Battered Marconi reports further sales slump

Battered telecoms equipment group Marconi has offered little sign of an immediate end to its woes after reporting a further sales slump.

Marconi, which completed a life-saving financial restructuring in May, said tough trading conditions and weaker demand had reduced sales in the three months to June 30 by about 15% on the previous quarter, to £367m (€521m).

Chief executive Mike Parton also ruled out a significant recovery in sales in the current quarter, although he did report positive longer-term signals.

The company added that cost savings achieved from reducing staff numbers by 805 during the three months to June 30 had been offset by the sales decline.

It has already warned that it intends to cut its workforce, which currently stands at 14,735, to 13,000 by the end of March 2004. Marconi has regional bases in Coventry, Nottingham, Liverpool and Chelmsford, Essex.

Today's trading update showed group first quarter sales fell from £430m (€610m) in the three months to March 31 and from £592m (€841m) a year earlier. The reduction was seen in all operating regions, with sales to Europe and the Middle East down 17% on the previous quarter at £220m (€312m).

However, Marconi pointed out that a number of its major European customers, including BT and Vodafone, had signalled their intention to increase expenditure, although this has not been translated into firm orders.

For the three months to September 30, Marconi expects "flat to slightly increased" sales on the previous quarter. The figure a year earlier had been £514m (€730m).

Marconi agreed a deal with bondholders and banks in May to swap £4.7bn (€6.6bn) of debt for equity in a new company, listed as Marconi Corporation.

That restructuring left Marconi with £783m (€1.1bn) of gross debt at June 30, with this position being offset by cash balances of £788m (€1.1bn).