Logica dives £235m into the red

TECHNOLOGY group Logica has slumped deep into the red after a collapse in revenues from the telecoms industry and heavy write-downs of businesses bought during the boom.

The group reported a pre-tax loss of £234.8m for the year to the end of June, compared with a profit of £136.2m last year.

Chief executive Martin Read warned that the market for IT services 'remains difficult' with the telecoms sector still on its knees. The absence of any encouragement about prospects for an upturn in IT markets unsettled investors and the shares slumped 23 1/2p to 134 1/2p, the lowest for nearly five years.

House broker Merrill Lynch downgraded its earnings forecasts for 2003 by 18% after the company said IT services revenues in the first half of the current year are likely to be lower than in the previous six months.

Logica, which shocked the market in May with a profit warning that savaged the share price, said trading had deteriorated alarmingly in the second half. The mobiles network division was worst hit, facing 'the toughest trading environment for a decade' as heavily indebted network operators cancelled capital spending.

Revenues from telecoms have fallen from 43% of the group total two years ago to 35% last year. Read said: 'Life has not stopped completely but boy, oh boy, is it depressed compared with the past.'

The meltdown in telecoms and financial services was largely offset elsewhere, particularly by strong growth in the public sector, energy and utilities and industrial sectors.

For the group as a whole, profits before write-downs and provisions tumbled by a quarter to £116m, in line with market expectations. Revenues were down only 1% to £1.1bn, while order intake was little changed at £1.3bn. Net cash at the year end was £123m.

However, restructuring costs of £33.7m, a £246.6m write-down in the value of German IT business pdv acquired in November 2000 for £378m and a £15m write-off at US subsidiary Carnegie inflicted heavy damage to the bottom line.

Read insisted the company is well placed with a strong balance sheet and solid order books. The final dividend is held at 3.1p, making a 5.4p total, up 8%. Logica warned that, 'in the current climate', the value of the dividend will be held in real terms this year.