16th Mar 2005 07:01
Smiths Group PLC16 March 2005 News ReleaseLondon, 16 March 2005For immediate release Smiths Group: Interim Results for the six months ended 31 January 2005 Highlights • Headline profit before tax up 16% at £155m*• Headline earnings per share up 17% at 20.4p*• On a statutory basis, profit before tax was £125m and EPS was 15.9p• At constant currency, all four divisions contributed to sales growth of 11%, headline operating profit growth of 16% • Medex acquisition scheduled to complete on 21 March• Interim dividend increased by 6%, to 9.25p• Momentum expected to be sustained in second half of 2005 * Before goodwill amortisation and exceptional items. Commenting on the results, Keith Butler-Wheelhouse, Chief Executive said: "Thiswas a strong first half and we expect to sustain this momentum through theremainder of the year. With all four divisions performing well, Smiths isachieving real underlying growth and gaining the incremental benefit of recentacquisitions. The Medex transaction is scheduled to close early next week andthis will have a beneficial impact on the Medical division. We have raised theinterim dividend for the first time since 2001, reflecting our positive outlookfor the full year." Media: Investors:Caroline Harris Russell Plumley+44 (0) 20 8457 8306 +44 (0) 20 8457 [email protected] [email protected] A meeting with analysts will be simultaneously webcast at 9:00am UK time onwww.smiths-group.com/interims2005 and archived there shortly after the event. Reported on a statutory basis 2005 2004 £m £m Sales - continuing 1,344 1,264 - discontinued - 55 1,344 1,319 Operating profit - continuing 153 141 - discontinued - 2 - goodwill amortisation (22) (21) - exceptional items (8) (10) 123 112 Pre-tax profit - continuing 155 133 - goodwill amortisation (22) (21) - exceptional items (8) (7) 125 105 EPS - continuing 20.4p 17.5p - statutory basis 15.9p 12.5p On a statutory basis, including goodwill amortisation and exceptional items,Smiths Group recorded pre-tax profit of £125m (2004: £105m) and earnings pershare of 15.9p (2004: 12.5p) for the six months ended 31 January 2005. Theremainder of this statement refers to the continuing activities of the companybefore goodwill amortisation and exceptional items, to provide a more consistentbasis for comparison. Results on this basis are referred to as "Headline" inthe remainder of this statement. Headline performance £m 2005 2004 Sales 1,344 1,264Headline operating profit 153 141Headline pre-tax profit 155 133Headline earnings per share 20.4p 17.5pInterim dividend 9.25p 8.75p Smiths Group recorded a 16% increase in headline pre-tax profit and a 17%increase in headline earnings per share for the first half of its 2005 financialyear. The improvement combined better operational performance, some benefitfrom acquisitions and lower financing costs. The Board has raised the interimdividend by 6% to 9.25p. Sales were 6% higher than for the same period last year and headline operatingprofit was up by 9%. The company's net margin on the same basis remained at11%. Smiths earns more than half its profit in the US, and the dollar's declinecompared with the first half last year reduced reported sales by £65m and profitby £9m. Measured at constant exchange rates, sales rose by 11% and headlineoperating profit by 16%. These gains came equally from the underlying businessand from the contribution of recent acquisitions. The momentum established in the second half of last year has been sustainedthrough the first six months of the current financial year. All four divisionsof Smiths achieved higher sales and profits on a constant currency basis.Aerospace benefited from the rapid recovery in the commercial sector, Detectionmade progress beyond the airport market, Medical kept pace with rising demandand Specialty Engineering was boosted by strong growth in Interconnect. A £3m reduction in net interest on ordinary activities and a £6m pensionsfinancing improvement contributed to the higher pre-tax profit. The company'stax rate on ordinary activities for the period was 26.0% (2004: 26.5%). Operating cash-flow for the period, after capital expenditure and beforeexceptional restructuring, was £83m, representing a conversion from headlineoperating profit of 54%. This conversion rate was lower than usual because ofincreased investment in aerospace production capacity, and higher stock levelsin anticipation of strong sales growth in the second half. By the year end,cash conversion is likely to have risen closer to normal levels. Net debt atthe end of the period was £392m, compared to £273m at the start. Smiths spent £61m on acquisitions during the half year. In November, thecompany acquired Integrated Aerospace Inc, a privately-owned, California basedsupplier of specialist landing gear systems, for £57m. In December, the companyacquired Tianjin Timing Seals Co Ltd in China, for £3m, and this is now part ofJohn Crane in Specialty Engineering. Both acquisitions are performing in linewith expectations. In December, Smiths announced it would acquire Medex Inc, a leading US medicaldevice company for a total of £490m, including some £160m of assumed debt.Medex brings a product range which is highly complementary and considerablyincreases Smiths' presence in the safety devices sector. Having receivedregulatory clearance from all necessary authorities, completion is scheduled for21 March. Meanwhile the integration of Medex has been planned in detail andwill lead to both revenue and cost synergy benefits. Two smaller acquisitions have been made since the end of the first half. Irishcompany Farran Technology Ltd was acquired in February for £16m, of which £3m isperformance related. Its millimetre wave expertise will be used in futureSmiths Detection products. The acquisition of the US Seal product line fromSuperior Essex Inc, for £6m has been announced today. It makes replacementmechanical seals which complement the John Crane range. Company funded R&D increased by £6m to £72m. Customer-funded projects increasedat a similar rate, to £63m in this period. Together, they represent 10% ofsales. Productivity continues to improve. A two-year restructuring programme,commenced last year, has led to charges of £39m, including £8m during thisperiod. The payback from this programme is matching expectations and theefficiencies gained are contributing to current performance. In addition, thecompany has absorbed increased costs for plastics, metals, energy and transportwithout margin impact. Smiths generated 54% of its sales by origin in North America (US, Canada andMexico), and 62% of its profit. UK sales by origin were 23% of the total,including £231m in exports. By division, Aerospace generated 38% of SmithsGroup sales, Detection 11%, Medical 18% and Specialty Engineering 33% in thisperiod. Smiths Aerospace £m 2005 2004 Sales 514 457Headline operating profit 39 33Margin 8% 7% Smiths Aerospace has entered a period of strong growth which is likely to besustained for a number of years, driven by a recovery in the commercial aviationsector and rising sales of military systems. In the first six months of 2005,sales were 17% and headline profits 24% higher on a constant currency basis.Whilst margins moved ahead by one point in the first half, the divisioncontinues with its normal bias towards the second half. Compared with a yearearlier, company-funded R&D was £3m higher. The upward trend is the result of a number of positive factors. Boeing andAirbus are raising their production rates, especially of narrow-bodied aircraft,and hence demand for Smiths' aircraft systems is higher. Similarly, the enginemakers are placing more orders on the company's engine component business.Meanwhile, the commercial aftermarket which, for Smiths, was initially slow torecover, is now growing firmly in step with airline traffic. In this period, the initial systems for the A380 were delivered, while work onthe B787 Dreamliner, now less than two years from first flight, is on schedule. The military part of Smiths' business continues to perform strongly, withcurrent front-line programmes on which the company has valuable shipsets allsustained at high levels. In the longer term, whilst the US government isseeking to reduce defence expenditure, Smiths' high capture rate of newprogrammes in recent years, combined with increasing international demand,provides the basis for sustained growth in military business. Smiths has recently delivered avionics equipment for the first F-35 Joint StrikeFighter, which is expected to make its initial flight in 2006. Similarly, thecompany has delivered the first hardware and software for the C-130 AMP, aprogramme to modernise up to 500 of the US AirForce's now elderly transporters. Recent awards will help sustain military business in the longer term. Smithsis teamed with Lockheed Martin on the US101 Presidential helicopter fleet, andNorthrop Grumman has selected the landing gear system for the X-47B J-UCASunmanned aircraft from recently acquired Integrated Aerospace. In Europe, thepartner nations have reached agreement on the production of Tranche 2 ofEurofighter, for which Smiths supplies a number of systems. Construction has commenced on the second phase of the Smiths Aerospace plant inSuzhou, China, which will double capacity to 130,000 sq ft by 2006. In Poland,a plant acquired with DGT has been expanded and is now delivering enginecomponents to Pratt & Whitney. Smiths Detection £m 2005 2004 Sales 153 143Headline operating profit 21 18Margin 13% 12% In the relatively short time since it was established, Smiths Detection hasreached a market-leading position in the supply of detection equipment tomilitary, homeland security and customs authorities. The increasing breadth ofthe business offers a wider range of detection and identification technologiesthan its competitors, and benefits from a truly global sales footprint. In the first half of this year, sales were up 10% and headline profit up 22% ona constant currency basis. The timing of large orders and deliveries, coupledwith the effect of US government spending cycles, continues to impact theperformance of the division considerably from one reporting period to the next.Sales to government bodies tend to be skewed to the second half of Smiths' year,and deliveries are expected to increase during the balance of the year. While aviation security is still the largest market, at a third of divisionalsales, it is now well balanced by other applications including military, firstresponder/hazmat teams, critical infrastructure, ports & borders andnon-security applications. The ports & borders market is growing rapidly.Smiths makes very large X-ray units capable of quickly inspecting freightcontainers without opening them. Whilst initially they were used to preventtranshipment of contraband, recent growth has come equally from the drive toeliminate terrorist threats in cargo. Deliveries to New Zealand Customs and anew contract with the Australian government have been among the most significantapplications of this technology during the half year. Additionally, the prisonauthorities in New South Wales ordered equipment to prevent illicit orthreatening items being smuggled into prisons. Military business continues to grow, confirming Smiths as a world leader inchemical agent detectors. In the US, the company has secured a valuablefollow-on order from the Department of Defense under the Automated ChemicalAgent Detector and Alarm (ACADA) programme. In Holland, an order for chemicalagent detectors has been won from the Royal Netherlands Army and in the UK, theMinistry of Defence has awarded Smiths a £20m contract for the LightweightChemical Agent Detector (LCAD), which can be worn by troops. With R&D now at 8% of sales, investment is focused on new-generation biologicaldetection capability, high frequency imaging systems and a stream of newproducts which will keep Smiths at the forefront of the detection industry.Recent additions to the range include: X-ray equipment which provides aviation-level security to public buildings,schools and business mailrooms; an Ionscan desktop trace detection machine thatsearches simultaneously for narcotics and explosives; and an upgraded SentinelII walk-through explosives detection portal, which has been deployed at some ofthe busiest US airports. Smiths is also working with the US Transportation Security Administration (TSA)on pilot programmes to scan passenger documents for signs of explosives and toimprove aircargo screening, using trace detection equipment. In this period, the division secured new orders for airport security equipment,both trace and X-ray, from authorities in Algeria, Australia, Korea, Mexico andSenegal, and from Luton Airport in the UK. Smiths Medical £m 2005 2004 Sales 237 234Headline operating profit 39 39Margin 17% 17% With more than two thirds of its profit generated in North America, the reportedperformance of Smiths Medical is significantly affected by the translationimpact of the US dollar's decline compared with a year earlier. While appearingsteady year-on-year as reported, on a constant currency basis sales grew by 6%and headline profit by 7%. Growth would have been higher but for the withdrawalfrom third-party products in Japan. Over the past six months the focus has been on operational improvement to givethe division a competitive advantage. Individual business units have beenbrought within an integrated structure for manufacturing, and this will beextended to administration and supply chain management. Production is beingconcentrated in fewer locations and the majority of assembly work is carried outin Tijuana, Mexico. In the single-use sector, Smiths has continued to benefit from strong demand fordevices which prevent accidental needlestick injuries. Hospitals in the US arestill some way from being fully compliant with the requirement to use safetyproducts, and the transition is driving above-average growth rates. Smiths isinstalling additional capacity and will shortly introduce a new generation, lowdead space hypodermic NeedlePro, the LDS Edge, which maintains technicalleadership for the highly-respected Portex brand. Single-use airway management, critical care and assisted reproduction devicesare all achieving organic sales growth. DHD Healthcare has received the US Food& Drug Administration's 510(k) approval to launch the innovative Aquinox heatedairway humidification device, an early benefit from this acquisition made lastJune. Medication delivery and patient monitoring equipment also contributed to SmithsMedical's growth. The Deltec Cozmo insulin pump is selling strongly in the US.Now offered with a combined blood/glucose monitor, developed in partnership withAbbott Laboratories, the Cozmonitor has a distinct competitive advantage.Additionally, pump users will shortly be offered the new Cleo introducer, whichallows them to place the disposable insulin catheter more securely under theirskin. The opportunities beyond the US are still opening up, and Cozmo has beenlaunched in another eight countries, starting with those where reimbursement isavailable. Ambulatory and hospital infusion, pain management, vital signs andvascular access products continue to sell well, combining original equipmentwith the valuable supply of disposables. A new emergency resuscitator for firstresponders, the Pneupac VR1, has just been launched. It is the first to bepowered by the ambulance's own oxygen supply, eliminating the need forbatteries. In Japan, where Smiths Medical is the market leader in anaesthesia andrespiratory care, the low margin third party products have been dropped,warehousing has been outsourced, and seven locations will soon be reduced to asingle, purpose-built facility, resulting in efficiency gains. Specialty Engineering £m 2005 2004 Sales 440 430Headline operating profit 54 51Margin 12% 12% Specialty Engineering delivered a strong first half performance, with sales upby 9% and headline profit by 14% on a constant currency basis. All businessesachieved higher sales and profits in constant currency and, overall, SpecialtyEngineering contributed 36% of Smiths' headline operating profit, entirely incash and after absorbing £3m in restructuring costs. John Crane is a truly global operation and its performance varied by region. Inthe Americas, it moved ahead strongly, securing an important contract in the USto supply seals for the grain processing plants operated by Archer DanielsMidland, and benefiting from good business in Venezuela. In the rest of theworld, the pattern was mixed: while business in Europe and Asia, includingChina, was strong, the important Middle East market for oil & gas productioncontinued to suffer from political instability. Recent John Crane initiatives are starting to show a return: orders are beingreceived from Gazprom via the joint venture established in Russia; long-termshared success contracts for aftermarket business are being secured on thePerformance Plus contract basis, now comprising 32 contracts in 12 countries;and customer specifications are being matched more swiftly by involving thesoftware centre co-located with the Indian subsidiary in Bangalore.Significantly, John Crane has generally been able to pass on its higher rawmaterial costs. Interconnect's sales and profits increased in this period, driven by positivemarket dynamics in the military, aerospace and telecoms sectors. The microwavecomponents business is performing particularly well. Its products are findingnew applications in integrated defence communications systems and in medicalelectronics, including hospital scanners. A new, highly-advanced silicondioxide cable has recently been added to the range. Sales of electronicconnectors and filters were also ahead, although there has been some softness inthe European market while awaiting orders for Tranche 2 of Eurofighter. Recent acquisitions have been quickly integrated, and the extended product rangegives Smiths a competitive advantage in meeting more complex specifications. Flex-Tek is performing well and, with higher sales to both HVAC and domesticappliance customers, margins have improved. Increased raw material costs,particularly steel and nickel, have been offset by productivity gains and, witha Malaysian plant now fully operational, Flex-Tek remains competitive in anindustry well used to global component sourcing. The Vac-U-Store hose, whichcan be fully retracted into the body of a vacuum cleaner, has secured its firstapplication, and there is great interest from other customers. The Marine business improved its profitability as a result of increased navalbusiness, although sales for commercial shipping were flat. International Financial Reporting Standards Progress continues on the transition towards International Financial ReportingStandards (IFRS), under which 2005/2006 results will be reported. The firsttime Smiths will report under IFRS will be on the interim Accounts to 31 January2006. The Board On 20 January, Einar Lindh retired after 28 years' service with the company,including nine years on the Board, most recently as Group Managing Director,Specialty Engineering. Prospects Smiths is building on its strong market positions, benefiting from investmentin new product R&D, productivity gains and recent acquisitions. With broadlyfavourable market environments, Smiths is capitalising on availableopportunities to generate continuing growth. Dividend The Board has declared an interim dividend of 9.25p an increase of 6%, and thefirst time the interim dividend has been increased for four years. The level ofincrease for the full year will be considered in six months' time. The interimdividend will be paid on 27 April 2005 to holders of all ordinary shares whosenames are registered at the close of business on 29 March. The ex-dividend datewill be 23 March. Tables attached - Profit & loss account- Statement of total recognised gains and losses- Summarised balance sheet- Cash-flow statement- Notes to the accounts Copies of the interim report will be sent to shareholders shortly, and will beavailable at the company's registered office, 765 Finchley Road, London NW118DS. PROFIT AND LOSS ACCOUNT (unaudited) 6 months ended 31 January 2005 Ordinary Goodwill Exceptional activities amortisation items Total Note £m £m £m £m Continuing operations 1,339.2 1,339.2Acquisitions 5.2 5.2Discontinued businesses Turnover 2 1,344.4 1,344.4 Continuing operations 152.2 (21.6) (7.6) 123.0Acquisitions 0.9 (0.5) 0.4Discontinued businesses Operating profit 153.1 (22.1) (7.6) 123.4 Exceptional items - Exceptional property profit Profit/(loss) on disposal of businessesProfit before interest and tax 153.1 (22.1) (7.6) 123.4Net interest payable (5.9) (5.9)Other finance income- retirement benefits 7.5 7.5 Profit before taxation 154.7 (22.1) (7.6) 125.0Taxation (40.2) 2.2 2.3 (35.7) Profit after taxation 114.5 (19.9) (5.3) 89.3Dividends 4 (52.0) (52.0)Retained profit 62.5 (19.9) (5.3) 37.3 Earnings per share 5Basic 20.4p (3.6p) (0.9p) 15.9pDiluted 20.3p (3.6p) (0.9p) 15.8p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (unaudited) 2005 £m Profit for the period year attributable to shareholders 89.3Exchange loss (8.7) 80.6 PROFIT AND LOSS ACCOUNT (unaudited) 6 months ended 31 January 2004 Ordinary Discontinued Goodwill Exceptional activities Businesses amortisation items Total Note £m £m £m £m Continuing operations 1,263.7 1,263.7AcquisitionsDiscontinued businesses 55.0 55.0 Turnover 2 1,263.7 55.0 1,318.7 Continuing operations 140.7 (18.9) (9.6) 112.2AcquisitionsDiscontinued businesses 2.2 (1.9) 0.3 Operating profit 140.7 2.2 (20.8) (9.6) 112.5 Exceptional items - Exceptional property profit Profit/(loss) on disposal 2.6 2.6 of businessesProfit before interest and tax 140.7 2.2 (20.8) (7.0) 115.1Net interest payable (8.8) (2.4) (11.2)Other finance income- retirement benefits 1.2 1.2 Profit before taxation 133.1 (0.2) (20.8) (7.0) 105.1Taxation (35.3) 1.8 (1.6) (35.1) Profit after taxation 97.8 (0.2) (19.0) (8.6) 70.0Dividends 4 (49.1) (49.1)Retained profit 48.7 (0.2) (19.0) (8.6) 20.9 Earnings per share 5Basic 17.5p (3.4p) (1.6p) 12.5pDiluted 17.5p (3.4p) (1.6p) 12.4p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (unaudited) 2004 £m Profit for the period year attributable to shareholders 70.0Exchange loss (35.0) 35.0 PROFIT AND LOSS ACCOUNT (unaudited) Year ended 31 July 2004 Ordinary Discontinued Goodwill Exceptional activities Businesses amortisation items Total Note £m £m £m £m Continuing operations 2,678.4 2,678.4AcquisitionsDiscontinued businesses 55.0 55.0 Turnover 2 2,678.4 55.0 2,733.4 Continuing operations 360.1 (37.1) (30.9) 292.1AcquisitionsDiscontinued businesses 2.2 (1.9) 0.3 Operating profit 360.1 2.2 (39.0) (30.9) 292.4 Exceptional items - Exceptional property profit 12.1 12.1 Profit/(loss) on disposal 7.8 7.8 of businessesProfit before interest and tax 360.1 2.2 (39.0) (11.0) 312.3Net interest payable (13.0) (2.4) (15.4)Other finance income- retirement benefits 3.2 3.2 Profit before taxation 350.3 (0.2) (39.0) (11.0) 300.1Taxation (92.8) 4.4 1.2 (87.2) Profit after taxation 257.5 (0.2) (34.6) (9.8) 212.9Dividends 4 (151.6) (151.6)Retained profit 105.9 (0.2) (34.6) 9.8 61.3 Earnings per share 5Basic 45.9p (6.2p) (1.7p) 38.0pDiluted 45.8p (6.2p) (1.7p) 37.9p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (unaudited) 2004 £m Profit for the period year attributable to shareholders 212.9Exchange loss (45.0)Taxation recognised on exchange gains/losses:Current - United Kingdom (0.4)FRS17 - Retirement Benefits:Actuarial gains/(losses) on retirement benefit schemes - gross 145.5Deferred tax credit related thereto (39.3) 273.7 SUMMARISED BALANCE SHEET (unaudited) 31 January 31 January 31 July 2005 2004 2004 Note £m £m £mFixed assets Intangible assets 748.6 579.8 728.2Tangible assets 434.6 413.5 423.5Investments and advances: Automotive 325.0 325.0 325.0 Other 2.9 2.1 2.3 1,511.1 1,320.4 1,479.0Current assets Stocks 484.9 416.7 423.5Debtors 628.4 580.7 629.6Cash at bank 343.0 494.2 449.2 1,456.3 1,491.6 1,502.3 Creditors: Amounts falling due within one year (1,045.1) (715.5) (1,077.1) Net current assets 411.2 776.1 425.2 Total assets less current liabilities 1,922.3 2,096.5 1,904.2Creditors: Amounts falling due after one year (490.7) (713.0) (499.6)Provisions for liabilities and charges (116.1) (114.6) (120.0) Net assets excluding pension assets/ liabilities 1,315.5 1,268.9 1,284.6 Pension assets 77.4 36.4 72.7Retirement benefit liabilities (228.7) (321.4) (234.8) Net assets 1,164.2 983.9 1122.5 Capital and reserves Share capital and share premium account 331.0 320.6 323.3Reserves 833.2 663.3 799.2 Capital employed 8 1,164.2 983.9 1,122.5 CASH-FLOW STATEMENT (unaudited) 6 months 6 months Year ended ended ended 31 January 31 January 31 July 2005 2004 2004 £m £m £m Note Operating profit (before exceptional restructuring costs) 131.0 122.1 323.3 Goodwill amortisation 22.1 20.8 39.0Depreciation 35.2 37.4 72.1Retirement benefits (3.6) 2.8 (22.9)(Increase) in stocks (56.9) (14.2) (2.4)Decrease/(increase) in debtors 9.1 (10.0) (78.8)(Decrease)/increase in creditors (6.9) (2.8) 52.6 Net cash inflow from normal operating activities 130.0 156.1 382.9 Exceptional restructuring expenditure (9.9) (6.2) (23.0) Net cash inflow from operating activities 120.1 149.9 359.9 Returns on investments and servicing of finance 6.3 3.8 10.5Tax paid (43.5) (39.5) (61.5)Capital expenditure and financial investment (47.0) (29.9) (53.9)Acquisitions and disposals 6 (57.7) 490.0 291.4Equity dividends paid (102.5) (96.5) (145.6)Management of liquid resources 99.7 (414.3) (383.7)Financing 2.9 5.6 21.2 (Decrease)/increase in cash (21.7) 69.1 38.3 (Decrease)/increase in short-term deposits (99.7) 414.3 383.7Decrease/(increase) in other borrowings 8.4 2.5 (10.9)Loan note repayments 2.7 2.9Exchange variations (5.9) 20.7 28.4 (Increase)/decrease in net debt (118.9) 509.3 442.4 Net debt at beginning of period (272.7) (715.1) (715.1) Net debt at end of period 7 (391.6) (205.8) (272.7) NOTES TO THE ACCOUNTS (unaudited) 1. Accounting policies The accounting policies used in preparing the interim financial statements areconsistent with those used in the annual financial statements for 2004. 2. Analyses of turnover and profit 6 months ended 6 months ended Year ended 31 January 2005 31 January 2004 31 July 2004 Turnover Profit Turnover Profit Turnover Profit £m £m £m £m £m £mMarket Aerospace 514.0 38.9 456.9 33.0 1,005.8 99.7 Detection 152.9 20.5 142.8 17.8 317.1 55.6Medical 236.7 39.3 234.1 39.1 487.7 91.6Specialty Engineering 440.8 54.4 429.9 50.8 867.8 113.2 1,344.4 153.1 1,263.7 140.7 2,678.4 360.1Discontinued businesses 55.0 2.2 55.0 2.2 1,344.4 153.1 1,318.7 142.9 2,733.4 362.3 Goodwill amortisation (22.1) (20.8) (39.0)Exceptional items (7.6) (7.0) (11.0) Profit before interest and tax 123.4 115.1 312.3 Net interest (5.9) (11.2) (15.4)Retirement benefits Net finance income 7.5 1.2 3.2 Profit before taxation 125.0 105.1 300.1 Geographical origin United Kingdom 368.0 13.4 366.3 17.2 784.9 46.0North America 776.6 94.3 702.9 81.6 1,472.6 221.0Europe 227.3 32.6 230.7 31.1 471.7 69.5Other overseas 104.8 12.8 85.7 10.8 188.6 23.6Inter-company (132.3) (121.9) (239.4) 1,344.4 153.1 1,263.7 140.7 2,678.4 360.1 NOTES TO THE ACCOUNTS 3. Exceptional items 6 months ended 6 months ended Year ended 31 January 2005 31 January 2004 31 July 2004 £m £m £m Operational restructuring (7.6) (9.6) (30.9)Exceptional property profit 12.1Profit on disposal of businesses 2.6 7.8 (7.6) (7.0) (11.0) Exceptional restructuring costs of £7.6m (2004: £9.6m) have been charged againstoperating profit in respect of the continuing programme for improvingcompetitiveness in Aerospace and the rationalisation of distribution in Medical. 4. Dividends An interim dividend of 9.25p per share (2004: 8.75p) has been declared and willbe paid on 27 April 2005 to holders of all ordinary shares whose names areregistered at close of business on 29 March 2005. 5. Earnings per share Separate figures are given for earnings per share related to the average numberof shares in issue for each period: 6 months ended 31 January Year ended 31 July 2005 2004 2004 Basic 561,914,824 560,171,050 560,656,310Effect of dilutive share options 2,366,714 896,887 893,394 Diluted 564,281,538 561,067,937 561,549,704 NOTES TO THE ACCOUNTS 6. Acquisitions During the period the major acquisition was the issued capital of IntegratedAerospace, Inc. The fair values set out below are provisional, and will befinalised in subsequent financial statements. Date of acquisition Consideration Goodwill Net assets £m £m £mBusinesses acquired Integrated Aerospace 23.11.04 56.6 47.9 8.7Other 4.0 1.7 2.3 60.6 49.6 11.0 Cash received on forward contract (2.9) Net expenditure on acquisitions 57.7 During the period the Company was in receipt of a cash inflow of £2.9m net ofexpenses in respect of a hedging transaction related to the acquisition of MedexInc. This sum will be set against the subsequent cost of acquisition. Inaccordance with the provisions of FRS 10, the company amortises goodwill arisingon acquisitions after 1 August 1998 on a straight-line basis over periods of upto 20 years. 7. Borrowings and net debt 31 January 31 January 31 July Fixed Floating 2005 2004 2004 £m £m £m £m £m Maturity:On demand/under one year 4.1 287.9 292.0 47.3 275.4One to two years 0.3 0.3 206.3 0.4Two to five years 0.9 0.9 1.0 0.8 Greater than five years:Bank loans 11.1 11.1 11.3 10.8TI Eurosterling bond 2010 149.0 149.0 148.8 148.9Smiths US private placement 2013 53.2 79.8 133.0 137.3 137.4Smiths Eurosterling Bond 2016 148.3 148.3 148.0 148.2 366.9 367.7 734.6 700.0 721.9Cash and deposits (343.0) (494.2) (449.2) Net debt 366.9 367.7 391.6 205.8 272.7 NOTES TO THE ACCOUNTS 8. Movement in shareholders 'equity 6 months 6 months Year ended ended ended 31 January 31 January 31 July 2005 2004 2004 £m £m £m Profit for the period 89.3 70.0 212.9Dividends (52.0) (49.1) (151.6) 37.3 20.9 61.3 Exchange variations (8.7) (35.0) (45.0)Taxation recognised on exchange gains/(losses):Current - UK (0.4)Share issues 7.7 10.8 13.2ESOP Trusts - disposal of company shares 5.4Goodwill written back on disposals 130.0 130.0Actuarial gains and losses on retirement benefits schemes - gross 145.5Deferred tax charge related thereto (39.3) Net increase in shareholders' equity 41.7 126.7 265.3 Shareholders' equity: At 1 August 1,122.5 857.2 857.2 1,164.2 983.9 1,122.5 NOTES TO THE ACCOUNTS 9. Contingent liabilities As previously reported, John Crane, Inc ("John Crane"), a subsidiary of theCompany, is one of many co-defendants in numerous law suits pending in theUnited States in which plaintiffs are claiming damages arising from exposure to,or use of, products containing asbestos. The John Crane products generallyreferred to in these cases are ones in which the asbestos fibres wereencapsulated in such a manner that, according to tests conducted on behalf ofJohn Crane, the products were safe. John Crane ceased manufacturing productscontaining asbestos in 1985. John Crane has resisted every case in which it has been named, and will continueits robust defence of all asbestos-related claims based upon this "safe product"defence. In addition, John Crane has access to insurance cover which, while itis kept under review, is judged sufficient to meet all material costs ofdefending these claims for the foreseeable future. As a results of its defence policy, John Crane has been dismissed before trialfrom cases involving approximately 102,000 claims over the last 26 years. JohnCrane is currently a defendant in cases involving approximately 179,000 claims.Despite these large numbers of claims, John Crane has had final judgmentsagainst it, after appeals, in only 43 cases, amounting to awards of some US$30m. These awards, the related interest and all material defence costs have to datebeen met in full by insurance. No provision relating to this litigation hasbeen made in these accounts. In common with many other enterprises of similar size, the Company and itssubsidiaries are from time to time engaged in litigation in respect of a varietyof commercial issues. No provision relating to such litigation has been made inthese accounts. Note: As stated in note 1, the above financial statements have been prepared inaccordance with the accounting policies set out in the company's accounts forthe year ended 31 July 2004. They do not constitute the full financialstatements within the meaning of S240 of the Companies Act 1985. Figuresrelating to the year ended 31 July 2004 are abridged. Full accounts for SmithsGroup plc for that period have been delivered to the Registrar of Companies.The auditors' report on those accounts was unqualified and did not contain astatement under S237(2) or S237(3) of the Companies Act 1985. -ends- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Smiths Group