At Hägglunds Vehicle work on CV90 for the Swedish MOD continued in the first half. Deliveries of new CV90 chassis were at lower levels than in 2001 as the contract is now winding down, but were replaced by work on upgrading CV90s for international missions. Spares deliveries were also at higher levels. The overall slight reduction in Hägglunds sales in the first half was primarily due to lower sales at Hägglunds Moelv in Norway following completion of the Armoured Engineer Vehicle contract and cancellation of the Armoured Mine Clearing Vehicle contract. Hägglunds Moelv made a loss in the first half. The Hägglunds Moelv business is being restructured to match the lower sales level.
At Hägglunds Vehicle pre-series deliveries of CV9030 vehicles for Finland were made, and these are now undergoing customer trials. Series production will be initiated in 2003. There has been a large build up of engineering and manufacturing work on CV9030 for Switzerland and the first deliveries are taking place now. The demonstration and reliability growth phase of the All Terrain Vehicle (Protected) programme for the British Royal Marines has gone well, and the UK MOD has approved the design for production, which will commence in 2003.
At Alvis Vehicles the increase in sales was driven by serial deliveries of Piranha vehicles to Oman. Work is now winding down on this programme and deliveries will be largely completed by the end of this year. The development of MRAV has continued and the first prototype is now running in Germany. The second will be delivered before the end of the year and the UK prototypes will follow in 2003. Product support activity ran at increased levels compared with 2001.
We announced on 2 August the proposed acquisition of Vickers Defence. The transaction has been approved by Alvis shareholders and by the South African authorities. It remains subject to competition clearance in UK. A decision is expected shortly, and, if favourable, we expect to complete the transaction by 30 September.
Following completion we intend to strengthen the Group identity around the Alvis name. In the UK, the combined Alvis Vehicles/Vickers Defence Systems business will be named Alvis Vickers Ltd, and Vickers Bridging and Vickers OMC will be renamed Alvis Bridging Ltd and Alvis OMC Pty respectively. In Sweden and Norway, Hägglunds Vehicle AB and Hägglunds Moelv AS will be renamed Alvis Hägglunds AB and Alvis Moelv AS respectively. Alvis Vickers Ltd will be headed by Mr Trevor Harrison, formerly Group Director of Marketing, as Managing Director. Trevor Harrison, aged 50, is an engineer with an extensive background in the UK military land systems business, having held a variety of senior roles in Royal Ordnance and Vickers as well as Alvis. He knows both Alvis Vehicles and Vickers Defence Systems well, and the Alvis Board is confident that under his leadership the integration of the two companies will be successfully managed and the business opportunities going forward maximised.
ORDERS AND PROSPECTS
Order intake in the period was £48.2m. Our order book at 30 June 2002 was valued at £560.7m as against £562.6m at 31 December 2001.
Orders received in the first half comprised mainly product support and some smaller vehicle orders. The most significant order was for BV206S protected all terrain vehicles for rapid reaction elements of the German Army. Further orders from Germany and other European armies are anticipated in the future.
We have continued to pursue vigorously some major export opportunities for Alvis Vehicles to provide follow on to the current Oman contract. We remain confident that these efforts will bring results, but the timing of export orders is always hard to predict.
In the UK both Alvis Vehicles and Vickers Defence Systems are submitting bids for the UK's Future Command and Liaison Vehicle programme. The result will be known in the first half of 2003. An Alvis/Vickers team has been formed to work on the UK MOD's Future Rapid Effect System (FRES) programme, initial contracts for which are expected to be let in 2003. Securing a leading position in these projects is a major priority for the combined business for the coming months.
Due to a lower level of activity at Alvis Vehicles in the second half and the reduced Group cash position, we expect operating profits, interest and profit before tax and exceptional items to be somewhat lower in the second half than in the first half.
Nevertheless, we expect profit before tax and exceptional items and earnings per share before exceptional items for the full year to be higher than for 2001. The acquisition of Vickers is not expected to have a material impact on pre-exceptional profits in the current year. As stated in the circular to shareholders about the Vickers acquisition, there will be an exceptional reorganisation cost, and we expect a proportion of this to be charged this year.
-ends- Statement by N. M. Prest, Chairman and Chief Executive, Alvis plc