View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Technology
July 1, 1987

FERRANTI’s NOT FOR RATIONALISING, AND THE NUMBERS MAY PUT IT OUT OF REACH OF MOST

By CBR Staff Writer

With the City full of dreams that STC might be preparing to pounce, Ferranti yesterday made it quite clear that it has no intention of surrendering its independence. Announcing the company’s steady but unspectacular 1987 results, chief executive Sir Derek Alun-Jones said that Ferranti finds the idea of being rationalised, as part of a shake-up of the UK electronics sector, very unattractive indeed. Ferranti, he said, is in a market place that is growing, and we don’t feel we need anyone else. Compared with Lord Weinstock’s GEC, which reported on Tuesday, Ferranti’s results look very good. Pre-tax profits were up 22% at UKP50.2m on turnover that was ahead by 6% at UKP628.7m despite unfavourable currency movements that reduced overseas revenue by an estimated UKP10m. Prospects for the coming year appear to be favourable. The oil price stability should help the Offshore Industries arm of the Industrial Electronics division recover the UKP9m turnover that went AWOL in 1986, and the current order book is up on the same time last year. Deputy managing director with responsibility for finance and administration Charles Scott says that the present figure of UKP750m, against UKP700m in July 1986, represents a real improvement of some 15% once currency movements are taken into account. Unlike its competitors, Ferranti is optimistic about the effects of the changes in the UK Ministry of Defence’s procurement policy.

Fixed price contracts

Sir Derek says that the move to fixed price contracts offers Ferranti a chance to improve the cost plus three to four per cent margins it has traditionally received from the Ministry. He also anticipates that the new policy gives Ferranti a better chance of increasing its market share. The other positive news for Ferranti watchers was the second half improvement in the electronics division, which saw a half-time loss of UKP750,000 turn into a profit of UKP300,000. The improvement has continued into the current year with the US operation, which lost $3m in 1987, starting to turn round, the discrete component business picking up, albeit slowly, and demand in Europe for integrated circuits strengthening. According to the other deputy managing director, Dr Alan Shepherd, the US recovery appears to have a firmer base than the short-lived upturn that took place at the same time last year. Sir Derek also holds out hope that margins can be boosted above 9% this year. With the exception of 1986, when Ferranti enjoyed only 8% margins, the company has year in, year out produced margins in the order of 8.7% to 8.8%, so 9% and above would represent something of a triumph. With the tax charge likely to remain relatively unchanged – unless the US operations, where Ferranti has accumulated losses to write off, recover strongly – and the company’s venture capital style investments over the last three to four years due to start bearing fruit, Ferranti looks in good shape. Both the Computer Systems and Defence Systems divisions showed strong growth in 1987 with operating profits up 16 and 17% respectively on turnovers of UKP243.9m and UKP202.1m, and Instrumentation doubled its earnings to UKP5.6m and should still have room to grow this year. The City was impressed by the prospects and the shares moved up 7p to 140p. STC would now have to offer around 200 pence a share to capture Ferranti and it seems unlikely that Lord Keith, Arthur Walsh and co could muster the UKP860m plus to carry the day.

Content from our partners
How to turn the evidence hackers leave behind against them
Why food manufacturers must pursue greater visibility and agility
How to define an empowered chief data officer
Websites in our network
Select and enter your corporate email address Tech Monitor's research, insight and analysis examines the frontiers of digital transformation to help tech leaders navigate the future. Our Changelog newsletter delivers our best work to your inbox every week.
  • CIO
  • CTO
  • CISO
  • CSO
  • CFO
  • CDO
  • CEO
  • Architect Founder
  • MD
  • Director
  • Manager
  • Other
Visit our privacy policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.
THANK YOU