Wednesday, British engineering company Tomkins Plc (TOMK.L,TKS) reported a loss for fiscal year 2008, impacted by non-cash impairment charges. On an adjusted basis, the company's profit declined from last year on lower sales, reduced volumes as well as higher raw material prices. The company also announced a cut in dividend, and said it expects a challenging 2009. In addition, Tomkins announced further restructuring initiatives, named 'Project Cheetah', including closure of 15 plants, affecting about 2,500 employees.
The company's full-year loss was $46 million, compared to profit of $318.8 million in the previous year. Loss for the period attributable to equity shareholders was $64.1 million or 7.29 cents per share, in comparison with prior year's profit of $293.8 million or 33.37 cents per share. In 2007, the loss from discontinued operations was $66.7 million or 7.54 cents per share, including the loss of $65.2 million on the disposal of Trico.
Excluding prior year's discontinued operations, loss from continuing operations was $46 million or 7.29 cents per share, compared to earnings of $385.5 million or 40.91 cents per share in the previous year.
The year 2008 results included non-cash impairment charges of $342.4 million, and restructuring costs of $26 million, partly offset by gain of $43 million on the disposal of Stant and Standard-Thomson.
In 2007, the company recognized a gain of $65.2 million on the disposal of Lasco Fittings Inc., a gain of $13.4 million on the disposal of Dearborn Mid-West, and a loss of $2.6 million on the disposal of Tridon Electronics' indicator and side object detection businesses, among other things.
Excluding items, adjusted earnings from continuing operations declined to $229.5 million or 26.02 cents per share from prior year's $328.3 million or 37.14 cents per share.
In the year, pre-tax loss was $7.6 million compared to pre-tax profit of $525.4 million, while adjusted profit before tax was $328.4 million, lower than last year's $469.6 million.
Annual sales from continuing operations declined to $5.52 billion from $5.89 billion a year ago. The company attributed the decline in sales mainly to the disposal of Stant and Standard-Thomson during the year, along with the disposal of Dearborn Mid-West in late 2007, together with lower volumes in most of the Group's key end markets, partially offset by net foreign exchange translation gains.
On a segmental basis, annual sales from Industrial & Automotive fell to $4.06 billion from $4.31 billion a year ago. US industrial production fell 8% in the year, and Europe showed a steady decline in industrial production, with India and China also softening. North American Automotive production in 2008 declined 16% from last year. Building products generated total sales of $1.46 billion in 2008, lower than last year's sales of $1.57 billion.
Geographically, US sales plunged to $2.95 billion from $3.46 billion a year ago. Sales in UK dropped to $399.6 million from $408.1 million last year, while full-year sales from Rest of Europe increased to $787.2 million from $733.9 million a year ago, and sales from Rest of the World grew to $1.38 billion from $1.29 billion in the previous year.
Total operating profit in the year plunged to $67.4 million from $586.3 million last year, and adjusted operating profit declined to $403.4 million from $530.5 million a year ago. The adjusted operating margin was 7.3%, compare to 9% in 2007.
David Newlands, Chairman, commented, "Economic conditions in our end markets continued to deteriorate through 2008, accelerating towards the end of the year, and adversely impacting Group performance."
Further, Tomkins said its Board has decided to propose a final dividend for 2008 of 2.00 cents per share making a total dividend for the year of 13.02 cents, lower than last year's 27.68 cents. Subject to approval by shareholders at the Annual General Meeting on June 1, 2009, the final dividend will be paid on June 10 to ordinary shareholders on the register as at the close of business on May 8.
For 2009, the Board has decided to target a total dividend of around 10 cents per share, subject to the prevailing circumstances and market outlook.
Looking ahead, Tomkins said its trading in early 2009 has been adversely affected due to the current challenging and uncertain economic and market conditions resulting in reduced visibility and making forecasting extremely difficult.
Newlands said, "2009 is expected to present further challenges, with continued declines in our global end markets."
Segment-wise, North American industrial markets are expected to continue to decline due to reduced economic and industrial activity, and Industrial activity in Europe is expected to worsen further, with many European countries entering or continuing in recession, coupled with continuing declines in export demand.
The Automotive Aftermarket in North America is expected to be broadly flat in 2009, while European markets are expected to experience similar trends to North American markets. The company's other geographies, mainly China and Brazil, are expected to soften and post single digit growth rates in 2009.
Automotive Original Equipment production in 2009 is currently expected to decline around 25% in North America and 20% in Europe.
US Non-Residential Construction is expected to decline around 20% on a square foot basis and around 15% on a value basis in 2009, while US Residential Construction is expected to continue its decline, with housing starts expected to decrease by around 30% in 2009.
Further, Tomkins announced more extensive restructuring initiatives, named 'Project Cheetah', aiming to refocus the company's manufacturing in low cost geographies and within its most efficient facilities. Under these initiatives, the company considers closing 15 plants including 4 in Europe, which likely would affect about 2,500 employees.
At the start of 2008, the company had launched restructuring initiatives named 'Project Eagle', a three-year program, which is expected to provide the opportunity to capture approximately $100 million of annual performance improvements by the end of 2010. Under the initiative, a total of eight facilities were closed, mainly in North America, with headcount reduced by around 3,500.
The company now said the total expected cash costs of the combined 'Project Eagle' and 'Project Cheetah' initiatives are $140 million, with $120 million of these costs to be incurred in 2009 and the remainder in 2010. Non-cash costs are expected to be around $40 million, substantially all of which is expected to be incurred in 2009. These initiatives are expected to achieve annual cash benefits of approximately $150 million by 2011.
TKS closed Tuesday's regular trading session at $6.17, up $0.27 or 4.58%, on a volume of 312 thousand shares.
TOMK.L is currently trading at 115.25 pence, up 9.50 pence or 8.98%, on a volume of 2.8 million shares.
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