.ForthepurposeofGroupshareplans,theCommitteeexerciseditsdiscretiontoallowMartinReadtoexerciseoutstandinggrantsundercertainGroupshareplans(seepages68to70).Hisotherleavingarrangements,inrespectofbenefitsandCompanyproperty,wereinlinewithnormalpractice.

Untilhisretirementdate,MartinReadwasentitledto:

• Atotalemployercontributiontoretirementbenefitsof35%ofannualbasesalary,ofwhich25%waspaidintoapensionplanandtheremaining10%intoanUURBS.MartinReadelectedtoreceivethefundsof£107,642includinginterestaccruedintheUURBSascashonhisretirement.Fundsinhisretirementplancontinuetobemanagedwithintheplanasadeferredmember.

P 63P 63 Benefits in line with those received by the other UK-based executives can be found on page 63

Onretirement,MartinReadpurchasedhiscompanycaratmarketvalue.Theliquidateddamagesclauseinhisservicecontract,dated

27July1993,didnottakeeffectduetohisretirement.TheclausestatedthatiftheCompanyterminatedhisemploymentinbreachofcontract,hewouldreceiveanamountequaltooneyear’sgrosssalaryplus30%ofannualgrosssalaryascompensationinrespectofpensions,bonusandotherbenefits.

MartinReadreceivedfeesfromanon-executivedirectorshipwithBritishAirways,detailsofwhichcanbefoundintheirreportandaccounts.

Didier HerrmannDidierHerrmannservedontheBoarduntil24July2007whenhewasrequestedtostepdown.Hisemployment,whichcommencedwitheffectfrom1October1972,wasterminatedon4January2008.

TwosettlementagreementshavebeenenteredintowithDidierHerrmannasfollows:

InrelationtotheterminationofhisroleswithsubsidiariesofLogicaCMGplcthefollowingsumswerepaid/sharestransferredinDecember2007/January2008:

• Legallyrequiredterminationpaymentof€913,693pursuanttotheapplicablecollectivebargainingagreement,

• settlementpaymentof€487,859(lessstandarddeductionsrequiredunderFrenchlaw),

• redemptionof7,764BSARs(Unilogshareoptions)atatotalsumof€17,469inlinewithnormalpractice(seepage73fordetailsoftheliquidityagreementandtheUnilogshareoptionarrangement),

• transferoftheremainingbalanceof550,000sharesundertheManagementIncentiveArrangement(seepage73).

Nobonuswaspaidinrespectof2007.OutstandingawardsundertheLTIPandtheExEPPlapsedonthedateoftermination.

DidierHerrmannpurchasedhiscompanycarandhislaptopundertermsnormallyappliedbyUnilog.

AsanExecutiveDirectorandsubsequentlyanemployeeoftheCompany,DidierHerrmann:

• participatedinthemandatoryAGIRCandARRCOpensionarrangementsapplicableinFrance

• receivedbenefitsinlinewithnormalFrencharrangementscomprisingpension,lifeassurance,medicalinsurance,invaliditycover.

Effective date Executive of appointment Notice period Contract detailsAndyGreen 1January2008 OneyearfromtheCompany, Anypaymentmadeinlieuofnoticeiscalculatedonthebasisofgross sixmonthsfromtheindividual salary,plus30%pensioncontributionplusacontributiontothevalue ofbenefits.Thecontractincludesamitigationclause,requiringthe executivetoactivelyseekalternativeemploymentduringthenotice period–paymentswillbereducedaccordinglyifsuchemployment isfound.SeamusKeating 1January2002 OneyearfromtheCompany, Anypaymentmadeinlieuofnoticeiscalculatedonthebasisofgross threemonthsfromtheindividual salaryplus12.5%asacontributiontothevalueofbenefits.Ifthe Companymakesapaymentinlieuofnotice,hisentitlementtoa companycarwillcontinueasifnoticehadbeengiventohim.JimMcKenna 23February1998 OneyearfromtheCompany, Anypaymentmadeinlieuofnoticeiscalculatedonthebasisofgross threemonthsfromtheindividual salaryplus12.5%asacontributiontothevalueofbenefits.Ifthe Companymakesapaymentinlieuofnotice,hisentitlementtoa Companycarwillcontinueasifnoticehadbeengiventohim.CristerStjernfelt¹ 10October2006 Sixmonthsfromeitherparty IntheeventofterminationofemploymentbytheCompany,12months severancepayispayable.Ifheassumesnewdutiesduringthisperiod, therighttoremainingseverancepayceases.

Executive Directors’ service agreements

¹CristerStjernfelt’sserviceagreementreflectsthearrangementsinplaceforhimpriortotheWM-dataacquisition

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Inrelationtotheremainingsharesblockedpursuanttothelock-upagreementsignedinNovember2005:

• settlementpaymentof€975,000followingtheretentionoftheselock-upsharesafterremovalfromtheBoardandfollowingFrenchCourtproceedings.

Executive Directors’ service agreements

ExecutiveDirectorseachhaveaservicecontractthatcontinuesuntilnormalretirementage(65)unlessterminatedbyeitherparty.

NoExecutiveDirector’sservicecontractincludesaliquidateddamagesclauseandnosuchclausewillbeincorporatedintofuturecontractsforExecutiveDirectors.OtherExecutiveDirectors’andECmembers’contractsdonotcontainanyprovisionforcompensationuponterminationofemploymentbeyondpaymentinlieuofcontractualnotice.ForAndyGreenandotherfutureExecutiveDirectors,amitigationstatementwillbeincludedintheemploymentcontract.

Non-Executive DirectorshipsExecutiveDirectorsmayacceptamaximumoftwoinvitationstobecomeaNon-ExecutiveDirectororChairmanofanotherCompany,onlyoneofwhichmaybeaFTSE100Company.SuchappointmentscanbroadentheirknowledgeandexperiencetothebenefitoftheCompany.Theymaynormallyretainfeesasthepostsentailpersonalresponsibility.JimMcKennareceivedfeesinrelationtohisappointmentasNon-ExecutiveDirectorandNon-ExecutiveChairman(designate)withAzzurriCommunicationsLimited.AndyGreenisaNon-ExecutiveDirectorwithNavtechInc.Detailsoffeesreceivedcanbefoundinthereportandaccountsoftherelevantcompanies.

Former DirectorsDuring2007,AndrewGiven,whoretiredon30December2002,andIanTaylor,whoretiredon30June2004,providedlimitedservicesonaconsultancybasistocertainseniorexecutivesaspartoftheCompany’smanagementdevelopmentprogrammes.

Chairman and Non-Executive Directors

Non-ExecutiveDirectorsdonothaveservicecontractswiththeCompany.Theyarenotnormallyeligibletoparticipateinperformance-relatedbonusplans,GroupshareplansorGroupemployeebenefitarrangements.TheyarenotentitledtoanypaymentsforlossofofficeoranyunexpiredtermoftheirappointmentasaNon-ExecutiveDirector.

TheChairman’sfeesaredeterminedbytheBoardupontherecommendationoftheCommitteeandtheGroupChiefExecutiveOfficer.

ThefeesoftheotherNon-ExecutiveDirectorsaredeterminedbytheExecutiveDirectorsfromrecommendationsfromtheChairmanandtheGroupChiefExecutiveOfficer.TheBoardhasthepowertoawardadditionalfeestoNon-ExecutiveDirectorsforservicesoutsidethescopeoftheirordinaryduties.Nosuchadditionalpaymentsweremadein2007.

AreviewofthefeesandfeestructurefortheNon-ExecutiveDirectorswasundertakenduringtheyearandrevisedfeeswereimplementedwitheffectfrom1January2008.Feeswerelastincreasedon1January2006.

The2007basefeeincludedmembershipofoneCommittee.AnadditionalfeewasonlypayableformembershipofmorethanoneCommittee(excludingtheNominationsCommittee).From2008,Non-ExecutiveDirectorswillreceiveabasefeeandadditionallyafeeforeveryCommitteemembership(againexcludingtheNominationsCommitteeforwhichnofeeispayable).ACommitteeChairmanwillonlyreceivethebasefeeandCommitteeChairmanfee.

Underthenewfeestructure,partoftheannualfeeaftertaxwillbedeliveredinshares:£10,000(gross)fortheNon-ExecutivesandtheDeputyChairman,and£30,000(gross)fortheChairman.TheNon-Executivesareencouragedtobuildupandretainashareholdingofonetimesannualfeeduringtheirtenure.

Thetablebelowshowsthe2007and2008feestructures.

Non-Executive Director Fee Structure £p.a.

Base fees 2007* 2008Chairman 180,000 300,000DeputyChairman 83,000 88,000Non-Executivebasefee 33,000 45,000 Additional fees* AuditCommitteeChairman 10,000 15,000RemunerationCommitteeChairman 10,000 12,000AuditCommitteemember 2,000 5,000RemunerationCommitteemember 2,000 5,000

*AdditionalfeesarenotpayabletotheChairmanoftheBoardandtheDeputyChairmanNB:InadditionandunconnectedtohisappointmentasNon-ExecutiveDirector,Gérard

PhilippotalsohadaoneyearfixedtermconsultancyagreementwiththeCompanyatavalueof€300,000(£205,479atanexchangerateof1.46)whichexpiredon3March2007.

CorStutterheimretiredasChairmanoftheBoardandGeorgeLoudonasNon-ExecutiveDirectoron1November2007.

P 44P 44 Further details on the Non-Executive Directors can be found in the Corporate governance report on pages 44 to 53.


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Directors’ remuneration (this information has been audited) Pension/cash payment Performance- in lieu of Salary related Termination Benefits Total Total pension* Pension andfees bonus payments inkind 2007 2006 2007 2006 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000Chairman and Executive Directors DavidTyler1 54 – – – 54 – – –CorStutterheim2 150 – – – 150 180 – –JimMcKenna3 455 – – 36 491 960 81 100SeamusKeating4 400 – – 16 416 863 80 56CristerStjernfelt5 229 201 – 6 436 82 130 29MartinRead6 503 – – 29 532 1,497 176 195DidierHerrmann7 325 – 1,640 1 1,966 610 18 15 2,116 201 1,640 88 4,045 4,192 485 395Non–Executive Directors WimDik 63 – – – 63 33 – –NoëlHarwerth8 35 – – – 35 – – –WolfhartHauser8 35 – – – 35 – – –AngelaKnight 42 – – – 42 43 – –RogerPayne 43 – – – 43 43 – –GérardPhilippot9 67 – – – 67 203 – –GeorgeLoudon10 29 – – – 29 35 – –HelmutMamsch11 34 – – – 34 83 – – 348 – – – 348 440 – – Former Directors AndrewGiven12 1 – – – 1 – – –IanTaylor13 2 – – – 2 4 – – 3 – – – 3 4 – – Total 2,467 201 1,640 88 4,396 4,636 485 395

* SaveforJimMcKenna,whoreceivesacashpaymentinlieuofpension,theamountsdisclosedrelatetopensioncontributionsintopensionplans.1 AppointedasNon-ExecutiveChairmanon1November2007,joinedasDeputyChairmanon18July2007.2 RetiredasNon-ExecutiveChairmanon1November2007.3 InterimChiefExecutiveOfficerfrom21September2007until31December2007.Receivespensionallowanceof17.75%ofsalaryincash.Amountsdisclosedfor2006reflectsalary

sacrificearrangementswhichendedon30November2006.4 HispensioncontributionstoanUnfundedUnapprovedRetirementBenefitScheme(UURBS)additionallyaccruedanotionalinvestmentreturnof5%perannum(£2,570).5 Amountsdisclosedfor2006arepro-ratedfromthedateofhisappointmentof10October2006.6 RetiredasGroupChiefExecutiveOfficeron21September2007.HispensioncontributionstoanUURBSadditionallyaccruedanotionalinvestmentreturnof5%perannum(£4,595).7 RequestedtostepdownasExecutiveDirectoron24July2007,butremainedanemployeeoftheCompanyuntil4January2008.Histerminationpaymentsinclude£1,627,775

relatingtoseverancepaymentspaidonterminationofemploymentand£11,965paidfortheredemptionof7,764BSARs(Unilogshareoptions).Amountsdisclosedfor2006arepro-ratedfromthedateofhisappointmenton10January2006.

8 AppointedasNon-ExecutiveDirectoron1January2007.9 Receivedanannualfeeof£33,000inrespectofhisappointmentasNon-ExecutiveDirector.Additionally,in2007hereceived£34,247asapaymentfortheremainingtwomonths

ofaoneyearfixedtermagreementforconsultancyserviceswhichexpiredon3March2007(seepage65).Amountsdisclosedfor2006comprise£33,000innon-executivedirectorshipfeesand£170,000relatingtothefirsttenmonthsoftheoneyearfixedtermconsultancyagreement.

10 RetiredasNon-ExecutiveDirectoron1November2007.11 RetiredasNon-ExecutiveDirectoratthe2007AGMon24May2007.12 RetiredasExecutiveDirectoron31December2002.Emolumentsdisclosedfor2007areapaymentfortheprovisionoflimitedconsultancyservices.13 RetiredasExecutiveDirectoron30June2004.Emolumentsdisclosedfor2007and2006areapaymentfortheprovisionoflimitedconsultancyservices.

Remuneration review

67


Pension benefit details for Cor Stutterheim (this information has been audited)

Transfervalueofthechange Changein inaccrued accrued Change pension pension Accrued Accrued transfervalue Transfer Transfer 31/12/06to 31/12/06to pensionat pensionat 31/12/06to valueat valueat 31/10/07 31/10/07 31/10/07 31/12/06 31/10/07 31/10/07 31/12/06 € € € € € € €

n/a n/a 257,945 257,945 87,998 3,971,620 3,883,622

From1August2006CorStutterheimhaselectedtoreceivemonthlypensionpaymentsattheageof60,aspermittedundertherulesofthescheme.

Directors’ Share Interests (this information is unaudited) Interestsofthedirectorsattheyear-endinthesharesofthecompanywereasfollows: Acquired 1January2007(ordateof ordisposed 31December2007 appointmentiflater) during (ordateofleavingifearlier) Non- theyear Non-Numberofshares Beneficial beneficial Beneficial Beneficial beneficialDavidTyler – – 200,000 200,000 –CorStutterheim 1,209,941 – – 1,209,941 –JimMcKenna 106,553 – 58,115 164,668 –SeamusKeating 63,560 – 58,115 121,675 –CristerStjernfelt 186,923 – – 186,923 –MartinRead 191,316 – 111,437 302,753 –DidierHerrmann 7,376,495 – (1,135,805) 6,240,690 –WimDik – – – – –NoëlHarwerth – – – – –WolfhartHauser – – – – –AngelaKnight 2,145 – – 2,145 –GeorgeLoudon 3,717 – – 3,717 –HelmutMamsch – – – – –RogerPayne 20,526 – – 20,526 –GérardPhilippot 8,611,532 – (8,611,532) – –

Themarketpriceofthesharesat31December2007was117.25p(31December2006was186.00p)andtherangeduringtheperiod1Januaryto31December2007was109.5penceto191.5pence. Thecompany’sRegisterofDirectors’Interests,whichisopentoinspection,containsfulldetailsofdirectors’shareholdingsandoptionstosubscribeforshares. At31December2007,theLogicaEmployeeShareOwnershipPlanTrustowned5,770,907shares.Between1Januaryand20March2008,theholdingoftheTrustreducedby10,817sharesfollowingtheexerciseofoptionsbyemployees.JimMcKenna,SeamusKeatingandMartinReadholdoptionsoversharesheldinthetrust. CorStutterheimhasageneralinterestinthe1,247,821sharesheldbytheCMGStichtingPensioenfondsintheNetherlandsasaresultofhisdeferredmembershipofthisscheme.

InMarch2008,sixNon-ExecutiveDirectorsandAndyGreenandSeamusKeatingpurchasedCompanyshares.

ShareswerepurchasedbyNon-ExecutiveDirectorson3March2008atapriceof89.75penceandinrespectofthenewNon-Executivesharefeepolicyasfollows:

Executive Director Number of sharesDavidTyler 19,551WimDik 6,509NoëlHarwerth 6,619WolfhartHauser* 17,559RogerPayne 6,509GérardPhilippot 6,509

* WolfhartHauser’spurchaseincludesanadditionalpersonalinvestment

AndyGreenandSeamusKeatingpurchasedshareson5March2008atapriceof93penceasfollows:

Executive Director Number of sharesAndyGreen 106,851SeamusKeating 53,387

JimMcKennasold20,759shareson12March2008atapriceof94.75pencefortaxplanningpurposes.Heintendstorepurchasesharesinthenextfewweeks.


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At31 December Granted Released/ 2007(ordate At1January during lapsedduring ofleaving Release 2007 theyear theyear ifearlier) Grantdate dateJimMcKenna 257,485 – – 257,485 25/05/06 25/05/09 234,652 – 234,652 10/04/07 10/04/10 257,485 234,652 – 492,137 SeamusKeating 224,550 – – 224,550 25/05/06 25/05/09 204,638 204,638 10/04/07 10/04/10 224,550 204,638 – 429,188 CristerStjernfelt 204,488 – – 204,488 01/11/06 01/11/09 123,121 – 123,121 10/04/07 10/04/10 204,488 123,121 – 327,609 MartinRead 583,832 – (324,360) 259,472 25/05/06 25/05/09 532,060 (458,165) 73,895 10/04/07 10/04/10 583,832 532,060 (782,525) 333,367 DidierHerrmann 164,055 – (164,055) – 25/05/06 25/05/09 149,508 (149,508) – 10/04/07 10/04/10 164,055 149,508 (313,563) –

Long Term Incentive Plan (this information has been audited) SharesgrantedtoExecutiveDirectorsundertheLongTermIncentivePlan2006areshowninthetablebelow.TheEPSandTSRperformanceconditionsfortheplanaredescribedonpage61.

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Executive Equity Participation PlanSharespurchasedthroughtheExecutiveEquityParticipationPlan2006anditspredecessor,theExecutiveEquityPartnershipPlan1998,andtheCompanymatchingawardsareshowninthetablesbelow.SharesacquiredbytheExecutiveDirectorsduringtheyeararealsoshownintheDirectors’shareintereststableonpage67.

Shares purchased by the Executive Directors under the ExEPP (this information has been audited)

Shares purchased underthe Shares planasat purchased 31December underthe Shares 2007 planasat acquired (ordate Award 1January during ofleaving date 2007 theyear ifearlier)JimMcKenna 19November1988 7,680 – 7,680

7April2006 22,938 – 22,938 8March2007 58,115 58,115 30,618 58,115 88,733

SeamusKeating 8April2004 9,548 – 9,548 7April2006 45,877 – 45,877 8March2007 58,115 58,115 55,425 58,115 113,540

CristerStjernfelt 8March2007 – – – – – –

MartinRead1 8April2004 14,746 – – 7April2006 20,921 – – 8March2007 111,437 – 35,667 111,437 147,104

DidierHerrmann2 8March2007 – 19,195 19,195 0 19,195 19,195

1 Followinghisretirement,thecommitteedecidedtoallowMartinReadtoexercisetheoneoutstandingawardgrantedin2006undertheExecutiveEquityPartnershipPlanwithin

12monthsfromthedateofhisretirementwithouttheperformanceconditionapplying.Theseawardswereexercisedandsoldon5September2007atapriceof164.75pence,realisingagainof£46,390.31.Fortheoneoutstandingawardgrantedin2007undertheExecutiveEquityParticipationPlan,theawardswillbereleasedtohimuponmaturitysubjecttotheachievementoftheperformanceconditionsandsharesbeingpro-ratedonatimebasis.

2 DidierHerrmann’sawardlapsedonleavingtheCompany.


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Report of the Remuneration CommitteeMatching shares awarded to the Executive Directors under the ExEPP (this information has been audited)

Matching Matching Matching shares shares Exercised/ shares heldat awarded lapsed heldat Performance 1January during during 31December Awarddate periodend 2007 theyear theyear 2007JimMcKenna 19November1998 2001 15,362 – – 15,362 7April2006 2009 39,116 – – 39,116 8March2007 2010 0 99,197 – 99,197 54,478 99,197 – 153,675 SeamusKeating 8April2004 2007 18,231 – – 18,231 7April2006 2009 78,226 – – 78,226 8March2007 2010 0 99,197 – 99,197 96,457 99,197 – 195,654 CristerStjernfelt 8March2007 2010 – – – – – – – – MartinRead1 8April2004 2007 28,158 – (28,158) – 7April2006 2009 35,672 – (17,852) 17,820 8March2007 2010 – 190,201 (158,503) 31,698 63,830 190,201 (204,513) 49,518 DidierHerrmann2 8March2007 2010 – 38,661 (38,661) – – 38,661 (38,661) – Subjecttocertainconditionsbeingsatisfied,theconditionalawardofsharesshallbetransferredtotheparticipantonorassoonasreasonablypracticableafterthevestingdate.

1 Followinghisretirement,thecommitteedecidedtoallowMartinReadtoexercisetheoneoutstandingawardgrantedin2006undertheExecutiveEquityPartnershipPlanwithin12monthsfromthedateofhisretirementwithouttheperformanceconditionapplying.Theseawardswereexercisedandsoldon5September2007atapriceof164.75pence,realisingagainof£46,390.31.Fortheoneoutstandingawardgrantedin2007undertheExecutiveEquityParticipationPlan,theawardswillbereleasedtohimuponmaturitysubjecttotheachievementoftheperformanceconditionsandsharesbeingpro-ratedonatimebasis.

2 DidierHerrmann’sawardlapsedonleavingtheCompany.

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Directors’ Share Options (this information has been audited) OptionstosubscribeforordinarysharesoftheCompanyheldbyDirectorsareasfollows: Optionsheldat Exercise 1January2007 Options Options Lapsed/ Options price(pence) (ordateof granted exercised cancelled heldat adjusted appointment during during during 31December forthe Exercisedates iflater) theyear theyear theyear 2007 Grantdate rightsissue1 Earliest LatestJMcKenna2 118,996 – (118,996) – – 14/10/97 155.97 14/10/00 13/10/07 118,996 – – – 118,996 17/09/98 329.08 17/09/01 16/09/08 148,745 – – – 148,745 14/09/99 689.09 14/09/02 13/09/09 66,417 – – – 66,417 17/10/00 1,626.08 17/10/03 16/10/10 1,844 – – – 1,844 17/10/00 1,626.08 17/10/03 16/10/10 113,770 – – – 113,770 13/09/01 598.57 13/09/04 12/09/11 341,310 – – – 341,310 24/09/02 107.23 24/09/05 23/09/12 341,310 – – – 341,310 23/09/03 238.20 23/09/06 22/09/13 341,310 – – – 341,310 07/04/05 159.09 07/04/08 06/04/12 4,850 – – – 4,850 07/04/06 192.75 01/05/09 01/11/09 1,597,548 – (118,996) – 1,478,552 SKeating 23,797 – – – 23,797 14/09/99 689.09 14/09/02 13/09/09 17,065 – – – 17,065 17/10/00 1,626.08 17/10/03 16/10/10 22,754 – – – 22,754 13/09/01 598.57 13/09/04 12/09/11 341,310 – – – 341,310 24/09/02 107.23 24/09/05 23/09/12 341,310 – – – 341,310 23/09/03 238.20 23/09/06 22/09/13 341,310 – – – 341,310 07/04/05 159.09 07/04/08 06/04/12 1,087,546 – – – 1,087,546 CStjernfelt – – – – – MRead3 892,474 – – – 892,474 17/09/98 329.08 17/09/01 16/09/08 297,491 – – – 297,491 14/09/99 698.09 14/09/02 13/09/09 111,925 – – – 111,925 17/10/00 1,626.08 17/10/03 16/10/10 1,844 – – – 1,844 17/10/00 1,626.08 17/10/03 16/10/10 170,655 – – – 170,655 13/09/01 598.57 13/09/04 12/09/11 739,505 – (739,505) – – 24/09/02 107.23 24/09/05 23/09/12 682,620 – – – 682,620 23/09/03 238.20 23/09/06 22/09/13 3,105 – – (3,105) – 24/09/03 238.20 01/12/06 31/05/07 802 – – (802) – 30/03/04 234.68 01/05/07 31/10/07 682,620 – – – 682,620 07/04/05 159.09 07/04/08 07/10/08 – 5,156 – (5,156) – 10/04/07 183.25 01/05/10 30/10/10 3,583,041 5,156 (739,505) (9,063) 2,839,629 DHerrmann – – – – – Total 6,268,135 5,156 (858,501) (9,063) 5,405,727 1 OptionsandawardsgrantedpursuanttotheGroup’sshareplanswereadjustedon9October2005,followingtheCompany’srightsissueinaccordancewiththeoption/award

numberratioof1.13770andtheoptionpriceof0.87896.TheadjustmentfactorswereapprovedbytherelevanttaxauthoritiesintheUKandtheCompany’sauditors.2 On17April2007JimMcKennaexercised118,996options,atthepriceof155.97pence,awardedtohimon14October1997undertheCompany’sExecutiveShareOptionScheme.

Herealisedagainof£30,897.31ontheexerciseofhisoptions. 3 Followinghisretirement,thecommitteedecidedtoallowMartinReadtoexerciseoptiongrantsuptoSeptember2003inthesixmonthsfollowingthedateofleaving,andtoexercise

optionsgrantedinApril2005inthe42monthsfollowingthedateofleaving.


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Report of the Remuneration CommitteePerformance conditions (this information has been audited) TheperformanceconditionsapplyingtograntsundertheExecutiveEquityPartnershipPlansince1998aresetoutbelow.ThedifferentperformanceconditionapplyingtotheExecutiveEquityParticipationPlan2006andtheLTIP2006isprovidedonpage61. Percentageof sharesthatvest1998and1999 EPSgrowthineachyearofrelevant3-year GrowthinUKRPI+7% 100%periodinexcessofgrowthinUKRPI GrowthinUKRPI+5% 20% LessthangrowthinUKRPI+5% 0% Awardsmayvestonaslidingscalebetween20%and100%provided EPSgrowthexceededgrowthinUKRPIby5%ineachyear2000and2001 EPSgrowthineachyearofrelevant3-year GrowthinUKRPI+12% 100%periodinexcessofgrowthinUKRPI GrowthinUKRPI+5% 20% LessthangrowthinUKRPI+5% 0% Awardsmayvestonaslidingscalebetween20%and100%provided EPSgrowthexceededgrowthinUKRPIby5%ineachyear 2002and2004 AverageEPSgrowthperannuminexcess GrowthinUKRPI+7% 100%ofgrowthinUKRPI GrowthinUKRPI+3% 20%

LessthangrowthinUKRPI+3% 0% Awardsmayvestonaslidingscalebetween20%and100%provided averageEPSgrowthexceededgrowthinUKRPIby3%

Theperformanceconditionfortheawardgrantedin1998wasfullysatisfied.Theminimumperformanceconditionsforthematchingawardsgrantedin1999,2000,2001and2002werenotsatisfiedandthereforefailedtovest.Theperformanceconditionsforthematchingawardsgrantedin2004and2005werefullysatisfied.

Performanceconditionsapplyingtoshareoptiongrantssince1996aresetoutbelow:

Date of grant Average EPS growth in excess of growth in UK RPI Percentage of shares that vest 1996,1997,1998andMarchandJune1999 GrowthinUKRPI+7% 100%September1999,2000,2001andMarch2002 GrowthinUKRPI+12% 100%September2002,MarchandSeptember2003, GrowthinUKRPI+7% 100%MarchandSeptember2004andApril, GrowthinUKRPI+3% 20%MayandSeptember2005 LessthangrowthinUKRPI+3% 0% Awardsmayvestonastraightlinebasisbetween100% and20%providedaverageEPSgrowthexceededgrowth inUKRPIby3% Retestingintheeventaperformanceconditionisnotachievedonmaturityoftheoptionappliesasfollows: Date of grant Retesting MarchandSeptember2003 Subjecttoretestingonamaximumoftwooccasions MarchandSeptember2004 Subjecttoretestingononeoccasiononly,namelythefourthanniversaryofthedateofgrant withtheretestingperiodstartingfromthedateofgrantoftheoption April,MayandSeptember2005 Notsubjecttoretesting Theperformanceconditionsforshareoptionsawardedin1996,1997,1998andMarchandJune1999havebeenmet.TheperformanceconditionsforshareoptionsgrantedinSeptember1999,March,OctoberandDecember2000,FebruaryandSeptember2001,andMarch2002havenotyetbeenmet.TheperformanceconditionsforshareoptionsgrantedinSeptember2002,MarchandSeptember2003,MarchandSeptember2004,andApril,MayandSeptember2005,havebeenmet.TheachievementoftheperformanceconditionofanExecutiveShareoptionisdependantuponthepercentagegrowthintheCompany’seps,adjustedforshareplans,whencomparedtothepercentagegrowthintheUnitedKingdom’sRetailPriceIndex(allindices).Forthefullawardtoberealisedthepercentagegrowthmustbeequaltoormorethanthepercentagetargetdetailedatthetimeofthegrantofoptions.

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Unilog share options exercisable under a liquidity agreement for Didier Herrmann Options Options (Lapsed)/ Options heldat granted cancelled heldat Exercise 1January during during 31December price Exercisedates 2007 theyear theyear 2007 Grantdate € Earliest Latest DidierHerrmann1 2,400(a) – (2,400) – 13/01/04 46.0000 02/01/09 30/04/09 7,764(b) – (7,764) – 01/06/05 2.2500 29/06/10 29/06/12 10,164 – (10,164) –

1 FollowingtheacquisitionofUnilogon13January2006,theCompanyenteredintoliquidityagreementswiththemajorityoftheoptionholdersinUnilog.Undertheliquidityagreement,outstandingoptionsinUnilogwill,uponexercise,beconvertedintosharesintheCompany,usingatransferratioof31.97CompanyplcsharesforeveryoneUnilogshare.

(a) Unilogoptions:equivalentnumberofCompanysharesifexercisedunderaLiquidityAgreement=30,691 (b)UnilogBSARwarrants:equivalentnumberofCompanysharesifexercisedunderaLiquidityAgreement=248,215

Management Incentive Arrangement (this information has been audited)DidierHerrmannwasawardedatotalof1,100,000sharesoveratwo-yearperiodundertheManagementIncentiveArrangement,whichwasputinplacefollowingtheUnilogacquisition.Thetwoperformanceconditions,onerelatingtoEPSperformancein2006(reportedinthe2006Annualreportandaccounts)andonerelatingtoEPSperformancein2006and2007,wereachievedinfull.Thefirsttrancheof550,000shareswasreleasedon14June2007,thesecondtrancheof550,000shareswasreleasedon24December2007.Theperformanceconditionforthesecondtranche(whichhasnotbeenaudited)isdescribedbelow. PercentageofEPSgrowth1January2006to31December2007 sharestovestGrowthinUKRPI+14% 100%GrowthinUKRPI+6% 20%GrowthlessthanUKRPI+6% 0%

Awardsmayvestonastraightlinebasisbetween100%and20%providedaverageEPSgrowthexceededgrowthinUKRPIby6%

Total shareholder return – value of hypothetical £100 holding (this information is unaudited)

Source:BloombergNotes:TSRbasedonendofyearprices.DJSTechnologydividendsbasedontheaverage12-monthdividendyieldofconstituents

Dow Jones STOXX Return

Logica

TheCommitteebelievestheDowJonesSTOXXReturnIndexisthemostappropriateindexagainstwhichTSRshouldbemeasured,asitisapan-EuropeanindexconsistingofcompaniesinsimilarmarketsandgeographiclocationstoLogica.AnumberofcompaniesinthisindexareincludedinourTSRcomparatorgroup,suchasAtosOrigin,Capgemini,DassaultSystems,IndraSistemas,MisysandSage.

Noël HarwerthChairman,RemunerationCommittee20March2008

£200

£150

£100

£50

£0

£200

£150

£100

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£0

Dec ’02 Dec ’03 Dec ’04 Dec ’05 Dec ’06 Dec ’07


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Title Definition Rationale

Book-to-bill Ordersbookedinaperioddividedbyrevenuesintheperiod.Book-to-billiscurrentlyreportedfortheUK,NL,andInternationalbusinessesasweharmonisethereportingofordersintheacquiredbusinesses.

Providesvisibilityoffuturerevenue.Abook-to-billaboveonemeansthattheCompanycontinuestobuildgoodorderpipelineforfuturedelivery.

Balanced business profile with four significant European profit generators

PercentageofGroupadjustedoperatingprofitattributabletoeachofourmajorEuropeanprofitcentres(UK,theNetherlands,FranceandtheNordics).Amajorprofitcentreisdeemedsignificantwhenitexceeds15%ofadjustedoperatingprofit.

StrengtheningourpositioninEuropemeansthatwehavenowfoursignificantprofitgenerators.Abalancedbusinessinwhicheachofthefourprofitgeneratorsaccountforatleast15%oftheGroup’sadjustedoperatingprofit,ensureslessriskassociatedwithnegativedevelopmentsinanysinglemarket.

Balanced market sector profile RevenueforeachmarketsectorwithinITandbusinessservices(FinancialServices,EnergyandUtilities,TelecomsandMedia,Industry,DistributionandTransport(IDT),PublicSector)asapercentageofGroupITandbusinessservicesrevenue.

Abalancedmarketsectorprofile(withnosectoraccountingforlessthan10%ormorethan30%)ensuresthatGrouprevenueislesssusceptibleinanyonesegment.Italsoensuresprofitislessvolatile,byensuringthatasufficientlevelofrevenueisdeliveredfromcontinuedinvestmentindomainexpertise.

Organic revenue growth in IT and business services

PercentagegrowthinITandbusinessservicesrevenueinthecurrentyearcomparedtorevenuesonalike-for-likebasisinthepreviousyear,forexample,takingintoaccounttheimpactofacquisitions,divestmentsandcurrencymovements.

ProvidesameasureofourabilitytogrowrevenuewithinITandbusinessservices.Thisdemonstratesourabilitytotakeadvantageofmarketgrowth,tousescaletogeneratemarketshareandtoleverageourglobaldeliverycapabilitytoexpandrevenuedespitepricedeflationcausedbyincreasedcompetitionfromoffshoreplayersinsomeofourgeographies.

Percentage of revenue from outsourcing

RevenuefromoutsourcingcontractsasapercentageofGrouprevenue.

IToutsourcing(includingapplicationsmanagement)andbusinessprocessoutsourcingarepredictedtobethefastestgrowingsegmentswithinITprofessionalservicesinWesternEuropefrom2007to2010,withcompoundannualgrowthratesof8.0%and9.3%respectively(source:Gartner).Longertermvalue-addedoutsourcingcontractsrepresentamorepredictablerevenuestream,assuminggoodprojectandriskmanagement.

Group key performance indicators 2007

P 29P 29 Our performance against these KPIs is set out on page 29


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(KPIs )

Adjusted operating margin Adjustedoperatingprofitasapercentageofrevenue.Adjustedoperatingprofitisoperatingprofitexcludingtheresultsofdiscontinuedoperations,exceptionalitemsandamortisationofintangibleassetsinitiallyrecognisedatfairvalueinabusinesscombination,wheneversuchitemsoccur.

Thismeasureisusedtocomparequalityofearningswiththoseofourpeersandtodetermineperformanceagainstourmedium-termstrategicobjectivesofdeliveringadjustedoperatingmarginofgraterthan10%inourmajorgeographies(UK,theNetherlands,France,andtheNordics).

Cash conversion Thenetcashinflowfromtradingoperationsdividedbyadjustedoperatingprofit(seeadjustedoperatingmarginKPI).

Ameasureoftheabilitytogeneratecashfromoperations.Theabilitytoconvertprofittocashisbasedonaninternaldisciplineoffocusoncashandthestrengthoftheinternalcollectionsmechanism,andisaproxyforstrengthofrelationshipswithcustomers.


Adjusted earnings per share (EPS)

NetearningsattributabletoequityholdersoftheparentCompanyexcluding,wheneversuchitemsoccur,theresultofdiscontinuedoperations,exceptionalitems,mark-to-marketgainsandlossesonfinancialassetsandfinancialliabilitiesdesignatedatfairvaluethroughprofitorloss,andamortisationofintangibleassetsinitiallyrecognisedatfairvalueinabusinesscombination,netoftaxwhereapplicable,dividedbytheweightedaveragenumberofsharesoutstandingintheperiod.

Directors’annualbonuses,LTIPandtheExecutiveEquityParticipationPlanarelinkedtoEPS,whichservesasameasureofprofitabilityinthebusiness.EPSgrowthovertherelevantthree-yearperformanceperiodisexpectedtoexceedgrowthintheUKRetailPriceIndexbyatleast3%perannumforExEPPandLTIPbonusisonlyforoneyear.

Employee attrition Annualisedvoluntaryattritionmeasuredbynumberofvoluntaryleaversasapercentageofthetotalemployeepopulation.Therewillalwaysbeanaturallevelofvoluntaryattritionduetopeopleretiring,decisionstochangecareersandacompetitivemarketplace.

Retentionofemployees,alongsideongoingtraininganddevelopment,allowsustoensurethatwearemaintainingandupgradingthedomainexpertisewhichisakeydifferentiatorforLogica.Itisalsoameasureofourmanagers’abilitytoretaintheiremployeesinamarketwherethereissignificantmovementofemployees,particularlywhenthemarketisbuoyant.

Employee satisfaction AweightedmeanscoreforkeyquestionsintheannualLogicaemployeesurvey.FollowingtheacquisitionofUnilogandWM-data,wearerefiningouremployeesatisfactionsurveytoensureconsistencyacrosstheGroup.Wewillreportonthismeasurein2008.

Assumingtheresponserateremainsunchanged,theweightedmeanscoreisameasureofoverallstaff‘engagement’withLogicaandthechangeinsatisfactionfromyeartoyear.



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3


7777

ResponsibilityIn this section:

78 Corporate responsibility report


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Corporate responsibility report

What does Corporate responsibility mean to Logica?Acting responsibly as a business is not an optional extra. It is the starting point for everything we do.

WedeliverITandbusinessservicesthatbringrealbenefits.Manyofourinnovativeservicesandsolutionsmakeapositivecontributiontopeopleandtheenvironment.Wehelpemergencyservicestorespondfaster;weimproveroad,railandairtrafficcontrolsystems;andwedevelopemissionsmanagementandtradingsystems.

Wealsorecognisethatouractivitiesmayhavesomenegativeconsequences.Increasingly,ourkeystakeholders–shareholders,customers,ourpeopleandourpartners–expectustooperateourbusinessinawaythatiseconomically,sociallyandenvironmentallysustainable.Meetingthoseexpectationshelpsustofunctionsuccessfullyasabusiness,betterabletoattracthighcalibrepeople,retainkeycontractsandtakeonnewchallenges.

ThisisthecontextforthereviewofourCorporateResponsibility(CR)policiesandpracticesundertakenin2007.Itsfindingsandconclusionsaresummarisedbelow.

Wearenowdeliveringdetailedprogrammesinthelightofthesefindings.Iwelcomethis,notleastbecauseIstronglybelievethatresponsiblecompaniesaresimplybetteratattractingandretainingthebestpeople,winningnewbusinessandsuccessfullygrowingtheirbusinesses.Ilookforwardtoprovidingyouwithanupdateonourprogressinnextyear’sAnnualreport.

Andy GreenChiefExecutiveOfficer

logica.com/CRlogica.com/CR This is an excerpt of our full CR policy report, which can be found on our website at www.logica.com/CR

Our approach to Corporate responsibility

In2007wereviewedourapproachtoCRtoensurewewereconcentratingonthosethingsthatreallymattertoourkeystakeholders.WearecreatingacommonCRframeworkacrosstheGroupandidentifyingtherightCRprioritiesforourorganisation.

OurinitialCRobjectivesinclude:

•havingamotivated,engaged,highcalibreworkforce

•havingastrongreputationincorporatecitizenshipthatmarksusasapartnerofchoiceforcustomersandsuppliers.

Toachievetheseobjectiveswearefocusingonthreepriorityareas:

•respectingtheenvironment

•makingapositivedifferencetothecommunity

•makingLogicaagreatplacetowork.

AGroup-widecommittee,chairedbyChiefMarketingOfficer,NickCaplan,onbehalfoftheExecutiveCommittee,coordinatesCRactivitiesthroughouttheorganisationandmeasuresourprogress.

Priority 1: Respect for the Environment

Our objectiveWeaimtooperateanenvironmentallysustainablebusiness.Weseektominimiseenergyuseandcarbonemissions.

Inourownoperations,weareimprovingourabilitytomeasureourdirectandindirectimpactontheenvironment.In2007totalGroupcarbonemissionswereapproximately108,700tonnesofcarbondioxideequivalent(tCO2e)1.Wehaveidentifiedourkeyenvironmentalcontributorsasbeing:

•Energyusefrom

– officeequipmentandlighting

– buildingheatingandcooling

– datacentreequipment

•Waste/consumption

– asgeneratedfromnormalofficeactivities

– fromITandofficeequipmentupgrades

– fromcateringfacilitiesonsite

– fromamenities

•Businesstravelanddeliveries

•Refrigerantandcoolantgases

1 Estimate.Dataextrapolatedfromlocationstotallingaround70%ofoperationsbyemployeenumbersacrosstheGroup.ThesehavebeenconvertedtocarbonemissionsusingemissionsfactorsinlinewiththemethodsdetailedbytheCarbonDisclosureProject(www.cdp.net)


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Our approachLogica’senvironmentalmanagementcapabilitieshelpotherbusinessestoreducetheircarbonemissions,butweneedtodomoretoenhancethesustainabilityofourownoperations.

AGroup-wideenvironmentsteeringgroupwasestablishedin2007.IthasdevelopedacommonframeworkandsetofobjectivesbasedonthethreeRs:reduce,re-useandrecycle.Earlyprioritiesinclude:

•Reduce

– usingtargetedcommunicationstoencouragereducedenergyuseatworkandathome

– ensuringthatunusedfacilitiesarepowereddownoutsideworkinghours

– encouragingconferencingtechnology,therebyreducingbusinesstravel

– upgradingofficeequipmenttofewerandmoreenergy-efficientdevices

– printinginitiatives,includingdouble-sidedprintingasstandard,reducedtoneruseand‘follow-me’printing

– switchingtomoresustainablesourcesofelectricity

•Re-use

– replacing,wherepossible,disposableitemswithre-useableitems:forexample,platesandcutleryinstaffrestaurants

– repurposinglegacyofficeequipmentandITassets

– sharingserversandprocessingcapacityindatacentres

•Recycle

– improvingrecyclingfacilities

Priority 2: Making a positive difference to the community

Our objectiveAsanorganisationthatemploys39,000peoplein36countries,LogicabelievesthatbeingactiveinthewidercommunityisessentialtoourCRprogramme.Wealsorecognisethatmanyprofessionalpeopleseekemployerswithanactivesocialpolicy.

Our approachGivenLogica’sroleintheknowledgeeconomy,wefocusoneducationalprogrammes,particularlythosetargetedatyoungpeople.Wesupportprojectsthatactivelyinvolveouremployeesand,wherepossible,makeuseoftheirexpertise.Wealsoencourageouremployeestoraisemoneyforcausesthatsupportourcommunitypolicy.

In2007weestablishedaGroup-widecommunitysteeringcommittee.Wehaveagreedtolooselyalignourcommunityprogrammesaroundtheprinciplessetoutinourpilotproject,theBloomprogramme.

Key objective Current status Key initiatives underway

Priorities for 2008

EnsureGroupmeasurementcapabilityofemissions(totalemissionsandpercapita)

Around70%ofourstaffworkincountrieswherewemeasureourCO2emissionsAverageof2.9tonnesofCO2emissionspercapita

UKpilotofanend-to-endcarbonandenergymanagementsystemplannedProgrammeunderwaytoinstilemissionsmeasurementineveryterritory

Roll-outcarbonandenergymanagementinkeyterritoriesDefineGroupCO2emissionsreductiontargetsfor2009

Improveenvironmentalawarenessamongstemployees

81%ofUKemployeesareawareofthe“Stampdownyourcarbonfootprint”programme(staffsurvey)

EmployeeenvironmentalawarenessprogrammesintheUK,France,IndiaandSwedenWorkunderwaytointroducesimilarprogrammesinotherkeyterritories

ImplementGroup-wideenvironmentalawarenessprogrammeMeasureawarenessofenvironmentalprogrammein2008viastaffsurvey

Increaserecyclingactivitiesanddecreasepaperconsumption

48%ofourstaffworkincountrieswherewehaveactiverecyclingprogrammes

EnsureGroup-widecompliancewithWEEEdirective

PromoterecyclingprogrammesacrosstheGroup

How we will measure success: Respect for the Environment

2 BasedonlatestupdatedDEFRAemissionfactorsandguidelines(www.defra.gov.uk/environment/business/envrp/pdf/conversion-factors.pdf)

In 2006, we initiated an environmental campaign, “Stamp down our Carbon Footprint” in our UK business, which followed the three Rs (as set out above). We intensified our activity in 2007 with good results.

The programme reduced carbon emissions by 10%2, avoided 14,800 tonnes of CO2 by switching to greener electricity suppliers and saved 1,630 tonnes of CO2 by turning off unused equipment. Teleconferencing rose by more than 50% and business travel fell substantially. Paper usage was down by 12% and printing-related energy consumption was cut by 11%.

Stamp down your carbon footprint campaign


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Corporate responsibility reportTheBloomprogrammeisaDutchcommunityinitiativewhichbeganin2005.Ourpeopleusetheirtechnicalknowledgetoeducateunderprivilegedpeopleandtrainnon-governmentalorganisations(NGOs),bothlocallyandindevelopingcountries.Theyhavedeliveredcomputerinfrastructuretoeducationalfoundationsandtaughtcomputerskillstodisadvantagedchildren.

TheworkwearedoingwithPlaneteUrgenceshowshowBloomprogrammeprinciplescanbeappliedinotherterritories.Logicaemployeeshavesupportedavarietyofcommunityprojects:bringingITtrainingtoBeninandimplementingaccountingsystemsinCameroon.

IntheUKLogica’sPromptPaymentSchemehassofarraisedover£135,000fortwomajorchildren’scharities,theNationalSocietyforthePreventionofCrueltytoChildren(NSPCC)andChildrenFirst.

Theschemewhichwasestablishedin2006,involvesaproportionofthereceiptsreceivedfromallourclientswhosigneduptoourpromptpaymentplanbeingdonatedtothesecharities.

Priority 3: Making Logica a great place to work

Our objectiveWerecognisethatthequalityofourservicesdependsontheexpertiseanddedicationofouremployeesandwewanttoattracttalentedandambitiouspeoplewhocangrowourbusiness.WewantLogicatobeagreatplacetowork.

Our approachWearecommittedto:

1 Attracting,developingandretainingthebestpeople

2 Engagingandcommunicatingwithourpeople

3 Creatingasupportiveworkingenvironment

Inearly2008weconsultedwidelyamongouremployeestoidentifycommonvalueswhichsupportournewLogicabrand.Theresultingvalues–committed,innovativeandopen–reflectourstrengthsasabusinesstodayandouraspirationsforhowwewanttobeinthefuture.

logica.com/valueslogica.com/values To learn more about our values please visit our website at: www.logica.com/values


Priorities for 2008

DevelopacomprehensiveGroup-wideapproachtomakingapositivecontributiontothecommunity

CommunitysteeringgroupisevaluatingactivitiesacrosstheGroupandidentifyingGroupobjectives

RolloutBloomprogrammeconceptinthekeyparticipatingcountries

AlignourcommunityactivitiesacrosstheGrouptoensuretheysupporttheGroupcommunityobjective

Buildemployeeawarenessandengagementamongourstakeholders

Awarenessandengagementvariesacrossgeographies

Groupprogrammeisbeingdevelopedtolaunchanumberofcommunityprogrammes

EnsureeffectivecommunicationstopromotelocalinitiativesacrosstheGroup.

Effectivemeasurementofourcontributiontothecommunity

MeasurementcriteriaestablishedintheNetherlands

Countryteamstodeveloplocalcommunityrolloutplansasappropriate

Establishcountryspecificmeasurementcriteriaforcommunitycontribution

Attracting, developing and retaining the best people IfwearetosucceedasaGroupweneedtoprovideemployeeswiththerighttoolsandsupporttoperformtheirrolestothebestoftheirability.

TheLogicaglobalcareerframework‘Pathways’andourPerformanceManagementSystem(PMS)provideasolidstructureforindividualcareerprogression.TheLogicaUniversitywaslaunchedattheendof2006astheumbrellaforouremployeedevelopmentprogramme.WearenurturingtheseniormanagersofthefuturethroughLeadershipDevelopmentprogrammesatGroupandcountrylevel.Keystatistics

•Totalnumberofemployeesover5yearperiod:

2003 2004 2005 2006 2007 19,749 19,695 21,340 40,483 38,7403

•Overallemployeeretention:84%(unchangedfrompreviousyear)

How we will measure success: Making a positive difference to the community

3 Reducedheadcountin2007asaresultofdisposalsofTelecomsProductsandCaran


81

Engaging and communicating with our peopleLogicapromotesaninteractive,informativeandconstructiveapproachtoemployeecommunications.Wevalue,encourageandreacttoemployeefeedback.Wekeepemployeesinformedthrougharangeofchannels,fromaCEOblogtoGroup-wideandcountry-specificmagazinesandnewsletters.

Eachyearwerunaglobalonlineemployeesatisfactionsurveyinmultiplelanguagestogatherfeedbackandidentifyareasofimprovement.TheBoardandExecutiveCommitteereviewtheresultsandlocalactionplansaredrawnupinresponse.


Priorities for 2008

BuildemployeeconfidenceandengagementinthenewLogicabrand

Employeebrandmeasuresin2007staffsurvey:68%workbytheCompanyvalues32%believeweareabetteremployer34%believeweworksuccessfullyasaglobalCompany

EmployeebrandprojectunderwaytoembedthenewLogicavaluesintotheorganisation

Employeebrandtargetsfor2008staffsurvey:75%workbytheCompanyvalues40%believeweareabetteremployer45%believeweworksuccessfullyasaglobalCompany

Increaseoverallstaffsatisfaction

70%respondedtostaffsatisfactionsurvey(64%in2006)Meansatisfactionscore:3.44(3.33in2006)

Improvinginternalcommunications,includingCEOblogandmailbox,corporatenewslettersandemployeevideomessagesStrengtheningengagementwithleadershipteamthroughmoreeffectivecommunications,suchasthemonthlyCEOcallandKnowledgeForums

Increasesurveyresponserateto75%Raisemeansatisfactionscoreto3.55Improve2008retentionrateby2%

Improvesatisfactionwithlearninganddevelopmentopportunities

46%aresatisfiedwithtraininganddevelopmentopportunities

Roll-outofLogicaUniversityIncreasingsupportforleadershipdevelopment

Increaseemployeesatisfactionwithtraininganddevelopmentto55%

ReduceGroup-widevoluntaryattrition

16%Groupattrition(16%in2006)

Reviewingincentiveschemestoensuretheseremaincompetitive

ReduceGroup-widevoluntaryattritionby2%

How we will measure success: Making Logica a great place to work

4 ExcludingFinland,PolandandEstoniawhichdidnotparticipateinthe2007staffsurvey

The Pulse Programme was launched in France in 2007 to speed up the integration of Logica and Unilog. Its aim was to engage all French employees in our vision to be an international player, a key partner for our clients, and the best employer in the industry. In 2007 Logica in France came fifth in an industry “Great Place to Work” survey in the Journal du Net magazine.

The Pulse Programme

Employee satisfaction

3.44Overall staff satisfaction – Group mean score out of 5 for a basket of 9 questions (2006: 3.33)

Employee engagement

70 %Staff survey response rate(2006: 64%)4

Creating a supportive working environmentAsupportiveworkplaceisanimportantpartofcreatingahigh-performanceorganisationandweaimtohelpouremployeesbalancetheirwork,familyandcommunityresponsibilities.

ItisLogica’spolicythateveryoneshouldhaveanequalopportunityforemploymentandadvancementonthebasisofability,necessaryqualificationsandfitnessforwork.Wesupportandrespecttheprotectionofinternationallyproclaimedhumanrights.

Inearly2008wesigneduptotheUNGlobalCompact,whichformallyalignsthebusinesswithtenuniversallyacceptedprinciplesintheareasofhumanrights,labour,theenvironmentandanti-corruption.


8282

4


8383

Financial statementsIn this section:

84 Our markets by geography86 Financial review96 Financial statements and notes



84

Our markets by geography

84

Our leading presence in Europe means that we are close to our customers. Our balanced geographic profile insulates the business against adverse conditions in individual markets.

Logica is a leading European IT and business services supplier with strong positions in the Nordics, the United Kingdom, France, the Netherlands and Portugal. We also have a sizeable operation in Germany and in a number of countries within the International business.

Different cultures have different ways of approaching complex business problems. Our customer intimacy and distinctly

European approach mean that we are well placed to work in partnership with our customers, tailoring our services and solutions to their unique local requirements.

In 2007, each of our four main geographies contributed between 20% and 30% of Group revenue. This balanced profile enhances the Group’s resilience to Europe’s economic cycles.

France 19%

of total Group revenue

UK 22%


Nordics 27%


9.2% Adjusted operating margin

33%% Revenue from outsourcing

9,400Employees (inc. Estonia)

Operational highlight of 2007Integration cost savings of £5 million achieved

£837m+6%

E&U£50m-1%

IDT£383m+14%



5,600Employees

Operational highlight of 2007Public Sector revenue up 10%



9,100Employees

Operational highlight of 2007Revenue growth across all sectors, with Energy and Utilities very strong

£588m+11%

E&U£86m+29%

IDT£222m

+7%

FS£161m+11%

T£55m+11%

PS £64m+5%

£662m-8%

E&U£105m

–

IDT£89m-35%

FS£60m-29%

T£36m-34%

PS £372m+10%

FS£87m+14%

T£65m-19% PS

£252m+2%

85


85

International 10%


£00m0%

Percentage revenue growth (pro forma) rounded to nearest decimal point

Total revenue (rounded to nearest million)

Germany 6%


Netherlands 16%


Revenue split by industry (rounded to nearest million) and pro forma growth

PS Public Sector IDT Industry, Distribution

and TransportE&U Energy and Utilities FS Financial Services T Telecoms and Media



6,000Employees

Operational highlight of 2007£40 million deal to outsource KPN’s HR Shared Services Centre



2,100Employees

Operational highlight of 2007Profitable through 2007



6,500Employees

Operational highlight of 2007Continued growth in IDT driven by InBev contract

£321m-2%

E&U£165m

-1%

IDT£50m+41%

FS£46m+2%

T£27m-46%

PS £33m+7%

£180m+9%

E&U£26m+2%

IDT£72m+5%

FS£54m+59%

T£22m-11%

PS £6m-50%

£485m+8%

E&U£51m+2%

IDT£106m+3%

FS£156m+5%

T£27m+3%

PS £145m+19%

Employee figures are rounded and include Outsourcing Services


86

Financial review

Growth Growth FY’07on FY’07on FY’06 FY’06 FY’06 FY’06 FY’07 Proforma Restated Proforma Restated £’m £’m £’m % %Nordics 836.9 790.1 190.5 5.9 339.3UK 662.5 718.4 718.4 (7.8) (7.8)France 588.2 530.5 560.0 10.9 5.0Netherlands 484.7 449.2 447.6 7.9 8.3Germany 179.6 164.4 168.6 9.2 6.5International 321.3 328.1 335.6 (2.1) (4.3)Totalcontinuing 3,073.2 2,980.7 2,420.7 3.1 27.0

Revenue by geography

Financial overviewGrouprevenuewas£3,073.2million,up27%onareportedbasis(2006restated:£2,420.7million).Thisrepresentedproformagrowthofjustover3%,inlinewithourmostrecentguidance.Groupadjustedoperatingprofitwas£207.6million(2006restated:£203.4million),representinganadjustedoperatingmarginof6.8%.Thiswasbelowthe8.4%restatedlevelachievedin2006.Theweaker2007operatingperformancewassomewhatoffsetbyalowertaxrate,givingadjustedEPSfromcontinuingoperationsof10.2p,a2%reductionover2006.Cashflowwasstronginthesecondhalf,withfullyearcashconversionof126%.Theproposedfinaldividendis3.5p,representinga4%increaseinthetotaldividendfortheyearto5.8p.Closingnetdebtwas£483.2million,withadequateheadroominourcurrentbankfacilitiesevenafterweredeemthe€303millionconvertiblebondsmaturinginSeptember2008.

P 12P 12 See ‘Highlights’ and ‘Performance’ on pages 12 to 15

P 27P 27 See ‘One Logica’ on page 27

P 30P 30 See outlook for 2008 on page 30

P 31P 31 See ‘Our future direction’ on page 31

Operating performance – continuing operations

P 16P 16 See ‘Our presence’ on pages 16 to 17

OurmajorcontinentalEuropeangeographiesperformedwellthroughtheyear,withgrowthabovethemarketinFrance,Germany,theNetherlandsandtheNordics.TheUKPublicSector,whichcontinuedtoaccountforoverhalfofUKrevenue,deliveredgrowthwellabovethemarket,up14%inthesecondhalf.However,weaknessinourUKcommercialsectorscontinuedtohaveadampeningeffectonoverallGroupperformance.TheEnergyandUtilitiesbusinessintheUKreturnedtogrowth,withsecondhalfrevenueup8%.IntheInternationalbusiness,revenuewasdown2%asaresultofcontractualpricereductionsintheEdinforbusinessandthecompletionofamajortelecomscontractinAsiainearly2007.ExcludingtheUKcommercialbusiness,revenuegrowthfortheGroupwasaheadofthemarketat7%.

Seamus Keating, Chief Financial Officer

Note:ComparativesarebasedonproformaITservicesandreflectaverage2007exchangerates,excludebusinessesdisposedofin2006(pdv.comandNoLimits),excludeFrenchpassthroughrevenue,areadjustedtoincludeCaran(soldinJune2007)tothebeginningofJune2006andtherestofWM-data(WM-dataacquisitioncompletedinOctober2006)forthefullyear(fromJanuarytoDecember2006),areadjustedtoincludetheacquiredSiemensBusinessServices(acquiredinMarch2007)fortheninemonthsfromMarch2006andareadjustedtoincludethedisposalsandacquisitionsofcertainnon-corebusinessesthattookplaceduringtheyear.Thisisintendedtoprovideamoremeaningfulcomparisontotheprioryear.

87


Ourtop10customersaccountedfor15%ofGrouprevenuein2007(2006,excludingWM-data:21%).

Adjustedoperatingmarginfortheyearof6.8%wasdisappointingcomparedtotheproforma8.5%achievedin2006,withsecondhalfadjustedoperatingmarginat7.6%(2006:9.8%).

ThemostsignificantimpactonGroupmarginwasintheUKbusiness,reflectingchargesinrespectofaprojectcostoverrunandweakerperformanceinthecommercialsectors.ThecostofmanagementchangesaffectedthemargininFrancedespiteastrongoperationalperformance.TheimpactofpricereductionscoupledwiththetimingofcostsavingsintheEdinforbusinessinPortugalreducedmarginsintheInternationalsegment.Morepositively,marginsintheNordicsincreasedfrom8.6%to9.2%asacquisitioncostsavingsof£5millionwereachieved.ThebusinessinGermanywasprofitablethroughtheyear,buildingonawellexecutedintegrationprogrammein2006.

Additionally,asweclosed2007,wehavetakenamoreconservativenear-termviewofanumberofprogrammesacrosstheGroupandhaveresolvedalongstandingUKcustomerdispute.Asaresultoftheseactions,2007operatingprofitwaslowerthanourpreviousexpectationsintheUKandtheNetherlands.AtaGrouplevel,thecombinedone-offimpactfortheyearoftheseprovisionsandchargeswasareductionofaround0.8%ofmargin.

Review of continuing operations by geography

NordicsRevenuewasup6%onaproformabasisto£836.9million,withfourthquartergrowthof5%onaproformabasiswhencomparedtoastrongquarterin2006.Adjustedoperatingprofitwasup13%onaproformabasisto£76.7million(2006:£68.0million),givinganadjustedoperatingmarginof9.2%.

IDTgrewwellaheadofthemarket,withgoodgrowthatcustomerssuchasVolvoandSchenkerwherewesecuredcontractrenewalsin2007.ThePublicSectorbusinessgrewinlinewiththemarket,withworkinthedefencesectorcontinuingtobeanimportantcontributor.InFinancialServices,growthwasdrivenbygoodcustomerdemandandhighervolumesofworkwithbothexistingandnewcustomersaswebegantoleveragetheskillsofthewiderGroupintotheNordics.EnergyandUtilities(E&U)wasbroadlystablewhilelowerrevenueintheTelecomsandMediabusinesswastheresultofanticipatedlowerlicensesaleswithinbillingsolutions.

UtilisationremainedgoodacrosstheNordicsandsubcontractinglevelsremainstable.WecontinuetoseegooddemandforERP,especiallySAP.Appetiteforglobaldeliveryisontheincrease.InitialinternalproductdevelopmentworkhasbeentransferredtoIndiaanduseofoffshoredeliveryoncustomercontractshasincreasedthroughtheyearinbothFinlandandSweden.

Growth Growth FY’07on FY’07on FY’07 FY’06 FY’06 FY’06 FY’06 FY’07 Margin Proforma Restated Proforma Restated £’m % £’m £’m % %Nordics 76.7 9.2 68.0 16.9 12.8 353.8UK 30.5 4.6 77.8 77.8 (60.8) (60.8)France 40.8 6.9 46.2 46.8 (11.7) (12.8)Netherlands 42.9 8.9 44.4 44.2 (3.4) (2.9)Germany 8.1 4.5 (1.4) (1.4) n/a n/aInternational 8.6 2.7 19.5 19.1 (55.9) (55.0)Totalcontinuing 207.6 6.8 254.5 203.4 (18.4) 2.1Note:Seepage86foranexplanationofthebasisofproformainformationandNote8onpage111foradefinitionofadjustedoperatingprofit.

Adjusted operating profit by geography


88

Financial review Growth Growth FY’07on FY’07on FY’06 FY’06 FY’06 FY’06 FY’07 Proforma Restated Proforma Restated £’m £’m £’m % %PublicSector 252.3 246.7 55.8 2.3 352.2Industry,DistributionandTransport 382.4 335.5 81.9 14.0 366.9EnergyandUtilities 50.1 50.5 13.0 (0.8) 285.4FinancialServices 86.8 76.4 20.2 13.6 329.7TelecomsandMedia 65.3 81.0 19.6 (19.4) 233.2Total 836.9 790.1 190.5 5.9 339.3Outsourcing(%) 33 – 31Adjustedoperatingprofit(£’m) 76.7 68.0 16.9Adjustedoperatingmargin(%) 9.2 8.6 8.9Note:Seepage86foranexplanationofthebasisofproformainformation.

NordicsRevenue by market sector

In 2007 Finland’s public sector transportation agencies formed a consortium to outsource IT services collectively. Finland’s Ministry of Transport and Communications, its Road Administration, Maritime Administration and Rail Administration agencies came together to increase the cost-effectiveness and quality of their outsourced IT services.

Logica, as WM-data, has a long history of partnership with Finnish government agencies. It has provided IT and infrastructural services to the Finnish Road Administration for over a decade.

Under the three-year €10 million contract, Logica will deliver a comprehensive set of IT services to the consortium. The contract includes infrastructure services for electronic transactions as well as identity and access management services for the client consortium. It will include workstation support, life cycle services, communications, critical systems hosting and mobile support.

We are simplifying as well as coordinating processes. A major development project is underway to migrate four separate workstation environments to a single consortium workstation, based on Microsoft Vista. The shared platform will improve inter-agency collaboration, which will make it easier to get Finland’s integrated transport policy working on the ground.

Logica was already well known to the agencies as Finland’s leading Intelligent Transport Systems (ITS) developer. The contract reinforces our number one status in the Finnish market and has raised our profile in ITS markets across the Nordics.


Finland’s Ministry of Transportation and Communications case study: harnessing the potential of innovative technologies

Throughayearofintegration,wesawalmostnoattritionatseniorlevels.Theimprovementinadjustedoperatingprofitwaslargelyduetoanticipatedintegrationcostsavingsof£5millionaswetransitionedsomeproductdevelopmentworkoffshore,closedtheLogicaofficeintheNordicsandreducedsomecentraloverheads.Wecontinuetoexpectanincremental£8millionofcostsavingsin2008,withannualisedcostsavingsof£15millionby2009.

Excludingtheimpactofintegrationcostsavings,marginwasbroadlyunchanged.Althoughimprovedutilisationandincreasinguseofoffshoreresourcehashadapositiveimpactonmargin,managinghigherwageinflationinthecontextoftoughrecruitmentmarketsremainsthekeychallengetoincreasingmarginfurtherintheregion.UKRevenuewasdown8%onaproformabasisto£662.5million.Thefourthquarterdeclineof7%wassimilartothatexperiencedinthethirdquarter.Adjustedoperatingprofitfortheyearwas£30.5million,comparedtoa£77.8millionadjustedoperatingprofitin2006.

Thelargestcontributortothedecreaseinadjustedoperatingprofitwasthepreviouslydisclosedprovisiononalong-termcontracttakeninthefirsthalf.WehavealsoresolvedalongstandingUKcustomerdispute.Thesecosts,addedtoamoreconservativeviewtakenonelementsofsomeotherUKcontracts,resultedina£20millionimpactonadjustedoperatingprofitfortheyear.Absentthesecharges,adjustedoperatingmarginfortheyearwouldhavebeen7.6%.

89


PublicSectorrevenuewasup10%andrepresented56%ofUKrevenuein2007.Secondhalfrevenuegrowthwasparticularlystrongat14%,aswedeliveredundercontractswiththeCrownProsecutionService,theMinistryofJustice,andtotheNHSConnectingforHealthProgrammethrougharrangementswithBT.SpaceandDefencecontinuedtoaccountforaroundathirdofUKPublicSectorrevenue.In2007,wedeliveredfurthersoftwarefortheUK’snextgenerationmilitarysatellitecommunicationssystem,Skynet5,andcontinuedtodeliverunderMinistryofDefencecontractssuchastheDefenceInformationInfrastructure(DII)programme.

OutsidethePublicSector,EnergyandUtilitiesrevenuewasstableyearonyear.Wemadesignificantimprovementsinthisbusinessthroughtheyear,resultinginrevenueup8%inthesecondhalf.TheIDTsectorcontinuedtobeaffectedthroughtheyearbytheconclusionofamajortransportcontractin2006.However,ournewcontractwithBAAandthewinwithTaylorWimpeybookedattheendof2007havecontributedtoastrengtheningorderbacklog.Acrossthecommercialsectors,ourexposuretoasmallernumberofclientshascontributedtoweaknessthroughtheyear,withM&AactivityinFinancialServiceshavinganimpactonconsultingrevenuein2007.OurfocuswillremainonreinvigoratingthesalescapabilityacrosstheUKbusinessthrough2008.

Book-to-billfortheyearwas0.97:1.Whileweenter2008withagoodpipelineinEnergyandUtilitiesandagoodorderbackloginthePublicSector,weexpectslowergrowthinthePublicSectorthanin2007.Thisshouldbeoffsetbyimprovementsinpartsofthecommercialsectorwithagradualreturntoamodestlevelofgrowthaswegothrough2008.

Withthemajorityofthe£20millionofcostsincurredinthefirsthalf,marginimprovedto8.0%(2006:12.6%)inthesecondhalf.Marginsalsobenefitedfromsomecostsavingsachievedasaresultofoverheadreductionsinthefirsthalf.Utilisationwaslowerthroughouttheyearasaresultofreducedvolumeofbusinessinthecommercialsectors.Wetookactiontoreducethelevelofsubcontractorsthroughtheyearalthoughtheycontinuetobedeployedinspecialistroleswhererequired.

The £3.6bn Skynet 5 project is the UK’s single biggest space venture. Three next-generation global military satellites will deliver secure, high-bandwidth communications to UK and allied armed forces. In an important milestone, the first two satellites launched successfully during 2007.

Skynet 5 is being delivered through a 15-year service contract with the Paradigm Services consortium. As a member of the consortium and the software prime contractor Logica is delivering key functionality for the service. We are responsible for Skynet 5’s management software. We have also developed the telecom operator’s back office systems; vital for the successful operation of Skynet.

This £120 million contract brings together our expertise in telecom systems, geospatial technologies, military-specific satellite access planning, network control and security systems.

The MOD’s highly flexible and cost effective solution guarantees secure communications whenever and wherever required and allows it to benefit from evolving technologies and increasing capacity.


Paradigm Services case study: secure communications for the UK and allied armed forces

Growth Growth FY’07on FY’07on FY’06 FY’06 FY’06 FY’06 FY’07 Proforma Restated Proforma Restated £’m £’m £’m % %PublicSector 372.0 337.1 337.1 10.4 10.4Industry,DistributionandTransport 89.3 136.7 136.7 (34.7) (34.7)EnergyandUtilities 104.7 104.7 104.7 – –FinancialServices 60.6 85.7 85.7 (29.3) (29.3)TelecomsandMedia 35.9 54.2 54.2 (33.8) (33.8)Total 662.5 718.4 718.4 (7.8) (7.8)Outsourcing(%) 39 40 40Adjustedoperatingprofit(£’m) 30.5 77.8 77.8Adjustedoperatingmargin(%) 4.6 10.8 10.8Note:Seepage86foranexplanationofthebasisofproformainformation.

UKRevenue by market sector


90

Financial reviewFranceRevenuewasup11%onaproformabasisto£588.2million,withstrongfourthquartergrowth.Adjustedoperatingprofitwas£40.8million(afterone-offcostsrelatedtomanagementchanges),comparedto£46.2milliononaproformabasisin2006.

Revenuegrewacrossallmarketsectors,withPublicSectorgrowthat5%inlinewiththemarketandgrowthinallothersectorsabove7%.Thefastestgrowingsectorthrough2007continuedtobeE&U,aswedeployedamajorprogrammeforEDF.FinancialServiceswasalsouponthebackofthecross-sellingcontractsignedin2006.WeexpectslowergrowthinEnergyandUtilitiesandFinancialServicestobebalancedagainststrongerPublicSectorgrowthintheabsenceofelectionactivityin2008.

Halfofourmajoraccountspostedgrowthofmorethan10%,withEDF,anumberoffinancialservicesinstitutionsandourprojectwiththeMinistryofDefencedrivinggrowth.Roll-outofourcontractforCarrefourwasalsoacontributor.

Managementchangesmadeinmid-2007didnothamperrecruitmentefforts.WerecruitedsuccessfullyintheFrenchmarket,exceedinginternaltargets.Excludingtheone-offcostsrelatedtomanagementchanges,adjustedoperatingmarginwas7.8%(2006proforma:8.7%)withsomesecondhalfdilutioncomparedto2006asaresultofhigheruseofsubcontractorsandamoreconservativeviewoncostsrelatedtosomecontractswhereweintendtoacceleratetheoffshoretransition.DoublingofourMoroccanheadcountthrough2007reflectsanincreaseddemandforablendeddeliverymodelamongFrenchclients,whichweexpecttobeapositivecontributortomarginin2008.

Growth Growth FY’07on FY’07on FY’06 FY’06 FY’06 FY’06 FY’07 Proforma Restated Proforma Restated £’m £’m £’m % %PublicSector 64.1 61.2 60.8 4.7 5.4Industry,DistributionandTransport 221.4 206.6 238.2 7.2 (7.1)EnergyandUtilities 86.2 66.8 66.4 29.0 29.8FinancialServices 161.3 146.0 145.0 10.5 11.2TelecomsandMedia 55.2 49.9 49.6 10.6 11.3Total 588.2 530.5 560.0 10.9 5.0Outsourcing(%) 32 30 30Adjustedoperatingprofit(£’m) 40.8 46.2 46.8Adjustedoperatingmargin(%) 6.9 8.7 8.4Note:Seepage86foranexplanationofthebasisofproformainformation.

FranceRevenue by market sector

When Europe’s largest retailer, Carrefour, took the decision to outsource its applications management, cost was a leading consideration. But it also recognised that the right partner would add value: processes would work more efficiently and quality would be improved.

Carrefour was looking for a partner capable of managing a large-scale, complex and mission-critical project in an efficient and cost effective way. As Unilog, Logica’s French business had already successfully managed Carrefour’s supply chain applications support in France for a number of years and when Unilog became part of Logica, the enlarged Group’s global resources provided the assurance that they could manage Carrefour’s applications. Its language-specific offshore service centre in Morocco was another key advantage.

As part of the three year, €23 million contract, Logica is supporting 150 key Carrefour applications for 1,200 hypermarket and supermarket stores in France. We provide a full 24-hour service with local representatives on the ground and world-class solutions delivered through our global service network.


Carrefour case study: large scale mission critical delivery

91


Growth Growth FY’07on FY’07on FY’06 FY’06 FY’06 FY’06 FY’07 Proforma Restated Proforma Restated £’m £’m £’m % %PublicSector 145.3 122.4 121.9 18.7 19.2Industry,DistributionandTransport 105.7 102.7 103.0 2.9 2.6EnergyandUtilities 50.9 49.7 49.4 2.4 3.0FinancialServices 155.8 148.2 147.3 5.1 5.8TelecomsandMedia 27.0 26.2 26.0 3.1 3.8Total 484.7 449.2 447.6 7.9 8.3Outsourcing(%) 18 13 13Adjustedoperatingprofit(£’m) 42.9 44.4 44.2Adjustedoperatingmargin(%) 8.9 9.9 9.9Note:Seepage86foranexplanationofthebasisofproformainformation.

NetherlandsRevenue by market sector

NetherlandsRevenuewasup8%to£484.7million,markinggrowthaheadofthemarketforthethirdconsecutiveyear.Growthslowedinthefourthquarterinlinewithourexpectations.Book-to-billfortheyearwas1.04:1.Adjustedoperatingprofitwas£42.9million,givinganadjustedoperatingmarginof8.9%.

Fortheyear,revenuegrowthwasdrivenbyastrongPublicSector,withrevenueup19%.FinancialServicesrevenuewasbroadlystableinthesecondhalfwhencomparedto2006,leadingtofullyearrevenuegrowthof5%,whileEnergyandUtilitiessawstrongerrevenuegrowthinthesecondhalf.InIDT,revenuewasstable.

IntheFinancialServicesandIDTareas,customersareadoptinghigherlevelsofoffshoreresourcetoensuretheyremaincostcompetitivegloballywhichhasdrivenadoublingoftheuseofourblendeddeliverymodelin2007.Whileweexpectacontinuedincreaseinvolumesofwork,thisislikelytocontributetolowerrevenuegrowthratesintheDutchmarketin2008.

AlthoughwecontinuedtorecruitsuccessfullyintheNetherlands,thelabourmarketremainedverycompetitive.Higherpricesthanin2006combinedwithincreaseduseofsubcontractorswerecontributorstoincreasedcoststhroughtheyear.Wealsorecognisedalevelofincreasedcostrelativetoonelong-termcontractbutcontinuetoseeopportunitiesinourDutchcontractstotransitionmoreworkoffshorein2008.Thecombinedimpactofthesefactorswasareductioninoperatingmarginwhencomparedto2006. One of the largest international banks, BNP Paribas is also a major force

in retail banking in its home country, France. Managing the applications used by back office staff to support their retail operations was a major cost for the bank. Consequently, the French Retail Banking IT Service (BDDF-I) division decided to outsource their application management services. In doing so they wanted to ensure that operations would be run by their existing trusted suppliers from ‘nearshore’ centres in France.

As one of the bank’s top suppliers in France, Logica was the natural choice. Through its expertise in application development and management, it has an established reputation with the bank for providing the highest-quality services, on time and on budget.

Logica set up a dedicated centre in Bordeaux that provides a secure high-performance facility to run a growing number of application management services (AMS) for the bank. Working to rigorous service level agreements, the Logica centre has already reduced the cost of managing the bank’s maintained applications services by 15% compared to 2002. As more services are introduced, the bank aims to reduce costs further.

In addition, the nearshoring project’s use of globally-recognised best practices has ensured the delivery of more secure, reliable services that help the bank’s staff work more efficiently.


BNP Paribas case study: banking on the best application management services


92

Financial reviewGermanyRevenuewasup9%at£179.6million,drivenbyparticularlystrongfourthquartergrowthat13%.Adjustedoperatingprofitwas£8.1million,resultinginanadjustedoperatingmarginof4.5%.Thiscomparestoalossof£1.4millionin2006.

RevenuegrowthwasdrivenbyastrongperformanceintheFinancialServicessectoraswedeployedaprogrammeforamajorinternationalbankandriskmanagementsolutionsforanumberofcustomersinthesector.IDTwasup5%asaresultofconsultingandservicesprojectsundertakenforInBevaswellasclientsintheautomotivesector.

ThebusinessinGermanyachievedprofitabilitythroughtheyear,buildingonawellexecutedintegrationprogrammein2006anddrivenbyrevenuegrowthinthebusinessin2007.

InternationalRevenuefortheyearwasdown2%to£321.3million.Thefourthquarterdeclineof5%waslargelyattributabletoamajorTelecomsandMediacontractwithNatrindoinAsiawhichcompletedin2006.Book-to-billfortheyearwas0.90:1.

Adjustedoperatingprofitwas£8.6million,givinganadjustedoperatingmarginof2.7%.TheloweroperatingprofitwaslargelyduetocostsrelatedtoimprovingtheefficiencyofourbusinessinPortugal,withheadcountreducedbyaround10%overthecourseof2007.ThephasingofthecostreductioncoupledwithplannedpricereductionsreducedmarginsintheInternationalsegmentdespiteimprovementsinprofitabilityintheUSandAustralianbusinesses.

EdinforrevenuecontinuedtoaccountforaroundathirdofInternationalrevenue.EdinforalsoremainedthelargestcontributortoEnergyandUtilitiesrevenueintheregion.WhileEDPremainsEdinfor’smajorclient,customersinthePortuguesewaterutilitiesmarketcontinuedtorepresentaroundafifthofrevenue.WealsocontinuetoseegoodopportunitiesinBrazilwhereourrevenuewasupin2007,mainlyunderourcontractwithnaturalgasdistributioncompanyComgás.

GrowthintheIDTbusinesscontinuedtobedrivenbyroll-outoftheInBevcontractwhileAustraliaandtheMiddleEastcontinuedtoseegoodPublicSectordemand.

Growth Growth FY’07on FY’07on FY’06 FY’06 FY’06 FY’06 FY’07 Proforma Restated Proforma Restated £’m £’m £’m % %PublicSector 6.1 12.2 12.1 (50.0) (49.6)Industry,DistributionandTransport 72.3 68.8 67.5 5.1 7.1EnergyandUtilities 25.6 25.1 24.9 2.0 2.8FinancialServices 53.5 33.6 39.5 59.2 35.4TelecomsandMedia 22.1 24.7 24.6 (10.5) (10.2)Total 179.6 164.4 168.6 9.2 6.5Outsourcing(%) 16 20 20Adjustedoperatingprofit(£’m) 8.1 (1.4) (1.4)Adjustedoperatingmargin(%) 4.5 (0.9) (0.8)Note:Seepage86foranexplanationofthebasisofproformainformation.

GermanyRevenue by market sector

Our major continental European geographies performed well through the year, with growth above the market in France, Germany, the Netherlands and the Nordics

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Creation of new Outsourcing Services divisionIn2007,revenuefromoutsourcingwas£959million(2006:£708million),representing31%ofGrouprevenue.

WehaverecentlyestablishedOutsourcingServicesasanewdivision,whichdevelopsourexistingoutsourcingmodel,andhavebeenworkinginternallytoensuretherightorganisationisinplacetotakethisbusinessforward.ThenewmodelwillbecomeoperationalinkeyEuropeangeographiesfromQ12008andwillbeinplaceacrossthewholeorganisationby2009.

Europeancustomersareincreasinglydemandingablendeddeliverymodel.Thenewdivisionwilltakeend-to-endresponsibilityforoutsourcingservices,ensuringthatcustomershaveaccesstothemostefficientandcosteffectiveblendofonshore,nearshoreandoffshoresupport.ItwillprovideoutsourcingsalesanddesignspecialiststoallLogica’scustomersviaourlocalorganisations.Itwillacceleratethestandardisationoftoolsandprocessesanddriveefficienciesacrosstheorganisation.

Thedivisionwillincorporatearound9,000Logicaemployeesworkingtodayinouronshore,nearshoreandoffshorecentres.Thisincludesaround2,000employeesinourinfrastructuremanagementcentresinSweden.

WeexpectourlargestoffshorecentresinIndiaandthePhilippinestocontinuetogrowwithinthisdivision.Theyarealreadyanimportantelementofdeliveringoutsourcingservicestocustomers.InconjunctionwithourplantocontinuetostrengthenourIndianpresence,weareappointinganewCEOforourbusinessinIndia.

WealsoexpectgrowthinouronshorecentresaswellasinnearshorecentreslikeMoroccoandtheCzechandSlovakRepublics,whichallowsustomeetthevaryinglanguageandculturalneedsofourcustomers.

Weexpecttoreportperformancemetricsforthisnewdivisionfromthesecondhalfof2008.

Growth Growth FY’07on FY’07on FY’06 FY’06 FY’06 FY’06 FY’07 Proforma Restated Proforma Restated £’m £’m £’m % %PublicSector 33.2 31.1 31.6 6.8 5.1Industry,DistributionandTransport 50.1 35.5 36.6 41.1 36.9EnergyandUtilities 164.7 166.2 169.1 (0.9) (2.6)FinancialServices 46.7 45.8 47.3 2.0 (1.3)TelecomsandMedia 26.6 49.5 51.0 (46.3) (47.8)Total 321.3 328.1 335.6 (2.1) (4.3)Outsourcing(%) 37 34 33Adjustedoperatingprofit(£’m) 8.6 19.5 19.1Adjustedoperatingmargin(%) 2.7 5.9 5.7Note:Seepage86foranexplanationofthebasisofproformainformation.

InternationalRevenue by market sector

EmployeesAttheendof2007,wehad38,740employees(2006,restatedforthedisposalofTelecomsProducts:38,789).Overthecourseoftheyear,werecruitedover8,500newemployees.Wemetorexceededinternalrecruitmenttargetsinmostofourmarkets.

Employeechurnthroughannualisedvoluntaryattritionwasbroadlystableon2006ataround16%andwasinlinewiththemarket.Theothersignificantmovementin2007wastheexitofapproximately1,100employeesaspartofthedisposaloftheCaranbusinessintheNordicsatthebeginningofJune.

Whileselectivepriceincreasesremainedpossiblethroughtheyear,wageinflationinourmajorgeographiescontinuedtoimpactourabilitytoimprovemarginsfurther.WhileUKutilisationhasbeenimpactedbyweaknessinthecommercialsectors,utilisationinourothermajorgeographiesremainsgood.

P 30P 30 See page 30 of the Business review for further information on employee KPIs


94

Financial reviewFinancial itemsAmortisationofintangibleassetsfromacquisitionswas£74.7million(2006:£37.6million),withtheincreasebeingmainlyattributabletointangibleassetsacquiredaspartoftheWM-dataacquisition.

Thenetexceptionalitemsof£23.2million(2006:£23.9million)includealossof£9.7millionrelatedtonon-coredisposalscompletedduringtheyear(excludingtheTelecomsProductsdisposalwhichisreportedasadiscontinuedoperation).The£9.7millionlossincludesa£2.6millionimpairmentlossonbuildingsinPortugal(occupiedbytheCopidataactivitypriortoitsdisposal).Alsoincludedare£13.5millionofrestructuringcostsassociatedwithoffshoringactivitiesandITinfrastructureaspartoftheWM-dataintegration.Afurther£8.3millionofcostsareexpectedtobeincurredin2008inrespectoftheWM-dataintegration.

Financecostswerebroadlyunchangedin2007.Higheramortisationofintangiblescomparedto2006andloweradjustedoperatingprofitresultedinaprofitbeforetaxof£84.1million(2006:£116.6million).

Adjustedbasicearningspersharefromcontinuingoperationswere10.2p(2006:10.4p)onaweightedaveragenumberofsharesof1,494.6million.Basicearningspersharefromcontinuingoperations,whichincludedhigheramortisationofacquisition-relatedintangiblesthanin2006,were5.4p(2006:6.4p).

ThefourthquartershowedgoodoperationalmanagementofworkingcapitalacrosstheGroup.Cashgeneratedfromcontinuingoperationswas£232.4million(2006:£209.5million).Thenetcashinflowfromtradingoperationswas£261.0million,givingacashconversionof126%(2006:119%).Profitfromdiscontinuedoperationsfortheyearwas£89.4million(2006:£3.7million),asaresultofthedisposaloftheTelecomsProductsbusiness.ThisresultedinanetprofitfortheGroupof£168.1million(2006:£89.1million).

Groupnetdebtat31December2007was£483.2million,comparedto£399.1millionat30June2007.Thisincreaseislargelyattributabletoanetoutflowfromthe£130millionsharebuybackcompletedinNovember2007.

Taxation Basedontheprogressofthelegalstructureintegrationfollowingtheacquisitionsinrecentyears,wehavebeenabletoacceleratethebenefitofhistorictaxlossesin2007.Theeffectivetaxrateoncontinuingoperationsfortheyear,beforeshareofpost-taxprofitsfromassociates,exceptionalitemsandamortisationofintangibleassetsinitiallyrecognisedonacquisition,was17.6%(2006:25.4%).Theeffectivetaxratefor2008isexpectedtobearound23%.

Thetotaltaxchargefortheyearended31December2007was£5.4million(2006:£31.2million)ofwhichataxcreditof£26.4million(2006:£14.0millioncredit)relatestoexceptionalitemsandamortisationofintangibleassetsinitiallyrecognisedonacquisition.Theremainingdecreaseismainlyduetotheuseofpreviouslyunrecognisedtaxlossesbroughtforward.

Minority interestsAtthetimeoftheWM-datatransaction,Logicaacquired95.33%oftheCompany’sissuedsharecapital.Thecompulsoryredemptionprocesstoacquiretheremaining4.67%fromWM-dataminorityshareholdersisprogressing.Wecurrentlyexpecttheredemptionprocesstocompletebythefourthquarterof2008.

European customers are increasingly demanding a blended delivery model. The new Outsourcing Services division will take end-to-end responsibility for outsourcing services

95


Acquisitions and disposalsInadditiontotheacquisitionofSiemensBusinessSystemsASinNorwayinthefirsthalfoftheyear,theGroupmadethefollowingsmallacquisitionsduring2007:

•theremaining63.7%ofMediciDataOy,aFinnishcompanyspecialisinginpatientcareapplicationsandinformationmanagementservicesforthehealthcaresector

•theremaining55%interestinInternetTelecomPaymentSolutionsAB,aSwedishcompanyprovidingbillingsolutionsandservicesforthetelecomssector

•KarttakoneOy,aFinnishcompanyprovidingdigitalandpaper-basedmappingproducts.

Theprovisionalfairvalueoftheidentifiableassetsandliabilitiesacquiredinallacquisitionsintheyearwas£15.1million.Totalcashconsiderationdueontheseacquisitionswas£23.6million.

InadditiontothedisposalsoftheTelecomsProductsandCaranbusinessesdisclosedinthefirsthalfof2007,theGroupcompletedthesaleofthefollowingnon-corebusinessesduring2007:

•anelementofthepayrollbusinessintheNetherlandswhichprovidedsolutionsfortheSMEandlocalgovernmentmarket;

•theCopidataintegratedgraphicservicesbusinessinPortugal;

•thebusinessprovidingstaffaugmentationandhostingservicestotheautomotiveindustryintheUnitedStates;

•theformerWM-datasubsidiaryoperatinginGermany,WM-dataDeutschlandGmbH;

•thesubsidiaryoperatingtheGroup’sITservicesbusinessinAustria,LogicaCMGGmbH;

•smallfinanceBPObusinessesinNorwayandSweden;and

•apartoftheITservicesbusinessinDenmark,providingservicesandproductstotaxauthoritiesaroundtheworld.

Theaggregatenetassetsofthesebusinesses,whicharenotindividuallysignificant,attheirdateofdisposalwas£17.7million.Thelossondisposalwas£9.7million.Netcashinflowarisingondisposalwas£12.8million.

Thetotalconsiderationforthesaleofnon-corebusinesses(excludingTelecomsProductsandCaran)was£15.6million,ofwhich£15.2millionwasreceivedincashduringtheyearand£0.4millionisreceivableduringthefirsthalfof2008.

Sincetheendof2007,LogicahasalsoacquiredasmallBPObusinessinSwedenandhasdisposedofitsUKprintandmailoperationsinBridgend,Wales.

Balance sheet itemsTheGroup’spolicyistomaintainadequateheadroomtomeetitsforeseeablefinancingrequirements.Withour€303millionconvertiblebondsduetoberedeemedinSeptember2008,wehaveensuredthatwehavesufficientcapacitytorepaythisattheredemptiondate.InNovember2007,weextendedthe£150milliontrancheofourexistingbankfacilities(whichwasduetomatureinAugust2008).ThisamendmenttotheloangrantstheoptiontoextenduntilNovember2010.Theothercommercialtermsoftheloan,whichisprovidedbyagroupofeightoftheCompany’srelationshipbanks,remainunchanged.

Logica’sotherprincipalbankfacilitiesarea€348milliontermloananda£330millionmulti-currencyrevolvingcreditfacility,whichislargelyundrawn.BothofthesefullycommittedfacilitiesmatureinSeptember2010.

Thesefacilitiesprovideuswithadequateheadroomtorepayourconvertibledebtattheredemptiondate,whileremainingwellwithinourbankingcovenants.

Events after the balance sheet dateAtthetimeoftheannouncementoftheTelecomsProductsdisposalinearly2007,weallocatedaportionoftheproceedstobeusedtobuyoutremainingminorityinterestsinEdinforandWM-data.EDPhasaputoptioninrespectofitsremaining40%interestinEdinfor.Thisbecameexercisableon21April2007.On19February2008,wereceivedformalnotificationthatEDPintendedtoexercisethisoptionandweacquiredtheremaining40%ofthebusinessinMarch2008for€55million.

DividendTheDirectorshaveproposedafinaldividendof3.5pencetobepaidon15May2008toeligibleshareholdersontheregisteratthecloseofbusinesson18April2008.Thisyear’sproposedtotaldividendof5.8pencerepresentsa4%increaseon2006.

Seamus KeatingChiefFinancialOfficer


96

Independent auditors’ report to the members of LogicaCMG plc

WehaveauditedtheGroupFinancialstatementsofLogicaCMGplcfortheyearended31December2007whichcomprisetheconsolidatedincomestatement,theconsolidatedstatementofrecognisedincomeandexpense,theconsolidatedbalancesheet,theconsolidatedcashflowstatementandtherelatednotes.TheseGroupFinancialstatementshavebeenpreparedundertheaccountingpoliciessetouttherein.

WehavereportedseparatelyontheparentCompanyFinancialstatementsofLogicaCMGplcfortheyearended31December2007andontheinformationintheReportoftheRemunerationCommitteethatisdescribedashavingbeenaudited.

Respective responsibilities of Directors and auditorsTheDirectors’responsibilitiesforpreparingtheAnnualreportandtheGroupFinancialstatementsinaccordancewithapplicablelawandInternationalFinancialReportingStandards(IFRSs)asadoptedbytheEuropeanUnionaresetoutinthestatementofDirectors’responsibilities.

OurresponsibilityistoaudittheGroupFinancialstatementsinaccordancewithrelevantlegalandregulatoryrequirementsandInternationalStandardsonAuditing(UKandIreland).Thisreport,includingtheopinion,hasbeenpreparedforandonlyfortheCompany’smembersasabodyinaccordancewithSection235oftheCompaniesAct1985andfornootherpurpose.Wedonot,ingivingthisopinion,acceptorassumeresponsibilityforanyotherpurposeortoanyotherpersontowhomthisreportisshownorintowhosehandsitmaycomesavewhereexpresslyagreedbyourpriorconsentinwriting.

WereporttoyououropinionastowhethertheGroupFinancialstatementsgiveatrueandfairviewandwhethertheGroupFinancialstatementshavebeenproperlypreparedinaccordancewiththeCompaniesAct1985andArticle4oftheIASRegulation.WealsoreporttoyouwhetherinouropiniontheinformationgivenintheReportoftheDirectorsisconsistentwiththeGroupFinancialstatements.TheinformationgivenintheReportoftheDirectorsincludesthatspecificinformationpresentedintheFinancialreviewthatiscrossreferredfromtheBusinessreviewsectionoftheReportoftheDirectors.

Inadditionwereporttoyouif,inouropinion,wehavenotreceivedalltheinformationandexplanationswerequireforouraudit,orifinformationspecifiedbylawregardingDirectors’remunerationandothertransactionsisnotdisclosed.

WereviewwhethertheCorporategovernancereportreflectstheCompany’scompliancewiththenineprovisionsoftheCombinedCode(2006)specifiedforourreviewbytheListingRulesoftheFinancialServicesAuthority,andwereportifitdoesnot.WearenotrequiredtoconsiderwhethertheBoard’sstatementsoninternalcontrolcoverallrisksandcontrols,orformanopinionontheeffectivenessoftheGroup’scorporategovernanceproceduresoritsriskandcontrolprocedures.

WereadotherinformationcontainedintheAnnualreportandconsiderwhetheritisconsistentwiththeauditedGroupFinancialstatements.TheotherinformationcomprisesonlytheChairman’sstatement,theChiefExecutive’sreview,theFinancialreview,theReportoftheDirectors,theCorporatesocialresponsibilitystatementandtheCorporategovernancestatement.WeconsidertheimplicationsforourreportifwebecomeawareofanyapparentmisstatementsormaterialinconsistencieswiththeGroupFinancialstatements.Ourresponsibilitiesdonotextendtoanyotherinformation.

Basis of audit opinionWeconductedourauditinaccordancewithInternationalStandardsonAuditing(UKandIreland)issuedbytheAuditingPracticesBoard.Anauditincludesexamination,onatestbasis,ofevidencerelevanttotheamountsanddisclosuresintheGroupFinancialstatements.ItalsoincludesanassessmentofthesignificantestimatesandjudgmentsmadebytheDirectorsinthepreparationoftheGroupFinancialstatements,andofwhethertheaccountingpoliciesareappropriatetotheGroup’scircumstances,consistentlyappliedandadequatelydisclosed.

WeplannedandperformedourauditsoastoobtainalltheinformationandexplanationswhichweconsiderednecessaryinordertoprovideuswithsufficientevidencetogivereasonableassurancethattheGroupFinancialstatementsarefreefrommaterialmisstatement,whethercausedbyfraudorotherirregularityorerror.InformingouropinionwealsoevaluatedtheoveralladequacyofthepresentationofinformationintheGroupFinancialstatements.

OpinionInouropinion:

•theGroupFinancialstatementsgiveatrueandfairview,inaccordancewithIFRSsasadoptedbytheEuropeanUnion,ofthestateoftheGroup’saffairsasat31December2007andofitsprofitandcashflowsfortheyearthenended;

•theGroupFinancialstatementshavebeenproperlypreparedinaccordancewiththeCompaniesAct1985andArticle4oftheIASRegulation;and

•theinformationgiveninthereportoftheDirectorsisconsistentwiththeGroupFinancialstatements.

PricewaterhouseCoopers LLPCharteredAccountantsandRegisteredAuditorsLondon20March2008

Financial statements and notes


97

Consolidated income statement For the year ended 31 December 2007

Restated* 2007 2006 Note £’m £’mCoNtiNuiNgopeRatioNs:

Revenue 5 3,073.2 2,420.7Netoperatingcosts 6 (2,963.5) (2,278.8)Operating profit 109.7 141.9 aNalysedas:

operatingprofitbeforeexceptionalitems 132.9 165.8 exceptionalitems 7 (23.2) (23.9) operatingprofit 5 109.7 141.9Financecosts 10 (37.8) (34.3)Financeincome 11 11.0 8.7shareofpost-taxprofitsfromassociates 1.2 0.3Profit before tax 12 84.1 116.6taxation 13 (5.4) (31.2)Profit for the year from continuing operations 78.7 85.4disCoNtiNuedopeRatioN:

profitfromdiscontinuedoperation 14 89.4 3.7Net profit for the year 168.1 89.1

attRibutableto:

equityholdersoftheparent 169.9 82.0Minorityinterests (1.8) 7.1 168.1 89.1

p/share p/shareEarnings per share from continuing operations–basic 16 5.4 6.4–diluted 16 5.3 6.3

Earnings per share from total operations–basic 16 11.4 6.7–diluted 16 11.2 6.6* RestatedasdescribedfurtherinNote14.

Consolidated statement of recognised income and expense For the year ended 31 December 2007

2007 2006 £’m £’mexchangedifferencesontranslationofforeignoperations 97.4 (4.1)exchangedifferencesrecycledondisposalofforeignoperations 5.1 –Cashflowhedgestransferredtoincomestatementonsettlement – (2.0)actuarialgainsondefinedbenefitplans 3.6 17.5taxonitemstakendirectlytoequity – (3.9) Net income recognised directly in equity 106.1 7.5profitfortheyear 168.1 89.1 Total recognised income and expense for the year 274.2 96.6

attRibutableto:

equityholdersoftheparent 274.0 89.4Minorityinterests 0.2 7.2 274.2 96.6

detailsofdividendspaidandproposedareprovidedinNote15.


98

Consolidated balance sheet 31 December 2007

2007 2006 Note £’m £’mNon-current assetsgoodwill 17 1,604.0 1,552.1otherintangibleassets 18 358.0 415.1property,plantandequipment 19 132.1 136.6investmentsinassociates 20 2.4 6.0Financialassets 21 11.0 10.1Retirementbenefitassets 38 12.0 18.7deferredtaxassets 28 54.5 50.6 2,174.0 2,189.2Current assetsinventories 22 1.4 2.9tradeandotherreceivables 23 1,021.2 1,070.2Currenttaxassets 40.5 31.2Cashandcashequivalents 34 108.7 177.3 1,171.8 1,281.6Current liabilitiesConvertibledebt 25 (220.0) (202.4)otherborrowings 25 (97.2) (33.1)tradeandotherpayables 24 (868.2) (886.4)Currenttaxliabilities (56.1) (32.3)provisions 27 (9.1) (20.8) (1,250.6) (1,175.0)

Net current (liabilities)/assets (78.8) 106.6Total assets less current liabilities 2,095.2 2,295.8

Non-current liabilitiesborrowings 25 (274.7) (498.9)Retirementbenefitobligations 38 (50.6) (64.1)deferredtaxliabilities 28 (125.0) (164.4)provisions 27 (18.9) (13.2)othernon-currentliabilities (0.7) (0.8) (469.9) (741.4)Net assets 1,625.3 1,554.4

Equitysharecapital 29 145.8 153.6sharepremiumaccount 30 1,098.9 1,097.0otherreserves 31 352.3 274.4Total shareholders’ equity 1,597.0 1,525.0Minorityinterests 32 28.3 29.4Total equity 1,625.3 1,554.4

theconsolidatedFinancialstatementsonpages97to145wereapprovedbytheboardofdirectorson20March2008andweresignedonitsbehalfby:

A GreenS Keatingdirectors20March2008


99

Consolidated cash flow statement For the year ended 31 December 2007

Restated* 2007 2006 Note £’m £’mCash flows from continuing operating activities Netcashinflowfromtradingoperations 261.0 242.5Cashoutflowrelatedtorestructuringandintegrationactivities (28.6) (33.0)Cash generated from continuing operations 33 232.4 209.5Financecostspaid (40.2) (26.3)incometaxpaid (45.8) (31.5)Net cash inflow from continuing operating activities 146.4 151.7

Net cash inflow/(outflow) from discontinued operating activities 7.0 (1.3)

Cash flows from continuing investing activitiesFinanceincomereceived 7.0 5.1dividendsreceivedfromassociates 1.0 –proceedsondisposalofproperty,plantandequipment 2.2 2.2purchasesofproperty,plantandequipment (35.3) (28.2)expenditureonintangibleassets (13.0) (17.1)purchaseofminorityinterests (2.2) –deferredconsiderationandacquisitionofsubsidiaries,netofcashacquired (34.2) (398.3)disposalofsubsidiariesandotherbusinesses,netofcashdisposed 42.0 1.9disposalofdiscontinuedoperation,netofcashdisposed 213.2 –Net cash inflow/(outflow) from continuing investing activities 180.7 (434.4)

Net cash outflow from discontinued investing activities – (5.5)

Cash flows from continuing financing activities proceedsfromissueofnewshares 2.5 3.4paymentforshareissuecosts – (5.4)purchaseofownshares (130.8) –proceedsfromtransferofsharesbyesoptrust 0.8 –proceedsfrombankborrowings 34.5 480.6Repaymentsofbankborrowings (204.2) (208.0)Repaymentsoffinanceleaseprincipal (4.7) (2.1)Repaymentsofborrowingsassumedinacquisitions – (3.8)proceedsfromotherborrowings – 0.4Repaymentsofotherborrowings – (0.4)paymentsonforwardcontractsdesignatedasanetinvestmenthedge (6.3) –dividendspaidtotheCompany’sshareholders (85.9) (61.1)dividendspaidtominorityinterests (0.4) (1.8)Net cash (outflow)/inflow from continuing financing activities (394.5) 201.8

Net decrease in cash, cash equivalents and bank overdrafts (60.4) (87.7)

Cash,cashequivalentsandbankoverdraftsatthebeginningoftheyear 34 150.9 245.3Netdecreaseincash,cashequivalentsandbankoverdrafts 34 (60.4) (87.7)effectofforeignexchangerates 34 9.1 (6.7)Cash, cash equivalents and bank overdrafts at the end of the year 99.6 150.9* RestatedasdescribedfurtherinNote33.


100

Note 1 General information

logicaisaleadingeuropeanitandbusinessservicescompany,employing39,000peopleacross36countries.itprovidesbusinessconsulting,systemsintegration,anditandbusinessprocessoutsourcingservices.logicaworkscloselywithitscustomerstoreleasetheirpotential–enablingchangethatincreasestheirefficiency,acceleratesgrowthandmanagesrisk.itappliesitsdeepindustry

Note 2 Accounting policies

Basis of preparationtheseconsolidatedFinancialstatementshavebeenpreparedinaccordancewithinternationalFinancialReportingstandards(iFRss)asadoptedbytheeuropeanunion(eu),iFRiCinterpretationsandthosepartsoftheCompaniesact1985(theact)thatremainapplicabletocompaniesreportingunderiFRss.

theconsolidatedFinancialstatementshavebeenpreparedunderthegoingconcernbasisandunderthehistoricalcostconventionwiththeexceptionofcertainitemswhicharemeasuredatfairvalue,asdisclosedintheaccountingpoliciesbelow.

Basis of consolidationtheconsolidatedFinancialstatementsincludethoseoftheCompanyandallofitssubsidiaryundertakings(together,thegroup),andthegroup’sshareoftheresultsofassociatesandjointventures.investmentsinassociatesandjointventuresareaccountedforusingtheequitymethod.

subsidiaryundertakingsarethoseentitiescontrolleddirectlyorindirectlybytheCompany.ControlariseswhentheCompanyhastheabilitytodirectthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.

theresultsofsubsidiariesacquiredorsoldareincludedintheconsolidatedincomestatementfromthedateofacquisitionoruptothedateofdisposalrespectively,usingthesameaccountingpoliciesasthoseofthegroup.allbusinesscombinationsareaccountedforusingthepurchasemethod.

onacquisition,theinterestofanyminorityshareholdersisstatedattheminority’sproportionofthefairvalueoftheassetsandliabilitiesrecognised.subsequently,theminorityinterestintheconsolidatedbalancesheetreflectstheminority’sproportionofchangesinthenetassetsofthesubsidiary.aminorityinterestisnotrecognisedinasubsidiarywithnetliabilitiesexcepttotheextentthattheminorityhasabindingobligation,andisabletomakeanadditionalinvestment,tocovercumulativelosses.

allintercompanytransactionsandbalancesareeliminatedonconsolidation.

Non-current assets held for sale and discontinued operationsNon-currentassetsanddisposalgroupsareclassifiedasheldforsaleinthebalancesheetiftheircarryingamountwillberecoveredthroughasaletransactionratherthanongoingusebutonlyifthesaleishighlyprobableandisexpectedtocompletewithinoneyearfromthedateofclassification.Non-currentassetsanddisposalgroupsheldforsalearemeasuredattheloweroftheircarryingamountandfairvaluelesscoststosell.

knowledge,technicalexcellenceandglobaldeliveryexpertisetohelpitscustomersbuildleadershippositionsintheirmarkets.logicaislistedonboththelondonstockexchangeandeuronext(amsterdam)(lse:log;euronext:log).Moreinformationisavailableatwww.logica.com.

theCompanyisapubliccompanyincorporatedanddomiciledintheuK.theaddressofitsregisteredofficeisstephensonHouse,75HampsteadRoad,londonNW12pl,uK.

theresultsofanoperationthatrepresentsaseparatemajorlineofbusinessandeitherhasbeendisposedofduringtheperiodorisclassifiedasheldforsale,areclassifiedasdiscontinuedoperations.thepost-taxprofitorlossofthediscontinuedoperation,plusthepost-taxgainorlossrecognisedonthemeasurementoftheassetsandliabilitieswithinthedisposalgroupatfairvaluelesscoststosell,ispresentedasasingleamountonthefaceoftheincomestatement.

Intangible assetsallintangibleassets,exceptgoodwill,arestatedatcostlessaccumulatedamortisationandanyaccumulatedimpairmentlosses.goodwillisnotamortisedandisstatedatcostlessanyaccumulatedimpairmentlosses.

Goodwillgoodwillrepresentstheexcessofthecostofacquisitionoverthefairvalueofthegroup’sinterestintheidentifiableassets,liabilitiesandcontingentliabilitiesacquiredinabusinesscombinationandtheexcessoftheconsiderationpaidforanincreaseinstakeinanexistingsubsidiaryovertheshareofthecarryingvalueofnetassetsacquired.

Development costsexpenditureincurredinthedevelopmentofsoftwareproductsorenhancements,andtheirrelatedintellectualpropertyrights,iscapitalisedasanintangibleassetonlywhenthefutureeconomicbenefitsexpectedtoarisearedeemedprobableandthecostscanbereliablymeasured.developmentcostsnotmeetingthesecriteria,andallresearchcosts,areexpensedintheincomestatementasincurred.Capitaliseddevelopmentcostsareamortisedonastraight-linebasisovertheirusefuleconomiclivesoncetherelatedsoftwareproductorenhancementisavailableforuse.

Other intangible assetsintangibleassetspurchasedseparately,suchassoftwarelicencesthatdonotformanintegralpartofrelatedhardware,arecapitalisedatcostandamortisedovertheirusefuleconomiclife.intangibleassetsacquiredthroughabusinesscombinationareinitiallymeasuredatfairvalueandamortisedovertheirusefuleconomiclives.

theusefuleconomiclivesoftheotherintangibleassetsareasfollows:

brandnames 3–5yearspurchasedcomputersoftware 3yearssoftwareproductsrecognisedonacquisition 3–7years

Notes to the consolidated Financial statements


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Note 2 Accounting policies (continued)

Customercontractsandrelationshipsareamortisedovertheirusefuleconomiclifewhicharebetweenfiveandeightyears,exceptforonecontractintheinternationalcategorywhichhasausefullifeof10years.

Property, plant and equipmentproperty,plantandequipmentarestatedatcostlessaccumulateddepreciationandanyaccumulatedimpairmentlosses.thecostofanitemofproperty,plantandequipmentcomprisesitspurchasepriceandanycostsdirectlyattributabletobringingtheassetintouse.

depreciationiscalculatedonastraight-linebasistowritedowntheassetstotheirestimatedresidualvalueovertheirusefuleconomiclivesatthefollowingannualrates:

Furniture 10–20%Computerequipment 25–33%partitionsandofficeequipment 10–20%Motorvehicles 25%Freeholdproperty 2%leaseholdequipmentandplant lifeoflease

theresidualvaluesandusefuleconomiclivesofproperty,plantandequipmentarereviewedannually.Freeholdlandandpropertiesunderconstructionarenotdepreciated.borrowingcostsrelatedtothepurchaseoffixedassetsarenotcapitalised.

Leasesleasesareclassifiedasfinanceleaseswheneverthetermsoftheleasetransfersubstantiallyalltherisksandrewardsofownershiptothelessee.allotherleasesareclassifiedasoperatingleases.

assetsheldunderfinanceleasesareinitiallyrecognisedasproperty,plantandequipmentatanamountequaltothefairvalueoftheleasedassetsor,iflower,thepresentvalueofminimumleasepaymentsattheinceptionofthelease,andthendepreciatedovertheirusefuleconomiclives.leasepaymentsareapportionedbetweenrepaymentofcapitalandinterest.thecapitalelementoffutureleasepaymentsisincludedinthebalancesheetasaliability.interestischargedtotheincomestatementsoastoachieveaconstantrateofinterestontheremainingbalanceoftheliability.

Rentalspayableunderoperatingleasesarechargedtotheincomestatementonastraight-linebasisovertheleaseterm.operatingleaseincentivesarerecognisedasareductionintherentalexpenseovertheleaseterm.

Impairment of non-current assetsgoodwillisallocatedtocash-generatingunitsforthepurposeofimpairmenttesting.therecoverableamountofthecash-generatingunittowhichthegoodwillrelatesistestedannuallyforimpairmentorwheneventsorchangesincircumstancesindicatethatitmightbeimpaired.thecarryingvaluesofproperty,plantandequipment,investmentsmeasuredusingacostbasisandintangibleassetsotherthangoodwillarereviewedforimpairmentonlywheneventsindicatethecarryingvaluemaybeimpaired.

inanimpairmenttest,therecoverableamountofthecash-generatingunitorassetisestimatedtodeterminetheextentofanyimpairmentloss.therecoverableamountisthehigheroffairvaluelesscoststosellandthevalueinusetothegroup.animpairmentlossisrecognisedtotheextentthatthecarryingvalueexceedstherecoverableamount.

indeterminingacash-generatingunit’sorasset’svalueinuse,estimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandrisksspecifictothecash-generatingunitorassetthathavenotalreadybeenincludedintheestimateoffuturecashflows.

Inventoriesinventoriesrepresentcomputerequipmentthat,atthebalancesheetdate,hadnotyetbeenallocatedtoaspecificcustomercontractandmaterials,includingwork-in-progress,usedindocumentprintingandfinishing.

inventoriesarestatedatthelowerofcostandnetrealisablevalue.Costcomprisesdirectmaterialsand,whereapplicable,directlabourcostsandthoseoverheadsthathavebeenincurredinbringingtheinventoriestotheirpresentlocationandcondition.Costiscalculatedusingthefirst-in-first-out(FiFo)method.Netrealisablevaluerepresentstheestimatedsellingpricelesscoststobeincurredinmarketing,distributionandsale.

amountsrecoverableoncontractsrepresentrevenuewhichhasnotyetbeeninvoicedtocustomersonfixedpricecontracts.suchamountsareseparatelydisclosedwithintradeandotherreceivables.thevaluationofamountsrecoverableoncontractsisadjustedtotakeupprofittodateorforeseeablelossesinaccordancewiththegroup’saccountingpolicyforprofitrecognition.

Trade receivablestradereceivablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,lessprovisionforimpairment.aprovisionforimpairmentoftradereceivablesisestablishedwhenthereisobjectiveevidencethatthegroupwillprobablynotbeabletocollectallamountsdueaccordingtotheoriginaltermsofthereceivables.significantfinancialdifficultyofthedebtor,probabilitythatthedebtorwillenterbankruptcyorfinancialreorganisationanddefaultordelinquencyinpaymentsareconsideredindicatorsthatthetradereceivableisimpaired.

theamountoftheimpairmentisthedifferencebetweentheasset’scarryingvalueandthepresentvalueofestimatedfuturecashflows,discountedatthefinancialasset’soriginaleffectiveinterestrate.thecarryingamountofthetradereceivableisreducedthroughtheuseofaprovisionaccountandtheamountofthelossisrecognisedintheincomestatementwithinnetoperatingcosts.Whenatradereceivableisconsidereduncollectable,itiswrittenoffagainsttheprovisionaccountfortradereceivables.subsequentrecoveriesofamountspreviouslywrittenoffarecreditedagainstnetoperatingcostsintheincomestatement.

atradeorotherreceivableisderecognisedfromthebalancesheetwhenthegroupentersintoafinancingtransactionwhichtransferstoathirdpartyallsignificantrightsorotheraccesstobenefitsrelatingtothatassetandallsignificantexposurestotherisksinherentinthatasset.

Trade payables tradepayablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.


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Changesinthefairvalueofderivativefinancialinstrumentsthatarenotdesignatedashedginginstrumentsordonotqualifyforhedgeaccountingarerecognisedintheincomestatementastheyarise.Changesinthefairvalueofderivativesorotherhedginginstrumentstransactedashedgesoffinancialitemsarerecognisedinfinancecosts/incomeintheincomestatementastheyarise.anyresultingineffectivenessisrecogniseddirectlyintheincomestatement.

Financial assetsthegroupclassifiesitsfinancialassetsinthefollowingcategories:atfairvaluethroughprofitorloss,loansandreceivablesandavailable-for-sale.theclassificationdependsonthepurposeforwhichthefinancialassetswereacquired.Managementdeterminestheclassificationofitsfinancialassetsatinitialrecognition.

Financial assets at fair value through profit or lossFinancialassetsatfairvaluethroughprofitorlossarefinancialassetsheldfortradingordesignatedassuchoninitialrecognition.afinancialassetisclassifiedinthiscategoryifacquiredprincipallyforthepurposeofsellingintheshortterm.Financialassetsatfairvaluethroughprofitorlossarestatedatfairvalue,withanyresultantgainorlossrecognisedintheincomestatement.

Loans and receivablestradereceivables,loansandotherreceivablesthathavefixedordeterminablepaymentsthatarenotquotedinanactivemarketareclassifiedasloansandreceivables.loansandreceivablesareincludedincurrentassets,exceptformaturitiesgreaterthan12monthsafterthebalancesheetdate,whichareclassifiedasnon-currentassets.loansandreceivablesaremeasuredatamortisedcostusingtheeffectiveinterestmethod,lessanyimpairmentandareclassifiedastradeandotherreceivablesinthebalancesheet.

Available-for-sale financial assetsavailable-for-salefinancialassetsarenon-derivativefinancialassetsthatareeitherdesignatedinthiscategoryornotclassifiedinanyoftheothercategories.suchfinancialassetsareincludedinnon-currentassetsunlessmanagementintendstodisposeoftheinvestmentwithin12monthsofthebalancesheetdate.

unlistedandlistedsharesheldbythegroupthataretradedinanactivemarketareclassifiedasbeingavailable-for-salefinancialassetsandarestatedatfairvalues.thefairvaluesofquotedsharesarebasedoncurrentbidprices.ifthemarketforafinancialassetisnotactive(unlistedshares),thegroupestablishesfairvaluebyusingvaluationtechniques.theseincludetheuseofrecentarm’slengthtransactions,referencetootherinstrumentsthataresubstantiallythesame,discountedcashflowanalysisandoptionpricingmodels.gainsandlossesarisingfromchangesinfairvaluearerecogniseddirectlyinequitywiththeexceptionofimpairmentlosses,interestcalculatedusingtheeffectiveinterestmethodandforeignexchangegainsandlossesonmonetaryassets,whicharerecogniseddirectlyintheincomestatement.


Financial instrumentsthefollowingpoliciesforfinancialinstrumentshavebeenappliedinthepreparationoftheconsolidatedFinancialstatements.

Cash and cash equivalentsForthepurposeofpreparationofthecashflowstatement,cashandcashequivalentsincludecashatbankandinhand,andshort-termdepositswithanoriginalmaturityperiodofthreemonthsorless.bankoverdraftsthatareanintegralpartofasubsidiary’scashmanagementareincludedincashandcashequivalentswheretheyhavealegalrightofoffsetagainstpositivecashbalances,otherwisebankoverdraftsareclassifiedasborrowingsinthebalancesheet.

Borrowings borrowingsarerecognisedinitiallyatfairvalue,netoftransactioncostsincurred.borrowingsaresubsequentlystatedeitheratamortisedcostor,ifdesignatedassuch,atfairvaluethroughprofitorloss.

Forborrowingsstatedatamortisedcost,anydifferencebetweentheproceeds,netoftransactioncosts,andtheredemptionvalueisrecognisedintheincomestatementovertheperiodoftheborrowingsusingtheeffectiveinterestratemethod.

thegroup’seuro-denominatedconvertiblebondshavebeendesignatedasafinancialliabilityatfairvaluethroughprofitorloss.thechangeinthefairvalueoftheconvertiblebondsthatreflectsthemovementinthequotedmarketpriceoftheconvertiblebondsisrecognisedintheincomestatementaseitherinterestincomeorexpense.thechangeinfairvaluerelatingtothemovementoftheexchangeratebetweentheeuroandpoundssterlingistreatedasahedgeofnetinvestmentsinforeignoperations(seebelow).Foreignexchangegainsandlossesontheconvertiblebondsaretakendirectlytoequitytotheextentthatthehedgeiseffective.

Derivative financial instruments and hedging activities derivativesareinitiallyrecognisedatfairvalueonthedateacontractisenteredintoandaresubsequentlyremeasuredatfairvalue.thefairvaluesofderivativesaremeasuredusingobservablemarketpricesor,wheremarketpricesarenotavailable,byusingdiscountedexpectedfuturecashflowsatprevailinginterestandexchangerates.thegainorlossonremeasurementistakentotheincomestatementexceptwherethederivativeispartofadesignatedcashflowhedgeoradesignatedhedgeofanetinvestmentinaforeignoperation.

theeffectiveportionofchangesinthefairvalueofderivativesthataredesignatedandqualifyasacashflowhedgeofafirmcommitmentorhighlyprobableforecastedtransactionarerecogniseddirectlyinequity.thegainorlossrelatingtotheineffectiveportionofacashflowhedgeisrecognisedimmediatelyintheincomestatement.

ifthecashflowhedgeresultsintherecognitionofanassetorliability,thentheassociatedgainsorlossesonthederivativethathadpreviouslybeenrecognisedinequityareincludedinthemeasurementoftheassetorliabilityatthetimetheassetorliabilityisrecognised.Forcashflowhedgesthatdonotresultintherecognitionofanassetoraliability,amountsdeferredinequityaretransferredtotheincomestatementinthesameperiodastheunderlyingtransactionoccurs.

Wherethegrouphedgesnetinvestmentsinforeignentitiesthroughcurrencyborrowingsorderivativefinancialinstruments,thegainsorlossesonthetranslationoftheborrowingsorchangeinfairvalueofthederivativearerecognisedinequity.gainsandlossesaccumulatedinequityareincludedintheincomestatementwhentheforeignoperationisdisposedof.



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Impairment of financial assetsthegroupassessesateachbalancesheetdatewhetherthereisobjectiveevidencethatafinancialassetorgroupoffinancialassetsisimpaired.Forunlistedsharesclassifiedasavailable-for-sale,asignificantprolongeddeclineinthefairvalueofthesecuritybelowitscostisconsideredasanindicatorthatthesecuritiesareimpaired.

ifanysuchevidenceexistsforavailable-for-salefinancialassets,thecumulativeloss–measuredasthedifferencebetweentheacquisitioncostandthecurrentfairvalues,lessanyimpairmentlossonthosefinancialassetspreviouslyrecognisedinprofitorloss–isremovedfromequityandrecognisedintheincomestatement.impairmentlossesrecognisedintheincomestatementonequityinstrumentsarenotreversedthroughtheincomestatement.thecarryingamountofthefinancialassetsisreducedbytheimpairmentlossdirectlyforallfinancialassetswiththeexceptionoftradereceivables,wherethecarryingamountisreducedthroughtheuseofaprovisionaccount.

impairmenttestingoftradereceivablesisdescribedabove.

TaxationCurrenttaxisrecognisedbasedontheamountsexpectedtobepaidorrecoveredunderthetaxratesandlawsthathavebeenenactedorsubstantivelyenactedatthebalancesheetdate.

deferredtaxisprovidedinfullontemporarydifferencesthatarisebetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheircorrespondingtaxbases.liabilitiesarerecordedonalltemporarydifferencesexceptinrespectofinvestmentsinsubsidiariesandjointventureswherethetimingofthereversalofthetemporarydifferenceiscontrolledbythegroupanditisprobablethatitwillnotreverseintheforeseeablefuture.

deferredtaxassetsarerecognisedtotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheassetcanbeoffset.

deferredtaxismeasuredonanundiscountedbasisusingthetaxratesandlawsthathavebeenenactedorsubstantivelyenactedatthebalancesheetdate.

Currentanddeferredtaxarerecognisedintheincomestatement,exceptwhenthetaxrelatestoitemschargedorcrediteddirectlytoequity,inwhichcasethetaxisalsodealtwithdirectlyinequity.

Provisionsprovisionsarerecognisedforrestructuringcostswhenthegrouphasadetailedformalplanfortherestructuringthathasbeencommunicatedtoaffectedemployees.provisionsarerecognisedforfuturecommittedpropertyleasepaymentswhenthegroupreceivesnobenefitfromthepropertythroughcontinuingusageandfuturereceiptsfromanysub-lettingarrangementsarenotinexcessofthegroup’sfuturecommittedpayments.

Wherethetimevalueofmoneyismaterial,provisionsaremeasuredatthepresentvalueofexpendituresexpectedtobepaidinsettlement.

Share capitalordinarysharesareclassifiedasequity.incrementalcostsdirectlyattributabletotheissueofnewsharesoroptionsareshowninequityasadeductionfromtheproceeds.

Foreign currenciesthepresentationcurrencyofthegroupispoundssterling.thegroupalsopresentsprimarystatementsineuros,seepages160to162.

itemsincludedintheseparateFinancialstatementsofgroupentitiesaremeasuredinthefunctionalcurrencyofeachentity.transactionsdenominatedinforeigncurrenciesaretranslatedintothefunctionalcurrencyoftheentityattheratesprevailingatthedatesoftheindividualtransactions.Foreigncurrencymonetaryassetsandliabilitiesaretranslatedattheratesprevailingatthebalancesheetdate.exchangegainsandlossesarisingarechargedorcreditedtonetoperatingcostsorfinancecosts/incomeintheincomestatement,asappropriate,exceptwhendeferredinequityasqualifyingcashflowhedgesandqualifyingnetinvestmenthedges.

theincomestatementandbalancesheetofforeignentitiesaretranslatedintopoundssterlingonconsolidationattheaverageratesfortheperiodandtheratesprevailingatthebalancesheetdaterespectively.exchangegainsandlossesarisingonthetranslationofthegroup’snetinvestmentinforeignentities,andoffinancialinstrumentsdesignatedashedgesofsuchinvestments,arerecognisedasaseparatecomponentofshareholders’equity.ondisposalofaforeignentity,thecumulativetranslationdifferencesarerecycledtotheincomestatementandrecognisedaspartofthegainorlossondisposal.

goodwillandfairvalueadjustmentsarisingontheacquisitionofaforeignentityaretreatedasassetsandliabilitiesoftheforeignentityandtranslatedattheratesprevailingatthebalancesheetdate.

themostimportantforeigncurrenciesforthegrouparetheeuroandtheswedishkrona.therelevantexchangeratestopoundssterlingwere:

2007 2006 Average Closing average Closing£1=€ 1.46 1.36 1.47 1.48£1=seK 13.51 12.87 13.57 13.39

Government grants grantsrelatedtoassetsarerecognisedinitiallyasdeferredincomeandsubsequentlycreditedtotheincomestatementonthesamebasisthattherelatedassetsaredepreciated.grantsrelatedtoincomearecreditedtotheincomestatementovertheperiodstomatchthemwiththerelatedcostswhichtheyareintendedtocompensate.

Revenue and profit recognitionRevenuerepresentsthefairvalueofconsiderationreceivedorreceivablefromclientsforgoodsandservicesprovidedbythegroup,netofdiscounts,Vatandothersales-relatedtaxes.Wherethetimevalueofmoneyismaterial,revenueisrecognisedasthepresentvalueofthecashinflowsexpectedtobereceivedfromthecustomerinsettlement.

Revenuefromthesaleofsoftwareproductsorhardwarewithnosignificantserviceobligationisrecognised100%ondelivery.Revenuefromthesaleofsoftwareproductsorhardwarerequiringsignificantmodification,integrationorcustomisationisrecognisedusingthepercentageofcompletionmethod.


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therevenueandprofitofcontractsforthesupplyofprofessionalservicesatpredeterminedratesisrecognisedasandwhentheworkisperformed,irrespectiveofthedurationofthecontract.

therevenueandprofitonfixedpricecontractsisrecognisedonapercentageofcompletionbasiswhentheoutcomeofacontractcanbeestimatedreliably.acontract’soutcomeisdeemedtobecapableofreliableestimationattheearlierofsixmonthsfromcontractcommencementandthedateatwhichthecontractis50%complete.ifacontractoutcomecannotbeestimatedreliably,revenuesarerecognisedequaltocostsincurred,totheextentthatcostsareexpectedtoberecovered.

thestageofcontractcompletionisdeterminedbyreferencetothecostsofprofessionalservicesincurredtodateasaproportionofthetotalestimatedcostsofprofessionalservices,exceptinrarecircumstanceswhenmeasuringthestageofcontractcompletionusingtotalcontractcostsismorerepresentativeoftheworkperformed,inwhichcasetotalcontractcostsareused.Whereacontractcontainsmultipleelements,theindividualelementsareaccountedforseparatelywhereappropriate.

provisionismadeforallforeseeablefuturelossesintheperiodinwhichitisidentified.

Segment reportingat31december2007,logicawasorganisedintosixgeographicalsegmentsbasedonthelocationofassets.thesesegmentsarethegroup’sprimaryreportingformatforsegmentinformationastheyrepresentthedominantsourceandthenatureofthegroup’srisksandreturnsfollowingthesaleofthetelecomsproductsbusiness.thegroup’ssecondaryreportingformatisbyverticalmarket.

inter-segmentsalesarechargedatarm’slengthprices.segmentassetsincludeallintangibleassets,property,plantandequipment,inventoriesandtradeandotherreceivablesbutexcludetaxassets,derivativefinancialassetsandcashandcashequivalents.segmentliabilitiescomprisemainlytradeandotherpayables,retirementbenefitobligationsandcertainborrowingsthatcanbeattributedtothesegmentbutexcludetaxliabilities,derivativefinancialliabilitiesandborrowingsthatareforgeneralcorporatepurposes.Capitalexpenditurecomprisesadditionstoproperty,plantandequipmentandintangibleassets.totalassetsareallocatedbasedonwheretheassetsarelocated.

Exceptional itemsexceptionalitemsfallwithinoperatingandfinancialactivitiesofthegroupbutareidentifiedasexceptionalitemsbyvirtueoftheirsize,natureorincidence.theseitemsaredisclosedinaggregateonthefaceoftheincomestatementtoaidanunderstandingofthegroup’sfinancialperformance.

Employee benefitsRetirement benefitsthegroupoperatesretirementbenefitplansofbothadefinedcontributionanddefinedbenefitnature.Retirementbenefitplansthatarefundedbythepaymentofinsurancepremiumsaretreatedasdefinedcontributionplansunlessthegrouphasanobligationeithertopaythebenefitsdirectlywhentheyfalldueortopayfurtheramountsifassetsaccumulatedwiththeinsurerdonotcoverallfutureemployeebenefits.insuchcircumstances,theplanistreatedasadefinedbenefitplan.

thecostofdefinedcontributionplansischargedtotheincomestatementonthebasisofcontributionspayablebythegroupduringtheyear.

Fordefinedbenefitplans,thedefinedbenefitobligationiscalculatedannuallybyindependentactuariesusingtheprojectedunitcreditmethod.theretirementbenefitliabilityinthebalancesheetrepresentsthepresentvalueofthedefinedbenefitobligationasreducedbythefairvalueofplanassetsandunrecognisedpastservicecost.aretirementbenefitassetisrecognisedtotheextentthatthegroupcanbenefitfromrefundsorareductioninfuturecontributions.

insurancepoliciesaretreatedasplanassetsofadefinedbenefitplaniftheproceedsofthepolicy:

• canonlybeusedtofundemployeebenefits;

• arenotavailabletothegroup’screditors;and

• eithercannotbepaidtothegroupunlesstheproceedsrepresentsurplusassetsnotneededtomeetallthebenefitobligationsorareareimbursementforbenefitsalreadypaidbythegroup.

insurancepoliciesthatdonotmeettheabovecriteriaaretreatedasnon-currentinvestmentsandareheldatfairvalueinthebalancesheet.

thecurrentservicecostisrecognisedintheincomestatementasanemployeebenefitexpense.theinterestcostresultingfromtheincreaseinthepresentvalueofthedefinedbenefitobligationovertimeandtheexpectedreturnonplanassets,isrecognisedasnetinterestexpenseorincome.theexpectedreturnonplanassetsis,foruKdefinedbenefitpensionschemes,shownnetofanexpectedreductionforpaymentstothepensionprotectionFund(the‘ppFlevy’).thedifferencebetweentheactualandexpectedppFlevyistreatedasanactuarialgainorloss.

apastservicecostisrecognisedimmediatelytotheextentthatbenefitshavealreadyvested,orisotherwiseamortisedonastraight-linebasisovertheaverageperioduntilthebenefitsvest.

actuarialgainsandlossesarisingfromexperienceadjustmentsorchangesinactuarialassumptionsarechargedorcreditedinthestatementofrecognisedincomeandexpenseintheperiodinwhichtheyarise.

Share-based paymentthecostofshare-basedemployeecompensationarrangements,wherebyemployeesreceiveremunerationintheformofsharesorshareoptions,isrecognisedasanemployeebenefitexpenseintheincomestatement.

thetotalexpensetobeapportionedoverthevestingperiodofthebenefitisdeterminedbyreferencetothefairvalueatthegrantdateofthesharesorshareoptionsawardedandthenumberthatareexpectedtovest.theassumptionsunderlyingthenumberofawardsexpectedtovestaresubsequentlyadjustedtoreflectconditionsprevailingatthebalancesheetdate.atthevestingdateofanaward,thecumulativeexpenseisadjustedtotakeaccountoftheawardsthatactuallyvest.

Short-term compensated absencesaliabilityforshort-termcompensatedabsences,suchasholiday,isrecognisedfortheamountthegroupmayberequiredtopayasaresultoftheunusedentitlementthathasaccumulatedatthebalancesheetdate.



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Death-in-service benefitsinsureddeath-in-servicebenefitsareaccountedforasdefinedcontributionarrangements.death-in-servicebenefitsforwhichthegroupdoesnothaveinsurancecoverareaccountedforasdefinedbenefitarrangements.

Employee share ownership trustsemployeeshareownershipplan(esop)trusts,whichpurchaseandholdordinarysharesoftheCompanyinconnectionwithcertainemployee

shareplans,areconsolidatedinthegroupFinancialstatements.anyconsiderationpaidorreceivedbyesoptrustsforthepurchaseorsaleoftheCompany’sownsharesisshownasamovementinshareholders’equity.

DividendsdividendstotheCompany’sshareholdersarerecognisedasaliabilityanddeductedfromshareholders’equityintheperiodinwhichtheshareholders’righttoreceivepaymentisestablished.

Note 3 Adoption of new and revised International Financial Reporting Standards

theaccountingpoliciesadoptedintheseconsolidatedFinancialstatementsareconsistentwiththoseoftheannualFinancialstatementsfortheyearended31december2006,exceptthatthefollowingstandards,amendmentstoandinterpretationsofpublishedstandardswereadoptedduringtheyear:

• iFRiC7,‘applyingtherestatementapproachunderias29’.

• iFRiC8,‘scopeofiFRs2’.

• iFRiC9,‘Reassessmentofembeddedderivatives’.

• iFRiC10,‘interimFinancialReportingandimpairment’.

• iFRs7,‘Financialinstruments:disclosures’andias1,‘amendmentstocapitaldisclosures’.thefulliFRs7disclosures,includingthesensitivityanalysistomarketriskandcapitaldisclosuresrequiredbytheamendmentofias1,aregivenintheseannualFinancialstatements.ias1(revised)isstillsubjecttoendorsementbytheeuropeanunion.

• iFRs4,‘insurancecontracts’.thisinterpretationwasnotrelevanttothegroup.

exceptfortheadditionaldisclosureunderiFRs7,theabovestandards,amendmentstoandinterpretationofpublishedstandardshadnomaterialimpactontheconsolidatedFinancialstatements.

thefollowingnewstandards,amendmentstostandardsandinterpretationshavebeenissuedbutarenoteffectivefor2007andhavenotbeenearlyadopted:

• iFRiC11,‘iFRs2–groupandtreasurysharetransactions’,effectiveforannualperiodsbeginningonorafter1March2007.ManagementdonotexpectthisinterpretationtohaveasignificantimpactontheconsolidatedFinancialstatements.

• iFRiC12,‘serviceconcessionarrangements’,effectiveforannualperiodsbeginningonorafter1January2008.Managementdonotexpectthisinterpretationtoberelevantforthegroup.theamendmenttothestandardisstillsubjecttoendorsementbytheeuropeanunion.

• iFRiC13,‘Customerloyaltyprogrammes’,effectiveforannualperiodsbeginningonorafter1July2008.Managementdonotexpectthisinterpretationtoberelevanttothegroup.theamendmenttothestandardisstillsubjecttoendorsementbytheeuropeanunion.

• iFRiC14,‘ias19–thelimitofadefinedbenefitasset,minimumfundingrequirementsandtheirinteraction’,effectiveforannualperiodsbeginningonorafter1January2009.ManagementdonotexpecttheinterpretationtohaveasignificantimpactontheconsolidatedFinancialstatements.theamendmenttothestandardisstillsubjecttoendorsementbytheeuropeanunion.

• ias1,‘presentationofFinancialstatements’,effectiveforannualperiodsbeginningonorafter1January2009.NosignificantimpactontheconsolidatedFinancialstatementsisexpected,exceptforadditionaldisclosure.

• ias23(amendment),‘borrowingcosts’,effectiveforannualperiodsbeginningonorafter1January2009.ManagementdonotexpecttheinterpretationtohaveasignificantimpactontheconsolidatedFinancialstatements.theamendmenttothestandardisstillsubjecttoendorsementbytheeuropeanunion.

• ias27(Revised),‘ConsolidatedandseparateFinancialstatements’,mustbeappliedprospectivelybythegroupfrom1January2010.therevisedstandardrequiresthatacquisitionsanddisposalsthatdonotresultinachangeofcontrolareaccountedforwithinequity.anydifferencebetweenthechangeintheminorityinterestandthefairvalueoftheconsiderationpaidorreceivedisrecogniseddirectlyinequityandattributedtotheownersoftheparent.therevisedstandardisstillsubjecttoendorsementbytheeuropeanunion.

• iFRs2(amendment),‘share-basedpayment’,effectiveforannualperiodbeginningonorafter1January2009.theamendmenttothestandardlimitsvestingconditionstoserviceconditionsandperformanceconditions.theamendmentalsospecifiesthatallcancellations,whetherbytheentityorbyotherparties,shouldreceivethesameaccountingtreatment,namely,accelerationoftheexpensebasedonthegrantdatefairvalue.NosignificantimpactontheconsolidatedFinancialstatementsisexpected.theamendmenttothestandardisstillsubjecttoendorsementbytheeuropeanunion.


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Note 3 Adoption of new and revised International Financial Reporting Standards (continued)

• iFRs3(Revised),‘businesscombinations’,mustbeappliedprospectivelybythegroupfrom1January2010.therevisedstandardrequiresthatallacquisition-relatedcostsaretobeexpensedtotheincomestatementintheperiodincurred.Furthermore,purchaseaccountingonlyappliesatthepointwhencontrolisachieved.thishasanumberofimplications:

– wheretheacquirerhasapre-existingequityinterestintheentityacquiredandincreasesitsequityinterestsuchthatitachievescontrol,itmustremeasureitspreviously-heldequityinteresttofairvalueasatthedateofobtainingcontrolandrecogniseanyresultinggainorlossintheincomestatement.

– oncecontrolisachievedallotherincreasesanddecreasesinownershipinterestaretreatedastransactionsamongequityholdersandreporteddirectlywithinequity.goodwillisnotremeasuredoradjusted.

therevisedstandardisstillsubjecttoendorsementbytheeuropeanunion.

• iFRs8,‘operatingsegments’,effectiveforannualperiodsbeginningonorafter1January2009.themainimpactwouldbethatoperatingsegmentswouldbeidentified,andsegmentinformationprovided,onthesamebasisasisusedinternallyforevaluatingsegmentperformanceandallocatingresources.Reconciliationswouldbeprovidedoftotalsegmentrevenues,profit,assets,liabilitiesandotheramountstothecorrespondingamountsintheconsolidatedFinancialstatements,togetherwithanexplanationofanydifferencesinmeasurementbasis.

alltheiFRss,iFRiCinterpretationsandamendmentstoexistingstandardshadbeenadoptedbytheeuatthedateofapprovaloftheseconsolidatedFinancialstatements,unlessotherwiseindicated.

exceptasdiscussedabove,thedirectorsanticipatethatthefutureadoptionofthosestandards,interpretationsandamendmentslistedabovethathavenotbeenadoptedearlywillnothaveamaterialimpactontheconsolidatedFinancialstatements.

Note 4 Key areas of estimation uncertainty

inpreparingtheconsolidatedFinancialstatements,managementhastomakejudgementsonhowtoapplythegroup’saccountingpoliciesandmakeestimatesaboutthefuture.thecriticaljudgementsthathavebeenmadeinarrivingattheamountsrecognisedintheconsolidatedFinancialstatementsandthekeysourcesofestimationuncertaintythathaveasignificantriskofcausingamaterialadjustmenttothecarryingvalueofassetsandliabilitiesinthenextfinancialyear,arediscussedbelow.

Revenue recognitiontherevenueandprofitoffixedpricecontractsisrecognisedonapercentageofcompletionbasiswhentheoutcomeofacontractcanbeestimatedreliably.Managementexercisesjudgementindeterminingwhetheracontract’soutcomecanbeestimatedreliably.Managementalsomakesestimatesofthetotalcostofprofessionalservices,orinsomeinstancestotalcontractcosts,whichareusedindeterminingthevalueofamountsrecoverableoncontracts.estimatesarecontinuallyrevisedbasedonchangesinthefactsrelatingtoeachcontract.thecarryingamountofamountsrecoverableoncontractsisdisclosedinNote23.

Impairment of goodwillthedeterminationofwhetherornotgoodwillhasbeenimpairedrequiresanestimatetobemadeofthevalueinuseofthecash-generatingunitstowhichgoodwillhasbeenallocated.thevalueinusecalculationincludesestimatesaboutthefuturefinancialperformanceofthecash-generatingunits,includingmanagement’sestimatesoflong-termoperatingmarginsandlong-termgrowthrates.thecarryingamountofgoodwillandthekeyassumptionsusedinthecalculationofvalueinuseofcash-generatingunitstowhichgoodwillisattributedaredisclosedinNote17.

iftheestimatedpre-taxdiscountrateappliedtothediscountedcashflowofallcash-generatingunitswere1%higherthanmanagement’sestimates,thegroupwouldnothaverecognisedanygoodwillimpairmentcharge.ifthelong-termoperatingmarginused

inthevalue-in-usecalculationsforallcash-generatingunitswere1%lowerthanmanagement’sestimates,thegroupwouldnothaverecognisedanygoodwillimpairmentcharge.ifthelong-termgrowthrateusedinthevalue-in-usecalculationsforallcash-generatingunitswere1%lowerthanmanagement’sestimates,thegroupwouldnothaverecognisedanygoodwillimpairmentcharge.

Defined benefit plansthecalculationofthedefinedbenefitobligationofadefinedbenefitplanrequiresestimationoffutureevents,forexamplesalaryandpensionincreases,inflationandmortalityrates.intheeventthatfutureexperiencedoesnotbearouttheestimatesmadeinpreviousyears,anadjustmentwillbemadetotheplan’sdefinedbenefitobligationinfutureperiodswhichcouldhaveamaterialeffectonthegroup.thecarryingamountsofassetsandliabilitiesrelatingtodefinedbenefitplans,togetherwiththekeyassumptionsusedinthecalculationofthedefinedbenefitobligationsrelatingtothoseplansandsensitivitytothosekeyassumptionsaredisclosedinNote38.

Income taxes inrecognisingincometaxassetsandliabilities,managementmakesestimatesofthelikelyoutcomeofdecisionsbytaxauthoritiesontransactionsandeventswhosetreatmentfortaxpurposesisuncertain.Wherethefinaloutcomeofsuchmattersisdifferent,orexpectedtobedifferent,frompreviousassessmentsmadebymanagement,achangetothecarryingvalueofincometaxassetsandliabilitieswillberecordedintheperiodinwhichsuchadeterminationismade.thecarryingvaluesofincometaxassetsandliabilitiesaredisclosedseparatelyintheconsolidatedbalancesheet.

iftheactualfinaloutcomeonthejudgementareasweretodifferby10%frommanagement’sestimates,thegroupwouldneedto:

• increasetheincomeanddeferredtaxliabilityby£6.9millionifunfavourable;or

• decreasetheincomeanddeferredtaxliabilityby£7.0millioniffavourable.



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Note 5 Segment information

at31december2007,logicawasorganisedintosixgeographicalsegmentsbasedonthelocationofassets.thesesegmentsarethegroup’sprimaryreportingformatforsegmentinformationastheyrepresentthedominantsourceandthenatureofthegroup’srisksandreturnsfollowingthedisposalofthetelecomsproductsbusinessinJune2007.

Primary basis – geographical segmentssegmentrevenueandprofitaftertaxundertheprimaryreportingformataredisclosedinthetablebelow.

Revenue Profit 2007 2006 2007 2006 £’m £’m £’m £’mNordics 836.9 190.5 13.4 4.8unitedKingdom 662.5 718.4 30.5 86.8France 588.2 560.0 20.2 13.0Netherlands 484.7 447.6 47.3 44.2germany 179.6 168.6 5.4 (19.5)international 321.3 335.6 (7.1) 12.6Revenueandoperatingprofit 3,073.2 2,420.7 109.7 141.9Financecosts (37.8) (34.3)Financeincome 11.0 8.7shareofpost-taxprofitsfromassociates 1.2 0.3taxation (5.4) (31.2)Profit after tax from continued operations 78.7 85.4discontinuedoperation 89.4 3.7Profit after tax 168.1 89.1

theshareofpost-taxprofitsfromassociatesintheyearsended31december2007and2006wasattributabletotheNordicsgeographicalsegment.inter-segmentrevenuefortheinternationalcategorywas£40.4million(2006:£30.7million).inter-segmentrevenuefortheothercategorieswasnotmaterial.

otheritemsincludedintheincomestatementandcapitalexpenditurefortheyearwereasfollows:

2007 Other Capital non-cash expenditure Depreciation Amortisation expenses £’m £’m £’m £’mNordics 11.9 10.5 51.2 2.1unitedKingdom 7.2 7.7 1.7 1.7France 11.4 4.9 21.2 2.2Netherlands 7.4 2.1 0.7 1.2germany 3.4 3.7 3.5 0.5international 14.8 9.8 5.7 0.8Continuingoperations 56.1 38.7 84.0 8.5discontinuedoperation 0.2 1.4 0.1 0.6 56.3 40.1 84.1 9.1


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Note 5 Segment information (continued)

2006 other Capital non-cash expenditure depreciation amortisation expenses £’m £’m £’m £’m Nordics 5.8 2.1 11.1 0.7unitedKingdom 9.8 7.3 0.9 2.6France 5.7 4.4 23.6 2.5Netherlands 1.7 2.9 1.1 1.7germany 5.8 3.0 3.2 0.6international 18.8 9.5 4.2 1.2 Continuingoperations 47.6 29.2 44.1 9.3discontinuedoperation 6.1 3.5 1.9 0.9 53.7 32.7 46.0 10.2

thesegmentassetswereasfollows: 2007 Segment Investments Total assets in associates assets £’m £’m £’mNordics 1,201.6 2.1 1,203.7unitedKingdom 453.7 – 453.7France 860.5 0.1 860.6Netherlands 175.1 – 175.1germany 178.2 – 178.2international 265.2 0.2 265.4Continuingoperations 3,134.3 2.4 3,136.7uNalloCatedassets

Cashandcashequivalents 108.7 taxassets 95.0 derivativefinancialassets 5.4totalassets 3,345.8

Restated2006 segment investments total assets inassociates assets £’m £’m £’mNordics 1,189.6 5.4 1,195.0unitedKingdom 470.3 – 470.3France 769.5 0.1 769.6Netherlands 152.1 0.1 152.2germany 165.5 – 165.5international 299.9 0.4 300.3Continuingoperations 3,046.9 6.0 3,052.9discontinuedoperation 157.4uNalloCatedassets

Cashandcashequivalents 177.3 taxassets 81.8 derivativefinancialassets 1.4totalassets 3,470.8



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thesegmentliabilitieswereasfollows: 2007 2006 £’m £’mNordics 234.3 213.0unitedKingdom 166.4 187.4France 272.9 232.4Netherlands 102.2 83.5germany 68.2 64.8international 101.0 135.6Continuingoperations 945.0 916.7discontinuedoperation – 68.1uNalloCatedliabilities

borrowings 591.9 734.4 taxliabilities 181.1 196.8 derivativefinancialliabilities 2.5 0.4totalliabilities 1,720.5 1,916.4

Secondary format – vertical market segmentsthefollowingtableprovidesananalysisofthegroup’srevenuebyverticalmarketsegment. 2007 2006 £’m £’mpublicsector 873.0 619.3industry,distributionandtransport 921.2 663.9energyandutilities 482.2 427.5Financialservices 564.7 485.0telecomsandMedia 232.1 225.0Continuingoperations 3,073.2 2,420.7discontinuedoperation 86.6 244.5 3,159.8 2,665.2

thefollowingtableprovidesananalysisofsegmentassetsandcapitalexpenditurebyverticalmarketforalloperations:

Segment assets Capital expenditure 2007 2006 2007 2006 £’m £’m £’m £’m publicsector 795.7 743.9 9.0 6.5industry,distributionandtransport 1,058.6 1,055.5 18.8 10.5energyandutilities 447.5 426.1 14.2 15.3Financialservices 560.0 527.8 9.4 9.6telecomsandMedia 272.5 293.6 4.7 5.7 Continuingoperations 3,134.3 3,046.9 56.1 47.6discontinuedoperation – 157.4 0.2 6.1 3,134.3 3,204.3 56.3 53.7


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Analysis of revenue by category Restated 2007 2006 £’m £’mCoNtiNuiNgopeRatioNs:

salesofgoods 138.6 138.4Revenuefromservices 2,934.6 2,282.3 3,073.2 2,420.7disCoNtiNuedopeRatioN:

salesofgoods 30.4 116.1Revenuefromservices 56.2 128.4 86.6 244.5 3,159.8 2,665.2

Revenuefromcontinuingoperationsaboveincluded£1,355.2millionwhichrelatedtocontractsaccountedforunderthepercentage-of-completionmethod(2006:£1,229.3million).allrevenuefromthediscontinuedoperationrelatedtocontractsaccountedforunderthepercentage-of-completionmethod.

Note 6 Net operating costs

Restated 2007 2006 £’m £’mamortisation 84.0 44.1depreciation 38.7 29.2employeebenefitsexpense 1,705.5 1,287.6legalandprofessionalfees 47.1 29.7Materialandotherexternalcharges 841.0 673.2propertycosts 108.5 101.9externalsalesandmarketingcosts 24.9 19.4disposalofbusinesses 9.7 –Reductioninretirementbenefitobligationduetoharmonisationofplanrules – (9.0)Restructuringandintegrationcosts 13.5 32.9otheroperatingexpenses 90.6 69.8Continuing operations 2,963.5 2,278.8discontinuedoperation 109.2 230.6 3,072.7 2,509.4

thediscontinuedoperationisdescribedfurtherinNote14.



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Note 7 Exceptional items

theexceptionalitemsrecognisedwithinoperatingprofitwereasfollows: 2007 2006 £’m £’mRestructuringandintegrationcosts (13.5) (32.9)disposalofbusinesses (9.7) –Reductioninretirementbenefitobligation duetoharmonisationofplanrules – 9.0 (23.2) (23.9)

thegroupincurredachargeof£13.5millionrelatingtotherestructuringofthebusinessintheNordicsfollowingtheacquisitionofWM-dataab.therestructuringcomprisedcostsassociatedwithoffshoringactivitiesanditinfrastructure.

during2007,thegroupincurredalossonthedisposalofseveralbusinessesof£9.7million.animpairmentlossof£2.6millionwasincludedinthelossonthedisposalofbusinesses.theimpairmentlossrelatedtobuildingspreviouslyoccupiedbythegraphicservicesbusinessinportugalpriortothedisposalofthisbusiness.thedisposalsaredescribedfurtherinNote35.

in2006,thegroupincurredachargeof£32.9millionmainlyrelatingtotherestructuringofthebusinessesinFranceandgermanyfollowingtheacquisitionofunilogandtheclosureofabuildingintheunitedstatesofamerica.therestructuringcomprisedareductioninheadcount,vacatedpropertyandothermeasurestoreducethecostbase.thegroupalsoharmonisedthecashcommutationratesusedintheCMguKpensionschemeacrosstheentireplanmembership.theeffectofapplyingthenewcashcommutationrateswasareductioninthedefinedbenefitliabilityof£9.0million,whichwasrecognisedinfullasanexceptionalitem.

Note 8 Adjusted operating profit

adjustedoperatingprofitexcludestheresultsofdiscontinuedoperations,exceptionalitemsandamortisationofintangibleassetsinitiallyrecognisedatfairvalueinabusinesscombination,wheneversuchitemsoccur.adjustedoperatingprofitisnotdefinedunderiFRssandhasbeenshownasthedirectorsconsiderthistobehelpfulforabetterunderstandingoftheperformanceofthegroup’sunderlyingbusiness.itmaynotbecomparablewithsimilarlytitledprofitmeasurementsreportedbyothercompaniesandisnotintendedtobeasubstitutefor,orsuperiorto,iFRssmeasuresofprofit. Restated 2007 2006 £’m £’mOperating profit 109.7 141.9exceptionalitems 23.2 23.9amortisationofintangibleassetsinitiallyrecognisedonacquisition 74.7 37.6Adjusted operating profit 207.6 203.4

adjustedoperatingprofitanalysispergeographicalsegmentwasasfollows: 2007 Adjusted Operating Exceptional Amortisation operating profit items of intangibles* profit £’m £’m £’m £’mNordics 13.4 13.2 50.1 76.7unitedKingdom 30.5 – – 30.5France 20.2 – 20.6 40.8Netherlands 47.3 (4.4) – 42.9germany 5.4 0.1 2.6 8.1international (7.1) 14.3 1.4 8.6 109.7 23.2 74.7 207.6* amortisationofintangibleassetsinitiallyrecognisedonacquisition.

2006 adjusted operating exceptional amortisation operating profit items ofintangibles* profit £’m £’m £’m £’mNordics 4.8 1.1 11.0 16.9unitedKingdom 86.8 (9.0) – 77.8France 13.0 11.2 22.6 46.8Netherlands 44.2 – – 44.2germany (19.5) 15.5 2.6 (1.4)international 12.6 5.1 1.4 19.1 141.9 23.9 37.6 203.4* amortisationofintangibleassetsinitiallyrecognisedonacquisition.


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Note 9 Employees Year end Average 2007 2006 2007 2006 Number Number Number Number Nordics 9,420 10,076 9,837 2,567unitedKingdom 5,655 6,073 5,797 6,083France 9,057 8,563 8,725 8,301Netherlands 6,035 5,829 6,136 5,784germany 2,081 2,059 2,097 2,168international 6,492 6,189 6,443 5,848 Continuing operations 38,740 38,789 39,035 30,751discontinuedoperation – 1,694 781 1,674 38,740 40,483 39,816 32,425

theemployeebenefitexpensefortheyearamountedto: Restated 2007 2006 £’m £’msalariesandshort-termemployeebenefits 1,320.7 1,009.0socialsecuritycosts 267.2 198.3pensioncosts(Note38) 109.1 70.1share-basedpayments(Note37) 8.5 9.3Continuing operations 1,705.5 1,286.7discontinuedoperation 40.0 86.9 1,745.5 1,373.6

thediscontinuedoperationisdescribedfurtherinNote14.employeebenefitexpenseof£4.3million(2006:£19.8million)hasnotbeenincludedinthetableabovebutwasincludedwithinthe£13.5million

(2006:£32.9million)chargeforrestructuringandintegrationcostsinNote7above.the£9.0milliongainreportedinexceptionalitemsin2006relatingtotheretirementbenefitobligation(seeNote7),wasnotincludedinthe£70.1millionofpensioncostsin2006inthetableabove.

Note 10 Finance costs Restated 2007 2006 £’m £’mFinanceleases 0.3 0.3bankloansandoverdrafts 28.6 21.9Convertiblebonds 6.0 6.2Retirementbenefitschemes – 0.5Financingfairvalueremeasurements – 2.9other 2.9 2.5Continuing operations 37.8 34.3discontinuedoperation 0.2 1.6 38.0 35.9




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Note 11 Finance income Restated 2007 2006 £’m £’mbankinterest 3.6 2.2unwindingofdiscountontradereceivables 3.0 3.6Retirementbenefitschemes 0.7 –Financingfairvalueremeasurements 1.6 –other 2.1 2.9Continuing operations 11.0 8.7discontinuedoperation 0.2 0.5 11.2 9.2


Note 12 Profit before tax

thefollowingitemshavebeenincludedinarrivingatprofitbeforetaxfromcontinuingoperations: Restated 2007 2006 £’m £’mlossondisposalofnon-currentassets 2.1 2.8Researchanddevelopmentexpenditure 0.3 0.2tradereceivablesimpairment 1.0 0.1exchangelosses 0.3 1.6

thegroupreceivedaRegionalselectiveassistancegrantfromtheWelshassemblyinFebruary2004toaidwiththedevelopmentofthegroup’soutsourcingfacilitiesatbridgend,Wales.thegroupdidnotreceiveanycashduringtheyear(2006:£nil).duringtheyearended31december2007,£0.5million(2006:£0.5million)wascreditedinarrivingatprofitbeforetax.

during2007thegroupdidnotreceiveanycash(2006:£0.5million)fromtheeuropeansocialFundtoaidwithcreatingnewemploymentintheNetherlandsoperation.duringtheyearended31december2007,£1.4million(2006:£1.7million)wascreditedinarrivingatprofitbeforetax.

thegroupalsoparticipatesinthebsiKprogramme(actsubsidyinvestmentKnowledgeinfrastructure)sponsoredbyaconsortiumoffivedutchministriesthatgivesupporttothepublicandindustryforrelatedresearchprojects.underthisprogrammethegroupreceived£0.7millionduringtheyear(2006:£0.3million)thatwascreditedinarrivingatprofitbeforetax.

Auditors’ remunerationthefollowingtableshowsananalysisoffeespayabletopricewaterhouseCoopersllp,thegroup’sauditors: 2007 2006 £’m £’mAudit servicesFeespayabletotheCompany’sauditor fortheauditoftheparentCompany andconsolidatedFinancialstatements 0.9 0.9

Non-audit services FeespayabletotheCompany’sauditor anditsassociatesforotherservices–auditofFinancialstatementsof subsidiaries,pursuanttolegislation 1.7 1.7–otherservicespursuantto suchlegislation 0.3 1.5–taxservices 0.4 0.5–allotherservices 0.2 0.1Total auditors’ remuneration from continuing and discontinued operations 3.5 4.7

Feesforotherservicespursuanttosuchlegislationfortheyearended31december2006included£1.1millionwhichwereincurredinconnectionwiththeacquisitionofWM-dataandwerenotchargedtotheincomestatementbutcomprisedpartoftheacquisitioncostsofWM-data.


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Note 13 Taxation

Restated 2007 2006 £’m £’m CuRReNttax:

uKcorporationtax (3.8) 17.2overseastax 50.5 28.4 46.7 45.6deFeRRedtax:

uKcorporationtax 1.8 2.4overseastax (43.1) (16.8) (41.3) (14.4)Continuingoperations 5.4 31.2discontinuedoperation 7.5 9.1 12.9 40.3

theeffectivetaxrateoncontinuingoperationsfortheyear,beforetheshareofpost-taxprofitsfromassociates,exceptionalitemsandamortisationofintangibleassetsinitiallyrecognisedonacquisition,was17.6%(2006:25.4%),ofwhichacreditof£0.4million(2006:chargeof£19.6million)relatedtotheunitedKingdom.theeffectivetaxratefor2007waslowerthan2006duetotheuseofunrecognisedlossesbroughtforward.

theeffectivetaxrateonexceptionalitemswas9.5%(2006:7.1%)andtheeffectivetaxrateonamortisationofintangibleassetsinitiallyrecognisedonacquisitionwas32.4%(2006:32.7%).

thetaxchargefromcontinuingoperationsislowerthanthestandardrateofcorporationtaxintheuKappliedtoprofitbeforetax.

thedifferencesareexplainedbelow. Restated 2007 2006 £’m £’mprofitbeforetax 84.1 116.6less:shareofpost-taxprofits fromassociates (1.2) (0.3)profitbeforetaxexcludingshare ofpost-taxprofitsfromassociates 82.9 116.3 taxattheuKcorporationtaxrate of30%(2006:30%) 24.9 34.9adjustmentsinrespectofpreviousyears (7.7) (7.0)adjustmentforforeigntaxrates 2.9 2.0taxlossutilisation (9.9) (5.5)incomenottaxable (7.6) (3.2)deferredtaxassetsnotrecognised 2.8 10.0Tax charge from continuing operations 5.4 31.2

inadditiontotheamountschargedtotheincomestatement,adeferredtaxchargeof£nil(2006:£4.5million)relatingtoretirementbenefitschemes,adeferredtaxcreditrelatingtoitemstransferredtotheincomestatementonsettlementof£0.6millionin2006andadeferredtaxchargeof£0.1million(2006:£0.4million)relatingtoshare-basedpaymentarrangementswererecogniseddirectlyinequity.intheprioryearadeferredtaxcreditof£0.6millionrelatingtoitemstransferredtotheincomestatementwasalsorecognisedinequity.

thecurrenttaxrelatedtoexceptionalitemsfortheyearended31december2007wasataxcreditof£2.2million(2006:£1.7million).

thereductioninthestatutorycorporationtaxrateintheuKfrom30%to28%from1april2008wasreflectedincalculatingtheuKdeferredtaxassetsandliabilities.theeffectontheresultsfortheyearended31december2007wasanadditionaltaxchargeof£0.7million.

Note 14 Discontinued operation

thegroupcompleteditsdisposalofthetelecomsproductsbusinesstoaninvestmentconsortiumledbyatlanticbridgeVentureson18June2007for£265.0million.thetransactionreflectsthegroup’sstrategicfocusondevelopingasamajorinternationalitandbusinessservicescompany.

Analysis of profit from discontinued operation 2007 2006 £’m £’mRevenue 86.6 244.5Netoperatingcosts (109.2) (230.6)operating(loss)/profit (22.6) 13.9Financecosts(net) – (1.1)taxation 2.3 (9.1)(loss)/profitfortheyearfromtelecomsproducts (20.3) 3.7

gainrecognisedondisposaloftelecomsproductsbusiness 119.5 –taxation (9.8) –Profit from discontinued operation 89.4 3.7

theconsolidatedincomestatementfortheyearended31december2006,wasrestatedtoshowthetelecomsproductsbusinessasadiscontinuedoperationtoallowamoremeaningfulcomparisonwiththecurrentperiod,asrequiredbyiFRs5‘Non-currentassetsheldforsaleanddiscontinuedoperations’.



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Note 14 Discontinued operation (continued)

thenetassetsofthetelecomsproductsbusinessonthedateofdisposalwereasfollows: £’mgoodwill 32.0otherintangibleassets 4.1property,plantandequipment 5.8tradeandotherreceivables 101.4Cashandcashequivalents 38.0Currenttax 0.5tradeandotherpayables (91.2)deferredtax (3.5)provisions (1.4)Net assets disposed of 85.7

totalconsideration 265.0Foreignexchangedifferencesrecycledfromequity (4.1)disposalcosts (55.7)Profit on disposal 119.5

Cashconsiderationreceived 264.8Cashandcashequivalentsdisposedof (38.0)Net cash inflow arising on disposal 226.8

thetotalconsiderationof£265.0millioncomprisedcashof£264.8millionandotherassetsof£0.2million.disposalcostsmainlyincludedexpensesrelatedtoemployeeredundancies,vacantpropertyprovisions,legalandadvisoryfeesandprovisionsagainsttradeandotherreceivables.

thenetoperatingcostsforthediscontinuedoperationwereasfollows: 2007 2006 £’m £’mamortisation 0.1 1.9depreciation 1.4 3.5employeebenefitsexpense 40.0 86.0legalandprofessionalfees 1.6 2.7Materialsandotherexternalcharges 42.0 104.9propertycosts 14.7 12.5externalsalesandmarketingcosts 1.6 3.7otheroperatingexpenses 7.8 15.4 109.2 230.6

theemployeebenefitexpenseforthediscontinuedoperationamountedto: 2007 2006 £’m £’msalariesandshort-term employeebenefits 33.1 73.1socialsecuritycosts 4.7 9.6pensioncosts(Note38) 1.6 3.3share-basedpayments(Note37) 0.6 0.9 40.0 86.9

thefinancecostsforthediscontinuedoperationwereasfollows: 2007 2006 £’m £’mbankloansandoverdrafts 0.1 1.6other 0.1 – 0.2 1.6

thefinanceincomeforthediscontinuedoperationwasasfollows: 2007 2006 £’m £’mbankinterest 0.1 0.2other 0.1 0.3 0.2 0.5

includedinprofitbeforetaxfromthediscontinuedoperationwasresearchanddevelopmentexpenditureof£14.7million(2006:£28.7million).

thetaxationchargeforthediscontinuedoperationwasasfollows:

2007 2006 £’m £’mCuRReNttax:

uKcorporationtax 0.2 4.0overseastax 8.6 3.2 8.8 7.2deFeRRedtax:

uKcorporationtax 0.1 –overseastax (1.4) 1.9 (1.3) 1.9 7.5 9.1


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Note 15 Dividends

thedirectorsareproposingafinaldividendinrespectoftheyearended31december2007of3.50pencepershare,whichwouldreduceshareholders’fundsbyapproximately£50.5million.theproposeddividendissubjecttoapprovalattheannualgeneralmeetingon14May2008andhasnotbeenrecognisedasaliabilityintheseFinancialstatements.thefinaldividendwillbepaidon15May2008toshareholderslistedontheshareregisteron18april2008.

theamountsrecognisedasdistributionstoequityholderswereasfollows:

2007 2006 2007 2006 p/share p/share £’m £’m interimdividend,relatingto2007/2006 2.30 2.20 34.0 24.9Finaldividend,relatingto2006/2005 3.40 3.20 51.9 36.2 5.70 5.40 85.9 61.1

dividendspayabletoemployeeshareownershiptrustsareexcludedfromtheamountsrecognisedasdistributionsinthetableabove.

Note 16 Earnings per share 2007 Weighted average number Earnings Earnings of shares per shareEarnings per share from continuing operations £’m million penceprofitfortheyearfromcontinuingoperations 78.7Minorityinterests 1.8earningsattributabletoordinaryshareholders 80.5 1,494.6 5.4Basic EPS 80.5 1,494.6 5.4effectofshareoptionsandshareawards – 20.1 (0.1)Diluted EPS 80.5 1,514.7 5.3

Adjusted earnings per share from continuing operationsearningsattributabletoordinaryshareholders 80.5 1,494.6 5.4addbaCK/(deduCt):

exceptionalitems,netoftax 21.0 – 1.4Mark-to-marketgainonconvertiblebondsdesignatedatfairvaluethroughprofitorloss,netoftax (0.2) – –amortisationofintangibleassetsinitiallyrecognisedonacquisition,netoftax 50.5 – 3.4Basic adjusted EPS 151.8 1,494.6 10.2effectofshareoptionsandshareawards – 20.1 (0.2)effectofconvertiblebonds,excludingmark-to-marketgain,netoftax 4.2 64.6 (0.1)Diluted adjusted EPS 156.0 1,579.3 9.9

2007 Weighted average number Earnings Earnings of shares per shareEarnings per share from discontinued operation £’m million penceearningsattributabletoordinaryshareholders 89.4 1,494.6 6.0Basic EPS 89.4 1,494.6 6.0effectofshareoptionsandshareawards – 20.1 (0.1)Diluted EPS 89.4 1,514.7 5.9



117

Note 16 Earnings per share (continued) 2007 Weighted average number Earnings Earnings of shares per shareEarnings per share from total operations £’m million penceearningsattributabletoordinaryshareholders 169.9 1,494.6 11.4Basic EPS 169.9 1,494.6 11.4effectofshareoptionsandshareawards – 20.1 (0.2)Diluted EPS 169.9 1,514.7 11.2

Restated2006 Weighted average number earningsper earnings ofshares shareEarnings per share from continuing operations £’m million penceprofitfortheyearfromcontinuingoperations 85.4Minorityinterests (7.1)earningsattributabletoordinaryshareholders 78.3 1,215.6 6.4Basic EPS 78.3 1,215.6 6.4effectofshareoptionsandshareawards – 18.6 (0.1)Diluted EPS 78.3 1,234.2 6.3

Adjusted earnings per share from continuing operationsearningsattributabletoordinaryshareholders 78.3 1,215.6 6.4addbaCK:

exceptionalitems,netoftax 22.2 – 1.9Mark-to-marketlossonconvertiblebondsdesignatedatfairvaluethroughprofitorloss,netoftax 0.1 – –amortisationofintangibleassetsinitiallyrecognisedonacquisition,netoftax 25.3 – 2.1Basic adjusted EPS 125.9 1,215.6 10.4effectofshareoptionsandshareawards – 18.6 (0.2)effectofconvertiblebonds,excludingmark-to-marketloss,netoftax 4.2 64.6 (0.2)Diluted adjusted EPS 130.1 1,298.8 10.0

Restated2006 Weighted average number earningsper earnings ofshares shareEarnings per share from discontinued operation £’m million penceearningsattributabletoordinaryshareholders 3.7 1,215.6 0.3Basic EPS 3.7 1,215.6 0.3effectofshareoptionsandshareawards – 18.6 –Diluted EPS 3.7 1,234.2 0.3

2006 Weighted average number earningsper earnings ofshares shareEarnings per share from total operations £’m million penceearningsattributabletoordinaryshareholders 82.0 1,215.6 6.7Basic EPS 82.0 1,215.6 6.7effectofshareoptionsandshareawards – 18.6 (0.1)Diluted EPS 82.0 1,234.2 6.6


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Note 16 Earnings per share (continued)

duringtheperiod25June2007to2November2007,theCompanypurchasedandsubsequentlycancelled83.6millionordinarysharesatanaveragepriceof£1.55,withanominalvalueof£8.4million,forconsiderationof£130.8million.Considerationincludedstampdutyandcommissionof£0.8million.

adjustedearningspershare,bothbasicanddiluted,havebeenshownasthedirectorsconsiderthistobehelpfulforabetterunderstandingoftheperformanceofthegroup’sunderlyingbusiness.theearningsmeasureusedinadjustedearningspershareexcludes,wheneversuchitemsoccur:theresultsofdiscontinuedoperations;exceptionalitems;mark-to-marketgainsorlossesonfinancialassetsandfinancialliabilitiesdesignatedatfairvaluethroughprofitorloss;

andamortisationofintangibleassetsinitiallyrecognisedatfairvalueinabusinesscombination.allitemsadjustedarenetoftaxwhereapplicable.

theweightedaveragenumberofsharesexcludesthesharesheldbyemployeeshareownershipplan(esop)trusts,whicharetreatedascancelled.

theconvertiblebondswerenotincludedinthecalculationofdilutedearningspersharefromcontinuingoperationsfortheyearended31december2007and31december2006astheywereanti-dilutive;however,theconvertiblebondsweredilutiveforthepurposesofcalculatingadjusteddilutedearningspersharefromcontinuingoperationsfortheyearended31december2007and31december2006.

Note 17 Goodwill

2007 2006 £’m £’mCost and net book amountat1January 1,552.1 385.4additionsduringtheyear 12.3 1,167.0disposalsduringtheyear (59.6) –exchangedifferences 99.2 (0.3)at31december 1,604.0 1,552.1

theadditionsduringtheyearended31december2007relatedprincipallytothegroup’sacquisitionofsiemensbusinesssystemsasinNorway(Note36).

Goodwill impairment testsgoodwillacquiredinabusinesscombinationisallocatedtooneormorecash-generatingunits(Cgus).Cgusrepresenttheoperationsofacountryor,inmorematerialoperations,divisionswithinacountry.thefollowingtableshowstheallocationofthecarryingvalueofgoodwillatthebalancesheetdatebygeographicalbusinesssegment:

2007 2006 £’m £’mNordics 721.3 686.9unitedKingdom 167.6 167.6France 496.8 456.5Netherlands 16.0 14.7germany 104.4 95.3international 97.9 99.1Continuingoperations 1,604.0 1,520.1discontinuedoperation – 32.0 1,604.0 1,552.1

thegroupconductsannualimpairmenttestsonthecarryingvalueofgoodwill,basedontherecoverableamountofCgustowhichgoodwillhasbeenallocated.at31december2007,therecoverableamountsofCgusweredeterminedfromvalueinusecalculations.thekeyassumptionsinthevalueinusecalculationswerethediscountrateapplied,thelong-termoperatingmarginandthelong-termgrowthrateofnetoperatingcashflows.

inallcasestheapprovedbudgetforthefollowingfinancialyearformedthebasisforthecashflowprojectionsforaCgu.thecashflowprojectionsinthefourfinancialyearsfollowingthebudgetyearreflectedmanagement’sexpectationsofthemedium-termoperatingperformanceoftheCguandgrowthprospectsintheCgu’smarket.

thediscountrateappliedtoaCgurepresentsapre-taxratethatreflectsmarketassessmentofthetimevalueofmoneyatthebalancesheetdateandtherisksspecifictotheCgu.thediscountratesappliedtotheCguswereintherangeof9.5%(2006:10.1%)to15.4%(2006:16.4%).

thediscountratesappliedtothemostsignificantCguswereasfollows: 2007 2006 % %Nordics* 9.9 –unitedKingdom* 12.6 13.4France 12.3 12.6* WeightedaveragediscountrateappliedtoCgusintheNordicsandtheunitedKingdom.

thelong-termoperatingmarginassumedforaCgu’soperationsisprimarilybasedonpastperformance.thelong-termoperatingmarginreferstothemarginonadjustedoperatingprofitasdescribedinNote8.ForsomeCgus,thoseforwhichmanagementhasstrongreasontobelievethatpastoperatingmarginsarenotindicativeoffutureoperatingmargins,expectedfutureimprovementsfromsustainableoperatingcostsavingsarealsoincludedinmanagement’sassessmentofthelong-termoperatingmargin.thelong-termoperatingmarginsappliedtoCguswereintherangeof5.0%(2006:5.0%)to10.0%(2006:10.0%).

thelong-termoperatingmarginsassumedforthemostsignificantCguswereasfollows: 2007 2006 % %Nordics* 10.0 –unitedKingdom* 10.0 10.0France 10.0 10.0* Weightedaveragelong-termoperatingmarginappliedtoCgusintheNordicsandthe

unitedKingdom.



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Note 17 Goodwill (continued)

long-termgrowthratesofnetoperatingcashflowsareassumedequaltothelong-termgrowthrateinthegrossdomesticproductofthecountryinwhichtheCgus’operationsareundertaken,andwereintherangeof1.7%(2006:1.4%)to5.0%(2006:4.9%).

thelong-termgrowthratesofnetoperatingcashflowsassumedforthemostsignificantCguswereasfollows:

Note 18 Other intangible assets

purchased Customer computer development brand contracts/ software software costs names relationships products total £’m £’m £’m £’m £’m £’mCostat1January2006 21.9 17.7 4.0 6.1 – 49.7additions 8.3 11.3 – – – 19.6acquisitionofsubsidiary 3.3 1.5 100.0 278.4 31.9 415.1disposals (5.0) (0.8) – – – (5.8)exchangedifferences (0.4) (0.4) 0.8 2.4 0.4 2.8at1January2007 28.1 29.3 104.8 286.9 32.3 481.4additions 9.6 6.7 – – – 16.3acquisitionofsubsidiaries/businesses – – – 1.9 – 1.9disposalsofsubsidiaries/businesses (3.0) (15.6) (4.0) (6.6) – (29.2)disposals (1.1) (0.2) – – – (1.3)exchangedifferences 3.0 0.8 7.0 19.2 2.4 32.4at31december2007 36.6 21.0 107.8 301.4 34.7 501.5

Accumulated amortisationat1January2006 13.4 10.0 0.5 0.5 – 24.4Chargefortheyear 5.8 2.6 13.1 22.9 1.6 46.0disposals (3.2) (0.5) – – – (3.7)exchangedifferences (0.2) (0.1) – (0.1) – (0.4)at1January2007 15.8 12.0 13.6 23.3 1.6 66.3Chargefortheyear 6.4 3.0 28.6 39.8 6.3 84.1disposalsofsubsidiaries/businesses (2.7) (11.4) (0.8) (0.4) – (15.3)disposals (0.9) (0.2) – – – (1.1)exchangedifferences 1.6 0.3 2.8 4.2 0.6 9.5at31december2007 20.2 3.7 44.2 66.9 8.5 143.5

Net carrying amountat31december2007 16.4 17.3 63.6 234.5 26.2 358.0at31december2006 12.3 17.3 91.2 263.6 30.7 415.1

purchasedcomputersoftwarerepresentedassetsboughtfromthirdparties,whilstdevelopmentcostsrepresentedinternallygeneratedintangibleassets.brandnames,customercontracts/relationshipsandsoftwareproductsrepresentedassetsrecognisedaspartofabusinesscombination.

thenetbookvaluesofindividuallymaterialintangibleassetsandtheirremainingusefullifeasat31december2007wereasfollows:

Carrying Remaining value useful life £’m YearsWM-databrandname 36.7 1.8unilogbrandname 25.7 2.3

2007 2006 % %Nordics 2.5 –unitedKingdom 2.4 2.4France 3.1 3.1

Nogoodwillimpairmentchargewasrecognisedintheyearended31december2007(2006:£nil).


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Note 19 Property, plant and equipment

Freehold leasehold landand propertyand equipment buildings improvements andplant total £’m £’m £’m £’mCost at1January2006 19.3 55.9 203.4 278.6additions – 4.4 29.7 34.1acquisitionofsubsidiary 5.3 – 30.9 36.2disposals (0.5) (0.6) (22.5) (23.6)exchangedifferences (0.1) (0.7) (4.0) (4.8)at1January2007 24.0 59.0 237.5 320.5additions 0.1 3.1 36.8 40.0acquisitionofsubsidiaries – – 3.9 3.9disposalsofsubsidiaries/businesses (0.1) (1.5) (46.5) (48.1)disposals (1.8) (4.8) (32.5) (39.1)exchangedifferences 1.0 1.9 16.3 19.2at31december2007 23.2 57.7 215.5 296.4

Accumulated depreciationat1January2006 0.7 24.6 150.8 176.1Chargefortheyear 0.1 5.1 27.5 32.7disposals (0.2) (0.3) (21.0) (21.5)exchangedifferences – (0.3) (3.1) (3.4)at1January2007 0.6 29.1 154.2 183.9Chargefortheyear 0.7 5.8 33.6 40.1disposalsofsubsidiaries/businesses – (1.7) (38.2) (39.9)disposals (0.1) (4.1) (30.1) (34.3)impairment 2.6 – – 2.6exchangedifferences 0.2 1.0 10.7 11.9at31december2007 4.0 30.1 130.2 164.3

Net carrying amountat31december2007 19.2 27.6 85.3 132.1at31december2006 23.4 29.9 83.3 136.6

theimpairmentof£2.6millioninthetableaboverelatedtobuildingspreviouslyoccupiedbythegraphicservicesbusinessinportugalpriortothedisposalofthisbusiness.thedisposalsaredescribedfurtherinNote35.

equipmentandplantincludedassetsheldunderfinanceleaseswithanetbookvalueof£3.4million(2006:£5.2million).additionstoequipmentandplantduringtheyearamountingto£4.7million(2006:£3.1million)werefinancedbynewfinanceleases.

Note 20 Investments in associates

thecarryingvalueofthegroup’sinvestmentsinassociatesat31decemberisshownbelow: 2007 2006 £’m £’massociates 2.4 6.0

Investments in associates £’mat1January2007 6.0increaseinstaketosubsidiary (2.0)disposals (2.3)shareofpost-taxprofitsofassociates 1.2dividendsreceived (0.7)exchangedifferences 0.2At 31 December 2007 2.4

summarisedinformationinrespectofassociatesat31decemberisprovidedbelowona100%interestbasisand,whererelevant,afterprovisionalfairvalueadjustments. 2007 2006 £’m £’massets 11.0 27.8liabilities (4.7) (15.7)

Revenue 32.2 13.1Netprofit 2.3 0.5



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Note 21 Non-current financial assets 2007 2006 £’m £’minsurancecontractsheldtofunddefinedbenefitpensionandlifeassurancearrangements(Note38) 10.1 8.6otherfinancialassets 0.9 1.5 11.0 10.1

Note 22 Inventories 2007 2006 £’m £’mComputerequipmentnotallocatedtoacustomercontract 1.2 0.5Materialsusedindocumentprintingandfinishing 0.2 2.4 1.4 2.9

thedirectorsestimatethatthecarryingvalueofinventoriesapproximatedtheirfairvalue.

Note 23 Trade and other receivables 2007 2006 £’m £’mtradereceivables 619.4 626.2less:provisionforimpairment (6.1) (8.1)tradereceivables–net 613.3 618.1

amountsrecoverableoncontracts 219.9 297.7prepaymentsandaccruedincome 148.5 123.2derivativefinancialinstruments 5.4 1.4otherreceivables 34.1 29.8 1,021.2 1,070.2

amountsrecoverableoncontractsincludedamountsdueforsettlementaftermorethanoneyearof£42.4millionat31december2007(2006:£40.6million).

Contracts accounted for under the percentage-of-completion method

Contracts in progress 2007 2006at the balance sheet date: £’m £’mContractcostsincurredplusrecognised profitslessrecognisedlossestodate 4,349.7 3,823.8less:progressbillings (4,217.5) (3,636.1) 132.2 187.7

Recognisedas:amountsduefromcontractcustomersincludedintradeandotherreceivables 219.9 297.7amountsduetocontractcustomersincludedintradeandotherpayables (87.7) (110.0) 132.2 187.7

thegroup’screditriskontradeandotherreceivablesisprimarilyattributabletotradereceivablesandamountsrecoverableoncontracts.thegrouphasnosignificantconcentrationsofcreditrisksincetheriskisspreadoveralargenumberofunrelatedcounterparties.thedirectorsestimatethatthecarryingvalueoffinancialassetswithintradeandotherreceivablesapproximatedtheirfairvalue.


122

Note 23 Trade and other receivables (continued)

thegroupbelievesthecarryingamountsofthegroup’stradeandotherreceivablesbygeographicallocationgivesafairpresentationofthecreditqualityofsuchassetsasdisclosedbelow:

2007 2006 £’m £’mNordics 158.1 164.3unitedKingdom 58.6 55.1France 192.2 156.0Netherlands 99.4 113.4germany 38.9 33.0international 66.1 96.3 613.3 618.1

at31december2007,tradereceivablesof£160.8million(2006:£155.1million)werepastduebutnotimpaired.theserelatetoanumberofindependentcustomersforwhomthereisnorecenthistoryofdefault.theamountsarestillconsideredrecoverable.theaverageageofthesereceivableswas54days(2006:52days).

Movementsinthegroupprovisionforimpairmentoftradereceivableswereasfollows: 2007 2006 £’m £’mat1January 8.1 7.0provisionforreceivablesimpairment 2.7 2.7acquisitionsofsubsidiaries – 2.6disposalsofsubsidiaries/businesses (0.4) –Receivableswrittenoffduringtheyear asuncollectable (3.1) (1.9)unusedamountsreversed (1.6) (2.2)Foreignexchange 0.4 (0.1)at31december 6.1 8.1

indeterminingtherecoverabilityofatradereceivable,thegroupconsiderstheageingofeachdebtorandanychangeinthecircumstancesoftheindividualdebtors.thedirectorsbelievethatthereisnofurtherprovisionrequiredinexcessoftheallowancefordoubtfuldebts.

thecreationandreleaseofprovisionforimpairedreceivableshavebeenincludedinnetoperatingcostsintheincomestatement(Note6).unwindofdiscountisincludedinfinancecostsintheincomestatement(Note10).amountschargedtotheallowanceaccountaregenerallywrittenoff,whenthereisnoexpectationofrecoveringadditionalcash.

at31december2007,tradereceivablesof£6.9million(2006:£8.1million)wereeitherpartiallyorfullyimpaired.theageingofthesereceivableswasasfollows: 2007 2006 £’m £’mlessthanthreemonths 0.2 0.2threetosixmonths 0.5 0.8oversixmonths 6.2 7.1 6.9 8.1

themaximumexposuretocreditriskatthereportingdateisthefairvalueofeachclassofreceivablesmentionedabove.thegroupheldnocollateralassecurity.

Note 24 Trade and other payables

2007 2006 £’m £’mtradepayables 166.5 188.9paymentsreceivedonaccountoncontracts 87.7 110.0accruals 181.3 161.5socialsecurityandothertaxes 197.1 186.1employeebenefitliabilities 122.1 119.8derivativefinancialinstruments 2.5 0.4otherpayables 111.0 119.7 868.2 886.4

thedirectorsestimatethatthecarryingvalueoftradeandotherpayablesapproximatedtheirfairvalue.



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Note 25 Borrowings

2007 2006 £’m £’mCurrentbankoverdrafts 9.1 26.4bankloans 84.8 1.62.875%2008convertiblebonds 220.0 202.4Financeleaseobligations 2.4 4.1otherborrowings 0.9 1.0 317.2 235.5

pReseNtedas:

Convertibledebt 220.0 202.4otherborrowings 97.2 33.1 317.2 235.5

Non-currentbankloans 269.9 496.4Financeleaseobligations 4.8 2.4otherborrowings – 0.1 274.7 498.9

Bank loansat31december2007,thegrouphadthefollowingunsecuredprincipalbankfacilities:

• a£330millionmulti-currency,syndicatedrevolvingcreditfacilitymaturingon19september2010.at31december2007,£25.0millionwasdrawndownunderthefacility(2006:£96.5million)andcarriedaninterestrateof0.80%(2006:0.95%)overliboR.

• a€348million(£255.9million)termloanmaturingon19september2010.at31december2007and31december2006,thetermloanwasdrawndowninfullandcarriedaninterestrateof0.85%overliboR(2006:1.0%overliboR).

• a£150millionsyndicatedrevolvingcreditfacilitymaturingon19November2008,withtherighttoextendthefacilityto19November2010.thefacilitywasenteredintoon20august2006andamendedon19November2007.at31december2007,seK650million(£50.5million)wasdrawndownunderthefacility(2006:£153.7million)andcarriedaninterestrateof0.80%overliboR(2006:0.95%overliboR).

theobligationsoftheborrowersunderthe£330millionfacilityand€348millionbankloanareguaranteedbytheprincipaluKanddutchtradingsubsidiaries,logicaCMguKlimitedandlogicaCMgNederlandb.V.the£150millionfacilityisguaranteedbylogicaCMguKlimited.

Convertible bondstheconvertiblebondsbearafixedcouponrateof2.875%perannum,payableannuallyinarrears,andwereissuedatparvalueof€303.4millionon19september2003.each€1,000principalamountofabondisconvertibleintoone2.875%exchangeableredeemablepreferenceshareoftheissuer,logicaCMg(Jersey)limited,withpaid-upvalueof€1,000thatwill,inturn,beexchangeableimmediatelyforordinarysharesoflogicaCMgplc.

thebondscanbeconvertedbytheholdersatanytimebetween29october2003andupto14dayspriorto19september2008.thenumberofordinarysharesintowhichthebondsareconvertibleisdeterminedbytranslatingtheprincipalamountintopoundssterlingatafixedexchangerateof€1.44862to£1andthendividingbytheprevailingexchangeprice.theexchangepriceisthepriceatwhichthesterling-equivalentparvalueofthe2.875%exchangeableredeemablepreferencesharesisconvertedintoordinarysharesoftheCompany.theinitialexchangepriceonissuewas372.53pencepershare.FollowingtherightsissueinNovember2005,theexchangepricewasrevisedto324.0pencepersharetoreflectthebonuselementoftherightsissue.

thebondissuermay,atitsoption,redeemthebondsatanytimefrom3october2006iftheCompany’ssharepriceisgreaterthan140%oftheprevailingexchangepriceonatleast20dealingdaysduringaperiodof30consecutivedealingdays,or,atanytime,if85%ormoreoftheprincipalamountofthebondshavebeenpreviouslyconvertedorpurchasedandcancelled.at31december2007,thebondholdersheldrightsovertheallotmentof64,635,376(2006:64,635,376)ordinarysharesoflogicaCMgplc.

thechangeinunderlyingfairvaluenotattributabletochangesin12-montheuRiboRwasanincreaseof£3.9million(2006:£2.8million).atmaturity,thegroupwouldbecontractuallyrequiredtorepay€303.4million(£223.1million)comparedtoafairvalueon31december2007of€299.2million(£220.0million).

Finance lease obligationstheminimumleasepaymentsunderfinanceleases,andtheirpresentvalue,felldueasfollows:

Minimum Present value of lease payments minimum lease payments 2007 2006 2007 2006 £’m £’m £’m £’mWithinoneyear 3.6 4.4 2.4 4.1intwotofiveyears 6.2 2.9 4.8 2.4 9.8 7.3 7.2 6.5Futurefinancecharges (2.6) (0.8)presentvalueofleaseobligations 7.2 6.5

thegroup’sobligationsunderfinanceleasesaresecuredbythelessor’stitletotheleasedassets.


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Note 25 Borrowings (continued)

All borrowingsbankloansandoverdrafts,loannotesandotherborrowingsbearfloatingratesofinterestbasedonliboRorforeignequivalentsappropriatetothecountryinwhichtheborrowingisincurred,andthusexposethegrouptocashflowinterestraterisk.theconvertiblebondsandfinanceleaseobligationsbearfixedratesofinterestandthereforeexposethegrouptofairvalueinterestraterisk.

allborrowingsaredenominatedintheborrowingentity’sfunctionalcurrencyexceptfortheconvertiblebondsandcertainamountsdrawndownundertherevolvingcreditfacility.borrowingsnotdenominatedinthefunctionalcurrencyoftheborrowingcompanyaredesignatedashedgesofnetinvestmentsinforeignoperations(seeNote26)andthereforeonlyexposethegrouptoincomestatementforeigncurrencyrisktotheextentthatthehedgeisineffective.

Note 26 Financial instruments

Categories of financial instruments 2007 Assets at fair value Loans and through profit and loss receivables TotalAssets as per the balance sheet £’m £’m £’mNon-currentotherfinancialassets(Note21) – 0.9 0.9tradereceivables(Note23) – 613.3 613.3Cashandcashequivalents – 108.7 108.7derivativefinancialinstruments(heldfortrading) 5.4 – 5.4 5.4 722.9 728.3

2006 assetsatfairvalue loansand throughprofitandloss receivables totalassetsasperthebalancesheet £’m £’m £’mNon-currentotherfinancialassets(Note21) – 1.5 1.5tradereceivables(Note23) – 618.1 618.1Cashandcashequivalents – 177.3 177.3derivativefinancialinstruments(heldfortrading) 1.4 – 1.4 1.4 796.9 798.3

2007 Liabilities at Derivatives fair value through used for Amortised profit and loss hedging cost TotalLiabilities as per the balance sheet £’m £’m £’m £’mConvertiblebond(designateduponinitialrecognition) 220.0 – – 220.0tradepayables(Note24) – – 166.5 166.5accruals(Note24) – – 181.3 181.3bankoverdrafts(Note25) – – 9.1 9.1bankloans(Note25) – – 354.7 354.7Financeleaseobligations(Note25) – – 7.2 7.2otherborrowings(Note25) – – 0.9 0.9derivativefinancialinstruments(heldfortrading) 0.9 – – 0.9derivativefinancialinstruments – 1.6 – 1.6 220.9 1.6 719.7 942.2

thedirectorshaveestimatedthefairvalueofthegroup’sborrowingsasfollows: 2007 2006 £’m £’mbankoverdrafts 9.1 26.4bankloans 354.7 501.3Financeleaseobligations 7.0 6.4Convertiblebonds 220.0 202.4otherborrowings 0.9 1.1 591.7 737.6

Fairvaluehasbeenestimatedbydiscountingthecashflowsrelatingtoborrowingsatthemarketrateatthebalancesheetdateor,forthequotedinstruments,byreferencetotheprevailingmarketpriceandexchangerateatthebalancesheetdate.



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Note 26 Financial instruments (continued) 2006 liabilitiesat derivatives fairvaluethrough usedfor amortised profitandloss hedging cost totalliabilitiesasperthebalancesheet £’m £’m £’m £’mConvertiblebond(designateduponinitialrecognition) 202.4 – – 202.4tradepayables(Note24) – – 188.9 188.9accruals(Note24) – – 161.5 161.5bankoverdrafts(Note25) – – 26.4 26.4bankloans(Note25) – – 498.0 498.0Financeleaseobligations(Note25) – – 6.5 6.5otherborrowings(Note25) – – 1.1 1.1derivativefinancialinstruments(heldfortrading) 0.4 – – 0.4 202.8 – 882.4 1,085.2

Financial risk managementthemultinationalnatureofthegroup’soperationsandtheirfinancingexposesittoavarietyoffinancialrisks.theprincipalrisksthatthegroupisexposedtoarecapitalrisk,foreigncurrencyexchangeraterisk,interestrateriskandliquidityrisk.thegroup’spolicieswithrespecttomanagingthoserisksinboththecurrentandprioryeararesetoutbelow.thegroupdoesnotundertakeanytradingorspeculativeactivityinfinancialinstruments.

thegroup’streasuryfunctionprovidesacentralisedservicetothegroupforfundingandforeignexchangemanagement.thegroup’streasuryfunctionoperateswithinpoliciesandproceduresthatareformallyapprovedbytheboard,whichincludestrictcontrolsontheuseoffinancialinstrumentsinmanagingthegroup’srisks.thepoliciesprovidewrittenprinciplesonnetdebtmanagement,currencymixofdebt,centralfundingliquidity,interestraterisk,foreigncurrencyrisk,bondsandguarantees,andcashinvestmentandcounterpartylimits.Compliancewithpoliciesandexposurelimitsisreviewedbytheinternalauditorsonaregularbasis.

Capital risk managementthegroup’spolicyoncapitalstructureistokeeptheratioofnetdebttoearningsbeforeinterest,tax,depreciationandamortisationbelowatargetlevelwhichisreviewedbytheboard.thetargetiscomfortablybelowthecovenantscontainedwithinthegroup’sbankingfacilities.

Foreign exchange riskthegrouphasoperationsinmanycountriesworldwide,exposingthegrouptoforeignexchangeriskonthetranslationoftheincomestatementandbalancesheetofforeignoperationsintopoundssterling.operationsarealsosubjecttoforeignexchangeriskfromcommittedtransactionsdenominatedincurrenciesotherthantheirfunctionalcurrencyand,oncerecognised,therevaluationofforeigncurrencydenominatedassetsandliabilities.

thetranslationofthebalancesheetsofoverseasoperationshasbeenpartiallyhedgedbymanagingthecurrencymixofthegroup’sborrowings.thegroupusedeuroandswedishkronaborrowingstohedgethebalancesheettranslationofoperationswiththeeuroandswedishkronaastheirfunctionalcurrency.thegroupdoesnothedgetheforeignexchangeriskrelatingtothetranslationoftheincomestatementsofoverseasoperations.

tomitigateforeignexchangeriskarisingfromtransactionsdenominatedincurrenciesotherthananentity’sfunctionalcurrency,assetsandliabilitiesnotdenominatedinthefunctionalcurrenciesarehedgedeconomicallybymeansofforwardcontracts.thegrouptreasury’sriskmanagementpolicyrequiresallcompaniesinthegrouptohedgetheirmaterialassetsandliabilityexposuresinfullbyusingforwardcontracts.additionally,wherematerial,thegrouphedgesitscontractedfutureprojectcashflowsinforeigncurrenciesbyusingforwardcontracts.grouptreasuryistheonlyentityinthegroupallowedtotransactexternalforeignexchangecontractswithbanks.toensurecompliancewiththeabovepolicy,subsidiarieswillusegrouptreasuryasaninternalbank,hedgingtheirmaterialforeignexchangeexposuresonaninter-companybasis.theseexposuresarethenaggregatedandnettedingrouptreasuryandtheoverallpositionhedgedexternally.

theforeignexchangeexposuresforthemostsignificantforeigncurrenciesreportedtogrouptreasuryandtherelatedhedgingofthoseexposuresagainstuKpoundsat31decemberwereasfollows: 2007 E’m USD’m SEK’mReportedexposure (284.8) 45.4 828.0Forwardcontracts 285.1 (45.3) (827.8)

2006 E’m usd’m seK’mReportedexposure (313.7) 123.6 (56.8)Forwardcontracts 313.7 (123.6) 56.0


126

Note 26 Financial instruments (continued)

positiveamountsrepresentedanassetoraforwardpurchase,whereasnegativeamountsrepresentedaliabilityorforwardsale.at31december2007,iftheeuro,swedishkronaandusdollarrateonforwardcontractsusedtohedgecontractedprojectfuturecashflows

hadweakened/strengthenedby10%againsttheuKpoundwithallothervariablesheldconstant,post-taxprofitontheseforwardcontractswouldhavebeen(lower)/higherasaresultofforeignexchangegains/lossesontranslationoftheeuro,swedishkronaandusdollarforwardcontracts,asfollows: 10% Weakened 10% Strengthened 2007 2006 2007 2006Project forward contracts £’m £’m £’m £’meuro (2.1) (0.4) 2.1 0.4usdollar (0.3) (0.1) 0.3 0.1swedishkrona – – – –

Interest rate riskthegroup’spolicyistofunditsoperationsthroughamixtureofretainedearnings,equityanddebt.Carefulconsiderationisgiventotheappropriatesplitofdebtandequitytoensureacceptablelevelsofliquidityandinterestraterisk.interestrateriskisthenfurthermanagedbyholdingaportionofthegroup’sborrowingsatfixedratesofinterest.at31december2007,thegrouphad£224.2million(2006:£208.9million)offixedrateborrowingsoutoftotalborrowingsof£591.9million(2006:£734.4million).

ifinterestratesonfloatingrateeuro-,swedishkrona-anduKpound-denominatedborrowingshadbeen50basispointshigherduringthe12monthsended31december2007and2006,withallothervariablesheldconstant,post-taxprofitwouldhavebeenlowerasaresultofhigherinterestexpenseonthoseborrowings,asfollows: 2007 2006Borrowings £’m £’meuro 1.2 0.6swedishkrona 0.7 0.2uKpound 0.2 0.2

Liquidity riskthegroup’spolicyistomaintainsufficientheadroomtomeetitsforeseeablefinancingrequirements.substantialcommittedfacilitiesaremaintainedwithasyndicateofleadinginternationalbanks.at31december2007,thegrouphadcommittedbankfacilitiesof£735.9million(2006:£718.8million)ofwhich£331.4million(2006:£484.9million)hadbeendrawndown,givingaheadroomof£404.5million(2006:£233.9million).thehighestamountdrawndownonthesefacilitiesduring2007was£636.2million(2006:£594.5million).

thetablebelowanalysesthegroup’sfinancialliabilitiesandnet-settledderivativefinancialinstrumentsintorelevantmaturitygroupingsbasedontheremainingperiodatthebalancesheettothecontractualmaturitydate.theamountsdisclosedinthetablearethecontractualundiscountedcashflowsandincludebothinterestandprincipalcashflows.theadjustmentcolumnrepresentsthepossiblefuturecashflowsattributabletotheinstrumentincludedinthematurityanalysiswhicharenotincludedinthecarryingamountofthefinancialliabilityonthebalancesheet.exceptforbankloans,theconvertiblebonds,andfinanceleaseobligations,balancesduewithin12monthsequaltheircarryingbalancesastheimpactofdiscountingisnotsignificant. 2007 On demand Between Between or within one and two and Over one year two years five years five years Adjustment Total £’m £’m £’m £’m £’m £’mbankoverdrafts (9.1) – – – – (9.1)bankloans (101.6) (14.4) (280.1) – 41.4 (354.7)2.875%2008convertiblebonds (224.3) – – – 4.3 (220.0)Financeleaseobligations (2.7) (2.0) (2.9) – 0.4 (7.2)otherborrowings (0.9) – – – – (0.9) (338.6) (16.4) (283.0) – 46.1 (591.9)tradeandotherpayablesexcludingderivative financialinstruments (865.7) – – – – (865.7)Netderivativefinancialinstruments 2.9 – – – – 2.9 (1,201.4) (16.4) (283.0) – 46.1 (1,454.7)



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Note 26 Financial instruments (continued)

2006 ondemand between between orwithin oneand twoand oneyear twoyears fiveyears over5years adjustment total £’m £’m £’m £’m £’m £’mbankoverdrafts (26.4) – – – – (26.4)bankloans (22.1) (171.9) (368.5) – 64.5 (498.0)2.875%2008convertiblebonds (212.6) – – – 10.2 (202.4)Financeleaseobligations (4.4) (2.6) (0.3) – 0.8 (6.5)otherborrowings (1.0) (0.1) – – – (1.1) (266.5) (174.6) (368.8) – 75.5 (734.4)tradeandotherpayablesexcludingderivative financialinstruments (886.0) – – – – (886.0)Netderivativefinancialinstruments 1.0 – - – – 1.0 (1,151.5) (174.6) (368.8) – 75.5 (1,619.4)

Derivative financial instrumentsthefollowingtableshowsthevalueandtypeofderivativefinancialinstrumentsrecognisedasseparateassetsandliabilitiesinthebalancesheetintradeandotherreceivablesandtradeandotherpayablesat31december: 2007 2006 Assets Liabilities assets liabilities £’m £’m £’m £’mForwardforeignexchangecontracts–fairvaluehedges 5.4 (2.5) 1.4 (0.4)

theprincipalcurrenciesofforwardforeignexchangecontractsoutstandingat31december2007weretheeuro,swedishkronaandtheusdollar.thenotionalamountsoutstandingatthatdatewere€266.3million(buying)(2006:€271.8million(netbuying)),seK2,722.6million(netselling)(2006:seK214.8million(netselling))and$27.0million(selling)(2006:$68.8million(netselling)).

Hedges of net investments in foreign operationson1January2007,thegrouphadeuroandswedishkronaborrowingswhichithasdesignatedasahedgeofthenetinvestmentinitssubsidiariesineurozonecountriesandsweden.thedesignatedborrowingscomprisedthe2.875%2008convertiblebondsandtheseK2,058millionbankloanandtheswedishkronadrawndownunderthegroup’s£330millionrevolvingcreditfacility.during2007,thegrouprepaiditsswedishkronaborrowingsandreplaceditwithforwardexchangecontractsforthesamevalue.thefairvalueofthedesignatedeuroborrowingsat31december2007was£220.0million(2006:£202.4million)andthatoftheswedishkronaborrowings/forwardcontractswas£52.1million(2006:£250.2million).

theforeignexchangelossof£27.9millionrelatingtotheseborrowingsintheyearended31december2007(2006:£1.3million)hasbeenrecogniseddirectlyinthetranslationreserve.therewasnohedgingineffectivenessrecognisedintheincomestatementintheyearended31december2007(2006:£nil).

Cash flow hedgesduringthe2006financialyear,anetgainof£2.0millionrelatedtointerestrateswaps,thatwereaccountedforasacashflowhedge,wasrecycledfromequitytotheincomestatement.theinterestrateswapswereacquiredthroughtheWM-dataacquisitionandhadpreviouslybeenusedbyWM-datatohedgefloatingrateinterestpaymentsonitsprimarybankloans.theinterestrateswapswereterminatedearly,andsettled,whenthehedgedbankdebtwasre-financedbythegroup.at31december2007and2006,thegrouphadnoderivativeinstrumentsthatwerepartofacashflowhedgerelationship.


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Note 27 Provisions

Vacant properties Restructuring other total £’m £’m £’m £’m at1January2007 15.7 13.5 4.8 34.0Chargedintheyear 11.5 2.6 6.7 20.8utilisedintheyear (5.6) (12.4) (5.7) (23.7)unusedamountsreversed (2.5) (0.8) (0.2) (3.5)unwindingofdiscount 0.4 – – 0.4disposalofsubsidiaries/businesses (1.4) – – (1.4)exchangedifferences 0.5 0.3 0.6 1.4 at31december2007 18.6 3.2 6.2 28.0 aNalysedas:

Currentliabilities 9.1Non-currentliabilities 18.9 28.0

Vacant propertiesat31december2007,provisionsforvacantpropertiesrepresentedresidualleasecommitments,togetherwithassociatedoutgoings,fortheremainingperiodoncertainpropertyleases,aftertakingintoaccountsub-tenantarrangements.thepropertycostsprovidedforaremainlyonpropertieslocatedintheunitedKingdomandsweden.at31december2007,non-currentvacantpropertyprovisionsamountedto£14.0millionofwhich£10.9millionwaspayablewithinfiveyearsandthebalancethereafter.

Restructuringat31december2007,therestructuringprovisionmainlyrelatedtotherestructuringofthebusinessesinFranceandgermanyfollowingtheacquisitionofunilogandtherestructuringintheNordicsfollowingthe

acquisitionofWM-data.therestructuringprogrammecomprisedareductioninheadcountandothermeasurestoreducethecostbase.at31december2007,£2.5millionoftherestructuringprovisionwaspayablewithinoneyearwiththeremainingbalancepayablebetweenoneandtwoyears.

Otherat31december2007,theotherprovisionmainlyrelatedtothevalueoflegalclaimsbroughtbyex-employees.at31december2007,£2.0millionoftheotherprovisionwaspayablewithinoneyearwiththeremainingbalancepayablebetweenoneandtwoyears.thetimingoftheoutflowscoulddifferfrommanagement’sestimatesdependingontheactualtimingofthesettlementsofthelegalclaims.

Note 28 Deferred tax property, plantand intangible Retirement equipment assets benefits taxlosses goodwill other total £’m £’m £’m £’m £’m £’m £’mat1January2006 3.6 (0.4) 13.4 6.1 (35.5) (7.5) (20.3)Credit/(charge)toprofitorlossfortheyear (3.0) 12.3 (4.0) 5.0 9.9 (7.7) 12.5(Charge)/credittoequity – – (4.5) – – 0.2 (4.3)Reclassificationfromcurrenttax – – – – – (0.7) (0.7)acquisitionofsubsidiary 3.0 (103.6) 1.2 1.3 – (2.4) (100.5)exchangedifferences – (0.6) – (0.2) – 0.3 (0.5) at1January2007 3.6 (92.3) 6.1 12.2 (25.6) (17.8) (113.8)(Charge)/credittoprofitorlossfortheyear (1.1) 24.2 (1.4) 9.3 15.6 (4.0) 42.6Chargetoequity – – (0.1) – – – (0.1)Reclassificationfromcurrenttax – – – – – 0.6 0.6acquisitionofsubsidiaries – – – – – (0.6) (0.6)disposalofsubsidiaries/businesses 0.5 – – – – 5.5 6.0exchangedifferences 0.2 (9.3) 0.2 0.5 (1.1) 4.3 (5.2) at31december2007 3.2 (77.4) 4.8 22.0 (11.1) (12.0) (70.5)



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Note 29 Share capital 2007 2006Authorised £’m £’m 2,250,000,000(2006:2,250,000,000)ordinarysharesof10penceeach 225.0 225.0

2007 2006Allotted, called-up and fully paid Number £’m Number £’mat1January 1,535,698,482 153.6 1,146,238,652 114.6allottedundershareplans 5,538,792 0.6 2,595,389 0.3sharespurchasedandcancelled (83,591,195) (8.4) – –allottedtoacquireWM–datashares – – 377,848,632 37.8allottedtoacquireWM–dataconvertibledebentures – – 9,015,809 0.9 at31december 1,457,646,079 145.8 1,535,698,482 153.6

Note 30 Share premium 2007 2006 £’m £’mat1January 1,097.0 1,084.8premiumonsharesallottedundershareplans 1.9 3.1premiumonsharesallottedtoacquireWM-dataconvertibledebentures,netofexpenses – 9.1 at31december 1,098.9 1,097.0

duringtheyearended31december2007,thesharepremiumaccountwasnotreducedbyexpensesrelatedtotheissuanceofnewordinaryshares(2006:£5.6million).

Note 28 Deferred tax (continued)

thecredittoprofitorlossfortheyearincludesa£1.3millioncredit(2006:chargeof£1.9million)whichisincludedintheprofitfromdiscontinuedoperation.

thedeferredtaxliabilityforgoodwillarisesasdeductionsareallowedfortaxpurposesincertainterritories.

deferredtaxassetsandliabilitiesareoffsetwherethereisalegallyenforceablerightofoffsetandthegroupintendstosettlethebalancesonanetbasis.ananalysisofthedeferredtaxbalancesforfinancialreportingpurposesisshowninthetablebelow:

2007 2006 £’m £’mdeferredtaxassets 54.5 50.6deferredtaxliabilities (125.0) (164.4) (70.5) (113.8)

thereductioninthestatutorycorporationtaxrateintheuKfrom30%to28%from1april2008wasreflectedincalculatingtheuKdeferredtaxassetsandliabilities.theeffectontheresultsfortheyearended31december2007isanadditionaltaxchargeof£0.7million.

at31december2007,thegrouphadunusedtaxlossesof£245.6million(2006:£298.4million)availableforoffsetagainstfuturetaxableprofitsforwhichnodeferredtaxassethadbeenrecognised.at31december2007,£82.6million(2006:£88.3million)oftheunusedlossesaresubjecttotimeexpiryrulesandwillexpireinfullonorbefore31december2022.

Nodeferredtaxliabilitywasrecognisedinrespectoftheunremittedearningsofoverseassubsidiaries,jointventuresandassociatesasthegroupisinapositiontocontrolthetimingofthereversalofthetemporarydifferencesanditisprobablethatsuchdifferenceswillnotreverseintheforeseeablefuture.thegroupestimatedthattaxof£62.7million(2006:£14.6million)wouldariseinrespectofremittingallearningsofoverseassubsidiariestotheunitedKingdomtotheextentlegallypossible.

theCompanyhasoneclassofauthorisedandissuedsharecapital,comprisingordinarysharesof10penceeach.subjecttotheCompany’sarticlesofassociationandapplicablelaw,theCompany’sordinarysharesconferontheholder:therighttoreceivenoticeofandvoteatgeneralmeetingsoftheCompany;therighttoreceiveanysurplusassetsonawinding-upoftheCompany;andanentitlementtoreceiveanydividenddeclaredonordinaryshares.



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Note 31 Other reserves Capital Retained treasury translation redemption Merger earnings shares reserve reserve reserve other total £’m £’m £’m £’m £’m £’m £’mat1January2006 (344.0) (35.9) 0.6 – – (0.8) (380.1)Netprofitfortheyear 82.0 – – – – – 82.0dividendspaid (61.1) – – – – – (61.1)share-basedpayment,netoftax 9.1 – – – – – 9.1actuarialgains 17.5 – – – – – 17.5acquisitionofWM-data – – – – 617.1 – 617.1Cashflowhedges –transferredtoincomestatement (2.0) – – – – – (2.0)taxonitemstakentoequity (3.9) – – – – – (3.9)other (0.1) – – – – – (0.1)exchangedifferences – – (6.8) – – 2.7 (4.1)at1January2007 (302.5) (35.9) (6.2) – 617.1 1.9 274.4Netprofitfortheyear 169.9 – – – – – 169.9dividendspaid (85.9) – – – – – (85.9)share-basedpayment,netoftax 9.5 – – – – – 9.5sharespurchasedandcancelled (130.8) – – 8.4 – – (122.4)actuarialgains 3.6 – – – – – 3.6Recycledondisposalofforeignoperations – – 5.1 – – – 5.1other – 0.8 – – 1.9 – 2.7exchangedifferences – – 95.0 – – 0.4 95.4 at31december2007 (336.2) (35.1) 93.9 8.4 619.0 2.3 352.3

Treasury sharesthegroupholdssharesinlogicaCMgplcinthreediscretionarytrustswhichweresetupforthebenefitoflogicaemployees.thetrustspurchasetheCompany’ssharesinthemarketforuseinconnectionwiththegroup’semployeeshareplans.theamountshowninthetreasurysharesreserveat31december2007,whichrelatedsolelytosharespurchasedanddisposedofbythetrusts,wouldbedeductedindeterminingtheamounttheCompanyhadavailablefordistributionatthatdate.

at31december2007,theemployeetrustsowned14,575,290ordinaryshares(2006:15,588,650)withanominalvalueof£1.5million(2006:£1.6million).thetrusteesoftheCMgesoptrustandthelogicaesoptrusthaveagreedtowaivetherighttofuturedividendsonordinarysharesheldbythetrustsexceptforanominalamount.at31december2007and2006,thenominalamountpayabletobothtrustswas0.001pencepershare.

Translation reservethetranslationreserverepresentedtheaccumulatedexchangedifferencesarisingfromthefollowingsources:

• theimpactofthetranslationoftheincomestatementandnetassetsofsubsidiarieswithafunctionalcurrencyotherthanpoundssterling;

• exchangedifferencesrecycledondisposalofforeignoperations;

• exchangedifferencesarisingonthetranslationofnetinvestmentsinaforeignoperationwhereanysubsidiaryofthegroupmayhaveareceivablefromorapayabletoaforeignoperationandsettlementisneitherplannednorlikely;and

• exchangedifferencesarisingonhedginginstrumentsthataredesignatedhedgesofanetinvestmentinforeignoperations,netoftaxwhereapplicable.

Capital redemption reservethecapitalredemptionreservewasanon-distributablereserveandcontainedthenominalvalueofthesharesrepurchasedandcancelled.

Merger reservethemergerreserverepresentedtheexcessofthefairvalueoverthenominalvalueofsharesissuedbytheCompanytoacquireatleast90%equityinterestinanacquireecompany.apurchasercompanyacquiringatleast90%equityinterestinanacquireecompanyunderanarrangement,whichprovidesfortheallotmentofequitysharesbythepurchaserinreturnfortheequityinterestintheacquireemustapplysection131oftheact.Whenapplicable,thesectionrequiredthatthepremiumontheissueofequitysharesbythepurchasercompanybedisregarded.accordingly,theCompanydidnotrecordapremiumontheshareitissuedbutrecognisedamergerreserveintheconsolidatedbalancesheet.



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Note 32 Minority interests 2007 2006 £’m £’mat1January 29.4 17.2shareofnetprofitfortheyear (1.8) 7.1shareofactuarialgainsondefinedbenefitschemes,netoftax – 0.1acquisitionsandbuyoutofminorityinterests (0.9) 7.5dividendspaidtominorityinterests (0.4) (1.8)disposalsofsubsidiaries – (0.7)exchangedifferences 2.0 –at31december 28.3 29.4

Note 33 Reconciliation of operating profit to cash generated from continuing operations Restated 2007 2006 £’m £’m Operating profit from continuing operations 109.7 141.9

adJustMeNtsFoR:

share-basedpaymentexpense 8.5 9.3depreciationofproperty,plantandequipment 38.7 29.2lossondisposalofnon-currentassetsandsubsidiaries 2.1 1.0lossondisposalofbusinesses 9.7 –amortisationofintangibleassets 84.0 44.1impairmentoffinancialassets 1.8 –derivativefinancialinstruments (1.0) 0.6definedbenefitplans (4.2) (13.4) 139.6 70.8

Netmovementsinprovisions (18.1) 3.6

MoVeMeNtsiNWoRKiNgCapital:

inventories 0.6 (0.2)tradeandotherreceivables 33.3 (51.3)tradeandotherpayables (32.7) 44.7 1.2 (6.8)

Cash generated from continuing operations 232.4 209.5addback:Cashoutflowrelatedtorestructuringandintegrationactivities 28.6 33.0 Net cash inflow from trading operations 261.0 242.5

theconsolidatedcashflowstatementfortheyearended31december2006wasrestatedtoshowthetelecomsproductsbusinessasadiscontinuedoperationtoallowamoremeaningfulcomparisonwiththecurrentperiod.


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Note 34 Reconciliation of movements in net debt

at acquisitions other At 1January and non-cash exchange 31 December 2007 Cashflows disposals* movements differences 2007 £’m £’m £’m £’m £’m £’mCashandcashequivalents 177.3 (78.2) – – 9.6 108.7bankoverdrafts (26.4) 17.8 – – (0.5) (9.1) 150.9 (60.4) – – 9.1 99.6Financeleases (6.5) 4.7 0.1 (4.7) (0.8) (7.2)bankloans (498.0) 169.5 – (1.9) (24.3) (354.7)otherloans (1.1) 0.2 – – – (0.9)Convertiblebonds (202.4) – – 0.2 (17.8) (220.0) Net debt (557.1) 114.0 0.1 (6.4) (33.8) (483.2)* excludescashandcashequivalentsassumedonacquisitionofbusinesses,amountingto£5.6millionandcashandcashequivalentsdisposedof£41.4millionandbankoverdrafts

disposedof£1.3million.

Note 35 Disposals

Telecoms Productsthetelecomsproductsbusinesswasdisposedofon18June2007andhasbeenpresentedasadiscontinuedoperation.theassociateddisclosuresaregiveninNote14.

CaranthegroupcompletedthedisposalofitsindustrialdesignandproductdevelopmentbusinessCarantoswedishconglomerateJCegroupon4June2007for£24.1million.thedisposalprocessforCaranincludedarationalisationofitspreviousbusinessventureswithsaab.theselattertransactions,whichcompletedon1april2007,included:thesaleofa50%interestinCaransaabengineeringab;thepurchaseofa40%interestina2acousticsabandtheacquisitionofsaab’sCombitechoperations.theentiresharecapitalofa2acousticsabandtheCombitechoperationsweresubsequentlydisposedofon4June2007.

thenetassetsoftheCaranbusinessthatwassoldtoJCegroupon4June2007wereasfollows:

£’mgoodwill 16.3otherintangibleassets 8.4property,plantandequipment 1.3tradeandotherreceivables 18.6Cashandcashequivalents 1.0borrowings (1.3)tradeandotherpayables (15.1)Currenttax (0.5)deferredtax (2.5)Net assets disposed of 26.2

totalconsideration 24.1Foreignexchangegainsrecycledfromequity 0.2disposalcosts (0.9)Loss on disposal (2.8)

Cashconsiderationreceived 24.1Cashandcashequivalentsdisposedof (1.0)Net cash inflow arising on disposal 23.1

Cash,cashequivalentsandbankoverdraftsatthebalancesheetdatecomprised: 2007 2006 £’m £’mCashatbankandinhand 100.9 141.2short-termdeposits 7.8 36.1bankoverdrafts (9.1) (26.4)Cash, cash equivalents and bank overdrafts 99.6 150.9

thegroup’screditriskoncash,cashequivalentsandbankoverdraftsislimitedbecausethecounterpartiesarewell-establishedbankswithhighcreditratings.includedincashatbankandinhandwere

overdraftsthatwerepartofcashpoolingarrangementsforwhichalegalrightofoff-setexistedagainstpositivecashbalancesthatwereofanequalorgreateramountatthebalancesheetdate.

thedirectorsestimatethatthecarryingvalueofcashandcashequivalentsapproximatedtheirfairvalue.

thegroup’spolicyforcashinvestmentsrequiresthatcashanddepositsonlybeplacedwithcounterpartiesthathaveaminimuma1/p1short-termratingandaa-equivalentlong-termcreditrating.thereferencetoratingsmustincludeatleastonefromeitherstandard&poor’sorMoody’s.Cashanddepositsarelimitedto£25millionperbank.Nocreditlimitswereexceededduringthereportingperiodandmanagementdoesnotexpectanylossesfromnon-performancebyanyofthesecounterparties.



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Note 35 Disposals (continued)

thesaleofthegroup’s50%associateinterestinCaransaabengineeringabon1april2007generatedaprofitof£3.0millionfromcashconsiderationreceivedof£4.4million.togetherwiththe£2.8millionlossondisposaloftheCaranbusinesssoldtoJCegroupon4June2007,thegroup’scombinedprofitfromthedisposalofallCaran-relatedbusinessactivitieswas£0.2million.

Other business disposalsthegroupcompletedthesaleofcertainothernon-corebusinessesduringtheyear,asdescribedbelow.theaggregatenetassetsofthesebusinesses,whicharenotindividuallysignificant,attheirdateofdisposalareanalysedbelow:

£’m goodwill 11.3otherintangibleassets 1.4property,plantandequipment 1.1othernon-currentassets 0.2inventories 1.2tradeandotherreceivables 4.1Cashandcashequivalents 2.4tradeandotherpayables (2.8)Retirementbenefitobligations (1.2) Net assets disposed of 17.7

totalconsideration 15.6Foreignexchangelossesrecycledfromequity (1.2)disposalcosts (6.6) Loss on disposal (9.9)

Cashconsiderationreceived 15.2Cashandcashequivalentsdisposedof (2.4) Net cash inflow arising on disposal 12.8

thetotalconsiderationforthesaleofothernon-corebusinesseswas£15.6million,ofwhich£15.2millionwasreceivedincashduringtheyearand£0.4millionisreceivableduringthefirsthalfof2008.includedinthe£6.6milliondisposalcostswasa£2.6millionimpairmentlossrelatingtobuildingspreviouslyoccupiedbythegraphicservicesbusinessinportugalpriortothedisposalofthisbusiness.

theothernon-corebusinessesdisposedofduringtheyearcomprisedthefollowing:

• anelementofthepayrollbusinessintheNetherlandswhichprovidedsolutionsforthesMeandlocalgovernmentmarket;

• theCopidataintegratedgraphicservicesbusinessinportugal;

• thebusinessprovidingstaffaugmentationandhostingservicestotheautomotiveindustryintheunitedstates;

• theformerWM-datasubsidiaryoperatingingermany,WM-datadeutschlandgmbH;

• thesubsidiaryoperatingthegroup’sitservicesbusinessinaustria,logicaCMggmbH;

• smallfinancebpobusinessesinNorwayandsweden;and

• apartoftheitservicesbusinessindenmark,providingservicesandproductstotaxauthoritiesaroundtheworld.

thesedisposalsdonotmatchthecriteriaofiFRs5‘Non-currentassetsheldforsaleanddiscontinuedoperations’asnoneofthedisposalsrepresentsaseparatemajorlineofbusinessorgeographicalareaofoperationsandhencewerenottreatedasadiscontinuedoperation.

Note 36 Acquisitions

duringtheyear,thegroupmadeasmallnumberofacquisitionsintheNordicregion,asdescribedbelow.

Siemens Business Systemson31March2007,thegroupacquiredtheoutsourcing,itinfrastructureandsystemsintegrationbusinessofsiemensbusinesssystemsasinNorway.theacquisitioncomprisedthepurchaseofthebusinessassetsandliabilities,togetherwiththetransferofapproximately250employees.

Medici Data Oyon29November2007,thegroupacquireda63.66%interestinMedicidataoy,resultinginfullownershipofthiscompany.the36.34%associateinterestheldpreviouslywasacquiredwiththeWM-datagroupinoctober2006.MedicidataoyisaFinnishcompanyspecialisingindevelopingandbuildingapplicationsforplanning,controllinganddocumentingpatientcareprocessesandprovidinginformationmanagementservicestothehealthcaresector.

Karttakone Oyon31october2007,thegroupacquireda100%interestinKarttakoneoy,acompanyprovidingdigitalandpaper-basedmappingproductscoveringthewholeofFinlandandotherpartsofeurope.

Internet Telecom Payment Solutions ABon31august2007,thegroupacquireda55%interestininternettelecompaymentsolutionsab,resultinginfullownershipofthiscompany.the45%associateinterestheldpreviouslywasacquiredwiththeWM-datagroup.theCompanyprovidessolutionsandservicesrelatingtobillingforthetelecomssectorinsweden.

Saab Combitechon1april2007,thegroupacquiredsaab’sCombitechoperationsandsubsequentlydisposedoftheoperationsaspartoftherationalisationofbusinessventureswithsaabreferredtoinNote35.


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Note 36 Acquisitions (continued)

theprovisionalfairvaluesoftheidentifiableassetsandliabilitiesacquiredinallacquisitionswereasfollows: Carryingamount pre-acquisition Fair value £’m £’mintangibleassets – 1.9property,plantandequipment 3.9 3.9inventories 0.1 0.1tradeandotherreceivables 8.8 8.8Currenttax 0.2 0.2Cashandcashequivalents 5.6 5.6tradeandotherpayables (4.6) (4.6)deferredtax – (0.6)Retirementbenefitobligations (0.2) (0.2)Net assets acquired 13.8 15.1profitrecognisedasassociates (0.1) 15.0goodwill 10.9Total consideration 25.9

totalconsiderationcomprised:Cash 22.9deferredconsideration 0.7Fairvalueofassociateinterestwhenacquired 2.0directlyattributablecosts 0.3 25.9

Factorsthatcontributedtotherecognitionofgoodwillof£10.9milliononacquisitionsduringtheyearwere:anticipatedrevenueandcostsynergieswithexistingoperationsinNorwayandFinland;thevalueoftheworkforceinplaceandtheanticipatedprofitsfromwinningbusinessinthefuturefromnewratherthanexistingcustomers.

thefairvaluesfortheacquisitionswerefinal,exceptforthefairvaluesofMedicidataoyincludedinthetableabove.duetotheshorttimeperiodbetweentheacquisitionofacontrollinginterestinMedicidataoyandthedateofapprovaloftheseconsolidatedFinancialstatements,thefairvaluesabovecontainsomeprovisionalamountswhichwillbefinalisedduringthe2008financialyear.

Pro forma financial informationtheacquiredbusinessescontributedrevenuesof£31.6millionandanetlossof£1.3millionfortheperiod1Januaryto31december2007.iftheacquisitionshadoccurredatthebeginningofthefinancialperiod,thegroup’sproformarevenueandnetprofitforthe12monthsended31december2007wouldhavebeen£3,086.6millionand£167.5millionrespectively.

Note 37 Share-based payment

Equity-settled share-based payment arrangements thegroupoperatessevenequity-settledshare-basedpaymentarrangements:thelongtermincentiveplan(ltip),thesharesaveplan,theexecutiveequityparticipationplan2006(exepp2006),theemployeeequitypartnershipplan(emepp)andtheexecutiveshareoptionplan2006(esop2006)andtwofurtherplans,theexecutiveshareoptionscheme(esos)andtheexecutiveequitypartnershipplan(exepp).underthelattertwoplans,nofurthergrantswillbemadeastheirten-yearawardcyclehascometoanend,butunderwhichexecutivesstillhavecurrentawards.asummaryofthemaintermsofthearrangementsisgivenbelow,withparticularreferencetothetermsofthosegrantsforwhichashare-basedpaymentexpensehasbeenrecognised.

Long Term Incentive Plantheltipisadiscretionarybenefitofferedbythegroupforthebenefitofitssenioremployees,aswellastostaffwithhighpotentialortorecognisesignificantachievements.iteffectivelysupersedestheesosastheCompany’smainequitybenefitdiscretionaryplan.anawardundertheltipmaybegrantedasaconditionalallocation,anil(ornominal)costoptionwithashortexercisewindoworasforfeitableshares.Cash-basedawardsofanequivalentvaluetoshare-basedawardsmayalsobegrantedorcash-basedpaymentsmaybeusedtosatisfyanawardoriginallymadeinshares(eitherinwholeorpart),althoughtheRemunerationCommitteedoesnotcurrentlyintendtodoso.themaximummarketvalueofordinarysharesintheCompanysubjecttoltipawardsgrantedtoanyemployeeinanyfinancialyearwillnotexceed200%ofthatemployee’sbasesalary.theintentioninitiallyisnottoexceed150%ofsalary.

theperformanceconditionattachedtoonehalfofanawardwillrequireannualearningspersharegrowthtoexceedthegrowthintheRetailpriceindexbybetween3%and7%perannumoverthreefinancialyearsforbetween30%and100%ofthishalfoftheawardtovest(thatis,between15%and50%ofthetotalaward).theperformanceconditionattachedtotheotherhalfofanawardwillmeasurethetotalshareholderreturnperformance(tsR)oflogicaoverasinglethree-yearperformanceperiodagainstanumberofothercompaniesdrawnmainlyfromthedowJoneseurostoxxtechnologyindex.30%ofthishalfoftheawardwillvestiftheCompanyisrankedinthemedianattheendoftheperformanceperiod,with100%ofthishalfoftheawardvestingiflogicaisatorabovetheupperquartile.theRemunerationCommitteeintendstoreviewtheperformanceconditionseachyeartoensurethattheyremainsuitableandreflecttheongoingmarket.

Sharesave Planthegroupoperatesasavings-relatedshareoptionplanunderwhichemployeesenterintoasavingscontractwithafinancialinstitutiontopayafixedmonthlysumforeitherathree-yearor,forgrantsbefore4october2002,five-yearperiod.shareoptionsaregrantedatanexercisepriceatleastequaltotheclosingmid-marketpriceoftheCompany’ssharesonadayshortlybeforethedateofgrant.theaggregateexercisepricepayableisequaltotheexpectedproceedsonmaturityofthesavingscontract.shareoptionsmaybeexercisedwithinsixmonthsofthevestingdate.therearenoperformanceconditionsattachedtosharesaveplanoptions.

US Stock Purchase Planus-basedemployeesareonlyentitledtoparticipateintheusstockpurchaseplan,underwhichtheycansaveupto$2,000perannum,withwhichsharesareboughtquarterly.logicaNorthamericacontributes15%oftheamountsavedbytheemployee.



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Note 37 Share-based payment (continued)

Equity Participation/Partnership Plansthegroupoperatesanequityparticipationplanforseniorexecutives,theexepp2006,andincertaincountriesanequitypartnershipplanopentoallemployees,theemepp,thetermsofwhicharesimilar.undertheequityparticipation/partnershipplans,employeesmakeaninvestmentintheCompany’sshares,subjecttofinanciallimits,whichmustbemaintainedoverathree-yearvestingperiod.Vestingwilloccurforthoseparticipantsemployedatthevestingdate,subjecttoaperformanceconditionbeingmet.

undertheexepp2006,seniorexecutives,inanyoneyear,mayinvestinsharesuptoamaximumof50%ofnetbonuspaid.theselodgedshareswillbematchedona1:1(grossbasis)(theMatchingaward).Matchingawardshareswillbereleasedassoonaspracticableafterthethirdanniversaryoftheaward,subjecttotheperformanceconditionshavingbeenmet.theperformanceconditionsinrespectoftheexepp2006havethesamecriteriaastheCompany’sltipperformanceconditionsdescribedabove.

theemepp’sperformanceconditionisbasedongrowthinthegroup’searningspersharewhichmustexceedthegrowthintheRetailpriceindexbyanaverageof3%perannumofthethreeyearsperformanceperiodfortheawardtovestinfull.theRemunerationCommitteemay,atitsdiscretion,allowMatchingawardsundertheemepptovestprorataiftheperformanceconditionisnotfullyachievedoverthethree-yearperformanceperiod.awardsofamatchingnumberofsharesaremadeatnilcosttoemployeesandareexercisableforuptosevenyearsafterthevestingdate,afterwhichtheawardwilllapse.

althoughnofurtherawardswillbemadeundertheexeppthereremainoutstandingawardswhichhaveyettoreachtheirthirdanniversary.thisplanwasoperatedforseniorexecutivesasanequity-basedinvestmentplansubjecttofinanciallimitsandtheinvestmentbeingmaintainedoverathree-yearvestingperiod.Vestingwilloccurforthoseexecutivesemployedatthevestingdatesubjecttoaperformanceconditionbasedongrowthinthegroup’searningspershareexceedingthegrowthintheRetailpriceindexbybetween3%and7%perannum.

Executive Share Option Plan 2006attheCompany’sannualgeneralMeetingin2006shareholdersapprovedtheimplementationoftheesop2006.thisplanhasbeenintroducedtoallowawardstobemadetoseniorexecutivesworkinginjurisdictionswhereitwouldbeinappropriatetomakeanawardundertheltip.itisanticipatedthatperformanceconditionsattachedtoanyesop2006awardswillhavethesamecriteriaastheltipnotedabove.asyet,noawardshavebeenmadeunderthisplan.

Executive Share Option SchemeNonewoptiongrantswillbemadeundertheesos,althoughoptionsmadeunderpreviousgrantstoseniorexecutivesandmanagersacrossthegroupremainoutstanding.optionsarenormallyexercisablebetweenthreeand10yearsfollowinggrant,providedthataperformancecondition,specifiedatthedateofgrant,hasbeensatisfied.typically,growthinthegroup’searningspershareovertherelevantthree-yearperformanceperiodisrequiredtoexceedthegrowthintheRetailpricesindexbyatleast21%fortheperformanceconditiontobemet.

esosoptiongrantspriorto2005haveamaximumseven-yearexerciseperiod,whiletheexerciseperiodforoptiongrantsin2005and2006isfouryears.Retestingofperformanceconditionsmaybecarriedouttwiceforesosoptionsgrantedin2003butonlyoncefor

optionsgrantedin2004.Noretestingispermittedforgrantsawardedin2005and2006.

theexercisepriceofesosoptionsisgenerallyatleastequaltotheclosingmid-marketpriceoftheCompany’ssharesonthedateofgrant,althoughthepricingmechanismvariesslightlyforgrantstoFrenchemployees.

Unilog Management Incentiveon10January2006,1,790,000optionsweregrantedforexerciseintwoequaltranchestofiveformerunilogmanagers.thiswasaone-offshareaward.For1,100,000optionsthefirsthalfoftheawardvestedinfullfollowingtheachievementoftheperformanceconditionandtheresultingshareshavebeenreleased.thefirsttrancheoftheremaining690,000conditionalawardsharesvestedsubjecttotheachievementofindividuallysetperformancetargetsandhavebeenreleased.

thesecondtranchesofthefullawardmaybetransferredassoonaspracticableafter31december2007.

Unilog InsightManagersinFrancewhoareeligibletoparticipateintheuniloginsightfundcouldannuallychoosetoinvestallorpartoftheirbonusintothisfund.logicaFrancecontributes50%ofthebonusinvestedbytheemployeetoamaximumof€4,000perannum.theuniloginsightfundinvests62%ofitscapitalinlogicasharesandismanagedbyanexternalfundmanagerappointedbylogicaFrance.

Unilog PlanFollowingtheacquisitionofunilogon13January2006,theCompanyenteredintoliquidityagreementswiththemajorityoftheoptionholdersinunilog.undertheliquidityagreement,outstandingoptionsinunilogwill,uponexercise,beconvertedintosharesinlogicaCMgplc,usingatransferratioof31.97logicaCMgplcsharesforeveryoneunilogshare.

underiFRs2,anyamendmentoftheoriginaltermsandconditionsofshareoptionsisdefinedasamodificationandtheportionoftheoriginalfairvaluechargenotyetexpensedshouldcontinuetobeaccruedovertheperiodfrommodificationtothevestingdate.ifthemodificationincreasesthefairvalueoftheoptions,thedifferencebetweenthefairvalueoftheoriginaloptionsandthemodifiedoptions,bothmeasuredasatthedateofmodification,shouldbeexpensedovertheperiodfrommodificationtothevestingdate.theincrementalincreaseinfairvalueafterthemodificationtobeexpensedintheperioduptothevestingdatewas£4.2million.thedateofmodificationwas6april2006.

thecalculationofthe£4.2millionmodificationchargewasmadeintwostages.Firstthefairvalueoftheoptions(priortomodification)wasrecalculatedasatthedateofmodification,usingtheassumptionsprevailingonthatdate,namely,6april2006.thefairvalueoftheoptionswasmeasuredusingtheintrinsicvalueoftheoptions(thesharepriceatacquisitionof€73lesstheexercisepriceofeachoption).stagetwoofthecalculationwastofair-valuetheoptionsdirectlyafter6april2006usingtheblack-scholesmodel.thedifferencebetweenthetwocalculationsrepresentstheincrementalincreaseinfairvalueof£4.2milliontobeexpensedfrom6april2006tothevestingdate.

theshareprice,exercisepriceandfairvalueoftheoriginalunilogoptionsinthetableabovehavebeentranslatedintosterlingusingtheexchangerateatthedateofacquisitionof€1.46to£1.theshareprice,exercisepriceandfairvalueoftheoriginalunilogoptionsatthedateofmodificationhavebeentranslatedintosterlingusingtheexchangerateatthedateofmodificationof€1.43to£1.


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Note 37 Share-based payment (continued) areconciliationofthemovementinthenumberofshareoptionsandshareawardsoutstandingisshownbelow:

2007 Share Share options awards Weighted average exercise Number of price Number of shares £ shares outstandingat1January2007 62,412,723 1.63 9,547,941granted 3,558,605 1.83 6,687,664exercised (4,688,438) 1.03 (1,961,798)Forfeited (8,032,351) 1.75 (2,185,801)expired (4,280,739) 2.45 (13) outstandingat31december2007 48,969,800 1.61 12,087,993 exercisableat31december2007 9,127,590 2.30 362,847

2006 share shareoptions awards Weighted average Numberof exerciseprice Numberof shares £ sharesoutstandingat1January2006 45,688,571 2.34 831,479throughacquisitionofunilog 34,535,016 0.75 –granted 2,515,071 1.93 9,087,722exercised (2,559,099) 1.26 (152,418)Forfeited (17,028,102) 1.72 (218,368)expired (738,734) 5.14 (474) outstandingat31december2006 62,412,723 1.63 9,547,941 exercisableat31december2006 15,835,436 3.29 81,949

theweightedaveragesharepriceatthedateofexerciseofshareoptionsexercisedduringtheyearended31december2007was103.1pence(2006:175.4pence).

theexercisepriceandremainingcontractuallifeofshareoptionsoutstandingatthebalancesheetdatewasasfollows:

2007 Share Share options awards Weighted Weighted average average remaining exercise contractual price life Number ofRange of exercise prices £ Years shareslessthan£1.00 0.52 2.5 22,125,569£1.00ormoreandlessthan£2.00 1.60 3.2 17,573,257£2.00ormoreandlessthan£5.00 2.56 4.7 6,891,644£5.00ormoreandlessthan£10.00 6.33 2.6 1,687,143£10.00ormore 15.63 2.7 692,187 1.61 3.1 48,969,800



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Note 37 Share-based payment (continued) 2006 share shareoptions awards Weighted Weighted average average remaining exercise contractual price life NumberofRange of exercise prices £ years shareslessthan£1.00 0.52 3.3 26,806,739£1.00ormoreandlessthan£2.00 1.53 4.1 20,752,153£2.00ormoreandlessthan£5.00 2.56 4.0 12,093,928£5.00ormoreandlessthan£10.00 6.29 3.7 1,955,991£10.00ormore 15.55 3.7 803,912 1.63 3.7 62,412,723

thefairvalueofshareoptionsandshareawardsgrantedinthe2007and2006financialyearsandtheassumptionsusedinthecalculationoftheirfairvalueonthedateofgrantwereasfollows: 2007 Share Share options awards Employee Executive Long Term Equity Equity Incentive Partnership Participation SharesaveWeighted average assumption Plan Plan Plan Plansharepriceondateofgrant £1.83 £1.84 £1.76 £1.84exerciseprice nil nil nil £1.83shareoptions/awardsgrantedintheyear 5,396,395 226,199 1,065,070 3,558,605Vestingperiod(years) 3.0 3.0 3.0 3.0expectedvolatility(%) 27.9 – 27.9 29.0expectedlife(years) 3.0 3.0 3.0 3.3Risk-freerate(%) 5.4 – 5.4 5.4dividendyield(%) 3.0 3.0 3.0 3.0Fairvaluepershareoption/award £1.29 £1.68 £1.23 £0.39

2006 share shareawards options employee executive longterm unilog equity equity executive incentive Management partnership partnership shareoption sharesaveWeighted average assumption plan incentive plan plan plan plansharepriceondateofgrant £1.68 £1.89 £1.93 £1.93 £1.93 £1.93exerciseprice nil nil nil nil £1.93 £1.93shareoptions/awardsgrantedintheyear 6,583,516 1,790,000 169,766 544,440 205,000 2,310,071Vestingperiod(years) 3.0 2.0 3.0 3.0 3.0 3.0expectedvolatility(%) 35.6 – – – 52.4 38.9expectedlife(years) 3.0 2.0 3.0 3.0 Note1 3.3Risk-freerate(%) 4.8 – – –- 4.5 4.5dividendyield(%) 3.3 3.1 2.9 2.9 2.9 2.9Fairvaluepershareoption/award £1.27 £1.78 £1.76 £1.76 £0.77 £0.511 theassumedexercisebehaviourofesosoptionholdersforgrantsmadein2006wasasfollows:60%ofparticipantsexerciseafterthreeyearsand25%aftersixyears,subjecttothe

marketsharepricebeingatleast20%overtheoptionexerciseprice.thebalanceareassumedtobeexercisedafter10years,providingtheoptionsareinthemoney.


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Note 37 Share-based payment (continued)

thefairvalueofesos,ltipandunilogManagementincentiveschemeoptionswasmeasuredusingaMonteCarlosimulationmodelandthefairvalueofsharesaveplanoptionswasmeasuredusingtheblack-scholesoptionpricingmodel.thefairvalueofshareawardsundertheequityparticipation/partnershipplanswasmeasuredatthemarketsharepriceatthedateofgrantreducedforthepresentvalueofexpecteddividendsoverthevestingperiod,forwhichawardholdershavenoentitlement.

expectedvolatilitywasdeterminedusingthehistoricalvolatilityoftheCompany’ssharepriceoveraperiodcommensuratewiththeexpectedlifeoftheshareoption.theperiodfrom1July1999to30June2001wasexcludedasmanagementbelieveitrepresentedaperiodofhighsharepricevolatilitywhichisunlikelytoberepeatedinthefuture.

shareawardsundertheequityparticipation/partnershipplansareassumedtobeexercisedonthevestingdate.sharesaveoptionsareassumedtobeexercisedthreemonthsafterthevestingdate,themid-pointofthecontractualexerciseperiod.

atthedateofgrant,itisassumedthatperformanceconditionswillbemetinfull.adjustmentsaremadesubsequently,wherenecessary,toreflectupdatedassessmentsofwhetherperformanceconditionswillbemetandthefinaldeterminationonthevestingdate.theshare-

basedpaymentexpensealsotakesaccountofexpectedforfeiturefromthebalancesheetdatetotheendofthevestingperiodfollowingcessationofemployment.aweightedaverageforfeiturerateof9%perannumwasassumedforcalculatingtheshare-basedpaymentexpensefortheyearended31december2007(2006:7%).

Forexercisespriortothevestingdate,theadditionalexpensebetweenthecalculationdateandthevestingdateisimmediatelychargedtotheincomestatement.

thegrouprecognisedatotalexpenseinrespectofequity-settledshare-basedpaymentarrangementsof£9.7million(includingatelecomsproductschargeof£0.6million)intheyearended31december2007(2006:£9.6millionincludingatelecomsproductschargeof£0.9million).

Cash-settled share-based payment arrangementsthegroupdoesnotoperateseparatecash-settledshare-basedpaymentsarrangements;however,socialsecurityobligationsarisingonshareoptionandshareawardplansaretreatedassuchanarrangementforaccountingpurposes.theliabilityforcash-settledshare-basedsocialsecuritypaymentsat31december2007was£1.2million(2006:£1.8million).themovementintheliabilityresultedinanincomefortheyearended31december2007of£0.6million(2006:expenseof£0.6million).

Note 38 Retirement benefit schemes

Defined contribution schemesthegroupoperatesanumberofvoluntarypensionschemesofthedefinedcontributiontypeintheuKandoverseas,underwhichcontributionsarepaidbygroupundertakings.insomecountries,contributionsaremadeintostatepensionschemes.thepensioncostchargefordefinedcontributionschemesamountedto£99.2millionincludingatelecomsproductschargeof£1.6million(2006:£64.0millionincludingatelecomsproductschargeof£3.3million). insweden,thegroupcontributedtothealectasepensionschemewhichisadefinedbenefitpensionscheme.thispensionschemewasclassifiedasadefinedcontributionschemeasitisamulti-employerplanandsufficientinformationisnotavailabletobifurcatetheassetsoftheplanbetweenthevariousemployers.anysurplusordeficitintheplanwillaffecttheamountoffuturecontributionspayable.alectausedacollectivefundingratiotodeterminethesurplusordeficitinthepensionscheme.thecollectivefundingisthedifferencebetweenalecta’sassetsandthecommitmentstothepolicyholdersandinsuredindividuals.thecollectivesolvencyisnormallyallowedtovarybetween125%and155%,withthetargetbeing140%.attheendof31december2007,alecta’scollectivefundingratiowas152%andpensioncontributionsfor2008willreduce.

Defined benefit schemesinaddition,thegroupoperatesdefinedbenefitpensionschemesprimarilyforthebenefitofemployeesintheuKandtheNetherlands,withsmallerschemesinothereuropeancountriesandtheus.definedbenefitschemesareusuallyfundedbycontributionsfromtheemployingcompanies,andinsomecasesalsoemployees,tomeetthecosts,atratesassessedbytheactuaryorinsurerofeachscheme,inregularfundingreviews.theschemes’assetsareheldinfundsseparatefromthoseofthegroup.schemebenefitstypicallyprovideforapensioninretirementbasedonyearsofqualifyingserviceandfinalpensionablesalary.

themostrecentvaluationsofplanassets,reimbursementrightsanddefinedbenefitobligationswerecarriedoutat31december2006byqualifiedactuaries.thepresentvalueofthedefinedbenefitobligation,andtherelatedcurrentandpastservicecost,weremeasuredusingtheprojectedunitcreditmethod.



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Note 38 Retirement benefit schemes (continued)

theweightedaverageprincipalactuarialassumptionsusedatthebalancesheetdatewereasfollows:

UK schemes Overseas schemes 2007 2006 2007 2006discountrate(%) 5.80 5.15 5.31 4.74averagelifeexpectancyfor65-year-oldmale(years) 22 20 17 17averagelifeexpectancyfor65-year-oldfemale(years) 25 21 21 21expectedreturnonplanassets(%) 6.50 6.94 4.12 4.02expectedreturnonreimbursementrights(%) – – 3.10 4.50generalsalaryincreases(%) 3.40 3.10 2.12 1.98Rateofincreaseofpensionsinpayment(%) 3.40 3.10 0.56 0.56inflation(%) 3.40 3.10 2.30 2.06

theamountsrecognisedintheincomestatementasemployeebenefitexpensefordefinedbenefitschemeswereasfollows:

2007 UK Overseas All schemes schemes schemes £’m £’m £’mCurrentservicecost 4.6 5.2 9.8pastservicecost 0.1 1.9 2.0Curtailmentgain – (0.3) (0.3)interestcost 10.2 7.9 18.1expectedreturnonplanassets (12.1) (6.4) (18.5)expectedreturnonreimbursementrights – (0.3) (0.3) 2.8 8.0 10.8

2006 uK overseas all schemes schemes schemes £’m £’m £’mCurrentservicecost 6.0 6.0 12.0pastservicecost (11.6) – (11.6)interestcost 9.9 7.1 17.0expectedreturnonplanassets (10.5) (5.6) (16.1)expectedreturnonreimbursementrights – (0.4) (0.4) (6.2) 7.1 0.9

pastservicecostin2006includeda£9.0milliongainwhichispresentedasanexceptionalitem,furtherdetailsofwhichareprovidedinNote7.theremaining£2.6milliongainrepresentedtheeffectofchangesinuKpensionlegislationintroducedon6april2006(a-day).a-dayallowedmembersoftheuKdefinedbenefitpensionschemestotakeupto25%oftheirpensionasatax-freecashsumatretirement.thegroupchangedtheassumptionsrelatingtothecashsumtakenbyschememembersatretirementandthisresultedina£2.6milliongain,whichhasbeenrecognisedinfullwithinoperatingprofit.

theactualreturnonplanassetsforuKschemeswasa£10.5milliongain(2006:£15.0milliongain)andforoverseasschemeswasa£7.9millionloss(2006:£9.7millionloss).theactualreturnonreimbursementrightsforoverseasschemeswasa£0.6milliongain(2006:£0.5millionloss).

actuarialgainsandlosseshavebeenrecognisedinfullinthestatementofrecognisedincomeandexpense.thecumulativeamountofactuarialgainsrecognisedthroughthestatementofrecognisedincomeandexpenseat31december2007was£14.8million(2006:£11.2milliongain).


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theamountsincludedinthebalancesheetinrespectofthegroup’sdefinedbenefitschemeswereasfollows: 2007 UK Overseas All schemes schemes schemes £’m £’m £’mpresentvalueofdefinedbenefitobligations (202.3) (180.3) (382.6)Fairvalueofschemeassets 189.3 154.6 343.9Deficit in the schemes (13.0) (25.7) (38.7)pastservicecostnotyetrecognised – 0.1 0.1Fairvalueofreimbursementrights – 10.1 10.1Net liability recognised in the balance sheet (13.0) (15.5) (28.5)

pReseNtedas:

Financialassets – 10.1 10.1Retirementbenefitassets 2.8 9.2 12.0Retirementbenefitliabilities (15.8) (34.8) (50.6) (13.0) (15.5) (28.5)

2006 uK overseas all schemes schemes schemes £’m £’m £’mpresentvalueofdefinedbenefitobligations (198.6) (166.0) (364.6)Fairvalueofschemeassets 171.5 147.5 319.0Deficit in the schemes (27.1) (18.5) (45.6)pastservicecostnotyetrecognised – 0.2 0.2Fairvalueofreimbursementrights – 8.6 8.6Net liability recognised in the balance sheet (27.1) (9.7) (36.8)

pReseNtedas:

Financialassets – 8.6 8.6Retirementbenefitassets 2.9 15.8 18.7Retirementbenefitliabilities (30.0) (34.1) (64.1) (27.1) (9.7) (36.8)



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thefollowingtablespresentareconciliationofthemovementsinthedefinedbenefitobligationbetweenthebeginningandendofthefinancialyear,andananalysisofthedefinedbenefitobligationbetweenunfundedschemesandthoseschemesthatarepartlyorwhollyfunded:

2007 UK Overseas All schemes schemes schemesDefined benefit obligation £’m £’m £’mat1January2007 198.6 166.0 364.6Currentservicecost 4.6 5.2 9.8pastservicecost 0.1 1.9 2.0Curtailmentgain – (0.3) (0.3)interestcost 10.2 7.9 18.1Contributionsfromschememembers 1.0 0.4 1.4actuarialgains (8.4) (10.8) (19.2)benefitspaid (3.8) (4.2) (8.0)plandissolution – (0.1) (0.1)acquisitionofsubsidiaries – 1.1 1.1disposalsofsubsidiaries – (1.2) (1.2)exchangedifferences – 14.4 14.4at31december2007 202.3 180.3 382.6

definedbenefitobligationofunfundedschemes – 19.1 19.1definedbenefitobligationoffundedschemes 202.3 161.2 363.5at31december2007 202.3 180.3 382.6

2006 uK overseas all schemes schemes schemesDefined benefit obligation £’m £’m £’mat1January2006 205.7 155.5 361.2Currentservicecost 6.0 6.0 12.0Curtailmentgain (11.6) – (11.6)interestcost 9.9 7.1 17.0Contributionsfromschememembers 1.0 0.5 1.5actuarialgains (8.8) (20.4) (29.2)benefitspaid (3.6) (3.5) (7.1)acquisitionofsubsidiary – 23.4 23.4exchangedifferences – (2.6) (2.6)at31december2006 198.6 166.0 364.6

definedbenefitobligationofunfundedschemes – 20.5 20.5definedbenefitobligationoffundedschemes 198.6 145.5 344.1at31december2006 198.6 166.0 364.6

insurancepoliciestakenouttofundretirementbenefitschemesthatdonotqualifyasplanassetsarepresentedasreimbursementrights.suchpoliciesfundpensionschemesingermanyandalifeassuranceschemeintheunitedstates.


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thefollowingtablespresentareconciliationofthemovementsinplanassetsandreimbursementrightsbetweenthebeginningandendofthefinancialyear: 2007 UK Overseas All schemes schemes schemesPlan assets and reimbursement rights £’m £’m £’mat1January2007 171.5 156.1 327.6expectedreturnonassets 12.1 6.7 18.8Contributionsbyemployer 10.1 5.6 15.7Contributionsfromschememembers 1.0 0.4 1.4actuariallosses (1.6) (14.0) (15.6)benefitspaid (3.8) (4.4) (8.2)plandissolution – (0.1) (0.1)acquisitionofsubsidiaries – 0.9 0.9exchangedifferences – 13.5 13.5at31december2007 189.3 164.7 354.0

planassets 189.3 154.6 343.9Reimbursementrights – 10.1 10.1at31december2007 189.3 164.7 354.0

2006 uK overseas all schemes schemes schemesPlan assets and reimbursement rights £’m £’m £’mat1January2006 149.3 158.3 307.6expectedreturnonassets 10.5 6.0 16.5Contributionsbyemployer 9.8 4.0 13.8Contributionsfromschememembers 1.0 0.5 1.5actuarialgains/(losses) 4.5 (16.2) (11.7)benefitspaid (3.6) (3.6) (7.2)acquisitionsofsubsidiaries – 9.5 9.5exchangedifferences – (2.4) (2.4)at31december2006 171.5 156.1 327.6

planassets 171.5 147.5 319.0Reimbursementrights – 8.6 8.6at31december2006 171.5 156.1 327.6



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thefairvalueofplanassetsatthebalancesheetdateisanalysedbelow: 2007 UK Overseas All schemes schemes schemes £’m £’m £’mequities 68.1 1.4 69.5governmentbonds 53.0 138.2 191.2Corporatebonds 53.6 10.1 63.7property 13.7 – 13.7Cash 0.9 – 0.9other – 15.0 15.0 189.3 164.7 354.0

2006 uK overseas all schemes schemes schemes £’m £’m £’mequities 100.1 4.0 104.1governmentbonds 26.2 134.5 160.7Corporatebonds 29.6 1.9 31.5property 15.4 0.5 15.9Cash 0.2 0.2 0.4other – 6.4 6.4 171.5 147.5 319.0

theexpectedratesofreturnongovernmentbondsandcorporatebondsisdeterminedbyreferencetomarketyieldsatthebalancesheetdateforbondsofasimilartermtothoseheldasplanassets.theexpectedrateofreturnonequitiesisdeterminedbyreferencetorealhistoricalequitymarketreturns.theoverallexpectedrateofreturnonplanassetsiscalculatedasaweightedaverageoftheexpectedratesofreturnofindividualassetclasses.theweightedaverageiscalculatedbyreferencetotheamountineachclassofplanassetsatthebalancesheetdate.planassetsinoverseasschemesincludeordinarysharesoftheCompanywithafairvalueof£1.5millionat31december2007(2006:£2.3million)butdonotincludeanypropertyoccupiedby,orotherassetsusedby,thegroup.

thehistoryofthegroup’sdefinedbenefitarrangementsisasfollows:

UK schemes 2007 2006 2005 2004 £’m £’m £’m £’mpresentvalueofdefinedbenefitobligation (202.3) (198.6) (205.7) (181.9)Fairvalueofplanassets 189.3 171.5 149.3 116.5deficit (13.0) (27.1) (56.4) (65.4)experiencegain/(loss)onplanliabilities 10.6 (0.9) (1.0) (4.4)experiencegain/(loss)onplanassets (1.6) 4.6 17.5 4.2


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Overseas schemes 2007 2006 2005 2004 £’m £’m £’m £’mpresentvalueofdefinedbenefitobligation (180.3) (166.0) (155.5) (140.2)Fairvalueofplanassets 154.6 147.5 149.1 132.8deficit (25.7) (18.5) (6.4) (7.4)experiencegain/(loss)onplanliabilities 5.5 2.7 (0.9) 2.8experience(loss)/gainonplanassets (14.3) (15.2) 12.3 3.8

thegroupexpectstocontributeapproximately£17.6million(2006:£17.5million)todefinedbenefitplansin2008,ofwhich£12.7million(2006:£13.2million)relatestouKschemesand£4.9million(2006:£4.3million)relatestooverseasschemes.

theassumeddiscountrate,rateofinflation,salaryincreasesandmortalityallhaveasignificanteffectontheaccountingvaluation.thefollowingtableshowsthesensitivityofthevaluationtochangesintheseassumptions:

Increase in Impact Decrease in Impact assumption on deficit assumption on deficit % £’m % £’mdiscountrate 0.5 (36.2) 0.5 36.5Rateofinflation 0.5 15.5 0.5 (14.1)Realrateofincrease/(decrease)insalaries 1.0 15.9 1.0 (14.2)oneyearincrease/(decrease)tolifeexpectancy – 7.9 – (8.1)

Note 39 Related party transactions

Remuneration of key management personneltheremunerationofthedirectorsoftheCompanyandthegroup’sexecutiveCommittee,whoarethekeymanagementpersonnelofthegroup,issetoutbelowinaggregateforeachofthecategoriesrequiredbyias24‘Relatedpartydisclosures’.FurtherinformationabouttheremunerationofindividualdirectorsisdisclosedintheReportoftheRemunerationCommitteeonpages56to73.

2007 2006 £’m £’mshort-termemployeebenefits 6.5 9.6post-employmentbenefits 0.9 0.8terminationbenefits 3.0 –share-basedpayment 3.8 3.9 14.2 14.3

theamountforshare-basedpaymentisthatcalculatedinaccordancewithiFRs2‘share-basedpayment’.



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Note 40 Financial commitments

Operating lease commitmentsat31december,thegrouphadcommitmentsundernon-cancellableoperatingleases,principallyforofficesandcomputerequipment,asfollows:

2007 2006 Land and landand buildings Other buildings otherFuture minimum lease payments payable £’m £’m £’m £’mWithinoneyear 78.6 54.1 78.6 59.5betweentwoandfiveyears 246.4 55.4 217.5 71.1afterfiveyears 173.0 – 196.0 – 498.0 109.5 492.1 130.6

theexpenserecognisedintheincomestatementforpaymentsundernon-cancellableoperatingleasesfortheyearended31december2007was£139.4millionincludingatelecomsproductschargeof£3.0million(2006:£108.9millionincludingatelecomsproductschargeof£6.4million).at31december2007,thetotalfutureminimumsub-leasepaymentsexpectedtobereceivedundernon-cancellablesub-leaseswere£23.0million(2006:£29.6million).

Capital expenditure commitments 2007 2006 Group Associates group associates £’m £’m £’m £’mContractedatthebalancesheetdate 0.8 – 0.1 –

Note 41 Contingent liabilities

thegroup’ssubsidiariesandtheCompanyarecurrently,andmaybefromtimetotime,involvedinanumberoflegalproceedings

includinginquiriesfromordiscussionswithgovernmentalandtaxationauthorities.Whilsttheoutcomeofcurrentoutstandingactionsandclaimsremainsuncertain,itisexpectedthattheywillberesolvedwithoutamaterialimpactonthegroup’sfinancialposition.

Note 42 Event after the balance sheet date

on15February2008,energiasdeportugals.a.(edp)notifiedthegroupofitsexerciseoftheedpputoption,underthetermsoftheshareholdersagreemententeredintobetweenedpandlogicaon

20april2005.accordingly,edpgavenoticethatitwillselltologicatheremaining40%interestintheequitysharesofedinfor–sistemasinformáticoss.a.andtheoutstandingshareholderloansforthefixedpriceof€55.0million.on7March2008,thetransactioncompletedresultinginlogicaowninga100%equityinterestinedinfor.


146

Independent auditors’ report to the members of LogicaCMG plc

WehaveauditedtheparentCompanyFinancialstatementsoflogicaCMgplcfortheyearended31december2007whichcomprisethebalancesheetandtherelatednotes.theseparentCompanyFinancialstatementshavebeenpreparedundertheaccountingpoliciessetouttherein.WehavealsoauditedtheinformationintheReportoftheRemunerationCommitteethatisdescribedashavingbeenaudited.

WehavereportedseparatelyonthegroupFinancialstatementsoflogicaCMgplcfortheyearended31december2007.

Respective responsibilities of Directors and auditorsthedirectors’responsibilitiesforpreparingtheannualreport,theReportoftheRemunerationCommitteeandtheparentCompanyFinancialstatementsinaccordancewithapplicablelawandunitedKingdomaccountingstandards(unitedKingdomgenerallyacceptedaccountingpractice)aresetoutinthestatementofdirectors’responsibilities.

ourresponsibilityistoaudittheparentCompanyFinancialstatementsandthepartoftheReportoftheRemunerationCommitteetobeauditedinaccordancewithrelevantlegalandregulatoryrequirementsandinternationalstandardsonauditing(uKandireland).thisreport,includingtheopinion,hasbeenpreparedforandonlyfortheCompany’smembersasabodyinaccordancewithsection235oftheCompaniesact1985andfornootherpurpose.Wedonot,ingivingthisopinion,acceptorassumeresponsibilityforanyotherpurposeortoanyotherpersontowhomthisreportisshownorintowhosehandsitmaycomesavewhereexpresslyagreedbyourpriorconsentinwriting.

WereporttoyououropinionastowhethertheparentCompanyFinancialstatementsgiveatrueandfairviewandwhethertheparentCompanyFinancialstatementsandthepartoftheReportoftheRemunerationCommitteetobeauditedhavebeenproperlypreparedinaccordancewiththeCompaniesact1985.WealsoreporttoyouwhetherinouropiniontheinformationgivenintheReportofdirectorsisconsistentwiththeparentCompanyFinancialstatements.theinformationgivenintheReportofdirectorsincludesthatspecificinformationpresentedinthemarketandFinancialreviewthatiscrossreferredfromthebusinessreviewsectionoftheReportofthedirectors.

inadditionwereporttoyouif,inouropinion,theCompanyhasnotkeptproperaccountingrecords,ifwehavenotreceivedalltheinformationandexplanationswerequireforouraudit,orifinformationspecifiedbylawregardingdirectors’remunerationandothertransactionsisnotdisclosed.

WereadotherinformationcontainedintheannualreportandconsiderwhetheritisconsistentwiththeauditedparentCompanyFinancialstatements.theotherinformationcomprisesonlytheChairman’sstatement,theChiefexecutive’sreview,themarketandFinancialreview,theReportofthedirectors,theCorporatesocialresponsibilitystatementandtheCorporategovernancestatement.WeconsidertheimplicationsforourreportifwebecomeawareofanyapparentmisstatementsormaterialinconsistencieswiththeparentCompanyFinancialstatements.ourresponsibilitiesdonotextendtoanyotherinformation.

Basis of audit opinionWeconductedourauditinaccordancewithinternationalstandardsonauditing(uKandireland)issuedbytheauditingpracticesboard.anauditincludesexamination,onatestbasis,ofevidencerelevanttotheamountsanddisclosuresintheparentCompanyFinancialstatementsandthepartoftheReportofRemunerationCommitteetobeaudited.italsoincludesanassessmentofthesignificantestimatesandjudgmentsmadebythedirectorsinthepreparationoftheparentCompanyFinancialstatements,andofwhethertheaccountingpoliciesareappropriatetotheCompany’scircumstances,consistentlyappliedandadequatelydisclosed.

WeplannedandperformedourauditsoastoobtainalltheinformationandexplanationswhichweconsiderednecessaryinordertoprovideuswithsufficientevidencetogivereasonableassurancethattheparentCompanyFinancialstatementsandthepartoftheReportoftheRemunerationCommitteetobeauditedarefreefrommaterialmisstatement,whethercausedbyfraudorotherirregularityorerror.informingouropinionwealsoevaluatedtheoveralladequacyofthepresentationofinformationintheparentCompanyFinancialstatementsandthepartoftheReportoftheRemunerationCommitteetobeaudited.

Opinioninouropinion:

• theparentCompanyFinancialstatementsgiveatrueandfairview,inaccordancewithunitedKingdomgenerallyacceptedaccountingpractice,ofthestateoftheCompany’saffairsasat31december2007;

• theparentCompanyFinancialstatementsandthepartoftheReportoftheRemunerationCommitteetobeauditedhavebeenproperlypreparedinaccordancewiththeCompaniesact1985;and

• theinformationgivenintheReportofdirectorsisconsistentwiththeparentCompanyFinancialstatements.

PricewaterhouseCoopers LLPCharteredaccountantsandRegisteredauditorslondon20March2008


147

Company balance sheet 31 December 2007

2007 2006 Note £’m £’mFixed assetsinvestments V 1,416.3 1,486.0

Current assetsdebtors:amountsduewithinoneyear Vi 376.3 388.6Cashatbankandinhand 4.2 2.5 380.5 391.1Creditors – amounts falling due within one year Vii (295.4) (284.7)Net current assets 85.1 106.4

Total assets less current liabilities 1,501.4 1,592.4

Creditors – amounts falling due after more than one year Viii – (175.1)

Net assets 1,501.4 1,417.3

Capital and reservesCalled-upequitysharecapital x 145.8 153.6sharepremiumaccount xi 1,098.9 1,097.0profitandlossaccount xi 225.0 143.4Capitalredemptionreserve xi 8.4 –otherreserves xi 23.3 23.3Equity shareholders’ funds xii 1,501.4 1,417.3

theCompanyFinancialstatementsonpages147to157wereapprovedbytheboardofdirectorson20March2008andweresignedonitsbehalfby:

A Green S Keating

directors20March2008


148

Note I Accounting policies

thefollowingaretheprincipalaccountingpoliciesoftheCompanywhichhavebeenappliedconsistentlythroughouttheyearandtheprecedingyear.

Basis of accountingtheCompanyFinancialstatementshavebeenpreparedunderthehistoricalcostconventionandinaccordancewiththeCompaniesact1985andapplicableuKaccountingstandards.

Investments in subsidiariesinvestmentsinsubsidiariesareaccountedforatcost.suchinvestmentsincludebothinvestmentsinsharesissuedbythesubsidiaryandotherparententityintereststhatinsubstanceformpartoftheparententity’sinvestmentinthesubsidiary.theseincludeinvestmentsintheformofloanswhichhavenofixedrepaymenttermsandwhichhavebeenprovidedtosubsidiariesasanadditionalsourceoflong-termcapital.tradeamountsreceivablefromsubsidiariesinthenormalcourseofbusinessandotheramountsadvancedoncommercialtermsandconditionsareincludedindebtors.

investmentsinsubsidiariesintheCompany’sbalancesheetareheldatcostlessanyaccumulatedimpairmentlosses.

Financial instrumentstheCompanyhastakenadvantageoftheexemptionsavailableinFinancialReportingstandard(FRs)25para3(c)(b)andFRs29para2(d)nottodiscloseanyinformationrelatingtofinancialinstrumentsastheCompany’sFinancialstatementsareincludedinpubliclyavailableconsolidatedFinancialstatements.

thefollowingpoliciesforfinancialinstrumentshavebeenappliedinthepreparationoftheCompany’sFinancialstatements:

Cash at bank and in handCashatbankandinhandincludesshort-termdepositswithanoriginalmaturityperiodofthreemonthsorless.bankoverdraftsthatareanintegralpartoftheCompany’scashmanagementareincludedincashatbankandinhandwheretheyhavealegalrightofoffsetagainstpositivecashbalances,otherwisebankoverdraftsareclassifiedasborrowings.

Debtorsdebtorsarestatedatamountsreceivablelessanyprovisionforrecoverability.atradeorotherreceivableisderecognisedfromthebalancesheetwhentheCompanyentersintoafinancingtransactionwhichtransferstoathirdpartyallsignificantrightsorotheraccesstobenefitsrelatingtothatasset,andallsignificantexposurestotherisksinherentinthatasset.

Borrowings borrowingsarerecognisedinitiallyatfairvalue,netoftransactioncostsincurred.borrowingsaresubsequentlystatedeitheratamortisedcostor,ifdesignatedassuch,atfairvaluethroughprofitorloss.Forborrowingsstatedatamortisedcost,anydifferencebetweentheproceeds,netoftransactioncosts,andtheredemptionvalueisrecognisedintheprofitandlossaccountovertheperiodoftheborrowingsusingtheeffectiveinterestratemethod.

TaxationCorporationtaxispayableontaxableprofitsatamountsexpectedtobepaid,orrecovered,underthetaxratesandlawsthathavebeen

enactedorsubstantivelyenactedatthebalancesheetdate.deferredtaxisrecognisedtotakeaccountoftimingdifferencesbetweenthetreatmentoftransactionsforfinancialreportingpurposesandtheirtreatmentfortaxpurposes.adeferredtaxassetisonlyrecognisedwhenitisregardedasmorelikelythannotthattherewillbesuitabletaxableprofitsfromwhichthefuturereversaloftheunderlyingtimingdifferencescanbededucted.

deferredtaxismeasuredattheaveragetaxratesthatareexpectedtoapplyintheperiodsinwhichthetimingdifferencesareexpectedtoreverse,basedonthetaxratesandlawsthathavebeenenactedorsubstantivelyenactedatthebalancesheetdate.deferredtaxismeasuredonanon-discountedbasis.

Foreign currenciesthefunctionalcurrencyoftheCompanyispoundssterling.transactionsdenominatedinforeigncurrenciesaretranslatedintothefunctionalcurrencyoftheCompanyattheratesprevailingatthedatesoftheindividualtransactions.Foreigncurrencymonetaryassetsandliabilitiesaretranslatedattheratesprevailingatthebalancesheetdate.exchangegainsandlossesarisingarechargedorcreditedtotheprofitandlossaccountwithinnetoperatingcosts.

Employee benefitsRetirement benefitstheCompanyparticipatesinretirementbenefitplansofadefinedcontributionnature.thecostofdefinedcontributionplansischargedtotheprofitandlossaccountonthebasisofcontributionspayablebytheCompanyduringtheyear.

Share-based paymentthecostofshare-basedemployeecompensationarrangements,wherebyemployeesreceiveremunerationintheformofsharesorshareoptions,isrecognisedasanemployeebenefitexpenseintheprofitandlossaccount.

thetotalexpensetobeapportionedoverthevestingperiodofthebenefitisdeterminedbyreferencetothefairvalueatthegrantdateofthesharesorshareoptionsawardedandthenumberthatareexpectedtovest.theassumptionsunderlyingthenumberofawardsexpectedtovestaresubsequentlyadjustedtoreflectconditionsprevailingatthebalancesheetdate.atthevestingdateofanaward,thecumulativeexpenseisadjustedtotakeaccountoftheawardsthatactuallyvest.

Other employee benefitsaliabilityforotheremployeebenefits,suchaspaidholiday,isrecognisedfortheamounttheCompanymayberequiredtopayasaresultoftheunusedentitlementthathasaccumulatedatthebalancesheetdate.

Employee share ownership trustsemployeeshareownershipplan(esop)trusts,whichpurchaseandholdordinarysharesoftheCompanyinconnectionwithcertainemployeeshareplans,areincludedintheCompanyFinancialstatements.anyconsiderationpaidorreceivedbyesoptrustsforthepurchaseorsaleoftheCompany’sownsharesisshownasamovementinshareholders’equity.

DividendsdividendstotheCompany’sshareholdersarerecognisedasaliabilityanddeductedfromshareholders’equityintheperiodinwhichtheshareholders’righttoreceivepaymentisestablished.

Notes to the Company Financial statements


149

Note II Profit attributable to the Company

aspermittedbysection230oftheCompaniesact1985,noseparateprofitandlossaccountispresentedinrespectoftheCompany.theprofitforthefinancialyearfortheCompanywas£296.6million(2006:£117.8million),whichincludedaforeignexchangegainof£0.1million(2006:lossof£0.8million).

Note III Employees and Directors

staffcostsfortheyearamountedto: 2007 2006 £’m £’msalariesandothershort-term employeebenefits 4.1 4.4socialsecuritycosts 0.3 0.6pensioncosts 0.1 0.3share-basedpayments(Notexiii) 0.6 1.1 5.1 6.4

theaveragemonthlynumberofemployees,includingdirectors,duringtheyearended31december2007was16(2006:15).thenumberofemployeesincludingdirectors,at31december2007,basedintheuKwas11(2006:11),1(2006:3)wasbasedintheNetherlandsand1(2006:1)wasbasedinFrance.ForfurtherinformationaboutthedirectorsoftheCompany,refertothedirectors’biographiesonpages36to39andfordetailsofdirectors’emolumentsandshareinterestsrefertotheReportoftheRemunerationCommitteeonpages56to73.

Note IV Dividends

thedirectorsareproposingafinaldividendinrespectoftheyearended31december2007of3.50pencepershare,whichwouldreduceshareholders’fundsbyapproximately£50.5million.theproposeddividendissubjecttoapprovalattheannualgeneralMeetingon14May2008andhasnotbeenrecognisedasaliabilityintheseFinancialstatements.thefinaldividendwillbepaidon15May2008toshareholderslistedontheshareregisteron18april2008.

theamountsrecognisedasdistributionstoequityholderswereasfollows:

2007 2006 2007 2006 p/share p/share £’m £’minterimdividend,relatingto2007/2006 2.30 2.20 34.0 24.9Finaldividend,relatingto2006/2005 3.40 3.20 51.9 36.2 5.70 5.40 85.9 61.1

dividendspayabletoemployeeshareownershiptrustsareexcludedfromtheamountsrecognisedasdistributionsinthetableabove.


150

Note V Investments

investmentsinsubsidiaryundertakings

shares loans totalCost £’m £’m £’mat1January2007 645.8 846.5 1,492.3additions 223.3 3.7 227.0disposals (47.8) (257.2) (305.0)Foreignexchange – 8.3 8.3at31december2007 821.3 601.3 1,422.6

Impairmentsat1January2007 (6.3) – (6.3)impairmentduringtheyear – – –at31december2007 (6.3) – (6.3)

Net book valueat31december2007 815.0 601.3 1,416.3at31december2006 639.5 846.5 1,486.0

thedirectorsconsiderthattogivefullparticularsofallsubsidiaryundertakingswouldleadtoastatementofexcessivelength.afulllistofsubsidiaryundertakingsat31december2007willbeannexedtotheCompany’snextannualreturn.at31december2007,theCompanyheld,directlyorindirectly,100%(exceptwhereshown)oftheordinaryissuedsharecapitalofthefollowingprincipalsubsidiaryundertakings:

Incorporated in England: Incorporated in Sweden:logicaCMguKlimited(nowlogicauKlimited) WM-dataab*CMguKlimited*(nowlogicaitservicesuKlimited) WM-datasverigeab*(nowlogicasverigeab) WM-datainfrasolutionsab*(nowlogicainfrasolutionsab)Incorporated in the Netherlands:logicaCMgNederlandbV*(nowlogicaNederlandbV) Incorporated in Norway:logicaCMgbV*(nowlogicaHoldingsNederlandbV) WM-dataas*(nowlogicaNorgeas)logicaCMgbusinessprocessoutsourcingbV*(nowlogicabusinessprocessoutsourcingNederlandbV) Incorporated in Finland: WM-dataoy*(nowlogicasuomioy)Incorporated in Germany:logicaCMgdeutschlandgmbH&CoKg* Incorporated in Denmark:(nowlogicadeutschlandgmbH&CoKg) WM-datadanmarkas*(nowlogicadanmarkas)unilogManagementgmbH* Incorporated in Australia:Incorporated in France: logicaCMgptylimited*(nowlogicaaustraliaptylimited)unilogsa*(nowlogicaFrancesas) Incorporated in the United States:Incorporated in Belgium: logicaCMginc*(nowlogicaNorthamericainc)logicaCMgNV/sa*(nowlogicabelgiumNV/sa) Incorporated in India:Incorporated in Portugal: logicaCMgprivatelimited*edinfor-sistemasinformáticossa*^ Incorporated in the Czech Republic:Incorporated in Jersey: logicaCMgsro*logicaCMg(Jersey)limited

* subsidiariesnotdirectlyheldbytheCompany.^ 60%holding.



151

Note VII Creditors

2007 2006 £’m £’mAmounts falling due within one yearbankloan 50.3 –amountsduetosubsidiaryundertakings 239.5 267.2socialsecurityandothertaxes 2.7 3.5otherfinancialliabilities – 2.2derivativefinancialinstruments 1.5 –accrualsandothercreditors 1.4 11.8 295.4 284.7

includedintheamountsduetosubsidiaryundertakingswasanamountof£237.7millionwhichcarriedaninterestrateof2.875%perannumwithnofixedtermsofrepaymentandnosecurity.

thebankloanisdescribedfurtherinNoteViii.otherfinancialliabilitiesof£nil(2006:£2.2million)representedtheCompany’scommitmenttoissuenewordinarysharesonconversionoftheconvertiblebondsissuedbylogicaCMg(Jersey)limited,anothergroupcompany(seeNote25oftheconsolidatedFinancialstatements).

thefairvalueofthecalloptionontheCompany’sshareswasmeasuredusingtheblack-scholesoptionpricingmodel,withthefollowingassumptionsusedat31december:

2007 2006sharepriceonmeasurementdate £1.18 £1.86exerciseprice £3.24 £3.24expectedvolatility 26% 31%expectedlife(years) 0.7 1.7Risk-freerate 4.1% 3.9%dividendyield 4.1% 3.9%

expectedvolatilitywasdeterminedusingthehistoricalvolatilityoftheCompany’sshareprice.theperiodfrom1July1999to30June2001wasexcludedasmanagementbelieveitrepresentedaperiodofhighsharepricevolatilitywhichisunlikelytoberepeatedinthefuture.

thedirectorsestimatethatthecarryingvalueoffinancialliabilitieswithincreditorsapproximatedtheirfairvalue.

Note VI Debtors

2007 2006 £’m £’mamountsduefromsubsidiaryundertakings 370.2 381.9deferredtaxasset 5.9 6.4Corporationtaxrecoverable 0.1 0.1otherdebtors 0.1 0.2 376.3 388.6

thedirectorsestimatethatthecarryingvalueoffinancialassetswithindebtorsapproximatedtheirfairvalue.


152


Note IX Deferred tax

themovementonthedeferredtaxassetduringtheyearwasasfollows:

£’mat1January2007 6.4debittotheprofitandlossaccount (0.5)at31december2007 5.9

at31december,deferredtaxwasrecognisedasfollows:

2007 2006 £’m £’motherfinancialliabilities 5.9 6.4share-basedpaymentarrangements – – 5.9 6.4

Note VIII Creditors – amounts falling due after more than one year

2007 2006 £’m £’mbankloans – 175.1

at31december2007,theCompanyhadthefollowingunsecuredprincipalbankfacilities:

• a£330millionmulti-currency,syndicatedrevolvingcreditfacilitymaturingon19september2010.at31december2007,£25.0millionwasdrawndownunderthefacilitybyanothergroupCompany(2006:£74.5million)andcarriedaninterestrateof0.80%(2006:0.95%)overliboR.at31december2007,thefacilitywasundrawnbytheCompany(2006:£22.0million);

• a£150millionsyndicatedrevolvingcreditfacilitymaturingon19November2008,withtherighttoextendthefacilityto19November2010.thefacilitywasenteredintoon20august2006andamendedon19November2007.at31december2007,seK650million(£50.5million)wasdrawndownunderthefacility(2006:£153.7million)andcarriedaninterestrateof0.80%overliboR(2006:0.95%overliboR).

theobligationsoftheborrowersunderthe£330millionfacilityareguaranteedbytheprincipaluKanddutchtradingsubsidiaries,logicaCMguKlimitedandlogicaCMgNederlandb.V.the£150millionfacilityisguaranteedbylogicaCMguKlimited.


153

Note X Share capital

2007 2006Authorised £’m £’m2,250,000,000(2006:2,250,000,000)ordinarysharesof10penceeach 225.0 225.0

2007 2006Allotted, called-up and fully paid Number £’m Number £’mat1January 1,535,698,482 153.6 1,146,238,652 114.6allottedundershareplans 5,538,792 0.6 2,595,389 0.3sharespurchasedandcancelled (83,591,195) (8.4) – –allottedtoacquireWM-datashares – – 377,848,632 37.8allottedtoacquireWM-dataconvertibledebentures – – 9,015,809 0.9at31december 1,457,646,079 145.8 1,535,698,482 153.6

theCompanyhasoneclassofauthorisedandissuedsharecapital,comprisingordinarysharesof10penceeach.subjecttotheCompany’sarticlesofassociationandapplicablelaw,theCompany’sordinarysharesconferontheholder:therighttoreceivenoticeofandvoteatgeneralmeetingsoftheCompany;therighttoreceiveanysurplusassetsonawinding-upoftheCompany;andanentitlementtoreceiveanydividenddeclaredonordinaryshares.


duringtheyear,5,538,792newordinaryshares,withanominalvalueof£553,879wereissuedunderemployeeshareplansasfollows:

Exercise price NumberYear of grant of option p/share exercised1997 134.0 140,0001997 156.0 441,0502000unilogoptions 91.7 2,332,4932002 107.2 687,5322002 80.9 294,7052003 83.5 100,3262004 156.5 45,5082005 159.1 52,1782006 – 1,445,000

duringtheyear3,558,605optionsweregrantedoverunissuedandexistingsharesunderemployeeshareoptionplansatapriceof183penceandareexercisablein2010.optionsgrantedundersayeplansanddiscretionaryoptionsweregrantedatmarketprice.

duringtheyear,awardsweremadeover226,199sharesundertheemployeeequitypartnershipplan(emepp),1,065,070sharesundertheexecutiveequityparticipationplan2006(exepp2006)and5,396,395sharesunderthelongtermincentiveplan(ltip).RefertoNotexiiiforfurtherinformationontheCompany’sshareplans.

at31december2007,therewererightstotheallotmentof37,771,989sharesunderemployeeshareplansatpricesrangingfrom81penceto2,288pence,exercisablebetween2008and2014.at31december2006,therewererightstotheallotmentof42,124,367sharesunderemployeeshareplansatpricesrangingfrom81penceto2,288penceandexercisablebetween2007and2014.

theCompanyholdstreasurysharesindiscretionarytrustswhichweresetupforthebenefitoflogicaemployees.thetrustspurchasetheCompany’ssharesinthemarketforuseinconnectionwiththegroup’sall-employeeanddiscretionaryshareoptionplansandequitypartnership/participationplans.

at31december2007,theemployeetrustsowned14,575,290shares(2006:15,588,650)withanominalvalueof£1.5million(2006:£1.6million).ofthisholding,4,121,631shareswereunderoptiontoemployees(2006:5,014,486)and2,207,215wereheldfortheequitypartnershipplans(2006:1,285,625).

thetrusteesoftheCMgesoptrustandthelogicaesoptrusthaveagreedtowaivetherighttofuturedividendsonsharesoftheCompanyheldbythetrustsexceptforanominalamount.at31december2007,thenominalamountpayabletobothtrustswas0.001pencepershare.Waiverofdividendspayableduringtheyearamountedto£0.9million(2006:£0.8million).themarketvalueofthesharesownedbyemployeetrusts,basedonthemid-marketpriceat31december2007was£17.2million(2006:£29.0million).


154

Note XI Capital and reserves

share profit Capital share premium andloss treasury redemption special capital account account shares reserve reserve total £’m £’m £’m £’m £’m £’m £’mat1January2006 114.6 1,084.8 121.6 (35.9) – 23.3 1,308.4Netprofitfortheyear – – 117.8 – – – 117.8sharesissued,netofexpenses 39.0 12.2 – – – – 51.2dividendspaid – – (61.1) – – – (61.1)share-basedpayment – – 1.0 – – – 1.0at1January2007 153.6 1,097.0 179.3 (35.9) – 23.3 1,417.3Netprofitfortheyear – – 296.6 – – – 296.6sharesissued,netofexpenses 0.6 1.9 – – – – 2.5sharespurchasedandcancelled (8.4) – (130.8) – 8.4 – (130.8)dividendspaid – – (85.9) – – – (85.9)other – – – 0.8 – – 0.8share-basedpayment – – 0.9 – – – 0.9at31december2007 145.8 1,098.9 260.1 (35.1) 8.4 23.3 1,501.4

duringtheyearended31december2007,thesharepremiumaccountwasnotreducedbyexpensesrelatedtotheissuanceofnewordinaryshares(2006:£5.6million).

Capital redemption reservethecapitalredemptionreservewasanon-distributablereserveandcontainedthenominalvalueofthesharesrepurchasedandcancelled.

Treasury sharestheCompanyholdssharesinthreediscretionarytrustswhichweresetupforthebenefitoflogicaemployees.thetrustspurchase

theCompany’ssharesinthemarketforuseinconnectionwiththegroup’semployeeshareplans.theamountshowninthetreasurysharesreserveat31december2007,whichrelatedsolelytosharespurchasedanddisposedofbythetrusts,wouldbedeductedindeterminingtheamounttheCompanyhadavailablefordistributionatthatdate.

Special reservethespecialreserverepresentedthereductionofthesharepremiumaccountfollowingtheHighCourt’sagreementin1988.

Note XII Reconciliation of movements in shareholders’ funds

2007 2006 £’m £’mprofitforthefinancialyear 296.6 117.8dividendspaid (85.9) (61.1) 210.7 56.7(purchase)/saleofownshares (130.0) –sharesissuedduringtheyear,netofexpenses 2.5 51.2othermovementsinreserves 0.9 1.0Netincreaseinshareholders’fundsfortheyear 84.1 108.9shareholders’fundsatthebeginningoftheyear 1,417.3 1,308.4shareholders’fundsattheendoftheyear 1,501.4 1,417.3



155

Note XIII Share-based payment

Equity-settled share-based payment arrangements thegroupoperatessevenequity-settledshare-basedpaymentarrangements:thelongtermincentiveplan(ltip),thesharesaveplan,theexecutiveequityparticipationplan2006(exepp2006),theemployeeequitypartnershipplan(emepp)andtheexecutiveshareoptionplan2006(esop2006)andtwofurtherplans,theexecutiveshareoptionscheme(esos)andtheexecutiveequitypartnershipplan(exepp).underthelattertwoplans,nofurthergrantswillbemadeastheirten-yearawardcyclehascometoanend,butunderwhichexecutivesstillhavecurrentawards.asummaryofthemaintermsofthearrangementsisgivenbelow,withparticularreferencetothetermsofthosegrantsforwhichashare-basedpaymentexpensehasbeenrecognised.

Long Term Incentive Plantheltipisadiscretionarybenefitofferedbythegroupforthebenefitofitssenioremployees,aswellastostaffwithhighpotentialortorecognisesignificantachievements.iteffectivelysupersedestheesosastheCompany’smainequitybenefitdiscretionaryplan.anawardundertheltipmaybegrantedasaconditionalallocation,anil(ornominal)costoptionwithashortexercisewindoworasforfeitableshares.Cash-basedawardsofanequivalentvaluetoshare-basedawardsmayalsobegrantedorcash-basedpaymentsmaybeusedtosatisfyanawardoriginallymadeinshares(eitherinwholeorpart),althoughtheRemunerationCommitteedoesnotcurrentlyintendtodoso.themaximummarketvalueofordinarysharesintheCompanysubjecttoltipawardsgrantedtoanyemployeeinanyfinancialyearwillnotexceed200%ofthatemployee’sbasesalary.theintentioninitiallyisnottoexceed150%ofsalary.

theperformanceconditionattachedtoonehalfofanawardwillrequireannualearningspersharegrowthtoexceedthegrowthintheRetailpriceindexbybetween3%and7%perannumoverthreefinancialyearsforbetween30%and100%ofthishalfoftheawardtovest(thatis,between15%and50%ofthetotalaward).theperformanceconditionattachedtotheotherhalfofanawardwillmeasurethetotalshareholderreturnperformance(tsR)oflogicaoverasinglethree-yearperformanceperiodagainstanumberofothercompaniesdrawnmainlyfromthedowJoneseurostoxxtechnologyindex.30%ofthishalfoftheawardwillvestiftheCompanyisrankedinthemedianattheendoftheperformanceperiod,with100%ofthishalfoftheawardvestingiflogicaisatorabovetheupperquartile.theRemunerationCommitteeintendstoreviewtheperformanceconditionseachyeartoensurethattheyremainsuitableandreflecttheongoingmarket.

Sharesave Planthegroupoperatesasavings-relatedshareoptionplanunderwhichemployeesenterintoasavingscontractwithafinancialinstitutiontopayafixedmonthlysumforeitherathree-yearor,forgrantsbefore4october2002,five-yearperiod.shareoptionsaregrantedatanexercisepriceatleastequaltotheclosingmid-marketpriceoftheCompany’ssharesonadayshortlybeforethedateofgrant.theaggregateexercisepricepayableisequaltotheexpectedproceedsonmaturityofthesavingscontract.shareoptionsmaybeexercisedwithinsixmonthsofthevestingdate.therearenoperformanceconditionsattachedtosharesaveplanoptions.

Equity Participation/Partnership Plansthegroupoperatesanequityparticipationplanforseniorexecutives,theexepp2006,andincertaincountriesanequitypartnershipplanopentoallemployees,theemepp,thetermsofwhicharesimilar.undertheequityparticipation/partnershipplans,employeesmakeaninvestmentintheCompany’sshares,subjecttofinanciallimits,whichmustbemaintainedoverathree-yearvestingperiod.Vestingwilloccurforthoseparticipantsemployedatthevestingdate,subjecttoaperformanceconditionbeingmet.

undertheexepp2006,seniorexecutives,inanyoneyear,mayinvestinsharesuptoamaximumof50%ofnetbonuspaid.theselodgedshareswillbematchedona1:1(grossbasis)(theMatchingaward).Matchingawardshareswillbereleasedassoonaspracticableafterthethirdanniversaryoftheaward,subjecttothestretchingperformanceconditionshavingbeenmet.theperformanceconditionsinrespectoftheexepp2006havethesamecriteriaastheCompany’sltipperformanceconditionsdescribedabove.

theemepp’sperformanceconditionisbasedongrowthinthegroup’searningspersharewhichmustexceedthegrowthintheRetailpriceindexbyanaverageof3%perannumofthethreeyearsperformanceperiodfortheawardtovestinfull.theRemunerationCommitteemay,atitsdiscretion,allowMatchingawardsundertheemepptovestprorataiftheperformanceconditionisnotfullyachievedoverthethree-yearperformanceperiod.awardsofamatchingnumberofsharesaremadeatnilcosttoemployeesandareexercisableforuptosevenyearsafterthevestingdate,afterwhichtheawardwilllapse.

althoughnofurtherawardswillbemadeundertheexeppthereremainoutstandingawardswhichhaveyettoreachtheirthirdanniversary.thisplanwasoperatedforseniorexecutivesasanequity-basedinvestmentplansubjecttofinanciallimitsandtheinvestmentbeingmaintainedoverathree-yearvestingperiod.Vestingwilloccurforthoseexecutivesemployedatthevestingdatesubjecttoaperformanceconditionbasedongrowthinthegroup’searningspershareexceedingthegrowthintheRetailpriceindexbybetween3%and7%perannum.

Executive Share Option Plan 2006attheCompany’sannualgeneralMeetingin2006shareholdersapprovedtheimplementationoftheesop2006.thisplanhasbeenintroducedtoallowawardstobemadetoseniorexecutivesworkinginjurisdictionswhereitwouldbeinappropriatetomakeanawardundertheltip.itisanticipatedthatperformanceconditionsattachedtoanyesop2006awardswillhavethesamecriteriaastheltipnotedabove.asyet,noawardshavebeenmadeunderthisplan.


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Note XIII Share-based payment (continued)

Executive Share Option SchemeNonewoptiongrantswillbemadeundertheesos,althoughoptionsmadeunderpreviousgrantstoseniorexecutivesandmanagersacrossthegroupremainoutstanding.optionsarenormallyexercisablebetweenthreeand10yearsfollowinggrant,providedthataperformancecondition,specifiedatthedateofgrant,hasbeensatisfied.typically,growthinthegroup’searningspershareovertherelevantthree-yearperformanceperiodisrequiredtoexceedthegrowthintheRetailpricesindexbyatleast21%fortheperformanceconditiontobemet.

esosoptiongrantspriorto2005haveamaximumseven-yearexerciseperiod,whiletheexerciseperiodforoptiongrantsin2005and2006isfouryears.Retestingofperformanceconditionsmaybecarriedouttwiceforesosoptionsgrantedin2003butonlyonceforoptionsgrantedin2004.Noretestingispermittedforgrantsawardedin2005and2006.

theexercisepriceofesosoptionsisgenerallyatleastequaltotheclosingmid-marketpriceoftheCompany’ssharesonthedateofgrant,althoughthepricingmechanismvariesslightlyforgrantstoFrenchemployees.

areconciliationofthemovementinthenumberofshareoptionsandshareawardsheldbyemployeesanddirectorsoftheCompanyisshownbelow: 2007 Share Share awards options Weighted average exercise Number of price Number of shares £ sharesOutstanding at 1 January 2007 6,271,987 3.00 1,280,669granted 6,187 1.83 1,359,945exercised (858,501) 1.14 (28,158)Forfeited (5,156) 1.83 (958,880)expired (4,682) 2.38 –Outstanding at 31 December 2007 5,409,835 3.29 1,653,576Exercisable at 31 December 2007 3,060,467 2.39 33,630

2006 share shareawards options Weighted average exercise Numberof price Numberof shares £ sharesoutstandingat1January2006 6,267,833 3.00 61,751granted 6,790 1.93 1,218,881transferofemployeefromsubsidiaryundertaking 775 2.38 37exercised (2,275) 1.07 –Forfeited (1,136) 11.12 –outstandingat31december2006 6,271,987 3.00 1,280,669exercisableat31december2006 3,925,123 2.12 15,399



157

Note XIII Share-based payment (continued)theexercisepriceandremainingcontractuallifeofshareoptionsoutstandingatthebalancesheetdatewasasfollows: 2007 Weighted Weighted average average remaining exercise contractual price life Number ofRange of exercise prices £ Years shares£1.00ormoreandlessthan£2.00 1.42 4.4 2,056,818£2.00ormoreandlessthan£5.00 2.77 3.6 2,376,710£5.00ormoreandlessthan£10.00 6.53 2.5 777,212£10.00ormore 16.26 2.8 199,095 3.29 3.7 5,409,835

2006 Weighted Weighted average average remaining exercise contractual price life NumberofRange of exercise prices £ years shares£1.00ormoreandlessthan£2.00 1.34 5.3 2,914,288£2.00ormoreandlessthan£5.00 2.77 4.6 2,381,392£5.00ormoreandlessthan£10.00 6.53 3.5 777,212£10.00ormore 16.26 3.8 199,095 3.00 4.8 6,271,987


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Note XIII Share-based payment (continued)thefairvalueofshareoptionsandshareawardsgrantedinthe2007and2006financialyearstotheemployeesanddirectorsoftheCompanyandtheassumptionsusedinthecalculationoftheirfairvalueonthedateofgrantwereasfollows:

2007 Share Share awards options Executive Equity Long Term Participation Incentive SharesaveWeighted average assumption Plan Plan Plansharepriceondateofgrant £1.73 £1.84 £1.84exerciseprice nil nil £1.83shareoptions/awardsgrantedintheyear 388,595 971,350 6,187Vestingperiod(years) 3.0 3.0 3.0expectedvolatility(%) 27.9 27.9 29.0expectedlife(years) 3.0 3.0 3.3Riskfreerate(%) 5.4 5.4 5.4dividendyield(%) 3.0 3.0 3.0Fairvaluepershareoption/award £1.22 £1.29 £0.39

2006 share shareawards options executive equity longterm participation incentive sharesaveWeighted average assumption plan plan plansharepriceondateofgrant £1.93 £1.70 £1.93exerciseprice nil nil £1.93shareoptions/awardsgrantedintheyear 153,014 1,065,867 6,790Vestingperiod(years) 3.0 3.0 3.0expectedvolatility(%) – 36.8 38.5expectedlife(years) 3.0 3.0 3.3Riskfreerate(%) – 4.7 4.5dividendyield(%) 2.9 3.3 2.9Fairvaluepershareoption/award £1.76 £1.29 £0.50



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Note XIII Share-based payment (continued)thefairvalueofesosoptionswasmeasuredusingaMonteCarlosimulationmodelandthefairvalueofsharesaveplanoptionswasmeasuredusingtheblack-scholesoptionpricingmodel.thefairvalueofshareawardsundertheequitypartnershipplanswasmeasuredatthemarketsharepriceatthedateofgrantreducedforthepresentvalueofexpecteddividendsoverthevestingperiod,forwhichawardholdershavenoentitlement.

expectedvolatilitywasdeterminedusingthehistoricalvolatilityoftheCompany’ssharepriceoveraperiodcommensuratewiththeexpectedlifeoftheshareoption.theperiodfrom1July1999to30June2001wasexcludedasmanagementbelieveitrepresentedaperiodofhighsharepricevolatilitywhichisunlikelytoberepeatedinthefuture.

shareawardsundertheequitypartnershipplansareassumedtobeexercisedonthevestingdate.sharesaveoptionsareassumedtobeexercisedthreemonthsafterthevestingdate,themid-pointofthecontractualexerciseperiod.

atthedateofgrant,itisassumedthatperformanceconditionswillbemetinfull.adjustmentsaremadesubsequently,wherenecessary,toreflectupdatedassessmentsofwhetherperformanceconditions

Note XIV Contingent liabilities

thegroup’ssubsidiariesandtheCompanyarecurrently,andmaybefromtimetotime,involvedinanumberoflegalproceedingsincludinginquiriesfromordiscussionswithgovernmentalandtaxation

authorities.Whilsttheoutcomeofcurrentoutstandingactionsandclaimsremainsuncertain,itisexpectedthattheywillberesolvedwithoutamaterialimpactonthegroup’sfinancialposition.theCompanyhasguaranteedcertaincontractsinthenormalcourseofbusinessandbankborrowingsofitssubsidiaries.

willbemetandthefinaldeterminationonthevestingdate.theshare-basedpaymentexpensealsotakesaccountofexpectedforfeiturefromthebalancesheetdatetotheendofthevestingperiodfollowingcessationofemployment.aweightedaverageforfeiturerateof9%perannumwasassumedforcalculatingtheshare-basedpaymentexpensefortheyearended31december2007(2006:7%).

Forexercisespriortothevestingdate,theadditionalexpensebetweenthecalculationdateandthevestingdateisimmediatelychargedtotheincomestatement.

theCompanyrecognisedatotalexpenseinrespectofequity-settledshare-basedpaymentarrangementsof£0.9millionintheyearended31december2007(2006:£1.0million).

Cash-settled share-based payment arrangementstheCompanydoesnotoperateseparatecash-settledshare-basedpaymentsarrangements,however,socialsecurityobligationsarisingonshareoptionandshareawardplansaretreatedassuchanarrangementforaccountingpurposes.theliabilityforcash-settledshare-basedsocialsecuritypaymentsat31december2007was£0.1million(2006:£0.4million).themovementintheliabilityresultedinanincomefortheyearended31december2006of£0.3million(2006:expenseof£0.1million).

Note XV Related party transactions

theCompanyhastakenadvantageoftheexemptioninFRs8‘Relatedpartytransactions’fromdisclosingtransactionswithother

membersofthegroupheadedbylogicaCMgplc.transactionswiththedirectorsoftheCompanyaredisclosedintheRemunerationCommitteereportonpages56to73.therewerenootherrelatedpartytransactionsduringthecurrentorprioryear.


160

Euro translation of selected financial information

thegrouphaspresentedatranslationoftheconsolidatedincomestatement,balancesheetandcashflowstatementintoeurostoassistusersoftheFinancialstatementsmorefamiliarwiththatcurrency.

theincomestatementandcashflowstatementineuroshavebeencalculatedbyconvertingthesterlingfigurestoeurosatanaveragerateof€1.46to£1(2006:€1.47to£1).thebalancesheethasbeencalculatedbyconvertingthesterlingfigurestoeurosattheclosingrateof€1.36to£1(2006:€1.48to£1).

Euro translation of consolidated income statement For the year ended 31 December 2007

Restated 2007 2006 €’m €’mCoNtiNuiNgopeRatioNs:

Revenue 4,486.9 3,558.4Netoperatingcosts (4,326.7) (3,349.8)Operating profit 160.2 208.6 aNalysedas:

operatingprofitbeforeexceptionalitems 194.1 243.7 exceptionalitems (33.9) (35.1) operatingprofit 160.2 208.6Financecosts (55.3) (50.4)Financeincome 16.1 12.8shareofpost-taxprofitsfromassociates 1.8 0.4Profit before tax 122.8 171.4taxation (7.9) (45.9)Profit for the year from continuing operations 114.9 125.5

disCoNtiNuedopeRatioN:

Resultfromdiscontinuedoperation 130.5 5.5Net profit for the year 245.4 131.0

attRibutableto:

equityholdersoftheparent 248.0 120.6Minorityinterests (2.6) 10.4 245.4 131.0

Earnings per share from continuing operations cents/share cents/share–basic 7.9 9.4–diluted 7.8 9.3

Earnings per share from total operations–basic 16.6 9.9–diluted 16.4 9.7


161

Euro translation of consolidated balance sheet 31 December 2007

seepage160forbasisoftranslation.

2007 2006 €’m €’mNon-current assetsgoodwill 2,181.4 2,297.1otherintangibleassets 486.9 614.3property,plantandequipment 179.7 202.2investmentsinassociates 3.3 8.9Financialassets 15.0 14.9Retirementbenefitassets 16.3 27.7deferredtaxassets 74.1 74.9 2,956.7 3,240.0Current assetsinventories 1.9 4.3tradeandotherreceivables 1,388.8 1,583.9Currenttaxassets 55.1 46.2Cashandcashequivalents 147.8 262.4 1,593.6 1,896.8Current liabilitiesConvertibledebt (299.1) (299.5)otherborrowings (132.2) (49.0)tradeandotherpayables (1,180.8) (1,311.9)Currenttaxliabilities (76.3) (47.8)provisions (12.4) (30.8) (1,700.8) (1,739.0)

Net current (liabilities)/assets (107.2) 157.8Total assets less current liabilities 2,849.5 3,397.8

Non-current liabilitiesborrowings (373.6) (738.4)Retirementbenefitobligations (68.8) (94.9)deferredtaxliabilities (170.0) (243.3)provisions (25.7) (19.5)othernon-currentliabilities (1.0) (1.2) (639.1) (1,097.3)Net assets 2,210.4 2,300.5Equity sharecapital 198.3 227.3sharepremiumaccount 1,494.5 1,623.6otherreserves 479.1 406.1Total shareholders’ equity 2,171.9 2,257.0Minorityinterests 38.5 43.5Total equity 2,210.4 2,300.5


162

Euro translation of consolidated cash flow statement For the year ended 31 December 2007

seepage160forbasisoftranslation.

Restated 2007 2006 €’m €’mCash flows from continuing operating activitiesNetcashinflowfromtradingoperations 381.1 356.5Cashoutflowrelatedtorestructuringandintegrationactivities (41.8) (48.5)Cash generated from continuing operations 339.3 308.0Financecostspaid (58.7) (38.7)incometaxpaid (66.9) (46.2)Net cash inflow from continuing operating activities 213.7 223.1

Net cash inflow/(outflow) from discontinued operating activities 10.2 (1.9)

Cash flows from continuing investing activitiesFinanceincomereceived 10.2 7.5dividendsreceivedfromassociates 1.5 –proceedsondisposalofproperty,plantandequipment 3.2 3.2purchasesofproperty,plantandequipment (51.5) (41.5)expenditureonintangibleassets (19.0) (25.1)purchaseofminorityinterests (3.2)deferredconsiderationandacquisitionofsubsidiaries,netofcashacquired (49.9) (585.5)disposalofsubsidiariesandotherbusinesses,netofcashdisposed 61.3 2.8disposalofdiscontinuedoperation,netofcashdisposed 311.2 –Net cash inflow/(outflow) from continuing investing activities 263.8 (638.6)

Net cash outflow from discontinued investing activities – (8.2)Cash flows from continuing financing activitiesproceedsfromissueofnewshares 3.7 5.0paymentforshareissuecosts – (7.9)purchaseofownshares (191.0) –proceedsfromtransferofsharesbyesoptrust 1.2 –proceedsfrombankborrowings 50.4 706.5Repaymentsofbankborrowings (298.1) (305.8)Repaymentsoffinanceleaseprincipal (6.9) (3.1)Repaymentsofborrowingsassumedinacquisitions – (5.6)proceedsfromotherborrowings – 0.6Repaymentsofotherborrowings – (0.6)paymentsonforwardcontractsdesignatedasanetinvestmenthedge (9.2) –dividendspaidtotheCompany’sshareholders (125.4) (89.8)dividendspaidtominorityinterests (0.6) (2.6)Net cash (outflow)/inflow from continuing financing activities (575.9) 296.7

Net decrease in cash, cash equivalents and bank overdrafts (88.2) (128.9)

Cash,cashequivalentsandbankoverdraftsatthebeginningoftheyear 221.8 360.5Netdecreaseincash,cashequivalentsandbankoverdrafts (88.2) (128.9)effectofforeignexchangerates 11.8 (9.8)Cash, cash equivalents and bank overdrafts at the end of the year 145.4 221.8


163

Five-year summary

thefive-yearfinancialsummarybelowincludesselectedinformationonacalendaryearbasis,whichhasbeenextractedfromauditedFinancialstatements.theinformationfortheyearsended31december2003to31december2006wasrestatedtoshowtelecomsproductsasadiscontinuedoperation.

theamountsdisclosedfortheyearended31december2003arepresentedunderuKgenerallyacceptedaccountingprinciples(uKgaap)becauseitisnotpracticabletorestateamountsforpriorperiodsbeforethegroup’sdateoftransitiontointernationalFinancialReportingstandards(iFRss)on1January2004.

UK GAAP1 Restated IFRS IFRS 2003 2004 2005 2006 2007 £’m £’m £’m £’m £’mRevenue 1,428.1 1,421.1 1,579.4 2,420.7 3,073.2Adjusted operating profit 102.6 99.8 107.8 203.4 207.6Operating profit before goodwill amortisation/ impairment and exceptional items 102.6 99.8 106.8 165.8 132.9goodwillamortisation/impairmentandexceptionalitems (130.4) (17.8) 0.5 (23.9) (23.2)shareofpost-taxprofitsfromassociates 0.4 0.4 1.4 0.3 1.2Netfinancecostspayable (11.7) (15.2) (16.2) (25.6) (26.8)Profit/(loss) on ordinary activities before tax (39.1) 67.2 92.5 116.6 84.1taxonprofit/(loss)onordinaryactivities (6.0) (26.1) (28.2) (31.2) (5.4)Profit/(loss) on ordinary activities after tax (45.1) 41.1 64.3 85.4 78.7Resultfromdiscontinuedoperation2 1.4 (15.9) 4.5 3.7 89.4Minorityinterests (2.4) (0.6) (3.0) (7.1) 1.8Profit/(loss) for the year attributable to ordinary shareholders (46.1) 24.6 65.8 82.0 169.9Closingnumberofemployeesfromcontinuingoperations 17,825 17,914 19,734 38,789 38,740turnovergrowthfromcontinuingoperations (14%) – 11% 53% 27%adjustedoperatingmarginfromcontinuingoperations3 7.2% 7.0% 6.8% 8.4% 6.8%adjustedbasicearningspersharefromcontinuingoperations4,5 8.0p 7.1p 7.0p 10.4p 10.2pdividendspershare4,6 5.01p 5.10p 5.31p 5.60p 5.80p1 adjustedoperatingprofitunderuKgaaprepresentedoperatingprofitfromcontinuingoperationsbeforegoodwillamortisationandexceptionalitems.adjustedoperatingprofitunder

iFRssisdefinedinNote8totheconsolidatedFinancialstatements.2 Fortheyearsended31december2004to31december2007,theresultfromdiscontinuedoperationrepresentedthetelecomsproductsoperation,whichwasdisposedon18June2007.

Fortheyearended31december2003,theresultfromdiscontinuedoperationrepresentedthetelecomsproductsoperationandothersmallnon-core,lossmakingbusinesseswithintelecomsproducts,reportedasdiscontinuedin2003.

3 underuKgaap,theadjustedoperatingmarginisfromcontinuingoperationsbeforegoodwillamortisation,restructuringandotherexceptionalitems.underiFRss,theadjustedoperatingmarginisfromcontinuingoperationsandbeforeexceptionalitemsandamortisationofthoseintangibleassetsinitiallyrecognisedatfairvalueinabusinesscombination.

4 earningspershareanddividendspersharehavebeenrestatedforthebonuselementoftherightsissuethattookplaceinNovember2005.5 adjustedbasicearningspershareunderuKgaaprepresentedbasicearningspersharefromcontinuingoperationsbeforegoodwillamortisationandexceptionalitems.adjustedbasic

earningspershareunderiFRssisdefinedinNote16totheconsolidatedFinancialstatements.6 dividendspersharearepresentedaccordingtothefinancialyeartowhichtheyrelateratherthanthebasisofrecognitionforaccountingpurposes.


164

5164

165


165

Shareholder informationIn this section:

166 Shareholder information


166

Shareholder information

Financial calendar 200827 Februarypreliminaryresultsannounced

14 AprilannualreportandagMNoticepublished

16 Aprilex-dividenddate

18 AprilRecorddate

14 MayannualgeneralMeetingandQ1interimmanagementstatement

15 MayFinaldividendpaidtoshareholders

14 Augustinterimresultsannounced

17 Septemberex-dividenddate

19 SeptemberRecorddate

17 Octoberinterimdividendpaidtoshareholders

5 NovemberQ3interimmanagementstatement

Shareholder information onlinelogica’sregistrarsareabletonotifyshareholdersbye-mailratherthanbypost,whenstatutorypublicationsorcommunicationsarepublishedontheCompany’swebsite.Whenevernewshareholderinformationbecomesavailable,suchaslogica’sinterimandfull-yearresults,CapitaRegistrarswillnotifyyoubye-mailandyouwillbeabletoaccess,readandprintdocumentsatyourownconvenience.

toregisteryourinterest,pleasegotowww.logicacmg-shares.com,select‘RegisterNewuser’,andfollowtheon-screenprompts.youwillbeaskedtoenteryourunique‘investorCode’,whichyouwillfindonyourdividendtaxvoucher,sharecertificate,orfromCapitaRegistrarsattheaddressbelow.

shouldyouchangeyourmindatalaterdate,youmaycancelyourrequesttoreceiveelectronicnotificationsbycontactingCapitaRegistrarsbypostorthroughtheabovementionedwebsite.

RegistrarsCapitaRegistrarsNorthernHouseWoodsomeparkFenaybridgeHuddersfieldHd80launitedKingdomwww.capitaregistrars.com

tel:08701623131(fromoutsidetheuK:+442086393399)Fax:+44(0)1484601512

Information for investorsinformationforinvestorsisprovidedontheinternetaspartofthegroup’swebsitewhichcanbefoundat:www.logica.com/investors

Investor enquiriesenquiriescanbedirectedviaourwebsiteorbycontactingourinvestorRelationsdepartment.

Karen KeyesHeadofinvestorRelationstel:+44(0)2074464372e-mail:[email protected]

Lucy DriverinvestorRelationsassistanttel:+44(0)2074461338e-mail:[email protected]

LogicaCMG plctel:+44(0)2076379111Registeredoffice:stephensonHouse,75HampsteadRoad,londonNW12plRegisteredinenglandNo.1631639

167


About Logicalogicaisaleadingeuropeanitandbusinessservicescompany,employing39,000peopleacross36countries.itprovidesbusinessconsulting,systemsintegration,anditandbusinessprocessoutsourcingservices.logicaworkscloselywithitscustomerstoreleasetheirpotential–enablingchangethatincreasestheirefficiency,acceleratesgrowthandmanagesrisk.itappliesitsdeepindustryknowledge,technicalexcellenceandglobaldeliveryexpertisetohelpitscustomersbuildleadershippositionsintheirmarkets.logicaislistedonboththelondonstockexchangeandeuronext(amsterdam)(lse:log;euronext:log).

logica.comlogica.com More information is available at logica.com


168

Published by Logica Corporate Communications, London.

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PrintstivesWesterhampress

AcknowledgementsourthankstosNCFfortheirkindcooperationwiththephotography.specialthanksalsotoouremployees:Jean-luc,Rebecca,iain,paul,Manishandpeter.

PaperthetextsectionofthisreporthasbeenprintedonRevive75specialsilkandRevive50:50offset.bothpapersaremadeupfrompreandpostconsumerwasteandvirginwoodfibre.thesepapershavebeenindependentlycertifiedaccordingtotherulesofForeststewardshipCouncil(FsC).Revive75specialsilkisaCarbonNeutralproduct.allpulpsusedareelementalChlorineFree(eCF)andthemanufacturingmillisaccreditedwiththeiso14001standardforenvironmentalmanagement.thecoverisprintedonKaskadboard,whichisproducedusingvirginfibre.thepulpsusedaretotallyChlorineFree(tCF)andtheinksusedareallvegetableoilbased.thisreportisrecyclableandnolaminationhasbeenused.

theuseoftheFsClogoidentifiesproductswhichcontainwoodfromwell-managedforestscertifiedinaccordancewiththerulesoftheForeststewardshipCouncil.

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