Financial performance
Interim results 2009
|
|
Headline* |
|
|
|
Statutory |
|
2009 |
2008 |
|
|
2009 |
2008 |
|
Continuing activities |
|
|
|
|
|
|
|
Sales |
1,292 |
1,088 |
19% |
(3)% |
1,292 |
1,088 |
|
Operating profit |
185 |
158 |
17% |
(10)% |
160 |
170 |
|
Operating margin |
14.3% |
14.5% |
– |
– |
12.4% |
15.6% |
|
Pre-tax profit |
167 |
159 |
5% |
(17)% |
135 |
165 |
|
Basic EPS |
32.5p |
30.8p |
6% |
|
28.0p |
34.3p |
|
Free cash flow |
104 |
26 |
|
|
|
|
|
Dividend |
10.5p |
10.5p |
|
|
10.5p |
10.5p |
*In addition to statutory reporting, Smiths Group reports its continuing operations on a headline basis. Headline profit is before exceptional items, amortisation of acquired intangible assets, profit/loss on disposal of businesses and financing gains/losses from currency hedging. Free cash flow is described in the Financial review.
#Underlying figures are at constant currency and exclude the impact of acquisitions and disposals.
Key developments#
- Divisional restructuring programmes underway to reduce costs and improve customer service
- Rationalisation of the corporate HQ completed and greater divisional focus on delivering returns – total restructuring savings to date of £8m
- Upgrade of business systems including ERP for Detection, John Crane and Medical on track
- Underlying increase in Group R&D investment of 11% to £49m (reported increase of 29%)
- Extended our product portfolio and presence through two acquisitions, subject to regulatory approvals
- US$175m of additional long-term debt capital raised in February to extend our maturity profile
- Strong free cash flow generation
Business highlights#
Smiths Detection: Reported sales up 5%; underlying sales down 11%
- As previously guided, revenue was distorted by variable order flow – particularly in ports and borders
- Strong sales of airport equipment to US and good military growth with orders for JCAD
- Margins adversely affected by currency transaction (£5m) and adverse cost absorption due to reduced volumes
John Crane: Reported sales up 39%; underlying sales up 6%
- Growth driven by ongoing demand from the oil and gas sector and robust aftermarket
- Restructuring initiatives delivered £3m savings
- Upstream energy services business created with CDI and Fiberod
Smiths Medical: Reported sales up 16%; underlying sales down 3%
- Single-use consumables proving more robust than hardware
- Operational improvements have reduced customer backorders to a five year low
- Decision to exit diabetes business informed by SKU and customer profitability review
Smiths Interconnect: Reported sales up 25%; underlying sales down 2%
- Several long-term military programmes have delivered revenue growth
- Offset by lower sales to wireless operators following a large contract last year
- First half margins constrained by restructuring costs
Flex-Tek: Reported sales up 12%; underlying sales down 11%
- Performance affected by deepening recession in US housing and household appliances although market share increased
- Continued growth in sales of components to the aircraft industry
- Rationalisation programme and other cost initiatives helping preserve margins