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Monday, 15 October, 2001, 09:46 GMT 10:46 UK
Slow progress on Marconi debts
Marconi logo
Troubled telecoms equipment giant Marconi has reassured investors that it is still on target to reduce its 4.44bn debt mountain.

But the company warned of tough market conditions ahead.

In a trading statement, Marconi said it had made an operating profit of 5m and its debts were down slightly.

The results suggest the company is still under severe financial pressure but its performance has not worsened.

It claims it is still on course to reduce its debts to 3bn by next March, but the City will be disappointed to learn that - to the end of September - debts stood at just below 4.3bn.

No state aid

The company said it had not reached a decision on whether to restructure its debts by buying back its own bonds.

But it would not be seeking state aid, chief executive Mike Parton said.

Marconi shares jumped 19% to 39.5p on Monday morning before falling back to 27p, 8% above Friday's closing price.

Some traders were concerned about the lack of information on how Marconi planned to get its debts down.

Mark Davies Jones, of Schroders Solomon Smith Barney said there was "some progress" in getting costs down "so they can at least stem losses, but they still have a long way to go before stabilising their financial position."

"Effectively bust"

Commenting on the latest figures, Mr Parton said: "Whilst trading conditions continue to be tough, group operating profit and cash flow in the second quarter were in line with our previous guidance.

"There is much to do and the new management team remain focused on delivering the cost and debt reduction targets arising from our operational review."

Commenting on Monday's trading statement, the BBC's business editor Jeff Randall said that "by all known criteria" Marconi was "bust".

He said the company was only being kept afloat by "rock solid lines of credit" from its banks.

But it would clearly need to make more than 5m a quarter in operating profits to seriously attack its debts.

Marconi, the former industrial giant GEC, spent billions on buying up smaller telecoms companies just as the market for its products was about to collapse.

In July, the company sent its shares into freefall when it warned that it would merely break even in the first quarter of its financial year, weeks after chief executive Lord Simpson gave an upbeat assessment.

On 4 September the company announced a first quarter operating loss of 227m, triggering the resignations of Lord Simpson and chairman Roger Hurn.

Marconi has made 10,000 workers redundant this year.


Analysts will be scouring this latest trading statement for signs that Marconi can trade its way out of trouble rather than being broken up and sold off.

The firm, which was recently relegated from the FTSE 100, has seen its share price has plunge from peaks of more than 12 last year to as low as 16p.

Marconi shares closed up 8p at 25p on Friday.

The company is to release its interim results on 13 November.


Roger Lyons, of the MSF union, welcomed Monday's statement as the first sign of a turnaround in Marconi's fortunes.

"Staff at Coventry and Liverpool will be relieved that the decline has been arrested.

"Unions will meet the new management today to discuss further plans for the continued revival of the company.

"We can only hope that the dark days of the Simpson/Mayo administration are now over."

The BBC's Business Editor Jeff Randall
"Marconi remains up to its neck in problems"
See also:

11 Oct 01 | Business
Marconi pay-off is 'outrageous'
01 Oct 01 | Business
Marconi shares hit by US attacks
27 Sep 01 | Business
Marconi shares hit all-time low
26 Sep 01 | Business
City analysts gloomy over Marconi
11 Sep 01 | Business
Marconi's share slide halted
05 Sep 01 | Business
Marconi shares collapse
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