Vickers calls for pounds 60.5m stabiliser

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The Independent Online
VICKERS, the maker of Rolls- Royce cars and Challenger tanks, launched a pounds 60.5m cash call to 'stabilise the company' as it announced a further loss of pounds 25.9m before tax for last year and a reduced dividend.

Sir Colin Chandler, the chief executive, said the one-for-four rights issue would allow the directors to take a 'cool, measured look at strategy'.

A board committee is reviewing the structure of the group. This could lead to parts of the group - which also include a medical business making baby incubators and marine engineering - being sold.

Vickers' shares rose 6p to 124p on the news against a rights price of 95p. The final dividend is 1p making 1.5p for the year, down from 6p in 1991.

The company's losses mostly reflect the sharp fall in demand for Rolls-Royce cars. Last year it reduced the workforce by 950, cutting the break-even point from 2,600 three years ago to 1,300.

Rolls-Royce lost pounds 15.8m before interest last year, having lost pounds 17.3m in the previous period. There was an exceptional restructuring cost of pounds 18.2m in addition to pounds 31.4m in 1991. Rationalisation costs were also incurred in medical business, which saw an unexpected downturn, and elsewhere in the group last year. Exceptional items have totalled pounds 65.8m in the past two years.

Sir Colin said the company hoped to receive an advance payment once a contract for tanks from Oman was signed. Vickers also hopes to sell further tanks to the British army.

Both the company's tank factories have full order books until 1995, but a decision on the future of one plant will be taken next year in the absence of new orders.

Borrowings have risen to pounds 100m or almost 50 per cent of shareholders' funds. The rights issue will reduce the ratio to 15 per cent, though Vickers expects this ratio to increase again to about 25 per cent in 1994 as advance payments on existing defence contracts are used up.

The company's net debt is offset by pounds 40m advance payments. It was also reduced by pounds 12m proceeds of a property sale.

Capital spending fell by pounds 9m to pounds 26m but the company expects it to recover to more than pounds 30m this year.

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