13 Mar 03. In the 12 months ended 31 December 2002 Alvis Group sales were £225.7m (2001: £149.4m), profit before tax and exceptional items was £16.5m (2001: £11.8m) and profit before tax was £14.5m (2001: £28.2m). Group profit after tax was £10.1m (2001: £21.0m) and earnings per ordinary share were 10.4p before exceptional items (2001: 6.3p) and 9.1p after exceptional items (2001: 18.2p).
The main changes to the composition of the pre-exceptional profit before tax in 2002 as compared with 2001 were:
* an increase in trading profit at Alvis Hägglunds from £5.8m in 2001 to £11.2m in 2002.
* an increase in trading profit at Alvis Vickers (formerly Alvis Vehicles) from £2.2m in 2001 to £5.3m in 2002.
* A reduction in Group interest received from £5.6m in 2001 to £2.1m in 2002
The large improvement in trading profit arose from increased sales at both Alvis Vickers and Alvis Hägglunds.
At Alvis Vickers sales increased to £97.2m (2001: £69.6m) as the bulk of the deliveries under the Oman Piranha contract were effected during the year. At Alvis Hägglunds sales increased to £111.7m (2001: £79.8m) as deliveries commenced on the major new CV90 programmes for Switzerland and Finland.
An exceptional charge of £2.0m was taken in respect of reorganisation at Alvis Vickers following the acquisition of the former Vickers Defence businesses.
The reduction in net interest receivable resulted primarily from lower cash balances arising from the redemption of outstanding convertible preference shares for £31.5m in April 2002 and the application of advance payments to working capital. Lower interest rates also affected interest earnings. The Group’s net funds position at the end of 2002 was £65.3m (2001: £141.7m), reflecting the initial cost of the Vickers Defence acquisition (£18.0m) as well as the above factors. The Group’s own net funds position, that is to say after deducting unapplied customer advances, was £5.1m (2001: £38.7m).
Acquisition of Vickers Defence
The acquisition of the Vickers Defence businesses on 30 September 2002 was a major development for the Group. Vickers Defence Systems, based at Newcastle, was combined with the former Alvis Vehicles business at Telford, and has been operating as Alvis Vickers under unified management since 1 October.
Alvis Bridging (formerly Vickers Bridging), based at Wolverhampton, reports into Alvis Vickers. Alvis South Africa (formerly Vickers OMC) reports to Alvis plc. At the same time as completing the Vickers acquisition we changed the names of Hägglunds Vehicle and Hägglunds Moelv to Alvis Hägglunds and Alvis Moelv respectively. We made these changes in order to promote a coherent international identity for the enlarged Group around the Alvis name, whilst preserving the individual company identities.
The acquisition of Vickers Defence Systems brought a valuable order book, some advanced and complementary technology, and the potential for cost savings. In order to exploit these opportunities, Alvis Vickers has established a unified management structure and announced a reorganisation under which Newcastle will become the main site. Significant facilities will be retained in Leeds and Telford. In addition to the exceptional charge taken in 2002, further costs will arise in 2003 and 2004. We expect the overall cash cost of the reorganisation to be contained within the £7.5m figure announced at the time of the acquisition.
The acquired businesses made a loss in the final quarter of 2002, but turnover in Newcastle was unusually low in this period and margin treatment on long-term contracts was conservative. Order intake at the acquired businesses in the final quarter was encouraging at £48.6m. General customer reaction to the acquisition has been extremely favourable, and it is clear that the overall market position of our UK company has been significantly enhanced.
Operations and Technology
At Alvis Vickers vehicle output in 2002 comprised more than 70 Piranhas