INDUSTRIAL
INDUSTRIAL IS FOCUSED ON TWO
SPECIALISED MARKET SECTORS. INTERCONNECT SUPPLIES ELECTRONIC
CONNECTORS AND COMPONENTS FOR DEFENCE, TRANSPORT, TELECOMMUNICATIONS
AND OTHER INDUSTRIES, WHILE AIR MOVEMENT PRODUCTS INCLUDE
DUCTING AND VENTILATION SYSTEMS.
With most exposure to the declining sectors
of the world economy, the Industrial division experienced
a marked drop in sales and profits. The greatest fall was
in our Interconnect communications components businesses,
which suffered as expansion of the mobile telecommunications
infrastructure slowed. Lower demand for Interconnect products
from the civil aerospace industry was offset by defence growth.
In total, sales fell by 13% to £422m
and operating profits by 31% to £64m. More positively,
cash conversion was strong at well over 100% of operating
profits. Importantly, even at this lower level of activity
the Interconnect communications businesses are making respectable
profit margins. The Air Movement businesses performed well,
attaining good margins on flat sales.
In reaction to the lower levels of business
activity, we reduced employee numbers by 12%. The costs associated
with restructuring were charged directly against profits.
Within Air Movement, Vent-Axia's manufacturing operations
were consolidated to improve efficiency and customer service.
Specialised products
Strategically, the division continued moving towards its goal
of becoming a supplier of highly specialised products that
solve its customers' problems. In the US, our Sabritec business
launched its Fibre Channel high data-rate multi-pin connector
during the year. This meets the needs of an aerospace and
space industry looking for higher density cabling. We have
already received a large number of orders. Among other applications,
Fibre Channel is being installed as part of the cockpit upgrade
in NASA's fleet of seven space shuttles. In another example
of the success of our approach, the PolyPhaser business was
contracted to supply lightning protection equipment for E911
radio equipment used by the emergency services in the US.
Within Air Movement, Vent-Axia continued
to launch new products to build on its market-leading brand,
including a low-energy version of its flagship 'T' series
fan.
We took action during the year to focus
on specialist businesses within the Industrial division where
we have critical mass. In particular, we want to concentrate
management time on those business areas offering the best
long-term prospects for growth. To this end, we sold a number
of small businesses, including Fans & Spares Group and
our European flexible hose business. We are constantly looking
for bolt-on acquisitions that will add to the capabilities
of our chosen business areas, but we will not overpay for
such acquisitions.
Outlook – Industrial
Looking forward, the actions taken this year have left us
well positioned for any recovery in our markets. If demand
does not deteriorate further, reduced costs should feed through
to higher profits in 2003. |
