Looking at these results in detail, what for you are the key figures?
Unfortunately, because of the restructuring activity and the fact that we’ve
been buying and selling companies as well, the presentation of the numbers is a
bit complicated. The way I look at the profit and loss account is basically just
to start at the top, first of all looking at revenue.
We said that the way we’re going to achieve the turnaround for this business is
by getting the top-line growing again and we were successful. You can see that
revenue in the first half was up 10.5%.
A lot of that, however, comes from acquisitions, and it’s equally important that
we can see what’s happening to the business organically. Organic revenue growth
was up 3.5%, which is a very good result in the circumstances.
These results are complicated, but when can we expect to see a clean
set of numbers?
I hope 2007 figures will be much easier to understand. The reason that
these results are complicated is primarily because of the restructuring
activity, and particularly the one-off items that we’re incurring. We should be
through with most of that towards the end of this year, so next year should be
much easier to follow.
Where are you with the restructuring?
I think we’re making good progress. As you would expect in anything that’s
this deep-rooted and widespread throughout the business, different restructuring
activities are moving at different paces. Some things are going better than
planned, others a little slower.
But I’m confident that the process is very much under control. We budget all of
these activities. We forecast the outcome from them. We have regular reviews. So
I think, as a senior management team, we are definitely working across all of
these issues. I know it’s hard work and it’s perhaps taking a little bit longer
than some investors might like, but we do have this activity under control.
The pension deficit has come down considerably since the end of last
year. Why is that?
Most of the deficit is attributable to the UK defined benefit scheme. We’ve
closed that scheme to future accrual and that will stop at the end of this
During the first part of this year, the trustees changed the investment mix in
the scheme. It used to be investing about 80% in equities. It’s now investing
about 80% in bonds.
During the course of the six months, basically market movements and interest
rates have helped us significantly. At the same time as changing the asset mix,
the trustees also put some derivatives in place to protect the scheme against
future moves in interest rates and inflation.
So I would hope that the deficit now will be much less volatile and shouldn’t
move as much if market conditions change. That said, we still haven’t eliminated
the problem. We still have a fairly significant deficit to reduce.
Looking at pre-tax profits, there seems to be an improving trend,
Q1-on-Q2. Does that mean that the benefits of the actions you’ve taken have
started to come through earlier than the business would have expected?
I think we need to be cautious. The reason that we have improving pre-tax
profits in the second quarter, that’s mainly due to technical accounting
factors, to do with interest.
If you look up to the operating profit level, you can see that profits were
still going backwards in the second quarter and we’re saying actually that we
expect the textiles and washrooms business basically to be flat in the second
half versus the first half. That said, we can see evidence of restructuring
benefits coming through in a number of our businesses.
Are you confident that you can maintain the dividend in 2006 and
what’s the policy going forward?
We’ve maintained the dividend at the interim stage and we expect to maintain
the dividend for the full year, and at that level the dividend is clearly
We said at the end of last year that our policy would be to take a fairly
cautious approach to growing the dividend until it was clear that the business
recovery was well established and that remains our position.
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