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LogicaCMG to cut 2,200 jobs
AMSTERDAM, the Netherlands (Reuters) - Anglo-Dutch computer services firm LogicaCMG on Wednesday posted second-half pre-tax profit in line with expectations, but investors fretted over its outlook which depends mainly on cost cuts. The group predicted continued pressure on margins in the first six months of this year, but saw cost savings boosting them in the second half despite tough markets, especially in France and Germany. The company said it had increased its number of planned job cuts to 2,200, almost a tenth of a combined workforce that has already been reduced by nearly 1,000 since June 2002. "Demand in systems integration and consulting remains weak as customers focus on cost reduction and maximising returns from existing investments,'' LogicaCMG said in a statement. This showed in the first set of results since Britain's Logica took over CMG for 510 million pounds in December. LogicaCMG posted second-half pro-forma pre-tax profit of 54.5 million euros, eight percent lower than in the previous six months. Revenues in the second half also fell sharply, by seven percent to 882.5 million pounds versus the previous half. "Even though these figures are in line with what the company said before it is still an appalling set of numbers,'' said one London-based analyst. LogicaCMG shares were down 4.7 percent in London and 3.5 percent in Amsterdam. The stock has lost a quarter of its value since relisting as a combined entity in December, placing the group's market capitalisation at 1.2 billion euros. Before the merger, which combined the two global leaders in mobile text messaging, both Logica and CMG had suffered along with most of their peers as companies slashed IT budgets to the bone amid economic slowdown and geopolitical uncertainty. The two were especially hurt by telecoms companies scrutinised investments after spending heavily on as yet unproven third-generation mobile services. NEW RIVALSLogicaCMG is also struggling to fend off Nokia and Ericsson which are moving into the mobile phone messaging systems market. They combine these messaging systems into their much larger mobile phone network systems. While LogicaCMG has a 70-percent share in the market for mobile phone text messaging, it has only has a quarter of the market for the emerging picture, sound and text messaging. An analyst who asked not to be named said: ``Pressure in continental European business is eating away profits in the core geographies, and headcount reductions are taking more time than expected.'' Analysts surveyed by Reuters had expected Europe's third-largest computer services company to post a pre-tax profit of 53-55 million pounds on revenues in the range of 873 to 883 million pounds. The company said CMG's former chief executive, Alistair Crawford, had resigned effective March 4 from LogicaCMG's board -- less than three months after the completion of the takeover -- to pursue other leadership opportunities. But LogicaCMG reassured that the integration of the two companies was on track, saying it now saw 80 million pounds in annual cost savings following the merger, 20 million than earlier expected. It expects 40 million pounds in cost savings this year, mainly in the second half. "Against a difficult market background we have maintained margins on lower revenues,'' LogicaCMG Chief Executive Martin Read said in a statement. "We have established a demanding pace for integration and the two cultures are fitting together well.'' Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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