Racal Electronics says it will delay the floatation of its telecoms business until the division's current "disappointing" revenue growth picks up.
However, despite reporting slow revenue growth and a dip in profit for its latest financial year, Racal expects its current telecoms investment binge to start paying off later this year.
Sales in its 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 1999. Operating profit dropped 42 per cent to £22.2 million.
Racal said its latest performance was impacted by the massive investment being made to turn Racal Telecom from a government and railway industry provider into a broadband, IP enabled national carrier for corporate customers.
Racal Telecom's managing director Martin Lea expects the investments, which include new 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," said Lea.
Corporate market and carrier to carrier business will account for the bulk of revenue growth in the next financial year, said Lea. Revenue growth in the transport rail sector will be "modest," and in government, where Racal has a "very strong position" revenue growth will be around 10 per cent, Lea added.
Last year, Racal announced its intention to float Racal Telecom, but the floatation won't be this year, according to Racal chairman Ernest Harrison.
"An IPO is totally 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 Telecommunications Services revenue growth remains disappointing. We are undertaking a fundamental reorganisation in order to implement a strategy to deliver strong revenue growth from the fast growing commercial and carrier services markets."
In April, Racal Telecom announced plans to upgrade its existing nationwide SDH backbone by boosting bandwidth using dense wave division multiplexing, implementing IP at the core of the network and adding more local points of presence.
In a bid to improve the performance of Racal Telecom, the company has split its telecoms operations into three units, details of which emerged today: Racal Telecom, will control the national backbone and target corporate and government customers; Racal Translink, will provide infrastructure for the railway market; and Racal Fieldforce, will be the maintenance operation.
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