Marconi postpones restructuring announcement

16 May 2002 -- Although it did report its results for the financial year to end-March, Marconi did not present its revised business plan on 16 May as previously intended.

May 19th, 2002

16 May 2002 -- Although it did report its results for the financial year to end-March, Marconi did not present its revised business plan on 16 May as previously intended.

According to chief executive Mike Parton, Marconi plc's restructuring discussions with its banks and bondholders have entered a new phase, so the parties agreed to withhold related information. However, observers say that holders of Marconi's £1.8bn of bonds are likely to swap their debt by giving shares to the banks, which are owed £2.1bn.

For the year to end-March Marconi made an operating loss of £463m (compared to a profit of £754m a year ago). However, it also wrote off £5bn from the value of businesses acquired during the dot.com boom.

Nevertheless, targets for end-March -- set by the new management team's Operational Review last September -- have been met. These include:
- re-organising into a Core network communications business (Network Equipment and Network Services) and a non-core Capital business (including the transferred Mobile Division), realising cash proceeds from disposals of over £1.5bn;
- reducing debt from £4.4bn to £2.7-3.2bn; and
- reducing the annualised operating expense run-rate in the Core business from £1.4bn to £1bn.

Also, after a strategic review, it began in January to further reduce operating expense run-rate to £870m by March 2003.

Sales for the year to end-March were £4.6bn (down 34%):
- Core business £3.1bn (down 34%), including £737m from Optical Networks (down 48% due to a drop in SDH sales to incumbents, though partly offset by a doubling of DWDM sales); Capital business £908m (£1.2bn);
- EMEA £2.46bn (down 34%, mainly Optical Networks), North America £1.52bn (down 37%), Central and Latin America £237m (down 2%), and Asia-Pacific £351m (down 25%).

Orders for the Core business were £2.83bn (down 36%). This reflected a reduction in the sales cycle as operators focus on short payback on investments, particularly for Optical Networks due to the absence of orders for major new network build projects and the increased proportion of short-term network in-fill orders.

Of the order backlog, Network Services accounted for over 40% (due to long-term maintenance and turnkey project contracts), Network Equipment just 24% (worst affected by reductions in capital expenditure by many of the UK's second operators and lower sales to British Telecom), and Mobile the remainder.
Marconi has also announced a planned initial public offering (IPO) of its Strategic Communications business.

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