P. M. BRIEFING : Ferranti Posts Heavy Losses

British defense group Ferranti International Signal PLC posted heavier than expected losses today and unveiled plans to tackle the crisis, which it blames on its U.S. unit.

Ferranti, which says it fell victim to fraud, reported a pretax loss of 15.4 million pounds ($25.6 million) in the six months to Sept. 30.

By midday in London, Ferranti’s stock fell about 10% in value from Thursday’s close. Ferranti blames the heavy losses on fraudulent contracts entered into by its U.S. subsidiary, International Signal & Control Group (ISC).

When Ferranti bought the Lancaster, Pa.-based weapons maker in 1987, it says it also inherited fake contracts that may cost it up to $235 million. Discovery of the scam has made it too dependent on bank finance, Ferranti said in a statement accompanying the results. It said its net debt Dec. 15 was 275.7 million pounds ($458.5 million).

The half-year results were also hit by lower profits from military business, including heavy losses in the United States, costs from job cutting in Britain and from the development of non-military business.