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Hsbc Bk.22 | LSE:49IA | London | Medium Term Loan |
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RNS No 8144h PACIFIC DUNLOP LIMITED 12th September 1997 1996/1997 Pacific Dunlop Results In Brief * Sales from continuing businesses were $5.8 billion. * Profit after tax and abnormals of $178 million compared with the previous years's loss of $133 million. * Profit after tax before abnormals up 8.7% to $176 million. * Earnings per share before abnormals up 9.6% to 17.2 cents. * Gearing reduced by 12 percentage points to 56%. * Final dividend of 7.0 cents making 14.0 cents for the year (previous year 14.0 cents). Pacific Dunlop 1996/1997 Results Summary Pacific Dunlop today announced a profit attributable to shareholders before abnormals of $175.7 million for the year ended 30 June 1997. This is an increase of 8.7% over the previous year's $161.7 million. Abnormal profit attributable to shareholders of $2.2 million was due primarily to a gain on sale of Loscam net of restructuring expenses incurred during the year. Sales by continuing businesses were $5.8 billion, a decrease of 3.6%. Operating margins increased from 6.2% to 6.4%, with strong improvement in the second half. Directors have declared a final dividend of 7.0 cents a share, franked to 60% at the prevailing Australian tax rate of 36%. This maintains a dividend of 14.0 cents for the full year, franked to 60% which is unchanged from the previous year. The dividend will be payable on 14 November 1997 to shareholders registered at the close of business on 13 October 1997. In 1996/97 a number of businesses were sold, as part of the Company's continuing rationalisation program. The sale of these non-core assets has enabled Pacific Dunlop to restructure its businesses within six core operating divisions. During the year, the Company purchased Golden Needles Knitting as a strategic investment to support the growth of one of its core businesses, Ansell International. Chairman's Comment The Chairman of Pacific Dunlop, Mr John Ralph, said the improved result reflected the Company's objective set a year ago of having the mainstream businesses performing at better levels by year end. He added: "This result is the outcome of a stronger, more focused business base as the work of bringing each business up to or near optimum performance continues. A continuing objective of the board and management is to deliver profitable growth to the Company by identifying those businesses capable of achieving top quartile shareholder performance, and the strategies and growth paths that will drive them. "The past 12 months has seen extensive rationalisation, which has included the losure, relocation and downsizing of factories in Pacific Brands and Cables, and the closure, relocation and refurbishment of outlets by Pacific Distribution. This process was accompanied by the investment of $190 million across all businesses in new equipment and systems, and improved safety and environmental practices. "Trading conditions in nearly all markets continued to be difficult, holding back sales and margin growth. This was felt particularly in the automotive-related markets of South Pacific Tyres and GNB Technologies, and to some extent by Pacific Distribution. "Apart from GNB Technologies' disappointing first half performance and an increase in interest cost charged against operating profit associated with Telectronics, the result was encouraging. Proceeds received during the year from the sale of non- core businesses of $303 million contributed to a further reduction in gearing and improved interest cover. "In looking ahead, the rationalisation and re-focusing of businesses over the past year is now beginning to yield positive results. All businesses are anticipating further improvement this year based on current market conditions. In order for the Company to achieve a significant increase in profits, however, substantial progress has to be made in overcoming the current problems in GNB Technologies." Balance Sheet The improvement in the balance sheet provides a solid platform for future growth. Interest bearing debt (including trade bills) to shareholders' equity decreased from 66% at the end of 1995/96 to 56%, and net liabilities (liabilities less cash) to equity reduced from 158% last year to 138%. Cash from operations was $289 million compared with $232 million in the previous year. Improvements in working capital from continuing operations contributed $101 million to cash flow for the year. Net interest bearing debt (borrowings less cash) decreased by $188 million. This result reflects the receipt of proceeds from the sale of the Telectronics business ($192 million), the sale of Loscam ($44 million), and the sale of a number of smaller businesses ($14 million). Cash payments during the year included $88 million for acquisitions, incorporating partial payment for Golden Needles Knitting; funding of other capital expenditure of $190 million; Telectronics' losses to the date of sale; and reimbursement of expenses and ancillary costs, including patient monitoring, for Telectronics and the Accufix Research Institute. Litigation In April 1997, the US District Court in Cincinatti, Ohio (having previously decertified a class in the litigation involving the Telectronics' Accufix Atrial "J" lead) recertified a class encompassing all patients in the US implanted with the lead. This, and the other State based litigation in the United States, against the Accufix Research Institute (the former Telectronics) and others, together with litigation in Canada, France, Germany, Turkey and Australia, is being vigorously defended. The US based litigation involving Ansell and a number of other defendants arising from the claims of individuals who are exposed to natural rubber latex products continues through its procedural phases. Members of the Pacific Dunlop Group remain co-defendants with other major glove companies in approximately 37% of the cases. No case in which Pacific Dunlop Group members are defendants, involves an application for class certifications. The claims continue to be vigorously defended, and already Ansell subsidiaries have been released from some law suits. Operations The Managing Director. Mr Rod Chadwick, made the following comments on operations: "Sales of continuing businesses were slightly lower at $5.8 billion after taking into account the divestment during the year of several non-core businesses including Loscam, Dunlop Industrial Footwear and some Household Products divisions. "Real progress will only be achieved as we continue to accelerate the process of change. Management is focused on building a world class manufacturing, marketing and distribution company. This will be based on operational excellence and the expanded capabilities of our people, leading to financial performance equal to or better than our industry peers. "Most parts of the Company responded well to the challenging two-year stretch targets set at the start of the year. Results during the year show that many of the operating divisions have in fact made commendable progress. "Cables has already achieved the margin target, and Ansell International, Pacific Brands and Pacific Distribution are showing improvement. GNB Technologies and South Pacific Tyres are meanwhile dealing with specific issues as well as reduced automotive industry demand. GNB also continues to be hampered by its under- performing Columbus lead smelter and factory performance issues in the United States. "Good progress is being made on inventory management in all divisions. All groups are forecasting further improvement in the coming year, reducing inventory levels whilst maintaining or enhancing customer service levels. "All businesses except GNB finished the year with return on investment ahead of the Company's weighted average cost of capital. The importance of cash in the creation of real value for shareholders has been reinforced by the introduction internally of the Cash Value Added (CVA) measure. Business Groups Ansell International continued to perform strongly in all markets with improved profit levels. Ansell's position as a global leader in barrier protective products was strengthened by the acquisition of Golden Needles Knitting Inc (GNK) for $114 million. GNK, based in North Carolina USA, has annual sales of $120 million and lifts Ansell's share of the US high specification cut resistant glove markets to 40%. GNK has developed a reputation as a market leader by marrying proprietary glove knitting technology with high performance products. Another important driver of growth in industrial gloves has been in the area of product protection, particularly in the food services industry and in pharmaceutical and critical environment applications. Excellent sales of the new thin nitrile glove were achieved out of the newly commissioned plant in Troy, Alabama. Market share in branded condoms continued to grow on a global basis with the formation in December of a 50-50 joint venture in India with Raymond Ltd. The Indian business has 25% of its domestic market and a manufacturing plant at Aurangabad, 400 km north-east of Bombay. Together with recent upgrades in the condom plant in Dothan, Alabama, the new venture will enable Ansell to target growth in several new emerging markets. Ansell's position in the medical glove markets was further boosted by new product releases of surgical and examination gloves, based on low allergenic, powder-free technology. This segment is the fastest growing medical glove category worldwide and has been supported by a $40 million capital expenditure program which will improve productivity and ensure adequate capacity to meet the growing demand. Sales received additional impetus with a $120 million contract over five years to supply surgical and examination gloves to Premier Inc, the largest alliance of hospitals and health systems in the US. Ansell recently moved its world headquarters to New Jersey in the United States in order to be closer to its major markets. The move reinforces the international nature of Ansell's operations. GBN TECHNOLOGIES GNB Technologies had a difficult year with continued competitive pressures in its automotive battery business and lower than anticipated recycled lead production at the Columbus lead smelter. Sales of GNB's Industrial Battery Group increased by 12.5%, helped by strong growth in the global telecommunications industry. Plant capacity for production of medium-sealed industrial batteries has been doubled ahead of the further growth anticipated in the next two years. Product lines were expanded with the introduction in March of the new Marathon and Sprinter batteries for the telecommunications and uninterrupted power supply segments. The flagship Absolyte(r) product line was also extended with the introduction of the Absolyte XL(r) for telecommunications central office switching applications. Increased demand for Champion(r) sealed, maintenance-free batteries for the forklift truck industry led to increased sales despite soft market conditions. Work also began on extending the Champion(r) industrial product line to serve the European market this year. Lead production from the Columbus smelter remains substantially below its rated annual capacity. Modifications have raised the production level, but this still remains well below full capacity. Design changes and process improvements will continue this year with the immediate target of a further lift in throughput closer to the rated capacity. The higher cost of purchased lead, particularly in the first half, had a severe impact on profits. Automotive battery market share in North America increased marginally as the company secured a sole source supply agreement with Sam's Club (a division of Wal-Mart Inc.). The company also shipped the first batteries to the new Mercedes Benz plant (Vance, Alabama), as the sole source for the new ML320 sports utility vehicle. In Australia, the Automotive and Industrial businesses maintained sales levels even though under heavy margin pressure. The New Zealand operation continued to perform well and maintained its significant market share in all product categories. Results include a fixed asset write-off in the first half of $12 million related to obsolete equipment. SOUTH PACIFIC TYRES (100%) Results were down on the previous record year in a very competitive market. For the first time in many years, the domestic tyre replacement market declined in each of the key radial tyre categories of passenger and truck. The light truck radial market grew marginally, at a much more subdued rate than in recent years. The softer demand was part of an overall automotive industry picture in which growth was limited, vehicle imports were higher, and the prevalence of low-cost Asian tyre suppliers increased. South Pacific Tyres was nevertheless able to hold its replacement market share position. This was achieved through a combination of improved supply and stock availability, stronger marketing, and a greater focus on new product introduction. Competition however, placed considerable pressure on pricing. The original equipment market was also difficult due to aggressive local and increasingly global competition, a rise in Korean car imports, and the move offshore of a number of truck original equipment manufacturers. The softer demand resulted in lower factory utilisation and a consequentially slower rate of productivity improvements. However, waste and work in progress levels were further reduced from last year's record lows. Working capital was kept under tight control. Export sales increased by a further 5% on the previous year and are now approaching $80 million annually. New export business included a contract with Dunlop Tire Corporation of the US to supply some 300,000 tyres annually. Increased offtake by Goodyear's Asian operations and South Pacific Tyres customers in the UK will significantly underpin manufacturing volume in 1997/1998. The program of strategic retail store acquisitions and selective store licensing continued strongly throughout the year with the total number of outlets increasing. Both profitability and market coverage in the retail chains improved during the year. A record number of new products were introduced during the year, servicing both the domestic and export markets. In passenger tyres, new releases included ranges of Goodyear Regatta, Olympic Sprinter, additional Centaur Supreme sizes for Kwk-Fit in the UX, and new sizes for Dunlop Tire Corporation. CABLES & ENGINEERING PRODUCTS The Cables Group had a much improved year due to benefits derived from the rationalisation and factory improvement program begun last year. A full year's operation of both Vision Cables and the Indonesian business also contributed to the division's profit increase. The group maintained its strong share of the low and medium voltage commercial and industrial market, despite intense competition. The Energy Division had a successful year, winning a number of new contracts for cable supply to electricity supply authorities. It was also involved in the supply of extra high voltage cables to the Sydney Olympic 2000 site at Homebush in Sydney and to Power Link in Cairns in northern Queensland. The division's New Zealand business completed a pleasing year, supported by exports to Australia and increased utilities business. This was the first full year of the Pay TV coaxial cable manufacturing joint venture, Vision Cables (51% owned). Vision Cables supplied Telstra and Optus' hard line cable requirements in an accelerated Pay-TV cable rollout program around Australia and also won supply contracts to New Zealand, Malaysia, Singapore and Indonesia. With most of the immediate network in Australia now in place, production has been suspended with the ongoing emphasis being transferred to meeting customer maintenance requirements. The Burton division continued its restructuring. A re-launch of the Click branded range of electrical accessories is being well received. The plants in China improved manufacturing performance but faced depressed domestic prices for telephone cable. In Indonesia, the new metallic telephone cable facility began the year well with strong demand from Indonesian Telecom and the second carrier franchisees, although orders slowed in the second half because of rollout delays. The Kelani Cables operation in Sri Lanka was restructured in readiness for a planned expansion to service the South Asian region. The Engineered Products division experienced generally difficult trading conditions. Market development of Dunlop Duratray suspended dump truck bodies continued with orders from Indonesia, US and Australia. Rubber mixing and compounding facilities were upgraded. PACIFIC BRANDS The Pacific Brands Group overcame generally flat retail demand and lower sales in nearly all of its product areas to generate an improved earnings performance. The improvement was marked by extensive rationalisation and restructuring which progressively increased manufacturing and sourcing efficiency. Substantial improvements in working capital management were achieved. The subdued Australian clothing market placed considerable pressure on pricing throughout the Clothing Group. Profit, however, increased with more focused product ranging and working capital control. The Bonds result improved as the year progressed. Holeproof successfully launched the "Me" brand to department and speciality stores. Berlei strengthened its market leadership position with a new range of sports bras. Jockey/Red Robin performed well. Boydex successfully re-launched the Amco jeans brand, and all clothing businesses improved their market positions in New Zealand. In New South Wales, Bonds Wear consolidated its South Coast manufacturing on to a single site at Unanderra and its North Coast manufacturing to a single site at Cessnock. Jockey closed its manufacturing facility at Maryborough in Victoria and relocated to Melbourne. The Sporting Goods Group again performed well with excellent results from the Fitness and Leisure divisions and an improved result from Dunlop Slazenger. The Fitness and Leisure Group also benefited from its significant restructuring in previous years. The Footwear Group continued to maintain market leadership across most market segments. Grosby completed a very successful year with strong performance from Grosby Australia and increased manufacturing efficiencies within the China factory. The focus of the Household Products Group was on restructuring to take advantage of the anticipated upturn in the Australian building and construction sector during 1997/98, and to increase customer responsiveness. PACIFIC DISTRIBUTION Sales Revenue from continuing operations decreased by 1.2%. Operating Profit derived from these businesses was in line with last year. The pallet hire business, Loscam, was sold in the second half for $44 million. Greater pricing disciplines enabled trading margins to partially offset the flat sales performance. In addition considerable work on working capital management produced a better rate of return for the division. In New Zealand, the leadership and central support functions for the Electrical business have now been integrated with those of the Automotive business involving some one-off costs in 1996/97. Considerable synergies are starting to emerge which will more favourably affect 1997/98. In the Australian Electrical business, extensive work has been done on property strategy. During the year a number of branches were relocated or converted to the new open sell format, and this program will continue through 1998. This is producing improvements in sales, operating margins, and working capital in comparison to traditional branches. By comparison, a number of Australian branches have been closed in a selective program of branch rationalisation. As part of this program, selected areas served by two or more undersized branches have been replaced by larger better- designed stores with superior service and stock levels. This has been met by a favourable response from customers. A program of rationalising and upgrading Electrical Distribution facilities is also delivering cost savings and a greatly enhanced service potential. In Automotive, considerable advance was made in appealing to the Do-lt-Yourself segment of the market. The establishment of Repco's new format stores which are designed to be more accessible to the Do-It-Yourself customer has had strong early success. Ten new branches and seven conversions in this format are now operating. In 1998 this program will be accelerated, subject to availability of appropriate property sites. For further information contact: Mr Rod Chadwick Mr John Hine Phone: (61-3) 9270 7270 Phone: (61-3) 9270 7140 Mobile: 0412-254 952 Appendix 4B Preliminary Final report Consolidated profit and loss account (The figures are not equity accounted) Current period- $A'OOO Previous corresponding period - $A'000 1.1 Sales (or equivalent operating) revenue 5,782,906 6,470,796 1.2 Other revenue 364,584 577,182 1.3 Total revenue 6,147,490 7,047,978 1.4 Operating profit (loss) before abnormal items and tax 265,836 263,652 1.5 Abnormal items before tax (detail in item 2.4) 593 (284,553) 1.6 Operating profit (loss) before tax (items 1.4 + 1.5) 266,429 (20,901) 1.7 Less tax 81,501 105,617 1.8 Operating profit (loss) after tax but before outside equity interests 184,928 (126,518) 1.9 Less outside equity interests 7,077 6,219 1.10 Operating profit (loss) after tax attributable to members 177,851 (132,737) 1.11 Extraordinary items after tax (detail in item 2.6) - - 1.12 Less outside equity interests - - 1.13 Extraordinary items after tax attributable to members - - 1.14 Total operating profit (loss) and extraordinary items after tax (items 1.8 + 1.11) 184,928 (126,518) 1.15 Operating profit (loss) and extraordinary items after tax attributable to outside equity interests (items 1.9 + 1.12) 7,077 6,219 1.16 Operating profit (loss) and extraordinary items after tax attributaMe to members (items 1.10 + 1.13) 177,851 (132,737) 1.17 Retained profits (accumulated losses) at beginning of financial period (257,622) 11,842 1.18 If change in accounting policy as set out in clause 11 of AASB 1018 Profit and Loss Accounts, adjustments as required by that clause (include brief description) - - 1.19 Aggregate of amounts transferred from reserves 339,690 2,087 1.20 Total available for appropriation (carried forward) 259,919 (118,808) 1.21 Dividends provided for or paid 143,798 138,814 1.22 Aggregate of amounts transferred to reserves - - 1.23 Retained profits (accumulated losses) at end of financial period 116,121 (267,622) Profit restated to exclude Ammortisation of Goodwill Current period- $A'OOO Previous corresponding period - $A'000 1.24 Operating profit (loss) after tax before outside equity interests (items 1 .8) and amortisation of goodwill 217,442 (91,421) 1.25 Less(plus) outside equity interests 7,077 6,219 1.26 Operating profit (loss) after tax before amortisation of goodwill) attributable to members 210,365 (97,640) Consolidated balance sheet At end of current As shown in last As in last half period $A'000 annual report yearly report $A'000 $A'000 Current Assets 4.1 Cash 1,191,816 1,327,477 1,260,607 4.2 Receivables 952,383 1,030,891 1,008,533 4.3 Investments - 166,000 - 4.4 Inventories 954,003 1,014,988 986,408 4.5 Other (prepayments) 68,110 62,412 74,158 4.6 Total current assets 3,166,312 3,601,768 3,329,706 Non-current assets 4.7 Receivables 77,931 87,303 68,289 4.8 Investments 188,676 183,682 195,583 4.9 Inventories - - - 4.10 Exploration and evaluation expenditure capitalised (see para.71 of AASB 1022) - - - 4.11 Development properties (mining entities) - - - 4.12 Other property, plant and equipment (net) 1,242,490 1,238,334 1,216,686 4.13 Intangibles (net) 639,996 576,759 558,225 4.14 Other (Future Income Tax Benefit) 277,474 256,994 215,686 4.15 Total non-current assets 2,426,567 2,343,072 2,254,469 4.16 Total assets 5,592,879 5,944,840 5,584,175 Current liabilities 4.17 Accounts payable 777,677 858,645 556,163 4.18 Borrowings 1,382,427 1,458,049 1,439,292 4.19 Provisions 452,579 497,578 411,387 4.20 Other (provide details if material) 17,469 11,038 189,738 4.21 Total current liabillitlies 2,630,152 2,825,310 2,596,580 Non-current liabilities 4.22 Accounts payable 6,261 59,232 378 4.23 Borrowings 825,333 992,892 942,216 4.24 Provisions 249,523 251,894 203,865 4.25 Other (provide details it material) 34,811 22,950 31,700 4.26 Total non-current liabilities 1,115,928 1,326,968 1,178,159 4.27 Total Liabilities 3,746,080 4,152,278 3,774,739 4.28 Net assets 1,846,799 1,792,562 1,809,436 Equity 4.29 Capital 513,573 511,027 512,972 4.30 Reserves 1,181,823 1,501,355 1,160,679 4.31 Retained profits (accumulated losses) 116,121 (257,622) 95,202 4.32 Equity attributable to members of the parent entity 1,811,517 1,754,760 1,768,853 4.33 Outside equity interests in controlled entitles 35,282 37,802 40,583 4.34 Total equity 1,846,799 1,792,562 1,809,436 4.35 Preference capital and related premium included as part of 4.32 - - - END
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