Sir Ernest considers all options as he puts Racal up for sale

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The Independent Online
Sir Ernest Harrison yesterday in effect raised a "for sale" sign over Racal Electronics, the defence to telecommunications business he has run for 31 years, in a final effort to please investors before his retirement.

Announcing the latest stage in Racal's restructuring, with the loss of 1,000 jobs world-wide, Sir Ernest made clear that "all options" were being considered in the quest for shareholder value, including sales or mergers of businesses or partnerships with larger companies. A third of the job losses would be in the UK.

Advisers including Goldman Sachs, the US investment bank, have been appointed to lead the hunt for partners. However Sir Ernest made clear there were no fast solutions to difficulties at Racal, which has made two profit warnings in the past 12 months.

"I hope it will be done quickly and certainly I would welcome a very early retirement. All options are open," said Sir Ernest who is 71. He added: "These things don't happen overnight as you know. They do take time."

He pledged to stay at the helm of Racal until the problems were sorted out: "I intend to remain chairman of this company and I am totally committed to achieving great value for shareholders. The key is to be bold when the occasion arrives and make the right decision... I and my board have an outstanding record."

Yesterday's news did little to boost the share price, which edged up 1.5p to 235p, valuing the group at pounds 670m. A year ago the shares were 313p. Sir Ernest has 717,000 share options exercisable at well above the current market price.

Sir Ernest would not be drawn on his own target for a break-up value. "If someone offered me 10 pounds a share I'd say, 'Can I have that in writing?' If they gave it to me in writing I'd take it," he said yesterday.

James Heal, an analyst with stockbrokers Hoare Govett, said: "He appears to have put the business up for sale. But it's quite clear there aren't going to be any deals for 12 months at least. The only question is how much the company is worth."

Profits for the year to March fell from pounds 70.4m to pounds 40.4m, the company said yesterday, in line with the last profits warning in April. Operating profits from continuing businesses rose by 6 per cent to pounds 78.9m before exceptional charges of pounds 29m. The problem division was data products, which lost pounds 19.1m last year and accounted for pounds 19m of the exceptional charges.

Sir Ernest said Racal would not want to keep its stake in the National Lottery if it was turned into a non-profit making organisation. He also admitted to embarrassment at pay rises for executives at Camelot, in which Racal has a 22.5 per cent stake: "We run the most efficient lottery in the world. Are you going to risk putting in someone new when the thing is doing so well?"