Logica provides software for text messaging

The dip left its pre-tax profits 28% lower than in the previous six months.

Sales slipped 3% to �854.3m, but LogicaCMG said its order book in the first half was strong, providing a solid start of the year.

The company said: "Against a challenging economic background, the first six months exceeded original expectations.

"The integration programme is well advanced, with savings slightly ahead of plan, giving a more competitive cost base."

Rosy outlook

But the computer services company said that "the greater impact of cost-savings" would see margins improve in the second half.

During its first six months as a merged company, the firm has slashed thousands of jobs in a bid to raise annual savings to �85m from a previous target of �60m.

When Logica unveiled its merger with CMG, chief executive Dr Martin Read vowed the move would create a "powerhouse" in its field.

Both groups ran IT services and designed lucrative text and media messaging software for mobile phone operators.

Dr Read said: "There's continuing evidence of pricing stability in our key territories and the UK business has returned to growth."

He added that while a challenging six months in Germany had had a knock-on effect on other European markets, the merger has served to strengthen the group's position in the UK.

In particular, the firm has benefited from extra exposure in the public services sector where government investment has increased.

UK revenues rose 3% to �322.9m, reversing a decline in the previous half-year, where public sector work now represents 40% of the firm's UK business.