Growth dip at Racal holds up flotation

Racal Electronics will delay the flotation of its telecoms business until the division's disappointing revenue growth picks up.

Sales in the telecoms businesses, which includes Racal Telecom, Racal Translink and Racal Fieldforce, increased 9.6 per cent to £296 million for the year ended 31 March. Operating profit dropped 42 per cent to £22.2 million.

Racal said its latest performance was affected by the massive investment made in turning Racal Telecom from a government and railway industry provider into a broadband, IP-enabled national carrier for corporates.

Martin Lea, managing director of Racal Telecom, said he expected the investments - which include additional staff as well as massive infrastructure investment - to start performing later this year.

'We expect to see the impact of everything we're doing in the second half of this financial year,' he said.

Corporate market and carrier-to-carrier business will account for the bulk of revenue growth in the next financial year, Lea added.

Last year, Racal announced its intention to float Racal Telecom, but the flotation will not occur this year, according to Ernest Harrison, chairman of Racal.

'An IPO is dependent on our having exciting revenue growth, but it won't be in 1999. The question is whether it can be in 2000,' said Harrison.

'In telecoms, growth remains disappointing.'

He added: 'We are undertaking a fundamental reorganisation to implement a strategy to deliver strong revenue growth from the fast-growing commercial and carrier services markets.'