We had been warned, but Radstone Technology Plc shares still shed 6.5 pence, or 16% on Friday, to a year-low of 33.5 pence, as the Towcester, Northamptonshire electronic and electrical equipment company reported pre-tax losses of ú2.6m, after a ú900,000 restructuring hit, against ú1.0m profits last time. Turnover also plunged 44% to ú8.3m, due mainly to the change in US defence procurement procedures, which hit the company even harder than anticipated (CI No 2,740). The changes were the result of Congress insisting on best industrial practices being followed by the defence procurement people. The company complained that this has meant continued delays in the placing of subsystem orders by US military systems integrators as they adjust to the new thinking, and cost it ú2.9m in decreased sales in the half. To add insult to injury, a major customer in the Far East also deferred a capital programme, resulting in ú1.7m decreased sales in the region. The ú900,000 restructuring charge was the result of merging the military and industrial divisions, and reorganising the structure and manufacturing of the company in June (CI No 2,693). The figures also included a tax credit of ú595,000 carried over from previous tax losses, and make no provision for carrying forward losses. Chairman Rhys Williams said the restructuring will reduce costs by ú1.1m. It created a single VMEbus board business, and manufacturing will be increasingly undertaken by the Foundation Technology subsidiary, which has been relocated within Towcester. The company was clearly wary of the long-term impact of the the shenanigans in the US and is looking increasingly to the telecommunications market for business. Research and development expenditure went up to 13.6% of sales, from 9.3% last time and gearing jumped to 28% from just 3%. The order books are at a low level, and continue to be lower than anticipated since the half ended. The ongoing dispute between President Bill Clinton and Congress over balancing the US budget, and the resulting shutdowns have also hit the company, in the shape of delayed orders. The second half results will, conceded Williams, be disappointing. However, it’s not all gloom and doom as he expects a return to profit next fiscal as customers adapt to the new procedures; Radstone pays no interim.
