The way its shares have been plummeting recently, telecommunications equipment maker Telspec Plc could almost be relieved that shares remained unchanged yesterday at 222.25 pence. However, this was even lower than the low last week of 225 pence, whe n the company issued its second profit warning in four months (CI No 2,991), and that was its lowest since flotation in July 1994. This time last year shares had recovered to 605 pence (CI No 2,743). As it uncannily predicted just last week, the company turned in a 6m pound pre-tax loss, on revenue that none the less rose 26% to 35m pounds. In spite of its accurate predictions, chairman Frank Hackett-Jones said the results are extremely disappointing. 1995 saw the company’s shares in decline because it came in beneath City expectations, although profits were still up strongly at 8.7m pounds. However the company was already blaming a myriad of factors for its under achievement, and the same applies this time. It calls these factors temporary, and says it expects to return to profitable trading in the second half. Telspec says demand for its pair gain equipment, which enables up to 11 logical phone lines to be put on one physical line, has remained strong worldwide, and should do so in the second half. It is also introducing a number of new pair gain products. Telspec also says it has seen strong growth in the ISDN market, where it has technology to put two 64Kbps lines on a single ISDN connection, and it is developing a new family of ISDN equipment that should be out next year. A new version of Telspec’s intelligent switch will be sold by the end of the year, the company said. In Australia, it has a new fiber optic product set for trials at the end of the year. The company forecasts strong second half performance from its Australian subsidiary. The company’s order book is down at 50m pounds, which it says is due to its delivery of more product to group customers, and the fact that some large contracts are due for renewal towards the end of the year. Telspec had debt of 12m pounds as at June 30, representing gearing of 80%. Chief executive Dr Garth Riley has stepped down, although he will remain as managing director of Telspec Europe. The company’s finance department has also been strengthened with the appointment of three qualified chartered accountants. This no doubt, following a number of weaknesses revealed in its accounting system at year end (CI No 2,877), which reduced pre-tax profits by 1.5 m pounds. In spite of its troubles, Hackett-Jones remains confident that as a result of actions taken to improve purchasing and the company’s product mix, margins will improve this half. He expects a return to profitable trading by year end, and say s the board views Telspec’s long term future with renewed confidence. But thanks to the losses this time, the firm will not pay an interim dividend.
