Record profits as Weinstock steps down in style

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The Independent Online
Lord Weinstock will step down as managing director of GEC on 9 September, marking the end of his 33-year reign at Britain's biggest manufacturing and defence company. The transfer of power to former Lucas chief executive George Simpson was confirmed yesterday along with better-than-expected results for the year to March.

Analysts agreed that he had gone out in style, with profits exceeding pounds 1bn, before exceptional charges, for the first time. He leaves GEC with a pounds 14bn order book, up 10 per cent on a year ago, and with a pounds 2.5bn cash pile. After years of bearing Lord Weinstock's relative parsimony, shareholders were rewarded with an unexpected 10 per cent rise in the full year dividend to 12.51p.

"This is racy stuff for GEC," Tressan MacCarthy, an analyst at Panmure Gordon, said of the dividend. "In the past GEC has been incredibly prudent and maybe it's going to be a bit more generous in future."

Brian Newman, analyst at Henderson Crosthwaite, said the stock had been depressed ahead of the results by market rumours of disappointing figures and significant restructuring charges.

"These figures will dispel any negative rumours and restore some confidence in the stock," Mr Newman said. "Weinstock is going out on a high note."

Lord Prior, GEC chairman, paid tribute to Lord Weinstock as he confirmed that a new position of chairman emeritus would be created "so that the company will have available the benefit of his long experience and deep knowledge". Lord Weinstock will not sit on GEC's board, but he will have an office at the company's Stanhope Gate headquarters and is expected to use it every day.

The closing of the Weinstock era at GEC puts an end to years of uncertainty during which the succession to what has been called the most important job in British industry has been agonised over by Lord Weinstock and shrouded in secrecy.

Over the past decade, many favourites have come and gone, with the roll- call of those who came close to receiving the nod reading like a Who's Who of British Industry. Sir Colin Southgate chose to remain with Thorn EMI, Michael Green of Carlton was considered briefly as was Alan Sugar, the consumer electronics entrepreneur who came close to characterising everything that GEC was not.

GEC's pre-tax profits for the year to March of pounds 981m were well up on the pounds 891m recorded in 1995, but detractors said yesterday they did not represent a great step forward from the pounds 710m achieved as long ago as 1986. The company's many critics accuse GEC of undue caution, which has led it to miss a string of opportunities in industries for which it had the technical skills but lacked the willingness to take the necessary chances.

The growth in profits last year reflected an improved performance from GEC Marconi, the defence electronics arm, where cost-overruns on large contracts had held back the first-half result. The company said solutions had been found for the technical problems and it did not expect results in future years to be affected. Boosted by the acquisition last year of warship and submarine maker VSEL, profits jumped from pounds 205m to pounds 291m.

GEC Alsthom, the Anglo-French power joint venture, and GPT, the telecommunications operation, which is jointly owned with Siemens of Germany, both reported record sales and profits.

When George Simpson takes over, he is expected to face a daunting task to follow in the footsteps of one of British business's most idiosyncratic and forceful managers. When not pursuing his twin passions for Mozart and horse-racing, Lord Weinstock gained a reputation for spending long hours in his office, maintaining almost constant telephone contact with his managers, more than 200 of whom were to on his speed-dial system.

Arguably, only Hanson and BTR shared his passion for financial controls when he introduced monthly reporting in the 1960s and 1970s, long before such monitoring became a central management technique.

Analysts believe the arrival ofMr Simpson, fresh from the disposal of Rover to BMW while at British Aerospace and a turnaround in Lucas's fortunes, will mark a dramatic change of culture at GEC.

Attention is most closely focused, however, on whether his close links with BAe's Dick Evans will lead to the long-rumoured merger of GEC's defence interests with BAe.

His biggest challenge, however, is viewed as reversing GEC's long-term underperformance of the market. Although, as the chart shows, GEC has beaten the market during the last 33 years, over the past 15 it has lost half its relative value.

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