Ferranti picks up the pieces after ISC fraud

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The Independent Online
FERRANTI International, the advanced systems group that almost went bust in 1989 after the discovery of massive fraud in its US subsidiary International Signal and Control, is now operating at break-even.

'A little more activity could see us into profit,' Eugene Anderson, chairman, said. He described his job as 'no longer fighting fires, but winning contracts and beefing up the capital structure'.

The loss before tax in the first half to the end of September was pounds 10.9m against a pounds 28.8m loss in the previous first half. Analysts expect a full-year loss of pounds 15m against pounds 39.6m last year. The shares shed 1p to 9p.

The restructuring programme is almost complete and the legacy of ISC almost out of the system. Redundancies cost pounds 3.4m in the first half and further redundancy costs are expected to be small and concentrated in the US. Ferranti International Controls Corporation in the US cost pounds 7m as part of an agreed settlement of litigation. The last payment is due next month.

Further scope for cost-cutting is limited, but when the property market revives, Ferranti hopes to unload 32 vacant UK properties which are costing it pounds 3.5m a year.

Interest costs fell 17.6 per cent to pounds 5.6m. Net borrowings are pounds 74.1m against shareholders' funds of pounds 62.2m.

Ferranti's order book stands at pounds 246.1m compared with pounds 279.6m on continuing businesses a year ago. The company won several small orders worth a total pounds 90.7m in the first half and has bids outstanding for pounds 400m, of which pounds 200m is in the Middle East. Landing an order for air defence systems for Saudi Arabia's Al Yamamah contract 'could transform the company,' Mr Anderson said.

Ferranti was confident of winning more orders from UK utilities, particularly nuclear power stations. Improvements to the capital structure could come through more partnerships such as the joint venture on sonar systems with Thomson of France, Mr Anderson said.

Further significant cash recoveries from litigation against James Guerin, former chairman of ISC, were not expected. However, the company was trying to get back tax from the Inland Revenue for previous overstatement of profits.

Arrangements for banking facilities expired next September and negotiations on new facilities with a steering committee of 10 banks would start next month. Mr Anderson said relations were very close and the banks had been supportive.

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