Notes to the accounts

1 Segment information

Analysis by business segments

For management purposes, the Group has been organised into three business segments – Detection, Medical and Specialty Engineering. These business segments are the basis on which the Group reported its primary segment information. For reporting purposes Specialty Engineering is analysed into two segments: John Crane and Specialty – Other.

	Year ended 31 July 2008
			Specialty Engineering
	Detection £m	Medical £m	John Crane £m	Specialty –Other £m	Total £m
Revenue	509.3	703.4	625.8	482.7	2,321.2
Headline operating profit	85.6	127.8	95.9	71.3	380.6
Exceptional operating items (note 4)	(0.3)	(10.0)	(51.5)	26.4	(35.4)
Amortisation of acquired intangible assets	(0.4)	(11.3)	(5.5)	(2.0)	(19.2)
Financing losses	0.1	(0.4)	(0.1)	0.1	(0.3)
Operating profit	85.0	106.1	38.8	95.8	325.7
Exceptional finance costs – adjustment to discounted provision (note 4)			(4.7)		(4.7)
Net finance costs – other					(0.7)
Share of post-tax (losses)/profits of associated companies	(1.4)		0.4		(1.0)
Profit before taxation					319.3
Taxation					(75.0)
Profit for the period – continuing operations					244.3

	Period ended 31 July 2007
			Specialty Engineering
	Detection £m	Medical £m	John Crane £m	Specialty – Other £m	Total £m
Revenue	437.5	690.6	532.4	500.4	2,160.9
Headline operating profit	78.6	127.3	75.3	66.4	347.6
Exceptional operating items (note 4)	(13.0)	(9.6)	(73.2)	(2.4)	(98.2)
Amortisation of acquired intangible assets	(0.4)	(11.5)	(0.6)	(2.3)	(14.8)
Financing losses	(0.1)	(0.2)	(0.2)	(1.0)	(1.5)
	65.1	106.0	1.3	60.7	233.1
Profit on sale of financial assets					24.0
Operating profit					257.1
Net finance costs					(0.6)
Share of post-tax (losses)/profits of associated companies	(1.1)		0.6		(0.5)
Profit before taxation					256.0
Taxation					(53.1)
Profit for the period – continuing operations					202.9

The Group’s revenue is analysed as follows:

	Year ended 31 July 2008 £m	Period ended 31 July 2007 £m
Sale of goods	2,077.8	1,965.2
Contracts	132.1	98.4
Services	111.3	97.3
	2,321.2	2,160.9

The non-cash expenditure included in operating costs by division is shown below:

	Year ended 31 July 2008				Period ended 31 July 2007
	Deprec- iation £m	Amort- isation £m	Goodwill and other asset impairments £m	Other non-cash expenses (excluding impairments) £m	Deprec- iation £m	Amort- isation £m	Goodwill and other asset impairments £m	Other non-cash expenses (excluding impairments) £m
Detection	7.8	4.4		2.7	6.2	2.5		1.8
Medical	26.5	16.6	0.3	4.1	18.3	18.9		3.6
Specialty Engineering:
John Crane	10.0	7.2		3.5	8.3	2.1		2.6
Specialty – Other	8.9	2.8		2.6	11.0	2.4	10.3	2.4
Continuing operations	53.2	31.0	0.3	12.9	43.8	25.9	10.3	10.4
Discontinued operations					8.4	3.8		3.5
Total	53.2	31.0	0.3	12.9	52.2	29.7	10.3	13.9

Included in goodwill and other asset impairments in 2007 is £8.1m relating to disposal group impairment of assets on re-measurement to fair value less costs of sale.

Capital expenditure

	Year ended 31 July 2008 £m	Period ended 31 July 2007 £m
Detection	32.3	25.9
Medical	37.8	42.5
Specialty Engineering:
John Crane	21.8	17.3
Specialty – Other	8.2	14.7
Continuing operations	100.1	100.4
Discontinued operations		127.7
	100.1	228.1

Included in discontinued operations for the period ended 31 July 2007 is capital expenditure of £90.9m, incurred during the period after being classified as a disposal group.

Balance sheet

	2008 £m	2007 £m
Assets
Detection	711.7	604.8
Medical	912.1	899.9
Specialty Engineering:
John Crane	490.5	336.0
Specialty – Other	375.1	357.6
Operating assets by segment – continuing operations	2,489.4	2,198.3
Unallocated corporate assets	311.4	393.7
Cash and cash equivalents	132.5	186.2
Total assets	2,933.3	2,778.2
Liabilities
Detection	143.6	164.2
Medical	93.0	136.2
Specialty Engineering:
John Crane	282.1	253.4
Specialty – Other	77.6	93.2
Operating liabilities by segment	596.3	647.0
Unallocated corporate liabilities	515.7	448.7
Borrowings	903.1	779.2
Total liabilities	2,015.1	1,874.9

Unallocated corporate assets and liabilities include net taxation liabilities of £90.7m, retirement benefit assets of £174.2m, retirement benefit obligations of £184.7m and property, plant and equipment of £16.8m. All these assets and liabilities are not directly attributable to the operating activities.

Analysis by geographical location

The Group's revenue by destination is shown below:

	Year ended 31 July 2008 £m	Period ended 31 July 2007 £m
United Kingdom	148.3	134.6
North America	1,107.5	1,038.4
Europe	586.3	546.2
Other overseas	479.1	441.7
	2,321.2	2,160.9

The following analysis shows the carrying amounts of the Group’s assets, and additions to intangible assets and property, plant and equipment.

	Segment assets		Additions to intangible assets and property, plant and equipment
	2008 £m	2007 £m	Year ended 31 July 2008 £m	Period ended 31 July 2007 £m
United Kingdom	393.8	583.6	16.6	76.9
North America	1,405.5	1,276.4	53.4	118.8
Europe	746.3	554.0	20.0	13.3
Other overseas	255.2	178.0	10.1	19.1
	2,800.8	2,592.0	100.1	228.1
Cash and cash equivalents	132.5	186.2
	2,933.3	2,778.2	100.1	228.1

Included in additions to intangible assets and property, plant and equipment above were the following in relation to discontinued operations: United Kingdom £nil (2007: £53.4m), North America £nil (2007: £66.7m), Europe £nil (2007: £0.6m), and Other overseas £nil (2007: £7.0m). Of the additions relating to discontinued operations in 2007, the following amounts were incurred during the period after being classified as a disposal group: United Kingdom £37.5m, North America £47.0m, Europe £nil, and Other overseas £6.4m.

Additional voluntary segment disclosure of the impact of the restructuring

As set out in the Chief Executive’s statement, the roles of the divisions and the corporate centre are being restructured with the new management structure in place from 1 August 2008. The following information, which is presented with no comparatives, illustrates how the result would have been reported if the new structure had been in place for the year ended 31 July 2008.

			Year ended 31 July 2008
	Detection £m	John Crane £m	Medical £m	Interconnect £m	Flex-Tek £m	Other £m	Corporate £m	Total £m
Revenue	509.3	625.8	703.4	260.6	206.1	16.0		2,321.2
Headline operating profit	93.3	103.8	139.6	54.0	24.3	0.8	(35.2)	380.6
Exceptional operating items (note 4)	0.1	(51.0)	(9.4)	(1.3)	(0.1)	28.3	(2.0)	(35.4)
Amortisation of acquired intangible assets	(0.4)	(5.5)	(11.3)	(2.0)				(19.2)
Financing losses			(0.4)		0.1			(0.3)
Operating profit	93.0	47.3	118.5	50.7	24.3	29.1	(37.2)	325.7
Exceptional finance costs – adjustment to discounted provision (note 4)		(4.7)						(4.7)
Net finance costs – other								(0.7)
Share of post-tax (losses)/profits of associated companies	(1.4)	0.4						(1.0)
Profit before taxation								319.3
Taxation								(75.0)
Profit for the period – continuing operations								244.3

The assets and liabilities of the five new operating segments are set out below:

			Year ended 31 July 2008
	Detection £m	John Crane £m	Medical £m	Interconnect £m	Flex-Tek £m	Other unallocated & corporate £m	Cash & borrowings £m	Total £m
Assets	711.7	490.5	912.1	267.4	106.2	312.9	132.5	2,933.3
Liabilities	(143.6)	(282.1)	(93.0)	(47.0)	(29.2)	(517.1)	(903.1)	(2,015.1)
Net assets	568.1	208.4	819.1	220.4	77.0	(204.2)	(770.6)	918.2

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