Logica's competitive edge takes the sharpness out of profits fall

Martin Read, the chief executive of the IT services company LogicaCMG , cheered the stock market yesterday as he claimed to be taking market share off his rivals.

Shares in the company, which was formed out of Logica's purchase of rival business CMG last year, shot up 19.8 per cent to close at 257p even though it reported reduced profits for the past six months.

"I think the improving position of our business - the increased order book - is actually down to us taking market share rather than markets getting any better," Mr Read said.

"There is the thought out there that things [market conditions] are on the move upwards, but I don't know. It's mixed. I think it's very patchy."

Pre-tax profits for the six months to 30 June were £39.4m, before accounting for exceptional items including restructuring costs and goodwill - 33 per cent down on the same period a year earlier, but better than the City had been expecting.

The company has been hurt after its customers, particularly in the financial and telecoms sectors, cut spending on IT systems in the face of tough economic conditions.

While it remained too early to call the bottom of the market, Mr Read said the combination of Logica and CMG was producing clear benefits. "What we're seeing and hearing in the market place is the combination of the two businesses really is a much more powerful force in the eyes of our customers," he said.

The company's order intake - orders it has taken in the period, some of which have already been accounted for - was 12 per cent ahead of revenues. It also said it was bidding and being short-listed for "a number" of big IT contracts in the UK.

The integration of CMG will cost around £110m, but will produce annual savings of about £85m - £5m more than it had previously expected.

It expects to axe around 2,650 jobs - 450 more than it previously predicted. The bulk of the redundancies have been in the UK and at its wireless networks division.

"This merger has gone well," Mr Read said. "If you're putting two 12,000-people businesses together in really lousy economic circumstances, it's always going to be difficult. It's a great relief it's gone as well as it has."

In the half-year period, the company took an £85.3m charge to cover the restructuring, mostly to cover redundancies. There was also a goodwill charge of about £12m.

The main disappointment in the six-month period was the company's performance in France and Germany, which made pre-tax losses of £1.4m and £4.1m respectively.