TI Group 1999 Interim Results
6 August 1999
TI Group 1999 Interim Results; Sales Up 24% to Pound 1,248 Million, $2,022 Million; PBT Up 7% to Pound 130.4 Million, $211.2 Million - before goodwill and exceptional items
Business Editors
NEW YORK--Aug. 5, 1999--
TI GROUP 1999 INTERIM RESULTS; SALES UP 24% TO (pound) 1,248
MILLION ($2,022 MILLION); PBT UP 7% TO (pound) 130.4 MILLION ($211.2
MILLION)
(before goodwill and exceptional items)
======================================================================
Six months to 30 June 1999 1998 Change
Total Sales (pound)1,248m (pound)1,009m +24%
- from Continuing Operations (pound)1,248m (pound) 920m +36%
Profit before taxation
- Before goodwill and
exceptionals (pound)130.4m (pound)122.2m +7%
- After goodwill and
exceptionals (pound)104.0m (pound)124.9m
(FRS3)
Earnings per share
- Before goodwill and
exceptionals 18.2p 17.5p +4%
- After goodwill and exceptionals 13.6p 16.9p
(FRS3)
Dividend per share 5.8p 5.6p +4%
====================================================================
- Organic profit growth of 6% with underlying margins improved
- Strong cash generation of (pound)142.5 million (1998:
(pound)115.0 million)
- Acquisitions on track
- DM800 million acquisition of Busak+Shamban announced today
- Group positioned for double digit profit growth
Commenting on these results, Sir Christopher Lewinton, Chairman,
said: "The Group has achieved a strong first half result with all four
world leader businesses outperforming their underlying markets. We
achieved organic growth in sales and profits and cash generation was
again strong. Underlying margins continued to improve. Recent
acquisitions have efficiently utilized the balance sheet and have
doubled the Group's addressable markets; as a consequence the Board is
confident that going forward TI Group is well positioned to generate
double digit profit growth."
Note: exchange rate used in this release is $1.62/(pound)1
TI Group has again achieved strong results with sales of
(pound)1,248m (1998: (pound)1,009m) and profit before taxation,
goodwill and exceptional items of (pound)130.4m (1998: (pound)122.2m).
Earnings per share before goodwill and exceptional items increased to
18.2p (1998: 17.5p).
In a separate statement, TI Group today announces the acquisition
of Busak+Shamban, a privately owned specialty polymer products group,
for DM800m, and the creation of TI Group Specialty Polymer Products
which will on completion combine Busak+Shamban and the Group's
existing polymer business, Forsheda. This acquisition will
significantly accelerate the growth of TI's polymer businesses.
PERFORMANCE SUMMARY
The Group completed three important bolt-on acquisitions in the
first half, which are now being successfully integrated, and announced
two small disposals; these transactions are set out in more detail in
the Key Events section.
TI Group's world leader businesses all continued to outperform
their underlying markets. John Crane performed well in industrial
markets which remain challenging. The integration investment program
announced earlier this year is well underway. The program will enhance
customer focus, make greater use of lower cost manufacturing
facilities, and leave the business well positioned to capitalize on a
market upturn. Forsheda, benefiting from senior management changes and
the introduction of a stronger marketing culture, is generating
improving results after a slow start to the year. It has also made
significant progress in winning new long-term business and globalizing
further its product range. Bundy continued to outperform its
underlying automotive markets which remained strong, particularly in
North America, and won important new business in Europe for S&H, its
powertrain fluid carrying systems business. Dowty sustained strong
sales and profits in aerospace markets which maintained high levels of
activity overall.
As a global specialized engineering group, with some 80% of sales
made in the country of origin, TI Group has no material foreign
currency transaction exposure. The translation of the results of
overseas subsidiaries for accounting purposes increased both sales and
profit by (pound)1m.
Total sales for the period were (pound)1,248m (1998:
(pound)1,009m), a 24% increase over 1998. Adjusting for the
translation impact of exchange rate movements and for changes in the
portfolio, organic sales growth was 3%.
Profit before interest, goodwill and exceptional items was
(pound)148.7m, up (pound)19.0m or 15% from last year overall, but up
(pound)28.2m or 23% on continuing operations. Adjusting for exchange
rate movements and portfolio changes, organic growth was 6%. The Group
operating margin of 12% reflects an improvement over the second half
of 1998 but is lower compared with the same period last year. This
reflects the initial impact of the acquisitions completed during 1998
and early 1999, where overall margins were below the Group average. TI
Group management actions are already generating margin improvements in
these acquired businesses, which will progressively bring them more in
line with the Group's strong underlying margins, which improved from
13.1% to 13.5%.
Profit before taxation, goodwill and exceptional items was
(pound)130.4m, up (pound)8.2m or 7% from last year. This figure
reflects the short term dilutive impact of the sale of the Group's
interest in the Messier-Dowty Joint Venture, which has not yet been
fully offset by the increasing benefit from the acquisitions made over
the last eighteen months.
In line with FRS10, goodwill on acquisitions completed since
January 1, 1998 is being amortized over 20 years, resulting in a
non-cash charge of (pound)14.3m (1998: (pound)3.0m) in the period.
There was an exceptional charge against operating profit of
(pound)12.1m, which relates to the integration investment in John
Crane following the major acquisitions completed in 1998. As
previously announced, further planned costs are expected to be
incurred in the second half of 1999 bringing the total to (pound)15m.
Net interest expense increased to (pound)18.3m (1998:
(pound)7.5m), principally as a result of acquisition expenditure. The
interest charge was covered 8 times (1998: 17 times) by the profit
before interest, goodwill and exceptional items.
The effective tax rate on profit before goodwill and exceptional
items of 31% was unchanged from 1998.
Earnings per share before goodwill and exceptional items were
18.2p (1998: 17.5p).
Capital and revenue investment by subsidiaries increased to
(pound)53m (1998: (pound)50m). Within this total, capital investment
was (pound)33m (1998: (pound)32m) and revenue investment, excluding
the exceptional integration investment of (pound)12.1m referred to
above, was (pound)20m (1998: (pound)18m).
Cash flow from operations was again strong at (pound)142.5m
(1998: (pound)115.0m). After capital investment, free cash flow was
(pound)108.2m, 16% ahead of the same period last year, and broadly
covered, as in previous years, the Group's net interest, tax and
dividend payments.
TI shareholders' funds were (pound)730.9m at June 30, 1999
(December 31, 1998: (pound)601.0m). Net debt at June 30, 1999 was
(pound)846.8m compared with (pound)254.8m at June 30, 1998 and
(pound)512.7m at December 31, 1998 reflecting the net cash outflow on
acquisitions during the first half.
The Board has declared an interim dividend of 5.8p (1998: 5.6p)
per ordinary share, an increase of 4%, which will be paid on October
13, 1999 to shareholders on the register at the close of business on
August 20, 1999.
KEY EVENTS
Corporate Activity
The Group completed three important bolt-on acquisitions and two
small disposals during the first half of 1999. All the acquisitions
increase the size of TI Group's addressable markets, bring significant
growth opportunities for product globalization and are consistent with
the Group's strategy. The integration of these acquisitions is going
well and they are performing in line with expectations; each will
enhance the Group's earnings in their first full year of ownership.
Acquisition Products Business Consideration Date
Group
Tri-Industries Jet Engine Dowty US$48m Mar 1999
Components
Kenmore Air-conditioning Automotive (pound)20m Mar 1999
Italiana components Systems
Walbro Fuel Storage and Automotive US$570m Jun 1999
Delivery Systems Systems
Following the acquisition of Walbro in June 1999, the Group
formed TI Group Automotive Systems, which combines the Bundy and
Walbro businesses, to create a world leader in brake, fuel and
powertrain fluid carrying systems.
In a separate statement, TI Group announced today the acquisition
of Busak+Shamban, a privately owned specialty polymer products group,
for DM800m (approximately (pound)275m). Busak+Shamban has a strong
strategic fit with TI Group's existing Forsheda business, bringing
complementary products in PTFE and other thermoplastic technologies
and a strong marketing culture. The acquisition will provide
significant opportunities to accelerate the growth of the combined
businesses within a new division, TI Group Specialty Polymer Products.
The two small disposals completed in the first half were of
businesses acquired with EIS Group last year, as follows:-
Disposal Products Consideration Date
Industrial Machinery Capital Goods (pound)2m Feb 1999
Aircraft Spares and Aviation (pound)12m Jun 1999
Distribution (part) Services
In March 1999 an affiliate of Kohlberg Kravis Roberts & Co (KKR)
invested (pound)94.4m to acquire through a placing 23.6 million shares
in TI Group. KKR is working with the company, as a supportive
shareholder, using its resources and market intelligence in the
continued successful growth of TI Group's businesses.
Management
TI Group goes forward with a strong management team in place, led
by Bill Laule. Following the successful acquisition of Walbro, Allan
Welsh, who joined the TI Board at the beginning of the year, was
appointed Chief Executive of TI Group Automotive Systems on June 22,
1999. On completion of the acquisition of Busak+Shamban, John
Langston, another TI Board director will be appointed Chief Executive
of TI Group Specialty Polymer Products.
TI Board
After nine years of valuable service as a non-executive director
Lord Fanshawe of Richmond retired from the Board in April 1999. Lord
Fanshawe's position as Chairman of the Organization and Remuneration
Committee was assumed by Mr. John Hignett, Deputy Chairman. On May 13,
1999, Mr. Henry R. Kravis, a senior partner in Kohlberg Kravis Roberts
& Co and a US citizen, was appointed a non-executive director of the
company.
Millennium Compliance
The Group-wide program to ensure Millennium (Y2K) Compliance is
well advanced. All the Group's business critical systems will be
Millennium compliant well before the end of the year, with contingency
plans in place to cope with any potential disruption from events
outside the Group's control. Significant work has also been undertaken
to minimize potential disruption caused by non-compliance of third
parties including customers and suppliers.
OPERATIONS
John Crane
John Crane, the world leader in the supply of engineered sealing
systems and related products for process and marine industries,
continued to perform strongly despite challenging trading conditions
in many of its process industry segments. Sales were up 55% at
(pound)341.9m (1998: (pound)220.9m) and operating profit was up 9% at
(pound)37.0m (1998: (pound)34.0m). At constant exchange rates and
after adjusting for acquisitions and disposals, sales were 2% lower
and operating profit 6% lower, reflecting weak market conditions
mitigated by the business' increased market share. John Crane's
overall margin declined principally as a result of the initial impact
of the acquisitions made during 1998. Underlying margins remain strong
and steps are already being taken progressively to improve performance
of the newly acquired businesses to bring their margins into line with
those of John Crane.
John Crane's industrial markets were significantly impacted by
low oil and chemical prices and some process plant over-capacity. Pump
and compressor OEM markets were materially lower year on year,
reflecting lower capital investment in new projects. Aftermarket
demand was softer across many process industry segments, reflecting
continued margin pressure particularly in the oil, refining and
chemical markets. Against this market backdrop John Crane continued to
benefit from the increased scope of new products and coverage brought
by last year's acquisitions and further OEM and End User alliances.
The one-off integration investment in respect of John Crane's
recent acquisitions has started well, strengthening customer focus and
increasing the spread of lean and low cost manufacturing across John
Crane's operations. The strategic acquisitions of Safematic, Sealol
and the fluid technology businesses of EIS have increased the range of
products and services that can now be offered to John Crane's
worldwide customer base.
John Crane-Lips, the world leading marine propulsion and sealing
systems business, achieved a good performance in both sales and
profit. Commercial shipbuilding markets remained healthy with
increased product sophistication and strong demand for cruise ships
and container vessels outweighing softness in offshore markets. Demand
for cable laying equipment continued to grow, driven by increasing
demands for telecommunications capacity. Defence markets offered some
opportunities in new construction, retrofits and upgrades of existing
fleets, but were broadly flat in the period.
With the strategic and other investments made to realign the
business more closely with customer needs, John Crane is strongly
positioned to enjoy significant growth from an upturn in its markets.
Forsheda
Forsheda, a world leader in engineered elastomer seals achieved
sales of (pound)128.9m (1998: (pound)128.4m) and operating profit of
(pound)18.0m (1998: (pound)17.6m). On an organic basis sales and
operating profit were unchanged, reflecting a slow start in the first
few months of the year during a period of senior management
transition, but the business has made a strong start to the second
half. Overall margins remained strong at 14%.
Forsheda's automotive markets continued to grow with both North
American and European production ahead of the same period in 1998.
Industrial markets for agricultural and construction machinery were
affected by the economic conditions in Asia Pacific and Latin America.
Construction demand for pipe seals in North America strengthened in
the first half but infrastructure spending in Europe remained
depressed. Aerospace demand was sustained at high levels.
Further progress was made in globalizing Forsheda's products.
This included investment in a Fuel Injector O Ring manufacturing cell
in Brazil, further capacity to manufacture Power-Lock(TM) plastic pipe
seals in North America and state-of-the-art automated visual
inspection equipment for Dowty O Rings in Malta. Woodville Polymer won
a valuable rail gangway contract for the Stockholm Metro system. It
also secured its first gangway contract with one of the leading North
American railway rolling stock manufacturers together with major
orders in Hong Kong and the UK where it is to provide inter-vehicle
gangways for the new tilting trains on Virgin Rail CrossCountry
services.
After a disappointing performance in the first few months of the
year Forsheda, under a new management team led by John Langston, had a
good second quarter and expects to achieve continuing good results in
the second half of the year. Going forward this performance will be
enhanced by the acquisition of Busak+Shamban.
TI Group Automotive Systems
TI Group Automotive Systems was formed following the $570m
acquisition of Walbro Corporation, a leading manufacturer of fuel
storage and delivery systems, which was completed in mid-June. Walbro
is now being successfully integrated alongside Bundy under TI Group
management and financial control.
Bundy, the leading supplier of fluid carrying systems to the
world's automotive and refrigeration OEMs, had another successful half
year. Building on strong customer relationships and a global market
leadership position, the division increased sales by 15% to
(pound)481.6m (1998: (pound)417.5m) and operating profit by 32% to
(pound)59.1m (1998: (pound)44.8m). On an organic basis sales grew by
8% and profit by 14%. The margin improved to 12% (1998: 11%).
Both North American and European automotive production were ahead
of the same period last year with US markets in particular enjoying
record production levels. Interest rate cuts in Brazil have slowly
started to stimulate consumer demand while production in Asia Pacific
has yet to improve. Refrigeration markets remain mixed as growth in
Mexico and the US offset sluggish demand in Europe and Latin America.
Bundy's automotive business again produced strong results. Sales
growth was ahead of the underlying markets reflecting strong positions
on key growth platforms and further increases in the average value
content per vehicle. New orders in North America included
DaimlerChrysler's Cruiser and Ram Pickup models and Ford's new Ranger,
fitted with Bundy's brake and fuel systems. In Europe Bundy was named
by Renault as an "Optima" supplier, a significant achievement, and
also added a lifetime contract to supply brake and fuel lines to the
new Renault/General Motors replacement for the Trafic van. This
follows Bundy's success in winning the air conditioning contract on
the same program for S&H products earlier in the year. Bundy Latin
America won contracts to supply the Peugeot 206 making Bundy the sole
supplier of brake lines to the car in the four countries where it is
manufactured.
In March TI Group completed the acquisition of Kenmore Italiana,
a manufacturer of receiver-dryers that complement the fluid carrying
systems of S&H, acquired last year. Combined they give a greater value
added content in the high growth automotive air-conditioning market
and enhance growth opportunities.
Investment in Bundy's refrigeration facilities includes a
significant new center of excellence being established at a greenfield
site in Mexico. This facility will supply refrigeration products to
North America such as dynamic condensers and a range of evaporators
including Roll Bond(TM) developed in Brazil. A facility extension in
Hungary is nearing completion and will add significant new capacity to
supply central European markets and will also enable Electrolux to
outsource its local condenser requirements to Bundy.
The formation of TI Group Automotive Systems brings together the
Bundy and Walbro businesses to create a unique supplier of complete
fuel storage and delivery systems as well as a full service supplier
of brake and powertrain fluid carrying systems. The enhanced business
will continue to outperform its markets.
Dowty
Dowty, a world leader in aerospace systems, continued to perform
strongly. Sales in the period increased by 93% to (pound)295.2m (1998:
(pound)153.1m), reflecting mainly the acquisition of the aerospace and
defence businesses of EIS Group PLC in 1998, and Tri-Industries in
1999. Operating profit grew by 41% to (pound)36.7m (1998:
(pound)26.0m). On an organic basis operating profit grew by 10% on
sales which were slightly ahead as underlying margins remained strong.
Dowty's markets overall remained strong. Demand for large civil
aircraft, as anticipated, began to level off during the period
although the regional jet market continued to grow. Engine
manufacturers, which tend to lead the market by around 12 months, have
already begun to adjust schedules to match expected lower future
demand for large civil aircraft. However, as key economies continue to
perform well, most forecasters are expecting a more gradual downturn
in the overall aerospace market than in previous cycles. Military
markets remain robust.
Sales by Dowty's turbine engine components businesses softened
during the first half of 1999 reflecting the cyclical reduction in OEM
engine activity, although this was somewhat offset by further
outsourcing opportunities. The acquisition of Tri-Industries was an
important step in extending Dowty's product range into hot section
fabrications and in generating new opportunities to offer packaged
products. The hydraulics and actuation and tubular systems businesses
increased their sales reflecting the sustained high OEM build rates
and strong spares demand in some areas. The aerostructures business,
strengthened by Dowty's established customer relationships, continued
to perform well. It improved its margin and secured long term
contracts with Boeing worth $250m to provide components for several
key platforms.
Dowty continued to invest in capital equipment to support the
hydraulics and actuation business with Boeing, in particular on the
767-ER aircraft which is now fitted with a comprehensive range of
actuation equipment supplied from Dowty's Wolverhampton plant. Other
revenue investments included development activity for the Joint Strike
Fighter programs and rolling out further lean manufacturing projects.
Dowty has a strong product range and good positions on many key
large civil, military and regional programs. With the added benefit of
the acquisitions coming through it is well placed to take advantage of
continuing industry trends, particularly consolidation and outsourcing
and sustain a strong performance relative to the cycle.
OUTLOOK
The Group has achieved a strong first half result with all four
world leader businesses outperforming their underlying markets. We
achieved organic growth in sales and profits and cash generation was
again strong. Underlying margins continued to improve.
Recent acquisitions have efficiently utilized the balance sheet
and have doubled the Group's addressable markets. As a consequence the
Board is confident that going forward TI Group is well positioned to
generate double-digit profit growth.
TI GROUP plc AND ITS SUBSIDIARIES
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS TO 30th JUNE 1999
6 months to 30th June 1999
------------------------------------------
Before
goodwill
amortisation
and excep- Goodwill Exceptional Total
tional items amortisation items
Notes (pound)m (pound)m (pound)m (pound)m
---- ------------------------------------------
Turnover
Total Group and
share of joint venture 1 1,247.6 - - 1,247.6
Less joint venture
(discontinued) - - - -
------------------------------------------
Continuing operations 1,211.2 - - 1,211.2
Acquisitions 36.4 - - 36.4
Discontinued operations - - - -
--------------------------------------------
Group 1,247.6 - - 1,247.6
--------------------------------------------
Operating profit 1
--------------------------------------------
Continuing operations 146.9 (13.4) (12.1) 121.4
Acquisitions 1.0 (0.9) - 0.1
Discontinued operations - - - -
-------------------------------------------
147.9 (14.3) (12.1) 121.5
Joint venture and
associates
Continuing operations 0.8 - - 0.8
Discontinued operations - - - -
-------------------------------------------
0.8 - - 0.8
-------------------------------------------
Operating profit and
joint venture
and associates 1 148.7 (14.3) (12.1) 122.3
Exceptional profit
on disposal of
operations 2 - - - -
-------------------------------------------
Profit before
interest 148.7 (14.3) (12.1) 122.3
Interest (18.3) - - (18.3)
------------------------------------------
Profit on ordinary
activities before
taxation
Before exceptional items 130.4 (14.3) - 116.1
Exceptional items 2 - - (12.1) (12.1)
---------------------------------------
130.4 (14.3) (12.1) 104.0
Taxation 3 (40.4) - 3.8 (36.6)
---------------------------------------
Profit on ordinary
activities after taxation 90.0 (14.3) (8.3) 67.4
Minority interests (0.2) - - (0.2)
---------------------------------------
Profit for the
financial period 89.8 (14.3) (8.3) 67.2
Dividends (29.0) - - (29.0)
---------------------------------------
Retained profit 60.8 (14.3) (8.3) 38.2
---------------------------------------
EARNINGS PER SHARE 4
On profit for the
financial period 18.2 (2.9)p (1.7)p 13.6 p
Goodwill amortisation - 2.9 p - 2.9 p
Exceptional items
(after tax) - - 1.7 p 1.7 p
Before goodwill
amortisation and
exceptional items 18.2 - p - p 18.2 p
-------------------------------------
6 months to 12 months to
30th June 1998 31st Dec 1998
------------------ --------------------
Before Before
goodwill goodwill
amortisation amortisation
and excep- and excep-
tional items Total tional items Total
Notes (pound)m (pound)m (pound)m (pound)m
---- ---------- -------- --------- ---------
Turnover
Total Group
and share of
joint venture 1 1,008.7 1,008.7 2,168.1 2,168.1
Less joint
venture (68.8) (68.8) (68.8) (68.8)
(discontinued)
-------- -------- --------- ---------
Continuing
operations 919.9 919.9 2,079.3 2,079.3
Acquisitions - - - -
Discontinued
operations 20.0 20.0 20.0 20.0
-------- -------- --------- ---------
Group 939.9 939.9 2,099.3 2,099.3
-------- -------- --------- ---------
Operating profit 1
Continuing
operations 119.3 107.3 254.3 227.7
Acquisitions - - - -
Discontinued
operations 1.5 1.5 1.5 1.5
-------- -------- --------- ---------
120.8 108.8 255.8 229.2
Joint venture and
associates
Continuing operations 1.2 1.2 1.8 1.8
Discontinued operations 7.7 7.7 7.7 7.7
-------- -------- --------- ---------
8.9 8.9 9.5 9.5
-------- -------- --------- ---------
Operating profit
and joint venture
and associates 1 129.7 117.7 265.3 238.7
Exceptional
profit on
disposal of
operations 2 - 14.7 - 14.7
-------- -------- --------- ---------
Profit before
interest 129.7 132.4 265.3 253.4
Interest (7.5) (7.5) (26.7) (26.7)
-------- -------- --------- ---------
Profit on
ordinary
activities
before
taxation
Before
exceptional items 122.2 119.2 238.6 223.5
Exceptional
items 2 - 5.7 - 3.2
-------- -------- --------- ---------
122.2 124.9 238.6 226.7
Taxation 3 (37.9) (43.5) (74.0) (80.7)
-------- -------- --------- ---------
Profit on ordinary
activities after
taxation 84.3 81.4 164.6 146.0
Minority interests (0.5) (0.5) (0.4) (0.4)
-------- -------- --------- ---------
Profit for the
financial period 83.8 80.9 164.2 145.6
Dividends (26.8) (26.8) (82.6) (82.6)
-------- -------- --------- ---------
Retained profit 57.0 54.1 81.6 63.0
-------- -------- --------- ---------
EARNINGS
PER SHARE 4
On profit
for the
financial period 17.5 p 16.9 p 34.3 p 30.4 p
Goodwill amortisation - 0.6 p - 3.2 p
Exceptional items
(after tax) - - - 0.7 p
Before goodwill
amortisation and
exceptional items 17.5 p 17.5 p 34.3 p 34.3 p
-------- -------- --------- ---------
Diluted earnings per share were the same as earnings per share on
profit for the financial period for each of the reporting periods
above.
TI GROUP plc AND ITS SUBSIDIARIES
BALANCE SHEET
AS AT 30th JUNE 1999
30th June 30th June 31st December
1999 1998 1998
Notes (pound)m (pound)m (pound)m
----- ------- ------- -------
Fixed assets
Intangible assets - goodwill 5 762.4 325.8 524.1
Tangible assets 634.6 372.9 478.8
Associates and other investments 41.4 50.6 11.1
------- ------- -------
1,438.4 749.3 1,014.0
------- ------- -------
Current assets
Stocks 348.1 233.6 303.6
Assets held for disposal 8.8 - 21.8
Debtors and prepayments 706.9 492.6 587.5
Cash and deposits 177.4 259.6 173.1
------- ------- -------
1,241.2 985.8 1,086.0
Creditors falling due
within one year
Short term borrowings (128.5) (180.4) (128.3)
Other creditors (687.0) (460.4) (559.6)
------- ------- -------
Net current assets 425.7 345.0 398.1
------- ------- -------
Total assets less current
liabilities 1,864.1 1,094.3 1,412.1
------- ------- -------
Creditors falling due after more
than one year
Loans and other borrowings (895.7) (334.0) (557.5)
Other creditors (8.7) (29.0) (14.7)
------- ------- -------
(904.4) (363.0) (572.2)
Provisions for liabilities (223.8) (143.3) (233.4)
and charges
735.9 588.0 606.5
------- ------- -------
Capital and reserves
Equity share capital and
share premium 6 283.5 178.4 188.9
Reserves 447.4 405.3 412.1
------- ------- -------
TI shareholders' funds 730.9 583.7 601.0
Equity interests of minority 5.0 4.3 5.5
shareholders
Total shareholders' funds 735.9 588.0 606.5
------- ------- -------
TI GROUP plc AND ITS SUBSIDIARIES
CASH FLOW STATEMENT
FOR THE SIX MONTHS TO 30th JUNE 1999
6 months 6 months 12 months
to 30th to 30th to 31st
June June December
1999 1998 1998
Notes (pound)m (pound)m(pound)m
------------ ------- -------
Net cash inflow from
operating activities 7 142.5 115.0 292.8
Dividends received from joint ventures 0.1 7.1 7.3
and associates
Returns on investment and
servicing of finance (20.8) (4.8) (21.9)
Taxation (32.6) (40.8) (91.2)
Capital expenditure and
financial investment (43.3) (69.1) (77.2)
Acquisitions and disposals (156.0)(179.5) (449.1)
Equity dividends paid (55.7) (51.6) (78.4)
Management of liquid resources 20.5 110.8 206.6
------- ------- -------
Cash flow before financing (145.3)(112.9) (211.1)
Financing 215.8 130.9 194.2
------- ------- -------
Increase/(decrease) in cash 70.5 18.0 (16.9)
------- ------- -------
Movement in Group net debt
Increase/(decrease) in cash 70.5 18.0 (16.9)
Decrease in short term deposits (20.5)(110.8) (206.6)
Increase in loans (122.5)(130.1) (192.8)
Loans less deposits acquired with (256.1) (2.3) (35.4)
new subsidiaries
Loan notes issued as consideration - - (16.0)
for new subsidiary
Finance leases 1.4 0.1 (4.1)
Exchange translation (6.9) 8.2 (3.0)
------- ------- -------
Movement in Group net debt (334.1)(216.9) (474.8)
Net debt at start of year (512.7) (37.9) (37.9)
------- ------- -------
Net debt at end of period (846.8)(254.8) (512.7)
------- ------- -------
Free cash flow (cash available
for interest, tax &
dividends; before 7 108.2 93.1 218.1
acquisitions/disposals)
TI GROUP plc AND ITS SUBSIDIARIES
NOTES TO THE INTERIM ACCOUNTS
1. Segment analysis
Turnover Operating profit
-------------------------------------------------
6 months 6 months 12 months 6 months 6 months 12 months
to 30th to 30th to 31st to 30th to 30th to 31st
June June December June June December
1999 1998 1998 1999 1998 1998
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
-------------------------------------------------------------
By class of business
John Crane 341.9 220.9 585.6 37.0 34.0 76.0
Forsheda 128.9 128.4 248.5 18.0 17.6 33.8
Automotive
Systems 481.6 417.5 794.0 59.1 44.8 90.9
Dowty 295.2 153.1 451.2 36.7 26.0 59.3
Parent and
other - - - (2.1) (1.9) (3.9)
------------------------------------------------------------
1,247.6 919.9 2,079.3 148.7 120.5 256.1
Discontinued
operations - 88.8 88.8 - 9.2 9.2
Less: joint
venture and - (68.8) (68.8) (0.8) (8.9) (9.5)
associates
1,247.6 939.9 2,099.3 147.9 120.8 255.8
Goodwill
amortisation (14.3) (3.0) (15.1)
Exceptional items (12.1) (9.0) (11.5)
---------------------------
121.5 108.8 229.2
---------------------------
By geographical
origin
United Kingdom 262.8 180.3 433.8 24.1 23.8 46.4
Continental
Europe 333.6 265.1 587.9 40.2 35.3 77.4
North America 573.6 471.1 965.5 82.9 69.3 137.7
Rest of World 77.6 92.2 180.9 3.6 3.2 7.7
Parent and other - - - (2.1) (1.9) (3.9)
-------------------------------------------------------
1,247.6 1,008.7 2,168.1 148.7 129.7 265.3
Less: joint
venture and - (68.8) (68.8) (0.8) (8.9) (9.5)
associates 1,247.6 939.9 2,099.3 147.9 120.8 255.8
Goodwill
amortisation (14.3) (3.0) (15.1)
Exceptional items (12.1) (9.0) (11.5)
---------------------------
121.5 108.8 229.2
----------------------------
Automotive Systems comprises Bundy and, for the period since its
acquisition on 19th June 1999, Walbro.
Dowty for the six months to 30th June 1999 and the year ended
31st December 1998 includes Titeflex, Lewis & Saunders and Cambridge
Vacuum Engineering. These businesses were included with Automotive
Systems for the six months to 30th June 1998 when their combined sales
and operating profit were (pound)38.2m and (pound)2.7m respectively.
Discontinued operations comprised TI Group's 50% stake in
Messier-Dowty and its 100% owned repair and overhaul business which
were sold on 30th June 1998.
NOTES TO THE INTERIM ACCOUNTS (continued)
2. Exceptional items 6 months 6 months 12 months
to 30th to 30th to 31st
June June December
1999 1998 1998
(pound)m (pound)m (pound)m
------- ------- -------
Restructuring cost- John Crane (12.1) -- --
- Bundy Germany -- -- (5.5)
Dowty Woodville Polymer
whistleblower action -- (9.0) (7.0)
Release of unutilised
litigation provision -- -- 1.0
----- ----- -----
Charged against operating profit (12.1) (9.0) (11.5)
----- ------ -----
Profit on disposal of
Messier-Dowty/Repair & Overhaul -- 2.7 2.7
Net profit on disposal of -- 12.0 12.0
other operations
Exceptional profit on disposal
of operations -- 14.7 14.7
----- ----- -----
Total exceptional items (12.1) 5.7 3.2
------ ----- ------
Restructuring costs arose during 1999 from the integration of the
1998 acquisitions of Safematic, Sealol, Flexibox and the Vacuum &
Filtration activities of EIS with the existing John Crane Mechanical
Seals business.
3. Taxation
Taxation excluding exceptional items included overseas company
taxes amounting to (pound)32.8m (1998 (pound)27.4m) and tax
attributable to associated undertakings of (pound)0.2m (1998
(pound)1.9m). The exceptional items gave rise to an exceptional tax
credit of (pound)3.8m (six months to 30th June 1998 net charge of
(pound)5.6m, year ended 31st December 1998 net charge of (pound)6.7m).
4. Earnings per share
Earnings per share are calculated on a weighted average basis
using the earnings for each month, which total (pound)67.2m (1998
(pound)80.9m) on an FRS3 basis. Earnings before goodwill amortisation
and exceptional items, which provides a consistent measure of
operating performance, were (pound)89.8m (1998 (pound)83.8m). The
weighted average number of shares in issue was 493.4m (1998 478.8m).
5. Intangible assets - goodwill
Intangible assets comprise purchased goodwill arising as follows:
(pound)m
-------
Balance at 1st January 1999 524.1
Acquisition of Walbro Corp 217.3
Other acquisitions 39.3
Adjustment to fair value of deferred (4.0)
consideration
Amortisation (14.3)
-------
Balance at 30th June 1999 762.4
-------
Capitalised goodwill is being amortised over 20 years using the
straight line method. Goodwill arising on the acquisition of Walbro
Corp is stated after estimated fair value adjustments to the net
assets acquired of $200m ((pound)124m) in respect of accounting policy
alignments, asset revaluations, onerous contracts and other
liabilities. These adjustments are provisional and subject to further
review during the second half of the year. Provisional fair value
adjustments arising on other 1999 acquisitions are not material.
NOTES TO THE INTERIM ACCOUNTS (continued)
6. Issue of shares
The principal movement in equity share capital and share premium
arose from the subscription of (pound)94.4m cash for 23.6m Ordinary
shares by an affiliate of Kohlberg Kravis Roberts & Co, the global
investment firm, on 23rd March 1999.
7. Net cash inflow from operating activities
6 months 6 months 12 months
to 30th to 30th to 31st
June June December
1999 1998 1998
(pound)m (pound)m (pound)m
------- ------- -------
Operating profit 121.5 108.8 229.2
Depreciation 34.4 24.0 54.1
Goodwill amortisation 14.3 3.0 15.1
Operating working capital movement (27.2) (21.5) (5.6)
Movement in pensions and related balances (0.5) 0.7 -
------- ------- -------
Net cash inflow from operating activities 142.5 115.0 292.8
Dividends received from joint venture
and associates 0.1 7.1 7.3
Capital expenditure (net) (34.4) (29.0) (82.0)
------- ------- -------
Free cash flow 108.2 93.1 218.1
------- ------- -------
Free cash flow included cash
expenditure related
to exceptional items of: 8.4 9.0 11.4
------- ------- -------
8. Statutory information
The interim financial information is unaudited but has been
reviewed by the auditors whose report is set out on page 22. The
financial information set out above does not constitute the Company's
statutory accounts for the year ended 31st December 1998. Statutory
accounts for 1998 have been delivered to the Registrar of Companies.
The auditors have reported on those accounts; their report was
unqualified and did not contain a statement under section 237 (2) or
(3) of the Companies Act 1985.
This statement is being sent to all shareholders and will shortly
be obtainable by the public from the Company's registered office, 50
Curzon Street, London W1Y 7PN.