Marconi reveals £5.1bn losses

EMBATTLED Marconi is braced for an extended downturn in its markets with any improvement in demand for its core communications business at least a year away.

The company, which has posted a £5.1bn half-year loss, said it was making progress towards reaching its cost and debt-reduction targets, but there was no evidence an improvement in markets will help ease its current distress.

The order book is static at £1.9bn but the company declined to give a formal outlook for its business as it heads into a calendar year-end period which is traditionally weak for orders.

'Lots of our sales are on very short lead times. I think there is comfort to be taken from the results of Energis and Vodafone which show our customers have got reasonably robust business models and are getting business growth,' said chief executive Mike Parton. 'My personal feeling is that it will be some time before it gets better, and I am talking a number of quarters, maybe the end of next year.'

The group, which has already issued two profits warnings, cut thousands of jobs, ousted senior directors and suffered the ignominy of ejection from the FTSE 100 index of leading shares, said a restructuring process that will see it employing 29,000 next March compared with 56,000 only eight months ago was starting to bear fruit.

The group made a small operating profit before goodwill and exceptional items in its second quarter. However, sales for the half-year to 30 September fell by 19% to £2.6bn and a mass of exceptionals hit the bottom line.

They included a £518m write-down against obsolete stock, a £148m increase in doubtful debt provisions and a £219m charge in relation to losses on investments and disposals. That included £200m involved in marking its stakes in Easynet and Atlantic Telecom to market, and a loss on the sale of its Lagardere business. Restructuring and reorganisation costs were £343m.

Chief financial officer Steve Hare said talks with banks to restructure the group's finances were constructive but a formal deal to restructure the debt was not expected until next year. By then disposals should have reduced its debts to about £3bn.

'Our aim is to get the maturity of the facilities extended so that we remove any short-term uncertainty surrounding Marconi's finances once and for all. From our short-term distress point of view the company has more than adequate funds for its operations,' Hare said.

Asked about the possibility of buying back some Marconi bonds, he said: 'We haven't ruled anything out. The banks obviously have a preference for us to pay down bank debt.'