Alvis clears the decks: Electro-optics operation sold ahead of expansion moves

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The Independent Online
ALVIS, the armoured vehicle maker, is selling its electro-optics operations to a Singapore-based subsidiary to raise money for acquisitions. The market gave the deal its seal of approval, pushing the shares up 6p to 44p, more than three times their low for the year of 14p.

The transfer shifts control of the measuring instrument maker Avimo and the periscope manufacturer Helio from Alvis to Avimo Singapore, a 51 per cent-owned subsidiary. The Singapore-quoted company will also take on Alvis's 49 per cent share in an optics joint venture with the Egyptian government.

Avimo Singapore also makes optical equipment for military applications as well as castings for the defence and aerospace industries. It plans to build up the UK and Egyptian companies, partly via a three-for-eight rights issue on the Singapore exchange, to raise pounds 8m.

In return, Alvis, which is passing up its rights, will receive pounds 8.2m in cash and 15 million new shares in the subsidiary, maintaining its shareholding at 51 per cent. It will also hand over responsibility for pounds 3.5m of debts. The cash to be raised has been earmarked for acquisitions in defence and to fund a move into specialist civilian engineering.

Alvis has promised to keep its 51 per cent stake until a week after Avimo Singapore's figures for the year to September are announced. It is understood that it will then reduce its stake or even sell it completely to raise further funds for expansion at home.

Alvis's interim figures for the six months to March showed a 40 per cent jump in pre-tax profits from pounds 1.56m to pounds 2.19m from sales of pounds 45.8m ( pounds 42m). Earnings per share were 0.1p compared with a loss of 0.8p. The dividend was held at 0.5p.

Helio produced its highest first-half profit for several years. An dollars 8m order was secured from the US government to supply periscopes for the MIA2 tank.

Alvis Industries, which after the reorganisation forms the core business, was disappointing. Sales of Alvis's light armoured vehicles were hit by lower-than-expected output of Starstreak Stormer vehicles after a redundancy programme that reduced the workforce in Coventry by a third to 500.