Logica lowers annual guidance and cuts more jobs

Logica (LSE: LOG.L - news) , the UK-based IT services company lowered its forecast for 2009, saying that annual revenues would fall 3 per cent for the year on weak performance in the company's consulting business, particularly in the Netherlands and Germany.

Logica had previously forecast a 2 per cent fall in sales. The company has been progressively nudging down its sales estimates since the start of the year.

Revenues in the Benelux region fell 23 per cent year on year to £125m ($207m) in the three months to the end of September. The region has performed poorly all year as banks, which account for a third of Logica's business in the region, continued to reign back on spending.

The company is cutting around 300 more jobs in weak areas, including the Netherlands, Sweden and Germany. The company had previously announced around 1,900 job cuts but now said it would take this number up to 2,200, around 5 per cent of its total workforce. The additional cost-cutting will result in a £20m charge.

Despite the weaker-than-expected sales, Seamus Keating, chief finance officer, said the company had seen the market stabilise in the third quarter.

"'Stablising' is the key word. There are small, anecdotal signs that our customers are looking at investing again, but these are anecdotal. Outsourcing will grow strongly in 2010, but the question is how long it will be before consulting and professional services returns to growth," Mr Keating said.

Outsourcing sales grew 11 per cent to £329m in the three months to the end of September, with many companies opting to let Logica run non-core business segments for them - such as human resources or accounting - in order to save money.

However, it was not enough to offset a 12 per cent decline in the consulting and professional services, where Logica helps companies undertake big IT modernisations of their businesses. Most such technology transformations have been put on hold in the downturn. Revenues for the third quarter fell 4 per cent to £862m.

Despite the declines, Logica said it was still on track to have an operating margin of 7.5 per cent for the full year.

Shares in Logica, which have gained around 70 per cent in value in the last year, closed up 5.7 per cent to 121.7p. Many analysts had already anticipated that the company would have to lower its revenue guidance.