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December 1, 1993

SHARE PRICE DIPS AS GEC TURNS IN A DECIDEDLY LACKLUSTRE FIRST HALF REPORT

By CBR Staff Writer

Lurking beneath General Electric Co Plc’s small increase in pre-tax profit, the company’s operating profit dipped to UKP267m from UKP285m. It was the income from deposits, loans and other investments that boosted the overall figure. Patchy is the word used repeatedly to describe the firm’s performance and GEC chairman Lord Prior said that figures for the full year were unlikely to be much above last years pre-tax profit of UKP863m. GEC’s business is traditionally skewed towards the end of the financial year and this is likely to be the case this year too, however difficult trading conditions will prevent much in the way of growth. GEC Plessey Telecommunications Ltd, the joint venture 40% owned by Siemens AG, saw its pre-tax profit sliced to UKP44m from UKP61m. Again, GPT’s business is usually weighted to the second half of the year, but GEC finance director David Newlands described the GEC Plessey business as relatively steady in an interview with Reuter. Newlands said usually strong deliveries in the first half last year made this year’s figure look weak in comparison, but said that he expected the position to reverse in the next six months. Lord Prior said that operating profit for GPT was ahead of its budget. The telecommunications supplier is one of three businesses at GEC described as having very full order books, the other two being Marconi and GEC Alsthom, the latter of which handles power engineering. In his statement Lord Prior said that profits were up at several GEC Marconi units, but overall pre-tax profits at Electronic Systems shrank by 14% to UKP79m. Lower margins on the continent operations and higher development spend is being blamed, however the company says that order intake exceeded sales in the six months. GEC is falling behind in the chip race with both turnover and profits down in the semiconductor manufacturing operations.

Reduced defence procurement

Some of this is a result of reduced defence procurement, but generally the company says that demand from some customers for computer peripherals was reduced. The division as a whole managed to turn in flat profits and marginally improved sales, thanks to the efforts of EEV and Marconi Instruments. Geographically, the company continues to expand the proportion of its business done overseas, up by some 70% to the point where GEC’s overseas operations account for 57% of its business. The biggest non-UK markets are the Americas (UKP912m), however the UKP910m sales to France run a close second. Sales in the Far East and South East Asia grew by 29% to a still small UKP56m. The interim dividend was increased to 2.81 pence from 2.68 pence last time. A reflection, the directors said, of the strong order book and its cash-rich position: the company has UKP1,416m net cash in the bank and the outstanding order book for the company as a whole is at a record level of UKP13,000m. The decision to pull its bid for Ferranti International Plc, which immediately pulled in the receivers (see front), might have been expected to please the market, since GEC will now be paying out less to get only what it wants of Ferranti, but despite being buoyed by post-budget euphoria, the market took a very dim view of the figures, and made GEC one of the few major counters to show a decline on the day – the shares fell 14 pence at 319.5 pence.

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