The group, formed from the merger of Britain's Logica and CMG of the Netherlands in late 2002, posted a 10.8-percent fall in pre-tax profit to 99.5 million pounds (149.3 million euros, 185.5 million dollars) in 2003 from a year earlier.

Analysts had forecast pre-tax profit of 95 million pounds.

Meanwhile, the group's revenue fell 6.4 percent last year to 1.71 billion pounds.

"We saw signs of improvement in all our major IT services markets except Germany where revenues continued to decline," said the group's chief executive, Martin Read.

"Overall, the market environment is gradually improving, tempered by continuing constraints on capital expenditure and with outsourcing offering the best growth opportunity," he added in a statement accompanying the results.

The company added: "Overall, we plan to return to growth in 2004.

"With the full-year impact of our merger cost-savings, but allowing for the difficult German market, we expect the operating margin for IT Services in 2004 to be slightly ahead of the level achieved in the second half of 2003."

SPACE.WIRE