Marconi losses reach £5.1bn

Telecoms equipment group Marconi has recorded a £5.1bn loss before tax for the six months to September.

The loss occurred after the company partly wrote off expensive acquisitions it made at the height of the technology boom.

The company, which lost its top executives as its share price sank from a high of £12 to around 30p, saw sales fall 19% from last year to £2.58bn.

Marconi's woes
April-September 2001 (Apr-Sep 2000)

Sales: £2.578bn (£3.186bn)

Core telecoms sales: £1.581bn (£2.148bn)

Operating loss: £227m (£310m profit)

Pretax loss: £5.116bn (£61m)

Net debt: £4.282bn (March 2001: £3.167bn)

With sales falling, the company's debt - a key source of concern for investors already over-burdened with bad news - ballooned to £4.28bn from £3.17bn at the end of March.

The losses prompted investors to sell Marconi shares in early trading.

By 1220 GMT, the company's stock was down 1.1p to 30p, after earlier falling as much as 10%.

Operating profit

The company also said it managed a slim £5m operating profit in the three months from July to September, although the previous three months had seen a loss of £227m.

Marconi's botched results cost Lord Simpson his job

The group has said it is now focusing on its core activities of selling broadband and network telecoms kit.

But sales in the core area fell 25% year on year to £1.59bn, and the company warned that there is no sign of the market picking up any time soon.

"Market conditions remain difficult with continued uncertainty regarding levels and timing of service provider spending," Marconi said in a statement.

"Events in the US of 11 September have further exacerbated this uncertainty.

"In this context, the group is not in a position to give sales and operating profit guidance for the full financial year."

Insiders at Japanese investment bank Nomura made it clear that the company's sales prospects for next year remain poor.

That could force the company into more expensive restructuring, pushing back break-even still further.

Debt burden

But Marconi promised it is still on track to get debt down to £2.7-£3.2bn by the end of the financial year in March 2002, with an ongoing programme of cost-cutting and selling off assets.

Since 30 September - the date on which the figures are based - Marconi has sold its medical systems division for £765m, bringing the debt down to about £3.5bn.

Other businesses are also on the block, but has so far had great difficulty in finding buyers willing to pay the prices Marconi needs to obtain.

Mistakes

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.

The goodwill from these acquisitions - the accounting term for the extra money paid over and above the actual value of the companies' assets during the dot.com gold rush - has now been written off, accounting for the company's huge pre-tax loss.

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 former chief executive Lord Simpson gave an upbeat assessment.

On 4 September the company announced its 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.