Notes to the accounts

3 Headline profit measures

The Company seeks to present a measure of underlying performance which is not impacted by exceptional items or items considered non-operational in nature. This measure of profit is described as ‘headline’ and is used by management to measure and monitor performance.

The following items have been excluded from the headline measure:

exceptional items, including income and expenditure relating to John Crane, Inc. asbestos litigation;
amortisation of intangible assets acquired in a business combination – the amortisation charge is a non-cash item, and the directors believe that it should be added back to give a clearer picture of underlying performance; and
other financing gains and losses, which represent the potentially volatile gains and losses on derivatives and other financial instruments which do not fall to be hedge accounted under IAS 39.

	Year ended 31 July 2008 £m	Period ended 31 July 2007 £m
Other financing gains and losses
Financing gains and losses on financial instruments	(1.4)	2.1
Exceptional finance costs – adjustment to discounted provision (note 4)	(4.7)
	(6.1)	2.1
Financing gains and losses reported in operating profit
Financing gains and losses on financial instruments	(0.3)	(1.5)
	(6.4)	0.6

Smiths Group divisions:
Smiths Detection, Smiths Medical, John Crane, Smiths Interconnect, Flex-Tek