Tomkins Business Report FY2008

Business Highlights

Financial Overview (in million dollars)
FY2008 FY2007 Rate of change(%) Factors
Consolidated Income Statement (selected)
Revenue 5,515.9 5,886.1 (6.2)


Profit from operations 403.4 530.5 (23.9)


Industrial & Automotive (I&A)
Revenue 4,060.8 4,312.7 (5.8)


Profit from operations 359.7 477.4 (24.7)

Power Transmission
-Sales increased principally due to net foreign exchange translation gains and price increases, which more than offset lower volumes from global weakening end market conditions. The automotive aftermarket business, where sales were up marginally over the course of the year, continued to demonstrate its resilience. Operating profit was impacted by lower fixed cost absorption from reduced sales volumes and initiatives to reduce inventory levels, the negative impact of transactional foreign exchange and raw material price increases. However, these factors were partially offset by price increases and the benefit of cost reduction initiatives. Gates expanded its electro-mechanical drive system, which achieves approximately 3-8% fuel savings, and now has 18 systems in production and development with customers such as PSA, Chery and Hyundai. In Europe, Gates further expanded sales of its variable vane oil pumps, which contribute approximately 2-3% fuel savings, winning new contracts with Audi and PSA. Annualized new business awards in the automotive OE market totaling $233 million were won with 74% outside North America.

Fluid Power
-Sales were higher due to the impact of price increases, foreign exchange translation gains and the acquisition of A.E. Hydraulic, which more than offset volume declines from weakening end markets, particularly in Europe. Gates Fleximak, which contributed $20.8 million of sales in 2007, was reclassified from the Other I&A to the Fluid Power segment in 2008. Operating profit decreased principally due to lower fixed cost absorption from reduced volumes, and initiatives to reduce inventory levels, coupled with the impact of higher raw material costs.

-Gates E&S continued to expand, with the opening of the Kuwait service centre in late 2008 and the Turkey service centre on schedule to open in early 2009. Sales more than doubled during the year, assisted by the acquisition of A.E. Hydraulic early in 2008.

Fluid Systems
-Sales and operating profit decreased principally due to the deteriorating automotive OE market in the US, combined with the sale of Stant and Standard-Thompson during the year, offset to some extent by price increases and new contract wins.

-Sales growth at Schrader Electronics slowed due to the weakness of the automotive OE market. This was partially offset by new contract wins at Mahindra & Mahindra and Ford, coupled with the increased replacement business from the greater number of vehicles fitted with RTPMS. European legislation mandating the application of RTPMS in European vehicles is currently expected and should drive continued growth in RTPMS.

-Schrader Electronics is also working with other Group companies to develop innovative pressure and flow monitoring technologies.

-Stant and Standard-Thomson were sold in June.

Other Industrial & Automotive
-Other Industrial & Automotive includes the Dexter, Ideal, Plews and Gates Winhere businesses. Other Industrial & Automotive sales decreased principally due to the weakening recreational vehicle and utility trailer end markets and general industrial market. Operating profit decreased principally due to lower volumes and, to some extent, by higher raw materials prices which were not fully offset by price increases.

-Dearborn Mid-West was sold on November 23, 2007.

-The Company won a business award for its tyre pressure monitoring systems from Mahindra & Mahindra Ltd. The order includes the supply of Schrader's snap-in valve sensor to a new global vehicle platform starting in April 2010 through 2017, inclusive. (From a press release on Aug. 29, 2008)

-The Company sold its Stant Corporation to H.I.G. Capital, LLC, a U.S. based private equity group. Stant Corporation designs and manufactures fuel system and vapor emission control products for automotive and industrial applications. In 2007, Stant Corporation had annual sales of $179 million. (From a press release on June 19, 2008)

Investment Activities

Investments outside UK
-The Company plans to expand its Gates plant's (Boone, Iowa). This expansion is among the projects scheduled to receive a funding by the Economic Development Board and Iowa Department of Economic Development (IDED). Gates plans include tripling the size of the facility and hiring an additional 25-30 employees. The technologies featured include Gates Hydraulic Hybrid Drive System technology, which offers potential fuel savings of between 50-70 percent, Gates Electro-Mechanical Drive邃「 (EMD) stop/start system technology for hybrid cars, which is currently available in the 2008 GM Saturn Vue Green Line, Saturn Aura, and 2008 Chevy Malibu. (From a press release on Feb. 20, 2008)