Vosper’s state of independence

Despite rumours that Vosper Thornycroft is a takeover target, finance director Chris Cundy tells LIAM O’Brien that being small can have its advantages

Rumoured in recent weeks to be the takeover target of the French defence industry giant Thomson-CSF, UK shipbuilder Vosper Thornycroft has been looking small and vulnerable.

The firm’s finance director Chris Cundy, who has been at the firm since 1993, insists that it has a future as an independent – if it plays to its strengths of technical expertise, nimbleness and niche marketing.

Its defence services division, augmented by the £30m acquisition of Bombardier’s air force training capability in May, is, he says, smart positioning in preparation for the changing shape of defence procurement.

Is Vosper Thornycroft moving into service provision?

No. Ten years ago Vospers was seen as a shipbuilding company, but that included service provision on export contracts. We’ve been trying to make the group more balanced since then with both shipbuilding and support activities. Shipbuilding is a `lumpy’ activity. What we are trying to do is even things out. Support services have gone from 5% of our business 10 years ago to just under 50% now with the rest being manufacturing.

What is the prognosis for shipbuilding over the coming years?

Over the past 10 years there has been a dearth of new orders, but over the next 10- 20 years there will be a reversal of this trend.

We will see the start of the Type 45 destroyer programme and its 12 ships. That will generate £6bn-£7bn. BAE Systems is the prime contractor, but we will also play a significant role.

With the Type 45 we are looking at an in-service date of mid-to-late 2007, which means that we will need to start building by 2002. This will require a significant design effort over the next 12 to 18 months.Then there is the Future Surface Combatant programme to replace the Type 22 and Type 23 ships, consisting of 20 vessels.

Isn’t there something of an order gap looming for the company?

The last of the new minesweepers will be delivered to the Royal Navy at the end of 2001 and the Type 45 will not begin until 2002, but we do have a number of projects that can fill that hole.

What about the currently static export market for warships?

The Middle East export market should bounce back for us. Oil prices were low and the countries of the region scaled back on their defence programmes. Oil hit US$10 per barrel so export demand has been slow. Now that oil has hit a higher level I believe that the orders will come back.

Does Vosper Thornycroft fear overseas competition, especially that from emerging nations?

Our major competition is from Germany and France; we have little competition from the cheaper end of the market, due to our skill and knowledge of weapons and the design side.

With the launch of Triton (the largest steel trimaran in the world) we have the lead in trimaran technology. And we have expertise in the smaller warships such as the fast attack craft we sell to the Middle East.

Is VT too small in today’s defence procurement market?

No. We are small and nimble and are better able to satisfy customer requirements in niche markets. Certainly our size is not a disadvantage. Being the size that we are we can react much more quickly than larger companies.

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