Now that General Electric Co Plc has pruned costs down to a minimum, it reckons it can sustain this year’s increase in profits. Especially as its order book is 16% higher than it was in 1992 at a record UKP12,300m. For the year ending March 31, the electronics and engineering group saw pre-tax profits rise 4.1% to UKP863m at the top end of analysts’ forecasts of between UKP840m and UKP870m. Finance director David Newlands said, however, that the profit figures reflected redundancy and reorganisation costs of about UKP90m against UKP65m in the previous year. And operating profits slipped to UKP695m this time from UKP702m last. While turnover was flat at UKP9,410m, some UKP9,200m came from customers outside the group – including the proportion attributable to joint ventures. The board has proposed a final dividend of 7.62 pence, which together with the interim dividend of 2.68 pence, brings the total to 10.3 pence for the year, an increase of 7.3% on 1992. Chairman Lord Prior felt that against the background of some improvement in the British economy and many other parts of the world, the performance of the company has been satisfactory. GEC now generates more than 67% of its turnover outside the UK, with exports from here increasing 17% to UKP1,400m. The group has seen its most rapid growth in the developing economies of South East Asia and the Far East, where it has won major orders for power generation plant. To capitalise on this, it’s strategy has been to form joint ventures, particularly in manufacturing, to develop our participation in these markets. The most promising opportunities, Lord Prior believes, will be presented by power generation, electronic systems, telecommunications and transport. And he is prepared to support tenders [for large projects] with equity investment, although, he added, this will depend on the likelihood of a satisfactory return as well as the opportunities for more loading for our factories. Things aren’t quite so rosy in Europe though, where Newlands said trading conditions gave cause for concern, particularly in Germany, France and Italy. Europe’s going through some of the problems that we’ve been through for the last couple of years, he said, but that having been said, most of our involvement in Europe is in the longer term infrastructure projects, where we have good order books. Prospects in Britain, on the other hand, are looking up as the country climbs out of recession – the recovery will be particularly beneficial to the company’s smaller businesses, which account for a significant proportion of its profits, Newland said.
Civil side
Defence electronics remains GEC’s main source of profit, and sales here increased despite declining expenditure in this field. But the civil side is growing steadily, and now makes up about 25% of the electronic systems division’s turnover. Examples of products include radio systems, satellite television receivers sold via Amstrad Plc in the UK, and telecommications equipment sold into Italy. Overall turnover at the division increased 1.2% to UKP2,698m, while operating profits rose 1.5% to UKP264m. And this despite the costs of reorganisation – some 4,500 staff lost their jobs during the year – and high levels of research and development expenditure on such projects as the Eurofighter 2000 and the Merlin helicopter. Another major earner, telecommunications, didn’t fare so well, however. Operating profit fell 16.5% to UKP106m, on turnover down 10% to UKP1,012m due to falling volumes and prices. But Newlands said he’d informed the City last year that the business would do as well this time because of phasing down of deliveries to BT [of System X products]. Still, he believes things should improve over the coming year because we’ve done the restructuring, we’ve taken the costs out and that business is now budgeting for a modest improvement in sales and profits in this financial year. Electronic components, however, which consists mainly of GEC Plessey Semiconductors, maintained its sales at UKP304m. Operating profit also increased 66.
6% to UKP20m, mainly as the result of earlier restructuring. While Newlands chooses to err on the side of caution as regards future prospects, believing nothing is certain, Lord Prior strikes a somewhat more optimistic note. Several economic factors are at present relatively favourable for industry, he said, A realistic exchange rate, low interest rates, and low inflation will, if sustained, encourage industrial expansion.
