Trading Update
06/07/2001
This trading update precedes the group's interim results announcement due on 6 September 2001.
The Group continues its process of recovery following Lincoln's bid last year for the Company and sales in the first six months of this year are ahead of last year in all three business divisions. However, as was reported at the Annual General Meeting, underlying earnings in the first half of this year will be lower than those achieved last year.
The improvement in the economic and trading environment envisaged by the Company earlier this year is no longer expected to materialise in the second half and competitive market conditions persist in most market segments in which the Group operates and trading margins are under pressure. In the current economic and other circumstances affecting Charter the prediction of results is unusually difficult, but it is anticipated that underlying full year results, before exceptional and one-off charges, will be better than those achieved last year.
At its Annual General Meeting held on 25 April 2001 the Company confirmed that an evaluation of its strategic and operational options aimed at enhancing shareholder value was being undertaken. Although this exercise is still ongoing, a number of non-core assets for disposal have been identified, as have several activities with excess capacity and related overhead under-recoveries. Furthermore, a reduction in the ongoing cost structure at head office and elsewhere is being actively undertaken. Further information will be provided with regard to these matters at the time of the interim results announcement.
The previously announced restructuring programme in the Welding and Cutting division is ongoing and will provide the foundation for significant improvements in the division's competitive position. The ongoing operational review has led to these restructuring programmes being extended, and to the inclusion of businesses within the Air and Gas Handling division. Further information will be provided on these matters at the time of the interim results announcement. The restructuring and other cost cutting programmes will result in a number of non-recurring charges in the current year, some of which, will be treated specifically as exceptional items and others will directly impact the reported trading profit line. It is envisaged that the majority of these exceptional and other one-off items will be taken in the first half of the year.
Despite the economic and trading environment, the Welding and Cutting division in particular continues its process of recovery following the Lincoln bid. Although the division this year will not generate the level of profits it made in the first half of last year, it is expected in the second half to achieve significantly better profits than those of last year.
The various businesses within the Air and Gas division have had a mixed first half, in part due to the recognition in this period of some contractual and one-off other issues and their profits are expected to be well down on last year. On the other hand, the division's results are expected to pick up significantly in the second half with the Power business anticipated to perform strongly, offset to an extent by the Systems business, which is contending with a number of large order delays.
In both halves of this year the Specialised Engineering division (which comprises six unrelated businesses) is expected to improve overall on the operating results achieved in the comparative periods, however operating results of the individual businesses will be mixed.
Commenting today, David Gawler, Chairman and Chief Executive said:
'Following my appointment on the 25 April 2001, I indicated that the Company would be undertaking an evaluation of its strategic and operational options to enhance shareholder value. Although this exercise is still ongoing a number of non-core assets for disposal have been identified, as have several activities with excess capacity and related overhead under-recoveries. Furthermore, measures to reduce the ongoing cost structure at head office and elsewhere are being pursued, the full benefits of which will only be reflected in results in future years.'
Contact
Andrew Fenwick; Helen Shepard, Brunswick +44 (0)20 7404 5959