LogicaCMG cuts more jobs as operating profit dips 6%

The computer services provider LogicaCMG is cutting 800 more jobs that previously thought and parting company with the former chief executive of the CMG business.

Meanwhile the company's shares plunged a further 15 per cent to 100p after the group expressed caution on future prospects. It said its markets in France and Germany "continue to weaken" and it expects further pressure on margins in the first half of this year.

One analyst said the increase in redundancies "means business is even worse than expected. There is hardly any good news you can expect from LogicaCMG in the next six months". Another said: "Most analysts are trimming their [profit] numbers and the risks of the business don't appear to have materially changed."

The company was formed in December when Logica acquired CMG for £510m and said at the time it would cut 1,400 staff. Yesterday the company said that figure would be 2,200, or 9.5 per cent of the workforce. The redundancies will cost £100m but lead to annual savings of £80m, rather than the £60m indicated at the time of the deal.

One of those leaving is Alistair Crawford, CMG's former chief executive. He was due to be head of European operations but will now leave in the next few months. He is entitled to £175,000 for his final six months. Martin Read, the chief executive of the newly merged group said: "It's disappointing. But he's been used to running companies and I think he's going off to find another chief executive role. But it's perfectly amicable."

The comments came as LogicaCMG reported a £444.7m loss for the six months to 31 December after £444m of goodwill impairment charges and £22m of merger fees. Stripping these exceptional charges out, operating profits were down 6 per cent on the previous year at £59m. Revenues were down 7 per cent to £882m compared with the same six-month period last year. Margins have held steady though there were fears that Logica is maintaining margins at the expense of sales.

"Even though these figures are in line with what the company said before it is still an appalling set of numbers," one analyst said.

Logica is a major provider of text messaging software to mobile phone handset makers. But manufacturers such as Nokia and Ericsson are increasingly moving into this area themselves. The group's wireless networks business was barely profitable in the first half and analysts fear it will not do much better in the second. One said it looks increasingly like a "jam tomorrow" business.

Full-year profit forecasts have been reined back to about £97m on an underlying basis.