Problem contracts hurt GEC results

RUSSELL HOTTEN

Problems with two important contracts forced GEC to make substantial provisions and caused a sharp fall in profits at its defence division.

The company said its GEC-Marconi business, where annual operating profits tumbled from pounds 252m to pounds 205m, had a difficult year but promised the provisions were a one-off and the operation would bounce back.

GEC as a whole saw pre-tax profits in the year to March rise from pounds 866m to pounds 891m, coming in below analysts' forecasts of between pounds 895m and pounds 934m.

David Newlands, finance director, would not disclose the size of the provisions. Concern about the state of GEC's defence businesses triggered an initial 7p fall in the shares, which recovered to close 4p down at 305p.

Cost over-runs on radar work on the Eurofighter 2000 project and the Phoenix sonar contract for the Royal Navy are thought to be the cause of the problems, though lower profits in Italy and Canada contributed to the shortfall.

Mr Newlands said: "Although profits were better than last year in several GEC-Marconi units, the overall results were adversely affected by substantial provisions taken on important contracts which are moving towards completion."

He said further restructuring of the defence businesses, which now include the VSEL Trident submarine maker, was unlikely and exceptional charges for last week's 1,000 Marconi job cuts would have little material affect on finances.

Headline sales in the GEC Alsthom joint venture, co-owned 50 per cent with France's Alcatel Alsthom, rose 18 per cent but GEC's share of the profit was flat at pounds 157m. Mr Newlands said that, adjusted for interest income, the venture's earnings rose by 6 per cent. Interest income was a natural and reliable profit source, he said.

The best performance came from the telecoms division where, after taking account of net interest and investment income, profits rose 6 per cent on sales up 18 per cent. Increased sales for the GPT telecoms unit helped raise operating profit from pounds 120m to pounds 148m. Telecoms exports rose 60 per cent and now represent more than a quarter of the group's total export sales.

GEC's order book and share of joint ventures stood at pounds 12.7bn, up from pounds 12.3bn, but one analyst said: "The make-up of the figures is not hugely inspiring."

GEC's cash pile grew another pounds 150m to pounds 2.95bn, though this was due to an increase in the company's share of net cash in joint ventures, which now stands at pounds 1.6bn.

Mr Newlands would not discuss speculation that GEC may eventually use some of that cash to bid for British Aerospace. A standstill agreement under which it would not bid for BAe expired last month, but no approach is expected until GEC has digested VSEL.

A final dividend of 8.42p (8.01p) makes 11.37p (10.82p) for the year.

PROMOTED VIDEO
Extras
indybest
Travel
Flocking round: Beyoncé, Madame Tussauds' latest waxwork, looking fierce in the park
travelIn a digital age when we have more access than ever to the stars, why are waxworks still pulling in crowds?
Arts and Entertainment
tv
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Sport
Is this how Mario Balotelli will cruise into Liverpool?
football
News
Ronahi Serhat, a PKK fighter, in the Qandil Mountains in Iraqi Kurdistan
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Poet’s corner: Philip Larkin at the venetian window of his home in 1958
booksOr caring, playful man who lived for others? A new book has the answer
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
art
News
Matthew McConaughey and his son Levi at the game between the Boston Red Sox and the Houston Astros at Fenway Park on August 17, 2014 in Boston, Massachusetts.
advertisingOscar-winner’s Lincoln deal is latest in a lucrative ad production line
Life and Style
Pick of the bunch: Sudi Pigott puts together roasted tomatoes with peppers, aubergines and Labneh cheese for a tomato-inspired vegetarian main dish
food + drink
Arts and Entertainment
Alfred Molina, left, and John Lithgow in a scene from 'Love Is Strange'
film
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

Junior Quant Analyst - C++, Boost, Data Mining

£25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Service Desk Analyst- (Desktop Support, Help desk)

£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

Junior Quant Analyst (Machine Learning, SQL, Brokerage)

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

UNIX Application Support Analyst- Support, UNIX, London

£45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape