20012000 Turnover£149.4m£203.5m Profit before exceptional items and tax£11.8m£13.4m Profit before tax£28.2m£12.8m Earnings per share before exceptional items6.3p7.3p Basic earnings per share18.2p6.9p Dividend per share (full year)5.5p5.0p Order book£562.6m£610.5m
CHAIRMAN'S STATEMENT
RESULTS
In the 12 months ended 31 December 2001 Group sales were £149.4m, (2000: £203.5m), profit before tax and exceptional items was £11.8m (2000: £13.4m) and profit before tax was £28.2m (2000: £12.8m). Group profit after tax was £21.0m (2000: £9.2m) and earnings per ordinary share were 6.3p before exceptional items (2000: 7.3p) and 18.2p after exceptional items (2000: 6.9p).
The main changes to the composition of the pre-exceptional profit before tax in 2001 as compared with 2000 were:
--reductions in sales and operating profits at Hägglunds Vehicle arising from a lower level of deliverable orders;
--a lower contribution from our former associate company, Avimo Group as a result of the sale of our interest at the beginning of the year;
--a large increase in interest arising from increased cash balances from advance receipts and the Avimo sale proceeds.
An exceptional profit of £16.1m arose from the sale of the remaining 17% stake in Avimo Group.
The reduction in sales had been anticipated as Hägglunds is in transition between the end of CV90 deliveries to Norway in late 2000 and the commencement of deliveries to Finland and Switzerland in the second half of 2002. High levels of activity in spares production, and in engineering work and component production for the new CV90 programmes, have enabled Hägglunds to maintain a respectable operating result of £5.8m (2000: £9.9m) on much lower turnover of £79.8m (2000: £125.5m). At Alvis Vehicles sales reduced to £69.6m (2000: £76.3m) as a result of a reduction in domestic upgrade work, partly offset by increased export sales. An improvement in operating margin provided an operating profit of £2.2m (2000: £2.1m).
The contribution of £0.3m from Avimo (2000: £3.3m) was for the last three months prior to the shareholding being sold.
The substantial increase in net interest earnings to £5.6m (2000: £0.4m) reflected the receipt of the Avimo sale monies and larger advance receipts on vehicle contracts. In fact, if the interest on contract advances is added to operating profits, the profit contribution from vehicle contracts at around £10.1m was only a little lower than the equivalent figure for 2000 of £11.8m.
The Group's net funds position was £141.7m at the end of 2001 (2000: £46.6m). This was after spending £5.5m on market purchases of 5,552,106 of the Group's convertible preference shares. The Group's own" net cash balance, that is to say after deducting unapplied customer advances, was £53.9m (2000: £52.6m).
OPERATIONS
At Hägglunds Vehicle deliveries of CV90s and Leopard 2 tanks to the Swedish MoD continued, and initial deliveries of vehicles upgraded for international missions were made. The first two BvS10 All Terrain Vehicles were delivered to the UK Royal Marines in June, and as part of their test programme took part in the challenging exercise Saif Sareea II in Oman. They acquitted themselves very well, as did the wide range of Alvis Vehicles products which took part. Altogether some 700 vehicles of eleven different types supplied by Alvis took part in the exercise, and the feedback from both the British and Omani Armies was very favourable.
In addition to BvS10, Hägglunds is simultaneously launching major new CV90 programmes for Finland and Switzerland, and a significant proportion of the company's resources was applied to this in 2001. A large number of new, highly qualified engineers have joined the company. To accommodate this increase and improve production efficiency, a £4m facilities investment programme is being implemented between 2001 and 2003.
At Alvis Vehicles output in 2001 comprised Supacat, Shielder and Rapid Intervention Vehicles for the UK MoD, and Tactica and Piranha for export customers. A first batch of Scorpion vehicles was dieselised for Oman, in time for the Saif Sareea II exercise.
Following the accession of the Netherlands to the MRAV programme in February 2001, work has continued on the development phase, and the first prototype vehicle will be running early in 2002. Alvis received an additional order for the development of an armoured ambulance variant of MRAV (ATEV) for the British Army.
Product support has continued to feature largely at Alvis Vehicles, accounting for £18m of sales in 2001. Innovative schemes are being developed for future vehicle support arrangements for the UK MoD. Towards the end of the year the company's maintenance contract for the Desert Warrior fleet in Kuwait was extended following a competitive evaluation.
CORPORATE DEVELOPMENTS
Apart from the sale of the final tranche of Avimo shares, there were no acquisitions or disposals of businesses in 2001. It was announced on 11 February 2002 that Alvis was in talks with Rolls-Royce about the possible acquisition of Vickers Defence Systems. These talks continue and a further announcement will be made in due course.
PERSONNEL AND ORGANISATION
The composition of the Alvis Board has remained unchanged during 2001 and Chris Rowe and Sven Kågevall continued as Managing Director and President of Alvis Vehicles and Hägglunds Vehicle respectively. The Group's senior executives, both at Alvis plc and at the operating subsidiaries, are experienced and competent and they have strength in depth in their staffs.
At Alvis Vehicles Mr Andrew Tonks, Finance Director, left in October 2001. He has been replaced by Mr Des Webster. Also, Mr Tony Mathers, Alvis Managing Director at ARTEC, Mr John Horton, Production Director, and Mr John Hodgson, Commercial Director, have all retired in the first few months of 2002. This has been long foreseen and succession arrangements have been made. The Board would like to thank all of them for their hard work for Alvis and wish them an enjoyable retirement.
Mr Lionel Steele, Export Sales Manager at Alvis Vehicles, was awarded the MBE for services to defence exports in this year's New Year's Honours List. Lionel Steele has been at Alvis since 1967 in a variety of management positions and has been involved in many of our most important sales campaigns. His dedication to Alvis is exemplary, and there are many others like him.
The Board would like to take this opportunity to thank all the Group's staff for their commitment and hard work.
ORDERS
The Group's order intake in the year was £127.7m (2000: £524.0m) and the Group's order book at 31 December 2001 stood at £562.6m (2000: £610.5m). Of this, £107.2m was at Alvis Vehicles and £455.4m at Hägglunds.
Hägglunds' order intake included an order worth about £20m for additional CV90s for Sweden, orders for armoured all-terrain vehicles for Sweden and Spain amounting to around £8m, and a £10m order from an Asian country for all-terrain vehicles, together with valuable new study and technology demonstration contracts for AMOS mortar turret systems and the SEP, the Swedish Army's planned future vehicle programme.
PROSPECTS
Based on existing deliverable orders, we expect vehicle sales and operating profits to increase in 2002. On the other hand, interest receipts are likely to diminish as a result of expected lower interest rates and lower cash balances caused by the anticipated redemption of convertible preference shares in April 2002, and the utilisation of advance receipts as working capital builds up on major projects.
Beyond 2002 we expect a continuing strengthening of performance at Hägglunds as deliveries from the current order book increase. The outlook for Alvis Vehicles remains dependent on order intake as the existing stock of orders will be largely delivered in 2002. We have continued to make progress on major sales campaigns in 2001, and there are good prospects for securing significant new business in 2002. However, the timing and outcome of export sales campaigns is hard to predict.
In the longer term the Group expects to benefit from MRAV and other UK MoD programmes to regenerate its light and medium armoured vehicle fleet.
Against the background of the Group's prospects and cash position, the Board is recommending a final dividend of 3.4p (2000: 3.1p). This makes a total dividend of 5.5p (2000: 5.0p) for the year, representing an increase of 10% over the previous year.
-ends-
" Results For the Year Ended 31 December 2001 :Highlights
