A commitment to maintain a progressive dividend policy and confirmation that current-year trading remains on track were not enough to prevent shares in Logica from drifting lower.

However, yesterday’s eagerly awaited strategy presentation by Andy Green, the new chief executive of the FTSE 250 computer services group, was always going to have to be superlative to justify the rally of nearly 30 per cent in the shares since the start of last month.

As it was, Mr Green’s proposed measures are sensible stuff: an increased sales and marketing push behind Logica’s consulting operations, a doubling of its offshore headcount to 8,000, better integration of the operating businesses – a persistent weakness of a company that has been built largely by pan-European acquisition – and cost-cutting measures that will cut total staff by 3 per cent.

Mr Green’s merit is that he is not afraid to be contrarian. At a time when the accepted wisdom is that lower-cost Indian rivals will steadily price Logica out of the market, he sees great value in the company’s strong local presence in Europe, from where it draws 95 per cent of sales. Logica ranks among the top four in its six biggest territories on the Continent. Mr Green also recognises Logica’s strengths in particular niches, such as utilities, government and SAP implementation. Indeed, he contends that Logica has a “strategically advantageous position” in three quarters of the areas in which it operates.

The upshot is that, rather like Mark Hurd, the new head of Hewlett-Packard, Mr Green appears to favour evolution over revolution, making Logica’s existing assets work harder rather than taking the company in a new direction.

Of course, that plan - which will cost more than £100 million to implement and should save £80 million a year by 2010 – disappointed some corners of the stock market, which had sought something more radical. For example, doubling Logica’s offshore headcount still leaves it far behind the likes of CapGemini and Accenture in numbers, albeit that the latter serve the much larger American market. The bigger question is whether Mr Green’s measures will be enough to meet his target of exceeding industry revenue growth next year – it is forecast to rise a pedestrian 3 per cent in 2008 – and take operating margins into double digits in the medium term, from 7.6 per cent currently.

There is no doubting Mr Green’s relish for the task at hand. However, at 111p, or ten times this year’s earnings, and with trading conditions likely to get tougher in the near term, there will be better times to buy.

Connaught

Ten years after its flotation Connaught shows no sign of losing its status as the darling of the mid-cap support services sector. Yesterday’s interims from the repairer of council houses revealed organic turnover growth to be running at 23 per cent – no mean feat for a company which, in the same period, made the largest acquisition in its history: the £91 million purchase of National Britannia, accelerating Connaught’s diversification into the provision of safety inspection services.

Nor has that growth come at the expense of profitability.

Operating margins in social housing rose from 5.2 per cent to 5.5 per cent, with those from compliance – Connaught’s catch-all term for services that span preparing data for the Health & Safety Executive to vetting food producers for Marks & Spencer – up from 11 per cent to 13 per cent.

Connaught’s attraction is that it straddles two highly defensive sectors: one is underpinned by long-term contracts from local authorities, while the other benefits from tightening regulatory requirements. They also remain very fragmented: in compliance, for example, the ten biggest companies have just 15 per cent of the market, providing huge scope for growth. Those traits bolster confidence that Connaught’s record of increasing earnings at more than 30 per cent a year – they rose 40 per cent in the first half – can be sustained. At 22 times current-year earnings, the shares are not cheap and the dividend yield is negligible. However, the prospect of earnings upgrades later in the year makes yesterday’s dip to 374p a good time to buy.

Entertainment Rights

Postman Pat may have a new look, involving the use of helicopters in preference to red vans, but this prospect was not enough to persuade anybody to buy Entertainment Rights, the parent company. Offer talks were ended this week, which is hardly a great sign of confidence for a company fighting to digest the acquisition of Classic Media, owner of Lassie. Borrowings, inflated to £100 million because of the deal, do not help, since interest charges in the present climate are higher than expected. However, a covenant breach has been avoided, if nothing else.

The future for Pat et al looks tough, too. Spending on children’s commissioning has been reined back in Britain, Entertainment’s home market. The DVD market worldwide is under pressure amid a faltering economy – and what will video-on-demand services do to DVD buying? The good news is that this gloom is factored into the cheap share price. At yesterday’s 9.7p, the shares trade at six to seven times expected earnings. The bad news is that few investors are willing to bet on a recovery at a time when consumer spending is fragile. A long slog to rebuild credibility lies ahead. Hold.

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