Bracknell, Berkshire-based Racal Electronics Plc has sold Racal-Redac, its computer-aided design and manufacturing business to Zuken Inc (see front page) as it did not constitute a core business for the group, the firm announced at its presentation of year end results. The sale was part of its strategy in the Data Communications segment to focus research and development on core and growth area products because its product portfolio has become far too varied, with research and development spread too thinly, a problem that the director of the division, Martin Richardson explained was inevitable in a mature company and has led to margin erosion. Its core products are its high speed dial-up modems, digital service units, networked managed systems and T1 access devices. The growth products include thoses sold with partners such as the local network internetworking worldwide reseller agreement signed with Wellfleet Communications Corp in May and end-user data communications equipment including a future Asynchronous Transfer Mode product range. On the basis of its new approach the company is confidently predicting that the Data Communications division will achieve profit margins of 5% on turnover of at least #400m for the current financial year and 1995-96 margins are expected to be in excess of 7.5% on further revenue growth.
Lottery
However, results for last year were less promising. Total company turnover to March 31 was down 3% to #916.1m including #1.1m turnover from the acquisition of ACS Ventures Ltd this time and pre-tax profits were down 45% to #26.4m after #19.6m losses on disposal and closure of operations and acquisition goodwill write-offs. The Data Communications division, which makes up 42% of the company, had turnover up close to 1% at #373.8m and operating profit down 72% to #3.5m. The recession on the continent hit Data Communications coupled with the late arrival of products from the US operation, although the development is now back on schedule. The firm anticipates long-term benefits from being part of the winning Camelot Group Plc UK National Lottery bid bringing both profit on the investment as well as the use of Racal data networks for carrying the traffic associated with the lottery, which is due to begin operation this November. It has now re-adjusted its predictions from earlier in the year that Racal Data Networks would have revenues of #100m within three years and now says that it will have revenues of #100m on the networks within two years, although the effect would be fairly low-key this year with the impact starting to increase after the end of this financial year. In the other business areas, Specialised Businesses had a successful year with operating profits up 27% to #20.9m on sales up near to 5% to #140.2m; Radio Communications saw operating profit down 24% to #17.8m on sales down 11% to #144.5m although Racal reports order intake for the first two months this year at a record level thanks to the Iris and Scopeshield programmes. Marine and Energy operating profit was down 27% to #11.8m on turnover down 12% to #117.5m and Defence Radar and Avionics operating profit was up 57% to #7.2m on revenue up 2% to #110.9m. The directors are recommending a final dividend of 2.75 pence net per share, which makes a total of 4.25 pence net per share for the year.
