Final Results
SMITHS INDUSTRIES PLC
29 September 1999
SMITHS INDUSTRIES: PRELIMINARY RESULTS 1999
For the year ended 31 July 1999
1999 1998 Change
Turnover £1.324bn £1.199bn +10%
Operating profit * £248m £224m +10%
Pre-tax profit * £241m £218m +10%
Operating cash-flow £195m £204m
Earnings per share * 53.5p 48.2p +11%
Total dividends 21.65p 19.65p +10%
* before goodwill amortisation
Commenting on the results, Keith Butler-Wheelhouse, Chief Executive said:
'This 11% increase in earnings shows that Smiths Industries continues to
achieve strong organic growth. Most of the improvement in sales and profits
came from our existing activities, with Aerospace well ahead. We have made
productivity gains, kept margins at a high level and have re-invested the
healthy cash-flow in extending our technology base through acquisitions and
R&D.
'Looking to the future, we can deliver growth from all three activities in the
near term, and I am confident that earnings and dividend increases can be
maintained in the years ahead.'
(see also comment on Prospects, page 7)
Further information: Russell Plumley: Tel: 020 8457 8203
Wednesday am: Tel: 020 8568 2088
Home: Tel: 020 8992 9751
Smiths Industries: Preliminary Results 1999
PRINCIPAL FEATURES OF THE RESULTS
Earnings continued to grow strongly
Operating margin maintained at 19%
Another year of strong cash-flow
Recent investments add to the technology base
45% of sales made to US customers
All three activities performed well in widely differing market conditions
Aerospace: profits improved by 28%
Medical: strong sales growth in second half
Industrial: consolidation of activities brings sharper focus
Prospects: Opportunities ahead for growth in each activity
EARNINGS CONTINUED TO GROW STRONGLY
For the year ended 31 July 1999, Smiths Industries recorded pre-tax profits of
£241m before goodwill amortisation (1998 : £218m), an increase of 10% on the
previous year. Earnings per share increased 11% to 53.5p (48.2p) helped by a
reduction in the tax rate. The Board has recommended a final dividend of
14.25p (12.9p), an increase of 10.2% and covered 2.4 times by earnings.
Shareholders will be offered the alternative of a scrip dividend.
OPERATING MARGIN REMAINED AT 19%
Operating profits climbed 10% to £248m (£224m) on a similar increase in
turnover to £1.324 billion, with Aerospace making the greatest contribution to
the improvement. The overall margin on sales remained at 19%, with all three
of the company's activities achieving profitability close to this figure. Most
of the increase in operating profit was generated by the continuing
activities, with the balance contributed by current year acquisitions and the
extra months of contribution from acquisitions made in 1998. Productivity,
measured as sales per employee, improved by 6%.
ANOTHER YEAR OF STRONG CASH-FLOW
Operating cash-flow is measured by Smiths Industries after capital expenditure
and working capital movements. On this basis the company generated operating
cash of £195m, representing almost 80% of profit. The slight reduction in this
conversion rate reflected the timing of capital investment programmes and of
advance payments for major Aerospace contracts. Net capital expenditure
increased by 31% to £48m and the working capital increase was in line with
higher levels of activity.
After tax and interest, the free cash-flow was £117m, while shareholders
holding close to 40% of the equity elected to take scrip dividends to the
value of £26m. After acquisition costs the company's net debt at the year end
was £93m, compared to £83m at the start of the year.
RECENT INVESTMENTS ADD TO THE TECHNOLOGY BASE
During the year the company made seven acquisitions for a total outlay of
£93m. Three for Aerospace in the UK and US (£25m) added to the company's HUMS
(Health & Usage Monitoring Systems) capabilities, a technology for improving
the safety and efficiency of helicopters in which Smiths Industries has
established a world lead. The acquisition of BCI Inc (£42m) for Medical
complemented existing expertise in vital signs monitoring. BCI is the US
leader in hand-held pulse oximeters. Medical's distributor in the Nordic
countries was also acquired. Industrial strengthened its interconnect business
with two US acquisitions (£25m) serving the defence and telecoms markets.
The combined contribution to profits of these acquisitions (before goodwill
amortisation) matched their funding costs during the year, and they are
expected to make a positive contribution in the current year. The goodwill on
acquisition is capitalised on the balance sheets and written off over 20
years. The amortisation of goodwill on these purchases was £3m.
The acquisitions made in 1998, mainly the Graseby businesses which joined
Aerospace and Medical, produced profits well in excess of their funding costs
during this first full year within Smiths Industries. In August 1999, the
acquisition of US company Environmental Technologies was completed for £9m,
adding to the chemical agent monitoring expertise of Graseby Dynamics within
Aerospace.
Research and Development is another means by which the company extends its
technology base. Last year, total expenditure on R&D amounted to £127m, of
which £74m was funded by customers. Aerospace accounts for the larger part of
this expenditure, but it is increasing in Medical as the company moves further
into advanced monitoring and therapy systems. The company-funded R&D was
charged against profits for the year.
45% OF SALES MADE TO US CUSTOMERS
The company's extensive involvement in the United States, where it has 25
manufacturing locations and employs 6,300 people, has again proved beneficial
during this sustained period of US economic growth. By destination of sales,
the US represents 45% of total sales, including on-shore production and
exports from the UK, which mainly comprise high value aerospace electronics.
This year-on-year effect of currency translation on reported profits was
insignificant, as sterling remained at an average exchange rate of 1.64
against the dollar and was relatively stable against most of the currencies.
As a major UK exporter (£296m sales in 1999), the company has had to adapt to
the continuing strength of sterling. The high pound has had an effect on
trading, particularly from the UK into continental Europe, where low
industrial investment has also held back sales growth. A number of the
company's UK operations have been re-structured during the year to keep them
competitive in this environment.
ALL THREE ACTIVITIES PERFORMED WELL IN WIDELY DIFFERING MARKET CONDITIONS
Maintaining a rapid rate of growth in 1999, Aerospace increased its
contribution to the total profits of Smiths Industries to 40%, with Medical
contributing 31% and Industrial 29%. While the world market for aircraft and
related services continued to rise in both civil and defence sectors, sales of
medical devices were restrained by Asian economic problems, strong sterling
and pricing pressure in the US. Markets for specialised industrial products
were strong in the US but remained at a low level in the UK and continental
Europe. Each of the company's activities performed strongly when measured
against widely differing market conditions in their respective sectors.
AEROSPACE PROFITS IMPROVED BY 28%
On sales 14% ahead at £529m, Aerospace profits advanced by 28% to £99m,
marking the third successive year of near 30% profit growth, with margin on
sales now close to 19%. While this performance was aided by positive trends in
the aerospace industry, it largely resulted from success in winning business
on major aircraft programmes, and from controlling overheads while volumes are
rising.
Production rates for civil jets reached an all-time high during the year, and
this sector of the industry has now reached the top of its present cycle.
However, systems for new-build civil aircraft represent only 20% of Aerospace
sales, within which the company's growing business on Airbus models will
offset lower volumes elsewhere. The company's own forecasts for civil aircraft
production show a short-lived dip to a level which will nevertheless remain
above 1996/7 volumes. Within five years, production of civil jets is expected
to be rising again.
More significant for Smiths Industries, the defence sector has become the
driving force for growth in Aerospace. The industry has entered a period when
an unusual number of large-scale military aircraft programmes are moving
simultaneously from development and test into their production phase. The
combination of valuable shipsets per plane and sustained delivery through the
decade ahead will have a beneficial effect on revenues.
Both military and civil aircraft in current service offer wide opportunities
for retrofit, upgrade and product support by Smiths Industries, and activities
in these areas continue to generate a very valuable and growing income stream.
MEDICAL: STRONG SALES GROWTH IN SECOND HALF
On sales up 9% to £376m, Medical Systems (SIMS) profits increased 2% to £76m,
reflecting a slight reduction in margins to 20%, still the highest among the
company's three areas of activity.
Over the past three years, SIMS' profit growth has been slowed by changing
purchasing practices in the US which have intensified competition, the
strength of sterling, and economic conditions in the Far East. A series of
actions have been taken by SIMS to counteract these market factors, and the
beneficial effects are starting to be felt. While sales and profits at the
Interim were little changed from the previous year, like-for-like sales in the
second half improved by 5%.
The actions underway include three significant steps. First, at the end of the
year, SIMS launched major new products in the core areas of single-use
tracheostomy tubes and ambulatory infusion pumps, both of which are expected
to achieve improved market share. Secondly, following the positive experience
of acquiring the distributor Japan Medico two years ago, the company has taken
direct control of distribution which was previously handled independently in
some key European territories. The SIMS distributors in France and Germany
have been re-organised to make them responsible for the complete product range.
Thirdly, to reduce costs in North America, a 'maquiladora' production facility
across the Mexican border has been considerably expanded to make products for
Deltec and SIMS Portex Inc, which were facing pricing problems.
Overall, the demand for better healthcare throughout the world provides a
positive business environment for SIMS. The market for its specialised devices
and equipment is growing at 6% per annum, underpinned by demographics.
Current trends also favour the adoption of procedures that use the company's
products: single-use devices to prevent cross infection, vital signs
monitoring to warn of imminent problems, and precision delivery of drugs and
fluids to patients during treatment.
INDUSTRIAL: CONSOLIDATION OF ACTIVITIES BRINGS SHARPER FOCUS
On sales 7% higher at £419m, Industrial profits increased slightly to £73m,
with margins down one point to 17%. After five years of rapid growth and
change, 1998/1999 was a period of consolidation, during which mixed market
conditions limited overall growth. Industrial has absorbed a dozen
acquisitions in the last five years, and during the past year they have been
more closely co-ordinated with the existing activities.
This integration continues to focus Industrial on its two main areas of
expertise, Interconnect and Air Moving Systems. Interconnect, which now
contributes close to 40% of divisional revenues, includes operations in the
UK, continental Europe and the US. It makes equipment that connects and
protects vital electrical and electronic circuits against hazards encountered
in extreme conditions or where failure could be catastrophic.
Operating in the very top slice of the worldwide connector market with premium
products, Interconnect performed strongly last year, securing new business
from aerospace, defence and telecoms customers. It has built substantial
business with Airbus as well as with major US aerospace companies.
The larger part of Industrial is Air Movement Systems. It includes specialised
ducting and hosing, and ventilating fans with associated air warming and
cooling equipment. Again, these activities span the UK, continental Europe and
the US. Those located in North America have continued to thrive, with strong
demand for air conditioning ducting and for hosing and heating elements used
in domestic appliances. Additional production facilities were established
during the year in the expectation of continued US sales growth.
By contrast, Air Movement in the UK and the Continent, representing about one
third of Industrial's total sales, suffered poor market conditions. This was a
major factor in preventing Industrial from continuing its profit growth last
year. The fan business made no progress in a very flat UK market, and the
hosing and ducting business faced difficult markets throughout Europe. Among
several actions, operations in Switzerland and Italy have been combined into a
single unit.
The outlook for Industrial is for more of the same: good conditions in North
America and in defence and telecoms, balanced against flat markets in Europe,
with early signs of a gradual recovery in the region.
PROSPECTS: OPPORTUNITIES AHEAD FOR GROWTH IN EACH ACTIVITY
Commenting on the prospects for the company, Keith Butler-Wheelhouse, Chief
Executive said: 'At the start of the 20th century, Sam Smith's company -
already 50 years old - was poised for growth, and grow it did. At the start of
the 21st century, Smiths Industries is again ready to face new challenges.
We are well placed in our key engineering sectors, and our specialised
products are in high demand.
'Aerospace is currently the brightest star and has exciting prospects in the
defence sector; Medical is beginning to regain sales growth; whilst within
Industrial, Interconnect operations are aligned with the upward momentum in
aerospace, defence and telecoms.
'We can deliver growth from all three activities in the near term, and I am
confident that earnings and dividend increases can be maintained in the years
ahead.'
The Annual General Meeting of the company will be held at the company's head
office, 765 Finchley Road, London NW11 8DS on Tuesday 16 November at 12.00
noon. If approved at the meeting, the final dividend on the ordinary shares
will be paid on 15 December 1999 to shareholders registered at the close of
business on 15 October 1999. The ex-dividend date will be 11 October 1999.
By Order of the Board 28 September 1999
Alan Smith, Secretary
Profit and Loss Account
Market and Geographical Analyses
Summarised Cash-Flow Statement
Summarised Balance Sheet
Notes to the Accounts
Five Year Review
Note:
In accordance with section 240 of the Companies Act 1985, this financial
information is an abridged version of the company's full accounts upon which
the company's auditors will be reporting and which will be sent to
shareholders on or before 18 October 1999 and filed with the Registrar of
Companies.
These results have been prepared in accordance with accounting policies set
out in the Company's accounts for the 52 weeks to 1 August 1998, as amended by
the latest accounting standards relating to the treatment of intangible assets
and earnings per share.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Ordinary
activities
before
goodwill Goodwill 52 Weeks ended 52 Weeks ended
amortisation amortisation 31 July 1999 1 August 1998
£m £m £m £m
Turnover:
Continuing operations 1290.4 1290.4 1198.5
Acquisitions 33.5 33.5
------ ------ ------
1323.9 1323.9 1198.5
Cost of sales (762.8) (762.8) (695.8)
------ ------ ------
Gross profit 561.1 561.1 502.7
Operating expenses (313.6) (3.0) (316.6) (278.5)
------ ------ ------ ------
Operating profit:
Continuing operations 243.7 243.7 224.2
Acquisitions 3.8 (3.0) 0.8
------ ------ ------ ------
Profit on ordinary
activities before interest 247.5 (3.0) 244.5 224.2
Net interest (7.0) (7.0) (6.1)
------ ------ ------ ------
Profit before taxation 240.5 (3.0) 237.5 218.1
Tax on profit (74.0) (74.0) (68.5)
------ ------ ------ ------
Profit on ordinary
activities after taxation 166.5 (3.0) 163.5 149.6
Minority interests (0.3) (0.3) (1.4)
------ ------ ------ ------
Profit for the financial
year 166.2 (3.0) 163.2 148.2
Dividends (67.9) (67.9) (60.8)
------ ------ ------ ------
Retained profit for
the year 98.3 (3.0) 95.3 87.4
====== ====== ====== ======
Earnings per share
Basic 53.5p (1.0p) 52.5p 48.2p
Fully-diluted 53.0p (1.0p) 52.0p 47.8p
ANALYSES OF TURNOVER AND PROFIT
Market Analysis
Turnover Profit
1999 1998 1999 1998
£m £m £m £m
Aerospace 528.5 463.0 98.5 77.0
Medical Systems 376.2 344.4 76.0 74.7
Industrial 419.2 391.1 73.0 72.5
------ ------ ------ ------
Ordinary activities
before goodwill 1323.9 1198.5 247.5 224.2
amortisation ====== ======
Goodwill amortisation:
Aerospace (1.0)
Medical Systems (1.1)
Industrial (0.9)
------ ------
Operating profit 244.5 224.2
after goodwill
amortisation
Net interest (7.0) (6.1)
------ ------
Profit before taxation 237.5 218.1
====== ======
Geographical Analysis
Turnover Profit
1999 1998 1999 1998
£m £m £m £m
United Kingdom 603.6 556.3 101.9 102.6
USA* 612.2 535.5 124.3 100.8
Continental Europe 135.0 124.4 14.3 13.1
Other overseas 76.5 71.6 7.0 7.7
Inter-company (103.4) (89.3)
------ ------ ------ ------
1323.9 1198.5 247.5 224.2
====== ======
Goodwill amortisation
United Kingdom (0.4)
USA (2.6)
------ ------
244.5 224.2
====== ======
*US Dollars $1004.0m $883.5m $203.9m $166.3m
SUMMARISED CASH-FLOW STATEMENT
1999 1998
£m £m
Operating profit 244.5 224.2
Goodwill amortisation 3.0
Depreciation 35.6 32.2
Working capital movement
and reorganisation (39.7) (15.9)
Cash in-flow from operating activities 243.4 240.5
Capital expenditure (50.4) (42.1)
Disposals 2.0 5.2
------ ------
Operating cash-flow after
capital expenditure 195.0 203.6
Tax paid (70.4) (65.4)
Interest paid (8.1) (6.1)
------ ------
Free cash-flow 116.5 132.1
Dividends (37.0) (52.5)
Acquisitions and disposals (93.7) (131.7)
New shares 9.1 7.6
Other (5.5) 3.7
------ ------
Increase in borrowings (10.6) (40.8)
Further details of the cash-flow showing the analysis between cash and liquid
resources is contained in note 8.
SUMMARISED BALANCE SHEET
1999 1998
£m £m
Fixed assets
Intangible assets 91.5
Tangible assets 231.7 215.4
Stocks 203.9 187.0
Debtors 351.3 310.8
Creditors (358.5) (328.6)
------ ------
196.7 169.2
Net borrowings/cash (93.4) (82.8)
Provisions for liabilities
and charges (68.0) (75.4)
------ ------
Funds employed 358.5 226.4
====== ======
Capital and reserves
Share capital and
share premium 169.5 134.4
Reserves 182.8 87.3
------ ------
Shareholders' equity 352.3 221.7
Minority interests 6.2 4.7
------ ------
Capital employed 358.5 226.4
====== ======
NOTES TO THE ACCOUNTS
1) Earnings per share are calculated on the weighted average number of shares
in issue for each period:
Basic Fully-diluted
52 weeks ended 1 August 1999: 310,932,199 313,490,677
52 weeks ended 2 August 1998: 307,320,126 310,146,904
2) Operating profit is after charging 1999 1998
£m £m
Depreciation of fixed assets 35.6 32.2
Research and development expenditure 53.9 48.8
Year 2000 related expenditure 1.7 1.3
3) Taxation 1999 1998
£m £m
Taxation on the profit for the year:
UK corporation tax at 30.67% (1998 - 31%) 37.1 35.0
Double taxation relief (3.2) (0.4)
Deferred taxation 2.8 0.5
Overseas taxation 37.3 33.4
------ ------
74.0 68.5
====== ======
4) Stocks
1999 1998
£m £m
Stocks comprise:
Raw materials and consumables 66.2 61.4
Work in progress 67.5 61.0
Finished goods 83.5 71.5
------ ------
217.2 193.9
Less payments on account (13.3) (6.9)
------ ------
203.9 187.0
====== ======
5) Debtors
1999 1998
£m £m
Amounts falling due within one year:
Trade debtors 247.2 223.7
Amounts recoverable on contracts 29.6 13.5
Other debtors 5.4 6.2
Prepayments and accrued income 14.6 12.7
------ ------
296.8 256.1
Amounts falling due after more than one year:
Other debtors 5.4 4.9
Deferred taxation 13.4 13.1
Pensions prepayment 35.7 36.7
------ ------
351.3 310.8
====== ======
6) Creditors
1999 1998
£m £m
Amounts falling due within one year:
Bank loans and overdrafts 112.1 82.6
Floating rate loan notes 4.6 23.2
Other loan notes 3.6 3.3
------ ------
120.3 109.1
Trade creditors 86.2 77.5
Bills of exchange payable 1.3 1.7
Other creditors 16.2 19.8
Proposed dividend 44.9 40.0
Corporate taxation 36.1 32.6
Other taxation and social security costs 9.2 9.7
Accruals and deferred income 131.9 118.5
------ ------
446.1 408.9
====== ======
Amounts falling due after more than one year:
8.34% Senior Notes 2002 61.7 61.0
Floating rate loan notes 4.6 4.8
Other loan notes 0.2 0.7
Bank loans 4.1
------ ------
66.5 70.6
Other creditors 32.7 28.8
----- -----
99.2 99.4
===== =====
7) Provisions for liabilities and charges
At2.8.98 Exchange Profit & loss Acquisitions Utilisation At31.7.99
Adjustments account
Provisions Releases
£m £m £m £m £m £m £m
Consolidated
Post-retirement
healthcare 27.2 0.3 1.1 (2.1) 26.5
Service guarantees
and product
liability 14.9 0.1 7.2 (1.2) 0.5 (7.5) 14.0
Reorganisation 17.5 4.5 (4.1) (8.6) 9.3
Property 12.4 0.1 1.1 (1.0) 2.3 (2.2) 12.7
Litigation 3.4 0.1 1.6 0.9 (0.5) 5.5
-----------------------------------------------------------------------------
75.4 0.6 15.5 (6.3) 3.7 (20.9) 68.0
-----------------------------------------------------------------------------
8) Borrowings and net debt
Fixed borrowings Floating Total Total
borrowings 1999 1998
Rate Years fixed Amount
£m £m £m £m
Currencies
Sterling 9.2% 1 3.8 9.2 13.0 32.9
US Dollar 8.34% 3 15.4 117.2 132.6 93.0
EMU participants 7.5 7.5 9.9
Other 0.4 0.4 1.6
Japanese Yen 33.3 33.3 42.3
------ ------ ------ ------
19.2 167.6 186.8 179.7
------ ------
Cash and deposits 93.4 96.9
------ ------
Net debt 93.4 82.8
====== ======
Maturity
On demand/under 1 year 3.6 116.7 120.3 109.1
1-2 years 0.2 2.1 2.3 5.3
2-5 years 15.4 48.8 64.2 64.6
Over 5 years 0.7
------ ------ ------ ------
19.2 167.6 186.8 179.7
====== ====== ====== ======
9) Cash-flow analysed between cash and liquid resources
1999 1998
£m £m
Operating profit 244.5 224.2
Goodwill amortisation 3.0
Depreciation 35.6 32.2
Increase in stocks (2.6) (11.7)
Increase in debtors (28.1) (13.4)
(Decrease)/Increase in creditors (9.0) 9.2
----- -----
Net cash in-flow from
operating activities 243.4 240.5
Returns on investments and
servicing of finance (8.1) (6.1)
Tax paid (70.4) (65.4)
Capital expenditure (50.4) (42.1)
Asset sales 2.0 5.2
Acquisitions and disposals (98.7) (117.5)
Equity dividends paid (37.0) (52.5)
Management of liquid resources 6.2 40.6
Financing:
Increase in term borrowings 53.5 13.8
Loan note redemptions (19.0) (5.9)
Share issues 9.1 7.6
----- ----
Increase in cash 30.6 18.2
===== ====
Reconciliation to net debt
Net debt at beginning of period (82.8) (42.0)
Net cash in-flow 30.6 18.2
Debt acquired with subsidiaries (3.0) (10.1)
Deposit acquired with subsidiaries 8.0
Loan note issues (net of repayments) 19.0 1.8
Increase in other borrowings (59.7) (54.4)
Exchange variations (5.5) 3.7
----- ----
Net debt at end of period (93.4) (82.8)
===== =====
10) Acquisitions
During the year the Company acquired the business of Signal Processing Systems
(SPS) and the issued share capitals of Stewart Hughes Ltd and Strategic
Technology Systems Inc (STSI) for Aerospace, Biochem International Inc (BCI)
and Hemex Medical AB for Medical Systems, and Transtector Inc and Engineered
Transitions Company Inc (Entraco) for Industrial. Details of the consideration
paid, book values of retained assets at the dates of acquisition, and
adjustments to reflect the Company's assessments of fair values are set out
below. These fair values are provisional, pending completion of detailed
reviews, and will be finalised in subsequent financial statements.
Date of Consideration Borrowings Goodwill Net
acquisition and overdrafts Assets
assumed
£m £m £m £m
SPS 28. 8.98 4.6 11.0 (6.4)
Stewart Hughes 2.11.98 10.1 9.6 0.5
STSI 30. 4.99 10.5 8.9 1.6
BCI 11. 1.99 50.3 8.0 37.8 4.5
Hemex 1. 2.99 0.6 0.4 0.2
Transtector 30.11.98 18.7 (3.0) 21.7
Entraco 30.11.98 3.3 5.1 (1.8)
--------------------------------------------------------------------------
98.1 5.0 94.5 (1.4)
--------------------------------------------------------------------------
Prior year adjustments: Specac 0.7
Disposals 0.6 0.6
--------------------------------------------------------------------------
0.6 1.3
--------------------------------------------------------------------------
Book Value Revaluation Consistency Fair
of accounting value
policy
£m £m £m £m
--------------------------------------------------------------------------
Fixed assets 8.9 (1.8) (2.5) 4.6
Investments 11.0 (3.2) (0.2) 7.6
Debtors 12.0 (0.9) 11.1
Creditors (11.9) (11.9) (23.8)
Provisions (0.1) (0.6) (3.0) (3.7)
Taxation 1.7 1.1 2.8
Borrowings assumed (3.0) (3.0)
Term deposits acquired 8.0 8.0
--------------------------------------------------------------------------
Net assets acquired 26.6 (17.3) (5.7) 3.6
--------------------------------------------------------------------------
Goodwill 94.5
--------------------------------------------------------------------------
Consideration 98.1
--------------------------------------------------------------------------
Satisfied by cash 98.1
--------------------------------------------------------------------------
Specac, which was acquired as part of Graseby plc in 1997/98, and held for
resale at the end of that year, has now been absorbed into Industrial.
Goodwill written off against reserves at the time has been increased by £0.7m
as a result, together with a further £0.6m arising from an adjustment to the
consideration received from Thermo Environmental Instruments Inc and Thermo
Sentron Inc for the sale of the Graseby Product Monitoring and Environmental
businesses.
In accordance with the provisions of FRS10 - goodwill and intangible Assets,
the Company amortises goodwill arising on acquisitions after
1 August 1998 on a straight-line basis over a period of up to 20 years. The
charge for the year was £3.0m. Goodwill relating to acquisitions up to
1 August 1998 was charged to reserves.
11) Share premium account and reserves
Share premium Revaluation Other Profit and Goodwill
account reserve reserves loss account reserve
£m £m £m £m £m
Consolidated
At 2 August 1998 57.2 3.3 199.8 694.5 (810.3)
Adjustment to 1998
goodwill (1.3)
Goodwill set off
against other reserves (199.8) (611.8) 811.6
Premium on
allotments 33.9 (2.9)
Retained profit 95.3
Exchange rate changes 4.4
--------------------------------------------------------------------------
At 31 July 1999 91.1 3.3 179.5
--------------------------------------------------------------------------
During the year the Company received £9.1m on the issue of shares in respect
of the exercise of options awarded under various share option schemes.
Employees paid £6.2m for the issue of these shares and the balance of £2.9m
comprised contributions to the qualifying employee share ownership trust
(QUEST) from undertakings within the Company. The trust has been included
within the financial statements.
3,447,556 shares at market values totalling £26m were taken up by shareholders
as a scrip alternative to cash dividends.
FIVE YEAR REVIEW
£m 1999 1998 1997 1996 1995
Turnover 1323.9 1198.5 1076.2 1008.4 899.3
Operating profit
before amortisation 247.5 224.2 194.6 168.1 140.9
Net interest (7.0) (6.1) (2.5) (2.7) (2.4)
Profit before amortisation
and exceptional items 240.5 218.1 192.1 165.4 138.5
Exceptional items (0.5) 5.0 (0.5)
Profit before amortisation
and taxation 240.5 218.1 191.6 170.4 138.0
Goodwill amortisation (3.0)
Profit after
taxation 163.5 149.6 132.6 117.8 93.9
Minority interests (0.3) (1.4) (0.9)
Shareholders'
equity 352.3 221.7 240.4 211.8 225.5
Shareholder investment 1166.9 1032.0 934.3 860.0 784.8
Operating profit
as a % of turnover 18.7 18.7 18.1 16.7 15.7
Taxation before amortisation
and exceptional items (%) 30.8 31.4 32.0 33.0 33.5
Operating cash-flow after
capital expenditure (£m) 195.0 203.6 161.0 151.2 144.3
Earnings per share (p)
(before exceptionals
and amortisation) 53.5 48.2 42.5 36.6 30.7
Dividends:
per share (p) 21.65 19.65 17.85 16.20 14.40
times covered: 2.4 2.4 2.4 2.2 2.1
Research & development 127.0 118.5 104.3 107.1 119.0
(of which, company funded) 53.9 48.8 48.2 50.0 49.2
Employees:
(at year-end)
UK 7000 6900 6400 6500 6100
Overseas 7900 7200 6900 6300 6200
Total 14900 14100 13300 12800 12300
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