MORE MUSICAL CHAIRS AT SHIPCO – VT TO WITHDRAW FROM SHIPBUILDING
By Julian Nettlefold, Editor, BATTLESPACE
10 May 07. Couched within the Chairman of VT’s Statement on the presentation of the firm’s latest results was the announcement that the company would be withdrawing from its core shipbuilding activities within three years of the formation of Shipco, the joint BAE-VT shipbuilding venture.
BATTLESPACE asked VT whether, “The withdrawal from shipbuilding was due to concerns that the CVF contract to build two new aircraft carriers for the Royal navy was in jeopardy?
“Shipco is conditional on CVF going ahead,” said the VT spokesman.
VT Group Chairman Michael Jeffries commented, “VT Shipbuilding has won two major export orders this year as well as continuing work on the Type 45 destroyers for the Royal Navy. The business remains solid with good visibility of the order book. Further medium-term prospects include follow-on ships for the Hellenic Navy and vessels for Libya, Kuwait and Saudi Arabia.”
“We announced in December 2006 that we had entered into discussions with BAE Systems to combine our respective surface shipbuilding and naval support businesses, including Fleet Support Limited (FSL). The proposed consolidation is in line with the Defence Industrial Strategy and would create a world-class provider and strategic partner for the UK Government. It is envisaged that the JV would be owned 45% by VT and 55% by BAE Systems, with equal board representation and voting rights. In addition it is envisaged that VT will benefit from certain specific rights governing its potential exit after year 3 with a minimum guaranteed floor price. The transaction as a whole remains subject to final agreement between the parties and the MoD and to VT
shareholder approval. Further details will be provided in due course. The JV would be expected to achieve turnover in excess of £700m per annum and would employ approximately 6,850 people.”
“As part of any transaction, it is also likely that VT would acquire BAE Systems’ 50% shareholding in Flagship Training Ltd (Flagship) which would enhance our training capability across all sectors. The planned JV would give improved stability and visibility of workload in the Naval sector and allow greater management focus on our developing support services businesses. Much progress has been made on this consolidation but the transaction can only be concluded following the full go-ahead of the Aircraft Carrier (CVF) project.”
“This has been another successful year for the Group with solid growth underpinned by a number of large contract wins and a strong performance from key acquisitions.”
Group Revenue including joint ventures increased by 19% to £1,005m (2006: £847m). Underlying profit before taxation improved by 21% to £74.2m (2006: £61.4m) with the corresponding adjusted earnings per share also improving by 25% to 30.9p (2006: 24.7p). This performance has enabled the board to recommend a final dividend of 8.6 pence, giving a total dividend for the year of 11.85 pence per share, an increase of 10% over last year.
“The year has seen significant successes in both our support services and shipbuilding businesses. Within our VT Support Services division, the full integration of the former Lex businesses has extended our capability in the provision of critical asset availability.”
“We have also decided to exit from our low margin commercial boat building activities; this has resulted in a £6m non-recurring charge, but also released 20 acres of land for sale within the next 2 year period.”
The FT reported that the departure would end 150 years of naval history at the company known formerly as Vosper Thornycroft. “We spend more time talking about ship-building than any other business even though it accounts for less than 20 per cent of sales,” said Paul Lester, VT’s chief executive.
Mr Lester has overseen VT’s transformation into a support services group