LONDON (Dow Jones)--U.K. IT services company LogicaCMG (LOG.LN) said Tuesday it has started 2005 on a positive note after trading in the second half of 2004 was boosted by a strong performance from its wireless networks division.
Martin Read, LogicaCMG chief executive, said in a statement; "With good order intake continuing in the second half of 2004 and the signing of our contract with Energias de Portugal (EDP) in early January, we start 2005 with a good platform from which to take our business forward."
Earlier this month, the company said it will pay GBP57 million on completion of a deal to acquire a 60% controlling interest in EDP IT unit Edinfor.
Shore Capital's George O'Connor upgraded the stock to hold from sell on the back of the robust outlook. "It's a very strong result," he said, arguing the trading statement was better than expected.
Key to LogicaCMG's success is the turnaround at wireless networks. The company designs systems that allow mobile phone users to send text and picture messages to each other - a very lucrative market over recent years.
After weakness in the first-half, some observers questioned whether LogicaCMG should retain the division, but the company's reassurance the business would improve in the second half has proved credible.
It said normal seasonal uplift in the unit's revenue, combined with good license sales in December and its cost reduction program, helped deliver a small full-year operating profit.
"We are particularly pleased that we reversed the first half losses in wireless networks," CEO Read said.
Shore's O'Connor said the performance of wireless networks was better than expected, and helped offset weakness in IT servicesin Germany and France. He said he will alter forecasts after speaking to the company, but not significantly and expects full-year forecasts to be at the lower-end of the consensus range.
At 0847 GMT, LogicaCMG's shares were trading down 5.25 pence, or 2.72%, at 187.75 pence.
In its core IT services division, LogicaCMG reported an increase in second-half revenue on the back of strong order intake. It said the U.K. performed well, maintaining strong first-half margins. Revenue grew in the Benelux and its order book strengthened, but margins weakened in the region on higher bid costs.
It said revenue was stable in Germany, a difficult market for IT services companies, despite the implementation of a cost reduction program. In France, another weak market for IT services providers, second-half results were "disappointing in a difficult market."
Elsewhere in the U.K. IT services sector, Xansa PLC (XAN.LN) Finance Director Peter Gill Tuesday said he will exit the company at the end of May to join an unnamed company preparing for a potential London flotation. Xansa has started searching for a new finance director and expects Gill to be fully involved in ensuring a smooth handover.
Shore's O'Connor said the exit will create a certain amount of unease amongst investors but noted Gill is still relatively new at the company. Gill has done a great job restructuring the company alongside CEO Alistair Cox, he added, noting also that he has presided over a deterioration in the company's balance sheet during a period when investors needed to see revenue growing.
At 0847 GMT, Xansa shares were trading flat at 92.25P.
Company Web site: http://www.logicacmg.com
http://www.xansa.com
-By Nic Fildes, Dow Jones Newswires; 44-20-78429264; nicolas.fildes@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 18th January 2005
Posted to: www.cellular-news.com/story/11720.php