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July 9, 1987

THORN EMI, ACQUISITIVE AGAIN, BEATS ANALYSTS’ FORECASTS WITH UKP679m PRE-TAX

By CBR Staff Writer

A substantially improved contribution from its technology division helped Thorn EMI Plc beat brokers’ forecasts to report record profits of UKP159.4m in the year to March. Against profits last time of UKP9.4m, the division produced UKP29.8m this time on turnover of UKP679m despite further losses by both chipmaker Inmos International and Thorn EMI Computer Software. Inmos lost a further UKP10m to add to the UKP17m of last year but Colin Southgate, who has now added the title of chief executive to his previous one of managing director, and chairman Sir Graham Wilkins declined to say how much Computer Software, the off-the-shelf financial software house had lost. After a management reshuffle and substantial redundancies, Computer Software is slated to break even this year. The future for Inmos International is not so certain. Thorn has appointed Goldman Sachs to find new investors (see front page) but any who come forward will be told that the continuing price volatility in the chip business makes forecasting the prospects difficult. Inmos is, however, benefitting from an increase in orders for the Transputer and its derivative, the Colour Look-Up Table that IBM has incorporated into the Personal System/2. A second major, so far unrevealed, US company recently placed a $10m order for the CLUT and demand from Japan for all Inmos’s products is picking up dramatically. In the whole of last year Inmos did only $1m in Japan but in the first quarter alone of the current year it did $3m of business. Despite the improvements, Colin Southgate is not prepared to state that Inmos will definitely move into the black this year. One reason is the continuing need to invest in the business. Commenting on the quest for outside investors in Inmos, Sir Graham said that he and his team now feel that the time is ripe to recoup some of the money poured into Inmos but he said no decision had been made about how large a stake in Inmos would be sold.

Acquisition targets

The rest of Thorn EMI’s computer operations, the Software Sciences consultancy, the Datasolve bureau, and the Computeraid micro maintenance company (CI No 720) all did well, although Southgate again declined to say how well. He broke his silence to say that software accounted for a total of UKP103m out of Thorn’s UKP3,200m turnover. The telecommunications arm Datatech saw a substantial improvement while Thorn’s joint public digital telephone exchange venture with L M Ericsson which yesterday opened a new manufacturing plant in Scunthorpe to build AXE 10 exchanges for the UK market has over UKP200m worth of orders on its books. At the results presentation, Sir Graham brushed aside suggestions that GEC would be able to undercut both Thorn and Plessey to win all of the next tranche of British Telecom business. We expect to win our share, he said. Sir Graham also revealed that Thorn EMI was in negotiations with several relatively small potential acquisition targets, all of which would fit in nicely with Thorn’s core businesses. On Amstrad’s approach for Ferguson, Sir Graham said that Alan Sugar’s company had entered the fray before the deal with Thomson’s had been signed and sealed, but following a meeting had declined to take away the books for further inspection. Without mentioning Amstrad by name, he said that one of those interested in Ferguson seemed more intent on acquiring the Gosport assembly unit rather than the Enfield, North London manufacturing facility. He suspected that was because the company was intending to manufacture the television subassemblies offshore and dispense with some of the UK staff.

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