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28 September 2011

£m Headline*     Statutory
Continuing activities 2011 2010 Growth Underlying# 2011 2010
Sales 2,842 2,770 3% 1% 2,842 2,770
Operating profit 517 492 5% 4% 438 436
Operating margin 18.2% 17.8% 40 bps - 15.4% 15.7%
Pre-tax profit 486 435 12% 11% 398 373
Basic EPS 92.7p 84.6p 10%   77.8p 75.3p
Free cash flow 236 331        
Dividend 36.25p 34.0p 7%   36.25p 34.0p
Return on capital employed 17.0% 16.6% 40 bps      

*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, costs of acquisitions and financing gains/losses from currency hedging. Free cash-flow and return on capital employed are described in the Financial review.
#Organic growth at constant currency.

You can click here to view the full press release.

The presentation slides and a live webcast of the presentation to analysts is available at


  • Sales up 3%; headline operating profit up 5%
  • Headline operating margin up 40 basis points to 18.2%
  • Company funded R&D increased by 5% to £99m
  • Restructuring programme savings of £15m; £56m to date from £70m target
  • Cash conversion strong – with free cash flow of £236m and year end net debt of £729m
  • Dividend up 7%
  • Return on capital employed up 40 basis points to 17.0%

"Smiths Group has made good progress against a deteriorating economic backdrop. We continue to build a solid foundation for future growth through further operational efficiencies and greater investment in new product development, sales and marketing effectiveness, expansion of our emerging market exposure and targeted acquisitions. The results again demonstrate the significant benefits delivered by our sustained focus on operational improvement that have driven margins to new highs. At the same time, we increased investment in future growth drivers, such as company-funded research and development, up 5%, and spent more on sales and marketing. We have again delivered strong cash conversion in line with guidance, and increased the annual dividend ahead of inflation.

"The economic outlook remains uncertain and continued pressures on government spending, which particularly impacted Smiths Detection, Medical and Interconnect are likely to continue to constrain revenue opportunities of some of our businesses during fiscal 2012. However, we still see further potential to drive operational improvements, enhance margins and deliver strong cash conversion."

Philip Bowman

Chief Executive
Smiths Group plc

Divisional highlights*

    Headline operating profit margin Headline return on capital employed
  % of Group sales Underlying sales growth* 2011 2010 2011 2010
Smiths Detection 18% (13)% 12.8% 15.7% 9.8% 13.3%
John Crane 31% 13% 21.1% 20.7% 25.4% 22.2%
Smiths Medical 30% (3)% 23.4% 21.5% 16.9% 15.1%
Smiths Interconnect 13% 3% 17.8% 18.2% 15.7% 17.3%
Flex-Tek 8%   12.5% 11.1% 21.9% 18.4%
Group 100% 1% 18.2% 17.8% 17% 16.6%

Smiths Detection

  • Revenue and margins declined as a result of order delays in most sectors, particularly military and ports & borders
  • A performance improvement programme is expected to deliver £40m of annualised savings by the end of FY2014
  • Announced the appointment of Mal Maginnis as divisional President, with effect from 1 January 2012
  • Sales will be affected by government budgets and regulations, margins will benefit from the restructuring initiatives

John Crane

  • Sales driven by growth in original equipment and aftermarket revenue, particularly in the oil and gas sector
  • Margins improved by 40 basis points to 21.1%, benefiting from increased volumes and efficiency initiatives
  • Restructuring initiatives delivered £6m savings in the period, with the total to date of £23m
  • A strong order book supports first half growth; expanding bearings aftermarket service through TCE acquisition

Smiths Medical

  • Margins enhanced 190 basis points to 23.4% through a range of cost management initiatives
  • These initiatives include portfolio profitability reviews, value engineering and restructuring
  • Tough operating environment with pressure on healthcare spend from government budgets and unemployment
  • New product launches benefiting from increased investment in R&D

Smiths Interconnect

  • Sales and margins affected by lower military sales offsetting growth in other sectors
  • Several new contract wins and further roll-out of broadband antenna for commercial aircraft
  • Integration of Interconnect Devices, Inc. complete, and agreed to acquire Power Holdings, Inc.
  • Sales growth will be held back by declines in the military sectors, other sectors are expected to see further


  • Improved volumes and continued cost efficiencies contributed to a 140 basis point increase in margins
  • Sales growth driven primarily by the aerospace and US residential construction sectors
  • Fluid management is expected to see continued growth while construction and appliances markets are uncertain
  • An upturn in these markets will generate positive earnings growth

*Figures are at constant currency and exclude the impact of acquisitions and disposals


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