24 March 2010

Interim results for the six months ended 30 January 2010

  Headline*     Statutory
  2010
£m
2009
£m
Growth Underlying# 2010
£m
2009
£m
Continuing activities            
Sales 1,279 1,292 (1)% (5)% 1,279 1,292
Operating profit 207 185 12% 7% 186 160
Operating margin 16.2% 14.3%  –  – 14.5% 12.4%
Pre-tax profit 178 167 7% 4% 148 135
Basic EPS 34.7p 32.5p 7%   28.7p 28.0p
Free cash flow 133 104        
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. Free cash flow is described in the Financial review.

#Organic growth at constant currency.


Highlights

  • Headline operating profit margin improved by 190 basis points to 16.2% - highest first half margin for 10 years
  • Operational efficiency initiatives delivered margin improvements across all divisions
  • Cash conversion increased to 111% (2009:83%) of headline operating profit
  • Free cash-flow increased 28% (£29m) to £133m
  • Restructuring programme generated savings of £10m; £27m to date
  • Procurement initiatives delivered savings of £6m
  • Company funded R&D increased by 6% to £43m
  • Portfolio and presence extended through the purchase of IDI, a connectors company for Smiths Interconnect, subject to regulatory approvals

 

"Our operational improvement and restructuring programme has delivered enhanced margins across all divisions – reaching a 10-year high. Continued focus on cash conversion, increased free cash-flow by 28% to £133m. We have also increased investment in new product development to support future growth and ensure that we are well positioned for an economic recovery. Our strategy of targeted acquisitions is underlined by the recent acquisition of Interconnect Devices, Inc., which will strengthen Smiths Interconnect's product portfolio and further increase our presence in China.

"Looking to the balance of the year, Smiths Group is well placed to build on these results to deliver further improvement in margins and returns while continuing to generate strong free cash-flow."

Philip Bowman

Chief Executive
Smiths Group plc



Divisional highlights*

Smiths Detection: Sales up 11% and headline operating profit up 56%; margin 14.5%

  • Double digit sales growth driven by ports and borders and military markets
  • Margins improved by 430 basis points to 14.5% with increased volumes and improved overhead recovery
  • Military business posted strong growth from the long-term JCAD programme
  • Order book supports sustained growth although stretched government finances may impact the timing of order call-offs

John Crane: Sales down 15% and headline operating profit down 8%; margin 17.9%

  • Margins improved by 110 basis points to 17.9%, benefiting from management action to improve operational efficiency
  • Restructuring initiatives delivered £6m savings, lifting the total to date to £12m
  • Sales declined as customers substantially reduced investment in OEM equipment
  • Book-to-bill ratio of over 100% supports an improved sales performance in the second half

Smiths Medical: Sales down 1% and headline operating profit up 9%; margin 20.9%

  • Excluding diabetes, sales grew 2%; hardware sales up 5% and disposable items up 1%
  • Increased volumes and cost management initiatives have increased margins 180 basis points to 20.9%
  • Portfolio profitability review has reduced complexity and is delivering price and margin benefits
  • Supply chain and customer service improved by performance initiatives

Smiths Interconnect: Sales down 9% and headline operating profit down 5%; margin 16.0%

  • Margins improved by 30 basis points through restructuring, manufacturing efficiencies and procurement savings
  • Acquisition of Interconnect Devices, Inc. subject to regulatory approvals, expands the product offering and increases our exposure to China
  • Launch of new broadband antenna for commercial aircraft will generate second half sales

Flex-Tek: Sales down 14% and headline operating profit down 14%; margin 9.8%

  • Sales affected by the recession in US residential construction although volumes have stabilised in recent months
  • Sales of components to the aircraft industry have softened
  • Site rationalisation programme and other pricing and cost initiatives help increase margins by 10 basis points

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

 

To view the full press release please click here

 

Presentation
The presentation slides and a live webcast of the presentation to analysts are available at www.smiths.com/results at 09.00 (UK time) on Wednesday 24 March. A recording of the webcast is available later that day. A live audio broadcast of the presentation is also available by dialling:
UK: 0808 238 7377
International: +44 (0)20 7906 8557
US/Canada: +1 866 546 4358

An audio replay is available for seven days on the following numbers (access PIN 259609#):
UK: 0800 376 5689
International: +44 (0)20 7075 6589
US/Canada: +1 866 286 6997

Photography
Original high-resolution photography is available to the media, please contact Colin McSeveny (contact details below).