Rolls-Royce powers up Vickers profit

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The Independent Online

Vickers, the defence and engineering group, continued its recovery yesterday with a 70 per cent leap in half-year profits, powered by another strong contribution from Rolls-Royce cars.

The company also said that it could be interested in buying VSEL's howitzer gun business which the new owner, GEC, is reported to be considering selling.

Yesterday's pre-tax profits of pounds 27m were at the top of analysts' forecasts, and came despite a flat performance from the defence equipment businesses and poor sales at the medical operation.

Although Rolls sold just 721 cars in the six months, 3 per cent up, the sales success of niche models came on top of a rise in prices and margins in the luxury car sector.

Sir Colin Chandler, the chief executive, said that Rolls would continue to focus on selling the more expensive, customised models and on the latest Bentley Azure, which was launched in March with a pounds 215,000 price tag. Sales in the Far East and in mainland Europe, particularly Germany, have been disappointing, but this was offset by stronger UK and US markets.

At the Cosworth engine division, profits were boosted by a 50 per cent rise in sales. Cosworth engines are widely-used in the US IndyCar racing programme, and have led the field in 11 out of 16 races this season, for which Vickers receives a win fee.

Vickers does not break down first-half profits, but Sir Colin was keen to stress that the propulsion technology division was doing particularly well. On the defence side, Challenger Tank production was behind much of the 49 per cent rise in turnover to pounds 501m.

Profits in the division were "holding steady" and for 1995 as a whole "could be up a little on last year".

The black spot was the medical division, which is unlikely to match last time's full-year operating profits of pounds 6m.

US sales have been hit by the government's threatened healthcare budget cuts.

After spending more than pounds 60m on acquisitions in the first half, Sir Colin said the strategy would remain the same and "we won't add on another leg" to the three divisions. The company is, however, watching the direction GEC takes with VSEL's howitzer gun business, which would fit well in Vickers' defence operations. "If they [GEC] came to the conclusion they wanted to sell it then we could be interested," Sir Colin said, but he emphasised that no formal approach had been made to GEC.

The interim dividend is raised from 1.75p to 2.4p. Shares rose 6p to 241p.