The troubled telecoms equipment maker Marconi yesterday confirmed that the last quarter had been no worse than it had predicted but warned that trading was still tough.
"Market conditions remain difficult with continued uncertainty regarding levels and timing of service provider spending. Events in the United States on 11 September have further exacerbated this uncertainty," the company said but refused to give more specific financial guidance.
Nevertheless, shares in Marconi closed up 13 per cent at 28.3p as the market breathed a sigh of relief that the trading statement did not contain any new shocks. So far this year, the company has issued two profit warnings, resulting in the departures of its top three executives and the axeing of some 10,000 jobs.
In the second quarter to 30 September, Marconi turned out an operating profit of £5m, compared with an operating loss of £227m in the first quarter, on sales of £1.44bn, down 24 per cent from the same period last year.
Second-quarter sales at its core communications business were £893m, down 33 per cent from last year's figure but up from the £688m recorded in the first quarter "due to the seasonality of the business".
The operating loss for the six-month period came in at £222m and debt, at 30 September, stood at £4.28bn down from £4.44bn a month earlier. The company also reaffirmed its debt target of £2.7bn to £3.2bn at the end of March next year.
Mike Parton, chief executive, refused to give any indication of the trading environment the business is up against, saying: "Once I start going down this path, I end up giving guidance. The position is we are not giving guidance for the second half.
"To be quite honest, when a company is going through a period of restructuring that Marconi is, cash flow is almost more important than profit," he said. During the second quarter, the company recorded positive operating cash flow of £83m.
Mr Parton said Marconi was still waiting for European regulatory approval for the sale of its Medical Systems business to Philips and said no decisions had yet been taken on whether to sell any of the businesses in its Capital division. "Those businesses will be managed for value. We will see how much money we can sell them for. We will look at how much cash they're generating and we will decide on a case-by-case basis if it's better to sell or to continue to generate cash by operating them. We don't need to sell all the businesses in Capital to meet the target as they have turnover of over £1bn," he said.
Nor, he said, had any decision yet been taken on whether to start a bond buyback programme. "The bond buyback is an option but we are looking at all areas of our debt structure. Some of the [bond] prices are attractive but spending money, that in a few months we need, would be a very unattractive thing to do. So we've not made a decision yet," Mr Parton said.
The company said it had to pay £210m in collateral as part of its share-option hedging arrangements. Mr Parton said Marconi could owe a further £6m payment should the company's shares drop to around 8p.Reuse content