Logica to Cut 1,300 Jobs as Part of Cost Reduction
Tuesday, April 22, 2008

Logica Plc, the Anglo-Dutch computer-services provider, will cut about 3 percent of the workforce, or 1,300 workers, to revive profit growth after a slump in sales in the U.K.

The reductions are part of a plan to save about 80 million pounds ($158 million) a year by 2010, the London-based company said today in a statement. Logica, which has about 39,000 employees, said it will meet a 2008 revenue growth forecast of about 3 percent.

Logica fell the most in seven weeks as some analysts said Chief Executive Officer Andy Green's plan doesn't go far enough and some goals may be difficult to achieve. Green outlined a program today to increase sales, cut jobs and expand support operations in India, the Philippines and Eastern Europe.

``The plan is not radical enough,'' London-based Panmure Gordon & Co. analyst George O'Connor, who rates Logica ``sell,'' wrote in a note today. ``Implementing the turnaround is the hard part.''

Green began a review of Logica's businesses in January to spur revenue, integrate acquisitions and boost Logica's shares, which fell 37 percent last year.

Logica fell 3.75 pence, or 3.3 percent, to 111 pence in London trading. The shares have fallen 5.7 percent this year.

Job Cuts

About 500 employees in the U.K. will lose their jobs. The plan will result in Logica taking a 110 million-pound one-time charge, with 70 million pounds taken in 2008 and the remainder in 2009.

``We're setting out today a program for growth,'' Green told reporters on a conference call. The plan will ``revitalize Logica'' and ``take 15 percent out of our overall costs.''

Logica's net income dropped in the second half of 2007 to 20.2 million pounds from 74.2 million pounds a year earlier as U.K. sales declined.

Green joined Logica in January from U.K. phone services provider BT Group Plc, where he had worked for more than 20 years. In February, he promised Logica investors the review wouldn't include ``huge'' asset sales or job cuts. Today he reiterated that Logica wouldn't sell any businesses.

Revenue Growth

Beginning in 2009, Logica will have sales growth that is higher than the market, Logica said. So-called outsourcing will be the fastest-growing unit, it said.

To boost revenue the company will increase its investment in its sales efforts. Logica said it will spend 8 million pounds in 2008 and 25 million pounds in 2009 to increase revenue.

Logica said it will more than double its staff overseas to 8,000, mostly in India, the Philippines, Morocco and Eastern Europe, to take advantage of lower wages.

The company said today its adjusted operating profit margin will be similar to 2007's 7.6 percent. In 2009, profit margin will increase 0.5 percent and in 2010, profit margin will increase 0.5 percent to 1 percent.

Green has promised investors that the company will use his international experience and his ability to ``integrate and organize complex large organizations.''

Logica, created from the 2002 merger of Logica Plc and CMG Plc, bought Sweden's WM-data AB and France's Unilog SA in 2006. The company changed its name to Logica Plc from LogicaCMG Plc in February.

``All of this growth strategy is driven around growing our key European clients,'' Green said today.