Racal Electronics Plc has seen its results improve markedly for the first half of its fiscal year, helped by cutting 1,000 staff. This means that the headcount had been reduced by 2,000 over 18 months. Even though redundancy, severance and reorganisation cost the company UKP7.8m pre-tax this time and UKP15.9m last time, net profits stood […]
Racal Electronics Plc has seen its results improve markedly for the first half of its fiscal year, helped by cutting 1,000 staff. This means that the headcount had been reduced by 2,000 over 18 months. Even though redundancy, severance and reorganisation cost the company UKP7.8m pre-tax this time and UKP15.9m last time, net profits stood at UKP11m against losses of UKP7.3m last time. Racal Electronics significantly lessened its restructuring costs this time and saw a profit turnaround at its data communications division. Further charges related to reorganisation are expected in the second half, but at a lower level. No such costs are anticipated during the next fiscal year. Pre-tax profits were UKP23.1m against losses of UKP2.4m last time, on turnover that fell 5.7% to UKP448m due to disposals.
New digital access products
Estimated net demerger costs relating to Chubb Security Plc and Vodafone Group Plc were UKP3.4m, after tax and UKP63,000 gains from the disposal of businesses this time. For the comparable period last year, estimated net demerger costs amounted to UKP8.1m, after tax and UKP80,000 gains from the disposal of businesses. Racal’s data communications division benefitted from cost-cutting and healthy sales of its new digital access products, which for the first time move it out of the dwindling modem market. Nonetheless, chairman Sir Ernie Harrison stated that the data product sector still needs licking into shape, and that profitability will further improve as a result. The first milestone, he said, was to generate a 5% return on sales. The start-up operation, network services, also produced operating profits of UKP200,000 compared with losses of UKP75,000 last time. Data networking is the fastest-growing sector of the business, and the group has been approached by several unnamed companies with a view to setting up joint ventures. Overall operating profits at the division were UKP2.3m this time compared with losses of UKP1m for the comparable 1991 period. These are expected to improve further by the year-end as sales are said to be weighted towards the second half. The radio communications division saw operating profits grow 11.5% to UKP12.5m, despite a 5% drop in turnover to UKP78.4m. The profit increase was attributed to a 16% growth in margins because of improved use of staff and material resources. Nonetheless, sales were down at the both the defence, radar and avionics business and the marine and energy division, from UKP59.2m to UKP51.5m, and from UKP73.8m to UKP66m respectively. The defence operations have now moved away from fixed-price contracts for the military, as there is no money to be made here any more. The focus is now on niche markets, or translating technology developed for defence purposes into civil applications. Revenues are expected to benefit greatly when the SatCom project goes live in March or April 1993. This will enable people on an aircraft to telephone anywhere in the world via a satellite link. Several major airlines have reportedly already signed up. Racal Redac, which specialises in electronic data interchange products, also suffered because of the poor state of the Japanese economy, where it saw a UKP3m fall in revenues. Cost-cutting measures are being implemented as a result. Sir Ernie is optimistic that the year-end will show further improvements in performance.
