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22 March 2011

  Headline*     Statutory
Growth Underlying# 2011
Continuing activities            
Sales 1,372 1,279 7% 2% 1,372 1,279
Operating profit 239 207 15% 9% 208 186
Operating margin 17.4% 16.2% 120bps  – 15.2% 14.5%
Pre-tax profit 224 178 25% 18% 189 148
Basic EPS 42.1p 34.7p 21%   35.7p 28.7p
Free cash flow 70 133 (47)%      
Dividend 11.25p 10.5p 7%   11.25p 10.5p
Return on capital employed 17.3% 14.9% 240bps      

*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.


  • Strong financial performance with sales up 7% and headline operating profit up 15%
  • Headline operating margin up 120 basis points to 17.4%
  • Company funded R&D increased by 14% to £49m
  • Restructuring programme generated savings of £6m; £45m to date from £70m target
  • Cash generation strong - apart from £32m working capital investment for Detection
  • Dividend returns to growth, up 7%
  • Return on capital employed up 240 basis points to 17.3%


"These figures demonstrate the benefit of our self-help initiatives and operational improvements across the Group. The business has performed well against a tough but steadily improving economic environment. First half margins have reached new highs as a result of volume leverage, better pricing and our focus on operational improvement and restructuring. Sales benefited from organic growth and recent acquisitions, despite order delays in Smiths Detection, a tougher trading environment and SKU rationalisation holding back Smiths Medical. Cash conversion has remained strong apart from the investment in Smiths Detection working capital to support second half deliveries. Return on capital employed increased 240 basis points to 17.3%.

"Looking ahead, we are enhancing our focus on top-line growth through increased investment in new product development, improved sales and marketing effectiveness, building our footprint in emerging markets, and targeted acquisitions. At the same time, we remain focused on delivering further savings from our restructuring and other initiatives. Cash conversion and improving returns continue to be key priorities and we remain confident of meeting expectations for the full year."

Philip Bowman

Chief Executive
Smiths Group plc

Divisional highlights*

Smiths Detection: Sales down 9% and headline operating profit down 11%; margin down to 13.9%

  • Revenue was constrained by the variable order flow in military and ports & borders
  • Company-funded R&D up 9% to 7.0% of sales; development projects for new products remain on track
  • Technology leadership in air cargo screening and liquid detection positions us well for future opportunities
  • Several new contracts secured and order book supports an improved second half; tender activity remains high


John Crane: Sales up 12% and headline operating profit up 8%; margin up to 19.0%

  • Margins improved by 110 basis points to 19.0%, benefiting from increased volumes and efficiency initiatives
  • Restructuring initiatives delivered £2m savings in the period, with the total to date of £19m
  • Sales driven by growth in aftermarket, as well as original equipment revenue, particularly by oil and gas sector
  • Strengthening order book points to second half sales growth


Smiths Medical: Sales down 2% and headline operating profit up 5%; margin up to 22.6%

  • Margins enhanced 170 basis points to 22.6% through cost management and restructuring initiatives
  • Portfolio profitability reviews, value engineering and restructuring continuing to deliver margin benefits
  • Tough operating environment given budget pressures as well as procedure rates down due to unemployment
  • Investment in new product development up 12% to 3.7% of sales


Smiths Interconnect: Sales up 7% and headline operating profit up 15%; margin up to 18.1%

  • Margins improved by 210 basis points through higher volumes and cost efficiencies
  • Growth across all end markets despite more challenging conditions in the military sector
  • Integration of Interconnect Devices, Inc. complete and accretive to margins
  • Several new contract wins and further roll-out of broadband antenna for commercial aircraft


Flex-Tek: Sales up 8% and headline operating profit up 27%; margin up to 11.6%

  • Improved volumes and continued cost efficiencies contributed to a 180 basis point increase in margins
  • Sales growth achieved across residential construction, aerospace and industrial sectors
  • Flex-Tek remains strongly geared to a recovery in US housing

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


To view the full press release please click here


Statutory reporting
Statutory reporting takes account of all items excluded from headline performance. On a statutory basis, pre-tax profit from continuing operations was £189m (2010: £148m) and earnings per share were 35.7p (2010: 28.7p). The items excluded from headline performance comprise amortisation of acquired intangible assets of £22m (2010: £19m); £5m of exceptional restructuring costs (2010: £5m), £5m in connection with John Crane, Inc. asbestos litigation (2010: £8m); acquisition costs of £1m (2010: nil) and financing losses of £2m (2010: £6m loss).


The presentation slides and a live webcast of the presentation to analysts are available at at 09.00 (UK time) on Wednesday 23 March. A recording of the webcast is available later that day. A live audio broadcast of the presentation is also available by dialling (no access code required):
UK toll free: 0808 368 1985
International: +44 (0)20 3140 0820
US/Canada toll free: +1 866 978 9967

An audio replay is available for seven days on the following numbers (access PIN 376061#):
UK toll free: 0800 368 1890
International: +44 (0)20 3140 0698
US/Canada toll free: +1 877 846 3918

Original high-resolution photography is available to the media from

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