The Investment Column: French troubles make Logica one to avoid

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The Independent Online

So Logica is buying Unilog, one of the country's best-respected IT consultancies, for €930m (£630m). The strategic benefits are clear: a client base of national giants including France Télécom, Total and Vivendi Universal; the ability to offer clients a broader range of services, and in particular more outsourced IT support; even a modest amount of cost-cutting benefits, although French labour laws mean even these may not be achieved.

Analysts say they have to be pretty cavalier with the numbers to believe the deal will generate a good return on capital quickly, and Logica's balance sheet is already stretched. The acquisition had to be part-funded by a £389m rights issue at a 36 per cent discount to the share price. Almost 92 per cent took up their rights at 107p and the rump were placed at 145p apiece yesterday. Even after the equity fundraising, gearing will still be a ticklish 67 per cent.

Across Europe, business spending on IT has picked up this year, so Logica has enjoyed a rebound in profitability. The medium-term trends, though, are not all in its favour, with margins under pressure for all the mid-tier players. The company remains sub-scale in Germany. And its wireless technology division, servicing telecoms operators, is still underperforming. Avoid.

NETeller still looks a good bet

A very, very big pay-day for Stephen Lawrence and John LeFebvre, founders and non-executives at NETeller, the money transfer business that provides an "e-wallet" for online gamblers to use to play poker and other games. The pair cashed in £218m yesterday - yes, £218m - as they sold their stake down from 49.9 per cent to 20.7 per cent.

The stock fell 56p to 652.5p as the pair's broker searched for buyers, and the placing was done at 625p. Some investors will take fright at the share sales, but there is an unhealthy scepticism about all things to do with online gaming. See the move instead as part of the company's growing up process.

The third quarter trading update showed that NETeller is still adding 3,085 new customers every day as more gamblers move to the internet to get their fix. NETeller's net income for the year to date has tripled and it is on course to make $97m (£55m) pre-tax profit this year, putting the shares on 17 times earnings. There is no sense of a slowdown in the growth of gambling over the net; no sign of a change to the US law that prohibits the practice and forces punters to use e-wallets such as NETeller's; and no appearance of tougher competition. Buy.