STILL smarting from the Government's decision to refer its bid for
VSEL to the Monopolies and Mergers Commission, GEC had the satisfaction
of fully meeting market forecasts for its half-year results yesterday.
Profits, at #378m for the six months to September against #360m, were
smack in line with analysts' expectations, as was the interim dividend,
which goes up 5% to 2.95p.
GEC is now preparing its evidence for the monopolies probe. It wants
to get VSEL because it believes it can develop its sales
internationally.
''We were really sad that the period of uncertainty for VSEL
shareholders, management and employees continues,'' said finance
director David Newlands. ''The management very much wanted their company
to be part of a large, financially sound group.''
GEC certainly has more firepower than rival bidder British Aerospace,
as its cash mountain stands at #2899m, up #88m since March. This is
split about equally between GEC itself and its share of associates'
cash. Lower interest rates have reduced the return on this, so operating
profits give a better idea of the group's trading performance. They were
14% ahead at #296m.
Chairman Lord Prior said of the figures: ''Power systems,
telecommunications, electronic metrology, electronic components,
industrial apparatus and distribution and trading all contributed higher
profits than last year.
''In electronic systems, profits were unchanged (at #79m) as
GEC-Marconi progressed important development contracts towards
completion.''
It is an open secret that GEC would like to add BAe's defence business
to its own. It is currently subject to a standstill agreement against a
bid for BAe but does not intend to renew this when it expires next year.
Mr Newlands played down suggestions that it might consider a bid for
BAe, pointing out the companies already co-operate on various projects.
As one of Britain's biggest exporters, GEC is playing its part in the
sharp improvement in the trade figures. Its exports jumped by a quarter
to #854m despite competitive markets.
The Far East is inevitably a strong performer because of the heavy
infrastucture development going on there. Barely a week goes by when the
big Anglo-French offshoot GEC-Althom does not announce a new order.
However, the going has become tougher, with this company's order books
falling #600m. Its market is ''lumpy'', but it is winning its fair share
and the drop largely reflects the incidence of contract closings. The
big Korean high-speed train order, first announced in April, didn't make
it into the firm's order books until October.
GEC-Althom also supplies France's high-speed trains and those for the
Channel Tunnel, which have unfortunately been breaking down alarmingly
often. The most recent order is for 100 London Underground trains.
The business raised its contribution to profits by 11%, pushing GEC's
power systems division up from #72m to #78m.
The group order book was also down, totalling a whisker under #12bn at
the end of September, against #13bn a year earlier and #12.4bn in March.
Telecommunications moved ahead, as might be expected, with a #10m
advance to #54m, while electronic metrology doubled to #60m on the back
of cost cutting and good demand for petrol pumps in the US which offset
poor figures from Avery Berkel.
Among smaller divisions, medical equipment slipped from #19m to #11m,
as the prospect of medical reforms in the US depressed demand, while
electronic components jumped from #6m to #11m.
GEC's full-year profits should hit #910m, up from #866m.
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