LogicaCMG reveals new woes in core IT services

More doubts have emerged over the strategy of LogicaCMG, the information technology services group, after it revealed a fresh set of problems just as it was claiming success in fixing its mobile phone messaging division, the last bugbear for investors.

More doubts have emerged over the strategy of LogicaCMG, the information technology services group, after it revealed a fresh set of problems just as it was claiming success in fixing its mobile phone messaging division, the last bugbear for investors.

This time the difficulties lie in the French and Benelux operations of the company's IT services division which provides technical solutions and consulting services for industries ranging from banking to space exploration. In a trading update yesterday, in the run-up to full-year results due on March 2, LogicaCMG said profits margins were weaker in Belgium and Luxembourg, while the second-half performance of its French operation had been "disappointing in a difficult market".

LogicaCMG shares fell 5.05 per cent after the statement, despite the company claiming it had made progress in fixing its Wireless Networks arm, which provides technology to run text and video messaging services for mobile phone operators.

Martin Read, the company's long-serving chief executive, has delivered disappointing trading statements in recent years and the shares have fallen over the past 12 months from 300p to 183.25p yesterday.

The problem areas on the Continent did not include the group's Dutch operations and the company said that overall trading would produce an outcome for the full year "within market estimates". The new trading year had also started brightly, said the company, with new orders in Portugal after a contract was signed with the utility Energias de Portugal. Richard Holway, at the industry analysts Ovum, said: "The problem with LogicaCMG is that it's like a car that never seems to get its engine to fire on all cylinders."

He said LogicaCMG's problems stemmed from increased pressures on margins and that profits growth would have to come from "unrelenting" cost reduction. He said market conditions would remain "tough" for the foreseeable future. LogicaCMG said it had opened an offshore centre in Bangalore where it employs 1,175 people.

Mr Read said: "We are pleased that we reversed the first-half losses in Wireless Networks and met our timetable for the restructuring of our German business. With good order intake continuing in the second half of 2004 ... we start 2005 with a good platform from which to take our business forward."

TROUBLED TIMES OF MARTIN READ

2000

7 June: Logica warns full-year sales will be below expectations, after which shares slide 14 per cent

11 December: Annual report reveals Martin Read earned £27m

2001

23 October: Insists no reason to change guidance following 11 September attacks

13 December: Issues first profits warning on Wireless Networks, shares fall 15 per cent

2002

16 January: Vodafone awards text messaging contract to its rival Ericsson

21 February: Second Wireless Networks profits warning; shares fall 16.9 per cent

10 May: Issues third profits warning on Wireless Networks, sacks 700 people and shares fall 17 per cent

24 June: Ejected from FTSE 100

30 December: Completes merger with its Dutch rival CMG, 1,440 jobs axed

2004

26 April: Stock market rumours surface of forthcoming profits warning from the merged LogicaCMG

18 May: AGM warning that Wireless Networks will be loss making in the first half of the year. Investors tell The Independent the market is "suspicious" of company's forecasts.

2005

18 January: Trading update warns of problems in its IT services division in France, Belgium and Luxembourg. Its shares fall 5.05 per cent