Marconi Shareholder Discontent Continues Despite AGM
18 Jul 13:35
By Richard Inder
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Beleagured U.K. telecommunications equipment company
Marconi PLC (MONI) attempted Wednesday to douse the flames of its shareholders'
discontent by promising a full review of its business.
However, the more than 1,000 angry investors who filled to overflowing one of
the largest conference rooms in London's Queen Elizabeth II Conference Center
for the company's annual general meeting weren't impressed.
Investors were looking for explanations of why the company's trading outlook
deteriorated so quickly; why its shares were suspended for a full session July
4 ahead of the announcement of a new outlook and why its shares have fallen 60%
since the beginning of July. But the company's explanations fell on deaf ears.
"I am not satisfied with your answers," said one disgruntled shareholder
echoing a view apparently widely held among the investors attending the
meeting. "You knew four to five months ago where the company was going."
"You have thrown away our money," said another.
Shares in Marconi failed to react positively to the news of the review,
closing Wednesday's session down 0.75%, or 0.75 pence at 99 pence. The DJ Stoxx
600 Technology Index was down 1.5%, or 5.48 points at 360.90 points.
The operational review, under the leadership of Chief Executive George
Simpson, will focus on driving costs down, generating cash and deciding which
of its units remain core to the group. Measures already introduced include
plans to cut operating costs by GBP200 million in the current financial year
and by GBP350 million each year after 2002.
The review will be completed in no more than two months and the outcome will
be reported to shareholders.
Marconi, which has suffered from a dramatic slowdown in demand for telecom
equipment, caused consternation July 4 when it warned that operating profits
for the fiscal year ending March 31, 2002 will be half of the GBP702 million
recorded in 2001. It also said sales over the period will fall by 15% from
GBP5.8 billion in 2001.
Not only did the warning represent a dramatic turnaround from its view of the
market in May, but it was preceded by a suspension of its shares for a full
session.
The company had earlier released news of the sale of its medical equipment
business but decided to suspend its shares until the board met at 1500 GMT to
consider weak business forecasts and avoid misleading the market. Shares
plummeted more than 50% on the London market the next day.
Share Suspension Scrutiny
Responding to investor questioning about why the board had not met earlier to
prevent the shares from being suspended, directors said they were only made
aware of the full scope of the downturn at 0800 GMT that day.
"Normally at the end of June, we would expect to see a sudden uptick in
performance as orders are finalized at the end of the quarter," Simpson said.
"Instead, what we saw, in fact, was a downturn. It was the difference between
these two things that gave us cause for concern."
Chairman Roger Hurn said much of the time between the arrival of the new
information and the board meeting was spent analyzing the implications of these
figures.
"We were between a rock and a hard place," Hurn said.
Despite numerous calls for board resignations at Wednesday's meeting, none
was publicly tabled by Lord Arnold Weinstock, a major shareholder and former
executive of the group.
Prior to the meeting it was thought that Weinstock was to vote his shares
against the reappointment of two non- executive directors, Raymond Seitz and
Sir Alan Rudge, and put forward Peter Gershon, a former executive with the
company, as an alternative.
The reelection of Seitz, Rudge and Simpson to the board was put to a ballot
after a show of hands was inconclusive. However, it is expected that the
resolutions would be passed in the ballot. Another resolution about changes to
the group's share scheme is expected to be passed.
The executives also paid tribute to former Chief Executive-designate John
Mayo, who resigned on the same day as the profit warning, saying that he had
made "many valuable contributions" to the company.
Mayo resigned after the company said Simpson was the most appropriate person
to lead the company through its recovery. Chairman Hurn said he will stay on in
his position, while Simpson has agreed to stay on for a further year, taking
him up to retirement age.
Mayo, who was expected to attend the meeting, didn't show but said in a
statement after that he welcomed the Hurn's comments about his performance at
the company.
The company said that it is confident for the medium- to long-term prospects
for the business.
This outlook combined with measures to improve the performance of the
business gave directors reason to believe that the current share price
undervalued the business.
Company Website: marconi.com
-By Richard Inder, Dow Jones Newswires; 44-20-7842-9293;
richard.inder@dowjones.com
(END) DOW JONES NEWS 07-18-01
01:35 PM |
