Vickers begins slow climb

Falling share prices are halted by chairman’s trading statements after shakedown

Stockbrokers have put Vickers shares back on buy this week after the big price shakedown driven first by the disappointing 1996 figures and last week’s grim annual general meeting trading statement from Sir Richard Lloyd, chairman.

David Bevan, of Credit Lyonnais Laing, has moved his recommendation from hold to buy: `simply because the shares have fallen to a level where all the problems are reflected in the price’.

This view, echoed elsewhere, lifted the shares several pence from the near £2 low hit on Sir Richard’s warning. Bevan reckons the break-up value of the company is at least £3 a share.

Arabella Grant, at broker Panmure Gordon remained cautious: `There are still a few ifs about Vickers going forward and we are keeping it on hold for now.’

Bevan and Grant have downgraded their forecasts. Bevan is down to £82m pre-tax for this year (£83.3m in 1996), and £95m next, while Grant has just clipped £4m off Panmure forecasts for both years and is down to £82m and £90.6m.

Sir Richard told shareholders last week that first-quarter figures were down on this stage last year, and that the interims would not be up to last year’s pre-tax £31.8m. He said that because of the strong pound, it was unusually difficult to foresee sales and profits trends.

Vickers usually exports 50% of turnover, but export orders are proving harder to get and margins on them are thinning.

Sir Richard said unit sales in the first quarter of the Rolls/Bentley car range were up 13% at 4446 units compared with this stage last year.

But Bevan believes the current range, which is due to be replaced this summer by a new one featuring BMW engines, is being discounted to clear the decks which will hit profits this year.

However, he is encouraged at the prospect of much better margins in the new range. Grant too sees a `significant upside’ in the new range once its `teething problems’ are sorted.

Sir Richard’s news that the reliability trials on the Challenger 2 tank are going `extremely well’ failed to stop City concern.