General Electric Co Plc failed to impress the markets with a less than 1% growth in pre-tax profits for the year to March 31, and it saw its share price tumble 21.5 pence to 272.5 pence. The share price’s rapid fall took place as electronics sector analysts shaved back their year earnings forecasts to ?920m from around ?975m. However analysts believe the share price has its floor and will profit from being one of the few large players in defence electronics. The group’s growth in turnover was similarly less than staggering, up 3.2% at ?9,701m.
Pergao Damn
Outstanding orders were flat at ?12,385m. However Lord Prior, in his chairman’s statement, was upbeat about the future, and in particular the group’s key markets of the US and UK: the year saw some improvement in the British and United States economies, and the beginning of an emergence from recession in continental Europe. Lord Prior also saw strong growth in Asia, and opportunities for business in India improved markedly and it is here that GEC hopes to bolster its order book, having exported ?870m, up 100%, to the Far East in the year. In Telecommunications, where profits rose by 13.2% to ?120m, on turnover up 3.7% at ?1,050m, GEC has shared the development costs of public switching equipment with Siemens AG and has delivered most of British Telecommunications Plc’s System X digital telephone exchange programme. However subsequent market requirements have forced heavy development and restructuring costs on GEC Plessey Telecommunications. In Electronic Systems, the acquisition of the Plessey businesses and work with Ferranti and Matra have improved GEC’s technology and market access in the US and Middle East, where sales and operating profits have increased by about 40% and 20% in the last five years. In spite of this Electronic Systems performed poorly. According to GEC, its earnings were held back by cost overruns, particularly in connection with the Eurofighter project and Boeing Co’s next generation 777 jet for which it is providing in-flight entertainment systems. GEC Marconi, providing electronic systems for the defence industry, was also hard hit by the global downturn in arms spending and operating profit fell 7% to ?252m, on turnover up 1.1% at ?2,749m. The group complained that its figures had suffered because of the British government’s row with Malaysia over allegations that bribes were paid to the Malaysian prime minister over the Pergao dam and with China on the hand-back of Hong Kong. GEC and its associates had some ?300m to Malaysia last year, and Lord Prior regards the rift as, at the very least, unfortunate. GEC used the results announcement as an opportunity to dispel rumours over the leadership of Lord Weinstock, managing director since 1963 and nearing his 70th birthday, confirming his position for a further two years. According to David Newlands, financial director: The board has invited him to carry on as managing director for a further two years, after which we’ll see. His conservative style of leadership has been criticised, being blamed for holding the group back. GEC also denied the newspaper report that it was talking to Thorn EMI Plc to buy some of its defence activities. The group will pay a dividend at 10.82p per share, at the top end of analysts’ expectations, and up 5% on last year.
