Pre-tax profit before exceptionals and goodwill dropped 33 percent in the six months to June to 39.4 million pounds (57.1 million euros, 61.6 million dollars) from the same period of the previous year, the group said in a statement.

The fall was smaller than many analysts had expected.

The company also cushioned the blow by revising upwards estimates for the cost savings associated with the merger that brought together Britain's Logica and CMG of the Netherlands late last year.

The price of shares in the company surged by 14.2 percent to 245 pence in early afternoon trading as renewed optimism towards technology stocks in particular helped to drive the broader London market up 1.6 percent.

"Against a challenging economic background, our first six months as a merged company have exceeded our original expectations," said chief executive Martin Read.

"The integration programme is well advanced with savings ahead of plan, giving us a more competitive cost base. Combined with our larger scale, this has enabled us to grow our order book substantially."

Prices in the company's markets were still showing signs of stability in key territories and the British business had returned to growth.

However, the Benelux economy remained fragile with revenues declining by four percent in the first half. In France and Germany, market conditions continued to be very difficult, it said.

But on the bright side expected merger savings had been increased to an annualised 85 million pounds from 80 million estimated previously.

Around 50 million pounds of those economies would come through in 2003, of which 10 million had already been achieved.

After one-off items, the group's pre-tax losses fell to 57.7 million pounds from 287.1 million in the year-earlier period. The cost of restructuring, including a total of 2,200 redundancies, cut into the company's bottom line.

SPACE.WIRE