Mayflower seeks 35m pounds: Big motor orders spark rights issue to fund expansion

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MAYFLOWER Corporation, the specialist engineering group, has launched a pounds 35m rights issue to finance a big expansion programme over the next few years.

The one-for-one cash call at 36p a share follows several car industry orders won by the company in the past month that could amount to more than pounds 300m over the next 10 years.

The biggest is from Ford involving the development and manufacture of drivers' cabs for a new generation of trucks for the American market.

The initial five-year contract is worth dollars 20m annually if anticipated production levels are met. Mayflower says the typical life of a truck model is at least 15 years, so the contract could be worth dollars 300m over the period.

Mayflower is also believed to have won an estimated pounds 100m sub-assembly contract for a new MG sports car under development by Rover.

Although neither side would confirm the project, there has been persistent speculation that the car would be launched in 1995. It would be the first new model bearing the legendary marque for almost 20 years.

Earlier this month, Mayflower won an estimated pounds 20m contract from Aston Martin to manufacture bodies for its new DB7 sports car. The model is expected to go into production early next year.

As a result of the orders, Mayflower plans to spend about dollars 12.5m to upgrade a factory in Ohio in the next three years. Another pounds 24.2m will go on a new plant at Coventry to meet future demand.

John Simpson, Mayflower's chief executive, said the new orders were likely to boost its turnover 'very significantly' by the end of 1995. 'The increase will necessitate substantial investment in working capital as well as individual capital projects,' he said.

The rights issue was accompanied by a surge in taxable profits from pounds 1.1m to pounds 1.7m for last year, on turnover more than doubled at pounds 68m. Earnings per share raced ahead from 1.9p to 2.9p a share.

The company is paying a total 1.25p dividend, the first since a new management team under Mr Simpson reversed into Triangle Trust, the troubled Tri-ang toys and financial services group in 1989.

The group - renamed Mayflower - has since withdrawn from its loss- making activities and expanded into engineering through acquisitions.

City analysts expect the company to increase pre-tax profits to about pounds 5m this year.

The shares closed 3p higher at 52p yesterday.

(Photograph omitted)