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October, 1998


Tomkins PLC

This article is based on the Chairman’s Statement in Tomkins PLC’s Annual Report 1998. The statement summarises Tomkins’ results for the 1997-1998 fiscal year to the shareholders, and contains interesting information about the companies that belong to the Tomkins Group.

 

Gregory Hutchings, Chairman, started his statement with the following words: "I am delighted to report that Tomkins, in the fifteenth year since I joined, has yet again delivered record results, with further advances in earnings and dividends per share supported by continued strong cash generation. This performance reflects the underlying quality of our businesses and their management teams. The benefits of our evolving strategy are clearly evident as we build on solid foundations to develop a corporate structure well positioned to identify and capitalise on growth opportunities. This has been an outstanding year for Tomkins. We have achieved above average growth, focused on our strategic business activities and improved our financial efficiency. "

 

Review of trading

Conditions remained sound in many of our key markets and our businesses, in aggregate, made good progress. Most trading environments continue to be characterised by low rates of inflation and generally stable economies.

Around 52 percent of Tomkins’ sales are in the US and that economy continues to be generally strong. Our businesses supplying the residential, commercial and industrial construction markets experienced firm conditions and achieved further good results. Gates delivered impressive growth. Rising demand for power transmission and hose and connector products, particularly from the industrial sector, and the launch of many new products, made a significant contribution. The integration of Stant is on target and the combination with Gates is delivering the anticipated savings.

In the UK, the engineering industry continues to be adversely affected by the strength of the pound, which makes exports uncompetitive and encourages import substitution. Our specialist companies had a difficult year, with a little sign of relief. The process valve producers encountered generally weak conditions with a low level of activity in their international markets.

Our food manufacturing companies made further satisfactory progress in a largely deflationary environment. These businesses are leaders in many UK market sectors and not subject to significant international competitive pressures.

The major European economies showed improvement.

Financial turmoil in the Far East led to a marked fall in economic activity and weakness in local currencies. Our businesses in this area account for some 2 percent of Tomkins’ total sales. Gates has considerable experience in Asia and is well invested without being overexposed; the company is in a sound position to benefit from recovery in these markets and also to take advantage of acquisition opportunities.

 

Corporate activity

There were five transactions during the year, all of which bring exciting opportunities to either the Industrial & Automotive Engineering or Food Manufacturing sectors. The purchases are characterised by a combination of firstly, excellent incremental sales growth potential and secondly, additional benefits from cost-saving opportunities, shared overheads and reduced input costs.

The purchase of Stant was completed in May 1997.

Schrader-Bridgeport International Inc. came into Tomkins in April 1998. Schrader is a long-established and well-respected engineering business with a sound record. It will work with Gates and Stant to enhance its market penetration in the US and develop opportunities in global markets.

In October 1997 we bought Golden West Foods, which provides a substantial and exciting opportunity. This high-quality business is the major supplier of baked and liquid products to McDonald’s restaurants, a company with impressive growth plans in the UK and throughout Continental Europe.

Six Spillers flourmills were added in March 1998.

Le Pain Croustillant was acquired just before the year-end. The company is the leading UK producer of high-quality, part-baked frozen bread and rolls for in-store bake-off.

Seventeen operations have been sold.

 

Employees

Tomkins is a major employer with a global workforce of 66,000. "Our financial performance and growth is not achieved by accident; everyone who works at Tomkins contributes to the result," says Gregory Hutchings. "I would like to thank everybody for their hard work and the part they played in achieving this year’s result."

 

Eurofocus, October 1998