Interim Results
Smiths Group PLC
12 March 2003
Smiths Group: Interim Results
for the 6 months ended 31 January 2003
Highlights:
• Operating profits of £180m (before goodwill), down 1% on a year ago.
• EPS of 20.8p on ordinary activities: Interim dividend maintained at 8.75p.
• Productivity gains counteract £10m adverse currency and £10m higher R&D.
• Operating cash at 88% of operating profit (after capex), and free
cash-flow of £92m.
• Further progress on disposals and acquisitions to strengthen the business.
• Pensions not a major issue for Smiths, FRS17 adopted.
Commenting on the results, Keith Butler-Wheelhouse, Chief Executive said:
'While the business environment continued to deteriorate, we held sales to
within 2% and operating profits to within 1% of a year ago, and delivered
profits largely in cash. This first half achievement, coupled with continued
productivity gains in the second half, provide confidence in our outlook for the
full year, subject to the outcome of the current uncertain geopolitical
situation.'
Media Enquiries: Investor Relations:
Bernard Carey Russell Plumley
+44 (0) 20 8457 8403 +44 (0) 20 8457 8203
bernard.carey@smiths-group.com russell.plumley@smiths-group.com
An audio webcast of a meeting with analysts at 9.00 am UK time can be accessed
on www.smiths-group.com/interim2003, and the meeting can be heard on +44 (0) 20
7784 1018
Statutory Reporting
£m 2003 2002
(Reported under FRS 17) (restated)
Turnover 1,456 1,588
Operating profit 160 162
Non-operating exceptionals 16 (24)
Interest and pensions financing (19) (21)
Pre-tax profit 157 117
Earnings per share 20.4p 13.2p
Reported on a fully consolidated basis, including now discontinued activities,
exceptionals and goodwill amortisation, Smiths Group recorded pre-tax profit of
£157 million (2002: £117m) and earnings per share of 20.4p (13.2p) in the first
half of the current year. The remainder of this statement focuses on the
operating performance of the company before exceptionals and goodwill
amortisation, to provide a more consistent basis for comparison.
Operating Performance
£m 2003 2002
Continuing activities
(Reported under FRS 17) (restated)
Turnover 1,456 1,479
Operating profit* 180 182
Interest and pensions financing (19) (14)
Pre-tax profit* 161 168
Earnings per share* 20.8p 21.6p
Interim dividend 8.75p 8.75p
*before exceptionals and amortisation
For the six months ended 31 January 2003, Smiths Group generated operating
profit of £180 million (down 1%), pre-tax profit of £161 million and earnings
per share of 20.8p, before exceptional items and amortisation of goodwill. The
Board has declared an interim dividend maintained at last year's level of 8.75p.
On slightly reduced sales of £1.46 billion, the company achieved an unchanged
profit margin of 12%.
The company maintained its strong record of cash generation, converting 88% of
operating profit into operating cash, after capital expenditure. Free
cash-flow, after interest, tax and restructuring costs was 16.5p per share. The
tax rate was 27.5%, and net debt at the end of the period was £812m.
The flat half-on-half comparison of operating profits masks an improvement in
underlying profitability. Included in this six months are the effects of £10m
adverse currency translation and £10 million of higher R&D costs, all of which
have been recovered through greater productivity and the benefit of earlier
restructuring.
On a geographical basis, 50% of the company's sales originated in North America.
Business in this region (US, Mexico and Canada) grew strongly, although this
was masked on translation by a 12 cent decline in the US dollar/pound average
exchange rate. The UK represented 27%, Continental Europe 18% and other
countries 5% of total sales.
Progress on acquisitions and disposals moved the company closer to focusing on
activities with the best opportunities for growth. The combined effect of M&A
activities in this period compared with a year earlier was to increase profits
by £4m after interest costs. The acquisition of Heimann Systems was completed
in December for £233m in cash. This world leader in x-ray inspection of airline
baggage and containerised freight is highly complementary to the existing Smiths
Detection activities. Total proceeds from disposals were £151m after costs,
principally from the sale of the Air Movement Group from the Industrial
division in December and Lodge from the Aerospace division in November. There
was an exceptional gain of £16m on the disposals.
The company incurred no exceptional restructuring charges in the period and does
not expect to do so in the full year. Restructuring costs of £5m to improve
productivity in all four divisions have been charged against operating profits.
This included further transfer of production to lower cost countries, including
manufacture of some medical devices, polymer and mechanical seals.
Company funded R&D increased by 18% to £69m in this period, reflecting higher
investment in new aerospace programmes, detection equipment and medical devices.
Customer funded R&D was maintained at £49m.
The Smiths pension schemes remain substantially well-funded, with liabilities
closely matched by assets. Measured at 31 July 2002 on an FRS17 basis, there
was an after-tax deficit of £52m in the funded schemes on assets of £2.3
billion. Approximately 42% of the funds were invested in equities, giving
below-average exposure to stockmarket declines. The company will make cash
contributions this year close to the current service cost of the schemes, and
the principal Smiths defined benefit pension schemes remain available to current
and new employees.
In its 2003 Accounts, Smiths has chosen to adopt the FRS17 Retirement Benefits
accounting standard, and the Interim Accounts have been published on this basis.
Comparative figures for 2002 have been restated: operating profit for the
first half of 2002 has been reduced by £19m and pre-tax profit has been reduced
by £6m. Under the new standard, the current service cost of retirement benefits
is charged against operating profit and the effect of surplus or deficit in the
schemes is shown within 'other finance costs/income - retirement benefits' in
the Profit & Loss Account. The surplus or deficit in the schemes, net of
related taxation, based on the market valuation at the start of the financial
year, is shown in the Balance Sheet.
The company does not now expect to receive a dividend on its preference shares
in TI Automotive during the current year, although the amount due will be rolled
up for payment at a later date. Smiths does not accrue for these dividends.
The company continues to hold the view that litigation relating to asbestos
previously used in John Crane Inc products does not represent a material
contingent liability.
In January, the company raised US$250m in a private placement of 10-year senior
notes with a coupon of 5.45%. The funds have been used to repay bank debt and
improve the spread of debt maturity. A substantial part of the new issue was
immediately swapped into floating rate debt to take advantage of current low US
interest rates.
Of total sales, Aerospace contributed 45%, Medical 16%, Sealing Solutions 27%
and Industrial 12%, proportions which were similar to the prior period.
Aerospace
£m 2003 2002
(restated)
Turnover 648 639
Operating profit 75 70
Margin 12% 11%
Profits from Smiths Aerospace improved 8%, assisted by a strong performance in
Detection helping to offset a sharp deterioration in sales of equipment for
civil aircraft. Sales of systems and equipment for aerospace customers now
split almost 60/40 military/civil. In response to lower rates of production of
new commercial jets, Smiths has downsized its capacity to match. An upturn in
this sector is not expected before financial year 2005. Investment is underway
on products for new civil aircraft programmes, including the A380. The long
term outlook is for resumed growth in line with air travel. The aftermarket for
spares and repairs is holding steady at about 10% below the level prior to
September 11, 2001.
In contrast, the market for defence systems remains buoyant, and Smiths is
well-positioned on many of the front-line aircraft in current production.
Continuing increases in procurement by the US Department of Defense will drive
further sales growth in the years ahead. Military aircraft in current
production with a high value of Smiths' equipment include the F-18E/F, the
Apache Longbow and the C-17 transporter. A number of important development
programmes are underway, both funded by government and financed by the company,
including systems for the F-35 Joint Strike Fighter and the Boeing 767 Global
Tanker Transport Aircraft.
The division's detection business continues to grow rapidly due in large part to
deliveries of equipment for detecting explosives. First half Aerospace
divisional sales include over 2,700 Ionscan units supplied to the US
Transportation Security Agency (TSA).
The addition of Heimann has effectively doubled the size of Smiths' involvement
in the detection sector and added a highly complementary range of products. The
process of US certification for a new x-ray system for automated checking of
baggage for explosives is well underway. X-ray inspection of cargo containers
is another area where Heimann has a strong market presence. The demand for
detection and protection systems for military and civilian use continues to show
strong growth worldwide.
Medical
£m 2003 2002
(restated)
Turnover 231 224
Operating profit 37 43
Margin 16% 19%
On a 3% increase in sales, Smiths Medical profits were 15% behind the prior half
year. A number of factors specific to this period accounted for the drop,
including the costs of launching a new insulin pump and increased R&D. The
benefit of these investments will start to show in the second half.
The Deltec Cozmo ambulatory pump for insulin delivery was successfully
introduced to the US market in December. It is selling well to those suffering
from the more serious, Type 1, form of diabetes, and purchase is covered largely
by healthcare insurance. One-off costs of $5m were incurred for the launch in
this period. Conventional ambulatory infusion pumps continued to sell well,
also generating good aftermarket revenues, as the homecare market in the US
recovers.
Sales of safe closure devices which conform to the US Needlestick Injury
Prevention Act of April 2001 have increased. Compliance with the Act is around
50% at present, so there is still considerable opportunity in this sector. The
safety range has been extended by the acquisition of the winged infusion set
product line from MPS Acacia. An earlier agreement with Medisys has generated
valuable sales of a retractable, single-use scalpel, but their Futura
retractable needle has not yet been added to the range. The new Gripper Plus, a
protected access needle for patients with implanted ports, was introduced in the
period.
Needle protection, pain management and patient monitoring products contributed
to increased sales in the US and UK, helped by new products such as the Digit
finger-tip blood/oxygen analyser. The Bivona silicone product line acquired
last year has benefited greatly from being added to the Portex range of airway
management devices.
Among other specialised healthcare products, the Pneupac emergency resuscitators
have secured sizeable orders from civil and military authorities in the UK.
Production of the Omnifuse hospital infusion pump is being outsourced from the
UK to Malaysia.
Outside the US and UK, Smiths Medical had mixed performance from its affiliate
and distributor operations. Sales in continental Europe were down as healthcare
costs come under increasing pressure and cuts in healthcare re-imbursement in
Japan affected prices of a number of airway products.
Medical R&D increased from £7m to £9m in the period, and is now 4% of sales.
This has resulted in a more rapid flow of new product introductions, several of
which will become available in the months ahead. In a continuing productivity
drive, further manufacturing has been transferred to Mexico, where the division
now employs nearly 1,200 people.
Although margins were lower than usual for the first six months, the outlook for
the remainder of the year is positive, with more typical margins expected in the
second half.
Sealing Solutions
£m 2003 2002
(restated)
Turnover 397 407
Operating profit 41 41
Margin 10% 10%
In Sealing Solutions, profits were maintained year-on-year on slightly reduced
sales, and market share was effectively increased in both mechanical and polymer
seals. The division has continued to gain productivity benefits from recent
restructuring, including transfer of production to lower cost locations in
Mexico and Eastern Europe.
After disposals during the prior year, Sealing Solutions now comprises two
focused activities, John Crane and Polymer Seals, each with a strong position in
its specialised sector.
John Crane is the world leader in rotating engineered seals principally used for
high pressure pumping applications in process plant. Half of its business is in
the oil & gas sector, where increasingly the business model is to secure
long-term supply and maintenance agreements with the major companies. The
aftermarket, repairing or replacing the company's own or competitors' seals,
accounts for 50% of sales.
High oil prices in recent months have led to an increase in exploration and
lifting of crude, but longer term, may have an impact on investment in refining
and processing.
A global agreement to manage the seals requirements of Chevron/Texaco is
generating incremental sales. A new joint venture has been set up in Russia to
service the compressor seals for Gazprom. In Latin America, despite problems
in Venezuela, sales grew strongly, driven by increased oil & gas production in
Mexico and Brazil.
Beyond oil & gas, John Crane's markets in pulp & paper, chemical and
pharmaceutical production saw little growth. Lower margins in high volume
automotive applications are being addressed by the move to a standardised
product design.
Polymer Seals supplies engineered plastic and rubber seals for a wide range of
industrial applications. Its business is closely related to the capital
equipment sector, with Europe as the largest market. It achieved a steady
performance compared to a year ago, in still depressed conditions.
Customer destocking is now complete and Polymer's book-to-bill ratio has
levelled out. Lean initiatives mean that even small sales increases will be
reflected in higher margins. There has been an improvement in business with a
number of customers, including US defence contractors, medical equipment
suppliers and Scandinavian truck makers.
Industrial
£m 2003 2002
(restated)
Turnover 180 209
Operating profit 27 28
Margin 15% 13%
A substantial disposal during the half year was the principal cause of a
reduction in Industrial division sales of 14% and in profits of 5%. The Air
Movement Group's performance was included for only four months in this period,
accounting for £16m of the reduction in sales.
The continuing activities achieved a considerably better performance than a year
ago, contributing to a two point improvement in margins for the division. The
cash conversion from profits was 100%.
Interconnect, comprising a range of connectors and microwave components used in
critical electronic circuits, has benefited from recent substantial
restructuring, with a strong improvement in profitability. Defence business was
up sharply.
The ducting and hosing operations, largely US based, had a weaker first half,
experiencing a drop in demand for consumer-related products including hoses for
vacuum cleaners and heating elements for clothes driers.
Prospects
The company's confidence in the full year outlook is supported by continued
progress on productivity and sales in difficult market conditions. These market
share gains will not be made at the expense of margins. The spread of
activities across different market sectors will help provide a resilient
performance, subject to the outcome of the current uncertain geopolitical
situation.
Dividend
The Board has declared an interim dividend of 8.75p, unchanged from a year ago,
and will consider whether or not to increase the final dividend in the light of
circumstances prevailing in six months' time. The interim dividend will be paid
on 17 April 2003 to holders of all ordinary shares whose names are registered at
the close of business on 21 March. The ex-dividend date will be 19 March. Copies
of the interim report will be sent to shareholders shortly, and will be
available at the company's registered office, 765 Finchley Road, London NW11
8DS.
Tables attached
• Profit & loss account
• Summarised balance sheet
• Cash-flow statement
• Notes to the accounts
The financial statements attached have been prepared in accordance with the
accounting policies set out in the company's accounts for the year ended 31 July
2002. The company has adopted FRS 17 (Retirement Benefits) in these interim
accounts. Figures relating to last year are abridged. Full accounts for Smiths
Group plc to 31 July 2002, on which the auditors made an unqualified report,
have been delivered to the Registrar of Companies.
Profit and loss account
6 months ended 31 January 2003
Ordinary Goodwill Exceptional
Activities Amortisation Items Total
£m £m £m £m
Note
Continuing operations 1,425.4 1,425.4
Acquisitions 30.2 30.2
_____________________________________________________
Turnover 2 1,455.6 1,455.6
_____________________________________________________
Continuing operations 173.0 (18.4) 154.6
Acquisitions 6.9 (1.8) 5.1
_____________________________________________________
Operating profit 179.9 (20.2) 159.7
Profit on disposal of businesses 3 16.5 16.5
_____________________________________________________
Profit before interest and tax 179.9 (20.2) 16.5 176.2
Net interest payable (18.0) (18.0)
Other finance costs - retirement benefits (1.4) (1.4)
_____________________________________________________
Profit before taxation 160.5 (20.2) 16.5 156.8
Taxation (44.1) 1.8 (42.3)
_____________________________________________________
Profit after taxation 116.4 (18.4) 16.5 114.5
Minority interests (0.5) (0.5)
_____________________________________________________
Profit for the period 115.9 (18.4) 16.5 114.0
Dividends 4 (48.9) (48.9)
_____________________________________________________
Retained profit 67.0 (18.4) 16.5 65.1
_____________________________________________________
Earnings per share 5
Basic 20.8p (3.3p) 2.9p 20.4p
Diluted 20.7p (3.3p) 2.9p 20.3p
Note: Results for the periods ended 31st January 2002 and 31st July 2002 have
been restated following the adoption of FRS17 - Retirement Benefits.
Profit and loss account
6 months ended 31 January 2002 (restated)
Ordinary Discontinued Goodwill Exceptional
Activities Businesses Amortisation Items Total
£m £m £m £m £m
Note
Continuing operations 1,479.3 1,479.3
Discontinued businesses 108.4 108.4
_________________________________________________________
Turnover 2 1,479.3 108.4 1,587.7
_________________________________________________________
Continuing operations 182.2 (18.8) (7.6) 155.8
Discontinued businesses 6.1 6.1
_________________________________________________________
Operating profit 182.2 6.1 (18.8) (7.6) 161.9
Loss on disposal of businesses 3 (23.4) (23.4)
_________________________________________________________
Profit before interest and tax 182.2 6.1 (18.8) (31.0) 138.5
Net interest payable (27.3) (6.9) (34.2)
Other finance income - retirement benefits 12.7 12.7
_________________________________________________________
Profit before taxation 167.6 (0.8) (18.8) (31.0) 117.0
Taxation (46.9) 0.2 1.8 2.1 (42.8)
_________________________________________________________
Profit after taxation 120.7 (0.6) (17.0) (28.9) 74.2
Minority interests (0.7) (0.7)
_________________________________________________________
Profit for the period 120.0 (0.6) (17.0) (28.9) 73.5
Dividends 4 (48.6) (48.6)
_________________________________________________________
Retained profit 71.4 (0.6) (17.0) (28.9) 24.9
_________________________________________________________
Earnings per share 5
Basic 21.6p (0.1p) (3.1p) (5.2p) 13.2p
Diluted 21.5p (0.1p) (3.1p) (5.2p) 13.1p
Note: Results for the periods ended 31st January 2002 and 31st July 2002 have
been restated following the adoption of FRS 17 - Retirement Benefits.
Profit and loss account
Year ended 31 July 2002 (restated)
Ordinary Discontinued Goodwill Exceptional Total
Activities Businesses Amortisation Items
£m £m £m £m £m
Note
Continuing operations 3,070.1 3,070.1
Discontinued businesses 153.4 153.4
_________________________________________________________
Turnover 2 3,070.1 153.4 3,223.5
_________________________________________________________
Continuing operations 418.8 (50.5) (43.7) 324.6
Discontinued businesses 9.3 (0.2) 9.1
_________________________________________________________
Operating profit 418.8 9.3 (50.7) (43.7) 333.7
Loss on disposal of businesses 3 (24.3) (24.3)
_________________________________________________________
Profit before interest and tax 418.8 9.3 (50.7) (68.0) 309.4
Net interest payable (46.4) (11.1) (57.5)
Other finance income - retirement benefits 25.5 25.5
_________________________________________________________
Profit before tax 397.9 (1.8) (50.7) (68.0) 277.4
Taxation (111.4) 0.5 3.8 16.1 (91.0)
_________________________________________________________
Profit after taxation 286.5 (1.3) (46.9) (51.9) 186.4
Minority interests (1.3) (1.3)
_________________________________________________________
Profit for the period 285.2 (1.3) (46.9) (51.9) 185.1
Dividends 4 (142.2) (142.2)
_________________________________________________________
Retained profit 143.0 (1.3) (46.9) (51.9) 42.9
_________________________________________________________
Earnings per share 5
Basic 51.2p (0.2p) (8.4p) (9.3p) 33.3p
Diluted 51.1p (0.2p) (8.4p) (9.3p) 33.2p
Note: Results for the periods ended 31st January 2002 and 31st July 2002 have
been restated following the adoption of FRS 17 - Retirement Benefits.
SUMMARISED BALANCE SHEET
31 January 2003 31 January 2002 31 July 2002
Note (Restated) (Restated)
£m £m £m
Fixed assets
Intangible assets 827.1 708.4 638.3
Tangible assets 528.6 607.8 563.9
Investments and advances:
Automotive 325.0 325.0 325.0
Other 10.9 13.2 11.6
_____________________________________________________________
1,691.6 1,654.4 1,538.8
Current assets
Stocks 508.2 576.9 474.5
Debtors 657.3 694.3 613.1
Cash at bank 92.3 201.8 109.5
_____________________________________________________________
1,257.8 1,473.0 1,197.1
Creditors: amounts falling due within one (818.4) (1,026.5) (912.0)
year
_____________________________________________________________
Net current assets 439.4 446.5 285.1
_____________________________________________________________
Total assets less current liabilities 2,131.0 2,100.9 1,823.9
Creditors: amounts falling due after one (895.4) (1,088.8) (728.9)
year
Provisions for liabilities & charges (118.8) (135.8) (113.8)
_____________________________________________________________
Net assets excluding pension assets/ 1,116.8 876.3 981.2
liabilities
Pension assets 84.4 267.0 84.7
Retirement benefit liabilities (218.6) (113.2) (213.4)
_____________________________________________________________
Net assets 982.6 1,030.1 852.5
_____________________________________________________________
Capital and reserves
Share capital and share premium account 305.2 287.6 303.3
Reserves 665.8 729.0 537.3
_____________________________________________________________
Shareholders' equity 9 971.0 1,016.6 840.6
Minority equity interests 11.6 13.5 11.9
_____________________________________________________________
Capital employed 982.6 1,030.1 852.5
_____________________________________________________________
Note: Balance Sheets at 31 January 2002 and 31st July 2002 have been restated
following the adoption of FRS17 - Retirement Benefits.
CASH FLOW STATEMENT
6 months 6 months Year
ended ended ended
31 January 31 January 31 July
2003 2002 2002
(Restated) (Restated)
Note £m £m £m
Operating profit (before exceptional
restructuring costs) 159.7 169.5 377.4
Non-cash items:
Goodwill amortisation and impairment 20.2 18.8 50.7
Depreciation 42.8 46.6 91.5
Retirement benefits 15.5 14.7 29.0
(Increase) / decrease in stocks (12.3) (31.0) 18.7
(Increase) / decrease in debtors (25.9) 50.1 48.5
Increase / (decrease) in creditors (8.3) (52.7) (32.8)
_______________________________________
Net cash inflow from normal operating activities 191.7 216.0 583.0
Restructuring costs (13.8) (26.0) (59.2)
_______________________________________
Net cash inflow from operating activities 177.9 190.0 523.8
Returns on investments and servicing of finance (17.2) (28.6) (56.5)
Tax paid (35.3) (19.6) (52.8)
Capital expenditure and financial investment (33.4) (50.4) (100.0)
Acquisitions and disposals 6, 7 (84.1) (3.7) 180.9
Equity dividends paid (93.4) (90.4) (139.1)
Management of liquid resources (1.7) (38.4) 0.1
Financing 71.4 93.5 (124.3)
_______________________________________
(Decrease) / increase in cash (15.8) 52.4 232.1
Increase/ (decrease) in short-term deposits 1.7 38.4 (0.1)
(Increase) / decrease in other borrowings (75.3) (92.2) 139.8
Loan note issues (net of repayments) 0.7 0.7 2.0
Term deposits acquired with acquisitions 4.8
Exchange variations (2.9) (6.9) 20.8
_______________________________________
(Increase) / decrease in net debt (86.8) (7.6) 394.6
Net debt at beginning of period (725.2) (1,119.8) (1,119.8)
_______________________________________
Net debt at end of period 8 (812.0) (1,127.4) (725.2)
_______________________________________
NOTES TO THE ACCOUNTS
1. Accounting policies
With the exception of the adoption of the accounting requirements of Financial
Reporting Standard 17 - Retirement Benefits 'FRS17' (Note 10) there have been no
changes to the accounting policies used in preparing the interim financial
statements from those used in the annual report and financial statements for
2002.
6 months ended 6 months ended Year ended
31 January 2003 31 January 2002 31 July 2002
2. Analyses of turnover and profit Turnover Profit Turnover Profit Turnover Profit
£m £m £m £m £m £m
Market
Aerospace 648.2 74.9 638.7 69.6 1,345.4 171.9
Medical 230.6 36.6 224.1 43.3 479.9 93.1
Sealing Solutions 397.4 41.7 407.4 41.1 822.4 93.2
Industrial 179.4 26.7 209.1 28.2 422.4 60.6
___________________________________________________________________
1,455.6 179.9 1,479.3 182.2 3,070.1 418.8
Discontinued businesses 108.4 6.1 153.4 9.3
___________________________________________________________________
1,455.6 179.9 1,587.7 188.3 3,223.5 428.1
_________ _________ _________
Goodwill amortisation (20.2) (18.8) (50.7)
Exceptional items 16.5 (31.0) (68.0)
_________ _________ _________
Profit before interest and tax 176.2 138.5 309.4
Net interest payable (18.0) (34.2) (57.5)
Expected return on pension scheme assets 76.6 88.1 176.2
Interest on retirement benefit (78.0) (75.4) (150.7)
liabilities
_________ _________ _________
Profit before taxation 156.8 117.0 277.4
_________ _________ _________
Geographical origin - continuing
activities
United Kingdom 427.3 23.4 475.1 34.7 966.2 89.3
North America 798.0 112.8 802.6 109.6 1,703.8 254.5
Europe 282.9 33.2 237.5 27.8 496.1 55.4
Other overseas 86.4 10.5 82.3 10.1 162.3 19.6
Inter-company (139.0) (118.2) (258.3)
___________________________________________________________________
1,455.6 179.9 1,479.3 182.2 3,070.1 418.8
___________________________________________________________________
The geographical analysis of results has been redefined to show North America as
a separate segment due to acquisition and restructuring activities resulting in
the Group having more closely linked operations in USA, Canada and Mexico.
6 months ended 6 months ended Year ended
3. Exceptional items 31 January 2003 31 January 2002 31 July 2002
£m £m £m
Restructuring and closure costs (7.6) (43.7)
Profit/(loss) on disposal of businesses 16.5 (23.4) (24.3)
_______ _______ _______
16.5 (31.0) (68.0)
_______ _______ _______
4. Dividends
An interim dividend of 8.75p per share (2002: 8.75p) has been declared and will
be paid on 17 April 2003 to holders of all ordinary shares whose names are
registered at close of business on 21 March 2003.
5. Earnings per share
Separate figures are given for earnings per share related to the average number
of shares in issue for each period -
6 months ended 31 January Year ended 31 July
2003 2002 2002
Basic 558,489,500 555,903,263 556,496,716
Effect of dilutive share options 1,857,298 1,021,646 1,267,591
_________________________________________________________
Diluted 560,346,798 556,924,909 557,764,307
_________________________________________________________
6. Acquisitions
During the period, the Company acquired the issued share capital of Heimann
Systems GmbH for Aerospace for £233m including costs, and the business/assets of
a product line from MPS Acacia Inc for Medical for £2m.
Details of the consideration paid and the net assets acquired are set out below.
These values are provisional, pending completion of the ongoing review, and will
be finalised in subsequent financial statements.
£m
Goodwill 219.7
Net tangible assets 15.5
______
Consideration 235.2
______
In accordance with the provisions of FRS 10, the company amortises goodwill
arising on acquisitions after 1 August 1998 on a straight-line basis over a
period of up to 20 years.
7. Disposals
During the period the Company disposed of its Air Movement and Cable Management
businesses from Industrial and its Lodge business from Aerospace. The amounts
set out below also include adjustments in respect of disposals in prior periods.
Air Movement Other Total
£m £m £m
Consideration, net of expenses 121.2 29.9 151.1
Net assets sold/retained liabilities (48.1) (12.0) (60.1)
______________________________________
Surplus over net assets/retained liabilities 73.1 17.9 91.0
Goodwill previously written off directly to reserves (66.8) (7.7) (74.5)
______________________________________
Profit on disposal 6.3 10.2 16.5
______________________________________
8. Borrowings and net debt
31 January 31 January 31 July
Fixed Floating 2003 2002 2002
£m £m £m £m £m
Maturity:
On demand/under one year 27.6 52.0 79.6 314.1 163.7
One to two years 106.5 72.2 178.7 19.9 183.0
Two to five years 143.5 53.5 197.0 697.9 191.5
Greater than five years:
Bank loans 0.1 0.1 1.3
TI Eurosterling bond 2010 148.6 148.6 148.4 148.5
Smiths US private placement 2013 61.0 91.5 152.5
Smiths Eurosterling bonds 2016 147.8 147.8 147.6 148.0
___________________________________________________________
486.5 417.8 904.3 1,329.2 834.7
________________________
_________________________________
Cash and deposits (92.3) (201.8) (109.5)
_________________________________
Net debt 812.0 1,127.4 725.2
_________________________________
9. Movements in shareholders' equity
6 months 6 months £m Year ended
ended 31 ended 31 31 July
January January 2002
2003 2002 £m
£m £m £m £m
Profit for the period 114.0 73.5 185.1
Dividends (48.9) (48.6) (142.2)
_______ _______ _______
65.1 24.9 42.9
Exchange variations (15.3) 10.3 (56.4)
Taxation recognized on exchange gains/(losses):
Current - UK (1.2)
Deferred - USA 4.5 4.5
Share issues 1.6 2.0 17.5
Goodwill written back on disposals 74.5 149.2
Actuarial loss on retirement benefits (427.0)
Movement in deferred taxation relating to actuarial loss 131.7
_______ _______ _______
Net increase in shareholders' equity 130.4 37.2 (138.8)
Shareholders' equity :
at 1 August as previously reported 998.2 839.7 839.7
Prior period adjustment - FRS 17 (157.6) 840.6 139.7 979.4 139.7 979.4
_______ _______ _______
_______ _______ _______
at end of period 971.0 1,016.6 840.6
_______ _______ _______
10. Accounting for Retirement Benefits - FRS17
The company has adopted FRS17 - Retirement Benefits. The current service cost of
retirement benefits is charged against operating profit with the expected return
on funded pension scheme assets' and interest on retirement benefit liabilities
shown as 'other finance costs/income'. The balance sheet shows separately the
retirement benefit assets/(liabilities), net of related deferred tax. This
represents the net surplus/(deficit) in funded pension plans together with net
liabilities of unfunded pension and post-retirement healthcare plans. In
accordance with FRS17, assets of the pension schemes are stated at their market
values at 31 July and liabilities are calculated using the prevailing corporate
bond yield at that date as a discount rate.
In arriving at the pension asset and liability balances at 31 January 2003, the
balances at 31 July 2002 have been adjusted to reflect the current service cost,
expected return on pension assets, interest on retirement benefit liabilities,
contributions paid and exchange translation for the period.
Comparative figures for prior periods have been restated with the following
effects:
6 months ended Year ended
31 January 31 July
2002 2002
£m £m
Decrease in operating profit (18.8) (34.2)
Other finance income - retirement benefits 12.7 25.5
Decrease in taxation 1.7 2.5
_____________________________
Decrease in profit after taxation (4.4) (6.2)
_____________________________
Increase/(decrease) in net assets 136.5 (157.6)
_____________________________
- ends -
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 17th May 2024
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