Alvis shares lost almost 30% of their value last week after a pessimistic trading statement and a warning that expected orders for the defence vehicles business acquired from GKN last year will take longer than expected to materialise.
Speaking after unveiling a fall in underlying half-year profits from £10.4m to £8m, chairman Nick Prest said orders would pick up in the second half. In the first half they fell 21% from £412.6m to £325.5m.
But despite the expected second-half improvement, Prest said some of Alvis’s projected business for 2000 could be pushed back, including Middle Eastern orders for its Piranha and Tactica armoured vehicles. His comments led several analysts to cut their earnings forecasts for next year.
The City’s reaction to the news was swift, and Alvis shares slumped from 190p to 146.5p. By the end of the week they had fallen to 134p, a 29% decline. At this level the company is valued at just £144m.
The figures did, however, contain some good news for investors, with a 12% dividend increase to 1.7p.
Arabella Grant, an analyst at WestLB Panmure, said the market’s response to the results was an over-reaction.
`The results were bang in line with expectations,’ she insisted. `People are missing the point with this company, which is its wider positioning in the market. It is clearly going to be one of the winners with defence consolidation going forward.’
Alvis acquired GKN’s defence vehicles business last year, and stressed that the export order intake predicted at the time of the deal was still expected to materialise.
In the UK, there was little news of progress on the contract to build a pan-European multi-role armoured vehicle. Signing of the deal to start work on the so-called `battlefield taxi’ has been delayed by uncertainty as to whether the French will remain in the project.
Stuart Mitchell, Alvis’s finance director, said the company was working on several other international projects which were coming close to fruition.
Recent contract successes include a £300m deal to supply the Swiss army with vehicles made by the Alvis Swedish subsidiary Hagglunds. Another similar deal with the Finnish armed forces is said to be close to completion.
Hagglunds contributed operating profits of £5.36m in the six-month period, while the contribution from the UK armoured business was £2.79m, compared with £6.52m a year ago.