Charter plc AGM Statement
25/06/2004
At today’s Annual General Meeting of shareholders, Mr David Gawler, Chairman & Chief Executive made the following statement,
“Review of the results for the year ended 31 December 2003
At this Meeting the shareholders consider the Annual Report and Accounts for the year ended 31 December 2003. I am pleased to report improved results for 2003, resulting from the benefits of the restructuring initiatives implemented since 2001 and some recovery in the second half of the year in key markets in which the group operates.
The adjusted operating profit in respect of continuing operations, before exceptional items and amortisation of goodwill, increased by 12 per cent to £33.5 million in 2003 from £29.8 million in 2002. Adjusted earnings per share was 12.5 pence in 2003 compared with 8.6 pence in 2002, an increase of 45 per cent.
The welding and cutting business (“Esab”) generated adjusted operating profits of £35.3 million compared with £36.0 million for 2002. In the first half of the year, Esab achieved operating profits of only £15.8 million, compared with £20.0 million for the first half of 2002. In the second half of 2003, Esab achieved a significant improvement with adjusted operating profits of £19.5 million, compared with £16.0 million for the second half of 2002.
The adjusted operating profits of the air and gas handling business (“Howden”) for the year were £6.3 million, as against only £1.5 million in 2002.
The sale of the group’s non-core US Defence businesses for some £26 million was completed in December 2003. It was gratifying to achieve the sale at this level, as in 2000 these businesses recorded an operating loss of £0.8 million. By 2003, their performance had improved sufficiently to enable the successful sale of these businesses.
The Accounts for 2003 include net exceptional charges of £18.0 million principally in connection with restructuring initiatives, profits and losses on the disposal of properties and non-core businesses and non-recurring financing costs.
Net debt reduced by £57.2 million in 2003 from £194.0 million at the end of 2002 to £136.8 million at 31 December 2003, through disposals of non-core assets, improved profitability, tighter management of working capital and constraints imposed on restructuring and capital expenditure.
Post year-end developments
As announced on 3 February 2004, the dispute that had arisen in 2003 with certain of the holders of the US loan notes was settled. The Company and its legal advisers have consistently maintained that no default occurred under the US loan notes. Notwithstanding this, the Directors considered that removing the uncertainties created by this legal dispute was in shareholders’ best interests.
In the light of this settlement, together with the improved trading results and reduced indebtedness, the Company decided it was appropriate to raise equity by means of a Rights Issue to strengthen the group’s balance sheet. The Rights Issue, announced on 20 February 2004, was approved by shareholders at the Extraordinary Meeting on 8 March 2004. As a consequence of the successful Rights Issue, the term of the syndicated revolving credit facility has been extended for a period of six months to 30 September 2005.
The Rights Issue net proceeds of £44.6 million were applied initially to reduce borrowings. Part of the Rights Issue proceeds are being used to resume the group’s planned restructuring programmes, undertake targeted capital expenditures and, where appropriate, increase the Company’s interests in associates and partly owned subsidiaries.
Non-executive Directors
At this Annual General Meeting, all of the non-executive Directors are standing for re-election and this presents me with the opportunity to place on record my thanks for their support and the unstinting commitment of their time and energy that they have devoted to the Board’s affairs throughout this challenging period.
Prospects
The restructuring programmes implemented since 2001 in Esab and Howden have reduced the ongoing cost base and improved the competitive position of these operating businesses. We reported at our preliminary results in March that we were beginning to see the benefits of these programmes as well as some recovery in key markets in which the group operates. These trends have continued with both businesses experiencing generally stronger trading conditions. Howden’s order book has strengthened since the year-end and it is continuing to perform strongly in a number of key markets, particularly in China. The directors believe, in the light of trading to date, that prospects for both of the core businesses have improved and the Board views the outcome of 2004 with confidence.
-Ends-
Contact
Andrew Fenwick, Pamela Small, Brunswick +44 (0) 20 7404 5959