One of the few stocks in my portfolio that ended UP today, not by much, but I'll take it! Here's the latest financial statement, a little confusing because they don't speak American.......
2000/2001 Interim Statement; Marconi Sales and Profits Growth Accelerate
Communications Networks Ahead 59%
LONDON, Nov. 29 /PRNewswire/ -- Marconi (Nasdaq: MONI) accelerated sales growth in the six months to 30 September 2000, as the Communications businesses exploited the strong geographic and product platform built in the past eighteen months. The Group is well-positioned for continuing top-line growth with 6.0 billion pounds of orders and new frame contracts received in the first half.
-- Group reported turnover increased by 26 per cent to 3,186 million
pounds (2000: 2,527 million pounds) or 19 per cent on a
like-for-like basis.
-- Communications Networks sales were 1,507 million pounds (2000: 947
million pounds), an increase of 59 per cent on a reported basis or
32 per cent like-for-like. Within this, Optical Networks sales were
631 million pounds, an increase of 57 per cent like-for-like.
-- R&D expenditure was 323 million pounds (2000: 207 million pounds),
an increase of 56 per cent.
-- Reported operating profit, before exceptional items and goodwill
amortisation, increased by 7 per cent, or 26 per cent like-for-like,
to 320 million pounds (2000: 299 million pounds).
-- Earnings per share, before exceptional items and goodwill
amortisation, rose 13 per cent on a reported basis to 7.1 pence
(2000: 6.3 pence).
-- An interim dividend of 1.9 pence per share (2000: 1.8 pence per
share) has been announced by the Directors.
Commenting on the Results, George Simpson, Chief Executive of Marconi said, "The trend of accelerating sales growth continued with yet another half of strong top line performance. Underlying profitability also grew ahead of sales. The momentum in order intake from our blue-chip customer base, primarily of established network operators and Fortune 500 companies, supports a buoyant outlook. As we reported in our trading update in October, we remain confident that our ongoing success will drive continued strong growth."
A presentation of Marconi 2000/2001 Interim Results will be held at 9.00am on Wednesday 29 November at The Conference Forum, The Marsh Centre, Colchester Street, London E1 8DX. The presentation will also be available live by webcast (http://www.marconi.com) and by conference call (UK callers: 020 8240 8241, international callers: +44 (0) 20 8240 8241 and quote "Marconi"). The webcast will also be archived on the Marconi website from approximately two hours after the presentation.
A conference call will be held at 10.00am New York time for US institutional investors. To join the call, please call toll-free on +1 800 482 5519 and quote "Marconi". A replay of the call will be available for three working days -- call toll-free on +1 800 625 5288 (Access code 872 993).
Marconi plc announces Interim Results for the six months ended 30 September, 2000.
GROUP OVERVIEW
Marconi's group sales performance was very strong in the first half, supported mainly by the continuing improvement of the Communications businesses. The acquired businesses, in particular Bosch Public Networks in Germany, have been rapidly and successfully integrated and Marconi Germany will be profitable for the year as a whole. Strong order intake from our customer base, primarily of established network operators and Fortune 500 companies, continues to fuel growth. Orders to the value of 3.3 billion pounds were received in the first half, in addition to 2.7 billion pounds of new frame contracts. New product launches such as our new optical product range contributed to this strong growth in orders. Our Research and Development spend for the half year rose 56 per cent and is focused on delivering next-generation broadband communications and emerging knowledge management software applications. The combination of these factors positions the Group to continue building sales growth momentum in the second half of the year.
The Group's reported turnover increased by 26 per cent to 3,186 million pounds (2000: 2,527 million pounds) or 19 per cent on a like-for-like basis.
This was underpinned by Communications Networks sales, which were 1,507 million pounds (2000: 947 million pounds), an increase of 59 per cent on a reported basis or 32 per cent like-for-like. Within this, Optical Networks' sales were 631 million pounds, an increase of 57 per cent like-for-like.
R&D expenditure was 323 million pounds (2000: 207 million pounds), an increase of 56 per cent. This was boosted by one-off investments in research and development amounting to around 40 million pounds. We expect gross profits in the second half to more than make up for this scaling up of R&D, with continuing benefits going forward.
Group operating profit, before exceptional items and goodwill amortisation, increased by 7 per cent, or 26 per cent like-for-like, to 320 million pounds (2000: 299 million pounds).
The Group's earnings per share, before exceptional items and goodwill amortisation, grew 13 per cent on a reported basis to 7.1 pence (2000: 6.3 pence).
The Directors have declared an interim dividend of 1.9 pence per share (2000: 1.8 pence per share).
STRATEGIC DEVELOPMENTS
During the first half of the financial year, Marconi continued with its strategy of focusing on communications. We see sustainable high growth rates in these markets underpinned by continuing deregulation and growing demand for mobile communications and Internet services. The 'bandwidth hungry' video applications of the future make this a long-term growth phenomenon which has only just begun. As operators migrate from legacy narrowband to broadband networks, we see their capital spend predominantly focusing on broadband roll-out; expanding capacity and enabling enhanced services whilst reducing operating costs. Marconi's product offering is focused on providing better value broadband solutions and our economic interest in narrowband infrastructure is insignificant. Optical Networking will build on the tremendous achievements in the first half and we have already launched our new DWDM (Dense Wave Division Multiplexing) photonics range into the US, effectively doubling our addressable market.
We announced in October a forward-looking initiative to increase our flexibility and efficiency by streamlining and modernising our supply chain in Communications Networks. We believe that, by adopting this model, we will gain competitive advantage against many of our competitors. This is a large-scale project, and while many of the process changes will be engineered this year, the physical changes will only start in the first half of next year, bringing cost and investment reductions and immediate improvements in our responsiveness to customers.
Our Communications Services strategy remains focused on taking advantage of the market shift towards the outsourcing of network operations. The emphasis for this division going forward is on satisfying demand for network infrastructure plan, build and operate services and on enabling Application Service Provider offerings for customers such as Coca-Cola. Recent acquisitions have given us good capability in these fast growing new markets. In infrastructure services, we added mobile network skills with APT in Europe, and both wireline and wireless capabilities in Australia through Australian Communication Solutions and in Germany through Bosch Public Networks. Our applications hosting capabilities in the US were expanded with the acquisition of SMS.
To capitalise on the opportunity offered by the 3G mobile internet, Marconi have deployed an integrated mobile strategy which focuses on our strengths in SDH (Synchronous Digital Hierarchy) and ATM (Asynchronous Transfer Mode), the key building blocks of new 3G networks, and which exploits our combined mobile service offering from Marconi, MSI and APT.
Our Systems business is increasingly focusing on its communications oriented software and application activities. For example, the petrol pump manufacturing business was separated and transferred to the Capital division, leaving Retail Solutions and Marconi Online in Systems. This trend is likely to continue going forward, re-emphasising the focus on our communications activities.
We continue to make strategic investments in a number of new businesses which will build and realise long-term value, particularly our optical components business and Fibreway, our UK-based fibre optic network.
We have recruited a new management team to take our optical components business forward. The market for optical components is forecast to grow very rapidly, driven by the growth in demand for optical networks. The combination of our leading technology research and product development, the quality of our management team, and our understanding of the market opportunity means this will be an exciting area of growth for Marconi in the next few years.
Fibreway made some important steps towards separation from Marconi in the first half, particularly the extension of its UK-based network into Europe through a deal with Viatel which was announced in June. With this and other developments, we remain on target to begin the separation of Fibreway in the first quarter of next calendar year. Fibreway has no legacy technology and is uniquely placed to provide a broadband backbone to meet future application needs. For instance, we believe the advent of the 3G mobile internet offers major opportunities for Fibreway and we expect to see this fact reflected in the value of the business when it is ultimately spun off from Marconi.
Returning to our main markets, our strategy is to focus increasingly on growing our communications-based activities and to progressively reduce our exposure to traditional hardware activities. Marconi is well positioned to leverage its strength in optical networks and continue its progress towards the Group target of top-line growth of more than 30 per cent.
OUTLOOK
The trend of accelerating sales growth continued with yet another half of strong top line performance. Underlying profitability also grew ahead of sales. The momentum in order intake from our blue-chip customer base, primarily of established network operators and Fortune 500 companies, supports a buoyant outlook. As we reported in our trading update in October, we remain confident that our ongoing success will drive continued strong growth.
REVIEW OF OPERATIONS
MARCONI COMMUNICATIONS
Turnover of the Communications division -- which comprises Networks, Services, Mobile and a number of smaller businesses -- increased by 47 per cent, or 30 per cent like-for-like, to 2,117 million pounds (2000: 1,441 million pounds).
Operating profit before exceptional items and goodwill amortisation was 229 million pounds (2000: 193 million pounds), an increase of 19 per cent, or 50 per cent like-for-like.
NETWORKS
Communications Networks comprises three principal businesses: Optical Networks and Transmission, Access Systems and Broadband Switching. Turnover of this group of businesses increased to 1,507 million pounds from 947 million pounds in the first half of last financial year. This represented growth of 59 per cent, or 32 per cent on a like-for-like basis. Operating profit rose to 181 million pounds from 148 million pounds, an increase of 22 per cent or 60 per cent on a like-for-like basis.
This strong financial performance was driven by growth in each of the businesses. Turnover of Optical Networks and Transmission was 631 million pounds (2000: 382 million pounds) an increase of 65 per cent or 57 per cent like-for-like, underpinned by growing sales volumes of high speed 10 gigagbits per second SDH equipment and our first shipments of DWDM.
Optical Networks and Transmission also won a number of European contracts for its leading optical networking equipment with customers including BT, Telecom Italia, T-Mobil and Belgacom.
Turnover of Access Systems increased by 51 per cent, or 19 per cent like-for-like, to 635 million pounds (2000: 420 million pounds). While the US access business continued to perform well, Bosch Public Networks, which has become Marconi's worldwide centre of excellence for broadband wireless access, made a strong start to its post-acquisition turnaround, also announcing a 350 million pounds contract with VIAG Interkom.
Broadband switching sales grew by 66 per cent, or 14 per cent like-for-like, to 241 million pounds. This reflected the planned shift in emphasis of the business towards the needs of telecom operator customers and reduced use of ATM among enterprise customers. It is expected that demand for ATM switching equipment will continue to grow strongly, as telecom operators begin to deploy new infrastructure that will allow them to offer 3G mobile internet services.
Other small Communications Networks businesses contributed a further 65 million pounds to turnover.
SERVICES
Our communications services offering was enhanced by a number of companies acquired during the first half of the year.
On 28 July 2000, we completed our acquisition of APT Limited, a European based specialist in identification and acquisition of sites for communication masts, and mast design, construction and maintenance. This acquisition strengthened our skills in planning and deploying the new communications networks which will enable operators to offer mobile internet services to their customers.
On 30 June 2000, we completed our acquisition of Systems Management Specialists Inc., a US based provider of data centres and IT outsourcing services. This acquisition has enhanced our applications hosting capabilities.
Communications Services increased its sales by 58 per cent, or 25 per cent like-for-like, to 387 million pounds from 245 million pounds. The growth in underlying sales was driven by strengthening demand from operators for network 'Plan, Build, Operate' services. Operating profit before exceptional items and goodwill amortisation rose 38 per cent or 28 per cent like-for-like, to 47 million pounds (2000: 34 million pounds).
MOBILE
Turnover rose to 158 million pounds from 90 million pounds in the corresponding period last year, representing growth of 76 per cent or 45 per cent on a like-for-like basis. This above trend performance was delivered by increasing sales of TETRA and secure communications equipment.
On 15 June 2000, we completed our acquisition of MSI, a global provider of network planning software and services for wireless telecommunications operators.
MARCONI SYSTEMS
Marconi Systems is comprised of three businesses: Medical Systems, Commerce Systems and Data Systems. Turnover of the division was 676 million pounds (2000: 615 million pounds), an increase of 10 per cent or 5 per cent like-for-like. Operating profit before exceptional items and goodwill amortisation rose to #70 million, representing an increase of 17 per cent, or 8 per cent like-for-like.
Medical Systems increased sales of its new range of multi-slice CT (Computed Tomography) scanners and benefited from positive exchange effects, to record 10 per cent growth in sales.
The software operations of Commerce Systems were separated from the service station equipment business during the first half of the year, in line with our strategy to focus on the development of applications based businesses. Turnover of the software businesses, Retail Solutions and Marconi Online, grew by 10 per cent to #55 million as they increased sales of billing and customer interface applications. The service station equipment business is now reported within Marconi Capital.
Revenues of Data Systems increased by 9 per cent to 120 million pounds, with the sound performance of the US operations being the main contributor.
MARCONI CAPITAL
Marconi Capital comprises two streams of business, emerging technology and mature businesses.
Emerging technology includes the Marconi Caswell Technology photonics research facility; our UK and European fibre network, Fibreway; and Marconi Software Solutions. This group of businesses increased its sales to 67 million pounds, representing growth of 10 per cent, or 8 per cent like-for-like.
The disposals of Avery Berkel and EASAMS last year and the cyclicality faced by the Service Station Equipment business accounted for most of the reduction in sales of the mature businesses from 436 million pounds to 337 million pounds. The remaining mature businesses continue to be managed to realise the maximum amount of value from them for shareholders.
OTHER FINANCIAL ITEMS
RESEARCH AND DEVELOPMENT
The Group's spend on Research and Development increased to 323 million pounds from 207 million pounds, an increase of 56 per cent. As part of this, Communications Networks' R&D grew to 235 million pounds from 132 million pounds, or 78 per cent.
The additional 40 million pounds invested in R&D which was discussed in our October Trading Update was focused on Communications Networks. The extra investment helped us to bring forward the launch of our DWDM optical portfolio and related Sonet (Synchronous Optical Network) interfaces for the North American market and will shorten the time to market of our 480-gigabit switch/router. We expect gross profits in the second half to more than make up for this scaling up of R&D, with continuing benefits going forward.
INTEREST
The Group's interest charge in the reporting period was 47 million pounds, compared with 50 million pounds in the corresponding period last year. Based on our current net debt position, we expect net interest charges to run at approximately twice this rate in the second half.
TAXATION
Taxation on profit on ordinary activities, before goodwill amortisation and exceptional items, was 79 million pounds, giving an effective tax rate of 28.5 per cent. We expect this tax rate to be maintained for the foreseeable future.
GOODWILL AMORTISATION
We have re-stated the Group's comparative goodwill amortisation figures in keeping with our year-end accounting policies.
The Group's goodwill amortisation charge decreased to 374 million pounds from 487 million pounds in the corresponding period last year. The reduction is due to a larger in-process research and development write-off last year.
Of the amount charged in the first half-year, 40 million pounds was a result of the acquisitions made in the reporting period. An additional 51 million pounds of in-process research and development was written off.
EARNINGS PER SHARE
Basic earnings per share, which reflects goodwill amortisation, write-off of In-Process R&D, and exceptional items, reduced from a loss of 12.3 pence to a loss of 5.4 pence.
Earnings per share excluding goodwill amortisation and exceptional items, which the Board feels more closely reflects the underlying performance of the business, increased by 13 per cent to 7.1 pence (2000: 6.3 pence).
PROVISIONS
Provisions increased to 912 million pounds from 870 million pounds at the end of last financial year. Of this amount, 42 million pounds related to liabilities acquired with MSI and the other smaller acquisitions in the period.
CAPITAL EXPENDITURE
Net capital expenditure increased to 262 million pounds from 120 million pounds in the first half of last year. This increase reflects our investment in our growth businesses. The major increases included investments in our emerging businesses and in expanded production capabilities for our high-speed SDH and photonics product ranges in Communications Networks.
CASH FLOW
Operating cash flow in the period was an outflow of 110 million pounds, compared with an inflow of 349 million pounds in the corresponding period last year.
There was a net cash outflow of 635 million pounds. This compared with an outflow in the corresponding period last year of 3,862 million pounds, when we acquired FORE Systems and Reltec Corporation. Acquisitions in this half year were only 157 million pounds, other major contributors to the cash outflow were the increased capital expenditure referred to above and an increase in working capital of 527 million pounds. This working capital increase related to a build-up of inventory of optical components ahead of planned product launches, together with debtors increasing as the business grew.
BALANCE SHEET
The net cash outflow resulted in a net debt position for the Group of 2,987 million pounds. This remains within a comfortable range for the Group and we expect net debt to be reduced in the second half of the year. The Group's gearing was 66 per cent and interest costs were covered 9.1 times by earnings before interest, taxation, depreciation, amortisation and exceptional items.
POST BALANCE SHEET EVENTS
On 9 October 2000, Marconi announced its intention to acquire the transmission business of Splice do Brasil, a manufacturer of telecommunications solutions for the Latin American market, for an initial cash consideration of US$64 million and additional payments of up to US$105 million over three years subject to certain performance targets being met.
On 18 October 2000, we completed the acquisition of Mariposa Technology, Inc., a US-based provider of Integrated Access Devices (IADs). This acquisition complements our end-to-end networking capabilities and will speed time to market for our next generation of IADs.
Cautionary statement regarding forward-looking statements
In order to utilize the "Safe Harbor" provision of the U.S. Private Securities Litigation Reform Act of 1995, Marconi plc (" the Company") is providing the following cautionary statement. Except for reported financial results or other historical information, certain statements in this press release are forward-looking statements, including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors which are beyond the control of the Company and its subsidiaries, and may cause actual results, performance and achievements to differ materially from anticipated future results, performance and achievements expressed or implied in the forward-looking statements (and from the past results, performance or achievement). Although not exhaustive, the following factors could cause such differences: any major disruption in production at our key facilities; changes in the environmental, tax and other laws and regulations, which, among other things, could cause us to incur substantial additional capital expenditures and operation and maintenance costs; and adverse changes in the markets for our products, including as a result of increased competition in the highly competitive international markets for such products. These factors and other factors that could affect these forward-looking statements are described in the Company's Form 20-F report and Form 6-K reports filed with the U.S. Securities and Exchange Commission. The Company disclaims any obligation to publicly update or revise these forward-looking statements, whether to reflect new information or future events or circumstances or otherwise.
SOURCE Marconi plc
CO: Marconi plc
ST: England |
