HISTORY

TOMKINS PLC is worth of £3 billion and has employed so far 37000 employees globally. TOMKINS was founded in 1925 named as F.H. Tomkins BUCKLE Company. This unit was small manufacturer of buckles and fasteners.

In 1980's to 1990's company successfully gone through acquisitions, leading in rapid growth of revenue, company's products and its global reach. Major acquisitions taken place were US - based with Gates Corporation in the year 1996. These acquisitions moved company into the industrial and automotive markets and went through acquisitions with Stant and Schrader business, which has strengthened these divisions.

Company has its large global parent having many subsidiaries held under two heads Industrial automotive & Building Products. Both fields hold big positions in the market. The excellence in technical is also part of these renowned fields of the company. Subsidiaries of Tomkins are also known as best brands in their fields.

Tomkins focuses on

  • lean manufacturing
  • Offer best price
  • Innovations in products
  • To offer Energy - efficient as well as ‘green' product .
  • To expand services and distribution capabilities.

Tomkins Plc. Global Reach :

Tomkins plc is globally spread in 24 countries throughout the world. Tomkins plc is targeting expansion into high growth emerging markets such as India, Eastern Europe & China.

Board Of Directors Compromises of:

  • Non-executive Chairman
  • Two Executive Directors
  • Five non-executive Directors

The board is responsible for leadership and corporate governance of the company. The non-executive Directors bring a substantial range of business and financial experiences to the Board.

Company's snapshots

  • Tomkins plc is company being registered in England and Wales.

  • Company's registered number is 203531.

Tomkins Share Price Information

London Stock Exchange

TOMK.L

Current Price

222.00

Net Change

2.00

Volume

4,708,692

Percentage Change

0.91

New York Stock Exchange - (ADR)

TKS.N

Current Price

13.46

Net Change

0.18

Volume

29,900

Percentage Change

1.36

Key areas of operations

  • Industrial machinery and equipment
  • Processing industries
  • Earthmoving equipment
  • Agricultural equipment
  • Mining
  • Oil and gas
  • Leisure equipment
  • Consumer equipment
  • Automotive OE
  • Automotive aftermarket
  • Residential construction
  • Commercial construction
  • Recreational vehicles
  • Manufactured housing
  • Remodelling and repair

Key areas in market are driven by

  • Industrial activity
  • Commodity prices
  • Industrial capital expenditure
  • Agricultural activity
  • Industrial construction
  • Automotive production
  • Number of cars in use
  • Average age of cars in use
  • Car usage (measured by miles driven)
  • Oil and fuel prices

Strategy

Tomkins is always tried to approach long term sustainable growth to their shareholders and its key elements are;

  1. Managing the cost base:
  2. Driving top-line growth:
  3. Managing the balance sheet:
  4. Reshaping the portfolios:

Managing the cost base

Tomkins faced a problem at the starting 2008 in a huge number of its end markets, then management decided to launched a project which name was project eagle , it was a stepping up an existing restructuring initiatives for cost base, it improves company competitiveness and operating margins. In the end of 2010, company should improve its performance by taking initiative on the three years Project Eagle program, which covers approximately $100 million annually.

Another initiative for the company is a restructuring project cheetah ,which is more fundamentally refocus for manufacturing groups in low-cost regions and within its most efficient facilities.

Driving top-line growth

Tomkins is taken a part in innovative technology, which is the key factor of company growth strategy and focusing to develop efficient, ‘green' products which achieve fuel and energy savings and reducing emissions.

Managing the balance sheet

Tomkins plc also maintains its cash flow and capital allocation, $442.8 million was good operating cash flow as a resultant of 2008. Tomkins working capital was decreased 68.9 million in period of 2008 , and capital expenditure was reduced $42.7 million lower then 2007.

Reshaping the portfolios

Tomkins has substantially completed non-core businesses divestments then buy 60% for expanded company's air distribution capabilities in INDIA, which introduced in 2006.

Core and Non-Core Strategy

Market outlook:-

The outlook of the current market is very difficult to make any forecasting and the visibility of reduced challenging is highly worse then ever just because of uncertainty of the economic volatility.

1: industrial:-

The group sales of in North America is 18.7% in industrial sector, same as 5.6% of group sales in Europe is captured in this region. Rest of the world 5.8% was a good sign for Tomkins pvt ltd in geographical markets.

2: Automotive aftermarket:-

3: Non-residential construction:-

In the United States of America Company has made strategy for 15.7% of the group sales. And it is expected almost the same for the values of basis in 2009.

4: Residential construction:-

The Tomkins pvt ltd. has decided as a consequence of the market conditions has adversely affected our trading in early 2009. And we think to improve efficiencies and the cost cutting will be tackled by our managers to maintain our strong position in the market.

5: Impairment:-

The wholly impairment recognized during 2008 was $342 million of which $228 million will be related to the Tompkins pvt ltd goodwill. This was highly appreciable for Tomkins pvt ltd.

6: Customers, investors and employees:-

Tomkins pvt ltd keeps eye on our customers, investors and employees and suppliers, business partners and look forward to continuing strong relationships over the next year. Always thank to all of them to help for achieving their dedicated targets.

PROFITABILITY RATIOS

2008

2007

Profit Margin (%)

profit before tax / turnover

-0.14%

8.93%

Gross Margin (%)

gross profit / turnover

27.05%

27.21%

Return on Capital Employed (%)

profit before interest and tax / net assets (fixed + current assets - current liabilities)

88.17%

1557.19%

Return on Total Assets (%)

profit before interest and tax / total assets (fixed + current assets)

54.48%

1005.43%

EBIT Margin (%)

earnings before interest & tax / turnover

0.56%

11.30%

2008 was challenging year for Tomkins as both of their business of automotive OE and residential construction were weak in the first half of the year and in second half markets were still weakened which went throughout the year. Recession has one of the major impacts on their business which resulted in 33% and 16% fall both sector of the business. Profit went down from 8.93% to -0.14% and other ratio also shows major decline in their business. None of the profitability ratio is showing good result.

Efficiency Ratios

2008

2007

Debtor Collection (days)

(debtors / credit sales)*365

50.89

59.89

Creditors Payment (days)

(creditors / credit purchase)*365

50.92

57.27

These time of efficiency ratio of gives us an idea how long it take for a company to pay or received outstanding amounts.

Debtor Collection (days)

shows an average time for company to collects its outstanding amount. It means less number of days show an increase of company's efficiency. In the same way Creditors payment (days)give us an idea about how much company is efficient to pay its outstanding bills. From the above ratios it shows us that number of days in both ratios have gone done as compare to last year which shows increase in company's efficiency.

Asset Turnover Ratio

2008

2007

Net Assets Turnover

turnover/net assets (fixed + current assets - current liabilities)

1.58

1.68

Fixed Assets Turnover

turnover/fixed assets

1.46

1.31

With the help of fixed asset turnover companies can measurestheir efficiency of using assets and to generates revenue. Its shows that fixed asset have gone little up 1.46, as compare to the last year. Turnover on net assets calculate evaluate capability of managing company's net asset. Net asset turnover is 1.58 as compare to 1.68 which shows that company efficiency of using their asset is little bit effected because of the economic crises.

Liquidity Ratio

2008

2007

Current Ratio

current assets/current liabilities

1.75

1.92

Quick Ratio

(Current assets - stock)/ current liabilities

1.39

1.57

Current ratio

These ratios measurea company's ability to payoff short-term obligations. This year its current ratio is 1.75 which is slightly lower than the last year because of the recession

A quick ratio is more accurate to calculate company's liquidity as compare to current ratio because it calculates liquidity after deducting stock value from the current assets.

S olvency Ratio

2008

2007

Solvency Ratio (%)

EAT/long term liability + short term Liability

-1.77%

13.74%

Gearing Ratio (%)

total debt / total equity

33.15%

28.24%

Interest Cover

profit before interest/ interest paid

95.94%

469.82%

The purpose of Solvency ratio is check whether company can pay long term loans. Due to recession in 2008 solvency ratio dropped dramatically as compare to 2007, which has affected the gearing ratio of the company to go up more which is not a good sign for a company.

Earning Ratio

2008

2007

RETURN ON EQUITY

NI/share holder equity

-0.86

59.47

EARNINGS YIELD (EY)

(EPS/MP)*100

-11.07

-12.44

The Return on equity ratio calculates that how much company was efficient to generate profit on every single unit of share with shareholders. It was quite better in 2008 and was 59.47% and now has dropped to -0.86%

Earnings per share ratio gives clear idea of how much proportion of profit will go to each and every share holder

Leaverge Ratio

Debt ratio

total liabilities/ total asset

57.28%

52.21%

Debt to equity

long term debt/share holder equity

49.58%

39.36%

The percentage of company's assets via debt ratio can be calculated with debt ratio. The ratio of total debt which total of long term liabilities plus current liabilities and total assets which are sum fixed assets , current assets and assets like goodwill. These ratios help us to check the capacity of a company to meet the financial obligation in future.

The ratio debt-to-equity (D/E) indicates percentage of shareholder's equity and debt to finance company's assets. This ratio is also called as gearing, risk or leverage ratio.

Conclusions

As a trainee analyst we produce a report using information only from the company's annual account of the company's business and strength. Every company main objective making more and more profit and it all depends on favorable ratios.

Company is effectively using its capital and its fixed assets with increasing liquidity capacity every year. But the business has to review its several areas and make adjustments where ever required. As every year the efficiency of company to generate income utilizing its total assets is decreasing. Business has to improve its inventory cycle. Company has to tighten its policies for accounts receivable to avoid the risk of bad debts as the debtors days is increasing every year, it shows that business capacity is increasing to allow debts to buyers for long time but it can result in bad debts. Company need to reduce its creditor's days as it may weaken its image in eyes of its new supplier but it also shows that the current suppliers trust the company's credit worthiness. Company has to observe its cost of sales as the cost of sales is increasing every year relevant to sales, so the company has to review its cost and make necessary adjustments to increase margin of safety. The company also has to reduce its debts.

Overall the business is performing well, but to meet performance excellent the above given suggestions should be followed, which will truly help the business to progress. The ratio analysis is beneficial as compare to comparative analysis. It gives snapshot view of the achievements of the company. It makes easier to draw conclusions for in depth understanding of the business performance and the areas to be improved. But the financial ratio analysis has also some limitations as it is only study of interim reports in which monetary factors are considered only, so it's only a mean not an end itself. The ratio analysis ignore the qualitative data as sometime the qualitative data may be more beneficial as such the ratio does not take into account the time value of money which is a big issue so it may not be a good measurement of business financial activity.

The comparison of financial ratios of company with the financial ratios of market leading company may be a best choice. The performance in recession period and taking into consideration the inflation and deflation rates along with financial analysis may be useful to view the company financial performance. These factors are important for true financial performance snapshot view as if the company financial ratios show that company financial performance is decreasing every year, but on the other hand it's a recession period and the company financial ratios shows better results as compare to the financial ratios of the leading competitors then its mean that the company is not going down, it is actually gaining the best results from its available resources. As such if company is improving the quality of its goods or services and it is increasing its cost which is reducing profit, that may be good for company in long run to increase sales to increase profits by gaining customer loyalty.

So other relevant factors should also be considered to draw conclusions about the financial performance of the business and the ratio analysis solely should not be taken into account to judge business financial performance.

The progress we achieved with our CSR program this year was pleasing, in particular the addition of new Supplier Charter and our improved environmental performance. This progress is testimony to the efforts of all our employees around the Group who, despite challenging economic and financial pressures continue to value the pursuit of our CSR activities. We will endeavor to further improve our CSR performance on a continued basis.

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