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June 13, 1990

RACAL ELECTRONICS HIT BY DISAPPOINTING SHOW AT EXPANDING DATA COMMUNICATIONS

By CBR Staff Writer

Racal Telecom Plc was once again acknowledged as the star performer in the announcement of Racal Electronic Plc’s results in London yesterday, but while sales and operating profit for the parent company both showed considerable increases from last year, some concern might be shown about the fact that Racal Telecom’s contribution to operating profits for the group as a whole had risen dramatically to 63% of the total, up from only 48% last year. Chairman Sir Ernest Harrison nonetheless claimed that results were generally in line with our expectations, with the exeption of the Data Communications business, where operating profit had been halved to around UKP13m because of a shortfall in turnover in the last quarter and greater than expected losses incurred by the Network Communications Group, bought from Digital Communications Associates in January; these losses were due to lower turnover than expected and the delay between taking rationalisation measures and the effects of these measures being seen. Data communications had seen good growth in Holland, France and West Germany, but Italy had been a disappointment, mainly because of the withdrawal of a large SIP order in the year. Sir Ernie admitted that, as a whole, traditional product areas had been disappointing but they had at least brought Racal into network services; however the Racal Government Data Network, which has a current total of 1,600 connections with a further 2,400 on order, is not expected to show profits before the end of the 1992-93 year, with total investment in the project only being recovered by 1996 at the earliest. The Radio Communications group, continued Harrison, was returning to a good level of profitability, while the Defence Radar and Avionics business, which saw profits half to UKP6.6m, was under review. Racal Electronics was planning for a modest growth in turnover for the current year, and was intending to continue its strategy of moving into high value-added services. Rumours of a rights issue – which had the effect of knocking 3 pence of Racal’s share price on Tuesday were categorically squelched. Sir Ernie stated that Racal had been given clearance to file an application with the New York Stock Exchange, with a listing expected in January next year. Shares in Racal Electronics climbed 3 pence to 365 pence after the announcement, a return to the level reached before trading opened on Tuesday morning.

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