Troubled Racal Electronics Plc is seeking a strategic partner for its telecommunications business and advisers are looking at merger options for its data productions division, the company revealed yesterday. This comes after a year when profits slumped after the group had to absorb the 29m pound costs of a fundamental reorganization of its Data Products division. At the pre-tax level, profits fell from 70.4 pounds to 40.4m pounds though revenues rose 14% to 1.138bn. The company says that reorganization of data products is now complete and its operating loss for the year was 19.1m pounds, 5.5m pounds down on the previous year’s figure. It is confident it can compete in the market for multimedia communications systems, which is growing at 25% a year. New products are being introduced though the company says that increased sales and profits margins are unlikely before the second half of the current year. But in order to ensure that shareholders get the best value from this business, the board says that they are being advised by merger and acquisition specialists on future options. On the telecommunications side, Racal says business is expected to grow at 15% annually, with good margins in a market expanding by 20-25% a year. But it says growth rates would be improved by international links for existing customers, strengthening of its value-added service portfolio, handling of network traffic landed in the UK and extra capital investment. A strategic partner could provide all, or some, of these, says Racal. Advisers are helping the company look at options.
