Tomkins Interim Report for the Half Year Ended October 28, 2000
17 January 2001
Tomkins Interim Report for the Half Year Ended October 28, 2000
LONDON--January 16, 2001--Tomkins PLC today announced its interim results for the half year ended October 28, 2000.EXECUTIVE CHAIRMAN'S STATEMENT
GROUP OVERVIEW
As well as announcing details of Tomkins' financial performance during the six months to October 28, 2000, I am pleased to be able to report the results of the strategic review instigated in October 2000.
During the reporting period the disposals of our European food manufacturing business, our food interests in North America, Red Wing, and the garden products business of Murray and Hayter were completed. Consequently the results for the period are split between continuing and discontinued businesses.
The segmental presentation of the results has been adjusted to provide a more meaningful analysis of operations and to identify corporate costs separately from business activities. The business groups now comprise Industrial & automotive, Air systems components and Engineered and construction products.
The results of the continuing businesses have been affected by weakening in some of the group's key markets, but we have continued to trade strongly and market conditions have been mitigated by management action and the underlying strength of our businesses.
During the reporting period sales of the continuing businesses, excluding Smith & Wesson, increased by 13 per cent to (pound)1,703 million (1999: (pound)1,506 million). Operating profit of the continuing businesses increased by 8 per cent to (pound)165 million (1999: (pound)153 million).
Sales of the Industrial & automotive group were up by 6 per cent to (pound)994 million (1999: (pound)935 million) with much of the increase accounted for by acquisitions and exchange rate movements. Operating profit was marginally lower at (pound)91 million (1999: (pound)95 million).
Sales of the Air systems components group increased by 109 per cent to(pound)247 million (1999: (pound)118 million) primarily due to acquisitions. Operating profit rose by 83 per cent to(pound)33 million (1999:(pound)18 million).
Sales of the Engineered & construction products group increased by 2 per cent to(pound)462 million (1999:(pound)453 million). Operating profit was lower by 2 per cent at(pound)51 million (1999: (pound)52 million).
Sales of the discontinued businesses and Smith & Wesson in the period were(pound)749 million (1999:(pound)1,154 million) and generated an operating profit of(pound)14 million (1999:(pound)75 million).
The lower overall operating profit, slightly higher interest cost and lower taxation charge resulted in earnings per share (before goodwill amortisation and exceptional charges) of 10.0 pence (1999: 13.1 pence). The reduction in earnings per share arose as a result of the short-term dilutive effect of the disposal of the food manufacturing business. Part of this dilution of earnings was offset by the share buy back program, in which 134 million shares were acquired for a total of (pound)284 million.
There is an exceptional net loss on disposal of (pound)62 million, which relates mainly to the sale of the Murray and Hayter businesses. It represents part of the goodwill written off against reserves on acquisition now being charged in the profit and loss account.
Your directors have declared an interim dividend of 4.6 pence per share (1999: 4.6 pence) payable on April 6, 2001. There will not be a dividend reinvestment plan option.
STRATEGIC REVIEW
In the first six months of the current year a number of events have overshadowed the continuing robust operational and financial performance of the Group. Against this background, in October, CSFB, Cazenove and McKinsey were appointed to assist the executive management team with a strategic review of the Group.
The key objectives of the review process were: an appraisal of the Tomkins strategy; the identification of the steps to build market confidence; development of a strategy to deliver value to shareholders; and a timely closing of the significant gap between the fundamental value of the Group and its current market valuation. We were determined that the review should, from the outset, favor no particular outcome and that the close involvement of advisers should ensure objectivity of the conclusions.
The review of our businesses has provided an objective analysis based on unfettered access to all business units and the key findings are as follows:
| -- | Following the disposal of the food manufacturing and garden products businesses, our portfolio is significantly more focused and principally consists of a set of mechanical engineering businesses, characterized by generally mature markets and technologies, assembly manufacturing, and traditional, multi-tier industrial distribution channels. |
| -- | The majority of total sales are generated by businesses with strong competitive positions in their specific markets (number 1 or number 2 position), which are related to the automotive, industrial and construction markets, primarily in the US, with growth rates broadly in line with trend GDP growth. Although the businesses are exposed to the cyclical downturns of these underlying markets they are well diversified across them. |
| -- | Market overlaps and business linkages exist, in particular, within the Industrial & automotive group and the Air systems components group. Within our broader portfolio, there are business synergies from scale economies in procurement, transfer of best practices in assembly manufacturing and centralized support services. |
| -- | The businesses are well run, delivering above average returns on operating capital as measured against their peers. Returns on total Group invested capital, including historic goodwill, are lower but still attractive. |
| -- | Identified growth opportunities exist both organically and through selective bolt-on acquisitions into new markets and geographies. |
While recognizing that some of the under-valuation reflects immediate market concerns over our exposure to a slowdown in the US economy and to the automotive sector, the strategic review confirms the significant gap between the fundamental value of the Group and its current market valuation.
Having investigated all options we have concluded that an immediate break-up of the Group, either through a disposal of a major business or de-merger, and other corporate finance options are unlikely to maximize value for shareholders in the near term. In arriving at this decision we have taken into account issues relating to current market and financing conditions, capital structure and taxation. In recognizing the importance of achieving a closer alignment of the market value and the fundamental value of the Group, we will continue to keep under review all options.
The review has confirmed that the Group has a sound platform of businesses from which to deliver value to shareholders and we have identified a set of actions to close the value gap. The key steps are:
-- Achieving the highest standards of corporate governance
-- Appointing a Chief Executive Officer with a clear commitment to
achieving growth of shareholder value
-- Pursuing clear growth strategies in our continuing businesses
-- Re-focusing and strengthening the corporate center
-- Exiting the Smith & Wesson business
-- Disposing of certain other businesses
-- Completing the share buy back program and continuing to review the
capital structure
-- Re-basing the dividend
We believe delivery of these actions is an important step to build market confidence and maximize shareholder value. We will continually measure our success in pursuing this strategy by our ability to close the value gap and deliver this value to our shareholders.
Achieving the highest standards of corporate governance
We are committed to achieving the highest standards of corporate governance. A number of the actions we have taken were outlined in my letter to shareholders dated December 21, 2000.
Appointing a Chief Executive Officer
We have retained an executive search firm to help to identify a new Chief Executive with a clear commitment to achieving growth of shareholder value. I will step down from my executive responsibilities upon the appointment of a Chief Executive and re-assume the role of non-executive Chairman.
Pursuing clear growth strategies in our continuing businesses
Our strategy will emphasize those operations in the Group's core engineering businesses, which have leading competitive positions in their markets investing where there are prospects of attractive growth and returns.
Going forward, we will seek to maintain the performance of each business in the top quartile of an appropriate peer group of companies and systematically benchmark its value creation potential against alternative options.
The management in Industrial & automotive, Air systems components and Engineered & construction products have identified clear opportunities within their businesses to create value and to deliver further growth. Key elements of their strategies are to:
-- Introduce new products which can leverage existing distribution
strength, and in particular to exploit technological and
legislative change to develop products that complement the
existing range
-- Build presence outside North America, primarily through
acquisition, where current capabilities and relationships provide
significant competitive advantage
-- Move into adjacent markets where there is sufficient overlap of
key assets and capabilities to provide a strong base for market
entry
-- Capture additional benefits through the rationalization and
integration of recent acquisitions in the Industrial & automotive
and Air systems components groups
-- Systematically pursue purchasing, operational and manufacturing
improvements and continue the transfer of manufacturing to low
cost locations
Re-focusing and strengthening the corporate center
Following the significant disposals and the planned exit from handgun manufacture and other small engineering businesses, the Tomkins portfolio will comprise a set of businesses that can be effectively managed through common corporate processes.
Specific actions to improve the value added by the corporate center include:
-- Introducing new performance metrics to bring even greater focus on
growth, free cash flow and value creation
-- Improving capital investment allocation and review process to
ensure every project delivers value for our shareholders
-- Driving group-wide performance improvement initiatives (e.g.
procurement, six-sigma)
-- Reviewing management incentive schemes to focus on the objective
of closing the value gap
-- Optimizing our management structure, which will also reduce
corporate costs
-- Strengthening our investor relations team and corporate
development function
Exiting the Smith & Wesson business
As shareholders are aware, Smith & Wesson has entered into an agreement with an agency of the Federal Government of the United States of America and various municipal plaintiffs pursuant to which it has undertaken to make certain changes in the design and distribution of its products. Of the 22 municipal cases, in which Smith & Wesson has been named as a defendant, the courts in preliminary hearings have dismissed 6 of the cases. In addition a release from the plaintiffs' suit has been agreed upon in the City of Boston case which may be used as the basis of dismissal of the remaining open suits in the near future.
We believe that this is an appropriate time to exit handgun manufacture, as it is not compatible with the future direction of the Group. The disposal process is underway.
Disposing of certain other businesses
We have identified certain of our smaller business units, which do not fit into the strategy of the Group and these are available for divestment. A sale process is currently underway to seek buyers for these businesses.
Completing the share buy back program and continuing to review the capital structure
We intend to complete the share buy back program announced in July 2000 and, accordingly, will return a further (pound)415 million to shareholders, which may include preference shareholders. The program of market purchases will be resumed in due course using the Company's remaining authority to repurchase up to about 56 million shares. Thereafter, further authority will be sought from shareholders as required to complete the share buy back program.
Since the acquisition of the Gates group of companies in 1996, Tomkins has had outstanding more than (pound)700 million of preference shares held by the trusts of the Gates family. If converted the trusts would own more than 20 per cent of the Group's ordinary shares. The preference shares have class rights. Whilst the Gates family has been and is a most supportive shareholder, it is not inconceivable that the interests of our ordinary shareholders and preference shareholders might diverge in the future and for this reason we have started a dialogue with representatives of the Gates family trusts to examine mutually acceptable alternatives.
The capital structure and the strong cash generating capability of the Group will continue to provide adequate resources to fund the investments needed to achieve growth within our businesses.
Re-basing the dividend
In the ten years to April 2000 dividends of the Group have increased at a compound annual growth rate of nearly 17 per cent per annum which is far in excess of the rate of growth of earnings per share over the same period of 9 per cent per annum. By the year to April 2000 dividend cover had reduced to 1.8 times based on basic earnings per share and 1.6 times based on fully diluted earnings.
The current period earnings per share has been reduced by the dilutive effect of the disposals during the period. Although part of the dilution has and will be offset by the share buy back program, we have concluded that the current level of dividend is not appropriate for the continuing business.
We have declared an interim dividend of 4.6 pence (1999: 4.6 pence) per share. We intend to set the final dividend at a level of 7.4 pence (1999/2000: 12.85 pence) per share which re-bases the overall aggregate dividend from which it can be grown in future years on a sustainable and prudent basis. Future dividend payments will take into account the cyclical nature of some of the businesses, the continuing capital requirements and future prospects of the Group.
Management and employees
I would like to thank our management and employees for their efforts in dealing not only with tightening market conditions, but also with the additional demands imposed by our wide-ranging strategic review.
THE BOARD
As you will be aware Greg Hutchings, who led the development of Tomkins over 17 years, resigned as Chief Executive and a Director on October 11, 2000.
We recently announced the appointment of Norman Broadhurst and Ken Minton as two new non-executive members of the Board. They will take on the respective roles of Chairman of the Audit Committee and Chairman of the Remuneration Committee.
We have announced today that Ali Wambold has retired from the Board having served as a non-executive director for 6 years. He leaves with our thanks and best wishes.
OUTLOOK
There is little doubt that the second half of the year is going to prove challenging as there will be some further deterioration in a number of the markets in which we operate particularly in Engineered & construction products and in the automotive original equipment market in North America. Generally, the broad spread of markets we serve will mitigate this trend. The actions we have taken to reduce costs and improve efficiency will help offset some of the short-term profit pressure although there will be further actions and associated costs in the second half.
We have completed the strategic review and have plans to generate sustainable long-term growth. We aim to implement our plans quickly and effectively to ensure that we have a sound platform to deliver future value for our shareholders.
David Newlands
Executive Chairman
OPERATING REVIEW
The operating review that follows outlines the main features of the trading performance in the first half of the year.
Overall, conditions in our core markets during the period have become more competitive. The slow down in the US economy has impacted our principal markets although markets outside of North America are more encouraging. We have experienced some levelling off in sales to original equipment customers as well as continuing de-stocking pressures in the automotive aftermarket. Residential housing and commercial construction markets have already peaked.
The impact on the businesses of the downturn in the markets has been mitigated in part by the strong strategic positions that they occupy. Our businesses are leaders in most of their markets. In many of our businesses we have identified and implemented cost saving measures to offset some of the pressure on profits arising from the lower rates of economic activity.
We are investing in process improvement, which enhances operational efficiency and reduces cost and we remain focused on the need to be a lean manufacturer and occupy the low cost position in the industries in which we operate. We are taking advantage of opportunities to utilize digital technology either to reduce input costs or to create new channels to market.
Our businesses continue to bring new products to market and examples of successes in the period are the beam blade in our wiper systems business and the tire pressure monitoring system in fluid systems.
Our geographic expansion has also continued with sales in Asia Pacific being an increasing percentage of total sales. We are making good progress in our business ventures in India and China albeit from a small base. In Thailand we are establishing a small local facility for our Air systems components business. Growth in Latin America has also been encouraging.
The integration of our recent acquisitions, Hart & Cooley in Air systems components and ACD Tridon in wiper systems, is progressing well.
Industrial & automotive
A robust performance in power transmission against a background of weakening market conditions in North America was offset by weaker performances in fluid power, fluid systems and wiper systems.
A feature of the first half was the strong financial performance in Latin America, Europe and Asia despite the impact of a shut down at our operation in Korea as a result of a labor strike that cost an estimated (pound)4 million in the period.
Power transmission
Power transmission accounts for over 40 per cent of the sales of the Industrial & automotive group. During the period sales were ahead of the comparable period last year by 8 per cent with strong performances across all regions. Pulley and tensioner sales were up by 11 per cent and accessory belt sales were well ahead. North America accounts for about 45 per cent of the sales of this business with 25 per cent in each of Asia and Europe and the balance in Latin America.
Operating profit increased by around 5 per cent having adjusted for the cost of the Korea plant shutdown. The operating margin was affected by product mix and by certain production inefficiencies in North America, particularly in the rapidly growing pulley and tensioners business where corrective action has been taken. Automotive original equipment sales fluctuate on a world-wide basis but represent under 40 per cent of sales in this group. The automotive aftermarket and the industrial markets provide stability against these cyclical movements. Overall power transmission sales remain strong.
Our plans to relocate certain production from our Erembodegem facility in Belgium to a new plant in Eastern Europe were announced during the period and this will involve capital expenditure of (pound)17 million and restructuring costs of (pound)11 million. This project will take advantage of new market opportunities and at the same time achieve cost reductions. The restructuring costs will be recognized in the second half of the year.
Fluid systems
Fluid systems accounts for around 13 per cent of the sales of the Industrial & automotive group. In the period sales were ahead of the comparable period last year by 5 per cent with gains in all regions and in particular in France and Brazil. Sales in our tire pressure monitoring business increased by over 100 per cent in the period and are set to triple for the year as a whole. This business is poised for rapid growth in the future as a result of the passing of the Tread Act in the United States which makes it mandatory to have tire pressure monitoring on cars and light trucks in three years time. Our tire pressure monitoring product is the leader in the market.
The automotive hose business in Europe remains in loss and management action for that business is being taken.
Overall divisional profit was affected by lower sales in the aftermarket and some manufacturing inefficiencies which have been corrected. There are some encouraging signs for the sales outlook in the second half.
Wiper systems
Wiper systems accounts for around 15 per cent of the sales of the Industrial & automotive group. Sales in the period on a like for like basis were behind the comparable prior year period by nearly 7 per cent. The major contributor to the shortfall was in North America where higher inventory levels at aftermarket customers resulting from the previous mild winter season has led to a de-stocking in the supply chain. Also there has been some shortfall in original equipment sales due to delays introducing the new Ford Explorer. As a consequence of the sales shortfall, particularly of higher margin aftermarket sales, operating profits in this sector were down around 32 per cent.
Actions have been taken to reduce costs to offset some of the lost contribution from sales and this has been helped by the cost synergies continuing to be gained from the acquisition of Tridon last year. There is still further benefit to be realized from this acquisition. We have announced our intention to exit the Dunstable site over the next three years and we continue to evaluate plans for a low cost manufacturing option in Europe.
There are signs of improvement in the aftermarket in the second half as we enter the winter season and de-stocking has lessened significantly. Together with the cost saving actions implemented we anticipate a more favorable financial performance for this business for the remainder of the year.
We continue to see increasing interest in our beam blade product with a number of new platform orders awarded during the period. Growing sales in this area, together with our Exact Fit product, should result in a resumption of sales growth.
Fluid power
Fluid power accounts for around 18 per cent of the sales of the Industrial & automotive group. Overall in the period sales were ahead of the comparable period last year by 1 per cent with gains in all areas except industrial hose and connectors in Europe. Operating profit in the period declined by around 10 per cent due to weaker market conditions in the aftermarket, particularly in North America where there has been a noticeable slow down in the construction and mobile original equipment sector. This will carry into the last six months, although the industrial replacement markets in North America are showing signs of stabilisation.
Air systems components
Air systems components provides heating and air conditioning products to the commercial, residential and industrial markets through a variety of distribution channels. For the period, sales exceeded prior year by 5 per cent and operating profits were higher by 5 per cent on a like for like basis. The integration of Hart & Cooley has proceeded according to plan and has established a strong competitive position in a larger available market as a result of the enhancement of the product range. In addition, the strong and established relationships which the Air systems component companies hold in the market has created additional distribution channels for Hart & Cooley's products, including those of Penn and the other acquired brands. Cost synergies are being realized in line with expectations.
The division continues to improve its manufacturing capabilities and its regional positioning in the United States. The acquisition of Hart & Cooley has provided the opportunity to rationalize a number of product lines to reduce costs and manufacture products closer to their end markets. This positioning significantly reduces both freight costs and delivery lead times.
Our market position will be further enhanced through new product introductions. In excess of 30 new products are currently in the development phase at the division's seven research and development centres. Current technology changes will also provide significant improvements in customer service and communications, and the division will be introducing the initial phase of its e-commerce programme to its customer base during the year 2001.
We continue to expand our international presence. Results of newly acquired Ruskin Air Management in the UK have exceeded expectations and have established a solid base for further expansion in Europe. An increased presence in the Far East is being created with the addition of manufacturing capabilities in Thailand. Largely untapped opportunities for expansion outside the United States will provide opportunities for significant future growth.
Trading conditions are challenging as the effect of the weakening construction markets becomes apparent, but the continued strong management focus on manufacturing efficiencies, new product development and cost controls will enable the division to maintain its industry leadership position, and to capitalize on growth opportunities as the markets recover.
Engineered & construction products
Lasco
Lasco accounts for just under 27 per cent of the sales of the Engineered & construction products group and sells into the commercial and residential construction, manufactured housing and recreational vehicle markets. In the period all of the markets weakened and although turnover was level with last year operating profit was adversely affected by lower volumes and higher input costs due to rising petrochemical prices resulting in an overall 17 per cent reduction in operating profit.
These businesses occupy strong competitive positions in their markets enabling them to preserve respectable margins in difficult economic conditions. We have continued to implement new product and process initiatives in the period to enhance and maintain the competitiveness of the businesses.
The weaker market conditions are expected to prevail over the remainder of the year and management actions are in place to reduce costs and mitigate in part the profit impact of the market downturn.
Philips
Philips accounts for around 19 per cent of the sales of the Engineered and construction products group, and designs, manufactures and assembles vinyl, aluminum and wood windows and doors, and ventilation products in the US primarily for residential and manufactured housing and recreational vehicles. The recreational vehicle sector continues to face difficulties, but sales into the residential sector have improved, with modest market share gains for vinyl products on both the east and west coast. Sales were down overall by 9 per cent and operating profits down by 18 per cent.
Material handling
Material handling accounts for around 22 per cent of the sales of the Engineered and construction products group and sells primarily into the automotive market and to a lesser extent into the bulk handling and the US postal market. Sales in the period have been strong but operating profits are largely unchanged due to reduced margins, mainly as a result of a more competitive automotive business and start-up and development costs associated with some of the new technologies introduced in the period. Going into the second half the order levels are good and should see a continuation of the steady financial performance for the balance of the year.
Dexter
Dexter accounts for around 19 per cent of the sales of Engineered and construction products group and sells into the manufactured housing and recreational vehicle markets as well as into general industrial sectors. The lower activity in these markets has resulted in a reduction in turnover in the business of around 5 per cent and operating profits lower by 4 per cent compared with the same period last year. The strong strategic position of this business has enabled it to preserve market share and retain good margins despite weak market conditions. We expect that the current market conditions will continue for the balance of this financial year.
Non-core and discontinued businesses
Food manufacturing
The Group completed the exit from food manufacturing on August 31, 2000 with the disposal of Ranks Hovis McDougall. Sales for the period up to August 31 were (pound)562 million and operating profit amounted to (pound)26 million.
Professional, garden & leisure products
The Group exited the major component of the Professional, garden & leisure products business with the disposal of Murray and Hayter with effect from the end of September. Sales amounted to (pound)187 million. Due to the seasonal nature of the business and the impact of an under recovery of overheads as production was restricted to reduce inventory levels, the combined Murray and Hayter businesses recorded a loss of nearly (pound)10 million on turnover of (pound)164 million.
Smith & Wesson
Smith & Wesson in the period accounted for around 1 per cent of Group turnover. During the period general market weakness ahead of the election of the US President and the impact of market reaction to Smith & Wesson signing the Settlement Agreement negatively impacted sales and resulted in a small loss for the period.
FINANCIAL REVIEW
For the six month period to October 28, 2000 sales of the Group were(pound)2,452 million (1999: (pound)2,660 million). Operating profit before exceptional items and goodwill amortisation amounted to(pound)179 million (1999:(pound)228 million). Profit before tax for the period was(pound)89 million (1999:(pound)210 million).
Sales of the Industrial & automotive group were up by 6 per cent to (pound)994 million (1999: (pound)935 million). Of this increase, (pound)20 million was from acquisitions and (pound)17 million due to exchange rate movements leaving an underlying increase of (pound)22 million representing over 2 per cent. Operating profit was marginally lower at (pound)91 million (1999: (pound)95 million).
Sales of the Air systems components group increased by nearly 109 per cent to (pound)247 million (1999: (pound)118 million). Of this increase, (pound)115 million was due to the effect of the acquisition of Hart & Cooley and (pound)3 million due to exchange rate movements leaving an underlying increase of (pound)11 million representing nearly 9 per cent. Operating profit rose by 83 per cent to (pound)33 million (1999: (pound)18 million).
Sales of the Engineered & construction products group increased by nearly 2 per cent to (pound)462 million (1999: (pound)453 million). The increase was reduced by (pound)7 million relating to companies disposed of during the half year to October 1999. Exchange rate movements resulted in a (pound)3 million increase, leaving an underlying increase of over (pound)13 million representing nearly 3 per cent. Operating profit reduced by around 2 per cent to (pound)51 million (1999: (pound)52 million).
Operating margins reduced slightly in the period with Industrial & automotive at 9 per cent (1999: 10 per cent), Air systems components 13 per cent (1999: 15 per cent) and Engineered & construction products at 11 per cent (1999: 11 per cent).
The total interest cost in the period was (pound)24 million (1999: (pound)17 million). The increase arose from a higher level of borrowing initially in the period, which was then offset by proceeds from disposal. Interest cover in the period before exceptional items was 7.6 times (1999: 13.3 times).
Capital expenditure in the period was (pound)81 million (1999: (pound)124 million) and represents 0.9 times depreciation. Capital expenditure for the full year is expected to be of the order of (pound)160 million to (pound)170 million (1999: (pound)247 million). For the continuing businesses capital expenditure was (pound)61 million in the period. The ratio of capital expenditure to depreciation in the current year for the continuing businesses is expected to be around 1.1 times.
Overall working capital declined by (pound)116 million. The currency impact led to an increase of (pound)38 million and working capital in disposals amounted to a reduction of (pound)206 million. Of the remaining increase of (pound)52 million there was a reduction of (pound)22 million in the businesses sold during the period of ownership in the first half. Working capital in the remaining core businesses was higher by (pound)74 million. This reflected the impact of the growth in turnover on debtors and stock (increase of (pound)60 million) and a change in payment arrangements with creditors around the half year period end (increase in working capital of (pound)14 million).
Operating cash flow, (defined as EBITDA, before exceptional items, less net capital expenditure and working capital movement for the period), was(pound)140 million (1999:(pound)187 million), representing a cash conversion of operating profit before exceptional items of 78 per cent (1999: 82 per cent). This was applied to paying tax of(pound)65 million (1999:(pound)28 million) and interest and dividends of(pound)160 million (1999:(pound)136 million). Net cash outflow before disposals and share buy backs was(pound)162 million (1999:(pound)41 million inflow). Of this outflow(pound)81 million (1999:(pound)15 million inflow) arose from the impact of the exchange rate on dollar borrowings.
Tax has been charged at an effective rate, before exceptional items, of 30.0 per cent (1999: 32.2 per cent) which is anticipated to be the rate for the year.
With the net proceeds from disposals in the period amounting to (pound)1.29 billion and the share buyback of (pound)284 million, the Group had net funds of (pound)44 million at the end of the period.
With effect from April 29, 2001 we will no longer hedge the net attributable profit for the year but will only hedge cash flow exposures in respect of interest, dividends and costs of the corporate center to the extent that the cash flow has to be remitted from overseas businesses. This cash exposure will be hedged on a rolling 12 month basis.
The current balance sheet hedging arrangements in place will be allowed to unwind naturally. In future the policy will be to borrow in the currency in which the assets are denominated up to the total level of borrowing in the group.
The change of policy will have no direct financial effect but in time it will mean that the results of the group may be subject to translation fluctuations due to the extent of the foreign currency denominated profit. Also the mark to market arrangement for currency borrowings will be discontinued and so there will be translation movements in currency denominated borrowings that should be offset by opposite movements in the translated values of the foreign currency net operating assets.
In the first half of the year the hedged exchange rate was (pound)1=$1.593 compared to an average rate during the period of (pound)1=$1.456. For the balance of the current financial year the hedged rate will remain at (pound)1=$1.593.
Ken Lever
Finance Director
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.
For the half year ended October 28, 2000
2000/01 first half
Before
goodwill
amortization
and
exceptional Exceptional
items items
Notes (pound) (pound)
million
Total Goodwill Total
$million* amortization (pounds)
(pound) million
million
(pound)million
Turnover
Continuing operations 2,748.4 1,725.3 -- -- 1,725.3
Discontinued operations 1,157.0 726.3 -- -- 726.3
1 3,905.4 2,451.6 -- -- 2,451.6
Operating profit
Continuing operations 251.9 162.9 (4.8) -- 158.1
Discontinued operations 25.3 16.1 (0.2) -- 15.9
277.2 179.0 (5.0) -- 174.0
Share of profit of
associated undertakings 0.2 0.1 -- -- 0.1
Operating profit
including associates 1 277.4 179.1 (5.0) -- 174.1
Loss on disposal of
businesses (441.3) -- -- (277.0) (277.0)
Reversal of provision
for loss on disposal
of business 342.5 -- -- 215.0 215.0
Provision for loss on
disposal of business
to be discontinued:
Impairment of goodwill -- -- -- -- --
Payments related directly
to the disposal -- -- -- -- --
Profit before interest 178.6 179.1 (5.0) (62.0) 112.1
Interest (net) (37.5) (23.5) -- -- (23.5)
Profit on ordinary
activities before
tax 141.1 155.6 (5.0) (62.0) 88.6
Before exceptional items 239.9 155.6 (5.0) -- 150.6
Exceptional items (98.8) -- -- (62.0) (62.0)
Tax on profit on ordinary
activities 2 (72.0) (45.2) -- -- (45.2)
Profit on ordinary
activities after tax 69.1 110.4 (5.0) (62.0) 43.4
Minority interest -
equity (1.7) (1.1) -- -- (1.1)
Profit attributable
to shareholders 67.4 109.3 (5.0) 62.0) 42.3
Dividends on equity
and non-equity shares 4 (79.0) (49.6) -- -- (49.6)
Retained profit/(loss)
for the period (11.6) 59.7 (5.0) 62.0) (7.3)
Earnings per share
Basic 3 4.17c 10.01p -- -- 2.62p
Diluted 3 4.17c 9.67p -- -- 2.62p
Dividends per
ordinary share 4 7.33c -- -- -- 4.60p
1999/2000 first half
Before
goodwill
amortization
and before
and after
exceptional
items Total
Notes (pound) (pound)
million million
Goodwill
amortization
(pounds)
million
Continuing operations 1,538.2 -- 1,538.2
Discontinued operations 1,121.6 -- 1,121.6
2,659.8 -- 2,659.8
Operating profit
Continuing operations 158.3 (0.8) 157.5
Discontinued operations 68.9 (0.2) 68.7
227.2 (1.0) 226.2
Share of profit of associated
undertakings 0.8 -- 0.8
Operating profit including
associates 228.0 (1.0) 227.0
Loss on disposal of
businesses -- -- --
Reversal of provision for loss
on disposal of business -- -- --
Provision for loss on disposal
of business to be discontinued:
Impairment of goodwill -- -- --
Payments related directly
to the disposal -- -- --
Profit before interest 228.0 (1.0) 227.0
Interest (net) (17.1) -- (17.1)
Profit on ordinary activities
before tax 210.9 (1.0) 209.9
Before exceptional items 210.9 1.0) 209.9
Exceptional items -- -- --
Tax on profit on ordinary
activities (67.6) -- (67.6)
Profit on ordinary
activities after tax 143.3 1.0) 142.3
Minority interest - equity (2.2) -- (2.2)
Profit attributable
to shareholders 141.1 (1.0) 140.1
Dividends on equity
and non-equity shares4 (60.8) -- (60.8)
Retained profit/(loss)
for the period 80.3 (1.0) 79.3
Earnings per share
Basic 13.08p -- 12.98p
Diluted 12.01p -- 11.93p
Dividends per ordinary share -- -- 4.60p
1999/2000 full year
Before
goodwill
amortization
and
exceptional Exceptional
items items
(pound) (pound)
million million
Total Goodwill Total
$million* amortization (pounds)
(pound) million
million
Turnover
Continuing operations 3,208.3 -- -- 3,208.3
Discontinued operations 2,409.3 -- -- 2,409.3
5,617.6 -- -- 5,617.6
Operating profit
Continuing operations 348.8 (4.5) -- 344.3
Discontinued operations 175.3 (0.5) -- 174.8
524.1 (5.0) -- 519.1
Share of profit of associated
undertakings 1.9 -- -- 1.9
Operating profit including
associates 526.0 (5.0) -- 521.0
Loss on disposal of
businesses -- -- (6.3) (6.3)
Reversal of provision for loss
on disposal of business -- -- -- --
Provision for loss on disposal
of business to be discontinued:
Impairment of goodwill -- -- (171.4)(171.4)
Payments related directly
to the disposal -- -- (43.6) (43.6)
Profit before interest 526.0 (5.0)(221.3) 299.7
Interest (net) (47.4) -- -- (47.4)
Profit on ordinary activities
before tax 478.6 (5.0)(221.3) 252.3
Before exceptional items 478.6 (5.0) -- 473.6
Exceptional items -- -- (221.3)(221.3)
Tax on profit on ordinary
activities (141.0) -- -- (141.0)
Profit on ordinary
activities after tax 337.6 (5.0)(221.3) 111.3
Minority interest - equity (5.8) -- -- (5.8)
Profit attributable
to shareholders 331.8 (5.0)(221.3) 105.5
Dividends on equity
and non-equity shares4 (200.2) -- -- (200.2)
Retained profit/(loss)
for the period 131.6 (5.0) (221.3) (94.7)
Earnings per share
Basic 31.38p -- -- 7.50p
Diluted 28.30p -- -- 7.49p
Dividends per ordinary share -- -- -- 17.45p
Note of historical cost profits: The profits for 2000/01 and 1999/00
are reported under the historical cost convention. *US Dollar
equivalents provided for reader convenience at the hedged rate
of(pound)1=$1.593
CONSOLIDATED CASH FLOW STATEMENT
For the half year ended
October 28, 2000 Notes 2000/01 1999/00 1999/00
first half first half full year
(pound)million (pound)million (pound)million
Cash flow from operating
activities 5 215.2 308.8 578.0
Dividends received from
associated undertakings 0.5 0.6 0.7
Returns on investments and
servicing of finance 6 (45.1) (30.4) (77.2)
Tax paid (net) 6 (65.3) (28.0) (62.9)
Capital expenditure (net) 6 (75.5) (121.3) (228.9)
Financial investment 6 - (0.2) (0.2)
Acquisitions and disposals 6 1,273.2 (33.3) (241.1)
Equity dividends paid (114.9) (105.9) (149.4)
Net cash inflow/(outflow) before
use of liquid resources and
financing 1,188.1 (9.7) (181.0)
Financing
Share issues (net of costs) 2.5 4.1 4.3
Buy back of own shares (284.2) (6.6) (6.3)
Mark to market of hedging
instruments (80.8) 15.4 (21.0)
Cash flow (decreasing)/increasing
debt and lease financing (994.4) 101.6 277.0
Net cash (outflow)/inflow
from financing 6 (1,356.9) 114.5 254.0
Management of liquid resources
Cash flow decreasing/(increasing) cash on deposit
and collateralized cash 6 70.6 (116.6) (24.9)
(Decrease)/increase in cash in
the period (98.2) (11.8) 48.1
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT)
For the half year ended
October 28, 2000 Notes 2000/01 1999/00 1999/00
first half first half full year
(pound)million (pound)million (pound)million
(Decrease)/increase in
cash in the period (98.2) (11.8) 48.1
Cash flow decreasing/(increasing)
debt and lease financing 6 994.4 (101.6) (277.0)
Cash flow (decreasing)/
increasing cash on
deposit and collateralized
cash 6 (70.6) 116.6 24.9
Change in net funds resulting
from cash flows 7 825.6 3.2 (204.0)
Loans and finance leases
disposed/(acquired) with
subsidiaries 7 18.9 (43.9) (46.9)
Translation difference 7 1.9 (1.7) (5.2)
Increase/(decrease) in net
funds in the period 846.4 (42.4) (256.1)
Net debt at April 29, 2000 7 (802.1) (546.0) (546.0)
Net funds/(debt) at
October 28, 2000 7 44.3 (588.4) (802.1)
CONSOLIDATED BALANCE SHEET
Notes October 28 October 30 April 29
2000 1999 2000
(pound)million (pound)million (pound)million
CAPITAL EMPLOYED
Fixed assets
Intangible assets 202.4 50.6 203.4
Tangible assets 884.2 1,370.2 1,448.1
Investments 12.8 16.6 17.0
-------- -------- --------
1,099.4 1,437.4 1,668.5
-------- -------- --------
Current assets
Stock 480.7 670.6 695.7
Debtors 8 700.7 889.8 1,061.8
Cash 298.1 498.6 466.4
------- -------- --------
1,479.5 2,059.0 2,223.9
Current liabilities
Creditors: amounts falling
due within one year 9 (758.8) (1,335.4) (1,466.7)
-------- -------- --------
Net current assets 720.7 723.6 757.2
-------- -------- --------
Total assets less current
liabilities 1,820.1 2,161.0 2,425.7
Creditors: amounts falling due
after more than one year 10 (306.2) (1,085.4) (1,245.6)
Provisions for liabilities
and charges 11 (355.8) (365.2) (465.2)
-------- -------- --------
Net assets 1,158.1 710.4 714.9
-------- -------- --------
CAPITAL AND RESERVES
Called up share capital
Ordinary shares 40.9 47.5 47.5
Convertible cumulative preference
shares 337.2 337.4 337.4
Redeemable convertible cumulative
preference shares 422.8 373.7 391.8
-------- -------- --------
800.9 758.6 776.7
Share premium account 93.5 105.7 106.0
Capital redemption reserve 58.9 37.0 37.0
Profit and loss account 170.0 (220.8) (238.3)
-------- -------- --------
Equity shareholders' funds 363.3 (30.6) (47.8)
Non-equity shareholders' funds 760.0 711.1 729.2
Shareholders' funds 1,123.3 680.5 681.4
Minority interest - equity 34.8 29.9 33.5
-------- -------- --------
1,158.1 710.4 714.9
-------- -------- --------
STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
For the half year ended
October 28, 2000 2000/01 1999/00 1999/00
first half first half full year
(pound)million (pound)million (pound)million
Profit attributable to
shareholders 42.3 140.1 105.5
Foreign exchange translation:
- group (1.3) (3.3) (2.4)
- associated undertakings - - 0.1
-------- -------- --------
Total recognized gains and losses 41.0 136.8 103.2
-------- -------- --------
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
For the half year ended
October 28, 2000 2000/01 1999/00 1999/00
first half first half full year
(pound)million (pound)million (pound)million
Total recognized gains and
losses 41.0 136.8 103.2
Dividends on equity and non-equity
shares (49.6) (60.8) (200.2)
-------- -------- --------
(8.6) 76.0 (97.0)
Ordinary share issues
(net of costs) 2.5 4.9 5.1
Payments to the QUEST - (0.8) (0.8)
Buy back of own shares
(including stamp duty
and commissions) (284.2) (2.7) (2.6)
Goodwill written back on
disposals 732.2 - 2.2
Goodwill written back on
proposed disposal - - 171.4
-------- -------- --------
Net addition to shareholders'
funds 441.9 77.4 78.3
Shareholders' funds at
April 29, 2000 681.4 603.1 603.1
-------- -------- --------
Shareholders' funds at
October 28, 2000 1,123.3 680.5 681.4
-------- -------- --------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Turnover Operating profit(a)
1. SEGMENTAL
ANALYSIS 2000/01 1999/00 1999/00 2000/01 1999/00 1999/00
first half first half full year first half first half full year
(pound) (pound) (pound) (pound) (pound) (pound)
million million million million million million
By activity:(b)
Industrial &
automotive 994.2 935.1 1,917.7 91.0 94.9 198.7
Air systems
components 247.1 118.3 305.2 32.8 18.3 42.0
Engineered &
construction
products 461.6 452.5 916.0 50.8 51.8 119.7
Food
manufacturing 562.1 925.5 1,898.6 26.0 69.7 162.0
Professional,
garden &
leisure
products 186.6 228.4 580.1 (12.3) 5.0 22.4
Central
costs - - - (9.2) (11.7) (18.8)
2,451.6 2,659.8 5,617.6 179.1 228.0 526.0
Goodwill amortization (5.0) (1.0) (5.0)
-------- -------- --------
174.1 227.0 521.0
By geographical origin:
United States of
America 1,306.5 1,349.2 2,861.5 110.2 132.5 291.8
United
Kingdom 643.4 917.1 1,908.6 33.9 63.3 167.5
Rest of Europe157.5 169.2 341.0 10.8 13.4 15.9
Rest of the
World 344.2 224.3 506.5 24.2 18.8 50.8
------- ------- -------- ------- -------- -------
2,451.6 2,659.8 5,617.6 179.1 228.0 526.0
Goodwill amortization (5.0) (1.0) (5.0)
-------- -------- --------
174.1 227.0 521.0
Turnover by geographical destination:
United States of
America 1,359.6 1,316.4 2,822.6
United
Kingdom 586.5 846.5 1,761.1
Rest of
Europe 204.8 228.1 471.8
Rest of the
World 300.7 268.8 562.1
-------- -------- --------
2,451.6 2,659.8 5,617.6
-------- -------- --------
(a) Operating profit includes the group's share of the profits of
associated undertakings. The split of the profits of associated
undertakings, analyzed by class of business, is Industrial &
automotive (pound)0.2 million (1999/00: half year (pound)0.3
million and full year (pound)0.6 million), Air systems components
(pound)nil (1999/00: half year (pound)nil and full year
(pound)nil), Engineered & construction products loss of
(pound)(0.2) million (1999/00: half year (pound)nil and full year
(pound)0.3 million), Food manufacturing (pound)0.3 million
(1999/00: half year (pound)0.5 million and full year (pound)1.0
million) and Professional, garden & leisure products loss of
(pound)(0.2) million (1999/00: half year (pound)nil and full year
(pound)nil). The split of the goodwill amortization charged for
the period, analyzed by class of business, is Industrial &
automotive (pound)0.8 million (1999/00: half year (pound)0.6
million and full year (pound)1.6 million), Air systems components
(pound)3.8 million (1999/00: half year (pound)nil and full year
(pound)2.5 million), Engineered & construction products (pound)0.2
million (1999/00: half year (pound)0.2 million and full year
(pound)0.4 million), Food manufacturing (pound)0.2 million
(1999/00: half year (pound)0.2 million and full year (pound)0.5
million) and Professional, garden & leisure products (pound)nil
(1999/00: half year (pound)nil and full year (pound)nil).
(b) See note 14.
2000/01 first half
Continuing Discontinued 1999/00 1999/00
operations operations (c) Total first half full year
(pound)million (pound)million (pound)million (pound)million(pound)million
Operating
expenses:
Cost of
sales 1,238.8 548.6 1,787.4 1,886.0 4,011.6
Distribution
costs 200.6 103.3 303.9 349.5 696.1
Administration
expenses 127.8 58.5 186.3 198.1 390.8
-------- -------- -------- -------- --------
1,567.2 710.4 2,277.6 2,433.6 5,098.
(c) Discontinued operations include the Food manufacturing group,
Murray Inc. and Hayter Limited.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
2. TAX ON PROFIT ON
ORDINARY ACTIVITIES
2000/01 1999/00 1999/00
first half first half full year
(pound)million (pound)million (pound)million
UK 7.7 17.0 34.6
Overseas 37.4 50.4 105.9
Associates 0.1 0.2 0.5
-------- -------- --------
45.2 67.6 141.0
-------- -------- --------
Tax has been provided at an estimated effective rate, before
exceptional items, of 30% (1999/00: half year estimated effective rate
of 32.2%) on profit on ordinary activities before tax, being the
anticipated rate of tax for the current financial year.
There was no tax charge on the exceptional items in any period.
3. EARNINGS PER SHARE
Basic earnings per share are calculated on a profit of (pound)23.8
million (1999/00: half year (pound)123.0 million and full year
(pound)71.1 million) representing the loss for the period of
(pound)7.3 million after adding back dividends payable to ordinary
shareholders of (pound)31.1 million (1999/00: half year retained
profit of (pound)79.3 million and ordinary dividends of (pound)43.7
million and full year loss of (pound)94.7 million and ordinary
dividends of (pound)165.8 million) and 907,236,103 ordinary shares
being the weighted average number of shares in issue during the first
half (1999/00: half year 947,750,052 and full year 947,773,953).
Diluted earnings per share are calculated on an adjusted weighted
average number of ordinary shares of 907,570,572 (1999/00: half year
1,174,862,078 and full year 949,793,392) after allowing for the
exercise of 334,469 share options (1999/00: half year 4,521,507 and
full year 2,019,439) and are calculated on a profit as stated above of
(pound)23.8 million (1999/00: half year (pound)123.0 million and full
year (pound)71.1 million). Based upon this profit and the 1999/00 full
year profit, the preference shares were anti-dilutive and therefore
have been excluded from the calculation for both periods. In the
1999/00 half year the weighted average number of shares also allowed
for the conversion of preference shares equating to 222,590,519
ordinary shares and earnings were adjusted for the preference dividend
of (pound)17.1 million.
The directors have also presented the earnings per share before
exceptional items and goodwill amortization on the basis that they
believe it represents a more consistent measure of underlying year on
year performance.
Basic earnings per share before exceptional items and goodwill
amortization are calculated on profit attributable to ordinary
shareholders of (pound)90.8 million (1999/00: half year (pound)124.0
million and full year (pound)297.4 million) which is stated before
exceptional items of (pound)62.0 million (1999/00: half year
(pound)nil and full year (pound)221.3 million) and goodwill
amortization of (pound)5.0 million (1999/00: half year (pound)1.0
million and full year (pound)5.0 million). Diluted earnings per share
before exceptional items and goodwill amortization are based on
adjusted earnings of (pound)109.3 million (1999/00: half year
(pound)141.1 million and full year (pound)331.8 million) after
adjusting for the preference dividend of (pound)18.5 million (1999/00:
half year (pound)17.1 million and full year (pound)34.4 million).
Based upon these earnings the preference shares are dilutive for all
periods disclosed. Therefore diluted earnings per share before
exceptional items and goodwill amortization are calculated on an
adjusted weighted average number of ordinary shares of 1,130,076,745
(1999/00: half year 1,174,862,078 and full year 1,172,354,623) after
allowing for the conversion of 222,506,173 preference shares (1999/00:
half year 222,590,519 and full year 222,561,231) and the exercise of
334,469 share options (1999/00: half year 4,521,507 and full year
2,019,439).
NOTES TO THE INTERIM FINANCIAL STATEMENTS
4. DIVIDENDS ON EQUITY & NON-EQUITY SHARES
2000/01 1999/00 1999/00
first half first half full year
(pnd)mill (pnd)mill (pnd)mill
Ordinary shares:
Interim 4.60p (1999/00 - 4.60p)
to be paid April 6, 2001 37.6 43.7 43.7
1999/00 - final
12.85p paid October 9, 2000 (6.5) - 122.1
Total ordinary shares 31.1 43.7 165.8
Preference shares:
Convertible cumulative
Accrued at April 29, 2000 (3.8) (3.8) (3.8)
Paid during period 9.4 9.0 18.0
Accrued at October 28, 2000 4.2 3.8 3.8
9.8 9.0 18.0
Redeemable convertible cumulative
Accrued at April 29, 2000 (3.6) (3.6) (3.6)
Paid during period 8.5 8.3 16.4
Accrued at October 28, 2000 3.8 3.4 3.6
8.7 8.1 16.4
Total preference shares 18.5 17.1 34.4
Total dividends 49.6 60.8 200.2
5. RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
2000/01 first half
------------------------------
Continuing Discontinued 1999/00 1999/00
operations operations Total first half full year
(pnd)mill (pnd)mill (pnd)mill (pnd)mill (pnd)mill
Operating profit 158.1 15.9 174.0 226.2 519.1
Depreciation
(net of
government
grants) 58.5 28.8 87.3 95.1 197.9
Loss/(profit)
on sale of
tangible fixed
assets (net) 0.3 (0.2) 0.1 1.7 (1.0)
Amortization of
goodwill 4.8 0.2 5.0 1.0 5.0
Post-retirement
benefits (net) (0.2) - (0.2) (0.7) (5.6)
Warranty
provisions (0.4) 0.5 0.1 (0.1) (0.2)
Amortization of
long term
loyalty plan
shares 0.7 - 0.7 0.9 1.3
Increase)/
decrease in
stock (13.4) 32.3 18.9 (78.8) (64.4)
(Increase)/
decrease in
debtors (46.6) 104.8 58.2 51.2 (73.2)
(Decrease)/
increase in
creditors (13.6) (115.3) (128.9) 12.3 (0.9)
Net cash inflow
from operating
activities 148.2 67.0 215.2 308.8 578.0
6. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CONSOLIDATED
CASH FLOW STATEMENT
2000/01 1999/00 1999/00
first half first half full year
(pnd)million (pnd)million (pnd)million
Returns on investments and
servicing of finance
Interest received 34.3 35.2 69.8
Interest paid (59.5) (46.4) (108.9)
Interest element of finance
lease rental payments (0.9) (1.0) (2.1)
Preference dividends paid (17.9) (17.3) (34.4)
Investment by
minority shareholder - - 1.5
Dividend paid to a
subsidiary company
minority shareholder (1.1) (0.9) (3.1)
Net cash outflow from
returns on investments
and servicing of finance (45.1) (30.4) (77.2)
Tax Paid
Tax paid (68.9) (58.7) (129.0)
Tax received 3.6 30.7 66.1
Net cash outflow
from tax paid (65.3) (28.0) (62.9)
Capital expenditure
Purchase of tangible
fixed assets (80.5) (124.4) (246.9)
Sale of tangible
fixed assets 5.0 3.1 18.0
Net cash outflow from
capital expenditure (75.5) (121.3) (228.9)
Financial investment
Purchase of fixed
asset investments - (0.2) (0.2)
Acquisitions and disposals
Purchase of subsidiary
undertakings 3.3 (28.8) (237.5)
Net overdrafts acquired
with subsidiary undertakings - (5.9) (6.3)
Purchase of associated
undertakings - - (0.9)
Sale of subsidiary
undertakings 1,343.2 1.4 3.6
Net cash disposed with
subsidiary undertakings (73.3) - -
Net cash inflow/(outflow)
from acquisitions and
disposals 1,273.2 (33.3) (241.1)
Financing
Share issues (net of costs) 2.5 4.1 4.3
Buy back of own shares (284.2) (6.6) (6.3)
Mark to market of
hedging instruments (80.8) 15.4 (21.0)
Debt due within one year:
decrease in short
term borrowings (59.4) (647.0) (687.8)
additional bank loans 2.4 - 58.1
repayment of other loans (2.5) (34.3) (37.0)
Debt due after more
than one year:
additional bank loans - 926.6 1,103.1
repayment of bank
and other loans (932.2) (136.8) (153.3)
Capital element of
finance lease
rental payments (2.7) (6.9) (6.1)
Cash flow (decreasing)/
increasing debt and
lease financing (994.4) 101.6 277.0
-------- -------- --------
Net cash (outflow)/
inflow from financing (1,356.9) 114.5 254.0
Management of
liquid resources
Decrease/(increase)
in cash deposits 65.6 (116.2) (24.7)
Decrease/(increase)
in collateralized cash 5.0 (0.4) (0.2)
Cash flow decreasing/
(increasing) cash on
deposit and
collateralized cash 70.6 (116.6) (24.9)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
7. ANALYSIS OF NET FUNDS/(DEBT)
Disposals
October 28 (excl.cash & Exchange April 29
2000 Cash flow overdrafts movement 2000
(pnd)mill (pnd)mill (pnd)mill (pnd)mill (pnd)mill
Cash on
demand 113.1 (113.8) 3.1 223.8
Overdrafts (28.0) 15.6 (2.3) (41.3)
(98.2)
Debt due
after more
than one
year (187.4) 932.2 10.4 (5.5) (1,124.5)
Debt due
within one
year (22.1) 59.5 5.4 -- (87.0)
Finance
leases (21.3) 2.7 4.1 (1.4) (26.7)
994.4
Cash on
deposit 185.0 (65.6) 8.0 242.6
Collateralized
cash 5.0 (5.0) (1.0) 11.0
(70.6)
Net funds/
(debt) 44.3 825.6 18.9 1.9 (802.1)
8. DEBTORS
October 28 October 30 April 29
2000 1999 2000
(pnd) mill (pnd) mill (pnd) mill
Amounts falling due
within one year:
Trade debtors 525.0 724.3 873.2
Amounts owing
by associated
undertakings 0.3 0.9 1.1
Amounts
recoverable on
long-term contracts 62.3 13.3 37.7
Sales and payroll taxes 4.7 14.3 14.3
Other debtors 33.0 44.0 54.2
Prepayments and
accrued income 65.1 72.8 62.6
Collateralized cash 5.0 11.0 11.0
695.4 880.6 1,054.1
Amounts falling
due after more
than one year:
Other debtors 5.3 9.2 7.7
700.7 889.8 1,061.8
9. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
October 28 October 30 April 29
2000 1999 2000
(pnd)million (pnd)million (pnd)million
Unsecured loan
notes 3.9 7.2 4.1
Other loans 0.1 2.2 2.5
Obligations under
finance leases 1.8 6.7 5.8
Bank loans and
overdrafts 46.1 101.4 121.7
Amounts due on
long-term
contracts 2.9 5.7 3.0
Trade creditors 294.2 570.7 635.8
Bills payable 1.2 3.6 2.9
Tax 81.0 180.3 169.7
Sales and payroll
taxes 19.0 31.7 28.6
Other creditors 94.7 132.0 115.1
Proposed and
accrued dividends 46.6 50.9 129.8
Accruals and
deferred income 167.3 243.0 247.7
758.8 1,335.4 1,466.7
NOTES TO THE INTERIM FINANCIAL STATEMENTS
10. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
October 28 October 30 April 29
2000 1999 2000
(pnd)million (pnd)million (pnd)million
Other loans 11.0 15.6 14.9
Obligations under
finance leases 19.5 18.9 20.9
Bank loans 176.4 946.1 1,109.6
Other creditors 94.2 99.6 94.9
Accruals and
deferred income 5.1 5.2 5.3
306.2 1,085.4 1,245.6
11. PROVISIONS FOR LIABILITIES AND CHARGES
Post-
Proposed Warranty retirement Deferred
disposal provisions benefits tax Total
(pnd)mill (pnd)mill (pnd)mill (pnd)mill (pnd)mill
At April
29, 2000 43.6 15.8 217.1 188.7 465.2
Foreign exchange
translation - 1.1 16.5 0.2 17.8
Subsidiaries
disposed - (7.2) (25.0) (51.4) (83.6)
Charge for the
period - 5.9 7.0 0.1 13.0
Utilized during
the period (43.6) (5.8) (7.2) - (56.6)
At October
28, 2000 - 9.8 208.4 137.6 355.8
12. ACQUISITIONS AND DISPOSALS
Industrial & automotive:
The(pound)3.3 million reduction in the purchase consideration of
ACD Tridon Inc. was received during the period.
Engineered & construction products:
Homer of Redditch Limited and Twiflex Limited were sold on May 18,
2000 and June 23, 2000 respectively for a total consideration, net of
costs, of (pound)2.9 million. (pound)1.0 million of goodwill
previously written off to reserves was written off to the profit and
loss account, resulting in a loss on sale of (pound)1.2 million.
Food manufacturing:
The Red Wing Company Inc. was sold on July 14, 2000 for a cash
consideration, net of costs, of (pound)95.8 million. The sale of the
remaining Food manufacturing business segment was completed on August
31, 2000 for a total cash consideration of (pound)1,138.4 million.
(pound)171.4 million of the (pound)828.7 million of goodwill
previously written off to reserves on acquisition of the businesses
was included in the write off of the impaired goodwill in the year
ended April 29, 2000 and the remaining (pound)657.3 million was
charged to the profit and loss account. Costs of the sale were offset
by the reversal of the (pound)43.6 million provision established at
April 29, 2000 for payments related directly to the disposal, which
included a provision of (pound)25.0 million for pension payments
arising as a result of the transaction. The net loss on sale charged
to the profit and loss account for the period to October 28, 2000 was
(pound)0.7 million.
Professional, garden & leisure products:
Murray Inc. and Hayter Limited were sold on October 5, 2000 for a
provisional consideration of (pound)149.4 million of which
(pound)140.6 million has been received in cash and (pound)8.8 million
as a secured subordinated loan note, repayable in 2006. There was a
loss on sale of (pound)60.1 million after charging (pound)73.9 million
of goodwill previously written off to reserves and (pound)2.9 million
costs of disposal.
13. 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-two 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
unquantified 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 include also 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. Smith
& Wesson Corp. and the directors believe similar decisions will be
reached in any of the other cases which come to trial based on its
reasonable approach to design, manufacture, distribution and safety in
general. On March 17, 2000, Smith & Wesson Corp. signed an agreement
with an agency of the Federal Government of the United States of
America and various of the municipal plaintiffs pursuant to which it
would be required to make certain changes in the design and
distribution of its products and the plaintiff signatories would be
required to dismiss it from suits subject to a consent decree entered
by the court or to refrain from filing suit against it. The
signatories to the agreement were the federal government, eleven
municipalities and two states. On December 11, 2000 Smith & Wesson
Corp. signed a settlement agreement with the City of Boston and the
Boston Public Health Commission which will become effective upon the
entry of an implementing consent decree the form of which has already
been agreed among Smith & Wesson Corp. and the plaintiffs. Pursuant to
that settlement agreement and consent decree Smith & Wesson Corp.
would be required to make certain changes in the design and
distribution of its products and the plaintiff signatories would be
required to dismiss it from the lawsuit which they have filed.
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.
14. BASIS OF PREPARATION
The interim financial statements for the half year ended October
28, 2000 have been prepared in accordance with the accounting policies
detailed in the financial statements for the year ended April 29, 2000
and were approved by the directors on January 16, 2001. The segmental
presentation has been adjusted to provide a more meaningful analysis
of operations and to identify corporate costs separately from the
business activities. Comparative figures have been restated in
accordance with the revised presentation. 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 1999/00 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 14 to 24 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 directors are responsible for preparing the interim
report in accordance with the Listing Rules of the Financial Services
Authority and applicable United Kingdom accounting standards. The
Listing Rules 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 in the United Kingdom by the Auditing Practices
Board and with our profession's ethical guidance. A review consists
principally of making enquiries 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 28, 2000.
Arthur Andersen
Chartered Accountants
London
January 16, 2001