Poor performance blamed for CEO departure

Trading update was final straw for LogicaCMG shareholders, say experts

LogicaCMG reported poor sales last week

The poor trading figures posted by LogicaCMGlast week were the final nail in the coffin for chief executive Martin Read, but were not the only reason for his departure, say analysts.

The IT outsourcing company last week warned that first quarter sales will fall 4.1 per cent to £174.6m, blaming slow UK private sector business and one specific project overrun that is expected to cost the supplier between £10m and £15m.

Read's announcement that he will retire once a successor is appointed is believed to have been driven by activist shareholders.

The move is not just a reaction to last week’s update, but reflects longstanding shareholder dissatisfaction with the company’s performance, says Ovum analyst Phil Codling.

‘Over the past five years, a period when technology stocks and equities more broadly have enjoyed a sustained recovery, LogicaCMG’s share price has actually fallen by 18 per cent,’ he said.

‘Patience had clearly run out and last week’s disappointment was the final straw.’

But LogicaCMG must appoint a successor rapidly if it is to dispel internal and external concerns over its future.

‘It is undoubtedly in for a period of increased uncertainty,’ said Codling. ‘The company said it plans to reassess the current size and structure of the board, a hint of more changes to come.’

Speculation over possible takeovers, including possible private equity interest, could also increase.

Martin Read has been LogicaCMG chief executive since 1993.