RNS Number:8921P
Alvis PLC
18 September 2003
18 September 2003
ALVIS plc
INTERIM RESULTS FOR THE SIX MONTHS
ENDED 30 JUNE 2003
HIGHLIGHTS
2003 2002
Turnover #163.6m #91.8m
Profit before exceptional items and tax #9.3m #7.8m
Profit before tax #8.8m #7.9m
Earnings per share before exceptional items 6.2p 5.0p
Interim dividend per share 2.5p 2.3p
Order book #796.3m #560.7m
* Turnover up 78%
* Profit before tax and exceptional items up 19%
* Earnings per share before exceptional items up 24%
* Interim dividend up 9%
* Order book stable at #800m level
Nick Prest, Chairman and Chief Executive of Alvis, commented:
"The integration of the Vickers Defence businesses into the Group has gone well,
and we continue to make progress. Our product and market positions provide many
opportunities."
Enquiries:
Alvis plc +44 (0)20 7808 8888
Nick Prest, Chairman and Chief Executive
Martin Greenslade, Finance Director
Smithfield Financial +44 (0)20 7360 4900
Rupert Trefgarne
INTERIM RESULTS FOR THE SIX MONTHS
ENDED 30 JUNE 2003
CHAIRMAN'S STATEMENT
RESULTS
Group turnover for the six months to 30 June 2003 was #163,629,000 (2002:
#91,751,000), profit before tax and exceptional items was #9,253,000 (2002:
#7,811,000), profit before tax after exceptional items was #8,790,000 (2002:
#7,895,000) and earnings per share after tax and preference dividends were 5.9p
(2002: 5.1p). Earnings per share before exceptional items were 6.2p (2002:
5.0p).
The growth in sales arose from the addition of the former Vickers Defence
companies to the Group and from increased deliveries under major CV90 programmes
at Alvis Hagglunds. Operating profit at Alvis Hagglunds increased with
turnover, whilst in the UK operating profit was lower than in the equivalent
period in 2002 due to the enlarged cost base of the combined Alvis Vickers
business and to reorganisation costs. Interest income was lower than in the
equivalent period in 2002, partly because of lower interest rates and partly
because of a lower net funds position. The Group's cash position remains strong,
with net funds at 30 June 2003 standing at #66.8m.
OPERATIONS
At Alvis Hagglunds serial deliveries of the CV90 to Switzerland built up in
the first half, while deliveries of CV90 chassis and upgrades continued to the
Swedish MOD. Major work was done on the CV90 Finland and ATV(P) UK programmes on
which serial deliveries will begin later this year. Work continues to
restructure Alvis Moelv, where performance has remained disappointing.
At Alvis Vickers product support and work undertaken to fulfil Urgent
Operational Requirements for the British Army deployment in the Middle East
constituted a major element of activity. Work has proceeded well on the #250m
Engineer Tank Systems project, and the first prototype was rolled out in May.
Alvis Bridging made a small operating profit in the period. Work is underway on
the #18m Malaysian order which will be delivered in late 2004.
Alvis South Africa broke even at the operating level in the period. Alvis OMC
has suffered from a delay in expected export orders, but Alvis Gear Ratio
performed ahead of plan.
ALVIS VICKERS REORGANISATION
The main elements of reorganisation following the acquisition of Vickers Defence
Systems in October 2002 and the creation of Alvis Vickers have been: a staff
reduction to eliminate duplicated functions; the creation of a business
headquarters at Newcastle with associated moves of administrative and sales
staff from Telford; the move of Leeds-based engineering staff to a new facility
which will be the company's centre of excellence for systems and electronics;
and the concentration of Telford staff onto the main site, allowing the leased
office block to be vacated. The latter is almost complete, and the new Leeds
site will be occupied in the near future. The business integration has so far
proceeded to plan.
OPERATION TELIC
Alvis Vickers was called upon at short notice to supply material and manpower to
support the deployment of the British Army to the Gulf. The company sent over 50
staff to Kuwait to fit urgently required upgrade kit to
Challenger 2 tanks and other armoured vehicles. The Alvis team performed
outstandingly well under difficult conditions, and the UK MOD has publicly
thanked the company for its crucial contribution to the success of Operation
Telic.
UK PROGRAMMES
On 17 July the UK MOD announced that it would be withdrawing from the
tri-national Multi-Role Armoured Vehicle (MRAV) programme. Since the
specification of MRAV was laid down in the mid-1990's, the British Army's view
of its needs has changed, and MRAV is now considered not to meet future
requirements for deployability and flexibility.
The UK MOD's plans to strengthen its capability in light and medium armour are
now based on the Future Command and Liaison Vehicle (FCLV) and the Future Rapid
Effects System (FRES). It was announced on 17 July that Alvis Vickers had been
selected as preferred bidder for the FCLV programme. A contract is expected to
be concluded shortly for 486 FCLV vehicles at a value in excess of #150m, with
additional quantities under option. Further opportunities are foreseen in export
markets. Sales revenue from the FCLV order will arise mainly in the period
2006-2009.
FRES is a project to provide the British Army with a new family of
medium-weight, air-portable armoured vehicles. It supersedes MRAV and will
replace existing, ageing platforms. FRES will make extensive use of modern
high-bandwidth communications and information technology, and will be at the
heart of the UK MOD's drive to establish Network Enabled Capability. An Alvis
team, working in partnership with BAE Systems and General Dynamics UK, has
assisted the MOD with its planning work for the last 12 months. FRES will
proceed in a number of stages, and decisions are expected from the MOD shortly
as to how the first study phase will be managed. Alvis is well positioned to
contribute to this study phase, and to later development and manufacturing
phases.
CORPORATE DEVELOPMENTS
It was announced on 22 August that BAE Systems was buying GKN's 29% stake in
Alvis, and the purchase was completed on 2 September. BAE Systems has
complementary skills in Land Systems to those of Alvis, as exemplified by the
partnership on FRES, and we look forward to working with them to generate value
for Alvis shareholders and customers.
David Wright originally joined the Alvis Board as GKN's appointee. Now that GKN
have sold their shares, the Board has asked David to continue to serve as an
independent non-executive Director, and is pleased that he has agreed to do so.
ORDERS AND PROSPECTS
Order intake in the first half amounted to #152m. Our order book at 30 June 2003
was valued at #796.3m as against #781.1m at 31 December 2002.
Major orders in the first half were the Platform - Battlefield Information
Systems Application (P-BISA) for Challenger 2 in association with the Bowman
radio programme (#23m), and the AMOS mortar system for Finland (#33m). The
balance was made up of product support and other small orders.
Aside from FCLV we are optimistic about receiving significant All-Terrain
Vehicle export orders at Alvis Hagglunds, and other useful business before the
end of the year.
We continue to work on a number of Piranha and CV90 export opportunities, and
these hold promise for 2004.
Overall the Board remains confident about the prospects of continued progress,
and is declaring an increased interim dividend of 2.5p (2002: 2.3p), payable on
27 October 2003 to shareholders on the register on 26 September 2003.
N M Prest
Chairman and Chief Executive
18 September 2003
GROUP PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2003
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
Notes #'000 #'000 #'000
Turnover including joint ventures 2 164,612 97,333 233,512
Share of turnover of joint ventures (983) (5,582) (7,798)
163,629 91,751 225,714
Trading profit of subsidiary undertakings 2 8,794 6,235 14,397
before operating exceptional items
Operating exceptional items 3 (455) - (2,048)
Trading profit 8,339 6,235 12,349
Share of results of joint venture undertakings 33 (6) 15
Operating profit 8,372 6,229 12,364
Non-operating exceptional items 3 (8) 84 71
Profit on ordinary activities before interest 8,364 6,313 12,435
Net interest receivable 426 1,582 2,108
Profit on ordinary activities before taxation 8,790 7,895 14,543
Taxation 4 (2,725) (2,071) (4,515)
Profit on ordinary activities after taxation 6,065 5,824 10,028
Equity minority interests 114 - 42
Profit attributable to shareholders 6,179 5,824 10,070
Dividends, including non-equity shares 5 (2,640) (2,939) (6,809)
Transfer to reserves 3,539 2,885 3,261
Basic earnings per ordinary share before
exceptional items 6 6.2p 5.0p 10.4p
Basic earnings per ordinary share 6 5.9p 5.1p 9.1p
Diluted earnings per ordinary share before 5.9p 4.7p 9.9p
exceptional items
Diluted earnings per ordinary share 5.6p 4.8p 8.6p
All turnover and operating profit of subsidiary and joint venture undertakings
are in respect of continuing operations.
GROUP BALANCE SHEET
As at 30 June 2003
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
Notes #'000 #'000 #'000
Fixed Assets
Intangible assets 248 - 255
Tangible assets 49,539 37,217 49,266
Investments 7
Interest in assets of joint ventures 1,388 909 3,093
Interest in liabilities of joint ventures (1,281) (862) (3,018)
107 47 75
Investment in associates 31 312 30
Other investments 4,843 5,405 5,533
Total investments 4,981 5,764 5,638
54,768 42,981 55,159
Current assets
Stocks 52,008 37,647 38,148
Debtors due within one year 49,192 32,036 59,622
Debtors due after one year 4,399 6,892 5,734
Cash at bank and in hand 90,790 94,921 88,336
196,389 171,496 191,840
Creditors due within one year (153,327) (83,345) (137,377)
Net current assets 43,062 88,151 54,463
Total assets less current liabilities 97,830 131,132 109,622
Creditors due after one year (20,744) (67,447) (38,063)
Provisions for liabilities and charges (33,723) (26,410) (32,918)
Equity minority interests 113 - (3)
Net assets employed 43,476 37,275 38,638
Capital and reserves
Equity share capital 27,366 27,154 27,265
Share premium account 1,550 730 1,164
Capital redemption reserve 37,014 37,014 37,014
Profit and loss account (22,454) (27,623) (26,805)
Shareholders' funds 43,476 37,275 38,638
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the six months ended 30 June 2003
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Profit attributable to shareholders, excluding
share
of joint ventures' results 6,151 5,848 10,066
Share of joint ventures' profit/(loss) for the 28 (24) 4
period
Profit attributable to shareholders 6,179 5,824 10,070
Other recognised gains and losses relating to the
period (exchange) 812 2,082 2,524
Total recognised gains and losses relating
to the period 6,991 7,906 12,594
GROUP RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
For the six months ended 30 June 2003
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Profit attributable to shareholders 6,179 5,824 10,070
Dividends (2,640) (2,939) (6,809)
3,539 2,885 3,261
Issue of new shares 487 50 595
Redemption of Convertible
Cumulative Non-Voting Redeemable
Preference shares ("Convertible Preference shares") - (31,462) (31,462)
Other recognised gains and losses relating to the
period (exchange) 812 2,082 2,524
Net addition/(reduction) to shareholders' funds 4,838 (26,445) (25,082)
Shareholders' funds at beginning of the period 38,638 63,720 63,720
Shareholders' funds at end of the period 43,476 37,275 38,638
All Shareholders' funds are in respect of equity interests.
GROUP CASH FLOW STATEMENT
For the six months ended 30 June 2003
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
Notes #'000 #'000 #'000
Net cash inflow/(outflow) from operating 8 4,943 (26,346) (16,076)
activities
Returns on investments and servicing of finance 246 1,156 1,775
Taxation paid (655) (5,025) (5,982)
Capital expenditure and financial investment (1,920) (2,407) (5,527)
Acquisitions and disposals (209) - (18,955)
Dividends paid on ordinary shares (3,873) (3,543) (5,941)
Management of liquid resources* (3,703) 65,226 77,817
Net cash flow before financing (5,171) 29,061 27,111
Financing 35 (31,524) (25,594)
(Decrease)/increase in cash in the period (5,136) (2,463) 1,517
Reconciliation of net cash flow to movement in net funds
(Decrease)/increase in cash in the period (5,136) (2,463) 1,517
Repayment /(drawdown) of debt and lease financing 452 112 (5,274)
Management of liquid resources 3,703 (65,226) (77,817)
Change in net funds resulting from cash flows (981) (67,577) (81,574)
Exchange differences 2,423 5,691 5,258
Net funds at beginning of the period 65,335 141,651 141,651
Net funds at end of the period 66,777 79,765 65,335
At 31 Dec. At 30 June
Analysis of changes in net funds 2002 Cash flow Exchange 2003
#'000 #'000 #'000 #'000
Cash at bank and in hand 24,954 (4,567) 674 21,061
Overdrafts (1,358) (569) (152) (2,079)
23,596 (5,136) 522 18,982
Time deposits 63,382 3,703 2,644 69,729
86,978 (1,433) 3,166 88,711
Loans (21,482) 480 (733) (21,735)
Finance leases (161) (28) (10) (199)
Net funds 65,335 (981) 2,423 66,777
* Liquid resources comprise solely term deposits which do not have a
maturity exceeding 6 months.
NOTES TO THE ACCOUNTS
For the six months ended 30 June 2003
1. Basis of preparation of interim financial information
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year ended
31 December 2002. The taxation charge is calculated by applying the Directors'
best estimate of the annual tax rate to the profit for the period. Other
expenses are accrued in accordance with the same principles used in the
preparation of the annual accounts. The interim report has neither been audited
nor reviewed.
2. Turnover and operating profit
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Turnover by origin:
United Kingdom 75,788 52,401 107,429
Scandinavia 74,202 39,350 111,718
South Africa 13,639 - 6,567
163,629 91,751 225,714
Share of joint venture undertakings 983 5,582 7,798
164,612 97,333 233,512
Operating profit by origin:
United Kingdom 3,142 4,018 4,920
Scandinavia 6,673 3,147 11,153
South Africa 23 - 75
9,838 7,165 16,148
Unallocated (1,044) (930) (1,751)
8,794 6,235 14,397
Operating exceptional items (in respect of United (455) - (2,048)
Kingdom)
Joint venture undertakings 33 (6) 15
Operating profit 8,372 6,229 12,364
All operations are continuing and are in respect of specialist vehicles.
Group operating profit for the six months ended 30 June 2003 includes goodwill
amortisation of #7,000 (six months ended 30 June 2002: #nil, year ended 31
December 2002: #2,000).
3. Exceptional items
Operating exceptional items
During the six months ended 30 June 2003, #455,000 (six months ended 30 June
2002: #nil; year ended 31 December 2002: #2,048,000) was charged in respect of
reorganisation at Alvis Vickers Limited following the acquisition of Vickers
Defence on 30 September 2002. These charges were all in respect of continuing
operations.
Non-operating exceptional items
During the six months ended 30 June 2003, a loss of #8,000 was recognised (six
months ended 30 June 2002: profit of #84,000; year ended 31 December 2002:
profit of #71,000) in respect of fixed asset disposals. These amounts were all
in respect of continuing operations.
4. Taxation
The tax charge for the period reflects the rate anticipated for the year to 31
December 2003.
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
United Kingdom 633 1,166 1,001
Joint venture undertakings 9 20 15
Overseas 2,083 885 3,499
2,725 2,071 4,515
The tax credit on operating exceptional items for the six months ended 30 June
2003 amounted to #141,000 (six months ended 30 June 2002: #nil; year ended 31
December 2002: #614,000).
The tax credit on non-operating exceptional items for the six months ended 30
June 2003 amounted to #2,000
(six months ended 30 June 2002: charge of #25,000; year ended 31 December 2002:
charge of #22,000).
5. Dividends
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
Ordinary shares
Interim dividend 2.5p 2.3p 2.3p
Final dividend - - 3.7p
Total 2.5p 2.3p 6.0p
Preference shares
5.5% Convertible preference dividend - 1.71p 1.71p
The interim ordinary dividend is to be paid on 27 October 2003 to shareholders
on the register at close of business on 26 September 2003.
6. Earnings per Ordinary Share
The basic earnings per ordinary share for the six months ended 30 June 2003 has
been calculated on the profit on ordinary activities after taxation. The basic
earnings per ordinary share for the six months ended 30 June 2002 and twelve
months ended 31 December 2002 has been calculated on the profit on ordinary
activities after taxation and preference dividends. The basic earnings per
ordinary share is based on the average number of ordinary shares in issue for
the six months to 30 June 2003 of 104.9m (six months to 30 June 2002: 104.2m
shares; year to 31 December 2002: 104.2m shares). The earnings per ordinary
share before all exceptional items has been calculated in addition to the
earnings per share required by Financial Reporting Standard No. 14 as, in the
opinion of the Directors, this will allow shareholders to consider the results
of the Group on a comparable basis.
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
Basic earnings per ordinary share 5.9p 5.1p 9.1p
Operating exceptional items (net of tax) 0.3p - 1.3p
Non-operating exceptional items (net of tax) - (0.1)p -
Basic earnings per ordinary share before exceptional
items 6.2p 5.0p 10.4p
In calculating the basic earnings per ordinary share, the weighted average
number of ordinary shares in issue excludes the ordinary shares held by the
Alvis Employee Benefit Trust at 30 June 2003 of 3,859,120 (30 June 2002:
4,406,458 shares; 31 December 2002: 4,444,463 shares).
7. Fixed Asset Investments
Included in other investments is #4.8m in respect of Own Shares purchased by the
Alvis Employee Benefit Trust. These have been classified within fixed asset
investments as the shares are held for the continuing benefit of the Company
through the reward of its employees. The market value of the shares in Alvis plc
held by the Alvis Employee Benefit Trust at 30 June 2003 was #7.3m.
8. Reconciliation of operating profit to net cash inflow/(outflow) from
operating activities
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Operating profit of subsidiary undertakings 8,339 6,235 12,349
Depreciation and amortisation 3,656 2,257 5,557
Increase in working capital (7,052) (34,838) (33,982)
Net cash inflow/(outflow) from operating activities 4,943 (26,346) (16,076)
9. General
The above financial information does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. The financial information for
the preceding full year is based on the statutory accounts for the year ended 31
December 2002. Those accounts, upon which the auditors issued an unqualified
opinion, have been delivered to the Registrar of Companies. The interim
statement will be sent to shareholders and further copies are available upon
request from the Company's registered office at 34 Grosvenor Gardens, London,
SW1W 0AL.
This information is provided by RNS
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END
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