Poor results spark review at Logica
SOURCE: Financial Times
DATE: Feb 28th, 2008
Mohit SoapBox:
Logica (The new LogicaCMG) seems to be focused on increasing it’s offshore presence in India and leveraging offshore more effectively to grow the organization. Logica has struggled for some time and had hired Andy Green to come in and
make things happen. Over the next couple of quarters it will be interesting to see how the strategy works out. Interestingly a # of the European firms are looking at increasing their offshoring presence. Is that the solution for the problems is yet to be seen.
ARTICLE
Logica disappointed investors after announcing weaker results in its UK business while warning that some financial services clients had cut their spending.
Andy Green, the Anglo-Dutch IT services company’s new chief executive, said that he would outline a strategy review by the beginning of May. He also gave a cautious outlook for the year, saying revenue growth will be similar to the 3 per cent achieved in 2007. “It is inevitable that we will see some level of economic slowdown and that will have some impact,” he said.
Mr Green said he would accelerate growth of Logica’s offshoring operations in India, which currently employ about 3,000 people.
The company, which changed its name to Logica from LogicaCMG yesterday, is planning to open a second site in India and will hire a chief executive for the Indian business. Mr Green also indicated he was planning job cuts. However, he said the review was unlikely to involve large-scale redundancies or disposals.
UK business, which accounts for about 22 per cent of revenues, saw sales fall 8 per cent to £662.5m in 2007, while adjusted operating profits were down 60 per cent at £30.5m. The declines came after a key contract was not renewed at the end of 2006 and Logica faced £20m of costs related to a legal dispute with T-Mobile, an over-running contract. It has also taken provisions against other contracts that are in danger of delays.
George O’Connor, analyst at Panmure Gordon, who cut his rating on the stock from “buy” to “hold”, said: “We were primed for bad, but this was worse.”
Revenues for 2007 rose 3 per cent to £3.07bn, while pre-tax profits fell 28 per cent to £84.1m. Earnings per share fell 16 per cent to 5.4p, buoyed by a lower tax charge. The company will pay a final dividend of 3.5p (3.2p) giving a total pay-out for the year of 5.8p (5.4p).
The shares, which have fallen 37 per cent in the past year, fell 4¼p to 105¼p yesterday.
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