|
Date: 30th October 2002 Key features: ·
Results in line with recent Trading Update - turnover £1.4 billion (2001 - £1.47 billion) - operating profit £110 million (2001 - £138 million) - profit before amortisation of goodwill, exceptional items and
taxation £76 million (2001 - £107 million) - earnings per share before exceptional items 2.7 pence (2001 -
4.2 pence) ·
Net cash inflow before dividends £50 million (2001 - £8 million) “Chairman, Sir Nigel Rudd, commented: As anticipated,
market conditions in the first half were very challenging. In spite of this,
Pilkington achieved positive free cash flow – a reflection of management’s
determination to focus on cash generation now that the bulk of restructuring
is complete. As we enter the second half, we expect market
conditions to remain challenging. Against this background, management’s
emphasis on improving the competitiveness of Pilkington’s manufacturing base,
through overhead reduction and increasing efficiencies, continues. This,
together with Pilkington’s portfolio of innovative products, will help to
ensure that the Group remains resilient in these testing markets.” GROUP RESULTS FOR THE HALF YEAR TO 30 SEPTEMBER 2002 Statement by the Chairman, Sir Nigel Rudd The Group’s results in the first six months of the year confirm
the expectations we set out in our previous statements, and reflect difficult
trading conditions in most of the markets in which the Group operates. The
attainment of positive free cash flow in the first half year represents an
important achievement. It is clear that the benefits produced by the
extensive restructuring of the last five years are showing through in
operational efficiencies and cash generation, putting Pilkington in a strong
position to withstand the testing trading conditions we expect to continue in
the next half year. Accounting treatment of redundancy and restructuring
costs As announced at the presentation of the Group’s annual results
for the year to 31 March 2002, the treatment of redundancy and restructuring
costs has been revised such that in future these items will not in general be
disclosed separately as an exceptional component of operating profit.
Comparative figures in this half year statement have been re-presented on a
consistent basis. Given the regular nature and amounts of redundancy and
restructuring costs expected, the Board considers the revised disclosure is
more appropriate. Further details are included in note 12 to the financial
statements. Results Turnover in the first half year was £1.40 billion, a reduction
of five per cent on the £1.47 billion achieved last year. Operating profits
of Group businesses were £87 million, down from £115 million last year. Operating
profits of joint ventures and associates were maintained at £23 million. Profit before goodwill amortisation, exceptional items and
taxation was £76 million, down from £107 million for the same period last
year but on a par with last year’s second half. Shareholders will recall that
the results for the first half of 2002 were the best for a decade. Net cash flow from operating activities was £154 million, £10
million better than last year. Cash flow before dividends, the management of
liquid resources and financing improved from £8 million last year to £50
million this year and clearly demonstrates the focus that management is now
placing on cash. Net debt at £689 million has declined by £15 million in the
first half year. Earnings and dividend Earnings per share fell from 4.2 pence to 2.8 pence. The interim
dividend has been maintained at 1.75 pence per share. The dividend will be
paid on 20 December 2002 to shareholders on the register at 6 December 2002.
A scrip alternative will again be offered to shareholders. The scrip dividend
share value will be calculated on the basis of the average of the middle
market quotation of Pilkington shares on the London Stock Exchange for the
five dealing days commencing on 4 December 2002 and ending on 10 December
2002. The last date for the cancellation of an existing scrip dividend
mandate and for the completion and return to the Registrars of a new scrip
dividend mandate is 12 December 2002. Hyperinflationary accounting in Argentina Following the collapse of the Argentinean peso last January,
Argentina’s inflation rate has increased dramatically to the extent that
conditions now meet the criteria set out in UITF 9 for hyperinflation
accounting. Consequently the results of the Group’s Argentinean businesses have
been accounted for in accordance with the indexation rules under UITF 9. This
has reduced profit before tax for the first half year by £5 million and
increased equity shareholders’ funds by £10 million at 1 April 2002, as
compared to historical cost accounting rules. Review of operations Building Products As anticipated, markets for Building Products remain difficult,
with the exception of the United Kingdom and Australia, where demand has been
strong. The restructuring actions taken over the past few years have
significantly strengthened Pilkington’s ability to compete in these testing
market conditions. Building Products sales, including joint ventures and
associates, were £744 million, down one per cent. Operating profit before
amortisation of goodwill of £84 million was £33 million down on the same
period last year. Our European Building Products business, representing around 60
per cent of Building Products sales in total, continues to be affected by the
slowdown in continental European markets. Float selling prices were under
pressure, but have now stabilised at a level around 10-12 per cent below the
average for last year. In response to the reduced level of demand we extended
the planned shutdown for cold repairs of our float glass plants at Gladbeck in
Germany and at Venice, Italy. Both plants are now back in full production. In contrast, the market in the United Kingdom has been robust,
underpinned by the rapid increase in the use of low emissivity glass in
buildings, a legislative requirement since 1 April 2002. This has benefited
both our primary and our processing and merchanting businesses in the UK. Pilkington Activ ™ self-cleaning glass has now been
launched in all our principal European markets. Market reaction to the new
product has been very positive, although uptake is slower than anticipated,
reflecting reduced activity in markets overall. Building Products North America, accounting for approximately 15
per cent of Building Products sales, has been affected by the contraction in
commercial building, which is its prime focus, although the residential
market has been strong. In July, the Ottawa float plant was taken down for
repair early and is now back in full production. Sales of our 35 per cent owned Mexican associate Vitro Plan SA
de CV (VVP) were similar to last year, with the consolidation of a full
period’s results from Cristal Glass in Spain, offsetting the impact of the
softness of the US economy and consequent pressure on prices, especially on
the West Coast. Results were also affected by the temporary shut down of one
float furnace, and operating profits in sterling terms were approximately 30
per cent below those of the first half of last year. Our South American operations have performed well despite
economic recession, currency devaluation and hyperinflation in Argentina, and
devaluations and political uncertainty in Brazil, which made trading in these
markets difficult. Results for the year to date of our Australian business,
representing approximately 10 per cent of Building Products sales, are very
encouraging. The Australian housing market continues to be strong, with some
glass products in short supply. Sales of our 19 per cent owned associate in China, SYP, continue
to grow, though pressure from new competitive floats has resulted in lower
profits than the first half of last year. Automotive Products Automotive Products sales, including associates and joint
ventures, were £648 million, a reduction of two per cent on the first half of
last year. Operating profit before amortisation of goodwill was £43 million,
up 13 per cent on the equivalent period in 2001. European light vehicle sales and production were around four per
cent down on the first half of last year, with only the UK market showing
signs of growth. Despite this lower vehicle production, our European
Automotive glass business, accounting for approximately half the Group’s
Automotive glass sales, has held up well, due to new model introductions and
solid Automotive Glass Replacement (AGR) sales. Demand for buses, coaches and
trucks in Europe is beginning to improve and aftermarket AGR demand continues
to be firm. Profits from the European Automotive business have been
sustained at around the level of last year, reflecting the continuing
benefits from the restructuring actions of recent years, combined with an
on-going improvement programme. In North America, light vehicle sales have been maintained,
assisted by Original Equipment (OE) manufacturers’ incentive programmes.
Vehicle production is five per cent higher than last year, in a flat sales
market, as vehicle inventories are replenished. In the AGR market demand has
softened. Profits from the North American Automotive business are ahead of
last year, reflecting the benefits of the restructuring programmes and
operational improvements. This improvement in margin was accomplished despite
a reduction in sales, which was largely due to the end of the Ford supply
contract. VVP’s automotive glass sales have held up well overall as an
increase in sales in the AGR market largely compensated for the impact of the
slower OE segment. Plant productivity gains have improved profitability. Demand for vehicles in South America has fallen with the
economic recession. Nevertheless, operating profits have been maintained. The
results of our Automotive OE business in Australia have improved
significantly. The slump in civil aviation markets continues to affect
Pilkington Aerospace’s business, but sales and operating profits have,
nevertheless, been maintained at last year’s levels. Outlook As we anticipated in our statements over the past year, the
challenging market conditions experienced in the second half of 2002 have
continued into the first half of the current financial year. We expect these
conditions to continue into the second half of this year. The significant
improvement in our competitiveness achieved over the last five years is
helping to mitigate the impact of these tough markets. PILKINGTON plc: GROUP PROFIT AND LOSS ACCOUNT
GROUP BALANCE SHEET
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||