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
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project