OH DEAR, City spies tell of more unrest at troubled IT services group Logica. Only weeks after the company confirmed that its chief operating officer, Jim McKenna, would leave later this year, news reaches The Sunday Times of a mass walk-out in Germany.

About 70 IT staff are thought to have quit to form their own business from the group’s Ludwigshaven site. Insiders have played down the walk-out as “fairly routine”, but the news has clearly unsettled some of Logica’s European staff.

It didn’t help that last week the group also quietly announced that Raul Mascarenhas, the head of Edinfor, Logica’s loss-making Portuguese business, had quit after a mere six months in the job. He will be replaced by José Carlos Goncalves, a former IBM executive.

The problems are far from disastrous for the company as a whole, but they lay bare the scale of the task ahead for new boss Andy Green, who clearly needs to tackle company morale as well as its serial underperformance.

As the company prepares to report its full-year results for 2007 this week, some investors want Green to draw a line under the past by announcing big write-downs and a sell-off of parts of the Swedish and French IT businesses.

But City watchers believe their hopes will be dashed because Green - only a few weeks into his job - will need time to finalise his strategy.

The consensus seems to be that Green will need to address underperformance in the UK business and work on knitting together a string of acquisitions made by his predecessor. He will also need to develop Logica’s Indian outsourcing base – which accounts for just 7% of its global staff, according to Soc Gen.

The shares have almost halved in value since last May and are trading at about 12 times projected 2008 earnings. In theory there could be plenty of upside potential in this business, but it may take some time for it to emerge.

Sports Direct

MIKE ASHLEY’s controversial Sports Direct will celebrate its first anniversary as a listed company this week with its shares two-thirds lower than where they started public life last February.

But despite one of the rockiest market debuts in living memory - with profit warnings and boardroom bust-ups galore - Ashley appears to be winning over the City. Following a recent charm offensive, a clutch of analysts are now recommending that investors hold or buy the stock.

After a period that saw the worst summer weather on record and England failing to qualify for the European championships, some observers may concur and agree things can’t get any worse.

But buying a retail stock that relies on clothing sales seems madness right now.

When Sports Direct came to the market it had no debt. Since then Ashley has geared up the business to go on an acquisition spree, buying a string of minority stakes in other firms. Many of these bets have already paid off handsomely. But adding debt to the balance sheet just as the economy falters will not help sentiment. John Lewis said last week that trade was the toughest in recent memory. Sports Direct is unlikely to be immune from that trend. Investors may be waiting some time before the shares hit 300p again.

jenny.davey@sunday-times.co.uk

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