Logica is cutting 1,300 jobs as it tackles the consequences of slow European growth due to the downturn.
Lower than expected profitability of some of its longer term contracts is making an impact on the business. “We have undertaken a thorough review of our contract portfolio. In particular, we have taken a more prudent view of a small number of long-term contracts to reflect the more difficult economic outlook,” Logica said.
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“Our orders performance on long-term contracts remains strong. However it has recently become clear that many of our clients are delaying short term expenditure and reducing discretionary investments to weather an uncertain economic future. As a result, the pockets of weakness we first saw in September have widened through the quarter.”
Logica said it would be incurring a one-off charge of £39m in 2011 to cover the expected lifetime contract losses as a result of the likelihood of lower expected revenue on a small number of volume-dependent contracts with between four to six years still to run.
The company will make greater use of automation and offshoring in its infrastructure management business, leading to the loss of 450 positions in Sweden and the UK. A further 550 jobs are expected to go in the Netherlands and Belgium due to the lower demand for IT contracts in these regions.