Vickers boosted by Rolls Royce boosts Vickers

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The Independent Online

Vickers, the Rolls Royce cars to Challenger tanks engineering group, saw its shares rise 8p to 184p yesterday after announcing better than expected annual results.

The company reported profit before tax of £44.8m for 1994, up 38 per cent from £32.3m the previous year, on turnover up 5 per cent to £727.2m. Analysts had expected profits of around £40m.

Rolls Royce, which doubled profits to £21m, had sales of £287m, up from £240m.

The better performance from Rolls Royce stemmed from the cars' higher specifications, which have larger margins.

The company also has high operational gearing.meaning turnover increases feed quickly through to the profits. Defence-related profits, meanwhile, grew 23 per cent to £12.7m.

One disappointing area was medical related products, which include incubators used in neo-natal intensive care.

Medical products reported profits of £6m, down from £9.7m in the previous year as a result of a slowdown in spending by health authorities in Europe and the United States. Orders, however, are expected to pick up in the current year.

Ewan Fraser, an analyst with James Capel, is planning to raise his forecast for the current year from £55m to between £60 and £65m.

He said: "The automotive side is looking promising, with volume increases improving profit. The company has medium-term security on the defence side following the Government's order for Challenger tanks. It is well- placed to grow in the near term."

Vickers' cash position strengthened during the year. Sir Colin Chandler, chief executive, said: "This positive cash position has given the company the necessary scope to accelerate important investment proposals for new plant . . . and to consider acquisitions of complementary businesses.

"It is through such investments, acquisitions and collaborations, that the way is being paved for continued and successful rebuilding of Vickers."

Earnings per share are 9.8p, up from 8p in the previous year. The dividend is 4.75p, up from 3p.