Dowty Group Plc, the electronics and aerospace manufacturer, accompanied its interim financial results with the news that it is in discussions with a number of parties that could result in the formation of an alliance which could enhance the prospects of the ailing information technology division. As a whole, the group has suffered a dramatic slump in pre-tax profits for the six months to September 30, hitting the bottom end of the range of City forecasts at UKP10m, down 73%. Sales fell 8% to UKP331m. The information technology division was particularly hard hit, with profits down to UKP700,000 from UKP7.3m. Dowty financial director Reg Moore says this division, Case Communications Ltd, which supplies computer networking equipment, has simply suffered under the recession, particularly as it has a thick cost base. Case, which had an average headcount of 2,500 last year, has shed between 200 and 300 jobs this time. Moore says the type of alliance Dowty is seeking for its communications company is most likely to be some sort of joint venture, where a partner takes a stake in it. Discussions are at a very early stage, and Dowty is talking to a number of potential partners. Asked whether Dowty might sell off its information technology division altogether, Moore said it would consider doing so if the price was right. Dowty’s intention is simply to enhance the division’s prospects. Dowty Group reports borrowings up at UKP126m, with gearing at 50% – according to the finance director, this is a typical balance sheet for a company like Dowty. Asked whether TI Group Plc had come through yesterday with a hostile bid for the group as a whole (CI No 1,805), Moore laughed his assurances that no bids had been received. Whether Dowty would recommend an offer to its shareholders, should one arise, would again depend on the price, he said. Dowty Group has been heavily cost-cutting, and since the start of the financial year headcount has been reduced from 15,000 by 1,600, with an additional 250 having left in the final quarter of last year; a further 540 redundancies are scheduled for the second half. As part of the company’s restructuring programme, a manufacturing plant in North America has been closed, and the operations there combined with the remaining plant in the region.
