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healthcare benefits.
Year ended 2 January 2010 $ million Year ended 3 January 2009 $ million
Ongoing segments
Industrial & Automotive:
- Power Transmission 29.7 -
- Fluid Power 31.4 -
- Other Industrial & Automotive 1.7 -
62.8 -
Corporate 0.2 -
63.0 -
1.7
-
62.8
-
Corporate
0.2
-
63.0
-
6 Interest payable
Year ended 2 January 2010 $ million Year ended 3 January 2009 $ million
Interest on bank overdrafts and loans 38.9 53.9
Interest element of finance lease rentals 0.4 0.5
Other interest payable 3.9 5.0
43.2 59.4
Post employment benefits:
- Interest cost on benefit obligation 70.0 78.4
113.2 137.8
43.2
59.4
Post employment benefits:
- Interest cost on benefit obligation
70.0
78.4
113.2
137.8
7 Investment income
Year ended 2 January 2010 $ million Year ended 3 January 2009 $ million
Interest on bank deposits 2.7 9.6
Other interest receivable 1.9 2.7
4.6 12.3
Post employment benefits:
- Expected return on plan assets 62.6 75.5
67.2 87.8
12.3
Post employment benefits:
- Expected return on plan assets
62.6
75.5
67.2
87.8
8 Other finance expense
Year ended 2 January 2010 $ million Year ended 3 January 2009 $ million
Hedging activities:
- (Loss)/gain on derivatives in designated hedging relationships (1.0) 0.1
- Gain/(loss) on derivatives classified as held for trading 2.3 (2.1)
- Currency translation loss on hedging instruments (1.6) (17.9)
(0.3) (19.9)
Other items:
- Loss on embedded derivatives - (5.1)
(0.3) (25.0)
(0.3)
(19.9)
Other items:
- Loss on embedded derivatives
-
(5.1)
(0.3)
(25.0)
Other finance 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.
Other finance expense is wholly attributable to continuing operations.
9 Income tax expense
Year ended 2 January 2010 $ million Year ended 3 January 2009 $ million
Current tax
- UK 0.7 (13.4)
- Overseas 41.0 50.6
41.7 37.2
Deferred tax (13.7) 1.2
Income tax expense for the period 28.0 38.4
Continuing operations 28.5 38.4
Discontinued operations (0.5) -
28.0 38.4
38.4
Continuing operations
28.5
38.4
Discontinued operations
(0.5)
-
28.0
38.4
10 Loss per share
a) Basic and diluted loss per share
Basic loss 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 3,962,756 shares (2008: 4,002,675 shares), being the weighted
average number of own shares held during the period.
Diluted loss 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 loss per share excludes the effect of:
*
options and awards over 16,091,420 shares (2008: 19,080,654 shares) whose exercise prices exceeded the average market price
of the Company's ordinary shares during the period and were therefore anti-dilutive; and
*
options and awards over 2,793,494 shares (2008: 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 loss per share because the Group incurred a loss in the period.
Year ended 2 January 2010 $ million Restated* Year ended 3 January 2009 $ million
Continuing operations
Profit/(loss) for the period 9.9 (46.5)
Minority interests (21.6) (18.1)
Loss for calculating basic and diluted loss per share (11.7) (64.6)
Discontinued operations
Loss for the period, being loss for calculating basic and diluted loss per share (3.9) -
Continuing and discontinued operations
Profit/(loss) for the period 6.0 (46.5)
Minority interests (21.6) (18.1)
Loss for calculating basic and diluted loss per share (15.6) (64.6)
Weighted average number of ordinary shares
For calculating basic and diluted loss per share 880,799,900 879,727,725
Minority interests
(21.6)
(18.1)
Loss for calculating basic and diluted loss per share
(15.6)
(64.6)
Weighted average number of ordinary shares
For calculating basic and diluted loss per share
880,799,900
879,727,725
* See note 1
10 Loss 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 adjusted for the
specific items excluded from operating profit in arriving at adjusted operating profit and the tax effect of those items.
Year ended 2 January 2010 $ million Restated* Year ended 3 January 2009 $ million
Continuing operations
Loss for calculating basic loss per share (11.7) (64.6)
Adjusted for:
- Amortisation of intangibles arising on acquisitions 11.2 10.6
- Impairments (see note 3) 73.0 342.4
- Restructuring costs (see note 4) 144.1 26.0
- Net gain on disposals and on the exit of businesses (see note 4) (0.2) (43.0)
- Gain on amendment of post-employment benefits (see note 5) (63.0) -
- Taxation on adjustments to earnings (22.5) (42.4)
Earnings for calculating adjusted basic and diluted earnings per share 130.9 229.0
Weighted average number of ordinary shares
For calculating adjusted basic earnings per share 880,799,900 879,727,725
Effect of dilutive potential ordinary shares:
- Employee share options and awards 2,793,494 2,265,568
For calculating adjusted diluted earnings per share 883,593,394 881,993,293
229.0
Weighted average number of ordinary shares
For calculating adjusted basic earnings per share
880,799,900
879,727,725
Effect of dilutive potential ordinary shares:
- Employee share options and awards
2,793,494
2,265,568
For calculating adjusted diluted earnings per share
883,593,394
881,993,293
* See note 1
11 Dividends on Ordinary shares
Year ended 2 January 2010 per share Year ended 3 January 2009 per share
Paid or proposed in respect of the period
Interim dividend 3.50c 11.02c
Final dividend 6.50c 2.00c
10.00c 13.02c
Year ended 2 January 2010 $ million Year ended 3 January 2009 $ million
Recognised in the period
Interim dividend for the period of 3.50c (2008: 11.02c) per share 30.9 97.1
Final dividend for the prior period of 2.00c (2008: 16.66c) per share 17.4 149.1
48.3 246.2
Year ended
3 January
2009
$ million
Recognised in the period
Interim dividend for the period of 3.50c (2008: 11.02c) per share
30.9
97.1
Final dividend for the prior period of 2.00c (2008: 16.66c) per share
17.4
149.1
48.3
246.2
The Directors propose a final dividend for 2009 of 6.50c per share that, subject to approval by shareholders, will be paid
on 10 June 2010 to shareholders on the register on 7 May 2010.
Based on the number of ordinary shares currently in issue, the final dividend for 2009 is expected to amount to $57.4
million.
12 Cash flow
A) Reconciliation of profit/(loss) for the period to cash generated from operations
Year ended 2 January 2010 $ million Restated* Year ended 3 January 2009 $ million
Profit/(loss) for the period 6.0 (46.5)
Interest payable 113.2 137.8
Investment income (67.2) (87.8)
Other finance expense 0.3 25.0
Income tax expense 28.0 38.4
Profit from continuing and discontinued operations 80.3 66.9
Share of loss of associates 0.4 2.1
Amortisation of intangible assets 25.6 26.0
Depreciation of property, plant and equipment 172.2 203.1
Impairments:
- Goodwill 8.7 228.6
- Other intangible assets 22.0 -
- Property, plant and equipment 26.8 113.8
- Trade and other receivables 15.5 -
(Gain)/loss on disposal of businesses:
- Continuing operations (0.2) (43.0)
- Discontinued operations 4.4 -
(Gain)/loss on sale of property, plant and equipment (1.6) 3.8
Gain on available-for-sale-investments - (1.2)
Cost of share-based incentives 11.3 12.0
Decrease in post-employment benefit obligations (122.4) (49.5)
Increase/(decrease) in provisions 45.1 (3.7)
Operating cash flows before movements in working capital 288.1 558.9
Decrease/(increase) in inventories 214.6 (12.8)
Decrease in receivables 52.3 143.8
Decrease in payables (22.9) (61.2)
Cash generated from operations 532.1 628.7
(1.6)
3.8
Gain on available-for-sale-investments
-
(1.2)
Cost of share-based incentives
11.3
12.0
Decrease in post-employment benefit obligations
(122.4)
(49.5)
Increase/(decrease) in provisions
45.1
(3.7)
Operating cash flows before movements in working capital
288.1
558.9
Decrease/(increase) in inventories
214.6
(12.8)
Decrease in receivables
52.3
143.8
Decrease in payables
(22.9)
(61.2)
Cash generated from operations
532.1
628.7
* See note 1
b) Reconciliation of net increase in NET cash and cash equivalents to the movement in net debt
Year ended 2 January 2010 $ million Year ended 3 January 2009 $ million
Net debt at the beginning of the period (476.4) (591.5)
Decrease/(increase) in net debt resulting from cash flows:
- Increase in cash and cash equivalents 157.2 19.2
- Decrease/(increase) in debt and lease financing 164.4 (96.2)
- Decrease in collateralised cash (2.1) (0.7)
319.5 (77.7)
Debt acquired on acquisition of subsidiaries (7.8) (0.8)
Other non-cash movements 0.5 (1.1)
Foreign currency translation (43.3) 194.7
Decrease in net debt during the period 268.9 115.1
Net debt at the end of the period (207.5) (476.4)
Other non-cash movements
0.5
(1.1)
Foreign currency translation
(43.3)
194.7
Decrease in net debt during the period
268.9
115.1
Net debt at the end of the period
(207.5)
(476.4)
12 Cash flow (Continued)
c) Analysis of net debt
As at 2 January 2010 $ million As at 3 January 2009 $ million
Cash and cash equivalents 445.0 291.9
Collateralised cash 2.1 3.8
Bank overdrafts (4.8) (13.7)
Bank and other loans (698.5) (792.4)
Obligations under finance leases (4.6) (6.9)
Derivatives hedging translational exposures 53.3 40.9
Net debt (207.5) (476.4)
(698.5)
(792.4)
Obligations under finance leases
(4.6)
(6.9)
Derivatives hedging translational exposures
53.3
40.9
Net debt
(207.5)
(476.4)
13 Goodwill and other intangibles
Goodwill $ million Other intangibles $ million
Carrying amount
As at 3 January 2009 415.9 108.8
Additions - 8.4
Acquisition of subsidiaries 26.8 5.9
Amortisation charge for the period - (25.6)
Disposals - (0.1)
Impairments (8.7) (22.0)
Foreign currency translation 2.0 2.6
As at 2 January 2010 436.0 78.0
(0.1)
Impairments
(8.7)
(22.0)
Foreign currency translation
2.0
2.6
As at 2 January 2010
436.0
78.0
In February 2008, the Group acquired a 60% interest in Rolastar, a duct manufacturer based in India, and agreed terms for
the subsequent acquisition of the remaining 40% minority interest, which was completed in July 2009. Since the acquisition
was negotiated, Rolastar's end markets have deteriorated and, as a result, impairments totalling $18.4 million were
recognised in respect of the related goodwill and acquired customer relationships. Also in 2009, an impairment of $11.8
million was recognised in relation to software licences that had become surplus to requirements as a consequence of the
Group's restructuring initiatives.
14 property, plant and equipment
$ million
Carrying amount
As at 3 January 2009 1,167.3
Additions 115.2
Acquisitions of subsidiaries 8.0
Depreciation charge for the period (172.2)
Transfers to assets held for sale (11.8)
Disposals (11.1)
Impairments (26.8)
Foreign currency translation 54.2
As at 2 January 2010 1,122.8
(26.8)
Foreign currency translation
54.2
As at 2 January 2010
1,122.8
During 2009, impairments totalling $26.8 million were recognised in relation to property, plant and equipment that has
become impaired as a consequence of the Group's restructuring initiatives (none of these impairments were individually
significant).
15 Trade and other receivables
As at 2 January 2010 $ million As at 3 January 2009 $ million
Current assets
Financial assets:
- Trade receivables 662.3 684.4
- Derivative financial instruments 1.2 1.1
- Collateralised cash 2.1 3.8
- Other receivables 41.3 37.0
706.9 726.3
Non-financial assets:
- Prepayments 46.1 43.4
753.0 769.7
Non-current assets
Financial assets:
- Derivative financial instruments 56.9 73.4
- Other receivables 16.4 32.5
73.3 105.9
Non-financial assets:
- Prepayments 7.8 -
81.1 105.9
56.9
73.4
- Other receivables
16.4
32.5
73.3
105.9
Non-financial assets:
- Prepayments
7.8
-
81.1
105.9
16 Trade and other Payables
As at 2 January 2010 $ million As at 3 January 2009 $ million
Current liabilities
Financial liabilities:
- Trade payables 419.6 384.9
- Other taxes and social security 24.3 23.7
- Derivative financial instruments 2.3 15.7
- Other payables 48.0 26.1
494.2 450.4
Non-financial liabilities:
- Accruals and deferred income 183.4 199.7
677.6 650.1
Non-current liabilities
Financial liabilities:
- Derivative financial instruments 3.9 30.4
- Other payables 14.3 17.7
18.2 48.1
Non-financial liabilities:
- Accruals and deferred income 8.9 3.5
27.1 51.6
3.9
30.4
- Other payables
14.3
17.7
18.2
48.1
Non-financial liabilities:
- Accruals and deferred income
8.9
3.5
27.1
51.6
17 PROVISIONS
Restructuring costs $ million Environmental remediation $ million Workers' compensation $ million Warranty provisions $ million Product liability provisions Insurance provisions Total
$ million $ million $ million
As at 3 January 2009 15.9 7.4 25.5 11.5 7.4 4.3 72.0
Charge/(credit) for the period 109.7 4.3 7.5 4.2 14.2 (4.1) 135.8
Utilised during the period (58.4) (5.6) (11.1) (4.7) (11.7) - (91.5)
Foreign currency translation 1.7 0.4 0.1 0.3 0.1 0.6 3.2
As at 2 January 2010 68.9 6.5 22.0 11.3 10.0 0.8 119.5
-
(91.5)
Foreign currency translation
1.7
0.4
0.1
0.3
0.1
0.6
3.2
As at 2 January 2010
68.9
6.5
22.0
11.3
10.0
0.8
119.5
Provisions are presented in the Group's balance sheet as follows: As at 2 January 2010 $ million As at 3 January 2009 $ million
Current liabilities 100.3 48.8
Non-current liabilities 19.2 23.2
119.5 72.0
Non-current liabilities
19.2
23.2
119.5
72.0
Provisions for restructuring costs principally relate to the restructuring initiatives under projects 'Eagle' and 'Cheetah'
and are expected largely to be utilised during 2010.
18 Post-employment benefit obligations
The net liability recognised in the Group's balance sheet as at 2 January 2010 in respect of post-employment benefits was
as follows:
Pensions $ million Other post-employment benefits $ million Total $ million
Present value of the benefit obligation 1,116.0 142.1 1,258.1
Fair value of plan assets (924.5) - (924.5)
191.5 142.1 333.6
Effect of the asset ceiling 8.6 - 8.6
Net liability 200.1 142.1 342.2
Presented in the Group's balance sheet as follows:
- Surpluses (1.3) - (1.3)
- Deficits 201.4 142.1 343.5
Net liability 200.1 142.1 342.2
- Surpluses
(1.3)
-
(1.3)
- Deficits
201.4
142.1
343.5
Net liability
200.1
142.1
342.2
Changes in the net liability during 2009 were as follows:
Pensions $ million Other post-employment benefits $ million Total $ million
Net liability as at 3 January 2009 (180.6) (147.7) (328.3)
Change in the benefit obligation:
- Current service cost (6.7) (0.4) (7.1)
- Past service cost (2.7) - (2.7)
- Negative past service cost 0.3 17.2 17.5
- Curtailments 36.4 10.5 46.9
- Settlements 0.3 - 0.3
- Interest cost (61.0) (9.0) (70.0)
- Benefits paid less employee contributions 76.6 14.9 91.5
- Net actuarial loss (101.4) (24.0) (125.4)
- Foreign currency translation (39.7) (3.6) (43.3)
(97.9) 5.6 (92.3)
Change in the fair value of plan assets:
- Expected return on plan assets 62.6 - 62.6
- Settlements (0.3) - (0.3)
- Net actuarial loss (18.4) - (18.4)
- Employer contributions 52.7 - 52.7
- Benefits paid less employee contributions (76.6) - (76.6)
- Foreign currency translation 42.4 - 42.4
62.4 - 62.4
Effect of the asset ceiling 16.0 - 16.0
Net liability as at 2 January 2010 (200.1) (142.1) (342.2)
- Net actuarial loss
(18.4)
-
(18.4)
- Employer contributions
52.7
-
52.7
- Benefits paid less employee contributions
(76.6)
-
(76.6)
- Foreign currency translation
42.4
-
42.4
62.4
-
62.4
Effect of the asset ceiling
16.0
-
16.0
Net liability as at 2 January 2010
(200.1)
(142.1)
(342.2)
18 Post-employment benefit obligations (continued)
The weighted average discount rates used in determining the net liability were as follows:
As at 2 January 2010 As at 3 January 2009
Pension plans:
- UK 5.75% 6.50%
- US 5.75% 5.88%
- Other countries 4.80% 5.95%
Other benefits 5.63% 6.08%
5.95%
Other benefits
5.63%
6.08%
19 Acquisitions
A) Current year acquisitions
Industrial & Automotive
Fluid Power
On 7 July 2009, the Group acquired a 100% interest in Hydrolink, a fluid engineering services provider to the oil and gas
and marine sectors in the Middle East. Provisional goodwill of $16.5 million was recognised on the acquisition, which
represents the expected benefits to the Group from accelerating the market penetration of its products in this high-growth
region.
Building Products
Air Distribution
On 7 July 2009, the Group acquired the remaining 40% minority interest in Rolastar Pvt Ltd, a duct manufacturer based in
India. Goodwill of $4.6 million was recognised on the acquisition of the minority interest. Overall, the Group recognised
goodwill of $8.5 million on the acquisition of its 100% interest in the business, which represents the expected benefits
from the expansion of its air distribution business in India.
B) Adjustment in respect of prior year acquisitionS
On the completion of the initial accounting for acquisitions completed in 2008, the attributable goodwill was increased by
$5.7 million as follows:
Provisional goodwill $ million Adjustment $ million Final
goodwill $ million
A.E. Hydraulic (Pte) Ltd. 8.1 1.6 9.7
Rolastar Pvt Ltd 0.9 3.0 3.9
Trion Inc. 2.4 1.1 3.5
5.7
Trion Inc.
2.4
1.1
3.5
5.7
Comparative information has not been restated to reflect these adjustments, which principally arose due to revisions to the
fair value of acquired property, plant and equipment and the recognition of additional deferred tax liabilities, because
they are not material to the Group's results or financial position.
19 Acquisitions (continued)
C) Financial effect of acquisitions
Year ended 2 January 2010
Acquiree's carrying amount in accordance Fair value adjustments Provisional
with IFRS $ million fair
$ million value
$ million
Net assets acquired
Intangible assets - 5.9 5.9
Property, plant and equipment 9.3 (1.3) 8.0
Inventories 10.6 (3.2) 7.4
Trade and other receivables 8.6 (1.4) 7.2
Cash and cash equivalents 0.4 - 0.4
Bank and other loans (7.4) - (7.4)
Obligations under finance leases (0.4) - (0.4)
Trade and other payables (10.3) - (10.3)
Income tax liabilities (0.4) - (0.4)
Deferred tax liabilities - (6.9) (6.9)
Minority interest 4.6 2.0 6.6
15.0 (4.9) 10.1
Goodwill on current year acquisitions 21.1
Adjustments to goodwill on prior year acquisitions 5.7
Consideration (including transaction costs) 36.9
(6.9)
(6.9)
Minority interest
4.6
2.0
6.6
15.0
(4.9)
10.1
Goodwill on current year acquisitions
21.1
Adjustments to goodwill on prior year acquisitions
5.7
Consideration (including transaction costs)
36.9
The net cash outflow on acquisitions during the period was as follows:
Year ended 2 January 2010 $ million Year ended 3 January 2009 $ million
Consideration paid on current period acquisitions 25.5 65.5
Cash and cash equivalents acquired (0.4) (0.1)
Adjustment to consideration on prior period acquisitions 1.4 (0.4)
26.5 65.0
(0.4)
(0.1)
Adjustment to consideration on prior period acquisitions
1.4
(0.4)
26.5
65.0
Businesses acquired during 2009 contributed $10.9 million to the Group's sales and reduced the Group's profit for the year
by $2.0 million. If these businesses had been acquired at the beginning of 2009, it is estimated that the Group's sales
would have been $16.0 million higher, at $4,196.1 million, in 2009, but it is not practicable to estimate what the Group's
profit for the year would have been because they did not prepare balance sheets in accordance with IFRS as at 3 January
2009.
20 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.
21 Subsequent event
On 26 February 2010, the Group acquired a 100% interest in Koch Filters Corp ('Koch'), for a total cash consideration of
$35.5 million. Koch is a leading manufacturer of air filters for the non-residential filtration replacement market, in the
US.
10. PRINCIPAL RISKS AND UNCERTAINTIES
Tomkins operates globally in a variety of markets and is affected by a number of risks inherent in its activities.
Business risk can be considered either as downside risk (the risk that something can go wrong and result in a financial
loss or exposure) or volatility risk (the risk associated with uncertainty, meaning there may be an opportunity for
financial gain as well as the potential for loss).
We outline below the risks and uncertainties that the Board believes have the greatest potential to affect the Group's
results or financial position. We have not listed these risks in any order of priority.
Additional risks not currently known to us, or risks that currently we do not regard as significant, could also have a
material adverse effect on our results or financial position. Our analysis of our principal risks and uncertainties should
therefore be read in conjunction with the cautionary statement regarding forward-looking statements set out on page 13.
Our strategy Risks associated with acquisitions and disposals One of our strategic objectives is to reshape our portfolio by making strategic bolt-on acquisitions of complementary businesses All investment and divestment projects are subject to a detailed project proposal process. The Board identifies divestment targets, timing and values in the context of the existing market conditions and the Group's portfolio. A rigorous, prescribed due diligence process is undertaken by an experienced team on all potential acquisitions. We prepare and execute formal integration plans to maximise the synergies arising on acquisitions.
to expand our product portfolio and geographic presence and by disposing of non-core businesses. Acquisitions and disposals,
particularly investments in emerging markets, involve legal, economic and political risks. We also encounter risks in the
selection of appropriate investment and disposal targets, execution of the transactions, integration of acquired businesses and
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