As Ferranti International Plc saw a pre-tax loss of UKP12.6m in the year to March 31, chairman Eugene Anderson admitted recovery is a puzzle to him. The losses mark an improvement on last time’s UKP33.5m deficit, which in turn was healthier than the previous year, but Ferranti’s ascent into profit appears to be as difficult […]
As Ferranti International Plc saw a pre-tax loss of UKP12.6m in the year to March 31, chairman Eugene Anderson admitted recovery is a puzzle to him. The losses mark an improvement on last time’s UKP33.5m deficit, which in turn was healthier than the previous year, but Ferranti’s ascent into profit appears to be as difficult as ever. The firm’s major market, defence electronics and systems, is still depressed without sign of improvement. Turnover drooped to UKP230.9m from last time’s UKP362.6m, although UKP170m-worth of orders were won and bids for new business worth over UKP600m are in the offing. Orders came in from the UK Ministry of Defence for a Command Team and Operator Trainer for the Sandown Class Minehunter, and more recently for the full scale development and production of electronic test units for ASRAAM, the Advanced Short range Air-to-Air Missile programme, worth over UKP2m. Discontinued operations contributed to loss and lower turnover: at the year end the assets and business of Ferranti International Controls Corp, previously placed in Cahpter 11 of the US Bankruptcy Code, were sold to Elsag Bailey Inc, but settlement costs were UKP11m.
During the year, Ferranti Healthcare Systems Corp was sold to Keane Inc, and ServiceTec Ltd bought Ferranti Infographics Ltd and the Metrology Service and Maintenance business. Since the year end, the business and certain assets of Ferranti Venus Inc were sold to a subsidiary of the Eldec Corp based in Seattle, Washington for under $2m. Gross borrowings rose from UKP90.4m to UKP99.5m, including an adverse exchange adjustment of UKP2.5m. But Ferranti benefited from lower interest rates, as the interest charge fell UKP1.3m to UKP12.2m. Ferranti’s efforts to rationalise during the year included a 26% staff reduction costing UKP5.2m made up of redundancies and the sell-offs. The workforce now stands at 3,973, down from a high of 23,000 five years ago. The firm is left with a number of empty properties because of staff cuts and notably the transfer of Head Office from Gatley to Manchester Concord Business Park. The cash drain of UKP3.5m they represent is expected to disappear post-recession as properties are sold. The fraud, discovered in 1989 after the merger with International Signal & Control Group Plc still casts a heavy shadow: in Ferranti’s terms, it is as significant as the Fall. Former Signal & Control director Stuart Pindell, the subject of proceedings for fraud, filed in the US for protection under Chapter 11 of the US Bankruptcy Code. He and Ferranti have subsequently reached a settlement where the firm will get the deeds to a US property, subject to bankruptcy court approval. Ferranti has recovered a total of UKP41.9m in connection with the fraud, but cannot issue shareholder dividends until it has distributable reserves. Costs associated with the fraud in the year were UKP500,000, down from UKP5.9m last time. Ferranti is now considering the alternative rescue initiatives of equity injection or strategic partnership. The result of one such joint venture, the sonar company Ferranti-Thomson Sonar Systems UK Ltd, continues to be successful, with wins like the 2050 Batch 4 Sonar and the final UK sonar order for Trident. Ferranti has undoubtedly done well in hanging on despite what Anderson calls a crippling fraud and subsequent life threatening situations that would have finished off a lesser company. But it still owes around UKP19m to suppliers and craves fresh orders. The puzzle may not be solved for a while.