TIDMTOMK
RNS Number : 3635X
Tomkins plc
13 August 2009
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London, Thursday 13 August 2009
2009 Half Yearly Report
1.KEY POINTS
* Sales were $2,002.3 million (H1 2008: $2,927.0 million)
* Adjusted operating profit(1) was $82.3 million (H1 2008: $242.7 million(2))
* Adjusted operating profit of ongoing segments was $89.8 million (H1 2008: $240.6
million(2))
* Loss before tax was $114.9 million (H1 2008: profit of $61.3 million(2))
* Operating cash flow(3) was $14.6 million (H1 2008: $90.4 million)
* Net debt was $515.9 million (H1 2008: $702.8 million, FY 2008: $476.4 million)
* New $450 million forward-start committed borrowing facility completed, maturing
in May 2012
* Adjusted diluted earnings per share(4) were 2.99 cents (H1 2008: 16.84 cents(2))
* Diluted loss per share(5) was 14.07 cents (H1 2008: earnings of 0.42 cents per
share)
* Interim dividend of 3.5 cents per share (H1 2008: 11.02 cents)
* Restructuring initiatives on track to achieve cost savings of $150 million per
annum by end of 2011
* H1 2009 headcount reduction of 3,900
* Acquisition of Hydrolink to complement Gates Engineering & Services
(1) Operating profit before restructuring initiatives, impairments and the
amortisation of intangible assets arising on acquisitions.
(2) Restated to reflect the adoption of an amendment to IFRS 2 "Share-based
Payment" (see note 1 to the accompanying financial statements).
(3) Operating cash flow is cash generated from operations less net capital
expenditure.
(4) Adjusted earnings per share is based on earnings from continuing operations
before items excluded in arriving at adjusted operating profit and related tax
effects.
(5) From continuing operations.
David Newlands, Chairman, commented:
"Conditions in our end markets continued to deteriorate throughout the first
half of 2009 which negatively impacted Group trading. The rate of deterioration
in some of these markets has slowed as evidenced by trading in June and July,
however the outlook remains uncertain. Management continues its disciplined
approach to cost containment and restructuring across the Group, which remains
on track.
In line with the guidance provided on dividends at the time of the 2008
Preliminary Results announcement in February this year, the Board has decided to
declare an interim dividend of 3.5 cents per share. In arriving at this
decision, the Board has considered prevailing end market conditions and market
outlook."
James Nicol, Chief Executive Officer, commented:
"The global recession has impacted Group sales which were down significantly
compared with the first half of 2008. Notwithstanding this, the Group returned
an adjusted operating profit of $82.3 million. Under these continuing difficult
economic conditions, the Group's focus remains clear: continuing positive
cash flow generation, maintaining our momentum in restructuring the business,
preserving a strong balance sheet and identifying further opportunities for
growth, particularly in green products and service-related
businesses. Hydrolink, a fluid engineering services provider to the oil and gas
and marine sectors in the Middle East and CIS regions was acquired in July.
Hydrolink's product offering and geographical footprint will supplement the
expansion of our Gates Engineering and Services business."
Enquiries
Investors: Media:
Sarah Thompson Rollo Head / Robin Walker
Tomkins Corporate Communications Finsbury
Tel +44 (0) 20 8877 5163 Tel +44 (0) 20 7251 3801
ir@tomkins.co.uk rollo.head@finsbury.com
The video webcast and presentation slides for this results announcement can be
downloaded from the Tomkins corporate website on http://www.tomkins.co.uk
2.SUMMARY GROUP PERFORMANCE
As explained in note 2 to the accompanying financial statements, the segmental
analysis of the Group's operations was changed during the period and distinction
is now drawn between those of the Group's operating segments that are ongoing
and those that have been exited or are to be exited. Segments exited or to be
exited include Caps & Thermostats (Stant and Standard-Thomson, sold in 2008) and
Doors & Windows (Philips Doors and Windows, to be exited in Q3 2009).
Comparative information for H1 2008 has been re-presented to reflect these
changes.
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Continuing operations | Period |
+---------------------------------------+-------------------------------------------------------------------------------+
| $ million, unless otherwise indicated | H1 2009 | H1 2008(1) |
+---------------------------------------+----------------------------------------+--------------------------------------+
| | Ongoing | Segments | Total | Ongoing | Segments | Total |
| | segments | exited or to | | segments | exited or to | |
| | | be exited | | | be exited | |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| | 1,967.1 | 35.2 | | 2,771.1 | 155.9 | |
| Sales | | | 2,002.3 | | | 2,927.0 |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Adjusted operating profit/(loss) | 89.8 | (7.5) | 82.3 | 240.6 | 2.1 | 242.7 |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Restructuring costs | (122.4) | (13.7) | (136.1) | (16.2) | (0.8) | (17.0) |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Net gain on disposals and the exit of | - | - | - | - | 42.4 | 42.4 |
| businesses | | | | | | |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Amortisation of intangible assets | (5.0) | - | (5.0) | (4.1) | - | (4.1) |
| arising on acquisitions | | | | | | |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Impairment | (33.7) | - | (33.7) | (168.1) | (7.0) | (175.1) |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Operating (loss)/profit | (71.3) | (21.2) | (92.5) | 52.2 | 36.7 | 88.9 |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Operating margin(2) | 4.6% | (21.3)% | 4.1% | 8.7% | 1.3% | 8.3% |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| (Loss)/profit before tax | | | (114.9) | | | 61.3 |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Tax | | | (3.2) | | | (46.9) |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| (Loss)/profit after tax | | | (118.1) | | | 14.4 |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Diluted (loss)/earnings per share | | | (14.07)c | | | 0.42c |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Adjusted diluted earnings per | | | 2.99c | | | 16.84c |
| share(2) | | | | | | |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Operating cash flow | | | 14.6 | | | 90.4 |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
| Net debt | | | 515.9 | | | 702.8 |
+---------------------------------------+------------+--------------+------------+------------+--------------+----------+
(1) Restated (see note 1 to the accompanying financial statements).
(2) Based on adjusted operating profit.
Sales from ongoing segments for the first half of 2009 were $1,967.1 million (H1
2008: $2,771.1 million). Most of the Group's end markets weakened significantly,
which caused a corresponding decline in sales volumes across the Group,
particularly compared to a relatively strong first half in 2008. This was
mitigated partially by pricing actions taken towards the end of 2008.
Adjusted operating profit from ongoing segments was $89.8 million (H1 2008:
$240.6 million). The adjusted operating margin of ongoing segments was 4.6% (H1
2008: 8.7%). Profitability was adversely affected by the volume declines noted
above, and by initiatives to reduce inventory levels, which decreased absorption
of fixed costs, together with the lagged effect of higher raw material costs in
2008. This was partially offset by pricing actions and the increasing benefit of
restructuring initiatives.
Restructuring costs were $136.1 million (H1 2008: $17.0 million). These costs
are associated with the ongoing implementation of the restructuring initiatives
that were discussed in our 2008 Preliminary Results Announcement. A further
$19.8 million of restructuring costs are expected in the second half of the
year. The cash costs relating to these restructuring initiatives incurred in
the first half of the year were $34.6 million. Approximately $70 million of
cash costs are expected in the second half of the year.
The Group took an impairment charge of $33.7 million in the period (H1 2008:
$175.1 million). Restructuring initiatives accounted for $21.3 million, with the
remaining $12.4 million relating to the loan note taken as part of the
consideration on the disposal of Stant and Standard-Thomson. The impairment in
the comparative period relates to certain businesses with high exposure to the
North American automotive and housing markets.
During the first half of 2009, there was no net gain or loss on disposals and
the exit of businesses. During the first half of 2008, the Group sold Stant and
Standard-Thomson, which recently filed for Chapter 11 bankruptcy protection in
the US, on which it recognised a gain of $42.4 million.
Operating cash flow was $14.6 million (H1 2008: $90.4 million). Lower operating
profit combined with restructuring cash costs more than offset reductions in
capital expenditure and benefits from reduced inventory levels.
Net debt was $515.9 million (H1 2008: $702.8 million). The reduction in debt
reflects our continuing focus on generating cash and maintaining a strong
balance sheet. At the end of 2008, net debt was $476.4 million. The rise in net
debt since the end of 2008 reflects normal seasonal fluctuations in our cash
flows.
Group Priorities
The Group continues the execution of its four key priorities:
(i) Managing the cost base
The Group made good progress with its restructuring initiatives. In the first
half of 2009, headcount was reduced by 3,900, of which 2,500 was associated with
the Eagle and Cheetah restructuring initiatives and a further 1,400 associated
with other actions taken in response to the continuing adverse economic
conditions. The Group expects to make a further reduction of approximately
1,600 employees by the end of the year. So far this year 28 plant closures have
been announced or completed of which 15 are within the Industrial & Automotive
business group and 13 within Building Products. Expected annualised savings
through these restructuring initiatives remain at $150 million by the end of
2011.These restructuring initiatives will enable the Group to benefit from any
recovery in its end markets.
Rigorous expense management throughout the Group remains a high priority.
(ii) Managing the balance sheet
The Group continues to focus on generating cash and maintaining a strong balance
sheet. In the first half of 2009, operating cash flow was $14.6 million (H1
2008: $90.4 million), down principally due to the decline in activity
levels. Inventory levels were reduced by $105.7 million on a constant currency
basis over the first half as a result of lower volumes and the impact of
initiatives to reduce inventory levels. Net capital expenditure was $60.1
million in the first half of 2009; $44.8 million lower than the first half of
2008 (H1 2008: $104.9 million). Net debt was $515.9 million at the end of the
first half of 2009.
(iii)Driving top-line growth
The Gates Aftermarket business continues to grow and gain market share, and in
the first half completed the transition to key supplier status to over 1,300 CSK
stores acquired by O'Reilly Automotive, Inc. in North America.
In July of this year, we acquired Hydrolink, a fluid engineering services
provider to the oil and gas and marine sectors in the Middle East and CIS
regions. This acquisition supports our strategy of expanding our Gates service
offering, which we commenced last year. Hydrolink's product range covers
hydraulic system flushing, filtration and pump maintenance and supply, which
complements the hydraulic hose and fluid transfer product range of Gates Fluid
Power. Furthermore, the geographical footprint of Hydrolink provides immediate
expansion opportunities into 9 new locations across the Middle East and the CIS
regions. Hydrolink's sales in 2008 were approximately $40 million.
In March 2009, legislation was passed in Europe mandating the use of remote tyre
pressure monitoring systems on certain vehicles. This will become effective for
all new models approved after November 2012 and all vehicles manufactured after
November 2014. As a result, the market for these products is expected to double,
and Schrader Electronics is expected to benefit as a global leading manufacturer
and distributor of these products. Schrader Electronics is currently working
with European manufacturers to prepare for this introduction.
(iv)Reshaping the portfolio
The exit of Philips Doors and Windows commenced during the first half of the
year, as part of the Group's plan to dispose of or exit non-core businesses, and
is expected to be completed in the third quarter of this year.
End-Market Outlook for the remainder of 2009
Set out below are our expectations for end-market performance for the second
half of 2009 compared to the first half of 2009. The share of Group sales shown
below is based on sales of ongoing business segments for the 12 months ended 4
July 2009.
Market conditions remain uncertain; however we expect some modest improvement in
the second half from a slowdown in the rate of decline in some of our
end-markets.
Industrial
* North America (18.6% of Group sales)
North American industrial markets are expected to be flat, dependent upon the
extent and timing of an increase in general industrial activity.
* Europe (5.0% of Group sales)
European industrial activity is expected to perform in line with the North
American markets.
* Rest of World (5.9% of Group sales)
Industrial activity across the remainder of Tomkins' geographic markets is
expected to be weak, except for markets in China and India which are expected to
show moderate growth supported by stimulus plans.
Automotive Aftermarket (21.0% of Group sales)
* The global aftermarket is expected to be broadly flat.
Automotive Original Equipment
* North America (8.0% of Group sales)
Automotive Original Equipment production in North America is expected to
increase by 1.5 million units to approximately 5.0 million units, supported by
low inventory levels and fewer plant shutdowns.
* Europe (5.2% of Group sales)
Automotive Original Equipment production in Europe is expected to increase by
approximately 1 million units to approximately 8.7 million units, supported by
continued scrappage schemes.
* Rest of World (8.1% of Group sales)
The Chinese and Indian markets are expected to grow by low single digits. The
Brazilian market is expected to be flat or down by a low single digit
percentage.
Non-Residential Construction (18.1% of Group sales)
* US Non-Residential Construction is expected to be marginally lower.
Residential Construction (8.7% of Group sales)
* Annualised housing starts in the US are expected to be between 550,000 and
600,000 units.
Other markets include Manufactured Housing and Recreational Vehicles which in
total account for 1.4% of Group sales. These markets are expected to remain
soft.
Our strong market positions and the ability of our managers in cutting costs and
improving efficiencies, coupled with our strong balance sheet will enable us to
continue to mitigate the impact of these difficult end markets and generate cash
whilst positioning the Group for an eventual recovery in end markets.
3. OPERATING AND FINANCIAL REVIEW
3.1 Operating Review
Industrial & Automotive
+--------------------------------------------------+--------------+--------------+
| Continuing operations | Period |
+--------------------------------------------------+-----------------------------+
| $ million, unless otherwise stated | H1 2009 | H1 2008 |
+--------------------------------------------------+--------------+--------------+
| Sales | | |
+--------------------------------------------------+--------------+--------------+
| Ongoing segments | | |
+--------------------------------------------------+--------------+--------------+
| Power Transmission | 801.1 | 1,125.6 |
+--------------------------------------------------+--------------+--------------+
| Fluid Power | 281.9 | 443.4 |
+--------------------------------------------------+--------------+--------------+
| Sensors & Valves(1) | 135.0 | 225.2 |
+--------------------------------------------------+--------------+--------------+
| Other I&A(2) | 229.5 | 346.0 |
+--------------------------------------------------+--------------+--------------+
| Total sales from ongoing segments | 1,447.5 | 2,140.2 |
+--------------------------------------------------+--------------+--------------+
| Exited segment | | |
+--------------------------------------------------+--------------+--------------+
| Caps & Thermostats(3) | - | 80.2 |
+--------------------------------------------------+--------------+--------------+
| Total sales | 1,447.5 | 2,220.4 |
+--------------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------------+--------------+--------------+
| Adjusted operating profit/(loss) | | |
+--------------------------------------------------+--------------+--------------+
| Ongoing segments | | |
+--------------------------------------------------+--------------+--------------+
| Power Transmission | 81.5 | 134.8 |
+--------------------------------------------------+--------------+--------------+
| - Operating margin(4) | 10.2% | 12.0% |
+--------------------------------------------------+--------------+--------------+
| Fluid Power | (8.5) | 37.1 |
+--------------------------------------------------+--------------+--------------+
| - Operating margin(4) | (3.0)% | 8.4% |
+--------------------------------------------------+--------------+--------------+
| Sensors & Valves | (5.6) | 17.6 |
+--------------------------------------------------+--------------+--------------+
| - Operating margin(4) | (4.1)% | 7.8% |
+--------------------------------------------------+--------------+--------------+
| Other I&A | 8.1 | 36.4 |
+--------------------------------------------------+--------------+--------------+
| - Operating margin(4) | 3.5% | 10.5% |
+--------------------------------------------------+--------------+--------------+
| Total adjusted operating profit from ongoing | 75.5 | 225.9 |
| segments | | |
+--------------------------------------------------+--------------+--------------+
| - Operating margin(4) | 5.2% | 10.6% |
+--------------------------------------------------+--------------+--------------+
| Exited segment | | |
+--------------------------------------------------+--------------+--------------+
| Caps & Thermostats(3) | - | 10.3 |
+--------------------------------------------------+--------------+--------------+
| Total adjusted operating profit | 75.5 | 236.2 |
+--------------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------------+--------------+--------------+
| Capital expenditure (net) | 51.4 | 90.4 |
+--------------------------------------------------+--------------+--------------+
| Depreciation | 74.3 | 95.2 |
+--------------------------------------------------+--------------+--------------+
(1) Includes the Schrader Electronics and Schrader International
businesses.
(2) Includes the Dexter Axle, Plews and Ideal businesses.
(3) Stant and Standard-Thomson.
(4) Based on adjusted operating profit.
Overview
Sales from ongoing segments in the first half of 2009 were $1,447.5 million (H1
2008: $2,140.2 million).
Adjusted operating profit from ongoing segments was $75.5 million (H1 2008:
$225.9 million). The adjusted operating margin of ongoing segments was 5.2% (H1
2008: 10.6%).
Market background
US industrial production, as measured by the US Federal Reserve, continued to
decline on a monthly basis through the first half of the year, and at June was
14% lower year on year. European industrial production (as measured by
Eurostat) also continued to decline, with the industrial production index down
nearly 20% on average compared to 2008. The Chinese markets stabilised, with
production levels in India improving towards the end of the period.
The Automotive Aftermarket remained broadly flat across all of the Group's key
global markets.
The North American Automotive Original Equipment market was down approximately
50% in the first half of the year, driven by a sales rate approximately 35%
lower year on year, resulting in extensive plant closures across the industry in
the early part of the year. Automotive Original Equipment markets outside North
America were also affected, however the stimulus plans implemented in early 2009
helped to mitigate some of the declines driven by lack of demand, particularly
in Europe. European production was down 34% in the first half, with global
volumes 30% lower. In China, production was up by around 10%, with sales
approximately 20% higher.
Power Transmission
Sales in the first half of 2009 were $801.1 million (H1 2008: $1,125.6 million).
Adjusted operating profit was $81.5 million (H1 2008: $134.8 million). The
adjusted operating margin was 10.2% (H1 2008: 12.0%).
Sales for the first half were 28.8% lower year on year due primarily to
depressed sales volumes across most of our markets. Sales to the Industrial
Original Equipment and Replacement markets were affected by plant shutdowns,
short work weeks, a widespread decline in industrial activity and destocking
which continued throughout the first half. Our Gates Automotive Aftermarket
business (around 40% of the division's sales), accounts for the majority of our
aftermarket business, and remained broadly flat over the first half. Sales to
the Automotive Original Equipment market were also adversely affected by
extended plant shutdowns, short work weeks, the bankruptcy of GM and Chrysler,
and high levels of vehicle inventory. Pricing across the division held up
relatively well, helping to mitigate some of the volume declines.
Adjusted operating profit was adversely impacted by lower fixed cost absorption
from significantly reduced volumes and continued efforts to reduce inventory,
along with some remaining high raw material costs on inventory sold in the
period. This was partially offset by the increasing benefits of cost reduction
initiatives, which enabled the division to maintain double digit margins in the
period.
All plant closures associated with Power Transmission's restructuring
initiatives have been announced and are underway. Construction on the new plant
in Turkey has commenced, with the start of production targeted for 2010. The
closure of our Aachen facility continues on track, with full transfer of
production to our Dumfries and Turkey plants to be completed by the end of 2010.
The Gates Aftermarket group completed the transition to key supplier status to
over 1,300 CSK stores acquired by O'Reilly Automotive, Inc. in North America.
Fluid Power
Sales in the first half of 2009 were $281.9 million (H1 2008: $443.4 million).
During the first half of 2009 there was an adjusted operating
loss of $8.5 million (H1 2008: profit of $37.1 million). The adjusted operating
margin was (3.0)% (H1 2008: 8.4%).
Sales in the first half declined predominantly due to significantly lower
volumes in all of our geographical markets, driven by plant shutdowns and lower
general industrial activity, mainly in the European and North American
markets. Our Gates Engineering and Services division, however, continued to grow
and posted double digit growth rates for the period.
Adjusted operating profit decreased principally due to lower fixed cost
absorption from significantly reduced volumes and to reduce inventory levels,
coupled with the impact of higher raw material costs. Continued efforts to
reduce expenses helped to mitigate some of the impact of declining volumes.
Restructuring initiatives remain on track, with all plant closures announced and
production transfer currently underway. Production in our Belgian plant is
scheduled to finish in Q3 2009, and activity in our Rockford Illinois plant is
currently being transferred to other locations. We expanded our restructuring
initiatives through announcing the closure of our Boone, North Carolina facility
which is scheduled for completion by the end of 2009.
Our new plant in Changzhou, China is nearing completion and is scheduled to
start production in the last quarter of this year.
Sensors & Valves
Sales in the first half of 2009 were $135.0 million (H1 2008: $225.2 million).
During the first half of 2009 there was an adjusted operating
loss of $5.6 million (H1 2008: profit of $17.6 million). The adjusted margin
was (4.1)% (H1 2008: 7.8%).
Sales and adjusted operating profit decreased principally due to the declining
Automotive Original Equipment market in the US and Europe.
Schrader Electronics (SEL) won a new ongoing programme at Ford, contributing an
additional $10 million of business in the period. SEL continues to work with
other Group companies to develop innovative pressure and flow monitoring
technologies, particularly with our Gates businesses.
Other I&A
Sales in the first half of 2009 were $229.5 million (H1 2008: $346.0 million).
Adjusted operating profit was $8.1 million (H1 2008: $36.4 million). The
adjusted operating margin was 3.5% (H1 2008: 10.5%).
Sales in the first half decreased principally due to the declining industrial
production activity and weakening utility trailer and recreational vehicle end
markets. Operating profit decreased principally due to lower volumes along with
the continued impact of higher raw material prices, partially offset by pricing
activity, the benefit of headcount reductions and a continued effort to contain
costs.
Restructuring initiatives within the Industrial Products division, primarily
relating to our Dexter business, are expected to be completed during the second
half of 2009.
Building Products
+-------------------------------------------------+---------------+--------------+
| Continuing operations | Period |
+-------------------------------------------------+------------------------------+
| $ million, unless otherwise stated | H1 2009 | H1 2008 |
+-------------------------------------------------+---------------+--------------+
| Sales | | |
+-------------------------------------------------+---------------+--------------+
| Ongoing segments | | |
+-------------------------------------------------+---------------+--------------+
| Air Distribution | 446.2 | 521.3 |
+-------------------------------------------------+---------------+--------------+
| Bathware | 73.4 | 109.6 |
+-------------------------------------------------+---------------+--------------+
| Total sales from ongoing segments | 519.6 | 630.9 |
+-------------------------------------------------+---------------+--------------+
| Segment to be exited | | |
+-------------------------------------------------+---------------+--------------+
| Doors and Windows(1) | 35.2 | 75.7 |
+-------------------------------------------------+---------------+--------------+
| Total sales | 554.8 | 706.6 |
+-------------------------------------------------+---------------+--------------+
| | | |
+-------------------------------------------------+---------------+--------------+
| Adjusted operating profit | | |
+-------------------------------------------------+---------------+--------------+
| Ongoing segments | | |
+-------------------------------------------------+---------------+--------------+
| Air Distribution | 35.7 | 43.4 |
+-------------------------------------------------+---------------+--------------+
| - Operating margin(2) | 8.0% | 8.3% |
+-------------------------------------------------+---------------+--------------+
| Bathware | (5.6) | (8.6) |
+-------------------------------------------------+---------------+--------------+
| - Operating margin(2) | (7.6)% | (7.8)% |
+-------------------------------------------------+---------------+--------------+
| Total adjusted operating profit from ongoing | 30.1 | 34.8 |
| segments | | |
+-------------------------------------------------+---------------+--------------+
| - Operating margin(1) | 5.8% | 5.5% |
+-------------------------------------------------+---------------+--------------+
| Segment to be exited | | |
+-------------------------------------------------+---------------+--------------+
| Doors and Windows | (7.5) | (8.2) |
+-------------------------------------------------+---------------+--------------+
| Total adjusted operating profit | 22.6 | 26.6 |
+-------------------------------------------------+---------------+--------------+
| | | |
+-------------------------------------------------+---------------+--------------+
| Capital expenditure (net) | 8.6 | 14.4 |
+-------------------------------------------------+---------------+--------------+
| Depreciation | 17.6 | 20.2 |
+-------------------------------------------------+---------------+--------------+
(1) Philips Doors and Windows.
(2) Based on adjusted operating profit.
Overview
Sales from ongoing segments in the first half of 2009 were $519.6 million (H1
2008: $630.9 million).
Adjusted operating profit from ongoing segments was $30.1 million (H1 2008:
$34.8 million). The adjusted operating margin of ongoing segments improved to
5.8% (H1 2008: 5.5%), predominantly as a result of the benefit of restructuring
initiatives.
Market Background
Non-Residential Construction in the US, as measured by Dodge, declined by 49% on
a square feet basis in the first half of 2009, and by 41% in value terms. The US
Architectural Billings Index remained at historically low levels in early 2009,
notwithstanding some increase towards the middle of the year. Vacancy rates
continued to rise through the first half and now stand at nearly 17%, which is
the highest level in approximately four years.
Residential Construction in the US continued to decline in the early part of the
year. Annualised housing starts were approximately 50% lower year on year, and
at June were 580,000 units. The number of months' supply of unsold existing
homes remains high at around 10 months (NAHB).
Air Distribution
Sales in the first half of 2009 were $446.2 million (H1 2008: $521.3 million).
Adjusted operating profit was $35.7 million (H1 2008: $43.4 million). The
adjusted operating margin was 8.0% (H1 2008: 8.3%).
Sales into the Non-Residential Construction markets softened during the first
half of 2009, particularly in the second quarter, as the impact of the decline
in the non-residential construction market began to be felt in late-stage
construction activity. This was mitigated to some extent by the continued
performance in sales of our "green" product offering, with some large contract
wins on a number of construction projects initiated to improve the energy
efficiency of the building and achieve LEED (Leadership in Energy and
Environmental Design) status. The continued impact of pricing initiatives also
helped to mitigate some of the volume declines. Our new joint venture in the
UAE, Ruskin Titus Gulf, began production and is now working on a number of large
construction and infrastructure projects in the region.
Sales to the Residential Construction markets continued to be depressed
throughout the first half, mainly affecting our Hart & Cooley businesses. Sales
of chimney products remained relatively strong over the first half, offsetting
some of the market decline. Hart & Cooley closed three facilities during the
first half, with a further two facility closures planned for the remainder of
2009.
Adjusted operating profit declined due to the weakness in the residential
construction markets and softening non-residential markets. This was partially
offset by the increasing benefits of ongoing restructuring initiatives, together
with additional headcount and expense reductions, which enabled the group to
achieve a margin broadly in line with the previous year.
Bathware
Sales in the first half of 2009 were $73.4 million (H1 2008: $109.6 million).
During the first half of 2009 there was an adjusted operating loss of $5.6
million (H1 2008: loss of $8.6 million). The adjusted operating margin
was (7.6)% (H1 2008: (7.8)%).
Sales continued to suffer from persisting declines in the Residential
Construction and Remodelling markets. Bathware reduced operating losses through
its restructuring initiatives, prior year pricing actions and lower material
prices. During the first half, Bathware completed the closure of its Leander,
Texas plant, and has now substantially completed its restructuring initiatives.
3.2 Finance Review
Impairment
During the first half of 2009, the Group recognised impairments totalling $33.7
million, comprising $21.3 million in relation to assets that have become
impaired as a result of the Group's ongoing restructuring initiatives and $12.4
million in relation to the loan note taken by the Group as part of the
consideration on the disposal of Stant and Standard-Thomson.
Restructuring initiatives
Restructuring costs were $136.1 million and principally related to the
restructuring of the Group's manufacturing operations under Project Cheetah and
Eagle. Restructuring costs of $119.0 million relate to the Industrial and
Automotive division, $3.0 million to Building Products and $0.4 million to
corporate operations. A further $13.7 million relates to the Philips business.
Net finance costs
Net interest payable was $18.6 million (H1 2008: $23.4 million) and was lower
predominantly due to lower average net debt during the period.
The net finance cost in relation to post-employment benefits was $4.1 million
(H1 2008: $1.1 million), the increase due principally to the lower expected
return on plan assets.
Other finance income of $0.3 million (H1 2008: expense of $3.1 million)
principally represents changes in the fair value of translational hedging
instruments.
Tax
During the first half of 2009, the Group recognised an income tax expense of
$3.2 million (H1 2008: $46.9 million) on a loss before tax of $114.9 million (H1
2008: profit before tax of $61.3 million).
Excluding the effect of restructuring costs and impairments, the effective tax
rate is expected to be approximately 37% for 2009. Also excluding tax
adjustments in respect of prior years, the effective underlying rate for the
first half of 2009 was 28.2%, which is also the expected effective underlying
rate for the year as a whole.
Earnings per share
In the first half of 2009, there was a loss per share from continuing operations
of 14.07 cents (H1 2008: earnings per share of 0.42 cents).
Adjusted earnings per share is based on profit for the period from continuing
operations before restructuring initiatives, impairments and the amortisation of
intangibles arising on acquisitions and related tax effects. Adjusted diluted
earnings per share were 2.99 cents (H1 2008: 16.84 cents).
Interim dividend
The interim dividend for 2009 of 3.5 cents per share will be paid on 19 November
2009 to shareholders on the register on 16 October 2009. Shareholders with
registered addresses in the UK and the Republic of Ireland will receive their
dividends in Sterling, unless they choose to receive them in US dollars. All
other shareholders will receive their dividends in US dollars. Any currency
elections need to be received by our registrars, Equiniti, no later than 29
October 2009. The exchange rate that will be used to calculate the dividend
amount payable in Sterling will be determined by reference to the forward
exchange rate achieved by the Group on or around 5 November 2009 for settlement
on the dividend payment date. This rate will be published on the Group's website
on the following day.
The Dividend Reinvestment Plan ("DRIP") will again be offered in respect of the
interim dividend for 2009 to be paid on 19 November 2009. The last day for
receipt of elections under the DRIP by our registrars, Equiniti, will be 29
October 2009.
Based on the number of shares currently in issue, the interim dividend is
expected to amount to $30.9 million.
Cash flow
Cash generated from operations was $74.7 million (H1 2008: $195.3 million).
Cash generation was adversely affected by the decline in activity levels, but
the effect of this was mitigated by further working capital reduction
initiatives. Working capital increased by $25.4 million in the first half of
2009 (H1 2008: increased by 126.6 million). Working capital was $934.2 million
at the period end (H1 2008: $1,182.7 million).
Net capital expenditure was $60.1 million (H1 2008: $104.9 million),
representing 0.7 times depreciation (H1 2008: 0.9 times). Gross capital
expenditure in the first half of 2009 was $61.6 million (H1 2008: $106.7
million) and is expected to be around $140 million for 2009 as a whole (2008:
$193.8 million).
Operating cash flow was $14.6 million (H1 2008: $90.4 million).
The table below shows the movement in net debt in the period:
+---------------------------------------------------+------------------+------------------+--------------------+
| | Period |
+---------------------------------------------------+----------------------------------------------------------+
| $million | H1 2009 | H1 2008 | FY 2008 |
+---------------------------------------------------+------------------+------------------+--------------------+
| Opening net debt | (476.4) | (591.5) | (591.5) |
+---------------------------------------------------+------------------+------------------+--------------------+
| | | | |
+---------------------------------------------------+------------------+------------------+--------------------+
| Cash generated from operations | 74.7 | 195.3 | 628.7 |
+---------------------------------------------------+------------------+------------------+--------------------+
| Capital expenditure | (61.6) | (106.7) | (193.8) |
+---------------------------------------------------+------------------+------------------+--------------------+
| Disposal of property, plant and equipment | 1.5 | 1.8 | 7.9 |
+---------------------------------------------------+------------------+------------------+--------------------+
| Operating cash flow | 14.6 | 90.4 | 442.8 |
+---------------------------------------------------+------------------+------------------+--------------------+
| Taxation | (2.3) | (71.8) | (84.5) |
+---------------------------------------------------+------------------+------------------+--------------------+
| Interest (net) | (17.6) | (24.4) | (44.3) |
+---------------------------------------------------+------------------+------------------+--------------------+
| Other movements | (12.5) | (8.9) | (13.1) |
+---------------------------------------------------+------------------+------------------+--------------------+
| Free cash flow to equity shareholders | (17.8) | (14.7) | 300.9 |
+---------------------------------------------------+------------------+------------------+--------------------+
| Dividends | (17.4) | (149.1) | (246.2) |
+---------------------------------------------------+------------------+------------------+--------------------+
| Acquisitions | (1.4) | (65.1) | (65.8) |
+---------------------------------------------------+------------------+------------------+--------------------+
| Disposals | 0.6 | 121.5 | 124.6 |
+---------------------------------------------------+------------------+------------------+--------------------+
| Investments in associates | (2.1) | (1.1) | (10.4) |
+---------------------------------------------------+------------------+------------------+--------------------+
| (Purchase)/sale of other investments (net) | - | (0.1) | 1.5 |
+---------------------------------------------------+------------------+------------------+--------------------+
| Ordinary share movements | (1.4) | (3.9) | (4.5) |
+---------------------------------------------------+------------------+------------------+--------------------+
| Foreign currency movements | (6.4) | 1.3 | 16.1 |
+---------------------------------------------------+------------------+------------------+--------------------+
| Cash movement in net debt | (45.9) | (111.2) | 116.2 |
+---------------------------------------------------+------------------+------------------+--------------------+
| Non-cash movement in net debt | 6.4 | (0.1) | (1.1) |
+---------------------------------------------------+------------------+------------------+--------------------+
| (Increase)/decrease in net debt | (39.5) | (111.3) | 115.1 |
+---------------------------------------------------+------------------+------------------+--------------------+
| | | | |
+---------------------------------------------------+------------------+------------------+--------------------+
| Closing net debt | (515.9) | (702.8) | (476.4) |
+---------------------------------------------------+------------------+------------------+--------------------+
A reconciliation of the above table to the consolidated cash flow statement is
presented on page 28.
Borrowings
The Group has committed borrowing facilities and bonds in issue amounting to
$1,319.6 million.
Two bonds have been issued under the Group's GBP750 million Euro Medium Term
Note Programme: GBP150 million repayable in December 2011 and GBP250 million
repayable in September 2015.
The Group also has a GBP400 million multi-currency revolving credit facility
that expires in August 2010. As at 4 July 2009, the amount drawn under this
facility was $94.4 million (the maximum amount drawn under this facility so far
this year was $136.7 million). As previously announced, the Group recently
extended its committed bank funding with a $450 million forward-start committed
bank facility which matures in May 2012.
Overall, as at 4 July 2009 the Group had committed borrowing headroom of
$562.4 million in addition to cash and cash equivalents of $249.9 million.
Post retirement benefits
During the first half of 2009, the net liability recognised in respect of the
Group's defined benefit pension plans increased by $55.1 million to $235.7
million, due principally to a decline in the market value of the assets held by
the plans.
Cash contributions to defined benefit pension plans were $25.3 million (H1 2008
$23.6 million) and are expected to be in the region of $45 million for 2009 as a
whole.
An analysis of the change in the net liability is presented in note 17 to the
accompanying financial statements.
Acquisitions and disposals
Early in the second half of 2009, the Group acquired Hydrolink, a fluid
engineering services provider to the oil and gas and marine sectors in the
Middle East and CIS regions, and the remaining 40% minority shareholding in
Rolastar Pvt Ltd (in which it acquired a 60% shareholding in 2008). Both of
these acquisitions are for cash totalling up to $35 million.
Principal risks and uncertainties
Details of the principal risks and uncertainties facing the Group were set out
on pages 36 and 37 of the 2008 Annual Report, a copy of which is available on
the Company's website. In summary, those risks and uncertainties were as
follows: risks associated with the economic downturn (in particular those
affecting the US automotive and construction industries); risks arising from
illiquid credit markets; the cost and availability of raw materials; risks
associated with the Group's supply chain; risks associated with the Group's
ability to attract and retain talented employees, execution risk associated
with new strategic investments (in particular, in emerging economies); and the
inherent risk of product liability claims.
The principal risks and uncertainties facing the Group are unchanged since the
approval of the 2008 Annual Report and each of them has the potential to affect
the Group's results or financial position during the remainder of 2009.
Going concern
As discussed under the heading "End-Market Outlook for the remainder of
2009", the Group's end markets are expected to remain challenging during 2009.
Current economic conditions make forecasting extremely difficult and there is
the possibility that the Group's actual trading performance during the remainder
of the year may be materially different from management's expectations.
Based on internal forecasts and projections that take into account reasonably
possible changes in the Group's trading performance, the Directors believe that
the Group has adequate financial resources to continue in operation for the
foreseeable future. Accordingly, the Directors continue to adopt the going
concern basis in preparing the Group's financial statements.
Breakdown of underlying, acquisition and currency impact from 2008 to 2009
(unaudited)
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Ongoing segments | | Exchange | Like- | Acqns | Underlying | H1 2009 | Underlying |
| $ million, unless | H1 2008 | rate | for- | | change | | Change(2) |
| otherwise | | effect | like | | | | % |
| indicated | | | basis | | | | |
| | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| | | | | | | | |
| Sales(1) | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Industrial & | | | | | | | |
| Automotive | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Power Transmission | 1,125.6 | (117.4) | 1,008.2 | - | (207.1) | 801.1 | (20.5)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Fluid Power | 443.4 | (32.3) | 411.1 | 3.4 | (132.6) | 281.9 | (32.3)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Sensors & Valves | 225.2 | (36.2) | 189.0 | - | (54.0) | 135.0 | (28.6)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Other I&A | 346.0 | (6.5) | 339.5 | - | (110.0) | 229.5 | (32.4)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Industrial & | 2,140.2 | (192.4) | 1,947.8 | 3.4 | (503.7) | 1,447.5 | (25.9)% |
| Automotive | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Building Products | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Air Distribution | 521.3 | (9.7) | 511.6 | 12.2 | (77.6) | 446.2 | (15.2)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Bathware | 109.6 | - | 109.6 | - | (36.2) | 73.4 | (33.0)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Building Products | 630.9 | (9.7) | 621.2 | 12.2 | (113.8) | 519.6 | (18.3)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Total ongoing | 2,771.1 | (202.1) | 2,569.0 | 15.6 | (617.5) | 1,967.1 | (24.0)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| | |
| Adjusted operating profit(1) | |
+------------------------------------------------------------------------------------+------------+
| Industrial & | | | | | | | |
| Automotive | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Power Transmission | 134.8 | (14.4) | 120.4 | - | (38.9) | 81.5 | (32.3)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Fluid Power | 37.1 | (1.6) | 35.5 | 0.4 | (44.4) | (8.5) | (125.1)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Sensors & Valves | 17.6 | (3.8) | 13.8 | - | (19.4) | (5.6) | (140.6)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Other I&A | 36.4 | (1.0) | 35.4 | - | (27.3) | 8.1 | (77.1)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Industrial & | 225.9 | (20.8) | 205.1 | 0.4 | (130.0) | 75.5 | (63.4)% |
| Automotive | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Building Products | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Air Distribution | 43.4 | (0.8) | 42.6 | - | (6.9) | 35.7 | (16.2)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Bathware | (8.6) | - | (8.6) | - | 3.0 | (5.6) | 34.9% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Building Products | 34.8 | (0.8) | 34.0 | - | (3.9) | 30.1 | (11.5)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Corporate | (20.1) | (0.3) | (20.4) | - | 4.6 | (15.8) | 22.5% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| | | | | | | | |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
| Total ongoing | 240.6 | (21.9) | 218.7 | 0.4 | (129.3) | 89.8 | (59.1)% |
+--------------------+---------+----------+----------+--------+------------+---------+------------+
(1) From ongoing business segments.
(2) The underlying percentage change is calculated by taking the underlying
change as a percentage of the like-for-like basis.
Performance measures
Background
We assess the financial performance of our businesses using a variety of
measures. Some of those measures are neither explicitly defined under IFRS nor
required to be presented in accordance with a particular IFRS and are therefore
termed "non-GAAP measures". An explanation of those measures and the limitations
of non-GAAP measures is set out on pages 10 to 12 of the 2008 Annual Report. We
outline below the performance measures to which we refer in this announcement.
Adjusted operating profit
Adjusted operating profit represents operating profit before specific items
that are considered to hinder comparison of operating performance either year on
year or between different businesses.
During the period under review, these items were restructuring initiatives
(comprising restructuring costs and the net gain or loss on disposals and on the
exit of businesses), impairments and the amortisation of intangible assets
arising on acquisitions.
A reconciliation of operating profit to adjusted operating profit is presented
in note 2 to the accompanying financial statements.
Adjusted operating margin
Adjusted operating margin represents adjusted operating profit as a percentage
of sales.
Underlying change in sales and adjusted operating profit (non-GAAP measures)
We define the underlying change in a performance measure as the year-on-year
change excluding the effect of currency fluctuations and the contribution before
organic growth of businesses that have been acquired or disposed of during the
current and prior years.
Reconciliations identifying the underlying change in sales and adjusted
operating profit of the Group's ongoing segments are presented on page 12.
Adjusted earnings per share (non-GAAP measure)
Earnings for the purpose of calculating adjusted earnings per share represents
earnings from continuing operations adjusted for the specific items excluded in
arriving at adjusted operating profit and the tax effects of those items.
We calculate adjusted basic and diluted earnings per share using the average
number of shares that are used in calculating the equivalent measures under IFRS
as described in note 9 to the accompanying financial statements.
Operating cash flow (non-GAAP measure)
Operating cash flow represents cash generated from operations less net capital
expenditure (cash outflows on the purchase of property, plant and equipment and
non-integral computer software) less proceeds from the disposal of property,
plant and equipment.
A reconciliation of cash generated from operations to operating cash flow is
presented on page 33.
Free cash flow (non-GAAP measure)
Free cash flow represents operating cash flow net of cash flows in relation to
tax, interest and other items (principally dividends received from associates
and cash flows involving minority shareholders).
A reconciliation of cash
generated from operations to free cash flow is presented on page 33.
Net debt
Net debt represents bank overdrafts, bank and other loans, finance lease
obligations and the carrying amount of derivatives used to hedge translational
exposures, less cash and cash equivalents and collateralised cash (included in
trade and other receivables).
An analysis of net debt is presented in note 11 to the accompanying financial
statements.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Forward-looking statements are identified by the words "expect", "believe",
"intend", "anticipate", "estimate", "will", "may", "could", "should" and similar
expressions. Under the safe harbour provisions of the US Private Securities
Litigation Reform Act of 1995, the Company cautions that any forward-looking
statements made by the Company, including those made in this announcement in
relation to the outlook for the remainder of 2009, are subject to risks and
uncertainties that may cause actual results to differ materially from those
predicted. Risks and uncertainties that may affect the Group's operations
include, but are not limited to, those described in the Company's Annual Report
on Form 20-F and in other filings with the US Securities and Exchange
Commission. The Company disclaims any obligation to update any forward-looking
statement, whether as a result of new information, future events or otherwise,
except as required by law.
Statement of directors' ResponsibilitIES
The Directors declare that to the best of their knowledge:
1) the condensed financial statements set out on pages 16 to 32 have been
prepared in accordance with IAS 34 "Interim
Financial Reporting" and
give a true and fair view of the Group's assets, liabilities and financial
position as at 4 July 2009
and of its loss for the six-month period
then ended;
2) the interim management report includes a fair review of:
a) the important events that have occurred during the six months ended 4
July 2009 and their impact on the condensed
financial statements;
and
b) the principal risks and uncertainties for the remaining six months of
the year; and
3) there were no related party transactions or changes in the related party
transactions described in the 2008 Annual Report
that materially
affected the Group's results or financial position during the six months ended 4
July 2009.
At the date of this statement, the Directors of the Company remain those listed
on pages 40 and 41 of the 2008 Annual Report.
By order of the Board
+--------------------+-------------------+--------------------+
| J. Nicol | | J.W. Zimmerman |
+--------------------+-------------------+--------------------+
| Chief Executive | | Finance Director |
+--------------------+-------------------+--------------------+
| 12 August 2009 | | |
+--------------------+-------------------+--------------------+
INDEPENDENT REVIEW REPORT TO TOMKINS PLC
Introduction
We have been engaged by Tomkins plc ("the Company") to review the condensed
financial statements of the Company and its subsidiaries (together, "the Group")
for the six months ended 4 July 2009, which comprise the consolidated income
statement, consolidated cash flow statement, consolidated balance sheet,
consolidated statement of comprehensive income, the consolidated statement of
changes in equity and the related notes 1 to 19. We have read the other
information contained in the half-yearly report and considered whether it
contains any apparent misstatements or material inconsistencies with the
condensed financial statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements 2410 (UK and Ireland), "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued
by the Auditing Practices Board. Our work has been undertaken so that we might
state to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the half-yearly report in
accordance with the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
As disclosed in note 1, the Group's annual financial statements are prepared in
accordance with IFRSs as adopted for use in the European Union. The condensed
financial statements contained in this half-yearly report have been prepared in
accordance with International Accounting Standard 34, "Interim Financial
Reporting" ("IAS 34"), as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
financial statements contained in the half-yearly report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed financial statements for the six months ended 4 July 2009 are
not prepared, in all material respects, in accordance with IAS 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditors
London
12 August 2009
CONDENSED FINANCIAL STATEMENTS
condensed Consolidated income statement (UNAUDITED)
SIX MONTHS ENDED 4 JULY 2009
+------------------------------------------------+------+-----------+-----------+-----------+---+
| |Note | 6 | Restated* | Restated* |
| | | months | 6 months | Year |
| | | ended | ended | ended |
| | | 4 July | 28 June | 3 January |
| | | 2009 | 2008 | |
| | | $ | $ | 2009 |
| | | million | million | $ |
| | | | | million |
+------------------------------------------------+------+-----------+-----------+-----------+
| Continuing operations | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Sales | 2 | 2,002.3 | 2,927.0 | 5,515.9 |
+------------------------------------------------+------+-----------+-----------+-----------+
| Cost of sales | | (1,485.5) | (2,118.4) | (4,023.7) |
+------------------------------------------------+------+-----------+-----------+-----------+
| Gross profit | | 516.8 | 808.6 | 1,492.2 |
+------------------------------------------------+------+-----------+-----------+-----------+
| Distribution costs | | (215.9) | (313.2) | (584.5) |
+------------------------------------------------+------+-----------+-----------+-----------+
| Administrative expenses | | (223.5) | (257.3) | (513.3) |
+------------------------------------------------+------+-----------+-----------+-----------+
| Impairments | 3 | (33.7) | (175.1) | (342.4) |
+------------------------------------------------+------+-----------+-----------+-----------+
| Restructuring costs | 4 | (136.1) | (17.0) | (26.0) |
+------------------------------------------------+------+-----------+-----------+-----------+
| Gain on disposals and on the exit of | 4 | - | 42.4 | 43.0 |
| businesses | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Restructuring initiatives | | (136.1) | 25.4 | 17.0 |
+------------------------------------------------+------+-----------+-----------+-----------+
| Share of (loss)/profit of associates | | (0.1) | 0.5 | (2.1) |
+------------------------------------------------+------+-----------+-----------+-----------+
| Operating (loss)/profit | | (92.5) | 88.9 | 66.9 |
+------------------------------------------------+------+-----------+-----------+-----------+
| | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Interest payable | 5 | (55.7) | (69.2) | (137.8) | |
+------------------------------------------------+------+-----------+-----------+-----------+---+
| Investment income | 6 | 33.0 | 44.7 | 87.8 |
+------------------------------------------------+------+-----------+-----------+-----------+
| Other finance income/(expense) | 7 | 0.3 | (3.1) | (25.0) |
+------------------------------------------------+------+-----------+-----------+-----------+
| Net finance costs | | (22.4) | (27.6) | (75.0) |
+------------------------------------------------+------+-----------+-----------+-----------+
| (Loss)/profit before tax | | (114.9) | 61.3 | (8.1) |
+------------------------------------------------+------+-----------+-----------+-----------+
| Income tax expense | 8 | (3.2) | (46.9) | (38.4) |
+------------------------------------------------+------+-----------+-----------+-----------+
| (Loss)/profit for the period from continuing | | (118.1) | 14.4 | (46.5) |
| operations | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Discontinued operations | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Loss for the period from discontinued | | - | (0.8) | - |
| operations | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| (Loss)/profit for the period | | (118.1) | 13.6 | (46.5) |
+------------------------------------------------+------+-----------+-----------+-----------+
| Minority interests | | (5.8) | (10.7) | (18.1) |
+------------------------------------------------+------+-----------+-----------+-----------+
| (Loss)/profit for the period attributable to | | (123.9) | 2.9 | (64.6) |
| equity shareholders | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Reconciliation of operating (loss)/profit to | | | | |
| adjusted operating profit | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Operating (loss)/profit | | (92.5) | 88.9 | 66.9 |
+------------------------------------------------+------+-----------+-----------+-----------+
| Adjustments: | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| - Amortisation of intangible assets arising on | | 5.0 | 4.1 | 10.6 |
| acquisitions | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| - Impairments | 3 | 33.7 | 175.1 | 342.4 |
+------------------------------------------------+------+-----------+-----------+-----------+
| - Restructuring initiatives | 4 | 136.1 | (25.4) | (17.0) |
+------------------------------------------------+------+-----------+-----------+-----------+
| Adjusted operating profit | | 82.3 | 242.7 | 402.9 | |
+------------------------------------------------+------+-----------+-----------+-----------+---+
| | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| (Loss)/earnings per share | 9 | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Basic and diluted | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Continuing operations | | (14.07)c | 0.42 c | (7.34)c |
+------------------------------------------------+------+-----------+-----------+-----------+
| Discontinued operations | | - c | (0.09)c | - c |
+------------------------------------------------+------+-----------+-----------+-----------+
| Total operations | | (14.07)c | 0.33 c | (7.34)c |
+------------------------------------------------+------+-----------+-----------+-----------+
| | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Adjusted earnings per share | 9 | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Basic | | 3.00 c | 16.89 c | 26.03 c |
+------------------------------------------------+------+-----------+-----------+-----------+
| Diluted | | 2.99 c | 16.84 c | 25.96 c |
+------------------------------------------------+------+-----------+-----------+-----------+
| | | | | |
+------------------------------------------------+------+-----------+-----------+-----------+
| Dividends per ordinary share | 10 | 3.50 c | 11.02 c | 13.02 c |
+------------------------------------------------+------+-----------+-----------+-----------+---+
* See note 1
condensed Consolidated CASH FLOW statement (UNAUDITED)
SIX MONTHS ENDED 4 JULY 2009
+-----------------------------------------------+------+----------+----------+----------+
| | Note | 6 months | 6 months | Year |
| | | ended | | ended |
| | | 4 July | ended | 3 |
| | | 2009 | 28 June | January |
| | | $ | 2008 | 2009 |
| | | million | $ | $ |
| | | | million | million |
+-----------------------------------------------+------+----------+----------+----------+
| Operating activities | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Cash generated from operations | 11 | 74.7 | 195.3 | 628.7 |
+-----------------------------------------------+------+----------+----------+----------+
| Income taxes paid | | (31.5) | (78.5) | (116.3) |
+-----------------------------------------------+------+----------+----------+----------+
| Income taxes received | | 29.2 | 6.7 | 31.8 |
+-----------------------------------------------+------+----------+----------+----------+
| Net cash inflow from operating activities | | 72.4 | 123.5 | 544.2 |
+-----------------------------------------------+------+----------+----------+----------+
| | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Investing activities | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Purchase of property, plant and equipment | | (56.3) | (100.3) | (183.2) |
+-----------------------------------------------+------+----------+----------+----------+
| Purchase of computer software | | (5.3) | (6.4) | (10.6) |
+-----------------------------------------------+------+----------+----------+----------+
| Capitalisation of development costs | | (0.5) | (0.2) | (0.6) |
+-----------------------------------------------+------+----------+----------+----------+
| Disposal of property, plant and equipment | | 1.5 | 1.8 | 7.9 |
+-----------------------------------------------+------+----------+----------+----------+
| Purchase of available-for-sale investments | | - | (0.1) | (0.1) |
+-----------------------------------------------+------+----------+----------+----------+
| Sale of available-for-sale investments | | - | - | 1.6 |
+-----------------------------------------------+------+----------+----------+----------+
| Purchase of interests in associates | | (2.1) | (1.1) | (10.4) |
+-----------------------------------------------+------+----------+----------+----------+
| Purchase of subsidiaries, net of cash | | (1.4) | (64.3) | (65.0) |
| acquired | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Sale of businesses and subsidiaries, net of | | 0.6 | 121.5 | 124.6 |
| cash disposed | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Interest received | | 2.2 | 5.3 | 11.2 |
+-----------------------------------------------+------+----------+----------+----------+
| Dividends received from associates | | 0.2 | 0.4 | 0.6 |
+-----------------------------------------------+------+----------+----------+----------+
| Net cash outflow from investing activities | | (61.1) | (43.4) | (124.0) |
+-----------------------------------------------+------+----------+----------+----------+
| | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Financing activities | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Issue of ordinary shares | | - | 0.2 | 0.2 |
+-----------------------------------------------+------+----------+----------+----------+
| Draw-down of bank and other loans | | 2.8 | 68.9 | 114.6 |
+-----------------------------------------------+------+----------+----------+----------+
| Repayment of bank and other loans | | (50.7) | (1.0) | (15.6) |
+-----------------------------------------------+------+----------+----------+----------+
| Receipts/(payments) on foreign currency | | 50.1 | (27.3) | (178.6) |
| derivatives | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Capital element of finance lease rental | | (0.7) | (1.4) | (2.8) |
| payments | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Interest element of finance lease rental | | (0.2) | (0.3) | (0.5) |
| payments | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Decrease in collateralised cash | | 0.5 | 0.8 | 0.7 |
+-----------------------------------------------+------+----------+----------+----------+
| Purchase of own shares | | (1.4) | (4.1) | (4.7) |
+-----------------------------------------------+------+----------+----------+----------+
| Interest paid | | (19.6) | (29.4) | (55.0) |
+-----------------------------------------------+------+----------+----------+----------+
| Financing costs paid | | (6.3) | - | - |
+-----------------------------------------------+------+----------+----------+----------+
| Equity dividend paid | | (17.4) | (149.1) | (246.2) |
+-----------------------------------------------+------+----------+----------+----------+
| Investment by a minority shareholder in a | | - | 0.4 | 0.4 |
| subsidiary | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Dividend paid to a minority shareholder in a | | (5.9) | (9.5) | (13.5) |
| subsidiary | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Net cash outflow from financing activities | | (48.8) | (151.8) | (401.0) |
+-----------------------------------------------+------+----------+----------+----------+
| | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| (Decrease)/increase in cash and cash | | (37.5) | (71.7) | 19.2 |
| equivalents | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Net cash and cash equivalents at the | | 278.2 | 280.2 | 280.2 |
| beginning of the period | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Foreign currency translation | | (6.2) | 11.0 | (21.2) |
+-----------------------------------------------+------+----------+----------+----------+
| Net cash and cash equivalents at the end of | | 234.5 | 219.5 | 278.2 |
| the period | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| | | | | |
+-----------------------------------------------+------+----------+----------+----------+
| Analysis of net cash and cash equivalents: | | 6 months | 6 months | Year |
| | | ended | | ended |
| | | 4 July | ended | 3 |
| | | 2009 | 28 June | January |
| | | $ | 2008 | 2009 |
| | | million | $ | $ |
| | | | million | million |
+-----------------------------------------------+------+----------+----------+----------+
| Cash and cash equivalents | | 249.9 | 242.4 | 291.9 |
+-----------------------------------------------+------+----------+----------+----------+
| Bank overdrafts | | (15.4) | (22.9) | (13.7) |
+-----------------------------------------------+------+----------+----------+----------+
| | | 234.5 | 219.5 | 278.2 |
+-----------------------------------------------+------+----------+----------+----------+
As at 4 July 2009, the Group's net debt was $515.9 million (28 June 2008: $702.8
million; 3 January 2009: $476.4 million).
A reconciliation of the change in net cash and cash equivalents to the movement
in net debt is presented in note 11.
condensed Consolidated BALANCE SHEET (UNAUDITED)
AS AT 4 JULY 2009
+-------------------------------------------------+------+-----------+-----------+-----------+
| |Note | As at | As at | As at |
| | | 4 July | 28 June | 3 |
| | | 2009 | | January |
| | | $ | 2008 | 2009 |
| | | million | $ | $ |
| | | | million | million |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Non-current assets | | | | |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Goodwill | 12 | 423.0 | 603.1 | 415.9 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Other intangible assets | 12 | 96.2 | 95.4 | 108.8 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Property, plant and equipment | 13 | 1,137.6 | 1,343.9 | 1,167.3 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Investments in associates | | 20.2 | 16.3 | 20.3 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Trade and other receivables | 14 | 102.9 | 38.4 | 105.9 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Deferred tax assets | | 78.6 | 48.1 | 64.8 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Post-employment benefit surpluses | 17 | 10.6 | 8.3 | 5.3 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| | | 1,869.1 | 2,153.5 | 1,888.3 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Current assets | | | | |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Inventories | | 680.5 | 879.7 | 772.4 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Trade and other receivables | 14 | 786.8 | 1,110.9 | 769.7 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Income tax recoverable | | 41.7 | 57.7 | 47.6 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Available-for-sale investments | | 1.1 | 3.2 | 0.8 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Cash and cash equivalents | | 249.9 | 242.4 | 291.9 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| | | 1,760.0 | 2,293.9 | 1,882.4 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Assets held for sale | | 3.6 | 4.3 | - |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Total assets | | 3,632.7 | 4,451.7 | 3,770.7 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| | | | | |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Current liabilities | | | | |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Bank overdrafts | | (15.4) | (22.9) | (13.7) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Bank and other loans | | (45.5) | (76.1) | (29.5) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Obligations under finance leases | | (1.3) | (1.9) | (1.5) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Trade and other payables | 15 | (531.4) | (805.3) | (650.1) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Income tax liabilities | | (13.5) | (28.8) | (17.9) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Provisions | 16 | (132.3) | (51.2) | (48.8) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| | | (739.4) | (986.2) | (761.5) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Non-current liabilities | | | | |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Bank and other loans | | (783.7) | (845.8) | (762.9) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Obligations under finance leases | | (4.9) | (7.1) | (5.4) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Trade and other payables | 15 | (19.6) | (32.4) | (51.6) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Post-employment benefit obligations | 17 | (392.9) | (284.1) | (333.6) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Deferred tax liabilities | | (15.9) | (42.5) | (29.7) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Income tax liabilities | | (79.0) | (67.6) | (63.5) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Provisions | 16 | (24.5) | (27.5) | (23.2) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| | | (1,320.5) | (1,307.0) | (1,269.9) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Total liabilities | | (2,059.9) | (2,293.2) | (2,031.4) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Net assets | | 1,572.8 | 2,158.5 | 1,739.3 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| | | | | |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Capital and reserves | | | | |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Share capital | | 79.7 | 79.7 | 79.7 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Share premium account | | 799.1 | 799.1 | 799.1 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Other reserves | | 772.9 | 921.0 | 736.2 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| (Accumulated deficit)/retained profit | | (204.8) | 238.8 | (4.2) |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Shareholders' equity | | 1,446.9 | 2,038.6 | 1,610.8 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Minority interests | | 125.9 | 119.9 | 128.5 |
+-------------------------------------------------+------+-----------+-----------+-----------+
| Total equity | | 1,572.8 | 2,158.5 | 1,739.3 |
+-------------------------------------------------+------+-----------+-----------+-----------+
CONDENSED Consolidated statement of comprehensive income (UNAUDITED)
SIX MONTHS ENDED 4 JULY 2009
+-----------------------------------------------------+----------+-----------+-----------+
| | 6 months | Restated* | Restated* |
| | ended | 6 months | Year |
| | 4 July | ended | ended |
| | 2009 | 28 June | 3 January |
| | $ | 2008 | |
| | million | $ | 2009 |
| | | million | $ |
| | | | million |
+-----------------------------------------------------+----------+-----------+-----------+
| (Loss)/profit for the period | (118.1) | 13.6 | (46.5) |
+-----------------------------------------------------+----------+-----------+-----------+
| Other comprehensive (loss)/income | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| Foreign currency translation: | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| - Currency translation differences on foreign | | | |
| operations: | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| Subsidiaries | 29.8 | 42.5 | (211.7) |
+-----------------------------------------------------+----------+-----------+-----------+
| Associates | - | (0.7) | (3.2) |
+-----------------------------------------------------+----------+-----------+-----------+
| - Gain/(loss) on net investment hedges | 3.7 | (5.9) | 57.2 |
+-----------------------------------------------------+----------+-----------+-----------+
| - Reclassification to profit or loss of currency | - | 6.4 | 6.7 |
| translation loss on foreign operations sold | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| | 33.5 | 42.3 | (151.0) |
+-----------------------------------------------------+----------+-----------+-----------+
| Available-for-sale investments: | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| - Gain/(loss) arising in the period | 0.4 | - | (1.0) |
+-----------------------------------------------------+----------+-----------+-----------+
| - Reclassification to profit or loss of gain on | - | - | (1.2) |
| investments sold | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| | 0.4 | - | (2.2) |
+-----------------------------------------------------+----------+-----------+-----------+
| Post-employment benefits: | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| - Net actuarial loss | (91.3) | - | (98.8) |
+-----------------------------------------------------+----------+-----------+-----------+
| - Effect of the asset ceiling | 13.7 | - | 12.3 |
+-----------------------------------------------------+----------+-----------+-----------+
| | (77.6) | - | (86.5) |
+-----------------------------------------------------+----------+-----------+-----------+
| Other comprehensive (loss)/income before tax | (43.7) | 42.3 | (239.7) |
+-----------------------------------------------------+----------+-----------+-----------+
| Income tax benefit on components of other | 17.4 | 2.8 | 14.3 |
| comprehensive (loss)/income | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| Other comprehensive (loss)/income after tax | (26.3) | 45.1 | (225.4) |
+-----------------------------------------------------+----------+-----------+-----------+
| | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| Comprehensive (loss)/income for the period | (144.4) | 58.7 | (271.9) |
+-----------------------------------------------------+----------+-----------+-----------+
| | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| Attributable to: | | | |
+-----------------------------------------------------+----------+-----------+-----------+
| - Equity shareholders in Tomkins plc | (149.7) | 47.2 | (288.3) |
+-----------------------------------------------------+----------+-----------+-----------+
| - Minority shareholders in subsidiaries | 5.3 | 11.5 | 16.4 |
+-----------------------------------------------------+----------+-----------+-----------+
| | (144.4) | 58.7 | (271.9) |
+-----------------------------------------------------+----------+-----------+-----------+
* See note 1
CONDENSED consolidated statement of changes in equity (UNAUDITED)
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| SIX MONTHS ENDED 4 JULY 2009 | Shareholders' equity | | |
+------------------------------+----------------------------------------------------------+-----------+----------+
| | Share | Share | Other | Restated* | Total | Minority | Total |
| | capital | premium | reserves | (Accumulated | $ | interests | equity |
| | $ | account | $ | deficit)/ | million | $ million | $ |
| | million | $ | million | retained | | | million |
| | | million | | profit | | | |
| | | | | $ million | | | |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| As at 4 January 2009 | 79.7 | 799.1 | 736.2 | (4.2) | 1,610.8 | 128.5 | 1,739.3 |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| | | | | | | | |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| (Loss)/profit for the period | - | - | - | (123.9) | (123.9) | 5.8 | (118.1) |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| Other comprehensive | - | - | 34.3 | (60.1) | (25.8) | (0.5) | (26.3) |
| income/(loss) | | | | | | | |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| Total comprehensive | - | - | 34.3 | (184.0) | (149.7) | 5.3 | (144.4) |
| income/(loss) | | | | | | | |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| Other changes in equity: | | | | | | | |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| - Dividends paid on ordinary | - | - | - | (17.4) | (17.4) | - | (17.4) |
| shares | | | | | | | |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| - Purchase of own shares | - | - | (1.4) | - | (1.4) | - | (1.4) |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| - Transfer of own shares | - | - | 3.8 | (3.8) | - | - | - |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| - Cost of share-based | - | - | - | 4.6 | 4.6 | - | 4.6 |
| incentives | | | | | | | |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| - Dividends paid to minority | - | - | - | - | - | (5.9) | (5.9) |
| shareholders | | | | | | | |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| - Minority interests on | - | - | - | - | - | (2.0) | (2.0) |
| acquisition of subsidiaries | | | | | | | |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| | - | - | 2.4 | (16.6) | (14.2) | (7.9) | (22.1) |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
| As at 4 July 2009 | 79.7 | 799.1 | 772.9 | (204.8) | 1,446.9 | 125.9 | 1,572.8 |
+------------------------------+---------+---------+----------+----------------+----------+-----------+----------+
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| SIX MONTHS ENDED 28 JUNE 2008 | | | |
+--------------------------------+-------------------------------------------------+--------+----------+
| As at 30 December 2007 | 65.5 | 679.4 | 1,013.4 | 379.5 | 2,137.8 | 117.0 | 2,254.8 |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| Profit for the period | - | - | - | 2.9 | 2.9 | 10.7 | 13.6 |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| Other comprehensive income | - | - | 41.5 | 2.8 | 44.3 | 0.8 | 45.1 |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| Total comprehensive income | - | - | 41.5 | 5.7 | 47.2 | 11.5 | 58.7 |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| Other changes in equity: | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Change of functional | 22.6 | 112.4 | (135.0) | - | - | - | - |
| currency | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Ordinary shares issued | - | 0.2 | - | - | 0.2 | - | 0.2 |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Redenomination of ordinary | (8.4) | 7.1 | 1.3 | - | - | - | - |
| share capital | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Dividends paid on ordinary | - | - | - | (149.1) | (149.1) | - | (149.1) |
| shares | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Purchase of own shares | - | - | (4.1) | - | (4.1) | - | (4.1) |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Transfer of own shares | - | - | 3.9 | (3.9) | - | - | - |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Cost of share-based | - | - | - | 6.6 | 6.6 | - | 6.6 |
| incentives | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Dividends paid to minority | - | - | - | - | - | (10.3) | (10.3) |
| shareholders | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Shares issued by a | - | - | - | - | - | 0.4 | 0.4 |
| subsidiary to minority | | | | | | | |
| shareholders | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Minority interests on | - | - | - | - | - | 1.3 | 1.3 |
| acquisition of subsidiaries | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| | 14.2 | 119.7 | (133.9) | (146.4) | (146.4) | (8.6) | (155.0) |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| As at 28 June 2008 | 79.7 | 799.1 | 921.0 | 238.8 | 2,038.6 | 119.9 | 2,158.5 |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| YEAR ended 3 january 2009 | | | |
+--------------------------------+-------------------------------------------------+--------+----------+
| As at 30 December 2007 | 65.5 | 679.4 | 1,013.4 | 379.5 | 2,137.8 | 117.0 | 2,254.8 |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| (Loss)/profit for the period | - | - | - | (64.6) | (64.6) | 18.1 | (46.5) |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| Other comprehensive loss | - | - | (150.9) | (72.8) | (223.7) | (1.7) | (225.4) |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| Total comprehensive | - | - | (150.9) | (137.4) | (288.3) | 16.4 | (271.9) |
| (loss)/income | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| Other changes in equity: | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Change of functional | 22.6 | 112.4 | (135.0) | - | - | - | - |
| currency | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Ordinary shares issued | - | 0.2 | - | - | 0.2 | - | 0.2 |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Redenomination of ordinary | (8.4) | 7.1 | 1.3 | - | - | - | - |
| share capital | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Dividends paid on ordinary | - | - | - | (246.2) | (246.2) | - | (246.2) |
| shares | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Purchase of own shares | - | - | (4.7) | - | (4.7) | - | (4.7) |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Transfer of own shares | - | - | 12.1 | (12.1) | - | - | - |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Cost of share-based | - | - | - | 12.0 | 12.0 | - | 12.0 |
| incentives | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Dividends paid to minority | - | - | - | - | - | (13.5) | (13.5) |
| shareholders | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Shares issued by a | - | - | - | - | - | 0.4 | 0.4 |
| subsidiary to minority | | | | | | | |
| shareholders | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| - Minority interests on | - | - | - | - | - | 8.2 | 8.2 |
| acquisition of subsidiaries | | | | | | | |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| | 14.2 | 119.7 | (126.3) | (246.3) | (238.7) | (4.9) | (243.6) |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
| As at 3 January 2009 | 79.7 | 799.1 | 736.2 | (4.2) | 1,610.8 | 128.5 | 1,739.3 |
+--------------------------------+-------+--------+----------+----------+----------+--------+----------+
* See note 1
Notes to the condensed financial statements (Unaudited)
SIX MONTHS ENDED 4 JULY 2009
1 Basis of Preparation
The condensed financial statements for the six months ended 4 July 2009 have
been prepared on a going concern basis in accordance with IAS 34 "Interim
Financial Reporting" and the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
The Group's annual financial statements are prepared in accordance with IFRSs as
adopted for use in the European Union. Except as noted below, the Group's
principal accounting policies are unchanged compared with the year ended 3
January 2009.
At the beginning of the current period, the Group adopted the following
accounting pronouncements that are relevant to its operations, none of which had
any significant impact on its results or financial position:
* IAS 1 Revised (2007) "Presentation of Financial Statements".
* IAS 23 Revised (2007) "Borrowing Costs".
* Amendment to IFRS 2 "Share-based Payment - Vesting Conditions and
Cancellations".
* Improvements to IFRS 2008, except where adoption of an improvement is not
permitted without also adopting early IAS 27 Revised (2008) "Consolidated and
Separate Financial Statements".
* IFRIC 16 "Hedges of a Net Investment in a Foreign Operation"
An outline of each of these pronouncements was provided on pages 74 and 75 of
the 2008 Annual Report.
Retrospective application of the amendment to IFRS 2 had the effect of
increasing administrative expenses, by $0.3 million to $257.3 million in the
first half of 2008 and by $0.5 million to $513.3 million in 2008 as a whole, and
there was a corresponding increase in the credit to equity in relation to
share-based incentives (there were no tax effects).
The condensed financial statements have been reviewed by the auditors, Deloitte
LLP, and their review report is set out on page 15.
The condensed financial statements do not constitute statutory accounts. The
statutory accounts of Tomkins plc for the year ended 3 January 2009, on which
the auditors gave an unqualified report that did not draw attention to any
matters of emphasis and did not contain a statement under section 237(2) or
237(3) of the Companies Act 1985, have been delivered to the Registrar of
Companies.
The condensed financial statements were approved by the Board of Directors on
12 August 2009.
2 Segment information - Continuing operations
The Group's operating segments are identified by grouping together businesses
that manufacture similar products, as this is the basis on which information is
provided to the Board for the purposes of allocating resources within the Group
and assessing the performance of the Group's businesses.
The Group is organised for management reporting purposes into two principal
business groups: Industrial & Automotive and Building Products.
Industrial & Automotive manufactures a wide range of systems and components for
car, truck and industrial equipment manufacturing markets, and industrial and
automotive aftermarkets throughout the world. Industrial & Automotive is now
comprised of four operating segments: Power Transmission, Fluid Power, Sensors &
Valves and Other Industrial & Automotive.
Building Products is comprised of two operating segments: Air Distribution and
Bathware. Air Distribution supplies the industrial and residential heating,
ventilation and air conditioning market, mainly in North America. Bathware
manufactures baths and whirlpools for the residential, and hotel and resort
development markets, mainly in North America.
During 2009, the Group will substantially complete its long-term programme of
disposing of or exiting its non-core businesses. During the first half of 2009,
internal reports to the Board were therefore restructured to assist the Board's
focus on the performance of the Group's ongoing businesses and distinction is
now drawn between those of the Group's operating segments that are ongoing and
those that have been exited or are to be exited. The following changes were made
that are relevant to these financial statements:
* the Stant and Standard-Thomson businesses that were sold in 2008 were removed
from the Fluid Systems segment and are now presented as a separate segment named
Caps & Thermostats;
* the remainder of the Fluid Systems segment was renamed Sensors & Valves;
* the Philips Doors and Windows business that is to be closed during 2009 was
removed from the Other Building Products segment and is now presented as a
separate segment named Doors & Windows; and
* the remainder of the Other Building Products segment was renamed Bathware.
Also during the first half of 2009, the Group's Water Pumps business was
transferred from Other Industrial & Automotive to Power Transmission.
Comparative information for 2008 has been re-presented to reflect these changes.
The Board uses adjusted operating profit to measure the profitability of each
segment. Adjusted operating profit is therefore the measure of segment profit
presented in the Group's segment disclosures. Adjusted operating profit
represents operating (loss)/profit before the amortisation of intangible assets
arising on acquisitions, impairments and restructuring initiatives (comprising
restructuring costs and the net gain or loss on disposals and on the exit of
businesses).
2 Segment information - Continuing operations (continued)
Segment information about the Group's continuing operations is presented below.
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| | | | Sales | | Adjusted operating |
| | | | | | profit/(loss) |
+--------------------------+---------+---------+---------+--+---------------------------------+
| | 6 | 6 | Year | | 6 | Restated* | Restated* |
| | months | months | ended | | months | 6 months | Year |
| | ended | ended | 3 | | ended | ended | ended |
| | 4 July | 28 | January | | 4 July | 28 June | 3 January |
| | 2009 | June | 2009 | | 2009 | 2008 | |
| | $ | 2008 | $ | | $ | $ | 2009 |
| | million | $ | million | | million | million | $ |
| | | million | | | | | million |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| Ongoing segments | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| Industrial & Automotive: | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| - Power Transmission | 801.1 | 1,125.6 | 2,125.2 | | 81.5 | 134.8 | 228.1 |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| - Fluid Power | 281.9 | 443.4 | 832.3 | | (8.5) | 37.1 | 46.2 |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| - Sensors & Valves | 135.0 | 225.2 | 421.0 | | (5.6) | 17.6 | 29.6 |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| - Other Industrial & | 229.5 | 346.0 | 602.1 | | 8.1 | 36.4 | 45.5 |
| Automotive | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| | 1,447.5 | 2,140.2 | 3,980.6 | | 75.5 | 225.9 | 349.4 |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| Building Products: | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| - Air Distribution | 446.2 | 521.3 | 1,112.3 | | 35.7 | 43.4 | 104.2 |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| - Bathware | 73.4 | 109.6 | 208.2 | | (5.6) | (8.6) | (11.8) |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| | 519.6 | 630.9 | 1,320.5 | | 30.1 | 34.8 | 92.4 |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| Corporate | - | - | - | | (15.8) | (20.1) | (37.0) |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| Total ongoing | 1,967.1 | 2,771.1 | 5,301.1 | | 89.8 | 240.6 | 404.8 |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| Segments exited or to be | | | | | | | |
| exited | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| Industrial & Automotive: | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| - Caps & Thermostats | - | 80.2 | 80.2 | | - | 10.3 | 10.3 |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| Building Products: | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| - Doors & Windows | 35.2 | 75.7 | 134.6 | | (7.5) | (8.2) | (12.2) |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| Total exited or to be | 35.2 | 155.9 | 214.8 | | (7.5) | 2.1 | (1.9) |
| exited | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
| Total continuing | 2,002.3 | 2,927.0 | 5,515.9 | | 82.3 | 242.7 | 402.9 |
| operations | | | | | | | |
+--------------------------+---------+---------+---------+--+---------+-----------+-----------+
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| | | | Sales | | Adjusted operating |
| | | | | | profit/(loss) |
+--------------------------+---------+----------+---------+--+---------------------------------+
| | 6 | 6 | Year | | 6 | Restated* | Restated* |
| | months | months | ended | | months | 6 months | Year |
| | ended | ended | 3 | | ended | ended | ended |
| | 4 July | 28 | January | | 4 July | 28 June | 3 January |
| | 2009 | June | 2009 | | 2009 | 2008 | |
| | $ | 2008 | $ | | $ | $ | 2009 |
| | million | $ | million | | million | million | $ |
| | | million | | | | | million |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| By origin | | | | | | | |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| US | 1,120.7 | 1,564.9 | 2,947.6 | | 35.0 | 108.6 | 181.4 |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| UK | 127.8 | 219.6 | 399.6 | | (2.4) | 7.0 | (5.0) |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| Rest of Europe | 287.6 | 447.0 | 787.2 | | 15.6 | 42.4 | 55.9 |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| Rest of the world | 466.2 | 695.5 | 1,381.5 | | 34.1 | 84.7 | 170.6 |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| | 2,002.3 | 2,927.0 | 5,515.9 | | 82.3 | 242.7 | 402.9 |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| By destination | | | | | | | |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| US | 1,184.5 | 1,693.9 | 3,178.7 | | | | |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| UK | 42.8 | 73.9 | 129.0 | | | | |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| Rest of Europe | 315.4 | 493.8 | 864.9 | | | | |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| Rest of the world | 459.6 | 665.4 | 1,343.3 | | | | |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
| | 2,002.3 | 2,927.0 | 5,515.9 | | | | |
+--------------------------+---------+----------+---------+--+---------+-----------+-----------+
* See note 1
Inter-segment sales were not significant.
2 Segment information - Continuing operations (continued)
+-------------------------------------------------------+---------+-----------+-----------+
| Reconciliation of adjusted operating profit to | 6 | Restated* | Restated* |
| (loss)/profit before tax: | months | 6 months | Year |
| | ended | ended | ended |
| | 4 July | 28 June | 3 January |
| | 2009 | 2008 | |
| | $ | $ | 2009 |
| | million | million | $ |
| | | | million |
+-------------------------------------------------------+---------+-----------+-----------+
| Adjusted operating profit | 82.3 | 242.7 | 402.9 |
+-------------------------------------------------------+---------+-----------+-----------+
| Amortisation of intangible assets arising on | (5.0) | (4.1) | (10.6) |
| acquisitions | | | |
+-------------------------------------------------------+---------+-----------+-----------+
| Impairments (note 3) | (33.7) | (175.1) | (342.4) |
+-------------------------------------------------------+---------+-----------+-----------+
| Restructuring initiatives (note 4) | (136.1) | 25.4 | 17.0 |
+-------------------------------------------------------+---------+-----------+-----------+
| Operating (loss)/profit | (92.5) | 88.9 | 66.9 |
+-------------------------------------------------------+---------+-----------+-----------+
| Net finance costs | (22.4) | (27.6) | (75.0) |
+-------------------------------------------------------+---------+-----------+-----------+
| (Loss)/profit before tax | (114.9) | 61.3 | (8.1) |
+-------------------------------------------------------+---------+-----------+-----------+
* See note 1
3Impairments
During the first half of 2009, the Group recognised impairments totalling $33.7
million, comprising $21.3 million in relation to assets that have become
impaired as a result of the Group's ongoing restructuring initiatives and $12.4
million in relation to the loan note taken by the Group as part of the
consideration on the disposal of Stant and Standard-Thomson.
+-------------------------------------------------------+---------+----------+----------+
| | 6 | 6 | Year |
| | months | months | ended |
| | ended | ended | 3 |
| | 4 July | 28 June | January |
| | 2009 | | 2009 |
| | $ | 2008 | $ |
| | million | $ | million |
| | | million | |
+-------------------------------------------------------+---------+----------+----------+
| Ongoing segments | | | |
+-------------------------------------------------------+---------+----------+----------+
| Industrial & Automotive: | | | |
+-------------------------------------------------------+---------+----------+----------+
| - Power Transmission | 11.4 | 168.1 | 284.6 |
+-------------------------------------------------------+---------+----------+----------+
| - Fluid Power | 8.2 | - | 11.7 |
+-------------------------------------------------------+---------+----------+----------+
| - Sensors & Valves | - | - | 1.1 |
+-------------------------------------------------------+---------+----------+----------+
| - Other Industrial & Automotive | 0.9 | - | - |
+-------------------------------------------------------+---------+----------+----------+
| | 20.5 | 168.1 | 297.4 |
+-------------------------------------------------------+---------+----------+----------+
| Building Products: | | | |
+-------------------------------------------------------+---------+----------+----------+
| - Air Distribution | - | - | 34.0 |
+-------------------------------------------------------+---------+----------+----------+
| - Bathware | 0.8 | - | - |
+-------------------------------------------------------+---------+----------+----------+
| | 0.8 | - | 34.0 |
+-------------------------------------------------------+---------+----------+----------+
| Corporate | 12.4 | - | - |
+-------------------------------------------------------+---------+----------+----------+
| Total ongoing | 33.7 | 168.1 | 331.4 |
+-------------------------------------------------------+---------+----------+----------+
| | | | |
+-------------------------------------------------------+---------+----------+----------+
| Segments exited or to be exited | | | |
+-------------------------------------------------------+---------+----------+----------+
| Building Products: | | | |
+-------------------------------------------------------+---------+----------+----------+
| - Doors & Windows | - | 7.0 | 11.0 |
+-------------------------------------------------------+---------+----------+----------+
| Total exited or to be exited | - | 7.0 | 11.0 |
+-------------------------------------------------------+---------+----------+----------+
| | | | |
+-------------------------------------------------------+---------+----------+----------+
| Total continuing operations | 33.7 | 175.1 | 342.4 |
+-------------------------------------------------------+---------+----------+----------+
4 Restructuring Initiatives
Restructuring costs recognised during the first half of 2009 principally arose
in relation to the restructuring of the Group's manufacturing operations under
"Project Cheetah". In particular:
* in Industrial & Automotive, Power Transmission announced the cessation of its
manufacturing operations in Aachen, Germany, and the closure of its powder metal
facility at Mississauga, Ontario and its pulley and tensioner facility at
London, Ontario, while Fluid Power announced the cessation of its hose
manufacturing activities in Erembodegem, Belgium and the closure of its assembly
facility at St Neots, UK; and
* in Building Products, restructuring costs related principally to the closure of
the Philips Doors and Windows business.
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| | 6 months ended 4 | | 6 months ended 28 | | Year ended 3 |
| | July 2009 | | June 2008 | | January 2009 |
+----------------------+----------------------------+--+----------------------------+--+----------------------------+
| | Restructuring | Disposals | | Restructuring | Disposals | | Restructuring | Disposals |
| | costs | and exit | | costs | and exit | | costs | and exit |
| | $ million | of | | $ million | of | | $ million | of |
| | | businesses | | | businesses | | | businesses |
| | | $ million | | | $ million | | | $ million |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| Ongoing segments | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| Industrial & | | | | | | | | |
| Automotive: | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| - Power Transmission | (79.0) | - | | (11.3) | - | | (13.8) | - |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| - Fluid Power | (29.2) | - | | (2.0) | - | | (1.9) | - |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| - Sensors & Valves | (1.9) | - | | - | - | | (0.2) | - |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| - Other Industrial & | (8.9) | 0.3 | | - | - | | (3.2) | - |
| Automotive | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| | (119.0) | 0.3 | | (13.3) | - | | (19.1) | - |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| Building Products: | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| - Air Distribution | (1.9) | - | | (1.7) | - | | (3.6) | - |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| - Bathware | (1.1) | - | | (0.9) | - | | (2.2) | (0.2) |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| | (3.0) | - | | (2.6) | - | | (5.8) | (0.2) |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| Corporate | (0.4) | (0.3) | | (0.3) | - | | (0.3) | - |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| Total ongoing | (122.4) | - | | (16.2) | - | | (25.2) | (0.2) |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| Segments exited or | | | | | | | | |
| to be exited | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| Industrial & | | | | | | | | |
| Automotive: | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| - Caps & Thermostats | - | - | | - | 42.4 | | - | 43.2 |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| Building Products: | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| - Doors & Windows | (13.7) | - | | (0.8) | - | | (0.8) | - |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| Total exited or to | (13.7) | - | | (0.8) | 42.4 | | (0.8) | 43.2 |
| be exited | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
| Total continuing | (136.1) | - | | (17.0) | 42.4 | | (26.0) | 43.0 |
| operations | | | | | | | | |
+----------------------+---------------+------------+--+---------------+------------+--+---------------+------------+
5Interest payable
+----------------------------------------------------+----------+----------+----------+
| | 6 months | 6 months | Year |
| | ended | | ended |
| | 4 July | ended | 3 |
| | 2009 | 28 June | January |
| | $ | 2008 | 2009 |
| | million | $ | $ |
| | | million | million |
+----------------------------------------------------+----------+----------+----------+
| Interest on bank overdrafts and loans | 21.0 | 28.9 | 53.9 |
+----------------------------------------------------+----------+----------+----------+
| Interest element of finance lease rentals | 0.2 | 0.3 | 0.5 |
+----------------------------------------------------+----------+----------+----------+
| Other interest payable | - | - | 5.0 |
+----------------------------------------------------+----------+----------+----------+
| | 21.2 | 29.2 | 59.4 |
+----------------------------------------------------+----------+----------+----------+
| Post employment benefits: | | | |
+----------------------------------------------------+----------+----------+----------+
| - Interest cost on benefit obligation | 34.5 | 40.0 | 78.4 |
+----------------------------------------------------+----------+----------+----------+
| | 55.7 | 69.2 | 137.8 |
+----------------------------------------------------+----------+----------+----------+
6Investment income
+----------------------------------------------------+----------+----------+----------+
| | 6 months | 6 months | Year |
| | ended | | ended |
| | 4 July | ended | 3 |
| | 2009 | 28 June | January |
| | $ | 2008 | 2009 |
| | million | $ | $ |
| | | million | million |
+----------------------------------------------------+----------+----------+----------+
| Interest on bank deposits | 1.4 | 4.7 | 9.6 |
+----------------------------------------------------+----------+----------+----------+
| Other interest receivable | 1.2 | 1.1 | 2.7 |
+----------------------------------------------------+----------+----------+----------+
| | 2.6 | 5.8 | 12.3 |
+----------------------------------------------------+----------+----------+----------+
| Post employment benefits: | | | |
+----------------------------------------------------+----------+----------+----------+
| - Expected return on plan assets | 30.4 | 38.9 | 75.5 |
+----------------------------------------------------+----------+----------+----------+
| | 33.0 | 44.7 | 87.8 |
+----------------------------------------------------+----------+----------+----------+
7Other finance income/(expense)
+----------------------------------------------------+----------+----------+----------+
| | 6 months | 6 months | Year |
| | ended | | ended |
| | 4 July | ended | 3 |
| | 2009 | 28 June | January |
| | $ | 2008 | 2009 |
| | million | $ | $ |
| | | million | million |
+----------------------------------------------------+----------+----------+----------+
| Hedging activities: | | | |
+----------------------------------------------------+----------+----------+----------+
| - (Loss)/gain on derivatives in designated hedging | (0.5) | 0.8 | 0.1 |
| relationships | | | |
+----------------------------------------------------+----------+----------+----------+
| - Gain/(loss) on derivatives classed as held for | 1.0 | (0.5) | (2.1) |
| trading | | | |
+----------------------------------------------------+----------+----------+----------+
| - Loss on other instruments not qualifying for | (0.2) | (2.1) | (17.9) |
| hedge accounting | | | |
+----------------------------------------------------+----------+----------+----------+
| | 0.3 | (1.8) | (19.9) |
+----------------------------------------------------+----------+----------+----------+
| Other items: | | | |
+----------------------------------------------------+----------+----------+----------+
| - Loss on embedded derivatives | - | (1.3) | (5.1) |
+----------------------------------------------------+----------+----------+----------+
| | 0.3 | (3.1) | (25.0) |
+----------------------------------------------------+----------+----------+----------+
Other finance income/(expense) from hedging activities represents fair value
gains and losses arising on instruments held by the Group to hedge its
translational exposures where either the economic hedging relationship does not
qualify for hedge accounting or to the extent that there is deemed to be
ineffectiveness in a qualifying hedging relationship.
8Income Tax expense
+----------------------------------------------------+----------+----------+----------+
| | 6 months | 6 months | Year |
| | ended | | ended |
| | 4 July | ended | 3 |
| | 2009 | 28 June | January |
| | $ | 2008 | 2009 |
| | million | $ | $ |
| | | million | million |
+----------------------------------------------------+----------+----------+----------+
| Current tax: | | | |
+----------------------------------------------------+----------+----------+----------+
| - UK | (1.5) | 2.8 | (13.4) |
+----------------------------------------------------+----------+----------+----------+
| - Overseas | 19.7 | 42.8 | 50.6 |
+----------------------------------------------------+----------+----------+----------+
| | 18.2 | 45.6 | 37.2 |
+----------------------------------------------------+----------+----------+----------+
| Deferred tax | (15.0) | 1.3 | 1.2 |
+----------------------------------------------------+----------+----------+----------+
| Income tax expense | 3.2 | 46.9 | 38.4 |
+----------------------------------------------------+----------+----------+----------+
9 earnings per share
a) Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the profit or loss for the
period attributable to equity shareholders by the weighted average number of the
Company's ordinary shares in issue during the period. The weighted average
number of the Company's ordinary shares in issue during the period excludes
3,818,636 shares (6 months ended 28 June 2008: 4,137,253 shares; year ended 3
January 2009: 4,002,675 shares), being the weighted average number of own shares
held during the period.
Diluted earnings per share takes into account the dilutive effect of potential
ordinary shares. The weighted average number of the Company's ordinary shares
used in the calculation of diluted earnings per share excludes the effect of:
*
* options and awards over 2,394,914 shares (year ended 3 January 2009: 2,265,568
shares) whose exercise prices were exceeded by the average market price of the
Company's ordinary shares during the period and were therefore theoretically
dilutive but were not taken into account in the calculation of diluted earnings
per share because the Group incurred a loss in those periods.
+----------------------------------------------------+-------------+-------------+-------------+
| | 6 months | Restated* | Restated* |
| | ended | 6 months | Year |
| | 4 July | ended | ended |
| | 2009 | 28 June | 3 January |
| | $ | 2008 | |
| | million | $ | 2009 |
| | | million | $ |
| | | | million |
+----------------------------------------------------+-------------+-------------+-------------+
| Continuing operations | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| (Loss)/profit for the period | (118.1) | 14.4 | (46.5) |
+----------------------------------------------------+-------------+-------------+-------------+
| Minority interests | (5.8) | (10.7) | (18.1) |
+----------------------------------------------------+-------------+-------------+-------------+
| (Loss)/earnings for calculating basic and diluted | (123.9) | 3.7 | (64.6) |
| (loss)/earnings per share | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| Discontinued operations | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| Loss for the period, being earnings for | - | (0.8) | - |
| calculating basic and diluted loss per share | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| Continuing and discontinued operations | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| (Loss)/profit for the period | (118.1) | 13.6 | (46.5) |
+----------------------------------------------------+-------------+-------------+-------------+
| Minority interests | (5.8) | (10.7) | (18.1) |
+----------------------------------------------------+-------------+-------------+-------------+
| (Loss)/earnings for calculating basic and diluted | (123.9) | 2.9 | (64.6) |
| (loss)/earnings per share | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| Weighted average number of ordinary shares | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| For calculating basic (loss)/earnings per share | 880,653,308 | 879,846,684 | 879,727,725 |
+----------------------------------------------------+-------------+-------------+-------------+
| Effect of dilutive potential ordinary shares: | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| - Employee share options and awards | - | 2,755,467 | - |
+----------------------------------------------------+-------------+-------------+-------------+
| For calculating diluted (loss)/earnings per share | 880,653,308 | 882,602,151 | 879,727,725 |
+----------------------------------------------------+-------------+-------------+-------------+
* See note 1
9 earnings per share (Continued)
b)Adjusted earnings per share
Adjusted earnings per share is based on the profit or loss for the period from
continuing operations before the amortisation of intangibles arising on
acquisitions, impairments, restructuring initiatives (comprising restructuring
costs and the net gain or loss on disposals and on the exit of businesses) and
related tax effects.
+----------------------------------------------------+-------------+-------------+-------------+
| | 6 months | Restated* | Restated* |
| | ended | 6 months | Year |
| | 4 July | ended | ended |
| | 2009 | 28 June | 3 January |
| | $ | 2008 | |
| | million | $ | 2009 |
| | | million | $ |
| | | | million |
+----------------------------------------------------+-------------+-------------+-------------+
| Continuing operations | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| (Loss)/earnings for calculating basic | (123.9) | 3.7 | (64.6) |
| earnings per share | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| Adjusted for: | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| - Amortisation of intangibles arising on | 5.0 | 4.1 | 10.6 |
| acquisitions | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| - Impairments (note 3) | 33.7 | 175.1 | 342.4 |
+----------------------------------------------------+-------------+-------------+-------------+
| - Restructuring initiatives (note 4) | 136.1 | (25.4) | (17.0) |
+----------------------------------------------------+-------------+-------------+-------------+
| - Taxation on adjustments to earnings | (24.5) | (8.9) | (42.4) |
+----------------------------------------------------+-------------+-------------+-------------+
| Earnings for calculating adjusted basic and | 26.4 | 148.6 | 229.0 |
| diluted earnings per share | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| Weighted average number of ordinary shares | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| For calculating adjusted basic earnings per | 880,653,308 | 879,846,684 | 879,727,725 |
| share | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| Effect of dilutive potential ordinary | | | |
| shares: | | | |
+----------------------------------------------------+-------------+-------------+-------------+
| - Employee share options and awards | 2,394,914 | 2,755,467 | 2,265,568 |
+----------------------------------------------------+-------------+-------------+-------------+
| For calculating adjusted diluted earnings | 883,048,222 | 882,602,151 | 881,993,293 |
| per share | | | |
+----------------------------------------------------+-------------+-------------+-------------+
* See note 1
10 Dividends on Ordinary shares
+----------------------------------------------------+----------+----------+----------+
| | 6 months | 6 months | Year |
| | ended | ended | ended |
| | 4 July | 28 June | 3 |
| | 2009 | 2008 | January |
| | $ | $ | 2009 |
| | million | million | $ |
| | | | million |
+----------------------------------------------------+----------+----------+----------+
| Recognised in the period | | | |
+----------------------------------------------------+----------+----------+----------+
| Interim dividend for the period of 3.50c (2008: | - | - | 97.1 |
| 11.02c) per share | | | |
+----------------------------------------------------+----------+----------+----------+
| Final dividend for the prior period of 2.00c | 17.4 | 149.1 | 149.1 |
| (2008: 16.66c) per share | | | |
+----------------------------------------------------+----------+----------+----------+
| | 17.4 | 149.1 | 246.2 |
+----------------------------------------------------+----------+----------+----------+
The interim dividend for 2009 of 3.50c per share will be paid on 19 November
2009 to shareholders on the register on 16 October 2009. Based on the number of
ordinary shares currently in issue, the interim dividend is expected to amount
to $30.9 million.
11 Cash flow
A) Cash generated from operations
+----------------------------------------------------+----------+-----------+-----------+
| | 6 months | Restated* | Restated* |
| | ended | 6 months | Year |
| | 4 July | ended | ended |
| | 2009 | 28 June | 3 January |
| | $ | 2008 | |
| | million | $ | 2009 |
| | | million | $ |
| | | | million |
+----------------------------------------------------+----------+-----------+-----------+
| (Loss)/profit for the period | (118.1) | 13.6 | (46.5) |
+----------------------------------------------------+----------+-----------+-----------+
| Interest payable | 55.7 | 69.2 | 137.8 |
+----------------------------------------------------+----------+-----------+-----------+
| Investment income | (33.0) | (44.7) | (87.8) |
+----------------------------------------------------+----------+-----------+-----------+
| Other finance (income)/expense | (0.3) | 3.1 | 25.0 |
+----------------------------------------------------+----------+-----------+-----------+
| Income tax expense | 3.2 | 46.9 | 38.4 |
+----------------------------------------------------+----------+-----------+-----------+
| Operating (loss)/profit | (92.5) | 88.1 | 66.9 |
+----------------------------------------------------+----------+-----------+-----------+
| Share of loss/(profit) of associates | 0.1 | (0.5) | 2.1 |
+----------------------------------------------------+----------+-----------+-----------+
| Amortisation of intangible assets | 12.0 | 11.5 | 26.0 |
+----------------------------------------------------+----------+-----------+-----------+
| Depreciation of property, plant and equipment | 85.2 | 108.2 | 203.1 |
+----------------------------------------------------+----------+-----------+-----------+
| Impairments | 33.7 | 175.1 | 342.4 |
+----------------------------------------------------+----------+-----------+-----------+
| (Gain)/loss on disposal of businesses: | | | |
+----------------------------------------------------+----------+-----------+-----------+
| - Continuing operations | - | (42.4) | (43.0) |
+----------------------------------------------------+----------+-----------+-----------+
| - Discontinued operations | - | 0.8 | - |
+----------------------------------------------------+----------+-----------+-----------+
| Loss on sale of property, plant and equipment | 1.3 | 1.0 | 3.8 |
+----------------------------------------------------+----------+-----------+-----------+
| Gain on available-for-sale investments | - | - | (1.2) |
+----------------------------------------------------+----------+-----------+-----------+
| Cost of share-based incentives | 4.6 | 6.6 | 12.0 |
+----------------------------------------------------+----------+-----------+-----------+
| Decrease in post-employment benefit obligations | (28.8) | (27.4) | (49.5) |
+----------------------------------------------------+----------+-----------+-----------+
| Increase/(decrease) in provisions | 84.5 | 0.9 | (3.7) |
+----------------------------------------------------+----------+-----------+-----------+
| Operating cash flows before movements in working | 100.1 | 321.9 | 558.9 |
| capital | | | |
+----------------------------------------------------+----------+-----------+-----------+
| Decrease/(increase) in inventories | 105.7 | (54.4) | (12.8) |
+----------------------------------------------------+----------+-----------+-----------+
| Decrease/(increase) in receivables | 5.7 | (115.3) | 143.8 |
+----------------------------------------------------+----------+-----------+-----------+
| (Decrease)/increase in payables | (136.8) | 43.1 | (61.2) |
+----------------------------------------------------+----------+-----------+-----------+
| Cash generated from operations | 74.7 | 195.3 | 628.7 |
+----------------------------------------------------+----------+-----------+-----------+
* See note 1
b)Reconciliation of net decrease in cash and cash equivalents to the movement in
net debt
+----------------------------------------------------+----------+----------+----------+
| | 6 months | 6 months | Year |
| | ended | | ended |
| | 4 July | ended | 3 |
| | 2009 | 28 June | January |
| | $ | 2008 | 2009 |
| | million | $ | $ |
| | | million | million |
+----------------------------------------------------+----------+----------+----------+
| Net debt at the beginning of the period | (476.4) | (591.5) | (591.5) |
+----------------------------------------------------+----------+----------+----------+
| (Increase)/decrease in net debt resulting from | | | |
| cash flows: | | | |
+----------------------------------------------------+----------+----------+----------+
| - (Decrease)/increase in cash and cash equivalents | (37.5) | (71.7) | 19.2 |
+----------------------------------------------------+----------+----------+----------+
| - Decrease/(increase) in debt and lease financing | 48.6 | (66.5) | (96.2) |
+----------------------------------------------------+----------+----------+----------+
| - Decrease in collateralised cash | (0.5) | (0.8) | (0.7) |
+----------------------------------------------------+----------+----------+----------+
| | 10.6 | (139.0) | (77.7) |
+----------------------------------------------------+----------+----------+----------+
| Debt acquired on acquisition of subsidiaries | - | (0.8) | (0.8) |
+----------------------------------------------------+----------+----------+----------+
| Other non-cash movements | 6.4 | (0.1) | (1.1) |
+----------------------------------------------------+----------+----------+----------+
| Foreign currency translation | (56.5) | 28.6 | 194.7 |
+----------------------------------------------------+----------+----------+----------+
| (Increase)/decrease in net debt during the period | (39.5) | (111.3) | 115.1 |
+----------------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------------+----------+----------+----------+
| Net debt at the end of the period | (515.9) | (702.8) | (476.4) |
+----------------------------------------------------+----------+----------+----------+
11 Cash flow (Continued)
c)Analysis of net debt
+----------------------------------------------------+----------+----------+----------+
| | 6 months | 6 months | Year |
| | ended | | ended |
| | 4 July | ended | 3 |
| | 2009 | 28 June | January |
| | $ | 2008 | 2009 |
| | million | $ | $ |
| | | million | million |
+----------------------------------------------------+----------+----------+----------+
| Cash and cash equivalents | 249.9 | 242.4 | 291.9 |
+----------------------------------------------------+----------+----------+----------+
| Collateralised cash | 3.6 | 5.0 | 3.8 |
+----------------------------------------------------+----------+----------+----------+
| Bank overdrafts | (15.4) | (22.9) | (13.7) |
+----------------------------------------------------+----------+----------+----------+
| Bank and other loans | (829.2) | (921.9) | (792.4) |
+----------------------------------------------------+----------+----------+----------+
| Obligations under finance leases | (6.2) | (9.0) | (6.9) |
+----------------------------------------------------+----------+----------+----------+
| Derivative financial instruments hedging | 81.4 | 3.6 | 40.9 |
| translational exposures | | | |
+----------------------------------------------------+----------+----------+----------+
| Net debt | (515.9) | (702.8) | (476.4) |
+----------------------------------------------------+----------+----------+----------+
12 Goodwill and other intangibles
+--------------------------------------------------------------+----------+-------------+
| | Goodwill | Other |
| | $ | intangibles |
| | million | $ million |
+--------------------------------------------------------------+----------+-------------+
| Carrying amount | | |
+--------------------------------------------------------------+----------+-------------+
| As at 3 January 2009 | 415.9 | 108.8 |
+--------------------------------------------------------------+----------+-------------+
| Additions | - | 5.8 |
+--------------------------------------------------------------+----------+-------------+
| Acquisition of subsidiaries | 5.7 | 0.3 |
+--------------------------------------------------------------+----------+-------------+
| Amortisation charge for the period | - | (12.0) |
+--------------------------------------------------------------+----------+-------------+
| Impairments | - | (7.6) |
+--------------------------------------------------------------+----------+-------------+
| Foreign currency translation | 1.4 | 0.9 |
+--------------------------------------------------------------+----------+-------------+
| As at 4 July 2009 | 423.0 | 96.2 |
+--------------------------------------------------------------+----------+-------------+
13 property, plant and equipment
+--------------------------------------------------------------+----------+----------+
| | | $ |
| | | million |
+--------------------------------------------------------------+----------+----------+
| Carrying amount | | |
+--------------------------------------------------------------+----------+----------+
| As at 3 January 2009 | | 1,167.3 |
+--------------------------------------------------------------+----------+----------+
| Additions | | 55.0 |
+--------------------------------------------------------------+----------+----------+
| Depreciation charge for the period | | (85.2) |
+--------------------------------------------------------------+----------+----------+
| Transfers to assets held for sale | | (3.4) |
+--------------------------------------------------------------+----------+----------+
| Disposals | | (7.4) |
+--------------------------------------------------------------+----------+----------+
| Impairments | | (13.7) |
+--------------------------------------------------------------+----------+----------+
| Foreign currency translation | | 25.0 |
+--------------------------------------------------------------+----------+----------+
| As at 4 July 2009 | | 1,137.6 |
+--------------------------------------------------------------+----------+----------+
14 Trade and other receivables
+----------------------------------------------------+----------+----------+----------+
| | As at | As at | As at |
| | 4 July | 28 June | 3 |
| | 2009 | 2008 | January |
| | $ | $ | 2009 |
| | million | million | $ |
| | | | million |
+----------------------------------------------------+----------+----------+----------+
| Current assets | | | |
+----------------------------------------------------+----------+----------+----------+
| Financial assets: | | | |
+----------------------------------------------------+----------+----------+----------+
| - Trade receivables | 689.5 | 981.1 | 684.4 |
+----------------------------------------------------+----------+----------+----------+
| - Derivative financial instruments | 3.5 | 17.0 | 1.1 |
+----------------------------------------------------+----------+----------+----------+
| - Collateralised cash | 3.6 | 5.0 | 3.8 |
+----------------------------------------------------+----------+----------+----------+
| - Other receivables | 51.7 | 55.7 | 37.0 |
+----------------------------------------------------+----------+----------+----------+
| | 748.3 | 1,058.8 | 726.3 |
+----------------------------------------------------+----------+----------+----------+
| Non-financial assets: | | | |
+----------------------------------------------------+----------+----------+----------+
| - Prepayments | 38.5 | 52.1 | 43.4 |
+----------------------------------------------------+----------+----------+----------+
| | 786.8 | 1,110.9 | 769.7 |
+----------------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------------+----------+----------+----------+
| Non-current assets | | | |
+----------------------------------------------------+----------+----------+----------+
| Financial assets: | | | |
+----------------------------------------------------+----------+----------+----------+
| - Derivative financial instruments | 82.9 | 5.4 | 73.4 |
+----------------------------------------------------+----------+----------+----------+
| - Other receivables | 20.0 | 33.0 | 32.5 |
+----------------------------------------------------+----------+----------+----------+
| | 102.9 | 38.4 | 105.9 |
+----------------------------------------------------+----------+----------+----------+
15Trade and other Payables
+---------------+---------+---------+---------+----------+
| | As at | As at | As at |
| | 4 | 28 | 3 |
| | July | June | January |
| | 2009 | 2008 | 2009 |
| | $ | $ | $ |
| | million | million | million |
+---------------+---------+---------+---------+
| Current | | | |
| liabilities | | | |
+---------------+---------+---------+---------+
| Financial | | | |
| liabilities: | | | |
+---------------+---------+---------+---------+
| - | 295.9 | 493.1 | 384.9 |
| Trade | | | |
| payables | | | |
+---------------+---------+---------+---------+
| - | 21.2 | 38.1 | 23.7 |
| Other | | | |
| taxes | | | |
| and | | | |
| social | | | |
| security | | | |
+---------------+---------+---------+---------+
| - | 4.2 | 16.2 | 15.7 |
| Derivative | | | |
| financial | | | |
| instruments | | | |
+---------------+---------+---------+---------+
| - | 30.3 | 32.8 | 26.1 |
| Other | | | |
| payables | | | |
+---------------+---------+---------+---------+
| | 351.6 | 580.2 | 450.4 |
+---------------+---------+---------+---------+
| Non-financial | | | |
| liabilities: | | | |
+---------------+---------+---------+---------+
| - | 179.8 | 225.1 | 199.7 |
| Accruals | | | |
| and | | | |
| deferred | | | |
| income | | | |
+---------------+---------+---------+---------+
| | 531.4 | 805.3 | 650.1 |
+---------------+---------+---------+---------+
| | | | |
+---------------+---------+---------+---------+
| Non-current | | | |
| liabilities | | | |
+---------------+---------+---------+---------+
| Financial | | | |
| liabilities: | | | |
+---------------+---------+---------+---------+
| - | - | 0.4 | 30.4 |
| Derivative | | | |
| financial | | | |
| instruments | | | |
+---------------+---------+---------+---------+
| - | 16.5 | 20.9 | 17.7 |
| Other | | | |
| payables | | | |
+---------------+---------+---------+---------+
| | 16.5 | 21.3 | 48.1 |
+---------------+---------+---------+---------+
| Non-financial | | | | |
| liabilities: | | | | |
+---------------+---------+---------+---------+----------+
| - | 3.1 | 11.1 | 3.5 |
| Accruals | | | |
| and | | | |
| deferred | | | |
| income | | | |
+---------------+---------+---------+---------+
| | 19.6 | 32.4 | 51.6 |
+---------------+---------+---------+---------+----------+
16PROVISIONS
+------------------+---------+---------------+--------------+----------+-----------+---------+---------+
| | | Restructuring | Workers' | Warranty | Product | Other | Total |
| | | costs | compensation | $ | liability | $ | $ |
| | | $ million | $ million | million | | million | million |
| | | | | | $ million | | |
+------------------+---------+---------------+--------------+----------+-----------+---------+---------+
| As at 3 January | | 15.9 | 25.5 | 11.5 | 7.4 | 11.7 | 72.0 |
| 2009 | | | | | | | |
+------------------+---------+---------------+--------------+----------+-----------+---------+---------+
| Charge for the | | 114.5 | 5.1 | 1.8 | 6.0 | (1.6) | 125.8 |
| period | | | | | | | |
+------------------+---------+---------------+--------------+----------+-----------+---------+---------+
| Utilised during | | (30.0) | (6.1) | (2.3) | (3.9) | (3.9) | (46.2) |
| the period | | | | | | | |
+------------------+---------+---------------+--------------+----------+-----------+---------+---------+
| Foreign currency | | 4.6 | (0.1) | 0.3 | 0.1 | 0.3 | 5.2 |
| translation | | | | | | | |
+------------------+---------+---------------+--------------+----------+-----------+---------+---------+
| As at 4 July | | 105.0 | 24.4 | 11.3 | 9.6 | 6.5 | 156.8 |
| 2009 | | | | | | | |
+------------------+---------+---------------+--------------+----------+-----------+---------+---------+
+------------------------------------------------------+--------+----------+----------+
| Provisions are presented in the Group's balance | | As at | As at |
| sheet as follows: | | 4 July | 3 |
| | | 2009 | January |
| | | $ | 2009 |
| | | million | $ |
| | | | million |
+------------------------------------------------------+--------+----------+----------+
| Current liabilities | | 132.3 | 48.8 |
+------------------------------------------------------+--------+----------+----------+
| Non-current liabilities | | 24.5 | 23.2 |
+------------------------------------------------------+--------+----------+----------+
| | | 156.8 | 72.0 |
+------------------------------------------------------+--------+----------+----------+
17 Post-employment benefit obligations
The net liability recognised in the Group's balance sheet as at 4 July 2009 in
respect of post-employment benefits was as follows:
+-------------------------------------------------------+-----------+-----------------+-----------+
| | Pensions | Other | Total |
| | $ | post-employment | $ |
| | million | benefits | million |
| | | $ million | |
+-------------------------------------------------------+-----------+-----------------+-----------+
| Present value of the benefit obligation | (1,052.0) | (146.6) | (1,198.6) |
+-------------------------------------------------------+-----------+-----------------+-----------+
| Fair value of plan assets | 827.2 | - | 827.2 |
+-------------------------------------------------------+-----------+-----------------+-----------+
| | (224.8) | (146.6) | (371.4) |
+-------------------------------------------------------+-----------+-----------------+-----------+
| Effect of the asset ceiling | (10.9) | - | (10.9) |
+-------------------------------------------------------+-----------+-----------------+-----------+
| Net liability | (235.7) | (146.6) | (382.3) |
+-------------------------------------------------------+-----------+-----------------+-----------+
| | | | |
+-------------------------------------------------------+-----------+-----------------+-----------+
| Presented in the Group's balance sheet as follows: | | | |
+-------------------------------------------------------+-----------+-----------------+-----------+
| - Surpluses | 10.6 | - | 10.6 |
+-------------------------------------------------------+-----------+-----------------+-----------+
| - Deficits | (246.3) | (146.6) | (392.9) |
+-------------------------------------------------------+-----------+-----------------+-----------+
| Net liability | (235.7) | (146.6) | (382.3) |
+-------------------------------------------------------+-----------+-----------------+-----------+
Changes in the net liability during the first half of 2009 were as follows:
+-------------------------------------------------------+----------+-----------------+---------+
| | Pensions | Other | Total |
| | $ | post-employment | $ |
| | million | benefits | million |
| | | $ million | |
+-------------------------------------------------------+----------+-----------------+---------+
| Net liability as at 3 January 2009 | (180.6) | (147.7) | (328.3) |
+-------------------------------------------------------+----------+-----------------+---------+
| Change in the benefit obligation: | | | |
+-------------------------------------------------------+----------+-----------------+---------+
| - Current service cost | (3.3) | (0.2) | (3.5) |
+-------------------------------------------------------+----------+-----------------+---------+
| - Interest cost | (30.1) | (4.4) | (34.5) |
+-------------------------------------------------------+----------+-----------------+---------+
| - Benefits paid less employee contributions | 37.4 | 7.0 | 44.4 |
+-------------------------------------------------------+----------+-----------------+---------+
| - Net actuarial loss | (3.5) | - | (3.5) |
+-------------------------------------------------------+----------+-----------------+---------+
| - Foreign currency translation | (34.4) | (1.3) | (35.7) |
+-------------------------------------------------------+----------+-----------------+---------+
| | (33.9) | 1.1 | (32.8) |
+-------------------------------------------------------+----------+-----------------+---------+
| Change in the fair value of plan assets: | | | |
+-------------------------------------------------------+----------+-----------------+---------+
| - Expected return on plan assets | 30.4 | - | 30.4 |
+-------------------------------------------------------+----------+-----------------+---------+
| - Net actuarial loss | (87.8) | - | (87.8) |
+-------------------------------------------------------+----------+-----------------+---------+
| - Employer contributions | 25.3 | - | 25.3 |
+-------------------------------------------------------+----------+-----------------+---------+
| - Benefits paid less employee contributions | (37.4) | - | (37.4) |
+-------------------------------------------------------+----------+-----------------+---------+
| - Foreign currency translation | 34.6 | - | 34.6 |
+-------------------------------------------------------+----------+-----------------+---------+
| | (34.9) | - | (34.9) |
+-------------------------------------------------------+----------+-----------------+---------+
| Effect of the asset ceiling | 13.7 | - | 13.7 |
+-------------------------------------------------------+----------+-----------------+---------+
| Net liability as at 4 July 2009 | (235.7) | (146.6) | (382.3) |
+-------------------------------------------------------+----------+-----------------+---------+
17 Post-employment benefit obligations (continued)
The weighted average discount rates used in determining the net liability were
as follows:
+-------------------------------------------------------+---------+---------+---------+
| | | As at | As at |
| | | 4 July | 3 |
| | | 2009 | January |
| | | | 2009 |
+-------------------------------------------------------+---------+---------+---------+
| Pension plans: | | | |
+-------------------------------------------------------+---------+---------+---------+
| - UK | | 6.25% | 6.50% |
+-------------------------------------------------------+---------+---------+---------+
| - US | | 6.13% | 5.88% |
+-------------------------------------------------------+---------+---------+---------+
| - Other countries | | 5.95% | 5.95% |
+-------------------------------------------------------+---------+---------+---------+
| | | | |
+-------------------------------------------------------+---------+---------+---------+
| Other benefits | | 6.08% | 6.08% |
+-------------------------------------------------------+---------+---------+---------+
18 Contingencies
The Group is, from time to time, party to legal proceedings and claims, which
arise in the ordinary course of business. The Directors do not anticipate that
the outcome of any current proceedings or known claims, either individually or
in aggregate, will have a material adverse effect upon the Group's financial
position.
19Subsequent events
Early in the second half of 2009, the Group acquired Hydrolink, a fluid
engineering services provider to the oil and gas and marine sectors in the
Middle East and CIS regions, and the remaining 40% minority shareholding in
Rolastar (in which it acquired a 60% shareholding in 2008). Both of these
acquisitions are for cash totalling up to $35 million.
Supplemental cash flow analysis (unaudited)
+-----------------------------------------------------+---------+--+---------+--+---------+
| | 6 | | 6 | | Year |
| | months | | months | | ended |
| | ended | | ended | | 3 |
| | 4 July | | 28 | | January |
| | 2009 | | June | | 2009 |
| | $ | | 2008 | | $ |
| | million | | $ | | million |
| | | | million | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Cash generated from operations | 74.7 | | 195.3 | | 628.7 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Gross capital expenditure: | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Purchase of property, plant and equipment | (56.3) | | (100.3) | | (183.2) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Purchase of computer software | (5.3) | | (6.4) | | (10.6) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| | (61.6) | | (106.7) | | (193.8) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Disposal of property, plant and equipment | 1.5 | | 1.8 | | 7.9 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Operating cash flow | 14.6 | | 90.4 | | 442.8 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Tax: | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Income taxes paid | (31.5) | | (78.5) | | (116.3) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Income taxes received | 29.2 | | 6.7 | | 31.8 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| | (2.3) | | (71.8) | | (84.5) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Interest: | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Interest element of finance lease rental payments | (0.2) | | (0.3) | | (0.5) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Interest received | 2.2 | | 5.3 | | 11.2 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Interest paid | (19.6) | | (29.4) | | (55.0) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| | (17.6) | | (24.4) | | (44.3) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Other movements: | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Capitalisation of development costs | (0.5) | | (0.2) | | (0.6) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Dividends received from associates | 0.2 | | 0.4 | | 0.6 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Financing costs paid | (6.3) | | - | | - |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Investment by a minority shareholder in a | - | | 0.4 | | 0.4 |
| subsidiary | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Dividend paid to a minority shareholder in a | (5.9) | | (9.5) | | (13.5) |
| subsidiary | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| | (12.5) | | (8.9) | | (13.1) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Free cash flow to equity shareholders | (17.8) | | (14.7) | | 300.9 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Ordinary dividends | (17.4) | | (149.1) | | (246.2) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Acquisitions and disposals: | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Purchase of subsidiaries, net of cash acquired | (1.4) | | (64.3) | | (65.0) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Sales of businesses and subsidiaries, net of cash | 0.6 | | 121.5 | | 124.6 |
| disposed | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Purchase of available-for-sale investments | - | | (0.1) | | (0.1) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Sale of available-for-sale investments | - | | - | | 1.6 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Debt acquired on acquisition of subsidiaries | - | | (0.8) | | (0.8) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Purchase of interests in associates | (2.1) | | (1.1) | | (10.4) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| | (2.9) | | 55.2 | | 49.9 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Ordinary share movements: | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Issue of ordinary shares | - | | 0.2 | | 0.2 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Purchase of own shares | (1.4) | | (4.1) | | (4.7) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| | (1.4) | | (3.9) | | (4.5) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Foreign currency movements: | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Cash and cash equivalents | (6.2) | | 11.0 | | (21.2) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Other debt | (50.3) | | 17.6 | | 215.9 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| - Receipts/(payments) on foreign currency | 50.1 | | (27.3) | | (178.6) |
| derivatives | | | | | |
+-----------------------------------------------------+---------+--+---------+--+---------+
| | (6.4) | | 1.3 | | 16.1 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Cash movement in net debt | (45.9) | | (111.2) | | 116.2 |
+-----------------------------------------------------+---------+--+---------+--+---------+
| Non-cash movements | 6.4 | | (0.1) | | (1.1) |
+-----------------------------------------------------+---------+--+---------+--+---------+
| (Increase)/decrease in net debt | (39.5) | | (111.3) | | 115.1 |
+-----------------------------------------------------+---------+--+---------+--+---------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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