Final Results
Smiths Group PLC
25 September 2002
Smiths Group: Preliminary Results
for the 12 months ended 31 July 2002
Highlights:
• Operating profit of £452m from continuing activities
• Profit margin of 15% on sales of £3.1 billion
• Operating cash after capex of £473m, free cash-flow of
£315m
• Debt reduced by £395m to £725m, helped by cash-flow and
disposals
• Earnings per share on continuing activities of 52.3p
• Civil aerospace slowdown balanced by strong defence
business
• Substantial increase in demand for detection equipment
• Medical division increasing its focus on product innovation
• Increased final dividend of 16.75p, making an annual total
of 25.5p
Commenting on the results, Keith Butler-Wheelhouse, Chief Executive said:
'These results prove our resilience in tough times. We are limiting the impact
of the global slowdown by cutting costs and concentrating on margins and
cash-flow. We are not counting on near-term market improvements, particularly
in the US where we generate half of our revenues. But we are focusing the
company on our growth opportunities, which will enable Smiths to deliver a
robust performance in the period ahead.'
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
Smiths Group: Preliminary Results 2002
Consolidated Results
On a fully consolidated basis, including now discontinued activities,
exceptional items and goodwill amortisation, Smiths Group recorded pre-tax
profit of £286 million, and earnings per share of 34.4p, for the year ended 31
July 2002. This compares with a pre-tax loss of £112m and a loss per share of
37.3p in the previous year, when there were significant merger-related costs.
The remainder of this statement focuses on the company's continuing activities,
in order to provide a more consistent basis for comparison.
Performance of continuing activities
£m 2002 2001
Turnover 3,070 3,132
Operating profit* 452 499
Interest (46) (59)
Pre-tax profit* 406 441
Earnings per share* 52.3p 56.4p
Annual dividend 25.5p 25.0p
*before exceptionals and amortisation
Smiths Group earned an operating profit of £452 million on its continuing
activities in 2002, compared with £499m in 2001, a drop of 9% year on year. The
decrease was mainly due to a slowdown in commercial aerospace and telecom
network markets. With sales at £3.1 billion, close to last year, the resulting
average profit margin across the company was one percentage point down, at 15%.
A reduced interest charge and lower tax rate benefited earnings per share, down
7% to 52.3p. The Board is recommending a final dividend of 16.75p, bringing the
total for the year to 25.5p, up 2% from 2001. The annual dividend is twice
covered by earnings from the continuing activities.
The company has a long-established record of delivering a high proportion of
profits directly in cash. This year the £473m operating cash-flow, measured
after capital expenditure, exceeded the operating profit of £452m. After
restructuring, interest and tax, free cash-flow was £315m, or 56 pence per
share. With proceeds of disposals exceeding acquisition spend by £181m,
year-end net borrowings were reduced to £725m from £1,120m at the start.
Interest charges were covered 10 times by operating profits.
The rebalancing of the company's activities to focus on areas with the greatest
opportunity for growth continued throughout the year. Nine disposals were made
for net proceeds of £247m, of which the sale of the marine seals business was
the largest. Four acquisitions were made for a combined outlay of £65m, two for
Medical and one each for Aerospace and Industrial divisions. At the year end,
Smiths Group employed 33,000 people.
Investment in research and development (R&D) increased by 13% to a total of
£212m, of which £116m was expensed against profits and the rest recovered from
customers. The increase reflects success in being selected for new aircraft
programmes and the accelerated pace of new product launches in Medical.
Operating exceptional charges of £44m were booked during the year, comprising
£39m to restructure the commercial aerospace business to meet lower demand from
aircraft manufacturers and £5m to move further medical device production from
the US to Mexico. Equivalent annual cost savings will be achieved by 2004.
Non-operational exceptionals of £24m were booked to cover asset write-downs on
disposals. Within the goodwill charge of £51m is a one-off £12m impairment
charge against a small business in the communications equipment sector which was
acquired in the previous year.
The company was due to receive a cash dividend on its preference shares in TI
Automotive Ltd in July, but did not accrue for it in the 2002 accounts. This
payment, of £16m, has been deferred while that company undergoes a restructuring
of its debt. Smiths expects to receive the dividend shortly.
In compliance with current accounting standards, the company reports its pension
expense under SSAP 24. If FRS 17 had been applied, the profit before tax would
have been £8m lower. The combined UK pension funds still have a small surplus
measured according to FRS 17 at 31 July 2002, despite the low level of the UK
equity market at that date. Looking ahead, if FRS 17 were to be applied for
2003, based on the July 2002 equity market, the additional charge to pre-tax
profit would be some £30m.
Just over half of the company's sales originated from the United States, where
13,500 people are employed. The business environment deteriorated during the
year and shows little sign of recovery. The average pound/dollar rate was
close to the previous year. However, the dollar's more recent decline, if
sustained, would have a negative impact on reported profits in the current
financial year.
A third of sales originates from the UK, employing 12,500 people. Here, too,
market conditions remained depressed through the year, and the company's sales
and profits were similar to the prior year. Exports from the UK were £520m in
2002.
On a divisional basis, Aerospace contributed 42% of operating profit, Medical
and Sealing Solutions 22% each, and Industrial 14% of the total.
Aerospace
£m 2002 2001
Turnover 1,345 1,301
Operating profit 191 209
Margin 14% 16%
On a 3% sales increase, Aerospace profits declined 9% compared to the prior
year. Demand for defence equipment and detection systems was strong, but the
sharp fall in the civil sector caused the overall reduction, which was more
pronounced in the second half.
Demand for original equipment from passenger jet manufacturers has fallen
sharply from its peak of two years ago, and is likely to remain at these lower
levels for some time. Aftermarket demand from airlines reflects the decline in
fleet usage, and the discretionary spend on upgrading in-service jets has
dwindled. The division has been restructuring to match current activity
levels. Looking ahead, the company continues to invest in new civil aircraft
programmes, and has secured a good position on the Airbus A380.
The drop in civil business has been largely outweighed by strong growth in
defence equipment and detection systems. Half of the division's sales are for
well-established military aircraft programmes, and these will continue to
increase for a number of years. Additionally, Smiths Aerospace has succeeded
in being selected as a systems integrator on some important new programmes,
including the F-35 Joint Strike Fighter and the Boeing 767 Global Tanker
Transport Aircraft. To enhance capabilities for this latter programme, Able
Corp of Los Angeles was purchased in April for £13 million, plus
performance-related payments with a maximum possible consideration of £19m.
The Detection business grew rapidly, and included a full-year contribution from
Barringer for the first time. Equipment to detect explosives at airports is in
great demand, and a new walk-through trace detection portal has just been
introduced creating considerable international interest. Chemical and
biological detection equipment has continued to attract new orders, including
one for a system to detect anthrax in US postal sorting offices. Military
sales of battlefield detection units have also been strong.
Medical
£m 2002 2001
Turnover 480 452
Operating profit 97 93
Margin 20% 21%
Sales by Smiths Medical rose by 6% and profits by 4%, compared to the prior
year, as the division benefited from steadily increasing healthcare spending in
the developed world. This continues to be the part of Smiths Group which
generates the highest returns, with margins of 20% and good growth prospects.
The focus of Medical's activities is on single-use devices for critical care,
and on specialist equipment used in operating rooms and during recovery, often
beyond the hospital environment. The product range has been organised into a
number of global business units, each with its own specialist sales force,
backed by a coordinated approach to winning new business with large group
purchasing organisations in the US and the National Health Service in the UK.
The worldwide distribution network is being simplified, with the company
progressively taking direct ownership in key markets, most recently in Austria
and Australia. Manufacturing is being rationalised, with nearly half of all
product assembly now taking place in Mexico, bringing substantial productivity
gains.
Two acquisitions were made in the year, complementing existing product lines.
The US company, Bivona, making silicone airway devices, was added in October
2001 for £24m. A unit of Abbott Laboratories, making procedural kits for pain
management, was purchased for £21m in December 2001. The ostomy and urology
products, no longer core to Medical's range, were sold in May.
Innovative products in specialist niches helped sustain Medical's good margins.
The company invested heavily to develop the new Cozmo insulin pump, which has
now received its 510k regulatory approval from the US Food & Drug
Administration. Cozmo provides a less invasive and more precise means of
delivering medication to those with serious diabetes than multiple daily
injections. Safe needle closure devices is another area where Smiths Medical
is among the market leaders. Production reached an annualised 200 million
units by the year end, with the US market still only around 40% converted to the
mandated safety procedures. The range has been extended, through a licensing
agreement, to include the Futura retractable hypodermics and scalpels.
The Japanese medical business continued to perform well, although its growth was
restricted by a tighter healthcare reimbursement regime, and reported sales and
profits were reduced by yen depreciation.
Sealing Solutions
£m 2002 2001
Turnover 822 892
Operating profit 100 104
Margin 12% 12%
While sales in the Sealing Solutions division declined by 8%, the improvements
in productivity achieved during the year restricted the decline in profits to
4%. Moving elements of production to Mexico and the Czech Republic has
significantly reduced the cost base, and earlier investments in supply chain
management and lean enterprise initiatives are now paying off. Following a
number of disposals, of which the largest was the marine seals business sold to
Wartsila of Finland in April, Sealing Solutions is now focused on John Crane
mechanical seals and the polymer seals business.
John Crane's metal and ceramic seals are mainly used in pumping applications for
large process plant, such as petrochemical production. Higher oil prices have
sustained investment in this sector, from which John Crane benefited. The
aftermarket, including the Performance Plus total care package, has been
relatively firm. Despite general industrial slowdown, sales remained steady
year-on-year and profitability improved sharply. John Crane is the recognised
world leader in this sector and is now in a good position to make competitive
gains in tough market conditions.
The Polymer Seals business experienced a more difficult year. Its
highly-specified rubber and plastic seals are used in a wide variety of
industrial applications. The depressed state of the European capital equipment
market, particularly hydraulic plant and machinery, caused sales to fall.
Timely action to cut costs limited the drop in profitability, and in the
principal markets, including Germany and Scandinavia, the orderbook has
stabilised. As in John Crane, moving production to lower cost countries and the
outsourcing of components are part of the process of margin improvement.
Industrial
£m 2002 2001
Turnover 422 487
Operating profit 65 93
Margin 15% 19%
Sales in the Industrial division declined 13% and profits fell by 31%, leading
to a four point decrease in margins to 15%, still level with the company's
overall margin. A number of individual businesses were downsized to match lower
demand, and the restructuring costs of a 12% cut in the workforce announced
earlier in the year have been taken within the operating result. With a sharp
reduction in working capital, cash generation was well in excess of profits.
Industrial is involved in electronic interconnect equipment, ducting and air
moving products. Most of the profit decline was within the interconnect area
serving a wide range of specialised customers. This includes builders and
operators of wireless telecoms infrastructure, where network overcapacity has
caused a significant drop in activity. Even at currently depressed sales
levels, the division's telecom-related business earns double digit margins.
Other interconnect business remained firm, helped by strong sales in the defence
sector, including multi-pin connectors for Eurofighter Typhoon.
Ducting and hosing products are made in the US, UK and continental Europe, and
are used in a wide variety of applications, both industrial and consumer. This
business performed robustly in generally flat markets, retaining good double
digit margins. Sales by the mainly UK-based air moving business were held down
by the low level of industrial and commercial demand in this country.
Prospects
In difficult market conditions, Smiths Group has performed well this year,
mainly as a result of the cost savings which have limited the reduction in
operating profit. The high level of cash generation demonstrates the substance
to the profits. Debt has been reduced by £1 billion since the formation of
Smiths Group in December 2000, and the balance sheet is strong. R&D has been
substantially increased. The re-shaping of the company to focus on growth
opportunities continues to make good progress. All of these actions will
benefit future performance. The company is not counting on an upturn in the
general economic climate, although in specific sectors, including defence,
healthcare and detection equipment, growth prospects are good. With the
constant focus on operational improvement, the Board is confident that, even
under these mixed conditions, the performance of Smiths will remain robust in
the period ahead.
The Annual General Meeting of the company will be held at the offices of JP
Morgan, 10 Aldermanbury, London EC2V 7RF, on Tuesday, 12 November at 12.00 noon.
If approved at the meeting, the recommended final dividend on the ordinary
shares will be paid on Friday, 15 November to shareholders registered at the
close of business Friday, 18 October. The ex-dividend date will be Wednesday, 16
October.
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
2001. The company has adopted FRS 19 (Deferred Taxation) in these financial
statements. The financial statements do not constitute the full financial
statements within the meaning of S240 of the Companies Act 1985. Figures
relating to the year ended 31 July 2001 are abridged. Full accounts for Smiths
Group plc for that period have been delivered to the Registrar of Companies.
The auditors' report on these accounts was unqualified and did not contain a
statement under S237(2) or S237(3) of the Companies Act 1985.
Smiths Group: Preliminary Results 2002
PROFIT AND LOSS ACCOUNT (unaudited)
Year ended 31 July 2002
Ordinary Discontinued Goodwill Exceptional Total
activities businesses amortisation items
& impairment
Note £m £m £m £m £m
Continuing operations 3,043.0 3,043.0
Acquisitions 27.1 27.1
Discontinued businesses 153.4 153.4
Turnover 1 3,070.1 153.4 3,223.5
Continuing operations 446.8 (48.6) (43.7) 354.5
Acquisitions 5.6 (1.9) 3.7
Discontinued businesses 9.9 (0.2) 9.7
Operating profit 1 452.4 9.9 (50.7) (43.7) 367.9
Exceptional items - 2
profit / (loss) on disposal (24.3) (24.3)
of businesses
Profit before interest and tax 452.4 9.9 (50.7) (68.0) 343.6
Net interest payable (46.4) (11.1) (57.5)
Profit before taxation 406.0 (1.2) (50.7) (68.0) 286.1
Taxation 8 (113.7) 0.3 3.8 16.1 (93.5)
Profit/(loss) after taxation 292.3 (0.9) (46.9) (51.9) 192.6
Minority interests (1.3) (1.3)
Profit/(loss) for the period 291.0 (0.9) (46.9) (51.9) 191.3
Dividends (142.2) (142.2)
Retained profit/(loss) 148.8 (0.9) (46.9) (51.9) 49.1
Earnings per share 4
Basic 52.3p (0.2p) (8.4p) (9.3p) 34.4p
Diluted 52.2p (0.2p) (8.4p) (9.3p) 34.3p
PROFIT AND LOSS ACCOUNT
Year ended 31 July 2001
Ordinary Discontinued Goodwill Exceptional Total
activities businesses amortisation items
Note £m £m £m £m £m
Continuing operations 3,132.4 3,132.4
Acquisitions
Discontinued businesses 1,825.8 1,825.8
Turnover 1 3,132.4 1,825.8 4,958.2
Continuing operations 499.5 (34.3) (115.8) 349.4
Acquisitions
Discontinued businesses 151.8 (14.4) (17.7) 119.7
Operating profit 1 499.5 151.8 (48.7) (133.5) 469.1
Exceptional items - 2
merger costs (54.2) (54.2)
profit / (loss) on (286.0) (286.0)
disposal of businesses
write-down of goodwill on (125.0) (125.0)
future anticipated disposals
Profit before interest and tax 499.5 151.8 (48.7) (598.7) 3.9
Net interest payable (58.7) (57.5) (116.2)
Profit before taxation 440.8 94.3 (48.7) (598.7) (112.3)
Taxation 8 (127.9) (28.3) 3.6 60.5 (92.1)
Profit/(loss) after taxation 312.9 66.0 (45.1) (538.2) (204.4)
Minority interests (1.1) (0.5) (1.6)
Profit/(loss) for the period 311.8 65.5 (45.1) (538.2) (206.0)
Dividends (199.5) (199.5)
Retained profit/(loss) 112.3 65.5 (45.1) (538.2) (405.5)
Earnings per share 4
Basic 56.4p 11.9p (8.2p) (97.4p) (37.3p)
Diluted 56.2p 11.8p (8.1p) (97.0p) (37.1p)
SUMMARISED BALANCE SHEET (unaudited)
31 July 31 July
Note 2002 2001
£m £m
Fixed assets
Intangible assets 638.3 678.3
Tangible assets 563.9 620.1
Investments: TI Automotive Ltd. 325.0 325.0
Other 11.6 12.1
Current assets and liabilities
Stocks 9 474.5 567.6
Debtors 10 768.7 918.6
Creditors 11 (844.2) (914.6)
1,937.8 2,207.1
Net borrowings / cash 12 (725.2) (1,119.8)
Provisions for liabilities and charges 15 (202.5) (234.9)
Funds employed 1,010.1 852.4
Capital and reserves
Share capital and share premium 303.3 285.0
Reserves 694.9 554.7
Shareholders' equity 998.2 839.7
Minority interests 11.9 12.7
Capital employed 1,010.1 852.4
Comparative figures for provisions for liabilities and charges and reserves have
been restated on the adoption of FRS 19 to include an additional deferred
taxation provision of £26.0m relating to past tax benefits derived from goodwill
acquired before 1 August 1998 and written off against reserves under accounting
policies in force at that time.
SUMMARY CASH-FLOW STATEMENT SHOWING CONTINUING ACTIVITIES (unaudited)
Year ended Year ended
31 July 2002 31 July 2001
Continuing Total
activities
£m £m £m
Operating profit before goodwill amortisation 452.4 462.3 651.3
Depreciation 88.5 91.5 139.3
Working capital 30.1 29.2 (89.6)
Net cash inflow from ordinary activities before capex 571.0 583.0 701.0
Capital expenditure (98.1) (100.0) (188.0)
Net cash inflow from ordinary activities after capex 472.9 483.0 513.0
Interest paid (56.5) (117.9)
Tax paid (52.8) (115.6)
Restructuring (59.2) (74.2)
Free cash-flow 314.5 205.3
Merger costs (54.2)
Acquisitions (66.5) (198.1)
Disposals 247.4 604.8
Dividends (139.1) (171.3)
Other 38.3 (40.6)
Reduction in net debt 394.6 345.9
Net debt at beginning of period (1,119.8) (1,465.7)
Net debt at end of period (725.2) (1,119.8)
CASH-FLOW STATEMENT (unaudited)
Year ended 31 Year ended 31
July 2002 July 2001
£m £m
Operating profit (before restructuring and merger costs) 411.6 602.6
Goodwill amortisation and impairment 50.7 48.7
Depreciation 91.5 139.3
Decrease/(increase) in stocks 18.7 (34.4)
Decrease/(increase) in debtors 38.3 (71.7)
(Decrease)/increase in creditors (27.8) 16.5
Operating cash-flow before restructuring costs 583.0 701.0
Restructuring costs (59.2) (74.2)
Operating cash-flow after restructuring costs 523.8 626.8
Merger costs (54.2)
Returns on investments and servicing of finance (56.5) (117.9)
Tax paid (52.8) (115.6)
Capital expenditure and financial investment (100.0) (188.0)
Acquisitions and disposals 182.8 400.9
Deferred consideration re prior-year acquisitions (1.9) (32.3)
Equity dividends paid (139.1) (171.3)
Management of liquid resources 0.1 193.6
Financing (124.3) (448.2)
Increase in cash 232.1 93.8
Reduction in short-term deposits (0.1) (193.6)
Decrease in other borrowings 139.8 452.8
Loan note issues (net of repayments) 2.0 3.5
Term deposits acquired with acquisitions 19.0
Debt de-consolidated on disposals 19.1
Exchange variations 20.8 (48.7)
Decrease in net debt 394.6 345.9
Net debt at beginning of period (1,119.8) (1,465.7)
Net debt at end of period (725.2) (1,119.8)
NOTES TO THE ACCOUNTS (unaudited)
1) Analyses of turnover and profit - continuing ordinary activities
Market
Turnover Profit
2002 2001 2002 2001
£m £m £m £m
Aerospace 1,345.4 1,301.2 190.9 208.7
Sealing Solutions 822.4 891.9 99.8 104.3
Medical 479.9 452.5 97.2 93.3
Industrial 422.4 486.8 64.5 93.2
3,070.1 3,132.4 452.4 499.5
Net interest (46.4) (58.7)
406.0 440.8
Geographical origin
Turnover Profit
2002 2001 2002 2001
£m £m £m £m
United Kingdom 966.2 996.4 123.5 121.2
USA 1,628.7 1,620.9 233.6 263.6
In US dollars $2,369.8m $2,350.3m $339.9m $382.2m
Continental Europe 496.1 507.4 55.4 76.5
Other overseas 253.1 239.0 39.9 38.2
Inter-company (274.0) (231.3)
3,070.1 3,132.4 452.4 499.5
2) Exceptional items
2002 2001
£m £m
Restructuring and closure costs (43.7) (133.5)
Merger costs (54.2)
(43.7) (187.7)
Loss on disposal of businesses (note 6) (24.3) (286.0)
Goodwill on anticipated disposals (125.0)
(68.0) (598.7)
3) Dividends
A final dividend of 16.75p per share (2001 16.25p) has been recommended and, if
approved, will be paid on 15 November 2002 to holders of all ordinary shares
whose names are registered at close of business on 18 October 2002.
4) Earnings per share
Separate figures are given for earnings per share related to the average number
of shares in issue for each year:
Year ended Year ended
31 July 2002 31 July 2001
Basic 556,496,716 552,770,686
Effect of dilutive share options 1,267,591 2,113,803
Diluted 557,764,307 554,884,489
5) Acquisitions
During the year the company acquired the issued share capital of Bivona Inc.,
and the business assets of a product line from Abbott Laboratories for Medical,
the issued share capital of Summitek Instruments, Inc. for Industrial and the
issued share capital of Able Corp for Aerospace.
Details of the consideration paid, amounts treated as goodwill and the net
assets acquired are set out below. These values are provisional, and following
completion of the ongoing review, will be finalised in subsequent financial
statements.
Date of Consideration
plus net debt Goodwill Net assets
acquisition
£m £m £m
Bivona 31.10.01 24.3 18.4 5.9
Abbott anaesthesia kit business 20.12.01 20.9 15.9 5.0
Summitek 2.12.01 6.8 4.9 1.9
Able 1.4.02 12.6 9.6 3.0
64.6 48.8 15.8
Further performance-related consideration of up to £6.4m may become payable in
relation to Able.
Consistency of
Book value accounting policy
Revaluation Fair value
£m £m £m £m
Fixed assets 4.2 (0.7) 3.5
Stocks 9.2 (1.0) 8.2
Debtors 4.8 (0.1) 4.7
Creditors (3.6) (0.4) (4.0)
Provisions (0.2) (0.2)
Taxation (0.1) 3.6 0.1 3.6
14.5 2.9 (1.6) 15.8
Goodwill 48.8
Consideration - all satisfied in cash 64.6
Deferred consideration - prior year acquisitions 1.9
Total acquisition spend including assumed borrowings/deposits 66.5
In accordance with the provisions of FRS 10, the Group 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 £38.7m. In addition
goodwill arising from the December 2000 acquisition of Radio Waves Inc was
impaired, giving rise to an additional charge of £12.0m.
6) Disposals
The principal disposal in the year was John Crane LIPS, summarised as follows:
£m
Proceeds 234.8
Net operating assets at date of sale (including cash of £23.0m) 61.2
Capitalised goodwill 4.3
Net assets 65.5
Costs and retained liabilities:
Transaction costs 7.9
Retained liabilities 8.7
16.6
Surplus of consideration over net assets, fees and expenses 152.7
Goodwill previously written-off to reserves (145.6)
Profit on sale before tax 7.1
Disposals in the year are summarised as follows:
John Crane LIPS Other Total
£m £m £m
Proceeds less expenses and retained liabilities 218.2 42.6 260.8
Net assets 65.5 70.4 135.9
Surplus of proceeds over net assets and expenses 152.7 (27.8) 124.9
Goodwill previously written-off to reserves (145.6) (3.6) (149.2)
Profit/(loss) on sale 7.1 (31.4) (24.3)
In 2001, an exceptional item of £125m was charged through the P&L account
relating to goodwill previously written off to reserves in respect of
prospective disposals. £86m of this relates to the other disposals in 2002.
2002 2001
7) Operating profit is after charging
£m £m
Depreciation of fixed assets 91.5 139.3
Research and development 116.5 109.5
8) Taxation 2002 2001
£m £m
Taxation on the profit for the year:
UK corporation tax at 30% (2001 - 30%) 62.8 95.8
Double taxation relief (7.7) (20.9)
55.1 74.9
Overseas taxation 61.0 85.4
116.1 160.3
Tax relief on exceptional items (16.1) (60.5)
Deferred taxation (6.5) (7.7)
93.5 92.1
The company has adopted FRS 19 - Deferred Taxation. As a result, an adjustment
of £26.0m has been made to opening reserves to reflect the deferral of tax
relating to goodwill acquired before 1 August 1998, and written off to reserves
under accounting policies in force at that time. The effect on the reported
profits of the prior period is not material.
9) Stocks 2002 2001
£m £m
Stocks comprise:
Raw materials 133.4 154.3
Work in progress 149.2 199.7
Finished goods 216.9 235.0
499.5 589.0
Less: payments on account (25.0) (21.4)
474.5 567.6
10) Debtors 2002 2001
£m £m
Amounts falling due within one year:
Trade debtors 486.5 641.6
Amounts recoverable on contracts 52.9 61.3
Other debtors 28.3 18.6
Prepayments and accrued income 30.0 30.9
597.7 752.4
Amount falling due after more than one year:
Other debtors 15.4 20.8
Pensions prepayment 155.6 145.4
171.0 166.2
Total debtors 768.7 918.6
11) Creditors 2002 2001
£m £m
Amounts falling due within one year:
Trade creditors 196.0 285.1
Bills of exchange payable 3.3 3.4
Other creditors 39.4 51.0
Proposed dividend 93.6 90.4
Corporate taxation 119.0 60.4
Other taxation and social security costs 31.6 23.3
Accruals and deferred income 267.2 325.2
750.1 838.8
Amounts falling due after more than one year: 94.1 75.8
Total creditors (excluding borrowings) 844.2 914.6
12) Borrowings and net debt
Fixed rate borrowings
Weighted average
Interest Years Floating Total Total
rate fixed Amount borrowings 2002 2001
£m £m £m £m
Currencies:
Sterling 7.19% 13 161.9 167.0 328.9 620.3
US dollar 8.27% 1 43.6 196.8 240.4 329.3
Euro 4.45% 2 136.8 77.0 213.8 200.6
Japanese yen 2.30% 1 8.0 32.4 40.4 32.6
Other 10.07% 1 0.7 10.5 11.2 54.2
351.0 483.7 834.7 1,237.0
Cash and deposits (109.5) (117.2)
Net debt 725.2 1,119.8
Maturity:
On demand / under one year 46.7 117.0 163.7 342.6
1-2 years 17.3 165.7 183.0 90.6
2-5 years 139.0 52.5 191.5 506.8
Over 5 years 148.0 148.5 296.5 297.0
351.0 483.7 834.7 1,237.0
2002 2001
£m £m £m £m
13) Movements in shareholders' equity
Profit/(loss) for the year 191.3 (206.0)
Dividends (142.2) (199.5)
49.1 (405.5)
Exchange variations (60.6) (10.3)
Tax recognised on exchange variations 3.3 (2.4)
Write back of goodwill on disposals 149.2 470.3
Share issues 17.5 26.2
Net increase in shareholders' equity 158.5 78.3
Shareholders' equity :
At 1 August 2000 865.7 787.4
Prior period adjustment - FRS 19 (26.0) (26.0)
839.7 761.4
At 31 July 2002 998.2 839.7
14) Post retirement benefits
The accounts are prepared under SSAP 24. The principal UK and US defined
benefit pension funds are summarised:
UK US
Valuation date March/April 2001 July 2001
Assets £2,082m $485m
Funding level 124% 100%
As required by FRS 17 the following disclosures relate to the status of all US
and US post retirement benefit plans as at 31 July 2002 calculated on the
prescribed FRS 17 basis:
UK US
£m £m
Funded pension plans - market value of assets 2,083 262
Funded pension plans surplus/(deficit) 8 (93)
Unfunded plans and post retirement healthcare liabilities (36) (83)
(28) (176)
Related deferred tax asset 8 67
Net FRS 17 pension liability (20) (109)
If FRS 17 had been adopted, the following amounts would have been recognised in
the performance statements for the year to 31 July 2002 in respect of post
retirement benefits:
Unfunded
Funded pension plans plans incl.
UK US healthcare Total
£m £m £m £m
Operating profit (34) (13) (2) (49)
Finance income/(charges) 34 (1) (7) 26
Nil (14) (9) (23)
The total charge to the profit and loss account under FRS 17 would have been
£23m. The actual 2002 P&L cost calculated under SSAP 24 was £15m.
15) Provisions for liabilities and charges
At Exchange P&L At
1.8.2001 adjustment charge Releases Acquisitions Utilisation Disposals 31.7.2002
Post-retirement
healthcare 91.4 (6.5) 6.2 (4.9) 86.2
Product liability
& guarantees 32.8 (1.1) 16.9 0.2 (14.1) 34.7
Reorganisation 43.2 (0.6) 34.6 (40.1) 37.1
Property 21.2 (0.3) 11.4 (6.7) (5.6) 20.0
Legal 8.9 (0.1) 12.3 (1.6) (1.2) 18.3
Total 197.5 (8.6) 81.4 (8.3) 0.2 (65.9) 196.3
Discontinued 9.7 (0.1) (9.6)
Total 207.2 (8.6) 81.4 (8.3) 0.2 (66.0) (9.6) 196.3
Deferred tax 27.7 6.2
Total provisions 234.9 202.5
16) Share premium account and reserves
Share premium Revaluation reserve Merger Profit and
account loss account
reserve
£m £m £m £m
Adjusted consolidated balance at 146.1 3.2 234.8 316.7
1 August 2001
Premium on allotments 17.6 (0.8)
Retained profit 49.1
Write back of goodwill on disposals 149.2
Exchange rate changes (including tax on (57.3)
recognised gains)
At 31 July 2002 163.7 3.2 234.8 456.9
-ends-
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