General Electric Co Plc chose the announcement of its year-end finals to reveal that the ú16m net exceptional loss incurred was due to the sales of its interest in Siemens Stromberg-Carlson. The company saw its pre-tax profits after exceptionals rise 3.5% to ú891m on turnover up 6.2% to ú10,003m. The figures failed to impress the analysts, who had forecast profits between ú895m and ú934m. Analysts attributed the 4p drop in share price to 305p once the figures has been released to a disappointing performance from GEC-Marconi which saw increased orders but lower operating margins and deliveries. Lord Prior, GEC’s chairman recognised that the defence division had had a difficult year highlighting unexpectedly heavy development expenditure on certain contracts coupled with order cancellation from Canadian government contracts as the main reason for this. Lord Prior said order book levels now stood at ú4009m and added that the division would show substantial progress in restoring results to acceptable levels in the forthcoming year. The order book including shares in joint ventures was ú12,007m. The bulk of group revenue came from the Electronic Systems, Power Systems and Telecommunications divisions. Profits from electronic systems rose 1.5% to ú205m on turnover down 3.2% to ú2,749m, while profits from power systems dropped 0.6% to ú157m on turnover up 17.2%. Telecommunications saw the highest rise in profits, to ú148m from ú120m, on sales up 3.9% to ú1,091m. GEC-Marconi’s business still remains in non-civilian markets but a contract to supply fun and games in-flight information systems to five airlines including United Airlines and Japan Air System has shifted this balance. The Avionics, Defence Systems, Sensors, Inflight Systems, Lear Astronics Corp and Ca nadian Marconi units within Marconi jointly developed the system now installed in Boeing 777s.
Orders in China
But civilian contracts in the group’s telecommunications business through Marconi SpA and GEC-Marconi Communications accounted for more than half of turnover. Marconi SpA saw a rise in export orders increasing its order book. Marconi Communications received orders for high-frequency radios from Turkey and orders for sound broadcasting systems from Indonesia. GEC’s fortunes in the telecommunications market flourished in line with an upward trend in sales across the world. Export orders, which contributed 25% to total sales, rose by 60%. GEC Plessey Telecommunications and Siemens won ú40m worth of orders in China. This division also won a ú35m contract to manage communications for the Hong Kong Mass Transit Railway project and the Saudia Arabia National Guard network. Sales to customers outside the group including those from joint ventures and associated companies came to ú1,003m, 6.2% up on last time, with 70% of sales from outside the UK. China, South East Asia, India and the Middle East were singled out as the most lucrative regions for future orders. In a move to further expansion of its naval systems and shipbuilding business the company has now made an offer of ú800m for sub maker VSEL Plc. The bid was made possible following the UK government decision to allow GEC to bid for VSEL and completing a 10-month bidding race with British Aerospace. Finance director David Newlands said ú700m of the acquisition would be paid in cash during this financial year. The company’s net cash reserves stood at ú2,950m at the year-end with cash from joint ventures, primarily the GEC Alsthom power engineering group owned 50% by France’s Alcatel Alsthom SA, up by ú161m to ú1,620m. Newlands said much of GEC’s cash would be generated by joint ventures and spending it would require agreement of partners: not all the money would be spare cash. Analysts are speculating that the VSEL acquisition will preclude a bid for Aerospace to give GEC the national lead in weapons, aircrafts and naval systems – a long-held dream of Lord Weinstock, the group’s managing director. However, speculation centres on whether GEC has enough cash to buy Aerospace, which is curre
ntly valued at some ú2,400m. GEC will pay a final dividend of 8.42 pence, making a rather stingy 5% increase in the year’s payout, to 11.37 pence.
