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.

Share of the Week

Logica symbol : LOG

Business spending on IT has been picking up and LogicaCMG should be one of the beneficiaries. Following its acquisition of French IT services business Unilog last September, the company is certainly better positioned to take advantage of strong demand in its core markets.

LogicaCMG is a provider of IT services and wireless telecoms solutions, created through the merger of Logica and CMG in 2002. One problem that has dogged the company is its lack of critical mass in Europe, where it hasnt had the scale to win some of the really key contracts. Its operations in both France and Germany have suffered as a result, losing a combined 9.5 million in the first half of 2005.

But the acquisition of Unilog should change that. We think the deal was a good strategic move because it transforms LogicaCMG into a truly pan-European IT services company, much better equipped to win key European contracts. Indeed, the acquisition gives the company the scale it needs in France and helps to improve the situation in Germany.

Following the take-over, LogicaCMG says it expects cost savings of 9.5 million in 2006 and 19 million in 2007 targets that we feel are achievable, given the managements good track record of cutting costs from previous acquisitions. And because of its offshore capabilities, pan-European coverage and strong industry knowledge, LogicaCMG should be able to sell more services to Unilog clients.

Over the next two years, we forecast top-line growth in the mid single digits, and we expect earnings to increase by 15% a year because of improving profitability. Following completion of the Unilog acquisition, the group should be able to boast one of the best IT services operations in Europe, with strong offshore capabilities. It could be time for investors to log on to the shares.

LogicaCMG (LSE: LOG.L - news) rallied 6 to 190 after being upgraded to 'buy' from 'hold' at Deutsche Bank (Xetra: 514000 - news) on the back of the group's offshore strategy and high expectations for Unilog (Paris: FR0000034662 - news) in 2006.

Deutsche highlighted the firm had made significant progress in scaling its offshore operations, adding that it believed the market had underestimated the potential the offshore business holds for margin protection and offers LogicaCMG a different growth strategy.

Investtech

LOGICA ORD 10P (LOG) - 21 Feb. Price: 191.00
Has broken the floor of the rising trend, which indicates a weaker initial rising rate. Has broken through the ceiling at 188 of a rectangle pattern. A decisive break will signal a further rise to 199 or more. The stock has broken up through the resistance at p 189. This predicts a further rise. The stock is overall assessed as technically positive for the medium long term.

Logica beginning to waken up. If it can get above 203 or so the chart will have completed a reverse head and shoulders made over the last year with a target of around 240p. Recent upgrades from Barclays and Deutsche banks will help it on it's way. H

Suth.. thanks. Yes been here for a long time and took up the rights. Will soone be in profit. Good luck all in.

Azhar, I also took up the rights and topped up @192p. Overall I am about 15% in profit on capital and anticipate all being well to get out between 240 and 300p, depending on what the chart does when it (fingers crossed) gets to around 240p. Divi hasn't been too bad either over the last few years. H

LogicaCMG full-year profit surges UPDATE
AFX


(adds detail from results)

LONDON (AFX) - Anglo-Dutch computer services company LogicaCMG PLC reported a surge in full-year profit in line with expectations, with strong UK and Netherlands businesses offsetting weak French and German markets.

Logica, which bought France's fourth-biggest IT services firm Unilog SA for 931 mln eur last October, said pretax profit for the year to December 31 rose to 105.6 mln stg from 63.7 mln a year earlier.

Revenue rose 10.6 pct to 1.83 bln stg from 1.65 bln.

The average analysts' forecast was for pretax profit, excluding exceptional items and goodwill amortisation, of 104.7 mln stg on revenue of 1.83 bln.

'Our IT services businesses in the United Kingdom and The Netherlands once again performed well, with a marked improvement in second half year operating margins,' said Logica chief executive Martin Read in a statement.

'The combination of improving market conditions, increased scale and a broader geographic footprint should enable the LogicaCMG group to make further progress in 2006.'

Adjusted earnings per share rose 18.8 pct to 7.6 pence.

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.