Ferranti International Plc made it clear on Friday that all the bad news is still not out of the way when it reported a pre-tax loss for the six months to September 30 of UKP15.4m against a profit last time restated down to UKP16.6m. The loss was much worse than expected and was attributed to […]
Ferranti International Plc made it clear on Friday that all the bad news is still not out of the way when it reported a pre-tax loss for the six months to September 30 of UKP15.4m against a profit last time restated down to UKP16.6m. The loss was much worse than expected and was attributed to high interest costs Ferranti has had to take on vast short-term debt to plug the hole in its balance sheet – lower profits on military contracts and substantial losses in the US, redundancy costs in the UK, and the cost of developing the Zonephone Telepoint system. The company hopes for a rather less awful second half, and it now looks highly likely that the rights issue of preferred shares it’s one-for-one at 25 pence against a price of about 35 pence in the market – to raise UKP187.1m gross and cut the enormous bank borrowings – will go ahead and that no bid will intervene ahead of time. The new preferred shares will carry two votes against one for the ordinaries, and will be entitled to double any dividend paid on the ordinaries in the future – effectively two shares for the discounted price of one. They will also have priority over all but the company’s preference shares and special shares in any winding up. Thomson-CSF SA is now seen to the the only game in town, and the political ramifications of a company owned by the French state acquiring a UK defence contractor outright is seen as an insuperable bar to a full bid from Thomson, which leaves only a minority stake. Monopoly considerations mean that GEC Plc is equally ill-placed to take Ferranti over. Ferranti is a much smaller company in more ways than one after the alleged frauds knocked a UKP215m hole in its balance sheet: it says it will have reduced its headcount in ongoing businesses – excluding the ones sold or for sale – by 20% plus over the 12 months from March 1989. The company plans an issue of special shares to its shareholders, to be created by subdividing the 10p nominal ordinary and preferred shares into one new ordinary share of 9p and a Special Share of 1p, and one new preferred share of 9p and a Special Share of 1p and which will not be quoted on any stock exchange but will entitle the holders to a share of any money that Ferranti can get back through legal proceedings against James Guerin and others over the alleged International Signal & Control fraud. The company says that the order book at the end of September stood at UKP1,100m, down from $1,300m a year earlier. Since then, it talks of a strong order book with significant new contracts being won.