Anglo-Dutch software and services company LogicaCMG Plc. continues to face a tough operating environment in the first half of 2004, despite signs that it is now over the worst.
For the six months ended June 30, LogicaCMG reported a net loss of 3.2 million pounds ($5.82 million) compared to a loss of 69.4 million pounds ($126.3 million) in 2003, on revenue that fell 5.1% to 809.2 million pounds ($1.47 billion). At the end of the period the company had cash and cash equivalents of 106 million pounds ($192.9 million), down from 132.4 millonion pounds ($241 million) in 2003.
During the period, the company’s core UK market performed fairly well, growing revenue 4.6% to 336.1 million pounds ($611.7 million) largely due to strong demand in the public sector and telecommunications, which grew 31% and 18% respectively. However these gains were offset by falls at its other key market in Benelux, which saw revenue decline 1.7% to 189.5 million pounds ($344.9 million). Meanwhile France declined five percent to 50.9 million pounds ($92.6 million) Germany slumped 25% to 46.3m pounds ($84.3 million), mainland Europe overall fell 20% to 18.7 million pounds ($34 million) and the rest of the world fell 14% to 50.4 million pounds ($91.7 million).
Germany, where LogicaCMG experienced the biggest decline, is currently seeing headcount reductions to the tune of 17 million pounds ($30.9 million), which it hopes will return the operation to profit in 2005. The company said that consulting services have little prospect of a return to profitability, although it is on course to developing a profitable outsourcing operation, having secured a 44 million euros ($80.1 million) five-year deal with Interbrew during the period. The company said that globally it plans to generate some 30% of total revenue from outsourcing by the end of 2005, up from 23% currently.
Overall, LogicaCMG only experienced growth in telecoms and the public sector, which grew 6.3% to 64.4 million pounds ($117 million) and 26% to 223.7 million pounds ($407 million) respectively. An area for concern is Wireless Networks, which reported a 13% decline in revenue to 117.3 million pounds ($213.5 million) in the first half of the year, which it blamed on orders which have longer delivery schedules and a more substantial solutions component, extending revenue recognition. During the period, the company signed two notable multi media messaging (MMS) deals with European telecom operators, however the company faces losing market share to rivals such as Nokia and Ericsson.
LogicaCMG also confirmed that it is bidding to take over Edinfor-Sistemas Informaticos SA, the IT services company owned by Portugese utility company, Electricidade de Portugal (EDP). LogicaCMG confirmed that it is one of only two remaining bidders for the operation following speculation last month that the company was bidding against EDS, in a deal that will involve the winner providing outsourcing services to EDP. For its first half of 2003, Edinfor posted revenue down 37% to 95 million euros ($117 million), with earnings before interest and tax down 25% to 9.5 million euros ($11.7 million).
LogicaCMG is also expanding headcount within its low cost delivery centers, where it has operations in South Wales and Bangalore, India. The company now employs 1,800 people in these facilities up from 1,600 at the end of 2003. However overall, headcount at the company declined 1.4% during the half to 19,468.
Despite this, LogicaCMG sees signs of an upturn in demand, with IT services having its highest book to bill ratio since it went through the merger in 2002. In a statement, the company said: Both our key territories are growing once again and we are taking the necessary actions to address the under-performing parts of the business.