Exel plc 2001 Results
RNS Number:6947S
Exel PLC
11 March 2002
PART 1
Exel reports a steady performance in 2001
Delivers good turnover growth despite difficult markets
New business wins in 2001 over £600m p.a.
2001 2000 %
Year to 31 December £m £m Change
Turnover – continuing operations 4,525 4,312 4.9
Operating Profit – continuing operations 1 208.5 214.5 (2.8)
Operating Profit – discontinued operations 1 (0.8) (8.2)
Net interest (21.1) (15.7)
Profit Before Tax1 186.6 190.6 (2.1)
Basic Earnings Per Share1 41.4p 41.2p 0.5
Dividend Per Share 21.3p 20.7p 2.9
1 before goodwill and exceptional items
Highlights
• Good progress in contract logistics in Americas and Asia Pacific
• Outperformed difficult freight management markets to deliver sound
results
• Strong new business performance with gains of over £600m p.a.
• Strong free cash flow through continued focus on cash management
• Positive start to 2002: early trading ahead of last year despite
subdued markets
John Allan, Chief Executive of Exel, commented:
"2001 saw Exel prove the value of its robust business model by overcoming
difficult underlying markets in freight management and the technology and
automotive sectors, and achieving a strong rate of new contract wins. Our
performance in Asia Pacific and in the Americas was particularly strong given
underlying conditions. We have made a positive start to 2002, despite few clear signs of recovery in our underlying markets. Trading is in line with our expectations and ahead of the same period last year. Our businesses continue to develop new ways of creating value for our customers, and this, combined with our recent contract gains and strong new business pipeline, gives us confidence, at this early stage in the year, that the Group should deliver growth in line with market expectations."
For further information please contact:
Exel plc
John Allan, Chief Executive On 11 March: +44 20 7678 0152
John Coghlan, Deputy CEO Generally: +44 1344 744409
and Group Finance Director
John Dawson, Director of Corporate Affairs
The Maitland Consultancy
Lydia Pretzlik / Martin Leeburn +44 20 7379 5151
Presentation of Results
The presentation of results will be held at 9:00am at ABN Amro, 250 Bishopsgate,
London. Conference call for Analysts, Institutions and other Interested Parties
John Coghlan and John Dawson will be hosting a conference call from 2:30pm UK me for further questions concerning the results. The contact number for the
call from the UK is 0845 2003471 and +44 1452 542300 from outside the UK. Please
ask to be connected to the 'Exel Prelims Call'. Once prepared, a transcription
of the call will be posted to www.exel.com.
Despite difficult markets for some of Exel's activities, 2001 saw the Group make
progress by developing its contract logistics operations and by outperforming
underlying weak markets in airfreight, particularly in Asia. In addition, Exel
had to absorb the effects of the tragic events of 11 September, which caused
significant disruption to global airfreight movements and impacted group profits
by an estimated £5m. Strong new business wins and sustained progress in generating increased revenues from combined services should help position the Group well for the future. A number of acquisitions and a business disposal further refined the portfolio, adding key capabilities and removing non-core operations. Exel's logistics activities remain the core area of development. The Group made substantial further progress in implementing its strategy, built around the three core principles of customer focus, global coverage and integrated capability. This strategy has continued to deliver significant competitive advantage. Exel's integrated supply chain proposition has been a key element in securing new business in 2001 and the Group continues to develop innovative supply chain solutions that add value to its existing services and create greater efficiencies for its customers.
Group Performance
On continuing operations, turnover was up 5% at £4,525m (2000: £4,312m), but
slightly down on an organic basis (adjusting for movements in exchange rates,
acquisitions and disposals). Operating profit reduced by 3% to £208.5m (2000:
£214.5m), down 7% on an organic basis.
Total contract logistics turnover increased by 9% to £2,324m, up 4% on an
organic basis, as the Group continued to win new business across all
geographies. Overall contract logistics operating profit increased by 0.2%.
However, on an organic basis the decrease was 6%. Margins generally improved,
other than within the UK, which was particularly adversely affected by the
downturn in the technology and automotive sectors. Total freight management turnover was up 1% to £2,099m, but down 5% on an organic basis, driven by a fall in total airweight of 3% worldwide. This was due principally to lower activity and volumes from multi-national companies, particularly in the technology sector. In contrast, Exel's seafreight revenues were up 8%. Group freight management margins were lower year on year, particularly in Europe and
Americas, offset by an improvement in Asia Pacific arising from more efficient
consolidation and good cost control. Consequently, group freight management
profit, including the £5m estimated impact of the events on 11 September,
decreased by 10% to £57.3m, down 13% on an organic basis.
Environmental turnover increased by 2% to £103m (2000: £101m). Operating profit
was down slightly at £14.7m (2000: £15.4m). The business made significant
strategic progress in securing further growth opportunities.
A more detailed analysis of performance is included in Appendix A, the review of
operations.
Profit Before Tax and Earnings Per Share
Net interest increased by £5.4m to £21.1m (2000: £15.7m), principally reflecting
acquisition expenditure. Profit before tax, goodwill and exceptional items was
£186.6m (2000: £190.6m) and earnings per share on the same basis was 41.4p
(2000: 41.2p). Basic earnings per share was 22.9p, up 17.0p from 2000. The
effective tax rate for 2001 improved to 30.5% (2000: 31.5%).
Cash Flow
Free cash flow was £140.3m (2000: £62.2m), reflecting the strong overall
performance in working capital management and lower investment in capital
expenditure, due in part to phasing of spend between 2001 and 2002. The year on
year improvement in free cash flow was also helped by the significant reduction
in reorganisation costs. Improvements in working capital contributed an inflow of £27.9m. Capital expenditure of £123.6m was £23.0m lower than prior year (2000: £146.6m), representing 128% of the depreciation charge (2000: 151%). After proceeds from the sale of fixed assets, net capital expenditure was £66.0m (2000: £76.0m). Net cash outflow before financing activities was £25.5m which was after expenditure of £116.7m on acquisitions. This contributed to net debt increasing by £43.9m to £219.8m at the year end (2000: £175.9m). Balance Sheet gearing at the end of the year was 26.1% (2000: 21.5%) and interest cover remained strong at 10 times (2000: 13 times).
Dividend
The Board is recommending a final dividend of 14.3p per share, making a total
dividend of 21.3p, an increase of 2.9% over the previous year. The dividend, if
approved, will be paid on 14 May 2002 to shareholders on the register on 19
April 2002.
Exceptional Items and Profit Before Tax (FRS3 basis)
Total exceptional items amounted to a net charge of £38.0m (2000: £90.9m
charge). The profit on disposal of fixed assets was £8.6m (2000: £29.4m, which
included £25.9m share of joint venture profit on the disposal of Paddington land
and buildings).
In October 2001, the Group reached a successful conclusion to its closing
balance sheet dispute with the purchaser of the Allied Pickfords business (sold
in 1999) and further proceeds of £12.3m have been received. At the same time,
the Group has taken the opportunity to write off £10.7m against the carrying
value of its investment in Allied Worldwide (the company formed by the merger of
Allied Pickfords with North American Van Lines in the US), thus leaving a net
credit of £1.6m.
In December 2001, the Group announced the resolution for its loss making, shared
user network food business in Germany. The frozen food logistics business was
sold to a management buy out, resulting in a loss of £23.1m (after reinstated
goodwill of £16.1m). The chilled logistics business is to be closed in the
first half of 2002 and a provision for closure of £10.2m (after reinstated
goodwill of £1.2m) has been charged in the 2001 accounts.
As announced with the Group's 2000 results, the Group has charged a further
£15.0m (2000: £29.9m) of reorganisation costs to complete the integration of the
two former businesses. After goodwill amortisation and exceptional items, profit before tax was £128.3m (2000: £85.3m).
FRS17 – Retirement Benefits
FRS17 calculations as at 31 December 2001 reaffirm the significant level of
pension scheme surpluses, as previously reported at the time of the last
valuations of the schemes. FRS17 has no impact on cash flows, and the Group's
contribution holiday for its principal UK schemes continues. More details are
included in Appendix B to this statement.
Strategic Progress
2001 has been a year of substantial progress in the execution of the Group's
market leading strategy, despite operating in difficult underlying markets.
Clear strategic growth plans and a focus on developing a wider understanding of
the value that integrated logistics services can bring customers have
characterised the Group's development through the year.
Focus on Operational Performance
During 2001, Exel focused on improving the performance of five business units
that had performed below management expectations during the first few months of
the year. Good progress has been made in improving performance and prospects at
three of the largest operations and the Group restructured and disposed of a
fourth. At Exel Direct, the introduction of a new management team and the
development of a customer focused business model to service several key contract
gains led to a significant improvement in performance during the year.
Transportation Services, the US-based intermodal road and rail broker, produced
sound overall results in weak markets, despite set backs in the first few months
of the year, including the loss of several large agents. New contract wins and
the strategic decision to exit the milk transportation business should
strengthen Exel's UK based Tankfreight operation in 2002. In December the Group
disposed of its non-core loss making German frozen food distribution business
and put in place a programme to close its remaining restaurant services
activities in Germany in the first half of 2002. The fifth business, Automotive
Management Services, with turnover of around £30m, continues to receive
management focus as early signs of recovery were not sustained.
Acquisitions
Exel has continued to make selective acquisitions to enhance global coverage and
capability. These include Werthmann+Koster, FX Coughlin and All Cargo Logistics.
In addition, the Group set up its first operation in Switzerland and acquired a
controlling interest in its airfreight agent in Turkey. The Total Logistics
Company (TLC), a healthcare logistics business based in Australia and New
Zealand, which the Group acquired at the end of 2000, performed ahead of
expectations. Werthmann+Koster, a German automotive logistics supplier acquired in early 2001, performed well. FX Coughlin, a freight management company serving principally the US automotive sector, did not meet expectations. The business only broke even in its first nine months in the Group, with particularly disappointing results in the last few months of the year, its key trading period. Performance was severely impacted by the events of 11 September and by sharply reduced production volumes within Ford, its largest customer. Whilst vigorous management action has been taken to minimise costs, maximise synergies and pursue new business opportunities, the timing and degree of financial improvement will be significantly linked to the recovery of the US automotive industry and particularly Ford. Opportunities to leverage the specialist skills of the business, as Exel further develops its relationships in the automotive industry, remain strong. The overall financial performance of Exel's acquisition programme continues to be satisfactory. These focused acquisitions have strengthened group capabilities and coverage and led to significant benefits through strengthened commercial opportunities and customer recognition. For example, through combining contract logistics skills with global airfreight and Exel's US domestic freight forwarding business, acquired in 1998, major technology customers have seen stronger inventory management skills and time definite fulfilment deliver improved service levels. Exel will continue to seek selective acquisitions which add strategic capability, are reasonably priced and are capable of being integrated and managed within the Group.
Accelerating the Sale of Integrated Service Propositions
In 2001, the Group made considerable progress in selling to customers its
global, integrated supply chain management solutions. During the year, the Group
secured new business wins totalling over £600m of annualised turnover, of which
30% involved integrated supply chain solutions. After accounting for contract
losses and strategic decisions to withdraw from weak markets, new business
secured net gains of over £250m annualised turnover, the equivalent of 7% of
related logistics activity. As a result, the growth expectation across Exel's
supply chain operations remains positive in what are expected to be mixed
markets in 2002.
The expectation, at the time of the merger, that Exel could leverage its
customer base and successfully market combinations of products and services to
the same customer has also been realised. Overall, 65% of new contract gains
have been secured with existing customers. Of these, over 50% have involved
selling new services, 40% have been generated through cross-selling and 30% have
enhanced our geographic scope with individual customers. Examples include gains
with Carrefour, Compaq, Dal-Tile, Disney, Saab and Tesco, which have been
realised through combining the products and services of different logistics
activities. In recent months, Exel has announced gains with Home Depot, which
combined Exel's retail services in North America with the expertise of Exel's
automotive specialists to create a unique cross-dock solution for the leading
retailer. Exel's business with Dal-Tile has been significantly expanded by the
collaboration of Exel's contract logistics and transportation teams to create an
international solution to the customer's supply chain management needs.
Creating New Value in the Supply Chain
The unrivalled position of Exel as a global integrated freight management and
contract logistics business provides the Group with an opportunity to develop
stronger and deeper relationships with its customers. Responding to clear
demands for integrated logistics solutions, Exel has been able to develop, for
many of its clients, customised solutions that unlock significant amounts of
shareholder value. In turn, these implementations have helped Exel to achieve
steady results in 2001 and underpin improving prospects in future years.
Accelerating the development of this opportunity is a key objective for the
Group in 2002.
Prospects
Exel has a strong global spread and balance of activities that has enabled the
Group to achieve robust results during a demanding year. Underlying markets have
been weak, particularly in the technology and automotive sectors, where reduced
demand for products and services compounded the impact of a slowing global
economy. Exel took action early in 2001 to position its operations to minimise
the impact of these weaknesses.
Exel has made a positive start to the new year. Trading is in line with internal
expectations and ahead of the same period last year. At this early stage in
2002, there are few signs of any immediate recovery in underlying markets. The
trend of key customers to outsource more of their logistics needs continues to
be strong and Exel, the leading global supply chain specialist, remains well
positioned to benefit from these initiatives.
Exel's new business pipeline is strong and the rate of new contract wins early
in the year is in line with expectations. Building on the sound platform created
by the merger, Exel is well positioned to meet market expectations for growth in
2002 and support the future development of the business.
Appendix A – Review of Operations
UK & Ireland
Contract Logistics
Turnover from contract logistics activities in the UK and Ireland rose by 1% to
£1,168m (2000: £1,157m). Organic growth, adjusting for the impact of exchange
rates, acquisitions and disposals, was also 1%. Operating profit declined 13% to
£56.1m (2000: £64.8m), principally reflecting the revised contractual
arrangements at Tradeteam, difficult trading conditions in technology and the
weak performances at Automotive Management Services (AMS) and Tankfreight,
offset by good performance in Retail. As a result margins declined to 4.8%
(2000: 5.6%).
Retail and consumer activities showed steady growth in both turnover and profit.
Year on year benefits were seen from 2000 and 2001 contract wins with Argos,
IKEA, Littlewoods, Safeway, Sainsbury's, Selfridges, Somerfield and Tesco.
Healthcare margins were lower than in previous years due to the full year impact
of increased overheads as the global management team was established to develop
this market. Underlying gross margins at key activities were unchanged. In the
technology sector, sharply decreased levels of activity and the decisions of key
customers to relocate operations from Ireland and Scotland impacted results in
the year. Contract wins, including new business with Lucent, provided some
offset. In automotive, new business wins with Bridgestone, Cummins, Exide and
Ford provided some balance to the poor performance at Automotive Management
Services which saw significant volume weakness, particularly in the first half
of the year, at a time when the Group was making revenue investments in the
business to enhance systems and deliver restructuring. Tradeteam performed well
during 2001, although margins were slightly down, reflecting the impact of the
contract extension agreed with Bass Brewers in mid-2000. Tankfreight operations,
whilst maintaining strong revenues, saw margin weakness due to operational
difficulties that have been largely resolved. The full year effect of new
business with BP provided some offset to the strategic decision to exit milk
transportation.
Freight Management
Turnover from freight management activities increased by 6% to £257m (2000:
£243m) and operating profits improved by 7% to £5.8m (2000: £5.4m). On an
organic basis, turnover grew by 2% and operating profit declined 4%. Overall
operating margins improved slightly to 2.3% (2000: 2.2%).
Performance in the UK airfreight businesses improved on similar year on year
volumes. Cross-selling initiatives supported new business gains, including
contract wins with Hewlett Packard and Lucent. The downturn in technology
activities in Ireland, as customers reviewed manufacturing strategies, led to
decreased margins, although the addition of new business saw overall volumes
ahead 14%. Operating profit at Exel's international mail and courier businesses
was down on unchanged volumes, reflecting difficult market conditions.
Continental Europe & Africa
Contract Logistics
Continental European and African contract logistics operations made good
progress during 2001 with turnover ahead 22% at £430m (2000: £351m) and
operating profit up 33% to £6.5m (2000: £4.9m). On an organic basis, turnover
increased by 11% and operating profit reduced by 2%. Operating margins improved
to 1.5% (2000: 1.4%), principally reflecting the impact of the Werthmann+Koster
acquisition in early 2001.
Good performance was achieved in technology, led by organisational changes at
key operations in the Netherlands, and automotive, aided by the acquisition of
Werthmann+Koster and other new contract gains. Exel also benefited from the
first full year of its lead logistics partner relationship with Ford in Europe.
Performance at consumer activities in Belgium, France and Germany was somewhat
weaker due to volume reductions. Performance in Spain remained steady. New
business wins included a significant contract with Allied Domecq. During the
year, Exel established a European managed transportation services facility to
support operations with Unilever and Kraft Jacob Suchard. Retail operations
performed well. New contract wins across Europe included Alcampo in Spain and
Intermarche in France. In South Africa, Exel has provided an integrated supply
chain solution for Compaq involving the distribution and storage of Compaq's
products originating from Europe and the Far East. In addition, Exel secured new
contracts with Gillette and Kodak for integrated logistics operations in the
region.
Freight Management
Freight management activities proved resilient in difficult markets. Turnover
grew by 14% to £435m (2000: £383m). Operating profit reduced to £6.2m (2000:
£10.9m). On an organic basis, turnover grew by 12% and operating profit
decreased by 47%. Operating margins decreased to 1.4% (2000: 2.8%). The weaker
margin mainly reflects investment in a strengthened regional senior management
team and a poor performance in the Group's Dutch seafreight operations, which
has also incurred some restructuring costs. Airweight was up slightly compared
with the previous year. Notwithstanding the weak performance in the Netherlands,
the contribution from seafreight operations across Europe improved 12%.
Across the region, growth in airweight was achieved despite worsening underlying
trading conditions, particularly in technology related operations and within
Sweden and Germany. The transfer of two customers' manufacturing activities from
Germany impacted margins. Operations in Finland, Italy and the Netherlands all
made good progress in the year, as did the specialist Motorsport logistics
operation. In February, the Group started its first operation in Switzerland.
Exel's freight management and other services in West Africa performed strongly.
At the very end of the year, Exel strengthened its market reach through the
acquisition of All Cargo Logistics, an airfreight business in Austria.
Americas
Contract Logistics
Turnover from contact logistics activities in the Americas was up 10% at £658m
(2000: £599m) and operating profit was ahead 13% at £37.1m (2000: £32.7m). On an
organic basis, turnover and profit were ahead 4% and 6% respectively. Operating
margins improved slightly to 5.6% (2000: 5.5%).
Consumer activities in the Americas benefited from the new business secured in
2000 from Unilever in Brazil and Procter & Gamble in the US. These more than
offset several business reductions. As reported at the half year, operating
issues with one particular customer impacted results but these have now been
largely resolved. Retail operations improved efficiencies and made some progress
in securing new contracts, including business with Toys R Us and Home Depot.
Exel Direct has completed its reorganisation and now provides both dedicated and
network services for customers. The reorganisation and the addition of new
business with appliance manufacturers Amana and Maytag and retailer
Williams-Sonoma have largely offset the impact of the loss of a key customer in
mid-2000. Chemical performance declined in line with underlying volumes as
customers reduced manufacturing levels in the US. Automotive contract logistics
operations performed very strongly, with turnover ahead over 40% and operating
profit up over 50%, mainly reflecting new business growth, particularly with
DaimlerChrysler and Goodyear. Notwithstanding difficult markets, technology
activities grew turnover and profit strongly, aided by new business gains with
Motorola and Agilent, which helped offset underlying volume declines. An
expanded role at Compaq in Houston also contributed to the performance, as did
project design work for a leading office supplies business.
Freight Management
Turnover from freight management activities in the Americas increased by 3% at
£922m (2000: £897m) but operating profit declined by 21% at £18.6m (2000:
£23.6m). On an organic basis, turnover and profit were down 10% and 24%
respectively. Operating margins decreased to 2.0% (2000: 2.6%). Overall,
airweight was up 8% compared with the prior year, reflecting the strong domestic
performance.
Exel's airfreight activities in the Americas have performed well in very
difficult markets. International airweight was down 8%, slightly better than the
underlying market which saw volumes down by around 11%. Exel's domestic
airfreight operations maintained their strong growth with turnover up 25% and
airweight up 19%, compared with 2000.
The acquisition of FX Coughlin in April 2001 helped establish Exel as a leading
supplier of long distance automotive logistics, with specialist skills in
recyclable packaging and freight management. FX Coughlin's expertise in securing
charter capacity enabled Exel's airfreight operations to respond well to the
tragic events in September. However, these events and major production changes
at Ford, a key customer, contributed to the business failing to meet
expectations, having only broken even in its first nine months in the Group.
After a difficult start to the year, Transportation Services, formerly Mark VII,
recovered well and despite low levels of underlying activity, delivered good
margins on reduced volumes. New business gains with Coors, Eastman Chemicals and
PepsiCo provided evidence of good recovery in the second half of the year.
Asia Pacific
Contract Logistics
Turnover from Exel's contract logistics operations in Asia Pacific grew
strongly, up 113% to £68m (2000: £32m) with profit ahead £2.9m to £2.3m (2000: £
(0.6)m). On an organic basis, turnover and profit were up 49% and 83%
respectively. Operating margins improved to 3.4% (2000: (1.9)%).
The addition of the Total Logistics Company, acquired in December 2000, made a
significant impact to Exel's critical mass in the Asia Pacific region, and has
allowed the Group to develop a leading position in healthcare logistics in
Australia and New Zealand. The business has already benefited from new contracts
with Boehringer Ingleheim, Tyco and six other global customers of Exel.
New contract wins in Vietnam, with Nestle, and in Hong Kong, with a leading
telecommunications equipment manufacturer, complemented wins in the first half
from Johnson & Johnson and Procter & Gamble. Whilst still relatively small,
Exel's contract logistics activities in the region have established a firm
platform for growth.
Freight Management
Despite airfreight markets that were sharply down during 2001 compared with the
previous year, Exel's operations in the region delivered a strong performance
through focusing on customer service and operational efficiency. Turnover was
down 12% to £486m (2000: £551m), but operating profit increased by 12% to £26.7m
(£23.9m). Operating margins improved to 5.5% (2000: 4.3%), reflecting careful
management of fixed costs, including the renewal of key property leases at lower
rents and improvements in freight consolidation.
Underlying airfreight markets out of Asia into Europe and the Americas were down
around 10% during 2001, particularly driven by weaknesses in the technology
sector, on which Exel, in this region, has a high reliance. Against this
backdrop, Exel's operations performed well and, through effective operational
management and leveraging of the Group's leadership position in the region,
delivered high levels of customer service. In particular, performance in the key
markets of Hong Kong, Singapore, Korea and Malaysia exceeded early expectations.
Developing operations in India, Thailand and the Philippines also made progress
and, despite suffering a major fire which destroyed the local office, Exel's
Taiwan operation maintained performance. Considerable new business gains were
secured during the year in freight management, including contracts with
Abercrombie & Fitch, a US retailer, and technology businesses Acer, Maxtor and
Sony.
Environmental
Cory Environmental made steady progress, with turnover ahead 2% at £103m (2000:
£101m). Reported profit reduced slightly to £14.7m (2000: £15.4m). The overall
result for the year was slightly depressed by poor weather at the beginning of
the year which resulted in flooding at a landfill site in Gloucester and the
closure for three weeks of a landfill site in Essex.
During 2001, Cory made significant progress in securing key strategic objectives
related to the development of its landfill activities and waste management
contracts in and around London. Planning permission was obtained to extend the
life of the Mucking landfill site in Thurrock for a further five years. The
business continued to make steady progress towards securing a 30 year contract
with the Western Riverside Waste Authority to manage the disposal of municipal
waste. Final negotiations of the contract are underway. The proposal envisages
using Cory's existing river barge infrastructure and will include significant
recycling activities. In addition, Cory has been selected as the sole preferred
bidder for the renewal of the waste management contracts with Gloucestershire
County Council, due in 2002.
Other landfill developments include planning consent for a new site at Greatness
in Kent, providing over 1.5 million cubic metres of capacity. Site preparation
is underway and operations are expected to commence towards the end of 2002.
Consent was also received for a further three million cubic metres of capacity
at Cory's landfill at Bellhouse in Essex, bringing the total consented capacity
at the site to around eight million cubic metres. In the Midlands, Cory's
landfill site at Himley produced a satisfactory result in its first year of
trading and the business has now established a good position in the local
market.
Cory's municipal services contracts were depleted by the loss of a contract with
the London Borough of Bromley where it was outbid on renewal. The remaining
contracts performed in line with expectations, notwithstanding some start up
issues with a new contract in Milton Keynes.
Appendix B – FRS 17 Retirement Benefits
FRS 17 has not been adopted in the Group's 2001 financial statements. However,
the transitional phased disclosures will be included in the notes to the
financial statements.
At 31 December 2001, the Group's pension schemes had an aggregate FRS 17 surplus
of £491m (almost entirely in the UK), net of deficits totalling £12m in certain
overseas schemes.
The introduction of FRS 17 will have no impact on the Group's cash flow.
Contributions to the Group's pensions schemes will continue to be determined
according to their latest actuarial valuations and on the advice of external
actuaries. The Group's principal pensions schemes (which are in the UK) were
significantly over-funded at March 2000 and the Group continues to suspend
contributions to those schemes. The FRS 17 valuation update as at 31 December
2001 confirms that the UK schemes remain significantly in surplus.
The preliminary estimate of the impact on the profit & loss account in 2002, if
FRS 17 were to be applied in that year, is about £6m below the SSAP 24 number,
relatively modest in view of the decline in equity market values over the last
18 months.
