Racal Electronics Plc has attempted to take the sting out of its slump in interim profits with a pre-announcement (CI No 3,055), and by accompanying its results statement with news of an alliance to pitch for a 2bn British pound contract. As it warned, the company turned in pre-tax profits down 30% at 21.2m pounds on revenue that rose 19% to 602m pounds, and blamed defense contracts delayed at the last minute. The figures include charges of 10.1m pounds for reorganization of the sluggish Data Group, whose Data Products communications equipment business has been in the doldrums for some 10 years now, but which is still the largest single unit within the group and perennially promises jam tomorrow (CI No 2,928). The forecast restructuring charge of 20m pounds is likely actually to come out at 25m pounds, the company says, although the extra will be offset by an exceptional credit in the second half. Racal says its Data Products business is in fact improving, with revenue up 3% to 149m pounds and operating losses down 8% to 12m pounds. Restructuring is well under way it says, and it expects the division to make a modest operating profit in the second half of the year. It is looking for a return to profitability in 1997-98. To offset the bad news, Racal Radio announced it has signed an agreement in principle with US rival for the contract ITT Corp’s ITT Defense, and Siemens Plessey Systems Ltd to form an alliance to pitch for the UK Ministry of Defense’s 2bn pound Bowman contract for a new battlefield communications system for the British Armed Forces. The Ministry is expected to make a decision soon. The Network Services division saw sales and operating profits trebled. Revenue was up to 137m pounds and operating profits were 20.6m pounds. The Defense Radar and Avionics sector reported revenue up 13% to 92.8m pounds with profits up 43% to 11.2m pounds, in what the company describes as an excellent first half. Radio Communications sales fell 18%, and it expects operating losses for the year. Marine and Energy benefited from a strong recovery in the energy group, and marine revenue was steady but profitability improved. Racal now reports its associates separately. In the first half, they contributed profit slightly down on last year of 10m pounds, including a write off of 1.2m pounds for start up costs. Associates include the 22.5% share the company holds in UK lottery company Camelot Group Plc. For the full year, Racal expects pre-tax profits of around 50m pounds after an exceptional charge of 20m pounds. Before exceptionals, it expects pre-tax profits to be similar to 1995-96. The company intends to pay an interim dividend of 2.1 pence, unchanged from last year.
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