Following months of head scratching by the board and its various external advisors, Racal Electronics Plc is to sell its loss making Data Communications business and float off its profitable telecoms division. Together these account for 45% of the group’s revenue, and Racal will instead focus on its growing defense and instrumentation businesses. The troublesome datacoms arm will be sold within three to six months and the telecommunications float will occur at the right time dependent upon market conditions. The float will also be subsequent to the appointment of a new chief executive. Such a move is likely to value the division at around 600m pounds but Racal would not say how much of its holding would be put up for sale. The plans were announced alongside Racal’s interim results which show group net profits to October down 58% at 5.6m pounds on revenue that fell 1.0% to 596.4m pounds. The datacoms business which is up for sale has been a huge money pit for Racal, with endless product delays costing millions in R&D expenses and lost revenues. In the six months to October it saw operating losses nearly double to 22m pounds on revenue of 125m pounds. The head of the US datacoms division, Paul Kozlowski, had initially expressed a preference for a flotation on the Nasdaq, but this route was dependent upon breaking into a profit. As it stands, further product delays have caused mounting losses, and the float has been abandoned in favor of a quick disposal. The telecommunications arm saw its operating profits fall by 4m pounds to 16.5m pounds on revenues that climbed a disappointing 2.4% to 140m pounds. An outright sale of this division was also considered but the board has decided on flotation as the best option to maximize shareholder value. Racal said it hopes to accelerate telecoms revenue growth to 8% for the full year. Revenue growth was 13% from businesses which are planned to be retained within the group. The interim dividend is held at 2.1 pence and the shares rose 15.5 pence to 236 pence.
