Shares in Anglo-Dutch computer services firm LogicaCMG edged down yesterday, despite better than expected 2004 profits.
The company, which lists Midlands-based Punch Taverns among its client portfolio, said it expected to report substantially higher profits this year after posting a £13.8 million net profit in 2004 against the previous year's loss of £46.1 million.
LogicaCMG also reported a 2.8 per cent drop in adjusted pre-tax profit of £97.2 million for 2004, on revenues of £1.66 billion. The market had on average expected pretax profits of £96 million.
Born out of the December 2002 merger of Britain's Logica and Anglo-Dutch CMG, LogicaCMG also said it expected to strengthen its order book in the first quarter and forecast strong performance for its core UK and Benelux businesses.
However, shares fell nearly three per cent amid disappointment that LogicaCMG's French IT services business had worsened in the second half and fears that a bounceback of its Wireless Networks unit would be elusive.
Finance director Seamus Keating said the firm had taken the knife to costs in France and forecast first-half operating performance similar to last year's second half. Losses in the second half dragged France to a loss.
"We'll take some restructuring costs and then we could expect to have a significantly better second-half. All of these costs will be within the operating line and won't be charged as a separate restructuring item," Mr Keating added.
LogicaCMG said its other problem area, Germany, had posted a reduced loss in the second-half, with cost cuts as part of a restructuring plan announced last year providing a platform for further improvement this year.
Some analysts questioned the wisdom of holding on to the two laggard businesses, saying the company needed urgently to re-focus on its core markets - the UK and Benelux countries.
But chief executive Martin Read brushed aside suggestions that it should exit the problem territories.
"We do believe that strategically they are important to the company. We do believe that we can get both territories to profits," he said.
Mr Read said the company's mainstay IT services business was expected to perform well, especially in the UK and Benelux, and listed recent large contract wins in the UK public sector as evidence of the rising order book.
He also said LogicaCMG was part of the Atlas consortium headed by US-based EDS that was yesterday confirmed as the preferred bidder for a multi-billion-pound contract to upgrade the MoD's IT infrastructure.
The firm is hoping for £100 million in revenues in the first phase and for revenues of £ 10 million to £15 million this year.
Mr Keating said LogicaCMG was expecting its IT services business to grow by three to four per cent during 2005, but declined to give a similar figure for its Wireless Networks business, which accounts for about 14 per cent of group revenues.
The firm said it expected to improve the profitability of Wireless Networks, but with a smaller presence in multimedia messaging. Shares closed down 2p at 185p.