Software firm LogicaCMG predicted that a recovery in the IT services market would continue for at least 12 more months after underlying profits jumped 23.9 per cent.
Logica expected its customers to focus on driving down costs, managing risks and improving their processes in 2006 and said two big deals over the past year would allow it to cash in on the gradual improvement in the market.
Margins improved mark-edly in the UK and Netherlands during the second half of the year - boosted by outsourcing contracts with the likes of Transport for London.
P retax profit rose to £105.6 million in the year to the end of December from £63.7 million the year before, on revenues up 10.6 per cent at £1.83 billion, in line with expectations.
Underlying profits came in a shade above expectations at £121.7 million.
Revenues in the UK were ahead by 4.8 per cent during the year to £712 million.
Logica reported a sharp fall in business from utilities since the summer as high energy prices forced many to cut back on IT spending.
But demand from the public sector remained stable as Logica picked up more work for the National Health Service and extended contracts with the Crown Prosecution
Service, General Medical Council and the Health & Safety Executive.
Defence spending also flowed more quickly into its coffers after the Government accelerated the Atlas programme, which involves setting up an integrated communications system.
Logica, which has a global workforce of more than 21,000, bulked up last year by swallowing Edinfor on the Iberian peninsula and followed it with the acquisition of Paris-based
Unilog for 930.3 million euros (£630.6 million).
The deal for Unilog put France on a par with the United Kingdom and the Netherlands in terms of the i mportance of revenue streams, while giving it a platform to become profitable in Germany.
Chief executive Dr Martin Read said: "The combination of improving market conditions, increased scale and a broader geographic footprint should enable the LogicaCMG group to make further progress in 2006 - in line with current market expectations."
Logica said it was looking at potential acquisitions to boost growth in Europe.
Mr Read said the company was seeking an opportunity in Germany but there was no obvious target as it looked to buy its way into Europe's largest economy.
"Once you take out the two really big players in Germany it's a fragmented market, there isn't really a Unilog in Germany that would suit," he said. "Acquisitions are not something you can put a timeframe on."
In its Wireless Networks business, which is being renamed Telecoms Products to reflect demand from fixed line and cable operators, Logica said revenues rose 7.3 per cent to £254.7 million.
Shares closed down 83/4p at 1921/4p