Marconi to seek a US listing as soon as practicable
2000 Annual General Meeting Chairman's Statement
25 July 2000
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Good afternoon ladies and gentlemen, as it is now 12 o'clock I would like to welcome you to the Annual General Meeting of Marconi for 2000.
I would like to start today's proceedings by making a short statement.
This is the first Annual General Meeting of Marconi, the new Company having been listed on the London Stock Exchange on 30 November 1999. I am very pleased to report an excellent start for our Company in its new form.
This has been a very exciting year for Marconi and the management team, led by our Chief Executive, Lord Simpson. They have achieved a great deal in delivering on the commitments made to shareholders at the time of the separation of the defence business.
We have shifted decisively the focus of the business towards the high growth markets for telecommunications equipment. This business now generates approximately 60 per cent of the Company's sales. We have also broadened our international presence in these markets, most notably in the United States. Approximately 45 per cent of Marconi sales are now made in America and it remains our intention to seek a US listing as soon as practicable.
The rationale for focusing on these markets has been the rapid growth in the use of the Internet and other data communications services, and the demand this creates for transforming and expanding the communications networks. The volume of Internet traffic doubles every 100 days in the US and every 150 days in Europe. These and other factors are stimulating rapid technology development and growth in the market for communications equipment.
Marconi now has a strong competitive position in these markets after completing a number of acquisitions and successfully integrating the new businesses into a single company operating under the global Marconi brand name.
During the 1999/2000 financial year, we completed the acquisitions of Reltec Corporation and Fore Systems. These businesses expanded our technology as well as giving us a strong foothold in the important US market. The headquarters of our communications equipment business was moved to Pittsburgh in November, reflecting the importance of the US market.
In addition, we have made a number of smaller acquisitions that have provided us with access to new customers and filled small gaps in our product portfolio.
In December 1999, we acquired an optical networking business from Nokia. This acquisition reinforced our leading position in this market.
In January 2000, we acquired the Public Networks division of Bosch, which has given us a position in the German market, which is the largest in Europe.
In March 2000, we acquired Australian Communication Solutions - a provider of network support services.
The integration of these communications equipment businesses has been our most important operational priority, and was completed successfully during the year.
Since the end of the financial year, we have acquired MSI - a world leader in the planning and design of networks for fixed and mobile wireless communications operators. In addition, we acquired SMS, which provides the IT infrastructure for our customers and some of our own businesses to sell their software applications over the Internet.
We have received more than $2 billion worth of new orders that we would not have been in a position to win before making these acquisitions. Each of the three businesses within the communications division reported record sales in the last quarter of the financial year. Rapidly bringing together our original business with the acquired companies has been the key to these successes.
As you may already have seen, BT has awarded Marconi a five-year contract worth more than £2 billion to build Europe's most advanced optical network. Winning this record breaking contract against all our global competitors is a powerful endorsement of our leading technology and business solutions for operators converting to advanced optical networks, and puts us clearly in the Premier League of the world's communications equipment companies.
In keeping with the new strategic direction of the Group towards high technology markets, our Systems business is increasing its focus on the sale of software applications. We have three specialist Systems businesses, each of which is an industry leader in its own sector:
commerce systems for retail automation
medical systems for radiology and healthcare information
and data systems for product coding and e-commerce applications
Each of these businesses is developing a new, high technology product offering based on "converged solutions" which combine specialised software applications with our communications networking skills.
An example of these converged solutions is our exclusive $100 million contract with Coca-Cola won by Marconi Online, a division of Commerce Systems. Initially we will connect half a million Coca-Cola vending machines over the Internet. We will gather an array of consumer and logistical data from this network of vending machines and use it to bring a number of innovative new services to Coca-Cola and the consumer.
Another recent win for Marconi in this field of converged solutions is our $650 million contract with Thrucomm. We are planning, building and operating a wireless network that will enable very fast, credit card authorisation for retailers across the US.
Whilst all this has been going on, the Group continued to show very encouraging growth. The existing businesses went from strength to strength and were complemented by our new arrivals, producing an impressive 40 per cent growth in reported sales, 48 per cent growth in operating profit and an increase in earnings per share of 17.4 per cent.
Turning to the current year.
Trading conditions for the Group continue to be favourable, especially in the Communications sector where increased sales and marketing investment has yielded strong growth in the level of orders won in the first quarter. Our increasing investment in Research and Development is keeping our new product pipeline on track and is already delivering new products into the marketplace. Substantial progress has been made on the integration of Bosch, which should achieve breakeven levels of performance by the end of the current financial year. The Board believes that, based on the strong order book and despite increasingly tight conditions in the supply chain for the Communications sector, the outlook for this financial year and beyond is for continued strong growth.
I would now like to tell you, well in advance, about our plan for orderly succession at the top of Marconi.
At the time of the Annual General Meeting in July next year, George Simpson will have completed his 5 year contract with the Company and, at his own request, wishes to stand down as Chief Executive at that time.
Together, George Simpson and John Mayo, the Finance Director, have been the principal architects of the remarkable transition from GEC to Marconi and upon my recommendation, the Board intends to invite George Simpson to succeed me as Chairman and to ask John Mayo to succeed George Simpson as Chief Executive. Consequently I plan to retire as Chairman, and from the Board, at the conclusion of next year's Annual General Meeting. Between now and then, we intend to add at least one new non-executive Director to the Marconi Board.
I have every confidence that these arrangements will ensure the continued success of Marconi in the years ahead.
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