Cray's rescue brings saviours healthy profits: Remuneration committee considers higher salaries for directors

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THE four businessmen who were recruited to rescue Cray Electronics from its difficulties have turned their initial investment of pounds 2.85m into about pounds 40m in less than four years.

The precise value of the controversial incentive scheme put together for Sir Peter Michael and his colleagues will be decided shortly when Cray's auditor determines the appropriate level of earnings per share.

At yesterday's closing share price of 156p, Sir Peter's holding will be worth about pounds 12.5m. Roger Holland, who has recently succeeded Sir Peter as Cray's chairman, will have about pounds 10.5m of shares, Jon Richards will have pounds 10m and Jeff Harrison about pounds 9.5m. The four men were already wealthy from the 1989 sale of UEI to Carlton Communications.

Mr Holland said: 'If you look at the job that has been done, (the reward) is, to say the least, justifiable.'

Ingrid Kirby, the Postel investment manager who queried the share scheme at its inception, said the outcome illustrated the grounds for her original scepticism. 'It still seems to me that the gearing in the thing was too great,' she said. 'The risk-reward ratio was rather skewed.' Postel retains a stake of nearly 1.8 per cent.

Cray's new management has refocused the company through the acquisitions of Dowty Information Technology and Autofile, a leader in holiday reservation computer systems. The group's future lies in data communications networks and 'high ticket' software.

Pre-tax trading profits in the year to end April jumped from pounds 2.7m to pounds 17.6m. But when a pounds 3.4m foreign exchange gain from Black Wednesday and an pounds 8m profit on closures and disposals is added in, Cray has FRS3 pre- tax profits of pounds 29m, and earnings per share of 13.8p.

'They're quite outstanding results we think, in our modest way,' Mr Holland said.

Although the exceptional disposal profits will be excluded from the share scheme calculation, Mr Holland said the foreign exchange windfall - worth 1.9p of EPS - would be included, since the auditors regard it as a result of normal trading. Without this, Cray's earnings of 7.1p a share would have only just reached the trigger point for one of the classes of incentive shares.

Despite the strongly improved results, Cray's shares slipped 6.5p.

Mr Holland, Mr Richards and Mr Harrison said they had no intention of converting their shares to realise their value. If Cray's share price continues to rise, it is worth them holding on. Mr Holland said the continued growth of Cray would provide them with 'a bit of intellectual satisfaction'.

Cray's remuneration committee is considering higher salaries for Mr Holland, Mr Richards and Mr Harrison. Sir Peter recently left the board.

Analysts are forecasting Cray's profits this year to be about pounds 25m- pounds 26m, with earnings of about 8.5p.