Cray's balance sheet hit by P-E acquisition

CRAY ELECTRONICS' recent pounds 16m acquisition of P-E International, the management consultancy, has cost its balance sheet pounds 7.3m, including a pounds 2.9m writedown of overvalued property.

Jeff Harrison, finance director, said that P-E used the over-generous valuation of its offices to help secure borrowings. Cray had also adopted more conservative accounting polices on work in progress and had written off pounds 400,000 overdue on a contract with Iran.

Office closures, a provision for unused properties and 90 redundancies cost pounds 3.1m. Cray said those who had left were directors, managers and administrators. None of the programmers and consultants who earned P-E's revenue were made redundant.

Cray, whose business is mainly in computer communications and specialist software, was reporting doubled first half operating profits of pounds 9.6m. However, pre-tax profits of pounds 7.8m were pounds 10m down on the previous year, which was boosted by a pounds 13m tax-free profit on the sale of Malvern Instruments. Earnings per share on the FRS3 accounting basis fell from 10.3p to 2.5p.

The confusing picture from this changing company contributed to a 6 1/2 p fall in the shares to 164 1/2 p. The interim dividend rises 50 per cent to 0.75p.