Simpson pledges to double value of GEC

LORD SIMPSON, the chief executive of GEC, yesterday put his City reputation on the line by pledging to double the stock market value of the company in three to five years.

In a six-hour presentation to analysts and institutional investors, he committed GEC to achieving 12 to 14 per cent compound sales growth in each of the next five years.

The ambitious targets follow the pounds 7.5bn sale of GEC's Marconi arm to British Aerospace and are designed to return the business to the same size in market capitalisation and sales that it was prior to the demerger.

Lord Simpson disclosed that GEC would now seek a reclassification of its stock exchange listing from the electricals and electronics sector to the information technology sector, and a US listing.

Following the pounds 4bn acquisition of two US telecoms equipment suppliers - Reltec and Fore Systems - this year more than half GEC's sales will come from the high-growth telecoms sector.

Analysts and fund managers were told that once the Fore Systems deal and BAe sale are complete, GEC will have net debt of between pounds 1.75bn and pounds 2bn. Before the latest acquisitions it had a pro-forma cash pile of pounds 2.6bn.

Lord Simpson and his finance director, John Mayo, said the sales growth targets would be met by a "judicious mix" of organic growth and acquisitions. There are no more "blockbuster deals" on the horizon, but a number of acquisition opportunities to broaden GEC's reach in telecoms are in the pipeline.

Before the welter of deals that transformed GEC in the past 12 months, the group had sales of pounds 10.4bn and profits of pounds 954m. On a pro-forma basis, sales are now pounds 4.7bn and operating profits pounds 602m, assuming the defence demerger and completion of the Fore Systems deal.

Investors were told that Marconi Communications - the telecoms arm of GEC - expects to achieve annual revenue growth of 12 to 15 per cent by exploiting its strong position in growth markets such as the Internet.

Marconi Systems, comprising the medical imaging equipment manufacturer Picker, Videojet, which makes inkjet printers, and Gilbarco, maker of petrol pumps, has been set a 7 to 10 per cent sales growth target.

GEC is currently capitalised at pounds 17.7bn. Its shares slipped 16p yesterday to 648.5p on profit taking, but have risen by more than a third since Lord Simpson arrived in September 1996. He believes the goal of doubling market cap will be made easier by the fact that the businesses GEC is moving into command very high market ratings.

GEC, for instance, paid pounds 2.8bn - equivalent to 90 times earnings - for Fore Systems, which supplies Internet switching equipment. For that reason it has set itself a "stretch target" of doubling market value in three years.

Analysts believe that doubling sales within five years may prove a tougher target. The Reltec and Fore Systems deals brought in combined sales of pounds 848m.

The businesses which make up the group's third division, GEC Capital will be run for value and sold off if the opportunity arises. GEC Capital consists of GEC's remaining 24 per cent stake in power engineering and transport joint venture Alstom, its 50 per cent of the Hotpoint washing machine venture General Domestic Appliances, and its weighing machine subsidiary Avery Berkel and Woods.

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power