Marconi reverses losses to record a profit

Telecoms equipment group Marconi passed a key milestone in its recovery today with its first quarterly profits for three years.

The firm, which needed a complex financial restructuring to stay afloat last year, surprised markets with profits of £11m (€16.3m) in the first three months of 2004.

This was an improvement on losses of £240m (€353m) a year earlier and was driven by a cost-cutting programme that has seen more than 1,000 jobs lost over the past 12 months.

Marconi also offloaded its North American broadband business during a year in which annual losses narrowed to £171m (€251.7m) from a deficit of £1.3bn (€1.9bn) a year ago.

Sales fell by 20% to £1.45bn (€2bn) during the 12 months to March 31 as major telecoms customers invested less in their networks.

But contract wins with operators including BT had helped to stabilise demand and Marconi forecast sales growth in the “low single digits” in the current financial year.

Chief executive Mike Parton said: “We delivered profit, our sales have stabilised and we have cash in the bank. All of our energy is now turned to profitably growing our business.”

Higher margins were expected from transferring its outsourced manufacturing operations to the Far East and eastern Europe where costs are lower.

Marconi employs 12,400 people world wide, a third of them in the UK at Coventry, Beeston in Nottingham, Liverpool and Chelmsford.

It put an end to 18 months of falling sales in October by announcing a 6% increase in business for its second quarter to £389m (€572.5m).

The signs of improved fortunes follow a £4.7bn (€6.9bn) debt-for-equity restructuring that put the group on a more stable footing – a move that also handed control of the new company to banks and bondholders.

The group nearly collapsed after suffering a drop in orders following its switch of focus from electronics to telecoms.

Restructuring charges wiped £97m (€142m) off the balance sheet over the past 12 months and costs totalling £35m (€51.5m) are expected in the current financial year, mainly from job losses in Italy and Germany and the settlement of leases.