LogicaCMG: RFID on the Threshold of European Breakthrough
LONDON, April 15 /PRNewswire/ -- The key findings of an international study undertaken by LogicaCMG (LSE: LOG.L - news - msgs) ADVERTISEMENT


reveal that Radio-Frequency Identification (RFID) is high on the agenda for European retailers, food manufacturers and logistic service providers. A majority of the companies interviewed in the Netherlands, UK, Ireland, Germany, France and Belgium, gave RFID top priority in terms of planned IT investment.

RFID is seen as the successor to barcoding. By using RFID it is possible to electronically identify and track objects, such as supermarket goods, without time delays or the need for human intervention. As a result, supply chain logistics are more streamlined and efficient and this ultimately leads to lower costs and higher revenues.

The study shows that half of the 50 companies interviewed in Europe have or are planning to deploy RFID pilot projects throughout 2004, with the vast majority planning to start implementing the technology within the next three years. A number of major retailers, such as Tesco (LSE: TSCO.L - news - msgs) (UK) and Metro (Germany) will initiate large-scale rollout of RFID. Whilst these projects will be finalised by 2007, the research indicates that companies will not begin to tag consumer products until 2008 when prices of tags will have naturally lowered. The focus for the moment is on Returnable Transport Items (RTIs), such as crates and pallets. The tagging of these RTIs will be standard as of 2005. The research highlights when and how RFID will be used on a large scale for RTIs within European retail supply chains. Due to the large variety of RTIs in retail supply chains, the management, recording and administration is both complex and labour intensive. RFID is set to eliminate these concerns.

Since RFID will have great impact on the processes and IT systems of companies, it is necessary that they thoroughly prepare themselves. The use of RFID with RTIs will only take place if the financial benefits are greater than the cost of implementation. The cost/benefit analysis part of the research showed that based on a tag price of 50 eurocents the handling cost per pallet could decrease by 8.5%. This leads to a payback period of between two and three years.

A majority of companies that have trailed RFID prefer the EPC (Electronic Product Code) network as standard for information exchange and UHF (Ultra High Frequency) as frequency. In the short term there are a number of issues that should be solved before RFID can be broadly adopted. First, the EPC network has not been finalised yet. Second, limitations in European legislation mean that the use of UHF technology is currently restricted. Finally, the software to integrate RFID in the existing IT infrastructure is not mature yet. LogicaCMG anticipates that by the end of 2004, the main issues will be resolved. As volume deployments will increase in the next few years, the cost of RFID tags will be naturally lower.

Paul Stam de Jonge, Director Sales and Marketing of LogicaCMG: 'The research shows that we are on the threshold of a breakthrough of RFID technology in the European market. The quick introduction of the EPC network is key for the broad acceptance and implementation of RFID. For this reason we, together with many organisations within the sector, have put a lot of effort in the definition of the EPC network."

Since the whole supply chain is involved, the RFID implementations of the large retailers in 2005 will have a great impact on the food manufacturers, logistic service providers and retailers. According to Paul Stam de Jonge 'the RFID implementations will lead to an irreversible process in the retail market. In the short term, it is therefore of the up most importance for companies to gain knowledge and experience with RFID'.

About RFID technology

RFID technology is based on a relatively simple concept. It consists of two elements that communicate through radio transmission - a tag and a reader. The tag contains a small chip and an antenna and can be placed on any object. The information on the tag, such as an identification number, can be transmitted to an RFID reader over a distance of a few meters. The readers are placed in various locations throughout the supply chain. RFID allows objects to be electronically identified and followed throughout the complete distribution chain.

There are two main reasons for the application of RFID technology in RTIs. On the one hand it allows RTI pool organisers and logistic service providers to electronically follow the RTIs. On the other hand it allows manufacturers and retailers to follow and identify products. Both reasons result in a higher cost-effectiveness.

The dominant position of the retailers in the supply chain means that they have a leading role in the uptake of RFID. The study shows that retailers are particularly interested in tracking at an individual product level. Tagging at pallet level is not as crucial as they are often only used to transport the goods to the distribution centre, as opposed to throughout the entire supply chain.

NOTES TO EDITORS
About the research
- The research is an initiative of LogicaCMG in close co-operation with
EAN Netherlands and ECR D-A-CH and is sponsored by Checkpoint Systems (NYSE: CKP - news) ,
Euro Pool System, Intermec, Omron, Zetes, SAS and Container
Centralen A/S
- The geographies researched were the Netherlands, UK, Ireland, Belgium,
France and Germany
- The study consisted of 50 in-depth interviews with potential users of
RFID technology (retailers, manufacturers, logistics service providers
and RTI pool organisers) as well as extensive desk research
- As it is expected that Returnable Transport Items (RTIs) will be fitted
with RFID relatively quickly, the study focused on the application of
RFIDs in pallets, crates and containers within the supply chain

About LogicaCMG

LogicaCMG is a major international force in IT services and wireless telecoms. It provides management and IT consultancy, systems integration and outsourcing services to clients across diverse markets including public sector, telecoms, financial services, energy and utilities, industry, distribution and transport. Formed in December 2002, through the merger of Logica and CMG, the company employs around 20,000 staff in offices across 34 countries and has nearly 40 years of experience in IT services. Headquartered in Europe, LogicaCMG is listed on both the London and Amsterdam stock exchanges (LSE: LOG; Euronext: LOG). More information is available from www.logicacmg.com.

About EAN Netherlands

EAN Netherlands plays an active and leading role in the promotion and implementation of the global, open EAN-UCC standards for automatic identification and electronic communication in the Netherlands. EAN Netherlands is a non profit organisation, with 5.800 member companies from 30 industry sectors, and is a member organisation of EAN International www.ean.nl.

About ECR D-A-CH

Efficient Consumer Response (ECR) is a joint initiative by manufacturers, retailers and other partners in the supply chain. ECR aims to improve processes and provide consumers with optimum quality, service and variety of products at the best price www.ecr.de.

Bit of a jump today, needs to get above 205p to get really motoring. Don't know why the leap today? hopefully good news on the way. H

I have not got a share interest in Logica but have noticed that the CEO was effectively forced to resign by Morley Fund Management who presumably had other institutional backing. Capital Group International which has been successful with turn around situations has announced that it holds a 4.89% stake. From the brief look I have had, the Co sold off its telco side and intends to use 130m (about half of the proceeds) to buy back shares. This may well be worth a look for the considered recovery investor. Currently waiting for the appointment of new ceo. sp currently 156p.

Made an initial purchase today at 153.5p as a recovery play. Also tipped on 2nd July on www.iii.co.uk (then click on "expert opinion)

I got out of LOG around the 180p mark some while ago. I also think they look a recovery play although down a little today. They have a resonable yield of about 3.5%. 140 -150p seems to be a long term support level. I changed to NIS which is now just back in profit.
I am also considering an initial repurchase of LOG, maybe a quarter unit of my normal purchase which is around 1/20 of my portfolio. H

Fidelity announced that they are interested in 4.98% of the issued share capital. sp 154.5p

MoneyAM
LogicaCMG, the Anglo-Dutch computer services company, said IT services revenues increased 3.3% for the half year.

The group reported strong growth in the Nordic region, Netherlands, Germany and France offsetting a 9% revenue decline in the UK.

In a separate announcement to its trading update Logica said it had appointed Jim McKenna as interim CEO and was making progress in the search for a permanent replacement after Martin Read announced his resignation in May.

'Our executive search firm is working on a shortlist of suitable candidates for consideration and the board remains focused on appointing the best candidate to run the business,' Logica said in a statement.

Revenue in the first half was 1.52bn and Logica said its guidance for full year remained unchanged.

Logica, seen as a takeover target after the resignation of Read in May, days after a profit warning, said it expected its UK business to return to growth in the second half of its year.

'Our outlook on market demand remains unchanged, with European market growth expected to be between 4% and 6%, Logica said.

'As indicated at the time of our May trading update, we still expect revenue growth around the lower end of this range for 2007.'

Adjusted operating profit will be weighted slightly towards the second half than the previous year, mainly due to 'UK commercial sector weakness in the first half' and previously disclosed costs, the company said.

Guscavalier comment: sp strong today up 7p to 157p after announcement. Pamure Gordon have rated shares as a Buy.

Shares are a strong market today at 159.5p. Tempus in The Times today given the Company a favourable write up. Can be found on business.timesonline.co.uk

LOG mentioned in Shares Magazine this week (vol 9, issue 30, page 17) as play of the week.

Just bought March 150 calls @ 18.5.
2517

I'm in too and hoping the new CEO they'll be bringing in will please the markets.

David Tyler, deputy chairman of computer services group LogicaCMG, has bought his first shares in the company. Tyler, who is to become chairman of the Anglo-Dutch company in November, bought 199,000 shares at 154p each. sp currently 162p

Guscavalier------Yes I saw that, looking good for my call options. I've also noticed (mentioned in one of the sunday papers today) that directors are buying far more shares in their own co's than they are selling, has to be viewed as positive. Good luck all.
2517

Any news of a new CEO.

Looks like a coup albeit that log is paying Andy Green a 3.5m golden hello. to secure his services from BT. sp up strongly today on the news at 168p.

This is the news we've been waiting for! Andy Green has a strong track record for growing an already large and complex business so I reckon we can see Logica's shares moving upwards again over the long term. They've been somewhat rudderless for a while...

I believe LOG have a top duo now with David Tyler the new chairman, he was FD of GUS for 10 years and is well respected in the city by all accounts, and now Andy Green from BT where he has been for a good many years, so not flybynight management, hopefully they will release the undoubted value in LOG.
2517

I have just sold my options in LOG, 34.6% profit in less than 2 months. Whilst I like LOG, more so with the new top management I could not resist that profit. If they fall back to the mid 150's I will, funds permitting, buy the shares. Good luck all holders.
2517

Hi George - I sold mine today, too, as I wanted the funds for other stocks. Only a small profit though, unlike yours! I will continue to keep an eye on LOG but at the moment I think BLT and others are likely to move faster in the short term - and, regrettably, can't stretch to holding them all!

Toya, a profit is a profit, regarding BLT they have had a terrific run this year, maybe that will continue, long term commodities are bullish but nothing goes up in a straight line and if I were going for BLT I would buy on weakness. My preferred route is MLW because of its spread of companies, I mentioned them only a matter of weeks ago @ 507p, now look @ them. Anyway best of luck with BLT.
2517

Hi George, thanks for the info re MLW - I didn't know about them and probably didn't see your posting if it was a few weeks ago. I see that's gone up significantly!

Re BLT (though this is really the LOG thread): I was really lucky a few weeks back, having bought it at around 1350p and sold last week just when it ducked below the 1800 (missed the peak of 1840 which appeared very briefly!). If only I could learn from that and repeat it!