Tomkins Results for 26 Weeks Ended October 30, 1999 Highlights
14 January 2000
Tomkins Results for 26 Weeks Ended October 30, 1999 Highlights
Business Editors
LONDON--January 13, 2000--Tomkins PLC
, the international manufacturing company, today announced the
interim results for 26 weeks ended October 30, 1999.
- Diluted earnings per share rise 13.1 percent
- Operating profit before goodwill amortization advances 3 percent
to (pound)228.0 million ($367.4 million)
- Dividend increased by 15 percent to 4.6 pence (7.4 cents) (net)
per share
- Strong cash generation
- European food transaction progressing
Gregory Hutchings, Executive Chairman of Tomkins, said:
"Tomkins has delivered another sound performance and that trend
is continuing in the second half of the year. We have again
demonstrated our strength by increasing cash generation, earnings and
dividends as well as creating value with a return on investment above
our weighted average cost of capital from our focused manufacturing
business areas.
I am pleased that shareholders will again receive an interim
dividend increase of 15 percent. This progressive payment policy is
made possible by the strength of our cash flow and outperformance in
earnings per share.
We look forward with enthusiasm, confident that our proven and
successful management teams will maintain Tomkins' growth record. Our
concentration on developing our position in our chosen national and
international markets, backed by selective add on acquisitions, will
ensure that we continue to deliver growth."
* US dollar equivalents are provided for reader convenience at
the hedged exchange rate of (pound)1.00 = $1.6115.
Chairman's Statement
Tomkins has again demonstrated its strength by increasing its
cash generation, earnings and dividends as well as creating value with
a return on investment above our weighted average cost of capital from
our focused manufacturing business areas.
In the half year to October 30, 1999 diluted earnings per share
increased by 13.1 percent to 11.93 pence. Operating profit, including
associates, reached (pound)227.0 million, 2.4 percent above the
equivalent period last year. Pre-tax profit was (pound)209.9 million
(1998: (pound)220.1 million before exceptional items) after deducting
interest of (pound)17.1 million (1998: (pound)1.5 million). The higher
interest cost relates to the borrowings associated with the (pound)578
million share buy back program, carried out in the early months of
calendar 1999. The effect of the repurchase has been to reduce our
issued share capital by 20.2 percent. Cash flow from operations, net
of tax paid and capital expenditure, was (pound)159.5 million (1998:
(pound)73.4 million) continuing to demonstrate the cash generative
nature of our businesses.
The interim dividend is raised by 15.0 percent to 4.6 pence (net)
per share. It will be paid on April 7, 2000 to holders of ordinary
shares on the register at the close of business on February 11, 2000.
Shareholders will again be given the choice of receiving payment in
cash or increasing their holding in Tomkins through the Dividend
Reinvestment Plan.
Operations
Trading conditions in our major areas were reasonably constant
over the period. Opportunities to achieve growth in each of our
businesses are being pursued with vigor. We are focusing attention on
the development of new product systems, investment in value-added
projects, further enhancement of customer relationships and
identifying opportunities to take cost out of the supply chain.
In the United States, where over half our sales arise, economic
confidence remains high and is reflected in the strength of the new
car and construction markets. This has boosted demand from the
automotive original equipment manufacturers (OEMs) for our power
transmission, hose and connector, windscreen wiper and other
associated items and systems. Sales to the aftermarket were slightly
ahead, maintaining the trend of recent months. Our product offering
has been significantly extended through the successful integration of
the Stant and Schrader ranges. The industrial market, which represents
around one third of North American OEM sales, was patchy. The
agricultural machinery industry remained depressed; lower farm
commodity prices influenced demand for its equipment with the knock-on
effect impacting our sales to these manufacturers.
The construction component companies, most of which are leaders
in their segments of the North American construction, housing and
remodeling markets, experienced generally strong demand in
satisfactory trading conditions. Additional benefit also accrued from
recent investment in new manufacturing capacity, which led to further
improvement in service levels. The new air distribution plants opened
in the past year have increased efficiency and extended geographical
coverage. Investment in capacity continues; Lasco Fittings moved into
its new 470,000 square foot, state of the art, injection molding
facility in Tennessee. The acquisition of Hart & Cooley, announced on
December 30, 1999, is an excellent fit with our existing air
distribution businesses, and will enable us to offer customers a
broader range of products and systems while providing a major growth
opportunity.
In the UK, the food businesses are being affected by the pricing
pressure resulting from competition between retailers. The results,
while reflecting the strength of our portfolio of companies and
brands, have also been influenced by the implementation of a number of
restructuring and investment initiatives to underpin future
profitability. The recent reorganization into eight separate streams
is working well with enhanced efficiency and shorter lines of
communication. Our strategy of increasing focus on growth segments,
particularly in the area of frozen
In Continental Europe, new car demand raised sales of power
transmission products while the aftermarket was also sound. Our curved
hose operations are affected by industry over- capacity and low
barriers to entry; the results of these operations are unacceptable
and their future is under review.
It is encouraging that our companies in the Far East, which
contribute over three percent of total Tomkins sales, are recovering
from the recent financial turbulence in that region. The improvement
is most marked in Korea, where we have seen a good sales increase
compared with the same period last year.
Strategy
The emphasis on the development of our automotive, construction
and industrial activities has encouraged operating management to
identify and capitalize on growth opportunities. Overseas sales
offices and, where appropriate, add-on acquisitions will contribute to
global development of these businesses. We remain cautious when
entering new territories to ensure that financial exposure is limited
and our investment tightly controlled.
Tomkins has developed a strong systems capability, particularly
in power transmission and wipers. This market presence is resulting in
our products being specified for an increasing number of new car
platforms.
Since the announcement of the intention to demerge our Food
activities we have had a high degree of interest from potential
acquirers of the business, and we have recently launched the formal
sale process. Given the many complicated issues that have to be dealt
with in a sale or demerger of a large business, we are currently
concentrating for the time being on the sale process. It is as yet too
early to give any indication as to the outcome or to provide a
timetable as a number of important contractual, technical and
regulatory issues are yet to be resolved. The Board will test any
offer in the light of current circumstances and its wish to maximize
shareholder value.
The disposals of Hayter and Murray, our power mower
manufacturers, and Red Wing, the US based producer of private label
groceries, are progressing.
During the last few years, Tomkins has evolved from being a
broadly based Diversified Industrial into a focused manufacturing
company operating in a limited number of balanced business sectors. We
have become more financially efficient from being cash positive to a
suitably leveraged position. Since September 1997 we have reduced our
share capital by almost 22 percent by buying back 262 million shares
for a total of over (pound)660 million. Our return on investment
exceeds our weighted average cost of capital, thus creating
shareholder value.
Every single year since 1983 our earnings per share have grown
and dividends have been increased by at least 15 percent per annum.
Both these performance measures have achieved above average growth, as
compared to the FTSE Non-financials index, each year for the past 16
years.
We have developed our core manufacturing business areas by making
add-on acquisitions in order to consolidate their position of being
leaders in their chosen fields. We have built strong management teams
and excellent systems that have delivered this success and enable us
to continue to move forward with confidence.
These interim results continue this successful performance and we
anticipate yet another year of above average growth.
Board
I am pleased to report that Ken Lever joined Tomkins as Finance
Director on November 1, 1999. Ken qualified as a chartered accountant
with Arthur Andersen in 1977, becoming a partner in 1987. He
subsequently left the profession to take up a number of positions in
industry. He brings to Tomkins excellent experience in commercial and
financial management, corporate transactions and investor relations.
Value creation
Tomkins has consistently created intrinsic value for shareholders
through its cash generation, growth in earnings and dividends and has
a return on investment above our weighted average cost of capital. The
stock market is currently focused on high sales growth sectors
irrespective of profits and cash generation, as a result of which the
share price of companies such as Tomkins has not risen in line with
earnings growth.
Our business is solid, stable, well balanced and reliable, in
good shape and progressing well. We will continue to build value
within the company for our shareholders by focusing on increasing
earnings, dividends and cash generation and by seeking to ensure that
we achieve a return on capital invested in excess of the underlying
cost of capital.
Outlook
Trading in the second half of the year has continued the trend of
the first half.
The levels of economic activity in the areas in which we operate
are steady and market conditions remain challenging. Our confidence in
Tomkins financial strength is demonstrated by the dividend increase of
fifteen percent. The strategic decisions of recent years, coupled with
the ongoing structural changes, are positioning the company for growth
as we focus on those industries and markets which have expansion
opportunities, both organically and through add-on acquisitions. The
outlook for Tomkins is good and we will continue to work to deliver
increasing value to our shareholders.
OPERATING REVIEW
INDUSTRIAL & AUTOMOTIVE ENGINEERING
1999/00 1998/99
Sales (pound)935.1m (pound)838.0m
Operating profit* (pound)88.7m (pound)78.4m
Operating margin 9.5% 9.4%
Operating net assets (pound)661.9m (pound)595.9m
*includes share of profits of associates
Sales in North America were over four percent ahead of the prior
year. Our companies, supplying power transmission belts and systems
and hose and connectors, benefited from the continued expansion of the
automotive original equipment market reflecting strong demand for new
cars and light trucks. Sales to the automotive aftermarket were
slightly ahead over the period. In the industrial sector, higher
demand for our replacement products and the capture of new business
from original equipment manufacturers has generally offset the
continued weakness in the agricultural market. In Europe, power
transmission sales improved by over five percent as a result of
increased demand from automotive original equipment manufacturers and
the aftermarket. Operating margins in hose and connectors improved,
although they remain unsatisfactory.
Operations in Asia have seen a marked improvement from last year
as a result of some economic recovery, the introduction of Stant
products in the aftermarket, and building of momentum from GNAPCO, the
new power transmission joint venture.
The integration of ACD Tridon, acquired in June 1999, is
proceeding smoothly with a number of synergies identified;
consolidation activity is underway in both the operations and sales
and marketing areas. The prime objectives, aside from cost savings,
are to strengthen our position as an automotive original equipment
wiper systems supplier and also deliver a broader product offering to
the aftermarket.
CONSTRUCTION COMPONENTS
1999/00 1998/99
Sales (pound)570.8m (pound)561.0m
Operating profit* (pound)71.4m (pound)65.2m
Operating margin 12.5% 11.6%
Operating net assets (pound)258.1m (pound)232.7m
*includes share of profits of associates
The sector, supplying the US housing, construction and remodeling
market, achieved another strong performance against a background of
ongoing economic stability. Our companies, manufacturing components
for the air handling industry, each raised profit on an aggregate
sales increase of eight percent. Benefit is already accruing from the
additional capacity offered by the new plant in Tarboro, North
Carolina, which is ideally located close to the important East Coast
markets. The introduction of new airflow measuring products helped
boost sales, reflecting the strength of our relationship with major
customers. The businesses producing baths, pipe fittings and composite
panels also did well, maintaining their profit growth on total sales
ahead by over ten percent. Investment in new vacuum forming equipment
will enhance production quality and efficiency at the recently
acquired Aquatic Industries luxury whirlpool operation. The new
facility in Tennessee, producing PVC fittings, commenced
injection-molding operations on schedule. This plant will overcome
previous capacity constraints and allow the business to maintain its
expansion.
The specialist valve producers endured a further very tough
trading period. Although the UK housing market showed some
improvement, the continued strength of sterling makes our export
prices less competitive while also encouraging import substitution at
home.
FOOD MANUFACTURING
1999/00 1998/99
Sales (pound)925.5m (pound)962.9m
Operating profit* (pound)62.7m (pound)71.8m
Operating margin 6.8% 7.5%
Operating net assets (pound)551.6m (pound)495.7m
*includes share of profits of associates
In difficult markets, underlying sales were close to the level of
the first half of last year after taking account of disposals.
Operating profits take into account a number of restructuring and
commissioning costs. Rank Hovis delivered another robust result; the
variable nature of the UK wheat harvest has offered opportunities for
deploying the company's skills in the cost-effective use of different
wheat varieties.
British Bakeries retained market share, although profit fell in a
highly competitive environment. Bread prices were raised in order to
help partially restore margins. The closure of the Londonderry bakery
was announced to help improve cost effectiveness in Northern Ireland.
The European frozen bakery division saw strong demand in both France
and the UK, building on its market leadership positions.
Centura Foods, which includes the leading Bisto, Robertson's and
Sharwood's brands, delivered a satisfactory result. The relaunch of
Bisto Gravy Granules is giving an extra competitive edge to the brand.
Sharwood's programme of product development continued, including a
range of fresh, branded ethnic breads and supported by an imaginative
advertising campaign.
Among the partnership businesses, R F Brookes was affected by the
commissioning costs arising from running our new (pound)48 million
chilled foods facility in tandem with the existing one, in order to
ensure a smooth transfer and to keep our customers satisfied. This new
plant manufactures primarily for Marks and Spencer and will benefit
from the additional business already accruing from this important
customer as a result of its review of supplier arrangements. At Golden
West, incremental costs to secure enhanced bun quality depressed
performance in the short term, despite raised demand. Distribution
efficiency will be increased following the recent opening of the
company's new (pound)11 million distribution center for McDonald's at
Basingstoke.
PROFESSIONAL, GARDEN & LEISURE PRODUCTS
1999/00 1998/99
Sales (pound)228.4m (pound)240.7m
Operating profit (pound)4.2m (pound)6.2m
Operating margin 1.8% 2.6%
Operating net assets (pound)133.9m (pound)131.4m
Murray delivered an encouraging result although below last year's
level, which had benefited from a longer spring selling season in
1998. The market for lawn and garden products has continued strongly
through the first half and is expected to be robust for the balance of
the year. Indications for power mowers for the spring 2000 selling
season are promising, particularly from Wal*Mart and The Home Depot,
Murray's key retail partners. The bicycle market continues to be very
difficult with pricing pressure remaining a critical issue and the
company has adhered to its consistent strategy of concentrating on
better margin business, even at the expense of volume; annual sales
are now below one million units. Snow-blowers sold well during the
autumn, benefiting from the successful introduction of a new 4-cycle
small single stage machine.
The operations of Hayter, our UK based mower manufacturer, were
combined with those of Murray from the beginning of the fiscal year.
This consolidation should generate improved prospects and
opportunities in Europe. International business continues to expand in
Latin America, as major US retail customers open outlets in those
territories.
Smith & Wesson delivered an improved performance, with turnover
and profit ahead of the equivalent period last year. Demand for the
company's products has continued to rise in both the US and overseas.
FINANCIAL REVIEW
Sales increased by 2.2 percent with Construction components ahead
1.7 percent, Industrial & automotive engineering up 11.6 percent and
Food manufacturing virtually unchanged. Professional, garden & leisure
products saw a slight reduction in turnover. The net increase in
turnover arising from acquisitions and disposals was (pound)10.1
million.
The operating margin in Construction components increased to 12.5
percent (1998: 11.6 percent) and Industrial & automotive engineering
was also ahead at 9.5 percent (1998: 9.4 percent). Margins in Food
manufacturing and Professional, garden & leisure products slipped
slightly to 6.8 percent (1998: 7.5 percent) and 1.8 percent (1998: 2.6
percent) respectively.
Operating profit is after charging (pound)1.0 million of goodwill
amortization. At the full year, earnings per share will be disclosed
both before and after the amortization of goodwill.
Net investment in working capital compared to May 1, 1999
increased by (pound)20.7 million of which (pound)13.2 million and a
decrease of (pound)8.6 million related to the impact of acquisitions
and disposals and foreign exchange movements respectively. Working
capital as a percentage of moving annual total sales is unchanged at
8.4 percent. Net capital expenditure in the first half was
(pound)121.3 million, down from (pound)136.6 million in the
corresponding period last year. Net expenditure on acquisitions and
disposals was (pound)33.3 million.
Investment in net operating assets over the period increased to
(pound)1,605.5 million (May 1, 1999: (pound)1,546.3 million) of which
(pound)37.8 million relates to acquisitions and disposals.
Operating cash flow* after tax totaled (pound)159.5 million
(1998: (pound)73.4 million). It was applied paying interest and
dividends of (pound)136.3 million (1998: (pound)133.3 million). The
increase in debt after taking into account foreign exchange movements
and acquisitions was (pound)42.4 million.
Operating cash flow per share was 16.83 pence (1998: 6.24 pence)
compared to earnings per share of 11.93 pence (1998: 10.55 pence
before exceptional items). The cash flow per share in 1998 was
affected by the increase in working capital during that period.
The higher interest charge arose from the additional borrowings
as a result of the share buy back program in the previous financial
year. Debt is effectively denominated in dollars to provide
appropriate currency hedging.
Tax has been provided at an estimated effective rate of 32.2
percent (1998: 32.0 percent).
During the period Tomkins debt facilities were refinanced. The
group now has multi-currency bank facilities of (pound)1.3 billion
with varying maturity up to 3 years. At October 30, 1999, (pound)926.6
million of the facilities had been drawn down and are included within
long term creditors. Appropriate financial instruments are used to
protect against interest rate fluctuations.
Throughout the period there have been further activities around
the group to ensure all business critical systems are year 2000
compliant. No problems arising from the "millennium bug" have been
identified to date.
*Operating cash flow comprises net cash inflow from operating
activities, net of tax paid and capital expenditure.
Tomkins comprises a broad range of low-risk technology
manufacturing companies. Tomkins' US interests include The Gates
Rubber Company, Denver, CO, the world's leading manufacturer of power
transmission belts and a major producer of hose and connector
products. Other interests include, Murray, Inc., Brentwood, TN, one of
the leading US producers of power lawnmowers, snow blowers and
bicycles; Red Wing Corporation, Fredonia, NY, the largest US
manufacturer of private label grocery products; and TomkinsIndustries,
Dayton, OH, a leading manufacturer of components for residential,
commercial, and industrial buildings, materials handling and the
transportation industry.
Tomkins shares trade in the US in ADR form (each equal to four
ordinary shares) on the New York Stock Exchange under the symbol TKS;
its ordinary shares are listed on the London Stock Exchange.
*T
CONSOLIDATED PROFIT & LOSS ACCOUNT
For the half year ended October 30, 1999
1999/00 1998/99 first half
first half Before Before
and after exceptional
exceptional items
items
Notes $million (pound)million (pound)million
Turnover 1 4,286.3 2,659.8 2,602.6
Operating Profit 1 364.5 226.2 220.3
Net loss on disposal
of subsidiary
undertakings -- -- --
Provision for loss
on disposal
of business -- --
364.5 226.2 220.3
Share of profit of
associated
undertakings 1 1.3 0.8 1.3
Interest (net) (27.6) (17.1) (1.5)
Profit on ordinary
activities before tax 338.2 209.9 220.1
Tax on profit on
ordinary activities 2 (108.9) (67.6) (70.4)
Profit on ordinary
activities after tax 229.3 142.3 149.7
Minority interest - equity (3.5) (2.2) (1.3)
Profit attributable
to shareholders 225.8 140.1 148.4
Dividends on equity
& non-equity shares 4 (98.0) (60.8) (64.5)
Retained profit for the period 127.8 79.3 83.9
Earnings per share
Basic 3 (cent)20.92 12.98p 11.15p
Diluted 3 (cent)19.23 11.93p 10.55p
Diveidens per
ordinary share 4 (cent) 7.41 4.60p
1998/99 first half 1998/99 full year
Exceptional Total Before Exceptional Total
items Exceptional items
items
(pound) (pound) (pound) (pound) (pound)
million million million million million
Turnover -- 2,602.6 5,344.7 -- 5,344.7
Operating Profit -- 220.3 495.3 -- 495.3
Net loss on
disposal of
subsidiary
undertakings -- -- -- (34.9) (34.9)
Provision for loss
on disposal
of business (40.0) (40.0) -- -- --
(40.0) 180.3 495.3 (34.9) 460.4
Share of profit
of associated
undertakings -- 1.3 2.2 -- 2.2
Interest (net) -- (1.5) (1.0) -- (1.0)
Profit on ordinary
activities
before tax (40.0) 180.1 496.5 (34.9) 461.6
Tax on profit on
ordinary activities -- (70.4) (155.2) -- (155.2)
Profit on ordinary
activities
after tax (40.0) 109.7 341.3 (34.9) 306.4
Minority
interest - equity -- (1.3) (1.3) -- (1.3)
Profit attributable
to shareholders (40.0) 108.4 340.0 (34.9) 305.1
Dividends on equity
& non-equity shares -- (64.5) (186.6) -- (186.6)
Retained profit
for the period (40.0) 43.9 153.4 (34.9) 118.5
Earnings per share
Basic 7.74p 26.43p 23.42p
Diluted 7.71p 24.57p 22.05p
Diveidens per ordinary share 4.00p 15.15p
Note of historical cost profits
The profits for 1999/00 and 1998/99 are reported under the
historical cost convention.
CONSOLIDATED BALANCE SHEET
Restated*
October October October 31, May 1
30, 1999 30, 1999 1998 1999
$million (pounds) (pounds) (pounds)
Notes million million million
CAPITAL EMPLOYED
FIXED ASSETS
Intangible assets 6 81.5 50.6 5.3 12.6
Tangible assets 2208.1 1,370.2 1,297.9 1,339.5
Investments 26.8 16.6 15.6 16.2
2316.4 1,437.4 1,318.8 1,368.3
CURRENT ASSETS
Stock 1080.7 670.6 625.5 588.0
Debtors 1433.9 889.8 842.2 924.8
Cash 803.5 498.6 489.6 408.8
3318.1 2,059.0 1,957.3 1,921.6
CURRENT LIABILITIES
Creditors: amounts falling
due within one year (2152.0) (1,335.4)(1,672.3) (1,994.9)
NET CURRENT
ASSETS/(LIABILITIES) 1166.1 723.6 285.0 (73.3)
TOTAL ASSETS LESS
CURRENT LIABILITIES 3482.5 2,161.0 1,603.8 1,295.0
Creditors: amount falling
due after more than one year(1.749.2) (1,085.4) (153.6) (298.4)
Provisions for
liabilities & charges 5 (588.5) (365.2) (341.2) (365.6)
NET ASSETS 1144.8 710.4 1,109.0 631.0
CAPITAL AND RESERVES
CALLED UP SHARE CAPITAL
Ordinary shares 76.6 47.5 58.8 47.5
Convertible cumulative
preference shares 543.7 337.4 337.6 337.5
Redeemable convertible
cumulative preference
shares 602.2 373.7 366.4 381.1
1222.5 758.6 762.8 766.1
Share premium account 170.3 105.7 105.3 100.7
Capital redemption reserve 59.6 37.0 17.1 36.8
Profit & loss account (355.8) (220.8) 194.2 (300.5)
0.0
Equity shareholders'
funds (49.3) (30.6) 375 (115.5)
Non-equity shareholders'
funds 1145.9 711 704.0 719
SHAREHOLDERS' FUNDS 1096.6 680.5 1,079.4 603.1
Minority interest - equity 48.2 29.9 29.6 27.9
1144.8 710.4 1,109 631.0
* The figures at October 31, 1998 have been restated to reflect a
reclassification required as a result of the adoption of FRS 12.
CONSOLIDATED CASH FLOW STATEMENT
For the half year
ended October 30, 1999 Notes 1999/00 1999/00 1998/99 1998/99
first half first half first half full year
$million (pound) (pound) (pound)
million million million
Cash flow from
operating activities 7 497.6 308.8 258.8 587.7
Dividends received from
associated undertakings 1.0 0.6 - 0.8
Returns on investments
& servicing of finance 8 (49.0) (30.4) (19.2) (39.7)
Tax Paid (45.1) (28.0) (48.8) (142.6)
Capital Expenditure
(net) 8 (195.5) (121.3) (136.6) (260.4)
Financial Investment 8 (0.3) (0.2) (0.2) (1.3)
Acquistions & disposals 8 (53.7) (33.3) 40.5 82.7
Equity dividends paid (170.6) (105.9) (114.1) (160.5)
NET CASH (OUTFLOW)/INFLOW
BEFORE USE OF LIQUID
RESOURCES AND FINANCING (15.6) (9.7) (19.6) 66.7
FINANCING
Share Issues
(net of costs) 6.6 4.1 7.3 11.1
Buy back of own shares (10.6) (6.6) (11.1) (571.7)
Mark to market of
hedging instruments 24.8 15.4 1.4 (24.0)
Cash flow increasing
debt & lease
financing 163.7 101.6 125.1 515.4
Net cash inflow/
(outflow) from
financing 8 184.5 114.5 122.7 (69.2)
MANAGEMENT OF LIQUID RESOURCES
Cash flow (increasing)/
decreasing cash
on deposit
and collaterized
cash 8 (187.9) (116.6) (103.0) 6.2
(DECREASE)/INCREASE
IN CASH IN
THE PERIOD (19.0) (11.8) 0.1 3.7
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
For the half year
ended October 30, 1999 Notes 1999/00 1999/00 1998/99 1998/99
first half first half first half full year
$million (pound) (pound) (pound)
million million million
(Decrease)/Increase
in cash in the period (19.0) (11.8) 0.1 3.7
Cash Flow increasing
debt & lease
financing 8 (163.7) (101.6) (125.1) (515.4)
Cash Flow increasing/
(decreasing) cash
on deposit
and collaterized
cash 8 187.9 116.6 103.0 (6.2)
Change in net funds
resulting from
cash flows 9 5.2 3.2 (22.0) (517.9)
Loans and finance
leases acquired
with subsidiary 9 (70.8) (43.9) (7.8) (6.7)
New finance leases - - - (9.4)
Translation difference 9 (2.7) (1.7) (4.3) 2.5
Increase in net debt
in the period (68.3) (42.4) (34.1) (531.5)
Net debt at May 1, 1999 9 (879.9) (546.0) (14.5) (14.5)
Net debt at
October 30, 1999 9 (948.2) (588.4) (48.6) (546.0)
STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
For the half year
ended October 30, 1999
1999/00 1999/00 1998/99 1998/99
first half first half first half first half
$million (pounds) (pounds) (pounds)
million million million
Profit attributable
to shareholders 225.8 140.1 108.4 305.1
Foreign exchange translation:
- group (5.3) (3.3) (6.4) (2.7)
- associated undertakings - - - .02
Total recognized gains
and losses 220.5 136.8 102.0 302.6
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS FUNDS
For the half year ended
October 30, 1999
1999/00 1999/00 1998/99 1998/99
first half first half first half full year
$million (pounds) (pounds) (pounds)
million million million
Total recognized
gains and losses 220.5 136.8 102.0 302.6
Dividends on equity
& non-equity shares (98.0) (60.8) (64.5) (186.6)
122.5 76.0 37.5 116.0
Ordinary share issues
(net of costs) 7.9 4.9 7.3 11.1
Payments to the QUEST (1.3) (0.8) - -
Buy back of own shares
(including stamp duty
and commissions) (4.4) (2.7) (18.3) (582.6)
Goodwill written off on
prior year's acquisitions - - (3.1) (3.9)
Goodwill written back
on disposals - - - 39.0
Goodwill written back
on prosed disposal - - 32.5 -
Net addition to/(reduction in)
shareholders' funds 124.7 77.4 55.9 (420.4)
Shareholder's funds
at May 1, 1999 971.9 603.1 1,023.5 1,023.5
Shareholders' funds
at October 30, 1999 1096.6 680.5 1,079.4 603.1
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Turnover Operating profit*
1.SEGMENTAL ANALYSIS 1999/00 1998/99 1998/99 1999/00 1998/99 1998/99
first first full first first full
half half year half half year
(pound) (pound) (pound) (pound)(pound) (pound)
million million million million million million
By activity:
Industrial & automotive
engineering 935.1 838.0 1,700.9 88.7 78.4 166.2
Construction
components 570.8 561.0 1,102.7 71.4 65.2 142.1
Food manufacturing 925.5 962.9 1,965.1 62.7 71.8 166.3
Professional, garden
& leisure products 228.4 240.7 576.0 4.2 6.2 22.9
2,659.8 2,602.6 5,344.7 227.0 221.6 497.5
By geographical origin:
United States
of America 1,349.2 1,321.9 2,700.8 131.7 122.5 267.6
United Kingdom 917.1 958.4 1,946.6 63.2 75.0 176.9
Rest of Europe 169.2 158.3 332.2 13.3 10.2 21.3
Rest of the World 224.3 164.0 365.1 18.8 13.9 31.7
2,659.8 2,602.6 5,344.7 227.0 221.6 497.5
Turnover by geographical destination:
United States
of America 1,316.4 1,272.5 2,604.7
United Kingdom 846.5 892.4 1,814.5
Rest of Europe 228.1 207.7 445.1
Rest of the World 268.8 230.0 480.4
2,659.8 2,602.6 5,344.7
* Operating profit includes the group's share of the profits of
associated undertakings.
1999/00 1998/99 1998/99
first half first half full year
(pound)million (pound)million (pound)million
Operating expenses:
Cost of sales 1,886.0 1,861.7 3,828.0
Distribution costs 349.5 324.9 667.7
Administration expenses 198.1 195.7 353.7
2,433.6 2,382.3 4,849.4
-------- -------- --------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
2. TAX ON PROFIT ON ORDINARY ACTIVITIES
1999/00 1998/99 1998/99
first half first half full year
(pound)million (pound)million (pound)million
UK 17.0 26.5 61.7
Overseas 50.4 43.3 92.8
Associates 0.2 0.6 0.7
67.6 70.4 155.2
Tax has been provided at an estimated effective rate of 32.2%
(1998/99: half year estimated effective rate of 32.0%) on profit on
ordinary activities before tax, being the anticipated rate of tax for
the current financial year.
In 1998/99 there was no tax charge on the exceptional items.
3. EARNINGS PER SHARE
Basic earnings per share are calculated on a profit of
(pound)123.0 million (1998/99: half year (pound)91.1 million and full
year (pound)270.9 million) representing the retained profit for the
period of (pound)79.3 million before deducting dividends payable to
ordinary shareholders of (pound)43.7 million (1998/99: half year
retained profit of (pound)43.9 million and ordinary dividends of
(pound)47.2 million and full year retained profit of (pound)118.5
million and ordinary dividends of (pound)152.4 million) and
947,750,052 ordinary shares being the weighted average number of
shares in issue during the first half (1998/99: half year
1,176,292,664 and full year 1,156,876,614).
Diluted earnings per share allow for conversion of preference
shares of 222,590,519 (1998/99: half year 223,597,268 and full year
223,124,521) and share options of 4,521,507 (1998/99: half year
6,598,554 and full year 3,750,385) and are calculated on earnings
adjusted for the preference dividend of (pound)17.1 million (1998/99:
half year (pound)17.3 million and full year (pound)34.2 million).
The earnings per share before exceptional items represent a more
consistent measure of underlying year on year performance. Basic
earnings per share before exceptional items of (pound)nil (1998/99:
half year (pound)40 million loss and full year (pound)34.9 million
loss) are calculated on profit attributable to ordinary shareholders
of (pound)123.0 million (1998/99: half year (pound)131.1 million and
full year (pound)305.8 million). Diluted earnings per share before
exceptional items are based on adjusted earnings of (pound)140.1
million (1998/99: half year (pound)148.4 million and full year
(pound)340.0 million).
1999/00 1998/99 1998/99
first half first half full year
pence pence pence
per share per share per share
Basic earnings per share 12.98 7.74 23.42
Exceptional items - 3.41 3.01
Basic earnings per share
before exceptional items 12.98 11.15 26.43
Diluted earnings per share 11.93 7.71 22.05
Exceptional items - 2.84 2.52
Diluted earnings per share
before exceptional items 11.93 10.55 24.57
-------- -------- --------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
4. DIVIDENDS ON EQUITY & NON-EQUITY SHARES
1999/00 1998/99 1998/99
first half first half full year
(pound)million (pound)million (pound)million
Ordinary shares:
Fixed cumulative foreign
income dividend 3.06p
paid March 31, 1999 - 36.1 35.5
Interim 4.60p (1998/99 - 0.94p)
to be paid April 7, 2000 43.7 11.1 10.9
1998/99 - final 11.15p paid
October 11, 1999 - - 106.0
Total ordinary shares 43.7 47.2 152.4
-------- -------- --------
Preference shares:
Convertible cumulative
Accrued at May 1, 1999 (3.8) (3.7) (3.7)
Paid during period 9.0 9.0 17.8
Accrued at October 30, 1999 3.8 3.7 3.8
9.0 9.0 17.9
-------- -------- --------
Redeemable convertible cumulative
Accrued at May 1, 1999 (3.6) (3.5) (3.5)
Paid during period 8.3 8.3 16.2
Accrued at October 30, 1999 3.4 3.5 3.6
8.1 8.3 16.3
Total preference shares 17.1 17.3 34.2
Total dividends 60.8 64.5 186.6
5. PROVISIONS FOR LIABILITIES & CHARGES
Post-
Warranty retirement Deferred
provisions benefits tax Total
(pound) (pound) (pound) (pound)
million million million million
At May 1, 1999 15.1 211.2 139.3 365.6
Foreign exchange translation (0.3) (4.0) (0.7) (5.0)
Subsidiaries acquired 0.2 - 2.1 2.3
Charge for the period 5.0 5.9 3.1 14.0
Utilized during the period (5.1) (6.6) - (11.7)
At October 30, 1999 14.9 206.5 143.8 365.2
NOTES TO THE INTERIM FINANCIAL STATEMENTS
6. ACQUISITIONS
On May 28, 1999, Tomkins acquired the trademarks and certain
assets of Frank Cooper for a cash consideration of (pound)3.5 million.
The fair value of the assets acquired was (pound)0.1 million. Goodwill
of (pound)3.4 million arose on the acquisition.
On June 25, 1999, Tomkins acquired ACD Tridon Inc. for a
provisional cash consideration of (pound)23.2 million and inherited
debt of (pound)45.1 million. The estimated fair value of the net
liabilities on acquisition was (pound)8.0 million. Goodwill of
(pound)32.8 million arose after acquisition costs of (pound)1.6
million. The calculation of goodwill is provisional and may be amended
as a result of the finalization of the fair value of net assets.
Certain elements of the ACD Tridon business have been integrated with
Tomkins' existing businesses. The intention is to absorb the remaining
elements over the short to medium term. As a result, the individual
results of the acquired company are not separately identifiable.
On August 9, 1999, Tomkins acquired Hayden's Bakeries Limited for
a consideration (pound)3.5 million of which (pound)0.5 million was
paid in cash and (pound)3.0 million was met by the issue of loan
notes. The estimated fair value of net assets on acquisition was
(pound)2.4 million, excluding net debt of (pound)1.7 million. Goodwill
of (pound)2.8 million arose on the acquisition.
7. RECONCILIATION OF OPERATING PROFIT TO
OPERATING CASH FLOWS
Restated
1999/00 1998/99 1998/99
first half first half full year
(pound)million (pound)million (pound)million
Operating profit 226.2 220.3 495.3
Depreciation (net of
government grants) 95.1 88.0 175.0
Loss/(profit) on sale of
tangible fixed assets (net) 1.7 (1.6) (6.1)
Amortization of goodwill 1.0 - 0.3
Post-retirement
benefits (net) (0.7) (0.2) (0.9)
Warranty provisions (0.1) (1.0) 1.0
Amortization of long term
loyalty plan shares 0.9 0.3 0.9
(Increase)/decrease in stock (78.8) (37.1) 4.7
Decrease in debtors 51.2 83.5 7.2
Increase/(decrease) in
creditors 12.3 (93.4) (89.7)
-------- -------- --------
Net cash inflow from
operating activities 308.8 258.8 587.7
-------- -------- --------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
8. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CONSOLIDATED
CASH FLOW STATEMENT 1999/00 1998/99 1998/99
first half first half full year
(pound) (pound) (pound)
million million million
RETURNS ON INVESTMENTS & SERVICING OF FINANCE
Interest received 35.2 40.7 81.3
Interest paid (46.4) (40.0) (79.7)
Interest element of finance
lease rental payments (1.0) (1.3) (2.5)
Preference dividends paid (17.3) (17.3) (34.0)
Investment by minority
shareholder - 0.6 1.2
Dividend paid to a subsidiary
company minority shareholder (0.9) (1.9) (6.0)
Net cash outflow from returns on
investments & servicing
of finance (30.4) (19.2) (39.7)
-------- -------- --------
CAPITAL EXPENDITURE
Purchase of tangible
fixed assets (124.4) (142.6) (275.7)
Sale of tangible fixed assets 3.1 6.0 15.3
Net cash outflow from
capital expenditure (121.3) (136.6) (260.4)
-------- -------- --------
FINANCIAL INVESTMENT
Purchase of fixed asset
investments (0.2) (0.2) (1.3)
-------- -------- --------
ACQUISITIONS & DISPOSALS
Purchase of subsidiary
undertakings (28.8) (7.2) (16.0)
Net (overdrafts)/cash acquired
with subsidiary undertakings (5.9) 10.5 10.7
Sale of subsidiary undertakings 1.4 37.2 88.0
Net cash (outflow)/inflow from
acquisitions & disposals (33.3) 40.5 82.7
-------- -------- --------
FINANCING
Share issues (net of costs) 4.1 7.3 11.1
Buy back of own shares (6.6) (11.1) (571.7)
Mark to market of hedging
instruments 15.4 1.4 (24.0)
Debt due within one year:
(decrease)/increase in short
term borrowings (647.0) 115.9 366.3
additional bank loans - 12.8 17.5
repayment of other loans (34.3) (3.8) (3.7)
Debt due after more than one year:
additional bank loans 926.6 0.8 146.2
repayment of bank and
other loans (136.8) (0.9) (3.0)
Additional finance leases - 5.6 -
Capital element of finance lease
rental payments (6.9) (5.3) (7.9)
Cash flow increasing
debt & lease financing 101.6 125.1 515.4
Net cash inflow/(outflow)
from financing 114.5 122.7 (69.2)
-------- -------- -------
MANAGEMENT OF LIQUID RESOURCES
(Increase)/decrease in
cash deposits (116.2) (103.6) 7.6
(Increase)/decrease in
collateralized cash (0.4) 0.6 (1.4)
-------- -------- --------
Cash flow (increasing)/decreasing
cash on deposit and
collateralized cash (116.6) (103.0) 6.2
NOTES TO THE INTERIM FINANCIAL STATEMENTS
9. ANALYSIS OF NET DEBT Acquisitions
October 30, (excl. cash & Exchange May 1,
1999 Cash flow overdrafts) movement 1999
(pound) (pound) (pound) (pound) million
Cash on demand 170.4 (21.4) (1.7) 193.5
Overdrafts (46.6) 9.6 0.7 (56.9)
--------
(11.8)
--------
Debt due after
more than
one year (961.6) (789.8) (0.9) 0.6 (171.5)
Debt due within
one year (64.2) 681.3 (39.0) 1.8 (708.3)
Finance leases (25.5) 6.9 (4.0) 0.3 (28.7)
--------
(101.6)
--------
Cash on deposit 328.2 116.2 (3.3) 215.3
Collateralized
cash 10.9 0.4 (0.1) 10.6
--------
116.6
--------
-------- -------- -------- -------- --------
Net debt (588.4) 3.2 (43.9) (1.7) (546.0)
-------- -------- -------- -------- --------
10. CONTINGENT LIABILITIES
The group is, from time to time, party to legal proceedings and
claims which arise in the ordinary course of business.
Smith & Wesson Corp. has been named as a defendant in some twenty
cases brought by various municipal authorities in the United States.
The defendants in these cases include a variety of United States and
foreign manufacturers of firearms as well as distributors and
retailers of such products, and trade associations. In these cases,
none of which have yet come to trial, the plaintiffs are seeking to
show that the defendants are liable under a variety of legal theories
including strict product liability, negligent distribution and
marketing, and public nuisance, and are seeking unspecified damages in
order to recoup their costs in dealing with violence involving
firearms, as well as injunctive relief. In one case the plaintiffs
have amended their pleadings to also include parent companies of
various defendants as defendants in the case. Although Tomkins PLC has
been named as a defendant it has not been served with process, and the
current pleadings do not make any specific allegations against Tomkins
PLC. In the past, Smith & Wesson Corp. has successfully defended
itself in cases involving similar charges.
The directors do not anticipate that the outcome of the above
proceedings and claims, either individually or in aggregate, will have
a material adverse effect upon the group's financial position.
11. POST BALANCE SHEET EVENTS
On December 30, 1999 Tomkins acquired the business and assets of
Hart & Cooley for a cash consideration of approximately (pound)199
million (US$320 million).
On January 9, 2000 Tomkins acquired Air Diffusion Limited and the
business of Actionair for a cash consideration of (pound)8.1 million
and the repayment of debt of (pound)2.5 million.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
12. BASIS OF PREPARATION
The interim financial statements for the half year ended October
30, 1999 have been prepared in accordance with the accounting policies
detailed in the financial statements for the year ended May 1, 1999,
after giving effect to the adoption of FRS 15 and 16 and were approved
by the directors on January 13, 2000. The interim financial statements
are unaudited, but have been reviewed by the auditors and their report
to the Company is set out below.
The financial information for the full year 1998/99 is an
abridged version of the financial statements for that year on which
the auditors gave an unqualified report. A copy of those statements
has been filed with the Registrar of Companies.
INDEPENDENT REVIEW REPORT TO TOMKINS PLC
Introduction
We have been instructed by the Company to review the financial
information set out on pages 1 to 11 and we have read the other
information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with
the financial information.
Directors' responsibilities
The interim report, including the financial information contained
therein, is the responsibility of, and has been approved by, the
directors. The Listing Rules of the London Stock Exchange require that
the accounting policies and presentation applied to the interim
figures should be consistent with those applied in preparing the
preceding annual accounts except where any changes, and the reasons
for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in
Bulletin 1999/4 issued by the Auditing Practices Board. A review
consists principally of making inquiries of group management and
applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the
accounting policies and presentation have been consistently applied
unless otherwise disclosed. A review excludes audit procedures such as
tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit
performed in accordance with Auditing Standards and therefore provides
a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material
modifications that should be made to the financial information as
presented for the half year ended October 30, 1999.
Arthur Andersen
Chartered Accountants
London January 13, 2000