Logica warning as 700 jobs axed

TEXT messaging and computer services group Logica looks was heading for the FTSE 100 exit today after it issued a profits warning and said 700 jobs would have to go. The group said its mobile networks business, which provides text and next-generation messaging software, was suffering from spending cuts and was not expected to show signs of recovery until at least the start of next year.

Shares in Logica have collapsed from a 2500p peak in March 2000 and today tumbled 51p to 243p, valuing the firm at around £1bn and making it a near certainty for expulsion at next month's FTSE 100 review. Logica's share slide undermined other listed technology stocks with Vodafone, ARM Holdings and CMG among the biggest losers.

The group statement said: 'Trading conditions at our mobile networks division have worsened considerably as the current half has progressed. Total mobile networks revenue for the second half will be substantially below the £161.7m achieved during the first half. The division is expected to break even at the operating profit level for the second half. Messaging revenue in the half will show a significant decline over the first half.'

Chief executive Martin Read admitted the group was being shut out from new next generation multi-media messaging contracts being won by infrastructure providers such as Ericsson and Nokia.

The group said it was taking a raft of remedial measures to try to mitigate the effects of the slowdown on its bottom line, and will book £34m of restructuring charges this year as it tries to strip £40m from its annual costs. The measures include the loss of 400 jobs at its mobile networks operation and 300 in the computer services operation that provides the bulk of group revenue.

Group revenue in the year to 30 June is now expected to be about the same as last year's £1.13bn, with single-digit growth in services operations helping offset the slowdown in text messaging.

Logica said: 'During the third quarter, short message service (SMS) traffic has continued to grow globally but, as expected, at a slower rate in Japan, Europe and Asia while the US market has maintained its strong performance.' The group said demand for new 3G services, already running in Japan and due here next year, was disappointing. Logica employs about 11,500 people worldwide.