Datacom duds overshadow Racal

As always, Racal's figures are a mixed bag in which good performances from a number of extremely promising businesses have been overshadowed by yet another dismal result from the company's data products division.

That is unfortunate, because it distracts attention from the company's undoubted entrepreneurial skills and the uncanny knack Sir Ernest Harrison has shown over the years for realising shareholder value.

The numbers themselves for the six months to September were in line with expectations - pre-tax profits of pounds 30.1m, up 28 per cent, and a nice 20 per cent rise in the interim payout to 2.1p - so yesterday's share price improvement, up 6p to 276p, was a reflection of the market's welcome for the acquisition of British Rail's in-house telecommunications supplier for pounds 133m.

Buying in profits of pounds 17.6m, the deal is expected to be earnings-enhancing from day one and dilutes the impact of struggling modems, credit card terminals and other computer peripherals on the dominant data communications division. Owning the network should open some useful doors in both Whitehall and the private sector.

That is just as well given the slump into losses of the division once the beneficial contribution of Racal's Camelot stake is stripped out.

Without Camelot, datacoms made a pounds 5m loss compared with an pounds 800,000 profit last year, itself a pathetic return on sales of almost pounds 200m.

The company makes two points, both of which carry some weight. First, Camelot is an integral part of the datacoms division - if it were not so high-profile, and the rest of the business so arcane to the average observer, no one would consider stripping it out in the first place.

Second, the division is showing every sign of having bottomed out - new management has an impressive track record in turning around other apparent basket cases.

But with no one claiming that break-even is any closer than 18 months away, data communication is still a heavy drag on the rest of Racal, itself something of a curate's egg.

Margins are under pressure at the biggest earner, Specialised Businesses, the up-front costs of trying to win the Government's Bowman radio contract are draining Radio Comms, and marine and energy work is highly competitive so Racal was more than usually dependent on an impressive 10 per cent return on sales from its defence companies.

Profits for the full year to March are now expected to reach pounds 73m compared with last year's pounds 58.3m, putting the shares on a prospective price/earnings ratio of 16. There is plenty of growth potential in Racal, but the shares have had a strong run over the past few years and, with an unexciting yield, they are high enough.

PROMOTED VIDEO
Voices
Ukip leader Nigel Farage arrives at the Rochester by-election count
voicesIs it any wonder that Thornberry, Miliband, and Cameron have no idea about ordinary everyday life?
Sport
sportComment: Win or lose Hamilton represents the best of Britain
Life and Style
tech
News
ebooksNow available in paperback
Extras
indybest
Sport
Arsene Wenger reacts during Arsenal's 2-1 defeat to Swansea
footballMan United and Arsenal meet on Saturday with both clubs this time languishing outside the top four
News
i100BBC political editor Nick Robinson had a lot of explaining to do
News
A girl plays on a Sony 'PS Vita' portable games console
news
Life and Style
Nappies could have advice on them to encourage mothers and fathers to talk to their babies more often
newsTalking to babies can improve their language and vocabulary skills
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

US immigration: President Obama ready to press ahead with long-promised plan to overhaul 'broken system' - but will it get past a Republican-controlled Congress?

Immigration: Obama's final frontier

The President is ready to press ahead with the long-promised plan to overhaul America's 'broken system' - but will it get past a Republican-controlled Congress?
Bill Cosby rape allegations explained: Why are these allegations coming out now? Why didn’t these women come forward earlier? And why has nobody taken legal action?

Bill Cosby rape allegations explained

Why are these allegations coming out now? Why has nobody taken legal action? And what happens next for the man once thought of as 'America's Dad'
Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain

You know that headache you’ve got?

Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain
Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?

Scoot commute

Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?
Paul Robeson: The story of how an American icon was driven to death to be told in film

The Paul Robeson story

How an American icon was driven to death to be told in film
10 best satellite navigation systems

Never get lost again: 10 best satellite navigation systems

Keep your vehicle going in the right direction with a clever device
Paul Scholes column: England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil

Paul Scholes column

England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil
Michael Dawson: I’ll thank Spurs after we win says defender as he prepares to return with Hull

Michael Dawson: I’ll thank Spurs after we win

Hull defender faces his struggling former club on Sunday ready to show what they are missing. But he says he will always be grateful to Tottenham
Frank Warren column: Dr Wu has big plans for the professionals yet he should stick to the amateur game

Frank Warren column

Dr Wu has big plans for the professionals yet he should stick to the amateur game
Synagogue attack: Fear unites both sides of Jerusalem as minister warns restoring quiet could take 'months'

Terror unites Jerusalem after synagogue attack

Rising violence and increased police patrols have left residents of all faiths looking over their shoulders
Medecins sans Frontieres: The Ebola crisis has them in the headlines, but their work goes far beyond West Africa

'How do you carry on? You have to...'

The Ebola crisis has Medecins sans Frontieres in the headlines, but their work goes far beyond West Africa
Isis extends its deadly reach with suicide bombing in Kurdish capital

Isis extends its deadly reach with suicide bombing in Kurdish capital

Residents in what was Iraq’s safest city fear an increase in jihadist attacks, reports Patrick Cockburn
Underwater photography competition winners 2014 - in pictures

'Mysterious and inviting' shot of diver wins photography competition

Stunning image of cenote in Mexico takes top prize
Sir John Major: Negative West End portrayals of politicians put people off voting

Sir John Major hits out at theatres

Negative West End portrayals of politicians put people off voting
Kicking Barbie's butt: How the growth of 3D printing enabled me to make an army of custom-made figurines

Kicking Barbie's butt

How the growth of 3D printing enabled toy-designer to make an army of custom-made figurines