So far, personally, this has been a pretty rough year. My assistant Lindsey Russell died in May of colon cancer after a long illness and my secretary, who happened to be very close to Lindsey, left shortly afterwards in June. We purposefully have a very small head office. For example, I am the investor relations department and have been since I joined the company in 1988, so these events did put a real strain on what we were doing. I have since redefined my assistant’s role and recently hired a secretary who’ll be able to take on some of her responsibilities.
It has also been a very busy year for us, starting with Tomkins being repositioned from the diversified industrials sector to the engineering sector. We applied to the Actuaries Committee for the switch last year because we felt that it would better reflect the company’s operations, since engineering accounts for around two-thirds of our business. It was actually a natural transition and we did not have to meet a whole new group of analysts because we were already being fairly well covered by the engineering analysts.
Lower than expected
January was a crucially important month for the company with the release of our interim results. Our earnings did meet expectations but our statement was not well received at all and our share price performed badly. Analysts were disappointed by the slowdown in growth in a couple of markets such as agricultural and construction equipment, which had an effect on our sales. The same problems were highlighted by our peers, particularly selling into the agricultural equipment market, which was hit by a combination of low commodity prices, the relative strength of the dollar and the Asian financial crisis. (The US accounts for over 60 percent of Tomkins industrial and engineering group’s sales and represents over 80 percent of its construction component unit’s sales).
On the day of the results announcement, we held a number of meetings with analysts and investors as well as meeting with the press in London. We also went to Scotland plus we spent five days in the US, criss-crossing the entire country, talking to our shareholders. There is a great deal of interest in the States in the company, especially from the value funds.
In January and February we bought back 6 percent of the company’s shares and, in March, we launched a tender share buy-back program in order to buy a further 167 mn shares – close to 15 percent of our total issued share capital, or about £421.1 mn. We held an extraordinary general meeting in April, asking for shareholder approval for the program. The company’s intention was to move toward a significantly more efficient capital structure. We also did not want to just venture into the market and buy from the largest of our shareholders. We wanted all of our shareholders to participate equally – an approach which is known in the US as a Dutch auction.
A tender offer for shares had never been done before in the UK so there was no precedent whatsoever and, as a result, a great deal of work was needed to put it together correctly. It was a highly pressurized three to four weeks in the run-up to the tender offer, meeting with the lawyers and bankers in the US and UK. Everyone in the head office was involved including the chairman, company secretary, finance director and myself. It involved the drafting and redrafting of documents, dealing with the US advisors, lawyers and bankers and briefing Taylor Rafferty, our investor relations agency. My only regret is that I had to miss someone’s wedding because I was responsible for signing-off the document. I had to sit at the printers for hours.
Strategy meeting
March is also the time at which the company does its annual strategic planning, which is a combination of a three year view and budget. The chief executive of each company has to focus on the key issues and draw up a brief narrative of operations. Then they meet with the top management at our management centers in London, Dayton, Ohio and Denver, Colorado.
It is a very intensive period and involves a great deal of preparation. I am part of the small group of people that listens to the presentations given by the head of each business but our chairman Greg Hutchings and chief operating officer David Snowdon do the bulk of the questioning. It is important that I sit in on these meetings because it gives me a far greater understanding of the dynamics of each of the businesses. It is also a great opportunity to meet with the individual members of management and talk to them about their respective divisions. The more familiar I am with their companies, the more willing they’ll be to talk to me about what is going on. All this information is also very helpful for when I prepare the company’s annual report.
I spent the rest of April talking to our analysts about where the company is heading and making sure they were fully up to speed with events. I either call them or visit them personally. We are talking to fund managers all the time and try to visit them on a regular basis. We make about five trips to the US every year and I am off tomorrow (end of July) with David Snowdon and Greg Hutchings to New York, Boston and Chicago for a three day trip following the preliminary announcement.
After each meeting with a fund manager, I draw up a brief contact report detailing who I saw, the discussions we had and any particular comments. I circulate this to our brokers as well as Taylor Rafferty so they also have a record of who I saw and what was discussed.
Complicated discussion
May and June are mostly taken up by the organization of the annual report which we publish in August. I am responsible for the production, overseeing the design – we have used the same firm for a number of years now – and the writing of the report, with the help of divisional management who send in their contributions and drafts. Tomkins is often described as ‘complicated’ so my job is to give a clear and concise picture of what we are. It is a hectic period because of the different deadlines that have to be met by me and my colleagues. Also, it seems that just as you think you are finished, you get a mass of good ideas which leads to a complete redesign. I always set a goal that this year I will not repeat the last minute rush but so far I have not achieved it.
During recent months there has been considerable press speculation about Tomkins covering a number of subjects ranging from a possible demerger or sale of our food business to boardroom disagreement. Company policy is clear and consistent, we never comment on rumors! The analysts know this as does the press. We do not normally speak to journalists, that is left to Hudson Sandler, our financial communications advisors.
In July we made our preliminary results announcement which included plans to demerge our European food manufacturing business. It was also announced that Ian Duncan had resigned as finance director in order to become the chairman of the demerged food company. As a consequence of the press speculation, by the time we made our announcement it was not very hot news!
The disappointment, however, was that it was going to take six to eight months to complete the transaction. I think some would like us to announce the deal on the Monday and complete it by Tuesday. But, obviously, these things cannot happen overnight and our timetable is a short one. For example, when we bought Gates (industrial and automotive business) in December 1995, we had hoped to close the deal by April but it was not completed until the end of July purely because of the time it took to work through the regulatory procedures, due diligence and other preparatory work.
I spent several weeks preparing the announcement to go into our preliminary results statement. It was a substantial task which involved working with our lawyers in the US and UK as well as Warburgs, our financial advisors in London. In general, I spend about three to four weeks preparing for our results, planning the messages we want to convey, getting the slide presentation ready, going through the question and answer rehearsals. When the results are actually released, the day is usually taken up by meetings with analysts and institutional investors both collectively and individually. We also held a teleconference with investors and analysts in the US so that we could explain the company’s strategy.
