City shocked as Marconi posts £5bn loss

Beleaguered telecoms group Marconi made a massive £5.1bn loss in the last half year - equating to £28m a day - which was today seen as one of the worst corporate figures in history.

The group, which has shocked the market with profit warnings and thousands of job cuts, and has been ejected from the prestigious FTSE 100 Index, also showed sales tumbled 19% to £2.58bn.

The £5.1bn losses for the period to September 30, includes a charge of £3.5bn, incurred after Marconi cut the value of acquisitions made during the tech boom, such as US groups Fore Systems and Reltec.

Figures were also hit by a £148m increase in doubtful debt provisions, while restructuring charges which include costs of cutting staff totalled £343m.

The losses compare with losses of £66m the same period the previous year.

Jeremy Batstone, head of research at Natwest Stockbrokers said: ‘‘Certainly Marconi’s figures are being seen as one of the worst corporate losses in history.’’

Justin Urquhart Stewart at 7 Investment Management said they were the worst results in recent memory.

‘‘It took eight years to grow the company and 18 months to bring it to its knees,’’ he said.

Marconi said trading conditions in the first half year were ‘‘extremely difficult, with unprecedented declines in spending on network infrastructure’’.

However, chief executive Mike Parton said a new management team at the firm was beginning to improve performance.

Mr Parton, who took the helm after former boss Lord Simpson was ousted, added that although he was not anticipating an upturn in the market in 2002, he was confident the firm would weather the difficult period.

‘‘We have not anticipated any upturn for this year or next year in the markets. If the upturn comes we will be very pleased but in our business plan we have not anticipated an upturn next year (the calendar year 2002),’’ he said.

‘‘We are very confident of weathering this downturn,’’ he added.

The firm was taking costs out of the business but was still investing very heavily in state-of-the-art products, he said.

‘‘There is much more to be done in the coming months and we expect little or no help from our major markets, which remain depressed,’’ he went on.

He added the large exceptional costs were a ‘‘necessary part of getting Marconi focused on the future’’.

Marconi chairman Derek Bonham told the BBC Radio: ‘‘We are in discussion with the banks, they have been very supportive and they know that we extend the facilities, but we are working closely with them and we are taking them into our confidence and the relationships are beginning to work much better than they have been in the past."

Mr Bonham said Marconi ‘‘certainly’’ had a future. ‘‘We have got some very talented people and we’ve got some great customers who are very loyal.’’

To cut costs, Marconi has been axing staff numbers and during the six months it shed 7,000 staff, bringing numbers down to 49,000 people worldwide.

The firm, which has announced plans to cut 10,000 jobs in its core business from 39,000 at the end of March to below 29,000 by the end of its financial year said that at the half-year stage it had brought job numbers in the core down by 6,400 to 32,600.

Roger Jeary, MSF national secretary of manufacturing said: ‘‘Our understanding is that Marconi is realigning its debts and liabilities. It doesn’t change our position that we are still working very closely with the company to help them restructure, which in the long term will help give our members secure jobs for the future.’’

The group’s other major aim is to bring its massive debts down, and it showed it had moved further towards its target of between £2.7bn and £3.2bn of debt by March 2002.

When taking recent disposals into account, debts were about £3.5bn.

Stripping out the one-off items, operating losses were £222m, comprising losses of £227m in the first quarter and profits of £5m in the second.

Shares today tumbled by 4% to 30p. Shares have slumped by more than 97% in the past year, falling from a high of £12.50.