Logica falls 15% after charges push losses to £235m

By Liz Vaughan-Adams
Saturday 04 January 2014 05:11

The IT services company Logica yesterday warned it expected trading to remain tough as it plunged into the red after accounting for a string of exceptional charges.

"This is an industry that depends on other people's capital expenditure and in uncertain times, people are cautious about investing," Martin Read, Logica's chief executive, said. "I hope things will get better but I don't see them getting better tomorrow."

Shares in the company plunged 15 per cent, or 24.25p, to close at 133.75p after it said the market for IT services remained "difficult" and predicted IT services sales in the first half of the current year were unlikely to beat those of the previous six months.

"There are areas of real strength such as the public sector and outsourcing but telecoms and financial services remain extremely weak," Logica said.

The alert came as the company posted a pre-tax loss of £234.8m in the year to 30 June compared with a profit of £136.2m a year before. Sales were £1.1bn down from £1.13bn.

Among the exceptional items that pushed the company into the red was a £33.7m charge to cover its restructuring programme and a £261.2m charge mainly to cover the reduced value of PDV, the German IT company it bought two years ago.

On an underlying basis before accounting for exceptional items, however, Logica reported an annual profit of £116m, down from last year's £155.6m.

"This is certainly the worst situation for IT services and telco companies for at least a decade and our results reflect the reality of the marketplace," Mr Read said.

Behind the drop was a 20 per cent fall in sales from telecoms companies and a 9 per cent fall in turnover from organisations in the financial sector after both drastically cut their budgets.

"It has been hard for us. Telco operators are strapped for cash and they're not investing in anything unless they absolutely have to," Mr Read said.

On a positive note, sales to the public sector grew 45 per cent in the period while sales to the energy and utilities industry were up 9 per cent.

Nevertheless, Mr Read insisted Logica remained a "strong" company that was "well spread by market sector", with a healthy cash pile of about £123m.

Logica said there could be more job cuts, but none are planned in the short to med-ium term.

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